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Council questions city’s bidding process for rail contract

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City Council members yesterday questioned administration officials about the bidding process that led to Ansaldo Honolulu winning the contract to build the rail transit cars and operate the system.

Councilwoman Tulsi Tamayo said doing a basic Internet search on Ansaldo Honolulu’s Italy-based parent companies brought out  issues other cities have had with contract performance.

“Just on the surface, it reveals a lot of issues that Ansaldo has had in meeting its contractual obligations,” she said. She asked city officials what type of due diligence was made in looking at a contractor’s past performance.

But Wendy Imamura, purchasing administrator for the city Department of Budget and Fiscal Services, said she could not get into specifics because the procurement process is still under way.

“I don’t know how we can accept no response to these types of concerns,” Tamayo said. “My concern is that once the process is over, it’s too late.”

Every contract, including the one Ansaldo Honolulu won, has provisions for termination and breach, Imamura said.

“I’m not at all comfortable with this,” Tamayo said.

Councilman Stanley Chang pointed to the scoring system used by a six-member panel, made up of three employees of the city Department of Transportation Services and three consultants.

Chang said the design and build portion of the criteria is weighed as seven times more important than the operations and maintenance portion. Ansaldo Honolulu’s design and build portion of the contract was the cheapest of the three bidders, at $574 million.

“When you look at what it takes to operate each year by year, it’s not a significant portion of our evaluation,” said Toru Hamayasu, chief of the city Rapid Transit Division and one of the six evaluators. “Once you start operating, it’s a repetitive thing. The (design build) portion is much greater.”

Chang also questioned why Ansaldo Honolulu’s design and build price dropped from $679.8 million in June to $574 million in February, yet its operations and maintenance costs went up by about $100 million.

This was also raised by Gino Antoniello, vice president of transportation systems and equipment unit at Sumitomo Corp. of America, one of two losing bidders.

“We can’t render an opinion on why the proposal changed,” Imamura said.

She said the city has scheduled debriefings next week with Sumitomo and Bombardier Transportation, the third bidder, who was also rejected.

Imamura explained that Bombardier Transportation’s officials “conditioned their proposal on a change in the indemnification clauses.” She said the city does not allow bidders to set conditions in their proposals.

Bombardier’s bid, when taking into account the total operations and maintenance costs, came to about $1.2 billion. That was lower than Ansaldo Honolulu’s $1.4 billion proposal, and Sumito­mo’s $1.45 billion proposal.

“If you look at the overall cost, they’re the lowest,” Councilman Romy Cachola said of Bombardier’s offer.

“We’re not looking at the cheapest, we’re looking at best value,” Hamayasu said.

Imamura said contracts awarded in the past have been rescinded due to protests filed by losing bidders. Sumitomo Corp. of America has said it intends to file a protest. Bombardier officials said they would wait until after their debriefing.

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