STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MOTOROLA, INC., )

)

Petitioner, )

)

vs. ) Case No. 00-2921BID

)

DEPARTMENT OF MANAGEMENT )

SERVICES, )

)

Respondent, )

)

and )

)

COM-NET ERICSSON CRITICAL )

RADIO SYSTEMS, INC., )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to written notice, a formal hearing was held in the above-styled case on August 17, 28, 29, and 30, 2000, by Don W. Davis, an Administrative Law Judge of the Division of Administrative Hearings, in Tallahassee, Florida.

APPEARANCES

For Petitioner Motorola, Inc. (Motorola):

C. Everett Boyd, Jr., Esquire Melissa Fletcher Allaman, Esquire Ervin, Varn, Jacobs & Ervin

Post Office Drawer 1170 Tallahassee, Florida 32302

For Respondent Department of Management Services (Department):

W. Robert Vezina, III, Esquire Mary M. Piccard, Esquire

Vezina, Lawrence & Piscitelli, P.A.

318 North Calhoun Street Tallahassee, Florida 32301

For Intervenor Com-Net Ericsson Critical Radio Systems, Inc. (Com-net):

William E. Williams, Esquire

J. Andrew Bertron, Jr., Esquire Huey, Guilday & Tucker, P.A.

106 East College Avenue, Suite 900 Tallahassee, Florida 32301

Alan C. Sundberg, Esquire Mark K. Logan, Esquire Smith, Ballard & Logan, P.A.

403 East Park Avenue Tallahassee, Florida 32301

STATEMENT OF THE ISSUE

The issue in this proceeding is whether the proposed action of the Department with regard to procurement of the State of Florida Statewide Law Enforcement Radio Communications System, DMS Number 21-725-001-W, is contrary to the Department's governing statutes, rules, policies, or any applicable bid or proposal specification.

PRELIMINARY STATEMENT

This is a formal protest filed by Motorola pursuant to Section 120.57(3), Florida Statutes, and Rule 60A-1.002, Florida Administrative Code, challenging a June 23, 2000 posting of a notice of intent by the Department to negotiate sequentially, beginning with Com-Net, for a contract to provide the State of

Florida Statewide Law Enforcement Radio Communications System, DMS Number 21-725-00100-W.

On or about January 31, 2000, the Department issued a request for proposals (RFP) for the contract. Com-net and Motorola were the only two vendors submitting proposals in response to the RFP.

On April 4, 2000, the Department posted a notice terminating the RFP and declaring both proposals to be non-responsive.

By letters to both submitting vendors dated April 5, 2000, the Department advised both parties that a determination had been made to follow a negotiation process pursuant to Section 287.057(4), Florida Statutes. On April 10, 2000, the Department advised both vendors by letter of procedures that would be followed in that process and specifically reserved the right to enter into concurrent or sequential negotiations with the two vendors.

Following receipt of additional information from the vendors and a series of meetings with each, the Department posted a notice of intent on June 23, 2000, to negotiate sequentially with the vendors and award the contract. In the letter, the Department ranked Com-Net number 1 and Motorola number 2.

Motorola timely protested the notice of intent, declaring in its protest that the Department was required to conduct concurrent negotiations with both Com-Net and Motorola for DMS No. 21-725-001-W and also rank Motorola number 1.

The matter was referred to the Division of Administrative Hearings on July 10, 2000. With consent of the parties, the matter was set for commencement of formal hearing on August 17, 2000.

At the hearing, Motorola presented the testimony of nine witnesses and nineteen exhibits. The Department presented five exhibits. Com-Net presented no witnesses or exhibits. There were 12 joint exhibits presented.

A Transcript of the hearing was filed with the Division of Administrative Hearings on September 5, 2000. All parties filed Proposed Recommended Orders which have been reviewed and utilized in the preparation of this Recommended Order.

FINDINGS OF FACT

1. General Background

   
   

   1. Pursuant to Section 282.1095, Florida Statutes, the State of Florida established the State Agency Law Enforcement Radio Trust Fund (Trust Fund) in the Department to fund the construction, maintenance, or support of a statewide law enforcement radio system.

   2. On or about January 31, 2000, the Department issued RFP No. 21-725-001-W entitled "Statewide Law Enforcement Radio Communications System." The RFP sought proposals for providing the statewide law enforcement radio communication system.

   3. The purpose of the proposed radio system is to allow various state law enforcement officers to communicate from one

      end of the state to the other. Motorola was the vendor responsible for the construction and operation of Phases I and II of the radio system. In this procurement, the Department sought proposals for continued maintenance and operation of Phases I and II and completion of Phases III, IV, and V of the radio system.

   4. The Department sought "innovative proposals from the private sector that will result in a more economical and timely completion of a statewide radio communications system." The Department stated that it would "consider all approaches, methods, alternative technologies . . . provided that the proposal is reasonable, clearly achievable, and can be accomplished with minimal or no cost to the State of Florida to the extent permitted by law."

   5. On March 7, 2000, Com-Net and Motorola submitted proposals in response to the RFP. Com-Net and Motorola were the only two vendors that submitted proposals.

   6. On April 4, 2000, the Department posted a notice terminating the RFP and declared both proposals non-compliant.

   7. On April 5, 2000, the Department sent a letter to Com- Net and a letter to Motorola, advising each vendor of the major areas of the proposals deemed non-responsive. The letters also informed the vendors that the Department had determined to follow a negotiation process pursuant to Section 287.057(4), Florida Statutes.

   8. On April 10, 2000, the Department sent a letter to Com- Net and a letter to Motorola, advising each vendor of the procedures for the negotiation process. The letters included a list of questions and vendor evaluation guidelines and advised the vendors to bring their proposals into compliance with the specifications and requirements of the terminated RFP document.

   9. The April 10, 2000 letters also advised Com-Net and Motorola that the Department reserved the right to negotiate concurrently or sequentially with the vendors.

   10. On April 19, 2000, Com-Net and Motorola each submitted responses to the questions in the Department's April 10, 2000 letters, revisions to technical and financial proposals, and other information.

   11. After Motorola and Com-Net submitted their respective modified proposals on April 19, 2000, the Department conducted an initial meeting on May 12, 2000, with both vendors to provide further direction on how the negotiation process would work and to answer questions. At the May 12, 2000 meeting, the Department introduced a five-member evaluation team. The Chairman of the evaluation team, Roy Cales, explained to the proposers that there would be an evaluation process followed by a negotiation process. During that process, focus would initially be on the technical proposals, while later consideration would focus on cost proposals.

   12. Each member of the evaluation team brought different relative strengths and perspectives to the decision process. Kourosh Bastani's primary expertise was technical. As the coordinator of Phase I and II, field manager of the radio system, and twenty years' experience in the Florida Highway Patrol, Captain Keith Gaston brought the skills and perspective of a system user and manager. Lisa Saliba has an extensive background in state budgeting, planning, and coordination of projects with agencies. Rick Blankenship is an investment banker and brought considerable financial expertise to the process. As Chairman of the evaluation committee and Chief Information Officer for the State of Florida, Roy Cales possesses technical expertise and experience with state procurement of technology products.

   13. The evaluation team was assisted by a technical advisory team composed of technical experts employed by the state, Bruce Meyers and J.P. Saliba, and external technical consultants, Jeff Ellis and Mike Thayer of the Gartner Group.

   14. From May 12, 2000 to June 22, 2000, representatives of the evaluation team and technical advisory team met on several occasions with the proposers, both individually and together. During these meetings, the parties engaged in discussions regarding changes to both technical/financial aspects of the proposals and potential contract.

   15. After the series of meetings with one or both vendors present, the evaluation team met in private on June 22, 2000, to

       review the proposals one last time and to make certain all team members understood the financial aspects of both proposals.

   16. On June 23, 2000, the evaluation team met in public and voted to rank Com-Net's proposal first and Motorola's proposal second, and to negotiate sequentially beginning with Com-Net. On that same day, the Department posted notice of its proposed agency action which stated that if the negotiations with Com-Net were successful, a contract would be awarded to Com-Net. If the negotiations with Com-Net were not successful, the Department would proceed to negotiate with Motorola and, if successful, a contract would be awarded to Motorola.

   17. On July 10, 2000, Motorola filed its Petition to Formally Protest Decision to Negotiate Sequentially, and Initially, with Com-Net Ericsson Critical Radio Systems, Inc. The sole relief sought by Motorola in its Petition is a final order "declaring that the Department is required to conduct concurrent negotiations with both Com-Net and Motorola . . . and that Motorola be ranked No. 1."

   18. On or about July 19, 2000, the Department referred Motorola's protest to the Division of Administrative Hearings and requested that an Administrative law Judge be assigned to conduct a hearing.

   19. On August 9, 2000, the Administrative Law Judge entered an Order granting the Petition of Com-Net to intervene in this proceeding.

2. The Evaluation Process

   
   

   1. Motorola's Allegations

      
      

      1. The Department terminated the RFP with its April 4, 2000 posting, and any specific scoring or weighting stated in the RFP. The Department's April 10, 2000 letter, explicitly advised that the state would use the attached evaluation criteria only as a "negotiation guideline" and that "these guidelines may not be all-inclusive of the criteria to be considered. Further not all of these criteria will necessarily be considered with the same weighting."

      2. Motorola, in its Petition acknowledges that it "was directed [by the Department's April 10, 2000 letter] to forget the RFP, think out of the box, and be creative." By Motorola's own admission, the Department's clear direction to "forget the RFP" and "think out of the box" put Motorola squarely on notice that the RFP was at most a guideline in the Section 287.057(4), Florida Statutes, negotiation process.

      3. In internal e-mails, Motorola personnel stated that the Department had "given us the opportunity to change the assumption of our models, get outside the bounds of the RFP and find ways to reduce costs . . . ." Motorola understood that in addition to its response to the April 10, 2000 letter, it had the opportunity to submit technical and financial alternatives "outside the boundaries of the RFP and current technical question submittals." Motorola cited no provision which would prohibit the Department

         from disregarding the RFP and negotiating in the best interests of the state.

      4. Motorola alleged that the Department impermissibly permitted Com-Net to materially alter its proposal after the April 19, 2000 deadline for re-submission of modified proposals during "improper negotiations not in accordance with the procedures set forth in the April 10, 2000 letter." Motorola, however, presented no evidence at hearing as to what "improper negotiations" occurred. The evidence presented does establish that Motorola availed itself of an opportunity to significantly change its April 19, 2000 cost proposal. A simple comparison of Motorola's April 19, 2000 and June 22, 2000, cost proposals reveals substantial differences.

      5. Motorola did not establish at any time in this proceeding an absence of Department authority to allow proposers to change their proposals after April 19, 2000. Both proposers were clearly on notice that the Department was seeking changes to the proposals. Both proposers were informed of the process and had an equal opportunity to respond. There was no advantage to one proposer over another when the Department sought modifications to proposals during the negotiation process under Section 287.057(4), Florida Statutes.

   2. Evaluation Team Determination

      
      

      1. Four out of five members of the evaluation committee voted for sequential negotiations and ranked Com-Net first and Motorola second.

      2. The only member of the evaluation committee who did not rank Com-Net first and vote for sequential negotiations was Kourosh Bastani. Mr. Bastani ranked Motorola first and voted for concurrent negotiations, although he acknowledged that the rankings were meaningless in concurrent negotiations. He had concerns about both proposals, describing Motorola's technical proposal as "acceptable" and Com-Net's technical proposal as "viable," yet believed that both vendors "provided good proposals, and they were worthy of further consideration." Despite being the only team member who did not rank Com-Net first and vote for sequential negotiations, Mr. Bastani unequivocally expressed his belief in the fairness of the evaluation process and respect for the votes of the other members by stating:

         I believe that the process provided me an opportunity to objectively review both proposals and provide an opportunity for both vendors to provide clarifications and answer questions. And I was able to, in a fair and objective manner, arrive at my decision. So I believe in the integrity of the process, whether I agree with their vote or not, I think they reached it in an informed manner.

      3. Mr. Bastani could think of no basis or prejudice in the process that would undermine the validity of the decision.

      4. Captain Gaston voted to negotiate sequentially with Com-Net first because he felt the cost difference between Motorola and Com-Net was so great it was unlikely Motorola was going to get within the "ballpark." His interest is in securing a contract as quickly as possible and he believed concurrent negotiations would delay the final outcome.

      5. Ms. Saliba voted to negotiate sequentially with Com-Net first because she wanted the opportunity to concentrate on negotiations with a single vendor without the distraction of lobbying and external communications from representatives of competing vendors. In addition to the cost factor, she favored Com-Net because Com-Net is attempting to gain a "foot-hold" in the industry through this contract to establish itself as a credible provider and therefore is committed to reaching an agreement that will satisfy the state's needs. She did not have that confidence in Motorola.

      6. Mr. Cales voted to negotiate sequentially with Com-Net first based on a determination of the overall best value for the state. He informed the vendors from the beginning of the evaluation process that if one stood out above the other, the negotiations would be sequential. In that circumstance, concurrent negotiations would have penalized the vendor that stood out and Mr. Cales determined that Com-Net stood out. Additionally, in Mr. Cales' view, concurrent negotiations (e.g.,

         double sessions with a single DMS negotiation team) would take twice as long and time is a critical factor.

      7. Com-Net's proposal stood out because it guaranteed a system that would do the job, guaranteed a cost within the trust fund revenue stream and guaranteed the state would have the level of service it would contract for without additional cost to the state. Motorola's proposal did not provide those guarantees. In fact, the only way the Motorola proposal would not cost the state millions of dollars more than Com-Net would be if projected tower lease revenue was realized, and those projections were unreasonable and unsubstantiated in Mr. Cales' assessment.

      8. Mr. Blankenship voted to negotiate sequentially with Com-Net first based on a determination that doing so would be in the best interests of the state because Motorola required the state to assume risk while Com-Net did not; Motorola required the state to borrow money which was not authorized; Motorola's proposal entailed operating at a deficit for years three through seventeen; Motorola's tower revenue projections were unreasonable and unreliable; and Com-Net's proposal included technology refreshers that Motorola did not.

3. Technical Proposals

   
   

   1. After several meetings with both vendors to review their technical proposals and after considering the input of the technical committee, the evaluation team determined that the two

      technical proposals were either equivalent or that, if not equivalent, both vendors could do the job.

   2. The responsiveness of both vendors' technical proposals is not at issue in this proceeding. Both vendors met any "threshold" requirements in the Department's April 10, 2000 letter, and were eligible to be considered for negotiation.

4. Cost Proposals

1. Motorola alleges that the Department "failed to properly calculate the cost to the State of Motorola and Com- Net's proposals," and the Department "improperly assigned a zero revenue figure to the revenue sharing financial component of Motorola's June 22, 2000 financial proposal."

2. Both Com-Net and Motorola submitted cost proposals on April 19, 2000, and submitted revised cost proposals on June 22, 2000. Both Com-Net and Motorola outlined modifications to their respective cost proposals during meetings with the Department evaluation team on June 22, 2000.

3. The major components of both vendors' cost proposals are similar, including up-front cash payments from the vendor to the state, an initial first-year payment from the state to the vendor of a portion of the current balance in the Trust Fund, continuing payments from annual Trust Fund revenues to the vendors, and sharing with the state of revenues that the vendors expect to derive by renting excess tower space to third party users of "tower tenants." While the major components in the two

   proposals are similar, the dollar figures and guarantees differ substantially. The proposals can be fairly summarized based on the major components which most greatly affect the cost to the state.

4. On April 19, 2000, Com-Net's proposal was for revenue sharing to the state of 33 percent, an initial capital contribution from Com-Net to the state for tower upgrade and enhancement, an initial payment to Com-Net of $39 million from the current Trust Fund balance, and annual payments to Com-Net of all Trust Fund revenues, plus $2 million per year.

5. On June 22, 2000, Com-Net reduced the revenue sharing component to 15 percent, eliminated the $2 million per year payment, and proposed to charge the state the annual net revenues from the Trust Fund. Com-Net represented to the evaluation team that this proposal would give the state its "entire wish list within the confines of the trust fund." Com-Net proposed to build, operate, and maintain the radio system for no more than the amount of the current balance and annual revenues in the Trust Fund.

6. Steve Savor, Chief Executive Officer of Com-Net, told the evaluation team on June 22, 2000:

   We want you to be in a position where you do not have to go back to the Legislature. We are guaranteeing a position where we do not come back to you.

   Regardless of whether the state ever receives a single dollar of revenue sharing, it can obtain the radio system from Com-Net without exceeding the confines of the Trust Fund.

7. The total cost to the state of Com-Net's June 22, 2000 proposal as calculated by the evaluation team was approximately

   $331 million. Com-Net's June 22, 2000 proposal included an initial contribution from Com-Net to the state of $20 million, a first-year payment to Com-Net from the Trust Fund of $39 million, and annual payments from the state to Com-Net of all future Trust Fund revenues over twenty years totaling $348 million. Com-Net also proposed to include two features not included in Motorola's June 22, 2000, proposal - a mobile data system valued between $25 million to $40 million and "technology refreshes" valued between

   $10 million and $50 million.

   
   

8. Motorola's April 19, 2000 cost proposal included two alternates. The cost of the primary proposal was approximately

   $80 million more than the cost of the alternate. Motorola acknowledges that its cost proposal as of April 19, 2000 was "considered outrageous" by the Department.

9. At the June 22, 2000 evaluation team meeting, Motorola presented a revised cost proposal which it explained to the team. Motorola proposed a total cost of $418 million. This figure exceeded the projected Trust Fund revenues of $348 million by $70 million. Because the proposed annual payments to Motorola would exceed available monies to the state in the early years, Motorola

   proposed to loan the state the funds to cover these shortfalls, and charge the state an estimated total of $55 million in interest. In that the interest cost is only an estimate and funds available to the state could differ from that projected by Motorola, the actual interest cost to the state could increase.

10. Motorola's witness, David Kliefoth, testified that despite the cost of $418 million offered to the Department in Motorola's June 22, 2000 proposal for the project, Motorola's real or "net" price is actually $364 million. Even after making adjustments to the costs of both proposals, Mr. Kliefoth admitted that Motorola's "net price" was $34 million more than Com-Net's price.

11. In order to pay for the radio system, Motorola proposed three sources of funds: i) Trust Fund current balance and projected annual revenues of $348 million, ii) revenue sharing from third party tower rentals of $68 million, and iii) an initial cash contribution from Motorola of $32 million, for a total of $448 million. Although the annual Trust Fund revenues are not sufficient to cover the annual payments to Motorola, the company contends that its proposal provides the state with ample revenue sharing that will allow the state to have a $30 million positive balance in the Trust Fund at the end of twenty years. Yet, despite repeated requests by the evaluation team, Motorola failed to guarantee the projected amount of revenue sharing required to "make the deal work" within the confines of the

    "Trust Fund. As Motorola representatives told the evaluation committee on June 22, 2000, if Motorola's projected third party tower rental revenues or the projected Trust Fund revenues did not materialize, the state would be expected to make up the difference. The most Motorola was willing to do was to say they "could talk about it."

12. As a basis for its third party tower rental revenue projections, Motorola told the evaluation team on June 7, 2000, that its tower company partner, Pinnacle Tower, had an average of

    4.9 tenants per tower nationally and an average of 3.9 tenants per tower in Florida. On June 22, 2000, just two weeks later, Motorola doubled the estimate, claiming that Pinnacle Tower would average 10 tenants per tower in Florida. Motorola raised its estimate without any explanation and despite the fact that tower industry financial research analysts, such as Lehman Brothers, limit their estimates to a more conservative five tenants per tower.

13. In contract to Motorola, Com-Net used a more conservative figure of 1.1 to 2.4 tenants per tower when estimating future third party tower rental revenues. As Com-Net stated to the evaluation team at its June 22, 2000 meeting, third party revenues are "speculative at best."

14. Because they considered both vendors' projections of potential future revenues to be speculative and because neither vendor could guarantee the projections, the evaluation team

    decided to disregard both vendors' revenue sharing projections and evaluate both proposals based on cost alone. On that basis, the evaluation team determined that the Motorola proposal would be significantly more expensive to the state. Depending on how the proposals were viewed and the assumptions made, most of the evaluation team members determined that the Com-Net proposal would cost the state approximately $91 million less than the Motorola proposal.

15. Each of the evaluation team members decided that the two technical proposals were either equivalent or that, while not equivalent, both vendors could do the job. Having determined that both proposers could do the job, the paramount consideration for most team members became cost. Motorola's internal e-mails demonstrate that it fully understood the importance of cost to the state. Motorola's June 9, 2000 internal e-mail states that the evaluation committee "continues to place higher percentage priority on cash flow of the trust fund and revenue sharing funds versus technology, system performance and long-term maintenance" and that "the State is trying to back into the completion of [the radio system] by using funds available and doing the best they can [to] reduce the scope of work and technology if that's what it takes to finish the State buildout."

16. Motorola alleges that the Department impermissibly altered Motorola's financial proposal such that Motorola's true financial proposal was not fairly considered. Specifically,

    Motorola argues that the evaluation team disregarded Motorola's revenue-sharing projections by assigning a zero revenue figure. Yet Motorola points to no statute, rule, or policy which would prohibit the Department from such flexibility in evaluating the proposals. Motorola refused to guarantee the revenue-sharing projections and the Department was free to accept or reject such projections. Motorola also complains that the evaluation committee did not inform Motorola of its decision to disregard revenue-sharing projections; yet again Motorola points to no authority imposing an obligation on the committee to do so.

17. The evaluation team treated Motorola and Com-Net equally in this regard by ignoring both vendors' revenue projection and focusing instead on cost. The team recognized the risks and speculation involved in predicting market conditions and revenue streams twenty years into the future.

18. Motorola also alleges that it was told to provide a stronger revenue-sharing model, and thus having been explicitly solicited, its revenue-sharing projections should not be disregarded. However, Mr. Cales established in his testimony that what he asked for was not a higher percentage of revenue sharing or for the state to bear more risk, but rather by "stronger model" he meant he wanted to see the numbers and assumptions behind the projections. Mr. Cales was especially concerned that Motorola kept changing its projected tower revenue

    figures and that except for changes in the sharing percentage, the total revenue projections should not change.

19. At 6:51 p.m., on June 22, 2000, Motorola transmitted by e-mail to a Department technical consultant additional information from Pinnacle Tower relating to tower tenants. At the time of the e-mail the evaluation team was in session and the team did not know of the information that night. Some of the team members saw it at some point, but the information would not have affected their votes. Pinnacle Tower had a full opportunity to state its case for tower revenues at the June 7, 2000, meeting and at that time projected only five tenants per tower.

    Moreover, Pinnacle Tower was present at the meeting site on June 22, 2000, but Motorola elected not to have them present in the meeting room even though Motorola understood the team had serious concerns about the revenue projections. As Mr. Cales made clear in his testimony, the last-minute information from Pinnacle Tower concerning tenant projection did not resolve concerns over the substantial increases in projections or their speculative nature.

20. Further as to Motorola's tower revenue projections of June 22, 2000, Mr. Bastani believed the projection of 10 tenants per tower was unrealistic. The other team members likewise did not accept Motorola's assumption that it would achieve 10 tenants per tower.

    Ultimate Findings of Fact

    
    

21. Motorola's June 22, 2000 proposal did not guarantee that the cost of the contract would be within the revenue from the Trust Fund.

22. Motorola's projections of revenue from tower leases was not reliable and was not guaranteed by Motorola.

23. Com-Net's cost proposal of June 22, 2000, was substantially less costly than Motorola's proposal and provided a guarantee that the cost of the contract would not exceed the revenue from the Trust Fund.

24. The decision to negotiate sequentially beginning with Com-Net was logical and reasonable.

    CONCLUSIONS OF LAW

    
    

    1. General Provisions

       
       

25. The Division of Administrative Hearings has jurisdiction over this subject matter and the parties to this action pursuant to Section 120.57(1), Florida Statutes.

26. Motorola has standing to challenge the proposed action of the Department in this proceeding. Com-Net has standing to intervene. Section 120.57(1) and (3), Florida Statutes (1999).

27. Chapter 287.054, Florida Statutes, provides in pertinent part:

    1. Unless otherwise authorized by law, all contracts for the purchase of commodities or contractual services in excess of the threshold amount provided in s. 287.017 for CATEGORY TWO shall be awarded by competitive sealed bidding.

       * * *

       
       

    2. When an agency determines in writing that the use of competitive sealed bidding is not practicable, commodities or contractual services shall be procured by competitive sealed proposals.

       
       

28. Section 287.057(4), Florida Statutes, provides as follows:

    (4) 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.

29. Procurement by negotiation authorized under this section is permitted "in lieu of" the bidding or RFP methods required by subsections (1) and (2). Thus, in this case once the RFP was terminated by April 4, 2000 posting, and there was no protest of the finding of non-responsiveness, the RFP no longer was the governing document. There are no administrative rules governing negotiations under Section 287.054(4), Florida Statutes. Thus, upon termination of the RFP, the Department was permitted to pursue negotiations on the "best terms and conditions" for the state and was not subject to strict procedural or technical requirements.

30. Section 120.57(3)(f), Florida Statutes, provides in pertinent part:

    Unless otherwise provided by statute, the burden of proof shall rest with the party

    protesting the proposed agency action. In a competitive-procurement protest, other than a rejection of all bids, the administrative law judge shall conduct a de novo proceeding to determine whether the agency's proposed action is contrary to the agency's governing statutes, the agency's rules or policies, or the bid or proposal specifications. The standard of proof for such proceedings shall be whether the proposed agency action was clearly erroneous, contrary to competition, arbitrary, or capricious.

    (emphasis added.)

    
    

31. Therefore, Motorola has the burden of proof in this proceeding and must show that the Department's decision to rank Com-Net's proposal first and negotiate sequentially is contrary to the agency's governing statutes, the agency's rules or policies, or the negotiation procedures.

32. The focus in a bid protest hearing is on the agency action. "The judge may receive evidence, as with any formal hearing under Section 120.57(1), Florida Statutes, but the object of the proceeding is to evaluate the action taken by the agency." State Contracting and Engineering Corp v. Department of Transportation, 709 So. 2d 607, 609 (Fla. 1st DCA 1998).

33. The Florida Legislature has capped the amount which the Department may spend on the radio system by specifically instructing the Department that it may not obligate the State of Florida for any amount in excess of the Trust Fund balance and future revenues. Chapter 00-369, Laws of Florida, provides in relevant part that:

    The Department of Management Services

    may . . . [e]xecute contracts between private vendors and the Department of Management Services which implement the proposal.

    However, the contracts may not obligate the state to expenditures beyond those which can be met by the unexpended balance of funds specifically appropriated for the law enforcement radio system together with the official projected future revenues of the State Agency Law Enforcement Radio System Trust Fund established by section 282.1095, Florida Statutes.

34. Thus, Chapter 00-369, Laws of Florida, effectively prohibited the Department from considering any vendor which proposed a cost in excess of the Trust Fund balance and official projected future revenues.

    1. Motorola's Proffer of Evidence

       
       

35. Motorola has submitted a written proffer of testimony that was excluded from evidence pursuant to an order granting the Department's ore tenus motion in limine, in which Com-Net joined. The motion in limine sought exclusion of evidence offered by Motorola on the issues of whether Com-Net's proposal was responsive to the terms and conditions of the failed RFP, met any requirements in the Department's April 10, 2000 letter by the April 19, 2000 deadline, was not financially responsible or otherwise failed to pass any threshold requirements to be considered for negotiations. Motorola's petition requests that "a Recommended and Final order be entered granting Motorola's bid protest and declaring that [the Department] is required to conduct concurrent negotiations with both Com-Net and

    Motorola . . . and that Motorola be ranked No. 1." (Emphasis added). By asking for concurrent negotiations with both proposers, Motorola necessarily concedes that Com-Net has met any alleged or putative threshold requirements for negotiations. If negotiations are to be concurrent, as Motorola requests, then the relative rankings become meaningless.

36. Motorola protests that it has not conceded the responsiveness of Com-Net's proposal. However, in the Pre- Hearing Stipulation, Motorola contends that one of the issues of fact which remain to be litigated is "[w]hether, in a negotiation process, it is erroneous to eliminate a competitive vendor so that true competition for the lowest price is eliminated." This statement reaffirms Motorola's assertion first raised in its Petition that the negotiations should be concurrent, rather than sequential. Assuming that negotiations are to be concurrent as Motorola requests, it necessarily follows that Com-Net is to be included. Therefore, Motorola effectively concedes that Com-Net is qualified to be at the negotiation table regardless of whether it expressly makes that concession. The Motorola Petition contains a clear and unambiguous statement of relief requested. At no time did Motorola seek leave to amend the Petition.

37. Motorola's proffer seeks to establish that Com-Net is not qualified to be included in negotiations. For the reasons stated above, that evidence is irrelevant and the proffer is rejected.

    1. Motorola has Not Met its Burden.

    
    

38. Given the nature of the relief requested by Motorola (e.g., the opportunity to negotiate concurrently with Com-Net) the sole issue to be decided is whether Motorola met its burden of proving that the decision to negotiate sequentially with Com- Net first is contrary to the agency's governing statutes, the agency's rules or policies, or the bid or proposal specifications and instructions to the extent that the Department's proposed action is clearly erroneous, contrary to competition, arbitrary, or capricious.

39. There are no rules, policies, or proposal specifications applicable to this procurement. The applicable statute is Section 287.057(4), Florida Statutes. The Department's charge under that statute is to negotiate a contract under the best terms and conditions. There is nothing in the statute limiting or controlling the process by which the Department went about its negotiations and there is no requirement that the Department justify its decision to negotiate sequentially with Com-Net first. Therefore, Motorola has not and cannot show that the decision to negotiate sequentially with Com- Net first was contrary to the governing statute, rules, policies, or specifications. Concomitantly, the Department's decision was not clearly erroneous, contrary to competition, arbitrary, or capricious.

40. The Department proceeded with the negotiations fairly and objectively. Both vendors were given equal opportunities to present the Department with information and clarifications about what they were willing to propose and what it will cost. Both vendors were technically and financially capable of delivering. In order to be in the "ball park" in terms of cost, Motorola depended on its assumption that revenues from leases would reach an average of 10 tenants per tower when Motorola itself had informed the Department that the industry average for such leases was 1.89. The negotiation team members' refusal to accept Motorola's assumption was more than reasonable.

41. Motorola's testimony to the effect that two of the negotiation team members advised Motorola that the state was willing to undertake the risk of financial shortfalls that existed in Motorola's proposal was refuted by Mr. Cales and Mr. Blankenship. Accordingly, Mr. Cales and Mr. Blankenship's testimony on this subject is more credible and Motorola's testimony that it was told the state was willing to assume financial risk is not credited.

42. Even if the Department had encouraged Motorola to present a plan that included risk sharing as well as revenue sharing, it would not follow that the decision to negotiate sequentially with Com-Net first was clearly erroneous, contrary to competition, arbitrary, or capricious. Com-Net presented a proposal that posed no risk that the state would ever pay out

more than the revenue stream from the Trust Fund. If the state had been willing to accept financial risk (which it is not) it would still have been reasonable to determine that the Com-Net risk-free plan was sufficiently preferable to warrant sequential negotiations.

RECOMMENDATION

Based upon the findings of fact and conclusions of law, it

is

RECOMMENDED:

That the Department of Management Services enter a final

order denying Motorola's protest.

DONE AND ENTERED this 3rd day of October, 2000, in Tallahassee, Leon County, Florida.

DON W. DAVIS

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 3rd day of October, 2000.

COPIES FURNISHED:

C. Everett Boyd, Jr., Esquire Melissa Fletcher Allaman, Esquire Ervin, Varn, Jacobs & Ervin

Post Office Drawer 1170 Tallahassee, Florida 32302

W. Robert Vezina, III, Esquire Mary M. Piccard, Esquire

Vezina, Lawrence & Piscitelli, P.A.

318 North Calhoun Street Tallahassee, Florida 32301

William E. Williams, Esquire

J. Andrew Bertron, Jr., Esquire Huey, Guilday & Tucker, P.A.

106 East College Avenue, Suite 900 Tallahassee, Florida 32301

Alan C. Sundberg, Esquire Mark K. Logan, Esquire Smith, Ballard & Logan, P.A.

403 East Park Avenue Tallahassee, Florida 32301

Shari M. Goodstein, Esquire Shipman & Goodwin, LLP

One Landmark Square Stamford, Connecticut 06901

Pennington G. Kamm, Esquire Terry A. Stepp, Esquire Office of the General Counsel

Department of Management Services 4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950

Bruce Hoffmann, General Counsel Department of Management Services 4050 Esplanade Way

Tallahassee, Florida 32399-0950

Cynthia Henderson, Secretary Department of Management Services 4050 Esplanade Way

Tallahassee, Florida 32399-0950

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: 00-002921BID

Orders for Case No: 00-002921BID