A special state appeal panel has invalidated the selection by Maine's Bureau of General Services (BGS) of a proposal by Maine Natural Gas (MNG) to build an 80-mile-long natural gas pipeline to the state capital, Augusta, and the surrounding Kennebec Valley.

In a decision issued Wednesday, the panel said Summit Natural Gas of Maine Inc., a competing bidder that had appealed the BGS decision, had established "that the awarding of the contract to provide natural gas service to the August/Gardiner area to MNG was in violation of law, contained irregularities that created a fundamental unfairness, and was arbitrary or capricious."

The panel found that the BGS's request for proposals (RFP) "does not support the argument made by BGS and MNG that BGS was looking for proposals to serve only state facilities located in Augusta...not only does the failure of the RFP to include a clear definition of the scope of work constitute a violation of law, but also the lack of a clear definition resulted in a fundamentally unfair and arbitrary or capricious determination of job creation and cost."

The panel also found that BGS erred in using unit cost rather than cost savings to score proposals, and inconsistently scored portions of proposals from the three bidders for the project -- MNG, Summit and Self-Gen Inc. -- in which the bidders used three different methods to estimate the number of jobs their projects would create.

In June Maine officials selected MNG, a company affiliated with Central Maine Power Co. parent company Spain-based Iberdrola USA, to build the pipeline system in the Augusta area. The decision was promptly appealed by Colorado-based Summit, which is in the process of acquiring Kennebec Valley Gas. Summit objected in part because it said its pipeline would create more jobs and serve more communities (see Daily GPI, Aug. 23).

Summit argued that the bidding process used by the state was flawed; MNG contended that it won the bid in a fair, albeit imperfect, process. The bids were starkly different, with the Brunswick, ME-based gas distributor proposing to serve only state offices and facilities on either side of the Kennebec River in Augusta; the Summit proposal would also serve residential and industrial customers. Summit's proposed pipe eventually would traverse more than a dozen central-Maine towns, none of which currently have a supply of natural gas.

MNG's plan called for a $19.3 million project, which would create 40 jobs during the next two years. Summit estimated its broader-scale project at $150 million would create 435 jobs to eventually serve 15,000 residential and industrial customers by its third year of operation. Summit's pipeline is designed to run north from the capital to Waterville and terminate at Madison, ME.

The BGS on Wednesday notified MNG "that the RFP was invalidated; no binding award will be made, and the RFP has been withdrawn," according to Iberdrola spokesman Dan Hucko.

"Obviously, Iberdrola USA and Maine Natural Gas are disappointed with the appeal panel's decision to invalidate our BGS contract award as low-bidder for the state's RFP," Hucko told NGI. "At this point, we will continue to evaluate all of our options and decide on a course of action in the near future."

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