Wednesday, February 13, 2013

Host International, Inc. v. Maryland Transportation Authority (Cir. Ct. Balto. City)

Filed: November 5, 2012
Opinion by Judge Audrey J.S. Carrion

Held:  (1) The majority of Plaintiff’s claims failed because the disputed government contract was not “procurement” as defined by applicable statutes, regulations, and the Request for Proposal; (2) although the winning bid was not approved by one of three legislative committees before being awarded as required by statute, the court declined to void the contract for public policy reasons. 

Facts:  Plaintiff sued the Maryland Transportation Authority (“MTA”) and various administrative agency leaders, alleging that a public-private agreement to develop and operate two travel plazas was awarded improperly.  Plaintiff argued that the MTA’s award of the Interstate 95 Travel Plaza Redevelopment Public Private Partnership Lease and Concession Agreement (“I-95 P3”) was illegal under applicable procurement laws and regulations.  Plaintiff sought a declaratory judgment that the award of the I-95 P3 was null and void and imposing procedural requirements for a re-bidding process.  The MTA moved to dismiss.  After a thorough examination of the statutory, regulatory, and administrative law concepts controlling the dispute, the Circuit Court for Baltimore City dismissed Plaintiff’s complaint in its entirety with prejudice. 

Analysis: The I-95 P3 and other public-private partnerships like it are being used increasingly by state and local governments to develop infrastructure with less funding by “delegate[ing] project risks and construction management to private parties[.]”  With those goals in mind, the MTA sought a party to lease two travel plazas and “to enter into a concession agreement for thirty-five years, during which time the private-sector partner would be fully responsible for redeveloping and then maintaining and operating these travel plazas.”  The court noted that the contract was estimated to be worth approximately $400 million. 

          The court determined that the procurement laws and regulations at issue did not apply to MTA’s proposal and award of the I-95 P3.  Under those laws, a “procurement occurs where the State buys or temporarily obtains, as lessee, goods or services.”  Md. Code Ann., Transp. Art. §§ 11-101(m)(1)(i)-(ii).  Further, MTA regulations exclude “from procurement the occurrence when the State of Maryland leases its own property.”  COMAR (2012).  Last, the court noted that the Request for Proposal, “which Plaintiff agreed to abide by in bidding for this P3 agreement,” was clear that the project would not be subject to procurement laws.  Thus, the court concluded, “the I-95 P3 lease of State travel plazas in exchange for revenue and other benefits is not covered by the term ‘procurement’ as defined by Maryland law and regulation.”

          The court dismissed with prejudice the majority of Plaintiff’s claims because the procurement laws and regulations the MTA allegedly violated did not apply to the I-95 P3 project.  The court dismissed other claims, such as biased and capricious action by the MTA, for incomplete factual pleading.  Plaintiff’s sole remaining claim was that the award was illegal and void because the MTA submitted it to only two of three legislative committees as required by the Maryland Code, Transportation Article § 4-406(f).  The court agreed that MTA failed to comply with the statute, but it invoked policy justifications in declining to void the award for a technical statutory violations.  The court reasoned: “Nothing in the record suggests that the public interest will be seriously harmed by the enforcement of this agreement as opposed to a rehashing of the bidding and award process.”  Further supporting the court’s conclusion was Plaintiff’s waiver of this claim by its failure to raise the issue during the bidding process.   
The full opinion is available in PDF