STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
SYSLOGIC TECHNOLOGY SERVICES, ) INC., )
)
Petitioner, )
)
vs. )
) SOUTH FLORIDA WATER MANAGEMENT ) DISTRICT, )
)
Respondent. )
Case No. 01-4385BID
)
RECOMMENDED ORDER
The parties having been provided proper notice, Administrative Law Judge John G. Van Laningham of the Division of Administrative Hearings convened a formal hearing of this matter in West Palm Beach, Florida, on December 3, 2001. The proceeding was adjourned on December 4, 2001.
APPEARANCES
For Petitioner: James S. Ganther, Esquire
Kathleen M. Wade, Esquire Ganther & Fee, P.A.
Bank of America Plaza, Suite 1030
101 East Kennedy Boulevard Tampa, Florida 33602
For Respondent: Frank S. Bartolone, Esquire
Frank Mendez, Esquire
South Florida Water Management District 3301 Gun Club Road
West Palm Beach, Florida 33406
STATEMENT OF THE ISSUES
The issues in this bid protest are whether, in making a preliminary decision to award a staff augmentation contract, Respondent acted contrary to a governing statute, rule, policy, or project specification; and, if so, whether such misstep(s) was/were clearly erroneous, arbitrary or capricious, or contrary
to competition.
PRELIMINARY STATEMENT
On July 26, 2001, Respondent South Florida Water Management District (the "District") issued a request for proposals (the "RFP") seeking a vendor to provide staff augmentation services as needed by the District. Twenty-one firms submitted proposals in response to the RFP. Among the proposers were Petitioner Syslogic Technical Services, Inc. ("Syslogic") and DUA Computer Resources, Inc. ("DUA").
After an initial evaluation of the proposals, the District scored the top three proposers as follows: DUA, 419 points; Syslogic, 416 points; and Radiant Systems, Inc. ("Radiant"), 410 points. As ranked by the District based on these raw scores, DUA and Syslogic were tied for first place, with Radiant coming in third.
Because of the tie, the District invited DUA, Syslogic, and Radiant to make oral presentations to the Evaluation Committee, as the RFP permitted. Oral presentations occurred on October 5,
2001. The Evaluation Committee then reevaluated the top three proposals. The final ranking of the three proposers was DUA, first; Syslogic, second; and Radiant, third. The District then announced its intention to award a contract to DUA.
Syslogic filed a timely protest of the proposed award. The District referred the matter to the Division of Administrative Hearings on November 9, 2001, with a request that an Administrative Law Judge be assigned to conduct a formal hearing. Despite notice, no other interested party intervened in this proceeding.
At final hearing, Syslogic presented the testimony of Susie Carrigan, Syslogic’s CEO; Mandy Florio, Syslogic’s Project Manager; and Gabriel Ocasio-Davila, the District’s Senior Contract Specialist responsible for the RFP. In addition, Syslogic tendered the deposition testimony of Marie-Christine Leavitt, Jorge Rivera, Sandra Turnquest, Richard Morgan, Robert Brown, Jon Gleason, Joseph Lemme, Linda Engelbrecht, and Carolyn King David.
The District put on the following witnesses: Marie- Christine Leavitt, Jorge Rivera, and Linda Engelbrecht. The District also tendered the deposition testimony of Susie Carrigan, Mandy Florio, and Gabriel Ocasio-Davila.
Joint Exhibits 1 through 45 were offered and received, with no reservations or objections, by stipulation of the parties.1
A two-volume transcript of the final hearing was filed on December 10, 2001. The parties timely filed Memoranda of Law and Proposed Recommended Orders on December 21, 2001. These post-hearing papers have been carefully reviewed and considered.
FINDINGS OF FACT
The parties' Joint Pre-Hearing Stipulation2 and the evidence presented at final hearing established the facts that follow.
The Request for Proposals
On July 26, 2001, the District issued Request for Proposals C-11940 (the "RFP"). The purpose of the RFP, as set forth on page one thereof, was
to solicit technical and cost proposals from qualified respondents [for a staff augmentation contract.3] The South Florida Water Management District (District) is interested in establishing a single qualified information systems/technology contracting firm to provide the services defined herein on an as-needed basis.
Contingent upon the responses received as a result of this Request for Proposals (RFP), the District will determine which respondent meets the required standards and qualifications through an evaluation process. The Vendor meeting the required standards and qualifications will be determined to be “pre-qualified” to provide information systems/technology services to the District.
The deadline for submission of proposals in response to the RFP was Monday, August 27, 2001 at 2:30 p.m.
Section 1.12 of the RFP, which is relevant to this protest, stated as follows:
REJECTION OF RESPONSES
The District reserves the right to reject any and all responses when such rejection is in the District's interests. Minor irregularities contained in a response may be waived by the District. A minor irregularity is a variation from the solicitation that does not affect the price of the contract or does not give a respondent an advantage or benefit not enjoyed by other respondents, or does not adversely impact the interests of the District. The District further reserves the right to cancel this solicitation at any time if it is in the best interest of the District to do so.
Section 1.13 of the RFP stated, in pertinent part: AWARD
The District anticipates entering into contract negotiations with the respondent(s) who submits the response(s) judged by the District to be the most advantageous to the District, price and other factors considered.
Section 1.16 of the RFP stated: ORAL PRESENTATIONS
Following the submission and evaluation of the written proposals, the District, in its discretion, may require the highest ranked respondents to give an oral presentation clarifying and/or demonstrating each proposal. In such an event, the proposals will be reevaluated and rescored to reflect consideration of both the written proposal and the oral presentation. Consequently, the initial rankings of the written
proposals are subject to change. All oral presentations shall be scheduled by the District.
Section 2.5. of the RFP governed the format and contents of proposals. Subsection 2.5.C thereof stated as follows:
C. Qualifications and Experience
This shall be a separate section and include details as follows:
* * *
A list of at least three (3) current clients and pertinent references (include name, address and telephone number) that the District may contact.
A list of at least five (5) former client references pertaining to similar past projects including contact name, address and telephone number, summary of each project scope as it relates to this project (one paragraph), and date that each project was completed. For at least two of the references, include sample work plans which were used to accomplish the project.
(Emphasis in original).
Subsection 2.5.E of the RFP stated in pertinent part:
Supplemental Information
This section shall include the following items:
* * *
2. Provide Financial Statements for the past two years that have been audited, reviewed or compiled by a third party accountant, annual reports, or other similar evidence of respondent’s financial
stability. The District reserves the right to perform a detailed review of financial information in order to determine whether or not the respondent is financially stable for successful performance of any ensuing contract award.
Subsection 2.5.F of the RFP provided in relevant part:
Attachments
The following attachments shall be provided with the response:
* * *
2. Certification from the Florida Secretary of State, if respondent is a corporation or partnership, verifying respondent’s corporate status and good standing. If respondent is also an out-of- state corporation, provide evidence of authority to conduct business in the State of Florida.
Section 3.2 of the RFP prescribed the evaluation criteria to be used by the committee of staff (the "Evaluation Committee" or "committee") appointed to review the responses and select the proposer to whom the contract should be awarded. The evaluation criteria are set forth in full below:
Maximum Points (Total 100) | Category |
30 | Technical: looking for currently and in the near future. |
Understanding of the scope of work and process required.
Ability to match technical contractors to the District’s requirements.
Knowledge of Master Service Agreement / staff augmentation process.
The experience level in providing contractors, which match a specific type of experience the District is
45 | Qualifications and Experience: 15 for the total number of contractors managed at one time. |
10 | Financial: Reasonableness of total proposed prices and the completeness of the ill rate ranges applied to each District position. |
10 | Minority Business Enterprise: Minority and Women Business Enterprise (M/WBE) Participation (Requires 51% M/WBE to receive maximum points). |
5 | Previous District Work: that a proposer who has received work. |
Qualifications of the firm for conducting and managing the staff augmentation process with the District and sub–contractors as outlined in the RFP.
That the firm has met the minimum years of five years of experience in IT contractor recruitment and account management. Also, has met the minimum requirements of
The Vendor’s experience with partnership and/or management of sub-vendor including back office capabilities. That adequate contractor liability insurance is in place. What types of current benefit programs does the Vendor have for its contractor employees.
Past performance of the firm in staff augmentation. (Based on discussions with references and determining their level of satisfaction e.g., delivering quality service within budget and on schedule).
The firm’s experience level in working the process with and/or creating similar types of reports and/or documents (with applicable samples) as outlined in the RFP.
Organizational stability and reasonable longevity in providing staff augmentation implementation.
Volume of work previously awarded to the proposer by the District in the past three years. A proposer with no previous District work will receive a higher score
On the "previous District work" criterion (the last one listed above), the District, as a matter of practice, has awarded points on a sliding scale. The District's sliding scale, which dates back at least to 1993, looks like this:
$ of Work Awarded Score
0 - 50,000 5
50,001 - 150,000 4
$ of Work Awarded Score
150,001 - 300,000 3
300,001 - 500,000 2
500,001 - 750,000 1
750,001 + 0
In considering the dollar amount of previous work awarded, the District reviews the most recent three-year period. Thus, a proposer who had received $40,000 worth of District work during the preceding three years would be awarded the same number of points——five——as a proposer who had received no work from the District.
The District's sliding scale for scoring previous work was neither included nor incorporated by reference in the RFP.
The Issuance of An Addendum, Submission of Proposals, and Appointment of An Evaluation Committee
The District conducted an optional pre-proposal conference on Monday, August 13, 2001, from 2:00 p.m. until 4:00
p.m. Both Syslogic and DUA sent representatives to this pre- proposal conference.
Following the pre-proposal conference, on August 17, 2001, the District issued Addendum Number One to the RFP.
Of significance to this protest is Question 12 and the response thereto, contained on page 2 of Addendum Number One:
12. The current list of references (2.5 C-
4) states 3 [current] and 5 former. Can we list more current and less former?
(Boldface and italics in original).
Syslogic, DUA, and Radiant timely submitted proposals in response to the RFP, as did 18 other hopefuls.
The District appointed an Evaluation Committee to review and score the proposals. The five members of this committee, all of whom were employees of the District, were: Marie-Christine Leavitt, Richard Morgan, Jorge Rivera, Sandra Turnquest, and Robert Brown. In addition, the District's Senior Contract Specialist, Gabriel Ocasio-Davila, maintained responsibility for, and was actively involved in, the subject procurement.
Relevant Details Concerning the Pertinent Proposals
DUA's Proposal
Attached to DUA’s proposal were self-described "Financial Statements" comprised of balance sheets, income statements, and profit and loss statements for calendar years 1999 and 2000 that had not been independently audited, reviewed, or compiled.
DUA’s proposal did not contain the names of any former clients for whom it had performed similar work but listed, as references, clients under ongoing contracts.
DUA’s written proposal did not include a current certification from the Florida Secretary of State verifying its corporate status and good standing through December 31, 2001. Instead, DUA attached to its proposal a Department of State certificate dated September 2, 1998, issued in the name of former Secretary of State Sandra B. Mortham, which stated in pertinent part:
I . . . certify that [DUA] has paid all fees and penalties due this office through December 31, 1998, that its most recent annual report was filed on April 21, 1998, and [that] its status is active.
DUA had done business with the District before the submission of its proposal. In fiscal year 2001, the District had paid DUA approximately $47,000 for its contractual services.4
Syslogic's Proposal
Syslogic’s proposal included financial statements, labeled as such, consisting of balance sheets, income statements, and profit and loss statements for calendar years 1999 and 2000. The financial statements that Syslogic submitted with its proposal had been compiled by a third party accountant "in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants." Syslogic's financial statements had not been independently audited or reviewed.5
Syslogic’s proposal contained a list of both current and former clients for whom Syslogic had performed similar work.
Syslogic’s written proposal contained a current certificate from the Florida Department of State verifying its corporate status and good standing through December 31, 2001.
As of this procurement, Syslogic had not previously performed any work for the District.
The Evaluation and Oral Presentations
On or about August 28, 2001, each member of the Evaluation Committee was furnished a package consisting: (1) of a copy of the RFP, including the addendum; (2) a copy of each proposal; (3) evaluation criteria guidelines; (4) an evaluation matrix; (5) past performance records; and (6) an acknowledgement form and instructions (the "Package").
Upon receiving the Package, each Evaluation Committee member independently reviewed and evaluated the proposals. (As a matter of practice, the District does not disqualify proposals for non-responsiveness prior to evaluation by a selection team. Thus, the Evaluation Committee considered the merits of all proposals.)
On September 24, 2001, the Evaluation Committee met to discuss, evaluate, and score the proposals as a group. After the committee scored and ranked the proposals, DUA and Syslogic
were tied for first place, with Radiant behind them in the number three position.
Because of the tie, the committee decided to request that DUA, Syslogic, and Radiant each make an oral presentation of their respective proposals. The three finalists were notified in writing of the committee's decision to hear from them, and of the date of a meeting for that purpose. All of them made oral presentations to the committee on October 5, 2001, as scheduled.
After the oral presentations, the committee members were permitted to revise their scores. Each did, to DUA's net benefit, as follows: Marie-Christine Leavitt reduced her original score of Syslogic’s proposal by 12 points overall; Richard Morgan reduced his original score of Syslogic’s proposal by 3 points overall; Jorge Rivera increased his original score of DUA’s proposal by 4 points overall; Sandra Turnquest increased her original score of DUA’s proposal by 5 points overall; and Robert Morgan increased his original score of DUA’s written proposal by 6 points.
Each of the finalists received, from each of the five committee members, five points (the maximum) on the "previous District work" criterion. None of these scores was amended following the oral presentations.
As a result of the reevaluation, DUA emerged as the highest-ranked proposer, followed by Syslogic, the new number
two.
Thereafter, on his own initiative, Gabriel Ocasio-
Davila confirmed DUA’s current corporate status and good standing with the Florida Secretary of State. He also obtained a Dun and Bradstreet report on DUA which satisfied the District that DUA was financially stable.
The Notice of Intended Award and Syslogic's Protest
On October 11, 2001, pursuant to Section 120.57(3)(a), Florida Statutes, the District posted a notice, styled "Authorization to Enter into Contract Negotiations," announcing its intent to award the contract to DUA.
Syslogic availed itself of this clear point of entry by timely and properly initiating an administrative bid protest. Syslogic stated its protest grounds in a formal written petition filed with the District on October 26, 2001. After taking discovery, Syslogic amended its petition, with the District's consent, on November 29, 2001. The grounds of protest were further refined in a Joint Pre-Hearing Stipulation which the parties filed on November 30, 2001.
Ultimate Factual Determinations
DUA's proposal deviated from the project specifications in two material respects, namely, by failing to
include, as separate attachments: (1) financial statements which had been audited, reviewed, or compiled by an outside accountant, and (2) a current official certification of corporate status and good standing.
The District's acceptance of a proposal that was non- responsive due to non-waivable material irregularities was contrary to law and contrary to competition.
In addition, the committee members' respective decisions to award DUA, Radiant, and Syslogic five points apiece on the "previous District work" criterion was contrary to the RFP and contrary to competition.
Certain ultimate findings of fact have been rendered or restated below under the heading "Conclusions of Law." This has been done for organizational convenience and for clarity of analysis. Accordingly, the findings announced in paragraphs 89, 99, 110, 114, 116, and 121, infra, are hereby incorporated as Findings of Fact, as if fully set forth in the instant section of this Recommended Order.
CONCLUSIONS OF LAW
Jurisdiction
The Division of Administrative Hearings has personal and subject matter jurisdiction in this proceeding pursuant to Sections 120.569 and 120.57(1), Florida, and the parties have standing.
The Burden of Proof
Pursuant to Section 120.57(3)(f), Florida Statutes, the burden of proof rests with the party opposing the proposed agency action, here Syslogic. See State Contracting and Engineering Corp. v. Department of Transportation, 709 So. 2d 607, 609 (Fla. 1998). Syslogic must sustain its burden of proof by a preponderance of the evidence. Department of Transportation v. J.W.C. Co., Inc., 396 So. 2d 778, 787 (Fla. 1st DCA 1981).
The Rules of Decision in Bid Protests
The Standard of Conduct
Section 120.57(3)(f), Florida Statutes, spells out the rules of decision applicable in bid protests. In pertinent part, the statute provides:
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.
These two sentences defy facile interpretation. The language, however, is critical to the adjudication of the present dispute; to ascertain the appropriate analytical framework for reaching a
decision in this matter, the statute must be carefully construed.6
Confusion initially may be engendered by the statute's use of the term "de novo proceeding." Ordinarily, a de novo trial or hearing involves "[t]rying a matter anew; the same as if it had not been heard before and as if no decision had previously been rendered." Black's Law Dictionary (5th ed. 1979)(hereafter "Black's")(defining "de novo trial"). Thus, a
hearing de novo literally means a new hearing, or a hearing the second time.
. . . . Such a hearing contemplates an entire trial of the controversial matter in the same manner in which the same was originally heard. It is in no sense a review of the hearing previously held, but is a complete trial of the controversy, the same as if no previous hearing had ever been held. It differs, therefore, from an ordinary appeal from an inferior to an appellate body where the proceedings of the hearing in the inferior court are reviewed and their validity determined by the reviewing court. A hearing de novo therefore is nothing more nor less than a trial of the controverted matter by the court in which it is held. The decision therein is binding upon the parties thereto and takes the place of and completely nullifies the former determination of the matter. It is in a sense and is in fact a trial of the controversy in a court of law.
Collier & Wallis v. Astor, 70 P.2d 171, 173 (Cal. 1937)(citation omitted).
If the framers of Section 120.57(f), Florida Statutes, had intended the term "de novo proceeding" to have its customary
legal meaning, then presumably they would have written something like: the administrative law judge shall conduct a de novo proceeding to determine which of the competing offerors, if any, should be awarded the contract. But instead, the drafters defined the issues for determination in a "competitive- procurement protest" so as to make it (reasonably) clear that the "de novo proceeding" must focus on the agency's "proposed action" and produce a (recommended) decision to uphold or override such action. Yet, this creates some dissonance: such a review of prior action is not a trial-level duty; it is an appellate function. And moreover, appellate-level proceedings are rarely (if ever) "de novo proceedings" (although appellate courts review certain legal decisions under a de novo standard of review).
The First District Court of Appeal has construed the term "de novo proceeding," as used in Section 120.57(3)(f), Florida Statutes, to "describe a form of intra-agency review.[7] The judge may receive evidence, as with any formal hearing under section 120.57(1), but the object of the proceeding is to evaluate the action taken by the agency." State Contracting and Engineering Corp. v. Department of Transportation, 709 So. 2d 607, 609 (Fla. 1st DCA 1998). In this, the court followed its earlier Intercontinental Properties, Inc. v. State Department of Health and Rehab. Serv., 606 So. 2d 380, 386 (Fla. 1st DCA
1992), a decision which predates the present version of the bid protest statute, wherein the court had reasoned:
Although the hearing before the hearing officer was a de novo proceeding, that simply means that there was an evidentiary hearing during which each party had a full and fair opportunity to develop an evidentiary record for administrative review purposes. It does not mean, as the hearing officer apparently thought, that the hearing officer sits as a substitute for the Department and makes a determination whether to award the bid de novo. Instead, the hearing officer sits in a review capacity, and must determine whether the bid review criteria set . . . have been satisfied.
Thus, the "de novo proceeding" contemplated in Section 120.57(3), Florida Statutes, might be envisaged, oxymoronically, as an "appellate trial," a hybrid proceeding in which evidence is received, factual disputes are settled, legal conclusions made——and prior agency action is reviewed for correctness.
The first district's interpretation of "de novo proceeding" is sensible and almost certainly implements the legislative intent. After all, if bid protests were de novo proceedings in the usual sense, then administrative law judges might become, de facto, the state's über-purchasing agents; it is doubtful the statute's drafters desired that result. The problem is, once bid protests are conceived to be "appellate trials," new questions arise, and chief among them is this: What are the standards of review?
As the statute says, the ultimate issue is "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." This could be construed as a standard of review, which might be distilled into: whether the agency erred in applying a governing principle. Such a review would be akin to an appellate court's evaluation of a lower tribunal's legal conclusions. Ordinarily, of course, legal conclusions are decided independently (or de novo) by the reviewing court, with little deference paid to the trial judge.
E.g. Florida Game and Freshwater Fish Comm'n v. Dockery, 676 So.
2d 471, 474 (Fla. 1st DCA 1996); Avery Development Corp. v. Village by the Sea Condominium Apartments, Inc., 567 So. 2d 447,
449 (Fla. 4th DCA 1990).
The next sentence, however, which describes the "standard of proof," renders the foregoing interpretation untenable, for reasons that will become clear. But first: it is an impediment to applying the statute that of the several standards ushered in by words "standard of proof," none is a known "standard of proof."
As commonly used in legal discourse, the term "standard of proof" signifies the nature, quality, and quantity of evidence with which the proponent of an allegation (or the one who bears the burden of proof) must come forward in order to
establish that allegation. The widely-recognized standards of proof are: preponderance (or greater weight) of the evidence, clear and convincing evidence, and proof beyond a reasonable doubt. See, e.g., Black's Law Dictionary (definition of "standard of proof"); see also Allstate Ins. Co. v. Vanater, 297 So. 2d 293, 295 (Fla. 1974)(listing the "three basic standards by which the sufficiency of evidence is weighed by fact- finders"). It is highly unlikely that the legislature intended to change the standard of proof in bid protests, from "preponderance of the evidence," see Section 120.57(1)(j), Florida Statutes, to a new and unfamiliar standard.
Instead, a reasonable interpretation of "standard of proof" as used in Section 120.57(3)(f) is that the term means standard of review. This is because, while the "standard of proof" sentence fails to mention a single common standard of proof, it does articulate two accepted standards of review: the "clearly erroneous" and abuse of discretion (= "arbitrary, or capricious") standards. (The "contrary to competition" standard——whether it be a standard of proof or standard of review——is unique to bid protests.) Construing "standard of proof" to mean "standard of review" makes the sentence make sense.8
It also sheds light on the "de novo proceeding" sentence. If the "standard of proof" sentence describes the
standard of review (as reasonably it must), then logically the "de novo proceeding" sentence must not prescribe the standard of review, because the legislature presumably would not have done so twice, differently. Moreover, the "standard of proof" sentence plainly manifests an intent that the agency's proposed action be accorded a measure of deference that is inconsistent with a de novo review for error, which would seem to be the standard of review if the "de novo proceeding" sentence were construed to articulate one. By framing the ultimate issue as being "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," it is probable that the legislature, rather than describing a standard of review, intended to establish a standard of conduct for the agency. The standard is: In soliciting and accepting bids or proposals, the agency must obey its governing statutes, rules, and the project specifications. If the agency breaches this standard of conduct, its proposed action is subject to (recommended) reversal by the administrative law judge in a protest proceeding.
Applying the above interpretations, it is concluded that the party protesting the intended award must identify and prove, by the greater weight of evidence, a specific instance or
instances where the agency's conduct in taking its proposed action was either:
contrary to the agency's governing statutes;
contrary to the agency's rules or policies; or
contrary to the bid or proposal specifications.
It is not sufficient, however, for the protester to prove merely that the agency violated the general standard of conduct. By virtue of the applicable standards of review, the protester must in addition establish that the agency's misstep was:
clearly erroneous;
contrary to competition; or
an abuse of discretion.
Having identified these review standards, it will be seen that they are markedly different from one another. The abuse of discretion standard, for example, is a good deal more deferential (or narrower) than the clearly erroneous standard. The review process thus necessarily entails a decision regarding which of the several standards of review to apply in evaluating a particular action. To do this requires that the meaning of each standard be properly understood.
The Standards of Review
1. The Clearly Erroneous Standard
The clearly erroneous standard is that generally applied in reviewing a lower tribunal's findings of fact. In
Anderson v. City of Bessemer City, North Carolina, 470 U.S. 564, 573-74 (1985), the United States Supreme Court expounded on the meaning of the phrase "clearly erroneous," explaining:
Although the meaning of the phrase "clearly erroneous" is not immediately apparent, certain general principles governing the exercise of the appellate court's power to overturn findings of a [trial] court may be derived from our cases. The foremost of these principles . . . is that "[a] finding is 'clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." This
standard plainly does not entitle a reviewing court to reverse the finding of the trier of fact simply because it is convinced that it would have decided the case differently. The reviewing court oversteps the bounds of its duty . . . if it undertakes to duplicate the role of the lower court. "In applying the clearly erroneous standard to the findings of a [trial] court sitting without a jury, appellate courts must constantly have in mind that their function is not to decide factual issues de novo." . . . . If the [trial] court's account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently. Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous. . . . .
(Citations omitted)(emphasis added).
The Florida Supreme Court has used somewhat different language to give this standard essentially the same meaning:
A finding of fact by the trial court in a non-jury case will not be set aside on review unless there is no substantial evidence to sustain it, unless it is clearly against the weight of the evidence, or unless it was induced by an erroneous view of the law. A finding which rests on conclusions drawn from undisputed evidence, rather than on conflicts in the testimony, does not carry with it the same conclusiveness as a finding resting on probative disputed facts, but is rather in the nature of a legal conclusion. . . . .
When the appellate court is convinced that an express or inferential finding of the trial court is without support of any substantial evidence, is clearly against the weight of the evidence or that the trial court has misapplied the law to the established facts, then the decision is 'clearly erroneous' and the appellate court will reverse because the trial court has 'failed to give legal effect to the evidence' in its entirety.
Holland v. Gross, 89 So. 2d 255, 258 (Fla. 1956)(Citation omitted).
Even after its meaning is clearly understood, however, applying the clearly erroneous standard in a bid protest is problematic because of the hybrid nature of this "appellate trial." Appellate courts, not being triers of fact, defer to the fact findings of the lower tribunal——hence the standard. But administrative law judges are triers of fact charged with making findings based upon the evidence in the record. Yet, in arriving at its intended award, the agency——which in a bid protest is loosely analogous to a lower tribunal (despite being
a party litigant)——may itself have made factual determinations. The agency's findings, of course, would not be based upon evidence in a record developed in a formal, adversarial, de novo proceeding, but still: To what extent, if at all, should the administrative law judge defer to the agency's factual determinations? (And if not at all, to what actions does the clearly erroneous standard apply?)
In sorting this out, a distinction should be drawn between historical, objective, or "hard" facts, on the one hand, and ultimate factual determinations, on the other. The former are susceptible to proof by conventional methods. With regard to this kind of fact, the evidence may be hotly contested and highly in conflict, but in the end, the light was either red, yellow, or green. An ultimate factual determination, in contrast, is often a conclusion derived by reasoning from objective facts; it frequently involves the application of a legal principle or rule to hard historical facts: e.g. the driver failed to use reasonable care under the circumstances and therefore was negligent; and it may be infused with policy considerations. Reaching an ultimate factual finding requires that judgment calls be made which are unlike those that attend the pure fact finding functions of weighing evidence and choosing between conflicting but permissible views of reality.
Because a bid protest is fundamentally a de novo proceeding, it is concluded that the agency is entitled to no deference in connection with the resolution of disputes involving objective facts. It is exclusively the judge's job, as the trier of facts, to ascertain from the competent, substantial evidence in the record what actually happened in the past or what reality presently exists, as if no decision previously had been made.
If, however, the challenged agency action involves an ultimate finding of fact——for example, an agency's conclusion that a proposal's undisputed departure from the project specifications was a minor irregularity as opposed to a material deviation——then some deference is in order, according to the clearly erroneous standard of review. To prevail on an objection to an ultimate finding, therefore, the protester must substantially undermine the factual predicate for the agency's conclusion or convince the judge that a defect in the agency's logic led it unequivocally to commit a mistake.
There is another species of agency action that also is entitled to review under the clearly erroneous standard: interpretations of statutes for whose administration the agency is responsible, and interpretations of the agency's own rules. See State Contracting and Engineering Corp. v. Department of Transportation, 709 So. 2d 607, 610 (Fla. 1st DCA 1998). In
deference to the agency's expertise, such interpretations will not be overturned, either by the courts or administrative law judges, unless clearly erroneous. Id.9
This means that if the protester objects to a proposed agency action on the ground that it violates either a governing statute within the agency's substantive jurisdiction or the agency's own rule, and if, further, the validity of the objection turns on the meaning, which is in dispute, of the subject statute or rule, then the agency's interpretation thereof must be accorded deference; the challenged action should stand unless the agency's interpretation is clearly erroneous (and assuming the agency acted in accordance therewith).10
2. The Abuse of Discretion Standard
The statute requires that agency action (in violation of the applicable standard of conduct) which is "arbitrary, or capricious" be set aside. Above, the phrase "arbitrary, or capricious" has been equated with the abuse of discretion standard because the concepts are indistinguishable and hence interchangeable——and because use of the term "discretion" here is a useful reminder as to the kind of agency action reviewable under this highly deferential standard.
It is now frequently observed that an arbitrary decision is one that is not supported by facts or logic, or is despotic. Agrico Chemical Co. v. Department of Environmental
Regulation, 365 So. 2d 759, 763 (Fla. 1st DCA 1978). Thus, under the arbitrary or capricious standard, "an agency is to be subjected only to the most rudimentary command of rationality. The reviewing court is not authorized to examine whether the agency’s empirical conclusions have support in substantial evidence." Adam Smith Enterprises, Inc. v. State Department of
Environmental Regulation, 553 So. 2d 1260, 1273 (Fla. 1st DCA 1989). Nevertheless,
the reviewing court must consider whether the agency: (1) has considered all relevant factors; (2) has given actual, good faith consideration to those factors; and (3) has used reason rather than whim to progress from consideration of each of these factors to its final decision.
Id.
The second district nicely framed the "arbitrary or
capricious" review standard in these terms: "If an administrative decision is justifiable under any analysis that a reasonable person would use to reach a decision of similar importance, it would seem that the decision is neither arbitrary nor capricious." Dravo Basic Materials Company, Inc. v. State Department of Transportation, 602 So. 2d 632, 634 n.3 (Fla. 2d DCA 1992). As the court observed, this "is usually a fact- intensive determination." Id. at 634.
Compare the foregoing "arbitrary or capricious" analysis with the test for review of discretionary decisions:
"Discretion, in this sense, is abused when the judicial action is arbitrary, fanciful, or unreasonable, which is another way of saying that discretion is abused only where no reasonable man would take the view adopted by the trial court. If reasonable men could differ as to the propriety of the action taken by the trial court, then it cannot be said that the trial court abused its discretion."
Canakaris v. Canakaris, 382 So. 2d 1197, 1203 (Fla. 1980), quoting Delno v. Market Street Ry. Co., 124 F.2d 965, 967 (9th Cir. 1942). Further,
[t]he trial court's discretionary power is subject only to the test of reasonableness, but that test requires a determination of whether there is logic and justification for the result. The trial courts' discretionary power was never intended to be exercised in accordance with whim or caprice of the judge nor in an inconsistent manner. Judges dealing with cases essentially alike should reach the same result. Different results reached from substantially the same facts comport with neither logic nor reasonableness.
Id.
Whether the standard is called "arbitrary or
capricious" or "abuse of discretion," the scope of review is identical and demands the maximum deference. The reason for pointing this out, and for invoking the abuse of discretion standard, is not to satisfy academic curiosity, but to underscore that the narrow "arbitrary or capricious" standard of review cannot properly be applied in evaluating all agency
actions that might be challenged in a bid protest; rather, this highly deferential standard appropriately applies only to those decisions which are committed to the agency's discretion.
For example, as previously discussed, an agency's interpretations of some statutes and its own rules are entitled to the deference that the clearly erroneous standard affords. But an agency's statutory construction is never reviewed under an "arbitrary, or capricious" standard because issues of interpretation, being fundamentally legal in nature, are not matters of personal judgment over which the agency (or any body, including a court) has discretionary power.
Likewise, ultimate factual determinations cannot be reviewed for abuse of discretion, because issues of fact——even "ultimate" factual issues——are not, by nature, questions reserved to the decision maker's discretion. Some deference to such ultimate factual determinations is appropriate; they should stand unless clearly erroneous. Maximum deference, however, is plainly unwarranted.
Thus, in sum, where the protester objects to agency action that entails the exercise of discretion, the objection cannot be sustained unless the agency abused its discretion,
i.e. acted arbitrarily or capriciously. For other agency actions, a different standard of review must be applied.
The Contrary to Competition Standard
The third standard of review articulated in Section 120.57(3)(f) is unique to bid protests. The "contrary to competition" test is a catch-all which applies to agency actions that do not turn on the interpretation of a statue or rule, do not involve the exercise of discretion, and do not depend upon (or amount to) a determination of ultimate fact.
The difficulty in applying this standard is its singularity. It is not a test that has a fixed meaning in the law. And the legislature chose not to define the standard. Thus, it becomes necessary to give life to the statutory terms through application on a case by case basis.
The starting point, as always, is the statute's plain language. In ordinary usage, the preposition "contrary to" means "in conflict with." See Mirriam-Webster's OnLine Collegiate® Dictionary <http://www.m-w.com/> (definition of "contrary to"). The term "competition" means "the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms[;] a contest between rivals." Id. (definition of "competition"). Thus, agency action that is inconsistent with the efforts of two or more rivals to secure the agency's business by offering the most favorable terms is "contrary to competition."
Obviously, the plain language approach has its limitations. The simple "inconsistency" test is too slippery for sure-handed application——and fails adequately to accord deference to the agency's proposed action. Almost any misstep by the agency could be deemed "inconsistent with" competition, absent additional explication of the nature and degree of inconsistency that justifies overriding the agency's intended award.
To probe the legislative intent in this regard, reference is made to Chapter 287, Florida Statutes, which deals with state purchasing. Section 287.001 contains an expression of legislative intent concerning public procurement. It reads:
The Legislature recognizes that fair and open competition is a basic tenet of public procurement; that such competition reduces the appearance and opportunity for favoritism and inspires public confidence that contracts are awarded equitably and economically; and that documentation of the acts taken and effective monitoring mechanisms are important means of curbing any improprieties and establishing public confidence in the process by which commodities and contractual services are procured. It is essential to the effective and ethical procurement of commodities and contractual services that there be a system of uniform procedures to be utilized by state agencies in managing and procuring commodities and contractual services; that detailed justification of agency decisions in the procurement of commodities and contractual services be maintained; and that adherence by the agency and the contractor
to specific ethical considerations be required.
Reviewing this statement of the reasons why the legislature intends that public contracts be let pursuant to free and open competition, and the aims of such competition, is helpful in envisioning those actions that are contrary to competition. As Section 287.001, Florida Statutes, is examined, it becomes evident that actions which tend to thwart the legislative goals, or to cause the harms against which the legislature intends to guard, should be considered contrary to competition.11
Thus, from Section 287.001 can be derived an articulable standard of review. Actions that are contrary to competition include those which:
create the appearance of and opportunity for favoritism;
erode public confidence that contracts are awarded equitably and economically;
cause the procurement process to be genuinely unfair or unreasonably exclusive; or
are unethical, dishonest, illegal, or fraudulent.
The Responsiveness of DUA's Proposal
As protest grounds, Syslogic contends that DUA's response deviated materially from the project specifications as
set forth in the RFP, and that, therefore, the District breached the applicable standard of conduct by considering DUA's offer and recommending that DUA be awarded the contract.12 Specifically, Syslogic argues that DUA's response failed to include required information pertaining to financial stability, corporate status, and former clients. In response, the District asserts that DUA's proposal satisfied the project specifications; it adds, alternatively, that if DUA's proposal deviated from a requirement to submit an official certificate of corporate good standing, then the irregularity was minor and thus could be waived. The alleged irregularities will be examined in turn.
Evidence of Financial Stability
Repeating a fact finding whose relevance is at hand, the financial statements that DUA included with its proposal consisted of self-prepared balance sheets and income statements that had not been audited, reviewed, or compiled by a third party accountant. Recall, also, that Subsection 2.5.E.2 of the RFP instructed proposers that a response "shall" include, among other items, "Financial Statements for the past two years that have been audited, reviewed or compiled by a third party accountant, annual reports, or other similar evidence of the
respondent's financial stability." (Emphasis added). The
District maintains that DUA's self-prepared financial papers fell within the meaning of the underlined language just quoted.
The resolution of this issue turns on the interpretation of Subsection 2.5.E.2 of the RFP. The agency's interpretation of this provision, which Syslogic did not timely protest, will stand unless clearly erroneous.
Subsection 2.5.E.2 is not ambiguous. The terms "financial statements"13 and "annual reports"14 have plain meanings in everyday conversation. That the provision permits the submission of "other similar evidence" does not create ambiguity because, under the longstanding rule of ejusdem generis, such general words will be construed to reference items of the same general kind or class as those specifically mentioned. See Frymer v. Brettschneider, 710 So. 2d 10, 12 (Fla. 4th DCA 1998).
The District's construction of Subsection 2.5.E.2 contravenes the provision's plain and unambiguous meaning, for two reasons. First, observe that DUA did not purport to submit "other similar evidence" of financial stability; rather, it offered papers that were——in DUA's own words (which agree with the common understanding and usage of the term "financial statements")——"Financial Statements for the past two years." But the RFP clearly required that financial statements be independently audited——and DUA's were not.15 By allowing
unaudited financial statements to be received, the District's interpretation of Subsection 2.5.E.2 would vitiate the descriptive phrase "that have been audited, reviewed or compiled by a third party accountant" because, logically, a financial statement cannot be both independently audited and unaudited at the same time. If the District truly had no preference for one versus the other, then it should not have required the former to the logical exclusion of the latter.
Second, applying the ejusdem generis principle, it is evident that unaudited financial statements (besides being logically excluded by the requirement that such be independently audited), are simply not of the same general kind or class as independently audited financial statements and annual reports. The items specifically mentioned carry an indicium of reliability——outside scrutiny or comment——that self-prepared financial papers lack.16 For that additional and independent reason, it is impermissible to interpret Subsection 2.5.E.2 in the manner that the District suggests.
Thus, the District's conclusion that DUA's unaudited financial statements satisfied Subsection 2.5.E.2 was clearly erroneous.
Before concluding that the proposed award should be rescinded on this basis, it should be considered whether the District's action might be upheld on the theory that the
irregularity in DUA's proposal was a minor one that the District could have waived. The District's action, in other words, might be sustained as being right for the wrong reason.17 Because, however, the District's proposed action was not based on a finding that DUA's submission of unaudited financial statements constituted a minor deviation, the District having concluded that DUA's proposal was responsive, there exists no ultimate factual determination in this regard to review for clear error.18 As a result, the question whether DUA's failure to submit audited financial statements is a minor or material deficiency must be decided de novo.
It has long been recognized that "although a bid containing a material variance is unacceptable, not every deviation from the invitation to bid is material. [A deviation] is material if it gives the bidder a substantial advantage over the other bidders and thereby restricts or stifles competition." Tropabest Foods, Inc. v. State Department of General Services,
493 So. 2d 50, 52 (Fla. 1st DCA 1986). "The test for measuring whether a deviation in a bid is sufficiently material to destroy its competitive character is whether the variation affects the amount of the bid by giving the bidder an advantage or benefit not enjoyed by other bidders." Harry Pepper & Associates, Inc.
v. City of Cape Coral, 352 So. 2d 1190, 1193 (Fla. 2d DCA 1977).
The courts have applied two criteria in determining whether a variance is material and hence non-waivable:
[F]irst, whether the effect of a waiver would be to deprive the municipality of its assurance that the contract will be entered into, performed and guaranteed according to its specified requirements, and second, whether it is of such a nature that its waiver would adversely affect competitive bidding by placing a bidder in a position of advantage over other bidders or by otherwise undermining the necessary common standard of competition.
[S]ometimes it is said that a bid may be rejected or disregarded if there is a material variance between the bid and the advertisement. A minor variance, however, will not invalidate the bid. In this context a variance is material if it gives the bidder a substantial advantage over the other bidders, and thereby restricts or stifles competition.
Robinson Electrical Co. v. Dade County, 417 So. 2d 1032, 1034 (Fla. 3d DCA 1982), quoting 10 McQuillan, Municipal Corporations
§ 29.65 (3d ed. rev. 1981)(footnotes omitted).
Pausing momentarily, it is noted and concluded as an initial matter that the question of materiality must be decided from the perspective of the agency at the time the proposals were opened or when the deficiency should have been discovered, if later——but before the proposals were scored and ranked and the preliminary outcome known.19 The decision cannot properly take account of facts extrinsic to the deficient proposal, such as that, for example, the deficient proposal was ranked number
one, or that information acquired after the proposal opening—— whether submitted by the proposer or obtained by the agency sua sponte——cured the deficiency to the agency's satisfaction.
The District's acceptance of DUA's unaudited financial statements in lieu of the independently audited financial information required to be submitted under the clear language of the RFP gave DUA an undeniable, if difficult to quantify, advantage over the other proposers. Whereas other proposers were required to prove their financial stability or expose a lack thereof with independent verification of the relevant facts (or to submit an objective report, like those attached to Syslogic's proposal, in which an independent accountant takes an agnostic position on the company's financial position, which the District can then take into account), DUA was excused.20
There is, of course, no way of knowing for certain whether, or precisely how, the presence of audited financial statements might have affected the scoring of DUA's proposal. It will not do, however, to say that since the Dun and Bradstreet report obtained afterwards showed DUA to be in good financial shape, the absence of audited financial information during the evaluation period is of no moment. At the time the proposals were evaluated, the District could not be sure that Dun and Bradstreet would provide supplemental information about DUA's finances that would demonstrate to the District's
satisfaction that DUA was not down-and-out; the Dun and Bradstreet report, which was not part of DUA's proposal, must be ignored.21
Once the later-verified fact of DUA's financial stability is excluded from consideration, the materiality of its proposal's deficiency becomes palpable. The District's acceptance of self-prepared financial information——despite a clear specification requiring independently audited data——is tantamount to allowing a financially unstable firm to compete without having adequate information upon which to evaluate the risk posed by the company's financial position. This is because, deprived of the disclosures expected from independently audited financial statements, a reasonably prudent letting authority should assume that the proposer's failure to comply with the RFP bespeaks a withholding of bad news.22 Yet, having no objective information, the agency cannot reliably adjust the noncompliant proposer's score to account for the deficiency. Thus, when competitors of unknown (but presumably unstable) financial condition are permitted to join the fray, financially stable rivals (and those that are less stable but have provided independent information for the agency's evaluation), being held to a higher standard, are placed at a disadvantage. Also, waiver of this specification would lower the bar, preferentially, for the favored proposer, even after other,
would-be competitors may have been prevented from making an offer by this very provision. See City of Opa-Locka v. Trustees
of the Plumbing Industry Promotion Fund, 193 So. 2d 29, 32 (Fla. 3d DCA 1966).23
Consequently, DUA's submission of unaudited financial statements was a material defect that the District could not waive. The District's decision to accept DUA's materially deficient proposal cannot be upheld as being right for the wrong reason.
Certificate of Good Standing
As found, the RFP provided that a proposal submitted by a Florida corporation “shall” include, as an attachment, a “Certification from the Florida Secretary of State” attesting to the proposer’s corporate status and good standing. The certificate attached to DUA’s proposal was dated September 2, 1998, and established that DUA was an active corporation in good standing “through December 31, 1998”——nearly three years earlier.
The District argues that DUA’s proposal was responsive because the RFP did not expressly require a current certificate of good corporate standing——and hence that an old one was acceptable. Because this issue of responsiveness turns on the interpretation of a specification that was not timely protested,
the District’s construction will not be disturbed unless it is clearly erroneous.
Although the District is right in claiming that the adjective “current” is not used in Section 2.5.F.2 of the RFP to modify the noun “Certification,” its construction of this provision is nevertheless plainly wrong. The reason is that anything but a current certificate is irrelevant absent a clear expression of intent to examine a company’s historical compliance with the state’s corporate code. That a corporation paid all the required fees and filed the necessary annual report last year, or the year before that, may be meaningful information for the agency to consider, but past performance, while an indicator perhaps, is obviously no guarantee of present compliance.
Let there be no doubt: it would be reasonable for a letting authority to request official certificates attesting to good standing in prior years, to ascertain a corporation’s consistent compliance with the law. To look at historical performance while ignoring present compliance, however, would be illogical. Therefore, when an agency asks for a certificate of good standing without specifying the period that the certificate must cover, the only reasonable interpretation of the request is that the agency wants and expects current information.
The District’s interpretation of the specification at issue is outside the range of permissible interpretations. Therefore, the District’s construction, with all due deference, is clearly erroneous and must be rejected.
The District contends alternatively that if DUA’s failure to provide a current certificate of good standing was an irregularity (which it was), then the deficiency was immaterial and could have been waived.24 The District asserts that the immateriality of the present deficiency is demonstrated by the fact that DUA was an active corporation in good standing at the time it submitted its proposal, as the District verified with the Department of State after the proposals were opened.
The problem with the District’s "no harm, no foul" argument is that, as discussed above, the question of materiality must be decided without reference to facts outside the four corners of the deficient proposal. Many, perhaps most, deficiencies could be corrected if supplemental or amendatory submissions were allowed to be considered after the opening of proposals. But then, most professional place-kickers would make that missed 25-yard field goal if only they were given a second chance. That is not the way football is played, and it is not the way competitive procurements are handled, either. See
Section 120.57(3)(f), Florida Statutes (“[N]o submissions made after the bid or proposal opening amending or supplementing the
bid or proposal shall be considered.”); see also Harry Pepper & Associates, Inc. v. City of Cape Coral, 352 So. 2d 1190, 1192 (Fla. 2d DCA 1977)("[A] bidder cannot be permitted to change his bid after the bids have been opened, except to cure minor irregularities.").
Once the fact of DUA’s good corporate standing is ignored, as it must be, the materiality of DUA’s failure to submit a current certificate becomes clear. Other competitors were required to prove their good standing; DUA’s was assumed. Further, the inference of good standing was unreasonable; indeed, the logical inference, when provided with only an out- of-date certificate, would be that the proposer is not presently in good standing.
To waive the requirement of proving current good standing is tantamount to allowing an inactive or dissolved corporation to compete——to the plain competitive disadvantage of the rivals in good standing. And, as with the requirement that independently verified financial statements be submitted, waiver of this specification would lower the bar, preferentially, for the favored proposer, even after other, would-be competitors may have been prevented from making an offer by need to provide official certification of corporate good standing. See City of
Opa-Locka v. Trustees of the Plumbing Industry Promotion Fund, 193 So. 2d 29, 32 (Fla. 3d DCA 1966).
DUA’s submission of an out-of-date certificate of good standing was a material deviation from the project specifications which could not be waived. The District’s proposed action——an award of the contract to
DUA——cannot be upheld as being right for the wrong reason.
Former Client References
As originally issued, the RFP required proposers to submit a list of three current and five former clients. Later, in response to a written request to “list more current and less former” clients, among other inquiries, the District issued an Addendum that revised the RFP, among other ways, so as to seek “a list that will permit us to see a clear picture of your corporation experience during the past years and to include present contracts.” DUA’s proposal listed current clients——but not former clients. Syslogic brands this a material deviation.
The language of the Addendum plainly required that proposers list current clients. It is unclear, however, whether a list of current, long-standing clients which paints a clear picture of the corporation’s past experience is sufficient, without more, as the District concluded, or whether, as Syslogic asserts, the phrase “and to include” was intended to mean that some former clients were to be named in all cases, even if the list of active contracts would afford the District a clear
picture of the proposer’s past experience. In a word, the Addendum made this particular provision of the RFP ambiguous.
Neither Syslogic nor any other proposer timely challenged the ambiguous language. The right to protest uncertainty in the specification having been waived, the District’s interpretation will be upheld unless it is clearly erroneous.
The District’s reasonable interpretation of the ambiguous provision is within the range of permissible constructions and not clearly erroneous. Accordingly, the District’s decision to treat DUA’s proposal as responsive to the RFP’s requirements pertaining to past and present clients must be affirmed.25
The Scoring of Previous District Work
One of the evaluation criteria, worth five points out of 100, focused on whether the proposer had received previous District work. Intending to achieve “equitable distribution of contracts among qualified firms,” see Rule 40E-7.206(2)(a)6., Florida Administrative Code, the District desires that proposers having had little prior business with the District receive comparatively higher scores on this criterion than those that have had significant prior business——and that proposers who have had no previous District work be awarded the highest score. To this end, the RFP provided that “[a] proposer with no previous
District work will receive a higher score than a proposer who has received work.”
In the instant evaluation, DUA, Syslogic, and third- place Radiant each received, from each evaluator, the maximum five points on the previous District work criterion. In fact, however, DUA and Radiant had done business previously with the District, whereas Syslogic had not. Syslogic complains that it should have been awarded a higher score than its rivals, according the RFP’s plain language.
The District defends its committee’s action by pointing out that established agency policy and practice provided for the award of maximum points to any proposer who had been paid up to $50,000 for District work during the preceding three years. Because neither DUA nor Radiant had been compensated more than $50,000 during the relevant period, the District argues, the committee was justified in awarding all three competitors the same number of points.
The awarding of points based on stated evaluation criteria is, generally speaking, a discretionary matter that will not be second-guessed except upon a showing that such discretion was abused. Thus, for example, if the District were to award the same four points to firms that had received, respectively, $27,000 and $48,000 in previous District work, it is highly unlikely that such action would be upset in a protest.
Conversely, if the District awarded four points apiece to companies with $10 million and $10,000, respectively, in previous District business, it is doubtful such decision would be upheld over challenge.
But some aspects of the scoring plainly are not discretionary. For example, in this procurement, the maximum number of points that could be awarded on the “previous work” criterion was five. Thus, a committee member did not have the discretion to award one proposer, say, 12 points for this criterion. If he had, his action would have been both contrary to the RFP and contrary to competition and hence reversible. Similarly, the committee did not have the discretion to award points to the proposer with the snazziest corporate logo, because that was not a stated evaluation criterion. Such action, if taken, would be reversed in a protest for being contrary to a governing statute26 and contrary to competition. Note that the result in either of these examples would be the same even if the District were able to articulate some plausible basis in fact or logic for the action.
The present situation is analogous to the foregoing examples. The RFP mandated that a proposer with no prior District work receive a higher score than one who has received such work. “No previous District work” clearly and unambiguously means “none”——not “less than $50,000 worth.” As a
matter of the RFP’s plain language, therefore, the committee simply did not have the discretion——regardless of District policy or practice——to award the same number of points to a proposer with no previous District work and a proposer who previously had received District work. The issue is not how many points to assign (which is discretionary) but obedience to a clear instruction in the RFP (which is not a matter of discretion).
By awarding five points apiece to Syslogic, a proposer with no previous District work, and DUA and Radiant, proposers who had received such work, the committee members acted contrary to the RFP. Further, this breach of the standard of conduct was contrary to competition, for at least three reasons. First, it was genuinely unfair. Syslogic was entitled under the plain rules of the contest to a higher score on this criterion than its rivals, and every point counts, as the tie which resulted in this evaluation process underscores. Second, the clear departure from the plain terms of the RFP created the appearance of and opportunity for favoritism; although in this case the District was, in fact, acting pursuant to an established policy and practice, and not out of partiality, agencies cannot be permitted to circumvent the plain terms of their RFPs by relying on contrary policies or practices.27 Finally, to deprive a competitor of an advantage to which it
clearly was entitled under the RFP would tend to undermine public confidence that the contract was being awarded equitably.
For these reasons, the District committed reversible error in assigning the same number of points to Syslogic, DUA, and Radiant on the “previous work” criterion.
The Remaining Protest Grounds
Syslogic has raised a number of additional objections to the District’s proposed action. Because none of these remaining protest grounds constitutes a reversible error, and because the outcome is dictated in any event by the foregoing determination that DUA’s proposal is materially non-responsive, the balance of Syslogic’s protest will be discussed in abbreviated fashion.
The Scoring of Past Performance
Syslogic complains that the Evaluation Committee improperly awarded points for past performance to DUA because discussions were not had with DUA’s former clients. This objection is intertwined with Syslogic’s contention (rejected above) that DUA’s proposal was non-responsive for failure to list expired contracts; to the extent it depends upon the unsuccessful contention, this argument too must fail.
Beyond that, awarding points is a discretionary matter; thus, the District’s committee is entitled to maximum deference in connection with its scoring decisions. The greater
weight of the evidence does not persuasively establish that the Evaluation Committee abused its discretion in awarding points to DUA for past performance. Therefore, the scores for this criterion cannot be disturbed.
The Evaluation Committee’s Training
Syslogic asserts that the Evaluation Committee was not properly schooled in the law of procurement and thus could not correctly have evaluated the proposals. Syslogic, however, has not identified a specific statute, rule, policy, or project specification that requires such instruction, however valuable it might in fact be.28 Therefore, this contention cannot be a basis for reversal.
A Committee Member’s Alleged Bias
Syslogic charges that one of the members of the Evaluation Committee was biased in favor of DUA and against Syslogic. This allegation was not established by a preponderance of the evidence.
Unstated Evaluation Criteria
Syslogic contends that the District scored the proposals according to evaluation criteria that were not expressed in the RFP. Specifically, Syslogic is concerned that the District paid unwarranted attention to undisclosed preferences for an on-site project manager, a project manager
with a college degree, and the proposer’s proximity to the District.
The use of undisclosed evaluation criteria to rank proposals is potentially a reversible error. When such an allegation is made, however, the question whether a particular criterion was “undisclosed,” as the disappointed proposer will urge, or whether it was simply subsumed within a broadly-worded criterion, as the agency inevitably will counter, is rarely an easy one. The best remedy for general or vague evaluation criteria is the specifications protest, which allows these types of disputes to be resolved in advance of the evaluation.
Here, the District, through its scoring, expressed a preference for some details that were not specifically enumerated in the RFP. However, upon review, it cannot be said that the proposers were not fairly apprised that the particular details at issue might be among the items considered, given the general language of the RFP, and in view of the additional mandatory criteria spelled out in Rule 40E-7.206(2)(a)1.-7., Florida Administrative Code. The District’s interpretation of these criteria was not clearly erroneous, and the committee’s application of them was not an abuse of discretion. Accordingly, there is no basis for reversal in the charge that unstated evaluation criteria were used.
The Conduct of the Oral Presentations
Syslogic takes issue with the District’s use of oral presentations to break a tie, rather than to have the proposers “clarify” or “demonstrate” their respective proposals, which are the purposes for such presentations according to the RFP.
The District’s actions with respect to the oral presentations were consistent with the RFP and Rule 40E- 7.206(2), Florida Administrative Code. Its interpretation of the applicable provisions of the RFP and Rule was not clearly erroneous, and its implementation of them was not an abuse of discretion. Thus, no reversible error has been shown in this regard.
The Committee’s Failure to Determine Responsiveness
Syslogic alleges that the Evaluation Committee failed to determine the responsiveness of the proposals, as required by Rule 40E-7.2091(1), Florida Administrative Code, which provides that “[t]he Committee [meaning a Proposal Evaluation Committee such as the one in this case] will review proposals for contractual services for compliance with the specifications set forth in the solicitation.”
Syslogic is correct that the Committee which evaluated the subject proposals did not carry out this particular responsibility. Syslogic is probably correct that it
should have. Syslogic has a point that the Committee’s failure could be considered contrary to competition.
But it is concluded that Syslogic did not plead this ground with sufficient particularity. Nor was the contention clearly raised in the parties’ Joint Pre-Hearing Stipulation. It cannot be said that the issue was tried by consent, either.
Because this point was not timely and properly raised, it will not be reached here.
RECOMMENDATION
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the District enter a Final Order that declares DUA’s proposal to be materially non-responsive and, accordingly, rescinds the proposed award to DUA. In addition, while recognizing that the choice of remedies for invalid procurement actions is within the agency’s discretion, it is nevertheless recommended that, rather than reevaluate or reject all responsive proposals, the District award the contract to the highest-ranked responsive proposer, Syslogic.
DONE AND ENTERED this 18th day of January, 2002, in Tallahassee, Leon County, Florida.
JOHN G. VAN LANINGHAM
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 18th day of January, 2002.
ENDNOTES
1/ The undersigned was unable to locate original Joint Exhibits
41 through 44 after the hearing. By agreement of the parties, the District provided duplicates thereof which have been marked and substituted for the originals.
2/ Paragraphs 29 and 31 under the heading "Admitted Facts" in the Joint Pre-Hearing Stipulation were determined at hearing to be ambiguous and not the product of a meeting of the minds between the parties. With unanimous consent, these two paragraphs were stricken and have not been considered by the undersigned.
3/ The selected vendor will be responsible for placing information systems/technology professionals (the people who keep computers operating properly) at the District on an as- needed basis; such professionals will be recruited, selected, and managed by the vendor——relieving the District of those duties.
4/ Radiant had received a similar dollar amount from the District for contract work in fiscal year 2001.
5/ The Accountant's Reports prepared by Syslogic's CPA contained the following disclaimers:
A compilation [such as this] is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the financial statements, and accordingly, do not express an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures required by generally accepted accounting principles. If the omitted disclosures were included in the financial statements, they might influence the user's conclusions about the Company's financial position and results of operations. Accordingly, these financial statements are not designed for those who are not informed about such matters.
(Emphasis added).
6/ Beyond construing the term "de novo proceeding," see infra in the text, recent judicial applications of the statute, which was revised substantially in 1996, offer little guidance as to the meaning of the determinative language, the courts having quoted the subject provisions without critical comment. See Gtech Corp. v. State Department of the Lottery, 737 So. 2d 616, 619 (Fla. 1st DCA), rev. denied, 749 So. 2d 502 (1999); State Contracting and Engineering Corp. v. Department of Transportation, 709 So. 2d 607, 609 (Fla. 1st DCA 1998).
7/ Because the Division of Administrative Hearings ("DOAH") is independent of the letting authority in all instances, see Section 120,65(1), Florida Statutes, it might be preferable to label bid protests before DOAH a form of inter-agency review or, alternatively, intra-branch review, although of course the letting authority itself ultimately renders the final order, so the first district's nomenclature is technically correct.
8/ The legislature's use of the term "standard of review" in the very next sentence of the statute, which deals with protests contesting a rejection of bids, has not been overlooked. While ordinarily it would be presumed that the legislature, having chosen to use different terms in the same statute, must have intended that each separate term convey a distinct meaning, the
ordinary presumption simply does not work here. The legislature could not reasonably have intended that a protester establish its case by "clearly erroneous" evidence, or by proof that is "contrary to competition."
9/ From the general principle of deference follows the more specific rule that an agency’s interpretation need not be the sole possible interpretation or even the most desirable one; it need only be within the range of permissible interpretations.
State Board of Optometry v. Florida Society of Ophthalmology,
538 So. 2d 878, 885 (Fla. 1st DCA 1988); see also Suddath Van Lines, Inc. v. Department of Environmental Protection, 668
So. 2d 209, 212 (Fla. 1st DCA 1996). However, "[t]he deference granted an agency’s interpretation is not absolute." Department of Natural Resources v. Wingfield Development Co., 581 So. 2d 193, 197 (Fla. 1st DCA 1991). Obviously, an agency cannot implement any conceivable construction of a statute or rule no matter how strained, stilted, or fanciful it might be. Id.
Rather, "only a permissible construction” will be upheld by the courts. Florida Society of Ophthalmology, 538 So. 2d at 885.
Accordingly, “[w]hen the agency's construction clearly contradicts the unambiguous language of the rule, the construction is clearly erroneous and cannot stand.” Woodley v. Department of Health and Rehabilitative Services, 505 So. 2d 676, 678 (Fla. 1st DCA 1987); see also Legal Environmental Assistance Foundation v. Board of County Commissioners of Brevard County, 642 So. 2d 1081, 1083-84 (Fla.
1994)(“unreasonable interpretation” will not be sustained).
10/ In a protest following the announcement of an intended award, the same result should usually obtain with regard to agency action taken upon its interpretation of the project specifications——but for a different reason. It is, of course, by no means self evident that deference is appropriate in connection with an agency's interpretations of its project specifications. That an agency possesses expertise in, say, environmental protection does not suggest that the agency is expert at drafting contractual language. However, Section 120.57(3)(b), Florida Statutes, provides a remedy for badly- written or ambiguous specifications: they may be protested within 72 hours after the receipt thereof. The failure to avail oneself of this remedy effects a waiver of the right to complain about the specifications per se. Consequently, in a post- proposed award protest, if the dispute turns on the interpretation of an ambiguous, vague, or unreasonable specification, which could have been corrected or clarified
prior to acceptance of the bids or proposals had a timely specifications protest been brought, and if the agency has acted thereafter in accordance with a permissible interpretation of the specification (i.e. one that is not clearly erroneous), then the agency's intended action should be upheld——not out of deference to agency expertise, but as a result of the protester's waiver of the right to seek relief based on a faulty specification. If, however, the agency has acted contrary to the plain language of a lawful specification, then its action is clearly erroneous and cannot stand; in that situation, no waiver would have occurred, because no one would be expected or well- advised to protest an unambiguous specification that facially conforms with Florida procurement law.
11/ This approach is suggested by Judge Miner's dissent in Gtech Corp. v. State Department of the Lottery, 737 So. 2d 616, 622-25 (Fla. 1st DCA 1999). Although the judge's argument failed to command a majority, the dissenter's use of Section 287.001, Florida Statutes, to give meaning to the "contrary to competition" concept is not inconsistent with the majority opinion in that case or any other of which the undersigned is aware.
12/ The District, of course, does not contend that an award could be made to a proposer whose response deviated materially from the project specifications. Such action, it is summarily concluded, would be contrary to: governing statutes (e.g.
Sections 287.012(16) and 287.052(2), Florida Statutes); a rule (Rule 40E-7.2091(1), Florida Administrative Code); RFP Sections 1.3, 1.12, 3.1; and the RFP's statement of purpose. In sum, to the extent grounded on allegations that the District proposes to accept a materially non-responsive proposal, Syslogic's protest sufficiently has satisfied the statutory requirement of identifying action that, if proven, violates the letting authority's standard of conduct.
13/ According to Black's, the term "financial statement" means "[a]ny report summarizing the financial condition or financial results of an organization on any date or for any period. The two principal types of financial statements are the balance sheet and the profit and loss statement."
14/ Black's defines "annual report" as:
A report for stockholders and other interested parties prepared once a year;
includes a balance sheet, an income statement, a statement of changes in financial position, a reconciliation of changes in owners' equity accounts, a summary of significant accounting principles, other explanatory notes, the auditor's report, and often comments from management about the year's business and prospects for next year. By law, any public corporation that holds an annual stockholders meeting is required to issue an annual report.
15/ To avoid cumbersome repetition in the ensuing discussion, the single word "audited" will be used in place of, but intending to mean, "audited, reviewed or compiled by a third party accountant." (The term "unaudited" will be used likewise to signify that none of the three accounting functions at issue was performed by a third party accountant.)
16/ The independent accountant's comments may be telling not because a favorable opinion is expressed concerning the proposer's financial condition but because they reveal, as in Syslogic's case, something negative, e.g. that "management has elected to omit substantially all of the [required] disclosures
. . . ." The agency is more likely to receive this sort of negative information in objective, independently audited financial papers than in self-prepared (and potentially self- serving) financial documents.
17/ Under the so-called "tipsy coachman" rule, a reviewing court will usually affirm a ruling based on erroneous reasoning if the lower tribunal's ultimate decision was correct under another theory revealed in the record. E.g. Farrey's Wholesale Hardware Co., Inc. v. Hobesound Industrial Park, Inc., 719 So. 2d 374,
375 (Fla. 3d DCA 1998); see also Dade County School Board v. Radio Station WQBA, 731 So. 2d 638, 644 (Fla. 1999); Green v. First American Bank and Trust, 511 So. 2d 569, 573 (Fla. 4th DCA 1987), rev. denied, 520 So. 2d 584 (1988). (The origin of this rule's colorful name is revealed in Carraway v. Armour and Co., 156 So. 2d 494, 497 (Fla. 1963).)
18/ When an agency asserts for the first time as a party litigant in a bid protest that an irregularity was immaterial, the contention must be treated, not with deference as a presumptively neutral finding of ultimate fact, but with fair
impartiality as a legal argument; in other words, the agency is entitled to nothing more or less than to be heard on an equal footing with the protester.
19/ The reason for this should be clear: If the decision on materiality were made from a post facto perspective based on extrinsic factors, then the temptation would be great to base the determination on reasons that should not bear on the issue. In particular, the materiality of a deviation should not depend on whether the deficient proposal happens to be highest ranked. To see this point, imagine a close football game in which, at the start of the fourth quarter, one team scores a go-ahead touchdown——if the receiver came down in bounds. Would anyone think it fair if the referees awarded the points provisionally and reserved ruling on whether the touchdown should count until after the end of the game? Of course not. In a contest, potentially determinative decisions involving a competitor's compliance with the rules need to be made when the outcome is in doubt, when the effect of the decision is yet unknown; otherwise, the outcome may be manipulated. See endnote 22.
20/ It is understood that there may not, in fact, have been a dime's worth of difference, in terms of reliability and accuracy, between the financial statements submitted by Syslogic and those tendered by DUA. Neither proposer proffered financial statements that had been verified by a third party accountant as in an audit (using that term here in its usual, narrower sense). In Syslogic's case, however, the agency knew, at least, that the company's management had elected to omit substantially all of the generally required disclosures and that the outside accountant had not rendered any opinion as to the company's financial position; it knew these things because the outside accountant had so stated in the report attached to the independently prepared compilation that Syslogic attached to its proposal. With DUA, in contrast, the agency had no way of knowing what, if any, disclosures management had elected to omit, and it had no outside accountant's opinion (or "non- opinion opinion") upon which to rely.
21/ That the District "reserve[d] the right to perform a detailed review of financial information in order to determine whether or not the respondent is financially stable" is irrelevant to the instant question of materiality. The purpose of the quoted provision plainly was to verify the wherewithal of the responsive proposer with which the District intended to do business——not to allow the District improperly to shore up a
deficient proposal with additional information. See Section 120.57(3)(f), Florida Statutes ("[N]o submissions made after the bid or proposal opening amending or supplementing the bid or proposal shall be considered.").
22/ It would be illogical to assume or infer, based upon the fact that a proposer has failed to submit independently audited financial information, as specifically requested, that the proposer’s financial status is solid. While there may well be other explanations, besides a looming financial crisis, for the proposer’s failure to comply with the specification, a prudent agency should assume the worst, not hope for the best. Indeed, such caution is not only prudent, but also a matter of fairness to the other competitors who have provided the requested financial data.
23/ Imagine a hypothetical proposer named "Endrun" whose attached financial statements, like DUA's, were not independently audited. If the District is going to waive the requirement of independently audited financial statements for DUA, then it cannot disqualify Endrun's proposal without improperly showing favoritism. So, Endrun competes.
Imagine as well a potential hypothetical proposer named "Smallco." Smallco is a well-regarded firm but——unbeknownst to its many satisfied clients and the public generally——its financial house in not fully in order. Smallco's owner fears that if his company's independently audited financial statements——complete with footnotes and caveats——are made public, then his firm may be embarrassed. Smallco's existing clients might become worried——and some might take their business elsewhere. So, Smallco chooses not to submit a proposal and remains on the sidelines.
Now suppose that after the Evaluation Committee scores and ranks the proposals, Endrun's is number one. Thereafter, the District buys a Dun and Bradstreet report that raises doubts about Endrun's financial condition. Perhaps, because Endrun's proposal is so good, the District will award the contract to Endrun despite the negative financial information; perhaps not. But is it fair to the other competitors that the District is making the decision now, after Endrun has been ranked the number one proposal——especially since its proposal might not have been as highly ranked if independently audited financial statements had been tendered with the proposal?
The answer is "no." The agency may be influenced by the proposer's ranking, even if it professes not to be. The desire to accept a superior proposal is, understandably, very strong, so when a proposal that would be the agency’s first choice suffers from a deficiency, the agency will be tempted to deem the problem immaterial, even if waiver of the defect would afford the highest-ranked proposer a competitive advantage. It is a form of favoritism to wait-and-see where the proposer ranks in relation to the other competitors before deciding whether to waive a problem with its proposal.
Another important point shown by this example is that Endrun received a substantial competitive advantage simply by not having to have to compete against a rival that had removed itself from the contest because of the very rule that Endrun was permitted to circumvent.
Of course, it will usually not be known how many, if any, potential proposers were dissuaded from submitting a proposal because of one project specification or another. That is why specifications that have the capacity to act as a barrier to access into the competition——as this RFP's requirement of independently audited financial statements did——should generally be considered material and non-waivable for that reason.
24/ The District’s proposed action was not based on an ultimate finding that the defect in DUA’s proposal was a minor irregularity; it was based, rather, on the District’s position (rejected herein) that DUA’s proposal was responsive to the RFP’s requirements regarding the provision of a certificate of good standing. Thus, there being no ultimate finding of immateriality to which deference need be accorded, the question will necessarily be decided de novo.
25/ Additionally, it is questionable whether Syslogic properly raised this issue for review. In its pre-hearing pleadings and in the Joint Pre-Hearing Stipulation, Syslogic alleged that DUA's failure to list, as references, three current clients constituted a material defect; it did not, however, specifically protest DUA's failure to identify former clients, which is a related but different problem.
26/ The evaluation criteria must be specified in the request for proposals. See Section 287.012(15), Florida Statutes.
27/ The emphasis on contrary cannot be overlooked because that adjective makes all the difference. There is nothing wrong with an agency’s reliance on policies or practices that are consistent with the RFP’s plain terms. The problem with implementing contrary policies or practices is that doing so at least appears to bend the rules to someone’s advantage——and obviously creates opportunities to show favoritism.
Accordingly, an agency’s procurement policies or practices should be reflected in the RFP’s terms, to the extent it intends to follow them.
28/ Familiarity with procurement law should not be confused with understanding of the subject matter of the underlying contract.
The latter is required by statute in many instances. According to Section 287.057(15), Florida Statutes, at least three members of the selection team must "have experience and knowledge in the program areas and service requirements for which contractual services are sought," if the value of the contract exceeds
$150,000.
COPIES FURNISHED:
Frank S. Bartolone, Esquire Frank Mendez, Esquire
South Florida Water Management District 3301 Gun Club Road
West Palm Beach, Florida 33406
James S. Ganther, Esquire Kathleen M. Wade, Esquire Ganther & Fee, P.A.
Bank of America Plaza, Suite 1030
101 East Kennedy Boulevard Tampa, Florida 33602
Frank R. Finch Executive Director
South Florida Water Management District Post Office Box 24680
West Palm Beach, Florida 33416-4680
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.
| Issue Date | Document | Summary |
|---|---|---|
| Mar. 06, 2002 | Agency Final Order | |
| Jan. 18, 2002 | Recommended Order | Petitioner established that putative successful proposer had submitted materially non-responsive proposal, and that Respondent had incorrectly scored proposals in one respect. Recommended intended award be rescinded. |
