ALJDEC decisions subject to certification as final

22F-003-ADM · Department of Administration · 2023-05-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Guidesoft Inc., DBA Knowledge Services

ARIZONA DEPARTMENT OF ADMINISTRATION

No. 22F-003-ADM

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: April 3, 2023, April 10, 2023, and April 11, 2023, with the record held open until May 1, 2023.

APPEARANCES: Guidesoft Inc., doing business as Knowledge Services (“Guidesoft”) was represented by Joshua Grabel. The Arizona Department of Administration was represented by Assistant Attorney General Kelly M. Wagner.

ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer

_____________________________________________________________________

FINDINGS OF FACT

On November 11, 2021, the Arizona Department of Administration, State Procurement Office (“Department”) first published Solicitation No. BPM003913 (“Solicitation”) for the procurement of MTS-MSP-Multi-Temporary Staffing Services – Managed Services Provider in the State of Arizona on the Arizona Procurement Portal ("APP"). Notice of the publication of the Solicitation was sent to two thousand eight hundred nine (2,809) prospective suppliers in APP on the same day.

On November 17, 2021, notice of the Solicitation was also published in the Arizona Republic.

At 10:00 a.m. on November 29, 2021, the Pre-Offer Conference was held virtually on Google Meet for all interested parties.

On December 2, 2021, Solicitation Amendment #1 was issued. The amendment posted the questions and answers from the Pre-Offer Conference.

The Solicitation included several parts, including instructions regarding minimum information required in the offer, specific responsibility or susceptibility criteria, the relative order of importance of the evaluation factors, and other offer requirements specific to the Solicitation. The evaluation factors were set forth, specifically identified with the Special Instructions to Offerors, at Paragraph 6.5 and listed in their relative order of importance, which were 1) Experience and Capacity of Offeror; 2) Method of Approach; and 3) Pricing.

With respect to Experience and Capacity of Offeror, the Solicitation contained Attachment 9: Experience and Capacity Questionnaire, which asked five overall questions, with several questions having subparts. As part of the questions asked in Attachment 9, prospective offerors were also to complete Attachment 7: Organization Profile and Attachment 4 Supplement: Key Personnel.

With respect to Method of Approach, the Solicitation contacted Attachment 11: Method of Approach, which included several overall questions. As part of the questions asked in Attachment 11, prospective offerors were also to complete Attachment 8: Proposed Subcontractors.

With respect to Pricing, the Solicitation included Attachment 12: Pricing Document.

On December 13, 2021, the Evaluation Tool was finalized. The Evaluation Criteria and Factors were Experience and Capacity of Offeror; Method of Approach; and Pricing. The Evaluation Tool, referred to as “the Shell” or “Evaluation Matrix” in the hearing, included the overall factors and the separate criteria, with a total point value for each criteria that fell under those overall factors.

Experience and Capacity of Offeror was scored with a total of 500 points with 100 points for Company Profile, 100 points for Clients Market, 100 points for Serving Clients in Arizona, 50 points for Current Client Size, 50 points for Two Examples of Offerors’ Experience, and 100 points for Proposed Project Members.

Method of Approach was scored with a total of 300 points with 75 points for Staff Augmentation Services, 75 points for Project Based Consulting Services, 50 points for VMS Software, 50 points for Vendor Network, and 50 points for Contractor Resource Management.

Pricing was scored with a total of 200 points.

On December 15, 2021, an Evaluation Committee was appointed with individuals from the agencies that most utilized the services that were the subject of the Solicitation. The ACPO asserted that these individuals were subject matter experts for purposes of the Solicitation because they represented those that most used the services.

On January 18, 2022, the Solicitation was closed at 3:00 p.m., with a total of eleven (11) submitted proposals.

On January 24, 2022, the Evaluation Committee received the pre-separated proposals for independent review.

After the initial review of proposals, Confidentiality Determination Letters were sent out to six (6) Offerors on January 21, 2022; and Request for Clarification letters were sent out to five (5) Offerors from February 7 to February 15, 2022.

On February 17, 2022, the initial consensus evaluation was conducted by the Evaluation Committee. During the initial consensus evaluation, the Scoring Criteria was developed. The development of the Scoring Criteria was the process of assigning numerical values to the proposal responses received, in an effort to compare Offerors’ strengths and weaknesses. Based on the initial scoring, it was determined that seven (7) Offerors were not susceptible for award in comparison to other offers based on the Evaluation Criteria set forth in the Solicitation.

On March 25, 2022, Offerors determined to be reasonably susceptible for award provided Methodology Presentations to the Evaluation Committee. The Offeror’s presentations were scored after the presentations were complete, on the same day.

On April 4, 2022, negotiations were conducted with responsible Offerors determined to be reasonably susceptible for award.

On April 21, 2022, a request for Best and Final Offer was given to all Offerors Susceptible for Award.

On April 27, 2022, the Best and Final Offer period closed at 3:00 p.m.

On May 6, 2022, an evaluation report and the recommendation of award was made by the Evaluation Committee to the ACPO.

On May 6, 2022, award, non-award, and determination letters were sent out to the Offerors, and the procurement file was made available for public inspection.

On May 10, 2022, a debriefing on the solicitation was provided to Guidesoft by the ACPO.

On May 16, 2022, Guidesoft filed its Protest of the award alleging, in part, that the manner in which the Department scored the criteria of Experience and Capacity of Offeror and Method of Approach resulted in the Department “relying exclusively upon price.”

On June 29, 2022, the ACPO issued an Agency Chief Procurement Officer’s Decision in which the ACPO denied the Protest and concluded that “the actions taken by the ACPO were reasonable, supported by evidence, and well-within the discretion afforded to procurement officers under the Arizona Procurement Code.” On page 14 of the decision, the ACPO stated that “[a]fter the initial review of the proposals, the MTS-MSP Proposal Scoring Criteria . . . was developed.” This was the notice Guidesoft received that the Scoring Criteria was not set until after the offers were opened and reviewed.

On July 29, 2022, Guidesoft filed an appeal of the denial of its Protest to the Department director. In the request, Guidesoft argued that the decision and award of the ACPO was clearly erroneous, arbitrary, and capricious and an abuse of discretion. The bases for the appeal were set forth as follows:

Failing to establish Scoring Criteria before reviewing Proposals;

Erroneously scoring Guidesoft’s Experience;

Failing to review the information submitted by ACRO;

Failing to properly evaluate the Key Personnel criteria; and

Failing to properly evaluate ACRO’s response regarding clients.

On August 19, 2022, the ACPO issued an Agency Report in which she stated that the appeal was “built on misrepresentations and misstatements, as well as new claims, and represented nothing more than a disagreement on how the ACPO scored the Offerors’ proposals.” The ACPO concluded that, while Guidesoft may not agree with the scoring of Offerors’ experience and methods of approach, it “failed to set forth any actual legal or factual errors in the procurement process.”

On August 29, 2022, Guidesoft filed a request for hearing arguing that the ACPO set arbitrary Scoring Criteria and ACRO was not susceptible for Award.

On October 7, 2022, the Department director referred the matter to the Office of Administrative Hearings for a hearing.

At hearing, Guidesoft argued there were only six bases for their appeal as follows:

The Evaluation Criteria were determined after the ACPO reviewed the proposals;

The ACPO failed to evaluate experience based upon the Scope of Work in the Solicitation;

The ACPO failed to ask the right questions to get the answers the State wanted;

The ACPO violated the Code by setting a floor regarding scoring making the scoring system wrong;

The ACPO failed to verify ACRO’s data because it contained untruthful statements; and

The scoring of the Solicitation turned the matter into an invitation for bids.

ACPO Whittington testified that she did not prepare any evaluation instructions prior to the bid openings. ACPO Whittington testified at hearing that Exhibit 37, or “the Shell”, constituted the Evaluation Tool. ACPO Whittington further stated that Exhibit 10, entitled MTS-MSP Proposal Scoring Criteria, was not the Evaluation Tool, but was only her summary of the discussion that occurred during the initial consensus evaluation.

The Department argued that the Evaluation Criteria was different than the Scoring Criteria. The Department asserted that the Evaluation Criteria, “the Shell”, was finalized prior to opening and did not change after opening. The Scoring Criteria, on the other hand, was the “Exceeds Expectations,” “Meets Expectations,” “Falls Below Expectations,” and “Not Responsive” that was determined during the initial consensus evaluation among the Evaluation Committee members. The Scoring Criteria was not set prior to the opening or prior to the individual Evaluation Committee member’s review of the offers.

The Department asserted in its closing arguments that setting Scoring Criteria prior to the opening of offers, would violate the Arizona Procurement Code and create “absurd situations” that would be potentially costly to the Department. The Department posited that, if Scoring Criteria were drafted ahead of the offer due date and time, “the scoring could likely be set at such levels that it may require the Solicitation to be canceled and rebid as one or no prospective vendors could meet predetermined scoring criteria that cannot be varied once determined.” Rather, the Department argued that “to promote competition, the scoring criteria concerning the evaluation criteria are determined by the evaluation committee after offers are received so that scoring relates to the received offers.”

ACPO Whittington stated that, in all her years managing procurement processes in Arizona, the Scoring Criteria was always set during the initial consensus evaluation after the offers were opened and reviewed by the Evaluation Committee.

ACPO Whittington also testified that the document entitled MTS-MSP Proposal Scoring Criteria was just her notes of the initial consensus evaluation meeting discussion and that she used the notes to ensure that the Evaluation Committee was consistent throughout the evaluation of the offers.

ACPO Whittington asserted that the Evaluation Criteria could not be altered at any time after the offers were opened as it would indicate “bias” based on what was contained in the offers, but was unable to explain why the Scoring Criteria could be set after the offers were opened and reviewed by the Evaluation Committee without invoking the possibility of bias.

Guidesoft argued that allowing the Evaluation Committee to set the Scoring Criteria after all the offers were opened and reviewed opened the process to bias, favoritism, and corruption.

CONCLUSIONS OF LAW

The Arizona Procurement Code is set forth in A.R.S. § 41-2501 et seq.

A.R.S. § 41-2615 provides that the Arizona Procurement Code and the rules adopted under the Code “provide the exclusive procedure for asserting a claim against this state or any agency of this state arising in relation to any procurement conducted under this chapter.”

Guidesoft bears the burden of proof to establish by a preponderance of the evidence that the Solicitation did not comply with the procurement statutes and regulations. See A.R.S. § 41-1092.07(G)(1); A.A.C. R2-19-119; see also Vazzano v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” Morris K. Udall, Arizona Law of Evidence § 5 (1960).

The Arizona Procurement Code’s stated purposes were, in part, to

Provide for increased public confidence in the procedures followed in public procurement.

Ensure the fair and equitable treatment of all persons who deal with the procurement system of this state. . . .

Foster effective broad-based competition within the free enterprise system.

Provide safeguards for the maintenance of a procurement system of quality and integrity.

A.R.S. § 41-2501(B) provides that the Arizona Procurement Code “applies to every expenditure of public monies, including federal assistance monies . . . by this state, acting through a state governmental unit, under any contract . . . .”

The Arizona Procurement Code sets forth the procedures for the procurement of goods and services for the State of Arizona. As part of the process, the Director may delegate procurement authority to those within the agency, to which ACPO Whittington testified she had received relative to this matter. See A.R.S. § 41-2512.

Pursuant to A.A.C. R2-7-206, a “procurement officer shall perform all procurement duties in accordance with the Arizona Procurement Code and within the authority delegated to the procurement officer in accordance with this Chapter.”

A.A.C. R2-7-A901(C) provides that if a protest “is based upon alleged improprieties in a solicitation that are apparent before the offer due date and time, the interested party shall file the protest before the offer due date and time.” A.A.C. R2-7-A901(D) provides that if the alleged improprieties in a solicitation are not apparent before the offer due date and time, “the interested party shall file the protest within 10 days after the agency chief procurement officer makes the procurement file available for public inspection.”

Statutes shall be liberally construed to affect their objects and to promote justice. See A.R.S. § 1-211(B). In interpreting a statute, “[w]e first consider the language of the statute and, if it is unclear, turn to other factors, including ‘the statute’s context, subject matter, historical background, effects, consequences, spirit, and purpose.” McMurren v. JMC Builders, Inc., 204 Ariz. 345, 350 ¶ 12, 63 P.3d 1082, 1087 (App. 2003) (citation omitted).

Statutes should be interpreted to provide a fair and sensible result. See Gutierrez v. Industrial Commission of Arizona, 226 Ariz. 395, 249 P.3d 1095 (2011)(citation omitted); State v. McFall, 103 Ariz. 234, 238, 439 P.2d 805, 809 (1968) (“Courts will not place an absurd and unreasonable construction on statutes.”).

“In applying a statute its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.” Mid Kansas Federal Savings and Loan Ass’n of Wichita v. Dynamic Development Corp., 167 Ariz. 122, 128, 804 P.2d 1310, 1316 (1991).

The Tribunal is required to apply equitable principles when rendering decisions. Seitz v. Industrial Commission of Arizona, 184 Ariz. 599, 603 (Ariz. Ct. App., Div. 1, 1995). The application of equity entails offering a remedy to avoid an unconscionable or unjust result. Sanders v. Folsom, 104 Ariz. 283, 289, 451 P.2d 612 (Ariz. 1969) (quoting Merrick v. Stephens, 337 S.W.2d 713, 719 (Mo. App. 1960)).

The evidence established Guidesoft did not file its Protest prior to the offer due date and time, but did file its Protest within ten days after the procurement file was made available for public inspection.

To the extent the Department argued that Guidesoft waived its argument regarding the allegedly erroneous methodology of scoring the offers because the issue was not raised in the Initial Protest, Guidesoft did not waive the argument because it had no way of knowing the Scoring Criteria was not set prior to the opening of the offers until receipt of the ACPO’s Decision that explained the process.

A.A.C. R2-7-C316 provides, in pertinent part, as follows:

A. An agency chief procurement officer shall evaluate offers and best and final offers based on the evaluation criteria contained in the request for proposals. The agency chief procurement officer shall not modify evaluation criteria or their relative order of importance after offer due date and time.

B. An agency chief procurement officer may appoint an evaluation committee to assist in the evaluation of offers. If offers are evaluated by an evaluation committee, the evaluation committee shall prepare an evaluation report for the agency chief procurement officer. The evaluation report shall supersede all previous draft evaluations or evaluation reports. The agency chief procurement officer may:

1. Accept or reject the findings of the evaluation committee,

2. Request additional information from the evaluation committee, or

3. Replace the evaluation committee.

Standard Procedure 043 (“SP 043”) is a “Standard Procedure for conducting Evaluations and Discussions in accordance with A.R.S. § 41-2534, Competitive Sealed Proposals, as set forth in the Arizona Procurement Code.” SP 043 provides additional direction regarding the procurement process.

Pursuant to SP 043, the ACPO must determine the contract and contractor objectives and then create criteria related to those objectives. Specifically, SP 043 provides as follows:

1.4 Create Criteria. With the Customer, prioritize these objectives by their relative importance, with the most important objectives listed first and the least important objective listed last. Use these prioritized objectives in establishing the Solicitation’s Evaluation Criteria.

SP 043 further details the development of a solicitation, in part, as follows:

2.1 Incorporate Criteria in Solicitation. Develop the Solicitation with Evaluation Criteria in mind. Identify how Offers will be evaluated for each Criterion. Include sufficient Solicitation Instructions, Forms, and Questionnaires to address each of the Evaluation Criteria.

2.2. Plan Evaluation. Develop the Evaluation Tool, as well as its accompanying Evaluation Instructions.

With respect to preparation for opening, SP 043 provides, in pertinent part, as follows:

3.2 Finalize Evaluation Preparation. Finalize Evaluation Committee members, Evaluation Tool, and Evaluation Instructions. Hold a Kick-Off meeting with the Evaluation Committee to review the plan, discuss the Solicitation and agree on schedules.

Regarding the evaluation process, SP 043 provides, in pertinent part, as follows:

4.3 Evaluation Committee Meeting. Hold Evaluation Committee Meeting(s) as necessary. Complete an Evaluation Tool for each Offer. Document the Evaluation Committee’s responses and rating for each rating item, based upon consensus. If no negotiations are to be performed, then the Evaluation Committee shall provide the consensus score with a written recommendation for award to the Procurement Officer.

The Department did not point the Administrative Law Judge to any provision of the Arizona Procurement Code, the Arizona Administrative Code, or SP 043, that specifically provided that the Scoring Criteria could be established after the offers were opened and reviewed by the Evaluation Committee. In fact, the Administrative Law Judge was unable to locate the term “Scoring Criteria” in any of those documents. Rather, 3.2 of SP 043 requires that the Evaluation Tool and Evaluation Instructions be finalized prior to opening the offers.

Based on the testimony presented at hearing, the only matter decided before the offers were opened and reviewed was the selection of the questions to be scored.

After the members of the Evaluation Committee reviewed the proposals individually, the members met and discussed the offers in setting the Scoring Criteria as a group. Interestingly, the Scoring Criteria was recorded as “Exceeds Expectations,” “Meets Expectations,” “Falls Below Expectations,” or “Not Responsive.”

“Expectation” is defined as “the act or state of expecting.” “Expect(ing)” is defined as “to anticipate or look forward to the coming or occurrence of.”

The very act of waiting until the offers had been opened and reviewed before determining the Scoring Criteria vitiates the premise that the responses exceeded, met, or fell below anyone’s expectations. One cannot anticipate what an offer will include if one has already reviewed the offer.

While ACPO Whittington was confident that the members of the Evaluation Committee would not allow any information they knew outside the contents of the offers, including opinions regarding the identity of the offerors themselves, to affect how they scored the offers, the manner in which the Scoring Criteria was developed allows for that to have occurred. Without preset Scoring Criteria, the members of the Evaluation Committee could easily sway the scoring in favor of one offeror or against another offeror.

While the Department presented the possibility of a situation in which all of the responsive offerors were deemed not susceptible for an award because the Scoring Criteria was set too high, ACPO Whittington emphasized that the members of the Evaluation Committee were selected as subject matter experts because they were representative of the agencies that most used the service at issue. If the members of the Evaluation Committee were, in fact, subject matter experts as to the scope of the Solicitation, they should have been able to establish appropriate Scoring Criteria reflective of the State’s needs.

In fact, the opposite result would be more of a concern. That the Evaluation Committee, relying on the proposals as submitted to establish what would constitute “Exceeds Expectations,” “Meets Expectations,” “Falls Below Expectations,” or “Not Responsive,” could award a contract to an offeror that was not suitable. In such a case, proper Scoring Criteria established prior to the review of the offers would result in none of the responsive offerors being deemed susceptible for an award to the benefit of the State.

While nothing in the Arizona Procurement Code explicitly prohibits the formulation of Scoring Criteria after the bids are open and reviewed, such a process is antithetical to the purposes of the code. Rather, the requirement that Evaluation Tool and Evaluation Instructions be finalized prior to the offers being opened demonstrates that the offers themselves should not affect the scoring.

The development of the Scoring Criteria, as described by ACPO Whittington, failed to ensure fairness in the process.

Accordingly, Guidesoft sustained its burden of proof to establish by a preponderance of the evidence that the Department erred in its scoring of the offers responsive to the Solicitation.

Based on this analysis, it is unnecessary to determine the validity of the remaining bases of Guidesoft’s appeal.

RECOMMENDED ORDER

Based on the foregoing, it is recommended that the appeal filed by Guidesoft be granted.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be forty (40) days from the date of that certification.

-54864001

001

-137160-45720000Done this day, May 22, 2023.

/s/ Tammy L. Eigenheer

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile to:

Elizabeth Alvarado-Thorson,

Department of Administration

Kelly M. Wagner

Office of the Attorney General

[email redacted]

Joshua Grabel

DICKINSON WRIGHT PLLC

[email redacted]

By: OAH Staff