Guidesoft, Inc. D/B/A Knowledge Services v. State Protest Committee, State of Tennessee

09/02/2021
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
July 7, 2021 Session
GUIDESOFT, INC. D/B/A KNOWLEDGE SERVICES v. STATE PROTEST
COMMITTEE, STATE OF TENNESSEE, ET AL.
Appeal from the Chancery Court for Davidson County
No. 19-1161-I Patricia Head Moskal, Chancellor
No. M2020-00964-COA-R3-CV
This appeal concerns a bid protest. UWork.com, Inc., d/b/a Covendis Technologies
(“Covendis”) successfully bid on a contract to manage a network of temporary workers for
the State of Tennessee. Guidesoft, Inc. d/b/a Knowledge Services (“Knowledge
Services”), an unsuccessful bidder, filed a protest with the Central Procurement Office
(“the CPO”). The CPO dismissed Knowledge Services’ bid for insufficient bond.
Knowledge Services appealed to the State Protest Committee (“the Committee”), which
denied the appeal. Knowledge Services then filed a petition for common law writ of
certiorari in the Chancery Court for Davidson County (“the Trial Court”). After a hearing,
the Trial Court dismissed Knowledge Services’ amended petition. Knowledge Services
now appeals to this Court, arguing that under Tenn. Code Ann. § 12-3-514(d), its protest
bond should be based on 5% of the lowest evaluated cost proposal rather than 5% of the
State’s estimated maximum liability as found below. We hold, inter alia, that the protest
bond statute is meant to protect the State, and the appropriate protest bond amount is based
on the costs the State may incur rather than a bidder’s proposed cost. Further, the fee relied
upon by Knowledge Services to calculate its protest bond is but a small portion of the
contract at issue, which is estimated to cost the State $190,000,000. The Committee did
not exceed its jurisdiction or act illegally, arbitrarily, or fraudulently. We affirm the Trial
Court.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed;
Case Remanded
D. MICHAEL SWINEY, C.J., delivered the opinion of the court, in which FRANK G.
CLEMENT, JR., P.J., M.S., and ANDY D. BENNETT, J., joined.
Darwin A. Hindman, III, and Rachael C. Haley, Nashville, Tennessee, for the appellant,
Guidesoft, Inc. d/b/a Knowledge Services.
David R. Esquivel and Jeffrey P. Yarbro, Nashville, Tennessee, for the appellee,
UWork.com, Inc., d/b/a Covendis Technologies.
Herbert H. Slatery, III, Attorney General and Reporter; Andrée Sophia Blumstein, Solicitor
General; Eugenie B. Whitesell, Senior Assistant Attorney General; and, Janie C. Porter,
Senior Assistant Attorney General Education and Employment Division, for the appellee,
the State Protest Committee, State of Tennessee.
OPINION
Background
In response to a Request for Proposal (“the RFP”) issued by the CPO, Knowledge
Services and Covendis bid for a statewide contract to provide managed services for
Tennessee’s contingent workforce. The RFP called for a managed service provider
(“MSP”) to manage the State’s staff augmentation, to include establishing and managing a
sub-vendor network. Knowledge Services was the incumbent MSP. The State’s estimated
maximum liability under the RFP was $190,000,000. The contractor would be
compensated under the contract by retaining a percentage of the maximum bill rate. The
MSP fee—the percentage of the bill rate kept by the MSP—would be deducted from the
rate received from a sub-vendor. Each bidder was required to submit two separate parts to
their bid: a Technical Response, and a Cost Proposal. In the Cost Proposal, each bidder
offered a bid rate that was a percentage mark-up of the amounts charged by sub-vendors to
the State for labor. The CPO then converted this bid rate to an amount on a Cost Proposal
evaluation score sheet, and the bidder with the lowest evaluated cost amount would be
assigned all 20 points possible in the category. Higher bidders would be assigned a scaled
score based on a formula using the lowest evaluated cost amount. Covendis offered a bid
rate representing a .75% mark-up of the sub-vendor charges to the State. Covendis
received all 20 points for its Cost Proposal.
In May 2019, the State issued its notice of intent to award the RFP to Covendis. In
its notice, the State provided that in the event of a protest, the protest bond was
$9,500,000—or 5% of the State’s estimated maximum liability under the RFP. In so doing,
the CPO applied Tenn. Code Ann. § 12-3-514(d)(2) which bases the protest bond on the
State’s estimated maximum liability. Knowledge Services timely filed a protest with the
CPO asserting that the State acted arbitrarily and capriciously in awarding the contract to
Covendis. In its bid protest, Knowledge Services asserted that Covendis lacked sufficient
experience in certain key areas. Knowledge Services contemporaneously submitted a
protest bond of $71,250—5% of Covendis’ lowest evaluated Cost Proposal of .75% of the
estimated maximum liability—rather than the $9,500,000 required by the CPO. It was,
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and is, Knowledge Services’ contention that Tenn. Code Ann. § 12-3-514 subsection (d)(1)
rather than (d)(2) should have been applied here. Nevertheless, the CPO dismissed
Knowledge Services’ protest on grounds that its bond was insufficient. Tenn. Code Ann.
§ 12-3-514 provides as follows, in part:
(b) Any respondent who has submitted a response to a solicitation authorized
under this chapter and who claims to be aggrieved in connection with the
solicitation, award, or proposed award of a contract may protest to the chief
procurement officer. The protest shall be submitted in writing within seven
(7) calendar days after the earlier of the notice of the award or intent to award
the contract is issued. Any issues raised by the protesting party after the
seven-day period to protest shall not be considered as part of the protest.
Upon receipt of a protest of a solicitation, award, or proposed award of a
contract, and a protest bond as required in subsection (d), a stay of the
solicitation, award, or proposed award shall be in effect until the protest is
resolved as provided under this section.
***
(d) A protest under this section is not actionable unless the protesting party
submits a protest bond contemporaneously with a protest. A protest bond
shall be payable to the state in the amount of:
(1) Five percent (5%) of the lowest bid or cost proposal evaluated;
(2) Five percent (5%) of the maximum liability or estimated maximum
liability provided in the solicitation;
(3) Five percent (5%) of the estimated maximum revenue, if the solicitation,
award, or proposed award is for a contract in which the state receives
revenue; or
(4) For no-cost contracts, an amount to be determined by the chief
procurement officer.
(e) The protest bond shall be in form and substance acceptable to the state
and shall be surrendered to the state after the protesting party has had an
opportunity to oppose the payment of the protest bond and after a finding by
the protest committee that:
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(1) The protest was signed, before or after appeal to the chief procurement
officer or protest committee, in violation of subsection (c);
(2) The protest has been brought or pursued in bad faith;
(3) The affected state agency has suffered damages resulting in a loss of
funding, increased expenditures, or a disruption in services; the protest was
filed in bad faith or in violation of subsection (c); and the protest was not
upheld;
(4) The protest did not state on its face a valid basis for protest; or
(5) For any other reason approved by the protest committee.
***
(h) The chief procurement officer, in consultation with the head of the state
agency, has authority to resolve the protest. The chief procurement officer
shall resolve the protest within sixty (60) calendar days after a protest is filed.
The final determination of the chief procurement officer shall be made in
writing and submitted to the protesting party, the protest committee, and the
comptroller of the treasury. If the chief procurement officer fails to resolve
the protest within sixty (60) calendar days, then the protesting party may
request that the protest committee meet to consider the protest. The chief
procurement officer shall provide the minutes of the protest proceedings to
each committee member and to the comptroller of the treasury and shall post
the final determination within fifteen (15) business days to the website of the
central procurement office. A request for consideration before the protest
committee shall be made in writing within seven (7) calendar days from the
date of the chief procurement officer’s final determination or within seven
(7) calendar days following the chief procurement officer’s failure to resolve
the protest within sixty (60) calendar days after receipt of the protest.
(i) A stay made pursuant to subsection (b) shall not be lifted unless, after
giving the protesting party an opportunity to be heard, the chief procurement
officer or the protest committee makes a written determination that
continuation of the procurement process or the award of the contract without
further delay is necessary to protect the interests of the state.
***
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(l) Protests appealed to the chancery court from the protest committee shall
be by common law writ of certiorari. The scope of review in the proceedings
shall be limited to the record made before the protest committee and shall
involve only an inquiry into whether the protest committee exceeded its
jurisdiction, followed an unlawful procedure, or acted illegally, fraudulently,
or arbitrarily without material evidence to support its action.
Tenn. Code Ann. § 12-3-514 (2019).1
Knowledge Services appealed the CPO’s decision to the Committee. After a July
2019 hearing, the Committee denied Knowledge Services’ appeal. The Committee found
that pursuant to Tenn. Code Ann. § 12-3-514(e), the CPO had the authority to determine
whether a protest bond is acceptable to the State; that the CPO rather than the protesting
party determines the amount of the bond based on the type of contract; and that a protest
bond in form and substance acceptable to the State was a jurisdictional requirement.
Finally, the Committee found that the protest bond should be returned to Knowledge
Services and no sanctions were warranted.
Under Tenn. Code Ann. § 12-3-514(l), the manner in which to appeal to chancery
court the Committee’s decision on a protest is by common law writ of certiorari. In
September 2019, Knowledge Services filed its petition for common law writ of certiorari
in the Trial Court seeking review of the Committee’s decision. In October 2019,
Knowledge Services filed an amended petition adding Covendis as a party. In February
2020, Knowledge Services filed a motion to supplement the record seeking to introduce
two pieces of supplemental evidence: (1) the RFP and protest bond documents from a
Solicitation run by the CPO in 2019 (“the Credential RFP”); and (2) the RFP and protest
bond documents from the Solicitation run by the CPO in 2013 (“the 2013 RFP”).
According to Knowledge Services, the Credential RFP contradicted certain evidence
before the Committee as to the CPO’s alleged “longstanding” practice of interpreting Tenn.
Code Ann. § 12-3-514(d). In addition, Knowledge Services stated that the 2013 RFP
contradicted evidence before the Committee regarding what constitutes the “lowest
evaluated cost proposal” under Tenn. Code Ann. § 12-3-514(d)(1) and how it is calculated.
Knowledge Services alleged that the Committee’s interpretation of Subsection (d)(1) was
1
Prior to a 2015 amendment, see 2015 Tenn. Pub. Ch. 272, § 2 (eff. April 28, 2015), the statute contained
the following single method for calculating protest bonds: “The protesting party shall post with the chief
procurement officer, at the time of filing a notice of protest, a bond payable to the state in the amount of
five percent (5%) of the lowest cost proposal evaluated or, if a protest is filed prior to the opening of cost
proposals, the bond payable shall be five percent (5%) of the estimated maximum liability provided in the
procurement document.” Tenn. Code Ann. § 12-3-514(c) (West July 1, 2013 to April 27, 2015).
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based on incorrect or incomplete evidence and that the Committee thus acted illegally,
arbitrarily, and capriciously. This matter was heard in March 2020.
In June 2020, the Trial Court entered its final order. The Trial Court denied
Knowledge Services’ motion to supplement the record and dismissed its amended petition.
The Trial Court stated, in part:
After hearing argument on the motion, the Court determined at the
hearing that Knowledge Services’ request to supplement the record should
be denied. Under the express provisions of the bid protest statute, appeals to
chancery court are by common law writ of certiorari and the scope of the
chancery court’s review “shall be limited to the record made before the
protest committee.” Tenn. Code Ann. § 12-3-514(l). Neither the parties nor
the Court is aware of any cases construing this provision. The Court
concludes that the general body of case law applicable to common law writs
of certiorari, permitting additional evidence to be considered by the
reviewing court under certain circumstances, does not apply to judicial
review of bid protests where the legislature has expressly limited chancery
court’s review to the record before the state protest committee. Courts are
required to ascertain and give effect to the intent of purpose of legislation
based on the plain and ordinary meaning of the language used … The
legislature plainly stated that the scope of judicial review is limited to the
record before the state protest committee. The Court construes Tenn. Code
Ann. § 12-3-514(l) as limiting the courts review of bid protests to the record
before the state protest committee.
The Court additionally finds that both the 2013 and 2019 requests for
proposal were in existence and available at the time of the hearing before the
State Protest Committee. Knowledge Services could have offered those
documents at that hearing, but did not do so. The Court further finds that
neither … the 2013 or 2019 solicitation is relevant to the present case. The
2013 solicitation (which is the predecessor contract to the current RFP) pre-
dated the current version of the bid protest statute at issue here, establishing
the amount of the protest bond based on the type of contract solicited. The
2019 solicitation involved a different type of contract that was not based on
the State’s “estimated liability” under the contract. For these reasons, the
Court respectfully denies Knowledge Services’ motion to supplement the
record.
***
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In reviewing the plain language of the protest statute, the Court finds
that it provides four different methods of calculating protest bonds.
Subsections (d)(1) and (d)(2) do not specify the type of contract to which
each applies, while subsections (d)(3) and (d)(4) do specify the type of
contract. In comparing the four subsections, however, it is evident that the
first two subsections apply to cost-type contracts to the State, as contrasted
with no-cost or revenue contracts in the latter two subsections. In analyzing
the language used in (d)(1) and (d)(2), a distinction is drawn between the cost
method or pricing to the State. Subsection (d)(1) contemplates a contract
with a fixed cost proposal, in which the actual cost or liability of the State for
the goods or services to be provided is quantified. Subsection (d)(2)
contemplates a contract where the actual cost or liability of the State is not
known or guaranteed and the actual cost may vary over the contract term.
Instead of quantifying the actual cost, the State caps its maximum liability or
estimated maximum liability based upon the State’s anticipated needs or
utilization under the RFP. While the four alternative provisions are written
using the disjunctive, the plain language used and differences in the cost or
pricing structure of the alternative provisions leads the Court to conclude that
the legislative intent is for a separate method of calculating bond amounts to
correspond to the types of contracts and cost structures that the State uses in
its contract solicitations. The Court further finds that those alternatives are
intended to be mutually exclusive.
To the extent there is any ambiguity in the language used in
subsections (d)(1) or (d)(2), the Court finds that the legislature’s 2015
amendment to the protest bond statute, reflects an intent to shift away from
using a single method of calculating the bond (5% of the lowest cost proposal
evaluated, unless the protest was filed before the cost proposals were opened)
to using four alternative methods of calculating the bond based on the
contract type and cost structure of the request for proposal. The Court further
finds that the legislature did not intend to leave alternative bond calculations
up to the aggrieved bidders, allowing them to simply choose (at least as
between (d)(1) and (d)(2)) the lower bond amount they prefer to post. Such
a construction would render subsection (d)(2) largely inoperative or
superfluous in those solicitations where the State’s costs or liability are
unknown, but are estimated over the life of the contract. Leaving the bond
amount up to a bidder’s choice could also lead to an absurd result, allowing
several competing and aggrieved bidders protesting the same solicitation to
calculate and post bonds in different amounts. The Court concludes that the
cost structure of the contract solicited and the corresponding method of
calculating the protest bond amounts are based on four alternatives: a
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contract for a specified or fixed cost to the State under (d)(1), a contract with
an open-ended, unknown cost or liability to the State as to which the State
has estimated its maximum liability under (d)(2), a revenue contract to the
State based on an estimate of the maximum revenues under (d)(3), or a no-
cost contract based on the CPO’s determination as to the bond amount under
(d)(4).
The foregoing construction of the protest bond statute and the decision
of the State Protest Committee is further supported by material facts in the
record. The terms of the RFP did not require the bidders to propose fixed
pricing or fixed costs to the State in terms of dollars, nor did the RFP require
the State to evaluate the cost proposals. As a result, there was no “lowest
bid” or “lowest cost proposal evaluated” that would allow Knowledge
Services to calculate the bond under subsection (d)(1). Even though the RFP
included a “Cost Proposal” form, the terms of that form and the RFP required
the bidders to propose, as the compensation they would receive, a percentage
of the maximum bill rate to be charged to the State based on the volume of
services the State ultimately utilizes. The RFP did not ask the bidders to
propose the actual or fixed compensation they would receive the managed
services fee they would retain from the maximum bill rate. The State
evaluated the proposed percentage rates, which translates to the
compensation the successful bidder will be paid, in an amount to be
determined, that is a function of the State’s utilization of workforce services
under the RFP over the duration of the contract.
Knowledge Services also challenges the CPO’s asserted reliance on
Tenn. Code Ann. § 12-3-514(e) as granting the CPO broad discretion to
determine the amount of the bond, which the State Protest Committee also
upheld in its Summary of Decision. Subsection (e) provides that the “protest
bond shall be in form and substance acceptable to the state …” Tenn. Code
Ann. § 12-3-514(e). Other than the dispute concerning the amount of the
protest bond, however, no additional issues are raised by any party as to
alleged deficiencies in the “form and substance” of the protest bond
submitted by Knowledge Services. The Court finds that the protest bond
amount specifically is determined under subsection (d), and is separate from
the general “form and substance” of the bond that is acceptable to the State
as required under subsection (e).
Knowledge Services generally complains in its Amended Petition that
the State Protest Committee acted illegally, fraudulently, or arbitrarily under
Tenn. Code Ann. § 12-3-514. The bid protest statute grants the CPO
authority, in consultation with the head of the state agency, to resolve bid
protests. Tenn. Code Ann. § 12-3-514(h). This authorization includes the
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ability to resolve all issues raised by a protest, including the amount of the
bond. As provided under the protest statute, Knowledge Services filed a
protest of the contract award under the RFP with the CPO. The CPO made
a determination that the bond amount submitted by Knowledge Services was
insufficient and dismissed the protest. He made his determination in writing.
Knowledge Services requested review of the CPO’s decision by the State
Protest Committee. The State Protest Committee met and upheld the CPO’s
decision. Knowledge Services did not identify any procedural error
committed by the State Protest Committee that was unlawful under Tenn.
Code Ann. § 12-3-514. Based on these facts as established by the record, the
Court concludes that the State Protest Committee did not act illegally,
fraudulently, or arbitrarily under Tenn. Code Ann. § 12-3-514 in upholding
the decision of the CPO.
Knowledge Services presses the additional argument that by requiring
a protest bond of $9,500,000, where the value of the contract to the successful
bidder is only $1,425,000 in profits, has a chilling effect on aggrieved bidders
and undermines the purposes of competitive solicitations to ensure fair
competition and discourage abuse in the public procurement of goods and
services. In support of this argument, Knowledge Services points out that
while all states have public procurement statutes that include provisions for
unsuccessful bidders to protest big awards, only four states, including
Tennessee, impose a protest bond requirement. Knowledge Services claims
the requirement of protest bonds is so limited because protest bonds tend to
discourage bidders from protesting and participating in the public bidding
process. The Court finds this policy-based argument is best addressed to the
legislature.
Knowledge Services timely appealed to this Court.
Discussion
Although not stated exactly as such, Knowledge Services raises the following issues
on appeal: 1) whether the Trial Court erred in upholding denial of Knowledge Services’
bid protest for failure to file sufficient bond under Tenn. Code Ann. § 12-3-514(d); and 2)
whether the Trial Court erred in denying Knowledge Services’ motion to supplement the
record.
In Leonard Plating Company v. Metropolitan Government of Nashville and
Davidson County, we discussed the limited and deferential standard applied to decisions
reviewed under a common law writ of certiorari as follows:
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The scope of review afforded by a common-law writ of certiorari is
extremely limited. Reviewing courts may grant relief only when the board
or agency whose decision is being reviewed has exceeded its jurisdiction or
has acted illegally, arbitrarily, or fraudulently.
Review under a common-law writ of certiorari does not extend to a
redetermination of the facts found by the board or agency whose decision is
being reviewed. The courts may not (1) inquire into the intrinsic correctness
of the decision, (2) reweigh the evidence, or (3) substitute their judgment for
that of the board or agency. However, they may review the record solely to
determine whether it contains any material evidence to support the decision
because a decision without evidentiary support is an arbitrary one.
Ascertaining whether the record contains material evidence to support
the board’s or agency’s decision is a question of law. For the purpose of this
inquiry, “material evidence” is relevant evidence that a reasonable person
would accept as adequate to support a rational conclusion. The amount of
material evidence required to support a board’s or agency’s decision must
exceed a scintilla of evidence but may be less than a preponderance of the
evidence.
Leonard Plating Co. v. Metropolitan Gov’t of Nashville and Davidson Cnty., 213 S.W.3d
898, 903-04 (Tenn. Ct. App. 2006) (internal citations and footnotes omitted).
An issue on appeal concerns statutory interpretation. As our Supreme Court has
instructed:
Issues of statutory construction present questions of law that we review de
novo with no presumption of correctness. Martin v. Powers, 505 S.W.3d
512, 518 (Tenn. 2016). The primary goal of statutory interpretation is to
carry out legislative intent without expanding or restricting the intended
scope of the statute. State v. Smith, 484 S.W.3d 393, 403 (Tenn. 2016)
(citations omitted). In determining legislative intent, we first must look to
the text of the statute and give the words of the statute “their natural and
ordinary meaning in the context in which they appear and in light of the
statute’s general purpose.” Mills v. Fulmarque, Inc., 360 S.W.3d 362, 368
(Tenn. 2012) (citations omitted). When a statute’s language is clear and
unambiguous, we enforce the statute as written; we need not consider other
sources of information. Frazier v. State, 495 S.W.3d 246, 249 (Tenn. 2016).
We apply the plain meaning of a statute’s words in normal and accepted
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usage without a forced interpretation. Baker v. State, 417 S.W.3d 428, 433
(Tenn. 2013). We do not alter or amend statutes or substitute our policy
judgment for that of the Legislature. Armbrister v. Armbrister, 414 S.W.3d
685, 704 (Tenn. 2013).
Coleman v. Olson, 551 S.W.3d 686, 694 (Tenn. 2018).
We first address whether the Trial Court erred in upholding denial of Knowledge
Services’ bid protest for failure to file sufficient bond under Tenn. Code Ann. § 12-3-
514(d). In its brief, Knowledge Services argues that its protest bond should have been
calculated based upon 5% of the lowest evaluated cost proposal rather than a
straightforward 5% of the State’s estimated maximum liability. Knowledge Services
observes that subsection (d)(1) does not include the words “for fixed cost contracts only”
and (d)(2) likewise does not state “only for contracts where the actual cost may vary over
the contract term” or “for statewide contracts only.” Knowledge Services notes that (d)(3)
and (d)(4) plainly apply to revenue and no-cost contracts respectively, but no similar
distinction is made between subsections (d)(1) and (d)(2). According to Knowledge
Services, “[i]f a protest is filed and the RFP contained a lowest evaluated cost proposal,
the protest bond should be calculated based on the lowest evaluated cost proposal as
expressly stated in (d)(1). If a protest is filed and the RFP did not contain a lowest
evaluated cost proposal, the bond can and must be calculated based on maximum or
estimated maximum liability as set forth in (d)(2).” Knowledge Services notes further that
prior to the 2015 amendment to the bid protest statute, the only way to calculate a post-
award protest bond was “5% of lowest cost proposal evaluated.” Knowledge Services
argues that the RFP in the instant case contained a lowest evaluated cost proposal, thus
(d)(1) offers the appropriate formula for calculating the protest bond. Namely, the RFP
contained “a multi-step evaluation process that converted the percentage mark-up to a
dollar amount, thereby resolving any question about how and whether the bond can be
calculated.” Finally, Knowledge Services argues that the protest bond is meant to protect
the State from frivolous bid protests, not to ensure full performance of the contract.
In response, the Committee argues “both Subsections (d)(1) and (d)(2) apply to cost
type contracts, with each involving a different scenario. Subsection (d)(1) applies to
contract solicitations where the State’s maximum costs are set. Subsection (d)(2) applies
to contracts where the State’s costs are not known, and there is thus an estimated maximum
liability.” The Committee argues further that Knowledge Services wrongly equates
“lowest cost proposal” with management fees by basing its protest bond amount on the
maximum management fees that an awardee can receive under the contract. The
Committee argues that subsections (d)(1) and (d)(2) are predicated on the State’s costs
rather than a contractor’s revenue. In addition, the Committee submits that “the
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management fee itself does not represent what the cost to the State will be over the life of
the contract.” For its part, Covendis argues that Knowledge Services ignores the State’s
actual costs under the contract. Covendis notes that “the vendor will be responsible for the
delivery of contingent workforce services for the State. The vendor will be liable for the
failure in performance. That liability does not pass through to the subvendors, but is
retained by the prime contractor. Under this contract, the prime contractor will not receive
payments limited to its MSP Fee but approximately $50 million annually from the State of
Tennessee.”
This issue requires us to construe Tenn. Code Ann. § 12-3-514(d). We begin by
considering the statute’s overall purpose. A protest bond does not inure to the benefit of
the disappointed bidder; on the contrary, it is an obstacle to the disappointed bidder, as
Knowledge Services has experienced. Knowledge Services points out that few states
impose any kind of protest bond requirement. We are left to conclude that Tenn. Code
Ann. § 12-3-514, which imposes an obstacle for disappointed bidders, is intended to protect
the State.
Knowledge Services argues nevertheless that Tenn. Code Ann. § 12-3-514 is meant
only to deter frivolous protests, not secure full performance of the contract. While
deterring frivolous bid protests surely is an intended purpose of the statute, the issue is how
to calculate the amount that will deter a frivolous bid. The statute’s overall intent is to
protect the State. Basing the amount on a bidder’s proposed cost without heed to the State’s
actual exposure on the contract is not a reasonable interpretation in light of the purpose of
the statute. Tenn. Code Ann. § 12-3-514(d) offers four distinct methods of calculating a
protest bond amount. Each of these methods corresponds to a different type of contract.
In order to effectuate the evident purpose of the statute, the proper method to apply in a
given case will be the one that addresses the State’s exposure under the proposed contract.
In other words, the four distinct methods created by the 2015 amendment provide four
separate ways of protecting the State depending on the type of contract at issue. The correct
subsection to apply will depend on how much cost the State may incur under the RFP.
Again, the perspective is that of the State, not the disappointed bidder. This is in keeping
with the Tennessee Supreme Court’s instruction that we are to “give the words of the statute
‘their natural and ordinary meaning in the context in which they appear and in light of the
statute’s general purpose.’ ” Coleman, 551 S.W.3d at 694 (quoting Mills v. Fulmarque,
Inc., 360 S.W.3d 362, 368 (Tenn. 2012)).
In the present case, the CPO applied subsection (d)(2), with its grounding in the
State’s estimated maximum liability. Under the RFP, the State’s estimated maximum
liability is $190,000,000. Applying subsection (d)(2) yields a protest bond amount of
$9,500,000. The $71,250 bond submitted by Knowledge Services is grossly
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disproportionate to the State’s estimated maximum liability. The fee relied upon by
Knowledge Services as the basis for its own calculation of the protest bond is but one
portion of the State’s liability in this matter. Thus, the CPO’s application of Tenn. Code
Ann. § 12-3-514(d)(2) was in keeping with the statute’s purpose as it protects the State
based on its actual exposure. We further construe Tenn. Code Ann. § 12-3-514 to mean
that it is the CPO, rather than the disappointed bidder, that determines the protest bond
amount in the first instance. Otherwise, Tenn. Code Ann. § 12-3-514(d) would constitute
a menu from which a disappointed bidder could choose the most advantageous subsection
to calculate a protest bond. That is contrary to the statute’s evident purpose, which is to
protect the State.
On common law writ of certiorari review, we are confined to inquiring into whether
the board or agency at issue exceeded its jurisdiction or acted illegally, arbitrarily, or
fraudulently. It is a narrow review. In the instant case, the CPO applied Tenn. Code Ann.
§ 12-3-514(d)(2) to calculate the amount of the protest bond. Knowledge Services failed
to post the necessary protest bond of $9,500,000 and its protest was dismissed as a result.
Knowledge Services then appealed to the Committee, which denied the appeal upon a
hearing. At no stage was the law misapplied. The Committee did not exceed its jurisdiction
or act illegally, arbitrarily, or fraudulently in denying Knowledge Services’ appeal of the
CPO’s decision. We affirm the judgment of the Trial Court dismissing Knowledge
Services’ amended petition for common law writ of certiorari.
The second and final issue we address is whether the Trial Court erred in denying
Knowledge Services’ motion to supplement the record. Knowledge Services argues that it
should have been permitted to put on proof in the Trial Court of the Credential RFP and
the 2013 RFP to show that the Committee acted arbitrarily in denying its appeal. Regarding
whether and when additional evidence may be introduced in connection with judicial
review under the common law writ of certiorari, this Court has stated:
[J]udicial review under a common-law writ of certiorari is typically limited
to the record made before the board or agency. See Jeffries, 108 S.W.3d 862at 873. However, “the trial court may permit the introduction of additional
evidence on the issue of whether the board or agency exceeded its
jurisdiction[ ] or acted illegally, capriciously, or arbitrarily.” Adams v. Tenn.
Dep’t of Corr., No. M2013-00370-COA-R3-CV, 2014 WL 4536557, at *3
(Tenn. Ct. App. Sept. 11, 2014) (emphasis added) (citing Hunter v. Metro.
Bd. of Zoning Appeals, No. M2002-00752-COA-R3-CV, 2004 WL 315060,
*2 (Tenn. Ct. App. Feb. 17, 2004)); see also Cooper v. Williamson Cnty. Bd.
of Educ., 746 S.W.2d 176, 179 (Tenn. 1987); Davison v. Carr, 659 S.W.2d
361, 363 (Tenn. 1983). Thus, we review the trial court’s discovery decisions
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on appeal for an abuse of discretion. Johnston v. Metro. Gov’t of Nashville
& Davidson Cnty., 320 S.W.3d 299, 315 (Tenn. Ct. App. 2009) (citing Frye
v. St. Thomas Health Servs., 227 S.W.3d 595, 600 (Tenn. Ct. App. 2007)).
Hanley v. Turney Ctr. Disciplinary Bd., No. M2016-01223-COA-R3-CV, 2016 WL
6995481, at *5 (Tenn. Ct. App. Nov. 30, 2016), Rule 11 perm. app. denied Mar. 9, 2017.
Knowledge Services argues that by adopting common law writ of certiorari review,
the bid protest statute also adopts the jurisprudence surrounding the common law writ of
certiorari including the ability to introduce additional evidence that goes to whether the
board or agency exceeded its jurisdiction or acted illegally, capriciously, or arbitrarily. The
State and Covendis disagree, pointing to the language of Tenn. Code Ann. § 12-3-514(l)
that “[t]he scope of review in the proceedings shall be limited to the record made before
the protest committee….” However, this language merely restates the common law writ
of certiorari scope of review under which review is typically limited to the record before
the board or agency. See Emory v. Memphis City Schools Bd. of Educ., 514 S.W.3d 129,
140 (Tenn. 2017) (internal citations, brackets and quotation marks omitted) (“Generally,
the scope of review for a common-law writ of certiorari (intended to address legality) is
limited to the record to determine as a question of law whether there is any material
evidence to support the agency’s findings, but new evidence could be admitted on the issue
of whether the administrative body exceeded its jurisdiction or acted illegally, capriciously,
or arbitrarily”). That, in turn, is consistent with the well-recognized exception that
additional evidence may be introduced regarding whether the board or agency exceeded its
jurisdiction or acted illegally, capriciously, or arbitrarily. See Moore v. Metro. Bd. of
Zoning Appeals, 205 S.W.3d 429, 435 (Tenn. Ct. App. 2006) (citations omitted) (“Judicial
review under a common-law writ of certiorari is limited to the record made before the board
or agency unless the court has permitted the introduction of additional evidence on the
issue of whether the board or agency exceeded its jurisdiction or acted illegally,
capriciously, or arbitrarily”). Tenn. Code Ann. § 12-3-514(l) does not carve off this
longstanding aspect of common law writ of certiorari jurisprudence (i.e., does not state that
no additional evidence may be introduced ever). It merely uses the default language
associated with the common law writ of certiorari that review is limited to the record of the
board or agency. Tenn. Code Ann. § 12-3-514(l) does not preclude a party from
introducing additional evidence for the limited purpose of showing that the Committee
exceeded its jurisdiction or acted illegally, capriciously, or arbitrarily. It is not, however,
a chance to relitigate the Committee’s substantive decision.
Nevertheless, a party is not necessarily entitled to put on this additional evidence.
A trial court’s decision on whether to admit the additional evidence is subject to abuse of
discretion review. Our Supreme Court has articulated the abuse of discretion standard of
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review as follows:
This Court has described the abuse of discretion standard in some detail:
The abuse of discretion standard of review envisions a
less rigorous review of the lower court’s decision and a
decreased likelihood that the decision will be reversed on
appeal. It reflects an awareness that the decision being
reviewed involved a choice among several acceptable
alternatives. Thus, it does not permit reviewing courts to
second-guess the court below, or to substitute their discretion
for the lower court’s. The abuse of discretion standard of
review does not, however, immunize a lower court’s decision
from any meaningful appellate scrutiny.
Discretionary decisions must take the applicable law
and the relevant facts into account. An abuse of discretion
occurs when a court strays beyond the applicable legal
standards or when it fails to properly consider the factors
customarily used to guide the particular discretionary decision.
A court abuses its discretion when it causes an injustice to the
party challenging the decision by (1) applying an incorrect
legal standard, (2) reaching an illogical or unreasonable
decision, or (3) basing its decision on a clearly erroneous
assessment of the evidence.
Lee Med., Inc. v. Beecher, 312 S.W.3d 515, 524 (Tenn. 2010) (citations
omitted); see also BIF, a Div. of Gen. Signals Controls, Inc. v. Serv. Const.
Co., No. 87-136-II, 1988 WL 72409, at *2 (Tenn. Ct. App. July 13, 1988)
(citations omitted) (“The standard conveys two notions. First, it indicates
that the trial court has the authority to choose among several legally
permissible, sometimes even conflicting, answers. Second, it indicates that
the appellate court will not interfere with the trial court’s decision simply
because it did not choose the alternative the appellate court would have
chosen.”).
Lee Medical provided the framework for determining whether a trial
court has properly exercised its discretion:
To avoid result-oriented decisions or seemingly
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irreconcilable precedents, reviewing courts should review a
lower court’s discretionary decision to determine (1) whether
the factual basis for the decision is properly supported by
evidence in the record, (2) whether the lower court properly
identified and applied the most appropriate legal principles
applicable to the decision, and (3) whether the lower court’s
decision was within the range of acceptable alternative
dispositions.
Lee Med., 312 S.W.3d at 524-25 (citing Flautt & Mann v. Council of City of
Memphis, 285 S.W.3d 856, 872-73 (Tenn. Ct. App. 2008) (quoting BIF, 1988
WL 72409, at *3)); see also Vodafone Americas Holdings, Inc. &
Subsidiaries v. Roberts, 486 S.W.3d 496, 514 (Tenn. 2016).
Harmon v. Hickman Cmty. Healthcare Servs., Inc., 594 S.W.3d 297, 305-06 (Tenn. 2020).
The Trial Court found that Knowledge Services’ supplemental evidence was
irrelevant, stating “the 2013 solicitation (which is the predecessor contract to the current
RFP) pre-dated the current version of the bid protest statute at issue here, establishing the
amount of the protest bond based on the type of contract solicited. The 2019 solicitation
involved a different type of contract that was not based on the State’s ‘estimated liability’
under the contract.” The Trial Court further found that Knowledge Services could have
introduced these pieces of evidence before the Committee but failed to do so. These
conclusions by the Trial Court are rational and supported by the record. Ultimately, the
issue presented on appeal is a question of law—that is, the interpretation of Tenn. Code
Ann. § 12-3-514. The supplemental evidence Knowledge Services sought to introduce
concerning the CPO’s past practices would not assist our interpretation of Tenn. Code Ann.
§ 12-3-514, with its plain language and evident purpose.
We conclude that the Trial Court, in denying Knowledge Services’ motion to
supplement the record, did not apply an incorrect legal standard; did not reach an illogical
or unjust decision; and did not make a clearly erroneous assessment of the evidence. In
addition, the Trial Court’s decision had a factual basis; properly identified and applied the
most appropriate legal principles applicable to the decision; and was within the range of
acceptable alternative dispositions. No injustice was done toward Knowledge Services. In
short, the Trial Court did not abuse its discretion in denying Knowledge Services’ motion
to supplement the record. We affirm the judgment of the Trial Court.
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Conclusion
The judgment of the Trial Court is affirmed, and this cause is remanded to the Trial
Court for collection of the costs below. The costs on appeal are assessed against the
Appellant, Guidesoft, Inc. d/b/a/ Knowledge Services, and its surety, if any.
______________________________________
D. MICHAEL SWINEY, CHIEF JUDGE
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