Findings Of Fact Pursuant to agreement of the parties, this case was submitted to the undersigned Hearing Officer upon the filing of briefs and proposed final orders. There are no disputed issues of material fact. The legal issue in this case is whether Rule 13A-1.002(3), Florida Administrative Code, is an invalid exercise of delegated legislative authority. The parties were represented as follows: Petitioner: Richard A. Lotspeich, Esquire Post Office Box 271 Tallahassee, Florida 32302 Respondent: Sandra E. Allen, Esquire Room 452, Larson Building Tallahassee, Florida 32399-0955 Intervenors: Charles S. Ruberg, Esquire Knott Building Tallahassee, Florida 32399 (Department of Education) Paul W. Lambert, Esquire Post Office Box 11189 Tallahassee, Florida 32302 (Microdyne Corporation) The parties' proposed final orders were filed on June 25, 1987 and a ruling on each proposed finding of fact is included in the Appendix to this Final Order.
The Issue Is Petitioner entitled under Section 57.111(4), Florida Statutes, to attorney's fees and costs incurred in DOAH Case No. 97-5194?
Findings Of Fact Outcome of Prior Administrative Proceeding Thomas A. Birkhead, d/b/a Century Center ("Birkhead," "Mr. Birkhead, or the "business") is a business in the form of a sole proprietorship. On August 4, 1997, the Division of Hotels and Restaurants (the "Division") served the business with a Notice to Show Cause. Seven weeks or so earlier, on June 13, 1997, the business had been served with an Emergency Order of Suspension. The Emergency Order suspended the business's license to operate a public lodging establishment in Cocoa Beach, Florida, as a nontransient rooming house. The license, bearing number 15-04001 H, had been issued to Mr. Birkhead by the Division. Mr. Birkhead requested a hearing on both the Emergency Order and the Notice to Show Cause. The request was referred to DOAH and assigned Case No. 97-5184. Unlike this case for fees and costs in which Mr. Severs has appeared in behalf of Mr. Birkhead, at no time during the pendency of DOAH Case No. 97-5184 did any attorney, including Mr. Severs, file a notice of appearance or appear in any capacity on behalf of Mr. Birkhead. The hearing held in April and June of 1998 (at which Mr. Birkhead appeared pro se) culminated in a Recommended Order issued October 1, 1998. The order recommended that the Notice to Show Cause be dismissed but that the Emergency Order be sustained. On May 14, 1998, the Division issued a Final Order. The Order makes no mention of Mr. Birkhead having been represented in any capacity other than pro se in post-recommended order proceedings. In acceptance of the advice of the Recommended Order, the Division dismissed the Notice to Show Cause. As for the recommendation with regard to the Emergency Order the final order stated: The Emergency Order of Suspension was a final order of the Division and subject to judicial review pursuant to section 120.60(6) and 120.68, Florida Statutes, not administrative review. Thus, the part of Birkhead's request for formal administrative review that pertained to the issuance of the Emergency Order of Suspension should have been dismissed for lack of jurisdiction. Final Order, page 9, Paragraph 16. Accordingly, the Division ordered that "Birkhead's Motion to Dismiss is hereby granted and the request for formal administrative review of the Emergency Order of Suspension is hereby dismissed." Final Order, page 10. Attorney's Fees and Costs When Case No. 97-5184 was initiated, Mr. Severs had long represented Mr. Birkhead as an attorney in various matters. His normal billing rate during the life of the case was $175 per hour. Although Mr. Severs did not appear as attorney of record in the administrative case, from the time the Emergency Order of Suspension was issued in June of 1997, through the issuance of the Final Order by the Department in Case No. 97-5184, Mr. Severs provided legal services to Mr. Birkhead. Some of the services were related to the administrative case; some were related to other matters. The fees for these services, related or unrelated, totaled $14,929.95, according to the petition filed in this case. An affidavit by Mr. Severs, attached to the petition, showed that only $4,860 of that amount was related to the administrative case. The related services were performed on at least fifteen occasions. Principally these included review and/or drafting of documents and consultation with regard to the reviewed or drafted documents. Mr. Severs' records demonstrate that at least 32.4 hours were expended in the performance of legal services related to Case No. 97-5184. (There were many telephone consultations not included in these hours because Mr. Severs moved from one firm, to his own firm, to the Titusville City Hall, where he is now the full-time City Attorney for the City of Titusville. Because of these transitions, phone records became unavailable.) At an hourly rate of $150 (the rate requested by Petitioner for this case, $25 below Mr. Severs' normal rate), total attorney's fees for 32.4 hours come to $4,860.00. These fees are reasonable. Court reporter costs in defending this action incurred by Mr. Birkhead totaled $478.50. He paid an expert witness fee in the amount of $200 to an engineer who testified in the proceeding. In addition, there were subpoenas for documents of $42; publications, such as the Fire Safety Manual 101, necessary to purchase in order to defend the case, in the amount of $49.35; photocopies of $48.10; office supplies of $56.12; postage and postage stamps of $173.52; and copier maintenance of $605.13. These costs total: $1,655.72. Mr. Birkhead also claimed additional costs of more than $10,000 used to maintain and operate the closed Century Center as an office for the duration of the administrative case. Mr. Birkhead explained this claim at hearing: The building that I was in there using as an office [Century Center] was shut down by the Division, so I could do nothing with it, except just work out of there myself to prepare this case, to work on the case. So, what I have given here is the direct charges of -- you know, that were during the time period for electricity and so forth. (Tr. 25). In addition to electricity, this sum includes charges for telephone, sanitation, pest control, water and sewer and fire extinguisher maintenance. Small Business Party The business's claim for attorney's fees and costs is filed under the authority of Section 57.111, Florida Statutes, a provision of the Florida Equal Access To Justice Act (the "Act.") Section 57.111(3)(d), Florida Statutes, of the Act defines the term "small business party," in pertinent part as: A sole proprietor of an unincorporated business . . . whose principal office is in this state, who is domiciled in this state, and whose business . . . has, at the time the action is initiated by a state agency, not more than 25 full-time employees or a net worth of not more than $2 million including both personal and business investments. . . Mr. Birkhead is the sole proprietor of the business, Thomas A. Birkhead, d/b/a Century Center. The business is unincorporated. Its principal office is in Florida. Mr. Birkhead is domiciled in Florida and his business has less than 25 full-time employees. The only criterion left in order for Thomas A. Birkhead, d/b/a Century Center to qualify as a small business party is net worth. Is Mr. Birkhead's net worth "not more than $2 million including both personal and business investments . . ."? Net Worth Mr. Birkhead's undocumented testimony that his personal net worth and that of the business was less than two million dollars was not rebutted by any evidence offered by the Division. Cross examination revealed that Birkhead's net worth in June of 1997 was certainly in excess of $1.5 million. How much in excess could not be determined because his calculation of net worth was anything but precise as shown from Mr. Birkhead's testimony: Q What is the value of the hotel located across the street from the Century Center? A The value of the hotel at that time, I believe was one and a half million dollars . . . Q What portion of the hotel did you own? A Um? Q What portion of the hotel did you own? A Two thirds. Two thirds of the stock. * * * Q . . . And what was the Century Center worth [in June of 97]? * * * A Well, I had a mortgage against it for two hundred and some thousand dollars. I gave, I believe, five hundred something. So, five hundred and something minus two, whatever it was, forty or fifty thousand, two hundred and thirty five or forty thousand. It would leave three hundred thousand dollars. Q . . . Your testimony is that you've had an equity in the Century Center of three hundred thousand dollars? A That was my intention, to say that. Yes. I subtracted out in my mind the mortgage that I had against the property, versus what I had paid for it. Q And when did you purchase it? A I purchased it . . .in 1990. Q But you don't . . . know what the value was in 1997? A Not at the Century Center. * * * Q . . . What other properties did you own, besides the Century Center, the hotel and the condo in Cape Canaveral? A I own my house. Q How much is it worth? A Well I paid sixty five thousand for it, I believe. It's probably worth a little bit more than that now. * * * JUDGE: When did you buy it? * * * WITNESS: When did I buy it? I bought it in -- let's see. Twenty five years ago or more. * * * Q Was there any other property that we didn't cover so far that you owned at that time? A Let me think a little bit. Yeah. I've got one in Cape Canaveral. It's an empty lot up there. I think I paid very little for it. I bought it because it was cheap. It's the only reason I've still got the thing. I think I gave eighteen hundred dollars for it or something like that. It think it would be worth more than that now. I don't know exactly what it would be worth. Try to sell it. These lots go up, you know, they might be worth fifteen to twenty thousand dollars. I can't -- I can't give you an exact figure on that. JUDGE: When did you buy it? * * * A . . . April of 1967, I believe. * * * JUDGE: . . . What Mr. Biggins is getting at is he wants to know about all our your personal and business investments and what their . . . net worth is. And you said you made a list and you went through and you figured this out. WITNESS: Say what? JUDGE: You said that you figured this out before you filed this motion for attorney's fees . . . WITNESS: Yeah. I called and got the figures as to what I had in June of '97. And I looked at, you know, statements that I had, and this that and the other thing, and added it all up. . . Some of the things, like I say, are joint with my wife. JUDGE: Yes, sir. But what were those things? That's what I want to know. You say you did this calculation. You got together all this information. Now, what information was it and what did the information show? WITNESS: Well, it showed the value of the things that I had in June of '97. JUDGE: And what were those things? What information did you obtain? WITNESS: Well, bank accounts, stock brokers, whatever I could, you know, had money in. JUDGE: . . . What was the value of the bank accounts? WITNESS: Not a whole lot. I don't think I probably had over -- I'm guessing a little bit now. You know, three or four thousand dollars. JUDGE: How about stock? WITNESS: Um? JUDGE: Stock? WITNESS: Stock, what? JUDGE: Equities. WITNESS: Um? JUDGE: Equities? New York Stock Exchange? WITNESS: Well, my stock is largely in a joint account with my wife. And . . . JUDGE: . . . You have control of it? WITNESS: Um? JUDGE: You have control of it? WITNESS: Well, either one of us could be called in control. It's joint . . . with right of survivorship. JUDGE: . . . Did you include the value of that stock in this calculation you did? WITNESS: I believe I did. Yes sir. JUDGE: . . . And what was the value of that stock? WITNESS: I can't recall, Your Honor, exactly what it was. JUDGE: Well, we've been . . . dealing with approximations here. So, do your best. WITNESS: Well, it's a joint account. JUDGE: And what's the value of the account? WITNESS: . . . I think it's somewhere in the neighborhood of probably seventy five or a hundred thousand dollars. JUDGE: And you can't do any better than that? WITNESS: Um? JUDGE: You can't pinpoint it any more than that, a twenty five thousand dollar swing? WITNESS: I can't to be honest with you, Your Honor . . . (Tr. 38-50). Mr. Birkhead's testimony also revealed that he owned two "low priced condos in Cape Canaveral" (Tr. 36) held as rental property. At the time he purchased them, Mr. Birkhead "gave twenty four thousand and change for them." Id. Asked when they were purchased, Mr. Birkhead replied, "I'm not sure. Before 1997." When asked to approximate when they were purchased, Mr. Birkhead testified, "Five, ten years. I don't know." Id.
The Issue This case concerns a challenge to the validity of Rules 13A-1.001(12), 13A- 1.002(1)(b) and 13A-1.002(3) , Florida Administrative Code, pursuant to Section 120.56, Florida Statutes.
Findings Of Fact In the fall of 1988, the State of Florida, Department of Transportation (DOT) put out a Request for Proposals (RFP) as RFP-DOT-88-0l. Through this RFP the agency sought to acquire a new barrier and ticket toll collection system which would automate the toll collection operations and retrieval of audit data, having in mind increased reliability and performance. The project is principally one which envisions the purchase of commodities. It has an associated service component. Section 287.062(1)(e), Florida Statutes together with Section 287.073(3), Florida Statutes, established the basic authority for the award of RFP-DOT-88-01. The agency received responses in March, 1989, from three companies. The offerors were Petitioner and Intervenor and one other concern. The other company was AGS Informations, Inc. (AGS). Following evaluation DOT determined on May 18, 1989 to reject the Intervenor's proposal as nonresponsive. This rejection was followed by the Intervenor's notice of protest on Nay 25, 1989. A formal written protest was made on June 6, 1989. On July 31, 1989, Intervenor filed a notice of voluntarily dismissal of the formal written protest. This was addressed by the DOT final order of August 2, 1989 which dismissed the formal written protest. On November 21, 1989, DOT posted its intent to award a contract to Petitioner. This statement of intent to award was met by a notice of protest filed by Intervenor on November 27, 1989, followed by a formal written protest on December 6, 1989. The case was sent to the Division of Administrative Hearings for consideration and through response to a motion to dismiss the Hearing Officer in that case, DOAH Case NO. 89-6926B1D, entered a recommended order of dismissal. On January 22, 1990 DOT entered a final order dismissing Intervenor's petition and stating its intent to award the contract to Petitioner. An amendment to the January 22, 1990 order was made on February 21, 1990 reminding all concerned that the contract award was subject to review and approval by the Governor and Cabinet sitting as the State of Florida, Department of General Services to decide the propriety of the subject purchase which was an information technology resources purchase under Section 287.073, Florida Statutes. On February 21, 1990, DOT sent notice to the three offerors that it was rejecting all proposals submitted. As described in the notice of agency decision, DOT was operating on the basis that a further review of the proposals revealed that the proposals by AGS and Intervenor were nonresponsive. It went on to say that to have competitive offerors there must be two or more offers submitted by responsive and qualified offerors. In this instance DOT felt that it did not have two acceptable proposals and did not have a competitive offer. Because the commodities sought were available from more than one source, it had decided to withdraw its notice of intent to award which was contingent upon the approval of the Governor and Cabinet. On February 27, 1990, Petitioner gave a notice of protest of the DOT decision to reject all bids. This was followed by a formal written protest on March 9, 1990. Although the decision to reject all proposals was not opposed by Intervenor, the motion by the Intervenor to intervene in DOAH Case No. 90- 1583BID was granted allowing limited participation in support of the DOT decision to reject all proposals. That outcome tended to create the opportunity for Intervenor to participate in any re-advertisement for proposals. As revealed in the final hearing in DOAH Case No. 90-1583BID, DOT utilizes Chapter 13A, Florida Administrative Code, in the procurement process. Intervenor participated in the final hearing in DOAH Case NO. 90- 1583BID. The DOT decision to reject all proposals in which reliance upon the rules under challenge are perceived to support that decision has an adverse impact on Petitioner. By that arrangement Petitioner loses the opportunity for the contract. Additionally, it is placed in a disadvantaged position in that the particulars of its method of responding to the RFP have been revealed and are now known to the competitors who might be expected to utilize that information in a setting where a re-advertisement takes place. Under the circumstances, Petitioner filed its challenge to the existing rule on March 28, 1990. Intervenor sought the opportunity to intervene in this case on April 4, 1990, and that opportunity was granted on April 6, 1990. Intervenor intends to participate in any re-advertisements of the RFP. In his testimony at hearing William Monroe, Director of the Division of Purchasing for Respondent, established that in governmental purchasing the terms "offers" and "proposals" are synonymous. This opinion is accepted. Mr. Monroe also established that Respondent believed that it was implementing Section 287.012(15), Florida Statutes, when promulgating Rule 13A- 1.001(12), Florida Administrative Code. Through the promulgation of Rules 13A- 1.002(1)(b), and 13A-1.002(3), Florida Administrative Code, Respondent believed that it was implementing Section 287.062, Florida Statutes. Respondent interprets Section 287.062, Florida Statutes, to require an agency making a commodity purchase to use competitive sealed proposals in instances where invitations to bid are not used. Mr. Monroe in speaking for Respondent indicated that this interpretation gained support from the language set out in Section 287.001, Florida Statutes. According to Mr. Monroe the circumstance in which less than two responsive and qualified offerors respond to an RFP is one in which the procuring agency must reject all proposals or seek the approval from Respondent to negotiate with the one responsive offeror or where no responsive offerors were received to negotiate with someone whom the agency has chosen. Likewise, a sole source purchase negotiation must be approved by Respondent. Mr. Monroe's testimony, in speaking for Respondent, indicates that Respondent interprets the terminology within Section 287.062(2), Florida Statutes, "no competitive" to modify the words "bids" and "proposals." Thus, it is incumbent upon an agency to receive authority to negotiate in those instances where it receives less than two proposals submitted by responsive and qualified offerors who are responding to a RFP in acquiring commodities.
Findings Of Fact The Department of General Services, Division of Purchasing, is the state agency responsible for establishing standards and specifications and term contracts for purchase by the State of commodities used in volume. Generically, term contracts are established for fixed periods of time, usually one year, with no predetermined quantities or guarantees of purchase. The current ITB contemplates $38,000,000 in annual expenditure. During the fixed period, vendors agree to sell commodities at the prices established through the competitive bidding process. Term contracts permit concentration of the State's entire purchasing power so as to obtain price advantages through anticipated large volume purchases, through reduced administrative costs, and through standardized terms and conditions of sales, warranties, and service. History of DGS and Department of Education collaboration in drafting of a term contract for microcomputers dates back at least to 1982. Purchases have, of course, been made under those contracts. Continuity in successive state microcomputer term contracts serves the significant purposes of supporting microcomputer equipment already in place with various governmental users (the "embedded State base") and supporting expansion of that embedded base by meeting users' emerging needs. On October 30, 1987, DGS issued Invitation to Bid 462-250-040B, microcomputers. Potential bidders (including among them both manufacturers and dealers) were notified of a bidders' conference to be held on November 16, 1987, and were asked to submit written questions concerning the ITB by November 9, 1987. At the November 16, 1987 conference, written answers to the pre-submitted questions were read aloud and distributed to all in attendance. Caber had submitted written questions, but no Caber representative attended the conference. On November 17, 1987, an Addendum to Invitation to Bid 462-250-040B was issued, incorporating selected suggested changes, thereby completing Invitation to Bid 462-250-040B (hereafter, "ITB-462"). A simultaneous bid submittal deadline and bid opening was scheduled for 2:00 p.m., December 3, 1987. Caber timely filed its Notice of Protest on November 23, 1987, within 72 hours (excluding weekends and holidays) of receipt of completed ITB-462. Following uneventful and unsuccessful informal procedures, Caber timely filed its Formal Written Protest on December 2, 1987. Pursuant to Section 120.53(5)(c), Florida Statutes, and Rule 13A-1.006(3)(d), Florida Administrative Code, DGS stopped the bid solicitation process at that point, one day prior to the bid submittal/bid opening deadline of December 3, 1987. At the time of Caber's filing its Formal Written Protest, Apple, along with approximately 72 other dealers and manufacturers had already submitted bids. IBM was en route to DGS with IBM's bid, but IBM's bid submittal was refused by DGS because of the statutory "freeze." MCA had filed no Notice of Protest, no bid, and no Formal Written Protest. The purpose of ITB-462 was to establish a 12 month term contract for the purchase of microcomputers, which term contract could be extended for each of two successive 12-month terms. As a term contract, all state agencies would be required to purchase microcomputers from the contract. The state university system, counties, municipalities, local school districts, and political subdivisions would have the option of doing so. The format of ITB-462 reflects major substantive changes in DGS' policies for the microcomputer term contract from what those policies had been previously. Last year, when intended awards by DGS under its last previous (1986) microcomputer bid solicitation (ITB-545) for the proposed 1987 term contract were protested by Caber, DGS had decided to reject all bids arising thereunder and to rewrite ITB-545 to correct certain flaws. The DGS' decision to reject all bids under ITB-545 was upheld over Caber's protest in consolidated cases Caber Systems, Inc. et al. v. DGS, et al., DOAH Case No. 87-0836BID and Microage Computer Stores, Inc. v. DGS, DOAH Case No. 87-0837BID. As a result of the flaws in ITB-545 revealed during that formal protest, DGS finally abandoned ITB-545 entirely, extended the 1985 microcomputer contract (hereafter, "contract 621" or "621") for one year to January 26, 1988, embarked on serious reevaluation of its users' needs, and commenced the drafting process that resulted in the ITB-462 format which is the subject of the instant specification protest. In order to assure that the new specifications would meet the needs of its embedded base, DGS consulted the Department of Education (DOE), other state agencies, the Information Resources Commission (IRC), user groups such as the Government and Education Microcomputer User Group (GEMUG), and various manufacturers of microcomputers. DOE operated partly as a conduit for user need information from school boards and the state university system. IRC acted partly as a conduit for user need information from other state agencies and partly as a consultant providing technical information and bid specification evaluation to DGS. The format of ITB-462 contains four tables. Table I identifies 353 microcomputers of 21 manufacturers arranged by brand and model and includes product descriptions supplied by the respective manufacturers. Table II consists of forms for bidders to list microcomputer options and accessories. Table III consists of forms for bidders to list microcomputer software. Table IV contains a set of separate generic specifications of IBM compatible clones. Tables I through IV were combined with DGS' General Conditions and Certain Special Conditions. The Special Conditions of ITB-462 provide that, in the case of Table I, brand name and models, "[n]o additional micro- computer brand names and models will be considered for this bid;" and that third party components (products of one manufacturer installed in the larger system or computer of another manufacturer) are not acceptable for Table I unless they are used by the manufacturer in normal production and supported by the manufacturer for warranty and maintenance service, and they further provide that: EVALUATION AND AWARD Any contract resulting from this bid shall be awarded for specific microcomputers listed in Table I by brand name and model number to the low qualified bidder. A single award shall be made for each IBM- compatible clone configuration listed in Table IV to the low qualified bidder for that configuration. Options, `Accessories and Operating System/Programing Language/Utility Software placed on any contract resulting from this bid shall be limited to those products applicable to microcomputer models awarded to each low qualified bidder. Technical Specification 3.2 of the Specifications Nos. 250-040 and 250-041 of the ITB identifies fourteen "acceptable" hardware options/accessories and provides that these "are the only peripherals or components that are acceptable for this bid and any award." Unlike prior microcomputer ITBs, there is no place in Table I of ITB- 462 for a vendor to bid systems that are equivalent to (meet or exceed) any brand system listed in Table I. The list of 353 systems in Table I is designated a Qualified Product List (QPL). DGS intends to make one award to the lowest responsive bidder for each system. Responsiveness of bids will be determined by ascertaining that a bid is in the proper form, properly executed, and correctly identifies the item bid. Award by low price will be faster than the evaluation process that had been employed with the 1986 ITB-545, which took far in excess of the time allotted. Improving the former evaluation process and attaining a speed factor were identified and evaluated as positive goals in the course of the ITB-545 bid protest and in the drafting process for ITB-462. DGS intended that there should be no technical evaluation (i.e. benchmarking) for Table I of ITB-462 because the QPL has eliminated that need. Microcomputer Models were selected for inclusion in the ITB-462 Table I QPL based on four criteria listed specifically in the ITB itself as "placement on the current microcomputer contract, review of contract exceptions, demand by State contract users, and experience of prior usage by the State." DGS formulated the four criteria as a means to achieve the objective of supporting the State's embedded base of microcomputers and applied a volume of usage measurement to all four criteria. Although Caber and MCA urged that meeting just one of these four criteria was insufficient to get on the QPL and that there was in place an unpromulgated "50 sales" threshold rule or policy with regard to volume of usage, the credible competent substantial evidence as a whole does not support their inference. Rather, the evidence shows that DGS personnel wanted to apply a "50 sales" policy but abandoned it in favor of merely requiring hard proof through sales reports or sales receipts, purchase orders, or similar documentation or by user requests that there was a current embedded base of more than one sale of one model by each potential supplier. This is reasonable for a term contract. Each of the four criteria has the same intent and purpose, that is, to determine the true current embedded base. Caber originally protested that DGS should be precluded from requiring any proof of volume sales by way of sales reports and similar documentation without first promulgating a formal rule or enunciating a clear policy. The agency has wide discretion in how it implements its statutory duties, and requiring proof of volume usage is a reasonable method of determining the true current embedded base and serving it. Requiring proof of the true current embedded base does not exceed DGS' statutory authority and is not arbitrary or capricious. It is reasonable for DGS to require potential suppliers to prove past sales instead of merely accepting, without further proof, self-serving letters from them alleging that they have made such sales. DGS cannot legitimately ignore that if potential suppliers' allegations of sales are taken at face value, some potential suppliers will be tempted to falsify their claim of sales in the hope of gaining an advantage. Also, as set out in Finding of Fact 19, infra, such proof has been anticipated and provided for in prior contracts. Neither Caber or MCA filed a Section 120.54 or 120.56, Florida Statutes, rule challenge, with regard to either a volume policy of "50 sales" or the policy above- described. In the course of formal hearing and in their posthearing proposals, however, Caber and MCA suggested unequal application of the policy of volume usage and the number needed to be proved. Although it was shown that an indefinite volume usage scale was applied, to various manufacturers, Caber and MCA were unable to show that any legitimate party to this instant protest was treated unequally. See, infra. Findings of Fact 22-26 and the Conclusions of Law. During the course of the 621 contract, DGS had, pursuant to General Condition 25, revised that contract on at least a quarterly basis, to reflect, among other things, deletions of discontinued products and additions of new products by actual sales to the state. 4/ Therefore, DGS did not question volume of current usage of recently added suppliers or require those suppliers which had been recently added to the 621 contract revisions to demonstrate anew a need for their products by State users so as to get on the ITB-462 QPL. Rather, DGS broadened the ITB-462 QPL by all models of any manufacturer listed on the 621 contract revisions up to the date of mailing ITB-462. If DGS already possessed proof of volume usage by the embedded base either by proof of sales or by user requests, it added any supplier listed on the basic 621 contract to the ITB-462 QPL, without further inquiry or proof requirements. However, if DGS had reason to question the volume of current usage by the State embedded base of products from suppliers listed on the basic 621 contract, DGS then required those particular suppliers to come forward with proof of current true volume usage of their products by the State embedded base, before DGS would add that particular supplier's products to the ITB-462 QPL. DGS only questioned volume of current State embedded base usage of the products or potential suppliers listed on the basic 621 contract if two situations converged. First, DOE, IRC, and the state contract users would have to have given no indication that a 621 listed supplier's products were still in demand and DGS would have to have had no independent record of sales above a single unit single sale. No potential supplier in this dual category is a legitimate party to this Section 120.53, 120.57, Florida Statutes, ITB-462 protest, and none submitted to DGS satisfactory proof of sales to an embedded state user base sufficiently in advance of the ITB-462 mailing to be placed on the ITB-462 Table I QPL. See, infra., Findings of Fact 22-26 and the Conclusions of Law. If a brand/model could not qualify under the first of the four ITB-462 QPL criteria, "listing on the revised 621 contract," DGS would still place it on the ITB-462 QPL if it met one of the other three criteria. Criterion one was not demonstrated to be arbitrary or capricious either in concept or in application to any party with standing in this proceeding. Together with the other three criteria, it is a reasonable component of a method of achieving the agency's statutory goal of competitive bidding, and does not exceed the agency's statutory authority. Criterion two, "review of contract exceptions", refers to DGS' role in approving or disapproving State agencies' requests to acquire microcomputers and equipment which is not on a state contract. See, Rule 13A-1.008(4), Florida Administrative Code. DGS personnel reviewed the 621 contract exceptions that had been granted previously, but did not consider a contract exception for a single unit sufficient to qualify a brand/model for the ITB-462 Table I QPL. However, Table IV, the IBM clone category, was drafted in response to DGS' review of contract exceptions. DGS demonstrated that this standard was reasonable. Caber and MCA did not affirmatively demonstrate any significant competitive bidding benefit or any substantial and compelling embedded user base that was overlooked in requiring more than a single unit exception, nor did they show that a multiple unit standard was unreasonable, arbitrary, capricious, exceeded statutory authority or showed favoritism. Criterion three, "demand by state users", refers to oral and written requests from State contract users for certain products. DGS reasonably added Datamaxx brand products to the 462 Table I QPL as a result of such a request from the Department of Health and Rehabilitative Services, and Caber and MCA failed to demonstrate any significant competitive bidding benefit or substantial and compelling embedded user base that was overlooked in this process or that Datamaxx should be deleted from Table I due to any overreaching of statutory authority, unreasonableness, arbitrariness, capriciousness, or favoritism employed by DGS. Criterion four, "experience of prior usage by the State" was a catchall category by which DGS sought to ultimately capture all potential suppliers needed by its embedded base. In practice, it overlapped criterion one and was not arbitrary or capricious and did not exceed the agency's statutory authority. DGS again would not accept a single unit sale as proof of a significant embedded users base. DGS' initial knowledge of volume sales can come from sales reports and purchase orders and from DGS personnel's oral and written contact with various state agencies. Also, suppliers on contract 621 are required to furnish to DGS quarterly sales reports and the contract notifies them in advance that furnishing these quarterly sales reports will be considered in awarding future contracts, but there has not been uniform supplier compliance with that 621 contract requirement, and DGS admits its figures in this regard are not entirely accurate. If no contract user had specifically requested a microcomputer product, rather than simply striking those suppliers which had not properly provided adequate sales documentation under contract 621, DGS allowed listed suppliers to submit proof of a current embedded base of state users of their products in the form of receipts, invoices, sales records, and similar documentation. DGS expected the supplier listed to make initial contact with DGS to supply this volume usage information, but where first contact had been initiated by such a potential supplier, DGS would actively continue to solicit such proof. DGS reasonably and logically required that the proof be submitted sufficiently in advance of the mailing of the ITB-462. If DGS already had proof or an embedded user base through proof of sales or had contract user requests for suppliers listed on contracts predating contract 621, DGS also added those potential suppliers to the ITB-462 QPL without requiring further proof. This broadening of the ITB-462 QPL could fall in either criterion three or four and demonstrates no offense against competitive bidding even if it does not precisely fit criterion one. In every application of the criteria, the intent of DGS' actions has been to responsibly broaden the QPL, not limit it. Caber's protest suggests adding specific name brands to the ITB-462 Table I QPL: Toshiba, Wyse, Tandon, NEC, and Convergent Technologies. DGS had not included these brands in the QPL because DGS had no requests and no independent proof of an embedded base, and because these brands submitted no documentation of volume usage prior to the ITB-462 mailing. At no time prior to the conclusion of formal hearing in this cause was Caber an authorized dealer for Tandon, NEC or Convergent Technologies, and therefore Caber could not have bid products of those brands by December 3, 1987, the bid submittal/opening date. Nor did Caber have any standing to represent these manufacturers during the crucial 72 hour "window" provided for filing notices of protest. Caber's connections with these manufacturers is "hopeful" at worst and speculative at best. Caber is an authorized dealer for Toshiba and Wyse. At formal hearing, Caber proved up a one unit sale of a Toshiba product under a contract exception, but Caber's principal witness stated that a similar single unit bid would not be in Caber's best interest. At formal hearing, Caber presented no proof through supporting sales receipts, invoices, or similar sales documentation of any Wyse sales to an embedded state user base. NEC does not sell directly, but only through third party dealers. Its products appear on the expired 621 contract but neither NEC nor its dealer, who is the supplier listed on the 621 contract, filed a protest or sought to intervene in this proceeding. NEC knew about the required proof of sales, but submitted no supporting documentation of sales to an embedded state user base when requested to do so by DGS prior to the ITB-462 mailing, and prior to that date there was no direct request for NEC products by contract users. Intervenor MCA is the sole authorized distributor of Convergent Technologies products in Florida. MCA sells such microcomputers to state contract users through an arrangement with Integrated Microsystems, Inc. Integrated Microsystems is listed on the 621 contract as providing Convergent Technologies equipment. MCA provided quarterly sales reports to Integrated Microsystems but neither MCA nor Integrated Microsystems filed them with DGS. Neither MCA nor Integrated Microsystems met DGS' deadline for submitting similar documentation of such sales prior to the mailing of ITB-462, although MCA had requested that Convergent Technologies be added to the ITB-462 QPL. Neither MCA, Integrated Microsystems, Inc., or Convergent Technologies timely filed a Notice of Protest or Formal Written Protest. MCA made a conscious decision not to do so. Neither Integrated Microsystems, Inc. nor Convergent Technologies sought to intervene. Caber and MCA proposed that if ITB-462 is not modified to allow addition by name brands or equivalent bids for Table I models, then it should be modified to allow potential suppliers reasonable notice and opportunity to submit proof of State user demand for any brands/models not currently listed on Table I. Implementing such a proposal would only be providing an additional chance for these potential suppliers to submit the proof DGS required prior to the ITB mailing and which was not supplied then. Pursuant to General Condition 25, DGS intends to add new brands to the new microcomputer contract resulting from ITB-462 by competitive bidding. DGS intends to develop criteria for addition to the Table I QPL to be published and mailed to potential vendors in the future. Once a microcomputer meets the criteria, there will be an ensuing bid and award. DGS then plans to continue to add replacement models without competitive bidding when they meet or exceed specifications at the lower prices. New brands will then be added by specific make and model only. If DGS is required to fulfill its intention, the protestants' goal will be achieved without sacrificing additional time in getting out ITB-462 and the goal of further expansion of the embedded base will be served quarterly within the contract's life. In drafting ITB-462, DGS worked closely with DOE and the Information Resources Commission (IRC) beginning approximately in June 1987 and provided each with a draft or "specimen" copy of the ITB at a conference held October 7, 1987 and requested their comments at a conference held October 16, 1987. The IRC is the centralized management authority for all information technology (computer) use within State agencies. With the exception of the Department of Community Affairs, no state agency suggested equivalency bidding, and the IRC did not recommend this substantial change in the specimen ITB-462 format when it presented its review of agencies' needs and its own recommendations to DGS. DOE expressed no need for an "all other" or "equivalent" category/goal because it was felt that Table I contained a broader range of models which would meet the majority of their users' needs and the Table IV clones would meet any state needs not met by Table I. DGS' position was that reopening Table I to "all other" or "equivalent" categories would be to return to the 1986 ITB-545 format that Caber previously protested and that DGS had abandoned because it was vague and because it was impractical to administer. Caber and MCA proposed that DGS develop specifications (an "all other" category) which bidders would attempt to meet by assembling their own systems of components. Specifically, Caber and MCA proposed deleting the provisions of the Special Conditions of ITB-462 which prohibit bidding of equivalents, and allowing potential vendors to bid models that are "equivalent" to (meet or exceed the specifications of) Table I models, either by creating a new Table V form on which vendors may bid a model equivalent to any specified model on Table I or by creating a set of "other low qualified bid" categories involving generic specifications based on Table I models. However, Caber and MCA did not affirmatively demonstrate any compelling competitive bid advantage to the State's embedded user base in doing so. Neither did they present any substitute specifications by which an "equivalent" goal/category could be successfully bid, evaluated, and awarded, whether it be added to existing Table I or placed in a "created" Table V. The 1986 ITB-545 bid protest resulted in part from a failed attempt to draft generic specifications and Caber and MCA only suggested in the present formal hearing that DGS should advertise for someone to come forward and write such specifications and other methods more reminiscent of a "request for proposal", (RFP) than of a firm specification for an ITB to meet a known embedded user base with definite parameters of need. Evaluation by benchmarking to establish functional equivalency would be necessary to implement Caber's and MCA's proposals even if generic specifications could be drafted, due to the myriad combinations possible. The alternatives to benchmarking proposed by the Caber and MCA witnesses are impractical and demonstrably not in the best interests of the State, based on time considerations associated with benchmarking literally hundreds of potential combinations, time considerations rendered even more compelling by the termination of the 621 contract on January 26, 1988. Moreover, Caber's and MCA's suggestions that the State rely solely on default provisions of the ensuing contract clearly would not be in the best interests of the State in that such a practice would inherently subvert all the price benefits sought through term contracting. Moreover, as it stands now, a degree of equivalent bidding is permitted in Table IV of ITB-462. Although third party components (products of one manufacturer installed in the larger system or computer of another manufacturer) may be bid in other tables, DGS has excluded them from Table I by the following language, Third party components are not acceptable within a system designated by a manufacturer's model number on Table I unless they are used by the manufacturer in normal production and supported by the manufacturer for warranty and maintenance service. The purposes behind this exclusion are to avoid the same problems inherent in bidding equivalents and the necessity for benchmarking of all possible variations, and because manufacturers will generally not provide maintenance contracts on altered equipment, because of the need for contract users to know exactly what they are getting, because of enunciated safety reasons, and because of the need for specificity in bid solicitations, administration, and award. By their prehearing stipulation, Caber, MCA, DGS, IBM, and Apple stipulated that the Manufacturer's Certificate called for in ITB-462 should be modified so as to delete the following language "AND IS OFFERING EQUIPMENT THAT IS IN COMPLETE COMPLIANCE WITH THE BID SPECIFICATIONS." No reason was shown why this stipulation should not be accepted and given effect, provided all the potential bidders have an opportunity to resubmit bids to comply with ITB-462 as reformed on this point. An IBM-compatible clone is a computer marketed by a manufacturer other than IBM, having an operating system that will run IBM programs and which has the capability to be expanded with IBM-compatible devices. DGS established such a category in Table IV to meet demonstrated needs of an embedded base of State microcomputers which perform the same functions as IBM equipment but which can be obtained at significantly lower prices. The clone category specifications are already at least "semi-generic" or "semi-equivalent" in that any combination of components which meets those specifications is acceptable to DGS, regardless of manufacturer or dealer. Third party components are acceptable in the IBM- compatible clone systems, provided that all such components are warranted by the bidder and maintenance subsequent to the warranty period is available from the bidder. There are hundreds of manufacturers of IBM compatible clones in the microcomputer marketplace today, and there are many third party components offered for use in IBM computers and/or IBM compatible clones of widely varying features and prices. There has never before been an IBM clone category awarded on a State contract, but a clone category involving two models was proposed in the ITB-545 abandoned last year, and the new ITB-462 contemplates that there will be a single award to the lowest bidder for each of the four IBM compatible clone configurations in its Table IV. There is nothing in the specifications which would prevent Caber from bidding many models on Table IV. Determining compliance of clones with the ITB-462 specifications as now drafted will involve DGS performing benchmark testing of at least two systems in each configuration, or at least 8 tests. DGS has allotted 10 days to perform these tests and it is estimated that it will take one person approximately one day to test each clone. The purpose of the benchmark test is to certify that the computers bid are IBM compatible and actually work as represented. Benchmarking is done by setting up the machines, formatting disks, and running the application's software to ensure that the machines can create, retrieve, update, and manipulate files, and can generally perform all the functions of IBM compatible machines. Caber and MCA propose that there be multiple awards for each configuration. The majority of state agencies do not favor multiple awards for the clone category because the four configurations on Table IV represent the basic equipment they need. DOE opposed multiple awards for itself and its constituency. IRC did not recommend multiple awards for clones. Multiple awards are the least desired method of contracting in State government and are reserved for situations where a specification cannot be written. DGS was able to draft specifications for the clone configurations that the State embedded base of users indicated were most needed. DGS' intent in the Table IV category was to capture the single lowest bid through competitive bidding, not to produce a catalogue of manufacturers/dealers willing to do business with State users, which latter goal seems to be the thrust of the ITB amendments proposed on this point by Caber and MCA, who demonstrated no cost advantage to the State in making multiple awards for clones. Multiple awards for clones would result in the benchmark testing criticized in the orders of consolidated cases Caber Systems Inc. et al. v. DGS, et al., DOAH Case No. 87-0836BID and Microage Computer Systems Stores, Inc. v. DGS, DOAH Case No. 87-0837B1D. Again, Caber and MCA witnesses proposed several alternatives to benchmarking the literally thousands of configurations possible under their proposal. All proposed alternatives were overwhelmingly discredited by credible testimony as impractical and subject to enormous time delays. Historically, DGS has not limited the number or type of related options/accessories that a winning bidder could have placed on the microcomputer term contract. ITB-462 limits the number and types of options/accessories to 14 acceptable items. The Special Conditions restrict the options to the models with which they function, require bidders to identify the options' list prices, percentage discounts, and net delivered prices in Table II. In developing the list of acceptable options, DGS drew on what it had learned from the last bid protest and considered the volume of State usage of the options, prices of the items, and the need to support equipment in place. Information supporting the usage of the options which were eventually listed included sales reports, purchase orders, sales summaries, and input from State users. The IRC, DOE, and GEMUG concurred in the limited list of options which finally resulted. DGS proved a reasonable need for these items by an embedded State user base. Caber and MCA did not demonstrate any need by an embedded State user base which was left unmet by DGS' procedure or which is not otherwise addressed by other existing State contracts or by the state contract exception provisions. In the case of certain accessories/option additions proposed by Caber and MCA, the cost of such proposed additions fell below the vanishing point for unit price savings through volume purchases.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that DGS enter a Final Order providing: That MCA be dismissed as an intervenor in this cause. That Caber's Petition as it addresses products of Tandon, NEC, and Convergent Technologies be dismissed. That ITB-462 be amended to delete the following language in the Manufacturer's Certificate: "and is offering equipment that is in complete compliance with the bid specifications," and amended in no other way. That a date certain for completion of bid submittals (and resubmittals as necessary for those bidders who responded before the statutory freeze) be established, which date will allow sufficient time for all those eligible to submit bids that comport with the ITB-462 as amended pursuant to paragraph 3. That the Division of Purchasing develop procedures to be included in the contract resulting from ITB-462, providing for additions to the Table I QPL at every General Condition 25 revision and requiring that copies of these procedures be published and mailed to all potential vendors prior to the first revision of the ensuing contract. DONE and RECOMMENDED this 29th day of April, 1988, at Tallahassee, Florida. ELLA JANE P. DAVIS, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day of April, 1988.
The Issue An Administrative Complaint and cease and desist order was filed by the Department of Banking and Finance on March 29, 1990, against Respondent and thirty-one other persons, alleging various violations of Chapter 517, F.S., the "Florida Securities and Investor Protection Act". The only allegation of wrongdoing by Robert Micalizio is that he offered or sold an unregistered security in violation of Section 517.07, F.S. He admits contacting investors, but claims those contacts were to obtain indications of interest (IOI) which are not proscribed. The issue for resolution in this proceeding is whether Respondent committed the alleged violation and if so, what discipline is appropriate.
Findings Of Fact The following facts are reflected in the parties' prehearing stipulation filed on February 11, 1991, and required no proof at hearing: Robert Micalizio was registered with the Department as an associated person of Thomas James Associates, Inc., from on or about February 1, 1987 until the termination of his registration with Thomas James Associates, Inc., on or about June 16th, 1989. During all times Robert Micalizio was registered with the Department, he was simultaneously registered with the National Association of Securities Dealers. He is currently employed as an associated person at Advantage Capital Corporation. Thomas James Associates, Inc., offered to the public, units, shares, and warrants of Electronic Assembly Services, Inc., from their offices in Florida. Electronic Assembly Services, Inc., was a "firm commitment" securities offering underwritten by Thomas James Associates, Inc. A unit of Electronic Assembly Services, Inc., consisted of four (4) shares of common stock plus two (2) common stock purchase warrants and was sold to the public for two dollars ($2.00) per unit. The units, shares, and warrants of Electronic Assembly Services, Inc., were securities as that term is defined by Section 517.021, Florida Statutes. The effective date of the offering (that is the date at which the units could first legally be sold) was July 6th, 1988. The initial public offering of Electronic Assembly Services, Inc., consisted of 1.5 million units which were offered to the public at two dollars ($2.00) per unit. The total number of units sold of Electronic Assembly Services, Inc., by Robert Micalizio was eleven thousand one hundred and fifty (11,150) for a total price to the customer of twenty two thousand three hundred dollars ($22,300.00). The commissions received by Robert Micalizio on these sales were approximately six hundred and thirty-nine dollars ($639.00). These facts are adduced from the evidence presented at hearing, including the weighing of credibility of the witnesses: Robert Micalizio is 29 years old, and his association with Thomas James was his first job in the securities field. Nonetheless, prior to obtaining his Series 7 Registration with the State of Florida and with the National Association of Securities Dealers (NASD), in order to sell stocks, bonds and mutual funds, he had to take and pass a test covering rules and regulations of the Security & Exchange Commission (SEC) and other matters. He also studied Florida laws governing the sale of securities. Rule 3E-600.005, F.A.C., in effect at the time Micalizio became registered, requires every applicant for registration to execute and submit a notarized affidavit attesting to the applicant's knowledge and review of the Florida Security Act. His training on how to handle clients and make sales was from salesmen at Thomas James. On or before June 21, 1988, Robert Micalizio contacted William Furnas about the purchase of units of Electronic Assembly Services, Inc. Furnas already had an account with Thomas James and had dealt with Micalizio before on other securities offerings. During that conversation Furnas placed an order for 750 units, at $2.00 a unit. He mailed his check for $1,500.00 on the 21st or 22nd to Thomas James Associates (check #1109, dated June 21, 1988). William Furnas does not remember whether Micalizio told him the securities were unregistered, but he was not told that he could cancel his order. Furnas' check appears on the Thomas James Associates office log as received on June 23rd. Because the Electronic Assembly Services offering was oversold, the company allotted only 575 units to William Furnas. The remainder of the $1,500.00 was used to purchase another security from Mr. Micalizio. William Furnas received his prospectus on Electronic Assembly Services sometime after July 13, 1988, when he received confirmation of his purchase. On June 21 or 22, 1988, Robert Micalizio contacted Dorothy Gerjovich, by telephone, at her home in Orlando. He asked her to purchase units of Electronic Assembly Services, telling her that it was a good company. She agreed to the purchase, and he told her how much she owed. He did not tell her she could cancel the transaction; nor did he tell her the securities were not registered. She wrote her check for $1,000.00 on June 22, 1988, and mailed it to Thomas James Associates, where it was logged as received on June 27, 1988. Sometime after mailing her check, Dorothy Gerjovich received her prospectus for Electronic Assembly Services. Although he does not acknowledge the date of sale, Robert Micalizio acknowledges selling Electronic Assembly Services units to Glen R. and Margaret Callin. A check from them in the amount of $1,200.00 dated June 24, 1988, and marked "for ELAS", was logged in at Thomas James Associates on June 27th. The check log was obtained by Donna Mezger, an examiner for the Department of Banking and Finance, Division of Securities, during her investigation of Thomas James Associates, Inc. It was given to her by a clerk at Thomas James upon her request when she first came to do her investigation. It is required to be maintained by SEC regulations and by the Division of Securities. Under normal circumstances, a security is registered with the Florida Department of Banking and Finance or the SEC, or both agencies. The agency review prior to registration is to determine whether the offering is fair, just and equitable and whether there is proper disclosure of material information in the prospectus. Unless and until the offering is registered, the statutory protection of the investor is not available. An "indication of interest" (IOI) is a process by which broker/dealers and associated persons try to determine how much interest there is in a public offering that is about to come to market. Many firms do firm commitment underwritings; that is, they agree to purchase securities from an issuer and resell them to the public. The IOI allows the broker/dealer to determine how much demand there is for the security he is getting ready to sell so that he can anticipate the risk. Generally an IOI is done by contacting customers and explaining the offering to them and sending them a preliminary prospectus for review. This prospectus is called a "red herring" because of the red language on the cover, alerting the customer that it is preliminary only. The preliminary prospectus is authorized during the waiting period between filing the registration statement and the time it is declared effective. The customer may indicate to the firm whether they are interested and how many shares they might purchase after the offering is determined effective. It is appropriate and legal for a broker or associate to take IOI's, as opposed to making an offer or sale, prior to the effective date of registration. The Department of Banking and Finance has an established policy of looking at whether the money has been accepted in determining whether there has been a "sale" of securities. There is no statutory definition of "indication of interest", but there are SEC statements of policy describing it. Robert Micalizio had a grasp of what an IOI is. At some point in the course of his employment with Thomas James he was instructed that an IOI is a firm commitment. He disagreed with this as he knew that the regulations provided that an IOI could be cancelled before a stock starts trading publicly. Robert Micalizio's statements regarding what he told his customers were contradictory and disingenuous. In a sworn affidavit given to Donna Mezger in which he was allowed to make changes, he stated that he told customers that an IOI is a firm commitment because that is what he was told to say. He also stated that he considered his customers as astute investors, and since it was not in a script anywhere, he would tell them they could cancel an IOI only if they asked. At hearing, he said that he always told clients that an IOI could be cancelled at anytime. It is clear that he did not tell William Furnas or Dorothy Gerjovich that they could cancel their June 1988 orders for Electronics Assembly Services units. It is also clear that these customers correctly assumed they were making purchases of securities, not simply indications of interest, when Micalizio contacted them prior to the effective date of registration. He knew that they were making that assumption, according to his statement to Donna Mezger. Petitioner has no written disciplinary guidelines, but in similar cases involving sales of unregistered securities has imposed a suspension, fine, and a registration agreement restricting the registrant's practice and requiring supervision by his employer.
Recommendation Based on the foregoing, it is hereby, recommended that a final order be entered finding Robert Micalizio guilty of violating Section 517.07, F.S., suspending his registration for two years and imposing an administrative fine of $639.00, the amount of commissions he earned on the unregistered sales. RECOMMENDED this 17th day of April, 1991, in Tallahassee, Leon County, Florida. MARY CLARK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of April, 1991. APPENDIX TO RECOMMENDED ORDER, CASE NO. 90-2509 The following constitute specific rulings on the findings of fact proposed by the parties: Petitioner's Proposed Findings 1. and 2. Adopted in statement of the issues and preliminary statement. Adopted in paragraph 1. and 5. Adopted in paragraph 2. Adopted in paragraph 3. Adopted in paragraph 5. and 9. Adopted in paragraph 7. Adopted in paragraph 9. - 13. Adopted in paragraph 10. 14. and 15. Adopted in paragraph 11. Adopted in paragraph 12. and 18. Rejected as unnecessary. Adopted in paragraphs 8, 10 and 11. and 21. Adopted in paragraph 13. Rejected as immaterial. Adopted in paragraph 14. Adopted in paragraphs 15 and 16. and 26. Rejected as unnecessary. 27. - 30. Adopted in substance in paragraph 18. 31. Adopted in paragraph 19. Respondent's Proposed Findings of Fact Adopted in paragraph 1. Adopted in paragraph 16. Adopted in paragraph 14. Adopted in paragraph 15. Adopted in paragraph 6. Rejected as contrary to the weight of evidence. Rejected as unnecessary and immaterial. The manner by which Respondent designated the transaction, the notation itself, does not prove the transaction was an IOI. More credible evidence established that it was not. Adopted in paragraph 14. Rejected as unnecessary. and 11. Rejected as contrary to the weight of evidence. Rejected as unnecessary (as to not telling customers the stock was registered). The fact that he told customers that the IOI could be cancelled would tend to prove that even Respondent considered the Furnas and Gerjovich contacts as something more than an IOI, since he did not tell them the order could be cancelled. - 18. Rejected as immaterial. Adopted in paragraph 7, as to Furnas. Otherwise rejected as unsubstantiated by clear, competent evidence. Adopted in paragraph 9. Rejected as contrary to the evidence. There is no written policy, but a policy has been established through a series of cases dealing with discipline in a uniform manner. Adopted in paragraph 16. Rejected as unnecessary. There are plain definitions of "offer to sell" and "sale", and if the transactions meet those definitions, as these did, they are not mere IOIs. COPIES FURNISHED: Robert K. Good Asst. General Counsel Office of the Comptroller Hurston South Tower, #S225 400 W. Robinson Street Orlando, FL 32801 Gina Micalizio 237 Quayside Circle Maitland, FL 32751 Hon. Gerald Lewis, Comptroller Dept. of Banking and Finance The Capitol, Plaza Level Tallahassee, FL 32399-0350 William G. Reeves, General Counsel Dept. of Banking and Finance The Capitol Plaza Level, Rm. 1302 Tallahassee, FL 32399-0350
Findings Of Fact On April 1, 1985, Respondent, Florida Department of Law Enforcement (FDLE), gave notice to thirty vendors that it would receive competitive sealed bids on Bid Number 84-67 for the following commodities: eight computer binder cabinets 36x18 5/8x71 Putty/Black, three hundred single point binder hooks, six hundred 10" steel reinforced binder posts. The bids were to be filed in Tallahassee, Florida, no later than 11:00 a.m., April 16, 1985. The Invitation to Bid included General Conditions, Special Conditions and technical specifications describing the dimensions and capacities of the desired equipment. Of special significance was the technical specification that the single point binder hooks be "[c]apable of supporting up to 6 inches of llx14 7/8 20 lb. computer paper." Paragraph 6 of the General Conditions provides as follows: 6. MANUFACTURERS' NAMES AND APPROVED EQUIVALENTS: Any manufacturers' names, trade names, brand names, information and/or catalog numbers listed in a specification are for information and not intended to limit competition. The bidder may offer any brand for which he is an authorized representative, which meets or exceeds the specification for any items(s) [sic]. If bids are based on equivalent products, indicate on the bid form the manufacturer's name and number. Bidder shall submit with his bid, cuts, sketches and descriptive literature and or complete specifications. Reference to literature submitted with a previous bid will not satisfy this provision. The bidder shall also explain in detail the reason(s) why the proposed equivalent will meet the specifications and not be considered an exception thereto. The State of Florida reserves the right to determine acceptance of items(s) [sic] as an approved equivalent. Bids which do not comply with these requirements are subject to rejection. Bids lacking any written indication of intent to bid an alternate brand will be received and considered in complete compliance with the specifications as listed on the bid form. The purchaser is to be notified of any proposed changes in (a) materials used, (b) manufacturing process, or (c) construction. However, changes shall not be binding upon the State unless evidenced by a Change Notice issued and signed by the purchaser. (Emphasis added.) Paragraph 7 of the General Conditions imposed the following duty upon all bidders: 7. INTERPRETATIONS: Any questions concerning conditions and specifications shall be directed in writing to this office for receipt no later than ten (10) days prior to the bid opening. Inquiries must reference the date of bid opening. No interpretation shall be considered binding unless provided in writing by the State of Florida in response to requests in full compliance with this provision. Of the thirty vendors given an opportunity to submit bids, only two did so. They were Petitioner, Pro Tech Data (PTD or Petitioner), and Office Systems Consultants (OSC). Their bids were in the amounts of $4,645 and $5,244, respectively. After reviewing the bids, and consulting with both bidders, the director of the agency's Division of Criminal Justice Information Systems, Mark Scharein, determined that Petitioner's bid was nonresponsive for not meeting specifications and was accordingly rejected. The bid was then awarded to OSC, the second lowest bidder, on May 3, 1985. That precipitated the instant proceeding. In its bid response, PTD listed "Dennison Monarch #7830" as manufacturer and model number for the single point binder hooks. Petitioner also submitted a Dennison Monarch catalogue with its bid response. When FDLE examined the catalogue to ascertain the specifications of the hooks, it found no model number 7830. Indeed, the closest item matching this number was model number 7830-22 which referred to shelf supports, an item not solicited in the bid proposal. After consulting with PTD, it was determined that the use of model number 7830 was in error, and that Petitioner had intended to use model number 7802-30. Its request to amend the bid response was denied. Even if the bid proposal had contained the correct model number, the binder hooks in model number 7802-30 did not meet specifications. The product description of that model carries the following limitation: "Can accommodate a few sheets of paper or a stack of data 4" thick." In addition, at hearing PTD's representative conceded that the manufacturer did not recommend hanging six inches of paper from that model binder hook. This was inconsistent with FDLE's specific requirement that such hooks be "[c]apable of supporting up to 6 inches of . . . computer paper." OCS submitted product designations which conformed in all material respects to the specifications and conditions required by the bid proposal. Although PTD suggests that OCS's binder hooks do not support six inches of computer paper, .OCS's bid response reflects that they do, and there was no evidence to contradict this representation.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Bid No. 84-67 be awarded to Office Systems Consultants, and that Petitioner's bid protest be DENIED. DONE and ORDERED this 16th day of August, 1985, in Tallahassee, Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, FL 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this l6th day of August, 1985.
The Issue The issues in the case are whether the allegations of the Administrative Complaint are correct, and, if so, what penalty, if any, should be imposed.
Findings Of Fact At all times material to this case, the Respondent was a seller of business opportunities registered with the Petitioner, holding registration number 2000-054, and located at 3101 Twenty-Second Avenue South, St. Petersburg, Florida 33712. The Respondent was the successor in interest to American Cash Machine, Inc., and is responsible for fulfilling the obligations of the previous company. At all times material to this case, Gilbert B. Swarts was the president and chairman of the board of the Respondent. On July 8, 2005, the Respondent entered into a contract with Bonnie Campbell as trustee of the Campbell Family Trust (purchaser) under which the purchaser agreed to purchase 36 "CardPayment" machines from the Respondent, and the Respondent agreed to place the machines in appropriate business locations on behalf of the purchaser. As required by the contract, the purchaser paid a total of $135,000 by check to the Respondent. At the time of the sale, the Respondent provided a disclosure form to the purchaser which stated that 200 "CardPayment Business Opportunities" had been sold by the Respondent to other purchasers by the end of 2005 and that 25 "Internet Kiosk Business Opportunity [sic]" had been sold by the Respondent to other purchasers by the end of 2002. The disclosure form also stated that the Respondent would provide to the purchaser, the names, addresses, and telephone numbers of the ten purchasers located closest to the purchaser; however, the disclosure form did not include the information, and the Respondent did not otherwise provide the information to the purchaser. The Respondent stocked the 36 CardPayment machines, but failed to acquire business locations for all of the machines. The Respondent has asserted that after discussions with the purchaser, the parties agreed to "upgrade" the 36 CardPayment machines identified in the contract to 18 Internet Kiosk machines. The Respondent was subsequently unable to acquire business locations for all of the Internet Kiosk machines. The Respondent has asserted that after discussions with the purchaser, the parties agreed to "upgrade" the 18 Internet Kiosk machines to 18 "Smart Terminal" machines. The CardPayment machines, Internet Kiosk machines, and Smart Terminal machines are different types of machines, and each type has a usage different from the others. The terms of the contract executed between the parties did not provide for the substitution of various machines upon failure by the Respondent to place the machines into operation. The contract required the Respondent to rebate a portion of the sales price for each month during which each CardPayment machine was not placed for operation. No contract for the purchase of either the Internet Kiosk or the Smart Terminal machines was executed by the parties. The disclosure information provided by the Respondent to the purchaser related to the Internet Kiosk machines was insufficient to comply with the statutory requirements addressed herein. No disclosure information related to the Smart Terminal machines was provided by the Respondent to the purchaser.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Agriculture and Consumer Services enter a final order finding that the Respondent has violated Subsections 559.803(11)(a) and (b) and 559.809(11), Florida Statutes (2005); imposing an administrative fine of $10,000; and placing the Respondent on probation for a period of three years subject to such conditions as the Department deems appropriate. DONE AND ENTERED this 8th day of February, 2008, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM 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 8th day of February, 2008. COPIES FURNISHED: Eric H. Miller, Esquire Department of Agriculture and Consumer Services 2005 Apalachee Parkway Tallahassee, Florida 32301 Gilbert B. Swarts American Cash Machine, LLC 535 Twenty-Second Street South St. Petersburg, Florida 33712 Richard D. Tritschler, General Counsel Department of Agriculture and Consumer Services 407 South Calhoun Street, Suite 520 Tallahassee, Florida 32399-0800 Honorable Charles H. Bronson Commissioner of Agriculture Department of Agriculture and Consumer Services The Capitol, Plaza Level 10 Tallahassee, Florida 32399-0810
Findings Of Fact Based upon the joint stipulation of counsel and the pleadings filed in this cause, the following findings of fact are determined: Government Service Supply Corporation (GSSC) was a Florida corporation engaged in the business of supplying federal agencies with office supplies and related items. It was wholly owned by Krista Peterson. On an undisclosed date, Krista Peterson incorporated Aerotek Resources Corporation in the State of Virginia, and that entity became involved in supplying agencies in the State of Florida with general office supplies and computer equipment. Because an unrelated company claimed that the name "Aerotek" infringed on its trademark, on an undisclosed date, Aerotek Resources Corporation changed its name to Tekresources Services Corporation, the petitioner in this cause. David Peterson was formerly the vice-president of GSSC. His relationship to Krista Peterson, if any, is not of record. During the period from July 1, 1991, to November 30, 1993, David Peterson used United States General Services Administration (GSA) supplier contract numbers without authorization. He concealed the lack of authorization to use the numbers by making representations to government purchasing agents that he was authorized to use the GSA supplier numbers. On August 9, 1994, the United States Attorney for the Northern District of Florida filed an information charging David Peterson and GSSC with making a false statement in violation of Title 18, United States Code, Section 1001, a public entity crime. Thereafter, GSSC and Peterson pled guilty to the charge. Judgments of conviction were rendered by the United States District Court for the Northern District of Florida on November 4, 1994. As required by law, on June 12, 1995, Aerotek Resource Corporation made timely notification to respondent, Department of Management Services (DMS), and provided details of the convictions. After conducting an investigation, on July 26, 1996, DMS gave its notice of intent to place petitioner on the convicted vendor list on the theory that petitioner was "related" to GSSC through Krista Peterson's ownership of both corporations. Placement on the list forbids petitioner from doing business with the State of Florida. In mitigation, the parties have agreed that the federal government suffered no loss as a result of these illicit actions, and there was no intent to cause any loss or to sell or provide inferior products to the government. In addition, David Peterson paid a $16,000 fine, petitioner fully cooperated with both the federal government and the DMS in their respective investigations, and petitioner promptly notified DMS of the convictions. Finally, procedures have been implemented which are designed to prevent the recurrence of this conduct. Given these mitigating factors, the parties have agreed that it is not in the public interest to place petitioner on the convicted vendor list. Therefore, the petition should be approved.
Findings Of Fact On, or about, November 20, 1991, HRS released ITB 92-18BC. ITB 92-18BC was an invitation to bid on HRS' procurement of a data processing cartridge tape subsystem for Unisys computers. Prior to the issuance of the ITB, HRS conducted a bidder's conference. The bidders' conference was attended by representatives of HRS, Unisys and StorageTek. Vendor representatives at the bidders' conference were informed that HRS would "attempt to answer the questions in the best" possible manner. Vendors were also instructed that the answers received at the bidders' conference were "not binding, are not official, and must be submitted in writing to receive an official answer." Additionally, the ITB contains language stating that any questions concerning specifications or conditions were to be submitted in writing to HRS and that no interpretation shall be binding on HRS unless it is in writing. StorageTek and Unisys submitted written questions pursuant to the above mentioned instructions. The only relevant inquiry submitted by Unisys had to do with the requirement of "one (1) dual path controller with redundant paths for each string." Pursuant to Unisys' request, HRS modified that requirement to read "At least one (1) dual path controller with redundant paths for each string." The only relevant written inquiry submitted by StorageTek is found on page 14 of the written inquiries of the ITB. The written inquiry by StorageTek asked whether HRS would consider the total automation through an RFP rather than only a small piece of total automation through an ITB. HRS responded negatively stating that the success of this ITB will be based on using current allocations to fund the change to cartridge tape. Following the issuance of ITB 92-18BC, StorageTek filed a notice of intent to protest the specifications of the ITB. StorageTek never filed a formal notice of protest and subsequently withdrew the notice of intent to protest the bid specifications. The ITB as finally issued states its "Purpose" as "The purpose of this Invitation is to obtain competitive bid prices for a data processing cartridge tape subsystem, with installation components and maintenance, to be attached to Unisys A17-L and A15-I computers located at the HRS Technology Centre, 1940 North Monroe Street, Tallahassee, Florida." The ITB also contains the following hardware "Quantities and Technical Specifications": The following minimum specifications shall govern any equipment offered: Twenty-eight (28) cartridge tape drives configured as follows: One (1) string of sixteen (16) tape drives One (1) string of eight (8) tape drives One (1) string of four (4) tape drives At least one (1) dual path controller with redundant paths for each string In the General Conditions, the ITB states Any questions concerning conditions and specifications shall be directed in writing to this office for receipt no later than ten (10) days prior to the bid opening. Inquiries must reference the date of bid opening and bid number. No interpretation shall be considered binding unless provided in writing by the State of Florida in response to requests in full compliance with this provision. In bold print at the bottom of the "General Conditions" is found: "NOTE: ANY AND ALL SPECIAL CONDITIONS AND SPECIFICATIONS ATTACHED HERETO WHICH VARY FROM THESE GENERAL CONDITIONS SHALL HAVE PRECEDENCE." The ITB also contains the following "Special Conditions": The Office of Management Systems intends to acquire robotic tape units within 24 months to manage approximately 20,000 tapes. The future value of the cartridge tape drives toward this goal will be a consideration in this bid. If the purchased tape drives will directly attach to the robotic units then 100% of the value is maintained. However, if the tape drive unit must be replaced then a trade-in value must be bid (see Cost Table). Auto load trays are considered part of the tape drive unit. The Office of Management System also must be able to connect these tape drives to an IBM computer in the future. This capability is mandatory and must be stated with supporting documentation. The hardware/software to accomplish this goal is not part of this bid, but associated cost should be identified in the documentation provided. The ITB also specified that "[t]he award will be made to the responsive bidder with the lowest bid price for 'Net Future Cost'." Finally, the ITB contains the following pricing sheet formula for calculating cost, the blanks of which were to be completed by the bidder: CARTRIDGE TAPE SUBSYSTEM COST $ Includes all costs for specified 28 cartridge tape drives . . . . LESS TRADE-IN ALLOWANCE ( ) (see specified Bid Condition #5 and 13) SUPPLIES MAINTENANCE NET COST . . . . . . . . FUTURE VALUE OF TAPE EQUIPMENT (See Notes A and B below) * ( ) NET FUTURE COST $ Note to Bidders: (A) If the tape drives directly attach to the robotics unit, the future value of tape equipment shall equal to [sic] the amount entered for item 1 above. (B) If the tape drives must be replaced in accordance with section 6 of this ITB, the amount entered will be the trade-in value of the equipment in October 1993. HRS received two bids for ITB 92-18BC. The bids that were submitted were bids by StorageTek and Unisys. The two bids were publicly opened at Winewood and transported to Management Systems for evaluation. When the bids arrived at Management Systems they were evaluated by an evaluation team consisting of Joe Duggar, Marilyn VanDusseldorp and Dick Bradley. The evaluation team concluded that both bids that were submitted were materially responsive to the ITB. However, review of the StorageTek bid showed that StorageTek failed to subtract line six from line five on the bid pricing sheet and had placed a zero for the cost on line seven of the bid pricing sheet. HRS reworked the numbers and entered a price on line seven in accordance with the mathematical requirements of the pricing sheet. HRS corrected StorageTek's entry on line seven and found that StorageTek's bid for line seven was over $300,000. Unisys' bid for line seven was for $243,454. HRS concluded that Unisys was the lowest responsive bidder for ITB 92- 18BC. As such, Management Systems reported these findings to Secretary Robert B. Williams, Secretary, Department of Health and Services, on January 2, 1992. After, reviewing the Unisys bid, StorageTek raised concerns about whether the Unisys bid satisfied the mandatory requirements of the ITB. StorageTek was concerned with whether Unisys had met the requirement of "At least one dual path controller with redundant paths for each string." Larry Smith, an employee of StorageTek, contacted Tom Johnson, Assistant Deputy Secretary for Management Systems, about the contents of the Unisys bid. Mr. Johnson, after listening to Larry Smith's concerns, asked Marilyn VanDusseldorp to check into StorageTek's allegations. Ms. VanDusseldorp and Mr. Duggar met with Mr. Greg Priest and Mr. John Thompson of the Unisys Corporation. Mr. Priest and Mr. Thompson went over the bid with the HRS evaluators. At this meeting, a conversation took place about the number of controllers that StorageTek and Unisys had bid and the cross coupling cables between those controllers. Unisys informed HRS that if HRS wanted that cable for strings B and C, Unisys could make that cable available at no additional charge. However, HRS would not avail itself of this crosscabling until after the acceptance period for the hardware as bid. The ability to cross cable strings B and C is not a requirement of or part of this ITB. Ms. VanDusseldorp and Mr. Duggar were convinced that they understood the Unisys bid and their original understanding of the Unisys bid's responsiveness did not change because of these conversations. Ms. VanDusseldorp reported back to Tom Johnson that the allegations by StorageTek were unfounded and that Unisys was responsive as bid in Unisys' response to the ITB. HRS awarded the bid to Unisys on January 16, 1992. StorageTek filed a timely notice of protest and formal written protest. As framed by StorageTek's amended formal written protest and the parties' Prehearing Stipulation, StorageTek contended that the award to Unisys was improper because: Unisys did not meet the requirement of providing "at least one dual path controller with redundant paths for each string"; Unisys allegedly failed to prove equipment capable of connecting the tape drives to an IBM computer without the loss of redundant paths; and Unisys allegedly failed to accurately represent net future costs. DISPUTED TECHNICAL REQUIREMENTS At Least One Dual Path Controller With Redundant Paths for Each String The ITB contained the following pertinent hardware requirements: Quantities and technical specifications: The following minimum specifications shall govern any equipment offered: (28) Cartridge tape drives configured as follows: One (1) string of sixteen (16) tape drives One (1) string of eight (8) tape drives One (1) string of four (4) tape drives At least one (1) dual path controller with redundant paths for each string . . . StorageTek bid equipment to provide two controllers for string A, two controllers for string B and two controllers for string C. Unisys bid two controllers for string A, one controller for string B and one controller for string C. StorageTek interpreted the requirement "at least one dual path controller with redundant paths for each string" as calling for dual or redundant controllers and complete redundancy from the mainframe or host computers to the tape drives. StorageTek's interpretation is contrary to the plain language of the specification and the common usage in the industry. In determining the common usage in the industry, the testimony of Dr. Fred J. Taylor is given great weight. He is an expert in configuration and design of I/O subsystems. He is an independent expert in that he is not an employee of any party and he had no involvement in the bid proceedings. A "path" is an unidirectional connection between two points. The word "path" has a different meaning depending on whether it is being used in reference to software or hardware. In the software context a "logical path" is the artificial path which exists only within the software configuration. The "physical path" is a hardware path along which information is actually communicated. It is the wires themselves. ITB 92-18BC is seeking a hardware system, not a software system. Therefore, the requirement of "[a]t least one dual path controller with redundant paths" relates only to the physical connection path. It refers only to the physical path (the wires) between the host computer (the A15 and A17) and the controller. Each controller can control only eight tape drives. Therefore, for string A, two controllers are needed. For Strings B and C, only one controller is required as long as it has two physical paths between the host and the controller and two other redundant physical paths between the same points. The term "redundant" given both its common English language usage and its usage in the industry means "duplicate," "copy," "alternate," or "more than one of that thing." The three string configurations bid by Unisys are responsive to the requirements of the ITB because each string contains dual paths between the host and the controller and each contains redundant paths for each of the requisite dual paths. StorageTek claimed to have asked HRS at the prebid conference and later in a telephone conference with Tom Johnson, Assistant Deputy Secretary for Management Systems, whether HRS intended to require two controllers per string. The evidence does not support this claim. StorageTek also claimed to have orally questioned whether the purpose of requiring at least one dual path controller with redundant paths for each string was to provide for simultaneous data transfers. Again, the competent, substantial, credible evidence does not support this claim. StorageTek did not put any such questions in writing. The ITB provided and StorageTek understood that changes or clarifications to the contract were not binding unless in writing. Nothing in the ITB required each string of tape drives to contain two controllers. Nothing in the ITB required that each string be capable of processing simultaneous data transfers. Nothing in the ITB required complete redundancy from the host computers to the tape drives. Capability to Connect Tape Drives to an IBM Computer in the Future The ITB contained the following special condition: The office of management systems also must be able to connect these tape drives to an IBM computer in the future. This capability is mandatory and must be stated with supporting documentation. The hardware/software to accomplish this goal is not part of this bid, but associated costs should be identified in the documentation provided. StorageTek claimed that Unisys' bid was nonresponsive because it did not demonstrate that the subsystem as bid in its entirety was capable of attaching to an IBM computer without losing one of the redundant paths on string B and string C. Nothing in the ITB required the bidders to demonstrate that the subsystem as bid could attach to an IBM computer without losing one of its redundant paths. To the contrary, the specification was specifically limited to demonstrating the capability of connecting the underlying tape drives to an IBM computer in the future. The purpose of the requirement for demonstrating the capability to attach to an IBM computer was to insure that the tape drives retained some value in the future if HRS no longer used the equipment to attach to the Unisys A series computer. Unisys' bid demonstrated it was capable of attaching the tape drives to an IBM computer and therefore the bid was responsive. NET FUTURE COST The ITB provided that the contract would be awarded to the bidder with the lowest dollar amount for "net future cost." Net future cost was the descriptive term for line item 7 on the ITB pricing information sheet (the pricing sheet). The ITB pricing sheet is set forth in Findings of Fact 14 above. The bidders were to insert the appropriate amount on each line, adding or subtracting as indicated by the presence or absence of parentheses. Unisys and StorageTek both filled out the pricing sheet appropriately with respect to line items 1-6. On line item 7, Unisys entered the difference between line item 5 and line item 6. This resulted in a figure of $243,454.00. StorageTek entered a zero on line item 7. The clear meaning of the pricing sheet was that line item 7 would be the difference between line item 6 and line item 5. StorageTek inserted on line item 7 its proposed cost to HRS in the future to attach the cartridge tape drives bid by StorageTek to robotic units. Line item 2 required bidders to enter one of two numbers. If the bidders' cartridge tapes would be capable of directly attaching to robotic units, the bidder was given a 100% credit for the present cost of the cartridge tapes on the pricing sheet. If the bidders' cartridge tapes would not be capable of directly attaching to robotic units, the bidder was required to insert on line item 2 the amount of the trade-in value the bidder would provide in the future in order to attach to robotic units. Under StorageTek's asserted interpretation of the pricing sheet, there would have been no difference between the information provided on line item 2 and the information provided on line item 7 because, as submitted by StorageTek, the substance of the information provided on both line 2 and line 7 was that there would be no additional change to HRS to attach the StorageTek cartridge tape drives to robotic units. Under StorageTek's asserted interpretation of the requirements of the pricing sheet, the amount of money being expended by HRS today would have had no bearing on the award of the contract. If StorageTek's bid on line item 5 -- the net cost to HRS today -- had been $10 million or $100 million, under StorageTek's theory it still would have been entitled to award of the contract because it would charge zero dollars in the future to attach the tape drives to robotic units. Such an interpretation is both illogical and unreasonable. The ITB did not define net future cost as the cost of attaching the cartridge tape drives to robotic units in the future. During the prebid conference, Larry Smith, the account representative for StorageTek, questioned Karin Morris, the HRS contract administrator for the ITB. Larry Smith suggested to HRS that the cost of attaching to the robotic units "was being totally ignored in this ITB." Karin Morris advised Larry Smith to put his concerns in writing. StorageTek did put its concern in writing requesting HRS to reconsider this acquisition by issuing an RFP (request for proposals) which would include consideration of the cost of converting to automation (robotics). HRS' response to StorageTek's written question was "No. The success of this ITB will be based on using current allocations to fund the charge to cartridge tape. No new appropriations have been requested for this acquisition." Larry Smith testified that he objected to the ITB because it ignored the cost of attaching to robotics, yet he inserted zero on line 7 because he understood net future costs to be the cost of attaching to robotics. The response of HRS to StorageTek's written question no. 11 unequivocally stated that the ITB would be awarded based on current allocations. HRS properly concluded that StorageTek deviated from the bid requirements by placing a zero on line 7. HRS properly waived the irregularity in StorageTek's bid regarding the line item 7 and recalculated StorageTek's pricing sheet to comport with the pricing sheet requirements by subtracting line six from line five to arrive at the net future cost in line 7. After recalculating StorageTek's pricing sheet, HRS correctly found that Unisys submitted lower dollar amounts on line item 5 and line item 7. ULTIMATE FACTS Unisys' bid was responsive to the ITB in all material respects. Unisys' bid was the lowest bid. Unisys' bid was the lowest responsive bid and should be awarded the contract.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health and Rehabilitative Services enter a Final Order therein: Determine Unisys to be the lowest responsive bidder pursuant to Section 287.057(1). Award the bid for ITB 92-18BC to Unisys. DONE and ENTERED this 31st day of March, 1992, in Tallahassee, Florida. DIANE K. KIESLING Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 31st day of March, 1992. APPENDIX TO THE RECOMMENDED ORDER The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case. Specific Rulings on Proposed Findings of Fact Submitted by Petitioner, Storage Technology Corporation 1. Each of the following proposed findings of fact is adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1(1); 2-7(9-14); and 34(43). 2. Proposed findings of fact 8-10, 52-54, 93, 103, 111, 112, 122, 134, 135, 141, 145, 146, 148, 156, and 158 are subordinate to the facts actually found in this Recommended Order. 3. Proposed findings of fact 11-21, 29-32, 39, 40, 47-51, 91, 92, 104-107, 110, 123-129, 131, 132, 136-140, 142, 143, 149, 150, 152, and 153 are irrelevant to the resolution of the issues raised in this case. 4. Proposed findings of fact 22-28, 35-38, 41-43, 55-76, and 113-121 are mere summaries of testimony and to the extent that factual matters recited in them are reflected in the Findings of Fact herein, they are subordinate to those Facts. 5. Proposed findings of fact 33, 44-46, 77-79, 94, 98, 102, 108, 109, 130, 133, 144, 147, 151, 154, 155, 157, 159, and 160 are unsupported by the credible, competent and substantial evidence. 6. Proposed findings of fact 80-90, 95-97, and 99-101 are unnecessary in light of the Findings of Fact and issues herein. Specific Rulings on Proposed Findings of Fact Submitted by Respondent, Department of Health and Rehabilitative Services Each of the following proposed findings of fact is adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1-8(1-8); 9-26(15-32); 27(34); 28(41); 29(43); 30(50); 35(52); 37(57); 38(58); 39(63); 40(62); 41(77); 42(78); and 43(82). Proposed findings of fact 31-34 and 36 are subordinate to the facts actually found in this Recommended Order. Specific Rulings on Proposed Findings of Fact Submitted by Intervenor, Unisys Corporation Each of the following proposed findings of fact is adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1(57); 2(58); 3(14&59); 4-23(60-79); 29-33(34-38); 34-40(45-51); 41(41); 43(44); and 45-49(52-56). Proposed findings of fact 24-28, 42, and 44 are subordinate to the facts actually found in this Recommended Order. COPIES FURNISHED: F. Perry Odom Melissa Fletcher Allaman Attorneys at Law Ervin, Varn, Jacobs, Odom & Ervin 305 South Gadsden Street Post Office Drawer 1170 Tallahassee, Florida 32302 Peter A. Lewis Assistant General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building one, Room 407 Tallahassee, Florida 32399-0700 W. Robert Vezina, III Mary M. Piccard Attorneys at Law Cummings, Lawrence & Vezina, P.A. 1004 DeSoto Park Drive Post Office Box 589 Tallahassee, Florida 32302-0589 Robert B. Williams, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Slye General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Sam Power, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
The Issue Whether the petition should be dismissed for failure to comply with Section 120.53(5)(b), Florida Statutes.
Findings Of Fact The Petitioner filed bids for ITB No. 4-600-370-K which, if responsive, were the apparent low bid for the Class 3 bid and next to lowest for Class 4 and 5 categories of copier equipment listed in the ITB. [Petition, page 8] On October 16, 1995, the Department posted the intended awards and disqualified all three of Petitioner's bids as nonresponsive. [Petitioner's memorandum in opposition to Respondent's motion for summary recommended order (MEMO), paragraph 1] The Petitioner filed a notice of protest against the disqualification of its bids on October 19, 1995. [MEMO, paragraph 1] The petition for formal hearing was filed with the Department on October 30, 1995. [MEMO, paragraph 1] The petition for formal hearing alleged, in part: SUMMARY OF GROUNDS FOR PROTEST ...The Division of Purchasing ("Division") disqualified all three of Petitioner's bids on vague grounds identified by three words: "Disquality -- Manufacturers Certification. " See Ex. 3 hereto at 1. There are two provisions in the ITB that require the "certification" of the Original Equipment Manufacturer ("OEM"). See Ex. 1 hereto at 3 and 32. Since the State has not seen fit to adequately identify which provision(s) are at issue, Petitioner is required to address both provisions that might apply. Both of these requirements are completely arbitrary, irrational and, most importantly, anticompeti- tive, for the reasons described further in Section 3 below. The "certification" require- ments are arbitrary and irrational because they are not designed to obtain the equipment at issue for the lowest price. Indeed, they ensure that the State will pay higher prices than it would without the requirements. Neither are the "certification" requirements rationally related to the quality of the equip- ment that was bid by Petitioner or the other bidders, including the OEMs. Finally, these requirements are blatantly anticompetitive be- cause they place the right to exclude all other competitors in the hands of the OEMs, which can deny such certification with impunity, ensuring that only those OEM bidders will prevail, as was the outcome here. This preferential treat- ment not only runs counter to the express intent of the legislature to promote free and open competition, it also raises serious anti- trust concerns. Disqualification of Petitioner's bids on the grounds presented by the Division should be reversed and the contract awards should be adjusted accordingly. * * * The preferential treatment provided to Xerox, Kodak, and other OEMs by insertion of the "certification" requirements in this ITB is consistent with a longstanding history of such anticompetitive treatment of independent providers of the equipment and service at issue, resulting in higher prices (but not necessarily higher quality) for the State's taxpayers. Petitioner's recent experience in dealing with the State on these matters is also consistent with this pattern of bias toward OEMs. * * * 3. BASIS OF PROTEST A. The Division of Purchasing Has Acted Arbitrarily and in Restraint of Trade * * * Petitioner has identified two potentially applicable provisions that the Division could be relying on for its disqualification decision. First, in the ITB's definition of "acceptable equipment" it states that bids for classes 3, 4, 5 and 6 shall be for "new and newly remanu- factured equipment only," and that "newly remanufactured equipment must be certified by the manufacturer." Ex. 1 at 3. This pro- vision also states that "remanufactured" equip- ment is not acceptable. Second, the ITB requires certification by the manufacturer as to the copy speed, recommended monthly copy volume, and other basic specifications of the equipment models being bid. Ex. 1 at 32. Both of these provisions are irrational, arbitrary, and clearly anticompetitive. * * * The Division's definition of acceptable equipment bears no relationship to the actual remanufacturing processes used by Petitioner or Xerox. Even if Xerox certifies its own "remanufactured" equipment, the State only receives assurances that the remanufacturing process used by Xerox meets certain standards. Petitioner certifies that its equipment meets certain quality and performance standards, just like Xerox does. There is no rational reason why self-certification of the equipment at issue would provide any different assurances of quality for the State. * * * 2. Certification by the OEM of Copy Speed and Other Basic Specifications Petitioner provided a sworn verification that its equipment meets the copy speed, recommended monthly copy volume, and other minimum specifications for each category of equipment for which it submitted bids. Its certification is based on the same procedures used by Xerox to certify its own equipment. There is no rational reason why that certifi- cation cannot meet the needs of the State. To insist upon certification only from the OEM is an arbitrary and anticompetitive requirement not related to quality or designed to achieve the lowest price. * * * This requirement also is blatantly anticompet- itive. Petitioner is in direct competition with Xerox for the sale and maintenance of the equipment at issue. It is irrational for the Division to expect Xerox to provide such certification to its competitors, even as to this type of uncontroversial information unless award to Xerox is the intended goal. The ITB required a manufacturer's certification which specified a notarized certification of the copy speed, recommended monthly copy volume, and other minimum specifications for the equipment bid. [Exhibit 1 to the Petition] The bids submitted by Petitioner included a certification executed by Advantage's president, Jane Beekmann. [MEMO, paragraph 3] The equipment specified by Advantage was manufactured by Xerox but was remanufactured by Advantage. [MEMO, paragraph 3, and as represented by Petitioner's counsel] Advantage maintains it may certify its remanufactured equipment in the same manner that Xerox certified its equipment. [MEMO, paragraph 5] The ITB provided, in pertinent part: ACCEPTABLE EQUIPMENT ...Bids for Classes 3, 4, 5 and 6 shall be for new and newly remanufactured equipment only. In Classes 3, 4, 5 and 6 newly remanu- factured equipment must be certified by the manufacturer. The ITB further provided, at page 32: This is to certify the manufacturer's recommended monthly volumes and certified copy speed (specify from the glass or document feeder) for the machines listed below. Monthly volume indicates the number of copies which can be made per month by the machine without causing excessive downtime. It does not necessarily denote the maximum number of copies that can be made by that particular machine. NOTE: This must be executed by the manu- facturer and must be notarized. Dealers are not authorized to sign this certification form. Failure to submit this certification with your bid shall result in disqualification of bid. The certifications provided by Petitioner identified the machines proposed by Advantage as the Xerox 5100, the Xerox 1090 w/finisher; and the Xerox 1075 w/finisher. Each of these certifications identified Advantage as the name of the manufacturer. [Exhibit C to the motion not disputed by Petitioner] Petitioner did not manufacture the Xerox 5100, the Xerox 1090 w/finisher; or the Xerox 1075 w/finisher. [Petitioner represents it is the remanufacturer, MEMO, paragraph 2] Petitioner maintains, and for purposes of this order it is accepted, that Advantage is the remanufacturer of the Xerox 5100, the Xerox 1090 w/finisher; or the Xerox 1075 w/finisher. [MEMO, paragraph 2] Petitioner did not timely challenge the specifications for ITB No. 4- 600-370-K.
Recommendation Based on the foregoing, it is, hereby, RECOMMENDED: That the Department of General Services enter a final order dismissing the petition of Advantage as an untimely challenge to the ITB specifications. DONE AND ENTERED this 5th day of January, 1996, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of January, 1996. COPIES FURNISHED: William H. Lindner, Secretary Department of Management Services Knight Building, Suite 307 Koger Executive Center 2737 Centerview Drive Tallahassee, Florida 32399-0950 Paul A. Rowell, General Counsel Department of Management Services Knight Building, Suite 312 Koger Executive Center 2737 Centerview Drive Tallahassee, Florida 32399-0950 Cindy Horne Assistant General Counsel Department of General Services Office of the General Counsel 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399-0950 J. Daniel Leftwich Berry & Leftwich 2000 K Street, Northwest. Suite 450 Washington, D.C. 20006 James Leech Post Office Box 7473 Fort Lauderdale, Florida 33338 Lawrence P. Stevenson Hume F. Coleman HOLLAND & KNIGHT Post Office Drawer 810 Tallahassee, Florida 32302
