Ansaldo penalty ‘slap on the wrist,’ councilman says

City Councilman Tom Berg, a critic of the selection of rail car contractor Ansaldo Honolulu, said the city should have disqualified the Italian-based company because it was in violation of state law by bidding for the project before obtaining a contractor’s license.

The settlement of licensing violations by the winning bidder for the city rail car contract is only a "slap on the wrist," said Berg.

Rail bidder Ansaldo Honolulu, which won a $1.4 billion contract to design, build, operate and maintain the city’s rail cars, violated state law when it bid for the contract before it obtained a Hawaii contractor’s license.

The issue was brought to the state’s attention by two firms subcontracted by Sumitomo Corp. of America, one of the two losing bidders on the contract.

Ansaldo Honolulu agreed to pay $150,000 to the state to settle the two licensing violations.

"We’re pleased that this has been resolved, and we’re looking forward to moving on," said Carolyn Tanaka, a spokeswoman for Ansaldo.

Jeanne Mariani-Belding, spokeswoman for the Honolulu Authority for Rapid Transportation, echoed the statement.

Daria Goto, a supervising attorney for the state Regulated Industries Complaint Office, said the fine "reflects the size of the project" and that Ansaldo was in the beginning stages of the bidding process. Goto said the office handled the case the same as "similar cases" in which no consumers were harmed.

Berg, who has introduced a resolution asking the city to revisit the contract, disagrees.

"The biggest disappointment I have is that there’s this window of opportunity for the mayor and the state to save the taxpayer $231 million," Berg said Monday, referring to the difference between Ansaldo’s bid and a $1.2 billion proposal from Bombardier Transportation.

Bombardier was disqualified after changing language about limited liability in its bid. The city viewed it as a "condition" of the contract, which meant an automatic disqualification. Bombardier argued that it was not adequately informed of the consequences of changing the language.

Sumitomo’s contract would have amounted to $1.45 billion.

"Bombardier and Sumitomo both obviously had their licenses before submitting their bids," said Andy Robbins, Bombardier vice president and Hawaii project manager. "We’re really the two companies that are the most experienced in North America for these kinds of bids. The lack of a license speaks to the lack of experience in doing business in North America and Hawaii."

Bombardier filed a lawsuit in the summer to try to force the city into reconsidering the contract, but the suit was dismissed. On Oct. 13, Bombardier appealed to the state Intermediate Court of Appeals.

"You know when you’re right and you gotta keep fighting," Robbins said.

Although Sumitomo executives protested the city’s announcement to award the contract to Ansaldo, the company has decided against legal action. A Sumitomo executive was not available for comment, but the company has also repeatedly asked the city to reconsider the contract.

Ansaldo faced penalties ranging from $2,500 to 40 percent of the contract price.

As part of a previous procurement protest, a senior hearings officer with the Department of Commerce and Consumer Affairs determined that Ansaldo’s licensing status did not disqualify the company from bidding on the rail project.

"It’s just really irritating," Robbins said. "Our entire bid, the low-priced bid, would get disqualified on a technicality, and the government finds a way for a slap on the wrist for a contractor’s violation."

Berg said it was the perfect opportunity for the city to disqualify Ansaldo, just as it did Bombardier.

"It’s another exhibit of the city and county doing everything in its power to fleece the taxpayer," Berg said. "They could’ve used this as a means and a measure to save $231 million. Instead, the procurement office, the mayor’s administration and the state has done everything in its power to coddle Ansaldo."