In the Missouri Court of Appeals Western District
LO MANAGEMENT, LLC, et al., ) Respondents, ) ) WD84954 v. ) Consolidated with WD84956 ) OFFICE OF ADMINISTRATION, et al., ) FILED: December 20, 2022 Appellants. )
APPEAL FROM THE CIRCUIT COURT OF COLE COUNTY THE HONORABLE COTTON WALKER, JUDGE
BEFORE DIVISION TWO: LISA WHITE HARDWICK, PRESIDING JUDGE, THOMAS N. CHAPMAN, JUDGE AND JANET SUTTON, JUDGE
Office of Administration, Division of Purchasing and Materials Management
(“OA”) appeals the judgment in favor of LO Management LLC and David Koester
on their petition for declaratory judgment and injunctive relief alleging OA
violated state procurement laws in awarding a license office contract to a
competing vendor. OA contends the circuit court erred in granting LO
Management and Koester relief on one of their claims because they failed to
exhaust their administrative remedies. Additionally, OA asserts the court erred in
finding: (1) OA needed to promulgate a rule before using proximity as one of the
criteria in evaluating bids; (2) OA was required to allow LO Management to submit additional information to correct and supplement its proposal after the contract
was awarded to the competing vendor; (3) OA acted arbitrarily, capriciously, and
unlawfully in awarding proximity points and customer service experience points
to LO Management; and (4) LO Management and Koester were entitled to
attorneys’ fees. For reasons explained herein, we affirm, in part, and reverse, in
part.
FACTUAL AND PROCEDURAL HISTORY
In October 2019, OA issued a request for proposal (“October RFP”) to elicit
bids to operate the license office in Troy for the Department of Revenue (“DOR”).
The October RFP provided that, in evaluating the applications, up to 10 proximity
points would be given to vendors whose principal place of business was near the
Troy license office.
When the October RFP was issued, the Troy license office was operated by
Koester & Koester, LLC, which was owned by Koester and his father. Before the
deadline for submitting proposals to the October RFP, Koester and his uncle
formed LO Management for the purpose of submitting a proposal. LO
Management’s Articles of Organization, filed with the Secretary of State, identified
Koester’s home address in O’Fallon as LO Management’s business address.
LO Management submitted a proposal in response to the October RFP. The
proposal listed Koester’s home address in O’Fallon as LO Management’s principal
place of business. The Troy Chamber of Commerce, which had operated the Troy
license office prior to Koester & Koester, also submitted a proposal in response to
2 the October RFP. OA elected not to award the contract to any vendors under the
October RFP.
Instead, in May 2020, OA issued a new RFP for operation of the Troy license
office (“May RFP”). Proposals were due on June 4, 2020. Under the May RFP,
vendors could earn up to 205 total evaluation points, split between several
evaluation criteria and bidding preferences, including up to 24 points for
proximity points and up to eight points for customer service experience. The
contract was to be awarded to the vendor with the highest total evaluation score.
Portions of the bids were to be evaluated and scored by OA, while other portions,
including the proximity points and customer service experience points, were to be
evaluated and scored by a three-person evaluation committee comprised of DOR
employees.
Proximity points were based on the distance of the vendor’s principal place
of business from the current Troy license office as measured by Google Maps. A
principal place of business within five miles of the license office would be given
the full 24 points, with fewer points given as the distance increased up to 100
miles, over which no points would be given.
The May RFP defined the vendor’s principal place of business as “the bona
fide place of business for the contractor as declared by the contractor and
indicated in any organizational documents for the contractor’s business
organization.” It required that a principal place of business: (1) “Include a
permanent, enclosed building or structure owned or leased by the contractor”; (2)
3 “Be actually occupied by the contractor as a place of business”; and (3) “Be
located where the public may contact [the] owner or operator of the contractor, or
his or her representative, in person or by phone at any reasonable time.”
To receive proximity points, the May RFP required the vendor to include
documentary proof, such as a deed, mortgage or loan document, lease
agreement, or property tax receipt, of its interest in the property located at the
address of its principal place of business. The May RFP instructed that the
address a vendor listed for its principal place of business had to be a street
address and not a post office box. The May RFP further provided that, if the
vendor had a business address that it had filed with the Secretary of State’s office,
it had to use this address as its principal place of business address. If the vendor
did not indicate any principal place of business address, it would not receive any
proximity points.
Other general terms of the May RFP included a provision advising that it
was the vendor’s responsibility to ask questions and advise OA if the vendor
believed that any language, specifications, or requirements violated any state or
federal law or regulations. Any questions or issues regarding the May RFP were
to be submitted to an identified “buyer” no later than 10 calendar days prior to
the due date of the proposals. In fact, the May RFP emphasized that all questions
or comments from vendors regarding the May RFP were to be directed only to the
buyer:
4 Vendors and their agents (including subcontractors, employees, consultants, or anyone else acting on their behalf) must direct all of their questions or comments regarding the RFP, the evaluation, etc. to the buyer of record indicated on the first page of this RFP. Vendors and their agents may not contact any other state employee regarding any of these matters during the solicitation and evaluation process. Inappropriate contacts are grounds for suspension and/or exclusion from specific procurements. Vendors and their agents who have questions regarding this matter should contact the buyer of record.
(Emphasis added.)
The May RFP further provided that OA was “under no obligation to solicit
information if it is not included with the proposal.” Vendors were warned that
“ambiguous responses” may result in an “unfavorable evaluation” of the
proposal, but OA “reserve[d] the right to request clarification of any portion of the
vendor’s response in order to verify the intent of the vendor.” The vendor was
cautioned that its response “may be subject to acceptance or rejection without
further clarification.” In evaluating a proposal, OA “reserve[d] the right to
consider relevant information and fact, whether gained from a proposal, from a
vendor, from vendor’s references, or from any other source.”
After OA issued the May RFP and increased the number of possible
proximity points, LO Management decided to obtain office space in Troy.
Through a real estate agent, LO Management rented a unit in the back of a
building located at 499 Main Street in Troy. The space had previously been rented
to other businesses and was within five miles of the current Troy license office.
LO Management’s commercial lease agreement stated that the unit was
5 commonly known as 491 West Wood Street, and LO Management’s real estate
agent told Koester that this was the correct address for the unit. LO Management
updated its address with the Secretary of State to reflect 491 West Wood Street as
its business address. At the time the commercial lease was drafted, however, the
office space did not have an address formally assigned to it by the Lincoln County
911 Mapping and Addressing Department, which is the entity responsible for
assigning addresses to properties in Lincoln County. In fact, the address of 491
West Wood Street was assigned on most common mapping systems to a vacant
lot several blocks down the street from the office space.
Six vendors, including the Troy Chamber of Commerce and LO
Management, submitted proposals in response to the May RFP. In its proposal,
submitted on June 3, 2020, LO Management requested proximity points, listing
491 West Wood Street as the address of its principal place of business. LO
Management did not include a copy of the commercial lease with its proposal but
stated that a copy of the lease was available upon request. LO Management also
requested customer service experience points.
Two days after LO Management submitted its proposal, Rachel South, the
Executive Director for the Troy Chamber of Commerce, emailed the buyer and the
office of OA’s Commissioner notifying them that LO Management’s principal place
of business address was “nothing but a fake address, empty lot at best.” South
copied her email to several other people, including State Senator Jeanie Riddle;
Mary Cotton, Riddle’s assistant; and State Representative Randy Pietzman.
6 Riddle’s office contacted DOR about the Troy license office and the bidding
process.
On August 27, 2020, the DOR evaluation committee authorized OA to award
the contract for the Troy license office to LO Management. In scoring LO
Management’s proposal, the DOR evaluation committee gave LO Management 24
proximity points based on the address of 491 West Wood Street for its principal
place of business. The committee gave LO Management zero points for customer
service experience. LO Management’s overall point total was almost 20 points
higher than the point total of the next highest vendor, which was Troy Chamber of
Commerce.
The same day that the DOR evaluation committee authorized OA to award
the Troy license office contract to LO Management, Riddle began contacting the
office of Sarah Steelman, then OA’s Commissioner. Steelman’s executive
assistant sent an email to Steelman on August 27, 2020, advising her, “Sen.
Riddle [stated Riddle’s cell phone number] called yesterday and today regarding
fee office contracts. She said that the contract is supposed to go into effect
tomorrow. It is her understanding that it is in OA’s court. She would like for you
to call her about it. She has thoughts to share.” Steelman’s office was aware that
Riddle was calling about the Troy license office. Steelman talked to Riddle, who
expressed concern that LO Management’s principal place of business address was
a vacant lot.
7 According to Joseph Plaggenberg, the Director of the Motor Vehicle and
Driver Licensing Division, there was no reason for Riddle, or anyone else, to be
aware that an award was about to be made, because that information should have
been kept confidential until the award was actually made. Furthermore,
Plaggenberg believed it was improper for the Troy Chamber of Commerce to be
communicating with DOR instead of the buyer, and it was improper for the Troy
Chamber of Commerce to use a state official to contact DOR on its behalf.
Nevertheless, in response to Riddle’s contact, Steelman suggested to Ken
Zeller, then DOR’s Director, that the physical address of the bids be checked to
ensure the addresses were accurate. DOR checked Google Maps, contacted the
Lincoln County Assessor, and sent an employee to 491 West Wood Street. Each
confirmed that the address was a vacant lot. DOR did not contact LO
Management as part of its investigation. DOR did not check the physical
addresses of any of the other proposals submitted for the Troy license office.
Following DOR’s investigation into LO Management’s address, the DOR
evaluation committee completed a new evaluation report. The committee gave
LO Management zero proximity points on the basis that the location of its
principal place of business “is a vacant lot.” The committee also changed LO
Management’s customer service experience rating to award it one point.
As a result of the revised scoring, the Troy Chamber of Commerce received
an overall evaluation score that was 1.5 points higher than LO Management’s
score. The DOR evaluation committee authorized OA to award the contract to the
8 Troy Chamber of Commerce. On October 6, 2020, OA awarded the contract to the
Troy Chamber of Commerce.
LO Management subsequently filed a bid protest with OA, asserting that it
should have received 24 proximity points because its listing of the incorrect
address for its principal place of business was “due to an unfortunate
misunderstanding, outside LO Management’s control.” As an attachment to its
bid protest, LO Management submitted the lease on its principal place of
business, an affidavit from its realtor explaining that the unit LO Management
rented was commonly known to everyone, including the building’s owner, as 491
West Wood Street, and a letter from the Lincoln County 911 Mapping and
Addressing Department issuing a new address of 195 West Wood Street for the
property on October 7, 2020, the day after OA awarded the contract to the Troy
Chamber of Commerce. LO Management also asserted in its bid protest that it
should have received more than one point for customer service experience.
OA denied LO Management’s bid protest. OA rejected LO Management’s
request for more proximity points on the basis that it could not “allow a vendor to
supplement their proposal after the scoring with material that was not available to
the evaluation committee.” Additionally, OA declined to change LO
Management’s customer service experience score.
LO Management and Koester subsequently filed a petition for declaratory
judgment and injunctive relief in Cole County Circuit Court challenging OA’s
denial of its protest. They alleged that OA violated procurement laws by: refusing
9 to award LO Management any proximity points for the location of its principal
place of business (Count I); awarding LO Management fewer customer service
experience points than it merited (Count II); and including the proximity points
factor in the May RFP because OA did not validly promulgate a rule for awarding
location-based points to license office vendors (Count III).
Trial was held in June 2021. On October 4, 2021, the circuit court ruled in
LO Management and Koester’s favor on all counts, concluding that OA acted
arbitrarily, capriciously, and unlawfully in awarding the contract to the Troy
Chamber of Commerce and that the contract award was unlawful and void. The
court permanently enjoined OA from taking any action to implement the contract
awarded to the Troy Chamber of Commerce as a result of the May RFP and from
awarding any other contract based on the May RFP. On October 27, 2021, LO
Management and Koester filed a motion for attorneys’ fees under Section
536.021.9.1 The court issued an amended judgment awarding LO Management
and Koester $114,013 in attorneys’ fees. OA appeals.
STANDARD OF REVIEW
Section 536.150 governs judicial review of non-contested administrative
decisions. Mo. Nat. Educ. Ass'n v. Mo. State Bd. of Educ., 34 S.W.3d 266, 274 (Mo.
App. 2000). In non-contested cases, the circuit court conducts a “de novo review
in which it hears evidence on the merits of the case, makes a record, determines
1 All statutory references are to the Revised Statutes of Missouri 2016, as updated by the 2019 Cumulative Supplement.
10 the facts, and decides whether, in view of those facts, the agency’s decision is
unconstitutional, unlawful, unreasonable, arbitrary, capricious, or otherwise
involves an abuse of discretion.” Id.
On appeal, we review the circuit court’s judgment and not the
administrative agency’s decision. Id. Our review of the circuit court's judgment is
“essentially the same as the review for a court-tried case” and, therefore, “is
governed by Rule 73.01 as construed in Murphy v. Carron, 536 S.W.2d 30 (Mo.
banc 1976).” Id. at 274-75. We will affirm the circuit court’s decision unless it is
not supported by substantial evidence, is against the weight of the evidence, or
erroneously declares or applies the law. Tri-Cty. Counseling Servs., Inc. v. Office
of Admin., 595 S.W.3d 555, 563 (Mo. App. 2020).
ANALYSIS
In Point I, OA contends the circuit court erred in granting LO Management
and Koester relief on their claim in Count III that OA violated state procurement
laws by including the proximity points factor in the May RFP without first
promulgating a rule for awarding location-based points to license office vendors.
OA argues LO Management and Koester failed to exhaust their administrative
remedies by not asserting this claim prior to filing their petition in the circuit
court.2
2 After the petition was filed, OA filed a motion to dismiss Count III on this basis. The court denied the motion.
11 Koester contends he had no administrative remedies to exhaust because he
was challenging the award of the Troy license office contract to the Troy Chamber
of Commerce in his standing as a taxpayer. He argues that, because he was
merely a taxpayer and not the bidder, he could not have submitted a bid protest
raising this claim.
To be entitled to taxpayer standing, “a taxpayer must establish that one of
three conditions exists: (1) a direct expenditure of funds generated through
taxation; (2) an increased levy in taxes; or (3) a pecuniary loss attributable to the
challenged transaction of a municipality.” Lee’s Summit License, LLC v. Office of
Admin., 486 S.W.3d 409, 418 (Mo. App. 2016) (quoting Manzara v. State, 343
S.W.3d 656, 659 (Mo. banc 2011)).
Koester asserts he had taxpayer standing under subdivision (1). The
Supreme Court has interpreted “a direct expenditure of funds generated through
taxation” to mean “a sum paid out, without any intervening agency or step, of
money or other liquid assets that come into existence through the means by
which the state obtains revenue required for its activities.” Manzara, 343 S.W.3d
at 660. To establish standing under this subdivision, “a Missouri taxpayer needs
to show only that his or her taxes went or will go to public funds that have or will
be expended due to the challenged action.” State ex rel. Mo. Auto. Dealers Ass’n
v. Mo. Dep't of Revenue & Its Dir., 541 S.W.3d 585, 593 (Mo. App. 2017) (citation
omitted).
12 “However, not all uses of governmental revenue are ‘direct’ expenditures
under these standards.” Id. (internal quotation marks and citation omitted).
“[G]eneral operating expenses which an agency incurs regardless of the allegedly
illegal activity are not direct expenditures, and are insufficient to establish
taxpayer standing.” Id. (internal quotation marks and citation omitted). “Thus,
salaries for staff time of [agency] employees, correspondence and telephone calls
used to engage in the allegedly unlawful activity are not the type of expenditure of
public funds which would give standing, as they are general operating expenses
which would be incurred whether or not the challenged transaction took place.”
Id. (citations omitted).
Koester alleged in the petition that he was aggrieved as a taxpayer because,
“[i]f the Troy Chamber of Commerce is permitted to proceed with the contract, the
State will be obligated to expend State funds generated through taxation in
connection with the implementation of the contract.” The funds that the State
would be obligated to expend to implement the contract to operate a license fee
office in Troy would be expended regardless of whether the contract was
awarded, allegedly illegally, to the Troy Chamber of Commerce, or whether it was
awarded, allegedly legally, to LO Management or to any other vendor. Because
the State is obligated to expend funds to operate license offices, this is the type of
general operating expense that would be incurred whether or not the challenged
transaction of awarding the contract to the Troy Chamber of Commerce took
place. See id. Thus, Koester has not demonstrated that OA’s actions “impacted
13 the direct expenditure of public funds of the nature sufficient to establish taxpayer
standing.” Id. (citation omitted). Where, as in this case, the “tenor” of the
plaintiff’s challenge “is as [a] competitor seeking to avoid competition and not as
[a] vindicator of a larger public interest,” the plaintiff does not have standing to
bring the action as a taxpayer. Id. (internal quotation marks and citation omitted).
Koester did not have taxpayer standing to assert the claim in Count III that the
inclusion of proximity points as a factor in the May RFP was unlawful because it
was not promulgated as a rule. Because Koester did not have standing, the circuit
court had no authority to entertain his claim in Count III of the petition.
We turn next to whether the court had the authority to entertain LO
Management’s claim in Count III by looking at whether LO Management
exhausted its administrative remedies prior to asserting this claim.3 To seek
administrative review of a state-awarded contract, 1 CSR § 40-1.050(12) requires
that a bid protest “be submitted in writing to the director or designee and
received by the division within ten (10) days after the date of the award.” The
protest must include, among other things, a “[d]etailed statement describing the
grounds for the protest.” 1 CSR § 40-1.050(12)(D). The director or designee will
3 The parties do not dispute on appeal that LO Management had standing to assert Count III. Bidders have a legally protectable interest in a fair and equal bidding process. Byrne & Jones Enters., Inc, v. Monroe City R-1 Sch. Dist., 493 S.W.3d 847, 854 (Mo. banc 2016). LO Management asserted in its petition that the unlawful inclusion of proximity points as a factor deprived it of a fair opportunity to compete in the bidding process. “[B]id documents which require bidders to strategically structure bids or offers to receive scores in several categories do not present a ‘fair opportunity’ to all bidders if one of the scored categories is an unlawful component of the procurement process.” Lee’s Summit License, 486 S.W.3d at 417.
14 review the protest and “will only issue a determination on the issues asserted in
the protest.” 1 CSR § 40-1.050(12).
If the protesting party disagrees with the director or designee’s decision,
then Section 536.150.1 provides for judicial review of the decision. “Because
section 536.150.1 provides a right to judicial review when an agency decision is
‘not subject to administrative review,’ it requires that a party exhaust its
administrative remedies prior to seeking judicial review in non-contested cases.”
Tri-Cty. Counseling, 595 S.W.3d at 568 (quoting State ex rel. Robison v. Lindley-
Myers, 551 S.W.3d 468, 472 (Mo. banc 2018)).
The purpose for requiring the exhaustion of administrative remedies is to
preserve “the efficiency in the relationships between agencies and the courts.” Id.
(citation omitted). The exhaustion requirement recognizes the agency’s ability not
only to develop a factual record, but also to address issues within its purview and
expertise:
Exhaustion is generally required as a matter of preventing premature interference with agency processes, so that the agency may function efficiently and so that it may have an opportunity to correct its own errors, to afford the parties and the courts the benefit of its experience and expertise, and to compile a record which is adequate for judicial review.
Boot Heel Nursing Ctr., Inc. v. Mo. Dep't of Soc. Servs., 826 S.W.2d 14, 16 (Mo.
App. 1992).
LO Management acknowledges that it did not assert in its bid protest that
the inclusion of proximity points was unlawful because it was not promulgated as
15 a rule but argues it was not required to do so because the issue was merely an
additional “legal argument” or “legal theory.” We disagree. In its bid protest, LO
Management argued it was entitled to the full 24 proximity points under the May
RFP. Thus, while the bid protest challenged the number of proximity points LO
Management was awarded under the May RFP, Count III challenged the
lawfulness of the inclusion of proximity points as a factor in the first place and,
consequently, the validity of the May RFP. This was not simply an additional
“legal argument” or “legal theory” to support the grounds asserted in the bid
protest; it was an entirely new ground for challenging the award.
Nevertheless, LO Management insists that its claim in Count III falls under
an exception to the exhaustion requirement. Exhaustion of administrative
remedies is not required when an issue “poses no factual questions or issues
requiring the special expertise within the scope of the administrative agency’s
responsibility, but instead proffers only questions of law clearly within the realm
of the courts.” Premium Std. Farms, Inc. v. Lincoln Twp. of Putnam Cty., 946
S.W.2d 234, 238 (Mo. banc 1997) (citation omitted). “A failure to exhaust
administrative remedies may be justified when the only or controlling question is
one of law, at least where there is no issue essentially administrative, involving
agency expertise and discretion, which is in its nature peculiarly administrative.”
Id. (citations omitted). LO Management argues that whether the inclusion of the
proximity points factor in the May RFP was unlawful because it was not
16 promulgated as a rule was a purely legal issue that needed no factual
development or OA’s specialized expertise. We disagree.
LO Management’s claim in Count III did not present a purely legal issue
outside the realm of OA’s responsibility and expertise. The legislature provides
the commissioner of administration the authority to make rules concerning
procurements:
The commissioner of administration shall make and adopt such rules and regulations, not contrary to the provisions of this chapter, for the purchase of supplies and prescribing the purchasing policy of the state as may be necessary. No rule or portion of a rule promulgated under the authority of this chapter shall become effective unless it has been promulgated pursuant to the provisions of section 536.024.
§ 34.050. The legislature’s use of the phrase “as may be necessary” indicates that
the commissioner of administration has discretion to determine when to make
and adopt rules.
This is consistent with Section 536.041, which allows for persons to file a
petition with any administrative agency requesting the adoption of a rule. Section
536.041 provides that, after such a petition is filed, the decision as to whether to
the proposed rule should be adopted is to be made by the agency. Along with its
decision, the agency is required to submit a “concise summary of the state
agency’s specific facts and findings with respect to the criteria in Section
536.175.4.” The criteria in Section 536.175.4 are:
(1) Whether the rule continues to be necessary, taking into consideration the purpose, scope, and intent of the statute under which the rule was adopted;
17 (2) Whether the rule is obsolete, taking into consideration the length of time since the rule was modified and the degree to which technology, economic conditions, or other relevant factors have changed in the subject area affected by the rule;
(3) Whether the rule overlaps, duplicates, or conflicts with other state rules, and to the extent feasible, with federal and local governmental rules;
(4) Whether a less restrictive, more narrowly tailored, or alternative rule could adequately protect the public or accomplish the same statutory purpose;
(5) Whether the rule needs amendment or rescission to reduce regulatory burdens on individuals, businesses, or political subdivisions or eliminate unnecessary paperwork;
(6) Whether the rule incorporates a text or other material by reference and, if so, whether the text or other material incorporated by reference meets the requirements of section 536.031;
(7) For rules that affect small business, the specific public purpose or interest for adopting the rules and any other reasons to justify its continued existence; and
(8) The nature of the comments received by the agency under subsection 2 of this section, a summary of which shall be attached to the report as an appendix and shall include the agency's responses thereto.
Section 536.041 further provides for the joint committee on administrative rules
and the commissioner of administration to be involved in this process.
These statutes indicate that the legislature has vested the responsibility of
making the initial determination as to whether a rule needs to be promulgated
with OA and prescribed the administrative procedure for doing so. LO
Management’s attempt to take this decision away from OA and bypass the
administrative procedure entirely by seeking relief first from the court prematurely
18 interferes with agency processes, deprives OA of an opportunity to correct its own
errors if it were to determine that promulgating a rule was required, and deprives
the parties and the courts of the benefit of OA’s experience and expertise in
applying the criteria set forth in Section 536.175.4 in making its decision. LO
Management was required to exhaust its administrative remedies on its claim that
OA violated state procurement laws by including the proximity points factor in the
May RFP without first promulgating a rule for awarding location-based points to
license office vendors. Point I is granted.
Because Koester lacked standing to assert the claim in Count III and LO
Management failed to exhaust its administrative remedies with regard to this
claim, the court had no authority to entertain Count III of the petition. Therefore,
the judgment in favor of LO Management and Koester on Count III is reversed.
We deny as moot Point II, in which OA challenges the merits of the court’s award
in favor of LO Management and Koester on Count III. Lastly, because the court
was without the authority to entertain Count III of the petition, and the judgment
of $114,013 in attorneys’ fees was premised entirely on the court’s finding in favor
of LO Management and Koester on Count III,4 we reverse the attorneys’ fees
4 The court awarded attorneys’ fees under Section 536.021.9, which provides, in pertinent part: If it is found in a contested case by an administrative or judicial fact finder that a state agency's action was based upon a statement of general applicability which should have been adopted as a rule, as required by sections 536.010 to 536.050, and that agency was put on notice in writing of such deficiency prior to the administrative or judicial hearing on such matter, then the administrative or judicial fact finder shall award the prevailing nonstate agency party its reasonable attorney's fees incurred prior to the award, not to exceed the amount in controversy in the original action.
19 award in favor of LO Management and Koester. In light of this reversal, we need
not further address Point V, in which OA challenges the merits of the court’s
award of attorneys’ fees in favor of LO Management and Koester.
In Points III and IV, OA challenges the court’s conclusion that it acted
arbitrarily, capriciously, and unlawfully in awarding proximity points and
customer service experience points to LO Management. An agency acts
arbitrarily if there is no rational basis for its decision. Mo. Nat. Educ. Ass'n, 34
S.W.3d at 281. “Capriciousness concerns whether the agency’s action was
whimsical, impulsive, or unpredictable.” Id. “An agency must not act in a totally
subjective manner without any guidelines or criteria.” Id.
Looking first at the proximity points award, the court concluded that OA’s
“handling of the entire series of events that resulted in DOR taking the proximity
points away from LO Management was arbitrary and capricious.” In particular,
the court noted that DOR’s usual practice of evaluating proximity points by simply
inserting the listed address into Google Maps to determine the distance would
have resulted in LO Management’s receiving the full 24 proximity points. The
court found that OA’s decision to deviate from that practice based on
communication on behalf of and from a competing vendor was arbitrary. The
court further found “no rhyme or reason” for OA’s approach to the address issue,
because instead of choosing to investigate all vendors’ addresses, OA singled out
one vendor, LO Management, “against whom vendor, Troy Chamber, engaged in
improper communication.” Specifically, the court explained that OA permitted
20 the Troy Chamber of Commerce to violate, without repercussion, the May RFP’s
rules, but OA did not give LO Management the opportunity to clarify whether its
principal place of business was truly a vacant lot. The court found that seeking
this clarification from LO Management “would have been the most reasonable
response—it is absurd to believe a vendor would intentionally list a vacant lot as
its address in both its proposal and with the Secretary of State.” The court
concluded, “These disparate approaches resulted in LO Management being
treated unfairly.” Substantial evidence supports these findings.
OA argues, however, that it was not allowed to contact LO Management to
clarify its principal place of business address because State ex rel. Stricker v.
Hanson, 858 S.W.2d 771 (Mo. App. 1993), does not allow vendors to supplement
their proposals after the close of the bid process. In Stricker, a vendor submitted
a bid that failed to include information necessary for its bid to even be considered.
Id. at 772-76. After all of the other bids were submitted, and the vendor knew it
had been deemed the lowest bidder, OA allowed the vendor to supply the missing
information. Id. We found that the vendor’s initial bid was non-responsive, in that
it contained a material variance from the awarding authority’s specifications. Id.
at 776. We further found that the non-responsive initial bid should have been
rejected because “a bid which contains a material variance may not be corrected
after the bids have been opened in order to make it responsive.” Id. As OA’s
consideration of the corrected bid afforded the vendor “a substantial advantage or
21 benefit not enjoyed by the other bidders,” we held that the award of the contract
to that vendor was unlawful. Id. at 777-78.
Stricker is inapposite. The OA’s Director of the Division of Purchasing
testified that there was not a responsiveness issue with LO Management’s bid.
The circuit court found that LO Management actually leased an office space that
qualified under the May RFP as a principal place of business within five miles of
the license office in Troy. The court further found that this office space did not
have an address formally assigned to it by the Lincoln County 911 Mapping and
Addressing Department when LO Management submitted its bid and that the only
address for the office space was its “commonly known address” of 491 West
Wood Street. Asking LO Management to clarify its principal place of business
address under these circumstances is not comparable to allowing the bidder in
Stricker to supply a material term that it had previously left blank in its initial bid.
The May RFP expressly provided that OA “reserve[d] the right to request
clarification of any portion of the vendor’s response in order to verify the intent of
the vendor.” If OA believed Stricker precluded it from seeking clarification from
vendors, it should not have included this provision in the May RFP.
While the May RFP may not have required OA to seek clarification on LO
Management’s principal place of business address, it did not preclude OA from
doing so, and OA should have sought clarification under the circumstances. OA
allowed a competing bidder, the Troy Chamber of Commerce, to have
inappropriate contacts with state employees—a ground for suspension and/or
22 exclusion from specific procurements under the May RFP—and then used the
information gleaned from those inappropriate contacts to award LO Management
zero proximity points without giving LO Management the opportunity to clarify its
intent in listing that address. There was no rational basis for OA’s actions, which
appear to have been entirely subjective and unpredictable. The circuit court did
not err in finding that OA acted arbitrarily, capriciously, and unlawfully in
awarding proximity points to LO Management.5 The portion of Point III alleging
error in the court’s judgment regarding the proximity points award is denied.
Because we are affirming the circuit court’s determination that OA acted
arbitrarily, capriciously, and unlawfully in awarding proximity points to LO
Management, we find, pursuant to Section 34.150,6 that the court correctly
declared that the contract awarded to the Troy Chamber of Commerce was void
on this basis. Therefore, there is no need for us to address, and we deny as moot,
the remaining portion of Point III and the entirety of Point IV, both of which allege
error in the court’s determination that OA acted unlawfully in awarding customer
service experience points to LO Management.
5 OA argues that its decision to award LO Management zero proximity points could also be supported by LO Management’s failure to follow the May RFP’s instructions to provide a copy of the lease agreement or other documentation for its principal place of business with its bid. While OA could have denied LO Management proximity points on this basis, the evidence shows that it did not. Moreover, OA awarded a competing bidder who also did not provide any documentation for its principal place of business 22 proximity points, so denying LO Management proximity points on this basis would have been arbitrary and capricious.
6 Section 34.150 states, in pertinent part, “Whenever any department or agency of the state government shall purchase or contract for any supplies, materials, equipment or contractual services contrary to the provisions of this chapter or the rules and regulations made thereunder, such order or contract shall be void and of no effect.”
23 CONCLUSION
The court’s ruling in favor of LO Management and Koester on their claim in
Count III of their petition that OA’s inclusion of proximity points in the May RFP
was unlawful because it was not promulgated as a rule is reversed. The award of
attorneys’ fees to LO Management and Koester is reversed. The court’s
declaration that the license office contract awarded to the Troy Chamber of
Commerce was void because OA acted arbitrarily, capriciously, and unlawfully in
awarding proximity points to LO Management is affirmed.
_________________________________ LISA WHITE HARDWICK, JUDGE All Concur.