STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BELLSOUTH COMMUNICATION )

SYSTEMS, INC., )

)

Petitioner, )

)

vs. ) Case No. 99-3956BID

)

DEPARTMENT OF THE LOTTERY, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on October 18, 1999, in Tallahassee, Florida, before Patricia Hart Malono, a duly-designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Martin B. Sipple, Esquire

Craig Varn, Esquire Ausley & McMullen Post Office Box 391

Tallahassee, Florida 32302

For Respondent: Paul J. Martin, Esquire

Office of the Attorney General The Capitol, Plaza 01 Tallahassee, Florida 32399-1050

STATEMENT OF THE ISSUES

Whether the Respondent's determination that the proposal the Petitioner submitted in response to the Revised Request for

Proposal No. 98/99-010/G was non-responsive is arbitrary or capricious.

Whether the Respondent's determination that it would initiate contract negotiations with the only company submitting a responsive proposal in response to the Revised Request for Proposal No. 98/99-010/G and that it would award a contract to that company if the negotiations were successful is contrary to the applicable statutes, rules or policies, or the proposal

specifications.

PRELIMINARY STATEMENT

On April 27, 1999, the Department of the Lottery ("Department") issued a Request for Proposal Number 98/99-010/G

• Revised, Revised Request for Proposal for Maintenance of Telecommunications Equipment and Software, and Miscellaneous Data Processing Equipment and Software for the Florida Lottery ("Revised Request for Proposal"). The responses to the Revised Request for Proposal were opened on June 4, 1999, and the Department posted its Revised Notice of Responsiveness and Responsibility, Notice of Intent to Negotiate, Notice of Contract Award, 98/99-010/G, Request for Proposal for Maintenance of Telecommunications Equipment and Software and Miscellaneous Data Processing Equipment and Software for the Florida Lottery ("Revised Notice") at 9:30 a.m. on September 7, 1999. The Department stated in the Revised Notice that it had

  received three non-responsive proposals, including the proposal submitted by Bellsouth Communication Systems, Inc. ("Bellsouth"), and one responsive proposal, which was submitted by GTE Communications Corporation ("GTE"). In the Revised Notice, the Department notified all bidders of its intent to evaluate the proposal of GTE for acceptability, to initiate contract negotiations with GTE if its proposal is found acceptable, and to award the subject contract to GTE subject to completion of successful negotiations.

  In its Formal Written Protest of Request for Proposal

  
  

  No. 98/99-010/G dated September 9, 1999, Bellsouth contested the intended action of the Department set out in the Revised Notice. In a letter dated September 21, 1999, the Department referred Bellsouth's bid protest to the Division of Administrative Hearings for assignment of an administrative law judge. By notice dated September 23, 1999, the final hearing was scheduled for October 18, 1999.

  On October 13, 1999, Bellsouth filed a Motion for Entry of Summary Recommended Order and Incorporated Memorandum of Law; this motion was denied in an Order issued October 14, 1999.

  Bellsouth also filed on October 13, 1999, an Agreed Motion to File Amended Formal Written Protest and Petition for Formal Administrative Hearing. The motion was granted, and the Amended Formal Written Protest and Petition for Formal Administrative

  Hearing ("Amended Protest") was substituted for the original bid protest. In the Amended Protest, Bellsouth asserts, first, that its proposal is responsive to the Revised Request for Proposal and that the Department's determination to the contrary is arbitrary and capricious. Second, and assuming that Bellsouth's proposal is non-responsive, Bellsouth asserts that the Department failed to comply with Section 287.057, Florida Statutes, on two grounds: The Department failed to resolicit proposals even though it did not receive two responsive proposals to the Revised Request for Proposal or, in the alternative, the Department failed to document the reasons why it would be in the best interest of the Department to initiate contract negotiations with the only company submitting a responsive proposal. Bellsouth requests in the Amended Protest that its proposal be deemed responsive and that the technical, cost, and CMBE portions of its proposal be evaluated by the Department; in the alternative, Bellsouth requests that the Department resolicit the procurement. Bellsouth also requests that it be awarded reasonable attorneys' fees and costs incurred in prosecuting this bid protest.

  At the hearing, Bellsouth presented the testimony of Drew Smith, a sales executive employed by Bellsouth; V. Carol Moore, a bid support manager employed by Bellsouth; Gregory Rhett Frisbie, Purchasing Supervisor for the Department; Louisa

  Warren, an attorney employed by the Department; and John Brehm, a Purchasing Specialist III with the Department. Petitioner's Exhibits 1, 3 through 10, 14, 15, 17 through 20, 22, 26, and 31 were offered and received into evidence; Petitioner's Exhibit 24 was offered into evidence but rejected; Petitioner's Exhibit 31 consists of the transcript of the deposition of Gregory Rhett Frisbie. The Department presented the testimony of Louisa Warren and Gregory Rhett Frisbie, and Respondent's Exhibits 1 and 2 were offered and received into evidence.

  Respondent's Exhibit 2 was a document created subsequent to the filing of Bellsouth's bid protest, and it was signed by Gregory Rhett Frisbie on October 15, 1999, three days before the final hearing in this case. 1/ Bellsouth objected to this exhibit because it had not been provided with a copy of the document prior to its being identified and offered into evidence during the final hearing. Bellsouth asserted that it could not properly cross-examine the witness regarding the document and that it would, therefore, be prejudiced if the exhibit were received into evidence. Respondent's Exhibit 2 was received into evidence, and Bellsouth was given leave to depose

  Mr. Frisbie with regard to the exhibit and to file the deposition transcript as a late-filed exhibit. No deposition transcript has been filed to date.

  The transcript of the formal hearing was filed with the Division of Administrative Hearings on November 2, 1999. On November 5, 1999, Bellsouth filed a Motion for Extension of Time to file Petitioner's Proposed Recommended Order, which was granted, and the time for filing proposed recommended orders was extended to November 19, 1999. The parties timely filed their proposed findings of fact and conclusions of law, which have been duly considered.

  FINDINGS OF FACT

  
  

  Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made:

  1. The Department of the Lottery is the state agency responsible for operating the state lottery authorized by Section 15, Article X, Florida Constitution. Section 24.104, Florida Statutes (1999). The Department is authorized to "[e]nter into contracts for the purchase, lease, or lease- purchase of such goods and services as are necessary for the operation and promotion of the state lottery "

     Section 24.105(17), Florida Statutes (1999).

     
     

  2. Bellsouth Communication Systems, Inc., is a corporation authorized to do business in the State of Florida. In 1987, Bellsouth was awarded the contract to install and maintain the Department's telecommunication system. This contract expired in

     1993, and Bellsouth and the Department entered into a second contract that expired in 1999. Bellsouth is currently maintaining the Department's telecommunications equipment pursuant to the Second Extension of Agreement for Maintenance of Telephone Equipment and Software, and Miscellaneous Data Processing and Telecommunications Equipment and Software, which was executed on September 29, 1999. This extension commenced on October 1, 1999, and "shall continue until the execution and implementation of a new contract, . . . not to exceed six(6) months."

  3. The services that Bellsouth is currently providing to the Department are similar to the services specified in the Revised Request for Proposal.

     Revised Request for Proposal and Department's Revised Notice of Responsiveness and Responsibility.

     
     

  4. On February 8, 1999, the Department issued Request for Proposal Number 98/99-007/G, Request for Proposal for Maintenance of Telecommunications Equipment and Software, and Miscellaneous Data Processing Equipment and Software for the Florida Lottery ("Request for Proposal"). The Department received three proposals in response to Request for Proposal Number 98/99-007/G, including one submitted by Bellsouth. The proposals were opened on March 2, 1999. At 4:30 p.m. on

     March 29, 1999, the Department posted a Notice of Responsiveness

     and Responsibility, Notice of Rejection of All Proposals for Request for Proposal Number 98/99-007/G. The Department rejected all proposals because it determined that all three proposals were non-responsive. 2/

  5. On April 27, 1999, the Department issued Request for Proposal Number 98/99-010/G - Revised, Revised Request for Proposal for Maintenance of Telecommunications Equipment and Software, and Miscellaneous Data Processing Equipment and Software for the Florida Lottery. The provisions of the Revised Request for Proposal were similar in many respects to the original Request for Proposal Number 98/99-007/G, but some of the original requirements were substantially modified. For the convenience of those responding to the Revised Request for Proposal, those portions of the Revised Request for Proposal in which there were major substantive changes were indicated in bold print, underlined and italicized. 3/ Two addenda to the Revised Request for Proposal were issued, one on May 19, 1999, and one on May 21, 1999.

  6. The responses to the Revised Request for Proposal were opened on June 4, 1999, and the Department posted a notice that stated that it had received three proposals, all of which were non-responsive. It subsequently withdrew this notice and posted a Revised Notice of Responsiveness and Responsibility, Notice of Intent to Negotiate, Notice of Contract Award, 98/99-010/G,

     Request for Proposal for Maintenance of Telecommunications Equipment and Software and Miscellaneous Data Processing Equipment and Software for the Florida Lottery ("Revised Notice") at 9:30 a.m. on September 7, 1999.

  7. In the Revised Notice, the Department stated that it had received four proposals and that three had been found to be non-responsive. The Department found Bellsouth's proposal non- responsive for the following reason:

     • Responses to the following sections were conditional:

       
       

       • Section 2.10

       • Section 2.22E

       • Section 2.22H

       • Section 3.3A

       • Section 3.6

         
         

         The Department also found the proposals of GTE Florida Incorporated and Sprint non-responsive.

  8. The Department announced in the Revised Notice:

     
     

     A fourth response which was received timely was inadvertently omitted from the responsiveness and responsibility review.

     The following Respondent submitted a responsive proposal:

     
     

     GTE Communications Corporation

     
     

     No Respondent was determined to be non- responsible.

     
     

     * * *

     
     

     The Florida Lottery will evaluate GTE Communications Corporation's proposal for

     acceptability. If the proposal is determined to be acceptable, the Lottery intends to initiate contract negotiations and, subject to completion of successful negotiations, intends to award a contract. Award is contingent upon successful completion of negotiations.

     
     

     Should the Florida Lottery fail to successfully negotiate a contract with the responsive firm, the Lottery will score the technical and price proposals of the non- responsive firms using the criteria set forth in the Request for Proposal.

     Negotiations will then begin with the firm who receives the highest ranked score. If the Florida Lottery is unable to negotiate a satisfactory contract with that firm, negotiations will continue with the next highest ranked firm. Failing accord with the second highest ranked firm, the Secretary or designee will continue negotiations with the third highest ranked firm. Should the Secretary or designee be unable to negotiate a satisfactory contract with any of the selected firms, additional firms may be selected in accordance with Rule 53ER97-39, Florida Administrative Code, or negotiations may be reinstated following the original order of priority. The Florida Lottery will award a contract to the Respondent offering the terms and conditions which best meet its needs.

     
     

  9. Although the cost proposals submitted by the four companies submitting proposals to the Revised Request for Proposal had not been opened as of the date of the final hearing, it is undisputed that the value of the contract exceeds

     $25,000.

     The Revised Request for Proposal and Bellsouth's proposal.

     
     

  10. In Section 1.1 of the General Information section of the Revised Request for Proposal, the purpose of the Revised Request for Proposal is explained in pertinent part as follows:

      This Request for Proposal ("RFP") has been issued by the Florida Department of the Lottery ("Lottery") to obtain sealed proposals from respondents qualified to provide maintenance of the Florida Lottery's statewide telecommunications equipment and software, and miscellaneous data processing equipment and software.

      
      

      This RFP, and all other activities leading toward the execution of a contract per this RFP, are conducted under the Lottery policies set forth in Rule 53ER97-39, Florida Administrative Code, and Chapter 24, Fla. Stat. The Lottery considers it in the best interest of the State of Florida to acquire the commodities and/or services described herein through a competitive formal Request for Proposal process.

      
      

  11. Bellsouth's response to the Revised Request for Proposal was prepared by a group of employees located in Alabama and was coordinated by the sales executive who has been handling the current Bellsouth contract with the Department. The group was headed by V. Carol Moore, a bid support manager for contracts, whose duties are to "review incoming RFPs and commercial proposals for terms and conditions of compliance in relation to our company's policies." 4/ Ms. Moore was the person primarily responsible for preparing those portions of Bellsouth's proposal that did not involve purely technical

      information regarding maintenance and pricing. Her area of responsibility included those sections of the Revised Request for Proposal that were deemed conditional by the Department.

  12. In preparing the proposal, Ms. Moore was guided by her interpretation of the description of mandatory requirements of the proposals in Section 2.1 of the Revised Request for Proposal and her interpretation of the evaluation review process described in Section 5.2 of the Revised Request for Proposal, as well as by Bellsouth's business practices and policies.

      Ms. Moore particularly noted the Department's failure to expressly provide in the first paragraph of Section 2.1 that deviation from the mandatory requirements of the proposal, defined as those requirements containing the words "shall," "must," and "will," would be grounds for rejecting a proposal. She also particularly noted the Department's announced intention in Section 5.2 to negotiate "fair, competitive, and reasonable" conditions and prices with those responding to the Revised Request for Proposal.

  13. Ms. Moore assumed that the clarifications and modifications included in Bellsouth's proposal would be considered alternatives to the requirements included in the Revised Request for Proposal and that the clarifications and modifications would be subject to negotiations with the

      Department once the bid process entered the contract negotiation phase. 5/

  14. Section 2.10 of the Special Conditions section of the Revised Request for Proposal provides:

      2.10 Proposal Tenure

      
      

      All Proposals are binding until execution of a contract.

      
      

  15. Bellsouth included in its proposal the following statement:

      2.10 Proposal Tenure

      
      

      Bellsouth Response: Read and Agreed, with the clarification that Bellsouth's proposed pricing is valid for 90 days after bid submission, to allow sufficient time for evaluation and award. Extensions may be mutually agreed if the situation warrants.

      
      

  16. Bellsouth included the clarification limiting the tenure of its pricing proposal for the following reason:

      It was a business decision in that with these kinds of RFPs the process can take an extensive amount of time sometimes. And we don't generally hold our pricing open for longer than 90 days and that's because whatever stipulations we get from our manufacturers we have to live with in those bounds also. And so we felt like it was appropriate to put a time frame on the pricing only, but realizing of course these kinds of acquisitions though municipalities and governments sometimes take longer than

      90 days, we did give them an avenue for extending it for whatever circumstances that might warrant that particular extension. 6/

      It is Bellsouth's practice to include such language in virtually all of its responses to requests for proposals because the prices Bellsouth obtains from manufacturers are subject to change, and Bellsouth cannot guarantee its prices indefinitely.

  17. Section 2.22E of the Special Condition section of the Revised Request for Proposal provides:

      2.22 Contents of Contract

      
      

      In addition to the terms and conditions referenced above, the Contract between the Lottery and the Contractor shall also include at least the following provisions:

      
      

      * * *

      
      

      E. Subcontracting - The Contractor may enter into written subcontracts for performance of work under the Contract with prior written approval of the Lottery. All subcontractors shall be subject to the approval of the Lottery. The Lottery shall have the continuing right throughout the term of the Contract to disapprove subcontractors if such disapproval would be in the best interest of the Lottery. The Lottery shall have the right to inspect and acquire copies of any of the subcontractor documents executed between the Contractor and the subcontractor.

      
      

  18. Bellsouth included in its proposal the following statement:

      2.22 Contents of Contract

      
      

      * * *

      
      

      E. Subcontracting

      Bellsouth Response: Read and Agreed. Rejection of Bellsouth's subcontractor(s) shall be reasonably applied and approval not unreasonably withheld. The extent of "copies of any of the subcontractor documents executed between the Contractor and the subcontractor" shall be as mutually agreed and only to the extent required under Florida law.

      
      

  19. Bellsouth included the final sentence to give notice to the Department that, in the event Bellsouth decided to use subcontractors, it wanted the opportunity to sit down with the Department and discuss the documents that the Department required, as well as the law applicable to their disclosure. Bellsouth was concerned that the Department would require it to provide unlimited access to documents executed between it and a subcontractor because some of the documents might contain proprietary information, such as "specific internal pricing methodologies and profit margins and things like that." 7/

  20. Section 2.22H of the Special Condition section of the Revised Request for Proposal provides:

      2.22 Contents of Contract

      
      

      In addition to the terms and conditions referenced above, the Contract between the Lottery and the Contractor shall also include at least the following provisions:

      
      

      * * *

      
      

      1. Indemnification - Contractor shall act as an independent contractor and not as an employee of the Lottery in the performance of the tasks and duties which

         are the subject of the Contract. Contractor shall be liable, and agrees to be liable for, and shall indemnify, defend, and hold the Lottery, the state of Florida, its officers and employees harmless from all claims, suits, judgments, or damages (including litigation costs and reasonable attorney's fees) arising from Contractor's performance of the tasks and duties which are the subject of the Contract, including:

         
         

         1. Claims for the unauthorized use of name or likeness of any person, libel, slander, defamation, disparagement, piracy, plagiarism, unfair competition, idea misappropriation, infringement of copyright title, patent, slogan or other property rights and any invasion of the right of privacy; and

            
            

         2. Claims arising from contracts between the Contractor and third parties made pursuant to the Contract.

      
      

  21. Bellsouth included in its proposal the following statement:

      2.22 Contents of Contract

      
      

      * * *

      
      

      H. Indemnification

      
      

      Bellsouth Response: Read and Agreed with the following clarifications:

      (i) to the maximum extent allowed by applicable Florida law, indemnification is reciprocal and applicable only to each parties' negligent or wrongful acts or omissions arising under each others' performance under the contract; and (ii) with respect to the intellectual property aspects of section H.1., Bellsouth substitutes section 24 of the enclosed Master Agreement located in Tab 8 of this response. 8/

      
      

  22. Bellsouth included this language for the following reason:

      The indemnification provision itself was staffed through our corporate attorneys who chose to put this particular language in there. We had just gone through another quasi-state agency bid which eventually ended up having this particular kind of language in it so that the indemnification allowed between the parties would be to the point of complying with Florida law and that's what our attorney felt like was appropriate here with an eye on the fact that the lawyers would sit down at contract award time and negotiate this particular provision. 9/

      
      

      Bellsouth understood that the reciprocal indemnification provision would require each party to the contract to be responsible for its own misconduct, and Bellsouth anticipated that the precise language of the indemnification clause would be worked out during contract negotiations.

  23. Section 3.3A of the Scope of Services section of the Revised Request for Proposal provides:

      1. SCOPE OF SERVICES

         
         

         Contractor will be required to provide the following services:

         
         

         1. Maintenance

      
      

      Maintenance is defined as the service necessary to keep equipment and software in or return the equipment and software to good working order. The term includes, but is not limited to, preventative maintenance, adjustments, and

      replacement or exchange of parts and equipment necessary to remedy and repair all errors or malfunctions of equipment and software, and provision of all software modifications and improvements provided by the Licensor on a priority basis and provision and installation of all engineering orders/field change orders to upgrade the hardware issued by the manufacturer of the equipment. Contractor will be required to provide services in the cities listed on Attachment B. A guaranteed response time for each site listed on Attachment B will be set forth in the Contract. The Contractor will be required to provide maintenance service for additional items of equipment and software added to the Lottery's inventory, either through the contract resulting from the Request for Proposals or otherwise acquired, for the same unit cost as stated on Attachments C1 - C15 (Equipment and Software Maintenance Cost Proposal Forms) of this RFP. The maintenance period for new items purchased will begin at the end of the product's warranty period and will automatically be added by Contractor to any and all occurrences in the Contractor's maintenance tracking database(s) to avoid any lapse in coverage.

      
      

      (Underlining and italics in the original; deleted provisions omitted.)

  24. Bellsouth included in its response the following statement:

      1. SCOPE OF SERVICES

         
         

         1. Maintenance Required

      
      

      Bellsouth Response: Read and Agreed, with clarification.

      * * *

      
      

      Bellsouth maintains one of the most comprehensive proactive preventive maintenance programs in the industry. Bellsouth agrees to provide maintenance service for additional items of equipment and software added to the Lottery's inventory, as long as the equipment/software is either provided by or certified by Bellsouth (through a separate certification process). Please also see Bellsouth Response to Section 4.6 for specific response times.

      
      

  25. The Department requested that Bellsouth amplify this statement with a description of its certification process. Bellsouth provided the following explanation:

      Bellsouth Certification Process

      
      

      Should The Florida Lottery install or have installed equipment supplied by companies other than Bellsouth, Bellsouth will certify the equipment - to be added to any existing maintenance/warranty term - on a Time and Materials basis at Bellsouth's then-current rates. These rates may be different from the rates quoted in the bid response because the time of implementation cannot be pre- determined. Should the Lottery decline Certification, the subject part will not be covered by any extended warranty and the Lottery will be liable for any repair cost associated with installing the non-certified part. In some instances, depending upon the part, the existing warranty provided by Bellsouth (if any) may be adversely affected.

      
      

      Generally, the Certification process involves visual inspection, and after installation, complete system diagnostics may be performed. Routine tests as recommended by the system manufacturer as

      well as the part manufacturer may be performed. The type and amount of testing, diagnostics, and/or repairs are entirely dependent on the individual part.

      
      

  26. Bellsouth included its clarification to the provisions of Section 3.3A because it wanted the Department to be aware that it had a process for certifying equipment and software purchases from third parties to make sure that the equipment met Bellsouth's standards and would not have a detrimental effect on any of the other equipment Bellsouth was maintaining for the Department. In addition, Bellsouth was concerned that the Department would buy a piece of equipment that was not listed on Attachments C1 - C15 and expect Bellsouth to maintain it for the same price as it would maintain a similar piece of equipment listed in the attachments. Bellsouth wanted to make sure that the Department understood that the prices it provided for the equipment listed in the attachments was for that equipment only, not for similar equipment. It also wanted the Department to understand, first, that additional pieces of equipment certified by Bellsouth would not be maintained at the bid price but at its then-current prices and, second, that the Department would be liable for the costs of maintenance of any additional equipment which was not certified by Bellsouth. Any additional equipment the Department purchased from Bellsouth would be maintained under the terms of the contract.

  27. Section 3.6 of the Scope of Services section of the Revised Request for Proposal provides:

      3.6 PRICE PROVISIONS

      
      

      The Contractor must provide all labor, commodities and service required to meet the provisions of the Contract. The price proposal must reflect the total cost for maintenance and support services required by the RFP. This includes but is not limited to maintenance, parts and training as specified in Section 3.3. Unless approved in writing by the Lottery, all maintenance costs must be billed monthly in arrears in accordance with Section 215.422, Florida Stat. The monthly billing shall include charges for only those items actually in the possession of the Lottery for the time period maintenance is being charged.

      
      

      There shall be an annual advanced payment discount option which either meets or exceeds the current earnings rate of the State Treasurer.

      
      

      Pricing for maintenance and support service shall not be increased during the first year of the contract. The Contractor may request one (1) price increase per year for the remaining four (4) years of the contract.

      If the Contract is renewed, Contractor may request one (1) price increase per renewal period to be negotiated by both parties.

      The request must be supported by documentation acceptable to the Lottery that demonstrates that the Contractor's costs for providing commodities and/or services have increased by at least the percentage of the requested increase; in no event shall the increase exceed the percentage increase in the CPI during the corresponding period.

      The third paragraph of Section 3.6 of the original Request for Proposal was deleted in its entirety from the Revised Request for Proposal.

  28. Bellsouth included in its proposal the following statement:

      3.6 PRICE PROVISIONS

      
      

      Bellsouth Response: Read and Agreed. Please see Tab 1 of the Cost Proposal response submitted with this response. The monthly prices quoted for each site are based upon the products outlined in Attachments C1-C15 only (items currently in

      the possession of Florida Lottery). Monthly maintenance prices quoted for items still under warranty are listed as information only. Once the initial warranty period is over, the equipment will be added to the Florida Lottery's maintenance agreement and Bellsouth's then-current maintenance prices will apply. Bellsouth offers a 5% (five- percent) annual advanced payment discount option. Bellsouth will adjust maintenance prices, not to exceed the CPI, prior to the beginning of the next renewal term, and based on the existing inventory at a particular location. This adjustment shall be automatic as allowed by the contract and not subject to additional documentary justification.

      
      

  29. Bellsouth included the final sentence because it

      
      

      wanted to make it [price adjustment process] automatic at the time so that it would be a less administrative burden for both parties. And after working with the government, I know what it is to go back in and do price adjustments to contracts. And it is easier if you do know at the onset what it's going to be and how it's going to be adjusted and just do a carte blanche adjustment at that

      particular point. We wanted to make it easier for everyone to do that. It was certainly a suggestion or an alternative of how they might do it under price and provisions.

      
      

      We also stated that it would be automatic as allowed by the contract. Assuming, of course, that this was going to be a negotiated contract. 10/

      Bellsouth specifically included in its proposal the provision that no "additional documentary justification" would be required to support the automatic price adjustment because it was concerned that the Department might require documents containing confidential or proprietary information to support the price increases:

      [I]t was unknown at that particular point in time when we answered this what kind of additional documentation they [the Department] would be requiring. They could very well have left quite a bit of the company open to their inspection when it didn't have to deal with this particular contract. Not that we tried to hide that particular information, it was just that I didn't -- the company did see the relevance of it. 11/

      
      

      The Department's determination that Bellsouth's proposal was non-responsive.

      
      

  30. In Section 1.2 of the General Information section of the Revised Request for Proposal, "responsive proposal" is defined as "[a] timely submitted proposal which conforms in all material respects to the RFP."

  31. Sections 2.1 and 2.2 of the Special Conditions section of the Revised Request for Proposal provide in pertinent part:

      1. MANDATORY REQUIREMENTS

         
         

         The Lottery has established certain mandatory requirements which must be included as part of any proposal. The use of the terms "shall," "must" or "will" (except to indicate simple futurity) in this RFP indicates a mandatory requirement or condition.

         
         

         The words "should" or "may" in this RFP indicate desirable attributes or conditions, but are permissive in nature. Deviation from, or omission of, such a desirable feature will not by itself be cause for rejection of a proposal.

         
         

      2. NON-RESPONSIVE PROPOSALS, NON- RESPONSIBLE RESPONDENTS

      
      

      Proposals which do not meet all material requirements of this RFP or which fail to provide all required information, documents, or materials will be rejected as non- responsive. Material requirements of the RFP are those set forth as mandatory, or without which an adequate analysis and comparison of proposals is impossible, or those which affect the competitiveness of proposals or the cost to the State. The Lottery reserves the right to determine which proposals meet the material requirements of the RFP.

      
      

  32. Section 2.14 of the Revised Request for Proposal provides in pertinent part:

      The Contract shall incorporate this RFP, addenda to this RFP, and the Contractor's proposal as an integral part of the Contract, except to the extent that the Contract explicitly provides to the

      contrary. In the event of a conflict in language among any of the documents reference above, the provisions and requirements of the contract shall govern. In the event that an issue is addressed in the proposal that is not addressed in the RFP, no conflict in language shall be deemed to occur. . . .

      
      

  33. Nothing in the Revised Request for Proposal instructed those submitting proposals to respond to any of the mandatory requirements of Section 2.22, which specify the contents of the contract, or to any of the mandatory requirements of Section 3, which specify the scope of services to be provided under the contract. The Department generally considers no response to the provisions of these sections, and responses such as "read and understood" or "read and agreed", to indicate acquiescence to the mandatory provisions included in requests for proposals.

  34. Section 5.2 of the Revised Request for Proposal describes the evaluation review process as follows:

      The Secretary shall appoint an Evaluation Committee. All responsive technical proposals submitted by responsible Respondents will be reviewed and scored by the Evaluation Committee.

      
      

      The cost and CMBE proposals will thereafter be publicly opened and evaluated in accordance with the formula set forth in Section 5.4.

      
      

      The issuing Officer shall rank the Respondents based on the total scores of the technical, cost and CMBE proposals.

      Thereafter, the Lottery shall commence negotiations with the most highly ranked

      Respondent. Should the Lottery be unable to negotiate with that Respondent the conditions and price that the Florida Lottery deems to be fair, competitive, and reasonable, negotiations with that Respondent shall be terminated. The Florida Lottery shall then undertake negotiations with the second most highly ranked Respondent. Should the Florida Lottery be unable to negotiate a satisfactory Contract with that Respondent, the third and lower ranked Respondents may be selected to participate in this negotiation process or negotiations may be reinstated with the highest ranked Respondent. Negotiations shall continue until an agreement is reached or all proposals are rejected.

      
      

      An award of this RFP does not guarantee execution of a Contract.

      
      

      (Underlining and italics in original.)

      
      

  35. The "conditions and price" referred to in Section 5.2 of the Revised Request for Proposal include the mandatory requirements of Sections 2.22 and 3. In the course of contract negotiations, the Department can agree to include in the contract provisions different from those contained in these sections of the Revised Request for Proposal. The Department is not, however, required to negotiate or accept alterations to any of the mandatory requirements for the contents of the contract or for the scope of services.

  36. In conducting the responsiveness review of Bellsouth's proposal, the Department reviewed only the information contained in the proposal. The Department noted that Bellsouth had

      included clarifications and modifications to a number of the mandatory requirements of the Revised Request for Proposal, from which it could be inferred that Bellsouth found those mandatory requirements unacceptable.

  37. Members of the Department's purchasing office and legal office reviewed the substance of the clarifications and modifications included in Bellsouth's proposal, and some deviations were waived as minor. However, the members of the Department's purchasing office and legal office determined that the clarifications and modifications contained in Sections 2.10, 2.22E, 2.22H, 3.3A, and 3.6 of Bellsouth's proposal constituted material deviations from the mandatory requirements of the Revised Request for Proposal which, by the terms of Section 2.2 of the Revised Request for Proposal, rendered Bellsouth's proposal non-responsive.

  38. The Department concluded that Bellsouth's statement in Section 2.10 of its proposal that its pricing proposal would remain valid for only ninety days, with extensions subject to mutual agreement, was a material deviation from the Revised Request for Proposal. Section 2.10 of the Revised Request for Proposal unequivocally states that pricing proposals submitted in response to the Revised Request for Proposal would be "binding until execution of a contract." The Department interprets this requirement as a statement of fact, which would

      not, under any circumstances, be subject to modification or negotiation. If the Department waived this deviation and accepted Bellsouth's proposal as responsive, Bellsouth could, prior to execution of a contract, unilaterally alter its price proposal. This would not only give Bellsouth a significant advantage over the other companies submitting proposals, it could adversely affect the Department.

  39. The Department's legal office reviewed Bellsouth's proposal with respect to the clarifications and modifications included in Sections 2.22E, 2.22H, 3.3A, and 3.6 and concluded that, if the Department waived the deviations from the mandatory requirements in these sections and accepted Bellsouth's proposal as responsive, the Department might be legally bound to accept the clarifications and modifications as part of any contract it might negotiate with Bellsouth. As a consequence, the Department could be precluded from negotiating conditions and prices that it considered "fair, competitive, and reasonable" should Bellsouth's proposal be the most highly ranked and the Department enter into negotiations with Bellsouth.

  40. The Department would be adversely affected if it were required to accept Bellsouth's clarifications and modifications to Sections 2.22E, 2.22H, 3.3A, and 3.6: Specifically, Bellsouth would not have an obligation to submit documentation to support price increases; Bellsouth would have the option of

      refusing to maintain equipment purchased by the Department during the contract period if Bellsouth failed to certify such equipment, with the Department being liable for the cost of maintaining such equipment; Bellsouth would have a more restrictive indemnification obligation than that specified in the Revised Request for Proposal; and Bellsouth could withhold documentation relating to subcontractors to which the Department would be entitled under the mandatory provisions of the Revised Request for Proposal.

  41. A document entitled "RE: RFP NO. 98/99-010/G DOCUMENTATION OF CIRCUMSTANCES OF LOTTERY DETERMINATION THAT A THIRD CALL FOR BIDS WOULD NOT BE IN THE BEST INTEREST OF THE LOTTERY," was signed by the Department's Purchasing Supervisor on October 15, 1999. The document provides:

      THIS DOCUMENT is being created pursuant to Florida Lottery Rule 53ER97-39(5)(f) [Florida Administrative Code] and documents the circumstances of the Lottery's determination that it would not be in the Lottery's best interest to issue a third call for bids in this procurement.

      
      

      1. The Lottery issued RFP 98/99-007/G for Maintenance of Telecommunications Equipment and Software, and Miscellaneous Data Processing Equipment and Software on February 8, 1999,

         
         

      2. Of the three responses received to that RFP, none was responsive. Consequently, on March 29, 1999, the Lottery posted its Notice of Responsiveness and Responsibility and Notice of Rejection of All Proposals.

      3. As a result of receiving no responsive proposals to the above referenced RFP, the Lottery issued a new revised Request for Proposals, RFP 98/99-010/G for the same services and equipment. This RFP was issued on April 27, 1999.

         
         

      4. Vendors received a cover sheet with the second RFP titled "Important Notice and Instructions to Respondents" drawing their attention to certain changes in the RFP and encouraging a complete review.

         
         

      5. Of the responses received to the second RFP, three were not responsive. The Lottery inadvertently overlooked a fourth response, initially, to the revised RFP. While still thinking that only three non-responsive proposals had been received, a Notice of Responsiveness and Responsibility and Notice of Intent to Negotiate and Notice of Contract Award was posted on August 30, 1999. This Notice advised of the Lottery's intended procedure for negotiating and awarding a contract.

         
         

      6. Subsequent to posting the Notice referred to in paragraph 4, the Lottery discovered that a fourth response had been received under the revised RFP. That response was accordingly reviewed for responsiveness and responsibility using the same criteria as had been applied under the RFP for the first three responses. The fourth response was found to be responsive and responsible.

         
         

      7. Consequently, the Lottery issued a Revised Notice of Responsiveness and Responsibility and Notice of Intent to Negotiate and Notice of Contract Award under RFP 98/99-010/G. This Notice was dated September 7, 1999. It advised of the Lottery's intent to evaluate the one responsive proposal and, if acceptable, to initiate contract negotiations with the responsive Respondent and, pending the

         outcome of the negotiations, to award a contract to that Respondent.

         
         

      8. The foregoing facts and circumstances were all taken into account in making the decision not to issue a third RFP, as provided in Rule 53ER97-39(5)(f). The Lottery considered, for example, that after having issued two Requests for Proposals, with a combined total of seven responses, only one responsive proposal had been received. After having made these two attempts, the Lottery had no reason to believe that additional attempts would prove to be more successful. Further, the Lottery considered the fact that its then current contract for these services was scheduled to expire on September 30, 1999, and that, therefore, there was a need to reach a successor agreement on an expedited basis, if possible.

         
         

      9. Based on all the foregoing circumstances, it was determined to be in the Lottery's best interest to proceed without issuing yet another Request for Proposal.

      
      

      Although it was drafted over a month after the Department made its decision, this document accurately reflects the factors taken into consideration by the Department in deciding to initiate contract negotiations with GTE.

      Summary

      
      

  42. The evidence presented by Bellsouth is not sufficient to establish with the requisite degree of certainty that the Department's determination that Bellsouth's proposal was non- responsive was arbitrary or capricious. Rather, the evidence establishes that Bellsouth chose to include in its proposal

      clarifications and modifications to mandatory requirements of the Revised Request for Proposal even though those who submitted proposals were advised in Section 2.14 of the Revised Request for Proposal that a proposal would be rejected as non-responsive if it failed to "meet all material requirements of this RFP," where "material requirements" are defined as "those set forth as mandatory." In the absence of anything in the proposal to indicate that Bellsouth intended to put forward these clarifications and modifications simply as negotiating points, the Department could reasonably interpret Bellsouth's responses as conveying its refusal to accept the mandatory requirements of the Revised Request for Proposal.

  43. The evidence further establishes that the Department evaluated Bellsouth's proposal during the responsiveness review and determined that, if it were to accept Bellsouth's proposal as responsive, the clarifications and modifications included in Bellsouth's responses to Sections 2.10, 2.22E, 2.22H, 3.3A, and

      3.6 could adversely impact the Department and inhibit its ability to negotiate the best terms and conditions were it to enter contract negotiations with Bellsouth. The evidence presented by Bellsouth is not sufficient to establish that the Department reached this conclusion without considering the factors relevant to a determination of responsiveness or that the Department's interpretation of the provisions of the Revised

      Request for Proposal was irrational or unsupported by facts or logic.

  44. Similarly, the evidence submitted by Bellsouth is not sufficient to establish that the Department's decision to initiate contract negotiations with GTE rather than to solicit proposals for a third time was inconsistent with its governing statutes, rules, or the provisions of the Revised Request for Proposal. The Department's contract with Bellsouth for the maintenance of its telecommunications equipment has twice been extended. The Department has twice solicited proposals and received only one proposal that it determined to be responsive. Under these circumstances, it is not unreasonable for the Department to conclude that it would be in its best interests to proceed with contract negotiations with the company submitting the only responsive proposal to the Revised Request for Proposal. The Department is not bound to enter into a contract with GTE unless the Department is able to negotiate the conditions and price that it considers "fair, competitive, and reasonable." Section 5.2, Revised Request for Proposal.

      CONCLUSIONS OF LAW

      
      

  45. The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding and of the parties thereto pursuant to Sections 120.569 and .57(1), Florida Statutes (1997).

  46. In its Amended Formal Written Protest and Petition for Formal Administrative Hearing, Bellsouth has alleged that the Department's decision to reject its proposal as non-responsive is arbitrary and capricious and that the Department failed to comply with Section 287.057, Florida Statutes, when it decided to initiate contract negotiations with GTE, the only company submitting a responsive proposal. Bellsouth's protest was filed pursuant to Section 120.57(3), Florida Statutes (1999), which provides in pertinent part:

      (f) . . . 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. . . .

      
      

  47. The court in State Contracting and Engineering Corp. v. Department of Transportation, 709 So. 2d 607, 609 (Fla. 1st

      DCA 1998) defined the de novo hearing required by Section 120.57(3)(f) as

      a form of intra-agency review. The judge may receive evidence, as with any formal hearing under Section 120.57(1), but the object of the proceeding is to evaluate the action taken by the agency. See Intercontinental Properties, Inc. v.

      Department of Health and Rehabilitative Services, 606 So. 2d 380 (Fla. 3d DCA 1992)

      . . . .

      
      

  48. Section 120.57(3)(f) also provides that "[u]nless otherwise provided by statute, the burden of proof shall rest with the party protesting the proposed agency action." There is no statute placing the burden of proof in a bid protest proceeding on anyone other than the party prosecuting the bid protest. Section 120.57(1)(j), Florida Statutes (1999), provides in pertinent part that "[f]indings of fact shall be based upon a preponderance of the evidence, except in penal or licensure disciplinary proceedings or except as otherwise provided by statute, . . . ." There a no statute providing for a lesser or a greater quantum of proof in a bid protest proceeding than a preponderance of the evidence. Accordingly, pursuant to Section 120.57(3)(f), and in accordance with the allegations in its petition, Bellsouth has the burden of proving by a preponderance of the evidence that the Department's decisions that Bellsouth's proposal was non-responsive and that it would initiate contract negotiations with GTE were arbitrary, capricious, or contrary to the statute governing the procurement at issue herein.

  49. "A capricious action is one taken without thought or reason or irrationally. An arbitrary decision is one not supported by facts or logic." Agrico Chemical Co. v. Department

      of Environmental Regulation, 365 So. 2d 759, 763 (Fla. 1st DCA

      
      

      1978). The inquiry to be made in determining whether an agency has acted in an arbitrary or capricious manner involves consideration of "whether the agency: (1) has considered all relevant factors; (2) has given actual, good faith consideration to those factors; and (3) has used reason rather than whim to progress from consideration of these factors to its final decision." Adam Smith Enterprises v. Department of

      Environmental Regulation, 553 So. 2d 1260, 1273 (Fla. 1st DCA 1989).

  50. In Section 24.105(14), Florida Statutes (1999), the Department is granted

      the authority to perform any of the functions of the Department of Management Services under chapter 255, chapter 273,

      chapter 281, chapter 283, or chapter 287, or any rules adopted under any such chapter, and may grant approvals provided for under any such chapter or rules. If the department finds, by rule, that compliance with any such chapter would impair or impede the effective or efficient operation of the lottery, the department may adopt rules providing alternative procurement procedures.

      
      

      Therefore, the Department is bound in its procurement activities to adhere to the procedures set forth in Chapter 287, Florida Statutes, and in Chapter 60A, Florida Administrative Code, which govern the procurement of contractual services, unless it enacts alternative procedures in accordance with Section 24.105(14).

  51. Pursuant to Section 287.057(1), Florida Statutes (1999), "all contracts for the purchase of commodities or contractual services in excess of the threshold amount provided in s. 287.017 for CATEGORY TWO [$25,000] shall be awarded by competitive sealed bidding." The Department can, if it determines that "the use of competitive sealed bidding is not practicable," procure contractual services by competitive sealed proposals. Section 287.057(2), Florida Statutes (1999). Competitive sealed proposals are solicited through issuance of a request for proposals.

  52. Section 287.012(15), Florida Statutes (1999), provides that a request for proposals

      means a written solicitation for competitive sealed proposals with the title, date, and hour of the public opening designated. The request for proposals is used when the agency is incapable of specifically defining the scope of work for which the commodity, group of commodities, or contractual service is required and when the agency is requesting that a qualified offeror propose a commodity, group of commodities, or contractual service to meet the specifications of the solicitation document. A request for proposals includes, but is not limited to, general information, applicable laws and rules, functional or general specifications, statement of work, proposal instructions, and evaluation criteria.

      Requests for proposals shall state the relative importance of price and any other evaluation criteria.

  53. A request for proposals "is flexible, identifies the problem, and requests a solution." Systems Development Corp. v. Department of Health and Rehabilitative Services, 423 So. 2d 433, 434 (Fla. 1st DCA 1982). Accordingly, a company submitting a proposal will "regularly suggest technologically innovative approaches" to solving the problem posed in the request for proposal. Id. Nonetheless, however flexible it might be, a request for proposals must include "a statement of the commodities or contractual services sought and all contractual terms and conditions applicable to the procurement of commodities and contractual services, including the criteria, which shall include, but need not be limited to, price, to be used in determining acceptability of the proposal."

      Section 287.057(2), Florida Statutes (1999). Thus, the flexibility inherent in a request for proposals does not extend to the scope of services to be performed under the contract or to the terms and conditions that the agency determines will be included in the contract.

  54. Rule 60A-1.002(9), Florida Administrative Code, which was adopted by the Department of Management Services to implement various provisions of Chapter 287, provides that "[t]he agency shall reserve the right to waive any minor irregularities in an otherwise valid bid/proposal. Variations which are not minor cannot be waived." Section 2.2 of the

      Revised Request for Proposal defines material requirements of the Revised Request for Proposal "as those set forth as mandatory" and specifies that "proposals which do not meet all material requirements of this RFP . . . will be rejected as non- responsive."

  55. An agency is given wide discretion in soliciting and accepting competitive bids and proposals. Department of Transportation v. Groves-Watkins Constructors, 530 So. 2d 912,

      913 (Fla. 1988); Liberty County v. Baxter's Asphalt and Concrete, Inc., 421 So. 2d 505, 507 (Fla. 1982). In Tropabest Foods, Inc. v. State of Florida, Department of General Services,

      493 So. 2d 50, 52 (Fla. 1st DCA 1986), the court found that an agency has the discretion to waive an irregularity in a bid when the irregularity is not material, that is, when it does not give the bidder "a substantial advantage over the other bidders."

      The converse is not true, however: An agency is not required to waive even a minor irregularity in a bid or proposal, even if it has the power to do so. Bobick v. Florida Keys Aqueduct Authority, 648 So. 2d 1263 (Fla. 3d DCA 1995).

  56. Based on the findings of fact herein and in light of the foregoing conclusions of law, Bellsouth has failed to prove by a preponderance of the evidence that the Department's decision to reject its proposal as non-responsive was arbitrary or capricious. Bellsouth chose to include in its proposal

      clarifications and modifications to mandatory requirements of the Revised Request for Proposal even though it had notice that deviations from these mandatory requirements were material deviations and would render a proposal non-responsive. It is of no legal significance in determining the materiality of the deviations that Bellsouth considered its clarifications and modifications commercially reasonable and necessary to remedy ambiguities and potentially unenforceable terms in the Revised Request for Proposal.

  57. Bellsouth argues that it is logically impossible for its proposal to be found non-responsive based on its responses to Sections 2.10, 2.22E, 2.22H, 3.3A, and 3.6 because no response was required to these sections of the Revised Request for Proposal. This argument is rejected as without merit. Far from remaining silent with respect to these requirements, Bellsouth made it apparent on the face of its proposal that it found the mandatory requirements in the specified sections unacceptable. If, as Bellsouth asserts, a responsive proposal is one that conforms in all material respects to the request for proposals, the Department could reasonably find Bellsouth's proposal non-responsive.

  58. Section 287.057(3), Florida Statutes (1999), requires that an agency purchasing contractual services with a value exceeding $25,000 receive competitive sealed proposals except

      under circumstances and for services that are not relevant to this case. "Competitive sealed proposals" are defined in Section 287.012(5), Florida Statutes (1999), as "the receipt of two or more sealed . . . proposals submitted by responsive and qualified . . . offerors." Responsive offeror "means a person who has submitted a . . . proposal which conforms in all material respects to the . . . request for proposals." Section 287.012(17), Florida Statutes (1999). Reading these sections in

      pari materia, it appears that, to go forward with the procurement of contractual services with a value exceeding

      $25,000, an agency must receive at least two responsive proposals, that is, two proposals that conform in all material respects to the request for proposals issued by the agency. In this case, the Department received only one responsive proposal.

  59. Section 287.057(4), Florida Statutes (1999), provides:

      
      

      If less than two responsive bids or proposals for commodity or contractual services purchases are received, the department or the agency may negotiate on the best terms and conditions. The agency shall document the reasons that such action is in the best interest of the state in lieu of resoliciting competitive sealed bids or proposals. The agency shall report all such actions to the department on a quarterly basis, in a manner and form prescribed by the department.

      
      

      Effect can be given to Sections 287.057(3), 287.012(5) and (17), and 287.057(4), by interpreting Section 287.057(4) as describing

      the circumstances in which an agency can go forward with the procurement when only one responsive proposal is received. In this case, the Department decided to enter into negotiations with GTE even though it submitted the only responsive proposal to the Revised Request for Proposal. At the time the Department made this decision, it determined that it was in its best interests to go forward with the procurement. Bellsouth has not shown that the Department's failure to document the factors it considered in reaching this determination until just prior to the final hearing in this case impaired the fairness of the process or had any impact on the correctness of the decision to enter into contract negotiations with GTE.

  60. Based on the findings of fact herein and in light of the foregoing conclusions of law, Bellsouth has failed to prove by a preponderance of the evidence that the Department's decision to go forward with contract negotiations with GTE is contrary Section 287.057, Florida Statutes, or to the specifications of the Revised Request for Proposal. 12/

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of the Lottery enter a final order

1. Denying the bid protest of Bellsouth Communication Systems, Inc.;

2. Dismissing the Amended Formal Written Protest and Petition for Formal Administrative Hearing filed by Bellsouth Communication Systems, Inc. ,and

3. Denying Bellsouth's request for an award of attorneys' fees and costs.

DONE AND ENTERED this 13th day of December, 1999, in Tallahassee, Leon County, Florida.

PATRICIA HART MALONO

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 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 13th day of December, 1999.

ENDNOTES

1/ The date on the document is "9/15/99"; Mr. Frisbie, who signed the document, testified at the hearing that this was a mistake and that the date he signed the document was actually October 15, 1999.

2/ The Department identified three items in Bellsouth's proposal that it deemed non-responsive:

Did not commit to provide services within a (4) hour on-site response time.

(Section 3.3A)

Did not submit a Manufacturer's Product List. (Section 3.3B(1))

Took exception to Section 4.7 by including a statement referencing a one time right-to- use fee.

3/ The bold print has been omitted in the quotations from the Revised Request for Proposal contained herein; the italics and underlining have been retained.

4/ Transcript at 59.

5/ Ms. Moore testified that she prepared Bellsouth's response "with the understanding that all of these particular items [the conditions included in the Revised Request for Proposal] were going to be negotiated." Transcript at 66.

6/ Testimony of Carol Moore, transcript at 70. 7/ Transcript at 72.

8/ A copy of the Master Agreement was not included with Bellsouth's response, which is Petitioner Exhibit 8.

9/ Testimony of Carol Moore; transcript at 73. 10/ Testimony of Carol Moore; transcript at 81. 11/ Id. at 83.

12/ The Department contends that Bellsouth's reliance on Section 287.057, Florida Statutes (1999), is misplaced and that its Rule 53ER97-39, Florida Administrative Code, governs procurements by the Department. Without deciding whether the Department's position is correct, it is noted that there is nothing in Rule 53ER97-39 to indicate whether it is an alternative rather than a supplement to the procurement procedures set forth in Chapter 287 and the rules enacted under that chapter. See Section 24.105(14), Florida Statutes (1999)("If the department finds, by rule, that compliance with any such chapter would impair or impede the effective or efficient operation of the lottery, the Department may adopt rules providing alternative procurement procedures.").

COPIES FURNISHED:

Sue M. Cobb, Interim Secretary Department of the Lottery

250 Marriott Drive Tallahassee, Florida 32301

Ken Hart, General Counsel Department of the Lottery

250 Marriott Drive Tallahassee, Florida 32301

Martin B. Sipple, Esquire Craig Varn, Esquire Ausley & McMullen

Post Office Box 391 Tallahassee, Florida 32302

Paul J. Martin, Esquire

Office of the Attorney General The Capitol, Plaza 01 Tallahassee, Florida 32399-1050

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

10 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.

Docket for Case No: 99-003956BID

Orders for Case No: 99-003956BID