Failure to seek stay and appeal means aggrieved bidder’s claims
are moot, appeals court says
Bidders beware: When asserting a flaw in the bidding process, the
aggrieved bidder must obtain a temporary injunction or appeal an adverse
determination to prevent claims from becoming moot.
By org jforward wisbar Joe Forward, Legal Writer,
State Bar of Wisconsin
Sept. 8, 2011
– A losing bidder that did not appeal to stop a Wisconsin agency
from entering into contracts with winning bidders lost its opportunity
to challenge the bidding process.
That’s what the District I Wisconsin Appeals Court held in Managed
Health Services Ins. Corp. v. Wisconsin Department of Health
Services, 2010AP2551 (Sept. 7, 2011), a case in which Managed
Health Services (Managed Health) sought a Health Maintenance
Organization (HMO) contract.
In 2009, the Department of Human Services (DHS) issued a request for
proposal (RFP) to procure Medicaid HMO services through BadgerCare Plus
for southeastern Wisconsin. Managed Health was one of five bidders to
submit a timely response, and the only bidder to lose out on a promised
Managed Health subsequently filed a protest notice with DHS based on
the belief that ex parte communications between DHS staff and a winning
bidder during the RFP process violated established DHS protocols and
Wisconsin’s bidding laws. Managed Health’s protest was
denied by DHS.
Managed Health asked DHS to cease and desist awarding contracts pending
its appeal with the Wisconsin Department of Administration (DOA). DHS
agreed to hold the contracts, but obtained permission from the DOA to
begin preparing for implementation of the contracts.
When the DOA denied Managed Health’s administrative appeal, it
filed a declaratory action in circuit court, alleging violations of
Wisconsin’s bidding and administrative laws. It also obtained a
temporary restraining order to prohibit DHS and DOA from entering into
contracts resulting from the RFP process.
But when the circuit court later denied Managed Health’s motion
for temporary injunction, Managed Health did not appeal the circuit
court’s decision. DHS then signed the contracts with winning
bidders. The circuit court denied Managed Health’s remaining
claims by upholding the DOA’s decision.
Managed Health appealed.
The appeals court ruled that Managed Health’s remaining claims
were moot because Managed Health failed to obtain a temporary injunction
before DHS signed contracts with winning bidders.
“Despite being notified that DHS intended to enter into contracts
with the winning proposers, Managed Health failed to take further action
to prevent DHS from doing so,” Judge Kitty Brennan wrote.
“Because it did not, DHS signed contracts with the four winning
proposers, and now Managed Health’s claims are moot.” That is, resolution would have no
practical effect since contracts were already signed.
The appeals court explained that Managed Health “could have, and
should have” asked the circuit court to stay proceedings while it
sought appeal of the non-final injunction order with the appeals court.
In reaching that conclusion, the appeals court followed PRN
Associates LLC v. State of Wisconsin Dept. of Administration, 2009
WI 53, 317 Wis. 2d 656, 766 N.W.2d 559.
In PRN, the Wisconsin Supreme Court dismissed as moot
PRN’s claim that the DOA’s flawed RFP process led to an
improper denial of PRN’s bid to renovate a State building.
The appeals court also rejected Managed Health’s argument that an
aggrieved bidder need only file a temporary injunction to prevent claims
from becoming moot.