89 Hawai'i 443, Southern Foods Group, L.P. v. State, Dept. of Educ.

• Decision Date: 23 March 1999
• Docket Number: No. 21715,21715
• Citation: 974 P.2d 1033
• Parties: 89 Hawai'i 443 In the Matter of SOUTHERN FOODS GROUP, L.P., dba Meadow Gold Dairies, Petitioner-Appellant, v. STATE of Hawai'i, DEPARTMENT OF EDUCATION, Respondent-Appellee, and House Foods Hawaii Corporation, dba Foremost Dairies Hawaii, Intervenor
• Court: Hawaii Supreme Court

Page 1033

974 P.2d 1033

89 Hawai'i 443

In the Matter of SOUTHERN FOODS GROUP, L.P., dba Meadow Gold

Dairies, Petitioner-Appellant, v. STATE of Hawai'i, DEPARTMENT OF EDUCATION, Respondent-Appellee, and House Foods Hawaii Corporation, dba Foremost Dairies Hawaii,

Intervenor

No. 21715.

Supreme Court of Hawai'i.

March 23, 1999.

Marc E. Rousseau (C. Michael Hare and Dennis J. Gaughan with him on the briefs) of Cades Schutte Fleming & Wright, for petitioner-appellant Southern Foods Group, L.P. dba Meadow Gold Dairies

Russell A. Suzuki, Deputy Attorney General (Patricia Ohara, Deputy Attorney General with him on the brief) for respondent-appellee State of Hawai'i, Department of Education

Michael C. Bird (John T. Komeiji with him on the brief) of Watanabe, Ing & Kawashima for intervenor House Foods Hawaii Corporation dba Foremost Dairies Hawaii

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

Opinion of the Court by RAMIL, J.

The instant appeal arises from respondent-appellee State of Hawai'i Department of Education (hereinafter referred to as the "DOE")'s procurement of a supplier to furnish and deliver fresh milk to public schools in the State of Hawai'i for the 1998/1999 school year. Petitioner-appellant Southern Foods Group, L.P. dba Meadow Gold Dairies (hereinafter referred to as Meadow Gold) appeals from the Department of Commerce and Consumer Affairs (DCCA) Administrative Hearings Officer's affirmance ¹ of the DOE's rejection of Meadow Gold's bid and the award of the contract to intervenor House Foods Hawaii Corporation, dba Foremost Dairies Hawai'i (hereinafter referred to as Foremost).

Because Meadow Gold submitted a bid with "multiple or alternate offers" in violation of Hawai'i Administrative Rules (HAR) § 3-122-4 (1995), the DOE correctly rejected Meadow Gold's bid as nonresponsive, under Hawai'i Revised Statutes (HRS) § 103D-104 (1996). ² Accordingly, inasmuch as the instant Invitation for Bids (IFB) prohibited "multiple or alternate offers," the hearings officer correctly interpreted HRS Chapter 103D in concluding that the best interests of the DOE, as addressed in HRS § 103D-308 (1993 & Supp.1997) and HAR § 3-122-95 (1995), were irrelevant and in concluding that the accompanying rules adopted pursuant to Chapter 103D mandated rejection of Meadow Gold's bid. Therefore, we affirm.

I. BACKGROUND

A. The Invitation for Bids

The following facts are largely undisputed. On February 5, 1998, the DOE's Procurement and Distribution Section issued an Invitation for Sealed Bids for job number E98-21 (IFB No. E98-21), in order to procure the delivery and furnishing of fresh 2%, whole and lowfat chocolate milk for various schools in the State of Hawai'i (the "Bid Solicitation"). The Bid Solicitation consisted of four contracts and provided four respective bid pages for the islands of O'ahu, Hawai'i, Maui, and Kaua'i. The present appeal only challenges the award of the O'ahu contract.

In addition to the bid page, ³ pursuant to statute, the Bid Solicitation contained special conditions regarding the form of the bid. ⁴ For example, the Bid Solicitation contained condition 2A.1, which provided the following:

A proposal that contains any omission, erasure, addition not called for, conditional bid or irregularity of any kind may be rejected....

The bid price shall be all inclusive....

....

Unless otherwise stated, bidder shall offer only one (1) bid item/number. If more than one bid is offered, all bids shall be rejected for that item/number.

The record reveals that, in response to the Bid Solicitation, only Meadow Gold and Foremost submitted bid sheets for the island of O'ahu. It is undisputed that Meadow Gold submitted two OF-3 pages. Meadow Gold's first OF-3 page indicated that all of the milk would consist of Class III Hawai'i products, arguably entitling the bid to a 10% preference consideration, and provided the following prices per half pint of milk: (1) Group I--$.26; (2) Group II--$.25; (3) Group III--$.235; (4) Group IV--$.24; (5) Group V--$.24; (6) Group VI--$.26; (7) Group VII--$.26; and (8) Group VIII--$.26. Meadow Gold's second OF-3 page did not indicate a Hawai'i products preference, yet provided the following prices: (1) Group I--$.236363; (2) Group II--$.227272; (3) Group III--$.213636; (4) Group IV--$.218181; (5) Group V--$.218181; (6) Group VI--$.236363; (7) Group VII--$.236363; and (8) Group VIII--$.236363.

Foremost submitted one OF-3 page, which also indicated that all of the milk would consist of Class III Hawai'i products, arguably entitling the bid to a 10% preference consideration, and provided the following prices: (1) Group I--$.2259; (2) Group II--$.2824; (3) Group III--$.2223; (4) Group IV--$.2824; (5) Group V--$.2824; (6) Group VI--$.2337; (7) Group VII--$.2259; and (8) Group VIII--no bid.

B. The Bid Opening

The DOE opened the IFB No. E98-21 bids on February 25, 1998. A DOE representative quickly discovered that Meadow Gold submitted two OF-3 pages and announced "I have a duplicate bid for Oahu which means a rejection." This prompted a series of meetings and communications between Meadow Gold and the DOE.

The first written communication, a letter dated March 2, 1998, was from Meadow Gold to Mr. Eric Tom, a DOE Procurement and Distribution Specialist. Therein, Meadow Gold stated that this letter is an explanation of our actions in connection with the sealed bid for the Oahu school milk and to assist you in making a decision regarding this matter.

At the outset, our two bids for the Oahu school milk were in no way intended to mislead or deceive the [DOE]....

Our best intent behind these two bid sheets was to offer the DOE the best milk prices available on Oahu, thereby reducing the DOE's costs. As long as milk supplies are available, Meadow Gold would supply locally processed milk; however, the poor economy in Hawaii has caused many local milk producers to close operation or reduce production. If the trend continues there may be a significant shortage of locally produced milk and Meadow Gold would have to rely on mainland suppliers. Therefore, we were merely offering the DOE the best possible alternatives available to us in the market.

If the dual bid sheets are interpreted as a violation of 2A.10 of the Special Conditions, we believe that the withdrawal of one bid sheet would not unfairly taint the sealed bid process and would provide the DOE with the best possible offer that Meadow Gold is able to make. We believe that this would be governed by § 3-122-31(c)(3) of the Hawaii Administrative Rules, Title 3 ... which provides in part:

If the mistake is not allowable under paragraphs (1) [arithmetical] and (2) [minor informality not affecting price, quantity, delivery or contractual conditions], but is an obvious mistake that if allowed to be corrected or waived is in the best interests of the government agency or for the fair treatment of other bidders, and the chief procurement officer or ... the head of the purchasing agency concurs with this determination, the procurement officer shall correct or waive the mistake.

(Emphases added.) Interpreting the March 2, 1998 communication as a request to withdraw one of the two OF-3 pages, by letter dated March 9, 1998, Eric Tom responded:

... In addition and during our meeting you/your representatives further advised me that one of [the] bids did not meet our procedures in that it was not a qualified product.

Based on above, your position of providing the DOE a choice but at the same time arguing one of the bid pages was for a non qualified product [sic], I must invite your attention to paragraph 7 of section 2A.1 page SC 2-1 within the Special Conditions entitled Bid/Proposal Requirements. Reference reads as follows: "Unless otherwise stated, bidder shall offer only one (1) bid per item/number. If more than one bid is offered, all bids shall be rejected for that item/number."

On March 12, 1998, Meadow Gold formally protested the rejection of its bid pursuant to HRS § 103D-701 (1993 & Supp.1997) and HAR § 3-126-3 (1995) by writing to Mr. Alfred Suga, DOE Assistant Superintendent in charge of the DOE's purchasing agency. Meadow Gold sought reversal of the rejection or a rebid of the contract.

Notwithstanding its March 2, 1998 description of "our two bids for the Oahu school milk," Meadow Gold contended that it "did not submit two bids for the contracts ... [but] submitted one, integrated bid reflected on two bid sheets identified as OF-3. Meadow Gold intended these bid sheets to be treated as a single, unconditional bid." Meadow Gold further argued that, because it did not condition its bid to gain unfair advantage over other bidders, it was a responsive bidder under HRS § 103D-104, and that "[t]here is no prohibition in the bid specifications for submitting a bid price structured in this manner." Meadow Gold conceded that its bid may have been " 'irregular' or a mistake," but urged the DOE to exercise its discretion in correcting the bid. Finally, without citing to which price it submitted, Meadow Gold argued that its bid prices on Groups Nos. II, IV, and V were the lowest and would result in a savings of approximately $595,000.00.

On March 18, 1998, Suga issued a final decision, ⁵ affirming the rejection of Meadow Gold's bid as nonresponsive in violation of the requirement that the bidder submit "only one bid offer per item/number."

C. The Administrative Hearing

On April 8, 1998, Meadow Gold appealed the DOE's rejection of its bid to the DCCA's Office of Administrative Hearings, pursuant to HRS § 103D-709 (1993 & Supp.1997). ⁶ The DCCA hearings officer issued a notice of hearing and pre-hearing conference on April 23, 1998; the pre-hearing conference was set for May 4, 1998, and the hearing was set for May 11, 1998. However, because of scheduling conflicts of both parties, the pre-hearing conference was rescheduled to May 7, 1998, and the parties agreed to set a date for the hearing. Because the parties had...