Okada Trucking Co. v. Board of Water Supply

• Citation: 97 Haw. 544,40 P.3d 946
• Decision Date: 20 March 2001
• Docket Number: No. 22956.,22956.
• Parties: OKADA TRUCKING CO., LTD., Petitioner-Appellee, v. BOARD OF WATER SUPPLY, City and County of Honolulu, Respondent-Appellee, and Inter Island Environmental Services, Inc., Intervenor-Respondent-Appellant.
• Court: Court of Appeals of Hawai'i

40 P.3d 946

97 Haw. 544

OKADA TRUCKING CO., LTD., Petitioner-Appellee, v. BOARD OF WATER SUPPLY, City and County of Honolulu, Respondent-Appellee, and Inter Island Environmental Services, Inc., Intervenor-Respondent-Appellant.

No. 22956.

Intermediate Court of Appeals of Hawai`i.

March 20, 2001.

Reconsideration Granted April 2, 2001.

Certiorari Granted May 21, 2001.

Darryl H.W. Johnston, David F.E. Banks, and Marc E. Rousseau, Honolulu, (Cades Schutte Fleming & Wright), for intervenor-respondent-appellant.

James E.T. Koshiba and Neal K. Aoki, Honolulu, (Koshiba Agena & Kubota), for petitioner-appellee.

BURNS, C.J., WATANABE, and FOLEY, JJ.

OPINION OF THE COURT BY WATANABE, J.

This case stems from a protest by Petitioner-Appellee Okada Trucking Co., Ltd. (Okada), challenging the award of a contract for the construction and installation of the Kaluanui Booster Station, Phase II (the Project) by Respondent-Appellee Board of Water Supply, City and County of Honolulu (BWS) to Intervenor-Respondent-Appellant Inter Island Environmental Services, Inc.¹ (Inter Island). The grounds of Okada's protest were that Inter Island, in violation of statutes, rules, and bid documents, failed to identify in its bid the names of joint contractors or subcontractors (collectively, "subcontractors") who possessed the specialty licenses allegedly required for performance of the plumbing, reinforcing steel, and roofing work under the contract.

On November 10, 1999, following a de novo administrative review requested by Okada, a hearings officer with the Office of Administrative Hearings, Department of Commerce and Consumer Affairs, State of Hawai`i (DCCA) issued Findings of Fact, Conclusions of Law and Decision (Decision), concluding that: (1) Inter Island was not a responsible bidder because it did not have, at the time of bid opening, a properly licensed plumbing subcontractor "lined up" to perform the portions of the work for the Project that allegedly required a plumbing contractor's license; (2) Inter Island's bid was non-responsive because, in violation of the subcontractor listing requirement imposed by Hawai`i Revised Statutes (HRS) § 103D-302(b) (Supp.2000) and Hawai`i Administrative Rules (HAR) § 3-122-21(a)(8), Inter Island failed to list the names of the subcontractors who would be performing work under the contract in three areas (plumbing, reinforcing steel, and roofing) that allegedly required specialty contractor licenses; and (3) although BWS was authorized to waive Inter Island's failure to list a reinforcing steel and roofing subcontractor, BWS violated the Hawai`i Public Procurement Code (the Procurement Code) set forth in HRS chapter 103D, as well as the administrative rules promulgated to implement the Procurement Code, HAR Title 3, subtitle 11, chapter 120, when it waived Inter Island's failure to list a plumbing subcontractor² and awarded the contract to Inter Island.

Accordingly, the hearings officer ordered that BWS's contract award to Inter Island be terminated and that Inter Island be compensated for actual expenses reasonably incurred under the contract, plus a reasonable profit based upon its performance of the contract up to the time of termination. Inter Island thereafter sought appellate judicial review.

We conclude that the hearings officer's Decision that Inter Island was neither a responsible nor responsive bidder was premised on an erroneous determination that Inter Island was required to engage properly licensed plumbing, reinforcing steel, and roofing subcontractors in order to perform the contract in question. Therefore, the hearings officer should not have ordered BWS to terminate its contract award to Inter Island. However, since Inter Island, in its application for judicial review, failed to challenge that determination, we decline to grant Inter Island's request that we reinstate BWS's award of the contract to Inter Island.

BACKGROUND

A. The Invitation for Bids

On or about May 6, 1999, BWS issued an Invitation for Bids (IFB), seeking sealed bids for the Project. As required by HRS § 103D-302 (Supp.2000),³ the IFB instructed prospective bidders that they were required to list, on a form included in the IFB, each subcontractor to be engaged by the prospective bidder in the performance of the contract for the Project. Prospective bidders were also notified that they had to be licensed to undertake the Project, pursuant to HRS chapter 444, relating to the licensing of contractors and were required to hold a current "A" General Engineering Contractor license⁴ from the State of Hawai`i.

B. The Bid Opening

On June 10, 1999, BWS opened the nine sealed bids that had been submitted for the Project. Inter Island was determined to be the lowest bidder, with a bid of $1,349,160. Okada was the second lowest bidder, with a bid of $1,375,000.

It is undisputed that Inter Island is a licensed "A" general engineering contractor, as required by the IFB. Inter Island also holds a "B" general building contractor license and "C" contractor licenses in the following specialty classifications: C-13 (electrical contractor) and C-27 (landscape contractor). Pursuant to HAR § 16-77-32(d),⁵ Inter Island, by virtue of its C-13 and C-27 licenses, automatically held licenses in all subclassifications of the C-13 and C-27 specialty classifications. Additionally, pursuant to HAR § 16-77-32(a) and (c),⁶ Inter Island, by virtue of its "A" and "B" licenses, automatically held "C" licenses in a number of specialty classifications. The Special Provisions of the IFB specifically required that all "[r]estoration of pavements" work under the contract "shall be done by a contractor holding a current C-3—ASPHALT PAVING AND SURFACING CONTRACTOR specialty license for the State of Hawaii [Hawai`i.]" Additionally, the Special Provisions included the following requirement:

All construction contract bids involving any chlorination work shall have a name listed for the C-37d Water Chlorination Subcontractor. Any bid not listing this subcontractor shall be rejected and disqualified. However, where the value of the work to be performed by the subcontractor is equal to or less than one percent of the total bid amount, the listing of the subcontractor may be waived if it is in the best interest of [BWS].

In its bid, Inter Island, as required by the Special Provisions, listed subcontractors who possessed specialty contractor licenses in the "C-3" (asphalt paving and surfacing) and "C-37d" (water chlorination) classifications and subclassifications. Inter Island also designated a "C-33" (painting and decorating) subcontractor. However, Inter Island did not list any subcontractors who possessed a "C-37" license in plumbing,⁷ a "C-41" license in reinforcing steel,⁸ and a "C-42" license in roofing.⁹ Our review of the record indicates that the other eight bidders did list subcontractors with "C-41" and "C-42" licenses. However, of the nine bidders, only three listed a "C-37" plumbing subcontractor. Moreover, even Okada did not name a "C-37" plumbing contractor.¹⁰

C. The Bid Protests

Following the bid opening, an agent of The Pacific Resources Partnership (PRP), an unregistered partnership doing business in Hawai`i whose stated mission is "to secure a level playing field for all public works contracts," contacted BWS to inquire about the status of the bid award for the Project. The PRP agent also communicated to BWS PRP's concern regarding Inter Island's failure to list all the specialty subcontractors that PRP believed were necessary to perform the construction for the Project.¹¹ Okada was then, and is now, a member of PRP.

Thereafter, PRP, through its attorney, submitted a letter of formal protest to BWS, requesting that BWS reject as nonresponsive any bids for the Project that did not include all of the specialty "C" licenses required to complete the work described in the bid documents. In the letter, PRP explained, in relevant part:

We submit that any bid proposal which does not include all of the specialty licenses (to be held by either the bidder and/or its joint contractor/subcontractor) required to complete the work described in the bid documents should be deemed non-responsive and, therefore, disqualified or rejected. For example, the bid proposal of [Inter Island] for [the Project] indicates that neither [Inter Island] nor any of its joint contractors or subcontractors holds the "C-37" (Plumbing), "C-41" (Reinforcing Steel) and "C-42" (Roofing) contractor's licenses, all of which are required for significant portions of the contract work.

Pursuant to the Contractors Law, [HRS] Chapter 444, and its related administrative rules, any licensee who acts, assumes to act, or advertises in any classification other than for which the licensee is duly licensed shall be construed to have engaged in unlicensed activity. Although a licensee who holds the "A" general engineering contractor classification is automatically allowed to work in certain other specialty classifications without further examination or licensing fees, the C-37, C-41 and C-42 classifications do not fall within this exemption. The technical nature of Plumbing, Reinforcing Steel and Roofing work mandates that only a licensee who holds these particular specialty licenses be permitted to complete this work. The safety of the public and the integrity of this special work requires the strict application of this licensing law....

Moreover, any proposition that—

(1) an "A" general engineering contractor can engage in any contract which provides for more than two unrelated building trades, even if the general engineering contractor does not possess the specialty licenses for such trades, or

(2) the Plumbing, Reinforcing Steel and Roofing work required under the subject contract is merely incidental and supplemental to the work needed to complete the contract,

is illogical, contrary to the consumer protection purpose of the Contractors Law, and will certainly be

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