Local construction firm Nan Inc., the lowest of three bidders looking to build the Honolulu rail system’s first nine stations from West Oahu to Aloha Stadium, has dropped its recent protest against a decision to cancel those bids.

Rail officials canceled the bids a few weeks after they found that each had exceeded the transit project’s budget by more than $100 million.

Nan’s move to withdraw and not pursue legal action, rail officials say, frees the agency handling the project to move forward with new bid requests for those stations, splitting them into smaller groups of work in the hopes that the new bids will come in far less expensive.

However, in its original Sept. 15 protest letter, Nan’s president called it "ludicrous" that breaking up the work into smaller pieces would yield any significant savings.

"Unless there is a major reduction in scope and/or a redesign, the mere repackaging of this project will not reduce cost and is not a valid reason for canceling this project" under state procurement law, Nan Inc. President Fooney Freestone told the Honolulu Authority for Rapid Transportation, which is overseeing the rail system’s completion, in an 11-page letter.

But Nan withdrew its protest in a letter Thursday, citing HART’s value as an important client.

The firm said, however, that it had spent about $200,000 to prepare its bid. It also stated that "numerous suppliers and subcontractors" were also "severely impacted" by HART’s move to cancel the bids.

Nan officials did not return calls for comment on their decision to withdraw.

In his initial response to the protest, HART Executive Director Dan Grabauskas said his agency’s move to cancel the bids was warranted, and in the public’s best interest to help control project costs.

On Thursday, Grabauskas lauded the company’s decision. "I think that they’ve taken a high road in their response by pulling back on the protest and allowing us to do what we’re trying to do, which is retool the contract to bring down costs. I hope that they, among others, will participate in a re-compete."

After those first bids came in 60 percent above what HART had budgeted for those stations, the rail authority consulted with local contractors on ways to fix its request and hopefully get lower bids, he said.

"We can’t control the red-hot market but we can maybe control some other factors," Grabauskas said.

The bids to build those nine stations were among the first to be opened for some $1.2 billion in total budgeted construction scheduled to go out this year. Amid the sticker shock of those first three bids, rail officials aren’t yet sure whether contingency dollars will fully cover the rising construction price.

Nan had bid $294.5 million to build the nine stations, while Nordic PCL bid $312.3 million and Hensel Phelps bid $320.8 million. HART, meanwhile, had budgeted some $184 million for the work, including contingency. The other two firms did not file protests, rail officials said.

Grabauskas further said Thursday he did not think that HART’s move to cancel the original bids — even after they had been publicly disclosed — would discourage quality candidates for the work from bidding in the future.

"As long as we listen to them and make the changes that we recommend, that we can do, then I don’t think there will be a chilling effect on their bids," he said. "I think it’s going to be better."

Requests for bids to build the first smaller grouping of stations could go out in mid-November, and the bids for that work would likely be opened in about February.

That schedule would end any chance that the rail’s first 10-mile stretch to Aloha Stadium would open in 2017 as scheduled, instead pushing that opening to sometime in 2018, Grabauskas said.

The full 20-mile, 21-station line is still slated to open in 2019, rail officials.

Last week, HART officials held community meetings to show the public early renderings of stations on the 20-mile line’s eastern end. They included stations planned for Kalihi, Kapalama, Iwilei, Chinatown, downtown and Kakaako.

HART hasn’t yet released requests for bids to build those stations on the eastern end.