Kennedy Temporaries v. Comptroller of Treasury

WILNER, Judge. Appellant bid on a State contract. He was underbid by one of his. competitors and therefore did not get the contract. Alleging that the low bidder should have been disqualified because of an insufficient bid bond, appellant eventually commenced a proceeding that has grown in complexity at each successive stage.

We now have before us cross-appeals from a judgment of the Circuit Court for Baltimore City involving significant questions concerning the State procurement law, the regulations issued under it, the jurisdiction and authority of the State Board of Public Works and the State Board of Contract Appeals, the right of a bidder “entitled” to a contract to recover damages from the State for the 'wrongful award of the contract to another bidder, the doctrine of sovereign immunity, and assorted alleged waivers. It will not be necessary for us to address all of these issues, because we think that (1) appellant has no standing to . make the complaint that has engendered them, and (2) even if he had such standing, at a critical stage he effectively waived his right to adjudicate that complaint. Unfortunately, in order to demonstrate how that occurred, we shall be obliged to discuss in some detail not only the factual and procedural history of the case but also the procurement law, the regulations issued under it, and some of the procedures mandated by the law and the regulations. ²⁷ I. The Procurement Law In 1980, after several years of study, the General Assembly enacted a new procurement code for the State. It took effect July 1, 1981, and is presently codified as Md.Code Ann. art. 21.

The heart of the law is § 2 -201(a), which states simply that no State agency in the Executive Branch “may enter into a contract for supplies, services, or construction except in accordance with the provisions of this article and the regulations established pursuant to this article.” The law then sets forth some basic rules governing the methods by which the State is to select and deal with its suppliers. In title 3, for example, it authorizes five types of source selection (§ 3-201(a)), establishes a preference for one of them— competitive sealed bidding (§ 3-201(b)), and requires that when that method is used, “[t]he contract shall be awarded to the responsive and responsible bidder whose bid is . . . the lowest bid price. . . . ” Other sections in title 3 specify qualification standards for bidders (subtitle 4), bond requirements (subtitle 5), and restrictions on certain types of contracts (subtitle 7). In title 7 (§ 7-201), the law establishes a specific four-step procedure for resolving disputes relating to both the formation of a contract (i.e., the award of a contract) and a contract already awarded. The first step is the agency procurement officer who, upon timely demand, and “consistent with ... all applicable laws and regulations,” is authorized to “negotiate and resolve” these disputes, including disputes “concerning the qualification of bidders . . . and the determination of the successful bidder.. . . ” (§ 7-201(a)).

The second step is review of the procurement officer’s decision by the agency head, who may “approve or disapprove the procurement officer’s decision” and whose determination “is deemed final action by the agency. . . . ” (§ 7-201(c)). The third step is an appeal to the Board of Contract Appeals, an independent entity created by § 7-202. The decision of that Board, according to § 7-201(d), “is final ²⁸ only subject to judicial review.” Judicial review, in accordance with the Administrative Procedure Act, is the fourth and final step. (§ 7-203).

Subject to these statutory criteria, the essential thrust of the law is to continue overall control over State procurement in the Board of Public Works, where it has resided for at least fifty years, but to permit the Board, by regulation, to delegate part of its control authority to four other State agencies having special procurement responsibilities — the University of Maryland and the Departments of Budget and Fiscal Planning, General Services, and Transportation. These five agencies — but primarily the Board of Public Works — are directed to develop the necessary implementing details and procedures by administrative regulation. We see this in § 2-101. Section 2-101(a) places in the Board of Public Works “power and authority over the procurement, management, and control of all supplies, services, construction, and other items procured by the State.” See also Md.Code Ann. art. 78A, §§ IB and 10.

To carry out the provisions of the statute, the Board “has authority to set policy and to adopt regulations which are consistent with this article,” as well as to exercise any authority conferred on the other four specified agencies. Subsection (b) also deals with regulations. It states, in relevant part, that the Board “shall adopt regulations, consistent with this article, governing procedures for the review and approval of procurement contracts ... [and] procedures for review of determinations.... ” The Board is further directed to “ensure that the regulations of the procurement agencies provide for procedures which are consistent with this article and which are substantially the same among the agencies.” The four departmental procurement units derive their special authority from § 2-101(c). That section directs each of those agencies to adopt regulations “consistent with this article” concerning a number of things, including ²⁹ “[Rejection of bids, consideration of alternate bids, and waiver of informalities in bids.” Regulations were, in fact, adopted by the Board and the four other agencies, effective July 1, 1981.

They appear in COMAR, Title 21, and include, among other things, procedures and requirements relating to bid bonds (21.06.07), protests (21.10.02), the Board of Contract Appeals (21.02.02 and 21.10.06), and the waiver of minor irregularities and deficiencies in bids (21.05.02.12 and 21.06.02.03). Approval authority over certain types of procurement contracts was delegated to the other four agencies (21.02.01.03-07), but anything not delegated was reserved to the Board of Public Works. With respect to any such contracts (including service contracts exceeding $100,000), the agency procurement officer has no authority to award the contract. His decision, or, upon review, that of the agency head or the Board of Contract Appeals, is in the nature of a recommendation to the Board of Public Works, which alone can approve or reject.

When these various provisions governing the dispute-resolution process and the overall authority of the Board of Public Works are read together harmoniously, as they should be, the legislative intent seems clear that the dispute-resolution process set forth in § 7-201 should be completed before the Board of Public Works, as the final approval authority, acts on a disputed matter concerning contract formation, in order that the Board may then act in conformance with the decision reached through that process. That is what § 2-201(a) would seem to require; and only in that manner can the prerogatives of the Board under the law be clearly and neatly meshed with the more specific criteria and procedures mandated by the General Assembly.

II

Factual and Procedural Setting At some point in the early fall of 1981, the Comptroller of the Treasury determined that he would need additional temporary personnel to assist in the processing of income tax returns expected to be received during the winter and ³⁰ spring of 1982. On October 1, 1981, through his procurement officer, John A. Clinton, the Comptroller issued an invitation to about twenty companies to bid on a contract to provide such personnel for the period January 1 — June 30, 1982. Enclosed with the invitation was a memorandum describing the bidding process. Paragraph P of that memorandum dealt with bid bonds.

Reflecting the provisions of Md.Code Ann. art. 21, § 3-504 and COMAR 21.06.07.01 and .02, Paragraph P stated: “Bids exceeding $25,000 in anticipated price must contain a Bid Bond in an amount equal to at least five percent (5%) of the total amount bid. The preferred bid security is a bond in form satisfactory to the State underwritten by a company licensed to issue bonds in Maryland. The bond shall be in substantially the form contained in Appendix (F). State procurement regulations permit other forms of bid securities.

Contact the issuing officer to discuss any other form of bid security. Failure to provide an acceptable bid security with the bid when required shall result in the bid being rejected.” (Emphasis in original.) When the bids were opened on November 17, 1981, it appeared that the two lowest bidders were Bay Services, Inc. at $608,159, and Kennedy Temporaries at $621,502. Bay Services’ bid was accompanied by a bid bond, in proper form, in the amount of $30,000, which was $407.95 short of five percent of its bid. Kennedy did not submit a bid bond.

Its bid was accompanied by a letter from a branch officer of Maryland National Bank stating, in relevant part: “As part of the above bid proposal, it is necessary to provide a $50,000.00 ‘Bid Proposal Bond.’ Please be advised by this letter that Maryland National Bank guarantees to provide any collateral necessary to the State of Maryland to be held as collateral against performance; should Stephen G. Kennedy’s bid be accepted by the State of Maryland.” ³¹ Mr. Kennedy was in attendance when the bids were opened, and he asked if he could see the amount of the bid bond posted by Bay Services. The procurement officer initially rejected his request — “until we got everything sorted out” — but permitted such an inspection on November 23, 1981. Mr. Kennedy then noticed the shortfall and pointed it out to Ms. Mary Ann Porter, the personnel manager of the Comptroller’s office, indicating that, as a result of the deficiency, the Bay Services bid should be rejected. The next day, Mr. Clinton, the procurement officer, called, and Kennedy iterated his complaint to him.

On November 25, 1981, Clinton wrote to Bay Services, pointing out the deficiency in the bid bond and advising that “a question has been raised” with respect to it. Clinton called attention to COMAR 21.05.02.12, permitting him to waive “technicalities or minor regulations [sic, irregularities] in bids,” and COMAR 21.06.02.03, defining “minor irregularity” and empowering the procurement officer to “give the bidder ... an opportunity to cure any deficiency resulting from a minor informality or irregularity in a bid ... or waive the deficiency, whichever is to the advantage of the State.” Obviously regarding the shortage in the bid bond as “minor,” Clinton purported to exercise his prerogative under the latter regulation and directed Bay Services to file an additional $500 in approved security by December 1, 1981. A copy of that letter was sent to Kennedy. Two days later — on November 27 — Clinton sent another letter to Bay Services, again with a copy to Kennedy.

In this letter he abandoned reliance on COMAR 21.05.02.12 and 21.06.02.03 and instead invoked his authority under COMAR 21.06.07.-02B. That regulation provides, in relevant part: “If a bid does not comply with the security requirements of this regulation, the bid shall be rejected as nonresponsive, unless the failure to comply is determined by the procurement officer to be nonsubstantial when: ³² (2) The amount of the bid security submitted, though less than the amount required by the invitation for bids, is equal to or greater than the difference in the price stated in the next higher acceptable bid. . . . ” Because the $30,000 bid bond filed by Bay Services was greater in amount than the $13,000 difference between its bid and that of Kennedy, Clinton concluded that the deficiency was “nonsubstantial” and would therefore be excused altogether. He ended the letter with the statement, “your bid bond is accepted without any need for further action.” In addition to sending Kennedy a copy of this November 27 letter, Clinton wrote a separate letter to Kennedy the same day. Noting that Kennedy had “questioned our decision to award the above captioned contract to the lowest bidder, Bay Services Incorporated,” Clinton advised that he had “determined that the award can be made to the low bidder pursuant to COMAR 21.06.07.02B(2),” which he then quoted.

He ended this letter by repeating his determination that the inadequacy in the Bay Services bid bond was non-substantial and that, based upon the regulation, the Comptroller’s Office “will recommend to the Board of Public Works that this contract be awarded to the low bidder, Bay Services Incorporated.” On December 2, 1981, the matter was taken up by the Board of Public Works which, as we have noted, retained under the law full approval authority over service contracts exceeding $100,000. The transcript of that meeting shows that both Mr. Clinton and Mr. Kennedy appeared and presented their respective views. 1 No mention was made by Mr. Clinton (or by anyone else) of the lack of written protest; but neither did Mr. Kennedy give any indication that he intended to pursue the matter before the Board of Contract Appeals. Clinton maintained that the deficiency in ³³ the Bay Services bid bond was non-substantial and argued that “it just doesn’t make sense to disqualify a low bidder for a $407 deficiency in a bond and cost the State $13,000.” Kennedy, on the other hand, forcefully argued his case— that the statute was there, that it was clear, and that it ought to be applied uniformly — and he seemed clearly to understand that the final resolution of the matter was in the Board’s hands. The Board was apparently unimpressed by Kennedy’s argument, as it approved the contract with Bay Services that day, although it is not certain from the record when that decision was first communicated to Kennedy. 2 On December 7, 1981, Kennedy called and left a message for Clinton requesting “the final decision of the Procurement Office.” Clinton returned the call the next day and told Kennedy that as “I had not gotten an official protest from him so I didn’t have to give him the final response.” He added that Kennedy “should put it in writing and then I could quote the appropriate language from the procurement regulations that said this is the final decision of the Procurement Office.” Nothing further happened until December 21, 1981, when Kennedy wrote a letter to Clinton, stating, in relevant part: “Confirming our previous conversation would you please advise in writing if your decision relative to my protest is final.

As you know I feel that Kennedy Temporaries was the lowest ‘responsive’ bidder and that Bay Services was deficient in the mandatory minimum requirements of the bid; namely, failure to post ‘at least ’ five percent of the bid price. * * * * * * ³⁴ Your prompt attention to this matter will be greatly appreciated.” (Emphasis in original.) Clinton received this letter on December 30, and responded immediately. He stated first that his recommendation that the contract be awarded to Bay Services, which had been approved by the Board of Public Works, as indicated in his letter of December 9, was his “final recommendation.” He then stated: “It is not clear to me whether your letter of December 21, 1981 is filed as a protest under Subtitle 10 of the Procurement Regulations. Assuming that your letter of December 21 is a protest, I do not believe it was filed in accordance with 21.10.02.03B. If your letter is not timely, you may be precluded from any further remedies.

Without prejudice to our right to raise the issue of timeliness, I do wish to advise you in accordance with 21.10.02.08(3)A that: This is the final decision of the procurement officer. This decision may be appealed to the Maryland State Board of Contract Appeals. If you decide to make such an appeal, you must file written notice of appeal to the Appeals Board within fifteen days from the date you receive this decision.” Nothing further happened until January 15, 1982, when, by letter of that date, Kennedy appealed to the Board of Contract Appeals. 3 In his letter, he urged that Mr. Clinton had misapplied COMAR 21.06.02.03 (waiver of minor irregularities in bids) in that an irregularity could be regarded as “minor,” and thus subject to waiver under that regulation only if the correction or waiver of it “would not be prejudicial to other bidders.” He claimed that in other cases, he had been disqualified because of an inability to meet the five percent requirement exactly; and he felt that it was unfair “when one Procurement Officer can deny your bid as not meeting the minimum bid requirements while another Pro ³⁵ curement Officer can take away your successful bid by waiving the same requirements.” In a decision rendered July 20, 1982 — three weeks after the contract with Bay Services had been fully completed— the Board of Contract Appeals concluded that: (1) Kennedy had failed to comply with COMAR 21.10.02.-02, requiring that a written protest be filed “not later than 7 days after the basis for protest is known or should have been known, whichever is earlier.” (2) That requirement, being procedural in nature, can be waived. (3) Because Mr. Clinton had actual knowledge of Kennedy’s ground of protest within the seven-day period, and because he “acted to resolve the dispute in the same manner as if he had received a written protest,” he had effectively waived the formal requirements of COMAR 21.10.02.02; and the protest was therefore effectively filed.

(4) In excusing the deficiency in Bay Services’ bid bond, Clinton acted in conformance with COMAR 21.06.07.02B. The