Idaho has lost the Syringa Networks lawsuit over the multimillion-dollar contract award for the Idaho Education Network, with a 4th District judge declaring the contract award void, and “made in violation of state procurement law.” The summary judgment ruling, which came out late yesterday from 4th District Judge Patrick Owen, is highly critical of the state Department of Administration’s continuing efforts to salvage the deal, which already has resulted in the cut-off of tens of millions in federal e-rate funds that were supposed to pay for three-quarters of the cost of the broadband network linking every Idaho high school.
“An agreement made in violation of the state’s procurement law cannot be fixed or cured,” the judge wrote in his ruling. “The award to ENA violates state procurement law, and as a result, is void.”
There were two bidders on the original $60 million contract: Education Networks of America, partnering with Syringa Networks; and Qwest, partnering with Verizon. The Idaho Department of Administration, under then-director Mike Gwartney, awarded the contract to both ENA and Qwest, with subsequent amendments dividing the work so all the parts that Syringa originally would have handled in its partnership with ENA – the technical network services, or “backbone” of the broadband network – instead would be done by Qwest, and Syringa would have no part in the contract. Syringa sued.
Syringa charged an array of counts of wrongdoing against the state, including breach of contract, tortious interference, and improper influence. The district court initially dismissed all the counts, but Syringa appealed to the Idaho Supreme Court, which resurrected the case on just a single count: That the contract was awarded illegally, in violation of Idaho law. The Supreme Court ruled that by splitting up the duties after the contract was awarded, the state Department of Administration was “in effect, changing the RFP after the bids were opened.”
The Supreme Court sent the case back to the 4th District court, where the state has tried to fight it on multiple grounds, but the judge found in favor of Syringa, in a ruling the state still could appeal again to the Idaho Supreme Court. “The consequence of entering into a contract which violates state procurement law is governed by Idaho Code,” Judge Owen wrote. “This statute requires that agreements made in violation of state procurement law ‘shall be void.’”
Owen also rejected ENA’s request to dismiss the claim with regard to its part in the contract. “ENA is seeking a ruling that would allow ENA to benefit from an improper award,” the judge wrote. “In the Court’s view, such a result would fly in the face of the Supreme Court’s decision in this case.”
He also noted that the state sought to extend the case to allow for “additional discovery and ultimately a trial on the merits. In the Court’s view, there is no good reason to further delay this case,” the judge wrote. The state has paid more than $750,000 to a private attorney, Merlyn Clark of Hawley Troxell, to represent the state in the case.
The judge wrote, “To date, DOA (Department of Administration) refuses to acknowledge that its bid process in this case was and remains fatally flawed. Even after the Supreme Court decision, and despite further rulings from this court rejecting DOA’s post appeal arguments, DOA continues to fund these contracts. DOA even tries to fix what cannot be fixed.”
The implications of the ruling are huge. At stake are not only the tens of millions in federal e-rate funds that haven't been paid for the broadband network since 2013, but also the e-rate funds that were paid out before that date. And any future expenses for the school broadband network paid out to ENA and Qwest would have to come 100 percent from state tax funds, rather than just 25 percent. The ruling appears to order ENA and Qwest to refund to the state all money they were paid under the contract. And the future of the broadband network linking Idaho schools is uncertain.