A dispute between labor unions a year ago led city to ink a $21 million, no-bid contract

The July 2024 meeting of the Budget and Government Efficiency Committee of the San Diego City Council seemed like another routine piece of mid-week city hall business, with a couple of items on the agenda to take care of before the summer recess.

But when two influential labor unions clashed over which company should get a massive contract for security guard services, it set off a series of events that took nearly a year to resolve — and cost the cash-strapped city millions of dollars.

At that meeting 14 months ago, the committee opted not to award a five-year, $50 million contract to Allied Universal, the nation’s largest security firm. The company had been selected as the best proposal after a competitive bidding process. 

The SEIU United Service Workers West union lined up in favor of Allied, largely because the company was union-friendly and had labor contracts in place with the union around the state. 

But a rival union, Laborers’ International Union 89, opposed awarding the contract to Allied, citing the company’s recent history of wage and labor violations. A LIUNA 89 union official urged the committee to reject the award and before bidding it out again, create new standards that contractors for services like security guards had to meet to get city business. 

And that’s what the committee did, electing to wait until those new standards could be developed, which at the time was expected to be completed by the end of 2024.

That decision meant the city had to pay for security guard services on a piecemeal basis for months from Allstate, at a cost of nearly $5 million, while negotiating a new contract with the company. 

Finally, in April, the city approved what was supposed to be a one-year, $3 million stopgap deal with Allstate.

But just three months later, that contract had turned into a two-year, no bid, $21 million contract the city council approved in July.

And those new contracting standards? They’re delayed too, until the end of this year at the earliest. Part of the reason, according to the mayor’s office: The “bandwidth” needed to draw up the new standards was instead diverted to work on another union-backed proposal to pay hospitality workers a minimum wage of $25 per hour.

The story of the city security services contract highlights a number of issues at play now in San Diego governance, like the rising costs and changing demands on services like security guards.

It also illustrates the sway labor unions hold.

In recent years labor has become the most powerful force in city politics. And when unions square off on opposite sides of an issue, elected officials can be put in the uncomfortable position of going against one of their primary sources of support — as Council President Joe LaCava said before voting against the Allied contract.

LaCava said he was frustrated by “issues being raised by competing labor unions going forward, to kind of create a no-win situation for the council …”

The security guards contract is also a striking example of the clout that labor unions can have on city policy, and how that impacts the city’s increasingly fraying bottom line — and taxpayers who pay for the service.

The contract

The main citywide contract provides security guards at libraries, parks, recreation centers, storage yards and buildings. Another contract provides more specialized guards at water and wastewater facilities.

The city’s first contract with Allstate in 2018 was for $24.9 million, but that was amended twice in subsequent years and eventually topped out at $32 million. Costs are expected to rise in the coming years, too, the city’s independent budget analyst said in a 2023 report. 

The biggest users of security services are the Parks and Recreation Department and the city library system, which has its own unique security needs. A 2023 change to the Allstate contract that increased the cost by $4 million was due in part to requiring guards who work at libraries to be trained in administering Naloxone, a drug which can rapidly reverse opioid overdoses. 

In March 2024 the city issued a request for proposals for a new citywide contract. A month later, after reviewing 16 responses, the city’s Purchasing & Contracting Department elected to award the new deal to Allied.

The five-year contract would pay the company $50.5 million — more than twice the original 2018 contract given to Allstate.

A 2024 city staff report said there were several reasons for the increasing costs. Overall demand for security services and therefore guards had increased in recent years, and companies have seen costs for training, equipment, and insurance increase, triggering an increase in the rates they charge.

Increases in the minimum wage and living wage laws — like one in San Diego — and overall inflation also drove up costs, the report noted.

While some of Allied’s costs were higher than other bidders, Purchasing & Contracting Director Claudia Abarca said in an interview that the company’s proposal was overall best for the city. 

“It’s a best value proposal,” she said of the bidding competition. “So we’re looking at not only price, we’re looking at the actual technical experience, and what they could bring to the table.”

Union vs. union

But what Allied could bring to the table did not seem to be the determining factor at the July 2024 meeting.

Samuel Kehinde of SEIU USWW said approving the deal would help security guards, because they would have a chance to unionize and bargain for higher wages and better working conditions. 

The union already has contracts with Allied around California, covering thousands of workers, Kehinde said. 

“I’m looking for you all to do the right thing, by not delaying (for) workers the opportunity to form a union, and be a member of my union,” he said, according to a video of the meeting.

But then minutes later Kelvin Barrios, director of government affairs for LIUNA 89, said Allied’s labor record on wages, fair employment and overtime was “staggering and deeply troubling.” 

He said the state labor regulators had cited the company several times over the past five years for wage violations involving overtime, sick leave and vacation. He also noted that in October 2023 the federal government fined the company $400,000 for discriminating against Black applicants, and another investigation that recovered $1.1 million for workers in Seattle for improperly deducting time for meal breaks when guards often had to continue working.

In a letter to the committee the company said it regretted the state labor violations, which came to a total of $44,000. The Seattle case related to an audit of one worksite from July 2019 to March 2021, which the company contested, and ended up with “amicable agreement” with the government.

Barrios also pointed to Allied paying out $2.3 million of a $5.5 million settlement with the family of a man who died while security guards for the Metropolitan Transit System held him down and one knelt on his neck at a downtown trolley stop in 2019. One of the guards was employed by Allied, which contracted with MTS for security guards.

City rules for contractors don’t specifically say a history of wage violations disqualify a company from getting city business, Barrios said — but they should. 

He said that lining up against another union was awkward, and attempted to downplay the rift. “This is not in any way a jab at the work SEIU USWW has been doing around security guards,” he said.

But awarding the contract to Allied would be a mistake. “We do not want to stand idly by and see a $50 million contract awarded to a company that has such egregious alleged violations in its background,” he told the committee.

While LIUNA is a union that largely represents construction trades, security guards also make up a portion of its membership, Barrios said in an interview with inewsource. 

He acknowledged LIUNA would want a chance to organize guards under the city contract — though he said the main concern of his comments at the meeting was urging the city to establish higher standards when it came to wage violations for contractors seeking work.

“We made it a point: we’re not going after SEIU, the union,” he said. “This is going after a bad contractor.”

It worked. After the committee rejected the contract, the discussion turned to how the city would provide security guards before the matter could be put out to bid again. 

Abarca told the committee that the city would have to negotiate a no-bid, sole source deal with Allstate. That might take six months, she said, because the contract had actually expired in June 2024 and a new agreement would have to be fashioned.

She also said she would want to wait until a new policy covering contracting standards for service contracts like the guards deal was completed. 

Matt Yagyagan, the director of policy for Mayor Todd Gloria, told Councilmember Vivian Moreno that the city was planning to model a policy on one San Diego County has, and expected that would be done by the end of 2024.

Yet neither the new contract nor the new policy were done by the end of the year.

First, discussions with Allstate dragged on, according to a city staff report from this past July. The company wanted to negotiate some new pay rates and contract terms, and then it took nearly seven months for the company to provide a surety bond to the city.

In the interim the city had been paying for security on what Abarca called “a quote-based process.” Departments would ask for short-term price quotes for immediate needs.

Allstate got most of that business, which Abarca said came to $4.8 million.

Meanwhile, the work on new standards foundered. The county policy turned out to be a poor model. Rachel Laing, a spokesperson for the mayor, said the county standards conflict with parts of the city’s Living Wage Ordinance — passed initially in 2005 and updated in 2022, both times with strong union support.

Then this February, Councilmember Sean Elo-Rivera unveiled a proposal for a $25 minimum wage for workers in hotels, tourism and other hospitality businesses. 

When that happened, Laing said, “bandwidth needed for that compliance policy was diverted to the currently more pressing Hospitality Minimum Wage Ordinance.”

By April, nine months after the council committee rejected the Allied contract, the no-bid contract with Allstate was approved. Just three months later that, too, changed. 

With no discussion in July, the council approved a revised contract for two years with Allstate through spring 2027.

The cost had skyrocketed $18.5 million, from the initial $3 million to $21.5 million.

Abarca said the union dispute that played out in the meeting was unexpected and “had us scrambling a little bit to figure out how to ensure the continuity” of security services. 

It’s possible the contract won’t run the full term. Abarca said that the city hopes to get the new contracting standards completed by the end of this year, and send out a new request for proposals on a citywide contract early next year. 

“We’re trying to get there,” she said. “But the position we were put in, this was the best option for us, to do the gap contract.”

Aftermath

Barrios said “this is the tough thing in the labor world, where you have a contractor and you have a potential to have membership, but they might not be the best player in town.” 

“I understand their position,” he said. “The opportunity to organize is best for them if Allied got the contract. But for us, that’s not good enough — an opportunity for someone to organize. We’re looking at a contractor that has all these issues.”

Representatives of SEIU USWW did not respond to an interview request. 

When the dust settled, Allstate appears to have made the most of what appeared to be a bad ending. The company could end up with an additional three years of work for the city if the latest contract runs its course.

That contract calls for the company to be paid up to $10 million per year. The contract that the council committee rejected back in 2024 with Allied did not reach that amount of expenditure until the fourth year of a five-year deal.

When the time comes to put the city’s security guard needs out for proposals, both companies may have another bite at the apple. 

That’s because instead of one large contract, the city plans to break up the work, issuing contracts for some individual departments like the library and parks departments and one for all other departments. 

That work isn’t expected to begin until sometime early next year.