STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CAPELETTI BROTHERS, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 85-3340RX

)

STATE OF FLORIDA, ) DEPARTMENT OF TRANSPORTATION, )

)

Respondent. )

)

FINAL ORDER

This matter came on for hearing in Tallahassee, Florida, before Robert T. Benton, II, Hearing Officer of the Division of Administrative Hearings on November 1, 1985. The parties waived the statutory deadline for entry of a final order. Capeletti Brothers, Inc. filed its proposed order on December 6, 1985, and the Department of Transportation also filed its. Proposed final order (styled proposed recommended order 1/) on December 6, 1985. The parties arc represented by counsel:

For Petitioner: F. Alan Cummings, Esquire and

Harry R. Detwiler, Jr., Esquire Holland and Knight

Post Office Drawer 810 Tallahassee, Florida 32302

For Respondent: Larry D. Scott, Esquire

Haydon Burns Building 605 Suwannee Street

Tallahassee, Florida 32301-8064

By petition filed September 27, 1985, Capeletti Brothers, Inc., (Capeletti) calls into question the validity of Rule 14-78.03, Florida Administrative Code, insofar as that provision relates to women's business enterprises only. The broad question whether Rule 14- 78.03, Florida Administrative Code, insofar as it relates

to women's business enterprises, is an invalid exercise of delegated legislative authority was narrowed by the parties to the following

ISSUES.

Whether Rule 14-78.03, Florida Administrative Code, implements Sections 339.05, Florida Statutes (1984 Supp.) or 339.0805(1), Florida Statutes (1983) or 49 CFR Part 23, Subpart C, Section 23.45(g)(4), or any combination thereof, as regards women's business enterprises? Whether Section 339.05, Florida Statutes (1984 Supp.) may even be looked to, since it is not listed in the Florida Administrative Code as a law implemented by the rule?

FINDINGS OF FACT

1. After the Department of Transportation (DOT) proposed to reject its bid on State Project, Job No. 97860- 3319 as unresponsive, for failure to meet a women's business enterprise (WBE) goal, and failure to document good faith efforts to reach the goal, Capeletti initiated substantial interest proceedings, Capeletti Brothers, Inc. and State Paving Corporation vs. Department of Transportation and John Mahoney Construction Company, Inc., No. 85-3003, contending that it had made good faith efforts to meet the goal and that it had adequately documented the efforts; that the second low bidder had not met the goals; that DOT treated the goals as quotas; and that the DOT committees who evaluated the bids met in violation of the Sunshine Law. At the hearing in the present case, the parties stipulated that Capeletti's "bid was rejected because of noncompliance with Rule 14-78.03 as it relates to women's business enterprises and for noncompliance with the bid specifications which incorporated those provisions.

   
   

2. The rule provisions under challenge read, in pertinent part:

   
   

   14-78.03 General Responsibilities.

   1. In furtherance of the purpose of this rule chapter, the Department shall establish overall DBE and WBE goals for its entire DBE one WBE program. In setting the overall goals the Department shall consider the following factors:

      1. the number and types of contracts to be awarded by the Department;

      2. the number, capacity, and capabilities of certified DBEs and VBEs likely to be available to compete for contracts let by the

         Department; and

      3. the past experience of the Department in meeting its goals and the results and reasons therefore.

   2. To implement its DBE and WBE goal program the Department may:

. . .

(b) establish contract goals on each contract with subcontracting opportunities for certified DBEs and WBEs

1. The Department shall establish separate contract goals for firms owned and controlled by socially and economically disadvantaged individuals and for firms owned and controlled by women.

2. In setting contract goals, the Department shall consider the following factors:

   1. the type of work required by the contract to be let;

   2. the subcontracting opportunities in the contract to be let;

   3. the estimated total dollar amount of the contract to be let; and

   4. the number, capacity and capabilities of certified DBEs and WBEs.

3. For contracts with an estimated total dollar amount of $1,000,000 or less, the contract goals shall not exceed 50 percent of the identified potential for DBE and WBE participation. For contracts with an estimated total dollar amount of $1,000,000, the contract goals shall not exceed 75 percent of the identified potential for DBE and WBE participation.

4. For all contracts for which DBE and WBE contract goals have been established, each bidder shall meet or exceed or demonstrate that it could not meet, despite its good faith efforts, the contract goals set by the Department. The DBE and WBE participation information shall be submitted with the contractor's bid proposal. Award of the contract shall be conditioned upon submission of the DBE and WBE participation information with the bid proposal and upon satisfaction of the contract goals or, if the goals are not met, upon demonstrating that good faith efforts were made to meet the goals. Failure to satisfy these requirements shall result in a contractor's bid being deemed nonresponsive and the bid being rejected.

DOT proposes to deem Capeletti's bid nonresponsive forits conceded failure to meet a WBE goal and for the alleged failure to document good faith efforts to meet the goal.

Citation Deleted

1. In the course of the adoption of amended Rule 14- 78.03, Florida Administrative Code, Bjarne B. Andersen, Jr., an attorney on the staff of the Joint Administrative Procedures Committee, wrote Ms. Margaret-Ray Kemper, DOT's Deputy General Counsel, on January 22, 1985, with reference to amended Rule 14-78.03, stating:

   
   

   Sections 339.05 and 339.081, F.S., contain no specific rulemaking authority . . . while we do agree that the rule appears in part to implement s.339.05, F.S., as amended by Ch.

   84-309, L.O.F.; we do not believe this "assent to Federal aid" is specific rule authority.

   It is at best implied authority.

   
   

   The day before a DOT employee (who, counsel represented at hearing, is not a lawyer) had written Ms. Elizabeth Cloud, Bureau Chief, Bureau of Administrative Code and Laws, Department of State, as follows:

   
   

   Based upon a telephone conversation with Mr. Bjarne B. Andersen, Jr. of the Legislative Joint Administrative Procedures Committee and further legal review by our office, we request that the . . . "law implemented" be amended to . . . [delete reference to Section 339.05, Florida Statutes (1984 Supp.)]

   
   

   In an internal memorandum dated March 8, 1985, DOT's Deputy General Counsel set out DOT's legal position in these words:

   
   

   Subpart A of 49 CFR, Part 23, defines minority persons . . . The definition of minority does not include women. However, women are encompassed within the definition of minority business enterprise which is defined as a small business concern owned and controlled by one or more minorities or women. 49 CFR, 23.5.

   49 CFR, Part 23, Subpart C, sets forth general requirements for all recipients of federal funds. Among those requirements is a policy statement to be included in every financial assistance agreement affirming a commitment to MBE/DBE participation in contracts financed in whole or in part with federal funds. Also required is a MBE/DBE affirmative action program which must be incorporated by reference into financial assistance agreements. The program is made "a legal obligation and failure to carry out its terms shall be treated as a violation of this financial assistance agreement." 49 CFR, S23.43(b).

   
   

   The goal program is one of the required WBE/DBE program components. 49 CFR, S23.45(g). . . . However, although women are included within the definition of MBEs, 49 CFR, Part 23, Subpart C, requires recipients to establish separate overall and contract goals for firms owned and controlled by minorities and firms owned and controlled by women. 49 CFR, 23.45(g)(4).

   
   

   The memorandum relies exclusively on 49 CFR, Part 23, Subpart C, 23.45(g)(4) as authority for Florida's WBE program, citing no federal or state statutes as authority.

   
   

   CONCLUSIONS OF LAW

   
   

2. Under the heading "Law Implemented" at the end of Rule 14-78.03, Florida Administrative Code, the only statutory reference is "339.0805 F.S." The cited statute requires DOT to spend

   not less thank 10 percent of the amounts expended with small business concerns owned and controlled by socially and economically disadvantaged individuals as defined by s.8(d) of the Small Business Act (15 U.S.C.

   s. 637(d)) and relevant subcontracting regulations. Section 339.0805(1), Florida Statutes (1984 Supp.)

   
   

   Rule 14-78.03, Florida Administrative Code, undoubtedly implements this statute insofar as it deals with DBEs

   performing work on projects financed with federal money but, as the parties have stipulated, "women involved in women's business enterprises certified by respondent do not fall within the category of "socially and economically disadvantaged individuals as defined by s.8(d) of the Small Business Act (15 U.S.C. s.637(d)) and relevant subcontracting regulations.'"

   
   

   Statute Not Cited

   
   

3. Section 120.54(7), Florida Statutes (1984 Supp.) requires, for each rule, explicit "reference to the section or subsection of the Florida Statutes or the Laws of Florida being implemented, interpreted, or made specific," in order to make it perfectly clear wherefrom a rule gains its power." Florida Power and Light Company v. Florida Public Service Commission, 471 So.2d 526, 528 (Fla. 1983)(reh. dism'd 1985).

   
   

4. Capeletti contends that a rule should be declared an invalid exercise of delegated legislative authority to the extent it fails to implement the statute(s) listed in the Florida Administrative Code as the "Law Implemented," even when the rule implements another statute which is not listed. Conceding that an inadvertent omission might call for different treatment, Capeletti points to the fact that DOT first proposed, then withdrew Section 339.05 as a provision to be listed as "Law Implemented" by Rule 14- 78.03, Florida Administrative Code.

   
   

5. For the first time on rehearing, the agency involved in Shell Oil Company v. Department of Revenue, 461 So.2d 959 (Fla. 1st DCA 1984) argued that an administrative rule crucial to the case should be read as implementing a particular statute, viz., Section 220.42(1). The court "f[ou]nd that the rule itself contains no reference to Section 220.42(1)," at 963, and reiterated the proposition that "each rule is required to contain a reference to `the section or subsection of the Florida Statutes or Laws of Florida being implemented, interpreted, or made specific.'" at 963. In denying the agency's petition for rehearing, on the ground "that authority . . . not cited and issues not raised in the brief or on oral argument cannot be raised for the first time on motion for rehearing," at 963, the Shell Oil court observed:

   
   

   We may speculate that had this statute been

   urged in the court below, in support of the department's interpretation of its rule, the trial judge's decision might well have been favorable to the department on this issue.

   At 962.

   
   

   This language suggests that the absence of a statutory reference in the published rule does not require invalidation of the rule, even if the rule implements the unlisted statute, and not the statute(s) that are listed.

   
   

6. In any event, the failure to name the statute a rule implements should ordinarily be deemed harmless error, in the same way erroneous or incomplete economic impact statements do not render administrative rules invalid unless the deficiencies are material and impair either the fairness of rulemaking proceedings or the correctness of the rule. See e.g., Humhosco, Inc. d/b/a Humana Hospital Mandarin v. Department of Health and Rehabilitative Services, No. AZ-403 (Fla. 1st DCA; September 25, 1985); State Department of Insurance v. Insurance Service Office,

   434 So.2d 908 (Fla. 1st DCA 1983); Plantation Resident's Association v. School Board of Broward County, 424 So.2d 879 (Fla. 1st DCA 1983); Division of Worker's Compensation

   v. McKee, 413 So.2d 805 (Fla. 1st DCA 1982). In the present case, moreover, the notice of intent to amend Rule 14-78.03, Florida Administrative Code, did contain a reference to Section 339.05, Florida Statutes.

   
   

7. Eschewal of the per se invalidity approach leaves intact important incentives for agencies to list statutory authority carefully and comprehensively in rule adoption proceedings. Adequate statutory references may obviate an agency's having to defend rule challenges predicated on misapprehension omissions have induced. Rulemakers should also anticipate the chariness with which claims that omitted statutes confer rulemaking authority will inevitably be greeted.

   
   

   Federal Law Reference

   
   

8. The state statute on which DOT relies as substantive authority for its WBE program does not explicitly mention women. It is a general, massive grant of authority to DOT to "do all things necessary to cooperate with the United States government in the construction of roads under . . . [certain] acts of

   Congress . . . " Section 339.05, Florida Statutes (1984 Supp.) In its entirety, the state law reads:

   
   

   The state hereby assents to the provisions of the Act of Congress approved July 11, 1916, known as the Federal Aid Law, which Act of Congress is entitled "An act to provide that the United States shall aid the states in the construction of rural post roads and for other purposes," and assents to all subsequent amendments to such Act of Congress and any other act heretofore passed or that may be hereafter passed providing for federal aid to the states for the construction of highways and other related projects. The department is authorized to make application for the advancement of federal funds and to make all contracts and do all things necessary to cooperate with the United States Government in the construction of roads under the provisions of such Acts of Congress and all amendments thereto.

   
   

   As reflected by the internal DOT memorandum in evidence, stipulated to by the parties at the prehearing conference, and reiterated by DOT in its proposed order, the federal law (incorporated in the state law by reference), on which DOT relies as authority for the rule provisions under challenge here, is found at 49 C.F.R. S23.45(g)(4), which provides:

   
   

   Recipients shall set separate overall and contract goals for firms owned and controlled by minorities and firms owned and controlled by women. 45 Fed. Reg. 21187, Respondent's Exhibit No. 4.

   
   

   This provision should be construed in pari materia with 49

   C.F.R. 23.43(a)(1), which states:

   
   

   It is the policy of the Department of Transportation that minority business enterprises as defined in 49 CFR part 23 shall have the maximum opportunity to participate in the performance of contracts financed in whole or in part with federal funds . . . 45 Fed. Reg. 21186, Respondent's

   Exhibit No. 4 (emphasis supplied).

   
   

   Capeletti contends that these federal regulations cannot support Rule 14-78.03, Florida Administrative Code, insofar as it mandates WBE goals for projects on which no federal money is used, because (a) the regulations are limited to projects "financed in whole or in part with Federal funds,"

   (b) the regulations derive not from an Act of Congress, but from an Executive Order, and (c) because no state statute can, as a matter of Florida constitutional law, incorporate federal law prospectively. This last argument fails to take into account the fact that the most recent version of Section 339.05 was enacted after the pertinent federal regulations were adopted. Ch. 84-309 Laws of Florida (1984). A hearing officer cannot, in any event, invalidate a rule in Section 120.56 proceedings on constitutional grounds, which Capeletti concedes.

   
   

9. Capeletti argues that 49 C.F.R. 23.45(g)(4) was adopted to implement a federal executive order rather than a federal statute. In its proposed order, DOT concedes that the "WBE program was instituted by Executive Order 12138, 44 F.R. 29637 (May 18, 1979)," while arguing that an executive order should be treated in the same way as an Act of Congress, citing Contractor's Association of Eastern Pa.

v. Secretary of Labor, 442 F. 2d 159 (3rd Cir. 1971) ccrt.den. 404 U.S. 854 (1971). The only federal statute cited by DOT as authority for the rule is 23 U.S.C. S324, which forbids discrimination on the basis of sex and authorizes, with respect to women, "rules similar to those already established, with respect to racial and other discrimination, under Title VI of the Civil Rights Act of 1964." 23 U.S.C. S324. In light of the limited scope of the federal regulations actually adopted, it is unnecessary to decide whether 23 U.S.C. S324 might authorize a federal regulation requiring state agencies receiving federal moneys to establish WBE goals even on projects financed exclusively from state revenues see M. C. West, Inc. v. Lewis, 522 F Supp. 338 (M.D. Tenn. 1981). The regulations in fact in place do not purport to require recipients of federal funds to set WBE goals for projects that depend on no federal money. 49 C.F.R. 23.43(a)(1).

It is, accordingly, ORDERED:

To the extent Rule 14-78.03, Florida Administrative Code, purports to authorize respondent to establish and enforce WBE goals on contracts under which no federal moneys are expended, Rule 14-78.03, Florida Administrative Code, is an invalid exercise of delegated legislative authority.

DONE and ENTERED this 31st day of December, 1985, in Tallahassee, Florida.

ROBERT T. BENT0N, II

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 31st day of December, 1985.

ENDNOTE

1/ Respondent, but not petitioner, submitted proposed findings fact. These are addressed in the attached appendix.

APPENDlX TO FINAL ORDER In Case No. 85-3340RX

Each of respondent's proposed findings of fact was supported by the weight of the evidence, and each has been adopted, in substance, except for paragraph three which is deemed immaterial.

COPIES FURNISHED:

Thomas E. Drawdy, Secretary Department of Transportation Haydon Burns Building

605 Suwannee Street

Tallahassee, Florida 32301-8064

A. J. Spalla, Esquire Larry D. Scott, Esquire

562 Haydon Burns Buildiig 605 Suwannee Street

Tallahassee, Florida 32301-8064

F. Alan Cummings, Esquire Harry R. Detwiler, Jr., Esquire Holland and Knight

Post Office Drawer 810 Tallahassee, Florida 32302

Larry D. Scott, Esquire Haydon Burns Building Tallahassee, Florida 32301

Docket for Case No: 85-003340RX

Orders for Case No: 85-003340RX