Montgomery Park v. Dept. of Gen. Services

Montgomery Park, LLC v. Maryland Department of General Services, Nos. 12 & 13, September Term, 2022. Opinion by Eaves, J. STATE FINANCE AND PROCUREMENT – MARYLAND STATE BOARD OF CONTRACT APPEALS – LEGAL STANDARD OF REVIEW FOR CANCELLATION OF INTENDED PROCUREMENT AWARDS The Supreme Court of Maryland held that in a bid protest filed under the State Finance and Procurement Article of the Maryland Code (“SF”), Title 15, Subtitle 2, the standard of review that the Maryland State Board of Contract Appeals (“Board”) must apply to a procurement officer’s decision to cancel a request for proposal (“RFP”) is the arbitrary or capricious standard. In this case, the Procurement Officer for the Department of General Services (“DGS”) issued an RFP seeking bids for a new lease for the Maryland Insurance Administration (“MIA”) headquarters. The Procurement Officer thereafter cancelled the RFP after notifying Montgomery Park, LLC (“Montgomery Park”) that it was the intended awardee of the bid for new office space, but prior to approval of the bid by the Board of Public Works.

Montgomery Park filed a bid protest with the Board, which reversed the Procurement Officer’s decision. The Supreme Court held that the Board erred in concluding that the Procurement Officer’s decision was arbitrary and capricious. STATE FINANCE AND PROCUREMENT – BID PROTEST – STANDING To file a bid protest under State procurement law, the protestor must be an interested party. An interested party is defined as an “actual or prospective bidder, offeror, or contractor that may be aggrieved by the solicitation or award of a contract, or by the protest.” Md. Code Regs. 21 .10.02.01B(1).

The Supreme Court held that Montgomery Park lacked standing to protest the sole source renewal of the existing lease between MIA and St. Paul Place. The Court held that the RFP for office space and the subsequent renewal of the existing lease were two factually and legally distinct events that must be considered separately. The Court determined that, once the Procurement Officer cancelled the RFP, Montgomery Park was “no longer an ‘actual or prospective bidder [or] offeror[.]” With the RFP no longer in effect, under SF § 13- 105(g), the Procurement Officer was entitled to proceed with the renewal of the existing lease as a sole-source contract renewal, without soliciting other offers. Because Montgomery Park had no interest in the existing lease and was never in line for an award of a lease renewal under the sole-source renewal provisions of State law, the Court held that it lacked standing to challenge the renewal lease.

Circuit Court for Baltimore City Case Nos. 24C20000887 & 24C20001565 Argued: October 3, 2022 IN THE SUPREME COURT OF MARYLAND* Nos. 12 & 13 September Term, 2022 MONTGOMERY PARK, LLC v. MARYLAND DEPARTMENT OF GENERAL SERVICES Watts, Hotten, Booth, Biran, Gould, Eaves, Harrell, Glenn T., Jr. (Senior Justice, Specially Assigned) JJ. Opinion by Eaves, J. Filed: February 24, 2023 * At the November 8, 2022, general election, the voters of Maryland ratified a constitutional Pursuant to the Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this amendment changing the name of the Court of document is authentic. Appeals to the Supreme Court of Maryland. The 2023-02-24 14:17-05:00 name change took effect on December 14, 2022.

Gregory Hilton, Clerk The dispute in this case arises from two decisions of the Maryland State Board of Contract Appeals (“the Board”) that sustained two bid protests filed by Montgomery Park, LLC (“Montgomery Park”). In 2017, the Maryland Department of General Services (“DGS”), on behalf of the Maryland Insurance Administration (“MIA”), issued a Request for Proposal (“RFP”) for office space. Although Montgomery Park was initially named the intended awardee, DGS, through its Procurement Officer, later cancelled the RFP before the award was presented to the Board of Public Works for approval. After cancelling the RFP for new office space, the Procurement Officer negotiated a renewal of MIA’s existing lease at 200 St. Paul Place in Baltimore City.

In response to DGS’s actions, Montgomery Park filed two separate bid protests— one relating to the Procurement Officer’s decision to cancel the RFP, and a second one relating to the renewal of the existing lease between MIA and St. Paul Place (hereinafter referred to as “St. Paul Plaza” or “leased premise” as appropriate to the context). The Procurement Officer denied both bid protests. The Procurement Officer determined that the cancellation of the RFP complied with the applicable provisions of the State Finance and Procurement Article of the Maryland Code and the Code of Maryland Regulations (“COMAR”). With respect to the second bid protest, the Procurement Officer determined that Montgomery Park did not have standing to challenge the lease renewal, but even if it did, the lease renewal was negotiated pursuant to the provisions of State law that permit the renewal of an existing lease without soliciting other offers.

Thereafter, Montgomery Park appealed the Procurement Officer’s decisions to the Board, which overturned the Procurement Officer’s decisions. The Board determined that the Procurement Officer’s cancellation of the RFP and subsequent lease renewal violated Maryland procurement law. In a separate opinion, the Board concluded that Montgomery Park had standing to challenge the Procurement Officer’s renewal of MIA’s existing lease. Turning to the merits, the Board ruled that the Procurement Officer violated the procurement law by failing to document separately her reasons for determining that it was in the State’s best interest to renew the lease with St. Paul Plaza.

DGS appealed the Board’s two decisions to the Circuit Court for Baltimore City, which reversed the Board. Montgomery Park appealed the circuit court’s decisions to the Appellate Court of Maryland (at the time named the Court of Special Appeals of Maryland).1 The Appellate Court affirmed the circuit court’s rulings in a reported opinion.2 Montgomery Park petitioned this Court for a writ of certiorari, which this Court granted on June 3, 2022.3 Montgomery Park presents the following questions for our review, which we have rephrased as follows:4 1 At the November 8, 2022, general election, the voters of Maryland ratified a constitutional amendment changing the name of the Court of Special Appeals of Maryland to the Appellate Court of Maryland. The name change took effect on December 14, 2022. 2 Montgomery Park, LLC v. Maryland Dep’t of Gen. Servs., 254 Md. App. 73 (2022). 3 Montgomery Park, LLC v. Maryland Dep’t of Gen.

Servs., 479 Md. 64 (2022). 4 The questions presented in the petition for a writ of certiorari were: 1. Is it arbitrary or capricious for a procurement officer to cancel the proposed award of a procurement contract without making independent “written findings” required by Maryland law to support that decision, and instead relying on someone else’s findings that were not supported by the administrative record? 2 1. Did the Board err in determining that the Procurement Officer’s decision to cancel the RFP for an office lease in connection with the relocation of MIA’s headquarters was arbitrary and capricious? 2. Did the Board err in determining that Montgomery Park, as the intended awardee of the RFP, had standing to challenge the renewal of MIA’s existing lease after the RFP was cancelled?

For the following reasons, this Court answers “yes” to both questions and shall affirm the judgment of the Appellate Court of Maryland. I. BACKGROUND A. Statutory and Regulatory Background Before we discuss the particular facts and procedural background of this case, it is useful to provide an overview of Maryland procurement law. Title 13 of the State Finance and Procurement Article of the Maryland Code and Title 21 of COMAR govern the solicitation and award of certain state contracts, including an agency’s leasing of real or personal property as a lessee. State Ctr., LLC v. Lexington Charles Ltd. P’ship, 438 Md. 451, 503 (2014); Md. Code Ann., State Finance and Procurement Article (“SF”) (1988, 2021 Repl.

Vol.) § 11-101(n)(1). “The procurement process begins with the procurement officer—the individual authorized by an agency to enter, administer, and make determinations and findings with respect to procurement contracts—who selects a procurement method and solicits bids for procurement.” Brawner Builders, Inc. v. State Highway Admin., 476 Md. 15 , 33–34 (2021) 2. Did Montgomery Park have standing to challenge the unlawful award of a sole source contract? 3 (citing SF § 11-101(p) (defining “procurement officer) and SF § 13-102 (permitting procurement officer to solicit bids)). Under COMAR 21.03.04.01, “[e]ach determination required by the State Finance and Procurement Article” or Title 21 of COMAR must be written and “[b]ased on written findings of, and signed by, the person who made the determination[.]” After a bid is opened, but prior to an award, “if with the approval of the Board, a unit[5] determines that it is fiscally advantageous or otherwise in the best interest of the State, the unit may cancel the invitation for bids, a request for proposals, or other solicitation[.]” SF § 13-206(b)(1); see also COMAR 21.06.02.02.02C(1) (“After opening of bid proposals but before award, all bids or proposals may be rejected in whole or in part where the procurement agency . . . determines that this action is fiscally advantageous or otherwise in the State’s best interest.”).6 Additionally, if a procurement officer “determines that renewal of an existing lease is in the best interest of the State, the procurement officer may negotiate the renewal without soliciting other offers.” SF § 13-105(g); see also COMAR 21.05.05.02D (“When it is determined to be in the best interest of the State, the 5 “Unit” is defined as “an officer or other entity that is in the Executive Branch of the State Government and is authorized by law to enter into a procurement contract.” SF § 11-101(y)(1). DGS is a “primary procurement unit” with the authority to designate procurement officers to “(1) enter into a procurement contract; (2) administer a procurement contract; or (3) make determinations and findings with respect to a procurement contract” on behalf of the State.

SF § 11-101(m)(2), (p)(1)–(3). 6 SF § 13-206(b)(1) states that a “unit determines” whether the cancellation is in the best interest of the State. In the instant case, DGS is the “unit” for purposes of SF § 13- 206(b)(1). DGS’s Procurement Officer was Wendy Scott-Napier, who was also the Assistant Secretary of DGS during the pendency of the procurement at issue here. 4 procurement officer may negotiate the renewal of an existing real property lease without soliciting other proposals.”). Title 15, Subtitle 2 of the State Finance and Procurement Article sets forth the statutory remedies for “dispute resolution.” State Ctr., 438 Md. at 505 .

A bid protest is a “complaint relating to the solicitation or award of a procurement contract.” COMAR 21.10.02.01B(2). “A prospective bidder or offeror, a bidder, or an offeror” may submit a protest to the procurement officer.” SF § 15-217(a)(1); see also COMAR 21.10.02.02A (“An interested party may protest to the appropriate procurement officer against the award or proposed award of a contract[.]”). If the protestor is dissatisfied with the procurement officer’s decision, they may appeal to the Board pursuant to COMAR 21.10.07.02. Under SF § 15-223(a)(1), a decision of the Board is subject to judicial review in accordance with the Maryland Administrative Procedure Act (“APA”), Title 10, Subtitle 2 of the State Government Article (“SG”) (1984, 2021 Repl. Vol.).

Section 10-222(h) of the State Government Article provides the circuit court with the authority to take the following actions with respect to an agency decision: (1) remand the case for further proceedings; (2) affirm the final decision; or (3) reverse or modify the decision if any substantial right of the petitioner may have been prejudiced because a finding, conclusion, or decision: (i) is unconstitutional; (ii) exceeds the statutory authority or jurisdiction of the final decision maker; 5 (iii) results from an unlawful procedure; (iv) is affected by any other error of law; (v) is unsupported by competent, material, and substantial evidence in light of the entire record as submitted; [or] * * * (vii) is arbitrary or capricious. Parties aggrieved by a final judgment of the circuit court may appeal to the Appellate Court of Maryland. SG § 10-223(b)(1). B. Factual Background In August 2017, MIA’s headquarters was located at 200 St. Paul Place, in Baltimore City, Maryland.

MIA was a tenant under an existing lease with St. Paul Plaza, which was set to expire in May 2019, subject to a five-year renewal option and a six-month holdover period. Based upon concerns about parking options for its employees, MIA requested that DGS issue an RFP for new office space. Approximately twelve vendors submitted proposals, including Montgomery Park and St. Paul Plaza. After the submission period closed, DGS’s Procurement Officer, Wendy Scott-Napier (hereinafter referred to as “the Procurement Officer” or “Ms. Scott-Napier”) evaluated and listed each proposed location in ranked order.

Montgomery Park came in first place, while St. Paul Plaza came in second. Accordingly, Ms. Scott-Napier notified Montgomery Park that it was the recommended awardee for the procurement. DGS chose Montgomery Park over St. Paul Plaza because “[c]urrently . . . not all MIA employees have access to free parking. Montgomery Park 6 operates a surface parking lot where all MIA employees would have access to free parking.” 7 Following DGS’s selection of Montgomery Park as the intended awardee, representatives of DGS, MIA, and Montgomery Park met in November 2018 to discuss the logistics of the move from the St. Paul Plaza location to Montgomery Park.

Montgomery Park left that meeting “with an understanding that the lease was to be presented to the Board of Public Works in January 2019.” However, on March 12, 2019, DGS informed Montgomery Park that the MIA lease would be presented to the Board of Public Works for approval on April 24, 2019. During the same time in which DGS and Montgomery Park were negotiating the terms of a new proposed lease, Ms. Scott-Napier was also attempting to negotiate a short- term lease extension with St. Paul Plaza to provide additional time for MIA to prepare to move to the Montgomery Park location. A St. Paul Plaza representative, however, rejected the offer. Instead, the representative stated that St. Paul Plaza was only interested in a multi-year lease.

Ms. Scott-Napier and another DGS representative met with a St. Paul Plaza representative on March 29, 2019, to again discuss a short-term lease renewal. There were no notes taken of this meeting, although, in a follow-up email to Ms. Scott-Napier, the St. Paul Plaza representative stated: 7 DGS’s other reasons for selecting Montgomery Park included an annual savings of $337,705.27 and a “$3,337,052.70 savings over the full 10-year lease term, after factoring in the agency’s moving costs and a moving allowance provided by the landlord.” 7 I just wanted to send a reminder that in our meeting on March 29th, we determined a [Letter of Intent] with fully negotiated terms agreed upon by both parties would be delivered no later than April 24th or we would have to unfortunately continue negotiations with other tenants to fill the MIA space[.] (Emphasis in original). Ms. Scott-Napier, however, disagreed with this summarization of the meeting and testified that the only purpose of the meeting was to discuss a short-term extension or holdover extension.8 As it was preparing to relocate, MIA concluded that the initial justification for the request for proposals—primarily the lack of adequate parking—was not sufficient to justify relocating to an area in which public transit options were not readily available. The Maryland Insurance Commissioner, Alfred Redmer, Jr., was concerned about the impact the proposed location would have on MIA.

Accordingly, in a letter dated April 23, 2019, Commissioner Redmer asked DGS to cancel the procurement of the MIA lease. He provided four reasons to cancel the RFP: 1. The initial justification for the Request for Space has changed and is no longer valid. The MIA initiated a Request for Space with the intent of offering its staff improved parking options and less street construction and congestion. . . . [However,] it became clear that improved parking options were less critical to staff than access to multiple modes of public transportation; approximately 60% of MIA employees use public transportation to commute to and from work. [Montgomery Park] is not directly accessible by multiple city bus routes, regional commuter buses, Metro and Light Rail.

Lack of direct access to [Montgomery Park] will requires employees to board a private [ ] shuttle[.] . . . Members of the 8 At the Board hearing, Ms. Scott-Napier testified that, at the March 29th meeting, “we [DGS] told them we could not discuss [a long-term] lease renewal” and that “we did not discuss terms.” According to Ms. Scott-Napier, DGS explained that it would know by April 24—the date of the Board of Public Works meeting—“whether we were moving to Montgomery Park[,]” because we would have sought approval for the lease.” 8 general public will not have access to the private shuttle and will be required to transfer to one of the two bus lines[.] 2. Employee retention will be significantly adversely impacted. . . . The MIA anticipates that its relocation to [Montgomery Park] will result in the departure of experienced regulatory staff with the specialized insurance-related knowledge and expertise needed to perform its regulatory functions.

An increase in employee turnover and the time and expense to recruit and train new staff will be particularly detrimental to the MIA’s operations[.] 3. Interruption of MIA operations and regulation of Maryland’s insurance industry will hurt Maryland consumers and businesses. The moving cost estimate did not consider the interruption to regulatory operations during the relocation period which is projected to last several weeks. This interruption could have a significant adverse effect upon consumers and the regulation of the Maryland insurance industry. 4.

Insurance companies doing business in Maryland have opposed the move on the basis that it will be the second time in 10 years that these companies must fund the MIA’s relocation. Among other regulated entities, several large insurance companies, one a Maryland domestic company, have complained that the relocation of the agency twice in 10 years is a wasteful expenditure of their funds. The moving cost estimate did not consider that the relocation would increase the cost of doing business in Maryland. Should a company leave the state, this will not only hurt consumers of insurance, but will reduce jobs, and reduce the premium tax revenue.

(Emphasis in original). Commissioner Redmer concluded that it was “in the best interest of the State to cancel this procurement.” That same day, Ms. Scott-Napier sent a letter to Montgomery Park cancelling the RFP. The letter did not state a reason for cancelling the procurement, “only that ‘[a]t the request of [MIA], [DGS] is canceling [the] RFP [.]’” Ms. Scott-Napier, however, attached Commissioner Redmer’s April 23 letter to DGS outlining the reasons MIA wanted to cancel the procurement. She then prepared a Procurement Officer’s Written Determination 9 in which she summarized Commissioner Redmer’s April 23 letter and concluded that “[b]ased on the rationale presented, I find that the RFP is no longer in the State’s best interest and recommend approval of MIA’s request.” Having cancelled the RFP, the Procurement Officer then determined that it was in the best interest of the State to renew MIA’s lease with St. Paul Plaza, and proceeded to negotiate the renewal of MIA’s lease with St. Paul Plaza without soliciting other offers.

The Board of Public Works ultimately approved DGS’s request to renew MIA’s lease with St. Paul Plaza on January 8, 2020. Montgomery Park filed two bid protests with Ms. Scott-Napier, in her capacity as DGS’s Procurement Officer, as provided for in SF § 15-217(a)(1). We examine each bid protest and subsequent appeal in turn. C. Montgomery Park’s First Bid Protest Montgomery Park’s first bid protest related to Ms. Scott-Napier’s decision to cancel the procurement (“First Protest”).

Specifically, Montgomery Park contended that “DGS’s decision to cancel the RFP was arbitrary and capricious, lacked a rational basis, and was otherwise unreasonable.” In support thereof, Montgomery Park argued that the cancellation notice violated COMAR 21.03.04.01 and 21.06.02.02 because there was “no determination made by DGS that cancellation is ‘fiscally advantageous or otherwise in the State’s best interest,’ nor are there reasons offered by DGS why cancellation is necessary.” Moreover, according to Montgomery Park, Commissioner Redmer’s April 23 letter did not provide “DGS with a rational basis to support its decision to cancel the RFP.” Finally, Montgomery Park contended that MIA’s reasons for cancellation were “pretextual” and 10 meant “to prevent the State of Maryland from entering into a lease agreement with anyone other than St. Paul Plaza.” (Emphasis in original). Ms. Scott-Napier denied Montgomery Park’s First Protest. She stated that “[a]fter careful and detailed consideration of all the factors . . . I determined that [ ] the solicitation was no longer justified, and that cancellation of the RFP was fiscally advantageous and in the best interest of the State.” Ms. Scott-Napier rejected Montgomery Park’s contention that the cancellation notice violated COMAR, reasoning that the “absence of a continued need for the procurement is, in and of itself, a sufficient reason for cancelling the RFP.” She determined that MIA had a rational basis for requesting that the RFP be canceled, which was explained in Commissioner Redmer’s letter, and that DGS evaluated the concerns, and reached the same conclusion.

Montgomery Park appealed DGS’s denial of the First Bid Protest to the Board. D. Montgomery Park’s Second Bid Protest On September 27, 2019, Montgomery Park filed a second bid protest challenging DGS’s decision to renew MIA’s lease with St. Paul Plaza (“Second Protest”). To support its claim, Montgomery Park argued that: (1) DGS violated COMAR because the Procurement Officer negotiated the MIA lease with St. Paul Plaza without first determining, in writing, that the lease renewal was in the best interest of the State; (2) it was not in the State’s best interest to renew the lease with St. Paul Plaza; and (3) Montgomery Park had proper standing because it was aggrieved by DGS’s unauthorized negotiations with St. Paul Plaza and the award of the lease renewal. 11 As a threshold matter, before considering the merits of the Second Protest, Ms. Scott-Napier addressed the timeliness of the bid protest and Montgomery Park’s standing. First, she determined that Montgomery Park’s Second Protest was untimely.

She concluded that Montgomery Park should have, pursuant to COMAR 21.10.02.03B, filed its Second Protest within seven days of July 23, 2019. Second, she concluded that Montgomery Park lacked standing because it was not an interested party to the lease renewal. In other words, Ms. Scott-Napier believed that the lease renewal was solely between DGS and St. Paul Plaza, and therefore did not include Montgomery Park. Finally, Ms. Scott-Napier determined that, even if the protest was timely and Montgomery Park had standing, the protest must be denied on the merits.

She reasoned that COMAR does not require the procurement officer to make a written determination prior to negotiating a lease renewal. Montgomery Park appealed DGS’s denial of the Second Protest to the Board. E. Montgomery Park’s First Appeal to the Board of Contract Appeals In Montgomery Park’s appeal to the Board as to the First Protest, the parties debated the applicable standard of review that the Board must apply when reviewing the Procurement Officer’s decision to cancel the RFP. Montgomery Park urged the Board to find that the cancellation was arbitrary or capricious and that there was no rational basis to support the cancellation.

For its part, DGS asked the Board to consider whether the cancellation was “so arbitrary as to be fraudulent or a breach of the public trust.” At the Board hearing, Ms. Scott-Napier testified that she canceled the RFP because she determined that it was in the State’s best interest to do so. She testified that she knew 12 of MIA’s concerns about moving to Montgomery Park before the April 23, 2019, cancellation, and explained that, “when we met in February we were reviewing the moving costs to address their concerns, but were still working toward seeking approval for the Montgomery Park lease.” She stated that she asked Commissioner Redmer to put MIA’s concerns in writing. She reviewed Commissioner Redmer’s letter and considered MIA’s reasons “to be legitimate because of the conversations that I had with MIA,” and “[b]ecause I’m hearing it directly from Al Redmer and I take it seriously.” Ms. Scott-Napier acknowledged that she