GUARDIAN SECURITY SYSTEMS, INC.

Appellant

Subject Matter: RFP for Electronic Monitoring Equipment and Services for Anchorage Area

Introduction.

In this protest appeal Guardian Security Systems, Inc., an Alaskan owned company based in Anchorage, challenges as unduly restrictive the Department of Corrections' RFP 99-0140 (amended) for Electronic Monitoring Equipment and Services for the Anchorage area. Guardian contends that there are three problems with the RFP and the pre-proposal process. First, the RFP excludes virtually all potential Alaskan bidders by requiring that they have three years of experience in monitoring prisoners in home detention. Second, the RFP precludes Alaskan companies from joint venturing or subcontracting with an outside company that has the requisite experience. Third, the department refused Guardian's request for a pre-proposal conference to discuss Guardian's concerns that the RFP barred experienced and qualified Alaskan companies from participating.

On March 3, 1999, Guardian filed a timely appeal of the Department of Corrections (DOC) decision denying its protest regarding the RFP. At a pre-hearing conference on March 26, the parties agreed to an expedited hearing schedule to allow the appeal to be heard before DOC awards a contract. DOC agreed to hold off in issuing a contract until close of business on April 22, 1999.

A hearing was held on April 16, 1999 in the Office of Tax Appeals before Hearing Officer, Shelley Higgins. Al Szepanski, Procurement Manager, Dwayne Peeples, Director of Administrative Services, and Steve Messing, Procurement Specialist, represented the Department of Corrections. Each testified for DOC. Guardian was represented by its president, Ned Hahn, and Jeremy Vermilyea of the law firm of Royce and Brain. Mr. Hahn testified for Guardian.

Facts.

Legislation specifically authorizing DOC to allow a prisoner to serve of imprisonment by electronic monitoring became effective on September 17, 1998. Chapter 116 SLA 98.

On December 18, 1998, the DOC issued an RFP that solicited the services of a contractor to provide electronic monitoring equipment and services for up to sixty prisoners in the Anchorage area. In response to complaints and one protest regarding the minimum contractor qualifications and restrictions on local subcontractors, the DOC cancelled the original solicitation.

On January 29, 1999, DOC issued an amended RFP. The revised RFP retained a minimum three-year experience requirement for contractors. § 2.07.2 of the RFP required proposers to:

Provide proof that the equipment and services being offered have been successfully installed and supported by the proposing firm in an electronically monitored home detention program for a period of not less than three years. The equipment and services must have been, or is (sic), similar in scope to that sought in this RFP. (Emphasis supplied.)

Guardian has been in the business of providing security services in Alaska since 1974. Guardian is one of the two largest Alaskan companies providing security alarm monitoring and security guard services, with 175 employees in Alaska. Guardian's corporate office and 24 hour monitoring station is in Anchorage. The company also has offices in Fairbanks, Wasilla, and Kenai.

Guardian electronically monitors between 3,500 and 4,000 different alarm systems all over Alaska. Some of these monitoring jobs are more complex than the house arrest monitoring in DOC's solicitation. Guardian has substantial monitoring experience in life and death environments, including current monitoring of 400 fire alarm systems and 240 medical alert alarms in senior housing units.

Guardian performs the security monitoring for Sears Mall, Northway Mall and Dimond Center. Guardian electronically monitors its security guards on patrol all over the state to ensure that each guard is where he/she is supposed to be at a particular time.

Guardian employs cutting edge technology in its security work, including a radio alarm backup system to relay alarm control data when phones are down and sophisticated WinDSX software for remote site monitoring by video and interactive voice.

Guardian emphasizes its commitment to service. Guardians' President, Ned Hahn, runs the business with the goal of being able to look his Anchorage clients and neighbors in the eye with pride. That ability to offer responsive, reliable local service was the primary reason that Guardian won the Alaska Court System contract for drug screening in the Fairbanks area after competing with national companies for that contract. In the Court System solicitation, experience in the specific program was a weighted factor in proposal evaluation, not a pre-requisite to submitting a proposal.

Despite having the substantial electronic monitoring experience and technological capability described above, Guardian was not qualified to submit a proposal under DOC's RFP 99-0140 because Guardian did not have at least three years experience in an electronically monitored home detention program.

On February 12, 1999, Guardian protested the three-year experience requirement and the prohibition on joint ventures. That protest was timely as it was filed at least 10 days before the deadline for submitting proposals under the amended RFP. In its protest, Guardian requested that DOC hold a pre-proposal conference to discuss its concerns that the three year experience requirement would disqualify Alaskan companies like Guardian that had substantial experience in similar electronic monitoring programs but no specific experience in home detention monitoring because that program was new to Alaska.

On February 22, 1999, DOC's procurement manager denied Guardian's protest on the grounds that Guardian had not shown that no Alaska companies could meet the three year experience requirement and that the department had determined that a pre-bid conference was unnecessary. This appeal followed.

DOC received six proposals. All six met the three-year experience requirement and were responsive. None of the six proposers are Alaska-owned. One of the six qualified for the Alaska bidder preference. That company, Cornell Corrections, acquired the requisite experience in an electronically monitored home detention program outside Alaska. Cornell established an Anchorage office and sought certification as an Alaska business after the bill authorizing home detention was signed into law in June 1998. But even with the Alaska bidder preference, Cornell did not submit the winning proposal. DOC has issued a notice of intent to award the contract to an outside company based in Colorado. That same company has performed some electronic monitoring in Alaska under contract with DFYS.

At the hearing on this appeal, DOC vigorously defended the experience requirement. The purpose of requiring that the contractor have a minimum of three years experience in the same service solicited by the RFP, an electronically monitored home detention program, is to protect public safety. Placing offenders in the community by home detention, instead of in institutions, involves risks and is a very sensitive public issue. Because DOC itself does not have experience in running an electronically monitored home detention program, DOC needs to be able to rely on a contractor that does have that experience. DOC determined that it is essential to have a contractor that has already gone through the learning curve in monitoring offenders in the home. The three-year experience requirement that DOC used in this RFP is the same as the minimum experience that DOC has required in solicitations for contractors to provide private prison services.

During the RFP planning process, DOC consulted with other states that have implemented home detention programs regarding the question of minimum contractor qualifications. California requires its contractors to have at least five years of experience in electronic monitoring for law enforcement purposes. Six other states also require some experience in electronic monitoring of home detention. Hawaii did not require its current contractor to have prior experience in a home detention-monitoring program and allowed the primary contractor to subcontract with an experienced firm and has had some unspecified problems with contractor/ subcontractor interface.

Although DOC consulted with other states on the question of minimum experience requirements, DOC did not consult with any experienced Alaska security companies when considering qualifications and the terms of the RFP. DOC was confident, after consulting with other states, that it wanted three years of program-specific experience as a minimum qualification to assure successful performance of the new home detention program and public confidence in the DOC and placement of offenders in the community.

DOC prohibited proposers from joint-venturing or subcontracting with companies that had the requisite three years of experience because DOC wanted to be able to deal one on one with a single contractor that had the expertise to provide the essential electronic monitoring services.

During the pre-proposal process, DOC was not certain that no Alaskan companies would be able to meet the minimum experience requirement. But DOC did realize that there might be a limited number of Alaskan vendors capable of meeting the experience requirement, and for that reason, DOC solicited outside vendors.

Discussion.

A. The three-year minimum experience requirement.

Guardian contends that the requirement that a contractor have three years experience with the specific equipment and services solicited in the RFP, i.e. electronic monitoring of offenders in home detention, is essentially arbitrary and has the effect of barring participation by Guardian and other Alaskan companies that have substantial experience in providing very similar equipment and services. Guardian argues that DOC has not shown that the specific experience prerequisite was necessary, or even reasonably related, to DOC's goal of protecting the public.

DOC's testimony established that DOC required proposers to have a minimum of three years experience in monitoring home detention because DOC currently has no employees that are experienced in electronic monitoring of offenders. For that reason, and given the fact that home detention is a sensitive public issue, DOC needs to be able to rely on a contractor that does have experience in monitoring home detention to assure successful implementation of the new and controversial program. DOC decided to require a minimum of three years of specific home detention monitoring experience after learning that other states that have implemented home detention have adopted similar experience requirements. DOC feels that the three-year experience requirement is one of the most important elements of this contract.

Although DOC did not offer any evidence showing why similar electronic monitoring experience, like Guardian's, would not be a satisfactory substitute, it stands to reason that a contractor with experience in monitoring home detention may have encountered some specific problems that would not necessarily arise in other monitoring situations. Furthermore, Guardian concedes that experience is relevant and that DOC could reasonably have used prior experience in home detention monitoring as a weighted factor in evaluating proposals.

On this record, and although I think it is a close question, I am unable to conclude that DOC's decision to require three years of experience in electronically monitoring home detention as a minimum qualification was unreasonable. The fact that DOC had no experience in home detention monitoring at the time that it issued this RFP is a critical factor in my conclusion that the experience pre-requisite is reasonable and not arbitrary.

I want to emphasize, however, that this decision should not be read as a blanket approval of the sort of minimum experience requirement at issue here. If DOC issues another RFP for home detention monitoring in the future, after acquiring some experience in implementing home detention, it might well be unreasonable to require prior program-specific experience as a pre-requisite to vendor participation in a subsequent solicitation when that requirement has the effect of precluding local companies from participating.

B. The prohibition on joint ventures or sub-contracts with outside companies.

The only reason that DOC offered for prohibiting a local contractor from joint-venturing or sub-contracting with an outside company that has experience in monitoring home detention was that DOC wants to deal one on one with the company providing the services. Guardian argues that this rationale is flawed for the reason that the RFP allows an outside contractor to subcontract with a local provider for the installation and maintenance of the monitoring equipment and instructing offenders in the use of the monitoring devices. According to Guardian, if DOC really believed in its joint-venturing rationale, it would have completely restricted the ability of a successful proposer to sub-contract.

I agree with Guardian's argument that DOC's rationale is flawed. Under the RFP at issue, DOC will not have a one to one relationship with the contractor providing the equipment and monitoring. DOC will have to deal with a local service subcontractor if there are problems with the monitoring equipment and with the primary contractor, an outside company, on other problems related to the monitoring services.

It is inconsistent to allow an outside vendor to subcontract for the local servicing of the monitoring equipment but to disallow a local vendor, which has extensive electronic monitoring experience but lacks the narrow experience required by the RFP, to subcontract with an outside company for the home detention expertise. In both instances, DOC may have to deal directly with the subcontractor as well as the primary contractor in addressing service issues. In any event, DOC is able to insist on contract terms that require the primary contractor to respond when any problems arise and to be solely responsible for the overall performance. In short, the need for a one to one relationship is an unpersuasive rationale that fails to justify the restrictions on joint ventures and sub-contracts.

DOC's decision to prohibit joint ventures and sub-contracts for the required expertise in home detention monitoring was flawed for another, very important reason. DOC failed to consider the impact of those restrictions on participation by Alaska companies in the solicitation. DOC argues that its job is to manage offenders to ensure the security of the offenders and the public safety, not to ensure new job opportunities for Alaskan companies. DOC did not consider the Alaska bidder preference in planning the solicitation for electronic monitoring. In DOC's view, its responsibility in connection with the Alaska bidder preference is limited to applying the preference in evaluating bids or proposals as expressly required by AS 36.30.170. I disagree.

AS 36.30.170 (b) establishes an Alaska bidder preference and requires the procurement officer to apply the preference in determining the lowest responsive and responsible bidder. AS 36.30.250 requires the procurement officer to take into account the Alaska bidder preference under AS 36.30.170 (b) in determining whether a competitive sealed proposal is advantageous to the state. AS 36.30.180 explains the purpose of this preference to be accorded Alaskan companies in the procurement process:

The purpose of bidder preference for resident firms when the state acts as a market participant is to encourage local industry, strengthen and stabilize the economy, decrease unemployment, and strengthen the tax and revenue base of the state.

Together these statutes express a strong state policy favoring and promoting the award of state contracts to Alaska companies when state agencies procure products or services. This legislative policy would be easily frustrated if state agencies had discretion to set unreasonably restrictive bid or proposal requirements that effectively barred resident Alaskan companies from participating. The statutory bidder/proposer preference is useless if Alaskan companies can't qualify to submit bids or proposals. For this reason, the above statutes should be construed to implicitly require procurement officers to consider the preclusive effect of bid or proposal requirements.

Given the decision to require contractors to have a minimum of three years of experience in electronically monitoring offenders, and the fact that electronically monitored home detention is a new program for Alaska, DOC should have considered the effect on participation by Alaska companies in deciding whether to allow joint venturing or sub-contracting to meet the specific experience requirement. Guardian's protest appeal is granted on this point.

C. Denial of a pre-proposal conference.

Guardian claims that DOC erred in refusing to hold a pre-proposal conference concerning the experience requirement and other terms of the RFP. I have no doubt, based on this record, that a pre-proposal conference would have been very useful in this case. At a minimum, affording Guardian and other interested Alaska companies an opportunity to discuss their experience and qualifications, and their inability to meet the RFP's three-year experience requirement, would have served to better inform DOC concerning the local market and preclusive effect of the RFP restrictions. Or the interested Alaska companies may have persuaded DOC to loosen the restrictions on joint venturing and sub-contracting and may have made this appeal unnecessary.

However, the decision to conduct a pre-proposal conference is left to the sound discretion of the procuring agencies. There is no statute or regulation that requires a pre-proposal conference. In this case, I cannot conclude that it was an abuse of discretion for DOC to decide not to hold the conference.

Recommendations.

What remedies are appropriate in this situation is a very difficult question. AS 36.30.585 provides that in determining appropriate remedies after a protest is sustained in whole or part, numerous factors must be considered. Those include the extent to which the procurement has been accomplished, the seriousness of the procurement deficiencies, the prejudice to the protesting party, the good faith of the procuring agency, the costs to the agency, and the impact on the public welfare.

In this case, the contract has not been awarded but the notice of intent to award has been issued. DOC has indicated that it cannot delay in issuing a contract for more than a few days because of the need to move some offenders into home detention by May 1. Although I concluded that DOC erred in arbitrarily restricting the ability of Alaska companies to acquire the necessary expertise in electronically monitoring offenders by joint venturing or sub-contracting with an outside firm that does have the experience, DOC acted in good faith to determine proposal requirements that DOC believed were necessary and appropriate to protect public safety. DOC followed the letter of the Alaska bidder preference statute but inadvertently ignored the spirit and implicit requirements of the statutory preference for resident bidders/proposers. Although it is reasonable to assume that Guardian would have been able to participate if allowed to joint venture or sub-contract with an outside firm that had the required experience, there was no evidence to indicate that Guardian's proposal would have won.

Based on these factors, I recommend that this RFP not be cancelled, unless DOC decides to do so.

However, I also recommend that DOC not renew the contract issued under this RFP after the second period of performance ends on June 30, 2000, and that DOC issue a new RFP for the Anchorage offender monitoring. By that time DOC will have gained over a year of experience in electronic monitoring of offenders and should be in a better position to consider prior experience as a weighted factor in evaluating proposals, instead of a minimum requirement to qualify.

I further recommend that DOC consider the strong state policy favoring participation and contract awards to Alaskan companies when it considers restrictions on joint-venturing or sub-contracting, or any other RFP terms, in any future solicitations for electronic monitoring of offenders in Anchorage or other Alaskan communities.

Dated: April 21, 1999