STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

XEROX CORPORATION, )

)

Petitioner, )

)

vs. ) CASE NO. 83-3018BID

) STATE OF FLORIDA, DEPARTMENT OF ) GENERAL SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

This case was heard on February 6, 1984, by R. L. Caleen, Jr., hearing officer with the Division of Administrative Hearings, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Kenneth G. Oertel, Esquire

646 Lewis State Bank Building Tallahassee, Florida 32301

Charles M. Bredehoft, Esquire Office of General Counsel Xerox Corporation

1616 North Fort Myer Drive Arlington, Virginia 22209

For Respondent: Susan B. Kirkland, Esquire

Assistant General Counsel Department of General Services

452 Larson Building Tallahassee, Florida 32301

ISSUES

1. Whether the Department of General Services should award state contracts for "walk-up convenience copiers" to Xerox Corporation in categories where Xerox was the only responsive bidder, or should reject Xerox's bid and solicit new bids on grounds that competitive bids were not received and there is no basis or excepting the award from competitive bid requirements;

   
   

2. Whether the Department should disqualify Xerox's bid in one category for alleged material deviation from bid specifications where Xerox failed to initial a change in its bid price.

BACKGROUND

On March 24, 1983, respondent Department of General Services (DGS) solicited bids for numerous categories of "walk-up convenience copiers." Bid

responses were submitted by several vendors, including petitioner Xerox Corporation (Xerox). The invitation to bid (ITB) required that each bidder give a guaranteed yield for its supplies. DGS determined that Xerox's bid did not guarantee yields and in one category Xerox did not initial a price change. On those grounds, DGS proposed to disqualify Xerox's bids as unresponsive to the ITB.

On September 2, 1983, Xerox protested DGS' intended decision and requested a Section 120.57(1) proceeding. On September 27, 1983, the parties stipulated that Xerox was responsive on the issue of guaranteed yields.

As a result of this stipulation, there are several categories in which Xerox is the single responsive bidder. DGS proposes to reject Xerox's bids for these categories on grounds that competitive bids were not received and this contract award does not fall within one of tile exceptions to Section 287.062, Florida Statutes, which requires that commodities costing in excess of $2,500 be purchased on the basis of competitive bids. DGS contends that the purchase is not a "single source" because the copier equipment is available from other sources, and emergency conditions do not exist. DGS also proposes to reject Xerox's bids for these categories because the prices are too high. Xerox contends that it should be awarded the contracts in categories where it submitted the single responsive bid because DGS has awarded contracts to single responsive bidders in the past--and continues to do so.

DGS also proposes to disqualify Xerox's bid for (copier) category Group I, Type III, Class 12, monthly rental acquisition plan, on the basis that Xerox's failure to initial a price change was a material deviation from the terms and conditions of the ITB.

At hearing, Xerox presented the testimony of Ruth Bayes, M. Christopher Bryant, Edward Judge and Salvatore V. Cavallero. DGS presented the testimony of John J. Hittinger. Xerox's Exhibit Nos. 3, 4, and 9 through 11 were received in evidence, as were DGS' Exhibit Nos. 1, 2, and 4.

The transcript of hearing was filed on March 5, 1984. Proposed findings of fact were filed by March 18, 1984. Those proposed findings incorporated in this recommended order are adopted; otherwise, they are specifically rejected as unsupported by the evidence or as irrelevant or unnecessary to resolution of the issues presented.

Based on the evidence presented, the following facts are determined: FINDINGS OF FACT

1. On March 24, 1983, DGS issued ITB No. 351-600-38B entitled "Walk-up Convenience Copiers, Bond Paper and Magazine Bond" to establish a twelve-month contract for the purchase of walk-up convenience copiers by state agencies and institutions. The ITB contains general and special conditions and specifications. The specifications provide for two groups, four types, and twelve classes of copiers with four acquisition plans--monthly rental, annual lease, two-year lease, and outright purchase. In the general conditions, DGS reserved the right to reject any and all bids. (Respondent's Exhibit No. 1)

   
   

2. In paragraph 1 of the general conditions, the bidders were explicitly advised that all corrections made by a bidder to hid bid price must be initialed. The purpose of this provision is to prevent a bidder from attempting to change its bid price after bids have been opened by arguing that the price on

   the bid was - not the price submitted by the bidder--and that the change in price was made by someone other than the bidder. (Testimony of Hayes and Hittinger; Respondent's Exhibit No. 1)

   
   

3. For the category Group I, Type 3, Class 12, monthly rental acquisition plan, Xerox submitted a bid sheet in which the price of the machine cost for the monthly minimum cost per month had been "whited-out" and typed over. Contrary to the bid condition, this price change was not initialed by Xerox.

   
   

4. This uninitialed price change is a material deviation from the terms and conditions of the ITB, and justifies rejection of Xerox's bid. In past years, DGS has rejected bids, including those submitted by Xerox, for uninitialed price changes. If bids with uninitialed price changes cannot be rejected as nonconforming, DGS cannot enforce a condition reasonably intended to prevent abuses in the competitive bidding process.

5. Xerox was the only responsive bidder in the following categories: Type I, Class 11 Type II, Class 11

   Monthly Monthly

   Annual Annual

   Two-Year Two-Year

   Purchase Purchase

   
   

   Type I, Class 12 Type II, Class 12 Monthly Monthly

   Annual Annual

   Two-Year Two-Year

   Purchase Purchase

   
   

   Type II, Class 4 Type III, Class 11 Monthly Monthly

   Annual Annual

   Purchase Two-Year

   Purchase

   
   

   Type II, Class 5 Type III, Class 12 Monthly Annual

   Annual Two-Year

   Purchase Purchase

   
   

   Type II, Class 6 Type IV, Class 11 Monthly Monthly

   Annual Annual

   Purchase Two-Year

   Purchase

   
   

   Type II, Class 7 Type IV, Class 12 Monthly Monthly

   Annual Annual

   Purchase Two-Year

   Purchase

   Type II, Class 8 Monthly Annual Purchase

   
   

   (Testimony of Hayes; Petitioner's Exhibit No. 3)

   
   

6. The prices bid by Xerox in these categories were substantially higher than the bids submitted by other vendors. IBM submitted lower bids in some categories, but these bids were rejected for failure to guarantee yields. 1/

   In other categories, vendors bid prices that were lower than both Xerox and IBM. If new bids are solicited, DGS can reasonably expect to receive responsive bids in most categories from both Xerox and IBM. In comparing the bid prices of Xerox and IBM, the Xerox prices are between $213 to $806.58 more per machine per month. In some cases, the differential between IBM and Xerox prices is as high as 62 percent. (Respondent's Exhibit Nos. 3, 4; Testimony of Hayes)

   
   

7. The copier equipment for which bids were solicited is available from other sources; it is not a "single source" commodity. Neither have emergency conditions been shown which would justify awarding the contracts to Xerox on an emergency basis. (Testimony of Hittinger)

   
   

8. In 1979, a Division of Administrative Hearings hearing officer issued a final order in a rule challenge to DGS' Rule 13A-1.02(3), dealing with the receipt of one bid in a first call for bids on commodities exceeding $2,500. Amdahl Corporation v. Florida Department of General Services, Case No. 79-625R (April 27, 1979). (Petitioner's Exhibit No. 4) Prior to and after the Amdahl order, it was DGS' practice to award contracts to single responsive bids (1) when the commodity was available only from a "single source," or (2) when the single responsive bid was the lowest of the apparent bids received. In the fall of 1983, DGS reinterpreted the Amdahl order as, in effect, prohibiting awards to single responsive bids where competition is available even though the sole responsive bid is the lowest of the bids received. DGS now awards commodity contracts to single responsive bids only in "single source" or emergency situations or through the negotiation process. 2/ In DGS' view, if there is only one responsive bidder, competitive bids have not been received. Xerox is not the only bidder to be subjected to this change in agency policy. In the instant case DGS rejected the bid of Gestetner, a single responsive bidder, for the same reason it proposes to reject the bid of Xerox. (Testimony of Hayes and Hittinger)

   CONCLUSIONS OF LAW

   
   

9. The Division of Administrative Hearings has jurisdiction over the subject matter and parties to this proceeding. s. 120.57(1), Fla. Stat. (1983).

   
   

10. Section 287.062, Florida Statutes, provides in pertinent part:

    
    

    1. No purchase of commodities may be made when the purchase price thereof is in excess of $2,500 unless made upon competitive bids received, except:

       1. If the head of any state agency maintains that an emergency exists in regard to the purchase of any commodity, so that the delay incident to giving opportunity for competitive bidding would be detrimental to the interests of the state, then the head of

          such agency shall file with the division a statement under oath certifying the conditions and circumstances. In the case of the emergency purchase of insurance, the period of coverage of such insurance

          shall not exceed a period of 30 days; and all such emergency purchases shall be reported to the head of the Department of General Services.

       2. Purchasing agreements, contracts, and maximum price regulations executed by the division are excepted from bid requirements.

       3. Commodities available only from a single source may be excepted from the bid requirements upon the filing by the head of an agency of a certification of conditions and circumstances with the division if, subsequent thereto, the division authorizes the exception in writing.

          * * *

    2. If no competitive bids or proposals for commodity purchases are received, the division may negotiate on the best terms and conditions.

       
       

11. Rule 13A-1.02(3), Florida Administrative Code provides:

    
    

    (3) Receipt of One Bid in the First Call for Bids on Commodities Exceeding $2,500-- When only one bid is received for the purchase of a commodity or group of commodities exceeding $2,500 in the first call for bids, the agency shall review the bid in order to determine the reasons, if any, why only one bid was received before issuing a second call for bids; provided, however, if the agency determines that an emergency exists or that commodities are available only from a single source, then the agency head may make a certification, in writing, as to the conditions and circumstances to the Division of Purchasing. In addition, copy of complete bid invitation and specification, copy of

    all bids along with a tabulation sheet noting

    `no bid' responses, and a list of vendors by name and address from whom bid invitations were solicited must accompany the certifications. The Division may, in writing, authorize the purchase or require a second call for bids.

    
    

12. Rule 13A-1.01(11), defines competitive bids as two or more valid responses to a bid invitation.

    
    

13. In the categories where Xerox submitted the only valid response, competitive bids were not received under DGS rules, infra. The contracts should

    not be awarded to Xerox in those categories unless an emergency exists or Xerox is the only available source for the equipment. See, International Business Machines v. Florida Department of General Services, 1 F.A.L.R. 548-A, 555-A, where DGS adopted a hearing officer's recommended order, stating:

    
    

    Even if IBM's bid were determined to be responsive to the RFP, it would not be appropriate to award the contract to IBM. If IBM's bid were found responsive, the State would have received only one valid bid. When only one bid is received, a matter must be rebid unless an emergency exists such that the delay inherent in rebidding would not be justified, or unless there is only a single source for the commodity. DGS Rule

    13A-1.02(3), Florida Administrative Code; Amdahl Corporation v. Florida Department of General Services, DOAH Case No. 79-625R (Final Order entered April 27, 1979). The evidence in this case would not support a conclusion that an emergency exists (DGS Rule 13A-1.01(12), Florida Administrative Code) and it is clear that there are at least three vendors able to supply the commodity.

    
    

14. A "single source" purchase is defined as the "purchase of a commodity or contractual service that is available from only one source." Rule 13A- 1.01(14), Fla. Admin. Code. Since the equipment bid by Xerox is available from other sources, Xerox can not be awarded the contract on the basis of a "single source" purchase.

    
    

15. An emergency purchase is defined by Rule 13A-1.01(13), as

    
    

    [A] purchase necessitated by a sudden unexpected turn of events (e.g., acts of God, riots, fires, floods, accidents or any circumstances or cause beyond the control of the agency in the normal conduct of its business) where the delay incident to competitive bidding would be detrimental to the interests of the State.

    
    

    These circumstances have not been shown to exist in the instant case.

    
    

16. In Amdahl Corporation v. Florida Department of General Services, 1

    F.A.L.R. 457-A (Final Order filed April 27, 1979), the hearing officer held:

    
    

    When the statute [s. 287.062, Fla. Stat.] refers to `competitive bids received'

    it clearly requires that before purchases of commodities in excess of $2,500 are made, more than one valid bid will be received by an agency. If only one bid is received, the agency has not received competitive bids, and a purchase cannot be made unless it is made under one of

    the exceptions set out at Section 287.062.

    * * *

    If an item is bid more than one time, and there is still only one responsive

    bidder, a sole source procurement would be appropriate. The fact that other vendors might have the materials would not frustate the sole source procurement, since their failure to bid clearly eliminates them as a source.

    
    

    Id. at 458A. DGS concedes that it erroneously interpreted the Amdahl decision as allowing awards to a single responsive bidder where its bid is the lowest of the apparent bids received, though the commodity may be available from other sources. Under its revised interpretation of Amdahl--one more consistent with Section 287.062, Florida Statutes, and Rule 13A-1.02--single responsive bids are rejected and new bids solicited unless the purchase is a "single source or an emergency. DGS has adhered to this interpretation of Amdahl since the fall of 1983.

    
    

17. Neither has Xerox shown that it is entitled to the award under the DGS interpretation existing prior to fall, 1983. Xerox is not the low bidder of the bids received in any of the categories at issue. Even if Xerox had shown entitlement under DGS' earlier interpretation of Amdahl, DGS is not precluded from rejecting Xerox's bids on the basis that Section 287.062, Florida Statutes, and Rule 13A-1.02(3), prohibit awards to single responsive bidders where the purchase is neither a "single source" or an emergency.

    
    

18. Agency non-rule policy may be changed or enforced so long as it is defended and explicated in Section 120.57 proceedings. Florida Cities Water v. Florida Public Serv., 384 So. 2d 1280, 1281 (Fla. 1980). DGS has adequately explained and justified its change in policy.

    
    

19. DGS has wide discretion to reject bids. A rejection which is made in good faith, and is not arbitrary, will be upheld even though reasonable persons may disagree as to its correctness. Liberty County v. Baxter's Asphalt & Concrete, 421 So. 2d 505 (Fla. 1982); Culpepper v. Moore, 40 So. 2d 366 (Fla. 1949); Couch Const. Co. Inc. v. Department of Transp., 361 So. 2d 172 (Fla. 1st DCA 1978).

    
    

20. A significant price difference between apparent bidders may justify rejection of a bid and readvertisement. See, Saxon Business Products, Inc. v. Dept. of General Services, 4 F.A.L.R. 1102-A, 1105-A (Final Order filed April 7, 1982). Here, there are significant price differences between Xerox's bids and IBM's bids. DGS' proposed rejection of Xerox's bids because high price is reasonable, especially in light of DGS' duty to secure the best value at the lowest cost to the public. See, Wester v. Belote, 138 So. 721 (Fla. 1931); s. 287.032, Fla. Stat. (1983).

    
    

21. Xerox's failure to initial a price change for Group I, Type 3, Class 12, monthly rental acquisition plan, is a material deviation from the conditions of the ITB. The Xerox bid should, therefore, be disqualified as unresponsive. By not initialing the price change, Xerox could, conceivably, obtain an unfair advantage over other bidders. After bid opening, it could attempt to change its price by arguing that the price on its bid was changed by someone else after the bid was submitted.

22. DGS has the right to remove, by bid condition, opportunities to manipulate the bidding process. By issuing a bid condition which requires the initialing of bid price changes--and rejecting noncomplying bids--DGS is simply enforcing that right.

RECOMMENDATION

Based on the foregoing, it is RECOMMENDED:

1. That DGS reject Xerox's single responsive bids and readvertise; and

   
   

2. That Xerox's bid for category Group-I, Type 3, Class 12, monthly rental acquisition plan, be rejected as nonconforming.

DONE and ENTERED this 11th day of July, 1984, 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 11th day of July, 1984.

ENDNOTES

1/ IBM was disqualified for failure to guarantee yields. Although the yields offered were the same as ones offered in IBM's standard catalog to government, IBM's bid did not state the yields were guaranteed. Subsequent to DGS' decision to disqualify IBM, IBM informed DGS that the failure to guarantee yields was an over-sight. In all likelihood, the defect would be cured on rebid. Testimony of Hittinger.

2/ Section 287.062(2), Florida Statutes, authorizes DGS to negotiate on the best terms and conditions when no competitive bids are received.

COPIES FURNISHED:

Kenneth G. Oertel, Esquire 646 Lewis State Bank Building Tallahassee, Florida 32301

Charles M. Bredehoft, Esquire Office of General Counsel Xerox Corporation

1616 North Fort Myer Drive Arlington, Virginia 22209

Susan B. Kirkland, Esquire Assistant General Counsel Department of General Services

452 Larson Building Tallahassee, Florida 32301

Ronald W. Thomas, Executive Director

Department of General Services Room 115 Larson Building Tallahassee, Florida 32301

Docket for Case No: 83-003018

Orders for Case No: 83-003018