STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

THE APEX MANAGEMENT GROUP ) OF NEW JERSEY, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 95-0596BID

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the above matter was heard before the Division of Administrative Hearings by its assigned Hearing Officer, Donald R. Alexander, on February 27, 1995, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Laura Sanders, Esquire

125-310 Village Boulevard Princeton, New Jersey 08540

For Respondent: John F. Gilroy, III, Esquire

325 John Knox Road The Atrium, Suite 325

Tallahassee, Florida 32303 STATEMENT OF THE ISSUE

The issue is whether respondent acted fraudulently, arbitrarily, illegally, or dishonestly in proposing to award the contract for Invitation to Bid SHP-95- 001.

PRELIMINARY STATEMENT

This matter began on January 30, 1995, when petitioner, The Apex Management Group of New Jersey, Inc., filed its formal written protest contesting a decision by respondent, Agency for Health Care Administration, to award a contract for actuarial consulting services to Gabriel, Roeder, Smith & Company. The protest generally alleged that the agency incorrectly deemed petitioner to be nonresponsive, and that the low bidder, and at least one other vendor, were also nonresponsive under the specifications.

The matter was referred by respondent to the Division of Administrative Hearings on February 10, 1995, with a request that a hearing officer be assigned to conduct a formal hearing. By notice of hearing dated February 14, 1995, a final hearing was scheduled on February 27, 1995, in Tallahassee, Florida.

At final hearing, petitioner presented the testimony of Donato J. Gasparro, its managing director. Also, it offered petitioner's exhibits 1-6. All exhibits were received in evidence. Respondent presented the testimony of Merrill Moody, an agency senior management analyst II, Leticia Nazario, an agency senior management analyst, and Norman Jones, president of Gabriel, Roeder, Smith & Company. Also, it offered respondent's exhibits 1-3. All exhibits were received in evidence.

There is no transcript of hearing. Proposed findings of fact and conclusions of law were filed by respondent and petitioner on March 8 and 9, 1995, respectively. A ruling on each proposed finding of fact is made in the Appendix attached to this Recommended Order.

FINDINGS OF FACT

Based upon all of the evidence, the following findings of fact are determined:

1. Background

   
   

   1. This case began on December 2, 1994, when respondent, Agency for Health Care Administration (AHCA), issued a notice of invitation to bid (ITB) inviting some forty-five professional actuarial consulting firms to submit a bid for providing actuarial consulting services. The ITB is more specifically identified as ITB SHP-95-001. Under the contract, the successful bidder would "produce analytical reports which (would) form the basis for program changes (in the state health insurance program) to be proposed to the Legislature." The specific scope of work is described in Subsections 20.5 through 20.10 of the specifications.

      
      

   2. In response to the ITB, nine firms submitted bids, including petitioner, The Apex Management Group of New Jersey, Inc. (Apex), and Gabriel, Roeder, Smith & Company (GRSC), the successful bidder. After four bids were rejected as being nonresponsive, including the bid submitted by petitioner, on December 29, 1994, the remaining five bids were opened and evaluated by a committee for technical compliance. The cost proposals were then opened on January 3, 1995. Because GRSC submitted the lowest bid ($39,000.00), AHCA proposed to award the contract to that vendor. On January 12, 1995, petitioner was advised by letter that its bid was determined to be nonresponsive, and that the variance could not be waived as a minor irregularity. Claiming that it had submitted the lowest responsive bid, and that AHCA had not followed the requirements of the ITB in evaluating other proposals, Apex filed its protest on January 23, 1995. That precipitated the instant proceeding. Because the contract calls for services to be performed during the 1995 legislative session, the agency has requested that a decision be rendered on an expedited basis.

      
      

2. The Specifications

   
   

   1. In preparing the specifications, AHCA identified seven "mandatory requirements" in section 50 which, because of their materiality and importance, could not be waived. One of these requirements was found in subsection 50.4, Corporate Background and Experience, and required that the bidder have "a corporate background and experience of at least three (3) years performing actuarial consulting services in the health industry for government groups and/or large groups with heterogeneous utilization patterns." To show compliance with this requirement, the bidder was asked to provide verification

      regarding the "(n)umber of years performing actuarial consulting services in the health industry." In this regard, subsection 60.2 of the ITB provided in part that

      
      

      (e)ach bid will be reviewed to determine that the mandatory requirements contained in section 50.1 . . . have been included . . . Corporate background and experience and organization and staffing mandatory require-ments will be evaluated for each bid in order to establish if they comply with the speci- cations.

      
      

   2. The requirement in subsection 50.4 was especially important to AHCA since representatives of the successful bidder would have to appear before legislative committees, and AHCA wanted that firm to be an ongoing concern with an organizational track record of at least three years. Also, and to a lesser degree, AHCA recognized that a firm having been in existence less than three years would have difficulty in obtaining corporate work references to present to the legislative committees.

      
      

   3. In construing this provision, AHCA required that the business entity itself have been in existence at least three years. Simply because the employees of the entity had worked as a group on similar projects in the past, while working for other firms, did not speak to the capabilities, reliability or credibility of a newly formed organization. Indeed, the intent of subsection

      50.4 was to require an organizational track record to insure the hiring of an established, proven firm, separate and apart from the individual qualities of member or members. Then, too, it was impractical, and virtually impossible, for AHCA to base its assessment of a corporate bidder on corporate versus individual experience. This interpretation of the provision is reasonable, supported by a factual basis, and is not arbitrary.

      
      

   4. Subsection 50.5 relates to Organization and Staffing and requires that those individuals performing the actuarial consulting services have at least five years of experience performing such services in the health industry and carry a professional designation. AHCA interpreted this provision to mean that only those persons performing the actual technical services under the contract be professional actuaries. This meant that a non-technical person could assume the role of project manager so long as he or she did not supervise or engage in the actuarial consulting services. This interpretation is reasonable and has a logical basis.

      
      

3. The Evaluation Process

   
   

   1. The responses were opened on December 29, 1994, and evaluated for technical compliance by a committee consisting of three persons, two from AHCA and one from the Department of Management Services. The committee found petitioner's proposal to be nonresponsive as to subsection 50.4 since Apex had only been incorporated since October 7, 1993. Therefore, Apex (as opposed to its individual members) lacked the necessary three years' experience "performing actuarial consulting services in the health industry." Because this requirement was mandatory for all bidders, it could not be waived. This was consistent with subsection 40.8 which provided that "(b)ids that do not conform to the minimum requirements of the ITB will be determined to be nonresponsive and will be rejected at the time of public opening."

      
      

   2. In evaluating the response of the lowest responsive bidder, GRSC, the committee approved its proposal to name a non-technical person as project manager. That individual would serve as liason with AHCA for scheduling and

      administrative management of the project, and be generally available to manage GRSC's satisfactory performance of the contract. At the same time, GRSC named a professional actuarial to serve as manager of technical services and to head the technical aspects of the project.

      
      

   3. At hearing, petitioner belatedly contended for the first time that by approving this arrangement, AHCA violated subsection 50.5 of the ITB and allowed GRSC to obtain a substantial financial advantage over other bidders. According to Apex, this was because other bidders would designate a professional actuarial as project manager, and those firms would incur higher costs than GRSC since actuarials traditionally are paid at a higher rate than non-technical persons. In making this charge, however, Apex made two incorrect assumptions. First, it assumed that GRSC's project manager had a lower salary than its technical manager. Second, it assumed that subsection 50.5 prohibited such an arrangement. Because neither assumption is correct, GRSC did not obtain a financial advantage over the other bidders by structuring its proposal in that manner. Finally, it is noted that even though Apex claims it was financially disadvantaged by GRSC's arrangement, its bid was $5,000.00 lower than GRSC's bid even though it proposed to use an actuarial as its project manager.

      
      

4. Other Contentions

1. Petitioner has also argued that the term "corporate" as used in subsection 50.4 of the ITB refers strictly to a corporation, and that AHCA interpreted this term broadly for another bidder while construing the requirement concerning corporate experience in the same section more narrowly as to Apex's bid. Specifically, Apex points out that AHCA considered as responsive a bid submitted by the Minneapolis office of DeLoitte and Touche even though that bidder was a limited liability partnership and not a corporation. But AHCA demonstrated that it follows the common usage of the term "corporation" in state bidding and contracting practices by allowing any organization or firm established as a legal entity to qualify. Therefore, it is found that AHCA had a reasonable basis and rationale for interpreting the ITB in this manner, and such action was not arbitrary.

   
   

2. Finally, prior to filing its bid, Apex communicated with AHCA to determine the meaning of the corporate experience requirement in subsection 50.4, and it came to understand that the specification was intended to limit the bidding to firms with three years of experience. Since Apex obviously could not qualify under this requirement, its managing director wrote AHCA a letter urging it to reconsider the inclusion of this specification. He was told by the chief of the bureau of state employee health insurance, however, that the provision would not be changed. Apex then made the decision not to protest the specification because of the expense involved in doing so, but instead to file its bid, and if it did not win, to then challenge the award of the contract. There is no basis to find that Apex was mislead by AHCA or that Apex did not understand the meaning of the subsection prior to filing its bid. Finally, Apex has waived its right to challenge any part of the specifications by failing to do so within seventy-two hours after receipt of the ITB.

   
   

   CONCLUSIONS OF LAW

   
   

3. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties hereto pursuant to Subsection 120.57(1), Florida Statutes.

11. The scope of inquiry in this proceeding is limited to determining "whether the agency acted fraudulently, arbitrarily, illegally, or dishonestly" in choosing GRSC as the successful vendor. See e. g., Moore v. State, Department of Health and Rehabilitative Services, 596 So.2d 759, 761 (Fla. 1st DCA 1992). Further, the undersigned is required to honor the rule that 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." Liberty County v. Baxter's Asphalt & Concrete, Inc., 421 So.2d 505, 507 (Fla. 1982). At the same time, the agency is responsible "for ensuring that the integrity of the competitive bidding process is maintained," Procacci v. State, Department of Health and Rehabilitative Services, 603 So.2d 1299, 1301 (Fla. 1st DCA 1992), and "(t)here is a strong public policy in favor of awarding contracts to the low bidder, and an equally strong public policy against disqualifying the low bidder for the technical deficiencies which do not confer an economic advantage on one bidder over another." Intercontinental Properties, Inc. v. Department of Health and Rehabilitative Services, 606 So.2d 380, 387 (Fla. 3rd DCA 1992). Finally, as the party challenging the agency's action, Apex must prove by a preponderance of the evidence that DMS' decision was inappropriate for one of the reasons cited in Moore.

1. By failing to challenge the specifications within seventy-two hours after receipt of the ITB, Apex has waived its right to contend that the specifications are unfair or confusing. Subsection 120.53(5)(b), Florida Statutes; Capeletti Brothers, Inc. v. Dept. of Transportation, 499 So.2d 855, 857 (Fla. 1st DCA 1986).

   
   

2. There is less than a preponderance of evidence to establish that AHCA acted in an arbitrary manner in proposing to award the contract to GRMC. Indeed, the more persuasive evidence shows that the agency's interpretation of the specifications was reasonable and even-handed, and thus it had a rationale basis for disqualifying Apex. Similarly, AHCA did not allow the successful bidder to violate the terms of subsection 50.5 and thereby gain an unfair advantage over other bidders. This being so, the protest should be dismissed.

   
   

3. In reaching this conclusion, the undersigned has considered petitioner's argument that under the rationale of the Intercontinental Properties case, AHCA should have waived the mandatory requirement in subsection

50.4 since this was simply a technical deficiency in form, Apex was the lowest bidder, and it did not gain any unfair competitive advantage by reason of the technical omission. But corporate background and experience was a material requirement on this project for the reasons cited in findings of fact 4 and 5, and Apex would have derived an unfair competitive advantage over other bidders had AHCA waived its requirements.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered by respondent awarding the

contract for Invitation to Bid SHP-95-001 to Gabriel, Roeder, Smith & Company and denying the protest of petitioner.

DONE AND ENTERED this 16th day of March, 1995, in Tallahassee, Florida.

DONALD R. ALEXANDER

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 16th day of March, 1995.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-0596BID

Petitioner:

1. Rejected as being contrary to the evidence.

2. Partially accepted in finding of fact 9.

3. Partially accepted in finding of fact 6. 22-33. Partially accepted in finding of fact 9.

Respondent:

1. Partially accepted in findings of fact 8 and 9.

2. Partially accepted in finding of fact 10.

3. Partially accepted in finding of fact 9.

Note - Where a proposed finding has been partially accepted, the remainder has been rejected as being unnecessary for a resolution of the issue, irrelevant, cumulative, subordinate, not supported by the more credible evidence, or a conclusion of law.

COPIES FURNISHED:

Laura Sanders, Esquire 125-310 Village Boulevard

Princeton, NJ 08540

John F. Gilroy, III, Esquire

Agency for Health Care Administration

325 John Knox Road Suite 325 - The Atrium Tallahassee, FL 32303

R. S. Power, Agency Clerk

Agency for Health Care Administration The Atrium, Suite 301

325 John Knox Road Tallahassee, FL 32303

Tom Wallace, Assistant Director Agency for Health Care Administration The Atrium, Suite 301

325 John Knox Road Tallahassee, FL 32303

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit to the agency written exceptions to this Recommended Order. All agencies allow each party at least ten 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: 95-000596BID

Orders for Case No: 95-000596BID