BEFORE THE ALASKA DEPARTMENT OF ADMINISTRATION

 

In the Matter of:                                           

                                                                       

ELECTRONIC DATA SYSTEMS, Inc.     

                                                           

Appellants.            DHSS RFP No. 2002-0600-3012    Dept. of Administration No. 02.23

 

 

 

RECOMMENDED DECISION

 

Facts

RFP No. 2002-0600-3012 [RFP] was issued by the Department of Health and Social Services [DHSS] on March 15, 2002.  The RFP solicited proposals for contractor services to develop, install and operate a new Decision Support System [DSS] and Medicaid Management Information System [MMIS] for DHSS and to provide other fiscal agent services.  The RFP included the standard Alaska bidder’s and offeror’s preferences.  AS 36.30.170(b); 2 AAC 12.260(e).

Proposals were due on June 13.  DHSS anticipated issuing a Notice of Intent on July 29 and, after obtaining federal approval, awarding a contract on September 10.  The contractor would begin developing the proposed systems after contract award.  Implementation of the DSS was scheduled for March, 2004; the MMIS was scheduled to begin operations in September, 2004.  The contract was to terminate in 2012.

A number of questions were submitted by potential offerors prior to the due date for final questions, April 15.  On Friday, April 26, EDS submitted additional questions.  On Tuesday, April 30, DHSS posted a 43 page document entitled “Responses to Bidders Questions”.  The document did not contain an answer to any of EDS’ questions submitted on Friday, April 26.[1]  Also on April 30, DHSS extended the date for submission of proposals to July 8 and revised its anticipated post-submission schedule by pushing back the dates for evaluation, contract award, and performance by two weeks.  As in the original RFP, DHSS continued to solicit proposals offering a faster implementation schedule than the two-year period allowed in the RFP.

Three proposals were submitted.  One was from the incumbent MMIS contractor, First Health Services Corporation [First Health].  The First Health transmittal letter claimed eligibility for the Alaska bidder’s and offeror’s preferences.  A second proposal was from EDS.  EDS does not qualify for, and did not claim, the Alaska preferences. 

Following evaluation, on September 3, DHSS issued a notice of intent to award the contract to First Health.  On September 9, EDS requested copies of the procurement file and other materials for its review in preparing a potential protest.  EDS also asked that the time for filing a protest be extended and that no contract be awarded until after any protests were resolved.  In response, on September 12, DHSS extended the time for filing protests through September  25.  

EDS filed a protest on September 25.  The protest listed thirteen grounds, identified as A-M:

A.                 Inclusion of the Alaska bidder’s and offeror’s preferences was arbitrary, capricious and unreasonable because it did not serve any of the purposes of AS 36.30.180.

B.                 Inclusion of the Alaska bidder’s and offeror’s preferences was arbitrary, capricious and illegal because it created an unfair competitive advantage for First Health.[2]

C.                 Inclusion of the Alaska bidder’s and offeror’s preferences was arbitrary, capricious and illegal because they had not been included in another, similar, solicitation.

D.                 Inclusion of the Alaska bidder’s and offeror’s preferences was contrary to applicable federal guidelines, and therefore impermissible under the Supremacy Clause and AS 36.30.890.

E.                  Issuance of an amendment to the existing contract had provided First Health with an unfair competitive advantage in its ability to shift costs from its proposal to the amended contract.

F.                  The calculation of the Alaska bidder’s and offeror’s preferences was contrary to Alaska law and to the terms of the RFP.

G.                 The Alaska offeror’s preference is illegal because it is not authorized by Alaska statute.

H.                 The Alaska offeror’s preference, if authorized by law, is limited to 5% because a greater preference for competitive proposals than for competitive bids is irrational, illogical and illegal.

I.                    Inclusion of the Alaska offeror’s preference lacks a legitimate basis because it serves none of the purposes of AS 36.30.180.

J.                   The Alaska bidder’s preference unconstitutionally denies the equal protection of the law.

K.                The Alaska offeror’s preference unconstitutionally denies the equal protection of the law.

L.                  The First Health proposal was non-responsive because First Health did not propose to locate all key personnel in Alaska.

M.               DHSS failed to adequately or timely disclose information relating to the procurement.

 

EDS asked that the proposals be evaluated without the Alaska preferences, and that the contract be awarded to EDS. [9/25 at 12]

On November 12, DHSS issued its decision denying the protest.  The decision briefly responded on the merits to each of the points raised.  In addition, with respect to issues A, B, D, F and H, DHSS specifically asserted that the issue had not been raised in a timely manner, prior to the due date for proposals.

On November 14, counsel for DHSS wrote to counsel for EDS and advised that DHSS’ position was that no stay of the contract award had been granted.  On November 15, EDS filed an appeal with the commissioner from the denial of a stay.  By letter dated November 19, the commissioner directed DHSS not to award the contract pending a further directive from the commissioner, and to submit a memorandum regarding a stay.  On November 22, EDS filed an appeal on the merits of the protest decision.  By letter dated November 25, DHSS advised the commissioner that the contract award could not occur until after completion of federal review of the proposed contract, and that DHSS would agree not to award the contract for at least 45 days.  First Health and EDS also agreed to a delay in contract award.  First Health filed a motion to intervene and asked that the protest appeal be dismissed. 

On November 27, the commissioner dismissed the appeal of the denial of the stay, appointed a hearing officer to adjudicate the protest appeal and directed DHSS not to award the contract prior to January 10, 2003.  The hearing officer was directed to expedite proceedings in order to allow for a final decision by the commissioner no later than January 8.

The hearing officer conducted a telephonic prehearing conference on December 2.  First Health’s motion to intervene was granted and its request to dismiss the protest appeal was denied.  In a Memorandum and Order issued December 3, the hearing officer ruled that Issues E, F and L were timely and would be heard on the merits, dismissed Issue M, and established a briefing schedule regarding the timeliness of the remaining issues.

The parties submitted memoranda addressing questions of timeliness of the protest and the authority of DHSS and the hearing officer.  In its submission dated December 9, EDS expressly abandoned all issues raised in the protest appeal with the exception of Issues A, B, C, G, H, I, J and K.  At a teleconference on December 12, EDS confirmed that it had abandoned all other issues, and the parties agreed that all questions remaining at issue could be addressed on the basis of the record established to date. 

Analysis

A.        EDS’ Protest of the Preference Terms Was Untimely.

1.          The Protest Challenges the Terms of the RFP.

AS 36.30.565(a) states: “A protest based on alleged improprieties or ambiguities in a solicitation must be filed at least 10 days before the due date of the bid or proposal…”  EDS argues that AS 36.30.565(a) does not to apply to protests of provisions of an RFP that have no effect on the contemplated performance.  It asserts that in this case, the preferences have no effect on the solicitation, but only affect evaluation.  Accordingly, it says, the protest as to issues A, B, C, G, H, I, J, and K should be construed as a timely protest of the proposed award of the contract, rather than as an untimely protest of the terms of the solicitation. [12/9/ at 9-11]

This argument is mistaken on two counts.  First, the protest was directed at the terms of the RFP.  EDS argues that the “administrative act which made the preferences relevant to any protest was the Division’s use of them [in the evaluation].”  [12/9 at 10]  However, that act was predicated on inclusion of the preferences in the RFP: DHSS was allowed to use the preferences in the evaluation because, and only because, it included them in the RFP.   Except insofar as EDS claimed (issue F) that DHSS misapplied the RFP’s stated terms, the protest as to the preferences was aimed at the terms of the solicitation, not the evaluation.  Second, because the preferences could induce an offeror to submit a higher price than it might in the absence of the preference (since the evaluated price would be reduced), or even affect the decision whether to compete at all, it is clear that the preferences could affect contract performance. 

2.       EDS’ Letter of April 26 Was Not Substantial Compliance.

An interested party may file a protest with the procurement officer pursuant to AS 36.30.560.  EDS argues that it did “substantially protest” the preferences when it asked that the preferences be omitted in a question submitted on April 26.  [12/9 at 11] One of the “questions” EDS submitted on that date stated:

Since the majority of funds utilized for the MMIS transfer and operations are federal funds, it appears unreasonable to provide an ‘Alaska Offeror’s Preference.’  The preference gives an unfair advantage to the incumbent and given the relatively small number of potential bidders qualified to provide the services requested, the effect of this preference is to restrict this procurement to potentially a single bidder.  It is requested that the State waive this requirement so as to ensure a fair and competitive competition.

 

“[S]ubsantial compliance involves conduct which falls short of strict compliance with the statutory…requirements, but which affords…the same protection that strict compliance would offer.”  Jones v. Short, 696 P.2d 665, 667 n. 10 (Alaska 1985).  For example, as previously ruled in this case, a protest appeal letter may substantially comply with the requirements for timely filing, notwithstanding the failure to include a copy of the protest decision.  The essential attribute of compliance with AS 36.30.560 is that the procurement officer be notified that an interested party has invoked the statutory protest remedy.

Asking a question about a particular RFP requirement during the question period is insufficient to substantially comply with AS 36.30.560.  A purchasing agency cannot be expected to read every question as an invocation of the protest remedy: as was clearly stated in the RFP, questions and answers are a discretionary matter that has no relationship to the formal protest process.  In this particular case, EDS’ April 26 submission was entitled “Questions to [DHSS]”.  It included eleven questions, several of which in substance asserted that the RFP language was ambiguous or otherwise defective.  The submission did not reference AS 36.30.560 and did not provide reasonable notice that it was intended to invoke the statutory protest remedy with respect to any of the matters addressed in it.  While not in interrogatory form, the “question” about the preferences in substance asked, “Will you waive application of the preferences in this RFP?”  To all appearances, the April 26 submissions were just what they purported to be: questions, not a protest. I conclude that EDS' submission of April 26 did not substantially comply with AS 36.30.560 with respect to any matters it raised.  

B.         EDS Has Not Shown Good Cause to Accept an Untimely Protest.

An untimely protest may be accepted for good cause.  AS 36.30.565(b).  Good cause for accepting an untimely protest does not mean good cause for delay in filing the protest: it means good cause for accepting the protest under all of the circumstances.  See generally, Appeal of Scientific Fishery Systems, Inc., No. 98.08, at 2-7 (Department of Administration, July 26, 1999).  The commissioner will afford due deference to the decision of a procurement officer to reject an untimely protest.  See generally, Appeal of Waste Management, Inc., No. 01.08, at 11-13 (Department of Administration, April 25, 2002).  The deference due to such a decision varies.  Where the procurement officer’s decision states the basis for concluding that there is or is not good cause to accept an untimely protest, the commissioner will review the decision for an abuse of discretion.  Where the procurement officer’s decision does not specifically address good cause, the commissioner’s review is necessarily less deferential.  In this case, because the procurement officer did not address good cause, the commissioner will exercise independent judgment in light of the circumstances at the time the protest was denied.

It is a well-established principle of procurement law that all objections to the terms of an RFP must be raised prior to the due date for proposals:

Timely protests concerning specifications provide a procurement officer with the opportunity to correct an erroneous or defective RFP before the submission of proposals.  Excusing untimeliness could enable an unsuccessful proposer to obtain a second opportunity in the selection process and may substantially disrupt the procurement process.  For these reasons, the requirement of timely filing of protests based on defective solicitations is an important one: it avoids unnecessary expense, disruption and delay in the procurement of goods and services.

 

Appeal of Scientific Fishery Systems, Inc., supra, at 3.

In light of the importance of the requirement, accepting an untimely protest requires a clear showing of good cause.  Prior Alaska administrative decisions highlight several important factors to be considered:[3] first, the timing of the protest; second, the nature of the objections raised; and third, the strength of the claims asserted.

(1)               Timing of Protest.

a.                   EDS Had Knowledge of the Grounds Prior to the Due Date.

Clearly, one consideration that would support acceptance of an untimely protest is that the protester previously lacked actual or constructive knowledge of the grounds for objection.  See, e.g., Appeals of Bachner Company and Bowers Investment Company, No. 02.06/.07 at 12 (Department of Administration, October 16, 2002).  EDS does not assert that it lacked actual knowledge (through counsel) of the legal grounds for its objections to the preferences prior to the due date for proposals, and in any event it clearly had constructive knowledge of any objections based on prior Alaska caselaw.  Indeed, any claim that EDS was unaware of the basis for its objection would be inconsistent with EDS’ position that it sufficiently raised these issues in its April 26 submission.  With respect to the timing of the protest, EDS cannot plead ignorance.

b.            DHSS’ Failure to Respond Did Not Excuse EDS’ Delay

EDS contends that DHSS’ failure to specifically respond to its April 26 question regarding preferences excused EDS’ failure to file a timely protest. [11/27 at 2, n.1; 12/9 at 3] EDS argues that DHSS’ statement on April 30 that “The remaining questions will be answered soon” misled it into believing that it could await a response, rather than filing a protest.

DHSS’ response to questions on April 30 was not a reasonable basis for EDS to forgo filing a formal protest.  The RFP expressly required that questions be submitted by April 15, and stated that any response, even to timely questions, was at DHSS’ discretion.  DHSS’ posting of April 30 stated: “[This] ‘Response to Bidders Questions’ contains the answers to Vendor questions submitted by April 15, 2002.  This response answers 94% of the questions.  The remaining questions will be answered soon.”  The “questions” referred to in the second and third sentences of this excerpt are those previously mentioned in the first sentence, namely, those submitted in a timely manner, by April 15.

Any possible misconception was eliminated by the answers, which specifically responded to the question, “Can we get a 2 week extension for questions and answers?”:  “No, [t]he Division has allowed 90 days for vendors to prepare responses to this RFP.  You may submit questions whenever you desire, however the Division is under no obligation to answer them.  The Division may at its discretion answer them.”  [emphasis added] In light of that response, it would clearly be unreasonable to read the introductory language as creating any obligation on DHSS’ part to respond to any of EDS’ questions.  The suggestion that EDS could reasonably continue to await an answer to its untimely questions after the remaining timely questions were answered on June 18 is fanciful.[4]

            c.         EDS Improperly Awaited the Outcome of the Evaluation.

EDS contends that it was justified in withholding filing a formal protest until after it had determined whether the preferences actually affected the outcome of the solicitation.  This argument turns the requirement of pre-due date protests on its head.  A primary purpose of pre-due date protests is to prevent offerors from obtaining an unfair competitive advantage by acquiring a second opportunity to submit proposals.  EDS’ claim that it was better to wait until it determined whether the objectionable material had actually affected the outcome of the solicitation is categorically rejected.  Indeed, to the extent that EDS knowingly waited until after the proposals were submitted because it wanted to see how the procurement came out, that is a circumstance tending to demonstrate a lack of good cause.

The second primary reason for pre-due date protests of the terms of a solicitation is to provide time for corrective action before proposals are submitted.  EDS’ claim that DHSS and the Commissioner of Administration were unable to provide the requested relief with respect to the issues presently being pursued, assuming it is true, does not make this consideration irrelevant.  To the contrary, had EDS filed a formal protest on all of the preference issues on April 26, those matters within the scope of their authority (including issue D, for which either DHSS or the commissioner could have provided complete relief, and which EDS has abandoned on appeal) could have been fully resolved at the administrative level well in advance of the due date for proposals, with additional time prior to the due date for an appeal to the superior court for a decision on the merits of any legal issues not susceptible of resolution at the administrative level.

EDS delayed filing a protest from April 26, when it had knowledge of the basis for its objection, until September 25, a period of five months.  The protest was filed nearly three months after the due date for a timely protest on the preference issues (June 28).  While the delay may have avoided potentially unnecessary disruption before the due date for submitting proposals, it created the potential for substantially greater disruption later on, since litigation after selection of a contractor would place timely performance of the contract in jeopardy.  What is more, EDS’ unilateral decision not to file a formal protest eliminated DHSS’ ability to restructure the procurement process to address the concerns raised without unduly impacting the timely acquisition of the desired services. While EDS may believe that it was in the state’s best interests not to confront the preferences issues prior to the due date, that was not EDS’ choice to make: AS 36.30.565(a) mandates that concerns over the contents of a solicitation be raised in advance because the purchasing agency, not any offeror, has sole responsibility for the conduct of the solicitation.

The “timing of the protest” factor did not support accepting an untimely protest in this case.

(2)            Nature of the Claims Asserted.

In prior cases, one factor that has been identified as supporting acceptance of an untimely protest is the existence of questions concerning the integrity of the procurement, such as bias, prejudice, or conflict of interest.  See, Appeals of Bachner Company, Inc. and Bowers Investment Company, Nos. 02.06/07 at 12 (Department of Administration, October 16, 2002); Appeal of Spectrum Printing, Inc., No. 98.14 at 8 n. 9 (Department of Administration, April 29, 1999).  In this case, there was no hint of any impropriety of that nature.     

Another factor that would support accepting an untimely protest would be a protest alleging ambiguities or improprieties in the solicitation that materially impact the ability of the purchasing agency to fulfill its actual needs.  See, Appeal of Waste Management of Alaska, Inc., No. 01.08 at 8 (Department of Administration, April 25, 2002); Appeal of Scientific Fishery Systems, Inc., No. 98.08, supra, at 6; cf. 2 AAC 12.860(2), (7).  In this case, that factor was not present.  The preferences at issue could result in a less highly rated proposal being accepted, but there was no indication that any of the proposers lacked an understanding of the terms, or that their qualifications and abilities would not be fairly and accurately reflected in the evaluations.  To the extent EDS objected that the preferences were contrary to the state’s best interests because they could result in selection of a higher cost or lower rated proposal, the legislature and the commissioner would obviously have considered that point prior to passing the legislation and adopting the regulation.  Under the legislation and regulations adopted, however, purchasing agencies did not have the option of omitting those preferences on a case-by-case basis.  

Another factor of relevance in this context is that EDS contends that neither the purchasing agency nor the commissioner had authority to provide the relief sought on the untimely issues.  How could there have been “good cause” to accept an untimely protest on issues for which, according to the protestor, no administrative relief was available?

The “nature of the issues” factor did not support accepting an untimely protest on the preference issues.

(3)        Strength of the Claims Raised.

EDS’ protest raised serious and substantial questions regarding the legality of the preferences incorporated into the RFP.  However, those questions are not within the expertise of the Department of Administration: they are within the special competence of the courts.  The other issues raised by EDS in its protest were within the department’s procurement expertise but did not appear to raise serious and substantial questions on the merits.  The responsiveness of the First Health proposal was clear: First Health’s transmittal letter bound it to the terms of the RFP even if its proposal did not in every respect parrot the specifications, and the single discrepancy noted by EDS was not listed as a mandatory minimum requirement of the RFP.  Regarding the amendment of the existing contract, EDS did not assert that the contract amendment was itself improper, and the fact that First Health (as the current contractor) has a competitive advantage in this solicitation is not unfair or improper.  EDS submitted no evidence to support its claim that the costs of this solicitation were “improperly” shifted, and in any event proposals were submitted before the amendment occurred.

Given that the timely issues within the procurement officer’s bailiwick appeared to lack substantial merit, and that the untimely preference issues were outside the expertise of either the purchasing agency or the Department of Administration, the “strength of issues” factor clearly weighed against accepting an untimely protest on the preference issues.

C.           EDS Failed to Exhaust Its Administrative Remedy.

Exercising independent judgment as to whether there was good cause for accepting an untimely protest on the preference issues at the time of the decision to deny the protest, I conclude that there was not good cause, at the time the protest was denied, to accept an untimely protest on the preferences.  The question remains whether the exhaustion doctrine bars consideration of the preference issues in this protest appeal.  This is a question of issue exhaustion, not of exhaustion of remedies: EDS filed a timely protest and appeal.  The question is whether issues that were not timely protested should be considered in a protest appeal from a protest that was timely as to other issues (since abandoned).[5] 

1.            The Commissioner Has Discretion to Consider Untimely Issues.

Initially, it is necessary to determine whether a statute or regulation bars review in a protest appeal of an issue that was not timely raised in a protest.[6]  AS 36.30.590(a) provides for an appeal to the commissioner from the decision of a procurement officer on a protest.  AS 36.30.590(b) provides that the appeal must identify “the factual or legal errors in the decision that form the basis for the appeal.”  Clearly, a protestor asserting error in the refusal of a procurement officer to accept an untimely protest may raise that issue on appeal, and, if good cause is shown, may obtain a ruling on the merits.  But §590(b) also appears to permit consideration of untimely issues that were addressed on the merits in a protest decision, even in the absence of good cause to accept the protest on those issues: the statute expressly provides for an appeal of legal and factual errors in the protest decision.  Moreover, the commissioner’s statutory responsibility for statewide procurement oversight, in the context of procurement authority delegated to purchasing agencies, warrants providing the commissioner with discretion to review a wide range of issues in a protest appeal.  See, Appeal of Waste Management of Alaska, Inc., No. 01.08 at 11-13 (Department of Administration, April 25, 2002).  I conclude that there is no statutory requirement of timely issue exhaustion in a protest appeal for untimely issues that were addressed on the merits in the protest decision.  The commissioner thus has discretion to entertain untimely issues in a protest appeal, even in the absence of good cause to accept a protest on those issues, if those issues were addressed on the merits in the decision being appealed.

In this case, the procurement officer’s protest decision addressed the merits of each of the preference issues, even if it also objected that those issues were untimely.  Because the procurement officer chose to address the issues on the merits, rather than to rely on untimeliness as a grounds for refusing to address them, I conclude that there is no statutory bar to consideration of the merits of those issues in this protest appeal.

2.            Issue Exhaustion Should Be Required In This Case.

A finding that there was not good cause to accept an untimely protest on particular issues does not necessarily mean that the exhaustion doctrine bars consideration of those issues in a protest appeal timely as to other issues.  The question whether there was good cause to accept an untimely protest is addressed by the procurement officer, and by the commissioner on appeal, in light of the circumstances on the date the protest is denied.  The question of issue exhaustion for purposes of the protest appeal, however, is addressed in light of the circumstances at the time a decision is made to accept or reject the appeal.  In the procurement context, this is a significant difference, since the status of contract award and performance is a relevant consideration in determining which issues should be addressed.  Furthermore, considerations unique to the commissioner’s oversight authority may be relevant at the appeal stage.[7]

Application of the exhaustion doctrine to bar consideration in a protest appeal of issues as to which no timely protest was filed, and for which there was not good cause to accept an untimely protest, is (in the absence of a statutory bar) an exercise of administrative discretion.  Alaska judicial decisions applying the exhaustion doctrine in the context of civil actions for declaratory relief[8] or damages,[9] or in the context of an administrative appeal,[10] typically address the exercise of judicial discretion, and are not binding precedent for purposes of the exercise of administrative discretion.  For this reason, although Alaska exhaustion precedent may provide useful points of reference, it is not necessarily a persuasive guide to the proper exercise of administrative discretion,[11] particularly when multiple claims are involved.[12]

In general, issues that were not timely protested, for which there was no good cause to accept a protest, but which were addressed (without waiving a timeliness objection) in the protest decision, will not be considered in a protest appeal.  It is not necessary in this case to list all the factors that might lead the commissioner to consider such issues.[13]  It suffices to note that under the facts of this case, EDS’ argument that the preference issues should be considered is not persuasive.

EDS asserts that the exhaustion doctrine should not be applied in this protest appeal to bar consideration of issues that were not raised in a timely manner before the purchasing agency, on two grounds: (1) a protest on the preference issues would have been futile, since DHSS lacked authority to provide relief; and (2) constitutional claims are not waived for purposes of the exhaustion doctrine.

(1)               Futility.

EDS asserts: “No administrative officer, including the procurement officer of the Commissioner, has the authority or jurisdiction to declare [the Alaska bidder’s and offeror’s] preferences unconstitutional or to declare the Alaska Offeror’s preference regulation unlawful and invalid.  Thus, EDS simply cannot receive the relief it seeks through the administrative protest and appeal process.” [12/9 at 2] Because it cannot obtain the relief it seeks administratively, EDS suggests, it was excused from filing a timely protest regarding the preference issues.

EDS’ argument that the commissioner lacks authority to declare statutes unconstitutional, or to find regulations contrary to law, may have significance should EDS apply to the superior court for declaratory relief, or should it file an administrative appeal, but it is clearly not a reason why the commissioner should exercise discretion in favor of considering those issues in a protest appeal when they were not timely raised.  EDS’ argument is one for hearing the preference issues in superior court, not one for considering them in a protest appeal.  To suggest that the futility exception applies to permit issues to be considered by the commissioner even though they are outside the commissioner’s “authority and jurisdiction” is plainly nonsensical.

Furthermore, EDS’ argument fails to recognize that the “relief” that it sought in its protest was not a declaratory judgment or damages, but the award of the contract to it.  At least one of the untimely preference issues raised by EDS (D, since abandoned) did not raise a constitutional question, and was therefore an issue as to which DHSS had authority to grant the complete relief to which EDS claimed it was entitled.  A timely protest on that issue plainly would not have been futile.

Finally, that DHSS or the commissioner may not refuse to enforce the law does not necessarily mean that either lacked authority to provide substantial relief with respect to the preferences, even on constitutional issues, had a timely protest been filed.  The relief sought was uniquely administrative, not judicial, and both DHSS and the commissioner had ample authority to address EDS’ concerns.  First, in light of the serious and substantial questions raised by EDS, either might have sought a declaratory judgment on an expedited basis.  Second, if either was persuaded that the Alaska offeror’s preference was illegal, DHSS could have cancelled the solicitation, while the commissioner could have directed that the due date for proposals be extended, or delayed evaluation of proposals, and initiated an expedited revocation of 2 AAC 12.260(e).[14]  Third, under AS 36.30.890 either arguably had authority to order that the preferences not be applied to this particular RFP if they were contrary to federal law (including the United States Constitution).  At this time, however, those remedies could not be provided without substantially disrupting a solicitation that has been years in the making, and that involves an expenditure of $100,000,000. 

For all these reasons, I conclude that the futility exception does not warrant consideration of the untimely preference issues in this protest appeal.

(2)               Constitutionality.

EDS argues that constitutional issues are never waived, and that there is no exhaustion requirement with respect to those issues. 

This argument, too, is one that may have relevance in the event EDS files a civil action for declaratory relief or damages,[15] or an administrative appeal, but it has no relevance for purposes of issue exhaustion at the protest appeal stage.  The reason why the courts find that constitutional issues are not waived for purposes of judicial proceedings when they are not asserted at the administrative level is that such issues are within the special competence and expertise of the courts.  Thus, constitutional claims generally need not be raised at the administrative level prior to resort to the courts, except when necessary to obtain a factual record, or when non-constitutional claims are also at issue.[16]  

For purposes of administrative adjudication, however, this consideration warrants precisely the opposite conclusion: even if the commissioner could, at this late juncture, provide substantial relief with respect to the preference issues, those issues should not be unnecessarily addressed.  Even the courts prefer not to decide constitutional issues.  So much the less should the commissioner exercise discretion in a protest appeal to address constitutional issues that were not raised in a timely protest.

Legal Conclusions

I conclude that none of the issues presently being asserted on appeal before the commissioner was raised in a timely protest, and that there was not good cause to accept an untimely protest with respect to any of those issues.  I further conclude that had a timely protest been filed with respect to all the preference issues (including D), either DHSS or the commissioner would have had administrative discretion and legal authority to provide substantial relief at the administrative level on the basis of one or more of those issues.  Finally, in light of all the considerations identified in the foregoing analysis, I conclude that this appeal should be dismissed on the ground that the issues being asserted were waived for purposes of the protest remedy by EDS’ failure to file a timely protest raising any of those issues, and that EDS’ failure to file a timely protest with respect to those issues should not be excused for purposes of a protest appeal.

DATED December 27, 2002.

______________________________

                                                            Andrew M. Hemenway

Hearing Officer