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Loop contract questioned: RailWorks says bid awarded to DMVW should be rescinded and given to RailWorks or all bids voided

Officials with RailWorks Track Systems leveled allegations of fraud and collusion Thursday against the Spiritwood Energy Park Association over a construction contract for a rail loop it awarded to Dakota Missouri River Valley and Western Railroad last month.

Howard Swanson, a Swanson & Warcup Ltd. attorney representing RailWorks Track Systems of Lakeville, Minn., made the allegations at a special meeting of the SEPA.

“We believe relying on information submitted the day after the bid opening is a serious impropriety,” he said. “We believe DMVW altered the bid by taking items out of the bid at that point.”

The rail loop project will provide access to rail service to businesses in the Spiritwood Energy Park. It is a joint project of the Jamestown/Stutsman Development Corp. and Great River Energy.

Bids for the project were opened on Jan. 6, with Gratech being the apparent low bidder. The bids were then “normalized” to make all bids comparable.

SEPA engineers adjusted the bids so each bidder was proposing the same work. They referred to this as normalizing the bids.

DMVW was allowed to remove 750 feet of track from the project that had not been bid by the other competitors. It reduced its bid by $443,000 because of this reduction in the work it would perform. This made DMVW the new low bidder. The information from DMVW was dated the day after the bids were opened.

Swanson also said that RailWorks’ $91,000 optional deduction for a lower quality rail tie was not considered. This would have made RailWorks the low bidder if it had been considered, he said. The bid by the DMVW used a lower quality tie in its bid.

“RailWorks was not allowed to bid on the same level of DMVW,” Swanson said. “It appears that considerable credit was given DMVW for having a presence in the community. Bid documents do not allow you to give emphasis to local bidders.”

Joe Larson, SEPA’s attorney, said Swanson’s presentation was purely speculation. He also said RailWorks was allowed to modify the amount of the contract price retained by SEPA until completion after the bids were opened.

Swanson asked that SEPA rescind the bid award to DMVW and award RailWorks the contract, or declare all bids void and revisit the contract.

Larson said the items presented by RailWorks would be taken under advisement although no timeline was set. No contract has been signed with DMVW but a letter of intent to enter into a contract had been sent.

SEPA officials had planned to start construction this spring on the rail loop, which will provide access to the Dakota Spirit AgEnergy plant currently under construction.

Sun reporter Keith Norman can be reached at 701-952-8452 or by email at