STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MCI TELECOMMUNICATIONS )

CORPORATION, )

)

Petitioner, )

)

vs. )

) STATE OF FLORIDA, DEPARTMENT )

OF GENERAL SERVICES, ) CASE NO. 87-5205RX

)

Respondent, )

and )

) MICROTEL, INC., and UNITED ) STATES TRANSMISSION SYSTEMS, )

)

Intervenors. )

)

FINAL ORDER

Pursuant to notice, a formal hearing was conducted on December 10, 11, and 12, 1987, at Tallahassee, Florida, before Michael M. Parrish, a duly designated Hearing Officer of the Division of Administrative Hearings. The parties were represented at the hearing as follows:

For Petitioner: Carolyn S. Raepple, Esquire

Richard D. Melson, Esquire HOPPING BOYD GREEN & SAMS

Post Office Box 6526 Tallahassee, Florida 32314

For Respondent: Susan B. Kirkland, Esquire

Sandra E. Allen, Esquire Office of General Counsel Department of General Services Room 452, Larson Building Tallahassee, Florida 32399

For Intervenors: Patrick K. Wiggins, Esquire

Wings Slocum Benton, Esquire RANSON & WIGGINS

325 West Park Avenue Post Office Drawer 1657

Tallahassee, Florida 32302 ISSUES AND INTRODUCTION

The basic issue in this case is whether Rule 13A-1.001(1)(c) and (d), Florida Administrative Code, is an invalid exercise of delegated legislative authority. The Petitioner, MCI Telecommunications Corporation (hereinafter

"MCI") filed a petition pursuant to Section 120.56, Florida Statutes, contending that the rule is invalid. The Department of General Services (hereinafter "Department" or "DGS") contends that the rule is valid. The Intervenors, Microtel, Inc., and United States Transmission Services (hereinafter "Intervenors" or "Microtel" and "USTS", respectively), also contend that the rule is valid.

The final hearing in this case was conducted at the same time as the final hearing in a related case in which MCI is contesting the award of certain contracts to other providers. At the final hearing, all parties offered evidence in support of their respective positions. By stipulation of the parties, several amendments to the petition were made at the hearing. The parties also stipulated to many of the facts alleged in the petition, as amended.

The amendments to the petition were as follows:

At paragraph 6 of the petition, the words "long distance telecommunications services" were deleted from the first sentence and the following words were added in place of the deleted words, "intermachine trunks, intrastate WATS, and interstate WATS."

At paragraph 7 of the petition, the words, "awarded a contract for the telecommunications services" were deleted and the following words were added in place of the deleted words: "issued a CSA for intermachine trunks, intrastate WATS, or interstate WATS."

At paragraph 16(b) of the petition, the words "Pursuant to that authority," were deleted and nothing was added in their place.

At the conclusion of the hearing the parties decided to order a transcript of the hearing, which transcript was filed with the Hearing Officer on January 4, 1988. The parties also agreed to a deadline for the filing of proposed final orders of January 14, 1988. All parties filed timely proposed orders containing proposed findings of fact and conclusions of law. Those proposed orders have been carefully considered in the preparation of this final order and specific rulings on all findings of fact proposed by all parties are contained in the Appendix which is attached to and incorporated into this final order.

FINDINGS OF FACT

Based on the stipulations and admissions of the parties, on the exhibits received in evidence, and on the testimony of the witnesses at hearing, I make the following findings of fact.

Findings Based on Stipulations

1. The Petitioner is MCI Telecommunications Corporation (MCI), whose business address is Suite 400, 400 Perimeter Center Terrace NE, Atlanta, Georgia 30346.

   
   

2. The Respondent is State of Florida, Department of General Services (Department), whose address is 614 Larson Building, 200 East Gaines Street, Tallahassee, Florida.

   
   

3. Rule 13A-1.001(1)(c) and (d), Florida Administrative Code (the "challenged rule"), provides, in pertinent part, as follows:

   13A-I. 001 Definitions.

   1. A Purchase -- A purchase is defined as an acquisition by contracting in any manner, whether by rent, lease, lease/purchase or installment sales contract which may provide for the payment of interest on unpaid portions of the purchase price, or outright purchase, from a source of supply for either commodities or contractual services.

      Within the meaning of this definition of a purchase, the following are not a purchase:

      1. Regulated utilities.

      2. Regulated Public Communications, i.e., telephone, telegraph. (emphasis added)

      
      

4. MCI is certified by the Florida Public Service Commission to provide intrastate long distance telecommunications services within the State of Florida and is authorized by the Federal Communications Commission to provide interstate telecommunications services throughout the United States.

   
   

5. On November 10, 1987, the Division of Communications of the Department of General Services awarded contracts to provide intermachine trunks, intrastate WATS, and interstate WATS for the State of Florida following a "negotiation" process. According to the Department of General Services, such "negotiations" were conducted as a joint venture between the Division of Communications and the Division of Purchasing.

   
   

6. MCI was one of the suppliers involved in the "negotiations," but it was not issued a CSA for intermachine trunks, intrastate WATS, or interstate WATS.

   
   

7. On November 23, 1987, MCI filed with the Division of Communications a formal written protest of that award and of the process leading up to the award.

   
   

8. The Florida Public Service Commission has granted long distance certificates to a number of competitive long distance companies, including MCI, AT&T, Microtel, U.S. Sprint, and others. MCI and other competitive carriers today provide both intrastate and interstate long distance service in the State of Florida.

   
   

9. MCI, Microtel, AT&T, Southland, and USTS are all interexchange carriers authorized by the Federal Communications Commission to provide, among other things, interstate WATS.

   
   

10. MCI, AT&T, Southland, and Microtel are all interexchange carriers certified by the Florida Public Service Commission to provide, among other things, intermachine trunks and intrastate WATS.

    
    

11. Prior to 1982, intermachine trunks, intrastate WATS and interstate WATS were available from only a single source within the State of Florida (the Bell System).

    
    

12. Currently, intermachine trunks, intrastate WATS, and interstate WATS are all available from more than one source within the State of Florida.

    
    

    Findings Based on Evidence Adduced at Hearing

13. The Intervenors are Microtel, Inc., whose address is 7100 West Camino Real, Suite 311, Boca Raton, Florida 33433, and United States Transmission Systems, whose business address is 320 Park Avenue, New York, New York 10022.

    
    

14. The Department from time to time procures long distance telephone service of the types provided by MCI for the State of Florida.

    
    

15. The Department regards long distance telecommunications services or facilities as "regulated public communications" that are covered by subsection

    (d) of the challenged rule.

    
    

16. The Department does not regard long distance telecommunications services or facilities as "regulated utilities" that are covered by subsection

    (c) of the challenged rule.

    
    

17. Under subsection (d) of the challenged rule, the Department can procure long distance telephone services or facilities without competitive bidding or competitive negotiations simply by picking up the telephone and negotiating a contract with a single vendor, or by issuing a communications service authorization (CSA) to a particular vendor.

    
    

18. The Department uses subsection (d) of the challenged rule as a basis for procuring telephone services or facilities approximately four to five times a year.

    
    

19. The Department used subsection (d) of the challenged rule as authority for a negotiated procurement of interstate long distance telephone services or facilities for the State in 1985.

    
    

20. The Division of Communications would have to approve the purchase of any transmission service or facility for any agency of the State of Florida.

    
    

21. The Department did not rely on subsection (d) of the challenged rule as a basis for authority to negotiate the purchase of interstate and intrastate long distance telephone services or facilities for the State in 1987. However, the Department could have relied on subsection (d) of the challenged rule for authority to negotiate that 1987 purchase.

    
    

22. There have been a number of amendments to Rule 13A-1.001. From September 7, 1978, to until August 25, 1982, the rule exempted the procurement of "utilities" and "public communications" from the definition of purchase. Since August 26, 1982, the rule has exempted the procurement of "regulated utilities" and "regulated public communications" from that definition.

    
    

23. No section or subsection of Chapter 282 is referred to in the note to Rule 13A-1.001, either as authority for the rule or as the law implemented by the rule.

    
    

    CONCLUSIONS OF LAW

    
    

    Based on the foregoing findings of fact and on the applicable statutes, rules, and court decisions, I make the following conclusions of law.

    
    

24. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. Sec. 120.56, Fla. Stat.

25. Long distance telecommunications services or facilities do not come within the scope of Rule 13A-1.001(1)(c), Florida Administrative Code. Long distance telecommunications services or facilities do come within the scope of Rule 13A-1.001(1)(d), Florida Administrative Code.

    
    

26. Because long distance telecommunications services or facilities do not come within the scope of Rule 13A-1.001(1)(c), Florida Administrative Code, Petitioner is not substantially affected by that subsection of the rule, and its challenge to that subsection should be dismissed.

    
    

27. The facts in this case demonstrate that Petitioner is substantially affected by Rule 13A-1.001(1)(d) in a manner similar to the circumstances of the firefighters in Professional Firefighters of Florida, Inc. v. Department of Health and Rehabilitative Services, 396 So.2d 1194 (Fla. 1st DCA 1981). Petitioner currently conducts business in the area regulated by the rule and, because of the rule, is exposed to a continual risk that the Department will acquire such services or facilities from one of Petitioner's competitors without complying with the requirements of Chapter 287, Florida Statutes. The presence of this continual risk, which does not depend on any future action by Petitioner, distinguishes the present circumstances from cases such as Florida Department of Offender Rehabilitation v. Jerry, 353 So.2d 1230 (Fla. 1st DCA 1978), and State Department of Health and Rehabilitative Services v. Alice P.,

    367 So.2d 1045 (Fla. 1st DCA 1979). Unlike Jerry and Alice P., the Petitioner in this case can be immediately affected at any time, without its knowledge, whenever the Department chooses to rely on the rule to acquire long distance services or facilities. In this situation, the possibility of injury to the Petitioner in this case is more than mere speculation. Therefore, the Petitioner has standing to challenge Rule 13A-1.001(1)(d), Florida Administrative Code.

    
    

28. Petitioner challenges the subject rule provision as constituting an "invalid exercise of delegated legislative authority." The quoted term is defined in Section 120.52(8), Florida Statutes (1987), as follows:

    
    

    (8) "Invalid exercise of delegated legisla- tive authority" means action which goes beyond the powers, functions, and duties delegated by the Legislature. A proposed or existing rule is an invalid exercise of dele- gated legislative authority if any one or more of the following apply:

    1. The agency has materially failed to follow the applicable rulemaking procedures set forth in s. 120.54;

    2. The agency has exceeded its grant of rulemaking authority, citation to which is required by s. 120.54(7);

    3. The rule enlarges, modifies, or contra- venes the specific provisions of law imple- mented, citation to which is required by s. 120.54(7);

    4. The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency; or

    5. The rule is arbitrary or capricious.

29. Petitioner contends that the challenged rule provisions are an invalid exercise of delegated legislative authority because DGS has exceeded its grant of rulemaking authority, and because the rule enlarges, modifies, and contravenes the specific provisions of the law implemented. The burden on the Petitioner in a case of this nature is a heavy one, but a Petitioner who shows that a rule purports to accomplish ends different from or greater than what is authorized by statute has met the challenger's burden. As noted in State, Department of Business Regulation v. Salvation Limited, Inc., 452 So.2d 65 (Fla. 1st DCA 1984):

    
    

    It is axiomatic that an administrative rule cannot enlarge, modify or contravene the provisions of a statute. Seitz v. Duval County School Board, 366 So.2d 119, 121 (Fla. 1st DCA 1979); State Department of Health and Rehabilitative Services v. McTigue, 387 So.2d

    454 (Fla. 1st DCA 1980). A rule which purports to do so constitutes an invalid exercise of delegated legislative authority. Nicholas v. Wainwright 152 So.2d 458, 460 (Fla. 1963).

    
    

30. For the reasons set forth below, the Petitioner has met its burden. Chapter 287, Florida Statutes, establishes a comprehensive scheme for the procurement of commodities and services by the State of Florida. The legislative intent is set forth in Section 287.001, which states in part that:

    
    

    The Legislature recognizes that fair and open competition is a basic tenet of public procurement; that such competition reduces the appearance and opportunity for favoritism and inspires public confidence that contracts are awarded equitably and economically; and that documentation of the acts taken and effective monitoring mechanisms are important means of curbing any improprieties and establishing public confidence in the process by which contractual services are procured. (emphasis added)

    
    

31. Consistent with this legislative intent, Chapter 287 generally requires competitive sealed bidding or competitive sealed requests for proposal to be used for procuring commodities and services when the amount involved is

    $3,000 or more. Sections 287.057(2), (3), (4), 287.062(1), (2), Fla. Stat.

    (Supp. 1986). Certain acquisitions are exempted by definition from the scope of Chapter 287, and hence from these requirements. Section 287.012(4)(b), Fla.

    Stat. Other acquisitions are exempted from these requirements in narrowly defined circumstances. Section 287.057(5), (6), (7), (8), (11), 287.062(1)(a)- (e), (2), Fla. Stat. Finally, certain acquisitions are exempted by provisions of other statutes. A Sections 15.18(7), 601.10(12), Fla. Stat. However, no provision of Chapter 287 gives the Department general authority to exempt procurements from the chapter's competitive acquisition requirements.

    
    

32. None of the statutory provisions cited by the Department provides authority to exempt the procurement of long distance telecommunications services or facilities from these competitive acquisition requirements.

(a) Section 282.101, Florida Statutes (as amended by Chapter 87-137, Laws of Florida) merely defines "communications" and "communications system" for the purpose of Chapter 282.

(b) Sections 282.102(2), (7), (12), (14), and (16), Florida Statutes (as amended by Chapter 87-137, Laws of Florida), grant the Department's Division of Communications the power to purchase or contract for communications facilities or services for use by the state or any of its agencies. Nothing in these sections provides a basis to exempt such purchases or contracts from any of the requirements of Chapter 287.

(c) Section 287.042(1)(a), (2), (5), (6), (7) and (13), Florida Statutes (1985), grant the Department's Division of Purchasing the power to purchase commodities on behalf of other state agencies and to exercise general oversight over purchases by other state agencies. Nothing in these sections provides a basis to exempt any particular type of commodity or service from the other requirements of Chapter 287.

1. Section 287.057(5), Florida Statutes (Supp. 1986), allows contracts for contractual services to be awarded without competition "if it is determined in writing that such services are available from only one source." This section provides authority for Rule 13A-1.001(1)(d) to the extent that it allows the noncompetitive purchase of local telephone service, which is available in any geographic area only from the local telephone company. It does not provide authority for that rule to the extent that it covers long distance service, which the record reflects is available on a competitive basis from multiple vendors.

   
   

2. Section 287.057(6), Florida Statutes (Supp. 1986), allows contracts for contractual services to be awarded without competition "if state or federal law prescribes with whom the agency must contract or if the rate of payment is established during the appropriations process." This section likewise provides authority for Rule 13A-1.001(1)(d) to the extent that it allows the noncompetitive purchase of local telephone service, which is provided as a statutory monopoly under Section 364.335(4), Florida Statutes. It does not provide authority for that rule to the extent it covers long distance service, which the record reflects is available from multiple vendors certificated by the Florida Public Service Commission and the Federal Communications Commission. See, Microtel v. Florida Public Service Commission, 483 So.2d 415, 417-418 (Fla. 1986) (recognizing that the legislature eliminated the statutory monopoly for long distance service by the enactment of Chapter 82-51, Laws of Florida).

   
   

3. Section 287.062(1)(b), Florida Statutes (Supp. 1986), excepts from the bid requirements "purchasing agreements, contracts, and maximum price regulations executed by the division [of purchasing]" for "commodities." Assuming, without deciding, that long distance telephone service is a "commodity" within the meaning of this section, that statute does not provide authority for a rule that would exempt all purchases of that service, regardless of by whom the contract for such services is executed. This is particularly true where Chapter 282 gives the Division of Communications, not the Division of Purchasing, the exclusive authority to contract for such services for the state. Section 282.102, Fla. Stat. (as amended by Chapter 87-137, Laws of Florida).

   
   

4. Section 287.062(1)(c), Florida Statutes (Supp. 1986), allows an exception from the bid requirements under certain circumstances for "commodities available only from a single source." Assuming, without deciding, that long distance telephone service is a "commodity" within the meaning of this section,

that statute does not provide authority for the rule. As discussed above, the record shows that long distance telephone service is not "available only from a single source."

32. Rule 13A-1.001(1)(d) is therefore an invalid exercise of delegated legislative authority to the extent that it applies to long distance telecommunications services. The rule in effect modifies Chapter 287 to create an exemption from the competitive acquisition requirements for a category of procurements where the legislature has neither provided an exemption nor authorized the Department to provide an exemption. This creation of an exemption is not only beyond the authority delegated to the Department, it is inconsistent with the legislative intent expressed in Section 287.001, Florida Statutes.

Upon consideration of all of the foregoing, it is ORDERED:

1. That the Petitioner does not have standing to challenge Rule 13A- 1.001(1)(c) and its petition directed to that subsection of the rule is hereby dismissed.

   
   

2. That the Petitioner does have standing to challenge Rule 13A- 1.001(1)(d) and such rule is an invalid exercise of delegated legislative authority to the extent it applies to long distance telecommunications services or facilities.

DONE AND ORDERED this 11th day of February, 1988, at Tallahassee, Florida.

MICHAEL M. PARRISH, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 11th day of February, 1988.

APPENDIX TO FINAL ORDER, CASE NO. 87-5205RX

The following are my specific ruling on all of the findings of fact proposed by all of the parties.

Findings Proposed by the Petitioner:

Paragraphs 2, 2, 3, 4, 5, 6, 7, and 8 are accepted.

Paragraph 9 is rejected as constituting a statement of position rather than a proposed finding.

Paragraph 10 is accepted.

Paragraph 11 is rejected as constituting a conclusion of law or argument rather than a proposed finding.

Paragraphs 12, 13, 14, 15 and 16 are accepted.

Paragraph 17 is rejected as constituting subordinate or unnecessary details.

Paragraphs 18 and 19 are accepted.

Paragraph 20 is rejected as constituting subordinate or unnecessary details.

Paragraph 21 is accepted.

Findings Proposed by the Respondent:

Paragraphs 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, and 12 are accepted.

Paragraphs 13, 14, 15, 16, 17, 18, 19, and 20 are rejected as constituting subordinate or unnecessary details.

Paragraph 21 is accepted in substance with some unnecessary details omitted.

Paragraph 22 is rejected as constituting subordinate or unnecessary details.

The first and last sentences of paragraph 23 are accepted. The second sentence is rejected as constituting argument or legal conclusion rather than findings of fact.

Paragraphs 24 and 25 are accepted.

Findings Proposed by the Intervenors:

(The Intervenors adopted the proposed findings submitted by the Respondent and did not make any additional proposed findings.)

COPIES FURNISHED:

Susan Kirkland, Esquire General Counsel

Department of General Services Room 452, Larson Building

200 East Gaines Street Tallahassee, Florida 32399-0955

Carolyn S. Raepple, Esquire Hopping, Boyd, Green & Sams Post Office Box 6526 Tallahassee, Florida 32314

Patrick K. Wiggins, Esquire Wings Solcum Benton, Esquire Ranson & Wiggins

325 West Park Avenue Post Office Drawer 1657

Tallahassee, Florida 32302

Liz Cloud, Chief

Bureau of Administrative Code Department of State

Room 1802, The Capitol Tallahassee, Florida 32399-0250

Carroll Webb, Executive Director Administrative Procedures Committee Room 120, Holland Building Tallahassee, Florida 32399-1300

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW PURSUANT TO SECTION 120.68, FLORIDA STATUTES. REVIEW PROCEEDINGS ARE GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.

Docket for Case No: 87-005205RX

Orders for Case No: 87-005205RX