The Metropolitan Council said Tuesday it will seek new bids for construction of a massive bus garage in Minneapolis, after one of the firms vying for the contract filed a lawsuit saying the agency botched the bidding process.

The agency had been planning to award Knutson Construction a $114 million contract to build the garage. It reversed course Tuesday afternoon after a losing bidder, AP Midwest, said it was unfairly disqualified for shortcomings in recruiting women- and minority-owned subcontractors.

The decision came a day after the council's transportation committee voted to move forward with the contract, though attorneys said the agency would hold off on final approval until a judge ruled on whether to halt the process. The lawsuit was filed last week.

The council, which oversees Twin Cities transit, has been preparing for nearly two decades to build a new garage beside its existing Heywood garage in the North Loop, to accommodate its expanding fleet of vehicles. Council spokesman John Schadl said Tuesday that the agency would rebid the project but declined to explain the reasons behind the decision.

AP Midwest, which filed the suit, submitted the lowest bid for the project — $355,000 less than Knutson's bid. But bidders were required to assign at least 15% of the work to women- and minority-owned businesses, or show they made a "good faith" effort to meet the 15% goal. The council determined that AP Midwest neither met the threshold nor made a sufficient effort.

The firm claims the council overlooked their extensive efforts to solicit that work. The lawsuit says the firm expected to reach 12.5%.

AP Midwest President Mark Liska said the firm has tried to increase participation from "historically disadvantaged populations" in their industry, and the lawsuit cites examples of their outreach efforts to boost those numbers. AP Midwest is a subsidiary of Adolfson & Peterson, Inc., based in Golden Valley.

"[T]he issue is not about [disadvantaged business enterprise] goals, but about the integrity of the process used to award the contract," Liska said in a statement. "Competition for public contracts should be conducted on a level playing field to make the process fair for all."

The lawsuit says the firm went out of its way to find women- and minority-owned subcontractors for the project. It split up the work into more focused pieces, contacted subcontractors located close enough to perform the work, posted on relevant websites, hosted a meet-and-greet breakfast and asked the council to waive certain certification requirements.

The council's bid documents say bidders must either show they can meet the 15% goal or document their "good faith" efforts to meet it.

The council asked AP Midwest for documentation of its efforts and ultimately found them insufficient. The lawsuit says the council, in an August memo, criticized AP Midwest for not reaching out to more subcontractors, rejecting some more expensive bids, and finding women- and minority-owned subcontractors for only 17 out of 63 facets of the project, among other problems. It also highlighted that the second-lowest bidder had met the goal.

The council, through spokesman Schadl, declined to make the memo public, citing open-records laws protecting bidding documents until a contract is awarded. Schadl said the agency also could not comment on pending litigation.

The new bus garage has been in the works since 2000, council staff said, with the first land purchase in 2006. It would be built on an 11-acre site adjacent to the Heywood garage and Metro Transit's headquarters, just northwest of Target Field.

The council says it has already run out of space to store its fleet of more than 900 vehicles at its five existing garages.

"Right now we're at the point where we've exceeded the capacity and even the crush capacity [of our garages]," project manager Robert Rimstad told a council committee last month. "Where we're parking buses outside, we're parking them overnight, we're really struggling with some of those things to maintain that service throughout the day."

The agency expects that will only be further squeezed by the addition of longer bus-rapid-transit vehicles and plans of expanding service in the future. The new 350,000-square-foot garage would accommodate storage and maintenance of about 216 buses.

"It's a very good central location," Rimstad said. "It's efficient to operate our service out of and reduce the amount of deadhead hours the drivers operate the buses without any passengers on them."

Five firms submitted bids for the project, ranging from $114 million to $120 million.

Before Tuesday's decision, construction was slated to be complete by summer 2022.