STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SAXON BUSINESS PRODUCTS, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 81-2230BID

) STATE OF FLORIDA DEPARTMENT OF ) GENERAL SERVICES, )

)

Respondent, )

and )

)

SAVIN CORPORATION, )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, R. L. Caleen, Jr., held a formal hearing in this case on December 14, 1981, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Philip S. Parsons, Esquire

Post Office Box 391 Tallahassee, Florida 32301

For Respondent: William P. Beck, Esquire, and

Thomas M. Beason, Esquire Room 457, Larson Building Tallahassee, Florida 32301

For Intervenor: Thomas J. Guilday, Esquire

Post Office Box 1794 Tallahassee, Florida 32302

ISSUE

Whether Saxon Business Products, Inc.'s ("Saxon") response to the Department of General Services' invitation to bid for walk-up convenience copiers should be disqualified on grounds that:

1. Saxon's omission of a supply price list was a material deviation from the bid specifications and conditions; and

   
   

2. Saxon's walk-up convenience copier, model "Saxon 300," failed to prove two-sided copy capability.

BACKGROUND

The State of Florida Department of General Services ("DGS") seeks to award a 12-month contract for the purchase of walk-up convenience copiers by all state agencies. To this end, it solicited bids for numerous categories of walk-up convenience copiers.

Saxon Business Products, Inc. ("Saxon") submitted bid responses in six categories. DGS proposed to disqualify Saxon's bid ,in five of those categories on grounds that it was non-responsive, that it materially deviated from bid specifications and conditions. In addition, DGS proposed to disqualify Saxon's entry in one category for failure to prove two-sided copying capability.

By petition dated September 8, 1981, Saxon challenged the proposed disqualification of its bid response and requested a Section 120.57(1), Florida Statutes (1981), proceeding. On September 11, 1981, DGS asked that a hearing officer be assigned to conduct the requested hearing. Hearing was thereafter set for December 14, 1981. Savin Corporation ("Savin") petitioned to intervene; unopposed by Saxon, the petition was granted.

At hearing, Saxon called as its witnesses: Manny Celnik, Jack Hittinger, Ruth Eberhard, Dermot K. Nee, William E. Wallace, and Walter Joseph Reinhart. It offered Petitioner's Exhibit 1/ Nos. 1 through 11 into evidence, each of which was received.

DGS called Dermot K. Nee as its only witness and offered Respondent's Exhibit 1/ Nos. 1 through 3 into evidence, each of which was received.

Intervenor Savin called Thomas M. Pekins as its witness and offered Intervenor's Exhibit 1/ Nos. 1 through 7 into evidence, each of which were received.

The parties agreed to a schedule for submittal of proposed findings of fact and conclusions of law, and responsive memoranda. These posthearing filings were received by January 18, 1982.

Based on the evidence presented at hearing, the following facts are determined:

FINDINGS OF FACT

I.

Invitation to Bid

1. On June 10, 1981, DGS issued invitation to Bid No. 544-600-38-B ("ITB") entitled, "Walk-Up Convenience Copiers; Bond Paper and Magazine Finish Bond Paper." The ITB proposes an annual contract under which state agencies and institutions can purchase copying machines. It contains general and special conditions and specifications, and warns vendors that bids that do not comply with such conditions "are subject to rejection." (Testimony of Celnik)

2. The ITB specifications divide copiers into two groups: Group I, plain bond copiers, Group II, magazine finish copiers. The copiers are further categorized by type: Type I indicates minimum features; Type II indicates two- sided copying capability; Type III indicates one reduction capability; and Type IV indicates two or more reduction capabilities. These types are further separated into 12 classes on the basis of speed and volume (P-1.)

   
   

3. The ITB special conditions instruct bidders to submit bid sheets 2/ breaking down all copying costs to a per-copy basis. Bids are to be evaluated and contracts awarded to bidders submitting the, lowest cost per copy in each category of copier. Cost per copy is calculated by using a specific cost formula. (P-1.)

   
   

4. The ITB cost formula contains three components: machine cost, labor cost, and supply cost. DGS proposes to disqualify Saxon's bid in several categories of copiers for failure to supply a supply price list required by the supply cost component. This component provides, in relevant part:

   
   

   C) SUPPLY COST - The bidder shall compute supply costs on the Manufacturer's Brand. If there is an existing state con- tract for supplies for the manufacturer's brand equipment, the state contract price may be substituted. Supply costs will be rounded to six (6) decimal points. All other costs will also be rounded off to six (6) decimal points. The volume price used by the vendor to compute supply cost shall be based on the monthly median vol- ume of the type and class being bid. Supply cost submitted shall be firm for the contract period, except for paper,

   and all supply costs shall be current market price, verifiable. Vendor must submit supply price lists with his bid to substantiate that correct price vol- umes were used, unless state contract prices were used. A contract award may include supplies if deemed in the best interest of the State. By electing to substitute state contract supplies, the vendor is certifying that his equipment, using said supplies, will meet all per- formance requirements of this bid and of the equipment manufacturer.

   
   

   NOTE - All cost formulas will be verified by the Division of Purchasing and errors in extension will be corrected. In the event incorrect supply cost volumes are used by a bidder, the Division of Purchas- ing will adjust these costs to the median volume range. (e.s.)(P-1.)

5. The purpose of the supply price list requirement, included in DGS's 1980 and 1981 ITB for convenience copiers, is to enable DGS to verify the supply cost figures shown on a vendor's bid sheets; in this way, DGS can insure that all vendors are using correct quantity pricing on their bid sheets. 3/ (In the past, some bidders had used lower supply prices, which were tied to high volume purchases; but those volumes frequently exceeded the state's needs and the median volumes specified by the ITB for each category of copier.) The verification procedure followed by DGS in both 1980 and 1981 involves checking the vendor's bid sheets against the prices shown on the supply price list. 4/ If DGS finds an inconsistency between the two, it "corrects" the bid sheet supply cost upward or downward to reflect the price shown on the supply price list. 5/ Such a bid sheet correction would also change the total median cost per copy, the factor used to evaluate competing bids. DGS also checks the supply list to determine whether it contains current market prices. (Testimony of Hittinger, Eberhard.)

   
   

6. If a vendor fails to submit a supply price list, DGS cannot verify that the supply prices used on the bid sheet (to compute total median cost per copy) accurately reflect the median volumes specified in the ITB. Neither can DGS determine whether the supply prices used on the bid sheet are set prices, which do not vary with volume, or volume prices, which do; the bid sheets, on their face, do not reveal which type of pricing is being used. (Testimony of Eberhard; P-1.)

   
   

7. After sealed bids are publicly opened, DGS has an established practice of not allowing any bidder to submit additional material which could alter price or other information previously submitted on bid sheets. DGS does, however, accept late information if it can be corroborated by an independent source. For example, a bidder might -- after bid opening -- supply its corporate charter number, which can be easily verified by contacting the Department of State. (Testimony of Hittinger, Eberhard.)

   
   

8. The ITB special conditions also require DGS to test and approve copiers prior to bid opening. Copiers which are not tested and accepted by DGS are ineligible for a contract award:

   
   

   EQUIPMENT APPROVAL - Each item of equipment bid shall have been tested by the Division of Purchasing prior to the bid opening time and date for performance and reliability under normal working con- ditions. Any bidder whose equipment has not been tested shall provide a model of the equipment on which he intends to bid to a specified testing station, complete with all supplies, at no expense to the State. Testing will extend for a period of twenty (20) working days. In the event evaluation and acceptance of untested ma- chines has not been accomplished prior to

   the bid opening date and time, such machine shall not be eligible for an award. (P-1.)

   II.

   
   

   Bid Opening: Saxon's Failure to Submit Supply Price List

   
   

9. Prior to the 1981 bid opening, Saxon failed to submit a supply price list in connection with its bid. This was apparently an oversight on its part; a year earlier, it had furnished a supply price list in response to a similar ITB for convenience copiers. Because of Saxon's omission, DGS was unable to verify the supply prices used by Saxon on its bid sheets or determine whether Saxon was utilizing set or volume prices. (Testimony of Eberhard, Celnik, Hittinger.)

   
   

10. After bid opening, Saxon notified DGS that the supply prices shown on its bid sheets were set supply prices -- unit prices which do not vary with volume -- and confirmed that they are the supply prices which it now offers to the state. (Testimony of Celnik.)

    
    

11. In its evaluation of the bids, DGS applied the requirement of a supply price list equally to all bidders. All bidders who omitted a supply price list were informed that they were disqualified. Saxon's bid was disqualified in five copier categories: Group I, Type I, Class I; Group I, Type I, Class II; Group I, Type I, Class IV; Group I, Type II, Class I; and Group I, Type II, Class II. At least 11 vendors, however, did submit supply price lists with their bid sheets; approximately one-third were set price lists, the remaining were volume price lists. (Testimony of Eberhard; P-3.)

    
    

12. If a vendor could submit a supply price list after the bid opening, it could effectively decrease or increase its bid. (This is so because, in case of a conflict between the bid sheet supply price and the supply price list, the price list value will prevail. A change in the bid sheet supply price will change the cost per copy figure the determining factor in awarding contracts.) A vendor submitting a late supply price list would have an unfair advantage since it could change its bid after bid opening while its competitors could not. The competitive nature of the bidding process would be impaired. (Testimony of Hittinger, Eberhard.)

    
    

13. Furthermore, if late submittal of a supply price list was allowed, a bidder could disqualify itself by refusing to provide it; the bidder would then have the advantage of revisiting its bid and -- if it chose -- withdrawing it after bid opening. The opportunity to withdraw a bid -- after bid opening -- would be an advantage not enjoyed by those who timely submitted supply price lists with their bids. (Testimony of Hittinger, Eberhard.)

    
    

14. In some copier categories, the vendors who omitted supply price lists were the low bidders. If DGS disqualifies them for their omission, it must award the contract to the next highest bidder. The difference between those low bids and the next higher bid is substantial -- in some cases exceeding 23 percent. 6/ (Testimony of Celnik, Eberhard, Nee, Reinhart.)

    
    

    III.

    Failure of "Saxon 300" to Demonstrate Two-Sided Copying Capability

15. In accordance with the ITB, Saxon submitted its "Saxon 300" copier to DGS for evaluation and testing. Prior to bid opening, DGS conducted a 20-day test of the machine. The "Saxon 300" machine which DGS tested lacked two-sided copying capability. It could reproduce clearly on one side, but not on the other. The "Saxon 300" sales literature and instruction manual submitted with the machine did not represent that the machine had two-sided copying capability. (Testimony of Nee; 1-5, 1-6, 1-7, R-2.)

    
    

16. The "Saxon 300" may have two-sided copying capability, but only after special modifications are made to the copier. These modifications include removal of a roller device, replacement of the heating element, and replacement of the blower system. Saxon did not indicate at the time of testing, or in its bid, that the "Saxon 300" required such modification for two-sided copying capability. Neither did it indicate what, if any, additional costs would be charged for such modifications. (Testimony of Nee, Wallace; R-3.)

    
    

17. After DGS tested the "Saxon 300," it sent Saxon a form letter indicating that the copier met minimum operating requirements. The letter did not inform Saxon that the machine lacked two-sided copying capability because DGS did not consider the lack of such capability a major malfunction in the equipment. (Testimony of Nee.)

    
    

18. If a machine malfunctions, DGS has -- in the past -- allowed vendors to correct the deficiency or substitute another machine. (Testimony of Nee.)

    
    

19. The Group I, Type II, Class I category of copiers, requires two-sided copying capability. Saxon bid its "Saxon 300" as a copier which meets this requirement. (Testimony of Celnik, Nee; P-1.)

    
    

    CONCLUSIONS OF LAW

    
    

20. The Division of Administrative Hearings has jurisdiction over the subject matter and parties to this proceeding. 120.57(1), Fla. Stat. (1981).

    
    

21. Section 287.042(2), Florida Statutes (1981), empowers the DGS, through its Division of Purchasing:

    
    

    (2) To plan and coordinate purchases in volume and to negotiate and execute

    agreements and contracts under which the division shall require state agencies to purchase commodities and under which a county, municipality or other local public agency may purchase commodities. . .

    
    

22. Although not required to do so, 7/ DGS awards state purchasing agreements by using the competitive bidding process. The purpose of the competitive bidding process was enunciated by the Florida Supreme Court in Wester v. Belote, 138 So. 721, 723-724 (Fla. 1931):

    
    

    [T]o 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 for the county at the lowest possi- ble expense; and to afford an equal advan- tage to all desiring to do business with the county, by affording an opportunity for an exact comparison of bids.

23. Competitive bidding statutes: [S]erve the object of protecting the

    public against collusive contracts and

    prevent favoritism toward contractors by public officials and tend to secure

    fair competition upon equal terms to all bidders, they remove temptation on the part of public officers to seek private gain at the taxpayers' expense, are of highly remedial character, and should receive a construction always which will fully effectuate and advance their true intent and purpose and which will avoid the likelihood of same being circumvented, evaded or defeated. (Citations omitted.) Id.

    
    

    They are based on public economy, are important to the taxpayer, and "ought not to be frittered away by exceptions." Id.

    
    

24. In order to ensure the desired competitiveness, "a bidder cannot be permitted to change his bid after the bids have been opened, except to cure minor irregularities." Harry Pepper and Associates, Inc. v. City of Cape Coral,

    352 So.2d 1190, 1192 (Fla. 2d DCA 1978). The test for measuring whether a bid deviation is sufficiently material to destroy its competitive character is:

    
    

    [W]hether the variation affects the amount of the bid by giving the bidder an advan-

    tage or benefit not enjoyed by other bidders. Id. at 1193.

    
    

    DGS has, by rule, incorporated this test. See, Rule 13A-1.02(10), Florida Administrative Code. 8/

    
    

25. As a prophylactic measure, bids must conform closely to published specifications. Baxter's Asphalt & Concrete, Inc. v. Liberty County, 406 So.2d 461, 465 (Fla. 1st DCA 1981). The critical factor is not whether a bidder, in fact, gained an unfair advantage over its competitors; it is whether the bidder, by its deviation, "conceivably could have gained an unfair bidding advantage." Id. at 464.

    
    

26. Saxon's omission of a supply price list was a material deviation from the conditions of the ITB. The supply price list enabled DGS to determine whether price volume discounts were used, and, if so, whether the correct volume was utilized. By "correcting" erroneous bid sheet supply prices to conform to the price lists, DGS could insure accuracy and uniformity among the bids.

27. If Saxon is allowed to provide a price list or price confirmation after bid opening, it could conceivably obtain an unfair bidding advantage over its competitors. Saxon responds that its bid utilizes set pricing; that its late price list would simply confirm the prices on its bid sheet, that its bid would not be changed by such confirmation. But DGS cannot effectively verify that Saxon's original bid was based on set supply prices rather than volume prices. Saxon's bid sheets, on their face, do not reveal which method of pricing is used. Consequently, Saxon, with equal facility, could have provided a late-filed price list utilizing volume pricing; such a list could have contained information which would have required DGS -- as part of its verification process -- to "correct" the bid sheet supply prices. Such corrections would effectively change the price of the bid -- the median cost per copy. Vendors cannot change bid prices after bid opening. See, Rule 13A- 1.02(10), supra; Harry Pepper and Associates, supra. If allowed an opportunity to do so, they would enjoy an unfair advantage over their competitors. To allow bids to be changed after bid opening would open the door to abuses which competitive bidding statutes are designed to prevent and would impair the sanctity of the competitive bidding process. See, Harry Pepper and Associates, supra at 1192-1193.

    
    

28. In addition, Saxon -- on revisiting its bid -- could refuse to supply the required supply price list, thereby effectively disqualifying itself and withdrawing its bid. This would be a privilege not enjoyed by its competitors.

    
    

29. Accordingly, it is concluded that Saxon's bid in categories: Group I, Type I, Class I; Group I, Type I, Class II; Group I, Type I, Class IV; Group I, Type II, Class I; and Group I, Type II, Class II, is non-responsive and materially deviates from the conditions and specifications of the ITB. Saxon's bid in these categories should be disqualified.

    
    

30. Similarly, Saxon's bid in Group I, Type II, Class I materially deviates from the ITB, is non-responsive and should be disqualified. The "Saxon 300" offered to DGS for testing and acceptance failed to demonstrate two-sided copying capability. If Saxon were permitted to demonstrate -- after bid opening

    -- the capability of the "Saxon 300," with modifications, to perform two-sided copying, it would be receiving an advantage not enjoyed by other bidders.

    
    

31. When a public agency disqualifies a nonconforming low bid, it has two alternatives: it may award the contract to the next lowest bidder who meets the bid specifications, or -- under its reserved power -- reject all bids and readvertise for new ones. See, Harry Pepper and Associates, supra at 1193;

    Wood-Hopkins Contracting Company v. Roger J. Au & Son, Inc., 354 So.2d 446 (Fla. 1st DCA 1975). In this case, the evidence indicates a significant cost difference between the disqualified low bids and the next lowest conforming bids. Under such circumstances, DGS might choose to reject all bids and readvertise. At hearing, however, no party advocated or presented evidence in favor of this alternative. In the absence of record evidence on the appropriateness of such action, it cannot be recommended.

    
    

32. The parties have submitted proposed findings of fact and conclusions of law; to the extent such findings are incorporated herein, they are adopted; otherwise, they are rejected as unsupported by the evidence or unnecessary to resolution of the issues presented.

RECOMMENDATION

Based on the foregoing, it is RECOMMENDED:

1. That Saxon's bids in Group I, Type I, Class I; Group I, Type I, Class II; Group I, Type I, Class IV; Group I, Type II, Class I; and Group I, Type II, Class II be disqualified; and

   
   

2. That Saxon's bid in Group I, Type II, Class I be disqualified.

DONE AND RECOMMENDED this 26th day of February, 1982, in Tallahassee, Florida.

R. L. CALEEN, JR. Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 26th day of February, 1982.

ENDNOTES

1/ Petitioner's, Respondent's, and Intervenor's Exhibits will be referred to as "P- ," "R- ," and "I- ," respectively.

2/ The bid sheet forms attached to the ITB were required to be used. (P-1.)

3/ The ITB special conditions require bidders to use a supply price which corresponds to the monthly median copy volume specified for the particular category of copier.

4/ Alternatively, if the vendor used a state contract supply list, DGS would verify it against the state contract prices.

5/ DGS was required to "correct" a substantial number of bids because of such inconsistencies. Vendors sometimes used bid sheet prices based on projected volume purchases in excess of the median volumes specified in the ITB. Four of seven successful low bidders had their bids "corrected" in this manner.

6/ In addition to Saxon, other low bidders which DGS proposes to disqualify for failure to submit a supply price list are Cummings, Sharp, and Cavalier.

7/ See, s. 287.062(1)(b), Fla. Stat. (1981).

8/ (10) Right to Reject Bids - Correction of Commodity Bids - The agency shall reserve the right to waive minor irregularities in an otherwise valid bid. A minor irregularity is a variation from the bid invitation, terms and conditions which does not affect the price of the bid, or give the bidder an advantage or benefit not enjoyed by other bidders, or does not adversely impact the interest of the agency. Variations which are not minor cannot be waived. A bidder may not modify its bid after bid opening . . .

COPIES FURNISHED:

Philip S. Parsons, Esquire Post Office Box 391 Tallahassee, Florida 32301

Thomas ,J. Guilday, Esquire Post Office Box 1794 Tallahassee, Florida 32301

William P. Beck, Esquire, and Thomas M. Beason, Esquire Department of General Services Room 457, Larson Building Tallahassee, Florida 32301

Thomas R. Brown, Executive Director Department of General Services

Room 115, Larson Building Tallahassee, Florida 32301

Docket for Case No: 81-002230

Orders for Case No: 81-002230