BART EXECUTIVE DECISION DOCUMENT

Definitions: For the purpose of this EDD:

Background - Proposed Transfer of Rights [Appendix A]

After Phase 1 of the AATC project was completed in April 1996, MKTCI ceased active participation in the RTA. For a period of time, HTCSI continued with the AATC Project without involvement by MKTCI. In December 1996, after completing some portions of Phase 2, HTCSI advised the District that continuation of Phase 2 development and Phase 3 implementation would require the leading participation of another entity experienced in the signaling industry. Thereafter, HTCSI informed BART that it had discussed such participation with various signaling companies. HTCSI then informed BART that HTCSI and Harmon had reached an agreement for an exclusive United States license for the use of EPLRS in fixed guideway transportation applications, and that Harmon was willing to continue with the AATC Project provided proper approval was obtained from HMK, MKTCI and BART.

Hughes, HTCSI and Harmon have now negotiated an exclusive United States License pursuant to which Harmon will be the sole U. S. Licensee able to use EPLRS to develop an AATC system. The HMK joint venture has been terminated. Pursuant to this termination, HTCSI has been authorized by MKTCI to transfer HMK's rights in the District's AATC Project and the technology developed during Phases 1 and 2 (except and only for certain property that will be retained by MK and MKTCI but which is not necessary for, and will not be used in connection with, the AATC Project) subject to certain required consents. Harmon, as exclusive United States licensee to the EPLRS technology, is proposed to succeed HMK as the entity with which the District would continue negotiations of 49GB-110. HTCSI is committed to supply radio equipment and engineering services to Harmon for 49GB-110 under a subcontract.

The FTA and DARPA have been apprised of the license and proposed transfer to Harmon. The FTA is cooperating with the District, HTCSI, and Harmon regarding amendments to the MOU for the DoD grant and the Cooperative Agreement with the FTA, which will reflect that Harmon and the District will be the RTA members and that HTCSI will continue to work on the AATC Project under a subcontract with Harmon. Changes will also be made to the work scope for Phase 2 work under the grant. Corresponding work scope changes will be made to 49GB-110, which will cover Phase 2 work not funded by the grant and all Phase 3 work.

Subject to the Board taking the actions requested in this EDD, the District and Harmon would enter into a Letter of Intent (LOI) that sets forth parameters for the continuation of work under the DoD grant and the process pursuant to which 49GB-110 will now be negotiated with Harmon rather than Hughes. The LOI acknowledges that the District cannot become obligated to pay Harmon except in the context of an executed 49GB-110. However, based on the District's execution of the LOI, Harmon is willing to keep the project on track by expending its own funds on Phase 2, (subject to the provisions of the LOI, which provide for reimbursement by BART only if 49GB-110 is executed). It is expected that this will enable Harmon to complete the Phase 2 scope of work by September 30, 1999.

Basis for Consenting to Transfer of Rights in No. 49GB-H110

HTCSI, MKTCI, the District, the FTA and DARPA have made a considerable investment of time and money in the development of AATC technology to date. Staff believes that Harmon, as exclusive licensee of that technology, is fully and exclusively capable of completing Phase 2 and performing the Phase 3 option of 49GB-110 and is exclusively able to obtain necessary technical assistance and equipment from Hughes/HTCSI based on the license agreement and related subcontract that have been negotiated by Hughes/HTCSI and Harmon. As part of 49GB-110, Harmon will be required to obtain a performance bond for Phase 3 of the procurement. Staff believes that Harmon's good faith and strong interest in the project is demonstrated by Harmon's willingness to invest money in it without any assurances that 49GB-110 will be successfully negotiated and approved.

A re-bid of the AATC procurement would have the following consequences, none of which would be in the public interest:

  1. There is a significant risk that there would be no bidders and BART would be unable to procure a satisfactory AATC system.
  2. There was only one bidder on 49GB-110. The HMK joint venture has now been terminated. In addition, HTCSI is not interested in pursuing the project on its own and has granted Harmon exclusive U.S. rights to the EPLRS technology.

    Harmon may not re-bid. If BART proceeds now, Harmon can keep the expertise for the project together through a consulting arrangement with HTCSI. However, if the project is re-bid, HTCSI will redeploy and disperse the engineering staff who have special expertise in the AATC project. Without such expertise, Harmon may decide not to re-bid.

    BART staff have monitored the activities surrounding New York's investigation of AATC systems. Based on these activities and the staff's reasonable investigation of the industry, the staff believe in good faith that there is no other system that could meet the specifications needed to satisfy BART.

  3. A re-bid would cause a significant delay in the procurement of the AATC equipment. The delayed procurement will have an adverse affect on the projected operational needs of the District.
  4. The staff estimates that it would delay the project at least one year to prepare an RFP, evaluate the proposals, if any, and select a contractor.

    BART is midway through Phase 2 with the EPLRS technology. This amounts to more than 34 months of effort. To start from scratch with another technology would cause significant additional delays before the alternative technology could be developed to the same point.

    Even if Harmon were the successful bidder, the loss of momentum and technical expertise during the re-bid process would cause significant additional delays beyond the time needed to re-bid.

  5. The system developed by a re-bid would very likely be more expensive or have less capability.
  6. $2.9 million of the remaining DoD grant funds would be lost because it is tied to the EPLRS radio technology, and without the BART contract, Harmon may decide not to develop the technology.

    Even if Harmon is selected, the delay and loss of technical expertise will increase costs.

    If another contractor is selected, BART will have to make a significant resource investment to understand alternative technology. BART must become confident in this technology before deploying it in this safety critical application.

    Based on BART's reasonable investigation of the industry, BART believes in good faith that it would have to revise the specifications to accommodate systems of lesser capability in order to attract bidders if the project is re-bid.

  7. The following investments in the AATC technology developed to date would yield no benefit to BART:

Given these facts and the unique history and unusual circumstances surrounding this procurement, staff believes that the Board has the authority to consent to the proposed transfer and authorize staff to pursue negotiation of 49GB-110 solely with Harmon without violating any statutory requirements. The public's interest is still protected to the same extent it would have been protected had BART continued negotiations with HMK. In addition, there is case law supporting exceptions to competitive bidding requirements where competitive proposals would not produce advantage or would be undesirable. In the case of this AATC procurement, the staff believes there would be no advantage for the District to rebid and the result would be undesirable.

The public interest goals that are typically served by competitive negotiation, i.e. adequate competition and a procuring agency's ability to obtain the best product and price combination, would not be served by rebidding. The District received only one proposal four years ago, and staff does not believe that other AATC technology exists which is comparable to the EPLRS technology that has been exclusively licensed to Harmon.

NEGOTIATION OF CONTRACT NO. 49GB-110 WITH HARMON INDUSTRIES, INC.

Purpose: 1) To obtain Board approval for the General Manager to consent to the transfer by HTCSI to Harmon of rights originally held by HMK to proceed with the AATC Project, as permitted by MKTCI in connection with the termination of HMK, 2) to request Board approval and authorization for the staff to negotiate 49GB-110 solely with Harmon and 3) to obtain the findings noted below from the Board in support of the Board's approval for the foregoing consent and authorization.

Discussion: Pursuant to Board authorization for a competitively negotiated procurement under Section 20229.1 of the Public Contract Code, in April 1993 the District issued the IFP for 49GB-110. Under 49GB-110, Phase 1 of the AATC Project was to be a prototype development program that included a demonstration at the District's Hayward test track. Phase 2 was to be a pilot system development phase which would conclude with a demonstration of production equipment at the Lake Merritt and Fruitvale stations. Phase 3 would implement the developed system on the M Line and the Upper A Line down through Bayfair Station. Phase 3 would be a contract option in 49GB-110 to be exercised in the District's discretion.

In response to the IFP only a single proposal was received, from an entity called "HMK, a joint venture of Hughes Aircraft Company and Morrison Knudsen Corporation, in the amount of $68,429,000. As requested in the IFP, the proposal included innovative financing arrangements. As a result, the District and HMK applied, as a Regional Technology Alliance (RTA), for a Department of Defense (DoD) grant under the Defense Advanced Research Projects Agency (DARPA) Technology Reinvestment Program. In 1994, the AATC Project was selected for funding by DARPA and negotiations ensued. The DoD funding covered all of Phase 1 and a portion of Phase 2. The purpose of that grant was to develop a new commercially viable AATC system through the conversion of existing radio technology utilizing Enhanced Position Location Reporting System (EPLRS) originally developed by Hughes for the military. Since the DoD funding was intended to be used only for commercialization, and not for BART's procurement, DARPA directed the District to defer execution of 49GB-110. DARPA directed BART to instead execute a Memorandum of Understanding (MOU) between the District and HMK to govern the roles of the parties for work performed under the DoD grant and to describe the intentions of the parties with regard to future negotiations on 49GB-110. The parties also entered into a Cooperative Agreement with the FTA, which administers the grant. Funding authorization for the DoD grant is currently expected to expire on September 30, 1999.

Phase 1 was successfully completed in April 1996. During Phase 2, HTCSI advised BART and the FTA that it would no longer continue work on the AATC Project. A detailed explanation of those events, actions taken by the parties to transfer rights in the project to Harmon, and the basis for the staff recommendations is included in Appendix A to this EDD, attached and incorporated by reference.

Based on the factual basis and reasoning set forth in Appendix A [reproduced above], staff recommends that the Board take the action and make the findings proposed in the motions set forth below.

The Office of the General Counsel concurs with staff's recommendations and has determined that there is a proper basis for the Board to take the proposed actions and make the proposed findings.

Fiscal Impact: None from this Board action. Any transfer of funds from the District to Harmon will be pursuant to 49GB-110, which will be brought to the Board for approval after negotiations are completed.

Alternatives: Reject the proposal of HMK for 49GB-110 and direct that staff re-bid the AATC procurement.

Recommendation: Adoption of the following motions.

Motions:

  1. The General Manager is authorized to consent to the transfer by HTCSI to Harmon of rights originally held by HMK to proceed with the AATC Project, as permitted by MKTCI in connection with the termination of HMK.
  2. Staff is authorized to negotiate the remaining portions of Phase 2 and Phase 3 of Contract No. 49GB-110 solely with Harmon.
  3. The Board makes the following findings in support of the Board's approval for the foregoing consent and authorization:
    1. The Board finds that, based on the success demonstrated in Phase 1, it desires to continue with the AATC Project described in the Invitation for Proposals (IFP) issued in April 1993 for 49GB-110, and in the response thereto, for an advanced automatic train control system based on and utilizing Hughes'/HTCSI's EPLRS.
    2. The Board finds that there is no reasonable, cost-effective and proven alternative to the development and installation of an EPLRS-based advanced automatic train control system that can reduce the scheduled headway and run time to accommodate future traffic needs and that can be developed and installed quickly enough to service the expected increase in passenger traffic without delaying or interfering with service.
    3. The Board finds that, because of the termination of the HMK joint venture and the license negotiated between Hughes/HTCSI, and Harmon, pursuant to which Harmon will be the exclusive United States licensee of the EPLRS based AATC technology, that there is no source other than Harmon from whom the EPLRS technology can be procured and through whom the development and installation of an EPLRS-based advanced automatic train control system can be accomplished.
    4. The Board finds that the EPLRS based advanced automatic train control system will be installed as an overlay to the existing track circuit train control system on the M line and on the upper A line. Once installed, the EPLRS-based system (during normal operation and absent failure) will be solely responsible for train location determination and train speed control on the M line and on the upper A line. The existing track circuit-based train control system will no longer perform those functions except and only in the event of failure of the EPLRS-based system.
    5.  
    6. The Board finds that, after consideration of the alternatives to proceeding with the AATC Project solely with Harmon, under the present circumstances, a re-bidding of the IFP for 49GB-ll0 would not serve the public interest, would be undesirable and impractical, would not likely produce competitive proposals, and would not likely produce proposals of lower cost or comparable schedule advantage to that expected if 49GB-110 is negotiated solely with Harmon. Any such re-bidding would not produce any advantage to the District because it will be practically impossible to obtain a proposal from any entity other than Harmon that can accomplish the objectives of 49GB-110 (which have already been proven by the EPLRS-based system) for the same cost and within the same schedule as can Harmon.

Notes: Motion approved by BART Board of Directors at its regular meeting on August 28, 1997. Conversion to html format introduced formatting differences and possibly minor errors from the original public documents. -tjs