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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Weed v. Bachner Company Inc. (5/14/2010) sp-6475

Weed v. Bachner Company Inc. (5/14/2010) sp-6475, 230 P3d 697

     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

JAMES WEED, JURANDA FAITH )
MADSON a/k/a JAN MADSON, )
BRUCE SENKOW, and JOHN )
BENNETT, individually, )
) Supreme Court No. S- 13284
Petitioners, )
) Superior Court No.
v. ) 4FA-04-266 CI
)
BACHNER COMPANY INC., and )
BOWERS INVESTMENT )
COMPANY, ) O P I N I O N
)
Respondents. ) No. 6475 - May 14, 2010
)
          Petition  for Review from the Superior  Court
          of  the  State  of  Alaska,  Fourth  Judicial
          District, Fairbanks, Mark I. Wood, Judge.

          Appearances:  Janell  M.  Hafner,   Assistant
          Attorney  General  and Richard  A.  Svobodny,
          Acting   Attorney   General,   Juneau,    for
          Petitioners.  Michael C. Kramer,  Borgeson  &
          Burns, P.C., Fairbanks, for Respondents.

          Before:  Carpeneti, Chief Justice, Fabe,  and
          Christen,  Justices.  [Eastaugh and  Winfree,
          Justices, not participating.]

          CARPENETI, Chief Justice.
          FABE, Justice, concurring.

I.   INTRODUCTION
The    sole   question   in   this   case   is   whether    state
procurement  officials  are  entitled  to  absolute  immunity  or
qualified  immunity for common law claims arising  from  the  bid
evaluation process.  In this case, a disappointed bidder sued the
procurement   officials  individually  after  the  administrative
hearing  officer  in  the  bid protest proceeding  found  serious
improprieties in the bid evaluation process.  The officials moved
for  dismissal  on  the ground that they were absolutely  immune.
The  superior court held that they were protected instead by only
qualified immunity, which applies only to actions taken  in  good
faith.   Because  the  complaint alleged  bad  faith,  the  court
further  held that most of the causes of action could go forward.
We  accepted  the  officials petition for review.   Applying  our
three-factor  test, we conclude that the officials  are  entitled
only to qualified immunity, and therefore affirm the decision  of
the superior court.
II.  FACTS AND PROCEEDINGS
          This  is the second time this matter comes before  us.1
Bachner  Company  and  Bowers Investment Company  (Bachner)  were
unsuccessful  bidders on a state contract ultimately  awarded  to
McKinley  Development.2   Bachner  filed  bid  protests  alleging
irregularities in the bid scoring process.3  The hearing  officer
who heard the matter found grave deficiencies in four of the five
evaluations  by procurement officials (the petitioners  here)  in
the  bid  award process, and ultimately awarded Bachner  its  bid
preparation  costs.4   Bachner  appealed  that  decision  to  the
superior  court,  arguing that the hearing  officer  should  have
ordered  the bids re-scored or re-opened.5 Bachner was successful
in  the  superior court, but we reversed that court and  affirmed
the hearing officers recommendation.6
          Before  we  had decided that appeal, Bachner  sued  the
four procurement officials as individuals.  The complaint alleged
that   the   procurement  officials  failed  to  follow  required
procedure  for  scoring bids.  It claimed that:  (1)  Senkow  and
Bennet  favored McKinleys bid because of McKinleys site location,
which  was  not one of the exclusive criteria they were permitted
to  consider; (2) Madson advised Senkow and Bennet they could not
consider  the location, but they did not lower their scores;  (3)
Weed intentionally lowered his score on Bachners bid in order  to
counteract what he perceived as favoritism of that bid by another
officer;  and  (4)  after  Bachner  filed  its  protest,   Madson
intentionally misstated that time constraints prevented the state
from  postponing  award  of the contract while  the  protest  was
pending.  Bachner stated two causes of action arising from  these
alleged  facts: the state tort claim of intentional  interference
with  prospective economic opportunity and a federal  tort  claim
under   42   U.S.C.  section  1983.   The  defendant  procurement
officials then moved to dismiss on the pleadings.
          Superior Court Judge Mark I. Wood granted dismissal  of
Bachners  section  1983 action, but refused to  dismiss  Bachners
claim under state tort law.  Judge Wood specifically rejected the
defendant  procurement officials claims that their  actions  were
protected  by  absolute  immunity.   The  court  held  that   the
defendants  were protected only by qualified immunity,  and  that
          certain alleged actions, if true, would fall outside the scope of
that   immunity.    The  procurement  officials  petitioned   for
discretionary  review  to address whether they  are  entitled  to
absolute immunity, and we granted that petition.
III. STANDARD OF REVIEW
          The  applicability and scope of official immunity is  a
question of law, which we review de novo.7
IV.  DISCUSSION
          This case presents a single, discrete question: Are the
procurement officials entitled to absolute or qualified  immunity
for  allegedly tortious conduct arising out of actions they  took
in  the course of the bid evaluation process?  This is the  first
time we have ever directly addressed this question.8  Bachner did
not cross-appeal the superior courts holding that the procurement
officers  are protected by official immunity9  the only  question
is  whether  that  immunity is qualified  or  absolute.   If  the
immunity  is qualified, Bachner will be able to proceed with  its
claims that the procurement officers acted maliciously and in bad
faith.10
          In Aspen Exploration Corp. v. Sheffield,11 we first set
out  a  three-factor test for determining whether an official  is
entitled to absolute or qualified immunity.  The three factors we
consider  are:  (1)  the nature and importance  of  the  official
function  to  government administration; (2) the likelihood  that
the  official will frequently be accused of wrongful  motives  in
performing  this function, and how easily the officer can  defend
against  those  accusations; and (3) the  availability  of  other
relief  to an injured party.12  We have applied this three-factor
test  in  several contexts, holding that the governor is entitled
to  absolute  immunity  when supervising permitting  decisions,13
while social workers14 and state troopers15 are entitled only  to
qualified immunity for their actions.  Applying this same  three-
factor  test  to  the  present  context,  we  conclude  that  the
procurement  officers  in  this case are  entitled  to  qualified
immunity.16
          Under  a  rule of qualified immunity, a public official
is  shielded from liability . . . when discretionary acts  within
the  scope of the officials authority are done in good faith  and
are  not malicious or corrupt.  In other words, malice, bad faith
or  corrupt  motive transforms an otherwise immune act  into  one
from  which  liability  may ensue. 17   As  we  stated  in  Aspen
Exploration, the purpose of qualified immunity is to protect  the
honest  officer  who  tries to do his duty  while  ensuring  that
official  immunity  [does]  not become  a  cloak  for  malicious,
corrupt,  and otherwise outrageous conduct on the part  of  those
guilty  of  intentional  abuse  of  power  with  which  they  are
entrusted by the people.18
          1.   Nature and importance of the function
          The  first factor is: The nature and importance of  the
function  that  the  officer performed to the  administration  of
government (i.e. the importance to the public that this  function
be  performed;  that  it  be  performed  correctly;  that  it  be
performed   according  to  the  best  judgment  of  the   officer
unimpaired by extraneous matters) . . . .19        The procurement
          officials argue that their functions play a critical role in
ensuring the state receives needed services and products across a
range  of  departments and agencies at a reasonable  cost.   They
compare  the  importance  of  their functions  to  the  governors
function   in  rejecting  the  oil  companys  permit   in   Aspen
Exploration.   In  Aspen  Exploration,  we  found  the  governors
function  sufficiently important to support absolute  immunity.20
The  procurement  officials argue that, although  any  individual
officers function may seem unimportant, in the aggregate they are
essential to the smooth administration of government.
          Bachner  responds that the importance  of  the  bidding
process  is  the  prevention of fraud, collusion, favoritism  and
improvidence in the awarding of public contracts, and  therefore,
this first factor weighs against absolute immunity.  Bachner also
distinguishes this case from Aspen Exploration, pointing out that
governors  and  others  in  high state office  are  traditionally
protected by absolute immunity, unlike lower-level officials.
          As to this first factor, we find Bachners argument more
persuasive.   We  agree  that this case is  distinct  from  Aspen
Exploration: Although the oil company in that case challenged the
governors instruction to the commissioner to reject the  companys
permit application, we considered the function at issue to be the
governors supervision of his subordinates.21  We observed that the
governor,  as  an  elected official, has great responsibility  to
supervise  unelected subordinates.22  We also  noted  that  these
concerns  are  particularly important where  the  states  natural
resources are concerned.23  Consequently, our discussion of  this
factor  in Aspen Exploration does not favor absolute immunity  in
the present case.
          We also agree with Bachner that an important purpose of
the  bidding  process  is to create transparency  in  the  states
procurement  system,  and to avoid awarding  contracts  based  on
improper considerations,24 and that this purpose weighs in  favor
of applying qualified immunity to procurement officers.  Finally,
we  conclude  that the highly restricted nature of a  procurement
officers  discretion also makes this factor  weigh  in  favor  of
qualified immunity.  Unlike the governors function in supervising
his  or  her  subordinates   which requires  that  the  governors
discretion and judgment remain largely unfettered  the role of  a
procurement  officer  in  selecting  bids  involves  a  brand  of
discretion that is extraordinarily limited: Procurement  officers
are  only  allowed to consider those factors that the Procurement
Code  specifically lays out.25  We conclude that these  statutory
limitations  on the officials discretion also weigh in  favor  of
qualified immunity.  Although we are sympathetic to the officials
argument that the smooth functioning of the procurement decision-
making  process  is important to the efficient administration  of
government,  we  believe that the other considerations  discussed
here tip the balance in favor of qualified immunity.
                     2.   Likelihood of litigation and burden  of
               defense
          The next factor we consider is: The likelihood that the
officer  will  be subjected to frequent accusations  of  wrongful
motives  and  how  easily the officer can  defend  against  these
          allegations . . . .26  The procurement officials argue that
awarding  a contested bid always results in dissatisfied  bidders
who  will be invited to sue the officials personally unless  they
are  absolutely immune.  They point out that disappointed bidders
frequently  file  bid protests.  They argue that the  competitive
nature  and  large  sums  of money at issue  in  the  procurement
process  make  this  outcome inevitable.  They  also  argue  that
defending  such  actions  will  be expensive  and  time-consuming
because of the subjective nature of the decisions and the lack of
clear tort principles applicable to them.  Bachner responds  that
defending  against this kind of litigation will not be nearly  as
burdensome  as  the  officials argue.  It  argues  that  the  bid
protest  process will both screen out frivolous suits,  and  give
officials  notice and a preliminary opportunity to prepare  their
defenses.
          Although  it  might  sound  intuitively  correct   that
qualified immunity would increase the likelihood of tort suits in
this  context,  as the officials argue, intuition  alone  is  not
sufficient:  In  evaluating this factor  in  the  past,  we  have
required  empirical evidence that frequent suits are likely.   In
Aspen  Exploration,  we noted that it would seem  that  the  very
nature  of [the governors] high office would make the governor  a
ready  target for numerous lawsuits.27  However, we  went  on  to
observe  that, in fact, Aspen Exploration was the first  personal
tort  suit  against  the governor to reach this  court,  stating:
Neither  party  points to any trend, past or present,  indicating
that   governors   in  general  have  been  the   target   of   a
disproportionate number of lawsuits and our own research fails to
denote any such phenomena.28  We concluded that in the absence of
hard  evidence showing that numerous suits were likely, the first
prong  of  this  factor   the likelihood of  frequent  litigation
would weigh in favor of qualified immunity.29
          In  Smith v. Stafford,30 we took the same approach.  In
an  appeal  from a personal tort suit against the social  workers
who  had  handled the plaintiffs daughters Child in Need  of  Aid
(CINA)   proceeding,  we  concluded  that  this  factor   favored
qualified  immunity  because there was no  evidence  that   under
qualified immunity social workers would be subjected to  frequent
lawsuits.31  We noted that, despite the highly emotional nature of
CINA  proceedings,  the  level  of  emotion  involved  does   not
necessarily  translate  into a high number  of  lawsuits  against
social  workers.32  Concluding that this factor favored qualified
immunity, we stated: Historically, these types of suits have been
relatively  rare, and [the social workers] present  no  empirical
evidence that more lawsuits [would] result . . . .33
          Similarly, the procurement officials here do not  offer
any  empirical  evidence in support of their argument.   And  our
independent  research  suggests that these  types  of  suits  are
infrequent:   Although  this  court  often  sees   appeals   from
administrative bid protests,34 we have only seen  one  tort  suit
against  an individual procurement officer.35  Because  arguments
based  solely on intuition are unpersuasive in this  context  and
the  empirical evidence actually suggests that frequent suits are
unlikely, we conclude that the first prong of this factor  favors
          qualified immunity.
          We  are similarly unpersuaded by the officials argument
with  respect to this factors second prong: the ease  with  which
the officials will be able to defend themselves against suits  of
this  kind.   We agree with Bachners argument that most,  if  not
all, unsuccessful bidders who file a tort suit will also file  an
administrative  bid  protest, and therefore,  the  officers  will
first  be  required to defend their subjective decision  in  that
context.  It is likely that much of the civil trial will  involve
the  claims  and  defenses  made in the  administrative  protest,
substantially easing the officers burden of preparing  a  defense
for  the purpose of litigation.  While we see some force  in  the
officials  argument  that such lawsuits  would  turn  largely  on
questions  of fact, and therefore, require expensive presentation
of the issues to a jury, we do not think that this alone tips the
balance in favor of absolute immunity.  In light of the foregoing
discussion,  we  conclude  that this second  factor  also  favors
qualified immunity.
          3.   Availability of alternative relief
          Finally,  we consider: The availability to the  injured
party  of  other remedies or other forms of relief (i.e.  whether
the  injured party can obtain some other kind of judicial  review
of  the  correctness or validity of the officers action).36   The
procurement  officials  argue  that  the  availability  of  other
avenues of relief  the bid protest process, criminal law, and the
Alaska Executive Branch Ethics Act  cause this factor to weigh in
favor of absolute immunity.
          As   to   the  bid  protest  process,  the  procurement
officials  argue that it constitutes a comprehensive  alternative
remedy.   The  officials  assert that  the  bid  protest  process
provides  for a hearing before an administrative law  judge,  who
will fashion an appropriate remedy depending on the nature of the
impropriety.37   These  could include awarding  the  disappointed
bidder  bid  preparation costs, re-scoring of the bids,  or  even
issuing  a  new  request for bids.  Further contributing  to  the
comprehensiveness of this remedy, these proceedings  are  subject
to appeal and judicial review.38
          Bachner  responds that bid preparation costs can  be  a
pittance when compared to the damages available in tort, and that
the  prospect of receiving bid preparation costs alone  will  not
sufficiently  incentivize disappointed bidders to engage  in  the
protest  process.  It urges us to adopt the superior courts  view
that   [n]othing   in  the  current  system  holds   [procurement
officials]  accountable for their performance  of  their  duties.
The  superior  court considered it necessary to the fairness  and
accountability  of  the  system to afford  procurement  officials
immunity  only  for  those actions taken  in  good  faith   i.e.,
qualified immunity.
          Here, we think that the procurement officials have  the
better  argument.   In  Aspen Exploration, we  concluded  that  a
similar administrative process was an adequate alternative remedy
for  purposes of this factor.39  Although the hearing officer may
not  award money damages greater than bid preparation costs,  the
hearing  officer  may  fashion an appropriate  remedy,  including
          sending the bids back for re-scoring or re-opening the bidding
process.40  These are much more comprehensive remedies  than  are
available  in  a civil suit.  Although in this case  the  hearing
officer  awarded Bachner only its bid preparation costs,  Bachner
had its chance at greater remedies.41  The bid protest process is
comprehensive,   and   reflects  the  legislatures   scheme   for
redressing injury in the procurement process.  Thus, we  conclude
that this factor favors absolute immunity.
          As  to  the  role  that criminal  law  and  the  Alaska
Executive  Branch Ethics Act42 play in providing  an  alternative
avenue  of  relief, we are not persuaded of their relevance.   As
the procurement officials argue, both criminal law and the Ethics
Act provide additional checks on impropriety in procurement,43 but
this  does  not speak to the availability of relief and  judicial
review  to the injured party, which is what this factor concerns.
Furthermore,  both criminal law and the Ethics Act apply  to  all
executive  officials,44  so  if we  did  consider  them  adequate
alternative remedies, this factor would always weigh in favor  of
finding  executive officials absolutely immune.  For this reason,
it adds little to the analysis.  Regardless, because we think the
bid  protest process does provide an adequate alternative  remedy
for disappointed bidders, we conclude that this factor weighs  in
favor of absolute immunity.
          4.   Balancing the factors
          Weighing  these  factors together, we  agree  with  the
superior  courts  conclusion that the procurement  officials  are
entitled  only to qualified immunity.  Although the final  factor
suggests  that procurement officers should be absolutely  immune,
the  first  two  factors tip the balance in  favor  of  qualified
immunity.  This is not a situation where unfettered discretion is
crucial  to  the  best  interests  of  the  public;  indeed,  the
procurement  officers  discretion  is  designed  to   be   highly
restricted.   Moreover,  there is no  evidence  that  procurement
officials  are  often sued in tort, and the bid  protest  process
makes  it  likely  that the officials will  be  well-prepared  to
defend  suits  when they do arise.  Finally,  as  we  have  noted
before, we have generally extended absolute immunity only to  the
highest  levels  of  government  officials,  and  afforded   only
qualified immunity to lower-level officials.45  Thus, we conclude
that,  in  defending  against common law claims  arising  out  of
actions  taken in the bidding process, procurement  officers  are
entitled only to qualified immunity.
          We  take  this opportunity to reiterate that  qualified
immunity still provides the officials with substantial protection
from liability.  Qualified immunity protects an official who  has
merely  acted negligently, and it might even protect an  official
for  liability  arising  out of a knowing  violation  where  that
official  lacked the requisite degree of bad faith.  The standard
is  similar  to  the one our legislature has articulated  in  the
punitive damages context: For an official with qualified immunity
to  be  held  liable,  his conduct must have been  outrageous  or
evidenced  reckless  indifference  to  the  interest  of  another
person.46  Thus, qualified immunity still affords officials, like
the  procurement officers, substantial protection from  liability
          for actions taken within the scope of their authority.
V.   CONCLUSION
          After applying the three-factor test, we conclude  that
qualified immunity is appropriate, and AFFIRM the superior courts
conclusion.
FABE, Justice, concurring.
          I  agree  with  the courts conclusion that  procurement
officials  are  entitled  only to qualified  immunity.   I  write
separately to express my view that the exclusive remedy provision
of the procurement code may bar lawsuits such as this one.  Under
the  exclusive  remedy provision, the procurement  code  and  its
implementing  regulations  provide the  exclusive  procedure  for
asserting  a  claim against an agency arising in  relation  to  a
procurement.1   Claims  against procurement  officials  in  their
individual capacity for performing usual and proper duties  might
fairly be characterized as claim[s] against an agency, even where
bad  faith is alleged; they would thus be barred by the exclusive
remedy  provision.2   In  this lawsuit, Bachners  allegations  of
misconduct   improperly scoring proposals, improperly  overseeing
the  scoring process, and improperly deciding to proceed  with  a
contract  award   all relate to the usual and  proper  duties  of
procurement  officials.3  However, the case is  before  us  on  a
limited  petition  for  review.  We are not  presented  with  the
question  of  the  scope of the exclusive remedy  provision,  nor
asked  to  decide  whether it bars this  lawsuit.   Therefore,  I
concur with the courts opinion.

_______________________________
     1     See State, Dept of Admin. v. Bachner Co., 167 P.3d  58
(Alaska 2007).

     2    Id. at 59-60.

     3    Id. at 60.

     4    Id.

     5    Id.

     6    Id. at 62.

     7    Aspen Exploration Corp. v. Sheffield, 739 P.2d 150, 154
(Alaska 1987).

     8     In  J&S  Servs. v. Tomter, 139 P.3d 544,  549  (Alaska
2006),   we   did  briefly  address  this  question   in   dicta,
hypothesizing  that it was likely that a thorough analysis  would
lead  us to conclude that procurement officials were entitled  to
absolute  immunity.  However, we explicitly declined  to  resolve
the issue.  Id.

     9     Official  immunity applies to official,  discretionary
actions  within the scope of the officials authority.   Smith  v.
Stafford, 189 P.3d 1065, 1072 (Alaska 2008).

     10     Aspen  Exploration Corp., 739 P.2d at 158 (Under  the
rule  of  qualified immunity, a public official is shielded  from
liability  only when discretionary acts within the scope  of  the
officials  authority are done in good faith and are not malicious
or corrupt.).

     11    739 P.2d 150 (Alaska 1987).

     12    Id. at 159-60.

     13     Id. at 162 (but granting only qualified immunity  for
defamatory statements).

     14    Smith, 189 P.3d at 1073.

     15     Prentzel v. State, Dept of Pub. Safety, 169 P.3d 573,
584-85 (Alaska 2007).

     16    This petition does not present the question whether the
exclusive  remedy provision of the procurement code  bars  claims
against procurement officials in their individual capacity.

     17    Aspen Exploration Corp. v. Sheffield, 739 P.2d 150, 158
(Alaska 1987) (quoting Shellburne, Inc. v. Roberts, 238 A.2d 331,
338 (Del. 1968)) (internal citation omitted).

     18    Id. at 158 (quoting W. Prosser, Handbook of the Law of
Torts,   132  at  989 (4th ed. 1971)) (internal  quotation  marks
omitted).

     19    Aspen Exploration, 739 P.2d at 159-60.

     20    Id. at 160.

     21    Id.

     22    Id.

     23    Id.

     24    See McBirney & Assocs. v. State, 753 P.2d 1132, 1135-36
(Alaska 1988) (The purposes of competitive bidding are to prevent
fraud,   collusion,   favoritism,   and   improvidence   in   the
administration of public business, as well as to insure that  the
[state] receives the best work or supplies at the most reasonable
prices practicable.  (quoting Gostovich v. City of West Richland,
452 P.2d 737, 740 (Wash. 1969))) (brackets in original).

     25    AS 36.30.250.

     26    Aspen Exploration Corp. v. Sheffield, 739 P.2d 150, 160
(Alaska 1987).

     27    Id. at 161.

     28    Id.

     29    Id.

     30    189 P.3d 1065 (Alaska 2008).

     31    Id. at 1073.

     32    Id.

     33    Id.

     34     See, e.g., Lakloey, Inc. v. Univ. of Alaska, 141 P.3d
317 (Alaska 2006);  Kila, Inc. v. State, Dept of Admin., 876 P.2d
1102  (Alaska  1994);  Bowers Office Prods.,  Inc.  v.  Univ.  of
Alaska, 755 P.2d 1095 (Alaska 1988).

     35    See J&S Servs. v. Tomter, 139 P.3d 544 (Alaska 2006).

     36    Aspen Exploration Corp. v. Sheffield, 739 P.2d 150, 160
(Alaska 1987).

     37    AS 36.30.585.

     38     In  fact,  we  have previously affirmed  the  hearing
officers  decision  to award Bachner its bid  preparation  costs.
State, Dept of Admin. v. Bachner Co., 167 P.3d 58 (Alaska 2007).

     39    Aspen Exploration, 739 at 161-62.

     40    AS 36.30.585; Bachner, 167 P.3d at 60.

     41    Bachner, 167 P.3d at 60.

     42    AS 39.52.010 et seq.

     43    See id.

     44    See AS 39.52.910.

     45    Smith v. Stafford, 189 P.3d 1065, 1073 (Alaska 2008).

     46    AS 09.17.020 provides:
          (b)  The  fact finder may make  an  award  of
          punitive damages only if the plaintiff proves
          by  clear  and convincing evidence  that  the
          defendants conduct
          (1) was outrageous, including acts done with malice  or
bad motives; or
          (2) evidenced reckless indifference to the interest  of
another person.

     1    AS 36.30.690.

     2     See  J  & S Servs., Inc. v. Tomter, 139 P.3d 544,  548
(Alaska 2006) (suggesting that claims against . . . a procurement
officer  acting within the course and scope of his  duties  would
appear to be barred by the exclusive remedy provision).

     3    These allegations are distinguishable from those in J &
S Services, where we held that the exclusive remedy provision did
not  necessarily bar a lawsuit against a procurement official  in
his  individual  capacity.  Id. at 547,  549,  552.   There,  the
procurement  official was alleged to have actively  assisted  the
winning bidder (a company formed by one of his friends) and  made
arrangements to receive kickbacks from the winning bidder.

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