Datatrol Inc. v. State Purchasing Agent

• Decision Date: 04 February 1980
• Citation: Datatrol Inc. v. State Purchasing Agent, 379 Mass. 679, 400 N.E.2d 1218 (Mass. 1980)
• Parties: DATATROL INC. v. STATE PURCHASING AGENT et al.
• Court: Supreme Judicial Court of Massachusetts

Page 1218

400 N.E.2d 1218

379 Mass. 679

DATATROL INC. v. STATE PURCHASING AGENT et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Oct. 5, 1979.

Decided Feb. 4, 1980.

Paul A. Good, Asst. Atty. Gen., for defendants.

John Silas Hopkins, III, Boston (John M. Harrington, Jr., Boston, with him), for American Totalisator Company, Inc., intervenor.

Charles F. Choate, Boston (Wm. Gerald McElroy, Jr., Boston, with him), for plaintiff.

Before HENNESSEY, C. J., and BRAUCHER, KAPLAN, WILKINS and LIACOS, JJ.

LIACOS, Justice.

The State Lottery Commission (Lottery) awarded a contract for an on-line number selection processing system to American Totalisator Company, Inc. (AmTote), on September 27, 1978. Datatrol Inc. (Datatrol), a disappointed bidder, commenced this action on October 13, 1978, in the Superior Court for Suffolk County. Datatrol sought, inter alia, a preliminary injunction forbidding the Lottery, the executive director, chairman, and members of the Lottery, and the State Purchasing Agent (Agent) from entering a contract with AmTote for the computer system. On October 18, 1978, the request for an injunction was denied. However, on November 13, 1978, the plaintiff was allowed to amend the complaint by adding a request for a determination that the award to AmTote did not comply with the requirements of G.L. c. 7, § 22, and was therefore void.

After trial on the merits, a judge of the Superior Court entered judgment on February 28, 1979, setting aside the award to AmTote. On March 8, 1979, the judgment was ordered amended to enjoin the Lottery and the other defendants from performing a contract executed pursuant to the award. The Lottery's motion for a stay of judgment was denied, and an amended judgment was entered on March 19, 1979.

On March 22, before the Lottery's appeal was docketed, AmTote moved in the Appeals Court to intervene as a party appellant and moved for a stay of the judgment. The Appeals Court single justice denied both motions on March 28. On April 26, after the Lottery's appeal was docketed, AmTote appealed the denial of the March 22 motion and renewed its motion to intervene. The single justice of the Appeals Court transferred the motion to the panel assigned to decide the appeal. AmTote's appeal was consolidated with the main appeal. We transferred the appeals here on our own motion.

Thus, the Lottery and AmTote appeal from the amended judgment of March 19. Furthermore, AmTote appeals from the denial of its motion to intervene, and AmTote's renewed motion to intervene is before us de novo. We grant AmTote's motion to intervene, and affirm the judgment of the Superior Court.

I.

We state the relevant facts, as found by the trial judge. On May 19, 1978, the Lottery issued an Invitation to Bid and Request for Proposals (RFP) for a lottery computer system. This invitation described itself in the following terms. "Purpose of Bid Request. The purpose of this bid request is to solicit technical and cost proposals for the procurement of equipment and support services necessary for the implementation and operation of an On-Line Number Selection Lottery Processing System. Such a system would be utilized for operating the Massachusetts Lottery's current Numbers Game, the soon to be implemented Lotto Game and other planned number selection Lottery games to be offered in the future. Further, this on-line system is to be operated in parallel with the Lottery's currently installed Off-Line Number Selection Lottery Processing System . . . ."

In outline, the system was described as consisting of at least 300 to 500 on-line betting terminals to be installed at sales agent locations throughout the Commonwealth, and a telephone communications system linking the terminals to a central computer, to be installed at Lottery headquarters in Braintree. ¹ The system's principal function was to improve the efficiency of the daily numbers game. ² The REP sets out a description of the purposes of the system, the jobs it was supposed to do, and the support services to be furnished by the bidder. However, the RFP does not set out a description of many aspects of the system itself. Thomas Bryan O'Heir, the deputy director of the Lottery for planning and development and the author of the RFP, characterized the RFP as a "problem oriented bid specification." It stated a general problem to be solved. The bidders were to supply the specifications of a system that would solve the problem. The judge identified fourteen areas in which the specifications were left open. "(a) The type of business arrangement desired by the Commission. . . . (T)he (RFP (at par. 14.11)) sets forth five types of business arrangements which are 'possible under this procurement': Facility Management Proposals; Turn-Key System Proposals; System Equipment Proposals; Specific Equipment Proposals; and Software/System Implementation Proposals. . . . ³

"(b) The delivery or completion date for the system . . . .

"(c) The number of computer terminals per telephone circuit. This number is significant because the fewer telephones per circuit, the more circuits required and the greater is the communications cost of operation. . . .

"(d) The number of characters to be on the keyboard of the terminal. The number selected by the bidder could be from twenty to one hundred and twenty. The number of characters would be a factor in cost, ease of operation, maintenance required and operational capability.

"(e) The numbers of characters to be on the display panel.

"(f) The ticket format and whether multi-bet or single-bet tickets should be used; if several bets could be entered on one ticket, this would obviously lower transaction time and the cost of ticket stock.

"(g) The maximum average transaction time for the system. The Invitation to Bid emphasizes the importance of this feature. It could vary widely depending on the equipment used. More expensive and more complex equipment could be used to achieve a lower transaction time, in the process increasing the cost of maintenance.

"(h) A maximum cost for the system proposed.

"(i) The overall design of the software system required.

"(j) The specific complement of equipment required at the central computer location.

"(k) Whether it was desirable or undesirable that a supplier use subcontractors. . . .

"(l ) Whether an encryption system was desirable and the type of system to be used.

"(m) The optical mark reader is a very recent advance in computer technology which permits the bettor to write the terms of his bet on a special card which the machine can read and transmit to lottery headquarters.

"(n) The bidders were requested to specify in addition 63 additional characteristics of the terminal proposed see par. 12.6 of the Invitation to Bid" (footnote added).

The judge found that it was feasible for the Lottery to have filled in all of the foregoing open specifications, and we agree.

The RFP stated that bidders' proposals would be evaluated according to eighteen criteria, ⁴ subject to a proviso:

"For purposes of bidding vendors may assume that equal weighting will be applied to all factors listed. The Lottery however reserves the right to assign any weight to whatever criteria it has listed in order to arrive at an award decision which best satisfies the requirements of this specification and the Lottery's long term best interests."

In keeping with this loosely constrained procedure, the RFP further stated: "It is to be understood that awards will be made to successful vendors based upon the criteria listed above. This may not result necessarily in an award to the lowest bidder although, clearly, where all other elements are equal, this will be the deciding factor." ⁵

The RFP required submission of proposals by Friday, June 30, 1978, at 2 P.M. Several companies, including Datatrol, met the 2 P.M. deadline. AmTote requested from the Agent and received a two-hour extension over the plaintiff's protest. AmTote filed its bid at 3:45 P.M. After June 30, O'Heir submitted a letter to Dr. William E. Perrault, executive director of the Lottery, evaluating the bids and expressing a preference for AmTote. On July 3, the Agent disqualified AmTote. The Lottery rejected all bids and on August 23, 1978, announced a rebid on the original RFP. Of six companies to submit bids by the September 8, 1978, deadline, O'Heir chose three "finalists" including AmTote and Datatrol. ⁶ In a written analysis of these bids, he recommended that AmTote's proposal be accepted. Perrault, the Agent, and the Lottery approved the award for AmTote and the award was made on September 27, 1978. During the course of the instant litigation, the Lottery and AmTote proceeded to negotiate a contract which they executed on February 16, 1979. ⁷

In his decision of February 28, 1979, the judge ruled that G.L. c. 7, § 22, the general procurement statute, applies to the award of a lottery computer system. He ruled that problem-oriented bidding "is not absolutely prohibited by Mass. (sic ) law but, . . . it is a bidding process which must undergo a 'most careful scrutiny' to determine whether its use in the circumstances of this award has thwarted the object of the competitive bidding statute to ensure genuine competition and avoid favoritism, and whether . . . the plans and specifications state the quantity and quality of the work with as much certainty and definiteness as may be practicable." The judge found that the extension for AmTote in the first round of bidding was an act of favoritism. He remarked that "(w)ith the bids opened and analyzed, I am unable to see what legitimate purpose was served by the use of problem solving in the second round of bidding." Thus, the Lottery bore "a heavy burden to dispel the taint of favoritism which now surrounded the letting of the contract," ⁸ and it was "essential" that the specifications be made definite in the second RFP. The judge further ruled the Lottery's failure to have...