STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SWEEPING CORPORATION OF AMERICA ) INC., )

)

Petitioner, )

)

vs. ) CASE NO. 91-8230BID

) DEPARTMENT OF TRANSPORTATION, )

)

Respondent, )

)

and )

) CERTIFIED PROPERTY MAINTENANCE, )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted in this case on January 16, 1992, in Fort Lauderdale, Florida, before J. Stephen Menton, a duly designated Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Ignacio E. Sanchez, Esquire

Kelly, Drye & Warren 2400 Miami Center

201 South Biscayne Boulevard Miami, Florida 33131

For Respondent: Susan P. Stephens

Assistant General Counsel State of Florida Department of

Transportation

605 Suwannee Street, MS-58 Tallahassee, Florida 32399

For Intervenor: Raymond Hanousek, pro se

President

Certified Property Maintenance 3203 Robbins Road

Pompano Beach, Florida 33062 STATEMENT OF THE ISSUE

The issue in this case is whether the Respondent Department of Transportation's ("DOT"), proposed award of District Contract Nos. E4551 and E4554 to the Intervenor, Certified Property Maintenance, Inc. ("CPM") should be upheld.

PRELIMINARY STATEMENT

On October 11, 1991, DOT set out for bid District Four contracts E4551 and E4554 (the "Contracts"). Petitioner, Sweeping Corporation of America, Inc. ("SCA"), submitted a bid for the Contracts as did CPM, Florida Sweeping, Inc. and P. F. Gomez Construction Co., Inc. On October 18, 1991, DOT posted its Notice of Intent to Award the Contracts to SCA. As discussed in more detail in the Findings of Fact below, DOT initially rejected the bids submitted by CPM as being non-responsive. On October 22, 1991, CPM filed a Notice of Intent to Protest the award of the Contracts to SCA. CPM submitted a formal written protest on October 29, 1991. Subsequently, DOT notified all bidders that it would be re-posting its intent to award on November 5, 1991. In the November 5, 1991 Notice of Intent, DOT designated CPM as the intended awardee of both Contracts. SCA timely filed an initial protest of this decision on November 6, 1991 and a formal written protest on November 15, 1991. The case was referred to the Division of Administrative Hearings which noticed and conducted a hearing on the matter pursuant to Sections 120.53(5) and 120.57, Florida Statutes.

At the commencement of the hearing, Raymond Hanousek, the President of CPM, appeared and requested that CPM be granted intervenor status in this proceeding. Neither party objected and CPM was allowed to participate fully in the proceeding. Subsequent to the hearing, CPM filed a letter dated January 20, 1992 confirming its request to become a party to this case. That request is hereby granted.

At the hearing, SCA presented the testimony of Donald Mahaffey, the vice president and one of the owners of SCA, Teresa Martin, assistant director of contract administration for DOT's District Four, and Joseph M. Yesbeck, director of Planning and Programs for DOT's District Four. SCA offered fourteen exhibits into evidence, all of which were accepted without objection.

DOT also presented testimony from Teresa Martin and Joseph Yesbeck. In addition, DOT presented testimony from Raymond Hanousek, president of CPM. DOT offered three exhibits into evidence, all of which were accepted without objection.

CPM presented testimony from Raymond Hanousek, but did not offer any exhibits into evidence. SCA presented testimony from Joseph Caplano in rebuttal.

A transcript of the proceedings has been filed. Petitioner and Respondent have submitted proposed recommended orders within the time frame established at the conclusion of the hearing. CPM did not submit any proposed findings of fact or conclusions of law. A ruling on each of Petitioner's and Respondent's proposed findings of fact is included in the Appendix attached to this Recommended Order.

FINDINGS OF FACT

Based upon the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made.

1. On October 11, 1991, DOT's District Four office let out for bid district contracts E4551 and E4554.

2. Contract E4551 calls for the mechanical sweeping of Interstate 95 in Broward County. Contract E4554 calls for the mechanical sweeping of Interstate

   95 in Palm Beach County.

   
   

3. At a mandatory pre-bid conference, the bidders for the Contracts were provided with a packet which included a Notice to Contractors and Standard Specifications. The Notice to Contractors is a four page document which is specific to each contract. The Standard Specifications are the same for all district contracts.

   
   

4. Both the Notice to Contractors and the Standard Specifications to the bidders required bidders to submit proof of the ability to acquire a performance and payment bond in an amount equal to the contract bid price. Bidders could satisfy this requirement by submitting a bid guarantee of 5% of the bid, submitting a notarized letter of intent from a bonding company or by providing a Certificate of Qualification issued by Respondent.

   
   

5. The Notice to Contractors for both Contracts provided as follows:

   
   

   Failure to provide the following with each bid proposal will result in rejection of the contractor's bid....

   
   

   District contracts of $150,000 or less require the following as proof of ability to acquire a performance and payment bond:

   
   

   A notarized letter from a bonding company, bank or other financial institution stating that they intend to issue a performance and payment bond in the amount of your bid, should your firm be awarded the project; in lieu of a notarized letter the following may be substituted: (1) a bid guarantee of five percent (5%); or (2) a copy of the Contractor's Certificate of Qualification

   issued by the Department. (No emphasis added)

   
   

6. Similarly, the first Standard Specification provides:

   
   

   1.1 Bidders (contractors)

   
   

   A contractor shall be eligible to bid on this contract if:...

   
   

   (2) Proof of ability to acquire a performance and payment bond in an amount equal to the contract bid price is provided to the District Contract Administrator with the bid proposal. As such proof all bids must be accompanied by a notarized letter from a bonding company, bank or other financial institution stating that they intend to issue a bond in the amount of your bid, should your firm be awarded the project....

7. The requirement to submit proof of the ability to acquire a performance and payment bond has been imposed on the Districts by DOT Directive 375-00-001-a (hereinafter the "Directive".) This Directive was in place at all times material to this proceeding. Section 3.2.2 of the Directive provides:

   
   

   A contractor shall be eligible to bid if:

   
   

   ...Proof of ability to acquire a performance and payment bond in an amount equal to the contract bid price is provided to the minicontract administrator with the bid proposal. As such proof all bids must be accompanied by a notarized letter from a bonding company, bank or other financial institution stating that they intend to issue a bond in the amount of the bid, should the firm be awarded the project. A bid guaranty as specified above may substitute as proof of ability to obtain a performance and payment bond. This applies to bids amount over or under $150,000. A copy of the Contractor's Certificate of Qualification issued by the Department may be substituted in lieu of a notarized letter for those contracts not requiring a bid bond.

   
   

8. The bids for the Contracts were opened on October 11, 1991 in Fort Lauderdale, Florida. Bids were received from four bidders: CPM, SCA, Florida Sweeping, Inc. and P. F. Gomez Construction Co., Inc.

   
   

9. In its bid proposals, SCA included executed bid bonds in an amount sufficient to cover the amount of each bid proposal. Each bid bond cost $55.00.

   
   

10. CPM did not submit executed bid bonds with its proposals. Instead, CPM submitted letters from Mark A. Latini dated September 25, 1991. Those letters were provided on the stationery of Bonina-McCutchen-Bradshaw, Insurance and indicate that Mr. Latini is the "bond manager." The letters provide as follows:

    
    

    Amwest Surety Insurance Company is the surety for the above-referenced contractor and stands ready to provide the necessary performance and payment bond for the referenced bid should Certified Property Maintenance, Inc., be low and awarded the referenced contract. All bonds are subject to normal underwriting requirements at the time of the bond request....

    
    

11. The letters submitted by CPM with its bid proposals were not notarized and were not binding obligations to issue bonds since they were conditioned upon meeting certain unspecified underwriting requirements at the time of the bond requests.

    
    

12. The submitted bids were reviewed by the District Four Contractual Services Office. The bids submitted by CPM were the lowest for each contract. Its bid for Contract No. E4551 was $109,343.97. Its bid for Contract No. E4554

    was $30,312.63. SCA's bids for the Contracts were $139,442.14 and $44,100.00, respectively.

    
    

13. During the initial review of the bid proposals, the Contractual Services Office rejected CPM's bids for failure to have its bonding company "letters of intent" notarized. In addition, the bid proposals submitted by Florida Sweeping, Inc. were rejected for failure to note a required addendum and the bids submitted by P. F. Gomez Construction Co., Inc. were rejected because the "proposal bond was not of proper character".

    
    

14. On October 18, 1991, DOT posted its Notice of Intent to Award the Contracts to SCA, the only bidder for the Contracts whose proposals had not been rejected.

    
    

15. CPM timely filed protests of the proposed awards to SCA on October 22, 1991. The protests filed by CPM argued that its bids should not have been invalidated simply because the bonding company's letters did not include notary seals.

    
    

16. At this point, the sole basis for the disqualification of CPM's bids was the failure to have the bonding company letters notarized. Respondent contends that, except for the absence of the notary seal, the letters submitted by CPM met the requirements of the Notice to Contractor and the Standard Specifications cited above. However, those letters are equivocal and do not evidence a binding commitment to issue a bond upon award of the contract. The DOT officials admit that they do not know what "normal underwriting requirements" would or could be required by CPM's bonding company. This conditional language makes it uncertain whether CPM could obtain the necessary bond. Therefore, it is concluded that those letters do not meet the requirements of the Notice to Contractors, the Standard Specifications or the Directive.

    
    

17. A hearing on CPM's protest was not held. CPM's president, Raymond Hanousek, who prepared CPM's bid and attended the pre-bid meeting, called DOT's District office the day the bids were opened and was informed that his company's bid was low, but was rejected because its bond commitment letter was not notarized. Mr. Hanousek spoke with Joseph Yesbeck, the District's Director of Planning and Programs. After their conversation, Mr. Yesbeck reviewed the file and met with Teresa Martin, the District's contract administrator for construction and maintenance contracts, and other members of the contracting staff. Ms. Martin explained why CPM's bid had been disqualified, and the matter was thereafter discussed with the District and Department attorneys.

    
    

18. After reviewing the situation, Mr. Yesbeck determined that the failure to submit notarized letters should be considered a non-material deviation and the bids submitted by CPM should be accepted and considered the low responsive bids. Mr. Yesbeck concluded that the absence of the notary seal did not give any competitive advantage to CPM and that defects of this nature are routinely allowed to be cured. Therefore, he reversed the contract administrator's decision to disqualify CPM on both Contracts.

    
    

19. The District secretary concurred in the decision reached by Mr. Yesbeck to repost the award of the Contracts. Mr. Yesbeck prepared a joint letter of reposting which removed CPM's disqualification and declared CPM to be the low bidder for both Contracts.

    
    

20. At the time Mr. Yesbeck made his decision, he had not reviewed the Directive from the Assistant Secretary's office stating that there must be a

    notarized letter showing proof of ability to obtain a performance and payment bond. Mr. Yesbeck did not review the Directive until his deposition was taken one week prior to the hearing in this case.

    
    

21. According to Ms. Martin, the option to provide a notarized letter from a bonding company as an alternative to the posting of a 5% bid guarantee or obtaining prequalification was designed to promote participation in state contracting by small business and minority business enterprise applicants.

    While DOT was apparently trying to make it easier and cheaper for companies to bid by not requiring a bond to be posted, the DOT Directive and the bid documents still clearly required unconditional proof that a bid bond would be issued if the contract was awarded to the bidder.

    
    

22. CPM was not prequalified nor did it post a bond. Thus, in order to meet the requirements of the Notice to Contractors and the Standard Specifications, CPM's only option was to submit a notarized letter showing proof of ability to obtain a performance and payment bond.

    
    

23. DOT was never provided with any proof that CPM had been prequalified by the bonding company for a bond and/or that a bond would unconditionally be issued if CPM was awarded the Contracts. Because the letters stated they were "subject to normal underwriting requirements at the time of the bond request", there was some possibility CPM would not be able to obtain a bond. Such a condition was not permissible under the bid doucments.

    
    

24. The decision to accept CPM's bid was contrary to the DOT Directive, the Notice to Contractors and the bid specifications which require that a bidder demonstrate proof of ability to obtain a performance and payment bond. Consequently, it is concluded that DOT's decision to accept the conditional, unnotarized letters submitted by CPM was arbitrary and capricious.

    
    

25. There is some indication that other DOT Districts have, on occasion, waived the notarization requirement for the bond letter. However, it is not clear whether the language in the bid documents was the same or similar in those cases and/or whether the bond letters were conditional. In the past, whenever District Four has gotten a bid without a notarized bond letter, the bid was rejected. Apparently, there has never been a protest based on such a denial in District Four.

    
    

26. Under Section 337.18, DOT does not need to require notarized, unconditional bond letters on contracts under $150,000. Indeed, there was a suggestion that some DOT Districts have dropped the requirement for certain contracts under $150,000. However, the bid documents in this case clearly required some proof that the bidder could acquire a performance and payment bond upon award of the Contracts. It was incumbent for all bidders to meet this requirement. It was arbitrary to delete this requirement after the bids were submitted.

    
    

    CONCLUSIONS OF LAW

    
    

27. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding. Section 120.53(5), Florida Statutes.

    
    

28. The purpose of competitive bidding was explicated in Hotel China & Glassware Co. v. Board of Public Instruction, 130 So.2d 78,81 (Fla. 1st DCA 1961), where the court stated as follows:

    Competitive bidding statutes are enacted for the protection of the public. They create a system by which goods or services required by public authorities may be acquired at the lowest possible cost. The system confers upon both the contractor and the public authority reciprocal benefits, and exacts from each of them reciprocal obligations.

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

    
    

29. Competitive bidding statutes should be construed to advance their purpose and to avoid their being circumvented. Webster v. Belote, 103 Fla. 976, 138 So. 721 (1931).

    
    

30. The Department of Transportation is authorized to solicit bids for the maintenance of roads designated as part of the State Highway System and any roads placed under its supervision by law and may award contracts pursuant thereto to the lowest responsible bidder. See Section 337.11, Florida Statutes. While Section 337.11 establishes a procedure for the award of certain road maintenance contracts, contracts awarded under Section 337.11 are not specifically exempted from the requirements of Chapter 287. Therefore, to the extent that the provisions of Chapter 287 are not inconsistent with Section 337.11, they will be applied herein. See Adams v. Culver, 111 So.2d 665 (Fla. 1959).

    
    

31. Section 287.057, Florida Statutes sets forth the general standards for procurement of contractual services by a State agency.

    
    

32. Section 120.53(5), Florida Statutes, establishes a statutory framework for resolution of protests arising from the contract bidding process.

    
    

33. Generally, a formal administrative proceeding under Chapter 120 is a de novo proceeding which is intended to formulate final agency action and is not aimed at merely reviewing the agency's preliminary action or decision. The Hearing Officer's function is to help formulate what the agency's final action should be and not merely to review whether the agency's preliminary action or initial decision is arbitrary, capricious or departs from the requirements of law. In such a de novo proceeding, the Hearing Officer assists in formulating agency action by considering all the evidence presented, resolving conflicts therein, drawing permissible inferences from the evidence and reaching ultimate findings of fact and recommending legal conclusions to be drawn therefrom. See, Beverly Enterprises-Florida Inc. v. Department of Health and Rehabilitative Services. 512 So.2d 1011, 101515 (Fla. 1st DCA, 1990); Heifetz v. Department of Business Regulation, 475 So.2d 1277 (Fla. 1st DCA 1985). The Hearing Officer does not function as a reviewing tribunal which considers an agency's preliminary decision in a review capacity, while according that preliminary

    decision a presumption of correctness. McDonald v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1st DCA 1977).

    
    

34. The Florida Supreme Court's decision in Department of Transportation

    v. Groves-Watkins, 530 So.2d 912 (Fla. 1988) creates some confusion as to the role of a Hearing Officer in a bid dispute proceeding under Section 120.53(5), Florida Statutes. The facts of this case are clearly distinguishable from those in Groves-Watkins. This case involves DOT's decision to waive a failure to comply with the bid specifications and award a contract to one of several bidders. Groves-Watkins involved a decision by DOT to reject all bids on a highway construction project because the bids exceeded the pre-bid estimate.

    The Groves-Watkins court noted that DOT was granted statutory discretion to award the bid to the lowest responsive bidder or to reject all bids. 530 So.2d at 914. Arguably, the Groves-Watkins decision is limited to those situations where an agency is authorized to reject all bids and does so. See, Rillstone and Rouse, "An Examination of Groves-Watkins: Where do we go from here?" Fla. B.J., June 1991, p. 77. In all other situations, the usual Chapter 120 standards should apply and the Hearing Officer should sit on behalf of, and in the place of, the agency head and should examine the evaluation process de novo. Capeletti Brothers, Inc. v. Department of General Services, 423 So.2d 1359 (Fla. 1st DCA 1983); Couch Construction Company v. Department of Transportation, 361 So.2d 172 (Fla. 1st DCA 1978); But see, Scientific Games, Inc. v. Dittler Brothers, Inc., 586 So.2d 1131 (Fla. 1st DCA 1991).

    
    

35. In any event, even if the narrow standard of review adopted by the court in Grove-Watkins is applied in this case, the result is the same.

36. Section 287.012(13), Florida Statutes (1990 Supp.), provides: "Qualified bidder," "responsible bidder,"

    "qualified offeror" or "responsible offeror," means a person who has the capability in all respects to perform fully the contract requirements and has the integrity and reliability which will assure good faith performance.

37. Section 287.012(16), Florida Statutes (1990 Supp.), provides: "Responsive bid" or "responsive proposal"

    means the bid or proposal submitted by a responsive, and responsible or qualified, bidder or offeror *which conforms in all material respects to the invitation to bid or request for proposals*." (emphasis supplied between *)

    
    

38. In this case, the bids submitted by CPM were not responsive because they did not provide the required proof of the ability to obtain a performance and payment bond.

    
    

39. The lack of a notary seal alone may have been insignificant. But the conditional language in the letters provided by CPM rendered them virtually meaningless. While DOT was trying to make it easier for contractors to participate in the bidding process by allowing bidders to submit letters from bonding companies in lieu of posting a bond, the bid documents in this case clearly spelled out what was required. Those requirements included

    unconditional proof of the ability to obtain a bond. CPM did not provide such proof.

    
    

40. Although CPM's bid should be deemed non-responsive, the Department is not obligated to award the contract to SCA. Section 287.057(3) provides that, except in certain specified situations, an agency may not award a contract except through "competitive sealed bids."

41. Section 287.012(5) defines competitive sealed bids as follows: "competitive sealed bids" or "competitive

    sealed proposals" refers to the receipt of

    *two or more* sealed bids or proposals submitted by *responsive and qualified* bidders or offerors. (emphasis added)

    
    

    This definition was added to the statute in 1990, apparently in response to the First District Court of Appeals decisions in Satellite Television Engineering Inc. v. Department of General Services. 522 So.2d 440 (Fla. 1st DCA 1988) and Harris/3M v. Office Systems Consultants. 533 So.2d 833 (Fla. 1st DCA 1988) where the court rejected the Department of General Services' (DGS) interpretation that competitive bids required two or more responsive bids. The term "competitive bids" was not defined in the statutes in effect at the time of those decisions. In Harris/3M, supra, the Court held that, under the prior statute, an agency was not required to obtain authority from DGS prior to awarding a contract to the only responsive bidder. The court held that where there were "two or more bids only one of which 'conforms in all material respects to the Invitation To Bid,' the competitive bidding requirement has been met. In 1990, the legislature added the above provision which made it clear that, if only one responsive bid is received, an agency must obtain permission from DGS prior to entering into a contract. That provision clearly implies that the agency is not bound to accept the one responsive bid it received. Instead, DGS (or the agency if authorized) is empowered to negotiate a contract so as to achieve the best price possible for the state. In other words, by adding the "competitive sealed bids" definition to the statute, the legislature has implicitly rejected the above decisions and mandated that two "responsive" bids be received in order for the bidding to be deemed competitive and the contract awarded.

    
    

42. Section 287.057(4) (1990 Supp.) provides as follows:

    
    

    (4) If less than two responsive bids or proposals for commodity or contractual services purchases are received, the division1/ may negotiate or authorize the agency to negotiate on the best terms and conditions.

    
    

    In sum, because there was only one responsive bid, DOT is not obligated to award the contract and may negotiate with the sole responsive bidder to obtain the best terms and conditions and/or rebid the contract. In view of the large difference in the bids submitted by SCA and CPM, DOT should seek a more favorable price before awarding the contracts.

    RECOMMENDATION

    Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order finding the bids submitted

    by CPM to be non-responsive and rejecting those bids. Petitioner should enter into negotiations with SCA regarding the award of the contract. In the absence of a favorable negotiation, Petitioner should enter a Final Order rejecting all bids and opening the Contracts up for new bids.

    
    

    DONE and ENTERED this 24th day of March, 1992, at Tallahassee, Florida.

    
    

    
    

    J. STEPHEN MENTON 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 24th day of March, 1992.

    
    

    ENDNOTES

    
    

    1/ The "division" is defined in Section 287.012(a) as the Division of Purchasing of the Department of General Services. Rule 13A-1.002(2)(c)9 provides that contracts entered into pursuant to Section 337.11, Florida Statutes do not require approval from the Division of Purchasing. Thus, approval from DGS is not necessary to award the contracts in this case.

    However, as noted above, it does not appear that contracts entered into pursuant to Section 337.11 are otherwise exempt from the provisions of Chapter 287. When only one bid has been received, DOT should review the circumstances surrounding the bid in order to determine the reasons, if any, why only one responsive bid was received. See e.g., Rule 13A-1.018(b) (which sets forth the criteria DGS will look to in determining whether to authorize an agency to contract with a sole responsive bidder.)

    
    

    APPENDIX

    
    

    The Petitioner and the Respondent have submitted Proposed Recommended Orders. The following constitutes my rulings on the proposed findings of fact submitted by the parties.

    The Petitioner's Proposed Findings of Fact Proposed Finding Paragraph Number in the Findings of Fact

    of Fact Number in the Recommended Order Where Accepted or Reason for Rejection.

    
    

    1. Adopted in substance in Findings of Fact 1.

       
       

    2. Adopted in substance in Findings of Fact 2.

1. Adopted in substance in Findings of Fact 7.

   
   

2. Adopted in substance in Findings of Fact 7.

   
   

3. Adopted in substance in Findings of Fact 7.

   
   

4. Adopted in substance in Findings of Fact 25.

   
   

5. Adopted in substance in Findings of Fact 14.

   
   

6. Adopted in substance in Findings of Fact 15 and in the Preliminary Statement.

   
   

7. Subordinate to Findings of Fact 17, 18 and 19.

   
   

8. Adopted in substance in Findings of Fact 20.

   
   

9. Rejected as vague and unnecessary.

   
   

10. Subordinate to Findings of Fact 4, 5 and 6.

    
    

11. Adopted in substance in Findings of Fact 22.

    
    

12. Adopted in substance in Findings of Fact 18.

    
    

13. Rejected as unnecessary and a summary of argument rather than a finding of fact.

    
    

14. Rejected as constituting argument rather than a finding of fact. This subject matter is addressed in Findings of Fact 16 and 23.

    
    

15. Adopted in substance in Findings of Fact 23.

16. Adopted in substance in Findings of Fact 23.

    
    

17. Adopted in substance in Findings of Fact 24.

    
    

18. Rejected as unnecessary.

    
    

19. Rejected as unnecessary.

    
    

20. Rejected as unnecessary and as constituting argument.

    
    

21. Subordinate to Findings of Fact 24.

The Respondents's Proposed Findings of Fact

Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or

1. Subordinate to Findings of Fact 18 and 19.

   
   

2. Adopted in substance in Findings of Fact 18.

   
   

3. Subordinate to Findings of Fact 16 and 23.

   
   

4. Adopted in substance in Findings of Fact 17.

   
   

5. Adopted in substance in Findings of Fact 17.

COPIES FURNISHED:

Ben G. Watts, Secretary

Attn: Eleanor F. Turner, M.S. 58 Department of Transportation Haydon Burns Building

605 Suwannee Street

Tallahassee, Florida 32399-0458

Thornton J. Williams, General Counsel Department of Transportation

Haydon Burns Building 605 Suwannee Street

Tallahassee, Florida 32399-0458

Ignacio E. Sanchez, Esquire Kelly, Drye & Warren

2400 Miami Center

201 South Biscayne Boulevard Miami, Florida 33131

Susan P. Stephens Assistant General Counsel

State of Florida Department of Transportation

605 Suwannee Street, MS-58 Tallahassee, Florida 332399-0458

Ray Hanousek, President Certified Property Maintenance 3203 Robbins Road

Pompano Beach, Florida 33062

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.

=================================================================

AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA DEPARTMENT OF TRANSPORTATION

SWEEPING CORPORATION OF AMERICA, INC.,

Petitioner,

vs. DOAH CASE NO. 91-8230BID

DEPARTMENT OF TRANSPORTATION,

Respondent,

and

CERTIFIED PROPERTY MAINTENANCE,

Intervenor.

/

FINAL ORDER

On November 5, 1991, the DEPARTMENT OF TRANSPORTATION (hereinafter DEPARTMENT) notified bidders of its intent to award sweeping contracts E4551 and E4554 to CERTIFIED PROPERTY MAINTENANCE (hereinafter CPM). On November 11, 1991, SWEEPING CORPORATION OF AMERICA (hereinafter SCA) timely filed a notice of protest of the DEPARTMENT's intended award and on November 15, 1991, filed its formal protest. Pursuant to Sections 120.53(5) and 120.57, Florida Statutes, the matter was then referred to the Division of Administrative Hearings (hereinafter DOAH).

Pursuant to notice, a formal hearing was conducted in this case on January 16, 1992, in Fort Lauderdale, Florida, before J. Stephen Menton, a duly designated Hearing Officer of the Division of Administrative Hearings. At the commencement of the hearing, Raymond Hanousek, President of CPM, made an appearance and an ore tenus Motion To Intervene. Neither party objected to a finding that CPM had standing to Intervene. Ruling on the Motion was reserved until a written Motion was made by CPM. The written Motion dated January 20, 1992, was filed with the Hearing Officer and CPM's Motion To Intervene was granted.

Appearances on behalf of the parties were as follows: For Petitioner: Ignacio E. Sanchez, Esquire

Kelly, Drye & Warren 2400 Miami Center

261 South Biscayne Boulevard Miami, Florida 33131

For Respondent: Susan P. Stephens

Assistant General Counsel' State of Florida Department of

Transportation

605 Suwannee Street, MS-58 Tallahassee, Florida 32399

For Intervenor: Raymond Hanousek, pro se

President

Certified Property Maintenance 3203 Robbins Road

Pompano Beach, Florida 33062

At issue is whether the DEPARTMENT's intended award of Contract Nos. E4551 and E4554 to Intervenor CPM should be upheld or whether CPM's bid should be deemed non-responsive. At hearing, SCA presented the testimony of Donald Mahaffey, vice president and one of the owners of SCA; Teresa Martin, assistant director of contract administration for Department's District Four office, and Joseph M. Yesbeck, director of Planning and Programs for Department's District Four office. SCA offered fourteen exhibits into evidence, all of which were accepted without objection.

The Department also presented testimony from Teresa Martin and Joseph Yesbeck. In addition, the Department presented testimony from Raymond Hanousek, president of CPM. The Department offered three exhibits into evidence, all of which were accepted without objection.

CPM presented testimony from Raymond Hanousek, but did not offer any exhibits into evidence. SCA presented testimony from Joseph Caplano, its President and General Manager, in rebuttal.

The Department filed exceptions to the Hearing Officer's Recommended Order.

Those exceptions are ruled on as follows:

Exception No. 1. Irrelevant to the material nature of the notary seal or the binding effect of the letter.

Exception No. 2. Rejected. Hearing Officer's finding was based on Mr.

Yesbeck's testimony that he interpreted the reference to "normal underwriting requirements" that there was some possibility that if the contract was awarded that ;they would not be [sic] able to get a bond." (Tr. p. 80, 1. 24 - p. 81, 1.

1. Also, Ms. Martinis testimony that she read the language but did not understand what requirements were being referenced adequately supports the Hearing Officer's Finding No. 11. (TR. p. 97, 1. 22 - p. 98, 1. 1-7)

   
   

   Exception No. 3. Respondent's Exhibit Nos. 2 and 3 clearly support the Hearing Officer's Finding of Fact No. 15 that CPM's filed protests "argued that its bids should not have been invalidated simply because the bonding company's letters did not include notary seals." The cited portions of the transcript are irrelevant to this Finding of Fact. This exception is rejected.

   
   

   Exception No. 4. Rejected. See discussion under Exception No. 2.

   
   

   Exception No. 5. Nothing in the Hearing Officer's Finding of Fact No. 17 directly or inferentially finds misconduct on the part of Mr. Yesbeck. The conversations were as contemplated in Section 120.53(5), Florida Statutes.

   Absent any finding of misconduct on the part of the Department, no exception is warranted.

   
   

   Exception No. 6. Rejected. See discussion under Exception No. 2. Exception No. 7. Rejected. See discussion under Exception No. 2.

   Exception No. 8. Accepted in part. The First sentence of Finding of Fact No. 24 is accurate. The Hearing Officer's finding that the letter did not demonstrate CPM's ability to obtain a performance bond is supported by record evidence. See discussion at Exception No. 2. The second sentence is a legal conclusion which is contrary to prevailing law as to the notary requirement as discussed more fully in Conclusion of Law 9 below.

   
   

   Exception No. 9. Accepted as to Finding of Fact No. 26, application to the notary requirement. However, the finding of arbitrariness as to the conditional nature of the bond letter, although a legal conclusion, is correct.

   
   

   The filed Exceptions to the Hearing Officer's Conclusions of Law are accepted. The Hearing Officer's construction of Department of Transportation v. Groves- Watkins, 530 So.2d 912 (Fla. 1988), and its progeny, Scientific Games. Inc.. v. Dittler Bros.. Inc.. 586 So.2d 1131 (Fla. 1st DCA 1991), is incorrect and the reliance on various cases which preceded Groves-Watkins is misplaced. This standard is discussed at length in the Conclusions of Law.

   
   

   FINDINGS OF FACT

   
   

   Based upon a review of the record in its entirety, including the Hearing Officer's Recommended Order, the transcript, exhibits and the filed exceptions, the following findings of fact are made:

   
   

   1. On October 11,1991, the Department's District Four office let out for bid - district contracts E4551 and E4554.

      
      

   2. Contract E4551 calls for the mechanical sweeping of Interstate 95 in Broward County. Contract E4554 calls for the mechanical sweeping of Interstate 95 in Palm Beach County.

      
      

   3. At a mandatory pre-bid conference, the bidders for the contracts were provided with a packet which included a Notice to Contractors and Standard Specifications. The Notice to Contractors is a four page document which is specific to each contract. The Standard Specifications are the same for all district contracts.

      
      

   4. Both the Notice to Contractors and the Standard Specifications to the bidders required bidders to submit proof of the ability to acquire a performance and payment bond in an amount equal to the contract bid price. Bidders could satisfy this requirement by submitting a bid guarantee of 5 % of the bid, submitting a notarized letter of intent from a bonding company or by providing a Certificate of Qualification issued by the Department.

      
      

   5. The Notice to Contractors for both Contracts provided as follows:

      
      

      Failure to provide the following with each bid proposal will result in rejection of the contractor's bid.... District contracts of $150.000 or

      less require the following as

      proof of ability to acquire a performance and payment bond:

      
      

      A notarized letter from a bonding company, bank or other financial institution stating that the intend to issue a performance and payment bond in the amount of your bid, should your firm be awarded the project; in lieu of a notarized letter the following

      may be substituted: (1) a bid guarantee of five percent (5 %); or (2) a copy of the Contractor's Certificate of Qualification issued by the Department. (No emphasis added)

      
      

   6. Similarly, the first standard specification provides:

1. 1 Bidders (contractors)

A contractor shall be eligible to bid on this contract if:...

(2) Proof of ability to acquire a performance and payment bond in an amount equal to the contract bid price is provided to the District Contract Administrator with the bid proposal. As such

proof all bids must be accompanied by a notarized letter from a bonding company, bank or other financial institution stating that they intend to issue a bond in the amount of your bid, should your firm be awarded the project. ...

1. Finding of Fact No. 7 made by the Hearing Officer is rejected as being unsupported by competent, substantial evidence. Petitioner's Exhibit No.

   11 (The Directive) bears a cover memo dated September 28, 1987. Paragraph 2 of that memo states:

   
   

   All offices are requested to follow these procedures as amended. Portions underlined represent new material and portions struck-through represent material that has been deleted. The number of this procedure is being changed from 375-000-001-a to 375-000-001-b to show it has been amended. In addition, the revised procedure has been reclassified to a directive which means that it automatically expires March 10, 1988. (emphasis added)

   
   

   There was no testimony or documentary evidence introduced to indicate that a replacement procedure or rule has succeeded the expired directive. Further, it was apparent the decision to waive the technical defect of the notary seal was made by Mr. Yesbeck with no thought or consideration of the expired directive. (Tr. p. 74, 1. 11-20) Also see Finding of Fact No. 20. Notwithstanding Ms.

   Martin's belief that the directive required notarization of the bond letter (Tr.

   1. 64,1. 4-5,1. 8-12; p. 66,1. 6-13), the exhibit itself is the best evidence of whether the directive was in effect.

      
      

2. The bids for the contracts were opened on October 11, 1991, in Fort Lauderdale, Florida. Bids were received from four bidders: CPM, SCA, Florida Sweeping, Inc., and P. F. Gomez Construction Co., Inc.

3. In its bid proposals, SCA included executed bid bonds in an amount sufficient to cover the amount of each bid proposal. Each bid bond cost $55.00.

   
   

4. CPM did not submit executed bid bonds with its proposals. Instead, CPM submitted letters from Mark A. Latini dated September 25, 1991. Those letters were provided on the stationery of Bonina-McCutchen-Bradshaw, Insurance and indicate that Mr. Latini is the "bond manager." The letters provide as follows:

   
   

   Amwest Surety Insurance Company is the surety for the above-referenced contractor and stands ready to provide the necessary performance and payment bond for the referenced bid should Certified Property Maintenance, Inc., be low and awarded the referenced contract. All bonds are subject to normal underwriting requirements at the time of the bond request.

   
   

5. The letters submitted by CPM with its bid proposals were not notarized and were not binding obligations to issue bonds because they were conditioned upon meeting certain unspecified underwriting requirements at the time of the bond requests.

   
   

6. The submitted bids were reviewed by the Department's District Four Contractual Services Office. The bids submitted by CPM were the lowest for each contract. Its bid for Contract No. E4551 was $109,343.97. Its bid for Contract No. E4554 was $30,312.63. SCA's bids for the Contracts were $139,442.14 and

   $44,100.00, respectively.

   
   

7. During the initial review of the bid proposals, the Department's Contractual Services Office rejected CPM's bids for failure to have its bonding company "letters of intent" notarized. In addition, the bid proposals submitted by Florida Sweeping, Inc., were rejected by the Department because the "proposal bond was not of proper character."

   
   

8. On October 18, 1991, the Department posted its Notice of Intent to Award the Contracts to SCA, the only bidder for the Contracts whose proposals had not been rejected.

   
   

9. CPM timely filed protests of the proposed awards to SCA on October 22, 1991. The protests filed by CPM argued that its bids should not have been invalidated simply because the bonding company's letters did not include notary seals.

   
   

10. At this point, the sole basis for the disqualification of CPM's bids was the failure to have the bonding company letters notarized. The Department contended that, except for the absence of the notary seal, the letters submitted by CPM met the requirements of the Notice of Contractor and the Standard Specifications cited above. However, those letters are equivocal and do not evidence a binding commitment to issue a bond upon award of the contract. The Department officials admitted at hearing that they do not know what "normal underwriting requirements" would or could be required by CPM's bonding company. This conditional language makes it uncertain whether CPM could obtain the necessary bond. Therefore, it is concluded that those letters do not meet the requirements of the Notice to Contractors, the Standard Specifications. Any reference to the Directive in this Finding is deleted as irrelevant as the Directive was not in effect at any time material hereto. See Finding No. 7. 1/

11. A hearing on CPM's protest was not held. CPM's president, Raymond Hanousek, who prepared CPM's bid and attended the pre-bid meeting, called Department's District Office the day the bids were opened, and was informed that his company's bid was low but was rejected because its bond commitment letter was not notarized. Mr. Hanousek spoke with Joseph Yesbeck, the District's Director of Planning and Programs. After their conversation, Mr. Yesbeck reviewed the file and met with Teresa Martin, the District's contract administrator for construction and maintenance contracts, and other members of the contracting staff. Ms. Martin explained why CPM's bid had been disqualified, and the matter was thereafter discussed with the District and Department attorneys.

    
    

12. After reviewing the situation, Mr. Yesbeck determined that the failure to submit notarized letters should be considered a non-material deviation and the bids submitted by CPM should be accepted and considered the low responsive bids. Mr. Yesbeck concluded that the absence of the notary seal did not give any competitive advantage to CPM and that defects of this nature are routinely allowed to be cured. Therefore, he reversed the contract administrator's decision to disqualify CPM on both Contracts.

    
    

    
    

    1 It should be noted here that in its formal bid protest, SCA raised the issue of the "bindability" of the letter from CPM's surety, Bonina-McCutchen-Bradshaw. This issue was never raised by the Department, but was specifically plead by SCA. Any inconsistencies between this Final Order and others where a surety letter contained similar language is due solely to the fact that the issue was specifically raised and tried here. On the narrow facts of this case and the minimal record testimony on this issue, the Hearing Officer's finding on this matter is adopted.

    
    

13. The District Secretary concurred in the decision reached by Mr. Yesbeck to repost the award of the contracts. Mr. Yesbeck prepared a joint letter of reposting which removed CPM's disqualification and declared CPM to be the low bidder for both contracts.

    
    

14. At the time Mr. Yesbeck made his decision, he had not reviewed the Directive from the Assistant Secretary's office stating that there must be a notarized letter showing proof of ability to obtain a performance and payment bond. Mr. Yesbeck did not review the Directive until his deposition was taken one week prior to the hearing in this case.

    
    

15. According to Ms. Martin, the option to provide a notarized letter from a bonding company as an alternative to the posting of a 5 % bid guarantee or obtaining prequalification was designed to promote participation in state contracting by small business and minority business enterprise applicants. While the Department was apparently trying to make it easier and cheaper for companies to bid by not requiring a bond to be posted, the bid documents still clearly required unconditional proof that a bid bond would be issued if the contract was awarded to the bidder. Any reference to the Directive in this Finding is deleted as irrelevant as the Directive was not in effect at any time material hereto. See Finding No. 7.

    
    

16. CPM was not prequalified nor did it post a bond. Thus, in order to meet the requirements of the Notice to Contractors and the Standard

    Specifications, CPM's only option was to submit a notarized letter showing proof of ability to obtain a performance and payment bond.

    
    

17. The Department was never provided with any proof that CPM had been prequalified by the bonding company for a bond and/or that a bond would unconditionally be issued if CPM was awarded the contracts. Because the letters stated they were ":subject to normal underwriting requirements at the time of the bond request", there was some possibility CPM would not be able to obtain a bond. Such a condition was not permissible under the bid documents.

    
    

18. The decision to accept CPM's bid was contrary to the Notice to Contractors and the bid specifications which require that a bidder demonstrate proof of ability to obtain a performance and payment bond. Consequently, it is concluded that the Department's decision to accept the conditional, not notarized letters submitted by CPM was arbitrary and capricious. Any reference to the Directive in this Finding is deleted as irrelevant as the Directive was not in effect at any time material hereto. See Finding No. 7.

    
    

19. There is some indication that other DOT Districts have, on occasion, waived the notazation requirement for the bond letter. However, it is not clear whether the language in the bid documents was the same or similar in those cases and/or whether the bond letters were conditional. In the past, whenever District Four has gotten a bid without a notarized bond letter, the bid was rejected. Apparently, there has never been a protest based on such a denial in District Four.

    
    

20. Under Section 337.18, Florida Statutes, the Department does not need to require notarized, unconditional bond letters on contracts under

$150,000. Indeed, there was a suggestion that some Department Districts have dropped the requirement for certain contracts under $150,000. However, the bid documents in this case clearly required some proof that the bidder could acquire a performance and payment bond upon award of the contracts. It was incumbent upon all bidders to meet this requirement. It was arbitrary to delete this requirement after the bids were submitted.

CONCLUSIONS OF LAW

1. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding. Section 120.53(5), Florida Statutes.

   
   

2. The Department of Transportation is authorized to solicit bids for the maintenance of roads designated as part of the State Highway System and any roads placed under its supervision by law and may award contracts pursuant thereto to the lowest responsible bidder. See Section 337. 11, Florida Statutes. Section 287.057, Florida Statutes, sets forth the general standards for procurement of contractual services by a State agency. Contracts awarded under Section 337. 11 are specifically exempted from the competitive sealed bid requirements of Chapter 287. To the extent that other provisions of Chapter 287 are not inconsistent with Section 337.11, they will be applied herein. See Adams v. Culver, 111 So.2d 665 (Fla. 1959).

   
   

3. Section 120.53(5), Florida Statutes, establishes a statutory framework for resolution of protests arising from the contract bidding process.

   
   

4. Generally, a formal administrative proceeding under Chapter 120 is a de novo proceeding which is intended to formulate final agency action and is not

   aimed at merely reviewing the agency's preliminary action or decision. However, the Florida Supreme Court's decision in Department of Transportation v. Groves- Watkins, 530 So.2d 912 (Fla. 1988) settles the role of a hearing officer in a bid dispute proceeding under Section 120.53(5), Florida Statutes. Scientific Games. Inc. v. Diftler Brothers. Inc., 586 So.2d 1131 (Fla. 1st DCA 1991). More recently the First District Court of Appeal has made it abundantly clear that the hearing officer's de novo evaluation of agency action, ordinarily appropriate in section 120.57(1) proceedings, is no longer appropriate in bid protests pursuant to Groves-Watkins. Fort Knox Center v. Department of Health and Rehabilitative Services, 17 FLW D878 (Fla. 1st DCA April 2, 1992).

   
   

   In Liberty County v. Baxter's Asphalt and Concrete. Inc., 421 So.2d 505,

   507 (Fla. 1982), the Florida Supreme Court granted great deference to an agency's decision regarding competitive bidding. That deference was expounded upon Groves-Watkins where the court stated that "the hearing officer's sole responsibility is to ascertain whether the agency acted fraudulently, arbitrarily, illegally, or dishonesty." Id. at 914.

   
   

5. In any event, even if the narrow standard of review adopted by the court in Grove-Watkins is applied in this case, the result is the same.

   
   

6. Section 287.012(13), Florida Statutes (1990 Supp.), provides:

   
   

   "Qualified bidder," "responsible bidder," "qualified offerer" or "responsible offeror," means a person who has the capability in all respects to perform fully the contract requirements and has the integrity and reliability which will assure good faith performance.

7. Section 287.012(16), Florida Statutes (1990 Supp.), provides: "Responsive bid" or "responsive proposal" means the bid

   or proposal submitted by a responsive, and responsible or qualified, bidder or offeror which conforms in all material respects to the invitation to bid or request for proposals." (emphasis supplied)

   
   

8. In this case, the bids submitted by CPM were not responsive because they did not provide the required proof of the ability to obtain a performance and payment bond.

   
   

9. The lack of a notary seal alone is insignificant and is a waivable technical defect. Nothing in the record intimates that the defect provided an advantage to CPM over the other bidders. Harry Pepper and Associates v. City of Cape Coral, 352 So.2d 1190, 1193 (Fla. 2d DCA 1977); Accord Robinson Electrical Co. v. Dade Count , 417 So.2d 1032, 1034 (Fla. 3d DCA 1982) ("variance is material if it gives the bidder a substantial advantage over the other bidders, and thereby restricts or stifles competition."); See also, Mercedes Lighting arid Electrical Supply v. Department of General Services, 560 So.2d 273, 278 (variance which affects the price of bid/proposal is not a minor irregularity.) But the conditional language in the letters provided by CPM raised the possibility that CPM might not in fact have a firm bond commitment. The Department's failure to assess and understand the import of the language and to award the contract to CPM where the agency acknowledged that such possibility existed that CPM might not be able to acquire the bond, was arbitrary. Department of Transportation v. Groves-Watkins, 530 So.2d 912 (Fla. 1988). The bond commitment is material in nature because it is intended to screen those

   entities not capable of performing under the contract. SCA was required to arrange its business affairs in such a manner as to enable it to qualify for the performance bond. Those requirements included unconditional proof of the ability to obtain a bond. CPM did not provide such proof. It is unclear from the letter entered into evidence as Petitioner's Exhibit 13 that CPM was required to meet a similar requirement and as such could have obtained a competitive price advantage over SCA.

   
   

10. CPM's bid should be deemed non-responsive. However, the Department is not obligated to seek DGS sole source approval because it is specifically exempted from the Section 287.057(3) competitive sealed bids requirements in Section 287.057(3)(f)10., Florida Statutes. See also Florida Administrative Code Rule 13A-I .002(2)(c)9. The Hearing Officer's attempt to apply the competitive bid provisions to the Section 337. 11 contract is erroneous and is rejected as contrary to statute.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that the bids submitted by CPM are non-responsive and are rejected.

The contract shall be awarded to Petitioner SCA if it honors its bid price. Absent entering into a contract with the Department, all bids shall be rejected and the contracts re-let for new bids.

DONE AND ORDERED this 30th day of April, 1992, at Tallahassee, Florida.

BEN G. WATTS, P.E.

Secretary

Florida Department of Transportation 605 Suwannee Street

Tallahassee, Florida 32399

NOTICE OF RIGHT TO APPEAL

THIS ORDER CONSTITUTES FINAL AGENCY ACTION AND MAY BE APPEALED BY PETITIONER PURSUANT TO SECTION 120.68, FLORIDA STATUTES, AND RULE 9.110, FLORIDA RULES OF APPELLATE PROCEDURE, BY FILING A NOTICE OF APPEAL CONFORMING TO THE REQUIREMENTS OF RULE 9.110(D), FLORIDA RULES OF APPELLATE PROCEDURE, BOTH WITH THE APPROPRIATE DISTRICT COURT OF APPEAL, ACCOMPANIED BY THE APPROPRIATE FILING FEE, AND WITH THE DEPARTMENT'S CLERK OF AGENCY PROCEEDINGS, HAYDON BURNS BUILDING, 605 SUWANNEE STREET, M.S. 58, TALLAHASSEE, FLORIDA 32399-0458, WITHIN THIRTY (30) DAYS OF RENDITION OF THIS ORDER.

Copies furnished to:

J. Stephen Menton Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

Ignacio E. Sanchez, Esquire Kelly, Drye & Warren

2400 Miami Center

201 South Biscayne Boulevard Miami, Florida 33131

Rick Chesser, District Secretary Florida Department of Transportation 780 S.W. 24th Street

Ft. Lauderdale, Florida 33313

Ruby Rodriquez

District 4 Contracts & Purchasing Administrator Florida Department of Transportation

780 S.W. 24th Street

Ft. Lauderdale, Florida 33313

Susan P. Stephens, Esquire

Florida Department of Transportation 605 Suwannee Street

Tallahassee, Florida 32399-0458

Docket for Case No: 91-008230BID

Orders for Case No: 91-008230BID