XTL-NH, Inc. v. New Hampshire State Liquor Commission, 090616 NHSUP, 217-2013-CV-119

Docket Nº:217-2013-CV-119
Opinion Judge:Richard B. McNamara, Presiding Justice.
Party Name:XTL-NH, Inc. v. New Hampshire State Liquor Commission
Case Date:September 06, 2016
Court:Superior Court of New Hampshire
 
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XTL-NH, Inc.

v.

New Hampshire State Liquor Commission

No. 217-2013-CV-119

Superior Court of New Hampshire

September 6, 2016

NOT FOR PUBLICATION

MERRIMACK, SS

ORDER

Richard B. McNamara, Presiding Justice.

The Plaintiff, XTL-NH, Inc. ("XTL"), brought an action against the Defendant, the New Hampshire State Liquor Commission (the "Commission" or "NHSLC"), arising out of XTL's unsuccessful bid for a liquor warehousing contract, which the Commission awarded to Exel, Inc. ("Exel"). In July 2014, this Court held that XTL could maintain a claim for damages against the Commission on a promissory estoppel theory. Cross-motions for summary judgment were denied on January 4, 2016 and a bench trial was held on XTL's promissory estoppel claim in May and June of 2016. Based on the evidence presented at trial, the Court finds that the Commission did not breach its obligation to provide a competitive bidding process that complied with New Hampshire law. Accordingly, the Court finds for the Commission on XTL's claims.

Index to Subject Headings

I. Factual Background………………………………………………………….………………….2

A. The Commission's Request for Proposals……………………………………………….2

B. The Proposals……………………………………………………………………………………..8

II. Controlling Law…………………………………………………………………………………..9

A. XTL's Promissory Estoppel Claim………………………………………………………….9

B. Competitive Bidding…………………………………………………………………………..10

C. Request for Proposals and Invitations to Bid…………………………………………12

III. XTL's Claim that the RFP Process is Inconsistent with Competitive

Bidding………………………………………………………………………………………….….15

IV. XTL's Claim that the Process followed was Inconsistent with the RFP……..18

A. XTL's Claim that the Material Requirements of the RFP Cannot be Waived……………………………………………………………………………………………..19

B. The Consumer Price Index ("CPI") Provision………………………………………..21

C. Warehouse Location…………………………………………………………………………..23

D. Clarifications During the Best and Final Offer Stage ……………………………..24

E. XTL's Claim that the RFP was Scored on Unknown Criteria …………………..29

F. The Contract Award Date……………………………………………………………………32

G. Auction Techniques……………………………………………………………………………34

H. Governor and Council Approval of the Contract…………………………………….36

V. Summary………………………………………………………………………………………….37

I. Factual Background

A. The Commission's Request for Proposals

The Commission is essentially a liquor retailer. It produces a substantial amount of revenue for the State. It has traditionally contracted with private vendors for liquor warehousing services. In 1997, it entered into a five-year contract with two five-year renewal terms with Law Warehouses, Inc. ("Law Warehouses"). Once the contract and the renewal expired, the Commission entered into an 18-month renewal term with Law Warehouses. In 2012, it was necessary to obtain a new contract.

The Commission decided to seek a 20-year contract because it recognized, after speaking with vendors, that it would be difficult for vendors to commit capital or obtain financing for construction of modern warehousing facilities unless a vendor had a contract of sufficient duration to justify the capital expenditure. The Commission had never entered into a 20-year contract term. Indeed, contracts of that length are unusual in the State system. Trial testimony established that the only contract the State had ever executed of that length was for a ski area.

On March 28, 2012, the Commission issued a Request for Proposal ("RFP") to solicit proposals from vendors for a long-term warehousing contract. The proposals were to contain in detail the submitting vendor's plan "for a comprehensive and efficient warehousing system" capable of meeting all of the Commission's needs. (RFP § 1.1.) The RFP stated, "Vendors are encouraged to propose any arrangement of Warehouse services that will best meet the NHSLC needs as described [in the RFP]." (RFP § 2.1.) The RFP further encouraged proposals with "innovative ideas" where "the Vendor believes s/he is able to improve an operation or reduce a cost." (RFP § 1.7.3.) The flexibility accorded potential vendors is illustrated by RFP section 1.7.2, which provides:

1.7.2 Mandatory requirements Except where clearly excluded, all portions of this RFP shall be considered to be Mandatory. The NHSLC shall solely resolve any matter requiring interpretation. At its sole discretion, the NHSLC may waive Mandatory requirements and accept alternatives deemed to be in the best interests of the NHSLC. (Emphasis added)

The RFP established a question and answer process through which potential bidders could submit questions related to the RFP process that the Commission would publicly answer on its website. The Commission's responses reiterated the RFP's desire for innovative proposals that would serve the Commission's best interests. For example, on May 1, 2012, the Commission clarified its answers to previous questions as follows: The proposal must contain a written response to all portions of the RFP and appendices. The response shall at least be "understood, " which means that the Vendor agrees and takes no exception to that portion of the RFP. Even where the RFP "requires" that a particular task be accomplished, the Vendor may take a clearly described exception and, if possible, suggest an alternative. The NHSLC may waive mandatory requirements and accept alternatives deemed to be in the best interest of the NHSLC.

(May 1, 2012 RFP Clarifications and Amendments.)

The May 1, 2012 Answer to Vendor Question 118 posted on the website stated that the "RFP contains a large number of basic, functional requirements that must be met in some fashion. There is, however, an opportunity for the Vendor to propose a solution that reaches the same result but takes a different path." (NHSLC 000198.) Critically, the RFP provided a vendor the opportunity to take "exception" to a requirement of the RFP and propose an alternative. When a vendor did so, however, it took a risk; if the Commission did not accept the exception, the bid was likely to be rejected. Nonetheless, all of the vendors, except for XTL, utilized the exception process.

Craig Bulkley ("Bulkley"), the Commission's Director of Administrative Services and Chief Operating Officer, testified credibly that the Commission took such a broad view of what proposals would be acceptable because the Commission did not consider itself to have expertise in warehousing but expected that those responding to the RFP would be experts and therefore would have suggestions or alternatives that would make business sense. The Commission wanted to encourage innovative ideas that had not come to its attention; however, the RFP specifically stated, "Innovative ideas will be considered, but may not necessarily be deemed superior." (RFP § 3.0.7.)

Bulkley testified credibly that the RFP was not a low bid RFP. The Commission was concerned that if the transaction failed there would be significant impact not only to the operation but to revenue that the Commission was, by law, required to maximize. Because the Commission felt that the proposals vendors submitted were going to be difficult to analyze, since the RFP called for a 20-year contract, the RFP included a provision that any proposal must remain valid for 210 days from the issuance of the RFP, which was longer than the 180-day timeframe typically used by the Commission. The timeframe was never amended.

The RFP provided for an opportunity for vendors to ask questions. About 170 questions were propounded and answered by the Commission; when a question was asked, all vendors were informed of the question and the response by posting them on a website. XTL, as well as Exel, submitted inquiries as did virtually all other vendors.

After the question and answer process and subsequent submission of proposals, the RFP required the Commission to "conduct a comprehensive, fair and impartial review and evaluation of all qualifying Proposals." (RFP § 4.1.) It stated that the evaluation process "shall include, but not be limited to, a fair and impartial ranking of all qualified Proposals. . . ." (Id.) The RFP created the Evaluation Committee ("EC") to conduct the proposal review process and make an initial determination as to which proposal would best meet the Commission's needs. (RFP § 4.2.) The EC consisted of Bulkley; George Tsiopras, the Commission's Chief Financial Officer ("CFO"), who had prior experience with the New Hampshire Office of Legislative Budget Assistant; and John Bunnell who had been with the Commission for 18 years. Additionally, the Commission chose Peter Hastings, the Acting Commissioner...

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