STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

EASTMAN KODAK COMPANY, )

)

Petitioner, )

)

vs. ) CASE NO. 84-3347BID

) STATE OF FLORIDA, DEPARTMENT ) OF GENERAL SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing in this cause was held on December 12, 1984, in Tallahassee, Florida, before Diane A. Grubbs, a hearing officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Martha Harrell Hall, Esquire

410 Lewis State Bank Building Post Office Drawer 190 Tallahassee, Florida 32302

For Respondent: Susan B. Kirkland, Esquire

Department of General Services Larson Building

Tallahassee, Florida 32301

ISSUE

Whether the Department of General Services should disqualify as unresponsive Kodak's bid for Classes 11 and 12, Types I, III, IV of Bid No. 402- 600-38-B, Walk-Up Convenience Copiers, Plain Bond Paper.

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 Eastman Kodak Company (Kodak). DGS determined that the quantity discount submitted by Kodak contained additional terms and conditions and on that basis proposed to disqualify Kodak's bid as unresponsive.

On August 13, 1984, Kodak filed its notice of intent to protest, and on August 23, 1984, filed its formal protest and petition for formal hearing. On September 17, 1984, the petition was forwarded to the Division of Administrative Hearings.

Prior to hearing the parties filed a Joint Pre-hearing Stipulation which set forth the facts that were admitted and clarified the issues of fact and law that remained in dispute.

At the hearing Kodak called three witnesses: Ruth Hayes, former Contracts Specialist with the Division of Purchasing; Bruce Goodrich, the Kodak sales representative responsible for preparing Kodak's bids; and Ron Cheldelin, Kodak's Manager of Government Markets, National Accounts, Business Systems, Market Division. Kodak also introduced into evidence three exhibits which were designated as Petitioner's Exhibits A, B, and C. The Department called as its witnesses Jack Hittinger, director of the Division of Purchasing, and Ruth Hayes. No exhibits were offered by DGS.

Both parties timely submitted proposed recommended orders on January 17, 1985. Those proposed findings of fact incorporated in this recommended order are adopted; otherwise they are specifically rejected as unsupported by the evidence or as unnecessary to resolution of the issues presented.

FINDINGS OF FACT

1. The Department is the state agency empowered to contract for the purchase, lease, or acquisition of all commodities required by any state agency under competition bidding or by contractual negotiation.

   
   

2. On April 26, 1984, the Department issued Invitation to Bid No. 402-600- 38-8 entitled Walk-up Convenience Copiers, Plain Bond Paper. The bid invitation categorized walk-up convenience copiers by type, class, and acquisition plan. The specifications provided for four types and twelve classes of copiers with four acquisition plans--one-year lease, two-year lease, three-year lease, and outright purchase.

   
   

3. Kodak responded to the bid invitation on June 26, 1984, by submitting bids on all acquisition plans for the following categories: Type I, Classes 8- 12; Type II, Class 12, Type III, Classes 8-12; and Type IV, Classes 8-12.

   
   

4. The Department posted its decision on the Copier Bid on August 9, 1984, at which time the Department indicated its intent to reject all bids submittsd by Kodak on the ground that Kodak's bid contained additional terms and conditions. Addendum A to Kodak's bids contains the language which the Department found to be additional terms and conditions and consists of an explanation of a quantity discount offered by Kodak to all state agencies.

   
   

5. Kodak's bids were the lowest bids received by the Department of the two-and three-year lease plans for the following categories:

   
   

   Type I, Classes 11 and 12

   Type III, Classes 11 and 12

   Type IV, Classes 11 and 12

   
   

   In addition, Kodak's bids were the lowest bids for the one-year lease plans on Class 12 of Type I, III, and IV.

   
   

6. The quantity discount reflected in Addendum A does not affect the bid prices (price per copy made) submitted by Kodak for any of the machine categories or acquisition plans on which Kodak bid and was not considered by the Department in finding Kodak to be the low bidder in those categories specified above.

7. The invitation to bid (ITB) contains general and special conditions. The "general conditions" are conditions that apply to all contracts bid by the state; the "special conditions" are the terms and conditions that apply specifically to the invitation to bid under consideration. The general conditions provide that "[a]ny and all special conditions and specifications attached hereto which vary from these general conditions shall have precedence."

8. Section 4(b) of the general conditions provides: "Under Florida law use of State contracts

   shall be available to political subdivisions (county, county board of public instruction, municipal, or other local public agency or authority) and State Universities, which may desire to purchase under the terms and conditions of the contract. Such purchases shall be exempt from the competitive bid requirements otherwise applying to their purchases."

   
   

9. The special conditions set forth the purpose of the bid as the establishment of "....a 12 month contract for the purchase of Walk-up Convenience Copiers: Plain Bond Paper by all State of Florida agencies and institutions." The purpose provision does not mention political subdivisions. However, several special conditions of the ITB refer to political subdivisions. Under "Estimated Quantities" it states: "It is anticipated that the State of Florida agencies and other eligible users will expend approximately $1,000,000 under any term contract resulting from this bid." Other eligible users include political subdivisions. The condition entitled "Distribution of Literature" provides: "Successful bidder will be required to furnish State agencies and political subdivisions...with descriptive literature..." The condition entitled "Summary of Total Sales" provides that "Total Dollar sales to political subdivisions may be submitted in lieu of the detailed information required for State and university placements."

   
   

10. Although political subdivisions may purchase under the terms and conditions of the state copier contract, certain of the special conditions distinquish between state agencies and political subdivisions. As mentioned above, the ITB provides that total dollar sales to political subdivisions may be submitted in lieu of the information required for state and university placement. Further, the ITB requires each bidder to identify its equity accrual plan and sets forth minimum requirements that the plan must meet. One of the minimum requirements refers to State agencies only, directing that "[t]he State shall have the right to transfer the equipment from one State agency to another State agency without the loss of equity accrued."

    
    

11. The special condition at issue in this proceeding is entitled" Quantity Discounts". It provides:

    
    

    "Bidder is urged to offer additional discounts for one time delivery of large single orders of any assortment of items."

    
    

    In response to this provision, Kodak included as part of its bid "Addendum A", which reflects the quantity discount offered by Kodak to major customers.

12. The discounts offered by Kodak are based upon the total number of machines installed in state agencies at the time invoices are sent out. If the state has fewer than seventy-five machines installed, it enjoys no discount and pays the full amount indicated on the price sheets submitted in Kodak's bid. If a seventy-fifth machine is installed, the state receives a two percent discount off the bottom line of each monthly invoice on all Kodak machines installed. When the number of Kodak machines exceeds 149 the state receives a three percent discount, and when the number of machines exceeds 199, a four percent discount is applied. When the discount level changes either up or down due to a change in the machine base, Kodak provides 60 days advance written notice prior to applying the new discount level.

    
    

13. Kodak's billing system utilizes a computer which tracks the number of machines and applies the quantity discounts. Each individual account or customer has a "custom master" in the computer, which is a computer record consisting of the name of the company, the address, the customer number, and information concerning invoices. The "custom master" is used in billing the customer. When quantity discounts are involved, a master agreement number and/or a common owner number is assigned and that number is placed on each individual custom master in the system that comes under the master agreement. Thus, each individual account has both an individual customer number and a master agreement number. When the computer prepares the bill, it automatically counts the number of machines installed with all customers who share the same master agreement number. Because of the billing system, any machine that is included in the billing is also included in determining the quantity discount. If the machine is not counted in the machine base, the customer is not being charged for the machine.

    
    

14. Paragraph II of Addendum A provides:

    11. Eligible Users Eligibility under the Quantity

    Discount Schedule listed below will be

    exclusively for installations of KODAK EKTAPRINT Copier-Duplicator and Duplicator models within the State of Florida's Government departments, agencies, and State universities. The Quantity Discount Schedule does not apply to installations of KODAK EKTAPRINT Copier-Duplicator and Duplicator models within political subdivisions in the State of Florida (county, county board of public instruction, municipal, or other

    local public agency or authority).

    
    

    This provision prevents the state from receiving discounts based upon machines purchased by political subdivisions, and also prevents political subdivisions from receiving quantity discount credit for machines placed with state agencies and universities. In other words, the machine base for state agencies and

    universities would be determined solely by the number of machines installed with state agencies and universities; machines installed within political subdivisions would not be counted in that machine base because political subdivisions would not have the master agreement number assigned to state agencies and universities.

    
    

15. Although Kodak contends that each political subdivision would be eligible for quantity discounts based upon the number of machines installed within that particular political subdivision, that provision was not included in Addendum A. Kodak did not address political subdivisions in the quantity discount provision because the purpose of the ITB, as stated in the special conditions, was to establish a contract for state agencies and because the quantity discount provision did not specify that any quantity discounts offered must include political subdivisions.

    
    

16. After the copier contract is awarded, each eligible user places its orders for copiers from the contract. The orders do not go through the Department, and the Department does not have a system that indicates how many machines are installed in state agencies and universities. Although the Department does not have a system for independently monitoring the number of machines installed, under Kodak's billing system the state may elect to receive a monthly or quarterly printout which lists each machine installed by its purchaser and provides information relating to the machine's location, type, and acquisition plan. In addition, the state may designate a central location to receive copies of all invoices sent out on each machine installed within the state system.

    
    

17. The Department determined that Kodak's bids should be disqualified as containing additional terms and conditions. Specifically, the provision of Addendum A excluding political subdivisions from participation in the quantity discount offered and the Department's inability to independently monitor the quantity discount were identified as the additional terms and conditions.

    
    

18. If not for Addendum A, Kodak would have been awarded the contract on the categories for which it was the low bidder. Had Kodak failed to provide any quantity discounts it would have been awarded the contract. Had Kodak omitted Addendum A from its bids, but automatically accorded to the state its quantity discount through its billing system, the state would have paid the discounted prices.

    
    

19. The inclusion of Addendum A in its bids does not give Kodak an advantage or benefit not enjoyed by other bidders. All bidders were "urged to offer additional discounts...; however, the quantity discounts offered were not considered in determining the low bidder. Therefore, the inclusion of the quantity discount offered by Kodak could not have given it a competitive advantage not enjoyed by other bidders.

    
    

20. The inclusion of Addendum A does not adversely impact the interests of eligible users of state contracts. Had Addendum A not been included in Kodak's bids, Kodak would have been awarded the contract in the categories previously specified, and all eligible users would pay the full contract price. Political subdivisions are not adversely affected by the inclusion of Addendum A because they will pay no more than they would have paid had Kodak failed to provide any quantity discounts. State agencies and universities are not adversely affected by the quantity discount offered because they will pay the same or less than they would have paid had Kodak not included Addendum A.

    CONCLUSIONS OF LAW

    
    

21. The Division of Administrative Hearings had jurisdiction over the subject matter and parties to this proceeding. Section 120.57(1), Florida Statutes. Kodak's protest and request for administrative hearing were timely filed, and Kodak has standing to maintain this action.

    
    

22. Section 287.042(2), Florida Statutes (Supp. 1984) provides that the Department's Division of Purchasing shall have the following powers, duties, and functions:

    
    

    (2) To plan and coordinate purchases in volume and to negotiate and execute purchasing agreements and contracts under which the division shall require state agencies to purchase commodities and under which a county, municipality, or other local public agency may purchase commodities. Purchases by any county, municipality or other local public agency under the provisions in the state purchasing contracts shall be exempt from the competitive bid requirements otherwise applying to their purchases.

    
    

    Pursuant to this authority, the Department issued the invitation to bid for walk-up convenience copiers, and in accordance with the statute, provided in General Condition (4)(b) that "...use of State contracts shall be available to political subdivisions...which may desire to purchase under the terms and conditions of the contract."

    
    

23. The inclusion of Addendum A in the state contract does not prevent political subdivisions from purchasing from the state contract under the terms and conditions of the contract. There is nothing in the language of General Condition 4(b) or Section 287.042(2) suggesting that the terms and conditions of the contract may not differentiate between state agencies and political subdivisions. The ITB itself differentiates between state agencies and political subdivisions in the special condition entitled "Summary of Total Sales" and in the minimum requirements for the equity accrual plan. Further, if all eligible users had to be accorded identical treatment under the contract, there would be no reason for the request in the ITB that bidders indicate whether educational discounts are given.

    
    

24. In its request for quantity discounts, the Department did not require that any discount offered be uniformly available to all eligible users nor did it require that the discount offered be independently verifiable by the Department; the request merely urged the bidder to offer additional discounts "for one time delivery of large single orders of any assortment of items." Although it would appear that the discount offered by Kodak does not comply with the provision that the discount be "for one time delivery of large single orders", the Department's determination that the bid was unresponsive was not based on a failure to comply with that provision, but rather on Kodak's exclusion of political subdivisions from the quantity discount offered and on the Department's inability to independently verify that the proper discount was being applied. 1/ Because the ITB did not require that any quantity discount

    offered be available to all eligible users or require that any discount offered be independently verifiable by the state, the quantity discount offered by Kodak cannot be considered to be a deviation from the terms and conditions of the invitation to bid.

    
    

25. However, even if the type of quantity discount offered by Kodak is considered a deviation from the terms and conditions of the ITB, the deviation should be considered a minor irregularity. Rule 13A-1.02(9), Florida Administrative Code, October 1984 Supplement defines a minor irregularity as "a variation from the invitation to bid/request for proposal terms and conditions which does not affect the price of the bid/proposals 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.

    
    

26. Kodak's inclusion of Addendum A in its bids does not affect the price of its bids. The quantity discounts were not considered in determining the low bidder, and the price of Kodak's bids are the same as they would have been had Kodak not offered its quantity discount. The inclusion of Addendum A does not give Kodak an advantage or benefit not enjoyed by other bidders. By offering a quantity discount Kodak neither gained an economic advantage over other bidders nor placed itself in a position superior to other bidders. Unlike the situation in Harry Pepper & Assoc. v. City of Cape Coral, 352 So.2d 1190 (Fla. 2d DCA 1977), where the nonconforming bidder "had everything to gain and nothing to lose" by inclusion of the nonconforming provision Kodak had everything to lose and nothing to gain by the inclusion of Addendum A in its bids since the quantity discounts were not considered in evaluating the bids. Finally, to the extent that Kodak's quantity discount constitutes a variation from the terms and conditions of the ITB, it is not a variation which adversely affects the interests of the state or other eligible users of the state contract. The only possible impact the inclusion of Addendum A could have is for state agencies and universities to pay less than they would have had Addendum A not been included. Therefore, even if the quantity discount offered is a variation from the terms and conditions of the ITB, it is a minor irregularity which can and should be waived.

RECOMMENDATION

Based on the foregoing, it is

RECOMMENDED that the State of Florida, Department of General Services, award to Eastman Kodak Company the following portions of Bid Number 402-600-38- B:

Class 11, Types I, III, IV - two and three year lease. Class 12, Types I, III, IV - one, two and three year lease.

DONE and ENTERED this 26th day of February, 1985, in Tallahassee, 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 26th day of February, 1985.

ENDNOTE

1/ Although the difficulty with verification is a direct result of Kodak's discount being linked to the total number of machines installed in all state agencies and universities, it is not a result of Kodak's failure to provide a discount "for one time delivery of large single orders" since that type of discount could also be linked to the number of machines installed.

COPIES FURNISHED:

Martha Harrell Ball, Esquire

410 Lewis State Bank Building Post Office Drawer 190 Tallahassee, Florida 32302

Susan B. Kirkland, Esquire Department of General Services Larson Building

Tallahassee, Florida 32301

Ronald W. Thomas Executive Director

Department of General Services Room 115 Larson Building Tallahassee, Florida 32301

=================================================================

JOINT STIPULATED DISMISSAL

=================================================================

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

EASTMAN KODAK COMPANY,

Petitioner,

vs. CASE NO. 84-3347

STATE OF FLORIDA DEPARTMENT OF GENERAL SERVICES,

Respondent.

/

JOINT STIPULATED DISMISSAL

Petitioner, EASTMAN KODAK COMPANY and Respondent, STATE OF FLORIDA DEPARTMENT OF GENERAL SERVICES, jointly file this stipulated dismissal of the above-styled action pursuant to the terms and conditions of the attached Stipulated Settlement Agreement filed herewith this 21st day of March, 1985.

SUSAN B. KIRKLAND MARTHA HARRELL HALL

Office of General Counsel Carlton, Fields, Ward, Emmanuel, Department of General Services Smith & Cutler, P.A.

Room 452, Larson Building 410 Lewis State Bank Building Tallahassee, Florida 32301 Tallahassee, Florida 32302

(904) 487-1082 (904) 224-1585

Attorney for Respondent Attorney for Petitioner

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a copy of the foregoing pleading has been furnished by hand delivery to: DIANE GRUBBS, Division of Administrative Hearing, The Oakland Building, 2009 Apalachee Parkway, Tallahassee, Florida 32301 and MARTHA HARRELL HALL, ESQUIRE, 410 Lewis State Bank Building, Post Office Drawer 190, Tallahassee, Florida 32302 this 25th day of March, 1985.

SUSAN B. KIRKLAND

================================================================= STIPULATED SETTLEMENT AGREEMENT

=================================================================

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

EASTMAN KODAK COMPANY,

Petitioner,

vs. CASE NO. 84-3347

STATE OF FLORIDA DEPARTMENT OF GENERAL SERVICES,

Respondent.

/

STIPULATED SETTLEMENT AGREEMENT

Petitioner, EASTMAN KODAK COMPANY ("Kodak"), and Respondent, STATE OF FLORIDA DEPARTMENT OF GENERAL SERVICES ("the Department") do hereby join in this stipulated settlement of all matters at issue in the above-styled proceeding.

In order to effectuate said settlement, Kodak and the Department jointly stipulate and agree as follows:

1. The bids submitted by Kodak on Bid Invitation No. 402-600-38-B ("State Copier Contract") for the following categories were fully responsive to the terms, conditions, and specifications included within said bid invitation:

   
   

   Type I, Classes 8, 9, 10, 11, and 12 Type II, Class 12

   Type III, Classes 8, 9, 10, 11, and 12

   Type IV, Classes 8, 9, 10, 11, and 12

   
   

2. The bids submitted by Kodak on the two and three year lease plans for duplicator category, Class 11, Types I, III, and IV, were the lowest bids submitted for those categories and lease plans. In addition, Kodak submitted the lowest bid on the one, two and three year lease plan for Class 12, Types I, III, and IV.

   
   

3. It is in the best interests of Kodak, the Department, and those governmental entities eligible to utilize the State Copier Contract that a contract be awarded to Kodak for those lease plans and duplicator categories described in Paragraph 2 above.

   
   

4. Upon execution of this Stipulated Settlement Agreement, both parties shall file with the Executive Director of the Department a joint stipulated dismissal of the present proceeding.

   
   

5. The Department shall recommend to the Governor and Cabinet the awarding of a contract to Kodak for those lease plans and duplicator categories described in Paragraph 2 above.

6. The Department shall immediately schedule the following item for consideration by the Governor and Cabinet at its April 4, 1985 meeting: formal action on the Department's recommendation to award to Kodak the contract on the two and three year lease plans for duplicator categories Class 11, Types I, III, and IV and the one, two and three year lease plans for duplicator categories Class 12, Types I, III and IV of the State Copier Contract.

   
   

7. Should the Governor and Cabinet adopt the Department's recommendation awarding the above-described contract to Kodak, said contract shall be finally executed and shall become effective by April 8, 1985.

Respectfully submitted this 22nd day of March, 1985.

SUSAN B. KIRKLAND MARTHA HARRELL HALL

Office of General Counsel Carlton, Fields, Ward, Emmanuel, Department of General Services Smith & Cutler, P.A.

Room 452, Larson Building 410 Lewis State Bank Building Tallahassee, Florida 32301 Tallahassee, Florida 32302

(904) 487-1082 (904) 224-1585

Attorney for Respondent Attorney for Petitioner

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a copy of the foregoing pleading has been furnished by hand delivery to: DIANE GRUBBS, Division of Administrative Hearings, The Oakland Building, 2009 Apalachee Parkway, and MARTHA HARRELL HALL, ESQUIRE, 410 Lewis State Bank Building Post Office Drawer 190, Tallahassee, Florida 32302 this 22nd day of March, 1985.

SUSAN B. KIRKLAND

Docket for Case No: 84-003347

Orders for Case No: 84-003347