City Begins Defense of Ansaldo Rail Contract
UPDATED 8/2/11 10:21 a.m.
With accusations and rumors flying, the City and County of Honolulu on Monday began laying out its defense against an appeal challenging its decision on a key rail contract.
With losing bidder Sumitomo having wrapped up its arguments, an attorney for the city asked that the matter be dismissed because Sumitomo failed to prove that the award of a $1.4 billion core systems contract to Ansaldo was arbitrary, capricious or unreasonable.
Joseph Stewart, the city’s special counsel, said one of Sumitomo’s expert witnesses had “absolutely no credibility” and that his testimony should be totally disregarded. Stewart said the appeal has been a “direct challenge” to the language of the city’s Request For Proposals, which should have been brought up before a contractor was picked and is now too late. He said, in short, that Sumitomo has no case.
UPDATE When that tack was rejected1 by Senior Hearings Officer David Karlen, the city called witnesses to explain the procurement process — essentially, why things happened the way they did.
Monday’s hearing came days after news reports of financial troubles at the winning bidder so serious that its parent company is considering selling it amid its own financial difficulties. In another blow to Ansaldo last week, an expert witness for Sumitomo compared the full costs of the contract over the 30-year life of the train cars and said Ansaldo’s bid would be $700 million more expensive than Sumitomo’s.
The city’s defense had a brick-by-brick quality to it. Witnesses included Simon Zweighaft of InfraConsult and Kerry Stevenson of Parsons Brinckerhoff — both companies were hired by the city to manage the project, and both witnesses were first questioned by Sumitomo last week.
When Zweighaft was pressed Thursday and admitted evaluators didn’t pick up the phone to dig deeper on Ansaldo’s problems, the city remained quiet.
On Monday, Zweighaft defended the decision to not consider Ansaldo’s past problems in evaluating the proposal’s reasonableness, saying those problems were not unexpected for a company that size.
James Dunn, Design and Construction director for Parsons Brinckerhoff and a price realism expert hired by the city, walked through the process that engineers went through to judge bids.
He responded to the claim by one of Sumitomo’s expert witnesses that large infrastructure projects in this country have a long history of serious cost overruns.
“I think there’s a difference between looking at a budgetary overrun versus a fixed-price contract overrun,” Dunn said. That means any extra costs that Ansaldo incurs due to an unrealistic proposal will be Ansaldo’s problem alone. The city will only be asked to spend more money than the contract calls for if the scope or schedule of the project changes.
The hearing will continue Tuesday at 12:30 p.m. The city is expected to call one more witness, and Ansaldo will also be able to call witnesses.
