STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AJAX CONSTRUCTION, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 82-1026BID

) STATE OF FLORIDA, DEPARTMENT ) OF CORRECTIONS and DYSAN & )

COMPANY, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on May 17, 1982, in Tallahassee, Florida. The issue for determination at the hearing was whether Dyson & Company submitted the lowest responsive and qualified bid for Project No. DC-8130 for the construction of facilities at the Tomoka Correctional Institution in Volusia County, Florida.

APPEARANCES

For Petitioner: Philip S. Parsons

Ausley, McMullen, McGehee, Carothers & Proctor

Post Office Box 3091 Tallahassee, Florida 32302

Kenneth H. MacKay, Jr. McKay & Ranew, P.A.

Suite 201, Concord Square

Seven East Silver Springs Boulevard Post Office Box 206

Ocala, Florida 32678

For Respondent Michael J. Minerva Department: Office of General Counsel

Department of Corrections 1311 Winewood Boulevard

Tallahassee, Florida 32301

For Respondent Barry L. Silber

Dyson: Levin, Warfield, Middlebrooks, Mabie & Magie, P.A.

Seville Tower

226 South Palafox Street Post Office Box 12308 Pensacola, Florida 32581

INTRODUCTION

The procedural background and history of this proceeding as it relates to the request for a formal hearing in accordance with Section 120.57(1), Florida Statutes, will not be reiterated in this Recommended Order. Such facts have been fully set forth in the case of Ajax Construction, Inc. v. State of Florida, Department of Corrections and Dyson and Company, Case No. AK-70, So.2d (Fla. 1st DCA, Op. filed April 2, 1982).

During the administrative hearing before the undersigned, the petitioner adduced the testimony of Alfred W. Petty, the authorized representative of KBJ Architects, Inc. who was responsible for the management of the design of the contract documents and the management of the construction and costs of the subject project. Petitioner's Exhibits 1 through 9 were received into evidence. Exhibit 8 is under seal, pursuant to a Protective Order issued by the Hearing Officer. Exhibits 1 through 5 consist of the depositions of Jack Boykin Norment, Chairman of the Board of Norment Industries, Inc.; James L. Ridley, President of Taylor, Cotton and Ridley; Allah Rakha, an estimator with Dyson & Company who was responsible for all aspects of the subject bid; Raymond Dyson, President of Dyson & Company; and Eldridge Frank McClane, Jr. an architect and the former Facilities Services Administrator for the Department of Corrections. Respondent Dyson's Exhibit 1 was received into evidence.

Subsequent to the hearing, Ajax Construction, Inc. and Dyson & Company submitted proposed findings of fact and conclusions of law which have been fully reviewed and considered by the undersigned. To the extent that the parties' proposed findings of fact are not included in this Recommended Order, they are rejected as being either not supported by competent substantial evidence adduced at the hearing, irrelevant or immaterial to the issues in dispute or as constituting conclusions of law as opposed to findings of fact

FINDINGS OF FACT

Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found:

1. In response to an invitation to bid issued by the Department of Corrections (Department) for the construction of Phase II, Part I of the Tomoka Correctional Institution in Volusia County, the petitioner Ajax Construction Company, Inc. (Ajax) and the respondent Dyson & Company (Dyson), along with others, submitted bid proposals on December 22, 1981. The bidders were instructed to submit a base bid for the construction of Building 14 and an alternate bid for the construction of Building 15. The ultimate scope of the project was dependent upon funding available to the Department for the construction of prison facilities.

   
   

2. The contract terms and conditions governing the preparation and delivery of bids are contained in a Project Manual prepared jointly by the project architects, KBJ Architects, Inc., and the Department. (Petitioner's Exhibit 6) Each bidder is required to prequalify (Exhibit 6, Section B-2), and

   
   

   In order that the owner may be assured

   only qualified and competent subcontractors will be employed on the project, each bidder shall submit with his Proposal a list of

   the subcontractors who will perform the

   work for each Division of the Specifications

   as indicated by the `List of Subcontractors' form contained in these specifications. The bidder shall have determined to his own complete satisfaction that a listed sub- contractor has been successfully engaged

   in this particular type of business for

   a reasonable length of time, has successfully completed installations comparable to that which is required by this Agreement and is qualified both technically and financially

   to perform that pertinent phase of this work for which he is listed. Only one

   subcontractor shall be listed for each phase of the work.

   * * *

   The Owner reserves the right to reject the bid of any contractor who lists a subcontractor not certified and/or registered by the State to perform the work of his trade if such certification or registration is required for the trade

   by Florida Laws.

   
   

   After public opening and reading of proposals, the listing of subcontractors submitted by the apparent low bidder will be read publicly. The listings of other bidders will be returned.

   
   

   No change shall be made in the list of subcontractors, before or after the award of a contract, unless agreed to in writing by the Owner. (Exhibit 6, Section B-15)

   
   

   The form provided for the List of Subcontractors indicates that the list is "attached to, and is an integral part of the bid submitted by" the bidder and requires the bidder to list the "names of the subcontractors who will perform the phases of the work indicated." Among the six areas of work indicated are security hardware" and "security equipment." (Exhibit 6, Section D) A listing of a subcontractor was not required for the "locking system control console."

   
   

3. The bidding documents furnished the bidder for his use in preparing a bid contain technical architectural and structural specifications for various divisions of the project. Very technical requirements are set forth for security hardware (Division 875), security equipment (Division 1188) and the locking systems control console (Division 1190). The specifications for the security hardware division in a section entitled "prequalification of manufacturer," require that all bidding manufacturers of security hardware, with the exception of those contained in a listing of approved manufacturers, must submit a request for approval by the architect fifteen days prior to bid opening. If the manufacturer is approved, an addendum to the approved listing of manufacturers is to be issued to all bidding general contractors of record.

   
   

4. The specifications for security hardware further provide that the locking devices "shall be installed either directly by or under the direct supervisory control of the manufacturer of the device," and that

   Manufacturer's representative shall visit project three (3) times; (1) when hardware is delivered (to consult

   with Contractor's representative regarding installation), (2) during installation (to check on proper installation), and (3) when installation is complete (to check on proper functioning and instruct Owner's representative in operation). (Exhibit 6, Division 875,

   Section 1.6)

   
   

5. The specifications for security equipment (Division 1188) contain the following general requirement:

   
   

   1.1 Qualifications of Suppliers: Five (5) years experience fabricating and installing security and detention equipment of the types specified and a reputation for prompt work and service. Acceptable: Folger-Adams; Sesco; Roanoke Iron and Bridge.

   
   

6. The locking systems control console division (Division 1190) specifications contain an identical requirement for the "qualification of supplier," but do not include a listing of approved suppliers.

   
   

7. The areas of security hardware, equipment and controls are interfaced and function as a related system. Coordination between the manufacturer and the installer of this equipment is important, as the existence of a fragmenting of responsibility in this area has created past problems for the Department and project architect.

   
   

8. The bids for the subject project were opened on December 22, 1981. Ajax submitted a proposal containing a base bid of $1,852,342 for Building 14 and an alternate bid of $1,744,951 for Building 15. Dyson submitted a proposal of $1,861,590 as a base bid and $1,729,610 as an alternate bid. Both submitted with their bids the list of subcontractors required by Sections B-15 and D of the specifications. The names of the subcontractors provided by Ajax and by Dyson were identical except with regard to the areas of security hardware, security equipment and lathing and stucco. In those three areas, Dyson named itself as subcontractor and Ajax named SESCO, a division of Norment Industries, as a subcontractor for security hardware and security equipment and another entity for lathing and stucco. (Petitioner's Exhibit 7 and Dyson's Exhibit 1). While SESCO was identified as an acceptable qualified supplier in the bid specifications regarding security equipment (Division 1188) neither SESCO nor Norment Industries (of which SESCO is a division) was listed as an approved, qualified manufacturer in the specifications relating to security hardware (Division 875).

   
   

9. Believing that a contract was to be awarded for Building 14 (the base bid) only due to the availability of funds, the project architect's representative, Al Petty, determined that Ajax appeared to be the lowest bidder on the base bid. The subcontractors' list of Ajax was accordingly opened and read publicly. On December 28, 1981, Mr. Petty certified the bid tabulation and recommended a contract award to Ajax.

10. After being informed by the Department, in early January, 1982, that funds had been secured for the construction of Buildings 14 and 15, Mr. Petty telephoned the Department architect's secretary and requested that she open and publish to him Dyson's list of subcontractors. Upon learning that Dyson had listed itself as the subcontractor in three areas, Mr. Petty spoke with Mr. McClane, the Department's architect, and expressed his view that Dyson's failure to list subcontractors was a material omission which failed to meet bid requirements and that Dyson's bid should be disqualified.

    
    

11. Subsequent to the opening of Dyson's list of subcontractors, there ensued a series of telephone conversations between Mr. Petty and Mr. Allah Rakha, the authorized representative of Dyson, and between Mr. McClane and Mr. Rakha. A review of the testimony of these three witnesses regarding their conversations concerning the listing of subcontractors for the areas of security hardware and security equipment leads to the finding that Dyson intended to purchase the hardware and equipment from a supplier or manufacturer and to personally perform a majority of the actual work of installing these materials. This finding is also substantiated by a review of the scope sheet or bid proposals submitted to Dyson by various suppliers and manufacturers. In some instances, the manufacturers and suppliers intended to perform or furnish no labor and installation work. In the case of the bid proposals submitted by SESCO prior to the bid opening date of December 22, 1981, nine of the seventeen categories of equipment were to be furnished only, and not installed by SESCO. A breakdown of the labor costs as between Dyson and SESCO illustrates that Dyson intended to furnish $21,496 worth of the installation work while SESCO would provide only $5,940 worth of the installation work. The only difference between SESCO's (Norment Industries) bids submitted prior to and after the bid opening was a deletion or deduction for the price of control wiring due to an overlap or duplication of that item in the electrical subcontractor sections of the specifications.

    
    

12. Subsequent to his telephone conversations with Mr. McClane and Mr. Petty, Mr. Rakha sent a letter dated January 12, 1982, to the Department stating:

    
    

    Following is the list of suppliers and installers of security hardware and security equipment.

    1. Security Hardware by Brinks and Folger-Adams, installation

       by Normant [sic] Industries.

    2. Security Equipment by Folger- Adams, installation by Normant [sic] Industries.

       
       

13. Dyson & Company has had experience in providing labor and installation for security hardware and equipment in other prison facilities and detention centers in Florida and Alabama. These include the Escambia County jail in Pensacola, a receiving and classification center in Wetumpka, Alabama, a maximum security prison in Atmore, Alabama, and a brig at the Naval Air Station in Pensacola.

    
    

14. Within the construction industry and trade, the terms "subcontractor," "manufacturer" and "supplier" have separate, distinct and individual meanings and definitions. Generally speaking, a manufacturer builds or constructs the material, a supplier furnishes or delivers that material to another person or entity and a subcontractor furnishes and installs the material for the

    contractor. The definition of a "subcontractor" contained in the American Institute of Architects Document A201, a part of the bidding document in this case, reads in part as follows:

    
    

    5.1.1 A Subcontractor is a person or organization who has a direct contract with the Contractor to

    perform any of the Work at the site.

    
    

    CONCLUSIONS OF LAW

    
    

15. The prime issue in this proceeding is whether the fact that Dyson & Company listed itself as the subcontractor in the areas of security hardware and security equipment renders its bid unresponsive and therefore subject to rejection or disqualification. A resolution of this issue requires an interpretation of the following provisions of the Project Manual: Section B-15, entitled "Listing of Subcontractors;" Section D, entitled "List of Subcontractors Form;" and the Architectural and Structural Specifications for Divisions 875 (security hardware) , 1188 (security equipment) and 1190 (locking systems control console) . A review of these pertinent provisions, as well as the evidence adduced in this proceeding, leads to the conclusion that Dyson's bid was responsive and did not contain a material omission or deviation from the bid specifications.

    
    

16. Section B-15 reveals that the purpose of requiring a list of subcontractors is to assure the Department that only qualified and competent subcontractors will be employed on the project. Only one subcontractor is to be listed for each phase of the work. The "list of subcontractors form," Section D of the Project Manual, indicates the phases of the work for which the name and address of the subcontractor must be listed. Subsection B-15 requires the bidder, who is also required in Section B-2 to submit evidence of his own qualifications, to determine to his complete satisfaction that a listed subcontractor is qualified both technically and financially. The right to reject the bid on the basis of the list of subcontractors provided by the bidder is reserved to the Department only In those instances where the listed subcontractor is found to be not certified and/or registered.

    
    

17. It is contended by Ajax that if Dyson intended to perform the work on the project in the areas of security hardware or security equipment so as to justify listing itself as a subcontractor in those areas, it should have sought the approval of the Department or the project architect prior to the bid opening. In the alternative, it is contended that if Dyson intended to utilize another person or entity in any phase of such work, it should have listed that person or entity as a subcontractor so that the Department or the project architect could determine if that person or entity was qualified as required by Divisions 875, 1188 and 1190 of the technical specifications and so that other bidders and potential subcontractors would not be at a competitive disadvantage. A careful reading of the specifications regarding those divisions leads to the conclusion that Ajax's contentions are without merit.

    
    

18. The specifications regarding work to be done in the areas of security hardware, security equipment and locking systems control console do not contain any requirements for either the qualification or prequalification of "subcontractors." (It should be noted that the locking systems control console is not one of the six phases of work indicated for the required listing of subcontractors.) The specifications for Divisions 1188 and 1190 address themselves only to the qualifications of "suppliers." Three such suppliers of

    security equipment have been designated in the specifications as acceptable to the Department. These include Folger-Adams and SESCO. The prequalification of "manufacturers" is referred to in the specifications for Division 875--Security Hardware, and a listing of approved manufacturers of security hardware is included in the specifications. 1/ All those manufacturers who are not on the list are required to submit a fully documented request for the architect's approval fifteen days prior to bid opening. If such a request is approved, an addendum to the approved list of manufacturers is to be issued to all bidding general contractors. It is obvious that Dyson, in listing itself as a subcontractor in the area of security hardware, was not claiming or seeking approval to bid as a security hardware manufacturer. Rather, it was simply informing the Department that Dyson intended to perform the majority of the work in that area. The "list of subcontractor form," when reviewed in conjunction with the instructions to bidders (Section B-15) permitted the listing of only one subcontractor in the division of work entitled "security hardware." There was no requirement on the form or otherwise for a listing of "manufacturers" or "suppliers" to be utilized in that area. Indeed, there was no need for such a separate designation of manufacturers or suppliers. The Department had already determined and specified those manufacturers and suppliers who were deemed to be qualified to bid and furnish work in the area of security hardware, and had further specified the method of adding others to the approved listing of manufacturers. The form provided for the bid proposal contains a statement that the bidder has read and has submitted his bid in full accordance with the specifications. Thus, it must be assumed that the contractor, in preparing his bid proposal, has utilized the bid provided by a manufacturer of security hardware or a supplier of security equipment previously approved by the Department. Unless that manufacturer or supplier is also to act as a subcontractor, there is nothing in the bidding documents requiring a listing of a manufacturer or supplier on the "list of subcontractors form" to be attached to the bid proposal. As Section B-15 indicates, it is the bidder who determines the technical and financial qualifications of the subcontractor, with the Department only having the capability to reject a bid if the subcontractor is found to be not certified and/or registered by the State. The specifications and contract documents do not require the prime contractor to utilize a different subcontractor. They simply require that, if a subcontractor is to be utilized in the six areas indicated, it is to be listed on the form submitted with the bid proposal.

    
    

19. The other provisions contained in the specifications for the areas of security hardware and security equipment are further indicative that there is a distinction between a "manufacturer" and a "subcontractor." These provisions are quoted in Finding of Fact No. 3 and will not be repeated in full at this point. A reference to Section 1.6 of the specifications for Division 875 reveals that the manufacturer is not required to install the hardware, though he must exercise direct supervisory control, consult. with the Contractor's representative regarding installation and check on proper installation and proper functioning. These requirements do not, by themselves, turn a "manufacturer" into a "subcontractor." Had the Department intended for the manufacturer or supplier and the subcontractor (or installer) of security hardware or equipment to be one and the same person or entity, it would have been a simple matter to provide for this requirement in the specifications. 2/ In summary, there is no requirement in the bidding documents that a subcontractor (other than one who is also a manufacturer or supplier of security hardware and/or equipment) receive approval from the Department or the project architect prior to the opening of bids; and there is no requirement that manufacturers or suppliers be listed or utilized as subcontractors in the area of security hardware or security equipment.

20. The evidence indicates that both prior and subsequent to the bid opening, Dyson intended to perform the majority of the installation work in the areas of security hardware and security equipment. It thus had a choice of four alternatives in preparing the required "list of subcontractors" for those indicated phases of the work. Dyson could have chosen to (1) leave these spaces blank, (2) list only one of its manufacturers or suppliers, (3) list itself and its manufacturers and/or suppliers, or (4) list only itself. To leave the spaces blank on the listing of subcontractor form would have violated the terms of the bidding submission requirements and would have constituted a material omission. E. M. Watkins & Company, Inc. vs. Board of Regents and Winchester Construction and Engineering, Case No. 8L-32, So.2d (Fla. 1st DCA, Op. filed May 12, 1982). A listing of manufacturers or suppliers, as those terms are commonly understood in the trade, was not required and would have been meaningless to the Department inasmuch as the Department has already designated the only manufacturers and suppliers found qualified to furnish work on the project. With full knowledge that manufacturers and/or suppliers would be involved, the Department chose to require in its bidding instructions and required form the listing of only one "subcontractor" in the area of security hardware and one "subcontractor" in the area of security equipment. In spite of the definition of a "subcontractor" provided in AIA Document A201, it is entirely reasonable to interpret the bidding requirements of this project as one for the listing of the one person or entity which would provide the majority of the work in the designated areas. While Dyson can not technically "subcontract" with itself, the listing of itself as the subcontractor who would furnish the majority of the work in the areas of security hardware and equipment constituted a reasonable and good faith effort to comply with the requirements for the submission of a bid. Dyson's later submission of "suppliers and installers" to the Department by letter dated January 12, 1982, was only provided in response to the inquiries of the project architect and the Department. That letter cannot be regarded as a "substitution of subcontractors after the bid opening," as contended by Ajax, because Dyson never withdrew its designation of itself as the entity which would perform a majority of the work on the installation of the security hardware and equipment for this project.

    
    

21. Requirements in bidding instructions to provide a list of subcontractors not only provide assurance to the Owner of the quality and competency of those who will perform work on the project, as recognized in Section B-15 in the bidding documents. Such requirements also serve to protect the competitive bidding process by discouraging "bid shopping," which works to the disadvantage of subcontractors after the contract is awarded, other prime bidders during the bidding process and ultimately the Owner. In the absence of firm commitments for the subcontracting work, the general contractor can bid shop and obtain more favorable subcontract prices than those upon which his bid was based, with the dual result of inflated costs to the Owner and substandard work by the subcontractors at their lower prices. As stated in the case of E.

    M. Watkins & Co. vs. Board of Regents and Winchester Construction and Engineering, supra,

    
    

    The unfair bidding advantage one contractor derives from the failure to list required subcontractors is generally threefold: (1) it provides the precious few minutes which may be saved by failing to provide a name for the appropriate blank on form D-1 and matching the name with the price used in the bid computation, (2) it allows the potential

    for speculation, by use of a phantom price and efforts to shop that item or trade until a subcontractor can be found at the speculative contract price, and (3) it permits a successful bidder to accept additional subcontractor bids after the bid opening, giving the opportunity for undercutting the low subcontractor on whom he relied in formulating his bid.

    
    

    The concerns expressed in the preceding paragraph do not exist in this case. Here, Dyson listed itself as the subcontractor -- the entity which would provide the majority of the installation work in the areas of security hardware and security equipment. Bidders were not required to inform the Department or other bidders of those previously approved manufacturers or suppliers of hardware or equipment they would utilize, nor were bidders required to contract with the manufacturer or supplier to also provide the installation work.

    Dyson's bid was based, in large part, upon its own, not "phantom," costs for the provision of installation services. By listing itself as the subcontractor, Dyson committed itself to perform a majority of the installation work. Dyson cannot now use another subcontractor to perform a majority of this work without seeking a change order or the removal or replacement of itself as a subcontractor for good cause shown. Florida Statutes, Section 255.0515. Other subcontractors are not placed at a competitive disadvantage as they have notice that Dyson intends to perform the installation work itself. Competing bidders are not placed at a disadvantage because Dyson was not holding itself out as a competing subcontractor who would submit a bid to other prime bidders. And finally, the Owner has previously been apprised of the prime contractor's qualifications prior to the submission of its bid.

    
    

22. In conclusion, it is determined that Dyson did not commit a material deviation from or omission of the requirements of the bidding documents when it listed itself on the mandatory form for the listing of subcontractors in the areas of work involving security hardware and security equipment. Having otherwise submitted the lowest qualified and responsible bid for the project, Dyson & Company is entitled to an award of the contract.

RECOMMENDATION

Based upon the foregoing findings of fact and conclusions of law recited herein, it is RECOMMENDED that the construction contract for the Tomoka Correctional Institution, Phase II, Part I, Project No. DC-8130, be awarded to Dyson & Company and that the petition of Ajax Construction Company be DISMISSED.

Respectfully submitted and entered this 11th day of June, 1982.

DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 11th day of June, 1982.

ENDNOTES

1/ While not raised as an issue in this proceeding, it must be noted that neither SESCO nor its parent Norment Industries are contained in the listing of approved manufacturers of security hardware. Thus, if Ajax is correct in its position that Dyson committed a material omission or deviation by not seeking pre-approval by the Department since its name was not on the approved list contained in the specifications, it (Ajax) too committed the same error. Ajax listed SESCO as a subcontractor in the security hardware phase of the work.

2/ A comparison of the language utilized in the "electrical" division specifications is instructive. In Section 16000 entitled "common requirements for electrical work," (for which a listing of a subcontractor is required) the specifications state, "A single electrical contractor shall have responsible charge of all work specified in Division 16."

COPIES FURNISHED:

Philip S. Parsons, Esquire Ausley, McMullen, McGehee,

Carothers & Proctor Post Office Box 3091

Tallahassee, Florida 32302

Kenneth H. MacKay, Jr., Esquire McKay & Ranew, P.A.

Suite 201, Concord Square

Seven East Silver Springs Blvd. Post Office Box 206

Ocala, Florida 32678

Michael J. Minerva, Esquire Office of General Counsel Department of Corrections 1311 Winewood Blvd.

Tallahassee, Florida 32301

Barry L. Silber, Esquire Levin, Warfield, Middlebrooks, Mabie & Magie, P. A.

Seville Tower

226 South Palafox Street

P. O. Box 12308 Pensacola, Florida 32581

Louie L. Wainwright, Sr. Secretary

Department of Corrections 1311 Winewood Boulevard

Tallahassee, Florida 32301

Docket for Case No: 82-001026

Orders for Case No: 82-001026