STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

NATIONAL MEDICAL CARE, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 93-7111BID

)

DEPARTMENT OF CORRECTIONS, )

)

Respondent, )

and )

)

HEALTHINFUSION, INC./NEFRA, )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James W. York, held a formal hearing in the above- styled case on February 1, 1994, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Seann M. Frazier, Esquire

Jennifer Kujawa-Graner, Esquire PANZA, MAURER, MAYNARD & NEEL, P.A.

3081 East Commercial Avenue Fort Lauderdale, Florida 33308

For Respondent: R. Beth Atchison, Esquire

Department of Corrections 2601 Blair Stone Road

Tallahassee, Florida 32399-2500

For Intervenor: Timothy G. Schoenwalder, Esquire

BLANK, RIGSBY & MEENAN, P.A.

204-B South Monroe Street Tallahassee, Florida 32301

STATEMENT OF THE ISSUE

Whether the decision by the State of Florida, Department of Corrections (DOC) to reject all bids received in response to Request For Proposal 93-RIVHSD- 075 (RFP) was arbitrary, capricious, fraudulent, illegal or dishonest.

Additionally, Intervenor challenges Petitioner's standing to bring this proceeding since Bio-Medical Applications, Petitioner's wholly-owned subsidiary corporation, submitted the bid at issue and because Petitioner would not be a party to any contract awarded pursuant to the RFP.

PRELIMINARY STATEMENT

All parties filed proposed recommended orders in this case. Rulings on the proposed findings of fact of the parties are addressed in the Appendix to this Recommended Order.

National Medical Care, Inc. (NMC) called two witnesses: Shara Bates, former purchasing director for the Department's District IV office, and Robert Lauper, a regional manager for NMC and Bio-Medical Applications of Florida, Inc. The DOC also called Ms. Bates as a witness.

All parties agreed to admit into evidence Joint Exhibits 1-9. The parties also admitted into evidence Petitioner's Exhibits 1 and 2, Respondent's Exhibits

1 and 2, and Intervenor's Exhibits 1-4.

Prior to the final hearing, NMC filed a Motion to Strike certain portions of the petition to intervene filed by HealthInfusion, Inc./NEFRA (HealthInfusion). NMC's motion was denied and HealthInfusion was allowed to intervene. HealthInfusion moved for a summary recommended order for dismissal of NMC's bid protest petition based on NMC's alleged lack of standing. That motion was denied without prejudice.

FINDINGS OF FACT

Standing

1. In its response to the Request For Proposal at issue in this proceeding, Bio-Medical Applications of Florida, Inc. (BMA) provides the following regarding vendor name and address:

   
   

   Vendor Name:

   Bio-Medical Applications of Florida, Inc.

   
   

   Vendor Mailing Address:

   c/o National Medical Care, Inc. 1601 Trapelo Road

   Walthem, Massachusetts 02154

   
   

2. In the bidder acknowledgment and ownership interest portion of its response to the RFP, BMA disclosed the following:

   
   

   ... This bid is presented in good faith without collusion or fraud and Ernestine M. Lowrie, as signer of the bid from Bio-Medical Applications of Florida, Inc. has full authority to bind as the principal bidder.

   
   

   All stock of Bio-Medical Applications of Florida, Inc. is held by Bio-Medical Applications Management Company, Inc. and all the stock of the latter corporation is held by National Medical Care, Inc., 1601 Trapelo Road, Walthem, Massachusetts 02154. All of the stock of National Medical Care, Inc. is held by W. R. Grace and Company.

3. The Dialysis Services Division of National Medical Care, Inc. (NMC) is the largest division of NMC. In each state in which NMC has an interest in dialysis services operations, Bio-Medical Applications is organized as a corporate entity and is part of the Dialysis Services Division of the parent corporation, NMC.

   
   

4. Petitioner in this proceeding, NMC, is not currently organized and registered as a corporation under the laws of the State of Florida.

   
   

5. At the final hearing in this case, NMC's representative testified that he was not aware that NMC was registered to do business in the State of Florida but thought NMC had been operating in Florida for about 20 years.

   
   

6. BMA is wholly owned by NMC. The Respondent agency originally expressed its intent to award the contract at issue to BMA. NMC has a substantial interest in the RFP and the contract at issue, therefore, its substantial interests will be affected by the agency's proposed action to reject all bids.

   
   

7. NMC has alleged that the agency's decision to reject all bids was arbitrary, illegal, dishonest, and fraudulent. Further, Petitioner also contends that the agency decision to reject all bids, after BMA's bid proposal has been disclosed to competitors, undermines the competitive purpose of the bid process.

   
   

   The Request for Proposal

   
   

8. On August 27, 1993, the DOC issued RFP No. 93-RIVHSD-075.

   
   

9. The RFP requested bidders to submit bids for a contract to perform peritoneal dialysis and hemodialysis treatment at the Department's Broward Correctional Institution and its South Florida Reception Center.

   
   

10. The RFP required that bid proposals be filed with the DOC by September 30, 1993.

    
    

11. The RFP provided that a bidder would receive up to 50 points for its price proposal and up to 50 points for its qualitative proposal for a total of

    100 possible points.

    
    

12. The RFP also provided that the DOC reserved the right to reject all bids when the DOC determined it was in its best interest to do so.

    
    

    The Bid Evaluation

    
    

13. Upon initial review of the proposals submitted in response to the RFP, the DOC originally calculated that Petitioner's subsidiary, BMA, had received 49 out of 50 possible points from its price, as well as qualitative proposal for a total of 98 points.

    
    

14. On October 22, 1993, the DOC sent written notice to all proposers of its intent to award the contract to National Medical Care, Inc. (Petitioner).

    
    

15. At the time it mailed its notice of intent, the DOC believed that the difference between the Bio-Medical and the lowest price proposal (received by HealthInfusion) was $156,780 over the five year term of the proposed contract.

16. HealthInfusion and an additional disappointed bidder filed protests contesting the DOC's notice of intent. Based upon input from the protestors, the DOC learned that it had miscalculated the cost of Bio-Medical's proposal.

    
    

17. When the DOC corrected its initial error in calculation, BMA's proposal was $340,000 higher over the first three years of the proposed contract and $972,000 higher than the lowest bidder for the entire five year contract term.

    
    

    The Decision to Reject All Bids

    
    

18. On November 24, 1993, the DOC notified all bidders of its intent to reject all bids.

    
    

19. In addition to the initial miscalculation of price in the bid, the DOC discovered what it considers to be other irregularities in the evaluation in this case.

    
    

20. BMA was the existing provider at the time the RFP issued. The bid evaluators worked closely on a day to day basis with Petitioner's employees. The DOC believes the evaluators preferred that Petitioner be awarded the contract and that the evaluators were not objective.

    
    

21. During the process of evaluation, the evaluators were provided a letter from a party representing one of the bidders which contained allegations regarding negative background information on other bidders. The DOC believes that the letter should not have been given to the evaluators and that access to the letter further affected the evaluator's ability to be objective.

    
    

    Admitted Facts

    
    

    NMC and the Respondent DOC filed a Prehearing Stipulation in which the following facts are admitted by those parties:

    
    

22. The DOC issued Request for Proposal No. 93-RIVHSD-075 ("RFP").

    
    

23. The RFP requested bidders to submit bids for peritoneal dialysis and hemodialysis treatment at Broward Correctional Institution and South Florida Reception Center.

    
    

24. Bid proposals had to be filed with the DOC by September 30, 1993.

    
    

25. On November 24, 1993, the Department notified all bidders of its intent to reject all bids.

    
    

26. The Department rejected all bids due to significant irregularities in the bid evaluation process and the price difference between the winning bid and the low bid was too great. (Emphasis supplied.)

    
    

27. On December 3, 1993, National Medical Care, Inc. filed its notice of intent to protest the DOC's decision to reject all bids.

    
    

28. On December 13, 1993, National Medical Care, Inc. filed its formal written bid protest.

    Burden of Proof

    
    

29. Petitioner has failed to prove, by the preponderance of evidence, that the DOC acted arbitrarily, illegally, fraudulently or dishonestly in making its decision to reject all bids.

    
    

    CONCLUSIONS OF LAW

    
    

30. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this cause pursuant to Section 120.57(1), Florida Statutes.

    
    

    Standing

    
    

31. The Intervenor in these proceedings, HealthInfusion, Inc., has challenged the standing of the Petitioner NMC to bring this bid protest. In its Motion for Summary Recommended Order, at the final hearing, and in its Proposed Recommended Order, HealthInfusion makes the following arguments:

    
    

    1. BMA is identified in the bid response

       as the vendor submitting the proposal at issue.

    2. BMA has not filed a bid protest in this proceeding.

    3. NMC is not the vendor, did not sign the sworn statement regarding Public Entity Crimes as required by Florida Statutes, and was not a party signatory to subcontracts submitted in the bid response submitted by BMA. 1/

       
       

32. In support of its argument that NMC does not have standing to pursue its bid protest, Intervenor relies primarily on the case of Ft. Howard Co. v. State Department of Management Services, 624 So.2d 783 (Fla. 1st DCA 1993). In Ft. Howard, decided by the First District Court of Appeal on September 17, 1993, the Court stated that the only issue for decision was whether a non-bidder had standing to bring a bid protest. Id. at 785. The Court noted that, in the case of Westinghouse Electric Corp. v. Jacksonville Transportation Authority, 491 So.2d 1238 (Fla. 1st DCA 1986), it had held that, "absent extraordinary circumstances, a non-bidder does not have standing to file a bid protest." Acknowledging that Ft. Howard was distinguishable from Westinghouse on the basis that the Ft. Howard appellant was a supplier to two bidders, the Court still concluded: "To rule that a supplier for a bidder has standing to halt the bid process by filing a bid protest would eradicate the exceptional circumstances limitation and open a floodgate of potential protestants to bid awards." Id.

    
    

33. Intervenor relies on Ft. Howard to argue that NMC's petition must be dismissed because NMC is a non-bidder and, "as a matter of law lacks standing to bring this bid dispute."

    
    

34. The problem with Intervenor's reliance on Ft. Howard under these facts arises from a later bid protest case decided by the First District Court of Appeal. Two months after the Ft. Howard decision, the court again dealt with the issue of standing for non-bidding suppliers in bid protest proceedings. Fairbanks, Inc. v. State of Florida Department of Transportation, 18 Fla. Law Weekly 2455 (Fla. 1st DCA 11/18/93).

35. In the Fairbanks case, a non-bidding supplier brought a bid protest because the agency had determined that the supplier's protest did not meet contract standards. The agency issued an order denying the supplier's request for a formal hearing to protest the finding, relying on a determination that the bid statute in question did not intend to protect the interest of a non-bidding supplier. Id. The Fairbanks court reversed the agency and remanded the case from formal hearing.

    
    

36. The Fairbanks court applied the two pronged test for standing in bid protest cases announced in Agrico Chemical Co. v. Department of Environmental Regulation, 406 So.2d 478 (Fla. 2d DCA 1981). In Agrico, the court held that, to establish entitlement to a 120.57 formal hearing, a party must establish that its substantial interests will be affected by the proposed agency action. Determining "substantial interests" involves a showing that (1) the proposed action will result in an injury in fact of sufficient immediacy to justify a hearing; and (2) the injury is of that type that the statute pursuant to which the agency acted is designed to protect. 18 Fla. Weekly 2454 (citing Agrico, supra).

    
    

37. In Fairbanks, the agency conceded that the supplier had sufficiently satisfied the first part of the Agrico test but disagreed that the bidding statute in question protected non-bidding suppliers. Id. at 2455. The Fairbanks court held that the primary purpose of public procurement statutes is, in general, to ensure the integrity of the competitive bidding process. The court noted that Florida courts have held in numerous occasions that the legislative intent behind such statutes is protection of the public, and held that, since the supplier had alleged that the agency action challenged undermined the competitive bidding process, it had standing to protest the bid in question.

    
    

38. The Fairbanks court said that its holding was limited to the scope of the facts in that case and noted that the opinion does not suggest "that an unhappy supplier is entitled to a formal hearing whichever an agency determines its goods do not meet contract specifications." The court limited its holding in Fairbanks to grant standing to non-bidding suppliers when facts are alleged which imply fraudulent, arbitrary, illegal or dishonest agency action intended to circumvent the purposes behind competitive bidding. Id. (See, e.g., Department of Transportation v. Groves-Watkins Constructors, 530 So.2d 912 (Fla. 1988).

    
    

39. In this case, the Intervenor challenges NMC's standing to bring a bid protest based primarily on the contention that NMC is a non-bidding parent corporation. NMC is the parent corporation to the bidder (BMA), its wholly- owned subsidiary. As such, NMC has a substantial interest in the agency's intended action, at least equal to that of a supplier. In paragraph 17 of its petition for formal hearing, NMC alleges that DOC's decision to reject all bids was "arbitrary, illegal, fraudulent and/or dishonest." In paragraph 18, NMC alleges that the proposed rejection of all bids in this case "undermines the competitive purpose of requests for proposals." As the parent corporation to BMA, NMC sufficiently establishes a substantial interest in the outcome in these proceedings and, based upon the allegations in the petition, would appear to satisfy both prongs of the Agrico test.

40. Intervenor also relies on the case of Brasfield & Gorrie General Construction, Inc. v. Ajax Construction Co., Inc., 627 So.2d 1206 (Fla. 1st DCA 1993). In Brasfield, (entered two weeks after Fairbanks, supra), the First District Court of Appeal held that one partner in a joint venture bid had no standing to enjoin the public contracting process where the other partner to the venture did not participate in the litigation.

    
    

41. The Brasfield court cited Ft. Howard and held that "a non-bidder, who is not or cannot potentially be a party to the contract ... is not entitled to either an award of the contract, or a re-bid" has no standing to seek such injunctive relief. 627 So.2d at 1203. However, in Brasfield, there was no allegation that the public agency acted arbitrarily, illegally, dishonestly or fraudulently, and there is no discussion of the application of the Agrico test for standing in that case.

    
    

42. In Fairbanks, supra, the court specifically notes that its holding is narrow and limited to specific facts. The non-bidding supplier in Fairbanks was obviously concerned that a finding by the agency that its product did not meet specifications would severely limit future sales to vendors bidding on State agency contracts. The allegations in Fairbanks also implied that the contract specifications subverted the bidding process by creating a situation where there was only one subcontractor who could satisfy the terms of the contract. See, Advance Barricades & Signing, Inc. v. Fla. Dept. of Transportation, 19 Fla. Law Weekly 476 (explaining Fairbanks, supra) (Fla. 1st DCA 3/2/94). There is no similar issue in this case. Intervenor raises troublesome issues in its arguments against granting standing to NMC. NMC is referred to throughout the bid submission as the prime party to the submission, but would not be a party to any contract awarded BMA. NMC does, however, appear to satisfy both prongs of the Agrico test and, on the authority of Fairbanks, has standing to bring this protest.

    
    

    The Merits

    
    

43. Although NMC has been ruled to have standing, albeit a close call, it has failed to make a case on the merits in this proceeding.

    
    

44. NMC has the burden to prove the allegations in its petition by a preponderance of competent evidence. Department of Transportation v. J.W.C. Co., Inc., 396 So.2d 778 (Fla. 1st DCA 1981).

    
    

45. In this case NMC has the burden to prove that, in making its decision to reject all bids, the DOC subverted the purpose of competitive bidding, such purpose being to prevent public officials from showing favoritism to vendors and to secure fair competition, on equal terms, to all prospective bidders. Liberty County v. Baxter's Asphalt & Concrete, Inc., 421 So.2d 505 (Fla. 1982).

    
    

46. The decision of DOC to reject all bids in this case may not be overturned unless that decision is found to be arbitrary, capricious, illegal, fraudulent or otherwise evidences the agency's bad faith. Department of Transportation v. Groves-Watkins Constructors, 530 So.2d 912 (Fla. 1988), Baxter's Asphalt and Concrete, Inc. v. Department of Transportation, 475 So.2d 1284 (Fla. 1st DCA 1984).

47. At the final hearing in this case, NMC and DOC filed a joint stipulation which contained, as an admitted fact, that:

    
    

    The Department rejected all bids due to significant irregularities in the bid evaluation process and the price difference between the winning bid and the low bid was too great.

    
    

48. Having admitted the above, NMC all but concedes that the action of the agency in rejecting all bids was not arbitrary, capricious, illegal, fraudulent, or dishonest. Additionally, since it is admitted as factual that significant irregularities occurred in the bid evaluation process, a failure by DOC to reject all bids could amount to conduct of the very nature NMC complains the agency is guilty of. Finally, rejection of all bids on the basis that the price difference between the winning bid and low bid is too great is hardly an arbitrary action by the agency.

    
    

49. Petitioner's chief underlying complaint in this case is that DOC rejected all bids after NMC's competitors were privy to the contents of BMA's submission. At some point in the process, the access to bid submissions by competitors (as well as the general public) is an attendant condition in the public procurement process.

    
    

50. Petitioner argues that its problem stems from the DOC's "back door" exit through the RFP provision providing for the agency to reject all bids when to do so is in the best interest of the Department. But the RFP clearly informed all bidders, in advance, that the "back door" exit might be available to DOC and NMC has admitted facts which clearly demonstrate that, in this case, rebidding is in the agency's best interest.

RECOMMENDATION

Based upon the foregoing, it is

RECOMMENDED that the Respondent enter a final order dismissing NMC's protest of its decision to reject all bids in response to request for Proposal No. 93-RIVHSD-075.

RECOMMENDED this 16th day of March, 1994, at Tallahassee, Florida.

JAMES W. YORK, 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 16th day of March, 1994.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-7111BID

The following constitute specific rulings, pursuant to Section 120.59(2), Florida Statutes, upon the parties' respective proposed findings of fact (PFOF).

Petitioner's PFOF:

1. Petitioner's PFOF 1 is adopted in paragraph 8 of the Recommended Order (RO).

2. Petitioner's PFOF 2 is adopted in paragraph 9 of the RO.

3. Petitioner's PFOF 3 is hereby adopted.

4. Petitioner's PFOF 4 is hereby adopted.

5. Petitioner's PFOF 5, to the extent not conclusory, is adopted in paragraph 1 of the RO.

6. Petitioner's PFOF 6 is hereby adopted.

7. Petitioner's PFOF 7 is adopted in paragraph 2 of the RO. 8-9. Petitioner's PFOFs 8 and 9 are hereby adopted.

1. Sentence 1 of Petitioner's PFOF 10 is hereby adopted. Sentence 2 of this proposed finding is rejected as conclusory.

2. Petitioner's PFOF 11 is adopted in paragraph 14 of the RO. 12-14. Petitioner's PFOFs 12, 13 and 14 are hereby adopted.

1. Petitioner's PFOF 15 is adopted in paragraph 2 of the RO.

2. Petitioner's PFOF 16 is hereby adopted.

3. Petitioner's PFOF 17 is adopted in paragraph 26 of the RO and is a fact, in effect, stipulated to by Petitioner and Respondent.

4. Petitioner's PFOF 18 is adopted in substance in paragraph 21. To the extent not adopted in the RO, the remainder of Petitioner's PFOF 18 is hereby adopted.

5. Petitioner's PFOF 19 is adopted in paragraph 13 of the RO.

6. Petitioner's PFOF 20 is adopted, in substance, in paragraph 16 of the

RO.

21-24. Petitioner's PFOFs 21-24 are hereby adopted.

1. Petitioner's PFOF 25 is rejected as a conclusion.

2. Petitioner's PFOF 26 is rejected as conclusory and argumentative.

   This proposed finding is also irrelevant based upon facts admitted by Petitioner.

3. Petitioner's PFOF 27 is rejected as irrelevant based upon facts admitted to by Petitioner.

28-34. Petitioner's PFOFs 28-34 are hereby adopted to the extent relevant. Based upon Petitioner's admission that the Respondent rejected all bids based on "significant irregularities," these proposals are for the most part irrelevant and unnecessary to the conclusions reached.

35. Petitioner's PFOF 35 is hereby adopted. 36-39. Petitioner's PFOFs 36-39 are adopted.

40-44. Petitioner's PFOFs 40-44 are cumulative and not necessary to the conclusions reached.

Respondent's PFOF:

1-19. Respondent's PFOFs 1-19 are adopted in the RO.

20. Respondent's PFOF 20 is rejected as conclusory.

21-22. Respondent's PFOFs 21 and 22 are adopted in the RO.

23. Respondent's PFOF 23 is rejected as argument.

24-26. Respondent's PFOFs 24-26 are adopted in the RO.

27. Respondent's PFOF 27 is rejected as conclusory.

28-29. Respondent's PFOFs 28 and 29 are adopted in the RO.

30-32. Respondent's PFOFs 30-32 are rejected as conclusions and argument.

1. Respondent's PFOF 33 is hereby adopted.

2. Respondent's PFOF 34 is rejected as argument.

Intervenor's PFOF:

1-21. Intervenor's PFOFs 1-21 are adopted in substance in the RO.

1. Intervenor's PFOF 22 is adopted, in substance, in paragraph 4 of the

   RO.

   
   

2. Intervenor's PFOF 23 is hereby adopted.

3. Intervenor's PFOF 24 is adopted in substance.

4. Intervenor's PFOF 25 is hereby adopted. However, Intervenor has

failed to prove that the activity of NMC is not within one of the several exceptions to the requirements of Section 607.1501, Florida Statutes.

COPIES FURNISHED:

Seann M. Frazier, Esquire Jennifer Kujawa-Graner, Esquire

PANZA, MAURER, MAYNARD & NEEL, P.A.

3081 East Commercial Avenue Fort Lauderdale, Florida 33308

R. Beth Atchison, Esquire Department of Corrections 2601 Blair Stone Road

Tallahassee, Florida 32399-2500

Timothy G. Schoenwalder, Esquire BLANK, RIGSBY & MEENAN, P.A.

204-B South Monroe Street Tallahassee, Florida 32301

Harry K. Singletary, Jr. Secretary

Department of Corrections 2601 Blair Stone Road

Tallahassee, Florida 32399-2500

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.

Docket for Case No: 93-007111BID

Orders for Case No: 93-007111BID