vs. ) Case No. 97-1506BID
Respondent. )
Pursuant to notice, a formal hearing was held in this case on May 13 and 14, 1997, at Tallahassee, Florida, before Stephen
F. Dean, a duly designated Administrative Law Judge of the Division of Administrative Hearings.
For Petitioner: Douglas M. Lurio, Esquire
For Intervenor: Wilbur E. Brewton, Esquire
Kelly Brewton Plante, Esquire Gary, Harris & Robinson, P.A.
Whether the Department of Corrections acted fraudulently, arbitrarily, illegally, or dishonestly, thus subverting the purposes of the bid statute by deciding to reject all bids
Whether the Department of Corrections, after initiating a competitive bid process for the purchase of commodities under Section 287 et seq. Florida Statutes, is permitted to award the contract for the purchase of the commodities to PRIDE under Section 946.515, Florida Statutes, without regard for the requirements of the bid statute, Section 287 et seq. Florida Statutes?
Whether the Department of Corrections violated the purposes of the bid statute by commencing and continuing negotiations with PRIDE regarding the uniform shirts that were the subject of invitation to bid number, 97-DC-7048, after the rejection of all bids submitted in response to the Invitation To Bid (ITB)?
On December 20, 1997, the Department of Corrections (the "Department") advertised an invitation to bid for the manufacture of correctional officer shirts with emblems for its officers. At the January 8, 1997, bid opening, Prison Rehabilitative Industries and Diversified Enterprises, Inc. ("PRIDE") was the lowest bidder and Elbeco Incorporated ("Elbeco") was the second lowest bidder. On March 5, 1997, the Department notified all parties that it had decided to reject all bids. Elbeco timely filed its notice of intent to protest as well as its formal written protest. Prior to the hearing, PRIDE was permitted to intervene as a party in this matter. A formal hearing on Elbeco's bid protest was held on May 13 and 14, 1997.
At the commencement of the hearing, the Department and PRIDE presented a motion to dismiss the bid protest filed by Elbeco as moot. In its motion, the Department claims that even if it wanted to award the bid contract to Elbeco, Section 946.515, Florida Statutes, would prevent such award even if the Department's rejection of all bids was arbitrary, illegal or dishonest. The motion further states that since the Department cannot award the contract to Elbeco, the administrative law judge does not have the power to redress Elbeco's injury and this bid protest is moot. Ruling on this motion was reserved until issuance of this order because it was based upon the facts surrounding the handling of the ITB.
At the hearing, each party had the opportunity to present witnesses and evidence in connection with the motion and Elbeco's bid protest. The oral deposition of Secretary Harry Singletary, Jr., of the Department taken on May 9, 1997, was admitted into evidence as part of the record by stipulation of the parties.
A transcript of the hearing was filed on May 20, 1997. By agreement of all parties, their Proposed Recommended Order were filed on or about June 3, 1997.
On Friday, December 20, 1996, the Department of Corrections ("Department") issued bid proposal 97-DC-7048, pursuant to the bid statute and applicable regulations (the "ITB"). The bid was opened on January 8, 1997.
The ITB requested prices for eight different shirts:
men's and women's tan and white, short and long-sleeve shirts. The ITB did not request prices for maternity shirts.
The ITB provided that the "[s]uccessful bidder may be required, before the award of the contract, to show to the complete satisfaction of this office that they have the necessary facilities to assure compliance with [the] bid as submitted and within the time specified." The ITB also provided that "[t]he Department reserves the right to reject any and all bids."
Elbeco is a manufacturer of uniform shirts. For the past three years, Elbeco had been awarded the bid by the Department for the manufacture of correctional officer uniform shirts, and its latest contract expired February 7, 1997.
PRIDE is a nonprofit corporation authorized by Florida Statute to operate correctional work programs for inmates. The directors of PRIDE are appointed by the Governor.
In early 1996, William Stancill, General Manager of PRIDE and a former Chief, Bureau of General Services of the Department, met with Stan W. Czerniak, Assistant Secretary of the Department, to discuss the possibility of PRIDE manufacturing correctional officer shirts for the Department. The question of quality was raised by Czerniak, and Stancill offered to have PRIDE make sample shirts. These samples were made and distributed to the regional directors of the Department. The samples also were brought by Mr. Czerniak to the Department's October 1996, Executive Leadership Committee meeting where they were discussed. The samples were made at the Lawtey Correctional
Institution and were returned to PRIDE after the October 1996, meeting.
Prior to the issuing by the Department of the ITB, Mr. Stancill made at least two presentations to the Department at the offices of the Department regarding PRIDE's manufacture of correctional officer shirts for the Department. These presentations were attended by Secretary Singletary. The subject of the discussions between Stancill and the officials of the Department was PRIDE's bidding on the contract for the correction officers' shirts.
The Department knew that PRIDE made uniform shirts; knew about the quality of PRIDE's shirts; knew that PRIDE wanted to make shirts for the Department; and knew that there were security issues involved in PRIDE making these shirts prior to issuing the ITB.
The subject ITB required the contract vendor to purchase and sew various emblems on each garment. Under the prior contract, the institutional tab was not sewn on the shirts by the contract vendor. The institutional tab is a small emblem which identifies the particular correctional institution to which the officer is assigned. This tab is also referred to in the testimony as the rocker emblem. There are 56 correctional institutions operated by the Department.
Elbeco incurred significant expense and spent a great deal of time in connection with the preparation and submission of the ITB. Considerable effort was incurred in contacting
suppliers and locating personnel during a holiday period. Significant time and effort was also expended in connection with devising a strategy to deal with sewing on the rocker emblem.
Because there were 56 different correctional institutions, each of which required its own tab, the rocker emblem could not be sewn on during the manufacturing process.
The rocker emblems would have had to be sewn on the shirts separately by Elbeco upon the receipt of an actual order from an institution. This would require Elbeco to box the un- ironed shirts by size prior to sewing on the tabs. Upon receiving an order from an institution, appropriate sizes would have had to be retrieved and the tabs hand-sewn on each one. Thereafter, the shirts would have had to be ironed, folded, and re-boxed. This process would be labor intensive for Elbeco. It is noted that Elbeco, unlike PRIDE, is subject to wage and hour laws.
Bids were opened on January 8, 1997. PRIDE bid $10.84 for all sizes of the short-sleeve shirts and $13.33 for all sizes of the long-sleeve shirts. Elbeco bid $13.60, $13.15, $13.95 and
$13.50 for various sizes of the short-sleeve shirts, and $16.05,
$15.60, $16.15 and $15.80 for the various sizes of the long- sleeve shirts.
Calculating the purchase of the exact number of shirts anticipated to be ordered by the Department, it would cost
$672,735 to buy the shirts from PRIDE and $834,175 to buy the shirts from Elbeco, a difference of $161,440.
PRIDE submitted the lowest bid for shirts to be manufactured by inmates of the Department of Corrections. The evaluation committee determined that the bid submitted by PRIDE was responsive and sample shirts were requested by the Department and submitted by PRIDE.
Elbeco had the second lowest bid. The Department did not determine if Elbeco's or any of the other bids were responsive.
The samples submitted by PRIDE did not have the number of horizontal threads per square inch or the "fill" required by the ITB. However, PRIDE's shirts used the fabric identified in the ITB. The failure to meet the required number of horizontal threads was not a substantial deviation from the specifications.
The Department had security concerns with the possibility a PRIDE inmate worker could take a correctional officer shirt, put on the shirt, and escape by walking out of the institution dressed like a correctional officer.
After the bid opening, Secretary Singletary instructed James Upchurch, Security Administrator, to ensure that the proposed PRIDE manufacturing facility at the Lawtey Correctional facility would be suitable for the manufacture of correctional officer shirts.
A meeting was held between PRIDE and the Department on January 28, 1997, to discuss security issues. An on-site inspection of the proposed manufacturing facility was held on February 6, 1997, in order to determine what security
enhancements were required. This inspection was attended by representatives of PRIDE and the Department.
Prior to the February 6, 1997, inspection of the Lawtey Correctional Institution, the Department had made several improvements to the proposed manufacturing facility in anticipation of PRIDE being awarded the contract. These included construction of a lockable shake down area and construction of a fenced-in outdoor break area for the inmates.
As a result of the inspection and meetings, the Department required the following additional security provisions: expanded metal would be required to be purchased and installed over the exterior of the windows of the facility, extension of the fence installed around the break area, and installation of a hand print verifier. The Department also required that all of the doors of the facility be locked rather than use the panic bars currently provided. This necessitated employment of two additional correctional officers to provide added security and control the keys in case of emergencies. PRIDE also was required to fund any overtime for correctional officers required at the fabrication facility.
After the meeting, Mr. Stancill sent Mr. Upchurch a letter dated February 13, 1997, to address the specific issues and concerns raised by the Department at the meeting, as follows:
Thank you for the time you, Mr. Czerniak, Mr. Crosby, Supt. Gordon, and Major Cairel spent with our staff in discussing PRIDE's proposed plan to supply uniform shirts to the Department. We also appreciate the input Mr.
Roberts with the Fire Marshall's [sic] office.
After reviewing the security concerns expressed in the meeting, PRIDE will agree to the following modifications and will not ask for an increase in our bid price for shirts. Uniform shirt sales will not be considered in PRIDE's calculation of payments to the Department:
Fund two (2) Correctional Officers who will be assigned to the PRIDE industry. Thirty two thousand dollars ($32,000) each.
Purchase necessary expanded metal to cover the exterior windows in the PRIDE building (the Department will install).
Purchase fence material to add a top to the outside break area (the Department will install).
Fund the cost of a hand verifier similar to that used at North Florida Reception Center at a cost not to exceed six thousand five hundred dollars (6,500).
Agree to fund Correctional Officers overtime if extra hours or extended operating days are required.
Your choice in the following two options for labels in the Correctional Officer shirts, "Quality Uniforms for Quality Officers" or "Manufactured for the Florida Department of Corrections".
The Department will begin serving bag lunches to inmates assigned to the PRIDE industry.
PRIDE understands and appreciates the concerns for both quality and security expressed at each meeting and is committed to making it happen.
An Officer Uniform sample is being provided directly to Mrs. Bonnie Holcomb in the Bureau of General Services for your specification compliance testing. (Emphasis supplied.)
The underlined portion of the letter above refers to the payment of one-and-one-half percent of the value of PRIDE's sale of goods to the Department. Nancy Wittenberg, Assistant Secretary of Administration of the Department, did not agree to foregoing the one-and-one-half percent payments made to the Department from sales of uniform shirts.
At a February 20, 1997, meeting of the Department's Executive Leadership Committee, the union's objections to employees sewing on the rocker tabs were raised by Secretary Singletary. The Secretary decided that the rocker emblem would be eliminated from the uniform. The union was demanding that officers be paid for sewing on the rocker emblems. It was estimated that the cost would be $25-$30 per officer per year. The decision to eliminate the emblems was made despite the fact that the ITB called for the vendor to sew the rocker emblems on each shirt, a fact known to Nancy Wittenberg who attended the meeting.
On February 24, 1997, when advised by Nancy Wittenberg about deleting the rocker emblems, Karin Morris, the Department's purchasing specialist, recommended to Nancy Wittenberg that the contract be rebid.
Shortly after February 24, 1997, Nancy Wittenberg discussed the pending ITB with Secretary Singletary. The Secretary decided that all bids would be rejected, and the Department would negotiate exclusively with PRIDE for the
purchase of the uniform shirts that were the subject of the bid proposal.
Karin Morris testified that on February 5, 1997, she realized she had left maternity uniform shirts out of the ITB. In the past, these shirts would be purchased as needed.
At the May 13, 1997, hearing, the Department was unable to indicate how many maternity uniforms were required in a year. The record did not reveal discussions between PRIDE and the Department about the specifications or prices for the maternity shirts.
On March 4, 1997, after the decision to reject the bids had been made, Ms. Wittenberg called a meeting with Karin Morris; Stan Czerniak, Assistant Secretary for Security and Institutional Management; and William Stancill of PRIDE.
At the meeting, PRIDE proposed to reduce its original bid price by $.27 to eliminate the rocker and increase its bid price by $1.094 to cover the additional security enhancements required by the Department, for a net increase of $.82 per shirt. Following that discussion, the Department proposed a price increase of $.75 per shirt over the price originally bid by PRIDE, to which PRIDE agreed.
It was agreed at the March 4th meeting that the Department would be responsible for acquiring and installing expanded metal to cover the exterior windows in the facility and purchase and install fence material to add a top to the outside break area that had already been constructed by the Department.
Finally, it was agreed that one-and-one-half percent would be paid to the Department by PRIDE from the sales of uniform shirts.
As of the meeting on March 4, 1997, the Department had not notified PRIDE or any of the other bidders of its decision to reject all bids.
Prior to rejecting all bids, the Department never requested that Elbeco supply it with a new bid price, reflecting the elimination of the rocker emblem.
The Department never calculated or considered the costs of the security enhancement required to manufacture the shirts at the Lawtey manufacturing facility in arriving at its proposed price, which was $.75 over PRIDE's initial bid.
Immediately following the meeting on March 4, 1997, Karin Morris instructed the Department personnel to prepare a proposed contract. The proposed contract contains the terms agreed to at the March 4, 1997, meeting regarding the original response to the ITB. However, the contract's term was for two years with a two-year renewal term, a departure from the terms of the ITB.
On March 5, 1997, Karin Morris instructed Bonnie Holcomb, purchasing specialist for the Department, to prepare for Morris' signature the letter to all bidders indicating that all bids had been rejected. The letter was signed by Ms. Morris and telecopied to all bidders. The letter did not indicate that the Department was pursuing a contract with PRIDE and did not state any reasons for the rejection of all bids.
Several days after the March 4, 1997, meeting, Mr. Stancill met with the President of PRIDE. At that meeting, the President of PRIDE agreed to all of the terms and conditions discussed at the March 4, 1997, meeting.
Elbeco filed a timely notice of intent to protest, and, on March 20, 1997, filed a formal written protest pursuant to Section 120.57(3)(b), Florida Statutes.
Prior to rejecting all bids and up until the day of the hearing, the Department continued to pursue a contract for the uniform shirts exclusively with PRIDE. On April 29, 1997, the Department delivered to PRIDE the proposed contract. This contract contained the terms and conditions agreed to during the March 4, 1997, meeting which did not address maternity shirts.
Since opening the bids, the Department has made no efforts to negotiate with Elbeco.
Mr. Lurio, President of Elbeco, stated that the Department never offered to pay for any of Elbeco's manufacturing facilities or any improvements thereto. He also indicated that Elbeco has never returned to the Department a percent of sales as a payment in a manner similar to that required of PRIDE by the Department.
The Department asserts it rejected all bids because of eliminating the tabs and failing to include maternity shirts in the ITB. The reason for eliminating the rocker emblems was the "demand" by the union representing the correctional officers for compensation to sew on these tabs. The Department’s stated
reason for eliminating the tabs was allegedly the cost of meeting the Police Benevolent Association (PBA) demand for payment for this uniform maintenance item.
Secretary Singletary placed the total cost of PBA's demand between $400,000-$480,000 ($25-$30 per officer) based on 16,000 officers having to sew on tabs on five shirts each year at
$5.00 per shirt.
This explanation does not fit the facts because under the ITB, the rocker emblems were to be sewn on all new shirts by the manufacturer. Ms. Wittenberg, who was in attendance at the meeting, knew about this provision of the ITB. Because the shirts were to be provided with tabs, the union's demand was only applicable to personnel transferred from one institution to another. Therefore, the Secretary’s cost estimate is severely flawed.
The record reveals that maternity shirts were not a consideration because Secretary Singletary had decided to reject the bids prior to the maternity shirts being brought up. In addition, the facts reveal that there have been no discussions of specifications and costs for maternity shirts.
The facts reveal that the bids were rejected after discussions with PRIDE in which the terms departed further and further from the specifications in the ITB. PRIDE’s price was increasing as a result of the costs for the various security measures, and the term of the contract being discussed with PRIDE was double the term set forth in the ITB. At the same time,
elimination of the tabs meant Elbeco’s price on rebid would be less, and potentially much less.
The foregoing is the factual situation surrounding the Department’s decision not to rebid the shirts and the basis for the Department's assertion that it is bound by law to pursue a purchase from PRIDE.
The Department did not offer any evidence to explain why it initially rejected a sole-source purchase from PRIDE. Further, the Department did not offer any evidence regarding any change in circumstance supporting its sole-source purchase from PRIDE.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties hereto pursuant to Section 120.57(1), Florida Statutes (Supp. 1996).
Section 946.515(2), Florida Statutes (Supp. 1996) provides as follows:
No similar product or service of comparable price and quality found necessary for use by any state agency may be purchased from any source other than the corporation [PRIDE] if the corporation certifies that the product is manufactured by, or the service is provided by, inmates and the product or service meets the comparable performance specifications and comparable price and quality requirements as specified under s. 287.042(1)(f) or as determined by an individual agency as provided in this section. The purchasing authority of any such state agency may make reasonable determinations of need, price, and quality with reference to products and services available from the corporation.
Although Chapter 120, Florida Statutes, was modified during the 1996 legislative session, the standard of review concerning an agency's intended decision to reject all bids was unchanged and remains whether the intended action was fraudulent, arbitrary, illegal, or dishonest.
Petitioner asserts error in the Department's rejection of all bids. Therefore, Petitioner has the burden of proof in this hearing. See Florida Dept. of Transp. v. J.W.C. Co., Inc.,
396 So. 2d 778 (Fla. 1st DCA 1981). Petitioner must establish its burden by a preponderance of the evidence. See Florida Dept. of Health and Rehab. Servs. v. Career Serv. Comm'n, 289 So. 2d
412 (Fla. 4th DCA 1974).
An agency has wide discretion in all aspects of bid letting and awarding bids. Concerning an agency's decision to reject all bids, such discretion, even if wrong, will not be disturbed unless it is found to be fraudulent, arbitrary, illegal, or dishonest. See Department of Transp. v. Groves- Watkins Constr., 530 So. 2d 912 (Fla. 1988); Moore v. Dept. of Health and Rehab. Servs., 596 So. 2d 759 (Fla. 1st DCA 1992); Asphalt Pavers, Inc. v. Dept. of Transp., 602 So. 2d 558 (Fla. 1st DCA 1992).
A bidder has the right to protest and challenge an agency's decision to reject all bids and re-bid, see Solar Energy Control, Inc. v. State of Florida Dep't of Health and Rehab. Servs., 377 So. 2d 746 (Fla. 1st DCA 1980). "Where the agency is authorized to reject all bids, judicial intervention to prevent
the rejection of a bid should occur only when the purpose or effect of the rejection is to defeat the object and integrity of competitive bidding." Groves-Watkins Constr., 530 So. 2d at 913.
There are three issues to be considered in this case. The first issue is whether the Department’s motion to dismiss should be granted. The Department’s motion is denied. The Department initiated the bid process with issuance of an ITB. It subsequently rejected all bids. The Petitioner was substantially affected by the Department’s determination as the second lowest bidder. The Petitioner’s substantial interests were affected by the Department’s decision, and it has a right to pursue a bid protest. The Department may assert the provisions of Section 946.515(2), Florida Statutes, as a defense for the actions it took, but may not prevent the Petitioner from showing that the Department’s actions were illegal, fraudulent, or dishonest.
The second issue is whether the Department, after initiating a competitive bid process for the purchase of commodities under Section 287, et seq., Florida Statutes, may award the purchase of said commodities to PRIDE under Section 946.515, Florida Statutes, without penalty. Having rejected initially a sole-source purchase from PRIDE and issued an ITB, the Department may not reject the bids and pursue a commodity purchase without good cause because its decision has caused Elbeco and the other competitive bidders to change their position and expend time and money to submit bids. It is not merely rejection of the bid, but rejection of the bid and pursuit of the
sole-source purchase without good cause which defeats the object and integrity of the bidding process.
When an agency rejects all bids, it may request new proposals, cease the acquisition process, or resort to sole- source purchase. An agency ceases the acquisition process if funding for the purchase is eliminated, or there is no longer a need for the purchase. In this case the Department has the funding, needs the shirts, and is seeking to obtain them. Re- issuing the bid is the favored means of proceeding when all bids are rejected. Sole-source purchase is an option, but sole-source purchases generally must be justified to the State’s purchasing authorities. The provisions of Section 946.515, Florida Statutes, eliminate the requirement to justify a sole-source purchase from PRIDE if the product to be purchased is competitive in price and quality to similar products from other suppliers.1
In this case, the Petitioner’s evidence demonstrates that the Department decided to sole-source the shirts from PRIDE and abandon the competitive bid process when Elbeco’s and PRIDE’s prices were becoming more comparable as a result of pricing advantages to Elbeco due to elimination of the tab and cost disadvantages to PRIDE due to enhancing security. However, Elbeco did not present evidence on its costs after elimination of the tab. Therefore, a more specific finding regarding Elbeco’s price compared to PRIDE's price cannot be made.
Nonetheless, Elbeco expended time and money responding to the Department’s ITB, and, although the Department explained
why it rejected all bids, it presented no evidence to explain its decision to acquire the shirts through sole-source purchase after first bidding for them. The Department suggests that the decision to buy from PRIDE was based upon the requirements of Section 946.515, Florida Statutes, that it buy from PRIDE. However, the statute was in effect when the Department issued its ITB. Re-issuance of the ITB would have been consistent with the Department’s original position in the absence of some change of circumstance supporting abandoning the bid process. The Department offered no factual justification for its change of position. In fact, as stated above, the price differential between Elbeco and PRIDE actually was narrowing. The decision by the Department to pursue a sole-source purchase after issuance of an ITB was arbitrary and without factual basis.
Having determined that, in the absence of some change in circumstances, the decision of the Department to pursue a sole-source purchase from PRIDE after initiating the ITB was arbitrary, the Petitioner is entitled to its costs in preparing its ITB and attorney’s fees and costs in this proceeding. Acceptance of this award is a bar to Petitioner’s challenging the decision of the Department to sole-source purchase the shirts from PRIDE because it embodies the same issues which would be raised in that matter. Jurisdiction is retained to consider the factual issues of the costs of preparing the ITB and the amount of Petitioner’s attorney’s fees and costs.
Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is,
DONE AND ENTERED this 3rd day of July, 1997, in Tallahassee, Leon County, Florida.
STEPHEN F. DEAN
Filed with the Clerk of the Division of Administrative Hearings this 3rd day of July, 1997.
1 The record shows that testing found PRIDE’s shirts to meet ITB quality specifications and quality differences are not at issue.
Harry K. Singletary, Jr., Secretary Department of Corrections
Louis A. Vargas, General Counsel Department of Corrections
Douglas M. Lurio, Esquire Lurio & Associates
Wilbur E. Brewton, Esquire Kelly Brewton Plante, Esquire Gray, Harris & Robinson, P.A.
All parties have the right to submit written exceptions within 15 days from the date of this recommended order. Any exceptions to this recommended order should be filed with the agency that will issue the final order in this case.
