New MSBCA Opinions – Part 2

The second opinion, Appeal of Bio Energy, LLC, can be found here.  While facts of Bio Energy are a bit complicated, the salient facts are as follows: A company named Green Planet Power Solutions, Inc. (GPPS), submitted a proposal that was accepted by the State.  However, a planned subsidiary of GPPS – Maryland Bio Energy, LLC (MBE) – entered into the actual procurement contract.  This was done at the request of GPPS and with the full knowledge of, and agreement with, the procurement officer and assistant attorney general who reviewed the contract.  Nearly two years later, the State terminated the contract for convenience, and GPPS and MBE filed a joint claim for damages in excess of $5,000,000 pursuant to the contract’s termination clause. 

 The State denied the claim and ruled that the contract was void ab initio. The Board affirmed, reasoning that since the procurement officer was only allowed to award a contract to an offeror, and because GPPS and not MBE was the responsible offeror, the contract with MBE was in violation of Maryland procurement law and void.  Thus, neither GPPS nor MBE was able to recover termination for convenience damages.  However, MBE, but not GPPS, was permitted to proceed on its claim for costs and a reasonable profit under the procurement law’s savings provision found at Md. Code Ann., State Fin. & Proc. § 11-204(b), which permits recovery for a contractor under a void contract if the contractor acted in good faith, did not contribute to the violation and did not know of the violation before contract award. 

 This case is an important reminder to any business that contracts (or interacts) with the State to confirm the State’s authority to do what it proposes to do.  Even if the procurement officer agrees with a proposal, if the proposal is not permitted under State procurement law, then it likely will not be enforceable regardless of the procurement officer’s position, statements, acquiescence, etc.