A 30-page brief filed late Thursday in a lawsuit against the Public Finance Authority over a $137 million contract it awarded to oversee some $16.7 billion in disaster recovery projects alleges the agency lacked the statutory authority to do so and had a clear conflict of interest when it selected a firm whose parent company had employees embedded with the V.I. Public Works Department, when three DPW executives were on the committee that evaluated the bids.
Hill International filed suit on Sept. 10 after it said it exhausted efforts to learn why the PFA awarded the contract to CH2M for a “staggering” $107 million more than its bid of just over $30 million when the evaluation committee scored Hill highest of all as to “cost effectiveness” and second-highest overall of the nine participating bidders. Moreover, the RFP stated that two contracts would be awarded, it said. The company is seeking a temporary restraining order, preliminary injunction and declaratory relief.
In a partially redacted response filed Sept. 19, after removing the case from V.I. Superior Court to V.I. District Court, the PFA said it chose the company that represented the best value for the territory, not the lowest price, and that Hill did not meet all the technical requirements. It has also vociferously denied the conflict-of-interest claims, and said delaying the work will risk missing the deadline to spend the federal relief dollars within 10 years.
The scope of work includes project and construction management for the rebuilding of schools, office buildings, roads, drainage systems, essential services facilities, hospitals and other infrastructure that was damaged or destroyed by the twin Category 5 hurricanes of 2017.
The money is mostly a mix of Federal Emergency Management Agency grants and Community Development Block Grants administered by the Department of Housing and Urban Development. In January, Gov. Albert Bryan Jr. announced the Rebuild USVI initiative to expedite the recovery by consolidating the work under a “Super Project Management Office,” hence the contract that is now in dispute.
According to Hill’s latest brief, the committee that evaluated the bids included Public Works Commissioner Derek Gabriel, Chief Engineer Tawana Nicholas and Highway Program Manager Jomo McClean, even though two employees of CH2M’s corporate parent, Jacobs Solutions Inc., were embedded with the department at the time the contract was awarded. Moreover, Jacobs is currently advertising six jobs in the territory “that are plainly intended to staff this contract, in the event it survives Hill’s challenge,” the brief states. Former DPW Commissioner Darryl A. Smalls also served on the committee, it said.
“DPW is receiving a benefit from the work being performed by the Jacobs employees, and the net value of that benefit could be very high, depending on what amounts DPW is paying or not paying, as the case may be,” Hill’s brief states. “In addition, the presence of two Jacobs employees in a government agency that has three officials on the Evaluation Committee creates a very real risk that those employees could have learned confidential information about this procurement,” including an independent cost analysis the PFA solicited prior to receiving the proposals that put the range of the contract at $152 to $226 million, it alleges.
“Significantly, there is no suggestion that DPW Commissioner Gabriel erected any kind of a firewall at DPW to ensure that” the embedded Jacobs employees — Christopher Guerra and Bill Bekemeier, an engineer and senior project manager who was formerly with CH2M — “would not either intentionally or inadvertently learn confidential information about the RFP through seeing documents, overhearing conversations, viewing emails, and the like,” according to Hill’s brief. Declarations by members of the evaluation committee that they never talked to the Jacobs employees about the RFP “do next to nothing to alleviate the appearance of impropriety and raise more questions than they answer about the existence of conflicts,” it says.
Moreover, the PFA lacked the statutory authority to award the contract at all, which under Virgin Islands Rules and Regulations is the sole purview of the Property and Procurement Department, the brief states. “Far from being a procurement agency for the V.I., VIPFA’s statutory responsibility is to issue revenue bonds under the direction of the GVI, and to make interest and principal payments on bonds from Gross Receipts Taxes and other GVI tax revenues pledged against those bonds. Because P&P had no role in making this procurement, it is unlawful on that basis alone,” it said.
The PFA therefore also cannot promulgate procurement regulations, according to the brief, including bid protest rules it claimed Hill failed to exhaust when the company learned on Aug. 15 that it was not awarded the contract.
Hill said it was stymied when it sought a debriefing with Procurement and Contracts Manager Michadia Veira on Aug. 16, but did not get a meeting until Aug. 30, and only after it emailed Veira the request a second time. Hill subsequently filed a bid protest on Sept. 3, per the “supposed procurement regulations,” it said.
In its opposition to Hill’s complaint, the PFA submitted a declaration by evaluation committee member Nicholas that among other things said Hill was rejected because its “‘labor mix … was insufficient to meet the Construction Management portion of the RFP’; 2) it was not sufficiently detailed …, and failed to … demonstrate that [Hill] would be ready to initiate performance on day one, and 3) did not ‘propos[e] sufficient resources (i.e. boots on the ground) to perform the scope of work,’” according to the brief.
She further stated that the committee was concerned that the PFA would be called upon to fill those gaps in Hill’s proposal, or that it would result in costly change orders, it says.
However, those reasons for its rejection were never stated in Hill’s evaluation report and show a reliance on what is known in procurement parlance as “price realism,” which is an analysis used to determine whether a bid price is unreasonably low, the brief states. But the RFP contained no requirement to conduct such an analysis, it says. “VIPFA’s own declaration makes it clear that that the Evaluation Committee relied on unstated criteria in considering Hill’s bid, which is contrary to law,” the brief alleges.
“Moreover, the reasons now given by Nicholas for the award to CH2M rather than Hill are post hoc rationales — i.e., rationales that are contained nowhere in the Report but instead are contrived after the bid award — to try to defend the indefensible. The rule that post hoc rationales may not be considered by a Court in a bid protest case is well-settled and is based on a general principle of review of agency action,” it says.
Additionally, the evaluation committee’s scoring of cost-effectiveness was arbitrary, Hill alleges.
In the four non-price categories, “Hill received an aggregate score of 65.6 points and CH2M, 75.7. The difference in dollar terms between CH2M’s bid of $137,000,000 and Hill’s bid was $106,711,015.36. This difference means that CMH2’s bid was 4.5 times higher than Hill’s. Yet, in the cost-effectiveness scoring, however, Hill scored 15.6 against CH2M’s score of 10.8, a ratio of only 1.44. Plainly, the cost-effectiveness scores for CH2M were arbitrarily high and did not reflect the enormous magnitude of cost savings offered by Hill’s bid over CH2M’s,” the brief states.
“Had the cost-effective scores for CH2M reflected the 4.5 ratio in bid amounts, CH2M would have received only 3.5 points for cost effectiveness, and Hill’s total score of 81.2 would have exceeded CH2M’s. In short, the cost-effectiveness scoring was itself an instance of ‘arbitrary action in the procurement process’” that is prohibited by the Code of Federal Regulations, according to the brief.
Finally, in its response to the complaint, the PFA failed to address Hill’s allegations that the “Virgin Islands has been plagued in the past by cronyism in the award of contracts and improper use of procurement procedures” since 2002 when the PFA was audited and then audited again in 2017 by the U.S. Office of the Inspector General, Department of the Interior. The 2017 report found a litany of shortcomings at the agency, which the IG’s office said placed millions of dollars at risk for fraud, waste and mismanagement.
“When contracts of this magnitude are at issue, and there is evidence that the procurement laws have been violated, public distrust follows,” Hill said, citing a 1999 case, C&C/Manhattan v. Government of Virgin Islands, decided by now V.I. Supreme Court Justice Maria M. Cabret when she was a Superior Court judge.
“To withhold the injunction under such circumstances would result in a loss of public confidence in the integrity of the procurement system. Thus, the Court finds that [the disappointed bidder] and the public would be irreparably harmed if [the awarded] were permitted to proceed under the contract,” it said.
Hill International is represented by Stefan B. Herpel and Alex M. Moskowitz of Dudley Newman Feuerzeig of St. Thomas. The PFA and its Office of Disaster Recovery are represented by David Bornn of Winston & Strawn LLP of Washington, D.C.
