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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

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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