Judges: ARNOLD H. POLLOCK
Agency: Department of Health
Latest Update: Apr. 18, 1985
Summary: Where bid documents aimed at one provider but other providers were not precluded, breach not sufficient to set aside award.
84-4416.PDFSTATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
EASTMAN KODAK COMPANY, )
)
Petitioner, )
)
vs. ) CASE NO. 84-4416BID
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent. )
) EASTMAN KODAK COMPANY, )
)
Petitioner, )
)
vs. ) CASE NO. 85-0043BID
)
DEPARTMENT OF HEALTH AND )
REHABILITATIVE SERVICES, )
)
Respondent. )
)
RECOMMENDED ORDER
Consistent with the Order dated February 4, 1985, entered by Hearing Officer Donald R. Alexander, a hearing was held in this case before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings on February 28, 1985, in Tallahassee, Florida. The basic issue for consideration in both cases was whether the terms and specifications contained in Respondent's Invitation to Bid on Bid No. 85-41 BC effectively prevented the Petitioner, Eastman Kodak Company, from submitting a responsive bid; prevented Eastman Kodak Company from competitively bidding on the commodity sought; and improperly circumvented competitive bidding requirements of the State of Florida.
APPEARANCES
For Petitioner: Martha Harrell Hall, Esquire
Jacob D. Varn, Esquire
Carlton, Fields, Ward, Immanuel, Smith & Cutler, P. A.
410 Lewis State Bank Building Post Office Drawer 190 Tallahassee, Florida 32302
For Respondent: David P. Gauldin, Esquire
Assistant General Counsel Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32301
BACKGROUND INFORMATION
On December 7, 1984, Petitioner Eastman Kodak Company (Kodak), submitted a written protest and petition for formal administrative hearing in Case No. 84- 4416 in which it contended that the terms and conditions of Respondent's Bid No. 85-41 BC contained matters which effectively prevented it from submitting a responsive bid, prevented it from competitively bidding on the commodity sought, and circumvented competitive bidding requirements. Thereafter on December 18, 1984, after the bids on the above procurement had been opened, Petitioner again submitted a formal written protest and petition for formal administrative hearing regarding the State's decision to award the bid on the procurement to Xerox Corporation (Xerox). This latter written protest was assigned DOAH file number 85-0043 and was assigned to a different hearing officer than that assigned to the prior case.
A Notice of Hearing in Case Number 84-4416, dated January 17, 1985, was issued by Hearing Officer Alexander setting the hearing for April 24, 1985. The following day, however, Respondent submitted a Notion to Expedite in the case.
Before that motion could be ruled upon, on January 25, 1985, Petitioner moved to consolidate both cases for hearing, and on February 4, 1985, Hearing Officer Alexander granted the Motion to Consolidate and rescheduled the hearing to February 28, 1985.
At the hearing, Petitioner presented the testimony of Bruce D. Goodrich, a copy products salesman for Kodak; William F. Cox, a purchasing official at DHRS headquarters in Tallahassee; and Willard R. Vick, Central General Services Administrator for DHRS. Respondent presented the testimony of Mr. Cox, Mr. Vick and Charles A. Stryker, sales representative for Xerox. The parties agreed to the admission of 9 joint exhibits which were identified and admitted into evidence, however, as Petitioner's Exhibits 1 through 9.
The parties have submitted posthearing proposed findings of fact pursuant too Section 120.57(1)(b)4, Florida Statutes. A ruling on each proposed finding of fact has been made either directly or indirectly in this Recommended Order, except where such proposed findings of fact have been rejected as subordinate, cumulative, immaterial, or unnecessary.
FINDINGS OF FACT
Since 1976, DHRS has leased two Xerox 9200 copy machines for its Tallahassee headquarters. The two units together rent for a total of $9,945.11 per year.
On September 27, 1984, Mr. Charles A. Stryker, account manager for Xerox in Tallahassee, by letter to the director of central general services for DHRS in Tallahassee, proposed several alternative plans for DHRS to obtain the equipment necessary to handle its central reproduction duplicating needs. Among the proposals submitted by Mr. Stryker was a purchase of the present Xerox 9200 units currently being leased from Xerox. This proposal pointed out that the machines in question had reached the maximum equity per machine that they could earn on a rental basis and that among other things, Xerox would be willing, if DHRS were to buy them, to provide nine months free maintenance on the units and a guaranteed 50 percent trade-in value if the units were to be traded in on new units from Xerox within 12 months from date of purchase.
DHRS officials, recognizing the fact that maximum equity on the machines had been realized and foreseeing the opportunity to obtain the machines at a substantial dollar saving to the State, by letter dated October 10, 1984, contacted the appropriate officials at the Department of General Services (DGS), requesting authority to procure these particular used units from Xerox on a sole source procurement.
On November 1, 1984, DGS responded denying sole source procurement authority, but granting authority to purchase two suitable duplicating systems through the competitive bid process. It was the opinion of DGS that the equipment was available and the fact that the total cost of the acquisition exceeded the upper limit of $2,500.00, the competitive bid process was necessary.
Thereafter, a purchase requisition was submitted on November 2, 1984, by Mr. Vick which was approved. On November 7, 1984, Mr. Vick forwarded a memorandum to Mr. Cox which stated:
"Please determine how we are going to purchase the (2) Xerox 9200's. Their offer ends December 15, 1984."
An Invitation to Bid on Bid No. 85-41 BC for two used high speed, high volume xerographic duplicating systems was mailed to Xerox and Kodak on November 19, 1984. The Invitation to Bid form reflected the bids would be opened on December 7, 1984, at 2 p.m. The Invitation to Bid forms were sent to Xerox and Kodak only because they were the two companies in the area which manufactured and supplied equipment which would meet the specifications required by DHRS. Both Xerox and Kodak submitted their bids on December 6, 1984.
Xerox's bid price was $29,764.00 per machine for a total price of
$59,528.00 for the used machines that were currently in use at DHRS headquarters. As a part of its bid, Xerox offered a rebate voucher in the amount of $5,990.75 to cover the purchase of 4 620 Memorywriter typewriters and
7 printwheels. This rebate was part of a National promotion to all government customers.
Kodak's bid was for $134,280.00 per machine for a total price of
$268,560.00 for new Kodak model 250AF machines.
Mr. Goodrich admits that Kodak does not manufacture a xerographic which meets the technical qualifications contained on page 5 of the Invitation to Bid. In addition to this, he points to the specifications listed in the special conditions and technical specifications section of the IFB contained on pages 3 and 4, specifically number 3 which calls for full maintenance for a period of 9 months following installation at no expense to the department and a guaranteed
50 percent trade-in allowance within 12 months of purchase.
Kodak contends that since as Kodak has its own price specials which it could have offered if the terms of the IFB were not so narrowly defined, and it was thereby precluded from competitively bidding on this contract, the inclusion of those terms mentioned above effectively negated the competitive bidding process.
Admittedly, Kodak did not submit a proposal to DHRS at the time Xerox did prior to the issuance of the IFB. It is for this same reason that Kodak's bid referred to new equipment rather than the used equipment called for under the IFB because at the time, Kodak did not have any used equipment which would meet the terms and conditions of the invitation to bid.
Mr. Goodrich admits also that Kodak did not compete for the original contract to provide xerographic equipment in 1976 because it, was not in operation in the Tallahassee area at that time and could not have bid competitively. However, they have equipment which can do substantially what the Xerox 9200, in use since 1976, can do and more, and this was the item they offered in their response to the IFB.
The IFB in this procurement was developed by Mr. Cox who built the solicitation utilizing the general conditions dictated by DGS for all procurements, the technical specifications developed by DHRS' technical services division, and the special conditions which he developed to satisfy the needs of the department in this procurement. Specifications calling for used equipment was utilized because it was felt that a purchase of the used, in place xerox equipment would permit a substantial monetary savings while still getting equipment which had been proven satisfactory to do the job. Nonetheless, if new equipment from either Xerox or Kodak would have done the job required and still saved money, that would have been the route taken. This was not the case, however.
According to Mr. Vick, the request to go sole source on this procurement was prompted by a desire to take advantage of the Xerox proposal of late September 1984 which, it was felt, would result in a substantial dollar savings for the State while still providing equipment which was satisfactory for the task required.
DHRS maintains an open door policy toward vendors to encourage them to come in and attempt to sell their product. Mr. Cox has dealt with Kodak on several occasions in the past but never in the area of copying equipment. At the time in question, there was nothing at all to preclude Kodak from coming in with their own offers.
DHRS officials do not deny that they wanted to accept Xerox's proposal. Offers by several other vendors had been turned down in the past, but this one looked so good and appeared to have the promise of substantial dollar savings to the State, that a request was made to DGS to go single source procurement so that this proposal could be accepted. However, once this request was turned down, an Invitation for Bids was sent out to competing vendors and while the terms paralleled those offered by Xerox and it was obvious that Xerox's bid would comply with them, there was nothing in the procedure on DHRS' part that would preclude Kodak from offering the same terms. The officials at DHRS had no way of knowing that Kodak's internal policies would not permit the meeting of the same terms as to free maintenance and trade in allowance. If Kodak had been willing to meet those terms, it could thereafter have battled Xerox head to head on the one issue where they could compete - price.
DHRS also admits that generally, it is reluctant to make outright purchases of technical equipment, preferring to lease as was done here for several years, because of the changing state of the art. It is for that reason that the invitation to bid specified used equipment here to keep costs down and
to allow upgrading in the reasonably near future. To go even further, Mr. Cox admitted that while the bid was open to others, it was aimed at getting the Xerox proposal which would save a total of $76,000.00 on this purchase and trade-in.
Considering the evidence in its totality, it is clear that the officials at DHRS were attempting to save state funds in this procurement. Their method of handling this procurement lacks finesse, perhaps, but cannot be said to be ill-motivated, arbitrary, capricious, or unreasonable.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of these proceedings.
The Petitioner contests the award of this procurement to Xerox on two basic grounds and raises a third issue unrelated to the award itself. The third mentioned above is whether Kodak may maintain the present bid protest. The other two issues are:
Whether the bid specifications included in Bid No. 85-41BC improperly restrict competitive bidding in violation of Chapter 287, Florida Statutes; and,
Whether the bid condition requiring a future guaranteed buy back improperly restricts competitive bidding in a future bid procedure.
At the hearing, little if any issue was made by Respondent regarding the propriety of or standing of the Petitioner to maintain the present bid protest. The criteria for maintaining a bid protest are that the party filing the protest be adversely affected by an agency decision or intended decision concerning a procurement award, that notice of protest in writing be filed within 72 hours of the posting of the bid tabulation, and that formal written protest be filed within 10 days after the filing of the notice of protest.
There is no issue that both the notice of protest and the formal written protest were both timely filed. The evidence is clear that both Xerox and the Petitioner herein, Kodak, were specifically identified by Respondent as potential bidders and bids were accepted from both. The issue of whether Kodak failed to notify DHRS in a timely fashion as to its objections to the bid conditions cannot reasonably be made to fall within the terms and conditions of paragraph 7 of the ITB which requires questions concerning conditions and specifications be filed not less than 10 days prior to the bid opening. As Kodak points out in its memorandum of law, filed herein after the hearing, it had no question regarding the meaning of the terms, conditions, and specifications of the bid, but only argument as to their effectiveness and legality. The proper avenue for raising that contest is in a bid protest as called for in Rule 13A-1.06, Florida Administrative Code. Petitioner has done this and there is no doubt it is a proper party to maintain such an action.
Turning to the two other issues previously mentioned, which relate to the specifications and terms of the invitation to bid, and which are, for the most part, the same issue phrased differently, Petitioner contends that the bid specifications permitted only one bidder to submit a responsive bid to the invitation. The two paragraphs in question here are the requirement that the
bidder agree to furnish nine months free maintenance and guarantee a fifty percent trade-in value if the units were traded in within twelve months from date of purchase. Petitioner contends that these two conditions permit only Xerox to submit a responsive bid and thereby violate the intent of Chapter 287, Florida Statutes and are invalid, citing Mayes Printing Company v. Flowers, 154 So. 2d 859, (Fla. 1st DCA 1963).
As was stated in the Findings of Fact, above, the solicitation was for used equipment and was admittedly aimed at procurement of the Xerox equipment already in the possession of and in place in DHRS. Nothing has been established by Petitioner, who bears the burden of proof in this case, to show that had Kodak been willing to meet the terms of the solicitation at a better price than Xerox, it would not have been given the award. To contend that the terms about which Kodak now complains are unduly restrictive and limit competition is stretching an argument beyond reason. It is simply unbelievable that Kodak does not have or have access to used equipment which would fill the needs of DHRS and which could be supplied at a competitive price. It is clear that Kodak chose to go another route, offering new equipment which was substantially more expensive than that asked for, with the possibility that such offer could be realized if the challenge to Xerox's proposal was sustained.
The Respondent herein had the responsibility of procuring equipment for the State at the best possible cost. In fact, the agency had the responsibility to determine the lowest responsible and responsive bidder (Rule 13A-1.02 (9), F.A.C.). Substantial discretion is left with an agency head to control the award of contracts within his procurement activities to insure that the State gets the best possible return for its money, that a contract is not let for a sun greater than the available funds, and that there is an actual competitive area of bidding on a particular proposal. However, this discretion is not without limits. The exercise of discretion by the agency must not be arbitrary, unreasonable, or capricious. Wood-Hopkins Contracting Co. v. Roger J. Au & Son., 354 So. 2d 450 (Fla. 1st DCA 1978).
Here it is obvious that while DHRS desired to keep the Xerox copiers it had, and its invitation was drafted in such a way as to encourage that result, the terms of the invitation did not exclude any prospective bidder who had the commodity desired and was willing to comply with the two not unreasonable conditions imposed. It is clear that had Kodak so desired, it, Xerox, or any other vendor of a similar product could have met the requirements for maintenance and trade-in value and absent a showing that these conditions were too severe or unreasonable, the decision of the agency head in awarding the procurement to Xerox cannot be said to have been arbitrary, unreasonable, or capricious. To the contrary, the State, funded on the dollars of the taxpayers, received a benefit from sound fiscal and purchasing activity.
RECOMMENDED ACTION
Based on the foregoing Findings of Fact and Conclusions of Law, it is,
RECOMMENDED that the Petitioner's protest be denied and the award be made to Xerox Corporation for the purchase of two Xerox copiers as outlined in the proposal.
RECOMMENDED in Tallahassee, Florida, this 29th day of March, 1985.
ARNOLD H. POLLOCK
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 29th day of March, 1985.
COPIES FURNISHED:
Martha Harrell Hall, Esquire Jacob D. Varn, Esquire
Carlton, Fields, Ward, Immanuel, Smith & Cutler, P. A.
410 Lewis State Bank Building Tallahassee, Florida 32302
David P. Gauldin, Esquire Assistant General Counsel Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32301
David Pingree, Secretary Department of Health and
Rehabilitative Services 1323 Winewood Boulevard
Tallahassee, Florida 32301
Docket for Case No: 84-004416
Orders for Case No: 84-004416
| Issue Date |
Document |
Summary |
|
Apr. 15, 1985 |
Agency Final Order
|
|
|
Mar. 29, 1985 |
Recommended Order
|
Where bid documents aimed at one provider but other providers were not precluded, breach not sufficient to set aside award.
|
