STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

XEROX CORPORATION, )

)

Petitioner, )

)

vs. ) CASE NO. 79-2226BID

) DEPARTMENT OF GENERAL SERVICES, )

)

Respondent. )

)

A. B. DICK PRODUCTS COMPANY OF ) TALLAHASSEE, INC., SAVIN )

CORPORATION, INTERNATIONAL ) BUSINESS MACHINES, CORP., and ) SAXON BUSINESS PRODUCTS, INC., )

)

Intervenors. )

)

RECOMMENDED ORDER

Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on January

29 and 30, 1980, in Room 314 of the House Office Building, Tallahassee, Florida.

APPEARANCES

For Petitioner: John Radey and

Vicki Gordon Kaufman Holland and knight Post Office Drawer 810

Tallahassee, Florida 32302

For Respondent: Thomas M. Beason and

Spiro Kypreos

Department of General Services Room 457, Larson Building Tallahassee, Florida 32301

For Intervenors: Thomas F. Woods

1. B. Dick: Woods, Johnston and Erwin

1030 East Lafayette Street, Suite 112

Tallahassee, Florida 32301

Savin Corp.: Thomas J. Guilday

Akerman, Senterfitt & Eidson Post Office Box 1794 Tallahassee, Florida

International: Donald M. Middlebrooks Business 1400 Southeast First Machines,Corp., National Bank Building

Miami, Florida 33131

Saxon: No appearance INTRODUCTION

By a petition filed pursuant to Florida Statutes, 120.57(1), Xerox Corporation challenged the proposed award of bids and the competitive single award bidding approach employed by the Department of General Services in its annual contract for the State's requirements for plain bond and magazine finished bond copying machines. The twelve vendors which submitted bids were provided notice of the petition and the final hearing dates, and were given the opportunity to be joined as parties. The undersigned granted the motions to intervene of A. B. Dick Products Company of Tallahassee, Inc., Savin Corporation, International Business Machines Corporation and Saxon Business Products, Inc. Saxon made no appearance at the final hearing.

Prior to the final hearing, the undersigned entered a Recommended Order dated January 18, 1980, dismissing Paragraph 13 of the petition. That Paragraph challenged the competitive, single award bid policy utilized by the Department in contracting for copying machines.

The issues remaining for determination at the final hearing were framed by paragraphs 9, 10, 11 and 16 of the petition for hearing, as amended. Stated briefly, these issues are as follows:

1. whether the Department improperly disqualified the Xerox bids in the "out right purchase" method of acquisition;

   
   

2. whether the Department improperly recalculated the "supply costs" listed in the Xerox bids;

   
   

3. whether Xerox's model 9200 was improperly disqualified on the ground that it is print shop equipment requiring a dedicated operator, as opposed to being a walk-up convenience copier; and

   
   

4. whether Xerox's Model 3450 was improperly disqualified on the ground that its testing was not completed and approved until several days after the bid opening date. The petitioner contends that each of these issues must be affirmatively determined. The respondent and participating intervenors contend that the Xerox bids in each of these areas, as well as in other terms and conditions of its bid, constitute a material deviation or variation from the specified terms and conditions of the invitation to bid, and therefore the bids of Xerox were unresponsive and should be rejected.

FINDINGS OF FACT

Upon consideration of the oral and documentary evidence adduced at the hearing the following relevant facts are found:

GENERAL BACKGROUND

1. On May 25, 1979, the respondent, through its Division of Purchasing, issued its invitation to bid (ITB) entitled "Plain Bond and Magazine Finish Bond Copying Machines" to sixty-five (65) companies. The ITB proposes to establish an annual contract (from October 1, 1979 through September 30, 1980) under which all state agencies may acquire an indefinite amount of copying machines using a choice of four acquisition plans. No awardee under the contract is assured of any specific quantity. It is contemplated that all copiers purchased by a state agency will he purchased under the contract, and each category of copier machine listed in the ITB reflects the specific needs of the various agencies. In order to acquire equipment covered under the proposed contract, an agency would simply issue a purchase order and send certification to the respondent's Division of Purchasing. No prior authorization would be necessary. If an agency desired to acquire a copying matching not covered by the state contract, it would have to apply to the respondent for an exception and receive verification from the respondent that the exception met the needs of the agency.

   
   

2. Between May 25, 1979, and August 22, 1979, the respondent held two prebid conferences and published five addenda to the ITB. The ITB establishes approximately eighty (80) categories of award for plain bond copiers and for magazine finish copiers. These copiers are categorized into types according to features and into classes according to machine speeds and copy volumes. Each category contains four available acquisition plans: monthly rental, annual rental, two-year lease and outright purchase. The ITB proposes a contract award in each category to the vendor responding to the technical specifications with a copier offering the lowest cost per copy. Thus, the basis for evaluation of each responsive bidder was cost per copy, and the ITB provided a cost formula.

   
   

3. On September 10, 1979, twelve vendors submitted responses to the ITB. These twelve included the petitioner and the four intervenors. The bids were opened on September 12, 1979.

   
   

4. As noted above, the bidding process was structured for competitive award, and the basis for evaluation was cost per copy of responsive bids. Under the competitive award method, when the respondent fails to receive either qualified bids or two or more bids, it weighs the options and then decides to either negotiate with the bidders or to reject all bids and rebid the contract. DGS did not receive qualified or two or more responsible bids in all categories in this instance. Due to the time constraints imposed by the near expiration date of the prior annual contract, respondent elected to communicate with some of the bidders in an attempt to obtain withdrawal or modification of the variations or conditions contained in their responses. These communications were conducted at a time when all bidders had knowledge of what other vendors had bid.

   
   

5. When evaluating the bid responses of petitioner, respondent found that in six different respects petitioner had qualified its bid in a manner inconsistent with the specified bid terms and conditions. After discussion and correspondence, three of these qualification were subsequently withdrawn or deleted by petitioner. The remaining three pertained to variations from the ITB with respect to Xerox's pricing plan for the annual and two-year acquisition methods; the removal of machines by Xerox for failure to comply with guidelines for supply use; and the service of machines in remote areas.

   
   

6. When the bids were evaluated and the bid prices were verified by respondent, Xerox's supply costs were recalculated and Xerox's bids were

   disqualified in the outright purchase category, for the 9200 Model and for the 3450 Model.

   
   

7. By memorandum dated October 18, 1979,the respondent recommended the award of contracts In 73 categories to eight vendors. The petitioner was included in the eight, but only subject to the withdrawal of those terms and conditions in conflict with the ITB.

   
   

   OUTRIGHT PURCHASES

   
   

8. In the outright purchase method of acquisition, Xerox did not insert on its bid sheets a dollar figure indicating the price of the machine hid.

   Instead, petitioner inserted an "X" in the blank next to the outright purchase acquisition plan. Xerox's bid package did include a 100-page catalog which, on page 69, contained a list of equipment purchase prices.

   
   

9. The bid sheet form included in the original ITB contained a dollar sign at the beginning of the four blanks for the four different acquisition plans. One of the addendums to the ITB included a revised bid sheet, and bidders were instructed to use only the revised form. This bid sheet had no dollar signs by the four acquisition method blanks, though the form contained dollar signs on many other blanks. Ms. Ruth Eberhard, a purchasing contract specialist with the respondent, testified that the dollar sign on the revised bid sheet form in the outright purchase category was inadvertently removed when the form was revised. Mr. John Isensee, an employee of Xerox who assisted in preparing the bid response, testified that he telephoned Ms. Eberhard and inquired how to complete the acquisition plan blanks on the bid sheets. According to Mr. Isensee, he was instructed to place an "X" to indicate the method of acquisition.

   
   

10. Respondent proposes to disqualify every one of petitioner's outright purchase bids because petitioner did not insert the purchase price of the machine on its bid sheet. Had these bids not been disqualified, it is estimated that Xerox would have received awards in three or four different categories.

    
    

11. Ms. Eberhard, who was assigned the duty of verifying figures on the bid sheet and evaluating the bids for the lowest cost per copy, could not verify the petitioner's cost per copy without the purchase price of the machine appearing on the bid sheet. It was her testimony that she could not look beyond the bid sheet for information to insert figures not contained therein when verifying prices per copy. This is consistent with the terms and conditions of the ITB, which expressly admonishes bidders not to rely on catalogs and price lists. Page 4 of the special conditions of the ITB provides, under the heading of "Bid Page," that "GSA catalogs, price lists, and copies of vendor purchase and/or lease contracts outlining terms and conditions are not acceptable." Ms. Eberhard testified that no other bidder in the outright purchase acquisition method failed to insert the machine cost on their bid sheets, though one bidder did insert the machine price elsewhere on the page.

    
    

12. The petitioner presented testimony that the acquisition price of the machine could be ascertained from the information listed on the bid sheet by performing a four-step mathematical process. The result could then have been verified by comparing it with the equipment prices listed in the catalog. Ms. Eberhard did not consider using this method because it was her duty to verify the price per copy and not the purchase price of the machine. The cost per copy could not be verified without the purchase price. It was further her opinion that even using the prices contained in the catalog, she could not verify the machine acquisition cost per copy with the information provided by petitioner on

    its bid sheet. The machine cost information cannot be correlated with other information on the bid sheet in accordance with the cost formula contained in the ITB.

    
    

    SUPPLY COSTS

    
    

13. The ITB contains a provision relating to the computation of supply costs which are to he inserted on the bid form, and are used to calculate the ultimate cost per copy. Bidders were to compute their supply costs either on the manufacturer's brand or by using the prices contained in the then-existing state contract. The ITB further provides that "the volume price used by the vendor to compute supply cost shall be based on the monthly median volume of the type and class bid."

    
    

14. According to the formula contained in the ITB, Xerox did not enter the correct supply costs on its bid responses. Instead of using tie monthly median volume for paper, Xerox used quantity discount prices available only in purchases of 1,000 cartons or more. It did this in order to offer the state the benefit of volume discount. The paper supply costs inserted by petitioner affects the amount of its bid. No other vendor utilized a volume discount price as opposed to the monthly median volume price.

    
    

15. In accordance with her duties to verify costs, Ms. Eberhard recomputed the supply costs submitted by Xerox to reflect the volume price based on the monthly median volume of the type and class bid. While Ms. Eberhard could not use outside sources to insert information omitted on the bid sheet, she did use other information to verify figures supplied by the bidder. This recomputation had the result of raising the prices Xerox bid for supplies so that Xerox was no longer the low bidder in approximately four categories.

    
    

    9200 MODEL

    
    

16. Xerox bid its 9200 Model in five categories. The respondent recommends rejection of these bids on the basis that the 9200 is not a walk-up convenience copier, but is instead print shop equipment requiring a dedicated operator. This model has been tested and acquired by state agencies for use as a sophisticated, high speed duplicator which must be run by a dedicated operator. With one exception, Model 9200 is being used by the state in a print shop operation with a dedicated operator.

    
    

17. The Model 9200 was originally marketed by Xerox in 1975 as a duplicator with a dedicated operator. It is capable of producing 7,200 copies per hour and is less expensive in cost per copy than other models. The main difference between the 9200 Model and walk-up convenience Model 5400 is speed, with the 9200 Model having greater sorting capacity, a more comprehensive logic system and the ability to deal easier with multiple documents. The operating buttons on the 9200 Model are not complicated. The 9200 may be used as either a duplicator or a copier, depending upon the nature of the work required and the pricing plan selected. The amount of training for its operators depends upon its usage as a duplicator or as a convenience, walk-up copier. If used as a copier, the training is approximately two hours or the same as other convenience copiers manufactured by Xerox. If used as a duplicator in a print shop operation, the training of a dedicated operator would require approximately two days.

    
    

18. The Department of Corrections acquired a Model 9200 in August of 1978. It was initially acquired as a high speed, high volume machine with an inmate

    trained as a dedicated operator. When the inmate was paroled, the machine was used in the central office as a convenience, walk-up copier. The 9200 Model is currently being used in the central office of the Department of Corrections by some thirty (30) different people a week and is currently fulfilling the Department's copying needs.

    
    

19. There was no evidence adduced at the hearing that the bids of Xerox with respect to its 9200 Model constituted the lowest offered bids in those categories.

    
    

    3450 MODEL

    
    

20. The ITB requires testing and approval of all items bid prior to the time and date of the bid opening. Testing is to extend for a period of twenty

    (20) working days. Page 3 of the 1TH provides under the heading of "Equipment Approval" that

    
    

    In the event evaluation and

    acceptance of untested machines has not been accomplished prior to the bid opening date and time, such machines shall not be eligible for an award."

    
    

    The mandatory nature of this requirement was further addressed in question and answer number 9 attached to the ITB.

    
    

21. Xerox bid its 3450 Model in two different classes of plain bond copying machines. The Xerox bid was the only bid received by the respondent in Group I, Type III, Class 2A, and it was bid at a lower price than the machine recommended for award in Group I, Type III, Class 3A. The machine did not arrive in time to complete its testing due to a trucking strike during its travel. The bid opening date was September 12, 1979, and the Model 3450 completion of testing and approval did not occur until September 18, 1979. For this reason, the Model 3450 was disqualified for consideration by the respondent. At least two other bidders either opted not to bid their equipment due to insufficient time for testing or went to extreme expenses to comply with the testing requirements.

    
    

    OTHER VARIATIONS FROM THE ITB

    
    

22. The catalog rental plans of Xerox vary from the ITB conditions with respect to firm pricing and terms of rental. Under the ITB, an agency acquiring a copier on annual lease at any time during the contract year is entitled to twelve months of firm prices from the date of purchase. The same is true under the two-year lease plan. Contrary to these conditions, the Xerox bid contains extensive fiscal option plans and extended term plans which could include price increases and, if not renewed at the option time, liquidated damages to Xerox. Under the terms and conditions of the Xerox bid, an agency cannot purchase equipment under the annual or two-year lease plans with the assurance of firm- pricing and no liquidated damages or removal charges.

    
    

23. The ITB provides that the bidder must maintain or have access to facilities and personnel capable of servicing equipment anywhere in the state within four hours after notification. The Xerox bid reserves the right not to accept installation or service in areas which are remote or not readily or adequately serviced by Xerox. The term "remote" is not defined by Xerox in its catalog.

24. The Xerox bid reserves to Xerox the right to cancel its contract in whole or in part upon 30 days prior written notice. The ITB mandates that contract provisions prevail for at least 180 days after the effective date of the contract, and then allows cancellation after 30 days prior written notice.

    
    

    CONCLUSIONS OF LAW

    
    

25. The prime issue in this proceeding is whether Xerox Corporation should be designated as the lowest responsible bidder for items bid in certain outright purchase categories, where the recalculation of supply costs prevented it from being the lowest bid, and in categories wherein Xerox bid the 9200 and the 3450 Models. Stated differently, did the Xerox bid in these four areas, or in other areas, constitute a material deviation from the provisions of the ITB and thus render Xerox's bids unresponsive

    
    

26. The bidding process utilized herein was structured and evaluated for competitive award. The purpose of competitive bidding is to protect the public against collusive contracts, to secure fair competition among equal terms for all vendors and to afford an equal advantage to all vendors desiring to do business with the State. Hotel China and Glassware Co. v. Bd. of Public Instruction, 130 So.2d 78 (Fla. 1st DCA, 1961) Wood Hopkins Contract v. Au and Son, 354 So.2d 446 (Fla. 1st DCA, 1978). In soliciting competitive bids, the procedures followed should afford an equal advantage to all vendors. Wester v. Belote, 138 So. 721 (Fla. 1931). A variation in bid specifications which affects the amount of the bid and gives the bidder an advantage or benefit not enjoyed by other bidders constitutes a material change and invalidates the bid response. Harry Pepper and Assoc. v. City of Cape Coral, 352 So.2d 1190 (Fla. 2nd DCA, 1978).

    
    

27. It is contended by Xerox that due to the error committed by the Department in omitting on the bid form a dollar sign next to the outright purchase plan of acquisition, Xerox completed the bid sheet in a reasonable fashion and no other bidders were prejudiced thereby. This contention cannot be accepted. The failure of Xerox to enter a purchase price for the equipment bid under the outright purchase plan rendered it impossible for the respondent to verify cost per copy in accordance with the cost formula contained in the 1TH. Inasmuch as cost per copy constituted the basis for an award, such failure was a material deviation and renders the outright purchase bids unresponsive. The ITB required all pricing information to be placed on the bid sheet and the use of catalog prices was not permissible. In addition, the catalog prices could not be correlated with other information supplied by petitioner on its bid sheets in the outright purchase plans of acquisition.

    
    

28. The use by Xerox of large volume discounts in computing its supply costs constitutes a material deviation from the ITB, which requires the supply price to be based on monthly median volume. Such a deviation results in prejudice to other vendors who complied with the ITB and gives Xerox an unfair advantage over those other bidders. The fact that the large volume discount prices available from Xerox may be more economical to the State than prices based upon monthly median volume, as contended by petitioner, is irrelevant due to the specific terms and conditions of the ITB. It is concluded that the Department correctly recalculated the supply costs of Xerox where those figures were based upon large volume discounts.

    
    

29. Xerox has sufficiently illustrated by evidence adduced at the hearing that its Model 9200 may be utilized as a walk-up convenience copier, as well as

    a duplicator requiring a dedicated operator. It is concluded that the respondent's exclusion of Model 9200 is not supported by the evidence and that said Model should be given full consideration as a convenience, walk-up copier.

    
    

30. It is argued by Xerox that the disqualification of its Model 3450 for failure to comply with the testing requirements does not promote the economy of the State. Xerox contends that the disqualification forces respondent to allow a need of the State to go unsatisfied in the class for which no other bids were received and it forces the respondent to award the contract to a vendor with a higher cost per copy in the remaining class. It is further urged that the Department should view the circumstances as they exist at the time of its decision. Since the Model 3450 completed testing on September 18, 1979, it should no longer be disqualified. These contentions are not acceptable. First, the testing provisions of the ITB are clear and mandatory. There must be some cutoff date fair to all vendors. The evidence indicates that other untested machines were either not bid or were delivered for testing at great expense to the vendor. To waive the testing requirement for any vendor would give that vendor an advantage not enjoyed by other vendors. By enforcing the terms of the ITB, the Department will be viewing the circumstances at the time of its decision. The A "circumstance" is that testing must be completed and acceptance achieved as of September 12, 1979 -- the date of the bid opening. If this does not occur, the machine "shall not be eligible for an award." The petitioner's failure to complete testing by the bid opening date is a material deviation disqualifying the Model 3450.

    
    

31. Finally, the undersigned concludes that the Xerox bid does not conform to the ITB with respect to the annual and two-year lease acquisition plans. The variances contained in the Xerox bid with respect to pricing changes and lease terms constitutes a material deviation from the provisions of the ITB, and gives Xerox an unfair advantage over other bidders. The ITB contemplates a fixed rental period with fixed prices during the term of the rental. To permit Xerox to change the term of the rental period, to raise its prices during the rental period or to collect liquidated damages would be unfair to other bidders. The Xerox bid with respect to service in remote areas and reservation of 30-day cancellation rights also constitute material deviations from the ITB giving Xerox an advantage or benefit not enjoyed by other vendors.

    
    

32. The undersigned has carefully considered the proposed recommended orders submitted by the parties in this proceeding. To the extent that the proposed findings of fact are not contained herein they are rejected as being either not relevant or material to the issues for determination or not-supported by competent, substantial evidence adduced at the hearing.

RECOMMENDATION

Based upon the above findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered declaring that Xerox Corporation failed to submit a low responsive bid in the categories provided in the Invitation to Bid. It is further RECOMMENDED that an Order be entered holding that:

1. the Department properly disqualified the Xerox bids in the outright purchase plan of acquisition;

   
   

2. the Department properly recalculated the supply cost figures in the Xerox bid;

3. the Department improperly disqualified the Model 9200 on the ground that it is not a walk-up convenience copier. However, due to the unresponsiveness of other portions of Xerox's bid (see paragraph 5 below) and a lack of evidence that Xerox submitted a low bid on Model 9200, the Department was justified in disqualifying the Xerox bid for Model 9200;

   
   

4. the Department properly disqualified the Model 3450; and

   
   

5. the terms and conditions of the Xerox bid with respect to the annual and two-year lease methods of acquisition, service of equipment and 30day cancellation reservation constitute material deviations from the ITB, and thus the Xerox bid is unresponsive.

Respectively submitted and entered this 29th day of February, 1980, in Tallahassee, Florida.

DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

COPIES FURNISHED:

John Radey and Honorable George Firestone Vicki Gordon Kaufman, Esquires Secretary of State Holland and Knight The Capitol

Post Office Drawer 810 Tallahassee, Florida 32301 Tallahassee, Florida 32302

Honorable Hill Gunter

Tom Beason and State Treasurer

Spiro T. Kypreos, Esquires State of Florida

Office of General Counsel The Capitol

Department of General Services Tallahassee, Florida 32301 Room 457, Larson Building

Tallahassee, Florida 32301 Honorable Doyle Conner

Commissioner of Agriculture

Thomas J. Guilday, Esquire State of Florida Akerman, Senterfitt and Eidson The Capitol

Post Office Box 1794 Tallahassee, Florida Tallahassee, Florida 32301

Honorable Ralph Turlington

Thomas F. Woods, Esquire Commissioner of Education

1030 East Lafayette Street State of Florida

Suite 112 - The Capitol Tallahassee, Florida 32301 Tallahassee, Florida 32301

Philip S. Parsons, Esquire MacFarlane, Ferguson, Allison

and Kelly

Post Office Box 1548 Tallahassee, Florida 32302

Donald M. Middlebrooks, Esquire 1400 Southeast First National

Bank Building

Miami, Florida 33131 Mr. Thomas A. Brown Executive Director

State of Florida

Department of General Services

115 Larson Building Tallahassee, Florida 32301

Honorable Bob Graham Governor, State of Florida The Capitol

Tallahassee, Florida 32301

Honorable Jim Smith Attorney General State of Florida The Capitol

Tallahassee, Florida 32301

Honorable Gerald A. Lewis Comptroller

State of Florida The Capitol

Tallahassee, Florida 32301

Docket for Case No: 79-002226

Orders for Case No: 79-002226