STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

PHILIP J. PROCACCI and WHARTON )

INVESTMENT GROUP, INC., )

)

Petitioner, )

)

v. ) CASE NO. 90-2459BID

) DEPARTMENT OF HEALTH AND REHABILITATIVE ) SERVICES, )

)

Respondent. )

)

)

GAIL W. CURTIS, Trustee, )

)

Petitioner, )

)

1. ) CASE NO. 90-2666BID

   ) DEPARTMENT OF HEALTH AND REHABILITATIVE ) SERVICES, )

   )

   Respondent. )

   )

   
   

   RECOMMENDED ORDER

   
   

   Pursuant to notice, a formal hearing was held in this case on June 28, 1990, in Gainesville, Florida, before the Division of Administrative Hearings, by its designated Hearing Officer, Diane K. Kiesling.

   
   

   APPEARANCES

   
   

   For Petitioner Robert A. Sweetapple Procacci, et al.: Attorney at Law

   465 East Palmetto Park Road Boca Raton, Florida 33432

   
   

   For Petitioner Harry R. Detwiler, Jr. Curtis: Attorney at Law

   Holland & Knight

   Post Office Drawer 810 Tallahassee, Florida 32302

   and

   
   

   Gloria Fletcher Attorney at Law

   515 North Main Street, Ste. 300 Gainesville, Florida 32607

   For Respondent: Frances S. Childers

   District Legal Counsel Department of HRS

   1000 Northeast 16th Avenue Gainesville, Florida 32609

   
   

   STATEMENT OF ISSUES

   
   

   The issues are 1) Whether the Department of Health and Rehabilitative Services (HRS) properly rejected all bids on Lease Bid No. 590:2133, and 2) Whether either Petitioner is entitled to award of Lease Bid No. 590:2133 as the lowest and best responsive bidder.

   
   

   PRELIMINARY STATEMENT

   
   

   Petitioners Procacci and Wharton Investment Group, Inc., (Wharton) presented the testimony of John M. Curtis, Donald J. Cerlanek, T.C. Little, Jr., Mary Virginia Goodman, Philip J. Procacci, Mark J. Williams, and Mary Hawkes.

   Procacci Exhibits 1-5 and 7-9 were admitted in evidence. Procacci Exhibit 6 was proffered. Procacci Exhibit 9 is the deposition testimony of Steven Gertel and is admitted subject to the various objections of the parties which were filed after the hearing. Gail W. Curtis, Trustee, (Curtis) presented the testimony of Donald J. Cerlanek, T.C. Little, Jr., Mary Virginia Goodman, Philip J. Procacci, Mark J. Williams, Mary Hawkes, and John M. Curtis. Curtis Exhibits 1-4 were admitted in evidence. HRS presented the testimony of Don Cerlanek and had HRS Exhibit 2 admitted in evidence.

   
   

   The complete transcript of the proceedings was filed on August 14, 1990.

   The parties timely filed their proposed findings of fact and conclusions of law on September 4, 1990. All proposed findings of fact and conclusions of law have been considered. A specific ruling on each proposed finding of fact is made in the Appendix attached hereto and made a part of this Recommended Order.

   
   

   FINDINGS OF FACT

   
   

   1. On October 16, 1989, HRS issued an Invitation to Bid (ITB) on Lease Bid No. 590:2133 for 43,634 net square feet of office space in Ocala, Marion County, Florida.

      
      

   2. The bid package contained specifications, evaluation criteria, and numerical weight to be assigned to each criteria.

      
      

   3. The bid package indicated the area of emphasis placed on the facility by HRS which focused on client safety, public access, availability of public transportation, and parking. The emphasis on each area was indicated by the weighted points to be given in each area.

      
      

   4. On January 24, 1990, HRS received bids from both Wharton and Curtis. Both bids were responsive. Curtis submitted the apparent low bid and Wharton submitted the apparent second lowest bid.

      
      

   5. Curtis, as Trustee, is the owner of the property which is presently occupied by HRS in Ocala, Florida. The lease on these premises was awarded in 1980 and expires in 1990. Curtis purchased the leasehold in April of 1988 while HRS was a tenant and subject to the existing lease.

   6. Philip J. Procacci is the President of Procacci Development which is the general partner in Wharton Investment Group.

      
      

   7. The actual bids submitted were not offered into evidence by any party in this proceeding.

      
      

   8. Susanne Casey, the District Administrator of HRS District 3, is ultimately responsible for the leasing of all HRS facilities in the district, including facilities in Marion County.

      
      

   9. Casey appointed a bid evaluation committee to review and evaluate the responsive bids based on the criteria stated in the bid package. The committee was to make a recommendation regarding the lowest and best bidder.

      
      

   10. Before the bids were opened, the bid evaluation committee met and agreed upon objective parameters for each of the evaluation criteria. These parameters established standards against which each committee member could independently evaluate and award points on each bid.

       
       

   11. The evaluation criteria in the bid package assigned points in three major categories: associated fiscal costs, location, and facility. Associated fiscal coasts were further broken down into (a) rental rates for the basic lease term, (b) rental rates for optional renewal terms, and (c) associated moving costs. The maximum points available in each of these categories were fixed in the bid package and could not be altered by the committee.

       
       

   12. These criteria are standard in a lease procurement through out the state.

       
       

   13. State regulations require that all bids for lease space in the state evaluate rental rates using present value methodology. See Rule 13M-1.029, Florida Administrative Code. This means that the proposed rental rates in all bids are calculated to present value dollars for the purpose of comparison. The Department of General Services has a computer program, the sole function of which is to calculate the present value of the rental rates. The program has nothing to do with the assignment of points under the criteria, but is used as a tool to allow comparison of the bids.

       
       

   14. The present value of the Curtis bid was $662,464 lower than the present value of the Wharton bid.

       
       

   15. The rental rates were awarded points under criterion 1a of associated fiscal costs. The committee awarded the full 20 points to Curtis and awarded 5 points to Wharton. The committee members awarded these points in accordance with the standards and formula they had agreed on prior to the bid opening.

       
       

   16. The formula the committee used was not the more commonly used formula, but it was reasonable and rational and it was fairly applied to the bids in this case.

       
       

   17. There is no rule or policy of HRS or of the Department of General Services (DGS) that mandates that a particular formula be used in awarding points for the rental rate criterion 1a. There is a formula that HRS and DGS recommend as guidance of a methodology that is appropriate and reasonable, but the recommendation is not binding on the committee or on the District Administrator.

   18. There was another criterion of associated moving costs considered as part of the associated fiscal costs. Each committee member awarded 10 points to Wharton and 8 points to Curtis on this item. Wharton received 10 points because it sent a letter with its bid in which it offered to pay all moving costs incurred by HRS in a move to its building. Curtis received 8 points because HRS already occupied two of its buildings and would have limited moving costs in moving into the two additional buildings included in its bid.

       
       

   19. The bid specifications and bid package contained no indication that a bidder could offer to pay all moving costs as part of its bid. In fact, Wharton submitted its letter offering to pay all moving costs as a result of its discussion with one committee member, T.C. Little. Mr. Little is also the General Services Manager for HRS District 3 and is involved with all bids in the district. Mr. Little interpreted the bid specifications to permit such an offer even though the bid specifications were silent on the issue.

       
       

   20. At page 5 of the bid package, it is clearly stated that questions concerning the bid are to be directed to the project contact person. It further states:

       
       

       Any questions which might be prejudicial to other bidders will be answered in writing in the form of a clarification to the bid and will be sent to all prospective bidders.

       
       

       On that same page, the bid specifications address proposal of alternatives by stating:

       
       

       For evaluation purposes each bid submitted will be evaluated as to adherence to the specifications requested. If a bidder desires to propose alternatives to the specified specifications, he/she may do so by attaching a sheet to the bid submittal document titled Alternatives. However, these alternatives will not be presented to the bid evaluation committee for use in comparison of bids and can only be considered after an award of bid is made.

       
       

   21. The project contact person was Donald J. Cerlanek and any request for clarification should have been addressed to him and not to Mr. Little.

       
       

   22. Mr. Little's gratuitous advice and interpretation of the bid specifications made to Wharton and not to all bidders was incorrect, violated the terms of the bid specifications, and was improper. The bid specifications do not permit an offer to pay all moving costs to be considered in the award of points under the associated moving costs criteria. Such an offer can only be considered as an alternative proposal and cannot be considered by the bid evaluation committee in comparing the bids.

       
       

   23. Under the standards established by the committee, Wharton should have received 5 points on the associated moving costs criterion instead of 10 points.

   24. The committee members individually evaluated each bid and awarded points within the parameters they had established. Except for the incorrect award of points on the associated moving costs criteria, the scoring method and award of points by each committee member was rationally and reasonably related to the relative importance of each criterion as established in the bid package and was neither arbitrary nor capricious.

       
       

   25. Each committee member came to the conclusion that the Curtis bid was the lowest and best based on the award of points in each member's independent evaluation. On February 13, 1990, they recommended in writing that Curtis be awarded the bid.

       
       

   26. On February 19, 1990, the District Administrator adopted the committee's recommendation and reported the recommendation to Steven Gertel, the assistant staff director for HRS Facilities Services in the Office of General Services.

       
       

   27. On March 7, 1990, Mr. Gertel sent a memo to the District Administrator. The memo said:

       
       

       Review of the bid evaluation committee's recommendation has disclosed that the committee used a non-standard method of evaluating present value of rental rate for the lease term. Please provide an explanation of this variation to accepted practice.

       
       

   28. In fact, the committee used the established DGS formula to calculate the present value of rental rates. However, the committee used its own formula to award points based on the present value of rental rates. There was nothing impermissible about the committee's actions or formula.

       
       

   29. Because of a fear of a bid protest, Ms. Casey, the District Administrator, sent a notice rejecting all bids on the project. No other reason was articulated for rejecting all bids. The fear of a bid protest is not a legally sufficient reason to reject all bids, particularly because it is not stated in the bid specifications and is based on speculation about a future event which may never occur.

       
       

   30. HRS did reserve the right to reject all bids in the bid package, but it may not do so for an improper purpose. Fear of a bid protest is not a proper purpose.

       
       

   31. Wharton alleged and attempted to show some level of collusion between Curtis and Mr. Cerlanek of HRS. While Mr. Curtis had several contacts with Mr. Cerlanek about the project, such contacts are not per se inappropriate because Mr. Cerlanek is the District 3 Lease Coordinator and is the proper person to discuss future projects with potential bidders. No competent, substantial evidence was presented to show that Mr. Cerlanek discussed anything that was not public record or anything that gave Mr. Curtis any advantage in the bid process. Mr. Cerlanek did not tell Mr. Curtis what would be in the bid package or what would be needed to insure award of the bid to Curtis.

       
       

       CONCLUSIONS OF LAW

       
       

   32. The Division of Administrative Hearings has jurisdiction of the parties to and subject matter of these proceedings. Sections 120.53(5) and 120.57(1), Florida Statutes.

   33. Section 255.25(3), Florida Statutes, and Rule 13M-1.015(1), Florida Administrative Code, provide that no state agency shall enter into a lease for 2,000 square feet or more of office space in a privately owned building except by advertisement and receipt of competitive bids and award to the lowest and best bidder.

       
       

   34. Further, Rules 10-13.012 and 13M-1.015(5), Florida Administrative Code, reserve to the agency the right to reject all bids and reinstate the competitive bid process if necessary. However, the Florida Supreme Court established the standard for examining the rejection of all bids by an agency in Department of Transportation v. Groves-Watkins Constructors, 530 So.2d 912 (Fla. 1988). The agency may not act fraudulently, arbitrarily, illegally, or dishonestly in rejecting all bids and it may not subvert the competitive bidding process. An agency's honest exercise of its discretion will not be overturned even if its actions are erroneous or if a reasonable person may disagree.

       
       

   35. These same standards apply to the evaluation of the bids. Central to the integrity of the competitive bidding process is the requirement that an agency's actions be expressed within the bid specifications and evaluation criteria created by it. Eccelston Properties, Ltd. v. Department of Health and Rehabilitative Services, 11 F.A.L.R. 1184 (Case No. 88-4901BID, February 8, 1989). The agency has wide discretion in soliciting and accepting bids, but its decision must be based on an honest exercise of this discretion. Liberty County

       v. Baxter's Asphalt & Concrete, Inc., 421 So.2d 505, 507 (Fla. 1982). Agency action will be reversed if it subverts the purpose of competitive bidding or if the agency acted fraudulently, arbitrarily, illegally or dishonestly. Groves- Watkins, supra.

       
       

   36. The agency issuing the ITB must evaluate the bids received solely on the criteria stated in the ITB and prospective bidders are entitled to rely on the completeness of the terms stated therein. Aurora Pump, Division of General Signal Corporation v. Goulds Pumps, Inc., 424 So.2d 70 (Fla. 1st DCA 1982).

       
       

   37. While the ultimate decision-making authority for HRS bid awards is the District Administrator pursuant to Section 20.19(7)(c)2, Florida Statutes, that authority must be exercised within the limits set forth above.

       
       

   38. In applying these standards to the present case, it first becomes apparent that rejection of all bids for the sole reason of fear of a bid protest is improper. An agency may not reject a bid for reasons not given weight in the bid evaluation criteria because that decision strikes at the very heart of the integrity of the competitive bidding process and is therefore arbitrary and capricious. Groves-Watkins, supra, and Eccelston, supra. Since the bids were wrongly rejected, the remaining issue is which bidder is the lowest and best.

       
       

   39. The formula used by the committee in awarding points for the rental rates was a reasonable and rational method and was not contrary to any methodology established by statute, rule or binding policy. The only error on the part of the evaluation committee was the evaluation of and award of points for Wharton's improperly proposed alternative offer to pay all moving costs. This offer was not based on the bid specifications and should not have been considered by the committee. The net result of this is only to decrease the points that should have been awarded to Wharton.

   40. Even without this recalculation necessitated by Wharton's alternative offer, it is ineluctably clear that the lowest and best bidder was and is Curtis. Since the bids were wrongly rejected by HRS, the bid should be made to the lowest and best bidder.

RECOMMENDATION

Based upon 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 the bid in Lease No. 590:5133 to Gail Curtis, as Trustee, as the lowest and best bidder.

DONE and ENTERED this 27th day of September, 1990, in Tallahassee, Florida.

DIANE K. KIESLING

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 27th day of September, 1990.

APPENDIX TO THE RECOMMENDED ORDER

IN CASE NOS. 90-2459BID AND 90-2666BID

The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case.

Specific Rulings on Proposed Findings of Fact Submitted by Petitioner, Wharton

1. Each of the following proposed findings of fact is adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 2-4(5) and 19(27).

2. Proposed findings of fact 1, 5, 11-17, 20, 29, 30, 38, 39, 45, 46, 51, and

57 are subordinate to the facts actually found in this Recommended Order.

3. Proposed findings of fact 6, 8-10, 18, 21, 24, 25, 27, 31-34, 37, 40-44, 48-

50, 52, and 55 are irrelevant.

1. Proposed findings of fact 7, 28, 56, 58, and 59 are unsupported by the competent, substantial evidence.

   
   

2. Proposed findings of fact 22, 23, 26, 35, 36, 38, 47, 53, and 54 are mere summaries of testimony and are not appropriately framed as proposed findings of fact.

Specific Rulings on Proposed Findings of Fact Submitted by Petitioner, Curtis, as Trustee

1. Each of the following proposed findings of fact is adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 4(11), 7&8(13), 9(14), and 15(25).

   
   

2. Proposed findings of fact 1-3, 5, 6, 10-12, and 16-26 are subordinate to the facts actually found in this Recommended Order.

   
   

3. Proposed findings of fact 13, 14, and 27-29 are unnecessary.

Specific Rulings on Proposed Findings of Fact Submitted by Respondent, Department of Health and Rehabilitative Services

1. Each of the following proposed findings of fact is adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: Part I paragraphs 2(1&2), 3(4), 4(8), 5(30), Part II paragraphs 2(1&2), 3(3), 4(4), 5(8), 6(9), 8(10), 19(25), and 20(26).

   
   

2. Proposed findings of fact Part I paragraphs 1 and 6 and Part II paragraphs 1, 7, 9, 10, 12-18, and 21-24 are subordinate to the facts actually found in this Recommended Order.

   
   

3. Proposed finding of fact 11 is irrelevant.

Copies furnished to:

Robert A. Sweetapple Attorney at Law

465 East Palmetto Park Road Boca Raton, FL 33432

Harry R. Detwiler, Jr. Attorney at Law Holland & Knight

Post Office Drawer 810 Tallahassee, FL 32302

Gloria Fletcher Attorney at Law

515 North Main Street, Ste. 300 Gainesville, FL 32607

Frances S. Childers District Legal Counsel Department of HRS

1000 Northeast 16th Avenue Gainesville, FL 32609

Sam Power, Clerk Department of Health and

Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, FL 32399-0700

Docket for Case No: 90-002459BID

Orders for Case No: 90-002459BID