Kohl v . Manchester, NH CV-03-162-M 10/30/03 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Kohl Partners, LLC; Symmes Maini & McKee Associates, Inc.; and J.T. Callahan Construction, Inc., Plaintiffs
v. Civil N o . 03-162-M Opinion N o . 2003 DNH 188 City of Manchester, Defendant
O R D E R
A disappointed competitor complains that awarding a public
works contract to a rival who submitted a lower-cost proposal is
against public policy. Plaintiffs (sometimes referred to
collectively as “Kohl”), jointly submitted an unsuccessful
contract proposal to the City of Manchester (“the City”), and now
sue for a declaratory judgment voiding the City’s contract with
the successful bidder, intervenor Gilbane Building Company
(“Gilbane”) (Count II). 1 Plaintiffs also assert claims of
promissory estoppel (Count I I I ) , breach of the covenant of good
1 Because the contract at issue has already been awarded, plaintiffs recognize that their request for injunctive relief to block the award (Count I ) is moot. (Pl.’s Mem. of Law Supp. Obj to Mot. to Dismiss, at 4-5.) faith and fair dealing implicit in every New Hampshire contract
(Count I V ) , bad faith (Count V ) , quantum meruit (Count V I ) ,
unjust enrichment (Count V I I ) , negligent misrepresentation (Count
V I I I ) , and breach of contract ( I X ) . Before the court are motions
to dismiss for failure to state a claim upon which relief can be
granted, filed by the City and Gilbane.
Standard of Review
A motion to dismiss for “failure to state a claim upon which
relief can be granted,” F E D . R . C I V . P . 12(b)(6), requires the
court to conduct a limited inquiry, focusing not on “whether a
plaintiff will ultimately prevail but whether the claimant is
entitled to offer evidence to support the claims.” Scheuer v .
Rhodes, 416 U . S . 2 3 2 , 236 (1974). When considering a motion to
dismiss under F E D . R . C I V . P . 12(b)(6), the court must “accept as
true all well-pleaded allegations and give plaintiffs the benefit
of all reasonable inferences.” Cooperman v . Individual, Inc.,
171 F.3d 4 3 , 46 (1st Cir. 1999) (citing Gross v . Summa Four,
Inc., 93 F.3d 9 8 7 , 991 (1st Cir. 1996)). However, while a court
“deciding a motion to dismiss under Rule 12(b)(6) . . . must take
all well-pleaded facts as true . . . it need not credit a
2 complaint’s ‘bald assertions’ or legal conclusions.” Shaw v .
Digital Equip. Corp., 82 F.3d 1194, 1216 (1st Cir. 1996) (quoting
Wash. Legal Found. v . Mass. Bar Found., 993 F.2d 9 6 2 , 971 (1st
Cir. 1993)). Finally, “[d]ismissal under Fed.R.Civ.P. 12(b)(6)
is only appropriate if the complaint, so viewed, presents no set
of facts justifying recovery.” Cooperman, 171 F.3d at 46 (citing
Dartmouth Review v . Dartmouth Coll., 889 F.2d 1 3 , 16 (1st Cir.
1989)).
Background
The relevant facts, as drawn from plaintiffs’ complaint, the
City’s Request for Proposals (“RFP”), and the written decision
rendered by the City’s Selection Committee in response to a
formal protest filed by Kohl,2 are as follows.
2 “Ordinarily, a court may not consider any documents that are outside of the complaint, or not expressly incorporated therein, unless the motion is converted into one for summary judgment.” Alternative Energy, Inc. v . S t . Paul Fire & Marine Ins. Co., 267 F.3d 3 0 , 33 (1st Cir. 2001) (citing Watterson v . Page, 987 F.2d 1 , 3 ) (1st Cir. 1993)). However, under the circumstances of this case, the RFP and the Selection Committee decision qualify as documents “whose authenticity is not challenged” and that have “‘merge[d] into the pleadings’” such that “the court may properly consider [them] under a Rule 12(b)(6) motion to dismiss.” Alternative Energy, 267 F.3d at 33 (quoting Beddall v . State S t . Bank & Trust Co., 137 F.3d 1 2 , 17 (1st Cir. 1998); Clorox C o . P.R. v . Proctor & Gamble Commercial
3 On February 1 2 , 2002, the City enacted an ordinance
establishing a special purchase procedure for the Manchester
Schools Improvement Project (hereinafter “the ordinance”).
(Def.’s Mot. to Dismiss, Ex. B.) The ordinance provides, in
pertinent part:
That notwithstanding the provisions of any other ordinance, the City may enter into competitive negotiations with contractors for design/build services with options to finance and operate the Manchester Schools Improvements Project. This ordinance is a trial establishment of a special purchase procedure as allowed by the Charter.
The City may in lieu of bidding the project enter into competitive negotiations with contractors for the particular service desired providing:
c. The City, through the Highway Department, shall develop the Request For Proposals for the Manchester Schools Improvements Project.
d. Requested proposals and negotiations from all contractors will be based on the same scope of services defined in the Request For Proposals for the purpose of evaluation and selection.
f. All solicitations, negotiations and selections shall be documented.
Co., 228 F.3d 2 4 , 32 (1st Cir. 2000)).
4 g. Project award shall be made based on demonstrated competence and qualifications to provide the required services at a fair and reasonable price.
(Def.’s Mot. to Dismiss, Ex. B.)
The Request for Proposals, dated September 2 3 , 2002, is a
fifty-five page document that includes the following relevant
provisions. In a portion of Section 1 titled “Unsolicited
Alternatives,” the RFP provides:
. . . The City is willing to entertain and encourages the proposal of alternates to those requirements contained herein. These will be considered as part of the final selection process. Alternatives should be clearly detailed and provide cost ramifications on an item by item basis. Alternatives may include, but are not limited t o : locations and/or layouts of school additions, substitution of materials and methods, facility reprogramming[,] funding mechanisms not previously approved, methods of insurance and bonding, etc.
(Def.’s Mot. to Dismiss, Ex. A at 10 (emphasis added).)
In that portion of Section 3 titled “City Rights,” the RFP
provides:
5 . . . The City reserves the right, in its sole discretion, t o :
• cancel, modify or withdraw the entire RFP; • modify the RFP process; . . . • accept other than the lowest priced Proposal; • waive deficiencies, informalities and minor irregularities in Proposals; and • request supplements to a Proposal.
(Def.’s Mot. to Dismiss, Ex. A at 11.) Section 3 further
The RFP does not commit the City to enter any agreement, nor does it obligate the City to pay for any costs incurred in preparation and submission of a Proposal for phase 1 or in anticipation of such an agreement. By submitting a Proposal, a Team disclaims any right to be paid for such costs for phase 1 and for phase 2 , except with respect to phase 2 proposals as provided in Section 6 .
(Def.’s Mot. to Dismiss, Ex. A at 12.)
Section 4A of the RFP, titled “Ownership of Submitted
Proposals,” provides:
The proposals and all materials and other documents submitted with such proposals and all supplementary materials submitted in connection with any clarification of any submitted proposal and in connection with the negotiation of any proposal with
6 the City (collectively, “Proposal Materials”) shall upon submittal become the absolute property of the Owner [the City] and may be used by the Owner in connection with the Project and for such other purposes as the City may choose without engaging the Proposer for the Project and without any compensation therefore being paid to the Proposer. The Proposer understands that in submitting its Proposal Materials to the City, the Proposer is delivering all such materials to the City in consideration of a potential award of a contract for the Project. The Proposer in doing so agrees that it has received such consideration and other good and valuable consideration sufficient to transfer all right, title and interest in and to the Proposal Materials to the Owner who shall have and retain all copyright, trademark, other intellectual property and other intangible rights, and all ownership, right, title and interest in and to the Proposal Materials.
(Def.’s Mot. to Dismiss, Ex. A at 22.)
Section 6 of the RFP includes the following relevant
descriptions of the selection process:
After evaluation of the proposals received in response to the RFP, the City intends to engage in individual discussions and interviews with those candidates who, in the sole opinion of the City, have fully and adequately responded to the RFP. . . .
. . . If the City determines that only one candidate is fully qualified, or that one offer is clearly more highly qualified and suitable than any other under consideration, then a contract may be negotiated and awarded to that candidate without any further consideration of the other proposals.
7 (Def.’s Mot. to Dismiss, Ex. A at 30 (emphasis added).) Section
6 also discusses reimbursement of proposal preparation costs:
Prior to commencing Phase 2 of the selection process the City intends to seek from the Board of Mayor and Aldermen and establish an available reimbursement fund to provide reimbursement to Phase 2 proposers in two circumstances. Such reimbursement fund, in the amounts determined by the City and expected to be announced prior to solicitation of Proposals for Phase 2 , would be available;
(i) to reimburse certain of the proposers’ costs up to a maximum amount to be set by the City in the event that at the end of Phase 2 the City chose not to enter into any contract for the Work with either proposer and (ii) to reimburse certain of the costs, up to a maximum amount to be set by the City, of the proposer who was not selected at the end of Phase 2 (if the other proposer is selected and awarded the DB Contract for the work). The amount in clause (ii) once announced by the City would be financed and paid as part of the cost of the project. Such reimbursement cost is to be included in the GMP [guaranteed maximum price] proposed for the second phase by all candidates.
(Def.’s Mot. to Dismiss, Ex. A at 31 (emphasis added).)
Finally, Section 10 of the RFP “sets forth the exclusive
protest remedies with respect to the RFP.” (Def.’s Mot. to
8 Dismiss, Ex. A at 40 (emphasis added).) The protest provision
Each Proposer, by submitting its Proposal, expressly recognizes the limitation on its right to protest contained herein, expressly waives all other rights and remedies, and agrees that the decision on any protest, as provided herein, shall be final and conclusive. These provisions are contained in the RFP expressly in consideration for such waiver and agreement by the Proposers. Such waiver and agreement by each Proposer are also consideration to each other Proposer for making the same waiver and agreement.
(Def.’s Mot. to Dismiss, Ex. A at 40.) Section 10 then sets out
both a pre-proposal procedure for protesting “the terms of the
RFP on grounds that any aspect of the procurement process
described herein is contrary to legal requirements applicable to
this procurement” and a post-award procedure for protesting “any
determination of any award of the D-B Contract.” (Def.’s Mot to
Dismiss, Ex. A at 40 (emphasis added).)
Under the pre-proposal procedure, “[p]rotests regarding [the
terms of] the RFP shall be filed as soon as the basis for protest
is known to the Proposer, but in no event later than thirty (30)
days before the Proposal Delivery Date.” (Def.’s Mot. to
Dismiss, Ex. A at 40.) Section 10 further provides that
9 [t]he failure of a Proposer to raise a ground for a protest regarding the RFP Documents shall preclude consideration of that ground in any protest of a selection unless such ground was not and could not have been known to the Proposer in time to protest prior to the final date for such protests.
(Def.’s Mot. to Dismiss, Ex. A at 40.)
Section 10 also establishes the format for protests. For
protests of the terms of the RFP, “[n]o hearing will be held on
the protest, but it shall be decided on the basis of the written
submissions by the Owners’ Representative, whose decision shall
be final and conclusive.” (Def.’s Mot. to Dismiss, Ex. A at 4 0 ) .
For protests of the award, “[u]nless otherwise required by law,
no evidentiary hearing or oral argument shall be provided,
except, in the sole discretion of the Owners’ Representative, a
hearing or argument may be permitted.” (Def.’s Mot. to Dismiss,
Ex. A at 41.)
In response to the RFP, both Gilbane and Kohl submitted
proposals for Phase 1 . During the proposal preparation period,
the City assured Kohl that “price would not be the sole factor in
the City’s award of the Project.” (Am. Compl. ¶ 13.) The City
10 also represented to Kohl that it would be reimbursed for the
costs of proposal preparation if its proposal was unsuccessful.3
(Am. Compl. ¶ 14.) Gilbane’s Phase 1 submission contained
material deviations from the requirements of the RFP, and the
City did not inform Kohl of those deviations or that it would
accept non-compliant proposals. (Am. Compl. ¶ 17.) Gilbane also
submitted several supplements to its Phase 1 proposal, outside
the RFP process. (Am. Compl. ¶¶ 18-20.) Kohl was not told that
Gilbane had made those supplemental submissions, and was not told
that the City would accept such submissions. (Am. Compl. ¶¶ 1 9 ,
21.) “[N]either of the two Phase 1 proposals was selected or
acted upon by the City [and] [t]he City did not make any award
based on the Phase 1 proposals.” (Def.’s Mot to Dismiss, Ex. E
at 1.)
Both Gilbane and Kohl submitted Phase 2 proposals on
February 1 4 , 2003. (Am. Compl. ¶ 24.) Gilbane’s Phase 2
3 Plaintiffs do not, however, identify any particular City official who made such a representation, nor do they state the manner in which any such representation was made. Plaintiffs also do not allege that the City actually received funds for reimbursement from the Board of Mayor and Aldermen and did not pay them out, o r , alternatively, that the City failed to request such funds.
11 proposal contained a material deviation from the RFP.4 (Am.
Compl. ¶ 25.) The “City never objected to this material
deviation, and did not inform Kohl that the City would accept
such a deviation from Kohl.” (id.) The City also did not
mention that there was a significant price difference between the
two proposals. (Am. Compl. ¶ 27.) After receiving the two Phase
2 proposals, the City scheduled negotiating sessions with Gilbane
(March 4 , 2003) and Kohl (March 6, 2003). (Am. Compl. ¶ 27.)
After negotiating with Gilbane on March 4 , the City cancelled its
session with Kohl, told Kohl that the contract would be awarded
to Gilbane, and disclosed to Kohl, for the first time, “a large
4 According to plaintiffs, Gilbane’s proposal deviated from the terms of the RFP by
amend[ing] the “proposal pricing form,” required by the RFP to state that Gilbane would sign the City’s contract “subject to reaching a mutually agreeable resolution to the issues outlined in Gilbane’s 2-C-03 letter to [the City’s representative,] M r . Timothy Clougherty.”
(Am. Compl. ¶ 25.) Plaintiffs also assert that
Gilbane’s Phase 2 proposal . . . contained substantial exclusions, assumptions and estimates inconsistent with the RFP’s requirements, including but not limited to Gilbane’s omission of a guaranteed maximum price, a condition which the City required Kohl to satisfy.
(Am. Compl. ¶ 34.)
12 price disparity between the proposals.” (Am. Compl. ¶¶ 30-31.)
The “extraordinary price differential between the competitors”5
is largely attributable to Kohl’s use of a $25 million lease-
buyback financing plan which involved costs not incurred by the
revenue-bond financing plan included in Gilbane’s proposal.6
(Am. Compl. ¶¶ 3 1 , 33.) Kohl based its proposal on the more
expensive form of financing at the City’s suggestion. (Am.
Compl. ¶ 33.)
On March 1 2 , 2003, Kohl protested the City’s award to
Gilbane.7 (Am. Compl. ¶ 43.) A hearing was held on April 9,
2003, and the Selection Committee issued a four-page written
decision on April 1 8 , 2003. (Am. Compl. ¶ 4 4 ; Def.’s Mot. to
Dismiss, E x . E.) Kohl was allowed less than seven days to
5 Kohl does not state the exact amount of the “extraordinary price differential” in its complaint. However, the Selection Committee decision states that “Gilbane’s price was over $38 million lower than Kohl’s.” (Def.’s Mot. to Dismiss, Ex. E at 1.) 6 Defendant disputes that allegation but, for purposes of deciding a motion to dismiss, it must be assumed to be true. See Cooperman, 171 F.3d at 46 (citations omitted). 7 In its protest, plaintiffs also challenged certain terms of the RFP, principally the Section 10 protest procedure. In response, the Selection Committee ruled that plaintiffs’ protest of the terms of the RFP was untimely.
13 examine materials produced to it by the City, was allowed only
half an hour to present its case, was not permitted to examine
any City employees, and was given a hearing before Timothy J.
Clougherty, the same City official who had made the decision to
cancel the negotiating session with Kohl. (Am. Compl. ¶ 44.)
Kohl’s protest was unsuccessful.
Based upon the foregoing, Kohl filed this suit, seeking a
declaratory judgment that the City’s contract with Gilbane is
null and void, and seeking monetary damages in the form o f : (1)
proposal preparation costs; (2) the profits it would have earned
had its proposal been accepted; and (3) the reasonable value of
the services it provided the City by preparing a proposal
containing ideas that the City was able to use, even without
hiring plaintiffs. Plaintiffs’ basic theory of recovery is that
the City violated the ordinance when it cancelled the March 6
negotiating session, failed to evaluate both proposals based on
the same scope of work, and failed to document the negotiations
it held with Gilbane. Kohl also argues that the City is liable
for giving Gilbane various unfair advantages and for breaking its
promise to reimburse proposal preparation costs.
14 Discussion
The City moves to dismiss on grounds that Kohl waived its
right to seek redress in this forum, under the terms of the RFP
itself. Substantively, the City argues that the selection
process was conducted in strict conformity with the RFP.
Finally, the City offers count-by-count arguments for dismissal
based upon failure to state a claim under each of the causes of
action asserted by plaintiffs. Gilbane moves for dismissal on
grounds that Kohl failed to protest the terms of the RFP in a
timely manner and waived the right to sue the City, under the
terms of the RFP.
I. The Ordinance
Because many of plaintiffs’ claims turn on their assertion
that the City violated the ordinance, that is a good starting
point. According to plaintiffs, the ordinance created an
enforceable right to a negotiating session with the City. The
City violated the ordinance, plaintiffs say, by cancelling the
scheduled March 6, 2003, negotiating session with them.
Defendant counters that its action was expressly allowed by
Section 6 of the RFP.
15 The ordinance does not extend the right plaintiffs attempt
to read into i t . While its preamble allows the City to enter
into competitive negotiations, the ordinance does not specify the
form that such negotiations must take, and does not require the
City to meet with each proposer. Thus, the RFP provision
allowing the City to negotiate with only one candidate, if that
candidate is “clearly more highly qualified and suitable than any
other under consideration,” does not violate the ordinance.
Moreover, as discussed below, if plaintiffs thought the RFP
violated the ordinance, their exclusive remedy was the pre-
proposal protest procedure described in Section 10 of the RFP.8
Because the ordinance did not create an enforceable right to
negotiate with the City, plaintiffs’ claims based upon an alleged
violation of that right must necessarily fail.
II. The RFP Protest Remedy
The City and Gilbane both argue that this suit should be
dismissed because: (1) under the terms of the RFP, by submitting
8 Plaintiffs did, in fact, invoke the post-award protest prote procedure, arguing that the City violated the ordinance by failing to negotiate with them. That argument was rejected by the Project Selection Committee. (Def.’s Mot. to Dismiss, Ex. E at 3.)
16 a proposal, Kohl agreed that the Section 10 protest procedure
would be its exclusive remedy for resolving any complaints about
the City’s decision to award the contract to Gilbane; and (2)
Kohl never protested the terms of the RFP, thereby waiving any
complaints about the format of the protest procedure.
Kohl counters that: (1) any argument based upon its failure
to use the Section 10 procedure to protest the terms of the RFP
improperly rests upon facts outside the complaint; (2) its
failure to protest the terms of the RFP is not material because
it was entitled to believe that the City would conduct the
procurement process in accordance with the ordinance; (3) it
never agreed to the City’s protest procedure, and could not have
done s o , because Section 10 is extremely vague and does not
fairly describe the limited hearing that was provided by the
City; (4) the Selection Committee’s decision is not binding
because it resulted from a hearing held before a biased tribunal
and because Kohl was given only a short time to present its case
and was not allowed to cross-examine City witnesses; and (5)
Section 10 is unenforceable as contrary to public policy because
it allowed the Owners’ Representative (Clougherty) to expand the
17 scope of the City’s authority by conducting a protest procedure
that violates the ordinance. Plaintiffs further argue that even
if Section 10 is applicable, it bars only their request for a
declaratory judgment voiding the contract award to Gilbane, but
not their request for reimbursement of proposal preparation costs
(based upon promises allegedly made outside the RFP) or their
request for lost profits (based upon the City’s alleged bad
faith). Plaintiffs’ arguments are unavailing.
If the copy of the RFP appended to defendant’s motion to
dismiss is authentic – and plaintiffs do not contest its
authenticity – then defendant is entitled to dismissal because
plaintiffs have no possibility of prevailing on the facts they
themselves have alleged.
Most, if not all, of the allegedly unfair aspects of the
City’s protest procedure are described in the RFP. Therefore,
the Section 10 pre-proposal protest procedure is plaintiffs’
exclusive remedy. For example, the RFP provides that “[u]nless
otherwise required by law, no evidentiary hearing or oral
argument shall be provided, except, in the sole discretion of the
18 Owners’ Representative, a hearing or argument may be permitted.”
(Def.’s Mot. to Dismiss, Ex. A at 41.) The RFP also provides
that the decision on any protest will be made by the Owners’
Representative. (Def.’s Mot. to Dismiss, Ex. A at 41.) Because
the format of plaintiffs’ post-award hearing and the fact that it
was conducted by the Owners’ Representative were express terms of
the RFP, plaintiffs’ sole avenue for challenge was the pre-
proposal protest process established in Section 1 0 .
As defendant correctly points out, despite being put on
notice, well in advance of submitting a proposal, that the
protest procedure gave them no right to present evidence or oral
argument, and that any protest would be adjudicated by the
Owners’ Representative, plaintiffs never filed a pre-proposal
protest of those terms of the RFP. Plaintiffs raised those
issues only belatedly, in their post-award protest. Because the
exclusive mechanism for challenging the terms of the RFP was a
timely filed pre-proposal protest, which plaintiffs did not file,
none of the alleged deficiencies in the protest procedure may now
serve as a basis for relief in this court. See, e.g., Seal & C o .
v . Wash. Metro. Area Transit Auth., 768 F. Supp. 1150, 1161 (E.D.
19 V a . 1991) (decided under federal law) (holding that “any claim
that the language of an [RFP] is on its face ambiguous, or any
latent ambiguity of which a contractor is aware, must be pursued
prior to the opening of bids”).
III. The Award to Gilbane & Plaintiffs’ Requests for Relief
Because plaintiffs have been afforded an opportunity to
fully present their protest of the award to Gilbane, under the
terms set out in the RFP, their request for declaratory judgment
is not properly before this court. Section 10 could not be more
clear; the established protest procedure is the exclusive means
for challenging the City’s decision to award the contract to
Gilbane. Plaintiffs accepted the exclusive remedy provision of
Section 10 by declining to protest that term before they
submitted their own proposal and, as a consequence, they validly
waived their right to challenge the City’s decision at this time
in this forum.
While there is no New Hampshire case directly on point,
several courts have ruled that once a person submits a proposal
in response to an RFP, he or she gives up the right to protest
20 any of the terms of the RFP. See, e.g., Arizona’s Towing
Prof’ls, Inc. v . State ex rel. Dep’t of Admin., 993 P.2d 1037,
1039-40 (Az. C t . App. 1999) (holding that contracting agency had
no authority to hear protest of RFP terms when RFP stated that
objections to defects had to be made prior to bid opening, and
disappointed bidder had not filed timely, pre-bid, protest);
Optiplan, Inc. v . School Bd., 710 S o . 2d 569, 572-73 (Fla. Dist.
C t . App. 1998) (holding that unsuccessful bidder waived
constitutional challenge to specifications of RFP by “fail[ing]
to file a bid specification protest, and having submitted a
proposal based on the published criteria); Fla. Dep’t of Health &
Rehab. Servs. v . E.D.S. Fed. Corp., 631 S o . 2d 353 (Fla. Dist.
C t . App. 1994) (enforcing RFP’s exclusive-remedy provision, when
proposer failed to file a pre-submission protest, and rejecting
claim that RFP protest procedure was inadequate because agency
contracting officer was not impartial decision maker); Grumman
Data Sys. Corp. v . Widnall, 15 F.3d 1044, 1047 (Fed. Cir. 1994)
(holding that in federal procurement, “protests based upon
alleged ‘improprieties’ which are apparent in the RFP must be
raised prior to bidding”); Alliant Techsystems, Inc. v . U.S.
Dep’t of the Navy, 837 F. Supp. 7 3 0 , 736-37 (E.D. V a . 1993)
21 (explaining that post-award protest of RFP terms is barred by
doctrines of estoppel and waiver: “Having waived its opportunity
to protest the RFP while the possibility of changing the terms
still existed, Alliant cannot now protest the award simply
because its gamble [submitting a proposal without protesting the
RFP terms] did not pay off.”).
Plaintiffs are also barred from seeking reimbursement of
their proposal preparation costs in this court. While they argue
that the City made additional promises of reimbursement, outside
the RFP process, the fact remains that reimbursement is a topic
specifically addressed in the RFP, which brings resolution of
reimbursement claims within the ambit of Section 1 0 . Plaintiffs
plainly understood that. In fact, they pressed their claim for
reimbursement, unsuccessfully, through the post-award protest
procedure.9 (Def.’s Mot. to Dismiss, Ex. E at 4.) Because
reimbursement for proposal preparation costs is a Section 10
matter (and one that has already been resolved against
9 In its decision, the Project Selection Committee found that “[e]ach proposer knew in advance of bidding on Phase 2 that such approval [from the Board and Mayor of Alderman, to reimburse proposal preparation costs] had not been obtained and that no reimbursement was to be expected by the disappointed bidder.” (Def.’s Mot. to Dismiss, Ex. E at 4.)
22 plaintiffs), plaintiffs may not seek those costs in this court.
Moreover, even if plaintiffs were entitled to litigate
reimbursement in this forum, based upon promises made outside the
RFP,10 they have failed to allege that the Board of Mayor and
Alderman actually appropriated funds for reimbursing proposal
preparation costs, which, under Section 6, was a necessary
prerequisite to any reimbursement.
Plaintiffs’ attempt to recover lost profits stands on even
shakier ground. While plaintiffs seek lost profits under four
different theories, including promissory estoppel (Count III), 11
10 As noted above, plaintiffs make only the barest conclusory reference to promises of reimbursement allegedly made by the City, rather than pointing to specific promises made by one or more identified City officials. 11 In Count I I I , plaintiffs claim that the City promised that:
( a ) that the City would treat Kohl and Gilbane fairly and equally; (b) that proposals would be evaluated in a fair and competitive manner; ( c ) that a competitive negotiation process would be followed; and (d) that the City would reimburse the proposal preparation costs of the entity to whom the City did not award the Project.
(Am. Compl. ¶ 55.) According to plaintiffs,
the City acted knowingly, willfully, and in bad faith in failing to fulfill its promises by accepting late and nonconforming submissions from Gilbane, providing
23 breach of the implied covenant of good faith and fair dealing
(Count IV), 1 2 bad faith (Count V ) , 1 3 and breach of contract (Count
IX), 1 4 a close reading of those four claims reveals that all the
material advantages in the procurement process to Gilbane, failing to make a good faith inquiry into the comparative merits of Kohl’s and Gilbane’s proposals, failing to conduct competitive negotiations, and instituting protest procedures which do not comply with due process requirements.
(Am. Compl. ¶ 57.) 12 In Count IV, plaintiffs assert that the City breached the implied covenant of good faith and fair dealing by:
failing to carry out the procurement process promised in the Enabling Ordinance and the RFP, providing material advantages in the procurement process to Gilbane, failing to negotiate with Kohl as promised, and instituting protest procedures which do not comply with due process requirements.
(Am. Compl. ¶ 61.) 13 Count V restates, in ¶ 6 5 , the same list of wrongful acts enumerated in ¶ 6 1 . 14 In Count I X , plaintiffs restate, in ¶ 8 5 , the same list of promises enumerated in ¶ 5 5 . They further claim that the City breached an agreement with them by:
(a) failing to treat Kohl and Gilbane fairly and equally; (b) failing to evaluate proposals in a fair and competitive manner; (c) failing to follow the competitive negotiation process required by the agreement; and (d) failing to reimburse Kohl for its proposal preparation costs.
(Am. Compl. ¶ 87.)
24 wrongdoing alleged involves matters subject to the Section 10
protest procedure.
Having determined that all of the wrongdoing alleged by
plaintiffs falls within the scope of the Section 10 protest
procedure, it is necessary to address plaintiffs’ contention that
Section 10 is unenforceable because it violates public policy.
According to plaintiffs, Kohl was unable, as a matter of
law, to waive its right to judicial review because allowing the
Owners’ Representative to conduct the procurement process
(including presiding over the protest procedure), without any
judicial check, is contrary to public policy. Plaintiffs cite
several precedents establishing that New Hampshire law “will not
enforce a contract or contract term that contravenes public
policy.” Harper v . Healthsource N.H., Inc., 140 N.H. 7 7 0 , 775
(1996) (citing Audley v . Melton, 138 N.H. 416 (1994); Technical
Aid Corp. v . Allen, 134 N.H. 1 (1991)). But they offer no
support for the proposition that New Hampshire courts would find
the exclusive remedy provision of the RFP violative of public
policy.
25 While such exclusive remedy provisions may prove
unenforceable in federal contracting, under 41 U.S.C. § 3 2 1 , at
least one state court has enforced such an RFP provision on
grounds that “a party may waive any right to which it is legally
entitled under the constitution, a statute, or a contract.”
E.D.S., 631 S o . 2d at 355 (citations omitted). Tellingly, the
court in E.D.S. noted that “[w]aiver does not apply . . . in
transactions forbidden by statute or against public policy,” yet
went on to enforce the exclusive remedy provision in the RFP at
issue. Id. (citations omitted). Furthermore, in Florida
Department of Lottery v . GTECH Corp., 816 S o . 2d 6 4 8 , 651 (Fla.
Dist. C t . App. 2001) (citations omitted), the court explained
that under Florida’s administrative procedure act, the
administrative tribunal is “the exclusive remedy for disputes
arising in the competitive procurement process.” Thus, it is by
no means universally accepted in the realm of public contracting
that established policy prohibits exclusive remedy provisions
such as Section 1 0 . In the absence of any New Hampshire
authority deeming such provisions to be contrary to public
policy, there is no basis for concluding that Kohl was unable, as
26 a matter of law, to waive its right to judicial review of the
conduct, or outcome, of the City’s procurement process.
Moreover, public policy supports strict enforcement of the
doctrines of waiver and estoppel in situations such as this. A
requirement that
protests based upon alleged ‘improprieties’ which are apparent in the RFP must be raised prior to bidding . . . encourages the early detection of RFP errors, insures that each contractor’s bid is based upon the same set of specifications and decreases the likelihood that the government would later be forced to issue a corrected RFP and reopen a solicitation.
Grumman, 15 F.3d at 1047 (citations omitted). As the court
explained in Optiplan,
[t]he purpose of such a [pre-proposal] protest is to allow an agency to correct or clarify plans and specifications prior to accepting bids in order to save expense to the bidders and to assure fair competition among them.
710 S o . 2d at 572 (citations omitted). Here, Kohl had an
opportunity to challenge the provisions of the protest procedure
before submitting a proposal. Had it done so and lost, it might
have obtained injunctive relief, delaying the submission process
27 until it obtained a decision regarding the legality of Section
10. And, it is possible that Kohl might have prevailed on a
challenge to the exclusive remedy provision of the protest
procedure (although Kohl has provided no New Hampshire authority
supporting its position on that issue). But, like the
disappointed bidder in Alliant, 837 F . Supp. at 7 3 7 , Kohl made a
business decision to let the pre-proposal protest deadline pass
and gambled that it would not need, or could later challenge, the
protest procedure. Public policy does not require the City to
insure Kohl’s gamble, and the mere fact that plaintiffs might
have prevailed in a judicial challenge to an unfavorable pre-
proposal protest does not excuse their failure to file such a
protest when they had the chance.
Finally, this is hardly the usual competitive bidding case,
in which a disappointed low bidder protests the award of a
contract to a higher bidder. Plaintiffs have not suggested how
the public may have been harmed by the City’s decision to
negotiate a contract for $38 million less than the cost of
plaintiffs’ proposal. See Irwin Marine, Inc. v . Blizzard, Inc.,
126 N . H . 2 7 1 , 274 (1985) (quoting 10 E . MCQUILLIN, MUNICIPAL
28 CORPORATIONS § 28.45, at 144-45 (3d ed. rev. 1981) (“In the context
of municipal contracts, competitive bidding statutes are intended
for the benefit of property holders and taxpayers, not that of
the bidders, and for the purpose of guarding against ‘favoritism,
improvidence, extravagance, fraud and corruption . . . ’ ” ) .
In sum, the ordinance did not create an enforceable right to
a negotiating session with the City; all of the complaints raised
in this case were subject to the resolution procedure described
in Section 10 of the R F P , and, under New Hampshire law, Section
10 is not unenforceable against Kohl. Accordingly, defendants
are entitled to dismissal.
Conclusion
For the reasons given above, defendant’s motion to dismiss
(document n o . 7 ) is granted. The Clerk of the Court shall enter
judgment in accordance with this order and close the case.
29 SO ORDERED.
Steven J. McAuliffe United States District Judge
October 3 0 , 2003
cc: E . Tupper Kinder, Esq. Robert J. Meagher, Esq. Andrew W . Serell, Esq.