LO Mgmt., LLC v. Office of Admin.
| Decision Date | 20 December 2022 |
| Docket Number | WD 84954,C/w WD 84956 |
| Citation | 658 S.W.3d 228 |
| Parties | LO MANAGEMENT, LLC, et al., Respondents, v. OFFICE OF ADMINISTRATION, et al., Appellants. |
| Court | Missouri Court of Appeals |
Charles W. Hatfield, Alexander C. Barrett, Jefferson City; Renee E. Henson, Kansas City, for Respondent.
Craig H. Jacobs, Jefferson City for Appellant.
Robert R. Harding, Lowell D. Peaerson, Jefferson City, for Intervenor.
Before Division Two: Lisa White Hardwick, Presiding Judge, Thomas N. Chapman, Judge and Janet Sutton, Judge
Office of Administration, Division of Purchasing and Materials Management ("OA") appeals the judgment in favor of LO Management LLC and David Koester on their petition for declaratory judgment and injunctive relief alleging OA violated state procurement laws in awarding a license office contract to a competing vendor. OA contends the circuit court erred in granting LO Management and Koester relief on one of their claims because they failed to exhaust their administrative remedies. Additionally, OA asserts the court erred in finding: (1) OA needed to promulgate a rule before using proximity as one of the criteria in evaluating bids; (2) OA was required to allow LO Management to submit additional information to correct and supplement its proposal after the contract was awarded to the competing vendor; (3) OA acted arbitrarily, capriciously, and unlawfully in awarding proximity points and customer service experience points to LO Management; and (4) LO Management and Koester were entitled to attorneys’ fees. For reasons explained herein, we affirm, in part, and reverse, in part.
In October 2019, OA issued a request for proposal ("October RFP") to elicit bids to operate the license office in Troy for the Department of Revenue ("DOR"). The October RFP provided that, in evaluating the applications, up to 10 proximity points would be given to vendors whose principal place of business was near the Troy license office.
When the October RFP was issued, the Troy license office was operated by Koester & Koester, LLC, which was owned by Koester and his father. Before the deadline for submitting proposals to the October RFP, Koester and his uncle formed LO Management for the purpose of submitting a proposal. LO Management's Articles of Organization, filed with the Secretary of State, identified Koester's home address in O'Fallon as LO Management's business address.
LO Management submitted a proposal in response to the October RFP. The proposal listed Koester's home address in O'Fallon as LO Management's principal place of business. The Troy Chamber of Commerce, which had operated the Troy license office prior to Koester & Koester, also submitted a proposal in response to the October RFP. OA elected not to award the contract to any vendors under the October RFP.
Instead, in May 2020, OA issued a new RFP for operation of the Troy license office ("May RFP"). Proposals were due on June 4, 2020. Under the May RFP, vendors could earn up to 205 total evaluation points, split between several evaluation criteria and bidding preferences, including up to 24 points for proximity points and up to eight points for customer service experience. The contract was to be awarded to the vendor with the highest total evaluation score. Portions of the bids were to be evaluated and scored by OA, while other portions, including the proximity points and customer service experience points, were to be evaluated and scored by a three-person evaluation committee comprised of DOR employees.
Proximity points were based on the distance of the vendor's principal place of business from the current Troy license office as measured by Google Maps. A principal place of business within five miles of the license office would be given the full 24 points, with fewer points given as the distance increased up to 100 miles, over which no points would be given.
The May RFP defined the vendor's principal place of business as "the bona fide place of business for the contractor as declared by the contractor and indicated in any organizational documents for the contractor's business organization." It required that a principal place of business: (1) "Include a permanent, enclosed building or structure owned or leased by the contractor"; (2) "Be actually occupied by the contractor as a place of business"; and (3) "Be located where the public may contact [the] owner or operator of the contractor, or his or her representative, in person or by phone at any reasonable time."
To receive proximity points, the May RFP required the vendor to include documentary proof, such as a deed, mortgage or loan document, lease agreement, or property tax receipt, of its interest in the property located at the address of its principal place of business. The May RFP instructed that the address a vendor listed for its principal place of business had to be a street address and not a post office box. The May RFP further provided that, if the vendor had a business address that it had filed with the Secretary of State's office, it had to use this address as its principal place of business address. If the vendor did not indicate any principal place of business address, it would not receive any proximity points.
Other general terms of the May RFP included a provision advising that it was the vendor's responsibility to ask questions and advise OA if the vendor believed that any language, specifications, or requirements violated any state or federal law or regulations. Any questions or issues regarding the May RFP were to be submitted to an identified "buyer" no later than 10 calendar days prior to the due date of the proposals. In fact, the May RFP emphasized that all questions or comments from vendors regarding the May RFP were to be directed only to the buyer:
Vendors and their agents (including subcontractors, employees, consultants, or anyone else acting on their behalf) must direct all of their questions or comments regarding the RFP, the evaluation, etc. to the buyer of record indicated on the first page of this RFP. Vendors and their agents may not contact any other state employee regarding any of these matters during the solicitation and evaluation process. Inappropriate contacts are grounds for suspension and/or exclusion from specific procurements. Vendors and their agents who have questions regarding this matter should contact the buyer of record.
(Emphasis added.)
The May RFP further provided that OA was "under no obligation to solicit information if it is not included with the proposal." Vendors were warned that "ambiguous responses" may result in an "unfavorable evaluation" of the proposal, but OA "reserve[d] the right to request clarification of any portion of the vendor's response in order to verify the intent of the vendor." The vendor was cautioned that its response "may be subject to acceptance or rejection without further clarification." In evaluating a proposal, OA "reserve[d] the right to consider relevant information and fact, whether gained from a proposal, from a vendor, from vendor's references, or from any other source."
After OA issued the May RFP and increased the number of possible proximity points, LO Management decided to obtain office space in Troy. Through a real estate agent, LO Management rented a unit in the back of a building located at 499 Main Street in Troy. The space had previously been rented to other businesses and was within five miles of the current Troy license office. LO Management's commercial lease agreement stated that the unit was commonly known as 491 West Wood Street, and LO Management's real estate agent told Koester that this was the correct address for the unit. LO Management updated its address with the Secretary of State to reflect 491 West Wood Street as its business address. At the time the commercial lease was drafted, however, the office space did not have an address formally assigned to it by the Lincoln County 911 Mapping and Addressing Department, which is the entity responsible for assigning addresses to properties in Lincoln County. In fact, the address of 491 West Wood Street was assigned on most common mapping systems to a vacant lot several blocks down the street from the office space.
Six vendors, including the Troy Chamber of Commerce and LO Management, submitted proposals in response to the May RFP. In its proposal, submitted on June 3, 2020, LO Management requested proximity points, listing 491 West Wood Street as the address of its principal place of business. LO Management did not include a copy of the commercial lease with its proposal but stated that a copy of the lease was available upon request. LO Management also requested customer service experience points.
Two days after LO Management submitted its proposal, Rachel South, the Executive Director for the Troy Chamber of Commerce, emailed the buyer and the office of OA's Commissioner notifying them that LO Management's principal place of business address was "nothing but a fake address, empty lot at best." South copied her email to several other people, including State Senator Jeanie Riddle; Mary Cotton, Riddle's assistant; and State Representative Randy Pietzman. Riddle's office contacted DOR about the Troy license office and the bidding process.
On August 27, 2020, the DOR evaluation committee authorized OA to award the contract for the Troy license office to LO Management. In scoring LO Management's proposal, the DOR evaluation committee gave LO Management 24 proximity points based on the address of 491 West Wood Street for its principal place of business. The committee gave LO Management zero points for customer service experience. LO Management's overall point total was almost 20 points higher than the point total of the next highest vendor, which was Troy Chamber of Commerce.
The same day that the DOR evaluation committee authorized OA to award the Troy license office contract to LO Management, Riddle began...
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