Sunday, April 24, 2011

Bid Protest in Major Honolulu Rail Contract

The two losing bidders in a Honolulu rail car contract worth more than $1.2 billion have filed protests over what they see as serious errors in the selection process.

Unbalanced Bidding? Sumitomo Corporation of America, one of the losing bidders, argues that the evaluation criteria for the Design-Build-Operate-Maintain (DBOM) contract were excessively skewed towards the Design-Build phase. The company claims that this created an incentive for the firm that won the contract, Ansaldo Honolulu to submit an "unreasonably low" price for the Design-Build part of the project, and shift costs to the operate-maintain portion. Sumitomo contends that although Ansaldo's winning bid was $115 million cheaper for the Design-Build phase, Sumitomo's losing bid would have ended up costing $900 million less over the 30-year life of the project.

"Conditioned" Proposal Declared Non-Responsive: The other losing bidder, Bombardier Transportation, is decrying the city's eleventh-hour finding of its bid as non-responsive due to what appears to be a technicality. While details are scarce, the finding seems to be based on liability language that Bombardier included in the proposal. The city objected to the language as making the proposal "conditioned," but Bombardier insists that the clause "wasn't really a condition," but was only meant to clarify "confusing, contradictory, awkward, and faulty language" from the city. Furthermore, Bombardier argues, the language in question was in their original proposal, which had already passed muster with the city months earlier without any objections.

Past Performance Questions: In its protest, Sumitomo also raised questions about Ansaldo's past performance on other rail projects. The company raised questions about problems on projects in Los Angeles County, Sweden, Denmark, and Boston, even going so far as to argue that past issues "should have resulted in Ansaldo's disqualification."

More information
Lessons Learned:  It is important for public agencies to develop clear and transparent selection processes for public works construction projects where cost is not the only criterion for selection (Design-Build, GC/CM, CM at Risk, etc.).  Public agencies should be strategic in developing the selection criteria, scoring elements, and processes in a manner that helps mitigate against contractors attempting to unfairly game the process in order to be awarded the project.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC

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