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GTECH Corp. v. Commonwealth

February 24, 2009

GTECH CORPORATION, PETITIONER
v.
COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF REVENUE AND SCIENTIFIC GAMES INTERNATIONAL, INC., RESPONDENTS



The opinion of the court was delivered by: Judge Leavitt

Argued: December 8, 2008

BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE MARY HANNAH LEAVITT, Judge (P.), HONORABLE JOSEPH F. McCLOSKEY, Senior Judge.

OPINION

GTECH Corporation seeks to set aside the Department of Revenue's award of a contract to provide terminal-based games for the Pennsylvania Lottery. In its petition for review with this Court, GTECH alleges that the Department violated the Procurement Code, 62 Pa. C.S. §§101-4509, in handling the request for proposals for this contract, and in refusing to hear GTECH's bid protest in a timely fashion. GTECH seeks declaratory and injunctive relief against the further advancement of a government contract that it believes was produced in an unlawful manner, and it appeals the Department's refusal to stay finalization of a contract with the successful offeror, Scientific Games International, Inc. (SGI), while GTECH's bid protest was being considered. Respondents have filed preliminary objections to the petition, asserting, inter alia, that this Court lacks subject matter jurisdiction over GTECH's claims, and they have filed motions to quash GTECH's appeal on the grounds that a refusal to stay contract negotiations is not a final, appealable order.

Factual and Procedural Background

The pertinent facts alleged in GTECH's amended petition for review are as follows. On June 29, 2007, the Department issued a Request for Proposals for Pennsylvania Lottery Gaming System and Related Services, RFP Number Lottery 2-2007 (RFP 2-2007). RFP 2-2007 will result in a five-year contract (with up to five one-year extensions) between the successful offeror and the Department.*fn1 The contract was scheduled to begin January 1, 2009, after the Department's contract with its current contractor, SGI, expired on December 31, 2008. Timely proposals were submitted by SGI and one other offeror, GTECH. Following an evaluation period, the Department notified GTECH on January 14, 2008, that it had been selected for contract negotiations.

The next day, the Secretary of Revenue, Thomas W. Wolf, publicly announced the Department's selection of GTECH in a press release. Noting that SGI had been paid approximately $50 million to provide terminal-based lottery services to the Pennsylvania Lottery in fiscal year 2006-2007, Secretary Wolf estimated that the contract with GTECH "will be at least $25 million less per year compared to the [C]ommonwealth's existing contract." Amended Petition for Review, ¶15. Thus, as a result of the January 15, 2008 press release, SGI was able to determine the otherwise confidential cost component of GTECH's proposal.

In response to the Department's selection of GTECH for contract negotiations, SGI filed a protest with the Department and requested a debriefing on the selection of GTECH.*fn2 GTECH was not given notice of SGI's protest; an opportunity to respond; or an opportunity to participate in SGI's debriefing.*fn3

During contract negotiations with the Department, GTECH informed the Department that it planned to substitute its Altura lottery terminal for the IMAGINE terminal that had been specified in GTECH's proposal. In a letter to the Department dated March 4, 2008, GTECH described its Altura terminal as its "current, state-of-the-art lottery terminal" of which the IMAGINE terminal is a derivative. Amended Petition for Review, ¶23. As such, the substitution was permitted by, and compliant with, RFP 2-2007 and did not involve any increase in cost to the Department.*fn4

On March 11, 2008, the Department responded to GTECH's change of proposed equipment by announcing that it would solicit "Best and Final Offers" from both GTECH and SGI. On March 21, 2008, the Department requested a best and final offer from GTECH and informed GTECH that it would "not conduct a reverse auction event for additional [c]ost submittals." Amended Petition for Review, ¶27. GTECH voiced no objection to the Department's best and final offer announcement, and both companies submitted best and final offers. On April 25, 2008, the Department announced that it had selected SGI instead of GTECH to enter into contract negotiations for RFP 2-2007.

On May 1, 2008, GTECH protested the Department's selection of SGI and requested a debriefing. The Department deferred action on GTECH's protest. On May 15, 2008, Secretary Wolf wrote a letter to GTECH in which he stated the following:

The Department of Revenue has received your protest of May 1, 2008, regarding [RFP 2-2007]. As a contract has not been negotiated as a result of this procurement, no contract has been awarded. Therefore, your protest is deemed premature and will not be considered at this time.

If and when an award is made to [SGI], through the final execution of a negotiated contract, the Department will then consider your protest on the grounds stated in your letter to be timely and consider the protest on its merits.

Amended Petition for Review, ¶36. GTECH, through counsel, responded by letter on May 27, 2008, stating its disagreement that the protest was premature. GTECH pointed out that Section 1711.1 of the Procurement Code, 62 Pa. C.S. §1711.1, the Department of General Services' Procurement Handbook and RFP 2-2007 each contemplate a protest review before award or execution of a contract. Accordingly, GTECH requested that the Department immediately comply with its obligation to act upon GTECH's protest and to stay contract negotiations with SGI, as required by Section 1711.1(k) of the Procurement Code.*fn5

The Department took no action on GTECH's protest until September 22, 2008, when the Department's Issuing Officer, Thomas Blaskiewicz, informed GTECH that "the terms of the contract have been reached" with SGI and scheduled GTECH's debriefing for September 29, 2008. Amended Petition for Review, ¶45. The following day, Deputy Secretary for Administration Barry T. Drew sent a letter to GTECH's counsel confirming the award of the contract to SGI and stating that "[i]n light of this development, the May 1, 2008, protest filed by GTECH Corporation has been activated." Amended Petition for Review, ¶49. Secretary Drew's letter further advised:

Execution of the contract will not be stayed pending resolution of the GTECH protest since award without delay is necessary to protect the substantial interests of the Commonwealth. The current on-line games services contract expires at midnight, December 31, 2008. Significant transition time is needed in order to change the telecommunications system and install new terminals at all of the Lottery's retail locations, as well as to install the hardware and software for the new games system so that operations can commence on January 1, 2009.

Pursuant to the requirements of Section 1711.1(d) of the Commonwealth Procurement Code,*fn6 the contracting officer's response to the originally filed protest must be submitted to me as the Secretary of Revenue's designee no later than fifteen (15) days following the date of this letter, unless the protest is further supplemented as discussed above.

Amended Petition for Review, ΒΆ52 (emphasis added). At the September 29, 2008, debriefing the Department informed GTECH that among the reasons for rejecting GTECH was its proposal to ...


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