Computer Shoppe, Inc. v. State
| Decision Date | 02 August 1989 |
| Citation | 780 S.W.2d 729 |
| Parties | The COMPUTER SHOPPE, INC., Plaintiff/Appellant, v. STATE of Tennessee, Defendant/Appellee. |
| Court | Tennessee Court of Appeals |
E. Clifton Knowles, Bass, Berry & Sims, Nashville, for plaintiff/appellant.
Charles W. Burson, Atty. Gen. and Reporter, Tara A. O'Brien, Asst. Atty. Gen., for defendant/appellee.
This appeal concerns the Tennessee Claims Commission's jurisdiction to consider a complaint filed by an unsuccessful bidder after the Commissioner of General Services rejected all the bids for a statewide microcomputer system. The bidder sought to recover its costs for software modifications made at the State's request during the procurement process. The Commission found that it lacked subject matter jurisdiction and dismissed the complaint. We have determined that the complaint states a claim upon which relief can be granted and, therefore, reverse the Commission's decision.
The Department of Correction received a criminal justice block grant from the United States Department of Justice in 1986 to help Tennessee's sheriffs set up a statewide microcomputer system. The purpose of the system was to automate the sheriffs' local operations and to provide them with a communications link to the Tennessee Bureau of Investigation's criminal information system.
In July, 1986 and again in May, 1987, the executive director of the Tennessee Sheriffs' Association, Inc. ("TSA") 1 requested the Department of General Services to procure the system in accordance with Tenn.Code Ann. § 12-3-1001 (1987). 2 The department agreed to assist the TSA and, bypassing the state agencies normally involved in procuring computer equipment, assembled a committee to assist in drafting the specifications and evaluating the bids. 3 The specifications proved to be seriously deficient. Many key specifications were ambiguous; others were missing. In addition, the testing procedures were imprecise and failed to reflect the system's actual requirements.
On July 1, 1987, the Department of General Services issued an invitation to bid ("ITB") for a two-year, $2 million contract to purchase the microcomputers, peripherals, and software, including the Bell System's 8A1 communications protocol, 4 needed for the system. Eleven bidders responded to the ITB. The department opened the bids on August 4, 1987, and eventually disqualified the two lowest bidders because they could not provide the Bell System 8A1 communications protocol. On August 17, 1987, it requested the third lowest bidder, The Computer Shoppe, Inc. ("Computer Shoppe"), to set up its system at the TBI's headquarters for demonstration and testing.
Several performance problems appeared during the initial demonstration of the Computer Shoppe's system. The department agreed to extend the testing period, and the Computer Shoppe agreed to make the needed corrections as well as other minor software modifications not required by the specifications. Additional tests revealed other minor problems which the Computer Shoppe also agreed to correct. In order to give the Computer Shoppe the opportunity to modify its software, the department again extended the test period.
According to the Computer Shoppe's manager, the TBI and the Department of General Services' representatives and the TSA's executive director informed the company on September 3, 1987, that only one problem remained and promised to award the contract to the Computer Shoppe if it would agree to modify its software by September 4, 1987 to provide on-screen verification of the receipt of inquiries. The Computer Shoppe agreed to make the necessary software modifications, even though it believed that the specifications did not clearly require them, and flew in its hardware and communications experts to do the work.
The TBI employee responsible for testing the system gave his preliminary approval to the modifications on September 4, 1987. However, he later informed the TSA and the Department of General Services on September 8, 1987, that the Computer Shoppe's communications software did not comply with the specifications in three areas. Accordingly on September 9, 1987, the TSA requested the Department of General Services to reject the Computer Shoppe's bid and to proceed to the next bidder.
The Computer Shoppe discovered during a September 11, 1987 conference call that its system had not passed the TBI's tests. After obtaining the test results, it filed a formal protest with the Commissioner of General Services on September 16, 1987, detailing its efforts to satisfy the TBI's demands and pointing out the inadequacies and contradictions in the specifications.
The Commissioner met with the Computer Shoppe's representatives and on September 18, 1987, extended the procurement process until September 25, 1987, to give the Computer Shoppe time to "complete the adjustments allowed by the I.T.B." He also invited the Computer Shoppe to seek whatever other "clarifications" to the specifications it required.
The TBI conducted benchmark tests of the Computer Shoppe's system on September 25, 1987. On September 28, 1987, it notified the Department of General Services and the TSA that the system had complied with all tests except one which had not been included in the specifications and which had never been discussed with the bidders.
During the latter stages of the testing, an employee of the General Assembly's Fiscal Review Committee requested the Attorney General to review the ITB and the procurement process being used to acquire the sheriffs' computer system. During a September 30, 1987 meeting, a deputy attorney general informed the TSA's executive director and officials on the Department of General Services that the ITB was so seriously flawed that any contract based upon it would be void.
Following this meeting, the Commissioner of General Services decided to exercise his statutory prerogative to cancel all the bids on the pretext that the ITB had failed to include a provision relating to installation and training. On October 5, 1987, the Department of General Services, without explanation, notified the Computer Shoppe that it had rejected all the bids and had cancelled the ITB.
The Computer Shoppe filed another protest with the Commissioner of General Services on October 13, 1987. Two days later, the Commissioner declined to consider the protest and referred the Computer Shoppe to the Tennessee Claims Commission. On October 30, 1987, the Computer Shoppe requested a hearing before the Board of Standards. 5 The Board discussed the Computer Shoppe's request and on November 20, 1987, declined to hear the protest due to the Computer Shoppe's "failure to state a claim upon which the Board could grant relief." 6
The Computer Shoppe then filed a claim for damages with the Division of Claims Administration. The division transferred the claim to the Tennessee Claims Commission ("Commission") on May 2, 1988, and on June 1, 1988, the Computer Shoppe filed a complaint with the Commission seeking to recover its costs to modify its software and communications protocols in response to the assurances that it would be awarded the contract if the modifications were made. The Commission ultimately determined that it did not have subject matter jurisdiction to consider the complaint because the Commissioner of General Services had rejected all the bids before a contract to purchase the Computer Shoppe's system came into existence.
While the Computer Shoppe was pursuing its administrative remedies within the state system, the TSA started the procurement process anew through Montgomery County's purchasing system. The TSA eventually acquired the sheriffs' computer system from another vendor who had also submitted a bid in response to the State's ITB.
We turn first to the Computer Shoppe's contention that the Division of Claims Administration's processing of the claim somehow conferred subject matter jurisdiction on the Tennessee Claims Commission. While the state officials who reviewed the matter led the Computer Shoppe to believe that the Commission could consider its claim, they cannot confer subject matter jurisdiction on the Commission if it does not exist by statute.
The Computer Shoppe pursued every administrative remedy available to disgruntled bidders before it filed its claim with the Commission. It filed a protest with the Commissioner of General Services pursuant to Tenn.Code Ann. § 12-3-214(a) (1987); 7 it requested a hearing before the Board of Standards pursuant to Tenn.Code Ann. § 12-3-214(b)(2); and it filed a claim for damages with the Division of Claims Administration pursuant to Tenn.Code Ann. § 9-8-402(a) (1987).
In each instance, the state officials or agencies declined to take action and referred the Computer Shoppe elsewhere. On October 15, 1987, the Commissioner of General Services suggested that the Computer Shoppe should take its claim to the Tennessee Claims Commission. On November 6, 1987, the Board of Standards declined to hear the matter, stating that the Computer Shoppe had "other remedies." On May 2, 1988, the Division of Claims Administration transferred the case to the Commission because it had been unable to act on the claim within ninety days.
We can readily see how the actions of the Commissioner of General Services, the Board of Standards, and the Division of Claims Administration would create the expectation in any reasonable claimant's mind that the Commission could hear and act on its claim. However, only the Tennessee Constitution or the Legislature can confer subject matter jurisdiction. Turpin v. Conner Bros. Excavating Co., 761 S.W.2d 296, 297 (Tenn.1988); Kane v. Kane, 547 S.W.2d 559, 560 (Tenn.1977). It cannot be conferred by the parties' conduct. Shelby County v. City of Memphis, 211 Tenn. 410, 413, 365 S.W.2d 291, 292 (1963); Seagram Distillers Co....
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