Opinion ID: 1124217
Heading Depth: 3
Heading Rank: 2

Heading: Substantial Interest Determination

Text: No written determination that would even arguably meet the requirements of HRS § 103D-701(f) was made until March 13, 1996. In its entirety, the written determination consisted of a statement by the Administrator of the State Procurement Office, Unebasami, in a memo to Kane, that [p]ursuant to Section 103D-701(f) and based upon our review, it has been determined that the award of the contract to Ameritech without delay is necessary to protect the substantial interests of the State. With respect to this written substantial interest determination, the Hearings Officer concluded that [t]he determination that substantial State interests were involved allowed [the Library] and [Ameritech] to proceed under the Contract despite the pendency of [CARL's] protests. COL 23. COL 23 is in violation of ... statutory provisions. HRS § 103D-710(e)(1). A determination that substantial State interests were involved is not sufficient, under the plain language of HRS § 103D-701(f), to allow the Library to proceed with the contract despite CARL's protest. Not only must substantial State interests be involved, but the delay required to resolve the solicitation protest must threaten to impair those interests such that award of the contract without delay is necessary to protect  them. HRS § 103D-701(f) (emphasis added). The Hearings Officer also concluded that 24. [CARL] did not meet its burden of proving by a preponderance of evidence that the CPO's decision of March 13, 1996, finding that the award of the Contract to [Ameritech] without delay was necessary to protect the substantial interests of the State despite [CARL's] protest was in violation of the law or violated the Constitution, statutes, regulations, or the terms and conditions of the solicitation. The only FOF relevant to COL 24 referred to Kane's February 6 and 16 memos to Unebasami, reciting the arguments made therein. The Hearings Officer also found that: 276. By memorandum to Mr. Kane dated March 13, 1996, the CPO determined that the award of the Contract to [Ameritech] without delay was necessary to protect the substantial interests of the State. To the extent that the Hearings Officer found that Unebasami was the Chief Procurement Officer with authority to make the substantial interest determination pursuant to HRS § 103D-701(f), we hold that finding is clearly erroneous, and COL 24 is, therefore, wrong. HRS § 103D-203 provides in pertinent part that: The chief procurement officer for each of the following state entities and the several counties shall be: . . . . (7) The department of educationthe superintendent of education; and (8) The remaining departments of the executive branch of the State and all governmental bodies administratively attached to themthe administrator of the procurement office of the department of accounting and general services. HRS § 103D-204 establishes the office of the administrator of the procurement office and provides that [t]he administrator shall be the chief procurement officer for the governmental bodies of the executive branch other than the University of Hawaii and the department of education, and those governmental bodies administratively attached thereto.  (Emphasis added.) Responsibility for operating the Library ultimately rests with the Board of Education, but the Library is administratively attached to the department of education. See 1981 Haw. Sess. L. Act 150, § 7 at 300-04 (transferring responsibility for operation of library system from Department of Education to Board of Education through State Librarian); but see Hse. Conf. Comm. Rep. No. 20, in 1981 House Journal, at 905-06 (Through this bill, the public library system is hereby placed under the sole and direct control of the Board of Education, to be administered by the State Librarian, and is placed in the Department of Education for administrative purposes only. (Emphasis added.)). Therefore, Unebasami, the administrator of the State Procurement Office, was not authorized to make the substantial interest determination in this case, and his March 13, 1996 memo to Kane did not satisfy the requirement of HRS § 103D-701(f). Nowhere in the record is there evidence that there was a proper substantial interest determination made by the Superintendent of Education; thus, the Library's continued work on the contract, as well as the January 25 execution of the contract, was in violation of HRS § 103D-701(f). [21] Moreover, COL 24 is wrong for substantive, as well as procedural, reasons. Even if Unebasami had been authorized to make the substantial interest determination, his written determination failed to identify, and the Hearings Officer failed to make findings regarding, the State interests implicated and how those interests would be impaired by delay. The general rule established by HRS § 103D-701(f) is that a timely protest halts solicitation and contract activities until the protest is resolved. By maintaining the status quo during the pendency of a protest, violations of the procurement code can be rectified before the work on the contract has proceeded so far that effective remedies, for the protestor and the public, are precluded by expense and impracticality. Because the Code both shortens deadlines for filing protests and applications for review and expedites the administrative hearings process, the delay contemplated is minimal, generally a few months. [22] There are, however, situations where a delay of several months before a contract may be awarded would have serious repercussions on the continuation of essential State functions. It is in these situations that the solicitation or award is allowed to proceed, upon a written determination that the award of the contract without delay is necessary to protect the substantial interests of the State. HRS § 103D-701(f). As the commentary to ABA Model Code § 9-101, which is substantively identical to HRS § 103D-701(f), explains: In general, the filing of a protest should halt the procurement until the controversy is resolved. In order to allow essential governmental functions to continue, Subsection (6) provides that the [State] may proceed with the solicitation or award of the contract, despite the protest, upon a determination in writing by the Chief Procurement Officer or the head of the Purchasing Agency that such action is necessary. It is expected that such a determination will occur only in those few circumstances where it is necessary to protect a substantial interest of the [State]. (Emphasis added.) The Hearings Officer apparently found that Unebasami's determination was based on Kane's February 6 and 16 memos, but failed to enter any FOF or COL that the interests cited therein were substantial and would be harmed by delay on the contract. Unebasami's March 13, 1996 letter to Harris certainly suggests that he relied more on Kane's assessment of the merits of CARL's protest than on any evaluation of the impact on State interests. Although the merits of CARL's protest is a necessary and proper basis for Kane's decision under subsection 701(c), consideration of the merits of CARL's protest has no place in the substantial interest determination required by subsection 701(f). Indeed, if the contracting officials could both deny the protest and authorize performance of the contract based on their assessment of the merits, subsection 701(f) would be meaningless. Moreover, if an erroneous assessment of the merits of the protest by the contracting officials could result not only in denial of the protest, but also in the elimination of any remedy because the contract has been awarded and performed based on that same assessment, there would be little purpose served by review of the decision as provided for in HRS §§ 103D-709 and 103D-710. To the extent that the substantial interest determination was based on an assessment of the merits of CARL's protest, we hold that it was improper and did not satisfy HRS § 103D-701(f). To the extent that Unebasami relied on the interests cited in Kane's February 6 memo, we hold that CARL met its burden of proving by a preponderance of the evidence that continued performance on the contract pending resolution of its protest was not necessary to protect substantial State interests. Kane's memo argued that the contract with the current vendor, DRA, had expired on June 30, 1995 and that service could terminate at any time, without significant notice, thereby adversely impacting library operations. The complete cessation of library automation services is the only argument advanced by Kane that even approaches impairment of a substantial State interest requiring award of the contract without delay. The record, however, shows by a preponderance of the evidence that performance of the Ameritech contract without delay was not necessary to maintain library automation services. Keith Fujio, who was employed by the Library as the Director of the Management Information Branch and the Administrative Services Officer, with responsibility for administration of contracts, all purchases, and payroll, was called as a witness by the Library. On cross-examination by CARL, he testified that his staff had communicated with DRA and the indication we were given [was that,] because of all these subsequent problems that arose, they would still support us on a month-to-month extension agreement. He further testified that the maintenance contract with DRA renews automatically from year to year if both parties agree to all the terms and that his understanding was that DRA was willing to continue providing services under its contract until the protest was resolved and a new vendor commenced providing services. Fujio's testimony was undisputed. Therefore, although the State may have a substantial interest in continuing library automation services, award of the contract to Ameritech without delay was not necessary to protect that interest, and CARL proved as much by a preponderance of the evidence. The rest of Kane's memo to Unebasami merely describes how the library would be inconvenienced by maintaining the status quo during any delay in performing the contract and identifies no substantial interest of the State that would suffer. Accordingly, we hold that COL 24 is wrong and that the award of and performance on the Ameritech contract was in violation of HRS § 103D-701(f). We further hold that a substantial interest determination, pursuant to HRS § 103D-701(f), must specifically identify the State interests involved and articulate why it is necessary for the protection of those interests that the contract be awarded without delay.