This is a protest appeal, arising from an RFP issued under authority of ASPS 99-0053 by the Department of Commerce and Economic Development [DCED]. DCED awarded the contract to Moore Business Solutions, Inc., [Moore]. Spectrum Printing, Inc. [Spectrum] filed a protest, which was denied. On appeal, the commissioner appointed a hearing officer. A hearing was conducted. Bruce Moore of Spectrum and Philiciann Bennett and Thomas Lawson of DCED testified at the hearing. I find the following facts, based on the record, the exhibits and the testimony.

DCED issued a Request for Proposals [RFP] for the production, printing and mailing of approximately 7,000 registered nurse license renewal packets and 40,000 Alaska business license renewal packets for the Division of Occupational Licensing [Division]. No responses were received. Accordingly, in July, 1998, DCED sent out a letter of interest for the same two projects and on July 20 it issued a second RFP, with proposals due August 21, 1998.

As described in the RFP, the project included making "significant changes" to both packets, transferring data from the Division's CD, and printing, assembling and mailing the packets no later than October 2 for the nurse packets and November 2 for the business license packets.

Spectrum and Moore submitted timely proposals. On September 9, DCED notified Spectrum that its proposal had been deemed non-responsive, "because the price as submitted does not include the postage cost." [1] Spectrum informed DCED that Spectrum had asked the Division about the postage item prior to proposal submission, and had been told that because postage was a fixed cost, the total price component did not have to include a specific amount for that item. On September 11, DCED acknowledged that the Division's discussion with Spectrum could have "created confusion" in this regard, and it therefore allowed respondents until September 14 to submit revisions to the direct expense and total price components of the proposals with regard to postage only. Spectrum submitted a timely revision identifying the postage component of its direct expenses and including that amount in the total price.

Although Spectrum had submitted a timely revision, the Division decided to produce the nurse packets in house, as it had previously done, due to the short time remaining for completion of that portion of the contract. Because the nurse packet was deemed a material element of the RFP, DCED determined that it could not simply cancel that portion of the RFP, and it therefore decided to cancel the entire RFP and to rebid the business license packets as a separate contract.

The third RFP under ASPS 99-0053 was issued on September 21; it was limited to the business license packets. Proposals were due on September 29. The RFP stated that DCED would evaluate the proposals on September 30 and issue a notice of intent on October 1. Spectrum and Moore submitted timely proposals. Notice of intent to award the contract to Moore was issued on October 7. [2]

Spectrum filed a protest. The protest asserted that Moore should not be awarded the contract because (1) Moore would not manage the contract in Alaska, as required by the RFP; and (2) Moore did not properly list direct expenses and daily or hourly rates for its employees. [3]

DCED denied the protest and Spectrum appealed. The appeal raised no new issues. However, in its comments on the protest report, Spectrum for the first time argued that (3) DCED "manipulated the award of the proposal to a vendor of their choice"; and (4) DCED's handling of Spectrum's protest was improper.

A.

Moore's Proposal Was Responsive.

1.

A Material Variance is Necessary for a Finding of Non-Responsiveness.

The RFP states: "This contract shall be managed by and through the contractor's office located in the state of Alaska." Spectrum argues that a contractor whose proposal demonstrates that the contract will not be managed by and through the Alaska office must be rejected. Because all responsive proposals must be accepted and evaluated, this argument is, in essence, an argument that Moore's proposal was non-responsive.

A proposal is non-responsive when it does not conform in all material respects to the solicitation. 2 AAC 12.990(9). "A variance is material if it gives the bidder a substantial advantage over the other bidders and thereby restricts or stifles competition." Chris Berg, Inc. v. State, Department of Transportation and Public Facilities, 680 P.2d 93, 94 (Alaska 1984).

Not every requirement in an RFP is material. An agency may expressly establish minimum requirements that must be satisfied in order for a proposal to be considered responsive, but in the absence of specific language linking particular requirements with the determination of responsiveness, the materiality of a requirement is determined in light of the RFP as a whole. See, e.g, Kendrick Business Services/InterMedia JV, at 2-4 (Dept. of Administration No. 97-06, October 2, 1997). An agency has discretion to accept proposals that vary from the non-material requirements of an RFP. See, e.g., Gunderson v. University of Alaska, Fairbanks, 922 P.2d 229, 235-36 (Alaska 1996) (proposal met functional needs, although it was not in compliance with the design specification; cf. 2 AAC 12.080).

2.

The Location of Management is Not Material.

In this case, I find that Moore did not propose to manage the contract by and through its office in Alaska as required by the RFP. [4] However, neither the language of the RFP nor the testimony at the hearing supports a finding that the term regarding the location of the contract management was material. The RFP does not state that meeting this requirement was a condition of proposal submission, or that the failure to meet it would, or even might, result in a finding of non-responsiveness. DCED stated that the term was intended to apply only in the event of a joint venture, and that it did not apply in this case. Although I do not adopt that reading of the term, [5] the fact that DCED intended it to have only a limited application is evidence that it is not a material term in this case, and DCED argued that it was not material. There is no evidence that the Division deemed it important for purposes of its dealings with the contractor during the course of the work. The failure to meet the requirement did not give Moore a competitive advantage over Spectrum, because the latter did meet the requirement. Accordingly, I find that the provision is not material to the performance of the contract, and that the failure to meet this requirement did not render Moore's proposal non-responsive.

3.

DCED Had Discretion to Clarify the Price Terms.

The RFP required respondents to identify direct expenses, and it stated that the contractor would not be paid any markup on those expenses and that such markups were "not to be used in determining the price of the proposal". Spectrum argues that Moore's proposal included a markup for certain direct expenses, and it was therefore non-responsive.

Moore's proposal specified a price for the initial contract year and the option year. The price for each year was the sum of the direct expenses and the postage expenses set forth in Sections 7.1 and 7.2. However, there are two deficiencies apparent of the face of Moore's pricing provisions. First, Moore specified a two-year "Combined Total" of $109,840, but the sum of the prices quoted for the two years was $103,840. Second, section 7.3 of Moore's proposal showed rates for its services under the contract, but nothing in the proposal indicated that work performed at those rates was included in the total price.

Given these deficiencies, on the face of Moore's proposal it could not be determined whether the correct total price was the sum of the two years or the figure submitted as the "Combined Total", or whether the total price was all-inclusive or was subject to an unspecified add-on for services provided. Therefore, DCED contacted Moore in order to clarify the price component of its proposal. It was advised that the correct total price was $103,440, and that the cost of its services had been included in the calculation of the direct expenses. [6]

As noted above, the fact that required information is not submitted, or is submitted in an improper or ambiguous format, [7] does not in itself establish that a proposal is non-responsive. Under Alaska law, agencies have substantial discretion to either accept or reject a bid that contains pricing errors, in order to obtain the most favorable result for the state. See generally, Jensen & Reynolds Construction Co. v. State, 717 P.2d 844 (Alaska 1986). In the case of RFP's, agencies have even greater discretion, because the price component is generally merely an evaluation factor, not a determining element, and because post-submission clarification of the terms of the proposal for purposes of determining responsiveness is expressly permitted by law, as are pre-award negotiations concerning price. See generally, Kendrick Business Services/InterMedia JV, at 6-7 (Dept. of Administration, October 2, 1997); AS 36.20.240; 2 AAC 12.285; -.290(a).

If this solicitation had been conducted under the rules applicable to competitive sealed bidding, it is unlikely that the deficiencies in the price terms would have rendered Moore's bid non-responsive. [8] Because the solicitation was conducted as an RFP, it is clear that the deficiencies were not material: DCED could obtain clarification prior to evaluation, and the price specified was subject to negotiation before a contract was awarded. Furthermore, the RFP stated: "Proposals submitted without a total price may be declared non-responsive." This language clearly suggests that other deficiencies in the pricing provisions of a proposal would not result in a finding of non-responsiveness so long as a total price was provided. Moore did submit a total price. I find that DCED did not abuse its discretion in accepting Moore's proposal.

B.

Spectrum Did Not Establish that DCED Manipulated this Award.

Spectrum argues that the evidence is sufficient to establish that DCED manipulated the procurement process in order to steer the contract to its preselected vendor, Moore. This is an extremely serious allegation that warrants a direct response. [9]

"[A]gency personnel and procedure are presumed to be honest and impartial until a [claimant] makes a showing of actual bias or prejudgment." Bruner v. Petersen, 944 P.2d 43, 49 (Alaska 1997); Earth Resources Co. v. State, Department of Revenue, 665 P.2d 960, 962 n. 1 (Alaska 1983). "[T]he presumption can be overcome only with convincing evidence that 'a risk of actual bias or prejudgment is present.' In other words, any alleged prejudice on the part of the decisionmaker must be evident from the record and cannot be based on speculation or inference." Navistar International Transportation Corp. v. United States Environmental Protection Agency, 941 F.2d 1339, 1360 (6th Cir. 1989) (citation omitted).

In this case, there were a number of anomalies associated with ASPS 99-0053: the fact it was rebid twice in itself demonstrates the problematic nature of the solicitation. However, there is no direct evidence that any of the anomalies identified by Spectrum was the product of bias or of a deliberate attempt to circumvent the competitive bidding process. Spectrum infers or speculates that the anomalies reflect a preexisting bias in favor of Moore, but the more plausible view of the record is that the procurement officer acted in good faith in a reasonable and ultimately successful effort to comply with the requirements of law while meeting an inflexible deadline for completion of the work. Spectrum has not established that DCED abused its discretion, and DCED provided reasonable explanations for the decisions Spectrum complained of. [10] Notwithstanding any possible speculation to the contrary, I find the evidence as a whole insufficient to overcome the presumption of honesty and impartiality. Compare, e.g., Stivers v. Pierce, 71 F.3rd 732 (9th Cir. 1995). To the extent that any of the anomalies identified by Spectrum, viewed in isolation and without any explanation by DCED, could be deemed to create an appearance of impropriety, I conclude that remedial relief is not warranted. [11]

DATED this 28th day of April, 1999.

______________________________ Andrew M. Hemenway Hearing Officer

[1]  return to text

Although Spectrum's proposal did not include a specific amount for postage as a direct cost or otherwise, it clearly indicated that the cost of postage was included in the amount to be charged to the state. The proposal stated: "Total Proposed Price: $23,155.00 + Postage". Since postage is a fixed cost that is identical for all proposers, it would appear that DCED had sufficient information to evaluate the Spectrum proposal on an equal basis with the others submitted. Because Spectrum's proposal clearly indicated that the state was to pay the cost of postage, it is arguable that Spectrum's proposal should not have been deemed non-responsive.

[2]  return to text

Testimony at the hearing indicated that the notice was delayed because two evaluations were conducted. The first evaluation was scrapped and a new evaluation committee was formed because one evaluator's scoring was inconsistent with the instructions. One might speculate that this error reflected a bias on the part of that evaluator, but there was no direct evidence to support such speculation. Spectrum did not argue that the evaluation actually used was unreasonable.

[3]  return to text

Spectrum objected that the time remaining for performance was less than Moore's RFP had indicated was necessary for it to perform the work. It did not raise this issue in its appeal, however. DCED explained in its protest report that it had contacted all three respondents in order to ensure that they would be able to perform the work in a timely manner, because the notice of intent had been delayed beyond the October 1 date set out in the RFP.

Spectrum also complained that DCED had refused to extend confidentiality to certain portions of its RFP. That issue was resolved in Spectrum's favor after Spectrum retained legal counsel and incurred an expense of $992. On appeal, Spectrum contends that it should be awarded its legal expenses. However, legal expenses incurred by a protestor are not "damages" and are not recoverable as "costs" under AS 36.30.585(c). See, Human Resources Company, Inc., at 3-4 (Dept. of Administration, No. 97-12, October 22, 1997), reversed on other ground, Human Resources Company v. Department of Health & Human Services, Division of Administrative Services, No. 3AN 97-0907 CI (Alaska Superior Court, July 24, 1998).

[4]  return to text

DCED's argument to the contrary is unpersuasive. DCED observed that it had dealt with the Alaska office, but this was in the procurement process, not in connection with contract performance. The proposal specifically identifies Moore's personnel outside the state as the management team. It states that the "Project Manager" (located Outside) is "the front line individual responsible for implementation of client projects", and is "the key client contact on a project". The "primary responsibility" of the Account Manger (in Anchorage), on the other hand, is to "manage and develop relationships within assigned accounts" and to act as a "liaison between the client and Moore for ongoing projects." While the project may be managed "through" the Account Manager, it is clearly managed "by" the Project Manger. Moore's presence in Alaska is a marketing presence, not a managerial one.

[5]  return to text

While DCED may have intended to limit the provision to joint ventures, its unexpressed intent does not control. Nothing in the RFP suggests that the term applies only to joint ventures. The language used was unconditional, and the provision was not included in the rather specific provisions governing joint ventures. Furthermore, to limit the term to joint ventures makes no sense. For purposes of contract oversight by the agency, there is no discernable reason why a firm that is not a joint venture should be permitted to manage its contract by and through an office outside the state when a joint venture may not do so. I find that the term applies in all cases.

[6]  return to text

DCED's acceptance of Moore's proposal as responsive and its subsequent clarification of the pricing term is in marked contrast to its earlier rejection of Spectrum's first proposal as non-responsive under substantially similar circumstances. Compare, note 1, supra. However, the different outcomes may be reasonably be viewed as reflecting different good faith judgments.

[7]  return to text

The deficiency in Moore's proposal was arguably merely a matter of improper formatting. Spectrum argues that Moore's proposal marked up the actual direct cost of certain materials. This objection equates the contractual payment obligation with the pricing total used for purposes of evaluation. The RFP clearly stated that the state would pay only for the actual direct expenses incurred, and not for any markup, and it required the contractor to provide detailed invoices documenting the expenses claimed. Accordingly, even if Moore's proposal included a markup, the state was not obligated to pay the marked up amount. In any event, marking up direct costs on the proposal would not give Moore any competitive advantage. To the contrary, it would increase the total cost, resulting in fewer points in the evaluation.

[8]  return to text

See, Jensen, supra, 717 P.2d at 848-850 (Compton, dissenting); Vintage Construction Inc. v. State, Department of Transportation and Public Facilities, 713 P.2d 1213, 1215-16 (Alaska 1986) (unit price controls over sum, unless intent to contrary is apparent and it would be unconscionable to hold bidder to the unit price).

[9]  return to text

This issue was not raised in a timely manner. However, although Spectrum did not characterize the issue raised in its protest as manipulation of the bidding process, the protest did raise several of the specific points and arguments that Spectrum now relies on to establish manipulation. Because conduct that would circumvent the Procurement Code may be grounds for cancellation of a contract regardless of whether the issues were raised in a timely protest, and because the commissioner has inherent authority to review actions taken under delegations of his procurement authority, I will consider the evidence presented as it pertains to the question of manipulation. See, McBirney v. State, 753 P.2d 1132, 1136 note 5 (Alaska 1988); AS 36.30.880.

[10]  return to text

In addition to the matters addressed above, Spectrum objected to the decisions to waive the standard 40% price provision and to cancel the initial RFP and perform the nurse's license portion in house, despite the fact that Spectrum had submitted a clarification within the time permitted. But DCED obtained authorization to reduce the cost factor to 20%, justifying the request on the ground that it was "absolutely critical" that the job be done "correctly without error", rather than just at the lowest price possible (implicit in the request is DCED's view that the normal 60% emphasis on non-cost factors would be insufficient for that purpose); DCED also explained that it did not consult with the Division prior to inviting Spectrum's clarification, and the Division's decision to cancel that portion was not unreasonable, given the time available. Spectrum's argument that it was unreasonable to put the business license portion to bid, because the initial contract could have been renewed for less than the eventual contract price, is without any merit. Renewal was not an option after June 30, 1998, when the initial term expired. Of course, the fact that proposals were solicited from other vendors, rather than renewing the contract with Moore, is completely inconsistent with the allegation that DCED was attempting to steer the award to Moore.

Spectrum's additional allegation that the procurement officer's handling of the protest demonstrates a bias in favor of Moore is not persuasive. In particular, I find that the procurement officer's testimony was credible, responsive and forthcoming, that the procurement officer did not tell Spectrum that the contract would be awarded prior to the expiration of the statutory 10 day period, and that the contract in fact was not executed until after that time. It is likely that Spectrum was informed that the award of the contract would not be stayed and the contract would be fully performed before the protest and any appeal was resolved, and that Spectrum misunderstood this information to mean that the contract would be awarded immediately, without the 10 day waiting period. Compare, AS 36.30.365 with AS 36.30.575.

[11]  return to text

In reaching this determination, I apply the standards set forth in Keco Industries, Inc. v. United States, 492 P.2d 1200 (Ct. Cl. 1974). See generally, Paul Wholesale v. State, Department of Transportation, 994 P.2d 1000-1004 (Alaska 1995); Dick Fisher Development v. Department of Transportation, 838 P.2d 263, 267 (Alaska 1992); KILA, Inc. v. State, Department of Administration, 876 P.2d 1102, 1105 (Alaska 1994); McBirney, note 8, supra. Applying the Keco standards, I find (1) there is no direct evidence of subjective bad faith by any state employee, (2) DCED provided a reasonable explanation for the various actions complained of, (3) the decisions involved were discretionary in nature, and (4) the matters complained of did not involve alleged violations of law. In light of the foregoing Alaska cases I conclude that there is not a sufficient appearance of impropriety to warrant discretionary remedial relief.