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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
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
| POWERCORP ALASKA, LLC, | ) |
| ) Supreme Court No. S- 12176 | |
| Appellant, | ) |
| ) Superior Court No. 3AN-04-11858 CI | |
| v. | ) |
| ) | |
| STATE OF ALASKA, ALASKA | ) O P I N I O N |
| INDUSTRIAL DEVELOPMENT | ) |
| AND EXPORT AUTHORITY, | ) No. 6196 November 9, 2007 |
| ALASKA ENERGY AUTHORITY, | ) |
| ) | |
| Appellee. | ) |
| ) | |
Appeal from the
Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Larry D. Card,
Judge.
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.
I. INTRODUCTION
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
occurred.
II. FACTS AND PROCEEDINGS
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,
immaterial.9
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.
III. DISCUSSION
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
restrictive.23
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
attention.
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
IV. CONCLUSION
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*
BEFORE THE ALASKA ENERGY AUTHORITY
In the Matter of: )
)
POWERCORP ALASKA, LLC, )
)
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), 1.1.1.2] Paralleling switchgear can reduce
fuel consumption by 5-10%, [id., Table 1-1, note 8] but can cost
$150-$200,000.
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
3/13]
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
projects.
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
occasions.
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.
Analysis
A. AEA Did Not Abuse Its Discretion by Issuing an ITB Prior to
Evaluation.
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
consideration.2
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
restrictive.
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
solicitation.
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
utilized.4
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.
Recommendation
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
issue.
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
consideration.
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