STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RUSSELL, INC., )

)

Petitioner, )

)

1. )

   ) CASE NO. 86-3548B1D DEPARTMENT OF TRANSPORTATION, )

   )

   Respondent, )

   and )

   )

   CAPELETTI BROTHERS, INC., )

   )

   Intervenor. )

   )

   
   

   RECOMMENDED ORDER

   
   

   Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on September 22, 1986, in Tallahassee, Florida. The issue for determination in this proceeding is whether Capeletti Brothers, Inc., submitted the lowest responsible bid on State Job Number 97870-3336.

   
   

   APPEARANCES

   
   

   For Petitioner: Martha J. Edenfield, Esquire

   Oertel & Hoffman, P.A. Post Office Box 6507

   Tallahassee, Florida 32314-6507

   
   

   For Respondent: Larry D. Scott, Esquire

   Haydon Burns Building, Mail Station 58 605 Suwannee Street

   Tallahassee, Florida 32301

   
   

   For Intervenor: F. Alan Cummings, Esquire

   Cummings & Lawrence, P.A. Post Office Box 589 Tallahassee, Florida 32302

   
   

   INTRODUCTION

   
   

   In this proceeding, petitioner takes the position that it should be awarded the state contract for new highway construction work because the lower bid submitted by Capeletti Brothers, Inc., was nonresponsive for failure to meet the contract goal for use of disadvantaged business enterprises. In support of this position, petitioner presented the testimony of Ronald Ernest Akins, its vice- president; Thaddeus Fortune, accepted as an expert witness in the administration of the Department of Transportation's minority programs; and, by deposition,

   James George, president of Ivory Modernized Services, Inc., Petitioner's Exhibits 1 through 3 and Joint Exhibits 1 through 3 were received into evidence.

   
   

   The respondent, Department of Transportation, presented the testimony of John Ted Barefield, Chief of the Bureau of Contracts Administration. The Intervenor Capeletti Brothers, Inc., presented the testimony of its president, Joe Capeletti.

   
   

   Subsequent to the hearing, each party submitted proposed findings of fact and proposed conclusions of law. 1/ The proposed findings have been accepted and/or incorporated in this Recommended order, except as noted in the Appendix hereto.

   
   

   FINDINGS OF FACT

   
   

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

      
      

   2. The Department of Transportation (D0T) advertised for bids on State Project Number 97879-3336 in July of 1986. The project involves new roadway construction with specified materials, drainage installation, curbs, gutters and sidewalks adjacent to the Orange Bowl in Dade County. The D0T set a disadvantaged business enterprise (DBE) participation goal for this project of fifteen percent. In order to comply with this goal, a bidder must state its intention to subcontract with a D0T certified DBE an amount of work equal to or greater than fifteen percent of the total dollar value of its bid.

      
      

   3. The D0T opened the nine bids received for this project on July 30, 1986. The intervenor Capeletti Brothers, Inc. (Capeletti), submitted the apparent low bid in the amount of $2,044,000.18, and the petitioner Russell, Inc. (Russell), submitted the apparent second low bid of $2,047,503.00 The remaining bids ranged between $2,124,527.32 and $2,851,657.26.

      
      

   4. Bidders indicate compliance with the minority participation goals established for a project through the submittal of "DBE/WBE Utilization Form No. 1," which is submitted with the bid. In this case, Capeletti provided information on Form No. 1 that it would subcontract with Ivory Modernized Services to do "trucking" and "aggregates" at a dollar amount of $307,622.00, or

      15.05 percent of the total contract amount. Russell indicated on Form No. 1 that it would subcontract with Community Asphalt Corporation to do "asphalt paving" at a dollar amount of $352,151.00, or 17 percent of the total contract amount.

      
      

   5. During the bid letting process, it is the practice of the DOT to conduct a facial review of the "DBE/WBE Utilization Form No. 1" submitted with the bid to determine whether the named subcontractor is a certified DBE or WBE and whether the participation goal set for that project has been met. Prior to awarding the contract, the DOT does not make a separate investigation to determine whether a listed DBE subcontractor is actually capable of performing the work for which the bidder has indicated. Any such investigation is made at or after the time a contractor actually submits to the DOT a request for authorization to sublet, which occurs after the DOT has awarded the contract to the bidder. The DOT considers the successful bidder to be bound to pay a DBE at least the amount listed on Form No. 1 submitted with its bid. If, for some reason, the DBE listed cannot perform the work for which it has subcontracted to perform, the DOT will require the prime contractor to either pay that amount to the listed DBE or subcontract with another DBE for that work.

   6. Ivory Modernized Services, Inc. (Ivory), is a DOT certified DBE. In its application to the DOT for certification, it listed "trucking (hauling of aggregates)" as the nature of its business. The DOT requests such information on the application because it publishes a directory of certified DBEs for the use of bidders on state contracts.

      
      

   7. Prior to submitting its bid, Capeletti and Ivory agreed that if Capeletti were the successful low bidder on this project, Ivory would furnish and deliver aggregates to the job site. It was agreed that the responsibility for obtaining and delivering the aggregates to the project site would rest with Ivory. The sum of $307,622.00 was derived by estimating the quantities of the various types of aggregates needed for the project, the material cost per ton, the hauling cost per ton and the amount and charge for on-site hauling.

      
      

   8. In the past, Capeletti has directly purchased rock from mining pits in the area. While Capeletti has never before purchased fill from Ivory, Ivory has performed one D0T job where it was responsible for both the buying and hauling of aggregates. Ivory does not own any fill land, pits or fill material, does not do any active pit excavation and does not plan to stockpile aggregate materials for this project. Ivory intends to negotiate with the rock pit owner for the required amounts, types and purchase prices of the aggregates needed, pick up those aggregates from the pits and transport them to the job site. The precise methods of payment for the aggregates has not yet been determined.

      
      

   9. In order to avoid any potential markups in the price of limerock and aggregates, Russell deals directly with the rock pits in purchasing its materials. Truckers are hired separately to deliver the materials to the job site, and they do not purchase the fill. In its bid, Russell did not list a DBE trucker or hauler because the fifteen percent participation goal could not be reached with amounts expended for trucking alone.

      
      

   10. It has been the past practice and policy of the DOT to allow all material costs to be included in meeting the DBE participation goal where the DBE subcontractor assumed the actual and contractual responsibility for the provision of the materials and supplies. For example, where a DBE grasser or concrete finisher also assumes responsibility for purchasing and obtaining the sod or concrete and responsibility for supplying those materials to the project site, the costs of the sod or concrete are included in meeting the DBE participation goal. The prime purpose of limiting payments which can be included in the case of "suppliers" who perform some commercially useful function is to prevent mere brokerage or pass-through services as qualifying for full participation in meeting DBE goals. "Commercially useful functions" performed by a "supplier" can include the stockpiling and transporting of materials.

       
       

       CONCLUSIONS OF LAW

       
       

   11. It is the petitioner's contention in this proceeding that, in accordance with DOT rules and the job specifications for this project, only 20 percent of Capeletti's claimed expenditures to Ivory for materials may be counted toward fulfillment of the 15 percent DBE goal. Since Capeletti included the full costs of materials, as well as hauling, and still only computed 15.05 percent DBE participation, it is argued that Capeletti did not properly meet the DBE goal and thus its bid was not responsive and must be rejected.

   12. The pertinent portions of the DOT's rules and the subject job specifications can be found, respectively, in Chapter 14-78.03(2)(b)7 a through g, Florida Administrative Code, and Section 4-7.3.2(1) through (5)(b) of the Special Provisions (page 56). The two sets of provisions are almost identical and only the rules will be fully quoted herein.

       
       

       "7. The Department shall count DBE and WBE participation toward meeting DBE and WBE goals as follows:

       1. The total dollar value of the contract to be awarded to the certified DBE or WBE may be counted toward the applicable DBE or WBE goal.

       2. A portion of the total dollar value of a contract with a joint venture eligible

          under this rule chapter equal to the percentage of the owner-ship and control of the DBE or

          WBE partner in the joint venture may be counted toward the DBE or WBE goal.

       3. Only expenditures to DBEs and WBEs that perform a commercially useful function

          in the work of a contract may be counted toward the DBE and WBE goal. A DBE or WBE is con- sidered to perform a commercially useful function when it actually performs and manages at least

          51 percent of the work subcontracted to it. To determine whether a DBE or WBE is performing a commercially useful function, the Department shall evaluate all relevant factors such as

          the amount of work subcontracted and industry practices.

       4. Consistent with normal industry practices, a DBE or WBE may enter into subcontracts. If a DBE or WBE subordinates 50 percent or more of the work of the subcontract, the DBE or WBE shall be presumed not to be performing a commercially useful function.

          This presumption is rebuttable.

       5. Expenditures for materials and supplies obtained from DBE or WBE suppliers and manufacturers may be counted toward the DBE or WBE goal, provided that the DBEs or WBEs

          assume the actual and contractual responsibility for the provision of the materials and supplies.

       6. Expenditures to a DBE or WBE manufacturer (i.e., a supplier that produces goods from

          raw materials or substantially alters them before resale) may be counted toward the DBE or WBE goal.

       7. Twenty percent of the contractor's expenditures to DBE or WBE suppliers that are not manufacturers, may be counted toward the DBE or WBE goal, provided that the DBE or WBE supplier performs a commercially useful function in the supply process."

   13. The job specifications read a little differently. After subsection

       1. cited above from the rules, the special provisions of the contract adds the following sentence:

          
          

          "5 . . . .The percentage allowed toward the DBE or WBE goal is as follows:

          1. All expenditures to a DBE or WBE manufacturer (i.e., a supplier that produces goods from raw materials or substantially alters them before resale) may be counted toward the DBE or WBE goal.

          2. Only twenty percent of the contractor's expenditures to DBE or WBE suppliers that are not manufacturers may be counted toward the DBE or WBE goal, provided that the DBE or

       WBE supplier performs a commercially useful function in the supply process."

       
       

   14. Given the above-quoted language, the undersigned can appreciate the petitioner's concern regarding the appropriate amount of expenditures to Ivory which Capeletti may properly include in satisfying the established 15 percent DBE participation goal for this contract. However, the DOT's interpretation of its own regulations and job specifications are entitled to great deference, especially when such an interpretation is permissible, is not in conflict with legislative intent and is supported by the reality of the bid letting process. See Tri-State Systems, Inc. v. Department of Transportation, 491 So.2d 1192 (Fla. 1st DCA, 1986).

       
       

   15. It is the policy of the DOT to determine the regularity or responsiveness of a bid from an examination of the bidding documents alone. Obviously, the DOT can not conduct a full-scale investigation of every bid item prior to announcing its intent to award contracts to particular bidders. Likewise, DOT does not and could not conduct a separate investigation during the bid letting process to determine whether a listed certified DBE subcontractor is capable of performing certain work or will indeed perform over 50 percent of the work for which he will later subcontract. If problems of DBE performance develop, the DOT resolves them at that time by requiring the prime contractor to comply with the information provided earlier on its "DBE/WBE Utilization Form No. 1."

       
       

   16. Petitioner contends that the "facial validity of the bid" interpretation renders the 20 percent rule applying to "suppliers" a nullity. This contention is without persuasion. If it can be determined from the face of Form No. 1 that the listed DBE will do nothing more than "supply" materials for the contractor, the DOT could certainly apply the 20 percent rule to ascertain whether the contract goal has been met. Here, however, the face of the instrument demonstrates that Ivory will be utilized by Capeletti for "trucking; aggregates" and that Capeletti will pay Ivory at least $307,622.00. Further, the evidence demonstrates that Ivory will have the actual responsibility for obtaining and delivering the aggregates to the project site. Given that responsibility, the DOT's determination that Capeletti's bid met the DBE contract goal was not arbitrary, capricious or erroneous. The evidence establishes that Ivory will not function as the mere broker, middleman or pass- through which the "20 percent supplier rule" was designed to avoid.

       
       

   17. The fact that Russell determined to deal directly with aggregate suppliers, and separately contract with truckers to transport the materials does

not render Capeletti's bid nonresponsive or its decision to utilize a DBE for that purpose fraudulent. Petitioner can not collaterally attack a DBE's prospective ability to perform a contract with the successful bidder in a bid protest proceeding unless such inability is apparent from the bid itself. No competitive disadvantage to petitioner has been demonstrated, and no clear violation of the Department's rules or job specifications has been shown.

RECOMMENDED ORDER

Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the bid protest filed by Russell, Inc., be DISMISSED, and that the contract for State Job No. 97870-3336 be awarded to Capeletti Brothers, Inc., as the lowest responsible bidder.

DONE and ORDERED this 23rd day of October 1986, in Tallahassee, Florida.

DIANE D. TREMOR

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 23rd day of October 1986.

ENDNOTE

1/ For the ruling on the intervenor's motion for extension of time to file proposed findings of fact and conclusions of law, please see the Appendix.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-3548BID

At the conclusion of the final hearing, it was agreed that the hearing would be left open for the filing of the deposition of James George on September 26, 1986, and that proposed recommended orders would be simultaneously filed on "the following Wednesday." The petitioner and the respondent timely filed their proposals on October 1, 1986. On October 6, 1986, counsel for the intervenor moved for an extension of time for filing on the ground that he had inadvertently marked his calendar October 8, 1986, in lieu of October 1, 1986.

It was represented that he did not read the proposals submitted by the petitioner. The petitioner filed a response objecting to the extension of time, claiming prejudice by the fact that the intervenor would be afforded more time to review the transcripts and the record. The intervenor's proposals were filed at 10:56 a.m. on October 7, 1986.

Since the Findings of Fact in this Recommended Order are based upon the entire record of this proceeding and not upon the parties' proposed factual findings, and since the undersigned did not even receive the transcript of the final hearing until October 15, 1986, no meaningful reason exists for not

granting the motion for extension of time and not considering the intervenor's proposed recommended order.

Accordingly, the proposed findings of fact submitted by all parties have been carefully considered and are accepted and/or incorporated in this Recommended Order, except as noted below:

Petitioner

25. Rejected as irrelevant to the issues in dispute.

29-31. Rejected as irrelevant to the issues in dispute.

37-39. Rejected as not supported by the entirety of Mr. George's testimony.

43. Rejected. See Finding of Fact 6.

53. Rejected as legal conclusion as opposed to factual finding.

60. Partially accepted as applying to only "suppliers."

1. Rejected as a legal conclusion as opposed to a factual finding.

2. Rejected as irrelevant to the facts of this proceeding.

1. Rejected as irrelevant.

2. Rejected as a legal conclusion as opposed to a factual finding.

69-70. Rejected as immaterial. Having fulfilled the DBE goal as indicated on Form No. 1, there was no reason to file a "good faith efforts" package with the bid.

Respondent

4. Rejected; not supported by the evidence.

Intervenor

7. Last sentence partially rejected. See Finding of Fact 4.

COPIES FURNISHED:

Martha J. Edenfield, Esquire OERTEL & HOFFMAN

Post Office Box 6507 Tallahassee, Florida 32314-6507

Larry Scott, Esquire 605 Suwannee Street

Tallahassee, Florida 32301

Alan Cummings, Esquire 1020 East Lafayette Street Tallahassee, Florida 32301

Thomas E. Drawdy Secretary

Department of Transportation Haydon Burns Building Tallahassee, Florida 32301

Docket for Case No: 86-003548BID

Orders for Case No: 86-003548BID