STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CENTRE CITY PARKING, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 92-0882BID

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on February 25, 1992, in Miami, Florida, before Stuart M. Lerner, a duly designated Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Michael A. Meyers, President

Centre City Parking, Inc.

170 Northeast 1st Street Miami, Florida 33131

For Respondent: Morton Laitner, Esquire

Department of Health and Rehabilitative Services

401 N.W. 2nd Avenue, S-424 Miami, Florida 33128

STATEMENT OF THE ISSUES

Whether Respondent should sustain Petitioner's challenge to the preliminary determination to award Bid No. DCPHU 10-91 to Kinney System of Florida, Inc.?

PRELIMINARY STATEMENT

By letter dated January 23, 1992, Petitioner filed a formal written protest contesting the recommendation of Respondent's bid evaluation committee that Bid No. DCPHU 10-91 be awarded to Kinney System of Florida, Inc. The body of the letter read as follows:

This letter will serve as our Formal Protest of the bid award to Kinney System of Florida Inc. for the above mentioned bid under article #4 (page 6) of the Invitation to Bid dated November 22, 1991. Enclosed is our bond in the amount of eight hundred dollars ($800.00) payable to the Department of Health and Rehabilitative Services. The Bond represents an amount equal to 1% of the gross annual receipts estimated at $80,000.00.

We feel Centre City Parking is in full compliance with all the articles required by the Department and should have won the right to operate the parking facility with it's [sic] winning low bid. I understand the Department chose to set aside our bid because of a letter attached to our financial statement by our accountant. The cover letter from our accountant was not removed from our submitted documentation because it is typical of indemnities attached to all uncertified statements. A certified statement is not a requirement of the bid specifications. Our accountant's letter does not diminish the strength or the financial stability of our company.

Centre City Parking Inc. is one of many privately-held Sub-Chapter "S" corporations held by Mr. Michael A. Meyers, whose personal net worth is in excess of nine million dollars. It is Mr. Meyers' decision to aggressively pursue this situation and affirm our position as the recipient of this bid award.

Centre City Parking through a recent though short lived operating agreement controlled the parking facilities of Kinney System of Florida Inc. In that position Centre City Parking became intimately involved in the every day operation of this parking facility and accordingly is aware of the requirements involved. In fact, during our short tenure we were able to service the previously unresolved staff lunch relief problem from our nearby Professional Arts Center location, resulting in cost reductions by cutting overtime pay.

Secondly, I believe statements supplied to the Department are those of Kinney System Inc. and not those of Kinney System of Florida Inc.

I look forward to an early resolution to this situation so that Centre City can take it's [sic] proper position as the bid winner.

On February 10, 1992, the matter was referred to the Division of Administrative Hearings for the assignment of a Hearing Officer to conduct a formal hearing.

A total of three witnesses testified at the hearing: Herbert Ehrlich, a Certified Public Accountant who performs accounting services for Petitioner and prepared the financial statement and cover letter referenced in Petitioner's

formal written protest; James Robinson, a Certifed Public Accountant who gave expert testimony; and Maria Valdez, a member of the bid evaluation committee that considered the bids submitted in the instant case. In addition to the testimony of these three witnesses, various exhibits were offered and received into evidence.

At the close of the evidentiary portion of the hearing on February 25, 1992, the Hearing Officer announced on the record that post-hearing submittals had to be filed no later than 20 days following the conclusion of the hearing. He further indicated that he would issue his Recommended Order within 40 days following the conclusion of the hearing. No objection was made to the imposition of these deadlines. Respondent filed a proposed recommended order on March 18, 1992. The proposed findings of fact set forth in Respondent's proposed recommended order have been carefully considered and are specifically addressed in the Appendix to this Recommended Order. To date, Petitioner has not filed any post-hearing submittal.

FINDINGS OF FACT

Based on the record evidence, the following Findings of Fact are made:

1. In November, 1991, Respondent issued Invitation to Bid No. DCPHU 10-91 (hereinafter referred to as the "ITB").

   
   

2. Through the ITB, Respondent solicited bids to manage the Dade County Public Health Unit's parking lot located at 1350 N.W. 14th Street in Miami, Florida.

   
   

3. The managerial responsibilities to be assumed by the successful bidder were described in the ITB as follows:

   
   

   1. That the OWNER will grant unto the MANAGER, the full exclusive management rights to operate a public parking service, and said MANAGER will take the exclusive rights to operate upon the premises and driveways, of what is commonly known as a "Public Parking

      Service" at and for the Dade County Public Health Unit. The term "Public Parking Service" as indicated above, is defined as meaning "those patrons wishing to avail themselves of a paid parking service."

      
      

   2. MANAGER will furnish competent and courteous uniformed parking attendants, during the times and on the days and hours as may be deemed necessary, and to be set forth by the OWNER. It is understood and agreed, all employees are in the employ of MANAGER, solely and not in the employ of OWNER. OWNER is in no way liable to employees for their wages or compensation.

      
      

   3. That in consideration for such services, the OWNER will allow the MANAGER the exclusive right to charge, collect the established fees for all those wishing to

      have their cars parked upon the parking premises. All fees must be approved by the OWNER.

      
      

   4. The ITB indicated that, in order to be deemed a "qualified bidder," the bidder "must be licensed to do business in the State of Florida."

      
      

   5. The following advisement was given in the ITB regarding how the bids of "qualified bidders" would be evaluated:

      
      

      Bidders shall be evaluated on the basis of proposal for operating the lot, proposed rates, proposed net income distribution, proposer's financial condition, prior job performance, and recommended detailed anticipated operating expense budget for a twelve (12) months [sic] period.

      
      

   6. So that Respondent would have information upon which to evaluate the financial condition of those submitting bids, the ITB directed all bidders to submit: "1. COPY OF 1990 OR LATEST FINANCIAL STATEMENT AND 2. FEDERAL INCOME TAX RETURN AND 3. ANNUAL REPORT."1/

      
      

   7. There are three basic types of financial statements that accountants prepare: those that are the product of an audit (hereinafter referred to "audit statements"); those that are the product of a review; and those that are the product of a compilation (hereinafter referred to as "compilation statements").

      
      

   8. Of the various types of financial statements produced by accountants, certified audit statements are considered to be the most reliable and compilation statements that are produced without the benefit of the accountant's examination of the source documents and materials upon which they are purportedly based are considered to be the least reliable. In preparing such compilation statements, the accountant simply puts the figures he has been provided by his client in financial statement form without verifying the accuracy of these figures. Accordingly, it is standard practice in the accounting profession for accountants to warn readers of such compilation statements that they "do not express an opinion or any other form of assurance on the[se statements]."

      
      

   9. The ITB did not specify what type of financial statement bidders had to submit along with their bid. There was no indication in the ITB that a compilation statement would be deemed unacceptable.

      
      

   10. Petitioner submitted a timely bid in response to the ITB. Its bid was accompanied by the financial statement required by the ITB.

       
       

   11. The financial statement was a compilation statement prepared by Petitioner's accountant, Herbert Ehrlich. Appended to the statement was a letter written by Ehrlich. The body of the letter read as follows:

       
       

       We have compiled the accompanying balance sheet of Centre City Parking Inc. as of December 31, 1990, and related statement of income, retained earnings and supporting schedules, for the year then ended, in

       accordance with standards established by the American Institute of Certified Public Accountants.

       
       

       A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them.

       
       

       Management has elected to omit substantially all of the disclosures and the statement of cash flows required by generally accepted accounting principles. If the omitted disclosures and statement of cash flows were included in the financial statements, they

       might influence the user's conclusions about the company's financial position, results of operations and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters.

       
       

       The shareholders2/ have elected to treat the company as a small business corporation for income tax purposes as provided in the Internal Revenue Code and the applicable state statutes. As such, the corporation income or loss and credits are passed through to the shareholders and combined with their personal income and deductions to determine taxable income on their individual returns.

       
       

       In issuing such a written warning regarding the compilation statement he had prepared for Petitioner, Ehrlich was acting in accordance with the standards of acceptable accounting practice prescribed by the American Institute of Certified Public Accountants.

       
       

   12. Kinney System of Florida, Inc. (hereinafter referred to as "Kinney"), Meyers Parking System, Inc. and Republic Parking System also timely submitted bids in response to the ITB.

       
       

   13. Kinney's bid was accompanied by a certified audit statement of its parent corporation, Kinney System Holding Corporation. There was no financial statement, however, reflecting Kinney's individual financial condition.

       
       

   14. A bid evaluation committee comprised of five members evaluated each of the four bids submitted in response to the ITB.

       
       

   15. The members of the committee determined that, of the four bids submitted, Petitioner's was the lowest. They were concerned, however, based upon the statements made in Ehrlich's letter, that Petitioner had Ehrlich prepare its financial statement without giving him the opportunity to verify the accuracy of the representations it had made to him regarding its financial condition.

   16. Because of these concerns, they eliminated Petitioner's bid from consideration, notwithstanding that it was the lowest responsive bid submitted by a qualified bidder, and recommended that the contract be awarded to Kinney, whom they determined to be the next lowest qualified and responsive bidder.3/

       
       

   17. The committee members' decision was announced in a letter dated January 13, 1992, the body of which read as follows:

       
       

       Based on the proposed net income distribution, references, background and financial condition, the Parking Lot Management Bid Selection Committee recommends award of the annual parking lot management contract to Kinney Systems [sic] of Florida, Inc.

       
       

       Failure to file a protest within the time prescribed in Section 120.53(5), Florida Statutes, shall constitute a waiver of proceedings under Chapter 120, Florida Statutes. Protests not filed within the prescribed time limit will not be considered. To comply with this statute, a written notice of intent to protest must be filed with the Administrative Services Director named in the bid invitation within 72 hours after receipt of this notice. Within ten days after a notice of intent to protest is filed, a formal written notice of protest must be

       filed with the Administrative Services Director.

       
       

   18. A copy of this letter was mailed to Petitioner.

       
       

   19. Petitioner subsequently protested the committee's recommendation in accordance with the procedures set forth in the letter.

       
       

       CONCLUSIONS OF LAW

       
       

   20. With certain exceptions not applicable to the instant case, state agencies may procure contractual services only through the process of competitive sealed bidding. Section 287.057, Fla. Stat.

       
       

   21. It has been said on more than one occasion that competitive bidding requirements, such as those imposed upon state agencies, have as their purpose and object the following:

       
       

       [T]o protect the public against collusive contracts; to secure fair competition upon equal terms to all bidders; to remove not only collusion but temptation for collusion and opportunity for gain at public expense; to close all avenues to favoritism and fraud in various forms; to secure the best values for the [public] at the lowest possible expense; and to afford an equal advantage to all desiring to do business with the [government], by affording an opportunity for an exact comparison of bids.

       Wester v. Belote, 103 Fla. 976, 138 So. 721, 723-24 (Fla. 1931); Harry Pepper & Associates, Inc. v. City of Cape Coral, 352 So.2d 1190, 1192 (Fla. 2d DCA 1977). See also Section 287.001, Fla. Stat.

       
       

   22. In soliciting and evaluating competitive bids, a state agency has wide discretion. See D.O.T. V. Groves-Watkins Constructors, 530 So.2d 912, 913 (Fla. 1988); Liberty County v. Baxter's Asphalt & Concrete, Inc., 421 So.2d 505, 507 (Fla. 1982).

       
       

   23. Its discretion with respect to these matters, while broad, is not unbridled. It must exercise such discretion in a manner that is not illegal, dishonest, fraudulent, arbitrary, unreasonable, capricious or in any other way that would subvert or undermine the purpose and object of competitive bidding. See D.O.T. v. Groves-Watkins Constructors, 530 So.2d at 913-14; Caber Systems

       v. Department of General Services, 530 So.2d 325, 336 (Fla. 1st DCA 1988);

       Couch Construction Company, Inc. v. Department of Transportation, 361 So.2d 172,

       175 (Fla. 1st DCA 1978); Wood-Hopkins Contracting Company v. Roger J. Au & Son, Inc., 354 So.2d 446, 450 (Fla. 1st DCA 1978).

       
       

   24. Section 287.057(1), Florida Statutes, mandates that, where, as in the instant case, competitive sealed bidding for contractual services is required, the "[c]ontract shall be awarded . . . to the qualified and responsive bidder who submits the lowest responsive bid."

       
       

   25. "Responsive bid," as used in Section 287.057(1), Florida Statutes, is defined in Section 287.012(16), Florida Statutes, as "a bid . . . submitted by a responsive, and responsible or qualified bidder . . . which conforms in all material respects to the invitation to bid."

       
       

   26. "Responsive bidder," as used in Section 287.057(1), Florida Statutes, is defined in Section 287.012(17), Florida Statutes, as "a person who has submitted a bid . . . which conforms in all material respects to the invitation to bid."

       
       

   27. "Responsible or qualified bidder," as used in Chapter 287, Florida Statutes, is defined in Section 287.012(13), Florida Statutes, as "a person who has the capability in all respects to perform fully the contract requirements and has the integrity and reliability which will assure good faith performance."

       
       

   28. Section 287.057(1), Florida Statutes, makes it illegal for an agency to use criteria "in determining the acceptability of [a] bid that was not set forth in the invitation to bid."

       
       

   29. The bid evaluation committee engaged in such illegal conduct in the instant case when it decided to eliminate Petitioner's bid from consideration because the financial statement accompanying the bid was a compilation statement based upon representations made by Petitioner to its accountant, the accuracy of which the accountant was unable to verify, as a result of Petitioner's failure to make full disclosure. The ITB gave no indication that the submission of such a financial statement would be unacceptable.

       
       

   30. The committee compounded its error by recommending that the contract be awarded to Kinney, a bidder that did not conform in all material respects to the ITB. Kinney did not submit its own financial statement as required by the ITB. Rather, it submitted the financial statement of its parent corporation. This constituted a material deviation from the requirements of the ITB and,

       accordingly, rendered Kinney a nonresponsive bidder ineligible to be awarded the contract. See Lykes Memorial Hospital, Inc. v. Department of Health and Rehabilitative Services, 13 FALR 951 (HRS 1991); Support Systems Services Corporation v. Department of Health and Rehabilitative Services, 13 FALR 716 (HRS 1991).4/

       
       

   31. In view of the foregoing, Petitioner should reject the recommendation of its bid evaluation committee and, in accordance with Section 287.057(1), Florida Statutes, award the contract to Petitioner, the "qualified and responsive bidder who submit[ted] the lowest responsive bid."

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby

RECOMMENDED that the Department of Health and Rehabilitative Services enter a final order sustaining Petitioner's protest and awarding Petitioner the contract advertised in the ITB.

DONE AND ENTERED in Tallahassee, Leon County, Florida, this 26th day of March, 1992.

STUART M. LERNER

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 26th day of March, 1992.

ENDNOTES

1/ The ITB advised prospective bidders that "[a]ny questions concerning conditions and specifications shall be directed in writing to this office for receipt no later than ten (10) days prior to the bid opening."

2/ Petitioner's bid package did not include any information concerning the financial condition of its shareholders.

3/ Kinney proposed an annual operating expense budget of $26,850.00, $50.00 more than Petitioner's proposed operating expense budget.

4/ In both of these cases, the Department of Health and Rehabilitative Services held that the requirement of Section 381.707(3), Florida Statutes, that "[a]n application for a certificate of need shall contain: . . . An audited financial statement of the applicant" is not met by the submission of an audited financial statement of the applicant's parent corporation.

5/ The committee members were concerned, not because the information contained in the financial statement submitted by Petitioner revealed that Petitioner was

in poor financial condition, but because Petitioner had not provided its accountant with an opportunity to verify the accuracy of this information.

APPENDIX TO RECOMMENDED ORDER IN CASE NO. 92-0882BID

The following are the Hearing Officer's specific rulings on the findings of fact proposed by Respondent:

1-6. Accepted and incorporated in substance, although not necessarily repeated verbatim, in this Recommended Order.

1. First and second sentences: Accepted and incorporated in substance; Third sentence: Rejected because it is not supported by persuasive competent substantial evidence.

   
   

2. Accepted and incorporated in substance.5/

   
   

3. First, second and third sentences: Accepted and incorporated in substance; Fourth sentence: Rejected because it would add only unnecessary detail to the factual findings made by the Hearing Officer.

   
   

4. First sentence: Rejected because it is not supported by persuasive competent substantial evidence; Second sentence: Accepted and incorporated in substance; Third sentence: Rejected because it is more in the nature of argument than a finding of fact.

11-12. Accepted and incorporated in substance.

COPIES FURNISHED:

Michael A. Meyers, President Centre City Parking, Inc.

170 Northeast 1st Street Miami, Florida 33131

Morton Laitner, Esquire Department of Health and

Rehabilitative Services

401 N.W. 2nd Avenue, S-424 Miami, Florida 33128

R.S. Power, Agency Clerk Department of Health and Rehabilitative Services

1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32399-0700

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

ALL PARTIES HAVE THE RIGHT TO SUBMIT WRITTEN EXCEPTIONS TO THIS RECOMMENDED ORDER. ALL AGENCIES ALLOW EACH PARTY AT LEAST 10 DAYS IN WHICH TO SUBMIT WRITTEN EXCEPTIONS. SOME AGENCIES ALLOW A LARGER PERIOD OF TIME WITHIN WHICH TO

SUBMIT WRITTEN EXCEPTIONS. YOU SHOULD CONTACT THE AGENCY THAT WILL ISSUE THE FINAL ORDER IN THIS CASE CONCERNING AGENCY RULES ON THE DEADLINE FOR FILING EXCEPTIONS TO THIS RECOMMENDED ORDER. ANY EXCEPTIONS TO THIS RECOMMENDED ORDER SHOULD BE FILED WITH THE AGENCY THAT WILL ISSUE THE FINAL ORDER IN THIS CASE.

Docket for Case No: 92-000882BID

Orders for Case No: 92-000882BID