The Issue The issues in this case are whether Respondent committed the violations alleged in the Administrative Complaint, and, if so, what discipline should be imposed.
Findings Of Fact Admitted Facts Per Pre-Hearing Stipulation Petitioner is the state agency charged with regulating the practice of contracting pursuant to section 20.165 and chapters 455 and 489, Florida Statutes. Respondent is a state-certified building contractor in the State of Florida, having been issued license No. CBC 039025. Respondent was the licensed primary qualifying agent for Thom Colan Construction, Inc., from June 10, 2004, to September 4, 2008. On January 10, 2006, Thom Colan Construction, Inc., entered into a contract with Kathleen and Robert Masten to construct a house and pool on property located at 547 Bradenton Road, Venice, Florida (the project). The contract price for the project was $260,000.00. The project was completed with the issuance of a certificate of occupancy. Additional Findings of Fact Based on the weight and credibility of the testimony and evidence presented, the following additional facts are found: The contract between Respondent and the Mastens was a fixed-price contract. Although the contract price was $260,000.00, the Mastens paid a total of $320.394.19 for the project. The payments were made by the following methods: $49,968.58 was paid by check from the Mastens directly to Respondent; Respondent obtained an additional $222,320.71 in total bank draws, pursuant to a construction loan that authorized Respondent to draw funds directly from the bank for the project; and the remaining $48,104.90 was paid by check or credit card by the Mastens directly to subcontractors for labor and materials provided for the project. Thus, the Mastens paid $60,394.19 more than the contract price. At issue, and the subject of much dispute at the final hearing, was why the project exceeded the contract price by over $60,000.00. Respondent asserted that the entire amount by which the contract price was exceeded was attributable either to changes to the contract terms required by the Mastens or to circumstances beyond Respondent's control, such as price increases by subcontractors.2/ It was difficult to establish the causes for the price increases, in part, because the parties to the contract did not adhere to the formalities called for by the contract. For example, while both witnesses acknowledged that the Mastens requested changes as the project progressed, there was substantial disagreement about the extent of these changes and the cost differential. Unfortunately, there were no written change orders as required by the contract. Written change orders would have documented exactly what was changed and what cost was attributable to the change. Another problematic area in attempting to pinpoint why the contract price was exceeded was that there was no clear proof of the contract specifications detailing the design features of the house and pool. The written contract described a process of developing "plans" with "specifications" as to design elements. Initially, the plans would be preliminary, with items designated for buyer selections. The contract contemplated that the buyer would make these selections, which would become part of the plans, and the plans would then be considered final. Thus, certain buyer selections would be part of the contract. Thereafter, if the buyer wanted to change the final plans and specifications, the buyer would be responsible for the increased costs. No evidence was presented as to what the plans provided with respect to design features and which of those design features provided for buyer selections. Neither the preliminary plans and specifications for the Masten contract, nor the final plans and specifications after buyer selections, were offered into evidence, and it is unclear whether the process contemplated by the written contract was even followed. Nonetheless, Mrs. Masten admitted that she requested certain changes, which she acknowledged were not contemplated by the contract and were more costly than what the contract contemplated. For example, Mrs. Masten acknowledged that she requested an upgrade in kitchen appliances, increasing the cost by $2,703.55. She also acknowledged that she requested an upgrade in bathroom fixtures, but she was unsure of the cost attributable to the upgrade. Respondent testified that the total cost increase for upgrades requested by Mrs. Masten to plumbing and fixtures was $4,745.42. Mrs. Masten thought that amount was too high; it included changes claimed by Respondent, but disputed by Mrs. Masten, such as an upgrade to a hot tub that Mrs. Masten said she did not want but, apparently, was installed. The circumstances surrounding other apparent changes were in dispute. For example, an expedition, including Mrs. Masten and Respondent, trekked to a tile outlet store in Fort Meyers to pick out tile to use in the shower stall and floors. For the shower stall, Respondent testified that he "insisted" on travertine; Mrs. Masten apparently agreed, but said that she felt pressured to do so. The purchase was made, and Respondent returned to haul the travertine and other tile for the flooring on a trailer back to Venice. At some point, Mrs. Masten changed her mind about the travertine after being told by a competitor that travertine was a high-maintenance bad choice. Respondent claimed it was too late to return the tile, which he valued at $750.00, and so he testified that he threw it away. Mrs. Masten then selected different tile from the competitor at a price that was $1,292.16 higher than the travertine. The circumstances surrounding the selection of cabinetry were also in dispute. Respondent testified that he planned to use Enrique Benitez, a subcontractor who was doing other work in the house, to make the cabinets. Respondent claimed that he had Enrique prepare wood samples with different stains and that Mrs. Masten approved the samples and picked out the stain. At that point, Respondent said he paid Enrique $2,970.00 to begin constructing the cabinets. Mrs. Masten claimed that she never approved any samples, was shown only a rough, long plank of splintered wood that she said was awful and would not approve, and that she did not like any of the work this particular subcontractor was doing throughout the house. At some point, Mrs. Masten impressed upon Respondent that she would not accept these cabinets, and she selected different cabinets at an increased cost of $6,886.00. If Enrique ever built cabinets for the Mastens, he kept them. Another outing was made to select countertops. Mrs. Masten did not like the granite pieces that Respondent had intended to use, and the result was that the cost of the granite countertops selected by Mrs. Masten was $5,000.00 higher. Respondent and Mrs. Masten also could not agree on the extent of requested changes to the plans for flooring or the cost of those changes. Respondent testified that Mrs. Masten changed the mix of tile and carpeting, but Mrs. Masten disagreed. Respondent testified that Mrs. Masten required an upgraded carpet style, and although Mrs. Masten acknowledged that she selected a different carpet style, there was no evidence pinpointing the cost difference of the carpet upgrade. Additionally, Respondent acknowledged that one reason why the total cost for flooring was higher than expected was that Enrique Benitez increased the price to install the tiles from $3,000.00 to $7,500.00. Respondent sought to blame Mrs. Masten for the increased installation price, claiming that Mrs. Masten "fired" Enrique over the cabinet debacle, but Respondent had to rehire Enrique to install the floors and had to pay the increased price to overcome Enrique's hurt feelings. Mrs. Masten denied the claim that she "fired" Enrique, though she acknowledged that she was not happy with his work and that she refused to approve the cabinets Enrique was supposed to build, because the sample was unacceptable. Respondent testified that an additional $3,079.90 was spent for upgraded lighting and fans requested by the Mastens and for other electrical upgrades to accommodate other changes, such as the pool heater and spa tub. The cost to construct the pool increased by $3,700.00. According to Respondent, this increase was due to the cost of adding a pool heater that was not part of the original plans, at the request of the Mastens. Mrs. Masten disputed that this was a change. Respondent testified that there was a $323.00 cost increase because of the Mastens' request for an upgraded water softener. Post-contract changes made by the engineer to relocate the septic tank system necessary to obtain the requisite permits, altered the elevation and slope of certain parts of the property, including the space where the air conditioner would sit. Those changes resulted in the need to add a concrete slab and platform for the air conditioner. This additional cost was $419.25. Also because of the septic system design change, the county imposed additional landscaping requirements in order to obtain a certificate of occupancy. This resulted in an additional $979.05 spent to purchase trees. Respondent testified that permitting fees imposed by the county exceeded the estimated cost by $2,365.63. Respondent attributed the increase to the higher impact fee charged by the county as a condition to obtain a certificate of occupancy because the post-construction value of the house was higher than estimated. In other words, the combination of cost increases and upgrades led to imposition of a higher impact fee. The rest of the difference between the contract price and the total paid by the Mastens was attributable to increases in costs because of the delay in completing the project or increases in prices charged by subcontractors for their labor and materials. These included increases in the price of concrete, plumbing work, framing, insulation, roofing, drywall, hauling trash, installation of flooring, electrical work, equipment rental, and electricity charges. Respondent explained that he obtained "bids" for various components of the project in September 2005, although he did not sign the contract with the Mastens until January 10, 2006. Respondent anticipated that he would start the project that month, but the start was delayed by more than two months because of the septic system permitting difficulties encountered by the project engineer who had been retained by the Mastens. Mr. Colan utilized the estimates he received from others to develop his overall cost estimates for the project, which he used to establish the contract price. There was no allowance built into the cost estimations for inflation, price increases, or contingency reserves. Although Respondent characterized the price estimates he obtained from subcontractors as "bids," they were not bids in the sense of being firm offers to do work or supply material at a specific cost; they were essentially price estimates subject to change. Respondent testified that at least in some cases, he could count on a bid price being "good" for six months and, in some cases, for as long as seven months. However, Respondent did not lock in any of the bid prices by contracting with the subcontractors in September 2005 or in January 2006 when the Masten contract was executed. Thus, Respondent's reliance on the price estimates given to him in September 2005 was not shown to be reasonable. These estimates would have been four months old before Respondent anticipated starting the project and closer to seven months old before the project actually began. Since many of the price estimates were for items that would not be needed for months after the project began (such as bathroom fixtures, appliances, cabinetry, flooring, and lighting), even under the best-case scenario without any delays, Respondent was plainly taking a risk by using September 2005 cost estimates as if they were guaranteed prices in determining the contract price for the Mastens' project. Not surprisingly, many subcontractors were not willing to honor the stale price estimates when Respondent sought to contract with them many months later. Respondent suggested that he should not bear the risk of others' price increases, because they were not within his control. But Respondent controlled how he went about estimating his costs for the project and how he established the fixed price he agreed to in the contract. No credible evidence was presented to establish that the price increases by Respondent's subcontractors were due to such extraordinary market conditions or delays that they could not have been reasonably anticipated and addressed sufficiently through inflation allowances or contingency reserves built into the cost estimations. While Respondent attempted to characterize certain price increases, such as the rise in the price of cement and copper or the increased cost of dirt, as attributable to a "heated up" construction market, which caused unanticipated demand, Respondent's testimony was not credible and was not supported by any independent non-hearsay evidence. Indeed, Respondent admitted that in most cases, he did not shop around before accepting the price increases demanded by his subcontractors. In some cases, he had checked on prices within the two-county area when obtaining the cost estimates in September 2005, and then he assumed that by identifying the lowest price or best supplier in September 2005, there was no need to check around when that supplier demanded a price increase later. In no instance did Respondent check prices outside of his local area. Respondent acknowledged that the total amount spent for engineering and surveying fees exceeded his estimate by $4,177.12. Respondent argued that these fees were beyond his control, because the Mastens had retained the engineer and surveyor before Respondent entered into a contract with the Mastens. However, Respondent included the engineer and surveyor fee expenses in his cost estimates and assumed the responsibility for covering these fees as part of the overall construction of the house and pool within the fixed contract price. No credible evidence established that the fees were unusually high and could not have been anticipated or addressed by appropriate contingency reserves. Respondent attempted to blame many of the price increases on the two-plus month delay in starting the project because of the engineer's need to relocate the septic system to resolve permitting issues. As pointed out above, this delay did not in and of itself cause the problem of price increases by subcontractors unwilling to honor price estimates quoted in September 2005. In any event, Respondent did not testify that the delays were extraordinary and not reasonably anticipated, even if the exact reason for the delays may not have been known. Instead, various delays for various reasons are to be expected, and, indeed, are expressly contemplated throughout the written contract. Notably, in a section called "Price Guarantee," the contract form allowed the parties to specify a month by which construction had to begin or else the builder would have a qualified right to adjust the contract price. Respondent waived that right by specifying "N/A" in the blank where a start-by month could have been named: This Contract price is guaranteed to Buyer only if it is possible for Builder to start construction on or before the month of N/A. If start of construction is delayed beyond this time by Buyer, or due to any ruling or regulation of any governmental authority, or due to any other cause which is not the fault of the Builder, the Contract price may be adjusted to the current list price or to cover any cost increases incurred by Builder. A plausible explanation for Respondent's lack of care in developing reasonable, achievable cost estimates is that Respondent did not consider the fixed-price contract to be a fixed-price contract. Respondent testified that even though the contract on its face is a fixed-price contract, he believed that he had an understanding with the Mastens that the contract was really a "cost-plus" contract. Respondent testified that despite what the contract said, the Mastens had agreed that they would pay whatever the ultimate costs were, even if the prices went up from his estimates, plus an additional $37,000 for Respondent's profit. Respondent testified that the only reason that the contract was written up as a fixed-price contract was to secure the bank loan. That suggestion would be troubling, if true, because the implication is that Respondent was a party to fraud or deception to induce the construction loan. However, there was no credible evidence to support Respondent's attempt to justify recovering full costs, plus full profit, when the fixed price he contracted for proved inadequate. Notwithstanding Mr. Colan's apparent view that there was a secret deal standing behind the written contract, he signed the written contract, is bound by the fixed-price term, and must bear the consequences of his inadequate cost estimations. At some point when the Mastens became concerned about the extent to which they were apparently exceeding the contract price while Respondent was still drawing bank funds from the Mastens' construction loan, Mrs. Masten testified that she told Respondent not to draw any more bank funds. The evidence did not clearly establish whether Respondent violated Mrs. Masten's instructions by withdrawing more bank funds after the instructions were given. The Administrative Complaint had alleged that the Mastens contacted the bank and ordered the bank to make no further disbursements, and that the next day, Respondent attempted to withdraw all remaining funds in the construction loan account. No evidence was presented to substantiate this allegation. Petitioner incurred total costs of $299.36 in the investigation of this matter, excluding costs associated with attorney time.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Petitioner, Department of Business and Professional Regulation, Construction Industry Licensing Board, finding that Respondent, Thomas Colan, d/b/a Thom Colan Construction, Inc.: Violated section 489.129(1)(g)3. and (1)(m), as charged in Counts Two and Three, and for those violations, imposing a total fine of $3,000.00; Requiring Respondent to pay restitution to the Mastens in the total amount of $30,083.04; Requiring Respondent to pay costs of $299.36; and further Dismissing Count One (based on Petitioner's voluntary dismissal) and Count Four (based on an absence of proof). DONE AND ENTERED this 14th day of April, 2011, in Tallahassee, Leon County, Florida. S ELIZABETH W. MCARTHUR Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of April, 2011.
The Issue Whether Respondents violated the provisions of chapter 440, Florida Statutes, by failing to secure the payment of workers' compensation coverage, as alleged in the Stop-Work Orders, and, if so, what penalty is appropriate.
Findings Of Fact The Department is the state agency charged with enforcing the requirement of chapter 440, Florida Statutes, that employers in Florida secure workers' compensation coverage for their employees. § 440.107(3), Fla. Stat. Respondents are gas station/convenience stores located in South Florida. Northlake was created by Nazma Akter on May 6, 2014. MB was created by Ms. Akter on March 23, 2010. Congress Valero was created by Muhammad Saadat on July 21, 2011. Hena was created by Ms. Akter and Abu Ahsan on December 14, 2011. Hayma was created by Ms. Akter on December 14, 2011. Blue Heron was created by Ms. Akter on August 4, 2009. At all times relevant hereto, Respondents were duly-licensed to conduct business in the state of Florida. On February 2, 2015, the Department's Compliance Investigator Robert Feehrer, began a workers' compensation compliance investigation of Gardenia, LLC. Investigator Feehrer called the number listed for Gardenia, LLC, and was provided with a corporate office address. On February 10, 2015, upon arrival at Gardenia, LLC's, corporate office located at 165 US Highway 1, North Palm Beach, Florida, 33408, Investigator Feehrer spoke with Operations Manager Mohammad Hossain. Mr. Hossain stated that Gardenia, LLC, was a paper corporation and existed only for the purpose of paying unemployment taxes on the "six stores." Mr. Hossain went on to provide Investigator Feehrer with a list of Respondents and names of the employees that worked at each store. As an employee of Gardenia, LLC, and Respondents, Mr. Hossain's statements are party opponent admissions and bind Respondents. Lee v. Dep't of Health & Rehab. Servs., 698 So. 2d 1194, 1200 (Fla. 1997). With Mr. Hossain's statements and the list of Respondents' employees, Investigator Feehrer then consulted the Division of Corporations website, www.sunbiz.org, and confirmed that Respondents were current, active Florida companies. Investigator Feehrer then consulted the Department's Coverage and Compliance Automated System ("CCAS") for proof of workers' compensation coverage and exemptions associated with Respondents. Investigator Feehrer's CCAS search revealed that Respondents had no workers' compensation policies and no exemptions. On February 24, 2015, Investigator Feehrer conducted site visits at each of the six stores. Ms. Akter and Mr. Hossain accompanied Investigator Feehrer during these site visits. At all times material hereto, Ms. Akter was a corporate officer or managing member of each of the six Respondents. Muhammed Saadat and Abu Ahsan were corporate officers or managing members of Congress Valero, Hena, and Blue Heron. Kazi Ahamed was a corporate officer or managing member of Congress Valero and Hayma. Kazi Haider and Mohammed Haque were managing members of Hayma. All received compensation from the companies with which they were involved. Although Investigator Feehrer only personally observed one employee working at each location during his site visits, the payroll records revealed that at least four employees (including corporate officers or managing members without exemptions) received compensation for work at each location during the relevant period. Investigator Feehrer required additional information to determine compliance, and with Respondents' permission, contacted Respondents' accountant. Investigator Feehrer met with the accountant at least two times to obtain relevant information prior to March 30, 2015. Upon Ms. Akter's authorization, the accountant provided tax returns and payroll information for Respondents' employees. Information from Ms. Akter and Mr. Hossain also confirmed the specific employees at each of the six stores during the period of March 30, 2013, through March 30, 2015. On March 30, 2015, based on his findings, Investigator Feehrer served six Stop-Work Orders and Orders of Penalty Assessment. The Stop-Work Orders were personally served on Ms. Akter. Mr. Hossain was present as well and confirmed the lists of employees for each of the six stores were accurate. In April 2015, the Department assigned Penalty Auditor Christopher Richardson to calculate the six penalties assessed against Respondents. Respondent provided tax returns for the audit period and payroll transaction details were provided, as well as general ledgers/breakdowns, noting the employees for each Respondent company. Based on Investigator Feehrer's observations of the six stores on February 24, 2015, Auditor Richardson used the classification code 8061 listed in the Scopes® Manual, which has been adopted by the Department through Florida Administrative Code Rule 69L-6.021(1). Classification code 8061 applies to employees of gasoline stations with convenience stores. Classification codes are four-digit codes assigned to various occupations by the National Council on Compensation Insurance to assist in the calculation of workers' compensation insurance premiums. In the penalty assessment, Auditor Richardson applied the corresponding approved manual rate for classification code 8061 for the related periods of non-compliance. The corresponding approved manual rate was correctly utilized using the methodology specified in section 440.107(7)(d)1. and rule 69L-6.027 to determine the final penalties. The Department correctly determined Respondents' gross payroll pursuant to the procedures required by section 440.107(7)(d) and rule 69L-6.027. On January 14, 2016, the Department served the six Amended Orders of Penalty Assessment on Respondents, assessing penalties of $1,367.06 for Northlake, $9,687.00 for MB, $12,651.42 for Congress Valero, $18,508.88 for Hena, $7,257.48 for Hayma, and $4,031.60 for Blue Heron. The Department has demonstrated by clear and convincing evidence that Respondents were engaged in the gasoline station, self-service/convenience store industry in Florida during the periods of noncompliance; that Respondents failed to secure the payment of workers' compensation for their employees, as required by Florida's Workers' Compensation Law; and that the Department correctly utilized the methodology specified in section 440.107(7)(d)1. to determine the appropriate penalties.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a consolidated final order upholding the Stop-Work Orders and the Amended Orders of Penalty Assessment in the amounts of $1,367.06 for Northlake Mobile Enterprises, Inc.; $9,687.00 for MB Food and Beverage, Inc.; $12,651.42 for Congress Valero, Inc.; $18,508.88 for Hena Enterprises, Inc.; $7,257.48 for Hayma Enterprises, Inc.; and $4,031.60 for Blue Heron BP, Inc. DONE AND ENTERED this 16th day of June, 2016, in Tallahassee, Leon County, Florida. S MARY LI CREASY 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 16th day of June, 2016.
The Issue Whether Petitioner's conduct, omissions or actions in failing to execute and provide required documentation regarding roadway maintenance contracts awarded by Respondent, warrants a finding that Petitioner is "non-responsible" for a two-year period and prohibited from contracting with the state for that period of time.
Findings Of Fact The undersigned makes the following findings of relevant and material facts: M&B bid on Department Contract E7J12 let on October 9, 2013. M&B bid on Department Contract E1N43 let on January 16, 2014. M&B bid on Department Contract E3082 let on August 13, 2015. M&B bid on Department Contracts E6K44, E6K45, E6K46, and E6K51 let on January 28, 2016. M&B bid on Department Contract E4R75 let on February 5, 2016. M&B does not have a certificate of qualification from the Department, nor is it required to have one. The Department is the state agency responsible for coordinating the planning of a safe and efficient state transportation system. To accomplish that, the Department relies on qualified contractors to provide roadway mowing and other landscaping maintenance services in order to meet Florida's transportation needs. Jonathan McIntyre owns and operates M&B, a company that provides mowing and landscaping maintenance services for the Department. The company was previously owned by his father. The company has been a contractor for the Department for over 30 years and has adequately performed many mowing and landscaping maintenance contracts for the state. "One hundred percent" of M&B's business is derived from mowing and landscaping maintenance contacts with the Department, and the state is its exclusive client. During the hearing, Alan Autry, manager of Contract Administration for the Department, provided an overview of the bidding process. The bidding process begins with a bid solicitation notice which is also known as the advertisement. The solicitation outlines the requirements for bidders and includes project specific information. It also establishes when bids will be received. Resp. Ex. 46. The next step in the bidding process is for the Department to receive and open bids on the date and time identified in the solicitation. Depending upon the nature of the bid, a technical review is done. Once the contract is awarded, the vendor is notified and sent an award letter along with the contract and other pertinent documents for execution. The award letter identifies the date for which the signed contract along with other documents are to be returned to the Department for review to ensure conformance with the solicitation and specifications. Subsequently, the Department has a specific timeframe to execute and enter into the agreement. After being awarded several maintenance contracts as the low bidder, the Department issued a Notice of Intent to Declare Non-responsible ("Notice") to M&B on March 28, 2016, concerning its failure to "execute" eight contracts that had been awarded.1/ A noteworthy document that must be returned to the Department, along with the signed contract, is a payment performance bond, also known as a contract bond (a document that is signed by or executed by the vendor, and the vendor's surety). Other documents that must be promptly returned include a contract affidavit and insurance confirmation, such as policies and certificates as required by the contract specifications or "specs." Resp. Ex. 46–48. According to contract specifications 3-6 and 3-7, if the Department does not receive the executed documents from the vendor within ten days, excluding weekends and holidays, the Department may annul the contract, award it to another vendor, or perform the work by other means. Resp. Ex. 47. The solicitations for the contracts in this case expressly incorporated contract specifications 3-6 and 3-7. Resp. Exs. 1, 5, 10, 16, 22, 28, 35, 40. The contracts at issue in this case are considered "low bid" contracts, meaning that the award of these contracts is made to the vendor that submits the lowest cost bid in response to the solicitation, without further inquiry or analysis. Resp. Ex. 48. Concerning Department Contract E7J12, M&B was the initial lowest bidder. The Department awarded the contract to M&B; however, M&B failed to return a signed contract form, contract bond, contract affidavit, and/or sufficient insurance documentation within the ten-day time period. Resp. Exs. 3, 4, 4b. Concerning Department Contracts E1N43, E3082, E6K46, and E4R75, M&B was also the initial lowest bidder. The Department awarded the contracts to M&B; however, M&B failed to return a signed contract form and required documents within the allotted time period. Resp. Exs. 7–9, 12-15, 30-33, 42–45. Concerning Department Contracts E6K44, E6K45, and E6K51, M&B was not the initial lowest bidder according to preliminary bid tabulations. However, the initial lowest bidder (another company) was found to be non-responsive, and M&B subsequently became the lowest bidder and was awarded those contracts as well. However, M&B also failed to return the executed contract and accompanying documents to the Department within the ten-day period. Resp. Exs. 18-21, 24-27, 36–39. There was no dispute regarding the calculation of the ten-day timeframe for M&B to sign the contract(s) and return the required contract documents. McIntyre admitted during testimony to never signing these contracts or obtaining bond approval "certificates" in a timely fashion for the subject contracts. In enforcement actions like this, the Department considers several factors to determine the appropriate length of time to declare a contractor non-responsible. The Department considers the severity of the situation and makes an evaluation on a case-by-case basis. Maintaining the integrity of the bidding process is also a focus of concern. Typically, the Department will impose six months to a year of non-responsibility per incident. Resp. Ex. 48. Throughout all the evidence and testimony presented, it was clear to the undersigned that a lack of contract work performance or anticipated work performance by M&B was not the ground(s) for finding M&B "non-responsible." Rather, it was M&B's failure to (1) sign the subject contracts and (2) provide required supporting documents that formed the basis for finding M&B non-responsible. Despite his candid testimony that he did not sign or timely provide the supporting documents, M&B raised several defenses claiming there was not sufficient cause to hold M&B "non-responsible." McIntyre explained that a series of events with the Department regarding another maintenance contract prevented him from complying with the bonding requirement. He argued that other conduct of the Department, inextricably intertwined with these contracts, belies any finding that M&B was at fault, or non-responsible.2/ More specifically, M&B asserted that the failure on the part of M&B to "execute" the 2016 contracts cited in the Department's Notice was caused by the Department's failure to timely pay M&B for five months of work which M&B had completed for the Department on a prior contract, Department Contract E4Q26. Stated differently, M&B argued that it did not obtain required performance bonds on the subject contracts let in 2016 because M&B did not have the funds needed to pay the performance bonds on those contracts. This in turn was due to the Department's failure to pay M&B for five months of work it had completed for the Department on a prior contract, Department Contract E4Q26.3/ As a part of this defense, evidence was presented that on March 8, 2016, M&B, through its counsel, sent a letter to the Department demanding payment that was overdue on Department Contract E4Q26. Pet. Ex. 1. This included a claim for payment for five months of work M&B had already completed for the Department. After M&B retained counsel and demanded payment, the Department, on March 28, 2016, mailed notice to M&B that the Department was declaring M&B "non-responsible." McIntyre testified that when M&B bid on the subject contracts in 2016, he anticipated that the Department would have timely and regularly paid it the monies the Department owed it on Department Contract E4Q26. The undersigned finds that based on his longstanding relationship with the Department and its practice of paying M&B each month on Department Contract E4Q26, this reliance was not unreasonable. By all accounts and the reasonable inferences drawn from the evidence and testimony of McIntyre, M&B would have been in a solvent financial position to post performance bonds on the subject contracts let in 2016, but for the fact that the Department had delayed monthly payments for work M&B had performed on Department Contract E4Q26. There was no persuasive or credible evidence presented to dispute this. Likewise, there was no persuasive evidence presented to show or suggest that there were any performance issues related to Department Contract E4Q26 which would have justified a material or significant offset or deduction of what was due to M&B on that contract. When Autry was reviewing the file and evaluating the enforcement options available to the Department, he was not aware that counsel for M&B had already written the Department and asserted that M&B had not been paid for five months of work M&B had performed on a prior contract, Department Contract E4Q26. The Department's ongoing monthly payment for work M&B had completed on Department Contract E4Q26 was interrupted and significantly delayed because of problematic language in the E4Q26 contract prepared by the Department. More specifically, the Department had been paying M&B for work on Department Contract E4Q26 on a monthly basis, for seven months. At some point, the Department was audited by the Department of Financial Services and learned that monthly payments were not permitted under that contract's language, as written. In a legitimate and good faith effort to correct the payment delay, the Department drafted and requested that M&B sign a supplemental contract that it felt would have corrected the payment delay. As it turned out, when it submitted the supplemental contract to M&B, nearly all 12 months of the work under Department Contract E4Q26 had been completed, and only a few weeks remained on that contract. McIntyre, not being particularly skilled at understanding supplemental contracts, was skeptical and concerned that signing a supplemental contract could jeopardize his ability to insist on getting all the money he was due on Department Contract E4Q26. While McIntyre grappled with how to respond to the supplemental contract proffered by the Department, Michael E. Sprayberry was aware and mulling over the March 8, 2016, letter from M&B's counsel demanding that the Department pay M&B $66,666.65 owed for the five months of work it had completed. In M&B's counsel's March 8, 2016, letter to the Department, which attached M&B's Invoice No. 8 for $66,666.65, he asked for an explanation as to why payment was not being made to M&B and why the Department was asking M&B to sign a supplemental contract when the contract had been completed by M&B. The Department failed to provide any detailed explanation before issuing its Notice on March 28, 2016. Other important events are worth noting. Prior to issuance of the Notice declaring it non-responsible, M&B had obtained four necessary Bond Approval Advisories dated March 10 and 14, 2016, which verified that all the subject contract bonds were pre-approved by the insurer and were ready to be issued pending receipt of the premium payments. Pet. Composite Ex. 4.4/ Payment to M&B on Department Contract E4Q26 in the amount of $48,102.65 finally came from the Department on May 16, 2016. Pet. Ex. 5.5/ Sprayberry acknowledged that the Department quit paying M&B after the seventh month on Department Contract E4Q26, which was a 12-month contract. Sprayberry testified that the Department was "very surprised" when the Department of Financial Services directed the Department to discontinue paying M&B because of the language of the contract entitling M&B to be paid monthly.6/ Sprayberry forthrightly acknowledged that M&B should have been paid on contract #E4Q26 and that he had difficulty understanding the language of the contract which prompted the Department of Financial Services to suddenly direct the Department to stop paying M&B on a monthly basis. See generally Pet. Ex. 6. Sprayberry also acknowledged that the "snafu" the parties experienced with the payment provisions of Department Contract E4Q26 was, indeed, "a problem" that "we need to get solved." Insofar as the interruption in monthly payments under Department Contract E4Q26 was concerned, Sprayberry went on to add that the Department was "very surprised" by the audit response by the Department of Financial Services and "didn't count on that." He went on to explain that the Department was also certain that "McIntyre didn't count on that" (meaning the abrupt discontinuation in monthly payments). Once M&B was paid the monies that the Department owed on Department Contract E4Q26, M&B was awarded two additional Department contracts for which it timely returned all required documents and the performance bonds.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Transportation reconsider its preliminary decision and reverse its determination that M&B was non-responsible. DONE AND ENTERED this 5th day of December, 2016, in Tallahassee, Leon County, Florida. S ROBERT L. KILBRIDE 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 5th day of December, 2016.
Findings Of Fact The Medicaid reimbursement program is a joint state and federal program which provides reimbursement to Florida-licensed nursing homes for long-term care provided to Medicaid eligible persons. The Florida Title XIX Long Term Care Reimbursement Plan (Plan) governs reimbursement to nursing homes for the provision of Medicaid services. The Agency for Health Care Administration (AHCA) is the State agency responsible for implementation of the Medicaid program in the State of Florida. The AHCA is the successor in interest to the Department of Health and Rehabilitative Services, the agency originally responsible for Medicaid reimbursement. At all times material to this case, Quality Health Care (Quality) is and has been a provider of services for purposes of the Medicaid program. Medicaid per diem reimbursement rates for nursing home care were historically based on a "cost" system, which included four components: operating costs, patient care costs, property asset costs and return on equity. Re-valuation of property due to property asset sales and refinancing mechanisms, resulted in a steadily increasing property cost component to the reimbursement formula. The Federal Deficit Reduction Act of 1984 (DEFRA) was enacted in part to limit the effect of property asset re-valuation on reimbursement. The DEFRA restricted the "step up" in property costs which occurred when existing facilities were sold and existing property was re-valued. The actual effect of the DEFRA provisions was to freeze property cost reimbursement. In response to DEFRA, the State of Florida revised its reimbursement program in 1984-85 to shift from the traditional cost system to the fair rental value system (FRVS.) The FRVS, designed to provide an alternative to the DEFRA imposed limits, was created by the State of Florida and the nursing home industry to address the industry's concerns about the effect of DEFRA on reimbursement rates and cash flow. The FRVS methodology imputes a provider's property asset value and indexes the value to specified inflation factors. A provider is reimbursed for a portion of the indexed value rather than actual property costs. The methodology itself is not at issue in this proceeding. On October 1, 1985, the State of Florida implemented Medicaid reimbursement on the FRVS program. At the time of implementation of the FRVS, it was determined that application of the FRVS should be temporarily deferred for some providers. The temporary deferment was intended to protect existing providers committed to long term property liability in anticipation of cost reimbursement rates from being injured by the altered reimbursement program and the resulting reduction in reimbursement rates. In order to provide for deferment of the FRVS, the creators of the system created a "hold harmless" provision designed to protect providers in existence and enrolled in the Medicaid program prior to the October 1, 1985 FRVS implementation date by continuing to reimburse such providers under the cost system for an extended period of time. For purposes of the "hold harmless" provision, Quality was in existence and was enrolled in the Medicaid program on October 1, 1985. In creating the FRVS and hold harmless provision, it was clear that facilities qualifying for cost reimbursement under the hold harmless system would receive a benefit unavailable to FRVS-reimbursed providers. It was necessary to create a mechanism by which the advantage of cost reimbursement could be negated. Accordingly the creators determined that the continued cost reimbursement would, be viewed as an "overpayment" by the agency to the facility which would need at some future date to be repaid. The overpayment is known as the "hold harmless payback liability." Because actual property costs decrease over time due to depreciation and retirement of debt, a provider's cost reimbursement eventually becomes less than the projected FRVS reimbursement rate. When a provider's projected reimbursement under the FRVS exceeds the costs system reimbursement, a provider would normally become entitled to reimbursement at the higher rate. In order to collect the hold harmless payback liability, a provider in the hold harmless program otherwise entitled to the higher FRVS reimbursement receives only cost reimbursement until the point when the "overpayment" by the agency has been "reimbursed." When the hold harmless payback liability is extinguished, the provider receives full FRVS reimbursement. Plan section IV.D. provides that during the transition period, some facilities shall continue receive cost reimbursement until such time as FRVS payments exceed cost reimbursement as specified in Section V.E.1.h. of the Plan, at which time a facility shall begin reimbursement under the FRVS. Plan section IV.D. provides as follows: Effective October 1, 1985, a fair rental value system (FRVS) shall be used to reimburse facilities for property. To prevent any facility from receiving lower reimbursement under FRVS than under the former method where depreciation plus interest costs were used to calculate payments, there shall be a transition period in which some facilities shall continue to be paid depreciation plus interest until such time as FRVS payments exceed depreciation and interest as specified in Section V.E.1.h. At that time a facility shall begin reimbursement under the FRVS. Facilities entering the program after October 1, 1985 that had entered into an armslength (not between related parties) legally enforceable agreement for construction or purchase loans prior to October 1, 1985 shall be eligible for the hold harmless clause per Section V.E.1.h. Plan section V.E.1.h. sets forth the hold harmless provision and provides that if after calculation of the FRVS rate FRVS reimbursement is lower than cost reimbursement, a facility shall continue to receive cost reimbursement until such time as the hold harmless payback liability is extinguished. Plan section V.E.1.h. provides as follows: A "hold harmless" provision shall be implemented to ensure that facilities existing and enrolled in the Medicaid program at October 1, 1985 do not receive reimbursement for property and return on equity or use allowance under the FRVS method less than the property cost reimbursement plus return on equity or use allowance given at September 30, 1985. If, after calculation of the FRVS rate, that reimbursement would be lower than depreciation plus interest costs under III.G. 3.-5. of this plan, a facility shall continue to be reimbursed depreciation plus interest according to III.G. 3.-5. of this plan until such time as the net difference in total payments between III.G. 3.-5. and FRVS is -0-. Plan section III.G. 3.-5. provides the methodology for calculation of cost reimbursement. As of October 1, 1985, Quality's cost reimbursement exceeded the FRVS reimbursement and the "hold harmless" provision was applicable to Quality. As of October 1, 1985, Quality was entitled to cost reimbursement under the "hold harmless" provision based on the Plan provisions cited herein. The Medicaid program establishes reimbursement rates on a semiannual basis. Rates are communicated to providers via rate notices. For all periods except the July 1, 1987 and January 1, 1988 rate cycles, Quality's cost reimbursement rate exceeded the projected FRVS reimbursement rate. For the July 1, 1987 and January 1, 1988 rate cycles, Quality's cost reimbursement rate was less than the projected FRVS reimbursement rate. The rate fluctuation experienced by Quality in the July 1, 1987 and January 1, 1988 rate periods is best described as an anomaly. On August 19, 1993, the agency issued a retroactive notice of rate adjustment from cost to FRVS beginning in the July 1989 rate cycle and for all subsequent periods. The evidence is unclear as to why the retroactive rate adjustment was to become effective beginning in the July 1989 rate cycle. By letter of September 24, 1993, the AHCA notified Quality that its hold harmless payback liability was $212,574.32. The agency asserts that based on Plan section IV.D., Quality should be shifted to the FRVS reimbursement program based on that fact that for the two rate cycles beginning in July 1, 1987, FRVS reimbursement payments exceeded costs reimbursement. The agency's position is contrary to the language of Plan section V.E.1.h. (the hold harmless provision) which states as follows: ...If, after calculation of the FRVS rate, that reimbursement would be lower than depreciation plus interest costs under III.G. 3.-5. of this plan, a facility shall continue to be reimbursed depreciation plus interest according to III.G. 3.-5. of this plan until such time as the net difference in total payments between III.G. 3.-5. and FRVS is -0-. Based on the Plan provisions cited herein, for the July 1, 1987 and January 1, 1988 rate periods, and for the subsequent period within the time frame at issue in this proceeding, Quality would be entitled to cost reimbursement because the net difference in total payments between cost and FRVS has not reached zero. It is not unusual for reimbursement rates to be set at times other than at the beginning of a rate cycle. Such rate changes result in additional rate notices to providers. On three occasions, the agency sent notices to Quality stating that the reimbursement rate was being set at the lower FRVS level. On each occasion, Quality inquired and was informed that the reimbursement rate would remain at cost. The AHCA asserts that the responses to the Quality inquiries were erroneous and that it is entitled to correct the errors. Quality asserts that it relied to its detriment on the responses to its inquiries and that the agency should be estopped from retroactively altering the reimbursement mechanism under which Quality is paid.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Agency for Health Care Administration enter a Final Order providing that Quality Health Care Center continue to be reimbursed under the cost reimbursement system until such time as Quality's hold harmless payback liability is extinguished. DONE and RECOMMENDED this 29th day of June, 1994 in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day of June 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-0164 To comply with the requirements of Section 120.59(2), Florida Statutes, the following constitute rulings on proposed findings of facts submitted by the parties. Petitioner The Petitioner's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 24. Rejected, cumulative. 27-28. Rejected, unnecessary. 30. Rejected, unnecessary. 39-56. Rejected, unnecessary. Respondent The Respondent's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 8. Rejected, cumulative. 11. Rejected, not supported by cited testimony. 20-23. Rejected, unnecessary. 24. Rejected as to use of term "discovered." ,The agency had sent three notices Quality prior to the August 1993 action. 26-36. Rejected, unnecessary. 37. Rejected, irrelevant. The testimony is clear that the drafters of the Plan did not contemplate the situation at issue in this case. 40-43. Rejected, irrelevant, not supported by the greater weight of the evidence. There is no credible evidence that any other provider has experienced this situation. Further, such treatment would be contrary to the clear provisions of the Plan. 47. Irrelevant. There is no deadline for payment of hold harmless payback liability. 48-52. Rejected, unnecessary. COPIES FURNISHED: Douglas M. Cook, Director 2727 Mahan Drive Tallahassee, Florida 32308 Harold D. Lewis, Esquire The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Peter A. Lewis, Esquire 307 West Park Avenue Post Office Box 1017 Tallahassee, Florida 32302-1017 Heidi Garwood, Esquire 1317 Winewood Boulevard Building 6, Room 234 Tallahassee, Florida 32399-0700
Findings Of Fact At all times material, the Respondent was licensed as a general contractor, holding license number CG C003564, qualifying WSCON Corporation. On or about September 27, 1990, the Respondent, acting on behalf of WSCON Corporation, entered into a contract with Emilio and Jennie Delgado to build an addition to the Delgado's residence at 13562 Southwest 286th Terrace, Miami, Florida, for a price of $12,756.00. On or about January 5, 1991, the parties to the contract agreed to a change order which increased the contract price by $1,248.00, to a total of $14,004.00. The Respondent obtained a building permit for the job from Dade County and the Respondent began work on the job about a month after signing the contract. The Delgados made payments to the Respondent pursuant to the contract in the total amount of $10,500.00. The final payment was due upon completion of the job. The Delgados never made the final payment because the Respondent never finished the job. After about September or October of 1991, the Respondent performed no further work under the contract. At that time, the Respondent had completed the majority of the work, but there was still some work that remained to be completed. 1/ The Respondent discontinued performing work called for by the contract because of financial problems he was having due to his not having received certain funds owed to him by Dade County. He offered to continue working on the job if the Delgados would advance him sums under the contract that were not yet due, but the Delgados refused to do so. The Delgados never discharged the Respondent. The Delgados completed the job themselves, paying a total of $6,046.21 to various suppliers of labor and materials other than the Respondent. 2/
Recommendation On the basis of all of the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Construction Industry Licensing Board issue a Final Order in this case to the following effect: Dismissing the charges alleged in Counts II and III of the Administrative Complaint; Finding the Respondent guilty of a violation of Section 489.129(1)(k), Florida Statutes, as charged in Count I of the Administrative Complaint; and Imposing the following penalty: an administrative fine in the amount of one thousand dollars ($1,000.00) and a one year period of probation. DONE AND ENTERED this 23rd day of June 1994 in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of June 1994.
The Issue Whether Respondent owes $1,568,399.00 or $2,323,765.60 as a penalty for failing to secure workers' compensation insurance for its employees, as required by Florida law.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following findings of fact are made to supplement and clarify the sweeping factual stipulations set forth in the parties' June 1, 2005, Joint Stipulation3: Legislative History of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes Since October 1, 2003, the effective date of Chapter 2003-412, Laws of Florida, Section 440.107(7)(d)1., Florida Statutes, has provided as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer who has failed to secure the payment of compensation as required by this chapter a penalty equal to 1.5 times the amount the employer would have paid in premium when applying approved manual rates to the employer's payroll during periods for which it failed to secure the payment of workers' compensation required by this chapter within the preceding 3-year period or $1,000, whichever is greater. Prior to its being amended by Chapter 2003-412, Laws of Florida, Section 440.107(7), Florida Statutes, read, in pertinent part, as follows: In addition to any penalty, stop-work order, or injunction, the department shall assess against any employer, who has failed to secure the payment of compensation as required by this chapter, a penalty in the following amount: An amount equal to at least the amount that the employer would have paid or up to twice the amount the employer would have paid during periods it illegally failed to secure payment of compensation in the preceding 3-year period based on the employer's payroll during the preceding 3- year period; or One thousand dollars, whichever is greater. The Senate Staff Analysis and Economic Analysis for the senate bill that ultimately became Chapter 2003-412, Laws of Florida, contained the following explanation of the "change" the bill would make to the foregoing "penalty calculation" provisions of Section 440.107(7), Florida Statutes4: The department is required to assess an employer that fails to secure the payment of compensation an amount equal to 1.5 times, rather than 2 times, the amount the employer would have paid in the preceding three years or $1,000, which is greater. There was no mention in the staff analysis of any other "change" to these provisions. The NCCI Basic Manual The National Council on Compensation Insurance, Inc. (NCCI) is a licensed rating organization that makes rate filings in Florida on behalf of workers' compensation insurers (who are bound by these filings if the filings are approved by Florida's Office of Insurance Regulation, unless a "deviation" is permitted pursuant to Section 627.11, Florida Statutes). The NCCI publishes and submits to the Office of Insurance Regulation for approval a Basic Manual that contains standard workers' compensation premium rates for specified payroll code classifications, as well as a methodology for calculating the amount of workers' compensation insurance premiums employers may be charged. This methodology is referred to in the Basic Manual as the "Florida Workers Compensation Premium Algorithm" (Algorithm). According to the Algorithm, the first step in the premium calculating process is to determine the employer's "manual premium," which is accomplished by applying the rates set forth in the manual (or manual rates) to the employer's payroll as follows (for each payroll code classification): "(PAYROLL/100) x RATE)." Adjustments to the "manual premium" are then made, as appropriate, before a final premium is calculated. Among the factors taken into consideration in determining the extent of any such adjustments to the "manual premium" in a particular case are the employer's loss experience, deductible amounts, premium size (with employers who pay "larger premium[s]" entitled to a "Premium Discount"), and, in the case of a "policy that contains one or more contracting classifications," the wages the employer pays its employees in these classifications (with employers "paying their employees a better wage" entitled to a "Contracting Classification Premium Adjustment Program" credit). Petitioner's Construction of the "Penalty Calculation" Provisions of Section 440.107(7), Florida Statutes In discharging its responsibility under Section 440.107(7), Florida Statutes, to assess a penalty "against any employer who has failed to secure the payment of compensation as required," Petitioner has consistently construed the language in the statute, "the amount the employer would have paid," as meaning the aggregate of the "manual premiums" for each applicable payroll code classification, calculated as described in the NCCI Basic Manual. It has done so under both the pre- and post-Chapter 2003-412, Laws of Florida, versions of Section 440.107(7). This construction is incorporated in Petitioner's "Penalty Calculation Worksheet," which Florida Administrative Code Rule 69L-6.027 provides Petitioner "shall use" when "calculating penalties to be assessed against employers pursuant to Section 440.107, F.S." (Florida Administrative Code Rule 69L-6.027 first took effect on December 29, 2004.) Penalty Calculation in the Instant Case In the instant case, "1.5 times the amount the [Respondent] would have paid in premium when applying approved manual rates to [Respondent's] payroll during periods for which it failed to secure the payment of workers' compensation" equals $2,323,765.60.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner order Respondent to pay a $2,323,765.60 penalty for failing to secure workers' compensation insurance for its employees. DONE AND ENTERED this 5th day of August, 2005, in Tallahassee, Leon County, Florida. S STUART M. LERNER 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 5th day of August, 2005.
