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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Powercorp Alaska, LLC v. State, Alaska Industrial Development and Export Authority, Alaska Energy Authority (11/09/2007) sp-6196

Powercorp Alaska, LLC v. State, Alaska Industrial Development and Export Authority, Alaska Energy Authority (11/09/2007) sp-6196, 171 P3d 159

     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,


) Supreme Court No. S- 12176
Appellant, )
) Superior Court No. 3AN-04-11858 CI
v. )
AND EXPORT AUTHORITY, ) No. 6196 November 9, 2007
Appellee. )
Appeal    from     the
          Superior Court of the State of Alaska,  Third
          Judicial District, Anchorage, Larry D.  Card,

          Appearances:  Thomas R. Wickwire,  Fairbanks,
          for   Appellant.   Michael  G.  Mitchell  and
          Rachel L. Witty, Assistant Attorneys General,
          Anchorage,  and  David W.  M rquez,  Attorney
          General, Juneau, for Appellee.

          Before:    Fabe,  Chief  Justice,   Matthews,
          Eastaugh, Bryner, and Carpeneti, Justices.

          BRYNER, Justice.

          This appeal arises from a 2004 invitation to bid issued
by  the  Alaska  Energy Authority for switchgear  systems  to  be
installed  in eight remote Alaskan villages. Appellant  Powercorp
Alaska, LLC alleges that the agency unduly restricted competition
in  the  bidding process by requiring bidders to use a particular
operating  system  that Powercorp does  not  use.   At  issue  is
whether   the  agency  violated  its  authority  in   issuing   a
specification  that  excluded Powercorp from  competing  for  the
contract.   We affirm the agencys determination that no violation
     A.   Facts
          Hundreds  of  Alaskan  villages  are  located  off  the
electrical  grid  system  and must  rely  on  locally  owned  and
operated  power  generation and distribution operations  to  meet
their   energy  needs.   Larger  villages  are  served  by  well-
established  energy cooperatives, but roughly 120 of the  smaller
and  less  organized  communities are  not.   The  Alaska  Energy
Authority (Energy Authority or agency) is a public corporation of
the  State  of  Alaska that provides technical and administrative
support  to  the energy operations in these smaller  communities.
In  recent  years, the Energy Authority has implemented  a  Rural
Power  System  Upgrade  (RPSU) program  to  achieve  a  reliable,
sustainable  rural  electrical system in the face  of  decreasing
federal  funding.  One aspiration of this program is  to  upgrade
the  utilities  in  these  villages  with  automatic  paralleling
switchgear,  which maximizes fuel-efficient power  generation  by
match[ing]   power  generation  with  demand  on  a   continuous,
automatic basis.1
          A  key component of the switchgear system is the master
(or  supervisory)  control  the brain  that  collects  data  from
remote sensors and turns generators on or off as necessary  based
on  preset parameters.  The industry standard for this device  in
the United States is a programmable logic controller (PLC).2  The
Energy  Authority has extensive experience with  PLCs  and  finds
them to be reliable.  In particular, the Energy Authority regards
Allen-Bradley  brand  PLCs  to  be widely  distributed,  commonly
available  from multiple distributors, frequently installed,  and
familiar   to  experienced  operators.3   Powercorp,  an   Alaska
subsidiary  of an Australian company, manufactures an alternative
to  the PLC that runs off a personal computer (PC).  The PC-based
system reputedly provides additional programming flexibility  and
adaptability,  .  . . the ability to incorporate  multiple  power
generation sources . . . [and] a greater degree of remote control
than is possible with a PLC system, but the Energy Authority  has
very little experience with this relatively new system.4
          In   2003   the   Denali  Commission  (a  federal-state
partnership  that  supports infrastructure development  in  rural
Alaskan  communities) awarded two grants to the Energy  Authority
for demonstration projects that would allow the agency to design,
install, and evaluate different switchgear systems and ultimately
to  determine which one best meets the communitys needs.5   After
obtaining  the  necessary  competitive-bid  waiver,  the   Energy
Authority awarded sole-source contracts to both Controlled Power,
Inc.,  and  Powercorp to install systems in  Stevens Village  and
Golovin, respectively. While Controlled Power intended to install
PLC  switchgear,  Powercorp would showcase its  PC-based  system,
which would be the first of its kind in the United States.
          On May 28, 2004  before it had completed its evaluation
of  the  relative merits of the PLC and PC-based systems  at  the
demonstration  sites  the Energy Authority  invited  bids  for  a
          contract to install automatic switchgear systems in eight other
villages.   The  invitation  to  bid  (ITB)  specified  that  the
Programmable Logic Controller of the switchgear system was to  be
Allen-Bradley.  No  Substitutes. Powercorp, which  uses  PC-based
systems exclusively, did not bid.  Two companies submitted  bids;
the contract was awarded to Controlled Power.
     B.   Proceedings
          Powercorp  filed a timely protest of the ITB, asserting
that  the  specifications  excluded it from  bidding.   Powercorp
urged   the  agency  to  postpone  the  ITB  until  an  objective
evaluation of its PC system could be completed and also to review
the  bid  specifications  for  any unnecessary  exclusions.   The
protest  was  denied,  and Powercorp appealed  to  the  executive
director of the Energy Authority, who delegated the matter to  an
independent hearing officer.
          In   the   proceedings  before  the  hearing   officer,
Powercorp asserted that the specifications were written to  favor
Controlled  Power as the only company able to submit a responsive
bid.  More specifically, the hearing officer viewed Powercorp  as
alleging  that (1) the Energy Authority abused its discretion  in
issuing  the  ITB before completing an evaluation of  alternative
switchgear  systems; (2) Controlled Power had an undue  influence
in  the preparation of design specifications; (3) the ITB omitted
information  necessary  for  prospective  bidders  to  design   a
competitive system; and (4) the specification of an Allen-Bradley
supervisory controller was unduly restrictive.6
          After  conducting  an  extensive hearing,  the  hearing
officer issued a recommended decision concluding that the  Energy
Authority  acted within its discretion in all relevant  respects.
The  hearing officer found that, because the Energy Authority had
no  experience  with either PC-based systems in  general  or  the
Powercorp system in particular, the agency had reasonable grounds
for  not  accepting a PC-based alternative at  this  time.7   The
hearing  officer  further  found that  pre-existing  construction
schedules  dictated  the timing of the ITB and  that  the  Energy
Authority did not abuse its discretion by issuing the ITB  before
completing its evaluation of the PC system.  Finding no  evidence
that  Controlled Power had exerted any influence on  the  agencys
choice to require bids proposing PLC systems, the hearing officer
also  concluded  that it was appropriate for the  agency  to  ask
Controlled Power for technical information concerning the  system
it  built  for its demonstration project so that this information
could be used to develop the new bid specifications.8  Last,  the
hearing  officer  declined  to  address  whether  the  brand-name
specification  was unduly restrictive, concluding  that,  because
Powercorp had no intention of submitting a bid for a PLC  system,
the  brand  name specification was, from Powercorps  perspective,
          The  Energy  Authoritys executive director adopted  the
hearing  officers  recommended  decision  as  the  agencys  final
administrative decision of the protest. Powercorp appealed to the
superior court, which affirmed the agencys decision.
          Powercorp appeals.
     A.   Standard of Review
          When  the superior court acts as an intermediate  court
of  appeal  in an administrative matter, we independently  review
the merits of the agencys decision.10  We apply various standards
in  reviewing  administrative  determinations.   When  an  agency
interprets  and  applies  its  own  regulations,  we  review  its
determination to ensure it is not arbitrary, unreasonable, or  an
abuse  of  discretion.11  We review an agencys  factual  findings
under  the substantial evidence standard, reversing the  decision
only   if  we  cannot  conscientiously  find  that  the  evidence
supporting  [the agencys decision] is substantial.12  Substantial
evidence  is  such relevant evidence as a reasonable  mind  might
accept as adequate to support a conclusion.13
          We  substitute our judgment for the agencys in deciding
legal matters that do not involve agency expertise or matters  in
which the agencys specialized knowledge and experience would  not
be  particularly probative in determining the meaning of the  law
at  issue.14   But  when  questions of law implicate  specialized
agency  expertise  or  the determination of fundamental  policies
within the scope of the agencys statutory function, we apply  the
rational basis standard.15  Under this standard, we defer to  the
agencys determination so long as it is reasonable, regardless  of
whether we actually agree with it.16
          In  cases  involving  specialized  expertise,  we  have
applied the rational basis standard to review agency decisions in
the public procurement process.17  Here, the Energy Authority  is
uniquely  suited  to  understand how best to meet  its  objective
needs.   The  question  at  issue, essentially,  is  whether  the
specification  of  a PLC unduly restrict[ed] competition.18   The
agencys  expertise with respect to the relative merits of  a  PLC
over  alternative systems would be of material assistance to  any
determination  of  this issue.19  Further, the Energy  Authoritys
broad  statutory mandate calls upon it to exercise a  significant
range  of discretion;20 and nothing in the applicable procurement
regulations purports to fence this discretion.21  It follows that
broad  deference to the agencys judgment under the rational basis
standard is appropriate in this case.
     B.   Issues Addressed in the Administrative Hearing
          Most  of  the points that Powercorp raises here  simply
renew, albeit sometimes recast in different phrasing or form, its
original  challenges  on  the various issues  it  argued  in  the
administrative hearing.22  Specifically, Powercorp questions  (1)
whether the Energy Authority had sufficient basis for choosing  a
product-based  specification instead of a  needs-based  one;  (2)
whether  the  Energy  Authority  showed  illegal  favoritism   to
Controlled  Power  (the winning bidder) by  working  with  it  to
design  its system then specifying it in the ITB; and (3) whether
Powercorp has standing to challenge a bid specification as unduly
          As  already noted above, the hearing officer  concluded
that  the  Energy Authority acted within the scope of  its  legal
authority  in  excluding PC-based systems from the ITB  and  that
Powercorp  failed to show that the agency acted  unreasonably  in
interpreting   and   applying  relevant  statutes,   abused   its
          discretion in applying its own procurement regulations, or lacked
a  rational  basis  for  preferring  the  PLC  system.  Powercorp
continues  to  challenge the agencys judgment as to the  relative
merits  of  the PLC and PC systems, and it also argues  that  the
agency has been inconsistent in justifying its preference.
          As  the hearing officers decision recognized, under the
rational  basis test these arguments largely miss the point:  the
question  at issue here is not whether the agency made the  right
decision in preferring one operating system over the other or  in
deciding  to buy now rather than later; instead, the question  is
whether the agency had authority to specify the system it  wanted
and,  if  so,  whether it had a rational basis for  its  ultimate
choice.   The  hearing  officer  answered  yes  to  these   basic
questions,  and  after a careful review of the law  and  evidence
bearing on the specific claims Powercorp advanced to support  its
challenge    issued  a  thorough,  well-supported,  and   clearly
explained  decision rejecting Powercorps challenge.   The  Energy
Authority  has adopted the recommended decision and,  on  appeal,
Powercorp  has  failed  to  make  a  persuasive  showing  of  any
significant  legal  or  factual error in  the  agencys  decision.
Accordingly, we affirm the hearing officers recommended decision,
set  out  its full text in Appendix A, and rely on it to  explain
our  reasons  for  rejecting  the points  Powercorp  raises  here
renewing its arguments before the agency.
     C.   Additional Issues
          Not  all of Powercorps arguments raise issues addressed
in  the  hearing officers decision.  Powercorp lists several  new
points in this appeal; most need not be addressed on their merits
because  they  were  not  properly preserved  below  or  because,
despite  being  listed,  they have not actually  been  argued  in
Powercorps  briefing.24   Two  points,  however,  deserve   brief
          Powercorp asserts that federal procurement cases govern
the  hearing  process  involved in this  case;  relying  on  this
assertion,  it suggests that a different burden of  proof  should
have  applied  at  the hearing below because,  in  the  [f]ederal
procurement system[,] . . . the burden is first on the  procuring
agency to justify the restriction, not on the protester to refute
all  possible  justifications ex-ante.  But Powercorp  failed  to
raise  the  issue of applicable law (and corresponding burden  of
proof)  in the proceedings below.  In fact, the hearing  officers
choice of the governing issues of burden of proof appears to have
been   adopted  below  at  Powercorps  suggestion.  Given   these
circumstances,  Powercorp has waived  the  right  to  raise  this
argument here.25
          Powercorp  also challenges the hearing officers  ruling
that it lacked standing to challenge the ITBs specification of an
Allen-Bradley brand supervisory controller.  It suggests that  we
should  apply de novo review in resolving this issue.   But  even
applying  this proposed standard, Powercorps argument on standing
would  be unavailing.  As Powercorp itself acknowledges, it would
have  standing to challenge the brand-name specification only  if
it   could  establish  that  it  would  have  bid  but  for   the
specifications being so narrowly drawn as to exclude its product.
          It is uncontested that the specification of the Allen-Bradley
brand was not what excluded Powercorp from bidding in response to
the  ITB; rather, the obstacle was the more general specification
of   a   PLC  system.   Because  the  hearing  officer  correctly
recognized  that the brand-name specification was  immaterial  to
Powercorp based on undisputed facts, we uphold the agencys ruling
on this point.26
          Because   the  Energy  Authoritys  decision   to   deny
Powercorps  bid  protest has a reasonable basis  in  law  and  is
supported by substantial evidence, we AFFIRM the agencys decision
in all respects.
                          APPENDIX A*


In the Matter of:                  )
Appellant.                         )
                              )    AEA ITB No. REG-04-230

                      RECOMMENDED DECISION

     This  is  a protest appeal.  It concerns Invitation  to  Bid
[ITB]  REG-04-230,  issued on May 28, 2004 by the  Alaska  Energy
Authority  [AEA] for the purchase and installation of paralleling
switchgear at multiple sites.  Under the amended ITB,  bids  were
due  on  June  30,  2004.  Prior to the bid due  date,  Powercorp
Alaska,  LLC [Powercorp] filed a protest.  AEA issued a  decision
denying  the  protest on June 25, and Powercorp filed  an  appeal
with AEAs executive director.
     Two   bids   were  submitted,  by  Controlled   Power,   LLC
[Controlled Power] and by Thompson Technologies.  The  bids  were
opened  on  July  23.   Following review of  the  bids,  the  bid
submitted by Thompson Technologies was deemed non-responsive  and
was   rejected.   The  bid  submitted  by  Controlled  Power  was
accepted.    Controlled  Power  is  the  prospective  contractor,
pending resolution of the protest appeal.
     The  executive director delegated the conduct of the hearing
on  Powercorps  protest  appeal to a hearing  officer,  retaining
authority to make a final decision upon the recommendation of the
hearing  officer.   The hearing officer conducted  a  hearing  in
Anchorage  on August 31-September 1.  Assistant Attorney  General
Mike  Mitchell  represented  AEA, and  attorney  Thomas  Wickwire
represented Powercorp.  Representatives of Controlled Power  were
contacted  by  telephone following initial  testimony,  and  they
listened in from Seattle.  Sworn testimony was provided by Dennis
Meiners, Harvey Paul, Russ Cahill, Chris Mello, Kris Noonan, John
Cameron, Ted Creedon, Brian Gray and Mary Judd.
     This  recommended  decision is based on  the  record,  which
consists  of  the agency file as provided to the hearing  officer
and  the parties, the exhibits submitted at the hearing, and  the
testimony of the witnesses at the hearing.
                      Issues for Decision
     1.    Did AEA abuse its discretion in issuing the ITB  prior
to completing an evaluation of alternative switchgear systems?
     2.    Did  Controlled  Power have  undue  influence  in  the
preparation of design specifications?
     3.   Did the ITB omit necessary information?
     4.    Was  the specification of an Allen-Bradley supervisory
controller unduly restrictive?
                         Applicable Law
     This  solicitation is exempt from the Procurement  Code,  AS
     36.30.  Pursuant to the master grant agreement between AEA and
the  Denali  Commission, it is subject to  15  CFR  24.36,  which
mandates  full  and  open competition, and  to  AEAs  procurement
policies.   15  CFR  24.36(c)(1)(vi) indicates  that  brand  name
specifications   restrict   competition.    Unduly    restrictive
specifications  are  improper in the public procurement  process.
AEAs  procurement policy states that a specification that  limits
the  procurement  of  items to a specific manufacturers  name  or
catalog  number  shall  only  be  used  for  equipment  .   .   .
specifically identified by a consulting engineer and included  in
a  stamped  set  of  design  drawings. [AEA  Procurement  Policy,
Exception #4]
     The  protestor bears the burden of proof as to  all  factual
matters.   The  executive  director  determines  facts  de   novo
following  a  hearing  and  exercises  independent  judgment   on
questions  of  law  and  agency policy.  The  executive  director
should  afford  due  deference to  a  decision  by  agency  staff
regarding a matter within the discretion of the individual making
the determination.
                        Factual Findings
     Approximately 171 remote rural Alaskan villages are  located
off the electrical grid system and receive their electrical power
from  one  or  more  local power plants.   In  51  villages,  the
electrical  utility is operated by the Alaska Village  Electrical
Cooperative  [AVEC].   In the remaining 120  villages,  typically
smaller and more remote, the electrical utility is operated by  a
locally  owned  electrical  utility company.   Historically,  the
locally owned and operated utilities have operated at a cost that
cannot   be   supported  by  local  users,  and   have   provided
unsatisfactory  levels  of reliability.   For  at  least  fifteen
years,  AEA has been a major provider of technical and managerial
expertise  and a major funding agency for the locally  owned  and
operated  rural  electrical utilities.   One  component  of  AEAs
services has been a circuit rider program, in which AEA personnel
or   consultants  travel  to  villages  and  provide  advice  and
technical assistance on site.
     In recent years, with significant decreases in state funding
of energy programs and with increased federal funding through the
Denali  Commission that is perceived as unlikely to be maintained
in  the  long  term,  policymakers have increasingly  focused  on
achieving   a  reliable,  sustainable  rural  electrical   system
statewide.   AEAs Rural Power System Upgrade [RPSU]  program  was
implemented   to   work  towards  sustainability   by   upgrading
powerplants  throughout rural Alaska.  As part of  that  program,
AEA  developed a prioritized list of all 120 villages  under  its
oversight  and  set  out to overhaul as many  as  possible  while
Denali  Commission funding was available, anticipating completion
of all the villages within about ten years.
     The RPSU program includes, among other things, exploring and
expanding the use of alternative energy sources, primarily  wind,
at  remote sites.  It also includes increasing the efficiency  of
electrical  generation at rural power plants by  installation  of
automatic  paralleling switchgear, which matches power generation
with  demand  on  a continuous, automatic basis.   [Alaska  Rural
Energy  Plan (Plan),]  Paralleling switchgear can reduce
fuel  consumption by 5-10%, [id., Table 1-1, note 8] but can cost
     AEA is also interested in increasing its ability to remotely
monitor powerplant operations, in part to make up for substantial
reductions  in  funding for the circuit rider program  in  recent
years.   Beginning in mid-2002, AEAs RPSU program  manager,  Kris
Noonan, and a project manager assigned to the RPSU program, Lenny
Landis, had been looking into alternatives for remote monitoring.
[LL  email 7/3/03]  By July 2003, their efforts had led  them  to
Powercorp, which had installed a number of remote monitoring  and
control systems in Australia and elsewhere, including Antarctica.
[Id.]   In  mid-2003,  AEA received a remote monitoring  proposal
from  Ernie  Baumgartner,  which also  relied  on  the  Powercorp
system.  [LL email 8/4&6/03]  The Powercorp system had been  used
in  a  number  of locations for hybrid diesel/alternative  energy
systems control, [id.] which was of interest to AEA because  wind
generation  (and  heat  co-generation) are areas  highlighted  as
potential  contributors to sustainability  in  the  Alaska  Rural
Energy Policy plan. [Id.; Plan at  2,  3]
     The  critical components in a paralleling switchgear  system
are  a  supervisory (or master) controller, one  or  more  engine
controllers,  contactors, and the operator interface  unit.   The
system  includes sensors that detect load and demand as  well  as
generator conditions (e.g., temperature, speed).  The supervisory
controller takes the data sent to it by the sensors and based  on
pre-programmed  parameters instructs the  engine  controllers  to
adjust  the  generators  to  the optimum  operating  speed.   The
contactors connect the engine controllers to the generators.  The
operator interface unit (a monitor screen and keyboard) allows an
on site operator to monitor conditions and make adjustments.
     Programmable  logic  controllers  [PLC]  are  the   industry
standard for supervisory controllers.  PLCs are manufactured by a
number   of   manufacturers,  including  Allen-Bradley,   General
Electric, and others.  A PLC uses ladder logic to derive commands
for  the  engine  controllers from  the  data  submitted  by  the
sensors.     PLC-based   systems   utilizing   an   Allen-Bradley
supervisory  controller  had  been supplied  to  AEA  under  term
contracts for more than ten years.  Allen-Bradley controllers are
installed  in thousands of locations, including many  in  Alaska,
and  are  recognized  in the industry as  reliable.   Within  the
electrical   power   generation   industry,   they   are   widely
distributed,   commonly  available  from  multiple  distributors,
frequently installed, and familiar to experienced operators.
     The  Powercorp  system  supervisor controller  relies  on  a
personal  computer [PC] rather than a PLC to derive the  commands
sent to the engine controllers.  The Powercorp system is the only
PC-based system currently being marketed in Alaska.  Both PC- and
PLC-based  systems  are  programmed  to  derive  and  communicate
commands based upon preset parameters.  Both the PC and  the  PLC
can  be  programmed  to  any  number of different  configurations
deemed   suitable  by  the  operator.   However,   the   PC-based
controller   provides  additional  programming  flexibility   and
adaptability,  such as the ability to incorporate multiple  power
generation  sources.  In addition, because it is computer  based,
remote monitoring (given an online connection) is built into  the
Powercorp  system  and  the  programming  for  the  PC   can   be
manipulated online in a manner that affords a greater  degree  of
remote control than is possible with a PLC system.
     In    late   July   2003,   AEA   arranged   for   Powercorp
representatives  to travel to Washington state  to  discuss  with
Controlled  Power  the  possibility of working  cooperatively  to
design   a   switchgear  system  using  the  Powercorp   PC-based
supervisory   controller  (marketed  as  the  Commander)   in   a
demonstration  project, and as a bidder on future RPSU  projects.
[LL  email  8/4,5&6/03]   Those talks floundered,  however,  when
Controlled  Power  and  Powercorp  were  unable  to  come  to  an
agreement over which of them would be the prime contractor in any
such arrangement.
     To  assess  which of various alternative switchgear  systems
might  provide  the most benefit, in late 2003 [KP email  8/5/03]
the  Denali  Commission  awarded grants for  three  demonstration
projects to design, build and install fully automatic paralleling
switchgear  systems with remote data access capability  in  rural
Alaska villages.  Funds for one project were awarded to AVEC; AEA
received funding for two projects.
     By  the  fall of 2003, AEA was actively working on ten  RPSU
projects  that had been approved for construction.  AEA  selected
two  of  the  projects for the demonstration  grant  funding,  at
Golovin  and Stevens Village.  Pursuant to the grant, AEA awarded
sole  source  contracts for the Golovin (in  December  2003)  and
Stevens  Village  (in  January 2004)  paralleling  switchgear  to
Controlled Power and Powercorp, respectively.  AEA was to monitor
and  evaluate all three systems to determine which one best meets
the  communitys needs.  The Golovin equipment was  scheduled  for
delivery  under  the  contract by March 12,  2004.   The  Stevens
Village  equipment was scheduled for delivery under the  contract
by February 27, 2004.
     The   Stevens  Village  ITB  called  for  remote  monitoring
functionality, which had not previously been required by  AEA  in
its   switchgear   contracts.   The  ITB   specified   the   same
manufacturer  for the supervisory controller (Allen-Bradley)  and
engine  controllers  (Woodward) as in  prior  AEA  solicitations.
However,   it  specified  a  different  model  for   the   engine
controller,  a  Woodward  GCP-31.   The  Woodward  GCP-31  is   a
microprocessor-based unit that provides enhanced  capability  for
remote  monitoring  as  compared with prior Woodward  units.   In
March  2004 AEA finalized detailed specifications for the Stevens
Village   and   Golovin  projects1  and   began   work   on   the
specifications  for  its  next round of construction.  [BG  email
     On  March 17, 2004, an AEA consulting engineer inspected the
Powercorp  gear  at the fabrication site in Bothell,  Washington.
The  consultant found the quality of the switchgear  construction
good,  and the quality of the workmanship excellent but  observed
that  the  system  did not adhere to the specifications  for  the
Stevens Village system, noting that those specifications had been
designed  in  many  respects to meet the unique  needs  of  rural
     Alaska and to provide consistent equipment at multiple sites.
The  consultant  recommended several  minor  alterations  to  the
Powercorp  system  in  any  future  AEA  project,  and  also  one
significant alteration:
          The   automatic  control  of  the  generators
          should   be  accomplished  using  the   Allen
          Bradley PLC as utilized at other sites.   Due
          to the unique operating environment of . .  .
          rural  Alaska, there needs to be  commonality
          between communities.  This will allow the AEA
          to    easily    troubleshoot   problems    at
          communities,  easily monitor  the  equipment,
          and provide programming revisions.
     The  Stevens  Village  switchgear  installation  was  to  be
completed  on  or  about  April 9 [DM email  3/31/2004]  and  the
Golovin  switchgear  was scheduled for late  April.  [Id.]   AEAs
consultants,  in  the  meantime,  continued  to   work   on   the
specifications for the anticipated ITB for the next set  of  RPSU
     The  consultants  recommendation regarding  the  desire  for
commonality  of equipment was consistent with prior AEA  comments
that a standard control scheme, components and layout was desired
in  order  to facilitate AEAs operator training, maintenance  and
trouble  shooting, and parts replacement, as well  as  to  enable
continuing  refinement and improvement of systems in  the  field.
[LL   email,  8/6/2003]   AEA  decided  to  base  the   new   ITB
specifications  on  the  PLC-based system  installed  at  Stevens
Village,  with  key  components (other than the  Woodward  GCP-31
engine  controller) being current versions of the same  equipment
that   had   been  installed  under  AEA  paralleling  switchgear
contracts for at least ten years previously, under term contracts
and  prior competitive solicitations.  The decision to require  a
PLC-based  system was based on (1) Powercorps  lack  of  a  prior
operating and service record in Alaska; (2) the lack of  multiple
distributors for Powercorps supervisory controller; and  (3)  the
desire to maintain commonality of key components.
     AEA  retained a consulting electrical engineer, Brian  Gray,
to prepare the specifications for the new ITB, instructing him to
incorporate  the  PLC-based system used in  the  Stevens  Village
demonstration  project  as  the  prototype  for  the  ITB.   Work
continued  on  the new specifications through April.   [CV  email
4/12&14/2004]   The  AEA consultants contacted  Controlled  Power
with   specific   technical   questions   in   order   to   draft
specifications that would meet AEAs request to base  the  ITB  on
the system installed at Stevens Village. [JD email 4/15; BG email
4/21,22,&  30]   By the end of April the ITB specifications  were
nearly complete.  [BG email 4/30; CV email 5/3]
     The  specifications  called for using an  Allen-Bradley  PLC
controller.   Powercorp  could have  responded,  substituting  an
Allen-Bradley PLC controller for its own controller, but it chose
not  to  because the PC-based Commander controller  is  the  core
product  it  sells  and it is not interested in building  systems
using  other controllers.  The Powercorp PC-based system provides
enhanced  remote control capability over a PLC-based system,  and
is  a better system for use in mixed-generation power facilities.
The  Powercorp  system has an extensive track  record  in  remote
locations, often in severe environmental conditions, and has been
used  in Antarctica.  Powercorp has employed the Woodward  GCP-31
engine  controller  (under a prior owners  brand  name)  on  many
     Although the Denali Commissions grant was intended  for  the
evaluation of alternative systems, AEA has not developed specific
criteria  for  determining the relative  merits  of  the  systems
installed under the three Denali Commission demonstration grants.
One  basis  for  evaluation  of the  systems  installed  will  be
performance reliability.  A minimum evaluation period of 30  days
would  provide  some  useful  information,  but  a  comprehensive
assessment of operating performance and reliability would require
operation for one full year.
A.    AEA Did Not Abuse Its Discretion by Issuing an ITB Prior to
     The  central thrust of Powercorps protest and appeal is that
by  issuing  an ITB before completing an evaluation of  competing
systems, AEA has set itself on a course to make PLC-based systems
the  basis  for  all future procurements under the RPSU  program.
Powercorp contends that the agencys stated reasons for proceeding
to  bid  prior to completing an evaluation of its PC-based system
mask  institutional resistance to innovation.  Powercorp  asserts
that  senior management should intervene to ensure that potential
gains in functionality from a PC-based system that could lead  to
increased   sustainability  are  not  prematurely  removed   from
     Powercorps  primary  argument is  that,  given  AEAs  stated
preference for commonality, the selection of PLC-based  equipment
for  this ITB will effectively mandate the specification of  PLC-
based   systems  in  future  solicitations.   For  that   reason,
Powercorp argues, and because a PC-based system provides enhanced
functionality,  the requirement for a PLC controller  was  unduly
restrictive, and AEA should either have opened the ITB up to  PC-
based  systems,  or  delayed issuing  the  ITB  until  after  the
demonstration  project  was completed.   AEA  responds  that  the
issuance  of  the  ITB was dictated by pre-existing  construction
schedules, and that it had reasonable grounds for not accepting a
PC-based alternative at this time.
     The  evidence and testimony clearly establish that  AEA  was
within its discretion in issuing the ITB before completion of the
demonstration  project  and evaluation process,  given  the  pre-
existing   construction  schedule.   Although   AEA   relied   on
commonality  as a justification for its brand name specification,
there are multiple PLC-based systems and the decision to issue an
ITB  before the evaluation of Powercorps PC-based system had been
completed  had  nothing to do with a desire for commonality.   It
was   driven,  rather,  by  AEAs  judgment  that  an  operational
evaluation  of  the  Powercorp  PC-based  system  was  necessary,
because  it  had  no experience with either PC-based  systems  in
general or the Powercorp system in particular.
     Whether  AEA  actually needed to await the  results  of  the
     demonstration project evaluation in order to determine whether
the  Powercorp system is sufficiently reliable for use in  Alaska
may  reasonably be questioned.  In light of Powercorps experience
as  a  remote  site  supplier,  including  the  Australian  bush,
Southeast   Asia,  and  Antarctica,  AEA  might   have   obtained
sufficient  assurances  of reliability  by  other  means  than  a
demonstration  project.3  But the commonality  justification  for
limiting  competition to Allen-Bradley controllers  will  not  be
materially  stronger in a future ITB, simply because  eight  more
systems  use  that  controller, and the  decision  to  await  the
outcome   of   the   Golovin  demonstration   project   was   not
unreasonable.   Powercorps installed base of  about  50  PC-based
systems  worldwide pales in comparison to the installed  base  of
PLC-based systems.  Specification of a PLC-based system  did  not
unduly   restrict   competition,  because  there   are   multiple
manufacturers and distributors of such systems, and  it  was  not
unreasonable to require an Alaskan operating record.  Mr.  Noonan
testified that no decision has been made to preclude the  use  of
PC-based  systems  in  future  solicitations,  and  that  if  the
Powercorp system performs satisfactorily at Golovin the  question
of its use in future solicitations will be revisited.  Similarly,
to  the  extent  that Powercorp asserts that  a  PC-based  system
provides  enhanced  functionality, completion  of  an  evaluation
would  allow  AEA to determine whether those features  should  be
required in a future ITB.
     I  conclude  that  AEA  did  not  abuse  its  discretion  in
proceeding to the ITB stage on this contract before completing an
evaluation,  and that the specification of a PLC was  not  unduly
B.   Controlled Power Did Not Have Undue Influence.
     Powercorp  argues  that  Controlled  Power  had  undue   and
improper   influence   in   the   preparation   of   the   design
specifications.    This  argument  is  completely   unpersuasive.
Powercorp   conflates  AEAs  decision  to  specify  a   PLC-based
supervisory controller with AEAs subsequent actions to  implement
that  decision.   Clearly, once AEA had  decided  to  use  a  PLC
supervisory  controller, it was entirely appropriate  to  contact
Controlled   Power   to   obtain   technical   information    for
incorporation  into  the  bid  specifications.    There   is   no
suggestion  in the record that Controlled Power offered  anything
other than technical clarification in response to AEAs inquiries.
There  is no evidence that Controlled Power had any influence  or
role   in  AEAs  decision  to  preclude  PC-based  systems   from
participation in the ITB.
C.   The ITB Contained the Necessary Information.
     Powercorp  argues that the ITB failed to provide information
that  bidders  needed  in order to prepare competitive  bids,  in
that:   (1)  detailed  specifications  for  the  Stevens  Village
installation  were not provided, which gave Controlled  Power  an
unfair  competitive  advantage; and (2) the  ITB  indicated  that
undisclosed factors would be used to evaluate bids.
     AEA  responds  that  (1) the Stevens Village  specifications
were not necessary in order to prepare a competitive bid, and (2)
bids were not evaluated on any factor but cost.
     The  record does not support the argument that the  detailed
specifications for Stevens Village were necessary in order for  a
bidder  to  prepare a competitive proposal.  Most  significantly,
Thompson  Technologies  submitted a  lower  bid  than  Controlled
Power,    even    though   it   lacked   those    specifications.
Representatives  of  Thompson Technologies and  Bethel  Services,
Inc.,  a  prospective  bidder,  testified  that  the  information
provided  with  the ITB was sufficient to prepare  a  competitive
bid.  Even if the information had been deficient, Powercorp would
not  have  standing  to object, because it had  no  intention  of
submitting a bid using a PLC, and the general rule is that only a
prospective  bidder  has  standing to  protest  the  terms  of  a
     Similarly,  Powercorp has not shown that any  factors  other
than  price  were  to be evaluated.  Although  the  ITB  includes
language  suggesting  that  the  most  beneficial  bid  would  be
selected,  [ITB  at 2, par. 7; Part 5, par. C] both  the  program
manager and the procurement officer stated that price alone would
be  used  to determine the award as among any responsive bidders.
It  appears  that  the most beneficial language was  included  by
oversight,  inasmuch as it is clearly improper to  evaluate  bids
(except as to responsiveness) on any criterion other than  price;
for  other  factors  to be considered, the RFP  process  must  be
D.   Powercorp  Lacks  Standing to Contest Specification  of  the
     Allen-Bradley Controller.
     Powercorp  argues that the specification of an Allen-Bradley
supervisory controller was improper because: (1) it  was  a  sole
source   solicitation;  and  (2)  the  specification  is   unduly
restrictive  because  it establishes a brand  requirement  rather
than a functional requirement.
     AEA  responds that (1) the ITB was not sole source,  because
multiple  bidders could provide the switchgear system  even  with
the  specified  controller; and (2) the brand  specification  was
reasonable   for   reasons   of  demonstrated   performance   and
commonality of equipment.
     The  ITB  was  not a sole source procurement:  Allen-Bradley
controllers  are available from a multitude of distributors,  and
multiple firms design, fabricate and supply automatic paralleling
switchgear  systems.  Two firms submitted bids,  and  more  could
have.   The  specifications did, however, call for a  name  brand
component,  and Powercorp asserts that specification  was  unduly
restrictive and in violation of AEAs procurement procedures.
     But  the  brand  name  specification  was,  from  Powercorps
perspective,  immaterial, because Powercorp had no  intention  of
submitting  a  bid  for any PLC-based system, regardless  of  the
brand  specified.   For  this reason,  it  is  not  necessary  to
determine whether the name brand specification was appropriate.
     AEA  advanced  three reasons for precluding  Powercorps  PC-
based system from participation in this ITB: (1) it has not  been
demonstrated   to   be  reliable  in  Alaskan   field   operating
conditions;  (2)  the  supervisory controller  in  the  Powercorp
system  is  not  a widely distributed, easily obtained  component
generally familiar to operators in the industry; and (3) AEA  has
a need for commonality of equipment.
     I  conclude  that AEA had a reasonable basis  for  requiring
completion of a demonstration project prior to incorporating  new
technology into the RPSU program.  Because the timing of this ITB
was   driven   by   pre-existing  construction  schedules,   that
conclusion suffices to resolve this protest appeal.
     Whether,   after  resolving  any  concerns   regarding   the
reliability  of  the  Powercorp  system,  either  the  relatively
limited  availability of the system or the  lack  of  commonality
with existing equipment would be grounds for precluding Powercorp
from  a  future  ITB is a question that should be resolved  at  a
later date, in the context of a subsequent RFP.
     I recommend that the protest appeal be denied.

DATED September 13, 2004.

                                   Andrew M. Hemenway
                                   Hearing Officer

     1     In  re Powercorp Alaska, LLC, Recommended Decision  of
Hearing  Officer Andrew M. Hemenway, Appendix A at  4  (September
13, 2004).

     2    App. A at 5.

     3    Id.

     4    App. A at 6.

     5    App. A at 7.

     6    App. A at 2.

     7    App. A at 10-11.

     8    App. A at 12.

     9    App. A at 14.

     10    Williams v. Abood, 53 P.3d 134, 139 (Alaska 2002).

     11    J.L. Hodges v. Alaska Constructors, Inc., 957 P.2d 957,
960  (Alaska  1998)  (citing Rose v. Commercial  Fisheries  Entry
Commn, 647 P.2d 154, 161 (Alaska 1982)).

     12    Robinson v. Municipality of Anchorage, 69 P.3d 489, 493
(Alaska  2003) (citation omitted); see also Williams, 53 P.3d  at
139 (citation omitted).

     13    Leigh v. Seekins Ford, 136 P.3d 214, 216 (Alaska 2006)
(citation omitted).

     14    Tesoro Alaska Petroleum Co. v. Kenai Pipe Line Co., 746
P.2d 896, 903 (Alaska 1987).

     15    Id.

     16    Id.

     17    See, e.g., Laborers Local No. 942 v. Lampkin, 956 P.2d
422, 432 n.11 (Alaska 1998) (reasonable basis standard applies in
review  of agencys application of its own procurement code);  see
also  Gunderson v. Univ. of Alaska Fairbanks, 922 P.2d  229,  233
(Alaska  1996) (reasonable basis standard applies  in  review  of
agencys  compliance  with state procurement codes);  Alaska  Intl
Constr.,  Inc. v. Earth Movers of Fairbanks, Inc., 697 P.2d  626,
628-29  (Alaska  1985) (reasonable basis standard  applies  where
agencys  determination clearly required an understanding  of  the
type  of  business involved); Chris Berg, Inc. v. State, Dept  of
Transp.  & Pub. Facilities, 680 P.2d 93, 94 (Alaska 1984)  (abuse
of  discretion standard applies in review of agencys rejection of
bid);  State, Dept of Admin. v. Bowers Office Prods.,  Inc.,  621
P.2d  11, 13 (Alaska 1980) (reasonable basis standard applies  to
review of agencys determination that bid was unresponsive).

     18    15 C.F.R.  24.36(c)(3)(i) (2006).

     19    Kelly v. Zamarello, 486 P.2d 906, 916-17 (Alaska 1971)
([D]eference    should   be   given   to    the    administrative
interpretation,  since the expertise of the agency  would  be  of
material assistance to the court.).

     20     See  generally  AS  44.83.070  (The  purpose  of  the
authority  is  to  promote,  develop,  and  advance  the  general
prosperity  and economic welfare of the people of  the  state  by
providing  a means of financing and operating power projects  and
facilities that recover and use waste energy and by carrying  out
the powers and duties assigned to it under AS 42.45.); AS 42.45.

     21    15 C.F.R.  24.36 (2006); Alaska Energy Authority, Rural
Energy  Group Procurement Procedures.  Note that procurements  by
the  Energy  Authority as agent for the grantee of federal  funds
are exempt from state procurement statutes. See AS 36.30.850.

     22     For  example Powercorp argues in its brief  that  the
agencys  preference  of a PLC rather than a PC-based  system  was
arbitrary  in  violation  of 15 C.F.R.  24.36(c)(1)(vii)  (2006).
This  argument merely reframes an issue that was fully  addressed
in  the hearing officers decision, namely whether the agency  had
the authority to limit bids to PLC systems.  See App. A at 10.

     23     Powercorp  also raises nine issues of superior  court
error.   Because,  as  mentioned above, we  directly  review  the
agencys findings of fact and conclusions of law, claims that  the
superior court erred are not germane here.

     24     For  example  Powercorp lists as an  issue  that  the
agencys  hearing deprived it of due process.  The issue  has  not
been adequately briefed.

     25     See Nenana City Sch. Dist. v. Coghill, 898 P.2d  929,
934 (Alaska 1995) (issues not briefed or raised in administrative
appeal  to  superior  court are waived).   We  need  not  address
whether  an argument that has been waived has merit.  But  it  is
worth  noting  that Powercorp itself suggests that  the  proposed
standard  applies  only  where single-source  procurement  is  at
issue.  Because we affirm the agencys conclusion that the ITB  at
issue  was  competitive and not a de facto sole-source  contract,
Powercorps  reliance  on this proposed standard  would  seemingly
fail  to  advance its claim even if Powercorp had not waived  the

     26     See  Hoblit v. Commr of Natural Res., 678 P.2d  1337,
1340  (Alaska  1984)  (party  has  standing  only  where  he  has
sufficient personal stake in the outcome of the controversy).

*     The  AEAs  decision  has been edited to  conform  with  our
technical rules.

1     In  March,  Gray  was  working on  detailed  specifications
for  the  remote monitoring and control functions at the  Golovin
project.   [BG   email   3/5/04]   It  is   unclear   why   these
specifications were still being prepared, since the due date  for
delivery was March 12.

2     This  assertion  should  not be taken  lightly.   The  ISER
report  on achieving sustainability, issued in 2003, specifically
concluded  that  Professional  risk  aversion  on  the  part   of
designers  and engineers can also retard or discourage innovation
in design proposals. [ISER at 51]

     3      This  point,  like  Powercorps  contention  regarding
barriers  to  technical innovation, finds  support  in  the  ISER
report,  which acknowledges that sustainability can be  adversely
impacted  by pressure at the local level to maintain local  staff
at unsustainable levels.

     4     See AEA Procurement Procedures, Par. 5, Exception  No.
1:  Standard  procedures call for all procurements of  $5,001  or
more  to be competitive, with the low bid deciding how a contract
is  awarded.   A  proposal method may be  used  if  AEAs  project
manager determines that factors other than cost are a significant

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