STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GUS CROCCO; CROCCO, INC.; and ) SUPER SERVICE GENERAL )

PARTNERSHIP, )

)

Petitioners, )

)

vs. ) CASE NO. 84-2703BID

) DEPARTMENT OF TRANSPORTATION, )

)

Respondent, )

and )

)

BOBBY W. CARTER: CAREM )

ENTERPRISES, INC.; JOE A. ) CHAMBLISS; JOE A. CHAMBLISS, ) INC.; C. R. GOODE; CRG PRODUCTS, ) INC.; CONRAD F. STOCKS; and ) TOLER OIL COMPANY, )

)

Intervenors. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above- styled case on October 23, 1984, at Tallahassee, Florida.

APPEARANCES

For Petitioner, Bruce David Green, Esquire

Gus Crocco: 2610 West Oakland Park Boulevard

Fort Lauderdale, Florida 33311

For Petitioner, Bruce R. Abernethy, Jr., Esquire Crocco, Inc.: Post Office Box 1270

Fort Pierce, Florida 33454

For Petitioner, Super Service General

Partnership: Not represented.

For Respondent, Linda G. Miklowitz, Esquire Department of Haydon Burns Building Transportation: Tallahassee, Florida 32301

For Intervenors: John Radey, Esquire and

D. Bruce May, Esquire Post Office Drawer 810

Tallahassee, Florida 32302

By timely filed petitions, the Petitioners in this cause protest the Department of Transportation (DOT), Respondent, withdrawal of its notice of intent to award, and its rejection of all bids, on service plaza leases on the Florida Turnpike. As grounds for these protests it is alleged DOT's actions are arbitrary and capricious.

At the hearing Petitioners called two witnesses, both of whom are DOT employees, two intervenors testified in opposition to the petitions, and nineteen exhibits were admitted into evidence including the depositions of Gus Crocco, William Crocco, and Ralph Girvin. Such of these exhibits now specifically shown in the transcript as having been admitted are not admitted into evidence.

The parties have submitted posthearing proposed findings of fact pursuant to Section 120.57(1)(b)4., Florida Statutes. A ruling on each proposed findings of fact has been made, either directly or indirectly, in this Recommended Order, except, where such proposed findings of fact have been rejected as unsupported by the evidence, cumulative, immaterial, or unnecessary to the conclusions reached.

FINDINGS OF FACT

1. In May, 1983, DOT advertised for bids to separately lease the 11 service stations on the Florida Turnpike. Prospective bidders were prequalified before being allowed to submit bids. Bids were to be awarded to the bidder submitting the highest responsible bid and based solely on the amount per gallon to be paid to DOT on each gallon of motor fuel sold at the service plaza. The existing leases were all due to expire and an attempt to get bids in 1982 had been dropped after litigation delayed completion of the bid process.

   
   

2. Turnpike prices for motor fuels are regulated somewhat by DOT, in that the Turnpike prices must be comparable to prices at off-Turnpike stations in the vicinity which offer similar services. Those stations selected for comparative prices must be acceptable to the Turnpike station operator and DOT.

   
   

3. Equipment at the existing service plazas has been in use for many years and in the bid offering in May, 1983, several new provisions were included, as were many provisions of the expiring leases. To insure competent and qualified service to motorists on the Turnpike, retained lease provisions require the stations to be open 24 hours per day, to provide wrecker service, and to have a mechanic on duty. Few off-Turnpike stations meet these requirements. Accordingly, "comparable" stations within SD miles east-west of the Turnpike and in the vicinity of a specific service plaza may not be readily available. The bid offering provided that these "comparable" stations will be selected by mutual agreement of the parties but makes no provision for settling a dispute between the lessor (DOT) and the lessee. This is significant because another of the lease provisions contained in the bid offering is that the prices at which the service plazas sell fuel must not exceed by more than two cents per gallon the prices at these selected comparable stations.

   
   

4. New provisions in this bid offering required the successful bidder to replace all dispensing equipment (gas pumps) with modern equipment, and to

   provide for sale of motor fuels at self-service pumps. The bid offering contained no specifics as to where the self-service pumps are to be located with respect the existing service islands, whether self-service motor fuels are to be available by credit card or cash only sale, or whether there could be a different price for cash sales than for credit card sales.

   
   

5. The bid offering provided that no one entity could be awarded the lease of more than five service stations on the Turnpike, and no bond was required to be posted by any bidder.

   
   

6. DOT expected the successful high bidders to submit bids in the vicinity of eight cents per gallon. This was based on DOT's knowledge from surveys taken at frequent intervals over a long period of time, of the price motor fuels was selling bat comparable stations off the Turnpike; of the tank wagon costs of motor fuels to the station operators; of the sales of tires, batteries and accessories historically made by these stations, the profits from which are not included in the lease price; of the uncertainties inherent in the profits engendered by the to-be-offered self-service sales; other changes which increased the field of bidders; and the expected stability of motor fuel prices.

   
   

7. When the bids were opened on September 12, 1953, the first, second, and third highest bids received for each of the 11 service plazas are as follows:

   
   

   Service Plaza	First	Second	Third
   (Number)	Highest	Highest	Highest
   	Bid	Bid	Bid

   Snapper Creek (601) 13.51 12.34 5.40

   Crocco, Inc. Gus Crocco William Crocco

   
   

   Pompano		(611)	14.35 Crocco, Inc.	14.33 Gus Crocco	9.75 William Crocco
   Pompano		(612)	14.33 Crocco, Inc.	12.76 Gus Crocco	9.20 Super Service
   West Palm Beach (623) 15.67			15.67	11.55
   Gus Crocco			Crocco, Inc.	William Crocco
   West Palm Beach (624) 15.67			14.53	11.55
   Gus Crocco			Crocco, Inc.	William Crocco
   Ft. Pierce (635) 15.67			14.83	13.90
   Gus Crocco			Crocco, Inc.	Super Service
   Ft. Pierce (636) 15.67			14.53	12.40
   Gus Crocco			Crocco, Inc.	WMG, Inc.
   Ft.	Drum (647)	16.20 Super Service	15.67 Gus Crocco	14.53 Crocco,	Inc.
   Canoe Creek (658)		15.67 Gus Crocco	14.90 Super Service	14.53 Crocco,	Inc.
   Turkey Lake (669)		14.34 Gus Crocco	14.20 Super Service	13.43 Crocco,	Inc.

   Okahumpka (670) 14.34 13.25 5.67

   Crocco, Inc. Gus Crocco Gulf Oil

   
   

8. Although Crocco, Inc., and Gus Crocco were the apparent high bidders for 10 of the 11 Turnpike service station leases, DOT, with only 20 days to award or reject bids, on October 3, 1983, issued a notice of intent to enter into leases with the high bidders. Before such leases could be executed, a petition to protest the award of these bids was filed by parities who are the intervenors herein, the case was referred to the Division of Administrative Hearings and was assigned DOAH Case No. 83-3539.

   
   

9. Gus Crocco and William Crocco are brothers, are shareholders in Crocco, Inc., are shareholders in WMG, Inc., and have operated service stations on the Florida Turnpike for the past several years. All entities named in the above sentence submitted bids for Turnpike leases at this offering. Super Service General Partnership, the high bidder for the lease at Ft. Drum service plaza, is composed of a partnership consisting of Ralph Girvin and two other partners. Girvin prepared the bid submitted by Super Service General Partnership which, at

   16.02 cents per gallon of motor fuel sold, was the highest bid submitted for any lease. Gus Crocco, Crocco, Inc., William Crocco, and WMG, Inc., submitted the three highest bids for five of the 11 service station leases.

   
   

10. During discovery in preparation for the hearing in Case No. 83-3539, it was disclosed that Gus Crocco prepared the bids submitted by Gus Crocco and Crocco, Inc.; that no market survey was taken by Gus Crocco or Ralph Girvin before establishing the selling prices for motor fuels upon which their bids were predicated; that the profit per gallon of motor fuel assumed by Crocco included a rebate from the supplier of approximately six cents per gallon even though no rebate has ever been given at a Turnpike service station for more than a short period of time; the profits to be made per gallon did not take into consideration county taxes that are applicable to some of the service plazas; that existing prices at stations accepted as comparable in the past were much lower than the sale prices which Gus Crocco and Ralph Girvin used to arrive at a bid price; that absent a requirement for the posting of a bond the high bidder could withdraw his bid without financial penalty or liability; that some communication between the Crocco brothers had taken place before the bids were submitted; that Ralph Girvin hand attempted to contact Gus and William Crocco before submitting his bid; that the data upon which Gus Crocco, Crocco, Inc., and Super Service General Partnership based their bids was insufficient to account for all expenses to be incurred; and that there was a high probability that the service station could not provide adequate service to the motorists while paying the price bid for the leases and selling motor fuels at a price comparable to that charged by off-Turnpike stations in the vicinity. This information was passed to DOT.

    
    

11. Sam Roddenberry, Turnpike engineer for DOT, is the individual primarily responsible for the operation of the Turnpike in accordance with policies established by DOT. He was the DOT employee primarily responsible for the provisions of the bid proposals and lease, for the award of the lease to the highest qualified bidder, and for the policy changes, including the sale of motor fuel at self-service pumps. After receiving information discovered during trial preparation for Case No. 83-3539, Roddenberry compared Gus Crocco's projected selling price of $1.239 per gallon of regular leaded self-service gasoline with the 1983 average price in Jacksonville of $1.0991; compared the Crocco price estimate for unleaded self-service gasoline of $1.349 per gallon with the Jacksonville price of $1.1789; and the Crocco price estimate of $1.3996 for self-service super unleaded with the Jacksonville price of $1.2997. A

    similar comparison was made with respect to Super Service General Partnership's bid. These comparisons, the close relationship between the three high bidders at all stations (except for Super Service) and his knowledge that rebates, when given, are good only for short periods of time, led Roddenberry to conclude that all bids should be rejected.

    
    

12. On October 1, 1984, Chapter 84-276, Laws of Florida, became effective. This discontinued the high-bid system upon which the bids here involved were solicited and substituted therefor a request for proposal (RFP) system upon which the Department selects the applicant deemed best qualified to satisfy the statutory criteria established by this statute.

    
    

13. On June 25, 1984, each of the high bidders was notified by DOT that Respondent intended to withdraw its notice of intent to award leases and that it intended to reject all bids. These bidders at the same time were advised of their right to a Chapter 120.57 hearing, and the petitions for hearing, here involved, followed.

    
    

    CONCLUSIONS OF LAW

    
    

14. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.

    
    

15. Petitioners' contention that they had a vested right in the leases on which they had bid was rejected by this Hearing Officer in Order entered September 17, 1984, and that issue will not be revisited.

    
    

16. The offer to bid contained a provision authorizing DOT to reject all bids; and Rule 14-83.11(8), Florida Administrative Code, provides:

    
    

    The Department may, in its discretion, reject any and all bids so long as the Department does not act arbitrarily or capriciously.

    
    

17. To succeed here, Petitioners must prove, by a preponderance of the evidence, that Respondent acted arbitrarily and capriciously in rejecting the bids in this cause.

    
    

18. Petitioners contend that Respondent rejected all bids because it was frustrated by the action challenging the notice of intent to award leases, that it felt the delay caused thereby was detrimental to the motoring public, and that Respondent wanted to enter into leases under the new Chapter 84-276, Laws of Florida. Unfortunately for Petitioners, the evidence does not support the first two of these three arguments and the third is immaterial. Respondent contends that the Hearing Officer no longer has jurisdiction to consider this case after Chapter 84-276 became effective and leases for Turnpike service stations can be issued pursuant to that law subsequent to October 1, 1954. As one of the authorities cited for this position DOT cites McDonald v. Department of Banking and Finance, 346 So. 2d 569 (Fla. 1st DCA 1977). Petitioners, on the other hand, cite McDonald to support its position that DOT's notice of intent to withdraw its notice of intent to lease and to reject all bids was not accompanied by reasons and since it failed to explain such discretionary action it must therefore award the leases. Both parties miss the import of McDonald.

    
    

19. The function of the Hearing Officer is to conduct a hearing at which evidence is submitted from which facts are determined by the Hearing Officer and

    presented to the agency to assist the agency in formulating the decision it will ultimately make. This is the hearing at which Petitioners are given the opportunity to show the Department's proposed rejection of all bids would be arbitrary and capricious.

    
    

20. Respondent's position, that since the deadline of October 1, 1984, has passed, the Hearing Office no longer has jurisdiction to make viable recommendations to DOT, is also off the mark. These Petitioners prepared and submitted bids, presumably in good faith, under the law in effect at the time these bids were presented and considered by DOT. They are entitled to have their bids properly considered under that law. If the Department arbitrarily and capriciously rejected those bids, this is an error these proceedings are designed to correct.

    
    

21. Both parties also cite Couch Construction Co. v. Department of Transportation, 361 So. 2d 172 (Fla. 1st DCA 1978), as bearing on the issues whether DOT may reject all bids. Petitioners again overlook the holding in Couch that the Department may reject all bids, but before taking action to do so must give affected parties an opportunity, at an administrative hearing, to present evidence that the Department's action in rejecting all bids is, or would be, arbitrary and capricious. Petitioners have been afforded that type hearing in these proceedings.

    
    

22. Considering tee facts available to Respondent at the time it issued the notice of Intent to reject all bids, namely, that the close relationship between the low bidders on 10 of the 11 leases involved raises some' inference of collusion and, in fact, bids were prepared by the same individual; that the bids were submitted using unreliable and inaccurate assumptions regarding the prices that could be charged for motor fuel, the price the operators would pay for this motor fuel, which included a rebate that, at best, could last for only a short period; the pro formas upon which the bid prices were predicated failed to include certain costs that indubitably will be borne by the station operator; the failure of DOT to require a performance bond will allow bids to be withdrawn without financial penalty; and that the inability of the operator to run a profitable station would inevitably result in a reduction of services to the motoring public, left Respondent with no option but to reject the bids.

    
    

23. It is therefore concluded that the rejection of all bids for Turnpike service station leases is not arbitrary and capricious and these bids should be rejected. It is

RECOMMENDED that the Department of Transportation enter a Final Order rejecting all bids opened on September 12, 1983. for Turnpike service station leases.

ENTERED this 17th day of December, 1984, at Tallahassee, Florida.

K. N. AYERS 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 17th day of December, 1984.

COPIES FURNISHED:

Bruce David Green, Esquire

2610 West Oakland Park Boulevard Fort Lauderdale, Florida 33311

Bruce R. Abernethy, Jr., Esquire Post Office Box 1270

Fort Pierce, Florida 33454

Linda G. Miklowitz, Esquire Department of Transportation Haydon Burns Building,- M.S. 58 Tallahassee, Florida 32301

John Radey, Esquire and

D. Bruce May, Esquire Post Office Drawer 810

Tallahassee, Florida 32302

Timothy Laubach, Esquire Susan Sacco, Esquire

800 North Highland Avenue Orlando, Florida 32803

Michael Dunleavy, Esquire 6009-C Northwest 31st Avenue

Fort Lauderdale, Florida 33309

Paul A. Pappas, Secretary Department of Transportation Haydon Burns Building Tallahassee, Florida 32301

Docket for Case No: 84-002703

Orders for Case No: 84-002703