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

Heading: Carl may recover its attorneys' fees incurred in the protest.

Text: CARL contends that it is also entitled to an award of its attorneys' fees and costs incurred both in the protest hearing and in this judicial review, given HS[P]LS's and Kane's misconduct and attempt to deny CARL its rights to a fair and equitable bidding process and a full and fair hearing. Neither the Library nor Ameritech disputes CARL's entitlement to attorneys' fees in their briefs. Because nothing in the procurement code precludes an award of attorney's fees to a successful protestor, and, under the circumstances of this case, requiring CARL to bear the fees incurred in its protest would undermine the purposes of the Code, we agree with CARL. The only mention of attorney's fees in the relevant sections of the Code is found in HRS § 103D-701(g), which provides in part that the protesting bidder or offeror shall be entitled to the reasonable costs incurred in connection with the solicitation, including bid preparation costs other than attorney's fees. The placement of the provision in section 701, which defines the authority of the head of the purchasing agency or chief procurement officer to resolve protested solicitations, as well as the plain languagecosts in connection with the solicitation, including bid preparation costs other than attorney's feesdemonstrate that the provision has no applicability to this court's authority to award attorney's fees incurred in the protest. The provision, by its clear and unambiguous terms, refers to attorney's fees incurred in the solicitation, not the protest, [26] and is a restriction on the authority of the head of the purchasing agency and the chief procurement officer. Nowhere in the Code is the award of attorney's fees incurred in a protest expressly prohibited. Arguably, however, such an award is implicitly prohibited by HRS § 103D-704, which provides: The procedures and remedies provided in this part, and the rules adopted by the policy office, shall be the exclusive means available for persons aggrieved in connection with the solicitation or award of a contract, a suspension or debarment proceeding, or in connection with a contract controversy, to resolve their claims and differences. The contested case proceedings set out in chapter 91 shall not apply to protested solicitations and awards, debarments or suspensions, or the resolution of contract controversies. We have often stated that: In construing statutes, a court's primary objective is to ascertain and give effect to the intention of the legislature as gleaned primarily from the language contained in the statute itself.... Accordingly, [i]t is well settled that this court is bound by the plain, clear and unambiguous language of a statute unless the literal construction would produce an absurd and unjust result, and would be clearly inconsistent with the purposes and policies of the statutes.... The foregoing does not preclude an examination of sources other than the language of the statute itself even when the language appears clear upon perfunctory review.... Were this not the case, a court may be unable to adequately discern the underlying policy which the legislature seeks to promulgate and, thus, would be unable to determine if a literal construction would produce an absurd or unjust result, inconsistent with the policies of the statute. Survivors of Medeiros v. Maui Land & Pineapple Co., 66 Haw. 290, 297, 660 P.2d 1316, 1321 (1983) (citations omitted); see also Konno, 85 Hawai`i at 71, 937 P.2d at 407; Shipley v. Ala Moana Hotel, 83 Hawai`i 361, 365, 926 P.2d 1284, 1288 (1996); Bragg v. State Farm Mut. Auto. Ins. Co., 81 Hawai`i 302, 306, 916 P.2d 1203, 1207 (1996); Sato v. Tawata, 79 Hawai`i 14, 17, 897 P.2d 941, 944 (1995). We believe that a literal construction of HRS § 103D-704, on the facts of this case, produces an unjust result, inconsistent with the policies of the procurement code. The procurement code was enacted in an attempt to address real problems making daily headlines. The Code prescribes strict procedures for the procurement of goods and services by State agencies, for the purposes of: (1) providing fair and equitable treatment of all persons dealing with the government procurement system; (2) fostering broadbased competition among vendors while ensuring accountability, fiscal responsibility, and efficiency; and (3) increasing public confidence in the integrity of the system. There are only two mechanisms for enforcing the provisions of the code. Intentional violation of its provisions by any person is a misdemeanor, and in addition to the applicable criminal penalty, the violator is subject to removal from office and liable to the State for its costs incurred. HRS § 103D-106. Enforcement under this provision, like any criminal statute, is at the discretion of the prosecutor. The other enforcement mechanism is through protests by aggrieved participants in the process. The remedies available when a protest is sustained are limited; generally the solicitation must be canceled or revised to comply with the Code. In either case, though, the successful protestor has the remedy of an opportunity to participate in a fair procurement process and be awarded the contract if its bid or offer is the most advantageous to the State. Where, however, the contract has been awarded before the protest is decided, there is no remedy for the protestor who has proven that the process was in violation of the Code. After the award of the contract, the contract can only be ratified or terminated, with the relevant factors favoring ratification in direct relation to the progress made towards completion of the contract. Although ratification or termination of a contract found to have been awarded in violation of the Code may vindicate the public's interest in the integrity of the procurement process, neither remedy affords the protestor the opportunity to be awarded the contract based on the merits of its proposal. Thus, it is not the exclusive remedy provision of the Code that deprives a protestor of meaningful relief; in this case, CARL's lack of a remedy stems from Kane's unilateral, bad-faith, decision to award the contract to Ameritech in violation of HRS § 103D-701(f). The Code itself thus contains an inherent incentive for an agency to award the contract immediately upon receipt of a protest: it can avoid the delay and expense that would be incurred in the cancellation and resolicitation should the protestor prevail. In addition, there is a built-in disincentive for an aggrieved participant to pursue a protest past the agency stage once the contract has been awarded: regardless of whether it is successful in proving a violation of the code, and no matter how egregious the violation, the only potential relief available to the protestor is recovery of its bid preparation costs. Requiring such a protestor to bear its own attorney's fees strengthens the financial disincentive to pursue a protest once the contract has been awarded, and essentially nullifies the most effective enforcement mechanism in the Code. In the long term, this can only decrease competition among vendors. Moreover, if the procedural provisions of the Code are unenforceable except at the discretion of the prosecutor, the Code cannot [i]ncrease public confidence in the integrity of the system or, as it demonstrably failed to do in the instant case, [p]rovide for fair and equitable treatment of all persons dealing with the government procurement system. Although the Code does not expressly authorize the award of attorney's fees under the circumstances of the instant case, interpreting HRS § 103D-704 to preclude such an award renders the Code incapable of furthering the purposes and policies that required its enactment. We do not believe that the legislature intended this result. The remedy provisions of the procurement code were intended to encourage the settlement of disputes through administrative processes to save time and expense for both parties while preserving all rights and maintaining fairness.  Sen. Stand. Comm. Rep. No. S8-93, in 1993 Senate Journal, at 39 (emphasis added). Fairness is not maintained, however, by shifting the economic burden of enforcing the Code to a protestor, who, because of bad-faith actions of the contracting official, has been deprived of any means of being made whole following fruitless participation in an unlawfully conducted procurement process. Although the Code specifically addresses the appropriate remedy when the vendor awarded the contract acts fraudulently or in bad faith, HRS § 103D-707(2), it does not appear that the legislature contemplated a purchasing agency's bad-faith violation of the procedural requirements designed to promote fairness and public confidence in the integrity of the procurement code. We have held that, [a]mong courts' inherent powers are the powers to create a remedy for a wrong even in the absence of specific statutory remedies, and to prevent unfair results. Richardson v. Sport Shinko (Waikiki Corporation), 76 Hawai`i 494, 507, 880 P.2d 169, 182 (1994) (citations omitted). This inherent power is codified in HRS § 602-5(7), which acknowledges this court's jurisdiction and power [t]o make and award such judgments, decrees, orders and mandates, issue such executions and other processes, and do such other acts and take such other steps as may be necessary to carry into full effect the powers which are or shall be given to it by law or for the promotion of justice in matters pending before it.  (Emphasis added.) Accordingly, because the legislature has failed to provide any statutory remedy for bad faith conduct on the part of the purchasing agency, and because requiring the protestor to bear the financial burden of enforcing the Code under these circumstances undermines the purposes of the Code, we hold that a protestor is entitled to recover its attorney's fees incurred in prosecuting its protest if: (1) the protestor has proven that the solicitation was in violation of the Code; (2) the contract was awarded in violation of HRS § 103D-701(f); and (3) the award of the contract was in bad faith. See, e.g., Bolander & Sons v. City of Minneapolis, 438 N.W.2d 735, 738-39 (Minn.Ct.App.1989) (holding that where the contract is currently being performed, the successful protestor is entitled to its costs in preparing its unsuccessful bid and its expenses, including attorney's fees), aff'd, 451 N.W.2d 204 (Minn. 1990).