Opinion
NO. 2013-CV-119
01-04-2016
XTL-NH, Inc. v. New Hampshire State Liquor Commission
ORDER
The Petitioner, XTL-NH ("XTL"), brought an action against the Respondents, the New Hampshire State Liquor Commission (the "Commission" or "NHSLC"), arising out of XTL's unsuccessful bid for a liquor-warehousing contract. XTL alleges that the bidding process by which the Commission awarded the contract to Exel, Inc. ("Exel") was unlawful under New Hampshire competitive bidding law. It moves for summary judgment on the first two elements of its promissory estoppel claim—promise and breach of promise—and on its declaratory judgment claim. The Commission cross-moves for summary judgment. Additionally, the Commission moves for clarification of the Court's October 28, 2015 Order, granting XTL's Motion In Limine to Exclude the Advice of Counsel at Trial. For the reasons stated in this Order, both Motions for Summary Judgment are DENIED, and the Commission's Motion for Clarification is DENIED.
I
On cross-motions for summary judgment, the Court must consider the evidence in the light most favorable to each party in its capacity as the non-moving party, and, if no genuine issue of material fact exists, determine whether the moving party is entitled to judgment as a matter of law. Granite State Mgmt. Res. v. City of Concord, 165 N.H. 277, 282 (2013). In order to defeat summary judgment, the non-moving party "must put forth contradictory evidence under oath, 'sufficient . . . to indicate that a genuine issue of fact exists so that the party should have the opportunity to prove the fact at trial . . . .'" Phillips v. Verax, 138 N.H. 240, 243 (1994) (quoting Dolan v. Maple Leaf Health Care Ctr., Inc., 119 N.H. 424, 425 (1979)). A fact is material "if it affects the outcome of the litigation under the applicable substantive law." Palmer v. Nan King Rest., Inc., 147 N.H. 681, 683 (2002). Mindful of this standard, the Court sets forth the pertinent, undisputed facts below.
II
On March 28, 2012, the Commission issued a Request for Proposal ("RFP") to solicit proposals from vendors for a long-term warehousing contract. (Galdieri Aff. in Supp. of XTL's Mot. Partial Summ. J. [hereinafter Galdieri Aff.] Ex. B., at NHSLC 000001.) The proposals were to instructed detail the submitting vendor's plan "for a comprehensive and efficient warehousing system" capable of meeting all of the Commission's needs. (Id. at NHSLC 000008.) The Commission was specifically interested in proposals that would be of the greatest benefit to the Commission. To this end, the RFP stated, "Vendors are encouraged to propose any arrangement of Warehouse services that will best meet the NHSLC needs as described [in the RFP]." (Id. at NHSLC 000023.) The RFP further encouraged proposals with "innovative ideas" where "the Vendor believes s/he is able to improve an operation or reduce a cost." (Id. at NHSLC 000015.)
The RFP established a question and answer process through which potential bidders could submit questions related to the RFP process that the Commission would publicly answer on its website. (Id. at NHSLC 000010-11.) The Commission's responses reiterated the RFP's desire for innovative proposals that would serve the Commission's best interests despite not strictly complying with the basic RFP requirements. For example, on May 1, 2012, the Commission clarified its answers to previous questions as follows:
The proposal must contain a written response to all portions of the RFP and appendices. The response shall at least be "understood," which means that the Vendor agrees and takes no exception to that portion of the RFP. Even where the RFP "requires" that a particular task be accomplished, the Vendor may take a clearly described exception and, if possible, suggest an alternative. The NHSLC may waive mandatory requirements and accept alternatives deemed to be in the best interest of the NHSLC.(Id. at NHSLC 000169.) A May 1, 2012 answer further stated that the "RFP contains a large number of basic, functional requirements that must be met in some fashion. There is, however, an opportunity for the Vendor to propose a solution that reaches the same result but takes a different path." (Id. at NHSLC 000198.)
After the question and answer process and subsequent submission of proposals, the RFP required the Commission to "conduct a comprehensive, fair and impartial review and evaluation of all qualifying Proposals." (Id. at NHSLC 000035.) It stated that the evaluation process "shall include, but not be limited to, a fair and impartial ranking of all qualified Proposals." (Id.) The RFP created the Evaluation Committee ("EC") to conduct the proposal review process and make an initial determination as to which proposal would best meet the Commission's needs. (Id.) While the RFP stated that "the NCSLC is under no obligation to select a successful Vendor or to award a contract upon receipt of Proposals," it required any contract award be to the "responsive and responsible Vendor or Vendors who submit the Proposal(s) that best meets the needs of the NHSLC and subsequently is successful in negotiating a contract with the NHSLC." (Id.) Finally, the RFP specified that the Commissioners "have discretion to draw their own fair and impartial conclusions in selecting the Proposal(s) that best meets the ends of the NHSLC." (Id. at NHSLC 000040.)
As part of the review process, the RFP delineated certain bid specifications and evaluation criteria. The RFP required the EC to first conduct a preliminary review of the proposals to determine whether they met the mandatory RFP requirements. Any proposals not satisfying those requirements were to be disqualified. After the preliminary review, the review process consisted of two phases: Phase I—Initial Analysis, Review, and Ranking; and Phase II—Vendor Presentation and Final Analysis, Review, and Ranking. (Id. at NHSLC 000036.)
Phase I specifically called for the EC to score and rank proposals based on the following criteria: (1) General; (2) Vendor Experience and Qualifications/Transition; (3) Vendor Financial Stability and Capacity; (4) Vendor Technical, Service, and Project Management Proposal/IT Competence; (5) Vendor Overall Solution; (6) Vendor Pricing and Innovation; and (7) Vendor References. (Id.) Three of those criteria—General, Vendor Financial Stability and Capacity, and Vendor References—were to be evaluated on a qualified or disqualified basis, while the remaining four criteria were to be assigned point values. (Id.)
The RFP described with additional detail the factors that the Commission would consider when awarding points for each point-based criterion. (Id. at NHSLC 000037-39.) For example, the "Vendor Experience and Qualifications/Transition" criterion description stated:
The Vendor understands and is committed to implement [sic] business relationships and protocols . . . . The Vendor has adequate warehousing and transportation knowledge and experience consistent with the nature and magnitude of the NHSLC's warehousing operation. . . . [T]he NHSLC will consider . . . [q]ualifications of candidates for key Vendor staff roles. . . . The Vendor has correctly estimated the magnitude of effort and resources necessary to provide a Warehouse, has demonstrated the ability and willingness to resolve unforeseen problems that may arise, and has shown skill in anticipating and averting potential disruption.(Id. at NHSLC 000037.) Similarly, the description of the "Vendor Overall Solution" criterion indicates:
The EC will evaluate the ability of the Vendor to properly . . . manage[] and track incoming and outgoing shipments of Product in the timeliest, efficient and cost effective [sic] manner. . . . The Vendor must demonstrate suitable financial strength, stability and capacity to undertake a sophisticated and capital intensive Warehouse operation with a high degree of performance and in a timely manner.(Id. at NHSLC 000038.) Additionally, the "Vendor Technical, Service, and Project Management Proposal/IT Competence" criterion required the EC to evaluate whether the vendor can satisfy all of the IT requirements in Appendix K of the RFP as well as the vendor's "ability to understand, implement, and support all MIS/computer/business protocols in a timely and skilled manner." (Id. at NHSLC 000037-38.)
During Phase II, the RFP provided that the EC could "require a Vendor to participate in oral and/or written presentations on any aspect of its Proposal" or "demonstrate any Product(s) and/or service(s) proposed." The purpose of this phase was "to clarify and expound upon information provided in the written Proposals." The EC could consider any additional information gained from this phase when assigning point values to each of the point-based criterion. (Id. at NHSLC 000040.) The RFP also permitted the EC to solicit Best and Final Offers ("BAFOs") "from Vendors who have submitted qualified Proposals and which have been determined to be reasonably possible of selection for a contract award." (Id. at NHSLC 000040-41.) The RFP required the EC to evaluate BAFOs against the criteria used in Phase I. (Id.)
After completing both phases, the EC was to submit its final scoring and recommendation to the Commission. However, the RFP anticipated that the EC's recommendation would not be conclusive because the Commissioners had "discretion to draw their own fair and impartial conclusion in selecting the Proposal(s) that best meets the needs of the NHSLC." (Id. at NHSLC 000040.) The RFP provided that the Commission would then select the desired vendor and engage in contract negotiations, which, if successful, would result in the contract award. (Id.)
Five vendors, including XTL and Exel, submitted proposals on June 7, 2012. (Galdieri Aff. Ex. H, at 12.) In its proposal, XTL indicated that each of the criterions was "understood in its entirety." (Fredericks Aff. in Supp. of NHSLC's Obj. to XTL's Mot. Partial Summ. J. [hereinafter Fredericks Aff.] Ex. 2, at NHSLC 003637-41.) As directed by the RFP, the EC performed a preliminary review of the proposals and advanced all of the proposals to Phase I of the proposal review process, which began shortly thereafter. (Galdieri Aff. Ex. H, at 13-21.) The EC initially ranked the proposals at the conclusion of Phase I on July 19, 2012. This initial ranking placed XTL's proposal first and Exel's proposal third. (Id. at 21.)
The EC then undertook Phase II, during which the vendors made proposal presentations. After the presentations, the EC eliminated one vendor and solicited BAFOs from the four remaining vendors, including XTL and Exel. XTL submitted its BAFO on August 3, 2012. (Id. at 21-25.) On November 2, 2012, the EC recommended to the Commission that Exel be awarded the contract. (Galdieri Aff. Ex. J.) On November 8, 2012, the Commissioners authorized the EC to engage in contract negotiations with Exel, and the Commission ultimately awarded Exel the contract on November 20, 2012. (Galdieri Aff. Ex. H, at 42, 44.)
After the Commission awarded the contract, the EC released a final memorandum on January 16, 2013, detailing its point awards for each selection criterion. The EC specifically represented that "the scoring other than [price] is subjective," and that it calculated the scores "based on objective data" even though "the ultimate conclusion is subjective." (Id. at 35.) The EC awarded XTL the highest score for the "Vendor Pricing and Innovation" criterion. (Id. at 40.) However, XTL received lower scores than Exel in the "Vendor Technical, Service, and Project Management Proposal/IT Competence" and "Vendor Overall Solution" criterions. (Id. at 37-38.)
With respect to the "Vendor Experience and Qualifications/Transition" criterion, which totaled 20 points, the EC broke down the point awards into four subparts: (a) understanding of and commitment to implementing business relationships and protocols, 3 points; (b) adequate warehousing and transportation knowledge and experience, 6 points; (c) qualifications of key staff, 4 points; and (d) correct estimate of effort and resources necessary, 7 points. (Id. at 36.) Similarly, the EC created more specific point values within the "Vendor Overall Solution" criterion, such as seven points for ability to manage services in a timely and efficient manner and four points for suitable financial strength and stability. (Id. at 37-38.)
EC member Peter Hastings also created a spreadsheet with categories "specific to the IT component" of the RFP, and the EC ultimately used the spreadsheet in evaluating the "Vendor Technical, Service, and Project Management Proposal/IT Competence" criterion. (Fredericks Aff. Ex. 6, Hastings Dep. 44:17—45:14.) The spreadsheet scored proposals based on the following sub-criteria: (a) construction risks; (b) equipment procurement risks; (c) integration risks; (d) level of automation; (e) proven experience; (f) level of IT support; (g) systems integration solution; (h) understanding of business requirements; (i) software solution; (j) flexibility; and (k) preparation for day one. (Galdieri Aff. Ex. H, at Ex. J.)
As a disappointed bidder, XTL brought the present action against the Commission alleging that the bidding process by which the Commission awarded the warehousing contract to Exel was unlawful under New Hampshire competitive bidding law. The procedural history is complex. The Commission moved for summary judgment in July 2014, arguing that sovereign immunity barred XTL's claims, both monetary and nonmonetary. This Court granted the motion in part holding that the waiver of sovereign immunity in RSA 491:8 extends only to suits seeking money damages for breach of contract. (Order, July 16, 2014, at 10.) The Court correspondingly held XTL could not maintain an action seeking the equitable remedy that the Court award the contract to XTL. Because a promissory estoppel claim is essentially a contract claim, the Court further held that XTL's promissory estoppel claim could be maintained under Marbucco Corp. v. City of Manchester, 137 N.H. 629 (1993).
In its present Motion for Partial Summary Judgment, XTL alleges that the Commission promised to facilitate a competitive bidding process that complied with New Hampshire law, specifically RSA 21-I:18, I(b), RSA 21-I:22-a, and RSA 21-I:22-b. XTL contends that these statutes required that the Commission use a competitive bidding process that employed known, objective evaluation criteria rather than subjective, unknown evaluation criteria. It maintains that the Commission's evidence establishes that 60 percent of the criteria the Commission relied upon were subjective in nature and that the Commission therefore violated its implicit promise to conduct a fair bidding process consistent with New Hampshire law. XTL therefore concludes that it has established two elements of its claim of promissory estoppel—a promise and a breach of that promise.
The Commission objects to XTL's motion and cross-moves for summary judgment on XTL's promissory estoppel claim and claim for lost profits. It first argues that XTL has not pled a cognizable promise to support its claim because no promise arises from the relevant competitive bidding statutes—RSA 21-I:18, I(b), RSA 21-I:22-a, and RSA 21-I:22-b. The Commission further argues that, even if there were a cognizable promise, XTL cannot establish a promissory estoppel claim because it cannot establish that it reasonably relied upon any such promise. Finally, the Commission maintains that, even if XTL could establish liability on the promissory estoppel claims, it is not entitled to lost profit damages because there is no evidence that the Commission acted in bad faith.
III
XTL is not entitled to partial summary judgment on its promissory estoppel claim because it cannot satisfy its burden of proving as a matter of law that the Commission breached any promise to comply with competitive bidding statutes by considering the subjective point-based selection criteria. XTL maintains the Commission breached its promise to run a lawful bidding process when it failed to rely solely on objective criteria and instead relied predominantly on subjective criteria during the evaluation process. XTL also contends that EC member Hastings' spreadsheet with scoring subcategories utilized evaluation criteria not clearly contained in the RFP. The Commission counters that when interpreting the statutes with sole reference to the public interest, the statutes intend to allow the RFP process to involve both objective and subjective components because subjective judgment is often necessary when procuring complex services at the best value. It further asserts that the sub-categories Hastings spreadsheet permissible because they were clearly drawn from the language of the RFP and corresponded to the general scoring criteria.
Pursuant to RSA 21-I:18, I(b), the Commission must use competitive bidding procedures to acquire services. As part of a competitive bidding process, any RFP greater than $35,000 "shall contain within the body of the document the objective criteria by which each submission will be reviewed, if there are particular requirements that will receive more weight in the review of the submission, and the standards upon which any award will be based." RSA 21-I:22-a. The Commission's awarding decision must not "be made on criteria that are unknown to the parties submitting bids," but the Commission is not precluded "from making judgments on the capabilities of vendors to complete the work requested if the option is clearly stated in the body of the document and is used as the reason for the award, if so stated." RSA 21-I:22-b.
The purpose of competitive bidding is "to invite competition, guard against favoritism, improvidence, extravagance, fraud and corruption, and . . . secure the best work or supplies at the lowest price practicable." Marbucco Corp. v. City of Manchester, 137 N.H. 629, 632 (1993) (quoting Gerard Constr. Co. v. City of Manchester, 120 N.H. 391, 396 (1980)). A central principle of competitive bidding is that all prospective bidders "have identical information upon which to submit a proposal." Gerard Constr. Co., 120 N.H. at 397.
"[C]ompetitive bidding statutes are intended for the benefit of property holders and taxpayers, not that of the bidders," and they "are therefore applied 'fairly and reasonably with sole reference to the public interest.'" Irwin Marine, Inc. v. Blizzard, Inc., 126 N.H. 271, 274 (1985) (quoting 3 E. McQuillin, Municipal Corporations § 28.45, at 144-45 (3d ed. Rev.1981)). However, the New Hampshire Supreme Court has also observed, "a more than incidental benefit of mandatory competitive bidding is a safeguarding of the interests of those who bid on public works." Gerard Constr. Co., 120 N.H. at 396.
In this case, XTL is not entitled to summary judgment on the breach element of its promissory estoppel claim because it cannot establish the breach of promise element as a matter of law. Nothing in the competitive bidding statutes prohibits an agency from making subjective judgments on capabilities of vendors to complete the requested work. That the Commission would do so was explicitly stated in the RFP. Therefore, the crux of the matter is how narrow the subjective criteria must be to provide adequate notice of the scoring criteria.
A
While RSA 21-I:22-a requires that the RFP contain "the objective criteria by which each submission will be reviewed," RSA 21-I:22-b does not preclude the Commission from "from making judgments on the capabilities of vendors to complete the work requested if the option is clearly stated in the body of the document," so long as the awarding decision is not "made on criteria that are unknown to the parties submitting bids." The language of these statutes clearly permits the possibility of using both objective criteria and subjective judgment when making the award decision.
This conclusion is particularly proper considering the statutes are for the benefit of the public, not the bidder, and applying these statutes "fairly and reasonably with sole reference to the public interest" in securing the best work at the lowest cost practicable and ensuring government entities do not engage in misconduct. Irwin Marine, Inc. v. Blizzard, Inc., 126 N.H. 271, 274 (1985) (quotation omitted); Marbucco, 137 N.H. at 632. Exercising some subjective judgment would most likely be requisite to selecting the best value proposal in cases similar to the present case because of the nature of the RFP, the complex services sought, and the innovative solutions requested. The RFP was not an invitation for bids ("IFB") that sought only to procure the service at the lowest cost. Rather, the RFP sought proposals by which the Commission could obtain the best value, which is consistent with the public's interest in securing the best work at the lowest cost practicable. This distinction is critical:
Implicit in the definition of an RFP is the underlying rationale that, in some types of competitive procurement, the agency may desire an ultimate goal but cannot specifically tell the offerors how to perform towards achieving that goal; thus, a ready distinction arises between an RFP and IFB. Typically, an IFB is rigid and identifies the solution to the problem. By definition, an invitation specifically defines the scope of the work required by soliciting bids responsive to the detailed plans and specifications set forth. . . . On the contrary, an RFP is flexible, identifies the problem and requests a solution. Consideration of a response to an IFB is controlled by cost, that is, the lowest and best bid whereas consideration of an offer to an RFP is controlled by technical excellence as well as cost.Sys. Dev. Corp. v. Dep't of Health and Rehab. Servs., 423 So.2d 433, 434 (Fla. Dist. Ct. App. 1982).
The RFP's intent to select the best value, as opposed to the lowest cost, is evident throughout the RFP. For example, the RFP stated, "Vendors are encouraged to propose any arrangement of Warehouse services that will best meet the NHSLC needs as described [in the RFP]." (Galdieri Aff. Ex. B, at NHSLC 000023.) Indeed, the RFP encouraged proposals with "innovative ideas" where "the Vendor believes s/he is able to improve an operation or reduce a cost." (Id. at NHSLC 000015.) Additionally, during the question and answer process, the Commission on several occasions stated variations of the following idea:
The proposal must contain a written response to all portions of the RFP and appendices. The response shall at least be "understood," which means that the Vendor agrees and takes no exception to that portion of the RFP. Even where the RFP "requires" that a particular task be accomplished, the Vendor may take a clearly described exception and, if possible, suggest an alternative. The NHSLC may waive mandatory requirements and accept alternatives deemed to be in the best interest of the NHSLC.(Id. at NHSLC 000169.) The RFP identified the Commission's needs and specific information sought in each proposal, but was flexible as to how the vendors could propose solutions to those needs. It encouraged innovative solutions, which indicates that it anticipated that the proposals would vary, perhaps dramatically. Considering the possibility of widely varying proposals with the complex warehousing service sought, any inability to judge a vendor's capability to complete the service as proposed would make it nearly impossible for the Commission to determine which proposal best meets the Commission's needs at the lowest cost. Some subjective judgment becomes necessary to reach a decision under such factual circumstances.
Indeed, the language of the RFP expressly indicated the EC would evaluate the point-based criteria according to the EC's judgment of the vendor's abilities. The factors detailed in the criteria descriptions relate, either expressly or implicitly, to the vendor's ability to complete the requested work. (Id. at NHSLC 000037-39.) For example, the description of the "Vendor Overall Solution" criterion indicates:
The EC will evaluate the ability of the Vendor to properly . . . manage[] and track incoming and outgoing shipments of Product in the timeliest, efficient and cost effective [sic] manner. . . . The Vendor must demonstrate suitable financial strength, stability and capacity to undertake a sophisticated and capital intensive Warehouse operation with a high degree of performance and in a timely manner.(Id. at NHSLC 000038 (emphasis added).) Similarly, the "Vendor Technical, Service, and Project Management Proposal/IT Competence" criterion required the EC to evaluate the vendor's "ability to understand, implement, and support all MIS/computer/business protocols in a timely and skilled manner." (Id. at NHSLC 000037-38 (emphasis added).)
The conclusion that the competitive bidding statutes permit some subjective judgment is also supported by the fact that, even with the presence of some subjectivity, the public's interest in deterring government misconduct may nonetheless be served. The statutes provide safeguards to achieve this end. Specifically, RSA 21-I:22-b permits the use of subjective judgment only "if the option is clearly stated in the body of the document," and further permits the Commission to only base awarding decisions on criteria known to the bidders. Indeed, a central principle of competitive bidding is that prospective bidders "have identical information upon which to submit a proposal." Gerard Constr. Co. v. City of Manchester, 120 N.H. 391, 397 (1980).
The parties do not dispute that the RFP clearly indicated that the Commission had the authority to exercise discretion in determining the winning vendor. The RFP stated that the Commissioners "have discretion to draw their own fair and impartial conclusions in selecting the Proposal(s) that best meets the ends of the NHSLC." (Galdieri Aff. Ex. B, at NHSLC 000040.) Therefore, all of the bidders, including XTL, were on notice of possible subjective judgment and chose to submit proposals regardless of that risk. Furthermore, the RFP clearly stated the Commission's needs, the requirements for and information sought in each proposal, and the selection criteria. There is no evidence that this information was not identically available to each bidder. Consequently, the RFP employed the required safeguards, and XTL cannot show that the RFP's call for subjective judgment was necessarily contrary to the public interest in deterring government misconduct.
Other jurisdictions have also concluded competitive bidding processes permit government entities to exercise subjective judgment as to the bidders' capabilities to complete the work even in cases involving IFBs. For example, the Nebraska Supreme Court has observed:
[A] public body has broad discretion in the awarding of public contracts. Initially that discretion allows a public body to determine whether a bidder is responsible. It also allows a public body to look beyond a bid's stated price to determine the true value of the bid. Stated otherwise, a public body has the authority to determine which of the responsible bidders has submitted the bid that offers the best value to its constituents. However, when responsible bidders submit identical bids, the public body's freedom of action is curtailed and it must award the contract to the lowest of the responsible bidders.673 N.W.2d 869, 889 (Neb. 2004). Similarly, the North Dakota Supreme Court has held that the applicable competitive bidding statutes permitted "some discretion" when awarding a contract to the "lowest responsible bidder" in order to allow the governing body "to consider the bidder's ability, capacity, reputation, experience, and efficiency." Baukol Builders, Inc. v. County of Grand Forks, 751 N.W.2d 191, 199 (N.D. 2008).
B
Since the Court concludes that the competitive bidding statutes permit some subjective criteria, the next question is how narrow the subjective criteria must be to afford the bidders notice and a fair understanding of the criteria. Although there is no New Hampshire precedent addressing this issue, the Court finds cases from other jurisdictions instructive and concludes that the selection criteria in these was were sufficiently narrow such that EC member Hastings' spreadsheet did not constitute a breach of promise as a matter of law.
In Families United of Washington Cty. v. Me. Dep't of Health and Human Servs, the Maine Superior Court approved of a similar procedure in which the awarding government entity assigned more detailed point standards corresponding to the RFP language but not expressly included in the RFP. No. AP-11-38, 2012 WL 1521496 (Me. Super. Mar. 27, 2012). In that case, the RFP stated that proposals would be evaluated on a 100-point scale with specific point allotments under three broad criterions. The RFP provided descriptions of each category, but did not articulate any subcategories. Id. Despite this, the evaluating team assigned weighted sub-categories within the broader categories. A disappointed bidder claimed that the "use of sub-categories not contained in the RFP constituted a flawed and unlawful procedure" because the RFP did not provide sufficient notice as to how the proposals would be judged with respect to each category. Id. The court rejected this claim reasoning that nothing in the rules "prevent[s] a review team from internally articulating, for the sake of clarity and consistency, the elements that make up each requirement" when those sub-categories "correspond[] to the general scoring categories and did not alter the overall criteria and weights contained in the RFP." Id. The court further observed that the sub-category approach was fair because it "ensured consistent and methodical evaluation of each applicant." Id. Similarly, in Transactive Corp. v. N.Y. State Dep't of Soc. Servs., the court concluded that the use of more particularized evaluation factors was permissible because "the 109 items were simply more specific factors subsumed within the five general criteria and were a reworking and reformatting of the specification matrix that was included in the RFP." 236 A.D.2d 48, 53 (N.Y. App. Div. 1997).
In the instant case, the selection criteria were sufficiently narrow to provide bidders notice of the factors to be evaluated, and the sub-categories set forth in EC memorandum and EC member Hastings' spreadsheet were permissible. The sub-categories of each of the general selection criterion corresponded with the language used in the RFP such that the sub-categories did not alter the general selection criteria. Indeed, the sub-categories are a method to create a more fair and consistent application of subjective criteria.
For example, the "Vendor Experience and Qualifications/Transition" criterion description stated:
The Vendor understands and is committed to implement [sic] business relationships and protocols . . . . The Vendor has adequate warehousing and transportation knowledge and experience consistent with the nature and magnitude of the NHSLC's warehousing operation. . . . [T]he NHSLC will consider . . . [q]ualifications of candidates for key Vendor staff roles. . . . The Vendor has correctly estimated the magnitude of effort and resources necessary to provide a Warehouse, has demonstrated the ability and willingness to resolve unforeseen problems that may arise, and has shown skill in anticipating and averting potential disruption.
(Galdieri Aff. Ex. B, at NHSLC 000037.) The EC broke down the 20-point total award for this criterion into four subparts: (a) understanding of and commitment to implementing business relationships and protocols, 3 points; (b) adequate warehousing and transportation knowledge and experience, 6 points; (c) qualifications of key staff, 4 points; and (d) correct estimate of effort and resources necessary, 7 points. (Galdieri Aff. Ex. H, at 36.) Similarly, the "Vendor Technical, Service, and Project Management Proposal/IT Competence" criterion required the EC to evaluate whether the vendor can satisfy all of the IT requirements in Appendix K of the RFP as well as the vendor's "ability to understand, implement, and support all MIS/computer/business protocols in a timely and skilled manner." (Galdieri Aff. Ex. B, at NHSLC 000037-38.) EC member Hastings' spreadsheet delineated sub-categories within this category—such as level of automation, proven experience, level of IT support, and understanding of business requirements—squarely reflecting the RFP's description and the Appendix K requirements. (Galdieri Aff. Ex. H, at Ex. J.) The sub-categories at issue are nearly verbatim recitations of the RFP's description of the general category, and bidders therefore had adequate notice of evaluated factors.
Notably, XTL provides no authority for the proposition that the type of particularized evaluation used in this case is improper. For the foregoing reasons, the Court finds that XTL is unable to prove breach of promise as a matter of law, and it is therefore not entitled to summary judgment as to that element of promissory estoppel. Accordingly, XTL's Motion for Partial Summary Judgment is DENIED.
IV
Turning to the Commission's cross-motion for summary judgment, the Court finds that the Commission able to demonstrate as a matter of law neither that XTL's promissory estoppel claim fails nor that XTL's claim for lost profit damages is barred for lack of evidence of bad faith. The Commission advances three primary arguments in support of its cross-motion. First, it argues the Commission cannot establish an actionable promise as part of its promissory estoppel claim. Second, it maintains that XTL's promissory estoppel must fail because XTL cannot demonstrate reasonable reliance on a generalized promise to follow the law. The Commission further asserts that XTL cannot recover lost profit damages because there is no evidence of bad faith.
A
The Commission has not demonstrated that, as a matter of law, the statutes at issue cannot create an actionable promise for a promissory estoppel claim. The Commission contends that the alleged promise—that the Commission would comply with competitive bidding laws when selecting a vendor for the contract award—is too general and not expressly stated in the language of the RFP, and is therefore not an actionable promise under Marbucco Corp. v. City of Manchester, 137 N.H. 629, 632 (1993). XTL objects arguing that an actionable promise exists in this case because the public policy reasons set forth in Marbucco apply equally to the facts of this case. It further contends that the spirit of the competitive bidding statutes is to create a fair and impartial process, which the RFP had expressly promised.
This Court's July 16, 2014 Order held that XTL was entitled to a promissory estoppel claim because it was not barred by sovereign immunity. The Order explained that Marbucco "explicitly recognized that a bidder's reasonable reliance on a public entity's promise to award the contract to the lowest responsible bidder may entitle a bidder to damages under the theory of promissory estoppel." Marbucco reasoned that a bidder could maintain a promissory estoppel claim because it was the government entity's responsibility to protect the public interest through a competitive bidding process, and a promissory estoppel claim with money damages is appropriate to deter government misconduct that threatens the public interest. Id. at 633.
The Commission attempts to distinguish Marbucco because the plaintiff in Marbucco reasonably relied on a specific promise in the language of a bid document, id. at 631, whereas XTL claims that it reasonably relied on the Commission's promise—which was not expressly stated in the RFP—of a competitive bidding process that complied with New Hampshire law. In substance, the Commission argues that while a promissory estoppel claim may be made as a result of an IFP, such as that in Marbucco, a promissory estoppel claim may not be made in the case of an RFP. Such a distinction would be inimical to the purpose of the competitive bidding statutes. To effectuate the general purpose of the competitive bidding statutes, the RFP explicitly required the Commission to "conduct a comprehensive, fair and impartial review and evaluation of all qualifying Proposals," which was to include "fair and impartial ranking of all qualified Proposals." (Galdieri Aff. Ex. B, at NHSLC 000035.) Competitive bidding exists to invite competition, guard against favoritism, improvidence, extravagance, fraud and corruption and secure the best work or supplies at the lowest price practicable. Gerard Constr. Co., 120 N.H. at 396. The New Hampshire Supreme Court has recognized that in order avoid weakening public confidence in government, a municipality is required to treat all bidders fairly and equally. Marbucco v. City of Manchester, 137 N.H. at 632-633. In Marbucco, the New Hampshire Supreme Court noted:
The policy reason for denying money damages to the unsuccessful low bidder is that taxpayers should not have to pay twice, once for the contract and again in damages. (Citation omitted). We find this rationale unpersuasive. An award of money damages would be in the public interest because it would deter such misconduct by public entities in the future.Marbucco v. City of Manchester, 137 N.H. at 632-633. These policy considerations are equally applicable to the State of New Hampshire.
The Commission cites Endahl v. Vinnell Corp., No. 04-CV-00426-MSK-PAC, 2006 WL 57496 (D. Colo. Jan. 10, 2006), for the proposition that a promise to comply with the law is insufficient to be an actionable promise in a promissory estoppel claim. However, in Endahl, the alleged promise arose from an employee handbook, and the court concluded it was not reasonably construed as a commitment, but as a description of the employer's policies. Id. at *9. The facts in this case are readily distinguishable because an RFP is not reasonably construed as a mere statement of the Commission's policies. In the same document upon which sophisticated and experienced business people act, and expend substantial funds to satisfy. Therefore, the Commission cannot demonstrate as a matter of law that XTL lacks an actionable promise as part of a promissory estoppel claim.
B
The Commission is also unable to establish as a matter of law that XTL could not have reasonably relied on the alleged promise. The Commission maintains that XTL's promissory estoppel must fail because XTL cannot demonstrate reasonable reliance on a generalized promise to follow the law by relying solely on objective evaluation criteria where the RFP indicated it would permit the Commission latitude in evaluating proposals. Specifically, the RFP stated that the Commissioners "have discretion to draw their own fair and impartial conclusions in selecting the Proposal(s) that best meets the ends of the NHSLC." (Galdieri Aff. Ex. B, at NHSLC 000040.)
The actionable promise is that the Commission's evaluation process would comply with the applicable statutes, not that the Commission would not use subjective judgment. As XTL observes in its objection, a broadly worded RFP is not, as a matter of law, enough to place XTL on notice that the RFP would violate the applicable statutes. Therefore, the language of the RFP alone is not factually sufficient to prove that XTL cannot prove reasonable reliance.
C
Finally, the Court finds that the Commission is not entitled to summary judgment concerning XTL's entitlement to lost profit damages. The Commission asserts that XTL cannot recover lost profit damages because there is no evidence that the Commission acted in bad faith by making a promise it did not intend to fulfill with the intention of inducing another to rely on it. In its objection, XTL alleged bad faith:
Instead, upon observing that XTL had submitted the most competitive BAFO on August 13, 2012, the NHSLC embarked on a three-month odyssey designed to rig the bid in Exel's favor and steer the contract away from XTL. In short, private collusion, bad faith and favoritism—the very evils competitive bidding statutes are designed
to combat—corrupted what was supposed to be an open, honest and impartial competitive bidding process.(XTL's Obj. to NHSCL's Cross-Mot. Summ. J. ¶ 12 (emphasis added).) Specifically, XTL alleges the Commission engaged in improper contract negotiations with Exel on multiple occasions prior to the contract award date. It also alleges that the Commission afforded Exel favorable treatment by failing to disqualify Exel's BAFO for effectively submitting a new BAFO after the deadline and permitting Exel to submit alternative BAFOs without affording XTL the same opportunity. In response, the Commission has produced evidence that the Commission also engaged in similar discussions over issues with XTL regarding its bid prior to the contract award. (NHSLC's Reply to XTL's Obj. Exs. 14-16.)
"If a disappointed low bidder complies with all requirements of the bid instructions but is deprived of the contract through some conduct of the awarding authority tantamount to bad faith . . . then the recovery of lost profits should be the measure of damages." Marbucco Corp. v. City of Manchester, 137 N.H. 629, 634 (1993). "Bad faith involves more than mere bad judgment or negligence," and it "implies conscious wrongdoing." Porter v. Town of Sanbornton, 150 N.H. 363, 369 (2003). To prove bad faith, a party must "demonstrate intent to injury or intent to disregard duties." Id.
XTL argues that the Commission acted in bad faith by permitting Exel to submit multiple Best and Final Offers ("BAFO") and mad inappropriate financial concessions to mitigate Exel's financial risk, while not doing the same for XTL. XTL's Obj. to NHSCL's Cross-Mot. Summ. J., p. 18. Whether communications between Exel and the Commission or concessions made by the Commission were made in bad faith is fact sensitive and not appropriate for summary judgment in this case. Accordingly, the Commission is not entitled to partial summary judgment as to lost profits, and the Commission's Cross-Motion and Motion for Partial Summary Judgment is DENIED.
V
Finally, the Commission has also moved for clarification of the Court's October 28, 2015 Order, which found that the Commission was barred from relying from the advice of counsel defense at trial because it had not waived attorney-client privilege. Specifically, the Commission seeks clarification as to the procedure by which the parties will address witness testimony referring to the Commission's legal counsel or advice that does not intend to assert the advice of counsel defense. As XTL pointedly observes, the Order clearly indicates that witnesses may not testify as to how their state of mind or actions were affected by advice of legal counsel provided in connection with the RFP process because the Commission did not waive attorney-client privilege to permit XTL to discover what advice was given. Therefore, no clarification is necessary because no such procedure is necessary, and the Commission's Motion for Clarification is DENIED.
In sum, based on the foregoing, the Court rules as follows: XTL's Motion for Partial Summary Judgment is DENIED; the Commission's Cross-Motion and Motion for Partial Summary Judgment is DENIED; and the Commission Motion to Clarify is DENIED.
SO ORDERED.
1/4/16
DATE
s/Richard B . McNamara
Richard B. McNamara,
Presiding Justice RBM/