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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Lakloey, Inc. v. University of Alaska (03/31/2006) sp-5997
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| LAKLOEY, INC., | ) |
| ) Supreme Court No. S- 11624 | |
| Appellant, | ) |
| ) Superior Court No. 4FA-03-1996 CI | |
| v. | ) |
| ) O P I N I O N | |
| UNIVERSITY OF ALASKA, | ) |
| ) No. 5997 - March 31, 2006 | |
| Appellee. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Fourth Judicial District,
Fairbanks, Randy M. Olsen, Judge.
Appearances: William R. Satterberg, Jr.,
Fairbanks, for Appellant. Christopher E.
Zimmerman, McConahy Zimmerman & Wallace,
Fairbanks, for Appellee.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, Fabe, and Carpeneti, Justices.
EASTAUGH, Justice.
I. INTRODUCTION
The University of Alaska Fairbanks issued an addendum
to a bid solicitation on the day scheduled for opening bids and
after Lakloey, Inc. had submitted its bid. Lakloey filed a bid
protest that argued that irregularities in the bidding process
entitled it to recover its bid preparation costs. The university
eventually rejected all bids as exceeding project funds and then
denied Lakloeys bid protest. When Lakloey appealed, the
superior court rejected Lakloeys argument that it was denied due
process, and affirmed the universitys decision.
Because Lakloey has neither argued nor demonstrated
that any bidding irregularities wasted costs already expended in
bid preparation or caused it to incur additional costs, we affirm
the denial of its claim for bid preparation costs.
II. FACTS AND PROCEEDINGS
On March 5, 2003 the University of Alaska published a
Notice of Invitation for Bids for improving an existing facility
at the Yukon Flats Training Center Extension (YUTE) and for other
miscellaneous work. Bids were to be opened at 2:00 p.m. on March
20. The Instructions to Bidders explained the procedure for
submission and evaluation of bids. The instructions also
specified that addenda to the bid solicitation would be issued no
later than the day before the scheduled bid opening, and that
additional time would be granted to submit bids if an addendum
were issued within one week of the scheduled bid opening.1
Lakloey, Inc. submitted a bid before 2:00 p.m. on March
20. Also before 2:00 p.m. on March 20, but after Lakloey
submitted its bid, the university issued Addendum #2. Addendum
#2 changed several bid criteria and adjusted the amount of
required builders insurance from $1.5 million to the Value of
Completed Project. It also changed the date for the bid opening
from March 20 to April 1.
On March 24 Lakloey sent the university a protest
letter that alleged that Addendum #2 violated the conditions of
the solicitation, the procurement regulations of the University,
[and] the procurement code of the State of Alaska. The protest
also argued that Addendum #2 was without merit and speculated
that the addendum might represent the expression of a conflict of
interest. Lakloey requested that only those parties who had
submitted bids before the university issued Addendum #2 be
allowed to submit bids for the project as modified by the
addendum. Lakloey alternatively requested that the entire
solicitation be cancelled and that Lakloey be awarded its bid
preparation costs.
The university procurement officer rejected Lakloeys
protest on March 28. Her rejection letter stated that Addendum
#2 violated neither the applicable university regulations nor the
state procurement code, and that the instructions representation
concerning the timing and content of addenda was not binding on
the procurement officer.
By letter of March 31 Lakloey appealed the procurement
officers denial of its protest. Lakloeys appeal argued that
Addendum #2 (1) violated the instructions to bidders; (2)
violated AS 36.30.150(a) by introducing a subjective and nebulous
insurance requirement; (3) violated AS 36.30.130(a)s requirement
that any determination that a shortened bidding period is
advantageous be in writing; and (4) had theoretically reduced
competition.
On April 1 the bid opening date set by Addendum #2
Lakloey submitted another bid. On April 10 the university
notified Lakloey that the bids of Lakloey and its sole competitor
(Nenana Lumber) exceeded project funds and were therefore
rejected.
Because the university concluded that there were no
contested issues of material fact, it decided Lakloeys protest
appeal without a hearing. The university concluded that (1)
Lakloey had received the relief it requested because only it and
Nenana Lumber submitted bids by Addendum #2s deadline; (2) the
appeal was moot because Lakloey was not the apparent low bidder
and would not have been awarded the contract; (3) Lakloey was not
an interested party under AS 36.30.699;2 (4) Lakloey could not
raise new issues on appeal; (5) Lakloeys protest was vague and
non-specific; and (6) the instructions were superseded by state
law and university regulations.
Lakloey filed a superior court appeal from the denial
of its bid protest. Lakloey also argued that the university
violated Lakloeys due process rights by deciding its appeal
without a hearing.
The superior court rejected each of Lakloeys arguments.
It pointed out that under the instructions, Lakloey could have
asked the university for clarification or interpretation of the
allegedly ambiguous term Value of Completed Project. The court,
observing that the university rejected Lakloeys bid because it
exceeded the amount budgeted for the project, could not find a
connection between Addendum #2 and the disparity. The court also
noted the lack of causation between the universitys non-
compliance with AS 36.30.130 and any damages Lakloey might have
suffered. It therefore affirmed the universitys decision.
Lakloey appeals.
III. DISCUSSION
A. Standard of Review
When the superior court acts as an intermediate court
of appeal, we review its decision de novo.3 We use two standards
of review when reviewing the statutory interpretation of
administrative agencies. When statutory interpretation involves
agency expertise or the determination of fundamental policies
within the agencys statutory function, we use the rational basis
test.4 But when the statutory interpretation does not involve
agency expertise, or the agencys specialized knowledge and
experience would not be particularly probative, we substitute our
own judgment.5
B. Lakloey Is Not Entitled to Its Bid Preparation Costs.
Lakloey argues that AS 36.30.585 entitles it to recover
its bid preparation costs. Subsection .585(a) provides that [i]f
the procurement officer sustains a protest in whole or in part,
the procurement officer shall implement an appropriate remedy.6
Subsection .585(c) limits a successful bid protesters damages to
reasonable bid or proposal preparation costs.
In King v. Alaska State Housing Authority we held that
a bid solicitation is not an offer, but merely a request for
offers.7 A bid solicitation does, however, create an obligation
to consider all bids fairly and honestly.8 We concluded that
in exchange for a bidders investment of the
time and resources involved in bid
preparation, a government agency must be held
to an implied promise to consider bids
honestly and fairly. Breach of this implied
contract on the part of an agency entitles
the bidder to recover the costs incurred in
the preparation of the bid.[9]
The government therefore may not reject a bid in an arbitrary and
capricious manner.10
We elaborated on the arbitrary and capricious standard
in Dick Fisher Development No. 2, Inc. v. State, Department of
Administration, in which we stated that
in evaluating the governmental action, the
following factors should be considered: 1)
subjective bad faith on the part of the
officials, depriving the bidder of fair and
honest consideration of the proposal; 2)
proof that there was no reasonable basis for
the administrative decision; 3) the amount of
discretion entrusted to procurement
officials; and 4) violation of a pertinent
statute.[11]
Lakloey argues that the university acted in an arbitrary and
capricious manner by violating several statutes and acting
without a reasonable basis, entitling Lakloey to its bid
preparation costs.12
1. Alaska Statute 36.30.585 requires that Lakloey
show actual damages caused by the alleged bid
irregularities.
Lakloey argues that because AS 36.30.585 entitles
Lakloey to its full bid preparation costs, it is not required to
identify additional costs arising from alleged bid irregularities
or to show that the alleged irregularities caused a waste of
resources expended in bid preparation. Whether AS 36.30.585
requires Lakloey to show actual damages caused by the alleged bid
irregularities is a question of law that does not involve agency
expertise. We therefore decide the issue using our independent
judgment.13
Alaska Statute 36.30.585(c) limits damages in
successful bid protests to bid preparation costs. Alaska Statute
36.30.585(b)s list of factors to be considered in determining an
appropriate remedy indicates that recovery of full bid
preparation costs is not the only appropriate remedy possible.
Furthermore, we recognized in Dick Fisher that the rationale for
creating an implied promise not to reject bids arbitrarily was to
compensate bidders for loss of time and resources involved in bid
preparation.14 A successful bid protester is therefore not
automatically entitled to an award of its entire bid preparation
costs upon a showing of bid irregularities, but must demonstrate
a loss of time or resources, or identify additional costs
incurred, because of the bid irregularities.
2. Lakloey has not demonstrated that the universitys
violation of AS 36.30.130 wasted any part of its
bid preparation costs or caused it to incur
additional expenses.
Alaska Statute 36.30.130(a) provides that
[t]he procurement officer shall give adequate
public notice of the invitation to bid at
least 21 days before the date for the opening
of bids. If the procurement officer
determines in writing that a shorter notice
period is advantageous for a particular bid
and adequate competition is anticipated, the
21-day period may be shortened.
Alaska Statute 36.30.130(b) states that [i]f the state fails to
substantially comply with the requirements of (a) of this
section, the state is liable for damages caused by that failure.
The March 5 bid solicitation specified that bids were
to be opened on March 20. This was at most fifteen days after
the notice date, rather than the twenty-one days AS 36.30.130(a)
requires. By failing to make a written determination that the
shorter notice period was advantageous in this case, the
university procurement officer violated AS 36.30.130(a). We
assume for purposes of this case that the lack of a written
determination justifying the shorter period amounts to a failure
to substantially comply with AS 36.30.130(a).
If it could show that it incurred expenses attributable
to the universitys failure to substantially comply with AS
36.30.130(a), Lakloey would be entitled to recover those costs
from the university. But Lakloey has not alleged, much less
proved, that it suffered damages caused by the university
procurement officers failure to make a written determination
justifying the bid solicitations shortened notice period.
Lakloey is therefore not entitled to bid preparation costs based
on the lack of a written determination.
Nor has Lakloey demonstrated that the shorter notice
period itself caused Lakloey to suffer any damages. Lakloey
asserts that shorter bid preparation time generally increases bid
preparation costs.15 But because it neither argued nor
established that the reduced bidding period actually increased
its bid preparation costs, the shortened notice period itself
does not entitle Lakloey to recover its bid preparation costs.
3. Lakloey has not demonstrated that the universitys
untimely issuance of Addendum #2 wasted part of its
bid preparation costs or caused it to incur
additional expense.
The instructions to bidders stated that the procurement
officer may issue addenda to the bid solicitation until the day
before the scheduled bid opening.16 The procurement officer
issued Addendum #2 on the day bids were originally scheduled to
be opened. The university therefore issued Addendum #2 and
changed the bid solicitations insurance requirement after passage
of the deadline specified in the instructions. Lakloey argues
that the universitys untimely issuance of Addendum #2 entitles
Lakloey to its bid preparation costs.
The parties dispute whether the instructions impose
legal obligations on the university. We assume for purposes of
this decision that the university was bound to follow the
procedures outlined in the instructions.
Lakloey argues that it reasonably relied on the
instructions. In King we declined to reach the appellants
promissory estoppel argument because we concluded that the
appellant had established a prima facie case that the state had
breached the implied contract to consider bids fairly and
honestly.17 Restatement (Second) of Contracts 90(1) states that
[a] promise which the promisor should reasonably expect to induce
action or forbearance on the part of the promisee . . . and which
does induce such action or forbearance is binding if injustice
can be avoided only by enforcement of the promise. The remedy
granted for breach may be limited as justice requires.18
But the instructions allowed the university to issue
addenda until the day before the scheduled bid opening. If the
university had issued Addendum #2 a day earlier than it did,
Lakloey would have had no legal basis for complaining about the
addendums timing. Lakloey therefore may be regarded as having
relied on the instructions representation that the university
would issue no addenda the day of bid opening. But Lakloey has
not asserted that it took action or forwent taking action related
to the insurance requirement during the period between March 19
and 2:00 p.m. March 20.19
Because Lakloey has not demonstrated that it reasonably
relied to its detriment on the universitys representations in the
instructions about the timing of addenda, the untimely issuance
of Addendum #2 does not entitle it to any bid preparation costs.20
Nor can we say that the change in insurance coverage
required by Addendum #2 was arbitrary and capricious. The
procurement officer appears to have had a reasonable basis for
concluding that allowing bidders to agree to insure the value of
the completed project would result in better insurance coverage
and potentially more competitive bids than requiring contractors
to purchase $1,500,000 in builders risk insurance.
4. The insurance requirement in Addendum #2 is
objectively measurable.
Alaska Statute 36.30.150(a) provides in relevant part
that
the procurement officer shall evaluate bids
based on the requirements set out in the
invitation to bid . . . . The criteria that
will affect the bid price and be considered
in evaluation for award must be objectively
measurable, such as discounts, transportation
costs, and total or life cycle costs. The
invitation to bid must set out the evaluation
criteria to be used. Criteria may not be used
in bid evaluation if they are not set out in
the invitation to bid.
(Emphasis added.) The original bid solicitation required
contractors to obtain $1,500,000 in builders risk insurance.
Addendum #2 required bidders to insure the Value of Completed
Project. Lakloey argues that the value of the completed project
is not objectively measurable, but is dependent on the
procurement officers subjective interpretation. Lakloey argues
that a prospective bidder would therefore risk either being
deemed non-responsive if it guessed too low a value, or losing
competitive advantage if it guessed too high. Lakloey also seems
to argue that the allegedly subjective insurance requirement made
fair and honest consideration of its bid impossible, entitling it
to its bid preparation costs.
In interpreting statutes, we have adopted a sliding
scale approach, under which [t]he plainer the statutory language
is, the more convincing the evidence of contrary legislative
purpose or intent must be.21 Under Alaska law, words and phrases
in statutes generally are to be construed according to their
common and approved usage.22 The word objective means publicly or
intersubjectively verifiable [especially] by scientific methods
and expressing or involving the use of facts without distortion
by personal feelings or prejudices.23 The word measurable means
capable of being measured.24 The phrase objectively measurable is
therefore commonly understood as describing something that can be
measured with reference to externally verifiable facts. Lakloey
has not referred us to any legislative history that would suggest
another interpretation.
A requirement for insurance of the value of the
completed project is not as precise as the $1,500,000 insurance
requirement that it replaced. But the definition of objectively
measurable does not require that the insurance requirement be set
at a specific dollar amount. Instead, the range of values based
on the objective characteristics of the existing facility and
planned improvements satisfies the requirement of AS 36.30.150(a)
that the bid criteria be objectively measurable.
The YUTE project consisted of improving an existing
structure. Estimates of the expected added value of the
improvements would yield a range of acceptable values. Because
the range could be generated and evaluated by objective facts,
the value of the completed project was objectively measurable.
IV. CONCLUSION
For the foregoing reasons, the judgment of the superior
court upholding the universitys determination is AFFIRMED.
_______________________________
1 The instructions stated that
[t]he Owner may modify the Invitation for
Bids no later than seven (7) calendar days
prior to the date fixed for opening of bids
by issuance of an addendum to all parties who
have been furnished Invitation for Bids for
bidding purposes. In determining the
intervening calendar days between issuance of
an addendum and bid opening: the day the
addendum is issued is NOT counted; the day of
the bid opening is NOT counted. An addendum
may be issued up to and through the day prior
to the date fixed for opening of bids, in
which case the bid date shall be extended in
that addendum to allow for the previously
stated number of intervening days between
issuance of an addendum and bid opening.
Bidders must acknowledge receipt of all
addenda on the Bid Form.
(Bold lettering and capitalization in original; emphasis added.)
2 AS 36.30.699 provides that
[i]n AS 36.30.56036.30.695, interested party
means an actual or prospective bidder or
offeror whose economic interest may be
affected substantially and directly by the
issuance of a contract solicitation, the
award of a contract, or the failure to award
a contract; whether an actual or prospective
bidder or offeror has an economic interest
depends on the circumstances.
Because it dedicated its time and resources to preparing a bid,
we conclude that Lakloeys economic interest was affected
substantially and directly by the YUTE bid solicitation. Lakloey
is therefore an interested party within the meaning of AS
36.30.699.
3 Gunderson v. University of Alaska, Fairbanks, 922 P.2d
229, 233 (Alaska 1996).
4 Id.
5 Id.
6 AS 36.30.585(b) provides that in determining what
remedy is appropriate, the procurement officer should consider
the seriousness of the procurement
deficiencies, the degree of prejudice to
other interested parties or to the integrity
of the procurement system, the good faith of
the parties, the extent the procurement has
been accomplished, costs to the agency and
other impacts on the agency of a proposed
remedy, and the urgency of the procurement to
the welfare of the state.
7 King v. Alaska State Hous. Auth., 633 P.2d 256, 261
(Alaska 1981).
8 Id.
9 Id. at 263.
10 Id.
11 Dick Fisher Dev. No. 2, Inc. v. State, Dept of Admin.,
838 P.2d 263, 266 (Alaska 1992) (citing Keco Indus., Inc. v.
United States, 492 F.2d 1200, 1203-04 (Ct. Cl. 1974)).
12 Lakloey also argues that the universitys subjective bad
faith became clear during the course of Lakloeys protest and
appeal. In the employment context, subjective bad faith turns
not . . . on the employees personal feelings of unfairness, but
rather on the employers motives, requiring proof that the
employers decision to fire was actually made in bad faith. Era
Aviation, Inc. v. Seekins, 973 P.2d 1137, 1141 (Alaska 1999)
(holding that employer did not breach implied covenant of good
faith and fair dealing). Lakloey points out that Roger Brunner,
who served as an advisor to the chief procurement officer during
the appeal, was later hired as the universitys general counsel.
But this does not make it clear that the university officials
harbored subjective bad faith.
13 See Gunderson, 922 P.2d at 233.
14 Dick Fisher, 838 P.2d at 266 n.5 (citing King, 633 P.2d
at 263).
15 Lakloey argues that it was disadvantaged by . . . the
additional costs of preparing a bid on a shortened basis when
Addendum #2 extended the bidding period from March 20 to April 1.
But AS 36.30.130(a) applies to invitation[s] to bid, not to
addenda that extend bid opening dates. Furthermore, the record
does not indicate that Lakloey made an offer of proof. Instead,
Lakloey has repeatedly asserted that it was not required to show
additional costs caused by Addendum #2. We also note that
Addendum #2 extended the bidding period for twelve days, which is
longer than required by the instructions. See supra note 1.
16 See supra note 1.
17 King, 633 P.2d at 261. We also expressed reservations
in King about applying the promissory estoppel theory to enforce
an implicit promise. Id. at 261 n.6. These concerns are not
present in this case because the university made an explicit
representation in the instructions that no further addenda would
be issued on the day scheduled for bid opening.
18 Restatement (Second) of Contracts 90(1) (1981).
19 Lakloey also argues that it relied to its detriment on
the instructions by forgoing opportunities to bid on other
projects. Because Lakloey raises this contention for the first
time in its reply brief, we do not consider it. See Alaska R.
App. P. 212(c)(3) (providing that reply brief may raise no
contentions not previously raised in either the appellants or the
appellees briefs).
20 Lakloey also argues that Addendum #2 cancelled the
original bid solicitation in an arbitrary and capricious manner.
Addendum #2 modified the bid solicitation as contemplated by the
instructions, see supra note 1, but did so in an untimely manner.
Addendum #2 did not cancel the original bid solicitation.
Furthermore, because Lakloey was able to submit a bid for the
solicitation as modified by Addendum #2, its pre-Addendum #2 non-
insurance-related bid preparation costs were not wasted. Cf.
Dick Fisher, 838 P.2d at 266 n.5 (stating that [t]he rationale
for creating an implied promise to not reject bids arbitrarily is
the loss of time and resources involved in bid preparation).
21 Government Employees Ins. Co. v. Graham-Gonzalez, 107
P.3d 279, 284 (Alaska 2005).
22 Human Res. Co. v. Alaska Commn on Post Secondary Educ.,
State of Alaska, 946 P.2d 441, 444 (Alaska 1997); see also AS
01.10.040(a) (Words and phrases shall be construed according to
the rules of grammar and according to their common and approved
usage.).
23 Websters Third New International Dictionary 1556
(1966); see also Blacks Law Dictionary 1103 (2004) (defining
objective as [o]f, relating to, or based on externally verifiable
phenomena, as opposed to an individuals perceptions, feelings, or
intentions).
24 Websters Third New International Dictionary 1399.
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