vs. ) CASE NO. 84-2250BID
Respondent. )
Notice was given and a formal Section 120.57(1), Florida Statutes, hearing was held on Wednesday, September 12, 1984. Charles C. Adams was the Hearing Officer. The location of the hearing was the Oakland Building, 2009 Apalachee Parkway, Tallahassee, Florida. This Recommended Order is being entered following the receipt and the review of the transcript of the proceedings which was filed with the Division of Administrative Hearings on October 3, 1984. The proposed recommended orders of the parties have also been examined, as filed with the Division of Administrative Hearings on October 15, 1984. To the extent that the proposals are consistent with the Recommended Order they have been utilized. Otherwise, the proposals are rejected based upon a lack of relevance, materiality, as contrary to facts found, or because they are cumulative or subordinate.
Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A.
The issues presented in this hearing concern the question of whether the Respondent should reject all bids submitted on DOT State Project No. 72000-3541 or accept the bid of the Petitioner.
On March 1, 1984, Respondent gave notice to qualified contractors that it would receive sealed bids for State Project No. 72000-3541, referred to as Federal-Aid Project No. M 9041(10). This project involves the installation of a computerized traffic control system for the City of Jacksonville. In response to the opportunity to bid, the Department of Transportation received four bids. Petitioner, Winko-Matic Signal Company, was among the bidders. The other bidders were Georgia Electric Company, Traffic Control Devices, Inc., and Sperry Systems Management. The bids of Traffic Control Devices and Sperry Systems were rejected based upon an error in bid tabulations on the part of Traffic Control, a mistake on the quantities page, with the Sperry rejection being based upon a bid bond problem. Traffic Control had been the apparent low bidder with a bid of $1,964,115. Winko-Matic was the second apparent low bidder with a bid of
$2,279,604.70. The Department of Transportation had estimated that the total cost of the Jacksonville project would be $ 2,024,680.61.
Having discarded the bid of Traffic Control Devices, the Department of Transportation telegrammed Winko-Matic on April 4, 1984, advising Winko-Matic that it was the apparent low bidder for the Jacksonville project. Subsequently, the awards committee of the Department of Transportation met on April 18, 1984, and determined to reject all bids and re-advertise the job. In the course of this meeting the awards committee was told that there were erratic bids received on contract items, pointing to some perceived confusion among the contractors as to requirements of the contract. Discussion was also held on the possibility of establishing a pre-bid conference if the project was re advertised. The awards committee then voted to reject the bids on the basis that the apparent low bidder, Winko-Matic, had submitted a bid which-was 12.6 percent over the Department's estimate, instead of being within 7 percent of the Department of Transportation's pre-bid estimate, a point above which the Department of Transportation in its non-rule policy would call to question to the acceptability of the apparent low bid. In addition to deciding to reject all bids and re-advertise, it was determined that a pre-bid conference should be scheduled at least 30 days prior to the bid-letting date.
Winko-Matic was advised that the Department of Transportation's decision to reject all bids by correspondence of May 4, 1984, in which it was indicated that all bids had been rejected based upon the fact that they were too high. In response to this notice of rejection, Winko-Matic, effective May 17, 1984, filed a written notice of protest. The case was subsequently referred to the Division of Administrative Hearings on June 20, 1984, and a final hearing date was established by Notice of Hearing of July 5, 1984. The hearing date in this cause was September 12, 1984.
The Jacksonville project in question requires the utilization of what has been referred to "UTCS Enhanced" software. This software package is unique and has only been used in a limited number of locations within the country. Those locations are Los Angeles, California; San Diego, California; Broward County, Florida; and Birmingham, Alabama. Another unique feature within the project design is the use of an associated coaxial computer sys gem.
Given the unique nature of this project and the fact that the Department of Transportation had never advertised for bids related to UTCS software, Department of Transportation obtained assistance from a consulting firm, Harland, Bartholomew & Associates. In fulfilling its function Harland gave estimates to include an estimate related to the projected cost of the software, Item 681-102. The Harland estimate for the overall project was
$2,143,130 including a $100,000 estimate for the software system. That estimate relating to the software was subsequently adjusted by the Department of Transportation to depict a cost of $13,780. The Department of Transportation estimate was based upon information within its computer related to a system unlike the enhanced software contemplated by the plans and specifications. In other words, the stored information in the Department of Transportation computer was not the same as contemplated by the plans and specifications in the Jacksonville project. Moreover, the initial estimate of Harland was based upon the idea of an extended software system, as opposed to an enhanced software system.
Winko-Matic had bid $389,500 for the software in Item 681-102. That estimate was premised upon figures obtained from JHK and Associates, the group which Winko-Matic intended to use as its subcontractor for the enhanced software portion of the project. JHK developed the software and was responsible for systems integration of the Los Angeles, California, project, one of the locations in which UTCS enhanced software has been utilized. JHK premised its estimate for the software hare upon experience in Los Angeles and an evaluation of the tasks to be performed related to the enhanced software. This included general software development activities, hardware innovation, installation costs during the period of acceptance and testing, and the preparation of data base. The JHK bid price was $339,500. Another $50,000 was added to that price related to what the Petitioner describes as its management costs for that item.
By June 20, 1984, when a further meeting was held by the awards committee on the subject of the Jacksonville project, it was concluded that the estimate made by the Department of Transportation of $13,780 was not correct, on the topic of the enhanced software. A more reasonable estimate, according to the information imparted in this session, would be $200,000 for enhanced software as called for in this project, with a $100,000 amount being a reasonable estimate had they chosen to use extended software. Adjusting the initial price related to the UTCS enhanced software to reflect a corrected estimate of the Department of Transportation in its original advertised bid, that estimate becomes $2,210,900.61 and its consultant Harland's estimate becomes $2,243,130. With this adjustment, the differential in the estimate made by the Department of Transportation and the Petitioner approaches 3 percent and not the 12.6 percent originally found. The 3 percent is below the threshold of
7 percent used as the policy for determining whether a bid might be rejected as being far beyond the acceptable limits set forth in the Department of Transportation's estimate.
In the aforementioned June 20, 1984, awards committee meeting, the Department of Transportation continued to hold the opinion that all bids in the Jacksonville project should be rejected and the matter re-advertised. Although the problem pertaining to the estimate of the cost of the enhanced software package had been addressed, the committee continued to feel that the prices received in the bid letting were erratic Reference was also made to revisions or modifications to the project plan which would be offered if the matter were re- advertised. It was also pointed out that the Federal Highway Administration would concur in the Department's decision to reject all bids and would accept modifications. The awards committee again voted to reject the bids.
The matter was again considered by the awards committee on August 31, 1984. On that occasion, it was pointed out that the revisions contemplated by the Department of Transportation, should the matter be re-advertised, would not affect in a substantial way the cost estimate for the project with the exception of Item 680-101, the system control equipment (CPU), which would promote a lower price for the project. The committee determined in the August, 1984, meeting to reject all bids and re-advertise.
While the initial notice of rejection of May 4, 1984, had suggested the basis for rejection as being the fact that Petitioner's bid far exceeded the
7 percent allowance for price above the Department of Transportation's estimate of costs, the meetings of the awards committee and the suggestion of the Respondent in the course of the final hearing in this case indicated that there were other reasons for the decision to reject. Those Were: (a) an apparent lack of clarity among bidders regarding specifications for the Jacksonville job,
(b) the desire of the Respondent to revise specifications on the Jacksonville project; and (c) a lack of sufficient competition in the bids.
In connection with the first of the additional reasons Respondent suggests that variations within the bid responses related to particular line items within the specifications point out a lack of clarity in the project's specifications or confusion by bidders related to those specifications. Respondent did not bring forth any of the bidders who might speak to the matter of possible confusion or misunderstanding concerning some of the bid items. By contrast, the Petitioner's president; the president of JHK & Associates and James Robinson, Harland's project manager for the Jacksonville job, did not find the specifications in the original documents to be confusing. In addition, the testimony of those individuals established the fact that bid variations related to particular line items are not extraordinary and do not establish any apparent confusion by the bidders as to the requirements of those line items. In effect, what the differentials demonstrate are variations related to the manufacture or in-house capabilities of the bidders and an effort to allocate discretionary costs in various places as to line items. Moreover, they might indicate last- minute adjustments in the bid quote prior to the opening and a possible effort by a contractor to enter into a new job market. Finally, they demonstrate offsetting which is the allocation of item prices by a contractor to maximize profits. To do this, a contractor submits high bids on items representing quantities which the contractor feels will increase after the contract is awarded and submits low bids on items representing quantities which are not likely to change. In summary, while the Department of Transportation in its presentation expressed some concern about the variations in the pricing in the bid quotations offered by the respective bidders in this project, its suspicions on the question of the possible clarity of its specifications were not confirmed and are not convincing.
On the topic of revisions which the Department of Transportation would offer if the matter were re-advertised, with one exception those matters appear to be items that could be attended through change orders or supplemental agreements. They are not matters which necessarily must be addressed through a rejection of all bids and a re-advertising of the project. The lone exception to this is the possibility that the Department of Transportation may not be able to protect its proprietary rights in the enhanced software which is being developed for the project, under the terms of the present bid documents. Given that uncertainty, the Respondent would wish to re-advertise the project and make certain that its proprietary interests are protected.
Finally, Respondent has alluded to the fact that the Jacksonville project should be re-advertised in view of the lack of competition in the initial letting. Only four bidders expressed an interest in this project at the time of the first letting. Of those, two bidders were found to be responsive. While this is a low number of bidders, there does not appear to be any agency practice on the part of' the Department of Transportation to the effect that this number of bidders would not be accepted. Moreover, no indication has been given that should the matter be re-advertised a greater number of bidders would express an interest than was the case in the first letting. Consequently, this reason for bid rejection is not acceptable.
If Respondent did not reject the bids and re-advertise the project, Winko-Matic would be the successful bidder in the Jacksonville project.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action pursuant to Section 120.57(1), Florida Statutes.
The State of Florida, Department of Transportation, is granted the authority to contract for the maintenance of roads in keeping with Section 337.11, Florida Statutes. This would include the ability to enter into contracts related to the State Project No. 72000-3541. Here, having advertised for bids, and rejected those bids, consideration of the protest of the Petitioner to such rejection is made in accordance with Section 120.53(5), Florida Statutes, and Chapter 14-25, Florida Administrative Code.
In substance, determination of the outcome of the case is based upon Department of Transportation's exercise of discretion in keeping with Section 337.11(3), Florida Statutes, which states:
(3) The department may, at its discretion, award the proposed work to the lowest responsible bidder, or it may reject all bids and proceed to readvertise or perform the work with convict labor or free labor.
This discretion is further referred to in Section 3-1, Standard Specifications for Road and Bridge Construction (1982), as found in the bid documents of the present project. In exercising the discretion as alluded to, the Department of Transportation relies upon underlying agency rules or policy choices as supported by the record in the proceeding. In exercising its discretion the Department of Transportation may not act arbitrarily. See Couch Construction Company v. Department of Transportation, 361 So.2d 172 (Fla. 1st DCA 1978). On this occasion there are no rules which govern the question of bid rejection.
Therefore Petitioner having submitted a responsive bid, absent a viable non-rule policy, i.e., a non-rule choice which is not arbitrary in its tenor, Petitioner is entitled to the contract award.
The first policy choice for rejecting all bids was to the effect that the Petitioner's bid was in excess of the non rule policy that bids 7 percent above the Respondent's preliminary estimate are considered too high. As indicated in the record, once the bid estimate of the Department was corrected to reflect the true estimated cost of the enhanced software system, Petitioner's bid was well inside the 7 percent cutoff. In fact, the difference between the bid estimate of the Department of Transportation and the Petitioner's bid for
the original project was approximately 3 percent, with the Petitioner being on the high side. Consequently, Petitioner is within the policy choice of the Respondent as to the question of high bids.
The second reason for rejecting the bids concerns the variation in individual prices among bidders indicating some lack of clarity as to the bid specifications which confused the bidders and led to unacceptable bid, responses. The record in this case does not demonstrate such confusion. The Petitioner and the consultant to the Department of Transportation found those specifications to be clear. While the Department of Transportation through its witnesses surmise that the specifications were not clear, this point of view is not compelling. There were no other witnesses who testified as to clarity, namely, other bidders. Therefore, the policy choice of bid rejection for lack of clarity is arbitrary.
The Department of Transportation also would reject the bids to allow revision of the specifications. With the exception of the possible problem related to the copyright interest of the Department of Transportation on the subject of the enhanced software, the revisions that are contemplated could be attended by change orders and supplemental agreements as envisioned by Section 337.11(4)(b) and (c), Florida Statutes. For the Department of Transportation to re-advertise to effect the revisions would be an arbitrary act. The fact that the Department of Transportation might be placed in the position where its copyright interests are not as strong when using the original plans and specifications, does not suffice as a reason for re-advertising the project.
Finally, Respondent asserts that there was insufficient interest expressed in this project to promote the depth of competitive bidding which would be desirable. There is no established policy to reject bids where only two bidders were considered to have responded regularly. Moreover, there is no indication that should the matter be re-advertised a larger number of bidders would offer responses. Therefore, to reject the bids and re-advertise upon the hope that more bidders would express an interest in the project, would be an arbitrary act.
In summary, reasons as stated )for rejecting the bids, singularly or collectively, are not supported and being unacceptable, should the Department of Transportation reject the present bids on these bases it would be acting arbitrarily.
The Petitioner is entitled to the award of the contract in State Project No. 72000-3541.
Upon consideration of the facts found and conclusions of law reached, it is,
That a Final Order be entered which awards State Project No. 72000-3541 to the Petitioner, Winko-Matic Signal Company.
DONE AND ENTERED this 26th day of November, 1984, at Tallahassee, Florida.
CHARLES C. ADAMS
Filed with the Clerk of the Division of Administrative Hearings this 26th day of November, 1984.
Smith & Cutler, P.A.
Reynold Meyer, Esquire Department of Transportation Haydon Burns Building - M.S. 58 Tallahassee, Florida 32301
Paul A. Pappas, Secretary Department of Transportation Haydon Burns Building Tallahassee, Florida 32301
