A Montgomery County judge expressed disbelief Wednesday that Maryland officials defended their selection of a private team to design billions of dollars worth of toll lanes without addressing a losing bidder’s allegation that the winning proposal is not “financially feasible.”
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Montgomery Circuit Court Judge John M. Maloney said he would rule Thursday on the narrow question before him during the hearing: whether the losing bidder, a team led by Spanish firm Cintra, had filed its bid protest in time.
The legal case could have significant cost and timing implications for one of the largest highway projects ever in Maryland, which would add four toll lanes to Interstate 270 and part of the Capital Beltway. It has been the signature “traffic relief” plan for Maryland Gov. Larry Hogan (R), who has touted public-private partnerships as a way to build expensive infrastructure.
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Maloney on Wednesday expressed dismay at the Maryland Department of Transportation’s legal argument that the winning team abided by the rules of the solicitation and the losing bidder was too late in its challenge of those rules. The judge appeared incredulous that the state hadn’t tried to counter the losing bidder’s argument that the winning proposal was based on unrealistically low construction cost assumptions that could result in massive delays and cost overruns.
“You’re saying it’s okay [for a winning proposal] to be financially infeasible because the time to protest that was when [MDOT] came up with those rules?” the judge asked.
Later in the hearing, the judge said, “Financial feasibility isn’t something to be considered? … That’s kind of hard to hear from our state government.”
Losing bidder asks judge to review Maryland's choice for Beltway, I-270 toll lanes developer
The losing private consortium, known as Capital Express Mobility Partners, sought a Circuit Court judicial review in September after MDOT had twice rejected the bid protest.
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The legal case focuses on a “predevelopment agreement” awarded in August to Australian toll road operator Transurban and Australian investment bank Macquarie. The team has begun designing the toll lanes for up to $54 million at its own expense and will have the right of first refusal on a decades-long deal worth billions to build and operate the lanes. Under a broader public-private partnership contract, the companies would build the lanes and finance their construction in exchange for keeping most of the toll revenue over 50 years.
Losing bidder protests Maryland's choice for Beltway, I-270 toll lanes developer
The Cintra team argues that the winning Transurban team “gamed” the selection process by assuming artificially low markups on construction firms’ overhead costs and profit. That approach, Cintra has argued, will lead to escalating costs and construction delays down the line and, potentially, construction firms quitting — what Cintra’s lawyer, Douglas F. Gansler, called a “Purple Line on steroids.”
The Maryland light-rail line, which also is being built as part of a public-private partnership, is 4？ years behind schedule and recently soared to $1.46 billion over budget — nearly a 75 percent cost increase — after the private consortium’s original construction contractor quit following disputes with the state over delays and mounting costs.
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The protest filing asks that MDOT disqualify the Transurban team or reopen the bid competition, which would add months to the project. However, that probably would happen only if MDOT loses what could be a protracted court fight. If Maloney rules that the bid protest was filed in time, the case would go back to MDOT for another decision. Gansler, a candidate for Maryland governor, said he presumes MDOT would uphold its two previous rejections, which would result in Cintra taking the case back to Circuit Court.
Losing bidder on Md. toll lanes project says winner assumed "unrealistic" construction costs
While court action is common on large infrastructure projects, it injects significant risk because it can delay construction and increase costs. Higher construction costs also could be passed on to motorists via higher toll rates.
MDOT has said it gave all bidders “flexibility in managing financial risks” and that Cintra didn’t object to the formula by which the financial proposals would be judged. Transurban’s winning proposal had a “significantly higher” financial score — twice as high as Cintra’s — while Cintra had a “marginally higher” score on the technical merits, MDOT has said.
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Lydia B. Hoover, an assistant state attorney general, said the Cintra team was required to submit any protest of the bid solicitation rules before financial proposals were due in January 2021. She said the team had the “worst” financial proposal of the three bids.
Cintra “allegedly saw things that it didn’t like weeks or even months before it lost the competition, but it waited until it lost before it lodged a complaint,” Hoover told the judge. “ … It’s an attempt to get two bites at the apple.”
The judge jumped in, asking Hoover how the Cintra team could have realized its contention that the Transurban bid was “not financially feasible” before the bids were submitted.
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“How could they possibly have known that?” Maloney asked.
Maryland board approves first contract to design toll lanes for Beltway, I-270
Hoover said all the teams knew how the financial pitches would be scored, including how cost assumptions would be judged.
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“Are you saying it’s okay for a bidder to [include] no costs for any permits or fees or anything else?” Maloney asked. “ ... That’s fair? No payroll? No insurance?”
Hoover said the toll lanes would be built and operated “at net zero cost to the state.” The decades-long contract for the public-private partnership, she said, will be for a “bankable project.”
Gansler said the Cintra team couldn’t know about problems with the winning financial proposal until after Cintra learned why its bid wasn’t selected. He said the Cintra team also couldn’t have known earlier that the state would select a team that didn’t include significant construction expertise — something he said the bid rules required and that made the Transurban team less qualified.
Transurban leader calls Maryland's planned toll lanes for Beltway, I-270 'transformative'
The Transurban and Macquarie team initially included Atlanta-based Archer Western Construction, but it was not part of the final proposal. Transurban’s and Macquarie’s proposal named themselves as the lead construction contractor.
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“Seriously?” Gansler said. “How are you going to have a lead contractor be the toll booth guys and the money guys?”
A Transurban spokeswoman said before the hearing that the team has begun to solicit proposals from construction contractors and plans to select one this summer.
MDOT said the Cintra consortium should have objected to the construction firm leaving the Transurban team in January 2021, when it first learned of it in a news release, rather than a month later, after it lost out on the contract.
MDOT has said it required only that teams have construction management experience, which the Transurban team does. Transurban operates 53 miles of toll lanes in Northern Virginia.
Maryland plans to add two toll lanes in each direction to the Beltway between the Virginia side of the American Legion Bridge and the I-270 spur, as well as on I-270 to Frederick. On lower I-270, one carpool lane would be converted into a toll lane, while MDOT says the lane configuration north of Interstate 370 is still being studied. The regular lanes would be rebuilt and remain free.