ACCENTURE, LLP,

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

vs.

Petitioner,

Case No. 15-3775BID

DEPARTMENT OF TRANSPORTATION,

Respondent,

and

XEROX STATE AND LOCAL SOLUTIONS, INC.,

Intervenor.

/

RECOMMENDED ORDER

The final hearing in this matter came before Administrative Law Judge J. Bruce Culpepper of the Division of Administrative Hearings, pursuant to sections 120.569 and 120.57(1), Florida Statutes (2015), on July 28 through 30, 2015, in Tallahassee,

Florida.

APPEARANCES

For Petitioner: J. Stephen Menton, Esquire

Michael Barry, Esquire Rutledge Ecenia, P.A.

119 South Monroe Street, Suite 202 Tallahassee, Florida 32301

Maureen McCarthy Daughton, Esquire Maureen McCarthy Daughton, LLC

1725 Capitol Circle Northeast, Suite 340

Tallahassee, Florida 32308

For Respondent: Matthew Fontaine Childs, Esquire

Department of Transportation

Haydon Burns Building, Mail Station 58 605 Suwannee Street

Tallahassee, Florida 32399

For Intervenor: William Robert Vezina, Esquire

Eduardo S. Lombard, Esquire Megan S. Reynolds, Esquire

Vezina, Lawrence and Piscitelli, P.A.

413 East Park Avenue Tallahassee, Florida 32301

John A. Tucker, Esquire Foley and Lardner, LLP

One Independent Drive, Suite 1300 Jacksonville, Florida 32202

STATEMENT OF THE ISSUE

The issue in this bid protest matter is whether the decision of Respondent, Department of Transportation, to award the contract for the Centralized Customer Service System to Intervenor, Xerox State and Local Solutions, Inc., over Petitioner, Accenture, LLP, was contrary to its governing statutes, rules or policies, or the solicitation specifications.

PRELIMINARY STATEMENT

On November 1, 2013, Respondent, the Florida Department of Transportation (the "Department"), advertised an Invitation to Negotiate soliciting Proposals from vendors interested in participating in competitive negotiations for the award of a contract to provide a Centralized Customer Service System and associated Operations and Maintenance ("Customer Service System" or "CCSS") through ITN-DOT-13/14-8001-SM (the "ITN").

Several firms, including Petitioner, Accenture, LLP ("Petitioner"), Intervenor, Xerox State and Local Solutions, Inc. ("Xerox"), and Cubic Transportation Systems, Inc. ("Cubic"), submitted Proposals to the ITN. On April 10, 2014, the Department posted vendor rankings noticing the Department's intent to commence negotiations on the Customer Service System contract with Xerox as the first-ranked vendor.

At that point, Petitioner and Cubic filed notices of intent to protest the Department's rankings and decision to negotiate with Xerox. This first protest came before the Division of Administrative Hearings ("DOAH" or the "Division") in Case

No. 14-2322BID. Following an administrative hearing, the Administrative Law Judge ("ALJ") entered a Recommended Order recommending that Petitioner and Cubic's bid protests be dismissed. The Department issued a Final Order on October 6, 2014, adopting the ALJ's Recommended Order in its entirety.

In February 2015, following the initiation, then voluntary dismissal, of an appeal of the final order by Cubic, the Department continued the ITN process and commenced formal negotiations solely with Xerox. On June 2, 2015, at the conclusion of these negotiations, the Department posted its intent to award the Customer Service System contract to Xerox as the "best value" proposer.

On June 5, 2015, Petitioner timely filed its Notice of Protest with the Department. On June 22, 2015, Petitioner timely filed a formal written protest of the award decision.1/ On

June 30, 2015, the Department referred the matter to DOAH for assignment to an ALJ to conduct the hearing Petitioner requested in the Petition. Xerox intervened on July 1, 2015.

The final hearing was held on July 28 through 30, 2015. At the hearing, Joint Exhibits 1–7 were admitted into evidence.

Accenture's Exhibits 1, 3–8, 14, 15, 17, 18, 36, 39, 45, 47,

52–54, 56–61, 69, 73, 88–91, 93, and 94; Department Exhibit 9; and Xerox's Exhibits 3, 4, and 17–20 also were admitted.2/ Petitioner also proffered Exhibits 9-13, 48, 49, 67, and excerpts of Exhibits 82 and 83. Petitioner also filed rebuttal exhibits regarding its protest bond which were accepted into evidence without objection from opposing parties.

Petitioner offered testimony from Sheree Merting, Contractual Services Administrator for the Florida Turnpike Enterprise ("FTE"); Timothy Garrett, tolls program manager for FTE; John McCarey of McCarey Consulting, LLC, a consultant to FTE; and Diane Gutierrez-Scaccetti, FTE's Executive Director and Chief Executive Officer. Xerox did not call any witnesses. The Department did not call any witnesses.

A six-volume Transcript of the proceedings was filed with DOAH on August 4, 2015. The parties, by mutual agreement, were

allowed until August 17, 2015, to submit proposed recommended orders. All parties timely submitted Proposed Recommended Orders which were considered in the preparation of this Recommended

Order.

FINDINGS OF FACT

1. The Department is an agency of the State of Florida charged with planning, acquiring, leasing, constructing, maintaining, and operating toll facilities and cooperating with and assisting local governments in the development of a statewide transportation system. §§ 334.044(16)-(22), Fla. Stat. (2015).3/ The Department is authorized to enter contracts and agreements to help fulfill these duties. §§ 20.23(6) and 334.044(7), Fla.

   Stat.

   
   

2. FTE is a legislatively created arm of the Department and

   
   

   is authorized to plan, develop, own, purchase, lease, or otherwise acquire, demolish, construct, improve, relocate, equip, repair, maintain, operate, and manage the Florida Turnpike System. FTE is authorized to cooperate, coordinate, partner, and contract with other entities, public and private, to accomplish these purposes. § 338.2216(1)(b), Fla. Stat.

3. The Department has the express power to employ the procurement methods available to the Department of Management Services under chapter 287, Florida Statutes. § 338.2216(2), Fla. Stat.

   
   

4. On November 1, 2013, the Department advertised the ITN, soliciting Proposals from vendors interested in participating in competitive negotiations for the award of a contract to provide a Customer Service System and associated Operations and Maintenance. The Department issued the ITN pursuant to section 287.057, Florida Statutes. The Department did not receive any challenges to the ITN specifications.4/

5. The Customer Service System is expected to process nearly all electronic toll transactions in Florida. It will be designed to replace not only the FTE's existing customer service center systems (or "back offices"), but the back office operations for the other three local tolling agencies in Florida as well. These local tolling agencies include the Central Florida Expressway (formerly known as the Orlando–Orange County Expressway Authority), the Miami–Dade Expressway Authority, and the Tampa Hillsborough Expressway Authority (collectively the "Local Authorities"). Under the terms of the ITN, the contract will include all systems and services connected with the customer service operations of toll roads and the payment of tolls to the FTE and Local Authorities including: processing and billing of transactions; identification of the registered owners of vehicles; operational and financial reconciliation; comprehensive system reporting; and website, mobile website, mobile app, and interactive voice response.

   
   

6. The FTE, which oversees all Department tolling activities in the state, will execute and manage the Customer Service System contract. Through the ITN, the Department will enter a contract directly with the successful vendor. Thereafter, the Department will enter agreements with the Local Authorities to coordinate the joint use of the new tolling system. The initial contract term for the Customer Service System is seven years.

7. Generally, the Department's ITN set forth a solicitation process consisting of two phases. Phase one involved: (a) the prequalification or short-listing of vendors to determine vendors' eligibility to submit Proposals; and (b) following Proposal submissions, the Department's evaluation and ranking of the vendors' Proposals. Phase two of the ITN is the negotiation phase which would culminate in the Department's award of the Customer Service System contract to the vendor that the Department determined would provide the "best value to the state."

8. The ITN, section 2.26, NEGOTIATION PROCESS (as amended

   
   

   by Addendum 8), outlines the specific steps for the Department's solicitation and provides:

   Once Proposers have been ranked in accordance with Section 2.6.2 Proposal Evaluation, the Department will proceed with negotiations in accordance with the negotiation process described below. Proposers should be

   
   

   cognizant of the fact that the Department reserves the right to finalize negotiations at any time in the process that the Department determines that such election would be in the best interest of the State.

   
   

   • Step 1: Follow the evaluation process and rank Proposals as outlined in Section 2.6 Evaluation Process.

     
     

   • Step 2: The ranking will be posted, in accordance with the law (see Section 2.27), stating the Department's intent to negotiate and award a contract to the highest ranked Proposer that reaches an acceptable agreement with the Department.

     
     

   • Step 3: Once the posting period has ended, the Negotiation Team will undertake negotiations with the first-ranked Proposer until an acceptable Contract is established, or it is determined an acceptable agreement cannot be achieved with such Proposer. If negotiations fail with the first-ranked Proposer, negotiations may begin with the second-ranked Proposer, and so on until there is an agreement on an acceptable Contract. The Department reserves the option to resume negotiations that were previously suspended. Negotiation sessions are not open to the public and all negotiation sessions will be recorded by the Department.

     
     

   • Step 4: The Negotiation Team will write a short plain statement for the procurement file that explains the basis for Proposer selection and how the Proposer's deliverables and price will provide the best value to the state.

     
     

   • Step 5: The Department will contract with the selected Proposer.

     
     

     Section 2.27.1 of the ITN, Ranking/Intended Award, provides that

     
     

     "[t]he Ranking/Intended Award will be made to the responsive and

     
     

     responsible Proposer that is determined to be capable of providing the best value and best meet the needs of the Department."

9. Per ITN, sections 2.6 and 2.26, Step 1, the Department created a Technical Review Team and a Selection Committee which evaluated and ranked the Proposals in order of preference based on the vendors' technical approach and capabilities. The Selection Committee ranked Xerox first followed by Petitioner, then Cubic. The Selection Committee based its decision on Xerox's proven experience with other similar and large tolling projects, including some of the country's largest tolling systems. The Selection Committee further explained that, of the three vendors, only Xerox has fully operational tolling systems in the United States, bringing a "'comfort level' that did not exist with [Petitioner] and Cubic."5/

10. Thereafter, per ITN, section 2.26, Step 2, on April 10, 2014, the Department posted its ranking of vendors with Xerox first, Petitioner second, and Cubic third. The posting also announced the Department's intent to commence "sequential" negotiations. Under this process, the Department would start negotiations with Xerox as the first-ranked vendor. If negotiations with Xerox failed, the Department would then begin negotiations with Petitioner as the second-ranked vendor, and so

    
    

    on down the order of ranking until the Department negotiated an acceptable agreement.

11. Phase one of the solicitation, which involved

    
    

    section 2.26, Steps 1 and 2 above, was the subject of a prior bid protest in DOAH Case No. 14-2322BID before ALJ Linzie F. Bogan (the "First Protest"). Following the Department's ranking of vendors and its notice of intent to initiate negotiations with Xerox on April 10, 2014, Petitioner and Cubic each filed formal bid protests. Following an administrative hearing, ALJ Bogan entered a Recommended Order recommending that Petitioner and Cubic's bid protests be dismissed. The Department issued a Final Order on October 6, 2014, adopting ALJ Bogan's Recommended Order in its entirety.

12. As Petitioner and Cubic protested the Department's decision to enter negotiations with Xerox, and because of the automatic stay provision of section 120.57(3), the Department never commenced the negotiation phase (phase two) of the procurement as detailed in the ITN, section 2.26, Steps 3 and 4. However, once all litigation involving the First Protest concluded in January 2015, the Department continued with the solicitation process for the ITN.6/ The current bid protest proceeding relates only to phase two of the solicitation process, i.e., Steps 3, 4, and 5 above. Therefore, the undersigned specifically reviewed the negotiation phase of the Department's

    
    

    solicitation and the Department's ultimate decision to award the Customer Service System contract to Xerox.

13. The Department initiated the negotiations phase for the ITN on February 9, 2015. The negotiations were conducted by a Negotiation Team appointed by Department Secretary, Jim Boxold, on February 9, 2015, in accordance with the requirements of section 287.057(16). Section 287.057(16)(a) provides that the agency head shall appoint "[a]t least three persons to evaluate Proposals and replies who collectively have experience and knowledge in the program areas and service requirements for which commodities or contractual services are sought."

14. The Negotiation Team included: Sheree Merting, FTE's Contractual Services Administrator; Tim Garrett, the tolls program manager for HNTB Corporation ("HNTB"), which is a subcontractor for FTE; and John McCarey, of McCarey Consulting, a sub-consultant to FTE general engineering contractor, Atkins North America, Inc. Mr. Garrett was the project manager for the Customer Service System project. Mr. McCarey would serve as the chief negotiator.

15. Ms. Merting is a Florida certified contract negotiator, a Florida certified contract manager, and a Florida certified contract purchasing manager. Ms. Merting has significant procurement experience with the FTE, including prior experience serving on a negotiation team. Mr. Garrett is employed by HNTB,

    
    

    an engineering consulting firm that provides tolling operations consultation to FTE. His full-time assignment for HNTB is as the tolls program manager for the FTE. Mr. Garrett has extensive knowledge of tolling systems and the software technology that the vendors presented in response to the ITN. Mr. Garrett was the project manager for the Customer Service System procurement and, together with Ms. Merting, oversaw the ITN procurement process from its inception. Mr. Garrett was familiar with the technical aspects of the ITN and was aware of the technology required to transfer the current back office system to the Customer Service System.

16. Mr. McCarey has an extensive background in the transportation and tolling business and has participated in numerous contract negotiations for tolling system contracts. Mr. McCarey formerly worked for Lockheed Corporation for approximately 25 years, serving for a time as its chief operations officer who oversaw its transportation and tolling lines of business. Thereafter, he worked for five years for

    Affiliated Computer Services, Inc. ("ACS"), serving at one point as the chief financial officer for ACS's State and Local Solutions Group, which managed its tolling business. Mr. McCarey departed ACS in 2006. Xerox acquired ACS two years after

    Mr. McCarey left.

    
    

17. The Negotiation Team's task, as stated in the ITN, section 2.26, Step 3, was to undertake negotiations with the first-ranked Proposer (Xerox) until it established an acceptable contract. If the Negotiation Team did not reach an acceptable agreement with the first-ranked Proposer, the Negotiation Team was to begin negotiations with the second-ranked Proposer (Petitioner), and so on until it achieved an acceptable contract. Once the Negotiation Team agreed with a Proposer on an acceptable contract, per the ITN, section 2.26, Step 4, it was to make a recommendation to the Department explaining how that Proposer would be the "best value to the state." The Negotiation Team was not to reevaluate the vendor Proposals or rankings previously conducted by the Technical Review Team and Selection Committee. Rather, the Negotiation Team was tasked to negotiate a contract with the first-ranked Proposer as listed on the Selection Committee's ranking and continue the process of determining the "best value to the state."

18. The Negotiation Team members were aware that the Technical Review Team and Selection Committee considered the ITN, section 2.5.2, "Best Value Selection" criteria when they evaluated and ranked Proposals. The ITN, section 2.5.2 provides:

    The Department intends to contract with the responsive and responsible short-listed Proposer whose Proposal is determined to provide the best value to the Department. "Best value," as defined in Section

    
    

    287.012(4), F.S., means the highest overall value to the state, based on objective factors that include but are not limited to:

    
    

    • Company history

    • Project experience and qualifications

    • Proposed Project approach to the technical requirements

    • Proposed approach to the Project plan and implementation

    • Proposed approach to System Maintenance

    • Proposed approach to Operations and performance

    • Price

    
    

    Because the Technical Review Team and the Selection Committee had already evaluated each Proposal under the ITN selection criteria, the Negotiation Team did not revisit each technical issue listed in the ITN, section 2.5.2. The Negotiation Team's purpose was to negotiate with the vendor the Selection Committee ranked first.

    Nevertheless, the Negotiation Team members attended the vendors' oral presentations during the rankings phase of the procurement. They also reviewed the Technical Review Team's written evaluation summaries, as well as the vendors' Proposals. The Negotiation Team also considered Xerox's prior relevant experience in similar projects as required by section 287.057(1)(c)3.

19. The ITN, section 2.24.2, Technical Proposal Section 9, required vendors, in their technical Proposals, to identify any exceptions and assumptions. "Exceptions" pertained to any and all exceptions Proposers had to the ITN terms and conditions. "Assumptions" related to any assumptions vendors' relied upon to

    
    

    develop their proposed contract price. Section 2.24.2, Technical Proposal Section 9, explained that the Department was not obligated to accept any vendors' exceptions and that the Department would consider any exceptions during the evaluation process at the Department's sole discretion. Section 2.24.2, Technical Proposal Section 9, provides:

    Technical Proposal Section 9: Exceptions and Assumptions

    
    

    If Proposers take exception to Contract terms and conditions, such exceptions must be specified, detailed and submitted under this Proposal section in a separate, signed certification. The Department is under no obligation to accept the exceptions to the stated Contract terms and conditions.

    
    

    Proposers shall not identify any exceptions in the Price Proposal. All exceptions should be noted in the certification provided for in Proposal Section 9.

    
    

    Proposers shall not include any assumptions in their Price Proposals. Any assumptions should be identified and documented in this Section 9 of the Proposal. Any assumptions included in the Price Proposals will not be considered by the Department as a part of the Proposal and will not be evaluated or included in any Contract between the Department and the Proposer, should the Proposer be selected to perform the Work.

    
    

    Failure to take exception in the manner set forth above shall be deemed a waiver of any objection. Exceptions may be considered during the Proposal evaluation process at the sole discretion of the Department.

    
    

    As allowed by the ITN, section 2.24.2, all vendors included a detailed listing of exceptions and assumptions in their Proposals. The Department intended to address the exceptions and assumptions during the negotiation phase of the procurement process.

20. From the Negotiation Team's perspective, if the Negotiation Team resolved Xerox's exceptions and assumptions favorably to the Department, received acceptable answers to any questions regarding Xerox's Proposal, and obtained a price reduction, then the Negotiation Team would have achieved a contract that represented the "best value to the state." To accomplish its task, Mr. Garrett developed a comprehensive list of topics to guide the negotiations. From a practical standpoint, Mr. Garrett's list became the agenda for the Negotiation Team's first negotiation meeting with Xerox. The list addressed all of the exceptions and assumptions Xerox included in its Proposal, as well as the Negotiation Team's questions about Xerox's Proposal.

21. On February 10, 2015, the Negotiation Team initiated negotiations with Xerox as the first-ranked Proposer. The negotiation sessions, some lasting multiple days, occurred in February, March, April, and May of 2015, and entailed approximately 80 hours of meetings. These meetings included face-to-face engagements between the Negotiation Team and Xerox,

    
    

    as well as internal strategy meetings between the Negotiation Team members where Xerox was not present. Negotiation meetings also were periodically attended by various personnel from the Local Authorities and HNTB who provided input to the Negotiation Team throughout the process. During these meetings, the Negotiation Team discussed negotiation points and reviewed information gathered from Xerox.

22. During the negotiation meetings with Xerox, the Negotiation Team addressed each exception and assumption Xerox submitted with its Proposal. The Negotiation Team rejected most of Xerox's exceptions. However, the Negotiation Team did agree to certain exceptions that it believed would benefit the Department or improve the Customer Service System. These benefits included (1) the tolling system's potential inter- operability with other states' tolling systems, (2) a clause requiring at least 120 days' notice to exercise the contract renewal option, (3) the Department's access to Xerox's software source code to increase the Department's ability to operate and modify the system should Xerox cease to serve as the contracted vendor, and (4) limiting the use of interactive voice response ("IVR") technology to only customer service and not for user account set-up due to the frequency of errors associated with IVR usage. No evidence shows that the exceptions and assumptions the Negotiation Team accepted were detrimental to the Department.

    
    

    Neither did any evidence indicate that the exceptions the Negotiation Team approved would negatively impact the operational performance of the tolling system or increase the cost or risk to the Department.

23. The Negotiation Team and Xerox also reviewed "in excruciating detail" every Department question about Xerox's Proposal. At the final hearing, Mr. McCarey recounted that the Negotiation Team wanted to ensure that "the record was clear as to what Xerox was actually going to provide as a result of their Proposal." By the conclusion of its negotiations, the Negotiation Team had thoroughly negotiated the exceptions and assumptions with Xerox and clarified all questions it had about Xerox's Proposal.

24. In addition to favorably resolving all issues related to Xerox's exceptions and assumptions, the Negotiation Team obtained a significant price reduction from Xerox. At the Negotiation Team's insistence, Xerox agreed to reduce the price of its Proposal by over $20 million (roughly 3.5 percent). The Negotiation Team considered this price reduction a "big deal." The Department did not make any concessions to Xerox in negotiating the exceptions or assumptions. The Department was going to pay less for the Customer Service System contract and receive the same services from Xerox.

    
    

25. Also during the negotiations, the Negotiation Team scrutinized Xerox's performance on two of its existing customer service system contracts. The first contract was Xerox's back office system for the SunRail commuter rail system operating in the Department's District 5 in the Orlando area. Prior to negotiations, Negotiation Team members became aware that the Xerox SunRail system was experiencing problems. Therefore, to address any concerns that these issues might manifest in Xerox's performance on the Customer Service System contract, the Negotiation Team required the Xerox personnel responsible for the SunRail system to attend the first negotiation session. The Negotiation Team directed Xerox to provide an overview of the SunRail difficulties and discuss how Xerox was addressing those issues.

26. During the course of the negotiations, the Negotiation Team determined that Xerox's SunRail "transit" system was significantly different from its proposed FTE "tolling" system. The Negotiation Team learned that the SunRail system's account management and back office operations materially differed from the back office system Xerox planned to implement for the Customer Service System contract. SunRail is a transactional or card-based system. SunRail customers (commuters) purchase tickets ("fare media") from ticket vending machines for use on a

    
    

    transit (train) transportation system. The SunRail back office processes money stored by commuters on fare media.

27. By contrast, the Customer Service System contract involves a "tolling" system for motor vehicles. In a tolling system, customers use electronic transponders, such as a SunPass or E-Pass transponder, mounted in or on their vehicle as they drive through a tolling plaza. The Customer Service System would also include a video transaction component where a photo or video might be taken of a vehicle license plate as it passes through the tolling plaza. The license plate information is processed by the back office to determine whether the driver's prepaid account may be charged for the transaction. If no customer account is associated with the vehicle tag, the driver is sent an invoice.

28. The Negotiation Team discovered that the SunRail back office customer service problems primarily involved the operation of SunRail ticket vending machines. Ticket vending machines would not be used in the Customer Service System motor vehicle tolling operations. The Negotiation Team further ascertained that the Xerox business unit that would run the Customer Service System tolling system is a separate, independent business unit from the Xerox division that operates the SunRail transit system. The two business units would employ different personnel, different management teams, different reporting processes, and different technology.

    
    

29. Moreover, the Negotiation Team determined that the technology Xerox used to operate the SunRail transit system is "very new" technology. Conversely, the account management product Xerox intends to use for the Customer Service System contract is its VECTOR 4G tolling technology. The VECTOR 4G system is a well-established product in the toll collection industry. The VECTOR 4G system is used by multiple state agencies and in some of the largest toll collection systems in the United States, including New York, New Jersey, California, and Texas. Fundamentally, the VECTOR 4G back office system tracks customer prepaid accounts from which money is withdrawn and replenished for transactions being processed. Xerox's longstanding operation of VECTOR 4G-based systems, as well as its status as one of the largest providers of back office electronic tolling systems in the United States, became a key factor in the Negotiation Team's ultimate determination that Xerox's Proposal provides the "best value to the state."

30. Nonetheless, to alleviate any Department concerns and provide additional incentive for Xerox to perform as expected on the Customer Service System contract, the Negotiation Team took advantage of the negotiation process to strengthen the Department's position on the SunRail contract. The Negotiation Team demanded Xerox agree to a "cross-default" provision that would allow the Department to default Xerox and terminate the

    
    

    Customer Service System contract if Xerox defaulted on its responsibilities on the SunRail contract. The Negotiation Team believed the cross-default provision would pressure Xerox to ensure that it performed its duties under the smaller SunRail contract, as well as provide added protection on the Customer Service System contract. Although initially resistant, Xerox ultimately agreed to the addition of a cross-default provision to the Customer Service System contract.

31. The second Xerox contract the Negotiation Team reviewed was a similar tolling system Xerox currently operates for the Texas Department of Transportation ("TxDOT"). The Negotiation Team followed up on reports it received regarding problems TxDOT was experiencing with its Xerox tolling system. The Negotiation Team learned that the TxDOT issues primarily concerned data migration from prior tolling system accounts. These issues, however, did not arise from Xerox's system. They primarily resulted from TxDOT's specific instruction to Xerox to collect outstanding tolling fees and fines that were two years old and had never been processed or invoiced by the previous vendor. In addition, the Negotiation Team learned that the issues with the TxDOT databases resulted from the use of duplicate accounts and database sources that were much larger than what Xerox would experience with the FTE. Following its review, the Negotiation Team was satisfied with Xerox's approach to data migration for

    
    

    the FTE and was not concerned that Xerox's issues with TxDOT would impact Xerox's management and operation of the Customer Service System contract.

32. Ultimately, after considering all the problems Xerox experienced managing the SunRail and TxDOT contracts, the Negotiation Team concluded that any performance issues on the SunRail and TxDOT systems would not negatively impact or occur with the Customer Service System contract. Thereafter, the Negotiation Team concluded that Xerox could successfully implement and perform the toll collection system it proposed in response to the ITN.

33. At the conclusion of negotiations with Xerox, the Negotiation Team members were confident that Xerox could deliver the toll collection system it proposed. All three Negotiation Team members agreed that the two sides had resolved all outstanding exceptions and assumptions, as well as questions regarding Xerox's Proposal. Further, the Negotiation Team reconciled to their satisfaction any lingering concerns about the SunRail and TxDOT tolling contracts. The Negotiation Team members were also very pleased with Xerox's $20 million contract price reduction.7/ Accordingly, the Negotiation Team believed that it had achieved an acceptable agreement with Xerox that was beneficial to the Department and consistent with the ITN. Therefore, the Negotiation Team made a final determination that

    
    

    Xerox provided the "best value to the state" and should be awarded the Customer Service System contract.

34. In accordance with the ITN's "sequential" negotiation process detailed in ITN, section 2.26, step 3, the Negotiation Team only negotiated with Xerox, the first-ranked vendor. Once the Negotiation Team believed that it had established an acceptable contract with Xerox, it never initiated negotiations with Petitioner, the second-ranked vendor. Consequently, Petitioner was never provided the opportunity that Xerox received during the negotiation process to address any issues related to its exceptions and assumptions, answer any questions about its Proposal, or reduce its Proposal price.

35. Upon negotiating an acceptable contract with Xerox, Mr. McCarey, with input from the other Negotiation Team members,

    prepared a written recommendation memorandum (the "Recommendation Memorandum") setting forth the Negotiation Team's recommendation for the Department to award the Customer Service System contact to Xerox. The Recommendation Memorandum, entitled "Recommendation of Negotiation Team to Diane Scaccetti, Executive Director of the FTE," included background information on the negotiation, a summary of the negotiation, a review of the Negotiation Team's objectives and strategy, and the basis for its recommendation of Xerox. The Recommendation Memorandum cited to several key factors, including Xerox's prior relevant experience

    
    

    in operating high-volume toll service centers, as well as the approximately $20 million contract price reduction. Mr. McCarey summed up the Recommendation Memorandum by writing:

    Recommendation

    
    

    As a result of the actions of the Technical Review committee, the selection committee, and the negotiations as noted previously, as well as, all of the recorded meetings, the negotiating team believes it is in the best interest of the state to contract with Xerox for the [Customer Service System] contract, as providing the best value resulting from the ITN process. Xerox's experience in operating high volume toll service centers and the negotiating team's negotiated price reduction, were key factors in arriving at the negotiating team's recommendation.

    
    

36. Mr. McCarey concluded the Recommendation Memorandum with one additional recommendation that the Department establish a "peer review contract." Mr. McCarey wrote that:

    the team would also like to see the Turnpike engage an outside party, knowledgeable in large systems development and possessing toll industry experience to do a peer review of the Proposal, contract, schedule, etc to ensure the Turnpike has identified all risks, and recommend any improvements that may improve the success of the project moving forward.

    
    

    Recognizing that this ITN procurement involved the largest back office system in the United States for tolling, the Negotiation Team believed that it would be prudent for the Department to consider obtaining additional oversight to ensure that no issues or risks were overlooked during the procurement process. The ITN

    
    

    did not require a peer review contract. The Negotiation Team considered this recommendation independent and separate from its official recommendation to award the contract to Xerox as the "best value." The peer review recommendation was not based on the Negotiation Team's concern over whether Xerox could perform the Customer Service System contract. The Negotiation Team felt the Department could choose to implement, or not implement, a peer review as it so determined.

37. On June 2, 2015, the Department scheduled a public meeting to announce its notice of intent to award the Customer Service System contract. At that meeting, Mr. McCarey read the Recommendation Memorandum aloud to Ms. Scaccetti, who was present for the meeting. Ms. Scaccetti, in her capacity as FTE Executive Director, was delegated the general authority from the Secretary of the Department to award and execute contracts issued by the Department. As explained in the Recommended Memorandum, the Negotiation Team recommended that the Department award the Customer Service System contract to Xerox as the best value proposer.

38. After Mr. McCarey read the Recommendation Memorandum, Ms. Scaccetti asked each Negotiation Team member if they concurred with the recommendation. Each member confirmed that they did. With that, Ms. Scaccetti accepted the recommendation to award the Customer Service System contract to Xerox as the

    
    

    best value proposer to the state. Ms. Scaccetti was satisfied that the Negotiation Team had performed its job under the ITN, and she endorsed the Negotiation Team's recommendation that Xerox provided the "best value to the state." Ms. Scaccetti also accepted the Negotiation Team's additional recommendation for a separate peer review contract. The Negotiation Team's Recommendation Memorandum was made part of the Department's procurement file. On that same day, the Department publicly posted its notice of intent to award the Customer Service System contract to Xerox.

39. Ms. Merting, as the procurement administrator, was responsible for maintaining the ITN procurement file. Promptly after the June 2, 2015, meeting, Ms. Merting began drafting a "short plain statement" to be placed in the solicitation and contract files prior to the execution of the Customer Service System contract as required by section 287.057(1)(c)(5) and ITN, section 2.26, Step 4. At the time of the final hearing, however, Ms. Merting's short plain statement remained in draft format. Ms. Merting ceased working on her statement after Petitioner filed its notice of intent to protest the Department's intended award to Xerox. Ms. Merting testified that her "short plain statement" would have tracked the language of the Negotiation Team's Recommendation Memorandum and would have explained the basis for selecting Xerox and how Xerox's deliverables and price

    
    

    will provide the best value for the state. Ms. Merting placed her draft statement in the ITN procurement file.

40. Based on the above Findings of Fact, the greater weight of the evidence presented at the final hearing does not establish that the Department's action was clearly erroneous, contrary to competition, or arbitrary, or capricious. Therefore, the undersigned concludes, as a matter of law, that Petitioner did not meet its burden of proving that the Department's decision to award the Customer Service System contract to Xerox contravened the Department's governing statutes, rules or policies, or the solicitation specifications that apply to this procurement.

    CONCLUSIONS OF LAW

    
    

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

42. Pursuant to section 120.57(3)(f), the burden of proof rests with Petitioner as the party opposing the proposed agency action. State Contracting & Eng'g Corp. v. Dep't of Transp., 709 So. 2d 607, 609 (Fla. 1st DCA 1998). Petitioner must meet its burden of proof by a preponderance of the evidence. Dep't of Transp. v. J.W.C. Co., Inc., 396 So. 2d 778, 787 (Fla. 1st DCA

    1981).

    
    

43. Section 120.57(3)(f) provides that in a protest to a proposed contract solicitation or award process:

    
    

    Unless otherwise provided by statute, the burden of proof shall rest with the party protesting the proposed agency action. In a competitive-procurement protest . . . 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 solicitation specifications. The standard of proof for such proceedings shall be whether the proposed agency action was clearly erroneous, contrary to competition, arbitrary, or capricious.

    
    

44. The phrase "de novo proceeding," as used in section 120.57(3)(f), describes a form of intra-agency review. The purpose of the ALJ's review is to "evaluate the action taken by the agency." J.D. v. Fla. Dep't of Child. & Fams., 114 So. 3d 1127, 1132 (Fla. 1st DCA 2013); and State Contracting, 709 So. 2d at 609 (Fla. 1st DCA 1998). A de novo proceeding "simply means that there was an evidentiary hearing . . . for administrative review purposes" and does not mean that the ALJ "sits as a substitute for the [agency] and makes a determination whether to award the bid de novo." J.D., 114 So. 3d at 1133;

    Intercontinental Props., Inc. v. Dep't of Health & Rehab. Servs., 606 So. 2d 380, 386 (Fla. 3d DCA 1992). "The judge may receive evidence, as with any formal hearing under section 120.57(1), but the object of the proceeding is to evaluate the action taken by the agency." State Contracting, 709 So. 2d at 609.

    
    

45. Because the ALJ is a finder of facts charged with resolving disputed issues of material fact based upon the evidence presented at the final hearing and because bid protests are fundamentally de novo proceedings, the undersigned is not required to defer to the Department's findings of objective fact made prior to its proposed action. It is exclusively the ALJ's responsibility, as the trier of fact, to ascertain from the competent, substantial evidence in the record what actually happened in the past, or what facts presently exist, as if no findings previously had been made. Phil's Expert Tree Serv.,

    Inc. v. Broward Cnty. Sch. Bd., Case No. 06-4499BID, 2007 Fla. Div. Admin. Hear. LEXIS 161, *17-18 (Fla. DOAH Mar. 19, 2007);

    Care Access PSN, LLC v. Ag. for Health Care Admin., Case

    
    

    No. 13-4113BID, 2014 Fla. Div. Admin. Hear. LEXIS 3, *46-47 (Fla. DOAH Jan. 2, 2014).

46. Further, in framing the ultimate issue for this de novo proceeding as "whether the agency's proposed action is contrary to the agency's governing statutes, the agency's rules or policies, or the solicitation specifications," section 120.57(3) effectively establishes a standard of conduct for the agency. Accordingly, the Department, in soliciting, evaluating, and awarding the Customer Service System contract, must obey its governing statutes, rules and policies, and the ITN specifications. If the Department failed to meet this standard

    
    

    of conduct, its proposed action is subject to reversal. See

    
    

    Phil's Expert Tree Serv., Inc., 2007 Fla. Div. Admin. Hear. LEXIS 161, at *13-14; Care Access PSN, LLC, 2014 Fla. Div. Admin. Hear.

    LEXIS 3, *42-43.

    
    

47. Accordingly, Petitioner, as the party protesting the agency's intended award, must prove, by a preponderance of the evidence, that the Department's proposed action is either:

    (a) contrary to its governing statutes, (b) contrary to its rules or policies, or (c) contrary to the bid or Proposal specifications. To meet its standard of proof that the agency's proposed action violated its required standard of conduct, Petitioner must establish that the Department's intended award to Xerox was: (a) clearly erroneous, (b) contrary to competition, or (c) arbitrary or capricious. § 120.57(3)(f), Fla. Stat.

48. The "clearly erroneous" standard has been defined to mean "the interpretation will be upheld if the agency's construction falls within the permissible range of interpretations." Colbert v. Dept. of Health, 890 So. 2d 1165, 1166 (Fla. 1st DCA 2004); see also, Holland v. Gross, 89 So. 2d

    255, 258 (Fla. 1956) (when a finding of fact by the trial court "is without support of any substantial evidence, is clearly against the weight of the evidence or . . . the trial court has misapplied the law to the established facts, then the decision is "'clearly erroneous.'"). However, if "the agency's

    
    

    interpretation conflicts with the plain and ordinary intent of the law, judicial deference need not be given to it." Colbert, supra.

49. The "contrary to competition" standard of review in section 120.57(3)(f) is unique to bid protests. The "contrary to competition" test applies to agency actions that: (a) create the appearance of and opportunity for favoritism, (b) erode public confidence that contracts are awarded equitably and economically,

    (c) cause the procurement process to be genuinely unfair or unreasonably exclusive, or (d) are unethical, dishonest, illegal, or fraudulent. Id. An agency action is "contrary to competition" if it unreasonably interferes with the purpose of competitive procurement. As described in Wester v. Belote, 138 So. 721, 722 (Fla. 1931):

    The object and purpose . . . is to protect the public against collusive contracts; to secure fair competition upon equal terms to all bidders; to remove not only collusion but temptation for collusion and opportunity for gain at public expense; to close all avenues to favoritism and fraud in its various forms; to secure the best values . . . at the lowest possible expense; and to afford an equal advantage to all desiring to do business with the . . . , by affording an opportunity for an exact comparison of bids.

    
    

50. Finally, section 120.57(3)(f) requires an agency action be set aside if it is "arbitrary, or capricious." An "arbitrary" decision is one that is "not supported by facts or logic, or is

    
    

    despotic." Agrico Chemical Co. v. Dep't of Envtl. Reg., 365 So.

    
    

    2d 759, 763 (Fla. 1st DCA 1978), cert. denied, 376 So. 2d 74 (Fla. 1979). A "capricious" action is one which is "taken without thought or reason or irrationally." Id. The inquiry to be made in determining whether an agency acted in an "arbitrary, or capricious" manner involves consideration of "whether the agency: (1) has considered all relevant factors; (2) given actual, good faith consideration to the factors; and (3) has used reason rather than whim to progress from consideration of these factors to its final decision." Adam Smith Enter. v. Dep't of

    Envtl. Reg., 553 So. 2d 1260, 1273 (Fla. 1st DCA 1989). The

    
    

    standard has also been formulated by the court in Dravo Basic

    
    

    Materials Co. v. Department of Transportation, 602 So. 2d 632, 632 n.3 (Fla. 2d DCA 1992), as follows: "If an administrative decision is justifiable under any analysis that a reasonable person would use to reach a decision of similar importance, it would seem that the decision is neither arbitrary nor capricious."

51. The governing statute for the Department's solicitation of the Customer Service System contract is section 287.057. Section 287.057 establishes a statutory framework for an agency to procure commodities or contractual services in a competitive solicitation process. The express legislative intent behind the chapter 287 procurement requirements provides that:

    
    

    The Legislature recognizes that fair and open competition is a basic tenet of public procurement; that such competition reduces the appearance and opportunity for favoritism and inspires public confidence that contracts are awarded equitably and economically; and that documentation of the acts taken and effective monitoring mechanisms are important means of curbing any improprieties and establishing public confidence in the process by which commodities and contractual services are procured. It is essential to the effective and ethical procurement of commodities and contractual services that there be a system of uniform procedures to be utilized by state agencies in managing and procuring commodities and contractual services; that detailed justification of agency decisions in the procurement of commodities and contractual services be maintained; and that adherence by the agency and the vendor to specific ethical considerations be required.

    
    

52. Section 287.057(1)(c) specifically describes the "invitation to negotiate" solicitation process. In the ITN solicitation, an agency identifies one or more responsive vendors with which to negotiate in order to receive the "best value" in the procurement. Section 287.057(1)(c)3. states that the agency must specify the criteria it will use to guide its selection of the vendors with which it will negotiate. After receiving vendor replies to the invitation to negotiate, section 287.057(1)(c)4. instructs the agency to evaluate the replies against the evaluation criteria in order to establish a competitive range of replies reasonably susceptible of award. Thereafter, section 287.057(1)(c)4. states that:

    
    

    [t]he agency may select one or more vendors within the competitive range with which to commence negotiations. After negotiations are conducted, the agency shall award the contract to the responsible and responsive vendor that the agency determines will provide the best value to the state, based on the selection criteria.

    
    

53. Thus, section 287.057(1)(c) provides for two phases during an invitation to negotiate solicitation. The first phase consists of vendors' submissions of replies to the ITN, followed by the agency's evaluations and ranking of vendors "within the competitive range." The second phase entails the agency's negotiation with one or more vendors selected from the competitive range. The agency awards a contract to the vendor that that agency determines provides the "best value to the state, based on the selection criteria" set forth in the ITN.

54. The Department, to comply with invitation to negotiate solicitation requirements in section 287.057(1)(c), conducted the Customer Service System procurement through the steps outlined in the ITN, section 2.26. In phase one of the Department's procurement process (ITN, section 2.26, Steps 1 and 2), the Department's Technical Review Team and the Selection Committee considered the vendors' qualifications, presentations, and Proposals. The Technical Review Team and the Selection Committee then ranked the vendors "within the competitive range." The ITN established that the Department would negotiate with the ranked

    
    

    vendors "sequentially." "Sequential" negotiations meant that if the Department's Negotiation Team achieved an acceptable contract with the first-ranked vendor, the Negotiation Team was not required to commence additional negotiations with other vendors. ALJ Bogan reviewed phase one in the First Protest and determined that the Department's "sequential" procurement process was not contrary to Florida law or Department rules or policy. ALJ Bogan's Recommended Order was adopted in its entirety in the Department's Final Order.

55. Based on the principles of res judicata, administrative finality, and collateral estoppel, Petitioner may not relitigate in this Second Protest issues that were previously litigated or issues that could have been litigated during the First Protest, i.e., phase one, regarding the Department's decision to initiate negotiations with Xerox as the first-ranked vendor. A

    well-established premise of judicial and quasi-judicial proceedings is that decisions become final and conclusive at the end of litigation. See Felder v. State of Fla., Dep't of Mgmt. Servs., Div. of Ret., 993 So. 2d 1031, 1034-35 (Fla. 1st DCA

    2008).

    
    

56. Under the doctrine of res judicata, a final judgment or order bars a subsequent suit between the same parties based on the same issues and cause of action. Felder, 993 So. 2d at 1034.

    Res judicata applies both to issues actually raised and

    
    

    determined in the first proceeding, as well as issues that could have been raised and determined in that proceeding. Dadeland Depot, Inc. v. St. Paul Fire & Marine Ins. Co., 945 So. 2d 1216,

    1235 (Fla. 2006).

    
    

57. In the field of administrative law, the counterpart to res judicata is "administrative finality." Delray Med. Ctr. v. State Ag. for Health Care Admin., 5 So. 3d 26, 29 (Fla. 4th DCA

    2009). Administrative finality is the policy that there must be a "terminal point in every proceeding both administrative and judicial, at which the parties and the public may rely on a decision as being final and dispositive of the rights and issues involved therein." Fla. Power Corp. v. Garcia, 780 So. 2d 34, 44

    (Fla. 2001). The doctrine of administrative finality is based on litigants' need "to have confidence in the authority of an administrative order." Felder, 993 So. 2d at 1035.

58. Similarly, the doctrine of collateral estoppel also bars a party from litigating in a second action issues that were adjudicated in prior litigation between the same parties or their privies. The doctrine of collateral estoppel is applicable to administrative orders and decisions. Brown v. Dep't of Prof'l Reg., 602 So. 2d 1337 (Fla. 1st DCA 1992); see also Cook v.

    State, 921 So. 2d 631, 634 (Fla. 2d DCA 2005) (collateral estoppel "bars relitigation of the same issues between the same parties in connection with a different case of action "

    
    

    The collateral estoppel doctrine is "applicable to administrative proceedings.").

59. The essential elements of res judicata, administrative finality, and collateral estoppel are found in Petitioner's Second Protest. Petitioner, the Department, and Xerox were all parties to the First Protest. During the first administrative hearing, the parties presented identical facts and issues regarding the Department's authority to procure the Customer Service System contract and conduct "sequential" negotiations. The parties fully litigated the dispositive issues before an ALJ. Accordingly, the undersigned will not reexamine issues that were fully addressed and adjudicated in the Division's Recommended Order in the First Protest. The conclusions of law set forth in the Division's Recommended Order are conclusive as to every cause of action Petitioner raised in the First Protest, as well as every other matter which might have been litigated and determined in that action and are binding on all three parties to this case. See Delray Med., supra.

60. Accordingly, Petitioner is precluded from relitigating in this Second Protest claims that it raised or could have raised and litigated in its first bid protest action. These issues include ALJ Bogan's specific findings in the Recommended Order in DOAH Case No. 14-2323BID that:

    
    

    1. The Department does in fact and as a matter of law have the authority to issue the ITN. (¶¶ 1-3).

    2. The Department has the authority to procure and contract for the customer services system on behalf of the Local Authorities. (¶ 3, n. 2).

    3. The Selection Committee's ranking of Proposers with Xerox first, Petitioner second, and Cubic third per ITN, section 2.26, Steps 1 and 2, was not contrary to Florida Statutes, Department rules or policies, or the ITN specifications.

       (¶¶ 65-70).

       
       

    4. The Department's use of "sequential" negotiations in the procurement process as set forth in the ITN, section 2.26, Steps 2 and 3, was not prohibited by statute, rule, or policy. (¶¶ 45-48 and 134).8/

    5. The Department's action to negotiate with only one Proposer (Xerox as the first-ranked Proposer) per ITN, section 2.26, Step 3, was not contrary to Florida statutes. Section 287.057(1)(c)4. does not require the Department to negotiate with all Proposers within the competitive range to reach a "best value" determination. (¶¶ 45-48, 134, 136, and 141).

61. Further, Petitioner's decision not to submit written exceptions to ALJ Bogan's Recommended Order in the First Protest waived Petitioner's opportunity to challenge any Findings of Fact or Conclusions of Law contained in that Recommended Order.

    
    

    See, e.g., Envtl. Coal. of Fla., Inc. v. Broward Cnty., 586 So.

    
    

    2d 1212, 1213 (Fla. 1st DCA 1991) (holding that where the appellant filed no exceptions to a recommended order, which was adopted in toto in the final order, the appellant waived the right to later raise any objections thereto). In addition, Petitioner's failure to appeal the Department's Final Order from the First Protest further waived Petitioner's opportunity to challenge the factual and legal holdings in the Final Order.

    See, e.g., Browning v. Dep't of Bus. Reg., 574 So. 2d 188, 192 (Fla. 1st DCA 1991) (noting that unappealed judgment is final and binding on parties).

62. In addition, any challenge to the ITN specification terms and conditions must be protested within 72 hours of the solicitation's posting in order to be timely. See Capeletti

    Bros., Inc. v. Dep't of Transp., 499 So. 2d 855, 857 (Fla. 1st DCA 1986). Petitioner did not challenge the procurement steps outlined in the ITN, section 2.26. Therefore, it cannot now be heard to complain about the process detailed therein. See Consultech of Jacksonville, Inc. v. Dep't. of Health, 876 So. 2d

    731, 734 (Fla. 1st DCA 2004).

    
    

63. In light of ALJ Bogan's comprehensive findings and conclusions in his Recommended Order, the scope of this Second Protest administrative proceeding centers on the second phase of the invitation to negotiate solicitation process set forth in the

    
    

    ITN, section 2.26, Steps 3, 4, and 5. Therefore, the undersigned's review focuses on the Department's negotiations with Xerox and the Department's ultimate determination on June 2, 2015, to award the Customer Service System contract to Xerox as the "best value to the state" based on the selection criteria in the ITN.

64. The central question in this bid protest is whether the Department, in awarding Xerox the Customer Service System contract, violated its governing statutes, rules, policies, or solicitation specifications. If the Department did not follow its governing statutes, rules, policies, or the solicitation specifications, i.e., by making a determination that is clearly erroneous, contrary to competition, or arbitrary, or capricious, then the Department's decision must be set aside.

65. The Department's action in awarding the Customer Service System contract to Xerox was not "clearly erroneous, contrary to competition, or arbitrary, or capricious." The evidence admitted in the final hearing establishes that the Department complied with the competitive procurement requirements of section 287.057(1)(c). The Negotiation Team properly adhered to the ITN solicitation process during its negotiations, and the Department appropriately determined that Xerox will provide the "best value to the state" based on the selection criteria specified in the ITN.

    
    

66. Initially, the evidence shows that the Negotiation Team members were properly appointed in accordance with statutory guidelines. Section 287.057(16) requires the agency head to appoint at least three persons to conduct negotiations during a competitive sealed reply procurement who collectively have experience and knowledge in negotiating contracts, contract procurement, and the program areas and service requirements for which the contractual services are sought. Further, if the value of the contract exceeds $1 million in any fiscal year, at least one of the negotiators must be a certified contract negotiator. If the value of the contract is in excess of $10 million in any fiscal year, at least one of the negotiators must be a project management professional.

67. The Secretary of the Department, Jim Boxold, appointed Sheree Merting, Tim Garrett, and John McCarey to the Negotiation Team on February 9, 2015. Sheree Merting is a certified contract negotiator. Tim Garrett is a project management professional. The Negotiation Team members were well suited to their task due to their familiarity with tolling operations and the technical requirements of the Customer Service System contract. Collectively, the Negotiation Team had substantial knowledge of and experience with the entire Customer Service System procurement, the technical aspects of the proposed contract, and particulars of negotiating public contracts.

    
    

68. Regarding the ITN criteria and goals the Department used to identify and select a responsive vendor required by section 287.057(1)(c)3., as found in ALJ Bogan's Recommended Order in the First Protest, the Department adequately specified the selection criteria it employed to evaluate vendor's Proposals in the ITN. The ITN, section 2.5.2, Best Value Selection listed the "objective factors" the Department used to determine the "highest overall value to the state." These factors included: company history, project experience and qualifications, proposed project approach to the technical requirements, proposed approach to the project plan and implementation, proposed approach to system maintenance, and proposed approach to operations and performance, and price.

69. Turning to the Department's negotiations themselves, the evidence shows that the Negotiation Team properly conducted the negotiations referenced in section 287.057(1)(c)4. The ITN, section 2.26, NEGOTIATION PROCESS (as amended by Addendum No. 8),

    provided in Step 3 that, following the Technical Review Team and Selection Committee's evaluation and ranking of Proposals:

    the Negotiation Team will undertake negotiations with the first-ranked Proposer until an acceptable Contract is established, or it is determined an acceptable agreement cannot be achieved with such Proposer. If negotiations fail with the first-ranked Proposer, negotiations may begin with the second-ranked Proposer, and so on until there is an agreement on an acceptable Contract.

    
    

    The Negotiation Team followed the process set forth in the ITN, section 2.26, Step 3. The Negotiation Team commenced negotiations with Xerox, the first-ranked Proposer, as determined by the Selection Committee. The Negotiation Team engaged in a deliberate and comprehensive negotiation process with Xerox and addressed all issues that were pertinent to the Customer Service System contract. The Negotiation Team thoroughly reviewed the exceptions and assumptions Xerox presented to ensure that no ambiguities were present in the final contract. The Negotiation Team obtained several benefits for the Department, including a price reduction of over $20 million with no negative effect on operational performance of Xerox's proposed customer service system deliverables. The testimony and evidence accepted at the final hearing shows that the Negotiation Team was thorough, deliberate, reasonable, and rational in its negotiations with Xerox.

70. Upon the conclusion of the negotiations, the Negotiation Team reached an acceptable agreement with Xerox on all outstanding issues. The Negotiation Team members unanimously agreed that Xerox was the "responsible and responsive vendor" that would provide the "best value to the state" based on the ITN selection criteria. Thereafter, the Negotiation Team recommended to the FTE Executive Director that the Department award the Customer Service System contract to Xerox. Based on the evidence, the Department's

    
    

    negotiation process was not contrary to, or a "clearly erroneous" application of, section 287.057(1)(c).

71. Petitioner expresses two primary challenges to how the Department conducted its negotiation process under ITN,

    section 2.26. First, Petitioner contends that the Department could not have properly determined which vendor offered the "best value to the state" without considering other vendors' Proposals during negotiations. Petitioners allege that the Negotiation Team did not comply with section 287.057(1)(c) because it negotiated exclusively with Xerox. Second, Petitioner alleges that the Department failed to make the "best value" determination after negotiations were conducted as required by section 287.057(1)(c)4. Neither of Petitioner's contentions have merit or warrant reversal of the Department's intent to award the Customer Service System contract to Xerox.

72. The fact that the Negotiation Team did not conduct additional negotiations with other vendors is not "clearly erroneous" or contrary to section 287.057(1)(c). The Department's decision to negotiate only with Xerox in the course of its "sequential" negotiations and not with other vendors, was reviewed and approved by ALJ Bogan in the First Protest. ALJ Bogan concluded that section 287.057(1)(c) did not require the Department to conduct negotiations with "more vendors" within "the competitive range" after the Selection Committee ranked Xerox as

    
    

    the first-ranked Proposer based on the ITN selection criteria. Accordingly, once the Selection Committee selected Xerox first, the Negotiation Team could commence negotiations with the first- ranked Proposer and end negotiations with the first-ranked Proposer, as soon as it achieved an acceptable agreement.

    Section 287.057(1)(c) did not require the Department to negotiate with other vendors after it concluded its negotiations with Xerox.

73. Further, the Negotiation Team's negotiation process did appropriately determine that Xerox could deliver the "best value to the state" without opening negotiations to other vendors. The Negotiation Team did not operate in isolation. Before the Negotiation Team commenced negotiations, the Department's Technical Review Team independently evaluated all vendor Proposals based on the criteria specified in the ITN, section 2.5.2. Thereafter, the Department's Selection Committee, based on the Technical Review Team's evaluations, ranked the vendors in order of preference. The specific task of the Technical Review Team and the Selection Committee in this procurement was to identify which vendor would provide the "best value" under the contract. The fact that the Negotiation Team relied on the Selection Committee's ranking as the basis for a "best value" recommendation and did not consider other vendors during the negotiation process was not "clearly erroneous." All of the Department committees and teams, working together throughout the procurement process, combined to

    
    

    determine the "best value to the state" as required by section 287.057(1)(c). Therefore, although the ITN's "sequential" negotiations effectively precluded other vendors from the opportunity to refine their Proposals, confirm their pricing assumptions, or adjust their pricing, the manner in which the Department determined the "best value to the state" was not contrary to Florida law or the solicitation specifications.

74. Petitioner also asserted that because Xerox's exceptions and assumptions were addressed in the negotiation phase and not during the initial evaluation and ranking process, Xerox's Proposal was not a "final" Proposal when the Negotiation Team commenced negotiations; and, therefore, Xerox was allowed to unilaterally develop a winning Proposal without competition from Petitioner or other vendors which were not afforded the same opportunity. However, as found in the Recommended Order in the First Protest, the ITN required all vendors to identify in their Proposals any exceptions to contract terms and any assumptions regarding the vendors' approach or price. No evidence was presented that showed that the Negotiation Team's resolution of Xerox's exceptions and assumptions materially altered Xerox's Proposal. On the contrary, the evidence shows that the Negotiation Team thoroughly negotiated the exceptions and assumptions and reached an agreement that was beneficial to the

    
    

    Department and consistent with the ITN and the statutory imperative to achieve "best value."

75. Similarly, there is no evidence that the negotiated price reduction was in any way inconsistent with the ITN's terms. The Negotiation Team negotiated to maintain or improve the system's operability and deliverables while paying $20 million less for Xerox's services.

76. In addition, per section 287.057(1)(c)3., the Negotiation Team appropriately considered Xerox's prior relevant experience with SunRail and TxDOT. Xerox's sporadically problematic performance with its other transit and tolling systems does not establish that the Department erred in determining that Xerox will successfully perform the Customer Service System contract, as represented. The Negotiation Team investigated Xerox's prior service history as part of its due diligence review of Xerox's capabilities. No evidence established that any issues Xerox experienced operating the existing SunRail contract would affect its ability to implement the Customer Service System contract. Therefore, the Negotiation Team's recommendation that Xerox's tolling operations offers the "best value to the state" was reasonable and rational and not "clearly erroneous."

77. Further, the Negotiation Team did not improperly use the ITN procurement process to secure from Xerox the cross-default

    
    

    provision involving the SunRail contract. The cross-default concession the Negotiation Team negotiated that links a default on one Department contract to a default on another Department contract clearly benefits the Department. The fact that the Department's notice of intended award does not reference either the SunRail project or the cross-default provision does not violate section 287.057(1)(c) or the solicitation specifications. Neither section 287.057(1)(c) nor the ITN require the Department to identify all contract provisions in its notice of intended award.

78. Similarly, the Negotiation Team's recommendation that the Department pursue a peer review of the procurement process is not "clearly erroneous." The Negotiation Team intended its recommendation to be independent and separate from its recommendation to Ms. Scaccetti to award the Customer Service System contract to Xerox. Neither section 287.057(1)(c) nor the ITN require the Department to enter a peer review contract. The Negotiation Team did not condition its recommendation of Xerox as the "best value" on the Department's implementation of a peer review contract. Neither did the Negotiation Team offer the peer review recommendation because it doubted that Xerox could perform the contract as it represented in its Proposal. The peer review contract was the Negotiation Team's suggestion for the Department to implement "best practices." Therefore, the fact that the

    
    

    Negotiation Team included an additional recommendation for a peer review contract is not contrary to the Department's governing statutes or the solicitation specifications.

79. Regarding Petitioner's second challenge, the evidence establishes that the Department properly determined that Xerox provides the "best value to the state" after negotiations were conducted as instructed by section 287.057(1)(c)4. Per the ITN, section 2.26, Step 3, the Negotiation Team completed the negotiation process when it achieved an acceptable contract with Xerox, the first-ranked Proposer. That Xerox's Proposal presented the "best value" to the Negotiation Team was established by the Selection Committee's ranking per the ITN, section 2.26, Steps 1 and 2. On June 2, 2015, the Department publicly announced its intent to award the Customer Service System contract. The Negotiation Team presented its recommendation for the Department to award the Customer Service System contract to Xerox to Ms. Scaccetti, the FTE Executive Director. Ms. Scaccetti, as the Executive Director for the FTE, had the authority to execute the Customer Service System contract on behalf of the Department. Ms. Scaccetti affirmatively accepted the Negotiation Team's recommendation that Xerox will provide the "best value to the state." Therefore, the Department properly determined that the responsible and responsive vendor that will provide the "best value to the state" was Xerox. The

    
    

    Department's award of the contract to Xerox was not contrary to section 287.057(1)(c)4. or the solicitation specifications.

80. The evidence further shows that the Department included the statutorily required "short plain statement" in its contract file. Section 287.057(1)(c)5. provides that:

    The contract file for a vendor selected through an invitation to negotiate must contain a short plain statement that explains the basis for the selection of the vendor and that sets forth the vendor's deliverables and price, pursuant to the contract, along with an explanation of how these deliverables and price provide the best value to the state. (emphasis added).

    
    

    The ITN, Section 2.26, Negotiation Process, Step 4, also included the requirement that, "[t]he Negotiation Team will write a short plain statement for the procurement file that explains the basis for Proposer selection and how the Proposer's deliverables and price will provide the best value to the state."

81. The evidence demonstrates that the Department's procurement file contains a "short plain statement."

    Mr. McCarey's Recommendation Memorandum, dated June 2, 2015, explains the rationale for the Negotiation Team's determination that Xerox will provide the "best value to the state." The Recommendation Memorandum was read aloud to Ms. Scaccetti at a public meeting. Ms. Merting, in her role as the procurement administrator for the ITN, placed the Recommendation Memorandum in the Department's Customer Service System contract file. The

    
    

    evidence shows that the Recommendation Memorandum accurately and plainly reflects the Negotiation Team's conclusion that Xerox's deliverables and price will provide the best value for the state.

82. The Recommendation Memorandum in every material way conforms to the "short plain statement" required by section 287.057(1)(c)5. and the ITN, section 2.26, Step 4. Furthermore, neither section 287.057(1)(c)5. nor the ITN, section 2.26, impose a time limit regarding when the agency should prepare the "short plain statement" or place it in the contract file. Ms. Merting was in the process of drafting her own "short plain statement" for the Department's procurement file, but stopped when Petitioner filed its bid protest. Even so, Ms. Merting testified that her final statement would have mirrored the Negotiation Team's Recommendation Memorandum. The lack of a separate, completed "short plain statement" from Ms. Merting in the Customer Service System contract file did not place Petitioner at a competitive disadvantage during the procurement. See, e.g., Keystone Peer Review Org. v. Ag. for Health Care Admin., Case No. 10-9969BID,

    ¶ 141 (Fla. DOAH Jan. 12, 2011) (standing for the premise that the "short plain statement" may be added to the contract file after the contract is entered with the selected vendor).

83. Accordingly, the evidence establishes that the Department properly followed the applicable provisions of section 287.057(1)(c) and the ITN in conducting negotiations and awarding

    
    

    the Customer Services System contract to Xerox as the "best value to the state." The Department's conduct from the commencement of negotiations with the first-ranked Proposer through the posting of the award of the contract on June 2, 2015, was not impermissible, beyond its authority or discretion, or based on an erroneous application or interpretation of the governing statutes, the Department's rules or polices, or the solicitation specifications. The Department, throughout its procurement process, properly and reasonably negotiated the Customer Service System contract as the governing law and the ITN directed before making its decision.

    Therefore, Petitioner has not shown, by a preponderance of the evidence, that the Department's ultimate determination that Xerox will provide the "best value to the state" was conducted in a manner that was "clearly erroneous" or contrary to Florida statutes.

84. The one area in which Petitioner alleges the Department conducted its procurement process in a manner that was "contrary to competition" involves Petitioner's concerns that prior relationships between Negotiation Team members and Xerox created the "appearance of favoritism." Petitioner alleges that these prior contracts constitute conflicts of interest that threaten the competitive nature of the ITN's procurement process.

    
    

85. Petitioner initially raised its conflict of interest concerns in the First Protest. ALJ Bogan, however, specifically stated:

    There simply is no record support for [Petitioner's] assertions that there was any improper contact or any attempt by any person to influence the Department's evaluations or rankings based on past or existing relationships between the Department and Xerox or Xerox's acquired entities.[9/]

    
    

86. Based on the evidence presented in the present matter, the undersigned reaches the same conclusion as ALJ Bogan. There is simply no persuasive evidence of any unfair or partial activity or communications between Department personnel or Negotiation Team members and Xerox. The evidence presented at the final hearing does not establish that any past or existing relationships between Negotiation Team members and Xerox affected the negotiation process or the Department's ultimate decision to award the Customer Service System contract to Xerox.10/ The testimony Petitioner elicited from Mr. McCarey regarding his past ties to Xerox and the Vector 4G tolling system does not establish unfair bias or collusion in this procurement. Mr. McCarey never worked for Xerox. ACS, Mr. McCarey's previous employer, was acquired by Xerox two years after he left the company.

87. The Negotiation Team's task was simply to negotiate with the top-ranked vendor until an acceptable contract was reached and to make a recommendation for contract award. The

    
    

    evidence shows that the Negotiation Team exercised its fair and honest judgment in negotiating the Customer Service System contract. Accordingly, Petitioner did not prove that the Department's selection of Xerox as the "best value" Proposer either was predetermined, did not afford all vendors an equal opportunity to win the contract, or was "contrary to competition."

88. Finally, the evidence does not support Petitioner's assertions of a possible Sunshine Law violation under

    chapter 286. The ITN, section 2.26, Step 3, required that "all negotiation sessions will be recorded by the Department."11/ Petitioner failed to show that any official communications, deliberations, or negotiation sessions of the Negotiation Team were not recorded.

89. Based on the above Findings of Fact and Conclusions of Law, the undersigned determines that Petitioner did not demonstrate, by a preponderance of the evidence, that the Department's procurement process, conduct of negotiations, or notice of intent to award the Customer Service System contract to Xerox was clearly erroneous, contrary to competition, arbitrary, or capricious. The Department's actions in negotiating with and awarding the contract to Xerox as the "best value to the state" were accomplished in a comprehensive, deliberate, and thoughtful manner that was consistent with section 287.057(1)(c) and the ITN

    
    

    specifications. The evidence shows that the Negotiation Team considered relevant facts relating to Xerox's prior relevant experience, as well as Xerox's ability to meet the specific goal of the Department's solicitation. Ms. Scaccetti, in her role as FTE Executive Director, logically and rationally determined that Xerox is fully capable of performing the Customer Service System contract as the ITN required and provides the "best value to the state."

90. Therefore, Petitioner failed to establish that the Department's determination that Xerox will provide the "best value to the state, based on the selection criteria" in the ITN, is contrary to the Department's governing statutes, rules or policies, or the solicitation specifications. Accordingly, the Department's intended award to Xerox should not be set aside.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order upholding its determination to award the Customer Service System contract to Intervenor, Xerox, and denying the Petitioner's Petition for bid protest.

DONE AND ENTERED this 14th day of October, 2015, in Tallahassee, Leon County, Florida.

S

J. BRUCE CULPEPPER Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

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

Filed with the Clerk of the Division of Administrative Hearings this 14th day of October, 2015.

ENDNOTES

1/ Xerox contends that Petitioner failed to file a valid protest bond as required by section 120.57(3). Xerox asserts that as a consequence, Petitioner waived its right to challenge the contract award to Xerox. Section 287.042(2)(c), Florida Statutes, mandates that every protestor shall post a protest bond with the Department at the time of filing its formal written protest. Section 120.57(3)(a) provides that a protester waives his right to a chapter 120 proceeding by failing to timely file a protest bond. See also, ITN, section 2.27.2, Posting of Short- list/Ranking/Intended Award which states that: "[a]ny Proposer

who is adversely affected by the Department's recommended award or intended decision must . . . file a written notice of protest within seventy-two hours after posting of the Intended Award." Contrary to Xerox's assertion, however, the evidence supports Petitioner's claim that it timely filed a sufficient protest bond with its petition. Along with its petition, Petitioner submitted to the Department evidence that it had obtained Bond Number 285047118. The bid protest bond document appears valid on its face. The bond includes a Verification Certification and evidence of payment in April 2014 to maintain the bond in good standing throughout the bid protest proceeding. The protest bond also expressly states that Petitioner (the bond principal) and

Petitioner's surety are "jointly and severally" bound to the Department.

2/ At Xerox's request, the undersigned took official recognition pursuant to Florida Administrative Code Rule 28-106.213(6) of decisional law and court records including: (1) Petitioner's Notice of Filing Bid Protest Bond, dated April 25, 2014; (2) DOAH Case No. 14-2322BID; and (3) the Department's Final Order in DOAH Case No. 14-2322BID issued on October 6, 2014.

3/ Unless otherwise noted, citations to the Florida Statutes and Florida Administrative Code are to the current codifications.

4/ DOAH Case No. 14-2323BID, Recommended Order at ¶ 107.

5/ DOAH Case No. 14-2322BID, Recommended Order at ¶ 68, n.5. ALJ Linzie F. Bogan specifically found that the Selection Committee's ranking of Xerox as the first-ranked Proposer was reasonable, rational, and complied with the ITN and Florida law.

Recommended Order at ¶¶ 65-70. ALJ Bogan further found that all vendors were afforded a level playing field during the procurement process. Recommended Order at ¶ 130.

6/ Cubic appealed the Department's final order. Petitioner did not appeal. Cubic and the Department agreed to settle the appeal, thereby resolving Cubic's legal challenge in the First Protest. Cubic and the Department entered into a Settlement Agreement on January 11, 2015, and the First District Court of Appeal dismissed Cubic's appeal before it was decided on the merits. Petitioner asserts that the Department's settlement with Cubic was improper and establishes a stand-alone basis for reversing the Department's intended award of the Customer Service System contract to Xerox. However, prior to the final hearing, the undersigned determined that the Department's settlement with Cubic was not relevant to this proceeding. Accordingly, the undersigned did not permit Petitioner to conduct discovery on this topic, nor was Petitioner allowed to introduce witness testimony or other evidence in its case-in-chief regarding the Cubic Settlement Agreement. The undersigned, however, did allow Petitioner to proffer evidence on this topic, including the Cubic Settlement Agreement itself. The evidence admitted at the final hearing confirms that the Negotiation Team did not consider or reference the Cubic Settlement Agreement at any point during its negotiations with Xerox, nor did the Department's settlement with Cubic influence in any way the Department's ultimate determination that Xerox provides the "best value to the state"

based on the ITN evaluation criteria. Accordingly, the permissibility of the Department's actions in executing the Cubic Settlement Agreement in the middle of this ITN solicitation process is not addressed in this Recommended Order. The Cubic Settlement Agreement is referenced merely for purposes of background regarding when the Department resolved the First Protest and resumed the ITN procurement process.

7/ While the Negotiation Team was able to achieve an acceptable contract with Xerox, the negotiation process was not without its contentiousness. Testimony from Negotiation Team members revealed that at least twice the Negotiation Team was prepared to suspend further negotiations with Xerox and commence negotiations with the second-ranked Proposer (Petitioner). One of these confrontations involved Xerox's reluctance to accept the cross-default language regarding the SunRail contract. The other concerned the Department's access to and right to use the Xerox system source code. Ultimately, however, Xerox acquiesced to the Negotiation Team's demands.

8/ ALJ Bogan also noted that Petitioner failed to file a written protest to the ITN terms, conditions, and specifications within

72 hours after the posting of the ITN solicitation as required by section 120.57(3)(b). Therefore, Petitioners waived their right to protest the issue that section 287.057(1)(c) does not authorize the "sequential" negotiations outlined in the ITN, section 2.26.

9/ DOAH Case No. 14-2323BID, Recommended Order at ¶¶ 92-96.

10/ Petitioner also mentions possible violations of the statutorily imposed "cone of silence," under section 287.057(23). ALJ Bogan in his Recommended Order in the First Protest reviewed and rejected this claim. See DOAH Case No. 14-2323BID, Recommended Order at ¶¶ 93-96.

11/ See also, § 286.0113, Fla. Stat.

COPIES FURNISHED:

J. Stephen Menton, Esquire Rutledge Ecenia, P.A.

Post Office Box 551 (32302)

119 South Monroe Street, Suite 202 Tallahassee, Florida 32301 (eServed)

C. Denise Johnson, Esquire Department of Transportation

Haydon Burns Building, Mail Station 58 605 Suwannee Street

Tallahassee, Florida 32399-0458 (eServed)

William Robert Vezina, Esquire Vezina, Lawrence and Piscitelli, P.A.

413 East Park Avenue Tallahassee, Florida 32301 (eServed)

Eduardo S. Lombard, Esquire

Vezina, Lawrence and Piscitelli, P.A.

413 East Park Avenue Tallahassee, Florida 32301 (eServed)

Megan S. Reynolds, Esquire

Vezina, Lawrence and Piscitelli, P.A.

413 East Park Avenue Tallahassee, Florida 32301 (eServed)

John A. Tucker, Esquire Foley and Lardner, LLP

One Independent Drive, Suite 1300 Jacksonville, Florida 32202 (eServed)

Michael John Barry, Esquire Rutledge Ecenia, P.A.

119 South Monroe Street, Suite 202 Tallahassee, Florida 32301 (eServed)

Matthew Fontaine Childs, Esquire Department of Transportation

Haydon Burns Building, Mail Station 58 605 Suwannee Street

Tallahassee, Florida 32399 (eServed)

Maureen McCarthy Daughton, Esquire Maureen McCarthy Daughton, LLC

1725 Capital Circle Northeast, Suite 340

Tallahassee, Florida 32308 (eServed)

James C. Boxold, Secretary Department of Transportation

Haydon Burns Building, Mail Station 57 605 Suwannee Street

Tallahassee, Florida 32399-0450 (eServed)

Tom Thomas, General Counsel Department of Transportation

Haydon Burns Building, Mail Station 58 605 Suwannee Street

Tallahassee, Florida 32399-0450 (eServed)

Trish Parsons, Clerk of Agency Proceedings Department of Transportation

Haydon Burns Building, Mail Station 58 605 Suwannee Street

Tallahassee, Florida 32399-0450 (eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

10 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.

Docket for Case No: 15-003775BID

Orders for Case No: 15-003775BID