STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ECCELSTON PROPERTIES, LTD.,)

)

Petitioner, )

)

vs. ) CASE NO. 88-4901BID

) DEPARTMENT OF HEALTH AND ) REHABILITATIVE SERVICES, )

)

Respondent, )

and )

)

PHILLIP WATTS and )

KENNETH MONTGOMERY, )

)

Intervenors. )

)

RECOMMENDED ORDER

This matter came on for hearing in Pensacola, Florida, before the Division of Administrative Hearings by its duly designated Hearing Officer, Diane Cleavinger, on October 25, 1988. The parties were represented as follows:

For Petitioner: Edward Nickinson, III, Esquire

CARLTON, FIELDS, WARD, EMMANUEL, SMITH, CUTLER AND KENT, P.A.

Harbourview Building Post Office Box 12426

Pensacola, Florida 32582

For Respondent: Rodney Johnson, Esquire

District One Legal Counsel Department of Health and

Rehabilitative Services

160 Government Street Post Office Box 8420

Pensacola, Florida 32505-8420

For Intervenors: M. Alice Wells, Esquire

Thomas R. Jenkins, Esquire BEGGS & LANE

Seventh Floor Blount Building

3 West Garden Street Post Office Box 12950

Pensacola, Florida 32501

The issues addressed in this proceeding are: 1) Whether the Petitioner had a sufficient possessory interest in the rejected property to have a substantial interest in the outcome of this matter? 2) Whether the Intervenors made an unresponsive bid by having no possessory interest in certain land designated for

use as a parking lot during the on-site visit by the evaluation committee? 3) Whether the decision of the District Administrator to award the bid was arbitrary and capricious?

Petitioner called six witnesses and introduced five exhibits. Respondent called no witnesses and introduced no exhibits. Intervenors called one witness and introduced five exhibits. Additionally, the parties stipulated to the introduction of 25 joint exhibits which were admitted into evidence.

Petitioner, Respondent and Intervenors filed their proposed recommended orders on November 15, 1988, November 14, 1988, and November 18, 1988, respectively. The parties' proposed findings of fact have been considered and utilized in the preparation of this Recommended Order except where such proposals were not supported by the weight of the evidence or were immaterial, cumulative or subordinate. Specific rulings on the parties' proposed findings of fact are contained in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Prior to June, 1988, HRS determined that it needed 23,871 square feet of office space to house some of its social services for indigents in Northern Escambia County. Since HRS desired more than 2,000 square feet of office space, it was required to bid lease number 590:1987 competitively. To that end, Respondent prepared an Invitation to Bid and a bid submittal package. The package contained various bid specifications, bid evaluation criteria and the numerical weight assigned to each of those criteria. Specific areas of importance to Respondent in the selection of its office space were:

   
   

   1. client safety

   2. public access, ingress and egress

   3. availability of public transportation.

      
      

      The above areas were important to HRS since the agency would render indigent services to approximately 1000 people a month, many of whom are handicapped or lack good mobility due to age or infirmity. The majority of Respondent's clients are served within a 10 day period during each month. A great deal of pressure is placed on the surrounding area due to the in flux of people.

      Additionally, many of Respondent's clients utilize public transportation since they do not own or have access to personal vehicles. Because of servicing so many people the above factors received a great deal of weight under HRS's consideration of the property it desired to lease and occupy. All of the above areas were covered by Respondent's weighted bid evaluation criteria.

      
      

2. Additionally, in order to submit a responsive bid, a prospective lessor was required to meet one of the following qualifications at the time the bid was submitted: (a) be the owner of record of the facility and parking areas; (b) be the lessee of the space being proposed and present with the bid a copy of the lease with documentation of authorization to sublease the facility and parking areas; (c) submit documentation of an option to purchase the facility and/or parking areas; or (d) submit documentation of an option to lease the facility with authorization to, in turn, sublease.

   
   

3. The District Administrator of HRS, Chelene Schembera, is ultimately responsible for bidding, selection and leasing of all HRS facilities within District I, including Escambia County, Florida. In order to accomplish this task Ms. Schembera appointed a bid evaluation committee to review and grade the

   responsive bids under the criteria established in the bid package, and to recommend to her the committee's choice of the lowest and best bid.

   
   

4. Ms. Schembera's purpose in establishing the bid evaluation committee was to secure input from a cross section of people who had a variety of backgrounds and knowledge that would be material in evaluating the office space, in light of the uses for which it was intended and the relative public worth of the work space. Ms. Schembera appointed individuals who were familiar with the type of work to be done in the proposed space, as well as persons familiar with the bid process.

   
   

5. On July 21, 1988, HRS received five bids on the lease. Intervenors submitted the apparent low bid which Northside consisted of one building located at the Brentwood Shopping Center in Pensacola, Florida. At the time that the Intervenors submitted their bid, they included documentation which showed that they had a contract to purchase the subject facility; they have since closed on that transaction. This bid package did not include the four acres adjacent to the Brentwood Shopping Center property and no contract to purchase or other documentation was submitted as to the four acre parcel of property.

   
   

6. Petitioner submitted the apparent second lowest bid which consisted of one building located at Fairfield Plaza in Pensacola, Florida. Petitioner's interest in Fairfield Plaza is that of a lessee under a Master Lease with rights to sublet the property. All appropriate documentation was submitted with the bid. This property was the subject of a semi-friendly foreclosure action at the time that the Petitioner's bid was submitted. Petitioner was still in possession and control of the property. Both Petitioner's and Intervenors' property were within the mandatory geographical area designated in the bid package. Both bids were responsive under the minimum bid specifications and bidder qualifications.

   
   

7. The other three bids which were submitted by HRS are not in contention

   
   

8. The committee members personally inspected the sites offered by the Petitioner and the Intervenors. While at the Intervenors' site, the committee's concern over the property's minimal parking (as compared to Fairfield) and limited safe public access, ingress and egress were raised. The only access to Intervenor's property was from a very busy multi-lane highway. Certain turns onto and off the property were extremely dangerous. In order to make its bid package more acceptable, Intervenors' representative orally amended the bid package to include the southerly four acres contiguous to the Brentwood property.

   
   

9. The Inclusion of the southerly four acres would adequately increase Intervenors' parking. The amendment would also create additional and safer public ingress and egress since the four acres abutted on Murray Lane which intersects Highway 29. This amendment substantially worked to Intervenors' advantage and was a material change to the previously submitted bid. The improper amendment cannot be considered here.

   
   

10. Following the on-site inspections, the committee members met and rated the properties submitted by Petitioner and Intervenors according to a Bid Synopsis evaluation sheet which they had been previously provided. The committee members' review of the Intervenors' property included the improper bid amendment.

11. Even with the improper amendment, the unanimous recommendation of the evaluation committee was to award the lease to the Petitioner and Fairfield Plaza. The evaluation committee based its decision on the scores attributed to each property on the Bid Synopsis sheet by the individual committee members.

    The committee utilized all the weighted bid criteria. However, two factors were of primary importance. One was its determination that the property offered by the Intervenors presented greater problems for ingress and egress due to the congested nature the area. The other consideration was that service to Fairfield Plaza from public transportation was both more frequent and direct.

    The property offered by the Intervenors had less public transportation service. The stops were less frequent and a significant number of clients would be required to transfer buses to reach Brentwood when utilizing such public transportation. All bus passengers would be required to walk from the bus stop close to Brentwood and attempt at their peril to cross a very busy, dangerous and congested highway.

    
    

12. The reasons given by the individual committee members for distinguishing and preferring one bid over another were rational and reasonable considerations and were covered by the bid evaluation criteria. Each individual member gave a rational and reasonable basis for the scoring he or she used on the Bid synopsis score sheets. The scoring was done by each member after discussion of the two buildings and without influence from the other committee members. In essence, the committee felt that Petitioner's property was the better property for the money. Importantly, every committee member came to the conclusion that Petitioner's property was the lowest and best bid. There is no statutory or rule requirement that one scoring method be preferred over another. The only requirement is that the method be rational and reasonable especially where highly subjective, but legitimate criteria are involved in the selection of a piece of property. On these facts, the individual scoring methods used by the individual committee members were not arbitrary and capricious, but were very rational and reasonably related to the relative importance the committee members gave the above factors.

    
    

13. The District Administrator initially adopted the committee's recommendation and reported that recommendation to King Davis, the Director of General Services for HRS.

    
    

14. The Director of General Services later informed the District Administrator that he and his staff were concerned with the fact that the recommendation was to award the lease to the second lowest bidder. The staff's review considered the improper amendment as part of the Intervenors' bid.

    
    

15. Over a ten year period the Petitioner's rental cost was $62,381.00 more than the Intervenors'. In addition, the estimated energy consumption for the first year for the Petitioner's property was approximately $4800 more than for Intervenors. King Davis and his staff did not believe that the justifications cited in the recommendation letter would be considered crucial enough to override awarding the lease to the lowest bidder, should the agency get involved in a bid protest over the award. He and his staff did not disagree that the reasons assigned by the committee and Ms. Schembera were legitimate considerations. Their ultimate concern was that the reasons given by the committee and Ms. Schembera would not be given as great a weight by a Division of Administrative Hearings' hearing officer; and therefore, fail to withstand a potential bid challenge. But the conclusion that the lack of ingress and egress and public transportation could not outweigh the cost differences assumed that Intervenors' bid included the four acres. Without the four acres, the problems with ingress and egress, congestion and public transportation become even more

    important and can outweigh minor price differences in rent and energy. This is especially true when one considers the impact that the influx of at least 1000 people would have on an already congested and unsafe area. Put simply, the conclusion that the above factors can and do outweigh price and cost considerations in these facts is not an arbitrary and capricious decision, even though others may disagree with that decision.

    
    

16. Instead of reconvening the committee after receiving the recommendation from King Davis and discussing the same with him, the District Administrator made the determination that the lease should be awarded to the Intervenors. The District Administrator, acquiesced in Mr. Davis' assessment that HRS could not succeed in a bid challenge. She did not like his advice. In fact, even at the hearing Ms. Schembera still believed Petitioner's property was the lowest and best for HRS purposes. However, through circular reasoning she also concluded that Intervenors' property was the lowest and best bid because she chose it.

    
    

17. The agency's ability to succeed in a bid challenge which may or may not happen is not covered by any of the weighted bid evaluation criteria contained in the bid package and is not an appropriate reason to prefer one bid over another. The foregoing is particularly true when the reason given (surviving a bid protest) is based on the occurrence of a future event which may not occur. To reject a bid for a reason outside the bid criteria and one based on an unknowable future event is an arbitrary and capricious act on the part of Respondent.

    
    

18. A court-appointed receiver was ordered to take control of the property belonging to the Petitioner on September 28, 1988, after the bid award was announced. Petitioner still retains its right of redemption of the property, and such an interest is sufficient to confer standing on Petitioner to maintain this action. Moreover, the evidence was clear that Petitioner had both the ability and wherewithal to perform the lease should it receive the bid award. Perfected ownership or control is not required. With Petitioner's apparent ability to perform, the fact of the foreclosure action and the receiver should not work against the Petitioner in this bid protest.

    
    

    CONCLUSIONS OF LAW

    
    

19. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. Sections 120.53 and 120.57(1), Florida Statutes.

    
    

20. Pursuant to Section 255.249, Florida Statutes, and Chapter 13M-1, Florida Administrative Code, HRS is required to utilize the competitive bidding process for leased space of 2,000 square feet or more in privately owned buildings. HRS was clearly required to utilize the competitive bidding process for Bid NO. 590:1987 since the bid specification required a minimum of 23,871 square feet.

    
    

21. The ultimate decision-making authority concerning HRS bid awards lies with the District Administrator pursuant to Section 20.19(5)(c)(2), Florida Statutes (1988). This authority, however, is not absolute, but rather limited by Florida Law

    
    

22. Section 255.25, Florida Statutes, provides in relevant part that an agency may not lease a building or a part thereof "unless prior approval of the lease conditions and of the need therefore is first obtained from the division,"

    and that "no state agency may enter into a lease for the use of 2,000 square feet or more in a privately-owned building except upon advertisement for and receipt of competitive bids and award to the lowest and best bidder.''

    
    

23. Section 255.249, Florida Statutes, requires the agency to develop procedures for soliciting and accepting competitive bid proposals for leased space of 2,000 square feet or more in privately-owned buildings. The agency is also required to develop methods of allocating space in both state owned office buildings and privately-owned office buildings, acceptable terms and conditions of lease agreements, maximum rental rates, and conditions and requirements which must be met for leasing a building by the agency.

    
    

24. Section 255.254, Florida Statutes, provides that no state agency shall lease a facility of 20,000 square feet or more without having secured from the division a proper evaluation of life-cycle costs as computed by an architect or engineer. The statutes provides that the "life-cycle costs shall be a primary consideration in the selection of a building design," and that "a lease shall only be made where there is a showing that the life- cycle costs are minimal compared to available like facilities." Section 255.254(1), Florida Statutes.

    
    

25. Section 255.255, Florida Statutes, provides for the promulgation of rules and procedures by the division for conducting the life-cycle costs analysis and for developing energy performance indices to evaluate the efficiency of energy utilization. Specifically, a component of the life-cycle cost analysis is an energy consumption analysis of the major equipment of the facility's heating, ventilation, and cooling system, lighting system, hot water system, and all other major energy consuming equipment and systems.

    
    

26. To meet these statutory requirements an agency sets forth its minimum requirements for a particular bid in a bid submittal form. A conforming or responsive bid is one that meets the minimum requirements as set out in the bid submittal form. Both Petitioner's and Intervenors' bid met the minimum requirements set forth in the bid submittal form and accordingly, are conforming bids. Likewise, both pieces of property had minimal energy costs as compared to other like facilities.

    
    

27. Additionally, the District Administrator's authority is limited by the nature of the competitive bidding process as established in the statutes. In Hotel China and Glassware Co. v. Board of Public Instruction of Alachua County,

    130 So.2d 78 (Fla. 1st DCA 1961), the First District Court of Appeal explained the benefits and obligations in the use of the competitive bidding system in Florida as follows:

    
    

    ...The system confers upon both the contractor and the public authority reciprocal benefits, and exacts from each of them reciprocal obligations.

    The bidder is assured fair consideration of his offer and is guaranteed the contract if his is the lowest and best bid received. The principal benefit flowing to the public authority is the opportunity of purchasing the goods and services required by it at the best price obtainable. Under this system, the public authority may not arbitrarily or capriciously discriminate between

    bidders, or make the award on the basis of personal preference.

    
    

28. See, also Department of Transportation v. Grove Watkins Constructors,

    530 So.2d 912 (Fla. 1988) and Liberty County v. Baxter's Asphalt & Concrete, Inc., 1421 So.2d 505 (Fla. 1981)

    
    

29. Part of the reciprocity achieved under the competitive bidding process is achieved in the bid specifications and weighted bid evaluation criteria. Potential bidders are advised in advance of the requirements to be met in order to receive the contract award, as well as the standards by which each bid will be evaluated by the agency and each standard's relative importance to the agency. In essence, this advance notice enables a potential bidder to gauge the agency's notions of the type of bid best suited to its purpose for the money involved. A potential bidder can then determine whether he can meet the bid specifications and criteria and thereby determine whether he wishes to go to the time, expense and trouble of preparing and submitting a fairly lengthy and detailed bid proposal. Therefore, central to the integrity and reciprocity of the competitive bidding process is the requirement that an agency's action on a bid be expressed within the bid specifications and evaluation criteria which it created. In other words, should an agency reject a bid for reasons not given weight in the bid evaluation criteria, that action would go to the integrity of the competitive bidding process and would be arbitrary and capricious. Grove Watkins, supra.

    
    

30. The evidence showed that Petitioner's bid was the bid all parties determined was the lowest and best bid until the staff of HRS's Division of General Services reviewed the bid for technical merit. The Division of General Services' staff feared that HRS would not be able to withstand a potential bid challenge. The Division of General Services' staff did not believe the reasons given for the up to then unanimous selection of the higher priced bid could outweigh the cost factor. The staff believed the above even in light of the appropriate scoring done by the bid committee and the fact that the reasons given in support of the Petitioner's property were legitimate reasons within the bid criteria. The staff simply disagreed in the value the committee had placed on those reasons and bolstered and based its opinion on survival in a bid protest. The District Administrator acquiesced in the Division's evaluation even though she still felt Petitioner's property was the better property for the money. Surviving a bid protest which may not even occur is not covered by any of HRS's bid evaluation criteria. To reject a bid for reasons outside the bid evaluation criteria goes to the heart and integrity of the bid process and constitutes an arbitrary action on the part of HRS.

    
    

31. It is clear that HRS has wide discretion in soliciting and accepting bids, in that its decision when based on an honest exercise of its discretion will not be overturned by a court even if it appears erroneous and even if reasonable persons may disagree. Department of Transportation v. Groves- Watkings Constructors, 530 So.2d 912 (Fla. 1988); Liberty County v. Baxter's Asphalt and Concrete, Inc., 421 So.2d 505 (Fla. 1982).

    
    

32. However, in this case HRS's action in selecting Intervenors' property was arbitrary and capricious. Additionally, the evaluation of Intervenors' property took into consideration the improper amendment which added the additional four acres. The amendment was improper because it materially changed Intervenors' bid to their advantage. In essence It made Intervenors' bid much more acceptable to Respondent. By deleting the arbitrary act and excluding the

improper amendment Petitioner clearly submitted the lowest and best bid and should be awarded lease number 590:1987.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED:

That the Department of Health and Rehabilitative Services enter a final order awarding lease number 590:1987 to Eccelston Properties, Ltd., as the lowest and best bidder.

DONE and ORDERED this 10th day of January, 1989, in Tallahassee, Florida.

DIANE CLEAVINGER

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 10th day of January, 1989.

ENDNOTES

1/ Intervenors did in fact have a contract to purchase the contiguous southern four acres.

2/ The relative importance of the amendment is reflected in the draft of a letter for Ms. Schembera's signature which awarded the lease to Intervenors contigent upon the additional acreages inclusion in the lease.

3/ Obviously, the committee members reasoning on ingress and egress with the Brentwood area's high congestion is of even greater importance and weight when the improper amendment is not taken into consideration.

4/ The actual price difference of 48 cents per square foot between the two bids was considered relatively immaterial by the committee members and in fact was a minor difference.

5/ The difference in rental values is approximately 48 cents a sq. ft. or approximately 20 cents a sq. ft. Both figures are minor compared with the square footage involved and the amount of the lease involved. Together both figures amount to less than 1/10 the annual rent payable under the lease.

6/ Section 255.254 does not require selection of the property with the least energy cost. It requires selection of property with a minimal energy cost.

Here both bids met that requirement. The weight and analysis given to differences in minimal energy costs is similar to the weight and analysis given the differences rental values.

7/ In addition to the above rule, there may be implied criteria for certain bids since competitive bidding is in essence a contractual process. These implied criteria would be very limited since there is a preference in the competitive bidding statutes and rules for written criteria. There is very little reason not to put such criteria in writing.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-4901BID

The facts contained in paragraphs 1, 3, 4, 5, 6, 7, 9, second paragraph

numbered 10, 11, 13, 14, 16 and 17 of Petitioner's Proposed Recommended Order are adopted in substance in so far as material.

The facts contained in paragraph 8 of Petitioner's Proposed Recommended Order are subordinate.

The facts contained in the first paragraph numbered 10 and paragraph 12 of Petitioner's Proposed Recommended Order were not shown by the evidence.

The facts contained in paragraph 15 of Petitioner's Proposed Recommended Order are immaterial.

The facts contained in paragraphs 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12,

13, 14, 15, 16 and 17 of Petitioner's Proposed Recommended Order are adopted in substance, in so far as material.

The facts contained in paragraph 18 of Intervenors' Proposed Recommended Order are subordinate.

The facts contained in paragraph 21 of Intervenors' Proposed Recommended Order are immaterial.

The facts contained in the first sentence of paragraph 19 of Intervenors' Proposed Recommended Order are adopted. The facts contained in the last sentence were not shown by the evidence.

The facts contained in paragraphs 1, 2, 3, 4, 5, 6, 7, 8, 9, 11, 13, 14,

16, 17, 18, 19, 21, 22, 24, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40,

42, 47, 48, 49, 50, 52, 54 and 55 of Respondent's Proposed Recommended Order are adopted, in so far as material.

The facts contained in paragraphs 10, 12, 20, 23, 25, 26, 27, 41, 43, 44,

45, 46, 51 and 53 of Respondent's Proposed Recommended Order are subordinate. The facts contained in paragraph 15 of Respondent's Proposed Recommended

Order are adopted. However, the evidence also showed the District Administrator's real reason for rejecting Petitioner's bid was outside the bid criteria.

COPIES FURNISHED:

Edward Nickinson III, Esquire CARLTON, FIELDS, WARD, EMMANUEL, SMITH, CUTLER AND KENT, P.A.

Harbourview Building Post Office Box 12426

Pensacola, Florida 32582

Rodney Johnson, Esquire District One Legal Counsel Department of Health and

Rehabilitative Services

160 Government Street Post Office Box 8420

Pensacola, Florida 32505-8420

Ms. Alice Wells, Esquire BEGGS & LANE

Seventh Floor Blount Building

3 West Garden Street Post Office Box 12950

Pensacola, Florida 32501

Docket for Case No: 88-004901BID

Orders for Case No: 88-004901BID