The Issue The issue in the case is whether Respondent received an insurance premium payment from a client and failed to remit it to the insurer in order to obtain insurance for the client, in violation of Sections 626.611(4), (5), (7), (8), (9), (10), and (13), 626.621(2) and (6), 626.9561, 626.9521, and 626.9541(1)(e)1. and (o)1.
Findings Of Fact At all material times, Respondent has been licensed as a Surplus Lines Agent, Life and Health (debit) Agent, Life Agent, Life and Health Agent, and General Lines Insurance Agent. On July 22, 1988, Charles M. Wilks visited the office of Respondent to purchase insurance on his automobile. Respondent quoted him a premium of $1257 for a one-year term commencing August 19, 1988. Mr. Wilks decided to purchase the insurance at the quoted premium. Accordingly, he gave Respondent a check in the amount of $1257 payable to Respondent's insurance agency. The same day, Respondent gave Mr. Wilks an agency receipt and Temporary Binder and Receipt effective from August 19, 1988, through August 19, 1989. The temporary binder showed the insurer as Dairyland Insurance Company. Respondent caused the check to be promptly cashed and credited to his agency's account. However, Mr. Wilks never received a policy. His wife called the agency every week after the policy did not arrive promptly. But she was unsuccessful in obtaining the policy despite promises by employees of the agency that they would mail the policy to the Wilkses. Upset because the automobile was no longer covered by insurance, Mr. Wilks visited Respondent at his office in November and demanded a policy. Respondent stated that Dairyland could not insure the type of car for which Mr. Wilks sought insurance because the car was a special customized model. In fact, Respondent had never submitted the application for insurance or the premium to Dairyland for issuance of a policy. Respondent convinced Mr. Wilks to purchase the insurance from a different company. Refunding one-half of the previously paid premium, Respondent issued Mr. Wilks a certificate of insurance that purportedly reflects coverage for the automobile from November 7, 1988, through November 7, 1989, from Clarindon National. Respondent again failed to submit the policy application to the insurer. When Mr. Wilks had still not obtained a policy by January, 1989, he went to Respondent's office, but learned that he had moved. After some effort, Mr. Wilks tracked down Respondent and demanded the return of the remaining premium payment that he had previously made. Respondent finally gave Mr. Wilks a check for the balance. Taking the check immediately to the bank, Mr. Wilks received payment on it. Dairyland was less fortunate with Respondent's checks. By letter dated October 19, 1988, the insurer informed Respondent that his authority to write insurance for the company was withdrawn effective December 12, 1988. As of February 14, 1990, the sum owed to Dairyland by Respondent's agency totalled $1049.43 in nonsufficient funds checks.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Department of Insurance enter a Final Order revoking all of Respondent's above-described licenses. DONE and ORDERED this 29 day of March, 1989, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29 day of March, 1989. Copies to: Hon. Tom Gallagher State Treasurer and Insurance Commissioner The Capitol, Plaza Level Tallahassee, FL 32399-0300 Don Dowdell General Counsel Department of Insurance The Capitol, Plaza Level Tallahassee, FL 32399-0300 Nancy S. Isenberg, Attorney Division of Legal Services Department of Insurance 412 Larson Building Tallahassee, FL 32399-0300 Anthony Brooks 500 E. Semoran Blvd., Suite 32 Casselberry , FL 32707
The Issue Whether proposed rules 25-4.300 ("Scope and Definition"); 25-4.301 ("Applicability of Fresh Look"); and 25-4.302, ("Termination of Local Exchange Contracts"), Florida Administrative Code, known as "The Fresh Look Provision," constitute an "invalid exercise of delegated legislative authority".
Findings Of Fact Telecommunications carriers/providers may "wear different hats," dependent upon what function they are performing at a given time. Local exchange carriers are abbreviated "LECs" in the proposed rules. For purposes of this case only, Time Warner is an Alternative Local Exchange Carrier ("ALEC") and GTE and BST are Incumbent Local Exchange Carriers ("ILECs"). Both types of companies provide local telephone service over the public switch network. On February 17, 1998, Time Warner filed a Petition to Initiate Rulemaking. Time Warner's Petition requested that the Commission adopt what it described as a "Fresh Look" rule, under which a customer a/k/a "patron" a/k/a "end user" of an ILEC who had agreed to a long-term, discounted contract would have an opportunity to abrogate that ILEC contract without incurring the liability to the ILEC which the customer had agreed to, so that the customer could then enter a new contract with an ALEC. On at least one prior occasion, the Commission had elected to reach a similar result by a Final Order, rather than by enacting a rule. This time, the Commission granted Time Warner's Petition, and the Commission began the rulemaking process. Other states have adopted "Fresh Look" rules or statutes with varying degrees of success. The legislative, administrative, or litigation histories of these extraterritorial matters are immaterial to the rule validity issues herein, which are governed by Chapter 120, Florida Statutes. Those histories are likewise non-binding on this forum. The Commission has no way of identifying, let alone notifying, ILEC contract customers as a separate class of the public or as a separate class of potentially interested parties. However, the public, including customers and carriers, received the required statutory notice(s) at each stage of the rulemaking process, and only the following dates and occurrences have significance within the rulemaking process for purposes of the issues herein. A Notice of Rulemaking Development was published in the Florida Administrative Weekly on April 3, 1998. Commission staff held a Rule Development Workshop on April 22, 1998. Based on information received from carriers in response to staff data requests, the rules as proposed April 3, 1998, were revised by staff. On March 4, 1999, staff recommended that the revised rules be adopted by the Commission. At its Agenda Conference on March 19, 1999, the Commission set the rulemaking for hearing. On March 24, 1999, the Commission issued a Notice of Rulemaking, which included further revisions to the proposed rules. The Commission received a letter from JAPC dated April 28, 1999 ("the JAPC letter") which stated, in pertinent part: Article 1, Section 10 of the Florida Constitution prohibits the passage of laws impairing the obligation of contracts. Inasmuch as the rules effectively amend the terms of existing contracts, please reconcile the rules with the Constitution. The JAPC letter was not placed into the rulemaking record, responded-to by the Commission, or specifically addressed on its merits by any interested parties. Interested parties did not find out about it until many months later. A rulemaking hearing on the proposed rules was held before the Commission on May 12, 1999. Interested persons submitted written and oral testimony and comments at the hearing. No customer with a contract that would be affected by these rules participated in the rulemaking proceedings, including the hearing, before the Commission. At no time did anyone formally submit a lower cost regulatory alternative, but it was clear throughout the rulemaking process that Petitioners herein opposed the adoption of the proposed rules. Two Statements of Estimated Regulatory Cost ("SERCs") were prepared by Commission staff. The proposed rules were further revised after the May 12, 1999, hearing. On November 4, 1999, Commission staff issued a recommendation that the Commission adopt the latest rules draft, in part on the basis that the proposed rules will implement the "regulatory mandates" of Section 364.01, Florida Statutes, that the Commission should "promote competition by encouraging new entrants" and "encourage competition through flexible regulatory treatment among providers of telecommunication services." Attached to this recommendation was a revised SERC, dated September 13, 1999. The September 13, 1999, SERC addressed the alternative of not adopting the proposed rules, and found such an alternative was not viable because it would not foster competition. In preparing both SERCs, Commission staff relied solely on market share data for analyzing competition and did not fully account for revenues to which ILECs were contractually entitled, but which potentially could be unilaterally cancelled by the ILEC customer as a result of the proposed rules. Staff did not ask for such data for estimating cost of the proposed rules to the ILECs. At its November 16, 1999, Agenda Conference, the participation of interested parties was limited to addressing the new SERC. During this Agenda Conference, the Commission revised the rules further, limiting the contracts affected by them to contracts entered into before July 1, 1999, and voted to approve the proposed rules as revised. The exact language of the proposed rules under challenge, as published in the December 3, 1999, Florida Administrative Weekly, pursuant to Section 120.54(3)(d), Florida Statutes, is as follows: PART XII - FRESH LOOK: 25-4.300 Scope and Definitions. Scope. For the purposes of this Part, all contracts that include local telecommunications services offered over the public switched network, between LECs and end users, which were entered into prior to June 30, 1999, that are in effect as of the effective date of this rule, and are scheduled to remain in effect for a least one year after the effective date of this rule will be contracts eligible for Fresh Look. Local telecommunications services offered over the public switched network are defined as those services which include provision of dial tone and flat-rated or message-rated usage. If an end user exercises an option to renew or a provision for automatic renewal, this constitutes a new contract for purposes of this Part, unless penalties apply if the end user elects not to exercise such option or provision. This Part does not apply to LECs which had fewer than 100,000 access lines as of July 1, 1995, and have not elected price-cap regulation. Eligible contracts include, but are not limited to, Contract Service Arrangements (CSAs) and tariffed term plans in which the rate varies according to the end user's term commitment. The end user may exercise this provision solely for the purpose of obtaining a new contract. For the purposes of this Part, the definitions to the following terms apply: "Fresh Look Window" - The period of time during which LEC end users may terminate eligible contracts under the limited liability provision specified in Rule 25- 4.302(3). "Notice of Intent to Terminate" - The written notice by an end user of the end user's intent to terminate an eligible contract pursuant to this rule. "Notice of Termination" - The written notice by an end user to terminate an eligible contract pursuant to this rule. "Statement of Termination Liability" - The written statement by a LEC detailing the liability pursuant to 25-4.302(3), if any, for an end user to terminate an eligible contract. 25-4.301 Applicability of Fresh Look. The Fresh Look Window shall apply to all eligible contracts. The Fresh Look Window shall begin 60 days after the effective date of this rule. The Fresh Look Window shall remain open for one year from the starting date of the Fresh Look Window. An end user may only issue one Notice of Intent to Terminate during the Fresh Look Window for each eligible contract. 25-4.302 Termination of LEC Contracts. Each LEC shall respond to all Fresh Look inquiries and shall designate a contact within its company to which all Fresh Look inquiries and requests should be directed. An end user may provide a written Notice of Intent to Terminate an eligible contract to the LEC during the Fresh Look Window. Within ten business days of receiving the Notice of Intent to Terminate, the LEC shall provide a written Statement of Termination Liability. The termination liability shall be limited to any unrecovered, contract specific nonrecurring costs, in an amount not to exceed the termination liability specified in the terms of the contract. The termination liability shall be calculated as follows: For tariffed term plans, the payments shall be recalculated based on the amount that would have been paid under a tariffed term plan that corresponds to the actual time the service has been subscribed to. For CSAs, the termination liability shall be limited to any unrecovered, contract specific nonrecurring costs, in an amount not to exceed the termination liability specified in the terms of the contract. The termination liability shall be calculated from the information contained in the contract or the workpapers supporting the contract. If a discrepancy arises between the contract and the workpapers, the contract shall be controlling. In the Statement of Termination Liability, the LEC shall specify if and how the termination liability will vary depending on the date services are disconnected pursuant to subsections (4) and (6). From the date the end user receives the Statement of Termination Liability from the LEC, the end user shall have 30 days to provide a Notice of Termination. If the end user does not provide a Notice of Termination within 30 days, the eligible contract shall remain in effect. If the end user provides the Notice of Termination, the end user will pay any termination liability in a one-time payment. The LEC shall have 30 days to terminate the subject services from the date the LEC receives the Notice of Termination. (Emphasis provided only to facilitate the following discussion of "timed" provisions) "Tariff term plans" or "tariffed term plans" are telecommunication service plans in which the rate the customer pays depends on the length of the service commitment. The longer the service commitment the customer makes with the company, the lower the monthly rate will be. Ninety-eight percent of the contracts affected by the proposed rules are tariff term plans filed with the Commission. Contract service arrangements (CSAs) have many functions. By tariff term plans and CSAs, carriers and their customers formalize a negotiation whereby the customer signs-on for service for an extended period, in exchange for lower rates than he would get if he committed to shorter periods or under the regular tariff. Both tariff term plans and CSAs are subject to the Commission's regulatory oversight. No reason was given for use of the "included but not limited to" language added in the rules' current draft. The Commission has published that the "specific authority" for the proposed rules is Sections 350.127(2) and 364.19, Florida Statutes. The Commission has published that the "law implemented" by the proposed rules is Sections 364.19 and 364.01, Florida Statutes. The proposed rules would allow customers of ILECs, including Petitioners GTE and BST, to terminate their contracts and tariffed term plans for local exchange services without paying the termination liability stated in those contracts and tariffs. Instead, customers would only be required to pay the ILEC "any unrecovered, contract specific nonrecurring costs" associated with the contracts. (Proposed rule 25-4.302(3)(b)). For tariffed term plans (but not contracts), termination liability would be recalculated as the difference, if any, between the amount the customer paid and the amount he would have paid under a plan corresponding to the period during which he actually subscribed to the service. (Proposed rule 25- 4.302(3)(a)). The "Fresh Look" rule applies to agreements entered into before June 30, 1999, and that remain in effect for at least one year after the date the rule takes effect. (Proposed rule 25-4.300(1)). The window for contract termination starts 60 days after the rules' effective date and lasts for one year thereafter. (Proposed rule 25-4.301). In the case of ILEC customers who may exercise the "opt-out early" (termination) provisions of the proposed rules, the proposed rules would provide the ILECs with the compensation they would have received if the contracts had been made for a shorter period than for the period of time for which the parties had actually negotiated. The proposed rules clearly modify existing contracts. Indeed, they retroactively impair existing contracts. It may reasonably be inferred that the retroactive elimination of the respective durations of the existing contracts would work to the detriment of any ILECs which have waived "start up costs" on individual contracts or which planned or invested in any technological upgrades or committed to any other business components (labor, training, material, development, expansion, etc.) in anticipation of fulfilling the contracts and profiting over the longer contract terms legally entered-into prior to the proposed rules. The purpose of the proposed rules, as reflected in the Commission's rulemaking notices, is to "enable ALECs to compete for existing ILEC customer contracts covering local exchange telecommunications services offered over the public switched network, which were entered into prior to switch-based substitutes for local exchange telecommunications services." However, the Commission now concedes that switch-based substitutes for the ILECs' local exchange services were widely available to consumers prior to June 30, 1999, the date provided in the proposed rule. At hearing, the Commission asserted that it is also the purpose of the proposed rules to actively encourage competition, and that by proposing these rules, the Commission deemed competition to be meaningful or sufficient enough to warrant a "fresh look" at the ILECs' contracts, but not so widespread that the rules would not be necessary. In effect, the Commission made a "judgment call" concerning the existence of "meaningful or sufficient" competition, but has not defined "sufficient" or "meaningful" competition for purposes of the proposed rules. The Commission's selection of June 30, 1999, as the cut-off date for contract eligibility was motivated primarily by a concept that using that date would render approximately 40 percent of existing ILEC contracts eligible for termination. The rulemaking process revealed that the terms of so- called "long-term" agreements range from six months to four years in duration. The Commission selected a one-year term for eligible contracts subject to the proposed rules as a compromise based on this spread of actual contract durations. The one-year window of opportunity in which a customer will be permitted to terminate a contract was selected by the Commission as a compromise among presenters' views expressed during the rulemaking process. The one-year window is to be implemented 60 days after the effective date of the rule to avoid the type of problems incurred when a "fresh look" was previously accomplished by a Commission Order and to allow the ILECs and ALECs time to prepare. Tariffed term plans were developed as a response to competition and have been used at least since 1973. As early as 1984, the Commission had, by Order, given ILECs authority to use CSAs for certain services, upon the condition that there was a competitive alternative available. The Commission has long been aware of the ILECs' use of termination liability provisions in CSAs and tariff term plans, including provisions for customer premises equipment (CPE), and has not affirmatively determined that their use is anticompetitive, discriminatory, or otherwise impermissible. Private branch exchanges (PBXs), which are switches, competed with the ILECs' Centrex systems for medium- to large- size business customers and key telephone systems for smaller businesses, from the early 1980's, as recognized by a Commission Order in 1994. Commission Order No. PSC-94-0285-FOF-TP, dated March 3, 1994, in Docket No. 921074-TP, permitted a "fresh look" for customers of LEC private line and special access services with terms equal to, or greater than, three years. Customers were permitted a limited time to terminate their existing contracts with LECs to take advantage of emerging competitive alternatives, such as alternative access vendors' (AAVs') ability to interconnect with LECs' facilities. Termination liability of the customer to the ILEC was limited to the amount the customer would have paid for the services actually used. Prior to 1996, only ILECs could offer dial tone service, which enables end users to communicate with anyone else who has a telephone. Chapter 364, Florida Statutes, Florida's telecommunication statute, was amended effective January 1, 1996, to allow ALECs to operate in Florida. ILECs had offered tariffed term plans and CSAs for certain services before the 1996 revision of Chapter 364, Florida Statutes, but effective 1996, substantial amendments allowed the entry of ALECs into ILECs' markets. The new amendments codified and expanded the ILECs' ability to use CSAs and term and volume discount contracts in exchange for ILECs losing their exclusive local franchises and deleted statutory language requiring the Commission to determine that there was effective competition for a particular service before an ILEC could be granted pricing flexibility for that service. Tariff filings before the amendments had required Commission approval. The federal Telecommunications Act of 1996 also opened the ILECs' local exchange markets to full competition and imposed upon the ILECs a number of obligations designed to encourage competitive entry by ALECs into the market, including allowing ALECs to interconnect their networks with those of ILECs; "unbundling" ILEC networks to sell the unbundled elements to competitors; and reselling ILEC telecommunications services to ALECs at a wholesale discount. See 47 U.S.C. Section 51 et seq. "Resale" means taking an existing service provided by a LEC and repackaging or remarketing it. The requirement that ILECs resell their services, including contracts and tariffed term plans, to competitors at a wholesale discount, has been very effective in stimulating resale competition, but to resell or not is purely an internal business decision of each ALEC. For instance, Time Warner has elected not to be involved in "resales," and is entirely "facility based." Since 1996, competing carriers could and do sell additional (other) services to customers already committed to long-term ILEC contracts. They may also purchase ILEC CSAs wholesale at discount and resell such agreements to customers. Market share data demonstrates that there has been greater ALEC competition in Florida since the 1996 amendments, but typically, ALECs target big cities with denser populations and denser business concentrations. There is no persuasive evidence that any of the affected ILEC contracts (those post-June 30, 1999) were entered into by customers who did not have competing alternatives from which to choose. In fact, testimony by Commission staff supports a finding that since LECs' CSAs are subject to Commission review and their service tariffs are filed with the Commission, the Commission has not authorized CSAs unless there was an "uneconomic bypass" or competition. "Uneconomic bypass" occurs where a competitor can offer service at a price below the LEC's tariffed rate but above the LEC's cost. The Commission presented an ILEC customer, Mr. Eric Larsen of Tallahassee, who testified that he had had the benefit of competition, not necessarily from an ALEC, when he had entertained a bid from a carrier different from his then-current ILEC in 1999. However, at that time, he renegotiated an expiring contract with his then-current ILEC instead of with the competitor. This renewal contract with an ILEC would not be affected by the proposed rules. Business customers, such as Mr. Larsen, may reasonably perceive business trends. They could reasonably be expected to have factored into their negotiations with competing carriers at the time the contracts were formed that a potential for greater choices would occur in the future, even within the life of their long-term contracts with an ILEC. As of 1999, 80 ALECs were serving Florida customers, 100 more had expressed their intention of serving Florida before the end of the year 2000, and ALECs had obtained some share of the business lines in many exchanges. While this does not mean that every area of Florida has every service, it is indicative of a spread of competition. Petitioner GTE is anchored in the Tampa Bay area. By June 30, 1999, the date expressed in the proposed rules, nine facilities-based competitors were in the same geographic area. One ALEC (MCI) was serving 10,000 lines. Competitors operated 20 switches and 83 percent of the buildings in GTE's franchise area were within 18,000 feet of a competitor's switch. However, in most cases, GTE's CSA or tariff term agreements had been successful against specific competing bids for the respective services. Market share data showed that by June 30, 1999, Petitioner GTE had executed 101 agreements allowing ALECs to provide service by inter-connecting their networks with GTE's networks, reselling GTE's services, and/or taking "unbundled" parts of GTE's network. While market share data is not conclusive, in the absence of any better economic analysis by the Commission or other evidence of existing ALEC presence or of a different prognosis for ALEC penetration, market share is at least one indicator of the state of competition when the contracts addressed by the proposed rules were entered into. The Commission has no data about how many customers currently opt-out of their ILEC contracts prior to natural expiration and pay the termination liability to which those ILEC agreements bind them in order to accept a competing offer from another carrier, but clearly, some do. This evidences current competition. Competing carriers can and do sell to ILEC customers at the natural expiration of their long-term agreements. This evidences current competition. The Commission has no data predicting how many more customers would opt-out if the proposed rules are validated. Therefore, the presumption that "if we publish a rule they will come" is speculative. Likewise the Commission's presumption that customers regard termination liability provisions in ILEC contracts as a barrier to their choices and a bar to competition was not proven. Some of the factors that went into that presumption were speculative because the Commission has not reviewed the termination liability provisions of Petitioners' contracts and has offered no evidence of formal complaints to the Commission by customers who want to opt-out of ILEC contracts. "Informal communication" with Commission staff by customers was undocumented and unquantified. The Commission did present the testimony of Mr. Larsen who explained that because he needs to keep the same business telephone number, he feels that it is not economically feasible for him to opt-out of his several overlapping ILEC contracts unless he can synchronize all his existing contract termination dates and that the proposed "fresh look" rules would permit him to do that. However, his testimony provided no valid predictor that even if the termination of all his existing ILEC contracts were enabled by the proposed rules he would, in fact, be able to find a competitor in his area whose contract(s) were more to his liking. The proposed rules, with their arbitrary date of June 30, 1999, would not allow Mr. Larsen to terminate, without liability, the one ILEC contract he entered into after that date. (See Finding of Fact No. 47). Based on his sincere but unfocused testimony, it remains speculation to presume that Mr. Larsen would be willing to incur contractual liability by early termination of his single non-qualifying ILEC contract just because the proposed rules would let him "opt-out" of the several qualifying ILEC contracts. It is indicative of the proposed rules' possible effect on future competition that Mr. Larsen speculated that if he could terminate all his qualifying ILEC contracts simultaneously under the proposed rules, he might be able to persuade a competitor, perhaps an ALEC, to pay his termination costs on his single non- qualifying ILEC contract if he renegotiated all his business away from his ILEC and to that competitor. The introduction of the proposed rules into the market place could create a "competitive edge" not anticipated by the Commission. Other carriers, including ALECs competing with ILECs, can and do enter into contracts with their customers which, like the contracts which would be affected by the proposed rules, are long-term contracts subject to termination liability, but the long-term contracts of carriers other than ILECs would not be affected by the proposed rules. The proposed rules pertain only to ILECs and their business customers. In effect, the proposed rules apply predominantly to ILECs' large business customers. Under the proposed rules, competitors which had originally bid against the ILECs for an affected contract at the time it was entered-into could get "a second bite at the apple" occasioned solely by the application of the proposed rules.
The Issue The issue in this case is whether Respondent’s intended award of a contract for telephone systems maintenance and installation services pursuant to Bid #09-005/LH is contrary to Respondent’s governing statutes, Respondent’s rules or policies, or the solicitation specifications.
Findings Of Fact On June 17, 2008, the School Board issued an ITB for telephone systems maintenance and installation services. The ITB was identified as Bid #09-005/LH. Section 2.2 of the ITB described the scope of work as follows: Bids will be requested for the following types of work from the qualified and awarded Contractors: Upgrades and installation of various types of Telephone Systems, including but not necessarily limited to the following: wiring, cabinet, control, and conduit installation and upgrades to existing system components, programming panels/switches, testing telephone systems, installation, replacement of devices and system components, power supplies, all other projects directly related to telephone systems, including new installations (material and labor), at any designated SBBC [School Board] site and certification of various telephone systems. The School Board of Brevard County will have salvage rights if requested for all parts and material that is [sic] removed from each project. All work/materials shall be in accordance with State Requirements for Educational Facilities (SREF), the Florida Building Code, SBBC Facilities Standards and Guide Specifications. Section 2.4 of the ITB set forth the qualifications of the contractor and required the following: 2.4.1 The successful “Telephone System Contractor” shall be a person whose business includes the execution of contracts requiring the ability, experience, science and knowledge, and skill to lay out, fabricate, install, maintain, alter, repair, monitor, inspect, replace, or service telephone systems for compensation, including all types of telephone systems, for all purposes. The business shall be self-proprietary, will provide service with company employees, company owned and insured vehicles and company owned equipment. Subcontracting of Telephone System Services will not be allowed. * * * The bid will be awarded only to responsible bidders that are factory authorized dealers of the systems bid and qualified to do the work specified with manufacturer trained and certified technicians. The successful “Telephone System Contractor” shall have a minimum of two certified/trained technicians for each of the installed system [sic] bid. For systems that are manufacturer discontinued, contractor shall have a minimum of tow [sic] trained technicians, with five or more years of experience in maintaining such systems. Awarded bidder(s) shall be capable of and responsible for testing each wire, landing all wire, mounting all devices, programming panels, trouble shooting and certifying telephone system installations. In addition, the successful bidder(s) must be certified to provide support for existing structured cabling system (SCS) infrastructure. If the SCS has an existing warranty, the successful bidder(s) shall provide warranty coverage on the SCS as defined by the manufacturer. The School Board has existing SCS warranties from either Molex or Siemens[1] certified solutions. The successful bidder(s) must also be qualified and authorized by a manufacturer to design, configure, and maintain an IP telephony multiservice network solution using QoS, Call Control clustering, H.323, MGCP, or SIP signaling protocols and shall be able to integrate legacy TDM Telephone Systems and voice mail systems into an existing data network. Awarded bidder(s) must install telephone systems to meet all State of Florida Department of Education (SREF), NFPA and NEC requirements. The bidder shall submit the following information in ‘Envelope B’: Experience record and proof that bidder is a certified factory trained dealer for the system(s) being bid with at least five (5) years experience in telephone service work. Evidence that all field supervisory employees are certified manufacturer and SCS technicians. List and a brief description of similar work satisfactorily completed with location, dates of contracts, names, phone numbers and addresses of owners. List of equipment and facilities available to do the work. Names and evidence of level of competency of all personnel who will be used in District projects. The District must recognize competency certification and employees (names must appear on invoices with number of hours worked). Name(s) of project manager(s) and evidence of current “Certificate of Factory Training” of system(s) bid. Provide resume of Project Managers. Evidence that bidder’s support team is located within a 75 mile radius of Brevard County. Evidence of ability to supply as-built drawings as needed. Evidence of occupational license (business tax receipt) and State of Florida Low voltage license. Letter from manufacturer stating that you are an authorized dealer/service provider for systems bid. Failure to submit the above requested information (in Envelope ”B” with Price Sheet and Questionnaire) may be cause for rejection of the proposal. (Emphasis in original) The Contractor must complete the enclosed questionnaire which will be used to evaluate capabilities to perform the work during the contract period. The questionnaire must be completed and contain sufficient and specific information which directly responds to the request. The School Board reserves the right to reject bids which do not provide sufficient information to evaluate the qualifications of the Contractor and where information provided does not demonstrate a proven past record (such as negative references, failure to complete projects, etc.). Section 1.2 of the ITB stated: THE INTENT of this bid is to establish a contract for a period of one year from date of award during which time; the successful bidder(s) shall guarantee firm-fixed pricing for telephone system maintenance and materials and firm-fixed labor, equipment and material prices for minor and major installation of the District’s Telephone systems as awarded to him/her as specified in this bid. The bid shall be based on an ‘All-Or-None” format per system manufacturer. This bid will be awarded to a minimum of one contractor for each manufacturer of systems used by the District. In the best interest of the District two or more contractors may be awarded a specified system. The “lowest and best” bid will be the primary contractor and the next “lowest and best” bids will be alternate or secondary contractors. The primary contractor may be requested to perform the maintenance and work required for minor upgrades and installation projects with an estimated cost of $6,000.00 or less. Each project estimated to be over $6,000.00 will be given to all contractors awarded the specific system to quote as specified. At the discretion of The School Board of Brevard County, Florida the contractor providing the lowest quote meeting specifications will be awarded the project. Section 8.1 of the ITB clarified the meaning of “lowest and best bid” as follows: SCHOOL BOARD intends to accept the “lowest” and “best” bid(s) submitted to it. The term “lowest” aforesaid shall be interpreted to mean the lowest “ALL OR NONE” Total Net Bid Price for all required tasks for each system manufacturer. In determining which is the “lowest” and “best” bid received, the SCHOOL BOARD shall also consider and weigh (a) the experience, qualifications and reputation of each BIDDER, and (b) the quality of products and services proposed by each BIDDER. SCHOOL BOARD reserves the right to: reject any and all bids received by it, waive minor informalities in any bid, accept any bid or part thereof that in its judgment will be for the best interest of the School Board of Brevard County, Florida. The ITB listed the following telephone systems for which bids were to be submitted: Hitachi, IWATSU, NEC, Nortel- BCM, Premier, Prostar, Starplus, and Toshiba. Nortel-BCM and IWATSU are systems that are currently supported by the manufacturer. Xeta Technologies had acquired the distribution rights for Hitachi and was providing support for the Hitachi systems. The School Board considered the following systems to be discontinued systems, which were not currently supported by the manufacturer: NEC, Premier, Prostar, Starplus, and Toshiba, collectively referred to as the discontinued systems. Morse and BBTS were among the bidders which submitted bids in response to the ITB. BBTS bid all systems. Morse bid all systems with the exception of Nortel-BCM. Morse was not an authorized/certified dealer for Nortel-BCM systems. BBTS was the low bidder for the IWATSU system. Morse was the low bidder for the discontinued systems and Hitachi. In its bid, BBTS stated that it was a factory- authorized dealer for Hitachi, Nortel Networks, and IWATSU Voice Networks. BBTS submitted a letter from IWATSU stating that BBTS was an authorized IWATSU distributor in good standing. Contrary to the ITB specification 2.4.4J, BBTS did not submit a letter from Nortel stating that BBTS was an authorized dealer/service provider for Nortel. Instead, BBTS advised the School Board to contact Jon Gain, a field channel manager for Nortel, for information regarding the Nortel networks. BBTS provided Mr. Gain’s mailing and e-mail addresses and his telephone number. BBTS submitted a letter from XETA Technologies, which stated: Please be advised that XETA Technologies, Inc., acquired the distribution relationships of Hitachi Telecom (USA), Inc. for the HCX5000/HCX5000® product line, effective May 5, 2006. Per correspondence dated May 11, 2006, Orlando Business Systems was notified of XETA’s assumption of Hitachi’s obligations under their Authorized Distributor Agreement, and Orlando Business Systems remains an Authorized Hitachi Distributor. Kathyrn Arvonio, a telecommunication specialist employed by the School Board for over four years, helped to evaluate the bids submitted in response to the ITB. Ms. Arvonio spoke with a field channel manager from Nortel on July 23, 2008. She was advised by the field channel manager that BBTS could service, maintain, and buy parts necessary for all repairs on Nortel-BCM products. Based on the information provided by Nortel, Morse was authorized by Nortel to service and maintain a Nortel system. Prior to making a recommendation for contract award, Ms. Arvonio called personnel at XETA and was advised that BBTS was also an authorized distributor of Hitachi. Morse included with its bid a letter from IWATSU stating that Morse was an authorized dealer for IWATSU. Morse did not include a letter from either Hitachi or XETA that Morse was an authorized dealer for Hitachi or XETA. BBTS stated in its bid that it had trained/certified technicians for the discontinued systems and had maintained the discontinued systems for 20 years. In its bid, BBTS identified Arthur Love as a technician who had been employed with BBTS since 1992. The bid stated that Mr. Love “has certifications on the Hitachi PBX, Iwatsu Adix, Nortel BCM 1648 and many more. He is trained on the Premier NC616, Prostar Plus, and the Starplus Key Systems.” Included with the bid were certificates from Hitachi, IWATSU, and NEC. In its bid, BBTS identified Doug Chamberlin, who had been employed by BBTS as a technician since 1994, and stated that Mr. Chamberlin “has certifications on the Hitachi PBX, Iwatsu Adix, Iwatsu Enterprise CS (IP System), Nortel BCM, Mitel SX2000 PBX and the Mitel 3300 ICP (IP System), Starplus 616, Prostar and the Toshiba DK280 and many more. He is trained on the Premier NC616, and the NEC 16/48.” The bid included certificates for Mr. Chamberlin from Hitachi, IWATSU, Toshiba, and Starplus. BBTS identified Troy Gaskins in its bid as being employed, as having 11 years' experience as a technician, and as having “certifications on the Iwatsu Adix, Prostar and the Norstar Key Systems.” BBTS stated that Mr. Gaskins was trained on the Iwatsu ZTD, Premier NC616, Starplus, and the NEC 16/48 Key Systems. A certificate from IWATSU was included with the bid. In its bid, BBTS identified Gustavo Beltran as having 12 years' experience in the telecommunications industry. BBTS stated that Mr. Beltran was “certified on the Mitel SX-200ICP (IP PBX).” The bid also stated that Mr. Beltran was trained on the Iwatsu Adix, Prostar, Premier NC616, Starplus, and the NEC 16/48. In its bid, BBTS identified Kevin Krise as having over 28 years' experience in the telecommunications industry. BBTS stated that Mr. Krise was “certified on the Mitel SX-2000, Mitel SX-3300 ICP (IP PBX), Siemens, Telrad, Macro Voice and many others” and that he was “trained on the Iwatsu Adix, Toshiba DK280, Iwatsu ZTD, Prostar, Premier NC616, Starplus and NEC 16/48 Key Systems.” Morse indicated in its bid that Kevin Joyce, Dale Koehler, and Jeff Pitt had successfully completed technical training through IWATSU. Morse stated in its bid that Gary Gage had in-depth knowledge of the Toshiba telephone system. Morse did not establish in its bid that it had two trained technicians with five years' or more experience in maintaining Hitachi, Prostar, Premier, Starplus, Toshiba, or NEC systems. The School Board has eight to ten portable classrooms that have Siemon structured cabling. The remainder of the structured cabling used by the School Board is manufactured by Molex. Molex is the standard for the School Board, and, when the portable classrooms with Siemon structured cabling are moved, the structured cabling will be switched to the Molex brand. The ITB required the bidders to be certified to provide support for existing structured cabling system (SCS) infrastructure and to provide warranty coverage on the SCS for systems under warranty. Clearly based on the ITB, the contractor awarded the contract was to be able to and expected to provide work on the SCS infrastructure when warranty work was involved. Ms. Arvonio interpreted the ITB to mean that the bidder awarded the contract was not to work on the structured cabling, but was to be able to test the SCS and notify the School Board if there was a problem. She also was of the opinion that the ITB did not require the bidders to be certified by Molex or Siemon. According to Ms. Arvonio, if there was a problem with the structured cabling, the manufacturer would be contacted if warranty work was involved, and, if the system was not under warranty, the work would be done by separate contract. No explanation was given why the language requiring certification was included in the bid specifications. In response to the ITB requirement that the contractor be certified to provide support for the School Board’s existing SCS, BBTS stated in its bid: BBTS has been a structured cabling system contractor for 20 years and currently holds installer certifications for the following manufacturers. See attached Installer Certifications. Molex Hubbel Siemons BBTS is not a “Certified Installer” through Siemons, but we do maintain current individual designer/installer certifications for Siemons. BBTS commits to providing the manufacturer’s warranty per the manufacturer’s specifications. BBTS included a certificate with its bid, certifying that BBTS was a certified installer for Molex. Also included with the bid were certificates for four individuals showing that they were certified Molex installers. As part of its bid, BBTS submitted certificates showing that one employee of BBTS had “satisfactorily completed the recertification requirements as a Siemon Cabling System Authorized Designer/Installer” and that another BBTS employee had “completed the required training and satisfactorily met all requirements to become a Siemon Cabling System® Authorized Installer.” Based on BBTS’s response, BBTS had employees who could perform warranty work on the SCS, if required to do so. Morse included with its bid a certificate from Molex certifying that Morse was a Molex-certified installer. Morse also included with its bid a certificate from the Siemon Company that Morse was a certified installer for the design, installation, and administration of Siemon Cabling Systems. Section 3.1.3 of the ITB required the bidders to include a catastrophic failure plan with each bid. The plan was to “provide interim service for totally replacing any system(s) to be maintained if a catastrophe should occur during any applicable maintenance period.” BBTS provided a catastrophic failure plan in its bid, which stated, in part: In the event of a Catastrophic Failure, Brevard Business Telephone Systems, Inc. (BBTS), and Orlando Business Telephone Systems, Inc. (OBTS) are in a position to assist the Brevard County Public Schools in its telecommunications requirements. We currently maintain a system capable of 100 stations and 24 trunks that could be installed in the event of a catastrophic failure. * * * Brevard County Public Schools would identify the sites that are priorities for continued operation of their telephone systems. BBTS would work with Bell South in restoring service to these facilities. All supplies necessary for replacement would be moved inland to OBTS should the need arise in order to maintain the serviceability of the parts. Orlando Business Telephone Systems, Inc. (Orlando Business Systems), and BBTS are separate business entities. Orlando Business Systems did not submit a bid in response to the ITB, and the bid submitted by BBTS was not a joint bid of BBTS and Orlando Business Systems. In its bid, BBTS identified Orlando Telephone Company/Orlando Business Systems as an affiliate of BBTS. In her evaluation of BBTS’s bid, Ms. Arvonio did not consider Orlando Business Systems as part of the bid and made her evaluation on the services which were to be provided by BBTS. BBTS is the current contractor providing telephone maintenance services to the School Board. Based on Ms. Arvonio’s previous experience with BBTS, she was aware that BBTS could maintain a telephone system consisting of 100 stations and 24 trunks during a catastrophic event. On July 31, 2008, the School Board posted an intended award of all systems to BBTS as the primary contractor and an intended award of the IWATSU system to Morse as the secondary contractor. BBTS was the lowest, conforming bidder for all systems. Ms. Arvonio received an e-mail dated August 19, 2008, from Jason Harrison from Nortel. The e-mail concerned the relationship between Nortel and BBTS and stated: Brevard Business Telephone Systems, Inc. is a contracted Nortel Authorized Reseller. They have a long standing relationship with Nortel in [the] Brevard County, FL area with a dedicated Nortel Field and Inside Support Team. When the BCM was launched BBTS was one of the first reseller’s to get fully accredited. As the platform has evolved, Nortel has modified the Accreditation requirements. BBTS is in the process of completing the latest requirements and will be finished with them by August 22nd 2008. If service is required before the completion of the exams, Nortel Support Services may be implemented by BBTS. Nortel Support Services are available to BBTS as part of their contract with Nortel. After the intended award was posted, staff from the School Board met with personnel from Morse to discuss Morse’s protest to the intended award. Personnel from Morse were asked if Morse had trained technicians for any of the discontinued systems. They responded that Morse had trained technicians for Hitachi, but did not provide any support for their claim. At the meeting, Steven Koller, a project manager for Morse, indicated that Morse did have trained technicians for some of the discontinued systems. He did not identify the systems nor did he identify the technicians. At the final hearing, Mr. Koller testified that he had more than five years' experience with systems manufactured by Toshiba, NEC, and Hitachi. He could not identify other technicians at Morse who had more than five years' experience with the discontinued systems and deferred to Michael Costello, the owner of Morse, for that information. At the final hearing, Mr. Costello, who controlled all aspects of the technician side of Morse, testified that he had over five years’ experience with some of the discontinued systems and that he had two or more technicians with over five years’ experience with the discontinued systems with the exception of Hitachi. Mr. Costello further testified that he could not identify the technicians without looking at their resumes. No resumes were produced at the final hearing. Finally, Mr. Costello said that Gary Gage, a long-time employee of Morse, had experience with the discontinued systems. Mr. Costello’s testimony is not credible. As the person in charge of the technician side of Morse, he had very little knowledge of exactly what experience his staff had in working with the discontinued systems at issue. If he had staff with the requisite experience, it would have been very simple for him to submit resumes of those employees in its bid or to attach certificates of training as did BBTS. Morse chose not to do that. Additionally, after the intended award was posted, Morse was given an opportunity at meetings with the School Board to identify personnel with the experience with the discontinued systems, and it failed to take advantage of that opportunity. Petitioner has argued that the School Board and Ms. Arvonio, in particular, were biased toward BBTS. Ms. Arvonio had worked for BBTS for seven years prior to becoming employed by the School Board. No evidence established that either Ms. Arvonio or the School Board was biased in favor of Morse. Ms. Arvonio called companies listed by other bidders to verify the bidders’ credentials. Within the last two years, the School Board has awarded a bid to Morse for structured cabling for over $200,000.00. The School Board staff gave Morse an opportunity after the bids were opened to provide information which would establish that Morse had sufficient trained staff to service the discontinued systems.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered dismissing the bid protest filed by Morse. DONE AND ENTERED this 10th day of February, 2009, in Tallahassee, Leon County, Florida. S SUSAN B. HARRELL 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 10th day of February, 2009.
The Issue The issue is whether Respondent (“Ricky Lee Diemer”) offered to engage in unlicensed contracting as alleged in the Administrative Complaint, and, if so, what penalty should be imposed.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, matters subject to official recognition, and the entire record in this proceeding, the following Findings of Fact are made: The Department is the state agency responsible for regulating the practice of contracting pursuant to section 20.165, Florida Statutes, and chapters 455 and 489, part I, Florida Statutes. The Department initiated an undercover operation by gaining access to a house needing numerous repairs. The Department employees then utilized websites, such as Craigslist and HomeAdvisor, to identify people offering unlicensed contracting services. The Department employees found an advertisement posted by “RLD Handyman Services” on December 26, 2017, offering to perform multiple types of contracting work. This advertisement caught the Department’s attention because it did not list a contracting license number. Section 489.119(5)(b), requires every advertisement for contracting services to list such a number.2/ The advertisement listed a phone number, and the Department utilized the Accurint phone system to ascertain that the aforementioned phone number belonged to Mr. Diemer. The Department examined its records and ascertained that Mr. Diemer was not licensed to perform construction or electrical contracting in Florida. The Department contacted Mr. Diemer and approximately 12 other people offering contracting services and scheduled appointments for those people to discuss contracting work with an undercover Department employee at the house mentioned above. An undercover Department employee told Mr. Diemer and the other prospective contractors that he had recently bought the house and was hoping to sell it for a profit after making some quick repairs. An undercover Department employee met Mr. Diemer at the house and described their resulting conversation as follows: A: We looked at remodeling a deck on the back, the southern portion of the home. We looked at cabinets, flooring and painting that are nonregulated in nature, but also plumbing and general contracting services such as exterior doors that needed to be replaced, and the electrical, some appliances and light fixtures. Q: All right. So was there any follow-up communication from Mr. Diemer after your discussion at the house? A: Yes. We walked around the house. He looked at the renovations that we were asking. He took some mental notes as I recall. He didn’t make any written notes as some of the others had done. He did it all in his head, said that he was working on another project in the Southwood area at the time and just left his work crew there to come and visit with me and was rushed for time. So he was in and out of there in 10 to 15 minutes. It was pretty quick. Q: Okay. A: But he took the mental notes and said that he would go back and write something up and send me a proposal through our Gmail. . . . On February 7, 2018, Mr. Diemer transmitted an e-mail to the Department’s fictitious Gmail account offering to perform multiple types of work that require a contracting license: kitchen sink installation, bathroom remodeling, construction of an elevated deck and walkway, installation of light fixtures, and installation of front and back doors.3/ Mr. Diemer proposed to perform the aforementioned tasks for $13,200.00.4/ The work described in Mr. Diemer’s e-mail poses a danger to the public if done incorrectly or by unlicensed personnel.5/ The Department incurred costs of $118.55 for DOAH Case No. 18-6578 and $91.45 for DOAH Case No. 18-6579. The Department proved by clear and convincing evidence that Mr. Diemer advertised or offered to practice construction contracting without holding the requisite license. The Department also proved by clear and convincing evidence that Mr. Diemer practiced construction and electrical contracting when he transmitted the February 7, 2018, e-mail.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation issue a final order requiring Ricky Lee Diemer to pay a $9,000.00 administrative fine and costs of $210.00. DONE AND ENTERED this 1st day of April, 2019, in Tallahassee, Leon County, Florida. S G. W. CHISENHALL 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 April, 2019.
The Issue The issue in this case is whether Rule 25-4.113(1)(f), Florida Administrative Code, is a valid exercise of delegated legislative authority.
Findings Of Fact History of the Rule The Commission first adopted a rule setting out its policy on disconnection and refusal of service in August of 1955. In re: Adoption of rules and regulations governing telephone companies, Order No. 2195 (June 24, 1955) (O.R. E). (Prehearing stipulation p. 10) Rule 20 provided that: “Service may be denied to any subscriber or applicant for failure to comply with these rules, the telephone company’s tariff, municipal ordinances or state laws.” Id. Effective December 1, 1968, the Commission revised its disconnect rule to specifically provide that a company could disconnect telephone service for nonpayment. In re: Proposed revision of rules and regulations governing telephone companies, Order No. 4439 (October 17, 1968) (O.R. F). (Prehearing stipulation p. 10) Since adoption of Rule 310-4.66(1) in 1968, the Commission’s disconnect rule has been revised seven times: In re: Proposed revision of Chapter 2-4 relating to telephone companies and radio common carriers, Order No. 7132 (March 1, 1976) (O.R. G); In re: Amendment of Rules 25-4.113 and 25-10.74 - Relating to Refusal or Discontinuance of Service, Order No. 13787, 84 F.P.S.C. 10:208 (1984) (O.R. J); In re: Amendment of Rules 25-4.109 - Customer Deposits, 25-4.110 - Customer Billing, and 25-4.113 - Refusal or Discontinuance of Service, Order No. 16727, 86 F.P.S.C. 10:157 (1986) (O.R. K); In re: Amendment of Rule 25-4.113 - F.A.C., pertaining to Refusal or Discontinuance of Service by Company, Order No. 23721, 90 F.P.S.C. 11:75 (1990) (O.R. M); In re: Adoption of Rule 25-4.160, F.A.C., Operation of Telecommunications Relay Service and Amendment of Rules 25-4.113, F.A.C., Refusal or Discontinuance of Service by Company; 25- 4.150, F.A.C., The Administrator; 25-24.475, F.A.C., Company Operations; Rules Incorporated, Order No. PSC-92-0950-FOF-TP, 92 F.P.S.C. 9:208 (1992) (O.R. N); In re: Proposed Amendment of Rule 25-4.113, F.A.C., Prohibiting Refusal or Discontinuance of Service for Nonpayment of a Dishonored Check Service Charge Imposed by the Utility, Order No. PSC-92-1483-FOF-PU, 92 F.P.S.C. 12:543 (1992) (O.R. P); In re: Proposed Amendment to Rule 25- 4.113 F.A.C., Refusal or Discontinuance of Service by Company, Order No. PSC-95-0028-FOF-TL, 95 F.P.S.C. 1:50 (1995) (O.R. T). (Prehearing stipulation p.11) By Order No. 12765, issued December 9, 1983, the Commission expanded its disconnect policy to allow local exchange companies (LECs) that bill for interexchange carriers (IXCs) to disconnect local service for nonpayment of the long distance portion of the bill. In re: Intrastate telephone access charges for toll use of local exchange services, Order No. 12765, 83 F.P.S.C. 12:100, 125 (1983) (O.R. H). (Tr 118-119) The Commission believed that “by granting LECs disconnect authority bad debts for toll charges will be less than without this authority.” Order No. 12765 at 12:125. (Tr 120) In addition, the Commission found that if the IXCs encounter excessive bad debt expense, the IXCs may increase their toll charges to recoup expenses, which would cause Florida subscribers to pay higher toll rates. Order No. 12765 at 12:125. (Tr 120) The disconnect authority for nonpayment for IXC toll charges was limited only to LECs who performed billing and collection services for IXCs. Order No. 12765 at 12:125. (Tr 120) By Order No. 13429, issued June 18, 1984, the Commission ordered Florida’s LECs to file a uniform tariff that specified their billing and collection procedures and rates when billing for IXCs. In re: Intrastate telephone access charges for Toll Use of Local Exchange Services, Order No. 13429, 84 F.P.S.C. 6:221 (1984) (O.R. I). The LECs complied with this requirement. (Tr 126-127; Ex 30) Since the Commission first adopted its disconnect policy, the Legislature has never enacted legislation to invalidate the Commission’s policy. (Tr 155) Nor has the Joint Administrative Procedures Committee ever objected to any version of the Commission’s disconnect rule. (Tr 155-156) The Current Version of Rule 25-4.113(1)(f) Today, Rule 25-4.113(1) provides: the company may refuse or discontinue telephone service under the following conditions provided that, unless otherwise stated, the customer shall be given notice and allowed a reasonable time to comply with any rule or remedy any deficiency: * * * (f) For nonpayment of bills for telephone service, including the telecommunications access system surcharge referred to in Rule 25-4.160(3), provided that suspension or termination of service shall not be made without 5 working days’ written notice to the customer, except in extreme cases. The written notice shall be separate and apart from the regular monthly bill for service. A company shall not, however, refuse or discontinue service for nonpayment of a dishonored check service charge imposed by the company. No company shall discontinue service to any customer for the initial nonpayment of the current bill on a day the company’s business office is closed or on a day preceding a day the business office is closed. * * * (O.R. CC) LECs that bill for IXCs can still disconnect for nonpayment of toll calls. (Tr 122, 158) No company, however, can disconnect for nonpayment of unregulated services, such as customer premises services like inside wire maintenance and information services like voice mail. Rule 25-4.113(4)(e), Florida Administrative Code. (Tr 124-125, 130) In addition, the billing and collection tariffs are not uniform today because LECs have individually lowered many of the rates they charge for billing and collection services. (Tr 128-129; Ex 31). Two Separate, Pertinent Service Contracts It is important for understanding the Commission’s rationale for its disconnect rule to recognize that two separate, pertinent service contracts are involved. (Tr 151-152) One is the billing and collection services contract between the LEC and the IXC. (Tr 126, 152) The other is the contract for service between the company providing telephone service and the subscriber. (Tr 152) As discussed above, LECs who perform billing and collection services for IXCs have a tariff on file with the Commission that sets out the terms, conditions, and rates upon which the LECs offer this service. (Tr 126 -129; Ex 31) Pertaining to the contract for telephone service, the Commission has specified by rule the terms and conditions upon which a company may refuse or disconnect service. (Tr 137) Each company has a tariff on file with the Commission that sets out the terms and conditions upon which it will refuse or disconnect service. (Tr 137; Ex 32) The Commission’s Dispute Policy If service is going to be disconnected for any authorized reason, separate notice must first be provided to the customer. Rule 25-4.113, Florida Administrative Code; In re: Complaint of Aristides Day Against BellSouth Telecommunications, Inc. d/b/a Southern Bell Telephone and Telegraph Company regarding interruption of service, Order No. PSC-94-0716-FOF-TL, 94 F.P.S.C. 6:157 (1994) (O.R. R). If a customer has a pending complaint concerning disputed charges, Rule 25-22.032(10), Florida Administrative Code, prohibits disconnection for nonpayment of the disputed charges. (Tr 129) (O.R. FF) The customer, however, is expected to pay the charges not in dispute. In re: Complaint of Ron White against AT&T Communications and GTE Florida Incorporated regarding responsibility for disputed calling card charges, Order No. PSC-92-1321-FOF-TP, 92 F.P.S.C. 11:274 (1992) (O.R. O); In re: Complaint of Leon Plaskett against BellSouth Telecommunications, Inc. d/b/a Southern Bell Telephone and Telegraph Company regarding unpaid long distance bills, Order No. PSC-94-0722-FOF-TL, 94 F.P.S.C. 6:177 (1994) (O.R. S). When a LEC contracts with an IXC to perform an IXC’s billing and collection functions, the Commission acts to resolve disputes over both intra and interstate toll calls. In re: Complaint against AT&T Communications of the Southern States, Inc. and United Telephone Company of Florida by Health Management Systems, Inc., regarding interLATA PIC slamming, Order No. PSC- 97-0203-FOF-TP, 97- F.P.S.C. 2:477, 482 (1997) (O.R. AA). (Tr 55) Rationale for Rule 25-4.113(1)(f) The reasons the Commission gave in 1983 to allow companies to disconnect for nonpayment of toll are still viable today. (Tr 122, 158). If LECs could not disconnect for unpaid IXC bills, the IXCs uncollectible expenses would probably increase. (Tr 122-123, 138, 158) Moreover, if local service was not disconnected, a consumer could run up bad debts with different IXCs without ever paying for a toll call. (Tr 124, 135) This bad debt would have to be passed on to Florida consumers through increased rates to cover the uncollectible expenses. (Tr 122-123, 135, 158) Good paying customers should not have to pay for the fraud created by those who switch from carrier to carrier leaving behind unpaid toll charges. (Tr 124, 135) Additional reasons for the policy also exist because of the 1995 changes to Chapter 364, Florida Statutes (1995). If the Commission prohibited LECs from disconnecting local service for nonpayment of toll, LECs would be economically disadvantaged and alternative local exchange companies (ALECs) would be advantaged. (Tr 123, 147-148) This is because LECs could not disconnect local service for nonpayment of toll, but the ALECs could continue to disconnect due to the Commission’s limited jurisdiction and regulation over ALECs. (Tr 123, 147-148) Moreover, deposit requirements are affected by the disconnect policy. If LECs could not disconnect for nonpayment, deposit requirements would probably increase. (Tr 123-124, 195) Large deposits are a barrier to access to telecommunications services and would have an adverse effect on subscribership. (Tr 124) Finally, the Rule puts costs on the cost causer. (Tr 158) The Rule’s Impact on Universal Service The obligation to provide universal service is the obligation to offer access to basic telephone service at reasonable and affordable rates. Section 364.025(1), Florida Statutes (1995). (Tr 139, 167; Ex 29) As long as a customer pays the nondisputed portion of his bill, service will not be disconnected. (Tr 143) Therefore, Rule 25-4.113(1)(f) does not preclude a subscriber from obtaining basic local service, as long as he pays the undisputed portion of his telephone bill. (Tr 142-143) Basic service includes access to all locally available IXCs. Section 364.02(2), Florida Statutes (1995). (Tr 133-134) Any consumer who pays his bill can have access to any available carrier in the market where he resides. (Tr 133-134, 149) The Rule’s Impact on Competition Today the toll market is reasonably competitive. (Tr 144) In 1995, the Legislature authorized competition in the local market. However, very few providers are actually providing basic local service; therefore, market conditions have not substantially changed since Rule 25-4.113 was last amended. (Tr 144-145) The basic local market is still largely a monopoly despite the legislative changes at the state and federal level. (Tr 145; Ex 28) The Commission is charged with regulating telecommunications companies during the transition from monopoly to competitive services. Section 364.01(3), Florida Statutes (1995). (Tr 156, 197-198) To a certain extent, all rules and regulations restrict competition. (Tr 147) In this case, the benefits of the rule outweigh any negative impact the rule may have on competition, because the rule keeps uncollectible expenses lower than they would otherwise be and it also puts costs on the cost causer.
The Issue The issue in this case is whether the Electrical Contractors' Licensing Board should discipline the Respondent for violating section 489.533(1)(a), Florida Statutes (2013),1/ by violating section 455.227(1)(j), which prohibits "[a]iding, assisting, procuring, employing, or advising any unlicensed person or entity to practice a profession contrary to this chapter, the chapter regulating the profession, or the rules of the department or the board."
Findings Of Fact The Respondent, Michael Ellis, is licensed in Florida as an electrical contractor and holds licenses EC0000680 and EC13003559. He has been licensed in Florida since 1986 and has not been disciplined prior to this case. In the summer and fall of 2013, the Respondent was the primary qualifying agent of M. Ellis Electrical, Inc. (Ellis Electrical). In the summer and fall of 2013, Clark Huls was not licensed as an electrical contractor in Florida. In August 2013, Ellis Electrical had a subcontract with Powerhouse, Inc. (Powerhouse), which had a contract with 7-Eleven, Inc. (7-Eleven), for the installation of hot food cabinets at several different 7-Eleven retail locations in Florida. The installation required electrical work (including subpanels, new circuits, outlets, and breakers) and had to be done by a licensed electrical contractor. Someone at Powerhouse referred Huls to the Respondent, and the Respondent hired him to do the installations for $1,400 for each of nine different 7-Eleven jobsites. It was the Respondent's initial intent to hire Huls as a subcontractor. The evidence is disputed and not clear as to exactly what Huls represented to the Respondent about his license status when the Respondent hired him. The evidence is clear that Huls did not provide him with licensure and insurance information at that time and was supposed to provide this information to the Respondent at the first jobsite. The Respondent did not initially check DBPR's website to verify Huls' license status, which was the prudent and appropriate thing for him to have done. The first work performed by Huls for the Respondent was on August 21, 2013. The Respondent was there to supervise and direct the work. Huls did not provide license and insurance information. By this time, the Respondent clearly knew or should have known that Huls was not licensed. At the third installation Huls performed, on August 24, 2013, the Respondent had an employee named Jason Ippolito deliver an employment package to Huls. Huls refused to complete and sign the employment paperwork because it would change the terms of his agreement with the Respondent to be paid $1,400 per jobsite. The Respondent allowed Huls to continue to work on installations while trying to resolve the subcontract/employment issue. In all, Huls completed nine installations between August 21 and September 3, 2013. When Huls asked to be paid $1,400 per jobsite, as originally agreed, the Respondent refused to pay because Huls was not licensed as a subcontractor and refused to complete the paperwork to be paid as an employee. Huls then placed liens on all nine 7-Eleven properties and contacted Powerhouse to be paid. In order to save its relationship with 7-Eleven, Powerhouse paid Huls $5,806 and deducted that amount from what it owed Ellis Electrical. On October 12, 2013, the Respondent filed a DBPR complaint against Huls for subcontracting without a license. DBPR filed an Administrative Complaint against Huls for unlicensed activity. Criminal prosecutions of Huls also were filed and were pending at the time of the final hearing in this case. In mitigation, in addition to his clean record as a long-time licensee, the Respondent presented that he was dealing with his wife's serious health issues during the summer and fall of 2013, which affected his ability to manage his jobsites. In addition, no consumer or member of the public suffered financial harm. Ultimately, the financial harm was borne by the Respondent.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Electrical Contractors' Licensing Board find the Respondent, Michael Ellis, guilty as charged, fine him $1,000, require him to pay reasonable investigative costs, and take two additional hours of continuing education with an emphasis on laws and rules. Jurisdiction is retained for 30 days after the final order to determine reasonable investigative costs if the parties cannot reach an agreement. DONE AND ENTERED this 13th day of March, 2015, in Tallahassee, Leon County, Florida. S J. LAWRENCE JOHNSTON 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 13th day of March, 2015.
The Issue The issue in the case is whether Petitioner is entitled to a Resident Independent All-Lines Insurance Adjuster license.
Findings Of Fact On July 24, 1999, Petitioner was involved in a physical altercation in her driveway, defending herself against a female neighbor. Shortly after the altercation, Petitioner was arrested for Aggravated Battery. On January 12, 2000, a Criminal Information was filed against Petitioner charging her with Aggravated Battery Causing Great Bodily Harm. On August 15, 2000, Petitioner pled no-contest to Felony Battery and was placed on two-years' probation. Adjudication of guilt was withheld. Fourteen months later, on October 18, 2001, Petitioner's probation was terminated early without any violations. On March 11, 2002, Petitioner applied for licensure as a Resident Independent All-Lines Insurance Adjuster and provided the prior arrest information in her application. On May 24, 2002, Respondent denied Petitioner's application for licensure on the basis of her single arrest and subsequent plea. On June 18, 2002, Petitioner submitted a timely Election of Proceedings form requesting a formal hearing. Respondent's licensing review committee, composed of the Bureau Chief of Licensing Division, Licensing administrators, the Assistant Division Director of Agent and Agency Services, and a Department attorney, reviewed Petitioner's application and determined that she was unfit and untrustworthy to hold a license. The review committee's decision was based strictly on Petitioner's prior criminal plea and the limited time between her completion of probation and application for licensure. The evidence presented at hearing, however, demonstrated Petitioner's fitness and trustworthiness to hold a license. Petitioner, an African-American, lives in a 50-house subdivision containing approximately three African-American families. On July 24, 1999, Petitioner attempted to enter her driveway but was blocked by a car that was parked in front of her driveway. A Caucasian woman was parked in front of Petitioner's driveway and was reading mail that she had retrieved from the community mailbox located in Petitioner's front yard. Despite having experienced the woman's similar rude behavior 2-weeks prior, Petitioner politely "tooted" her horn to encourage the woman to move her van forward and patiently waited. Shortly thereafter, Petitioner again beeped her horn. In response, the woman glanced at Petitioner, looked away, and refused to move. Thereafter, Petitioner placed her car in park, approached the driver's side of the woman's car, knocked on her window, and said, "I want to go in my driveway." Again, the woman ignored her request and continued to read her mail. Petitioner stated that after further knocking, she opened the woman's door and said, "I don't know you and you don't know me. I want to go into my driveway and I need you to move your van." In response the woman said to Petitioner, "You need to move. I want to close my door." Immediately thereafter, and without warning, the woman pushed Petitioner to the ground, got out of her car and attacked Petitioner. After being repeatedly struck by the woman, Petitioner bit the woman's shoulder in self-defense. Within seconds, the altercation, which Petitioner alleges was racially motivated, ended and the woman drove away. Petitioner ran into her house and relayed the events to her teenage children. Prior to calling 911, Petitioner called her uncle for advice. While on the telephone with her relative, the police arrived at Petitioner's home and she was arrested. Petitioner retained a lawyer to contest the charge. Upon her attorney's advice, Petitioner reluctantly agreed to plead no-contest to the charge, accept two years of probation, and receive a withholding of an adjudication of guilt. Petitioner's probation was terminated after 14 months without incident. Petitioner has never been arrested nor convicted of any crime prior to this incident. Since 1987, Petitioner has been working in the insurance industry in various capacities including claims examiner. She is currently entrusted with large sums of money, successfully works in customer service, and routinely deals with difficult customers in an appropriate and professional manner. Petitioner has been praised by her employers and co-workers and possesses an excellent demeanor. Petitioner has been offered a position as an adjustor trainee with Zurich Insurance Company contingent upon obtaining an adjustor's license. On June 21, 2001, approximately nine months before Petitioner submitted her application, Respondent repealed its law enforcement waiting period rule which outlined the length of time an applicant was required to wait, following a felony plea, in order to qualify for licensure. While Respondent adopted a new law enforcement waiting period rule pursuant to Section 626.207, Florida Statutes, on October 17, 2002, approximately five months after Petitioner submitted her application, Respondent stipulates that the new rule does not apply to Petitioner. In fact, at the time Petitioner submitted her application in March 2002, Respondent stipulates that it operated strictly under Sections 626.611 and 626.621, Florida Statutes. Consequently, Petitioner applied at a time when Respondent admittedly used only the statutes as a basis for denial. Waiting periods were not applied to applications for licensure during March 2002. While Petitioner's Notice of Denial contains a typographical error as to the date on the first page of the letter, the Agent Personal Data Inquiry correctly shows that Petitioner was officially denied on May 24, 2002.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent issue a Final Order approving Petitioner's application for licensure as a Resident Independent All-Lines Insurance Adjuster. DONE AND ENTERED this 19th day of March, 2003, in Tallahassee, Leon County, Florida. WILLIAM R. PFEIFFER 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 19th day of March, 2003. COPIES FURNISHED: Ladasiah Jackson, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0333 Maria N. Neal 5639 Breckenridge Circle Orlando, Florida 32818-1377 Honorable Tom Gallagher Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Mark Casteel, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
The Issue The issues to be resolved in this proceeding concern whether Petitioner materially failed to comply with certain state contract conditions and whether, pursuant to pertinent rules, the Petitioner should be removed from the approved "vendor's list" and thereby precluded from bidding on proposed procurements of the Respondent agency.
Findings Of Fact Southern Communications Group was a partnership consisting of Mr. Daus, Timothy Barfield and another individual as general partners at the time Southern's bid for the telephone procurement in question was submitted. Southern is on the approved vendor's list maintained by DGS and is a qualified State contractor. Some time in early January 1988, after the subject contract was awarded to Southern, Tabco Enterprises, Inc. acquired Southern Communications Group, at which approximate time Mr. Barfield assumed management of the operation of Southern Communications. The Division of Purchasing of the Department of General Services is the state agency responsible for preparation and administration of state contracts for various commodities. State agencies are obligated to use these contracts. The Division of Purchasing of DGS is responsible for maintaining a list of approved vendors and has authority under Rule Chapter 13A-I, Florida Administrative Code to remove vendors who failed to perform as obligated under State contracts. One of the State wide commodities contracts prepared and administered by the Division of Purchasing is for "telephone instruments - not installed". Ms. Cherrie McClellan is a Purchasing Specialist with the Division who is responsible for the administration of this contract. She prepared the bid packets for the telephone instrument contract underlying the dispute in this case, contract No. 482-730-030-W (the contract). She prepared the bidding documents involved based upon general conditions promulgated by the Division, certain special conditions she prepared herself and technical specifications supplied by DGS's Division of Communications. She then issued the bid package to vendors who were on the previously existing mailing list, including the Petitioner. General condition Four E of the Invitation to Bid (ITB) states in pertinent part: It is understood and agreed that any item offered or shipped as a result of this bid shall be new (current model at the time of this bid) Prior to the bid award DGS had already interpreted and expressed the policy to the effect that the term "new" meant unused, never before installed, telephone equipment which is an acceptable current production model. The agency received a number of bids including one from Southern. During the bid evaluation Ms. McClellan noted that one bidder's price seemed unusually low based upon her experience with new telephone prices. She examined that bid and learned that the low prices were for re-manufactured as opposed to new telephone equipment. This bidder was notified of this fact and was thereafter disqualified from the bid award process for its failure to offer new equipment. Thereafter Ms. McClellan also noticed that prices in the bid submitted by Southern were unusually low and similar to those of the disqualified bid. Consequently, she attempted to contact Mr. Norris Daus who had submitted the Southern bid. After a number of unsuccessful efforts, she reached Mr. Daus by telephone on October 3, 1987 and inquired whether his quoted prices were for new as opposed to re- manufactured or refurbished instruments. Mr. Daus verbally confirmed that the prices were for new equipment. Mrs. McClellan's supervisor, Mr. John Fain, was also aware of the unusually low prices submitted by Southern in response to the ITB and he too conversed with Mr. Daus by phone. According to Mr. Fain, Mr. Daus confirmed that he understood that the bid called for new equipment. Mr. Daus, however, at hearing, testified initially that he had not spoken with Mrs. McClellan and then later said that he had no recollection of speaking with her. He contended that she had called him in January of 1988, after the contract was entered into. His testimony is somewhat equivocal and is not deemed as accurate as that of Mrs. McClellan and Mr. Fain and therefore, based upon the totality of the corroborating circumstances in evidence, including Mrs. McClellan's handwritten memo recording her efforts to contact Mr. Daus, is rejected in favor of her testimony and that of Mr. Fain. In any event, in December of 1987, Southern was awarded the contract based in part on the verbal representations of Mr. Daus to the effect that the telephones to be supplied were to be new instruments and not re-manufactured or re-furbished ones. The contract term commenced on January 20, 1988 and should have run through January 19, 1989. Early in the contract period, Mrs. McClellan received a complaint from a State agency reporting that Southern had supplied telephones under the contract which were not new instruments. She telephoned Mr. Barfield with Southern to inquire about this matter and requested that he come to her office to discuss the agency's complaint. Mr. Barfield testified, however, that the visit to her office was at his own instigation in order to learn more about his obligations under the contract and that only general issues about his obligations under the contract were discussed. Mrs. McClellan, however, discussed specifically her prior conversation with Mr. Daus, her concerns that the contract called for new equipment only and that they had reports that re- manufactured equipment was being supplied in some instances. She further testified that Mr. Barfield agreed to stop shipping re-manufactured instruments and to supply only new equipment thereafter. In view of the fact, established in evidence, that DGS had already expressed concerns to Mr. Daus about the provision of re-manufactured equipment instead of new before the conversation with Mr. Barfield, Mrs. McClellan's testimony is accepted concerning the subject matter of and the communications made during the meeting in question over that of Mr. Barfield. Later, in early 1988, Mrs. McClellan received other agency complaints concerning Southern's performance under the contract to the same effect, that is, that re-manufactured telephones instead of new ones were being supplied. After reviewing a number of these complaints, she again telephoned Mr. Barfield and confronted him with the complaints, directing him in March, 1988, to ship only newly manufactured equipment. Neither Mr. Daus nor Mr. Barfield had outwardly disagreed with Mrs. McClellan's interpretation of the word "new" and neither requested any written interpretation of that term. Mr. Barfield admitted that Mrs. McClellan directed him, in March 1988, to ship only newly manufactured equipment. Mrs. McClellan forwarded the complaints from the agencies which had received non-compliant instruments from Southern to Mr. Barfield. At least one non-compliant telephone instrument had been delivered to the University of North Florida. Non-compliant ten button telephones were delivered to the Palm Beach Detention Center, two non-compliant six button DTMF telephones were delivered in Crestview, Florida on behalf of the Apalachee Correctional Institution and two non-compliant telephones were supplied through the Apalachee Correctional Institution for delivery to DeFuniak Springs. Additionally, a non-compliant telephone instrument was delivered to District 11 of the Department of Health and Rehabilitative Services. DGS' Exhibits 6-10 relate to these complaints. Mr. Barfield received all of these complaint letters from Mrs. McClellan but only replaced telephone instruments at the University of North Florida with new, unused ones. Mrs. McClellan received certain telephones from the agencies which were allegedly non-compliant, re-manufactured ones which had been supplied these agencies by Southern. She forwarded these to Florian "Sam" Houston, the Supervisor of the Access Systems Section, Division of Communications. She requested that he examine the telephones in question to determine if they were in compliance with the contract requirements, that is, new and unused telephones, or alternatively, whether they were re-manufactured telephones. Mr. Houston is a telecommunications expert with over 17 years experience in the communications and aerospace telecommunications industry. His section is responsible for all telephone systems supplied to the State agencies. His staff prepared the technical specifications for the contract in question and he himself reviewed those specifications. He and his staff examined the three telephones submitted for inspection and determined that they contained used parts and were therefore not new telephones as required by the contract. Mr. Houston sent Don Daniels of his staff to perform field inspections of certain telephones supplied by Southern. Mr. Daniels thus found four non- compliant telephones in West Palm Beach, two in Crestview and two more in DeFuniak Springs, referenced above. DGS Exhibit 6 is the notification from the agency to Southern that a sample telephone instrument had been found to be non-complaint with the contract specifications and DGS thereby gave Southern Communications ten days to correct that situation or to be found in default on the contract. DGS Exhibits 7-10 are similar letters informing Southern of similar failures to perform with reference to the other non-compliant telephones referenced above. Each letter gives Southern ten days to comply or be found in default. A re-manufactured telephone involves a previously used instrument which is taken out of service, disassembled, thoroughly cleaned with any broken or unserviceable parts being replaced. It is then re-assembled to certain standards. When a re-manufactured phone is resold for further use, it must meet Federal Communications Commission standards. Those standards refer, however, to the transmitting and receiving capability and do not relate to the durability of the instrument itself. "Refurbishing" generally involves a less detailed re- juvenation process involving cleaning and placing in serviceable working order. Both terms describe the process of creating a finished product which contains used original parts. Mr. Michael Johnson, whose company supplied the re- manufactured instruments to Southern Communications which are in dispute here established that those terms are in reality interchangeable. In any event, DGS uses a ten year life expectancy for telephones on State contracts assuming those are new telephones. Ten years is the normal life expectancy accepted in the industry for new telephones. The life expectancy for re- manufactured instruments is significantly less and in some cases only five years. A decreased life expectancy of such instruments is due to the re-use of used components, some of which may already surpass the original life expectancy in the original condition instruments. In fact, according to Mr. Johnson, his company might even use twenty year old parts in some re-manufactured phones. While it is true that re-manufactured phones carry identical one year warranties as do new phones, the re-manufactured phones are not the service equals of new phones because re-manufactured instruments will not last as long and any telephone is used much longer than the warranty period itself. Re-manufactured phones appear to the casual observer and to the layman to be new phones. Casual inspection of such a telephone will not reveal any differences from a new telephone. The difference between new and re-manufactured instruments only becomes obvious when their covers are removed and they are disassembled and inspected. When State agency telephones are no longer needed for whatever purpose, they are declared surplus and sold or traded in. When they are traded in, re-manufactured phones have a significantly lower value than new phones, largely due to their used life expectancy versus that of new telephones. It is also true that re-manufactured telephones cost both the supplier and the purchaser significantly less than new instruments. Southern does not dispute that it supplied re- manufactured telephone instruments to users of the State contract in question. It maintains, however, that re-manufactured phones are the equivalent of new phones and that the specifications in the ITB documents regarding new phones was not specific enough to show any indication that re-manufactured phones were non- compliant and that since re-manufactured phones meet "FCC" specifications and carry the same warranty as a new telephone that they are no different than new telephones. In view of the above findings, however, re-manufactured phones are not the functional equivalent of new telephones because of their shortened useful life. In any event, Southern is belatedly disputing the nature of the specification regarding new telephones in the ITB and in the contract. It accepted without protest the provision in the Invitation to Bid documents and in the contract concerning "new" telephones, quoted above. Moreover, through communication by Mrs. McClellan to Mr. Daus before the contract was actually awarded, Southern was verbally informed of the Department's policy concerning what it deemed new phones to mean and that policy was proven by the testimony of Mrs. McClellan concerning her conversation by phone with Mr. Daus, as well as the fact that she had previously stricken the bid proposal of another vendor because that vendor was proposing to supply re-manufactured telephones. Southern should have known at the time that it was awarded the contract that re-manufactured equipment was not acceptable. Mr. Fain and Mrs. McClellan had provided adequate notice of this by their verbal contact with Mr. Daus. Clearly Southern knew that re-manufactured equipment would not be acceptable well before it cancelled the contract at any rate. Mr. Barfield admitted that Mrs. McClellan directed him to ship only newly manufactured equipment in March, 1988. Neither he nor Mr. Daus, before or after award of the contract, ever disagreed openly with the agency's interpretation of the word "new" in the specifications. Neither of them, nor any person on behalf of Southern, requested any written interpretation or clarification of that word in the specifications prior to bidding or at any time thereafter. The exact number of telephones supplied as re- manufactured by Southern is unknown. Southern supplied a total of 1723 telephones. The only way to determine the exact number of re-manufactured instruments would be through field examination of each phone sold by Southern or possibly through records that Southern may maintain concerning orders from its suppliers, and its inventory, if such exist. They are not in evidence however. In any event, Southern continued to ship re- manufactured instruments even after the March 9, 1988 conversation between Mr. Barfield and Mrs. McClellan wherein she instructed him to cease that practice. Mr. Barfield's testimony is indefinite on the question of when Southern ceased shipping re- manufactured instruments under the contract, if at all. Mr. Barfield testified at one point that only originally manufactured equipment was shipped after his March, 1988 conversation with Mrs. McClellan, but he later testified that he continued to ship re-manufactured equipment after that conversation, but stopped at some point thereafter. He did not establish when that was. Although directed by the Department to replace those re-manufactured instruments with new telephones, Southern replaced no re-manufactured instruments other than those supplied to the University of North Florida. Mr. Barfield stated in his testimony that he did not intend to replace any more re- manufactured telephones. DGS has not followed a policy or practice of accepting re-manufactured equipment pursuant to such a contract. Mr. Herman P. Barker is an expert in State procurement. He has been employed in that field since 1967. He was unaware of any instance where refurbished or re-manufactured telephones have been accepted when a contract calls for new equipment. Agencies using the State contract for such purchases typically deal directly with the approved contractor. The agencies receive the items which are the subject of such a contract and determine themselves whether the proper models have been delivered. The agencies, however, do not have the necessary expertise to perform technical evaluations of each instrument received and are not required under the terms of such contracts, including this one, to disassemble goods in order to make inspections and evaluations before acceptance upon the delivery of the instruments. If an agency cannot resolve a problem with a vendor, the agency then refers the matter to DGS and the DGS Purchasing Agent for the commodity in question gathers information about the dispute and contacts the contractor. Two contract users contacted Southern directly, Mr. McMullen of the University of North Florida and William A. Walker. Mr. Walker asked Southern to supply new instruments and agreed to return the re- manufactured ones upon receipt of the new instruments. Southern did not respond to Mr. Walker's request for new telephones nor did it replace other telephones as directed by DGS. Southern has taken the position that the agencies are precluded from challenging any purported nonconformance with the contract after they have accepted delivery of the instruments. Southern maintains that the agencies had an opportunity to inspect the instruments upon receipt, and if no complaint was registered with the contractor upon that initial inspection and acceptance, then title to the instrument passed and no complaint of non-performance of the contract with regard to those instruments may be thereafter asserted. The Petitioner contends that the place and method of inspection was fixed by the contract between the parties here as being the place of destination.1/ The fact remains, however, that the purchasers or recipients of the goods under the contract here, the agencies, did act within a reasonable time after delivery to complain of the nonconformance of the instruments. That is, the defects in the instruments were latent defects, not readily discernible upon delivery of the instruments to the purchasers and users because the instruments did operate as specified. The fact that they contained used parts and were re- manufactured instruments was not readily discernible without disassembling each unit. Thus, under the circumstances of this case, involving the latent nonconformance of the instruments, the rejection of the instruments by the agencies who happened to learn, at some time after delivery, that they were previously used instruments, must be deemed to have come within a reasonable time after delivery or tender. Notification of that fact by the agency to Southern was therefore seasonable./2 The defects involved in these instruments are not such that the personnel of the agencies should have discovered the nonconformance upon delivery because the nonconformance with the contract specification was not readily discernible to anyone who had no expertise in the manufacture and assembly of telephone instruments. The seller, Southern, was informed within a reasonable time after personnel of DGS, who did have expertise in such matters, discovered the nonconformance (when Mr. Houston's employee performed the inspections and evaluations of the instruments about which the agencies had raised questions.) Thus it is found that the "buyers", the agencies, did notify Southern within a reasonable time after they should have discovered the "breach".3/ Southern did not replace any other telephones as directed to by DGS except for those supplied to the University of North Florida. In response to some of DGS' letters, Southern did issue United Parcel Service "call tags" or "pick up orders" to some of the agencies. Southern provided no explanation of the purpose of these call tags to the agencies. It was not shown that all these agencies had knowledge that they had been supplied re-manufactured, as opposed to new telephones, upon the point of the receipt of these call tags. Southern received one telephone to exchange in response to these call tags. The agencies needed to have phones available to them and could not relinquish the nonconforming telephones and then be forced to wait on supply of new ones without phone service during the interim. Ultimately, DGS determined that Southern Communications should be held in default for failure to supply compliant equipment under the contract and noticed Southern of its intent to remove it from the approved bidders' list.
Recommendation Having considered the foregoing findings of fact, conclusions of law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a Final Order be entered by the Department of General Services removing Southern Communications Group, a division of Tabco Enterprises, Inc. from the State approved vendor list, until such time as that entity identifies and replaces all re-manufactured instruments which it sold under the subject contract or reimburses the Respondent for the costs of cover and re-procurement. DONE and ENTERED this 23rd day of October, 1989, at Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of October, 1989.
Findings Of Fact In May, 1983, DOT advertised for bids to separately lease the 11 service stations on the Florida Turnpike. Prospective bidders were prequalified before being allowed to submit bids. Bids were to be awarded to the bidder submitting the highest responsible bid and based solely on the amount per gallon to be paid to DOT on each gallon of motor fuel sold at the service plaza. The existing leases were all due to expire and an attempt to get bids in 1982 had been dropped after litigation delayed completion of the bid process. Turnpike prices for motor fuels are regulated somewhat by DOT, in that the Turnpike prices must be comparable to prices at off-Turnpike stations in the vicinity which offer similar services. Those stations selected for comparative prices must be acceptable to the Turnpike station operator and DOT. Equipment at the existing service plazas has been in use for many years and in the bid offering in May, 1983, several new provisions were included, as were many provisions of the expiring leases. To insure competent and qualified service to motorists on the Turnpike, retained lease provisions require the stations to be open 24 hours per day, to provide wrecker service, and to have a mechanic on duty. Few off-Turnpike stations meet these requirements. Accordingly, "comparable" stations within SD miles east-west of the Turnpike and in the vicinity of a specific service plaza may not be readily available. The bid offering provided that these "comparable" stations will be selected by mutual agreement of the parties but makes no provision for settling a dispute between the lessor (DOT) and the lessee. This is significant because another of the lease provisions contained in the bid offering is that the prices at which the service plazas sell fuel must not exceed by more than two cents per gallon the prices at these selected comparable stations. New provisions in this bid offering required the successful bidder to replace all dispensing equipment (gas pumps) with modern equipment, and to provide for sale of motor fuels at self-service pumps. The bid offering contained no specifics as to where the self-service pumps are to be located with respect the existing service islands, whether self-service motor fuels are to be available by credit card or cash only sale, or whether there could be a different price for cash sales than for credit card sales. The bid offering provided that no one entity could be awarded the lease of more than five service stations on the Turnpike, and no bond was required to be posted by any bidder. DOT expected the successful high bidders to submit bids in the vicinity of eight cents per gallon. This was based on DOT's knowledge from surveys taken at frequent intervals over a long period of time, of the price motor fuels was selling bat comparable stations off the Turnpike; of the tank wagon costs of motor fuels to the station operators; of the sales of tires, batteries and accessories historically made by these stations, the profits from which are not included in the lease price; of the uncertainties inherent in the profits engendered by the to-be-offered self-service sales; other changes which increased the field of bidders; and the expected stability of motor fuel prices. When the bids were opened on September 12, 1953, the first, second, and third highest bids received for each of the 11 service plazas are as follows: Service Plaza First Second Third (Number) Highest Highest Highest Bid Bid Bid Snapper Creek (601) 13.51 12.34 5.40 Crocco, Inc. Gus Crocco William Crocco Pompano (611) 14.35 Crocco, Inc. 14.33 Gus Crocco 9.75 William Crocco Pompano (612) 14.33 Crocco, Inc. 12.76 Gus Crocco 9.20 Super Service West Palm Beach (623) 15.67 15.67 11.55 Gus Crocco Crocco, Inc. William Crocco West Palm Beach (624) 15.67 14.53 11.55 Gus Crocco Crocco, Inc. William Crocco Ft. Pierce (635) 15.67 14.83 13.90 Gus Crocco Crocco, Inc. Super Service Ft. Pierce (636) 15.67 14.53 12.40 Gus Crocco Crocco, Inc. WMG, Inc. Ft. Drum (647) 16.20 Super Service 15.67 Gus Crocco 14.53 Crocco, Inc. Canoe Creek (658) 15.67 Gus Crocco 14.90 Super Service 14.53 Crocco, Inc. Turkey Lake (669) 14.34 Gus Crocco 14.20 Super Service 13.43 Crocco, Inc. Okahumpka (670) 14.34 13.25 5.67 Crocco, Inc. Gus Crocco Gulf Oil Although Crocco, Inc., and Gus Crocco were the apparent high bidders for 10 of the 11 Turnpike service station leases, DOT, with only 20 days to award or reject bids, on October 3, 1983, issued a notice of intent to enter into leases with the high bidders. Before such leases could be executed, a petition to protest the award of these bids was filed by parities who are the intervenors herein, the case was referred to the Division of Administrative Hearings and was assigned DOAH Case No. 83-3539. Gus Crocco and William Crocco are brothers, are shareholders in Crocco, Inc., are shareholders in WMG, Inc., and have operated service stations on the Florida Turnpike for the past several years. All entities named in the above sentence submitted bids for Turnpike leases at this offering. Super Service General Partnership, the high bidder for the lease at Ft. Drum service plaza, is composed of a partnership consisting of Ralph Girvin and two other partners. Girvin prepared the bid submitted by Super Service General Partnership which, at 16.02 cents per gallon of motor fuel sold, was the highest bid submitted for any lease. Gus Crocco, Crocco, Inc., William Crocco, and WMG, Inc., submitted the three highest bids for five of the 11 service station leases. During discovery in preparation for the hearing in Case No. 83-3539, it was disclosed that Gus Crocco prepared the bids submitted by Gus Crocco and Crocco, Inc.; that no market survey was taken by Gus Crocco or Ralph Girvin before establishing the selling prices for motor fuels upon which their bids were predicated; that the profit per gallon of motor fuel assumed by Crocco included a rebate from the supplier of approximately six cents per gallon even though no rebate has ever been given at a Turnpike service station for more than a short period of time; the profits to be made per gallon did not take into consideration county taxes that are applicable to some of the service plazas; that existing prices at stations accepted as comparable in the past were much lower than the sale prices which Gus Crocco and Ralph Girvin used to arrive at a bid price; that absent a requirement for the posting of a bond the high bidder could withdraw his bid without financial penalty or liability; that some communication between the Crocco brothers had taken place before the bids were submitted; that Ralph Girvin hand attempted to contact Gus and William Crocco before submitting his bid; that the data upon which Gus Crocco, Crocco, Inc., and Super Service General Partnership based their bids was insufficient to account for all expenses to be incurred; and that there was a high probability that the service station could not provide adequate service to the motorists while paying the price bid for the leases and selling motor fuels at a price comparable to that charged by off-Turnpike stations in the vicinity. This information was passed to DOT. Sam Roddenberry, Turnpike engineer for DOT, is the individual primarily responsible for the operation of the Turnpike in accordance with policies established by DOT. He was the DOT employee primarily responsible for the provisions of the bid proposals and lease, for the award of the lease to the highest qualified bidder, and for the policy changes, including the sale of motor fuel at self-service pumps. After receiving information discovered during trial preparation for Case No. 83-3539, Roddenberry compared Gus Crocco's projected selling price of $1.239 per gallon of regular leaded self-service gasoline with the 1983 average price in Jacksonville of $1.0991; compared the Crocco price estimate for unleaded self-service gasoline of $1.349 per gallon with the Jacksonville price of $1.1789; and the Crocco price estimate of $1.3996 for self-service super unleaded with the Jacksonville price of $1.2997. A similar comparison was made with respect to Super Service General Partnership's bid. These comparisons, the close relationship between the three high bidders at all stations (except for Super Service) and his knowledge that rebates, when given, are good only for short periods of time, led Roddenberry to conclude that all bids should be rejected. On October 1, 1984, Chapter 84-276, Laws of Florida, became effective. This discontinued the high-bid system upon which the bids here involved were solicited and substituted therefor a request for proposal (RFP) system upon which the Department selects the applicant deemed best qualified to satisfy the statutory criteria established by this statute. On June 25, 1984, each of the high bidders was notified by DOT that Respondent intended to withdraw its notice of intent to award leases and that it intended to reject all bids. These bidders at the same time were advised of their right to a Chapter 120.57 hearing, and the petitions for hearing, here involved, followed.
