The Issue The issues in this case are whether the Department of Transportation ("Department") erred by considering Willeby Construction, Inc. ("Willeby") a qualified bidder; whether the requirement to submit a bid bond or certified funds check or draft (hereafter "security on the bid") with the bid was a material requirement; whether the Department erred in treating Willeby’s failure to include security on the bid with its bid proposal as a minor, and, thereby, an irregularity which could be waived; and whether said decision of the Department was contrary to the terms of the bid, contrary to law, or arbitrary and capricious.
Findings Of Fact On November 14, 2000, the Department issued a bid solicitation notice for Financial Project No. 40509417201/Contract No. E3A78, a contract for routine mowing of grassed and vegetated roadside areas and litter removal from within the Department’s highway right-of-way in Gadsden and Leon Counties. The invitation to bid stated: In a letter dated November 17, 2000 from Richard Norris of the Department District Contracts Office to all prospective bidders, the Department reiterated the bid bond requirement stating "[i]f your bid is over $150,000, a Bid Bond of 5 percent of the bid amount is required and must be attached to your bid proposal. Failure to submit this with your bid will result in your bid being rejected." (Emphasis is in original.) The invitation to bid further stated: BID OR PROPOSAL BOND (If bid is over $150,000): Must be completely executed if bid is over $150,000. This 5 percent bid bond is required and must be included in your bid package. If bid is less than $150,000 no bid bond shall be necessary, however, the successful bidder shall be required to obtain a performance bond upon execution of the contract. The purpose of the requirement for security on the bid is to compensate the Department for damages in the event the low bidder fails to enter into the contract. The Department received bid proposals from six firms in response to its bid solicitation by the due date of December 7, 2000. The lowest bidder for Contract No. E3A78 was Willeby. Willeby submitted a business check drawn on Willeby’s business account no. 02-140168-01 with Farmers & Merchants Bank. This was an unsecured, personal check. At the time the bids were opened, Willeby’s Account No. 02-140168-01 contained insufficient funds to cover the check Willeby submitted as its bid bond in the amount of $11,996.52 for Contract No. E3A78. Willeby failed to submit the required security on the bid in the form of a cashier’s check, bank money order, bank draft of any national or state bank, or surety bond, payable to the State of Florida, Department of Transportation as required by the solicitation. The Petitioner, Phoenix, was the second lowest bidder. Phoenix submitted a bid bond equal to 5 percent of its total bid with its bid package. Phoenix fully complied with all the requirements of the invitation to bid. Bids for Contract No. E3A78 were opened on Thursday December 7, 2000. At that time, the Department's personnel discovered that Willeby had failed to submit security on bid as required by the terms of the bid solicitation. On December 15, 2000, eight days after the Department discovered that Willeby’s bid submittal was deficient, Starsky Harrell, the contract specialist with the District III office of the Department, telephoned W.J. Willeby, the president of Willeby Construction. Harrell informed Mr. Willeby that Willeby’s bid was non-conforming, and gave Willeby the opportunity to cure its non-responsive bid by submitting a check for certified funds or a bid bond as required by the bid solicitation. Willeby, at this point, had the opportunity to cure the defect or refuse to cure the defect, thereby, negating his bid. This gave Willeby an advantage not enjoyed by the other bidders. Willeby chose to cure its non-responsive bid, and submitted a certified check as its security on the bid. Willeby, thereafter, entered into the contract with the Department on Monday, December 18, 2000, eleven days after the bids were opened. The Department posted its intent to award Contract No. E3A78 on December 21, 2000, indicating its intent to award the contract to Willeby Construction. Phoenix timely filed this formal protest in opposition to the award of Contract No. E3A78 as contrary to Section 120.57(3)(f), Florida Statutes (2000). Regarding the requirements for security on the bid required in the solicitation for the bid and accompanying materials, Richard Norris, the contracts administrator, made the decision to emphasize the language by having it in bold-face type and underlined. His purpose for underlining and placing in bold-face type this language was to "put some accent on it, to make it stand out." A basic tenet of competitive procurement is to protect the integrity of the bidding process and ensure open and fair competition. A responsive bid is one which meets all the requirements of the proposal documents. Mr. Willeby has entered bids on Department contracts seventeen times in the past. Willeby is an experienced participant in the bid process. A bidder who has the option of taking a contract or not taking a contract after the bidder knows what the other bids are on a project has a competitive advantage over other bidders. If the bidder has bid too close to the profit margin, the bidder can refuse to cure the bid defect and avoid performance on the unprofitable contract. It is not only less expensive for a person to submit a personal check for security on a bid, but a stop payment order can be issued on a personal check. The bid bond posted by the Petitioner cost $800.00. This amount is not refundable. However, the proposal provides alternatives to a bid bond to establish security on the bid; therefore, paying the cost of the bond is not a competitive disadvantage. It is noted that a personal check is not among the alternatives, and the bid proposal's provisions for bid security specifically provide that checks or drafts for less than 5 percent of the bid amount will invalidate the bid. The only checks or drafts permitted under the terms of the bid proposal are those checks secured by the banking institution's funds and not subject to stop payment orders of the person in whose behalf the check is issued. It is consistent with the stated terms of invalidation, that, in addition to an insufficient amount, that an instrument not meeting the stated terms of the provision would also invalidate the bid. If being a dollar short on the secured amount is disqualifying, being short the entire amount in secured funds would be similarly disqualifying. Evidence was received regarding whether Willeby was a qualified bidder. This information related to the nature and amount of the equipment which Willeby had, and its financial ability to obtain additional equipment. Although Willeby did not have some of the equipment necessary to handle this job and its other contract obligations, he had ordered this equipment and his bank indicated that it would loan him the money. It was not developed whether the bank's willingness was dependent upon the pendency of the challenged contract award, and it is concluded that Willeby is a qualified bidder.
Recommendation Based upon the findings of fact and conclusions of law, it is RECOMMENDED: That the bid of Willeby Construction on Contract No. E3A78 be rejected, and the contract be awarded to the Petitioner. DONE AND ENTERED this 25th day of April, 2001, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN 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 25th day of April, 2001. COPIES FURNISHED: Julius F. Parker, III, Esquire Pennington, Moore, Wilkinson, Bell & Dunbar, P.A. 215 South Monroe Street, Suite 200 Tallahassee, Florida 32301 Brian A. Crumbaker, Esquire Department of Transportation Haydon Burns Building 605 Suwannee Street Tallahassee, Florida 32399-0450 James C. Myers, Clerk Department of Transportation Haydon Burns Building, Mail Station 58 605 Suwannee Street Tallahassee, Florida 32399-0450 Pamela Leslie, General Counsel Department of Transportation Haydon Burns Building, Mail Station 58 605 Suwannee Street Tallahassee, Florida 32399-0450
Findings Of Fact On March 1, 1984, Respondent gave notice to qualified contractors that it would receive sealed bids for State Project No. 72000-3541, referred to as Federal-Aid Project No. M 9041(10). This project involves the installation of a computerized traffic control system for the City of Jacksonville. In response to the opportunity to bid, the Department of Transportation received four bids. Petitioner, Winko-Matic Signal Company, was among the bidders. The other bidders were Georgia Electric Company, Traffic Control Devices, Inc., and Sperry Systems Management. The bids of Traffic Control Devices and Sperry Systems were rejected based upon an error in bid tabulations on the part of Traffic Control, a mistake on the quantities page, with the Sperry rejection being based upon a bid bond problem. Traffic Control had been the apparent low bidder with a bid of $1,964,115. Winko-Matic was the second apparent low bidder with a bid of $2,279,604.70. The Department of Transportation had estimated that the total cost of the Jacksonville project would be $ 2,024,680.61. Having discarded the bid of Traffic Control Devices, the Department of Transportation telegrammed Winko-Matic on April 4, 1984, advising Winko-Matic that it was the apparent low bidder for the Jacksonville project. Subsequently, the awards committee of the Department of Transportation met on April 18, 1984, and determined to reject all bids and re-advertise the job. In the course of this meeting the awards committee was told that there were erratic bids received on contract items, pointing to some perceived confusion among the contractors as to requirements of the contract. Discussion was also held on the possibility of establishing a pre-bid conference if the project was re advertised. The awards committee then voted to reject the bids on the basis that the apparent low bidder, Winko-Matic, had submitted a bid which-was 12.6 percent over the Department's estimate, instead of being within 7 percent of the Department of Transportation's pre-bid estimate, a point above which the Department of Transportation in its non-rule policy would call to question to the acceptability of the apparent low bid. In addition to deciding to reject all bids and re-advertise, it was determined that a pre-bid conference should be scheduled at least 30 days prior to the bid-letting date. Winko-Matic was advised that the Department of Transportation's decision to reject all bids by correspondence of May 4, 1984, in which it was indicated that all bids had been rejected based upon the fact that they were too high. In response to this notice of rejection, Winko-Matic, effective May 17, 1984, filed a written notice of protest. The case was subsequently referred to the Division of Administrative Hearings on June 20, 1984, and a final hearing date was established by Notice of Hearing of July 5, 1984. The hearing date in this cause was September 12, 1984. The Jacksonville project in question requires the utilization of what has been referred to "UTCS Enhanced" software. This software package is unique and has only been used in a limited number of locations within the country. Those locations are Los Angeles, California; San Diego, California; Broward County, Florida; and Birmingham, Alabama. Another unique feature within the project design is the use of an associated coaxial computer sys gem. Given the unique nature of this project and the fact that the Department of Transportation had never advertised for bids related to UTCS software, Department of Transportation obtained assistance from a consulting firm, Harland, Bartholomew & Associates. In fulfilling its function Harland gave estimates to include an estimate related to the projected cost of the software, Item 681-102. The Harland estimate for the overall project was $2,143,130 including a $100,000 estimate for the software system. That estimate relating to the software was subsequently adjusted by the Department of Transportation to depict a cost of $13,780. The Department of Transportation estimate was based upon information within its computer related to a system unlike the enhanced software contemplated by the plans and specifications. In other words, the stored information in the Department of Transportation computer was not the same as contemplated by the plans and specifications in the Jacksonville project. Moreover, the initial estimate of Harland was based upon the idea of an extended software system, as opposed to an enhanced software system. Winko-Matic had bid $389,500 for the software in Item 681-102. That estimate was premised upon figures obtained from JHK and Associates, the group which Winko-Matic intended to use as its subcontractor for the enhanced software portion of the project. JHK developed the software and was responsible for systems integration of the Los Angeles, California, project, one of the locations in which UTCS enhanced software has been utilized. JHK premised its estimate for the software hare upon experience in Los Angeles and an evaluation of the tasks to be performed related to the enhanced software. This included general software development activities, hardware innovation, installation costs during the period of acceptance and testing, and the preparation of data base. The JHK bid price was $339,500. Another $50,000 was added to that price related to what the Petitioner describes as its management costs for that item. By June 20, 1984, when a further meeting was held by the awards committee on the subject of the Jacksonville project, it was concluded that the estimate made by the Department of Transportation of $13,780 was not correct, on the topic of the enhanced software. A more reasonable estimate, according to the information imparted in this session, would be $200,000 for enhanced software as called for in this project, with a $100,000 amount being a reasonable estimate had they chosen to use extended software. Adjusting the initial price related to the UTCS enhanced software to reflect a corrected estimate of the Department of Transportation in its original advertised bid, that estimate becomes $2,210,900.61 and its consultant Harland's estimate becomes $2,243,130. With this adjustment, the differential in the estimate made by the Department of Transportation and the Petitioner approaches 3 percent and not the 12.6 percent originally found. The 3 percent is below the threshold of 7 percent used as the policy for determining whether a bid might be rejected as being far beyond the acceptable limits set forth in the Department of Transportation's estimate. In the aforementioned June 20, 1984, awards committee meeting, the Department of Transportation continued to hold the opinion that all bids in the Jacksonville project should be rejected and the matter re-advertised. Although the problem pertaining to the estimate of the cost of the enhanced software package had been addressed, the committee continued to feel that the prices received in the bid letting were erratic Reference was also made to revisions or modifications to the project plan which would be offered if the matter were re- advertised. It was also pointed out that the Federal Highway Administration would concur in the Department's decision to reject all bids and would accept modifications. The awards committee again voted to reject the bids. The matter was again considered by the awards committee on August 31, 1984. On that occasion, it was pointed out that the revisions contemplated by the Department of Transportation, should the matter be re-advertised, would not affect in a substantial way the cost estimate for the project with the exception of Item 680-101, the system control equipment (CPU), which would promote a lower price for the project. The committee determined in the August, 1984, meeting to reject all bids and re-advertise. While the initial notice of rejection of May 4, 1984, had suggested the basis for rejection as being the fact that Petitioner's bid far exceeded the 7 percent allowance for price above the Department of Transportation's estimate of costs, the meetings of the awards committee and the suggestion of the Respondent in the course of the final hearing in this case indicated that there were other reasons for the decision to reject. Those Were: (a) an apparent lack of clarity among bidders regarding specifications for the Jacksonville job, (b) the desire of the Respondent to revise specifications on the Jacksonville project; and (c) a lack of sufficient competition in the bids. In connection with the first of the additional reasons Respondent suggests that variations within the bid responses related to particular line items within the specifications point out a lack of clarity in the project's specifications or confusion by bidders related to those specifications. Respondent did not bring forth any of the bidders who might speak to the matter of possible confusion or misunderstanding concerning some of the bid items. By contrast, the Petitioner's president; the president of JHK & Associates and James Robinson, Harland's project manager for the Jacksonville job, did not find the specifications in the original documents to be confusing. In addition, the testimony of those individuals established the fact that bid variations related to particular line items are not extraordinary and do not establish any apparent confusion by the bidders as to the requirements of those line items. In effect, what the differentials demonstrate are variations related to the manufacture or in-house capabilities of the bidders and an effort to allocate discretionary costs in various places as to line items. Moreover, they might indicate last- minute adjustments in the bid quote prior to the opening and a possible effort by a contractor to enter into a new job market. Finally, they demonstrate offsetting which is the allocation of item prices by a contractor to maximize profits. To do this, a contractor submits high bids on items representing quantities which the contractor feels will increase after the contract is awarded and submits low bids on items representing quantities which are not likely to change. In summary, while the Department of Transportation in its presentation expressed some concern about the variations in the pricing in the bid quotations offered by the respective bidders in this project, its suspicions on the question of the possible clarity of its specifications were not confirmed and are not convincing. On the topic of revisions which the Department of Transportation would offer if the matter were re-advertised, with one exception those matters appear to be items that could be attended through change orders or supplemental agreements. They are not matters which necessarily must be addressed through a rejection of all bids and a re-advertising of the project. The lone exception to this is the possibility that the Department of Transportation may not be able to protect its proprietary rights in the enhanced software which is being developed for the project, under the terms of the present bid documents. Given that uncertainty, the Respondent would wish to re-advertise the project and make certain that its proprietary interests are protected. Finally, Respondent has alluded to the fact that the Jacksonville project should be re-advertised in view of the lack of competition in the initial letting. Only four bidders expressed an interest in this project at the time of the first letting. Of those, two bidders were found to be responsive. While this is a low number of bidders, there does not appear to be any agency practice on the part of' the Department of Transportation to the effect that this number of bidders would not be accepted. Moreover, no indication has been given that should the matter be re-advertised a greater number of bidders would express an interest than was the case in the first letting. Consequently, this reason for bid rejection is not acceptable. If Respondent did not reject the bids and re-advertise the project, Winko-Matic would be the successful bidder in the Jacksonville project.
Findings Of Fact The Petitioner, PFO, is a professional corporation organized and existing under the laws of the State of Florida. Petitioner's principal office is located in West Palm Beach, Florida. At all times material to the claims of this case, Petitioner had fewer than 25 full-time employees. At all times material to the claims of this case, Petitioner had a net worth of less than $2 million. On May 22, 1995, the Department provided Petitioner with a clear point of entry to a formal administrative hearing pursuant to Section 120.53(5), Florida Statutes. At that time the Department issued an intent to award the Palm Beach County (Intrastate) CSE contract to a third party. This dispute evolved into DOAH case no. 95-3138BID or "the bid case." The Department was not a "nominal party" in the bid case. A recommended order was entered in the bid case on September 5, 1995. Except for a minor point not relevant to the issues of this matter, the Department adopted the findings and conclusions of the recommended order and entered its final order on December 1, 1995. The final order in DOAH case no. 95-3138BID awarded the Palm Beach County (Intrastate) contract for CSE legal services to Petitioner. Such award was based upon the conclusions that the third party's proposal was nonresponsive and that aspects of the evaluation process were arbitrary. No appeal was timely filed against the final order. Petitioner is, therefore, a prevailing small business party within the meaning of Section 57.111, Florida Statutes. The Petitioner timely filed its request for attorneys' fees and costs in the instant case pursuant to Section 57.111, Florida Statutes. The total amount of attorneys' fees and costs incurred by Petitioner in the bid case was $63,495.25. Of that amount, at least $15,000 was reasonable and necessary for Petitioner to incur in the preparations for, and attendance at, the hearing in the bid case. The solicitation package for the bid case contained mandatory requirements with which all applicants were to comply. The final order in the bid case concluded that the successful applicant had failed to satisfy all mandatory requirements. Its bid was, therefore, nonresponsive to the solicitation. Additionally, the final order determined that the instructions regarding how the proposals were to be evaluated were unclear and that points were inappropriately assigned to the successful applicant. The overall conclusion of the final order found that the Department had acted arbitrarily in the intended award to this third party applicant. All of the material deficiencies relied on in the recommended order and the final order to reach the conclusion that the Department had acted arbitrarily were known to the Department at the time of its initial review and evaluation of the proposals. For example, the Department knew that the applicant had not identified two attorneys who would be expected to perform services under the contract, and had not included certificates of good standing from the Florida Bar for them. Additionally, the applicant had not provided references from three persons as specified in the solicitation package. This was evident upon the opening of the proposal. Nevertheless, the Department scored the nonresponsive proposal and awarded it sufficient points to be the apparent winner among the applicants. An award of attorneys fees' and costs under Section 57.111, Florida Statutes, is capped at $15,000. The agency has not disputed the reasonableness nor the amount of fees claimed in connection with the bid case. The agency has not offered evidence to specify each item of cost or fee in dispute. Discovery requested by the Department sought information for the period September 1995 through January 1996 which included runner logs of Petitioner's counsel, itemized bills regarding another party (not a party to the bid case nor this case), and the deposition of Don Pickett. None of the requested discovery addressed the issue of whether the Department's actions in the bid case were substantially justified. None of the requested discovery addressed facts which the Department had placed in issue by its response to the petition. None of the discovery addressed the issue of whether there are special circumstances which would make an award of reasonable fees and costs unjust. Moreover, the parties have stipulated that there are no special circumstances which would make an award of reasonable fees and costs unjust. No new information pertinent to the claim for fees and costs herein which was unknown to the Department as a result of the bid case proceeding was discovered from the deposition of Don Pickett. No new information pertinent to the reasonableness or amount of the fees claimed was discovered from the deposition of Don Pickett or the other discovery requested. The factual circumstances argued in Respondent's Proposed (sic) Recommended Order, ie. that the agency had relied on findings and conclusions from an unrelated DOAH case in connection with the review of the underlying bid case, were not set forth in the response filed by the agency in the instant case and have not been deemed credible in determining the issues of this case. The proposal submitted by the third party in the bid case was nonresponsive. The Department has stipulated that the award of a contract to a nonresponsive bidder is arbitrary.
The Issue The issues to be resolved in this proceeding concern whether the proposed award of a contract to Ben Withers, Inc., is contrary to the Agency's governing statutes, rules, or policies or contrary to the bid solicitation specification concerning bid bond requirements, within the meaning of Subsection 120.57(3)(f), Florida Statutes (2008). It must also be determined whether those bidders who submitted a less than "A+" bid bond rating are compliant with the specification, or should be disqualified for non-responsiveness.
Findings Of Fact The Petitioner is a closely held Florida corporation. It holds a State of Florida license as a General Contractor. Its licensure authorizes it to perform work of the nature and scope involved in this project. Mr. Milton Fulmer is the principal owner and president of the Petitioner. He testified in this proceeding on behalf of the Petitioner. The Respondent is an Agency of the State of Florida charged with managing and administering state-owned lands in the state park system, including the planning and arranging for the construction of facilities, installations and improvements on those lands. The Respondent engages in procurement through competitive bidding on a regular basis, in order to build and maintain its improvements on those lands. The Respondent issued an Invitation to Bid (ITB) for certain road and additional work to be performed at the Bald Point State Park, in Franklin County. The ITB is designated as “Bid No. 49-08/09” on the Department of Management Services’ Vendor Bid System (VBS). It is undisputed that the ITB was properly advertised and noticed. The ITB project involves the construction of a new entrance roadway, the removal of an existing timber bridge and the installation of a new “free-span" bridge. The project also includes related drainage and utility work. Three addenda to the ITB were issued, which significantly increased the scope of the work, and the estimated budget for the project, from $1,000,000 to $3,000,000. The bids were timely opened on January 12, 2009. Withers was the low bidder. The Petitioner was the sixth low bidder. The bid tabulation, announcing the Respondent’s intent to award to Withers was posted on January 23, 2009. The Petitioner filed a timely protest, pursuant to Section 120.57(3), Florida Statutes (2008). The protest notice was filed on January 28, 2009, and the Petition was timely filed on February 6, 2009. Eight vendors submitted timely bid responses. None of the bids were disqualified by the Respondent. The specifications in the ITB required bidders to submit a good faith deposit or bid guaranty, amounting to five percent of the bid. This could be provided in the form of a bid bond. All the bidders submitted bid bonds with their bids. The instructions to bidders in the specifications of the ITB require that, for bids exceeding $2,000,000, “the surety that will provide the Performance Bond and Labor and Materials Payment Bond shall have at least an 'A+' rating in A.M. Best Company’s online rating guide.” The ITB also provides that the rating of a reinsurance company is not applicable and does not meet this requirement. The Petitioner’s expert witness, Paul Ciambriello, acknowledged in his testimony that a Bid Bond, a Labor and Materials Payment Bond (payment bond) and a Performance Bond (payment bond) guarantee different aspects of a procurement or project. A bid bond guarantees that a vendor or contractor will execute the contract and undertake it for the bid price. A payment bond guarantees payment for all equipment, labor, materials and services, in the event the contractor fails to pay for them, as contractually required. The performance bond guarantees full performance of the contract by the surety company, if the contractor defaults on performance of the contract. The surety company would, in that event, be completing the job, or obtaining bids from other contractors for completion, while remaining liable for the difference between the contract price and the actual price of project completion. The Petitioner has taken the position that the specification requiring an "A+" rating for the payment and performance bonds should be applied by the Respondent to the bid bond requirement, as well, because there is no significant or practical difference between the issuance and underwriting efforts involved in the obtaining of the two types of bond for a given project. The Petitioner’s point is that, if an "A+" rated surety is required for the payment bond and the performance bond, then, as a practical matter, that is the same thing as requiring a bid bond of that same rating, because in the vast majority of cases, the surety which underwrites the bid bond and the one issuing the payment and performance bonds is the same surety, and that inclusive would allow for only one underwriting effort. Because of this purported custom or course of dealing in the industry, as also purportedly reflected in past Department practice regarding bond requirements, the Petitioner maintains that its bid was the only responsive bid, and all the other bidders should have been disqualified. The Petitioner provided its insurance and bond broker, Paul Ciambriello, of the Guignard Company with information about the project and its surety requirements. The broker then obtained a bid bond with International Fidelity Insurance Company and Everest Reinsurance Company, as co-sureties. International Fidelity Insurance Company has an “A-“ rating, according to the Best’s rating guide. Everest Reinsurance Company has a rating of “A+”, according to that rating guide. The other seven bidders submitted bids accompanied by bid bonds issued by surety companies with “A” ratings. The bid specification provided no rating requirement for the bid bond. The Petitioner has argued that it is the custom or practice in the surety industry for the surety company which underwrites a bid bond to also underwrite the payment and performance bonds. In addition to the reasons referenced above, this is generally done because the surety will offer a very low premium price for a bid bond and "make its money" on the premium price for the payment and performance bonds, which it would also issue in the normal course of dealing. There is also a very short time period between issuance of the bid bond and the requirement to underwrite the payment and performance bonds, which is another reason why it is the customary practice in the surety industry for the same company to write both types of bond. The Petitioner contends that the bid bond and the payment and performance bonds really have no practical distinction because it is so common that a surety company issuing a bid bond will be the same as the surety company (with its bond rating) which issues the payment and performance bonds. Although the Petitioner's expert witness, Mr. Ciambriello, testified that a bid bond, in essence, guarantees the payment and performance bond, that guarantee is not actually true as a matter of law. Rather, the bid bond does not guarantee that the surety company issuing the bid bond will issue the payment and performance bonds, but rather that the principal, i.e. the contractor, shall provide the payment and performance bonds from a good and sufficient surety, according to the obligee's, the Respondent Agency's, requirements (bid specifications). Mr. Ciambriello acknowledged in his testimony, however, that, while it is rare, in his experience representing surety companies, for a contractor to change the surety company it uses between the issuance of the bid bond and the issuance of the payment and performance bonds, a contractor certainly can do so. It can also simply initially select a different surety company, from the bid bond surety, to issue the payment and performance bonds. There are several reasons a contractor might elect to change surety companies between the issuance of the bid bond and the issuance of the payment and performance bonds. The surety company might become insolvent, lose its ratings, or another surety company might offer a better rate on its premium, which might induce a contractor to change surety companies between the issuance of the two types of bonds. In order for a vendor or contractor to establish a surety, a pre-qualification process is necessary. In pre- qualification, contractors must supply information including project history, credit references, reviewed financial statements, personal financial information and details regarding assets. The surety companies assess risk based upon the characteristics of the project, including its size, nature, location, and complexity. A surety may elect not to underwrite the payment and performance bonds for a project for which it has issued the bid bond, which would also require a contractor to seek a different surety for issuance of the later payment and performance bonds. Moreover, contractors must qualify for surety bonds and not all contractors succeed in qualifying; further, not all contractors can succeed in qualifying and procuring surety bonds from an "A+" rated company. The Petitioner, as found above, submitted its bid response with co-sureties proposed to underwrite the bonds. The Respondent accepts the premise that use of the rating of a co- surety is compliant with the ITB solicitation specification. The use of two surety companies listed as co-sureties on a bond is very unusual, in the Respondent's experience. The Respondent had a good faith belief, at the time it posted the notice of intent to award the bid, that it could not disqualify any bidder for submitting a bid bond from a surety rated less than A+, based upon its ITB specification. Indeed it should not, because the bid bond specification contained no rating requirement for the bid bond. Moreover, the Respondent had a good faith belief that the contractors could change surety companies between the issuance of the bid bond and the payment and performance bonds. The Respondent's belief or interpretation as to this last point is correct. In another procurement involving the Respondent, on a project located at Jonathan Dickenson State Park, a bidder, H and J Contracting, Inc. (H and J), changed surety companies between the issuance of the bid bond and the issuance of the payment and performance bonds. That bidder was determined to have successfully provided compliant bonds, which met the specifications in that solicitation. The Respondent had advertised the ITB for the campground renovation project at Jonathan Dickenson State Park, using the same solicitation specification for surety bonds as was used for the Bald Point project at issue in this case. The low bidder in that case, H and J Contracting, Inc., submitted a bid for $2,033,636.32. It was therefore required to comply with the specification for bonds regarding bids which exceeded two million dollars. H and J, therefore submitted a bid bond from Liberty Mutual Insurance Company, a company which carried an "A" rating according to Best's On-line Ratings Guide. H and J subsequently submitted payment and performance bonds from U.S. Specialty Insurance Company, a company rated "A+" according to that same ratings guide. H and J was deemed to have complied with the specifications concerning bonding, because, by changing surety companies for the payment and performance bonds, it provided such bonds with the required "A+" rating, even though the bid bond submitted in that case only carried an "A" rating. The solicitation specification in that case did not require any particular rating for the bid bond. In the instant situation, the Respondent did not violate its specification by accepting bid bonds of all bidders because the solicitation specification stated that the rating should apply to the surety company issuing the payment and performance bonds, not the bid bond. The Petitioner contends that its interpretation of the solicitation specification, that the rating requirement should be applied to the bid bond also, is the only practical interpretation because of the pre-qualification process and the lack of adequate time between submittal of the bid bond and the requirement for submittal of the payment and performance bonds. Moreover, the Petitioner contends that any other interpretation would be contrary to competition because other bidders may have bid on the project had they known that the Respondent was not applying the rating requirement to the bid bond, as the Respondent had done in past procurements. This argument is somewhat specious, however, because, in fact, the Petitioner's interpretation would negate the fact that the bid bond specification does not require a rating. The Petitioner is the only one of the six top bidders who submitted an "A+" bond rating response concerning, according to its argument, the bid bond requirement. Thus, if its interpretation were followed as to the bid bond rating requirement, then such would be anti-competitive, in relation to the other bidders, because none of them supplied an ”A+" rating surety in response to the bid bond specification. In the face of the fact that the bid bond specification required no rating, to interpret the rating requirement of the payment and performance bonds as being applicable to the bid bond stage of the procurement, would effectively eliminate the other bidders, which were lower in price than the Petitioner, from the competition. The Petitioner also argues that other unknown vendors might have bid on the project had they known that the Respondent was not applying a rating requirement to the bid bond, as the Respondent had done in the past. In fact, however, all bidders or vendors with access to the ITB solicitation knew, or should have known, of the specification of this particular ITB, which differed in its terms from some past solicitations of the Respondent by not requiring a rating for the bid bond. Moreover, there is no evidence that, in the pre- submittal stage of the process, potential bidders could not have asked for clarification of the specification from the Agency had they chosen to do so. There is no showing by persuasive evidence that there is an anti-competitive effect on potential bidders caused by the Respondent's specification concerning the bid bond. In fact, logic would dictate that by removing any rating requirement for the bid bond, the potential universe of bidders might be enlarged and therefore this might have a positive competitive effect. Additionally, the Petitioner's argument that the specification should be interpreted to apply a rating requirement to the bid bond, when the actual specification, in its language, does not contain such a requirement, is rejected also for the additional reason that such an interpretation is contrary to the plain meaning of the bid specification language. This amounts to, at least, an implicit collateral challenge to the specification, which is untimely and impermissible.1/ There are 19 vendors listed on the "plan holders list" for the Bald Point project. That relatively large number of potential bidders is because the project began as a paving contract, and was later amended to include vertical construction. This changed the licensure requirement as to potential vendors from a situation of no license being required, to a situation where a general contractor or building contractor license would be required. Some of the bidders appearing on the plan holders list are just paving contractors, and therefore, under the amended project, they would no longer qualify to bid on the entire job, although they might be sub-contractors. Not all bidders who bid on the Bald Point Project are listed on the plan holders list. The Petitioner's argument that the Respondent may have had more of the 19 potential bidders actually submit bids, if the other vendors had known that the Respondent would accept bid bonds from a surety rated less than "A+" is not persuasive. It is impossible to determine how many contactors actually reviewed the Bald Point Project plans and for what reasons they decided not to submit a bid. Seven of the eight bidders submitted bid bonds from surety's rated "A" rather than "A+." It certainly seems obvious that those bidders did not interpret the bid bond specification as requiring a bid bond from an "A+" rated surety company or better. Moreover, all potential vendors, whether they bid or not, who reviewed the specifications should have known when they read the specification that there was no rating requirement attendant to the bid bond (as evidenced by the fact that seven of the eight bidders competing in this situation obviously seemed to be so aware and did not submit an "A+" surety for the bid bond). Thus, in this context, the Respondent's interpretation of this specification is not anti- competitive. The Petitioner also contends that the Respondent acted contrary to its policy by accepting bid bonds from all eight bidders and not disqualifying all but the Petitioner's bid, since it alone submitted one carrying an "A+" rating. The Petitioner refers to past practices of the Respondent as being its "policy." In this particular, the Petitioner and Respondent were involved in a prior bid procurement and protest involving the Apalachicola National Estuarine Research Reserve Headquarters project (ANERR). The Petitioner in that situation was the lowest bidder, but had its bid disqualified. The Petitioner uses the prior project specification as evidence of what the Respondent's policy is with regard to situations such as that in the instant case. The solicitation specification regarding bonds for the ANERR project, however, was different from the solicitation specification for the Bald Point Project. The solicitation specification for the ANERR project required that all bonds have at least a minimum rating of "A" in the latest issue of the Best Rating Guide. The Petitioner submitted a bid bond from a surety company rated "A-" with its bid for the ANERR Project. The bid was therefore deemed non-responsive by the Respondent Agency and the bid was disqualified for failing to meet the solicitation specification. The Petitioner's president testified that he read the specification for the Bald Point Project and he conceded that it was different from the specification for the ANERR Project. The Petitioner's argument that, apparently, the Respondent's policy or practice in the ANERR Project situation should be applied to interpretation of the bonding requirement for the Bald Point Project is not persuasive. Clearly the specification concerning the bid bond and bond rating was different between the two projects. The attempted application of the purported past policy or practice of the Department to interpret the Bald Point specification concerning the bid bond, to require an "A+" rating for the bid bond, when the specification term clearly does not provide it (merely because that was the policy or practice in the ANERR project case, involving a different specification) amounts to an untimely collateral attempt to alter the specification of the Bald Point Project. Such would amount to a material deviation from the specifications because it would disqualify seven of the eight bidders (and would likely have resulted in fewer bids had potential bidders been on notice of that policy or interpretation). In like manner, the Petitioner relies on the case of Gum Creek Farms, Inc., v. Department of Environmental Protection, Case No. OGC 07-2623 (FO: June 20, 2008) as evidence of the Respondent's policy with regard to bond rating requirements. In that case, as in the ANERR situation, the solicitation specification was different from the Bald Point specification at issue. Because the two situations referenced above are different from the Bald Point Project as to the specification requirements, they cannot be said to be evidence of a policy or regular practice by the Agency which would be applicable to this case, since the specific requirements of the bid specifications in this solicitation are what drive the necessary bid responses. Over a period of approximately 10 years the Department has engaged in bid procurement with regard to approximately 600 projects. The Respondent has, during that time, consistently required compliance with its surety ratings specifications in its bid solicitations. This is because an adequate surety bonding for payment and performance is an important means for the Respondent to manage its risk as the owner of a project. Thus, whatever the specifications concerning bond ratings are for a particular project, the Respondent has consistently required compliance with them. In the instant situation, the Respondent re-wrote its rating specification for the Bald Point Project so that it was different from the other two projects referenced and discussed above. It has re-written its specifications on other occasions as well, which is within its prerogatives. Timeliness of Payment and Performance Bond Notification The general conditions of the contract require that the contractor submit evidence of its ability to provide acceptable payment and performance bonds within two working days of being notified of a successful bid. The contractor has 10 days to actually furnish the bonds. The testimony of Michael Renard, of the Department, shows, however, that as a practical matter, it is not a material deviation if a contractor does not supply evidence of ability to provide compliant bonds precisely within that time period. The actual payment and performance bonds are usually submitted to the Respondent at the time the contract is actually signed or shortly thereafter. Sometimes it may be a longer period of time before the contractor submits payment and performance bonds. This might occur because authorization to sign a contract is suspended due to budgetary concerns or due to lack of funding availability. The Respondent does not require and contractors do not generally wish to expend their capital for payment of a surety premium until a contract is actually signed and in effect, and the Agency's funding is approved and released, as persuasively shown by the testimony of Michael Renard and Ben Withers. The winning bidder herein, Withers, did not provide evidence of ability to provide compliant payment and performance bonds within two days of being notified of being the lowest bidder. This was because the protest was filed during the intervening time and Withers and the Respondent were of the good faith belief that all responsive efforts to the solicitation were tolled upon notice being provided that a protest had been filed. In fact, because a protest was filed, triggering a formal proceeding to determine which entity might ultimately be the contractor, it could not be determined that there was, as yet, a winning bidder or contract, as a necessary pre-requisite to issuance of payment and performance bonds. In fact, the Respondent has received evidence of Withers' ability to provide compliant payment and performance bonds. This evidence was provided after Withers was informed that a co-surety rating would be acceptable to the Respondent and in compliance with the bid specification. This treatment, of allowing a co-surety rating as being acceptable was also accorded the Petitioner, who submitted a co-surety proposal. There is no persuasive evidence that the fact that Withers may have supplied evidence of a compliant payment and performance bond beyond the above-referenced time limits had anything to do with selection of Withers over the Petitioner or other bidders and thus provided a competitive advantage for Withers. The Petitioner filed its written evidence of ability to provide the payment and performance bonds on February 20, 2009, almost a month after the posting of the Intent to Award. It did not even become incumbent upon Withers to submit such evidence regarding payment and performance bond compliance until after it was notified that it was a successful bidder. As pertinent to the issues in this proceeding, Withers was selected, in essence, because its bid submittal was compliant with the bid bonding requirement, other specifications, and was the lowest bid. The fact that Withers went beyond the time limits for furnishing evidence of compliant payment and performance bonds, occurred after the initial choice by the Agency as to the awarded bidder, here under review. Thus, Withers' excession of the time limit regarding the payment and performance bond evidence submittal, etc., is not a material deviation from specifications, as to the manner in which the award decision was made. It is of no consequence because, with the initiation of a formal proceeding, there was not even a final award and contract as yet. Finally, although argument was made concerning whether the Respondent had waived the requirement of payment and performance bonds from an "A+" down to an "A" rating, the persuasive evidence shows that the Respondent never did waive the rating requirement in order to post the award to Withers. The Respondent has established that there was no need for it to waive the "A+" rating requirement, and it had no intent to do so.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be issued by the Florida Department of Environmental Protection dismissing the protest. DONE AND ENTERED this 1st day of May, 2009, in Tallahassee, Leon County, Florida. S P. MICHAEL RUFF 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 1st day of May, 2009.
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Petitioner is a Florida corporation. It was incorporated on September 10, 1991. On August 25, 1995, it was administratively dissolved for failure to file its annual report. It has not been reinstated. At present, Petitioner has no assets. Its liabilities exceed $250,000.00 and include a judgment against it in the amount of $11,857.00 (plus interest) and numerous unpaid bills. Before its demise as an active corporation, 3/ Petitioner was a provider of travel services. It was registered as a "seller of travel" with the Agency in 1992 (from January 1 to December 31) and in 1993 (also from January 1 to December 31), during which time it held Seller of Travel Registration Number 14223. As part of the registration process, Petitioner posted with the Agency a $10,000.00 performance bond effective for the one year period commencing November 19, 1991 (the 1991-92 Performance Bond) and another $10,000.00 performance bond effective for the one year period commencing November 19, 1992 (the 1992-93 Performance Bond). 4/ The surety on these two performance bonds (the 1991-92 Performance Bond and the 1992-93 Performance Bond) was the Hartford Fire Insurance Company (the Hartford). Edward Volz, in his capacity as Petitioner's President, signed an indemnity agreement obligating Petitioner to indemnify the Hartford for any payments made by the Hartford "by reason or in consequence of its suretyship." 5/ Consumer claims against Petitioner were received by the Agency. By letter dated February 28, 1994, the Agency advised Petitioner of these "claims on the above referenced security" and of the Agency's intention "to make a demand under its [the security's] terms." By letter to the Hartford dated February 28, 1994, the Agency made "a demand on the surety bond." 6/ The letter read as follows: This is to notify your company that the Department of Agriculture and Consumer Services is in possession of claims made by persons who purchased travel-related services from the above-mentioned seller of travel [Petitioner]. This bond was issued by your company to secure the services of the seller of travel or to provide a refund to those customers who do not receive the services purchased. Please accept this letter as a demand on the surety bond. We would appreciate your advising this office in writing within fifteen (15) days from the date of this letter as to the form and information you require in order to make payment pursuant to the bonded obligation. If you have any questions please contact me at 904-922-2972 or Mr. Wayne Searcy, 904-922-2920. In or around March of 1994, Petitioner filed an application with the Agency to renew its "seller of travel" registration. In conjunction with the filing of its application, Petitioner posted with the Agency a $25,000.00 performance bond effective for the one year period commencing November 19, 1993 (the 1993-94 Performance Bond). The surety on the bond was the Hartford. 7/ By letter dated June 22, 1994, the Agency notified Petitioner that Petitioner's application for renewal of its registration had ben denied for failure "to provide a financial statement prepared by an independent public accountant." After receiving the Agency's June 22, 1994, letter, Petitioner discontinued its business operations. Having received additional claims against Petitioner since it had sent its February 28, 1994, demand letter to the Hartford and not having received any response from the Hartford to that letter, the Agency sent a second letter, dated September 29, 1994, to the Hartford. The letter read as follows: Subject: Excell Travel Club, Inc. 1239 East Newport Ctr., [Number] 113 Deerfield Beach, Florida 33442 Surety Bonds [Number] 41770-77 ($25,000) and [Number] 41770-77 ($10,000) Effective November 19, 1993/ Effective November 19, 1992 Dear Sir: The Department of Agriculture has claims exceeding the amount of the bonds [the 1992- 93 Performance Bond and the 1993-94 Performance Bond] from persons who purchased travel-related services from the above- mentioned seller of travel [Petitioner]. Therefore, the Department of Agriculture is making a demand on the bonds. The bonds were issued by your company to secure the services of the seller of travel or to provide a refund to those customers who do not receive the services purchased. Please accept this letter as a follow up demand on the surety bonds. We would appreciate your advising this office in writing within ten (10) days from the date of this letter as to the form and infor- mation you require in order to make payment to the bonded obligation. If you have any questions please contact me at 904-922-2820. A copy of this letter was sent to Petitioner. The Hartford sent a letter, dated October 18, 1994, to the Agency acknowledging receipt of the Agency's September 29, 1994, letter. Subsequently, the Hartford sent a second letter, dated November 2, 1994, to the Agency. The letter read as follows: RE: Our file: 319 S 26747 and 319 S 26748 Principal: Excell Travel Club, Inc. Dear Mr. Cloud: Enclosed are our checks totalling $35,000.00 which are in settlement of the two surety bonds with effective periods 11/19/92 to 11/19/93 and 11/19/93 to 11/19/94. Please acknowledge receipt of these two checks and acknowledge that our bonds are exonerated. Thank you for your advices concerning these matters. Appearing on both of the two checks that were enclosed with the Hartford's November 2, 1994, letter was the notation, "full and final settlement." Each of the checks also had a "loss date" written on it. The "loss date" written on the $10,000.00 check was November 18, 1993. The "loss date" written on the $25,000.00 check was September 29, 1994. Petitioner had no advance notice that the Hartford was going to make a "settlement" with the Agency. By letter dated May 17, 1995, the Agency advised Petitioner of its intention "to make distribution of the entire bond proceeds to the claimants on a pro rata basis." Thereafter, Petitioner filed a petition requesting an administrative hearing on such proposed action. Petitioner has not repaid any of the $35,000.00 that the Hartford paid the Agency for the benefit of those who filed claims against Petitioner, nor has the Hartford instituted legal proceedings to require Petitioner to indemnify it for having made such payment to the Agency.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Agency enter a final order dismissing, on the ground of lack of standing, Petitioner's petition requesting an administrative hearing on the Agency's proposed action to distribute the proceeds of the 1992-93 and 1993-94 Performance Bonds to claimants on a pro rata basis. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 8th day of October, 1996. STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 8th day of October, 1996.
The Issue The issue is whether the proposed disqualification of Petitioner’s bid is contrary to the agency's governing statutes, rules, or policies or contrary to the bid solicitation specifications within the meaning of Subsection 120.57(3)(f), Florida Statutes (2007).1
Findings Of Fact Petitioner is a closely held Florida corporation licensed in the state as a general contractor. Mr. Milton “Mitt” Fulmer is the owner, sole director, and only stockholder. Respondent is a state agency. Respondent regularly solicits bids for construction services to build and maintain its facilities. On August 3, 2007, Respondent issued an invitation to bid identified in the record as Bid No. 03-07/08 (the ITB). The ITB solicited bids to construct a new headquarters for the Apalachicola National Estuarine Research Reserve, commonly referred to in the record as ANERR. Four companies responded to the ITB. Petitioner submitted the lowest bid. Intervenor submitted the next lowest bid. Intervenor is a Florida corporation licensed in the state as a general contractor. The ITB required bidders to submit a bid bond in an amount equal to five percent of the amount of the bid, plus alternates. A bid bond is not a performance bond. A bid bond is customarily provided for gratis or a nominal charge, and variations in bid bonds do not result in a competitive advantage among bidders. A bid bond merely insures the successful bidder will enter into the contract and provide whatever payment and performance bonds (performance bond) the ITB requires. The Instructions to Bidders for the ITB required all bonds to be issued by a surety company that “shall have at least the following minimum rating in the latest issue of Best’s Key Rating Guide (Best's): 'A'” (the bond rating requirement). The bond rating requirement was a bid solicitation specification required for a bond to be acceptable to Respondent. Petitioner submitted a bid bond issued by a surety identified in the record as International Fidelity Insurance Company (IFIC). IFIC has Best's rating of "A-." Respondent proposes to reject Petitioner's bid for failure to satisfy the bond rating requirement and to award the bid to Intervenor as the second lowest bidder. The bond rating for the surety company that issued the bid bond for Intervenor is not in evidence. For reasons stated in the Conclusions of Law, Petitioner has the burden of proof. The parties provided the trier of fact with a wealth of evidence during the final hearing. However, judicial decisions discussed in the Conclusions of Law confine the purpose of this proceeding to a review of the proposed disqualification of Petitioner's bid at the time Respondent exercised that agency discretion. This proceeding is not conducted to formulate final agency action that determines which bidder should receive the contract or whether all of the bids should be rejected. The review of proposed agency action is limited to a determination of whether the proposed action violates a statute, rule, or specification. If a violation occurred, the review must then determine whether the violation occurred because Respondent exercised agency discretion that was clearly erroneous, contrary to competition, or an abuse of discretion. A preponderance of evidence does not show that the proposed agency action violates a statute, rule, or specification. That finding ends the statutorily authorized inquiry. In the interest of completeness and judicial economy, however, the trier of fact also finds that the exercise of agency discretion that led to the proposed agency action is not clearly erroneous, contrary to competition, or an abuse of discretion. It is undisputed that the proposed agency action does not violate a statute or rule. Petitioner implicitly argues that the proposed agency action violates the bond rating requirement in the bid specifications because an "A-" rating is equivalent to an "A" rating. The Best's ratings of surety companies are not equivalent. Before discussing the differences, however, it is important to note that Respondent did not base its proposed rejection of Petitioner's bid on an independent evaluation of the data used to distinguish the two ratings. The failure to conduct an independent evaluation of the differences in Best's ratings criteria was neither clearly erroneous, contrary to competition, nor an abuse of discretion. The differences in Best's ratings criteria are complex and proprietary. Respondent lacks sufficient staff and expertise to evaluate the data underlying the Best's ratings or the quality of surety companies. Respondent relied on its own experience, custom and practice in the surety industry, and advice of counsel. Respondent also took into account the unusual size and complexity of the ANERR project, time constraints, and the added risk aversion to any delay in starting the project. The proposed rejection of Petitioner's bid is consistent with Respondent's past practice. Respondent has consistently required compliance with bond rating requirements for bid bonds in previous projects. In the course of bidding 500 to 600 projects over approximately an eight-year period, only one of the apparent low bidders offered Respondent a bid bond from an "A-" rated surety when an "A" was required by the bid specifications. Respondent disqualified that bid, which was for a project of approximately four million dollars; the only previous project that approaches the $5-$6 million cost of the ANERR project. All other low bidders complied with the specification as written. Respondent reasonably inferred that the surety company for the bid bond would be the same for the performance bond. Respondent's experience with industry practice in the 500 to 600 previous projects suggests the surety company that writes the bid bond will also write the performance bond. It is also customary for a surety company to provide the bid bond for gratis or for a nominal charge because the surety company collects its premium upon writing the subsequent payment and performance bonds. Respondent's experience also shows that contractors must qualify for their surety bonds, and not all contractors succeed in qualifying for surety bonds. Moreover, not all contractors can succeed in procuring surety bonds from an A-rated company. The temporal exigencies between the award of the bid and the provision of a performance bond also supported Respondent's inference that the surety company for the bid bond would be the surety company for the performance bond. The General Conditions of the contract required Petitioner to submit evidence of its ability to provide the requisite performance bond within two working days of being notified of a successful bid. Petitioner had ten days to actually furnish the bond. Establishing a surety is not perfunctory but entails a prequalification process. Petitioner had to supply its bonding agent with information including project history, credit references, reviewed financial statements, personal financials, and details on its assets. Any delay in the ANERR project, in contrast to its previous projects, for reasons of contractor default or otherwise, would expose Respondent to greater risk and greater expense. Respondent reasonably experienced a heightened risk aversion for the ANERR project than the risk aversion Respondent experienced during previous projects. The $5 or $6 million price tag for the ANERR project is about 400 percent greater than all but one previous project in Respondent's experience. Unusual aspects of the project, including its design elements and its environmentally sensitive location, could be irreparably harmed in the event of default or delay. The nature of the project's funding, part of which is a federal construction grant that expires on a date certain and part of which involved taxes paid by Floridians, contributes to the unique qualities of the project that support Respondent's greater risk aversion in connection with the ANERR project. At the time Respondent had to make a decision to reject or accept Petitioner's bid, Respondent believed in good faith a distinction existed between Best's "A" and "A-" ratings. The Best's ratings publication is a summary based on data, much of which is proprietary. It would be pointless for Respondent to "cross examine" a summary before rejecting Petitioner's bid if significant portions of the data underlying the summary are proprietary and unavailable to the cross-examiner. If Respondent were to have sufficient staff and expertise to independently evaluate the data underlying the Best's ratings, if some of the data were not proprietary, and if such an evaluation were the basis for the proposed rejection of Petitioner's bid, the outcome would not alter the proposed rejection of Petitioner's bid. The Best's ratings are based, in relevant part, on Best's Capital Adequacy Ratio, commonly referred to in the record as BCAR. The BCAR score estimates the ability of a surety company to pay claims. The minimum BCAR score for an "A" rating is 145, meaning the value of a surety company's assets exceed its estimated claims by a minimum of 45 percent. The minimum BCAR score for a surety with an "A-" rating is 130, meaning the value of its assets exceed its estimated claims by 35 percent. Although a 15-percent differential may appear small, Best's states the differentials by reference to a range of scores. The actual differential between individual sureties with an "A" rating and an "A-" rating may be as little as one percent or as great as 29 percent. An independent evaluation by Respondent would have revealed a margin of error as large as 29 percent in the standard used to evaluate a surety company's ability to pay claims. If the proposed rejection of Petitioner's bid were based on an independent evaluation of the data underlying the Best's rating summaries, it would have been reasonable for Respondent to reject Petitioner's bid. It would have been reasonable for Respondent to reject a 29-percent margin of error for a surety company in a project that is 400 percent larger than the typical project and for which Respondent reasonably has a greater risk aversion due to the temporal limit on the availability of funds, the complexity of the project, and its environmental sensitivity. Much of the data underlying Best’s published ratings is proprietary information. However, the available evidence shows that Best's adjusts BCAR values based on qualitative factors such as: business plan, management quality, liquidity of assets, liabilities, and other operational aspects of the surety company. A qualitative analysis shows that ratings of "A" and "A-" are not the “functional equivalent” of each other. Petitioner submitted evidence that Best's "bands" surety companies with ratings of "A" and "A-" together in the Best's rating guide. However, the relevant specification in the ITB did not express the bond rating requirement in terms of a band or category. Rather, Respondent requested an "A" or better rating according to Best’s Key Rating Guide. An independent evaluation by Respondent would have provided a reasonable basis for an inference that the surety company for the bid bond and performance bond would be the same company. Petitioner has used IFIC for more than one year. During that time, IFIC has issued all of Petitioner’s bid bonds. IFIC issued Petitioner two payment and performance bonds. Petitioner was unable to identify any other surety company that had issued its payment and performance bonds within the time period during which Petitioner has used IFIC. Petitioner did not ask its insurance broker to obtain a bid bond from a company other than IFIC. When Petitioner sent a bid bond order form to its broker, Petitioner provided information to the broker about the project and the amount of the bid and Respondent’s surety requirements. The Bid Bond Order Form does not indicate the minimum bond rating requirement specified in the ITB. Mr. Fulmer had a conversation with his broker about Respondent’s bid security requirements, but it is unclear whether the relevant specifications were faxed to the broker or whether Mr. Fulmer saw the Bid Bond Order Form before it was provided to the broker. In response to the Bid Bond Order Form, the broker generated a bid bond and sent the bond to Petitioner for signature. At the time Petitioner received the bid bond, Petitioner did not consult Best’s Key Rating Guide to confirm that its surety met the minimum bond rating requirement in the ITB. It is unnecessary to determine whether the bond rating requirement was a material or immaterial requirement. If it were material, Respondent had no discretion to waive it. If it were non-material, within the meaning of Florida Administrative Code Rule 60D-5.002(9)(Rule), evidence discussed in previous Findings in this Order shows that the exercise of agency discretion underlying the refusal to waive the bond rating requirement was reasonable and was not clearly erroneous, contrary to competition, arbitrary, or capricious. Petitioner's bid protest is not, in substance, a challenge to the bid solicitation specification identified in this Order as the bond rating requirement. If the substance of the bid protest were deemed to be a challenge to a bid specification requirement, the challenge is untimely. On October 30, 2007, Respondent opened the bids, identified Petitioner as the apparent low bidder, consulted Best's for information on the "A-" rating, consulted with counsel, and disqualified Petitioner's bid. Petitioner filed a Notice of Intent to Protest on November 8, 2007, and a Petition to Protest on November 13, 2007. A deemed challenge to the specification for the minimum bond rating requirement was untimely within the meaning of Subsection 120.57(3)(b).
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that Respondent issue a final order dismissing the protest. DONE AND ENTERED this 21st day of March, 2008, in Tallahassee, Leon County, Florida. S DANIEL MANRY 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 21st day of March, 2008.
Findings Of Fact Nine bids were received for Contract E4571, Project/Job No. 99004-3516 ("E4571"). Petitioner's bid was timely received. Respondent opened bids on December 13, 1991. Respondent posted its intent to award E4571 to J & D Tropical Landscape Design on December 20, 1991. Section 1.2 of the Bid Specifications for E4571, as modified by the Special Provisions, states: A contractor's bid shall be in the form of a unit price for each unit expected to be accomplished. The Special Provisions to E4571 require each bidder to submit a single unit price for each pay item called for in the Bid Price Proposal. Item 4 in the Special "Provisions provides: It shall be the responsibility of the Contractor to submit to the Department A SINGLE unit price for each pay item called for in the Bid Price Proposal. The Contractor shall be responsible for his/her method of averaging. Failure to comply shall result in the Contractor's Bid Proposal being declared "Irregular" and such Bid Proposals will be rejected. (emphasis added) Petitioner's Bid Proposal was properly declared irregular and rejected by Respondent. Petitioner failed to comply with the requirements of Item 4 in the Special Provisions by failing to submit a single unit price for each pay item, by failing to correctly average a unit price, and by failing to state the unit price in words. The Unit Price Sheet on page 23 of the Bid Proposals contains the following table listing item numbers A582- 2 through A584-4. Petitioner listed item number A583 as follows: ITEM PLAN ITEM DESCRIPTION AND UNIT PRICE $ AMOUNTS NUMBER QUANTITIES UNIT PRICE (IN FIGURES) (Exten- (IN WORDS) sion Price) 3/ A583 4 200.000 TREES (8' TO 20, 85 20400 PLANT ' HEIGHT OR CLEAR TRUNK) @ DOLLARS CENTS The actual extension price 4/ for 200 trees at $85 per unit is $17,000 rather than the $20,400 stated by Petitioner in the table on page 23. The "Contract Total" stated by Petitioner in the bottom right corner of the table is $37,013.20. The "Contract Total" that should have been stated if Petitioner intended the extension price of item number A583-4 to be $17,000 would have been $33,613. The "Contract Total" listed by a bidder on the Unit Price Sheet is the unverified contract price. The actual contract price is determined by Respondent pursuant to the formula given in Section 1.3 of the Bid Specifications. Section 1.3 of the Bid Specifications foil E4571 states: The contract price is defined as the sum of the unit bid price times the planned work for each item as shown on the Unit Price Sheet. Petitioner would have been the lowest successful bidder irrespective of whether Respondent had replaced the extension price for item number A583-4 and the "Contract Total" stated by Petitioner with the actual extension price for item number A583-4 and the actual "Contract Total" . However, Respondent is precluded from doing so by Section 3-1 of the Standard Specifications For Road ,and Bridge Construction ("Standard Specifications"), published by the Florida Department of Transportation (1991) and by the Special Provisions for E4571. Respondent follows "Section 3-1 of the Standard Specifications for the purpose of evaluating bid proposals. Section 3-1 is used, in part, to determine the extension price for item numbers listed on the Unit Price Sheet. Section 3- 1 provides in relevant part: In the event of any discrepancy in the three entries for the price of any item, the unit price as shown in words shall govern unless the extension and the unit price shown in figures are in agreement with each other, In which case they shall govern over the unit price shown in words. Petitioner did not show the unit price in words for any item number on the Unit Price Sheet, including item number A583-4. There is a discrepancy in the three entries for item number A583-4 on the Unit Price Sheet. Petitioner failed to show the unit price for item number A583-4 in words, and the unit price and extension price are not in agreement. Under such circumstances, Respondent interprets Section 3-1 of the Standard Specifications as requiring that Petitioner's bid be declared irregular and rejected. Respondent's interpretation of Section 3-1 of the Standard Specifications is reasonable and is consistent with the mandate in Item 4 of the Special Provisions for E4571. See Finding 4, supra. Furthermore, in practice, the correct unit price of a pay item is necessary to process payment under the contract and the contractor must submit invoices based upon the pay items and unit prices listed in its bid. The bid specifications for E4571 provide that a bidder is responsible for his or her own averaging of a stated unit price, and that if a bidder fails to provide a single unit price for each pay item on the Unit Price Sheet the bid shall be declared "Irregular" and will be rejected. The requirement to provide a single unit price for each pay item was emphasized by Respondent at the mandatory pre-bid meeting. Petitioner's representative attended the mandatory pre-bid meeting. No challenges were made to the bid specifications by any bidder.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order dismissing the protest filed by Petitioner. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 20th day of February, 1992. DANIEL MANRY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (964) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of February, 1992.
The Issue The ultimate issue for determination is whether the School Board's proposed award of a construction contract to Federal Construction Company is fraudulent, arbitrary, illegal or dishonest. See Department of Transportation v. Groves- Watkins Constructors, 530 So.2d 912 (Fla. 1988). Also at issue is whether Gulf, as fifth lowest bidder, has standing to bring this action and, if so, whether it is entitled to award of the contract. STIPULATED FACTS In their Prehearing statement, filed on December 13, 1988, the parties have stipulated to the following facts: The SCHOOL BOARD placed [sic] for bids pursuant to bid documents on elementary school project known as "Elementary School "E". At a Pre-Bid Meeting on September 27 the bidders were told that the subcontractor's list must list one and only one subcontractor per item and include all subcontractors with no open blanks. If the general contractor was going to list himself as doing that particular piece of work he must so indicate. Bids were submitted to the SCHOOL BOARD on October 13, 1988, by six general contractors with the lowest bid being submitted by FEDERAL followed by PHILLIPS, INDUS, BARTON-MALOW and GULF. Required to be attached to each bid was a Bid Bond, Unit Price List, and List of Subcontractors. The List of Subcontractors Form required the bidder to list the names of subcontractors and suppliers who would perform the phases of the work indicated with the assumption that any work item (trade) not included would be performed by the Bidder's own forces. The lowest bidder, FEDERAL, left some of the items of work blank or had a horizontal line drawn beside them. FEDERAL's bid bond did not contain a penal sum and the Power of Attorney did not contain an original signature, but had a typed in date October 13, 1988 next to the copy of the signature. No Power of Attorney was filed in the Public Records of Sarasota County PHILLIPS' bid listed no subcontractors for any work items. INDUS' bid materially deviated in that it did not agree to complete the work in the time specified, left some work items blank on the subcontractor's list and listed itself as doing work items not normally done by a general contractor. BARTON-MALOW'S bid listed a steel supplier who did not bid the project to BARTON-MALOW and the bid bond was not on the specified form. GULF's bid was in conformance with the bid documents. On October 20, 1988, the SCHOOL BOARD Construction Staff recommended to the SCHOOL BOARD that the FEDERAL bid be accepted and that the contract be awarded to FEDERAL.
Findings Of Fact The bid specifications and related items for construction of Sarasota County School Board's Elementary School "E" and bus depot are dated July 1, 1988. (Joint Exhibit #1.) The Invitation for Sealed Bids was advertised on September 4, 11 and 18, 1988. Among the requirements included in the instructions to the invitation for sealed bids is the direction that each bid must be accompanied by a bid bond, written on the form satisfactory to the Board, or a cashier's check in the amount of five percent of the total base bid as a guarantee that, if successful, the bidder would enter into a written contract with the Board. (Joint Exhibit #1, P.C-1.300.) The instruction also includes the requirement that if a bid bond is submitted it must be "...written on the form bound within these bidding documents...". (Joint Exhibit #1, P.C-1.600.) Among other specifics related to the bond are the requirements that the dollar amount of the bond, or "5 percent of the bid", be typed or printed in the space provided, and that the surety's agent's power of attorney either be recorded in Sarasota County or include an original signature. (Joint Exhibit #1, P.C- 1.610.) Two addenda were issued to the July 1, 1988 bid specifications. Addendum No. 1 is dated September 30, 1988, and includes a revised bid form and list of subcontractors form. The material change in the list of subcontractors form was to delete language at the end of the form allowing changes or substitutions with written consent of the architect and owner prior to signing the agreement, and substituting this language: "The contractor shall not remove or replace subcontractors listed above except upon good cause shown and written approval by Owner". (Joint Exhibit #1, P.C-2.430.) Both the revised and former subcontractor list provide "Any work item (trade) not included will be assumed by the Owner as being performed by the Bidder's own forces". (Joint Exhibit #1, p.C-2.400.) A mandatory pre-bid conference was held on September 27, 1988. In order to have a valid bid proposal, all bidding contractors had to attend the conference. Gulf, Federal and the other bidders had representatives at the conference. Charles Collins, the School Board project manager, also attended and reviewed the specifications. He reminded the conference participants that the subcontractors list must be included with the bid and that one and only one subcontractor could be listed for each item. He also told the participants that if the contractor was going to do a particular item, he had to so indicate. He said that any deviation would result in the bid being rejected. (Transcript pp.316,319.) The bids were submitted and opened on October 13 1988. Six bids were received, with the following totals for both the school and bus depot: Federal $7,243,000.00 Phillips $7,322,155.00 Indus $7,390,000.00 Barton-Malow $7,398,000.00 Gulf $7,448,000.00 Carlson (amount not included in the record -- the highest bidder) (Joint Exhibits #2,3,4,5 and 6) The immediate reaction of Charles Collins and other School Board staff was that the lowest bid, Federal, was a very sloppy bid. There were problems, in fact, with the four lowest of the six bids. (Transcript pp.215 and 324.) Federal's bid bond was on the proper form, but the penal sum space was left blank. In addition, the power of attorney signature was not an original, but was rather part of the printed form. There was no power of attorney for its surety, American Home Assurance Company, on record in Sarasota County. The list of subcontractors form required by the School Board is divided into two columns. The first column lists the work item and in some cases, includes subcategories, such as "supplier", "installer", "manufacturer", "dealer/contractor", and similar designations. For some work items more than one, and as many as three, separate subcategories are included, indicating the need to fill in more than one blank for that work item. The heading over the second column is titled "Subcontractor or Material Supplier". The bidder is supposed to write in the space in this column the subcontractor or supplier for each of the work items and subcategories listed in the first column. Federal's list of subcontractors had either blank spaces or a line drawn in the second column for approximately twenty-two work items or subcategories under the work items. In several cases a single name was listed only once next to the work item, even though there were several subcategories under that item. For example, under the work item, "Pre-Engineered Metal Roof System", are three subcategories: "Manufacturer", "Dealer/Contractor (Supplier)" and "Erector". Federal has handwritten one name next to the "Dealer/Contractor (Supplier)" subcategory: "Hammer & Howell". (Joint Exhibit #3.) Dr. Melvin Pettit is the School Board's director of facilities and is responsible for the bidding process and construction of new schools. He is Charles Collins' supervisor. After the bid opening, Dr. Pettit and his other staff met with the bidders individually to make sure they understood the bid. Gulf's bid was very complete and there was not that much to interpret. (Transcript p.217.) Federal's bid was not complete and needed considerable explanation. Dr. Pettit took notes of the explanations on his copy of Federal's bid form. (Joint Exhibit #10.) Federal drew a line next to the work item "site concrete work" because it intended to do than work itself. Although it listed "United" only once for the two subcategories under "Sanitary Sewer Lift Station", it intended that United be both the supplier and installer. Under the work item, "Termite control", Federal drew a line because it did not have a bid or a subcontractor to list. "Underground Fuel Tanks (Bus Depot) and Accessories" with two subcategories, "Supplier" and "Installer", were left blank. Federal intended that J. H. Pump Services do the work, as they were also doing the fuel dispensing equipment, a separate work item on another page of the form. No supplier nor installer was listed under "Concrete Work" because the Federal representative could not remember the supplier's name when the bid was prepared. Federal had quotations for the "Chalkboard and tackboard" work item, but did not list a supplier. They also had quotations for the specialty signs but did not list a supplier for that work item. No subcontractor was listed under the work item, "Waste Handling Equipment"; Federal intended to use the same subcontractor for that and a separate item, "Food Service Equipment". For the separate items, "Dark Room Equipment" and "Library Equipment", no supplier was listed. Federal explained that it had quotes but did not list them because of the rush of bidding. No subcontractor nor supplier was listed for the separate items, "Intercommunications System" or "Public Address System". Federal explained that it intended to use the same subcontractor as that indicated for the electrical work because these items were included in the electrician's bid. For those items including separate subcategories, where only one name is listed, Federal intended in most cases to use the same firm for all subcategories. However, for the roof system example cited in paragraph #9, above, Federal assumed that Hammer and Howell would supply and erect a roof manufactured by Butler. In other words, Hammer and Howell would not also be the manufacturer of the system. The bid specifications list approved manufacturers, and Hammer and Howell is not one of them, nor were they certified as an approved manufacturer one week prior to the bid date, as required in the specifications. Bid opening day in a general contractor's office is a frantic time. Depending on the size of the job and its competitive nature, literally hundreds of phone calls are made. In this case there were over fifty line items that had to be filled in with names on the subcontractors list. Although quotations from subcontractors and suppliers are obtained in the weeks prior to opening, last minute confirmations are obtained in an effort to get the best and most accurate estimates. Preparation of the subcontractor list is time-consuming and critical to competition among bidders. If the bidder is allowed to leave an item blank, he may continue to "shop around" after the bid opening, if he is awarded the bid, to improve his profit margin. The owner, on the other hand, is deprived of the opportunity to consider the subcontractors or suppliers when the bids are evaluated. The bid opening was at 2:00 p.m. Federal, like many other contractors, dispatched an employee to the bid opening with a blank bid. While the staff were at the contractor's office compiling estimates, the representative at the opening was on the phone taking down last minute information. Rick Furr, Vice-President of Federal for eight years, did not give specific instructions to his representative regarding leaving blanks or drawing a line. In some cases, the blanks or lines were intended to mean that Federal was going to do the work itself; in most cases, however, Federal intended that someone else would do the work. After hearing Federal's explanation of its bid, Dr. Pettit and his staff discussed it and came to the conclusion that even though there were a "goodly number of irregularities", that it was "poorly done" and "sloppy" (transcript, p.219), in their opinion Federal did not gain significant material advantage, so they recommended the award go to Federal, as lowest bidder. Dr. Pettit explained at hearing that because of the language on the subcontractor list form, that ". . . any work item not included would be assumed by the owner as being performed by the Bidder's own forces", the School Board intended to require Federal to use their own forces for those work items which they left blank. By "their own forces", he means the work would be done by Federal employees on Federal's payroll, for whom workers' compensation is paid. (Transcript, pp.228-9.) This stated intention is so conflicting with Federal's intention and capabilities as to be utterly disingenuous. Although Federal can do its own site concrete work, just as most contractors do, it is not licensed to do termite control. It does not have a batch plant to supply concrete. It cannot manufacture a metal roof system, chalkboards and tackboards, specialty signs, darkroom equipment, an intercommunications system, or a public address system. Even if it could, it is not one of the approved manufacturers listed in the bid specifications for most of these items list. It is apparent, therefore, that Federal will either be unable to perform under the contract or that changes must be made to its subcontractors list. The approximate combined value of the work items left blank, or partially blank, by Federal is $1 million. Federal gained a competitive advantage by failing to complete all the blanks on the subcontractors list form. It gained precious minutes of time to concentrate on other aspects of the bid preparation; it is not bound to a given supplier, manufacturer or installer and can continue to bid shop. Phillips' bid, the second lowest, was non-responsive as it failed to list any subcontractors. It left blank the entire four-page attachment to the bid. (Joint Exhibit #4.) Indus' bid materially deviated from the specifications, as stipulated by the parties. (See stipulated Facts, above, and Joint Exhibit #5.) Barton-Malow's subcontractors list included Aetna Steel as the steel fabricator/supplier, but Aetna Steel verified in writing that they did not bid the structural steel on this job. Barton-Malow also used its surety's bid bond form, rather than the form required in the specification. The form provided by Barton-Malow lacked several provisions found on the required form, including the payments of expenses and attorney's fees in the event of a suit on the bond. (Joint Exhibits #1 and 6; Transcript, pp.89-90) Barton-Malow did fill in all of the blanks on the subcontractors list in accordance with the instructions at the pre-bid conference. In its bid specifications and accompanying documents and instructions, the School Board reserves the right to reject any and all bids received and to waive any and all irregularities in regard thereto. (Joint Exhibit #1, p.C- 1.310.) Since the only recommendation the School Board was given is to award the contract to Federal, the lowest bidder, it has not taken any action on the remaining bids.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the School Board of Sarasota County award the contract to Gulf Constructors, Inc., as the lowest responsive bidder. DONE and ENTERED this 1st day of March, 1989, in Tallahassee, Leon County, Florida. MARY CLARK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 904/488-9675 Filed with the Clerk of the Division of Administrative Hearings this 1st day of March, 1989. APPENDIX The following constitute my rulings on the findings of fact submitted by the parties: Petitioner's Proposed Findings Addressed in Background. Adopted in paragraphs 2. and 7. Adopted in paragraph 2. Adopted in paragraph 7. Adopted in paragraph 4. Rejected as irrelevant. Adopted in paragraphs 12. and 17. 8.-10. Rejected as unnecessary. 11.-13. Adopted in paragraph 3. 14.-19. Adopted in substance in paragraph 11. 20. Adopted in summary in paragraph 16. 21.-30. Adopted in substance in paragraph 16. 31.-36. Adopted in substance in paragraph 17. 37.-41. Addressed in conclusions of law. Rejected as cumulative. Adopted in paragraph 18. Adopted in paragraph 19. Adopted in paragraph 20. 46.-58. Rejected as cumulative and unnecessary 59.-61. Adopted in paragraph 12. 62.-90. Rejected as cumulative, unnecessary or a restatement of testimony, rather than a finding of fact. 91.-96. Although credible, Mr. Cannon's opinion on the enforceability of the bond is not competent. This is basically a legal opinion. 97.-149. Rejected as cumulative, unnecessary, or a restatement of testimony, rather than a finding of fact. Respondent's Proposed Findings Addressed in Background. Adopted in paragraph 3. Adopted in paragraph 21. 4.&5. Adopted in paragraph 3. 6.&7. Rejected as statement of testimony, not a finding of fact. 8.&9. Rejected as immaterial. 10.&11. Adopted in paragraph 4. 12.&l3. Rejected as immaterial. 14.-16. Rejected as contrary to weight of evidence. 17. Adopted `in paragraph 11. 18.-45. Rejected as unnecessary or subordinate to the findings in paragraph 11. Adopted as a legal conclusion. 47.-52. Rejected as unnecessary. Adopted in paragraph 14. Rejected as unnecessary; this is addressed in the conclusions of law. 55.-59. Rejected as contrary to the weight of evidence. Rejected as unnecessary. Rejected as contrary to the weight of evidence. COPIES FURNISHED: DARYL J. BROWN, ESQUIRE MICHAEL S. TAAFFE, ESQUIRE ABEL, BAND, BROWN, RUSSELL & COLLIER 1777 MAIN STREET POST OFFICE BOX 49948 SARASOTA FLORIDA 34230-6948 JOHN V. CANNON, III, ESQUIRE ELVIN W. PHILLIPS, ESQUIRE WILLIAMS, PARKER, HARRISON & DIETZ 1550 RINGLING BOULEVARD POST OFFICE BOX 3258 SARASOTA, FLORIDA 34230 HONORABLE BETTY CASTOR COMMISSIONER OF EDUCATION THE CAPITOL TALLAHASSEE, FL 32399 DR. CHARLES W. FOWLER SUPERINTENDENT SCHOOL BOARD OF SARASOTA COUNTY 2418 HATTON STREET SARASOTA, FL 33577
Findings Of Fact At all times relevant hereto Hossein Afghani, Respondent, was licensed as a real estate salesman in Florida and was working for Century 21/Bill Nye Realty in Zephyrhills, Florida. Since receiving his real estate license, Respondent has been involved in approximately 40 sales of residential property. Other than the accusations made in these proceedings, no other charges of impropriety involving a real estate transaction have been made against Respondent. Prior to the filing of the complaint which led to these proceedings, Respondent was the most productive salesman in the Bill Nye realty office. Mohamid Ali Iranmanesh was interested in purchasing a foreclosed residence from HUD and was referred to Respondent. Respondent showed Iranmanesh several properties and submitted bids for Iranmanesh on two of these properties. On neither was Iranmanesh the successful bidder. Iranmanesh saw a house on Perez Street in Tampa which was being offered for bids by HUD and was shown the house by the lady who was showing the house to another client. He liked the house and contacted Respondent who prepared a bid offer for $67,000 to be submitted to HUD. At Iranmanesh's insistence, when the bid offer was prepared, the commission was placed at 2% or $1340. Iranmanesh gave Respondent a check for $2000 as downpayment. On the sale of repossessed homes by HUD, a commission of up to 6% of the bid price will be paid by HUD. This commission does not affect the bid price in determining the successful bidder for the property. After preparing the bid offer and leaving Iranmanesh, Respondent concluded that the commission was inadequate and telephoned Iranmanesh to tell him he would not submit the bid offer with that commission and requested Iranmanesh's concurrence to up the commission $1000 to $2340. Although Iranmanesh denies he was ever asked by Respondent for permission to increase the commission to $2340, it is concluded that Iranmanesh agreed to this change in the commission. This conclusion is influenced by the following: The change would not affect the bid price or cost the bidder any money; Respondent's roommate testified to a telephone call between Respondent and Iranmanesh just before the bid submission, in which a change in the commission was discussed; Iranmanesh was satisfied with the contract until he learned the next highest bid was $60,000, $7,000 less than the bid Iranmanesh submitted; and, Iranmanesh agreed to the deletion of item 11 on the offer at the same time the commission was changed by Respondent. When Respondent telephoned Iranmanesh about the change in the commission, the latter also agreed that Respondent could delete item 11 which related to a forfeiture of the deposit if the buyer defaulted. Iranmanesh recalls authorizing this change in the bid offer. When Iranmanesh was advised his was the successful bid for the property, he inquired about the next highest bid and learned that bid was $60,000. He then tried to negotiate with HUD for the lower sum, but was unsuccessful. Iranmanesh then noted a change in the commission which had not been initialed by him and asserted the bid he had submitted had been changed without his consent and claimed the right to rescind the bid. A personal dispute had arisen between Respondent and Iranmanesh, and during these proceedings the latter attempted to assume the role of prosecutor and evinced a keen interest in punishing Respondent.
The Issue The Department of Corrections sought bids for construction of a health services building for a correctional facility. A discrepancy existed between the written specifications and the architectural drawings for the project. An addendum was issued to clarify the matter. The low bidder (Intervenor) did not acknowledge receipt of the addendum until several hours after the opening of bids. The Department accepted the Intervenor's bid. The Petitioner timely protested the action. The issue in this case is whether, in accepting the Intervenor's bid, the Department acted contrary to the requirements of law.
Findings Of Fact On July 31, 1990, the Department of Corrections (hereinafter "Department") issued an Invitation To Bid ("ITB") for PR-35-JRA, Project #90015, consisting of the construction of a Health Classification Building at the Columbia County Correctional Institution. In relevant part, the ITB requested price proposals for said construction, provided that the bid would be awarded to the responsive bidder submitting the lowest cost proposal, provided that "in the interest" of the Department, "any informality" in bids could be waived, and provided space on the bid form for acknowledgment of receipt of all addenda to the ITB. Bids were to be filed no later than 2:00 p.m. on September 11, 1990, the time scheduled for bid opening. Documents issued with the ITB included architectural drawings and written specifications for the building. The architectural firm of Jim Roberson and Associates, (hereinafter "JRA") had been employed by the Department to prepare the drawings and specifications. JRA was responsible for preparation and distribution of related addenda. Further, a JRA representative presided over the opening of bids on behalf of the Department. Following release of the ITB and supporting documents, JRA became aware of a conflict between sink faucets required by the drawings and those required by the written specifications. The specifications provided that sink faucets operated by hand levers or foot pedals were to be installed in the facility. The architectural drawings JRA indicated that sink faucets were to operate by means of "electric-eye" activators, rather than by hand levers or foot pedals. On September 10, 1990, JRA issued an addendum (identified as Addendum #2) 1/ to clarify that "electric-eye" type operators were to be included in the bids. The addendum was sent by telephone facsimile machine to all anticipated bidders. In part the addendum provides as follows: "This Addendum forms a part of the Contract Documents and modifies the original Specifications and Drawings, dated 31 July 1990, as noted below. Acknowledge receipt of this Addendum in the space provided on the Bid Form. Failure to do so may subject the Bidder to Disqualification." On September 11, 1990, the eight bids submitted in response to the ITB were opened by the JRA representative. The Intervenor, Custom Construction (hereinafter "Custom"), submitted the lowest bid at $898,898. The Petitioner, David Nixon (hereinafter "Nixon"), submitted the next lowest bid at $900,000. The bid form provided by the Department as part of the ITB materials to prospective bidders provided space for acknowledgment of addenda to the ITB documents. Upon opening the bid submitted by Custom, the JRA representative officiating at the opening noted that the Custom bid failed to acknowledge Addendum #2 in the appropriate space on the bid form. 2/ Robert L. Harris, president of Custom Construction, attended the bid opening. When the JRA representative noted the lack of acknowledgment of Addendum #2, Mr. Harris stated that he was unaware of the addendum. At hearing, Mr. Harris testified that his secretary told him that Addendum #2 was not received by his office. The JRA representative testified that his review of JRA's FAX transmission records indicated that the FAXed Addendum #2 was received by all bidders. The greater weight of the evidence establishes that Addendum #2 was transmitted to and received by, all bidders. Upon leaving the bid opening, Mr. Harris immediately contacted his plumbing subcontractor, Jerry Stratyon, and discussed the situation. Approximately two hours after the bid opening, and after talking with Mr. Stratton, Mr. Harris notified JRA, in a letter transmitted by FAX machine to JRA, that his bid price did include plumbing fixtures required by Addendum #2. Mr. Harris concluded the letter, "[w]hen can we start work. I know you don't want the alternate." On October 8, 1990, JRA recommended to the Department, that the Custom bid be accepted. The letter of recommendation, in part, provides: The apparent low bidder however, did not verify receipt of Addendum No. 2 on the Bid Proposal. Our office did receive a, facsimile after the bid verifying Addendum NO. 2 receipt from the Contractor's Office." However, the actual letter from Custom to JRA states, not that Addendum #2 was received, but that it was included in the price bid by Custom's plumbing subcontractor. Both Nixon and Custom obtained plumbing bids from the same subcontractor, Jerry Stratton. The cost increase attendant to the requirements of Addendum #2 is approximately $2,400 over the plumbing fixtures indicated in the written project specifications. Mr. Stratton was aware of Addendum #2 and testified that the requirements of Addendum #2 were reflected in his price quotes to both bidders. Mr. Stratton provided the same price bid to Nixon and Custom. Mr. Stratton also provided bids to Nixon and Custom for HVAC work. Mr. Stratton was accepted as Custom's HVAC subcontractor. Nixon's bid indicates that another HVAC subcontractor will perform the cork should Nixon receive the contract. The ITB provided that bid modification or withdrawal was permitted on written or telegraphic request received from a bidder prior to the time fixed for opening. Mr. Harris did not attempt to either withdraw or modify Custom's bid prior to bid opening. No bid modification was permitted subsequent to the bid opening. The Department's policy is to waive minor irregularities when to do so would be in the best interests of the State and would not be unfair to other bidders. The evidence does not establish that Custom Construction's failure to acknowledge the addendum was purposefully designed to permit withdrawal of their bid subsequent to the public bid opening. The omission of acknowledgment of Addendum #2 provided Custom an opportunity to withdraw the bid that was not available to other bidders. Custom could have informed the Department that the bid price did not include the requirements of Addendum #2, and the bid could have been withdrawn. Custom was therefore provided with a substantial advantage or benefit not enjoyed by the other bidders. The other bidders, all of whom acknowledged receipt of Addendum #2, had no opportunity to, and would not have been permitted to, withdraw their aids. The fact that Custom did not withdraw the bid is irrelevant.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Corrections enter a Final Order rejecting the bid submitted by Intervenor as nonresponsive and awarding the contract to the Petitioner. DONE and RECOMMENDED this 15th day of January, 1991, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of January, 1991.
