Radio Cade

Detecting Cheats on Contract Bidding (Re-release)

May 27, 2020 Jim McClave and Tom Rothrock Season 1 Episode 80
Radio Cade
Detecting Cheats on Contract Bidding (Re-release)
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Radio Cade
Detecting Cheats on Contract Bidding (Re-release)
May 27, 2020 Season 1 Episode 80
Jim McClave and Tom Rothrock

Big public infrastructure projects used to be synonymous with corruption, including bid rigging. Super-smart professors Jim McClave and Tom Rothrock figured out a way to detect bidding irregularities and catch cheaters. As a kid, Jim loved solving puzzles and did well at school, but suffered from bad “comportment” according to his teachers.  Tom, a farm boy from Missouri, went to a one-room schoolhouse in a town of 100. “Not a lot of education took place” so he struggled in school, but “math came easy” to him.  In 1977, Jim and Tom formed a business called InfoTech and have been collaborating ever since. This episode is a re-release.

Show Notes Transcript

Big public infrastructure projects used to be synonymous with corruption, including bid rigging. Super-smart professors Jim McClave and Tom Rothrock figured out a way to detect bidding irregularities and catch cheaters. As a kid, Jim loved solving puzzles and did well at school, but suffered from bad “comportment” according to his teachers.  Tom, a farm boy from Missouri, went to a one-room schoolhouse in a town of 100. “Not a lot of education took place” so he struggled in school, but “math came easy” to him.  In 1977, Jim and Tom formed a business called InfoTech and have been collaborating ever since. This episode is a re-release.

Intro:

Inventors and their inventions. Welcome to Radio Cade the podcast from the Cade Museum for Creativity and Invention in Gainesville, Florida. The museum is named after James Robert Cade , who invented Gatorade in 1965. My name is Richard Miles. We'll introduce you to inventors and the things that motivate them, we'll learn about their personal stories, how their inventions work and how their ideas get from the laboratory to the marketplace.

Richard Miles:

It's all rigged. Or is it? Specifically, how does one go about detecting bid rigging? Here to help us understand, are Jim McClave and Tom Rothrock, the inventors and developers of computerized tools to see who is cheating and who is not. Welcome to the show, Jim and Tom.

Jim McClave:

Thank you.

Tom Rothrock:

Thank you.

Richard Miles:

So let's start out, Jim, I'm going to ask you what , uh, what exactly is the technology , uh, that you have developed and are using, explain it to me who really doesn't know that much. I took one college statistics class, so I kind of know , uh , but not really. So to assume that our listeners don't have a deep background in statistics.

Jim McClave:

Fair enough. Um, our invention consists of , uh, software computerized techniques, statistical techniques that looks for patterns or trends to suggest that companies may not be playing fairly, that they may be rigging bids when they submit prices to government agencies to do work for them. So it's, it's basically software that makes the difference, shows a difference between competition and lack of competition.

Richard Miles:

So typically, if a government agency or public entity puts out a project to bid, they're going to get all these bid documents. And so the , the concept here is that all those bid documents get fed into a program. And then the program looks for anomalies or, you know, is there, is there a parameter range for each one of those numbers? And that's how it essentially works. Is it more sophisticated?

Jim McClave:

It's a little more sophisticated in that . If you're going to look for trends, you really need historical data. -Okay. So rather than just looking at today's bids, we're looking at maybe five or even 10 years worth of bids. And again , um , I try as hard as they might, if companies are cheating, it doesn't look like competition. So there are patterns that show up, sometimes they're trying to hide it, but -I see, we figured out ways that that look , uh, around the corners and into the nooks and crannies and find , uh , these patterns that suggest bid rigging.

Richard Miles:

Um , so I saw a great phrase, I think one of your company documents about administering statistical justice. Uh , who came up with that? That's a great phrase.

Jim McClave:

Uh , it was probably one of our PR people, Tom and I tend not to brag about what we do. We just do it.

Richard Miles:

Give that guy a raise, cause I mean, I like it, statistical justice.

Jim McClave:

I like it too .

Richard Miles:

Um , and so Jim, you started the company in 1977, Tom, you joined a few years later, but , um, uh , Jim, what gave you the idea? Uh, you were , you were a research, you're professor , um, and so that's always an interesting transition. I find from academia into the business world. Did, y'all wake up one day in 1977 and I'm sick and tired of being a professor. I'm going to, I'm going to start a business or how did it work?

Jim McClave:

Uh , actually I loved teaching , um, and , uh, I got the chance from our department chairman in statistics to do some consulting. And I really liked that because it was basically teaching and the university encouraged us to do it, but we had to keep records. And that's the sole reason I founded , uh , Infotech. As far as getting into our invention in the business, when today you should ask Tom because it started with him.

Richard Miles:

So Tom , uh , who found who? Did, did Jim come looking for you or did you hear what he was doing and decide to get involved?

Tom Rothrock:

After I finished my PhD I had several consulting opportunities with the Florida Attorney General's Office. They were interested in looking at public procurement in the state of Florida to determine if they were getting good prices on things that they were procuring. And they collected a lot of data and wanted me to analyze that data for them, but they also wanted to use the University of Florida's computer system since it was freely available to them. And one of the people working in the anti-trust unit, it had Jim for a class and raved about how good he was and asked me if I would be willing to partner with him on this project. And so I came down here on one rainy February night, and he met me at the airport and that started our relationship that has lasted now 41 years.

Richard Miles:

So did you have that core insight from the beginning that , um, or , or was it suggested to you by the, uh , what office was it in the Florida state government ?

Tom Rothrock:

It was the anti-trust general of the Attorney General's Office.

Richard Miles:

So did they already suspect that bid rigging was going on? I mean, it's not exactly a new thing, right? Been around for centuries, but did they already think that there was a path of statistical analysis path to find it? Or are you the ones that sort of said we...

Tom Rothrock:

They weren't sure. They weren't sure, okay. The connection there is, you know, I did my PhD dissertation in Missouri, at the University of Missouri on statistical methods to detect bid rigging. That was the topic of my thesis and one of the, my student friends there took a job at the Attorney General's Office, and he sort of sold them on the idea that they ought to be looking because it is fairly prevalent. And so they decided to bring me in as a consultant to help them identify areas where there might be problems in bid rigging on what they were procuring.

Richard Miles:

Wow. That's , uh , usually it's, you know , professors helping students and now in this case, a student helped a professor, right? Sort of by -yes recommending...um , uh, okay, we're going to talk about Infotech as a company a little bit later on. Um, but first I'd sorta like to hear about your background. It's always fascinating to me, sort of what, what are the early influences in careers and , and eventually , um, you know, your inventions. So, Jim, let's start with you. Are you, are you from Florida? Are you from the South? Uh, where'd your parents , uh, end up in and what were some of your early influences?

Jim McClave:

I , uh , no, I'm not from the South. I grew up in Eastern Ohio , uh, right across the river from Pittsburgh, a steel town. Um, and , uh , mom and dad , uh , grew up there as well. They were high school sweethearts. Um, so , uh , my early days were , uh, in a pretty tough area. I had a love from the beginning for science and math. My dad was an entrepreneur, so I think, I loved solving puzzles. That was my big deal as a kid. Uh, I remember they would buy me these books of puzzles and, and so I think that sort of , sort of launched me on the, on the path that I ended up on.

Richard Miles:

And were you a good student, Jim? I mean..?

Jim McClave:

I was, back then the report cards had two sides to it. One had the grades and the other had comportment and, and on the grade side, I was always great on the compartment side there were always some U's for unsatisfactory. I was a little talkative, I think, and too much energy.

Richard Miles:

And so did your parents just focus on the grade side or did they immediately flip it over to the comportment side?

Jim McClave:

They, they, they encouraged changing those U's to S's, but I think they were happy with the grades.

Richard Miles:

And Tom, how about you? Where, where did you grow up and what were you like as a kid?

Tom Rothrock:

I grew up on a farm about 50 miles West of St. Louis on a 300 acre farm run by my uncles. And I lived right next to the farm with my grandparents and my mom who was divorced , uh, you know , working and, she would drive into St. Louis every day, so I'd be there with my grandparents and my uncles. And they sort of taught me a lot about working on a farm. I did a lot of chores and activities like that, and sort of the one hallmark there is that town had a population about 100 and they had one school with one teacher for eight grades. So I went to a one room school house and as a result, I wasn't a very good student , uh , because not much education really took place in that environment. So I struggled a bit when my mom remarried, we moved to St. Louis and I struggled a bit started getting acclimated to , uh, you know, real education and the school environment.

Richard Miles:

So , um, both of you went into a field that is , uh, you have to understand numbers, not just understand that it's sort of really , uh , like the whole process. Do you remember at a point anywhere as , uh , in middle school, high school college, in which you just, there's something about numbers that fascinated you? And the reason I ask is , uh , we have a daughter who's an actuary and she just, she likes doing things like taxes or balancing a checkbook or things like that. It just sort of calms her down. I'm sort of the same way, by the way. Do you remember that sort of just feeling comfortable around numbers? So at any point, growing up?

Jim McClave:

What I remember most is that math came easy and I loved it. I loved the puzzle-solving part of , of math problems. And , um, so I think, you know, it's just always part of my DNA, right, for right from the beginning , uh, from the time that teachers was, hold up those cards with the two plus ones on it and , uh , uh, you know, to advanced calculus , uh , it just was something that was always , uh , uh, uh, I was fascinating to me.

Tom Rothrock:

As I mentioned, I sort of struggled with my , uh , education, but like Jim math came easy to me. And so I wound up in college , uh , choosing math as my major, because it was probably the easiest subject for me to do. I had enjoyed the analytical reasoning and problem-solving that goes along with the mathematics.

Richard Miles:

So now we're going to fast forward to you're, you're now involved with , uh , one of the most successful companies in , in the Gainesville, certainly, and certainly in the region. And you started out very small, tiny company, really just sort of you, Jim and then I presume a handful of employees. And now you're a fairly large employer. Um, tell us a little bit, what has that transition been like for you as a manager and a leader? What are you essentially the same guy in terms of those skillsets ? Or have you developed them in a, in a deliberate fashion, knowing that you're, you know , responsible for a lot more people?

Jim McClave:

I don't know . I would call it deliberate fashion. It certainly has evolved because it's had to , uh , you're right. We started actually, when I found it Infotech, it was my wife and I, so it was strictly a family business. She did the books and I did the consulting , uh , and it stayed when Tom joined us, we were still very small and both of us for whatever reason, had the concept of a family culture , uh , with our company. And we've really tried to foster that , uh , throughout we're all in this together, we treat each other, right. We treat our customers as part of our extended family. And so I think the transition that part of the transition that's been most challenging is maintaining that culture. Uh , as you grow from five to ten to a hundred now to 250 employees. Uh, but we have fought hard to do that. Um, the people that come to us that might be very bright, but don't fit in that culture don't we find don't last long. So now when we're doing interviewing, we make sure that there's a culture fit. So I think that's been the biggest challenge.

Richard Miles:

And I imagine you, you probably have a low turnover. It sounds like a lot of employees stay for quite a long time.

Jim McClave:

We've we recently had, I guess it's been a year or two now, a lunch where , uh, anybody that had 30 years in , uh , and it filled the room. It was just amazing, so, yes, we've got, we've got some now they're above 35 and we're only 40 years old. So a very low transition, turnover rate.

Richard Miles:

Yeah. That's, that's amazing. Um, Tom, every company has highs and lows , uh, sort of big successes where you hit it out of the park and others, not so much. Uh , would you willing to share with our listeners? I know that you've had some big successes in terms of detecting very large amounts of cheating and bids for the state of Florida and maybe others. So tell us a little bit about those, but also , uh , moments where you thought maybe , uh, you know, joining Jim and his endeavor was a bad idea.

Tom Rothrock:

Well, I wouldn't say that I ever thought that , uh , but in the early years it was a struggle as I think most companies and startups certainly experienced a challenge the first few years, as they're getting started in establishing a presence in the marketplace, getting steady customers that they can depend on. And, you know, we were the same way. You're right. We had a couple of big successes fairly early on. Uh, I was also professor at UF , uh, visiting from Wisconsin , uh, working with Jim. And we got hired by the Florida Attorney General's Office to investigate the highway construction industry, because there was information that in other states there were problems with bid rigging activity going on. There, there was no evidence of it, but they knew that we had the techniques, they could analyze the bidding data and point them in the right direction. And we did that very successfully and they recovered over $30 million in a few years based on our analysis. And what that did is it really launched us because at that point, other states were having similar problems. And so we wound up having to commit a lot of resources to working in that area. So that was a big success and really got the foundation and it was enough that I left the university to do this full time and kept wanting to think about going back, but Infotech kept growing and yeah, and now I look back 40 years later and here I am, but a , a failure happened probably about three years later , uh, because we were successful in developing this software and these programs. So we thought we could develop some other programs that would compliment this and offer them in the commercial marketplace. So we staffed up with a team of programmers and a team of marketers, and that costs us money and it really drained our resources. And it turned out that even though we had excellent products, there just wasn't a market there for those products. Which was a very important lesson for us is that no matter how good your product is, if you don't have a market, you're not going to be successful. And that almost caused us to go under.

Richard Miles:

That is very interesting. A recent guest on our show, Randy Scott, who you may know , um, said , uh, one thing that he finds talking to other entrepreneurs, particularly researchers, is the first thing you have to do is fall out of love with science and figure out what the market is. Because I think to your point, you know, it sounds like you had a great product, but the market wasn't there. And so it doesn't matter how great the product is -exactly the right, to buy it. Yeah. That brings up an interesting question. You know, so you, you develop the original sort of proprietary software back in the late seventies. Obviously, the world has changed a lot in terms of , uh, information, technology and software , um, has competition increased? Are there other companies out there or software's sort of come close to what you're doing? Or do you still have something that is , is hard for others to replicate?

Jim McClave:

We certainly have, the product has, has evolved over the years of techniques have evolved. Uh , as I was saying early on like , uh, those that are out there trying to cheat , uh , sort of, know, now all there are certain trends that we better not have. So , uh, it, it's , it's an evolutionary. Um, I, to be honest, I don't think there are others that are, that are doing quite what we're doing. I mean, there are people that are consultants in this, in the, in the business, but in terms of having the software to the point where we've got it, and as Tom will tell you, it's , it's grown well beyond just the bid rigging software, it's construction management software. So we've certainly learned that you've got to evolve, you've got to keep, you got to be creative. You got to keep going. You can't stand in one place because then you will be passed.

Richard Miles:

Right. Um, so I assume that your business is much broader than just Florida now, right? I mean, who are your clients? Are all over the country, all over the world or?

Tom Rothrock:

All over the country. -Okay. Yeah. We, one of the things we did back in the mid-eighties when we were having the challenges is we were approached by AASHTO, which is the American Association of State and Highway Transportation Officials. And they're an umbrella agency for all state departments of transportation. And they were interested in our software because they wanted to promote better procurement across the country. And so we agreed at that time to provide our software to them and they licensed the software out to the states. So right now we're serving about approximately 40 state departments of transportation with this bid rigging software. And , and it's unique, uh , there are other companies back in the eighties that tried to develop what we did, but they just weren't successful in getting it right. And so we don't really have any competition that I'm aware of for that type of software. But the interesting thing is Jim said earlier, it requires a lot of data to analyze where does that data come from other systems within the agency ? So what we started doing in the mid-eighties was helping agencies build those other systems to feed -

Richard Miles:

To capture all that data,

Tom Rothrock:

To capture the data. And that's, so we now have a full suite of construction management software all the way from the planning stages of a project, through the completion of construction. It lives within our software. And we also capture all of the bidding data, all the vendor information, the suppliers, the subcontractors, the materials, everything that goes into a job winds up in the database for us to be able to analyze.

Richard Miles:

So you have a very rich, sort of broad, and deep database where.

Tom Rothrock:

We certainly do.

Richard Miles:

Are there, are you scouting other opportunities for potential applications of this database?

Tom Rothrock:

Well, one of the things,

Richard Miles:

You tell me, you'd have to kill me. Right? Cause I sell it to your competitors right?

Jim McClave:

It actually, one of the surprises, as far as our evolution to me has concerned, we , we early on did highways, as Tom said, and Florida and, you know, I knew after that, that there was a lot of cheating that was going on in that industry. But I wondered, you know, is it widespread? What has in the consulting side of our business, which is what I basically run, we've found just about every industry that we've looked at. Not that there's all cheaters, but there are pockets of cheating. So I think what the way we've evolved is we're well beyond just applying it to two highways.

Richard Miles:

Ah , all right . We've , we've come to the part of this show where it's your chance to be sort of philosopher Kings here. Uh , you know, you've got, you've got more than 40 years of experience , um, coming out of academia, building starting a small business and building it to a very successful business. Jim, let's start with you. What, what advice would you give to any entrepreneur who's starting out, but also specifically to academics who have a great idea, and they say, I want to make a go of this in the market. Uh, you know, are there are , let's say, are there three things that they absolutely should do? And, and are there three things or any number of things they should definitely not do?

Jim McClave:

Well, as far as what they should do, is it that there will be a certain level of anxiety overcome that fear, go for it. Uh, I could go on with trite expressions , um, but, but, you know, chase your dream. Assume that your idea is really a good one, it may not be. Uh , and , and that's sort of the other side of this expect the fact that there will be, you can call them failures or dead ends , uh , along the way, but chase your dream to go . If you love just being teaching and doing research, that's fine. But if you've got an idea , uh, let's expand on it.

Richard Miles:

Uh , so Tom , when you joined , uh, you were already well into your academic career , um, and you said you were approaching 40, right? When you joined the company. So this is, you're 38, so , uh, if you had failed, you couldn't have just gone and slept on your mom's couch, right? You had a family by then and kids, it's a bit of a risk for you, which I think describes a lot of academics that sort of nearing the height of their careers. And then they decided to sort of give up their day jobs, so to speak. And what was that like for you? Uh, and then is that something you would advise if you saw yourself today in the form of a professor, would you tell him yep do it?

Tom Rothrock:

That's a good question. Uh, I know my wife certainly wasn't thrilled when I told her that I was going to leave teaching,

Richard Miles:

We'll have them on the next podcast.

Tom Rothrock:

To go start doing this. I think one of the keys is you can't be risk-adverse. And I guess from my upbringing and the different life experiences I had, I was always willing to sort of take a chance on an idea and see it through. And I always had enough confidence in what I could do that if it didn't work out, I felt that I would have opportunities to go back to teaching and I love teaching, but even when I started teaching back in 1970, I said, there's going to come a point in time when I want to get out of the university academic environment and try something on my own. And you know, when I met Jim and the stars sort of aligned, and I said, this is the opportunity I want to try. And if it works great, if it doesn't, that's fine too.

Richard Miles:

Are you often asked to speak about your experiences or do you have people sort of knocking on your door, asking for advice in terms of, do I start a company or not, or, or do you just not have time to do that?

Jim McClave:

I certainly would be glad to talk to folks. And now we're 250 and we've got this PR department that's pushing us to do the kind of thing we're doing today. So I have a feeling we'll be doing more of it, and I like doing it because again, to the extent we can share experiences that would help someone else go along a similar path and take the, take the chances as Tom just said, I think we both like , uh, like, like doing this. Yeah.

Tom Rothrock:

I know I've had some interaction with the innovation hub and back when David Day and Jane Muir were there, they invited me to come down and meet with some of the startup companies and talk to some of the young entrepreneurs and share some of the experiences, the good and the bad that we had and how we got started and how we stabilized as a company. So I guess, yes, it is exciting to talk to people who have these ideas and want to try something and try to help them along that path to become successful.

Richard Miles:

And I know Infotech as a company has been very supportive of the innovation economy in , in Florida and particularly in Gainesville, but I'll also broadly in the state, you know, sort of supporting that , uh, those young entrepreneurs and young inventors and so on. And it's been a tremendous support, but I want to thank both of you for coming on the show today, Jim and Tom , um, wish you the best of luck as , uh , watching Infotech's continued success and , um, and hoping you will dispense that, that wisdom and experience. Uh, cause I know there are a lot of folks in town here who really benefit.

Jim McClave:

Thanks very much.

Tom Rothrock:

Thank you, we really enjoyed it.

Richard Miles:

I'm Richard Miles, thank you for joining us for another episode of Radio Cade , please come back next week for another interview with an inventor or entrepreneurial.

Outro:

Radio Cade would like to thank the following people for their help and support, Liz Gist of the Cade Museum for coordinating and vendor interviews. Bob McPeak of Heartwood Soundstage in downtown Gainesville, Florida for recording, editing, and production of the podcasts and music theme. Tracy Collins for the composition and performance of the Radio Cade theme song featuring violinist , Jacob Lawson, and special thanks to the Cade Museum for Creativity and Invention located in Gainesville, Florida.