State ex rel. E. D. S. Federal Corp. v. Ginsberg
| Decision Date | 06 November 1979 |
| Docket Number | No. 14601,14601 |
| Citation | 259 S.E.2d 618,163 W.Va. 647 |
| Court | West Virginia Supreme Court |
| Parties | STATE ex rel. E. D. S. FEDERAL CORP., etc. v. Leon H. GINSBERG, Comm'r, Depart. of Welfare, etc., et al. |
Syllabus by the Court
1. An unsuccessful bidder, who has been unlawfully deprived of a contract by agency action under the State purchasing statutes, W.Va.Code, 5A-3-1 Et seq., has standing to prosecute an action in mandamus to require that the contract be awarded to him or for an injunction to enjoin violation of the requirement that contracts be awarded to the lowest responsible bidder. Syllabus pt. 2 of Pioneer Co. v. Hutchinson, W.Va., 220 S.E.2d 894 (1975) is overruled.
2. "Statutes and ordinances which require public officers or a public tribunal to award a contract to the 'lowest responsible bidder' vest wide discretion in officials." Syl. pt. 5 Pioneer v. Hutchinson, W.Va., 220 S.E.2d 894 (1975).
3. A State agency which awards a public contract upon criteria other than price is clothed with a heavy presumption that the contracting agency has properly discharged its duties and exercised discretionary powers in a proper and lawful manner; accordingly, the burden of proof in any action challenging the award of a contract by an unsuccessful bidder or a taxpayer is upon the challenger who must show fraud, collusion, or such an abuse of discretion that it is shocking to the conscience.
Chauncey H. Browning, Atty. Gen., Victor A. Barone, Deputy Atty. Gen., Charleston, for plaintiff in error.
G. Thomas Battle, Spilman, Thomas, Battle & Klostermeyer, Charleston, for Computer Co.
Kay, Casto & Chaney, George S. Sharp and Vincent V. Chaney, Charleston, for defendant in error.
This is a complicated case about State purchasing which requires the Court to integrate traditional contract law into the State purchasing statutes, W.Va.Code, 5A-3-1 Et seq. In early 1978 the West Virginia Department of Welfare decided to computerize its system for processing medicaid claims. The system was named Medicaid Management Information System (MMIS) and in October 1978, the State publicly advertised for proposals for the design and operation of MMIS. The Request For Proposal prepared by the staff of the Department of Welfare ran to 39 typewritten pages and included appendices three times the size of the formal request. In response to the Request For Proposal, four companies submitted proposals. One was appellee E.D.S. Federal Corporation and another The Computer Company, the eventual recipient of the contract and intervenor in this case. The other two bidding companies are not involved in this litigation and had no further part in the proceedings under consideration here.
This action was originally instituted in the Circuit Court of Kanawha County as a proceeding in mandamus at the relation of E.D.S. Federal Corporation to compel the appellants to deliver to E.D.S. Federal a contract for the MMIS. At the time the original petition was filed in the circuit court no final contract had been executed by any of the appellants with The Computer Company for the MMIS service. During the pendency of the mandamus proceeding the appellants entered into a contract for the MMIS service with The Computer Company. Upon learning of the contract the appellee filed an amended petition which repeated their request for mandamus relief and further requested a declaratory judgment voiding the contract with The Computer Company and an injunction prohibiting the implementation of the State's contract with The Computer Company.
On 5 June 1979 the circuit court by opinion letter found that the bid of The Computer Company was not responsive to the Request For Proposal and that the contract was improper, void, and of no effect. However, the court further found that the appellee's prayer for a writ of mandamus should be denied and, consequently, E.D.S. Federal was not awarded the contract by court order.
The West Virginia Department of Welfare appealed to this Court and E.D.S. Federal cross appealed asserting that the circuit court should have given E.D.S. Federal the contract. In both the lower court and on appeal E.D.S. Federal alleged that, in fact, they were the lowest responsible bidder. They argue that the Overall firm fixed price bid submitted by E.D.S. Federal was less than the Overall firm fixed price bid submitted by The Computer Company or any other bidder because the proposal and bid submitted by The Computer Company was not responsive to the Request For Proposal in that the Request For Proposal contemplated a binding three year contract subject only to the appropriation of funds by the Legislature. The bid submitted by The Computer Company contained a cancellation provision which permitted Either party to cancel the contract at the end of each year upon 180 days written notice. In oral argument before this Court, however, it was stipulated that the actual Contract entered into between The Computer Company and the State of West Virginia did not contain a cancellation provision as that provision had been removed during a seven day negotiation period provided in the Request For Proposal.
E.D.S. Federal also alleged that The Computer Company failed to respond to the Request For Proposal because they did not include the cost of printing reports which the request indicated must be submitted to the Department of Welfare. The heart of E.D.S. Federal's case is that notwithstanding the lower processing cost per item of The Computer Company, the additional cost of printing reports, training State personnel, and potentially turning the system over to the State in the event it chose to exercise its option, all made E.D.S. Federal's bid the lowest responsible one. We reverse the lower court and remand with directions to enter judgment on all points for appellants.
The Department of Welfare did not establish detailed specifications for the hardware or the software 1 involved in its Request For Proposal. The Department was soliciting both a specific way to solve its problem and a further definition of the problem. There are many ways to achieve a system for processing medicaid claims. The State's Request For Proposal and subsequent clarification through a question and answer session with representatives of the bidders on one side and the Department staff on the other gave notice that the purpose of the Request For Proposal was to generate creative alternatives for managing medicaid claims.
The State did, however, set forth certain requirements of a nontechnical nature which it expected to be included in the bidders' proposals which were as follows:
1. The contract would cover a three year period subject to cancellation in the event that the Legislature failed to appropriate money for the MMIS.
2. A fixed bid price based on 2.5 million claims per year would be the basis for evaluation of the cost proposal of the bidder.
3. The fixed price per claim would be constant throughout the initial three-year contract period and the first three-year bid price would be the basis for designation of the low bidder.
4. Following the selection of the low bidder, a period of negotiation would follow to prepare a contract incorporating the bidder's response with any modifications of that response felt necessary by the Department of Welfare.
5. Each contractor would submit a positive statement with respect to his willingness to comply with all requirements set forth in the Request For Proposal and the General Terms and Conditions for Contracts with the State of West Virginia and clearly describe any exceptions or limitations.
Pursuant to the Request For Proposal, each contractor was requested to submit its proposal organized in two separate sections. The first section set forth the hardware, software, and overall method of processing the claims; the second section described the costs. The technical sections of all proposals were opened on 22 November 1978 and the cost sections on 11 December 1978.
An evaluation and selection committee consisting of seven management executives from the Department of Welfare was appointed to evaluate the proposals. The committee was composed of a cross section of management and technical personnel within the Department and represented a total of 109 man years of experience with the Department of Welfare. In addition the Information Systems Services Division of the State Department of Finance and Administration was consulted in the evaluation of the technical sections of the proposals. The members of the evaluation committee individually reviewed each technical proposal and then met as a group to consider an evaluation report. The unanimous opinion of the committee was that The Computer Company submitted the best technical proposal. The Information Systems Services Division concurred in the committee's choice of The Computer Company as the best technical proposal.
When the cost sections of the proposals were opened on 11 December 1978, it was determined that The Computer Company's bid was $0.274 per claim or $685,000 per year based on 2.5 million claims per year. E.D.S. Federal's bid was $0.278 per claim or $695,000 per year based on 2.5 million claims per year. The bids of the other two companies were substantially higher. The Computer Company's bid of $0.274 per claim was a fixed price. None of the terms and conditions proposed by The Computer Company changed its per claim bid price and The Computer Company specifically agreed to comply with all requirements of the Request For Proposal subject only to stated exceptions and special provisions spelled out in subsection II-F of its cost proposal, none of which changed the fixed per claim bid price of $0.274.
The cost portion of E.D.S. Federal's proposal provided that: "The proposal and any contract developed as a result of this proposal are subject to the requirements of the RFP And to the following conditions." One of the conditions following...
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