STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SAVIN CORPORATION, )

)

Petitioner, )

)

vs. ) CASE NO. 84-3346BID

) DEPARTMENT OF GENERAL SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing in this case was held on December 13, 1984, in Tallahassee, Florida, before Diane A. Grubbs, a hearing officer with the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Thomas J. Guilday, Esquire

Akerman, Senterfitt & Eidson Post Office Box 1794 Tallahassee, Florida 32302

For Respondent: Susan Kirkland, Esquire

Department of General Services The Larson Building Tallahassee, Florida 32301

For Intervenor: W. Douglas Moody, Esquire

119 North Monroe Street Tallahassee, Florida 32301

STATEMENT OF THE ISSUES

Whether the Department of General Services should disqualify Savin Corporation's bid for failure to submit a separate supply price list.

PROCEDURAL BACKGROUND

On April 26, 1984, the Department of General Services (DGS or Department) solicited bids for numerous categories of walk-up convenience copiers. Bid responses were submitted by several vendors, including Petitioner Savin Corporation (Savin) and Intervenor, Canon U.S.A. (Canon). The Department determined that Savin's failure to include a separate supply price list with its bid was a material deviation from the terms and conditions of the invitation to bid (ITB) and on that basis disqualified Savin's bid.

On August 17, 1984, Savin filed a Formal Protest and Petition for Formal Hearing which contended that Savin's bid was responsive to all the terms and conditions of the ITB. Specifically the petition alleged that the special

conditions required a supply price list reflecting volume discount prices only when such discount pricing was offered; that Savin did not offer discount pricing, and therefore, the inclusion of a volume discount supply price list would have been meaningless; that Savin offered its lowest supply price for all volumes; that Savin does not offer volume discount prices for supplies to state acquisition programs in the Southeast; that because state agencies do not utilize volume discount pricing, the special condition is meaningless; and that Savin's supply prices are verifiable market prices. The second count of Savin's petition was voluntarily dismissed prior to hearing.

The Department referred the petition to the Division of Administrative Hearings on September 17, 1984. By order dated October 26, 1984, other companies which submitted bids in response to the ITB were notified of the proceeding. Canon's petition for leave to intervene in the proceeding was granted.

At the hearing Savin called as its witnesses Richard Doyle, Savin's Director of Government Sales; James Milner, Savin's Regional Manager for major accounts in the Southeast; Edward Judge, Chief of the Bureau of Procurement, Division of Purchasing; Herman Barker, Chief of the Bureau of Standards, Division of Purchasing; and Dermont K. Nee, Purchasing Standards Specialist, Bureau of Standards. The testimony of James Keeper and Donald Crier was presented by deposition. Savin had seven exhibits marked for identification, and exhibits numbered 1, 2, 3, and 6 were entered into evidence. The Department called as its witnesses John Cherry, Chief of the Bureau of Purchasing, Department of Natural Resources, and Ruth Ann Hayes, former Contract Specialist, Division of Purchasing. The Department's exhibits numbered 1-4 were admitted into evidence. Canon called no witnesses and introduced no exhibits.

Savin called Jack Bittinger, Division Director, Division of Purchasing, as a rebuttal witness and also sought to introduce the deposition of Mr. Hittinger in rebuttal. Objection to the introduction of the entire deposition was made on two grounds: (1) Mr. Hittinger was not a party as defined in Rule 1.330, Fla.

1. Civ. P.; and (2) the entire deposition was not proper rebuttal evidence. Ruling on the objection was reserved, and the parties were to address the issue in their proposed orders.

   
   

   The parties were given ten days after the filing of the transcript to file proposed findings of fact and conclusions of law. By order dated January 30, 1985, the time for filing proposed orders was extended to and including February 8, 1985. Savin and DGS filed proposed recommended orders.

   
   

   EVIDENTIARY RULING

   Rule 1.33O(a)(2), Florida Rules of Civil Procedure, provides: "The deposition of a party or of anyone

   who at the time of taking the deposition was an officer, director or managing agent

   or a person designated under Rule 1.310(b)(6) or 1.320(a) to testify on behalf of a public or private corporation, partnership or association or governmental agency that is a party may be used by an adverse party for any purpose."

   Mr. Hittinger is the Division Director of the Division of Purchasing of the Department of General Services. He was part of the team that prepared the Invitation to Bid, and all the other members of the team worked under him./1 Based on his position in the Department and his involvement with the ITB, Mr. Hittinger must be considered a managing agent of the Department, /2 and his deposition can be used by an adverse party for any purpose. /3

   
   

   Although the deposition, "may be used by an adverse party for any purpose", Rule 1.330(a) specifically states that the deposition may be used only "so far as admissible under the rules of evidence applied as though the witness were then present and testifying." In essence, Rule 1.330 "merely supplies certain exceptions to the rule excluding hearsay". Dinter v. Brewer, 420 So.2d 932, 934 (Fla. 3d DCA 1982). It does not authorize the introduction of evidence that otherwise would be inadmissible.

   
   

   In the instant case the introduction of the deposition was objected to because the deposition testimony was not proper rebuttal evidence. If, indeed, the deposition testimony is not proper rebuttal, then the deposition is inadmissible despite the provisions of Rule 1.330.(a)(2).

   
   

   In Driscoll v. Morris, 114 So.2d 314 (Fla. 3d DCA 1959), the court defined the scope of rebuttal testimony.

   
   

   Generally speaking, rebuttal testimony which is offered by the plaintiff is directed to new matter brought out by evidence of the defendant and does not consist of testimony which should have properly been submitted by the plaintiff in his case-in-chief. It is not the purpose of rebuttal testimony to add additional facts to those submitted by the plaintiff in his case-in-chief unless such additional facts are required by the new matter developed by the defendant.

   
   

   If the testimony of the witness goes to the issues raised by the pleadings, it is substantive and should be adduced during the case-in-chief. King Pest Control v. Binger, 379 So.2d 660 (Fla. 4th DCA 1980).

   
   

   In this case Savin sought to introduce the entire 78-page deposition of Mr.

   Hittinger as rebuttal evidence, rather than selected portions, and did not specify the "new matter" brought out by Respondent that the deposition was to rebut. Yet even a cursory reading of Mr. Hittinger's deposition reveals that the majority, if not all of the testimony is directed to the issues raised by Savin's petition and to the matters addressed in Savin's case-in-chief.

   Therefore the deposition cannot be considered proper rebuttal evidence and the objection to its introduction is sustained.

   
   

   FINDINGS OF FACT

   
   

   1. On April 26, 1984, DGS issued ITB 402-600-38-B entitled "Walk-up Convenience Copiers, Plain Bond Paper" to establish a state contract for the purchase of walk-up convenience copiers. The ITB contains general and special conditions and specifications. The specifications provide for four types and twelve classes of copiers with four acquisition plans -- one-year lease, two-

      year lease, three-year lease, and outright purchase. Vendors may submit a bid for each type, class, and acquisition plan. Savin submitted a bid for all acquisition plans in Type I, Classes 1-10; Type II, Classes 1-3; Type III, Classes 1-10; and Type IV, Classes 1-10. /4

      
      

   2. The special conditions of the ITB require that a price sheet (page 14 of the ITB) be submitted for each machine bid. The price sheets are used to evaluate the bids, and contracts are awarded in each category to the bidder submitting the lowest cost per copy. The cost per copy is determined by a cost formula set for in the special conditions which consist of three factors: machine cost, labor cost, and supply cost.

      
      

   3. The following special conditions of the Invitation To Bid relates to supply costs:

      
      

      C) SUPPLY COST- The bidder shall compute supply costs on the Manufacturer's Brand. If there is an existing state contract for supplies for the manufacturer's brand equipment; the state contract price may be substituted. Supply costs will be rounded to six (6) decimal points. All other costs will also be rounded off to six (6) decimal points. The volume price used by the vendor to compute supply cost shall be based on the monthly median volume of the type and class being bid. Supply cost submitted shall be firm for the contract period, except for paper, and all supply costs shall be current market price, verifiable. The price list shall also include the manufacturer's standard test pattern as the original document. Vendor must complete the supply price list (See page 13) and include it with his bid and must submit a separate supply price list reflecting volume discount prices to substantiate that correct price volumes were used unless state contract prices were used. A contract award may include supplies during the term of this contract if deemed in the best interest of the State. By electing to substitute state contract supplies, the vendor is certifying that his equipment, using said supplies, will meet all performance requirements of this bid and

      of the equipment manufacturer. Failure to include the supply price lists and manufacturer's guaranteed yields with your bid shall automatically disqualify the bid.

      
      

      NOTE: In the event of a variance between supply prices listed on the bid sheet and the supply price list submitted with the bid, the supply price list prices shall prevail, and the bidder's cost per copy will be adjusted accordingly.

      NOTE: All cost formulas will be verified by the Division of Purchasing and errors in extension will be corrected. In the event incorrect supply costs volumes are used by a bidder, the Division of Purchasing will adjust these costs to the median volume range.

      
      

      The above quoted portion of the ITB makes it absolutely clear that each vendor had to submit two supply price lists: the supply price list set forth on page

      13 and a separate supply price list, reflecting quantity discounts which was to be used to "substantiate that correct price volumes were used." Further, it was specifically stated that the failure to include both supply price lists with the bid would result in the bid being automatically disqualified.

      
      

   4. The page 13 supply price list consists of a list of various supplies and two columns for the bidder to complete entitled "Net Delivered Price (per carton)" and "Manufacturer's Guaranteed Yield". Page 13 was included in the ITB to cure a problem the Department had in the 1983-84 contract year with the manufacturer's guaranteed yield. A note at the bottom of page 13 reminds the bidder that a separate supply price list must be submitted with the bid. It states:

      
      

      NOTE: Bidders must submit their quantity discount prices for supplies on a separate sheet for verification and inclusion in the contract should the State elect to award supplies.

      
      

   5. The separate supply price list reflecting quantity discounts was required to verify the prices submitted by the bidder on pages 13 and 14 and to prevent the practice of low-balling". "Low-balling" occurs when a bidder uses a large quantity supply cost to determine the cost per copy on a low volume machine. This results in an artificially low cost per copy and gives the "low- balling" bidder an advantage over other bidders who use the correct supply price based on the median volume of the machine being bid. To verify that the proper cost per copy is submitted the prices on the separate supply price list are compared to the prices on the bid sheet. If there is a conflict, the prices on the separate supply price list prevail, and the prices on the bid sheet and on page 13 are adjusted to conform to the prices on the separate supply sheet.

      
      

   6. Prior to the 1984 Invitation to Bid Savin historically offered the state volume discount pricing for supplies. However, for the 1984-85 Invitation to Bid Savin decided to offer set pricing for supplies rather than volume discount pricing. Under set pricing the price of the supply item remains the same regardless of the quantity purchased. By offering a set price for supplies, at the lowest published discount pricing level offered to the Federal government, Savin felt it would gain a competitive advantage in Florida and other states that had competitive bidding. In states where competitive bidding was not used Savin did not offer set pricing but used published quantity discount pricing.

      
      

   7. In response to the 1984 Invitation to Bid, Savin completed the Supply Price List on page 13 and the bid sheet on page 14 for each machine bid. However, Savin did not submit the separate supply price list for each bid as required by the note at the bottom of page 13 and the underlined portion of the

      special conditions relating to supply cost. Because the separate supply price lists were not submitted with the bids, the Department determined that Savin's bids were unresponsive. The Department also disqualified three or four other vendors, including Royal, Panasonic, and Southern Copy Products, because they did not submit the separate supply price lists.

      
      

   8. Savin did not submit the separate supply price list because it interpreted the terms and conditions of the ITB as requiring a separate supply price list only when quantity discount pricing was being offered. Because Savin was offering set pricing, it did not consider that the separate supply price list was necessary. However, the only way the Department could determine whether a vendor was offering set pricing or quantity discount pricing was by referring to the separate supply price list. Several other vendors that offered set pricing including Canon, Mita Copy Star America, Pitney Bowes, Monroe and A.

      B. Dick, submitted separate supply price lists with their bids which indicated that set pricing was being offered. The separate supply price list not only indicated whether quantity discount pricing or set pricing was being offered, as stated above, it was used by the Department to verify the prices submitted on the bid sheets and on page 13. In one case where the bidder offered set pricing, the supply prices for toner and developer listed on the bid sheets and on page 13 differed from the prices on the separate supply price list, and the prices on the bid sheets and page 13 were adjusted to conform with the prices on the separate supply price list. Therefore, the inclusion of the separate supply price list was not necessary only when discount pricing was offered, it was necessary when set pricing was offered. The separate supply price list established that set pricing was being offered; it established the price at which the bidder must sell the supplies; and it was used to verify the prices on the bid sheet and page 13. /5 Therefore, the omission of the separate supply price list from the response to the ITB cannot be considered a minor irregularity which may be waived.

      
      

   9. Although a separate supply price list is required by the ITB, the list does not have to follow any particular format. The separate list sufficiently indicates that set pricing is being offered if only one price is quoted for a given supply. If varying prices are offered for a given supply, based on the amount ordered, then quantity discount pricing is being offered.

      
      

   10. Many of the proposed findings of fact submitted by the Petitioner have been rejected in whole or in part. The majority have been rejected by way of making contrary findings of fact as set forth above. Others have not been addressed in the findings of fact because they are conclusions of law or argument on the issue. However, other proposed findings are rejected for the reasons stated in the subparagraphs below:

       
       

       1. Paragraphs 17 and 18 are rejected as irrelevant, immaterial and not supported by competent substantial evidence. When Mr. Hittinger was asked whether he assumed that Savin was offering quantity discount pricing, he answered "I didn't assume. I didn't make any assumptions." (T-266). Mrs. Hayes stated: "I am afraid on a bid situation, we can't assume what their pricing would have been if they had submitted it." (T-245) Mr. Nee did indicate that the disqualification of Savin did not make any sense, but explained that statement by stating:

          
          

          "The phrase that didn't make any sense

          was talking about Savin's failure to submit a quantity discount price list... Because Savin had always done it in the past, and they --

          they never left -- if we asked them to cross every T, they crossed every T and it didn't make any sense that something apparently looked to be omitted".

          
          

       2. Paragraph 15 is rejected as not supported by competent substantial evidence. The evidence indicates that the primary purpose of page 13 was not to establish the price at which vendors would be obligated to sell their supplies, but was included in the ITB for the submission of manufacturer's guaranteed yields (T-144, T-146; T-158-16O, T-166-167, T-242). Further, the witnesses who testified that the vendor would be bound by the prices on page 13 all qualified their answers. In response to the question of whether the bidder would be bound by the prices on page 13, Mrs. Hayes responded, "...if he did submit a substantiating document that he is offering a set price, and that set price agrees with the price that is on page 13, yes." (T-242); Mr. Hittinger responded: "If he receives an award, yes"; "If he had a responsive bid" (T- 264); and "No, in itself it does not. It would have to have a supporting verification sheet to complete that offer." (T-268); Mr. Barker responded, "If they are correct," (T-163). Virtually all the witnesses testified that it was the separate supply price list that established the prices by which the vendors would be bound.

          
          

       3. Paragraph B is rejected as irrelevant, however, the evidence supports a finding that some state agencies utilize volume discounts on copier supplies and some state agencies do not purchase in sufficient quantities to utilize volume discounts.

CONCLUSIONS OF LAW

The Division of Administrative Hearings has jurisdiction over the subject matter and parties to this proceeding. Section 120.57(1), Florida Statutes.

Pursuant to the authority granted in Section 287.042(2), Florida Statutes; DGS issued Invitation to Bid 402-600-38-B to establish a State contract for the purchase of walk-up convenience copiers. Savin responded to the ITB but failed to submit a separate supply price list with its bids. Savin contends that its bids should not be disqualified on two grounds: (1) that because Savin offered set pricing, a separate supply price list was not required; and (2) even if the supply price list was required, its omission was a minor irregularity that can be waived by the Department.

There is nothing in the language of the ITB that indicates that a bidder offering set pricing does not have to submit a separate supply price list. To the contrary, the special conditions clearly indicate that the vendor "must submit" the separate supply price list and that the failure to submit the supply price list will result in the bid being disqualified.

On page 8 of the ITB the vendor was instructed as follows: "Vendor must complete the supply price list

(See Page 13) and include it with his bid and must submit a separate supply price list reflecting volume discount prices to substantiate that correct price volumes were used, unless state contract prices were used.

Other than the date for posting the bid tabulations, the phrase underlined above is the only phrase or word the entire body of the ITB that is underlined. That alone should have been sufficient to inform the vendor that the separate supply price list was important and was required. However, if it did not, the final sentence of the paragraph makes it quite clear: "Failure to include the supply price lists and manufacturer's guaranteed yields with your bid shall automatically disqualify the bid."

The purpose of the separate supply price list is set forth in the ITB. The supply prices on that sheet would be used "to substantiate that correct price volumes were used" (p.8), "for verification and inclusion in the contract should the State elect to award supplies" (p.13), and to adjust the bidder's cost per copy "[i]n the event of a variance between supply prices listed on the bid sheet and the supply price list submitted with the bid" (p.9). Although the language on page 9 does not specifically refer to the separate supply price list, as opposed to the page 13 supply price list, it is apparent that it is the separate supply price list that will be used to adjust the cost per copy since that list contains the supply prices that will be included in the contract.

Savin's argument that a vendor offering set pricing does not have to submit a separate supply price list, overlooks the clear language of the ITB requiring submission of the list and ignores the purpose of the list. However, the basic reason that Savin's argument must fail is that, if the list is not submitted, the Department does not know that the vendor is offering set pricing.

Rule 13A-1.02(9), Florida Administrative Code (October 1984 Supplement) provides:

() Right to Reject Bid/Proposals - Correction of Commodity Bids/Proposals - The agency shall reserve the right to reject any or all bids/proposals and such reservation shall be indicated in all advertising and invitation to bid/request for proposals. The agency shall reserve the right to waive any minor irregularities in an otherwise valid bid/proposal. A minor irregularity is a variation from the invitation to bid/request for proposal terms and conditions which does not affect the price of the bid/proposal, or give the bidder or offeror an advantage or benefit not enjoyed by other bidders or offerors or does not adversely impact the interests of the agency. Variations which are not minor cannot be waived. A bidder or offeror may not modify its bid after bid/proposal opening. Mistakes in an arithmetic extension of pricing may be corrected by the agency.

Savin's failure to comply with the express terms and conditions of the ITB requiring a separate supply price list cannot be deemed a minor irregularity.

In Saxon v. Department of General Services; 4 FALR 1102-A (Final Order filed April 7, 1982), Saxon failed to submit a supply price list with its bid and the omission was considered a material deviation. The facts in this case and the Saxon case are almost identical. In Saxon the vendor was required by the ITB to submit a supply price list "to substantiate that correct price volumes were

used." In this case the ITB required the vendor to submit a separate supply price list "to substantiate that correct price volumes were used." In Saxon, as in this case, the required supply price list was omitted. In Saxon the vendor notified DGS after the bid opening that the supply prices on its bid sheets were set prices. In this case the vendor presented testimony at the hearing that the prices on page 13 were set prices. In Saxon the final order stated:

Saxon's omission of a supply price list was a material deviation from the conditions of the ITB. The supply price list enabled DGS to determine whether price volume discounts were used, and, if so, whether the correct volume was utilized. By `correcting' erroneous bid sheet supply prices to conform to the price lists, DGS could ensure accuracy and uniformity among the bids. If Saxon is allowed to provide a price list or price confirmation after bid opening, it could conceivably obtain an unfair bidding advantage over its competitors. Saxon responds that its bid utilizes set pricing; that its late price list would simply confirm the prices on its bid sheet, that its bid would not be changed by such confirmation.

But DGS cannot effectively verify that Saxon's original bid was based on set supply prices rather than volume prices. Saxon's bid sheets, on their face, do not reveal which method of pricing is used.

Savin contends that the Saxon case can be distinguished from the instant case because in Saxon there was no page 13 supply price list. However, the ITB specifically states that the separate supply price list not the page 13 list will be used to substantiate that correct price volumes are used. Further, the Department cannot determine by looking at page 13 whether the vendor is offering set pricing or volume discount pricing. The separate supply price list in this case served the same purpose as the supply price list in Saxon.

Savin contends that its failure to submit the separate supply price list should be considered a minor irregularity because it does not affect the bid amount or give Savin an advantage or benefit not enjoyed by other bidders.

However, this argument only has validity when premised on the assumption that Savin intended to offer set pricing all along. Suppose, instead, that Savin was offering quantity discount pricing and failed to use the correct volume prices on its bid sheets. Had Savin submitted the separate supply price list, the costs would have been adjusted to conform to the prices on the separate supply price list. Under this scenario, the failure of Savin to submit the separate supply price list clearly affected the amount bid. If, on the other hand the Department were to accept the premise that Savin was offering set pricing, it would be the equivalent of allowing Savin to modify its bid after bid opening, giving Savin an advantage or benefit not enjoyed by other bidders. In Harry Pepper & Association v. City of Cape Coral 352 So.2d 1190 (Fla. 2d DCA 1977), the court, quoting from Coller v. City of Saint Paul, 223 Minn. 376, 26 N.W. 2d 835 (1947), stated:

If officials charged with the letting of public contracts should be permitted in their

discretion to permit bids to be changed after they have been received and opened, it would open the door to the abuses which it is the purpose of the requirements of competitive bidding to prevent and suppress.

Therefore, Savin's failure to submit the separate supply price list required by the ITB is not a minor irregularity which may be waived by the Department, and Savin's bids should be disqualified.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is recommended that Savin's bids be disqualified.

DONE AND ENTERED this of 7th June 1985, in Tallahassee, Leon County, Florida.

DIANE A. GRUBBS

Hearing Officer

Division of Administrative Hearings 2009 Apalachee Parkway

The Oakland Building Tallahassee, Florida 32301

(904)488-9675

Filed with the Clerk of the Division of Administrative Hearings this 7th day of June, 1985.

ENDNOTES

1/ The information in a deposition may be used to establish that the requirements for introduction of the deposition pursuant to Rule 1.330(a) are met. See Colonnades, Inc. v. Vance Baldwin Inc.; 318 So.2d 515 (Fla. 4th DCA 1975). Further, Mr. Hittinger's involvement with the ITB was indicated by other testimony presented at the hearing.

2/ Cf. Haines v. Leonard L. Farber Co., 199 So.2d 311 (Fla. 2d DCA 1967)(deputy tax assessors that performed actual investigation and assessment of property considered managing agents under the rule).

3/ The deposition would also be admissible under Section 90.803(18)(d.)Fla. Stat. See Dinter v. Brewer 420 So.2d 932 (Fla. 3d DCA 1982).

4/ Savin was the apparent low bidder in several categories; and it was stipulated that Savin had standing to maintain this action.

5/ Where quantity discounts are used, the verification process eliminates "low- balling". Although "low-balling" does not occur when set pricing is offered, without the separate supply price list the Department cannot verify that "low- ball" prices are not being used on the bid sheets; it has no way to ascertain that set pricing is being offered.

COPIES FURNISHED:

Thomas J. Guilday, Esquire Akerman, Senterfitt & Eidson Post Office Box 1794 Tallahassee, Florida 32302

Susan Kirkland, Esquire Department of General Services The Larson Building Tallahassee, Florida 32301

W. Douglas Moody, Esquire

119 North Monroe Street Tallahassee, Florida 32301

Ronald W. Thomas Executive Director

Room 133, Larson Building Tallahassee, Florida 32301

Stephen J. Kubik, General Counsel

457 Larson Building Tallahassee, Florida 32301

Docket for Case No: 84-003346

Orders for Case No: 84-003346