85 Hawai'i 431, CARL Corp. v. State, Dept. of Educ., 20049

• Decision Date: 22 August 1997
• Docket Number: No. 20049,20049
• Citation: 946 P.2d 1,85 Hawaii 431
• Parties: 85 Hawai'i 431 In the Matter of CARL CORPORATION, Petitioner-Appellant, v. STATE of Hawai'i, DEPARTMENT OF EDUCATION, Hawai'i State Library System, Respondent-Appellee, and Dynix, Inc. dba Ameritech Library Services, Intervenor
• Court: Hawaii Supreme Court

Page 1

946 P.2d 1

85 Hawai'i 431

In the Matter of CARL CORPORATION, Petitioner-Appellant, v. STATE of Hawai'i, DEPARTMENT OF EDUCATION, Hawai'i State Library System, Respondent-Appellee and Dynix, Inc. dba Ameritech Library Services, Intervenor

No. 20049.

Supreme Court of Hawai'i.

Aug. 22, 1997.

Reconsideration Denied Oct. 20, 1997.

Jeffrey S. Harris and Matt A. Tsukazaki, Torkildson, Katz, Fonseca, Jaffe, Moore & Hetherington, Honolulu, on the briefs, for petitioner-appellant.

John P. Dellera, Deputy Attorney General, on the briefs, for respondent-appellee.

Alan M. Oshima and Lawrence M. Reifurth, Oshima Chun Fong & Chung, Honolulu, on the briefs, for intervenor.

Before MOON, C.J., and KLEIN, LEVINSON, NAKAYAMA and RAMIL, JJ.

MOON, Chief Justice.

CARL Corporation (CARL), the unsuccessful competitor for the contract to provide automation and other services to the Hawai'i State Public Library System (HSPLS or the Library), appeals from the decision of the Department of Commerce and Consumer Affairs (DCCA) Hearings Officer. The Hearings Officer essentially rejected CARL's contention that Intervenor Dynix, Inc., dba Ameritech Library Services (Ameritech, Dynix, or ALS), who was awarded the contract, was afforded an unfair advantage in responding to the Library's request for proposals, but concluded that the process by which the proposals were evaluated was in violation of the State Procurement Code, Hawai'i Revised Statutes (HRS) Chapter 103D (1993) (the procurement code or the Code). In his "Findings of Fact, Conclusions of Law and Final Order," filed on August 15, 1996 (FOF, COL, and Order), the Hearings Officer remanded the matter back to the Library to reevaluate the competing proposals, "after which [the Library] shall ratify and affirm the contract, or terminate the contract as provided for in HRS § [§ ] 103D-707(1)(A) and (B)." CARL timely appealed.

For the reasons stated below, we vacate the Hearings Officer's Order remanding to the Library for (1) a reevaluation of the proposals and (2) a determination whether to ratify or terminate the disputed contract. We hold that, pursuant to HRS § 103D-701(g) and because the evaluation of the proposals was in violation of the procurement code, CARL is entitled to its costs in preparing its proposal. We further hold that, where CARL was deprived of any meaningful relief under the code by the award of the contract to Ameritech in bad faith violation of the code, CARL is entitled to recover its attorneys' fees incurred in successfully challenging the award of the contract before the Hearings Officer and on appeal.

Accordingly, we remand to the Hearings Officer for entry of an order: (1) awarding CARL its costs for preparation of its proposal and its reasonable attorneys' fees in prosecuting its protest and appeal; and (2) ratifying or terminating the contract as provided for in HRS § 103D-707.

I. BACKGROUND

CARL and Ameritech submitted the only two responses to the Library's November 13, 1995 Request For Proposals No. RFP-96-004-0 (RFP 96-4) for a new computer automation system. Ameritech was chosen to provide the system after a one-day evaluation of the two voluminous and highly technical proposals. The Library notified CARL by letter dated December 19, 1995, postmarked December 27, 1995, and received January 2, 1996, that another vendor's proposal was selected.

By letter dated January 3, 1996, and copied to State Librarian Bartholemew Kane, CARL lodged its formal protest with Lloyd Unebasami, Administrator of the State Procurement Office, pursuant to HRS § 103D-701, which provides:

(a) Any actual or prospective bidder, offeror, or contractor who is aggrieved in connection with the solicitation or award of a contract may protest to the chief procurement officer or the head of a purchasing agency. The protest shall be submitted in writing within five working days after the aggrieved person knows or should have known of the facts giving rise thereto.

(b) The chief procurement officer, the head of a purchasing agency, or a designee of either officer, prior to the commencement of an action in court concerning the controversy, may settle and resolve a protest of an aggrieved bidder, offeror, or contractor, actual or prospective, concerning the solicitation or award of a contract. This authority shall be exercised in accordance with rules adopted by the policy office.

(c) If the protest is not resolved by mutual agreement, the chief procurement officer, the head of a purchasing agency, or designee of either officer shall promptly issue a decision in writing. The decision shall:

(1) State the reasons for the action taken; and

(2) Inform the protestor of the protestor's right to review as provided in this part.

(d) A copy of the decision under subsection (c) shall be mailed or otherwise furnished immediately to the protestor and any other party intervening.

(e) A decision under subsection (c) shall be final and conclusive, unless fraudulent, or any person adversely affected by the decision commences an administrative proceeding under section 103D-709.

(f) In the event of a timely protest under subsection (a),no further action shall be taken on the solicitation or the award of the contract until the chief procurement officer, after consultation with the head of the using agency, or the head of the purchasing agency, makes a written determination that the award of the contract without delay is necessary to protect the substantial interests of the State.

(g) In addition to any other relief, when a protest is sustained and the protesting bidder or offeror should have been awarded the contract under the solicitation but is not, then the protesting bidder or offeror shall be entitled to the reasonable costs incurred in connection with the solicitation, including bid preparation costs other than attorney's fees.

(Emphases added.) The essence of CARL's protest was that "this was not an open procurement and that another vendor was predetermined from the outset." In support of its contention, CARL stated the following: (1) the evaluation was inadequate; (2) CARL was not given an opportunity to demonstrate its system; and (3) the implementation schedule proposed in the RFP was unrealistic and could only be achieved by a vendor who had received information not contained in the RFP.

Although, as discussed infra, CARL mistakenly identified Unebasami as the "chief procurement officer" with authority to resolve protests pursuant to HRS § 103D-701, ¹ Unebasami did nothing to correct CARL's error. He referred CARL's protest to Kane and requested that Kane "draft a response for my signature by January 10, 1996." Unebasami also informed Kane that, pursuant to Hawai'i Administrative Rules (HAR) § 3-126-5, "your agency shall not award the contract until the protest has been settled, unless I make a written determination after consulting with you, that the award is necessary to protect substantial interests of the State."

Kane, however, responded directly to CARL by letter dated January 9, 1996, denying the protest. Kane denied the protest on the grounds that: (1) the protest was untimely; (2) "the independent evaluation committee conducted a full and complete review of the two proposals"; (3) a demonstration was not necessary and was not required by law; and (4) the implementation schedule outlined in the RFP "was an essential specification that was an integral part of the RFP." Kane denied that the Library provided any vendor with information that was not in the RFP or that any vendor was authorized by the Library to initiate any act regarding the implementation of the system prior to the award. Kane's letter did not inform CARL of its right to a review of the denial of its protest as required by HRS § 103D-701(c)(2).

CARL received Kane's letter denying its protest on January 12, 1996. On January 22, CARL wrote to Unebasami, seeking "a detailed explanation of which aspects of the evaluation criteria favored the other party and why." unebasami responded to carl's letter on january 26, stating that CARL's letter would be discussed with Kane "in order to prepare a response to you at the earliest possible date." In the meantime, however, Kane executed the contract with Ameritech on January 25, 1996.

By memorandum dated January 30, Unebasami referred CARL's January 22 letter to Kane and informed Kane that his previous response to CARL, denying its protest as untimely, was improper. Unebasami requested that Kane prepare a response to CARL's letter and submit a draft to the State Procurement Office before finalizing and sending it to CARL's attorneys. CARL was to be advised in the response that the contract had already been signed with Ameritech and that the entire contract file was open for public inspection pursuant to HAR § 3-122-58. ²

On January 31, CARL filed a request for hearing with the DCCA, seeking review of Kane's January 9, 1996 denial of its protest. The request for hearing was made pursuant to HRS § 103D-709, which provides:

(a) The several hearings officers appointed by the director of the department of commerce and consumer affairs pursuant to section 26-9(f) shall have jurisdiction to review and determine de novo any request from any bidder, offeror, contractor or governmental body aggrieved by a determination of the chief procurement officer, head of a purchasing agency, or a designee of either officer under sections 103D-310, 103D-701, or 103D-702.

(b) Hearings to review and determine any request made pursuant to subsection (a) shall commence within twenty-one calendar days of receipt of the request. The hearings officers shall have power to issue subpoenas, administer oaths, hear testimony, find facts, make conclusions of law, and issue a written decision which shall be final and conclusive unless a person or governmental body adversely affected by the decision commences an appeal in the supreme court under section 103D-710.

(c) The party initiating...