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

Heading: Jurisdiction to Impose Remedies

Text: The Hearings Officer concluded that [t]he scope of the Hearings Officer's ability to fashion a remedy in the instant case is governed by section 103D-707, concerning remedies after an award. COL 22; see also COL 25 & 27. The Hearings Officer also concluded that, in order to determine whether the contract should be ratified or terminated pursuant to HRS § 103D-707, the best interests of the State must be considered. COL 26. Finally, the Hearings Officer concluded that he was without authority to determine the best interests of the State and that, therefore, should he conclude that the award of the contract was in violation of law, he was required to remand the matter back to the contracting officer to make this determination and to decide whether to ratify or terminate the contract. COL 28-30. The conclusion that a remand was necessary was based on HAR § 3-126-38(1), which provides: Upon finding after award that a state or county employee has made an unauthorized award of a contract or that a solicitation or contract award is otherwise in violation of law where there is no finding of fraud or bad faith, the chief procurement officer or the head of a purchasing agency may ratify or affirm the contract or terminate it in accordance with this section after consultation with the respective attorney general or corporation counsel, as applicable. (Emphasis added.) The Hearings Officer's interpretation of the regulation is incorrect and leads to the absurd result that, where the head of a purchasing agency has awarded a contract in violation of law, even if the action was in bad faith, he or she has exclusive jurisdiction to fashion the remedy for his or her own wrongdoing. The Procurement Code has already been declawed by the addition of the exclusive remedy provision, HRS § 103D-704; the Hearings Officer's interpretation of HAR § 3-126-38 would render it toothless as well. Neither the language of HRS §§ 103D-705 to 103D-707 nor the language of HAR 3-126-38(1), however, requires that interpretation. HRS § 103D-705 provides that the remedy provisions, HRS §§ 103D-706 and 707, apply where it is determined administratively, either by the head of the purchasing agency, pursuant to HRS § 103D-701, or by the Hearings Officer, pursuant to HRS § 103D-709, or judicially, pursuant to HRS § 103D-710, that the solicitation or award of a contract is in violation of law. HRS § 103D-707 provides that, where that determination is made after an award, the contract may be ratified or terminated. By its plain language, HAR § 3-126-38(1) clearly applies only where the head of the purchasing agency or the chief procurement officer finds, pursuant to HRS § 103D-701, that the protested solicitation or award was in violation of law: Upon finding after award [that the solicitation or award is in violation of law,] the chief procurement officer or the head of a purchasing agency may [ratify or terminate the contract]. Where the chief procurement officer or head of a purchasing agency finds that there was no violation of law, and, after de novo review, pursuant to HRS § 103D-709, a Hearings Officer finds otherwise, HAR § 3-126-38 has no application. In that case, by a common sense reading of HRS §§ 103D-705 and 103D-707, it is incumbent upon the Hearings Officer to determine whether to ratify or terminate the contract. We hold, therefore, that COL 28 and 29 are wrong and vacate that part of the August 15, 1996 order remanding the case to the Library to ratify and affirm the contract, or terminate the contract as provided for in HRS § 103D-707(1)(A) and (B). We instead remand to the Hearings Officer to make that determination. Although the Hearings Officer may consider the factors enumerated in HAR 3-126-38(4), supra, those factors are not the exclusive determinants of the best interests of the State. To determine whether the ratification of an unlawfully awarded contract is in the State's best interests, consideration must also be given to the State's interest in achieving the purposes of the procurement code, which are revealed by its legislative history: The purpose of this bill is to revise, strengthen, and clarify Hawaii's laws governing procurement of goods and services and construction of public works. Specifically, the bill establishes a new comprehensive code that will: (1) Provide for fair and equitable treatment of all persons dealing with the government procurement system; (2) Foster broad-based competition among vendors while ensuring accountability, fiscal responsibility, and efficiency in the procurement process; and (3) Increase public confidence in the integrity of the system. Sen. Stand. Comm. Rep. No. S8-93, in 1993 Senate Journal, at 39. As the Supreme Court of New Mexico explained in Planning & Design Solutions v. City of Santa Fe, 118 N.M. 707, 885 P.2d 628 (1994): The purposes of the Procurement Code are to provide for the fair and equitable treatment of all persons involved in public procurement, to maximize the purchasing value of public funds and to provide safeguards for maintaining a procurement system of quality and integrity. Of all the interests involved in competitive bidding, the public interest is the most important. An economical and efficient system of procurement directly benefits taxpayers.... It is certainly in the public interest that the [State] abide by the procurement rules it has set for itself. Id. at 710, 885 P.2d at 631 (citations and internal quotation marks omitted). The public interest in the integrity of the procurement code cannot be ignored when determining whether it is in the best interests of the State to ratify an unlawfully awarded contract. [23]