vs. )
) CASE NO. 96-1330BID
Intervenors. )
Pursuant to notice, the Division of Administrative Hearings, by its designated Hearing Officer, William F. Quattlebaum, held a formal hearing in the above-styled case on April 11-12, 1996, in Tallahassee, Florida.
For Petitioner: Carl D. Motes, Esquire
Maguire, Voorhis and Wells, P.A. 2804 Remington Green Circle, Suite 4
Thomas Valentine, Esquire Department of Insurance Division of Legal Services 612 Larson Building
For Intervenor ASI: William B. Graham, Esquire
Richard N. Sox, Jr., Esquire Bateman and Graham, P.A.
For Intervenor USF: Regina L. DeIulio, Esquire
The issue in this case is whether the Department of Insurance acted according to the requirements of law in reviewing submissions of vendors responding to the Department's request for proposals for provision of licensure and examination services.
In December 1995, the Department of Insurance (Department) issued a Request for Proposals for provision of services related to licensing and examination administration. After the proposals were received from vendors, Insurance Testing Corporation (ITC) was deemed non-responsive and was disqualified. The remaining proposals were evaluated by Department personnel.
After evaluation of the proposals, the Department proposed a contract award to Assessment Systems, Inc. (ASI). ITC filed a protest which was referred to the Division of Administrative Hearings. The University of South Florida (USF) intervened in the case.
ITC asserts that it was improperly disqualified from consideration by the evaluation committee, that ASI's inclusion of cost information within its technical proposal warrants rejection of the ASI proposal, and that ASI was improperly permitted to amend its fee collection proposal after all vendor proposals were opened.
At the hearing, ITC presented the testimony of five witnesses and had exhibits numbered 1-16 admitted. The Department had exhibits numbered 1-3 admitted. Intervenor ASI presented the testimony of three witnesses and had exhibits numbered 1-4 admitted. Intervenor USF presented no witnesses or evidence.
A transcript of the hearing was filed. All parties filed proposed recommended orders. The proposed findings of fact are ruled upon either directly or indirectly as reflected in this Recommended Order, and in the Appendix which is attached and hereby made a part of this Recommended Order.
The Department of Insurance is the state agency responsible for licensure and regulation of insurance agents in Florida pursuant to the Insurance Field Representative Licensing Procedures Law set forth at Chapter 626, Florida Statutes.
Persons seeking to become licensed by the Department are required to take and pass an examination.
Insurance Testing Corporation (ITC) develops and administers insurance licensure examinations in other states.
Assessment Systems Incorporated (ASI) develops and administers insurance licensure examinations in other states.
Since 1990, the Department has contracted with the University of South Florida (USF) for exam administration. The contract was to expire on September 30, 1994. It has been twice extended and is currently set to expire on September 30, 1996.
The parties have standing to participate in this proceeding.
On December 29, 1995, the Department of Insurance issued a Request for Proposal Number 95/96-07 (RFP) seeking the provision of testing development and administration services.
The RFP was prepared through a collaborative effort within the Department. In issuing the RFP, the Department intended to broaden the level of services obtained from a contracted vendor and to take advantage of the expertise of companies already in the business of regulatory examination provision.
The Department issued an RFP to permit vendors to generate their own programs for licensure and examination programs. The alternative, an Invitation to Bid, would have required vendors to bid on a program designed by the Department.
The RFP provided that the contract between the Department and the successful vendor would consist of the RFP, addenda and amendments to the RFP, and the successful vendor's proposal. The RFP also provided that Department reserved the right to negotiate with the selected contractor, to waive minor irregularities and to reject all submissions.
The RFP provided a schedule and deadlines as follows: submission of questions and requests for clarification by vendors, January 15, 1996; the preproposal conference with vendors, January 22, 1996; submission of proposals, February 12, 1996; oral presentations by vendors, February 19, 1996; and posting of the intended award, February 23, 1996.
There was no protest to the RFP's specifications.
Submissions were received from five vendors.
The RFP evaluation panel scheduled separate oral presentations by the five vendors submitting proposals.
The purpose of oral presentations was to permit the vendors to present their proposals and to respond to questions from the evaluation committee. The first thirty minutes of each one-hour presentation were reserved for the vendor presentation; the second thirty minutes were reserved for questions from the evaluation panel to vendor representatives.
Vendors were not invited to and did not attend the oral presentations of other vendors.
For reasons discussed herein, ITC's proposal was deemed non-responsive and was not evaluated.
After completion of oral presentations, the evaluation panel independently reviewed and scored the proposals (other than ITC's) and submitted the scores to the Department's purchasing office.
The purchasing office opened and scored the vendors cost proposals, then calculated the vendors' total scores.
Of the proposals which were evaluated, ASI's received the highest total score of 134.5 points. The second highest score, 115 points, was received by USF.
The Department posted a Notice of Intended Award to ASI on February 23, 1996.
On February 23, 1996, ITC contacted the Department purchasing director and requested a copy of the ASI proposal. At that time, ITC was advised that a notice of protest would be due on February 28, 1996.
ITC filed a Notice of Protest on February 28, 1996. ITC filed a formal protest on March 8. 1996.
Although the State of Florida insurance licensure tests are currently administered by USF, the Department retains ownership of the questions ("test items") used in the examination. Upon the expiration of the contract with USF, all test items are to be returned to the Department.
The test items used in Florida insurance exams are developed by employees of the Department with experience in the subject matter being tested. Test items have been revised and updated by USF according to psychometric principles.
The Department desires to continue ownership of the "Florida bank" of test items.
Section 2.1B of the RFP, "EXAMINATION DEVELOPMENT," states:
The Department currently retains ownership of all test items in use for existing exams.
The Department shall maintain exclusive owner- ship of the items developed, item bank(s), examinations, and all related materials deve- loped for use in fulfilling the requirements of this RFP. The Contractor will be respons- ible for continued development and maintenance of an item bank for use in preparing the examinations....
Section 2.2 of the RFP, "Related Requirements and Information," states:
Use of any test items owned by the Department or developed to fulfill obligations resulting from a contract entered into as a result of this RFP for any purpose other than those covered by said contract is prohibited with- out advance written authorization by the De- partment. Any violation of this provision will result in immediate cancellation of the contract and/or legal actions against the contractor.
Vendors were allowed to submit questions and requests for clarification by January 15, 1996.
At the preproposal conference, an addendum to the RFP was issued which included the Department's responses to vendor requests for clarification. All potential vendors received the addendum.
As did other vendors, ITC submitted question and requests for clarification.
ITC question Number 8 states:
The Department claims ownership of all existing test questions and requires owner- ship of all items, examinations, and related materials used in the Florida tests. This
requirement precludes the use of previously developed, calibrated, and validated banks of items owned by the major providers of insur- ance license examinations. It thus requires the development and maintenance of a completely separate bank of test questions for Florida.
This can be done only at considerable expense, which must be reflected in the test fees. Is it truly the Department position that all questions used in Florida insurance tests
will be or become the property of the Depart- ment? Is this a negotiable item?
The Department's response to ITC's question Number 8 states: The desire of the Department to retain owner-
ship of its test items does not preclude the
use of previously developed, calibrated and validated banks of items. Subject to the approval of the Department, the selected vendor may use test items it has already de- veloped as long as the subject/line of auth- ority listings for Florida are adhered to and are in accordance with Florida law and administrative rules.
It is the Department's position that all items currently owned by the Department or developed for the Department in fulfillment of services requested through this RFP, re- main the property of the Department. This is not a negotiable item.
ITC question Number 22 states:
Will the Department grant the contractor the right to use test items owned by the Depart- ment in other states where it has testing contracts. If so, what guarantees will the Department offer that the Department will treat these questions as confidential material in the future, when they are used in other states.
The Department's response to ITC's question Number 22 states:
Yes, the Department will grant the vendor authority to use test items owned by the Department in other states where it has testing contracts. However, some agreement would have to be reached regarding the vendor's liability and responsibility should any test item become compromised as a result of such use.
The question relating to the Department offering a guarantee that it will treat such questions as confidential when they are in use in other states is not understood.
Obviously, the Department would not want to compromise its own test items.
By February 12, 1996, the deadline for submission of proposals, five vendors had submitted responses to the RFP, including ITC, ASI and USF.
On the question of test item creation, ITC's proposal states:
Generally, we provide the entire bank of questions that are used in the tests of a state we serve. Florida is unusual in providing a bank of questions to start with. Our approach to questions for the Florida tests will follow three tracks. First, we will use the questions in the current Florida tests. Second, we will identify those ques- tions in our own bank that are appropriate for use in Florida. Third, we will write additional questions where shortages are identified in the banks, or to cover add- itional topics in the study manuals.
ITC's proposal further states, "ITC staff will write and develop all of the new test questions. We will not rely upon Department staff or the Florida insurance industry...to write any of the new questions required for your tests."
On the question of test item ownership, ITC's proposal states: Since you currently own a bank of test ques-
tions, we understand that you will want to
own a bank of test questions when a contract you may establish with us comes to an end.
We currently own our bank of questions and would not want to relinquish ownership to that bank as a result of contracting with Florida. Therefore, our proposal is to divide the bank ownership according to four criteria: (1) Ownership of questions in the
original Florida bank will remain with Florida;
(2) ownership of questions in ITC's bank as
of contracting will remain with ITC; (3) owner- ship of ITC-developed questions that are
Florida specific and not applicable to other states will be assigned to Florida; (4) ownership of ITC-developed questions that are applicable to other states will remain with ITC. Florida questions that are materially revised by ITC will be considered ITC questions.
During the ITC oral presentation, the evaluation panel sought clarification of ITC's position on test item ownership. ITC indicated that its position was as set forth in the proposal. The issue of test item ownership was the central question discussed at ITC's oral presentation.
Essentially, the ITC proposal provides that at the close of any potential contract period, the Department will own the questions it currently owns and only those ITC-developed questions that are specific to Florida and to no other state. Further, under the proposal, ITC would be able to "materially revise" any question in the current Florida test item bank and claim ownership of the revised question. Neither ITC's proposal nor its oral presentation provided reliable information as to what would constitute a "material revision" of a test item.
After the oral presentations were concluded, the evaluation panel and Department purchasing personnel determined that the ITC proposal did not comply with RFP's requirement related to test item ownership. The ITC proposal was disqualified and was not evaluated by the panel.
The evidence fails to establish that the Department acted improperly in disqualifying the ITC proposal.
The evidence establishes that the ITC proposal fails to meet the requirements of the RFP relating to ownership of test items, and was properly disqualified from further evaluation.
As set forth in the RFP, the Department requires "exclusive ownership of the items developed, item bank(s), examinations, and all related materials developed for use" in providing examination and licensure services to the Department.
RFP Addendum Number 1 clearly states "the Department's position that all items currently owned by the Department or developed for the Department in fulfillment of services requested through this RFP, remain the property of the Department" and further states that the item is not negotiable.
The purpose of the Department's insistence on ownership of test items is to assure that, at the conclusion of the contract period, the Department will own the questions which have been prepared by the successful vendor for use in Florida exams.
ITC's proposal fails to provide the Department with test item ownership as specifically required by the RFP and addendum.
ITC asserts that on the question of test item ownership, its proposal is essentially the same as the proposal submitted by ASI. The evidence fails to support the assertion. ASI's proposal states:
ASI acknowledges that the Department currently owns all examination items in use for existing exams. Furthermore, the Depart- ment will also retain ownership of all items developed for use in Florida examinations.
Unlike the ITC proposal, the ASI proposal clearly states that the Department will own all items developed for use on the Florida exam. Items developed for the Florida exam will be owned by the Department, whether or not the items are applicable to other states.
ITC asserts that the inclusion of cost information within the body of the RFP warrants disqualification of the ASI proposal. The evidence fails to support the assertion.
Each vendor was evaluated on compliance with Florida Certified Minority Business Enterprise (CMBE) contracting goals. Evaluation points were awarded if a vendor established that CMBE firms would receive at least 10 percent of the contract award.
Section 2.4 of the RFP, "Proposal Form and Content," provides instructions on how to structure a vendor proposal and states:
...ATTENTION IS CALLED TO SECTION 1.8. ANY REFERENCE TO COST IN PARAGRAPHS (A) THROUGH
(G) BELOW MAY DISQUALIFY THAT PROPOSAL.
Paragraphs (A) through (G) include items related to technical portions of vendor proposals. Section 1.8 addresses copies of proposals and states, "[c]ost proposals must be labelled as such and be submitted in a separate envelope."
ASI's proposal included the following statement:
...ASI has signed a Letter of Agreement with Stallion Properties Management of Tallahassee to provide certain real estate and property management services specifically related to the Department's RFP and this Proposal. In
total, it is estimated that ASI's Letter of Agreement with Stallion Properties Management will provide a total income of approximately
$600,000.00 to Stallion over the term of ASI's three year contract with the Department.
This project income to Stallion represents
ten percent of the total projected income that ASI will earn should we be awarded the Department's contract.
The requirement for submission of sealed cost proposals is intended to assure that the technical review of proposals is not influenced by cost factors.
Other than to note compliance with the CMBE goal, the members of the evaluation panel did not extrapolate the ASI disclosure to determine the total ASI cost proposal.
There is no evidence that the ASI disclosure affected the panel's evaluation of the proposal.
Had the ASI technical proposal included its total cost proposal, evaluation panel members would have referred the issue to the Department's purchasing office. Apparently because the panel members did not note the inclusion of the CMBE total and did not extrapolate cost information based on the CMBE disclosure, the members did not refer the matter to purchasing.
Because no other vendor included cost information within the technical portion of the proposals, there was no comparative cost information available for evaluation until the cost proposals were opened by Department purchasing personnel. Cost proposals were reviewed after the evaluation of technical factors was completed.
ITC asserts that ASI's proposal modification after the proposals had been opened and during the oral presentation warrants rejection of ASI's proposal. The evidence fails to support the assertion.
Section 2.1L of the RFP, "COLLECTION AND REMITTANCE OF FEES," states:
The Department requires the collection of certain fees from applicants for services related to the licensure and examination process. It is intended that the Contractor collect these fees, as necessary and appropri- ate, and remit these fees daily (exclusive of weekends and State of Florida holidays) in a manner acceptable to the Department. It is intended that the Contractor retain its fee for services as provided for in the contract and remit the balance to the Department as appropriate. The Department is currently not prepared to accept electronic funds transfers in this area, however, it is interested in proposals which could accommodate such tran- sactions during the contract period. The Department contemplates technological enhance- ments in the Receipt's database within the contract period, however it is unable to specify the details of such at this time.
Contractor must be able to accommodate such technological changes and enhancements. If any invoices are required to be submitted by the contractor to the Department, they must be submitted in a manner acceptable to the
Department and in detail sufficient for a pre- audit and postaudit thereof. The Contractor shall have a system which maintains certain data, as specified by the Department, related to its activities in this area.
The Department had indicated that a vendor could collect the total fee, deduct the vendor service charge, and remit the balance of the fee to the Department. Prior to the preproposal conference, ITC submitted a question (Number 21) seeking information on how fees were to be conveyed to the
Department. In Addendum Number 1, the Department indicated that a response to the question would be provided in a second addendum to be issued after the preproposal conference.
In the second addendum, the Department's response to ITC's question Number 21 states:
The Department intends for the vendor to receive, on behalf of the Department, certain fees currently paid by licensure applicants and/or exam candidates. These fees may be paid by personal check, certified check or money order. Cash cannot be accepted. All checks or money orders must be made payable to the Florida Department of Insurance and must be deposited by the vendor into a state concentration account (with Barnett Bank) or
a clearing fund in the name of the Department. The Department will assist in establishing these accounts. The Department will require a daily accounting of all monies collected and/or deposited. This information must be
in the format prescribed by the Department. This information must be transmitted via an automated system compatible with the Department's existing information systems in this area.
The vendor will be required to submit in- voices to the Department for services rendered on a monthly basis. Such invoices must be in sufficient detail for pre-audit and post-audit purposes and be in a format prescribed by the Department.
The Department's response in addendum Number 2 specifically noted that the Department's position had changed.
ASI's proposal states:
Fees will be collected on the day of examina- tion and/or license issuance. This method will eliminate late payment processing. We will collect examination fees payable to ASI. This will minimize reconciliation tasks for the Department, and will allow accounting efforts to focus on those fees collected on behalf of the Department. Application re- venues will be shared with the vendor, based on prices stipulated in the price proposal and associated processing volumes. Appli- cation and fingerprinting fees will be collected via checks made payable to the Department. ASI will provide a reconcilia- tion of these fees, and daily deposits will be made to the Department's account. ASI will invoice the Department for its applica- tion screening services on a monthly basis.
ASI's proposal further states:
As part of the standard project planning process, [ASI will work side-by-side with the Department to identify specific requirements to be included in the implementation plan, including fee collection procedures], de- tailed invoice requirements, and the most appropriate method to transmit detailed tran- saction information to the Department....
[emphasis supplied]
The proposed fee collection process suggested by ASI is inconsistent with applicable Florida law and does not follow the procedure set out by the Department in Addendum Number 2.
Section 2.4 of the RFP, "Proposal Form and Content," subsection (C) "Work Plan" states:
Describe in narrative form your plan for accom- plishing the work described....Modifications of requirements of this RFP are permitted, however, reasons for changes should be fully explained and justified. "
At the oral presentation, and prior to evaluation of the proposals, the evaluation panel advised ASI that the fee collection proposal was not legally appropriate. ASI representatives indicated that they were attempting to provide an improved fee reconciliation process and were not aware that Florida law prohibited their fee collection plan.
ASI utilizes the two-check fee payment system in some of the states where ASI administers licensing exams.
At the oral presentation, ASI representatives assured that, as specifically stated in the proposal, ASI was committed to working with the Department "...to identify specific requirements to be included in the implementation plan, including fee collection procedures...." ASI representatives stated that the fee collection procedure desired by the Department would be accomplished within the costs set forth in the proposal.
Although ASI's fee collection procedure does not follow the method suggested in the RFP, such does not warrant rejection of the ASI proposal. As stated in the RFP, ASI's modification of the RFP requirement was permitted where the reasons for changes were fully explained and justified.
ITC implies that ASI can't provide the services offered in the ASI proposal within the fee and cost structure set forth in the response to the RFP. There is no credible evidence supporting the implication.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and subject matter of this proceeding. Sections 120.53(5) and 120.57(1), Florida Statutes.
The Petitioner has the burden of establishing, by a preponderance of the evidence, that the Department's actions were contrary to the requirements of law. Department of Transportation v. J. W. C. Company, Inc., 396 So.2d 778 (Fla. 1st DCA 1981). In this case, the burden has not been met.
An agency has wide discretion in soliciting and accepting bids and is accorded substantial deference in competitive bidding activities. The agency decision, when based on an honest exercise of discretion, should not be overturned even if it may appear erroneous and even if reasonable persons may disagree. Liberty County v. Baxter's Asphalt & Concrete, Inc., 421 So.2d 505, at 507 (Fla. 1982).
In an administrative challenge to an agency's decision to award a contract or to reject all bids, the scope of the inquiry is limited to whether the purpose of competitive bidding has been subverted. The hearing officer's sole responsibility is to ascertain whether the agency acted fraudulently, arbitrarily, illegally or dishonestly. Department of Transportation v. Groves- Watkins Constructors, 530 So.2d 912, at 914 (Fla. 1988). An arbitrary act is one not supported by facts or logic, or despotic. Agrico Chemical Company v. Department of Environmental Regulation, 365 So.2d 759, at 763 (Fla. 1st DCA, 1979).
In this case, the Department's disqualification of the ITC proposal is clearly warranted. ITC is unwilling to provide ownership of test items to the Department as is required by the RFP and was clarified by responses to ITC's questions.
The Department has specifically stated that test item ownership is not negotiable. ITC attempted in its proposal and during its oral presentation to negotiate ownership of test items. The evaluation committee properly determined that the ITC proposal was non-responsive.
ASI's inclusion of cost information within its technical proposal provided ASI with no competitive advantage. There is no evidence that the ASI disclosure affected the evaluation of the proposal. There was no comparative cost information available for evaluation until the cost proposals were opened by purchasing department personnel, after the evaluation of technical factors was complete.
As to ASI's two-check fee collection proposal, the modification of the RFP requirements was specifically permitted by the RFP. ASI's proposal identified the reasons for the suggested change.
Upon inquiry during oral presentations, ASI indicated the two-check method was an alternative to the Department's proposed method. When advised that the two-check method was not acceptable, ASI reiterated its commitment, specifically set forth in the RFP, to work with the Department in establishing fee collection procedures which were acceptable to the Department.
Unlike the non-negotiable issue of test item ownership, the modification of the RFP's fee collection plan was permitted by the RFP, and does not warrant disqualification of the ASI proposal.
Based on the foregoing, it is hereby RECOMMENDED that the Department of Insurance enter a Final Order DISMISSING the case and awarding the contract to Assessment Systems, Incorporated.
DONE and ENTERED this 21st day of May, 1996 in Tallahassee, Florida.
WILLIAM F. QUATTLEBAUM, Hearing Officer Division of Administrative Hearings
Filed with the Clerk of the Division of Administrative Hearings this 21st day of May, 1996.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 96-1330BID
To comply with the requirements of Section 120.59(2), Florida Statutes, the following constitute rulings on proposed findings of facts submitted by the parties.
The Petitioner's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows:
6. Rejected, not supported by the weight of the evidence.
12-13. Rejected, contrary to the weight of the evidence.
22. Rejected, subordinate.
23-24. Rejected, unnecessary.
The Respondent's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows:
2. Rejected, subordinate.
3-5. Rejected, unnecessary.
7-8. Rejected, unnecessary.
14. Rejected, irrelevant.
20-23. Rejected, unnecessary.
34-37. Rejected, cumulative.
48-59. Rejected, cumulative.
61-62. Rejected, irrelevant.
63-69. Rejected, cumulative.
83. Rejected, cumulative.
96. Rejected, unnecessary.
Intervenor ASI's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows:
45. Rejected, subordinate.
50. Rejected, unnecessary.
Carl D. Motes, Esquire
Maguire, Voorhis and Wells, P.A. 2804 Remington Green Circle, Suite 4
Frank Fernandez, Esquire Thomas Valentine, Esquire Department of Insurance Division of Legal Services 612 Larson Building
William B. Graham, Esquire Richard N. Sox, Jr., Esquire Bateman and Graham, P.A.
Regina L. DeIulio, Esquire Office of the General Counsel University of South Florida
All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least ten 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.
