Court Opinion

ID: 4035318
Source: CourtListenerOpinion
Date Created: 2016-09-20 21:05:37.829385+00
Date Added: 2024-06-11T14:29:34.824012
License: Public Domain

***FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER***

                                                             Electronically Filed
                                                             Supreme Court
                                                             SCWC-14-0001160
                                                             20-SEP-2016
                                                             07:56 AM

          IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

                               ---o0o---

                           SCWC-14-0001160

 CERTIFIED CONSTRUCTION, INC., Petitioner/Petitioner-Appellant,

                                   v.

NANCY CRAWFORD, as Director of the Department of Finance, County
           of Hawaiʻi, Respondent/Respondent-Appellee.
                      (CIVIL NO. 14-1-0303)

                           SCWC-14-0001190

         In the matter of CERTIFIED CONSTRUCTION, INC.,
            Petitioner/Petitioner-Appellant/Appellee,

                                   v.

NANCY CRAWFORD, as Director of the Department of Finance, County
      of Hawaiʻi, Respondent/Respondent-Appellee/Appellant.
                      (CIVIL NO. 14-1-0200)

                 SCWC-14-0001160 & SCWC-14-0001190

        CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
             (CAAP-14-0001160 and CAAP-14-0001190;
              CIVIL NOS. 14-1-0303 and 14-1-0200)

                          SEPTEMBER 20, 2016

 RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
     ***FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER***

                  OPINION OF THE COURT BY POLLACK, J.

            This case arises from the disqualification of

Certified Construction, Inc.’s (Certified or CCI) bid proposal

on a public works project by the County of Hawaiʻi (County).1

After Certified’s bid was disqualified, Certified submitted a

bid protest to the County.       The Office of Administrative

Hearings determined that Certified’s protest was a challenge to

the contents of the bid solicitation rather than to the

disqualification of its bid proposal, and thus it concluded that

Certified’s protest was not timely and dismissed the case.               On

judicial review, the Circuit Court of the Third Circuit (circuit

court) disagreed, finding that the Office of Administrative

Hearings had jurisdiction to consider Certified’s challenge, and

the case was remanded for further proceedings.           On remand, the

merits of Certified’s challenge to its disqualification were

reviewed by a second hearings officer who determined that

Certified failed to demonstrate entitlement to relief.             The

decision of the second hearings officer was subsequently

affirmed on review by the circuit court.          Following the circuit

court’s second order, Certified appealed to the Intermediate

Court of Appeals (ICA) from the circuit court’s second order,

      1
            Nancy Crawford as Director of the Department of Finance of the
County of Hawaiʻi is the respondent in this case.

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and the County appealed to the ICA from the circuit court’s

first order.     The ICA determined that Certified’s protest was

untimely, and thus the ICA concluded the Office of

Administrative Hearings was without jurisdiction to consider

Certified’s protest.

             We conclude that the ICA erred in determining that

Certified’s bid protest challenged the contents of the County’s

bid solicitation; instead, Certified’s protest challenged the

County’s disqualification of its bid proposal.            Accordingly, we

vacate the ICA judgment on appeal and remand the case to the ICA

to address the other issues presented by the parties in the

consolidated appeal.

                                I. BACKGROUND

             On December 24, 2013, the County issued a Proposal and

Specifications (Bid Solicitation) for “Reroofing for Fire

Maintenance Shop and Fire Dispatch/Warehouse,” Job No. B-4190

(Project).     The Bid Solicitation solicited bids for the “new

replacement roof, purlins, roof insulation, flashing,

ventilators, gutters, downspouts, structural steel, painting and

related work.”2      The first page of the Bid Solicitation provides

that in order to be eligible to bid, a bidder must possess a

     2
             Sealed bids were to be accepted until February 6, 2014.

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General Contractor’s License B, and, in boldface, it directs

bidders to see the attached special notice to bidders:

            To be eligible to submit a bid, the Bidder must possess a
            valid State of Hawaiʻi, General Contractor’s License “B”.
            See Special Notice to Bidders for additional licensing
            requirements.

            The “Special Notice” to bidders first provides a

“reminder note,” explaining that work must be performed by

appropriately licensed entities and that a general contractor

may not act as a specialty contractor in areas in which it has

no license.    The Special Notice identified specialty contractor

classifications C-33, C-44, and C-48 as qualified to perform the

work and meeting the minimum licensing requirements.

Instructions preceded the listing of the specialty contractors

and explained that although the listing provided the minimum

requirements and no additional specialty contractor

classifications were required, the Bidder may list additional

subcontractors at its discretion.3        Following the listing of the

      3
            The Instructions explaining the listing of the specialty
contractors stated the following in boldface:

            Each of the following specialty contractor classifications
            listed in the table below have been determined by the
            County of Hawaiʻi as qualified to perform all of the work on
            this project based on the project’s scope and the County’s
            understanding of the State’s licensing requirements and
            specialty contractor classifications’ scopes of work. By
            way of the minimum licensing requirement stated for this
            project, no additional specialty contractor classifications
            are required to perform the work; however, the Bidder may
            list additional licensed subcontractors at its discretion.

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specialty contractors, there were “special instructions to

bidders regarding specialty contractor classifications and

regarding joint contractors and subcontractors.”4            The Special

     4
          The special instructions included the following:

          SPECIAL INSTRUCTIONS TO BIDDERS REGARDING SPECIALTY
          CONTRACTOR CLASSIFICATIONS AND REGARDING JOINT CONTRACTORS
          & SUBCONTRACTORS:

          . . . .

          2) In the circumstance where a specialty contractor
          classification license listed in the above table may be
          deemed unnecessary by a Bidder due to its intent to employ
          a plausible alternative means or method, the Bidder shall
          in its Proposal clearly state such intent and provide a
          detailed plan that meets with the satisfaction of the
          Director. The Director reserves the sole discretion and
          right to determine whether the Bidder’s proposed
          justification for not listing the required license is
          acceptable.

          3) In the circumstance where the Bidder is licensed in one
          or more specialty contractor classifications required of
          the project (whether automatically as a general engineering
          contractor “A”, general building contractor “B”, or
          outright) and it Intends to perform all or some of the work
          of those classifications using its own workforce, the
          Bidder shall, in its Proposal, list itself accordingly and
          in consideration of the balance of the instructions herein
          provided.

          4) In the circumstance where a specialty contractor
          classification required in the above table may, in part or
          in whole (as applicable to the classification’s scope of
          work), be within the licensed scope of work of another
          listed specialty contractor classification (e.g.
          overlapping scopes of licenses), the Bidder shall clearly
          delineate in its Proposal the extent of each
          subcontractor’s responsibility on the project such that the
          Director can reasonably determine which classification is
          responsible for the corresponding scopes. Where a listed
          specialty contractor classification is rendered completely
          unnecessary due to overlapping scopes of work, the Bidder,
          in its Proposal, shall clearly state such as the reason for
          not listing that respective entity in its Proposal.

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Notice also stated the manner in which challenges to the Special

Notice should be made and indicated that, if no objections were

received, bidders would be presumed to be in agreement with the

specifications of the Special Notice:

          Anyone who disagrees with the determination in the above
          table shall submit their written objection to the Director
          identifying the specialty contractor classification(s) in
          question and the justification(s) for such position at
          least 10 consecutive calendar days prior to bid opening.
          If no such written objections are received by the Director
          prior to such date, it will be presumed that all Bidders
          and affected parties are in agreement with the listing set
          forth above.

Thus, objections by bidders to the instructions in the Special

Notice were required to be submitted at least ten days prior to

bid opening.

          On February 6, 2014, bids were opened and evaluated,

and Certified submitted the lowest bid for the Project.            By a

letter dated February 14, 2014, from the Director of the

Department of Public Works, the County notified Certified that

its bid was disqualified pursuant to Section 2.2-6 of the

General Requirement and Covenants of the Department of Public

Works and Hawaiʻi Administrative Rules (HAR) § 3-122-33(d)(5).

The disqualification letter stated that the Project required a

C-44 license and that Certified’s proposal failed “to list a C-

44 – Sheet metal subcontractor or to describe an alternate means

and methods by which the work required of this project covered

by this license class would otherwise be legally executed.”

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            Certified filed a protest with the County by a letter

dated February 19, 2014.      Certified’s challenge was made

pursuant to Hawaiʻi Revised Statutes (HRS) § 103D-71, and it

protested the County’s “disqualification of CCI and rejection of

CCI’s bid” for the Project.      Certified’s challenge asserted that

the sheet metal work required for the Project could be performed

under Certified’s C-42 or C-44A licenses.         Certified also argued

that nothing in the Special Notice strictly required a C-44

license.    Instead, Certified argued, the Special Notice stated

only that the County believed C-44 contractors were qualified to

perform certain work for the Project.        Certified noted, “[T]hat

the county believes a certain type of construction work can be

performed under a particular license in no way means that the

same work cannot be performed under another specialty contractor

license.”   The County subsequently upheld the disqualification

of Certified’s bid as being nonresponsive to the Bid

Solicitation because Certified “failed to properly propose the

change in specialty licenses in its bid documents.”

            Certified filed a request for a hearing with the

Office of Administrative Hearings, Department of Commerce and

Consumer Affairs (OAH).     Certified filed a motion for partial

summary judgment, and the County filed a motion for summary

judgment contending, among other things, that Certified’s bid

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was nonresponsive.    The County also filed a motion to dismiss

Certified’s request for a hearing, which was granted by the

Hearings Officer.    In the “Hearings Officer’s Findings of Fact,

Conclusions of Law and Decision,” the Hearings Officer concluded

that “[t]aken as a whole” the Bid Solicitation required a C-44

license” even though the “[t]he Special Notice to Bidders did

not specifically say that a C-44 specialty contractor license

was required.”    Accordingly, the Hearings Officer concluded that

“it was incumbent upon [Certified] to file a written objection

ten calendar days prior to bid opening” in order to challenge

the requirement.    Because Certified did not file a protest until

after the bid opening--when its bid was disqualified--the

Hearings Officer concluded that Certified’s protest was untimely

and the OAH was without jurisdiction to consider the challenge.

          Certified appealed the dismissal of its protest to the

circuit court.    The circuit court held a hearing on Certified’s

appeal and issued its June 16, 2014 ruling (first order).5            The

circuit court found that the Special Notice did not require a C-

44 license for completion of the Project.         The circuit court

also found that Certified’s protest of the disqualification of

its bid was based in part on its position that it could properly

     5
          The Honorable Glenn S. Hara presided.

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perform the Project using its C-42 and C-44A licenses instead of

the C-44 license.    Accordingly, the circuit court determined

that the Hearings Officer’s conclusion that a C-44 specialty

contractor license was required by the Solicitation was clearly

erroneous and that Certified’s bid protest was thus timely

submitted.    Given that the circuit court concluded that the OAH

had jurisdiction to review Certified’s protest of the

disqualification of its bid, the circuit court vacated the

Hearings Officer’s decision and remanded the matter for further

proceedings.

             On remand to the OAH, the merits of Certified’s

protest were considered, and the Hearings Officer ruled that

Certified failed to demonstrate entitlement to relief.

Certified appealed this decision to the circuit court.            The

circuit court affirmed this determination (second order), and

Certified then appealed from the second order to the ICA.

Subsequently, the County separately appealed to the ICA from the

circuit court’s first order, which concluded that OAH had

jurisdiction to consider the merits of Certified’s challenge to

the disqualification of its bid and remanded the case to the OAH

for further proceedings.

             The ICA consolidated both appeals under appeal number

CAAP-14-0001160.    With regard to its appeal of the first order,

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the County argued that the circuit court erred when it

determined that Certified’s protest was timely filed and that

the OAH had jurisdiction to review the protest.          The County’s

position was that the Hearings Officer correctly determined that

Certified’s protest was an attack on the contents of the Bid

Solicitation.   The County contended that Certified’s argument

that the Special Notice reflected the County’s understanding of

licensing requirements was a “direct[]” challenge of the

contents of the Bid Solicitation.

          Certified countered that it challenged only the

County’s disqualification of its Bid Solicitation rather than

its contents, as the circuit court correctly determined.

Certified maintained that an attack on the contents of a

solicitation occurs when a bid solicitation expressly requires

something and the protestor contends that the stated requirement

is unlawful or otherwise invalid.        Certified argued that it did

not challenge the contents of the Bid Solicitation because in

contending that the Bid Solicitation did not require the use of

a C-44 licensee, it was not attacking the solicitation itself.

          The ICA concluded that the OAH was without

jurisdiction to consider Certified’s protest as Certified’s bid

protest was untimely under HRS § 103D-701(a).          The ICA noted

that, regardless of whether or not the Bid Solicitation required

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a C-44 licensed sheet metal contractor, the Bid Solicitation

required bidders to explain in their proposals how they would

accomplish the scope of work without such a specialty

contractor.      The ICA also noted that Certified’s protest letter

ignored Special Instruction #2, and the ICA observed that

“throughout the course of this litigation [Certified] fails to

address the Special Instructions and instead simply argues that

the designation in the solicitation of a C-44 licensed sheet

metal contractor was wrong or not required.”             Therefore, the ICA

explained, Certified “seeks to revise the Bid Solicitation by

completely omitting the requirements under Special Instruction

#2.”    The ICA remanded the case to OAH for dismissal for lack of

jurisdiction.

             Associate Judge Daniel R. Foley dissented from the

majority opinion.       In his dissent, Judge Foley indicated that he

would affirm the circuit court finding that Certified’s protest

was timely submitted.        Judge Foley reasoned that Certified’s

protest letter challenged the rejection and disqualification of

its bid as non-responsive; accordingly, he concluded that

Certified’s protest letter challenged the disqualification of

its bid rather than the contents of the Bid Solicitation.               The

dissent then proceeded to consider and indicate how it would

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have ruled upon the remainder of the issues on the consolidated

appeal.6

                         II. STANDARD OF REVIEW

            The appellate standard of review of an administrative

hearings officer’s decision is set forth in HRS § 103D–710(e)

(2012).    S. Foods Grp., L.P. v. State, Dep’t of Educ., 89 Hawaiʻi

443, 452, 974 P.2d 1033, 1042 (1999).            HRS § 103D-710(e)

provides the following:

            No later than thirty days from the filing of the
            application for judicial review, based upon review of the
            record the circuit court may affirm the decision of the
            hearings officer issued pursuant to section 103D-709 or
            remand the case with instructions for further proceedings;
            or it may reverse or modify the decision and order if
            substantial rights may have been prejudiced because the
            administrative findings, conclusions, decisions, or orders
            are:

             (1) In violation of constitutional or statutory
             provisions;

             (2) In excess of the statutory authority or jurisdiction
             of the chief procurement officer or head of the purchasing
             agency;

             (3) Made upon unlawful procedure;

             (4) Affected by other error of law;

             (5) Clearly erroneous in view of the reliable, probative,
             and substantial evidence on the whole record; or

             (6) Arbitrary, or capricious, or characterized by abuse of
             discretion or clearly unwarranted exercise of discretion;

            . . . .

      6
            This Opinion addresses only the timeliness of Certified’s protest
as the ICA majority did not address the other issues raised in the
consolidated appeal.

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HRS § 103D-710(e).      “The existence of jurisdiction is a question

of law that [this court] review[s] de novo under the right/wrong

standard.”     Pac. Lightnet, Inc. v. Time Warner Telecom, Inc.,

131 Hawaiʻi 257, 272, 318 P.3d 97, 112 (2013) (alterations in

original) (quoting Kepoʻo v. Kane, 106 Hawaiʻi 270, 281, 103 P.3d
939, 950 (2005)).

                               III. DISCUSSION

             The dispositive question raised in Certified’s

application for writ of certiorari is whether the ICA erred in

its determination that Certified’s bid protest to the

disqualification of its bid was timely made.

             Under HRS § 103D-701(a) (2012), “[a]ny actual or

prospective bidder, offeror, or contractor who is aggrieved in

connection with the solicitation or award of a contract may

protest to the chief procurement officer or a designee as

specified in the solicitation.7         The timeframe for submission of

     7
             HRS § 103D-701(a) states as follows:

             Any actual or prospective bidder, offeror, or contractor
             who is aggrieved in connection with the solicitation or
             award of a contract may protest to the chief procurement
             officer or a designee as specified in the solicitation.
             Except as provided in sections 103D-303 and 103D-304, a
             protest shall be submitted in writing within five working
             days after the aggrieved person knows or should have known
             of the facts giving rise thereto; provided that a protest
             of an award or proposed award shall in any event be
             submitted in writing within five working days after the
             posting of award of the contract under section 103D-302 or

                                                               (continued. . .)
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a protest is dependent on the particular grievance asserted.

Generally, a protest must be submitted “within five working days

after the aggrieved person knows or should have known of the

facts giving rise thereto.”       HRS § 103D-701(a).      If the protest

is from an award decision, the statute specifically provides

that the protest must be submitted within five working days

after the posting of the award.        Id.   If a protest challenges

the content of a solicitation, the statute specifies that the

protest must be submitted before the date set for the receipt of

offers.   Id.      With regard to challenges to the content of the

solicitation, the statute indicates the chief procurement

officer would not have jurisdiction to review the protest if the

protest was not submitted prior to the date set for offers to be

made:   “[N]o protest based upon the content of the solicitation

shall be considered unless it is submitted in writing prior to

the date set for the receipt of offers.”          Id.

            In this case, Certified submitted its protest within

five days of the County’s disqualification of its bid, which was

(. . .continued)

            103D-303, if no request for debriefing has been made, as
            applicable; provided further that no protest based upon the
            content of the solicitation shall be considered unless it
            is submitted in writing prior to the date set for the
            receipt of offers.

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after the date set for the receipt of offers.8           Thus, whether

Certified’s protest was timely under HRS § 103D-701(a) depends

on whether its protest is considered a challenge to the

disqualification of its bid or as a challenge to the contents of

the Bid Solicitation.      In its protest letter, Certified stated

that the purpose of its letter was to protest the County’s

“disqualification of CCI and rejection of CCI’s bid.”

Certified’s protest does not challenge or seek modification of

the requirements of the Bid Solicitation; rather, it explains

Certified’s interpretation of the requirements of the Bid

Solicitation and why it satisfied the Bid Solicitation.             Indeed,

Certified maintained in its letter that the Special Notice

stated only that the County “believes that C-44 contractors are

qualified to perform certain work for the project based on the

County’s understanding of the State’s licensing requirements.”

However, Certified argued, “[T]hat the county believes a certain

type of construction work can be performed under a particular

license in no way means that the same work cannot be performed

under another specialty contractor license.”           Thus, Certified’s

protest challenged the disqualification of its bid.

      8
            It is noted that the Special Notice specifically required
protestations to the contents of the Special Notice to be made “at least 10
consecutive calendar days prior to bid opening.”

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          Additionally, the terms of the Special Notice itself

further support Certified’s position that it challenged the

disqualification of its bid rather than the contents of the

Special Notice.    The Special Notice states, if no written

objections to the contents were received prior to the deadline

of ten calendar days prior to bid opening, “it will be presumed

that all Bidders and affected parties are in agreement with the

listing set forth above.”      Thus, under the terms of the Special

Notice, it should have been presumed that Certified was in

agreement with the requirements of the Special Notice.

          Although Certified may have had a different

interpretation of the Bid Solicitation than the one taken by the

Director of the Department of Public Works responsible for

reviewing its bid, “[n]owhere in the letter [did Certified] seek

revision of any solicitation term.”        Bombardier Transp.

(Holdings) USA Inc. v. Dir., Dep’t of Budget & Fiscal Servs.,

128 Hawaiʻi 413, 418, 289 P.3d 1049, 1054 (App. 2012) (holding

that a challenge to the rejection of a bid proposal was a

challenge to the rejection of the proposal rather than to the

bid solicitation).    Thus, Certified challenged the

disqualification of its bid rather than the contents of the Bid

Solicitation.   Certified’s protest to the disqualification of

its bid was timely made as it was submitted within five working

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days of the County’s letter communicating the disqualification

to Certified.     See HRS § 103D-701(a) (“[A] protest shall be

submitted in writing within five working days after the

aggrieved person knows or should have known of the facts giving

rise thereto . . . .”).

            The ICA majority concluded that Certified’s bid

protest was “based upon the content of the Bid Solicitation

because it necessarily challenges and seeks to omit material

terms of the Bid Solicitation,” including Special Instruction

#2.   However, Certified did not seek to modify, erase, or

dispute the appropriateness of Special Instruction #2; rather,

it sought to challenge the disqualification of its bid based on

what it perceived as an erroneous interpretation of Special

Instruction #2 by the County.         Regardless of the actual meaning

of Special Instruction #2 and Certified’s compliance or

noncompliance with that term, Certified did not seek a revision

of any terms of the Bid Solicitation.          In other words, merely

because a protest implicates an interpretation of the bid

solicitation, it does not mean that it necessarily challenges

the contents of the bid solicitation.          There is a significant

distinction between the contention that the terms of a bid

solicitation are invalid and the contention that the terms of

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the solicitation are being misinterpreted and thus misapplied.

This case clearly involves the latter situation.9

                              IV. CONCLUSION

            For the reasons discussed, Certified’s protest to the

disqualification of its bid was timely made, and the OAH had

jurisdiction to consider the merits of Certified’s protest.                 The

ICA’s April 20, 2016 judgment on appeal is vacated, and the case

is remanded to the ICA to address the other issues presented in

the consolidated appeal.

Jeffre W. Juliano and                  /s/ Mark E. Recktenwald
Kristi L. Arakaki
                                       /s/ Paula A. Nakayama
for petitioner
                                       /s/ Sabrina S. McKenna
Lerisa L. Heroldt and
Laureen L. Martin                      /s/ Richard W. Pollack
for respondent                         /s/ Michael D. Wilson

      9
            It is noted that this case is distinguishable from Ludwig
Constr., Inc. v. Cty. of Haw., Dep’t of Public Works, PCX-2009-6 (OAH
December 21, 2009), which was discussed by the parties in their briefs. In
Ludwig, a bid was disqualified because it failed to list a C-37 license even
though the County’s solicitation required a C-37 license. Ludwig, PCX-2009-
6, at 5. Following the disqualification of its bid, the bidder in Ludwig
protested the disqualification of its bid, arguing that “[i]n the bid
documents the county asked to use an improper license class on this project.”
Id. at 3 (alteration in original). Thus, the protest letter in Ludwig
challenged the contents of the bid solicitation for the project because it
argued that the requirement itself was improper.

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