ESCAMBIA COUNTY UTILITIES AUTHORITY

EAGLE TIRE & SERVICE CENTER,

Petitioner,

vs. DOAH Case No. 00-0661

ESCAMBIA COUNTY UTILITIES AUTHORITY,

Respondent.

/

FINAL ORDER

Pursuant to notice, a formal hearing was held in this case on April 25, 2000, in Pensacola, Florida, before Donald R. Alexander, the assigned Administrative Law Judge of the Division of Administrative Hearings. Judge Alexander submitted a recommended order dated the 14th day of June, 2000. On June 29, 2000, the Escambia County Utilities Authority adopted as its final order the recommended order of Judge Alexander, subject to certain corrections.

APPEARANCES

For Petitioner: John C. Barrett, Esquire

5 Calle Traviesa, Pensacola Beach Pensacola Beach, Florida 32561

For Respondent: Robert W. Kievit, Esquire

Michael J. Stebbins, Esquire Kievit, Kelly & Odom

15 West Main Street Pensacola, Florida 32501

STATEMENT OF THE ISSUE

The issue is whether Respondent's proposed award of a portion of Bid No. 99-79 for retread tire services to Dave Howell Tires was arbitrary and capricious, as alleged by Petitioner.

PRELIMINARY STATEMENT

This matter began on October 28, 1999, when Respondent, Escambia County Utilities Authority, announced that it intended to award a portion of Bid No. 99-79 to Dave Howell Tires for

retread tire services for Respondent's sanitation truck fleet. Thereafter, Petitioner, Eagle Tire & Service Center, the apparent low bidder, requested that Respondent reconsider its award. On January 7, 2000, Respondent advised Petitioner by letter that it would not reconsider its decision. Pursuant to Section 13-2(c) of the Escambia County Utilities Authority Code, Petitioner then filed a Petition for Appeal of Bid Award and Agency Action on January 18, 2000. In its petition, Petitioner generally contended that in making the proposed award, Respondent had violated in several respects its own rules, the bid criteria, and state and federal law.

Under a contractual agreement with the Division of Administrative Hearings, Respondent forwarded the matter to the Division of Administrative Hearings on February 3, 2000, with a request that an Administrative Law Judge be assigned to conduct a formal hearing. By agreement of the parties, a final hearing was scheduled on April 25, 2000, in Pensacola, Florida.

At the final hearing, petitioner presented the testimony of its owner, John Russell; Curtis W. Brotherton; and Dale Perkins, Bobby Tronu, George Watson, and Dr. Larry N. Walker, all members of the Authority; and Jerry Moore, director of sanitation. Also, it offered Petitioner's Exhibits 1-7 and 9. All exhibits were received in evidence. Respondent offered Respondent's Exhibits

A-I, which were received in evidence.

The Transcript of the hearing was filed on May 9, 2000.

Proposed Findings of Fact and Conclusions of Law were filed by Respondent and Petitioner on May 22 and 23, 2000, respectively. Also, on May 30, 2000, Respondent filed a Motion for Leave to File Response to Petitioner's post-hearing submission, together with a Response. This motion was granted by Judge Alexander.

FINDINGS OF FACT

Based upon all of the evidence, the following findings of fact are determined:

1. Background

   
   

   1. Respondent, Escambia County Utilities Authority (Authority), is a local governmental body governed by Chapter 92- 248, Laws of Florida. The Authority manages and operates certain utility systems within Escambia County, Florida, and areas adjacent thereto. It is governed by a board consisting of five elected members.

      
      

   2. To assist it in carrying out its duties, the Authority has adopted the Escambia County Utilities Authority Code (Code),

      which contains various regulations, including Chapter 13, pertaining to Purchasing Procedures. Pertinent to this controversy are Sections 13-2(b)(1), 13-2(d), and 13-12, which authorize the Authority to accept or reject bids, to separate bids into more than one part, and to give preference to local vendors, respectively.

      
      

   3. By public advertisement made on September 16, 1999, the Authority solicited sealed proposals for Bid No. 99-79 for the supply of new truck tires and retread services for its sanitation truck fleet. The contracting period would run for two years. Such proposals were to be filed by interested vendors no later than 2:00 p.m., Thursday, September 30, 1999. The bid specification identified the new tires and retread services as separate items, meaning that each could be awarded to separate bidders, as authorized by Section 13-2(d) of the Code. The bid also provided that the Authority "reserved[d] the right to waive informalities in any bid; to reject any and all bids in whole or in part; and to accept the bid[s] that in its judgment is the lowest and most responsible."

      
      

   4. In response to that invitation, four vendors, including Petitioner, Eagle Tire & Service Center (Eagle), and Dave Howell Tires (Dave Howell), located in Milton and Pensacola, Florida, respectively, timely submitted sealed proposals. Eagle was found to have the lowest dollar bid for both items. On the retread portion of their responses, Eagle's bid was for $83,100.00, while Dave Howell's bid was for $83,934.36, or a difference of slightly more than $900.00. At issue in this case is the retread portion of the bid.

      
      

   5. In its proposal, Eagle offered to supply specially engineered Goodyear retreading from its facility in Atmore, Alabama, some 45 minutes north of Pensacola. On the other hand, Dave Howell, whose facility is located in Pensacola, offered to use Bandag rubber on its retreads, which is another widely- recognized retread brand. According to the Authority's director of sanitation, Jerry Moore (Moore), he saw no difference in the quality of the two products.

      
      

   6. Bid proposals are first reviewed by the department head who is directly affected by the solicitation; that individual makes a recommendation to the Finance Advisory Committee (Committee), which then presents its recommendation to the Authority. The Committee is made up of seven members, including two members of the Authority (Dale Perkins and George Watson) and five appointed citizens.

      
      

   7. In this case, the bids were opened and reviewed by Moore, the director of sanitation. On the afternoon of October

      19, 1999, the Committee reviewed Moore's recommendation regarding the award of a contract. The Committee unanimously accepted Moore's recommendation that Petitioner, the lowest bidder, be awarded a two-year contract for both new and retread tire services.

      
      

   8. During the course of the Committee meeting, representatives of both Eagle and Dave Howell spoke to the Committee in support of their respective proposals. In addition, Dr. Larry N. Walker (Dr. Walker), a member of the Authority, appeared before the Committee to make comments favorable to Dave Howell. Among other things, Dr. Walker made the following statements:

      
      

      I come before you as something of a partisan today.

      
      

      I'm a friend of Dave Howell.

      
      

      I buy all my tires from his store.

      
      

      [B]ecause of conversations I've had with him and other input . . . this is one of those instances where we will actually come out ahead if we were to select the higher bid.

      
      

      I was not asked, t but it was] suggested by Mr. Howell that I call someone at the Escambia County School Board and ask them about their experience with Dave Howell Tires, his retreads, and I called Jerry Watson, one of the assistant superintendents, and Mr. Watson just was, was just very effusive in his compliments of the tires saying that their [tires were] far better than they had gotton before from the previous vendor. That they last much longer. They very seldom, that they don't start tearing up as quickly so that the, they say that when you have school bus tires starting to shred on the edges, the retread starts shredding and stuff, that, that you'll have parents calling, complaining, that, hey, the tires on my child's school bus look terrible. And said we don't, we just don't get those calls, and so in short he was very full of praise for the product produced by Dave Howell.

      It is a fact too that Dave Howell Tires is a local employer and contributes to our local economy and I think that's worth considering.

      
      

      I have had more than a few friends who submitted bids with ECUA contracts over the years and I've never stood up and made a speech like this before for any of them nor have I ever done it for Mr. Howell before. But in this particular instance when the dollar figures are this close, I think the points that, the points that I have raised have, have impressed me at any rate.

      
      

      [I]n short, this is a very close bid and I think there's some legitimate reasons for considering going with Mr. Howell's bid [which] is a better bid even though it's not the lowest.

      
      

   9. Despite the recommendation of Dr. Walker, the Committee rejected by a 5-2 vote a motion by Dale Perkins to award the retread portion of the contract to Dave Howell.

      
      

   10. When these comments were made, Dr. Walker was running for a term as County Commissioner. He had accepted a contribution of $300.00 from Dave Howell on August 1, 1999. In addition, Dave Howell made another $250.00 contribution on October 4, 1999. As required by law, all contributions were disclosed by Dr. Walker in his campaign treasurer's reports filed with the local Supervisor of Elections. The first contribution was disclosed by Dr. Walker in a quarterly report filed on October 13, 1999, or before the Committee meeting at which he spoke, while the second was disclosed in a later-filed quarterly report. During his appearance at the meeting, however, Dr. Walker did not disclose either contribution.

       
       

   11. On October 28, 1999, the Authority met to consider the award of a contract under Bid No. 99-79. At that meeting, Moore, speaking on behalf of the Committee, recommended that the contract for both items be awarded to Eagle.

       
       

   12. Dave Howell was also present at the meeting and was given an opportunity to make a brief presentation. He described his product (Bandag) as being "superior" to the other proposals, and pointed out that he did retreading for the Escambia County School Board (School Board). In addition, he mentioned the fact that he used a NDI (non-destruct imager) machine for scanning tire casings which would "save money" for the Authority.

       Finally, he pointed out that he was a local vendor who employed

       39 persons, all of whom were residents of Escambia County.

       
       

   13. At the same meeting, Dr. Walker again spoke on behalf of Dave Howell saying that "Howell Tires has the . . . best bid"; that it would "better . . . to go with Dave Howell tires because I do believe that the tires, the retread tires are a better tire, that will give longer wear, have fewer failures and therefore that we will come out ahead . . . in the long run"; that "I do believe that this is the better contract and part of that comes from talking with Mr. Jerry Watson who . . . said the School Board is absolutely delighted with the retreads from Dave Howell Tires"; and that "Mr. Howell insists that [Eagle's machine] can't be as good as his [NDI machine]."

       
       

   14. At the Authority meeting, another member produced a letter dated October 26, 1999, drafted by School Board Deputy Superintendent Jerry Watson (Watson), which stated in part that Watson understood that Dave Howell's service to the School Board under an existing contract "has been excellent"; that the firm provided "dependable, quality service"; that Dave Howell "understands that safety is of utmost importance to [the School Board]"; and that he "would recommend the excellent service of Dave Howell Tires." As it turned out, the letter had been solicited from Watson by Dr. Walker at the suggestion of Dave Howell. The letter was read in full at the meeting at the urging of Dr. Walker.

       
       

   15. Thereafter, the Authority unanimously voted to split the contract and award the new tire business to Eagle and the retread portion of the contract to Dave Howell. A splitting of the contract was permissible under Section 13-2(d) of the Code.

       
       

   16. Eagle did not send a representative to the Authority meeting believing that after the unanimous vote by the Committee to award Eagle the contract, it had no reason to attend. Had a representative attended, however, he would have been given an opportunity to speak. Eagle later learned in a telephone call from Moore that the retread portion of the contract had been given to Dave Howell. This appeal ensued.

       
       

   17. In its timely-filed appeal, Eagle contends that the award of the retread part of the contract "was arbitrary, capricious, unlawful, contrary to the Authority's rules and regulations, contrary to the substantial weight of the evidence and applicable [Authority] bidding procedures, deprived [P]etitioner of his substantial rights, and was unconstitutional." More specifically, Petitioner contended that the contract was awarded to Dave Howell "based on improper, irrelevant, incompetent, and highly prejudicial procedures,

       statements, events, and the personal interest of one or more board members"; that the Authority "improperly applied a 'local preference' standard"; that a board member (Dr. Larry Walker) "improperly, unethically, and in direct violation of his oath of office and state law engaged in extensive ex parse communications, personal contacts, and financial transactions with and in behalf of Howell"; and that Dr. Walker did not disclose the fact that "Howell had paid a substantial sum of money to Walker for the latter's political campaign." More specific findings regarding these contentions are made below.

2. Local vendor preference

   
   

   1. Section 13-12 of the Code prohibits favoritism for "local bidders" except in the narrowly defined circumstance where a "rapid response time" is needed in the case of a service contract. Bid No. 99-79 did not contain a local preference provision. While the Code does not define the term "local bidders," the evidence supports an inference that it applies to bidders who are located in Escambia County and the immediate area.

      
      

   2. During the discussions regarding Dave Howell at the Authority's meeting, Dr. Walker referred to Dave Howell as a local vendor, and another member, Dale Perkins, made reference to Dave Howell's local residency, the residency of his work force, and the taxes they presumably paid to Escambia County. A third member, Elvin McCorvey, also indicated that he was "inclined to agree . . . about doing business with the local vendor."

      
      

   3. In light of the foregoing comments, the Authority's General Counsel, Mr. Kievit, twice explained to the Authority members the local preference policy. Specifically, after two members expressed their desire to keep business "at home," Mr. Kievit cautioned the members against utilizing local vendor preference as a basis for awarding the contract in this instance.

      
      

   4. Testimony by Authority members at hearing confirms that this advice was accepted and that their decision was based on other criteria, including Dave Howell's "convincing" and uncontradicted presentation; his record of service with the School Board under an existing contract; the assertion that Bandag was a better product; the assertion that most private commercial waste haulers used Bandag tires; and an assertion that over time Dave Howell's NDI machine would save the Authority money. In short, it is fair to conclude that local preference played no role in the members' final votes on the matter. Finally, the member (Perkins) who had unsuccessfully moved that the Committee award the retread portion of the contract to Dave

      Howell, indicated at that time to the Committee members that his recommendation was not based on the local preference rule.

      
      

   5. While Petitioner asserts that Dave Howell received special preference as a "local vendor," the more persuasive evidence supports a finding that he did not.

      
      

3. Conflict of Interest

   
   

   1. As noted in earlier findings, Dr. Walker made comments in support of Dave Howell at both the Committee and Authority meetings. This was after Dr. Walker had accepted two contributions totaling $550.00 from Dave Howell for his reelection bid.

      
      

   2. Except for filing his campaign treasurer's reports with the Supervisor of Elections, Dr. Walker had no other legal or ethical requirement regarding disclosure of contributions. In retrospect, however, Dr. Walker wishes he had done so to avoid any appearance of impropriety. Even so, merely because he had accepted a campaign contribution did not require that Dr. Walker abstain from voting on the contract or prevent him from advocating on behalf of a contributor/constituent. There is no evidence that Dr. Walker received any direct, personal, or financial gain as a result of his vote.

      
      

   3. Although members have rarely advocated the award of a contract to a particular vendor in prior years, there is no legal or ethical prohibition against a member doing so on behalf of a constituent. There is also no prohibition against a member investigating information about a bidder. In this case, before the contract was awarded, Dr. Walker made inquiry from both Dave Howell and the School Board regarding the quality of the Bandag product; he visited Dave Howell's facility; and he solicited a letter from a School Board representative regarding Dave Howell's service under an existing contract. While he made no similar inquiries regarding Eagle, and in fairness probably should have, Dr. Walker acknowledged that had Eagle contacted him, he would have been happy to meet with a representative of that firm to discuss its product. Finally, the evidence shows that Dr. Walker did not discuss the contract with, or personally solicit the vote of, any other member before the final vote was taken.

      
      

   4. Dr. Walker, who is the author of a treatise entitled The Florida Municipal Officials Manual, a publication widely used by elected and appointed municipal officials, municipal attorneys, and the Florida League of Cities, had no reason to disbelieve, or question the reliability of, the information he obtained from Dave Howell. Indeed, he simply relied on Dave Howell's representations in advocating on that vendor's behalf.

4. Appearance by Dave Howell at the Authority Meeting

   
   

   1. As noted earlier, Dave Howell spoke at the Authority meeting on October 28, 1999. Eagle had no representative at that meeting. Eagle suggests that it was inappropriate for a vendor to appear at the meeting at which the contract was awarded; alternatively, Eagle suggests that the Authority should have given notice that vendors could appear and make presentations in support of their proposals.

      
      

   2. The evidence shows that while it is not a normal occurrence, several times a year a disappointed vendor will appear before the Authority and make a presentation. The Authority's policy is to allow any member of the public to speak, including disappointed bidders. Also, there is no requirement that the Authority inform all vendors that a disappointed bidder intends to make a presentation, or that the successful bidder should make an appearance on behalf of its proposal. Had an Eagle representative appeared at the meeting, he would have been allowed to give a presentation.

      
      

   3. The Authority violated no rule, Code provision, or statute by allowing Dave Howell to speak at the Authority meeting. Indeed, it is not unusual for a bidder to provide further information regarding its product to the Committee and Authority before a vote is taken, and such action by a bidder does not constitute a modification to its bid package.

      
      

5. Was the Final Decision Arbitrary?

1. In its proposed order, Eagle contends that there was no difference in quality between the retreads offered by either vendor. Thus, it argues that any assertion by the Authority members that their votes were based on Dave Howell providing a better quality product is simply a ruse for circumventing the local preference rule, and therefore its decision was not based on adequate facts.

   
   

2. The record establishes that both products were of similar quality and reliability and met all specifications. Assertions by Dave Howell that his product was better, that his NDI machine was superior to his competitor's machine and would save the Authority money in the long run, and that virtually all private waste haulers used the Bandag product were not accurate. Indeed, the products were similar in quality, Eagle had a NOT scanning machine which was just as good as the NDI machine and would achieve the same savings, if any, and the amount of use of Bandag tires by other waste haulers was embellished. Moreover, School Board Deputy Superintendent Watson's assertion that Dave

   Howell provided a better product than did the predecessor contract holder is somewhat puzzling since the prior vendor also used the same Bandag retread. All of these representations were accepted by the Authority, primarily because they were unrebutted, and they formed the factual basis for awarding the contract to Dave Howell. Indeed, at hearing, each Authority member acknowledged that he had no independent knowledge of these matters and accepted without further question the representations made by Dave Howell and Walker.

   
   

3. Because the Authority mistakenly relied on invalid assumptions, or representations which were either embellished or incorrect, as a basis for awarding the contract to someone other than the lowest bidder, its decision was not based on facts or logic and was therefore arbitrary.

   
   

   CONCLUSIONS OF LAW

   
   

4. The Escambia County Utilities Authority has jurisdiction over the subject matter and the parties hereto pursuant to Section 12, Chapter 92-248, Laws of Florida, and Section 13-2(c), Escambia County Utilities Authority Code.

   
   

5. In this proceeding, the burden is on the party protesting the award of the contract to establish a ground for invalidating the award. See, e.g., State Contracting and Engr. Corp. v. Dep't of Trans., 709 So. 2d 607, 609 (Fla. 1st DCA 1998).

   
   

6. Unlike Section 120.57(3), Florida Statutes (1999), which applies to competitive-procurement protests before state agencies, there are no provisions in the Code or Chapter 92-248 Laws of Florida, pertaining to burden of proof, grounds for overturning the Authority's preliminary decision, or the standard of proof. In the absence of specific statutory requirements, public agencies have the obligation to engage in contracting procedures in a manner which is not arbitrary and capricious. See, e.g., Volume Services Div. of Interstate United Corp. v. Canteen Corp., 369 So. 2d 391, 394 (Fla. 2d DCA 1979). The long- accepted definition of an arbitrary decision is one which is not supported by facts or logic. Agrico Chemical Co. v. Dep't of Envir. Reg., 365 So. 2d 759, 763 (Fla. 1st DCA 1978). Thus, a decision based on invalid assumptions or incorrect facts would be an arbitrary decision within the meaning of the law.

   
   

7. At the same time, where the local governmental agency has adopted rules that mandate awarding contracts by competitive bids, that agency may not act arbitrarily to ignore those rules or select someone other than the lowest and best bidder. City of Pensacola v. Kirby, 47 So. 2d 533, 535 (Fla. 1950). However, a

   public agency has no obligation to accept the "lowest dollars and cents bid as being the 'lowest responsible bid' in every case, to the exclusion of all other pertinent facts which may well support a reasonable decision to award the contract to a contractor filing a higher bid." Culver v. Moore, 40 So. 2d 366, 370 (Fla. 1949).

   
   

8. Section 13-2(b)(1) of the Code governs this dispute and provides in relevant part:

   
   

   1. If a transaction exceeds five thousand dollars ($5,000.00), a standing bid committee, consisting of the appropriate department director or his designee, the purchasing agent, and the director of finance or his designee, shall review all bids and recommend to the executive director which bid, if any, should be accepted. The executive director shall review the committee's recommendation and forward his recommendation to the ECUA board, which shall accept the lowest and best bid of a responsible bidder, or may reject all bids.

      
      

9. As distilled in its Proposed Recommended Order, Petitioner contentions are that the Authority acted arbitrarily and capriciously by awarding the contract based on improper considerations derived from the local preference rule, and by awarding the contract to the second lowest bidder in violation of Section 13-2(b)(1) of the Code. In addition, Petitioner alleges that its due process rights were violated by Dr. Walker participating and voting in this matter when he had a duty to abstain under Section 112.3143(3), Florida Statutes (1999). That section prohibits a "local public officer" from voting "on any measure . . . which he or she knows would inure to the special private gain or loss of any principal by whom he or she is retained . . ."

   
   

10. For the reasons given in the Findings of Fact, the greater weight of evidence supports a conclusion that after the Authority members were instructed by counsel, local preference considerations played no role in their decision to award the contract to Dave Howell.

    
    

11. The evidence supports a conclusion that the Authority acted arbitrarily, and that it violated Section 13-2(b)(1), by accepting other than the "lowest and best bid of a responsible bidder." While the Authority may consider "other pertinent facts" to justify the award of a contract to the second lowest bidder, Culpepper at 370, the other considerations must be valid

    and have a reliable basis in fact. In this case, the "other pertinent facts" relied on by the Authority, as described in Finding of Fact 31, were shown to be incorrect. This being so, the Authority was bound by its own rule to accept the lowest and best bid of a responsible bidder, Eagle. By not doing so, it acted in an arbitrary manner.

    
    

12. Finally, contrary to Petitioner's assertion, if no contract is awarded during the bid process, a disappointed bidder has no protected property interest which could support a due process claim. Key West Harbour Develon. Corp. v. City of Key West, 987 F.2d 723, 728-29 (llth Cir. 1993). Thus, its reliance on the case of Pataula Electric Membership Corp. v. Whitworth, 951 F.2d 1238 (llth Cir. 1992) is misplaced. Moreover, Dr. Walker had no obligation to make any disclosure of the contributions beyond those required by Section 106.07, Florida Statutes (1999), because he received no direct, personal, or financial benefit as a result of the vote. Since there was no conflict of interest, actual or potential, he could not have recused himself under Section 286.012, Florida Statutes (1999). It should be noted here that campaign contributions are not regarded as gifts which would improperly influence a public officer or require a public officer to abstain from voting.

    
    

13. In summary, the Authority acted arbitrarily by awarding a part of the contract to the second lowest bidder based on incorrect facts and assumptions. Therefore, the contract should be awarded to Eagle, the lowest responsible bidder.

FINAL ORDER

Based on the foregoing findings of fact and conclusions of law, it is

ORDERED that a two-year contract for retreading services for Sanitation vehicles be awarded to Eagle Tire & Service Center.

DONE AND ORDERED this 19th day of July, 2000.

Robert A. Tronu, Chairman

Docket for Case No: 00-000661BID

Orders for Case No: 00-000661BID