The Issue Whether the disputed amount within the Revised and Reduced Assessment by DOR against Respondent for the January 1, 2002, through December 31, 2004, audit period is correct and owed.
Findings Of Fact Petitioner Haas Publishing Companies, Inc., is a Delaware corporation (now known by the name "Consumer Source") which is authorized to do business in the State of Florida. At all times material, Haas/Consumer Source was a subsidiary of a company, known as “Primedia, Inc.,” which is publically traded on the New York Stock Exchange. (Stipulation 1) Respondent Department of Revenue (DOR) is the agency responsible for the administration and enforcement of Florida's tax laws, including sales and use tax and various local surtaxes. (Stipulation 9) This case concerns DOR’s assessment of Florida sales tax and associated interest against Petitioner Haas for the audit period of January 1, 2002, through December 31, 2004. This is the second of two similar proceedings involving Haas and DOR, regarding agreements between Haas and certain national retailers and the distribution of Haas’ publications, which agreements involve signing bonuses, space rental, and exclusivity rights. See Haas Publishing Companies v. Department of Revenue, DOAH Case No. 03-2683 (RO: 6/18/2004; Adopted in toto, FO: 11/9/04). (Haas 2003) Haas 2003, was a case which involved many similar, but not identical facts. It involved a tax assessment which arose from a different, earlier audit period. (Stipulation 14) However, this instant cause constitutes a de novo proceeding. The contracts at issue in Haas 2003, and the current case are similar, but not identical. The parties agree that the comparison of the Haas 2003 contracts and the Haas 2008, contracts, reflected by Bate Stamp H03161-H03164 is a fair and accurate summary, though the Department disagrees with the characterization of the Bally Total Fitness contract and Blockbuster contracts at H03161 as “identical” in light of the notation that both were amended. (Stipulation 15) Unlike Haas 2003, Haas is no longer arguing that its agreements with retailers do not involve any rental of real property. The parties have stipulated, subsequent to the filing of the Petition, that Haas is not arguing that these contracts are entirely non-taxable, but is only arguing that a portion of the contractual payments should be allocated to exclusivity in the in-market locations, which Haas maintains constitutes an intrinsically valuable intangible asset. (Stipulation 16) Petitioner Haas publishes free consumer guides to local apartments and homes and is paid by the apartment owners, property managers, builders, or developers who advertise in Haas’ publications. In 2008, Haas carried its local area guides, including its 77 different apartment guide publications, in approximately 60,000 locations. One of Haas' divisions, Distributech, distributes the guides through rack displays at retail stores. Haas' racks take up from two to four square feet worth of floor space wherever placed. Haas negotiates with retailers for an appropriate site for its display of publications at each retail location. (Stipulation 2) Haas supplied the magazine racks and was solely responsible for set-up, replenishing, servicing and maintenance of its racks on each retailer's property. (Stipulation 3) Haas considers space near an entrance/exit of a retailer's covered premises to be premium space. Haas maintains that retailers consider this same space to be “dead space,” beyond its cash registers, which is essentially useless for display or sale of their (the retailer’s) goods. (Stipulation 4) Haas does not sell or distribute any inventory of, or for, the retailer. Haas stocks its own publications and/or those of third parties in its own racks, which racks Haas has placed in the retailer’s space. (Stipulation 5) Under the contracts, retailers in whose stores the racks are placed have no obligation to market Haas' publications. These retailers do not buy or sell the publications, nor do they pay to advertise in them. Retailers pay nothing to Haas. (Stipulation 6) None of the retailers ever attempted to charge sales taxes to Haas on the payments made under the written agreements. Petitioner has not paid the contested tax to DOR or to the retailers, and no retailer has paid the tax on Haas’ behalf. (Stipulation 23) However, by the “exclusivity clauses” of its contracts with retailers, Haas acquires the right to exclude Haas’ competitors from the whole of the retailer’s premises, both inside and outside the retailer’s stores. By separate clauses in its contracts, Haas acquires the right to physically occupy, with racks, two-to-four feet of the retailer’s store space, which space is “premium” or “dead” space, dependent on either party’s point of view. None of Haas’ contracts with retailers lacks an exclusivity clause. That the retailer may consider the area beyond its cash registers “dead” space, while Haas considers the same physical area to be “premium” space, is immaterial to the issues herein. Without the exclusivity right, there is nothing to prevent retailers from licensing one of Haas’ competitors to install a wall rack above Haas’ floor rack. Without the exclusivity clause, retailers could agree to put piles of a Haas’ competitor’s publications in its restrooms. Without the exclusivity clause, a retailer could let a competitor distribute publications by hand in the parking lots. None of these locations are other than “dead space” for the display of the retailer’s products, but excluding competitors from the entire property is essential to Haas’ marketing plan. Haas concedes that a portion of its contractual payments are for the right to use and occupy real property and that the use and occupancy portions of its contractual payments are taxable. On this basis, Haas has offered DOR a portion of the assessed tax. However, it is the fact that the two rights are separate, and separately defined in the contracts, that affects the instant case. A review of the agreements between Haas and the various retailers reveals none in which the clauses providing for rack space and exclusivity are not separate and distinct. Some provisions are minimally different within the respective type of clause, but all are to the same effect that: In one contract clause, Haas acquires a right to physically place its racks in a described area of the retailer’s stores, and in an entirely separate clause of the same contract, Haas acquires the competitive advantage of exclusivity for its publications at that retailer’s locations. At most, the differences in Haas’ contracts amount to retailers who specify differences with regard to Haas’ physical use of the retailer’s real property, i.e. that racks will be located near exit doors instead of entrance doors, or that Haas will use an eight pocket-to-twelve pocket rack, as opposed to some other size of rack, but there are no differences of any significance affecting the exclusivity clauses. If anything, these minor differences in the various contracts point up the narrow area of the real property location within the store that is being rented for Haas’ racks and the breadth of the exclusivity agreement by which Haas pays for the right to exclude all competitors from the whole of the retailer’s internal and external premises, and further point up that the two contract provisions are different and severable. Haas paid for an exclusive right of occupancy and distribution in numerous locations throughout the United States and Florida, by entering into contracts with the following retail store chains: Seven-Eleven, Albertson's, Bally's, Blockbuster Video, CVS, Eckerd's, Harris Teeter, K-Mart, Polo's Videos, Sedanos, Suncoast Entertainment, Vero, and Winn Dixie. These contracts were not limited to locations within any single state but did involve Florida locations throughout many Florida regions and counties. (Stipulation 7) Pursuant to Section 72.011(1)(b), Florida Statutes, Haas has complied with the applicable registration requirements with respect to the taxes at issue herein. (Stipulation 8) DOR conducted an audit of Haas for the period of January 1, 2002, through December 31, 2004. The audit resulted in an assessment of sales and use tax and associated surtaxes, interest, and penalties (Assessment). There were four separate audit adjustments underlying the assessment, which were listed by the auditor on schedules B01, B02, B03, and B04, of the audit report. Schedule B04, concerning tax on licenses to use real property, is the adjustment which gave rise to this controversy. The other adjustments (B01, B02, and B03) were later paid as uncontested, prior to the filing of this action. (Stipulation 10) In Schedule B04 of the audit report, DOR’s auditor determined that tax should be assessed on the total amount which Haas had paid under its written agreements regarding its Florida locations. The auditor determined that such payments constituted taxable "rent" paid by Haas. The auditor further determined that tax should be imposed both on monthly rental payments and on "sign-on bonus" payments. (Stipulation 11)2/ By an April 8, 2008, Notice of Reconsideration (NOR), DOR upheld the audit and resulting assessment in full. The total balance DOR determined to be due at that time was $996,037.44, consisting of tax and interest. All assessed penalties were compromised or waived. (Stipulation 12g) On June 6, 2008, Haas paid $48,665.11, representing payment on all portions of the assessment which were uncontested at that time, pursuant to Section 120.80(14), Florida Statutes (2007). (Stipulation 12h) On August 18, 2008, after the case had been filed at DOAH, DOR filed a Notice of Revised and Reduced Assessment With Stated Rationale (Revised and Reduced Assessment). The Revised and Reduced Assessment removed "sign-on" bonuses from consideration in the computation of the tax liability, though expressly stated that DOR continued to consider such payments to be taxable. (Stipulation 12j) The Revised and Reduced Assessment sets forth the current assessment amount in controversy. It differs from the NOR only in the removal of "sign-on" bonuses from the tax computation. (Stipulation 12k)3/ DOR has represented by its Notice of Filing in connection with the Revised and Reduced Assessment that the reduction made was not intended as a concession or admission that the “sign-on bonuses” were not taxable, but rather was intended to avoid or render moot any assertion that DOR was acting inconsistently with the prior decision in Haas 2003. (Stipulation 13) In addition to the foregoing stipulations, the specific language of the Notice of Revised and Reduced Assessment is informative. It reads, in pertinent part, as follows: Although the amount of the reduction was determined by removing from the assessment the tax assessed on Petitioner’s payment of sign-on “bonus payments,” nothing in this reduction should be misconstrued as an admission or statement that bonus payments are not taxable, or as an admission or statement that any portion of the licensing agreement rental payments should be allocable to a non-taxable intangible, or that any non-taxable intangibles exist. Rather, this relatively small reduction was made to render “moot” any argument that the Department is now acting inconsistent [sic] with its’ prior Final Order (Haas 2003). The prior Final Order properly held that monthly rental payments are subject to tax but determined that sign-on bonus payments are not subject to tax, and this reduction now accomplishes that same effect. (Material in parentheses added for clarity.) DOR put on no evidence, and has cited no legal authority, permitting the Agency to ignore or fail to collect a tax it claims is legitimately owed by a taxpayer. The Notice of Revised and Reduced Assessment herein was not a stipulation in furtherance of litigation between the parties. It was a factual act/determination by DOR, whereby the Agency elected not to tax, for the instant audit period, a portion of Haas’ contractual payments. DOR had previously determined, via the Final Order in Haas 2003, that signing bonuses were not taxable. Therefore, the Revised and Reduced Assessment herein corrected this case’s auditor’s initial determination, contrary to the only existing case law, that signing bonuses were taxable. In entering the Revised and Reduced Assessment in the instant case, DOR apportioned out of Haas’ contractual payments for the instant audit period the portion of the contractual payments allotted to signing bonuses, thereby establishing the same apportionment as had occurred in Haas 2003. As of the date of the Joint Pre-hearing Stipulation, January 20, 2009, and throughout hearing on February 10-11, 2009, Haas agreed that it owes, in addition to the amount(s) it has already paid, an additional tax amounting to $206,450.06, plus interest. At hearing, Haas presented its calculations of why Haas believes it owes that amount. (See all references to Haas’ allocation methodology infra.) The parties are agreed that Haas did not ante-up that amount of cash prior to final hearing and that the failure to remit did not constitute a jurisdictional defect. However, DOR disagrees that Haas’ allocation methodology should be utilized. The record is silent as to the amount of interest which Haas would owe the State on the basis of the $206,450.06, tax debt that Haas has conceded. Therefore, in the event DOR establishes a prima facie case, but Haas' “allocation methodology” is accepted herein, interest on the conceded amount of $206,450.06, as well as the conceded $206,450.06, tax debt itself, must be provided-for in the Recommendation. On the other hand, in the event DOR establishes its prima facie case and Haas' “allocation methodology” is not proven, the amount claimed by DOR, plus interest, would be the subject of the Recommendation. The standard of a prima facie case for DOR is established at Section 120.80(14)(b)2., Florida Statutes (2007). Without a prima facie case, DOR cannot prevail on any theory. DOR’s only witness, the auditor-attorney who prepared the audit, testified that, partially in reliance on Homer v. Dadeland Shopping Center, Inc., 229 So. 2d 834 (Fla. 1970), he did not consider the allocation methodology submitted by Haas and did not allocate any of Haas’ contractual payments to premises owners to “exclusivity rights,” because Haas’ contractual right to exclude Haas’ competitors from placing their publications on the premises of the stores contracting with Haas equates with a restrictive covenant relating to real property deeds and is part of the “bundle of rights” traditionally associated with real property deeds and leases. Furthermore, DOR’s auditor did not consider allocating such exclusivity rights because he felt that exclusivity rights do not amount to “intrinsically valuable personal property” as used in Section 212.031(1)(c), Florida Statutes. Upon this testimony, the Agency maintains that Haas owes taxes on all rent it has paid to retailers. Ultimately, DOR’s only witness, the auditor, did not comment on Haas’ proposed allocation method’s conceptual or mathematical validity, and only opined that exclusivity rights could not be severed from real property for sales and use tax purposes under Section 212.031(1)(c), Florida Statutes. Haas’ proposed allocation methodology was presented at H03194 and H03166-H03193. (Stipulation 24) Haas’ proposed allocation methodology in the case at bar does not seek to attribute any value to logos, but only to exclusivity rights. (Stipulation 17) Haas seeks only to subtract from the assessed tax that portion of Haas’ payments made for exclusivity rights, as “intrinsically valuable personal property.” Haas challenges DOR’s Revised and Reduced Assessment and maintains that it fails to correctly allocate between allegedly exempt and allegedly non-exempt contractual payments, but does not challenge the assessment on computational grounds. (Stipulation 18) Haas has one or more competitors who distribute their own publications at retail store chains, but not at the retail store chains with which Haas contracts. (Stipulation 19) Typically, Haas has to "outbid" at least one other competitor to obtain the various rights which are at issue. (Stipulation 20) "In-market" areas are those geographical areas where Haas publishes magazines and places its own rack inside the stores, whereas "outlying" areas are those geographical areas where Haas does not publish a magazine. (Stipulation 21) In an "outlying" or "non-serviceable" area, Haas tries to find third parties who are willing to pay Haas to have their own advertising materials placed on racks pursuant to subleases. When Haas subleases to a third party, it does not pass on the right of exclusivity. (Stipulation 22) Haas only sells advertisements in areas where it has publications. The advertisements, not the publications, are sold, and the contractual exclusivity of distribution locations spurs Haas’ sales to its print advertisers. Advertising is the main source of Haas’ revenue, and was 80-85 percent of Haas’ total revenue during this audit period. Despite an aggressive marketing plan and remarkable growth rate (nearing 20 per cent) since 1996, Haas’ publications are published and circulated via its racks on retailers’ premises only in certain communities and regions and not all communities and regions have a Haas publication. That does not mean that Haas does not hope, and seek, to expand into those currently un-served communities and regions. All Haas’ sales representatives are trained to emphasize Haas’ exclusive distribution rights, obtained via the exclusivity clauses contained in Haas’ contracts with the various retailers. They use “media kits” designed to emphasize Haas’ exclusive distribution rights. The exclusivity rights are Haas’ “competitive edge” in what is a relatively new business sphere. Exclusivity rights allow Haas’ sales personnel to represent to potential advertisers that anyone entering specific retail chains will see only Haas’ publications. Thus, anyone entering those retail chains will see only the advertisements in Haas’ publications and will not see any publications featuring the competitors of Haas’ advertisers. The exclusivity rights ensure “unique foot traffic” audiences or “exclusive” eyeballs on Haas publications and effectively “fence out” competitive publishers, publications, and distribution plans. The element of exclusivity has permitted Haas to increase its rates, charge premium rates to client advertisers, charge higher rates than its competitors, and still increase its advertising sales volume throughout the audit period. According to Haas’ employee-witnesses, exclusivity is the most important factor in Haas’ ability to sell advertisements. Moreover, acquiring exclusivity rights from retailers has been the thrust of Haas’ marketing plan. Haas has never attempted to sell an exclusivity right to another publisher or publication distributor. Haas’ method of doing business is new, innovative, and possibly unique, but exclusivity is the key element which has allowed Haas to dramatically increase its market share. There are no sales to other publishers with which to compare Haas’ exclusivity rights. Exclusivity rights are something Haas wants to retain, so it is not unreasonable that Haas has not tested the market for sale of its exclusivity rights. However, the very facts that Haas has obtained exclusivity rights from retailers, via the contracts here at issue, and has transferred, via “pocket agreements,” the right of placement to other publishers, without simultaneously transferring Haas’ exclusivity rights, derived from the location owner (retailer), to those other publishers demonstrates that the rights of exclusivity and rental occupancy are severable, and that exclusivity is an intrinsically valuable personal property right. Some locations, such as grocery stores, are more valuable to Haas advertisers than other locations, such as consumer service locations, because they move more publications per month. While Haas would like to have its Guides published everywhere, a number of factors enter into the equation of where Haas will contract with retailers. Haas’ senior management selects particular markets in which to publish and decides the timing for market entry. The distinction between what Haas is willing to pay to “in-market” and “out-lying” stores currently may be $500 or more per month. However, the payment of $50, for a location in an outlying area versus the payment of $500, or more for the same multi-outlet retailer’s in-market store, provides Haas with the option for exclusive distribution in the outlying store if, and when, Haas moves into soliciting advertising, printing a publication, and distributing Haas’ publication(s) in that outlying community or locale at some date in the future. Clearly, this benefit is an intangible. Haas submits that it is a non-taxable intangible, but does not seek to reduce the Revised and Reduced Assessment to account for any possible value of such option for a future competitive advantage. Rather, Haas’ proposed allocation formula attempts to measure only the value of exclusivity in the in-market area where Haas has a current competitive advantage. Under Haas’ contracts, Haas pays one fee for “in- market” and one fee for “outlying” stores of the same retailer. If Haas ever exercises the option of developing a publication in a formerly outlying area, the area becomes “in-market” and the fee is the higher “in-market” fee. In outlying areas, Haas’ exclusivity does not provide the same competitive advantage as it does for in-market stores, but Haas may sublease its racks to existing publications in that area, without passing on the right of exclusivity. Usually, Haas’ income from the sublease only covers the amount Haas is already paying the outlying area retailer for that location. Haas never passes on the right of exclusivity to any third party. The physical location of the retail stores, aside from being in-market or in an outlying area, is immaterial to Haas and does not enter into Haas’ allocation formula. Kim Payne, Haas’ Director of Financial Analysis, analyzed the relative costs and benefits of the contracts at issue. She segregated the type(s) of retailers into five categories corresponding to the categories of “book movement” as assessed by Haas. (These categories are quite technical but roughly correspond to speed and quantity of sales, and vary by in-market and outlying area.) She allotted amounts to physical rent and exclusivity and calculated a taxable and non-taxable percentage. For contracts without separately negotiated in- market and outlying payment, she used the applicable book movement categories from similar retailers with separately negotiated in-market and outlying payments, each time choosing a conservative option. She eliminated at least one retailer’s non-taxable percentage due to that retailer’s minimal presence in Florida during the audit period, and she did not apply the non-taxable percentages for either Jacksonville (an outlying area) or Pensacola (an insignificant in-market area). Each of the adjustments, of which the foregoing are just examples, amounted to resolving a variable in favor of paying a higher tax. Through this allocation analysis, Ms. Payne arrived at Haas’ request for a reduction of $440,258.07, from the tax set forth in the Revised Assessment. Curtis Kimball was accepted, over objection, as an expert witness in the valuation and recognition of intangible assets. Mr. Kimball analyzes and values businesses, business interests, intellectual property, and intangible assets, and does forensic and investment analysis of business assets, including fractional interests in real estate. Among his many qualifications, he is an accredited senior appraiser in the business valuation and intangible assets group of the American Society of Appraisers (ASA) and has served on its Board of Examiners. Although Mr. Kimball’s field is the valuation of intangibles, and not real estate, he consulted a real estate appraiser as part of his preparation for forming the expert opinion he expressed at hearing. His opinion was rendered in accord with the Uniform Standards of Professional Appraisal Practice (USPAP), promulgated by the Appraisal Foundation and the American Society of Appraisers. He determined that Haas’ methodology employed in the preparation of its allocation analysis is an appropriate and sound approach to measure the value of intrinsically valuable personal property (the competitive advantage of exclusivity); that Haas’ calculations were consistent and mathematically correct, and that Haas’ allocation formula and amount was an appropriate allocation approach as he understood the dichotomy between the right of exclusivity and the right of rack placement. Mr. Kimball further opined that the competitive advantage that flows from exclusivity is intrinsically valuable personal property, because it relates to Haas’ revenue- generating abilities. It is analogous to the advantage of a holder of a patent, a franchise, a trademark, a service mark, or a logo, although it does not constitute a patent, franchise, trademark, or logo. In his experience, trademarks, service marks, logos, and patents are not necessarily “registered” and franchises typically are not registered. Therefore, the fact that no government entity “registers” exclusivity clauses is immaterial to comparing Haas’ exclusivity rights with those examples used in the statute in dispute. Mr. Kimball believed that if Haas were to sell its assets, Haas’ intangible contractual assets would have to be independently valued for federal income tax purposes. These are all indicia of intrinsically valuable personal property. DOR’s Auditor Wallace’s testimony was limited to the Agency’s position that Haas’ exclusivity rights are part of the bundle of rights of a real property deed, like the right of quiet enjoyment. Mr. Wallace did not testify to the substance of Haas’ proposed allocation between taxable and nontaxable payments. Therefore, Haas’ allocation formula and calculations were in no way discredited. Mr. Wallace also conceded that if the right of exclusivity had been found to be intrinsically valuable personal property, then under the statute, some allocation would be necessary.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a Final Order requiring Petitioner to pay $206,450.06, in tax, together with any interest on that amount, not previously waived, and dismissing all remaining claims against Petitioner for the specified audit period. DONE AND ENTERED this 20th day of August, 2009, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of August, 2009.
The Issue Whether Respondent acted contrary to the agency's governing statutes, rules or policies, or the bid specifications in its proposed decision to award Contract No. T1285 to Intervenor Kamminga & Roodvoets, Inc. ("K & R").
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of the proceeding, the following findings of fact are made: On May 14, 2008, the Department released its bid solicitation for Contract T1285. The proposed contract was for the construction of a one-way pair through Lake Alfred, including new construction, reconstruction, milling and resurfacing, widening, drainage improvements, lighting, signalization, signing and pavement marking and landscaping on State Road 600 (U.S. 17/92). Polk County, the location of the project, lies in the Department's District 1. Qualified contractors, including Mid-State and K & R, received an electronic disk containing the solicitation, bid blank, plans and specifications for Contract T1285. The letting date for this project was June 18, 2008. Bids were to be submitted on or before that date via Bid Express, the electronic bidding system used by the Department. No party submitted a protest of the terms, conditions, and specifications contained in the solicitation pursuant to Subsection 120.57(3)(b), Florida Statutes. The work to be performed on Contract T1285 included the installation of limerock road base to be paid for in accordance with line item 0175, Optional Base Group 09 ("Base Group 09"). The bid documents included a set of "Supplemental Specifications." Section 6 of the Supplemental Specification was titled "Control of Materials." Subsection 6-3.3, titled "Construction Aggregates," provided as follows: "Aggregates used on Department projects must be in accordance with Florida Administrative Code Rule 14-103."2 Under the heading "Developmental Specifications" is a February 15, 2008, revision to the Construction Aggregates subsection that provides: Subarticle 6-3.3 (Page 54) is expanded by the following: 6-3.3.1 Department Directed Source for Aggregates: For this Contract, obtain aggregates for use in limerock base from the following vendor: Vulcan Construction Materials LP. Upon award of the Contract, provide the vendor and the Department a schedule of project aggregate needs. Once a schedule has been provided to both the Department and vendor, the Engineer will issue written authorization, with a copy to the vendor, for the purchase of aggregates from the vendor. This authorization is required before aggregates will be released by the vendor. Pick up the required aggregate such that the project schedule will be maintained. Payment to the vendor by the Contractor will be due upon receipt of the materials pursuant to the Department's Vendor Contract No. BDH50. This rate is the unit price agreed upon by the Department and the vendor and will be made available to bid proposal holders at the time of bid at http://www.dot.state.fl.us/construction/aggregate /aggregate.htm. The Department will make payment to the Contractor for the aggregates on progress estimates as a part of the bid unit price for the appropriate pay items. The rate is subject to change and adjustments for such changes will be made to the bid unit price of the appropriate pay items. Disputes with the vendor concerning aggregate supply will not be cause for Contract time adjustments, time suspensions or monetary adjustments to the Contract amount. The Contractor will be solely responsible for providing the necessary advance notice to the vendor and other coordination to obtain timely aggregate supply for the project. The import of Developmental Specification 6-3.3.1 was that all bidders would be required to obtain the limerock needed for Base Group 09 from a single vendor, Vulcan Construction Materials LP ("Vulcan"). The winning bidder would agree to pay Vulcan in accordance with a separate contract negotiated between Vulcan and the Department. The hyperlink provided in Developmental Specification 6-3.3.13 led to a document called "Aggregate Guidance" produced by the Department's State Construction Office. The front page of the Aggregate Guidance document contained "Bidder Information" consisting of a spreadsheet setting forth the Vulcan price per ton for limerock base and limestone coarse aggregate, with the price varying depending on the date and port of delivery. Between January and June 2008, the Vulcan price per ton for limerock base from both the Port of Tampa and Port Canaveral was $16.93. The Aggregate Guidance page contained additional hyperlinks with the following titles: "Aggregate Vendor Contract Usage," "Aggregate Vendor Contract," "Aggregate Vendor Projects List," "Aggregate Vendor Authorization Letter," "Aggregate Vendor Contract Frequently Asked Questions," and "Aggregate Price Adjustment Sheet." Alvin Mulford is the vice-president of Mid-State who, along with his estimator, put together his company's bid for Contract T1285. Mr. Mulford testified that his company has been bidding on Department work, and that he has never before seen a provision similar to Developmental Specification 6-3.3.1. Mr. Mulford directed his estimator to obtain clarification from the Department, to be sure that the bidders were required to purchase the limerock base from Vulcan. One reason for Mr. Mulford's concern was the "exorbitant" rate charged by Vulcan in comparison to other vendors. The restriction to a single supplier was so abnormal, and that supplier's rate was so out of line with the market, that Mr. Mulford decided to seek guidance from the Department through the question and response internet bulletin board provided by the Department for its projects. The question posed by Mid-State was as follows: Does the contractor have to use Vulcan materials for the limerock base at a rate of $16.93 per ton as stated in the Developmental Specifications 6-3.3.1? If so from which location is the material to be picked up? Is it also true that payment to the vendor (Vulcan Materials) will be due immediately upon receipt of the materials? I wanted to clarify this issue as it is unusual for the contractor to be limited to the use of only one vendor. The Department's response was as follows: The unit rate for the Material can be found at the following website: http://www.dot.state.fl.us/construction/ Aggregate/Aggregate.htm Pickup locations for the Material can be found at the following website: http://www.dot.state.fl.us/construction/ Aggregate/Aggregate.htm Payment should be issued by the Contractor to the Vendor (Vulcan Construction Materials LP) upon receipt of the materials as defined in Developmental Specification 6-3.3.1. Because the Department's response did no more than redirect him to the Department's website, Mr. Mulford decided to look at the website in more detail. He investigated the hyperlinks, including the Vulcan contract with the Department. When he clicked on the hyperlink titled "Aggregate Vendor Contract Usage," he found a document that provided as follows, in relevant part: Aggregate Vendor Contract Usage by Districts With the execution of the contract with Vulcan Construction Materials LP, contract number BDH50, Vulcan has committed to provide aggregate in the types and quantities defined in the contract (attached). The process for this contract in Districts 1, 5, and 7, is as follows: Include in the projects identified in the attached spreadsheet the appropriate special provision beginning with the July 2007 lettings. The District Specifications Engineer and District Construction Office will need to coordinate this effort. There are two special provisions for the purpose of notifying construction contract bidders of the Department's intention toward the aggregate. The first special provision is the mandatory version that will direct the bidder to obtain aggregates for the specified work from Vulcan. The second special provision provides the bidder an option to obtain its aggregates from Vulcan. * * * After these projects have been awarded, the contractor is required to notify FDOT and Vulcan a schedule of its aggregate needs for the project. After receiving this schedule, FDOT's Resident Engineer will issue written authorization to the contractor, with copy to Vulcan. This authorization is required before Vulcan will release aggregate to the contractor. Payment to Vulcan will be from the contractor. FDOT will pay cost of aggregate on progress estimates as part of the contractor's bid price for the work. The contractor is required to include in its bid price for the work the cost of the aggregate at the Vulcan rate. The Vulcan rate will be posted on the FDOT State Construction Website showing the rate. When adjustments are made to the Vulcan rate, FDOT will make adjustments in the construction contract unit price. . . . (Emphasis added.) Mr. Mulford testified that he understood the underscored language in the hyperlinked document to be a directive to the bidders and therefore a mandatory requirement of the bid specifications. He did not ask the Department for further clarification because he believed the requirement was clearly stated in the hyperlinked document. David Sadler, the director of the Department's office of construction, testified that the hyperlinked document was developed by his office to offer guidance to the districts as to the concept behind and use of the aggregate vendor contract. The document was not a part of the bid solicitation document. Mid-State's bid price was $7,429,398.44. Mid-State's price for Base Group 09 was $619,645.80, or $19.30 per square yard. This price reflected the Vulcan rate for limerock base of $16.92 plus tax and Mid-State's costs for the work associated with Base Group 09. 19. K & R's bid price was $7,370,505.24, or $58,893.20 lower than the bid price of Mid-State. K & R's price for Base Group 09 was $256,848.00, based on a stated unit price of $8.00 per square yard for limerock base. K & R's price for Base Group 09 was $362,797.80 lower than that of Mid-State, accounting for more than the differential between the overall bids of Mid-State and K & R. Marcus Tidey, Jr., K & R's vice president in charge of its Florida division, testified that K & R was well aware that the Vulcan price for limerock base was $16.93, and that K & R understands its obligation to pay that price to Vulcan should K & R be awarded Contract T1285. Mr. Tidey testified that at the time of bid submission, he cut K & R's bid price to $8.00 per square yard as a competitive strategy to win the contract. Mr. Tidey made a conscious decision that K & R would absorb the difference between $8.00 bid price and the Vulcan price of $16.93. Mr. Tidey testified that K & R needed to win this job in order not to have its crews and equipment sit idle during the economic downturn, and therefore decided to take all of its markup, roughly $250,000, out of the bid. He could have made the $250,000 cut on any item or items in the bid, but decided on Base Group 09 because the limerock base was a big item and therefore easy to cut by a large amount. Mr. Tidey also testified that the contract provides a $400,000 incentive payment for early completion of the job, meaning that K & R will be able to work "faster and smarter" and make up for the price reduction at the end of the job. Mr. Tidey testified that he obtained the Vulcan prices from the Department's website as instructed by Developmental Specification 6-3.3.1. He did not click on the hyperlinks, which appeared to reference the contract between the Department and Vulcan and therefore was of no concern to him. The Department and K & R dispute Mid-State's assertion that the underscored language of the hyperlink set forth in Finding of Fact 15 was a requirement of the bid specifications, based on Mr. Sadler's direct testimony and the underlying illogic and unfairness of requiring bidders to seek out hidden specifications. The Department and K & R concede that if the bid specifications did in fact require the bidders to include in Base Group 09 the full costs associated with obtaining the limerock base from Vulcan, then K & R's bid is nonresponsive. Developmental Specification 6-3.3.1 directed bidders to the Department's webpage for the purpose of obtaining the current Vulcan rate quote. It did not instruct the bidders to investigate the hyperlinks or to assume that the information contained therein was mandatory. Absent an instruction to bidders to review the information contained in the hyperlinks, the Department could not make such information mandatory without placing less curious bidders at a competitive disadvantage. The Department had no intent to play hide-and-seek with the bid specifications in the manner suggested by Mid-State. In addition, K & R points to three line items of the bid specifications in which the Department eliminates competition, instructing the bidders not to bid and inserting a fixed unit price and bid amount for all bidders as to those items. K & R reasonably asserts that the Department was fully capable of treating Base Group 09 in the same fashion, had it intended to require the bidders to pass through to the Department all the costs associated with obtaining the limerock base from Vulcan. However, the Department supplied the bid quantity (31,106 square yards) and left it to the bidders to determine the price per unit they would bid. K & R's bid was responsive. Nothing in the bid specifications prevented K & R from absorbing part of the cost of the Vulcan limerock base and passing the savings on to the Department, or required bidders to pass on to the Department the full costs of complying with the bid specifications regarding Base Group 09. The sole remaining issue is whether K & R's bid, though facially responsive, was materially unbalanced. The Department routinely conducts reviews of bid line items that appear "unbalanced," i.e., for which there appear to be significant differences between the price bid and the Department's cost estimate, in order to determine whether the price difference is due to a quantity error by the bidder. The Department's review confirms that the bid quantity specified on the bid blank is accurate. If a quantity error is found, the bids are recalculated using the bidders' unit prices and the correct quantities to determine whether the bid rankings would change. A bid for which there is a discrepancy between the bid and the Department's estimate is termed "mathematically unbalanced." A mathematically unbalanced bid that affects the ranking of the low bid is "materially unbalanced." A mathematically unbalanced bid is acceptable, but a materially unbalanced bid affords the bidder an unfair competitive advantage and must be rejected. The Department followed its usual procedure in analyzing the K & R bid to determine whether it was unbalanced. Philip Gregory Davis, the Department's state estimates engineer, testified that there were some unbalanced items in the K & R bid, but no quantity errors that would have changed the ranking of the bids. Richard Ryals, the project designer who conducted the unbalanced bid review, testified that the quantities were correct for Base Group 09. As noted above, K & R's low bid for Base Group 09 was an intentional strategy, not the result of a quantity error. K & R's current bonded capacity qualification with the Department is $258 million in contracts at any one time. K & R posted a bid bond, and has more than enough capacity to comfortably perform this contract. There is no economic danger to the Department in accepting K & R's low bid.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is RECOMMENDED that the Department of Transportation enter a final order dismissing Mid-State's formal written protest and awarding Contract T1265 to K & R. DONE AND ENTERED this 9th day of January, 2009, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON 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 9th day of January, 2009.
The Issue The issue to be determined is whether Respondent violated Section 475.25(1)(b), Florida Statutes (2006), as alleged in the Administrative Complaint and if so, what penalties should be imposed?
Findings Of Fact Petitioner is the agency responsible for licensing and regulation of real estate brokers, pursuant to Section 20.165 and Chapters 455 and 475, Florida Statutes. At all times relevant to these proceedings, Respondent Maria V. King, has been a licensed Florida real estate broker, issued license number 662452 in accordance with Chapter 475, Florida Statutes. Her address with the DBPR is 900 Cesery Boulevard, Suite 107, Jacksonville, Florida 32211. Charles Wettstein was the listing broker for the property located at 3216 Randall Street, Jacksonville, Florida 32205 (subject property) for the owner/seller, Abdul R. Elsharif. The subject property was listed on the MLS for $269,900. A representative of Developing Entrusted Capital Counseling, LLC (DECC or buyer), came to the Respondent’s office and indicated that she wanted to purchase the subject property. On or about December 2, 2006, Respondent, on behalf of DECC, forwarded an offer to Wettstein for the property with a purchase price of $410,000. The offer was contingent on the following conditions: (1) buyer to choose closing agent; (2) an appraised value of $410,000; (3) satisfactory WDO and 4 point inspection; (4) assignable contract; and (5) an acceptance of a (legal) addendum between the buyer and seller only. In the cover letter sent by Respondent to Wettstein, Respondent states that there will be an assignment fee comprising the difference between the appraised value and sale price ($410,000 and $269,900). The cover letter also states that the MLS will need to be changed to the contract price of $410,000, which is usually done after an appraisal of the property, and that the appraisal would be paid for by the buyer and done immediately after the contract is signed. Respondent advised the buyer's representative that she was offering much more than the listing price for the property. Respondent testified that the buyer represented to her that the buyer was aware of the listing price, but that she had done her homework and she knew what she was doing in offering the price of $410,000. Respondent also testified that the proposed addendum to the contract and the assignment documents were given to her by the buyer. The buyer represented to Respondent that she had legal counsel who had advised her regarding the assignment and other stipulations in the contract. All documents given to her by the buyer, including the addendum to the contract, were not concealed from the seller and were in fact, submitted with the offer to the listing agent, Wettstein. Respondent was not involved in obtaining a mortgage for the buyer or doing an appraisal of the subject property, and did not intend to perform either function. Respondent did not benefit from this transaction, other than the potential commission based upon a sale price of $410,000, as opposed to the listed price of $269,900. Respondent had concerns about the purchase price but was following the instructions of her buyer. Respondent sent all documents, including the addendum and the assignment documents, to the seller because she was aware that he had an attorney who would be looking at the information sent. Respondent informed the buyer that she would submit all documents to the listing agent and her reasons for doing so. She also informed the buyer that she would only do the contract for the purchase of the subject property. Respondent did not think that the subject property would appraise for $410,000 as required by the conditions of the contract. In other words, Respondent doubted the actual sale would go through. The offer communicated by the Respondent to Wettstein, was presented to the seller and rejected. A mortgage loan was not obtained and an appraisal was not completed on the subject property in connection with the offer by DECC. Any appraisal of the subject property would have been arranged by the lending institution as opposed to Respondent, and would not have been performed by Respondent. Respondent was aware that the MLS for Duval County documents a history of the MLS listing prices. Respondent testified that based on her understanding of Duval County policy, the listing price of the subject property can only be increased if a legal, legitimate appraisal is submitted or seen by MLS. Therefore, if the subject property appraised for $410,000, and the listing price was changed as a result, the MLS would show the property’s previous listing price of $269,900.
Recommendation Upon consideration of the facts found and conclusions of law reached, it is RECOMMENDED: That the Florida Real Estate Commission enter a Final Order dismissing the Administrative Complaint in its entirety. DONE AND ENTERED this 24th day of February, 2010, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of February, 2010. COPIES FURNISHED: Daniel Villazon, Esquire Daniel Villazon, P.A. 1420 Celebration Boulevard, Suite 200 Celebration, Florida 34747 Patrick J. Cunningham, Esquire Department of Business and Professional Regulation 400 West Robinson Street Hurston Building-North Tower, Suite N801 Orlando, Florida 32801 Thomas W. O'Bryant, Jr., Director Division of Real Estate Department of Business and Professional Regulation 400 West Robinson Street Hurston Building-North Tower, Suite N801 Orlando, Florida 32801 Reginald Dixon, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792
The Issue Whether Saxon Business Products, Inc.'s ("Saxon") response to the Department of General Services' invitation to bid for walk-up convenience copiers should be disqualified on grounds that: Saxon's omission of a supply price list was a material deviation from the bid specifications and conditions; and Saxon's walk-up convenience copier, model "Saxon 300," failed to prove two-sided copy capability.
Findings Of Fact I. Invitation to Bid On June 10, 1981, DGS issued invitation to Bid No. 544-600-38-B ("ITB") entitled, "Walk-Up Convenience Copiers; Bond Paper and Magazine Finish Bond Paper." The ITB proposes an annual contract under which state agencies and institutions can purchase copying machines. It contains general and special conditions and specifications, and warns vendors that bids that do not comply with such conditions "are subject to rejection." (Testimony of Celnik) The ITB specifications divide copiers into two groups: Group I, plain bond copiers, Group II, magazine finish copiers. The copiers are further categorized by type: Type I indicates minimum features; Type II indicates two- sided copying capability; Type III indicates one reduction capability; and Type IV indicates two or more reduction capabilities. These types are further separated into 12 classes on the basis of speed and volume (P-1.) The ITB special conditions instruct bidders to submit bid sheets 2/ breaking down all copying costs to a per-copy basis. Bids are to be evaluated and contracts awarded to bidders submitting the, lowest cost per copy in each category of copier. Cost per copy is calculated by using a specific cost formula. (P-1.) The ITB cost formula contains three components: machine cost, labor cost, and supply cost. DGS proposes to disqualify Saxon's bid in several categories of copiers for failure to supply a supply price list required by the supply cost component. This component provides, in relevant part: C) SUPPLY COST - The bidder shall compute supply costs on the Manufacturer's Brand. If there is an existing state con- tract for supplies for the manufacturer's brand equipment, the state contract price may be substituted. Supply costs will be rounded to six (6) decimal points. All other costs will also be rounded off to six (6) decimal points. The volume price used by the vendor to compute supply cost shall be based on the monthly median vol- ume of the type and class being bid. Supply cost submitted shall be firm for the contract period, except for paper, and all supply costs shall be current market price, verifiable. Vendor must submit supply price lists with his bid to substantiate that correct price vol- umes were used, unless state contract prices were used. A contract award may include supplies if deemed in the best interest of the State. By electing to substitute state contract supplies, the vendor is certifying that his equipment, using said supplies, will meet all per- formance requirements of this bid and of the equipment manufacturer. NOTE - All cost formulas will be verified by the Division of Purchasing and errors in extension will be corrected. In the event incorrect supply cost volumes are used by a bidder, the Division of Purchas- ing will adjust these costs to the median volume range. (e.s.)(P-1.) The purpose of the supply price list requirement, included in DGS's 1980 and 1981 ITB for convenience copiers, is to enable DGS to verify the supply cost figures shown on a vendor's bid sheets; in this way, DGS can insure that all vendors are using correct quantity pricing on their bid sheets. 3/ (In the past, some bidders had used lower supply prices, which were tied to high volume purchases; but those volumes frequently exceeded the state's needs and the median volumes specified by the ITB for each category of copier.) The verification procedure followed by DGS in both 1980 and 1981 involves checking the vendor's bid sheets against the prices shown on the supply price list. 4/ If DGS finds an inconsistency between the two, it "corrects" the bid sheet supply cost upward or downward to reflect the price shown on the supply price list. 5/ Such a bid sheet correction would also change the total median cost per copy, the factor used to evaluate competing bids. DGS also checks the supply list to determine whether it contains current market prices. (Testimony of Hittinger, Eberhard.) If a vendor fails to submit a supply price list, DGS cannot verify that the supply prices used on the bid sheet (to compute total median cost per copy) accurately reflect the median volumes specified in the ITB. Neither can DGS determine whether the supply prices used on the bid sheet are set prices, which do not vary with volume, or volume prices, which do; the bid sheets, on their face, do not reveal which type of pricing is being used. (Testimony of Eberhard; P-1.) After sealed bids are publicly opened, DGS has an established practice of not allowing any bidder to submit additional material which could alter price or other information previously submitted on bid sheets. DGS does, however, accept late information if it can be corroborated by an independent source. For example, a bidder might -- after bid opening -- supply its corporate charter number, which can be easily verified by contacting the Department of State. (Testimony of Hittinger, Eberhard.) The ITB special conditions also require DGS to test and approve copiers prior to bid opening. Copiers which are not tested and accepted by DGS are ineligible for a contract award: EQUIPMENT APPROVAL - Each item of equipment bid shall have been tested by the Division of Purchasing prior to the bid opening time and date for performance and reliability under normal working con- ditions. Any bidder whose equipment has not been tested shall provide a model of the equipment on which he intends to bid to a specified testing station, complete with all supplies, at no expense to the State. Testing will extend for a period of twenty (20) working days. In the event evaluation and acceptance of untested ma- chines has not been accomplished prior to the bid opening date and time, such machine shall not be eligible for an award. (P-1.) II. Bid Opening: Saxon's Failure to Submit Supply Price List Prior to the 1981 bid opening, Saxon failed to submit a supply price list in connection with its bid. This was apparently an oversight on its part; a year earlier, it had furnished a supply price list in response to a similar ITB for convenience copiers. Because of Saxon's omission, DGS was unable to verify the supply prices used by Saxon on its bid sheets or determine whether Saxon was utilizing set or volume prices. (Testimony of Eberhard, Celnik, Hittinger.) After bid opening, Saxon notified DGS that the supply prices shown on its bid sheets were set supply prices -- unit prices which do not vary with volume -- and confirmed that they are the supply prices which it now offers to the state. (Testimony of Celnik.) In its evaluation of the bids, DGS applied the requirement of a supply price list equally to all bidders. All bidders who omitted a supply price list were informed that they were disqualified. Saxon's bid was disqualified in five copier categories: Group I, Type I, Class I; Group I, Type I, Class II; Group I, Type I, Class IV; Group I, Type II, Class I; and Group I, Type II, Class II. At least 11 vendors, however, did submit supply price lists with their bid sheets; approximately one-third were set price lists, the remaining were volume price lists. (Testimony of Eberhard; P-3.) If a vendor could submit a supply price list after the bid opening, it could effectively decrease or increase its bid. (This is so because, in case of a conflict between the bid sheet supply price and the supply price list, the price list value will prevail. A change in the bid sheet supply price will change the cost per copy figure the determining factor in awarding contracts.) A vendor submitting a late supply price list would have an unfair advantage since it could change its bid after bid opening while its competitors could not. The competitive nature of the bidding process would be impaired. (Testimony of Hittinger, Eberhard.) Furthermore, if late submittal of a supply price list was allowed, a bidder could disqualify itself by refusing to provide it; the bidder would then have the advantage of revisiting its bid and -- if it chose -- withdrawing it after bid opening. The opportunity to withdraw a bid -- after bid opening -- would be an advantage not enjoyed by those who timely submitted supply price lists with their bids. (Testimony of Hittinger, Eberhard.) In some copier categories, the vendors who omitted supply price lists were the low bidders. If DGS disqualifies them for their omission, it must award the contract to the next highest bidder. The difference between those low bids and the next higher bid is substantial -- in some cases exceeding 23 percent. 6/ (Testimony of Celnik, Eberhard, Nee, Reinhart.) III. Failure of "Saxon 300" to Demonstrate Two-Sided Copying Capability In accordance with the ITB, Saxon submitted its "Saxon 300" copier to DGS for evaluation and testing. Prior to bid opening, DGS conducted a 20-day test of the machine. The "Saxon 300" machine which DGS tested lacked two-sided copying capability. It could reproduce clearly on one side, but not on the other. The "Saxon 300" sales literature and instruction manual submitted with the machine did not represent that the machine had two-sided copying capability. (Testimony of Nee; 1-5, 1-6, 1-7, R-2.) The "Saxon 300" may have two-sided copying capability, but only after special modifications are made to the copier. These modifications include removal of a roller device, replacement of the heating element, and replacement of the blower system. Saxon did not indicate at the time of testing, or in its bid, that the "Saxon 300" required such modification for two-sided copying capability. Neither did it indicate what, if any, additional costs would be charged for such modifications. (Testimony of Nee, Wallace; R-3.) After DGS tested the "Saxon 300," it sent Saxon a form letter indicating that the copier met minimum operating requirements. The letter did not inform Saxon that the machine lacked two-sided copying capability because DGS did not consider the lack of such capability a major malfunction in the equipment. (Testimony of Nee.) If a machine malfunctions, DGS has -- in the past -- allowed vendors to correct the deficiency or substitute another machine. (Testimony of Nee.) The Group I, Type II, Class I category of copiers, requires two-sided copying capability. Saxon bid its "Saxon 300" as a copier which meets this requirement. (Testimony of Celnik, Nee; P-1.)
Recommendation Based on the foregoing, it is RECOMMENDED: That Saxon's bids in Group I, Type I, Class I; Group I, Type I, Class II; Group I, Type I, Class IV; Group I, Type II, Class I; and Group I, Type II, Class II be disqualified; and That Saxon's bid in Group I, Type II, Class I be disqualified. DONE AND RECOMMENDED this 26th day of February, 1982, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of February, 1982.
The Issue Whether the decision of Respondent, the Florida Department of Financial Services (“DFS”), to award the contract contemplated in its Invitation to Negotiate No. 1819-01 ITN TR, e-Payment Collection and Processing Services, to Intervenor, NIC Services, LLC (“NIC”), is contrary to governing statutes, rules, or policies, or the solicitation specifications; if so, whether that decision was clearly erroneous, contrary to competition, arbitrary, or capricious; and whether Petitioner, PayIt, LLC (“PayIt”), has standing to protest DFS’s decision.
Findings Of Fact The Parties and Claims at Issue DFS, through Florida’s Chief Financial Officer (“CFO”), is authorized to contract with vendors that process and collect electronic payments by credit card, charge card, debit card, and funds transfer (“e-Payment services”). § 215.322(4), Fla. Stat. DFS issued Invitation to Negotiate No. 1819-01 ITN TR (“ITN”) to procure a new contract for those services. NIC, headquartered in Olathe, Kansas, is an e-Payment services company focusing exclusively on government procurements. NIC is the intended recipient of the e-Payment services contract. PayIt, headquartered in Kansas City, Missouri, is also an e-Payment services company focusing exclusively on government procurements. DFS eliminated PayIt from negotiations after the first round. PayIt timely protested the intended award after receiving DFS’s notice of intent to award the contract to NIC. PayIt raises the following four claims: DFS did not make an appropriate best value determination by failing to: (A) consider vendor pricing before eliminating seven vendors during negotiations; (B) understand the pricing of the five remaining vendors before determining that NIC provided the best value to the State; and (C) consider whether making multiple awards would result in the best value to the State; DFS made the following material changes to the ITN during negotiations that improperly gave NIC a competitive advantage: allowing NIC to propose different pricing structures for individual agencies; (B) allowing NIC to waive the limitation of liability and parent company guarantee terms; and (C) allowing NIC to propose pricing based on a promise of exclusivity; DFS violated Florida law and the ITN by awarding the contract to NIC, a non-responsive vendor; and DFS violated Florida law and the ITN by failing to conduct the procurement in a transparent manner by: (A) holding a public meeting where no meaningful discussion occurred as to the reasons the negotiation team members voted in favor of an award to NIC; and (B) failing to prepare a short plain statement detailing the basis of its decision prior to awarding the contract to NIC. E-Payment Services and the ITN DFS is the state agency in charge of procuring contracts for and managing the processing and collection of e-Payment services, which include credit card, debit card, e-Check, and ACH transfer payments made in person via a point-of-sale device (“POS”), over the phone, or online. All state agencies and the judicial branch are required to use the e-Payment services vendor(s) with whom DFS has contracted unless otherwise approved. Local governments may choose to use the vendor(s), too. Approximately 20 state agencies and 95 other government entities use the e-Payment services contract. Each agency has unique needs depending on the type and number of transactions. The Department of Transportation (“DOT”) processes about 80 percent of the State’s e-Payment transactions per year, whereas the Department of Revenue (“DOR”) processes the largest dollar amounts per transaction. Some agencies have more web-based transactions while others have more POS transactions. In 2019, the State processed 1.7 billion transactions in e-Payments totaling about $52 billion. Bank of America (“BOA”) is DFS’s current e-Payment services vendor and its contract expires in 2021. BOA generally provides the services needed, but it uses subcontractors to manage different platforms utilized by the government entities, which has created continuity and reliability issues. BOA also replaced its dedicated team in Tallahassee with employees in Tampa and Orlando, which DFS believes has reduced the level of service it expected. DFS began the competitive procurement process in early 2018 to ensure a smooth implementation of a new e-Payment services contract. In March 2018, DFS conducted a business needs analysis and chose to use an ITN so it could negotiate with multiple vendors to meet the goals of the e-Payments program and provide the best value to the State. DFS wanted the best solution, not the lowest price. That is why it decided against an invitation to bid (“ITB”), as an award would have to go to the lowest bidder rather than the one with the best solution. DFS also decided against a request for proposals (“RFP”), as it could not define the specific services needed. DFS drafted the ITN over three to five months. DFS relied on its own experience, but also received input from DOT, DOR, and other agencies that utilize the contract so it could accommodate their needs and preferences. Based on that process, DFS finalized its primary needs and desires. Specifically, it wanted a single company that would: (1) perform all of the required services, in part to avoid difficulties it experienced by the current vendor’s use of subcontractors and multiple platforms; (2) provide customization to individual agencies and meet their customer service needs, including a year’s worth of data migration to the new platform, at least 15 participant-defined fields, and a dedicated team in Tallahassee; (3) provide contactless-capable POS devices, of which there are currently 600-800 in use; provide interactive voice response software (“IVR”) in at least English and Spanish so that individuals could make payments over the phone, which is consistently used; (5) have experience implementing a contract of this magnitude, given the billions of transactions and dollars processed each year; and (6) ensure the best value to the State. In November 2018, DFS issued the ITN. The ITN specifications detailed the procurement process, the selection methodology, and the award. Numerous sections of the ITN reflected the preferences just discussed, including 1.2 – Solicitation Objective, 1.3 – Background, 1.4 – Questions Being Explored, 1.5 – Goals of the ITN, 3.5.2 – Mandatory Criteria, 3.5.4 – Business References, 3.6.1 – Narrative on Experience and Ability, 3.6.2 – Respondent’s Proposed Solution, and 4.6 – Selection Criteria. The Solicitation Objective stated that DFS intended to make a single award using the Standard Contract, though it reserved the right to make multiple awards or no award at all. The ITN attached the Standard Contract, including a Statement of Work and Standard Terms and Conditions with several provisions of particular relevance: (1) Guarantee of Parent Corporation - requiring the vendor’s parent company (if any) to guarantee the vendor’s obligations under the contract; (2) Limitation of Liability – limiting DFS’s liability for any claim arising under the contract to the lesser of $100,000 or the unpaid balance of any compensation due for the services rendered to DFS under the contract; and (3) Nonexclusive Contract – providing that the contract would not be an exclusive license to provide e- Payment services, as DFS could contract with other vendors to provide similar or the same services. The ITN made clear that vendors had to notify DFS in their responses of any exceptions they had to the Standard Contract or its attachments. The ITN noted that the terms of the Statement of Work, the conditions, costs, different price adjustments, and related services may be negotiated, and required vendors who successfully negotiated such terms and conditions to submit a revised Statement of Work and attach it to their best and final offer (“BAFO”). The ITN also gave DFS discretion to negotiate and finalize terms with the vendor to whom it decided to award the contract. The ITN process involved three phases: solicitation, evaluation, and negotiation. DFS assigned Amy Jones as the procurement officer. She became the sole point of contact during the procurement process. The Solicitation Phase During the solicitation phase and prior to submitting responses, potential vendors could submit questions about the ITN. In response to 90- plus questions, many of which concerned pricing, DFS published answers to the following questions, among others, in a written document (“Q&A”): In response to a question as to whether DFS was open to a more simplified transaction pricing approach that provided a standard/blended rate across all card types and authorization levels, it clarified that it was interested in potential options that may exist and expected responses to propose the solution/approach the vendor believed provided the greatest value to the State. DFS confirmed that if the vendor did not charge a per transaction fee, it should enter a “0” on the spreadsheet but include the cost in the Total Fees. In response to questions concerning the ability to negotiate the terms of the Statement of Work, the contractual documents, or the Guarantee of Parent Corporation, DFS again confirmed that it reserved the right to negotiate the Standard Contract and that vendors had to fully describe any exceptions to such terms in their responses. In response to a question concerning the effective date, DFS indicated that it would be the date of contract execution, which should be in June 2019, but depended on the length of the ITN process. In response to a question as to the start date, DFS stated that the Project, defined in the Standard Terms and Conditions as the activities required to transition all agencies from the current vendor’s platforms to the new vendor’s platforms, should begin immediately upon contract execution. The Evaluation Phase DFS set the deadline for responses and the evaluation stage ensued. The ITN required each response to include three volumes: (1) Response Qualification Documents; (2) Technical Response; and (3) Price Response. The Response Qualification Documents had to contain financial documentation, including three years of audited financial statements, a completed business reference form, and a signed mandatory criteria certification, among others. The Technical Response had to include a narrative on the vendor’s experience, ability, proposed solution, any value-added services offered, any proposed exceptions to the terms and conditions in the Standard Contract, the requisite bond, and a security audit. The ITN stated that a vendor may be rejected if its “past performance, current status, or [r]esponse do not reflect the capability, integrity, or reliability to fully and in good faith perform the requirements of a contract.” The ITN, thus, gave DFS authority to reject a vendor regardless of its price if it could not fully perform the contract. The Price Response detailed the pricing requirements and confirmed that vendors had to complete an Excel spreadsheet provided by DFS. The spreadsheet had sheets for POS pricing, tiered pricing, non-tiered pricing, additional tiered pricing, and additional non-tiered pricing. All fees and pricing for each category, including credit card usage fees, had to be listed and additional rows had to be added if necessary. Tiered pricing represented the transaction-based services whereas non-tiered pricing represented the unit-based services. Pricing had to reflect the cost of the services as described in the Statement of Work. Any additional services had to be included in either the tiered or non-tiered pricing sheets depending on how they would be charged. The tiered and non-tiered sheets automatically populated a summary sheet based on a flat fee-per-transaction model, which would be used to compare the vendors’ pricing. Although the spreadsheet had to be completed as directed, the ITN did not prohibit more detailed explanations as to pricing elsewhere in the response. The Q&A also made clear that DFS encouraged alternative pricing arrangements. DFS received responses from 13 vendors, including BOA, Govolution, Alacriti Payments, NIC, PayIt, Fidelity Information Services (“FIS”), JetPay, JP Morgan, Official Payments, Point & Pay, Suntrust, Hancock Whitney, and Wells Fargo. As the ITN required, many of the vendors listed exceptions to the Standard Terms and Conditions and Statement of Work in their responses. NIC noted that it wanted to revise the language of the limitation of liability term and strike the parent guarantee term in its entirety, among other exceptions. PayIt chose not to list any exceptions in its response. Ms. Jones conducted an administrative review and identified deficiencies with ten of the responses, including PayIt’s. Ms. Jones did not deem NIC’s response deficient. Of particular relevance here, NIC listed four states and two federal agencies as business references to highlight its experience with payment processing services. NIC noted that these partners represented a small sample of the more than 50 governmental agencies that use its payment processing platform. NIC is a wholly-owned subsidiary of NIC, Inc., which has a number of other subsidiaries. Of the agencies listed in its response, NIC has contracts with only two of them. Although the other agencies listed have entered into contracts with NIC-related entities, NIC owns the payment-processing platform and provides e-Payment services to all of the agencies through those related entities. Based on the weight of the credible evidence, NIC accurately listed its experience providing the same e- Payment services at issue here in the states listed in its response. Ms. Jones notified the deficient vendors and gave them an opportunity to cure.1 At the end of the cure period, Ms. Jones deemed all but one vendor (Alacriti Payments) responsive, though the ITN authorized DFS to reconsider responsiveness and responsibility at any time during the procurement. Ms. Jones also reviewed the Price Responses and realized that the spreadsheet formulas had issues that could render the pricing information inaccurate. Several vendors utilized percentage-based pricing per transaction while others put text in the fields. Because the tiered pricing sheet formula only could use fees expressed in dollars and cents, the use of percentages or other text resulted in inaccurate pricing information and rendered the spreadsheet practically meaningless for scoring the Price Responses. 1 As explained later, PayIt’s responsiveness and responsibility (or alleged lack thereof) are not relevant considerations because it challenges the fundamental fairness of the process and seeks a re-bidding. However, for purposes of a complete record, PayIt’s deficiency concerned its failure to include three years of audited financial statements. Upon receipt of the deficiency notice, PayIt timely submitted audited financial statements for 2016 and 2017 (2016 was its first year being audited) and an unaudited financial statement for 2018. PayIt informed DFS that it would submit the audited 2018 statement in April 2019 once the auditors were finished. DFS waived this deficiency as a minor irregularity and moved PayIt on to negotiations. Although PayIt never ultimately submitted the 2018 audited financial statement, DFS ended negotiations with it on other grounds, as detailed below. For instance, PayIt utilized a percentage fee per credit card transaction. When it included the percentage in the tiered pricing spreadsheet, the spreadsheet automatically converted the percentage to pennies and inaccurately reduced its pricing for credit card transactions. NIC also utilized a percentage fee per credit card transaction. Instead of including the percentage in the spreadsheet, it included an “N/A” notation in the description column, which resulted in $0 being calculated for credit card fees in the spreadsheet. Although the Q&A instructed vendors to use $0 if they “would not charge a per-transaction fee for different card types and authorization levels,” it required them to provide “instead a total cost for Total Fees.” NIC failed to include the total fees that it would charge for credit card transactions elsewhere in the spreadsheet, resulting in a tiered pricing sheet that included fees only for ACH transactions and inaccurately reduced its total pricing. That said, NIC explained elsewhere in its response that it charged percentage fees for credit card transactions and described generally how those fees would apply. DFS did not issue deficiency notices to PayIt, NIC, or any other vendor as to the Price Response. However, because the spreadsheet could not accurately depict pricing for many of the vendors, making it impossible to accurately score this component during the evaluation phase, DFS had to make a decision. It could reject all bids and start over, create a revised spreadsheet that could suffer from similar formulaic errors, or issue an addendum that removed consideration of pricing from the evaluation phase. DFS chose the latter because it would allow for and encourage vendors to use creative pricing without having to start the procurement process over. It issued Addendum 4, which confirmed that pricing would not be scored or considered during the evaluation phase. Instead, technical scores would be utilized to establish a competitive range and pricing would be addressed in the negotiation phase. Although Addendum 4 noted that the Price Response would be used, it deleted the form’s instructions and confirmed that vendors did not need to resubmit it. The weight of the credible evidence showed that this decision was reasonable; it ensured that all vendors were treated fairly and equally when it came to pricing, were not excluded from negotiations simply because the spreadsheet was too rigid to accurately score their pricing, and it allowed all vendors to address and answer questions about their specific pricing during negotiations. Addendum 4 provided the requisite notice about filing a specifications challenge within 72 hours. No vendor filed such a protest. Ms. Jones sent the remaining 12 responses to the evaluation team for a qualitative review. The evaluation team reviewed the responses against the evaluation criteria and completed score sheets for each vendor. The scores ranged from 66 to 99 out of 141 possible points. Ms. Jones reviewed the scores to establish a competitive range of vendors that appeared reasonably susceptible to an award. Because there was no natural break in the scoring, Ms. Jones included all 12 vendors within the competitive range and DFS commenced negotiations with all of them. The Negotiation Phase The negotiation team included Jennifer Pelham, Teresa Bach, Tanya McCarty, and Rick Wiseman, who collectively have substantial experience in negotiating contracts, procurement, and e-Payment services. The team also invited subject matter experts, including individuals from the three largest users, DOT, DOR, and the Department of Highway Safety and Motor Vehicles (“DHSMV”), to participate in the negotiation and strategy sessions and provide their input. The ITN required the team to conduct the negotiations and make an award recommendation after determining which vendor presented the best value to the State in accordance with the following Selection Criteria: The Respondent’s articulation, innovation, and demonstrated ability of the proposed solution to meet the Department’s Solution goals and the requirements of this ITN; Experience and skills of the Respondent’s proposed staff relative to the proposed solution; and The Respondent’s pricing and overall cost to the State. The ITN gave DFS substantial discretion. It could eliminate vendors from further consideration, end negotiations at any time and proceed to a contract award, or reject all responses and start the process over. It could request clarifications and revisions to any vendor’s response (including BAFOs) until it believed it had achieved the best value. It could negotiate different terms and related price adjustments if it believed such changes provided the best value. And, it could arrive at an agreement with a vendor and finalize principal terms of the contract. The team conducted its first round of negotiations with the 12 vendors. Prior to the meetings, the negotiation team closely reviewed the vendors’ responses and prepared agendas with questions as to their ability to fully perform the required services, their proposed solutions, and their pricing models, among other things. The agendas asked the vendors to explain their pricing and each had that opportunity during their presentations. The team met immediately after each presentation to discuss the vendor, its ability to meet the Statement of Work and provide all of the required services, its experience, and any other issues that arose during the presentation. The team conducted a strategy session after the first seven presentations to discuss the same issues and tentatively decided with which vendors to move forward. The team conducted a similar strategy session after the final five presentations. Despite responses indicating otherwise, it became clear that several vendors did not fully understand or appreciate the scope of the required services. Several vendors also lacked the capability or demonstrated ability to perform all of the required services. Based on the presentations and strategy discussions, the team ended negotiations with seven vendors—i.e., BOA, JP Morgan, Govolution, Point & Pay, Suntrust, Hancock Whitney, and PayIt—for the following reasons: PayIt – did not offer IVR in Spanish, as required; claimed experience with POS devices, but failed to answer questions about that experience or about the specific types of equipment it could offer; failed to follow the agenda and answer specific questions/concerns raised by the team; experience limited to web and mobile, rather than POS or IVR; limited experience with individual agencies in states, but not an entire state contract, and only had been in business for a few years; lacked adequate resources and staff to handle the contract at the time, with only a promise to hire more staff later. BOA – did not offer IVR; could not provide all requested services, so BOA proposed two contracts with other entities, which would cause additional administrative difficulty. JP Morgan – lacked an understanding of the Statement of Work or the ITN; lacked a detailed implementation plan; could not offer participant defined fields for agencies to customize the platform or the required data migration; offered only a piecemeal solution relying on the current vendor to continue providing services. Govolution – lacked an understanding of the Statement of Work or the ITN; only offered payment technology, but lacked the ability to provide the processing component; lacked a detailed implementation plan; could not offer the required data migration. Point & Pay – lacked experience with both government contracts and contracts of the scope, complexity, and scale of this contract; focused more heavily on payment technology, rather than processing. Suntrust - lacked an understanding of the Statement of Work or the ITN; offered only a piecemeal solution relying on the current vendor to continue to provide services; could not provide data migration for the 15 participant fields needed for agency customization; lacked a plan to replace POS devices. Hancock Whitney - lacked an understanding of the Statement of Work or the ITN, including that the contract included SunPass or that local governments had to be converted during the implementation period; could not provide required data migration or 15 participant fields needed for agency customization. Based on the weight of the credible evidence, the team asked the vendors to discuss their pricing and considered it, but reasonably decided to end negotiations with these seven vendors—who could not offer all of the required services, lacked an understanding of the required services or a solid plan for providing them, failed to follow the agenda and provide the specific information requested, or lacked sufficient experience—consistent with the ITN and Florida law. The team continued negotiations with NIC, FIS, Official Payments, JetPay, and Wells Fargo. The team created agendas for the second round of negotiation sessions so that it could delve deeper into the vendors’ ability to perform all of the required services, their unique solutions for doing so, and their pricing. The team created a chart to conduct a side-by-side comparison of the vendors’ experience, their individual solutions, and their ability to provide the requisite services and value-added services. Although not required by the ITN, the team also created a chart listing the five vendors’ prices for the required services to try to do an apples- to-apples comparison. However, doing such a comparison remained a challenge because of the vendors’ different pricing structures. But, the team generally understood what the vendors charged for the services, including that Wells Fargo and FIS had cheaper transaction fees than NIC. After the second round, the team ended negotiations with JetPay and Wells Fargo for the following reasons: JetPay – Did not meet the information transfer requirements, forcing agencies to undergo extensive programming efforts to switch over; lacked experience with contracts of this size and scope; would not commit to a dedicated staff in Tallahassee. Wells Fargo – Did not use a single platform and had a multi-vendor solution; lacked a plan for replacing POS devices; could not meet the requirements for data migration or copies of batch files for processing payments that agencies requested; elaborate and extensive pricing. Based on the weight of the credible evidence, the team understood and considered the vendors’ pricing, but reasonably decided to end negotiations with JetPay and Wells Fargo—two vendors who lacked the demonstrated ability and experience to perform all of the required services of the ITN— consistent with the ITN and Florida law. The third round of negotiations continued with FIS, Official Payments, and NIC. The team met with each vendor again to obtain additional information about their ability to provide all of the required services, their solutions, and their pricing. In order to focus more closely on pricing, the team provided the vendors with past monthly invoices for DOT, DOR, and DHSMV and each completed the invoices based on their own pricing. This exercise allowed the team to understand the total cost to the State that each vendor would charge based on the services currently provided by BOA and compare those total costs both amongst each other and with BOA. Based on the weight of the credible evidence, the team reasonably decided to do this pricing exercise only with these three vendors because they were the only ones that it believed at the time were reasonably susceptible to an award. Nothing in the ITN required the team to conduct this pricing exercise with all vendors, much less those who already had been reasonably eliminated for failing the other two selection criteria. After the third round, the team ended negotiations with Official Payments for several reasons. First, it could not commit to a deliverable for next-day settlement of transactions, which BOA currently provided to agencies. Second, some of its references confirmed that it had not implemented the number, level, and complexity of services required by the ITN. Third, it offered to provide only one representative in Tallahassee who only had one year of experience with e-Payments. Based on the weight of the credible evidence, the team reasonably decided to end negotiations with Official Payments consistent with the ITN and Florida law. The team continued negotiations with FIS and NIC. It met with both vendors, checked their references, and reviewed their pricing exercises. The team understood that FIS offered lower prices than NIC, but decided to end negotiations with FIS for the following reasons distinct from price: FIS had no contactless payments or IVR services currently available and the team remained concerned that it had never implemented these services before. Although FIS promised to make those services available later in 2020, the team preferred (and, based on the language of the ITN and its answers in the Q&A, believed that the ITN required) that vendors be able to provide the services on the date they signed the contract to ensure implementation could begin immediately and the transition run smoothly. The team had concerns about FIS’s ability to live up to its promises, as it twice delayed meetings during negotiations and its references noted a lack of responsiveness to issues and implementing new services. FIS only offered one representative in Tallahassee and, at that, only during the implementation period. PayIt argues that the team misunderstood how much cheaper FIS was than NIC and ignored merchant fees during the pricing exercise. The weight of the credible evidence showed otherwise. PayIt contends that the team misunderstood FIS’s price because a spreadsheet it utilized contained an error as to FIS’s fee per transaction, which rendered FIS’s costs lower than the team realized. However, the team already knew that FIS’s prices were generally lower than NIC’s and the testimony confirmed that the error had no effect on their decision. Indeed, the team utilized the spreadsheet merely as a tool. It also cannot be ignored that, although NIC charged higher fees per transaction, FIS charged fees for monthly maintenance and equipment replacement, and charged hourly fees for customization development, which NIC offered for free. More importantly, based on the weight of the credible evidence, the team reasonably chose to eliminate FIS from negotiations despite its lower price because it fell short on the other two selection criteria—demonstrated ability and experience to meet the requirements of the ITN—and the team acted within its discretion under the ITN and Florida law in doing so. The team continued negotiations with NIC and solicited a BAFO only from it because no other vendor was reasonably susceptible to an award. NIC submitted its BAFO in December 2019. Consistent with its initial response, NIC proposed adjustments to the limitation of liability term and removed the parent guarantee term, and it attached those changes in its proposed Standard Terms and Conditions, as the ITN required. Although NIC understood that it would be the single awardee, its proposed Standard Terms and Conditions included the original non-exclusivity provision, making it clear that DFS was not granting NIC an exclusive license to provide the e-Payment services at issue. The BAFO also included a pass-through plus pricing model, which NIC proposed back in July 2019 during the pricing exercise. This pricing model passed through banking and merchant fees, reduced its fees per transaction from its original proposal, and included a discounted fee for DOT transactions. These adjustments generated significant savings to the State as compared to what the State currently pays BOA, which is exactly why DFS encouraged vendors to propose creative pricing in the ITN and the Q&A. PayIt argues that the team irrationally ignored merchant fees associated with credit card transactions during the pricing exercise, which would be a pass-through cost to the State. However, the weight of the credible evidence showed otherwise. Unlike processing fees (charged by NIC) and interchange fees (charged by the credit card company), merchant fees are charged by the intermediary that provides security and tokenization for the credit card transaction. Although the sample invoices submitted by FIS, Official Payments, and NIC during the pricing exercise did not itemize merchant fees, the total cost shown on the invoices included those fees. Thus, the team understood how the merchant fees would impact the total cost to the State, even if they did not understand exactly what those fees were. More importantly, agencies have the option to pass through merchant fees to the customer through a convenience fee and many of them do just that. In fact, agencies charged approximately $8.3 million in convenience fees in 2017-2018. By passing those fees through to the customer, they are not costs borne by the State. Because it is up to the agency to choose whether to pass through such fees, it is impossible to determine whether and to what extent the State will be responsible for those fees and how much they would cost the State. The Best Value Determination The team reviewed NIC’s BAFO and determined that it represented the best value to the State. The weight of the credible evidence established the following justifications for that decision: NIC was the only vendor that could provide all of the required services and exceed them, including contactless payments, POS devices, IVR in 21 languages, and next-day settlement with midnight cut-off so payments would be disbursed to the agency within one business day. NIC had over 25 years of government experience with states as large as Florida and had the demonstrated ability to perform all services effectively and immediately. NIC owned a single proprietary platform designed specifically for government entities with over 200 configurable elements that agencies could tailor to their own individual needs. NIC proposed a dedicated four-person team in Tallahassee for the duration of the contract, which was important due to the number of agencies utilizing the contract and the number of moving parts. NIC had a detailed project management plan for implementing the services to the agencies and local governments. NIC offered value-added services exceeding those required by the ITN, such as free replacement of all POS devices, a yearly device allowance, a mobile platform, and payment through text messages, among others. Although the team understood that choosing NIC may be more expensive than FIS, it determined that it was willing to pay more for a better solution that exceeded all of the ITN’s requirements from a more established vendor. The team did not want Florida to be a test case and it had confidence that NIC was battle-ready on day one. Given the importance of this billion- dollar contract and the number of agencies involved, the weight of the credible evidence showed that the team reasonably made this determination. The team’s almost year-long effort culminated in a public meeting on January 3, 2020. At that point, the team had conducted over 30 negotiation sessions with vendors, many of which spanned an entire day, and held over 100 strategy sessions averaging around four to six hours each. At the meeting, Ms. Pelham reviewed the selection criteria and each team member voted in favor of NIC. Although the team members did not detail the reasons for their vote at the meeting, they had spent hundreds of hours meeting with vendors and strategizing about their capabilities, solutions, and pricing, and discussing these issues at length during the strategy sessions. It is true that the team was to arrive at its recommendation by “discussion” during a public meeting, but the ITN did not define that term or require a specific level of detail. In any event, the failure to provide such details during the meeting resulted in no prejudice to any other vendors, all of whom already had been reasonably eliminated from negotiations. After the meeting, Ms. Pelham drafted a memorandum recommending the award to NIC. The memorandum confirmed that NIC provided the best value to the State based on its price and the selection criteria. Although the memorandum did not provide a more detailed explanation, the ITN contained no such requirement. Instead, the ITN stated that the negotiation team would make an award recommendation after determining which vendor presented the best value in accordance with the selection criteria and that the CFO or his designee will make the final determination based on that recommendation. Mr. Fennell, the deputy CFO, was tasked with making the final decision. As the deputy CFO of a large agency, he must rely on the advice of the division directors, deputies, and bureau chiefs who oversee the day-to-day operations of the divisions within his purview; this procurement was no different. Based on his confidence in the team and Mr. Collins, who had been involved throughout the ITN process, participated in some of the strategy sessions, and provided high-level updates to Mr. Fennell about the progress of the procurement, Mr. Fennell approved the team’s recommendation. Based on the weight of the credible evidence, DFS did not contravene the ITN, let alone in a material or prejudicial way, through the process by which it recommended the award. The negotiation team followed the dictates of the ITN by holding the public meeting, at which the selection criteria were reviewed and the team voted for the recommended action, which was then set forth in the team’s memorandum. Mr. Fennell complied with the ITN by making a final decision based on the memorandum and the confidence he had in the negotiation team’s recommendation. On January 13, 2020, DFS issued its notice of intent to award the contract to NIC. Upon receipt thereof, PayIt timely filed its bid protest. Assuming that DFS and NIC are successful in this protest, they will execute the contract. Thereafter, DFS will create a contract file, place the contract in it, and confirm that it contains a short plain statement explaining the basis for the award, as required by section 287.057(1)(c)5., Florida Statutes. The contract itself is often sufficient to meet this requirement. Based on the weight of the credible evidence and the language of the statute, the undersigned finds that DFS has no obligation to create such a file or prepare the statutory statement until the contract is signed, which cannot occur until this protest is finally resolved.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services issue a final order dismissing PayIt, LLC’s Amended Formal Written Protest Petition. DONE AND ENTERED this 6th day of August, 2020, in Tallahassee, Leon County, Florida. S ANDREW D. MANKO Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of August, 2020. COPIES FURNISHED: Brittany B. Griffith, Esquire Department of Financial Services Office of the General Counsel 200 East Gaines Street, Room 612B Tallahassee, Florida 32399-0950 (eServed) James A. McKee, Esquire Foley & Lardner LLP 106 East College Avenue, Suite 900 Tallahassee, Florida 32301 (eServed) Eduardo S. Lombard, Esquire Radey Law Firm, P.A. 301 South Bronough Street, Suite 200 Tallahassee, Florida 32301 (eServed) Alexandra Akre, Esquire Ausley & McMullen, P.A. 123 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302 (eServed) Eugene Dylan Rivers, Esquire Ausley & McMullen, P.A. 123 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32301 (eServed) Erik Matthew Figlio, Esquire Ausley & McMullen, P.A. 123 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32301 (eServed) Mallory Neumann, Esquire Foley & Lardner LLP 106 East College Avenue, Suite 900 Tallahassee, Florida 32301 (eServed) Marion Drew Parker, Esquire Radey Law Firm, P.A. 301 South Bronough Street, Suite 200 Tallahassee, Florida 32301 (eServed) John A. Tucker, Esquire Foley & Lardner, LLP One Independent Drive, Suite 1300 Jacksonville, Florida 32202 (eServed) Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent pay petitioner $12,057.68 for the 2,324 bushels of soybeans purchased on January 6 and 7, 1983. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day of September, 1983. COPIES FURNISHED: Paul M. Hendrick, Esquire P. O. Drawer 151 Jasper, Florida 32052 Terry R. McDavid, Esquire P. O. Box 1328 Lake City, Florida 32055 Robert A. Chastain, Esquire Room 513, Mayo Building Tallahassee, Florida 32301 Reggie Pennington Crawford and Company P. O. Box 1113 Lake City, Florida 32055
The Issue Whether Respondents are indebted to Petitioner for 35 boxes of beans sold by Petitioner to Respondent, Weis-Buy Services, Inc., and, if so, the amount of the indebtedness.
Findings Of Fact Respondent, Weis-Buy Services, Inc., is a dealer in agricultural products licensed by the Florida Department of Agriculture and Consumer Services. Respondent, Aetna Casualty & Surety Company of Maryland acts as surety for Weis-Buy. On January 5, 1995, Mark A. Underwood, Vice President of the Petitioner, sold to Respondent, Weis-Buy Services, Inc., 35 boxes of beans. This sale was the result of the order placed by Hank Douglas, a duly authorized employee of Weis-Buy. The price agreed to by the Petitioner and Weis-Buy was $28.55 per box, for a total purchase price of $999.25. The beans sold by Petitioner to Weis-Buy had been purchased by Petitioner from another grower, Suncoast Farms. There was no written contract between Petitioner and Suncoast or between Petitioner and Weis-Buy. Weis-Buy took delivery of the beans at Petitioner's dock in Homestead, Florida, on January 5, 1995. The beans were loaded into a refrigerated truck in the employ of Weis- Buy on January 5, 1995. From Homestead, the truck drove to Belle Glade, Florida, a trip of approximately 3.5 hours. In Belle Glade, the truck picked up a load of radishes. The truck then went to Immokalee, Florida, where it picked up a quantity of squash. The following day, the truck picked up a load of cherry tomatoes. On January 9, 1995, the beans were inspected by a federal inspector in Columbus, Ohio. 1/ The inspector noted on his inspection report that the beans showed evidence of freeze damage that was ". . . so located as to indicate freezing injury occurred after packing but not at present location". The inspection report noted that the beans were to be dumped. The parties disagree as to when the freeze damage to the beans occurred. Because Weis-Buy believes that the freeze damage occurred before it took delivery of the beans, it has refused to pay Petitioner for the 35 boxes of beans. The reason Weis-Buy believes that the freeze damage occurred before the beans were loaded onto the truck is because the other vegetables that were transported by the refrigerated truck were not damaged. Partly because the beans had been purchased from another grower, Mr. Underwood inspected the beans immediately prior to their being loaded onto Weis- Buy's truck. Based on his testimony, it is found that there was no freeze damage to the beans when they were loaded on Weis-Buy's truck on January 5, 1995. It is found that the freeze damage to the beans revealed by the federal inspection on January 9, 1995, occurred after the beans had been delivered to Weis-Buy. Consequently, it is concluded that Petitioner fulfilled its obligations under the verbal contract and is entitled to be paid the sum of $999.25.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Agriculture and Consumer Services that adopts the findings of fact and conclusions contained herein, that finds Respondent Weis-Buy Services, Inc., is indebted to Petitioners in the amount of $999.25, directs Weis-Buy Services, Inc., to make payment to Petitioner in the amount of $999.25 within 15 days following the issuance of the order, and provides that if payment in full of this $999.25 indebtedness is not timely made, the Department will seek recovery from the Aetna Casualty & Surety Company of Maryland, as Weis-Buy's surety. DONE AND ENTERED this 16th day of February, 1996, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON, 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 16th day of February 1996.
The Issue Whether there is probable cause for Petitioner to bring an action against Respondents for violation of the Florida Deceptive and Unfair Trade Practices Act?
Findings Of Fact Respondents sell used cars in Pensacola, about 500 a year. On or about June 19, 1981, when Fannie Mae Tunstall bought a '76 Buick LeSabre from Fairfield Motors, Inc. (Fairfield), she dealt with Elaine Owens Atkins, who is Fairfield's general manager, secretary-treasurer and a six-year employee. The installment sales contract specified an annual percentage rate of 29.64 percent, and was stamped with the legend, "MINIMUM $25 REPO OR COLLECTION FEE." Respondent's Exhibit No. 1. Ms. Tunstall told Ms. Atkins the payments were too much but signed the papers anyway, and did so without reading them, although Ms. Atkins had told her to read them. The payments did indeed prove too much and Ms. Tunstall fell behind. She was 13 days late with a payment in November of 1981, but Ms. Tunstall and Ms. Atkins had discussed the matter and Fairfield agreed to accept the payment late. Fairfield accepted other payments late, but arranged to have Willie Easley (formerly a singer and now a minister as well as a repossessor of cars) take possession of the Quick early in the morning of January 10, 1983, and drive it away. Ms. Tunstall had failed to make the monthly payment due December 30, 1982. Ms. Atkins had telephoned her once and gotten no answer. Later on January 10, 1983, Fairfield agreed to return the car in exchange for December's payment, another payment in advance, a six dollar late fee and a $100 repossession fee. Ms. Tunstall paid the entire balance Fairfield claimed to be owed and retrieved the car. Linda Louise LaCoste and her husband Ronnie have bought several cars from Fairfield, including a 1976 Chevrolet Suburban Mr. LaCoste bought on February 7, 1983, under an installment agreement calling for interest at an annual percentage rate in excess of 30 percent. The "cash price" was $3,459.75, and the "total sale price" was $4,613.15. Respondent's Exhibit No. 3. The LaCostes understood from prior dealings that their agreement required Mr. LaCoste to maintain insurance on the vehicle, and Mr. LaCoste contracted with Allstate Insurance Company (Allstate) for appropriate coverage. Allstate sent Fairfield a notice of cancellation for nonpayment of premium effective 12:01 A.M. April 4, 1983. Petitioner's Exhibit No. 4. At 11:25 A.M. on April 4, 1983, Allstate accepted the premium Ronnie LaCoste offered in order to reinstate the policy, No. 441361747, and Allstate's Chirstine Smith also wrote a new policy to be sure there would be coverage. Ms. Smith told Fairfield that insurance was in force on April 4, 1983. On April 20, 1983, Allstate issued another notice of cancellation for nonpayment of premium on policy No. 441361747, effective 12:01 A.M. May 4, 1983. At ten minutes past three o'clock on the afternoon of May 4, 1983, Mr. LaCoste's Chevrolet Suburban was repossessed at Fairfield's instance on account of the apparent lapse of insurance. Mrs. LaCoste and here sister appeared promptly at Fairfield's place of business and tendered payment due that day. All prior payments to Fairfield were current. When Mrs. Atkins refused payment, Mrs. LaCoste and here sister protested with such vehemence that a Fairfield employee called the sheriff's office. According to Fairfield's contemporaneous records, Fairfield employees ("we") tried to give Mrs. LaCoste a letter "advising vehichle [sic] would be held for 10 days" (i.e., that it would be sold thereafter) but "she refused to accept a copy." Respondent's Exhibit No. 3. At hearing, Ms. Atkins conceded that she had not mailed a copy of the letter to Mr. LaCoste but testified that Mrs. LaCoste accepted a copy after refusing to take it initially. Mrs. LaCoste denied that she ever received the letter, and her version has been credited. On May 7, 1983, Fairfield received another communication from Allstate. Whether insurance coverage in fact lapsed on May 4, 1983 was not clear from the record. On May 17, 1983, Fairfield sold the Chevrolet Suburban for $2,050.00. Carolyn V. Kosmas purchased a 1978 Ford LTD II from Fairfield and made a downpayment of $550.00 on June 2, 1983. Under the terms of the installment sale contract, which called for an annual percentage rate in excess of 29 percent, she was to begin seventy dollar ($70.00) biweekly payments on June 22, 1983. At the time of the sales of the Ford to Ms. Kosmas on June 2, 1983, Fairfield asked for credit information about her fiance as well as about herself. On June 24, 1983, she appeared at Fairfield's place of business and tendered not only the payment due June 22 but also the payment due July 6, a total of $140.00 in cash. Ms. Atkins refused to accept the money, telling her that her references had not panned out, and asked her to surrender the keys to the car and gather up her personal effects. Ms. Kosmas made no secret of her opinion that she was not being treated fairly, but, crying and afraid, eventually agreed to treat the transaction as a rental and accepted a refund of $104.39 on that basis. Ms. Atkins "advised if she gave me another background sheet, that I could verify, I would renegotiate with her," Respondent's Exhibit No. 5, but Ms. Kosmas told Ms. Atkins that she had lost her job at West Florida Hospital and the renegotiation eventuated in the retroactive lease. Respondent Pearl Allen was present on June 24, 1983, and took the car keys from her. It was also he who wrote her on June 27, 1983 that the 1978 Ford LTD II would be privately sold on July 6, 1983. She did not appear when and where she was told the sale would occur. The Ford was in fact sold at auction in Montgomery, Alabama, on July 19, 1983. Respondent's Exhibit No. 5. Mary Lee Hobbs' husband Forace paid Fairfield $800.00 down on a 1977 Oldsmobile 98 on February 27, 1982, agreeing to maintain insurance on the car until paid for, and to pay the unpaid principal balance of $4134.25 over a two and a half year period together with interest at an annual percentage rate of 29.79. Stamped on the contract was the legend, "MINIMUM $25 REPO OR COLLECTION FEE." In part, the installment sale contract read: * NOTE: DISCLOSURES REQUIRED BY FEDERAL LAW, Respondent's Exhibit No. 6 (reduced in size), has been omitted from this ACCESS Document. For review, contact the Division's Clerk's Office. All payments were current when, at about half past five o'clock on the morning of November 1, 1983, Fairfield's agents used a wrecker to remove the Oldsmobile, damaging the Hobbses' porch in the process. Fairfield acted because it received notice of cancellation or nonrenewal of the insurance policy that Hobbs maintained on the car. Typed on the form notice as the effective date of cancellation was November 29, 1983. Someone has written in ink "should be 10-29." In fact the insurance policy never lapsed. According to Fairfield's records, they received conflicting information, on October 29, 1983, about whether an insurance premium had been paid. The Hobbses' 27-year old "daughter said they p[ai]d--Conway Spence said they did not pay." Respondent's Exhibit No. 6. This was the same day Mr. Spence, an insurance agent, erroneously informed Fairfield that the effective date of expiration "should be 10-29." Respondent's Exhibit No. 6. Even after Mr. Spence's error was known to it, Fairfield refused to return the car without payment of a $75.00 "repossession fee," and also refused to let the Hobbs children return with the laundry they were sent to fetch from the trunk of the car. It was the refusal to give up the dirty laundry that sent Mrs. Hobbs to the authorities. Karel Jerome Bell bought a 1977 Delta 88 Oldsmobile from Fair field on July 22, 1982, under an installment sale contract calling for two "pick up notes" to be paid in August of 1982 and biweekly payments of $125.00 thereafter until payments reached a total of $4161.212. Respondent's Exhibit No. 7. The "pick up notes," each for $220.00 were due August 7 and 21, 1982, and were not treated as down payments on the installment sale form. After reducing his indebtedness to $1221.21, Mr. Bell fell two payments behind, and Fairfield repossessed the Oldsmobile on July 7, 1983. The same day Fairfield wrote Mr. Bell that it intended to sell his car, but not time or date was specified. On July 8, 1983, Mr. Bell called and asked whether he could continue making payments while the car on the lot. Respondent's Exhibit No. 7. Fairfield's Ms. Gilstrap accepted $100.00 from Mr. Bell on July 12, 1983, which she applied to satisfy a reposession fee of $100.00. On the Bell contract, too, had been stamped, "MINIMUM $25 REPO OR COLLECTION FEE." Ms. Gilstrap "told him as long as he paid something something regularly on the account, I felt sure we would hold it for him." Mr. Bell indicated he would pay an additional $125.00 the following Friday and Ms. Gilstrap made a notation to this effect in his file, where she also wrote, "Pls. don't sell he intends to pay for." Respondent's Exhibit No. 7. Mr. Bell had not made any further payment when, on July 30, 1983, without notice to Mr. Bell, Fairfield sold the car for $1,000.00 to a wholesaler. Respondents use form installment sale contracts. A blank form like the one in use at the time of the hearing was received as Respondent's Exhibit No. This was the form used in the Kosmas and LaCoste transactions. The predecessor form used in the Bell, Hobbs and Tunstall transactions was similar in many respects. The earlier form provided, "LATE CHARGES: Buyer(s) hereby agrees to pay a late charge on each installment in default for 10 days or more in an amount of 5 percent of each installment or $5.00 whichever is less." On the reverse, the form provided: ACCELERATION AND REPOSSESSION. In the event any Buyer(s) or Guarantor of this Contract fails to pay any of said installments, including any delinquency charges when due or defaults in the performance of any of the other provisions of this Contract or (c) in case Buyer(s) or Guarantor becomes insolvent or (d) institutes any type of insolvency proceedings or (e) has any thereof instituted against him, or (f) has entered against him any judgment or filed against him any notice of lien in case of any Federal tax or has issued against him any distraint warrant for taxes, or writ of garnishment, or other legal process, or (g) in case of death, adjudged incompetency, or incarceration of the Buyer(s) or Guarantor or (h) in case the seller or the holder of this Contract, upon reasonable cause, determines that the prospect of payment of said sums or the performance by the Buyer(s) or his assigns of this Contract is impaired, then, or in such event, the unpaid portion of the balance hereunder shall, without notice, become forthwith due and payable and the holder, in person or by agent, may immediately take possession of said property, together with all accessions thereto, or may, at first, repossess a part and later, if necessary, the whole thereof with such accessions, and for neither or both of these purposes may enter upon any premises where said property, may be and remove the same with or without process of law. Buyer(s) agrees in any such case to pay said amount to the holder, upon demand, or, at the election of the holder, to deliver said property to the holder. If, in repossessing said property, the holder inadvertently takes possession of any other goods therein, consent is hereby given to such taking of possession, and holder may hold such goods temporarily for Buyer(s), without responsibility of liability therefor, providing holder returns the same upon demand. There shall be no liability upon any such demand unless the same be made in writing within 48 hours after such inadvertent taking of possession. Should this contract mature by its term or by acceleration, as hereinabove provided, then, and in either such event, the total principal amount due hereunder at that time shall bear interest at the rate of 10 percent per annum, which principal and interest, together with all costs and expenses incurred in the collection hereof, including attorneys fees (to be not less than 15 percent of the amount involved), plus appellate fees, if any, and all advances made by Seller to protect the security hereof, including advances made for or on account of levies, insurance, repairs, taxes, and for maintenance or recovery of property shall be due the Holder hereof and which sums Buyer(s) hereby agrees to pay. * * * LIABILITIES AFTER POSSESSION. Seller, upon obtaining possession of the property upon default, may sell the same or any part thereof at public or private sale either with or without having the property at the place of sale, and so far as may be lawful. Seller may be a purchaser at such sale. Seller shall have the remedies of a secured party under the Uniform Commercial Code (Florida) and any and all rights and remedies available to secured party under any applicable law, and upon request or demand of Seller, Buyer(s) shall, at his expense, assemble the property and make it available to the Seller at the Seller's address which is designated as being reasonably convenient to Buyer(s). Unless the property is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Seller will give Buyer(s) reasonable notice of the time and place of any public or private sale thereof. (The requirement of reasonable notice shall be met if such notice is mailed, postage prepaid, to Buyer(s) at address shown on records of Seller at least five (5) days before the time of the sale or disposition) Expenses of retaking, holding, preparing for the sale, selling, attorneys' fees, supra, incurred or paid by Seller shall be paid out of the proceeds of the sale and the balance applied on the Buyer(s) obligation hereunder. Upon disposition of the property after default, Buyer(s) shall be and remain liable for any deficiency and Seller shall account to Buyer(s) for any surplus, but Seller shall have the right to apply all or any part of such surplus against (or to hold the same as a reverse against) any and all other liabilities of Buyer(s) to Seller. Similarly, the more recent form provides, on the obverse, Late Charge: If a payment is received more than ten (10) days after the due date, you will be charged $5.00 or five (5 percent) of the payment, whichever is less. and on the reverse, has identical provisions on "Acceleration and Repossession" and "Liabilities After Repossession."
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That Petitioner find probable cause to initiate judicial proceedings against Respondents pursuant to Section 501.207(1), Florida Statutes (1981). DONE and ENTERED this 26th day of April, 1985, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 FILED with the Clerk of the Division of Administrative Hearings this 26th day of April, 1985. COPIES FURNISHED: William P. White, Jr., Esquire Assistant State Attorney Post Office Box 12726 Pensacola, Florida 32501 Paul A. Rasmussen, Esquire Eggen, Bowden, Rasmussen & Arnold 4300 Bayou Boulevard, Suite 13 Pensacola, Florida 32503 Curtis A. Golden, State Attorney First Judicial Circuit of Florida Post Office Box 12726 190 Governmental Center Pensacola, Florida 32501
The Issue At issue in this proceeding is whether the decision of the Department of Management Services (Department) to reject the bid of National Data Products, Inc. (NDP), as non-responsive departed from the essential requirements of law.
Findings Of Fact Background On December 4, 1992, the Department of Management Services (Department) issued Invitation to Bid number 79-250-040-B REBID (hereinafter "the ITB") to establish a contract whereby eligible users could purchase microcomputers and optional components during the period of January 15, 1993, through October 31, 1993. The deadline for submitting sealed bids in response to the ITB was established as 2:00 p.m., December 16, 1992. At the time of the deadline, the Department received a number of bids, including those of petitioner, National Data Products, Inc. (NDP), and intervenor, Mon-Wal, Inc., d/b/a the Waldec Group (Waldec). On December 21, 1992, following its evaluation of the bids, the Department posted its bid tabulation. The bid tabulation indicated, inter alia, that, although NDP was the apparent low bidder, its bid had been rejected as non-responsive, and that Waldec was declared the low responsive bidder. Pertinent to this case, the predicate for the Department's rejection of NDP's bid was its conclusion that NDP had failed to include, as required by the ITB, the manufacturer's suggested retail price lists with its bid. NDP filed a timely notice of protest and formal written protest to contest the Department's decision. Such protest contended that the manufacturer's suggested retail price lists were included with its bid or, alternatively, that had they not been submitted, such oversight was a minor irregularity that should be waived. The Invitation to Bid The stated purpose of the ITB was to establish pricing for the purchase of microcomputers and optional components to be added to an existing contract for use by all State of Florida agencies and other eligible users. Specifically, the ITB invited bids for three separate product lines, Hewlett Packard, NCR and Zenith, and a bidder could respond with regard to one or more of the product lines. This bid protest relates only to that portion of the ITB regarding the Hewlett Packard (HP) product line. The ITB, apart from specifying the HP product line, did not identify any particular HP product or volume. Rather, the ITB sought to establish pricing by requiring each bidder to specify a percentage discount off the manufacturer's suggested retail price of all HP microcomputer systems and peripheral products. Pertinent to this case, the general conditions of the ITB provided: 9. AWARDS: As the best interest of the State may require, the right is reserved . . . to reject any and all bids or waive any minor irregularity or technicality in bids received. * * * 15. PRICE ADJUSTMENTS: Any price decrease effectuated during the contract period by reason of market change shall be passed on to the State of Florida . . . Price increases are not acceptable. * * * 24. THE SUCCESSFUL BIDDER(S) MUST PROVIDE: A copy of any product literature and price list, in excellent quality black image or white paper, or on 4 x reduction microfiche, suitable for duplication (120 lines resolution or better). * * * NOTE: ANY AND ALL SPECIAL CONDITIONS AND SPECIFICATIONS ATTACHED HERETO WHICH VARY FROM THESE GENERAL CONDITIONS SHALL HAVE PRECEDENCE. . . . And, the ITB contained the following special conditions: LITERATURE DISTRIBUTION Successful bidder shall be required to furnish State agencies and political subdivisions with price lists, (printed) descriptive literature and technical data service information for items awarded. Bidders are urged to reserve approximately 1,500 price lists for this purpose. * * * PRICE DISCOUNT SCHEDULE Bidders of brand name microcomputer systems and optional components, shall complete the price discount schedule in the format provided. The following information will be included: a copy of the Manufacturer's Suggested Retail current Price list (current Price list is the latest price list in effect between the "date mailed" as shown on the ITB and the Bid opening date), number and date, bid discount for microcomputer configured systems, bid discount for optional components not purchased as part of a microcomputer system. Separate bid discounts for government and education are requested, however education bid discounts must be greater than government bid discounts, for a separate award to be made. (See EVALUATION and AWARD paragraph, page 16, for evaluation and award criteria.) PRICING The discount offered and awarded shall remain firm for any product placed on the contract resulting from this bid, or for products added to the contract at a later date through revision to the contract. * * * MANUFACTURER'S SUGGESTED RETAIL PRICE CHANGES When the list prices for products on the contract are reduced, the contractor shall submit new prices which reflect the same percentage off list price as was originally bid. When the contractor cannot continue to offer products at the contracted discount due to a general change in the manufacturer's pricing policy or other valid reasons, the State shall determine whether to allow the product line to remain on contract. The contractor shall provide to the Division of Purchasing, documentation to justify why the product line can no longer be offered at the contracted discount. The determination to allow the product line to remain on contract and under what conditions shall be at the discretion of the Division of Purchasing in the best interest of the State. In no instance may the new pricing result in an increase in net prices. Reductions in price shall be effective upon receipt of written notification to the Division of Purchasing and shall remain in effect for the balance of the contract term, unless further reduced by the contractor. In the event that the contractor announces a price reduction on any equipment listed on the contract prior to the purchaser's acceptance of said equipment, such price reduction shall be made available to the purchaser. * * * FORMAT FOR SUBMISSION OF BID PRICE SHEETS Referenced Price Lists, Ordering Instructions, Dealer Lists and Locations or Service Locations, required in this bid, must be submitted in hard copy with the bid package. Also provide with the bid package or within ten (10) working days after notification the identical information, in WordPerfect 5.1 format, portrait orientation with minimum 0.5 inch margins, Courier 10 pitch font, in hard copy and on 3.5 or 5.25 diskette media. Failure to comply will result in your contract being withheld from distribution. EVALUATION AND AWARD Bids will be evaluated as follows: Government and Education bids will be evaluated and awarded separately. The percentage (%) discount bid for each brand name, for each category (configured microcomputer systems and optional components), will be multiplied by an applicable usage factor, (the projected percentage purchases from each category) to be stated at the time of the bid opening, which will yield a weighted discount. The weighted discounts of the two categories will be added to yield the total weighted discount on which an award will be made. Awards will be made separately for Government, and Education (if applicable), to the responsive bidder offering the greatest total weighted discount. EVALUATION FORMULA (Micro (%) discount (x) usage factor) (+) plus (option components (%) discount (x) usage factor) = total evaluation (%) discount. * * * MICROCOMPUTERS AND OPTIONAL COMPONENTS PRICE DISCOUNT SCHEDULE GOVERNMENT EDUCATION Manufacturers MICROS OPTIONS MICROS OPTIONS Brand Name Catalog Date %DISCOUNT %DISCOUNT %DISCOUNT %DISCOUNT HEWLETT PACKARD 1(A) (B) (C) -NA- (D) -NA- NCR 2(A) (B) (C) (D) ZENITH 3(A) (B) (C) (D) MSPR: Manufacturer's Suggested Retail Price from which discounts will be taken. Micros: Percentage discount for microcomputer systems. Options: Percentage discount for optional components when purchased Separately, not as a part of a microcomputer system. Responses to the ITB The price discount schedules submitted on behalf on NDP and Waldec were virtually identical except for the discounts offered. Each specified the HP catalog of October 1992 as containing the manufacturer's suggested retail price for personal computer products and the HP catalog of November 1992 for peripheral products from which percentage discounts would be taken for microcomputer systems and optional components. As to discounts, NDP bid 32.02% for microcomputer systems and 38.05% for optional components, and Waldec bid 25.90% for microcomputer systems and 39.92% for optional components. Following the bid opening, at which the bids were announced and tabulated, the bid documents were transported to the office of a Department purchasing specialist charged with the responsibility of evaluating the bids. Applying the evaluation criteria established by the ITB, NDP was calculated to be the apparent low bidder; however, because NDP's bid failed to include the MSRP lists, when examined by the specialist, it was declared non-responsive. The bid of Waldec, which scored second under the evaluation criteria, was found to include copies of the MSRP list referenced in its price discount schedule and was declared the low responsive bidder. The Manufacturer's Suggested Retail Price (MSRP) List With regard to Hewlett Packard, and ostensibly all manufacturers, there is only one manufacturer's suggested retail price (MSRP) at any given time. That price may be established by reference to the MSRP list published by the company, as well as any addenda that may be pertinent. Hewlett Packard publishes separate MSRP lists for personal computer products and peripheral products at 90 day intervals and updates those lists on a monthly basis, as needed, through addenda, its "In Touch" publication, and "The Hewlett-Packard News Network." Each method used by HP to update its quarterly MSRP list is expected to provide identical information, and each is considered an addendum to its quarterly MSRP list from which the current MSRP can be derived. 2/ Here, the proof demonstrates that the "Manufacturer's Suggested Retail current Price list (current Price list is the latest price list in effect between the `date mailed' as shown on the ITB and the Bid opening date)" which the ITB directed should be included with the bid, was the HP quarterly MSRP list of October 1992 for personal computer products, the HP quarterly MSRP list of November 1992 for peripheral products, and an addendum effective December 1, 1992 (whether by addenda, "In Touch" or "The Hewlett-Packard News Network"), for personal computer products. NDP contends that included with its bid were copies of the October 1992 and November 1992 MSRP lists for personal computer products and peripheral products, respectively, and a copy of the December 1, 1992, "In Touch" newsletter. The parties have stipulated that if NDP's bid included such documents it was responsive to the ITB. Compared with NDP's averred response, Waldec's bid included a copy of the October 1992 MSRP list for personal computer products and the November 1992 MSRP list for peripheral products, but no addenda to reflect price changes affecting personal computer products through the bid opening date. Notwithstanding, the Department has found Waldec's bid responsive. Such finding, discussed more fully infra, mitigates against the Department's contention that any failure to include MSRP lists with the bid constitutes a material deviation. The missing price lists To support its position that its bid included the HP MSRP lists, NDP offered, inter alia, the testimony of Carol Hutchins, Kyle Peterson, and Jacqueline Smith. Ms. Hutchins is the government sales manager for NDP at its offices in Clearwater, Florida, and prepared NDP's bid. Mr. Peterson is the general manager of the Tallahassee branch office of NDP, and was responsible for delivering NDP's bid to the Department. Ms. Smith is employed in the Tallahassee branch office, and is engaged in government sales on behalf of NDP. The bid prepared on behalf of NDP by Ms. Hutchins ostensibly included a copy of HP's MSRP list of October 1992 for personal computer products, HP's MSRP list of November 1992 for peripheral products, and HP's "In Touch" newsletter for December 1992. This bid package, along with two blank copies of the price discount schedule (page 23 of the ITB) in case NDP decided to alter the discount it initially established in its bid before submittal, was shipped via Federal Express to Mr. Peterson at NDP's Tallahassee branch office. According to Mr. Peterson, the package was delivered to his office at or about 11:00 a.m., December 16, 1992, and placed on his desk. When he opened it, Mr. Peterson observed NDP's response to the ITB, as well as the MSRP lists heretofore discussed. Notwithstanding that the role of the Tallahassee branch was "very minor . . ., to act as courier for the bid and ensure that it was delivered in a timely manner," the bid package was disassembled at least twice within that office. First, Ms. Smith thought it would be a good idea to make a copy of the bid for their files, so she made a copy of NDP's bid, but not the MSRP lists. According to Ms. Smith, after making the copy she replaced the original bid on top of the MSRP lists on Mr. Peterson's desk. Second, NDP elected to change the discount rate it initially proposed so a new price discount schedule was typed by Mr. Peterson's staff, and he exchanged the new page for the old page in the bid document. Thereafter, according to Mr. Peterson, he inserted the bid package, including the price lists, into an envelope which he sealed and delivered to the Department shortly before the bid opening, to-wit: at 1:49 p.m., December 16, 1992. Both Mr. Peterson and Ms. Smith attended the bid opening and, at hearing, related what they recalled of the scene and procedures utilized. Regarding significant matters, their recitation of what occurred bore little resemblance to what actually transpired. For example, Mr. Peterson described the tenor of what occurred during the bid opening as one of confusion, when the more compelling proof demonstrates the contrary. Indeed, the two purchasing agents and the purchasing specialist who conducted the opening did so with precision and in accord with Department policy. Mr. Peterson, likewise, described the table upon which the bids were opened as being upon a raised platform when in fact it was not, and recalled that the purchasing agent who opened the bids separated the envelopes from the bid packages before passing the bid package to the purchasing specialist to announce the bid, which she did not. Finally, notwithstanding the limited nature of their involvement with the bid, as well as the fact that each was taking notes as each bid was announced, Mr. Peterson and Ms. Smith aver that they saw the price lists attached to NDP's bid when it was announced. As for Mr. Peterson, he averred that he noticed "stapled" booklets included with NDP's bid which could only have been the price lists. Ms. Smith recalls that the thickness of the bid package she observed at opening compels the conclusion that the price lists were attached. Given the circumstances, the testimony of Mr. Peterson and Ms. Smith regarding their observations at bid opening, and having specific recall regarding the presence of "stapled" booklets or the thickness of the package, is less than compelling. Regarding the bid opening procedure, the proof demonstrates that it was carefully and precisely run, consistent with Department policy. The first purchasing agent was seated on the left of the bid opening table, the purchasing specialist was seated in the center, and the second purchasing agent was seated to the right. The first agent had the sealed bids stacked alphabetically in front of her, opened one at a time, removed the contents from the envelope, placed the contents on top of the envelope and secured them with a rubber band, and passed the bid package to the specialist. The specialist opened the bid to the price discount schedule (page 23 of the ITB), read off the discount bid, and laid the bid package upside down to his right. Continuing through the responses, each bid or no bid was announced and placed on the appropriate stack to his right. The second agent recorded the bids on the bid tabulation sheet, as announced, and never touched the bid packages. Following the bid opening, the first agent retrieved the bids and, as to each bid, cut the date stamp off the envelope and stapled it to the first page of the bid form and, if the bid contained a form requesting notice of the bid result and a check for such service, removed the form and check and stapled them together for delivery to another employee to process. 3/ The bids, each separately secured by a rubber band, were then stacked and secured by another rubber band and taken to the office of another purchasing specialist for evaluation. When the agent took the bids from the bid room, no papers were left behind. The specialist who evaluated the bids found them in his office, as bound by the agent, between 3:15 p.m. and 3:30 p.m. that day, or approximately 45 minutes to one hour after the bid opening concluded. The specialist went through each bid separately to ascertain its responsiveness to the conditions of the ITB, and calculated the apparent low bidder by application of the evaluation formula contained in the ITB. Upon evaluation of NDP's bid, the specialist discovered that it did not include the price lists required by the ITB, and concluded that NDP's bid was, therefore, non-responsive. Considering the proof, it is most unlikely that the price lists that were to be included in NDP's bid were misplaced by the Department. Rather, it is more likely that such price lists were not included with NDP's bid, when it was delivered to the Department, because of an oversight at NDP's Tallahassee branch office. While the proof fails to support the conclusion that NDP's bid included the HP price lists when delivered to the Department, such failure is not dispositive of NDP's protest where, as here, such failing was a minor irregularity. Minor irregularity Rule 60A-1.001(31), Florida Administrative Code, defines the term "minor irregularity" as" A variation from the invitation to bid . . . terms and conditions which does not affect the price of the bid . . ., or give the bidder . . . an advantage or benefit not enjoyed by other bidders . . ., or does not adversely impact the interests of the agency. Here, the Department rejected NDP's bid based on a uniform policy which it has established that the omission of a price list from any bid can never constitute a minor irregularity and always renders a bid non-responsive. The justification for such policy was stated as follows: . . . The purpose of requiring price lists is to insure that the vendor is bidding on the material that he has offered, that he has been certified by the manufacturer to act in their behalf. It also gives [the Department] the information by which [the Department] can provide price lists to agencies so the using agencies know the price lists from which they expect the discounts. Tr. 247. . . . A bidder can obtain a competitive advantage over competitors by failing to submit price lists with its bid because the bidder would then have the ability to disqualify its own bid in the event their quotation was out of line with the other bidders. Tr. 246. Also, by failing to submit a price list, a vendor may attempt to rely on price lists reflecting higher prices for the ultimate contract with the state. Tr. 268. [Department proposed findings of fact 21 and 22.] While the Department's concerns or rationale may be legitimate, depending on the facts of the case, they do not rationally support a uniform policy that a failure to include price lists with any bid can never be a minor irregularity. Stated differently, to explicate application of its policy in this case requires that the Department demonstrate that the concerns underlying its policy are existent in the instant bid. Here, at least with regard to NDP's bid, the proof fails to support the Department's policy. Of import to the resolution of the issue in this case are the provisions of the ITB regarding the price discount schedule, as follows: Bidders of brand name microcomputer systems and optional components, shall complete the price discount schedule in the format provided. The following information will be included: a copy of the Manufacturer's Suggested Retail current Price list (current Price list is the latest price list in effect between the "date mailed" as shown on the ITB and the Bid opening date), number and date, bid discount for microcomputer configured systems, bid discount for optional components not purchased as part of a microcomputer system. NDP's bid, consistent with Waldec's bid, specified the Hewlett Packard price lists of October 1992 and November 1992 as being the "current Price list" upon which it based its bid. Such lists are readily identifiable, and permitting NDP to provide such price lists after bid opening would not affect the price of its bid, give it any advantage or benefit not enjoyed by other bidders or adversely affect the interests of the agency. Also of import to the resolution of the issue in this case is the proof which demonstrates that during the course of its evaluation the Department did not know what the current price lists were, relied upon the bidders to comply with the requirement to attach current price lists, accepted Waldec's bid as responsive although it failed to include the December 1992 addendum, and proposed to rely on the manufacturer to resolve any disputes regarding discrepancies between lists. Such proof demonstrates that the price lists were a mere technicality, and that the provisions of the ITB, which specified the basis on which the bids were predicated as the manufacturers "current" price list, defined as "the latest price list in effect between the `date mailed' as shown on the ITB and the Bid opening date," were sufficiently precise to allow the parties to confidently contract. Here, none of the announced concerns of the Department, as set forth in paragraph 24 supra, have any applicability to NDP's bid. NDP's response to the price discount schedule was sufficiently precise to identify the price lists on which it was bidding (the material being offered), it submitted the required manufacturer's certificate demonstrating NDP was authorized to represent Hewlett-Packard (page 21 of the ITB), the provisions of the ITB required the successful bidder to furnish the state agencies and political subdivisions with price lists (page 10 of the ITB) after award, and NDP's identification of the price lists in the price discount schedule would preclude it from altering its bid after bid opening. In sum, NDP's failure to include the price lists with its bid was a minor irregularity that did not affect the price of the bid, give NDP an advantage or benefit not enjoyed by other bidders, or adversely affect the interests of the agency.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be rendered finding NDP's bid responsive, and awarding the subject bid to NDP as the lowest responsive bidder. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 31st day of March 1993. WILLIAM J. KENDRICK 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 31st day of March 1993.
