The state has surprised city leaders by awarding a contract that would move the Portland offices of the Department of Health and Human Services from Marginal Way, near downtown, to a site near the Portland International Jetport.

Mayor Michael Brennan said the DHHS’s 20-year lease on Marginal Way is due to expire at the end of 2014. After state officials went to the landlord about a year ago to talk about negotiating a lease to stay, they determined that the cost would be too high and decided to explore other options, he said.

A request for proposals went out last summer. The state sought an existing building or new construction with at least 80,000 square feet that could accommodate the DHHS offices and the local offices of the Department of Labor, which are now on Lancaster Street, near downtown Portland.

Four proposals were submitted in September. Two of them would have kept the state offices on Portland’s urban peninsula, in Bayside or the West End.

The developer that was selected, ELC Management Inc., offered a site in South Portland, near the airport, where it would construct a building by late 2014 or early 2015 and then lease it to the state.

“It makes no sense,” Brennan said Friday. “There is no other part of the state that has a population like Portland’s, that is served by DHHS. To move that office and those services to a location that isn’t suitable, we can’t just let that stand.”

People apply for various social services at local DHHS offices, including food stamps and Temporary Assistance for Needy Families, and receive referrals for mental health and other services. On Marginal Way, the DHHS offices are within walking distance of most neighborhoods on the peninsula.

Brennan said that when he spoke with DHHS Commissioner Mary Mayhew more than a year ago, she told him that the state wanted to keep the offices in Portland. Brennan said he didn’t hear from the state again until the last couple of weeks, after the contract had been awarded to ELC Management.

Senate President Justin Alfond, D-Portland, also criticized the decision, made by the state’s Bureau of General Services.

“This is a big decision that will have a long-term impact on thousands, if not tens of thousands, of people in Greater Portland,” he said in a written statement. “Decisions of this magnitude deserve to be done in collaboration with state and local leaders. Yet the LePage administration fell short. They took a go-it-alone approach and did not meet or discuss their decision with our city even though it will have a huge impact on our area.”

Julie Rabinowitz, a spokeswoman for the Department of Labor, said ELC Management was chosen because it had the lowest bid that met the criteria. She said the location was a concern but the state was reassured by the fact that it is on a public bus route.

Rabinowitz also said that the labor department and DHHS offices that will be in one building have a natural partnership.

Consolidating the offices is expected to save $14 million, said Jennifer Smith, spokeswoman for the state’s Department of Administrative and Financial Services, which includes the Bureau of General Services. She said the proposals that would have kept the offices on the peninsula were considered, but neither scored high enough to win the contract.

One of the three developers that weren’t chosen, Bayside I LLC, appealed the state’s decision. The appeal, dated Nov. 6, asked the state to invalidate the award “because of irregularities creating fundamental unfairness and because it was arbitrary and capricious.”

Bayside I proposed a building on Lancaster Street, which would have kept the DHHS and Department of Labor offices in the same area where they are now. Many of the city’s social services, including the general assistance office, Preble Street and the Oxford Street Homeless Shelter, are nearby.

That appeal was denied on Nov. 20 by Bureau of General Services Director Edward Dahl, who concluded that ELC Management had won the contract because it scored highest on the criteria in the state’s request for proposals.

The state has until Dec. 15 to negotiate a final agreement with ELC Management.

Brennan said the proposed location near the airport, much more than walking distance from downtown Portland, isn’t the only drawback. He said the land is wet.

In its appeal, Bayside I claimed that ELC Management doesn’t yet own the land where it proposes building.

No one from ELC Management could be reached for comment late Friday.

Tim Soley, president of East Brown Cow Management Inc., another developer that was not chosen, said he was surprised and disappointed that his proposal didn’t get more consideration. His idea was to renovate a building he owns on St. John Street, in the West End.

“I think everyone assumed it would stay in Portland,” he said.

Soley said he has no plans to challenge the decision.

“I think the process may have been flawed, but I’m not sure it’s my place to determine what is in the state’s best interest,” he said.

Brennan said he remembers a discussion dating back to the early 1990s, when the DHHS was debating where to put its Portland offices. The initial choice was off Canco Road, but many people felt it was too far from the downtown. Ultimately, the state settled on Marginal Way.

The jetport, Brennan said, is much farther from downtown Portland than Canco Road.

Eric Russell can be contacted at 791-6344 or at:

erussell@pressherald.com

Twitter: @PPHEricRussell

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