STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
MCI TELECOMMUNICATIONS )
CORPORATION, )
)
Petitioner, )
)
vs. )
) STATE OF FLORIDA DEPARTMENT )
OF GENERAL SERVICES, ) CASE NO. 87-5338BID
)
Respondent, )
and )
) MICROTEL, INC., and UNITED ) STATES TRANSMISSION SYSTEMS,)
)
Intervenors. )
)
RECOMMENDED ORDER
Pursuant to notice, a formal hearing was conducted on December 10, 11, and 12, 1987, at Tallahassee, Florida, before Michael M. Parrish, a duly designated Hearing Officer of the Division of Administrative Hearings. The parties were represented at the hearing as follows:
For Petitioner: Carolyn S. Raepple, Esquire
Richard D. Melson, Esquire HOPPING BOYD GREEN & SAMS
Post Office Box 6526 Tallahassee, Florida 32314
For Respondent: Susan B. Kirkland, Esquire
Sandra D. Allen, Esquire Office of General Counsel Department of General Services Room 452, Larson Building Tallahassee, Florida 32399
For Intervenors: Patrick K. Wiggins, Esquire
Wings Slocum Benton, Esquire RANSON & WIGGINS
325 West Park Avenue Post Office Drawer 1657
Tallahassee, Florida 32302 ISSUES AND INTRODUCTION
This is a proceeding brought by MCI Telecommunications Corporation (hereinafter "MCI") disputing the negotiation process, and contract awards made, by the Department of General Services (hereinafter "DGS") in the procurement of
intermachine trunks (IMTs), intrastate WATS, and interstate WATS for the State of Florida. The disputed legal issues are described as follows by the parties in their Prehearing Stipulation:
Whether IMTs are a commodity or a contractual service
Whether intrastate WATS and interstate WATS are commodities or contractual services.
Whether the negotiations for IMTs, intrastate WATS and interstate WATS were authorized by law.
Whether IMTs, intrastate WATS and interstate WATS must be procured following the procedures set forth in Chapter 13C-2, Florida Administrative Code.
If the negotiations were authorized by law, whether the methodology used to conduct those negotiations and determine which carriers should be awarded contracts was arbitrary and capricious.
Whether the MCI protest was filed in a timely manner pursuant to the requirements of Section 120.53(5), Florida Statutes, and if not, whether this failure constitutes a waiver by MCI of any further proceedings under Chapter 120.
Whether MCI, having fully and without protest or complaint, participated in the evaluation and negotiation process, and, having rejected an offered contract, can now protest the process and award, or is estopped from such a protest or is guilty of laches.
Whether MCI, having fully and without protest or complaint, participated in the evaluation and negotiation process, and, having rejected an offered contract, now has standing to object to the process and the award.
The two companies to whom contracts were awarded intervened in the proceeding. The Intervenors are Microtel, Inc., and United State Transmission Services (hereinafter "Microtel" and "USTS").
The final hearing in this case was conducted at the same time as the final hearing in a related case in which MCI is challenging the validity of Rule 13A- 1.001(1)(c) and (d), Florida Administrative Code. At the final hearing, all parties offered evidence in support of their respective positions. At the conclusion of the hearing, the parties decided to order a transcript of the hearing, which transcript was filed with the Hearing Officer on January 4, 1988. The parties also agreed to a deadline for the filing of proposed recommended orders of January 14, 1988. All parties filed timely proposed recommended orders containing proposed findings of fact and conclusions of law. Those proposed orders have been carefully considered in the preparation of this recommended order and specific rulings on all findings of fact proposed by all parties are contained in the Appendix which is attached to and incorporated into this recommended order.
FINDINGS OF FACT
Based on the stipulations and admissions of the parties, on the exhibits received in evidence, and on the testimony of the witnesses at hearing, I make the following findings of fact.
The Petitioner is MCI Telecommunications Corporation, whose business address is Suite 400, 400 Perimeter Center Terrace NE, Atlanta, Georgia 30346.
The Respondent is State of Florida, Department of General Service, whose address is 614 Larson Building, 200 East Gaines Street, Tallahassee, Florida.
The Intervenors are Microtel, Inc., whose address is 7100 West Camino Real, Suite 311, Boca Raton, Florida 33433, and United States Transmission Systems, whose business address is 320 Park Avenue, New York, New York 10022.
MCI, Microtel, AT&T, Southland, and USTS are all interexchange carriers authorized by the Federal Communications Commission to provide, among other things, interstate WATS.
MCI, AT&T, Southland, and Microtel are all interexchange carriers certified by the Florida Public Service Commission to provide, among other things, intermachine trunks and intrastate WATS.
The interexchange carriers who participated in the November 5, 1987, negotiations were not advised prior to 9:00 a.m. on that day that the negotiations would consist of three rounds of price quotations with the prices quoted and each round being posted immediately on the board for review by the other carriers.
The posting by the Division of Purchasing between 3:00 p.m. on November 2, 1987, and 3:00 p.m. on November 5, 1987, of a draft memorandum from William Monroe to Glenn Mayne was not a bid tabulation.
The State of Florida provides a communications system to state agencies, local governments, and public school districts through the SUNCOM Network. The SUNCOM Network consists of switches, access lines, and transmission facilities such as Intermachine Trunks, Interstate WATS, and Intrastate WATS. On the SUNCOM Network, long distance calls from one SUNCOM user to another SUNCOM user are completed on IMTs. Intrastate WATS facilities are used to place in-state long distance calls from a SUNCOM user to a party not a member of the SUNCOM Network. Interstate WATS facilities are used to complete out-of-state long distance calls.
The Division of Communications desired to migrate the data users of the SUNCON Network from an analog environment to a digital environment. In order to do that, there had to be changes to the SUNCOM switching facilities and changes to the transmission facilities. In 1984, a Request for Proposal (RFP) was issued for the switches. As a result of the RFP, the network went from 5 to 11 switches on December 1, 1986. The Division of Communications decided to utilize digital transmission facilities for both IMTs and Interstate WATS facilities on the newly configured network.
In 1985, the Division of Communications negotiated a contract with MCI for the provision of the Interstate WATS. MCI made no protest to being awarded the contract by negotiation. AT&T was selected to provide the IMTs. The selection of AT&T and MCI was an interim measure to give the Division of Communications time to evaluate the transmission facilities for changes after the new network had stabilized. At the time of the final hearing, AT&T was the current provider for the IMTs and Intrastate WATS and MCI was the current provider for the Interstate WATS.
On March 1, 1987, the Division of Communications and the Division of Purchasing sent a letter to seventeen suppliers of transmission facilities. The letter advised the suppliers that the Division of Communications was beginning an evaluation process to determine the viability of replacing some or all of the SUNCOM Network completion facilities with different suppliers. The suppliers were advised that a potential supplier did not have to service all routes or
provide all facilities in order to be considered. Suppliers were requested to provide information concerning their transmission facilities. It was contemplated that the transmission facilities would be tested for approximately
90 days, during which time there would be consideration of reliability, maintainability, cost, and billing. The evaluation process also contemplated consideration of corporate viability and status, network typology, and references from existing customers similar in size to the State of Florida. The suppliers were cautioned that their participation in the evaluation process did not guarantee a contract and that it was possible that the evaluation process might not result in any contract. The suppliers were also advised that any contract would be negotiated. The March 18, 1987, letter is a request for information and was so considered by the Division of Communications and the Division of Purchasing. By April 9, 1987, the Department of General Services had received ten responses to the March 18, 1987, letter.
A five member evaluation team was formed to review the April 9 responses from the suppliers, conduct the oral presentations, conduct the 90-day test and make recommendations. The evaluation committee was comprised of five employees of the Division of Communications. Division of Purchasing personnel did not actively participate on the evaluation committee because they wanted to remain impartial in the event the Division of Purchasing would later have to decide what method of procurement to use.
Each potential supplier was scheduled for an oral presentation in late April or early May of 1987. Additional information about the proposals was obtained at those presentations. The suppliers were asked during oral presentation if their prices were open for negotiation. Ed Martinez of MCI said that MCI was open for negotiation. Of the carriers that survived the technical evaluation process, MCI had submitted the lowest price for all of the solicited telecommunications facilities and services. An in-service test of the ten suppliers was conducted from July 10 to September 30, 1987. One supplier, Lightnet, disconnected its transmission facility prior to the end of the test period.
Robert Davis, chairman of the evaluation committee, used a numerical rating scheme to assist in evaluating the suppliers. The numerical point system was used as a way to make the evaluation process more objective. Additionally, when the evaluation was begun, the evaluation committee did not know whether contracts would be awarded through a formal acquisition process or through negotiation. The committee thought that an orderly ranking of the participants based on a rating scheme would be beneficial to Mr. Mayne in determining the method of acquisition. Mr. Mayne was unaware that a numerical point system was being used to evaluate the responses until he read the report prepared by the evaluation committee.
On October 16, 1987, the evaluation committee issued the "Report on Alternate Suppliers for SUNCOM Network Transmission Facilities." The report outlined the evaluation process, presented the findings of the committee in the areas of pricing, billing, reliability-maintainability, corporate viability and general compliance by the suppliers, and made recommendations based on their findings. The evaluation committee concluded that, based on the prices submitted by the suppliers, it was possible for the state to reduce the cost of the operation of the network by over $368,000 per month.
In considering the corporate viability of a supplier, the evaluation committee did not intend to conduct an indepth financial analysis. The evaluation committee wanted to determine whether the suppliers would have the
ability to survive in a competitive environment for the contract period of three years. Both DGS' staff and MCI's financial analysis expert agreed that ITT, MCI, Microtel, AT&T and Southland were in a position to maintain their corporate viability for the contract period.
The evaluation committee recognized that there was an opportunity to further reduce the cost of the network transmission facilities. The committee recommended that the IMTs, Interstate WATS and Intrastate WATS not be provided by one supplier. It was also recommended that Sprint, Digital Signal, and Lightnet be eliminated from further consideration. The report did not recommend specific suppliers. The committee recognized that if the point evaluation were used that the ranking would change as the result of further negotiations. They felt that if a decision was made not to use the point evaluation, then low cost would determine the suppliers.
The report was presented to Glenn Mayne for his consideration. Based on his review of the report, Mr. Mayne determined that the State was currently paying far too much money for the transmission facilities; the State desired to have more than one supplier for the transmission facilities; and there was a group of potential alternate suppliers who could supply the State with transmission facilities which would be acceptable for the SUNCOM Network. As soon as Mr. Mayne became aware of the enormous potential savings to the State (and probably because of that awareness) things began to happen very quickly.
A copy of the evaluation report was given to Bill Monroe. Mr. Mayne and Mr. Monroe discussed the report and Mr. Mayne expressed some concerns relating to the Division of Communications' need to migrate data signals to the network. Monroe asked that those concerns be put in writing. Mr. Mayne complied by memorandum dated October 28, 1987, in which he expressed his concerns relating to the discontinuance of Telpak and the Division of Communications' plans to migrate data to the voice network. The desire to address these concerns in the negotiations was due primarily to an AT&T proposal submitted in the late summer or early fall of 1987, which addressed these concerns. The Department had made no effort to obtain proposals similar to AT&T's from the other suppliers prior to requesting authority to negotiate from the Division of Purchasing. The Division of Purchasing deemed the October 28 memorandum to be the Division of Communications' formal request for the authority to negotiate.
Mr. Monroe authorized the Division of Communications to negotiate contracts for the transmission facilities and services for the SUNCOM Network. The authorization to negotiate was granted because the providing of transmission facilities and services was a regulated portion of the telephone industry; the participants were limited to those which met Florida Public Service Commission guidelines for facility based operations; an indepth evaluation of the suppliers had been performed; and the delay incident to using any other procurement method would result in a substantial monetary loss to the State. The most significant factor in the decision to negotiate was the monetary loss which would result from delay. The authorization memorandum recommended that the negotiation be handled as a joint venture between the Division of Communications and the Division of Purchasing, and that the Division of Purchasing participate in development of the criteria for final selection of a supplier.
Mr. Mayne discussed the method of negotiations to be used with Mr. Monroe and his staff. Based on his past experience with one-on-one negotiations, Mr. Mayne felt it would be fairer to put up everyone's prices on the board so that all suppliers could see each others prices. Mr. Mayne suggested that there be two verbal rounds of pricing and a final round in
writing. Mr. Monroe concurred with Mr. Mayne's suggestion. It was felt this method of negotiations would result in better pricing for the State; could be done quickly and easily; and would reduce the chance of one supplier being favored over another.
The intended decision of the Division of Purchasing to authorize the negotiation was posted in the Division of Purchasing beginning November 2, 1987, at 3:00 p.m. The posting was in the form of a post-dated, unsigned memorandum from the Division of Purchasing Director to the Division of Communications Director. Stamped at the bottom of the draft memorandum was the language required by Section 120.53(5), Florida Statutes, indicating that the failure to file a timely protest would constitute a waiver of Chapter 120, Florida Statutes, proceedings. In large letters at the top of this posting was the word DRAFT. Each of the ten suppliers was notified that the Division of Purchasing had authorized negotiations and that this decision would be posted beginning November 2 through November 5, 1987.
On November 2, 1987, Cherrie McClellan, a purchasing specialist for the Division of Purchasing, called MCI's Ed Martinez to advise him that the authorization for the Division of Communications to negotiate for the procurement of the SUNCOM Network alternate suppliers would be posted from 3:00
p.m. November 2, 1987 to 3:00 p.m. November 5, 1987. Ms. McClellan was unable to reach Mr. Martinez and left the message on his recording machine. On November 3, 1987, Mr. Martinez called Ms. McClellan to confirm the message. She told him that the posting was for the authority for the Division of Communications to negotiate and she assumed that the Division of Communications would be contacting him. In giving the telephone notification to MCI, the Division of Purchasing did not specifically advise MCI that its failure to file a timely protest of the Division of Purchasing's decision would waive MCI's rights to proceedings under Chapter 120, Florida Statutes. On November 3, Mr. Martinez also called John Fain, a purchasing specialist supervisor with the Division of Purchasing. Mr. Fain advised Mr. Martinez that the Division of Purchasing had received a request for authority to negotiate from the Division of Communications, final negotiation could not begin until after the conclusion of the posting at 3:00 p.m. on November 5, 1987, and he did not know if there would be another posting.
On November 2, 1987, Mohammed Amirzadeh Asl, an electrical engineer with the Division of Communications, called Ed Martinez between 2:00 and 3:00 p.m.; invited him to the negotiations on November 5; told him to bring his best prices for IMT routes and personnel who could make a decision; advised him he would have access during the negotiations to a phone but he had to use his credit card for any calls; and told him that DGS would be faxing him additional information concerning the negotiations. Mr. Amirzadeh also advised the other suppliers on November 2 of the negotiations and told them the same thing he had told Mr. Martinez.
Mr. Martinez called Mr. Amirzadeh on November 3 and 4 with questions concerning the negotiations. On November 4, DGS faxed a memorandum to the suppliers concerning the criteria for the negotiations and the prices which had been quoted thus far to the Division of Communications. The memorandum advised the suppliers that preliminary discussions would start at 9:00 a.m. on November
5 at the Division of Communications and official negotiations would not start until 3:00 p.m.
When Mr. Martinez, the MCI representative, came to the negotiations, he expected the Department to negotiate first with MCI to attempt to reach a
mutually satisfactory agreement for the solicited telecommunications facilities and services, and he expected the Department to negotiate with other suppliers only if the negotiations with MCI were unsuccessful. These expectations were based on MCI's status as one of the incumbent suppliers, on the fact that the Department appeared to very satisfied with MCI's performance, and on the fact that MCI had submitted the lowest price proposals for all of the solicited telecommunications facilities and services in its April 9, 1987, submittal.
These expectations were unwarranted.
The negotiations began at 9:00 a.m. on November 5,1987. Glenn Mayne started out the negotiations by discussing the criteria which had been faxed to the suppliers on November 4. The suppliers were also given copies of the evaluation committee report. The suppliers were advised that there would be three rounds of negotiations The first two rounds would be preliminary. The last round of negotiation was to take place prior to 5:00 p.m. There were some assumptions that the suppliers were given to use in presenting their prices. The suppliers' prices were to be for one T-1 on each route, and the costs were to include access charges. Additionally, if there was any difference between the quoted and actual access charges the difference would be the responsibility of the supplier. The format used by the Division of Communications for the negotiations on November 5, 1987, was not normally used by the Department.
The first round of pricing was at 11:00 a.m. Each supplier gave its price orally and as the price was given it was written on a board in the room. An objection was raised by one of the suppliers that the method used could give the last supplier an advantage because he would have seen all of the other suppliers' prices prior to giving his price.
The second round was scheduled for 2:00 p.m. The method of receiving prices was changed to accommodate the objections at the first round. In the second round each participant wrote his prices on a piece of paper, all the papers were picked up, the papers opened, and the prices were written on the board.
Between the second and third rounds, each supplier was given an opportunity to meet with Mr. Mayne and his staff. Mr. Martinez met with Mr. Mayne and his staff at 3:00 p.m. During the meeting, Mr. Mayne advised Mr. Martinez that DGS would like two separate fibers for each T-1 route for IMTs. The price for IMTs given by Microtel was approximately $9.50 per mile month.
The corresponding price for MCI was around $15 or $16 per mile month. Mr. Mayne advised Mr. Martinez that, in order for MCI to be considered for a portion of the IMTs, MCI's price needed to be around $10 per mile month. Mr. Mayne did not reference access charges when he discussed the $10 per mile month. One of the assumptions of the pricing for the negotiations was that all prices would include access charges. During the meeting, Mr. Mayne told Mr. Martinez that MCI's price for IMTs was almost twice as much as the other suppliers.
Additionally during the 3:00 p.m. meeting between Mr. Mayne and Mr. Martinez, Mr. Mayne explained to Mr. Martinez that the suppliers would reconvene at 4:00 p.m. and report their final responses and the last round of pricing would be before 5:00 p.m. Notwithstanding the clear explanation of when the suppliers would have their last opportunity to give their final prices, Mr. Martinez was apparently confused because he thought (albeit erroneously) that he would have another opportunity to offer a price after the third round. Because he thought that as an incumbent supplier MCI would have another opportunity to offer a price after all of the other suppliers had given their final prices, Mr. Martinez made a judgment call not to offer MCI's best price during the third
round of the negotiations. The best price that Mr. Martinez was authorized to offer on the interstate WATS was slightly higher than the best price actually offered by another supplier. Mr. Martinez appears to be the only one who was confused about the finality of the third round of negotiations. It would not have been fair to the other suppliers to have afforded MCI an opportunity to submit further prices after the third round. No one from the Department of General Services advised Mr. Martinez that he would be given an opportunity to present further pricing after the other suppliers had given their best and final prices.
The suppliers reconvened at 4:00 p.m. A supplier inquired whether the prices could be given before 5:00 p.m. Mr. Mayne asked the other suppliers whether they were ready and no one objected to giving the prices before 5:00
p.m. Mr. Mayne emphasized the third round was the last round.
The suppliers gave their final prices at 4:19 p.m. The suppliers were asked to sign the sheets which contained their prices for the last round. Microtel submitted the lowest price for IMTs at $8.89 per mile. MCI's price for the IMTs was $12.52 per mile. ITT submitted the lowest price for Interstate WATS facilities at $.1249 per minute. MCI submitted $.1285 per minute for the Interstate WATS facilities. MCI submitted the lowest price for Intrastate WATS facilities at $.1133 per minute. Microtel submitted $.1139 per minute for the Intrastate WATS facilities.
At the conclusion of the final round of pricing, AT&T indicated that they had additional pricing which was contained in a proposal submitted to Mr. Mayne in late summer or early fall of 1987. Mr. Mayne thought that AT&T had submitted its final prices during the last round and he advised AT&T that he would not consider the prices that were not contained on the sheets submitted by AT&T during the last round. John Fain, representative for the Division of Purchasing at the negotiations, also stated that prices not placed on the board could not be accepted. Mr. Mayne advised the suppliers at the end of the negotiations that the Division of Communications would try to reach a decision by the close of business on November 6. At the end of negotiations on November 5, 1987, the Division of Communications returned to AT&T its proposal which had formed part of the basis for the Division of Communications' request for authority to negotiate after AT&T claimed pricing information contained in that proposal was proprietary.
At the beginning of the negotiation session on November 5, Mr. Mayne was satisfied that each of the participants could provide the solicited transmission facilities and services. Since the AT&T proposal would not be considered, Mr. Mayne determined that the contract should be awarded based on lowest cost for each of the transmission facilities. Prior to acting on this determination, Mr. Mayne discussed the matter with the Division of Purchasing. The Division of Purchasing concurred in the decision to award on the basis of lowest cost. The contract awards were based on low price and not the total points assigned to the providers based upon the numeric rating system used by the evaluation committee in the evaluation report.
Mr. Amirzadeh telephoned Mr. Martinez on November 6, 1987, to inform MCI that the Department intended to award the Intrastate WATS facilities to MCI. Mr. Martinez advised Mr. Amirzadeh that the prices submitted by MCI were package prices. MCI later contacted the Department and advised the Department that the MCI price for Intrastate WATS was a package price. MCI withdrew its offering for Intrastate WATS.
On being advised that MCI was withdrawing its offer for the Intrastate WATS facilities, the Department decided to award the Intrastate WATS facilities to the next lowest provider, which was Microtel.
On November 10, 1987, the Department issued Communications Service Authorizations (CSAs) to Microtel for the Intrastate WATS facilities and IMTs, and to ITT for the Interstate WATS facilities. These CSAs are the only contracts to be executed by the State of Florida for the solicited telecommunications services and facilities. The CSAs were signed by the Division of Communications.
By contracting with Microtel for IMTs, Mr. Mayne estimated there would be a cost savings of $216,000 per month. The cost savings associated with contracting with Microtel for the Intrastate WATS is approximately $98,000 a month. It is estimated the State will save approximately $105,000 per month by contracting with ITT for Interstate WATS.
MCI filed a notice of intent to protest the contract awards on November 12, 1987. MCI filed its formal written protest on November 23, 1987.
In acquiring these transmission facilities the Department is leasing spaces on the supplier's fiber optic cable. The spaces within the cable are analogous to time envelopes, which may carry information or no information, being shot down the fiber optic cable. The Department leases the spaces in multiples of T-1s. A T-1 represents 1.544 million spaces per second. When the Department leases a T-1, the Department has a dedicated physical connection and the information that will be contained in the spaces or time envelopes will always appear in the same space and in the same time. The Department leases the fiber facilities on a 24-hour-a-day basis, because it is more economical than leasing for shorter periods of time. While the space is being leased to the State, no other customer of the transmission facilities supplier can use that space.
The functions of the facilities can also be described as follows. The interstate WATS service, the intrastate WATS service, and the IMT service for which the Department contracted, involve the receipt by the carrier of an originating call from a SUNCOM switch and the transmission of that call over the carrier's owned or leased facilities, including access facilities leased by the carrier from the local exchange company, to its destination either outside or inside the State of Florida or to another SUNCOM switch.
In addition to the lease of spaces, the Department will be acquiring maintenance and billing services and, in the case of the WATS facilities, it will also be procuring management reports concerning the location of calls.
For the facilities used to provide interstate WATS service, intrastate WATS service, and IMT service, the State of Florida will not have physical access to, the ability to monitor traffic over, maintenance or repair responsibility for, or rights to use particular components of those facilities. This applies to both the carriers' facilities and the access facilities leased by the carrier from local exchange companies to connect the SUNCOM switches and the carriers' facilities.
For the facilities used to provide interstate WATS service, intrastate WATS service, and IMT service, the long distance carrier will have the responsibility for maintenance and repair of those facilities, the right to replace or upgrade those facilities in a fashion transparent to the State, and
the right to determine the physical path through those facilities over which information from the State of Florida would be transmitted. This applies to both the carrier's facilities and the access facilities leased by the carrier from the local exchange companies to connect the SUNCOM switches to the facilities.
The Department interprets Rule Chapter 13C-2, Florida Administrative Code, to apply to the acquisition of nonregulated communications equipment. The forms referred to in Rule 13C-2.008 are forms which State agencies use in requesting approval from the Division of Communications for the purchase or lease of nonregulated communications services or equipment. Rule Chapter 13C-1, Florida Administrative Code, has been interpreted by the Department to deal with a regulated environment. The procurement at issue in this proceeding is in a regulated environment. The criteria and procedures described in Chapter 13C-2, Florida Administrative Code, were not used in this procurement of the solicited telecommunications facilities and services.
The negotiation process itself was negotiated in a fair and equitable manner. Each supplier was advised at the beginning of the negotiation session that there would be three rounds of pricing. There has been no claim by MCI that any of the suppliers had knowledge prior to 9:00 a.m. on November 5, 1987, of the actual negotiation process that would be used. When an objection was made by one of the suppliers to the method of accepting pricing in round one, the method of accepting prices was changed so that no supplier would have an advantage over another. It was made clear that the third round was the last round in which the suppliers could submit their best and final offers. The Department did not consider offers which were not submitted during the third round. The Department attempted to provide competition in the negotiation process by having the suppliers compete against each other in the pricing rounds. No supplier was treated more favorably than another. MCI was never told that it would be awarded the contracts.
MCI made no protest or objection to the negotiation process prior to or on November 5, 1987.
CONCLUSIONS OF LAW
Based on the foregoing findings of fact and on the applicable statutes, rules, and court decisions, I make the following conclusions of law.
The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. Sec. 120.56, Fla. Stat.
The Department and the Intervenors argue that the protest in this case is untimely and that the Petitioner has, therefore, waived its right to proceedings under Chapter 120. In this regard, the Department and Intervenors concede that pursuant to Section 120.53(5), Florida Statutes, the Petitioner was entitled to notice by "certified U.S. Mail, return receipt requested," but argue that the telephone notice to the Petitioner was sufficient. The Petitioner contends that the telephone notice was an insufficient substitute for the mail notice required by statute.
Shortcomings in the delivery of statutorily required notice may be overlooked or treated as harmless where there is some other form of adequate actual notice. See Unisys Corporation v. State of Florida, Department of General Services, et al., DOAH Case NO. 87-4105BID (Recommended Order issued January 5, 1988). Here, however, the alternate actual notice was not an adequate substitute. Section 120.53(5)(a)2, Florida Statutes, provides that the
required notice shall contain the following statement: "Failure to file a protest within the time prescribed in Section 120.53(5), Florida Statutes, shall constitute a waiver of proceedings under Chapter 120, Florida Statutes." The telephone communications to the Petitioner did not include the quoted statement, nor did they include other words of similar import. Accordingly, the telephone notice was an insufficient substitute for the required statutory notice. Because of the insufficiency of the telephone notice, neither that notice nor the posting that the Petitioner never saw operated to commence the ticking of the 72 hour clock in Section 120.53(5)(b), Florida Statutes. Therefore, the petition in this case was timely filed.
The next issue to be addressed is whether the instant procurement was one for commodities, contractual services, or both. This is a closer question. However, in view of the fact that the predominate feature of the procurement involves obtaining access to hardware (the tangible communications network equipment) and that any human services or personal services are incidental aspects of the procurement, the subject procurement is primarily one for commodities. The fact that it includes some incidental human or personal services (or "time and effort" type activities) appears to make it a procurement for both commodities and contractual services, which, under Section 287.052, Florida Statutes, "...shall be deemed to be a contract for the acquisition or purchase of commodities. "
The next issue is whether, in a procurement for commodities of the type involved here, the Department must follow the procedure and criteria in Chapter 13C-2, Florida Administrative Code. The Department and the Intervenors have persuasively argued that those rule provisions do not apply to this type of procurement. Had the Department chosen to make this acquisition by competitive bid, Chapter 13C-2 might well be applicable, but those rules are not applicable to the instant negotiated procurement.
The Petitioner next challenges whether the negotiations in this case were lawfully authorized and conducted. As set forth in greater detail in the following paragraphs, the negotiations were lawfully authorized and conducted.
The Division of Purchasing of the Department of General Services is given overall powers for supervision of purchasing by agencies of the State of Florida, pursuant to Chapter 287, Florida Statutes. Section 287.042(1)(a), provides in pertinent part that the Division of Purchasing is "[t]o canvass all sources of supply, establish and maintain a supplier list, contract for the purchase, lease, or acquisition in any manner,... of all commodities required by any agency under competitive bidding or by contractual negotiation." (emphasis supplied)
Subsection 5 of Section 287.042 also gives the Division of Purchasing the power "[t]o prescribe the methods of procuring competitive bids and proposals, or negotiating and awarding commodity contracts, unless otherwise provided by law." (emphasis supplied) Section 287.042(13) provides that the Division of Purchasing may delegate to any State agency any and all the responsibility conferred by Chapter 287. Agency is defined in Section 287.012(1) to include divisions of the executive branch of state government.
These statutory powers may be read together with Section 287.062(1)(b), Florida Statutes, which exempts contracts for commodities executed by the Division of Purchasing from competitive bidding requirements and confirms the Division of Purchasing's authority to produce commodities by negotiation. In Xerox Corporation v. Department of General Services, 2 F.A.L.R.
1383-A (Dept. of General Services 1980), the Hearing Officer concluded that the Department was not required to competitively bid contracts for the purchase of commodities.
Chapter 287, F.S., does not mandate competitive bidding but rather vests the department with the discretion to choose the most efficient and economical method on a commodity by commodity basis.... It is reasonable to presume that the legislature vested the department with broad discretion due to its unique and specialized role in state purchasing. Id. at 1390.
The Division of Purchasing can also negotiate commodity contracts when no competitive bids are received pursuant to Section 287.062(2), Florida Statutes. By rule the Division of Purchasing allows agencies to request the authority to negotiate when the agency receives no competitive bids. In other words, the Division of Purchasing may delegate its authority to negotiate to agencies. See Rules 13A-1.002(3) and(4), Florida Administrative Code, and Satellite Television Engineering v. Department of General Services, 9 F.A.L.R. 4036(1987)
The Division of Purchasing has not promulgated rules to govern situations in which an agency is seeking the authority to negotiate a contract for commodities prior to the agency attempting to procure the commodity by competitive bidding. However, it is clear that the Division of Purchasing has the authority to delegate its authority to negotiate in such instances. In the instant case the Division of Purchasing delegated its power to negotiate to the Division of Communications to be conducted as a joint venture between the two Divisions pursuant to the Division of Purchasing's statutory authority.
It is not necessary for the Division of Purchasing to adopt rules in order to delegate its authority to negotiate. Formal rulemaking is not initially necessary in all cases. City of Tallahassee v. Florida Public Service Commission, 433 So.2d 505 (Fla. 1983). An agency's decision to develop policy on a case-by-case basis is not an abuse of discretion. City of Tallahassee v. Florida Public Service Commission, 441 So.2d 620 (Fla. 1983).
To the extent the agency may intend in its final order to rely on or refer to emerging policy not recorded in rules or discoverable precedents,..., that policy must be established and may be challenged by proof. McDonald v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1977).
The agency explained the factual and policy basis for authorizing the negotiation of the transmission facilities. Evidence was presented to show that the evaluation process was fair, the providers were regulated carriers, subject to the Florida Public Service Commission, delay incident to using a competitive bid process would result in a substantial monetary loss to the State, and it would be difficult, if not impossible, to draft specifications which would adequately address the changing needs of the State for these transmission facilities, especially in the rapidly changing telecommunications environment. Petitioner, MCI, has shown no proof to discredit this policy or the factual basis for the delegation of authority made in this case. Therefore, DGS has
more than adequately explained how and why it reached its decision to negotiate, and DGS did have legal authority to negotiate, rather than bid, this procurement.
In the concluding paragraphs of its proposed order, the Petitioner raises several arguments challenging various aspects of the manner in which the negotiations were conducted. To the extent that there was any error in conducting the negotiations, it was harmless error. Although somewhat unusual and perhaps somewhat frustrating to the competing suppliers, at bottom the negotiations were fair and even handed. All prospective suppliers were given an equal opportunity to compete for the award of a contract. The negotiations seem to have also been quite efficacious from the Department's point of view because the prices offered by the competing suppliers represent substantial savings over the prices currently being paid. This entire procurement process could most likely have been handled in a more tidy and efficient manner, but there is nothing in the process that departs from the essential requirements of law or from fundamental fairness.
Based on all of the foregoing, it is recommended that a final order be entered denying the relief requested by the Petitioner.
DONE AND ENTERED this 11th day of February, 1988, at Tallahassee, Florida.
MICHAEL M. PARRISH
Hearing Officer
Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32399-1550
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 11th day of February, 1988.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-5338BID
The following are my specific ruling on all of the findings of fact proposed by all of the parties.
Findings proposed by the Petitioner:
Paragraphs 1, 2, 3, 4, 5, 6, 7, 8 and 9: All generally accepted, but some details have been omitted as either subordinate or unnecessary.
Paragraph 10: Rejected as subordinate and unnecessary details. Paragraphs 11 and 12: Rejected as irrelevant.
Paragraphs 13, 14, and 15: Accepted. Paragraph 16: Rejected as irrelevant. Paragraphs 17, 18 and 19: Accepted.
Paragraph 20: Rejected as irrelevant in light of other evidence. Paragraphs 21, 22, 23 and 24: Accepted.
Paragraph 25: Accepted in substance. Paragraphs 26 and 27: Accepted.
Paragraph 28: Rejected as subordinate and unnecessary details. Paragraph 29: Accepted in substance.
Paragraph 30: Rejected a subordinate and unnecessary Paragraphs 31 and 32: Accepted:
Paragraph 33: Rejected as contrary to the greater weight of the evidence. Paragraphs 34, 35, 36, 37, 38 and 39: Accepted.
Paragraphs 40 and 41: Rejected because the analogies fail. Paragraph 42: Accepted.
Paragraph 43: Rejected as subordinate and unnecessary details. Findings proposed by the Respondent:
Paragraphs 1, 2, 3, 4, 5, 6 and 7: Accepted.
Paragraph 8: Rejected as subordinate and unnecessary details. Paragraphs 9 and 10: Accepted.
Paragraph 11: Rejected as subordinate and unnecessary details. Paragraphs 12, 13, 14, 15, 16, 17 and 18: Accepted.
Paragraph 19: Rejected as subordinate and unnecessary details. Paragraphs 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32,33, 34, 35,
36, 37, 38, 39, 40, 41, 42, 43 and 44: Accepted.
Paragraph 45: First sentence accepted. The remainder is rejected as subordinate and unnecessary details.
Paragraph 46: First four sentences accepted. Last sentence is a conclusion of law.
Paragraphs 47 and 48: Accepted. Findings proposed by the Intervenors:
Paragraph 1: Rejected as statement of position rather than proposed finding.
Paragraph 2 and 3: Accepted.
Paragraphs 4, 5 and 6: Rejected as subordinate and unnecessary details.
Paragraphs 7, 8, 9 and 10: Some of the details proposed in these paragraphs have been included, but most are rejected as subordinate and unnecessary.
Paragraph 11: Rejected as subordinate and unnecessary, details. Paragraphs 12 add 13: Accepted in substance.
Paragraphs 14: Rejected as unnecessary. Paragraph 15: Accepted in substance.
Paragraphs 16 and 17: Rejected as irrelevant or as subordinate and unnecessary details.
Paragraphs 18, 19, 20, 21, 22, 23 and 24: Some of the details proposed in these paragraphs have been included, but most have been rejected as subordinate and unnecessary.
Paragraphs 25, 26 and 27: Rejected as subordinate and unnecessary details. Paragraph 28: Accepted.
Paragraph 29, 30, 31 and 32: Rejected as subordinate and unnecessary details.
Paragraphs 33, 34, 35, 36, 37 and 38: Accepted.
Paragraphs 39, 40, 41, 42, 43, 44, 45, 46, 47, 48 and 49: Rejected as subordinate and unnecessary details.
Paragraphs 50 and 51: Rejected as subordinate and unnecessary details. Paragraphs 52 and 53: Accepted.
Paragraph 54: Rejected as subordinate and unnecessary details. Paragraph 55: Accepted in substance.
Paragraph 56: Rejected as subordinate and unnecessary details. Paragraphs 57, 58 and 59: Accepted in substance.
Paragraphs 60 and 61: Rejected as subordinate and unnecessary details.
COPIES FURNISHED:
Susan Kirkland, Esquire Sandra D. Allen, Esquire Office of General Counsel
Department of General Services Room 452, Larson Building
200 East Gaines Street Tallahassee, Florida 32399-0955
Carolyn S. Raepple, Esquire Richard D. Melson, Esquire Hopping, Boyd, Green & Sams Post Office Box 6526 Tallahassee, Florida 32314
Patrick K. Wiggins, Esquire Wings Solcum Benton, Esquire Ranson & Wiggins
325 West Park Avenue Post Office Drawer 1657
Tallahassee, Florida 32302
Ronald W. Thomas Executive Director
Department of General Services
133 Larson Building
Tallahassee, Florida 32399-0955
| Issue Date | Proceedings |
|---|---|
| Feb. 11, 1988 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Mar. 08, 1988 | Agency Final Order | |
| Feb. 11, 1988 | Recommended Order | Agency negotiations for long distance telecommunications were reasonable and fair, even though somewhat unusual |
