STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MARPAN SUPPLY COMPANY, INC., )

)

Petitioner, )

) DEPARTMENT OF MANAGEMENT ) SERVICES, )

) CASE NO. 96-2777BID

Respondent, )

and )

) GENERAL ELECTRIC COMPANY, ) LIGHTING DIVISION, )

)

Intervenor. )

)

RECOMMENDED ORDER

A formal hearing was conducted in this proceeding before Daniel Manry, a duly designated Hearing Officer of the Division of Administrative Hearings, on June 28, 1996, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Paul R. Bradshaw, Esquire

Bryant, Miller and Olive, P.A.

201 South Monroe Street, Suite 500 Tallahassee, Florida 32302

For Respondent: Stephen S. Mathues, Esquire

Office of General Counsel Department of Management Services 4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950

For Intervenor: Lawrence P. Stevenson, Esquire

Holland and Knight, P.A.

315 South Calhoun Stree, Suite 600 Tallahassee, Florida 32301

STATEMENT OF THE ISSUE

The issue for determination is whether Respondent acted fraudulently, arbitrarily, illegally, or dishonestly in selecting Intervenor as the lowest bidder for a contract to supply the state with lamps valued at $3,692,499.

PRELIMINARY STATEMENT

On March 20, 1996, Respondent posted its intent to award Intervenor with a contract for substantially all of the lamps to be purchased by the state.

Petitioner timely filed a notice of protest. On June 11, 1996, the matter was

referred to the Division of Administrative Hearings for assignment of a hearing officer to conduct a formal hearing.

At the formal hearing, the parties submitted five joint exhibits.

Petitioner submitted two additional exhibits and presented the testimony of six witnesses. Respondent submitted one additional exhibit and presented the testimony of one witness. Intervenor submitted no additional exhibits and presented the testimony of two witnesses. The identity of the witnesses and exhibits and the rulings concerning each are reported in the transcript of the formal hearing filed on August 5, 1996.

The parties timely filed their proposed recommended orders ("PROs") on August 23, 1996. Proposed findings of fact in the parties' PROs are addressed in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. The Parties

   
   

   1. Respondent is the state agency responsible for soliciting bids to establish a contract for the purchase of large lamps by state agencies and other eligible users. Petitioner is a Florida corporation and the incumbent vendor under similar contracts for the preceding 10 years.

      
      

   2. Petitioner does not manufacture lamps. Petitioner sells lamps manufactured by Osram-Sylvania ("Sylvania").

      
      

   3. Intervenor is an Ohio corporation doing business in Florida. Intervenor manufactures the lamps it sells.

      
      

2. The ITB

   
   

   1. On March 15, 1996, Respondent issued Invitation To Bid Number 39-285- 400-H, Lamps, Large, Photo and STTV (the "ITB"). The purpose of the ITB is to establish a 24 month contract for the purchase of Large Lamps (fluorescent, incandescent, etc.), Photo Lamps (audio visual, projection, flash), and Studio, Theatre, Television, and Video Lamps ("STTV") by state agencies and other eligible users.

      
      

   2. The contract runs from July 10, 1996, through July 9, 1998. The ITB estimates the contract price at $3,692,499.

      
      

   3. The ITB contains General and Special Conditions. General Conditions are set forth in 30 numbered paragraphs and elsewhere in DMS Form PUR 7027. Special Conditions are set forth in various unnumbered paragraphs in the ITB.

      
      

      1. General Conditions

         
         

   4. Paragraphs 5, 11, and 24 of the General Conditions are at issue in this proceeding. The terms of each paragraph are:

      
      

      5. ADDITIONAL TERMS AND CONDITIONS: No additional terms and conditions included with the bid response shall be evaluated or considered and any and all such additional terms and conditions shall have no force and effect and are inapplicable to this bid. If

      submitted either purposely through intent or design or inadvertently appearing separately in transmittal letters, specifications, literature, price lists, or warranties, it is understood and agreed the general and special conditions in this bid solicitation are the only conditions applicable to this bid and the bidder's authorized signature affixed to the bidder's acknowledgment form attests to this.

      11. QUALITY ASSURANCE: The contractor, during the contract term, upon mutual agree- ment with the Division of Purchasing, will provide reasonable travel and lodging accommodations for one (1) to three (3) government employees to perform an on-site inspection of the manufacturing process(es) and review of the manufacturer's product quality control(s) and total quality manage- ment program(s). The contractor will reim- burse the State for actual transportation cost, per diem and incidental expenses as provided in Section 112.061, F.S. It is

      the State's desire that the contractor provide demonstration of quality control for improvement rather than post production detection.

      24. FACILITIES: The State reserves the right to inspect the bidder's facilities at any reasonable time with prior notice.

      
      

      1. Included Items

         
         

   5. Special Conditions in the ITB require bidders to submit prices for "Item 1" and "Item 2" lamps ("included items"). 1/ Item 1 lamps consist of Group 1 and 2 lamps.

      
      

   6. Group 1 lamps are Large Lamps such as fluorescent, incandescent, quartz, mercury vapor, metal halide, and high-pressure sodium lamps. Group 2 lamps are Photo Lamps such as audio visual, projection, flash, and STTV lamps.

      
      

   7. The total price for each group is multiplied by a weighted usage factor. The product calculated for Group 1 is added to the product calculated for Group 2 to determine the total price for Item 1 lamps.

      
      

   8. Item 2 consists of a category of lamps described as "T- 10 Lamps." The total price for Item 2 lamps is determined without application of the weighted usage factor used for Item 1 lamps. The total price for Item 2 lamps is a de minimis portion of the contract price.

      
      

   9. Special Conditions in the ITB require Respondent to award a single contract for included items to a single bidder. Special Conditions state that, "During the term of the contract established by this bid, all purchases of items will be made from the successful bidder." 2/

      
      

      1. Excluded Items

   10. Special Conditions require that, "The bidder shall offer a fixed discount from retail prices on all excluded items." Excluded items include high technology lamps.

       
       

   11. The requirement for a fixed discount on excluded items is not considered in evaluating bid prices for included items. Rather, the requirement is intended to reduce the state's cost for both included and excluded items by assuring a meaningful discount on excluded items.

       
       

       1. Formatting Requirements

       
       

   12. Special Conditions prescribe the format in which bids must be submitted. Price lists and authorized dealers' lists are required to be submitted in hard copy and on computer diskette. The format prescribed for computer diskette includes requirements for font and graphics. The Special Conditions state that, "Failure to comply with this requirement will result in disqualification of your bid."

   
   

3. The Bids

   
   

   1. The ITB prohibits the alteration of bids after they are opened. Respondent opened bids on April 10, 1996. Seven vendors submitted bids in response to the ITB.

      
      

      1. Included Items

         
         

   2. Four vendors, including Petitioner, submitted a bid for both Item 1 and Item 2 lamps. Intervenor and two other bidders did not submit a bid for Item 2 lamps.

      
      

      1. General Conditions

         
         

   3. Intervenor deleted paragraphs 11 and 24 of the General Conditions from its bid. At the direction of Intervenor's legal department in Cleveland, Ohio, Intervenor's regional sales manager struck through paragraphs 11 and 24 and initialed the deletions. The deletions are consistent with Intervenor's corporate policy. Intervenor routinely objects to contract provisions requiring inspection of Intervenor's facilities.

      
      

      1. Excluded Items

         
         

   4. Petitioner's bid includes a fixed discount of 44 percent on excluded items. Intervenor's bid includes a fixed discount of 0 percent.

      
      

      1. Formatting Requirements

      
      

   5. Intervenor included the information required by the ITB on the diskette it submitted with its bid. However, Intervenor supplied the information in Courier 12 characters per inch ("cpi") font, not the Courier 10 cpi font prescribed in the ITB.

   
   

4. Proposed Agency Action

   
   

   1. Respondent determined that Intervenor's bid was responsive. The purchasing specialist for Respondent who reviewed each bid to determine if it was responsive failed to observe the deleted paragraphs in Intervenor's bid.

   2. The purchasing specialist forwarded those bids determined to be responsive to the purchasing analyst assigned by Respondent to: determine if the lamps offered in each bid met the specifications prescribed in the ITB; and evaluate bid prices. The purchasing analyst noted that paragraphs 11 and 24 were deleted from Intervenor's bid.

      
      

   3. The purchasing analyst and purchasing specialist conferred. They determined that paragraph 5 of the General Conditions cured Intervenor's deletions without further action.

      
      

   4. The purchasing analyst correctly determined: that lamps offered by Petitioner and Intervenor met ITB specifications; that Intervenor's bid is the lowest bid for Item 1 lamps; that Petitioner's bid is the second lowest such bid; and that Petitioner's bid is the lowest bid for Item 2 lamps. Petitioner's bid for Item 1 lamps is approximately five percent greater than Intervenor's bid.

      
      

   5. Respondent proposes to award one contract for Item 1 lamps to Intervenor. Respondent proposes to award a second contract for Item 2 lamps to Petitioner.

      
      

   6. At 4:00 p.m. on May 20, 1996, Respondent posted its intent to award the contract for Item 1 lamps to Intervenor. Petitioner timely filed its formal protest on June 3, 1996.

      
      

   7. Respondent did not award a contract for excluded items. Respondent's failure to award a contract for excluded items is not at issue in this proceeding.

   
   

5. Arbitrary

1. Respondent's proposed award of a contract to Intervenor for substantially all of the items included in the ITB is a decisive decision that Respondent made for reasons, and pursuant to procedures, not governed by any fixed rule or standard prescribed either in the ITB or outside the ITB. Respondent's proposed agency action is arbitrary.

   
   

   1. Excluded Items

      
      

2. The requirement for bidders to offer a fixed discount on excluded items operates synergistically with the requirement for Respondent to award a single contract on included items to a single bidder. The combined action of the two requirements operating together has greater total effect than the effect that would be achieved by each requirement operating independently.

   
   

3. The requirement for a fixed discount on excluded items, operating alone, may not induce a bidder who could receive a contract solely for Item 2 lamps to offer a discount that is as meaningful as the discount the bidder might offer if the bidder were assured of receiving a contract for Item 1 and 2 lamps upon selection as the lowest bidder. 3/ By assuring bidders that a single contract for Item 1 and 2 lamps will be awarded to a single bidder, the ITB creates an economic incentive for bidders to provide a meaningful discount on excluded items.

   
   

4. Respondent frustrated the synergy intended by the ITB by applying the requirements for a fixed discount and for a single contract independently. Respondent penalized the bidder conforming to the requirement for a fixed

   discount on excluded items by awarding only a de minimis portion of the contract to the bidder. Respondent rewarded the bidder not conforming to the requirement for a fixed discount on excluded items by awarding substantially all of the contract to that bidder.

   
   

5. If Respondent elects to purchase all excluded items from Petitioner, Respondent will have used the contract for Item 1 lamps to induce a meaningful discount from Petitioner without awarding Petitioner with the concomitant economic incentive intended by the ITB. Such a result frustrates the ITB's intent.

   
   

   1. Paragraph 5

      
      

6. Respondent's interpretation of paragraph 5 fails to explicate its proposed agency action. Respondent's interpretation of paragraph 5: leads to an absurd result; is inconsistent with the plain and ordinary meaning of the terms of the ITB; and is inconsistent with Respondent's actions.

   
   

7. Respondent's interpretation imbues paragraph 5 with limitless curative powers. Respondent's interpretation empowers paragraph 5 to cure the deletion of all General Conditions in the ITB whether stricken by pen or excised with scissors. Respondent's interpretation of paragraph 5 would transform a bid containing no General Conditions into a responsive bid.

   
   

8. Respondent's interpretation of paragraph 5 is inconsistent with the plain and ordinary meaning of its terms. Paragraph 5 operates to cure "additional" terms. It does not operate to restore deleted terms.

   
   

9. Respondent's interpretation of paragraph 5 is inconsistent with Respondent's actions. Respondent did not rely on paragraph 5 to cure Intervenor's deletions without further action. Respondent took further action to cure the deletions.

   
   

   1. Further Action

      
      

10. On the morning of May 20, 1996, the purchasing analyst for Respondent telephoned Intervenor's regional sales manager. The purchasing analyst demanded that Intervenor accept the conditions Intervenor had deleted from its bid by submitting a letter of acceptance before the bid tabulations were posted at 4:00

    p.m. on the same day.

    
    

11. The regional sales manager contacted Intervenor's corporate headquarters in Cleveland, Ohio. Intervenor authorized the regional sales manager to accept the deleted paragraphs.

    
    

12. By letter faxed to Respondent at approximately 3:20 p.m. on May 20, 1996, Intervenor accepted the paragraphs it had previously deleted. The letter stated that, "GE Lighting [will accept] the Contract Conditions noted in Paragraphs 11 and 24 of the Lamp Quotation." [emphasis not supplied]

    
    

13. At 4:00 p.m. on May 20, 1996, Respondent posted the bid tabulation form. The bid tabulation form stated that the "award is contingent upon General Electric's acceptance of all the terms in conditions (sic)" in the ITB.

    
    

14. Respondent argues that the purchasing analyst who contacted Intervenor on the morning of May 20, 1996, exceeded her authority. Respondent

    characterizes the word "contingent" in the bid tabulation form as "poorly written" and a "bad word."

    
    

    1. Agency Construction Of ITB Terms

       
       

15. Respondent construes terms in the ITB in a manner that is inconsistent with their plain and ordinary meaning. The ITB requires that, "The bidder [shall] offer a fixed discount from retail price list on all excluded items." [emphasis supplied] Respondent interprets the quoted provision as meaning the bidder may offer such a fixed discount if the bidder elects to do so.

    
    

16. The purpose of the ITB is to establish "[a] 24 month contract" to supply large lamps to the state. [emphasis supplied] Respondent interprets the quoted provision as meaning that the purpose of the ITB is to establish two contracts.

    
    

17. The ITB states that, "During the term of the contract established by this bid, all purchases of items [will] be made from [the] successful bidder." [emphasis supplied] Respondent interprets the quoted provision as meaning that purchases of some items will be made from one successful bidder and that purchases of other items will be made from a second successful bidder.

    
    

18. The ITB states that the contract "[shall] be made statewide on an all or none basis" to the responsive bidder who satisfies the conjunctive requirements for: "[the] lowest "Award Figure Item (1; [and] lowest Award figure for Item (2." [emphasis supplied] Respondent interprets the quoted provision as meaning that separate contracts may be made statewide on less than an all or none basis to separate responsive bidders who satisfy the disjunctive requirements for either the lowest bid for Item 1 lamps or the lowest bid for Item 2 lamps, or both.

    
    

19. The ITB requires offers to be submitted for all items listed within a group for a bid to qualify for evaluation. Respondent interprets the requirement as meaning that a bidder who does not qualify for evaluation for all of the groups in the contract nevertheless qualifies for evaluation for the contract.

    
    

20. Finally, the ITB states that failure to comply with the formatting requirements for the diskette "[will] result in disqualification of your bid." [emphasis supplied] Respondent interprets the quoted language to mean that failure to comply with prescribed formatting requirements may result in disqualification of a bid.

    
    

21. The interpretations of the quoted terms proposed by Respondent, individually and collectively, frustrate the purpose of the ITB. They also ignore material requirements of the ITB.

    
    

    1. Material Deviation

       
       

22. Respondent deviated from the rule or standard fixed in the ITB in several respects. First, Respondent altered the bid evaluation procedure prescribed in the ITB. Second, Respondent ignored the requirement to award a single contract to a single bidder. Third, Respondent ignored the requirement that bidders provide a fixed discount on excluded items. Fourth, Respondent ignored the requirement to comply with the formatting requirements prescribed in the ITB.

23. Each deviation from the rule or standard fixed in the ITB is a material deviation. Each deviation gives Intervenor a benefit not enjoyed by other bidders. Each deviation affects the contract price and adversely impacts the interests of Respondent. 4/

    
    

    5.5(a) Benefit Not Enjoyed By Others

    
    

24. Intervenor enjoyed a benefit not enjoyed by other bidders. Intervenor obtained a competitive advantage and a palpable economic benefit.

    
    

25. Respondent altered the bid evaluation procedure prescribed in the ITB. On the morning of May 20, 1996, Respondent disclosed the bid tabulations to Intervenor alone, 5/ gave Intervenor an opportunity that lasted most of the business day to determine whether it would elect to escape responsibility for its original bid, allowed Intervenor to cure the defects in its bid, accepted Intervenor's altered bid, and conditioned the bid tabulations on Intervenor's altered bid. Respondent used a bid evaluation procedure that is not prescribed in the ITB and did not allow other bidders to participate in such a procedure. 6/

    
    

26. In effect, Respondent rejected Intervenor's initial bid, with paragraphs 11 and 24 deleted, and made a counter offer to Intervenor to accept a bid with paragraphs 11 and 24 restored. Intervenor accepted Respondent's counter offer. Respondent excluded other bidders from that process.

    
    

27. Respondent gave Intervenor an opportunity to determine whether it would elect: to escape responsibility for its original bid by declining Respondent's counter offer; or to perform in accordance with an altered bid by restoring paragraphs 11 and 24. A bidder able to elect not to perform in accordance with its bid has a substantial competitive advantage over other bidders unable to escape responsibility for their bids. 7/

    
    

28. Respondent awarded substantially all of the contract to Intervenor even though Intervenor failed to provide a meaningful discount on excluded items. Respondent provided Intervenor with a palpable economic benefit.

    
    

    5.5(b) Bid Price And Adverse Impact On The State

    
    

29. Respondent did not award a contract for excluded items. Respondent's proposed agency action allows Respondent to purchase excluded items from either Intervenor or Petitioner.

    
    

30. If Respondent were to purchase all of the excluded items it needs from Intervenor, Respondent could pay substantially more for excluded items than Respondent would save from the five percent price advantage in Intervenor's bid for Item 1 lamps. In such a case, Respondent's proposed agency action would effectively increase costs to the state that are inherent, but not stated, in the ITB. 8/

    
    

31. Conversion of incorrectly formatted data to the required font shifts prices to incorrect columns and causes other problems in accessing information in the diskette. Such problems can not be rectified easily but require substantial time and effort.

    
    

    1. Responsive Bidder

32. Respondent did not award the contract intended by the ITB to the lowest responsive bid. Although Intervenor's bid is the lowest bid for Item 1 lamps, it is not the lowest responsive bid for Item 1 and 2 lamps.

    
    

33. Petitioner's bid is the lowest responsive bid for Item 1 and 2 lamps. 9/ Respondent is statutorily required to award the contract to the lowest responsive bidder. 10/

1. Illegal

   
   

   1. Intervenor's bid is not responsive within the meaning of Sections 287.012(17), Florida Statutes (1995). 11/ It does not conform in all material respects to the ITB.

      
      

   2. Intervenor's unaltered bid deletes paragraphs 11 and 24. It does not include a fixed discount on excluded items, does not include a bid for Item 2 lamps, and does not conform to the formatting requirements in the ITB.

      
      

   3. Section 287.057 requires Respondent to award the contract to the bidder who submits the lowest responsive bid. Respondent has no authority either: to consider bids that are not responsive; or to award the contract to a bidder other than the lowest responsive bidder. Respondent's attempt to engage in either activity is ultra vires and illegal.

   
   

2. Minor Irregularities

   
   

   1. The ITB encourages, but does require, bidders to include quantity discounts for Item 1 and 2 lamps. Petitioner's bid does not include quantity discounts. Petitioner's bid does not fail to conform to material requirements in the ITB.

      
      

   2. Petitioner does not manufacture Item 1 and 2 lamps. Sylvania manufactures the lamps Petitioner sells.

      
      

   3. Petitioner has no legal right to require Sylvania to allow inspection of its facilities pursuant to paragraph 11 of the General Conditions. Petitioner's ability to provide the requisite inspections requires the cooperation of Sylvania.

      
      

   4. Petitioner's bid requires payment by the state within 30 days of an invoice. Section 215.422 and the ITB provide that Respondent has 40 days to issue warrants in payment of contract debts and that interest does not accrue until after 40 days.

      
      

   5. The defects in Petitioner's bid are minor irregularities within the meaning of Florida Administrative Code Rule 60A-1.001(16). 12/ They neither affect the bid price, give Petitioner a competitive advantage, nor adversely impact Respondent's interests.

      
      

   6. Petitioner has the practical ability to arrange inspection's of Sylvania's facilities. Petitioner is legally responsible for failing to do so. Respondent's employees have never visited Sylvania's facilities during the 10 years in which Petitioner has been the contract vendor to the state.

      
      

   7. The requirement for payment within 30 days does not obviate the provisions of Section 215.422. Private contracts can not alter mutually exclusive statutory provisions.

      CONCLUSIONS OF LAW

      
      

   8. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter in this proceeding. Section 120.57(1), Florida Statutes. The parties were duly noticed for the formal hearing. The parties have standing in this proceeding.

      
      

   9. The burden of proof is on the party asserting the affirmative of an issue. Florida Department of Transportation v. J.W.C. Company, Inc., 396 So. 2d 778 (Fla. 2d DCA 1981). Petitioner must show by a preponderance of the evidence that Respondent's selection of Intervenor is an arbitrary, fraudulent, dishonest, or illegal act of agency discretion. Department of Transportation v. Groves-Watkins Constructors, 530 So. 2d 912 (Fla. 1988). 13/

      
      

   10. Petitioner has neither alleged nor shown that Respondent's exercise of agency discretion was fraudulent or dishonest. However, Petitioner has shown that Respondent's exercise of agency discretion is arbitrary and illegal within the meaning of the law applicable to public procurement.

       
       

3. Arbitrary

   
   

   1. An arbitrary decision, in the context of public procurement, is a decisive decision not governed by a fixed rule or standard. Youth Crime Watch of America v. Department of Health and Rehabilitative Services, 619 So.2d 405,

      406 (Fla. 2d DCA 1993). Respondent's proposed agency action is an arbitrary decision.

      
      

   2. Respondent's decision to award Intervenor with a contract for substantially all of the included items is a decisive decision. It is the ultimate decision Respondent set out to make when Respondent first issued the ITB.

      
      

   3. Respondent's decision is not governed by any fixed rule or standard. Respondent deviated from the fixed rule or standard prescribed in the ITB. Respondent did not disclose any other fixed rule or standard to justify its action, and did not explicate its proposed agency action with competent and substantial evidence admitted in the record.

      
      

   4. Respondent ignored the requirement that Intervenor include a fixed discount on excluded items. Respondent ignored the requirement to award a single contract to a single bidder. Respondent ignored the requirement to format bids in accordance with prescribed criteria in the ITB.

      
      

   5. By ignoring material requirements in the ITB, Respondent used prescribed criteria improperly. Respondent's improper use of prescribed criteria is not an honest exercise of agency discretion and results in a fatally defective decision. Courtenay v. Department of Health and Rehabilitative Services, 581 So.2d 621, 623 (Fla. 5th DCA 1991).

      
      

   6. Respondent did not disclose the criteria it used: to interpret the ITB in a manner that is inconsistent with the plain and ordinary meaning of its terms; to deviate from material requirements in the ITB; or to alter the prescribed bid procedure. Section 287.057 prohibits Respondent from determining the acceptability of a bid on the basis of criteria not set forth in the ITB. Such criteria are improper criteria. Respondent's consideration of improper

      criteria is not an honest exercise of agency discretion and results in a fatally defective decision. Courtenay, 581 So.2d at 623.

      
      

   7. Respondent deviated from the bid evaluation procedure prescribed in the ITB. Respondent contacted Intervenor after opening the bids. Respondent allowed Intervenor to alter its bid and to cure defects in its bid. Respondent's failure to follow its own bid evaluation procedure is arbitrary. Procacci v. Department of Health and Rehabilitative Services, 603 So.2d 1299, 1299-1300 (Fla. 1st DCA 1992).

      
      

   8. Respondent did not disclose a fixed rule or standard outside of the ITB that governs Respondent's action. Respondent did not explicate its proposed agency action.

   
   

4. Illegal

   
   

   1. Section 287.057 requires Respondent to award the contract to the ". .

      . responsive bidder who submits the lowest responsive bid." A responsive bid is defined in Section 287.012(17) as:

      
      

      . . . a bid . . . which conforms in all material respects to the invitation to bid. . . .

      
      

   2. Intervenor's bid is not a responsive bid within the meaning of Section 287.012(17). Intervenor's bid does not conform in all material respects to the requirements of the ITB.

      
      

   3. Intervenor's bid deletes material terms in the General Conditions. Intervenor's bid fails to conform to the requirement for a bid on all included items. It fails to conform to the requirement for a fixed discount on excluded items and fails to comply with prescribed formatting requirements.

      
      

   4. Respondent has no legal authority to consider a bid from any bidder other than a responsive bidder. Respondent's attempt to do so is ultra vires and illegal.

      
      

   5. Respondent determined the acceptability of Intervenor's bid on the basis of criteria other than the criteria set forth in the ITB. Respondent ignored material requirements in the ITB for Intervenor to bid on Item 1 and 2 lamps, to offer a meaningful discount on excluded items, and to comply with prescribed formatting requirements. Section 287.057 prohibits Respondent from determining the acceptability of bids on the basis of criteria not set forth in the ITB. Respondent's attempt to do so is ultra vires and illegal.

   
   

5. Material Deviation

   
   

   1. Respondent's deviation from the rule or standard fixed in the ITB is material. For reasons already stated in the Findings of Fact and not repeated here, Respondent's deviation from the evaluation procedure, criteria, and requirements prescribed in the ITB satisfies all three of the disjunctive requirements for a material deviation.

      
      

   2. Respondent's deviation affects the price of the bid, gives the bidder an advantage or benefit not enjoyed by other bidders, and adversely impacts the interests of the agency. Harry Pepper & Associates, Inc. v. City of Cape Coral,

   352 So.2d 1190, 1193 (Fla. 2d DCA 1977). Cf. Intercontinental Properties, Inc.

   v. Department of Health and Rehabilitative Services, 606 So.2d 380, 386 (Fla. 3d DCA 1992) (holding that an agency decision was a minor variation because it failed to satisfy one of the foregoing requirements for a major variation).

   
   

6. Public Policy

1. There are two primary means of public procurement. One is an ITB. The other is a request for proposal ("RFP").

   
   

2. An RFP is inherently more subjective than an ITB. An RFP generally asks proposers to propose a solution to the issuer's stated needs and to estimate the cost of the proposed solution. Proposals generally describe the proposer's sense of the best solution and its cost. The criteria and procedures prescribed in an RFP are intended to minimize, but not eliminate, the subjectivity inherent in the RFP process. 14/

   
   

3. An ITB is significantly different from an RFP. An ITB requires bids to comply with the specifications prescribed in the ITB. A bidder estimates the cost that the issuer will pay for the solution prescribed in the ITB.

   
   

4. The procurement document prepared by Respondent is an ITB. The ITB prescribes the requirements that must be met for a bid to be responsive and to qualify for evaluation.

   
   

5. Section 287.001 makes it essential to the effective public procurement of commodities to maintain a:

   
   

   . . . detailed justification of agency decisions in the procurement of commodities. . . .

   
   

   Respondent deviated from the criteria prescribed in the ITB and failed to disclose a fixed rule or standard for doing so. Respondent failed to maintain the detailed justification required by the legislature for Respondent's proposed agency action.

   
   

6. Respondent has adequate flexibility to exercise its discretion within the limits of applicable law. Respondent may select the lowest bid that conforms to the requirements of the ITB or reject all of the proposals and seek new bids through a new ITB. See, e.g., Groves-Watkins, 530 So.2d at 913. 15/

   
   

7. Respondent did not exercise either of the options legislatively authorized for the public procurement process. Respondent exercised its discretion in a manner that is not governed by any fixed rule or standard. Respondent failed to detail a justification for its action. Such action defeats the object and integrity of the public procurement process. See, e.g., Groves Watkins, 530 So.2d at 913.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order granting Petitioner's

protest of Respondent's proposed agency action.

RECOMMENDED this 26th day of September, 1996, in Tallahassee, Florida.

DANIEL S. MANRY, Hearing Officer Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 26th day of September, 1996.

ENDNOTES

1/ The language used in the ITB creates some ambiguity over the issue of whether separate contracts can be awarded for Item 1 and 2 lamps. However, that ambiguity is resolved by reading ambiguous terms in the ITB in a manner that is consistent with the purpose of the ITB.

The purpose of the ITB is to establish "a 24 month contract for the purchase of large lamps." (emphasis supplied) The Special Condition paragraph entitled Evaluation/Award, on page 6 of the ITB, states:

Awards shall be made statewide on an all or none basis to the responsive bidder(s) offering the lowest Award Figure, Item (1 and lowest Award figure for Item (2 on price sheets. To qualify a bid for a specific group, bids must be submitted for all items listed within the group.

The quoted language is properly construed in a manner that is consistent with the purpose of the ITB. Accordingly, the quoted language is interpreted to mean that the 24 month contract intended to be established by the ITB is to be awarded on an all or none basis to the responsive bidder, or joint bidders, who satisfy the conjunctive requirements of: the lowest price for Item 1; and Item 2 lamps. To qualify a bid for either item, the bid must include prices for all lamps listed within each item. See, paras. 43-46, infra.

2/ See, discussion in n. 1, supra, and paras. 43-46, infra.

3/ Compare, the 0 percent fixed discount offered in Intervenor's bid with the

44 percent discount offered in Petitioner's bid. Intervenor interpreted the ITB as allowing separate bids on Item 1 and 2 lamps and as authorizing separate contracts on Item 1 and 2 lamps. Petitioner interpreted the ITB as requiring a bid on both Item 1 and 2 lamps and as authorizing only one contract for Item 1 and 2 lamps.

4/ Cf. Intercontinental Properties, Inc., v. Department of Health and Rehabilitative Services, 606 So.2d 380, (Fla. 3d DCA 1992). The court defined a minor irregularity as:

. . . a variation from the bid invitation or proposal terms and conditions which does

not affect the price of the bid, or give the bidder an advantage or benefit not enjoyed

by other bidders, or does not adversely impact the interests of the Department.

Intercontinental Properties, 606 So.2d at 386. See also, Fla. Admin. Code Rule 60A-1.001(16).

5/ Respondent disclosed the bid tabulations to Intervenor prior to the time prescribed in the ITB for posting bid tabulations and used a method of disclosure not prescribed in the ITB. No other bidder enjoyed the benefit of knowing the bid tabulations at any time and in any manner other than that prescribed in the ITB.

6/ See, Mercedes Lighting and Electrical Supply v. Department of General Services, DOAH Case No. 88-2211-BID (June 28, 1988) (holding that a bidder can not be permitted to correct a deficiency after bid opening).

7/ Jones Floor Covering, Inc. v. Department of General Services, DOAH Case Number 90-5032BID (November 29, 1990).

8/ Some evidence suggests that Respondent could pay as much as $400,000 more for excluded items purchased from Intervenor than Respondent would pay for the same items purchased from Petitioner. Although $400,000 is greater than the five percent difference in the price bid by Petitioner and Intervenor for Item 1 lamps, the actual increment paid for excluded items depends on a variety of factors including the quantity of excluded items actually purchased.

9/ Petitioner's bid is only five percent greater for Item 1 lamps and could offer the lowest cost to the state for both included and excluded items. See,

n. 8.

10/ Sec. 287.057 requires Respondent to award the contract to the lowest responsive bidder. Cf. Intercontinental Properties, 606 So.2d at 387 (holding that there is a strong public policy against disqualifying the lowest bidder for technical deficiencies). The rationale underlying the public policy enunciated in Intercontinental Properties is no less persuasive when the state attempts to award the contract to a bidder who submits a bid that is materially deficient.

11/ All chapter and section references are to Florida Statutes (1995) unless otherwise stated.

12/ All references to rules are to rules promulgated in the Florida Administrative Code as of the date of this Recommended Order.

13/ Contrary to the procedure generally followed for formal hearings conducted pursuant to Section 120.57(1), the hearing officer does not conduct a de novo hearing in public procurement proceedings. In such proceedings:

. . . the hearing officer sits in a review capacity, and must determine whether

. . . [RFP] criteria . . . have been satisfied.

Intercontinental Properties, Inc. v. Department of Health and Rehabilitative Services, 606 So.2d 380, 386 (Fla. 3d DCA 1992).

The hearing officer's scope of inquiry is limited to a determination of whether Respondent abused its discretion. An agency abuses its discretion if it exercises that discretion in an arbitrary, dishonest, fraudulent, or illegal manner. In Groves-Watkins, the court stated:

. . . the hearing officer's sole responsi- bility is to ascertain whether the agency acted fraudulently, arbitrarily, illegally, or dishonestly.

Groves-Watkins, 530 So. 2d at 914.

14/ See, e.g., System Development Corporation v. Department of Health and Rehabilitative Services, 423 So.2d 433 (Fla. 1st DCA 1982); Tropabest Foods, Inc. v. Department of General Services, 493 So.2d 50 (Fla. 1st DCA 1986); Marriott Corporation v. Metropolitan Dade County, 383 So.2d 622 (Fla. 3d DCA 1980); Eggart V. Westmark, 45 So.2d 505 (Fla. 1950).

15/ In Groves-Watkins, the court was concerned with an ITB. The court stated that flexibility needed to exercise the agency's broad discretion is provided in the ability to accept the lowest bid or reject all bids.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 96-2777BID

Petitioner's Proposed Findings Of Fact.

1.-16 Accepted in substance

17.-18. Rejected as recited testimony 19.-25. Accepted in substance

Respondent's Proposed Findings Of Fact.

Intervenor's Proposed Findings Of Fact.

persuasive evidence and as legal argument

67. Accepted in substance

68.-69. Rejected as recited testimony

70. Rejected as not supported by credible and

persuasive evidence and as legal argument 71.-73. Rejected as recited testimony

74. Rejected as not supported by credible and persuasive evidence and as legal argument

75.-79. Rejected as recited testimony

80. Rejected as not supported by credible and persuasive evidence

81.-85. Accepted in substance

86.-93. Rejected as recited testimony 94.-96. Accepted in substance

97.-98. Rejected as recited testimony

COPIES FURNISHED:

William H. Linder, Secretary Department of Management Services 4050 Esplanade Way

Tallahassee, Florida 32399-0950

Paul A. Rowell, General Counsel Department of Management Services 4050 Esplanade Way

Tallahassee, Florida 32399-0950

Stephen S. Mathues, Esquire Department of Management Services Office of General Counsel

4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950

Paul R. Bradshaw, Esquire Bryant, Miller and Olive, P.A.

201 South Monroe Street, Suite 500 Tallahassee, Florida 32302

Lawrence P. Stevenson, Esquire Holland and Knight, P.A.

315 South Calhoun Street, Suite 600 Tallahassee, Florida 32301

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 MANAGEMENT SERVICES

MARPAN SUPPLY COMPANY, INC.,

Petitioner,

vs. DOAH Case No. 96-2777B1D

STATE OF FLORIDA

DEPARTMENT OF MANAGEMENT SERVICES,

Respondent,

and

GENERAL ELECTRIC COMPANY, GE LIGHTING

Intervenor.

/

FINAL ORDER

The recommended order of the hearing officer dated September 26, 1996, came before me for final action. Exceptions to the recommended order were filed by Respondent's attorney. No other party filed exceptions.

1. The conclusion of law in paragraph 83 of the recommended order (RO) is that the bid of intervenor, General Electric Company (GE) is "not a responsive bid." There was no exception to this conclusion. Thus, findings of fact that do not show unresponsiveness are irrelevant and need not be adopted by DMS, and conclusions of law applicable to irrelevant facts need not be adopted.

   
   

2. The existence of a contract or ITB is a point of fact, but its interpretation is a point of law.

   
   

3. The issues of law and fact were stipulated by all parties to be: "Whether GE's bid was properly determined to be responsive; whether GE enjoyed a competitive advantage over other bidders." There was not issue as to DMS's right to award more than one contract.

   
   

4. Exceptions 1 and 2 are well taken. Paragraphs 29, 30 and 31 of the RO are labeled as findings of fact but are essentially conclusions of law. Each paragraph finds that the invitation to bid (ITB) required DMS to award a single contract to one bidder. This conclusion is not correct because paragraph 10 of the general conditions reserved to DMS the right to make awards to one or more suppliers." Also, this conclusion is moot.

5. Exception 3 is well taken on the grounds stated above as to Exceptions 1 and 2. It is not necessary to review the evidence in order to rule on Exception 3.

   
   

6. Exception 4 is well taken. The RO's finding 32 is intertwined with the erroneous findings in paragraphs 29 and 30. Finding 32 is based on an interpretation of the ITB, which is a point of law rather than fact.

   
   

7. Exception 5 is well taken. Paragraphs 44, 45, 46 and 48 address the propriety of awarding more than one contract, which was not an issue. The third sentence of paragraph 49 is the erroneous conclusion of law that more than one contract is prohibited.

   
   

8. Exception 6 is well taken. The first sentence of paragraph 56 is irrelevant. The remainder is an interpretation of the ITB or the purchasing statutes or both and an irrelevant conclusion of law. Paragraph 57 is irrelevant.

   
   

9. Exception 7 is well taken. The second sentence of paragraph 77 reiterates the conclusion of law that DMS is required to award a single contract.

   
   

10. The hearing officer's order recommended that the protest be granted. The sustaining of exceptions has no effect on that recommendation because GE's bid was nonresponsive.

Accordingly, it is ORDERED that:

1. The hearing officer's findings of fact and conclusions of law are adopted except paragraphs 29-32, 44-46, 56 and 57 and the third sentence of paragraph 49 and the second sentence of paragraph 77.

   
   

2. The bid protest petition of Marpan Supply Company, Inc. is granted. The proposed award of two contracts to Marpan and GE is rescinded.

DONE AND ORDERED this 22nd day of November, 1996.

DON MILLS

Deputy Secretary

Department of Management Services Suite 250

4050 Esplanade Way

Tallahassee, Florida 32399-0950

(904) 488-3341

NOTICE OF RIGHT TO APPEAL

A party who is adversely affected by this final order is entitled to judicial review which shall be instituted by filing one copy of the notice of appeal with the agency clerk of the Department of Management Services, and a second copy, along with the filing fee as prescribed by law, with the District Court of Appeal in the appellate district where the agency maintains its headquarters or where a party resides. Review proceedings shall be conducted in accordance with the Florida Appellate Rules. The notice of appeal must be filed within 30 days of rendition of this order.

COPIES FURNISHED:

Daniel Manry Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

Paul R. Bradshaw

Bryant, Miller & Olive, P.A.

201 South Monroe Street, Suite 500 Tallahassee, Florida 32302

Lawrence P. Stevenson Holland and Knight, P.A.

315 South Calhoun Street, Suite 600 Tallahassee, Florida 32301

Stephen S. Mathues Assistant General Counsel

Department of Management Services 4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-00950

Filed with the Clerk of the Department of Management Services this 22nd day of November, 1996.

MICHELE LAYTON

Docket for Case No: 96-002777BID

Orders for Case No: 96-002777BID