The Issue Whether the Department of Corrections? action to withdraw its Intent to Award and to reject all replies to ITN 12-DC-8396 is illegal, arbitrary, dishonest, or fraudulent, and if so, whether its Intent to Award is contrary to governing statutes, rules, policies, or the solicitation specifications.
Findings Of Fact The DOC is an agency of the State of Florida that is responsible for the supervisory and protective care, custody, and control of Florida?s inmate population. In carrying out this statutory responsibility, the Department provides access to inmate telephone services. On April 15, 2013, the DOC issued the ITN, entitled “Statewide Inmate Telephone Services, ITN 12-DC-8396,” seeking vendors to provide managed-access inmate telephone service to the DOC. Responses to the ITN were due to be opened on May 21, 2013. The DOC issued Addendum #1 to the ITN on April 23, 2013, revising one page of the ITN. The DOC issued Addendum #2 to the ITN on May 14, 2013, revising a number of pages of the ITN, and including answers to a number of vendor questions. EPSI, GTL, and Securus are providers of inmate telephone systems and services. Securus is the incumbent contractor, and has been providing the Department with services substantially similar to those solicited for over five years. No party filed a notice of protest to the terms, conditions, or specifications contained in the ITN or the Addenda within 72 hours of their posting or a formal written protest within 10 days thereafter. Replies to the ITN were received from EPSI, GTL, Securus, and Telmate, LLC. Telmate?s reply was determined to be not responsive to the ITN. Two-Part ITN As amended by Addendum #2, section 2.4 of the ITN, entitled “ITN Process,” provided that the Invitation to Negotiate process to select qualified vendors would consist of two distinct parts. In Part 1, an interested vendor was to submit a response that described certain Mandatory Responsiveness Requirement elements, as well as a Statement of Qualifications, Technical Response, and Financial Documentation. These responses would then be scored using established evaluation criteria and the scores would be combined with cost points assigned from submitted Cost Proposals. In Part 2, the Department was to select one or more qualified vendors for negotiations. After negotiations, the Department would request a Best and Final Offer from each vendor for final consideration prior to final award decision. The ITN provided that the Department could reject any and all responses at any time. High Commissions and Low Rates Section 2.5 of the ITN, entitled “Initial Cost Response,” provided in part: It is the Department?s intention, through the ITN process, to generate the highest percentage of revenue for the State, while ensuring a quality telephone service with reasonable and justifiable telephone call rate charges for inmate?s family and friends similar to those available to the public-at- large. Section 2.6 of the ITN, entitled “Revenue to be Paid to the Department,” provided in part that the Department intended to enter into a contract to provide inmate telephone service at no cost to the Department. It provided that, “[t]he successful Contractor shall pay to the Department a commission calculated as a percentage of gross revenues.”1/ The commission paid by a vendor is the single largest expense in the industry and is an important aspect of any bid. Contract Term Section 2.8 of the ITN was entitled “Contract Term” and provided: It is anticipated that the initial term of any Contract resulting from this ITN shall be for a five (5) year period. At its sole discretion, the Department may renew the Contract in accordance with Form PUR 1000 #26. The renewal shall be contingent, at a minimum, on satisfactory performance of the Contract by the Contractor as determined by the Department, and subject to the availability of funds. If the Department desires to renew the Contracts resulting from this ITN, it will provide written notice to the Contractor no later than thirty days prior to the Contract expiration date. Own Technology System Section 3.4 of the ITN provided in part: The successful Contractor is required to implement its own technology system to facilitate inmate telephone service. Due to the size and complexity of the anticipated system, the successful Contractor will be allowed a period of transition beginning on the date the contract is executed in which to install and implement the utilization of its own technology system. Transition, implementation and installation are limited to eighty (80) days. The Department realizes that some "down time" will occur during this transition, and Respondents shall propose an implementation plan that reduces this "down time" and allows for a smooth progression to the proposed ITS. GTL emphasizes the language stating that the successful contractor must implement “its own” technology system, and asserts that the technology system which EPSI offers to install is not owned by it, but by Inmate Calling Solutions, LLC (ICS), its subcontractor. However, EPSI demonstrated that while the inmate telephone platform, dubbed the “Enforcer System,” is owned by ICS now, that EPSI has a Master User Agreement with ICS and that an agreement has already been reached that before the contract would be entered into, a Statement of Work would be executed to create actual ownership in EPSI for purposes of the Florida contract. GTL alleges that in EPSI?s reply, EPSI relied upon the experience, qualifications, and resources of its affiliated entities in other areas as well. For example, GTL asserts that EPSI?s claim that it would be providing 83 percent of the manpower is false, since EPSI has acknowledged that EPSI is only a contracting subsidiary of CenturyLink, Inc., and that EPSI has no employees of its own. While it is clear that EPSI?s reply to the ITN relies upon the resources of its parent to carry out the terms of the contract with respect to experience, presence in the state, and personnel, EPSI demonstrated that this arrangement was common, and well understood by the Department. EPSI demonstrated that all required capabilities would be available to it through the resources of its parent and subcontractors at the time the contract was entered into, and that its reply was in conformance with the provisions of the ITN in all material respects. EPSI has the integrity and reliability to assure good faith performance of the contract. Call Recording Section 3.6 of the ITN, entitled “Inmate Telephone System Functionality (General),” provided in part: The system shall provide the capability to flag any individual telephone number in the inmate?s „Approved Number List? as „Do Not Record.? The default setting for each telephone number will be to record until flagged by Department personnel to the contrary. Securus alleges that section 3.6 of the ITN implements Department regulations2/ and that EPSI?s reply was non-responsive because it stated that recording of calls to specific telephone numbers would be deactivated regardless of who called that number. Securus alleges that this creates a security risk because other inmates calling the same number should still have their calls recorded. EPSI indicated in its reply to the ITN that it read, agreed, and would comply with section 3.6. While EPSI went on to say that this capability was not connected to an inmate?s PIN, the language of section 3.6 does not mention an inmate?s PIN either. Read literally, this section requires only the ability to “flag” any individual telephone number that appears in an inmate?s number list as “do not record” and requires that, by default, calls to a telephone number will be recorded until it is flagged. EPSI?s reply indicated it could meet this requirement. This provision says nothing about continuing to record calls to that same number from other inmates. Whether or not this creates a security risk or is what the Department actually desired are issues which might well be discussed as part of the negotiations, but this does not affect the responsiveness of EPSI?s reply to section 3.6. Furthermore, Mr. Cooper testified at hearing that EPSI does have the capability to mark a number as “do not record” only with respect to an individual inmate, at the option of the Department. EPSI?s reply conformed to the call-recording provisions of section 3.6 of the ITN in all material respects. Call Forwarding Section 3.6.8 of the ITN, entitled “System Restriction, Fraud Control and Notification Requirements,” provided that the provided inmate telephone services have the following security capability: Ability to immediately terminate a call if it detects that a called party?s telephone number is call forwarded to another telephone number. The system shall make a “notation” in the database on the inmate?s call. The system shall make this information available, in a report format, to designated department personnel. In response to an inquiry noting that, as worded, the ITN did not technically require a vendor to have the capability to detect call-forwarded calls in the first place, the Department responded that this functionality was required. Securus alleges that EPSI is unable to comply with this requirement, citing as evidence EPSI?s admission, made some months before in connection with an RFP being conducted by the Kansas Department of Corrections, that it did not yet have this capability. EPSI indicated in its reply to the ITN that it read, agreed, and would comply with this requirement. As for the Kansas solicitation, EPSI showed that it now possesses this capability, and has in fact installed it before. EPSI?s reply conformed to the call-forwarding provisions of section 3.6.8 of the ITN in all material respects. Keefe Commissary Network Section 5.2.1 of the ITN, entitled “Respondents? Business/Corporate Experience,” at paragraph e. directed each vendor to: [P]rovide and identify all entities of or related to the Respondent (including parent company and subsidiaries of the parent company; divisions or subdivisions of parent company or of Respondent), that have ever been convicted of fraud or of deceit or unlawful business dealings whether related to the services contemplated by this ITN or not, or entered into any type of settlement agreement concerning a business practice, including services contemplated by this ITN, in response to a civil or criminal action, or have been the subject of any complaint, action, investigation or suit involving any other type of dealings contrary to federal, state, or other regulatory agency regulations. The Respondent shall identify the amount of any payments made as part of any settlement agreement, consent order or conviction. Attachment 6 to the ITN, setting forth Evaluation Criteria, similarly provided guidance regarding the assessment of points for Business/Corporate Experience. Paragraph 1.(f) provided: “If any entities of, or related to, the Respondent were convicted of fraud or of deceit or unlawful business dealings, what were the circumstances that led to the conviction and how was it resolved by the Respondent?” Addendum #2. to the ITN, which included questions and answers, also contained the following: Question 57: In Attachment 6, Article 1.f. regarding respondents “convicted of fraud, deceit, or unlawful business dealing . . .” does this include associated subcontractors proposed in this ITN? Answer 57: Yes, any subcontractors you intend to utilize on this project, would be considered an entity of and related to your firm. As a proposed subcontractor, ICS is an entity of, or related to, EPSI. There is no evidence to indicate that ICS has ever been convicted of fraud or of deceit or unlawful business dealings. There is no evidence to indicate that ICS has entered into any type of settlement agreement concerning a business practice in response to a civil or criminal action. There is no evidence to indicate that ICS has been the subject of any complaint, action, investigation, or suit involving any other type of dealings contrary to federal, state, or other regulatory agency regulations. The only evidence at hearing as to convictions involved “two individuals from the Florida DOC” and “two individuals from a company called AIS, I think that?s American Institutional Services.” No evidence was presented that AIS was “an entity of or related to” EPSI. Conversely, there was no evidence that Keefe Commissary Network (KCN) or anyone employed by it was ever convicted of any crime. There was similarly no evidence that KCN entered into any type of settlement agreement concerning a business practice in response to civil or criminal action. It was shown that KCN “cooperated with the federal government in an investigation” that resulted in criminal convictions, and it is concluded that KCN was therefore itself a subject of an investigation involving any other type of dealings contrary to federal, state, or other regulatory agency regulations. However, KCN is not an entity of, or related to, EPSI. KCN is not a parent company of EPSI, it is not a division, subdivision, or subsidiary of EPSI, and it is not a division, subdivision, or subsidiary of EPSI?s parent company, CenturyLink, Inc. EPSI?s reply conformed to the disclosure requirements of section 5.2.1, Attachment 6, and Addendum #2 of the ITN in all material respects. Phases of the ITN Section 6 describes nine phases of the ITN: Phase 1 – Public Opening and Review of Mandatory Responsiveness Requirements Phase 2 – Review of References and Other Bid Requirements Phase 3 – Evaluations of Statement of Qualifications, Technical Responses, and Managed Access Solutions3/ Phase 4 – CPA Review of Financial Documentation Phase 5 – Review of Initial Cost Sheets Phase 6 – Determination of Final Scores Phase 7 – Negotiations Phase 8 – Best and Final Offers from Respondents Phase 9 – Notice of Intended Decision Evaluation Criteria in the ITN As amended by Addendum #2, the ITN established scoring criteria to evaluate replies in three main categories: Statement of Qualifications (500 points); Technical Response (400 points); and Initial Cost Sheets (100 points). It also provided specific guidance for consideration of the commissions and rates shown on the Initial Cost Sheet that made up the pricing category. Section 6.1.5 of the ITN, entitled “Phase 5 – Review of Initial Cost Sheet,” provided in part: The Initial Cost Proposal with the highest commission (percentage of gross revenue) to be paid to the Department will be awarded 50 points. The price submitted in Table 1 for the Original Contract Term, and the subsequent renewal price pages for Table 1 will be averaged to determine the highest commission submitted. All other commission percentages will receive points according to the following formula: (X/N) x 50 = Z Where: X = Respondents proposed Commission Percentage to be Paid. N = highest Commission Percentage to be Paid of all responses submitted. Z = points awarded. * * * The Initial Cost Proposal with the lowest telephone rate charge will be awarded 50 points. The price submitted in Table 1 for the Original Contract Term, and the subsequent renewal price pages for Table 1 will be averaged to determine the highest commission submitted. All other cost responses will receive points according to the following formula: (N/X) x 50 = Z Where: N = lowest verified telephone rate charge of all responses submitted. X = Respondent?s proposed lowest telephone rate charge. Z = points awarded. The ITN as amended by Addendum #2 provided instructions that initial costs should be submitted with the most favorable terms the Respondent could offer and that final percentages and rates would be determined through the negotiation process. It included the following chart:4/ COST PROPOSAL INITIAL Contract Term 5 years ONE Year Renewal TWO Year Renewal THREE Year Renewal FOUR Year Renewal FIVE Year Renewal Initial Department Commission % Rate Proposed Initial Blended Telephone Rate for All Calls* (inclusive of surcharges) The ITN, including its Addenda, did not specify selection criteria upon which the determination of best value to the state would be based. Allegation that EPSI Reply was Misleading On the Certification/Attestation Page, each vendor was required to certify that the information contained in its reply was true and sufficiently complete so as not to be misleading. While portions of its reply might have provided more detail, EPSI did not mislead the Department regarding its legal structure, affiliations, and subcontractors, or misrepresent what entity would be providing technology or services if EPSI was awarded the contract. EPSI?s reply explained that EPSI was a wholly owned corporate subsidiary of CenturyLink, Inc., and described many aspects of the contract that would be performed using resources of its parent, as well as aspects that would be performed through ICS as its subcontractor. Department Evaluation of Initial Replies The information on the Cost Proposal table was reviewed and scored by Ms. Hussey, who had been appointed as the procurement manager for the ITN. Attempting to follow the instructions provided in section 6.1.5, she added together the six numbers found in the boxes indicating commission percentages on the Cost Proposal sheets. One of these boxes contained the commission percentage for the original five-year contract term and each of the other five boxes contained the commission percentage for one of the five renewal years. She then divided this sum by six, the number of boxes in the computation chart (“divide by six”). In other words, she calculated the arithmetic mean of the six numbers provided in each proposal. The Department had not intended for the commission percentages to be averaged in this manner. Instead, they had intended that a weighted mean would be calculated. That is, they intended that five times the commission percentage shown for the initial contract term would be added to the commission percentages for the five renewal years, with that sum then being divided by ten, the total number of years (“divide by ten”). The Department did not clearly express this intent in section 6.1.5. Mr. Viefhaus testified that based upon the language, Securus believed that in Phase 5 the Department would compute the average commission rate the way that Ms. Hussey actually did it, taking the arithmetic mean of the six commission percentages provided by each vendor, and that therefore Securus prepared its submission with that calculation in mind.5/ Mr. Montanaro testified that based upon the language, GTL believed that in Phase 5 the Department would “divide by ten,” that is, compute the weighted mean covering the ten-year period of the contract, and that GTL filled out its Cost Proposal table based upon that understanding. The DOC posted a notice of its intent to negotiate with GTL, Securus, and EPSI on June 3, 2013. Telmate, LLC, was not chosen for negotiations.6/ Following the Notice of Intent to Negotiate was this statement in bold print: Failure to file a protest within the time prescribed in Section 120.57(3), Florida Statutes, or failure to post the bond or other security required by law within the time allowed for filing a bond shall constitute a waiver of proceedings under Chapter 120, Florida Statutes. On June 14, 2013, the DOC issued a Request for Best and Final Offers (RBAFO), directing that Best and Final Offers (BAFO) be provided to the DOC by June 18, 2013. Location-Based Services The RBAFO included location-based services of called cell phones as an additional negotiated service, requesting a narrative description of the service that could be provided. The capability to provide location-based services had not been part of the original ITN, but discussions took place as part of the negotiations. Securus contends that EPSI was not a responsible vendor because it misrepresented its ability to provide such location-based services through 3Cinteractive, Inc. (3Ci). EPSI demonstrated that it had indicated to the Department during negotiations that it did not have the capability at that time, but that the capability could easily be added. EPSI showed that due to an earlier call it received from 3Ci, it believed that 3Ci would be able to provide location- based services to it. EPSI was also talking at this time to another company, CTI, which could also provide it that capability. In its BAFO, EPSI indicated it could provide these services, explained that they would require payments to a third- party provider, and showed a corresponding financial change to their offer. No competent evidence showed whether or not 3Ci was actually able to provide that service on behalf of EPSI, either at the time the BAFO was submitted, or earlier. EPSI showed that it believed 3Ci was available to provide that service, however, and there is no basis to conclude that EPSI in any way misrepresented its ability to provide location-based services during negotiations or in its BAFO. Language of the RBAFO The RBAFO provided in part: This RBAFO contains Pricing, Additional Negotiated Services, and Value Added Services as discussed during negotiation and outlined below. The other specifications of the original ITN, unless modified in the RBAFO, remain in effect. Respondents are cautioned to clearly read the entire RBAFO for all revisions and changes to the original ITN and any addenda to specifications, which are incorporated herein and made a part of this RBAFO document. Unless otherwise modified in this Request for Best and Final Offer, the initial requirements as set forth in the Department?s Invitation to Negotiate document and any addenda issued thereto have not been revised and remain as previously indicated. Additionally, to the extent that portions of the ITN have not been revised or changed, the previous reply/initial reply provided to the Department will remain in effect. These two introductory paragraphs of the RBAFO were confusing. It was not clear on the face of the RBAFO whether “other specifications” excluded only the pricing information to be supplied or also the specifications indicating how that pricing information would be calculated or evaluated. It was not clear whether “other specifications” were the same thing as “initial requirements” which had not been revised. It was not clear whether scoring procedures constituted “specifications.” While it was clear that, to the extent not revised or changed by the RBAFO, initial replies that had been submitted -- including Statements of Qualifications, Technical Response, Financial Documentation, and Cost Proposals -- would “remain in effect,” it was not clear how, if at all, these would be considered in determining the best value to the State. In the RBAFO under the heading “PRICING,” vendors were instructed to provide their BAFO for rates on a provided Cost Proposal table which was virtually identical to the table that had been provided earlier in the ITN for the evaluation stage, including a single square within which to indicate a commission rate for the initial five-year contract term, and five squares within which to indicate commission rates for each of five renewal years. The RBAFO stated that the Department was seeking pricing that would provide the “best value to the state.” It included a list of 11 additional services that had been addressed in negotiations and stated that, “in order to provide the best value to the state,” the Department reserved the right to accept or reject any or all of these additional services. It provided that after BAFOs were received, the Negotiation Team would prepare a summary of the negotiations and make a recommendation as to which vendor would provide the “best value to the state.” The RBAFO did not specify selection criteria upon which the determination of best value to the State would be based. In considering commission percentages as part of their determination as to which vendor would receive the contract, the Negotiation Team decided not to consider commissions that had been listed by vendors for the renewal years, concluding that the original five-year contract term was all that was assured, since renewals might or might not occur. On June 25, 2013, the DOC posted its Notice of Agency Decision stating its intent to award a contract to EPSI. Protests and the Decision to Reject All Replies Subsequent to timely filing notices of intent to protest the intended award, Securus and GTL filed Formal Written Protests with the DOC on July 5 and 8, 2013, respectively. The Department considered and compared the protests. It determined that language in the ITN directing that in Phase 5 the highest commission would be determined by averaging the price for the original contract term with the prices for the renewal years was ambiguous and flawed. It determined that use of a table with six squares as the initial cost sheet was a mistake. The Department determined that the language and structure of the RBAFO could be read one way to say that the Department would use the same methodology to evaluate the pricing in the negotiation stage as had been used to evaluate the Initial Cost sheets in Phase 5, or could be read another way to mean that BAFO pricing would not be evaluated that way. It determined that the inclusion in the RBAFO of a table virtually identical to the one used as the initial cost sheet was a mistake. The Department determined that the language and the structure of the RBAFO could be read one way to require further consideration of such factors as the Statement of Qualifications and Technical Response in determining best value to the State, or could be read another way to require no further consideration of these factors. The Department prepared some spreadsheets demonstrating the varying results that would be obtained using “divide by six” and “divide by ten” and also considered a spreadsheet that had been prepared by Securus. The Department considered that its own Contract Manager had interpreted the Phase 5 instructions to mean “divide by six,” while the Department had actually intended the instructions to mean “divide by ten.” The Department had intended that the Negotiation Team give some weight to the renewal-year pricing, and had included the pricing table in the RBAFO for that reason, not simply to comply with statutory requirements regarding renewal pricing. The Department determined that the way the RBAFO was written and the inclusion of the chart required at least some consideration of ten-year pricing, and that vendors had therefore been misled when the Negotiation Team gave no consideration to the commission percentages for the renewal years. Specifically, based upon the Securus protest, the Department determined that the RBAFO language had been interpreted by Securus to require that the Phase 5 calculation of average commission percentage be carried over to evaluation of the pricing in the BAFOs, which Securus had concluded meant “divide by six.” The Department further determined that based upon the GTL protest, the RBAFO language had been interpreted by GTL to require the Department to consider the renewal years in pricing, as well as such things as the Statement of Qualifications and Technical Response in the BAFO stage. The Department determined that had “divide by six” been used in evaluating the BAFOs, Securus would have a computed percentage of 70 percent, higher than any other vendor. The Department concluded that the wording and structure of the ITN and RBAFO did not create a level playing field to evaluate replies because they were confusing and ambiguous and were not understood by everyone in the same way. Vendors naturally had structured their replies to maximize their chances of being awarded the contract based upon their understanding of how the replies would be evaluated. The Department concluded that vendor pricing might have been different but for the misleading language and structure of the ITN and RBAFO. The Department did not compute what the final award would have been had it applied the scoring procedures for the initial cost sheets set forth in section 6.1.5 to the cost elements of the BAFOs. The Department did not compute what the final award would have been had it applied the scoring procedures for the Statement of Qualifications and Technical Response set forth in section 6.1.3 to the BAFOs. Ms. Bailey testified that while she had originally approved the ITN, she was unaware of any problems, and that it was only later, after the protests to the Notice of Intended Award had been filed and she had reviewed the specifications again, that she had come to the conclusion that the ITN and RBAFO were flawed. Following the protests of the intended award by GTL and Securus, on July 23, 2013, the DOC posted to the Vendor Bid System a Notice of Revised Agency Decision stating the DOC?s intent to reject all replies and reissue the ITN. On August 5, 2013, EPSI, GTL, and Securus filed formal written protests challenging DOC?s intended decision to reject all replies. Securus subsequently withdrew its protest to DOC?s rejection of all replies. As the vendor initially notified that it would receive the contract, EPSI?s substantial interests were affected by the Department's subsequent decision to reject all replies. GTL alleged the contract had wrongly been awarded to EPSI and that it should have received the award, and its substantial interests were affected by the Department's subsequent decision to reject all replies. The Department did not act arbitrarily in its decision to reject all replies. The Department did not act illegally, dishonestly, or fraudulently in its decision to reject all replies. EPSI would likely be harmed in any re-solicitation of bids relative to its position in the first ITN, because potential competitors would have detailed information about EPSI?s earlier reply that was unavailable to them during the first ITN. An ITN requires a great deal of work by the Department and creates a big demand on Department resources. The decision to reject all replies was not undertaken lightly. The State of Florida would likely benefit in any new competitive solicitation7/ because all vendors would be aware of the replies that had been submitted earlier in response to the ITN, and bidders would likely try to improve upon those proposals to improve their chances of being awarded the contract.
Recommendation Upon consideration of the above findings of fact and conclusions of law, it is RECOMMENDED: That the Department of Corrections issue a final order finding that the rejection of all replies submitted in response to ITN 12-DC-8396 was not illegal, arbitrary, dishonest, or fraudulent, and dismissing all four protests. DONE AND ENTERED this 1st day of November, 2013, in Tallahassee, Leon County, Florida. S F. SCOTT BOYD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of November, 2013.
The Issue Whether respondent's proposed rule 25-6.100(7), Florida Administrative Code, providing that electric utilities may collect municipal or county franchise fees only from customers within the municipality or county levying the fee, constitutes an invalid exercise of delegated legislative authority.
Findings Of Fact Notice of the proposed rule was published in the January 15, 1982, issue of the Florida Administrative Weekly ("FAW"). 2/ The notice set forth only the proposed amendment of the rule and did not publish the existing rule in full. At the time that the notice of proposed rulemaking was published, an economic impact statement (EIS) was made available by the Commission. 3/ A public hearing on the proposed rule was held before a member of the Commission's staff on February 4, 1982. The Cities participated in the hearing and, subsequent thereto, filed with the Commission their Motion to Dismiss or Withdraw Proposed Rules. 4/ During the pendency of the rulemaking proceeding, the Commission drafted and circulated a revised economic impact statement. The Commission's staff member circulated to the participants of the rulemaking proceeding a proposed final amendment of Rule 25-6.100 and the revised economic impact statement, requesting comments thereon. 5/ Written comments were received from various participants in the rulemaking. 6/ While the comments addressed the substance of the proposed rule, none addressed the revised economic impact statement. The Commission staff presented a written recommendation to the Commission on the proposed rule, which also included the participants' comments and the revised economic impact statement. At its regularly scheduled Agenda Conference of September 20, 1982 the Commission adopted the proposed rule recommended by its staff, as well as the revised economic impact statement. Order No. 11277 also denied the Cities' Motion to Dismiss or Withdraw Proposed Rule. 7/ Filing of the proposed rule with the Secretary of State was withheld pending a determination of validity by the Division of Administrative Hearings.
The Issue Whether Respondent committed the offenses set forth in the two-count Administrative Complaint, dated April 17, 2007, and, if so, what penalty should be imposed.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made: The Department of Business and Professional Regulation, Division of Real Estate (the "Department"), is the state agency charged with enforcing the statutory provisions pertaining to persons holding real estate broker and sales associate's licenses in Florida, pursuant to Section 20.165 and Chapters 455 and 475, Florida Statutes. At all times relevant to this proceeding, except where specifically noted, Respondent Mathew Johnson was a licensed Florida real estate sales associate, having been issued license number SL3149081. Respondent first obtained his real estate associate's license in 2003 and worked under the license of broker Jacqueline Sanderson in Orlando. When he married and his wife became pregnant, Respondent believed that he needed a more steady income than his commission-based employment with Ms. Sanderson provided. Respondent left Ms. Sanderson's employ on good terms and commenced work as the marketing manager for the downtown YMCA in Orlando. While working at the downtown YMCA, Respondent met a member of the YMCA named Tab L. Bish ("Mr. Bish"), a broker who owns First Source, Inc., an Orlando real estate sales company (sometimes referred to as "FSI Realty"). Respondent became friendly with Mr. Bish, and expressed an interest in getting back into the real estate business. Mr. Bish offered Respondent a job at First Source. Respondent had allowed his sales associate's license to lapse while he was working at the YMCA. Respondent informed Mr. Bish of that fact, and told Mr. Bish that he required a salaried position in order to support his young family. Respondent testified that Mr. Bish was happy to hire him as an office manager, because Mr. Bish wanted Respondent to perform a marketing role for First Source similar to that he had performed for the YMCA. Respondent started working at First Source in May 2005, as a salaried office manager. Mr. Bish agreed that he initially hired Respondent as an office manager, but only on the understanding that Respondent would take the necessary steps to reactivate his sales associate's license and commence selling property as soon as possible. Respondent took the licensing course again. Mr. Bish believed that Respondent was taking too long to obtain his license, and cast about for something Respondent could do during the interim. In order to make profitable use of Respondent's time, Mr. Bish began to deal in referral fees from apartment complexes. Certain complexes in the Orlando area would pay a fee to brokers who referred potential renters to the apartments, provided these potential renters actually signed leases. Among the apartment complexes offering referral fees was the Jefferson at Maitland, which in 2005 offered a referral fee of half the first month's rent. Mr. Bish placed Respondent in charge of connecting potential renters with apartment complexes, showing the apartments, following up to determine whether the potential renters signed leases, and submitting invoices for the referral fees. Mr. Bish did not authorize Respondent to collect the payments. Respondent initiated contact with the Jefferson at Maitland and began sending potential renters there. Respondent would submit invoices to the Jefferson at Maitland, payable to First Source, for each referral that resulted in a lease agreement. Respondent estimated that he submitted between 12 and 15 invoices for referral fees to the Jefferson at Maitland during his employment with First Source. Respondent obtained his license and became an active sales associate under Mr. Bish's broker's license on November 16, 2005. Mr. Bish began a process of weaning Respondent away from his salaried position and into working on a full commission basis. Respondent stopped showing apartments under the referral arrangement and began showing properties for sale. The last lease for which First Source was due a referral fee from the Jefferson at Maitland was dated December 5, 2005. In early February 2006, it occurred to Respondent that he had failed to follow up with the Jefferson at Maitland regarding the last group of potential renters to whom he had shown apartments during October and November 2005. Respondent claimed that he "hadn't had the opportunity" to follow up because of the press of his new duties as a sales associate and the intervening holiday season. However, nothing cited by Respondent explained his failure to make a simple phone call to the Jefferson at Maitland to learn whether First Source was owed any referral fees. Respondent finally made the call to the Jefferson at Maitland on February 9, 2006. He spoke to a woman he identified as Jenny Marrero, an employee whom he knew from prior dealings. Ms. Marrero reviewed Respondent's list and found three persons who had signed leases after Respondent showed them apartments: Mike Tebbutt, who signed a one-year lease on October 26, 2005, for which First Source was owed a referral fee of $532.50; Terry Ford, who signed an eight-month lease on November 14, 2005, for which First Source was owed a referral fee of $492.50; and Juan Sepulveda, who signed an eight-month lease on December 2, 2005, for which First Source was owed a referral fee of $415.00. However, there was a problem caused by Respondent's failure to submit invoices for these referral fees in a timely manner. Respondent testified that Ms. Marrero told him that the Jefferson at Maitland had reduced its referral fee from 50 percent to 20 percent of the first month's rent, effective January 2006.2 Ms. Marrero could not promise that these late invoices would be paid according to the 2005 fee structure. According to Respondent, Ms. Marrero suggested that the Jefferson at Maitland's corporate office would be more likely to pay the full amount owed if Respondent did something to "break up" the invoices, making it appear that they were being submitted by different entities. She also suggested that no invoice for a single payee exceed $1,000, because the corporate office would know that amount exceeded any possible fee under the 2006 fee structure. Ms. Marrero made no assurances that her suggestions would yield the entire amount owed for the 2005 invoices, but Respondent figured the worst that could happen would be a reduction in the billings from 50 percent to 20 percent of the first month's rent. On February 9, 2006, Respondent sent a package to the Jefferson at Maitland, via facsimile transmission. Included in the package were three separate invoices for the referral fees owed on behalf of Messrs. Tebbutt, Ford, and Sepulveda. The invoices for Messrs. Tebbutt and Sepulveda stated that they were from "Matt Johnson, FSI Realty," to the Jefferson at Maitland, and set forth the name of the lessee, the lease term, the amount of the "referral placement fee," and stated that the checks should be made payable to "FSI Realty, 1600 North Orange Avenue, Suite 6, Orlando, Florida 32804." The invoice for Mr. Ford stated that it was from "Matt Johnson" to the Jefferson at Maitland. It, too, set forth the name of the lessee, the lease term, and the amount of the referral fee. However, this invoice stated that the check should be made payable to "Matt Johnson, 5421 Halifax Drive, Orlando, Florida 32812." The Halifax Drive location is Respondent's home address. The package sent by Respondent also included an Internal Revenue Service Form W-9, Request for Taxpayer Identification Number and Certification, for Mr. Bish and for Respondent, a copy of Respondent's real estate sales associate license, a copy of Mr. Bish's real estate broker's license, and a copy of First Source, Inc.'s real estate corporation registration. Approximately one month later, in early March 2006, Mr. Bish answered the phone at his office. The caller identifying herself as "Amber" from the Jefferson at Maitland and asked for Respondent, who was on vacation. Mr. Bish asked if he could help. Amber told Mr. Bish that the W-9 form submitted for Respondent had been incorrectly filled out, and that she could not send Respondent a check without the proper information. Mr. Bish told Amber that under no circumstances should she send a check payable to Respondent. He instructed her to make the payment to First Source. Amber said nothing to Mr. Bish about a need to break up the payments or to make sure that a single remittance did not exceed $1,000. Mr. Bish asked Amber to send him copies of the documents that Respondent had submitted to the Jefferson at Maitland. Before those documents arrived, Mr. Bish received a phone call from Respondent, who explained that he submitted the invoice in his own name to ensure that Mr. Bish received the full amount owed by the Jefferson at Maitland. On March 10, 2006, after reviewing the documents he received from the Jefferson at Maitland, Mr. Bish fired Respondent. On March 29, 2006, Mr. Bish filed the complaint that commenced the Department's investigation of this matter.3 At the hearing, Mr. Bish explained that, even if Respondent's story about the need to "break up" the invoices and keep the total below $1,000 were true, the problem could have been easily resolved. Had Mr. Bish known of the situation, he would have instructed the Jefferson at Maitland to make one check payable to him personally as the broker, and a second check payable to First Source, Inc. In any event, there was in fact no problem. By a single check, dated March 15, 2008, First Source received payment from the Jefferson at Maitland in the amount of $1,440, the full sum of the three outstanding invoices from 2005. Respondent testified that he never intended to keep the money from the invoice, and that he would never have submitted it in his own name if not for the conversation with Ms. Marrero. Respondent asserted that if he had received a check, he would have signed it over to Mr. Bish. Respondent and his wife each testified that the family had no great need of $492.50 at the time the invoices were submitted. Respondent's wife is an attorney and was working full time in February 2006, and Respondent was still receiving a salary from First Source. In his capacity as office manager, Respondent had access to the company credit card to purchase supplies. Mr. Bish conducted an internal audit that revealed no suspicious charges. Respondent failed to explain why he did not immediately tell Mr. Bish about the potential fee collection problem as soon as he learned about it from Ms. Marrero, why he instructed the Jefferson at Maitland to send the check to his home address rather than his work address, or why he allowed a month to pass before telling Mr. Bish about the invoices. He denied knowing that Mr. Bish had already learned about the situation from the Jefferson at Maitland's employee. The Department failed to demonstrate that Respondent intended to keep the $492.50 from the invoice made payable to Respondent personally. The facts of the case could lead to the ultimate finding that Respondent was engaged in a scheme to defraud First Source of its referral fee. However, the same facts also may be explained by Respondent's fear that Mr. Bish would learn of his neglect in sending the invoices, and that this neglect could result in a severe reduction of First Source's referral fees. Respondent may have decided to keep quiet about the matter in the hope that the Jefferson at Maitland would ultimately pay the invoices in full, at which time Respondent would explain himself to Mr. Bish with an "all's well that ends well" sigh of relief. Given the testimony at the hearing concerning Respondent's character and reputation for honesty, given that Respondent contemporaneously told the same story to his wife and to Ms. Sanderson that he told to this tribunal, and given that this incident appears anomalous in Respondent's professional dealings, the latter explanation is at least as plausible as the former. Respondent conceded that, as a sales associate, he was not authorized by law to direct the Jefferson at Maitland to make the referral fee check payable to him without the express written authorization of his broker, Mr. Bish. Respondent also conceded that Mr. Bish did not give him written authorization to accept the referral fee payment in his own name. Respondent has not been subject to prior discipline.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Real Estate Commission enter a final order: Dismissing Count I of the Administrative Complaint against Respondent; and Suspending Respondent's sales associate's license for a period of one year for the violation established in Count II of the Administrative Complaint. DONE AND ENTERED this 21st day of September, 2007, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 21st day of September, 2007.
The Issue The issue in this bid protest matter is whether the decision of Respondent, Department of Transportation, to award the contract for the Centralized Customer Service System to Intervenor, Xerox State and Local Solutions, Inc., over Petitioner, Accenture, LLP, was contrary to its governing statutes, rules or policies, or the solicitation specifications.
Findings Of Fact The Department is an agency of the State of Florida charged with planning, acquiring, leasing, constructing, maintaining, and operating toll facilities and cooperating with and assisting local governments in the development of a statewide transportation system. §§ 334.044(16)-(22), Fla. Stat. (2015).3/ The Department is authorized to enter contracts and agreements to help fulfill these duties. §§ 20.23(6) and 334.044(7), Fla. Stat. FTE is a legislatively created arm of the Department and is authorized to plan, develop, own, purchase, lease, or otherwise acquire, demolish, construct, improve, relocate, equip, repair, maintain, operate, and manage the Florida Turnpike System. FTE is authorized to cooperate, coordinate, partner, and contract with other entities, public and private, to accomplish these purposes. § 338.2216(1)(b), Fla. Stat. The Department has the express power to employ the procurement methods available to the Department of Management Services under chapter 287, Florida Statutes. § 338.2216(2), Fla. Stat. On November 1, 2013, the Department advertised the ITN, soliciting Proposals from vendors interested in participating in competitive negotiations for the award of a contract to provide a Customer Service System and associated Operations and Maintenance. The Department issued the ITN pursuant to section 287.057, Florida Statutes. The Department did not receive any challenges to the ITN specifications.4/ The Customer Service System is expected to process nearly all electronic toll transactions in Florida. It will be designed to replace not only the FTE's existing customer service center systems (or "back offices"), but the back office operations for the other three local tolling agencies in Florida as well. These local tolling agencies include the Central Florida Expressway (formerly known as the Orlando–Orange County Expressway Authority), the Miami–Dade Expressway Authority, and the Tampa Hillsborough Expressway Authority (collectively the "Local Authorities"). Under the terms of the ITN, the contract will include all systems and services connected with the customer service operations of toll roads and the payment of tolls to the FTE and Local Authorities including: processing and billing of transactions; identification of the registered owners of vehicles; operational and financial reconciliation; comprehensive system reporting; and website, mobile website, mobile app, and interactive voice response. The FTE, which oversees all Department tolling activities in the state, will execute and manage the Customer Service System contract. Through the ITN, the Department will enter a contract directly with the successful vendor. Thereafter, the Department will enter agreements with the Local Authorities to coordinate the joint use of the new tolling system. The initial contract term for the Customer Service System is seven years. Generally, the Department's ITN set forth a solicitation process consisting of two phases. Phase one involved: (a) the prequalification or short-listing of vendors to determine vendors' eligibility to submit Proposals; and (b) following Proposal submissions, the Department's evaluation and ranking of the vendors' Proposals. Phase two of the ITN is the negotiation phase which would culminate in the Department's award of the Customer Service System contract to the vendor that the Department determined would provide the "best value to the state." The ITN, section 2.26, NEGOTIATION PROCESS (as amended by Addendum 8), outlines the specific steps for the Department's solicitation and provides: Once Proposers have been ranked in accordance with Section 2.6.2 Proposal Evaluation, the Department will proceed with negotiations in accordance with the negotiation process described below. Proposers should be cognizant of the fact that the Department reserves the right to finalize negotiations at any time in the process that the Department determines that such election would be in the best interest of the State. Step 1: Follow the evaluation process and rank Proposals as outlined in Section 2.6 Evaluation Process. Step 2: The ranking will be posted, in accordance with the law (see Section 2.27), stating the Department's intent to negotiate and award a contract to the highest ranked Proposer that reaches an acceptable agreement with the Department. Step 3: Once the posting period has ended, the Negotiation Team will undertake negotiations with the first-ranked Proposer until an acceptable Contract is established, or it is determined an acceptable agreement cannot be achieved with such Proposer. If negotiations fail with the first-ranked Proposer, negotiations may begin with the second-ranked Proposer, and so on until there is an agreement on an acceptable Contract. The Department reserves the option to resume negotiations that were previously suspended. Negotiation sessions are not open to the public and all negotiation sessions will be recorded by the Department. Step 4: The Negotiation Team will write a short plain statement for the procurement file that explains the basis for Proposer selection and how the Proposer's deliverables and price will provide the best value to the state. Step 5: The Department will contract with the selected Proposer. Section 2.27.1 of the ITN, Ranking/Intended Award, provides that "[t]he Ranking/Intended Award will be made to the responsive and responsible Proposer that is determined to be capable of providing the best value and best meet the needs of the Department." Per ITN, sections 2.6 and 2.26, Step 1, the Department created a Technical Review Team and a Selection Committee which evaluated and ranked the Proposals in order of preference based on the vendors' technical approach and capabilities. The Selection Committee ranked Xerox first followed by Petitioner, then Cubic. The Selection Committee based its decision on Xerox's proven experience with other similar and large tolling projects, including some of the country's largest tolling systems. The Selection Committee further explained that, of the three vendors, only Xerox has fully operational tolling systems in the United States, bringing a "'comfort level' that did not exist with [Petitioner] and Cubic."5/ Thereafter, per ITN, section 2.26, Step 2, on April 10, 2014, the Department posted its ranking of vendors with Xerox first, Petitioner second, and Cubic third. The posting also announced the Department's intent to commence "sequential" negotiations. Under this process, the Department would start negotiations with Xerox as the first-ranked vendor. If negotiations with Xerox failed, the Department would then begin negotiations with Petitioner as the second-ranked vendor, and so on down the order of ranking until the Department negotiated an acceptable agreement. Phase one of the solicitation, which involved section 2.26, Steps 1 and 2 above, was the subject of a prior bid protest in DOAH Case No. 14-2322BID before ALJ Linzie F. Bogan (the "First Protest"). Following the Department's ranking of vendors and its notice of intent to initiate negotiations with Xerox on April 10, 2014, Petitioner and Cubic each filed formal bid protests. Following an administrative hearing, ALJ Bogan entered a Recommended Order recommending that Petitioner and Cubic's bid protests be dismissed. The Department issued a Final Order on October 6, 2014, adopting ALJ Bogan's Recommended Order in its entirety. As Petitioner and Cubic protested the Department's decision to enter negotiations with Xerox, and because of the automatic stay provision of section 120.57(3), the Department never commenced the negotiation phase (phase two) of the procurement as detailed in the ITN, section 2.26, Steps 3 and 4. However, once all litigation involving the First Protest concluded in January 2015, the Department continued with the solicitation process for the ITN.6/ The current bid protest proceeding relates only to phase two of the solicitation process, i.e., Steps 3, 4, and 5 above. Therefore, the undersigned specifically reviewed the negotiation phase of the Department's solicitation and the Department's ultimate decision to award the Customer Service System contract to Xerox. The Department initiated the negotiations phase for the ITN on February 9, 2015. The negotiations were conducted by a Negotiation Team appointed by Department Secretary, Jim Boxold, on February 9, 2015, in accordance with the requirements of section 287.057(16). Section 287.057(16)(a) provides that the agency head shall appoint "[a]t least three persons to evaluate Proposals and replies who collectively have experience and knowledge in the program areas and service requirements for which commodities or contractual services are sought." The Negotiation Team included: Sheree Merting, FTE's Contractual Services Administrator; Tim Garrett, the tolls program manager for HNTB Corporation ("HNTB"), which is a subcontractor for FTE; and John McCarey, of McCarey Consulting, a sub-consultant to FTE general engineering contractor, Atkins North America, Inc. Mr. Garrett was the project manager for the Customer Service System project. Mr. McCarey would serve as the chief negotiator. Ms. Merting is a Florida certified contract negotiator, a Florida certified contract manager, and a Florida certified contract purchasing manager. Ms. Merting has significant procurement experience with the FTE, including prior experience serving on a negotiation team. Mr. Garrett is employed by HNTB, an engineering consulting firm that provides tolling operations consultation to FTE. His full-time assignment for HNTB is as the tolls program manager for the FTE. Mr. Garrett has extensive knowledge of tolling systems and the software technology that the vendors presented in response to the ITN. Mr. Garrett was the project manager for the Customer Service System procurement and, together with Ms. Merting, oversaw the ITN procurement process from its inception. Mr. Garrett was familiar with the technical aspects of the ITN and was aware of the technology required to transfer the current back office system to the Customer Service System. Mr. McCarey has an extensive background in the transportation and tolling business and has participated in numerous contract negotiations for tolling system contracts. Mr. McCarey formerly worked for Lockheed Corporation for approximately 25 years, serving for a time as its chief operations officer who oversaw its transportation and tolling lines of business. Thereafter, he worked for five years for Affiliated Computer Services, Inc. ("ACS"), serving at one point as the chief financial officer for ACS's State and Local Solutions Group, which managed its tolling business. Mr. McCarey departed ACS in 2006. Xerox acquired ACS two years after Mr. McCarey left. The Negotiation Team's task, as stated in the ITN, section 2.26, Step 3, was to undertake negotiations with the first-ranked Proposer (Xerox) until it established an acceptable contract. If the Negotiation Team did not reach an acceptable agreement with the first-ranked Proposer, the Negotiation Team was to begin negotiations with the second-ranked Proposer (Petitioner), and so on until it achieved an acceptable contract. Once the Negotiation Team agreed with a Proposer on an acceptable contract, per the ITN, section 2.26, Step 4, it was to make a recommendation to the Department explaining how that Proposer would be the "best value to the state." The Negotiation Team was not to reevaluate the vendor Proposals or rankings previously conducted by the Technical Review Team and Selection Committee. Rather, the Negotiation Team was tasked to negotiate a contract with the first-ranked Proposer as listed on the Selection Committee's ranking and continue the process of determining the "best value to the state." The Negotiation Team members were aware that the Technical Review Team and Selection Committee considered the ITN, section 2.5.2, "Best Value Selection" criteria when they evaluated and ranked Proposals. The ITN, section 2.5.2 provides: The Department intends to contract with the responsive and responsible short-listed Proposer whose Proposal is determined to provide the best value to the Department. "Best value," as defined in Section 287.012(4), F.S., means the highest overall value to the state, based on objective factors that include but are not limited to: Company history Project experience and qualifications Proposed Project approach to the technical requirements Proposed approach to the Project plan and implementation Proposed approach to System Maintenance Proposed approach to Operations and performance Price Because the Technical Review Team and the Selection Committee had already evaluated each Proposal under the ITN selection criteria, the Negotiation Team did not revisit each technical issue listed in the ITN, section 2.5.2. The Negotiation Team's purpose was to negotiate with the vendor the Selection Committee ranked first. Nevertheless, the Negotiation Team members attended the vendors' oral presentations during the rankings phase of the procurement. They also reviewed the Technical Review Team's written evaluation summaries, as well as the vendors' Proposals. The Negotiation Team also considered Xerox's prior relevant experience in similar projects as required by section 287.057(1)(c)3. The ITN, section 2.24.2, Technical Proposal Section 9, required vendors, in their technical Proposals, to identify any exceptions and assumptions. "Exceptions" pertained to any and all exceptions Proposers had to the ITN terms and conditions. "Assumptions" related to any assumptions vendors' relied upon to develop their proposed contract price. Section 2.24.2, Technical Proposal Section 9, explained that the Department was not obligated to accept any vendors' exceptions and that the Department would consider any exceptions during the evaluation process at the Department's sole discretion. Section 2.24.2, Technical Proposal Section 9, provides: Technical Proposal Section 9: Exceptions and Assumptions If Proposers take exception to Contract terms and conditions, such exceptions must be specified, detailed and submitted under this Proposal section in a separate, signed certification. The Department is under no obligation to accept the exceptions to the stated Contract terms and conditions. Proposers shall not identify any exceptions in the Price Proposal. All exceptions should be noted in the certification provided for in Proposal Section 9. Proposers shall not include any assumptions in their Price Proposals. Any assumptions should be identified and documented in this Section 9 of the Proposal. Any assumptions included in the Price Proposals will not be considered by the Department as a part of the Proposal and will not be evaluated or included in any Contract between the Department and the Proposer, should the Proposer be selected to perform the Work. Failure to take exception in the manner set forth above shall be deemed a waiver of any objection. Exceptions may be considered during the Proposal evaluation process at the sole discretion of the Department. As allowed by the ITN, section 2.24.2, all vendors included a detailed listing of exceptions and assumptions in their Proposals. The Department intended to address the exceptions and assumptions during the negotiation phase of the procurement process. From the Negotiation Team's perspective, if the Negotiation Team resolved Xerox's exceptions and assumptions favorably to the Department, received acceptable answers to any questions regarding Xerox's Proposal, and obtained a price reduction, then the Negotiation Team would have achieved a contract that represented the "best value to the state." To accomplish its task, Mr. Garrett developed a comprehensive list of topics to guide the negotiations. From a practical standpoint, Mr. Garrett's list became the agenda for the Negotiation Team's first negotiation meeting with Xerox. The list addressed all of the exceptions and assumptions Xerox included in its Proposal, as well as the Negotiation Team's questions about Xerox's Proposal. On February 10, 2015, the Negotiation Team initiated negotiations with Xerox as the first-ranked Proposer. The negotiation sessions, some lasting multiple days, occurred in February, March, April, and May of 2015, and entailed approximately 80 hours of meetings. These meetings included face-to-face engagements between the Negotiation Team and Xerox, as well as internal strategy meetings between the Negotiation Team members where Xerox was not present. Negotiation meetings also were periodically attended by various personnel from the Local Authorities and HNTB who provided input to the Negotiation Team throughout the process. During these meetings, the Negotiation Team discussed negotiation points and reviewed information gathered from Xerox. During the negotiation meetings with Xerox, the Negotiation Team addressed each exception and assumption Xerox submitted with its Proposal. The Negotiation Team rejected most of Xerox's exceptions. However, the Negotiation Team did agree to certain exceptions that it believed would benefit the Department or improve the Customer Service System. These benefits included (1) the tolling system's potential inter- operability with other states' tolling systems, (2) a clause requiring at least 120 days' notice to exercise the contract renewal option, (3) the Department's access to Xerox's software source code to increase the Department's ability to operate and modify the system should Xerox cease to serve as the contracted vendor, and (4) limiting the use of interactive voice response ("IVR") technology to only customer service and not for user account set-up due to the frequency of errors associated with IVR usage. No evidence shows that the exceptions and assumptions the Negotiation Team accepted were detrimental to the Department. Neither did any evidence indicate that the exceptions the Negotiation Team approved would negatively impact the operational performance of the tolling system or increase the cost or risk to the Department. The Negotiation Team and Xerox also reviewed "in excruciating detail" every Department question about Xerox's Proposal. At the final hearing, Mr. McCarey recounted that the Negotiation Team wanted to ensure that "the record was clear as to what Xerox was actually going to provide as a result of their Proposal." By the conclusion of its negotiations, the Negotiation Team had thoroughly negotiated the exceptions and assumptions with Xerox and clarified all questions it had about Xerox's Proposal. In addition to favorably resolving all issues related to Xerox's exceptions and assumptions, the Negotiation Team obtained a significant price reduction from Xerox. At the Negotiation Team's insistence, Xerox agreed to reduce the price of its Proposal by over $20 million (roughly 3.5 percent). The Negotiation Team considered this price reduction a "big deal." The Department did not make any concessions to Xerox in negotiating the exceptions or assumptions. The Department was going to pay less for the Customer Service System contract and receive the same services from Xerox. Also during the negotiations, the Negotiation Team scrutinized Xerox's performance on two of its existing customer service system contracts. The first contract was Xerox's back office system for the SunRail commuter rail system operating in the Department's District 5 in the Orlando area. Prior to negotiations, Negotiation Team members became aware that the Xerox SunRail system was experiencing problems. Therefore, to address any concerns that these issues might manifest in Xerox's performance on the Customer Service System contract, the Negotiation Team required the Xerox personnel responsible for the SunRail system to attend the first negotiation session. The Negotiation Team directed Xerox to provide an overview of the SunRail difficulties and discuss how Xerox was addressing those issues. During the course of the negotiations, the Negotiation Team determined that Xerox's SunRail "transit" system was significantly different from its proposed FTE "tolling" system. The Negotiation Team learned that the SunRail system's account management and back office operations materially differed from the back office system Xerox planned to implement for the Customer Service System contract. SunRail is a transactional or card-based system. SunRail customers (commuters) purchase tickets ("fare media") from ticket vending machines for use on a transit (train) transportation system. The SunRail back office processes money stored by commuters on fare media. By contrast, the Customer Service System contract involves a "tolling" system for motor vehicles. In a tolling system, customers use electronic transponders, such as a SunPass or E-Pass transponder, mounted in or on their vehicle as they drive through a tolling plaza. The Customer Service System would also include a video transaction component where a photo or video might be taken of a vehicle license plate as it passes through the tolling plaza. The license plate information is processed by the back office to determine whether the driver's prepaid account may be charged for the transaction. If no customer account is associated with the vehicle tag, the driver is sent an invoice. The Negotiation Team discovered that the SunRail back office customer service problems primarily involved the operation of SunRail ticket vending machines. Ticket vending machines would not be used in the Customer Service System motor vehicle tolling operations. The Negotiation Team further ascertained that the Xerox business unit that would run the Customer Service System tolling system is a separate, independent business unit from the Xerox division that operates the SunRail transit system. The two business units would employ different personnel, different management teams, different reporting processes, and different technology. Moreover, the Negotiation Team determined that the technology Xerox used to operate the SunRail transit system is "very new" technology. Conversely, the account management product Xerox intends to use for the Customer Service System contract is its VECTOR 4G tolling technology. The VECTOR 4G system is a well-established product in the toll collection industry. The VECTOR 4G system is used by multiple state agencies and in some of the largest toll collection systems in the United States, including New York, New Jersey, California, and Texas. Fundamentally, the VECTOR 4G back office system tracks customer prepaid accounts from which money is withdrawn and replenished for transactions being processed. Xerox's longstanding operation of VECTOR 4G-based systems, as well as its status as one of the largest providers of back office electronic tolling systems in the United States, became a key factor in the Negotiation Team's ultimate determination that Xerox's Proposal provides the "best value to the state." Nonetheless, to alleviate any Department concerns and provide additional incentive for Xerox to perform as expected on the Customer Service System contract, the Negotiation Team took advantage of the negotiation process to strengthen the Department's position on the SunRail contract. The Negotiation Team demanded Xerox agree to a "cross-default" provision that would allow the Department to default Xerox and terminate the Customer Service System contract if Xerox defaulted on its responsibilities on the SunRail contract. The Negotiation Team believed the cross-default provision would pressure Xerox to ensure that it performed its duties under the smaller SunRail contract, as well as provide added protection on the Customer Service System contract. Although initially resistant, Xerox ultimately agreed to the addition of a cross-default provision to the Customer Service System contract. The second Xerox contract the Negotiation Team reviewed was a similar tolling system Xerox currently operates for the Texas Department of Transportation ("TxDOT"). The Negotiation Team followed up on reports it received regarding problems TxDOT was experiencing with its Xerox tolling system. The Negotiation Team learned that the TxDOT issues primarily concerned data migration from prior tolling system accounts. These issues, however, did not arise from Xerox's system. They primarily resulted from TxDOT's specific instruction to Xerox to collect outstanding tolling fees and fines that were two years old and had never been processed or invoiced by the previous vendor. In addition, the Negotiation Team learned that the issues with the TxDOT databases resulted from the use of duplicate accounts and database sources that were much larger than what Xerox would experience with the FTE. Following its review, the Negotiation Team was satisfied with Xerox's approach to data migration for the FTE and was not concerned that Xerox's issues with TxDOT would impact Xerox's management and operation of the Customer Service System contract. Ultimately, after considering all the problems Xerox experienced managing the SunRail and TxDOT contracts, the Negotiation Team concluded that any performance issues on the SunRail and TxDOT systems would not negatively impact or occur with the Customer Service System contract. Thereafter, the Negotiation Team concluded that Xerox could successfully implement and perform the toll collection system it proposed in response to the ITN. At the conclusion of negotiations with Xerox, the Negotiation Team members were confident that Xerox could deliver the toll collection system it proposed. All three Negotiation Team members agreed that the two sides had resolved all outstanding exceptions and assumptions, as well as questions regarding Xerox's Proposal. Further, the Negotiation Team reconciled to their satisfaction any lingering concerns about the SunRail and TxDOT tolling contracts. The Negotiation Team members were also very pleased with Xerox's $20 million contract price reduction.7/ Accordingly, the Negotiation Team believed that it had achieved an acceptable agreement with Xerox that was beneficial to the Department and consistent with the ITN. Therefore, the Negotiation Team made a final determination that Xerox provided the "best value to the state" and should be awarded the Customer Service System contract. In accordance with the ITN's "sequential" negotiation process detailed in ITN, section 2.26, step 3, the Negotiation Team only negotiated with Xerox, the first-ranked vendor. Once the Negotiation Team believed that it had established an acceptable contract with Xerox, it never initiated negotiations with Petitioner, the second-ranked vendor. Consequently, Petitioner was never provided the opportunity that Xerox received during the negotiation process to address any issues related to its exceptions and assumptions, answer any questions about its Proposal, or reduce its Proposal price. Upon negotiating an acceptable contract with Xerox, Mr. McCarey, with input from the other Negotiation Team members, prepared a written recommendation memorandum (the "Recommendation Memorandum") setting forth the Negotiation Team's recommendation for the Department to award the Customer Service System contact to Xerox. The Recommendation Memorandum, entitled "Recommendation of Negotiation Team to Diane Scaccetti, Executive Director of the FTE," included background information on the negotiation, a summary of the negotiation, a review of the Negotiation Team's objectives and strategy, and the basis for its recommendation of Xerox. The Recommendation Memorandum cited to several key factors, including Xerox's prior relevant experience in operating high-volume toll service centers, as well as the approximately $20 million contract price reduction. Mr. McCarey summed up the Recommendation Memorandum by writing: Recommendation As a result of the actions of the Technical Review committee, the selection committee, and the negotiations as noted previously, as well as, all of the recorded meetings, the negotiating team believes it is in the best interest of the state to contract with Xerox for the [Customer Service System] contract, as providing the best value resulting from the ITN process. Xerox's experience in operating high volume toll service centers and the negotiating team's negotiated price reduction, were key factors in arriving at the negotiating team's recommendation. Mr. McCarey concluded the Recommendation Memorandum with one additional recommendation that the Department establish a "peer review contract." Mr. McCarey wrote that: the team would also like to see the Turnpike engage an outside party, knowledgeable in large systems development and possessing toll industry experience to do a peer review of the Proposal, contract, schedule, etc to ensure the Turnpike has identified all risks, and recommend any improvements that may improve the success of the project moving forward. Recognizing that this ITN procurement involved the largest back office system in the United States for tolling, the Negotiation Team believed that it would be prudent for the Department to consider obtaining additional oversight to ensure that no issues or risks were overlooked during the procurement process. The ITN did not require a peer review contract. The Negotiation Team considered this recommendation independent and separate from its official recommendation to award the contract to Xerox as the "best value." The peer review recommendation was not based on the Negotiation Team's concern over whether Xerox could perform the Customer Service System contract. The Negotiation Team felt the Department could choose to implement, or not implement, a peer review as it so determined. On June 2, 2015, the Department scheduled a public meeting to announce its notice of intent to award the Customer Service System contract. At that meeting, Mr. McCarey read the Recommendation Memorandum aloud to Ms. Scaccetti, who was present for the meeting. Ms. Scaccetti, in her capacity as FTE Executive Director, was delegated the general authority from the Secretary of the Department to award and execute contracts issued by the Department. As explained in the Recommended Memorandum, the Negotiation Team recommended that the Department award the Customer Service System contract to Xerox as the best value proposer. After Mr. McCarey read the Recommendation Memorandum, Ms. Scaccetti asked each Negotiation Team member if they concurred with the recommendation. Each member confirmed that they did. With that, Ms. Scaccetti accepted the recommendation to award the Customer Service System contract to Xerox as the best value proposer to the state. Ms. Scaccetti was satisfied that the Negotiation Team had performed its job under the ITN, and she endorsed the Negotiation Team's recommendation that Xerox provided the "best value to the state." Ms. Scaccetti also accepted the Negotiation Team's additional recommendation for a separate peer review contract. The Negotiation Team's Recommendation Memorandum was made part of the Department's procurement file. On that same day, the Department publicly posted its notice of intent to award the Customer Service System contract to Xerox. Ms. Merting, as the procurement administrator, was responsible for maintaining the ITN procurement file. Promptly after the June 2, 2015, meeting, Ms. Merting began drafting a "short plain statement" to be placed in the solicitation and contract files prior to the execution of the Customer Service System contract as required by section 287.057(1)(c)(5) and ITN, section 2.26, Step 4. At the time of the final hearing, however, Ms. Merting's short plain statement remained in draft format. Ms. Merting ceased working on her statement after Petitioner filed its notice of intent to protest the Department's intended award to Xerox. Ms. Merting testified that her "short plain statement" would have tracked the language of the Negotiation Team's Recommendation Memorandum and would have explained the basis for selecting Xerox and how Xerox's deliverables and price will provide the best value for the state. Ms. Merting placed her draft statement in the ITN procurement file. Based on the above Findings of Fact, the greater weight of the evidence presented at the final hearing does not establish that the Department's action was clearly erroneous, contrary to competition, or arbitrary, or capricious. Therefore, the undersigned concludes, as a matter of law, that Petitioner did not meet its burden of proving that the Department's decision to award the Customer Service System contract to Xerox contravened the Department's governing statutes, rules or policies, or the solicitation specifications that apply to this procurement.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order upholding its determination to award the Customer Service System contract to Intervenor, Xerox, and denying the Petitioner's Petition for bid protest. DONE AND ENTERED this 14th day of October, 2015, in Tallahassee, Leon County, Florida. S J. BRUCE CULPEPPER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of October, 2015.
Findings Of Fact Quality of Service At the end of the test year (calendar year 1979), the utility provided water and sewer service to approximately 2,577 customers, most of whom reside in two mobile home parks. Of that number, seven testified at the hearing. Two were concerned with the magnitude of the increase sought by the utility, one complained of an odor emanating from the sewage treatment plant, and the remainder described the water as being discolored and having a bad taste. There were no complaints about poor water pressure or interruptions in service. At present, there are no citations or corrective orders with regard to the utility's water plant. Its sewage treatment facility is being operated pursuant to a temporary operating permit granted by the Florida Department of Environmental Regulation. The effluent from the sewage treatment facility is meeting all applicable standards. Rate Base Petitioner has proposed an average water rate base of $311,028 and a year-end sewer rate base of $426,373 (Exhibit No. 4). However, it proposes to include in water rate base additional costs associated with the construction of a water storage tank. This increases the utility's proposed average water rate base to $376,118. The Commission urges a number of adjustments to rate base which collectively have the effect of reducing the amounts proposed by the utility. These adjustments affect plant in service, construction work in progress, accumulated depreciation and working capital allowance, and should be accepted. First, a reduction in water plant and an increase in sewer plant are required to correct certain costs recorded in the wrong system account. It is also necessary to increase water plant and sewer plant to reflect the capitalization of certain costs that were improperly expensed. Second, the proposed inclusion in rate base of costs associated with the (1) automatic switching for chlorine feed and chlorine scale, (2) chlorine emergency repair kit, and (3) a 500,000 gallon concrete storage tank is improper because these expenditures are substantially beyond the scope of the test period and are not "required by (a) duly authorized governmental authority." Section 367.081(2), Florida Statutes. Third, because of the adjustment to plant in service, it is also necessary to adjust accumulated depreciation. Finally, revisions to the operation and maintenance expenses discussed hereinafter necessitate a mechanical adjustment to the utility's working capital allowance. The following schedules portray the adjusted rate bases for water and sewer operations, and a brief description of each of the adjustments made in arriving at those amounts. Ferncrest Utilities, Inc. Average Water Rate Base Year Ended December 31, 1979 COMPANY ADJUSTMENTS ADJUSTED BALANCES Utility Plant in Service $ 625,030 (1) $ 625,030 Construction Work in Progress 209,985 (200,375) (2)9,610 Accum. Depreciation (95,911) - (3) (95,911) CIAC (376,191) - (376,191) Working Capital Allowance 13,205 (244)(4) 12,961 Income Tax Lag -0- (234) (234) Adjusted Rate Base $ 376,118 $ 175,265 During the hearing, the utility revised its rate base exhibit to reflect the changes in plant in service discussed in the main body of this order (Exhibit No. 4). Accordingly, no adjustment is shown on the schedule. Reduces construction work in progress by eliminating the expected costs associated with the automatic switchings for chlorine feed and chlorine scale, chlorine emergency repair kit, and a 500,000 gallon concrete storage tank. During the hearing, the utility agreed with the change in accumulated depreciation occasioned by the revisions in plant in service in item (1)(Exhibit No. 4). Therefore, no adjustment is shown on this schedule. Restates the working capital allowance to reflect one-eighth of operation and maintenance expenses. Ferncrest Utilities, Inc. Year End Sewer Rate Base Year Ended December 31, 1979 COMPANY ADJUSTMENTS ADJUSTED BALANCES Utility Plant in Service $1,373,224 - (1) $1,373,224 Construction work in Progress 2,285 (2,285)(2) -0- Accum. Depreciation (180,902) - (180,902) CIAC (780,457) - (780,457) Working Capital Allowance 12,223 (428)(3) 11,795 Income Tax Lag -0- (603) (603) Adjusted Rate Base $ 426,373 $ 423,057 The utility revised its rate base exhibit during the hearing in accordance with the plant in service adjustments discussed above (Exhibit No. 4). Accordingly, no adjustment is reflected on the schedule. Reduces construction work in progress by eliminating those expected costs associated with the automatic switchings for chlorine feed and chlorine scale and a chlorine emergency repair kit. Restates the working capital allowance to reflect one-eighth of operation and maintenance expenses. Net Operating Income On Exhibit No. 13, the utility shows an operating loss of $39,241 for its water operations and an Operating loss of $14,857 for its sewer operations for calendar year 1979. The utility then adjusts its results of operations by including the additional revenues required to earn a fair rate of return, and additional operating and maintenance expenses that it contends should be recognized. As adjusted, Ferncrest portrays an operating income of $54,236 and $61,483 for its water and sewer operations respectively. Certain adjustments are required, however, which affect revenue, operation expense, maintenance expense, depreciation expense, taxes other than income and income taxes. Revenues must first be reduced to reflect only that amount which is being recommended hereinafter. Operation expense should be restated to (1) reflect the expenses in the proper system account, (2) show the proper accrual, (3) remove expenses that should be capitalized, (4) recognize additional expenses not reflected in test year operations, and (5) correct improper amortization periods and pro forma adjustments. Maintenance expense must necessarily be corrected to transfer out charges improperly recorded therein. Depreciation expense should be recalculated using an average depreciable base for water operations and a year-end depreciable base for sewer operations in accordance with the rate bases used above. Finally, an adjustment to gross receipts taxes and income taxes is required to conform such taxes to the appropriate amount of revenues being recommended herein. The adjusted operating incomes of the utility and a description of the adjustments made in arriving at those amounts are shown on the following schedule. FERNCREST UTILITIES, INC., Operating Income - Water Year Ended December 31, 1979 ADJUSTED COMPANY ADJUSTMENTS BALANCE Operating Revenues Operating Expenses: 178,221 (33,349) (1) $144,872 Operation $ 98,298 (2) 98,298 Maintenance 7,342 (1,957) (3) 5,385 Depreciation 3,367 - (4) 3,367 Taxes other than Income 12,211 (833) (5) 11,378 Income Taxes 2,766 (1,595) (6) 1,171 Total Operating Expenses $ 123,985 119,599 Operating Income $ 54,236 $ 25,273 Revenues are adjusted downward to reflect only that amount being recommended herein. The utility has agreed to utilize the amount of operation expenses reflected above (Exhibit No. 13) . Therefore, no adjustment is shown on the schedule. Reduces maintenance expense by eliminating the pro forma annual cost of motor maintenance, and amortizing certain repairs over a 3-year period (Exhibit No. 15, Schedule 1; Exhibit No. 17, Schedule B) Because the utility has agreed to the revision of depreciation expense stated above, the actual adjustment is not reflected on the schedule (Exhibit No. 13). Restates gross receipts taxes owed by the utility to conform with the recommended revenue increase (Exhibit No. 13) Conforms income taxes with increase in revenues. Ferncrest Utilities, Inc. Operating Income - Sewer Year Ended December 31, 1979 ADJUSTED COMPANY ADJUSTMENTS BALANCE Operating Revenues $ 181,672 (4,109) (1) $ 177,563 Operating Expenses Operation 90,312 (273) (2) 90,039 Maintenance 7,474 (3,150) (3) 4,324 Depreciation 7,478 - 7,478 Taxes other than Income 11,006 (102) (4) 11,704 Income Taxes 3,119 (105) (5) 3,014 Total Operating Expenses 120,109 116,559 Operating Income $ 61,493 $ 61 004 Adjusts revenues to reflect the actual amount being recommended heroin (Exhibit No. 13) Reduces operation expenses by using a 2-year amortization period for recalibration of a motor in lieu of charging all expenses to test year operations alone, and reclassifying STP deodorant costs to A/C 704 (Exhibit No. 15, Schedule 2). Revises maintenance expense by eliminating the pro forma annual cost of motor maintenance (Exhibit No. 17, Schedule A) Adjusts taxes other than income to reflect the appropriate amount of gross receipts taxes related to the recommended increase in revenues (Exhibit No. 13). Conforms income taxes with increase in revenues. COST OF CAPITAL The utility's application reflects it had a deficit in its equity accounts and no outstanding long-term debt as of the end of the test period. It did have approximately $600()00 in short-term debt which it characterized as "demand monies." It intends to roll over the short-term debt by borrowing $600,000 from The Dania Bank at 14 percent interest rate. The utility's capital structure would then consist of 100 percent debt at a cost rate of 14 percent. It was this return that was initially used by the utility in developing its revenue requirements. However, Commission approval is required in order to consummate that loan agreement. Such approval was denied by Order No. 9539, dated September 15, 19-30, in Docket No. 800577-US. On reconsideration the Commission approved the application by Order No. 9665, dated November 26, 1900, provided the utility use $120,000 of the proceeds as cumulative preferred stock. Accordingly, the pro forma capital structure will consist of 16.65 percent equity and 83.15 percent long term debt, By agreement of the parties, a cost rate of 14 percent should be assigned to the debt component and a 16 percent cost rate assigned to equity. The overall resulting cost of capital is 14.42 percent, and that rate should be used in determining the utility's revenue requirements. REVENUE REQUIREMENTS Given the above cost of capital, a grant of $68,540 in additional annual water revenues and $83,663 in additional annual sewer revenues should enable Ferncrest to earn a fair return on its utility operations. RATE STRUCTURE Residential water customers are now assessed a minimum monthly charge which includes a minimum number of gallons and a one-sept excess rate over that minimum gallonage. A declining block type of rate structure is used for general service water customers. Residential sewer customers with 5/8" x 3/4" meters pay a flat rate each month irrespective of usage, while those with larger meter sizes have the same structure as do residential water customers. General service sewer rates are based upon a declining block rate structure. The base facilities charge advocated by the Commission is superior to the rate designs presently used. Under this type of structure, a minimum charge will be assessed to recover the fixed or base costs of providing service, such as depreciation, taxes and a portion of billing and collecting expenses. Thereafter, a variable charge will be made for the gallons actually consumed. Because this type of rate structure offers greater control to the customer as to the amount of his bill, and allocates costs in a more equitable manner, it should be adopted. During the test year, a $5.50 fee was collected from approximately 50 customers per month who did not pay their bills in a timely fashion. This revenue ($3,300 on an annual basis) should be treated as miscellaneous revenue in designing the new rates. The utility reguests approval of a new tariff provision that governs the use of oversized lines and facilities constructed for developers (Exhibit No. 10) This provision is necessary in order to prescribe the deposit requirements for main extensions, and should be approved. The utility owns and operates a sewage collection and sewage treatment system which provides sewage treatment and disposal services to an adjacent travel park. As a result of this discharge, Ferncrest incurs chemical costs that exceed its applicable tariff rates. It proposes to amend its tariff to permit the recovery of such costs from the travel park (Exhibit No. 1) . Without this provision, the general body of ratepayers would be required to subsidize a portion of the operations. Accordingly, it should be accepted. The Commission proposes that language be added to the tariff which states: "During the period that service is not being furnished to the premises, a monthly standby charge equivalent to the base facility charge will be made. If service is terminated and resumed at the same address to the same customer within twelve months from the date of termination, an amount equal to the base facility charge for the period of the service termination will be collected as a condition precedent to the restoration of service." This change is necessary in order for the utility to recoup the fixed costs incurred in maintaining service to the customers, and it should be incorporated into the tariff. Finally, because an average rate base has been used for water operations and a year-end rate base for sewer operations, rate allocations for the systems should be based upon average and year-end customers and consumption respectively.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the application of Ferncrest Utilities, Inc. be granted in part and that the utility be authorized to file new tariffs to be approved by the Florida Public Service Commission that will generate $68,540 and $83,663 in additional annual gross revenues for the utility's water and sewer operations. It is further RECOMMENDED that the utility file appropriate tariff sheets in conformity with the Rate Structure portion of this Order. It is further RECOMMENDED that the bond or letter of credit filed by the utility be returned for cancellation. This Recommended Order entered on this 12th day of December, 1980, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 12th day of December, 1980. COPIES FURNISHED: R.M.C. Rose, Esquire Suite 103, 1020 E. Lafayette Street Tallahassee, Florida 32301 Jerome L. Hall, Esquire Suite 304, 200 S.E. 6th Street Fort Lauderdale, Florida 33301 Marta M. Crowley, Esquire 101 East Gaines Street Tallahassee, Florida 32301
Findings Of Fact On September 12, 1985, the LCSB issued a Request for Proposals ("PEP") for a telephone system to serve its Administrative Complex and Lively Area Vocational-Technical Center Main Campus ("the proposed telephone system"). Subsequently, several addenda and supplemental materials were forwarded to all participating vendors of handwritten portion. The PEP scheduled a vendor's conference for September 19, 1985. It required any "discrepancies, errors, omissions, or ambiguities in the specifications or addenda (if any)" to be reported to the LCSB no later than September 25, 1985. Similarly, the PEP required vendors to "submit written requests for clarification of terminology, if necessary, no later than September 25, 1985." Responses to the PEP were required by the time set for opening the vendors' proposals at 10:00 a.m. on October 4, 1985. The compressed time frames were imposed in an effort to be able to complete the PEP process, award the contract and have a telephone system installed by the first week of January 1986. This target date for installation was established because, although budgetary and other problems delayed the start of the PEP process, the LCSB had decided by September 1985 to change its telephone listings in the December 1985 to December 1986 edition of the Official Telephone Directory For Tallahassee, Florida, in anticipation of a new telephone system. Pursuant to a requirement of the PEP, ten letters of intent to submit proposals were received on or before September 19, 1985, including letters of intent from Petitioner, Telecom Plus of Florida, Inc. ("Telecom Plus"), and Intervenor, Centel Business Systems ("Centel"). Telecom Plus, Centel, and three other vendors submitted proposals on or before the deadline of October 4, 1985. By letters dated October 10, 1985, the LCSB Director of Purchasing notified the five proposing vendors that the Superintendent intended to recommend to the LCSB that the contract be awarded to Centel based on the bid tabulation prepared by the LCSB telecommunications consultants. Attached to those letters was a copy of the evaluation summary (bid tabulation). The letter was written on LCSB stationery on behalf of the LCSB and, under Rule 6g x 37-6.09, Rules of the LCSB, had the effect of announcing the intention of the LCSB to award the contract to Centel. The proposed telephone system will serve two locations, the LCSB Administration Complex and the Lively Area Vocational-Technical Center Main Campus. These two locations are separated by a distance of approximately 4,500 feet. The PEP required the proposed telephone system to provide telephone service to each location, as well as to interconnect the two locations. The cable(s) for the interconnection between the two locations will be housed in a 4,500-foot long, four-inch PVC conduit to be installed as part of the proposed telephone system. To satisfy the needs of the LCSB, the proposed telephone system could be in one of several configurations. At least one Electronic Private Automatic Branch Exchange (EPABX, commonly referred to as a "switch") is necessary to provide for intra- and inter-facility communications and to connect the Administration Complex and Lively Area Vocational-Technical Center Main Campus to the outside world. The PEP indicated that the possible configurations for the proposed telephone system included: (1) a single switch at the Administration Complex with cables extending at least 4,500 feet to each telephone instrument at the Lively location; (2) a single switch at the Administration Complex with remote peripheral equipment ("RPE," means a portion of the single switch which is remotely located) located at the Lively location and connected to the switch by 4,500-foot long cables, and (3) two switches, one at the Administration Complex and one at the Lively location, interconnected by 4,500-foot long cables. Telecom Plus filed a protest after the posting of the bid tabulations on or about October 16, 1985. 2/ In its letter of protest, as further explicated in the Prehearing Stipulation, Telecom Plus raised three basic issues. First, Telecom Plus complained that the RFP specifications were ambiguous and not well enough defined, resulting in comparisons between vendors' systems which were not "apples to apples." Second, Telecom Plus claimed that Centel's Call Accounting System, a required subcomponent of the proposed telephone system, fails to meet the FFP's specifications. Finally, Telecom Plus challenged the subjectivity of the point awards in the equipment evaluation, claiming that the point awards for equipment did not accurately reflect the proposals of Telecom Plus and Centel. The LCSB used a request for proposals to solicit vendors' suggestions on how its proposed telephone system needs could best be met because, in the opinion of the LCSB telecommunications consultants, an invitation to bid setting forth precise specifications for equipment in a given configuration would have eliminated all competition among vendors. While the telephone systems proposed by Telecom Plus and Centel differed in the mechanisms used to meet the LCSB needs, the systems were capable of comparison in an evaluation of whether and the extent to which they met the LCSB needs. Each of the alleged ambiguities raised in the Telecom Plus letter of protest were apparent on the face of the FFP. Telecom Plus did not avail itself of several opportunities to have any such perceived ambiguities in the RFP specifications cleared up. On September 19, 1985, the LCSB conducted a vendors' conference to answer vendor questions concerning the PEP and to clarify the vendors' understanding of the PEP. Representatives of Telecom Plus and Centel, as well as several other vendors, attended the vendors' conference. Notes from the vendors' conference setting forth questions raised and the LCSB's answers were distributed as supplemental material to all PEP specifications. In addition to the clarifications made as a result of the vendors' conference, the PEP included an invitation to vendors to submit written requests for clarification of terminology, if necessary, by no later than September 25, 1985. No such written requests were received by LCSB. The PEP also provided that any discrepancies, errors, omissions, or ambiguities in the specifications, errors, omissions, or ambiguities in the specifications or addenda should be reported in writing to the LCSB by no later than September 25, 1985. No such written notification was received by the LCSB. Despite complaints in its protest that these time frames were inadequate, Telecom Plus acknowledged the time frames in its response to the PEP and neither made objection nor took exception to them. On the merits, the PEP clearly and accurately communicated that no system architecture was "preferred" over another. The LCSB wanted the vendor's to propose their solutions to the peculiar communications problems faced by the LCSB. Neither single switch, double switch nor switch with remote peripheral equipment (RPE) configuration was to be excluded from consideration. Regarding the system features, the PEP required electronic multi-line key sets "providing for combinations of five or more lines and/or programmable feature access buttons." Although it may have been wiser to specify the maximum number of lines and feature access buttons, there is nothing ambiguous about the PEP. It requires a minimum of five lines or feature access buttons. Telecom Plus asserted that the Call Accounting System proposed by Centel did not comply with the RFP specifications in that the Call Accounting System proposed by Centel only provides 40,000 call records. The LCSB indicated in the notes from the vendors' conference that a 60,000 capacity in number of calls recorded was "desired"; no 60,000 capacity was specified in the EFP itself. Even if the desired target of 60,000 call records contained in the vendors' conference notes was considered a specification of the RFP, vendors had the option of adding or deleting items from the system requirements in their proposal as long as the additions or deletions are clearly indicated. Centel clearly indicated that its proposed SUMMA IV Call Accounting System would provide only 40,000 call records, complying with the addition/deletion provision of the RFP. 3/ In recognition of the fewer call records provided by Centel's Call Accounting System, the LCSB telecommunications consultants awarded Centel seven fewer points than possible. Telecom Plus, on the other hand, received all of the available points for its Call Accounting System that exceeded the desired target of 60,000 call records. The RFP described the criteria to be used by the LCSB in evaluating proposals. A maximum of 1,000 points would be awarded to each proposal--300 points for equipment considerations, 300 points for vendor considerations and 400 points for financial considerations. The equipment considerations included the system's fulfillment of the minimum size, feature, capacity and performance characteristics contained in the RFP, as well as the availability and functionality of specified items, such as the availability of features, ease of systems operation, and projected longevity. The vendor considerations included the vendor's capability and qualifications to provided installs and maintain the system, which would involve an evaluation of the vendor's experience (particularly with other installations of comparable size and complexity), available manpower, financial stability, and proposed installation and maintenance plans. The financial considerations included initial and recurring costs of the system, which would involve an evaluation of the cost of lease or purchase, cost of maintenance, cost of future additions based upon an assumed annual average growths cost of insurance, cost of systems administration, and any other determinable costs associated with the acquisition, installations or operation of the proposed system. In evaluating proposals, some effort was made to relate points to a dollar value. Since Centel's proposal would cost a total of $1,164,528 over seven years and Telecom Plus' would cost a total of $1,223,281 over seven years, it was borne in mind that each point in the equipment or vendor categories would relate to roughly $4,000 in the financial category. In other words, if a proposal fell short of optimal in an equipment category, for example, the proposal would receive enough fewer points in the equipment category to correspond to the value in dollars by which the proposal was thereby reduced figured at roughly $4,000 per point. By submitting a proposal in response to the PEP, Telecom Plus signified that it understood and accepted the criteria upon which proposals were to be evaluated and the sole discretion of the LCSB evaluators to determine the bid rankings. 4/ Extensive testimony was received regarding the capabilities and features of both Telecom Plus' proposed NEAX 2400 telephone system and Centel's proposed SL-1N telephone system. In addition, the LCSB telecommunications consultants who performed the technical evaluation of the proposals detailed the relative merits of the two systems in their Evaluation Of Proposals dated October 11, 1985. In the Evaluation Of Proposals, points were awarded as follows: Centel Telecom Plus A. Equipment Proven Reliability (of 40) 40 35 System Architecture (of 40) 39 35 Reliability Considerations (of 40) 37 35 System Capacities (of 40) 32 40 System Features (of 35) 35 33 Instruments (of 35) 28 30 Data Considerations (of 35) 34 30 Call Accounting System (of 35) 28 35 TOTAL 273 273 B. Vendor 292 290 C. Financial 384 366 GRAND TOTAL 949 929 The points awarded in the equipment evaluation were justified with one minor exception. The LCSB consultants based their award of points in the "System Features" category on the assumption that the system proposed by Telecom Plus provided for 100 speed call assignments. Actually, that system provides 200 speed call assignments. Accordingly Telecom Plus should have been awarded an additional point. Since the Telecom Plus system received 20 points overall less than Centel's proposed system, the addition of one point to Telecom Plus' total point award would not change the outcome. Regarding proven reliability of the equipment proposed, Centel's proposed switch was first marketed by Northern Telecom in 1975. The switch was improved and modified over the years, and much of the SL-1N is "backward compatible" (i.e., uses components that could be used in prior versions of the switch) Telecom Plus' proposed NEAX 2400, in contrast, has been on the market only approximately 18 months. This gave Centel's proposal the advantage in this category. Regarding Systems Architecture, Centel's RPE proposal gave it the advantage in solving the peculiar need of the LCSB to provide an EPABX to serve two buildings at least 4500 feet apart (but especially in comparison with the Telecom Plus proposal). Regarding reliability considerations, Telecom Plus did not prove (either by documentation in its proposal or by evidence at the hearing) that its D Term telephone instruments will operate reliably at 4500 or more feet from its single telephone switch, as was proposed to provide telephone service for the Lively building. Telecom Plus did, however, delete from the manufacturer's literature included in its response to the RFP the manufacturer's recommendation that the D Term not be used more than 4500 feet from the switch. All these facts and circumstances result in an advantage to the Centel proposal. In the categories System Capacities, Instruments and Call Accounting System, Telecom Plus' proposal deserved and was given the advantage. Telecom Plus did not prove that its advantage should have been larger. In System Capacities, Telecom Plus' proposal received eight more points (worth roughly $32,000) for being "non-blocking" (i.e., all telephone instruments could be off- hook at the same time) although Centel's proposal met all specifications of the RFP. Centel's Call Accounting System is capable of less-than-desired 40,000 call records; Telecom Plus' has the desired 60,000 call record capacity and was given the maximum 35 points in this category. Telecom Plus did not prove that its Call Accounting System was worth more than seven points (roughly $28,000) more to the LCSB, especially since lack of capacity can be addressed by simply "dumping" call records twice as often. (See also footnote 3 above.) Regarding the financial category, Telecom Plus proved that the LCSB consultants erroneously used the pre-cutover price of $240 instead of the post- cutover price of $281 in figuring the cost of additional telephone sets anticipated to be needed during the first seven years of operation under the Centel proposal. This error deflated the total cost of the Centel proposal by approximately $3,000 over seven years. In light of the actual total cost of the Centel proposal, Centel should have received only 383 points in the financial category instead of 384 points, not enough of a difference to change the outcome of this case.
Recommendation Based on the foregoing Findings Of Fact and Conclusions Of Law, it is recommended that the Leon County School Board enter a final order awarding a contract to Centel Business Systems to install the telephone communications system proposed in its response to the Request For Proposals in this case. RECOMMENDED this 5th day of December 1985, in Tallahassee, Florida. J. LAWRENCE JOHNSTON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of December 1985.
Findings Of Fact The Petitioner is a water and sewer utility subject to the jurisdiction of the FPSC. The utility's water and sewer service is in compliance with governmental requirements. During the test year ending December 31, 1977, the utility operated at a less and additional revenues were required to insure continued compliance with service standards. The test year rate base was $83,472 for water and $83,818 for sewer. The interim rates authorized by Order 9188 produce less than the established 10 percent rate of return on rate base, however, service will not suffer from the deficiency. A base facility charge rate structure is appropriate since it encourages conservation, tends to eleminate discrimination between classes of customers and establishes an acceptable rate for vacation service. This rate structure provides for a base charge that covers fixed costs (property taxes and insurance, depreciation, etc.) and a consumption charge that covers costs directly related to usage. Sixty percent of the residential customers use less than 3000 gallons of water a month, and nearly 69 percent use less than 4000 gallons. Should Respondent's proposed base facility charge rate structure be placed into effect to achieve the water revenue sought, the customers using less than 4000 gallons of water would be required to pay 25 percent mere than the interim rates. A similar situation exists for these same residential sewer customers. Respondent's proposed base facility charge rate structure is supposed to approximate a typical "bell" curve, however, in this instance the curve is "skewed" or "downright crooked" (tr. 104).
The Issue Whether the Department's proposed amendment of Rule 38F- 7.020, Florida Administrative Code, constitutes an invalid exercise of its delegated legislative authority under Section 120.52(8), Florida Statutes, [1996 Supp.], or whether the authority specified in the proposed rule is sufficient for the Department to adopt the proposed rule?
Findings Of Fact The Florida Society of Anesthesiologists is a voluntary, nonprofit association comprised of individual members, each of whom is licensed in the State of Florida to practice medicine. Petitioner, Robert A. Guskiewicz, M.D., is a licensed medical doctor in the State of Florida specializing in anesthesia. Pursuant to Section 440.13(12), Florida Statutes, a three-member panel is charged with the responsibility of determining the schedules of maximum reimbursement for physician treatment of workers' compensation patients. In March 1996, the three-member panel convened and adopted a resource-based relative value scale ("RBRVS") reimbursement system, which, on or about January 3, 1997, the Department published notice of its intent to embody in proposed Rule 38F-7.020, in Vol. 23, No. 1 of the Florida Administrative Law Weekly. A copy is attached and incorporated herein by reference. The proposed Rule lists Sections 440.13(7), 440.13(8), 440.13(11), 440.13(12), 440.13(13), 440.13(14), and 440.591, Florida Statutes, as specific authority. The proposed Rule implements Sections 440.13(6), 440.13(7), 440.13(8), 440.13(11), 440.13(12), 440.13(13), and 440.13(14), Florida Statutes. There are no other facts necessary for determination of the matter.
The Issue Whether Petitioner's application for a telephone salesperson license should be approved.
Findings Of Fact Respondent, the Department of Agriculture and Consumer Services (Department), is the state licensing and regulatory agency charged with the responsibility of administering and enforcing Chapter 501, Part IV, Florida Statutes, the Florida Telemarketing Act. On or about November 29, 1999, Petitioner, Gary A. Pappas (Petitioner), applied for licensure as a telephone salesperson. By letter dated February 10, 2000, the Department issued a letter denying Petitioner's application for licensure. According to the letter, the basis for denial of the license was Petitioner's felony conviction and his failure to disclose information relative to the felony conviction on his licensure application. As a part of the Department's application review process, a background investigation is conducted on each applicant. In this case, the Department had such an investigation done on Petitioner. The results of the background investigation of Petitioner revealed that he had been charged and convicted of a felony offense. According to the background investigation report, on October 17, 1988, in Pinellas County, Florida, Petitioner was convicted of a felony offense, constructive possession of an illegal substance. The report further indicated that adjudication was withheld. The Department's application form for licensure as a telephone salesperson contained Question 3 which requested information concerning the applicant's criminal history. In pertinent part, the question is as follows: 3. Please complete this section if you: a. Have previously been arrested for, convicted of or are under indictment or information for a felony and, if so, the nature of the felony. Conviction includes a finding of guilt where adjudication has been withheld. * * * If you have not been subject to any charge set forth above and are not subject to any current or restrictive order, then mark your initials in the [preceding] box. Your true name at the time of the action: Court or administrative agency rendering the decision, judgement [sic] or order: Date of conviction, judgement [sic] or order: / / Docket# Name of governmental agency which brought the action: Nature of conviction, judgement [sic], order or action: In response to Question 3, Petitioner initialed the box next to the statement, "If you have not been subject to any charge set forth above and are not subject to any current or restrictive order, then mark your initials in the box. The term "charge set forth above" referred to the offenses described in subsections a, b, c, d, and/or e of Question 3. In this case, only subsection a of Question 3 is relevant. By initialing the box mentioned in paragraph 7 above, Petitioner was indicating that he had never been convicted of a felony. On November 29, 1999, Petitioner signed his completed application for licensure as a telephone salesperson. On the application, immediately above the applicant signature line, the following statement was printed in bold letters: I DECLARE UNDER PENALTY OF PERJURY THAT ALL OF THE INFORMATION PROVIDED IN QUESTIONS 1-3, AND IN THE EXHIBITS ATTACHED HERETO, IS TRUE AND CORRECT. At the formal hearing, Petitioner admitted that in 1988, he had been convicted of a felony and adjudication had been withheld. He also testified that the conviction was for the sale and possession of marijuana. Although Petitioner had been convicted of a felony, he failed to disclose the conviction on his application for licensure as a telephone salesperson. Petitioner testified that he was misinformed and had misread and misinterpreted Question 3. Petitioner also testified that because the incident occurred more than ten years ago and adjudication was withheld, he thought the conviction did not have to be disclosed on the application. Petitioner's stated justification for failing to disclose his 1988 felony conviction lacks credibility given the clear wording of Question 3 on the application for licensure. Notwithstanding Petitioner's statements to the contrary, his testimony established that he was capable of reading and interpreting the questions on the application, including Question 3. Petitioner has had no felony convictions since the aforementioned conviction in 1988.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Agriculture and Consumer Services enter a final order denying Petitioner's request for licensure as a telephone salesperson. DONE AND ENTERED this 13th day of September, 2000, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD 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 13th day of September, 2000. COPIES FURNISHED: Honorable Bob Crawford Commissioner of Agriculture Department of Agriculture and Consumer Services The Capitol, Plaza Level 10 Tallahassee, Florida 32399-0810 Richard D. Tritschler, General Counsel Department of Agriculture and Consumer Services The Capitol, Plaza Level 10 Tallahassee, Florida 32399-0810 Brenda D. Hyatt, Bureau Chief Department of Agriculture and Consumer Services Mayo Building, Suite 508 407 South Calhoun Street Tallahassee, Florida 32399-0800 William N. Graham, Esquire Department of Agriculture and Consumer Services Mayo Building, Room 515 407 South Calhoun Street Tallahassee, Florida 32399-0800 Gary A. Pappas 2555 Oak Trail North, Number 114 Clearwater, Florida 33764
