This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its May 2018 decision in Teleguam Holdings LLC v. Territory of Guam, the Supreme Court of Guam struck down a contract award after the government, referred to in its judgment as GSA, failed to keep adequate records of the advice received from an external advisor it had retained to assist with its procurement process. The case dealt with a tendering process for the provision of telecommunication services for the executive branch of government. The complainant, referred to in the decision as GTA, brought a legal challenge after losing that bidding process. As the Supreme Court noted, the evidence found by GTA during pre-trial discoveries showed that the government failed to keep proper records of the advice obtained from its external advisor, who was retained to assist in preparing the Invitation to Bid (ITB) document used in the challenged bidding process:
During discovery in the trial court, GTA deposed Dr. Norman Okamura—the consultant hired by GSA to help prepare the IFB. Through the deposition, the parties discovered that the GSA failed to keep proper records of minutes of meetings with Dr. Okamura and the Government, records of communications between Dr. Okamura and the Government, drafts of the IFB worked on by Dr. Okamura, and other paper and materials used by Dr. Okamura in the development of specifications. Since the procurement record was incomplete, the court determined that it could not affirm any award under the IFB. The court vacated the Public Auditor’s decision, remanded the case to the Public Auditor, and ordered a new decision in light of the new findings that the record was incomplete. The Public Auditor issued a Decision on Remand which contained the following analysis: “No new evidence was presented that alters the Public Auditor’s previously issued Consolidated Decisions.” The case returned to the Superior Court.
The Supreme Court determined that the failure to keep the procurement records constituted a material procedural flaw that undermined the validity of the resulting contract award since the missing records prevented the Supreme Court from conducting a proper review of the evaluation process:
While we hold that a showing of prejudice is not required, we do find that an appealing party must establish that the items missing from the procurement record were material to the procurement. See Precise Sys., Inc. v. United States, 120 Fed. Cl. 586, 601-03 (Fed. Cl. 2015) (setting aside procurement award for materially incomplete record); cf. United States ex rel. Harrison v. Westinghouse Savannah River Co., [2003] USCA4 212; 352 F.3d 908, 913 (4th Cir. 2003) (finding that false statements by procurement bidders must be material to impose liability); FMC Corp. v. Manitowoc Co., 835 F.2d 1411, 1414-15 (Fed. Cir. 1987) (finding that documents missing from patent application must be material to hold patent invalid). Missing procurement records are material when, as a result of their absence, judicial review is thwarted in determining whether the appealing party is entitled to the relief requested. See Material, Black’s Law Dictionary (10th ed. 2014) (“3. Of such a nature that knowledge of the item would affect a person’s decision-making; significant; essential.”). GTA has satisfied a “materiality” standard.
In its Verified Complaint, GTA complained that GSA arbitrarily and capriciously failed to split the 1 Gbps service from the 10 Gbps service, resulting in higher costs. RA, tab 1 at 2-8 (Verified Compl.). The GSA’s stated reason for linking the services was that higher administrative costs and confusion would result from multiple providers. See, e.g., RA, tab 45 at 1847 (Gov’t Ex. List, Mar. 25, 2014). However, if the savings from multiple providers would outweigh any additional administrative costs, the GSA would have been required to consider this cost analysis. See 5 GCA § 5001(b)(5). There is no substantive evidence related to the GSA’s conclusion regarding higher administrative costs, and the incomplete record thwarts judicial review of the matter. Complete and thorough judicial review of the cost analysis is impossible in this case because documents from and communications with Dr. Okamura, the government-hired expert, are missing. If the documents existed, they might have supported the Government’s position or they might not have. However, it is sufficient for our materiality analysis that the documents may have included this information and their absence impacts our decision-making. Because there are material records missing from the procurement record, GTA’s challenge to Part E of the procurement was proper.
The Supreme Court therefore upheld the trial court’s decision to strike down the contract award, finding that “the procurement record was materially incomplete and the trial judge has the authority to cancel an award where the procurement record is incomplete.” As this case illustrates, public institutions must maintain adequate records of their evaluation and award processes in order to defend their awards against subsequent bid protests. Since the failure to do so can thwart a proper review of the evaluation process in those bid protest proceedings, the absence of records can result—and often has resulted—in review bodies drawing negative inferences about the evaluation process and invalidating resulting contract awards.
