Bombardier Transportation (Holdings) USA Inc. 1501 Lebanon Church Road Pittsburgh, PA 15236 USA www.bombardier.com TEL 412-655-5700 FAX 412-655-5260August 31, 2011The Honolulu Authority for Rapid TransportationBoard of DirectorsAli‘i Place, Suite 17001099 Alakea StreetHonolulu, HI 96813Dear Board Members:I am taking what some may view as an unusual step by communicating directly with you despitean active appeal with the Circuit Court and a Protest to the Federal Transit Administration.Given the importance of your mission as Board members on a project that will change the faceof Honolulu for 100 years or more, it is imperative that you be presented with facts andinformation that I believe have not been made available to you to-date.Bombardier also believes strongly in the Honolulu High-Capacity Transit Corridor rail projectand has no objective to block it in any way. Our actions should prove this having been anOfferor in 1991, having kept an active interest ever since, having fully re-engaged with the Citymore than 6 years ago, having encouraged City officials to become educated and understandglobal best practices and having offered cost-saving and passenger enhancements to City staffand consultants as they made their way through a long, complicated and arduous procurementprocess.Bombardier qualified for the Priority Offeror List and was invited to submit a proposal for thisproject. We responded to the RFP and 47 addenda and cooperated through numerous changesin plan and due dates. We submitted not one, but three proposals having committedexperienced staff time, resources, subcontractor and supplier resources to this multi-milliondollar effort to offer the City and its taxpayers the best possible proposal for the heart of thesystem – the Core Systems, as well as for long-term and ongoing Operations & Maintenance. Ibelieve City and HART staff would acknowledge that our efforts were serious, meaningful andvaluable.
The Honolulu Authority for Rapid TransportationPage 2DISQUALIFICATION OF BOMBARDIER’S PROPOSALWe are aware that some would characterize our actions of appealing our disqualification as“sour grapes” or the actions of “sore losers.” In fact, we did not “lose” this award. Our proposalwas disqualified and not even considered. When we examined the public file documents shortlyafter Mayor Carlisle made the award announcement on March 21, 2011, we were shocked todiscover that the disqualification of our proposal swept away what would have been the winningbid. Although the City did not finish the scoring of our proposal, according to the City’s ownevaluation of pricing in its life cycle cost analysis, and the scoring it did do on the technical &management aspects of the proposal, Bombardier had the lowest total price and highest score.It took the media to expose this truth despite a misleading City press release and improperredacting of documents. A summary of the pricing and the scoring is attached for yourconvenience. Also attached is the City’s own “Life Cycle Cost”, or more appropriately, “NetPresent Value” analysis of all three bids, which clearly shows that Bombardier offered the lowesttotal price proposal and best value by a significant margin.What is even more shocking is the City’s handling of our disqualification. Bombardier includedone sentence in all three of its proposals attempting to clarify a poorly drafted provision in theRFP. The provision involved the City adding language to create an overall cap on liability butthen leaving in language that circumvented the cap rendering it meaningless. While the Citypointed out other areas of our proposal that could be strengthened over this time period, theCity never specifically indicated to Bombardier through all this time that the objectionablesentence would be viewed as creating a conditional proposal and would be used, just days priorto awarding the Contract, as a reason to completely disqualify Bombardier and in the process,to sweep aside the lowest total price and highest scoring technical and management proposal.APPEALS WITH THE CITY AND DCCABombardier protested this improper disqualification to the Chief Procurement Officer of the City.We subsequently received a denial of our Protest, in reality by the same team that disqualifiedour proposal in the first place, leaving us no choice but to appeal to the State Department ofCommerce and Consumer Affairs (DCCA).Unfortunately, at DCCA, the Hearings Officer granted the City its summary motion to dismissand we never were afforded the opportunity for a fair hearing where we could present evidenceand testimony of the actions of the City that would have shown that the City acted improperlyand contrary to the Hawaii Procurement code. In addition, the Hearings Officer relied on aclever twisting of the facts by the City’s outside counsel when he conceived a theory thatBombardier “conditioned” its proposal to gain a price advantage on its competition. There waszero actual evidence presented to the Hearings Officer to justify such a theory. In fact,Bombardier‘s price would not have changed one bit at that time or now. The proof thatBombardier did not play this game is sitting in an Escrow bid file that is still in escrow today at alocal Title company and can be accessed to prove that the Hearings Officer got this wrong.
The Honolulu Authority for Rapid TransportationPage 3APPEAL TO FTA AND CIRCUIT COURTIt is for these reasons that we were compelled to file further appeals with the FTA and in CircuitCourt. Bombardier has an obligation to its shareholders, its suppliers and subcontractors andespecially to its employees to see this through. The utmost concern for HART Board membersis the interests of the taxpayers. It defies logic that the City would, at the 11th hour, simplysweep aside the lowest price and highest scored proposal based on one sentence of many tensof thousands, that it felt was objectionable.In fact, the Hawaii Procurement code was written with this logic in mind. The code is notintended for the City to cry “gotcha.” It is written to create a situation where the City becomes anagent to seek the best value on behalf of the taxpayers. In fact in HAR 3-122-97, it states:A proposal shall be rejected for reasons including but not limited to:(B) The proposal, after any opportunity has passed for modification or clarification, fails tomeet the announced requirements of the agency in some material respect…(emphasis added.)If the City truly believed that Bombardier’s sentence created a conditional proposal, and despitewhether the City believes it warned Bombardier or not about submitting such a proposal, theProcurement Code clearly establishes a road to seeking the best value for taxpayers. As hadbeen done on other bids in numerous jurisdictions including those involving FederalGovernment funds, all the City had to do was to provide an opportunity for Bombardier toaddress this issue and even withdraw the sentence.Yet, instead, the City has pursued a course of action of defending its position and award, whichhas led to a wide range of taxpayers questioning the wisdom of its actions and created a lack oftrust in the City’s stewardship of this large and complex Project. The City’s defense of appealsfrom both Bombardier and Sumitomo has a common theme, namely: 1) All protests are untimely, as they should have been made prior to submission of Offers. 2) While the RFP may be poorly drafted and constructed in several instances, it stands.While these have so far proven to be successful defenses for the City, with all due respect, Imust suggest that the HART Board of Directors have a more compelling interest and that is toget this procurement right for the future of Honolulu and to ensure that the best value has trulybeen obtained for the City.
The Honolulu Authority for Rapid TransportationPage 4THERE IS TIME TO GET THE CORE SYSTEMS RIGHTFortunately, there is time for the HART Board of Directors to take charge and get this right. TheHART Interim Executive Director made a presentation to you at a recent Board meetingindicating that the bulk of the anticipated $1.55B federal funding, via the Federal Full FundingGrant Agreement (FFGA), is now not expected until October 2012. Additionally, the City Councilhas stated its preference not to release significant funding from the excise tax account or permitthe floating of City bonds to advance funds to the project until the FFGA is secured. For thesereasons, significant construction cannot begin at this time and a reasonable delay in executingthe Core Systems contract will neither affect the Project schedule nor delay jobs, and especiallyconstruction jobs, from being created.Bombardier continues to believe that the best and most efficient course of action is to reversethe improper disqualification of Bombardier’s proposal and permit the evaluation of all threeOfferors to pick up where it left off, including full consideration of Bombardier’s proposal. Webelieve the results will be compelling and will provide confidence to taxpayers that HART trulyhas acted fully to ensure that the best value was obtained. Such a course of action can beaccomplished very swiftly as most of the work has already been completed.Should the course of action above not be possible, there is another avenue that is viable. HARTcan call for new bids from all three Offerors, which can be accomplished, in a reasonable periodof time, likely not to exceed two months. Such an action has been taken in other jurisdictionswhen a situation arises that potentially taints the procurement process.We are aware that Sumitomo has suggested to you that, should the AnsaldoHonolulu proposalultimately be rejected, Sumitomo ought to be awarded the contract. You should be aware,however that this would create a situation where HART selects the most expensive proposal ofthe three submitted to the City, as the City’s NPV analysis attached to this letter clearly shows.With Bombardier’s proposal reinserted into the evaluation, awarding to Sumitomo would alsomean that the City would have selected the lowest scoring and highest priced proposal of thethree Priority Listed offerors.OTHER FEATURES OF THE BOMBARDIER PROPOSALThe Bombardier proposal also contained many important elements that were passed over in thecourse of this controversy and to which, as HART Board members, you have not been informedof. For example, Bombardier was the only Offeror to include local assembly in Honolulu of amajority of the fleet of rail cars, thereby not only creating local jobs, but also careers for peoplewho would then migrate into the operations & maintenance of the system. Bombardier wasagain the only Offeror to propose 3-car trains thereby providing a higher level of comfort with50% more seating per train than any other Offeror. Bombardier created training and internshiparrangements with both the University of Hawaii-Manoa and Leeward Community College. Infact we already employ UH graduates on the mainland and have sponsored seven summerinterns to-date.
The Honolulu Authority for Rapid TransportationPage 5Bombardier also included both noise & vibration and corrosion control experts on our team toaddress very significant concerns in Honolulu and, perhaps most importantly, we included theVancouver SkyTrain Operating Company on our team to ensure that Honolulu’s system wouldbe operated correctly right from start. No other proposal included these important features.Unfortunately, all of these elements were simply passed over due to the City’s actions indisqualifying Bombardier’s proposal without specific discussions as required under the HawaiiProcurement code and because Bombardier took that action of pointing out an ambiguity in theRFP as, in fact, was its obligation to do under the RFP requirements.I highly suggest that you review all three proposals available to you so that you can decide foryourself about the quality of all three proposals.CONCLUSIONIn summary, Bombardier wishes to make the following points to the HART Board of Directors: • Bombardier hereby extends the validity of its proposal through October 31, 2011. Bombardier will not change the price in this proposal. • Bombardier is a financially strong, serious, and highly respected global leader in the supply of rail transit and aerospace products and solutions, and at no time did Bombardier “play games” to gain an unfair advantage in Honolulu. • Bombardier hereby waives the “condition” in its proposal relating to liability exclusions that the City believes is contained therein and Bombardier confirms that it meets all of the requirements of the RFP. The Hawaii Procurement code clearly permits the withdrawal of any such “conditions” prior to the City being compelled to disqualify a proposal. • Bombardier delivered the lowest total price to the City in its BAFO #2 proposal and received the highest technical and management scores of all three proposals from the City evaluators. • The HART Board of Directors has a compelling interest in not just defending past City actions but in being stewards in seeking the best value and most compelling solution for taxpayers and the future of Honolulu. • With a delay in Federal funding until October 2012, there is time to get the critical Core Systems Contract right. This should be of utmost interest and concern. • The City will be engaging a Core Systems Contractor for at least an 18-year period and therefore it is critical that a financially strong and capable Offeror be chosen who has delivered the most compelling and cost-effective proposal. We truly hope that this letter helps Board members understand the reasons why Bombardier’s proposal should be fully considered. The Honolulu Rail project is too important to the future of the City not to be done right. The HART Board of Directors has the chance now to make this right, restore public trust in the process and act in the interests of the taxpayers. We look forward to a solution that will benefit all of the citizens of Hawaii and that will ensure a successful and affordable project for generations to come.
SUMMARY OF OFFERORS’ SCORING AND PRICING _ _ _ __ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Initial Proposal Bombardier Sumitomo Ansaldo Score 7447 (#1) 6940 (#3) 7019 (#2) DB Price $820,788,511 $992,212,469 $679,848,161 Intermediate O&M Price 139,272,219 341,988,466 247,270,441 Full 5 Year Price 243,583,851 360,157,078 337,365,985 Optional Extended 5 Year 237,876,483 385,455,187 366,490,987 Price Total Contract Amounts 1,203,644,581 1,694,358,013 1,264,484,587 (See Note 1) Total of All Amounts 1,441,521,064 1,732,903,531 1,630,975,574 including Optional O&M 2nd BAFO Proposal Bombardier Sumitomo Ansaldo Score (See Note 2) 7513 (#1) 7389 (#3) 7462 (#2) DB Price $697,263,592 $688,825,949 $573,782,793 Intermediate O&M Price 86,550,393 273,491,568 166,974,503 Full 5 Year Price 176,167,567 240,438,085 339,056,303 Optional Extended 5 Year 203,375,014 250,694,496 317,573,494 Price Total Contract Amounts 959,981,552 1,202,755,602 1,079,813,599 Total of All Amounts 1,163,356,566 1,453,450,098 1,397,387,093 including Optional O&M Notes: 1. DB Prices and Intermediate O&M Prices are lump sum, firm-‐fixed and include escalation. The Full 5-‐Year and Optional 5-‐Year Pricing is in 2011 Dollars and is subject to an escalation index. Therefore adding these prices together is to illustrate the totals for each Bidder. A separate NPV analysis was done which confirms that Bombardier had the lowest overall cost to the City, with Ansaldo the second lowest and Sumitomo the highest. 2. For the 2nd BAFO Proposal, Bombardier’s score was not completed due to its disqualification. The score shown in the table above is the worst case scoring predicted for Bombardier should it be re-‐ inserted into the process and fully scored. The City scored Bombardier up until the “Price” and “Price Realism” categories. To estimate Bombardier’s total score, the Hawaii State guidelines were used for the Price score as well as the City’s Technical Committee analysis of Price Realism, assuming that all 6 Evaluators on the Evaluation Committee would adopt the Technical Committee’s recommendations. In the Debrief Session with the City, the City confirmed that Bombardier was leading in the Scoring up until the time that it was deemed to be disqualified.