STATE OF NEW MEXICO COUNTY OF SANTA FE FIRST JUDICIAL DISTRICT AMERICAN INSTITUTES FOR RESEARCH, Plaintiff/Appellant, vs. No. LAWRENCE MAXWELL, as State Purchasing Agent; NEW MEXICO PUBLIC EDUCATION DEPARTMENT, Defendants/Appellees. NOTICE OF APPEAL FROM July 2, 2014, DECISION ON PROTEST OF REQUEST FOR PROPOSALS #40-000-12-00027 FOR OPERATIONAL ASSESSMENTS Pursuant to the State of New Mexico Procurement Code, NMSA 1978, § 13-1-183, NMSA 1978, § 39-3-1.1, and Rule 1-074 NMSA, Appellant/Petitioner American Institutes for Research (“AIR”), by and through its undersigned counsel, hereby submits its Notice of Appeal of the State Purchasing Agent’s July 2, 2014, decision on AIR’s pre-award protest of Request for Proposals # 40-000-12-00027 (the “RFP”) for The Partnership for Assessment and Readiness for College and Careers (“PARCC”) Operational Assessments, attached as Exhibit A (the “Protest Decision”). Though AIR believes the entire procurement was flawed for the reasons noted in its pre-award protest and stated herein, AIR has no objection with the New Mexico Public Education Department’s moving forward with year one so that PARCC is not prevented from moving forward in any way. In support of its Appeal, AIR states as follows: I. PARTIES 1. Appellant American Institutes for Research (“AIR”) is a not-for-profit behavioral and social science research organization that applies science to address issues in a wide range of areas, including student assessment. AIR’s principal place of business is Washington, D.C. AIR is an interested party that would have submitted a proposal for all or the majority of work contemplated by the RFP, attached hereto as Exhibit B, but for the anticompetitive, overly restrictive, and unlawful specifications in the RFP, and but for the other ways this procurement violated New Mexico law. Based on the flaws in the RFP and the attendant procurement process, AIR filed a pre-award protest on December 11, 2013, fifteen days after learning the facts giving rise to its protest and prior to the deadline for proposal submission, in compliance with both the RFP and the procurement statutes. A copy of AIR’s pre-award protest is attached as Exhibit C (the “Protest”). After a dispute about the timeliness of AIR’s protest filing and a determination by this Court that the Protest was timely filed and that the State Purchasing Agent (the “SPA”) must consider the Protest on the merits, the SPA denied the Protest on July 2, 2014. See Exhibit A. AIR brings this Notice of Appeal of the Protest Decision. 2. Appellee Lawrence Maxwell is the State Purchasing Agent for the State of New Mexico. On May 27, 2014, this Court directed the SPA to rule on the merits of the Protest, which the SPA did on July 2, 2014, dismissing or denying each of AIR’s claims. See Exhibit A. The SPA’s office is located in Santa Fe, New Mexico. 3. Appellee New Mexico Public Education Department (“PED”) is an administrative agency of the government of the State of New Mexico procuring operational assessments through the RFP. The PED’s principal office is located in Santa Fe, New Mexico. 2 II. NOTICE OF APPEAL 4. AIR incorporates paragraphs 1 through 3 as if fully stated herein. 5. This Court has jurisdiction to hear and determine this Appeal pursuant to NMSA 1978, § 13-1-183, and NMSA 1978, § 39-3-1.1. This Court also has jurisdiction over this Appeal pursuant to this Court’s May 31, 2014, Order in Case No. D-101-CV-2014-00138, stating that “[p]ursant to NMRA 1-074(T), once the SPA has issued its written determination on the merits of AIR’s protest, the matter will once again be ripe for judicial review by this Court if necessary.” See Exhibit D. 6. On December 11, 2013, fifteen days after learning certain facts about the PED’s procurement for operational assessments on behalf of PARCC under the RFP, AIR submitted the Protest alleging that (i) the RFP unlawfully restricted competition by including a number of specifications that heavily favored one particular vendor and effectively precluded competition by requiring the use of one vendor’s proprietary system, bundling certain requirements, and forcing interested vendors to base proposals on yet-to-be-determined requirements, (ii) PARCC, the consortium on behalf of which the PED issued the solicitation, had an irreparable conflict of interest, and (iii) the PED structured the RFP as a cooperative procurement but then failed to put in place the requisite cooperative procurement agreements. See Exhibit C at 6-13. 7. On December 23, 2013, the SPA denied the Protest as untimely filed. See Exhibit 8. AIR appealed the SPA’s untimeliness determination to this Court, and on May 27, E. 2014, the Court reversed the SPA’s decision and remanded the case for a determination of the merits of the Protest. See Exhibit D. 3 9. On June 2, 2014, the SPA issued a letter setting forth the protest adjudication process and schedule. See Exhibit F. The SPA permitted the PED and NCS Pearson (“Pearson”) – the vendor that AIR alleged had an unfair advantage and that had been awarded the contract during the pendency of the appeal of the timeliness issue – to respond to the Protest by June 18, 2014,1 and then provided AIR an opportunity to reply to the PED’s and Pearson’s responses by June 25, 2014. Id. 10. The SPA did not invite any other vendors to respond to AIR’s protest. 11. The PED and Pearson each responded to the Protest on June 9, 2014. See Exhibit G (PED Response); Exhibit H (Pearson Response). 12. AIR filed its Reply to the PED’s and Pearson’s responses on June 25, 2014. See Exhibit I. 13. On July 2, 2014, the SPA issued its decision on the Protest. See Exhibit A. It determined: first, that AIR did not have standing because it failed to submit a proposal in response to the RFP it was protesting, see id. at 2; second, that the RFP was not a cooperative procurement, and thus that the PED did not err by failing to execute the statutorily required cooperative procurement agreements, id. at 3-5; third, that the RFP did not require vendors to use Pearson’s proprietary content delivery platform (“CDP”) for the first year of the contract, but rather permitted contractors to propose and use their own CDP for year one, and thus that the RFP did not unlawfully favor Pearson, id. at 5-7; and fourth, that the PED did not have to unbundle test development and administrative assessment to promote competition because the 1 Notably, the SPA invited Pearson to submit a response to AIR’s protest because it considered Pearson to be a “party in interest,” even though at the time AIR submitted the Protest – long before award of the contract – Pearson was no more an interested party than any other prospective bidder. 4 PED determined that it was more efficient to conduct the procurement as currently bundled, id. at 7-9. The SPA dismissed AIR’s conflict of interest protest ground as not ripe in a footnote. Id. at 3, n.1. 14. This Notice of Appeal is timely filed, as it is being filed within 30 days after the date of the Protest Decision. Rule 1-074 NMSA; see also NMSA 1978, § 39-3-1.1. 15. AIR is an aggrieved party within the meaning of NMSA 1978, § 39-3-1.1(C), as the SPA’s decision denying the Protest denies AIR the opportunity to compete for a multi-year contract worth potentially over one billion dollars,2 and denies AIR the opportunity to participate in a procurement that complies with New Mexico law. AIR would have submitted a proposal but for the fundamental flaws in the RFP that AIR raised in its protest, flaws that rendered the procurement anticompetitive and contrary to New Mexico law, and effectively prevented AIR from submitting a proposal. III. STATEMENT OF FACTS 16. AIR incorporates paragraphs 1 through 15 as if fully stated herein. 17. PARCC is a consortium of states working together to develop a common set of K- 12 assessments that measure whether students are on track to be successful in college and their careers. The membership of PARCC has varied somewhat over the years. PARCC, Inc. is a non-profit corporation established to support the PARCC consortium, including the procurement of goods and/or services from outside vendors for the benefit of the PARCC member states such as the RFP in question. 2 The estimated overall value of the contract is determined by multiplying $25 (the approximate cost per student) against 6,000,000-10,000,000 students (the range set by the RFP in its volume pricing requirement, see Exhibit B at 88) against 4-8 years (the base contract of four years plus up to four additional option years, see id. at 13). 5 18. PARCC drafted the bulk of the specifications for the RFP issued by the State of New Mexico. 19. The PED issued the RFP on November 14, 2013, and emailed a copy of the RFP to multiple vendors at the time of issuance. 20. The RFP is structured as a PARCC procurement and is drafted to address the assessment needs of all of PARCC member states. For example, New Mexico’s total student population for the 2013-14 school year was 339,219 in grades K-12, but the RFP required vendors to quote prices for three student population scenarios ranging from a minimum of 6,000,000 students to a maximum of 10,000,000 students. The RFP also contains provisions providing for a range of services that go well beyond New Mexico’s requirements, including specific and detailed scoring requirements for the State of New York.3 21. The PED itself confirmed in writing, through the RFP Questions and Answers attached hereto as Exhibit J (the “RFP Q&A”), that the RFP was intended to produce a contract through which assessment services would be provided in PARCC member states other than New Mexico.4 22. PARCC has also stated, in its own press release, its understanding that the RFP was issued by New Mexico on behalf of the PARCC member states.5 23. The evaluation committee for the procurement consisted of thirteen members, only two of whom were from New Mexico. The remaining eleven members were from other PARCC member states. 3 See Exhibit B at 129. See Exhibit J at Q36. See Argument ¶¶ 64-69. 5 See Release: PARCC Releases RFP for Operational Services, Nov. 19, 2013, available at www.parcconline.org/parcc-releases-rfp-operational-assessments. 4 6 24. Prior to release of the RFP, PARCC consulted with other consortium states to ensure that the specifications in the New Mexico RFP satisfied each state’s individual needs. 25. While the SPA asserted that the RFP did not require the successful offeror to use Pearson’s CDP, the public record and Pearson’s own proposal belie that assertion. 26. While vendors were asked to include pricing and specifications for their own content delivery platforms in their proposals, the PED made clear that this was only for contingency purposes and that the plan was to use the CDP vendor’s platform for the first operational year.6 27. Publicly available documents confirm that Pearson is the CDP vendor for the first year of this contract. Specifically, in an October 2012 RFP issued by the State of Indiana on behalf of PARCC, Pearson was hired to create the test forms that would be used in PARCC’s assessment program and to administer the field testing of such items. The Indiana RFP expressly provided that “PARCC will administer the Field Test and the first Operational Assessment on the same platform.”7 In other words, PARCC is committed to using Pearson’s content delivery platform for the first year of operational assessment. 28. In addition, in two separate submissions made in December 2013 – after issuance of the RFP but prior to the proposal deadline – PARCC made clear that it was using Pearson’s proprietary CDP for the first year of operational assessments.8 29. PARCC published on its website and distributed guidance to PARCC member states in September 2013 that stated Pearson’s proprietary CDP would be used for the first year 6 See Argument at ¶¶ 81-82 See Indiana PARCC Field Test RFP 13-29, Attachment E, at 50. 8 See Exhibit K (PARCC Response to Arizona Request for Information), at 27-28; see also Exhibit L (PARCC Proposal to Florida) at 26-28. 7 7 of operational assessments: "Web browser requirements for the PARCC Field Test and the 2014-2015 operational assessments are driven by browser compatibility with the Pearson TestNav 8 assessment delivery platform."9 TestNav is Pearson’s proprietary CDP. 30. Pearson’s proposal in response to the RFP showed clear understanding that Pearson’s proprietary CDP was required by the RFP, stating “In the first operational year (201415), PARCC will use PearsonAccess and TestNav systems.”10 31. PARCC and Pearson have submitted responses for assessment work in other states, and each has integrated the other into its offers. 32. For example, PARCC submitted an offer to Florida in response to an RFP for a five-year contract and an offer to Arizona in response to a Request for Information (“RFI”). In both submissions, PARCC stated it intends to partner with Pearson to use Pearson’s proprietary content delivery platform, TestNav 8, as part of its proposed solution.11 33. Specifically, in both the December 4, 2013, offer to Florida, and the December 2013, response to an RFI issued by Arizona, PARCC stated that it “is making available to schools and districts a caching option known as ‘Proctor Caching’ as part of the Pearson TestNav 8 delivery platform that PARCC will use for the first PARCC operational administration in 2014-2015.”12 In its Florida response, PARCC was even more blunt, specifically referencing Pearson as “PARCC’s assessment delivery platform provider,” (emphasis added).13 9 Technology Guidelines for PARCC Assessments Version 3.0 – September 2013 Update. See Pearson Proposal in Response to RFP at Cost Narrative, p. 3. 11 See Exhibit K at 27-28; Exhibit L at 26-28. 12 See id.; see also Argument at ¶ 89. 13 See Exhibit L, at 26. 10 8 34. In Pearson’s response to the Arizona RFI, it proposed to help deliver or support a number of assessment options, including the PARCC assessment.14 Pearson’s response is unique: no other vendor has been able to enter into an agreement with PARCC to offer the PARCC assessment or to use the PARCC items.15 35. PARCC thus was itself competing for assessment work in Florida, and stating its intent to compete in Arizona, using Pearson’s proprietary content delivery platform at the same time it was preparing the RFP and evaluating proposals for assessment work in New Mexico. 36. AIR filed the Protest of the RFP on December 11, 2013, within fifteen days of learning the facts and occurrences giving rise to its protest. 37. On December 23, 2014, the SPA denied the Protest as untimely filed. 38. The deadline for submission of proposals in response to the RFP was December 30, 2013. 39. Pearson was the only vendor that submitted a proposal in response to the RFP. 40. AIR timely appealed the SPA’s denial of the Protest as untimely filed. 41. The PED awarded the PARCC operational assessments contract to Pearson on May 1, 2014, while AIR’s appeal of the SPA’s denial of the Protest as untimely filed was pending, and prior to any determination of the merits of AIR’s protest. 42. On May 27, 2014, this Court reversed the SPA’s decision on AIR’s Protest and remanded the Protest back to the SPA for a determination on the merits. Exhibit D. 14 See Exhibit M (Pearson Response to Arizona Request for Proposal) at ES-1 – ES-2. Catherine Gewertz, Can Any State Use PARCC or Smarter Balanced Test Items?, Education Week, Jun. 13, 2014. 15 9 43. The SPA did not rule on the merits of the Protest until July 2, 2014, long after the proposal deadline, and months after the PED awarded the operational assessments contract to Pearson. IV. ARGUMENT 44. AIR incorporates paragraphs 1 through 43 as if fully stated herein. 45. The Protest Decision is arbitrary, capricious, not supported by substantial evidence, and contrary to the governing law. The Protest Decision is based on an improper reading of both the RFP and the New Mexico Procurement Code, and it ignores substantial evidence in the record – cited by AIR – that contradicts its conclusions. 46. This appeal concerns contract and statutory construction and therefore this Court reviews those aspects of the SPA’s decision de novo. City of Albuquerque v. AFSCME Council 18 ex rel. Puccini, 2011-NMCA-021, ¶ 8, 149 N.M. 379, 381, 249 P.3d 510, 512 (N.M. Ct. App. 2011) (“[w]hen reviewing an administrative agency’s conclusions of law,” the courts “review de novo”). 47. This Court reviews the SPA’s factual findings to determine whether they are supported by substantial evidence. Id. (a court applies “a substantial evidence test when reviewing an agency’s factual findings”). 48. The New Mexico Procurement Code, NMSA 1978, §§ 13-1-28 - 13-1-199, is designed to protect the integrity of the procurement process. Its stated purposes are “to provide for the fair and equitable treatment of all persons involved in public procurement, to maximize the purchasing value of public funds and to provide safeguards for maintaining a procurement system of quality and integrity.” NMSA 1978, § 13-1-29. Indeed, “[t]he Code and the Procurement Manual are designed to preclude even the appearance of impropriety.” See 10 Planning & Design Solutions v. City of Santa Fe, 1994-NMSC-112, ¶ 25, 118 N.M. 707, 713, 885 P.2d 628, 634 (emphasis in original). 49. A protest of a solicitation that alleges that an RFP is anticompetitive and unlawful is precisely the sort of protest the Procurement Code was designed to enable. It aims to provide for “the fair and equitable treatment of all persons involved in public procurement” by ensuring that no one vendor has an unfair advantage over any others, to “maximize the purchasing value of public funds” by ensuring that there is true competition, and to maintain “quality and integrity” in the procurement process by ensuring that all vendors have confidence that the procurement is conducted in an upstanding fashion and is free of any impropriety . NMSA 1978, § 13-1-29. 50. Though the PED has discretion to design an RFP that best meets its needs, issuance of an anticompetitive RFP that violates the New Mexico Procurement Code constitutes an abuse of discretion that is entitled to no deference at all and that this Court should not permit. (1) The SPA’s Determination that AIR Lacks Standing Was Arbitrary, Capricious, and Not Supported by the Governing Law. 51. AIR incorporates paragraphs 1 through 50 as if fully stated herein. 52. The SPA’s determination that AIR lacks standing to protest the RFP because it did not submit a proposal in response to the solicitation it protested as unlawful is a legal conclusion that this Court reviews de novo. 53. The SPA misinterprets the Procurement Code and the governing regulations, both of which unquestionably permit vendors to protest a solicitation prior to award. The SPA based its determination on NMSA 1978, § 13-1-172, which provides that “[a]ny bidder or offeror who is aggrieved in connection with a solicitation or award of a contract may protest to the state purchasing agent or a central purchasing office,” and requires that the protest “be submitted in 11 writing within fifteen calendar days after knowledge of the facts or occurrences giving rise to the protest.” Because AIR did not submit an offer, the SPA determined that AIR was not an “offeror” as defined in NMAC § 1.4.17(B)(13) and the RFP.16 Accordingly the SPA ruled that AIR did not have standing to protest. The SPA’s analysis is a bizarre interpretation of New Mexico’s procurement statutes and regulations that leads to an arbitrary, capricious and unlawful outcome. 54. Under the SPA’s reading, a contractor has no standing to file a protest of a solicitation if the fifteen day period for submitting a protest after learning the facts giving rise to the protest concludes prior to the date of proposal submission. As the deadline for submitting a protest of a solicitation is almost always before the deadline for submitting proposals, the SPA’s reading of the statute essentially eliminates the ability of a vendor to file a pre-award protest, something the Procurement Code unquestionably permits. 55. In addition, this narrow construction eviscerates a contractor’s ability to protest a sole source award, something New Mexico law expressly permits. Pursuant to NMAC 1.4.1.81, “[a]ny bidder or offeror who is aggrieved in connection with a solicitation or award of a contract, including a sole source procurement, may protest to the state purchasing agent or central purchasing office.” Under the SPA’s interpretation, if submission of an offer were a prerequisite to filing a protest because this section uses the term “bidder or offeror,” the only contractor with standing to protest a sole source award is the sole source awardee itself. Such a reading defies logic. 56. The SPA’s narrow interpretation requiring proposal submission as a prerequisite to filing a protest would also provide an incentive for agencies to avoid judicial scrutiny through 16 “Bidding” is not applicable in the context of a request for proposals. 12 administrative maneuvering and delay, as the SPA did here. In this case, the SPA’s refusal to consider AIR’s protest on the merits or to amend the solicitation to eliminate the anticompetitive provisions prior to the deadline for proposal submission effectively precluded AIR’s participation because submission of a proposal that could not comply with these overly restrictive provisions would have been pointless. 57. Rather than issuing a determination on the merits of AIR’s challenges, the SPA denied AIR’s protest based on an untimeliness argument that was later overturned by this Court. As a result, none of the flaws that AIR raised in the Protest had been addressed by the proposal submission deadline, thereby rendering AIR’s submission of a proposal pointless. The Procurement Code surely was not designed to allow agencies to engage in this kind of gamesmanship. 58. Quite simply, it makes no sense – and subverts the purpose of the protest rules – to require a protester to submit a proposal for an RFP that the protester cannot win due to the flaws it is protesting. 59. In addition, AIR’s protest is challenging what is effectively a de facto sole source award in violation of NMSA 1978, § 13-1-126(E) and NMAC § 1.4.1.54(G).17 Pursuant to 1.4.1.54(G), “[a]ny qualified potential contractor who was not awarded a sole source contract may protest to the state purchasing agent or a central purchasing office.” Under this provision, AIR did not have to first submit an offer to protest this de facto sole source award, and the SPA’s contrary conclusion falls apart. 17 See Argument at ¶ 75. 13 60. Finally and interestingly, while the SPA initially rejected the timeliness of AIR’s protest in its decision of December 23, 2013,18 it did not question AIR’s standing to protest the RFP even though AIR had not submitted a proposal at that time. The fact that the SPA raised this issue only after this Court reversed the SPA’s determination on timeliness and ordered the SPA to consider AIR’s protest on the merits is inconsistent at best. Upholding the SPA’s decision on standing would deny AIR the right of judicial review to which it is entitled pursuant to both the Procurement Code and this Court’s earlier decision. 61. In short, to uphold the SPA’s construction of New Mexico’s procurement law in this instance would not only flip the interpretive principle stated by this Court – that competitive procurement rules are to be strictly construed against the soliciting entity – but would render meaningless the very provisions that were intended to serve as a check against violations of such rules. 62. For the foregoing reasons, the SPA’s decision that AIR lacks standing because it did not submit a proposal in response to the challenged RFP is arbitrary, capricious, and contrary to the governing law, and must be set aside. (2) The SPA’s Decision that This Was Not a Cooperative Procurement Was Arbitrary, Capricious, and Not Supported by Substantial Evidence. 63. AIR incorporates paragraphs 1 through 62 as if fully stated herein. 64. The SPA’s determination that “this was never a cooperative procurement,”19 is arbitrary, capricious, and not supported by substantial evidence. Indeed, the evidence in the record overwhelmingly contradicts the SPA’s determination. 18 19 See Exhibit D. See Exhibit A at 3. 14 65. The SPA maintains that the RFP “was not meant to establish a cooperative procurement under New Mexico law, but rather a statewide price agreement that could be used not only by New Mexico entities but also by any other state that cared to leverage the agreement in accordance with their own state law.”20 The SPA further concludes that “[t]he only party to this procurement and the only entity to which any obligation is created, is the New Mexico PED.”21 In other words, because the requisite cooperative procurement agreements were not in place, this was not a cooperative procurement.22 The SPA’s holding ignores the overwhelming factual evidence that PARCC and the PED drafted the RFP not only to provide other PARCC member states with the opportunity to purchase assessment services at an agreed-upon price, but also to lay the groundwork for that opportunity by ensuring that the RFP included the requirements of those other states. 66. Under New Mexico law, a cooperative procurement, which must be conducted pursuant to NMSA 1978 § 13-1-135, is defined as a “procurement conducted on or behalf of more than one state agency or local public body, or by a state agency or local public body with an external procurement unit.” NMSA 1978, § 13-1-44. An “external procurement unit” is defined as “any procurement organization not located in this state which, if in this state, would qualify as a state agency or local public body.” NMSA 1978, § 13-1-56. Pursuant to this definition, Boards of Education or Departments of Education in other states qualify as external procurement units. As the SPA describes, “[t]he essence of a cooperative procurement is that one agency enters into the procurement by or on behalf of another entity to arrive at a common 20 21 22 Id. at 3. Id. at 5. See Id. at 4-5. 15 contractual arrangement.”23 That is precisely what was intended in this case (and would have resulted), but for the PED’s failure to enter into the requisite cooperative procurement agreements. 67. While the procurement resulting from the RFP may be denoted a “price agreement,” that does not signify that the PED did not intend to conduct this as a cooperative procurement. Indeed, the record is replete with evidence that the RFP was issued by New Mexico on behalf of the PARCC member states and was intended to go well beyond negotiating statewide volume pricing “that any other state may leverage” if it so chose. This evidence includes RFP provisions concerning both pricing and assessment criteria. The evidence also includes statements made by the PED in the RFP Q&A, and by PARCC in its own press releases. This evidence includes: a. The RFP Scope of Work explains that the assessment resulting from this RFP “will serve as the primary large-scale summative assessment in consortium states in the 2014-2015 school year and thereafter.” Exhibit B at 88 (emphasis added). b. The RFP requires vendors to price “three total consortium population scenarios: approximately 6 million, 8 million, and 10 million tested students. Offerors shall use these data to prepare a cost proposal for each population scenario.” Exhibit B at 88 (emphasis added). New Mexico’s total student population for the 20132014 school year was 339,219 students in all grades, and even fewer in the grades tested under this RFP. Thus the smallest scenario that the RFP requires vendors to price depends on at least fifteen times the student population of New Mexico alone. Indeed, the awarded contract contains no price if the number of students 23 Exhibit A at 4. 16 falls below 5.5 million, but rather requires that a price for a smaller number of students must be separately negotiated. In other words, if the vendor were to provide services only to New Mexico, the most critical contract term – price – would need to be negotiated separately from this contract. If the RFP was not a cooperative procurement and instead was just a price agreement, the RFP was fatally flawed because it could not yield a price for New Mexico alone or for any state alone. No current PARCC member state has anywhere near 6 million students to test by itself. Only if virtually all of the PARCC member states agree to join this contract can PARCC reach the 6 million students minimum stated in the RFP. c. The scope of work contains “special scoring requirements for New York,” requirements that would be unnecessary if this procurement were for New Mexico alone.24 d. In the RFP Q&A, one vendor asked: “Has the State entered into a ‘cooperative procurement agreement’ with any other state or states and, if so, please identify the state or states and provide a copy of the agreement(s).”25 In response, the PED stated: Memorandum of Understanding (MOUs) are in place between the PARCC Consortium states, under which they have made commitments to administer the PARCC assessment system in their states. No specific cooperative agreements have yet been executed. It is anticipated that other PARCC Consortium states will make cooperative purchases under the contract awarded by New Mexico, placing direct orders with the contracted vendor under the 24 25 Exhibit B at 129 (emphasis added). Exhibit J at Q7. 17 terms of the contract, or otherwise make direct purchases under comparable contract terms, such as through sole source arrangements.26 e. Also in the RFP Q&A, one vendor asked: “Is this RFP intended to result in an actual contract to provide the requested services for any state other than New Mexico (e.g., the constituent ‘Partnership’ states)?”27 The PED responded, “Yes.”28 This too directly contradicts the SPA’s statement that this was merely a price agreement and not a cooperative procurement on behalf of the PARCC member states. f. Also in the questions and answers, a vendor asked: “Is this RFP intended simply to gather a price quote for the services described in the RFP so that states who are consortia members can prepare state level RFPs for the services they wish to procure? If not, can you please clarify the intent of the RFP?”29 In response, the PED stated: “No. This RFP is intended to procure services for New Mexico and other Partnership states to provide PARCC Operational Assessments.”30 This too directly contradicts the SPA’s statement that this was merely a price agreement and not a cooperative procurement on behalf of the consortium states. g. The evaluation committee for the RFP consists of thirteen members, only two of whom are from New Mexico. The remaining eleven members are from eleven other PARCC member states. 26 Id. (emphasis added). Id. at Q36 (emphasis added). 28 Id. (emphasis added). 29 Exhibit J at Q37 (emphasis added). 30 Id. (emphasis added). 27 18 h. PARCC issued a press release upon issuance of the RFP, entitled “PARCC Releases RFP for Operational Assessments,” stating that “[t]he State of New Mexico released this RFP on behalf of the PARCC states.”31 i. An email from the PARCC CEO to member states sent two days prior to issuance of the RFP states: Over the last several weeks, my team has had one-on-one calls with states to discuss their anticipated mechanism for procuring or purchasing the PARCC assessments (e.g., cooperative agreement, sole source, individual competitive RFP), as well as to confirm any specific requirements the state has for cooperative purchasing. i. Through these conversations, we have identified a number of specific needs for a few states and are working with NM to address them. ii. I strongly encourage you to check with your team – state lead, procurement official, budget/finance official and legal counsel – to ensure you have shared any specific requirements for your state procurement process with us. We believe we have identified all of these requirements at this point, but want to make sure that every state’s needs are addressed prior to the RFP’s release next week. (emphasis added).32 68. This evidence overwhelmingly demonstrates that the RFP was intended as a cooperative procurement through which other PARCC member states would secure assessment services that met their needs. 69. In this case, the number of states and students at issue in the RFP is critical to a vendor’s ability to accurately develop a solution for operational assessments required by those 31 See Press Release: PARCC Releases RFP for Operational Services, Nov. 19, 2013, available at www.parcconline.org/parcc-releases-rfp-operational-assessments. 32 Brad McQueen, Emails Suggest Collusion Between AZ Dept of Ed and PARCC bid for AIMS replacement, Arizona Daily Independent, June 11, 2014. 19 states. Failure to put the requisite cooperative procurement agreements in place to ensure that a certain number of states can and will use the awarded contract directly impacts vendors – including AIR – by fundamentally changing the size and scope of the procurement and by failing to ensure that any state other than New Mexico will use the contract, as was unambiguously represented to vendors in the RFP Q&A. 70. In light of this mountain of evidence – all of which was cited by AIR and included in the record but ignored by the SPA – the SPA’s conclusion that the RFP was not a cooperative procurement and is merely a price agreement is arbitrary, capricious, and not supported by substantial evidence, and thus must be set aside. 71. Because this was a cooperative agreement, NMSA 1978, § 13-1-135 clearly states the PED was required to have in place executed cooperative procurement agreements with each state on whose behalf it was procuring operational assessments. There is no dispute that the PED failed to put agreements in place. The RFP thus was an improperly conducted cooperative procurement, was unlawful, and must not be permitted to stand. (3) The SPA’s Determination that the RFP Did Not Restrict Competition in Violation of New Mexico Law is Arbitrary, Capricious and Not Supported by Substantial Evidence. 72. AIR incorporates paragraphs 1 through 71 as if fully stated herein. 73. The SPA’s determination that AIR’s protest should be denied because the RFP did not restrict competition in violation of New Mexico law ignores a litany of evidence to the contrary and the indisputable fact that, out of the many qualified and interested vendors that compete for statewide assessment contracts, only one vendor – the provider of the CDP required for the first year of the contract and the contractor that AIR alleged had an unfair advantage in this procurement – bothered to submit a proposal in response to the RFP. This highly unusual and suspicious outcome speaks louder than any arguments made by the PED or by Pearson 20 (which not coincidentally was deemed an interested party even though this was a pre-award protest)33 or any proclamations by the SPA about the “competitiveness” of the procurement at issue. 74. AIR submitted the Protest weeks before proposals were due. Thus, the SPA had detailed, written evidence that the RFP specifications were drafted in such a way that competition would not be maximized as required by NMSA 1978, § 13-1-164. 75. The fact that the RFP favored one particular vendor and indeed yielded only a single proposal leads to the inescapable conclusion that the procurement under this RFP amounted to a de facto sole source procurement, the requirements for which have not been satisfied in this instance.34 Indeed, New Mexico law governing sole source procurements clearly contemplates the possibility of an ostensibly competitive procurement being used to disguise a de facto sole source procurement: “The state purchasing agent or a central purchasing office shall not circumvent the sole source request and posting and award process by narrowly drafting specifications so that only one predetermined source would satisfy those specifications.” NMAC 33 See Exhibit F. Notably, the SPA designated Pearson an interested party and invited it to respond to AIR’s protest but did not extend that same designation and invitation to the many other interested vendors that voted with their feet, so to speak, and decided to walk away from this deeply flawed RFP without submitting a bid. Indeed, the SPA’s action reinforces the tautological nature of this whole procurement: none of the other vendors is an interested party because the PED awarded the contract to Pearson because Pearson was the sole bidder in this deeply flawed procurement in which all of the other interested vendors elected not to submit bids because they understood the RFP to be drafted to favor Pearson. 34 See, e.g., NMSA 1978, §§ 13-1 126, 13-1-126.1 detailing the requirements for sole source procurements, including a written determination that “there is only one source for the required service” and that “other similar services . . . cannot meet the intended purpose of the contract”; use of due diligence to determine “the basis of the sole source procurement”; and posting “notice of the intent to award a sole source contract” on the SPA’s website “[a]t least thirty days before” awarding the contract.” 21 § 1.4.1.54(G); see also NMSA 1978, § 13-1-126(E). This prohibition was seemingly written with the instant case in mind. 76. This case should be reviewed in the context of the intent underlying the Procurement Code. There is no question that the Procurement Code was intended to protect the integrity of the procurement process and promote competition to the maximum degree practicable. NMSA 1978, § 13-1-164 provides: All specifications shall be drafted so as to ensure maximum practicable competition and fulfill the requirements of state agencies and local public bodies. In preparing specifications, if, in the opinion of the state purchasing agent or central purchasing office, a proposed component is of a nature that would restrict the number of responsible bidders or responsible offerors and thereby limit competition, if practicable, the state purchasing agent or central purchasing office shall draft the specifications without the component and procure the component by issuing a separate invitation for bids or request for proposals or by entering into a sole source procurement. (emphasis added). The Procurement Code thus requires the SPA to make a determination as to whether certain specifications in a procurement restrict competition. If so and if practicable, the SPA must revise the RFP. The SPA failed to conduct this statutorily required analysis and, accordingly, its denial of the Protest based on an implicit conclusion that the RFP did not restrict competition must be reversed. A. The Requirement for Vendors to Use Pearson’s CDP for Year One Was Widely Understood Within the PARCC States and Industry and Favored Pearson. 77. The SPA’s conclusion that the RFP does not require the use of Pearson’s CDP for the first year of the contract is not supported by substantial evidence but rather is contradicted by the record evidence. 78. The SPA’s entire argument is based on a single passage from the RFP, which states, in its entirety: 22 Response Requirements for Section V.B.1. a) Offeror’s proposal shall include a response to the requirements specified in Section V.B.1 b) For contingency purposes, PARCC would like the Offeror to provide the following cost options: i. Hosting, maintenance, and updates for PARCC’s Data Management and Reporting Components. ii. Contractor-provided Assessment Content, Assessment Delivery, and Shared Service for years one through four. For this option, the Contractor is not required to follow PARCC’s interoperability requirements for data exchanges between Contractor supplied components. The Contractor would be expected to follow PARCC’s interoperability requirements for data exchanges (item/student/organization) to/from the Contractor’s and PARCC’s data warehouse and reporting components. The Contractor shall identify areas where meeting PARCC’s requirements, would delay or prevent a successful implementation in year one.35 79. Based on this passage, as well as a response to questions in which the PED stated that “[t]he CDP vendor has yet to be contracted for,” the SPA maintains that “[e]very vendor had an equal opportunity to offer their own CDP,” and that vendors did not have to use Pearson’s CDP for the first contract year.36 80. This conclusion both misreads and misrepresents the RFP, and it ignores the record evidence. 81. While it is true that the RFP invites vendors to propose use of their own CDP for year one “for contingency purposes,” that does not negate the RFP’s requirement for vendors to propose and price use of Pearson’s CDP for year one of the contract. Nor does it detract from the fact that the PED and PARCC intended all along to use the Pearson CDP for year one and that vendors would be evaluated on their ability to deliver tests using the Pearson proprietary CDP. 35 36 Exhibit B at 87. Exhibit A at 7. 23 82. The SPA’s conclusion that use of Pearson’s CDP was not a requirement of the RFP is contradicted by substantial evidence establishing that the RFP required vendors to use Pearson’s CDP for year one. That evidence was cited by AIR, was included in the agency record, and yet was wholly ignored by the SPA. It includes the following: a. In Section V.B.I.F., the RFP explains that PARCC is separately procuring the “Year 1 Content/Delivery Platform (CDP) Vendor.”37 Given that it did not plan to procure the CDP as part of this procurement, PARCC obviously had no intention of exercising the “contingency” of procuring the CDP from any vendor other than Pearson even in the highly unlikely event that a vendor other than Pearson won this contract. b. In response to a vendor question about the provision upon which the SPA relies, asking whether “the awarded contractor [can] use their own platform in the first year of the contract,” the PED confirmed that it intended to use a separately procured CDP for year one: “The cost of an Offeror’s platform should be included. Technology, price, and other factors will determine if the Contractor can use its own platform. PARCC is requesting this only as a contingency option. PARCC plans to use the CDP vendor’s platform for the first operational year.”38 c. The public record makes clear that PARCC intended to use Pearson’s CDP for year one of the contract. Specifically, in two separate submissions, in Arizona and in Florida, each filed before the deadline for proposal submission in this 37 38 Exhibit B at 83-84. Id. at 87 (emphasis added) 24 procurement, PARCC stated that it is using Pearson’s proprietary TestNav 8 CDP for the first year of operational assessments: “PARCC is making available to schools and districts a caching option known as ‘Proctor Caching’ as part of the Pearson TestNav 8 delivery platform that PARCC will use for the first PARCC operational administration in 2014-2015.”39 Indeed, in the Florida submission, PARCC specifically referred to Pearson as “PARCC’s assessment delivery platform provider.”40 d. In addition, in the October 2012 PARCC Assessment and Administration RFP issued by the State of Indiana, PARCC stated that it “will administer the Field Test and the first Operational Assessment on the same platform.”41 PARCC is using Pearson’s CDP for delivery of the Field Test. e. PARCC published on its website and distributed guidance to PARCC member states in September 2013 that stated Pearson’s proprietary CDP would be used: "Web browser requirements for the PARCC Field Test and the 2014-2015 operational assessments are driven by browser compatibility with the Pearson TestNav 8 assessment delivery platform."42 TestNav is Pearson’s proprietary CDP. f. In December 2013, Pearson’s own proposal in response to the RFP acknowledges that it will be the year one CDP vendor: “In the first operational year (2014-15), 39 See Exhibit K at 27-28; Exhibit L at 26-28 (emphasis added). Exhibit L at 26. 41 Indiana PARCC Field Test RFP, Attachment E at 50. 42 Technology Guidelines for PARCC Assessments Version 3.0 – September 2013 Update. 40 25 PARCC will use PearsonAccess and TestNav systems.”43 The fact that Pearson interpreted the RFP and publicly available evidence exactly as AIR did in the Protest – that offerors must use Pearson’s proprietary CDP in Year one - leaves no doubt that the SPA’s post-hoc determination misreads and misinterprets the RFP and ignores available evidence. 83. Requiring use of Pearson’s CDP for year one gives Pearson an insurmountable competitive advantage. It enables Pearson to compete with unequal access to information stemming from its greater knowledge of and experience with its own proprietary CDP as compared to other interested vendors who have no access to the details of this proprietary platform. Because no other vendor has knowledge of, experience with, or access to Pearson’s proprietary CDP, they are effectively eliminated from the competition, rendering this a de facto sole source procurement. 84. The Protest Decision denying AIR’s protest ground challenging the RFP as favoring Pearson because of its requirement that vendors use Pearson’s CDP for year one was not supported by substantial evidence. Indeed, the Protest Decision ignored substantial evidence that proved otherwise. As a result, the decision was arbitrary and capricious and must be reversed. B. The Bundling of Test Development and Assessment Administration Work in this RFP and the Disproportionate Weighting of Evaluation Scores Overwhelmingly Positioned Pearson to Win the Procurement. 85. The wholly unnecessary bundling of two distinct sets of services – test development and test administration – tipped the scale in Pearson’s favor because Pearson was already the test developer for the PARCC program. Although an incumbent vendor often enjoys 43 Pearson Proposal in Response to the RFP at Cost Narrative, p.3. 26 some advantages, in this case, the tipping morphed into massive leverage with the weighting of evaluation scores assigned to the two distinct sets of services that were utterly disproportionate to their relative value in the procurement. Specifically, the RFP assigned approximately 60% of the points allotted under the RFP to the test development work even though such work is valued at well less than 10% of the contract being awarded.44 Put another way, Pearson’s role as the incumbent test developer for the PARCC program gave it enormous advantage in securing points that amounted to almost 60% of the total points available, which then translated into an insurmountable lead for separate and distinct work that amounted to over 90% of the value of the contract, all because the RFP bundled the two distinct sets of services. 86. In his decision, the SPA provided two oft-cited reasons that such bundling was reasonable: first, that one procurement is more efficient than two; and second, that bundling these requirements will create administrative efficiencies. Neither reason was supported by any evidence or analysis and neither reason is consistent with the Procurement Code’s requirement to unbundle where combining specifications restricts, or in this case wholly distorts and makes a mockery of, competition. Both of these purported reasons are true in nearly every procurement, and thus, if they were given any credence, they would eviscerate the Procurement Code’s presumption against bundling. And even if they could in theory justify bundling, neither of these purported reasons was supported by any analysis or evidence in the PED’s submission or the Protest Decision. To the contrary, they were nothing more than unsubstantiated assertions. In short, the SPA’s unsupported determination that bundling these tasks is more efficient than 44 See Exhibit B at 38. 27 separately procuring them is arbitrary and capricious, is unsupported by any evidence, much less substantial evidence, and therefore must be set aside.45 C. The Bundling of Work During Year One with Work in the Subsequent Years in a Single Procurement Further Restricted Competition. 87. As if the bundling of test development work with test administration work was not enough, competition under the RFP was further restricted by the bundling of year one work, delivered on Pearson’s CDP, with work in years two through eight which would be delivered on a yet-to-be-developed CDP.46 Combining work in this manner allowed Pearson to leverage its role as the CDP provider in year one into an unearned and undeserved advantage in securing the work in years two through eight. 88. The Protest Decision does not address AIR’s challenge to this second bundling requirement and the anticompetitive effects resulting therefrom. To the extent the Protest Decision touches upon the issue, the SPA appears to conflate it with the bundling of test development and test administration services and excuse it under the general, all-purpose heading of agency discretion.47 Such half-hearted effort, combined with the lack of any evidence or analysis, does not warrant any judicial deference. D. The Intertwined Relationship Between PARCC and Pearson Raises Troublesome Conflict of Interest Issues. 89. The mutual interests shared by PARCC and Pearson in pursuing work in various other states while this RFP was pending placed PARCC in a classic conflict of interest situation in which it was in PARCC’s interest to draft the specifications, evaluate the proposal, and award 45 It is practicable to unbundle the two sets of services, as that is precisely what PARCC did in the Indiana Field Test procurement. 46 The RFP provides for a base contract of four years, plus four additional option years, for a total duration of up to eight years. Exhibit B at 13. 47 Exhibit A at 7-8. 28 this procurement to Pearson irrespective of the merits. Specifically, during the pendency of this procurement, PARCC submitted responses in Arizona and Florida indicating its intent to partner with Pearson to deliver the PARCC assessment on Pearson’s TestNav 8 CDP system. Similarly, and also while this procurement was pending, Pearson submitted a response to the same RFI in Arizona that proposed to deliver the PARCC assessment.48 The significance of Pearson’s response to the Arizona RFI cannot be overstated: to date, no other vendor has been able to offer the PARCC assessment or to use the PARCC items.49 90. The SPA dismissed AIR’s conflict of interest challenge in three sentences in a footnote: “As AIR makes its argument, the potential conflict of interest for PARCC would occur in future solicitations performed by other states. Such a matter is clearly not ripe for the State Purchasing Agent of New Mexico. It is a matter for other states with other future solicitations to address.”50 91. The SPA’s conclusion is wrong on legal grounds. At the very least, PARCC’s involvement in designing and running a procurement that favors Pearson – with whom it is partnering in other competitions for assessment and testing work – creates an appearance of impropriety that the Procurement Code prohibits. See Planning & Design Solutions v. City of Santa Fe, 1994-NMSC-112, ¶ 25, 118 N.M. 707, 713, 885 P.2d 628, 634 (“[t]he Code and the Procurement Manual are designed to preclude even the appearance of impropriety”) (emphasis in original). 92. The SPA’s conclusion also completely ignores the chilling effect on prospective vendors in this RFP of having PARCC create the specifications for this New Mexico 48 See Exhibit M at ES-1 – ES-2. Catherine Gewertz, Can Any State Use PARCC or Smarter Balanced Test Items?, Education Week, Jun. 13, 2014. 50 Exhibit A at 3, n.1. 49 29 procurement and determine the winner through its 13-member evaluation committee (only two members of which were from New Mexico) while simultaneously partnering with one of the vendors in pursuing work in other states. It is beyond comprehension how such an arrangement rife with conflicts of interests maximizes competition, protects the integrity of the New Mexico procurement process, or is in the interest of the State of New Mexico. V. PRAYER FOR RELIEF WHEREFORE, AIR respectfully requests the following relief: 1. Reverse the denial of the Protest; and 2. Cancel years two and beyond of the awarded contract; and 3. Order the SPA to conduct a separate and lawful procurement, consistent with this Court’s holding, for years two and beyond of the contract term; and 4. Determine or declare (pursuant to the Declaratory Judgment Act, NMSA 1978, §§ 44-6-1 through 44-6-15) that the RFP restricted competition and otherwise failed to comply with New Mexico law, and that the PED must restructure the procurement of PARCC Operational Assessments for years two and beyond so that it is consistent with New Mexico law; or, in the alternative, 5. Determine or declare (pursuant to the Declaratory Judgment Act, NMSA 1978, §§ 44-6-1 through 44-6-15) that, based on the PED’s assertions and the SPA’s determination, the contract awarded pursuant to the RFP is only between the New Mexico Public Education Department and Pearson and that the PED shall not permit any third party, including any other state or agency thereof, to join or participate in the procurement; and 6. Such other and further relief as this Court may deem appropriate. 30 31 Dated: July 31, 2014 Respectfully submitted, MODRALL, SPERLING, ROEHL, HARRIS & SISK, P.A. By Electronically Filed R. E. Thompson R. E. Thompson Emil J. Kiehne Sarah M. Stevenson P.O. Box 2168 Albuquerque, NM 87103 Telephone: (505) 848-1800 -and- JENNER & BLOCK, LLP J. Alex Ward Carrie F. Apfel 1099 New York Avenue, NW, Suite 900 Washington, D.C. 20001-4412 Telephone: (202) 639-6045 Attorneys for Plaintiff/Appellant American Institutes for Research Y:\dox\client\86071\0001\PLEADING\W2231948.DOCX 32