vs. ) Case No. 98-0749BID
Intervenor. )
On March 12 and 13, 1998, a formal administrative hearing was held in this case in Tallahassee, Florida, before J. Lawrence Johnston, Administrative Law Judge, Division of Administrative Hearings.
For Petitioner: F. Alan Cummings
Thomas A. Valdez Cummings & Thomas, P.A. 1004 DeSoto Park Drive
For Intervenor: Donna H. Stinson
The issue in this case is whether the Respondent, the Department of Transportation (DOT), should award State Project No. 97160-3320 to Intervenor, Smith & Company (Smith), notwithstanding the bid protest
filed by the Petitioner, Hubbard Construction Company (Hubbard), alleging that its bid was responsive and lower than Smith's bid.
The Petitioner, Hubbard, and several others, including Intervenor Smith, bid on State Project No. 97160-3320 in Polk County (the project). Upon the opening of the bids on or about October 29, 1997, Petitioner was the apparent low bidder at $8,650,169.84; Cone & Graham was the apparent second low bidder at $8,863,088.21; and Intervenor Smith was the apparent third low bidder at $8,944,382.70.
The bids of Hubbard and Cone & Graham were reviewed by the DOT's Good Faith Efforts Committee of the DOT's Minority Programs Office for compliance with the project's Disadvantaged Business Enterprise (DBE) goals and were found to be non-responsive. Cone & Graham's bid was found to be non-responsive because no DBE utilization forms had been submitted. Hubbard's bid was found to be non-responsive because its DBE utilization forms relied on Suncoast Fabrics, which was not an approved DBE for state-funded projects; without Suncoast Fabric's participation, Hubbard's bid did not meet the project's DBE goals.
Neither Cone & Graham nor Hubbard submitted a package to demonstrate good faith efforts to meet the DBE goals.
The findings and recommendations of the Good Faith Efforts Committee were submitted to the DOT's Technical Review Committee. The Technical Review Committee concurred with the Good Faith Efforts Committee that the apparent low bid and second low bid were non-responsive and that the project should be awarded to Smith.
The findings and recommendations of the Technical Review Committee were submitted to the DOT's Contract Awards Committee. The Contract Awards Committee concurred with the Good Faith Efforts Committee and the Technical Review Committee that the apparent low bid and the apparent second low bid were nonresponsive, and awarded the contract to Smith.
DOT issued its Notice of Intent to Award the contract to Smith, and Hubbard timely filed its bid protest. No other bidder protested. Smith petitioned to intervene.
On or about February 12, 1998, the DOT referred Hubbard's bid protest to the Division of Administrative Hearings. Final hearing was scheduled and held on March 12 and 13, 1998. Hubbard called six witnesses and had Petitioner's Exhibits 1 through 15 admitted in evidence. The DOT called one witness and had Department Exhibits 1, 2, 3, 9, 11, 12, 17 and 18 admitted in evidence. Smith called one witness.
DOT ordered the preparation of a transcript of the final hearing, and the parties filed proposed recommended orders. (Hubbard's Motion to Supplement its proposed recommended order is granted over the written objections of the other parties.)
State Project No. 97160-3320 (the project) is for work on the Polk County Parkway in Polk County. This project is funded entirely with state funds. It had a Disadvantaged Business Enterprise (DBE) goal of twelve percent, consisting of four percent black, and eight percent non-minority female.
The Florida Department of Transportation (DOT) manages two separate DBE programs--a federal DBE program for federally funded projects, and a state DBE program for state-funded projects. The state program is based upon a disparity study conducted by MGT of America for the DOT in 1993. This study was conducted as a result of the case of City of Richmond v. J. A. Croson Co., 109 S.Ct. 706 (1989), which determined that a preferential contract system which was not based on actual discrimination was unconstitutional.
The MGT disparity study found that there was evidence of disparate treatment by DOT in Florida, and in a very small number of counties outside of Florida. As a result, the state DBE program only certifies DBEs with home offices in Florida or the other counties identified in the disparity study.
The DOT publishes a DBE directory for each bidding cycle. The DBE Directory includes DBEs certified or in the process of renewing expired certifications at the time the directory is published. The DBE directory includes DBEs for both the federal and state DBE programs but clearly indicates which DBEs are approved only for projects with at least some federal funding. Under DOT's policies and practices, a bidder can use any approved DBE listed in the directory even if the DBE's certification expires between publication and the bid letting.
The deadline for submission of bids for the project was October 29, 1997. Hubbard's initial bid included a DBE Utilization Summary form indicating that it would achieve the DBE goal established for the project.
The DBE Utilization Summary form gave Hubbard notice that another DBE Utilization Summary form listing the DBEs Hubbard would use, along with the dollar amounts of the subcontracts for each DBE listed, together with completed DBE Utilization forms for each DBE, had to be received by the DOT no later than 5 p.m. on the third business day after the bid letting. The DBE Utilization Summary form also gave notice that, otherwise: "Bids may be declared non-responsive
. . . ."
On November 3, 1997, Hubbard submitted a completed DBE Utilization Summary form, together with completed DBE Utilization forms. These forms stated that Hubbard stated would be using Suncoast Fabrics for erosion control work to meet $160,000 worth of the non- minority female goal for the project. Without the subcontract with
Suncoast Fabrics, Hubbard would fall $160,000 short of meeting the non-minority female goal.
In fact, Suncoast is not certified as a DBE for projects funded entirely by the State (i.e., without any federal funding). As a result, Hubbard's bid was $160,000 short of meeting the non-minority female goal for the project.
After November 3, 1997, Hubbard discovered its error in relying on Suncoast Fabrics as a DBE for the project and on November 5, 1997, submitted another DBE Utilization Summary form and DBE Utilization form stating that, instead of paying Suncoast
$160,000 for erosion control work, it would pay Margie Woods Trucking an additional $160,000.
Hubbard's bid was reviewed by the DOT's Good Faith Efforts Committee of the DOT's Minority Programs Office for compliance with the project's DBE goals and was found to be non- responsive because Hubbard's DBE utilization forms relied on Suncoast Fabrics, which was not an approved DBE for state-funded projects and because, without Suncoast Fabric's participation, Hubbard's bid did not meet the project's DBE goals.
Hubbard did not submit a package to demonstrate good faith efforts to meet the DBE goals (because Hubbard thought its bid met the DBE goals). The Good Faith Efforts Committee found that Hubbard's bid did not demonstrate good faith efforts to meet the DBE goals, a finding which Hubbard does not dispute.
The Good Faith Efforts Committee did not consider Hubbard's November 5, 1997, submission attempting to substitute Suncoast Fabric's participation with an increase in Margie Woods Trucking's participation because it was submitted after the deadline for submitting DBE utilization forms.
The findings and recommendations of the Good Faith Efforts Committee were submitted to the DOT's Technical Review Committee. The Technical Review Committee concurred with the Good Faith Efforts Committee that the apparent low bid and second low bid were non-responsive and that the project should be awarded to Smith.
The findings and recommendations of the Technical Review Committee were submitted to the DOT's Contract Awards Committee. The Contract Awards Committee concurred with the Good Faith Efforts Committee and the Technical Review Committee that the apparent low bid and the apparent second low bid were nonresponsive, and awarded the contract to Smith.
None of the DOT committees reviewing Hubbard's bid in the process of deciding to award the contract to Smith gave specific
consideration to the question whether Hubbard's failure to timely submit DBE utiJization forms meeting the project's DBE goals should be waived as being a minor irregularity.
The Department's policy is to strictly enforce the three-day period for submission of completed DBE utilization forms and to consider failure to submit DBE utilization forms meeting a project's DBE goals to be a material error mandating rejection of a bid as non- responsive. From January 1995 through December 1997, the Department rejected 18 out of 254 problem bids because the bids failed to meet DBE goals.
The DOT rejected the bid of Edward M. Chadbourne and Associates in a prior letting on facts very similar to those in this case. Chadbourne proposed Suncoast Sod Farms, Inc., a DBE firm based in Alabama, for a project wholly funded by the state. As reflected in the DBE Directory for that letting, Suncoast Sod was not eligible for non-federally funded projects.
In two prior state-funded projects for the Polk County Parkway, Suncoast Fabrics had been used by a contractor in its DBE submissions. The Department allowed the use of Suncoast Fabrics to count towards the contractor's DBE percentage because the DBE Directory for those projects erroneously failed to indicate that Suncoast Fabrics was certified as a DBE only for federally-funded projects.
Similarly, the DOT awarded a contract to Murphree Bridge Corporation in a prior letting although Murphree did not meet the three percent DBE goal for that project. In that case, DOT advertisements prior to the letting erroneously stated that the goal was two percent, and Murphree met the advertised goal but not the actual 3 percent goal.
In the two prior instances involving Suncoast Fabrics and the prior instance involving Murphree Bridge, the DOT declined to penalize the contractors for DOT's errors. However, there was no change in DOT's policy regarding the three-day period for submission of completed DBE utilization forms that meet a project's DBE goals. In addition, in those instances, DOT was unable to count the DBE utilization for purposes of its affirmative action program, for which it must report to the legislature.
Suncoast Fabrics apparently did not realize it was not approved for state-funded contracts, and it misled Hubbard when Hubbard inquired as to Suncoast's DBE eligibility. But regardless whether Suncoast had an excuse for its erroneous belief, it was Hubbard's responsibility to use the DBE Directory to verify whether a DBE is authorized for use on a particular project, and the applicable DBE Directory clearly noted that Suncoast Fabrics was not approved for this project. In fact, Suncoast Fabrics was appropriately identified as not qualifying for state-funded projects in each DBE Directory
since March 1997. DOT made no statement, representation or indication of any kind to Hubbard that would have misled Hubbard to think that Suncoast Fabrics was qualified as a DBE for State Project No. 97160- 3320. In this regard, Hubbard's situation is significantly different from the two prior instances involving Suncoast Fabrics, the prior instance involving Murphree Bridge.
The Department did not intend for bidders to use the three- day period for submission of completed DBE Utilization forms to shop DBEs' prices, attempt to drive DBEs' prices down, or continue to solicit quotes from DBEs. The Department has no statute, rule, procedure, or policy permitting substitution of DBEs more than three days after a bid letting and before work begins. The Department does not permit substituting DBEs after an award is posted unless the DBE fails to perform, and then only with the express prior approval of the Department.
Allowing a bidder the ability to shop DBEs' prices, attempt to drive DBEs' prices down, or continue to solicit quotes from DBEs after the three-day period could give the bidder a competitive advantage over bidders who do not.
The amount of the bid submitted by a contractor can be affected by the bids it received from DBEs. The bid submitted may be based upon quotes received from particular DBEs. If one contractor were allowed to use an unqualified DBE whose price was low, and the other contractors did not rely on such quote, knowing that the DBE was unqualified, the first contractor could enjoy a competitive advantage. Although Hubbard asserted that it did not decide which DBEs to use until after its bid was submitted, the possibility of an advantage exists.
Hubbard also contends that its failure to submit DBE Utilization forms meeting the DBE goal for the project is similar to Smith's alleged error in submitting a single DBE Utilization Summary form for both of the split goals (black and non-minority female), contrary to the instructions for the form. Suffice it to say that submitting the information on a single form is different from Hubbard's error. It is clear from Smith's submission that Smith's bid met the project's DBE goals; it was clear from Hubbard's bid that Hubbard's did not.
DOT's decision to reject Hubbard's bid for failure to comply with the DBE requirements was not contrary to statute, rule, policy, practice or the bid specifications. Hubbard did not show that the Department's action was clearly erroneous, contrary to competition, arbitrary, or capricious.
CONCLUSIONS OF LAW
Section 120.57(3)(f), Florida Statutes (1997), provides in pertinent part:
Unless otherwise provided by statute, the burden of proof shall rest with the party protesting the proposed agency action. In a competitive- procurement protest, other than a rejection of all bids, the administrative law judge shall conduct a de novo proceeding to determine whether the agency's proposed action is contrary to the agency's governing statutes, the agency's rules or policies, or the bid or proposal specifications. The standard of proof for such proceedings shall be whether the proposed agency action was clearly erroneous, contrary to competition, arbitrary, or capricious.
Section 339.0805(1)(b), Florida Statutes (1997), provides in pertinent part:
(b) Upon a determination by the department of past and continuing discrimination in nonfederally funded projects on the basis of race, color, creed, national origin, or sex, the department may implement a program tailored to address specific findings of disparity. The program may include the establishment of annual goals for expending a percentage of state- administered highway funds with small business concerns. The head of the department may
elect to set goals only when significant disparity is documented. (Emphasis supplied.)
Florida Administrative Code Rule 14-78.004 provides in pertinent part:
Purpose. It is the purpose of the Non- Federally Funded State DBE Program, hereinafter referred to as "State DBE Program," to take specific affirmative actions to eliminate discrimination and the effects of past discrimination . . . .
* * *
(4)(b) Eligible DBE's. Only DBE's certified under Rule 14-78.005 and 14-78.007, who meet all of the following criteria shall be eligible to participate in the State DBE Program. These DBE's are presumed to have experienced past discrimination by the Department, but the presumption is rebuttable.
Those DBE's with their primary place of business in the State of Florida or other counties where the disparity study has shown discrimination by the Department . . .
. (emphasis added)
Florida Administrative Code Rule 14-78.003(2)(b)3 provides in pertinent part:
For all contracts for which DBE contract goals have been established, each bidder shall meet or exceed or demonstrate that it could not meet, despite its good faith efforts, the contract goals set by the Department. The DBE participation information shall be submitted as outlined in 14-78.003(2) (b)3.a. and b. below.
Award of the contract shall be conditioned upon such submission of the DBE participation information and upon satisfaction of the contract goals or, if the goals are not met, upon demonstrating that good faith efforts were made to meet the goals. Failure to satisfy the information requirements shall result in a contractor's bid being deemed nonresponsive and the bid being rejected.
The contractor's bid submission shall include information, pursuant to 49 C.F.R. Subtitle A, Subpart C, 23.45(h)(1)(i), submitted on a completed Disadvantaged Business Enterprise (DBE) Utilization Form, Form 275-020-004, Rev. 10/95 and Disadvantaged Business Enterprise (DBE) Utilization Summary Form, Form 275-020-003, Rev. 10/95.
In lieu of a completed Disadvantaged Business Enterprise (DBE) Utilization Summary Form, Department of Transportation Form 275020- 003, Rev. 10/95, and a Disadvantaged Business Enterprise (DBE) Utilization Form, Department of Transportation Form 275-020-004, Rev. 10/95, the contractor will submit a Disadvantaged Business Enterprise (DBE) Utilization Summary Form which indicates that either the contractor will achieve the DBE goal established for the project for which the bid has been submitted, or that the contractor has submitted sufficient information to demonstrate that the contractor made good faith efforts to meet the DBE goal as part of the bid submission. If the contractor has submitted a Disadvantaged Business Enterprise (DBE)
Utilization Summary Form on which the contractor has indicated that the DBE goal will be achieved, the contractor will provide to the Minority Programs Office by 5:00 P.M. on the third business day following the bid letting day . . .
. (emphasis added)
This rule was amended to add option b. Before the amendment, all DBE utilization forms had to be included in the initial bid submission
Hubbard's primary contention in this case is that its failure to submit DBE utilization forms meeting the project's DBE goals within the three-day period specified in Rule 14- 78.003(2)(b)3.b was a minor irregularity that DOT should waive. "[A]lthough a bid containing a material variance is unacceptable, not every deviation from the invitation to bid is material. It is only material if it gives the bidder a substantial advantage over the other bidders and thereby restricts or stifles competition. [T]he purpose of competitive bidding is to secure the lowest possible responsible offer and minor irregularities can be waived in effectuating this purpose." Tropabest Foods, Inc. v. Department of General Services, 493 So. 2d 50 (Fla. 1st DCA 1986).
The Department has consistently interpreted Florida Administrative Code Rule 14-78.003(2)(b)3 to mean what it says: "Failure to satisfy the information requirements shall result in a contractor's bid being deemed nonresponsive and the bid being rejected." Although in this case the DBE information was not required until three days after the initial bid submission, the principles are the same.
In the Final Order, Murphy Construction Co. v. Department of Transportation, Case No. 91-0848BID, entered May 10, 1991, failure to provide a description of the work to be done on the DBE form was found to be a material error because" the irregularity was a violation of DOT rules which provide on their face that a violation will result in a bid being nonresponsive, and the DOT interprets the rule to mean what it says." This reasoning is equally applicable to the matter at issue in this case. Similarly, in the Recommended Order in Martin Eby Construction Company, Inc. v. State of Florida Department of Transportation, Case No. 93- 5703BID, entered December 28, 1993, a bidder relied on the assertion of a potential DBE that it would be approved for the letting, but the DBE was not listed in the applicable DBE directory. The matter was considered to be a material error:
To allow Petitioner to substitute certified DBEs for an uncertified DBE in its bid after the bid letting would give Petitioner a
substantial advantage over the other bidders, or an advantage or benefit not enjoyed by the other bidders, or both. Hence, the irregularity in Petitioner's bid is material and not waiveable; Petitioner cannot be permitted to substitute certified DBEs for Gearing, an uncertified DBE, after bid letting.
Courts have also recognized that the failure to list subcontractors when required is a material deviation, in that such failure provides the opportunity for bid shopping. In E.M. Watkins & Co., v. Board of Regents, 414 So. 2d 583 (Fla. 1st DCA 1982), the Court noted that:
The unfair bidding advantage one contractor derives from the failure to list required subcontractors is generally threefold: (1) it provides the precious few minutes which may be saved by failing to provide a name for the appropriate blank on form D-1 and matching the name with the price used in the bid computation, (2) it allows the potential for speculation, by use of a phantom price and efforts to shop that item or trade until a subcontractor can be found at the speculative contract price, and (3) it permits a successful bidder to accept additional subcontractor bids after the bid opening, giving the opportunity for undercutting the low subcontractor on whom he relied in formulating his bid.
Section 120.57(3)(f), Florida Statutes (1997), also provides in pertinent part:
(f) In a competitive-procurement protest, no submissions made after the bid or proposal opening amending or supplementing the bid or proposal shall be considered.
It is concluded that, for purposes of this statute, Hubbard's DBE utilization forms should be considered to have been "opened" at the end of the three-day period for their submission under Florida Administrative Code Rule 14-78.003(2)(b)3.b. Hubbard's attempt to change its DBE utilization forms after the deadline should not be considered.
Hubbard made the argument that, for purposes of Section 120.57(3)(f), the bid opening in this case was on October 29, 1997, and Hubbard's timely DBE utilization forms submitted on November 3, 1997, should not be considered, leaving only the representation in
the DBE Utilization Summary form Hubbard included with its initial bid submission that Hubbard would meet the DBE goals for the project. This argument is rejected. Clearly, DBE utilization forms submitted in accordance with Florida Administrative Code Rule 14-78.003(2)(b)3.b should be considered. Besides, if those forms are not considered, Rule 14-78.003(2)(b)3 would require rejection of the bid as non-responsive.
Hubbard cites State Contracting & Engineering Corp. v. Dept. of Transp., 1998 WL 161227, 23 Fla. L. Week D942 (Fla. 1st DCA 1998), for the proposition that Florida Administrative Code Rule 14-78.003(2)(b)3 is not dispositive. In State Contracting & Engineering (which has not yet been released for publication in the permanent law and is still subject to revision or withdrawal), the court observed that the requirements of some subsections of Rule 14-78 are enforced at the time the subcontracts are reviewed. But that observation related to the enforcement of subsections of Rule 14-78 imposing requirements concerning the sources of labor and materials that qualify as a part of the DBE goal. Those rule provisions do not suggest that their requirements must be met at the time the bid is submitted to the agency; as the DOT interprets them, those requirements are enforced at the time the subcontracts are reviewed.
In contrast, State Contracting & Engineering also acknowledges the DOT's consistent interpretation of Rule 14- 78.003(2)(b)3--i.e., that the sufficiency of the DBE Utilization forms included in a bid submission is determined at the time of bid submission based on the forms themselves. The actual holding of State Contracting & Engineering affirms this interpretation of Rule 14-78.003 (2) (b) 3.
Hubbard relied on the decision in Overstreet Paving Co. v. Dept. of Transp., 608 So. 2d 851 (Fla. 1st DCA 1992), as standing for the proposition that errors of the kind made by Hubbard in this case are not material. But in Overstreet, the issue was whether a required DBE utilization form was inadvertently omitted from a bid submission or whether DOT lost it. There was never any question as to the existence or contents of the form. Given those facts, the court held that Overstreet's evidence shifted the burden to DOT to prove that the form was not submitted and that DOT failed to meet its burden.
To help explain its holding, Overstreet contained dicta that omission of the DBE utilization form in that case was a "minor technical discrepancy" and that the form itself was a "mere technicality." However, it is not clear from the decision that the court would not have ruled differently if the contents of the form were not clear. It also cannot be inferred from the decision that the court would countenance changing the contents of a DBE
utilization form after the Rule 14-78.003(2)(b)3.b deadline has expired.
Hubbard also relied on Hubbard Construction Co. v. Dept. of Transp., 642 So. 2d 1192 (Fla. 1st DCA 1994), as additional support for the proposition that errors of the kind made by Hubbard in this case are not material. Although not apparent from the court decision itself, the Recommended Order, Hubbard Construction Co. v. Dept. of Transp., DOAH Case No. 92-4018BID, entered October 21, 1992, clarifies the facts. In that case, Hubbard used a DBE who was not listed in the applicable DBE Directory because its DBE certificate had expired and its pending application for recertification was not filed 90 days prior to expiration.
However, the DBE's application for recertification was delayed due to the DOT's last-minute requests for additional information that had no basis, in law or fact. In addition, while DOT had a policy to leave an expired DBE in the directory if its application for recertification was filed prior to 90 days before the expiration of its certificate, regardless of the length of time necessary to process the application for recertification, including any delays created by the DOT's requests for additional information, DOT had no rule that required DBE applicants for recertification to file for renewal not later than 90 days prior to expiration of their certifications. The Hearing Officer recommended that, on those facts, Hubbard should be allowed to count the DBE's participation towards meeting the project's DBE goals, but DOT's Final Order rejected the recommendation.
The court in Hubbard Construction simply held that the Recommended Order was supported by competent and substantial evidence and should not have be rejected in the DOT's Final Order. As in the case of the prior erroneous uses of Suncoast Fabric on the Polk County Parkway project, and the case of Murphree Bridge, it appears that Recommended Order reinstated by the Hubbard Construction decision turned more on fairness considerations than materiality. It cannot be inferred from Hubbard Construction that the outcome would have been the same without the DOT's misconduct. In contrast, in this case Hubbard was not induced by DOT to use Suncoast Fabrics. Hubbard knew State Project No. 97160-3320 was a state-funded project, and Suncoast was clearly noted to be unqualified in the applicable DBE directory.
order awarding State Project No. 97160-3320 to Smith & Company.
RECOMMENDED this 1st day of May, 1998, in Tallahassee, Leon County, Florida.
J. LAWRENCE JOHNSTON Administrative Law Judge
Filed with the Clerk of the Division of Administrative Hearings this 1st day of May, 1998.
F. Alan Cummings, Esquire Cummings & Thomas, P.A. Post Office Box 1116
Ft. Lauderdale, Florida 33302-1116
Donna H. Stinson, Esquire Broad & Cassel
Thomas F. Barry, Secretary Attention: Diedre Grubbs Haydon Burns Building
Pamela Leslie, General Counsel Department of Transportation Haydon Burns Building
All parties have the right to submit written exceptions within 15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.
