vs.
Respondent.
Case No. 16-4982BID
Pursuant to notice, a formal hearing was held in this case on October 31 and November 4, 2016, in Tallahassee, Florida, before Lawrence P. Stevenson, a duly-designated Administrative Law Judge of the Division of Administrative Hearings.
For Petitioner: Eduardo S. Lombard, Esquire
Bradley S. Copenhaver, Esquire Megan S. Reynolds, Esquire
Vezina, Lawrence & Piscitelli, P.A.
Zachary Wells Lombardo, Esquire Bryant Miller Olive, P.A.
Whether Respondent acted contrary to the agency's governing statutes, rules, or policies or the bid specifications in its proposed decision to award Contract No. T7380 to Astaldi Construction Corporation ("Astaldi").
On April 15, 2016, the Department of Transportation (“Department”) issued an Invitation to Bid on Contract T7380, a road-widening project on U.S. Highway 301 in Hillsborough County. Bids were opened on June 15, 2016. On June 29, 2016, the Department posted its notice of intent to award the contract to Astaldi.
On July 5, 2016, Prince Contracting, LLC (“Prince”), the second lowest bidder, filed its notice of intent to protest and a protest bond. On July 15, 2016, Prince filed its formal written protest, followed by an amended petition on August 1, 2016. On August 29, 2016, the Department referred the original petition to the Division of Administrative Hearings (“DOAH”) for assignment of an Administrative Law Judge to conduct a formal administrative proceeding. The final hearing was initially
scheduled for September 19 through 21, 2016, but was continued to October 21 through 23, 2016, upon Prince’s stipulated motion.
The Department provided notice of the proceeding to the five other construction companies that had submitted bids on the project, including Astaldi. On September 14, 2016, Hubbard Construction Company (“Hubbard”), the third lowest bidder, filed a petition to intervene, which was granted by Order dated September 15, 2016. On September 22, 2016, the Department filed Prince’s amended petition at DOAH.
On September 28, 2016, Prince filed a motion to compel production of documents, including the Department’s official cost estimate for the project. The Department contended that it was required to withhold information regarding the official cost estimate pursuant to section 337.168(1), Florida Statutes. By Order dated October 10, 2016, the Department was directed to either provide the requested information to Prince, subject to a confidentiality agreement, or to be foreclosed from addressing the confidential material in any manner at the hearing. The Department elected to retain the confidentiality of its official cost estimate and other items employed to arrive at that estimate and to forego reliance on them during the final hearing.
On October 10, 2016, Prince and Hubbard filed a Joint Motion for Continuance to allow time to resolve discovery
disputes, complete additional discovery, and file a second amended petition. The Department filed a written response in opposition to the motion on October 11, 2016. On October 12, 2016, Prince filed a motion to compel discovery on the Department’s declination to answer deposition questions regarding its bid analysis and supporting algorithms, computer programs, and tolerance parameters. The Department responded that the requested information was confidential in accordance with section 337.168(3), and in lieu of disclosing the information, elected to not rely on the information at the final hearing.
A telephonic hearing on pending motions was held on October 13, 2016. On the same date, an Order granting continuance was entered that rescheduled the hearing for October 31, 2016, and November 4, 2016.
On October 13, 2016, Prince filed a motion for leave to file a second amended petition to include a challenge to Department procedures and protocols as unadopted rules. By Order dated October 14, 2016, Prince’s second amended petition was accepted.
On October 21, 2016, Prince filed a Motion for Protective Order seeking to limit the scope of the deposition testimony and documents to be produced by its corporate representative. On October 24, 2016, Prince filed an objection to a document
request in a Department subpoena. On October 25, 2016, Prince filed a motion to compel an interrogatory response by the Department. A telephonic hearing on pending motions was held on October 26, 2016. By Order dated October 26, 2016, Prince’s motion for protective order was denied, and Prince was directed to resubmit its representative for deposition on the items the corporate representative had been instructed not to answer at the initial deposition.
On October 28, 2016, Prince filed three motions in limine seeking to exclude evidence (1) derivative of the information the Department contends is confidential, (2) related to bids submitted by Prince on other projects, and (3) relating to the Department’s defense that it could require Astaldi to perform the project for the price it bid. Also on October 28, 2016, the parties filed a joint pre-hearing statement.
A final hearing was held in Tallahassee, Florida, on October 31, 2016, and November 4, 2016. At the outset of the hearing, Joint Exhibits 1 through 18 were admitted without objection. Prince’s motion in limine to exclude evidence derivative of the Department’s confidential information was granted, without objection. The motions to exclude other evidence were deferred and limited testimony regarding one other project won by Prince was introduced at hearing.
At the hearing, Prince presented the testimony of its executive director, Jack Calandros; bid estimating expert, John Armeni; the Department’s contracts administration manager, Alan Autry; and the Department’s state estimates engineer, Greg Davis. The parties offered designated portions of the deposition testimony of Astaldi’s chief estimator, Ed Thornton, in lieu of live testimony, and the designations were accepted into evidence as Prince’s Exhibit 5. Prince’s Exhibits 7, 11, and 12, containing quotes from Westra Construction Corporation and Ferguson Waterworks, were admitted into evidence without objection. Prince’s Exhibit 16, a cost summary spreadsheet, was admitted into evidence under seal, over the Department’s objection.
Hubbard did not present any exhibits or witnesses, but did fully participate in the cross-examination of the other parties’ witnesses.
The Department was allowed to extend the cross-examination of Mr. Davis into direct testimony for its case-in-chief. The Department also called Mr. Autry to testify as its corporate representative. The Department’s Exhibit 3 was accepted into evidence over Prince’s objection.
The three-volume Transcript of the hearing was filed at DOAH on November 10, 2016. Two versions of Volume I were filed, one under seal containing confidential bid information and a
public version without the confidential information. The parties timely filed their Proposed Recommended Orders on November 21, 2016.
A separate final order will be issued that addresses Prince’s unadopted rule challenge.
References to the Florida Statutes are to the 2016 edition, unless otherwise noted.
Based on the oral and documentary evidence presented at the final hearing, and on the entire record of the proceeding, the following Findings of Fact are made:
The Department is a state agency authorized by section
337.11 to contract for the construction and maintenance of roads within the State Highway System, the State Park Road System, and roads placed under its supervision by law. The Department is specifically authorized to award contracts under section 337.11(4) to “the lowest responsible bidder.”
On April 15, 2016, the Department advertised a bid solicitation for Contract T7380, seeking contractors for the widening of a 3.8 mile portion of U.S. Highway 301 in Hillsborough County from two lanes to six lanes between State Road 674 and County Road 672 and over Big Bull Frog Creek. The advertisement provided a specification package for the project and the “Standard Specifications for Road and Bridge
Construction” (“Standard Specifications”) used on Department roadway projects. The work included seven components: bridge structures (Section 0001), roadway (Section 0002), signage (Section 0003), lighting (Section 0004), signalization (Section 0005), utilities (Section 0006), and intelligent transportation systems (Section 0007). The advertisement identified 666 individual items of work to be performed and quantity units for each item. The project was advertised as a low-bid contract with a budget estimate of $51,702,729.
The Department’s bid proposal form contains five columns with the following headings: Line Number; Item Number and Item Description; Approximate Quantities and Units; Unit Price; and Bid Amount.
The bid proposal form contains line items for the seven components of the project. The utilities component contains 42 line items, each with an Item Number and Item Description. For example, Line Number 1410 corresponds with the
following Item Number and Item Description: “1050 11225 Utility Pipe, F&I, PVC, Water/Sewer, 20–40.9 [inches].”
Each bidder inserts a Unit Price for the line item in the corresponding “Unit Price” column. The “Bid Amount” column for each line item is an amount generated by multiplying a bidder’s Unit Price by the Quantities (determined by the Department) for each Line Number. The Bid Amount for each Line
Number is then added together to generate the “Total Bid Amount” representing the bid for the entire project.
Astaldi, Prince, Hubbard, and other potential bidders attended the mandatory pre-bid meeting. Prequalified contractors were given proposal documents that allowed them to enter bids through Bid Express, the electronic bidding system used by the Department. Plan revisions were issued by addenda dated May 10, 2016, and June 7, 2016. A Question and Answer Report was published and updated as inquiries were addressed.
Bids were opened on the letting date of June 15, 2016.
Bids for Contract T7380 were received from Astaldi, Prince, Hubbard, the DeMoya Group (“DeMoya”), Ajax Paving Industries of Florida, LLC (“Ajax”), and Cone & Graham, Inc. (“Cone & Graham”). The bids were reviewed by the Department’s contracts administration office to ensure they were timely, included a Unit Price for each line item, and contained the completed certifications required by the specifications. Bidders were checked against the Department’s list of prequalified bidders to confirm they possessed a certification of qualification in the particular work classes identified by the bid solicitation.
Each bidder’s total current work under contract with the Department was examined to ensure that award of Contract T7380 would not place the bidder over its Department-designated financial capacity limit.
Astaldi submitted the lowest bid, a total amount of
$48,960,013. Prince submitted the next lowest bid, a total amount of $57,792,043. Hubbard’s total bid was the third lowest at $58,572,352.66. The remaining bidders came in as follows: DeMoya, $63,511,686.16; Ajax, $68,617,978.10; and Cone & Graham,
$70,383,697.74. All bidders were prequalified in the appropriate work classes and had sufficient financial capacity, in accordance with section 337.14 and Florida Administrative Code Chapter 14-22.
The Department’s construction procurement procedure, from authorization to advertisement through contract execution, is outlined in the Department’s “Road and Bridge Contract Procurement” document (“Contract Procurement Procedure”). The scope statement of the Contract Procurement Procedure provides: “This procedure applies to all Contracts Administration Offices responsible for advertising, letting, awarding, and executing low bid, design-bid-build, construction, and maintenance contracts.” Limited exceptions to the procedure may be made if approved by the assistant secretary for Engineering and Operations. If federal funds are included, the Federal Highway Administration division administrator, or designee, must also approve any exceptions from the procedure. The stated objectives of the Contract Procurement Procedure are: “to standardize and clarify procedures for administering low-bid,
design-bid-build, construction, and maintenance contracts” and “to provide program flexibility and more rapid response time in meeting public needs.”
The Department’s process for review of bids is set forth in the “Preparation of the Authorization/Official Construction Cost Estimate and Contract Bid Review Package” (“Bid Review Procedure”). The scope statement of the Bid Review Procedure states:
This procedure describes the responsibilities and activities of the District and Central Estimates Offices in preparing the authorization and official construction cost estimates and bid review packages from proposal development through the bid review process. Individuals affected by this procedure include Central and District personnel involved with estimates, specifications, design, construction, contracts administration, work program, production management, federal aid, and the District Directors of Transportation Development.
The Bid Review Procedure contains a definitions section that defines several terms employed by the Department to determine whether a bid or a unit item within a bid is “unbalanced.” Those terms and their definitions are as follows:
Materially Unbalanced: A bid that generates reasonable doubt that award to that bidder would result in the lowest ultimate cost or, a switch in low bidder due to a quantity error.
Mathematically Unbalanced: A unit price or lump sum bid that does not reflect a
reasonable cost for the respective pay item, as determined by the department’s mathematically unbalanced bid algorithm.
Official Estimate: Department’s official construction cost estimate used for evaluating bids received on a proposal.
Significantly Unbalanced: A mathematically unbalanced bid that is 75% lower than the statistical average.
Statistical Average: For a given pay item, the sum of all bids for that item plus the Department’s Official Estimate which are then divided by the total number of bids plus one. This average does not include statistical outliers as determined by the department’s unit price algorithm.
For every road and construction project procurement, the Department prepares an “official estimate,” which is not necessarily the same number as the “budget estimate” found in the public bid solicitation. The Department keeps the official estimate confidential pursuant to section 337.168(1), which provides:
A document or electronic file revealing the official cost estimate of the department of a project is confidential and exempt from the provisions of s. 119.07(1) until the contract for the project has been executed or until the project is no longer under active consideration.
In accordance with the Bid Review Procedure, the six bids for Contract T7380 were uploaded into a Department computer system along with the Department’s official estimate. A confidential algorithm identified outlier bids that were
significantly outside the average (such as penny bids) and removed them to create a “statistical average” for each pay item. Astaldi’s unit pricing was then compared to the statistical average for each item.
The computer program then created an “Unbalanced Item Report,” flagging Astaldi’s “mathematically unbalanced” items, i.e., those that were above or below a confidential tolerance value from the statistical average. The unbalanced item report was then reviewed by the district design engineer for possible quantity errors. No quantity errors were found.1/
The Department then used the Unbalanced Item Report and its computer software to cull the work items down to those for which Astaldi’s unit price was 75 percent more than or below the statistical average. The Department sent Astaldi a form titled “Notice to Contractor,” which provided as follows:
The Florida Department of Transportation (FDOT) has reviewed your proposal and discovered that there are bid unit prices that are mathematically unbalanced. The purpose of this notice is to inform you of the unbalanced nature of your proposal. You may not modify or amend your proposal.
The explanation of the bid unit prices in your proposal set forth below was provided by ASTALDI CONSTRUCTION CORPORATION on ( ) INSERT DATE.
FDOT does not guarantee advanced approval of:
Alternate Traffic Control Plans (TCP), if permitted by the contract documents;
Alternative means and methods of construction;
Cost savings initiatives (CSI), if permitted by the contract documents.
You must comply with all contractual requirements for submittals of alternative TCP, means and methods of construction, and CSI, and FDOT reserves the right to review such submittals on their merits. As provided in section 5-4 of the Standard Specifications for Road and Bridge Construction you cannot take advantage of any apparent error or omission in the plans or specifications, but will immediately notify the Engineer of such discovery.
Please acknowledge receipt of this notice and confirmation of the unit bid price for the item(s) listed below by signing and returning this document.
Section 5.4 of the Bid Review Procedure describes the Notice to Contractor and states: “Contracts are not considered for award until this form has been signed and successfully returned to the Department per the instruction on the form.” State estimating engineer Greg Davis testified that the stated procedure was no longer accurate and “need[s] to be corrected” for the following reason:
Since the procedure was approved back in 2011, we’ve had some subsequent conversations about whether to just automatically not consider the award for those that are not signed. And since then we have decided to go ahead and just consider the contract, but we are presenting
a notice, of course, unsigned and then let the technical review and contract awards committee determine.
Astaldi signed and returned the Notice to Contractor and noted below each of the ten listed items: “Astaldi Construction confirms the unit price.”
Mr. Davis explained that the purpose of the Notice to Contractor form is to notify the contractor that items have been identified as extremely low and to ask the contractor to confirm its understanding that in accepting the bid, the Department will not necessarily approve design changes, methods of construction, or maintenance of traffic changes.
Section 6.6 of the Contract Procurement Procedure sets forth the circumstances under which an apparent low bid must be considered by the Department’s Technical Review Committee (“TRC”) and then by the Contract Awards Committee (“CAC”).
Those circumstances include: single bid contracts; re-let contracts; “significantly mathematical unbalanced” bids; bids that are more than 25 percent below the Department’s estimate;
10 percent above the Department’s estimate (or 15 percent above if the estimate is under $500,000); materially unbalanced bids, irregular bids (not prepared in accordance with the Standard Specifications); other bid irregularities2/; or “[a]ny other reason deemed necessary by the chairperson.”3/ Bids that are not
required to go before the TRC and CAC are referred to as “automatic qualifiers.”
Because it was mathematically unbalanced, the Astaldi bid was submitted to the TRC for review at its June 28, 2016, meeting. The TRC is chaired by the Department’s contracts administration manager, Alan Autry, and is guided by a document entitled “Technical Review Committees” (“TRC Procedure”). The TRC Procedure sets forth the responsibilities of the TRC in reviewing bid analyses and making recommendations to the CAC to award or reject bids. The TRC voted to recommend awarding Contract T7380 to Astaldi.
The TRC’s recommendation and supporting paperwork was referred to the CAC for its meeting on June 29, 2016. The duties of the CAC are described in a document entitled “Contracts Award Committees” (“CAC Procedure”). Pursuant to the CAC Procedure, the CAC meets approximately 14 days after a letting to assess the recommendations made by the TRC and determines by majority vote an official decision to award or reject bids.
Minutes for the June 29, 2016, CAC meeting reflect
21 items before the committee including: two single bid contracts; four bids that were 10 percent or more above the official estimate; one bid that was 15 percent or more above the official estimate on a project under $500,000; three bids that
were more than 25 percent below the official estimate; and 11 bids with significantly unbalanced items, including Contract T7380 with an intended awardee of Astaldi. The CAC voted to award Contract T7380 based on the low bid submitted by Astaldi. A Notice of Intent to award the contract to Astaldi was posted on June 29, 2016.
As noted at Finding of Fact 2, supra, Contract T7380
consisted of seven components: structures, roadway, signage, lighting, signalization, utilities, and intelligent transportation system. The Department does not compare bids by component, but looks at the total bid amount to find the lowest bidder. The Department also reviews the bids for discrepancies in individual unit items using the process described above.
Astaldi’s bid of $48,960,013 was approximately
$8.8 million below Prince’s bid of $57,792,043, $9.6 million less than Hubbard’s bid of $58,572,352, and $2.7 million below the Department’s public proposal budget estimate of $51,702,729.
As part of its challenge to the intended award, Prince performed a breakdown of bids by individual components and discovered that nearly all of the differences between its bid and Astaldi’s could be attributed to the utilities component. Astaldi’s bid for the utilities component was $7,811,720, which was roughly $8.5 million below Prince’s utilities bid of
$16,305,903 and $5.8 million below Hubbard’s utilities bid of
$13,603,846.4/
The utilities component was included pursuant to an agreement between the Department and Hillsborough County, the owner of the water and sewer lines, relating to the improvement of water and sewer lines along the roadway limits of the project.
The utility work consists of installing a new water- line and force main sewer. The existing water main and the existing force main conflict with the proposed location of the new storm drainage system. The new water main and force main must be installed, tested, and approved before being put into active service. To prevent water utility outages to customers, the new system must be installed and approved before the existing waterline and existing force main can be cut off and removed. Utility work is therefore the first task to be performed on Contract T7380. Once the utility component is completed, the contractor will furnish and install the stormwater system, the roadway, the bridgework, and all other components.
Article 3-1 of the Standard Specifications5/ reserves to the Department the right to delete the utility relocation work from the contract and allow the utility owner to relocate the utilities. Utilities are the only portion of a Department
contract subject to deletion because the funding is provided by the utility owner, which usually has allocated a certain dollar figure to contribute towards the contract prior to the bidding. If the bid for utilities comes in over the utility owner’s budget, the owner can opt out of the contract and self-perform. In this case, Hillsborough County had contracted with the Department to contribute $8.9 million for utility relocation work. The Department did not exercise the option to delete the utilities portion of the contract.
Jack Calandros, Prince’s chief executive, testified that Prince uses a computer program called HeavyBid, created and supported by a company called HCSS, to build the cost components of its bids. Every witness with industry knowledge agreed that HeavyBid is the standard program for compiling bids in the construction field.
Mr. Calandros testified that cost components include material quotes provided by third-party vendors and quotes from potential subcontractors. Labor and equipment costs are ascertained by using historical rates and actual cost estimates that are tracked by the HeavyBid software. Prince maintains its own database of costs derived from 20 years’ experience.
Mr. Calandros stated that Prince’s internal labor and equipment rates are checked and adjusted at least once a year to ensure
they are current and accurate based on existing equipment and personnel.
Prince received three vendor quotes for the materials to perform the utility work on Contract T7380. In compiling its bid, Prince ultimately relied on a final quote from Ferguson Waterworks (“Ferguson”) of $8,849,850. Based on this materials quote and Prince’s overall utilities bid of $16,305,903,
Mr. Calandros opined that it would not be possible for Astaldi to perform the utilities component for its bid amount of
$7.8 million.
Prince’s estimating expert, John Armeni, reviewed Astaldi’s bid file, read the deposition testimony of Astaldi’s chief estimator, Ed Thornton, and spoke to Mr. Thornton by telephone. Mr. Armeni also reviewed Prince’s bid and the bid tabulation of all bidders’ utilities component line items. Based on his review and his extensive experience in the industry, Mr. Armeni concluded that Astaldi’s bid does not include all costs for labor, material, and equipment necessary to construct the utilities portion of this project.
Mr. Armeni reviewed the materials quote from Ferguson that Prince used in its bid. He noted that Astaldi’s bid file contained an identical quote from Ferguson of $8.8 million for materials, including some non-utilities materials. Mr. Armeni noted that the Ferguson quote for utilities materials alone was
approximately $8 million, an amount exceeding Astaldi’s entire bid for the utilities portion of the project.
Mr. Armeni also noted that Astaldi’s overall bid was
18 percent below that of the second lowest bidder, Prince. He testified that 18 percent is an extraordinary spread on a bid where the Department is providing the quantities and all bidders are working off the same drawings and specifications.
Mr. Armeni believed that the contracting authority “should start looking at it” when the difference between the lowest and second lowest bidder is more than 10 percent.
In his deposition, Mr. Thornton testified he was not aware of how Astaldi arrived at its bid prices for the utility section of the project. Mr. Thornton indicated multiple times that he was not Astaldi’s most knowledgeable person regarding the bid submitted by Astaldi on Contract T7380 project. He testified that Astaldi intended to subcontract the utilities work and acknowledged that the company received a subcontractor quote of $14.9 million after the bids were submitted.
Mr. Thornton did not know if Astaldi had solicited the quote. He said it is not unusual for a company to receive subcontractor bids after it has been named the low bidder on a project.
Mr. Thornton conceded that Astaldi’s bid did not include all the costs necessary to construct the utilities portion of Contract T7380. At his deposition, he did not have
before him the materials needed to determine which items of cost Astaldi had omitted. Mr. Thornton testified that Astaldi was not missing any information it needed at the time of bid submission and understood that its price was to include all labor, materials, and subcontracting costs to perform the contract.
After the proposed bid award, Astaldi used HeavyBid to produce a report indicating that the company now estimates its cost of performing the contract at $53,708,129.03, or roughly
$4.75 million more than its winning bid. Mr. Thornton testified that Astaldi nonetheless stood ready to execute the contract and perform the work at its bid price.
Central to the dispute in this case is Standard Specifications Section 9, “Measurement and Payment,” article 9-2 of which is titled “Scope of Payments.” In particular, subarticle 9-2.1 provides:
9-2.1 Items Included in Payment: Accept the compensation as provided in the Contract as full payment for furnishing all materials and for performing all work contemplated and embraced under the Contract; also for all loss or damage arising out of the nature of the work or from the action of the elements, or from any unforeseen difficulties or obstructions which may arise or be encountered in the prosecution of the work until its final acceptance; also for all other costs incurred under the provisions of Division I.
For any item of work contained in the proposal, except as might be specifically provided otherwise in the payment clause for the item, include in the Contract unit price (or lump sum price) for the pay item or items the cost of all labor, equipment, materials, tools and incidentals required for the complete item of work, including all requirements of the Section specifying such item of work, except as specially excluded from such payments.
Prince contends that the second paragraph of subarticle 9-2.1 renders Astaldi’s bid nonresponsive because Astaldi admittedly failed to include “the cost of all labor, equipment, materials, tools and incidentals” in its bid.
Prince points out that the “Technical Special Provisions” governing the utilities portion of the project reinforce the requirement that each bidder include all costs for the work. Technical Special Provisions Section 1-7.1 provides that “[p]ipe installation cost shall include all necessary work, equipment, and labor needed for installing the pipe, such as, coordination with existing utilities and support during construction and support of existing power poles during construction.” Technical Special Provisions Section 1-8.1 goes on to say that “[n]o separate payment will be made for the following items for work under this Technical Special Provision and the cost of such work shall be included in the applicable contract pay items of work,” followed by a comprehensive list of
30 items.
Prince concludes that the requirement that each bidder include all costs, including costs of all necessary labor, equipment, and materials, in the Unit Price for each work item is “manifest” in the bid specifications and requires rejection of any bid that does not include all costs. Mr. Armeni opined that if one bidder excludes a portion of its costs, the other bidders are placed at a competitive disadvantage.
Alan Autry, the Department’s central contracts administration manager, testified that five other projects were let as part of the bid package that included Contract T7380. He stated that it is typical for the Department to list multiple projects on one day. Mr. Autry’s office usually performs one bid letting per month, with the holiday months of November and December rolled together in a single letting. Mr. Autry stated that his office lets between 200 and 300 projects per year, not counting contracts that are let at the district level. Twenty other contracts were before the CAC at the June 29, 2016, meeting at which the Astaldi award in this case was approved.
As noted at Finding of Fact 2, supra, Contract T7380
included 666 line items. Six companies submitted bids, meaning there were a total of 3,996 line items in this single contract. Assuming that the 200 to 300 other projects let by the Department’s Tallahassee office contain similar numbers, there are more than one million line items bid in any given year. If
Prince’s reading of the bid specifications is correct, the Department is required to examine each of these line items and somehow make a determination whether the item includes all of the bidder’s costs.
This problem of determining bidder cost is complicated by the presence of “companion” or “sister” items in bids, i.e., two items that must be considered in tandem to arrive at something like the actual cost of the work. Prince provided an example of such companion items in its analysis of the bids in this project. Two bid items included in the structures section of the bid proposal form were concrete culverts and reinforcing steel. The contractor may cast the culverts in place at the worksite or purchase them precast. If the concrete culvert is cast in place at the worksite, then reinforcing steel must be used to strengthen the culvert. If the concrete culvert is precast by a materials supplier, then the reinforcing steel has already been incorporated into the culvert at the time of installation.
Mr. Calandros explained that when a contractor uses precast culverts, there is no need to list a separate additional cost for reinforcing steel; all costs are captured in the line item for concrete culverts. In this bid, Prince used precast culverts and therefore bid a penny per unit for reinforcing steel.6/ Bidders who cast the culverts in place showed a much
higher cost for reinforcing steel but a lower cost for the concrete culverts. When the “companion items” were considered in tandem, the total cost for each vendor was fairly consistent.
Prince’s explanation for companion items was coherent but did not explain how the Department is supposed to know which items are companion items as it undertakes the line-by-line cost examination of each bid in accordance with Prince’s reading of the bid specifications.
Prince also failed to provide an explanation as to how the Department is to determine a bidder’s costs for any one line item or, for that matter, for its overall bid on a project. Bidders consider their cost information and the processes by which they build bids to be confidential proprietary information. In the instant case, Prince disclosed its own information (aside from materials costs) only under seal during litigation. In its ordinary course of business, the Department does not have access to this information. In fact, as noted at Finding of Fact 23, supra, the Department does not compare bids by component. It looks only at the total bid amount in determining the lowest bidder.
Standard Specifications Article 3-8 reserves to the Department the right to perform an audit of the contractor’s records pertaining to the project upon execution of the
contract. No authorization is provided to audit records of bidders prior to contracting.
Standard Specifications Subarticle 2-5.1 allows bidders to indicate “free” or “$.00” for items that will be supplied at no cost to the Department. Though the Department’s practice, according to Mr. Autry, is to include zero bid items on the Notice to Contractor for confirmation of the price, subarticle 2-5.1 requires no Department investigation as to whether the bidder’s cost for a zero bid is actually zero. Bidders often bid a penny on items, as Prince did on reinforcing steel in this case.
Standard Specifications Article 3-5 requires all contracts to be secured by a surety bond such that, in the event of a default by the contractor, the surety company will indemnify the Department on all claims and performance issues.
Standard Specifications Section 4 provides that the scope of work is to be determined within the contract, including the furnishing of all labor, materials, equipment, tools, transportation, and supplies required to complete the work. The Department is authorized to make changes to the scope of work and make equitable adjustments of payments. If necessary, the Department may enter into supplemental agreements for additional or unforeseen work.
Prince cautions that these change provisions could become relevant because Astaldi’s bid contains no information explaining how Astaldi will cover the $4.75 million difference between its bid price and its actual cost to perform the contract. Prince accurately states that nothing in Astaldi’s bid demonstrates that it has cash reserves to cover the loss and still complete the entire scope of the work.7/ Prince contends that this lack of demonstrable reserves renders Astaldi nonresponsible as to this project.
Prince argues that it is error for the Department to rely on Astaldi’s certificate of qualification as proof of the company’s responsibility. The certificate of qualification process considers a contractor’s financial status at the time it submits its financial statements and other information regarding company resources.
Prince contends that the Department’s assessment of the contractor’s financial statements and issuance of a certificate of qualification is insufficient to determine the contractor’s responsibility on a given bid. Prince argues that the Department is required by its governing statutes and the Standard Specifications to award a particular contract to the particular bidder that is the lowest, responsive, and responsible bidder, and that “responsible” for a given project is not synonymous with “prequalified.”
Prince hypothesizes that under the Department’s practice, a bidder could possess a certificate of qualification issued in January, be indicted in another state for fraud and bribery in February, submit the lowest bid for a Department project in March, and be awarded the contract. By relying solely on the bidder’s certificate of qualification to determine responsibility, the Department could award a contract to a nonresponsible bidder.
Section 337.14 provides that any person desiring to bid on any construction contract in excess of $250,000 must first be certified by the Department. Mr. Autry explained that the Department prequalifies contractors to submit bids on certain types of contract, such as major bridges and structures. Contractors applying for certification are required to submit their latest annual financial statements. The Department is charged with reviewing applications to determine “whether the applicant is competent, is responsible, and possesses the necessary financial resources to perform the desired work.”
§ 337.14(3), Fla. Stat.
The Department assigns the contractor work classes and a total capacity after evaluating its experience and financials. The Department’s certificate is good for 18 months, though the contractor’s capacity is reviewed annually. At the time of a particular bid, the Department verifies the contractor’s
available capacity, which is simply its total assigned capacity minus current work the contractor is performing for the Department.
Mr. Autry testified that the Department does not go back and look at a bidder’s financials to determine whether it can sustain a loss on a given project. The Department does not repeat its capacity analysis during the year, regardless of how many projects the company bids on. The Department’s analysis is limited to whether the company’s current capacity is sufficient for the project on which it is bidding.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to and subject matter of this cause, pursuant to sections 120.569 and 120.57(3), Florida Statutes.
As the second lowest bidder, Prince has standing to bring this proceeding. “A party has standing to protest the lowest bid if that party has a substantial interest to be determined by the agency.” Westinghouse Electric Corp. v.
Jacksonville Transp. Auth., 491 So. 2d 1238, 1240 (Fla. 1st DCA 1986).
Hubbard’s standing is more problematic. Typically, the third lowest bidder in a proceeding establishes its standing via an attack on both the lowest and second lowest bidder. See,
e.g., NCS Pearson, Inc. v. Dep’t of Educ., Case No. 04-3976BID
(Fla. DOAH Jan. 5, 2005), at ¶ 87 and cases cited therein. Here, Hubbard has intervened in the interest of preserving the propriety of the Department’s bidding process. See, e.g.,
Bozell, Inc. v. Dep’t of Lottery, Case No. 91-3165BID (Fla. DOAH
July 25, 1991), at ¶ 80 (fourth-ranked bidder had standing to intervene to protect its position and “to examine . . . the propriety of the evaluation process”). No party has objected to Hubbard’s participation in this proceeding. Given the lack of opposition, it is concluded that Hubbard’s stated interest is sufficient to give it standing to intervene.
Prior to 2016, rule challenges and challenges to agency actions were required to be brought as separate actions, which could be consolidated into a single hearing. Chapter 2016-116, section 4, Laws of Florida, amended section 120.57(1) to now provide as follows, in relevant part:
(e)1. An agency or an administrative law judge may not base agency action that determines the substantial interests of a party on an unadopted rule or a rule that is an invalid exercise of delegated legislative authority. This subparagraph does not preclude application of valid adopted rules and applicable provisions of law to the facts.
2. In a matter initiated as a result of agency action proposing to determine the substantial interests of a party, the party’s timely petition for hearing may challenge the proposed agency action based
on a rule that is an invalid exercise of delegated legislative authority or based on an alleged unadopted rule.
Prince initially filed its petition solely as a challenge to the contract award in accordance with section 120.57(3). Prince’s second amended petition included a challenge to alleged unadopted rules, in addition to its challenge to the Department’s decision to award the Contract T7380 contract to Astaldi. The unadopted rule challenge is addressed in a separate final order.
Section 120.57(3)(f) provides in pertinent part:
[U]nless otherwise provided by statute, the burden of proof shall rest with the party protesting the proposed agency action. In a competitive-procurement protest, other than a rejection of all bids, proposals, or replies, 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.
Pursuant to section 120.57(3)(f), the burden of proof rests with Prince as the party opposing the proposed agency action to prove "a ground for invalidating the award." See
State Contracting and Eng’g Corp. v. Dep’t of Transp., 709 So. 2d 607, 609 (Fla. 1st DCA 1998). Prince must prove by a preponderance of the evidence that the Department's proposed
award of the contract to Astaldi is arbitrary, capricious, or beyond the scope of the Department's discretion as a state agency. Dep’t of Transp. v. Groves-Watkins Constructors, 530
So. 2d 912, 913-914 (Fla. 1988); Dep’t of Transp. v. J.W.C. Co., Inc., 396 So. 2d 778, 787 (Fla. 1st DCA 1981). See also
§ 120.57(1)(j), Fla. Stat.
The First District Court of Appeal has interpreted the process set forth in section 120.57(3)(f) as follows:
A bid protest before a state agency is governed by the Administrative Procedure Act. Section 120.57(3), Florida Statutes (Supp. 1996) provides that if a bid protest involves a disputed issue of material fact, the agency shall refer the matter to the Division of Administrative Hearings. The administrative law judge must then conduct a de novo hearing on the protest. See
§ 120.57(3)(f), Fla. Stat. (Supp. 1996). In
this context, the phrase "de novo hearing" is used to describe a form of intra-agency review. 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. See Intercontinental Properties, Inc. v. Department of Health and Rehabilitative Services, 606 So. 2d 380 (Fla. 3d DCA 1992) (interpreting the phrase "de novo hearing" as it was used in bid protest proceedings before the 1996 revision of the Administrative Procedure Act).
State Contracting and Eng’g Corp., 709 So. 2d at 609.
As outlined in section 120.57(3)(f), the ultimate issue in this proceeding is "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." In addition to proving that the Department breached this statutory standard of conduct, Prince also must establish that the Department's violation was either clearly erroneous, contrary to competition, arbitrary, or capricious.
§ 120.57(3)(f), Fla. Stat.
The First District Court of Appeal has described the "clearly erroneous" standard as meaning that an agency's interpretation of law will be upheld "if the agency's construction falls within the permissible range of interpretations. If, however, the agency's interpretation conflicts with the plain and ordinary intent of the law, judicial deference need not be given to it." Colbert v. Dep’t of Health, 890 So. 2d 1165, 1166 (Fla. 1st DCA 2004)(citations
omitted).
An agency decision is "contrary to competition" when it unreasonably interferes with the objectives of competitive bidding. Those objectives have been stated to be:
[T]o protect the public against collusive contracts; to secure far 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 various forms; to secure the best values for the [public] at the lowest possible expense; and to afford an equal advantage to all desiring to do business with the
[government], by affording an opportunity for an exact comparison of bids.
Harry Pepper & Assoc., Inc. v. City of Cape Coral, 352 So. 2d 1190, 1192 (Fla. 2d DCA 1977), quoting Wester v. Belote, 138 So.
721, 723-724 (Fla. 1931).
An agency action is capricious if the agency takes the action without thought or reason or irrationally. An agency action is arbitrary if it is not supported by facts or logic. See Agrico Chem. Co. v. Dep’t of Envtl. Reg., 365 So. 2d 759,
763 (Fla. 1st DCA 1978).
To determine whether an agency acted in an arbitrary or capricious manner, it must be determined "whether the agency:
(1) has considered all relevant factors; (2) has given actual, good faith consideration to those factors; and (3) has used reason rather than whim to progress from consideration of these factors to its final decision." Adam Smith Enters. v. Dep’t of
Envtl. Reg., 553 So. 2d 1260, 1273 (Fla. 1st DCA 1989).
However, if a decision is justifiable under any analysis that a reasonable person would use to reach a decision of similar importance, the decision is neither arbitrary nor capricious. Dravo Basic Materials Co., Inc. v. Dep’t of
Transp., 602 So. 2d 632, n.3 (Fla. 2d DCA 1992).
Prince has alleged that Astaldi’s bid is nonresponsive for failure to comply with the requirement of the bid
specifications that the bidder include in its pricing all costs to perform the work. The evidence established that Astaldi, at the time of bid submission, intended to perform all items of work included in the scope of the contract, and subsequently confirmed that it still intends to perform all such items of work if awarded the contract.
Prince maintains that Standard Specifications Subarticle 9-2.1 (the text of which is set forth at Finding of Fact 38, supra) requires that every expense a bidder may incur for every line item be accounted for in the price of that line item. Prince alleges that Astaldi’s bid for completing the utilities component would not even cover its cost of materials and Astaldi could not possibly complete the project for the unit prices submitted. Therefore, Astaldi’s bid should be considered nonresponsive under subarticle 9-2.1.
Based on the foregoing Findings of Fact, it is concluded that Prince has focused so intently on the second paragraph of Standard Specifications Subarticle 9-2.1, that it has lost sight of the purpose of that section. Section 9 is titled “Measurement and Payment.” Article 9-2 is titled “Scope of Payments.” The title of subarticle 9-2.1 is “Items Included in Payment,” and its first paragraph cautions the contractor that it must accept the compensation set forth in the contract
as full payment for all materials and work contemplated by the contract, as well as any unforeseen contingencies.
When read together with all of subarticle 9-2.1 and the rest of the Standard Specifications, the second paragraph is plainly seen to be cautionary, not prescriptive. It is not instructing the vendor to include all costs on pain of being found nonresponsive when the Department’s line-by-line review reveals some undisclosed cost. Rather, the second paragraph reiterates the warning that the bidder had best include all of its costs for each item because the Department will not pay more than the bid price.
The allowance of zero and penny bids in Standard Specifications Subarticle 2-5.1 indicates the Department expects that bidders may offer items at a price below their cost and is further indication that Prince’s interpretation of subarticle 9-
2.1 is mistaken.
Standard Specifications Article 1-3 defines “proposal” or “bid” as “the offer of a bidder, on the prescribed form, to perform the work and to furnish the labor and materials at the prices quoted.” The bid submitted by Astaldi was an offer to perform the work and furnish the labor and materials involved in Contract T7380 at the prices quoted by Astaldi in its bid package. The Department, taking subarticle 9-2.1 in context with the rest of the Standard Specifications, reads that
subarticle to mean that a bidder should not expect to be paid more for an item than the bid price it submitted. The Department’s reading is reasonable and accepted in this case.
Prince’s argument that Astaldi’s bid should be rejected if it cannot cover the costs associated with each unit item assumes the Department has the authority to investigate a bidder’s business relationships with its subcontractors, vendors, or suppliers, or inquire into its business, pricing, profit strategies, inventory, and actual expenses. Prince points to no statute or rule that gives the Department such authority, and the Department asserts that there is none. It is unreasonable to expect the Department to investigate a bidder’s pricing for every unit item and compel that bidder to explain its pricing strategy, inventory, relationship with subcontractors, and business structure, especially when such efforts would have to be made on hundreds of bids every year.
Prince asserts that Astaldi materially underbid the project, thereby undermining the necessary common standard of competition. “The test for measuring whether a deviation in a bid is sufficiently material to destroy its competitive character is 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, 352 So. 2d at 1193.
In this case, the scope of work was predetermined by the Department and no deviation from the specifications was possible. The awardee will be required to deliver all the listed items for the price it bid. All bidders are compared under a common standard, i.e., the scope of work specified by the Department. Astaldi’s only “deviation” was bidding a lower price than the other bidders. By doing so, Astaldi gained no benefit not enjoyed by other bidders. Astaldi will have to complete the same scope of work as any other bidder would have had to complete.
Prince relies on The Middlesex Corporation v.
Department of Transportation and Prince Contracting, LLC, Case
No. 15-0382BID (Fla. DOAH December 7, 2015)(Final Order January 5, 2016), a case in which Prince was the intended awardee but subsequently found nonresponsive. Middlesex involved a request for proposals (“RFP”) on a “design-build” project under section 337.11(7)(a). After an “expanded letter of interest” process whittled the field to a shortlist of four qualified firms, the Department released the RFP. The firms were required to submit both technical and price proposals, after which the Department would calculate an “adjusted score” based on a formula referencing the letters of interest, the technical proposals, and the price proposals.
In Middlesex, a bidder was also authorized to propose
an “alternative technical concept” (“ATC”) to the Department for review and approval prior to the deadline for proposal submission. The RFP provided that ATCs were required to comply with the provisions of the RFP unless the Department approved a deviation and issued an addendum through the ATC process.
Prince was initially awarded the contract as the bidder with the lowest adjusted score, but was found nonresponsive after it was established at hearing that its ATC had deviated from the RFP in ways the Department had not approved via the ATC process.
Prince agreed at hearing to abide by the RFP specifications as opposed to its proposed ATC, at no additional cost to the Department.
However, the Administrative Law Judge (“ALJ”) found that the deviations in question had materially affected Prince’s price bid, omitting materials and construction costs that gave it a substantial financial advantage over other firms that complied with the RFP terms. The ALJ concluded that the Department was statutorily barred from considering Prince’s proffered after-the-fact amendment to its submitted bid. In its Final Order, the Department accepted the ALJ’s determination that Prince’s proposal was not compliant with the RFP and contract requirements.
Middlesex is distinguishable from the instant case.
It involved an RFP process in which price was only one factor and in which vendors could propose alternative methods of completing the project. The instant case is a “low bid” procurement in which the Department has designed the project and established the quantity units necessary to complete the project. All specifications are set and the only variable a bidder can affect is price.
In Middlesex, Prince, without authorization, deviated from the RFP specifications in ways that dramatically reduced its price. In the instant case, Astaldi submitted a low bid on which it apparently will not recoup all of its costs. Prince would have it that Astaldi has deviated from the terms of subarticle 9-2.1 and is therefore nonresponsive. However, Astaldi has not enjoyed a competitive advantage over other bidders in this case. It entered a price for every item required of the bid solicitation, as did every other bidder. It made no quantity errors. Under the facts of this case, low price alone does not render Astaldi’s bid nonresponsive.
As to Prince’s allegations regarding Astaldi’s responsibility, the Department states that its ability to review responsibility as to an individual bid is circumscribed by section 337.16. The Department points out that, in the only appellate decision directly addressing the issue, the First
District Court of Appeal has agreed with the Department that section 337.16 provides the exclusive means for denial, suspension, or revocation of a certificate of qualification:
The Department interprets section 337.16 to require that a road contractor’s delinquency be addressed exclusively in administrative proceedings conducted pursuant to section
337.16 . . . . The Department posits that, under sections 337.14(3) and (4), if a contractor is prequalified and its certificate has not been suspended or revoked at the time of the bid, the contractor must be deemed responsible as a matter of law. The Department further explains that it is clear from the 1994 revision to section 337.16(2) that a prequalified contractor’s lack of responsibility must be addressed in the context of a proceeding concerning the contractor’s prequalification status and not on a project-by-project basis through bid protest proceedings.
The Department has correctly construed section 337.16 and its relationship with section 337.11. An administrative hearing triggered by a bid protest under sections 337.11 and 120.53(5) [now 120.57(3)] is not
the proper vehicle by which a contractor’s responsibility and qualification to bid is to be investigated and adjudicated. Under section 337.16, the department cannot affect, modify, or revoke a road contractor’s bidding privileges until there has been an adjudication of the contractor’s nonresponsibility.
D.A.B. argues that it is entitled to an administrative hearing under section 337.11(4) [now 337.11(5)], based on its allegation that White lacks the financial capacity to perform the contract . . . .
We agree with the department that under section 337.14(1) and department rules a
bidder’s financial resources and ability to perform the contract are subsumed within the prebid qualification process and cannot be addressed in a bid protest proceeding.
D.A.B. Constructors v. Dep’t of Transp., 656 So. 2d 940, 943-44
(Fla. 1st DCA 1995).
Despite Prince’s attempts to distinguish the instant case, it appears to the undersigned that D.A.B. Constructors is
controlling authority on the question of raising a bidder’s responsibility in a bid protest proceeding.
It must be said that these conclusions are not intended to establish a rule that a bid can never be rejected
simply for being “too low.” The Department’s own “significantly unbalanced” bid criterion indicates concern about suspiciously low bids. However, the threshold for such rejection should be high, given the many variables at work in the compilation of bids on a project this size and the jealous manner in which bidders guard their business information and strategies.
Mr. Armeni opined that the 18 percent spread between Astaldi’s bid and that of Prince should have triggered an investigation of Astaldi’s bid, but Prince’s second place bid was 22 percent lower than that of Ajax and nearly 26 percent lower than that of Cone & Graham. Should Prince’s bid be included in Mr. Armeni’s investigation? Going behind the face of the bids in a low bid procurement, where the low bidder is
responsive and responsible, should occur only in the most extraordinary situations. In this case, no evidence was presented that Astaldi lacks the will or the wherewithal to complete this project at the price it bid.
Prince has failed to establish by a preponderance of the evidence that the Department acted contrary to its governing statutes, rules or policies, or the solicitation. Prince has further failed to establish that the Department’s intended decision to award Contract T7380 to Astaldi is arbitrary, capricious, clearly erroneous, or contrary to competition.
Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is
RECOMMENDED that the Department of Transportation enter a final order dismissing Prince Contracting, LLC’s, second amended formal written protest and awarding Contract T7380 to Astaldi Construction Corporation.
DONE AND ENTERED this 22nd day of December, 2016, in Tallahassee, Leon County, Florida.
LAWRENCE P. STEVENSON
Filed with the Clerk of the Division of Administrative Hearings this 22nd day of December, 2016.
1/ If quantity errors had been found on any of the mathematically unbalanced items, the bid would have been recalculated using Astaldi’s unit prices and the correct quantities to determine whether the bid rankings would change. A mathematically unbalanced bid that affects the ranking of the low bid is "materially unbalanced," and subject to rejection.
2/ Standard Specification 2-6, titled “Rejection of Irregular Proposals,” provides as follows in relevant part:
A proposal is irregular and the Department may reject it if it shows omissions, alterations of form, additions not specified or required, conditional or unauthorized alternate bids, or irregularities of any kind; or if the unit prices are obviously unbalanced, or if the cost is in excess of or below the reasonable cost analysis values.
3/ Section 6.6 does not specify whether it is referring to the “chairperson” of the TRC or the CAC.
4/ The bids of the other three bidders on the utilities portion were generally in line with those of Prince and Hubbard: DeMoya bid $14,279,070; Ajax bid $17,000,064.23; and Cone & Graham bid
$15,022,074.25.
5/ The Standard Specifications include numbered prime divisions called “sections.” An “article” is the numbered prime subdivision of a section. A “subarticle” is a headed and numbered subdivision of an article. See Standard Specifications Article 1-3, “Definitions.”
6/ Standard Specification 2-5.1 allows bidders to indicate “free” or “$.00” for items that will be supplied at no cost to the Department. Mr. Calandros testified that he never “zero bids” any items for fear of being declared nonresponsive.
Mr. Armeni, who has 30 years of experience in bidding construction contracts, testified that he has never seen a zero bid. Mr. Autry testified that he has seen two or three zero bids, which were placed on the Notice to Contractor for explanation.
7/ Conversely, Prince presented no evidence that Astaldi lacks the reserves to complete the work at the bid price.
Eduardo S. Lombard, Esquire
Vezina, Lawrence & Piscitelli, P.A.
Frederick John Springer, Esquire Bryant Miller Olive, P.A.
Zachary Wells Lombardo, Esquire Bryant Miller Olive, P.A.
Megan S. Reynolds, Esquire
Vezina, Lawrence and Piscitelli, P.A.
William Robert Vezina, Esquire Vezina, Lawrence and Piscitelli, P.A.
Bradley S. Copenhaver, Esquire Vezina Lawrence & Piscitelli, P.A.
James C. Boxold, Secretary Department of Transportation Haydon Burns Building
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.
