STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SYSTEA SCIENTIFIC, LLC,

Petitioner,

vs.

DEPARTMENT OF HEALTH,

Respondent.

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) Case No. 05-2176BID

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FINAL ORDER

Pursuant to notice, a summary hearing was held in this case on June 29, 2005, in Tallahassee, Florida, before T. Kent Wetherell, II, the designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: John C. Oberholtzer, Esquire

Oberholtzer, Filous & Lesiak

39 Public Square, Suite 201 Post Office Box 220

Medina, Ohio 44258-0220

For Respondent: Janine B. Myrick, Esquire

Department of Health

4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32399-1703

STATEMENT OF THE ISSUE

The issue is whether the Department of Health’s proposed award of Invitation to Bid No. DOH 04-191 to Lachat Instruments- Hach Co. is contrary to the Department’s governing statutes,

rules, policies, or the specifications in the Invitation to Bid for the reasons alleged by Petitioner.

PRELIMINARY STATEMENT

On or about June 2, 2005, the Department of Health (Department) posted notice of its intent to award Invitation to Bid (ITB) No. DOH 04-191 to Lachat Instruments-Hach Co. (Lachat). Thereafter, Systea Scientific, LLC (Systea) filed with the Department a notice of protest and formal written protest contesting the proposed award. On June 16, 2005, the Department referred the protest to the Division of Administrative Hearings (DOAH). The case was initially assigned to Administrative Law Judge Harry Hooper, but it was subsequently transferred to the undersigned.

On June 16, 2005, the Department filed with DOAH a Motion for Expedited Proceeding and Summary Hearing in which it requested that this case be conducted pursuant to the summary hearing procedures in Section 120.574, Florida Statutes (2004).1 Systea agreed to the summary hearing procedures at the telephonic pre-hearing conference held by Judge Hooper and, based upon the parties’ agreement, the case was set for a “final hearing pursuant to the provisions of Section 120.574, Florida Statutes.” See Order Granting Continuance and Re-scheduling Hearing, dated June 22, 2005.

By letters dated and faxed June 20, 2005, the Department provided notice of Systea’s protest to the other bidders who responded to the ITB, Lachat and OI Corporation d/b/a OI Analytical (OI). The letters advised those entities that their substantial interests may be determined by this proceeding and that they could seek to intervene as a party by filing an appropriate petition with DOAH. No petitions to intervene were filed.

At the hearing, Systea presented the testimony of Craig Chinchilla. Systea’s Exhibits P-1 and P-2 were received into evidence. The Department presented the testimony of Tammie Kuhn, Cheryl Robinson, and Terry Walters. The Department’s Exhibits R-1, R-2, and R-3 were received into evidence.

No Transcript of the hearing was filed. The parties waived the filing of proposed final orders. They were given until 12:00 p.m. on June 29, 2005, to file post-hearing legal memoranda, but neither did so. This Final Order is being issued on an expedited basis at the Department’s request, with Systea's

concurrence.

FINDINGS OF FACT

1. The Department issued ITB No. DOH 04-191 to solicit bids for the purchase of a Discrete Analyzer System (DAS) and a three-year service/maintenance agreement for the DAS.

2. The DAS is a piece of laboratory equipment that is used primarily to analyze the chemical composition and level of nutrients in wastewater.

3. Bids were submitted in response to the ITB by Systea, Lachat, and OI.

4. The bids were opened and reviewed by the Department’s staff. The Department’s purchasing office reviewed the pricing information in the bids, and its laboratory staff reviewed the technical components of the bids.

5. Lachat was determined, based upon that review, to be the low bidder and, therefore, the Department posted notice of its intent to award the contract to Lachat.

6. Systea filed with the Department a notice of protest and a formal written protest challenging the award of the contract to Lachat. The sole basis of Systea’s protest is that the “grand total” line in Lachat’s bid was left blank and that the omission is not a minor irregularity that can be waived by the Department.2 The protest seeks to have Lachat’s bid “disqualified” based upon that omission.

7. Special Condition 5.1 of the ITB required bidders to “submit all mandatory, technical, and pricing data in the formats specified in the Invitation to Bid.”

8. Special Condition 6.16 stated that “[b]ids that do not meet the requirements specified in this Invitation to Bid will

   be considered non-responsive.” Similarly, paragraph 14 of the General Instructions to Bidders states that the “[f]ailure to comply with terms and conditions, including those specifying information that must be submitted with a response, shall be grounds for rejecting a response.”

9. The pricing data referenced in Special Condition 5.1 was to be provided by the bidders on the Price Page, which is Attachment II of the ITB.

10. The Price Page has space for the bidders to enter their “unit price” and the “total amount” for the DAS as well as space for the bidders to enter their annual price for the three- year service/maintenance agreement required by the ITB.

11. The Price Page also has space for the bidders to enter their “grand total,” and it is undisputed that the “grand total” was to reflect the sum of the individual prices referenced in the preceding paragraph.

12. Inclusion of the “grand total” on the Price Page is a mandatory requirement of the ITB because Special Condition 5.5 states that the Price Page “must be filled out as indicated” (emphasis supplied),3 and Special Condition 6.15 states that the contract is to be awarded to the bidder offering “the lowest grand total for the items being solicited.”

13. Thus, the omission of the “grand total” on the Price Page of a bid renders the bid non-responsive unless the omission is waived by the Department.

14. Special Condition 6.10 prohibits the Department from waiving “material deviations” in the bids that relate to the mandatory requirements of the ITB. That condition does not similarly prohibit the Department from waiving non-material deviations.

15. Other provisions of the ITB expressly authorize the Department to waive non-material deviations. For example, Special Condition 6.16 reserves the Department’s right to waive “any minor irregularity or technicality in bids received,” and paragraph 15 of the General Instructions to Bidders reserves the Department’s right to waive “any minor irregularity, technicality, or omission.” (All emphases supplied).

16. The Price Page in Lachat’s bid listed prices for the DAS and for each year of the required service/maintenance agreement, but the “grand total” line on the Price Page was left blank. Thus, Lachat’s bid was technically non-responsive.

17. In addition to the Price Page, Lachat’s bid included a document titled “Proforma [sic] Price Quotation.”

18. The Department staff did not consider the “Proforma” document in determining the responsiveness of Lachat’s bid or in tabulating the bid’s “grand total.” The document was ignored by

    Department staff because it was not something that was specifically required by the ITB.

19. The prices listed on the “Proforma” document correspond to the prices itemized on the Price Page in Lachat’s bid. The document also makes reference to the one-year parts and labor warranty that is included in the price of the DAS (and required by Special Condition 4.6) as well as the components included in the annual price that Lachat bid on the Price Page for the service/maintenance agreement, which is referred to in the “Proforma” as a “field service partnership”.

20. The components of the “field service partnership” listed in the “Proforma” -- i.e., “onsite, priority service, two preventative maintenance visits, and parts and labor” -- are materially the same as the required components of the service/maintenance agreement referenced in Special Condition 4.7.

21. As part of its review of the bids, the Department staff tabulated a “grand total” for Lachat’s bid by adding the unit prices itemized on the Price Page of Lachat’s bid.

22. The result of that tabulation was $46,548, which was lower than the “grand total” in the bids submitted by Systea and OI.

23. The Department staff would have performed this calculation even if Lachat had filled-in an amount on the “grand

    total” line in order to verify the underlying calculations. Indeed, the Department staff also verified the calculations in Systea’s and OI’s bids, which each included an amount on the “grand total” line.

24. Department staff confirmed the $46,548 figure with a representative of Lachat, as it is authorized to do under paragraph 14 of the General Instructions to Bidders. That paragraph provides that “[b]efore award, the [Department] reserves the right to seek clarifications . . . deemed necessary for proper evaluation of the submissions.”

25. The amount entered on the “grand total” line on the Price Page of Systea’s bid is $49,995. That figure equals the sum of the unit prices itemized on the Price Page of Systea’s bid.

26. The amount entered on the “grand total” line on the Price Page of IO’s bid is $52,427.50. That figure is inexplicably higher than the sum of the unit prices itemized on the Price Page of IO’s bid. The sum of the itemized prices is

    $49,747.50.

    
    

27. The Department staff did not contact OI to seek clarification regarding this discrepancy because OI would not have been the lowest bidder even if the unit prices in its bid were correct.

28. In posting the contract award, the Department listed OI as the third-lowest bidder based upon the “grand total” in its bid, rather than the second-lowest bidder based upon the Department’s tabulation of the itemized costs in the bid.

29. The omission of the “grand total” on the Price Page of Lachat’s bid is a minor irregularity because the bid contained (on the Price Page) all of the figures necessary to calculate the “grand total,” and the tabulation of the “grand total” was a simple mathematical calculation that the Department would have made in any event to verify the accuracy of the "grand total" based upon the unit prices itemized on the Price Page.

30. If Lachat’s bid was rejected based upon the omission of the “grand total” on the Price Page, there would be a negative fiscal impact on the Department of more than $3,000 because the bids of Systea and OI (as tabulated by the Department) were that much higher than Lachat’s bid.

31. The legislative appropriation for the Department’s purchase of the DAS expires on June 30, 2005, and the Department will lose the appropriated funds unless it expends or encumbers the funds by 5:00 p.m. on that date. A purchase order must be issued to encumber the funds, and the purchase order must identify the entity that the funds will be paid to.

    CONCLUSIONS OF LAW

    
    

32. DOAH has jurisdiction over the parties to and subject matter of this proceeding pursuant to Sections 120.569, 120.57(1), 120.57(3) and 120.574, Florida Statutes.

33. The administrative law judge’s decision arising out of a summary hearing is final agency action subject to judicial review, rather than a recommended order subject to review by the Department. See § 120.574(2)(f), Fla. Stat.

34. The Department did not contest Systea’s standing to challenge the award to Lachat even though Systea may not have actually been the second-lowest bidder. As a result, and because the evidence was insufficient to determine whether OI’s bid was intended to be $52,427.50 (as stated in the bid) or

    $49,747.50 (as tabulated by the Department), it is concluded that Systea has the requisite standing in this proceeding. See Preston Carroll Co. v. Florida Keys Aqueduct Authority, 400 So. 2d 524 (Fla. 3d DCA 1981) (second-lowest bidder has standing to protest contract award, but third-lowest bidder does not because it will not receive the contract even if it prevails in its protest).

35. On the merits of the protest, Systea has the burden of proof. See § 120.57(3)(f), Fla. Stat.

36. The scope of this proceeding and the nature of Systea’s burden of proof is defined as follows:

    In a competitive-procurement protest, other than a rejection of all bids, the administrative law judge shall conduct a de novo proceeding to determine whether the agency's proposed action is contrary to the agency's governing statutes, the agency's rules or policies, or the bid or proposal specifications. The standard of proof for such proceedings shall be whether the proposed agency action was clearly erroneous, contrary to competition, arbitrary, or capricious.

    
    

    Id. See also State Contracting & Engineering Corp. v. Dept. of Transportation, 709 So. 2d 607, 609 (Fla. 1st DCA 1998) (purpose of a bid protest proceeding is to “evaluate the action taken by the agency" in relation to the standards in Section 120.57(3)(f), Florida Statutes).

37. As a general rule, bids must strictly adhere to the requirements of the ITB. However, it is well-established that agencies have broad discretion to waive minor, non-material irregularities in bids if doing so would save the public money. See, e.g., Liberty County v. Baxter’s Asphalt and Concrete, Inc., 421 So. 2d 505 (Fla. 1982); Robinson Electrical Co. v. Dade County, 417 So. 2d 1032, 1034 (Fla. 3d DCA 1982) ("[T]he purpose of competitive bidding is to secure the lowest responsible offer and . . . the County may waive minor irregularities in effectuating that purpose.").

38. As stated in Intercontinental Properties, Inc. v.

    
    

    Department of Health and Rehabilitative Services, 606 So. 2d

    380, 387 (Fla. 3d DCA 1992), “there is a strong public policy in favor of awarding contracts to the low bidder, and an equally strong public policy against disqualifying the low bidder for technical deficiencies which do not confer an economic advantage on one bidder over another.”

39. The determination as to whether an irregularity in a bid is material or not turns on “whether the variation affects the amount of the bid by giving the bidder an advantage or benefit not enjoyed by the other bidders.” Harry Pepper & Associates, Inc. v. City of Cape Coral, 352 So. 2d 1190, 1193 (Fla. 2d DCA 1978). See also Tropabest Foods, Inc. v. Dept. of General Services, 493 So. 2d 50, 52 (Fla. 1st DCA 1986) ("[A]lthough a bid containing a material variance is unacceptable, not every deviation from the invitation to bid is material. It is only material if it gives the bidder a substantial advantage over the other bidders and thereby restricts or stifles competition.").

40. The ITB incorporates this standard in Special Condition 6.10, which provides in pertinent part:

    A deviation is material if, in the state’s sole discretion, the deficient response is not in substantial accord with the [ITB] requirements, provides an advantage to one bidder over other bidders, has a potentially significant effect on the quantity or quality of item bid, or on the cost to the state.

41. Mathematical errors in the calculation of the bid price have been considered in prior cases to be minor irregularities that the agency may waive or correct as part of its review of the bid. See, e.g., Guiding Light Enterprise, Inc. v. Dept. of Transportation, Case No. 04-2163BID, 2004 WL 1909270 (DOAH Aug. 25, 2004; DOT Sept. 15, 2004) (rejecting protest of award to bidder whose bid included monthly prices rather than an annual price as required by the ITB based, in part, on a prior version of Florida Administrative Code Rule 60A-1.002(11), which stated that “[m]istakes in an arithmetic extension of pricing may be corrected by the agency”); Trinity Services Group, Inc. v. Dept. of Corrections, Case No. 98- 3670BID, 1998 WL 930101, *21 (DOAH Nov. 30, 1998) (concluding that the agency was “duty-bound to correct” mathematical errors in bids and that such errors were minor irregularities that were properly waived); Storage Technology Corp. v. Dept. of Health & Rehab. Servs., Case No. 92-0977BID, 1992 WL 881180 (DOAH Mar. 31, 1992; HRS Apr. 21, 1992) (rejecting protest of bidder whose bid was no longer the lowest bid after the agency corrected mathematical errors on the bid’s pricing form).

42. Similarly, the evidence in this case establishes that the omission of the “grand total” on the Price Page of Lachat’s bid is a minor irregularity that the Department had discretion

    to waive based upon well-established case law and the express terms of the ITB.

43. Systea failed to prove that the Department’s waiver of the omission in Lachat’s bid was clearly erroneous, contrary to competition, arbitrary, or capricious. Indeed, the evidence establishes that the Department’s action was reasonable and appropriate under the circumstances.

44. Accordingly, Systea failed to meet its burden of proof under Section 120.57(3)(f), Florida Statutes.

ORDER

Based upon the foregoing findings of fact and conclusions of law, it is

ORDERED that:

1. Systea’s formal written protest is dismissed, the award to Lachat is affirmed, and this case is closed.

2. The Department shall return the bid protest bond or alternate security provided by Systea unless this Final Order is appealed or the Department files within 10 days after the expiration of the appeal period a motion for an award of costs (excluding attorney’s fees) against the bid protest bond or alternate security. See § 287.042(2)(c), Fla. Stat; Fla. Admin. Code R. 28-110.005(4). Jurisdiction is retained for the limited purpose of considering such a motion for costs, if filed.

DONE AND ORDERED this 29th day of June, 2005, in Tallahassee, Leon County, Florida.

S

T. KENT WETHERELL, II Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 29th day of June, 2005.

ENDNOTES

1/ All statutory references in this Final Order are to the 2004 version of the Florida Statutes.

2/ At the hearing, Systea also argued that Lachat's bid was not responsive because it failed to include the required warranty documentation and detailed information regarding the service/maintenance agreement. Those arguments have not been considered because they were not raised in the formal written protest.

3/ Pursuant to Special Condition 6.10, the use of “shall,” “must,” or “will” in the ITB indicates mandatory conditions, whereas the use of “should” or “may” indicates desirable attributes or conditions that are permissive rather than mandatory.

COPIES FURNISHED:

R.S. Power, Agency Clerk Department of Health

4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32399-1701

Timothy M. Cerio, General Counsel Department of Health

4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32399-1701

Dr. John O. Agwunobi, Secretary Department of Health

4052 Bald Cypress Way, Bin A00 Tallahassee, Florida 32399-1701

Janine B. Myrick, Esquire Department of Health

4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32399-1703

John C. Oberholtzer, Esquire Oberholtzer, Filous and Lesiak

39 Public Square, Suite 201

P. O. Box 220 Medina, Ohio 44258

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing the original Notice of Appeal with the agency clerk of the Division of Administrative Hearings and a copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the District Court of Appeal in the Appellate District where the party resides. The notice of appeal must be filed within 30 days of rendition of the order to be reviewed.

Docket for Case No: 05-002176BID

Orders for Case No: 05-002176BID