IN THE IOWA DISTRICT COURT FOR POLK COUNTY ) MICROSOFT CORPORATIO: ) ) NO. Petitioner, ) ) v. ) ) IOWA DEPARTMENT OF } PETITION FOR JUDICIAL ADMINISTRATIVE SERVICES, ) REVIEW CENTRAL PROCUREMENT > ENTERPRISE, ) ) Respondent. ) ) COMES NOW Petitioner, Microsoft Corporation, and pursuant to Jowa Code Section, 17A.19, hereby petitions the Court as follows: SUMMARY OF THE CASE 1, This Petition seeks judicial review of the Iowa Department of Administrative Services’ (“DAS”) Final Decision affirming its Notice of Intent to Award a state-wide cloud email and office productivity solution contract to Tempus Nova, Inc. (“Tempus Nova”) and its bidding partner Google Inc. (“Google”) following a competitive bidding process governed by Iowa procurement law. 2. Iowa procurement law holds the State to a basic standard of faimess when it obtains “goods and services from the private sector for public purposes...” 11 IAC § 117.3(8A). Specifically, the State must “achieve value for the taxpayer through a competitive selection process that is fair, open, and objective.” Id, Towa’s deputy Chief Information Officer (“CIO”) testified as to the meaning of the statutory requirement as follows: “Q. So you would treat each offeror fairly and equally? A. We would treat each offeror fairly and equally. I believe that's correct.” (Emphasis added).3. In awarding the state-wide cloud email and office productivity solution contract to ‘Tempus Nova and its bidding partner Google (which would actually provide the proposed cloud service) DAS failed to meet this basic standard of faimess. It failed to give unbiased, equal ‘treatment to Microsoft Corporation (“Microsoft”). 4. DAS issued the Notice of Intent to Award the contract to Tempus Nova even though the Tempus Nova proposal failed to meet critical mandatory requirements. As a result, the award to Tempus Nova will (1) restrict the State’s ability to comply with the Open Records Act, (2) impair the State's ability to satisfy its electronic discovery obligations in state litigation, and (3) undermine the secure protection of the data contained in the State's IT system—both State data and citizen data. 5. During the same process that resulted in the award to Tempus Nova, DAS rej ted Microsoft's lower-priced proposal based on a technicality. Specifically, DAS rejected Microsoft on the ground that it did not meet a Mandatory “Vendor Competency” Requirement, even though the Microsoft proposal stated that Microsoft provided cloud services to $00 agencies in the United States — federal, state, and local. Microsoft further provided DAS with specific examples in its proposal of having been one hundred percent (100%) responsible for the delivery of one hundred and sixty thousand (160,000) seats in two (2) states and the U.S, Army. 6. In fact, DAS refused even to evaluate Microsoft’s proposal based on its “failure” to meet the Vendor Competency Requirement, even though State employees involved in the process believed Microsoft was a responsible bidder. The State's own deputy CIO stated under ath that Microsoft is a responsible vendor—“Q. And Microsoft would be a responsible bidder? A. I presume, yeah.” (Emphasis added).7. Given DAS” obligation to administer a “competitive selection process that is fair, open, and objective,” it does not have the right to exervise discretion in an arbitrary and capricious manner to hold one vendor to a “requirement” where the vendor clearly meets the self-evident intent of the requirement, while waiving crucial and substantive requirements for another. It cannot disregard its own rules and processes and the terms of its own Request for Proposal at the expense of taxpayers. In doing so, DAS chose to ignore numerous substantial flaws in Tempus Nova’s proposal which will significantly and adversely impact the State of Iowa’s ability to meet its legal obligations and the ability of state employees to perform their work effectively. By contrast, DAS refused even to consider Microsoft's lower-priced proposal based on the untenable conclusion that Microsoft lacked sufficient experience supporting government cloud e-mail and productivity systems—a conclusion belied by the fact that Microsoft is directly ot \directly responsible for the cloud e-mail and productivity systems throughout federal, state and local governments, PARTIES, JURISDICTION AND VE 8. Petitioner, Microsoft is a Washington State corporation with its principal place of business in Redmond, Washington. 9. Respondent, DAS, is a state agency organized and existing under the laws of the State of Iowa, The Central Procurement Enterprise is a division of DAS tasked with facilitating the procurement and purchasing practices for the State of Iowa including the Office of the CIO. 10, Pursuant to Iowa Code Section 17A.19(2), venue is appropriate in the Towa District Court for Polk County, Iowa. 11, This Court has jurisdiction over DAS and the subject matter of this Petition. 12. Microsoft has exhausted its administrative remedies.FACTUAL AL {GATIONS 13. On April 3, 2014, DAS issued Request for Proposal Number 121400501 (“the REP”) requesting that bidders provide technical proposals to provide the “State of Iowa a cloud Email system, productivity applications, and services.” 14, The RFP contained “Mandatory (pass/fail) Requirements” and “Scored Technical Requirements.” By its terms, only technical proposals that met the Mandatory Requirement review were to be evaluated and scored using the Scored Technical Requirements. 15. The Mandatory Requirements function as a “gate-keeper” for responsible bidders in that the proposals would not be scored unless the Mandatory Requirements were met. 16. In many instances, the Mandatory Requirements had a corresponding Scored ‘Technical Requirements wherein a bidder was asked to explain how its proposal would deliver an agreed to Mandatory Requirement, 17, Pursuant to Iowa competitive bidding procedures, bidders also submitted cost proposals in a separate sealed envelope. DAS does not review or score the cost proposal until afier a bidder’s technical proposal had been scored. 18. The RFP required that the cost proposal be based on twenty three thousand five hundred (23,500) users. 19, The REP further required that technical and cost proposals be submitted no later than June 2, 2014 at 3 p.m. CD’ 20. According to the RFP, the initial approximate contract term was to begin on September 1, 2014. 21, — Microsoft timely submitted its technical and cost proposal in response to the RFP,rat A total of eight (8) bidders submitted technical and cost proposals in response to the RFP. 23. Less than two (2) weeks later, DAS “disqualified” six (6) of the eight (8) bidders, including such prominent cloud providers as Microsoft and IBM, on the ground that they failed to meet the Mandatory “Vendor Competency” Requirement of the RFP. The “Vendor Competency” Requirement stipulated that each_—bidder- must-have been “prime vendor” for two (2) or more state governments or, in the alternative one (1) state government and one (1) governmental entity (with three (3) or more agencies) where each implementation had ten thousand (10,000) or more seats. 24. As a result of “disqualification” (based on this single “Vendor Competency” Requirement) DAS did not score the technical proposals, nor even open or evaluate the cost proposals, of six (6) of the eight (8) bidders. This requirement elevates form over substance and essentially acted as a blind filter to eliminate otherwise “responsible bidders” as that term is defined in statute. 11 LAC § 117.2(8A). The key issue, from a substantive standpoint, is whether a vendor has experience providing cloud service to public entities. Microsoft has that experience, and is, in fact, one of the most experienced public sector cloud vendors in the United States. Microsoft currently provides cloud services from data centers owned and operated by Microsoft to twenty (20) other states and many agencies of the US Government, representing over two million (2,000,000) users, 25. In mid-June 2014, DAS evaluated and scored the technical and cost proposals of the two (2) remaining bidders, Tempus Nova and Planet Technologies, Inc., and submitted its evaluations to the CIO.26. DAS evaluated and scored the Tempus Nova technical and cost proposals and submitted its evaluation to the CIO despite obvious diserepancies between ‘Tempus Nova’s answers to the Mandatory Requirements and Scored Technical Requirements—discrepancies showing that many of Tempus Nova’s responses to the Mandatory Requirements were not accurate, 27. Although it strictly enforced the Mandatory “Vendor Competency” Requirement for six (6) other bidders to the detriment of those bidders, when evaluating the Tempus Nova proposal DAS chose to follow and enforce its own REP requirements only when convenient.! ‘This resulted in substantial prejudice to the rights of Microsoft and the other bidders, 28. On September 18, 2014, nearly three (3) months after DAS completed the evaluations and deter ed it would not score Microsoft's proposal, DAS issued a Notice of Intent to Award the contract to Tempus Nova, 29. DAS evaluated and scored the Tempus Nova proposal, and ultimately awarded the cloud contract to Tempus Nova, in violation of its own REP. DAS not only allowed Tempus Nova to bypass the “gate-keeping” function of the RFP’s Mandatory Requirements, it rewarded Tempus Nova for doing so. DAS provided no such allowance, or reward, to Microsoft and the five (5) other bidders it rejected based on the Mandatory “Vendor Competency” Requirement. 30. Microsoft timely appealed DAS? Notice of Intent to Award on multiple grounds, outlined below. "As this Court has recognized that an agency, “simply cannot establish procedures and then follow them only when it deems them convenient or when the rules suppor its decision to award the contract to [the selected awardee). If that were the standard, there would be no purpose for the RFP to be written at all.” Noridian Admin, Services, LLC ¥. lowa DHS et al., No. CV 008960 (Iowa Dist. Dec, 7, 2012).(@). The Tempus Nova proposal failed to meet mandatory and material requirements of the RFP that should have made it ineligible for further review or award according to the REP's own terms. (b). In particular, the Tempus Nova solution lacked “currently available goods and services,” as required by section 3.2.12 of the REP, that complied with (1) State data retention requirements (under RFP section 4.2.2) including the State's Open Records Act, and (2) e- Discovery requirements necessary for lawsuits by and against the State (under RFP section 4.2.5). More specifically, the solutions proposed for data retention and e-discovery requirements (Google Vault and Google Drive) do not: (i) retain documents from Google Groups, the offered solution for the required collaboration software; Gi) retain deleted documents created in Google Apps; (iii) retain draft email messages; (iv) retain off-the-record chats created in Google Vault; (v) retain off-the-record video conferencing and chat created in Google Hangouts; or (vi) retain earlier drafts of documents created in Google Apps. Asa result, the State will not be able to produce all required records as defined by state law (see e.g. lowa Code §22.1; 671 IAC §15.1(17A,305)) in response to either Open Records Act, requests or litigation discovery requests. (©). The Tempus Nova solution lacked the ability to deliver “currently available goods and services,” as required by section 3.2.12 of the RFP, that can “read, open, edit, and display standard Microsoft Office product formats” as required by RFP Section 4.2.23.4. StandardMicrosoft Office product formats include Microsoft Word, Microsoft Excel, Microsoft PowerPoint, Microsoft Access, Microsoft Publisher and Microsoft OneNote, all of which are in use by State employees. The proposed Google solution cannot open large Microsoft Word documents, large Microsoft Excel documents, or any documents created with Microsoft Access, sosoft Publisher or Microsoft OneNote. (@. At the time of Tempus Nova’s proposal, in June 2014, the proposed solution could not be used by all twenty-three thousand five hundred (23,500) users in the “state” as required by the stated purpose of the RFP—ie., the RFP defined the term “state” to include “all state agencies, boards, and commissions. .* (emphasis added). In particular, the Tempus Nova solution does not meet security requirements for State agencies that must transmit and receive sensitive and controlled data, or that utilize standard Microsoft Office produets that Tempus Nova fails to support. (©). The Tempus Nova proposal failed to meet REP section 3.2.8, which (along with the other requirements mentioned above) is a material term, req ing that employees of every “vendor” be subject to criminal history and background checks, Specifically, Google failed to guarantee that its employees—i.e,, those responsible for the operation and maintenance of the cloud solution provided to lowa—will be subject to criminal history and background checks by the Office of the CIO. Google meets the statutory definition of “vendor” because it is clearly “a person, firm, corporation, partnership, business or other commercial entity that provides services or offers goods for sale or lease.” 11 IAC § 117.2(8A). As such, Google is required to meet the criminal history and background check requirement. Moreover, Google itself promised, in ‘Tempus Nova’s proposal, to abide by all terms and conditions of the RFP (but it ultimately failed to honor that promise). In particular, the first three sentences of the proposal state:“Tempus Nova, Inc. and Google are pleased to submit this response to the State of Iowa Department of Administrative Services, We have thoroughly reviewed the State’s RFP 1214005011 for Email & Productivity Application Services, We understand and agree to the terms and conditions of the RFP including the contract provisions in Section 6 of the RFP.” (Emphasis added). (. DAS unreasonably and unfairly rejected Microsoft's proposal for failure to meet section 4.2.11 of the RFP, “Vendor Competency,” even though the State’s own deputy CIO stated under oath that Microsoft is a responsible vendor. Microsoft has an “indirect” model for the sale of cloud servi s to its government customers. Microsoft often provides cloud services through enterprise license agreements that already exist between the government customer and a Microsoft authorized license reseller. The reseller provides billing and other contract administration services. However, in all cases Microsoft, through data centers that it owns and operates, provides cloud services to its customers, and in most cases Microsoft provides the necessary migration and deployment services for its customers, The reseller may technically be the “prime” contractor in such scenario, but it is Microsoft, the cloud service provider, to which the Vendor Competency Requirement is relevant. Microsoft provided ample evidence that it should not fail the Vendor Competency because it had implemented similar solutions at locations with a total of one hundred and sixty thousand (160,000) users. By contrast, the Tempus Nova proposal was accepted even though it failed to meet several crucial Mandatory Requirements (described above). (@. DAS? waiver of certain RFP requirements for Tempus Nova resulted in an advantage to 1 mpus Nova (and Google) not enjoyed by the other vendors, ultimately undercutting the competitive bidding process.31. Administrative Law Judge Heather Palmer, Department of Inspections and Appeals, held a contested hearing on November 19, 2014. 32. On December 23, 2014, Judge Palmer issued her Proposed Decision. A copy of the Proposed Decision, which affirmed DAS’ award to Tempus Nova, Inc. is attached hereto as Exhibit “A.” 33. On January 6, 2015, Microsoft timely appealed the Proposed Decision to the Director of DAS and an oral argument was held in front of the Director on February 2, 2015, 34. On February 17, 2015, the Director of DAS issued a Final Decision, which affirmed the Proposed Decision. A copy of the Final Decision is attached hereto as Exhibit “B.” 35. By this Petition, Microsoft secks a review of DAS’ Final Decision, which affirmed the Notice of Intent to Award to Tempus Nova. UNT. ITION FOR JUDICIAL REVIEW, 36. Microsoft hereby restates and realleges paragraphs 1 through 35 as if fully set forth herein. 37. Pursuant to lowa Code Section 17A.19, Microsoft is entitled to relief because the DAS Final Decision prejudiced the substantial rights of Microsoft in that such actions were one or more of the following: (@. Beyond the authority delegated to the agency by any provision of law or in violation of a provision of law; and/or (®). Based on an erroneous interpretation of a provision of law, the interpretation of which has not been vested in the discretion of DAS; and/or (©). Based upon a procedure or decision-making process prohibited by law or which ‘as taken without following the prescribed procedure or decision-making process; and/or 10(@). Based upon a determination of fact clearly vested by a provision of law in the discretion of DAS that is not supported by substantial evidence in the record before the court when that record is viewed as a whole; and/or (©). The product of reasoning that is so illogical as to render it wholly irrational; and/or (®. The product of decision-making process in which DAS did not consider a relevant and important matter relating to the propriety or desirability of the action in question that a rational decision maker in similar circumstances would have considered prior to taking that action; and/or (g). Not required by law and its negative impact on the private rights affected is so grossly disproportionate to the benefits accruing to the public interest from that action that it must necessarily be deemed to lack any foundation in rational policy; and/or (h). Based upon an irrational, illogical or wholly unjustifiable application of law to fact that has clearly been vested by a provision of law in the discretion of DAS; and/or (H. Otherwise unreasonable, arbitrary, capricious or an abuse of discretion, 38. Microsoft's substantial rights have been prejudiced as a result of DAS” actions and the Notice of Intent to Award to Tempus Nova and thus, the Court should reverse such actions pursuant to Iowa Code Section 17A.19(10). rtPetitioner, Microsoft Corporation, respectfully requests the Court judicially review Respondent DAS’ Final Decision, enter an Order Reversing the Final Decision, and for any and all other relief allowed under Iowa Code Chapter 17 that the Court may deem appropriate. Respectfully submitted, LL, Bradley C, Obermeier ATO00S879 Ann L, Zebrowski ATO012033 Duncan, Green, Brown & Langeness A Professional Corporation 400 Locust Street, Suite 380 Des Moines, lowa 50309 Telephone: (515) 288-6440 Facsimile: (515) 288-6448 Bobermei @duncangreenlaw.com Azebrowski@duncangreenlaw.com Original filed via EDMS Copies via U.S. and electronic mail to: ‘Susan Hemminger, AG - Susan.hemminger@iowa.gov Chantelle Smith, AG —chantelle.smith@iowa.gov David Faith, AG — david faith@iowa.gov Administrative Law Divi Hoover Building, 2” Floor Des Moines, Iowa 50319 ATTORNEYS FOR RESPONDENT Michael McGill ~ Michael.megill@hoganlovells.com Hogan Lovells US LLP 555 Thirteenth Street, NW Washington, DC 20004 Andrew Anderson — Andrew.Anderson@FaegreBD.com Faegre Baker Daniels LLP 801 Grand Avenue Des Moines, IA 50309-8002 ATTORNEYS FOR TEMPUS NOVA, INC. 12 CERTIFIOATE OF SERVi Tho undersghod are tho trepongtroment wea sarod uponallpartes of cbovs cause locas the arya Se eee ie ne neccgron ee Bye) Ovehight Causa Epes G Hand Dotvered BUS, mail Ccorties Mat y C1 Scanned EB ARS sionatre “PO e/a