A circuit judge blocked the award of a contract worth up to a half-billion dollars to a Miami-based company to build and operate two travel plazas on Interstate 95, saying it appeared the state did not follow its own procurement law.
The decision Wednesday afternoon in Rockville by Circuit Judge Eric Johnson came hours after a vote by the state Board of Public Works to delay its contract vote for two weeks to give losing bidder HMSHost time to review documents and present its case.
In a four-page ruling in favor of HMSHost, Johnson said the Bethesda-based company "is likely to succeed on the merits of its claims that defendant Maryland Transportation Authority failed to follow governing procurement law and regulations in the evaluation and selection process."
Johnson ordered the Maryland Transportation Authority, HMSHost and winning bidder Areas USA to return to his courtroom for a hearing March 7, the day the Board of Public Works is scheduled to take up the contract again.
Despite the setback, Areas USA officials remain optimistic that they will prevail.
"This decision is based on very preliminary information," said Xavier Rabell, CEO of Areas USA. "Once the full details of the case are heard, we are confident our award will be upheld."
HMSHost officials said the judge's ruling was a vindication of their belief that the Maryland Transportation Authority's bidding process was flawed and that the evaluation was biased in favor of Areas.
HMSHost contends that the state underestimated the value of the company's package by as much as $80 million and gave Areas a chance to sweeten its offer without extending the same opportunity to HMSHost.
"The process was not fair and transparent," said Paul Mamalian, HMSHost's executive vice president and general counsel. "At this point, with all of the problems around this process, the state should rebid this contract under clear and defined guidelines."
Jack Cahalan, a spokesman for the Maryland Department of Transportation, said lawyers were reviewing the decision.
Areas proposes to spend $56 million to replace Maryland House in Harford County and Chesapeake House in Cecil County, and to bring in new food, fuel and retail vendors that would pay a portion of their profits to the state.
HMSHost proposes spending $75 million to replace the plazas, which it has operated since 1987.
At the Board of Public Works meeting Wednesday morning, Comptroller Peter Franchot signaled his uneasiness with awarding a long-term contract to Areas.
"Once we sign our names to this 35-year lease, there's no turning back," he told Gov. Martin O'Malley and state Treasurer Nancy K. Kopp, the other two members of the board. "I don't have anything against Areas, but here's the hard fact ... we're signing off with a company that has never done business in Maryland."
Maryland Transportation Secretary Beverley K. Swaim-Staley said the Areas proposal had been vetted by her staff, which determined that it would reap revenue for the state of up to $488 million over the life of the deal.
"It exceeds the expectations that we set out at the beginning of the process," she said.
Swaim-Staley said Areas "was the clear winner" in every aspect of the bidding and was allowed to improve its offer only after the company had been selected. She warned the Board of Public Works against delaying the vote.
"I believe we have a fiduciary responsibility to act," she said. "We have a terrific bid. We don't want to take the chance that we could lose this."
Her sentiments were echoed by Assistant Attorney General Stanley Turk, who represented both the Maryland Transportation Authority and the Board of Public Works at Tuesday's hearing in Rockville.
"I think it's important for the board to vote this up or down. We have a great deal. We don't want Areas to walk away," he said.
Franchot disagreed, noting that HMSHost's travel plaza experience goes back decades and encompasses many states while Areas is still building its first U.S. travel plazas, in Florida — a project that state worries has fallen behind schedule.
"The company that actually has the most experience is most likely to run a successful plaza" and return more revenue to the state, he said.
Swaim-Staley said she had talked to her Florida counterpart, who had expressed satisfaction with that state's contract with Areas, and that the Maryland Transportation Authority's executive secretary, Harold Bartlett, had visited all eight of the Florida plazas last week and came away impressed with the structures and the employees.
Tom Fricke, CEO of HMSHost, warned that a contract based on a flawed award might send the wrong message to the business community. He said that in 100 years in the hospitality industry, HMSHost had bid on thousands of projects across the country and had protested the outcome only once before.
O'Malley, a lawyer, said he didn't see any harm in waiting until the next board meeting to take up the contract.
But Areas USA's Rabell made a final — unsuccessful — pitch to the board.
"We are thrilled and ready to invest in Maryland," he said. "We work hard. We compete fairly. We were ranked No. 1. There is no reason to delay."