The Issue Whether the Department of Health and Rehabilitative Services (HRS) acted in an arbitrary and capricious manner in determining to award the bid for its district office to Koger Properties, Inc. (Koger) and whether the petitioner submitted the lowest and best bid under the terms of the bid specifications.
Findings Of Fact GENERAL BACKGROUND - STIPULATED FACTS Petitioners received a formal Invitation to Bid on Lease No. 590:1784 from HRS, District V. The purpose of the ITB was to obtain competitive proposals for the leasing of office space by HRS within a specifically defined area. Petitioners timely submitted their bid in response to the ITB. All timely received bids were first evaluated to determine technical responsiveness. Petitioners' bid was determined to be responsive to the technical requirements of the ITB. Responsive bids were then presented to a bid evaluation committee for comparison and formulation of a recommendation for award. In comparing the various responsive bids and formulating a recommendation for award, the members of the bid evaluation committee were required to visit each proposed facility and to apply the evaluation criteria as contained in the ITB package. By memorandum dated July 30, 1986, the bid evaluation committee recommended that the bid be awarded to Koger although petitioners submitted the lowest rental price. On or about August 5, 1986, petitioners received notice from HRS of its intent to award Lease No. 590:1784 to Koger. By letter dated August 6, 1986, petitioners notified HRS of their intent to protest the intended award of Lease No. 590:1784 to Koger. The Notice of Intent to Protest was timely filed pursuant to the provisions of Section 120.53(5), Florida Statutes, and Rule 10- 13.11, Florida Administrative Code. Thereafter, the petitioners timely filed their formal written protest. Petitioners are substantially affected by the decision of HRS to award the lease to Koger. THE BIDDING PROCESS The Department of Health and Rehabilitative Services issued an Invitation to Bid and Bid Submittal Form (ITB) seeking approximately 39,968 net rental square feet of office space in Pinellas County, Florida, to be used as the district administrative offices. The ITB set forth the method in which the bids would be evaluated as follows: EVALUATION OF BIDS Bids received are first evaluated to determine technical responsive- ness. This includes submittal on bid submittal form, inclusion of required information and data, bid signed and notarized, etc. Non responsive bids will be withdrawn from further consideration. Responsive bids are presented to a bid evaluation committee for com- parison and formulation of a recom- mendation for award. This is accomplished by a visit to each proposed facility and application of the evaluation criteria. The committees recommendation will be presented to the department's official having award authority for final evaluation and determin- ation of successful bidder. EVALUATION CRITERIA The successful bid will be that one determined to be the lowest and best. All bids will be evaluated based on the award factors enumerated in the bid submittal form. The ITB also provided that "the department agrees to enter into a lease agreement based on submission and acceptance of the bid in the best interests of the department and the state." In accordance with the ITB a pre-bid conference was held on April 29, 1986; however, neither petitioners nor any representative of petitioners attended the pre-bid conference. Further, petitioners made no oral or written inquiries concerning the ITB or the evaluation criteria to be utilized. Bids received from the following providers were determined to be responsive and presented to the bid evaluation committee for comparison and formulation of the recommendation for award: James P. & Margaret R. Gills (1100 Building) Koger Properties, Inc. (Koger) LTBCLH Partnership (Justice Building) Procacci Real Estate Management Co., Inc. (ICOT Building) Elizabethan Development, Inc. (Handy City Building). BID EVALUATION COMMITTEE The bid evaluation committee was composed of the following people who, along with their staffs, would occupy the leased property: Robert Withrow, Chairman of the Committee and District Administrative Services Director; Samuel Kinsey, Financial and Accounting Director for District V; Patricia Bell, Program Manager for Aging and Adult Services; Fredrick M. O'Brien, General Services, Manager for District V; and Pegi Hollingsworth, Personnel Officer. Each member of the evaluation committee received a bid package consisting of the bid specifications and the bids submitted. Each member also received a bid evaluation sheet which was used to rate each bidder. They received no other instructions with regard to the evaluation criteria. Although each specific evaluation criterion was weighted, i.e., given a comparative value, the committee members were not specifically instructed as to how points should be assigned for each category. The evaluation committee went to each of the proposed buildings for the purpose of making a comparative evaluation based on the evaluation criteria provided. However, the primary focus was on the Koger Building and the petitioners' 1100 Building because they had submitted the lowest rental rates of the five bidders considered. After the viewing process, the members of the committee, except Mr. Withrow, discussed the factors that should be considered in applying each of the evaluation criterion. Although the committee members had not formulated the evaluation criteria to be used, they were uniquely qualified to apply the evaluation criteria provided to the specific needs and requirements of the HRS offices that would occupy the building. Though the committee members were in agreement as to the various factors to be included in each of the criterion listed, they did not discuss the points that would be awarded to each facility. Each member independently assigned points to each facility based on his or her own evaluation of the facility's comparative value in each of the listed categories. Koger received the best evaluation from all five committee members with point totals of 98, 98, 98, 98 and 99 out of a possible 100 points. Petitioners' building was ranked last of the five buildings evaluated by four of the members, with point totals of 75, 77, 71 and 75, and fourth by Mr. Withrow with a total of 81 points. Based on the comparative evaluation of the buildings, the committee recommended that the bid be awarded to Koger. By letter dated July 30, 1986, the District V office received authorization from the HRS Director of General Services to award the bid to Koger as being in the best interest of the department and state. THE EVALUATION CRITERIA The ITB included the evaluation criteria list used by the committee to ascertain the relative value of each building. At the top of the page it is stated: The successful bid will be that one determined to be the lowest and best. All bids will be evaluated based on the award factors enumerated... The evaluation criteria are divided into three general areas: (1) Associated Fiscal Costs, (2) Location, and (3) Facility. Each general area includes subcategories, with each subcategory being given a total maximum value. Each of the criteria disputed by petitioners is discussed below. 1(a) Rental rates for basic term of lease. (Weighting: 45) All of the bids received by HRS were within the rental limits established by the Department of General Services and also much lower than expected. Even the highest bid was lower than anticipated, and Koger's and petitioners' bids were considered especially desirable. The bids received, listed at present value for the ton year basic lease period, are as follows: BIDDER TOTAL COST AMOUNT MORE THAN LOW BID 1100 BUILDING $1,881,690.1 KOGER 1,993,131.4 $111,441.3 JUSTICE 2,473,559.8 591,869.7 ICOT 2,655,306.1 773,616.0 HANDY CITY 3,223,202.0 1,341,511.9 Rental rates for the basic term of the lease were given a weighted value of 45. All of the committee members gave petitioners 45 points, as the low bidder, and all gave Koger 44 points as the next low bidder. However, four of the members simply agreed that the low bid would receive the maximum amount of points with each subsequent low bidder receiving one less point than the one before it, which resulted in the high bidder receiving 41 points even though its bid was 1.7 times greater than the low bid. Only Mr. Withrow made an attempt to prorate the points based on the differences in the amount bid, thus resulting in the high bidder receiving only 20 points. However, even Mr. Withrow awarded Koger 44 points based on the minimal difference between the Koger bid and the petitioners' bid. Both Mr. Withrow and Mr. Kinsey explained the award of 44 points to Koger by comparing the difference in the amounts bid to the HRS District V budget or the budgets of the entities using the facilities. However, the purpose of the evaluation was to compare each facility to the other facilities. Thus, the award of points for rental rates should have been based on a comparison of the rates offered. Although it was reasonable to assign the maximum number of points to petitioners, as the low bidders, the amount of points assigned to the remaining bidders should have been based on a comparison of the amount of each bid to the low bid. This would have made a significant difference in the points awarded to Justice, ICOT, and Handy City; however, even using a strict mathematical computation would not significantly affect the points awarded Koger due to the minimal difference in Koger's bid and petitioners' bid. Koger would receive no less than 42 points, only 2 points less than awarded, regardless of the method of mathematical computation used. 1/ 2(a) Proximity of offered space in central or preferred area of mad boundaries (Weighting: 5) All the members of the committee agreed that Koger is in the most preferred area because its location is more accessible to the employees and the persons who visit the office than any of the other buildings. Koger is in northeast St. Petersburg, minutes from the interstate. The 1100 Building is located in a more congested area in downtown Clearwater on the extreme northern boundary of the designated area. In making a comparison Of the building locations, all of which were located within the map boundary, the committee jusifiably determined that the building that was the most strategically located, in terms of accessibility, would be considered to be in the most preferred area. Thus, Koger was awarded five points by all committee members. The 1100 Building received 2, 0, 1, 3 and 1 points. Although all committee members awarded Koger the highest points, only one committee member resided closer to the Koger Building than the other buildings. Mr. Withrow, who lives closer to the 1100 Building than Koger, gave the 1100 Building only 1 point because it was more inaccessible to the district clients and employees. Further, the District Administrator, who approved the lease to Koger, resides closer to the 1100 Building. 2(b) Frequency and availability of satisfactory public transportation within proximity of the offered space (Weighting: 5) Both Koger and the 1100 Building received the maximum of five points in this category except from Mr. Withrow who gave the 1100 Building four points. The committee members felt that the bus transportation as about the same for each building. Although the 1100 Building had more buses passing the facility due to its location in downtown Clearwater, the committee considered the destination of the buses and concluded that a person would wait the same length of time for a bus to take him to his destination from either the Koger Building or the 1100 Building. Mr. Withrow differed on the points awarded because he considered the Koger location to be better due to its proximity to the airport. The district office has a large number of people that visit from Tallahassee and other districts in the state. 2(c) The effect of environmental factors, including the physical characteristics of the building and the area surrounding it, on the efficient and economical conduct of departmental operations planned for the requested space. (Weighting: 3) Koger received the maximum of 3 points from every committee member in this category; the 1100 Building received 0 points from every member. Although this category is listed within the general area of "Location", the committee members followed the category requirement and considered all environmental factors, including the physical characteristics of the building. In the 1100 Building, committee members noted problems with the air conditioning system and the elevators. The building was not maintained well, and the bathrooms were small and poorly ventilated. The HRS parking at the 1100 Building was not conveniently located. To get to the parking lot from the building an employee would have to cross a parking lot adjacent to the building, cross an intersection and then walk up to a block to get to his or her car. Many of the office employees work late and would be walking to their cars after dark, and there was concern expressed for employee safety considering the parking arrangement offered by petitioners. Koger had none of the problems observed at the 1100 Building. Further, Koger was better suited for the handicapped because there was no need to use a ramp as there was at the 1100 Building. 3(a) Conformance of space offered to the specific requirements contained in the Invitation to Bid. (Weighing: 10) 3(b) Susceptibility of the design of the space offered to efficient layout and good utilization. (Weighting: 10) 3(c) Provisions of the aggregate square footage in a single building. Proposals will be considered, but fewer points given, which offer the aggregate square footage in not more than two locations...within 100 yards of each other. (Weighting: 10) Koger's bid is for a two-story building containing approximately 39,000 square feet. The 1100 Building is a 15-story building. It would provide approximately 39,000 square feet on the second, fourth, fifth, part of the eighth, part of the ninth, and twelfth floors. The space allocation in the 1100 Building, spread over 6 floors, would provide a major problem in efficiently locating the staff. Certain offices could not be placed on certain floors because of space restrictions, and related offices could not be placed in close proximity to each other. Offices that needed to be on the same floor could not be located on the same floor. Because the space offered by petitioners is spread over 12 floors, accessibility to related offices would be much more difficult. Further, the limited space per floor makes it more difficult for HRS to properly utilize the space provided. None of the testimony provided by the committee witnesses related the "conformance of the space offered to the specific requirements contained in the Invitation to Bid" (e.s.) The ITB lists the offices and rooms required, giving sizes for each. Other than the total square footage, which petitioners met, there were no other specific requirements contained in the ITB. None of the committee members compared the conformance of the space offered to the specific room and office requirements. Indeed, the testimony of the committee members indicate that accessibility of the space was considered under criteria 3(a) rather than the conformance of the space to the ITB. Since the space offered by petitioners apparently complied with the requirements of the ITB, petitioners should have received 10 points for that category. The points awarded under 3(b) and 3(c), however, were proper. The space offered by the 1100 Building is not susceptible to an efficient layout or good utilization of the space offered. Further, the committee legitimately differentiated between the single buildings offered by each bidder, under 3(c), by considering where the space was located within the building. Obviously, factor 3(c) reflects a concern that the space offered not be too separated. It clearly provides that proposals for space in two separate buildings will get fewer points than single building proposals, and there is no indication that all single building proposals should receive the same maximum points. This factor clearly relates to the proximity of the spaces offered to one another, with contiguous space getting the most points. 3(d) Offers providing street-level space (Weighting: 2) Approximately half of the space offered by Koger is street-level space. Koger received two points. The 1100 Building provides no street-level space; it received no points in this category. Petitioners do not contend that they should have gotten any points, but assert Koger should only have gotten one point because not all its space was street-level space. THE COMPARATIVE EVALUATION The evaluation committee members were very conscientious in comparing the relative values of the buildings offered based on the criteria provided and their observations. Their evaluations were not made arbitrarily, but based upon the factors set forth in the evaluation criteria. Although errors were made in calculating the values awarded for categories 1(a) and 3(a), these errors were not due to arbitrary action by the committee members. Further, should the appropriate points under 3(a) be added to petitioners evaluations and three points be subtracted from Koger's evaluations (two points for 1(a) and one point for 3(d)), petitioners evaluations would be 79, 80, 76, 80 and 84, and Koger's would be 95, 95, 95, 95 and 96. The strategic plan for HRS, 1986-1991, Goal 12, is to enhance employee morale and job satisfaction in several ways, one of which is to replace or upgrade 90 percent of substandard physical work environments by December 31, 1990. The testimony and evaluations show, and the committee members found, that the Koger Center would provide a better work environment than the petitioners' 1100 Building. Based on the criteria set forth in the ITB, the Koger bid is the "lowest and best" bid.
The Issue Whether the application of Petitioner Florida Cities Water Company, to increase the ratios it charges customers for water service in Lee County should be granted. CONCLUSIONS and RECOMMENDATION Conclusions: Factors pertinent to ratemaking and enumerated in Section 367.081, Florida Statutes, have been considered in this pro- ceeding. The Petitioner utility has not justified use of "year-end" rate base; those adjustments which it has supported with a preponderance of evidence have been accepted, those lacking sufficient eviden- tiary support have been rejected. Peti- tioner's application for rate increase should be granted to the extent provided in this Recommended Order; the resulting rates are just, reasonable, compensatory, and not unjustly discriminatory. Recommendation: That the Commission recalculate adjusted rate base, operating income, and the result- ing additional and total gross revenues in a manner consistent with this Recommended Order, and that Petitioner be authorized to file new rates structured on the Base facility charge concept designed to generate the addi- tional and total annual gross revenues so specified.
Findings Of Fact Based upon the evidence presented at hearing, the following facts are determined: I. The Application By its application, the UTILITY seeks authority to increase its rates sufficiently to generate additional annual gross revenues of $1,483,300. It attributes the need for increased revenues to extensive additions recently made to its water plant pursuant to COMMISSION Order No. 6209 entered in Docket 74176-W. The UTILITY claims that the increased investment and higher operating expenses associated with such plant additions effectively reduce its rate of return to 4.2 percent; it asserts that the requested additional revenues are necessary to allow it to earn a fair and reasonable rate of return of 12 percent. (Testimony of Reeves, Cardey; P-2, P-8.) II. Rate Base There are three issues involving the proper determination of rate base in this case: (1) whether "year-end", rather than "average" rate base should be used, (2) whether an Allowance for Funds Used During Construction (AFUDC) for post-test period additions allowed in rate base is proper, and (3) whether connection fees collected from 1969 to 1973 should be recorded as Contributions in Aid of Construction (CIAC) "Year-end" v. "Average Rate Base In determining rate base, absent extraordinary or emergency conditions or situations, "average" rather than "year- end" investment during the test period should be used. City of Miami v. Florida Public Service Commission, 208 So.2d (Fla. 1968). The Florida Supreme Court has suggested that average investment "should not be departed from except in the most unusual and extraordinary situations where not to do so would result in rates too low as to be confiscatory to the utility." Id. at 258. Year-end investment may be used only when a utility is experiencing extraordinary growth. Citizens v. Hawkins, 356 So.2d 254 (Fla. 1978). The UTILITY has not established that it meets the standard for utilization of "year-end" rate base, i.e. , that it has experienced unusual and extraordinary growth. Its customer growth rate averaged 8.2 percent for the last seven years, with a 10.56 percent gain during the test year. This growth rate has been experienced by many other Florida utilities of similar size and is neither extraordinary nor unusual. Neither is the UTILITY's growth extraordinary when measured in terms of water sold. Between 1975 and 1979, its growth in water sales averaged approximately 11 per- cent, in 1980--6 percent. In terms of plant growth, the UTILITY averaged 19.37 percent over the last seven years; the growth rate for 1979 was 12.03 percent. However, in 3980, its investment in gross plant grew at a 33 percent rate. The UTILITY's growth rate was repeatedly described as "substantial" by its consultant, K. R. Cardey, but substantial growth does not equate to extraordinary or unusual growth as defined by the Florida Supreme Court. Furthermore, the UTILITY did not establish that failure to use "year-end" rate base would reduce its rates to a confiscatory level. See, City of Miami, supra. It follows that "average" investment during the test period is the proper method to utilize in determining rates in this case. (Testimony of Cardey, Deterding.) Appropriateness of Allowance for Funds Used During Construction (AFUDC) After the test period, the UTILITY completed five major additions to its plant, all of which were required by previous order of the COMMISSION. (Order No. 6209, Docket 74176-W.) The COMMISSION agrees that, since it required these post-test period additions, they should be included in rate base at full weight. Since these additions, which total $5,966,569, were under construction during the test period, the COMMISSION contends they should be recorded as Construction Work in Progress (CWIP). The UTILITY agrees that these additions should be included in rate base but seeks to include, as well , an AFUDC allowance in the amount of $326,422.2 AFUDC represents interest that was capitalized on each of these additions while they were under construction during and after the test period. Since these additions are already included in rate base at full weight, the inclusion of AFUDC in rate base would allow the UTILITY to duplicate earnings on its investment. Such a result would be unreasonable, improper, and should not be allowed. (Testimony of Reeves, Deterding; P-1, P-3, P-10, R-2.) Connection Fees: CIAC or Revenue From 1969 through 1973, the UTILITY operated under the regulatory jurisdiction of Lee County, not the COMMISSION. During those years, it was the UTILITY's practice and policy to record connection fees, which totaled $226,582, as revenue, not CIAC. Since connection fees are ordinarily considered CIAC, the COMMISSION proposes to adjust CIAC by $226,582. (Testimony of Deterding, Cardey; P-8, R-2.) Contributions in Aid of Construction are defined as monies used to offset the acquisition, improvement, or construction cost of utility property used to provide service to the public. Section 367.081(2), Florida Statutes (1980). The UTILITY's consultant testified that connection fees collected and credited to revenue by the UTILITY during 1971, 1972, and 1973, totaling $176,773, were "not used to offset the improvements or construction costs of the [UTILITY's] property. (P-8, p. 6.) The COMMISSION, on cross-examination, did not question the accuracy or impeach the credibility of this statement; neither did it present any evidence to controvert or rebut the UTILITY's assertion as to how the connection fees were used. The only evidence on the question presented by the COMMISSION consisted of its accountant's conclusion: "During the years from 1969 to 1973, Florida Cities Water Company recorded many tap-in fees collected as revenue. These should properly be recorded as contributions in aid to construction. This adjustment [of $226,582] adds these contributions." p. 5.)(Testimony of Deterding, Cardey; P-8, R-2.) In its Proposed Recommended Order, the COMMISSION asserts that the UTILITY has the burden of showing: (1) the correctness of collecting funds normally authorized for service availability and using them for another purpose, and (2) the exact manner in which the funds were used. (Proposed Recommended Order, p. 6.) However, there was no evidence in the record to show that the UTILITY's treatment of connection fees during 1971 through 1973, was incorrect or violative of Lee County's regulatory standards. Neither is there any evidence to show that the connection fees collected in those years were used as contributions in aid of construction, i.e., to offset acquisition, improvement, or construction costs. The only evidence presented as to how those fees were actually used was that of the UTILITY's consultant; he testified that those funds were used only to defray operation and other expenses associated with the new customers. This evidence was sufficient to shift to the COMMISSION the burden of presenting evidence on the question or discrediting the evidence presented by the UTILITY. The COMMISSION did neither. It is found, therefore, that the $176,773, representing connection fees collected between 1971 and 1973, do not constitute CIAC, the UTILITY's testimony in this regard being persuasive. (Testimony of Cardey, Deterding; P-8, R-2.) However, as to the years 1969 through 1970, the UTILITY presented no evidence that the $48,809 in connection fees collected during that time were used only for operating and maintenance expenses and not to offset acquisition, improvement, or construction costs. In the absence of such evidence, the COMMISSION testimony that connection fees should ordinarily be treated as CIAC is persuasive. The connection fees collected during 1969 and 1970, calculated to be $49,809, are therefore properly included as CIAC. (Testimony of Deterding, Cardey; P-8, R-2.) In light of the above findings and the absence of disagreement concerning other adjustments proposed by the COMMISSION, the elements of the UTILITY's adjusted rate base are: RATE BASE Test Year Ended March 31, 1980 Utility Plat in Service $ 11,178,094 Construction Work in Progress 5,966,569 3/ Accumulated Appreciation (626, 160) CIAC,(Net of Amortization) (3,041,747) 4/ Advances for Construction (111,567) AFUDC (326,422) 5/ Working Capital Allowance 146,911 Materials and Supplies 117,450 Income Tax Lay [To be calculated based on additional gross revenues rec- opmended herein.] RATE BASE [To be determined upon recalculation.] In order to determine the adjusted rate base which should be utilized, Income Tax Lag requires recalculation in a manner consistent with the above findings and Section III below. (Testimony of Cardey, Deterding; P-1, P-3, P-8, P-10, R- 2.) III. Operating Income Operating Expense: Water Royalty Charge In calculating operating income for the test year, the UTILITY included $18,577 as an operating expense attributed to a $.03 per gallon royalty charge it paid an affiliate for water pumped from the Green Meadows well field. The UTILITY operates this water field on a 21-acre site and has easements to locate 26 wells. It pays no other cost for the water. The COMMISSION disputes the reasonableness of this charge because it is not an arms-length transaction, and the UTILITY has not explained the basis of the $.03 charge, the cost to the affiliate of the land involved and its subsequent sales price (the affiliate reserving the water use rights) , and the identity of the present owner. The COMMISSION's accountant testified that reasonableness of the charge could be determined by analyzing the costs of the rental of the land based on the original cost of the property to the affiliate. In response, the UTILITY established that the $18,577 expense is less than it would cost tide UTILITY, in terms of annual revenue requirements, to purchase the land involved. But the UTILITY failed to address the cost of renting the property, based on the affiliate's acquisition costs, or furnish information necessary to make such a determination. The COMMISSION is entitled to clearly scrutinize the expenses claimed by a utility and require that their reasonableness be shown. Tide UTILITY did not adequately explain or support the reasonableness of its claimed royalty expense, and it should therefore be disallowed. (Testimony of Reeves, Deterding; P-6, R-2.) Depreciation and Taxes: Adjustments Attributable to Post-Test Period Plant Additions The parties disagree on whether adjustments should be made to test year operating expenses to reflect increases in depreciation and taxes due to the five post-test year plant additions completed subsequent to the test period. The evidence is uncontroverted that these plant additions, including the Green Meadows water treatment plant and related facilities, were required by prior COMMISSION order and that they were necessary to provide service to existing customers of the UTILITY. The parties have also agreed that the full cost of these additions should be included in rate base, at full weight. The operating expenses of the UTILITY during the test year should be adjusted as was rate base, for known and no net changes in order to reflect conditions which will prevail when the rates become effective. The UTILITY's 2.1 percent composite depreciation rate should thus be applied against the new plant additions, and tide resulting depreciation expense included in the cost of providing service. Similarly, taxes (other than income) on the $5,960,569 worth of plant additions are known and eminent, are a cost of providing service, and should be included as an adjustment to test year taxes. The COMMISSION presented no policy or factual justification or explanation for its opposition to these adjustments to test year operating expenses. It does not contend that these expenses are other than known and eminent, attributable to the government-ordered plant additions, and will be part of the cost of providing service during the period the new rates will be in effect. The UTILITY's evidence in support of these adjustments is therefore persuasive. (Testimony of Cardey, Deterding; P-1, P-8, P-10, R-2.) Similarly, the UTILITY contended that test year income tax should be adjusted to reflect changes in revenue, operating expenses, depreciation, taxes, and interest expenses attributed to operation of the new plant addition. The COMMISSION offered no reason or explanation why such an income tax adjustment should not be made; changes in income tax due to the operation of the plant additions are known and eminent, and should be allowed as adjustments to test year expenses in order to adequately represent the UTILITY's future costs of service. However, due to the findings herein relating to use of "average rate base, the AFUDC allowance, treatment of connection fees previously collected, the water royalty charge, depreciation, and taxes, the income tax adjustment proposed by the UTILITY requires recalculation. (Testimony of Cardey, Deterding; P-1, P-0, P-10, R-2.) In light of the above findings, and the UTILITY's lack of opposition to other adjustments proposed by the COMMISSION, the known elements of adjusted operating income are: operating revenues of $2,419,437 and operating expense (operation) of $1,175,291. In order to determine adjusted operating income which should be used in this case, depreciation, taxes other than income, and income taxes require recalculation consistent with the findings contained in Sections II and III, infra. (Testimony of Cardey, Deterding; P-1, P-8, P-10, R- 2.) IV. Capital Structure, Cost of Capital, and Rate of Return The parties agree that UTILITY's capital structure and cost of capital are as follows: CAPITALIZATION COMPOSITE WEIGHT Rate 15 pct. 16 pct. Long-Term Debt 49.33 pct. 10.68 pct. 5.27 pct. 5.27 pct. Equity Capital 41.25 15-18 6.19 6.60 Subtotal 90.58 pct. 11.46 pct. 11.87 Deferred Federal Income Taxes 4.74 pct. -0- -0- -0- Customer Deposits .90 8.00 .07 .07 subtotal 96.22 Investment Tax Credit 3.79 pct. Average 11.53 .45 pct. 11.94 pct. .45 TOTAL 100.00 pct. 11.98 pct. 12.39 pct. They are also in agreement that a 12 percent return on the UTILITY's rate base, including a 15-16 percent return on equity, is a fair and reasonable rate of return. (COMMISSION's Proposed Recommended Order, p. 7; P-8, P-5.) V. Additional Required Revenues In order to determine the additional gross revenues which the UTILITY should file rates designed to generate, the authorized operating income should be computed by multiplying 12 percent times the adjusted rate base computed pursuant to Paragraph 10 above. The UTILITY should then be authorized to earn additional gross revenues equivalent to thee difference between the authorized operating income and the adjusted test year operating income computed pursuant to Paragraph 14 above. VI. Rate Structure and Rates The UTILITY proposes, with the COMMISSION's concurrence, that its new rates be structured in accordance with the Base Facility Charge Rate Design (BFC) and that the 25 percent surcharge currently imposed on general service customers be eliminated. The new BFC rate structure design contains a customer charge and a gallonage charge, both of which are directly related to the cost of providing the service. The customer charge assures that all customers pay their pro rata share of certain fixed and operating costs of the UTILITY which are not related to the amount of water used by the customer. The gallonage charge is based on the actual amounts of water used. With implementation of the base facility charge system, the UTILITY should lower its current $20 charge for reconnections during working hours to $10; similarly, its current $25 charge for reconnection after working hours should be reduced to $15. These lower charges are sufficient to cover the costs associated with the service rendered. The UTILITY also proposes various increases in its service availability, or connection charges. These increases, based on increased construction costs, will be used to finance additional facilities and stabilize rates to existing customers. The BFC rate design system proposed by the UTILITY is fair, reasonable, and nondiscriminatory. In light of the foregoing, it is unnecessary to consider the "alternative" rate structure which was presented to the COMMISSION staff on the day of hearing. With such time constraints, meaningful review of the "alternative" rate structure proposal was not possible. (Testimony of Byrd, Collier; R-1, R-3.) VII. Adequacy of Service Customer testimony criticized the 25 percent surcharge currently Imposed on general service customers, and the magnitude of the requested rate increase. Several customers complained of the quality of the water supplied. Under the proposed rate structure, tide surcharge on general service customers will be eliminated. While several customers complained of sediment in their drinking water, testimony established that the new Green Meadows softening plant should help alleviate that problem. The water supplied by the UTILITY meets all regulatory and health standards of the Health Department and the Florida Department of Environmental Regulation. The UTILITY is currently under no citation for violation of any regulatory standards. It is found that the quality of the water service offered by the UTILITY is adequate. (Testimony of Collier, Reeves, Customers; P-7.) VIII. Franchise Fees The UTILITY has collected $395,000 in "franchise fees" for Lee County, but has not paid them to the county due to questions surrounding the legality of the franchise fee. Neither have the funds been placed in a special escrow account pending resolution of this controversy. The UTILITY should ensure that such franchise fees are deposited in a special interest-bearing escrow account, and take steps to ensure that this controversy is resolved without further delay. (Testimony of Cardey; Late-filed Exhibit P-12.)
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the COMMISSION recalculate adjusted rate base, operating income, and the resulting additional and total gross revenues in a manner consistent with this Recommended Orders and that Petitioner be authorized to file new rates structured on the base facility charge concept designed to generate the additional and total annual gross revenues so specified. DONE AND ENTERED this 27th day of February, 1981, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of February, 1981.
The Issue Whether the Department of Children and Family Services' (FDCF) notice of intent to award the contract for RFP No. MF650TH was contrary to the agency's rules or policies, or the proposal specifications and whether the Petitioner established that FDCF's decision was clearly erroneous, contrary to competition, arbitrary or capricious.
Findings Of Fact 1. The parties' Joint Prehearing Stipulation specified, in pertinent part, as follows: ADMITTED FACTS The following facts are admitted by all parties and will require no proof at hearing: On or about January 23, 1998, the Department issued RFP No. MF650TH ("the RFP"), Automated Fingerprint Identification System (AFIS). The purpose of the RFP was to solicit proposals from qualified proposers to design, develop and implement an automated fingerprint identification system, or AFIS, and to procure a statewide fingerprint identification capability for applicants and recipients of public assistance. The RFP was subsequently amended by Addendums 1, 2, 3, and 4 dated February 18, February 26, March 9, and March 16, 1998, respectively. Two vendors, Lockheed Martin and Sagem Morpho, submitted proposals in response to the RFP on March 23, 1998. The Department posted notice of its intent to award the contract described in the RFP to Morpho on April 17, 1998. On April 22, 1998, Lockheed Martin timely submitted a notice of intent to protest the proposed award to Sagem Morpho, pursuant to the terms of the RFP and Section 120.57(3), Florida Statutes. On May 1, 1998, Lockheed Martin filed its Formal Written Protest and Petition for Formal Administrative Proceeding. Jayne Paris served as Procurement Manager for the AFIS RFP. Connie Reinhardt served as Project Manager for the AFIS project. AGREED UPON ISSUES OF LAW The parties have agreed on the following issues of law: The Administrative Law Judge shall conduct a hearing pursuant to Section 120.57(3), Florida Statutes. All parties have standing to participate in this proceeding. ISSUES OF FACT WHICH REMAIN TO BE LITIGATED. The following issues of fact remain to be litigated: Whether Morpho's AFIS proposal was responsive to the RFP. Whether Lockheed Martin's AFIS proposal was responsive to the RFP. Lockheed Martin contends that the following additional facts remain to be litigated: What the Department's policy is with respect to evaluation of cost proposals on RFPs. Whether and when the Department altered its method of evaluating the AFIS cost proposals. The reason the Department decided not to use the cost proposal ranking and fatal criteria checklist which had been previously prepared. Whether the addenda to the RFP provided supplemental RFP instructions and incorporated clarifications in response to questions submitted by potential proposers. ISSUES OF LAW WHICH REMAIN FOR DETERMINATION BY THE JUDGE The following issues of law remain for determination by the Court: Whether Morpho's AFIS proposal was materially responsive to the RFP. Whether Lockheed Martin's AFIS proposal was materially responsive to the RFP. Lockheed Martin contends that the following additional issues of law remain for determination by the Judge: Whether any minor irregularities waived by the Department in evaluating and scoring the AFIS proposals met the definition of a "minor irregularity" under Rule 60A- 1.002(16), F.A.C. Whether the Department may alter its proposal evaluation methods after proposals have been received by it. Whether the Department's proposed award of the AFIS contract to Morpho is contrary to the Department's governing statutes, rules, or policies, or the AFIS RFP specifications. Whether the Administrative Law Judge shall conduct a de novo proceeding pursuant to Section 120.57(3), Florida Statutes, to determine whether the Department's proposed action is contrary to its governing statutes, rules, or policies, or the AFIS RFP specifications. Lockheed's unilateral statements of issues do not bind the parties or the undersigned but are included so that the pending Motion to Strike may be addressed in the Conclusions of Law, infra. At formal hearing, Petitioner Lockheed contended that Morpho's proposal was not responsive to the RFP and that Lockheed should be awarded the contract. Intervenor Morpho contended that its proposal was responsive and that Lockheed's proposal was not responsive. FDCF contended that both proposals were responsive and that the proposed final agency action to award the contract to Morpho should be carried out. The RFP solicited proposals from qualified proposers to design, develop and implement an Automated Fingerprint Identification System (AFIS) and to procure a statewide fingerprint identification capability for applicants and recipients of public assistance. (Agreed Facts). AFIS is intended to support the client certification process for the benefit programs delivered through the Department's electronic Benefits Transfer program (EBT). The current EBT programs include Food Stamps, Temporary Assistance to Needy Families -- Work and Gain Economic Self-Sufficiency (TANF-WAGES), and the Refuge Assistance (RA) programs. The Department had determined that AFIS is the only acceptable biometric technology. The RFP included the following pertinent provisions: General Provisions – The procurement process will provide for the evaluation of proposals and selection of the winning proposals according to applicable state and federal laws and administrative regulations. All responses received by the closing deadline, unless determined to be non-responsive will be evaluated by an evaluation team. (Exhibit P-1. pp. 66-67). Statement of Purpose The objective of this Request for Proposals (RFP) is to obtain proposals from qualified proposers to design, develop and implement the AFIS in accordance with the requirements defined in Section B of this RFP. FDCF intends to procure a statewide fingerprint identification capability for applicants and recipients of public assistance programs as stated above. Through this competitive solicitation, the FDCF desires to obtain a comprehensive identification service which represents the best value for the state, and which provides all hardware, (with the exception of existing administrative terminals as discussed in RFP Section B, subsection 6), software, communications networks, central site operations, terminal operations training, system administration training, operational support, maintenance, and other services. State personnel will be utilized to operate the system's imaging, fraud investigation, and administrative workstations located at state facilities. The system will include a central identification system to maintain fingerprint and photographic identification records and perform duplicate fingerprint record search and verification. It will also include workstations for creation of the fingerprint and photo identification records and for support of administrative and fraud investigation activities. Evaluation of Technical Proposals Part A Fatal Criteria Failure to comply with all Fatal Criteria will render a proposal non-responsive and ineligible for further evaluation. For a list of Fatal Criteria, see Appendix XIX. Any technical proposal that is incomplete, non-responsive, contains cost or pricing data, or in which there are significant inconsistencies or inaccuracies will be rejected by the FDCF. No points will be awarded for complying with the Fatal Criteria. 1.7 Acceptance of Proposals . . . Untimely proposals will be rejected as unresponsive. * * * All responsive proposals timely submitted will be evaluated. No proposed changes to the terms and conditions set out in this RFP, its appendices and any addenda will be accepted and submission of a proposal which purports to do so will make the proposal non- responsive. The FDCF may waive minor irregularities, but need not do so. Where the FDCF waives minor irregularities, such waiver shall in no way modify the RFP requirements or excuse the proposer from full compliance with the RFP specifications and other contract requirements if the proposer is awarded the contract. * * * The FDCF reserves the right to reject any or all proposals, cancel the RFP, or waive minor irregularities when to do so would be in the best interest of the State of Florida. Minor irregularities are those which will not, in the opinion of the contact person, have significant adverse effect on overall competition, cost or performance. 2. Proposal Format * * * The proposal should be prepared concisely and economically, providing a straightforward description of services to be provided and capabilities to satisfy the requirements of this RFP. Emphasis should be on completeness and clarity of content. In order to expedite the evaluation of proposals, it is essential that proposers follow the format and instructions contained herein. For purposes of this section, the terms "shall, will and must" are intended to identify items that are required to be submitted as part of the proposal. Failure to comply with all such requirements will result in the proposal being rejected as non-responsive. 3.3 Tab 3. Transmittal Letter Each copy of the proposal must include a transmittal letter in the form of a standard business letter and must be signed by an individual authorized to legally bind the proposer. It shall include at a minimum: * * * A statement indicating that the proposer and any proposed subcontractors are corporations or other legal entities and that each satisfied all licensing requirements of state or federal law and that they are authorized to do business within the State of Florida. All subcontractors must be identified. A statement indicating the percentage of work to be done by the proposer and by each subcontractor as measured by the percentage of total proposed price. A statement identifying the proposer's and any proposed subcontractor's federal tax identification number(s). 3.12 Tab 11. Technical Proposal: Corporate Qualifications . . . This section must also identify and describe the corporate capabilities of any proposed subcontractors and must include three (3) references for each subcontractor including names, addresses, and telephone numbers, and a description of the services which are being provided. Subcontractors not identified in the proposal will not be permitted to perform any work under any contract which results from the RFP. Cost Proposed Format The following information is intended to provide proposers with instructions and a format for submitting cost quotations. Cost quotations must be submitted using the provided pricing schedules. Responses that do not provide cost proposals in the required format will be rejected. Unless otherwise noted, the costs quoted shall apply for the entire term of the contact. Proposers are encouraged to identify means to reduce the cost of AFIS services in Florida. As part of the cost proposal, proposers should identify cost reduction factors, the rationale for costs savings, and any options in service that would produce such cost savings. In order to assess FDCF options, proposers are requested to submit AFIS system costs in two ways—as a bundled price per add transaction and as an unbundled price. The selection of the contract pricing method— either bundled or unbundled—shall be at the sole discretion of the FDCF. The FDCF will not make any corrections to arithmetic or other errors in the cost proposal. All numbers submitted will be assumed by the FDCF to be accurate even if an error appears likely. Proposers are cautioned to assure the accuracy of any amounts submitted because they will be held to the amounts which appear in the cost proposal throughout the term of any contract which results from this RFP as well as any extension or renewals of that contract. The RFP provided blank pricing schedules in the required format for submitting bundled and unbundled proposals. The RFP required proposers to submit prices based on alternative bundled and unbundled methods. Under the first method, proposers were to provide one lump sum price per record added to the AFIS database. An "add" is the function by which a fingerprint image is programmed into the computer and no match is found, indicating that fingerprint is not already in the system. Under that method, the provider was to be paid based on the number of fingerprints added to the database. (Schedules 1A and 1B). Under the second method, proposers were to provide a price per add, a price per inquiry (when the system searches the existing database), and prices for all hardware, broken down by type of hardware. This is called unbundled pricing. (Schedules 2A and 2B). As to unbundled pricing, the RFP specifically provided: Proposers must also provide unbundled pricing under the two communications network assumptions. Unbundled pricing includes a unit price per record added to the database, a unit price per workstation, and a unit price per printer. The cost of system development, implementation and operations must be reflected in the unit prices per add or inquiry. Schedule 3 applied to a POS Verification Study. The RFP also required a way to resolve smudged print identifications: 5.3.7. Identification Searching c) Workstations must provide the capability to launch identification search transactions using selected client records with or without minutiae editing. The RFP also required proposers to submit a thumb print option: Option to Add Thumb Prints . . . The department is also considering the option of capturing and storing both thumb prints, in addition to both index fingers, for each applicant household member required to comply. In order to help the department assess this option, the proposer shall provide an incremental price per record added to the database. . . There is no guarantee that the department will exercise the option to capture and store thumb prints. However, should the department decide to exercise this option, the successful proposer's system must be capable of supporting this option. The proposer was to provide the incremental price to capture and store thumb prints in Schedule 4. The RFP required proposers to submit a technical proposal and a separate sealed cost proposal. The RFP contemplated FDCF doing a completeness review against the "Fatal Criteria" provided in the RFP before the agency technically evaluated the proposals. The RFP presumed that those proposals which failed the completeness review would not be technically evaluated. No points were to be assigned via the completeness review. The RFP also contemplated that the cost proposals would remain sealed unless, and until, a proposer had passed the technical evaluation with at least 400 points. The evaluation system set out in the RFP provided for ranking proposals based on 600 possible points for the technical proposals and 400 possible points for the cost proposals. Any score less than 400 points on the technical proposal would mean the proposer could not be evaluated for cost. On March 23, 1998, the day of submittal, the technical responses were opened by Jayne Paris. She was FDCF's Procurement Manager and contact person for this RFP. In doing the completeness review, Ms. Paris compared the technical proposals with the Fatal Criteria checklist for completeness. She also reviewed each proposer's Supplemental Proposal Sheet for completeness and to be sure each proposer had promised compliance with all RFP requirements. She also reviewed each proposer's transmittal letter to be sure neither proposer intended to deviate from the RFP requirements. This completeness review was witnessed by Project Director, Connie Reinhardt, to assure the integrity and accuracy of the process. Although a consultant's checklist geared to federal contract review of cost proposal compliance was in the contract file which FDCF is required to maintain on every project, this checklist was only a suggestion which FDCF had rejected and had not included in the RFP. Ms. Paris did not apply it. Both Morpho and Lockheed used conditional language in their respective transmittal letters. Morpho's transmittal letter stated, "In the event that these stated requirements and assumptions are subsequently altered by the issuing agency, or are proved [sic] to be invalid due to actual experience, Sagem Morpho, Inc. reserves the right to make appropriate modifications to its scheduling or pricing." Lockheed asserts that by this language Morpho attempted to change the terms of the RFP, condition Morpho's prices, and include "pricing information" contrary to the RFP. The RFP required that each proposer identify in its transmittal letter all proposed subcontractors by name, corporate status, eligibility through licensure for state projects, the percentage of subcontract work each subcontractor would be doing, and federal tax identification number, and also provide three references for each contractor. It also provided that any subcontractors not identified by the proposer could not work on the contract. Lockheed's transmittal letter did not propose any subcontractors. It merely stated that Lockheed anticipated the need for a maintenance subcontractor beginning in June 1999, approximately 13 months after the start of the contract, and that Lockheed anticipated submitting a request for approval of a subcontractor by March 1999. Lockheed stated as its reason for the absence of subcontractor information that waiting until June 1999 would result in selection of a subcontractor that would provide the service levels demanded by Lockheed and FDCF. FDCF concedes that if a proposer intended to deviate from the RFP requirements, i.e. if the transmittal letter created a significant variance from the RFP specifications, that variance would have rendered that proposal substantively unresponsive at the completeness review, and no further evaluation of that proposal should have taken place. (TR-133; Exhibits P-2; P-3; DCF's PRO at page 7) However, in her initial completeness review of the respective proposals for the Fatal Criteria, signed management summary material checklist, and transmittal letter, Ms. Paris, in fact, only considered whether all necessary parts of each proposer's response were included. The Fatal Criteria only applied to the technical response. Ms. Paris deferred consideration of the content or effect of each proposer's "extraneous language" related in Findings of Fact 18-20 to the subsequent technical and cost evaluations. Therefore, Lockheed and Morpho were treated equally at the completeness review, because neither was disqualified as non-responsive nor docked any points on the basis of their respective transmittal letters. Ms. Paris' reason for not finding the transmittal letters unresponsive was apparently based at that stage on Section 1.7 of the RFP, which would hold the proposer to the RFP specifications despite waivers of irregularities. The next day, March 24, 1998, Ms. Paris provided the technical evaluation team with Sections I and III of an Evaluation Manual, which included the introduction and the substantive Evaluation Criteria Parts C-K. Ms. Paris also conducted a training session during which she provided a briefing on the evaluation process and instructions to the evaluation team members. The evaluation team was to evaluate only the technical merit of each proposal. Sections II and IV of the Evaluation Manual, which had been prepared for FDCF by outside consultants, were removed before the manual was distributed to the evaluation team on the basis that these sections were cost-related and the technical evaluation team members, whose duties did not include consideration of cost, were not to use them. The technical evaluation team members individually and independently evaluated the technical portion of each proposal and scored each technical response using a scale of 0 to 4 points, as instructed in Part I of the Evaluation Manual. With the exception of questions requiring a "yes" or "no" answer, scores were assigned as follows: 0 = no value; proposer demonstrated no capability to satisfy the Department's needs, ignored this area, or has so poorly described the proposal for this criteria that understanding it is not possible. 1 = poor; proposer demonstrated little or no direct capability to satisfy the Department's needs, or has not covered this area, but there is some indication of marginal capability. 2 = acceptable; proposer demonstrated adequate capability to satisfy the department's needs 3 = good; proposer demonstrated more than just adequate capability and good approach to satisfy the Department's needs. 4 = superior; proposer demonstrated excellent capability and an outstanding approach to satisfy the Department's needs. This scoring concept comports with the RFP, pp 67-68. A proposer had to receive a minimum score of 400 technical points before FDCF would open, review, and rank that proposer's cost proposal. FDCF determined that both Petitioner and Intervenor met this requirement. Morpho received 582.99 points out of a possible 600 points. Lockheed received 559.88 points. Under the scoring system, neither the Fatal Criteria nor the management summary were entitled to any points, so neither proposer was scored any points on those bases during the technical evaluation. "Minutiae editing" is the process of correcting misinformation details in an original fingerprint image which is smudged. Under Section 5.3.7 of the RFP, the system's workstations were required to have the capability to launch identification searches of fingerprint images "with or without minutiae editing." Morpho's system as proposed can launch a search and find a match after minituae editing. Lockheed's system could search, but its proposal candidly admitted that the Lockheed system could not match prints after minutiae editing. FDCF waived this technical problem with Lockheed's proposed system as an "immaterial irregularity" because the RFP expressly provided that proposers would be bound by the terms of the RFP. The RFP required submittal of a thumb print option but reserved the right of FDCF to unilaterally exercise the option. Lockheed submitted Schedule 4, providing for the thumb print identification option, quoting a cost of $0. However, Lockheed conditioned that $0 quote on FDCF accepting Lockheed's proposal at the time of the initial contract. Morpho did not submit any Schedule 4, and Morpho's technical proposal shows this omission was probably inadvertent. FDCF waived as "immaterial" Lockheed's extraneous language conditioning the thumb print option in its proposal and likewise waived Morpho's complete failure to submit a Schedule 4 for the thumb print option pursuant to the RFP. The optional thumb print function had no impact on ultimate scoring of the respective proposals because no value was assigned to it. FDCF has taken the position that since the technical evaluation team did not consider either proposal to be technically "nonresponsive," then all flaws or omissions were properly waived. The cost proposals remained sealed until after the technical proposals were scored by the technical evaluation team. At formal hearing, FDCF personnel testified that it was never FDCF's intent to enter into a contract for the thumb print option at the time of the initial contract and that the thumb print option was purely for future informational purposes. The RFP used mandatory language to ensure that cost proposals would be submitted in two ways -- a bundled price and an unbundled price. The bundled and unbundled pricing schedules were mutually exclusive, and the point system set up in the RFP assigned equal weight to the scoring of the bundled and unbundled price schedules. FDCF reserved the unilateral right to select either bundled or unbundled pricing as its procurement method. Cost proposals were to be scored using a formula which compared each proposer's price to the lowest price proposal. Of the 400 points possible for cost proposals, 195 points were allocated by the RFP to the bundled pricing schedules (Schedules 1A and 1B), 195 points were allocated to the unbundled pricing schedules (Schedules 2A and 2B), and 10 points were allocated to the POS Verification Study (Schedule 3). The RFP clearly indicated that both bundled and unbundled prices were required to be submitted on the provided Schedule format "in order to assess FDCF options." FDCF did not decide until after scoring the cost proposals and immediately before it was ready to post the Notice of Intent to Award to Morpho, that it would elect to contract based on the bundled cost proposals. Up until that moment, the bundled and unbundled price schedules had some significance to FDCF, if only for flexibility in procurement. The RFP specified that FDCF would not own any of the equipment (hardware) for which it was seeking single unit prices in the unbundled schedules. Nonetheless, on the unbundled pricing schedules provided in the RFP, proposers were required to provide an unbundled unit price per workstation and unit price per printer. On Schedules 2A and 2B, "Unbundled Pricing," Morpho did not provide an entry in dollars and cents for fraud workstation printers or administrative workstation printers. Rather, Morpho's schedule inserted in those spaces, "included in w/s (workstation) price" or "included above." Lockheed also had some extraneous language on one of its schedules as opposed to just a dollar amount, but cost breakout was clear. Morpho considered the printers part of the imaging and fraud investigation workstations because the RFP required a dedicated printer for each workstation and the RFP specified FDCF would not own or maintain any hardware. Ms. Paris reviewed each cost proposal for compliance with Section C of the RFP. She was concerned about whether Morpho's "unbundled" schedules complied with the RFP. The RFP defined waiveable "minor irregularities" as "those which will not, in the opinion of the contact person, have significant adverse effect on the overall competition, cost or performance." Upon advice of her supervisor, Connie Reinhardt, and FDCF's General Counsel, Ms. Paris determined both proposals to be responsive, and substituted a price of "zero" in the questionable spaces on Morpho's "unbundled" schedules, despite the absence of a pricing break-out between the fraud workstations and printers or between the administrative workstations and printers on Morpho's "unbundled" schedules. Ms. Paris conceded that she was never referred to Rule 68-1.001(16) Florida Administrative Code,1 which defines "minor irregularity" in terms of effect on cost. Ms. Paris was told that only items which had an effect on the overall scores of the responding proposers' cost proposals could not be waived. The cost proposals were not evaluated and scored subjectively as the technical proposals had been. No Fatal Criteria applied to this third review phase. Scoring was to be based on a purely mathematical formula devised prior to distributing the RFP. The RFP drafters had contemplated ranking the respective cost proposals by simply inserting the dollar values each proposer placed on the unbundled unit price list into a computer program. Ms. Paris attempted to rank the cost proposals. To assure the integrity of the process, Chris Haggard, Automation Specialist, physically entered cost proposal figures into the computer program. Ms. Paris instructed him to ignore any "extraneous language" on the schedules of both proposers. The computer program would not accept the "zeros" inserted by FDCF. Without any substitutions by Ms. Paris, Morpho had bid "zero" in the space indicating there would be no charge for the unbundled unit price per inquiry, thereby intending to signify that there would be no charge for this function. The record does not suggest that this proper use of "zero" had any effect on the computer program. Ms. Reinhardt viewed the problem with FDCF's imputed zero components as a purely technical problem with the computer program and not an "irregularity" under the RFP. The computer program was adjusted to accommodate the imputed zeroes and produce a spreadsheet. On unbundled Item 14, FDCF ranked Morpho with a score of one and Lockheed with 15, the maximum. On Item 15, the fraud workstation color printer, Morpho was ranked 15 and Lockheed was ranked zero. On Item 16, the administration workstation, Morpho was ranked three; Lockheed was ranked 15. On Item 17, the administration workstation printer, Morpho was ranked 15 and Lockheed was ranked zero. Pursuant to the adjusted spreadsheet, Morpho received a score of 343 for its cost proposal, and Lockheed received a score of 240. Even if Morpho had received zero points for the printers and work stations (lines 14-17 of the Unbundled Schedules), and if Lockheed had received the maximum number of points available on these items, Morpho still would have received the higher score for its cost proposal. At the disputed fact hearing, FDCF gave as its justification for imputing "zero" for bundling language in Morpho's "unbundled" schedules the following reasoning: because FDCF had requested unbundled prices purely for future contracts, not the contract to arise out of this RFP, for informational purposes, or for a cost benefit analysis for state budget purposes; because the RFP specified that FDCF would neither own nor maintain any of the hardware proposed for this RFP; because Morpho's failure to conform to the unbundled price format was not "irregular" if Morpho did not sell printers independently and Morpho used the unbundled schedules in a manner consistent with Morpho's offer; because the zero imputed by FDCF reflected accurately the integrated costs in effect; because Morpho was not charging separately for the printers; because FDCF's insertion of "zero" constituted no unfair economic advantage to Morpho; and finally, because having chosen the bundled option, FDCF believed the Morpho proposal will save a great deal of money and "represent the best value for the state."2 The RFP specified that the successful proposer would be responsible for the "cost of system development, implementation, and operations" for the contract term as well as any extensions and include that cost in either the unbundled unit price per record added (per add) or the price per inquiry (per inquiry) in Schedules 2A and 2B. There is no RFP requirement that the maintenance portion be "unbundled" further. "Cost of . . . operations" meant "cost of maintenance." According to Richard Woodard, who was responsible for the Morpho cost proposal, including Item 9, Morpho's price per add of $6.70 on Schedule 2A included $.80 for maintenance. However, at formal hearing, Lockheed elicited from Ms. Paris testimony that even though Morpho had indicated that maintenance was not included in its unbundled schedules, FDCF had decided to hold Morpho to the prices shown in their per add or per inquiry line item (TR-61), and that because of Morpho's own extra schedule attached to the bottom of unbundled pricing Schedule 2A, Morpho's maintenance price over 5 years could be calculated on current maintenance prices. (TR-62) When the prices are calculated mathematically over the life of the contract they do not correspond to the $.80 per add testified to by Mr. Woodard.3 Morpho's maintenance cost schedule and the provisions within Morpho's "Comments on Unbundled Pricing" indicated that only 12 months of warranty were included with the equipment identified in Morpho's unbundled pricing schedules and that after 12 months, maintenance contracts would be negotiated. FDCF ignored this as "extraneous language," and did not consider it to be a material irregularity. The Morpho bundled cost proposal was calculated on an average of 2.2 persons per file who would require finger imaging and matching. Morpho asserted that these calculations had been made on a "worst case scenario" based on RFP Addendum 3's specification that an actual number cannot be provided. It is expected that less than 2.2 persons per case will be printed. Lockheed selected a number less than 2.2 per file, and asserted that Morpho's "worst case" scenario is, in effect, a "best case" scenario because the higher the number of prints, the less Morpho can afford to charge per add; that by selecting the 2.2, Morpho has materially failed to comply with the RFP specification which estimated less than 2.2 persons per file, and that because Morpho also inserted the extraneous language in its transmittal letter as set out in Finding of Fact 19, supra., Morpho's proposal not only varied the express terms of the RFP by the use of "2.2" but also included "pricing information" in its transmittal letter and conditioned its prices on the potentially false assumptions stated or on a figure greater than a figure "less than 2.2," as required by the RFP.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Florida Department of Children and Family Services enter a final order rejecting all proposals. DONE AND ENTERED this 21st day of December, 1998, in Tallahassee, Leon County, Florida. ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 21st day of December, 1998.
Findings Of Fact The Respondent, Charles H. Butler, Jr., was for all periods relevant to this case a certified building contractor with the State of Florida, holding license number CB CA13872. It is officially recognized that on September 17, 1987, the administrative complaint that is the subject of this case was filed against Charles H. Butler, Jr. It is further officially recognized that the administrative complaint charges the Respondent with only two violations: Exhibiting "financial mismanagement, misconduct, or diversion, in violation of 489.129(1)(h) and (m)." Failing "to properly supervise the finances on said job, in violation of 489.129(1)(m), (j); 489.119; 489.105(4)." In April, 1986, Charles H. Butler, Jr., entered into a contract with Albert R. Harrelson to construct a commercial building for $144,000. R. Ex. 20, P. Ex. 6. Article 1 of the contract provides that "this contract includes by reference the following: 1) contract agreement form, 2) specifications, 3) material lists, and 4) approved plans." (E.S.) Article 3 of the contract stated that the "required plans and engineering to obtain a building permit are provided by the owner at his cost." The specifications, material lists, and approved plans are not in evidence. Pursuant to Article 7 of the contract, there was to have been a draw schedule for payments. The parties never agreed to a draw schedule as a part of their contract. A large portion of the loan for the construction was provided by Sun Bank of Tampa Bay. Sun Bank established a draw schedule for disbursement of the loan to the contractor, Mr. Butler, as progress was made in construction. Mr. Butler was not consulted regarding this draw schedule, and had not agreed to it. Mr. Harrelson apparently did not either since he testified that he got a copy of the Bank's draw schedule several months after entering into the contract with Mr. Butler. It is concluded that the draw schedule used by the Bank was imposed by the Bank, and was not a part of the contract between Mr. Butler and Mr. Harrelson. Sun Bank hired Inspection Service, Inc., to conduct inspections of the progress of the construction and in that manner to verify that construction had been completed, stage by stage, to justify disbursement of installments under the draw schedule. Sun Bank required Mr. Harrelson to approve loan disbursements as disbursements were made. In reliance upon progress reports of its inspector and Mr. Harrelson, Sun Bank made a total of $107,000 in disbursements under the loan. P. Ex. 9. Sun Bank had disbursed about $88,000 of this amount by February or March, 1987. P. Ex. 9. The amount disbursed by Sun Bank was never intended to cover the entire cost of construction. Mr. Harrelson was required to come up with his own funds to meet the total contract price. Mr. Harrelson refused to make payments to Mr. Butler outside the draw schedule imposed by the Bank. Mr. Harrelson discharged Mr. Butler for alleged breach of contract in March, 1987. Mr. Harrelson testified at length concerning defects that he perceived in the construction of the project and resultant extra financial cost to himself. While Mr. Harrelson testified as to his perception of mistakes made by Mr. Butler, Mr. Harrelson's testimony did not clearly explain the exact scope of the contract. There is no evidence that Mr. Harrelson has any training in the construction of commercial buildings. Mr. Butler testified at length about the delays and inadequacies in receipt of payments under the draw schedule, as well as disagreements he had with Mr. Harrelson concerning what was required by the contract. From the testimony of Mr. Harrelson and Mr. Butler it is concluded that there were changes made in the original plans, changes made in the scope of the work, changes made during the construction due to problems encountered, and that these changes were by attempted oral agreement. For example, neither party could agree as to who was to submit plans, although the written contract clearly says that the owner is responsible. The plans were never placed in evidence. Mr. Butler insists that the contract had an addendum. R. Ex. 20. Mr. Harrelson was not recalled to confirm or deny this testimony, but the contract submitted by the Petitioner, P. Ex. 6, has no addendum. There was to have been a draw schedule, but none was ever agreed to by the parties. Thus, the testimony is too fragmented, confused, and unclear to make a finding as to the exact scope and schedule of the contract. There was no testimony by the person who made the progress inspections for Sun Bank. There was no testimony from any expert in the field of contracting. During the formal administrative hearing, the Petitioner sought to voluntarily dismiss the charge of diversion of funds. The dismissal was sought without prejudice to refiling that charge at another date. The basis of the motion was that the witness from Sun Bank of Tampa did not bring files to answer questions from counsel, and was unprepared to answer from memory. It appeared during the course of the examination of the witness that counsel was not familiar with the documents in the possession of the witness, and that the witness was not prepared to present evidence. The motion was denied.
Recommendation It is therefore recommended that the Department of professional Regulation, Construction Industry Licensing Board, enter its final order dismissing the administrative complaint against Charles H. Butler, Jr. DONE and RECOMMENDED this 23rd day of March, 1988, in Tallahassee, Florida. WILLIAM C. SHERRILL, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of March, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-5041 The following are rulings upon proposed findings of fact which have either been rejected or which have been adopted by reference. The numbers used are the numbers used correspond to the numbered and unnumbered paragraphs and sentences in the findings of fact proposed by the Petitioner. (All paragraphs after paragraph 3 have been deemed to be numbered sequentially thereafter.) Findings of fact proposed by the Petitioner: 3. The first sentence is subordinate to findings of fact that have been adopted. It is true, however, and is adopted by reference. Since the entire contract was never proven by clear and convincing evidence, the relevance of this proposed finding of fact is unknown. It is impossible to conclude that the Respondent caused a "self made deficit of $25,000" since the contract itself was never proven by clear and convincing evidence. The administrative complaint did not charge Mr. Butler with failure to supervise the construction of the building. It charged him with financial mismanagement and failure to supervise finances. Moreover, the relevance of evidence concerning Mr. Butler's presence on the job site was never tied into the charge of financial mismanagement. No finding can be made on this record as to the percentage of completion on any date since the contract was never proven. With respect to the remainder of this proposed finding (the list of construction defects), the administrative complaint did not charge Mr. Butler with incompetence in the construction of the building. It charged him with financial mismanagement and failure to supervise finances. Since the entire contract, including changes and alleged defects, was never proven by clear and convincing evidence, it is impossible to conclude that Mr. Harrelson paid more than the contract price. The last two sentences are not relevant to the charge of financial mismanagement. The first sentence is not supported by the evidence. With respect to the next sentence of this proposed finding (the list of construction defects), the administrative complaint did not charge Mr. Butler with incompetence in the construction of the building. It charged him with financial mismanagement and failure to supervise finances. The last sentence is true, and adopted by reference. Since the entire contract was never proven by clear and convincing evidence, the relevance of this proposed finding of fact is unknown. No finding can be made on this record as to the percentage of completion on any date since the contract was never proven. Findings of fact proposed by the Respondent: None. COPIES FURNISHED: Lee Sims, Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 Charles H. Butler, Jr., Pro Se 8917 Maislin Drive Tampa, Florida 33610 Fred Seely, Executive Director Construction Industry Licensing Board Post Office Box 2 Jacksonville, Florida 32201 Tom GallagherSecretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 William O'Neil, General Counsel Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750
The Issue The issue in these cases is whether the Agency for Health Care Administration's (AHCA) proposed award of a contract to Caremark, Inc., based on evaluations of proposals submitted in response to a Request for Proposals (RFP), is clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact AHCA is the single state agency in Florida authorized to make payments for medical assistance and related services under Title XIX of the Social Security Act (the "Medicaid" program). In order to participate in the federal Medicaid program, AHCA is required to maintain a state plan for Medicaid in compliance with Title XIX of the Social Security Act. AHCA is required to operate the Florida Medicaid program in compliance with the state plan. AHCA is apparently concerned by costs associated with the Florida Medicaid program's hemophilia population. Florida's Medicaid hemophilia beneficiaries constitute a relatively small, but costly population to serve. Hemophilia is a bleeding disorder caused by a deficiency in one of numerous "clotting factors," which normally causes a persons' blood to coagulate. Hemophilia is treated by administration of the deficient clotting factor to the person with the disorder. AHCA seeks to control the cost of providing hemophilia-related services to this population through a combination of case management and medication discounts known as the Medicaid Comprehensive Hemophilia Management (MCHM) program. AHCA believes that a single vendor responsible for operation of the MCHM program can provide managed care to the population while achieving significant drug-cost savings. Through a federal requirement referred to as "freedom of choice," Florida's Medicaid program state plan must provide that any individual eligible for medical assistance (including drugs) may obtain such assistance from any institution, agency, community pharmacy, or person qualified to perform the service and who undertakes to provide such services. The freedom of choice requirement is subject to being waived in accordance with applicable federal law. Such waiver requires approval by the Centers for Medicare and Medicaid Services (CMS). AHCA began seeking approval from CMS for an amendment to an existing "Managed Care Waiver" to implement the MCHM program in October 2002. By letter dated May 22, 2003, CMS approved AHCA's request to amend the existing waiver to permit implementation of the MCHM program. Subsequent correspondence between the agencies has further established AHCA's authority to implement the MCHM program. AHCA issued the RFP ("RFP AHCA 0403") on October 1, 2003. The RFP seeks to implement the MCHM program. There were no timely challenges filed to the terms and specifications of the RFP. Section 287.057, Florida Statutes (2003), requires that an agency must make a written determination that an invitation to bid is not practicable for procurement of commodities or contractual services prior to issuance of an RFP. AHCA did not make such a written determination prior to issuance of the RFP. Under the terms of the RFP, AHCA will contract with a single provider for a period of two years, with an option to extend the contract for an additional two-year period. RFP Section 10.2 sets out an extensive list of vendor requirements designed to provide care to Medicaid hemophilia beneficiaries and better management of related costs. The RFP provides that the successful vendor will be paid only on the basis of the factor products dispensed to eligible Medicaid beneficiaries. All other services required by the RFP must be delivered within the revenue provided by AHCA's reimbursement for factor product costs. No additional payment beyond payment of factor product costs will be provided. The RFP stated that the successful vendor would be reimbursed for factor product cost based on the average wholesale price (AWP) of the factor product minus a minimum discount of 39 percent. The RFP provided that vendors may offer a greater discount than 39 percent. An Addendum to the RFP indicated that if a vendor proposed a discount greater than 39 percent, the increased discount must apply to all factor products and that vendors could not propose varying discounts for individual factor products. The RFP contains language in the background section referencing budget "proviso" language adopted by the Legislature and referring to the MCHM program as a "revenue enhancement program." HHS asserts that because this RFP does not create a revenue enhancement program, AHCA had no authority to proceed with the RFP. The evidence fails to establish that this program will enhance revenue. The evidence fails to establish that based on the "proviso" language, AHCA is without authority to issue the RFP. RFP Section 20.11 sets forth the "proposal submission requirements." The section included a number of requirements set in capital letters and highlighted in boldface. The terms of each requirement indicated that failure to comply with the requirement was "fatal" and would result in rejection of the proposal submitted. None of the proposals submitted by the parties to this proceeding were rejected pursuant to RFP Section 20.11. The evidence fails to establish that any of the proposals submitted by the parties to this proceeding should have been rejected pursuant to RFP Section 20.11. RFP Section 20.16 provides that AHCA may waive "minor irregularities," which are defined as variations "from the RFP terms and conditions, that [do] not affect the price of the proposal or give one applicant an advantage or benefit not enjoyed by others or adversely affect the state's interest." RFP Section 20.17 provides as follows: Rejection of proposals Proposals that do not conform to all mandatory requirements of this RFP shall be rejected by the Agency. Proposals may be rejected for reasons that include, but are not limited to, the following: The proposal was received after the submission deadline; The proposal was not signed by an authorized representative of the vendor; The proposal was not submitted in accordance with the requirements of Section 20.11 of this RFP; The vendor failed to submit a proposal guarantee in an acceptable form in accordance with the terms identified in Section 20.12 of this RFP or the guarantee was not submitted with the original cost proposal; The proposal contained unauthorized amendments, deletions, or contingencies to the requirements of the RFP; The vendor submitted more than one proposal; and/or The proposal is not deemed to be in the best interest of the state. None of the proposals submitted by the parties to this proceeding were rejected pursuant to RFP Section 20.17. The evidence fails to establish that any of the proposals submitted by the parties to this proceeding should have been rejected pursuant to RFP Section 20.17. RFP Section 30.1 provides that the "total cost of the contract will not exceed $36,000,000 annually." RFP Section 30.2 provides in part that the "total cost for the contract under any renewal will not exceed $36,000,000 per year." The RFP's contract amount apparently was based on historical information and assumed that some level of cost control would occur through case management. The contract amount cannot operate as a "cap" because Medicaid hemophilia beneficiaries are an "entitled" group and services must be provided. If the amount of the contract is exceeded, AHCA is obliged to pay for necessary factor products provided to the beneficiaries; however, in an Addendum to the RFP, AHCA stated that if the contract fails to contain costs "there would be no justification to renew or extend the contract." The RFP required vendors to submit a performance bond based on 20 percent of the $36 million contract amount. The RFP stated that proposals could receive a maximum possible score of 2000 points. The proposal with the highest technical evaluation would receive 1340 weighted points. The proposal with the lowest cost proposal would receive 660 weighted points. The combined technical and cost proposal scores for each vendor determined the ranking for the proposals. The RFP set forth formulas to be used to determine the weighted final score based on raw scores received after evaluation. AHCA conducted a bidder's conference related to the RFP on October 8, 2003. All parties to this proceeding attended the conference. At the conference, AHCA distributed a copy of a spreadsheet chart that listed all factor products provided to Florida's Medicaid hemophilia beneficiaries during the second quarter of 2003. The chart identified the amount of each factor product used and the amount paid by AHCA to vendors for the factor product during the quarter. The chart also showed the amount that would have been paid by AHCA per factor product unit had the vendors been paid at the rate of AWP minus 39 percent. AHCA received six proposals in response to the RFP. The proposals were received from Caremark, HHS, Lynnfield, PDI Pharmacy Services, Inc., Advance PCS/Accordant, and Coram. RFP Section 60 contained the instructions to vendors for preparing their responses to the solicitation. As set forth in RFP Section 60.1, the technical response was identified as "the most important section of the proposal with respect to the organization's ability to perform under the contract." The section requires vendors to include "evidence of the vendor's capability through a detailed response describing its organizational background and experience," which would establish that the vendor was qualified to operate the MCHM program. Vendors were also directed to describe the proposed project staffing and the proposed "technical approach" to accomplish the work required by the RFP. Vendors were encouraged to propose "innovative approaches to the tasks described in the RFP" and to present a detailed implementation plan with a start date of January 10, 2003. The technical responses were opened on October 29, 2003. AHCA deemed all six proposals to be responsive to the technical requirements of the RFP and each technical proposal was evaluated. For purposes of evaluation, AHCA divided the technical requirements of the RFP into 50 separate criteria. AHCA assembled the technical evaluators at an orientation meeting at which time an instruction sheet was issued and verbal instructions for evaluating the technical proposals were delivered. The instruction sheet distributed to the evaluators provided that the evaluators "should" justify their scores in the "comments" section of the score sheets. The five AHCA employees who evaluated the technical proposal were Maresa Corder (Scorer "A"), Bob Brown-Barrios (Scorer "B"), Kay Newman (Scorer "C"), Jerry Wells (Scorer "D"), and Laura Rutledge (Scorer "E"). AHCA employees Dan Gabric and Lawanda Williams performed reference reviews separate from the technical evaluations. Reference review scores were combined with technical evaluation scores resulting in a total technical evaluation score. Reference review scores are not at issue in this proceeding. Kay Newman's review was limited to reviewing the financial audit information provided by the vendors. Technical evaluators reviewed each technical response to the RFP and completed evaluation sheets based on the 50 evaluation criteria. Other than Mr. Wells, evaluators included comments on the score sheets. Mr. Wells did not include comments on his score sheet. The technical proposal scoring scale set forth in the RFP provided as follows: Points Vendor has demonstrated 0 No capability to meet the criterion 1-3 Marginal or poor capability to meet the criterion 4-6 Average capability to meet the criterion 7-9 Above average capability to meet the criterion 10 Excellent capability to meet the criterion Each evaluator worked independently, and they did not confer with each other or with anyone else regarding their evaluations of the responses to the RFP. Janis Williamson was the AHCA employee responsible for distribution of the technical proposals to the evaluators. She received the completed score sheets and evaluation forms from each of the technical evaluators. The RFP set forth a process by which point values would be assigned to technical proposals as follows: The total final point scores for proposals will be compared to the maximum achievable score of 1340 points, and the technical proposal with the highest total technical points will be assigned the maximum achievable point score. All other proposals will be assigned a percentage of the maximum achievable points, based on the ratio derived when a proposal's total technical points are divided by the highest total technical points awarded. S = P X 1340 N Where: N = highest number of final points awarded to t technical proposal P = number of final points awarded to a proposal S = final technical score for a proposal According to the "Summary Report and Recommendation" memorandum dated December 4, 2003, after application of the formula, Caremark received the highest number of technical points (1340 points). Of the parties to this proceeding, HHS was ranked second on the technical proposal evaluation (1132.30 points), and Lynnfield was ranked third (1101.48 points). Lynnfield and HHS assert that the scoring of the technical proposals was arbitrary based on the range of scores between the highest scorer and the lowest scorer of the proposals. Review of the score sheets indicates that Scorer "A" graded "harder" than the other evaluators. The scores she assigned to vendor proposals were substantially lower on many of the criteria than the scores assigned by other evaluators. The range between her scores and the highest scores assigned by other evaluators was greater relative to the Lynnfield and the HHS proposals than they were to the Caremark proposal, indicating that she apparently believed the Caremark technical proposal to be substantially better than others she reviewed. There is no evidence that Scorer "A" was biased either for or against any particular vendor. The evidence fails to establish that her evaluation of the proposals was arbitrary or capricious. The evidence fails to establish that AHCA's evaluation of the technical proposals was inappropriate. After the technical evaluation was completed, cost proposals were opened on November 21, 2003. Section 60.3 addressed the cost proposal requirements for the RFP. RFP Section 60.3.1 provides as follows: The cost proposal shall cover all care management services, hemophilia specific pharmaceuticals dispensing and delivery, and pharmacy benefits management activities contemplated by the RFP. The price the vendor submits must include a detailed budget that fully justifies and explains the proposed costs assigned. This includes salaries, expenses, systems costs, report costs, and any other item the vendor uses in arriving at the final price for which it will agree to perform the work described in the RFP. The maximum reimbursement for the delivery of services and factor products used in factor replacement therapy (inclusive of all plasma-derived and recombinant factor concentrates currently in use and any others approved for use during the term of the contract resulting from this RFP) will be at Average Wholesale Price (AWP) minus 39%. Proposals may bid at a lower reimbursement but not higher. All other drugs not otherwise specified in factor replacement therapy will be paid at the normal Medicaid reimbursement. RFP Section 60.3.2 provides as follows: A vendor's cost proposal shall be defined in terms of Average Wholesale Price (AWP) and conform to the following requirements: The first tab of a vendor's original cost proposal shall be labeled "Proposal Guarantee" and shall include the vendor's proposal guarantee, which shall conform to the requirements specified in this RFP, Section 20.12. Copies of the cost proposal are not required to include the proposal guarantee. The second tab of the cost proposal shall be labeled "Project Budget" and shall include the information called for in the RFP, including the total price proposed, a line item budget for each year of the proposal, a budget narrative, and other information required to justify the costs listed. The RFP does not define the "detailed" budget mentioned in RFP Section 60.3.1 and does not define the "line item" budget mentioned in RFP Section 60.3.2. No examples of such budgets were provided. RFP Section 80.1 provides as follows: Evaluation of the Mandatory Requirements of the Cost Proposal Upon completion of the evaluation of all technical proposals, cost proposals will be opened on the date specified in the RFP Timetable. The Agency will determine if a cost proposal is sufficiently responsive to the requirements of the RFP to permit a complete evaluation. In making this determination, the evaluation team will review each cost proposal against the following criteria: Was the cost proposal received by the Agency no later than time specified in the RFP Timetable? Did the vendor submit an original and ten copies of its cost proposal in a separate sealed package? Was the vendor's cost proposal accompanied by a proposal guarantee meeting the requirements of the RFP? Did the cost proposal contain the detailed budget required by the RFP? Does the proposal contain all other mandatory requirements for the cost proposal? The AHCA employee who opened the cost proposals apparently determined that each proposal met the requirements of RFP Section 80.1, including providing a "detailed" budget. The RFP set forth a process by which point values would be assigned to cost proposals as follows: On the basis of 660 total points, the proposal with the lowest total price will receive 660 points. The other proposals will receive a percentage of the maximum achievable points, based on the ratio derived when the total cost points are divided by the highest total cost points awarded. Where: S = L X 660 N N = price in the proposal (for two years) L = lowest price proposed (for two years) S = cost points awarded The cost proposal scoring process clearly required comparison of each vendor's total price for the initial two-year portion of the contract. Caremark's proposal included estimated total costs of $44,797,207 for FY 2002-2003, $43,245,607 for FY 2003-2004, and $44,542,975 for FY 2004-2005. According to RFP Section 30.1, the maximum annual contract was not to exceed $36,000,000. All of Caremark's estimated annual costs exceeded the contract amount set forth in the RFP. Caremark's proposal also provided as follows: The above budget includes all salary expenses for Caremark employees involved in providing services for the program including the Contract Manager, Clinical Pharmacist, Care manager, additional pharmacist(s), Client Service Specialists in Florida for the expanded hemophilia program. Also included are the support staff such as pharmacy technicians, materials management, field service representatives, warehouse, reimbursement, marketing, sales and administrative staff. Also included are all delivery, data and report development, educational and marketing communication expenses. Product costs including medically necessary ancillary supplies, medical waste disposal and removal, protective gear and therapeutic devices. Caremark's proposal did not include information sufficient to assign specific costs to any of the items that Caremark indicated were included in its annual cost estimate. The HHS proposal projected estimated costs identified by month and year. The HHS proposal estimated total first-year costs of $14,261,954 and second-year costs of $27,333,389. HHS did not propose to assume responsibility for serving all Medicaid hemophilia beneficiaries at the start of the contract, but projected costs as if beneficiaries would "migrate to our service at a rate of 20 per month" during the first year and that full service provision would begin by the beginning of year two. RFP Section 10.2 provides as follows: The purpose of this RFP is to receive offers from qualified vendors wishing to provide the services required by the Florida Medicaid Comprehensive Hemophilia Management Program. The contract resulting from this RFP shall be with a single provider for up to two years commencing on the date signed, with an option to renew for two additional years. Otherwise stated, all Medicaid hemophilia beneficiaries would be served though the program's sole provider from the start of the contract period. The RFP provides no option for a vendor to gradually increase service levels through the first half of the two-year contract. The HHS proposal also included a breakdown of costs by factor product unit, identifying the AWP for each listed factor product and applying a discount of between 39 percent and 45 percent to indicate the product cost-per-unit that would be charged to AHCA. In Addendum 2 to the RFP, AHCA stated that it has received a written inquiry as follows: Knowing that the minimum accepted discount is AWP less 39%, can different products have different discounts. AHCA's response to the inquiry was as follows: No. The proposed discount will apply to all factor products. As to the costs included in the proposal annual total, the HHS proposal provided as follows: The product price above will include the following costs incurred in servicing the patients: The cost of the product dispensed to the patient. The cost of freight and other delivery expense of transporting the product to the patient. Pharmacy, warehouse and patient supplies. Cost incurred for patient protective gear and education materials Salary costs for the following: o Project/Contract Manager Clinical Pharmacist Staff Pharmacist Case Management Coordinator Pharmacy Care Coordinators Shipping Clerk Warehouse Coordinator Community Advocates Insurance Reimbursement Specialist The cost of Information Technology support for systems and reporting The cost of rent, office supplies, equipment, postage, printing. The HHS proposal did not include information sufficient to assign specific costs to any of the items that HHS indicated were included in its annual cost estimate. Lynnfield's proposal estimated total costs of $34,000,000 for calendar year 2004 and $36,000,000 for calendar year 2005. Lynnfield's budget proposal included information identifying the specific expense lines which form the basis for the cost estimation, including salary costs by position, travel costs, employee insurance, postage, equipment costs, and various office expenses. Lynnfield's budget proposal included a significantly greater level of detail than did either the Caremark or the HHS proposals. Jerry Wells was assigned the responsibility to evaluate the cost proposals. Mr. Wells failed to review the RFP or the related Addenda prior to evaluating the cost proposals submitted by the vendors. Mr. Wells asserted that it was not possible, based on the information submitted by the vendors, to perform an "apples- to-apples comparison." Each vendor set forth information in its proposal sufficient to calculate a total price for the initial two-year portion of the contract. Mr. Wells testified at the hearing that his cost review was intended to determine what AHCA would be paying for each of the individual factor products that AHCA provides hemophiliacs through Medicaid because the cost of the products was all AHCA would be paying to the vendors. The RFP did not require vendors to include a detailed list of, or unit prices for, factor products. The RFP specified only that factor products be provided at a minimum of AWP minus 39 percent. AHCA employees, under the direction of Mr. Wells, created a cost comparison chart which purported to identify the price proposed by each vendor for certain factor products and which projects an estimated quarterly factor product cost for each vendor. HHS's cost proposal included a listing of specific prices to be charged for factor products. The list was based on products being used by existing HHS patients. Caremark offered to provide all products at the AWP minus 39 percent cost required by the RFP. Caremark also suggested various "innovative cost savings," which specified use of factor products and indicated discounts greater than the 39 percent required by the RFP. Lynnfield did not include a product-specific listing of factor costs in its proposal, but offered to provide all products at the AWP minus 39 percent cost required by the RFP. The AHCA employees used the HHS cost proposal, including the HHS range of discounts, as the basis for preparation of the cost comparison chart that included the other vendors. The factor products listed on the AHCA cost comparison mirror those listed in the HHS cost proposal. AHCA employees apparently applied the factor product usage information from the second quarter of 2003 that was included on the spreadsheet distributed at the bidder's conference to the HHS factor product list. The AHCA spreadsheet distributed at the bidder conference lists 29 factor products by name and dosage. Of the 29 products, 15 are listed in the HHS cost proposal. The AHCA cost comparison created at Mr. Wells' direction includes only the 15 factor products listed on the HHS cost proposal. AHCA's cost comparison assumed no costs would be incurred, where the AHCA spreadsheet information indicated no usage of the factor product that had been included on the HHS cost proposal. AHCA's cost comparison did not include factor products which have been supplied by AHCA to Medicaid beneficiaries, but which do not appear on the HHS list. Mr. Wells relied on this cost comparison to determine that the cost proposal submitted by HHS offered the lowest cost to the agency and was entitled to the 660 points. Lynnfield and Caremark were both ranked according to cost proposals of AWP minus 39 percent, and according to the Summary Report and Recommendation memorandum, were awarded 652.74 points. Calculation of the points awarded to Lynnfield and Caremark in the Summary Report and Recommendation memorandum does not appear to comply with the formula set forth in the RFP. The AHCA cost comparison spreadsheet identifies the HHS proposed cost as $10,706,425.66 and identifies the AWP minus 39 percent cost as $10,795,477.48 (assigned as the Lynnfield and Caremark cost proposal). The Summary Report and Recommendation memorandum states the lowest cost proposal to be $10,706,405.66 (perhaps a typographical error). The methodology applied by AHCA assumed that all vendors would utilize identical quantities of identical factor products (based on historical usage in Quarter 2 of 2003 of those listed in the HHS cost proposal) and that there would be no cost savings related to disease management. The application of methodology to compare vendor cost proposals outside the process established by the RFP is clearly erroneous, arbitrary, and capricious. The vendors who are party to this proceeding assert that each other vendor's budgetary submission is insufficient, flawed, or unreliable for varying reasons. It is unnecessary to determine whether the budgetary information submitted by the vendors meets the requirements of the RFP because, despite having requested the information, AHCA has no interest in the data. There is no evidence that in making an award of points based on the cost proposals, AHCA relied on any of the budgetary information required by the RFP or submitted by the vendors.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order rejecting all proposals submitted in response to the RFP AHCA 0403. DONE AND ENTERED this 29th day of April, 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 29th day of April, 2004. COPIES FURNISHED: Anthony L. Conticello, Esquire Thomas Barnhart, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Geoffrey D. Smith, Esquire Thomas R. McSwain, Esquire Blank, Meenan & Smith, P.A. 204 South Monroe Street Post Office Box 11068 Tallahassee, Florida 32302-3068 Linda Loomis Shelley, Esquire Karen A. Brodeen, Esquire Fowler, White, Boggs, Banker, P.A. 101 North Monroe Street, Suite 1090 Post Office Box 11240 Tallahassee, Florida 32301 J. Riley Davis, Esquire Martin R. Dix, Esquire Akerman & Senterfitt Law Firm 106 East College Avenue, Suite 1200 Tallahassee, Florida 32301 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3431 Tallahassee, Florida 32308
The Issue Whether Respondent Florida Department of Health and Rehabilitative Services (HRS), acted illegally, dishonestly, fraudulently, arbitrarily or/and capriciously in determining to award the contract for RFP 95-142CM-FAP to Unisys Corporation (Unisys).
Findings Of Fact On November 14, 1994, HRS's Office of Information Systems distributed the RFP, entitled "FLORIDA System --Applications Programming Services." The RFP was designed to procure the programming services required by HRS to complete the software programming of, among other things, the state's federally mandated Child Support Enforcement System, and to maintain and enhance the system upon its completion. Upon selection of the winning proposal, HRS intended to enter into the contract for thirty-six months, renewable upon agreement of the parties for an additional 12 months. The cost proposal rates for the initial three-year term would be binding for any subsequent work on the project. HRS also reserved the right to acquire additional consulting services from the contractor for related activities for up to one year after the termination of the Contract. HRS began developing this RFP in the late spring or early summer of 1994 in anticipation of the expiration of the current contract with Deloitte for provision of applications programming services. Before release to prospective proposers, the RFP was approved by HRS' Office of Contract Services and the Information Technology Resources Procurement Advisory Commission (ITRPAC), a body consisting of various state officials including the head of the Division of Purchasing, which ensures that the RFP complies with state rules. In addition, various federal agencies approved the RFP before its release to prospective proposers. The RFP provided that 60 percent of the proposal scoring would be based on the technical proposals contained in the responses to the RFP, and that the remaining 40 percent of the score would be assigned to the costs as submitted in the proposals. After scoring and weighting of the scores, the weighted scores were to be combined to determine the winning proposal. The breakdown of scoring between technical and cost components is based upon HRS' standard practice and its experience with the format required by other state and federal agencies with whom HRS works. The division of the scores was also intended to ensure that an unqualified vendor did not secure the bid solely on the basis of low cost. The selection of the evaluation criteria and weighting of evaluation points for this RFP were subject to the discretion of the Department at the time the RFP was prepared. On December 12, 1994, HRS held a bidders' conference at which representatives of Deloitte and Unisys were in attendance. EVALUATION OF RESPONSES On January 6, 1995, Deloitte and Unisys submitted the only two proposals in response to the RFP. Both proposals were deemed responsive to the requirements of the RFP. HRS appointed a five member Evaluation Committee to review and evaluate the proposals. HRS provided training to the Evaluation Committee members specifically directed to the proper method for reviewing and scoring proposals submitted in response to the RFP. Each member of the Evaluation Committee was qualified by training, education and experience to review and evaluate the technical merits of each proposal. The RFP defined the criteria by which the proposals would be reviewed, scored and ranked by the Evaluation Committee, and the contract awarded. Included in the RFP were blank cost proposal forms which the proposers were to complete. Those forms did not include any blank spaces to be filled in referencing costs associated with any "renewal" periods or otherwise provide for including information about proposed costs for any renewal periods. The Evaluation Committee members each independently reviewed the technical proposals submitted in response to the RFP over a period of approximately two weeks. Committee members submitted the raw scores from their technical evaluations to Karin Morris, the HRS System Program Administrator. The cost proposals were opened and scored on January 20, 1995 by Ms. Morris. The RFP provided, in Section 6.0, that a comprehensive, fair, and impartial evaluation would be conducted of all proposals received. The RFP also provided for the grouping of evaluation criteria into six categories with points assigned as follows: - Mandatory Requirements 0 points - Management Summary 0 points - Corporate Capabilities 200 points - Project Staff 200 points - Technical Approach 100 points - Project Workplan 100 points - Cost 400 points Section 6.0 of the RFP also contained the following language: Selection of the successful proposer will be based on the proposal that is determined to be in the best interest of the department, taking into consideration cost and other criteria set forth in the RFP. Further, the RFP provided, in Section 6.1, that: An Evaluation Committee will be established to assist the department in selection of the winning contractor(s). All proposals not meeting the mandatory requirements will be rejected. The committee will evaluate the technical approach, corporate capabilities and project staff of all responsive proposals. The committee will rank proposers by the resulting scores and make a recommended award. The committee will summarize their findings and prepare an evaluation report to the Deputy Secretary for Administration. The report will then be presented to the Secretary of HRS. The Secretary will review the final report, pertinent supporting materials and make the determination of the final award, taking into consideration cost and other evaluation criteria set forth in the RFP. The Secretary reserves the right to take any additional administrative steps deemed necessary in determining the final award. (Emphasis added). Most importantly, Section 6.3(D) of the RFP dealing with the evaluation of the cost proposals stated: The points awarded for the three cost evaluation categories will be totaled and added to the points awarded for technical evaluation cate- gories 3 through 6 to determine the winning proposer. (Emphasis added). After reviewing and comparing the weighted scores of both proposals, the Evaluation Committee issued a "Final Report," with recommendations, on January 30, 1995. The weighted technical scores reflected in the Evaluation Committee's Final Report are as follows: DELOITTE UNISYS Corporate Capabilities 200 186.36 Project Staff 200 159.07 Technical Approach 100 76.62 Project Workplan 100 76.73 TOTAL 600 499 The weighted cost scores were: DELOITTE UNISYS Fixed Price Tasks 10.0 2.27 Monthly Price 357.90 380.0 Hourly Price 7.77 10.0 TOTAL 375.67 392.2 Totaling all categories as required by paragraph 6.3(D) of the RFP, the Department's Evaluation Committee arrived at the following final ranking: DELOITTE UNISYS Technical Proposal 600 499 Business Proposal 376 392 TOTAL 976 891 Based upon the Evaluation Committee's scores, Deloitte's demonstrated technical capability is 20 percent higher than that of Unisys. Under the terms of the RFP, there was no discretion involved in scoring the cost portion of the proposals, including the weight to be accorded costs in the final overall scoring to determine the winning bidder. Based upon HRS' inclusion of the specific criteria in the RFP, the cost portion scoring was merely a mechanical calculation. Both of the proposers' cost proposals fall within the agency's budgetary limits for the current year for accomplishing the work requested by the RFP. Four of the five members of the HRS Evaluation Committee recommended award of the contract to Deloitte, in the following language: Deloitte & Touche scored higher in all areas including recommendations. Deloitte and Touche is the incumbent contractor and therefore there are no risks associated with the transition. Deloitte understood the requirements of the RFP and addressed them more completely in their proposal. Therefore, it is our recommendation that the contract should be awarded to Deloitte & Touche. (Emphasis added). One member of the Evaluation Committee recommended the decision be left to the Secretary of HRS. None of the members of the HRS Evaluation Committee recommended award of the contract to Unisys. HRS SECRETARY'S DECISION TO AWARD TO UNISYS On January 27, 1995, prior to preparation of the recommendations contained in, or the issuance of, the Evaluation Committee's Final Report, HRS Secretary James Towey convened a meeting with Deputy Secretary Lowell Clary, John Holland, Bill Belleville and the department's legal counsel to discuss the contract award process, a draft of the Evaluation Committee's Final Report and other matters the Secretary felt relevant to HRS' ultimate decision on the RFP. At the meeting, Towey was informed by Bill Belleville that Deloitte's proposal was the "best." Towey was also informed by John Holland and Bill Belleville that both companies could perform under the contract. However, neither Holland's nor Belleville's assessments were based on responses to the RFP, but rather upon their own experience with the two vendors outside of this RFP process. Belleville conceded that he believed that a proposer was qualified to perform the contract by merely meeting the "mandatory" requirements of the RFP, a category that was accorded zero points in the scoring criteria. Informed that both companies could perform under the contract, Towey "zeroed in" on costs as the major consideration for the award of the contract. At the meeting, he considered a present-value calculation of the payments that the State would make over the course of a contract, if the contract had been for a 48 month term. The calculation had been prepared by Dean Modling, an HRS senior management analyst supervisor, although the RFP had been approved by the Department of Management Services without provision for such an analysis. The RFP not inform proposers that a present-value analysis would be performed and provision for the present-value of a contract was not included in the scoring criteria for the proposals. Present value calculation became an issue when it was raised and discussed at the January 27, 1995 meeting, and subsequently used in the Secretary's decision to award the contract to Unisys. Towey also considered, in deciding to award the contract to Unisys, a calculation of "raw costs," provided after the January 27, 1995 meeting. These "raw costs" were presented on two charts. Both added up the amounts submitted by each proposer for fixed price tasks and monthly costs, over 36 months. Although the RFP did not request, and neither proposer submitted costs for a 48 month contract, the two charts included a calculation for a hypothetical 48 month contract using the same monthly payments submitted for the 36 month contract. In addition, one of the two charts included a 5.8 percent factor for overtime, which was also not addressed by the RFP or by the proposals submitted in response to the RFP. There was no evaluation criteria contained in the RFP which dealt with the issue of "raw costs" over the term of the contract. Prior to the decision to award to Unisys, HRS never performed and Towey never considered a present value analysis for the 36 month contract period provided for in the RFP. Finally, as a result of concern expressed at the January 27, 1995 meeting regarding whether Unisys could handle the immediate tasks required by the contract, including requirements of the Child Support Enforcement and federal certification programs, Towey considered whether there would be any risk of transition if Unisys were unable to hire some of Deloitte's employees and subcontractors should he decide to award the contract to Unisys. Towey specifically requested Deputy Secretary Clary to research this issue. In order to obtain information, Clary had HRS personnel directly contact Deloitte's subcontractors. Clary responded to Towey three days later on January 30, 1995, the day before the decision by Towey to award the contract to Unisys, that Deloitte's subcontractors would not be prohibited from working for Unisys. Consideration of overtime and risk of transition were not criteria contained in the RFP, nor were these elements evaluated and scored by the HRS Evaluation Committee. By way of a January 31, 1995 memorandum to Clary announcing the award of the contract to Unisys, Towey stated: I have now had an opportunity to review the report of the evaluators of this RFP, the recommendations contained therein, the raw data submitted with the proposals, and the RFP. I understand the nature of the project and its importance to the agency. Based upon my review of the information presented to me and my understanding of similar projects in the past, my decision is to award the contract to Unisys as the proposal most advantageous to the state of Florida, taking into consideration the price and other criteria set forth in the RFP. Although I have considered the risk of transition to a new contractor, I find that I am unable to ignore the dollar savings which will result in awarding the contract to Unisys. Since you and your staff have assured me that both companies are technically competent to perform the work, I believe the monetary savings outweigh any risk that might exist in the transition of contractors. Therefore, I have determined that it is in the state's best interest to award the contract to Unisys. Please take whatever steps are necessary to implement this decision. (Emphasis added). By his actions, Towey exercised more than the prerogative conferred by the RFP to "take any additional administrative steps deemed necessary in determining the final award" and actually evaluated criteria other than that contained in the RFP in reaching his decision to award the contract to Unisys. Further, in awarding the contract to Unisys, Towey effectively altered the relative weight of the criteria as specified in the RFP. Towey relied upon the advice of Clary. Illustrative of Clary's perspective is his testimony at the final hearing that he believed the 60/40 weighting contained in the RFP to be inapplicable to decision making by the Secretary of HRS. Neither Bill Belleville nor John Holland reviewed, in detail, the proposals submitted in response to the RFP. Neither performed their own independent analysis of the responses. Further, Clary never reviewed the RFP nor the proposals submitted in response to the RFP. In the course of his decision making process with regard to award of the contract to Unisys, Towey relied on the advice of Clary, Belleville and Holland, referred to by Towey as his "top managers", despite their undisputed lack of familiarity with the Deloitte and Unisys proposals. While his memorandum dated January 31, 1995, states he reviewed the RFP, Towey admitted in his testimony at the final hearing that he had not personally reviewed the document. Further, he never reviewed or performed his own analysis of the two proposals submitted in response to the RFP. The members of the Evaluation Committee members were the only persons to fully and carefully evaluate the two proposals and score them under the criteria contained in the RFP. Since that time, no one else from HRS has attempted to reevaluate or re-score the proposals. Neither Towey nor anyone else involved in the January 27, 1995 meeting disagrees with the analysis and scoring of the proposals by the Evaluation Committee. PRESENT-VALUE ANALYSIS Section 1.2 of the RFP, states, in part: This RFP will result in a thirty-six month contract. Further, Section 4.12(C) of the RFP states, in part: Upon selection of the winning proposal, the department shall enter into a contract for thirty-six (36) months. Although the possibility of renewal of the contract for a maximum of a single, one year term is contained in the RFP, there is no provision in the RFP which requires that HRS renew the contract after 36 months or that the contractor accept a renewal after 36 months for any specific term. By the terms of the RFP, any renewal of the contract for a period beyond the 36 month term is subject to negotiation between the contractor and the department. While proposals submitted by Unisys and Deloitte commit to maintaining the same costs in the event of renewal, negotiation as to the length, price and staffing for any renewal period less than a year, is not excluded by the terms of the RFP. Neither HRS nor the contractor is bound, under the terms of the RFP, to any extension of the contract. HRS' own manual, HRSP 75-3, entitled "Developing a Request for Proposal," states, in the section on contract renewals: If Contract Renewals have been provided for in this RFP, include the following recommended language in the Special Provisions subsection of the RFP: This contract may be renewed on a yearly basis not to exceed two (2) years beyond the initial contract or for a period no longer than the term of the original contract whichever period is longer. Such renewals shall be contingent upon satisfactory performance evaluations as determined by the department and shall be subject to the availability of funds. As specified in the provider's response to the RFP/ITB, the total cost for the contract under the' first year renewal will not exceed $ and the second year renewal will not exceed $ . Each renewal shall be confirmed in writing and shall be subject to the same terms and conditions set forth in the initial contract. (Emphasis added). Another in-house document at HRS is HRS manual, HRSM 75-2 (May 1, 1994 update), entitled "Contract Management System for Contractual Services". Chapter 5 of that document, entitled "Contractual Procurement Requirements," states, in pertinent part: The dollar amount and the manner in which the costs for the . . . renewals will be calculated must be specified in the response to the RFP and in the resulting contract document. By contrast, the RFP contains none of the language specified in either HRS manual regarding renewal. Section 4.12(c) of the RFP merely states: This contract term shall be renewable for a max- imum of a one year term upon the mutual agreement in writing of the contractor and the department. (Emphasis added). Terms of the RFP did not invite proposers to submit a specific cost or any other information for a renewal period or explain how costs for a renewal period would be calculated. Neither did the RFP contain any language that renewals would be conditioned on satisfactory performance by the contractor. Proposers, on blank cost forms, were requested in the RFP to provide HRS with their proposed prices for fixed price items, monthly costs and hourly costs. The forms, contrary to the requirements of HRS manuals applicable in situations where information for a renewal term is requested, did not provide a place for proposers to indicate costs for any renewal term or to demonstrate how those costs were calculated. Both contractors understood that any renewal would be subject to negotiation. The "Standard Contract" contained in the RFP provides only for a term of 36 months and a cost for that specific contract term. Consistent with the terms of the RFP that the contract was for a 36 month term, HRS submitted, on more than one occasion, materials to ITRPAC. In those materials, HRS represented that the proposed budget amounts of $25 million and $28 million for the project were for a three year term contract. The Notice of Award which HRS issued stated that a three year contract was to be awarded. Although the RFP addressed staffing at a maximum of 107 persons, HRS was aware that 100 percent staffing might not always occur. Section 2.l(B)(5) of the RFP permits 90 percent of the maximum staffing level at a given time without the vendor incurring a penalty. At one point in the RFP preparation, a draft of the RFP required 95 percent staffing. Even that level was considered by HRS to be too restrictive and anti-competitive and was amended to 90 percent out of fear that a 95 percent staffing level would discourage submission of competitive proposals. The 90 percent figure was also used in the RFP to account, in part, for projected attrition of contractor employees that HRS had historically experienced on this project. From the standpoint of budgetary allowances by HRS for the project, it is realistic to believe that the job will be staffed at somewhere between 90 percent and 95 percent rather than at the maximum staffing level of 107 employees. Although Section 4.15(D)(5) of the RFP states that the State is not responsible for paying contractor's employees for leave or vacation time, the testimony of Petitioner's financial expert, Dr. Elton Scott, establishes that a reasonable assumption is to assume that each employee is entitled to, and would take, at least two weeks vacation. Such an assumption should also be included when performing a present value analysis, particularly when assuming 100 percent staffing. Depending on budget allocations for this project, it is possible that HRS would only require that the contractor provide as few as 46 employees. The present value calculation performed by HRS indicated that, over 48 months, at 100 percent staffing (107 employees), the monetary cost of awarding the contract to Unisys would be approximately $500,000 less than the cost of awarding the contract to Deloitte, a savings of approximately 1.5 percent over the term of the contract. As demonstrated by HRS' subsequent present value calculation performed at final hearing in this cause, for the 36 month actual contract period, at maximum staffing, HRS would realize a savings of no more than $39,802 by awarding the contract to Unisys, a savings of less than 2/10ths of 1 percent. None of HRS' present value calculations accounted for leave/vacation time or for any staffing levels under 100 percent for any other reasons. Based upon the terms of the RFP, the language of HRS' procurement manuals, and the expert testimony of Dr. Scott, any valid present-value analysis should have included a 36 month term contract. Any such analysis should also have taken into account varying levels of staffing, leave/vacation time, and overtime if staffed at the minimum required. A properly performed present-value analysis indicates that Deloitte's proposal is less expensive than the Unisys proposal in the following amounts over a 36 month contract term, at the staffing levels indicated: Employees Leave/Vacation Time Overtime Deloitte Savings 107 2 weeks none $12,791 96 none none $109,062 96 none 5.8 percent $ 18,327 46 none none $844,473 (Pet. Exh. 15) The only scenario in which the Unisys proposal is less costly than the Deloitte proposal, using the proper present value analysis, would be at 107 employees, with no accounting for leave time. This unlikely future scenario would result in a savings of no more than $47,378, or less than 2/10ths of l percent of the contract amount over 36 months. Because it requires an up-front payment of more than $1,600,000 (as compared to $78,000 for Deloitte), the Unisys proposal places the State of Florida at substantially more financial risk than the Deloitte proposal in the event of nonperformance by Unisys. On February 1, 1995, HRS posted its notice of intent to award the Contract to Unisys. Deloitte filed its timely notice of intent to protest on February 3, 1995, and filed its timely formal protest and request for hearing on February 13, 1995.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered which declines the award to Unisys and takes into account the foregoing findings of fact and conclusions of law when deciding the future course of contracting for the services sought by the RFP. DONE and ENTERED this 12th day of May, 1995. DON W. DAVIS, 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 12th day of May, 1995. APPENDIX In accordance with provisions of Section 120.59, Florida Statutes, the following rulings are made with regard to purposed findings of fact submitted by the parties. Intervenor's Proposed Findings: Adopted. Adopted as to 1st sentence. Remainder not relevant with exception of last sentence which is adopted. Rejected, subordinate to HO findings. Accepted. Rejected, subordinate to HO findings. 6.-7. Rejected, cumulative. 8. Accepted. 9.-10. Rejected, subordinate to HO findings. Accepted. Rejected, subordinate to HO findings. Accepted. Rejected, cumulative. 15.-17. Rejected, subordinate. 18.-20. Rejected, relevance. 21.-22. Accepted. 23. Rejected, subordinate to HO findings. 24.-25. Accepted. 26.-29. Rejected, subordinate to HO findings. 30. Accepted. 31.-36. Rejected, subordinate. Rejected, weight of the evidence. Rejected, opinion, weight of the evidence. 39.-41. Rejected, subordinate. Respondent's Proposed Findings: 1.-3. Adopted, not verbatim. 1.-6. Adopted by reference. 7. Rejected, relevance. 8.-9. Rejected, cumulative, unnecessary. 10.-12. Accepted. 13. Rejected, cumulative. 14.-16. Accepted. Rejected, weight of the evidence. Rejected, relevance. Rejected, weight of the evidence. 20.-21. Rejected, argument. 22.-23. Rejected, subordinate to HO findings. 24. Rejected, argument. 25.-27. Rejected, subordinate, weight of the evidence. 28.-29. Rejected, relevance. 30.-31. Rejected, subordinate. Rejected, weight of the evidence. Rejected, subordinate, weight of the evidence. Rejected, relevance. 35.-36. Rejected, cumulative. Rejected, weight of the evidence. Accepted. Rejected, argument, weight of the evidence. Rejected, relevance, argument. 41.-42. Rejected, argument. Rejected, subordinate. Rejected, 20 percent difference, improper characterization. Rejected, relevance, argument. Rejected, argument, subordinate. Rejected, redundant, subordinate. Rejected, legal conclusion. Rejected, relevance, argument, lack of credible evidence. Rejected, weight of the evidence. Rejected, subordinate. Rejected, weight of the evidence. Rejected, relevance. Rejected, argumentative, legal conclusion. Rejected, legal conclusion, argument. Rejected, legal conclusion. Petitioner's Proposed Findings Of Fact: 1.-43. Accepted, though not verbatim in some instances. 44. Subordinate to HO findings. 45.-48. Accepted. Subordinate. Accepted. Subordinate. 52.-70. Accepted. COPIES FURNISHED: William E. Williams, Esq. Red D. Ware, Esq. Huey, Guilday & Tucker, P.A. 106 E. College Ave., Ste. 900 Tallahassee, FL 32301 William A. Frieder, Esq. Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, FL 32399-0700 W. Robert Vezina, III Cummings, Lawrence & Vezina, P.A. 1004 DeSoto Park Dr. Tallahassee, FL 32302 Steven A. Blaske Unisys Corporation 4151 Ashford Dunwoody Rd. Atlanta, GA 30319 Robert L. Powell, Agency Clerk Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, FL 32399-0700 Kim Tucker, Esq. Department of Health and Rehabilitative Services 1323 Winewood Blvd. Tallahassee, FL 32399-0700
The Issue Whether the Department’s action to reject all bids submitted in response to DOT-RFP-20-5003-DAA, relating to asbestos abatement, demolition, and removal services, is illegal, arbitrary, dishonest, or fraudulent.
Findings Of Fact Stipulated Facts (verbatim) The Department is an agency of the State of Florida tasked with procuring the services for Districtwide Asbestos Abatement and Demolition and Removal Services for Right of Way property under the Department’s supervision by law. The Department published a bid solicitation for DOT-RFP-20-5003- DAA, seeking bids to provide District Five Asbestos Abatement and Demolition and Removal Services for FDOT. The RFP included specifications, qualification requirements, instructions on what would be required of responders, a bid price proposal sheet, and the award criteria. Cross Construction and Cross Environmental submitted bids in response to the RFP. Cross Construction’s and Cross Environmental’s bids were evaluated by the Department. There is no debate, challenge, or disagreement raised in the Petitions with regard to the Technical Scores submitted by the responding firms to the RFP, only disagreement on three pay items. On June 15, 2020, the Department’s Selection Committee reviewed and discussed the information presented as to the Technical and Pricing scores of the Responding firms, asked for an additional bid item analysis, and indicated that it would reconvene at a future date for a decision. On June 22, 2020, the Selection Committee reviewed, discussed, and confirmed the recommendation presented by the results of the Technical Review Committee scorings and the Project Manager’s Bid Price analysis and selected Cross Construction and Cross Environmental as Intended Awardees. The Selection committee also found that Johnson’s Excavation and Services Inc., [Johnson] and Simpson Environmental LLC [Simpson] were deemed non-responsive due to irregular, and unbalanced pay items prices. On August 24, 2020, the Department’s Selection Committee decided to cancel the Procurement with the intent to readvertise with adjustments to the Scope and Pricing Structure and decided to reject all proposals. Additional Findings of Fact The “three pay items” referenced in paragraph six of the stipulated facts are the items that ultimately caused the Department to reject all bids in the instant dispute. The three pay items are collectively referred to as mobilization pay items. The RFP directs that bids are to contain two parts. Part I is the technical proposal, and Part II is the price proposal. Section 30.3 of the RFP provides that proposers “shall complete the Bid Price Proposal Form No. 2 and submit [the form] as part of the Price Proposal Package … [and that] [t]he Procurement Office and/or the Project Manager/TRC will review and evaluate the price proposals and prepare a summary of its price evaluation.” Five bidders submitted proposals in response to the RFP. One bidder did not advance beyond the initial review phase because its technical proposal did not meet minimum bid standards. The remaining bidders were CCS, CES, Simpson, and Johnson. Price proposals submitted by each of the remaining bidders were evaluated by the Department. Section 3 of the RFP provides a general outline of the process associated with awarding the contract. The steps are: “Pre-Proposal Conference; Public Opening (Technical Proposals); Price Proposal Opening & Intended Award Meeting; and, Selection Committee Meeting Summarizing Evaluations and Determining Anticipated Award.” The agenda for the “Price Proposal Opening & Intended Award Meeting,” as established by the RFP, provides as follows: Opening remarks of approx. 2 minutes by Department Procurement Office personnel. Public input period – To allow a reasonable amount of time for public input related to the RFP solicitation. At conclusion of public period, the Technical evaluation scores will be summarized. Announce the firms that did not achieve the minimum technical score. Announce the firms that achieved the minimum technical score and their price(s) as price proposals are opened. Calculate price scores and add to technical scores to arrive at total scores. Announce Proposer with highest Total Score as Intended Award. Announce time and date the decision will be posted on the Vendor Bid System (VBS). Adjourn. Section 30.4 b. of the RFP provides that a proposer can be awarded a maximum of 30 points for its price proposal. This section also provides that “[p]rice evaluation is the process of examining a prospective price without evaluation of the separate cost elements and proposed profit of the potential provider.” On June 15, 2020, the selection review committee met publicly for the purpose of opening price proposals and announcing an intended award. Price proposals were opened, and the eligible bidders received the following price scores: CCS - 11.09; CES - 13.22; Johnson - 19.76; and Simpson - 30. In terms of total score, which combined both the technical and price scores, Simpson received a score of 113.00, which was the highest score, followed by CES (107.55), CCS (103.76), and Johnson (101.76). After opening and considering the price proposals of the respective bidders, the selection committee did not announce an intended award at the meeting on June 15, 2020, but instead requested that the project manager “do further analysis on the pay items for any potential imbalance.” The project manager, through a staff member, performed the additional analysis and determined that Johnson and Simpson submitted “irregular, unbalanced pay items” which resulted in their respective bids being deemed non- responsive and thus not eligible for award. The “irregular, unbalanced pay items” are the three mobilization pay items at issue in the instant matter, and are identified on the bid price proposal sheet as items AB200, AB201, and AB202. Simpson bid $400 for item AB200, $100 for item AB201, and $50 for item AB202. Johnson bid $250 for item AB200, $250 for item AB201, and $100 for item AB202. CCS bid $1 for item AB200, $1 for item AB201, and $1 for item AB202. CES bid $1 for item AB200, 75 cents for item AB201, and 50 cents for item AB202. The Department, in evaluating the bidders’ mobilization pay items, considered costs associated with abatement two structures, a 1,500 and 2,250 square feet structure respectively. For the 1,500-square-foot structure, CCS’ AB200 mobilization costs totaled $1,500. For the 2,250-square-foot structure, CCS’ AB201 mobilization costs totaled $2,250. For the 1,500-square-foot structure, CES’ AB200 mobilization costs totaled $1,500. For the 2,250-square-foot structure, CES’ AB201 mobilization costs totaled $1,687.50. For the 1,500-square-foot structure, Johnson’s AB200 mobilization costs totaled $375,000. For the 2,250-square-foot structure, Johnson’s AB201 mobilization costs totaled $562,500. For the 1,500-square-foot structure, Simpson’s AB200 mobilization costs totaled $600,000. For the 2,250-square-foot structure, Simpson’s AB201 mobilization costs totaled $225,000. On June 22, 2020, the selection committee reconvened and announced CCS and CES as intended awardees of the contract. The Department also announced at this meeting that Johnson and Simpson were “deemed non- responsive due to irregular, unbalanced pay item prices.” On June 24, 2020, Simpson filed a Notice of Protest wherein the company informed the Department of its intent to formally protest the intended award of contracts to CCS and CES. On or about July 6, 2020, Simpson filed with the Department its “formal written petition of protest.” Although Simpson’s formal protest is dated July 6, 2020, CCS and CES contend that Simpson’s protest was actually filed on July 7, 2020, thereby making the protest untimely by a day. The Department did not refer Simpson’s formal protest to DOAH for final hearing, but instead considered the issues presented by Simpson in its protest and then attempted to negotiate a resolution with Simpson, CCS, and CES. Those efforts were unsuccessful. The question of the timeliness of the formal bid protest filed by Simpson is not before the undersigned. Nevertheless, the undisputed facts as to Simpson’s protest, as demonstrated by the record herein, are as follows. On June 24, 2020, Simpson filed notice of its intent to protest the RFP. On June 29, 2020, CCS received notice that a bid protest was filed with respect to the RFP. On July 1, 2020, CES filed a public records request “for public records related to the bid protest made to the” RFP. On or about July 6, 2020, Simpson filed its formal written protest with respect to the RFP, and although the evidence is not clear as to the date, it is undisputed that the Department received affidavits from Simpson explaining the factual circumstances surrounding the filing of the company’s formal written protest. On July 15, 2020, the Department notified CCS and CES that “in response to the Formal Written Protest filed by Simpson Environmental Services, the Department will hold a settlement conference” on Friday, July 17, 2020. On July 21, 2020, Simpson, CES, and CCS notified the Department that they “reached an agreed upon settlement proposal.” On August 11, 2020, the Department, after considering the settlement proposal for several weeks, notified Simpson, CES, and CCS that the Department would discuss the RFP at a public meeting to be held on August 24, 2020. As previously noted, it was during the meeting on August 24, 2020, when the Department announced that all proposals received in response to RFP were rejected. CES, on or about July 1, 2020, submitted to the Department a public records request wherein the company sought a copy of documents related to Simpson’s protest. In response to the request, the Department provided CES a copy of the formal written protest filed by Simpson. It is undisputed that the initial copy provided to CES by the Department did not show either the date or time of receipt of the document filed by Simpson. At some point after the settlement conference, the Department provided to CES a date and time stamped copy of Simpson’s formal written protest. There was no evidence presented explaining the circumstances or the process which resulted in the Department providing different copies of Simpson’s formal written protest to CES, and the remaining evidence does not provide a sufficient foundation to reasonably infer that the Department acted with nefarious motives when providing different versions of the documents to CES. Simpson’s formal protest contains the following statement with respect to the price proposal that the company submitted in response to the RFP: Petitioner’s individual bid price items were based in fact, were reasonable and were in conformity with standard industry rates for similar asbestos abatement and demolition and removal projects. Petitioner’s bid price items were also patently similar to bid price items that Petitioner has previously submitted in response to past FDOT proposal requests that ultimately resulted in the corresponding contracts having been awarded to Petitioner. Indeed, Petitioner has a longstanding relationship with the FDOT as Petitioner has previously contracted with FDOT as a vendor performing asbestos abatement services on numerous projects over the course of the past eight years. Petitioner’s price items for bid proposals have remained consistent for each of its past projects with FDOT. Petitioner’s price items for the instant bid proposal did not differ or vary in any material aspect from those proposed by Petitioner for previous projects that FDOT has deemed reasonable. Michelle Sloan works for the Department as a district procurement manager, and was assigned to manage the instant RFP. Ms. Sloan testified that because Simpson protested the Department’s intended decision to award the contracts to CCS and CES, and specifically referenced in its protest “that their bid for mobilization was in conformance with industry standards, as well as previous bids submitted to the agency that were deemed responsive,” she conducted additional review of the Simpson and Johnson bids. Ms. Sloan testified that after reviewing the RFP, the price sheets related thereto, Simpson’s protest, and the additional analysis of the pay items conducted following the June 15, 2020, selection committee meeting, she concluded that material ambiguities existed in the RFP’s mobilization pay items and recommended to the district secretary that the Department “reject all [bids] and re-advertise with a revised pricing sheet and instructions.” On August 24, 2020, the selection committee, following public notice, accepted Ms. Sloan’s recommendation, rejected all proposals, and canceled the procurement with the “intent to re-advertise with adjustments to the Scope and Pricing structure.” A review of the credible evidence demonstrates a rational basis for the conclusions reached by Ms. Sloan and members of the selection committee. Exhibit C of the RFP is titled “Price Proposal/Detailed and Contractual Price Sheet.” The first page of this document provides a general description of the asbestos removal and abatement pay items. The general pay items are as follows: AB100 Fees [as] determined from the Department of Environmental Protection based upon regulated material. AB200 One-time fee necessary to mobilize for full isolation, per parcel, when abatement with isolation is required. AB300 Fees to be charged by square feet for preparation [of] structure before abatement can commence. AB400 Fees to be charged by square feet, to abate asbestos from various surfacing material such as ceiling, walls, beams, plaster, sheetrock and fireproofing using conventional containment methods. AB500 Fees to be charged either by square foot, linear foot or fittings to abate asbestos from various mechanical systems such as boilers, stacks ducts, fittings, pipes, flutes and flanges. AB600 Fees to be charged either by square foot, linear foot or fittings to abate asbestos from various mechanical systems such as boilers, stacks, ducts, pipe, fittings and jackets which involve the use of a Glove bag. AB700 Fees to be charged by square foot, to abate asbestos from various roofing materials such as cement roof shingles, flashing, rolled roof, felts, wood shingles and mobile home coating. AB800 Fees to be charged by square foot or piece to abate asbestos from various materials such as floor tile, mastic adhesive, sheet vinyl, carpet, wood sub- floor, concrete sub-floor, vibrator dampers, wallboard, metal ductwork and sinks with insulation and heat shields (light fixture). AB900 Fees to be charge[d] by landfill for asbestos disposal. The bid price proposal sheet, which is form number 2 of the RFP, provides a listing of specific pay items related to the general “AB ---” items listed in Exhibit C to the RFP. Below is an example of some of the specific pay items listed on the bid price proposal sheet: [See table on next page] Item Number Description (A) Estimat ed Quantit y Unit (B) Unit Pric e Total Bid Amount (A x B) ASBESTOS REMOVAL ABATEMENT AB200 Mobilization for structures less than 2,000 Sq. FT. 1 SQ. FT. AB201 Mobilization for structures [from] 2001 – 5000 Sq. FT. 1 SQ. FT. AB202 Mobilization for structures over 5001 Sq. FT. 1 SQ. FT. AB300 Mask and Seal 1 SQ. FT. AB401 Remove ACM plaster/lathe including all surface materials 1 SQ. FT. AB501 Remove insulation from fittings 1 LF. AB603 Remove insulation from boilers, stacks or ducts piping 1 LF. AB703 Remove roofing cement 1 SQ. FT. AB810 Remove carpet and mastic adhesive 1 SQ. FT. AB820 Remove sinks with insulation 1 SQ. FT. AB901 Non-Friable 1 SQ. FT. General pay item category AB200, as described on Exhibit C, does not reference a “unit of measurement,” but instead notes that items within this category are to be determined on a “one-time – per parcel” basis. When the AB200 general pay item category is compared to the specific pay items for this category enumerated on the bid price proposal sheet (i.e., AB200, AB201, and AB202), it is evident that the unit of measurement “square feet” is listed as the basis for calculating the bid amount for this item when no such unit of measurement is stated for this item on Exhibit C. Comparatively, general pay item categories AB300 through AB800 each expressly references a specific unit of measurement (i.e., square foot, linear foot, or by the “piece”), and these units of measurement carry over to and are consistently reflected on the bid price proposal sheet for the specific pay items enumerated therein. By inserting a unit of measurement (i.e., square feet) in the mobilization pay items listed on the bid price proposal sheet, when the general description on Exhibit C instructs that they are “one-time, per parcel” pay items, the Department created a material ambiguity in the bidding process.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby Recommended that the Department of Transportation issue a final order in Case Nos. 20-4214 and 20-4216 finding that the rejection of all proposals in response to Request for Proposal RFP-DOT-20-5003-DAA was not illegal, arbitrary, dishonest, or fraudulent, and dismissing the two petitions. DONE AND ENTERED this 14th day of December, 2020, in Tallahassee, Leon County, Florida. S LINZIE F. BOGAN 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 December, 2020. COPIES FURNISHED: Douglas Dell Dolan, Esquire Florida Department of Transportation 605 Suwannee Street, MS 58 Tallahassee, Florida 32399-0458 (eServed) Richard E. Shine, Esquire Florida Department of Transportation 605 Suwannee Street, MS 58 Tallahassee, Florida 32399 (eServed) Brian A. Leung, Esquire Holcomb & Leung, P.A. 3203 West Cypress Street Tampa, Florida 33607 (eServed) Diane E. H. Watson, Esquire Cross Environmental Services, Inc. Post Office Box 1299 Crystal Springs, Florida 33524-1299 (eServed) Kevin J. Tibault, P.E., Secretary Department of Transportation Haydon Burns Building 605 Suwannee Street, MS 57 Tallahassee, Florida 32399-0450 (eServed) Sean Gellis, General Counsel Department of Transportation Haydon Burns Building 605 Suwannee Street, MS 58 Tallahassee, Florida 32399-0450 Andrea Shulthiess, Clerk of Agency Proceedings Department of Transportation Haydon Burns Building 605 Suwannee Street, MS 58 Tallahassee, Florida 32399-0450 (eServed)
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
