Hitachi Data Systems Corp. v. Leatherman

• Court: South Carolina Supreme Court
• Writing for the Court: FINNEY; HARWELL
• Citation: Hitachi Data Systems Corp. v. Leatherman, 309 S.C. 174, 420 S.E.2d 843 (S.C. 1992)
• Decision Date: 23 March 1992
• Docket Number: No. 23698,23698
• Parties: HITACHI DATA SYSTEMS CORPORATION, Respondent, v. Hugh K. LEATHERMAN, Grady L. Patterson, Luther L. Taylor, Jules J. Hesse, Roy E. Moss, Kiffen R. Nanney, Gus J. Roberts, and Carol Baughman, as members of the South Carolina Procurement Review Panel, and the South Carolina Procurement Review Panel, Appellants. . Heard

Page 843

420 S.E.2d 843

309 S.C. 174

HITACHI DATA SYSTEMS CORPORATION, Respondent, v. Hugh K. LEATHERMAN, Grady L. Patterson, Luther L. Taylor Jules J. Hesse, Roy E. Moss, Kiffen R. Nanney, Gus J Roberts, and Carol Baughman, as members of the South Carolina Procurement Review Panel, and the South Carolina Procurement Review Panel, Appellants.

No. 23698.

Supreme Court of South Carolina.

Heard March 23, 1992.

Decided Aug. 10, 1992.

Faye A. Flowers, Columbia, for appellants.

David W. Robinson, II, and Jacquelyn Bartley of Robinson, McFadden & Moore, P.C., Columbia, for respondent.

FINNEY, Justice.

Appellants, as members of the South Carolina Procurement Review Panel (Panel), appeal the circuit court's ruling that, absent the formal protest of a Chief Procurement Officer's prior decision, the Panel lacked jurisdiction to, sua sponte, conduct an administrative review, and its further holding that the Panel was without authority to conduct investigative hearings. We affirm.

In April, 1990, pursuant to S.C.Code Ann. § 11-35-510 (1986), the Division of General Services of the South Carolina Budget and Control Board solicited bids for a mainframe computer for the South Carolina Department of Social Services (DSS). The specifications listed IBM, Amdahl, Hitachi and related equipment as brands to be considered for the proposed lease/purchase acquisition. Respondent Hitachi Data Systems Corporation submitted the only bid. The contract was awarded to the respondent, and the computer was subsequently delivered to DSS and installed. No party objected to or filed a protest in connection with the contract, and no written decision was ever issued by a Chief Procurement Officer.

In July, 1990, the United States Attorney's Office for the State of South Carolina announced that it had been conducting an undercover investigation, code-named Operation Lost Trust, focusing on illegal payoffs by lobbyists to members of the South Carolina legislature, and that several legislators would be indicted during the months following the announcement. Ron Cobb, a key federal witness and informant in the investigation, had been a lobbyist in South Carolina for the respondent and its predecessor, National Advance Systems, since 1985. As a result of the far-reaching effect of Operation Lost Trust, the Federal Bureau of Investigation and the State Law Enforcement Division announced their intention to investigate the procurement of the Hitachi computer.

In September of 1990, the Panel launched an independent investigation, asking questions of Hitachi, the Division of General Services and DSS regarding procurement of the computer. On September 13, 1990, the Panel notified Hitachi and the state agencies involved that "... the Procurement Review Panel has decided to conduct an administrative hearing to determine whether any violations of the Procurement Code occurred in this procurement ... As a result of this hearing, the Panel may affirm the actions of the state or may order that the contract be rebid ..." The hearing was set for October 8, 1990, and witnesses were subpoenaed.

Upon receiving notice of the hearing, the respondent instituted this action pursuant to S.C.Ann. § 15-53-10, et seq., (1976), and Rule 57, SCRCP, seeking 1) a declaration that the Panel had no jurisdiction or authority to conduct the proposed hearing; 2) to have the subpoena directed to respondent's employee quashed; and 3) to have the Panel temporarily and permanently enjoined from holding the scheduled hearing. In its amended complaint, the respondent alleged that the matter was not a "contested case" within the meaning of S.C.Code Ann. § 1-23-310, et seq., (1986), the Administrative Procedures Act, and that the Panel was without statutory authority to conduct a hearing and affirm or order a rebid in the absence of a formal protest by an interested party.

During pendency of the action, the lease/purchase agreement was abandoned and the computer returned. Additionally, the Panel postponed its hearing pending a decision by the circuit court.

Subsequently, the circuit judge held a hearing on the sole remaining issue of jurisdiction and determined that the Panel was without authority to conduct the proposed hearing. The circuit court found that the Panel is an administrative review body, not an investigative one, and that its scope of authority is limited to the appellate review of written determinations and decisions brought to it by way of protest or application as set forth in S.C.Code Ann. § 11-35-10, et seq., (1986), the South Carolina Consolidated Procurement Code.

On appeal, appellants contend Section 11-35-4410(1) empowers the Panel, without a request or formal protest, to initiate review of any "decision, policy or procedure relating to the expenditure of state funds." Appellants allege further that the award of the computer contract to the sole bidder constitutes a "decision" within the meaning of the statute.

In resolving this controversy, we look first to Section 11-35-10, et. seq., the Procurement Code. Among the underlying purposes of the Procurement Code relevant to this issue are:

(a) The consolidation and clarification of the law governing procurement ...

(c) To require adoption of competitive procurement practices ...

(e) To ensure fair treatment of parties conducting business with the state's procurement system ...

(f) To provide increased economy in state procurement activities ...

(i) To develop an efficient and effective means of delegating roles and responsibilities to the various governmental bodies and to the chief procurement officers ... [and]

(l ) To mandate ... a structured system of auditing and monitoring to assure adherence to the Procurement Code.

See Section 11-35-20.

"Chief Procurement Officer" is defined in the Procurement Code as (a) the management officer for information technology, (b) the state engineer for areas of construction, architectural and engineering construction management, and land surveying services, and (c) the materials management officer for all other procurements.

The...