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Pacific International alleges violation of procurement law

By Giff Johnson, Marshall Islands correspondent

MAJURO, Marshall Islands (Marianas Business Journal, Nov. 9, 2009) – Marshall Islands-based Pacific International Inc. filed the first lawsuit against a United States Compact-funded construction project in Majuro in late October, disputing the bidding process that it contends violated the procurement laws of the country.

PII is the largest construction company in the Marshall Islands, and has significant holdings on Guam. It is the prime contractor for a $27 million Compact-funded road and water improvement project in Chuuk, Federated States of Micronesia.

The suit was filed against the College of the Marshall Islands and the Marshall Islands government procurement officials who sit on a bid committee for the local college that is midway through a major campus reconstruction program. PII is disputing Anil Construction Co.'s recent win of a $2.3 million contract to build a new administration building for the college.

In response to the suit, CMI has agreed not to award the bid to Anil until the dispute is resolved. A court status conference is set for Nov. 11.

The suit in the high court is the first by a construction company since the second Compact went into force in 2003. The Compact injects about $15 million annually for construction related work. Companies in the Marshalls rarely sue the Marshall Islands government or its agencies over construction bids.

PII Chief Executive Officer Joseph "Jerry" Kramer said he is just seeking an even playing field. "We have a protest in and we'd like to be treated fairly," he said. Kramer said that he wants rules to be clearly laid out so that "there is no appearance of special deals."

But college attorney James McCaffrey said that there was no difference in the way the disputed bid was awarded compared to the four previous college construction projects bids, of which PII and Anil each won two.

Because Compact funding is involved, the U.S. Department of Interior's Office of Insular Affairs has weighed in. "OIA has expressed its concern to the Marshall Islands government regarding this infrastructure matter and we are monitoring the situation closely," said Honolulu-based OIA infrastructure official Stephen Savage. "We have communicated that it is our expectation that this matter will be resolved by the Marshall Islands government through a fair, transparent and well-documented process for resolving bid disputes."

PII attorney David Strauss said in the suit that PII's bid was $300,000 lower than Anil - $2,338,468 compared to $2,639,000 - but that Anil scored 89.6 to PII's 89.5 on the bid evaluations.

"Because of the low score difference, the CMI Project Management Unit recommended the lowest bid," the suit says. But the CMI bid committee "instructed the CMI Project Management Unit to seek clarification from the other contractor on some of its 'seemingly incorrect' prices." PII's bid was so close to the engineer's estimate that CMI did not seek any clarification on prices from PII. When the "final scores" were done, Anil improved to 94.2 while PII remained at 89.5, the suit says.

"The alteration of the bid by the other contractor at the direction of the CMI bid committee is a direction violation ... of the Procurement Code, which states that after the bid opening, no changes in bid prices or other provisions of bids prejudicial to the interest of the government or fair competition shall be permitted," Strauss said in the suit.

McCaffrey has asked the High Court to dismiss PII's suit, saying the claim fails to show PII will suffer irreparable harm, one of the requirements for getting a restraining order.

McCaffrey said the system of rating bidders is the same as it has been years, with both PII and Anil fully aware of the system. CMI included a sample technical evaluation form "so the bidders are aware of the 11 technical evaluation factors," he said in CMI's court response. This procedure has been used in at least four other bids that PII submitted to CMI and won, McCaffrey said, adding, "It is impossible for any bidder to have misunderstood that they would be evaluated on both technical merit and price."Explaining why Anil was selected over PII for the bid, the college's reply says, "PII had a higher financial score as it had a lower price, but it had a lower technical score due to poor performance and late performance on current contracts with CMI, a poor proposed onsite supervisory team and a lack of subcontractors."

PII contends that the college's bid committee cherry-picked provisions from two entirely different sections of the procurement code, one that calls for sealed bids and another that provides for request for proposals with evaluations. "The Compact's fiscal procedures agreement says sealed bids are the preferred method for construction projects," the PII suit says, adding that the college violated the sealed bid provisions.

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