STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

VISION CARE, INC. a/k/a VISION )

SERVICE PLAN, )

)

Petitioner, )

)

vs. )

) DEPARTMENT OF MANAGEMENT SERVICES, )

as successor to the DEPARTMENT OF ) ADMINISTRATION, DIVISION OF STATE )

EMPLOYEES' INSURANCE, ) CASE NO. 92-3441BID

)

Respondent, )

and )

)

OPTIPLAN, INC. )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted in this case on June 24, 1992, in Tallahassee, Florida, before J. Stephen Menton, a duly designated Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Edward O. Savitz, Esquire

Bush, Ross, Gardner, Warren & Rudy, P.A.

220 South Franklin Street Tampa, Florida 33602

For Respondent: Stephen S. Mathues, Esquire

Department of Management Services Knight Building, Suite 309

Koger Executive Center 2737 Centerview Drive

Tallahassee, Florida 32399-0950

For Intervenor: Kenneth Oertel, Esquire

Christopher Bryant, Esquire Oertel, Hoffman, Fernandez

& Cole, P.A.

P.O. Box 6507

Tallahassee, Florida 32314-6507

STATEMENT OF THE ISSUE

The issue in this case is whether the Respondent's proposed award of a contract to the Intervenor, Optiplan, Inc., to provide a vision care plan to eligible state employees pursuant to Optiplan's response to Request for Proposal No. 92-007 Part C should be upheld.

PRELIMINARY STATEMENT

On or about November 1, 1991, the Respondent, the Department of Administration 1/, issued Request for Proposal No. 92-007, (the "RFP") seeking proposals for certain prepaid health services to be offered to state employees as part of their benefits plan. Part C of the RFP dealt with vision care services.

Proposals regarding Part C of the RFP were timely filed by two firms: Petitioner, Vision Care, Inc. a/k/a Vision Service Plan and Intervenor, Optiplan, Inc. Negotiations were conducted with both entities pursuant to Section 110.123, Florida Statutes. By letter dated April 24, 1992, the Secretary of the Department selected Optiplan as the recipient of the contract, and notice to that effect was sent to Vision Care.

On or about May 8, 1992, the Petitioner, Vision Care, filed a Formal Written Protest (the "Protest") with the Respondent challenging its initial decision and requesting a formal administrative proceeding. The Protest was referred by the Respondent to the Division of Administrative Hearings which noticed and conducted a hearing pursuant to Sections 120.53(5) and 120.57(1), Florida Statutes.

Vision Care contends that the apparent successful firm, Optiplan, submitted a response which did not conform to the RFP in a number of respects. More specifically, the Protest alleged that Optiplan's proposal did not set forth adequate and/or accurate information regarding its "network" of providers. In addition, the Protest alleged that Optiplan did not provide sufficient financial information with its proposal and was not a responsible bidder because it did not have the financial capability to complete the contract.

On June 17, 1992, Optiplan filed a Motion to Intervene in this proceeding.

That Motion was granted at the commencement of the hearing.

Prior to the hearing, Petitioner filed a Motion to Continue arguing that it needed additional time to complete discovery and investigate the financial condition of the Intervenor and its provider network. A telephone conference hearing was held in connection with the Motion for Continuance on June 22, 1992 during which Respondent and Intervenor objected to a continuance. In view of the statutory provision requiring a hearing to be commenced within 15 days of receipt of the formal written protest absent a stipulation by all parties, the Petitioner's Motion to Continue was denied. See, Section 120.53(5)(e), Florida Statutes.

At the hearing, Petitioner presented the testimony of three witnesses: Alicea Runyon, the director of the Division of State Employees' Insurance for Respondent; David Brown, who is employed with the Bureau of Specialty Insurance in the Department of Insurance; and Jan Kaplan, the president and chairman of the Board for the Intervenor.

Petitioner offered twenty one (21) exhibits into evidence, all of which were accepted. Respondent and Intervenor did not object to the authenticity of any of Petitioner's exhibits, but objected to the relevancy of Petitioner's Exhibits 15-21. Those objections were overruled.

Neither Respondent nor Intervenor called any witnesses. Intervenor offered one exhibit into evidence which was accepted over Petitioner's objection.

At the commencement of the hearing, Petitioner renewed its motion to continue which was again denied. During the course of the hearing, Petitioner contended that it had not had an opportunity to fully explore the financial affairs and capitalization of Intervenor. In addition, Petitioner argued that it had not been able to conduct discovery regarding Intervenor's "provider" network. During the abbreviated discovery that took place before the hearing, Intervenor refused to grant Petitioner access to the records of its provider network. After considerable argument and discussion during the hearing, the parties agreed that the contracts between Intervenor and its various providers would be produced to the undersigned Hearing Officer to review in camera.

Pursuant to that agreement, Intervenor produced 115 numbered folders containing contracts with providers and a computer printout listing contacts for potential providers. All of the numbered folders were reviewed in accordance with the guidelines established at the hearing. In addition, a limited, random telephone survey of those providers was conducted by the undersigned Hearing Officer as agreed to by the parties.

The results of the review and survey are set forth in an Memorandum Re Optiplan Provider Agreements entered by the undersigned Hearing Officer on August 4, 1992. Following the issuance of that Memorandum, a telephone conference hearing was held on August 7, 1992 at which time the record in this proceeding was closed and the parties agreed upon a schedule for filing proposed recommended orders. A transcript of hearing has been filed. All parties have submitted proposed findings of fact and conclusions of law in accordance with the agreed upon schedule. A ruling on each of the parties' Proposed Findings of Fact is included in the Appendix to this Recommended Order.

FINDINGS OF FACT

Based upon the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made:

1. The Parties.

   
   

   1. The Respondent, formerly the Department of Administration, (hereinafter referred to as the "Department"), is an agency of the State of Florida.

      
      

   2. On or about November 1, 1991, the Department issued Request for Proposal No. 92-007 (hereinafter referred to as the "RFP").

      
      

   3. The Petitioner, Vision Care, Inc. a/k/a Vision Service Plan (hereinafter referred to as "Petitioner" or "Vision Care"), is an unsuccessful responder to the RFP.

      
      

   4. According to its proposal, Petitioner is a Florida not-for-profit corporation with headquarters in Tampa, Florida. Petitioner purports to have an existing provider network with over 600 opticians, optometrists and ophthamologists under contract. Petitioner's proposal indicates that it is

      affiliated with a nationwide network of providers and Petitioner has contracts with providers in almost every county in the State of Florida. Other than the proposal, no evidence was presented at the hearing to establish these matters.

      
      

   5. As discussed below, the Department, after negotiations, deemed Intervenor, Optiplan, Inc., (hereinafter referred to as "Intervenor" or "Optiplan,") the successful responder to the RFP.

      
      

   6. Optiplan is a Florida not-for-profit corporation headquartered in Fort Lauderdale, Florida. Jan Kaplan is the president and chairman of the Board of Optiplan. Optiplan has entered into a ten year exclusive management contract with J.K. Enterprises, Inc., a subsidiary of United Vision Group. Jan Kaplan is currently the president of J.K. Enterprises and the controlling owner of United Vision Group. Although Optiplan has provided some services through HMO plans, it has never directly provided Section 125 benefit plans.

      
      

   7. Both Vision Care and Optiplan are licensed optometric service plan corporations as defined in Section 637.001(3), Florida Statutes.

      
      

   8. Vision Care and Optiplan have standing to participate in this proceeding.

      
      

2. The RFP.

1. The RFP was sent to licensed insurance providers inviting them to submit proposals for certain prepaid health services to be offered to state employees as part of their benefit package pursuant to Section 110.123(3)(d)7, Florida Statutes. The Department's solicitation contemplated plans to be offered in four areas with state employees permitted to elect to participate in one or more of the offered areas. All premiums would be paid via payroll deduction on behalf of those employees who elected to participate. The RFP sought proposals for (A) supplemental insurance, (B) a prepaid dental plan, (C) a vision care plan and (D) a cancer and intensive care plan. Only Part C is involved in this case.

   
   

2. A copy of the RFP was introduced at the hearing as Petitioner's Exhibit 14. The RFP included, among other things, sections relating to (a) the schedule (Section I); (b) the purpose and objectives of the RFP (Section II);

   (c) completing and submitting proposals (Section IV); (d) proposal requirements (Section VI); and (e) administrative procedures and requirements (Section VII). There was also a separate part in the RFP for each distinct service for which proposals were being sought. In each separate service part, there was a sub- section delineating the manner in which points would be awarded in the evaluation process. A number of provisions within the RFP are relevant to this controversy and are cited below.

   
   

3. A general requirement found in Section III required all responses to be prepared in a format consistent with the RFP. More specifically, this article provided:

   
   

   REFORMATTING OR NOT RESPONDING TO EACH STATEMENT AND/OR QUESTION WILL RESULT IN THE PROPOSER'S PROPOSAL BEING

   CONSIDERED NON-RESPONSIVE AND IT WILL NOT BE EVALUATED.

4. Paragraph G of Section III of the RFP suggests that changes to the RFP could be made in the "official minutes of the pre-submission conference".

   
   

5. Paragraph G of Section III provides as follows:

   
   

   Any changes made in this RFP which are not part of the official minutes of the pre- submission conference will be communicated in writing as an RFP amendment to all parties who receive this RFP or who record their presence at the pre-submission conference.

   
   

6. Part C of the RFP was directed to vision care plans and required the provider to offer eye examinations, eye glasses and contact lenses. The RFP sought proposals whereby enrolled employees would be covered whether or not they used a "participating" provider. The RFP established minimum benefits and services that were to be offered under the plan and recognized that benefits could be reduced for the use of a non participating provider. If the provider was a participating provider in the plan, the employee would be responsible for a $5 co-payment for all covered services and products (lenses, frames and contact lenses,) except that the employee would also be responsible for charges in excess of $80 for cosmetic contact lenses. If the provider was not a participant in the plan, the RFP required the provider to pay minimum dollar amounts for various services and materials and the employee would be responsible for any excess amount due.

   
   

7. Section I of the vision care portion of the RFP (Part C) required that vision care proposers "have a network of providers in sufficient number to provide accessibility of eye care providers for those state employees who wish to participate."

   
   

8. Section I of the vision care portion of the RFP also required that vision care proposers have a "provider network" that was "easily accessible to State of Florida employees who wish to participate."

   
   

9. Section II of Part C of the RFP required "appropriate and responsive" answers to each of the questions/requirements in Section II. The RFP expressly provided that "the absence of such appropriate and complete responses to each question/requirement will render the proposal non responsive."

   
   

10. With respect to "licensure, organization and management" of the proposed provider, Section II of Part C of the RFP asked "is the proposer licensed as a vision care service contractor doing business as a vision care provider pursuant to Florida State Law?" The reference to licensure was directed to the Florida Department of Insurance licensure as an optometric service plan corporation under Part I of Chapter 637, Florida Statutes.

    
    

11. Section II of Part C of the RFP also required the proposed provider to include certain information concerning its financial arrangements as follows:

    
    

    1. Describe any contractual or other provisions, including insurance to protect members [State of Florida employees] in the event of insolvency. Set forth the contractual provisions with the providers which ensure that members are held harmless in the event of non-payment of provider

       charges by the proposer.

    2. Describe reserving practices and level of reserves maintained to cover unanticipated claims expense.

       
       

12. Section III of Part C set forth the criteria for evaluation of proposals. This subsection of the RFP advised all prospective bidders that the response evaluation process would include an analysis of the following:

    
    

    1. The Cost Proposal.

    2. Previous experience and expertise in providing vision care services.

    3. Historical experience in enrolling and providing vision care services to participants in a group insurance program.

    4. Ability to adequately provide coverage and administrative support services.

    5. Accessibility to providers.

    6. Must have a rating of A or A+ by A.M. Bests & Co.

    
    

13. Section IV of Part C of the RFP was entitled "Evaluation of Proposals". This subsection delineated a point system that would be used to award the contract. The point system was based solely upon the cost to the state employees.

    
    

    1. Prebid Conference.

       
       

14. Between November 1, 1991 and November 14, 1991, prior to the time for submitting responses to the RFP, prospective proposers were permitted to submit questions concerning the bid requirements to the Department. Those questions and the Department's responses were typed and distributed to all prospective bidders prior to the due date for proposals.

    
    

15. Presubmission Question #29 submitted by Petitioner was directed to the requirement in the RFP that a proposer have an A or A+ rating by A.M. Bests. That question and the Department's response were as follows:

    
    

    Section III Criteria for Evaluation item 6 requires a rating of A or A+ by A.M. Bests & Co. VSP is not rated as A.M. Bests does not rate optometric service plan organizations. Can we substitute financial statements in lieu of rating? Answer: Yes

    
    

16. On November 14 and 15, 1991, the Department held separate pre-bid conferences for each of the four parts of the RFP, representing each of the four types of coverage sought. The pre-bid conference for Part C (vision care services) was held on November 15.

    
    

17. Representatives of Intervenor, Petitioner and the Department participated in the pre-bid conference.

    
    

18. During the pre-bid conference on November 15, 1991 regarding the vision care proposals, the Department's representatives in response to questions regarding Presubmission Question #29 and the final data requirement indicated that financial data could be substituted in lieu of a rating from A.M. Bests.

    In response to questions regarding the type of financial statements, the Department's representatives indicated that "the normal financial statement you sent to the Department of Insurance. Those would be satisfactory for us." The above question and answer, together with others submitted prior to the preconference, were transcribed by the Department and then furnished to all interested vendors.

    
    

19. Following the pre-bid conference, the Department prepared minutes of the pre-bid conference, and distributed them to all prospective bidders with a cover memorandum dated November 20, 1991. As set forth in those minutes, the Department's representatives stated that, assuming a proposal met these specifications and all the requirements of the bid, the contract would be awarded on the basis of points.

    
    

20. Optiplan was privy to the above clarifying information. Indeed, the minutes of the prebid conference reflect that Jan Kaplan, president of Optiplan was present.

    
    

21. The Department's response to Question #29 and the statements at the pre-bid conference effectively modified the RFP so that a proposer could submit evidence of the required A.M. Bests rating or financial statements. Failure to submit one or the other of these items should have resulted in a proposal being deemed non-responsive.

    
    

22. There is no evidence of any other communications and/or clarification of the "Criteria for Evaluation" prior to the time the proposals were submitted.

    
    

23. Other than the questions raised by Petitioner concerning the substitution of financial statements for the rating from A.M. Bests, there were no other pertinent written clarifications or modifications of the RFP.

    
    

    1. Responses to the RFP.

       
       

24. On December 2, 1991, the Department opened the proposals it received in response to the RFP.

    
    

25. Only two responses were received regarding the vision care portion of the RFP. Those proposals were from Petitioner and Intervenor. At best, the Department made a cursory effort to determine whether the proposals were "responsive" to the RFP before entering into negotiations with both proposers. Based upon its cursory review, the Department concluded that both proposals were "responsive" to the RFP.

    
    

26. Contrary to the procedure implicit in the RFP, the Department did not adequately review whether the proposals were responsive. More specifically, the committee did not "first determine if all required documents (were) included, that the proposal format (was) followed, and that all responses to the request's responsibilities of the provider (were) properly addressed."

    
    

27. Optiplan's proposal was materially non-responsive in at least two respects. First, it substituted the Department of Insurance certificate for the

    A.M. Bests and Company rating. Second, it failed to provide adequate and/or accurate information regarding its provider network.

    
    

28. The Intervenor Optiplan did not include any financial statements or a rating from A.M. Bests with its proposal. Instead, Intervenor submitted a copy of its Certificate of Authority (the "Certificate") issued by the Florida

    Department of Insurance. Intervenor cited this certificate as evidence of its financial stability. In other words, Optiplan's response unilaterally deleted the RFP requirement (as modified at the pre-bid conference) that it provide financial statements and/or a rating of A or A+ from A.M. Bests and Company.

    Moreover, Optiplan's proposal did not set forth any information regarding its provider network other than to claim:

    
    

    In polling its core of Providers, Optiplan has already received initial indications of intent to participate in its panel for the State of Florida Employees from over 400 (numerical

    400) Optometrist and Opticians, representing coverage in every Florida county. It is Optiplan's expectation, if awarded the contract, to increase Panel membership to provide State employees with a panel in excess of 700 (numerical 700) participating Providers.

    
    

    The proposal continues with a "timeline" for development of a provider network assuming that the contract is awarded to Intervenor. The evidence in this case established that, based upon these representations in the proposal and the verbal representation made by Intervenor's representatives during the negotiation process, the Department concluded that Optiplan had over 400 providers under contract with expressions of intent from an additional 250 providers at the time that it submitted its proposal. As discussed in more detail below, these assumptions were erroneous.

    
    

29. Vision Care's proposal to the RFP included copies of its financial statements and copies of the contracts it had with providers as proof of its "network."

    
    

30. Paragraph 1 of Section II of Part C of the RFP required the proposer to be duly licensed and required a copy of the current license. This requirement was separate and distinct from the provision in the Criteria for Evaluation set forth in Section III of Part C which required an A.M. Bests & Co. rating of A or A+. As noted above, during the pre-bid conference, this requirement was amended to permit the submission of financial statements in lieu of a rating. At the hearing in this cause, the Department contended that it did not have the knowledge or expertise to review the financial statements to determine the financial stability of the proposed providers. Therefore, the Department relied solely upon the Certificate of Authority from the Department of Insurance as evidence of financial stability. 2/ In other words, even though the RFP purports to require a certain standard of financial stability on the part of the proposed provider, the Department unilaterally and arbitrarily ignored this requirement during the review process and substituted in its place a requirement that the proposed provider simply be licensed by the state. This substitution was not announced at the pre-bid conference or by amendment to the RFP. The Department's unilateral and unannounced decision to ignore certain criteria for evaluation set forth in the RFP was arbitrary and capricious.

    
    

31. The Department and Intervenor contend that a proposed bidder was not required to submit financial statements in order to be deemed "responsive" to the RFP. Furthermore, they contend that A.M. Bests does not rate vision care providers. Thus, they suggest that the provision in the RFP requiring a rating from A.M. Bests was simply superfluous. However, no amendment to the RFP was ever issued to delete this requirement. At the pre-bid conference, the

    Department did not delete this requirement, but did permit financial statements to be submitted in lieu of the rating.

    
    

32. The Department accepted the representations of the Intervenor regarding its existing and anticipated network of providers at face value. As discussed in more detail below, the evidence established that the number of existing providers under contract with Intervenor at the time the proposal was submitted and during the negotiation process was greatly overstated. To award the contract to Intervenor in view of this evidence would be arbitrary and capricious.

    
    

33. At the hearing the Department stated that it did not anticipate the entire provider network to be in place at the time the contract was awarded. The Department concedes that in order for a proposal to be responsive to the

    RFP, the proposer had to have at least a "minimal vision care network" in place. The Department's representatives testified at the hearing that they were confident the Intervenor could complete an adequate provider network prior to the commencement date of the contract. However, it is clear that misleading information has already been provided regarding the nature of the Intervenor's provider network and no investigation has been undertaken by the Department to review or evaluate the network in view of this misinformation. While the Department could reasonably allow a successful bidder to supplement an existing satisfactory network, the evidence in this case indicates that the Intervenor has a long way to go in order to develop an adequate network that provides coverage throughout the state.

    
    

34. The evidence was confusing and inconclusive regarding Intervenor's contractual arrangements with its providers. The Intervenor claims that its arrangement with its providers is a "modified" capitation system whereby participating providers receive a share based on the percentage of services provided by that provider from a pool of premiums received for all services performed by participating providers for state employees after payment of material and laboratory fees, Intervenor's reserve allowance and claims for non- participating providers. The Department assumed the Intervenor's providers would provide services under a capitation system whereby providers agreed to see any and all participants in return for a percentage of the pool of premiums.

    The Department contends that financial soundness was less important in a capitation system because there is less need for capital reserves to ensure that money is available to pay providers as claims come in. The evidence raised serious questions as to the validity of the Departments assumption

    
    

35. The Department never received the Intervenor's contracts with its providers. A review of those contracts reveals that, while Intervenor's contracts with its providers limit the right of providers to seek financial reimbursement from participants in the plan, most contracts set forth a specific fee-for-services arrangement. Arguably, if a provider does not receive full reimbursement, he could terminate his agreement and the network of providers would be reduced. If several such instances occur, state employees enrolled in the plan could end up paying premiums with no ready accessibility to providers. Thus, even though there would apparently be no recourse by the providers against the employee participants, employees may only get the benefits of the program if the proposer is able to satisfy its contractual arrangements with the providers. Under these circumstances, the financial stability and ability of the provider to meet its obligations is more important and should have been more closely scrutinized by the Department.

    1. Negotiations with the Proposers.

       
       

36. Pursuant to Section 110.123(3)(d)7.a., Florida Statutes, the Department entered into negotiations with Petitioner and Intervenor following receipt of the proposals and the initial determination that both were responsive. These negotiations took place between December 2, 1991 and April 23, 1992. During this period, both Intervenor and Petitioner submitted supplementary responses to the RFP. Neither of the supplements addressed the financial condition or the existing network of providers of the respective proposer.

    
    

37. The Department included both premiums and benefit provisions as part of the negotiation process. The Department sought to make the proposals received from both bidders as comparable as possible so that it could use the cost to the state employees as the ultimate deciding factor in awarding the contract. The Department was seeking to get the best benefits for state employees at the lowest possible price. The initial bids submitted by Petitioner and Intervenor were not exactly comparable. Through the negotiation process, the Department felt that it was able to "equalize" the proposals from both parties so that the services offered were comparable.

    
    

38. At some point prior to April 23, 1992, the Department's representatives prepared documents purporting to compare the responses, as modified through the negotiation process. This comparison sheet reflects that Petitioner was currently represented by providers in 57 of the 67 counties in the State of Florida and that it had under contract a total of 768 provider locations including 719 optometrists and 50 ophthamologists. This comparison sheet also reflects that Intervenor had under contract 400 providers and had expressions of intent to participate from about 650 providers with an expected network of 900 providers if the contract was awarded. This sheet also indicates that Intervenor was represented in 55 counties in the state. The evidence established that, during the negotiation process, representatives of the Intervenor represented to the Department that Optiplan had 400 providers under contract. As discussed in the Preliminary Statement, Intervenor produced all of its provider contracts for in camera review subsequent to the hearing. Those files indicate that, as of April 23, 1992, Intervenor had only 84 provider locations under contract including 65 optometrists, 2 ophthamologists and 17 opticians. As of April 23, 1992, Intervenor was represented in approximately 16 counties in the state. As of the hearing on June 24, 1992, Intervenor had only

    111 provider locations under contract including 20 additional optometrists, 3 ophthamologists and 4 opticians. As of June 24, 1992, Intervenor was represented in only 19 counties in the state.

    
    

    1. Evaluation of the Proposals to the RFP; General.

    
    

39. As noted above, Section III of Part C of the RFP set forth the "Criteria for Evaluation".

    
    

40. In evaluating the proposals, the Department was supposed to consider experience, geographic accessibility, and the sufficiency of the network of providers as threshold determinations to determine whether the proposer was responsive. After concluding that both Intervenor and Petitioner were responsive, the Department was to determine the successful bidder based on the point calculation set forth in the RFP. This point system was based strictly on the cost of the state employee calculated by average premiums over the life of the contract.

41. After the negotiations were completed, the Department concluded that Intervenor offered monthly premiums of $4.79 for individuals and $12.98 for family coverage compared to Petitioner's calculated premiums of $5.40 for individuals and $13.90 for families. Based on this price difference, the Department concluded that Optiplan's proposal should be awarded a higher number of points under the cost evaluation system set forth in section IV of the RFP. The Director of the Division of State Employees' Insurance recommended to the Department's Secretary that the contract be awarded to Intervenor. In the recommendation, the Director stated:

    
    

    We have concluded both companies offer adequate networks able to handle the needs of insured state employees and their dependents. Given the fact that both companies are able to offer the requested benefits equally, price alone seems to be the real difference between these companies' bids[proposals].

    Accordingly, we have determined OPTIPLAN offers the rates which are most advantageous to state employees. [emphasis added]

    
    

42. The Secretary concurred in the recommendation and notified both proposers of the intended award of the contract to the Intervenor. In his notice, the secretary stated:

    
    

    In deciding to contract with Optiplan, the Department considered the proposer's experience and expertise in providing vision care services, the provider's network, the cost, the number of frame selections made available to participants and the financial stability of the companies. Taking into consideration each of these factors, Optiplan's proposal was most advantageous for the State.

    
    

43. As noted above, the evidence in this case established that, contrary to the representations in the Director's recommendation to the Secretary and the Secretary's Notice to the Proposers, Intervenor had only a minimal network in place at the time of the Notice of Intent to Award. The evidence also established that the only evidence of the financial stability of the Intervenor considered by the Department was the Certificate of Authority from the Department of Insurance.

    
    

44. At the hearing, Petitioner sought a continuance to pursue discovery regarding Optiplan's financial condition. Petitioner was prepared to present some evidence which it claimed would demonstrate the Intervenor's financial instability and inability to meet the contractual requirements. In view of the Department's admission that it relied solely upon the Certificate of Authority and its contention that evidence of financial stability was irrelevant, evidence on this issue was limited and few conclusions can be reached regarding the financial condition of Intervenor. It is clear from the Department of Insurance's records that, during the spring of 1992, the Department of Insurance became concerned with whether Intervenor could meet the net working capital requirements necessary under the statute. Ultimately, the Department of Insurance required a capital infusion prior to issuing a new Certificate of Authority in June of 1992.

45. The facts surrounding the capital infusion were not fully explained at the hearing. However, it is clear that such infusion did not take place until late May, 1992 at the earliest. Thus, if Intervenor had submitted current financial statements with its proposal, such financial statements may have reflected a significant working capital deficiency.

    
    

46. In February of 1992, Intervenor entered into an Installment Agreement with the Internal Revenue Service regarding more than $100,000.00 of unpaid withholding taxes. A federal tax lien in the amount of $96,595.96 was filed against Intervenor on April 3, 1992. The tax lien was levied against all tangible and intangible assets of Intervenor. A subsequent Installment Agreement dated June 22, 1992 reflects that an excess of $89,000.00 remains due to IRS from the Intervenor. These facts were not known to the Department at the time it made its decision to recommend that the contract be awarded to Intervenor.

    
    

    CONCLUSIONS OF LAW

    
    

47. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding pursuant to Sections 120.53(5) and 120.57, Florida Statutes.

    
    

48. Both Intervenor, as the intended contract awardee, and Petitioner, as the sole unsuccessful bidder, have standing to participate in this proceeding.

    
    

49. The purpose of competitive bidding was explicated in Hotel China & Glassware Co. v. Board of Public Instruction, 130 So.2d 78,81 (Fla. 1st DCA 1961), where the court stated as follows:

    
    

    Competitive bidding statutes are enacted for the protection of the public. They create a system by which goods or services required by public authorities may be acquired at the lowest possible cost. The system confers upon both the contractor and the public authority reciprocal benefits, and exacts from each of them reciprocal obligations.

    The bidder is assured fair consideration of his offer, and is guaranteed the contract if his is the lowest and best bid received. The principal benefit flowing to the public authority is the opportunity of purchasing the goods and services required by it at the best price obtainable. Under this system, the public authority may not arbitrarily or capriciously discriminate between bidders, or make the award on the basis of personal preference.

    
    

50. Competitive bidding statutes should be construed to advance their purpose and to avoid their being circumvented. Webster v. Belote, 103 Fla. 976, 138 So. 721 (1931).

    
    

51. As the party challenging the award of the contract, Petitioner must prove by a preponderance of the evidence that the Department's proposed award is improper. Cf. Capeletti Bros., Inc. v. State, Department of General Services,

    432 So.2d 1359, 1363-64 (Fla. 1st DCA 1983) (no error in requiring challenging party in bid proceeding to bear burden of proving agency action incorrect).

    
    

52. As a general rule, the scope of inquiry in a bid proceeding under Chapter 120, Florida Statutes is limited to determining "whether the agency acted fraudulently, arbitrarily, illegally, or dishonestly." Department of Transportation v. Groves-Watkins Constructors, 530 So.2d 912, 914 (Fla. 1988). See also, City of Cape Coral v. Water Services of America, Inc., 567 So.2d 510, 513 (Fla. 2d DCA 1990).

    
    

53. A Hearing Officer's role in a bid protest case is not to conduct a de novo evaluation of the bids or select the bidder to whom the contract should be awarded. See, Moore v. Department of Health and Rehabilitative Services, 596 So.2d 759 (Fla. 1st DCA 1992); Procacci v. Department of Health and Rehabilitative Services, 17 FLW D1859 (Fla. 1st DCA 1992).

    
    

54. The standard for review in this case was explained in Scientific Games as follows:

    
    

    The Hearing Officer need not, in effect, second guess the members of the evaluation committee to determine whether he and/or other reasonable and well-informed persons might have reached a contrary result.

    Rather, a "public body has wide discretion" in the bidding process and "its decision, when based on an honest exercise" of the discretion, should not be overturned "even if it may appear erroneous and even if

    reasonable persons may disagree." Department of Transportation v. Groves-Watkins Constructors, 530 So.2d 912, 913 ((Fla. 1988) (quoting Liberty County v. Baxter's Asphalt & Concrete, Inc., 421 So.2d 505 (Fla. 1982)) (emphasis in original). "[T]he hearing officer's sole responsibility is to ascertain whether the agency acted fraudulently, arbitrarily, illegally, or dishonestly." Grove-Watkins, 530 So.2d at 914.

    
    

    Scientific Games, 586 So.2d at 1131.

    
    

55. In sum, an agency has wide discretion in soliciting and accepting proposals and a decision based on an honest exercise of that discretion may not be overturned by a Hearing Officer even if reasonable persons disagree with the outcome. C.H. Barco Contracting Co. v. Department of Transportation, 483 So.2d 796 (Fla. 1st DCA 1986). Thus, in order for Petitioner to prevail in this matter, Petitioner is required to prove that the Department acted fraudulently, arbitrarily, illegally or dishonestly in some aspect of its development of the RFP, its acceptance of vendor proposals to the RFP as responsive, its evaluation of proposals to the RFP or in its decision as to which vendor is to be awarded a contract pursuant to the RFP.

    
    

56. While the statute and the RFP give the Department broad discretion to consider vendor proposals and determine the plan which would best meet the Department's goals, that discretion is not unlimited. The acceptance of a

    proposal which is not materially responsive to the RFP is arbitrary, and the agency does not have the discretion to do so.

    
    

57. The Department was authorized to solicit proposals for the offering of certain pretax benefit programs to state employees and to award contracts pursuant thereto to the lowest responsive entity submitting a proposal. See, Section 110.123, Florida Statutes.

58. Section 110.123(3)(d)7.a., Florida Statutes provides as follows: Based upon a desired benefit package, the

    Department of Administration shall issue a request for proposal for insurance providers interested in participating in the State Group Insurance Program. Upon receipt of all proposals, the Department may, as it deems appropriate, enter into contract negotiations with insurance providers submitting bids or

    negotiate a specially designed benefit package

    ....These contracts shall provide state employees with the most cost-effective and comprehensive coverage available; however, no state or agency fund shall be contributed towards the cost of any part of the premium of such supplemental benefit plans.

    
    

59. This case involves a request for proposal and not an invitation to bid. A "request for proposal" is defined in Rule 13A-1.001(5), Florida Administrative Code, as follows:

    
    

    A written solicitation for competitive sealed proposals with title, date and hour of the public opening designated and provision for the manual signature of an authorized representative. Since requests for proposal lack definitive specifications, they must also provide general information, applicable laws and rules, statement of work, functional or general specifications, proposal instructions, work detail analysis and evaluation criterion.

    
    

60. The differences in a request for proposal and an invitation to bid were explained in System Development Corporation v. Department of Health and Rehabilitative Services, 423 So.2d 433, 434 (Fla. 1st DCA 1982):

    
    

    Implicit in the definition of an RFP is the underlying rational that, in some types of competitive procurement, the agency may desire an ultimate goal but cannot specifically tell the offerors how to perform toward achieving that goal; thus, a ready distinction arises between an RFP and an ITB. Typically, an ITB is rigid and identifies the solution to the problem. By definition, the invitation specifically defines scope of the work by soliciting bids responsive to detailed plans and specifications set forth. Section

    287.057(1)(a) and (2), as amended. On the contrary, an RFP is flexible, identifies the problem, and requests a solution.

    Consideration of a response to an ITB is controlled by cost, that is, the lowest and best bid, whereas consideration of an offer to an RFP is controlled by technical excellence as well as costs.

    [Footnote omitted].

    
    

61. Section 110.123(3)(d)7, Florida Statutes, does not specifically address the applicability of Chapter 287, Part I, Florida Statutes, which generally governs the state's procurement of insurance and contractual services. See, Section 287.022, Florida Statutes. Petitioner assumes that all pertinent provisions of Chapter 287 apply. The Department and Intervenor do not address the provisions of Chapter 287 and apparently believe that Section 110.123(3)(d)7.a. grants the Department authority to solicit proposals and negotiate a contract outside the general limitations imposed on state contracting by Chapter 287. However, no specific exemption from Chapter 287 is set forth in Section 110.123, Florida Statutes. Indeed, Section 110.123(3)(d)7.a., specifically refers to a "request for proposal" which is a term defined in Section 287.012(15), Florida Statutes. While the Department is granted wide discretion to enter into negotiations following receipt of proposals, there is no authority in Section 110.123 allowing the Department to enter into a contract with a non-responsive bidder. Accordingly, it is concluded that the pertinent provisions of Chapter 287 should apply to the Department's intent to award a contract in this case.

    
    

62. Section 287.057(2) requires:

    
    

    (2) When an agency determines in writing that the use of competitive sealed bidding is not practical, commodities or contractual services shall be procured by competitive sealed proposals. A request for a proposal which includes a statement of the commodities or contractual services sought and all contractual terms in conditions applicable to the procurement of commodities or contractual services, including the criteria which shall include, but need not be limited to, price, to be used in determining acceptability of

    the proposal shall be issued....To ensure full understanding of and responsiveness to the solicitation requirements, discussions may be conducted with qualified offerors. The offerors shall be accorded fair and equal treatment prior to the submittal date specified in the request for proposals with respect to any opportunity for discussion and revision of proposals. The award shall be made to the responsible offeror whose proposal is determined in writing to be the most advantageous to the state, taking into

    consideration the price and the other criteria set forth in the request for proposals. The contract file shall contain the basis on

    which the award is made.

    
    

63. The principal inquiry in this proceeding is whether Intervenor's proposal was responsive. As discussed below, the evidence in this case established that the proposal submitted by Intervenor was not responsive to the RFP.

    
    

64. Section 287.012(13) provides:

    
    

    (13) "Qualified bidder," "responsible bidder," "qualified offeror," or "responsible offeror" means 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.

    
    

65. Section 287.012(16) provides:

    
    

    1. "Responsive bid" or "responsive proposal" means a bid or proposal submitted by a responsive, and responsible or qualified, bidder or offeror which conforms in all material respects to the invitation to bid or request for proposal.

       
       

66. Section 287.012(17) provides:

    
    

    1. "Responsive bidder" or "responsive offeror" means a person who has submitted a bid or proposal which conforms in all material respects to the invitation to bid or request for proposals.

    
    

67. By a preponderance of the evidence, Vision Care has established that Optiplan's proposal was materially non-responsive and should have been rejected. In order to award a contract to Intervenor, the Department would have to subvert the contract award process by waiving material requirements of the RFP and ignoring certain "Criteria for Evaluation" set forth therein.

    
    

68. If the Department intended to rely solely upon the Certificate of Authority issued by the Department of Insurance as evidence of a proposer's financial stability, that intent should have been clearly spelled out in the RFP, an amendment thereto or an appropriate announcement at the pre-bid conference. By requiring in the RFP that proposed bidders have a rating from

    A.M. Bests of A or A+, the Department alerted prospective bidders that a higher standard of financial stability would be required. When the Department learned that the rating system may not be applicable to all vision care providers, it did not delete the requirement, but, instead, advised prospective bidders that they could submit financial statements in lieu of the rating. The Intervenor's failure to comply with this requirement as modified should have rendered its proposal non-responsive. It is arbitrary for the Department to decide after the proposals have been submitted to ignore this requirement on the grounds that it did not have the expertise to review the financial statements. Such a

    unilateral and uncommunicated decision undermines the confidence of prospective bidders in the bidding process and should not be condoned.

    
    

69. The RFP clearly anticipated that the proposer would have a provider network. When the proposals were evaluated by the Department, the Department was operating under the belief that the Intervenor had approximately 400 providers under contract. The evidence established that Intervenor actually had less than 100 providers under contract. To explain this discrepancy, the Intervenor suggests that it had 400 "indications of intent" to participate. However, it is clear that at the time the evaluation of the proposals was conducted, the Department was operating under the assumption that those "indications to participate" were providers under contract. This impression was based upon the verbal representations made by the Intervenor's representatives. Under these circumstances, it would be arbitrary for the Department to ignore the evidence which refutes the prior representations made by Intervenor regarding its provider network.

    
    

70. The Department and the Intervenor argue that the RFP does not require any particular size of provider network and that the Intervenor will be able to develop an adequate network prior to the commencement of the contract. While the RFP is not specific regarding the size of the network, the necessity for a readily accessible network is clearly spelled out. If the Department did not intend to require such a network, the provisions in the RFP regarding the network should have been deleted.

    
    

71. Although Intervenor's proposal should have been deemed non-responsive, the Department is not obligated to award the contract to Petitioner. Indeed, Section 287.057(3) provides that, except in certain specified situations, an agency may not award a contract "without receiving competitive sealed bids or competitive sealed proposals."

72. Section 287.012(5) defines competitive sealed proposals as follows: "Competitive sealed bids" or "competitive

    sealed proposals" refers to the receipt of two

    or more sealed bids or proposals submitted by responsive and qualified bidders or offerors. (emphasis added)

    
    

73. This definition was added to the statute in 1988 apparently in response to the First District Court of Appeals decisions in Satellite Television Engineering Inc. v. Department of General Services, 522 So.2d 440 (Fla. 1st DCA 1988) and Harris/3M v. Office Systems Consultants, 533 So.2d 833 (Fla. 1st DCA 1988). Under the statutes in effect at the time of those decisions, the term "competitive bids" was not defined in the statute. The court rejected the Department of General Services interpretation that competitive bids required two or more responsive bids. The court held that where there were "two or more bids only one of which 'conforms in all material respects to the Invitation To Bid,' the competitive bidding requirement has been met and the Division may authorize the agency involved to award the contract without instituting a second round of bidding." By adding the "competitive sealed bids" definition to the statute, the legislature has implicitly rejected this interpretation and required that two responsive bids or proposals be received in order for the process to be deemed competitive and the contract awarded.

74. Section 287.057(4) provides as follows:

    
    

    (4) If less than two responsive bids or proposals for commodity or contractual services purchases are received, the division may negotiate or authorize the agency to negotiate on the best terms and conditions.

    
    

75. The "division" was defined in Section 287.012(8) as the Division of Purchasing of the Department of General Services. It is not clear how the abolition of the Department of Administration and the creation of the Department of Management Services discussed above effect these statutory provisions. In any event, because there was only one responsive bid to the ITB, this contract should not be awarded without authorization from the successor to DGS to negotiate on the best terms and conditions.

    
    

76. In Harris/3M, supra, the Court held that under the prior statute, an agency was not required to obtain authority from DGS prior to awarding a contract to the only responsive bidder. In 1990, the legislature added the above provision which made it clear that, if only one responsive bid or proposal is received, an agency must obtain permission from DGS prior to entering into a contract. That provision clearly implies that the agency is not bound to award a contract to the one responsive proposer. Instead, DGS (or the agency if authorized) is empowered to negotiate a contract so as to achieve the best

    price possible for the state.

    
    

77. It is not clear what factors DGS' successor will consider in evaluating an agency's request to enter into a contract with a sole responsive proposer. 3/ Agruably, the criteria set forth in Rule 13A-1.002(6) apply. Pursuant to this rule, DGS required an agency to review the circumstances surrounding the solicitation in order to determine the reasons, if any, why only one responsive proposal was received.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered by Respondent rejecting the

proposal filed by Optiplan, Inc. in response to RFP 92-0007. The Respondent

should either seek approval to negotiate with Petitioner or reject all bids and seek new proposals.

DONE and ENTERED this 30th day of September, 1992, at Tallahassee, Florida.

J. STEPHEN MENTON 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 30th day of September, 1992.

ENDNOTES

1/ As set forth in a Suggestion of Change in Name of Parties filed by Respondent on August 20, 1992, the Department of Administation has been abolished and the Division of State Employees' Insurance has been transferred to the Department of Management Services pursuant to Section 1 of Chapter 92-279, Laws of Florida and Section 55, Chapter 92-326, Laws of Florida effective July 1, 1992. For purposes of this Recommended Order, the Respondent will be referred to as the "Department".

2/ In determining whether to issue a Certificate of Authority, the Department of Insurance seeks to ensure that:

no contribution to the funds of the corporation for working capital are repayable by the corporation except out of earned income over and above operating expenses in such reserve as [the Department of Insurance] may deem adequate.

The amount of money for working capital is, and will continue to be, sufficient to carry all acquisition costs and operating expenses for a period of at least three months. This sufficiency of working capital shall be determined by the Department of Insurance....

Section 637.041(3)(a), Florida Statutes.

Each optometric service plan corporation is required to submit annually to the Department of Insurance the verified statement of its financial condition, prepared in accordance with generally accepted accounting principles, "in such form and containing such information as [the Department of Insurance] deems necessary." Section 637.061, Florida Statutes. The Department of Insurance is authorized to revoke, suspend or refuse to renew the Certificate of Authority of an optometric service plan corporation if it is in "unsound financial condition which would render its further transaction of business in the state hazardous or injurious to its policy holders, its certificate-holders, or the public." Section 637.115(1)(b), Florida Statutes. The Department of Insurance is also authorized to "immediately suspend" a Certificate of Authority, without advance notice or hearing, if adequate working capital is not maintained, or if the corporation is insolvent or impaired, or if the financial condition of the corporation poses an imminent threat. Section 637.115(2), Florida Statutes.

3/ Rule 13A-1.002(6) applies when "no competitive sealed bids/proposals" have been received. The term "competitive sealed bids" is defined in Rule 13A- 1.001(38) to refer to the receipt of two or more sealed bids by responsive and qualified bidders. Thus, when only one bid has been received, the provisions of Rule 13A-1.002(6) would appear to apply. This interpretation is consistent with Rule 13A-1.018(b).

APPENDIX

All parties have submitted Proposed Recommended Orders. The following constitutes my rulings on the proposed findings of fact submitted by the parties.

The Petitioner's Proposed Findings of Fact

Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or

Reason for Rejection.

1. Adopted in substance in the Preliminary Statement and in Findings of Fact 2 and 9.

2. Adopted in substance in Findings of Fact 9.

3. Adopted in substance in Findings of Fact 16.

4. Adopted in substance in Findings of Fact 15.

5. Adopted in substance in Findings of Fact 17.

6. Adopted in substance in Findings of Fact 19.

7. Adopted in substance in Findings of Fact 20.

8. Adopted in substance in Findings of Fact 22.

9. Adopted in substance in Findings of Fact 23.

10. Adopted in substance in Findings of Fact 24.

11. Rejected as unnecessary and irrelevant.

12. Adopted in substance in Findings of Fact 26.

13. Adopted in substance in Findings of Fact

    26 and 27.

14. Rejected as unnecessary and subordinate to Findings of Fact 34.

15. Adopted in substance in Findings of Fact 25.

16. Adopted in substance in Findings of Fact 32.

17. Adopted in substance in Findings of Fact 33.

18. Subordinate to Findings of Fact 4.

19. The first sentence is adopted in substance in Findings of Fact 36. The remainder is subordinate to Findings of Fact 54.

20. Adopted in substance in Findings of Fact 44.

21. Adopted in substance in Findings of Fact 46.

22. Adopted in substance in Findings of Fact 46.

23. The first sentence is adopted in substance in Findings of Fact 46. The second sentence is subordinate to Findings of Fact 46.

24. Adopted in substance in Findings of Fact 46.

25. Subordinate to Findings of Fact 40.

26. Adopted in substance in Findings of Fact 46.

27. Adopted in substance in Findings of Fact 46.

28. Adopted in substance in Findings of Fact 46.

29. Adopted in substance in Findings of Fact 46

30. Rejected as unnecessary and as constituting argument.

31. Subordinate to Findings of Fact 42 and 43.

32. Subordinate to Findings of Fact 6.

33. Subordinate to Findings of Fact 49-51.

34. Adopted in substance in Findings of Fact 50.

The Respondent's Proposed Findings of Fact

Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or

Reason for Rejection.

1. Adopted in substance in the Preliminary Statement and in Findings of Fact 2 and 9.

2. Adopted in substance in Findings of Fact 3, 6 and 33.

3. Subordinate to Findings of Fact 33.

4. Adopted in substance in Findings of Fact 44, 45 and 49.

5. Adopted in pertinent part in Findings of Fact 45.

6. Adopted in substance in Findings of Fact 49.

7. Adopted in substance in Findings of Fact 50.

8. Subordinate to Findings of Fact 20, 23, 26 and 29.

9.

1. Subordinate to Findings of Fact 38 and 39.

2. Adopted in substance in Findings of Fact 7.

3. Subordinate to Findings of Fact 52.

4. Subordinate to Findings of Fact 40 and 41.

5. Subordinate to Findings of Fact 40, 41 and 46.

6. Subordinate to Findings of Fact 46.

7. Subordinate to Findings of Fact 40 and 41. This subject matter is also addressed in Conclusions of Law 23.

8. Subordinate to Findings of Fact 54.

The Intervenor's Proposed Findings of Fact

Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or

Reason for Rejection.

1. Adopted in substance in the Preliminary Statement and in Findings of Fact 2 and 9.

2. Adopted in substance in Findings of Fact 14.

3. Adopted in substance in Findings of Fact 14.

4. Adopted in substance in Findings of Fact 15.

5. Adopted in substance in Findings of Fact

   18 and 19.

6. Adopted in substance in Findings of Fact 20.

7. Adopted in substance in Findings of Fact 24.

8. Adopted in substance in Findings of Fact

   26 and 27.

9. Adopted in substance in Findings of Fact 23.

10. Adopted in substance in Findings of Fact 26.

11. Adopted in substance in Findings of Fact 26.

12. Subordinate to Findings of Fact 29.

13. Adopted in substance in Findings of Fact 33.

14. Adopted in substance in Findings of Fact 7 and 52.

15. Subordinate to Findings of Fact 6.

16. Adopted in substance in Findings of Fact

    4 and 7.

17. Adopted in substance in Findings of Fact

    44 and 45.

18. Adopted in substance in Findings of Fact 45.

19. Subordinate to Findings of Fact 48.

20. Adopted in substance in Findings of Fact

    49 and 50.

21. Rejected as constituting argument.

22. Subordinate to Findings of Fact 40 and 41.

23. Subordinate to Findings of Fact 40 and 41.

24. Subordinate to Findings of Fact 40 and 41 and also addressed in Conclusions of Law

23 and 24.

33. Rejected as argumentative. The pertinent factual issues are addressed in Findings of Fact 54.

COPIES FURNISHED:

Edward O. Savitz, Esquire Bush, Ross, Gardner, Warren

& Rudy, P.A.

220 South Franklin Street Tampa, Florida 33602

Kenneth Oertel, Esquire Christopher Bryant, Esquire Oertel, Hoffman, Fernandez

& Cole, P.A.

P.O. Box 6507

Tallahassee, Florida 32314-6507

Stephen S. Mathues, Esquire Department of Management Services Knight Building, Suite 309

Koger Executive Center 2737 Centerview Drive

Tallahassee, Florida 32399-0950

Larry Strong, Acting Secretary Department of Management Services Knight Building, Suite 307

Koger Executive Center 2737 Centerview Drive

Tallahassee, Florida 32399-0950

Susan Kirkland, General Counsel Department of Management Services Knight Building, Suite 110

Koger Executive Center 2737 Centerview Drive

Tallahassee, Florida 32399-0950

John M. Carlson, Esquire Department of Management Services

Knight Building, Koger Executive Center 2737 Centerview Drive

Tallahassee, Florida 32399-0950

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 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.

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

AGENCY FINAL ORDER

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

STATE OF FLORIDA DEPARTMENT OF MANAGEMENT SERVICES

VISION CARE, INC. a/k/a VISION SERVICE PLAN,

Petitioner,

vs. DOAH CASE NO. 92-3441BID

DEPARTMENT OF ADMINISTRATION, DIVISION OF STATE EMPLOYEES' INSURANCE,

Respondent,

and

OPTIPLAN, INC.,

Intervenor.

/

FINAL ORDER

On September 30, 1992, the Division of Administrative Hearings (DOAH) Hearing Officer submitted his Recommended Order to the Department of Management Services (DMS). Pursuant to Section 120.57(1)(b)9, F.S., and F.A.C. Rule 13- 4.017, the parties were allowed to file written exceptions to the Recommended Order. DMS filed Exceptions and a Proposed Substituted Order, and Intervenor, OPTIPLAN, INC., (Optiplan) filed Exceptions. Additionally, the Hearing Officer reviewed, in camera, certain documents and filed a Memorandum with his findings relating to those documents. Petitioner, VISION CARE, INC., (Vision Care) then filed a reply to the Hearing Officer's Memorandum and Exceptions to the Proposed Substituted Order filed by DMS, and a reply to the Exceptions filed by Optiplan. The Recommended Order thereafter came before me, as head of the Department, for final agency action.

RULINGS ON EXCEPTIONS

DMS Exceptions:

Exceptions 1, 2, 3, 4 and 5 of DMS relate to certain findings of fact and conclusions of law dealing with the issue of the ability of DMS to negotiate directly with a bidder, regardless of whether that bidder's proposal was in strict compliance with the terms of the RFP. To the extent that the Recommended Order finds the actions of DMS improper or contrary to law, the exceptions of DMS are, for the reasons set forth below, sustained.

Section 110.123(3)(d)7, Florida Statutes, provides as follows:

Upon receipt of all proposals, the Department may, as it deems appropriate, enter into contract negotiations with insurance providers submitting bids or negotiate a specially designed benefit package.

The above-cited statute gives the Department the authority to negotiate without seeking the approval of the Division of Purchasing and gives the Department the authority to negotiate with proposers regardless of whether the proposers' submissions have been determined responsive to the request for proposal. Given this premise, the issue is whether the intended award of the contract to Optiplan based on the negotiations was correct.

DMS Exception No. 6 is denied, as there was sufficient evidence presented at hearing to indicate that the network represented by Optiplan as being in place, was, at best, exaggerated. However, there was no evidence presented to indicate that DMS knew at the time of the negotiations of this overstatement. Thus, the intended award was based on erroneous information supplied to the Department during the negotiations.

Optiplan Exceptions:

Exception Numbers 1, 2, 4, 10 and 11 of Optiplan are addressed above.

Exception Numbers 3, 5, 6, 7, 8 and 9 are rejected, as the findings of fact questioned are either supported by competent, substantial evidence, or are reasonable inferences drawn from the evidence by the trier of fact, the Hearing Officer.

Optiplan's exception to the Recommendation of the Hearing Officer is well taken. The Hearing Officer's recommendation reads as follows:

RECOMMENDED that a Final Order be entered by Respondent rejecting the proposal filed by Optiplan, Inc, in response to RFP 92-0007. (sic) The Respondent should either seek approval to negotiate with Petitioner or reject all bids and seek new proposals.

The Hearing Officer's sole responsibility is to determine whether the agency's proposed action is fraudulent, arbitrary, illegal or dishonest, Deartment of Transportation v. Groves-Watkins Constructors, 530 So.2d 912 (Fla. 1988). The question which was to be resolved at the hearing was whether DMS' proposed award of a vision care contract to Optiplan pursuant to negotiations which resulted

from RFP NO. 92-007 should be upheld. Once the agency action is determined to be flawed, the subsequent course of action is left to the agency's sound discretion, Moore v. Department of Health and Rehabilitative Services, 596 So.2d 759 (Fla. 1st DCA 1992).

IT IS THEREFORE ORDERED by the Department of Management Services that the offer made by Optiplan during the negotiations is rejected. A new request for proposals is to be issued, and except to the extent modified above, the Recommended Order is hereby adopted.

A party who is adversely affected by this Final Order is entitled to judicial review which shall be instituted by filing one copy of the Notice of Appeal with the Agency Clerk of the Department of Management Services, and a second copy, along with filing fee prescribed by law, with the District Court of Appeal in the appellate district where the agency maintains its headquarters or where a party resides. Review proceedings shall be conducted in accordance with the Florida Appellate Rules. The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed.

DONE AND ORDERED in Tallahassee, Leon County, Florida this 4th day of January, 1992.

WILLIAM H. LINDNER

Secretary

Department of Management Services Koger Executive Center

Knight Building

2737 Centerview Drive

Tallahassee, Florida 32399-0950

COPIES FURNISHED:

Edward O. Savitz, Esq. Stephen S. Mathues, Esq. Kenneth G. Oertel, Esq.

Division of Administrative Hearings, Clerk

Docket for Case No: 92-003441BID

Orders for Case No: 92-003441BID