Full opinion text
MEMORANDUM OPINION DAVID V. O’BRIEN, District Judge. These consolidated cases involve multiple challenges to a major contract between an arm of one of the nation’s largest investment banking firms and the Virgin Islands Water & Power Authority (“WAPA”). The outcome may well determine how the electric power needs of St. Croix will be met into the 21st Century. Having heard six days of testimony, considered nearly 200 trial exhibits and reviewed several hundred pages of legal memoranda, we conclude that the contract in question is legal, binding and enforceable. Accordingly, a permanent injunction will issue restraining any interference with the rights of the parties thereunder and its implementation. I. THE PARTIES AND PEOPLE INVOLVED On May 23, 1985, WAPA entered into an agreement to buy large quantities of power and steam for the next twenty years, (“the contract”). Events before and after that date involve many parties and people. We begin our discussion with an introduction to the movers and shakers who will appear in the factual background following this section. A. The Virgin Islands Water and Power Authority WAPA was created in 1964 to take over the operation of a federal agency, the Virgin Islands Corporation, which produced water and power for the Virgin Islands. (1964 Virgin Islands Session Laws, Act. No. 1248, p. 378, 30 V.I.C. Section 101 et seq.) WAPA is a body corporate and politic constituting a public corporation and autonomous governmental instrumentality of the Government of the Virgin Islands. It has a legal existence and personality separate and apart from the Government. It is governed by a board consisting of nine members, all appointed by the governor. Three of them are his direct appointees from among high level officials of his administration. They are not required to be confirmed by the Legislature. Six of them must be citizens not employed by the government. Their appointments are subject to legislative confirmation. (30 V.I.C. § 103). During the crucial period from 1983 to August, 1985, the board consisted of only six members, four private citizens and two from the government. They were: Herman Richardson — Virgin Islands Commissioner of Property & Procurement. With five years as commissioner, preceded by 20 years of military service, he has developed an appearance of fearlessness. He is wise to the ways of territorial politics. He was the elected chairman of the board. His attempt to insulate the contract from the vagaries of politics hastened his removal from the board by the governor. Roy Adams — Virgin Islands Director of Planning. He is a graduate in architecture from the University of Pennsylvania, and considered one of the most able and intelligent persons in local government service. He also has a strong sense of personal integrity. He was the point man for the WAPA board on the contract. He was also removed from the Board in August, 1985 by the governor. Margaret Creque — the secretary of the WAPA board. She was the chairman of a citizen WAPA watchdog committee pri- or to her appointment. She is independent and well organized in her approach and an outspoken supporter of the contract. She was removed by the governor and reinstated by the Court in August, 1985. Benjamin Banks — the vice chairman of the board. He is a resident of St. Croix who supported the contract. He was also removed by the governor and reinstated by the Court in August, 1985. John Harvey — an electrical engineer and board member resident on St. John. He supported the contract, but took a generally passive role in board proceedings. He abstained from voting in August board proceedings which would have led to two different contracts for purchase of power and steam by WAPA. Willem Westerbaan — a long time member of the board. He is a strong-willed and persistent critic of the contract. He is manager of utilities at the Martin Marietta Alumina plant on St. Croix’ south shore and experienced in the intricacies of power generation. After the governor removed certain board members in August, 1985, he appointed three high level members of his administration to the WAPA board. They are: Stephanos O’Reilly — the Budget Director for the government. He is outspoken and influential. He was elected chairman of the board to replace Richardson. He and the governor are the principal spokesmen for the administration relative to WAPA matters. Victor Schneider — the Acting Attorney General at the time. He delivered the coup de grace to the removed members. He also presented the Department of Law’s legal opinions which supported the governor’s removal of these members, and challenged the validity of the contract. Cecil George — the Commissioner of Public Works for the government. He is the brother to WAPA executive director Raymond George. He provided the .necessary vote in support of the Luis administration’s position as a WAPA board member, and voted for South Shore’s proposal within days of his appointment. B. Donaldson, Lufkin & Jenrette, et al. The other party to the contract with WAPA is a wholly-owned subsidiary of Donaldson, Lufkin & Jenrette, (“DU”), known as Caribbean Energy Co., Inc., (“Caribbean”). DU is the twelfth largest international investment banking firm in the country, owned by the Equitable Life Assurance Society of the United States. It has developed a specialty as one of a select few firms engaged in what is called third party cogeneration project financing. This specialty has developed as electric utilities became so hard pressed financially that they were unable to issue more bonds for capital expenditures, or pledge their credit for the purchase of needed equipment. As will be seen, WAPA fit that category. DU became financial advisor to WAPA when it sought to meet its equipment needs using this off-balance sheet financing mechanism. By off-balance sheet it is meant that WAPA would not own the shipment, and thus not pledge its credit, and the capital transaction would legitimately not be shown on the WAPA books. A third party would finance the purchase of, and own, the equipment, and sell the needed power and steam to WAPA. Only about ten of these projects have been successfully maneuvered through this complex and intricate process. It involves meshing the equipment purchased and integrated into WAPA's existing plant, with financing obtained by the third party who would own the equipment. DU has been involved in as many as half of these unique financing arrangements. The DU financial acumen was matched by the technical experience of the Sunlaw Energy Corporation, which is responsible for putting the entire installation in place on WAPA property and seeing to its successful operation. Key personnel associated in this endeavor are: Charles 0. Svenson — a senior vice president of DU. He combines a legal background on Wall Street with institutional financing expertise. He directed DU’s successful efforts to negotiate the contract and will be responsible for the financing intricacies. Robert Danziger — the president of Sun-law Energy Corporation. He was formerly associated with the Jet Propulsion Laboratory in Pasadena, California. When Congress gave the green light to third party financing projects by providing tax advantages, he put his talents to work in that field. His written estimates of cost savings to WAPA by the contract were challenged at the trial until he entered the courtroom and testified about them. Opposing counsel backhandedly recognized his expertise in calculating the savings by refraining from any further challenge. C. General Engineering Corporation By Virgin Islands standards, General Engineering Corporation, (“GEC”), is a large general contractor. It does substantial work repairing, servicing and maintaining existing WAPA equipment. GEC formed a joint venture with a large stateside electrical contractor, Harrison International Corporation, (“Harrison”), to propose the sale and installation of generating equipment to meet WAPA’s St. Croix needs. Harrison is owned by an even larger company, the Commonwealth Group. When its proposal was not accepted, GEC filed one of the actions herein, without Harrison’s involvement. It seeks to upset the contract, claiming standing as an unsuccessful bidder and a ratepayer in St. Croix. Leading its effort is: James Ronald Brown — affiliated with both GEC and Harrison. He was strongly critical of the contract and defended the technical aspects of the GEC/Harrison proposal from heavy attack. His contention that WAPA could still issue tax exempt bonds to pay for equipment lifted more than a few eyebrows in the courtroom. D. South Shore Alumina, Inc. South Shore Alumina, Inc., (“South Shore”), was formed by an influential group of local citizens. It is their vehicle for the purchase of the huge Martin Marietta alumina plant on St. Croix, which is now mothballed. This plant has its own power generation and water production facilities, now idle since Martin Marietta abandoned the alumina business because of economic conditions. South Shore saw the opportunity to profitably sell power and water produced by this plant to the Government and/or WAPA, and obtained an option from Martin Marietta while it pursued this opportunity. Governor Juan Luis supported its proposal and signed such a contract with South Shore even though WAPA had already signed its own contract with DU’s subsidiary. The stage was then set for the confrontation which resulted in the law suits herein. The principals of South Shore who figure in these matters are: Ashley Andrews — a lawyer admitted in New York but not the Virgin Islands. He has ready access to the governor at Government House or at home. He is adroit at bringing private businesses together with the Virgin Islands government for various projects. Ann Abramson — the president of South Shore. She is an active St. Croix businesswoman. She testified that a copy of the WAPA contract happened “to come to me” while lunching at a local restaurant. She then “inadvertently” left it at the offices of South Shore’s attorneys. Not coincidentally, between 30% and 40% of this agreement can be found word for word in the South Shore agreement signed by the Governor. Lloyd Williams — a member of the South Shore group. He is a former majority leader and long time member of the Virgin Islands Legislature, noted for his knowledge of the ineer workings of the government at a high level. E. Governor Juan Luis Governor Juan Luis first entered elective government service as a member of the Legislature. He was elected lieutenant governor as part of the administration of Governor Cyril E. King in 1974. When Governor King died in office, he became governor by succession. He was elected in his own right in 1978 and 1982. He is not eligible for reelection. 48 U.S.C. § 1591. Though Governor Luis has had the right to appoint a full complement of members of the WAPA board of his own choosing since 1980, he has never done so. The board which confronted the deteriorating operations and tattered finances of WAPA from 1983 up to August, 1985, barely constituted the quorum necessary to make policy decisions. While the governing board is ostensibly free to make its own policy on behalf of this autonomous public corporation, the realities of its situation prevent it from operating in a vacuum. WAPA has frequently turned to the general treasury of the Government for financial aid. It is natural to assume, therefore, that when the Governor speaks, WAPA board members listen. The fact that they listened to the Governor in July and August, 1985, but failed to accede to his wishes, is a key element in the events which followed. II. FACTUAL BACKGROUND A. The Crisis Looms The WAPA board appointed after 1980 was forced to grapple with a myriad of problems, both financial and technical. Much of the equipment that was inherited from the Virgin Islands Corporation in 1964 was antiquated. The situation in St. Croix had continued to worsen. Little had been allocated for maintenance and repair. The mix of equipment was unsatisfactory and its reliability had deteriorated to the point where WAPA’s engineers predicted that St. Croix would face frequent power outages, brownouts and rotating power to consumers within several years. WAPA engineering chief Donald Francois described the potential for a “complete catastrophe” in a February 27, 1984 report, which also noted: “The deficiencies inherent in St. Croix’ power plant system clearly point out the emergency that exists and the need for immediate additional reserve or standby generating units.” Various board members who testified at the trial described the situation as “desperate”, “urgent”, and “precarious”. When considering various solutions to the generating problems, the board confronted another equally serious difficulty. An $8.5 million bond anticipation note held by Chase Manhattan Bank had been repeatedly rolled over by the bank when WAPA could not make payment. On April 14, 1983, the note went into default when Chase refused to bid on its renewal. At the same time, WAPA was faced with stringent restrictions contained in its bond resolution. It could not enter the capital financial markets unless its debt service ratio, i.e. the ratio of revenues to debt service, was maintained at a certain level. WAPA never came close to maintaining the required ratio and was thus barred from further borrowings for capital improvements. The same set of facts prevented lease-purchase of equipment. In mid-1983, the board was receiving financial advice from another company. Executives of this company mentioned WAPA to executives of DU, recognizing the latter’s expertise in off-balance sheet projects for financially strapped utilities. Financial experts had determined that this was the only route open to WAPA to meet the needs of St. Croix consumers. In December, 1983, WAPA retained DU for a 90-day period as exclusive “agent and/or principal” for the purpose of arranging financing “to suit the needs and specification of the V.I. WAPA.” The initial retention letter also noted that “these arrangéments may include, but are not restricted to, an operating lease mechanism.” The implication was that WAPA would welcome DU’s proposals, since neither WAPA management or its board had any experience with off-balance sheet financing, or non-recourse third party financing. Although the language of subsequent retention letters changed, it is uncontroverted that the aims of the DU relationship to WAPA and its scope continued as originally intended. DU was not to receive any payment from WAPA. It was to be paid by third parties out of any project agreed upon, either by fees, commissions or equity participation in the project. DU quickly came up with one proposal which was within the framework of the third party financing mechanism. DU proposed to arrange for the installation of the necessary equipment at WAPA’s St. Croix plant. It would be owned by a third party, and WAPA would purchase power to meet its needs. This was the same formula for third party ownership and financing which ultimately formed the basis of the May 23, 1985 contract. But the WAPA staff rejected the proposal because it was dissatisfied with the equipment proposed. Mid-1984 arrived with no solution in sight. B. The WAPA Board Acts WAPA’s staff, over the months, had accumulated a number of proposals volunteered by equipment manufacturers and contractors, including Harrison. In the past, however, WAPA engineers felt that it had suffered from poor results by such informal dealings. It decided to put the search for a solution on a more formal footing. It prepared a draft document for issuance to interested manufacturers and contractors and submitted the document to the board. The board, however, considered the document too rigid and inflexible, akin to an Invitation for Bids. Known as an IFB, this is a structured bid document which locks the parties into their bids, and WAPA into the position of accepting a bid as offered without significant modification. The board decided to restructure the document into a Request for Proposals, (“RFP”). In competitive bidding parlance, an RFP asks for proposals of a less specific nature, leaving room for subsequent alteration and modification of the original proposal by negotiations. The board considered this necessary because it was embarking on a new task ... to meet the power generating needs of St. Croix without pledging its credit in any way. Flexibility was its byword. The document as issued reflects the unfamiliarity of both board and management with third party financing of cogeneration facilities. Under such an arrangement, it is power and steam which is sold to the utility, not the equipment itself. WAPA management and board labored hard to produce an RFP which pointed proposers in that direction, but the RFP contains various inconsistencies. For instance, at one point it directed proposers to state the terms of payment in the proposal, and went so far as to note: Payments to be in accordance with a negotiated agreement based on purchase of power or lease purchase agreement. But other parts of the same RFP provided that title to the work would pass to WAPA upon formal acceptance based on successful completion of a 24-hour performance test. This is the kind of language usually included where a purchase of equipment is contemplated. DU did not play any role in drafting the RFP. There is no misunderstanding, however, on what equipment package WAPA sought. It wanted proposals for a complete 20 megawatt generating facility involving two 10-megawatt engines. The proposals were also to include complete installation on WAPA’s property, including design and construction, of the building to house the facility. Brown of GEC was critical of the RFP in many respects, and compared it unfavorably with others he had seen. But he made one important concession: he clearly understood that the RFP contemplated a purchase of power, believing however that this would be a subject of later negotiation. The GEC/Harrison proposal which he prepared and submitted did not contain any proposal for the sale of power to WAPA. Inconsistent as the RFP was, it did not appear to confuse other proposers. The deposition of the executive of another proposer, Stork-Werkspoor Diesel of The Netherlands, was received in evidence. The executive, Peter Hokkeling, testified that it was “absolutely” his understanding that the RFP called for a power sales agreement. He said this was not surprising to him as a manufacturer because he had been dealing with WAPA for over a year and knew that its financial situation left it no other route to take except to purchase power. None of the eventual proposers, including GEC/Harrison, requested clarification from WAPA as to just what was intended by the RFP. None of the proposals eventually received by WAPA included a sale of power, and other financing mechanisms which were suggested were ruled out by reason of WAPA’s limitations on pledging its own credit. C. The Proposals Reviewed by WAPA Staff Ten companies responded to the RFP. The first step upon receipt of the proposals was a technical staff review of the equipment suggested in each proposal. Little attention was paid to provisions for the design or construction of the facility to house the equipment. The engineering staff’s primary interest at this point was to determine if the proposed equipment could be satisfactorily integrated into the existing St. Croix system. A lengthy analysis was prepared and forwarded to the WAPA board containing Director of Engineering Donald Francois’ preferred short list of proposers, based largely on his analysis of their equipment submissions. GEC/Harrison did not make it past Francois’ first cut. After two pages of criticism, he noted that In general all Harrison/GEC proposals lack the experience of a well-established Mechanical and Engineering firm and do not show any proper coordination with well-reputed diesel engine manufacturers____ He was particularly critical of the fact that the engines proposed by GEC/Harrison were unacceptable, because “this model is a new prototype engine with no operational experience.” At the trial, it developed that the engine was not even at the prototype stage, but was only being tested in Germany and had not been manufactured for sale anywhere. Because of the criticisms voiced by Francois of the GEC/Harrison equipment submission, he did not proceed to evaluate any other aspect of its proposal nor did he compare it to those of other proposers. The engines proposed by GEC/Harrison were from M.A.N. in Germany. But this firm, through its American sales office, had submitted several alternate proposals of its own to WAPA for other engines. Models of these M.A.N. engines are in place throughout the world. Two models of the M.A.N. engines offered directly by that manufacturer were on the final list recommended by Francois. The board decided to have DU evaluate, from a financing standpoint, all of the proposals whose equipment submissions had survived the first cut by Francois. And, in deference to the fact that GEC is a local contractor, it included the GEC/Harrison proposal for evaluation. As board member Roy Adams put it in his testimony, “we wanted to give them every chance to carry the fight for as many rounds as they could.” On December 4, 1984, Chairman Richardson forwarded a letter with the technical evaluation to DU and invited further technical evaluation “in addition to the financial aspects.” But, recognizing the urgency involved, he told DU Regardless of the approach taken, immediate steps should be initiated to arrive at the agreement most beneficial to the Authority and within a reasonable time frame. D. The DU Review of Proposals DU, under the direction of Senior Vice President Charles O. Svenson and Vice President Thomas S. DePre, began the evaluation almost immediately. They decided to meet separately in New York with each of the proposers on the list forwarded by Chairman Richardson. They did not take the GEC/Harrison submission seriously. This was not only because of the devastating Francois critique, but they had received further word from M.A.N. that it had not licensed either GEC or Harrison to quote the engine it was still only testing, When advised of this complication, Brown of GEC/Harrison could give no assurances except an offer to post a bond. To Svenson and DePre as financial men, however, this uncertainty, with its potential for litigation, would have created an enormous stumbling block to obtaining the $25 million in financing needed for the project. DU never invited GEC/Harrison to meet after that, and ended communication with Brown. Meetings with the other proposers did take place. Each of them was asked if they would participate as principals in a third party financing project involving the sale of power to WAPA. Each of them declined, indicating a desire to furnish the engines needed to generate the power and steam, and be done with it. No long term relationship was acceptable to any of them. DU, with technical advice from Sunlaw Energy Corporation, did settle on one of the engine models proposed by M.A.N. which was high up on the list from Francois. DU always understood that in putting together any financing scheme, WAPA would have the last word on the primary equipment. This explains why DU did not go outside of the recommended list forwarded by Richardson, but accepted WAPA’s view in that regard. The auxiliary equipment which goes with the primary engines to generate the power and steam was another matter. This equipment had been included in proposals submitted by the various manufacturers and contractors. The finalists interviewed by DU and Sunlaw were happy to negotiate any necessary or desired changes. WAPA was not concerned with this arrangement so long as the primary engines of its choice formed the core of the facility. The interviews concluded January 30,1985. Armed with the necessary data, DU reported .to the WAPA board in February, first informally, and then in writing. E. DU’s Third Party Financing Proposal In February DU advised the WAPA board that it would make a proposal to supply 20 megawatts of electric generating capacity to the WAPA grid on St. Croix, and up to 50,000 pounds of steam per hour for its desalinization plant, using M.A.N. equipment. In a February 25, 1985 letter attaching a proposed letter of intent, DU explained: We have evaluated the constraints imposed by the Authority’s outstanding electric revenue bond resolution, and we have concluded that the only feasible way to carry the project in light of these constraints is through an off-balance sheet transaction in which a third party — a private company — will acquire the equipment, arrange for the construction and permanent financing and supply the electric power and steam to the Authority under a “take if produced” contract. Structuring the transaction in this fashion will be beneficial to the Authority in that it will be “off credit”, i.e., it will not impair the Authority’s credit for other transactions. DU proposed that a company be formed by themselves and Sunlaw Energy Corporation. Sunlaw’s investors include the John Hancock Life Insurance Company, and the securities firms of Merrill Lynch and Smith Barney. The letter introduced Robert Danziger of Sunlaw who would meet with the board in March to describe the proposal in more specific terms and explain the possible savings to WAPA from its acceptance. In conversations with DU officials prior to the receipt of the letter, WAPA board members had learned that a power sale proposal would be forthcoming in which DU would form a subsidiary to be the owner of the equipment. Members of the board discussed whether the RFP should be reopened to permit the proposers to offer formal submissions in that regard. Nothing was done, however, except that a letter was sent to DU informing them of this possibility. On March 14, 1985, the formal WAPA board meeting was held and DU made its proposal, asking for a non-binding letter of intent which would permit them to commence drafting a contract. Board member Willem Westerbaan was upset at any idea of purchasing power rather than equipment. He contended that “the rules of the game had changed” and that the RFP should be reopened for submissions. Westerbaan testified at trial that he was so incensed that he walked out of the meeting. When pressed at trial to name three firms which might submit third party financing project proposals if the RFP were reopened, he admitted he knew of no such firms other than DU. As it subsequently developed, GEC/Harrison had notified the board that it would be interested in making such a submission. After Westerbaan walked out of the meeting, the discussion continued. The remainder of the board found that while it had not anticipated just how DU, as principal, would be involved, (through its subsidiary, Caribbean), it did not find this troubling, since it expected DU might be paid for its services through equity participation. A motion to approve the letter of intent was agreed upon by board members Richardson, Adams, Creque and Banks, with Harvey abstaining and Westerbaan absent. The next step was to negotiate the final contract. In doing so, both WAPA and DU were faced with important time constraints. For WAPA, there was the urgent need to get the entire project moving before St. Croix suffered the blackouts and brownouts predicted. According to the board, the generating situation at its St. Croix plant was fragile in early 1985, with much depending on a temperamental Rolls Royce gas fired turbine engine. For DU, the time constraints were based on different reasons which were no less urgent. The third party financing project was attractive in financial markets because it provided for an investment tax credit and accelerated depreciation program. However, it had been announced that President Reagan would make proposals for sweeping reforms of the federal tax structure, which would eliminate or diminish the tax advantages. He had already received a widely publicized tax reform proposal known as “Treasury I” from the Department of the Treasury. His speech formally embodying his proposals as they would be submitted to Congress, known as “Treasury II”, was due to be given on May 28, 1985. DU was fearful that unless an agreement with WAPA was in place before the president outlined his proposals, it would not be grandfathered under any subsequent tax reform and the project participants might lose the tax advantages of such a transaction. With the agreement in place, however, DU was confident from past practice that the financing package which included the attractive tax credit and depreciation would pass muster, even if the tax law subsequently changed these provisions. The draft agreement was forwarded to the WAPA board and distributed to management, and the engineering and legal staffs for review. In-house legal counsel to WAPA, Arthur Finch, Esq., forwarded his comments for minor revision to DLJ’s counsel. At no time did he suggest that competitive bidding or resubmission of the RFP was legally required. He only took this position in August, 1985 after the Governor had removed board members and replaced them with members of his administration, and the Acting Attorney General claimed the contract was invalid in part because of a lack of competitive bidding. During April, 1985 and up to May 22, 1985, the draft contract circulated through WAPA and the staff made suggestions for changes. On May 22, 1985, there was a full blown markup session. It was not a formal board meeting, but rather a contract review. Participating were board members, staff, DU and Sunlaw. Westerbaan did not attend, and testified he was not notified of the markup session. The next day, on May 23, 1985, all board members were present for the formal meeting. Also in attendance part of the time were DU and Sunlaw representatives. The board discussed some of the matters pertaining to the proposal in executive session, with DU and Sunlaw personnel excluded. Eventually, a motion was offered and seconded to authorize Chairman Richardson to enter into “a service agreement for the sale of electric power and steam with Caribbean Energy Company, Inc. a wholly owned subsidiary of Donaldson, Lufkin and Jenrette Securities Corporation.” Members Adams, Creque, Harvey, Banks and Richardson voted in favor, and Westerbaan voted against. After the meeting, Richardson signed the contract and Creque attested to his signature as board secretary. It was then signed by Svenson on behalf of the DU subsidiary, after which Richardson ordered WAPA’s executed copies of the contract to be placed under lock and key. F. The Contract — Described and Evaluated 1) The Contract Described WAPA’s contract with the DU affiliate is without question one of its most significant undertakings since its formation in 1964. It shifts responsibility to provide the base load of power needed on St. Croix from WAPA to the private sector. Here are the highlights of the contract: a. Caribbean must see to the design, construction, financing, installation and operation of a cogeneration plant to be located on WAPA’s property within four years. It will bear all such costs without recourse to WAPA. b. The plant must have a capacity of at least 20,000 kilowatts consisting of three eight megawatt units, ancillary equipment and connections to make the plant compatible with the WAPA system. c. WAPA will purchase not less than 140,000,000 kilowatt hours (“kwh”) of electricity and not less than 630,000,000 pounds of steam each year, for twenty years. d. WAPA will pay 4.5 cents per kwh for electricity and $2.00 per 1,000 pounds of steam; it will also supply fuel and lubricating oil, cooling and makeup water as needed. These prices may increase or decrease according to a formula as time goes on, but will never be lower than those stated above. e. WAPA will have an option to purchase the plant after twenty years at fair market value, and will also have the right of first refusal to purchase, in the event a sale is contemplated by Caribbean before the end of twenty years. f. WAPA will have the right of final approval of the prime mover portion (the engines) of the generators, but Caribbean will have the choice of auxiliary and connecting equipment, and will designate the contractor to design, build and install the plant. WAPA may make recommendations at all times. g. Caribbean will have the right to terminate the contract if it is unable to put together the financing package within one year. 2) Criticism and Evaluation Critics of the contract attacked it on several grounds. They contended that the 4.5 cents per kwh that WAPA must pay will permit a huge profit to Caribbean, that it does not compare favorably with the price at which WAPA could produce the electricity itself, and that the 140,000,000 kwh per year which WAPA must purchase would leave it in an untenable position of producing the remainder of the load required above that amount. Criticism of the steam purchase aspects was more muted, especially since WAPA negotiated a large reduction in the price from $3.30 per thousand pounds down to $2.00 per thousand. a. jPrice per KWH The 4.5 cents kwh price, with the addition of the cost to WAPA for fuel oil, lubricating oil, and water as needed, tells us the total cost per kwh to WAPA under the Caribbean contract. To analyze potential savings, this can be compared to the present cost per kwh to WAPA to produce the same electricity. Although there was conflict at the trial on this issue, it is not difficult to sort the matter out. Once that is done, it is very clear that the potential savings to WAPA (and, of course, its customers) from the Caribbean contract are impressive. WAPA’s own figures support this view. In its required filing with the Virgin Islands Public Service Commission in August, 1985, WAPA’s comptroller calculated its own “production cost” per kwh at that time. That price is 10.67 cents per kwh. The comptroller’s report makes clear that distribution, debt service, depreciation and administrative costs are not factored into that amount. WAPA’s director of engineering, Donald Francois, in reporting to the board, estimated the cost for fuel at 4.4 cents per kwh. He also disputed the comptroller’s calculations, but admitted the comptroller was in a better position to calculate the production cost than he was. Using the 4.5 cents that WAPA must pay to Caribbean as the base, and adding the cost of fuel as calculated by WAPA for its own generating equipment on St. Croix, we can see that potentially the total is 8.9 cents per kwh for Caribbean’s contract, excluding costs for lubricating oil and water as needed. This, can be roughly compared to the 10.67 cents per kwh quoted by the comptroller, leaving a potential savings to WAPA of 1.77 cents per kilowatt hour, less the cost of lubricating oil and water as needed. But even that would not be an accurate estimate of the potential savings, because it was demonstrated at the trial that the engines to be installed by Caribbean are twice as fuel efficient as the mix of engines presently used by WAPA. That translates into a fifty percent cut in fuel consumption which in turn means, potentially, that the 4.4 cents per kwh cost to WAPA for fuel under the Caribbean contract could drop to as low as 2.2 cents per kilowatt hour. If this is correct, the savings to WAPA by purchasing electricity from Caribbean rather than relying on its own production could be as much as 3.97 cents per kwh. If the general cost of fuel oil increases even greater benefits are realized from Caribbean’s equipment over WAPA’s. Sunlaw Energy Corporation estimated that the savings to WAPA over the life of the contract will average more than 15 percent a year, a 20-year total of more than $177 million. If borne out by actual operations, the benefit to WAPA and the ratepayers could be enormous. If WAPA purchases more than the minimum, up to the 160,000,000 kwh the Caribbean plant will be capable of producing, the savings will be even greater. We accept these figures as more credible than any others. When witnesses came forward on behalf of Caribbean and testified about them, counsel for their opponents skirted any discussion of substance about the subject. For instance, Robert Danziger, president of Sunlaw, had furnished a written estimate of the savings before the contract was executed. This letter was in evidence, and during the trial it was referred to critically. However, when Danziger came to the stand, ready for the challenge, none was forthcoming. He was an impressive witness, as was Sun-law’s chief engineer, Robert James Avera. No one challenged Avera’s estimate that the fuel consumption would be cut in half with Caribbean’s equipment. b. What is WAPA Left With? Avera was challenged on another ground. WAPA staff had testified that with Caribbean producing the base load needed for St. Croix, i.e., 140,000,000 kwh, WAPA itself was left only to generate the electricity needed for peak periods. This would cause a strain on WAPA’s equipment, they alleged, because it must be turned on and off daily in tune with the peak demand. The equipment was not meant to be used this way, according to the testimony, and was not the most efficient method of utilization. WAPA’s staff said it would result in swift deterioration of the equipment. Obviously, however, such a situation would confront WAPA in any power sales agreement whereby WAPA was purchasing a substantial amount of its needs from elsewhere. Avera conceded that the equipment would require startup and shutdown on a more frequent basis, and he further conceded that this was not normal. But, he emphasized, the startup and shutdown is easily accomplished if the manufacturer’s instructions are followed. In any event, the benefits of the contract far offset the reasons cited on this point. c. Caribbean’s Profit Evidence was presented suggesting that in putting the deal together, DU structured it to produce huge profits to itself and others. We received this evidence because of our policy stated to counsel at the outset, to err on the side of receiving rather than rejecting evidence, which is questioned on grounds of relevance. We also accepted the evidfence because it was alleged that DU suffered from a conflict of interest in its relationship with WAPA. But the fact that DU may have factored in a substantial profit is neither surprising nor disturbing. How else is it going to market the financing, except to make it more attractive than other investment opportunities? The question to us is not how much money DU will make. Rather, we are concerned with whether the contract is attractive to WAPA, and therefore the consuming public. The Virgin Islands has one of the highest electric power rates under the United States flag. WAPA’s per kwh cost is also among the highest. If talent from the private sector can meet WAPA’s needs and permit it to cut its costs, the profit to the private sector in accomplishing that result should not, for that reason alone, cause cancellation of the benefits. G. South Shore Presses Its Cause As early as November 28, 1984, the South Shore group was in contact with WAPA about meeting WAPA’s needs on St. Croix. With the huge Martin Marietta bauxite refining plant on the south shore of St. Croix about to close because of economic conditions, the members of the South Shore group saw a number of opportunities. The plant has its own power and water production facilities, as well as a deep water port and vast acreage for expansion. South Shore did not intend to succeed to Martin Marietta’s business of refining bauxite. Rather, it entered into an option with Martin Marietta to purchase the physical facilities on St. Croix for the development of an industrial park. No transfer of Martin Marietta’s good name or contracts for the purchase of bauxite or sale of alumina were involved. Since the facility had an operating power plant, South Shore offered to sell WAPA electricity. Principals of South Shore met with the Governor at his home on St. Croix in December, 1984 to spell out its plans. In early May, 1985, South Shore heard of the contemplated contract with DU’s subsidiary and asked for an opportunity to make a competing proposal. But WAPA went ahead with its contract with Caribbean, at the same time asking DU to look into the South Shore possibility. Chairman Richardson was of the opinion that South Shore might be able to assist WAPA in providing power during the interim period until DU’s subsidiary had its plant in place and operating. By late May, 1985, South Shore obtained a copy of the draft agreement DU had submitted to WAPA. Ann Abramson testified that a copy of the draft agreement “came to me” at lunch at a mid-island restaurant. She is usually an articulate, assertive and outspoken person, but as she described the incident, Mrs. Abramson was halting, hesitant and nervous. She claimed that the draft was on the very table where she sat down. She “inadvertently” left with it and turned it over to South Shore’s attorneys. There can be no doubt South Shore took advantage of DU’s draftsmanship and knowledge of the business. One need only look to South Shore’s own agreement later signed by the Governor. Thirty-nine percent (39%) of that agreement is lifted word-for-word from the DU draft. Meetings were held between DU and South Shore, but were inconclusive. Word of the Caribbean/WAPA agreement was widespread since on May 30, 1985, a lengthy newspaper article appeared concerning its terms. South Shore took its case to the Governor, and met with him at both office and home. Two of South Shore’s principals, Ashley Andrews and Lloyd Williams, are highly experienced at guiding business proposals through high level government circles. Andrews is a native Virgin Islander and attorney, though he is not licensed to practice in the territory. He was successful at an earlier time in guiding $100 million in construction projects through Government House and the Legislature in record time, without any need for competitive bidding, formal or informal. He did this on behalf of a West German contractor, who is to build all of the projects agreed upon. Williams, from St. Thomas, served in the Virgin Islands Legislature for many years, rising to majority leader. He is close to the Governor, and experienced at assisting business in making contact with high level government officials. The talents of Andrews and Williams were swiftly put to work. Obviously at their behest, and that of their colleagues, the Governor entered the fray. He called meetings with the WAPA board and others. He sought information about the status of any arrangement with DU, even though the same information had been in the newspaper. But in meetings between the Governor and the WAPA board, Richardson was not forthcoming. He and Adams dissembled, and left the impression there was much to do before any firm agreement could be reached. It is obvious to the Court why they did this. The WAPA board under their intellectual and tactical leadership had given the better part of fifteen months to solving the power needs of St. Croix. They were proud of what was achieved and feared it could quickly unravel. Both Richardson and Adams, wise to the ways of territorial politics, were making every effort to insulate the contract from the pitfalls of political practicalities. The Governor, finally informed that there was no way WAPA could accomodate both the Caribbean contract and any South Shore proposal, took a series of steps which brought matters to a head. He removed Richardson and Adams from the WAPA board. He also removed private members Creque and Banks, on the theory that their terms had expired and they had no right to continue in office. He replaced Richardson and Adams with Budget Director Stephanos O’Reilly, Acting Attorney General Victor Schneider, and Commissioner of Public Works Cecil George. His new appointees immediately took the position that the contract between Caribbean and WAPA was void, since it was authorized and executed on May 23, 1985, when there was no quorum of the WAPA board present, Creque and Banks having no right to participate. O’Reilly was elected chairman and the board was immediately presented with a contract from South Shore for the purchase of electricity and steam in quantities even greater than that provided for in the May 23, 1985 agreement. Before it had even been presented to the WAPA board for approval, it had been executed by the Governor, apparently without any analysis or scrutiny by either WAPA technical staff or the new board itself. O’Reilly was authorized to execute the South Shore agreement, thereby committing WAPA to yet another large scale purchase of electricity. He wisely deferred signing it, announcing his intention to have it reviewed by WAPA staff and further discussed by the board. It is the position of both the Governor and South Shore that their contract could be entered into without soliciting competitive bids. This position is based on South Shore’s claim that it is the successor in interest to and the assignee “of substantially all of the business” of Harvey Alumina Virgin Islands, Inc. In 1962, to encourage Harvey to come to the Virgin Islands and build a facility for refining bauxite into alumina, the Government of the Virgin Islands committed itself to a broad-based agreement which gave Harvey substantial inducements. Harvey sold its plant in the early 1970s to a subsidiary of Martin Marietta Corporation, which continued the bauxite refining business until mid-1985. The agreement between Harvey and the Government provides that the Governor may purchase power and water from Harvey without competitive bidding, on such terms and conditions as only he deems advisable. It is specifically binding “upon the successors in interest and assigns of the Government and of substantially all of the business of Harvey ...” 1962 Virgin Islands Session Laws, Act No. 31, p. 16. South Shore asserts that since it is the successor in interest to Harvey by a route traced through Martin Marietta, the Governor can deal with it on the basis described above. The governor agreeing, executed the agreement and submitted it to WAPA for further approval. At this point, with one contract signed by WAPA on May 23, 1985 now repudiated by its new board, and another signed by the Governor and being pressed upon the board, matters moved to the District Court for resolution. III. PROCEDURAL CHRONOLOGY AND ISSUES A. Procedural Chronology The events described above spawned three separate lawsuits. Not necessarily in the order of filing, they are: 1. An action by Creque and Banks seeking reinstatement to the WAPA board, brought against the Governor and various members of his administration and the WAPA board. Creque and Banks v. Hon. Juan Luis, et al, 616 F.Supp. 843 (D.V.I.1985). We consolidated this matter with the two cases described below, and held a hearing advanced, as to this claim, for a trial on the merits. Creque and Banks were ordered reinstated to their seats on the board, and certain actions taken in their absence were declared without legal affect. On September 9, 1985, Governor Luis and Acting Attorney General Victor Schneider appealed the Court’s holding to the U.S. Court of Appeals for the Third Circuit, where it is now pending. 2. An action by GEC against WAPA seeking a preliminary and permanent injunction against implementation of the WAPA/Caribbean May 23, 1985 agreement as violative of the competitive bidding requirements. WAPA filed an answer contesting the GEC assertion which, by implication at the very least, was an endorsement of the May 23rd agreement. Caribbean moved to intervene in this action, and its motion was granted. 3. An action by Caribbean against WAPA, certain board members, Ashley Andrews of South Shore, and South Shore itself. All parties named as defendants entered answers. WAPA’s answer was completely inconsistent with its answer in the GEC action, since it now takes the conflicting view that the Caribbean contract with WAPA was illegal for, among other reasons, violation of the competitive bidding statutes. This explains the prompt intervention by Caribbean in the GEC action to protect its own interest. All three actions were consolidated. At the hearing on the final merits as to the status of Creque and Banks, we also heard the requests for a preliminary injunction filed by GEC against WAPA and Caribbean against all of the defendants named by it. As stated earlier, we granted a final injunction which reinstated Banks and Creque. The preliminary injunction requests of GEC and Caribbean, however, were denied. We then, sua sponte, without objection from the remaining parties, bifurcated the issues and scheduled a consolidated trial on three matters: (1) GEC's claim for a permanent injunction against any private negotiations without compliance with WAPA’s competitive bidding statute; (2) Caribbean’s claim for a permanent injunction against interference with its May 23, 1985 contract with WAPA, and any defenses or assertions against such a claim, and (3) South Shore and any other party’s defense against either of the permanent injunction requests. Trial commenced September 23, 1985 and continued for six trial days. Near the completion of the proceedings the Court dismissed Caribbean’s complaint as to all individual board members. Remaining for final action by the Court herein are GEC’s claims against WAPA with Caribbean as intervenor, and Caribbean’s claims against WAPA, South Shore and Ashley Andrews. In sum, then, we deal at this stage with the following contentions: (1) Caribbean seeks a determination that its contract with WAPA is valid, and requests a permanent injunction preventing any interference with its contract rights; (2) GEC seeks a permanent injunction against WAPA to prevent it from awarding any contract for the sale of power and steam without competitive bidding, and the further determination that the Caribbean/WAPA contract is invalid for the lack of competitive bidding; (3) WAPA (by its present board) seeks to have the contract with Caribbean voided because of its own failure to comply with the competitive bidding statute. It also would hold any agreement with South Shore to the same requirement; (4) South Shore seeks to have the Caribbean/WAPA contract voided for the lack of competitive bidding, but contends that its own contract with the Governor may also be executed by WAPA without competitive bidding by reason of its role as successor in interest to the rights of Harvey Alumina Virgin Islands, Inc., and, (5) all of Caribbean’s adversaries claim a further ground for voiding the contract, asserting that DU was engaged in a conflict of interest in its dealings with WAPA. B. GEC’s Standing GEC’s standing to bring this action has been challenged by Caribbean from the outset. GEC alleges it has standing as both a disappointed bidder and a ratepayer, to which Caribbean replies that GEC is not a bidder and has no standing as a ratepayer. Standing is a prelude to challenging the action of a government agency. A “plaintiff must allege an injury in fact and [that] the interest sought to be protected by the plaintiff [is] within the ‘zone of interests’ protected by the statute “upon which the claim is based.” St. Croix Taxi Assoc, v. V.I. Port Authority, 17 V.I. 80, 83 (1980). These requirements ensure that a party has “alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness sharpens the presentation of issues.” Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663 (1962). Upon a showing of these factors, standing as a disappointed bidder is generally established. Merriam v. Kunzig, 476 F.2d 1233, 1240-41 (3d Cir.1973); St. Croix Taxi Association, supra. GEC, however, faces an additional obstacle because it is part of a joint venture with respect to the subject matter of this litigation. Pursuant to the law of joint ventures, GEC lacks the capacity to bring this action in its own name. Joint venturers are necessary parties and as such, they must join in an action alleging injury to their common interest or property. Bernitt v. Smith-Powers Logging Co., 184 F. 139, 143 (D.Or.1911); Kemp v. Murray, 680 P.2d 758, 759 (Utah 1984); Scott Company of California v. Enco Construction Company, 264 So.2d 409, 411 (Miss.1972). Waterfront Developers v. City of Miami Beach, 467 So.2d 733, 734 (Fla.Dist.Ct.App.1985). Moreover, Fed.R.Civ.R. 19(b) advises that the failure to join an indispensable party may result in dismissal of the action. Whether Harrison is indispensable is an issue we need not address, because we find that GEC has standing as a ratepayer. Undisputedly, GEC’s claim is within the zone of interest which 30 V.I.C. § 116 is intended to protect: the central policy underlying the statute is to prevent fraud and collusion in the administration of public business. This sums up GEC’s contention precisely. A much weaker argument supports the second prong of the standing test. GEC alleges that the cost of the Caribbean/WAPA contract is exorbitant and that in itself constitutes the requisite injury in fact. It relies on Virgin Islands Hotel Association v. Virgin Islands Water & Power Authority, 465 F.2d 1272 (3d Cir.1972) for this proposition. In that case, the Third Circuit found that an association of hotel owners had standing to contest a rate hike because it was clear that an increased charge for electricity would cause an immediate economic injury. Id. at 1275. We find Hotel Association inapposite. GEC has not alleged a direct injury. Nor has it shown that such an injury is certain to happen. The New Jersey Supreme Court faced a similar challenge in Autotote Ltd. v. New Jersey Sports & Exposition Authority, 85 N.J. 363, 427 A.2d 55 (1981), where the plaintiff was seemingly estopped from attacking a public contract because it had previously been awarded the contract without having bid on it. The public interests at stake prompted the court to relax standing requirements. We are concerned ... with a statutory provision as to which there has been a paucity of judicial attention. The issue is one of substantial public importance and large sums of public monies are at stake. The substantive issue before the Court has been fully developed by both parties and there is a strong likelihood that it would be raised again in the near future if we were to decline to reach it. Since the question is ripe for judicial resolution and since a decision on the public bidding issue will serve the public interest, we address the merits of plaintiff’s argument. Id. at 58. The contract contested here presents compelling interests. It will determine the adequacy of St. Croix’s electricity supply through the year 2005 as well as the rates that island residents will pay for this essential service. Consequently, we proceed to decide this case with GEC as a party. IV. COMPETITIVE BIDDING AND THE WAPA CONTRACT A. Bidding Generally Competitive bidding laws originated in distrust of public officers whose duty it was to execute public contracts. Webster v. Belote, 103 Fla. 976, 138 So., 721, 724 (1931); 64 AmJur 2d Public Works and Contracts § 37. The laws are designed to prevent fraud, collusion, favoritism and improvidence in the administration of public business. E.g., Autotote Ltd. v. New Jersey Sports and Exposition Authority, supra 427 A.2d at 58, Waste Management, Inc. v. Wisconsin Solid Waste Recycling Authority, 84 Wis.2d 462, 267 N.W.2d 659, 663 (1978); Platt Electric Supply, Inc. v. City of Seattle, Division of Purchasing, 16 Wash.App. 265, 555 P.2d 421, 426 (1976); 64 Am.Jur 2d Public Works and Contracts § 37; 81 ALR 3d Bidding on Public Utility Contracts § 2. As a general rule, competitive bidding is a mandatory requirement, e.g., Graydon v. Pasadena Redevelopment Agency, 104 Cal.App.3d 631, 164 Cal.Rptr. 56, 58 (1980), and contracts executed in violation of statutory bidding requirements are void. Platt, supra 555 P.2d at 431. “Public officials have no discretion to ignore the requirement of open competitive bidding, no amount of regard for their intention to act for the public good can provide an excuse for a violation of law and the question here is not one of good faith but of power to disregard the law.” American Totalisator Co., Inc. v. Seligman, 34 Pa.Cmwlth. 391, 384 A.2d 242, 263 (1977). The open competition fostered by competitive bidding serves two recognized purposes. First and primarily, it protects the taxpayer or ratepayer by assuring efficient use of public revenues. Competitive bidding also serves to provide a fair forum for those interested in undertaking public projects. Platt, supra 555 P.2d at 426. 30 V.I.C. § 116(a) (Supp.1984) mandates that WAPA conform to the general rule. It provides in pertinent part: § 116(a) Competitive bidding All purchases and contracts for supplies for services except for personal services, made by the Authority, including contracts for the construction of facilities of the Authority, shall be made after advertisement for bids sufficiently in advance of opening bids for the Authority to secure appropriate notice and opportunity for competition; Provided, That where the expense estimated to be necessary in connection with the purchase or work does not exceed two thousand five hundred (2,500) dollars the same may be carried out without advertisement for bids. Consequently, certain acts are clearly prohibited. Private negotiations with bidders regarding price or technical alterations violate the statute. E.g., American Totalisator v. Seligman, supra. In the absence of statutory authority, a contract subject to bidding may not be summarily renewed. Browning-Ferris Industries of Tennessee, Inc. v. City of Oak Ridge, 644 S.W.2d 400 (Tenn.Ct.App.1983). And contracts whose subject matter falls within the statute may not be awarded without compliance with bid procedures. Platt, supra. While mandatory when applicable, competitive bidding statutes are not absolute and generally provide for certain exceptions. In these situations the government unit has discretion to bypass bidding and directly negotiate a contract. 30 V.I.C. § 116(a) (Supp.1984) exempts bids when: (1) an emergency requires immediate delivery of the materials, supplies, equipment, or performance of the services; or (2) repair parts, accessories, or supplemental equipment or services are required for supplies or service previously furnished or contracted for; or (3) professional, financial (including financial printing) or other expert services or work are required and the Authority shall deem it best in the interest of good administration that contracts therefor be made without such advertisement; or (4) prices are noncompetitive because there is only one source of supply or because regulated under law; in such case the purchase of such materials, supplies, or equipment, or procurement of such services, may be made in the open market in the manner usual in commercial practice. In the comparison of bids and the making of awards, due consideration shall be given to such factors (in addition to whether the bidder has complied with the specifications) as the bidder’s ability to perform construction work of the kind involved in the construction contract under consideration; the relative quality and adaptability of materials, supplies, equipment, or services; and the time of delivery or performance offered. The Authority may prescribe rules and regulations for the submission of bids. Courts have followed two approaches in determining the flexibility with which the exceptions are to be read. One view is that bidding