SUPERIOR Court Associate Judge Wesley Bogdan has denied USA Fanter’s petition for an injunction and lifted the previously issued temporary preliminary injunction that prevented the Commonwealth Utilities Corporation from awarding a contract for the replacement of a wastewater treatment plant clarifier.
The judge said his order is effective immediately.
Judge Bogdan also affirmed CUC’s decision denying USA Fanter’s protest under the Administrative Procedure Act and the NMI Rules for Administrative Appeals.
In his ruling, he noted that the vast majority of records in this case indicated that CUC’s main consideration in its decision-making process was its budget, “which is not improper (nor should it be considered as a secret or surprise).”
CUC explicitly reserved the right “to reject any or all bids and waive any imperfection in the bid proposal in the best interest of the government,” the judge said.
CUC’s budget for the water clarifier was limited by its federal grant, he added.
“The cancellation letter sent to the bidders did provide the explanation that all the bids submitted were either invalid or beyond the certified budget set for this project. (March 29, 2021 Notice of Cancellation.) This clarification was in line with the warning listed in CUC’s notice withdrawing the award…that CUC would need to evaluate if CUC had the funding to proceed with the project at a higher bid price.”
Judge Bogdan said, “In Fanter’s April 13, 2021 Notice of Protest, Fanter clearly and explicitly acknowledges that the issue is CUC’s limited ‘budget’ for the Sadog Tasi water clarifier project (which Fanter suggested should be increased). CUC then explained the limited and fixed budget in its denial of the bid protest, stating that the funding for the project was part of a larger federal grant and the remaining funding…had already been allocated to other projects required by the grant.”
The judge noted that CUC “has continuously and consistently referenced and informed Fanter that its major concern at all parts of the bidding and cancellation process was its budget….”
He said the court “cannot find that cancellation of a project based on CUC’s internal budget, as decided by its own expertise, to be sufficient grounds for an arbitrary and capricious decision.”
“CUC did not ignore a critical aspect of the problem; it prioritized its budget from the federal grant as the most critical consideration,” the judge said. “CUC’s decision is in line with the facts before it as presented by its financial staff and engineers. And there is no showing by Fanter that CUC’s allocated budget was in bad faith or is so outrageous that it could not be based upon a difference of expert opinions regarding the cost of the work. Fanter may wish for CUC’s project budget to be placed within an [Invitation for Bid or] IFB, or for an exact accounting of CUC’s engineers’ reasoning; however, CUC is not required to do so under the procurement regulations and doing so would defeat the purpose of the competitive sealed bidding process. From a contracting standpoint, there is no benefit to CUC in disclosing a bid ceiling, as it would encourage bidders to bid as close to the ceiling as possible while remaining competitive instead of bidding lower. That would not be in the best interest of the contracting entity.”
The judge said CUC regulations are to be interpreted in a way so as to “provide increased economy in CUC procurement activities and to maximize to the fullest extent practicable the purchasing value of CUC funds.”
With no requirement to include budget ceilings and no benefit to CUC that could come from including budget ceilings, Judge Bogdan said the court will not require CUC to include a budget ceiling in its IFBs. It is neither a material nor an essential contract term for competitive sealed bidding under NMIAC § 50-50-205, he added.
“In other words, it is not arbitrary or capricious for CUC to cancel an IFB if all the bids required more money than CUC had available for the project and there is no requirement for CUC to post their budget in an IFB,” the judge said.
He affirmed CUC’s decision under these facts and denied Fanter’s requested relief.
“The solicitation at issue was cancelled because the bids were over budget and CUC may do so according to the lawful procurement process,” the judge said.
On July 7, 2022, USA Fanter filed a complaint in Superior Court requesting a temporary restraining order and a preliminary injunction restraining CUC from awarding the clarifier replacement contract while its bid protest was unresolved.
The Superior Court issued the TRO on July 8, 2022, and on July 15, 2022, issued a 30-day preliminary injunction.
USA Fanter, represented by attorney Joseph Horey, petitioned the court for a judicial review of CUC’s decision.
CUC was represented by Assistant Attorney General Charles P. Reyes Jr. and CUC lead counsel Hunter Hunt.
For its part, the U.S. Department of Justice, on behalf of the Environmental Protection Agency, has asked the District Court for the NMI to override the temporary restraining order and preliminary injunction issued by the CNMI Superior Court to a contractor so that the CUC can procure a crucial wastewater treatment plant clarifier.
The federal court has the power under the Supremacy Clause of the U.S. Constitution to override the local court’s order, the USDOJ stated.
CUC and the CNMI government, through the Office of the Attorney General, joined the USDOJ in its request to the federal court.
