vs. ) CASE NO. 88-5723BID
Respondent. )
Pursuant to notice, the formal hearing was held in this case on December 14, 1988, in Sarasota, Florida, before Mary Clark, Hearing Officer with the Division of Administrative Hearings.
For Petitioner: Daryl J. Brown, Esquire
Michael S. Taaffe, Esquire Abel, Band, Brown, Russell
For Respondent: John V. Cannon, III, Esquire
Elvin W. Phillips, Esquire Williams, Parker, Harrison
The petition in this matter was timely filed by an unsuccessful bidder, Gulf Constructors, Inc., in protest of a proposed contract award for the construction of Sarasota County School Board's new Elementary School "E".
The matter was referred to the Division of Administrative Hearings, and all bidders were notified of the proceeding and of their right to request intervention. See Notice to all Bidders, provided by counsel for the School Board on November 28, 1988. No other bidder requested intervention.
The bid specifications and related items for construction of Sarasota County School Board's Elementary School "E" and bus depot are dated July 1, 1988. (Joint Exhibit #1.) The Invitation for Sealed Bids was advertised on September 4, 11 and 18, 1988.
Among the requirements included in the instructions to the invitation for sealed bids is the direction that each bid must be accompanied by a bid bond, written on the form satisfactory to the Board, or a cashier's check in the amount of five percent of the total base bid as a guarantee that, if successful, the bidder would enter into a written contract with the Board. (Joint Exhibit #1, P.C-1.300.)
The instruction also includes the requirement that if a bid bond is submitted it must be "...written on the form bound within these bidding documents...". (Joint Exhibit #1, P.C-1.600.) Among other specifics related to the bond are the requirements that the dollar amount of the bond, or "5 percent of the bid", be typed or printed in the space provided, and that the surety's agent's power of attorney either be recorded in Sarasota County or include an original signature. (Joint Exhibit #1, P.C- 1.610.)
Two addenda were issued to the July 1, 1988 bid specifications. Addendum No. 1 is dated September 30, 1988, and includes a revised bid form and list of subcontractors form. The material change in the list of subcontractors form was to delete language at the end of the form allowing changes or substitutions with written consent of the architect and owner prior to signing the agreement, and substituting this language: "The contractor shall not remove or replace subcontractors listed above except upon good cause shown and written approval by Owner". (Joint Exhibit #1, P.C-2.430.)
Both the revised and former subcontractor list provide "Any work item (trade) not included will be assumed by the Owner as being performed by the Bidder's own forces". (Joint Exhibit #1, p.C-2.400.)
A mandatory pre-bid conference was held on September 27, 1988. In order to have a valid bid proposal, all bidding contractors had to attend the conference. Gulf, Federal and the other bidders had representatives at the conference.
Charles Collins, the School Board project manager, also attended and reviewed the specifications. He reminded the conference participants that the subcontractors list must be included with the bid and that one and only one subcontractor could be listed for each item. He also told the participants that if the contractor was going to do a particular item, he had to so indicate. He said that any deviation would result in the bid being rejected. (Transcript pp.316,319.)
The bids were submitted and opened on October 13 1988.
Six bids were received, with the following totals for both the school and bus depot:
Federal | $7,243,000.00 |
Phillips | $7,322,155.00 |
Indus | $7,390,000.00 |
Barton-Malow | $7,398,000.00 |
Gulf | $7,448,000.00 |
Carlson | (amount not included in |
the record | -- the highest bidder) |
(Joint Exhibits #2,3,4,5 and 6)
The immediate reaction of Charles Collins and other School Board staff was that the lowest bid, Federal, was a very sloppy bid. There were problems, in fact, with the four lowest of the six bids. (Transcript pp.215 and 324.)
Federal's bid bond was on the proper form, but the penal sum space was left blank. In addition, the power of attorney signature was not an original, but was rather part of the printed form. There was no power of attorney for its surety, American Home Assurance Company, on record in Sarasota County.
The list of subcontractors form required by the School Board is divided into two columns. The first column lists the work item and in some cases, includes subcategories, such as "supplier", "installer", "manufacturer", "dealer/contractor", and similar designations. For some work items more than one, and as many as three, separate subcategories are included, indicating the need to fill in more than one blank for that work item. The heading over the second column is titled "Subcontractor or Material Supplier". The bidder is supposed to write in the space in this column the subcontractor or supplier for each of the work items and subcategories listed in the first column.
Federal's list of subcontractors had either blank spaces or a line drawn in the second column for approximately twenty-two work items or subcategories under the work items. In several cases a single name was listed only once next to the work item, even though there were several subcategories under that item.
For example, under the work item, "Pre-Engineered Metal Roof System", are three subcategories: "Manufacturer", "Dealer/Contractor (Supplier)" and "Erector". Federal has handwritten one name next to the "Dealer/Contractor (Supplier)" subcategory: "Hammer & Howell". (Joint Exhibit #3.)
Dr. Melvin Pettit is the School Board's director of facilities and is responsible for the bidding process and construction of new schools. He is Charles Collins' supervisor.
After the bid opening, Dr. Pettit and his other staff met with the bidders individually to make sure they understood the bid. Gulf's bid was very complete and there was not that much to interpret. (Transcript p.217.)
Federal's bid was not complete and needed considerable explanation. Dr.
Pettit took notes of the explanations on his copy of Federal's bid form. (Joint Exhibit #10.)
Federal drew a line next to the work item "site concrete work" because it intended to do than work itself.
Although it listed "United" only once for the two subcategories under "Sanitary Sewer Lift Station", it intended that United be both the supplier and installer.
Under the work item, "Termite control", Federal drew a line because it did not have a bid or a subcontractor to list.
"Underground Fuel Tanks (Bus Depot) and Accessories" with two subcategories, "Supplier" and "Installer", were left blank. Federal intended that J. H. Pump Services do the work, as they were also doing the fuel dispensing equipment, a separate work item on another page of the form.
No supplier nor installer was listed under "Concrete Work" because the Federal representative could not remember the supplier's name when the bid was prepared.
Federal had quotations for the "Chalkboard and tackboard" work item, but did not list a supplier. They also had quotations for the specialty signs but did not list a supplier for that work item.
No subcontractor was listed under the work item, "Waste Handling Equipment"; Federal intended to use the same subcontractor for that and a separate item, "Food Service Equipment".
For the separate items, "Dark Room Equipment" and "Library Equipment", no supplier was listed. Federal explained that it had quotes but did not list them because of the rush of bidding.
No subcontractor nor supplier was listed for the separate items, "Intercommunications System" or "Public Address System". Federal explained that it intended to use the same subcontractor as that indicated for the electrical work because these items were included in the electrician's bid.
For those items including separate subcategories, where only one name is listed, Federal intended in most cases to use the same firm for all subcategories. However, for the roof system example cited in paragraph #9, above, Federal assumed that Hammer and Howell would supply and erect a roof
manufactured by Butler. In other words, Hammer and Howell would not also be the manufacturer of the system. The bid specifications list approved manufacturers, and Hammer and Howell is not one of them, nor were they certified as an approved manufacturer one week prior to the bid date, as required in the specifications.
Bid opening day in a general contractor's office is a frantic time. Depending on the size of the job and its competitive nature, literally hundreds of phone calls are made. In this case there were over fifty line items that had to be filled in with names on the subcontractors list. Although quotations from subcontractors and suppliers are obtained in the weeks prior to opening, last minute confirmations are obtained in an effort to get the best and most accurate estimates. Preparation of the subcontractor list is time-consuming and critical to competition among bidders.
If the bidder is allowed to leave an item blank, he may continue to "shop around" after the bid opening, if he is awarded the bid, to improve his profit margin. The owner, on the other hand, is deprived of the opportunity to consider the subcontractors or suppliers when the bids are evaluated.
The bid opening was at 2:00 p.m. Federal, like many other contractors, dispatched an employee to the bid opening with a blank bid. While the staff were at the contractor's office compiling estimates, the representative at the opening was on the phone taking down last minute information. Rick Furr, Vice-President of Federal for eight years, did not give specific instructions to his representative regarding leaving blanks or drawing a line. In some cases, the blanks or lines were intended to mean that Federal was going to do the work itself; in most cases, however, Federal intended that someone else would do the work.
After hearing Federal's explanation of its bid, Dr. Pettit and his staff discussed it and came to the conclusion that even though there were a "goodly number of irregularities", that it was "poorly done" and "sloppy" (transcript, p.219), in their opinion Federal did not gain significant material advantage, so they recommended the award go to Federal, as lowest bidder.
Dr. Pettit explained at hearing that because of the language on the subcontractor list form, that ". . . any work item not included would be assumed by the owner as being performed by the Bidder's own forces", the School Board intended to require Federal to use their own forces for those work items which they left blank. By "their own forces", he means the work would be done by Federal employees on Federal's payroll, for whom workers' compensation is paid. (Transcript, pp.228-9.)
This stated intention is so conflicting with Federal's intention and capabilities as to be utterly disingenuous.
Although Federal can do its own site concrete work, just as most contractors do, it is not licensed to do termite control. It does not have a batch plant to supply concrete. It cannot manufacture a metal roof system, chalkboards and tackboards, specialty signs, darkroom equipment, an intercommunications system, or a public address system. Even if it could, it is not one of the approved manufacturers listed in the bid specifications for most of these items list.
It is apparent, therefore, that Federal will either be unable to perform under the contract or that changes must be made to its subcontractors list.
The approximate combined value of the work items left blank, or partially blank, by Federal is $1 million.
Federal gained a competitive advantage by failing to complete all the blanks on the subcontractors list form. It gained precious minutes of time to concentrate on other aspects of the bid preparation; it is not bound to a given supplier, manufacturer or installer and can continue to bid shop.
Phillips' bid, the second lowest, was non-responsive as it failed to list any subcontractors. It left blank the entire four-page attachment to the bid. (Joint Exhibit #4.)
Indus' bid materially deviated from the specifications, as stipulated by the parties. (See stipulated Facts, above, and Joint Exhibit #5.)
Barton-Malow's subcontractors list included Aetna Steel as the steel fabricator/supplier, but Aetna Steel verified in writing that they did not bid the structural steel on this job. Barton-Malow also used its surety's bid bond form, rather than the form required in the specification. The form provided by Barton-Malow lacked several provisions found on the required form, including the payments of expenses and attorney's fees in the event of a suit on the bond. (Joint Exhibits #1 and 6; Transcript, pp.89-90)
Barton-Malow did fill in all of the blanks on the subcontractors list in accordance with the instructions at the pre-bid conference.
In its bid specifications and accompanying documents and instructions, the School Board reserves the right to reject any and all bids received and to waive any and all irregularities in regard thereto. (Joint Exhibit #1, p.C- 1.310.)
Since the only recommendation the School Board was given is to award the contract to Federal, the lowest bidder, it has not taken any action on the remaining bids.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and parties in this proceeding, pursuant to Section 120.57(1), Florida Statutes.
Section 235.31(1)(a) , Florida Statutes, requires the School Board to award the contract for a building or improvements, to the "lowest responsible bidder". This section also permits the Board to reject all bids.
... although the APA provides the procedural mechanism for challenging an agency's decision to award or reject all bids, the scope of the inquiry is limited to whether the purpose of competitive bidding has been subverted. In short, the hearing officer's sole responsibility is to ascertain whether the agency acted fraudulently, arbitrarily, illegally, or dishonestly. Department of Transportation v. Groves-Watkins, 530 So.2d 912, 914 (Fla. 1988).
No evidence was presented, nor was it suggested, that the School Board has acted fraudulently or dishonestly.
The deference accorded to an agency's wide discretion in competitive bidding situations is of no avail if the agency is acting illegally.
Section 255.0515, Florida Statutes, prohibits contractors, including those for educational facilities under Chapter 235, Florida Statutes, from removing or replacing subcontractors listed in the bid subsequent to the lists being made public at the bid opening, except upon good cause shown.
The award of the contract to Federal in this case will result in a violation of Section 255.0515, Florida Statues and is, therefore, illegal.
Federal cannot, and does not intend to, perform with its own forces all the work items and subcategories left blank on its subcontractors list.
Under the School Board's interpretation that blanks mean the general contractor will perform, those items not performed by Federal will require a substitution.
In a similar case involving bids for the construction of a Sarasota County School Board Elementary School, and involving some of the same bidders, the School Board adopted the Hearing Officer's recommendation that Barton- Malow's bid be rejected when Barton-Malow listed not one, but three subcontractors for roofing work on the subcontractors list. Ron A. Royal, Inc.
v. School Board of Sarasota County and Barton- Malow Southern, Inc., Case No. 86-2233BID, Final Order entered September 10, 1986.
In that case, other irregularities were deemed either minor or no deviation from the requirements of the bid, but the listing of multiple subcontractors for the same work was held essentially the same as listing no subcontractor, because in both cases the bidder could designate after bid opening the subcontractor who would actually perform the work.
This conclusion in Ron Royal, supra, was based in part on E. M. Watkins & Company, Inc. v. Board of Regents, 414 So.2d 583 (Fla. 1st DCA 1982), wherein the court held that failure to list major subcontractors was a material variance to the invitation to bid and a violation of Section 255.0515, Florida Statutes.
The Court recited with approval these policy reasons for requiring a list of subcontractors:
The unfair bidding advantage one contractor derives from the failure to list required subcontractors is generally threefold: (1) it provides the precious few minutes which may be saved by failing to provide a name for the appropriate blank on form D-1 and matching the name with the price used in the bid computation, (2) it allows the potential for speculation, by use of a phantom price and efforts to shop that item or trade until a subcontractor can be found at the speculative contract price, and (3) it permits a successful bidder to accept
additional subcontractor bids after the bid opening, giving the opportunity for undercutting the low subcontractor on whom he relied in formulating his bid. E. M. Watkins, supra., at p.587.
In Harry Pepper & Associates, Inc. v. City of Cape Coral, 352 So.2d 1190 (Fla. 2nd DCA 1987), Gulf was the lowest bidder on a city water treatment plant project. Gulf, however, specified a brand of pumps that was not on the bid specifications approved list. The City accepted Gulf's bid and allowed Gulf to write a letter stating that it would comply with the specifications regarding the pumps. The second lowest bidder, Pepper, protested, sued, and eventually appealed. The appellate court reversed the award to Gulf, finding that Gulf was given an advantage or benefit not enjoyed by the other bidders, the deviation was, therefore, material and the bid should have been rejected. Gulf, the court reasoned, was given the opportunity to either alter its bid to conform to the specifications or walk away from it.
Federal, here, enjoys a similar advantage with regard to its subcontractors list. Assuming that it is itself capable of performing all those items left blank on the form, it has the option of telling the School Board it will perform, or explaining that it had no intention of performing those tasks, thus releasing itself from the obligations of the bid.
Although Section 255.0515, Florida Statutes permits removal or substitution of subcontractors "upon good cause shown", none here is suggesting that good cause exists. Federal candidly admitted in its meeting with the School Board and at hearing why certain items were left blank. The prohibition in the statute would be meaningless if the press of time, not having names available and the intent to include the work item under a bid for a different category would be considered "good cause".
The inadvertent failure to fill in the penal sum and to include an original power of attorney signature do not render Federal's bid bond unenforceable and are not material deviations from the specifications.
Gulf cites a case describing the general rule that recovery on a penal bond is limited to the penalty named in the bond. Travelers Indemnity Corporation v. Askew, 280 So.2d 469 (Fla. 1st DCA 1973). This case does not address the situation where the penal sum is omitted. In a case cited by the School Board, R&B Builders, Inc. v. School District of Philadelphia, 202 A.2nd 82 (Penn.
1964), the Pennsylvania Supreme Court held that where the penal sum was omitted on a performance bond, the penal amount was enlarged to the full loss rather than restricted by a specific amount. The Bond was held to be valid and enforceable, notwithstanding the omission.
Gulf has standing to file this protest under Sections 120.53(5) and 120.57(1), Florida Statutes. Although several lower bids were submitted, those bids each contained defects. Gulf's was the lowest fully responsive bid.
Gulf proved that the proposed award to Federal is illegal.
Under the conclusions described above, the bids by Phillips, Indus and Barton-Malow are also fatally defective. Phillips included no subcontractors; Indus excluded several, and bid a substantially longer period for completion than specified in the bid documents. The parties' stipulation calls this a "material deviation". Barton-Malow's subcontractor list appears to require a
substitution as to the steel supplier; its bond is on the wrong form and fails to include certain required provisions.
The School Board still theoretically has the option of rejecting all bids, but there is nothing in the record to support that option. No evidence suggests that Gulf's bid should be rejected. It was responsive, and was barely $200,000 more than the lowest bid on a $7 million project.
RECOMMENDED that the School Board of Sarasota County award the contract to Gulf Constructors, Inc., as the lowest responsive bidder.
DONE and ENTERED this 1st day of March, 1989, in Tallahassee, Leon County, Florida.
Filed with the Clerk of the Division of Administrative Hearings this 1st day of March, 1989.
The following constitute my rulings on the findings of fact submitted by the parties:
11.-13. Adopted in paragraph 3.
14.-19. Adopted in substance in paragraph 11.
20. Adopted in summary in paragraph 16. 21.-30. Adopted in substance in paragraph 16. 31.-36. Adopted in substance in paragraph 17. 37.-41. Addressed in conclusions of law.
55.-59. Rejected as contrary to the weight of evidence.
DARYL J. BROWN, ESQUIRE MICHAEL S. TAAFFE, ESQUIRE ABEL, BAND, BROWN, RUSSELL
JOHN V. CANNON, III, ESQUIRE ELVIN W. PHILLIPS, ESQUIRE WILLIAMS, PARKER, HARRISON
DR. CHARLES W. FOWLER SUPERINTENDENT
