STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

TAUL ENTERPRISES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 95-3115BID

) DEPARTMENT OF MANAGEMENT ) SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a final hearing was held in this case in Tallahassee, Florida, on July 7, 1995, before the Division of Administrative Hearings by its duly designated Hearing Officer, James W. York.

APPEARANCES

For Petitioner: Mary M. Piccard, Esquire

CUMMINGS, LAWRENCE & VEZINA, P.A.

Post Office Box 589

Tallahassee, Florida 32302-0589

For Respondent: Cindy Horne, Esquire

Steven Mathues, Esquire Department of Management Services Office of the General Counsel 4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950 STATEMENT OF THE ISSUE

The issue is whether the Department of Management Services (DMS), in determining that the bid bond submitted by Petitioner, Taul Enterprises, Inc. (Taul) was not materially responsive to the specifications in the Invitation to Bid, and in deciding that the irregularity could not be waived, acted in a manner which was arbitrary, capricious, fraudulent, or illegal.

PRELIMINARY STATEMENT

By formal protest and request for a Section 120.57(1) hearing, Taul protests DMS's intent to award contracts for an indefinite quantity of painting of interior office buildings to the other bidders based on a determination by DMS that Taul's bid contained a nonwaivable irregularity.

By order dated June 22, 1995, the formal hearing was held on July 7, 1995. DMS's exhibits 1 through 10 were admitted into evidence without objection.

Petitioner presented the testimony of Mark Taul, David Pichard, David Batts and Joyce Plummer. DMS presented the testimony of Kathleen McKenzie and John F. Ward. A transcript of the proceedings was provided. At their request, the parties were granted time up to ten days from the filing of the transcript to submit proposed recommended orders. Therefore, the parties waived the statutory timing requirements for rendition of this order. Both parties filed timely proposed recommended orders and these proposals have been considered and utilized in the preparation of this Recommended Order. Specific rulings on the parties' proposed findings of fact are included in the appendix to this Recommended Order.

FINDINGS OF FACT

1. In April 1995, DMS issued ITB #94/95-053 soliciting bids for providing an indefinite quantity of interior painting of buildings statewide. Bidders were to submit unit prices for ten categories of work in each of five districts. The unit prices were added together to arrive at a total for each of the five districts. The invitation to bid (ITB) contemplated the award of five

   contracts--one for each district. The contract was to be issued for one year with the anticipated renewals of one year each.

   
   

2. The ITB provided that bids would be "evaluated and awarded to the responsible low bidder(s) per region."

   
   

3. On May 1, 1995, DMS issued an addendum to the ITB. DMS issued the addendum to add the requirement for a bid bond or cashier's check in the amount of $5,000. The purchasing specialist in charge of the solicitation had inadvertently omitted the bid bond requirement from the ITB.

   
   

4. The purpose of the bid bond is to compensate the agency for damages in the event the low bidder fails to enter the contract at issue. To underscore the importance of the bid bond requirement, DMS required that all bidders return a signed acknowledgment form with their bid.

   
   

5. Ten bidders submitted bids on May 15, 1995.

   
   

6. The lowest bidder for regions two through four was Brighton Painting Company (Brighton).

   
   

7. Although the ITB provided that bids could only be withdrawn prior to bid opening, David Batts, who will be responsible for managing the contracts, contacted Brighton's president after the bid opening and questioned him because the contractor was based in Illinois. Based on that conversation, Mr. Batts determined that Brighton would not be able to adequately manage the contract while based out of state. Although the ITB provided that bids could only be withdrawn prior to bid opening, DMS allowed Brighton to withdraw its bid.

   
   

8. Taul submitted the lowest bid for region one and the second low bid for regions two through five.

   
   

9. J. F. Ward Painting and Decorating (Ward) submitted the third lowest bid for regions one, two, four and five. CEM Enterprises, Inc., d/b/a Sunshine Painting (CEM) submitted the third lowest bid for region three. The total of the unit prices submitted by Ward and CEM were higher than the total of the unit prices submitted by Taul. 1/

10. After the bid opening, all bids were reviewed by the agency purchasing office in order to determine responsiveness.

    
    

11. Ms. Joyce Plummer is the purchasing officer for DMS, who was responsible for evaluating and awarding the contract.

    
    

12. Ms. Plummer found no irregularities in her review of Taul's bid.

    
    

13. After her review, Ms. Plummer provided Mr. Batts the three lowest bids for review by him. Mr. Batts reviewed the bids because he was the individual primarily responsible for preparing the ITB and because he would be the contract administrator once the contracts were awarded.

    
    

14. On May 30, 1995, at 10:20 a.m., DMS posted a notice of intent to award the contract to Ward. The posting indicated that Taul's bid was disqualified for failure to submit a bid bond.

    
    

15. Ms. Plummer posted the notice of intent to award the contracts to Ward based on the opinion of Mr. Batts that Taul had not submitted a valid bid bond.

    
    

16. At the request of Mr. Taul, DMS Bureau Chief Wayne Smith reviewed Taul's bid bond and determined that it was responsive. At that time DMS had in its possession a letter from the surety agent affirming the surety's obligation in a minimum amount of $5,000 under the bid bond. 2/ Ms. Plummer therefore reconsidered the posting and spoke with another purchasing officer, Kathleen McKenzie. Ms. McKenzie had been employed by DMS longer than Ms. Plummer and she recalled a prior bid process in which a bid bond similar to Taul's had been accepted. McKenzie did not know at the time she gave her opinion that the contract in question was an indefinite quantity contract.

    
    

17. As a result of the further inquiry into the sufficiency of Taul's bid bond, DMS posted an amended bid tabulation announcing its notice of intent to award the contracts to Taul.

    
    

18. Sometime after the second posting, Mr. Ward called Mr. Batts to discuss the award to Taul. Mr. Batts advised Mr. Ward that, in his opinion, Taul's bid bond was no good. After this conversation with Mr. Batts, Ward filed a notice of intent to protest the award to Taul.

    
    

19. When she received the notice of intent to protest filed by Ward, Ms. Plummer discussed the matter with DMS assistant general counsel. 3/ As a result of that discussion, Ms. Plummer posted a second amended tabulation indicating an award of all five regions to Ward. That tabulation subsequently also was amended to represent the award of the contract for region three to CEM.

    
    

20. The first posting showing an intent to award to Ward was verified by Mr. Batts and Ms. Plummer. The second posting showing an intent to award to Taul was verified by Ms. Plummer. The third and fourth postings were verified by DMS general counsel.

    
    

21. The bid security requirement in the ITB called for submission of a bid bond or a cashier's check in the amount of $5,000.

    
    

22. The ITB also required bidders to commit to furnishing a $100,000 performance and payment bond if they were successful.

23. In order to obtain a bid bond, a bidder must secure a commitment from the bonding company to issue a performance and payment bond. If the surety agrees to provide the payment bond, it will issue a bid bond without charge.

    
    

24. Taul has been in the commercial painting business since 1978. For the past 8 years 95 percent of its work has been awarded by governmental entities pursuant to competitive bids. Taul has consistently expressed the intent to execute and perform the contracts in accordance with its bid in this case.

    
    

25. In obtaining the bid bond in this case, Taul followed his standard practice--contacting the bonding agent and providing information regarding the nature of the contract and extent of commitment that would be required for the performance and payment bond. The bid specification for the bonds was given to and reviewed by the surety agent.

    
    

26. The surety agent, David Pichard, was of the opinion that, since the ITB called for a performance bond in the amount of $100,000 and because the amount of the contract was indefinite, the amount of the bid upon which to issue the bid bond was $100,000. The standard bid bond requirement on public contracts is five percent.

    
    

27. The plain wording of the bid bond submitted is that the sum of the surety obligation is "FIVE PER CENT (5 percent) OF AMOUNT BID." Since the contract to be awarded in this case is for an indefinite quantity of work, the "amount bid" is indeterminate. Petitioner was unable to establish, either prior to or at the final hearing, what the "amount of the bid" is.

    
    

28. Mr. Batts was of the opinion that the amount of the bid bond was not clear. Based on that opinion, Mr. Batts believed that the bond did not meet the specification in the ITB.

    
    

29. The purpose of the bid bond requirement was to ensure that DMS received considered bids. Due to the vagaries of the contract DMS wanted a contractor it could depend on to enter into the contract in case there was an emergency painting need such as storm damage. With a valid bid bond or a cashier's check the contractor could not unilaterally decide to walk away from the bid without leaving money on the table.

    
    

30. The ITB addendum is clear and definite with respect to the required bid bond. Taul's bid bond is indefinite and not specific with regard to the amount of the bid bond furnished. Taul's bid bond was therefore not responsive with regard to the bid bond requirement.

    
    

31. Petitioner has failed to prove that the agency acted arbitrarily, capriciously, fraudulently, or illegally, in determining that Petitioner's bid was materially not responsive to the requirements of the ITB at issue.

    
    

    CONCLUSIONS OF LAW

    
    

32. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this case, pursuant to Section 120.53(5), Florida Statutes.

    
    

33. The standard of review in a bid protest proceeding is clearly set forth in Department of Transportation v. Groves-Watkins Constructors, 530 So.2d 912, 914 (Fla. 1988), where the Court stated as follows:

    Thus, although the APA provides the procedural mechanism for challenging an agency's decision to award or reject all bids, the scope of inquiry is limited to whether the purpose of competitive bidding has been subverted. In short, the hearing officer's sole responsibility is to ascertain whether the agency acted fraudulently, arbitrarily, illegally, or dishonestly.

    
    

34. Petitioner has the burden of proof in this case to prove the allegations in its petition by a preponderance of substantial competent evidence. Capelletti Brothers, Inc. v. Department of General Services, 423 So.2d 1359 (Fla. 1st DCA 1983). Based upon the allegation in the petition in this case, Petitioner must, by a preponderance of the evidence, show that the DMS, in rejecting Taul's bid on the grounds that the bid contained a material variance from the requirements of the ITB and in proposing to award the contract at issue to Ward and Sunshine Painting, acted in a manner which is arbitrary and capricious.

    
    

35. An arbitrary action is one taken without a foundation in fact or logic. A capricious action is one taken without thought or reason. Dravco Basic Materials Co. v. Department of Transportation, 493 So.2d 50 (Fla. 1st DCA 1986).

    
    

36. In this case, the language of the bid bond requirement in the ITB is straightforward. The ITB provides that, "Bidders must furnish a bid bond, or a cashier's check on a bank licensed in the State of Florida with their bid at the bid opening, in the amount of $5,000.00."

    
    

37. The ITB in this case is clearly for an "Indefinite Quantity" of interior painting. It is equally clear that the dollar amount of the contract at issue is indeterminable. Petitioner's bid bond is for "FIVE PERCENT (5 percent) OF AMOUNT BID." Based upon the indeterminate quantity of work to be performed and the indeterminate dollar amount of the total contract, neither the Petitioner or Respondent was able to determine an "amount bid" at the contract opening. Therefore, Respondent reasonably determined that the bid bond submitted by the Petitioner was unacceptable. Petitioner has failed to prove that its bid bond was enforceable on its face or that the amount of the bond was

    $5,000.00 or any other dollar amount.

    
    

38. Petitioner argues that Petitioner's bid bond is enforceable because, in Florida, surety bonds are construed liberally in favor of the obligee and cites several Florida cases which support this proposition. Respondent cites cases in support of its argument that the bond would be unenforceable due to the ambiguity on the face of the bond. Whether the bond in question would be ultimately enforceable, however, is not the essential issue in this case. The issue is whether Petitioner has proved that Respondent's decision to reject the bond was not based on fact, logic, thought or reason.

    
    

39. In sum, Petitioner has the burden to prove, by a preponderance, that DMS acted arbitrarily or capriciously in determining that the disputed bid bond was an unacceptable deviation from the requirement for such bond as outlined in the ITB. Petitioner failed to meet that burden in this case.

    
    

40. Petitioner argues, however, that any defect in the bid bond was "at most a technical deficiency in form which afforded no advantage to Taul."

41. Not all requirements in an ITB are material and a variance which does not provide an unfair advantage to one bidder over the others is not necessarily material. Robinson Electrical Co., Inc. v. Dade County, 417 So.2d 1032 (Fla. 3rd DCA 1982). However, Robinson, supra, and other cases cited by Petitioner which involve disputed bid bonds in public procurement cases do not state that the requirement for a bid bond is not material. Instead, the cases cited by Petitioner turn on the form of the bid bond and not, as in this case, on whether the failure to provide any form of acceptable surety constitutes a mere "technical deficiency." In Robinson, the Court held that the submission of a cashier's check instead of a bid bond did not constitute a material variance from the requirements of the ITB.

    
    

42. Petitioner's reliance on the case of Ranger Construction Industries, Inc. v. Florida Department of Transportation, DOAH Case No. 92-1338BID (April 20, 1992), is likewise misplaced. In this case, the Hearing Officer concluded that the signature of a corporate officer on an otherwise valid bid bond was not a material variance from the bid bond requirement. The Hearing Officer in Ranger Construction did not determine that the bid bond requirement itself was not material.

    
    

43. As a general rule, where an agency elects to require a bid bond, the agency may exercise discretion as to its sufficiency and, if a satisfactory bond is not tendered as required, the bid may be rejected. 64 Am.Jur.2d 60 at 914, and case cited therein. Petitioner has cited no Florida case law which departs from this general proposition.

    
    

44. Petitioner has established that the procurement process in this case was not without flaws. The agency staff appeared indecisive as to the materiality of the bid bond requirement and changed positions more than once before making its ultimate award proposal. In addition, the agency made a business decision to permit the original presumed low bidder to withdraw its proposal after the bid opening and apparently did not cause the bid surety to be forfeited. However, none of these considerations undermine the legitimacy of the agency's determination that Petitioner's bid was not materially responsive.

    
    

45. In this case, DMS might have reasonably determined that, due to the aforementioned problems with the bid process, the project should have been re- bid. However, the agency did not make that decision. Instead, DMS chose to propose an award to the lowest bidder(s) that it determined were responsive.

    
    

46. It is not the role of the Hearing Officer in this proceeding to revisit the decisions made by the agency during this process. Instead, the sole issue for determination in this case is whether, in determining that the bid bond submitted was not responsive to a material specification in the ITB, the agency acted fraudulently, arbitrarily, illegally or dishonestly. Based upon the evidence presented in this proceeding, it is concluded that Petitioner has failed to meet its burden to prove the agency acted in any such manner.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Respondent enter a Final Order dismissing Petitioner's

formal bid protest.

DONE and ORDERED this 11th day of September, 1995, in 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 11th day of September, 1995.

ENDNOTES

1/ Taul's wall painting prices are the same as J. F. Ward's for gypsum and vinyl coated walls and Taul's prices are higher than Ward's prices for other surfaces. The aggregation of unit costs is an artificial number created by DMS for evaluation purposes. It does not reflect the actual cost of painting a building. It is only at the end of the contract year that it could be determined whether Taul or Ward would cost less. Only then would DMS know how many feet of each kind of wall surface had been painted and how many doors had been painted.

2/ DMS staff generally does not consider such matters not received at the time of the bid opening.

3/ At the time of the consultation, DMS was moving its offices and Purchasing had reduced access to the General Counsel's office. Plummer did not have the opportunity to seek a legal consultation when this issue surfaced.

APPENDIX TO RECOMMENDED ORDER

Rulings on Petitioner's Proposed Findings of Fact:

1-2. Adopted in paragraphs 1-2 of the Recommended Order.

1. Adopted in paragraph 5 of the Recommended Order.

2. Adopted in paragraph 6 of the Recommended Order.

3. Adopted in paragraph 8 of the Recommended Order.

4. Adopted in paragraph 9 of the Recommended Order.

7-10. Adopted, in material part and in substance, in paragraph 7 of the Recommended Order.

11-21. Adopted in paragraphs 11-21 of the Recommended Order.

22. Rejected as argumentative and conclusory.

23-28. Adopted in paragraphs 22-27 of the Recommended Order. Final sentence of proposed finding 28 is rejected as hearsay.

29. The first sentence is conclusory and is rejected. The remainder of this proposed finding is adopted in paragraph 29 of the Recommended Order.

30-32. Subordinate to facts found and not necessary to the conclusions reached in the Recommended Order.

1. Adopted in material part in paragraph 17 of the Recommended Order.

2. Adopted in substance in paragraph 24 of the Recommended Order.

3. Adopted, in substance, in paragraph 29 of the Recommended Order.

Rulings on Respondent's Proposed Findings of Fact:

1. Cumulative.

2. Adopted in paragraph 1 of the Recommended Order.

3. Adopted in paragraph 3 of the Recommended Order.

4. Adopted in paragraph 4 of the Recommended Order.

5. Adopted in substance in paragraphs 5 and 6 of the Recommended Order. 6-8. Adopted in substance in paragraph 7 of the Recommended Order.

1. Adopted in paragraphs 14-15 of the Recommended Order.

2. Adopted in paragraphs 14 and 16 of the Recommended Order.

3. Adopted, in material part, in paragraph 16 and Endnote 2 of the Recommended Order.

4. Adopted in Endnote 3 of the Recommended Order.

5. Adopted in paragraph 16 of the Recommended Order.

6. Adopted in substance in paragraphs 19-21 of the Recommended Order. 15-17. Cumulative and not necessary to the conclusions reached in the

Recommended Order.

18. Adopted in paragraph 27 of the Recommended Order.

19-24. Cumulative and not necessary to the conclusions reached in the Recommended Order.

25. Adopted in paragraph 4 of the Recommended Order.

26-27. Cumulative and not necessary to the conclusions reached in the Recommended Order.

28-29. Adopted in material part in Endnote 1 of the Recommended Order.

COPIES FURNISHED:

F. Alan Cummings, Esquire Mary M. Piccard, Esquire

CUMMINGS, LAWRENCE & VEZINA, P.A.

Post Office Box 589

Tallahassee, Florida 32302-0589

Cindy Horne, Esquire

Department of Management Services 4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950

William H. Lindner, Secretary Department of Management Services 4050 Esplanade Way

Tallahassee, Florida 32399-0950

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 95-003115BID

Orders for Case No: 95-003115BID