vs. ) CASE NO. 93-0854BID
Respondent. )
Pursuant to Notice, this cause was heard by Linda M. Rigot, the assigned Hearing Officer of the Division of Administrative Hearings, on February 25-26, 1993, in Tallahassee, Florida.
For Petitioner: William A. Friedlander, Esquire
A. Eugene Lewis, Esquire Marlow V. White, Esquire Lewis & White, P.A.
For Respondent: Alfred O. Bragg, III, Esquire
Robert C. Byerts, Esquire Department of Community Affairs 2740 Centerview Drive
The issue presented is whether the Department has acted fraudulently, arbitrarily, illegally, or dishonestly in issuing its bid specifications for its proposed Lease No. 520:0062.
On January 26, 1993, the Department issued its Request for Proposal and Bid Proposal Submittal Form for a full service lease, and Petitioner timely filed its notice of protest and its formal protest to that Request for Proposal and to the underlying Request for Prior Approval of Space Need. Petitioner's protest was thereafter transferred to the Division of Administrative Hearings for the conduct of a formal proceeding.
Petitioner presented the testimony of Kirby K. Bass, Leonard Pepper, Lynn Ekholm, Mary Anne McMullen, and Randall C. Baker. The Department presented the testimony of Kirby K. Bass, Lynn Ekholm, Mary Anne McMullen, Randall C. Baker, and Mark A. Hendrickson. Additionally, Petitioner's Exhibits numbered 1, 3, and
4 and the Department's Exhibits numbered 1-11 were admitted in evidence.
Both parties submitted post-hearing proposed findings of fact in the form of proposed recommended orders. A specific ruling on each proposed finding of fact can be found in the Appendix to this Recommended Order.
The Department of Community Affairs has its headquarters in the Rhyne Building on Centerview Drive in the City of Tallahassee. The Rhyne Building is one of a cluster of office buildings in the Koger Center which is owned by Koger Properties, Inc.
One of the organizational units in the Department is the Energy Office, which was organizationally located within the Office of the Governor until 1991. At that time, the Energy Office was transferred by the Legislature to the Department, and the Department temporarily located the Energy Office organizationally as one of the components in the Office of the Secretary. The Secretary of the Department has decided to organizationally and physically integrate the Energy Office into the Department's Division of Housing and Community Development, having determined that the Energy Office programs are functionally related to that Division's programs.
The Energy Office was physically housed in a building owned by Petitioner on Bronough Street in the City of Tallahassee. After the Energy Office was merged with the Department, the Department decided to move the Energy Office to the Rhyne Building. Officials of the Department responsible for supervision of the Energy Office had found it inconvenient to travel the distance between the Bronough Street and Centerview Drive locations and were experiencing difficulty in getting Energy Office personnel and other Department personnel to meet with each other and coordinate related duties. Accordingly, on January 31, 1993, the Department moved the Energy Office out of the Bronough Street building and into the Rhyne Building. As a result of that move, Petitioner has filed a lawsuit against the Department, alleging, inter alia, that the Department breached its lease with Petitioner. That litigation is still pending.
Another organizational component of the Department is the Florida Housing Finance Agency. That Agency is physically located in the Marathon Building on Seagate Drive in the City of Tallahassee, part of the Koger Center. That Agency is in need of additional office space caused by new programs and by additional employees. The Agency does not have adequate space for its employees in its current location.
The Agency and senior Department officials desire that the Agency remain in close physical proximity to the Rhyne Building since the Agency, like the other components of the Department, receives its administrative and other support services, including fiscal, legal, personnel, and procurement, from the Department. Further, the Agency, like the other divisions of the Department, have a number of interrelated programs which require a close working relationship.
Although there were a number of possible solutions to the overcrowding faced by the Agency, splitting its different components into different locations was determined to be impracticable. Accordingly, several proposals to relocate other components of the Department were considered. Ultimately, the Department decided to lease additional office space for the Agency and locate the Energy Office in the Rhyne Building.
A state agency which needs private office space of 3,000 square feet or more is required to engage in competitive bidding procedures. A state agency initiates such a process by submitting a Request For Prior Approval of Space Need ("RSN") to the Department of Management Services ("DMS") to show its need for additional space. Attached to the RSN is a Letter of Agency Staffing, which is used to determine the additional space needed based on the number and pay grade of agency employees and other variables. When an RSN is submitted, DMS first determines whether there is suitable state office space to meet the needs of the agency. If state-owned space is not available, the agency may solicit competitive bids from private lessors for the proposed lease by using a Request For Proposal ("RFP").
The state agency prepares the specifications used in the RFP, using the guidelines of DMS. Such specifications include a functional description of the type of space needed, the square footage, and the area of acceptable locations. The area of location of the premises is outlined by geographic boundaries on a map of the city or county where the space is needed, and the map is attached to the RSN and the RFP. The RFP also contains the evaluation criteria created by the agency soliciting bids for determining the score for each bidder's proposal. Each criterion is assigned a specific score, and the total possible score for all criteria is 100.
The Department's interest in keeping its component programs in close proximity to each other and to the Office of the Secretary in the Rhyne Building at the Koger Center for supervisory, management, and operational effectiveness is strong. The amount of additional space needed, however, made the Department's acquisition of additional space subject to competitive bidding.
The Department employee responsible for obtaining the additional space, Kirby Bass, advised senior management officials that in order for the Department to realize its desire to locate all of its components in proximity to the Office of the Secretary in the Koger Center, the Department could simply expand its current leases in the Koger Center in yearly increments below 3,000 square feet, thereby avoiding the requirement that the Department engage in the competitive bidding process. Rather than following the incremental approach, Bass' supervisor, Lynn Ekholm, directed him to prepare appropriate specifications for a new lease to accommodate 55 new and transferred employees needing approximately 14,000 square feet of additional space. Bass began gathering the information and preparing the paperwork to obtain the additional office space under the direction and supervision of Ekholm, the Department's Director of Administrative Services, and Mary Anne McMullen, the Department's Assistant Secretary, who had been charged with resolving the Department's office space problems.
Bass contacted Randall Baker at DMS and discussed with him that Department's requirements for procuring additional office space. He also contacted the purchasing agents at the Department of Revenue and at the Department of Labor and Employment Security ("DLES") to determine how best to prepare the requisite documentation to meet the lease parameters desired by his Department. He discussed his Department's desire to obtain office space in an existing building in or near the Koger Center.
Bass discovered that DLES had two leases obtained through competitive bidding within a small geographic area encompassing the Koger Center. One lease encompasses in excess of 15,000 square feet and is dated December 13, 1990; the other lease encompasses in excess of 16,000 square feet and is dated November 19, 1992. In both of those bid solicitations, DLES had received bid proposals from only two bidders located within that boundary -- Koger Properties, Inc., and Parkway-Oakland General Partnership. Each of those bidders received one of those two bid awards.
Bass also made telephone inquiries to owners of buildings within the geographic area utilized by DLES to obtain those two leases and drove through the area. Bass did not go into any of the buildings that he drove past to inquire of the rental agents whether they in fact had any space available. He did notice a sign located at or near the complex east of the Oakland Complex advertising space available for up to 18,000 square feet. The evidence is unclear as to the exact buildings with the sign. If the sign related to the buildings known as the Parkway-Oakland Complex, no space was available, according to the testimony of one of the Department's witnesses. If that sign related to the Parkway Terrace Building, that building is owned by one of Petitioner's related companies, and that building is full. As a result of Bass' driving in the area, the Department did not discover any vacant space in any existing building within the geographic boundaries utilized by DLES.
As a result of Bass' telephone contacts to owners of existing buildings within the geographic boundaries utilized by DLES, the only rental agent who represented that he had sufficient space available at that time was the rental agent for the Koger Center. That rental agent further advised Bass that although he had sufficient space available in the Koger Center, the rental rate would not be competitive with rates charged by other landlords. Accordingly, at the time that the Department drafted the geographic boundaries and evaluation criteria which are the subject of this proceeding, it knew that the Koger Center had sufficient space available although the Koger Center's rental agent did not consider his rates to be competitive, and the Department knew of no other available space within the boundaries.
The Department prepared its RSN, utilizing the geographic boundaries which DLES had used. As stated in the RSN and in the subsequent RFP, the geographic boundaries selected by the Department are as follows:
Beginning at the intersection of Capital Circle and Governor's Court Road, proceed west on Governor's Court Road until it ends.
Continue on a projection, due west, to the intersection with Blair Stone Road. Proceed south on Blair Stone Road to Paul Russell Road. Proceed east on Paul Russell Road to Monday Street. Continue east on Monday Street to Capital Circle. Go north on Capital Circle to Governor's Court Road, the point of beginning.
The RSN also represented that the Department was seeking a new lease for 14,193 square feet, more or less, to house 55 employees from June 1, 1993, through March 31, 1997.
The Department submitted its RSN to DMS where it was reviewed by Randall Baker. DMS is authorized to approve an RSN submitted by a state agency seeking to lease private office space. DMS checks to determine if there is space available in a state-owned building, and, if there is not, approves the request of an agency to lease private space. DMS also checks to verify that the amount of space being requested is appropriate for the number and types of employees who will occupy the desired space. DMS does not have the authority to approve or disapprove other components of the RSN; for example, DMS can only make recommendations regarding such items as geographic boundaries. Baker reviewed the RSN, determined that there was no space available in a state-owned building, determined that the amount of space requested was appropriate for the number and types of employees to be housed in the additional space, and determined that the RSN form was properly completed.
Baker was concerned about the small geographic area from which the Department would accept bids. He noted, for example, that the northern boundary cuts through a residential area and is not a commercial thoroughfare. He checked the vendor list maintained by DMS and found that there were other properties which were available but which were outside the boundaries to be utilized by the Department. Based upon his experience, he knew that an expanded radius for bid submittal would be likely to obtain a better rental rate for the Department.
Baker sent the Department a letter, dated December 30, 1992, which states as follows:
While we are approving your Request for Space Needs, it should be noted that the boundaries are rather restricted and may eliminate bidders who have quality space available.
The Department employees who received and/or reviewed that letter did not consider Baker's letter to be a criticism of the Department's desired geographic boundaries. Accepting the first half of the sentence and ignoring the second half of the sentence, the Department determined that Baker's letter represented approval of its RSN and the geographic boundaries set forth therein.
Accordingly, on January 26, 1993, the Department issued its RFP for its proposed Lease No. 520:0062. The bid specifications contained in that RFP called for 14,193 square feet of office space, more or less, to be available for occupancy not later than June 1, 1993. In addition, the RFP specified that the office space must be located in the City of Tallahassee inside the same geographic boundaries described in the Department's RSN.
The RFP also contained the criteria by which bid submittals would be evaluated. Those criteria are as follows:
C. EVALUATION CRITERIA (AWARD FACTORS)
The successful bid will be that one determined to be the lowest and best. All bids will be evaluated based on the award factors enumerated below.
Rental, using Total Present Value methodology for basic term of lease (see #D, General Provisions Items 3 and 4) applying
the present value discount rate of 5.38 percent. (Weighing: 30)
The effect of environmental factors, including the physical characteristics of the building and the area surrounding it, on the efficient and economical conduct of Departmental operations planned for the requested space. (Weighing: 15)
Conformance of and susceptibility of the design of the space offered to efficient layout and good utilization and to the specific requirements contained in the Invitation to Bid. (Weighing: 15)
Frequency and availability of satisfactory public transportation within one block of the offered space. (Not to exceed a weight of 10 award factors) (Weighing: 4)
Availability of adequate dining facilities within one mile of the offered space. (Weighing: 5)
Proximity of offered space to Department of Community Affairs, Secretary's Office, Rhyne Building, Koger Center. (Weighing: 25)
Moving cost (furniture, equipment, etc.) (Weighing: 1)
Aggregate square footage in street level space. (Weighing: 5)
Total award factors =
100
The bid specifications contain no other guidelines or information on how each criterion will be evaluated or how points will be awarded within the point spread for each criterion.
Other state agencies have utilized proximity as an evaluation criterion, and DMS considers proximity a legitimate and potentially important criterion. However, the proximity that is usually referred to is proximity to the clients being served, not, as in this case, proximity to the Office of the Secretary. At first blush, the bid specifications allocate the highest score to cost and the second highest score to the proximity of the leased space to the Rhyne Building. The evaluation criteria in the RFP place almost as much weight on proximity to the Office of the Secretary (criterion 6), assigning 25 points, as on the rental amount bid (criterion 1), assigning 30 points. Yet, criterion
2 with its weight of 15 points may also relate to proximity to the Office of the Secretary by its use of vague terms about the area surrounding the building and the efficient and economical conduct of the Department's operations. It may well be, therefore, that the proximity to the Office of the Secretary offers a maximum score of 40 points, while the amount of rent only offers 30 points.
Some state agencies awarding points for proximity include in their bid specifications a grid showing how many points are to be awarded for each incremental distance that a space being offered is from the target. Such a grid discloses to potential bidders in advance the number of points a bidder could expect to receive, for example, for a building located ten miles from the target as compared with how many points a bidder would receive for a building located one mile away. The Department's RFP contains no such grid system.
In the RFP under consideration herein, it is certain that Koger Center would receive the maximum number of points allowable for proximity since the Office of the Secretary is located there. There is no requirement that any other bidder receive any points for the proximity criterion.
Upon reviewing the bid specifications under consideration herein, Anagram Corporation timely filed its notice of protest and its formal protest challenging those bid specifications. By operation of law, the timely filing of the formal protest has caused the bidding process to be stayed until the resolution of this proceeding.
Leonard Pepper is an officer and shareholder in Anagram Corporation. He is also an officer, shareholder or partner in other business entities which offer commercial space for rent in Tallahassee. Pepper and his companies have been leasing buildings to the State for the last 25 years. During that period, Pepper and his companies have won bid awards approximately 18 to 20 times.
Neither Pepper nor Anagram has available office space within the geographic boundaries contained within the RFP. The Anagram building recently vacated by the Energy Office is still available. It, together with two other small buildings on adjacent parcels also owned by Anagram, would have sufficient space to respond to the RFP, but they are outside the geographic area specified. Gemini Associates, one of Pepper's related businesses, owns two buildings in what is known as the old FDLE Complex on Adams Street midway between the Capitol and the Governor's Mansion. One of those buildings has 27,000 square feet available and the other has 32,000 square feet available. Those buildings are also outside the geographic boundary specified in the RFP. Pepper has already made arrangements, however, for Gemini Associates to transfer title to those buildings to Anagram if Anagram so desires. Accordingly, Petitioner owns or controls property which meets the bid specifications but for the geographic boundaries contained in the RFP.
The more potential bidders there are in a bid solicitation process, the more competitive the bidders will be. Accordingly, expanding the radius from the restrictive boundaries contained in the Department's RFP is likely to result in obtaining a better rental rate. The Department's choice of geographic boundaries after ascertaining that only Koger Center was known to have available space although not at competitive rates, after learning that those boundaries on two different occasions had produced only two bids, and after being cautioned by DMS that the boundaries were restrictive enough to preclude available quality space, leads to only one reasonable conclusion: that the Department intended to award the bid to the Koger Center if Koger submitted a bid. The bid specifications drawn by the Department were likely to achieve the Department's intended goal to have all of its organizational components physically housed in close proximity to the Office of the Secretary in the Koger Center, despite the requirement that the Department solicit competitive bids.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties hereto and the subject matter hereof. Sections 120.53(5) and 120.57(1), Florida Statutes.
In its petition, Anagram has protested the RFP and the RSN upon which it is based. The RFP presents the initial point of entry for Chapter 120 purposes and, therefore, jurisdiction in this case extends to a review of the underlying RSN to the extent that it may establish the geographic boundaries for proposed Lease No. 520:0062. Further, Section 120.53(5)(b), Florida Statutes, confers the right to protest bid specifications, and the Department's argument that Anagram should wait and see how many bids are received is without merit. Anagram is entitled, as a matter of law, to present its grievance when it matures and is not required to wait until a later stage in the bid award process.
Anagram has met its burden of proving that the purpose of competitive bidding has been subverted because the Department acted fraudulently, arbitrarily, illegally, or dishonestly. Department of Transportation v. Groves- Watkins Constructors, 530 So.2d 912 (Fla. 1988). An arbitrary act is one which is unsupported by fact or is otherwise irrational. Agrico Chemical Co. v. Department of Environmental Regulation, 365 So.2d 759, 763 (Fla. 1st DCA 1978), cert. den. 376 So.2d 74 (Fla. 1979). The specifications for proposed Lease No. 520:0062 are arbitrary because it cannot reasonably be inferred that the Department intends to accomplish any purpose other than to secure additional space in the Koger Center.
Section 255.25(3)(a), Florida Statutes, prohibits agencies from leasing 3,000 square feet or more of space in a private building "except upon advertisement for and receipt of competitive bids and award to the lowest and best bidder." A preponderance of the evidence shows that the specifications in the RFP for proposed Lease No. 520:0062 would preclude competition and, therefore, such RFP is not an "advertisement for . . . competitive bids" as required by statute. The Department has, accordingly, acted illegally.
The phrase "competitive bids" in Section 255.25(3)(a), Florida Statutes, is not defined. The phrase, however, has been construed as meaning two or more bids, at least one of which must be responsive. Satellite Television Engineering, Inc. v. Department of General Services, 522 So.2d 440 (Fla. 1st DCA 1988); Harris/3M v. Office Systems Consultants, 533 So.2d 833 (Fla. 1st DCA 1988). Applying this definition here, the evidence reveals that use of the challenged geographic boundaries and evaluation criteria can be reasonably expected to produce only one responsive bid -- that of Koger Properties, Inc. -- and that the entire RSN/RFP process is biased toward this result.
The Department argues that since DLES received two bids when it used the same geographic boundaries, then a presumption arises that the Department's use of the same boundaries will produce competitive bids and Petitioner must negate that presumption. The Department offers no authority for the existence of such a presumption, and none has been found.
Petitioner has shown that the geographic boundaries are reasonably calculated to produce only one bid submittal, and they are not calculated to produce competitive bids. That is all Petitioner need prove to show that the Department is acting illegally, in contravention of the statute requiring the solicitation of competitive bids. Similarly, the Department's own survey of space available within the geographic boundaries selected by it prior to that selection produced the information that the most probable outcome of the bidding process would be one bid by Koger. Further, the Department stayed its course
despite written advice from DMS that the geographic boundaries chosen would preclude bidders with quality space available. That is all Petitioner need prove to show that the Department has acted arbitrarily.
Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered sustaining Petitioner's protest
to the bid specifications of proposed Lease No. 520:0062, declaring those bid
specifications to be void, and terminating any bid solicitation process based upon those bid specifications.
DONE and ENTERED this 12th day of May, 1993, at Tallahassee, Florida.
LINDA M. RIGOT
Filed with the Clerk of the Division of Administrative Hearings this 12th day of May, 1993.
APPENDIX TO RECOMMENDED ORDER DOAH CASE NO. 93-0854BID
A. Eugene Lewis, Esquire Marlow V. White, Esquire Lewis & White
Alfred O. Bragg, III, Esquire Robert C. Byerts, Esquire Department of Community Affairs 2740 Centerview Drive
William A. Friedlander, Esquire Friedlander & Mattox
Linda Loomis Shelley, Secretary Department of Community Affairs 2740 Centerview Drive
G. Steven Pfeiffer, General Counsel Department of Community Affairs 2740 Centerview Drive
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.
