cnr changchun/ hyundai rotem decision
DESCRIPTION
From a Boston Judge in relation to the MBTATRANSCRIPT
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COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURTCIVIL ACTIONNO. 201S-00790-BLSl
HYUNDAI ROTEM COMPANY
vs.
MASSACHUSETTS BAY TRANSPORTAION AUTHORITY and CNR MACORORATION
MEMORANDUM OF DECISION AND ORDER ONTHE PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION
INTRODUCTION
On October 22,2013, the defendant Massachusetts Bay Transportation Authority
(MBTA) issued a request for proposal (RFP) for a contract to manufacture and deliver of 152
new Orange Line Cars, 74 new Red Line Cars (with the option to order an additional 58 more
such cars) and related spare parts, manuals, test equipment and training aids (the Contract). The
plaintiff Hyundai Rotem Company (HRC) and the defendant CNR MA Corporation (CNR), as
well as four other firms submitted proposals (bids) in response to the RFP. The Contract was
awarded to CNR, which submitted a bid that was $154 million less than the next lowest bidder-
.HRC; CNR and the MBTA executed the Contract on November 19,2014. HRC filed this action
against the MBTA and CNR on March 20,2015. It is pled in four counts: Count I asks the
court to declare that" (a) the MBTA violated the Bidding Laws and the implied contract by
awarding the Contract to CNR; (b) CNR is neither a responsible nor eligible bidder under the
Bidding Laws and (c) HRC is the lowest responsible and eligible bidder and is entitled to the
award of the Contract;" Count II asks the court to preliminarily and permanently enjoin "the
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MBTA and CNR from proceeding in any fashion with the Contract;" Count III alleges that the
MBTA violated the Public Records Law (G.L. c. 66, 10); and Count IV alleges that CNR
violated G.L. c. 93A, 11. The case is now before the court on HRC's motion for a preliminary
injunction enjoining the defendants from continuing to proceed to perform their respective
obligations under the Contract that they executed six months ago. For the reasons that follow
that motion is DENIED.
BACKGROUNDA. TheRFP
The RFP stated that the Contract would be a "competitively negotiated procurement" in
which the MBTA would select the proposal that provided the "Best Value ... with price and
other factors considered." More specifically the RFP advised bidders that: "For the purposes of
this procurement, all technical evaluation factors other than price, when combined are more
important than lowest price. Therefore, the [MBTA] may select other than the lowest price offer
if it is determined that additional technical merit offered is worth the additional cost in relation to
other proposals .... The [MBTA], however, will not make any award at a significantly higher
overall cost to the [MBTA] to achieve only slightly superior technical features."
The RFP, including technical specifications, is hundreds of pages. Only a few provisions
have special relevance to this case. The MBTA reserved the right to revise or amend the terms
of the RFP before responses were submitted, if it determined it was in its best interest to do so.
Prospective bidders could submit questions to the MBTA designated contract officer seeking
clarification or further explanation of RFP provisions on specified forms. The MBTA did not
have to respond to these questions, but if it did, the response would be in the form of an
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Addendum to the RFP that would be provided to all bidders. Bidders were directed to
communicate with the MBTA concerning the RFP only through a designated contracting officer
and a project coordinator and that "communications regarding this procurement with any other
officers of Massachusetts Department of Transportation (DOT), the MBTA or other third parties,
including outside consultants, are prohibited and may result in disqualification."
The RFP called for bids to be submitted by May 15,2014 in two parts: Part A was the
price proposal and Part B the technical proposal. The MBTA would first open Part B
submissions and complete its review and evaluation of the technical proposals. The evaluation
team consisted ofMBTA management as well as outside consultants, including two design and
engineering firms. They were to evaluate the technical proposals based on five criteria--
technical approach, manufacturing plan, past performance, quality assurance plan, and
participation of minority and women owned businesses--and then to prepare an evaluation report
describing the results of the evaluation process and "the rationale for the ranking and evaluation
of each" proposal.' Only then were the the Part A price proposals to be opened and evaluated.
"Results of the technical and price reviews ... result in a total evaluation of each proposal based
on the evaluation criteria formula." When the contracting officer determined that an award of
the Contract to a particular bidder is in the "best interest" of the MBTA, he was to make his
recommendation to the General Manager of the MBT and the DOT Board of Directors; the
Contract award is subject to their approval. The MBTA reserved its right to enter into final
negotiations with the selected bidder before awarding the Contract.
1 The five criteria had numerous subparts. The RFP, as initially released, called for the evaluation team to record itsevaluations on a 100 point scale. Before bids were due, the RFP was amended and the evaluation team directed touse a so-called "adjectival" scale in which the bidders would be rated: excellent, good, acceptable, potential tobecome acceptable or unacceptable, for each criteria. HRC suggests that there was something nefarious about thischange to a "murky" rating system; however, "best value" procurement in which proposals are rated using aqualitative/adjectival approach appears to be the methodology suggested on the Federal Transit Administrations'Best Practices Procurement Manual website. See Section 4.5.2 Evaluation of Proposals.
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A few of the technical specifications are also relevant to the matters raised by the pending
motion. As originally published, the RFP contained the following paragraph in a section entitled:
Past Performance. (The italics are not in the original document but added for ease of reference.)
Past performance on similar size and scope projects in the North American Market willweigh heavily in the evaluation. The Authority may contact the previous customers of anOfferor and proposed manor subcontractors to supplement the provided information.
In a later section entitled: Technical Approach, the RFP included the following sentence.
Indicate the Offeror's experience with the design and manufacture of stainless steel carbodies for heavy rail transit vehicles, with emphasis on North American projects.
A few pages later, there was an instruction to the offeror to prepare a maitrix of all heavy rail
transit car contracts, especially those made of stainless steel undertaken in the last ten years, with
various information about each, that included the sentence: "List North American projects first."
In a Request for Clarification first submitted on November 13,2013, CNR's agent asked
that the italicized language quoted above be removed, suggesting that this "weighting" of North
American experience might lead to decreased competition for the Contract and noting that in a
previous 2011 RFP for green line cars there had been no comparable language. In its Addendum
No.7 issued on March 4,2014, in apparent partial response to CNR's request, the RFP was
revised to, among several other changes not material to this case, (i) add the following sentence
to the first paragraph quoted above: "Although experience on projects in North America is most
directly relevant, the MBTA recognizes that past performance on projects of similar size and
scope outside of North America is also relevant."; and (ii) eliminate the sentence: "List North
American projects first.", but to add the phrase "describe how these projects (e.g. duty cycles,
climate, other) are similar to this procurement." None ofCNR's other requested changes to
references to North America were made.
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An additional provision in the RFP that is referenced in HRC's motion had its genesis in
in the Acts of2014, Chapter 79, An Act Financing Improvements to the Commonwealth's
Transportation System. Section 2C of that Act appropriated the funds for the new Orange and
Red line cars, among other things. As relevant to this case, it provided that the final assembly of
these cars must take place in Massachusetts and, in evaluating proposals for the Contract, the
MBTA "shall consider, among other criteria, the effect said proposals will have onjob creation
and retention in the commonwealth and how said proposals will foster economic development in
the commonwealth." The MBTA incorporated this language into the RFP.
B. THE BIDDERS
As noted above, six firms submitted formal responses to the RFP, including HRC and
CNR. None of the bidders were based in the United States: two were China based, and one each
from South Korea, Japan, Spain and Canada. Turning to the parties to this case, HRC is
incorporated in the Republic of Korea and has its principal place of business in Seoul. Its
railway division supplies passenger coaches, among many other types of railway equipment, to
countries around the world. It identified 90 rail projects in its response to the RFP, although only
six of those projects were in North America. One was a contract with the MBTA to furnish new
bi-level commuter rail vehicles, in which significant delays (2 Yz years) and mechanical problems
were widely reported in the press. Although HRC encountered difficulties in completing that
project, there is no indication that the MBTA discouraged HRC from submitting a bid for the
Orange/Red line car project.
CNR is incorporated in the Republic of China and has its principal manufacturing facility
in Changchun. It is the largest railcar manufacturer in the world. Although it has manufactured
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cars for use in many countries including Australia, Brazil and Argentina, it had no prior
experience furnishing cars for use in North America.
C. PRE-BID EVENTS
As noted above, in November 2013 CNR submitted a formal request for clarification in
which it requested deletion of statements to the effect that experience in completing similar
projects in North America would receive greater weight than performance of projects in other
countries. In fact, hundreds of "clarification" requests were received from potential bidders,
including 201 from HRC. The MBTA issued dozens of revisions to the RFP in addenda,
including those reflecting on the weight to be given prior work on North American projects that
are described above.
In December 2013, Governor Deval Patrick and several officials from his administration,
including Richard Davey, Secretary of the Massachusetts DOT, participated in a trade mission to
Japan, Singapore and Hong Kong. In anticipation of the mission, CNR's agent asked if a
meeting could be scheduled at its manufacturing facility in Changchun. That request could not
be accommodated, but the Governor, Secretary Davy, and two other members of the delegation
did meet with representatives of CNR at the Marriot Hotel in Hong Kong. A day in advance of
that meeting, a member of the Governor's staff asked for briefing materials on the assumption
that the Governor would want to appear knowledgeable concerning the type of rail cars used in
Massachusetts. Some publicly available information was emailed in response to this request;
the email also included the following sentences: "The information ... is all publically available
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information. We need to be cautious on what further information is provide [sic] as this is an
active vehicle procurement."
At HRC's request, the court permitted HRC to take now former Secretary Davey's
deposition regarding this meeting. He described the meeting as lasting 30 to 45 minutes. Seven
to ten representatives of CNR were present and four from the Massachusetts delegation,
including the Governor who did not stay for the entire meeting. After introductions and the
exchange of cards, a fifteen minute commercial video describing CNR was shown and then a
further description of CNR and its work was offered (through translators, the CNR
representatives did not speak English). There was then a discussion of the Orange/Red line
project. Secretary Davey stated that the DOT was focused on "three things: quality, price and
schedule." Notes from another attendee at this meeting add that "CNR expressed interest in
setting up manufacturing facility in Western Massachusetts, as required by the MBTA's request
for proposals. CNR was encouraged to bid, and it was noted that we are hoping for robust global
competition for the procurement. No follow-up at this time." The Boston Globe also reported
contemporaneously on the meeting: "Patrick was also scheduled to meet with a major
manufacture of subway cars about setting up a facility in Massachusetts, perhaps to build cars for
the Red and Orange MBTA lines."
D. THE BID REVIEWS AND CONTRACT AWARD
Of the six bids submitted, one was considered non-compliant with the RFP because of a
deficient performance guarantee. The other five were evaluated by the MBTA team. The
engineering consultants made site visits and conducted reference checks. Individual meetings
with each bidder took place. One of the bids was found unacceptable based on the technical
evaluation. With the technical evaluations completed, the Part A price proposals were opened for
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the four remaining bidders. The MBTA had retained an outside expert to provide an independent
cost estimate of the project prior to the receipt of any bids. This estimate provided a range of
projected costs (assuming that the MBTA exercised all options for additional cars and parts): a
high of $845 million to a low of $765 million. The four bids when opened ranged from$1 080
million to $566 million (CNR's bid). HRC's bid was the second lowest at $720 million.
After the price and technical evaluations were completed, the MBT A staff recommended
that CNR be awarded the contract. It then entered into negotiations with CNR. Staff noted that
although CNR is the largest rail car manufacturer in the world with extensive experience
manufacturing stainless steel car bodies, it "recognized" that this project would be CNR's "first
experience providing heavy rail vehicles to the North American market." It therefore negotiated
certain risk mitigation factors with CNR; in particular, while the RFP required the successful
bidder to provide an irrevocable letter of credit guaranteeing Contract performance in the amount
of30% of the contract price, CNR agreed to increase that amount by an additional $100 million.
On October 16, 2014, the General Manager of the MBTA accepted the recommendation
of the selection committee and directed that the matter be presented to the DOT Board of
Directors for its approval. Itwas presented at the October 22,2014 Board Meeting. The minutes
of that meeting reflect that among others, representatives of HRC and two other disappointed
bidders appeared and asked the Board to postpone a vote on the award of the Contract. The
Board, however, authorized the MBTA to enter into the Contract with CNR. HRC notes that
Governor Patrick announced the award on Tuesday, October 21,2014, touting the new facility
that CNR planned to build in Springfield to assemble the Orange and Red line cars and its plan to
bid on other projects in North American projects using the Springfield facility as its
headquarters, i.e., a day before formal approval of the Contract by the Board.
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DISCUSSION
This case is before the court on HRC's motion for a preliminary injunction. To succeed
on its motion, HRC bears the burden of showing: (1) a likelihood of success on the merits of its
claim; (2) that it will suffer irreparable harm if injunctive relief is not granted; and (3) that its
harm, if injunctive relief is denied, outweighs any harm that would be suffered by the MBTA or
CNR, if they were enjoined from proceeding to perform their respective obligations pursuant to
the Contract terms. See Boston Police Patrolmen's Ass 'n, Inc. v. Police Dept. of Boston, 446
Mass. 46, 49-50 (2006); Packaging Indus. Group. Inc. v. Cheney, 380 Mass. 609, 616-617
(1980). Because of the nature of this dispute, which affects public transportation and seeks to
enjoin a quasi-governmental entity, the risk of harm to public interests must also be considered.
See Commonwealth v. Mass. CRINC, 392 Mass. 79, 87 (1984); Brookline v. Goldstein, 388
Mass. 443, 447 (1983).
A. Likelihood of Success on the Merits.
1. Did the RFP comply with applicable law?
HRC's first argument is that the project was not bid in compliance with G.L. c. 30,
39M ( 39M). The manner in which the bid process would have differed in a material way that
would have resulted in HRC being awarded the Contract rather than CNR has not been
articulated in a manner understandable to this court. 39M requires that a contract subject to its
terms be awarded to the lowest responsible and eligible bidder, but CNR was the lowest bidder
by a wide margin and the court has not seen anything in the record to suggest that as the largest
manufacturer of rail cars in the world, CNR could not have met the responsible and eligible
standards set out in the statute, if they had applied. Moreover, a public contract bid on a Best
Value basis, as was this Contract, and awarded in the face of a disregard of material
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specifications in the RFP, or based on political connections not merit, would be the result of
arbitrary and capricious agency action, a point discussed below. Nonetheless, if the subject
matter of the Orange/Red line car project were such that 39M applied to it, it would have to
have been bid according to the Section 39M procedures; it was not; and the Contract would be
void. The court, however, could not award the Contract to HRC, as HRC requests, but rather
would have to order that the project be rebid. See Thorn Transit Sys. Intl., Ltd. v.Massachusetts
Bay Transportation Authy., 40 Mass. App. Ct. 650, 651 (1996) (Thorn) (an MBTA project found
subject to 39M after contract awarded had to rebid pursuant to that section) and Modern
Continental Construction Co. v. Lowell, 391 Mass. 829, 837-838 (1984) (contract bid under
39M but found to be governed by G.L. c. 149, 44A-44H had to be rebid, although the plaintiff
raised no issue with the bid procedure until after contract was awarded to a competitor).
In any event, the court finds that this procurement was not subject to 39M. That statute
addresses bids on contracts for work to be performed on "any public work" above a minimum
dollar amount (far exceeded by the Contract in this case). " 39M [applies] to contracts
involving the actual physical 'construction' (including reconstruction, alteration, maintenance,
remodeling or repair) of public buildings and improvements on land owned by the
Commonwealth or one of its subdivisions, and contracts for the materials that typically go into
such construction projects." Andover Consultants, Inc., v. Lawrence, 10 Mass App. Ct. 156, 160
(1980). This case does not involve such a contract. It is a contract, albeit a very large contract,
for the delivery of subway cars, spare parts, and related equipment.
HRC's reliance on Thorn, apparently largely because it involved the MBTA and
subways, is misplaced. In Thorn, the Appeals Court explained that a court "must examine the
character of the RFP which resulted in the contract" to determine if 39M applied. 40 Mass.
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App. Ct. at 653. The contract at issue in Thorn was "the complete replacement of the existing
MBTA subway fare collection system." As the Court explained, among other things, this
required the physical removal and installation of fare collection equipment at the stations and
reconfiguration and remodeling of the stations to accommodate the new system, including design
and installation of money rooms. The Appeals Court concluded that the "alteration and
remodeling work on rapid transit stations required under the subject contract may then
comfortably be encompassed within the term 'public work' as construed in Andover
Consultants." Id. at 655-656. In this case, CNR has not contracted to alter and remodel any
subway stations; it has contracted to manufacture and deliver railcars. HRC's argument that the
cars will run on tracks is no more persuasive than an argument that a contract to provide police
cars or snow removal equipment cannot be bid on a best value basis because they must run on
the Commonwealth's roads.?
2. Was the implied contract breached?
In Cubic Transportation Systems, Inc. v. Massachusetts Bay Transportation Authority,
2002 WL 31957004, at *4 (Mass. Super. Ct. Dec. 12,2002) (van Gestel, J.), Judge van Gestel
thoughtfully explained the contours of the implied contract that arose when the MBTA issued an
RFP for a contract that was not subject to 39M, as follows:
Government entities, like the MBTA here, are liable on an implied contract theory toabide by the limitations imposed by the entity's bid solicitation. The implied contractobligates the bid solicitor to follow and apply those conditions. . .. When no underlyingstatute requires that 'contracts [] be awarded to the lowest [or highest] responsible bidder[,] such a requirement is not implied, but it is to be inferred that the awarding of contractsis left to the reasonable judgment of the [] officers charged with responsibility therefor."Datatrol, Inc. v. State Purchasing Agent, 379 Mass. 679, 698 n. 15 (1980). It has longbeen the law that determinations of this sort are for the agency to make, not the Court, inthe absence of some showing of illegal or arbitrary action. See, e.g., Fred C. McCleanHeating Supplies, Inc. v. Westfield Trade High School Building Committee, 345 Mass.
2 It may also be noted that HNR was happy with the best value RFP for commuter rail cars that it successfully bid ona few years earlier.
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267,273-74 (1963). Courts should not substitute their judgment for the judgment of theagency charged with making such discretionary decisions. Brennan v. The Governor,405 Mass. 390, 396 (1989); Capuano v. School Building Committee of Wilbraham, 330Mass. 494, 496 (1953).
Accordingly, in this case, the MBTA was required to place all bidders on equal footing and to
have had some rational basis for awarding the Contract to CNR. Stated differently, the MBTA
could not act arbitrarily or capriciously in making its contract decision. "A decision is not
arbitrary and capricious unless there is no ground which a reasonable person might deem proper
to support it." Garrity v. Conservation Comm 'n of Hingham, 462 Mass. 779, 792 (2012)
(Internal citations and quotations omitted.).
HRC's lead argument in support of its contention that the implied contract was breached
is that: "MBTA displayed impermissible favoritism to CNR by not disqualifying CNR after
improper communications at the Hong Kong meeting." This argument quite simply lacks
substance. First, there is nothing in the RFP that required disqualification. The RFP states that
"communications regarding this procurement with any other officers of Massachusetts
Department of Transportation (DOT) ... may result in disqualification." (emphasis supplied)
Clearly, whether the nature of the communications at issue require the disqualification of an
otherwise qualified bidder is a matter left to the sound discretion of the MBTA. Here, the
meeting itself was not secret but rather contemporaneously reported in the press in December
2013. More importantly, all evidence concerning the nature of this meeting presented in
preliminary injunction record suggests that it was innocuous. CNR introduced itself to the
Massachusetts delegation and, although the record does not contain a copy of the video CNR
presented, the court will infer that it showed CNR's 53 million square foot manufacturing facility
in Changchun in the best light possible and underscored its status as the largest manufacturer of
rail cars in the world. Secretary Davey, in tum, encouraged CNR to bid on the project because
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DOT wanted a "robust global competition" for the Contract. There is no evidence in this record
that there was any substantive discussion of bid specifications or other matters at this meeting
that would in any way advantage CNR over other bidders. To the contrary, before the meeting
staff reminded the meeting participants that "an active vehicle procurement" was open, and it is
clear that no one who would actually be involved in reviewing or evaluating bid proposals was
present.' Clearly, it was not an abuse of discretion for the MBTA to decide not to disqualify
CNR as a result of the meeting."
In fact, much of the remainder ofHRC's argument that the MBTA's decision to select
CNR was arbitrary and capricious constitutes variations on the theme that CNR's selection was
preordained and the result of unscrupulous, politically motivated favoritism, notwithstanding the
lack of any evidence that supports that contention. HRC asserts that: "Shortly after the Hong
Kong Meeting and CNR's improper communications, the MBTA acquiesced [sic] the campaign .
. . to strip the RFP of its core North American requirements." This "campaign" presumably
refers to CNR' s formal request that the RFP language concerning the "weighting" of prior
experience manufacturing cars for the North American market be removed. According to HRC,
this acquiescence "irreversibly impugned the integrity of the procurement process and
contributed to creating an impermissible 'unlevel' playing field for the rest of the bidders."
HRC's shrill advocacy is not a substitute for cogent argument. The RFP never required
prior experience in the North American market as a precondition to the award of the Contract,
but rather indicated the emphasis that it would place on experience in North America. The
3 At deposition, Secretary Davey testified that he had no role in the preparation of the RFP.
4 It should be noted that during this time HRC was in regular communication with the MBTA with respect to itsopen contract to deliver commuter rail cars. The MBTA directed the court's attention to an email from HRC to thegeneral manager of the MBTA commenting on its have recently appointed a new president of Hundai Rotem USA"to reinforce stronger engineering support on US projects including upcoming MBTA project. ... We are going toparticipate in the Orange & Red Line Bidding in March and I instructed my staff to make a very attractive andcompetitive proposal." This communication is equally innocuous.
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MBTA, in fact, declined to remove that language from the RFP but rather decided only to add a
clarifying sentence: "Although experience on projects in North America is most directly
relevant, the MBTA recognizes that past performance on projects of similar size and scope
outside of North America is also relevant." Moreover, this change could not create an "unlevel
playing field." No further requirement was added to the RFP that advantaged CNR because it
was somehow uniquely positioned to fulfill it.5 At most, this change did no more than open the
playing field and increase competition for the Contract. Moreover, the RFP expressly stated that
it could be revised before bids were submitted. If as originally issued the RFP actually had
excluded potential bidders who did not have previous North American experience, and the
MBTA decided to remove that exclusion to increase the universe of potential bidders, such as the
largest rail car manufacturer in the world, it was free to do that. 6
HRC also argues that it was "manifestly" unfair and a violation of the "Bidding Laws"
for CNR to include within its proposal a commitment to build a production facility in
Massachusetts. However, HRC's proposal also committed to establishing a final assembly plant
in Springfield that would employ 158 people. Indeed, as required by the Act appropriating the
funds for this project, final assembly had to be performed in Massachusetts, so unless a bidder
had a pre-existing production facility in the Commonwealth, and HRC did not, a new
Massachusetts facility was a necessary component of any qualifying bid. Additionally,
5 Of the five bidders whose bids were evaluated: two were based in China, one in South Korea, one in Japan and onein Canada. The vast majority of the prior experience identified by HRC in its response was not in North America.
6 In fact, to the extent that the addition of the sentence quoted above regarding the relevance of experiencedelivering similar rail cars to other countries could be considered a substantive change in the RFP, HRC seemsuniquely poorly positioned to complain about it: both because most of its projects were performed for othercountries and because of its prior problems meeting its obligations in its North American projects. In theirevaluation ofHRC's Past Performance submission, the evaluation team wrote: "Additionally, all of the Proposer'slisted North American passenger transportation rail car projects encountered delays. Customer reference checksidentified issues with the Proposer, such as inadequate staffing levels and lack of schedule adherence, that aresimilar to the Authority'S recent experience with the Proposer. These weaknesses, however, are susceptible tocorrection through Discussions." HRC's grade for the Past Performance criterion in the RFP was "Potential tobecome acceptable."
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mimicking the language of the appropriation, the RFP expressly stated that "the MBTA will
consider in the evaluation of this criterion the effect the Manufacturing Plan will have onjob
creation and retention in Massachusetts and how it will foster economic development in
Massachusetts." HRC complains that it was unfair for CNR to announce that its new production
facility would be a base of operations from which it hoped to bid on other rail car projects in the
United States. This proposal appears to be directly responsive to the RFP's express statement
that it would consider how the plant would address not only the creation of new jobs for this
project, but also the retention of those jobs and further economic development. "So long as
bidders have the opportunity to bid in the same way, on the same information, and to bear the
same risk of rejection, fairness and equality are preserved." Dep't of Labor & Industries v.
Boston Water & Sewer Commission, 18 Mass. App. Ct. 621, 626 (1984). CNR attempted to
marry the RFP requirements with its own plans for entry into the North American market
amortizing the cost of its proposed Springfield facility of future projects not yet bid or awarded
in a way that it undoubtedly hoped would be economically advantageous to it in the long run and
enhance the attractiveness of its offer. HRC's assertion that this constitutes an unfair trade
practice is unsupported by law or logic.
This leads to HRC's most curious argument, that CNR's price proposal is" predatory"
and "dangerously" low-significantly below the independent cost estimate provided to the
MBTA-and the MBTA's acceptance of this low bid proves that "politics trumped business in
this procurement, one of the very evils that the Bidding Laws was enacted to address." The
Orange/Red line car project is, however, a fixed cost bid, and the risk that the rail cars cannot be
delivered for the price quoted falls entirely on CNR. HRC also complains that the MBTA
"impermissibly" abused its discretion by "unilaterally" negotiating with CNR to mitigate risks
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arising from CNR's lack of North American experience and low bid, an opportunity not provided
to it. The RFP, however, specifically stated that negotiations with the selected bidder could be
undertaken before contract award. In this instance, the MBTA negotiated a $100 million increase
to the irrevocable letter of credit securing CNR's Contract performance, over and above the 30%
of contract value required by the RFP. Not only does this increase the MBTA's security, it also
increases the risk to CNR of a failure to complete delivery providing further incentive for
contract completion. HRC then goes on to argue that this mitigation is "woefully inadequate" to
compensate for CNR's lack of experience. Whether the mitigation is enough to compensate for
risk of inexperience is, of course, precisely the type of questions that are necessarily committed
to agency decision making and cannot be second guessed by a court. 7
Stripped to its essentials, HRC complains that its bidding advantage was diminished by
changes in the RFP that placed less emphasis on prior North American experience. If such a
change actually occurred, which is not at all clear, it was fully within the discretion of the MBTA
to make that change before bids were submitted. HRC's efforts to suggest a political cabal to
favor CNR lack any support in the materials submitted to this court or any particular logic."
7 Similarly, arguments that the MBTA evaluation team rated CNR too high or HRC too low on their responses toparticular specifications or criteria are not susceptible to judicial review under a theory of breach of an impliedcontract arising from a Best Value bid project. So too are HRC's warnings about a proposed merger between CNRand another rail car manufacturer recently announced. The MBTA negotiated contractual obligations requiring thatthe CNR personnel and facilities identified in the bid would be used to fulfill the Contract. Whether that approachsufficiently ameliorates risk is for the MBTA to decide not the court.
8 HRC makes much of an August 22, 2014 email chain in which former Secretary Davey reports to Governor Patrickthat "the MBTA team completed their technical review, interviews and opened the financial piece of the bids today.The apparent low, most qualified bidder was CNR, the folks we met in HK last December. They are also the folkswith the option on the land in Springfield that was widely reported a few months ago." The Governor responds:"Really good news. But would they do Pittsfield." This email seems evidence of the opposite of pre-ordainedoutcome. A month later, after the evaluation committee has completed its report and selected CNR there is otheremail in which the date that the award will be submitted to the DOT Board of Directors for approval is discussed,but none of it suggests that anyone has interfered with the evaluation team's or MBT A general manager'sresponsibilities to evaluate the bids. Indeed, on September 24, 2014, the general manager emails Davey that thepost-selection contract negotiations are underway, but if they are protracted that will delay Board approval. OnOctober 16,2014, the general manager formally approved the contract. While the Governor inappropriately
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HRC was widely criticized for its performance in its contract for delivery of commuter rail cars
to the MBTA, but it and CNR, which lacked North American experience, both passed the
technical evaluation phase of the bid review and their, and two other bidders', price proposals
were opened. CNR's was $154 million less than HRC's. Quite frankly, CNR's bid suggests a
willingness to reduce its price, spread the cost of a new manufacturing facility over future work
it hoped to win in the United States, and assume the risk of those business decisions, which it
secured with an approximately $270 million letter of credit. There is nothing in either the
common law or any statute that prevents the MBTA and the Commonwealth from accepting the
benefits of CNR's business decisions. To the extent that there are risks inherent in the MBTA's
decision to select a firm that has not previously delivered rail cars to a United States customer,
even though it is the largest rail car manufacturer in the world, that risk/reward analysis is
properly undertaken by the public officials to whom these decisions have been committed, and
"courts of equity will not interfere." Capuano, Inc. v. School Building Committee of Wilbraham,
330 Mass. at 496.
B. IRREPARABLE HARM
Having found that HRC has not established a likelihood of success on the merits of its
claim, the court need not address the relative, irreparable injuries that HRC and CNR would
suffer if a preliminary injunction did or did not issue. Nonetheless, the court will briefly address
this question. The defendants argue that because HRC has alleged that the MBTA acted in bad
faith in refusing to disqualify CNR following the Hong Kong meeting and revising the RFP to
minimize the requirement of prior North American experience, among other things, it has alleged
facts sufficient to support a recovery of, not only its bid costs, but also any profits that it would
announced the award on October 21, 2014, the day before the Board was scheduled to vote, there is no evidence ofany interference whatsoever in the bid evaluations, selection process, or contract negotiation.
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have earned if it had been awarded the contract. Therefore, according to the defendants, it has
alleged sufficient facts to entitle it to be made economically whole if it proves its case and
cannot show that it would be irreparably harmed in the absence of a preliminary injunction. See
Peabody Canst. Co. v. Boston, 28 Mass. App. Ct. 100-105-106 (1989) ("[I]f a bidder ... is
deprived of the contract through some conduct of the awarding authority tantamount to bad faith,
then the recovery of lost profits is the measure of damages.") On the other hand, ifHRC were
able to prove a breach of the implied contract, but not that the MBTA had acted in bad faith, it
would only be able to recover the costs it incurred in preparing the bid." See Petriccca Canst.
Co. v. Commonwealth, 37 Mass. App. Ct. 392, 399 (1994). This case, however, addresses issues
of import to all of the commuters in the Greater Boston Area who rely on the Orange and Red
lines to get to work or shop or recreate and the businesses who rely on the ability of the workers
to get to their jobs and their customers to get to their shops and entertainment venues. The court
will take judicial notice of the calamitous effect of last winter's snow on the antiquated Orange
and Red line cars. See, e.g. "Outmoded T trains no match for winter's fury," Boston Globe,
February 7, 2015. Clearly, this is a case in which the court must consider whether the public
interest would be adversely affected by the entry of preliminary equitable relief. See LeClair v.
Town a/Norwell, 430 Mass. 328,331-332 (1999).
The Contract was awarded in October 2014 and a Notice to Proceed issued to CNR in
December 2014. This case was not filed until March 20,2015 and the motion for preliminary
injunction until May 11, 2015. Substantial efforts have already been undertaken by CNR toward
9 Of course, if a preliminary injunction issued, CNR would suffer substantial loss as it has already incurred manysunk costs and would have to idle its substantial work force. Those economic losses would however be protected bythe posting of an adequate bond by HRC from which those losses could be recovered if HRC did not ultimatelysucceed on its claims. See M.R.Civ.P. 65 (c): " ... no restraining order or preliminary injunction shall issue exceptupon the posting of security by the applicant, in such sum as the court deems proper, for the payment of such costsand damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined orrestrained. "
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Contract fulfillment over the past six months. Enjoining CNR from continuing the multiple tasks
presently being undertaken in the design of the cars and the manufacturing facility in Springfield
and idling the engineers pursuing them would obviously dramatically impact the timely delivery
of the cars. Moreover, even ifHRC were successful, it is not at all clear that it could simply be
awarded the Contract. See, supra at 10. Itmight very well be that the Contract would have to be
rebid. The adverse effect on public interests of indefinitely delaying work on this project far
outweighs the risk that HRC might not be able to recover all of its monetary loss if it is able to
prove its case.
ORDERFor the foregoing reasons, the plaintiff's motion for a preliminary injunction is DENIED.
Mt!tlttkJustice of the Superior Court
Dated: May 27,2015
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