vs. ) CASE NO. 83-3373BID
Respondent. )
Intervenor. )
This matter came on for hearing in Tallahassee, Florida, before the Division of Administrative Hearings by its duly designated Hearing Officer, Robert T. Benton, II, on January 30, 1984. On February 2, 1984, the second and final day of hearing took place. The Division of Administrative Hearings received a transcript of proceedings on February 14, 1984. The parties are represented by counsel:
For Petitioner: Frank A. Baker, Esquire
For Respondent: Robert I. Scanlan, Esquire
For Intervenor: Jack A. Harnett, Esquire
These proceedings arise in connection with the bidding on State Job No.
55320-3425. Respondent Department of Transportation (DOT) proposed to award the contract for the job, about a million dollars' worth of work on a stretch of I-
10 in Leon County, to intervenor Solomon Construction Company (Solomon), principally on grounds that petitioner Baxter's Asphalt and Concrete, Inc. (Baxter), whose bid was lower, was not a responsible bidder.
There is agreement among the parties that Baxter availed itself timely of opportunities to protest this intended decision, and that the matter is properly before the Division of Administrative Hearings, in accordance with Sections 120.53(5) and 120.57(1), Florida Statutes (1983).
Whether DOT should disqualify Baxter's bid on State Job 55320-3425, because Baxter's uncompleted work might hinder prompt completion of Job No. 55320-3425, or on account of Baxter's not being "responsible" within the meaning of Section 337.11(3), Florida Statutes (1983), or, under Rule 14-22, Florida Administrative Code, on account of Baxter's falsely certifying current capacity?
In their prehearing stipulation, the parties agreed that: Baxter submitted the lower bid on Project No. 55320-3425, on August 31, 1983. On September 19, 1983, DOT advised Baxter its bid
would not be considered the lowest, responsible bid because of the failure of Baxter's to complete Job Nos.
49010-3535, 50060-3503, 49060-3508,
50030-3522, 50050-3506, 56010-3510, and
50010-3531 within the time allowed by their contract . . . . [E]ach of these projects w[a]s not completed within the allowed contract time and requests for extension of time are pending.
The parties further stipulated that DOT's Bid Award Committee voted unanimously to award the job to Solomon and caused notice of intent to award Job No. 55320- 3425 to Solomon to be posted on October 10, 1983.
At hearing, the parties stipulated on the record that Solomon is ready, willing and able to perform Job No. 55320-3425, and will perform, if the contract is awarded to Solomon. In Baxter's proposed findings of fact, Baxter concedes that "[t]here is no dispute that SOLOMON is a "responsible bidder?"
In their prehearing stipulation, the parties also agreed that the form Certificate of Current Capacity filed by Baxter on August 31, 1983, did not list the status of the contracts it had on hand to which DOT was not a party.
SPECIALTY JOB
Solomon and Baxter were the only bidders on Project No. 1R-10-3 (71)198-55320-3425 (Job No. 55320-3425). The job involves light grading, installing underdrains and some small drainage structures, covering the underdrains with type III asphalt course, sealing the shoulder joint, miscellaneous asphalt and concrete paving, paving a ditch with concrete, installing guardrails, striping and marking the pavement, and grassing the shoulders on Interstate Highway 10, from Timberlane Road to a point 0.6 miles east of the intersection of I-10 and U.S. 90, a stretch of 6.903 miles, in Leon
County. Installation of the underdrains would require about 300 tons of asphalt and some 2800 tons of asphalt would be required to do the whole job, but the production and spreading of asphalt is a relatively minor part of the whole project. Baxter's bid of $936,554.57 was lower than Solomon's by $21,255.63.
The work is to be performed within 230 calendar days.
TIME OVERRUNS
Baxter finished on time at least five projects under contracts DOT let to Baxter in 1981, using all or virtually all of the time allowed to complete Job Nos. 56010-3508, 56020-3508 and 61080-3418, aggregating $2,568,784, but finishing substantially ahead of schedule on Job Nos. 51010-3522 and 53070- 3506, aggregating $384,069.
Under contracts DOT let to Baxter in 1982, however, only two projects were finished within the time allowed. In all, DOT let twelve or thirteen contracts to Baxter in 1982. DOT's Exhibit No. 1. Of the 1982 contracts on which Baxter fell behind, DOT cited only five or six 1/ as evidence of Baxter's irresponsibility, in Secretary Pappas' letter of September 19, 1983.
LATE STARTS
Only one of the 1982 contracts was begun on or before the date specified in the contract as the date time charges were to begin to run. On Job No. 49010-3535 (U.S. 98 or SR 30 in Franklin County) Baxter did not begin work until after the completion date called for in the contract. The contract on
U.S. 98 in Franklin County was for $1,170,887.72. On Job No. 50060-3503 (SR 65 in Gadsden County), on which time charges began to run on August 10, 1982, and which was to have been completed within 200 days, Baxter began work on January 7, 1983, which was 235 days after the contract was executed. The contract on SR
65 in Gadsden County was for $744,134.34.
The contract DOT awarded Baxter for Job No. 49060-3508 (SR 65 in Franklin County) was for $1,380,270.15. Under the contract, time changes on SR
65 in Franklin County began on September 1, 1982, but Baxter did not begin work until February 23, 1983, which was 250 days after the contract was executed.
The SR 65 Franklin County contract between DOT and Baxter contemplated completion of the project within 276 calendar days from the start of work. Both Job Nos. 50030-3522 and 50050-3506 (State Roads 10 and 12 in Gadsden County) were let under an agreement specifying that time charges would begin on November 4, 1982. Baxter started work on the first of these on February 11, 1983, and did not begin the second till well after the date it had agreed to have it finished. Baxter started work on Job 56010-3510 (State Road 20 in Liberty County) on April 13, 1983, about six months after the contract was executed and about four and a half months after time charges began.
1983
Secretary Pappas also cited Job No. 50010-3531 in his letter of September 19, 1983, as one of the jobs on which Baxter's performance had indicated, at least to DOT, Baxter's irresponsibility. This contract was for work on State Road 10 in Gadsden County and was referred to at hearing as the "mini-contract." The contract allowed 30 days for completion of the work and was in the amount of $34,975. Under this contract, time charges began on May 30, 1983, so that work should have been completed by the end of June. Baxter began work on September 9, 1983, more than two months after it had agreed it would finish the job.
On the three other DOT jobs that Baxter was to begin in 1983, Job Nos. 53030-3521 (U.S. 231 in Jackson County), 61040- 3515 (SR 79 in Washington County), 54030-3507 (SR 19 in Jefferson County) , Baxter started work 26, 44 and
81 days late respectively.
DELINQUENCY DISPUTED
Whenever a contractor falls behind to the point that he has completed
20 percent less than he projected he would have on his progress chart and the amount he has completed expressed as a percentage of the whole is 20 points or more less than the amount of time elapsed expressed as a percentage of the total time allowed, DOT issues a preliminary notice of delinquency. The contractor has 15 days thereafter in which to request extensions of time. DOT may grant extension requests that render the contractor no longer delinquent, or it may issue a final notice of delinquency. Only if the contractor fails to file timely a petition for administrative proceedings does the "final" notice become final in law. Otherwise final agency action must await the outcome of proceedings pursuant to Section 120.57, Florida Statutes (1983).
DOT has issued final notices of delinquency to Baxter with respect to both jobs on SR 10 in Gadsden County, and the jobs on SR 79 in Washington County, SR 19 in Jefferson County, State Road 20 in Liberty County, State Road
10 in Gadsden County, State Road 65 in Franklin County, State Road 65 in Gadsden County, and U.S. 98 in Franklin County. Since 1973, Baxter has received more final notices of delinquency from DOT than any other road contractor. As of final hearing, there was no other road contractor in the Tallahassee residency with as many as two jobs uncompleted as of the date time expired.
With respect to each contract as to which DOT has issued a final notice of delinquency to Baxter, Baxter has filed requests for extensions of time. Some of these requests were granted. Others were not. If all of them had been granted, final notices of delinquency would not have issued. Baxter has also timely filed for formal administrative proceedings as to each final notice of delinquency directed to Baxter. At least one of these was scheduled for final hearing as early as August 5, 1983, but was, on Baxter's application, enjoined by court order. Baxter's Asphalt and Concrete, Inc. v. State of Florida, Department of Transportation; State of Florida, Division of Administrative Hearings; and R. T. Benton, II, No. 7-83-123 (Fla. 14th Cir.; Aug. 4, 1983). The parties stipulated that they have since agreed that the injunction be dissolved, although no order dissolving it has been entered.
In arriving at the times specified in DOT road contracts, DOT staff estimates the number of work days necessary to complete the project, then multiplies by 1.825, on the assumption that the road contractor will only be able to work four days a week, fifty weeks a year. On paving jobs, considerable additional time is built into the estimates to allow contractors to bid on and schedule several jobs. DOT allows time extensions nevertheless for inclement weather, when the weather interferes with the controlling items of work, and also allows time extensions for certain unforeseen problems beyond the contractor's control.
At hearing in the present case, Baxter made a colorable showing of a design problem on the SR 20 job in Liberty County, of a shortage of "friction course one materials" throughout 1982 and the first half of 1983, and of a shortage (of much shorter duration) of a chemical used to recycle milled asphalt, called HMA. Even if established, these claims would not excuse Baxter's lateness on all of the contracts mentioned in the Secretary's letter of September 19, 1983. For example, the evidence showed work had not progressed to the point that Baxter could have used the HMA during the time of the shortage. Baxter has even contended that it is not delinquent on jobs it did not begin until after the date by which Baxter had agreed to have finished. The evidence showed, however, that Baxter was delinquent in fact on these and other jobs.
The specifications for Job No. 55320-3425 included the 1982 Edition of the Standard Specifications for Road and Bridge Construction, Section 2-11 of which provides that a bidder may be disqualified on account of "Uncompleted work which in the judgment of the Department might hinder or prevent the prompt completion of additional work if awarded." Section 2-6 provides for rejection of qualified or conditional bids.
ASPHALT PRODUCTION
At all pertinent times, Baxter has had an asphalt plant in operation in Marianna, Florida (Plant No. 1). In the summer of 1982, Baxter erected a second asphalt plant in Liberty County. (Plant No. 2) After failing to obtain rezoning for a Gadsden County site, Baxter caused a third asphalt plant to be built in Franklin County. (Plant No. 3) By February of 1983, Baxter had obtained the requisite environmental permits for all three plants, although technical problems at Plant No. 3 were not overcome until later. Baxter can operate two, but not all three, of these plants simultaneously.
The capacity of the Marianna plant is such that all the asphalt necessary for all the jobs Baxter contracted with DOT could have been produced there in time for Baxter to perform the DOT contracts on time. Baxter had other uses for some of its asphalt, however. Among them was a $4,000,000 job in Alabama in 1982 which Baxter finished more than 100 days early. The fraction of Baxter's total production used on DOT jobs varied from .02 percent in March of 1982, when Baxter produced 10,769.9 tons, and 7.31 percent in June of 1983, when Baxter produced 16,109.26 tons, to 97.96 percent in August of 1982, when Baxter's total production was 37,846.72 tons and 92.88 percent in April of 1983, when Baxter produced 13,210.34 tons.
CAN DO
William D. Baxter, who owns petitioner, and Louis W. Seay, Jr., petitioner's vice-president since 1979, are capable and successful businessmen. According to J. Vern Williams, a C.P.A. familiar with Baxter's operations, Baxter is very well managed, with the possible exception of the accounting department. Mr. Baxter began with a pick-up truck and a hot pot, and his company now has some $10,644,000 in heavy equipment and transportation equipment (original cost). If anything, Baxter's equipment inventory is larger than necessary. Baxter could perform Job No. 55320-3425 without buying or leasing any heavy equipment other than a trencher. Bonding companies reportedly stand ready to write an additional $14,000,000 in bonds for Baxter's. Its working capital and its capitalization generally are adequate for what it has undertaken. Among its 150 employees are 15 who have been with Baxter for ten to fifteen years, including H. H. Barber, the general superintendent, and Timmy Jones and Spud Berry, each of whom has worked as an asphalt superintendent for ten years.
CHOSE NOT TO
Baxter's managers deliberately postponed work on DOT jobs closer to the sites chosen for Plants Nos. 2 and 3 (including the Gadsden County site originally chosen for Plant No. 3), in order to avoid the costs of transporting asphalt the longer distances from Plant No. 1, even when it was uncertain when Plant Nos. 2 and 3 would go into production. They also decided not to purchase asphalt from any other producer closer to the job sites, as a means of
performing timely under the DOT contracts mentioned in Secretary Pappas' letter of September 19, 1983.
Notwithstanding the number of DOT contracts Baxter undertook to perform and notwithstanding the extent to which work fell behind on many of them, Baxter never had more than a single asphalt crew at work at any one time on the whole group of jobs listed in Secretary Pappas' letter of September 19, 1983.
Since DOT indicated its intention to award Job No. 55320-3425 to Solomon, Baxter has made significant progress on the jobs listed in Secretary Pappas' letter. By January 18, 1984, it had completed four of them, all behind schedule, and was nearing completion on SR 65 in Gadsden County. Work on SR 65 in Franklin County was behind schedule and about one quarter completed.
Delays of this kind cause problems for DOT, whose employees are permanent and full-time. Months in advance, DOT schedules at least one employee on each job site, for at least part of each day for the duration of the job. These schedules are based on the road contractors' commitments under the contracts DOT lets and on the progress charts they file. Inefficient use of DOT staff time is a common result when road contractors fail to perform work as scheduled. DOT schedules supervisory and testing personnel for 500 to 600 jobs annually.
DOT WAFFLES
On January 25, 1984, DOT issued a corrected notice of intent to award Job No. 59010-3514 to Baxter. This $594,174.56 asphalt paving job in Wakulla County will require significantly greater quantities of asphalt than Job No. 55320-3425, at issue in these proceedings. None of the other bidders on Job No. 59010-3514 protested the award to Baxter within the time allowed.
ERRONEOUS CERTIFICATE
Until recently, Baxter's consistent practice has been to omit contracts with parties other than DOT on the certificate of current capacity filed with bids on DOT jobs. Mr. Seay testified he had not realized that contracts with parties other than DOT were required to be listed. On the form certificate filed on August 31, 1983, in conjunction with its bid on Job No. 55320-3425, Baxter failed to report about $500,000 in uncompleted work under private contracts, while reporting $5,478,000 in uncompleted work for DOT. At the time, Baxter had approximately $22,000,000 in unused capacity. Perhaps this is why Peter J. White, Director of DOT's Division of Construction testified that there was no material irregularity in the bid papers.
Petitioner submitted Baxter's proposed findings of fact and respondent filed a proposed recommended order which the intervenor adopted. Proposed findings have been adopted, in substance except to the extent they have been deemed unsupported by the weight of the evidence, immaterial, subordinate or cumulative.
CONCLUSIONS OF LAW
DOT proposes to disregard Baxter's bid on three grounds: (a) Baxter's uncompleted work might hinder the prompt completion of Job No. 55320-3425, within the meaning of Section 2-11 of the Standard Specifications; (b) Baxter is irresponsible, within the meaning of Section 337.11(3) Florida Statutes (1983);
and (c) Baxter's certificate of current responsibility was incomplete, in violation of Rule 14-22, Florida Administrative Code. But DOT's proposed action enjoys no presumption of validity. Capeletti Brothers v. State Department of General Services, 432 So.2d 1359, 1363 (Fla. 1st DCA 1983); Couch Construction
Co. v. Department of Transportation, 361 So.2d 172, 176 (Fla. 1st DCA 1978).
Section 2-11
Incorporated by reference among the specifications for Job No. 55320- 3425 is language giving DOT authority to disqualify a bidder whenever work the bidder has undertaken but not yet completed "might hinder or prevent the prompt completion of additional work if awarded." Section 2-11, Standard Specifications for Road and Bridge Construction (1982). The evidence in the present case showed that, at the time bids were received, Baxter was so far behind on so much other work, that performance of the contracts which was in arrears would inevitably have hindered and might very well have prevented the timely completion of Job No. 55320-3425. But it was also clear from the evidence that, by the time of hearing, Baxter's position had improved to the point that its unfulfilled commitments need not prevent or hinder timely completion of Job No. 55320-3425, if awarded.
The cases teach that formal administrative hearings are de novo and, specifically in the context of road contracts, that evidence of conditions at the time of hearing, rather than at some earlier point in the process, should be looked to.
[T]he agency's final order must defend
its decision on the basis of what it knows at the time the order is entered. Couch Construction Co. Inc., v. Department of
Transportation, 361 So.2d 172, 176 (Fla. 1978).
What DOT "knows at the time the order is entered," 361 So.2d at 176, must be read to mean conditions as they exist at the time of final hearing, when Section 120.57(1), Florida Statutes (1983), is invoked, as here. Final orders entered in the Couch Construction Co. case were rejected as "inadequate," because "Neither order t[ook] account of significant changes in circumstances since the Department's preliminary decision to reject all bids." 361 So.2d at 175. In the present case, significant changes in Baxter's situation since the September 19, 1983, letter of Secretary Pappas preclude disqualification of Baxter under Section 2-11 of the 1982 Standard Specifications for Road and Bridge Construction. The evidence at hearing demonstrated existing obligations Baxter had at that time would not likely hinder timely completion of Job No. 55320- 3425, if awarded.
Section 337.11(3), Florida Statutes (1983)
DOT has consistently asserted throughout these proceedings that Baxter is not a "responsible" bidder, within the meaning of Section 337.11(3), Florida Statutes (1983), which provides:
The department may, at its discretion, award the proposed work to the lowest responsible bidder, or it may reject all bids . . .
While its position has been consistent in these proceedings, the evidence showed that DOT recently awarded another contract to Baxter, action which is clearly
inconsistent with its stated position here. This inconsistency has probative, evidentiary value but does not set up any presumption that DOT acted correctly in making the award then, rather than now in contending that Baxter is not responsible within the meaning of the statute. What is "responsible" for present purposes no rule has spelled out, but the statute must be read with this judicial gloss:
Neither 337.16 nor the Supreme Court's White case has eliminated the traditional competitive bidding re
quirement that the contract be awarded to the lowest responsible bidder. That requirement is codified in Florida Statute 337.11. Delinquency in fact
in work progress is evidence to be considered on the question of whether White was a responsible bidder to whom the contract
could be awarded. The term "responsible" as used in bidding statutes such as 337.11, has been defined as follows:
"The term 'responsible' . . . is not limited in its meaning to financial resources and ability. What the public desires is a
well-constructed work, for which a law suit even against a responsible defendant is a poor substitute; and authorizations of this kind are held to invest public authorities with discretionary power to pass upon the honesty and integrity of the bidder necessary to a faithful per formance of the contract upon his skill and business judgment, his experience
and his facilities for carrying out the contract, his previous conduct under other contracts, and the quality of his previous work as well as to pass upon his pecuniary ability, and when that dis
cretion is properly exercised, the courts will not interfere."
See also, Kelling v. Edwards, 116 Minn. 484, 134 N.W. 221 (1912)(one contractor was in default in time upon other ditch contracts with the county," other con tractor "had duly, expeditiously and satisfactorily completed a former ditch
contract with the county."); Schulte v. Salt Lake City, 79 Utah 292, 10 P.2d 625 (1932)
(successful bidder had previously performed twenty-nine contracts for Salt Lake City with very satisfactory results); Wilson v. City of New Castle, 301 Pa. 358, 152 A.
102 (1930)(low bidder was "slow in its completion" of prior jobs). In Culpepper v.
Moore, 40 So.2d 366 (Fla. 1949) the effect of demands of other jobs already
undertaken by the bidder was held on proper consideration in determining
the bidder's ability to promptly perform the new job being bid, particularly since time was a material factor.
Couch Construction Co. v. Department of Transportation, 361 So.2d 184, 187 (Fla. 1st DCA 1978)(footnote omitted)
Baxter showed it has the "financial resources and ability" to perform timely on Job No. 55320-3425. The question is whether it can be counted on to finish on time if something else turns up. Baxter's management has showed itself willing to maximize profits even when doing so meant falling behind on a half dozen state contracts. Baxter had the "financial resources and ability" to perform on each of the contracts on which it fell behind, just as it has the resources to perform the job it now seeks. But it chose to delay beginning work under those contracts, sometimes until after the agreed completion dates, in order to keep costs down. The manner in which Baxter acquitted itself on those jobs, its "previous conduct under other contracts, and the quality [timeliness] of [its] previous work," 361 So.2d at 187, are sufficient evidence that it is not a responsible bidder for Job No. 55320-3425, within the meaning of Section 337.11(3), Florida Statutes (1983).
Rule 14-22
The clear language of Rule 14-22.12(1)(a), Florida Administrative Code requires that any error or omission on a certificate of current capacity be "willfully made." There was no proof that the information omitted in the present case was either material or known by anybody in Baxter's employ to be required to be supplied.
That DOT award Job No. 55320-3425 to Solomon.
DONE and ENTERED this 30th day of March, 1984, in Tallahassee, Florida.
ROBERT T. BENTON II
Filed with the Clerk of the Division of Administrative Hearings this 30th day of March, 1984.
1/ Job Nos. 50030-3522 and 50050-3506 are listed together as Job No. 50030-3522 on DOT's Exhibit No. 1. See Baxter's Exhibit No. 1.
Frank A. Baker, Esquire Roberts and Baker
Robert I. Scanlan, Esquire Department of Transportation
562 Haydon Burns Bldg. 605 Suwannee Street
Jack A. Harnett, Esquire Post Office Drawer 391 Quincy, Florida 32351
Paul A. Pappas, Secretary Department of Transportation Haydon Burns Building Tallahassee, Florida 32301
