STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SCAN-OPTICS, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 91-6545BID

) DEPARTMENT OF REVENUE, )

)

Respondent, )

)

and )

)

RECOGNITION EQUIPMENT )

INCORPORATED, )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to written notice a formal hearing was held in this case before Larry J. Sartin, a duly designated Hearing Officer of the Division of Administrative Hearings, on October 30 and 31, 1991, in Tallahassee, Florida.

APPEARANCES

For Petitioner: James W. Linn, Esquire

Rosa H. Carson, Esquire Carson, Linn & Adkins 1711-D Mahan Drive

Tallahassee, Florida 32308

For Respondent: Gene T. Sellers

Assistant General Counsel Department of Revenue Post Office Box 6668

Tallahassee, Florida 32314-6668

For Intervenor: William E. Williams, Esquire

Rex D. Ware, Esquire

HUEY, GUILDAY, KUERSTEINER & TUCKER, P.A.

106 East College Avenue Highpoint Center, Suite 900 Post Office Box 1794 Tallahassee, Florida 32302

STATEMENT OF THE ISSUES

Whether the Respondent, the Department of Revenue, acted in a fraudulent, arbitrary, illegal or dishonest manner in deciding to award a contract to the

Intervenor, Recognition Equipment Incorporated, based upon the Intervenor's response to Request for Proposal No. 90/91-261?

PRELIMINARY STATEMENT

On or about June 24, 1991, the Respondent, the Department of Revenue, issued a Request for Proposal No. 90/91-261 seeking proposals for optical scanning equipment. Three responses to the Request for Proposal were received. On or about September 19, 1991, the Respondent issued a Notice of Intent to Award Contract indicating its decision to award a contract to the Intervenor, Recognition Equipment Incorporated.

On or about October 4, 1991, the Petitioner, Scan-Optics, Inc., filed a Formal Written Protest and Petition for Formal Administrative Proceeding with the Respondent challenging its initial decision. A protest to the Respondent's award decision was also filed by GTE Vantage Solutions.

The requests for hearing were filed by the Respondent with the Division of Administrative Hearings on October 14, 1991. The challenge of GTE Vantage Solutions was assigned case number 91-6544BID. The Petitioner's challenge was assigned case number 91-6545BID. Both cases were assigned to the undersigned.

On October 18, 1991, Recognition Equipment Incorporated filed a Petition to Intervene. The Petition was granted by an Order entered October 21, 1991.

On October 25, 1991, GTE Vantage Solutions filed a Notice of Voluntary Dismissal. Case number 91-6544BID was, therefore, closed by Order entered October 29, 1991.

At the formal hearing the Petitioner presented the testimony of James Richard Evers, Edward J. Tracy and Wallace Leavelle (expert witnesses). The Petitioner presented rebuttal testimony from James Joseph Everett, Gerald Jerome Johnson and Michael Dwayne Mentor. The Petitioner also presented the deposition testimony of George Brown and Pat Gonzalez. Petitioner offered eighteen exhibits into evidence. All were accepted except Petitioner's exhibits 14 and 15.

The Respondent presented the testimony of Mr. Evers. No exhibits were offered as Respondent exhibits.

The Intervenor called no witnesses. The Intervenor presented the deposition testimony of Jerry Putzer and Mr. Leavelle. Two exhibits offered by the Intervenor were accepted into evidence.

Finally, the parties offered eleven joint exhibits. All were accepted into evidence.

The Petitioner and the Intervenor have filed proposed recommended orders containing proposed findings of fact. The Respondent has filed a proposed recommended order adopting the proposed findings of fact of the Intervenor. A ruling on each proposed finding of fact has been made either directly or indirectly in this Recommended Order or the proposed finding of fact has been accepted or rejected in the Appendix which is attached hereto.

FINDINGS OF FACT

1. The Parties.

   
   

   1. The Respondent, the Department of Revenue (hereinafter referred to as the "Department"), is an agency of the State of Florida.

      
      

   2. On or about June 24, 1991, the Department issued Request for Proposal on No. 90/91-261 (hereinafter referred to as the "RFP").

      
      

   3. The Petitioner, Scan-Optics, Inc. (hereinafter referred to as "Scan- Optics"), is an unsuccessful responder to the RFP.

      
      

   4. The Intervenor, Recognition Equipment Incorporated (hereinafter referred to as "REI"), is the successful responder to the RFP.

      
      

   5. Scan-Optics and REI have standing to participate in this proceeding.

      
      

2. Development of the RFP.

   
   

   1. For a number of years prior to the formal hearing of this case, the Department has been interested in purchasing optical scanning equipment for use in processing certain tax returns filed with the Department.

      
      

   2. The Department made inquiries and performed investigations concerning available optical scanning equipment as a result of its interest in the equipment.

      
      

   3. The Department contacted private producers of optical scanning equipment, including Scan-Optics and REI, and other state agencies that already had acquired optical scanning equipment. The Department observed Scan-Optics and REI optical scanning equipment in use by purchasers of the equipment in Florida and other States.

      
      

   4. During the Spring of 1991, the Department's budget was sufficient to allow the Department to purchase optical scanning equipment and the Department actually began to plan for such a purchase.

      
      

   5. The Department ultimately decided to acquire the equipment through a request for proposal instead of an invitation to bid because the Department knew what function the equipment was to serve but not how best to fulfill this function.

      
      

   6. James R. Evers, the Assistant Director of the Department's Division of Tax Processing, was assigned responsibility for drafting the specifications for the equipment to be acquired through the request for proposal.

      
      

   7. Mr. Evers travelled to several States with agencies that already had acquired optical scanning equipment, observed the equipment in use and discussed the equipment with personnel familiar with the equipment.

      
      

   8. Mr. Evers acquired and reviewed the specifications used in Florida and in other States in purchasing optical scanning equipment. Mr. Evers acquired requests for proposals and invitations to bid from other States and reviewed them.

   9. After preparing the specifications for the equipment to be included in the RFP, the Department submitted the specifications to the Information Technology Resource Procurement Advisory Council (hereinafter referred to as the "ITRPAC").

      
      

   10. The ITRPAC was created pursuant to Section 287.073(5), Florida Statutes, and is composed of the Director of the Division of Purchasing of the Department of General Services, the executive administrator of the Information Resource Commission and the Director of the Governor's Office of Planning and Budgeting.

       
       

   11. The ITRPAC, pursuant to the duty imposed on it by Section 287.073(5)(b), Florida Statutes, reviewed and approved the Department's specifications.

       
       

   12. The weight of the evidence failed to prove that the Department's actions in drafting the RFP were fraudulent, arbitrary, illegal or dishonest.

       
       

3. Issuance of the RFP.

   
   

   1. On June 24, 1991, the Department issued the RFP, No. 90/91-261, "Scanning Equipment Operation".

      
      

   2. Scan-Optics reviewed the RFP and concluded that several of the requirements of the RFP were product-specific; that only REI's equipment could meet some of the specifications.

      
      

   3. Based upon Scan-Optics' concerns, Scan-Optics sent a letter to the Department objecting to the RFP as "being a directed procurement to an individual company, namely Recognition Equipment Incorporated." In particular, Scan-Optics questioned why the features on pages 10 through 13 "which define a single vendor's product specifications . . . " were "mandatory" features. Scan- Optics requested that all REI-specific requirements be removed from the RFP.

      
      

   4. Pursuant to the RFP, a pre-proposal conference was held by the Department on July 16, 1991. This conference was attended by, among others, representatives of Scan-Optics and REI.

      
      

   5. The purpose of the pre-proposal conference was to provide written responses to written questions submitted by prospective vendors. Prospective vendors were informed through provisions of the RFP of the following concerning modifications to the RFP:

      
      

      1. Any question concerning the RFP was required to be submitted in writing. No interpretation of the RFP would be considered binding unless issued in writing by the Department. See paragraph 5 of the General Conditions of the RFP.

         
         

      2. Paragraph 5 of the General Conditions of the RFP also provided that protests to any part of the RFP were to be filed in writing as specified in Rule 13A-1.006, Florida Administrative Code.

         
         

      3. Section 1.4 of the RFP provided the following:

      
      

      No negotiations, decision, or action shall be initiated or executed by the offeror as a result of any discussions with any Department

      employee. Only those communications which are in writing from the purchasing office may be considered as a duly authorized expression on behalf of the Department.

      
      

   6. During the pre-proposal conference written questions that had previously been submitted by prospective vendors, including Scan-Optics' question concerning the "mandatory" features of section 3 of the RFP, and the Department's written responses thereto were distributed. Some discussion of the questions and responses also took place and some oral questions were answered.

      
      

   7. During the pre-proposal conference the Department's representative answered specific questions concerning the Department's desire to acquire "full multifont, set upper case, lower case alpha/numeric and hand print" capability. The questions to, and the comments of, the Department's representative during the pre-proposal conference were not reduced to writing or otherwise included in the RFP.

      
      

   8. Although the Department answered the oral questions asked during the pre-proposal conference, the Department's answers were not inconsistent with the intent of the Department evidenced in the RFP as discussed, infra. The evidence failed to prove that the Department's actions during the pre-proposal conference were fraudulent, arbitrary, illegal or dishonest in light of the clear directions of the RFP concerning modifications thereto being in writing.

      
      

   9. In response to Scan-Optics' initial complaint about the RFP, the Department changed its "mandatory" features, beginning at Section 3.2 of the RFP, to "desired" features. This the Department did through the issuance of Addendum No. 1, which was issued by the Department after the pre-proposal conference on July 17, 1991, and included all written questions submitted prior to the conference and the Department's responses thereto.

      
      

   10. No other written modification to the RFP was made by the Department other than Addendum No. 1 and the attached written questions and responses.

       
       

   11. Other than the questions raised by Scan-Optics concerning the vendor- specific issue and the written questions attached to Addendum No. 1, no written clarification of the RFP was requested by Scan-Optics or any other prospective vendor.

       
       

   12. No written protest to the RFP was filed by Scan-Optics or any other prospective vendor.

       
       

   13. The evidence failed to prove that the Department's actions in issuing the RFP or it actions between the issuance of the RFP and the filing of proposals by vendors (i.e., the conduct of the pre-proposal conference) were fraudulent, arbitrary, illegal or dishonest.

       
       

4. Purpose of the RFP.

   
   

   1. The RFP included the following "overview" of why the Department issued the RFP:

      
      

      The Department of Revenue is planning the purchase of scanning equipment to enhance its data entry capabilities. The Department currently utilizes the Tartan Data Entry

      System to capture data from tax returns and related documents in a key to disk environment.

      . . . Scanning equipment would enable the Department to capture handwritten or typed data through optical character recognition. It is estimated that over 90% of typed data and 70% of handwritten data can be captured through optical character recognition. The initial application of Intangible Tax Returns represented over 68 million keystrokes during the last year.

      
      

      . . . .

      
      

      Joint Exhibit 1 (Tab D), section 1.2, page 1.

      
      

   2. The Department provided the following more specific indication with regard to what it was seeking through the RFP:

      
      

      It is the intent of the State to procure a total turn-key system comprised of all equipment, software, and services associated with optical scanning/optical character recognition of source data to provide output data for further processing at Florida Department of Revenue via magnetic tape or telecommunications. The system must be current state-of-the-art, allowing for future integration of imaging techniques into the scanner system as a field upgrade without replacing installed equipment. . . . A turn- key proposal is envisioned which will include installation, the design of the initial forms, scanner and edit and reject/re-entry system programming, operations and programmer training on-site, and any other support services essential to the successful operation of the system. It is requested that the successful vendor propose a minimum of 100 hours of software support for future applications to be allocated at the discretion of the Department. Reference Current System for details regarding the two Intangible Tax Form(s) and Documentary Tax Forms which we propose as initial scanning applications.

      
      

      We believe that the Section below appropriately sets forth the hardware and software sub-objectives including a scanner/imaging system, but we would like any potential Offerors to know that our overall objectives are a continuing improvement in all areas of operation at Florida Department of Revenue. In order of importance, the following are our goals:

      . . . .

      
      

      Joint Exhibit 1 (Tab D), section 3.1, page 9. The RFP went on to list a number of objectives (generally referred to as lower costs, enhance taxpayer service, improve quality, accelerate cycle time and decrease paper handling) and approximately 30 "desired" features the Department wanted vendors to address.

      Joint Exhibit 1 (Tab D), sections 3.2 through 3.31, pages 10-16.

      
      

   3. There were three forms attached to the RFP which the RFP indicated the Department intended to process with the system initially purchased pursuant to the RFP. Each form was identified and the potential data to be collected was identified by indicating the data elements currently captured, their size and their class. Although the data elements currently captured included only numeric data for two of the forms and numeric and some alpha data for the third form, the RFP did not specify that all data currently captured would necessarily be captured as a result of the RFP. The RFP also indicated that "[s]ubstantial changes to the layout will occur at design time" indicating that the forms were to be redesigned to accommodate a vendor's proposed method of collecting data from the forms.

      
      

   4. The RFP did not require that the Department acquire equipment which would read all Department forms which may ultimately be processed with optical scanning equipment or even that the exact three forms attached to the RFP for initial processing be processed as a result of any purchase under the RFP.

      
      

   5. The intent of the Department reflected in the RFP and as explained during the hearing of this matter was for vendors to provide the Department with details concerning their full capability (equipment and costs) to process Department materials with their optical scanning equipment and allow the Department to select a combination of equipment which would initially allow the processing of the three forms, in whatever format could best serve the Department's needs, and allow the Department to later upgrade and increase its use of optical scanning equipment.

      
      

   6. The RFP requested that vendors identify each component of their systems, including all recommended features for the initial task. Joint Exhibit

      1 (Tab D), section 5.2, page 19.

      
      

   7. Vendors were also required to provide itemized prices for all components of their proposals:

      
      

      This tab must show the itemized prices for all components to include hardware, software, cables/connectors, shipping, installation, training, maintenance, start-up supplies/ equipment and any other goods/services.

      Pricing information must include all items that may be needed to provide a configuration of equipment and software to the Department. Any recurring charges must also be shown.

      Any quantity or price discounts offered in the proposal should be clearly stated.

      Pricing information must be submitted in the formats provided. It is imperative that adequate pricing information be included in the proposal. The Department cannot purchase any item against the proposal if adequate

      pricing information is not included in the proposal. Therefore, pricing information should be provided for optional features, equipment, software and services that are not a required part of any particular configuration herein, but may be desired if changes become necessary to any configurations purchased by the Department.

      . . .

      
      

      . . . .

      
      

      Joint Exhibit 1 (Tab D), section 5.2, page 20.

      
      

5. Responses to the RFP.

   
   

   1. On or about August 6, 1991, Scan-Optics, REI and GTE Vantage Solutions submitted responses to the RFP.

      
      

   2. All responses to the RFP were determined to be responsive to the RFP and were evaluated and scored. The evidence failed to prove that the Department's determination that the responses to the RFP were responsive was fraudulent, arbitrary, illegal or dishonest.

      
      

6. Evaluation of the Proposals to the RFP; General.

   
   

   1. Section 4.3 of the RFP established the criteria for evaluation of proposals to the RFP. A total of 35 points were available for "costs", 30 points for "functional requirements", 30 points for "future requirements" and 5 points for "tax related experienced".

      
      

   2. The Department established a four person committee (hereinafter referred to as the "Committee"), to review and evaluate proposals to the RFP. Those individuals were Mr. Evers, George Brown, Larry Neilson and Gerald Johnson. Pat Gonzalez, an employee of the Information Resources Commission, also served as a non-voting member of the Committee.

      
      

   3. Subsequent to the filing of the proposals to the RFP, the Committee met on several occasions to discuss scoring criteria and to review lists of equipment submitted by each vendor.

      
      

   4. The members of the Committee reviewed and scored each proposal individually. After individually scoring each proposal, the Committee met and reviewed the individual scores. The individual scores were averaged and tabulated by Ms. Gonzalez.

      
      

   5. REI received an average score of 30 points for the functional requirements of section 3 of the RFP, an average score of 23 points for section

      5 of the RFP and 5 points for section 6 of the RFP. Scan-Optics received average scores of 24.19, 12.5 and 5, respectively, for these three categories.

      
      

   6. Adding the scores for cost, discussed infra, the final tabulation of scores was as follows:

      REI 85.16

      Scan-Optics 76.69

      GTE Vantage 54.72

      
      

   7. Based upon the foregoing, the Department decided to award the contract under the RFP to REI.

      
      

7. Evaluation of the Proposals to the RFP; Costs.

   
   

   1. On August 6, 1991, when the proposals to the RFP were first opened, a preliminary bid tabulation sheet was completed. REI's proposed unit price was

      $1,389,025.00, and Scan-Optics' proposed unit price was $774,868.00.

      
      

   2. The Committee subsequently reduced the unit price of REI's proposal by

      $440,658.00, from $1,389,025.00 to $948,367.00. This reduction was made based upon a decision of the Committee, after a review of the REI proposal, to select a configuration of REI's equipment which the Committee believed comported with the Department's intent as evidenced by the RFP and would perform the tasks envisioned in the RFP. This decision was reasonable and consistent with the RFP in light of the following:

      
      

      1. The RFP informed vendors that the Department reserved the right to select any configuration of equipment submitted by vendors. Paragraph 7, General Conditions of the RFP, provided, in pertinent part:

         
         

         As the best interest of the State may require, the right is reserved to make award(s) by individual item, group of items, all or none, or a combination thereof; to reject any and all proposals or waive any minor irregularity or technicality in proposals received. . . .

         
         

      2. At Tab 11, Section 5 of the RFP, it was provided, in pertinent part:

         
         

         Offerors are required to include all equipment and software availability for their series or family of equipment proposed. The Department shall use these to determine the final ordered configuration from the selected

         proposal and from time to time, for additional equipment or software. This will also allow the Department the option of selecting equipment from State contract or under this RFP/Contract. This will also allow the Department to implement functions either undefined or unforeseen.

         
         

         The Department reserves the right to acquire any and all of the equipment, software and services necessary to meet the requirements of this proposal.

         
         

      3. Vendors were also required by Tab 11, Section 5 of the RFP to submit itemized prices for all components of a proposal: "Pricing information must include all items that may be needed to provide a configuration of equipment and software to the Department."

      4. REI's proposal included its entire array of equipment with itemized prices. This information allowed the Committee to equalize the vendors' proposals and, thus, allow a fair comparison of the two vendors. It also allowed the Committee to perform its task of deciding what configuration of equipment would best meet the Department's needs. Scan-Optics' proposal did not include separate itemized prices. Therefore, the Department was not able to decide the most advantageous configuration of Scan-Optics' equipment.

      
      

   3. Without the reduction in costs, REI's proposal was more extensive and more expensive than Scan-Optics' proposal. The Committee discussed the matter and questioned the Department's purchasing director as to whether REI's proposal could be reduced pursuant to the RFP to make it more compatible with the RFP. After being assured that such a reduction was permissible under the RFP, the Committee removed some of the REI proposed vocabulary kits and the costs of those kits. The Committee was unable to make a similar reduction to Scan- Optics' proposal because Scan-Optics had not itemized the cost of its equipment.

      
      

   4. With the reduction in REI's unit price made by the Committee, REI received a total of 27.16 points for the cost component during the evaluation process. The total score awarded to REI was 85.16.

      
      

   5. If the Committee had not given REI the reduction in unit price, REI would have only received 7.26 points for cost and its total score would have been 65.26. Scan-Optics received 76.69 total points (including 35 points for "cost"), which is higher than the points REI would have received but for the Committee's reduction of REI's unit price.

      
      

   6. REI was contacted by the Department to verify that the Department's understanding of the pricing information contained in REI's response to the RFP was correct. The evidence failed to prove that this contact allowed REI to provide any additional information to the Department or was otherwise improper. The Department did not contact Scan-Optics because Scan-Optics had not provided any information upon which the Department could have evaluated Scan-Optics' proposal in a similar manner as it had REI's. Therefore, there was no similar conclusion reached concerning Scan-Optics to be verified.

      
      

   7. The evidence failed to prove that the Department's evaluation of the costs of the vendors or the award of cost points to REI or Scan-Optics was fraudulent, arbitrary, illegal or dishonest.

      
      

8. Evaluation of the Proposals to the RFP; An Oklahoma Tax Commission Evaluation Form.

1. Prior to the evaluation of the proposals to the RFP Mr. Evers requested that an evaluation form used by the Oklahoma Tax Commission be provided to him. Mr. Evers made this request because he wanted to use the evaluation format he knew the Oklahoma Tax Commission had used. The evaluation form provided to Mr. Evers included the actual results of the Oklahoma Tax Commission's evaluation of proposals it had received. REI was awarded the Oklahoma Tax Commission contract.

   
   

2. Mr. Evers provided a copy of the Oklahoma Tax Commission's evaluation to one of the members of the Committee and told him to give a copy to one other member. The evidence failed to prove if the fourth member and Ms. Gonzalez were provided a copy.

3. The evaluation general point scale on the Oklahoma Tax Commission evaluation form was used by the Committee:

   
   

   1. Item not bid or does not meet specifications.

   2. Partially meets specifications.

   3. Meets specifications.

   4. Exceeds specifications.

   5. Substantially exceeds specifications.

   ? Need additional information from vendor.

   
   

4. Although Mr. Evers could have avoided all appearance of impropriety by distributing a blank Oklahoma Tax Commission evaluation form, the weight of the evidence failed to prove that Mr. Evers' actions in distributing the Oklahoma Tax Commission evaluation form was fraudulent, arbitrary, illegal or dishonest. The evidence failed to prove that the Committee was in fact influenced by the Oklahoma Tax Commission evaluation form in any substantial way.

   
   

   I. Evaluation of the Proposals to the RFP; REI's TARTAN XP80.

   
   

5. REI's proposal included equipment named the TARTAN XP80. This equipment is the basic optical scanning system of REI. The XP80 system proposed by REI is capable of including from 40 to 720 templates.

   
   

6. The Department, after evaluation of the proposals, decided that the XP80 with only 40 templates would be sufficient to meet the Department's initial goal as set out in the RFP. The Department concluded that it was not necessary to acquire the XP80 with its 720 template capacity. The 40 template system is the system which the Committee evaluated with regard to the cost of the REI proposal.

   
   

7. Section 3.17 of the RFP included the following desired characteristic:

   
   

   Optical Character Recognition - The document scanning system must be capable of employing both feature matching and feature analysis recognition techniques. The system must be capable of processing all standard OCR fonts in single font, multiple font, or multi-font mode under program control. The Offeror must provide a list of all fonts recognized by their system and any restrictions that apply. Vendor to define number of fonts recognized by his system, i.e., single font, multiple font, omnifont, and multifont.

   
   

8. The specifications of Section 3.17 of the RFP were not "mandatory" requirements of the system ultimately to be acquired by the Department. The Department requested information concerning these capabilities, but did not specify in the RFP that the system it would ultimately purchase for its initial project would contain the specifications of Section 3.17 of the RFP.

   
   

9. In light of Scan-Optics own challenge to the provisions of section 3 of the RFP as "mandatory" and the Department's decision to eliminate the reference to the provisions of section 3 as "mandatory", it is clear that there was no requirement that the ultimate system acquired pursuant to the RFP had to

   be capable of processing all standard OCR fonts in single font, multiple font, or multifont mode under program control.

   
   

10. The evidence failed to prove that REI did not provide information concerning its capabilities to meet the specifications set out in Section 3.17 of the RFP or that the information provided was inaccurate.

    
    

11. Two of the forms to be initially processed (forms 601I and 601C) only required capability to read numeric characters. The third form (form 219) could, in a limited number of instances, contain numeric and alpha characters. In evaluating the proposals, the Department decided that, to the extent that alpha characters may be contained on form 219's, the alpha characters could be ignored without creating significant problems in processing.

    
    

12. The Department's conclusion that the XP80 with only 40 templates can handle the initial task contemplated by the RFP was based upon the fact that the forms may be redesigned and the conclusion that the number of instances when alpha characters appear will be insignificant enough to ignore.

    
    

13. There was evidence presented that the XP80 with only 40 templates cannot efficiently and successfully process the three forms to be initially processed. There was also evidence that the XP80 with only 40 templates will not be successful even if the forms are redesigned. The weight of the evidence failed, however, to substantiate this claim.

    
    

14. Whether the XP80 with only 40 templates can successfully process the three forms depends upon the environment in which the forms are completed. It is possible that if the exact environment is known so that the number and type of fonts that may be used is known, only 40 templates can process the forms coming from that environment. The Department has not determined what exactly the environment in which the forms will be completed is. The Department did, however, consider the probable environment in reaching its decision. More importantly Scan-Optics did not prove what that environment is. Nor did Scan- Optics prove that the environment is, or will be, one which will prevent the XP80 with only 40 templates from being successfully used as contemplated by the RFP.

    
    

15. The evidence proved that an XP80 with a minimum of 200 templates up to a maximum of 350 templates could be used to successfully carry out the task contemplated in the RFP even in a random environment (one in which any number of fonts might be used to complete a form). If up to at least 280 templates were purchased the XP80 could handle the processing of the forms and, adjusting the score of REI for the additional costs and additional performance characteristics of an XP80 with up to 280 templates, REI would still be the highest scorer. Exactly where the cut-off between the number of additional templates which it may be necessary to acquire according to evidence presented by Scan-Optics (between 200 and 350) and the resulting reduction in REI's score to below Scan- Optic's score would occur was not proved.

    
    

16. The evidence failed to prove that the actions of the Department with regard to its decision to acquire an XP80 with as low as 40 templates was fraudulent, arbitrary, illegal or dishonest.

    
    

    1. Evaluation of the Proposals to the RFP; Table C.

       
       

17. Table C of the RFP required that vendors list any optional features, which would enhance optical scanning operations: "LIST ANY OPTIONAL FEATURES

    WHICH ENHANCE PERFORMANCE OF THE SCANNING EQUIPMENT OPERATION". Joint Exhibit 1

    (Tab D), page 30.

    
    

18. REI did not provide a completed Table C with its proposal.

    
    

19. REI's proposal included additional vocabulary kits containing from 40 to 720 templates and the cost of those kits in Table B of its proposal. Table B was to be used to provide the following: "LIST EACH AND EVERY COMPONENT AND FEATURES REQUIRED FOR INSTALLATION AND FULL OPERATIONAL STATUS." REI's proposal was consistent with these instructions.

    
    

20. The fact that the vocabulary kits involved in the award of points for costs were included on Table B and were not included on Table C does not mean that the Department could not reject vocabulary kits as unnecessary for its initial purchase based upon other information contained in REI's proposal. The inclusion of the kits on Table B merely indicates that, to acquire REI's total capability with an XP80, up to 720 templates are required for "FULL OPERATIONAL STATUS." That does not mean that the Department intended or was required by the RFP to actually acquire "FULL OPERATIONAL STATUS."

    
    

21. Section 3.9 of the RFP provided the following desired feature:

    
    

    Document Imaging - The proposed document scanning system must be capable of being field upgraded with image cameras for both front and back imaging of documents. Imaging must occur on both sides of the document in a single pass. The proposed system must be capable of taking partial images of the document within the confines of windows, zones, or strips. When and if imaging is added to the proposed system, it must not slow any other operations or functions of the system below that of normal throughput speed of the identical system without the added imaging capability.

    
    

22. The following question, submitted in writing to the Department, and the following written answer from the Department, were included in Addendum No. 1:

    
    

    48. Is the cost to retrofit to imaging included in evaluation criteria?

    
    

    Answer: Future costs will be considered.

23. REI responded to section 3.9 as follows: Exceeds Requirement: The proposed TARTAN

    XP80 can be upgraded to imaging exactly as

    defined in Section 3.9. In addition, image output can be passed to an extremely wide range of image processing systems including those from IBM, NCR, Unisys, FileNet, Plexus and many others.

    Joint Exhibit 3 (Tab H), page 5.

    
    

24. REI failed to list the equipment necessary to meet the desired feature of section 3.9, or the price of such equipment, on Table C of its proposal. This information, however, was included by REI on Table B according to the testimony of Mr. Evers. To the extent that Table C was not provided, REI's failure to provide the information to be contained thereon was a minor irregularity.

    
    

25. The RFP did not require that the Department evaluate the proposals based upon the cost of future upgrades. The RFP only required that the Department determine the ability of vendors to upgrade and REI's proposal gave the Department sufficient information to accomplish this requirement.

    
    

26. The evidence failed to prove that the Department's failure to reject REI's proposal because of its failure to provide Table C or that the Department's grading of REI's proposal in light of the failure to include a Table C with its proposal was fraudulent, arbitrary, illegal or dishonest.

    
    

    1. Evaluation of the Proposals to the RFP; The One- Year Warranty.

       
       

27. The RFP required that a one-year warranty be included with each proposal. REI's proposal only included a 90-day warranty.

    
    

28. REI's proposal, however, included the cost of one-year's maintenance costs of $61,587.00.

    
    

29. The evidence failed to prove that the Department's acceptance of REI's warranty and maintenance costs was fraudulent, arbitrary, illegal or dishonest.

    
    

    1. Evaluation of the Proposals to the RFP; Grading of Sections 3.2 through 3.31.

       
       

30. Addendum No. 1 to the RFP modified, among other things, three of the desired features of section 3 of the RFP. In particular, sections 3.5, 3.11 and

    3.20 of the RFP were modified.

    
    

31. The scores awarded to Scan-Optics by some of the members of the evaluation committee for its response to sections 3.5, 3.11 and 3.20 were lower than the scores awarded to REI.

    
    

32. The evidence failed to prove the actual reason why the scores awarded to Scan-Optics pursuant to sections 3.5, 3.11 and 3.20 of the RFP were lower than the scores awarded to REI or that the lower scores were based upon the requirements of those sections without regard to the modifications of Addendum No. 1. The impact on the scores of Scan-Optics, even if attributable to error by the Department, would be minimal.

    
    

33. The evidence failed to prove that even if the Department had graded Scan-Optics' proposal without taking into account the modifications of Addendum No. 1 to sections 3.5, 3.11 and 3.20, that the Department acted in a fraudulent, arbitrary, illegal or dishonest manner.

    
    

    1. Conclusion.

34. Based upon the foregoing, it is concluded that the evidence failed to prove that the Department's actions from the time that it developed the RFP to the announcement of its proposed award of the contract under the RFP to REI was fraudulent, arbitrary, illegal or dishonest. Any unfairness to Scan-Optics was a result of the Department's broad discretion pursuant to the RFP to decide what to acquire as a result of the RFP and the apparent confusion of Scan Optics, and probably REI, caused by the RFP. The RFP was not, however, challenged.

    
    

    CONCLUSIONS OF LAW

    
    

35. The Division of Administrative Hearings has jurisdiction of the parties to and the subject matter of this proceeding. Section 120.57(1), Florida Statutes (1991).

    
    

36. The parties to this proceeding have standing.

    
    

37. At the outset, it is recognized that this case involves a request for proposal and not an invitation to bid. A "request for proposal" is defined in Rule 13A-1.001(5), Florida Administrative Code, as follows:

A written solicitation for competitive sealed proposals with title, date and hour of the public opening designated and provision for the manual signature of an authorized representative. Since requests for proposal lack definitive specifications, they must also provide general information, applicable laws and rules, statement of work, functional or general specifications, proposal instructions, work detail analysis and evaluation criterion.

The differences in a request for proposal and an invitation to bid were explained in System Development Corporation v. Department of Health and Rehabilitative Services, 423 So.2d 433, 434 (Fla. 1st DCA 1982):

Implicit in the definition of an RFP is the underlying rational that, in some types of competitive procurement, the agency may desire an ultimate goal but cannot specifically tell the offerors how to perform toward achieving that goal; thus, a ready distinction arises between an RFP and an ITB. Typically, an ITB is rigid and identifies the solution to the problem. By definition, the invitation specifically defines scope of the work by soliciting bids responsive to detailed plans and specifications set forth. Section 287.057(1)(a) and (2), as amended.

On the contrary, an RFP is flexible, identifies the problem, and requests a solution. Consideration of a response to an ITB is controlled by cost, that is, the lowest and best bid, whereas consideration of an offer to an RFP is controlled by technical excellence as well as costs. [Footnote omitted].

1. The parties have agreed that the standard for review of the undersigned in this case was established in Scientific Games, Inc. v. Dittler Brothers, Inc., 16 F.L.W. 2046, So.2d (Fla. 1st DCA 1991). The standard for review in this case was explained in the opinion in Scientific Games as follows:

   
   

   The Hearing Officer need not, in effect, second guess the members of the evaluation committee to determine whether he and/or other reasonable and well-informed persons might have reached a contrary result. Rather, a "public body has wide discretion" in the bidding process and "its decision, when based on an honest exercise" of the discretion, should not be overturned "even if it may appear erroneous and even if reasonable persons may disagree." Department of Transportation v. Groves-Watkins

   Constructors, 530 So.2d 912, 913 (Fla. 1988) (quoting Liberty County v. Baxter's Asphalt & Concrete, Inc., 421 So.2d 505 (Fla. 1982)) (emphasis in original). "[T]he hearing officer's sole responsibility is to ascertain whether the agency acted fraudulently, arbitrarily, illegally, or dishonestly." Groves-Watkins, 530 So.2d at 914.

   
   

   Scientific Games 16 F.L.W. at 2047.

   
   

2. In order for Scan-Optics to prevail in this matter, Scan-Optics was required to meet its burden of proving that the Department acted fraudulently, arbitrarily, illegally or dishonestly in some aspect of its development of the RFP, its acceptance of vendor proposals to the RFP as responsive, its evaluation of proposals to the RFP or in its decision as to which vendor is to be awarded a contract pursuant to the RFP.

   
   

3. The evidence concerning the Department's preparation of the RFP not only failed to prove that the Department acted fraudulently, arbitrarily, illegally or dishonestly, it proved that the Department made reasonable efforts to avoid any wrongdoing.

   
   

4. The evidence also failed to prove that the Department acted fraudulently, arbitrarily, illegally or dishonestly, in determining that the proposals to the RFP it received were responsive or in evaluating the proposals of the vendors. The particular allegations concerning the Department's evaluation of the proposals of REI and Scan-Optics have been discussed in the Findings of Fact portion of this Recommended Order and will not be restated here.

   
   

5. The allegations of Scan-Optics concerning the Department's alleged improper evaluation of the proposals is based in large part on Scan-Optic's misunderstanding about what the RFP required of vendors and the Department. Most of Scan-Optics' arguments are based upon a mistaken belief that the

Department was seeking a system which met all of the desired features of section

1. But for Scan-Optics' own actions in questioning the Department's initial characterization of those features as "mandatory" features, this belief might

   have been correct. Through Scan-Optics' actions, however, the features of section 3 were changed from "mandatory" features to "desired" features.

   
   

   1. Additionally, the RFP contemplated that each vendor would inform the Department of that vendor's maximum capabilities and the Department, after evaluation, would select a very limited initial system to be purchased pursuant to the RFP.

      
      

   2. There was no requirement under the RFP that the system ultimately purchased by the Department include all of the features identified in section 3 of the RFP.

      
      

   3. The RFP gave the Department very broad discretion to consider vendor proposals and to pick and choose what equipment would best serve the Department's very limited initial purchase requirements. The RFP even gave the Department broad discretion concerning what information on the forms identified for initial processing would be optically processed as a result of the RFP. The evidence failed to prove that the Department acted outside of its broad discretion at least to the extent that it must be proved that the Department acted fraudulently, arbitrarily, illegally or dishonestly.

      
      

   4. Finally, the evidence failed to prove that the Department acted fraudulently, arbitrarily, illegally or dishonestly in awarding a contract to REI pursuant to the RFP.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a Final Order dismissing

the Formal Written Protest and Petition for Formal Administrative Hearing filed by Scan-Optics, Inc.

DONE and ENTERED this 17th day of January, 1992, in Tallahassee, Florida.

LARRY J. SARTIN

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 17th day of January, 1992.

APPENDIX

Case Number 91-6545BID

Scan-Optics and REI have submitted proposed findings of fact. The Department has indicated its intent to adopt the proposed findings of fact of REI. 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.

Scan-Optics' Proposed Findings of Fact

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

1 3 and 5.

2 4-5.

3 See 31-37.

1. See 32.

2. See 33.

6-7 Hereby accepted and see 33 and 64-69.

1. Not supported by the weight of the evidence. See 31-37 and 64-69.

2. 11 and 13. The third, fourth and seventh sentences are not relevant. The fifth and sixth sentences are misleading and not totally accurate--there was only one RFP and one ITB and they were included in Mr. Evers' file on REI.

3. See 19-20. The last sentence is not relevant.

11-12 20 and 26.

13 26.

14 22-23 and 26.

15 Hereby accepted.

16 See 20. But see 22, 25 and 27-30.

17-19 See 22, 25 and 27-30.

1. 48, 58 and hereby accepted.

2. Hereby accepted. But see 31-37.

3. 58 and hereby accepted.

4. 32, 70-71 and hereby accepted, except the fourth sentence, which is not supported by the weight of the evidence, and the last sentence, which is not relevant to this proceeding.

24-28 Hereby accepted.

1. Not relevant.

2. Hereby accepted.

31 32.

32 41.

33 44.

34 48 and 50-51.

35 See 47-48 and 51 and hereby accepted.

36 50-51.

1. 48-49 and 51 and hereby accepted, except the fifth and last sentences, which are not supported by the weight of the evidence.

2. See 54-57. The third sentence mischaracterizes Mr. Evers' testimony and is, therefore, not supported by the weight of the evidence.

3. Not supported by the weight of the evidence or not relevant.

40 56.

41-42 Not supported by the weight of the evidence.

43 See 60.

44 See 60-63.

45 Not relevant.

46-47 Not relevant. See 60-63

87-88 Not supported by the weight of the evidence.

1. See 68.

2. Not relevant.

3. See 68.

92 52.

93 Not supported by the weight of the evidence. See 31-37.

REI's Proposed Findings of Fact

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

44 See 61-63.

45 Hereby accepted.

46 See 37, 70 and 78.

47 77.

1. Not relevant.

2. Hereby accepted.

50-51 64.

52 59 and 65.

53 33 and 65. The last sentence is not supported by the weight of the evidence--there was some evidence presented.

54 67.

55-59 See 68.

60 See 83-86.

61 87.

62 Hereby accepted.

63 81.

COPIES FURNISHED:

James W. Linn, Esquire Rosa H. Carson, Esquire 1711-D Mahan Drive

Tallahassee, Florida 32308

William E. Williams, Esquire Rex D. Ware, Esquire

Post Office Box 1794 Tallahassee, Florida 32302

Gene T. Sellers

Assistant General Counsel Department of Revenue Post Office Box 6668

Tallahassee, Florida 32314-6668

Vicki Weber, General Counsel Department of Revenue

204 Carlton Building Tallahassee, Florida 32399-0100

J. Thomas Herndon Executive Director Department of Revenue

104 Carlton Building Tallahassee, Florida 32399-0100

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: 91-006545BID

Orders for Case No: 91-006545BID