vs. )
WATER SUPPLY AUTHORITY, ) Case No. 00-0555BID
Intervenor. )
Robert E. Meale, Administrative Law Judge of the Division of Administrative Hearings, conducted the final hearing in Sarasota, Florida, on February 25, 2000.
For Petitioner: Joseph W. Lawrence, II
Vezina, Lawrence & Piscitelli, P.A.
Mary M. Piccard
Vezina, Lawrence & Piscitelli, P.A.
For Respondent: Gary A. Vorbeck
Vorbeck & Vorbeck, P.A.
For Intervenor: Donald E. Hemke
The issue is whether Respondent's tentative award to Intervenor of a contract to construct and install a water pipeline should be invalidated because of fraud, arbitrariness, illegality, or dishonesty.
By Project Manual dated November 1999, Respondent issued an invitation to bid for a contract to furnish labor and materials for the construction of over six miles of water pipeline from the Peace River water plant in Charlotte County to the DeSoto County line. The invitation to bid set a bid opening for December 21, 1999.
Petitioner, Intervenor, and other bidders submitted sealed bids prior to the deadline. After opening and analyzing the bids, Respondent announced that Intervenor's bid was the lowest by $350,000 and that Petitioner's bid was the second lowest bid. Declaring Intervenor's bid to be responsive, Respondent issued a notice of intent to award the contract to Intervenor.
Petitioner timely filed a notice of intent to protest and a formal written protest and requested a formal hearing. In general, Petitioner challenges the tentative award on the ground that Intervenor's bid is not responsive.
At the hearing, Petitioner called six witnesses and offered into evidence Ryan Exhibit 1. Intervenor called one witness and offered into evidence Kenko Exhibits 1-5. Respondent called no witnesses and offered into evidence no exhibits. The parties jointly offered Joint Exhibits 1-8 and 10-23. All exhibits were admitted into evidence.
The court reporter filed the Transcript on March 16, 2000.
In November 1999, Respondent issued a Project Manual containing an invitation to bid for a contract to furnish labor and materials to construct a water pipeline from the Peace River water plant in Charlotte County to the DeSoto County line (ITB).
ITB Instructions to Bidders Section 4.9 provides:
The submission of a Bid will constitute an incontrovertible representation by BIDDER
. . . that without exception the Bid is premised upon performing and furnishing of labor, services, equipment and materials required by the Bidding/Contract Documents in accordance with such means, methods, techniques, sequences or procedures of construction as may be indicated in or required by the Bidding/Contract Documents
. . ..
ITB Instructions to Bidders Section 6.1 states:
The BIDDER shall use the Bid Form included with the Bidding/Contract Documents. Failure to use the Bid Form shall result in the Bid being declared unresponsive. No changes shall be made in the phraseology or format of the forms. All blanks on the Bid Form must be completed in ink or by typewriter.
ITB Instructions to Bidders Section 6.6 requires that a Pipe Manufacturer's Commitment, on the supplied form, accompany each bid. The Pipe Manufacturer's Commitment states that the pipe manufacturer, which signs the form, acknowledges that the bidder shall assign all warranties and that the pipe manufacturer shall give Respondent an express warranty that, among other things, the "materials . . . have been manufactured and supplied in strict accordance with the requirements of the Contract Documents "
ITB Instructions to Bidders Section 6.7 provides that any bid "may be deemed unresponsive which contains omissions, erasures, alterations, or additions of any kind, . . . or which in any manner should fail to conform to the requirements of the Bidding/Contract Documents."
ITB Instructions to Bidders Section 7.1 states:
A contract shall be awarded, if at all, on the basis that the BIDDER awarded the contract shall furnish only items of material and equipment named or specified in the Bidding/Contract Documents as advertised or modified by addenda. Each BIDDER shall list the manufacturers and suppliers to whom that BIDDER intends to award subcontracts for furnishing each selected named or specified item. Substitutes shall not be considered until after the notice of award.
ITB Instructions to Bidders Section 9.2 authorizes Respondent, "after due evaluation of a bid," to request the BIDDER to remove or replace a subcontractor or supplier, if Respondent has an objection to the subcontractor or supplier.
ITB Instructions to Bidders Section 10.2 provides that Respondent shall retain the bid bond, which is five percent of the base bid price, until the bidder has executed the contract.
ITB Instructions to Bidders Section 13.1 states that all bids shall remain subject to acceptance for 90 days after the bid opening, and Section 13.2 provides that Respondent may agree with one or more bidders to extend this time for acceptance.
ITB Instructions to Bidders Section 14.1 reserves to Respondent [BOLD] "THE RIGHT TO REJECT ANY AND ALL BIDS AS MAY BE DEEMED NECESSARY BY THE AUTHORITY, IN ITS SOLE AND ABSOLUTE JUDGMENT, TO BE IN ITS BEST INTEREST." [BOLD] ITB Instructions to Bidders Section 14.2 reserves to Respondent the right to waive "any and all informalities," as well as "mistakes, errors, or noncompliance with the requirements of these Bidding/Contract Documents, which may be committed by a BIDDER or BIDDERS, when it is deemed by the AUTHORITY to be in its best interest."
ITB Instructions to Bidders Section 14.6 authorizes Respondent to enter into negotiations with the "qualified, responsible and responsive bidder" that submits the lowest bid. ITB Instructions to Bidders Section 14.8 authorizes Respondent to "consider all matters deemed relevant to the Project by the AUTHORITY" in "evaluating the Bids." These matters may include "whether or not the Bids comply with the prescribed requirements
. . ., as may be requested in the Bid Form "
ITB Instructions to Bidders Section 16.3 warns that a failure to timely protest the bid specifications waives the right to dispute the specifications.
The Bid Form contains several Bid Schedules, generally divided by the size of the pipe. This case involves the responsiveness of Intervenor's bid regarding the 42-inch pipe.
The Construction Contract notes that the purpose of the contract is, among other purposes, the construction of 6100 feet of 42-inch ductile iron pipe. Construction Contract Article
1.B.3 incorporates by reference the specifications included in the Project Manual. Construction Contract Article 20.F states that the CONTRACTOR's entitlement to compensation "is premised upon performing and furnishing the labor, services, equipment and materials required to complete the Project described in the Contract Documents "
Bid Contract Section 02511 contains the specifications for the 42-inch pipe. Section 02511, Part 2, describes the ductile iron pipe itself.
Petitioner and Intervenor timely submitted bids in response to the ITB.
Petitioner's base bid price was $6,822,683, which includes $467,325 for the 3015 linear feet of 42-inch ductile iron pipe on Bid Schedule B and $466,560 for the 2880 linear feet of 42-inch ductile iron pipe on Bid Schedule C.
Intervenor's base bid price was $6,464,990, which included $491,445 for the 3015 linear feet of 42-inch ductile iron pipe on Bid Schedule B and $420,480 for the 2880 linear feet of 42-inch ductile iron pipe on Bid Schedule C.
The bids of Petitioner and Intervenor each contained a Pipe Manufacturer's Commitment, in the form described above. Petitioner's pipe manufacturer was American Cast Iron Pipe Co., and Intervenor's pipe manufacturer was U.S. Pipe and Foundry Co. (US Pipe).
However, Intervenor's bid contained one document not contained in Petitioner's bid. Intervenor's Bid Schedule-- Summary, which is a form summarizing the total base bid price, contains a handwritten note beside an asterisk at the bottom of the page. The asterisk corresponds to another handwritten asterisk beside "Base Bid Price." The handwritten note states:
Note: Kenko has based this bid on a quote from U.S. Pipe and Foundry including the attached letter from U.S. Pipe and Foundry dated December 21, 1999, stating that materials will be in accordance with ANSI/AWWA Standards.
The December 21 letter, which is part of Intervenor's bid, is on US Pipe stationary and addressed to "Prospective Bidding Contractors." Referencing the subject procurement, the December 21 letter states in its entirety:
U.S. Pipe & Foundry Co., Inc. is pleased to be able to provide you with pricing for the above mentioned project. We do however make the following notations:
U.S. Pipe & Foundry, Inc. cannot supply the 42" material in accordance with the specifications as written.
Several conversations with the engineer have lead [sic] us to believe that concessions of the specifications will be made to allow U.S. Pipe & Foundry, Inc. to make the 42" material acceptable [sic] to ANSW/AWWA Standards.
However, U.S. Pipe & Foundry, Inc. will accept no liability if the 42" material is not accepted or approved. U.S. Pipe & Foundry, Inc. will provide all material in compliance with ANSI/AWWA standards.
The December 21 letter is signed by Kevin R. Stine, Senior Sales Representative of US Pipe.
The December 21 letter follows an exchange of correspondence and memoranda among US Pipe, Respondent, and Respondent's project engineer, Post, Buckley, Schuh and Jernigan, Inc. (Post Buckley).
By letter dated December 15, 1999, from Mr. Stine of US Pipe to Thomas F. X. Flynn, professional engineer and vice president of Post Buckley, with a copy to Patrick Lehman, Respondent's executive director, US Pipe stated:
A review of the specifications for the above referenced project determines some requirements with which United State Pipe and Foundry Company, Inc. is unable to comply.
The following is a partial listing:
Proof of Design Testing--Our cement mortar lining meets the requirements of ANSI/AWWA C104/A21.4 and has been found to meet the service requirements imposed. Given the requirements of hydrostatic testing two joined pieces of pipe to 500 p.s.i., dewatering the assembly, allowing three
days to dry, then sound the lining for disbondment, U.S. Pipe cannot guarantee the disbondment will not exceed the area quantity specified. Furthermore, this test requires pipe of minimum of 10-foot length. Our test press, which will be required to test TYTON JOINT pipe, can only accommodate a maximum length of 15 feet.
Charpy Impact Coupons--It is neither our standard practice, nor a requirement of ANSI/AWWA C151/A21.51, to evaluate and record the microstructure of Charpy coupons.
Autogenous Healing--The Proof of Autogenous Healing testing required may incur an tenure of several months to perform. This could easily compromise the completion of the project within the specified term.
Fittings Fabrication--Our fittings are fabricated, tested and lined and coated at our Chattanooga Fittings Facility, not where our pipe is manufactured.
Fittings Pressure Test--Not all sizes of fittings can be pressure tested to 500 psi for 10 seconds. However, all sizes are pressure rated above the field test requirements and service requirements.
In summation, Unites State Pipe and Foundry Company, Inc. has the ability to provide product which will meet the service requirements of this project, manufactured strictly in accordance with the American National Standards ANSW/AWWA C151/A21.51, ANSI/AWWA C104/A21.4 and ANSI/AWWA
C115/A21.15 and United States Pipe and Foundry Company, Inc. manufacturing procedures only. The project specification requirements, included but not limited to, the method of calculating pipe weights, serializing pipe, annealing rejecting criteria, cement lining crack designations, cement lining disbondment testing and designation of where fittings will be lined and tested, will not be adhered to.
Please feel free to contact me regarding our concerns of the specifications. We would be unable to supply material for this project according to the current specifications.
Unless the specifications are changed, United States Pipe and Foundry Company, Inc. will not bid to supply pipe to this project.
By memorandum dated December 15, 1999, Mr. Lehman requested Mr. Flynn and two other Post Buckley representatives, John Eash and Ken Wilson, to respond to the US Pipe December 15 letter. His memorandum notes that Respondent received the US Pipe December 15 letter after the deadline for questions, but adds that they should resolve any technical issues raised by the US Pipe December 15 letter.
By memorandum dated December 17, 1999, from Dick Powell of US Pipe to Mr. Wilson, US Pipe offered alternative specifications for the 42-inch ductile iron pipe. The letter notes that Mr. Powell has been unable to submit the bid specifications to US Pipe specialists, as Mr. Wilson had requested, but would be able to do so during the week of December 20.
By letter dated December 20, 1999, from Mr. Stine to Mr. Wilson, US Pipe informed Post Buckley that it would bid 42- inch ductile iron pipe, "with the following exceptions to the 42" only specifications as discussed" by Mr. Wilson and Mark Troyanowski, US Pipe Assistant Southern Regional Sales Manager. The letter states the following exceptions:
Section 1.08 Quality Assurance--Paragraph B.4.--Add [BOLD] "Serial numbering of pipe
will commence at the standard location that is normally adhered to during the manufacturing process." [BOLD]
Section 1.09 Suppliers Qualifications-- Paragraph A.2.--"Fittings may be fabricated at a site other than where the pipe is manufactured and all testing and applications of lining and coatings [BOLD] may be performed at the manufacturing facility of the fittings." [BOLD]
Section 1.10 Proof of Design Tests-- Paragraph C and D--U.S. Pipe takes exception to these design tests. U.S. Pipe will furnish cement mortar lining in accordance with ANSW/AWWA C104/A21.4. However, U.S. Pipe will supply written documentation from the Ductile Iron Research Association (see enclosed) that autogenous healing does occur and will work on U.S. Pipe's cement mortar lining.
Section 1.11 Shop Tests--Paragraph E.1.-- [BOLD] "Each pipe prior to mortar lining shall be hydrostatically tested to 500 psi or 75% of yield for at least 10 seconds. Each fitting prior to mortar lining shall be hydrostatically tested to 250 psi for at least 10 seconds." [BOLD]
We thank you for your time and consideration. If you have any questions, please feel free to call me.
Intervenor's representative responsible for submitting its bid received the US Pipe December 21 letter less than one hour prior to the deadline for submitting bids. Forced to make a crucial decision under the twin pressures of little time and no guidance from his superiors, Intervenor's representative chose the more cautious path of conditioning Intervenor's bid by including with the bid the asterisked, handwritten note on the Bid Schedule--Summary and a copy of the US Pipe letter.
By letter dated December 21, 1999, from Mr. Wilson to Mr. Stine, Post Buckley informed US Pipe that it had received the letter of December 20 from Mr. Stine to Mr. Wilson, but that "any exceptions to the Contract Documents may be cause for bid rejection." The letter adds, "We would like to make it clear that there has been no official acceptance of the exceptions taken as listed in your faxed letter."
The day after the bid opening, discovering that it was the low bidder, Intervenor, through its president, Jeffrey McGrand, spoke by telephone with Mr. Flynn and asked how to withdraw the "exception," as Mr. Flynn characterized the above- described conditions accompanying Intervenor's bid.
On the same day, December 22, Mr. J.M. LaRock, Southern Sales Manager of US Pipe, sent a letter to Intervenor stating that, "[a]fter several conversations with Mr. . . . Wilson[,] it has become apparent to us that the verbal concessions we have been given will become a reality. In view of their willingness to compromise on some of the specifications which would exclude all but one pipe manufacturer, we believe it will be unnecessary to qualify our bid to you."
By letter dated December 27 from Mr. Flynn to Mr. McGrand, Post Buckley acknowledged that Respondent had received a letter dated December 22 from Mr. McGrand asking Respondent to disregard the handwritten, asterisked note added to Intervenor's bid. Mr. Flynn's letter notes, though, that Intervenor's bid
contained the US Pipe letter advising that it could not supply compliant 42-inch pipe. Mr. Flynn's letter continues:
This contradiction must be resolved before we can recommend to the Authority staff the award of the contract to your company. I suggest that you furnish a letter from a senior official of U.S. Pipe (that is, an individual who has authority over the production and testing of the pipe and who can commit to compliance with the specifications) refuting Mr. Stine's statement on the inability of U.S. Pipe to furnish the material as specified.
If the contradiction cannot be resolved in the manner described, then [Intervenor] must name a supplier for the 42-in. pipe that can meet the specifications, with no change in the bid price, for us to recommend to the Authority that the contract be awarded to [Intervenor]. If you follow this course, please submit the Pipe Manufacturer's Commitment from that supplier.
The second statement in Mr. Stine's letter says "Several conversations with the engineer have lead (sic) us to believe that concessions of (sic) the specifications will be made . . .." Be assured that the engineer [Post Buckley], made no statements before the bid opening that would have led anyone to believe that concessions would be made to the specifications as bid. While Mr. Stine's statement doesn't directly relate to the formality of the bid process, it does suggest that [Post Buckley] would fail in our duty to our client, and we reject that notion. We request, if another letter from U.S. Pipe is to be forthcoming, that Mr. Stine's statement in this regard also be refuted.
The next meeting of the Authority Board of Directors is on . . . 5 January 2000. Mr. Lehman intends to recommend to the Board award of the contract at that meeting. . . .
we will need, in hand, the resolution of the
matter discussed in this letter by the close of business in Sarasota tomorrow, 28 December.
In a telephone conversation the next day between Mr. Flynn and Mr. LaRock, Mr. LaRock continued to ask whether Respondent would relax the specifications to which US Pipe had taken exception, and Mr. Flynn stated that Respondent would not do so. At the end of this conversation, Mr. LaRock advised Mr. Flynn that US Pipe representatives would discuss the matter the following day and decide then what to do.
The next day, US Pipe representatives decided that they could conform to the specifications. By letter dated December 29, 1999, from Mr. LaRock to Intervenor, US Pipe asked that Intervenor "[p]lease disregard previous correspondence from us regarding this project. It is our intention to furnish the materials for referenced project as per the specifications issued."
By letter dated December 30, 2000, Mr. Eash advised Mr. Lehman that Post Buckley found that the apparent low bidder was Intervenor. The letter notes the handwritten, asterisked note in Intervenor's bid, but adds: "After the bid opening, [Intervenor] requested in writing that the note be disregarded and that they take no exception to the Contract Documents. In addition, United States Pipe and Foundry Company declared in writing its intention to furnish the materials per the specifications." The letter
recommends that Respondent award the contract to Intervenor, and Respondent eventually did so.
At no time did Respondent or its agent, Post Buckley, ever modify, orally or in writing, the subject specifications concerning the 42-inch ductile iron pipe. Respondent and Post Buckley prepared these specifications based on their intention that this buried pipe convey water for at least 50 years. No bidder or prospective bidder challenged the specifications.
At no time did Respondent ever receive any communication, orally or in writing, from US Pipe that it was withdrawing its exception to the specifications. But for the letters of December 22 and 29 from US Pipe to Intervenor, Respondent would have found Intervenor's bid nonresponsive. As late as December 28--one week after bid opening--US Pipe continued to reserve to itself the decision whether to go forward with the contract.
The present record leaves little room for doubt concerning the materiality of the difference between what Respondent specified and what Intervenor (and US Pipe) offered. Among Respondent, Intervenor, US Pipe, and Post Buckley, US Pipe possessed the most knowledge concerning 48-inch pipes, and US Pipe consistently excepted to the specifications until eight days after bid opening. Insisting that US Pipe definitively withdraw its exceptions, Post Buckley wisely treated the exceptions as a material variance from the specifications, rather than a minor
irregularity whose existence would not interfere with the execution of an enforceable construction contract.
The materiality of the difference between the pipe specified and the pipe bid gave Intervenor a unilateral option on the contract that other bidders were obviously denied. By allowing Intervenor to withdraw the exceptions after bid opening, Respondent effectively gave Intervenor a free look at the contract. Until the conditions were withdrawn by Intervenor and US Pipe, whose participation in the formation of the contract between Intervenor and Respondent was substantial, Intervenor and Respondent could not reached a mutually enforceable contract.
Under the circumstances, Respondent’s award of the contract to Intervenor is manifestly unfair to the other bidders and undermines the integrity of the bidding process. In the eight days following bid opening, Intervenor enjoyed the unfair advantage, not shared by other bidders, of analyzing the job and its bid, knowing that the absence of an enforceable contract would allow it to walk away from the job with impunity. That Intervenor did not walk away from the job means only that the post-bidding analysis disclosed that the job would be profitable.
Intervenor relies on various provisions of the ITB to support Respondent’s decision to award the contract to Intervenor. This reliance is misplaced. For instance, the ITB requires the winning bidder to provide labor and materials in strict conformity with the specifications; however, Intervenor
and US Pipe improperly conditioned the specifications with which Intervenor was willing to comply. The Pipe Manufacturer’s Commitment likewise does not cure the conditions improperly contained in Intervenor’s bid; the commitment assures only that the pipe will conform to the requirements of the contract documents, which, again, Intervenor and US Pipe improperly altered. Other ITB provisions reserve to Respondent the right to waive minor irregularities, to negotiate with the winning bidder, or to allow the winning bidder to substitute suppliers and manufacturers; however, these provisions apply only to bids that are responsive to the ITB.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter. Sections 120.57(1) and (3)(d)3, Florida Statutes. (All references to Sections are to Florida Statutes.)
Section 120.57(3) provides in material part:
* * *
(b) Any person who is adversely affected by the agency decision or intended decision shall file with the agency a notice of protest in writing within 72 hours after the posting of the bid tabulation or after receipt of the notice of the agency decision or intended decision and shall file a formal written protest within 10 days after filing the notice of protest. With respect to a protest of the specifications contained in an invitation to bid or in a request for proposals, the notice of protest shall be filed in writing within 72 hours after the receipt of notice of the project plans and
specifications or intended project plans and specifications in an invitation to bid or request for proposals, and the formal written protest shall be filed within 10 days after the date the notice of protest is filed.
Failure to file a notice of protest or failure to file a formal written protest shall constitute a waiver of proceedings under this chapter. The formal written protest shall state with particularity the facts and law upon which the protest is based. Saturdays, Sundays, and legal holidays shall be excluded in the computation of the 72-hour time periods provided by this paragraph.
* * *
(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. 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. In any bid-protest proceeding contesting an intended agency action to reject all bids, the standard of review by an administrative law judge shall be whether the agency's intended action is illegal, arbitrary, dishonest, or fraudulent.
Petitioner has proved that the tentative award to Intervenor is contrary to the specifications for the 42-inch pipe and, thus, clearly erroneous, contrary to competition, arbitrary,
capricious, and illegal. For these reasons, Respondent must set aside the award of the contract to Intervenor.
RECOMMENDED that the Peace River/Manasota Regional Water Supply Authority enter a final order rejecting Intervenor’s bid.
DONE AND ENTERED this 30th day of March, 2000, in Tallahassee, Leon County, Florida.
ROBERT E. MEALE
Filed with the Clerk of the Division of Administrative Hearings this 30th day of March, 2000.
Joseph W. Lawrence, II
Vezina, Lawrence & Piscitelli, P.A.
Mary M. Piccard
Vezina, Lawrence & Piscitelli, P.A.
Gary A. Vorbeck Vorbeck & Vorbeck, P.A.
Donald E. Hemke Carlton Fields
Patrick J. Lehman, Executive Director Peace River/Manasota Regional
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 must be filed with the agency that will issue the final order in this case.
