STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

EDWARD D. MATTHEWS and )

ROBERT C. WALKER, )

)

Petitioner, )

)

vs. ) CASE No. 89-2529BID

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent, )

and )

)

UNIREALTY SERVICES, INC., )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to notice, an administrative hearing was held in this case in Haines City, Florida, on May 26, 1989, before Daniel M. Kilbride, a duly designated Hearing Officer of the Division of Administrative Hearings (DOAH), at which the parties were represented as follows:

APPEARANCES

For Petitioner: Edward D. "Matt" Matthews, Jr.

2405 Hideaway Court

Tallahassee, Florida 32303

For Respondent: Jack Emory Farley, Esquire

HRS District VI Legal Counsel

4000 West Buffalo Avenue, Room 500

Tampa, Florida 33614

For Intervenor: Neal A. Sivyer, Esquire

and Paul J. Ullom, Esquire Shackleford, Farrior, Stallings

and Evans, P. A.

501 East Kennedy Boulevard Suite 1400

Tampa, Florida 33601 STATEMENT OF THE ISSUES

Whether the Department of Health and Rehabilitative Services acted fraudulently, arbitrarily, capriciously, illegally or dishonestly in issuing an award of bid for HRS Lease No. 590:2057 to Unirealty Services, Inc.

PRELIMINARY STATEMENT

This matter arose when Petitioners filed a formal protest pursuant to Section 120.53, Florida Statutes (1988), and Chapter 28-5, Florida Administrative Code, challenging the Department of Health and Rehabilitative Services' (HRS) award of Lease No. 590:2057 for existing office space in Haines City, Florida, to Unirealty Services, Inc.

No answer or motion responding to Petitioners' formal protest letter was filed by Respondent or Intervenor. No other pleadings, motions, or requests were filed by Petitioner or Respondent. Intervenor's Motion for Intervention was granted on May 22, 1989, and Intervenor's Motion for Attorney's Fees will be addressed herein.

HRS called as witnesses the six members on the On-Site Evaluation Committee, and Michael Akridge, who was the Assistant Facilities Manager for HRS District VI and the contact person for this Invitation to Bid project.

Intervenor called as witnesses Kenneth E. Allen, the owner of a business adjacent to Intervenor's bid site, Kenneth S. Takacs, President of Unirealty Services, Inc., the Intervenor in this matter, and Edward D. Matthews, a Petitioner in this matter. Petitioners called as witnesses William G. Drummond, the City Manager for Haines City, and Sheriar Khorsandian, a realtor who assisted Petitioners in preparing their bid package. Joint Exhibits 1-15 were received into evidence without objection. Petitioners' Exhibits 1-4 and Intervenor's Exhibits 1 and 2 were received into evidence. Ruling was reserved on Petitioners' Exhibit A.

The transcript of the hearing was filed June 13, 1989, and the parties were instructed by the hearing officer to file Proposed Recommended Orders and Memoranda of Law no later than June 28, 1989. Petitioners, Respondent, and Intervenor filed their proposed recommended orders on June 28, 1989, June 22, 1989, and June 30, 1989, respectively. Petitioner also filed a memorandum of law on June 28, 1989, and Intervenor filed a supplemental memorandum of law on July 7, 1989.

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, irrelevant, cumulative or subordinate. Specific rulings on the parties' proposed findings of fact are contained in the Appendix to this Recommended Order.

Based upon all of the evidence, the following Findings of Fact are made.

FINDINGS OF FACT

1. Sometime before January, 1989, The Department of Health and Rehabilitative Services (HRS) requested and received approval from the Department of General Services (DGS) for additional office space to provide for social services in Haines City, Florida. HRS was authorized to procure, through competitive bidding, a lease of 9041 square feet of existing office space, plus or minus 3%.

   
   

2. Public notice that HRS was seeking competitive bids was given by advertisement in four central Florida newspapers. HRS had prepared a document entitled Invitation to Bid for Existing Facilities (ITB), which set forth in detail all of HRS' requirements. The purpose of the ITB was to inform all potential bidders of the minimum requirements for submitting a responsive bid,

   and the specific criteria by which the bids would be evaluated. The evaluation factors and their relative weights were stated in the ITB:

   
   

   Evaluation Criteria

   The successful bid will be that one determined to be the lowest and best. All bids will be evaluated on the award factors enumerated below:

   1. Associated Fiscal Costs

      1. Rental rates for basic term of lease. Evaluated using present value methodology by application of the present value discount rate of %

         (Weighting: 30)

      2. Rental rates for optional renewal of terms of lease. Rates proposed are within projected budgeting restraints of the department.

         (Weighting: 5)

      3. Associated moving costs i.e. furniture, equipment, telephone systems, etc.

      (Weighting: 0)

   2. Location

      1. Proximity of offered space in central or preferred area of map boundaries.

         (Weighting: 10)

      2. Frequency and availability of satisfactory public transportation within proximity of the offered space.

         (Weighting: 5)

      3. The effect of environmental factors, including the physical characteristics of the building

      and the area surrounding it, on the efficient and economical conduct of the departmental operations planned for the requested space.

      (Weighting: 20)

      
      

   3. Facility

      
      

      1. Susceptibility of the design of the space offered to efficient layout and good utilization.

         (Weighting: 20)

      2. Provision of the aggregate square footage in a single building. Proposals will be considered, but fewer points given, which offer the aggregate square footage in not more than two locations provided the facilities are immediately adjacent to or within 15 yards of each other.

         (Weighting: 10)

         TOTAL POSSIBLE 100%

         The bid 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. rental rates

         2. environmental factors

         3. efficient space layout

         
         

         The above areas were important to HRS since the agency would render indigent services to several hundred people every month. The majority of Respondent's clients are served within a 10 day period each month. A great deal of pressure is placed on the surrounding area due to the influx of people. Because of servicing so many people, factors two and three 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.

         
         

   4. Sealed bids were submitted by Intervenor, Unirealty Services, Inc. (bid A), and Petitioners, Messrs. Matthews and Walker (bid B).

      
      

   5. The bids were opened February 20, 1989, and Mr. Michael T. Akridge, former Facilities Services Manager, District VI HRS, determined both bids were responsive.

      
      

   6. At the time the Intervenors submitted their bid, they included documentation which showed that they had an option contract to purchase the subject facility, and an authorization from the optionees (two principals of Intervenors) for Unirealty to act as their agent.

      
      

   7. Both Petitioner's and Intervenor's property were within the mandatory geographical area designated in the bid package.

      
      

   8. Both bids were responsive under the minimum bid specifications and bidder qualifications.

      
      

   9. The District Administrator appointed a bid evaluation committee to review and grade the responsive bids under the criteria established in the bid package, and to recommend to him the committee's choice of lowest and best bid.

      
      

   10. The 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. Six 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 were appointed to the Committee.

       
       

   11. The bid evaluation committee determined that the bid of Unirealty was the "lowest and best."

       
       

   12. The bid evaluation committee consisted of six representatives of the Department who visited each bidders' site and questioned the bidders' representatives.

       
       

   13. Each of the committee members worked with or supervised HRS programs that were to be located in the leased space.

   14. The solicitation for bids provided each bidder, among other things, with the bid evaluation criteria, a 100 point scale, which the committee used to evaluate the bids.

       
       

   15. Each committee member's evaluation scores were averaged and totaled to score Petitioners at 90.8, and Unirealty at 83.9.

       
       

   16. Each committee member gave a higher score to Unirealty.

       
       

   17. The three major bid evaluation criteria were FISCAL COSTS, LOCATION and FACILITY.

       
       

   18. Under the FISCAL COST criterion were three sub-categories: Rental Rates, Renewal Rates, and Moving Costs. For Rental Rates, Petitioners received

       30 points out of 30 possible, and Unirealty got 23.1. For Renewal Rates, Petitioners got 5 out of 5 possible points, and Unirealty received 3.7 points. No points were awarded for Moving Costs.

       
       

   19. The evaluation committee did not assess points for Rental or Renewal Rates. These were scored by Michael T. Akridge, bid manager, based on a present value analysis of bidders' proposed rates.

       
       

   20. Mr. Akridge did not give the Committee the points for Rental and Renewal Rates until after they had completed their evaluations of the LOCATION and FACILITY criteria.

       
       

   21. The LOCATION criterion also had three sub-categories: Central Area--

       10 points--with both bidders receiving 9.3; Public Transportation--5 points-- which both bidders received; and, Environmental Factors--20 points--out of which Petitioners received 12.8 points and Unirealty 20 points.

       
       

   22. The Environmental Factors sub-category included building physical characteristics and surrounding area and their effect on the efficient and economical conduct of Department operations.

       
       

   23. Unirealty received a higher score than Petitioner because the committee believed its building had a better appearance, and was in better shape. The area surrounding the building was more open, while Petitioners' building was in a less desirable neighborhood with a bar or liquor store and bus station nearby which could create problems for clients because of transients.

       It had far more window space which creates a better work environment, and allows staff to be watchful of clients and their children outside, and the windows would be tinted. The windows at Petitioner's site were limited and no more could be added. Unirealty had more adjacent parking spaces, with handicapped parking closer to the building, and part of it was fenced which provided added protection to clients and staff. Petitioners' site had adjacent businesses whose patrons were using some of the parking spaces which the committee felt could create a problem. The Unirealty building could have an outside food stamp issuance facility which would be far more accessible to clients and to make the lobbies less crowded. It had an existing alarm system. It did not have side streets adjacent to the building, thus there would be less traffic congestion and therefore safer for clients; and, it had outside gathering areas where clients could go to smoke.

       
       

   24. Of the three sub-categories under FACILITY, Petitioners received 11.8 points out of 20 for Layout/Utilization and Unirealty received 19.7 points; for Single Building, both bidders received 10 points out of 10 possible.

   25. For the Layout/Utilization sub-category Unirealty received more points because its building configuration was more flexible and conducive to design of interior space, with less maze effect. The members of the committee each testified that it was important that the Unirealty building had no support poles to get in the way as they did in Petitioners' building. The support poles in Petitioner's building created a safety problem for clients and inhibited the location of desks and corridors. At Unirealty's site each worker could have a window, and mechanical and service areas could be put in the center of the building, with a playroom for clients' children. It provided a better restroom location near the front of Petitioner's building and lobby areas, and clients would not have to wander through work areas to get to the restrooms.

       Unirealty's building provided better control of clients' movements and thus better security. Members of the committee also upgraded the Unirealty building because its pitched roof was less likely to leak and its air conditioning was zoned thus providing better air quality and temperature control. At Unirealty there was better ingress and egress, and entry ways could be added. This could not be done at Petitioners' site. The Unirealty building could have different entrances for each HRS program, with separate lobbies for each program with less client congestion and better control.

       
       

   26. During the Committee members inspection of the sites they were told of an existing security alarm system already in place at the Unirealty site and were told that system would remain in place. When asked, the Petitioner's representative was unsure if his client would install a similar system at their site. A security system for the entire building was not included in the bid specifications, and it was improper for the committee to give Unirealty extra points for this unsolicited item.

       
       

   27. The proposed lease agreement calls for 9041 square feet of office space and a minimum of 66 parking spaces. Unirealty offered 72 parking spaces and Petitioner offered 75. The committee awarded more evaluation points to the Unirealty site based on future expansion capability of the building and the existing additional on-site parking spaces which were visible at the site at the time of inspection. The committee erroneously believed that the extra square footage of building space and extra parking spaces would necessarily be available to HRS if and when it might expand its offices. Future expansion was not in the bid specifications and it was clearly erroneous for them to have included this factor in their bid evaluation.

       
       

   28. The evaluation committee included the improper bid considerations in their evaluation of the Unirealty property. The two improper factors cannot be considered here.

       
       

   29. The unanimous recommendation of the evaluation committee was clearly to award the lease to the Intervenor. 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 Petitioners presented greater problems for design and flexibility due to the rectangular configuration of the building. The other consideration was that the physical characteristics of the Unirealty site and the surrounding area were considered far superior to the Petitioner's site. A close review of each evaluation sheet and the testimony of each committee member at the hearing shows that the improper factors were not so heavily weighted as to invalidate the committee recommendation.

   30. 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 inspection of the two buildings and without influence from the other committee members. In essence, the committee felt that Intervenor's property was the better property for the money. Importantly, every committee member came to the conclusion that Intervenor'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 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.

       
       

   31. Over an eight year period the Petitioner's rental cost was significantly lower than the Intervenor's. However, it is clear the legitimate considerations of the committee were crucial enough to override awarding the lease to the lowest bidder. 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.

       
       

   32. After the committee recommendation was scored and tabulated, Mr. Akridge requested the committee chair, Ms. Gail Newell, to prepare a draft letter of the proposed bid award. This was done in collaboration with the other committee members.

       
       

   33. Mr. Michael T. Akridge then prepared the bid award letter for the signature of the Administrative Services Director based on the draft letter. In it the two improper considerations were mentioned.

       
       

   34. The authority to award the lease to Unirealty was approved on March 8, 1989, by King W. Davis, Director of General Services for HRS based on the bid award letter, dated February 26, 1989.

       
       

       CONCLUSIONS OF LAW

       
       

   35. 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.

       
       

   36. 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. 590:2057 since the bid specification required a minimum of 9,041 square feet.

       
       

   37. 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 for 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 awards to the lowest and best bidder."

   38. 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.

       
       

   39. 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 Intervenor's bid met the minimum requirements set forth in the bid submittal form and, accordingly, are conforming bids.

       
       

   40. Additionally, the Department'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.

       
       

       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).

       
       

       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 can 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.

       
       

       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 rule for written criteria.

       
       

   41. The evidence showed that Intervenor's bid was the bid the agency determined was the lowest and best bid. The reasons given for the unanimous selection of the higher priced bid outweighed the cost factor. The reason given by the bid committee in support of the Intervenor's property were overwhelmingly legitimate reasons within the bid 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, if they are substantial. In this case they were not.

       
       

   42. The burden of proof and going forward with the evidence is upon the unsuccessful bidder which seeks to establish that it is entitled to the award, or that the award to another bidder is arbitrary, capricious, illegal, or violative of established procedures. J. W. C. Co., Inc. v. Department of Transportation, 396 So.2d 778 (Fla. 1st DCA 1981).

       
       

   43. As the low bidder of the subject property and substantially affected party in this proceeding, it was the Petitioner's burden to establish at the hearing that the Department's intended award of the lease in question to the Intervenor was not the result of an honest exercise of the Department's discretion, but rather resulted from illegality, fraud, oppression or misconduct. Liberty County v. Baxter's Asphalt and Concrete, Inc., 421 So.2d 505 (Fla. 1982).

       
       

   44. A state agency has wide discretion is soliciting and accepting bids and its decision based on an honest exercise of this discretion may not be overturned even if reasonable persons disagree with the outcome. C. H. Barco Contracting Co. v. State, Dept. of Transportation, 483 So.2d 796, 800 (Fla. 1st DCA 1986); Liberty County v. Baxter's Asphalt and Concrete, Inc., 421 So.2d 505, 507 (Fla. 1982).

       
       

   45. The improper reasons cited by the committee and approved by the District Administer were insubstantial and insufficient to taint the entire bidding process. There is no credible evidence in this case to show that the Department acted fraudulently, arbitrarily, illegally or dishonestly. State, Dept. of Transportation v. Groves-Watkins Constructors, 530 So.2d 912, 914 (Fla. 1988). Thus, petitioner has failed to sustain its burden in this case.

       
       

   46. Petitioners filed their formal written notice of protest on March 30, 1989, which stated the specific grounds on which the protest was based. No motion to amend or supplement said protest was filed prior to or at the hearing. During the course of the testimony, Petitioners sought to introduce testimony relating to issues not raised in the formal written notice of protest. Respondent and Intervenor timely objected to the Petitioners' attempt to raise issues not alleged in the notice of protest on the basis of surprise and prejudice. The objection was sustained. Petitioners' had nearly sixty days from the date of the filing of the notice of protest to the date of the hearing to move to amend their notice of protest which serves as the initial pleading in bid cases. To allow new substantive issues to be raised at the final hearing

without adequate notice to the other parties so they could be prepared to respond to them is unfair and prejudicial. See Rules 221-6.004(3), 4 and 28- 5.201(2), Florida Administrative Code. See Also: Fla.R.Civ.P. 1.110(b); Hart Properties, Inc. v. Slack, 159 So.2d 236 (Fla. 1963)

RECOMMENDATION

Based on the foregoing, the Hearing Officer recommends that the Secretary of the Department of Health and Rehabilitative Services enter a final order awarding lease number 590:2057 to Unirealty Services, Inc., as the lowest and best bidder.

DONE and ENTERED this 21st day of July, 1989, in Tallahassee, Leon County, Florida.

DANIEL M. KILBRIDE

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 21st day of July, 1989.

APPENDIX

1. Petitioner's Proposed Findings of Fact:

   
   

   The facts contained in paragraphs 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 12, 15,

   23, 26, 27, 28, 30, 34, 38, 39 (in part), 40, 41, 42, 45, 46, 47, 48, 49, 50,

   51, 53, 64, 65, 67, 69, 70, 71, 76, 77, 81, 83 (in part) are adopted in substance in so far as material.

   Paragraphs 14, 16, 17, 18, 21, 22, 24, 25, 29, 33, 36, 37, 73, 74, 80 are

   rejected as conclusions of law.

   Paragraphs 13, 19, 20, 44, 54, 59, 60, 61, 63, 68, 72, 75, 778, 82, are

   rejected as not supported by the evidence.

   Paragraphs 31, 32, 35, 43, 52, 55, 56, 57, 58, 62, 66 are rejected assubordinate or immaterial.

   
   

2. Respondent's Proposed Findings of Fact:

   
   

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

   13, 14, 15, 16, 17 are adopted in substance in so far as they are material.

   
   

3. Intervenor's Proposed Findings of Fact:

The facts contained in paragraphs 1-17 are adopted in substance in so far as they are material.

COPIES FURNISHED:

Edward D. Matthews, Jr. 2405 Hideaway Court

Tallahassee, Florida 32303

Gregory L. Coler Secretary

Department of Health and Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, FL 32399-0700

Jack Emory Farley, Esquire HRS District VI Legal Counsel

4000 West Buffalo Avenue, Room 500

Tampa, Florida 33614

Neal A. Sivyer, Esquire Paul J. Ullom, Esquire

Shackleford, Farrior, Stallings and Evans, P. A.

501 East Kennedy Boulevard Suite 1400

Tampa, Florida 33601

Sam Power, Clerk Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, FL 32399-0700

John Miller, Esquire Department of Health and

Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, FL 32399-0700

Docket for Case No: 89-002529BID

Orders for Case No: 89-002529BID