The Issue The issues in this case are whether Respondent committed the violations alleged in the Administrative Complaint, and, if so, what discipline should be imposed.
Findings Of Fact Admitted Facts Per Pre-Hearing Stipulation Petitioner is the state agency charged with regulating the practice of contracting pursuant to section 20.165 and chapters 455 and 489, Florida Statutes. Respondent is a state-certified building contractor in the State of Florida, having been issued license No. CBC 039025. Respondent was the licensed primary qualifying agent for Thom Colan Construction, Inc., from June 10, 2004, to September 4, 2008. On January 10, 2006, Thom Colan Construction, Inc., entered into a contract with Kathleen and Robert Masten to construct a house and pool on property located at 547 Bradenton Road, Venice, Florida (the project). The contract price for the project was $260,000.00. The project was completed with the issuance of a certificate of occupancy. Additional Findings of Fact Based on the weight and credibility of the testimony and evidence presented, the following additional facts are found: The contract between Respondent and the Mastens was a fixed-price contract. Although the contract price was $260,000.00, the Mastens paid a total of $320.394.19 for the project. The payments were made by the following methods: $49,968.58 was paid by check from the Mastens directly to Respondent; Respondent obtained an additional $222,320.71 in total bank draws, pursuant to a construction loan that authorized Respondent to draw funds directly from the bank for the project; and the remaining $48,104.90 was paid by check or credit card by the Mastens directly to subcontractors for labor and materials provided for the project. Thus, the Mastens paid $60,394.19 more than the contract price. At issue, and the subject of much dispute at the final hearing, was why the project exceeded the contract price by over $60,000.00. Respondent asserted that the entire amount by which the contract price was exceeded was attributable either to changes to the contract terms required by the Mastens or to circumstances beyond Respondent's control, such as price increases by subcontractors.2/ It was difficult to establish the causes for the price increases, in part, because the parties to the contract did not adhere to the formalities called for by the contract. For example, while both witnesses acknowledged that the Mastens requested changes as the project progressed, there was substantial disagreement about the extent of these changes and the cost differential. Unfortunately, there were no written change orders as required by the contract. Written change orders would have documented exactly what was changed and what cost was attributable to the change. Another problematic area in attempting to pinpoint why the contract price was exceeded was that there was no clear proof of the contract specifications detailing the design features of the house and pool. The written contract described a process of developing "plans" with "specifications" as to design elements. Initially, the plans would be preliminary, with items designated for buyer selections. The contract contemplated that the buyer would make these selections, which would become part of the plans, and the plans would then be considered final. Thus, certain buyer selections would be part of the contract. Thereafter, if the buyer wanted to change the final plans and specifications, the buyer would be responsible for the increased costs. No evidence was presented as to what the plans provided with respect to design features and which of those design features provided for buyer selections. Neither the preliminary plans and specifications for the Masten contract, nor the final plans and specifications after buyer selections, were offered into evidence, and it is unclear whether the process contemplated by the written contract was even followed. Nonetheless, Mrs. Masten admitted that she requested certain changes, which she acknowledged were not contemplated by the contract and were more costly than what the contract contemplated. For example, Mrs. Masten acknowledged that she requested an upgrade in kitchen appliances, increasing the cost by $2,703.55. She also acknowledged that she requested an upgrade in bathroom fixtures, but she was unsure of the cost attributable to the upgrade. Respondent testified that the total cost increase for upgrades requested by Mrs. Masten to plumbing and fixtures was $4,745.42. Mrs. Masten thought that amount was too high; it included changes claimed by Respondent, but disputed by Mrs. Masten, such as an upgrade to a hot tub that Mrs. Masten said she did not want but, apparently, was installed. The circumstances surrounding other apparent changes were in dispute. For example, an expedition, including Mrs. Masten and Respondent, trekked to a tile outlet store in Fort Meyers to pick out tile to use in the shower stall and floors. For the shower stall, Respondent testified that he "insisted" on travertine; Mrs. Masten apparently agreed, but said that she felt pressured to do so. The purchase was made, and Respondent returned to haul the travertine and other tile for the flooring on a trailer back to Venice. At some point, Mrs. Masten changed her mind about the travertine after being told by a competitor that travertine was a high-maintenance bad choice. Respondent claimed it was too late to return the tile, which he valued at $750.00, and so he testified that he threw it away. Mrs. Masten then selected different tile from the competitor at a price that was $1,292.16 higher than the travertine. The circumstances surrounding the selection of cabinetry were also in dispute. Respondent testified that he planned to use Enrique Benitez, a subcontractor who was doing other work in the house, to make the cabinets. Respondent claimed that he had Enrique prepare wood samples with different stains and that Mrs. Masten approved the samples and picked out the stain. At that point, Respondent said he paid Enrique $2,970.00 to begin constructing the cabinets. Mrs. Masten claimed that she never approved any samples, was shown only a rough, long plank of splintered wood that she said was awful and would not approve, and that she did not like any of the work this particular subcontractor was doing throughout the house. At some point, Mrs. Masten impressed upon Respondent that she would not accept these cabinets, and she selected different cabinets at an increased cost of $6,886.00. If Enrique ever built cabinets for the Mastens, he kept them. Another outing was made to select countertops. Mrs. Masten did not like the granite pieces that Respondent had intended to use, and the result was that the cost of the granite countertops selected by Mrs. Masten was $5,000.00 higher. Respondent and Mrs. Masten also could not agree on the extent of requested changes to the plans for flooring or the cost of those changes. Respondent testified that Mrs. Masten changed the mix of tile and carpeting, but Mrs. Masten disagreed. Respondent testified that Mrs. Masten required an upgraded carpet style, and although Mrs. Masten acknowledged that she selected a different carpet style, there was no evidence pinpointing the cost difference of the carpet upgrade. Additionally, Respondent acknowledged that one reason why the total cost for flooring was higher than expected was that Enrique Benitez increased the price to install the tiles from $3,000.00 to $7,500.00. Respondent sought to blame Mrs. Masten for the increased installation price, claiming that Mrs. Masten "fired" Enrique over the cabinet debacle, but Respondent had to rehire Enrique to install the floors and had to pay the increased price to overcome Enrique's hurt feelings. Mrs. Masten denied the claim that she "fired" Enrique, though she acknowledged that she was not happy with his work and that she refused to approve the cabinets Enrique was supposed to build, because the sample was unacceptable. Respondent testified that an additional $3,079.90 was spent for upgraded lighting and fans requested by the Mastens and for other electrical upgrades to accommodate other changes, such as the pool heater and spa tub. The cost to construct the pool increased by $3,700.00. According to Respondent, this increase was due to the cost of adding a pool heater that was not part of the original plans, at the request of the Mastens. Mrs. Masten disputed that this was a change. Respondent testified that there was a $323.00 cost increase because of the Mastens' request for an upgraded water softener. Post-contract changes made by the engineer to relocate the septic tank system necessary to obtain the requisite permits, altered the elevation and slope of certain parts of the property, including the space where the air conditioner would sit. Those changes resulted in the need to add a concrete slab and platform for the air conditioner. This additional cost was $419.25. Also because of the septic system design change, the county imposed additional landscaping requirements in order to obtain a certificate of occupancy. This resulted in an additional $979.05 spent to purchase trees. Respondent testified that permitting fees imposed by the county exceeded the estimated cost by $2,365.63. Respondent attributed the increase to the higher impact fee charged by the county as a condition to obtain a certificate of occupancy because the post-construction value of the house was higher than estimated. In other words, the combination of cost increases and upgrades led to imposition of a higher impact fee. The rest of the difference between the contract price and the total paid by the Mastens was attributable to increases in costs because of the delay in completing the project or increases in prices charged by subcontractors for their labor and materials. These included increases in the price of concrete, plumbing work, framing, insulation, roofing, drywall, hauling trash, installation of flooring, electrical work, equipment rental, and electricity charges. Respondent explained that he obtained "bids" for various components of the project in September 2005, although he did not sign the contract with the Mastens until January 10, 2006. Respondent anticipated that he would start the project that month, but the start was delayed by more than two months because of the septic system permitting difficulties encountered by the project engineer who had been retained by the Mastens. Mr. Colan utilized the estimates he received from others to develop his overall cost estimates for the project, which he used to establish the contract price. There was no allowance built into the cost estimations for inflation, price increases, or contingency reserves. Although Respondent characterized the price estimates he obtained from subcontractors as "bids," they were not bids in the sense of being firm offers to do work or supply material at a specific cost; they were essentially price estimates subject to change. Respondent testified that at least in some cases, he could count on a bid price being "good" for six months and, in some cases, for as long as seven months. However, Respondent did not lock in any of the bid prices by contracting with the subcontractors in September 2005 or in January 2006 when the Masten contract was executed. Thus, Respondent's reliance on the price estimates given to him in September 2005 was not shown to be reasonable. These estimates would have been four months old before Respondent anticipated starting the project and closer to seven months old before the project actually began. Since many of the price estimates were for items that would not be needed for months after the project began (such as bathroom fixtures, appliances, cabinetry, flooring, and lighting), even under the best-case scenario without any delays, Respondent was plainly taking a risk by using September 2005 cost estimates as if they were guaranteed prices in determining the contract price for the Mastens' project. Not surprisingly, many subcontractors were not willing to honor the stale price estimates when Respondent sought to contract with them many months later. Respondent suggested that he should not bear the risk of others' price increases, because they were not within his control. But Respondent controlled how he went about estimating his costs for the project and how he established the fixed price he agreed to in the contract. No credible evidence was presented to establish that the price increases by Respondent's subcontractors were due to such extraordinary market conditions or delays that they could not have been reasonably anticipated and addressed sufficiently through inflation allowances or contingency reserves built into the cost estimations. While Respondent attempted to characterize certain price increases, such as the rise in the price of cement and copper or the increased cost of dirt, as attributable to a "heated up" construction market, which caused unanticipated demand, Respondent's testimony was not credible and was not supported by any independent non-hearsay evidence. Indeed, Respondent admitted that in most cases, he did not shop around before accepting the price increases demanded by his subcontractors. In some cases, he had checked on prices within the two-county area when obtaining the cost estimates in September 2005, and then he assumed that by identifying the lowest price or best supplier in September 2005, there was no need to check around when that supplier demanded a price increase later. In no instance did Respondent check prices outside of his local area. Respondent acknowledged that the total amount spent for engineering and surveying fees exceeded his estimate by $4,177.12. Respondent argued that these fees were beyond his control, because the Mastens had retained the engineer and surveyor before Respondent entered into a contract with the Mastens. However, Respondent included the engineer and surveyor fee expenses in his cost estimates and assumed the responsibility for covering these fees as part of the overall construction of the house and pool within the fixed contract price. No credible evidence established that the fees were unusually high and could not have been anticipated or addressed by appropriate contingency reserves. Respondent attempted to blame many of the price increases on the two-plus month delay in starting the project because of the engineer's need to relocate the septic system to resolve permitting issues. As pointed out above, this delay did not in and of itself cause the problem of price increases by subcontractors unwilling to honor price estimates quoted in September 2005. In any event, Respondent did not testify that the delays were extraordinary and not reasonably anticipated, even if the exact reason for the delays may not have been known. Instead, various delays for various reasons are to be expected, and, indeed, are expressly contemplated throughout the written contract. Notably, in a section called "Price Guarantee," the contract form allowed the parties to specify a month by which construction had to begin or else the builder would have a qualified right to adjust the contract price. Respondent waived that right by specifying "N/A" in the blank where a start-by month could have been named: This Contract price is guaranteed to Buyer only if it is possible for Builder to start construction on or before the month of N/A. If start of construction is delayed beyond this time by Buyer, or due to any ruling or regulation of any governmental authority, or due to any other cause which is not the fault of the Builder, the Contract price may be adjusted to the current list price or to cover any cost increases incurred by Builder. A plausible explanation for Respondent's lack of care in developing reasonable, achievable cost estimates is that Respondent did not consider the fixed-price contract to be a fixed-price contract. Respondent testified that even though the contract on its face is a fixed-price contract, he believed that he had an understanding with the Mastens that the contract was really a "cost-plus" contract. Respondent testified that despite what the contract said, the Mastens had agreed that they would pay whatever the ultimate costs were, even if the prices went up from his estimates, plus an additional $37,000 for Respondent's profit. Respondent testified that the only reason that the contract was written up as a fixed-price contract was to secure the bank loan. That suggestion would be troubling, if true, because the implication is that Respondent was a party to fraud or deception to induce the construction loan. However, there was no credible evidence to support Respondent's attempt to justify recovering full costs, plus full profit, when the fixed price he contracted for proved inadequate. Notwithstanding Mr. Colan's apparent view that there was a secret deal standing behind the written contract, he signed the written contract, is bound by the fixed-price term, and must bear the consequences of his inadequate cost estimations. At some point when the Mastens became concerned about the extent to which they were apparently exceeding the contract price while Respondent was still drawing bank funds from the Mastens' construction loan, Mrs. Masten testified that she told Respondent not to draw any more bank funds. The evidence did not clearly establish whether Respondent violated Mrs. Masten's instructions by withdrawing more bank funds after the instructions were given. The Administrative Complaint had alleged that the Mastens contacted the bank and ordered the bank to make no further disbursements, and that the next day, Respondent attempted to withdraw all remaining funds in the construction loan account. No evidence was presented to substantiate this allegation. Petitioner incurred total costs of $299.36 in the investigation of this matter, excluding costs associated with attorney time.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Petitioner, Department of Business and Professional Regulation, Construction Industry Licensing Board, finding that Respondent, Thomas Colan, d/b/a Thom Colan Construction, Inc.: Violated section 489.129(1)(g)3. and (1)(m), as charged in Counts Two and Three, and for those violations, imposing a total fine of $3,000.00; Requiring Respondent to pay restitution to the Mastens in the total amount of $30,083.04; Requiring Respondent to pay costs of $299.36; and further Dismissing Count One (based on Petitioner's voluntary dismissal) and Count Four (based on an absence of proof). DONE AND ENTERED this 14th day of April, 2011, in Tallahassee, Leon County, Florida. S ELIZABETH W. MCARTHUR Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of April, 2011.
The Issue Whether the recommended decision to award AXA Equitable Life Insurance Company ("AXA Equitable") a contract to provide 403(b) annuity retirement products to employees of Respondent, Broward County School Board ("School Board"), is clearly erroneous, arbitrary, capricious, contrary to competition, contrary to the School Board's governing statutes, rules or policies, or contrary to the specifications within Request for Proposal ("RFP") 15-010P; and, if so, whether Petitioner, Life Insurance Company of the Southwest ("LSW"), should be awarded a contract to provide annuity retirement products to School Board employees pursuant to the RFP.
Findings Of Fact LSW LSW is a life insurance company that sells fixed annuity deferred plans to school districts, hospitals, churches, governments, and other qualified employer plans. LSW is an active supplemental retirement benefit vendor in 5,300 school districts throughout the country. LSW serves 321,000 annuity policyholders with over $12.7 billion dollars invested.3/ LSW is a current provider of supplemental retirement benefits to the School Board, and it has over 3,700 existing School Board employees as policyholders with over $69 million dollars invested. The School Board's RFP for Annuities (RFP 15-010P) On March 4, 2014, the School Board issued its RFP entitled "403(b)/457(b) Program for School Board Employees," RFP 15-010P, for the purpose of soliciting replies from vendors seeking to provide tax sheltered annuity and/or mutual fund retirement products to the School Board's active, full-time employees (approximately 25,139 employees). The School Board issued Addendum No. 1 to the RFP on March 26, 2014. The retirement benefit products offered as a result of this procurement are optional and supplement the retirement benefits available to qualified School Board employees through the Florida State Retirement System. In issuing the RFP, the School Board seeks to "streamline its 403(b) and 457(b) offerings to a limited number of vendors in an effort to generally improve retirement awareness of all eligible employees and improve retirement savings of participating employees." The School Board seeks proposals with competitive fee and expense structures and minimal to no surrender charges and/or sales charges. The RFP does not limit the number of vendors that may be selected for negotiation or award. The RFP was developed by the School Board's Benefit and Employment Services Department in collaboration with its consultant, Gallagher Benefit Services ("Gallagher"). Gallagher has served as the School Board's consultant on insurance matters for over 20 years. The RFP describes the School Board's current landscape of nine current active annuity vendors, which offer fixed annuities, variable annuities, equity indexed annuities, and mutual funds. The current active annuity vendors include the three recommended annuity product awardees under the RFP (ING, VALIC, and AXA Equitable), as well as LSW. In addition, the School Board has 17 current inactive vendors with a total of 690 accounts.4/ The RFP provides that mutual fund proposals and annuity proposals will be evaluated and ranked separately. The RFP further provides that the School Board "at its sole option will then decide based on the top-ranked Proposer(s) in each category, if a sole provider or multiple providers with annuity and/or mutual fund options are more beneficial to SBBC and its employees." Under the RFP: "A sole provider is either one Awardee for both annuity and mutual fund products or is the only vendor for one of the product offerings. A multiple Awardee(s) is one of many vendors for the same product offerings." On or before April 17, 2014, at 2:00 p.m., the School Board's Supply Management and Logistics Department received proposals in response to the RFP. Proposals for the annuity products were submitted by AXA Equitable, Great American, Horace Mann, ING, LSW, MetLife, and VALIC. Six companies submitted proposals for mutual fund products. In addition, a proposal was submitted by Aspire Financial Services, LLC. The proposals for both annuities and mutual funds were delivered to the School Board's Superintendent's Insurance Advisory Committee ("Insurance Committee") members within two or three days of receipt by the School Board on April 17, 2014. Each of the proposals was several hundred pages in length and described as being roughly the size of a telephone book. The proposals were evaluated by the Insurance Committee. The Insurance Committee is a standing committee composed of persons appointed by the superintendent of schools, including representatives of various labor unions and "meet and confer" groups (populations of employees that are not represented by a labor union). The purpose of the Insurance Committee is to make recommendations regarding insurance matters including the subject RFP. The Insurance Committee regularly provides input in the development of the school district's competitive procurements for insurance and employee benefits and evaluates proposals for such services. No member of the Insurance Committee had any special expertise in mutual funds or annuities. There was a training session and review of the RFP at the Insurance Committee meetings on January 9 and 15, 2014. Section 5.1 of the RFP provides that the Insurance Committee: shall evaluate all Proposals received, which meet or exceed Section 4.2, Minimum Eligibility Requirements and Section 7.1 Indemnification, according to the following criteria: CATEGORY MAXIMUM POINTS A. Experience and Qualifications 10 B. Scope of Services 40 C. Cost of Services 40 D. Supplier Diversity & Outreach Program D.1. Participation 3 D.2. Diversity 4 D.3. Community Outreach 3 TOTAL[:] 100 Failure to respond, provide detailed information or to provide requested Proposal elements may result in the reduction of points in the evaluation process. The Committee may recommend the rejection of any Proposal containing material deviations from the RFP. The Committee may recommend waiving any irregularities and technicalities. "Cost of Services" is an integral part of the RFP. Section 4.7 of the RFP addresses Cost of Services and requires proposers of annuity products to submit their Cost of Services by completing the RFP's Attachment B1, Financial Response Form ("B1 form"). The B1 form requires a series of responses to various items relating to the Cost of Services offered for annuity products. The RFP and B1 form solicit two cost proposals, only: one for "Sole Carrier" and one for "Multiple Carrier." The B1 form has two columns: one for "Sole Carrier" and one for "Multiple Carrier." The RFP and B1 form do not allow for proposers to submit more than one multiple carrier proposal and to alter the B1 form to include an additional column for more than one multiple carrier proposal. The B1 form specifically advises proposers in bold letters that: "If you are proposing annuity product(s), please complete the following form for both being a sole carrier or one of multiple carriers." Reproduced below are the two pages of the B1 form included within the RFP: Section 4.7 of the RFP unequivocally warns: "No deviations from this form are permitted. No conditions or qualifications (e.g., participation requirements) to the quoted rates are acceptable." AXA Equitable's Non-Responsiveness Based on Its Alterations to the B1 Form and Two Multiple Vendor Proposals, and the Insurance Committee's Evaluation of AXA Equitable's Proposals, Recommendation, and Award Notwithstanding the RFP's admonition against alterations to the B1 form, AXA Equitable modified the B1 form in responding to the RFP by adding an additional column and providing two separate multiple carrier proposals. Significantly, AXA Equitable labeled its modified B1 form to provide the following three separate cost proposals: (1) "Sole Carrier"; (2) "Multiple Carrier (2-4 Investment Providers)"; and (3) "Multiple Carrier (2-4 Investment Providers)." Reproduced below are the two pages of the B1 form submitted by AXA Equitable: The last two columns of AXA Equitable's B1 form, although labeled the same, offer different costs for certain categories. Significantly, in the second column, AXA Equitable listed "0.50%" for "Mortality, Expense, and Administrative Charges." However, in the third column, AXA Equitable listed "0.70%" for "Mortality, Expense, and Administrative Charges." In the second column, AXA Equitable also listed a "5 year participant level" for "CDSC or Surrender Charges & Terms." However, in the third column, AXA Equitable listed a "10 year participant level" for "CDSC or Surrender Charges & Terms." The form in AXA's proposal for annuities was also mislabeled "Attachment B2," which is the form for mutual fund submissions. Although AXA Equitable provided information on the wrong form (B2 instead of B1), and mislabeled the second and third columns on its Attachment B2, the information within its response to the RFP made it clear to Gallagher that the second column on both pages was intended to contain AXA Equitable's two separate multiple carrier proposals. The second column on both pages was intended to contain AXA Equitable's two-to-four multiple vendor annuity proposal, and the third column on both pages was intended to contain AXA Equitable's five or more multiple vendor annuity proposal.5/ No other proposer altered the B1 form or submitted more than one multiple carrier proposal. At the hearing, the School Board conceded that it expected the proposers to complete the B1 form without deviation, and that no deviation should be permitted that would allow one vendor to obtain a competitive advantage over another vendor. The School Board conceded at the hearing that AXA Equitable deviated from the B1 form by including an additional column in the form for two separate multiple proposals that was unsolicited. Gallagher prepared executive summaries of the annuity and mutual fund proposals which assembled the proposers' verbatim responses in a side-by-side format corresponding to the RFP's evaluation scoring criteria. The Insurance Committee received these summaries about one week prior to their June 11, 2014, meeting at which a decision was to be made on the various proposals. The summaries for the annuity proposals were over 800 pages in length. A similar-sized comparison was prepared for the mutual fund proposals. The Insurance Committee met on June 11, 2014, to evaluate the annuity and mutual fund proposals. The meeting started at 10:30 a.m. and adjourned at 5:30 p.m., with a break for lunch. No proposal scoring was conducted before the meeting. The Insurance Committee determined at the start of its June 11, 2014, meeting that Aspire's proposal was non-responsive because it lacked the most recent three years of independent audited financial statements required by Section 4.2.5 of the RFP. Substantial discussion occurred during the June 11th meeting as to how to score AXA Equitable because of its two multiple vendor proposals. Some of the Insurance Committee members expressed concern over how to score AXA Equitable's annuity proposal because of its three separate proposals and modifications to the B1 form. In response, Gallagher recommended during the June 11, 2014, meeting that AXA Equitable be scored separately and have three separate scores. During the meeting, AXA Equitable was treated differently than all of the other annuity proposals, because each of the other annuity proposals were scored only twice while AXA Equitable receive three separate scores. Gallagher provided the Insurance Committee with a separate scoring sheet just for AXA Equitable because of its three separate proposals: one for sole carrier, another for two-to-four carriers, and the third proposal for five or more carriers. Once the Insurance Committee scored and ranked each of the proposals for all of the proposed annuity vendors, it was recommended that only then should the committee determine whether the award should be given to a sole vendor or to multiple vendors. At the conclusion of Gallagher's presentation on the annuity and mutual fund proposals, the Insurance Committee was given 20 to 30 minutes to score all of the proposals. Thirteen members of the Insurance Committee scored the proposals. The Insurance Committee's scores ranked the annuity proposals as follows: Sole Vendor Total ING 90 AXA Equitable 76.9 VALIC 74.2 MetLife 69.2 LSW 67.5 Great American 64.2 Horace Mann 61.0 Multiple Vendors Total ING 86.9 VALIC 71.2 AXA Equitable (based on its 2-4 vendor proposal) 69.7 LSW 67.0 AXA Equitable (based on its 5+ vendor proposal) 65.2 MetLife 64.7 Great American 61.9 Horace Mann 59.5 Thus, AXA Equitable's proposal was deemed responsive by the Insurance Committee, and it received three separate scores for its annuity proposals: a score of 76.9 for its sole vendor proposal; a score of 69.7 for its two-to-four vendor proposal; and a score of 65.2 for its five or more vendor proposal. The scoring sheets reflect that AXA Equitable received different scores for cost of services under its two multiple vendor proposals. Notably, nine of the Insurance Committee members scored AXA Equitable's two-to-four vendor proposal higher for cost of services than AXA Equitable's five or more vendor proposal for cost of services.6/ After seeing the rankings of the scores during the meeting, the committee proceeded to pass a motion authorizing negotiations between the committee and the top three ranked annuity vendors, only, until a successful negotiation with three annuity vendors is reached. Day two of the Insurance Committee's meeting (held June 12, 2014) consisted of negotiations between the Insurance Committee and the three highest ranked vendors for annuity and mutual fund products. After negotiating with the top three ranked proposers, the Insurance Committee members voted to award the contracts for annuities to ING, VALIC and AXA Equitable (under its two-to-four vendor proposal), as the three top-ranked responsive proposers with whom the Insurance Committee was able to successfully conduct contract negotiations. The Insurance Committee also voted to award the contracts for mutual fund services to ING, MetLife, and VALIC and to reject Aspire's proposal as non- responsive for failure to meet the RFP's minimum eligibility criteria. The superintendent accepted the Insurance Committee's recommendations. On June 16, 2014, the School Board's Supply Management and Logistics Department posted the School Board's intended recommendation for the award of the RFP. The intended decision is to: (a) award contracts for the provision of annuity programs to ING, VALIC, and AXA Equitable (under its two-to-four vendor proposal); (b) award contracts for the provision of mutual fund programs to ING, MetLife, and VALIC; and (c) to reject Aspire's proposal as being non-responsive for failure to meet the RFP's eligibility criteria. On June 17, 2014, LSW timely filed its Notice of Protest. On Monday, June 30, 2014, LSW filed its Formal Written Protest and Petition for Administrative Hearings and bid protest bond with the School Board. Because the School Board was closed on Friday, June 27, 2014, the formal written protest was timely filed on the School Board's next business day. No bid specification protest was filed concerning either the RFP or Addendum No. 1. AXA Equitable's alteration to the B1 form, which adds a third column and offers one sole vendor proposal and two separate multiple cost proposals, is non-responsive to the RFP and a material deviation. AXA Equitable's alteration to the B1 form affected its price by giving it the opportunity to fine-tune its bid and submit a third cost proposal that was not solicited. AXA Equitable's two multiple vendor proposals contained different charges. The charges for "Mortality, Expense, Administrative Charges" and "CDSC or Surrender Charges & Terms" were higher for AXA Equitable's five or more multiple vendor proposal than its two-to-four vendor proposal. AXA Equitable received three separate scores that were evaluated by the committee while all other annuity proposals received only two scores that were evaluated. Most of the committee members gave AXA Equitable higher scores for its two- to-four cost of services proposal than its five or more cost of services vendor proposal. AXA Equitable's two multiple vendor proposals, which contained different cost proposals, and which were scored separately, allowed AXA Equitable to receive an extra bite at the apple not afforded to any of the other vendors competing for the award and allowed AXA Equitable to gain an unfair competitive advantage over all of the other proposers. Nevertheless, the School Board contends there is no provision in the RFP which prohibits AXA Equitable from submitting more than one multiple vendor proposal, and that at best, AXA Equitable's alteration of the B1 form by adding a third column and submitting three separate proposals, each of which were scored separately, is a minor irregularity that can be waived. The School Board did not determine prior to the filing of LSW's bid protest that AXA Equitable's submission of two multiple proposals was a minor irregularity, and not a material deviation. At hearing, the School Board argued that AXA Equitable, or any other vendor for that matter, could have submitted an infinite number of multiple proposals. The School Board relies on the following language within Section 2.1 of the RFP, which states: SBBC is requesting Proposals with competitive fee and expense structures; minimal to no surrender charges and/or sales charges; performance and/or guaranteed returns that exceed objective benchmarks and peer groups; and education resources and tools that will help SBBC employees understand the importance of retirement savings and plan for the future. Proposers should propose an investment lineup that is in line with current trends in the 403(b) and 457(b) market. For example, group versus individual annuity products, open architecture mutual funds, and institutional share-classes. SBBC encourages the proposal of features that may or may not be offered today, such as designated Roth accounts, investment advice, managed portfolios, etc. At its sole option, SBBC reserves the right to annually review each Awardee and its product offerings for such things including, but not limited to: enrollment; fees and expenses; performance; and benchmarks. This language requests the submission of competitive cost proposals. In no way, however, does this language allow for the submission of more than one multiple vendor proposal and AXA Equitable's modifications to the B1 form by including an additional column and second multiple vendor proposal. The School Board also contends that AXA Equitable's alteration to the B1 form and submission of two multiple vendor proposals is authorized by language within Section 4.7 of the RFP that requires a proposer to complete a B1 form "for each program offered." This language, however, pertains to the requirement to disclose the costs for each type of annuity product offered. It does not allow the submission of a second multiple vendor proposal and AXA Equitable's modification to the B1 form by including an additional column and second multiple vendor proposal. The School Board also relies on Section 5.1 of the RFP, which states that the Insurance Committee "shall evaluate all Proposals received, which meet or exceed Section 4.2, Minimum Eligibility Requirements and Section 7.1 Indemnification." Section 4.2 of the RFP, entitled "Minimum Eligibility," provides as follows: Minimum Eligibility In order to be considered for award and to be further evaluated, Proposer must meet or exceed the following criteria as of the opening date of the Proposal. Proposer is responsible for providing the following information in its response. The Proposer must also include a statement of acknowledgement for each item below. Proposer must agree to the language in Section 7.1, Indemnification. Proposer must be licensed in the State of Florida. Provide a copy of the current license and/or certificate that allows Proposer to provide the services proposed. If Proposer is an insurance carrier, Proposer must be licensed to provide the proposed services in the State of Florida with an AM Best rating of A- or higher and financial size category of VI or larger. In the alternative to the foregoing AM Best and financial-size category, a licensed carrier may satisfy the requirements of 4.2.4. If Proposer is not an insurance company or lacks an AM Best or financial size category, Proposer must provide the most recent three (3) years available of independent, audited financial statements. Each Awardee will agree to provide SBBC an annual fee of $10 per active and inactive participant. Each Awardee will agree to provide an annual fee of $12 per active and inactive participant to fund third-party administrative services. The plain reading of Section 4.2 is that the phrase "following criteria" as used therein pertains to the critera within Section 4.2 (4.2.1, 4.2.2, 4.2.3, 4.2.4, 4.2.5, and 4.2.6), only. To accept the School Board's position would render meaningless the admonitions in Section 4.7 of the RFP and the B1 form against submitting more than one multiple vendor proposal and deviating from the form. Contrary to the School Board's contention, nothing in the RFP allows the alterations to the B1 form and submission of more than one multiple vendor proposal, as submitted by AXA Equitable. In fact, Section 4.7 of the RFP and the B1 form unequivocally prohibit it. To accept the School Board's argument would have allowed AXA Equitable or any other proposer to submit any number of separate multiple proposals with different costs of services and have each of them scored separately. Under the School Board's view, AXA Equitable could have submitted separate multiple vendors of say, for example, one-to-three providers; two-to-four providers; three-to-five providers; four-to-six providers; five-to-seven providers; eight-to-nine providers, etc. (each with different costs of services), until one of them hits and is a winner. The School Board's argument fails to consider that each multiple proposal allowed the committee to give AXA Equitable an extra look and opportunity to fine-tune its bid with the hope that one of its proposals would stand out to the committee and be chosen as a winner. That is precisely what happened in the instant case. Indeed, the Insurance Committee viewed each of AXA Equitable's multiple proposals as a separate proposal and scored them separately with different results. Only after each of the multiple proposals were viewed and scored did the committee then choose to negotiate with the companies that submitted the three topped-ranked proposals. The committee had the opportunity to view AXA Equitable's five or more proposal alongside its two-to-four proposal and sole provider proposal, view the scores from all the proposals, and then determine which way it wanted to go in terms of the number of vendors. After observing that AXA Equitable provided higher costs of services for its five or more proposal than its two-to- four proposal, most of the committee members gave AXA Equitable higher scores for its lower two-to-four cost proposal, and then the committee chose to go with the top three ranked proposals. The Insurance Committee had the opportunity to view AXA Equitable's two-to-four proposal and its five plus proposal separately, rank each of these proposals separately along with the one multiple proposals submitted by each of the other vendors, and then the committee was able to stack each of the proposals against each other, compare them, and decide to go with the top three. This clearly gave AXA Equitable a competitive advantage over the other proposals, which was prohibited by the RFP, and constitutes a material deviation that cannot be waived. AXA Equitable's Non-Responsiveness for Failure to Provide Cost Information Required by the RFP In addition, one of the questions asked in the B1 form was: "What is the Net Revenue Pricing for this plan in basis points?" For the sole carrier proposal, AXA Equitable stated that its net revenue pricing is 1.70. For each of its two multiple carrier proposals, however, AXA Equitable stated: "This would be higher than 1.70 if we are not the single provider." AXA Equitable failed to commit to a specific pricing in basis points for net revenue pricing in each of its two multiple carrier proposals. Net revenue pricing is material to the evaluation of a proposer's cost of services, yet AXA Equitable failed to sufficiently respond to this question on the B1 form in response to the RFP. Some of the Insurance Committee members did not understand what the phrase "net revenue pricing" meant or appreciate the significance of this omission from AXA Equitable's multiple vendor proposals. The evidence presented at hearing failed to establish that any of the committee members deducted points because AXA Equitable failed to provide net revenue pricing for its multiple vendor proposals. AXA Equitable's failure to provide net pricing in basis points in the B1 form for its multiple proposals constitutes a material deviation from the RFP, provided AXA Equitable with a competitive advantage, and is not a minor irregularity that can be waived. The proposers were required to provide the net revenue pricing for their annuity product cost offerings. Net revenue pricing is material to the cost of the services. Thus, AXA Equitable was non-responsive to the RFP by failing to include its net pricing in basis points for its multiple vendor proposals. Nevertheless, the School Board contends that AXA Equitable's omission of net revenue pricing is simply a factor that the committee could consider when scoring its cost proposal. The School Board relies upon Section 5.1 of the RFP, which provides that a "failure to respond, provide detailed information or to provide requested Proposal elements may result in the reduction of points in the evaluation process" and does not require a rejection of AXA Equitable's proposal. The School Board's reliance on Section 5.1 of the RFP is misplaced. The Insurance Committee members did not understand what the phrase "net revenue pricing" meant or appreciate the significance of this omission from the proposal. The evidence did not show that any of the members deducted points because of AXA Equitable's failure to provide net revenue pricing for its multiple carrier proposals. The School Board did not determine prior to the filing of LSW's bid protest that AXA Equitable's failure to provide net pricing in basis points in the B1 form for its multiple proposals was a minor irregularity, and not a material deviation. The Existence of Legacy Carriers Did Not Preclude Negotiations with the Three Top Ranked Annuity Vendors Alternatively, LSW contends that even if AXA Equitable's two-to-four vendor proposal is not rejected as non- responsive, the Insurance Committee lacked the authority to choose to negotiate with the three top-ranked annuity vendors given the number of "legacy carriers" (more than four) that can continue to participate in the payroll deduction even if not selected as a vendor going forward pursuant to the instant RFP. Although it is unnecessary for the undersigned to reach this issue, LSW's contention in this regard is without merit. A selection of the top three vendors in response to the instant RFP does not mean that the legacy carriers must be counted toward the number of vendors ultimately allowed to offer products under the instant RFP. Simply put, the legacy carriers and inactive vendors may continue to provide products to its existing employees alongside the top three vendors chosen pursuant to the instant RFP.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Broward County School Board enter a final order rescinding the proposed award to AXA Equitable for annuity products in favor of an award to LSW as the third-ranked responsive and responsible vendor for supplemental annuity retirement benefits. DONE AND ENTERED this 31st day of December, 2014, in Tallahassee, Leon County, Florida. S DARREN A. SCHWARTZ 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 31st day of December, 2014.
The Issue Whether Petitioner, instead of Intervenor, is entitled to the award of RFP-DOT-98-99-4005.
Findings Of Fact The Department issued and advertised RFP-DOT-98-99-4005 (RFP) for bridge tending, maintenance and repair service contracts for movable bridges in St. Lucie and Martin counties. Theresa Martin has been the Department's District IV Contractual Services Coordinator for the past four years. Ms. Martin is responsible for reviewing all requests for contractual services contracts, and did so in the present case. In preparing RFP’s, including the RFP that is the subject of this proceeding, the Contractual Services Office follows the statutory and rule provisions of Section 287.057, Florida Statutes, and Chapter 60A, Florida Administrative Code, and utilizes the Department's Contractual Services Acquisition Procedures, Procedure Number 357-040-020-D. The RFP specifications were not protested. Three proposers submitted timely responses to the RFP: General Electric Industrial Services(GE), Old Tampa Bay Enterprises (OTBE), and C&S Building Maintenance (C&S). The Department determined that the proposals of all three vendors were responsive. Having determined that the proposals were responsive, the Department reviewed and scored the proposals in accordance with the criteria listed in the RFP. The RFP established five (5) different criteria upon which the Department was to evaluate each proposal. The criteria and the maximum allotted points for each criteria were as follows: Management Plan . . . . . . . . .35 points Technical Plan . . . . . . . . .35 points 3. Price . . . . . . . . . .. . . . 25 points Certified Minority Business .. . .5 points Executive Judgment . . . . . . . .5 points GE received the highest rating among the three proposers for its proposal and OTBE was rated second. Based on these ratings, the Department of Transportation posted its intent to award the project to GE. The RFP required submission of separate price and technical proposals. The price proposal included forms for both the proposer’s price and for certification of the proposer’s intention with respect to the use of Disadvantaged Business Enterprises (DBEs). The price proposal and technical proposal were to be submitted to the Department at the same time but in separate sealed envelopes. The price proposal and the technical proposal were then opened separately and scored separately. The technical proposals were properly reviewed and scored by a technical review committee. After the technical proposals were scored, the members of the technical review committee reviewed the price proposals and provided the Department’s contract administrators with their views as to whether the price proposal was acceptable. The technical review committee concluded that GE’s pricing was acceptable, although it exceeded the Department’s estimated budgetary ceiling. The RFP expressly provides: "This is an Indefinite Quantity Contract for which the Department has established an estimated budgetary ceiling amount of $480,000.00. The Contractor shall not exceed the estimated budgetary ceiling amount without an executed Supplemental Agreement. A Supplemental Agreement to increase the estimated budgetary ceiling amount may be entered into based upon Department need and availability." The Department did not interpret the "estimated budgetary ceiling" as an absolute cap. Rather, the Department considered the "estimated budgetary ceiling" a budgeting tool that gave the proposers an indication of the Department’s estimation of the dollar amounts necessary and available for the contract. The estimated budgetary ceiling amount is typically based upon the Department's recent expenditures in similar contracts. Given that the budgetary ceiling in the RFP is an estimate, the RFP specifically authorizes the Department to amend or supplement the contract with additional dollars during the course of the project. The budgetary modification process provided by the execution of Supplementary Agreements for indefinite quantity contracts occurs on a regular basis in District IV and is provided for in the Department's governing Contractual Services Procedures. Consistent with the Department's interpretation of the "estimated budgetary ceiling," a price proposal that was higher than the budgetary estimate would not be considered irregular and rejected as non-responsive. OTBE apparently believed that the RFP’s statement of an "estimated budgetary ceiling" created an absolute cap on the amount of permissible bids. Based on its mistaken belief, OTBE submitted a price of $479,987.00, three dollars below the Department’s estimated budgetary ceiling amount. Both GE and C&S bid amounts that exceeded the estimated budgetary ceiling with GE’s total price bid being $575,100.00. Although the price proposals of GE and C&S exceeded the estimated budgetary ceiling of $480,000.00, the Department did not consider either of these proposals non-responsive. The Department’s decision in this regard was consistent with its definition and interpretation of estimated budgetary ceiling. To determine the number of points each proposal would be awarded in the price category, the Department applied the mathematical formula that was specified in the RFP. According to the RFP: THE PRICE USED IN AWARDING POINTS WILL BE THE GRAND TOTAL SHOWN ON PRICE PROPOSAL FROM "C." ALL RESPONSIVE PRICE PROPOSALS WILL BE SCORED IN RELATION TO THE LOWEST PRICE PROPOSAL USING THE FOLLOWING FORMULA: (Low proposal/subject proposal x 25 points = awarded price points) The points awarded for the price proposal after applying the aforementioned mathematical formula were applied to the price proposal and then added to the particular proposer’s technical proposal point total. Pursuant to the formula specified in the RFP, the low price proposal received 25 points and the other proposals received a proportionate share of 25 points equal to the ratio of the low price to the proposer’s price. The Department reviewed and scored the prices bid by GE, OTBE, and C&S using the price formula established in the RFP. OTBE, with the low bid a price of $479,100.00, was awarded 25 points in the price category. The RFP formula was also applied to GE’s price bid of $575,100.00; as a result thereof, GE was awarded 20.87 points in the price category. OTBE received the benefit of its low bid by receiving the maximum points in the price category. There was no minority business enterprises or DBE goal set for this RFP. However, pursuant to Section 287.057(6)(c), Florida Statutes, the Department provided a point preference for proposers that certified that they would subcontract at least 3 percent to 10 percent of the contract value to certified DBEs. The RFP provided that: The Department will add up to 5 points to the scores of firms (non-CDBE) utilizing Certified DBE’s as subcontractors for services or commodities as follows: 10% and above of total project dollars - 5 points, 3% - 9.9% of total project dollars - 2 points Complete and attach the DBE Preference Points Certification Form (Form "D") in the Price Proposal if CDBE preference points are to be considered. The DBE Preference Certification Form was included as part of the RFP package and was required to be submitted as part of each proposer's price package. Furthermore, the face of the form also required each proposer to declare if it intended to subcontract part of the work to DBEs and specified the scoring for certification of an intent to use DBEs. The DBE Preference Certification Form also advised vendors that a proposer who certified an intent to subcontract at least 10 percent of the contract was awarded 5 points; that a proposer who certified an intent to subcontract more than 3 percent, but less than 10 percent, was awarded 2 points; and that a proposer who did not commit to an intention to subcontract to DBEs would receive no additional points in this category. The purpose of utilizing the DBE Preference Form Certification is for the Department to provide an incentive for contractors to utilize DBEs on Department projects and to bind the proposer to the commitment that is certified on DBE Preference Certification Form. However, when the Department utilizes the form, it is a discretionary election of the proposer to take advantage of utilizing a DBE and receive the additional points. OTBE’s DBE Preference Certification Form stated that OTBE did not intend to use DBEs. Thus, OTBE did not receive any points in the certified business criteria. GE stated on its DBE Preference Certification Form that it intended to subcontract at least 10 percent of the contract to DBEs. Based on GE's certification of an intention to use DBEs for 10 percent of the contract work, in accordance with the provision of the RFP, the Department awarded GE 5 points. On the DBE Preference Certification Form, there was a place for the proposer to list the DBEs it proposed to use and to indicate the type of work and/or commodities that the DBEs would provide. On its DBE Preference Certification Form, GE listed the two DBE entities that it intended to use on the project: Advanced Marketing Consultants and J.C. Industrial Manufacturing Corp. (JC Machines). With regard to the type of work that could be subcontracted to these DBEs, GE indicated on its DBE Preference Certification Form that Advanced Marketing Consultants could provide payroll services and that JC Machines could perform mechanical repairs. The Department’s District IV Contracting Office reviewed GE’s price proposal, including GE’s DBE Preference Certification Form. As part of that process, the District IV contract administrator checked with the Department’s Central Office in Tallahassee, Florida, and confirmed that the DBE’s listed in GE’s proposal were certified DBEs. There is sufficient work available under the contract specifications for GE to meet its DBE commitment using the DBEs that GE listed in its proposal. Moreover, the DBEs listed by GE are capable of performing much of the work required in the RFP’s Scope of Services. The RFP required that each proposal include the names of qualified personnel that are able to perform the job duties and responsibilities outlined in the RFP specifications and that the proposer intended to use if it were awarded the contract. In this case, all three proposers, GE, OTBE, and C&S, submitted the same three key personnel for the bridge superintendent, bridge electrician, and bridge mechanic positions. At the time the proposals were submitted, the key personnel included in those proposals were all working in the positions for which they were listed. Apparently, these individuals had agreed to continue in their positions regardless of which proposer was awarded the contract. The RFP did not require that the personnel listed in a proposal be current employees of the proposer. Rather, the Department expected that these individuals would be employed by the proposer after the vendor was awarded the contract. The RFP specifies the percentage of work that the successful proposer may sublet under the contract. Section 6.0 of the RFP's Scope of Services (Section 6) provides in relevant part: The Contractor shall not sublet, transfer, assign or otherwise dispose of the contract or any portion thereof, or his right, title or interest therein without written approval of the Maintenance Engineer otherwise and in accordance with this agreement. Contractor shall not sublet more than fifty percent (50%) or [sic] a non set-a-side project. Based on the above-quoted provision, the successful proposer, as the prime contractor, can subcontract no more than 50 percent of the value of the contract. Notwithstanding the RFP’s limitation on the percentage of work that may be subcontracted, the RFP did not require proposers to state what percentage of the contract work they intend to subcontract. Moreover, the RFP did not require the vendors to submit proposed subcontracts nor did the RFP specify required terms for subcontracts. Therefore, at the time the RFP’s were evaluated, the Department did not and could not determine precisely what portion of the contract a proposer intended to subcontract or to whom work would be subcontracted. The Department interprets Section 6 to be a contract performance issue. The reason is that the percentage of the work that is subcontracted by the prime contractor after execution of the agreement is monitored by the Department during the performance of the contract. Such monitoring is accomplished by the Department’s requiring that all requests to subcontract portions of the contract be approved by the Department's project engineer. GE or any other successful proposer is obligated to comply with all the requirements and specifications of the RFP and contract. Failure of a successful proposer to comply with these requirements is a contract performance issue and not an issue that the Department is required or able to address at the proposal review and selection phase. In the instant case, the Department intended to award the contract to the responsive and responsible offerer whose proposal it determined to be the most advantageous to the State taking into consideration price and other criteria. GE was the apparent highest ranked, responsive, and responsible proposer or offerer with a total score of 87.20, including 20 points in the price category and 5 points for certifying its intent to use DBEs. OTBE was the second ranked proposer with 82.67, including 25 points for the price category; OTBE properly received no points for the DBE Preference Certification.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Transportation enter a final order awarding the contract to GE Industrial Systems and dismissing Petitioner’s challenge to the award of RFP-DOT-98-99- 4005. DONE AND ENTERED this 22nd day of June, 1999, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of June, 1999. COPIES FURNISHED: Thomas F. Barry, Secretary ATTN: James C. Myers, Clerk of the Agency Proceedings Department of Transportation Haydon Burns Building 605 Suwannee Street, Mail Station 58 Tallahassee, Florida 32399-0450 Pamela Leslie, General Counsel Department of Transportation Haydon Burns Building 605 Suwannee Street, Mail Station 58 Tallahassee, Florida 32399-0450 Brian F. McGrail Assistant General Counsel Department of Transportation Haydon Burns Building 605 Suwannee Street, Mail Station 58 Tallahassee, Florida 32399-0450 Brant Hargrove, Esquire 1545 Raymond Diehl Road, Suite 150 Tallahassee, Florida 32301 Jonathan Sjostrom, Esquire Steel, Hector & Davis, L.L.P. 215 South Monroe Street, Suite 601 Tallahassee, Florida 32301-1804
The Issue The issue for determination in this proceeding is whether Respondent should award a contract for a new telecommunications system to Intervenor.
Findings Of Fact The Parties Petitioner is a wholly owned subsidiary of NEC, Inc., a Delaware corporation authorized to do business and doing business in Florida. Respondent is a political subdivision and agency of the state. Intervenor is a Delaware corporation authorized to do business and doing business in Florida. The System Respondent's telecommunications system lacks the capacity to meet current and future needs. Respondent seeks a new telecommunications system to serve a minimum of seven high schools, 10 middle schools, 29 elementary schools, and 12 support offices (the "system"). 1/ The Expert Respondent contracted with Omnicom, Inc. ("Omnicom") to assist Respondent in obtaining a new system that is in Respondent's best interest. Omnicom is an expert in telecommunications. The contract requires Omnicom to perform several functions. Omnicom must prepare an RFP, administer the solicitation and receipt of proposals, evaluate the proposals on a point system, issue a report of its evaluation, and recommend a selection that is in Respondent's best interest. Subjectivity There are two primary means of public procurement. One is an invitation to bid ("ITB"). The other is an RFP. The consulting contract refers to a "Request for Bid." The contract indicates that the document will establish an award to the "low fixed price bid meeting specifications." An ITB is significantly different from an RFP. An RFP is inherently more subjective than an ITB. An ITB requires bids to comply closely with the specifications prescribed in the ITB. An ITB prescribes specifications and a solution sought by the issuer. A bidder estimates the cost that the issuer will pay for the solution prescribed in the ITB. An RFP is more subjective. An RFP generally asks proposers to propose a solution to the issuer's stated needs and to estimate the cost of the proposed solution. Proposals generally describe the proposer's sense of the best solution and its cost. The criteria and procedures prescribed in an RFP are intended to minimize, but not eliminate, the subjectivity inherent in the RFP process. The procurement document Omnicom prepared is an RFP. The consulting contract does not require Omnicom to design and implement a new system for Respondent and then obtain bids for the cost of such a system. The RFP solicits solutions to Respondent's telecommunication needs. It prescribes criteria important to Respondent, and Respondent then evaluates proposals on the basis of those criteria. Those criteria include service. Intent Respondent paid Omnicom to recommend a proposal that is in Respondent's best interest. However, neither Omnicom nor Respondent intended the recommendation to usurp Respondent's authority to exercise discretion in taking final agency action. The RFP makes it clear that the proposal selected will be the system that Respondent determines to be in its best interest. The RFP states: The proposal selected will be the . . . system that meets the present and future needs of [Respondent] and is in the best interest of [Respondent]. * * * The objective of [Respondent] in soliciting and evaluating proposals . . . is to obtain a system that best meets the present and future needs of [Respondent] at a cost that is consistent with the features and services provided. * * * It should be understood that the information provided in this RFP is not to be construed as defining specific system equipment, features, or solutions, but rather is intended to present [Respondent's] needs and objectives in terms of system services and control. * * * The submission and acceptance of proposals does not obligate [Respondent] in any way. . . . [Respondent] reserves the right to reject any and all proposals received by reason of this request or to negotiate separately with any source whatsoever, in any manner necessary to serve its best interest. [Respondent] makes no representation, implied or expressed, that it will accept and approve any proposal submitted. * * * Proposals submitted may be reviewed and evaluated by any person at the discretion of [Respondent]. * * * In submitting a proposal, the proposer understands . . . [Respondent] will determine at [its] discre- tion, which proposal, if any, is accepted. RFP at 1-2, 2-1, 2-4, 2-6, 2-7, and 2-11. The RFP The evaluation criteria and procedures established in the RFP are consistent with Respondent's intent in contracting with Omnicom. The RFP establishes a fixed rule or standard by which Respondent selects the proposal that is in Respondent's best interest. Respondent paid Omnicom with public funds to formulate that fixed rule or standard. Final Decision The RFP requires the proposal with the greatest total awarded points to be selected for a contract award. The RFP does not require the proposal with the greatest total awarded points to be recommended for selection. The RFP states: Proposals will be ranked in accordance with the technical and administrative awarded points. . . . The proposal with the greatest total awarded points will be selected for a contract award. (emphasis supplied) RFP, Appendix E, E-2. Alleged ambiguities within the RFP are resolved by the clear and unambiguous meaning of the underscored words in the quoted language. The proposal with the greatest total awarded points is to be selected by Respondent for a contract award. The clear and unambiguous words in the RFP are reasonable. Respondent hired a recognized expert in telecommunications to oversee the acquisition and implementation of a new system. The evaluation criteria and procedures fixed in the RFP reflect Respondent's intent to rely on the expertise it purchased with public funds unless Respondent: rejects all proposals; rejects Omnicom's evaluation and recommendation and asks Omnicom to re-evaluate the proposals; or conducts an independent evaluation of the proposals and substitutes Respondent's own independent judgment. The underscored language in the RFP is specific. It is consistent with general language in the RFP. For example, selection of the proposal with the most points awarded by Omnicom is consistent with the following general provision: Proposals submitted may be reviewed and evaluated by any person at the discretion of [Respondent]. * * * In submitting a proposal, the proposer understands . . . [Respondent] will determine at [its] discre- tion, which proposal, if any, is accepted. RFP at 2-7, and 2-11. Other general language in the RFP authorizes Respondent to reject all proposals and either develop a new RFP, seek a system through the ITB process, or seek a system through a process that is exempt from public procurement requirements if the system or Respondent qualify for such an exemption. The RFP states: The submission and acceptance of proposals does not obligate [Respondent] in any way . . . [Respondent] reserves the right to reject any and all proposals received by reason of this request or to negotiate separately with any source whatsoever, in any manner necessary to serve its best interest. [Respondent] makes no representation, implied or expressed, that it will accept and approve any proposal submitted. RFP at 2-6. Such language is "boiler plate" in public procurement documents. Nothing in the RFP is intended to, or has the effect of, exempting Respondent from the law applicable to public procurement. The RFP states: [Respondent] reserves the right to . . . negotiate separately with any source whatsoever, in any manner necessary to serve its best interest. RFP at 2-6. Respondent can not solicit proposals and then negotiate separately with a select proposer or a third party in violation of the body of law applicable to public procurement. The language quoted in the preceding paragraph does not authorize Respondent to take final agency action in a manner that is not governed by fixed rule or standard. The fixed rule or standard that governs Respondent's determination of its best interest is prescribed in the RFP and sanctioned by Respondent. The RFP states: Proposals will be ranked in accordance with the technical and administrative awarded points. . . . The proposal with the greatest total awarded points will be selected for a contract award. (emphasis supplied) RFP, Appendix E, E-2. The quoted language is specific, clear, and unambiguous. To the extent it is inconsistent with general provisions in the RFP, the plain meaning of the specific language controls any general provisions that may be contrary to either the specific language or the law applicable to public procurement. Scope Of Review The RFP limits the scope of review to information contained in the proposals submitted by the proposers. The RFP states: . . . Only the information contained in the proposal and references verifications will be used in the evaluation. RFP at E-2. Respondent fixes the scope of review by limiting it to the information contained in the proposals. Review And Approval Respondent reviewed the rule or standard fixed in the RFP. Respondent approved the RFP on July 11, 1995. On July 12, 1995, Omnicom issued the RFP. Omnicom's Evaluation And Recommendation The RFP solicits base proposals and alternate proposals that achieve Respondent's objectives for a new system. No alternate proposal is authorized without a base proposal that complies with the basic configuration prescribed in the RFP. Seven proposals were submitted to Omnicom. Omnicom determined that one proposal did not satisfy mandatory requirements. Omnicom evaluated the six proposals that satisfied mandatory requirements. They are: Petitioner's base proposal; Petitioner's alternate proposal; Intervenor's proposal; a base proposal from Bell South Business Systems, Inc. ("Bell South"); a base proposal from Orlando Business Telephone Systems ("OBTS"); and a base proposal from WilTel Communications, Inc. ("WilTel"). Omnicom awarded the following technical, cost, and total points. PROPOSAL TECHNICAL COST TOTAL NEC (Alternate) 699 200 899.0 Siemens ROLM 715.5 179 894.5 Bell South 719.5 161.1 880.6 NEC (Base) 700 172.8 872.8 WilTel(Base) 617 157.2 774.2 OBTS 595.5 158.4 753.9 Omnicom ranked Petitioner's alternate proposal highest in total points and points awarded for cost. Omnicom ranked Intervenor's proposal highest in technical merit. Omnicom conditioned its recommendation of Petitioner's alternate proposal on resolution of several concerns Omnicom expressed in its evaluation report. Those concerns are included in the discussion in paragraphs 108-124, infra. Omnicom recommended Petitioner's alternate proposal for selection if Respondent could resolve the concerns Omnicom had with Petitioner's alternate proposal and if Respondent deemed it to be in Respondent's best interest. Omnicom recommended Intervenor's proposal if Respondent either could not resolve Omnicom's concerns or if Respondent did not deem Petitioner's alternate proposal to be in Respondent's best interest. Arbitrary Selection Respondent selected Intervenor's proposal over Petitioner's alternate proposal. Respondent's selection of Intervenor's proposal was within the scope of the recommendation made by Omnicom. However, the manner in which Respondent exercised its agency discretion is arbitrary. The manner in which Respondent determined that Intervenor's proposal is in Respondent's best interest is not governed by any fixed rule or standard. Respondent did not conduct an independent evaluation and substitute Respondent's own judgment. Respondent did not apply the rule or standard fixed in the RFP to the information included in the proposals and substitute its judgment for that of Omnicom. Respondent did not substitute a fixed rule or standard different from the rule or standard fixed in the RFP. Respondent substituted a rule or standard that is not fixed but is invisible and known only to Respondent. Respondent expanded the evaluation procedure and scope of review fixed in the RFP. Respondent improperly applied criteria fixed in the RFP and applied improper criteria not established in the RFP. 6.1 Scope Of Review The RFP assignes a maximum of 800 points to criteria prescribed in six technical categories. It assigns a maximum of 200 points to cost. The maximum total score for technical and cost criteria is 1,000 points. The points Respondent fixed for the criteria in the RFP indicate the relative importance of the criteria. The RFP states: Proposals will be ranked in accordance with the technical and administrative awarded points and a short list of proposals established for further evaluation. The short listed proposals will then be evaluated on a cost basis and points awarded accordingly. Awarded cost points will then be summed with the awarded technical and administrative points. The proposal with the greatest total awarded points will be selected for a contract award. RFP, Appendix E, at E-2. 38. Omnicom evaluated the six proposals that met mandatory requirements and submitted an evaluation report in accordance with the evaluation criteria and procedures fixed in the RFP. The report recommends that the contract be awarded to Petitioner. In accordance with the evaluation procedure established in the RFP, Omnicom's evaluation report was submitted to a review committee on September 8, 1995. The committee consisted of knowledgeable representatives from the community and select employees of Respondent. The committee reviewed the evaluation report for accuracy and objectivity. The committee took no exception to any portion of the evaluation report and recommendation. In accordance with the evaluation procedure established in the RFP, the Superintendent of the Seminole County School District (the "Superintendent") recommended that Respondent award the contract to Petitioner for its alternate proposal. Respondent did not take issue with the recommendations of Omnicom, the committee, or the Superintendent. Respondent issued a notice of intent to award the contract to Petitioner on September 8, 1995. Respondent scheduled a work session for September 12, 1995, to consider the evaluation report from Omnicom and to vote on Omnicom's recommendation. 6.1(a) Intervenor's Expanded Proposal On September 11, 1995, Intervenor sent a letter to each of Respondent's members. Separately, each member obtained a report on user ratings of telecommunications equipment. The letter urged Respondent to consider Intervenor's local presence, including the local presence of Siemens Stromberg Carlson, Intervenor's corporate sibling. The letter asserted that Petitioner has no significant local presence. It claims that Intervenor is a "Tier 1" telecommunications vendor and that Petitioner is not. None of these matters were included in Intervenor's proposal even though service was one of the criteria for evaluation. Intervenor's solicitation provided Respondent with information not included in Intervenor's proposal. The additional information exceeded the scope of review and evaluation procedure fixed in the RFP. 6.2(b) Altered Procedure At the work session conducted on September 12, 1995, Respondent accepted comments from the public and from proposers. Intervenor emphasized its status as a Tier 1 vendor. One of Respondent's members expressed concern that Petitioner had only one local representative and that he worked out of his home. Petitioner has four technicians and stated in its alternate proposal that two additional technicians would be added. No member read any of the proposals. A second member stated that cost is an insignificant matter. The second member opined that cost should not be an issue considered in making the final decision. The second member is a senior management employee for Bell South. Bell South was ranked third in total points by Omnicom. The second member seconded a motion to postpone the contract award. In considering postponement of their vote, the members relied on information contained in Intervenor's expanded proposal. The members voted to postpone the award of the contract until September 20, 1995. At that meeting, each proposer was to make a twenty minute presentation to Respondent. 6.2(c) Improper Consideration Of Fixed Criteria And Consideration Of Improper Criteria The background statement in the agenda to the meeting scheduled for September 20, 1995, stated that Omnicom's point scores could not be used as the determining factor in awarding the contract because all but one of the proposals "did not meet all mandatory requirements." This was the first instance in which either Respondent or Omnicom indicated that any proposal except the alternate proposal submitted by WilTel failed to satisfy mandatory requirements in the RFP. 2/ None of Respondent's individual members read any portion of the proposals submitted to Omnicom. The members did not make independent determinations of whether the proposals submitted by Petitioner or Intervenor in fact satisfied mandatory requirements established in the RFP. On September 18, 1995, Petitioner notified Respondent that Petitioner protested the meeting scheduled for September 20, 1995. Petitioner stated that it would participate in the meeting under protest; without waiving any right it had to protest Respondent's deviation from the evaluation criteria, procedure, and scope of review fixed in the RFP. In the Notice of Public Meeting issued for the September 20 meeting, Respondent stated it may add up to 200 points to the total points awarded by Omnicom. The additional points were to be based upon the information the proposers submitted at the meeting. This was the first time Respondent disclosed the availability of points other than the 1,000 points fixed in the RFP. The Notice of Public Meeting stated no criteria upon which the additional points would be awarded. Respondent did not formulate any criteria upon which to award the additional points. 6.2(d) Final Decision: Expanded Scope, Altered Procedure, Improper Consideration Of Fixed Criteria And Consideration Of Improper Criteria At the meeting conducted on September 20, 1995, the proposers gave presentations to Respondent and Omnicom. The proposers answered questions posed orally by Respondent's individual members. Omnicom responded to comments made by the proposers. Each proposer was then allowed two minutes for "surrebuttal." The majority of comments related to reasons why specific points were deducted during Omnicom's evaluation. The proposers did not have access to a specific point award matrix to which the members may have referred during the meeting. The subject matter of the inquiry included criteria established in the RFP, including service capability. The inquiry did not focus on conditions Omnicom attached to its recommendation of Petitioner's alternate proposal. See, paragraphs 108-124, infra. Intervenor repeated its representation that it is a Tier 1 vendor. Intervenor asserted that it is the number one PBX supplier in the world and the number two vendor in annual expenditures for research and development. Intervenor submitted documents substantiating its claims. None of this information was included in Intervenor's proposal. After the presentations, the Superintendent suggested the members write down three of the five proposers. The Superintended stated that the additional points would not be written down because they were for the use of the individual members. The first round of voting produced a new short list that deleted Petitioner and consisted of Intervenor and Bell South. The members then discussed the two proposals on the new short list. During the discussion, one member stated that she felt the RFP assigned too many points for cost. The members voted to award the contract to Intervenor. The member who is an employee of Bell South recused himself from the final vote. The voting members did not disclose the criteria they relied on for their vote, the weight assigned to the criteria relied on, the additional points assigned, or the fixed rule or standard which governed Respondent's determination of which proposal was in Respondent's best interest. On September 21, 1995, Petitioner received Respondent's formal notice to award the contract to Intervenor. The notice states only that Respondent's decision is based on the evaluations by Omnicom and the presentations on September 20, 1995. 3/ The manner in which Respondent determined that Intervenor's proposal is in Respondent's best interest was not governed by any fixed rule or standard. Respondent selected Intervenor's proposal in a manner contrary to the rule or standard fixed in the RFP and on the basis of criteria and procedures that are not fixed in the RFP. Major Variation Respondent's deviation from the rule or standard fixed in the RFP is a major variation. The deviation affects the price of the contract selected. It gives Intervenor a benefit not enjoyed by other proposers. It adversely impacts the interests of Respondent. 4/ Contract Price Respondent's deviation from the rule or standard fixed in the RFP affected the contract price in two ways. First, it affected the stated cost of the contract. Second, it added costs that are inherent, but not stated, in Intervenor's proposal. 7.1(a) Stated Cost The complete system is to be installed in all 58 facilities over five years. The useful life of the system is between 7 and 10 years. Omnicom valued the system included in each proposal over its 10 year life expectancy. Omnicom placed the cost for each facility on a spread sheet correlating to the anticipated time of installation. The cost of each facility was discounted to its net present value at the time of evaluation. The evaluation report rates costs through 10 years because that is the reasonable life expectancy of the system. The cost of Intervenor's system was less in years 1-5. For the total life expectancy of the system, however, the cost of Petitioner's alternate proposal was less. During the 10 year useful life of the new system, the cost of Petitioner's alternate proposal would save Respondent $1,547,726 over the cost of Intervenor's proposal. The net present value of that savings is $1,212,528. Omnicom awarded the following technical, cost, and total points for the seventh year of operation. PROPOSAL TECHNICAL COST TOTAL NEC (Alternate) 699 200 899.0 Siemens ROLM 715.5 179 894.5 Bell South 719.5 161.1 880.6 NEC (Base) 700 172.8 872.8 WilTel(Base) 617 157.2 774.2 OBTS 595.5 158.4 753.9 The total point differential between Petitioner and Intervenor widened for years 8-10. The points awarded for the cost of Intervenor's proposal dropped to 178.4, 177.8, and 177.3, respectively, in years 8-10. The corresponding total scores for Intervenor's proposal dropped to 893.9, 893.3, and 892.8. 7.1(b) Unstated Cost The RFP requires five out of eight categories of work station devices to be two-way speaker phones. Two-way speaker phones eliminate the need for ancillary intercom equipment. Two of the five categories required to be two-way speaker phones are noncompliant in Intervenor's proposal. Compliant telephones are more expensive than the telephones used by Intervenor to calculate the cost Omnicom evaluated. Compliant telephones would cost approximately $736,901 more than the cost evaluated by Omnicom; based on information available in Intervenor's proposal. 5/ Respondent will either incur additional costs to acquire compliant telephones or incur the cost of ancillary intercom equipment. Benefit Not Enjoyed By Others Intervenor enjoyed a benefit not enjoyed by others. Intervenor obtained a competitive advantage and a palpable economic benefit. 7.2(a) Expanded Scope Respondent's reliance on a rule or standard not fixed in the RFP resulted in a benefit to Intervenor. Other proposers did not enjoy a similar benefit. 6/ The proposers relied upon the point distribution, evaluation procedure, and criteria fixed in the RFP. Any of the proposers could have solicited Respondent to consider information not included in the proposals, to follow procedures not established in the RFP, to assign an undisclosed weight to criteria fixed in the RFP, and to consider undisclosed criteria. However, only Intervenor successfully solicited Respondent to do so and then enjoyed the benefit of being selected for the contract. Respondent made concessions that favored Intervenor. No other proposer enjoyed the benefit of Respondent's concessions in a manner that changed the outcome of the contract award. 7.2(b) Alternate Proposal The base proposal required in the RFP included a configuration using analog tie lines. Intervenor prepared only one proposal. It included only digital tie lines. Intervenor's proposal is an alternate proposal. It does not include the analog tie lines required in the basic configuration prescribed in the RFP. Omnicom deducted points for Intervenor's failure to include analog tie lines. However, Omnicom evaluated Intervenor's alternate proposal in the absence of a base proposal. 7/ All other proposers complied with the provision in the RFP that prohibited alternate proposals in the absence of a base proposal. The prohibition, in effect, required Petitioner to submit two proposals. Petitioner prepared a base proposal and an alternate proposal. Petitioner prepared two quotes for each of the 58 facilities contemplated in the new system. Intervenor prepared only one quote for each of the facilities contemplated in the new system. Intervenor did not invest the time, energy, and expense invested by Petitioner in its two proposals. 7.2(c) Cost By using noncompliant telephones in its proposal, Intervenor lowered the cost evaluated by Omnicom. If other proposers had proposed noncompliant telephones, they would have been able to affect their evaluation scores in a positive manner. Intervenor received a palpable economic benefit from its omission. A cost difference of $50,000 to $100,000 translates to approximately two points in the evaluation process. An increased cost of $736,901 would have lowered Intervenor's cost score between 7.36 and 14.7 points. 8/ Omnicom did deduct points from Intervenor's technical score for the failure to include compliant telephones in its proposal. However, Omnicom did not deduct points for Intervenor's failure to include unit prices for compliant telephones. 9/ Unit prices are necessary for Omnicom to accurately calculate the increased cost of compliant telephones. Omnicom could not calculate the increased cost of compliant telephones based on the information available in Intervenor's proposal. Omnicom evaluated the cost of Intervenor's proposal based on the cost stated in the proposal. Adverse Impact On Respondent Respondent's deviation from the evaluation criteria and procedures fixed in the RFP has an adverse impact on the financial interests of Respondent. The award of the contract to Intervenor will cost Respondent approximately $1,212,528 in present value. Respondent may need to purchase compliant telephones at an additional cost of up to $736,901. Alternatively, Respondent may need to purchase ancillary intercom equipment at an unknown cost. Respondent's deviation from the evaluation criteria and procedures established in the RFP has an adverse impact on the Respondent's technical needs. The award of the contract to Intervenor may result in the use of noncompliant telephones, ancillary intercom equipment, or, in the event of an unforseen budget shortfall at the time, none of the technical capabilities needed by Respondent. Public Policy There is a "strong public policy against disqualifying the low bidder for technical deficiencies. . . ." 10/ Although an RFP inherently demands more subjectivity than an ITB, Respondent disqualified the low proposer for reasons that are not governed by any fixed rule or standard. Respondent could have rejected all six proposals and sought to obtain its system through a new RFP, the ITB process, or a process exempt from public procurement requirements; if the system or Respondent qualifies for such an exemption. 11/ However, Respondent did not reject all proposals and start over or seek to obtain its system through an exempt process. Respondent paid public funds for Omnicom's expert advice. Respondent paid Omnicom to evaluate Respondent's technical needs, formulate criteria, develop an evaluation procedure, prepare an RFP, evaluate proposals, and recommend the proposal that was in Respondent's best interest. Respondent approved the RFP prepared by Omnicom, including the rule or standard fixed in the RFP. Respondent then deviated from the fixed rule or standard. Respondent added points to change the relative importance of the technical and cost criteria fixed in the RFP. Respondent awarded up to 200 points in addition to the 1,000 points fixed in the RFP. The members neither disclosed the criteria they used to award additional points nor disclosed the number of points awarded. The members did not reveal, explain, or define either the weight assigned to each fixed criteria or any other fixed rule or standard used to evaluate the oral presentations made by the proposers. Respondent did not conduct an independent evaluation of the proposals and substitute its own judgment for that of Omnicom. None of Respondent's members read any of the proposals. Omnicom evaluated the proposals fairly, objectively, and reasonably. Omnicom's evaluation and recommendation was an honest exercise of agency discretion by the agency's own expert. 12/ Respondent neither rejected Omnicom's evaluation of the proposals nor rejected the proposals. Respondent did not request that Omnicom re-evaluate the proposals and did not request that Omnicom start over with a new RFP, an ITB, or pursue a system through an exempt process. Respondent neither explained its exercise of agency discretion on the record in this proceeding nor disclosed a fixed rule or standard Respondent used to govern its action. Respondent made an arbitrary decision. Illegal Respondent made an emergency award of a portion of the contract to Intervenor during the pendency of this proceeding. The award is limited to a purchase order for one switch out of 52 switches that will comprise the complete system. The single switch is necessary for Respondent to occupy its new administrative offices. Occupancy of the new administrative offices has always been a critical element in procurement of the entire system. Respondent is currently engaged in accomplishing this critical element. Respondent's award of part of the contract is not required by an immediate and serious threat to the public health, safety, or welfare. Respondent awarded part of the contract to Intervenor for public convenience. Installation of the system at the new administrative offices is necessary to occupy the new building. Occupancy is necessary so that various administrative offices of the School District can be consolidated. The School District has incurred costs since October, 1995, for utilities and maintenance associated with the unoccupied building. The reasons evidenced by Respondent constitute neither an immediate nor serious threat to the public health, safety, and welfare. It is not necessary to award any portion of the contract prior to final agency action in this proceeding. Minor Irregularities Omnicom conditioned its recommendation of Petitioner's alternate proposal on resolution of four concerns. Petitioner's alternate proposal failed to include detailed price information for one of the elementary schools in the new system ("Elementary School D"). Petitioner failed to separate its installation price from the price for hardware and software. Petitioner conditioned the mandatory commitment to discounted pricing beyond July, 1997, on a requirement that Respondent accept Petitioner's full contract. Finally, Petitioner failed to base its cost on required response times. Elementary School D Petitioner failed to include information for Elementary School D on the individual system detail price sheet. Petitioner's failure does not affect the contract price, does not result in a palpable economic benefit to Petitioner, and does not adversely affect Respondent's interest. Omnicom sent out approximately six addenda to the RFP before completing its evaluation. One of the addenda failed to include Elementary School D. Omnicom discovered the error and evaluated the cost of all proposals with Elementary School D excluded. The omission of Elementary School D was an honest exercise of agency discretion by Omnicom and did not result in disqualification of the low proposal for technical reasons. Combined Pricing The detailed price sheets for each school and support office includes a space for the price of hardware and software. A separate space is provided for the price of installation. Petitioner did not provide separate prices but provided one price for hardware, software, and installation. The purpose of the separate pricing requirement is twofold. Separate pricing allows Omnicom to determine if individual prices are out of line with industry standards. It also provides information needed for additional purchases of separate items. Petitioner's deviation from separate pricing requirement did not violate the strong public policy against disqualifying the low bidder for technical reasons. Omnicom awarded Petitioner the highest number of points and recommended Petitioner for the contract. Petitioner's deviation did not result in a competitive advantage for Petitioner. The purpose of the separate pricing requirements was informational. Petitioner's deviation did not adversely impact the interests of Respondent. It did not impact the lowest price posed or the technical capability of the proposal. Discounted Pricing The RFP instructs proposers to base their pricing on the assumption that the proposer would install the entire system. Petitioner's conditional commitment to discount pricing through July, 1997, merely restates the assumption mandated in the RFP. The RFP instructs all proposers to assume they will be awarded the contract for the entire system in preparing their proposals. Even if Petitioner's conditional commitment were a deviation from the RFP, it would not be a major variation. It does not violate the strong public policy against disqualifying the low bidder for technical reasons. It does not result in a competitive advantage for Petitioner. It does not adversely impact the interests of Respondent. Response Time The RFP requires an emergency service response time of two hours. It mandates damages for violation of the response time of $250 per hour up to $2,500 a month. Petitioner's alternate proposal does not conform with this requirement. It proposes a four hour response time. Petitioner took exception to the liquidated damages provision and proposed a maximum damage of $500. Petitioner's deviation is a minor irregularity. Omnicom adequately addressed the deviation in the evaluation report so that the deviation will not affect contract price, afford Petitioner a palpable economic benefit, or adversely impact Respondent's interest. Honest Exercise Of Agency Discretion Omnicom's response to the deviation's in Petitioner's proposal is an honest exercise of agency discretion by Omnicom. Omnicom applied the same methodology in a consistent manner for all of the proposals. Omnicom's decision is a reasonable exercise of its expertise in telecommunications based on independent knowledge and experience. Respondent did not reject Omnicom's evaluation of the proposals or reject the proposals. Respondent did not request that Omnicom re-evaluate the proposals. Respondent stated in its notice of intent to award the contract to Intervenor that its decision is based on the presentations at the September 20 meeting and on Omnicom's evaluation.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order granting Petitioner's protest of the selection of Intervenor. RECOMMENDED this 29th day of December, 1995, in Tallahassee, Florida. DANIEL S. MANRY, 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 29th day of December, 1995.
The Issue The issue is whether Respondent's notice of intent to award a contract for a Prescription Drug Monitoring System (PDMS) to Intervenor is, under section 120.57(3)(f), Florida Statutes, contrary to governing statutes, rules, policies, or solicitation specifications due to the nonresponsiveness of Intervenor's proposal or flaws in the scoring.
Findings Of Fact RFP On October 14, 2010, Respondent issued the RFP. RFP Section 3.1 states that the purpose of the RFP is to acquire and implement a customizable, commercial, off-the-shelf PDMS, in accordance with section 893.055, Florida Statutes. RFP Section 3.1 states that this statute provides for the establishment of a comprehensive, electronic database securely to collect and store data of the dispensing of Schedule II-IV controlled substances by prescribers and dispensers. Section 3.3 defines a commercial, off-the-shelf program as "computer software or hardware, technology, or computer products that are ready-made and available [to] the general public, which includes systems that are manufactured commercially, and then tailored for specific uses." RFP Section 3.2 states that the initial term of the PDMS contract is November 30, 2010, through September 30, 2011. The November 30 start date for this ten-month contract anticipated the posting of the intent to award on November 16, 2010 and no challenge to the proposed award. Section 3.2 states that the proposed PDMS should be delivered and accepted by Respondent within 90 days after execution of the contract. RFP Section 4.1 states: To participate in this solicitation the Proposer must provide documentation to answer all the qualification questions listed in Attachment I. Each mandatory question requires a "Yes" or "No" answer. Proposals that have any "No" answer to these mandatory requirements will be deemed non- responsive and will not be given further consideration. Proposers should use care and integrity in preparing their documentation supporting responses to the qualification questions, since these are mandatory requirements. The RFP contains a detailed statement of the scope of services,1 specific tasks,2 projected staffing profiles,3 qualifications,4 technical approach and implementation timelines,5 and other matters.6 Many of these provisions, such as the scope of services and specific tasks, are requirements imposed upon proposals. Among the requirements incorporated into the RFP is PUR 1001, which is the state of Florida "General Instructions to Respondents" to bid solicitation documents. Paragraph 4 of PUR 1001 states: "Failure to comply with terms and conditions, including those specifying information that must be submitted with a response, shall be grounds for rejecting a response." RFP Section 4.21 states that each proposer must submit a cost proposal, using the Cost Proposal Form that is Attachment XI. The cost proposal depicts the costs for the term of the contract plus three, one-year renewals. Of especial significance to this case, RFP Section 4.21 contains four bullet points and two flush paragraphs. Section states: The cost proposal must include the following items: The proposer must submit a cost proposal using the worksheet provided in Attachment XI, covering the entire period of the contract, including potential renewals. The cost proposal must show the cost for implementing the system, the cost for the maintenance of the system, the cost for hosting of the date through September 11, 2011, and the cost for providing operational support to the PDMS. The cost proposal shall include the costs necessary for the proposer to fully comply with the contract terms and conditions, RFP requirements including amendments, and the proposer's proposal. . . . Only costs incurred after the resulting contract's effective date specifically related to the implementation, maintenance, hosting, and operational support of contracted services should be included in the cost proposal. Proposers shall provide a firm fixed price for the tasks and deliverables outlined in this RFP. The fixed price shall take into consideration, including but not limited to, all staff hours, equipment, travel costs, overhead, and any profit or fees required for that deliverable. Immediately following these four bullet points, the first flush paragraph of RFP Section 4.21 provides: The Proposer must submit a narrative itemizing the costs included in the cost proposal. The narrative must specifically address the comprehensiveness of the proposed PDMS and any tasks or services that are excluded and are considered enhancements that may be implemented in the future. Proposed costs for prospective enhancements should be included. RFP Section 4.21 concludes with the second flush paragraph, which describes the scoring of the cost proposals. Section 4.21 provides that 50 points will be awarded to the lowest cost proposal. For higher cost proposals, the proposers will receive a score that results from multiplying 50 points times a fraction whose numerator is the lowest proposed cost and whose denominator is the proposed cost of the proposer under review. RFP Section 4.22 provides: Each qualified proposal will be evaluated and scored based on the criteria defined in Attachment II. Evaluation sheets will be used by the Evaluation Team to designate the point value assigned to each proposal. The scores of each member of the Evaluation Team will be averaged with the scores of the other members to determine the final scoring. . . . The proposer receiving the highest score will be selected for the award. RFP Section 5.8 provides: [Respondent] reserves the right to accept or reject any and all proposals, or separable portions thereof, and to waive any minor irregularity, technicality, or omission if [Respondent] determines that doing so will serve the State's best interests. [Respondent] may reject any response not submitted in the manner specified by the solicitation documents. Attachment I is "Qualifying Criteria." This attachment states at the top: . . . All proposals will be screened for compliance. Failure to comply shall render a proposal non-responsive and ineligible for further evaluation. . . . The nine qualifying criteria in Attachment I are stated as questions, and the form implies that Respondent will evaluate each proposal by answering "yes" or "no" to each of the questions. The qualifying criteria are: Does the proposal include a fully executed Statement of Financial Capability, including all supporting documentation? Attachment I. Does the proposer certify that they [sic] will comply with the Harold Rogers Grant #2009PM-BX-4004? (See Required DOH Certifications Attachment III) Does the proposal provide documentation that the prospective proposer currently hosts a PDMS as defined in this RFP in at least one other state for at least one year? See Section 3.2 Does the proposal provide documentation that the proposed system is a customizable, commercial-off-the-shelf data base system? See Section 4.6.1 Does the proposal provide documentation that the proposed system is compatible with existing PDMS used nationally? See Section 4.6.1 Does the proposal provide documentation that the proposed system collects electronic data in the format established by the American Society for Automation in Pharmacy (ASAP) 2007, version 4.1, Rules Based Implementation Guide for Prescription Monitoring Programs or its successor? See Section 4.2 Will the proposed system be hosted offsite and operate independently of any other systems or networks of the Department or the State of Florida? Does the proposed system comply with Health Insurance Portability and Accountability (HIPPA) as it pertains to protected health information, electronic protected health information (EPHI), and all other relevant state and federal privacy and security laws/regulations? See Section 4.2 Does the submitted Statement of Financial Capability and supporting documentation demonstrate the Proposer has the financial capability to complete the tasks of this RFP? For the last qualifying criterion, Attachment I adds: The Statement of Financial Capability . . . will be evaluated by an evaluator designated by the Department as having the knowledge and experience to determine if the Proposer is financially capable of completing all the services and tasks contemplated by this RFP. Failure to receive "YES" shall render a proposal non-responsive and ineligible for further evaluation. Attachment II is "Evaluation Criteria." These are the technical scoring items of this RFP. Attachment II states: Evaluation sheets will be used by the Evaluation Team to designate the point value assigned to each proposal. The scores of each member of the Evaluation Team will be averaged with the scores of the other members to determine the final scoring. The proposer receiving the highest score will be selected for award. Point Value: Unless otherwise indicated, zero is lowest possible and the number indicated in this column is the highest possible. Attachment II lists 19 items to be scored. For each item, Attachment II prescribes what is to be scored, identifies the section of the RFP to which the item relates, and states the maximum available points. The RFP does not contain further guidance for the evaluators in terms of the meaning of the maximum score or a score less than the maximum. The 19 scoring items carry a maximum of 500 points. The scoring dispute in this case focuses largely on one evaluator's scores of Items 15-19, each of which has a maximum score of 20 points.7 The five, 20-point items in dispute are stated below, with the item number on the left. The RFP reference for each items is RFP Section 4.21. The five items are: How well does the cost proposal narrative explain the costs of the customization and the necessity of the costs for delivery of the proposed PDMS? How well does the cost proposal narrative explain the operational support costs and the necessity of those costs for the proposed PDMS? How well does the cost proposal narrative explain the system maintenance costs and the necessity of those costs for the proposed PDMS? How well does the cost proposal narrative explain the costs for hosting and the necessity of those costs for the proposed PDMS? How well does the cost proposal narrative explain the need for and the cost of prospective enhancements? In contrast to the first 14 items, which require the evaluator to assess "the proposal," Items 15-19 direct the evaluator to assess "the cost proposal narrative." Four of the five challenged items require the proposer to explain the costs for a particular PDMS cost category and the necessity of these costs. The final item requires the proposer to explain the need for, and costs of, enhancements. Attachment XI, which is the Cost Proposal Form, identifies five categories of costs on a single page. The form requires the proposer to state a total cost for the commercial, off-the-shelf product, which is complete on delivery at the start of the contract, and a total cost for the customization required to conform the off-the-shelf product to the technical specifications in RFP Section 4.6. The RFP defines customization to include implementation, hosting, and maintenance through September 30, 2011. Attachment XI calls for a total cost for each of the remaining three categories of costs, which are maintenance support, operations support, and hosting for each of the three one-year anticipated renewal periods ending September 30, 2012, 2013, and 2014. The form requires the itemization of these three categories of costs into monthly amounts, which are merely the total annual costs of each category of cost divided by twelve. Lastly, the form requires the totaling of these five categories of costs, so that the proposer states at the bottom of the completed Attachment XI its "grand total cost proposal." Responses Cost Proposals Petitioner's Attachment XI shows no cost for the commercial, off-the-shelf program. The total cost of customization is $94,380. The annual costs for maintenance, operations, and hosting are, respectively, $40,440, $66,912, and $49,536, and these costs remain unchanged over the three anticipated renewal years. Petitioner's grand total cost proposal is therefore $565,044. Petitioner Response, p. 190. Intervenor's Attachment XI shows the total cost for the commercial, off-the-shelf program is $96,730, and the total cost of customization is $115,068. The annual costs for maintenance, operations, and hosting are, respectively, $50,665, $132,976, and $41,455, and these costs remain unchanged over the three anticipated renewal years. Intervenors grand total cost proposal is therefore $887,059. Intervenor Response, p. 126. Item 15: Customization Costs and Their Necessity Petitioner Response For its narrative of the cost of customization and the necessity of this cost, Petitioner's response explains that the first part of the customization cost is $15,015. Petitioner Response, p. 191. This is the labor cost of customization. Petitioner Response, p. 192. The narrative explains that most of the features described in RFP Section 4.6.1 are already in the commercial, off-the-shelf program. The labor in customizing the off-the-shelf program includes: Time spent in requirement analysis meetings to arrive at the Requirements Definition for customization of the software. We propose to have two sessions. To customize the software such that application security can be configured per user to assign security roles to authorized department staff, dispensers, prescribers, and any other users authorized by law. To make necessary changes and modifications to the application software such that all of the web pages are tuned to comply with the business rules of the State of Florida as agreed upon in the requirements sessions. To include a statement in the software indicating that Florida's PDMS was made available using funds from a federal grant . . .. Provide for a method that allows the department to suspend the 15 day requirement during emergency events (e.g., hurricane) Provide a method that allows registered dispensers to request an extension to the reporting requirement (e.g., per individual or per pharmacy) in accordance with proposed Rule 64K-1, F.A.C. Create a method to coordinate and implement the initial mass registration of dispensers and prescribers. Petitioner Response, pp. 192-93. To customize its off-the-shelf program, Petitioner stated that it must perform requirements analysis; perform analysis, study, and design; perform design documentation and review; make changes to the database; make changes to the user interface; make changes to the business logic; conduct quality assurance and quality control; prepare user documentation; and perform project management. In documenting $15,010 in total labor for customization, Petitioner's response itemizes the labor costs by hourly rate and number of hours for the following positions: systems analyst, database administrator, senior programmer analyst, programmer analyst, quality analyst, technical writer, and project manager. Petitioner Response, p. 193. The second part of Petitioner's customization cost is $14,000. This is for all costs and expenses related to implementation, travel, training, setup and data collection for system software and system hardware (servers), and setup for the help desk. Petitioner breaks down these costs into skilled labor and travel expenses. The skilled labor covers individual tasks--e.g., hardware and server setup, data collection help desk setup, and implementation of customized PDMS--by position type, hourly rate, and hours. The travel expenses show airfares, food and per diem for particular tasks, such as the "kick off" and requirements session, and training by a specified number of staff for a specified number of days. The total is $28,000, but Petitioner discounts this item by half for what it anticipates will be a long-term relationship. Petitioner Response, p. 191. The third part of the customization cost is $65,370. This is for the hosting, maintenance, and operations support from the "go-live" date of April 8, 2011,8 through September 30, 2011, or five months. The monthly cost for each of these components is, respectively, $3370, $5576, and $4128. Petitioner Response, p. 192. 2. Intervenor Response For its narrative of the cost of customization and the necessity of this cost, Intervenor's response states: all associated start-up costs for development, configuration, and integration are part of the total proposed implementation price. [Intervenor] will fully host the RxSentry solution for [Respondent] utilizing our state-of-the-art co-location data center, AtlantaNAP. Hosting costs include all hardware, software, co-location data center fees, communication fees, maintenance, and technical support as required under the contract. Additional costs for implementation include travel, training, and administrative fees such as bond and FBI criminal background checks for key personnel per [Respondent] requirements. A one-time licensing fee for RxSentry is included in the implementation pricing. Ongoing operational support costs in terms of personnel expense, operating expense, systems expense, corporate overhead, and annual maintenance for RxSentry are included in the total pricing for the initial contract period. [Intervenor] project management, clinical, and technical support staff are provided to ensure a seamless transition from implementation to daily operations. Personnel costs include a primary contact as the PDMP Account Manager Ms. Sheila McCollough, access to clinical expertise from our Training Manager, Mr. Steve Espy, RPh, technical writing expertise for customized user guides and training materials, quality and contractual compliance oversight, and a highly skilled technical and customer service staff to maintain the RxSentry solution and provide customer service and support to both [Respondent] staff and the prescriber/dispenser population. [Intervenor] performs regular monitoring and maintenance for all our clients, including routine backup and recovery activity, data archiving and removal, and other system upgrades, improvements, and error corrections to ensure that RxSentry continues to meet our clients' needs and standards. Expense categories used in pricing the project include all line item costs shown in the following table [no costs are shown]: [Technical Lead] Information Systems Manager . . . Customer Support Manager [Training Coordinator] . . . Technical Support Manager . . . Technical Help Desk Staff Technical Writing Staff Operating Expenses: Travel Training Office Supplies Printing fees Mailings Administrative fees . . . System Expenses: Hardware leasing Software purchase (one time) RxPert License Fee (one time) AtlantaNAP Data Center Fees Communication Fees Software Maintenance Hardware Maintenance Intervenor Response, pp. 123-24. Under the heading, "Customization," Intervenor's response states that Intervenor will work with Respondent during the implementation requirement sessions to document all specifications for collecting and reporting controlled substance data. This includes: dentifying required fields and layouts for patient advisory alerts and reports, request forms and authorization requirements, user roles and access, standard and ad-hoc report content and layout, and customization of screens per [Respondent] request. The next section of Intervenor's response is "Assumptions." This section states: No inflationary increase has been added to ongoing operational pricing. Standard technical hours and support for data submitters and requestors will be provided Mon-Fri, EST, from 9:00 AM - 5:00 PM; excluding state and national holidays. Training materials for dispensers and practitioners will be hosted online along with computer-based training as required by [Respondent]. Notification letter mailing costs for uploaders is based upon 8,322 active pharmacies and approximately 7,312 active dispensing healthcare practitioners. All tasks and activities will be performed at the [Intervenor's] Corporate Office in Auburn, AL. Proposed pricing and annual maintenance for PMIX Hub is not included in the cost proposal but is provided in the following narrative section, "System Enhancements." Intervenor Response, p. 125. Item 16: Operational Support Costs and Their Necessity Petitioner Response For its narrative of the cost of operational support and the necessity of this cost, Petitioner's response states that the operational support costs are $5576 per month for each of the three one-year renewal terms. These costs include "all labor costs . . . to support the collection and uploading of prescription data." These services include collecting, validating, scrubbing, and uploading the data, as well as contacting the data collectors about prescription errors. Petitioner Response, p. 195. Petitioner breaks down the operational support costs by position, hourly rate, and hours per month. The positions are data collection help desk analyst and data collection senior help desk analyst. Other expenses include infrastructure and office space and telephone. Petitioner's response describes the positions in terms of work experience. 2. Intervenor Response Except for enhancements, Intervenor's entire cost narrative has been described above. Item 17: System Maintenance Costs and Their Necessity Petitioner Response For its narrative of the cost of system maintenance and the necessity of this cost, Petitioner's response notes that the system maintenance costs are $3,370 per month for each of the three one-year renewal terms. These services are to respond to all emails from Respondent. For system-down calls, Petitioner will respond within four hours; for severely impaired-impact calls, Petitioner will respond within 24 hours. For the remaining calls, Petitioner will respond within 72 hours. Petitioner breaks down the system maintenance costs by position, hourly rate, and hours per month. The positions are database administrator, programmer analyst, quality analyst, and project manager. The proposal assumes 36 hours of software support and maintenance, but acknowledges that there is no limit on hours of support that Petitioner will actually provide. 2. Intervenor Response Except for enhancements, Intervenor's entire cost narrative has been described above. Item 18: Hosting Costs and Their Necessity Petitioner Response For its narrative of the cost of hosting and the necessity of this cost, Petitioner's response notes that the hosting costs are $4128 per month for each of the three one-year renewal terms. Hosting is at a secure facility with redundant power and redundant data carriers. Petitioner breaks down the hosting costs by the single position, which is system/network manager, and her hourly rate and hours per month. Other itemized costs are relatively small and include a backup circuit and server. 2. Intervenor Response Except for enhancements, Intervenor's entire cost narrative has been described above. Item 19: Need for, and Cost of, Prospective Enhancements Petitioner Response For its narrative of the need for and cost of prospective enhancements, Petitioner's response notes that its software has an available PMIX interface software module. Because PMIX "is beyond the scope of the current proposed project," Petitioner's response proposes the module as a prospective future enhancement. Petitioner breaks down the cost of the PMIX enhancement into a one-time cost of $10,600, which consists of $7800 for customization and implementation, and $2800, which consists of travel costs for training. Monthly costs would increase $1000, which consists of $750 for maintenance and $250 for operations. Petitioner breaks down the one-time labor costs by position, hour rate, and hours, and the travel costs for two persons for one day in Tallahassee. Additionally, Petitioner's response offers a methodology for how it would approach proposals from Respondent for future enhancements, including the hourly rates of 12 positions that might be involved in such work. 2. Intervenor Response The final section of the cost worksheets in Intervenor's response is "System Enhancements." This section states that Intervenor "is currently developing interchange functionality for RxSentry that will allow the exchange of data between states." Intervenor's response warns: "Pricing for PMIX Hub is not included in the proposed contract pricing but is provided below as a prospective enhancement to the RxSentry solution." The following table lists "PMIX Implementation" at a cost of $40,035 and "PMIX Hub Annual Maintenance" at a cost of $15,000. Assessment and Scoring of Proposals Respondent received only the two proposals of Petitioner and Intervenor. After the submittal deadline had passed, Respondent's Chief of Bureau of Operations, Lola Pouncey, examined each of the two proposals for compliance with the first eight of nine mandatories contained in Attachment I. Respondent hired CPA Richard Long to examine each proposal for compliance with the ninth mandatory, which requires an assessment of demonstrated financial capability. Ms. Pouncey and Mr. Long determined that both proposals met all of the mandatories in Attachment I. These determinations are not at issue. Likewise, one of Respondent's representatives calculated the cost scores for both proposals--50 points for Petitioner and 31.85 points for Intervenor--and these determinations are not at issue. The five evaluators had been trained by Respondent's Administrative Lead Janice Brown. By memorandum dated December 7, 2010, she advised them to "evaluate each proposal individually" and not to meet with other evaluators to discuss a proposal. Providing a little more guidance for scoring than is found in the RFP, the memorandum adds: The maximum possible score for each category should only be awarded if the vendor addressed each element we requested for that section thoroughly. If a vendor does not address elements in that section, their scores should be reduced accordingly. The five evaluators scored all of the Evaluation Criteria of Attachment II. The technical scores for Petitioner averaged 409.2 points--ranging from Ms. Poston's score of 266 to another evaluator's near-perfect score of 496. The technical scores for Intervenor averaged 448.6 points--ranging from scores of 360 to a perfect score of 500. Ms. Poston's total score for Intervenor is 430. Her score for Intervenor is its second lowest. Two of the evaluators scored Petitioner's proposal higher by 21 and 18 points. Two of the evaluators scored Intervenor's proposal higher by 40 and 32 points. Ignoring Ms. Poston's scores, which favored Intervenor by a lusty 164 points, Intervenor would have emerged from the technical scoring with an 8.25-point advantage. Because Petitioner earned a 18.15-point advantage from its superior cost proposal, Ms. Poston's scores, in this sense, dictated the outcome of the procurement. However, if Ms. Poston had assigned Petitioner's technical proposal the average of the scores of the other four evaluators or even the score of Petitioner's second-lowest evaluator, Petitioner would have prevailed on total points. Combining the technical scores with the cost scores, Respondent determined that Intervenor earned 480.45 points, and Petitioner earned 459.20 points. After confirming that Intervenor's references were acceptable, on December 21, 2010, Respondent posted its intent to award the contract to Intervenor. Except for the above-described examination of the proposals for compliance with the nine mandatories of Attachment I, at no time while Respondent processed the proposals did anyone determine whether each proposal was responsive to all of the other requirements of the RFP. On December 23, Petitioner timely filed a notice of intent to protest the intended award to Intervenor. On or before January 3, 2011, Petitioner timely filed the Formal Written Protest with a proper and sufficient bond. Respondent transmitted the file to the Division of Administrative Hearings on January 19, 2011. Determinations Concerning Responsiveness Respondent misreads the RFP in arguing that Attachment I is an exhaustive list of the requirements of the RFP to which a proposal must respond in order to be responsive. Attachment I lists nine requirements that, if unmet, will render a proposal unresponsive.9 But nothing in Attachment I implies that its nine requirements are an exhaustive list of the requirements of the RFP, or an exhaustive list of the RFP requirements that a proposal must satisfy to be responsive. Respondent's strained interpretation of its RFP creates an unnecessary conflict between Attachment I and paragraph 4 of PUR 1001, which warns proposers that Respondent may reject a proposal for a failure to comply with any RFP condition. On the basis of paragraph 4 of PUR 1001, as well as the authority cited in the Conclusions of Law, requirements contained in other RFP provisions, including Section 4.21, if unmet, may result in a determination that the proposal is nonresponsive, regardless of whether a proposal meets all of the mandatories set forth in Attachment I. As quoted above, Section 4.21 requires a "narrative itemizing the costs included in the cost proposal." (Emphasis supplied.) Intervenor's proposal does not itemize the costs of customization, operations, maintenance, and hosting. Intervenor's proposal minimally itemizes the costs of enhancement--$40,035 for PMIX Implementation and $15,000 for PMIX annual maintenance. The unitemized costs in Intervenor's cost proposal are: 1) $96,730 for the off-the-shelf program; 2) $115,068 for customization; 3) $50,655 for maintenance; 4) $132,976 for operations; and 5) $41,455 for hosting. The costs included in Petitioner's cost proposal are: 1) nothing for the off-the-shelf program; 2) $94,380 for customization; 3) $40,440 for maintenance; 4) $66,912 for operations; and 5) $49,536 for hosting. Petitioner's cost narratives itemize these costs in detail. The $94,380 for customization comprises $15,010 for customization labor, $14,000 for implementation, training, servers setup and data collection, and $65,370 for hosting, maintenance and operations through September 30, 2011, which is defined by the RFP as part of customization. Petitioner further itemizes the $15,015 of labor, $14,000 of implementation, training, servers setup and data collection, and $65,370 for hosting, maintenance and operations, which is merely the monthly costs for these items, as shown in Petitioner's Attachment XI, during the three annual renewal periods. Additionally, Petitioner's proposal itemizes the $3,370 per month for maintenance by showing hourly rates and number of hours by four positions; the $4,128 per month for hosting by showing the hourly rate and number of hours for one position plus various other monthly costs; and the $5,576 per month for operations by showing the hourly rate and number of hours for two positions and various other monthly costs. Lastly, for the PMIX enhancement, Petitioner itemizes the one- time customization costs of $7,800, which themselves are broken down; travel costs for training of $2,800, which themselves are broken down; and additional monthly costs of $1,000 for maintenance and operations. However, Intervenor's failure to itemize the costs in the cost proposal gave it no competitive advantage. Despite some unclear comments about a "cost-plus" proposal, Intervenor's proposal contains an unambiguous, enforceable statement of costs, as does Petitioner's. Each proposal locks in its proposer in terms of what it is agreeing to provide and at what cost. Nor did the requirement of itemization likely chill the bidding, so as to discourage potential vendors from competing for the PDMS contract. Attachment XI requires each proposer to identify the costs of customization and ongoing operations, maintenance, and hosting. To arrive at these broader category of costs, a diligent vendor probably would have had to assemble the underlying subcosts, so it would be easy to add them to the proposal. The effort in constructing the itemization appears minimal. The monthly costs of maintenance, operation, and hosting are relatively modest, so they do not have many subcosts, and the process of extending these costs for the term of the contract, plus renewals, is a simple matter of multiplication. In its proposed recommended order, Petitioner argues that Intervenor gained competitive advantage as follows: [Petitioner] recognized that this additional level of detail would enable [Respondent] to understand the level of commitment of resources of each respondent, and to hold the ultimate contract awardee accountable for the provision of the promised level of performance as reflected in the itemized costs. If a competitor fails to provide the detailed, itemized costs required by Section 4.21, it will enjoy a competitive advantage relative to bidders that do comply with that requirement. By failing to commit to any particular itemized cost, a bidder such as [Intervenor] may provide less training, and enjoy less expense, than another provider that itemized its costs. Failing to comply with Section 4.21 allows a bidder the flexibility not only to reduce its costs, but to also reduce the level and quality of services provided, without violating a commitment made to [Respondent.] Petitioner's proposed recommended order, p. 9. These arguments are that cost itemization: 1) enables Respondent to understand the level of commitment of each proposer; 2) enables Respondent to hold the selected proposer accountable for the promised level of performance; and 3) prevents a nonitemizing proposer from providing less services by reducing the level and quality of services provided. The second argument misses the purpose of itemization. Itemization breaks down the overall costs shown in Attachment XI. The accountability function that Petitioner mistakenly assigns to the itemization requirement is actually served by numerous other provisions of the RFP, such as the undertaking of to satisfy the scope of services, including specified data fields, data, and training10; the undertaking to provide the detailed tasks and services11; the specification of proposed staffing levels, which are enforceable conditions12; the detailed description of the design, capacity, and other features of host facility13; the detailed description of the proposer's approach to providing the technical services that demonstrates a thorough understanding of the project and includes a detailed description of the PDMS and how general maintenance and support services will be performed14; and the focus of the other 14 technical scoring items on various features of the PDMS.15 The first and third arguments are also unpersuasive. Respondent rejected the first argument in its preparation of the RFP. Omitting the Section 4.21 requirement of itemization from the five technical scoring items related to cost, Respondent implicitly decided that it did not need the additional insight into a proposer's level of commitment. This is not a complicated procurement. Each proposer has implemented at least one monitoring system of this type in another state. For the same reason that itemization may have been omitted from the scoring items, so it is not especially important in understanding the level of commitment of resources of each proposer. Also, the worries sometimes attendant to the association of underbidding with the failure to include all of the solicited goods and services do not apply here, at least based on the relative cost proposals of both proposers. The third argument implies that the cost narratives will be elevated into the contract itself. But nothing in the RFP compels a proposer to pay a help-desk employee or data programmer the rate of pay specified in any cost itemization. Perhaps, in a deflationary economy, the rate of pay of these employees may decline, as may the office rent and travel costs. The selected vendor may pocket these savings, just as it must absorb the additional expenses, if, in an inflationary economy, these items increase in cost during the term of the initial contract or three annual renewal terms. The floor on services is not provided by a few cost itemizations, but by enforceable contract provisions and the selected vendor's incentive to keep the contract for the three one-year renewal periods, and perhaps beyond. Determinations Concerning Scoring General Petitioner objects to Ms. Poston's scoring--in general, all of it, but, in particular, her scoring of Items 15-19. In its proposed recommended order, Petitioner seems to make two arguments about Ms. Poston's scoring of its proposal. First, Ms. Poston favored Intervenor's proposal by such a wide margin as to call into question all of her scores. Second, Ms. Poston offered startlingly odd reasons, such as noncompliant formatting, for the relatively low scores of Petitioner's proposal. However, as in the Formal Written Protest and the hearing, Petitioner analyzes Ms. Poston's scoring of Items 15-19 only. Preliminarily, Petitioner's approach to the scoring issue raises two problems. First, absent analysis of Ms. Poston's scoring of the other items, Petitioner fails to prove flawed scoring of these items under the Clearly Erroneous Standard, which is explained in the Conclusions of Law. For this reason, this recommended order will not otherwise consider Ms. Poston's scoring of these items. Second, Petitioner's challenge to Ms. Poston's scoring of Items 15-19 suffers from a misreading of what these items require to be evaluated. Specifically, Petitioner misreads Items 15-19 to require the evaluators to evaluate how well the cost narratives itemize costs, among other things. One example of this misreading occurs at the last sentence of paragraph 18 of its proposed recommended order, which states: "In fact, the Section 4.21 requirement that each proposer submit an itemization of its costs . . . received twice as much weight as the cost proposal itself." Itemization of costs actually receives no weight in the five scoring items that pertain to the cost narrative. None of these five scoring items uses the word, "itemize" or "itemization." RFP Section 4.21 requires the itemization of various costs, and this requirement, as discussed in the preceding section, serves as a basis on which to determine the responsiveness of proposals. But Respondent did not include the itemization requirement of Section 4.21 in the scoring items for the cost narrative. In preparing the RFP, Respondent included some, but not all, of the requirements of Section 4.21 in these five scoring items, which are drawn from the first bullet and first flush paragraph of this section. The first flush paragraph requires a narrative that: 1) itemizes the costs in Attachment XI; 2) specifically addresses the comprehensiveness of the proposed PDMS; and 3) specifically addresses any excluded tasks or services that may be enhancements. The first flush paragraph encourages--through the use of the word, "should"--the inclusion within this narrative of a fourth element: proposed costs for prospective enhancements. The first four scoring items focus exclusively on the four cost categories--customization, operation, maintenance, and hosting--identified in the first bullet of Section 4.21. The five scoring items authorize scoring of the narratives only as to how well they explain the costs and their necessity. When compared to RFP Section 4.21, the five scoring items omit the requirements of an itemization of costs, a specific description of the comprehensiveness of the proposed PDMS, and a specific description of excluded tasks that may be enhancements, although this last requirement is covered to some degree by the fifth scoring item. At minimum, then, the narrative's itemization of costs and specific description of the comprehensiveness of the proposed PDMS receive no direct weight in scoring, except, as noted below, for the indirect value of each of these elements when scoring the cost narrative for its explanations of costs and their necessity. Further distinguishing RFP Section 4.21 from the five scoring items covering the cost narrative, the scoring items add two elements not found in RFP Section 4.21: 1) an explanation of the costs and 2) an explanation of the necessity of the costs. These elements are closely related to the provisions of Section 4.21, but are not explicitly required in this section. Petitioner's misreading of Items 15-19 undermines its scoring argument. This misreading attaches great significance to Petitioner's compliance with the itemization requirement of RFP Section 4.21 and Intervenor's noncompliance with this requirement--facts of some importance to the responsiveness issue discussed in the preceding section, but of no direct importance to the scoring issue discussed in this section. Also unhelpful to Petitioner's scoring argument is the fact that Ms. Poston's scores of Items 15-19 do not stand out among the evaluators. She gave each proposal 60 points, although she was the sole evaluator to score Intervenor's proposal higher than Petitioner's proposal on Item 15. One other evaluator scored the two proposals a tie on these five items, although his score was 100 points each. Another evaluator scored the two proposals a near-tie, with Petitioner's proposal earning 100 points and Intervenor's proposal earning 98 points. The remaining two evaluators scored these five items substantially in Petitioner's favor, with advantages of 39 and 20 points. The proper analysis of Ms. Poston's scores is based on the actual language of Items 15-19. The impact of the inclusion or omission of the itemized costs from these cost narratives is more nuanced than Petitioner argues in its scoring argument. A cost narrative may explain the cost of, say, customization and the necessity of this cost without itemizing or identifying the subcosts of customization, although a cost narrative that starts by itemizing these subcosts may facilitate its explanation of the overall cost and its necessity. Understandably, Petitioner stresses Ms. Poston's testimony at the hearing that she reduced Petitioner's scores in general, at least in part, for the failure of its proposal to conform to various stylistic requirements in the RFP. These nonconformities include excessively small font size, inadequate margins, other unidentified formatting errors, numerous typographical errors, poor organization in which information was just "dropped" into various places, and inconsistency in style where sometimes the proposal uses bullet points and sometimes it uses narrative. Ms. Poston's testimony in the preceding paragraph is problematic for two reasons. First, Ms. Poston's testimony attempts to justify, in part, her scoring on grounds that are not authorized by the provisions of Attachment II. Second, this testimony is inapt. As to Petitioner's cost narrative, at least, the Administrative Law Judge did not measure font size, but did not notice any problems with font size, legibility, margins, formatting, typographical errors, or inconsistencies in style. And the organization of Petitioner's cost narrative permitted the Administrative Law Judge to find the relevant information much more readily than he could find it in Intervenor's cost narrative, which, as seen above, combined most of its responses to Items 15-18 in one section. Ms. Poston's typewritten scoring notes offer more support than her testimony, although her notes for Item 15 incorrectly report that Petitioner's response explained only the labor costs of customization. But her notes for Item 17 suggest that she captured more detail from Intervenor's proposal's explanation of system maintenance costs. However, nothing in the record suggests in any way that Ms. Poston was guilty of bias, fraud, or collusion in scoring, nor does Petitioner suggest as much. When asked, Ms. Poston freely explained her scores on items, using her typewritten notes when she could. She testified candidly and matter-of-factly about her scoring. Although not at all apologetic, Ms. Poston never appeared unduly invested in her scores or Respondent's proposed award. While testifying, she never acted adversarially, as an ally of Intervenor or opponent of Petitioner. Nor are Ms. Poston's scores of Items 15-19 arbitrary or capricious. Notwithstanding her comments about formatting, proofreading errors, and organization, Ms. Poston's scoring of these items is neither illogical nor irrational. Her typewritten notes reveal a clear understanding of the RFP and Petitioner's proposal, suggest an organized pattern to her thoughtful approach to scoring the items in question, and dispel any randomness in the scoring. The sole remaining question is whether Ms. Poston's scores of Items 15-19 are within the range of the reasonable. Consideration of the reasonableness of Ms. Poston's scoring must start with the acknowledgement that the phrasing of Items 15-19 invites a wider range of scores than would questions imposing on evaluators a task requiring more precision. These open-ended scoring items ask only "how well" a response "explains" certain costs and their necessity or, in the case of Item 19, "how well" a response explains the necessity and cost of prospective enhancements. Scoring of Item 15: Customization For Item 15, Petitioner first explains the labor in terms of the communications with Respondent's staff to obtain particularized information about what Respondent needs, programming to customize the off-the-shelf program to ensure that it delivers these communicated needs, and specific methods to allow registered dispensers to request extensions for reporting events and the mass registrations of dispensers and prescribers required on the initiation of the PDMS. Detailing this explanation of the labor involved in the customization of the off-the-shelf program, Petitioner's response outlines the tasks, which largely comprise the expected activities of analysis, design, design review, quality assurance and control, user documentation, and project management, but also identify changes to user interface and business logic. Petitioner's response further explains the costs of customization by detailing, by numbers of hours, the work to be done by systems analysts, database administrators, senior programmer analysts, programmer analysts, quality analysts, technical writers, and project managers. Second, Petitioner explains the costs of customization by discussing the costs and expenses related to implementation, travel, training, setup and data collection for system software and system hardware (servers), and setup for the help desk. This discussion shows individual tasks, such as hardware and server setup, data collection help desk setup, and implementation of customized PDMS, but distinguishes itself by identifying the hours of work by position type. The travel expenses show airfares, food and per diem for particular tasks, such as the "kick off" and requirements session, and training by a specified number of staff for a specified number of days. Petitioner's explanation of costs is particularly relevant for this topic because it further explains that it has halved these projected costs. Third, Petitioner explains the costs of customization with respect to the operational support, hosting, and maintenance costs from the "go-live" date through the end of the original term of the contract. Petitioner's explanation of these costs is ample. For Item 15, Intervenor explains that it starts with an off-the-shelf program that necessitates the payment of a one- time license fee. From there, Intervenor's proposal states that it will perform "all associated start-up costs for development, configuration, and integration [that] are part of the total proposed implementation price." "Additional costs for implementation include travel, training, and administrative fees such as bond and FBI criminal background checks for key personnel per [Respondent] requirements." Intervenor's proposal identifies some "line item costs" by position type, but this table omits hours or total costs and pertains largely, if not entirely, to operational support, hosting, and maintenance. Intervenor's proposal addresses customization costs explicitly in a relatively brief section devoted to this component. Intervenor explains that it will identify required fields and layouts for patient advisory alerts and reports, request forms and authorization requirements, user roles and access, standard and ad-hoc report content and layout, and customization of screens, as requested by Respondent. Ms. Poston assigned 15 points to Intervenor's conclusory explanation of customization costs and their necessity and 10 points to Petitioner's detailed explanation of these costs and their necessity. A score that assigns more points to Intervenor than to Petitioner for Item 15 is outside the range of the reasonable by five points. Scoring of Item 16: Operational Support For Item 16, Petitioner explains that operational support costs include "all labor costs . . . to support the collection and uploading of prescription data." These services include collecting, validating, scrubbing, and uploading the data, as well as contacting the data collectors about prescription errors. Petitioner identifies two positions--two help desk analysts--and breaks down the operational support costs by hourly rate and hours per month. Petitioner's response describes these positions in terms of work experience. For Item 16, Intervenor explains ongoing operational support costs in terms of personnel expense, operating expense, systems expense, corporate overhead, and annual maintenance for RxSentry, all of which are included in the total pricing for the initial contract period. Intervenor explains that project management, clinical, and technical support staff will assist Respondent in the transition from implementation to daily operations. Intervenor identifies available personnel by name and position--although not the expected extent of availability or use. Ms. Poston assigned each proposal 10 points for Item Petitioner's explanation of hours per month is of some utility, but the range of personnel--two help desk analysts-- limits the value of this response when compared, say, to the wider range of labor tasks involved in customization. Although more explanation might have been expected of Intervenor on this item, given the large difference between the two proposals for operations costs, the two explanations of operations costs and their necessity are roughly comparable, and Ms. Poston's scores for Item 16 are within the range of the reasonable. Scoring of Item 17: System Maintenance For Item 17, Petitioner explains that these costs involve email responses to service calls from Respondent, and Petitioner provides call-back deadlines based on the severity of reported problems. Petitioner breaks down the system maintenance costs by position, hourly rate, and hours per month. The positions are database administrator, programmer analyst, quality analyst, and project manager. The proposal assumes 36 hours of software support and maintenance, but acknowledges that there is no limit on hours of support that Petitioner will actually provide. For Item 17, Intervenor explains that maintenance is included in hosting and it will undertake all software and hardware maintenance. Additionally, Intervenor explains that it will perform routine backup and recovery activity, data archiving and removal, and other system upgrades, improvements, and error corrections necessary for the PDMS. Ms. Poston gave Intervenor 15 points and Petitioner 10 points for Item 17. She may legitimately have valued Intervenor's emphasis on system solutions over Petitioner's emphasis on customer service, so Ms. Poston's scores for Item 17 are within the range of the reasonable. Scoring of Item 18: Hosting For Item 18, Petitioner explains that the hosting is at a secure facility with redundant power and redundant data carriers. Petitioner breaks down the hosting costs by a single position, which is system/network manager, and her hourly rate and hours per month. Other itemized costs are relatively small and include a backup circuit and server. For Item 18, Intervenor explains that the hosting is at its "state-of-the-art" data center. Intervenor explains that hosting costs include all hardware, software, co-location data center fees, communication fees, maintenance, and technical support as required under the contract. Ms. Poston gave both proposals a 10 for Item 18. She understandably found no difference between a secure facility with redundant power and redundant data carriers and a state-of- the-art data center, so Ms. Poston's scores for Item 18 are within the range of the reasonable. Scoring of Item 19: Prospective Enhancements For Item 19, both parties identified the PMIX hub as a prospective enhancement. For this item, the RFP requires an explanation of the need for, and costs of, any enhancement. Neither party addressed the need for the enhancement in any detail, but perhaps that is because the PMIX hub is in the RFP Scope of Services, at RFP Section 4.2, although it is not in the Tasks and Services, at RFP Section 4.6.1. Petitioner explains that its software has an available PMIX interface software module. Petitioner further explains this cost by breaking the PMIX enhancement into one-time costs of customization and implementation and travel costs for training and monthly costs for maintenance and operations. Petitioner breaks down the one-time labor costs by position, hour rate, and hours. Petitioner further explains this cost by describing a methodology for how it would approach proposals from Respondent for future enhancements, including the hourly rates of 12 positions that might be involved in such work. Intervenor warns that it "is currently developing interchange functionality for RxSentry that will allow the exchange of data between states." Intervenor identifies the implementation and maintenance costs of a PMIX hub. Ms. Poston assigned Petitioner 20 points and Intervenor 10 points for Item 19. Contrasted to Petitioner's detailed explanation of enhancement costs, Intervenor's proposal acknowledges a present inability to provide this service, which certainly limits its ability to explain the costs that will eventually go with this service, once it is developed. Ms. Poston's scores for Item 19 are within the range of the reasonable. Summary of Scoring Findings Another shortcoming in Petitioner's scoring challenge is its failure to explain why the flaws in Ms. Poston's scoring of Items 15-19 should result in the rejection of all of her scores. To outpoint Intervenor, Petitioner needs over 100 more points from Ms. Poston. Items 15-19 are worth a total of 100 points, and Petitioner already received 60 points from her on these items, so Petitioner's scoring challenge, despite its focus on Items 15-19, necessarily seeks to overturn more than Ms. Poston's scores on these five items in Petitioner's proposal. But Petitioner does not seek more points from Ms. Poston. The gist of Petitioner's complaint with the scoring starts with the fact that it won or lost, by narrow margins, with the other four evaluators, but Ms. Poston's overall scoring margin--430 for Intervenor and 266 for Petitioner--determined the outcome of the scoring. Petitioner argues that Ms. Poston's scoring of Items 15-19 was illogical, irrational, and so outside the range of the reasonable that its effect cascades through all of her scores and, to preserve the integrity of the subject procurement, her scores must be thrown out in their entirety, resulting in a recommendation that Respondent rebid the PDMS contract or award it to Petitioner. Whatever the exact form of this argument, after close analysis of the five scoring items that Petitioner challenged, the Administrative Law Judge has found nothing arbitrary or capricious in Ms. Poston's scoring and only one item that falls outside the range of the reasonable--by only five points. As discussed in more detail in the Conclusions of Law, this finding provides no platform for Petitioner's larger attack on the reliability of Ms. Poston's overall scoring and its role in Respondent's overall evaluation of the two proposals.
Recommendation It is RECOMMENDED that the Department of Health enter a final order dismissing the Formal Written Protest. DONE AND ENTERED this 8th day of March, 2011, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of March, 2011.
The Issue The issue in these cases is whether the Department of Juvenile Justice's (Department) proposed award of certain contracts to Bay Area Youth Services, Inc. (BAYS), based on evaluations of proposals submitted in response to a Request for Proposals is clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact On July 2, 2003, the Department issued Request for Proposal (RFP) No. V6P01 for operation of IDDS programs in Judicial Circuits 1 through 20. The Department issued a single RFP and anticipated entering into 20 separate contracts, one for each circuit. Each contract was for a three-year period with the possibility of a renewal for an additional three-year period. The RFP was prepared based on a "contract initiation memo" generated within the Department and upon which the scope of services set forth in the RFP was based. The Department assigned one contract administrator to handle the procurement process. An addendum dated July 18, 2003, was issued to the RFP. As amended by the addendum, the RFP required submission of information in a tabbed format of three volumes. Volume I was the technical proposal. Volume II was the financial proposal. Volume III addressed past performance by the vendor. The addendum also allowed providers to submit some information in electronic format. The addendum requested, but did not require, that it be signed and returned with the submission. BAYS did not return a signed copy of the addendum in its proposal. Failure to sign and return the addendum was not fatal to the consideration of a proposal. The RFP set forth only two criteria for which noncompliance would be deemed "fatal" to a proposal. Failure to comply with a fatal criterion would have resulted in automatic elimination of a provider's response; otherwise, all responses submitted were evaluated. The proposals were opened on July 31, 2003. The contract administrator and staff reviewed the bids to ascertain whether required items were included, and noted the proposed costs on bid tabulation sheets. The first fatal criterion was failing to submit a properly executed "Attachment A" form to a submission. Attachment A is a bidder acknowledgment form. Both BAYS and JSP included a completed Attachment A in the responses at issue in this proceeding. The second fatal criterion was exceeding the Maximum Contract Dollar Amount. RFP Attachment B, Section XIII, provides in relevant part as follows: The Maximum Contract Dollar Amount will be the Annual Maximum Contract Dollar Amount multiplied by the number of years in the initial term of the Contract . . . . EXCEEDING THE ANNUAL MAXIMUM CONTRACT DOLLAR AMOUNT IS A FATAL CRITERION. ANY PROPOSAL WITH A COST EXCEEDING THE ANNUAL MAXIMUM CONTRACT DOLLAR AMOUNT WILL BE REJECTED. The information reviewed as to each provider's cost proposal was set forth in Volume II, Tab 1, which included RFP Attachment J. RFP Attachment J is a cost sheet where providers were required to set forth proposal costs identified as the "Maximum Payment" under their proposal. Attachment K to the RFP identifies the counties served in each circuit, number of available slots in each circuit, and the Annual Maximum Contract Dollar Amount for each circuit. JSP appears to have simply copied information from Attachment K onto Attachment J. The Department's contract administrator was the sole person assigned to review Volume II of the responses. Volume II included the cost proposal, the supplier evaluation report (SER), and the certified minority business enterprise (CMBE) subcontracting utilization plan. Neither BAYS nor JSP exceeded the Annual Maximum Contract Dollar Amount applicable to any circuit at issue in this proceeding. Both BAYS and JSP identified a Maximum Payment equal to the Annual Maximum Contract Dollar Amount as their proposal cost. Both BAYS and JSP received scores of 100 points for cost proposals in all responses at issue in this proceeding. JSP asserts that the instructions as to identification of the Annual Maximum Contract Dollar Amount were confusing and that its actual cost proposal was less than that set forth as the "Maximum Payment" on Attachment J. JSP asserts that it actually listed its cost proposal at the section identified on Attachment J as "renewal term dollar amount proposed." JSP asserts that the Department should have reviewed supporting budget information set forth in Attachment H to the RFP to determine JSP's cost proposal, and that the Department should have determined that JSP's actual cost proposal was less than that of BAYS. The Department did not review the budget information in Attachment H, but based its cost evaluation of the proposals on the total figures set forth on Attachment J. Nothing in the RFP suggests that underlying information as to cost proposals would be reviewed or evaluated. The evidence fails to establish that the Department's reliance on the information set forth on Attachment J was unreasonable or erroneous. The evidence fails to establish that the Department's scoring of the cost proposals was contrary to the RFP. The evidence fails to establish that JSP is entitled to have its cost proposal re-scored. One of the requirements of the RFP was submission of a "Supplier Evaluation Report" (SER) from Dunn & Bradstreet. The submission of the SER was worth 90 points. Dunn & Bradstreet transmitted most of the SERs directly to the Department, and the Department properly credited the providers for whom such reports were transmitted. The Department's contract administrator failed to examine BAYS submission for the SER, and BAYS did not receive credit for the SER included within its proposal. The failure to credit BAYS for the SERs was clearly erroneous. BAYS is entitled to additional credit as set forth herein. The RFP sought utilization of a CMBE in a provider's proposal. BAYS proposal included utilization of The Nelco Company, an employee leasing operation. The Nelco Company is a properly credentialed CMBE. Under the BAYS/Nelco arrangement, BAYS would retain responsibility for identification and recruitment of potential employees. BAYS performs the background screening and makes final employment decisions. BAYS retains the right to fire, transfer, and demote employees. The Nelco Company would process payroll and handle other fiscal human resource tasks including insurance matters. The Nelco Company invoices BAYS on a per payroll basis, and BAYS pays based on the Nelco invoice. JSP asserts that under the facts of this case, the participation of The Nelco Company fails to comply with the RFP's requirement for CMBE utilization. BAYS proposals also included utilization of other CMBEs. There is no credible evidence that BAYS utilization of The Nelco Company or of the other CMBEs included within the BAYS proposals fails to comply with the RFP's requirement for CMBE utilization. The Department assigned the responsibility for service proposal evaluation to employees located within each circuit. The contract administrator and staff distributed appropriate portions of Volume I of each proposal to the evaluators. The evidence establishes that the evaluators received the documents and evaluated the materials pursuant to written scoring instructions received from the Department. Some reviewers had more experience than others, but there is no evidence that a lack of experience resulted in an inappropriate review being performed. In two cases, the evaluators worked apart from one another. In one circuit, the evaluators processed the materials in the same room, but did not discuss their reviews with each other at any time. There is no evidence that evaluators were directed to reach any specific result in the evaluative process. JSP asserts that there was bias on the part of one evaluator who had knowledge of some unidentified incident related to JSP. The evidence fails to establish the facts of the incident and fails to establish that the incident, whatever it was, played any role in the evaluator's review of the JSP proposal. JSP also asserts that another evaluator had contact with JSP at some point prior to his evaluation of the RFP responses. There is no evidence that the contact was negative or was a factor either for or against JSP in the evaluation of the RFP responses. The RFP required that each provider's proposal include letters of intent from "local service resources" indicating a willingness to work with the provider and a letter of support from the State Attorney in the judicial circuit where the provider's program would operate. The RFP indicates that Volume I of a provider's response should contain five tabbed sections. The RFP provides that "information submitted in variance with these instructions may not be reviewed or evaluated." The RFP further provides that failure to provide information "shall result in no points being awarded for that element of the evaluation." JSP included letters of support in Tab 5 of Volume I. BAYS included letters of support in a tabbed section identified as Tab 6 of Volume I. JSP asserts that information included in Tab 6 of BAYS proposals should not have been evaluated and that no points should have been awarded based on the information included therein. The evidence fails to support the assertion. Based on the language of the RFP, submission of information in a format other than that prescribed is not fatal to a proposal. The Department reserved the authority to waive such defects and to evaluate the material. Here, the Department waived the variance as the RFP permitted, and reviewed the material submitted by BAYS. JSP asserts that BAYS proposal breached client confidentiality by inclusion of information regarding an individual who has allegedly received services through BAYS. Records regarding assessment or treatment of juveniles through the Department are deemed confidential pursuant Section 985.04, Florida Statutes (2003). The evidence fails to establish that an alleged violation of Section 985.04, Florida Statutes (2003), requires rejection of the BAYS proposals. There is no evidence that the information was released outside of the Department prior to the bid protest forming the basis of this proceeding. The evidence establishes that JSP misidentified the name of its contract manager in its transmittal letter. The evidence establishes that the misidentification was deemed immaterial to the Department, which went on to evaluate the JSP proposals. The results of the evaluations were returned to the contract administrator, who tabulated and posted the results of the process. On August 25, 2003, the Department posted a Notice of Intent to Award contacts based on the proposals submitted in response to the RFP. Insofar as is relevant to this proceeding, the Department proposed to award the contracts for Circuits 5, 6, and 20 to BAYS. The Department received four proposals from IDDS program providers in Circuit 5 (DOAH Case No. 03-3671BID). According to the Notice of Intended Contract Award, BAYS was the highest ranked bidder with 651.8 points. JSP was the second highest bidder with 642.6 points. White Foundation was the third highest bidder at 630.7 points, and MAD DADS was the fourth bidder at 442.8 points. The evidence establishes that BAYS included its SER in its Circuit 5 proposal. The Department neglected to examine BAYS submission for the SER, and BAYS did not receive credit for its SER. BAYS should have received an additional 90 points, bringing its total points to 741.8. The Department received two proposals from IDDS program providers in Circuit 6 (DOAH Case No. 03-3672BID). According to the Notice of Intended Contract Award, BAYS was the highest ranked bidder with 649.0 points. JSP was the second highest bidder with 648.8 points. The evidence establishes that BAYS included its SER in its Circuit 6 proposal. The Department neglected to examine BAYS submission for the SER, and BAYS did not receive credit for its SER. BAYS should have received an additional 90 points, bringing its total points to 739.0. The Department received two proposals from IDDS program providers in Circuit 20 (DOAH Case No. 03-3673BID). According to the Notice of Intended Contract Award, BAYS was the highest ranked bidder with 644.2 points. JSP was the second highest bidder with 620.6 points. The evidence establishes that BAYS included its SER in its Circuit 20 proposal. The Department neglected to examine BAYS submission for the SER, and BAYS did not receive credit for its SER. BAYS should have received an additional 90 points, bringing its total points to 734.2. MOTION TO DISMISS BAYS asserts that the Petitions for Hearing filed by JSP must be dismissed for failure to comply with Section 287.042(2)(c), Florida Statutes (2003), which requires that a protesting bidder post a bond or cash in an amount equal to one percent of the estimated contract amount by the time a formal written bid protest is filed. Item 8 of the RFP indicated that the bond or cash amount required was one percent of the total contract amount or $5,000, whichever was less. However, RFP Attachment "B," Section IX, indicates that it replaces RFP Item 8, and provides that the required bond or cash amount is one percent of the estimated contract amount. Pursuant to Section 120.57(3)(b), Florida Statutes (2003), JSP had 72 hours from the announcement of the bid award to file a Notice of Protest and an additional ten days to file a Formal Written Protest. The notice of intended bid award was posted on August 25, 2003. Accordingly, the written protest and appropriate deposits were due by September 8, 2003. The Department's Notice of Intended Award referenced the bond requirement and stated that failure to post the bond would constitute a waiver of proceedings. On September 8, 2003, JSP provided to the Department a cashier's check for $2,159.70 in relation to its protest of the award for Circuit 5. The contract amount was $647,910. One percent of the contract amount is $6,479.10. On September 8, 2003, JSP provided to the Department a cashier's check for $3,414.52 in relation to its protest of the award for Circuit 6. The contract amount was $1,025,857.50. One percent of the contract amount is $10,258.57. On September 8, 2003, JSP provided to the Department a cashier's check for $2,231.69 in relation to its protest of the award for Circuit 20. The contract amount was $669,507. One percent of the contract amount is $6,695.07. In response to JSP's insufficient cashier's checks, the Department, by letter of September 12, 2003, advised JSP of the underpayment and permitted JSP an additional ten days to provide additional funds sufficient to meet the requirements of the statute. JSP, apparently still relying on the superceded language in the RFP, forwarded only an amount sufficient to bring the deposited funds to $5,000 in each case. By letter dated September 25, 2003, the Department again advised JSP that the deposited funds were insufficient and provided yet another opportunity to JSP to deposit additional funds. On September 29, 2003, JSP forwarded additional funds to provide the appropriate deposits.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Juvenile Justice enter a Final Order as follows: Dismissing the Petition for Hearing filed by MAD DADS of Greater Ocala, Inc., in Case No. 03-3670BID based on the withdrawal of the Petition for Hearing. Dismissing the Petitions for Hearing filed by JSP for failure to comply with Section 287.042(2)(c), Florida Statutes (2003), and for the other reasons set forth herein. DONE AND ENTERED this 16th day of January, 2004, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 16th day of January, 2004. COPIES FURNISHED: James M. Barclay, Esquire Ruden, McClosky, Smith, Schuster & Russell, P.A. 215 South Monroe Street, Suite 815 Tallahassee, Florida 32301 Brian Berkowitz, Esquire Kimberly Sisko Ward, Esquire Department of Juvenile Justice Knight Building, Room 312V 2737 Centerview Drive Tallahassee, Florida 32399-3100 Larry K. Brown, Executive Director MAD DADS of Greater Ocala, Inc. 210 Northwest 12th Avenue Post Office Box 3704 Ocala, Florida 34478-3704 Andrea V. Nelson, Esquire The Nelson Law Firm, P.A. Post Office Box 6677 Tallahassee, Florida 32314 William G. Bankhead, Secretary Department of Juvenile Justice Knight Building 2737 Centerview Drive Tallahassee, Florida 32399-3100 Robert N. Sechen, General Counsel Department of Juvenile Justice Knight Building 2737 Centerview Drive Tallahassee, Florida 32399-3100
Findings Of Fact Petitioner, Greynolds Park Manor, Inc. (Greynolds), operates a skilled nursing home facility at 17400 West Dixie Highway, North Miami Beach, Florida. The facility was constructed in 1968 and has been certified in the Medicaid Program since 1971. It is licensed by Respondent, Department of Health and Rehabilitative Services (HRS), to operate 324 beds. However, its average patient census in 1979 through 1981 was between 220 and 225 patients. It is the largest nursing home in Dade and Broward Counties. HRS is the state agency designated to administer Florida's Medical Assistance (Medicaid) Program pursuant to Section 409.266, et seq., Fla. Stat. HRS and Greynolds have entered into a written agreement, "Agreement for Participation in Florida's Medical Assistance Program," for each fiscal year that Greynolds has participated in the program. Greynolds' fiscal year runs from June 1 through May 31. Effective October 1, 1977, HRS adopted the "Florida Title XIX Long Term Care Reimbursement Plan" (Plan). The Plan is a prospective reimbursement plan, designed to aid the State in containing health care costs for Medicaid recipients. The prospective reimbursement rate for a provider is based on the actual allowable costs of a provider for the previous fiscal year, to which an inflationary factor is added. The mechanics utilized to establish the prospective reimbursement rate under the Plan are clear. The provider is required to submit a uniform cost report within 90 days after the conclusion of its fiscal year. HRS audits the uniform cost report, determines allowable costs, adds an inflationary factor, and thereby sets the provider's prospective reimbursement rate. This rate is effective the first day of the month following receipt of the uniform cost report by HRS, and remains in effect until a new cost report is filed by the provider. Under the provisions of the Plan, all cost reports are desk reviewed within six months after their submission to HRS. HRS, under the terms of the Plan, may perform an audit on the cost report. An on-site audit is a more extensive review of the cost report than desk review. During an on-site audit the financial and statistical records of the provider are examined to ensure that only allowable costs were included in the cost report. The audit findings prevail over those made at desk review. Greynolds submitted its cost report for fiscal year 1979 on September 27, 1979. Previously, by letter dated September 10, 1979, Greynolds had been advised by HRS that an on-site audit was to be done of its ficsal year 1979 cost report, and that Greynolds' Medicare cost report would be a subject of inquiry. The cost report Greynolds submitted to HRS on September 27, 1979, did not make a Medicare cost adjustment, and none was made at desk review. 1/ A rather anomalous situation existed in 1979 through 1980 which lent itself to potential abuse. The Medicare cost adjustment was never made at desk review. It was only made if there was an audit. Yet only one in three providers were designated for audit each year, and even if designated the audit could be terminated at any time. Consequently, if no audit were made, or if terminated prematurely, the provider would not be required to make a Medicare adjustment and would reap a substantial windfall. Greynolds was fully aware of HRS' practice. In 1981 HRS altered its practice and began to make the Medicare adjustment at desk review. The audit of Greynolds' cost report for fiscal year 1979 was actually begun in October 1979 by the Fort Lauderdale Office of HRS. At the same time, the desk review of the cost report was undertaken by HRS' Jacksonville Office and was ultimately finalized on February 29, 1980. The desk review findings contained adjustments to expenditures totaling $46,592, but made no Medicare adjustment, consistent with HRS policy at that time. Based upon these adjustments, HRS' desk review established prospective reimbursement rates effective October 1, 1979. However, HRS advised Greynolds that these rates were "subject to change by any on-site audit." Greynolds used these rates for the period October 1, 1979 through August 31, 1980. In June 1980, HRS' Supervisor of Audit Services requested additional information before the field audit of the 1979 cost report could be completed. Greynolds presumably furnished this information because the field work was completed in September 1980. On June 24, 1981, Greynolds was notified by letter that the audit had been completed and was pending final review. The letter further advised Greynolds that "since this audit will supersede the desk review, the adjustments we made in our desk review letter of February 29, 1980, must stand until the on- site audit results are released." On June 9, 1982, HRS' Fort Lauderdale Office advised Greynolds that its on-site audit of the 1979 cost report had been completed. The audit adjustments to the cost report had been increased from $46,592 to $803,592. Most of this was due to a Medicare adjustment in the amount of $654,282. An exit conference was held by HRS' field representatives and Greynolds on June 21, 1982. None of the adjustments were changed as a result of this meeting. At that time, Greynolds first requested that it be allowed to file an interim rate change. Greynolds was advised, however, that the Office of Audit Services had no authority to approve such a request. On September 23, 1982, the final audit report of Greynolds' 1979 cost report was issued. The audit concluded that the reported allowable expenses of Greynolds would be reduced by $725,953, resulting in an overpayment of $288,024. Most of this was, again, the result of the Medicare adjustment of $654,282. The report further advised Greynolds of the right to request that any audit adjustment in dispute be addressed in a hearing pursuant to Section 120.57, Fla. Stat. Greynolds duly petitioned for a Section 120.57 hearing on the audit adjustments of September 23, 1982. This matter was forwarded to the Division of Administrative Hearings and docketed as Case No. 82-3208. At the outset of the hearing in that case, Greynolds withdrew its challenge to the Medicare adjustment of $654,282. Following receipt of the final audit report of September 23, 1982, Greynolds requested, by letter dated November 2, 1982, an interim rate change for its fiscal year 1980, "in accordance with the Florida Title XIX Long Term Care Reimbursement Plan IVA-10." The reasons assigned by Greynolds for making the request were: A substantial decrease in Medicare patient days in the fiscal year ended May 31, 1980 and the corresponding decrease in the Medicare adjustment; and A change in the percentage of skilled and intermediate Medicaid patients. The request was denied by HRS on January 12, 1983, on the ground that "interim rates will not be granted for a closed cost reporting period." HRS' denial failed, however, to inform Greynolds of its right to request a hearing. On June 7, 1983, Greynolds renewed its request for an interim rate change for its fiscal year ended May 31, 1980. This request was denied October 12, 1983, on the ground that: To grant an interim rate for a closed cost reporting period would be the same as making a retroactive payment to a nursing home whose costs exceed annual payment. Retroactive payments such as this are specifically prohibited by Section 10C-7.48(6)(1), Florida Administrative Code, which was in effect during the cost reporting period in question. Greynolds filed a timely request for a Section 120.57(1), Fla. Stat., hearing. The circumstances relied on by Greynolds to justify an interim rate request were primarily the result of a substantial decline in its Medicare patient census resulting from a staphytococcus bacterial infection among its patients. The bacterial infection arose in February 1979 and continued through May 31, 1980 (the end of Greynolds' 1980 fiscal year). Greynolds is a dual provider facility, treating both Medicare and Medicaid eligible patients. The bacterial infection, which was contained within the Medicare section of the facility, resulted in a 45 percent decline in Medicare admissions during the period. Under the Medicare and Medicaid reimbursement systems, a provider is required to first request payment from Medicare if the patient is Medicare eligible. Medicare reimburses at a higher rate than does Medicaid. Consequently, a substantial decrease in the number of Medicare patient days would result in a substantial decrease in the revenue received by the provider. Greynolds was fully aware of the change in the patient mix, as it occurred, during fiscal year 1980. Greynolds opined that it did not apply for an interim rate request at that time because the prospective reimbursement rate which had been set October 1, 1980, based on its cost report for fiscal year 1979, was "adequate" until the Medicare adjustment was finally made. The facts, however, reveal a different motivation. Under the Plan, whether on desk review or on audit, a Medicare adjustment is made to a provider's uniform cost report when developing a prospective reimbursement rate. The Medicare adjustment is made by excluding the Medicare patient days and Medicare costs from the provider's cost report, since these items are reimbursed by Medicare. The reimbursement rate is then established by adding an inflationary factor to the remaining patient days and costs. This reimbursement rate remains in effect until the provider files its next cost report. If the provider maintains its costs under the reimbursement rate, it may retain the difference; if the provider's costs exceed the reimbursement rate, it will not be reimbursed for its inefficiency. The Plan is predicated on a cost containment methodology. It is designed to encourage efficient administration by nursing home providers when providing services to Medicaid recipients. The Plan does, however, permit an adjustment to a provider's prospective reimbursement rate ("an interim rate") when unforeseen events during that fiscal year occur which were not contemplated in setting the provider's prospective reimbursement rate predicated on the previous year's costs. Greynolds was aware of the change, as it occurred, in its 1980 patient mix. Therefore, it could have applied for an interim rate adjustment at that time. To have done so, however, would have required it to make the Medicare cost adjustment to its 1979 cost report since its justification for an increase was the substantial decrease in Medicare patients and the corresponding decrease in the Medicare adjustment it was currently experiencing. To raise the Medicare adjustment issue was not, however, to its financial advantage. If it "escaped" the Medicare adjustment to its 1979 cost report, it would profit by the amount of that adjustment ($288,024). Greynolds' request for an increase in its reimbursement rate for 1980, after the 1980 cost reporting period was closed, also raises the disquieting specter that Greynolds will be reimbursed for the same costs twice. Since each year's reimbursement rate is based on the previous year's cost report, to retrospectively pick one reimbursement period from the series of years is disruptive of all the rates which were subsequently established. Under the Plan, if a provider experiences a substantial decrease in Medicare patient days and costs for a cost reporting period, the Medicaid reimbursement rate for the next period, based on that cost report, would substantially increase. Accordingly, Greynolds' 1981 reimbursement rate would be reflective of the loss of Medicare patient days in 1980. To now ignore the effect 1980 costs had in establishing 1981 reimbursement rates, and to reimburse Greynolds for 1980 without regard to the reimbursement rate for the subsequent year, ignores reality. Greynolds has on one other occasion availed itself of an interim rate request. On June 17, 1981, Greynolds applied for an interim rate for its fiscal year 1981. Greynolds' request was based on the fact that it had negotiated a union contract effective April 1, 1981, which resulted in a substantial increase in salaries for its employees. Since this factor was not reflected in its cost report for fiscal year 1980, upon which its current reimbursement rate was predicated, HRS, by letter dated July 29, 1981, granted Greynolds' request. Greynolds asserts that the granting of its 1981 interim rate request occurred after the close of its 1981 cost reporting period and is, therefore, evidence that the denial by HRS of its interim rate request in this case is inconsistent and improper. HRS asserts that the granting of Greynolds' interim rate request in 1981 was proper, and that it was not granted outside a closed cost reporting period. HRS interprets "cost reporting period" to be that period within which the provider must file its cost report for the previous fiscal year ("the cost report period"). Rule 10C-7.48(5)(c), F.A.C., in effect at the time, provided A cost report will be submitted as prescribed by the Department to cover the facility's fiscal year, along with the facility's usual and customary charges to private patients receiving comparable medicaid service, within 90 days after the end of the cost report period. According to HRS, the "cost reporting period" would be closed when the provider submits its cost report, which could be as much as 90 days after the "cost report period" had ended. HRS' interpretation is certainly reasonable, within the range of possible interpretations, and is therefore adopted. The interim rate request, granted Greynolds in 1981, was not granted after a closed cost reporting period. The reimbursement rate in effect on June 17, 1981, had commenced September 1, 1980. This rate remained in effect until the interim rate was granted, which interim rate remained in effect until Greynolds submitted its cost report for fiscal year 1981. Greynolds' 1981 cost report was submitted August 31, 1981, and its new reimbursement rate was therefore effective September 1, 1981. Accordingly, the grant of Greynolds' 1981 interim rate request was not inconsistent with the position it has adopted in this case. Had Greynolds "timely filed" its interim rate request in this case, HRS concedes the circumstances which gave rise to the request would have entitled the request to consideration under the provisions of Florida Title XIX Long Term Care Reimbursement Plan, paragraph IVA-10. However, since HRS rejected Greynolds' interim rate request as untimely, it never addressed, by review or audit, the accuracy or prospective impact of Greynolds' request.
