Yesterday all my troubles seemed so far away. Now it looks as though they're here to stay. Oh, I believe in yesterday. Yesterday ◊◊◊◊ The Beatles Thank you Governor David Y. Ige and Speaker of the House of Representatives Joseph M. Souki. Tomorrow is brighter! Your leadership, wisdom and vision shall be the order for today and Hawaii's future!

1. Yesterday, April 6, 2015,
The state Legislature has approved a five-year
extension of Oahu's rail tax surcharge, sending to
Gov. David Ige a bill that aims to help pull the largest
public works project in the state's history out of a huge
cash crisis.
With the Senate's 21-4 vote and the House's 39-12
vote Tuesday, lawmakers ended their months long
debate on rail by concluding that the train has already
left the station. The best way forward for the cash-
strapped project, a majority of them decided, would
be to provide the tax dollars needed to keep
construction going but not to bail out the city leaders
on other tough questions, such as how exactly they're
going to fund the future rail system's operations.
Source: Honolulu Star Bulletin. April 6, 2015. By Marcel
Honoré and Kevin Dayton.
http://www.staradvertiser.com/s?action=login&f=y&id=
302725381&id=302725381
While Mayor Caldwell, the leadership and management of the Honolulu Authority
for Rapid Transit were without doubt elated and joyous, the moment was short-
lived as reality came to bear. Justly so. Enter Governor David Y. Ige,
Hawaii Gov. David Ige isn’t saying whether he will
approve or veto any extension of a General Excise
Tax surcharge that is being earmarked for Honolulu’s
$6 billion rail project.
But he does acknowledge that he’s worried an
estimated $910 million shortfall in construction costs
will continue to balloon. And he’s not sure taxpayers
should be penalized for potential mismanagement.
At an editorial board meeting with Civil Beat editors
and reporters last week, Ige noted that until very
recently rail project officials had assured the public
that the project was on time and within budget. But a
few months ago, Honolulu Authority for Rapid
Transportation officials said the project was coming
up significantly short of money.

2. “There’s a big difference between on budget and on
schedule and a $1 billion shortfall,” Ige said. “That’s a
concern. An extension would essentially embrace the
notion that if in fact the project was mismanaged from
a financial perspective, that we are authorizing or
condoning that activity.” ...
Like lawmakers, Ige wants to see the city take more
ownership of the project and its finances. At the very
least, he said it should be a point of debate since the
project is funded with state and federal money.
[Emphasis Supplied]
Source: Hawaii Free Press. April 6, 2015 News Read.
By Andrew Walden.
http://www.hawaiifreepress.com/ArticlesDailyNews/tabid/65/ID/
14983/April-6-2015-News-Read.aspx
Case in point,
“Gov. David Ige still isn’t convinced the money is
needed, at least not yet. Ige tasked his budget
director, Wes Machida, with finding out just how
desperate the city is for more cash, including getting
detailed cost estimate information that Honolulu
officials are loathe to share because they believe
it will taint the bidding process.”
[Emphasis Supplied]
Source: Civil Beat. By Nick Grube. Math Problem:
Does Honolulu Rail GET Shortfall Really Add Up?
http://www.civilbeat.com/2015/03/math-problem-does-
honolulu-rail-get-shortfall-really-add-up/
***
Last August [2014], HART unsealed bids for the
construction of the first nine stations along the 21-
station route, but the lowest came in at more than
$110 million above what HART had budgeted.

3. HART then decided to repackage and recalibrate the
bid in order to lower costs, splitting the work into three
different contracts for three stations each.
Tuesday's bids [March 3, 2015] were the first of three
solicitations that HART put out for bids for the nine
stations.
Hawaiian Dredging Construction Co. Inc. came in with
the lowest bid at about $79 million, followed by Nan
Inc. at $85 million, Hensel Phelps at $88 million,
Watts Constructors at $88.8 million and Ralph S.
Inouye at $117.5 million.
The city had estimated that the stations would cost
between $60 million and $75 million to build.
However, a 13 percent contingency fund would raise
that amount to about $86 million, according to HART
spokeswoman Jeanne Mariani-Belding.”
[Clarification Supplied]
Source: Pacific Business News. By Duane Shimogawa. Honolulu
rail transit station bids come in $4 million above city estimate.
http://www.bizjournals.com/pacific/blog/morning_call/2015/03/
honolulu-rail-transit-station-bids-come-in-4.html?page=all
***
From PBN Report HART ESTIMATE
$117.5 Million - Ralph S. Inouye
$ 88.8 Million - Watts Constructors
$ 88.0 Million - Hansel Phelps
$ 85.0 Million – Nan Inc. $86 Million
▼ ▼
Reason for $6 Million Difference? Reason for $7 Million Difference?
$ 79.0 Million – Hawaiian Dredging Construction Company
Reason for $9 Million Difference?
▲
$68 Million

4. U.S. Department of
Transportation
Federal Highway
Administration
MEMORANDUM
Subject:
Bid Analysis and Unbalanced Bids Date: December 1, 1988
From: Chief, Construction and
Maintenance Division Office of
Highway Operations
Reply
To:
HHO-32
To: Regional Federal Highway Administrators
Direct Federal Program Administrator
Mr. Ronald Heinz' May 16, 1988, memorandum on bid analysis and
unbalanced bidding listed several steps which should be considered in
analyzing bids and possible actions to be taken.
We have attached, for your information, a copy of a memorandum
showing how one Division Administrator is addressing this situation.
He has taken a strong, positive stand by requesting a bid analysis from
the State and, where acceptance of an unbalanced bid is
recommended, support for the State's recommendation and the
controls to be used to protect the public interest. He will give full
consideration to the State's judgment, but he wants to be assured that
this judgment is supportable.
If you are not yet fully satisfied with the bidding and award controls
being exercised by States in your region, the attached example may
give you some ideas on how to address the situation.
Original Signed By
William A. Weseman
Attachment

5. U.S. DEPARTMENT OF TRANSPORTATION
FEDERAL HIGHWAY ADMIN1STRATION
October 12, 1988
Bid Analysis and Unbalanced Bidding
The FHWA has been placing increased emphasis on bid analysis and
unbalanced bidding. At the National level, the FHWA has supported
and encouraged improved methods, including computerized methods
for analyzing bids to determine unbalanced bidding and bid rigging.
The FHWA Division Offices have been instructed to work with the
State Highway agencies to improve bid analysis and decision-making
on award of contract, to more thoroughly review bid information, and to
condition award concurrence or withhold concurrence where
:necessary to protect the Federal interest.
As you can tell by recent letters from my staff, we have been more
closely reviewing bids for unbalancing. On projects in which there has
been substantial differences between bid prices and the engineer's
estimate, we have pointed out those bid items and have asked that
they be closely monitored during construction.
We believe that the [STA deleted] should initiate a bid analysis process
to evaluate bids for unbalancing. The purpose of the evaluation would
be to detect situations where award of contract to an apparent low
bidder would result in a financial advantage to that contractor with a
corresponding financial disadvantage to [STA deleted] and FHWA.
We believe implementation of an analysis process would not only
provide both [STA deleted] and FHWA tools for better protecting the
public interest, but would also fit into focus on controlling overruns in
project cost.
In our review of bid information involving substantial differences
between the low bid unit prices, we are required to consider first,
whether there is an error in the estimated quantity and if there is no
error, whether the bid is mathematically or materially unbalanced. A
mathematically unbalanced bid is one containing a bid item(s) which
do not reflect reasonable actual costs and a reasonable proportionate
share of the bidder's profit and overhead. A materially unbalanced bid
is one for which there is reasonable doubt that award to the bidder
submitting the mathematically unbalanced bid will result in the lowest
cost the Government.

6. As you will note from the enclosed excerpt from an FHWA
Headquarters memorandum on the subject, unbalanced bids are a
continuing concern and materially unbalanced bids require FHWA to
take action to protect the Federal interest. In these instances, the
Division Administrator may concur in the state's decision not to award
the contract or if the State decides to award, the Division
Administrator's action may range from non-concurrence to concurrence
with conditions limiting Federal participation.
While we intend to carry out responsibilities within the limits of our
resources, we will be requesting information from [STA deleted] when
an apparent unbalanced bid is identified. Consequently, we believe our
mutual interests would be best served if [STA deleted] initiated a
formal process for bid analysis and for decision-making regarding
unbalanced bids.
To begin this process, we recommend [STA deleted] undertake routine
comparison of the low bidder's individual bid amounts with the
engineer's estimate. Where substantial differences exist, the estimated
quantities should be checked. If a quantity error is confirmed, a
decision should be made on whether to award or reject bids.
If after examination, the estimated quantities are determined to be
reasonably accurate, then the low bid should be further evaluated for
unbalancing.
A detailed review of bid items can reveal where contractors may be
anticipating overruns by using substantially higher bid prices for those
items. Knowledge of this occurrence should alert the project manager
to monitor these items to control overruns. A recent example of this is
PCC slab replacements as a part of Interstate 4R projects.
The detailed review will also identify bid items which were bid at token
prices. Such bid items require continued project monitoring to ensure
the contractor performs. We have commented several times on token
prices for flagging.
The above analysis is based on the assumption that the engineer's
estimate is reasonably accurate. This has been a weak element in the
[STA deleted] program. FHWA has been tracking the accuracy of
estimates on an annual basis since 1984. A state is considered to have
a satisfactory estimating procedure if 50% of the engineer's estimates
are within ± 10% of the 1ow bids. For [STA deleted], the percentages
have ranged from 37% to 49%.

7. In the interim until [STA deleted] establishes its bid analysis process,
we will continue to review bid information, seeking clarification on
apparent unbalanced bids, and commenting on project monitoring
requirements or conditioning our concurrence action as appropriate.
However, beginning with bids submitted for our concurrence or non-
concurrence after January 1, 1989 we are asking the following
information accompany the request:
1. Results of your bid analysis: Identify which, if any, of the bid items you
believe are unbalanced. Confirm that quantities of these items have
been checked and any errors identified. Identify any of these items
considered to have the potential to significantly overrun or underrun.
Indicate whether the unbalanced item is considered to be
mathematically or materially unbalanced.
2. In cases where you propose to award a contract with an identified
unbalanced item, indicate why you believe it is in the public interest to
do so, and indicate what you expect to do to control the unbalanced
item.
We recognize that there are many legal and administrative
considerations in reaching a decision on whether a bid is to be rejected
on the basis of unbalancing. We also recognize that considerable
judgment is required in reaching a decision on whether a bid is
mathematically or materially unbalanced.
We intend to give full consideration to your judgment in these matters
and your proposed actions in reaching our decisions on award
concurrences.
The above mentioned excerpt includes discussion of the benefits of
incorporating into contract specifications a specific clause prohibiting
unbalanced bidding and encourages use of the AASHTO Guide
Specifications for Highway Construction provision. The current
Standard Specifications are silent on this matter except for the general
provision expressing the state's right to reject any or all proposals. With
the new Standard Specifications now being developed, an opportunity
to include such a provision is available.
Finally for your information, more than half the States are now involved
in using AASHTO's Bid Analysis and Management System (BAMS)
computer software package.

8. Two of the modules in BAMS are specifically designed for improving
the engineer's estimate and performing the analysis of bids. We urge
you give consideration to using it. This was the subject of a workshop
[dates omitted] which was attended by several of your staff.
Because this is a significant proposal which we expect will require
several discussions to arrive at a mutual understanding, we would be
pleased to meet with you and your staff to go over it. Please advise as
to your availability.
Contact: Jerry Yakowenko, Office of Program Administration, 202-366-1562
E-mail Jerry
***
Gerald.Yakowenko@dot.gov
8:48 AM (21 hours ago)
to Tara.McLoughlin, me
Tara,
In reply:
Yes, the 5/16/1988 memo is still in effect.
Thank you
__________________________
From: McLoughlin, Tara (FHWA)
Sent: Wednesday, May 06, 2015 2:29 PM
To: Yakowenko, Gerald (FHWA)
Cc: 'clifhasegawa@gmail.com'
Subject: question on Bid Analysis and Unbalanced Bids memo
Hi Jerry—
I got a call from Mr. Clifton Hasegawa in Hawaii today. He was referred to me by the main FHWA line.
He wants to know if the “Bid Analysis and Unbalanced Bids” Memo of May 16, 1988 (online at
http://www.fhwa.dot.gov/programadmin/contracts/880516.pdf) is still in effect. I did a little searching for him
on the FHWA site, and found this page http://www.fhwa.dot.gov/construction/cqit/award.cfm, which seems to
suggest that the memo is still valid (I also got your name and contact info from this page).
If you would be kind enough to reply to both Mr. Hasegawa and me, I sure would appreciate it.
Thanks, and hope you are having a great day!
Tara E. McLoughlin
Communications and Marketing Specialist
Federal Highway Administration
Office of Safety
E71-320
1200 New Jersey Avenue, SE
Washington DC 20590
Telephone: 202-366-2176
Email: tara.mcloughlin@dot.gov

9. ***
The Integrity and Transparency in the contracting process is paramount.
The Honolulu Authority for Rapid Transit (HART) repackaged and recalibrated
the solicitation issued in 2014 for nine stations along the 21-station Rail Transit
route “in order to lower costs, splitting the work into three different contracts for
three stations each the procurement.” [Emphasis Supplied]
This is the second round of bidding where contractors have prepared bids for
now split procurements.
The differential between the Hawaiian Dredging Construction Company and the
high/low range of the Honolulu Authority for Rapid Transit (HART) estimate is
$16 Million.
This $16 Million spread between the Hawaiian Dredging Construction Company
bid within range of the Honolulu Authority for Rapid Transit (HART) estimate.
From a contracting perspective, alarm is justified, reasonable cause for high alert
as red-flags are raised, not limited to possibility of mistake, intentional
underbidding and compromise of the integrity and transparency of the
procurement process.
Whether an award to Hawaiian Dredging Construction Company is justified
requires a determination that the bid submitted by Hawaiian Dredging
Construction Company is balanced, supported by the prices, pricing structure
and is without any irregularities or mistakes.

10. The fact that this procurement action part of the repackaged and recalibrated
2014 solicitation, reasonably, the estimate prepared by the Honolulu Authority for
Rapid Transit (HART) is well forecasted, prepared, sharpened and analyzed.
Would post-award change order(s) upward to $6 Million, $79 Million Hawaiian
Dredging Construction Company bid, $85 Million Nan, Inc. bid and the top-level
$86 Million estimate by the Honolulu Authority for Rapid Transit (HART) be
perfunctory and justifiable?
Thank you Governor David Ige for requiring Mayor Kirk Caldwell, the Honolulu
City Council and the leaders and managers of the Honolulu Authority for Rapid
Transit (HART) ask tough questions and “take more ownership of the project
and its finances.”
Mayor Kirk Caldwell, the Honolulu City Council and the leaders and managers of
the Honolulu Authority for Rapid Transit (HART) shall be held to be accountable
and responsible.
Going forward, business as usual is not acceptable. Improvements are required
and are mandated.