Int'l Display Sys., Inc. v. Okimoto
| Decision Date | 14 June 2013 |
| Docket Number | No. 30488.,30488. |
| Citation | 300 P.3d 601,129 Hawai'i 335 |
| Parties | INTERNATIONAL DISPLAY SYSTEMS, INC., Appellant–Appellant, v. Glenn M. OKIMOTO, Director, Department of Transportation, State of Hawai‘i; Ford N. Fuchigami, Deputy Director, Department of Transportation, Airports Division; Designees of Aaron S. Fujioka, Administrator, State Procurement Office, State of Hawai‘i; Ford Audio–Video Systems, Inc.; Department of Commerce and Consumer Affairs, Appellees–Appellees, and John Does 1–10; Jane Does 1–10; Doe Governmental Units 1–10; and Doe Entities 1–10, Appellees. |
| Court | Hawaii Court of Appeals |
OPINION TEXT STARTS HERE
Terry E. Thomason, (Corianne W. Lau and Shannon M.I. Lau (Alston Hunt Floyd & Ing, A Law Corporation) with him on the briefs), for Appellant–Appellant.
Stella M.L. Kam, (Donna H. Kalama with her on the brief), Deputy Attorneys General, for Appellees–Appellees Brennon T. Morioka and Designees of Aaron Fujioka.
This appeal arises out of a request for proposals issued by the State of Hawai‘i (State), Department of Transportation–Airports Division (DOTA),1 to provide new passenger information systems for the Kahului Airport (Kahului Airport Project). In response to the request for proposals, two companies, International Display Systems, Inc. (IDS) and Ford Audio–Video Systems, Inc. (Ford), submitted proposals. The DOTA rated Ford's proposal above IDS's proposal and awarded the contract for the Kahului Airport Project to Ford. IDS filed a protest of the contract award to Ford, which was denied by the DOTA. IDS then filed a request for administrative hearing on its protest before the Office of Administrative Hearings (OAH) of the State Department of Commerce and Consumer Affairs (DCCA).
Before a hearing was held on the merits of IDS's protest before the OAH, the DOTA in May 2009 cancelled the Kahului Airport Project and the contract awarded to Ford. The DOTA explained that due to the declining economy, there were insufficient funds to cover all of the DOTA's capital improvement projects, and the DOTA had decided to cancel the Kahului Airport Project, which it ranked as among its lower priority projects. The DOTA moved to dismiss IDS's request for an administrative hearing on its protest based on the cancellation of the Kahului Airport Project.
The OAH hearings officer granted the motion and dismissed IDS's request for an administrative hearing. The hearings officer determined that the DOTA had cancelled the solicitation for the Kahului Airport Project due to budget constraints related to “the current financial crisis” and that “there was no evidence that the cancellation was motivated by an improper purpose.” IDS sought judicial review of the hearings officer's decision before the Circuit Court of the First Circuit (Circuit Court).2 The Circuit Court affirmed the hearings officer's decision to dismiss IDS's request for an administrative hearing on its protest, although on different grounds.
The question raised by this appeal is whether despite DOTA's cancellation of the Kahului Airport Project and the underlying solicitation for the project, IDS was entitled to have the hearings officer rule on the merits of its protest so that IDS could pursue its claim for proposal preparation costs and attorney's fees. We conclude, under the circumstances of this case, where IDS did not demonstrate that the DOTA acted in bad faith or arbitrarily and capriciously in cancelling the Kahului Airport Project, that the answer to this question is no. We therefore affirm the Circuit Court's Final Judgment entered against IDS.
On May 7, 2008, the DOTA issued a Request for Proposals to Provide New Passenger Information Systems For Kahului Airport, Project No. AM1042–29R (RFP). The RFP for the Kahului Airport Project sought proposals for new passenger information systems for Kahului Airport, including a flight information display system, a public address system, and a gate management system. IDS and Ford submitted proposals, which were close in terms of cost. IDS's proposal was in the amount of $5,104,898.47, and Ford's proposal was in the amount of $5,161,731.00. Both proposals met the mandatory requirements of the RFP. Although IDS's proposal was for a slightly lower cost than Ford's proposal, the DOTA ranked Ford's proposal as the best proposal and IDS's proposal as the second best based on evaluation criteria that included approach, company experience, and cost. Pursuant to this evaluation, DOTA awarded the contract for the RFP to Ford for $5,161,731.00.3
On September 3, 2008, IDS protested the award of the contract to Ford. Among other things, IDS contended that the DOTA had failed to conduct a reasonable cost or price analysis of Ford's proposal as required by the applicable administrative rules and that Ford's proposal improperly restricted disclosure of purchasing information. The DOTA denied IDS's protest.
On October 10, 2008, IDS requested an administrative review hearing on its protest before the OAH.4 IDS requested, among other things: (1) the termination of the contract awarded to Ford; (2) the award of the contract to IDS because its proposal was rated second to Ford's proposal; (3) if the contract is not awarded to IDS, that IDS be awarded its proposal preparation costs; and (4) IDS be awarded attorney's fees and costs of the proceeding. Ford filed a motion to intervene in the proceeding which the OAH hearings officer granted. The hearing on IDS's protest was delayed by disputes over the extent to which IDS was entitled to disclosure of pricing information on which Ford's proposal was based, which Ford asserted was confidential. Eventually, a hearing on IDS's protest was scheduled for May 21, 2009.
However, shortly before the scheduled hearing date, the DOTA cancelled the Kahului Airport Project and terminated its contract with Ford. By letter dated May 11, 2009, the DOTA informed Ford that
[d]ue to the declining economy, projects at the Airports Division, Department of Transportation, that have not yet been issued Notices to Proceed are being reprioritized and we regret to inform you that the contract with [Ford] for the [Kahului Airport Project] is terminated. [The DOTA] hopes to issue a new competitive bid for a modified project with a reduced scope in the near future.
By letter dated May 13, 2009, the DOTA advised IDS that
On May 15, 2009, the DOTA notified the OAH hearings officer that it “has cancelled the [Kahului Airport Project] due to budget constraints and reprioritization of Airports Division projects.” The DOTA also notified the hearings officer of its request for a status conference to discuss procedures for dismissing the case. IDS responded with a letter to the hearings officer dated May 18, 2009, arguing that the DOTA's decision to terminate “the contract” was “unnecessary and in bad faith.” IDS informed the hearings officer that it planned to oppose the DOTA's motion to dismiss the case. The May 21, 2009, hearing on the merits of IDS's protest was taken off the calendar.
The DOTA and IDS agreed that IDS would not be required to file an additional, separate protest of the DOTA's cancellation/termination of the Kahului Airport Project, but could raise any issues and claims stemming from the cancellation/termination in the ongoing administrative proceeding. In preparation for the DOTA's filing of its motion to dismiss, IDS served subpoenas duces tecum on the DOTA for documents relating to the DOTA's decision to cancel the Kahului Airport Project and terminate the contract to Ford. The DOTA produced documents in response to the subpoenas deces tecum. In addition, Jeffrey Chang (Chang), the Engineering Program Manager for the DOTA who was involved in the decision to cancel the Kahului Airport Project, testified when the subpoenas duces tecum were returned.
On July 7, 2009, the DOTA filed a motion to dismiss IDS's request for an administrative hearing on IDS's protest of the award of the contract to Ford. The DOTA explained its decision to cancel the Kahului Airport Project as follows:
Due to the declining economy in the State, and the corresponding decline in funding for Airports capital improvement projects, DOT Airports Division has been using its available funding to finish up projects that have already started and also for projects with the highest priority, i.e., the projects involving safety and/or security, and projects mandated by State or federal law. The cash balance for the Airports Division capital improvement projects is insufficient to cover all of the planned and pending projects. Accordingly, Engineering Program Manager Jeff Chang was forced to cancel several projects with lower priority, which included [the Kahului Airport Project]....
On June 2, 2009, Jeff Chang and DOT Airports Fiscal Officer Ross Higashi testified at the return hearing on two subpoenas duces tecum for records concerning this project and the subsequent decision to cancel the project. As Mr. Chang testified, the DOT Airports Division could not proceed with the steps to encumber funds specifically for this project because of the stay imposed by the filing of the bid protest. Due to the economic downturn and the limited availability of funding for Airports capital improvement projects, Mr. Chang made the decision to cancel several projects that were low in priority and had not yet commenced.
In prioritizing its capital improvement projects, DOT Airports Division follows specific written guidelines. Projects involving security or safety are given the highest priority, followed by projects mandated by State or federal law. [The Kahului...
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