STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SOLOMAT-NEOTRONICS, )

)

Petitioner, )

)

vs. ) CASE NO. 94-1682

) STATE OF FLORIDA DEPARTMENT OF ) ENVIRONMENTAL PROTECTION, )

)

Respondent. )

)

RECOMMENDED ORDER

This cause came on for formal hearing on May 11 and 12, 1995 in Tallahassee Florida, before Ella Jane P. Davis, a duly assigned hearing officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Robert S. Cohen, Esquire

Pennington and Haben, P.A. Post Office Box 10095 Tallahassee, Florida 32301

For Respondent: Candi E. Culbreath, Esquire

Department of Environmental Protection 2600 Blair Stone Road

Tallahassee, Florida 32399-2400 STATEMENT OF THE ISSUE

May the Department of Environmental Protection hold Solomat-Neotronics in default for failure to comply with its procurement contract under ITB No. 93-03, and decertify Solomat-Neotronics from its vendors list until Solomat-Neotronics repays the contract price and all assessed reprocurement costs, pursuant to Rule 60A-1.006(3) F.A.C.?

PRELIMINARY STATEMENT

This cause involves Petitioner Solomat-Neotronic's (Solomat's) dispute of a March 3, 1994 notice from Respondent Department of Environmental Protection (Department) that Petitioner was in "default for failure to supply eight (8) water quality data transmitter/display/data logger units in accordance with requirements of Department of Environmental Regulation's Invitation to Bid (ITB) No. 93-03, opened October 23, 1992, and the competitive bid submitted and signed by Mr. Fred W. Zercher of Solomat-Neotronics." The Department of Environmental Protection (DEP) is the successor agency to the Department of Environmental Regulation (DER).

The result of the Department's finding of Solomat's default is that Solomat has been removed from the agency's approved vendor list and is subject to removal from other state vendor lists until such time as the Department is reimbursed the $50,086.32 paid to Solomat for the eight data loggers.

Additionally, the Department has reserved the right to assess Solomat all reprocurement costs associated with acquisition of the data loggers.

By filing a Petition for Formal Administrative Proceedings dated March 16, 1994, Solomat denied and challenged each allegation.

The matter was referred to the Division of Administrative Hearings, where, after continuance, it was heard on May 11 and 12, 1995 by the undersigned in the absence, due to emergency, of the previously assigned hearing officer.

Petitioner Solomat presented the oral testimony of Richard Stonier, accepted as an expert in air and water quality instrumentation and Peter Ebersold, accepted as an expert in the training and use of water quality monitoring equipment. John Robert Saffell, Ph.D., testified by deposition, Exhibit P-8. He is accepted as an expert in the development, manufacture and use of water monitoring equipment (TR-187). Daniel Cooke also testified by deposition, Exhibit P-7. Petitioner's Exhibits P1-9 were admitted in evidence.

Respondent Department presented the oral testimony of Wayne Magley Ph.D., accepted as an expert in water quality standards, monitoring requirements and parameters, and in the evaluation and interpretation of water quality test data; John Kent Edwards, accepted as an expert in chemistry, water quality testing, and in calibration, maintenance and uses of water quality testing equipment; and Louis Ley, accepted as an expert in field water quality testing and the operation, service and calibration of field water quality testing equipment.

Respondent's Exhibits R1-10 were admitted in evidence. (Contrary to Respondent's concern expressed in its proposed order, R-4 was admitted at TR- 100).

The parties' Prehearing Stipulation was admitted in evidence as Exhibit A. Joint Exhibits 1-8 were also admitted.

A transcript was filed in due course. The parties waived the prescribed time frame for entry of a recommended order and filed their respective proposed recommended orders on June 16, 1995. All proposed findings of fact have been considered and ruled upon in the appendix to this recommended order, pursuant to Section 120.59(2) F.S.

FINDINGS OF FACT

1. This case involves the Department's attempt to purchase and utilize eight water quality data transmitter/display/logger units to measure parameters of pH, conductivity, DO (dissolved oxygen), temperature, depth, salinity, an option for oxygen reduction potential, and an option for ammonia measurement simultaneously in either fresh water or salt water for a period of up to 48 hours.

   
   

2. The Department mailed ITB No. 93-03, entitled Water Quality Data Transmitter/Display/Data Logger Unit, on October 7, 1992.

   
   

3. The term "parameter" refers to specific measurements such a pH, dissolved oxygen, conductivity, depth, and temperature, those measurements that were called for in the ITB.

4. The term calibration refers to adjusting the measurements by a comparison to a standard. Calibration is performed to compensate for drift or shift in measurements, usually over a period of time.

   
   

5. ITB No. 93-03 contained the following specifications for the desired equipment under "special Conditions and Specifications":

   
   

   1. Water Quality Data Transmitter/Sonde - for use in both fresh and saltwater with

      automatic temperature compensation. Include temperature, conductivity, dissolved oxygen, depth, and low ionic pH system. Must be able to calculate or determine salinity and DO percent saturation. Must have option of adding additional probes, e.g. ORP and Ammonia. - 8 units.

      
      

   2. Water Resistant Digital Display/Data Logger Must be programmable for unattended data measurements for all parameters in item no. 1 above at various intervals (e.g. every 15,

      30, 60 minute) and have the capability of logging all such data. - 8 units.

      
      

   3. Calibration/Maintenance Kits - Calibration for all parameters in item 1 must be simple, requiring 5 minutes or less for each parameter. - 8 units.

      
      

   4. Stirrer Units (if needed) - 8 units.

      
      

   5. PC compatible Software and Cable for data down loading - 8 units.

      
      

   6. Sonde to Logger/Display Unit Cable - at least 50 feet. - 8 units.

      
      

   7. Unattended Monitoring - Must be able to log and maintain water quality data file for a sampling frequency of 15 minute intervals

      over at least a 48 hour period while in an unattended mode of operation - 8 units.

      
      

   8. Field Carrying Case for Sonde and Display/Logger Unit - 8 units.

      
      

   9. User Manuals - 8 Units.

      
      

   10. Probe weights (if needed) - 8 units.

       
       

6. ITB No. 93-03 specified the following warranty and delivery requirement:

   
   

   Must carry 2-year warranty on Sonde, Display/Logger Units, Stirrers, and Cables. Warranty service must be provided within two

   weeks of notification or, if extended repair period is required, then loaner units must be made available at no cost to DER during the warranty period. Delivery must be within 45 days of bid award.

   
   

7. Petitioner Solomat's bid of $50,086.32 was the lowest when bids were opened on October 23, 1992.

   
   

8. The company's written equipment specifications provided by the Petitioner to the Department were similar or superior to the written specifications provided with the competing bid responses. They were submitted in compliance with "General Condition" No. 7, page 1 of the ITB, which required submission of full specifications.

   
   

9. Dr. Wayne Magley, on behalf of the Department, requested that Petitioner demonstrate the equipment it was offering in its bid response because the Department was not familiar with the Petitioner nor its equipment.

   
   

10. After the bid opening, and before award in November 1992, Petitioner demonstrated its existing MPM4803 production unit for the Department in Florida, along with the 803PS sonde. A sonde is a multiparameter probe. The 803PS sonde was capable of being plugged into the existing MPM4803, and the WP4007 and WP803 data logger units then under development by Solomat.

    
    

11. Petitioner agreed to modify its software for the MPM4803 to add the ability to read out in milligrams per liter (MG/L), a capability not mentioned in the ITB specifications or in Solomat's company specifications. This software modification contributed to the Department's subsequent calibration troubles because, according to Mr. Stonier, the modification of the unit software rendered Solomat's "how to" manual less accurate, detailed, and specific than it would have been for the unmodified software.

    
    

12. The Petitioner amended its bid offering by letter dated November 5, 1992, to include, in addition to its October 20, 1992 bid response, the following:

    
    

    1. Stainless Steel Relief Cables with each unit

    2. Display D.O. readings in MG/L.

    3. A day of On-Site training from a Solomat factory representative

    4. A day of training at each local site from Geometrics.

    
    

13. The ITB had only called for a water resistent product, but during this same pre-contract award period, Department personnel expressed a need to hose off the equipment. Hosing off the equipment would require a waterproof unit, so Petitioner offered the option to upgrade to new instruments slated for development and sale in April or May of 1993. In so offering, Solomat's representative described to Department personnel a WP4007 unit then under development. Solomat also had its WP803 unit under development. The WP803 also was intended to be developed to be waterproof. The WP803 was not part of Petitioner's additional offers to the Department in November 1992.

    
    

14. Although Mr. Stonier asserted at formal hearing that Solomat's November 1992 upgrade offer was not integral to the finalized November 1992 bid

    award, he conceded that the Solomat offer was, "something Solomat was obliged to provide." In fact, this offer was reduced to writing.

    
    

15. In response to the Department's concerns about hosing off the units, the Petitioner also promised a latex boot to protect the probe on the MPM4803 unit. This offer also was reduced to writing.

    
    

16. The Petitioner further amended its bid response by letter dated November 10, 1992, to include, in addition to its October 20, 1992 bid offering and its November 5, 1992 enlargement of that offer, the following:

    
    

    1. Both versions of the weighting bracket will be provided with each unit.

    2. Two year warranty will cover any damage due to immersion or intrusion by salt air.

    3. Bottom latex boot will be supplied in addition to latex cover which you saw displayed today.

    4. A wrist strap will accompany each unit.

    5. Any further software (CS4) or Eprom updates will be available at no charge.

    6. SOLOMAT will extend the option to upgrade any or all of the instruments, with our new, fully waterproof version WP4007, within the next year at no charge.

    7. We will ship demo MPM 4803, fully preprogrammed, to be received by D.E.R. prior to November 18, 1992.

       
       

17. Petitioner knew via the original ITB specifications and by the further discussions that took place in November 1992 after the bid opening and prior to the final award and purchase order that the Department was concerned about the ruggedness, watertightness, and use of the eight instruments in the field for extended periods in various conditions and types of water.

    
    

18. No. 1 and No. 7 of the ITB "Special Conditions" specifications clearly stated that the Department wanted to leave the units on site for 48 hours in varying types of water. At formal hearing, Mr. Stonier admitted he knew in November 1992 that was what the Department wanted to do even if the ITB were confusing.

    
    

19. The Petitioner knew that the Department would be utilizing the water quality monitoring equipment under diverse conditions in the field because Mr. Stonier's November 12, 1992 letter to the Department provided as follows:

    
    

    The D.E.R.'s application includes the tough everyday use in varied environments that demands the ruggedness and reliability that the Solomat instruments have been designed and are each tested for.

    
    

20. Mr. Stonier testified at formal hearing that it was understood in November 1992

    
    

    . . that the units were going to be carried out on site into various types of measurement situations, . . . and that the probes would

    be -- the 803PS sonde would be submerged, and samples would be recorded. And these instruments are certainly designed to do that. in fact, they're designed where they can be left out on-site for longer periods of time.

    
    

21. The Department accepted the Petitioner's October 20, 1992 bid as amended by its November 5 and 10, 1992 letters, and in reliance on those letters. Although the ITB contained no definition of "accuracy", the Department's acceptance of Petitioner's bid also included reliance on Solomat's equipment specifications regarding equipment accuracy submitted by Petitioner in its response to "General Condition" No. 7, page 1 of the ITB.

    
    

22. The bid acceptance and subsequent purchase order occurred on or about November 20, 1992. The purchase order is not in evidence.

    
    

23. In January 1993, Petitioner delivered eight MPM4803 units and eight 803PS sonde units to the Department in response to the bid award/purchase order. This model was equipped with a latex boot, but the Department complained about the waterproof ability of the boots, and Petitioner promised to provide wider latex boots.

    
    

24. Petitioner's training representative provided one day of training in Tallahassee and one day of training in Orlando in early February, 1993.

    
    

25. Petitioner's training representative encountered difficulty in demonstrating how to calibrate the equipment at the February 1993 Tallahassee training session which he was unable to resolve prior to calling Petitioner's

    U.S. headquarters for technical assistance.

    
    

26. Beginning in early February 1993, Department personnel repeatedly encountered problems in calibrating the Petitioner's equipment. Calibration problems were encountered in trying to follow the manuals provided by the Petitioner despite some additional written instructions beyond the original faulty manual (see Finding of Fact 11) and despite oral instructions by telephone. There also were continuing problems with the pH sensor, with conductivity, and with DO (dissolved oxygen).

    
    

27. Beginning in February 1993, Department personnel repeatedly encountered problems with Petitioner's equipment's inability to stay calibrated and to take accurate measurements resulting from excessive drift.

    
    

28. Solomat employees perceived the Department users as unsophisticated and slow to understand how to use the Solomat equipment, and as preferring the earlier models of similar units with which they were more familiar and which had been developed by competitive vendors.

    
    

29. Indeed, some documented user errors included Department personnel failing to remove probe guards on sensors. Some OC3 dissolved oxygen sensors in the 803PS sonde had to be replaced by Solomat due to user error in installing them without the 0-ring so that water could seep in and damage the equipment or with two 0-rings so that there was no contact between the electrode and the probe sonde. However, these types of human error did not significantly affect valid tests showing calibration drift and accuracy reading problems. It is noted that P-5 (Loxahatchee notes), an August 24, 1993 28 day "short informal report" relied upon by Petitioner to show that some persistant, open-minded Department users could learn to correctly calibrate the MPM4803 data

    loggers/803PS sondes and that good data could be gathered over more than 48 hours, contains on its first page the comment, "Stabilities were very good except DO; it is unclear whether this was due to probe response drift or improper calibration by Solomat representatives."

    
    

30. Department personnel tracked their problems with the Petitioner's MPM4803 equipment's failure to take accurate measurements by sampling at field sites which have been consistently tested by Department personnel with other equipment over a period of years so that they had a background of data for comparison for any given parameter. When they were unable to account for significant drifts of calibration and even negative readings in some parameters on Petitioner's products, Department personnel then used other vendors' water quality monitoring equipment to confirm that the Petitioner's equipment was not giving consistently accurate measurements.

    
    

31. Although Petitioner's witnesses testified concerning their perception that such methods of comparison lacked accuracy and fairness, they offered no better field tests as an alternative. Petitioner's concerns mostly centered around other vendor's meters also sometimes registering outside ITB or company specifications. However, in fact, the Department was making some of its assessments based upon calibration and post-calibration readings on the same Solomat meter each time. In light of the testimony of John Kent Edwards that in his District, he personally calibrated the Petitioner's units every morning in the laboratory before they went out in the field and that careful post calibration procedures on the same meters still demonstrated significant drift; the testimony of Mr. Edwards and Louis They that standard calibration solution or calibration solutions prepared fresh by a chemist were used in calibrating Petitioner's units to eliminate variables of that sort; the admission by Don Roos to Department personnel in July 1993 that it could take five minutes to stabilize DO on the low end and on the high end (see Finding of Fact 36); the acknowledgement by Peter Ebersold that it is possible that DO and pH drift would violate ITB specifications and Petitioner's own equipment specifications over more than 24 hours in dirty water; Dr. Saffel's uncontradicted testimony that the calibration on all Petitioner's units provided to the Department were written only for generic water, not water as bioactive as some of Florida's water, and that Petitioner's units' long term stability of calibration depends very strongly on the purity of the water being measured; and Wayne Magley's testimony that a subsequent Winkler Titration test in the laboratory verified the other vendors' scores but not Petitioner's scores while showing that Petitioner's units were working correctly, and that statistical correlations of all the meters were done, it is found that the Department's testing procedure is probative and persuasive that the MPM4803 units were not meeting certain specifications encompassed in the bid award/purchase order. The Petitioner's assertion that low ionization cables threw off all calculations is in the nature of a nonsequitur, since this type of cable was agreed upon in the amended bid responses, became part of the parties' contract, and Petitioner was required to provide workable units under that agreement. Petitioner's assertion that the conversion of readings to MG/L was the problem falls in the same category.

    
    

32. During 1993, both parties made repeated good-faith attempts to resolve the calibration and instrument accuracy problems, with the Department informally telephoning Petitioner for assistance and sharing information among the Department's Tallahassee office and district personnel.

    
    

33. By a June 9, 1993 letter, the Department provided Petitioner its data showing its employees were not able to get consistent, reasonable readings with the Solomat units.

34. In June 1993, Wayne Magley, on behalf of the Department, asked the Petitioner to provide additional on-site assistance because Department personnel were still unable to resolve problems with calibrating and using Petitioner's equipment despite Petitioner rendering helpful technical advice when called by Department personnel. Dr. Magley specifically asked for Don Roos because of Mr. Roos' history of being extremely knowledgeable about the equipment and rendering helpful technical advice when called.

    
    

35. In July 1993, Don Roos and Peter Ebersold came to Florida to provide assistance at the Department headquarters in Tallahassee and Orlando District office.

    
    

36. During the Tallahassee visit, Mr. Roos admitted that it could take up to five minutes for DO to stabilize before it could be calibrated for low end and five minutes for DO to stabilize for high end, for a total time in excess of

    10 minutes for one parameter. This calibration time violates the Department's bid specification that each parameter must be calculated in five minutes or less.

    
    

37. Misters Roos and Ebersold observed Department staff calibrating the MPM4803 with the 803PS sonde during their July 1993 visit to Tallahassee and did not have any criticism of the Department staff's calibration process.

    
    

38. Petitioner diagnosed a problem with its MPM4803 units as being that some Department users were inadvertently recalibrating temperature and misinterpreting "error" message prompts, thus throwing all the readings off. Therefore, Solomat made a change to eliminate "temperature" from the recalibration cycle and changed the Eproms on the Department's units to simplify the procedure.

    
    

39. Despite trying to get the wider latex boots for the MPM4803 units until July 1993, Petitioner was unable to obtain wider latex boots and at that point gave up trying to get the required improved boots for the MPM4803 units, in anticipation of being able to upgrade the Department to newer units.

    
    

40. The Petitioner reiterated in correspondence as late as August 3, 1993 that the Department would be receiving an upgrade from the MPM4803 to the WP4007 units, stating, "[t]he exchange of your MPM4803s with the new WP4007 waterproof dataloggers will occur near the end of the year." Dr. Saffell testified that the Department was promised an upgrade on his authority.

    
    

41. By a November 15, 1993 letter, the Department reported to Petitioner that most of its employees still could not calibrate for each parameter within the five minutes or less as required by the ITB specifications and still had difficulty getting consistent readings. The Department wanted to return the units for refund.

    
    

42. By a December 7, 1995 letter, the Department notified Petitioner that it intended to find Petitioner in default of the bid contract including failing to provide the promised upgraded units in any timely fashion despite Petitioner's promise to do so within a year of its November 10, 1992 bid amendment and because the Petitioner's equipment could not be consistently calibrated in five minutes or less for each parameter as required by the bid specifications.

    
    

43. The Petitioner also had never supplied the latex boot as agreed.

44. It is clear that as of the December 7, 1993 letter, Petitioner was in default on the foregoing three elements of its contract with the Department.

    
    

45. By letter dated December 13, 1993, Petitioner notified the Department that it still wished to provide the instrument upgrade. In this letter, Petitioner unilaterally changed the model it was going to provide from the WP4007 to the WP803, on its own assessment that the WP4007 had too many options and a more user friendly unit would be less confusing to Department users.

    
    

46. The WP4007 features which are not on the WP803s were not part of the original ITB specifications. The WP803, like the WP4007, was intended to be waterproof. Solomat's specifications for the WP803 were intended to exceed those of other vendors for comparable machinery.

    
    

47. Despite Solomat's best intentions to have both the WP4007 and the WP803 models fully developed and ready for the market in April or May of 1993, neither the WP4007 nor the WP803 was released in the United States until February or March 1994.

    
    

48. By letter dated December 21, 1993, the Department gave Petitioner until February 1, 1994, to correct its failed performance under the contract by supplying eight replacement units that met the specifications agreed upon back in November 1992. No mention was made of what model unit would be necessary, however the Petitioner was notified that the replacement units had to be provided to the Department for testing and that the units had to be acceptable to the Department after testing by February 1, 1994 in order for Petitioner to avoid being found in default of the bid contract. The Department did not, in this letter, or at any other time, specifically agree to accept the WP803 upgrade instead of the promised WP4007 upgrade, but specified that a failure to supply eight upgraded units and have them timely accepted by the agency would result in default.

    
    

49. Petitioner responded that it would provide two prototypes or preproduction units to test in January and try to meet the Department's February 1, 1994 deadline for delivery of eight upgraded units.

    
    

50. The Department allowed Solomat until February 15, 1994 to exchange eight satisfactory upgraded units for the eight MPM4803s originally supplied.

    
    

51. Petitioner delivered two WP803 preproduction units and provided some training in January 1994. WP4007 preproduction units could have been provided but were not. Because development had lagged behind marketing, Petitioner had inventory of neither WP803 nor WP4007 production units.

    
    

52. The Department conducted testing, some of which could be considered limited field use, on January 18-20, 1994 on the prototype or preproduction WP803 units with Petitioner's representatives present. Petitioner's representatives did not criticize Department personnel's calibration procedures. On January 28, 1994, the Department provided the Petitioner a written summary of its findings as a result of the testing which included a four-point conclusion that the new units did not meet bid specifications.

    
    

53. Petitioner's witness conceded the following: The circuit boards on the preproduction WP803 units tested in January 1994 had been assembled by hand. The internal programming on the Eprom was not fully debugged. There were problems with the conductivity linearizations. Petitioner attempted to

    interface those instruments with the 803PS sondes the Department already possessed and the modifications did not work. Petitioner did not intend these prototype WP803s to be used in the field because, among the foregoing problems, they were not fully waterproof. Petitioner's review of the Department's test data in February 1994 on the prototypes convinced the company that there were problems that went beyond mere user problems. Some parameters were acceptable but results were not reliable for all parameters.

    
    

54. The testimony of John Kent Edwards, Louis They, and Wayne Magley together with Petitioner's assessment is sufficient to establish that despite a fair test, calibration drift for Petitioner's preproduction WP803 units tested on January 18-20, 1994 failed quality assurance levels and did not meet certain specifications of the contract.

    
    

55. The Department eventually extended the February 1, 1994 deadline until February 21, 1994.

    
    

56. The Department conducted additional testing on the WP803 production units supplied by the Petitioner prior to February 21, 1994. Wayne Magley set up and calibrated three of the production units received. One machine had an immediate hardware failure. Over a week, he did a series of calibrations and post-calibrations in the laboratory and one field trip. Despite employing calibration methodology to give Petitioner the benefit of the doubt and even accounting for low ionic strengths, the "five minutes for calibration of each parameter" specification could not be met. Problems with accurate readings remained even when Petitioner's instruments were tested against each other. Department testing on the WP803 production units demonstrated that they also failed to meet either the ITB specifications or the company specifications provided by the Petitioner as part of its bid.

    
    

57. By a March 3, 1994 letter, the Department notified Petitioner it was declaring a default, pursuant to Rule 60A-1.006 (3) F.A.C.

    
    

58. By mid-February, Petitioner had not supplied more than four production level WP803s. The Department instructed Solomat not to ship any more units because Department tests on the first four made the Department not want to progress further. Petitioner did not send the additional WP803 production units.

    
    

59. The Department ended up with four MPM4803 production units, four WP803 production units and four 803PS sondes. Solomat has four 803PS sondes at its Connecticut office marked, "DEP property."

    
    

60. In August 1994, Petitioner provided its production level WP803 data logger and 803PS sonde to U.S. Testing Labs which performed an independent evaluation to determine if the problems that the Department had experienced were with the units or with the users. Daniel Cooke, Ph.D., was in charge of the test. He, like the Department, had some initial start up difficulty, including learning how to calibrate with oral instructions over the telephone beyond the printed December 1993 instruction manual; a loose connection that Petitioner had to repair; and conductivity adjustments that Solomat had to make. As a result, he aborted the first test on his own and aborted the second try at a test at the request of Solomat. He found he was able to calibrate with the June 1994 instruction manual Petitioner created after the Department had claimed a default.

61. His test results also showed that: 1) high DO was outside of specification throughout the test; 2) conductivity was outside of specification throughout the test; 3) salinity was outside of specification throughout the test; and 4) all parameters were outside of Petitioner's specifications at times during the testing.

    
    

62. Petitioner's witness conceded that there could be some drift over the period of a week in the field, some small drift over two hours even in the lab calibrations and DO and pH drift could violate the ITB's "48 hours" specification, dependent upon the pollution of the water in the field. A few months before formal hearing, Petitioner revised its own company specifications to define more realistic tolerances under actual field conditions as 24 hours and two weeks after calibration.

    
    

63. The Department represented that it has not yet gone to the next bidder or established a timetable and assumed any costs of reletting the ITB, as contemplated by Rule 60A-1.006(3) F.A.C., because it has no money to do so. Accordingly, there is no evidence of cost of reprocurement which the Department seeks to assess against Solomat (TR-12-13)

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

65. The applicable rule for this case is 60A-1.006. Subsection (3) thereof provides:

    
    

    (3)Default - Contractors who fail to perform to contract terms and conditions shall be notified, in writing, stating the nature of the failure to perform and providing time certain for correcting the failure. The

    notification will also provide that, should it fail for perform within the time provided, the contractor will be found in default and removed from the agency's approved vendor list. Unless the contractor corrects its failure to perform within the time provided, or unless the agency determines on its own investigation that the contractor's failure is legally excusable, the contractor shall be found in default and issued a second notice stating the reasons the contractor is considered in default and stating that the agency will reprocure or has reprocured the commodities or services and the amount of the reprocurement if known. The defaulting contractor will not be eligible for award of a contract by the State until such time as the State is reimbursed by the defaulting contractor for all reprocurement costs. .

    
    

    Subsection (3) goes on to provide ways the defaulting contractor may obtain formal hearing and how reprocurement and "cover" costs (that is, the difference between the cost of substitute commodities and the contract price for such commodities) are to be calculated and assessed. Options include going down the list of previous bidders for the same contract, starting at the next lowest

    bidder; rebidding; and purchasing on the open market. Subsection (4) provides that a copy of all agency default actions shall be provided to the Division of Purchasing and that any defaulting source may be removed from various mailing lists for soliciting proposals and bids for State contracts until the defaulting contractor provides satisfactory assurances that no further defaults will occur. Subsection (5) provides for the Division of Purchasing to list such persons on a "convicted vendors list".

    
    

66. The parties correctly acknowledged at formal hearing that this is a case of first impression under Rule 60A-1.006(3) F.A.C., but subsequent research by the undersigned indicates that at least seven cases have been determined before the Division of Administrative Hearings under the predecessor rule, Rule 13A-1.006 F.A.C. Those cases have been considered in the preparation of this recommended order.

    
    

67. The parties stipulated that, despite their agreement for Petitioner to present its case first at formal hearing, the burden of proof and duty to go forward under the rule would normally be upon the decertifying agency (TR-14- 16). Their posthearing proposals do not agree upon what the nature of the burden of proof is under the rule, and prior case law is not helpful in that respect. Since this case amounts to suspension of a license to do business with the State and has far reaching implications for Petitioner's ability to conduct further business due to the probability of being listed on the Division of Purchasing's "convicted vendors list", it is concluded that the Department of Environmental Protection's burden of proof should be by clear and convincing evidence, for the same principles enunciated in Pic `N' Save Central Florida v. Department of Business Regulation, 601 So.2d 245 (Fla. 1st DCA 1992)

    
    

68. The evidence herein clearly shows that until default was mentioned as an option, the parties had agreed to be bound by all of Petitioner's representations up to the date of award, including the ITB, its own company specifications, and its November 5 and 10, 1992 letters by which it amended its bid response. The contract was formed with the purchase order and deviations thereafter could be only by mutual agreement. Any testimony by Petitioner's representatives hinting that Petitioner was not bound by its own company specifications is unreasonable, because these specifications were presented as part of the bid response in compliance with the provisions of the ITB and because the very process of competitive bidding requires State agencies to be able to rely on the responses to bid solicitations without taking the time for extensive testing. The fact that Petitioner modified its own specifications after independent testing is particularly telling.

    
    

69. Be that as it may, the evidence is also clear and convincing that the MPM4803 models initially provided did not meet the ITB specifications.

    
    

70. Petitioner knew from the outset that it was required to supply instrumentation accurate in less than pristine waters over at least 48 hours, even though the after-the-fact testimony of Dr. Saffel is to the effect that anything except pristine waters will cause potential malfunction of Petitioner's delicate instrumentation. The Department's problems with calibration drift was demonstrated to be an instrumentation problem rather than a user problem. Also, the latex boot was never provided for the MPM4803s and an upgrade to the WP4007 models was not accomplished within one year from the promises made or even from the purchase order. Those deficiencies constituted a default. As required by the rule, the Department gave Petitioner additional time to propose corrective action and to perform so as to avoid being found in default, and would have accepted any data logger model that could meet the contract specifications, even

    the WP803s if they tested out satisfactorily. They did not test out satisfactorily and that further failure to perform entitled the Department to exercise its right to formally declare Petitioner in default, decertify Petitioner, and assess reprocurement costs under the rule.

    
    

71. Petitioner wanted to make this a "showcase" contract, so it demonstrated and promised the WP4007s if the MPM4803s did not work out satisfactorily. When the MPM4803s did not work out satisfactorily and the Department gave the Petitioner time to make good on the contract deficiencies, Petitioner sought to upgrade, late. The WP4007 production units were not ready. Petitioner could not have provided the WP4007 production units timely under the contract even if it had wished to do so and even if it had considered them "user friendly" enough for the Department. The WP803 production units also were not ready, but a prototype was available, and Petitioner substituted the WP803 prototype without ever withdrawing its binding agreement to supply the WP4007s production units. Neither the WP803 prototype nor the WP803 production model performed to the original specifications. Under these circumstances, Petitioner can take no comfort in the Department's being willing to test the WP803s and not refusing them out of hand. Nor may Petitioner take comfort that the WP803s were intended to be above the original ITB specifications and no less than competitors' specifications for similar machinery or Solomat's own specifications for the originally promised WP4007s. Petitioner was bound by its representations upon which the contract was awarded, did not meet the specifications, was noticed that default was imminent, was given an opportunity to meet specifications by correcting its failure to perform, and neither of the options Petitioner selected to correct that failure worked out.

    
    

72. Contrary to the Department's argument within its proposed order, there is no clear showing of bad faith on Petitioner's part. However, Petitioner's defenses that "marketing got ahead of development" or "development did not keep pace with marketing" do not amount to a showing that the deficiencies on the contract are "legally excuseable."

    
    

73. The Department has followed the applicable rule and is entitled to default Petitioner and to be refunded its contract price. It may decertify under the terms of the rule until refund and reprocurement costs are repaid by Petitioner.

    
    

74. It is of some concern that the agency has offered no evidence of cover or reprocurement costs. It is noted that neither the March 3, 1994 default/decertification letter nor the prehearing stipulation herein reserved a right to assess any cover costs, and therefore those are deemed waived. With regard to the reprocurement costs, this is not a situation akin to that in Southern Communications Group v. Department of General Services, DOAH Case No. 88-6294 (RO entered October 23, 1989; FO entered December 5, 1989), where reprocurement costs have been camouflaged by the party in default and an extension of the decertification period to calculate and assess such costs was ordered. Therefore, it would be inequitable and unfair to continue Petitioner's decertification while the Department figures out how it is going to reprocure or while it exercises its option under the rule to purchase on the open market. However, the language of the rule does not eliminate the concept that such costs may legitimately be calculated after an administrative hearing determines the issue of whether or not there has been a default.

RECOMMENDATION

Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Environmental Protection enter a final

order that (1) determines Petitioner to be in default of its contract; (2) orders Petitioner to reimburse the Department $50,086.32 as refunded contract monies, without any additional cover costs; (3) orders Petitioner to pay to the Department, on or before the date payment of the contract monies is made by Petitioner, an amount equal to the actual cost of contracting with the next lowest bidder or the cost of reprocurement or the costs attendant upon replacement purchase on the open market in an amount either stipulated between the parties or as estimated upon past agency experience in letting the original bid/contract; (4) provides for the return of all equipment to Petitioner upon satisfaction of the requirements of paragraphs 2-3; and (5) provides for the removal of the agency decertification upon the satisfaction of the requirements of paragraphs 2-3.

RECOMMENDED this 2nd day of August, 1995, at Tallahassee, Florida.

ELLA JANE P. DAVIS

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 2nd day of August, 1995.

APPENDIX TO RECOMMENDED ORDER 94-1682

The following constitute specific rulings, pursuant to 5120.59(2), F.S., upon the parties' respective proposed findings of fact (PFOF)

Petitioner's PFOF:

1, 9, 12-14,

16-18, 21-25,

29-31, 48, 50,

53, 64, 68,

71-72, 80-81,

83-87, 89-90,

93, 94, 96,

101-102, 123,

127-128, 130,

133, 136, 146,

148, 149,

and 153

Substantially accepted except for unnecessary, subordinate, and/or cumulative material which has been interspersed therein and except for legal

argument and proposed conclusions of law for which a ruling under s. 120.59(2) F.S. is not required.

2 Covered in the preliminary statement. 3-8, 10, 27,

61, 82, 91-92

99-100, 112,

115, 117,

121-122, 125,

139-140,

142-143 Rejected as immaterial or non-dispositive of any material issue of fact.

11, 19-20,

28, 51-52,

54-55, 63,

73-78,

107-108, 124,

134-135, 137 Rejected as subordinate to the facts as found. 62, 65-67, 88,

98, 103-106,

113-114, 116,

118, 126, 129,

131-132, 138,

141, 144-145,

147 Rejected as out of context, misleading, and/or as they are stated, these proposals are not supported by the greater weight of the credible competent evidence of record.

15, 26, 49,

56-60, 69-70,

79, 95, 97,

119-120,

150-152 Rejected as stated because not proven as stated.

Same material substantially covered in the recommended order

32-47 Rejected in part as misleading and/or not supported by the greater weight of the credible competent record evidence; otherwise rejected because it is non-dispositive in that it is selectively culled opinion testimony. There were two aborted tries to do the test before the final data was run; all raw data (including the aborted tries) had been turned over to Solomat, so that additional inquiry of Daniel Cooke, the witness, was limited. Rejected further because it does not reach the dispositive material facts that Solomat did not supply the items called for in their negotiated/modified contract. This was ultimately a laboratory test with a new manual, not a field test with the old manual and the specifications were ultimately modified. Same material substantially covered in the recommended order.

109-111, 154 Substantially rejected as mere legal argument or as a conclusion of law not requiring a ruling pursuant to s. 120.59(2) F.S. Otherwise covered in the Conclusions of Law.

Respondent' s PFOF:

1-6, 9-17,

19-29, 31-39,

41-43 Substantially accepted except for unnecessary, subordinate, and/or cumulative material which has been interspersed therein and except for legal argument and proposed conclusions of law for which a ruling under s. 120.59(2) F.S. is not required.

18, Rejected as subordinate to the facts as found

7-8, 30, Rejected as immaterial or non-dispositive of any material issue of fact.

40, 45 Substantially rejected as mere legal argument or as a conclusion of law not requiring a ruling

pursuant to s. 120. 59(2) F.S. Otherwise covered in the Conclusions of Law.

44 Covered in the preliminary statement.

COPIES FURNISHED:

Robert S. Cohen, Esquire Pennington and Haben, P.A. Post Office Box 10095 Tallahassee, Florida 32301

Candi E. Culbreath, Esquire

Department of Environmental Protection 2600 Blair Stone Road

Tallahassee, Florida 32399-2400

Virginia B. Wetherell, Secretary Department of Environmental Protection Douglas Building

3900 Commonwealth Blvd.

Tallahassee, Florida 32399

Kenneth Plante

Department of Environmental Protection General Counsel

3900 Commonwealth Blvd.

Tallahassee, Florida 32399

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: 94-001682

Orders for Case No: 94-001682