STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DOUBLE E CONSTRUCTORS, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 91-1017BID

)

SCHOOL BOARD OF PALM BEACH )

COUNTY, FLORIDA, WASHINGTON ) ELEMENTARY SCHOOL, ADDITIONS/ ) REMODELING, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to written Notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Daniel Manry, held a formal hearing in the above-styled case on March 1, 1991, in West Palm Beach, Florida.

APPEARANCES

For Petitioner: Edward J. Pozzuoli, Esquire

Miller, Beilly & Pozzuoli Broward Financial Centre

500 East Broward Boulevard, Suite 1900 Ft. Lauderdale, Florida 33394

For Respondent: Robert A. Rosillo, Esquire

Office of the General Counsel 3970 RCA Boulevard, Suite 7010

Palm Beach Gardens, Florida 33410-4283 STATEMENT OF THE ISSUES

The ultimate issue for determination in this proceeding is whether Respondent's proposed determination that Petitioner's bid is non-responsive and Respondent's proposed rejection of all bids is arbitrary, capricious, or beyond Respondent's scope of discretion as a state agency.

PRELIMINARY STATEMENT

By letter dated February 8, 1991, Petitioner filed a formal written protest of Respondent's preliminary determination that Petitioner's bid for additions and remodeling of one of Respondent's elementary schools was non-responsive and Respondent's proposed rejection of all bids. The matter was referred to the Division of Administrative Hearings (the "Division") for assignment of a hearing officer, by letter dated February 11, 1991. The letter was received by the Division and assigned to the undersigned on February 15, 1991. A Notice of Hearing was issued on February 18, 1991, and the formal hearing was scheduled for March 1, 1991, in West Palm Beach, Florida.

At the formal hearing, the parties submitted 10 joint exhibits which were admitted in evidence pursuant to the stipulation of the parties. Petitioner presented the testimony of three witnesses, and Respondent presented the testimony of one witness.

A transcript of the formal hearing was requested by Respondent and filed with the undersigned on March 6, 1991. Proposed findings of fact and conclusions of law were timely filed by Respondent on March 12, 1991, and by Petitioner on March 18, 1991. 1/ The parties proposed findings of fact are addressed in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. A request for bids to remodel and make additions to Washington Elementary School was issued by Respondent on August 15, 1990, for Project No. 0191-8210. The request for bids included requests for a base work (the "base bid") and additional work described in various alternates (the "total bid"). Respondent had the option of selecting one or more alternates or none of the alternates. Bids were filed by four bidders on January 15, 1990.

   
   

2. Bid tabulations were posted on January 23, 1991. Petitioner was the lowest bidder, and Select Contracting, Inc. ("Select"), was the second lowest bidder. Petitioner's base bid was in the amount of $1,406,500. Petitioner's bid for the alternates eventually selected by Respondent was in the amount of

   $1,594,300. 2/

   
   

3. The bid documents required bidders to include a bid bond in an amount not less than five percent of the bid. Petitioner included a bid bond with its bid in the amount of $75,000 which was more than five percent of its base bid but less than five percent of the total bid calculated after taking into account the alternates selected by Respondent.

   
   

4. Respondent recommended to its Superintendent that the contract should be awarded to Petitioner. Select filed a bid protest on January 25, 1991, seeking an informal hearing. Select alleged that Petitioner's bid was not responsive because it failed to include a bid bond for five percent of Petitioner's total bid, including the alternates selected by Respondent. Select included a bid bond for five percent of its total bid, including the alternates selected by Respondent.

   
   

5. Respondent conducted an informal hearing on February 6, 1991, and proposed that all bids should be rejected and the project re-advertised. Respondent determined that Petitioner's bid was non-responsive in that it failed to include a bid bond in an amount equal to five percent of the total bid, including all alternates selected by Respondent. Respondent further determined that relevant language in the bid documents is ambiguous and may create an economic advantage for bidders who provide a bid bond in an amount less than that provided by other bidders. In a written analysis of the basis for recommending the rejection of all bids, the General Counsel stated:

   
   

   In the instant case, since bid amount is not specifically defined by the SCHOOL BOARD, one bidder may receive an unfair economic advantage over another by only including in its bid amount the cost for obtaining a bond

   which was less than the actual bid amount, (i.e. base bid plus alternates).

   
   

   The only reason that Respondent did not regard the amount of Petitioner's bid bond as a minor irregularity was that Respondent wanted to assure that all bidders were placed on ". . . an equal playing field . . ." by avoiding an unfair economic advantage for one or more bidders. 3/

   
   

6. Relevant language in the bid documents which defines the amount of the required bid bond is ambiguous. The Advertisement For Bid, in relevant part, requires that bids ". . . must be accompanied by a bid bond or cashier's check in an amount not less than five percent (5%) of the bid . . . ." Section 3.05(d) of the Instructions to Bidders refers bidders to Section 3.08 for purposes of the bid bond. Section 3.08 in relevant part requires bids to be accompanied by a bid bond ". . . of not less than five percent (5%) of the amount of the Bid .

   . . ." The bid proposal form, however, provides that the bidder ". . . further agrees that the security in the form of a Bid Bond, or Cashier's Check in the amount of not less that five percent (5%) of the total Bid Price . . . accompanies this Bid "

   
   

7. A bid bond in an amount equal to five percent of the base bid satisfies the requirements in the bid documents for a bid bond in all but one instance. A bid bond in an amount not less than five percent of the base bid is not consistent with the representation in the proposal form that a bidder has included a bid bond equal to five percent of the total bid price.

   
   

8. Respondent's bid documents have historically required a bid bond for only five percent of the base bid. The reference in the bid proposal form to a bid bond equal to five percent of the total bid is a recent change made by Respondent and is limited to the bid proposal form. The inclusion of a bid bond for only five percent of the base bid is consistent with Petitioner's historical practice in bidding previous jobs offered by Respondent.

   
   

9. Petitioner obtained no unfair economic advantage over Select by including a bid bond for only five percent of the base bid while Select included a bid bond equal to five percent of the total bid, including the alternates selected by Respondent. The uncontroverted evidence establishes that both Petitioner and Select obtained their respective bid bonds at no cost to either bidder. Companies that issue bid bonds, including the companies that issued bid bonds to Petitioner and Select, do not impose a charge for issuing a bid bond in the ordinary course of doing business. Such companies make their money if and when they issue a performance and payment bond for the successful bidder. 4/

   
   

10. Respondent did not know at the time it formulated its proposed agency action that no unfair economic advantage was gained by a bidder who submitted a bid bond for five percent of the base bid rather than five percent of the total bid. Respondent was uncertain of the economic advantage derived from submitting a lower bid bond, if any. Counsel for Select represented that an economic advantage was gained by Petitioner. Respondent decided to reject all bids and look ". . . for . . . direction from a Hearing Officer. "

    
    

11. Petitioner is ready, willing, and able to contract for and perform the work necessary to complete the Project. Petitioner is a pre-qualified contractor for projects undertaken by Respondent. Petitioner has a bonding limit substantially in excess of that required to complete the Project and substantial experience in similar projects for the Broward County School Board. Respondent

    is confident and has no concern over Petitioner's ability to complete the Project. 5/

    
    

    CONCLUSIONS OF LAW

    
    

12. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter in this proceeding. The parties were duly noticed for the formal hearing.

    
    

13. Petitioner has the burden of proof. Petitioner must show by a preponderance of the evidence that Respondent's proposed agency action would be arbitrary, capricious, or beyond the scope of Respondent's discretion as a state agency. Capeletti Brothers, Inc. v. State Department of General Services, 432 So.2d 1359, 1363 (Fla. 1st DCA 1983); Volume Services Division v. Canteen Corp.,

    369 So.2d 391, 395 (Fla. 2d DCA 1979); Mayes Printing Company v. Flowers, 154 So.2d 859, 864 (Fla. 1st DCA 1963); William A. Berbusse, Jr., Inc. v. North Broward Hospital Dist., 117 So.2d 550 (Fla. 2d DCA 1960). 6/

    
    

14. Bid proposals containing material or substantial deviations from the requirements of an invitation for bid are not responsive. Harry Pepper & Associates, Inc. v. City of Cape Coral, 352 So.2d 1190, 1192-1193, (Fla. 2nd DCA 1977); cf. Robinson Electrical Co. v. Dade County, 417 So.2d 1032, 1034 (Fla. 3rd DCA 1982). 7/ A material or substantial deviation in a bid proposal cannot be waived. Robinson Electrical, 417 So.2d at 1034 (citing Harry Pepper & Associates, 352 So.2d 1190).

    
    

15. A deviation is material or substantial if its waiver would either: (a) deprive the public body of an assurance that a contract will be entered into, performed, and guaranteed in accordance with specified requirements; or (b) adversely affects competitive bidding. Robinson Electrical, 417 So.2d at 1034. A determination of whether a deviation is material or substantial must be made based on the facts and circumstances present in a particular case.

    
    

16. Petitioner's inclusion of a bid bond for five percent of Petitioner's base bid, instead of five percent of Petitioner's total bid, including alternates selected by Respondent, does not deprive Respondent of an assurance that a contract will be entered into, performed, and guaranteed in accordance with bid specifications. The uncontroverted evidence establishes that Petitioner is a pre-qualified contractor for Respondent, has substantial experience in performing similar projects for the Broward County School Board, has bonding limits well in excess of those necessary to perform the subject project, and is otherwise ready, willing, and able to complete this Project. Furthermore, Respondent considers the asserted deficiency in Petitioner's bid bond to be de minimis.

    
    

17. Petitioner's inclusion of a bid bond for five percent of Petitioner's base bid, instead of five percent of Petitioner's total bid, including alternates selected by Respondent, does not adversely affect competitive bidding. A deviation adversely affects competitive bidding if its waiver would either place a bidder in a position of advantage over other bidders or otherwise undermine the necessary common standard of competition. Robinson Electrical,

    417 So.2d at 1034. The uncontroverted evidence establishes that Petitioner gained no unfair economic advantage over Select by including a bid bond for only five percent of Petitioner's base bid. 8/

    
    

18. The purpose of this proceeding is to formulate final agency action, not to review action taken earlier and preliminarily. Capeletti Brothers v.

    State, Department of General Services, 432 So.2d 1359, 1363 (Fla. 1st DCA 1983); Couch Construction Company, Inc. v. Department of Transportation, 361 So.2d 172,

    176 (Fla. 1st DCA 1978); McDonald v. Department of Banking and Finance, 346 So.2d 569, 584 (Fla. 1st DCA 1977). In formulating final agency action, the undersigned may consider competent and substantial evidence of facts and circumstances as they exist up to and including the date of the formal hearing. Baptist Hospital, Inc. v. State, Department of Health and Rehabilitative Services, 500 So.2d 620, 625 (Fla. 1st DCA 1987); Turro v. Department of Health and Rehabilitative Services, 458 So.2d 345, 346 (Fla. 1st DCA 1984). Evidence that Petitioner gained no unfair economic advantage, therefore, may be considered in recommending final agency action even though such evidence was not known to Respondent at the time Respondent formulated its proposed agency action. 9/

    
    

19. Respondent proposes to reject all bids in order to prevent Petitioner from gaining an unfair economic advantage when the uncontroverted evidence establishes that Petitioner has gained no unfair economic advantage. Such action by Respondent would be arbitrary and capricious. Although Respondent has wide discretion in awarding contracts to responsible bidders, Respondent can not act arbitrarily and capriciously when deciding whether to award a contract. Groves-Watkins Constructors v. State, Department of Transportation, 511 So.2d 323, 328 (Fla. 1st DCA 1987). Accordingly, Respondent does not have unbridled discretion to reject all bids with or without cause. Wood- Hopkins Contracting Co. v. Roger J. Au & Son, Inc., 354 So.2d 446, 450 (Fla. 1st DCA 1978).

    
    

20. Public bidding requirements serve many purposes including protection against collusive contracts, prevention of favoritism toward contractors, and the assurance of fair competition upon equal terms to all bidders. Even if requirements in the bid documents for a bid bond, when considered together, are interpreted as requiring a bid bond for five percent of the total bid, including the alternates selected by Respondent, Petitioner's failure to comply with such requirements is not a material or substantial deviation which should not be waived by Respondent. Rather, it is a minor irregularity having de minimis consequences. Such an irregularity creates no unfair economic advantage for any bidder and has no adverse impact on the ability of Petitioner to complete the Project. 10/

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner's written formal protest be GRANTED and the

contract awarded to Petitioner.

DONE AND ENTERED in Tallahassee, Leon County, Florida, this 3rd day of April, 1991.

DANIEL MANRY

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 3rd day of April, 1991.

ENDNOTES

1/ Proposed findings of fact and conclusions of law were required to be filed no later than 10 days after the date the transcript was filed on March 6, 1991. March 16, 1991, fell on a Saturday, and Petitioner filed its proposed findings of fact and conclusions of law on the next business day, March 18, 1991.

2/ Alternates selected by Respondent were: (a) a bus turn around area for

$55,000; (b) an area for parent drop off and parking for $121,500; and (c) certain exterior lighting for $11,300. The aggregate cost of alternates selected by Respondent was $187,800. The sum of the base bid ($1,406,500) and the aggregate cost of alternates selected by Respondent ($187,800) is

$1,594,300.

3/ The bid documents provide that bid bonds are intended as liquidated damages in the event the lowest bidder fails to enter into a contract after being selected as the lowest bidder. However, Respondent considers any deficiency in Petitioner's bid bond to be de minimis. A bid bond is primarily used to cover the incremental cost to Respondent when a low bidder refuses to enter into a contract and Respondent must enter into a contract with a higher bidder. A bid bond also functions as liquidate damages for Respondent in the event that all bidders refuse to enter into a contract with Respondent. The amount of Petitioner's bid bond was sufficient for both purposes of a bid bond.

4/ Only one company within the entire industry imposes a service fee for issuing bid bonds. That service fee is a flat $50 fee. The amount of the fee is not determined as a percentage of the face amount of the bid bond. A flat fee of $50 is de minimis in comparison to a bid in excess of $1 million and would not impose an unfair economic advantage on a bidder required to pay such a fee.

5/ Petitioner has been the lowest bidder and completed numerous projects for another school board in the area; the Broward County School Board. Although Petitioner has bid on a number of Respondent's previous projects, this is the first time Petitioner has been the successful bidder. Select has been the lowest bidder and successfully completed numerous projects for Respondent.

6/ See also System Development Corp. v. Department of Health and Rehabilitative Services, 423 So.2d 433, 434 (Fla. 1st DCA 1982); Glatstein v. City of Miami,

399 So.2d 1005 (Fla. 3rd DCA 1981)(pertaining to the burden of proof in an administrative proceeding involving a protest of a request for proposals).

7/ See also Glatstein v. City of Miami, 399 So.2d at 1008 (pertaining to deviations in responses to requests for proposals).

8/ Tropabest Foods, Inc. v. Florida Department of General Services, 493 So.2d

50 (Fla. 1st DCA 1986). The submission of either a cashier's check instead of a required bid bond or a bid bond instead of a required certified check was found not to be a material deviation. Robinson Electrical, 417 So.2d at 1034-1035. Deviations in a bid proposal consisting of the failure to comply with the form required by a public body and the failure to list exceptions to the successful bidder's proposal for maintenance and service of a city water system were found

to be deviations that could be waived. Any subsequent exceptions to the maintenance and service proposed by the successful bidder could be treated by the public body as non-binding proposed alternatives. Technical Sales of Jacksonville, Inc., v. City of Jacksonville, 258 So.2d 839 (Fla. 1st DCA 1972). See also System Development Corporation v. Department of Health and Rehabilitative Services, 423 So.2d 433 (Fla. 1st DCA 1982)(holding that proposed technological enhancements, innovations, and improvements that include advanced, state-of-the art equipment and processes do not constitute material irregularities in bid proposals submitted in response to requests for proposals).

9/ Respondent included in its proposed conclusions of law an alternate recommendation that this matter be remanded to permit Respondent an opportunity to formulate proposed agency action in light of the evidence adduced in the formal hearing. Such action would circumvent the purpose of this proceeding.

Accordingly, Respondent's alternate request for remand is denied.

10/ As a general proposition, an unfair economic advantage may be created for an unsuccessful bidder by rejecting all bids on the basis of deviations by the successful bidder that are neither substantial nor material. The potential for creating an unfair economic advantage by rejecting all bids may be greater when the unsuccessful bidder is customarily the successful bidder for the public body. There is no evidence that the creation of an unfair economic advantage for Select was the purpose for Respondent's proposed rejection of all bids.

APPENDIX TO RECOMMENDED ORDER

Petitioner submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted.

Petitioner's Proposed Findings of Fact

Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection

Respondent submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted.

Respondent's Proposed Findings of Fact

Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection

1. Accepted in Finding 1

2. Accepted in Findings 2, 4

3-7 Accepted in Findings 5-6

1. Accepted in Findings 2, 4

2. Accepted in Finding 5

COPIES FURNISHED:

Hon. Betty Castor Commissioner of Education The Capitol

Tallahassee, FL 32399-0400

Sydney H. McKenzie General Counsel Department of Education The Capitol, PL-08

Tallahassee, FL 32399-0400

Mr. Thomas J. Mills, Superintendent Palm Beach County School Board

3323 Belvedere Road

West Palm Beach, FL 33402

Robert A. Rosillo, Esq. Office of the General Counsel

Palm Beach County School Board 3970 RCA Boulevard, Suite 7010 Palm Beach Gardens, FL 33410-4283

Edward J. Pozzuoli, Esquire Miller, Beilly & Pozzuoli Broward Financial Center Suite 1900

500 E. Broward Boulevard Ft. Lauderdale, FL 33394

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 91-001017BID

Orders for Case No: 91-001017BID