STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GULF CONSTRUCTION GROUP, INC., )

)

Petitioner, )

)

vs. ) Case No. 98-1179RP

)

SOUTH FLORIDA WATER )

MANAGEMENT DISTRICT, )

)

Respondent, )

)

and )

)

IT CORPORATION, )

)

Intervenor. )

)

FINAL ORDER

Pursuant to notice, a formal hearing was held in this case on April 8, 1998, at West Palm Beach, Florida, before Susan B. Kirkland, a duly designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Larry R. Leiby, Esquire

Kevin Taylor, Esquire

Leiby Construction Law Firm

8551 West Sunrise Boulevard, Suite 304

Plantation, Florida 33322

For Respondent: Glenn M. Miller, Esquire

South Florida Water Management District 3301 Gun Club Road

West Palm Beach, Florida 33406

Mary F. Smallwood, Esquire

Ruden, McClosky, Smith, Schuster, & Russell, P.A.

215 South Monroe Street, Suite 815

Tallahassee, Florida 32301

For Intervenor: Hank Jackson, Esquire

Holland & Knight

625 North Flagler Drive

West Palm Beach, Florida 33401 STATEMENT OF THE ISSUES

Whether the proposed amendment to Rule 40E-7.653, Florida Administrative Code, is an invalid exercise of delegated legislative authority.

PRELIMINARY STATEMENT

By publication of the text of the proposed rule on December 19, 1997, in the Florida Administrative Weekly, and

subsequent Notice of Change on February 28, 1998, in the Florida Administrative Weekly, the Respondent, South Florida Water Management District (District) proposes to amend Rule 40E-7.653, Florida Administrative Code. Petitioner, Gulf Construction Group, Inc. (Gulf), filed a challenge to the proposed rule. IT Corporation (IT) filed a Motion to Intervene, which motion was granted.

At the final hearing, Gulf called Carolyn Williams as its witness and entered Petitioner's Exhibit 1 in evidence. Joint Exhibits 1 and 2 were admitted in evidence. The District also called Carolyn Williams as its witness. IT called no witnesses and presented no exhibits.

The parties agreed to file proposed final orders within ten days of the filing of the transcript. The transcript was filed on April 15, 1998. On April 30, 1998, the Respondent and

Intervenor filed a Joint Motion to Strike Portion of Gulf Construction Group, Inc.'s Proposed Final Order. On May 4, 1998, Petitioner filed a Memorandum in Opposition and Motion to Strike Intervenor IT Corporation's Proposed Final Order for Failing to Accurately Reflect the Proceedings. The motions of the parties are DENIED. The parties timely filed their proposed final orders, which have been considered in the rendering of this Final Order.

FINDINGS OF FACT

1. In July 1996, the Governing Board of the Respondent, South Florida Water Management District (District), adopted Chapter 40E-7, Part VI, Florida Administrative Code, which is called the Supplier Diversity & Outreach M/WBE Contracting Rule. Rule 40E-7.611(1), Florida Administrative Code sets forth the purpose of the rule as follows:

   1. The rules under this Part establish policies and procedures designed to remedy documented disparities in District contracting and the present effects of past marketplace discrimination. The rules under this Part implement specific recommendations of the District's Minority Business Availability and Utilization Study ('Study') as developed by MGT of America, Inc., dated August, 1995 and made a part of the District's Supplier Diversity & Outreach Program ('Program'). The rules under this Part shall apply to all competitive solicitations for commodities, construction, professional, and other contractual services, including change orders and amendments.

      
      

2. The Supplier Diversity & Outreach M/WBE Contracting Rule

   became effective September 25, 1996. Prior to the effective date of the rule, the District had a minority and women business enterprise (M/WBE) program, but had no rules governing the program. Under the pre-rule policy governing the M/WBE program, the standards for determining eligibility for certification were less stringent than those adopted by rule in 1996.

3. Beginning in October 1995, the District issued certification eligibility determinations for three-year periods. Prior to that time certifications were for a period of one year.

4. The District maintains a database of firms which have been certified as M/WBE's and uses that database to generate lists of eligible firms for specific solicitations. The list for any particular solicitation is project-specific based on the opportunities for M/WBE participation afforded by the project. For example, if a contract calls for plumbing, but not electrical services, the list of eligible M/WBE firms would be limited to plumbing contractors.

5. At the time that the Supplier Diversity & Outreach M/WBE Contracting Rule was adopted in July 1996, the District did not address in the rule how pre-rule certified M/WBE firms would be affected by the certification eligibility requirements in Rule 40E-7.653, Florida Administrative Code. Based on the District's database, there were approximately 370 to 380 firms which had been certified as M/WBE's prior to September 25, 1996, the effective date of Chapter 40E-7, Part VI, Florida Administrative

   Code. Some of the pre-rule certified firms are presently providing services to the District under existing contracts.

6. On December 19, 1997, the District gave notice by publication in the Florida Administrative Weekly of proposed amendments to Rule 40E-7.653, Florida Administrative Code. A Notice of Change was published in the Florida Administrative Weekly on February 28, 1998. The proposed amendment to Rule 40E- 7.653, Florida Administrative Code, which is at issue states:

   1. For purposes of this rule, a firm shall be considered a District certified M/WBE only if the firm has applied for and been granted certification by the District after September 25, 1996. Firms certified prior to September 25, 1996, shall be counted toward the M/WBE goal attainment only if:

      the firm is either a prime contractor or subcontractor for a particular District contract executed prior to the effective date of this rule; or the firm is listed on the M/WBE vendor list for particular District solicitation issued prior to the effective date of this rule. In either case, the firm shall only be counted toward M/WBE goal attainment for that particular contract or solicitation.

7. As part of the proposed rulemaking process, the District sent notice to all potentially affected firms recommending that the firms voluntarily apply for recertification prior to the effective date of the proposed rule. Carolyn Williams, the Director of the Office of Supplier Diversity and Outreach at the District, described the notification process as follows:

   We, when we initially entered into rule adoption, we sent a notice to all those interested and impacted firms and advised them that the District was undertaking this

   process and asked them to voluntarily submit their application for recertification, because at some point if the proposed rule was adopted, there would be an effective date and those firms then who had not come in to reapply for certification and did not fall within the exceptions under this proposed rule would no longer be considered certified by the District.

   The firms who fell within the two exceptions in the final rule language would be protected, and those firms who came back in to be recertified before the effective date of this rule would be protected, but anyone who did not would fall off the list.

   The rule initially had a May 1 effective date. We put a time, a series of dates in place to try to ensure that we notified all persons appropriately so they could get their certifications in, the application in.

   We had a March 30 deadline for all firms interested in recertifying prior to the effective date of the proposed rule, which was May 1.

   So again, if you didn't fall within the exceptions, the two exceptions, and you were certified prior to the rule, the original date of the rule, if you did not reapply by that May 1 date or we had not made a decision with regard to your status by that time, you would no longer be considered by the District.

8. Gulf Construction, Inc. (Gulf), was sent notice but did not submit an application for recertification. During the final hearing, counsel for the District acknowledged that Gulf was a pre-rule certified M/WBE. (Transcript at 66 and 67).

   CONCLUSIONS OF LAW

   
   

9. The Division of Administrative Hearings has jurisdiction over the subject of and the parties to this proceeding. Section 120.56(2), Florida Statutes.

10. The basis for challenging a proposed rule is that it is an invalid exercise of delegated legislative authority as defined by Section 120.52(8), Florida Statutes, which provides:

    1. 'Invalid exercise of delegated legislative authority' means action which goes beyond the powers, functions, and duties, delegated by the Legislature. A proposed or existing rule is an invalid exercise of delegated legislative authority if any one of the following principles applies:

       1. The agency has materially failed to follow the applicable rulemaking authority,

          citation to which is required by s. 120.54(3)(a)1.;

       2. The agency has exceeded its grant of rulemaking authority, citation to which is required by s. 120.54(3)(a)1.;

       3. The rule enlarges, modifies, or contravenes the specific provisions of law implemented, citation to which is required by s. 120.54(3)(a)1.;

       4. The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency;

       5. The rule is arbitrary or capricious;

       6. The rule is not supported by competent substantial evidence;

       7. The rule imposes regulatory costs on the regulated person, county, or city, which could be reduced by the adoption of less costly alternatives that substantially accomplish the statutory objectives.

    A grant of rulemaking authority is necessary but not sufficient to allow an agency to adopt a rule; a specific law to be implemented is also required. An agency may adopt only rules that implement, interpret, or make specific the particular powers and duties granted by the enabling legislation and is not arbitrary and capricious, nor shall an agency have the authority to implement statutory provisions setting forth general legislative intent or policy.

    Statutory language granting rulemaking authority or generally describing the powers and functions of an agency shall be construed to extend no further than the particular powers and duties conferred by the same statute.

11. Section 120.56(2), Florida Statutes, establishes the burden of proof in challenges to proposed rules and provides:

    The petition shall state with particularity the objections to the proposed rule and the reasons that the proposed rule is an invalid exercise of delegated legislative authority. The agency then has the burden to prove that the proposed rule is not an invalid exercise

    of delegated legislative authority as to the objections raised. . . .

    
    

12. Gulf has raised several objections to the proposed rule. Gulf claims that the proposed rule is an ex post facto law and, therefore, in violation of Article 1, Section 10 of the Florida Constitution, which states,"No bill of attainder, ex post facto law or law impairing the obligation of contracts shall be passed." The constitutional prohibition against ex post facto laws applies only to criminal laws. Seaboard System Railroad, Inc. v. Clemente, 467 So. 2d 348 (Fla. 3rd DCA 1985). Thus, the proposed rule is not an ex post facto law.

13. Gulf objects to the proposed rule as being contrary to established rules of statutory construction, which prohibits retroactive application of a law which diminishes a person's vested rights. In the instant case, the proposed rule is meant to apply retroactively to those entities which were certified prior to September 25, 1996. The issue then becomes whether three-year certification as an M/WBE is a vested right. It is not. M/WBE certification is a license. In Mayo v. Market Fruit Co. v. Sanford, Inc., 40 So. 2d 555, 559 (Fla. 1949), the Florida Supreme Court stated:

    [A] license is merely a privilege to do business and is not a contract between the authority granting it and the grantee, nor is it a property right, nor does it create a vested right.

    
    

14. In Hernandez v. State, Department of State, Division of Licensing, 629 So. 2d 205 (Fla. 3rd DCA 1993), the court upheld

    the retroactive application of Section 493.6118(4), Florida Statutes, which requires the revocation of the license of a private investigator who has been convicted of a felony, stating that the license was not a property right.

15. Gulf objects to the proposed rule as being in conflict with Section 287.0943(1)(i), Florida Statutes, which provides that minority business enterprises which are certified pursuant to the provisions of the state and interlocal agreement are deemed to be certified minority business enterprises in all jurisdictions in which the agreement is in effect. Rule

    40E-7.651, Florida Administrative Code, sets out the criteria for reciprocal certification by the District and does not include the state and interlocal agreement; thus, the District's use of reciprocal certifications is not governed by Section 287.0943, Florida Statutes. Arguendo, if the District did participate in the state and interlocal agreement pursuant to Section 287.0943, it is not relevant to this proceeding because the proposed rule does not pertain to certifications by other jurisdictions.

16. Gulf objects to the proposed rule, stating that the law claimed to be implemented, Section 373.607, Florida Statutes, does not provide authority for the revocation of existing M/WBE certifications. Section 373.607, Florida Statutes, enacted in 1996, states:

    Each water management district, as created by this chapter, may implement the recommendations from any study conducted pursuant to chapter 91-162, Laws of Florida,

    to achieve minority business enterprise procurement goals.

    
    

17. After the enactment of Section 373.607, Florida Statutes, the District enacted the Supplier Diversity & Outreach M/WBE Contracting Rule to implement its M/WBE program in accordance with the recommendations contained in the availability and utilization study which was performed for the District. Part VI of Chapter 40E-7, Florida Administrative Code, governs the certification of M/WBE's and requires that M/WBE's be certified by the District pursuant to Rule 40E-7.653, Florida Administrative Code. Those firms which were certified by the District prior to September 25, 1996, were obviously not certified pursuant to Rule 40E-7.653 because the rule was not in effect prior to that date. Gulf was not certified pursuant to the current rules, but rather was certified by the District without benefit of rules and, perhaps, without statutory authority.

18. Section 373.607 gives the District the authority to set up the M/WBE program, including determining the criteria for certification. The proposed rule clarifies what is already required by the current rules, that, with certain exceptions, the firms participating in the program must be certified by the District in accordance with Rule 40E-7.653. The proposed rule is authorized by Section 373.607, Florida Statutes.

19. Gulf states that the proposed rule amendment will essentially decertify Gulf as an M/WBE without due process

    because the decertification procedures set forth in Rule 40E- 7.664, Florida Administrative Code, will not have been followed. Gulf's argument is without merit because the District has in fact provided notice and an opportunity for Gulf to be heard prior to the effective date of the proposed rule. Gulf, along with the other 380 firms that were certified prior to September 25, 1996, were given notice that they should reapply for certification and that if they failed to do so, their certification would no longer be effective when the proposed rule went into effect, unless the firm fell within one of the exceptions stated in the proposed rule. If the firm was denied recertification, the firm would be given an opportunity for an administrative proceeding pursuant to Section 120.57, Florida Statutes. Gulf did not avail itself of this window of opportunity, and is in no position now to complain of a denial due process.

20. The District has established that the proposed rule is not an invalid exercise of delegated legislative authority.

ORDER

Based on the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that Gulf Construction Group, Inc.'s, challenge to proposed Rule 40E-7.653 is DISMISSED.

DONE AND ORDERED this 18th day of May, 1998, in Tallahassee, Leon County, Florida.

SUSAN B. KIRKLAND

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 18th day of May, 1998.

COPIES FURNISHED:

Samuel E. Poole, III Executive Director

South Florida Water Management District Post Office Box 24680

West Palm Beach, Florida 33416

Liz Cloud, Chief

Bureau of Administrative Code The Elliott Building Tallahassee, Florida 32399-0250

Carroll Webb, Executive Director

Joint Administrative Procedures Committee

120 Holland Building Tallahassee, Florida 32399-1300

Glenn M. Miller, Esquire

South Florida Water Management District Post Office Box 24680

West Palm Beach, Florida 33416

Larry R. Leiby, Esquire Kevin Taylor, Esquire

Leiby Construction Law Firm 8551 West Sunrise Boulevard Suite 304

Plantation, Florida 33322

Mary F. Smallwood, Esquire Ruden, McClosky, Smith, Schuster

& Russell, P.A.

215 South Monroe Street, Suite 815 Tallahassee, Florida 32301

Hank Jackson, Esquire Holland & Knight

625 North Flagler Drive

West Palm Beach, Florida 33401

Lawrence E. Sellers, Jr., Esquire Karen D. Walker, Esquire

Holland & Knight LLP Post Office Drawer 810

Tallahassee, Florida 32308

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing one copy of a Notice of Appeal with the agency clerk of the Division of Administrative Hearings and a second copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the District Court of Appeal in the appellate district where the party resides. The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed.

Docket for Case No: 98-001179RP

Orders for Case No: 98-001179RP