Opinion ID: 2632935
Heading Depth: 3
Heading Rank: 1

Heading: Lakloey Has Standing as an Interested Party.

Text: Alaska's general procurement code codified at AS 36.30.005-.995transfers purchasing authority to the Regents of the University of Alaska and requires the Regents to adopt purchasing regulations. [10] This authority is to be exercised in accordance with the general procurement code's rules, requirements, and procedures to the maximum extent possible. [11] In fulfilling this responsibility, the Regents have retained the general procurement code's requirement that a bidder have standing as an interested party in order to file a protest of a contract award. [12] As defined by Board of Regents Policy P05.06.990(a)(7), an interested party is an actual or prospective bidder or offeror whose economic interest might be affected substantially and directly by the issuance of a contract solicitation, the award of a contract, or the failure to award a contract. This definition mirrors the general procurement code's definition of an interested party, but omits the code's explanation that whether an actual or prospective bidder or offeror has an economic interest depends on the circumstances. [13] In sum then, both the University's regulations and the general procurement code require UAF to determine whether Lakloey's economic interests might be affected substantially and directly by the outcome of its protest. Although UAF did not initially question Lakloey's standing, it later reversed course and concluded that Lakloey did not in fact satisfy the requirement that it be an interested party. The final decision issued by UAF's hearing officer noted that Lakloey was not the next lowest bidder after U.S. Filter, and would not have received the award, even if U.S. Filter's bid had been disallowed. The decision then went on to reason that because Lakloey would not receive the award if its protest proved successful, it did not have an economic interest that may be substantially and directly affected by the award of the contract or failure to award it. Consequently, the decision concluded that Lakloey [did] not have standing, under the specific circumstances here, as an `interested person.' On appeal, UAF maintains that this decision and line of reasoning are correct. Lakloey responds that its status as a bidder who placed a bid for the deionization system is sufficient to establish that it is an interested party in this case. We begin our analysis by noting that the proper standard of review to apply to this issue is not readily apparent. It is unclear whether UAF believes that it is the general procurement code's provisions or the University's own regulations that require Lakloey to be the next lowest bidder. The final decision issued by UAF's hearing officer cited only the general procurement code; on the other hand, the brief filed in this case by UAFwhile still focused primarily upon the general procurement codecites both the code and the University's own regulations. It is equally unclear whether such a distinction between law and regulation is of any significance in this case since, as already noted, the general procurement code demands that the University's regulations mirror the code's rules, requirements, and procedures to the maximum extent possible. [14] Because we conclude that UAF's interpretation of the phrase interested party, which requires that Lakloey be the next lowest bidder, is unreasonable even under the more deferential reasonable and not arbitrary test reserved for reviewing an agency's interpretation of its own regulations, we need not resolve these ambiguities here. [15] We have previously noted that in exchange for a bidder's investment of the time and resources involved in bid preparation, a government agency must be held to an implied promise to consider bids honestly and fairly. [16] In other words, agencies implicitly guarantee potential bidders that their expenditures of time and resources on bid preparation will not be wasted on an unfair or dishonest bidding process. Bidders undoubtedly possess an economic interest in ensuring that agencies honor this implicit guarantee, and it is this interest that Lakloey seeks to vindicate. From its initial protest to its current appeal, the core of Lakloey's argument has been that Amendment No. 1 was a material change to the IFB and that U.S. Filter did not recognize or meet the demands of Amendment No. 1. More specifically, Lakloey contends that Amendment No. 1 established specifications that exceeded the capabilities of the brand name model identified in the original IFB and that U.S. Filter's bid for the brand name model was therefore non-responsive. If Lakloey's contention is correct, then UAF may have breached its guarantee to consider bids fairly and honestly by awarding the contract to U.S. Filterby assessing the responsiveness of bids based upon incorrect criteria, accepting a product markedly different from the one it asked for, and ultimately wasting the time and resources of bidders who could have potentially chosen to offer a less capable product at a better price or chosen not to bid at all. Lakloey certainly has an economic interest in ensuring that its bid was honestly and fairly considered and its time and resources expended on placing that bid not wasted. Of course, standing to file a protest requires more than an economic interest in ensuring that the procurement process was fair and honest. Under both the general procurement code and the University's regulations, a bidder must possess an economic interest that might be affected substantially and directly by the outcome of its protest. As the general procurement code notes, whether or not a bidder possesses such an interest is necessarily dependent upon the circumstances, [17] and the circumstances of this case dictate that Lakloey is indeed an interested party with standing to protest. UAF determined that five of the six bids submitted for the deionization system were administratively and technically responsive to the requirements laid out in the IFB and Amendment No. 1. Out of these five responsive bids, UAF determined that U.S. Filter was the low bidder, Frontier Plumbing Supply the second lowest, and Lakloey the third lowest. The final decision issued by UAF's hearing officer reasoned that because Lakloey was determined to be the third lowest responsive bidder, it would not receive the contract even if its protest proved successful. As a result, the opinion concluded that Lakloey did not have an economic interest in the outcome of its protest. But the very nature of Lakloey's argument precludes this conclusion. Lakloey asserts that UAF ignored Amendment No. 1's heightened specifications and evaluated the responsiveness of U.S. Filter's bid using the wrong criteria. Assuming that UAF used the same criteria in evaluating all of the bidsand there is nothing in the record to suggest that it did notthen Lakloey's assertion calls into question the responsiveness of every bid submitted. Until it is determined what criteria and specifications UAF used in evaluating the bids, it is impossible to know the proper ordering of the bids. If Lakloey prevails on its protest and the award to U.S. Filter is revoked, it may turn out, upon application of the correct criteria, that the second lowest bidder is not in fact responsive. This eventuality would place Lakloeywhich is currently understood to be the third lowest bidderas the low bidder. In other words, Lakloey's economic interest might be affected directly and substantially by the outcome of its protest. We therefore conclude that Lakloey is an interested party with standing to protest UAF's award to U.S. Filter. Of course, this is not to say that UAF may never deny a protesting bidder standing because that bidder is not next in line to receive the contract. There may in fact be many situations in which it would be entirely reasonable for UAF to deny a bidder standing solely on this basis. Our decision today merely maintains that the requirement that a protesting bidder be the next lowest bidder cannot reasonably be applied under the circumstances presented by this case.