Findings Of Fact The Florida Department of Transportation (hereinafter "DOT") advertised for bids on State Project No. 72190-3530 in Duval County, Florida, with the bids to be closed on June 19, 1985. The notice to contractors and the special provisions included with the bid package provided that the subcontractor participation goal for the project for firms owned and controlled by Disadvantaged Business Enterprises (hereinafter "DBE") was eight percent and for firms owned and controlled by Women Business Enterprises (hereinafter "WBE") was two percent of the total contract bid for that traffic signal installation and resurfacing project. In response to that advertisement for bids, Regency Electric Contracting Company (hereinafter "Regency") submitted a bid of $571,561.86 for the project. Mike Hunter, Inc.; Traffic Control Devices, Inc.; and Wiley N. Jackson Company also submitted bids for that project. Regency was the apparent low bidder. The bid submitted by Regency proposed to utilize 6.21 percent DBE subcontractors and .39 percent WBE subcontractors. Mike Hunter, Inc., proposed to utilize 5.4 percent DBE subcontractors and 2.8 percent WBE subcontractors. Traffic Control Devices, Inc., proposed to utilize 9.8 percent DBE subcontractors and 2.6 percent WBE subcontractors. Wiley N. Jackson proposed to utilize 39.9 percent DBE subcontractors and 2.7 percent WBE subcontractors. DOT, after reviewing the bids, issued a notice of switch in apparent low bidder for the project based upon the failure of Regency to achieve the DBE/WBE project goals and failure to submit documentation of good faith efforts to achieve those goals. Since Mike Hunter, Inc., (the second lowest bidder), also failed to achieve the project's DBE/WBE goals, DOT declared Traffic Control Devices, Inc. (the third lowest bidder), to be the low responsible bidder with its bid of $660,240.47 which is $88,678.61 more than the bid submitted by Regency. The 9.8 percent DBE participation proposed by Traffic Control Devices, Inc., was achieved by allocating a portion of the electrical work being performed by Traffic Control Devices, Inc., to a single DBE subcontractor at a price which was approximately double that proposed to be charged by Regency utilizing its own forces. W & T Enterprises, Inc., is the sole DBE subcontractor proposed to be utilized by Traffic Control Devices, Inc. Although W & T is a North Carolina corporation, it is certified by DOT as a DBE subcontractor for participation in contracts awarded by DOT. W & T qualified to transact business in the State of Florida on August 4, 1980, but its permit to transact business in Florida was revoked on December 16, 1981 for failure to file the annual report as required by law. Since that time, W & T has not re-qualified itself to do business in Florida, and W & T cannot now qualify to do business in Florida since there is now a Florida corporation under the name of W & T Enterprises, Inc. which is not affiliated with the North Carolina corporation, so that that name is no longer available in the State of Florida. Further, the North Carolina W & T Enterprises, Inc. is not registered under a fictitious name in Seminole County where it is alleged to maintain an office. Since Regency's Utilization Form No. 1 reflected that Regency had failed to achieve either the DBE or the WBE goals required for the project, an evaluation was made by DOT's "good faith efforts" review committee of Regency's "good faith efforts" documentation required to be submitted with its bid. In an attempt to evidence "good faith efforts" Regency submitted with its bid a one-page note which lists the DBE and WBE firms contacted by Regency. Regency only contacted a total of ten potential subcontractors and did not contact all of the potential subcontractors in any of the possible areas of subcontracting. The note further fails to indicate when the solicitations were made or that the solicitations were made at least seven days prior to the bid letting. Further, the few solicitations that were made were done by telephone and not by certified mail, return receipt requested, or by hand-delivery with a receipt. There is no evidence to indicate what information was given in the solicitations or that Regency offered to assist the firms contacted with preparation of their quotes, with review of the bid package, or with the obtaining of any required bonding or insurance. Lastly, none of the quotes obtained from any of the DBE or WBE firms contacted were attached to Regency's bid. DBE goals and WBE goals are established by DOT on a project-by-project basis. The evidence in this cause indicates that there were a number of facets to the project including, for example, grassing, asphalt/concrete, barricades/signs, guard rails, signalization and striping. Although one of Regency's witnesses who was not qualified as an expert made the statement that there was an insufficient amount of work available for subcontracting in the project, no specifics were offered as to the basis for that opinion other than the fact that Regency did not choose to subcontract any of the signalization work. No evidence was offered to show what portions of the project involved other-than-signalization work what portion of the project involved materials, or why no portion of the signalization should be subcontracted other than that witness's testimony that loop assembly work proposed to be subcontracted to W & T Enterprises Inc., by Traffic Control Devices, Inc., doubled the price of that portion of the work over Regency's estimate of the costs to do the loop assembly using Regency's own forces. Further, two of the four bidders were able to allocate sufficient portions of the project to subcontractors to meet the DBE goals set by DOT for the project, and three of the four bidders met the WBE goals.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, therefore, RECOMMENDED that a Final Order be entered declaring the bid of Regency Electric Contracting Company on State Project No. 72190-3530 nonresponsive, rejecting that bid, and dismissing with prejudice Regency's formal protest of intent to award a contract. DONE and ORDERED this 1st day of November, 1985, at Tallahassee, Florida. Hearings Hearings LINDA M. RIGOT, Hearing Officer Division of Administrative The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative this 1st day of November, 1985. APPENDIX TO RECOMMENDED ORDER, CASE NO. 85-2820 The following proposed findings of fact of Regency Electric Contracting Company have either been adopted verbatim or have been adopted as modified to conform to the evidence: 3-6 and 16-19. The following proposed findings of fact of Regency Electric Contracting Company have been rejected as not constituting findings of fact but as constituting either argument of counsel or conclusions of law: 1, 2, 13-15, and 20. The following proposed findings of fact of Regency Electric Contracting Company have been rejected as unnecessary: 7-12. The following proposed findings of fact of the Department of Transportation have either been adopted verbatim or have been adopted as modified to conform to the evidence: 1, 4, 7, and 8. The following proposed findings of fact of the Department of Transportation have been rejected as not constituting findings of fact but as constituting either argument of counsel or conclusions of law: 2, 3, 6, and 11. The following proposed findings of fact of the Department of Transportation have been rejected as unnecessary: 5, 9, and 10. The following proposed finding of fact of the Department of Transportation has been rejected as not being supported by any evidence: 12. COPIES FURNISHED: Larry D. Scott, Esquire Department of Transportation Haydon Burns Building Tallahassee, Florida 32301 Ronald W. Brooks, Esquire 863 East Park Avenue Tallahassee, Florida 32301 Thomas Drawdy, Secretary Department of Transportation Haydon Burns Building, M.S.-58 Tallahassee, Florida 32301
The Issue Whether the Department of Management Services' (Department) intent to award the contract pursuant to Invitation to Bid (ITB), Bid Number 33-840-980-E, to Frebon International Corporation, (FREBON), the second low bidder by price discount, and to reject the bid offered by Telecom Response, Inc. (TELECOM or TRI), the low bidder by price discount, was contrary to the Department's governing statutes, rules, policies, or the ITB? Further, whether the Department's proposed action was clearly erroneous, contrary to competition, arbitrary, or capricious? See Section 120.57(3), Florida Statutes.
Findings Of Fact The ITB During the spring of this year, the Department developed an ITB for video teleconferencing equipment and video bridging equipment for all State of Florida agencies and other eligible users. Department staff developed the specifications for the ITB. The ITB was a revision of the existing contract held by TRI, which expired on August 20, 2000, rather than a new contract. During the ITB/specifications review process, a new condition was added to require vendors to give a percentage discount from a list price to aid users in getting more choices and complete systems. On May 9, 2000, the Department advertised ITB 33-840- 980-E actively soliciting bids. The bid title refers to "videoteleconferencing equipment." Vendors were notified that bids would be opened on June 14, 2000, at 2:00 p.m. and that the bid tabulations would be posted on July 20, 2000. The ITB contains two (2) pages of general conditions which are used in most if not all Department ITB solicitations. The ITB also contains special conditions which, among other things, provide for the "purpose" and "scope" of the bid. "The purpose of this bid is to establish a 12-month contract for the purchase of Video Teleconferencing Equipment & Video Bridging Equipment by all State of Florida agencies and other eligible users in accordance with the Eligible Users paragraph, General Conditions." (emphasis added). Under the "scope" section, the Department provided: The objective of this Invitation To Bid (ITB) is to establish a contract for the purchase, installation and a maintenance of video teleconferencing systems and bridging equipment. The prospective bidder must offer the complete line of videoconferencing products and/or video bridge products to configure desktop and/or room videoconferencing systems, for each manufacturer bid. In addition the bidder must provide replacement parts as needed for repairs. In accommodating the specific agencies needs for auxiliary hardware necessary to make the videoconferencing equipment and video bridges operationally complete, the bidder must also provide and support the Optional Bid Items as shown in the Price Sheets section of this bid. (bold emphasis in original). This section requires the bidder to offer the complete line of a manufacturer's products to configure desktop and/or room videoconferencing systems for each manufacturer bid, and to further provide optional equipment by brand name, which could include more than one manufacturer. The "prices" section of the ITB also states: [p]rices shall be submitted in the form of a percentage(%) discount off manufacturer's current published price list. Only a single discount may be offered for each category. List Prices & percentage discount will remain firm for the entire contract period. Discounted prices shall be firm net delivered price to ordering agency. A copy of the Manufacturer's unaltered list price sheet as originally published, in general distribution and in effect on the date of bid opening must be submitted with the bid. Failure to include this with bid package will result in rejection of bid. (bold emphasis in original). The "evaluation/award" special condition provides: "Award shall be by manufacturer's products, based on the highest discount given from the manufacturer's list price sheet for each item, on a multiple award basis. If the same manufacturer's brand is bid by more than one bidder, only the bid with the highest discount percentage shall be considered for an award. All other provisions of Awards Paragraph, General Conditions, shall prevail." (emphasis added). Compare with Findings of Fact 12. The Department also provided several specific specifications for video teleconferencing equipment. Subsection 1.1 provides that the specifications were specifically written for two (2) categories of equipment: "(1) Videoconferencing Systems (includes Set-top, Desktop & Room Systems) (2) Video Bridging Systems." There were two types of commodities listed, i.e. videoconferencing equipment and video bridging equipment, types 1 and 2, respectively. Vendors, including TRI, understood that they could bid on either type or both at their choosing. The Department offered detailed specifications for the videoconferencing systems, category one. Specification 3.1.1 deals with "completeness of systems" and provides for room, set- top, and desktop systems. No other systems are discussed in the ITB. "A typical room system would include the codec, monitor(s), rollabout cart, and control unit." "A typical set-top system would include an integrated codec/camera unit; an external microphone pickup, and a control unit." A desktop system would "minimally include the PC codec card, a desktop video camera, a microphone/headset, and all associated cables for network connections & required peripherals." The remaining specifications, Sections 3.1.2 through 3.1.12.8, provide additional requirements for the room, set-top and desktop systems. Specification 3.3 provides for "optional bid items" which are provided for the convenience and benefit of the contract users as well as the awarded vendors. The optional bid items allow the purchaser a 'one-stop' procurement mechanism, as well as facilitating the ability of a contractor to provide a 'complete system' for the purchaser. It is incumbent on the purchaser to 'shop' the contract and purchase products that meet their needs at the lowest net delivered costs. The optional bid items shall never exceed the manufacturer's suggested list price (MSRP). Vendors must list all options to the contract that are to be offered as indicated on the attached bid sheets. The list must describe the item brand name/manufacturer, model number, and the net prices (see optional bid items price sheets). These "optional bid items" are products, which are not subject to the discount referred to in the "prices" or "evaluation/award" sections of the ITB. The ITB contains a price sheet for "videoconferencing systems" which, among other things, requires the vendor to provide the manufacturer's name bid, brand name bid, and the discount to be used with the manufacturer's price list. The price sheet has a "note" which provided: "Percentage discount applies to the entire manufacturer's line of videoconferencing equipment." (emphasis added). Immediately following the price sheet, the Department provided the vendor with a sheet to be used for "optional bid items" which required an item description, brand name, model number, and net price to be filled in by the vendor. The ITB does not require the vendor to apply the discount to the optional items. The ITB also contains a "manufacturer's certificate." A "special condition" provided: "All bids submitted, must include a certification executed by the manufacturer, stating that the bidder is an authorized dealer/representative of the manufacturer. Manufacturers must complete this form even if they own their own equipment. Dealer agreements shall not be accepted in lieu of manufacturer certification. Bids requiring manufacturer certification will not be considered if certification is not submitted with the bid." (bold emphasis in original). The certificate provided a "NOTE" which stated: "THIS MUST BE EXECUTED BY THE MANUFACTURER. DEALERS/REPRESENTATIVES ARE NOT AUTHORIZED TO SIGN THE CERTIFICATION FORM ON BEHALF OF THE MANUFACTURER. THIS CERTIFICATION MUST BE EXECUTED BY THE MANUFACTURER EVEN IF THEY ARE BIDDING THEIR OWN EQUIPMENT. FAILURE TO SUBMIT THIS CERTIFICATION WITH YOUR BID SHALL RESULT IN DISQUALIFICATION OF BID." The manufacturer certifies that the vendor is authorized to represent the manufacturer in the State of Florida. TRI did not believe the ITB, including the specifications and conditions, were unreasonable. There was no challenge to the ITB. TRI Inquiry On May 31, 2000, at the request of Mr. Brown of TRI, Ms. Brock of TRI, asked Mr. Hinson whether bidders were required to submit a bid response for categories one and two, mentioned above. Mr. Hinson advised her that a vendor could bid on either category. On June 12, 2000, and less than ten (10) days before the bid opening, Ms. Brock asked Mr. Hinson to clarify whether the Department was asking for a single or multiple discount, as to the set-top, desktop, and room teleconferencing systems. However, the general conditions of the ITB, paragraph 7, interpretations/deputes, provides that "[a]ny questions concerning conditions and specifications shall be directed in writing to this office for receipt no later than ten (10) days prior to the bid opening." This letter was untimely submitted pursuant to paragraph 7. The Department's Interpretation of the ITB Mr. Steve Welsh is an engineer. He received a Bachelor of Science degree in electrical engineering and a Master of Science degree in civil engineering. He has been employed by the Department's state technology office two and one-half years. He is not an expert in videoconferencing systems and this ITB was his first exposure to video teleconferencing systems. Mr. Hinson has been a purchasing specialist with the Department for more than five (5) years. He currently administers twelve (12) to thirteen (13) state contracts including the State's existing video teleconferencing contract with TRI. Mr. Welsh drafted the technical specifications for the videoconferencing equipment or systems in the ITB, including pages eleven (11) through seventeen (17), excluding Section 3.3, Optional Bid Items, which were prepared by Mr. Hinson. Mr. Welsh also drafted pages nineteen (19)(price sheet) and twenty (20)(optional bid items), with Mr. Hinson. Pages twenty-one (21) through twenty-seven (27) are standard forms. Set-tops, desktops, and room systems are three (3) generic types of videoconferencing systems. The definitions of these systems were general. Mr. Welsh was unaware of any industry standard regarding desktop, set-top, and room systems. The specifications required each vendor to offer a complete line of the manufacturer's videoconferencing equipment and systems, which might be included under these categories. The Department intended that the percentage discount apply to the complete manufacturer's line of videoconferencing equipment. Conversely, a vendor's offer of a manufacturer's partial line of equipment under "optional bid items" would be inconsistent with the objective of the "scope" section of the ITB. In general terms, Mr. Welsh knew that state agencies have differing needs for videoconferencing equipment and systems to communicate more effectively. However, he was able to give only one example; he knew that community colleges were looking for videoconferencing equipment for distance learning-type needs. Nevertheless, it was important for each vendor to offer a manufacturer's pre-configured or packaged systems, or configured systems from components and prices as the customer needed, or both. The ITB was not written to specifically address health care systems. Mr. Welsh did not consider certain industry specialties, such as education and health care systems, when he drafted the specifications, and there are no specifications expressly relating to videoconferencing products for use in educational or health care settings nor any mention of education or health care systems. However, it was his intent to draft flexible and wide-open specifications, so there may have been several types of industry specialties that he did not consider. The eligible users of this contract include any state, city, or county government, community and state universities, private colleges and universities, and any federal agency located within the State of Florida. The Department intended to award one contract with multiple manufacturers. The vendor could bid either category of equipment. The contract would be awarded to the vendor giving the highest discount for a particular manufacturer's products within each category. If a vendor did not offer a complete line of the manufacturer's products, the vendor could offer a greater discount and achieve a competitive advantage over other vendors who may have provided a more complete list. It was important to the Department to be able to compare each vendor's manufacturer's price list and then apply the vendor's discount in order to appropriately compare their bids. The Department was unable to compare TRI's bid because it submitted a discount for only one (1) page of Tandberg products versus the twenty-two (22) pages of discounted products offered by FREBON. Mr. Hinson explained that Tandberg's complete manufacturer's list price must consist of all items offered by Tandberg. However, Mr. Hinson did not know of the complete line of Tandberg video teleconferencing equipment and/or bridging equipment. The Department interprets the word "includes," which appears on TRI Exhibit 1, page 11, paragraph 1.1(1) of the specifications, to mean that desktop, set-top, and room systems could be included as part of a manufacturer's product line. However, it was not meant to be exclusive. The Department asserts that TRI's bid was non- responsive because TRI did not submit a complete, unaltered price list for all of Tandberg's video telecommunication products at a discount. TRI would have been awarded the contract for the Tandberg products if the bid had been responsive. On the other hand, the Department contends that FREBON's bid, containing approximately twenty-two (22) pages seemed complete and appeared to have included a complete line of Tandberg products. But, like TRI, GLOBAL's bid containing eight (8) pages, and DIGITAL's bid containing twelve (12) pages of discounted Tandberg products, were likewise non-responsive for being incomplete. TRI's one-page price list would not have been complete, in the Department's view, even if TRI had submitted a complete line of Tandberg products in the options portion of TRI's bid because TRI did not offer the discount for the options. Mr. Buddy Barker explained that a minor irregularity is a deviation from a specification which does not affect price and does not give one vendor a competitive advantage over another. He did not consider TRI's omission of other Tandberg's products to be a minor irregularity. The Tandberg Products There appears to be a major distinction between Tandberg videoconferencing systems, such as desktops, set-tops, and room systems, and Tandberg special "Application" products, such as health care and education products, in both appearance and functionality. Mr. Richard Grace is an Executive Vice President employed by the Applications Group at Tandberg, Inc. The term "Applications" within Tandberg, Inc. refers to market segments within their business. In this case, "Applications" pertains to distance education and health care products. During his deposition, admitted over objection as TRI Exhibit 18, Mr. Grace reviewed several documents, which were identified as DMS 0001, DMS 0006-0027, DMS 0029, and a memorandum dated June 9, 2000. These DMS numbered documents appear in TRI Exhibit 5. The DMS labeled documents were submitted with FREBON's bid. DMS 0006-0027 is the price list for the "Business Solutions" products manufactured by Tandberg, as well as the maintenance costs for various products, and also include the Tandberg health care and education products. These documents include the entire product lines price list for Tandberg's "Business Solutions" and "Applications" products. DMS 0006 is the first page from FREBON's bid and lists the "systems" products from Tandberg's "vision products price list." Tandberg's "vision products" are considered Tandberg "Business Solution" products, i.e., standard CODEC's or what Tandberg refers to as "off-the-shelf roll-abouts or set-top boxes." Off the shelf products are standard video conferencing systems that Tandberg designs and sells. They are also called roll-abouts, set-tops, and CODEC's. According to Mr. Grace, the Department's ITB asked vendors to offer to bid, material here, Tandberg's "Business Solutions" systems products. Mr. Grace said that Tandberg "education" and "health care" products would be considered room systems, but "the nature of the bid was looking for a more traditional answer of roll-abouts, which are administrative-type devises," and the "roll-abouts" are the systems referenced on TRI Exhibit 5, DMS 0006 and 0007, above the line, "Tandberg Educator," which were offered by TRI and FREBON. The products listed on TRI Exhibit 5, DMS 0006 to DMS 0007, above the notation "Tandberg Educator," are the videoconferencing systems manufactured and sold by Tandberg and, from a systems standpoint, are all of the "Business Solutions" products sold by Tandberg. The "systems" listed on these pages, (TRI Exhibit 5, DMS 0006 and the top of DMS 0007), include the only desktop, set-top, and room systems manufactured by Tandberg. Except for the omission of three (3) portable products listed in TRI Exhibit 5, DMS 0006 and 0007, of the FREBON bid, TRI's Tandberg "vision product price list" contained the same "systems" products as in FREBON's bid. (TRI Exhibit 2, BID 0033). The portables listed in FREBON's bid at DMS 0007, are not desktop, set-top, or room systems. TRI Exhibit 5, DMS 0007 through DMS 0013, lists accessories and optional items that can be attached to videoconferencing systems. DMS 0014 through DMS 0017, appear to be the maintenance pricing for the "Business Solution" products. DMS 0018 and 0019 refer to the "Application" products for Tandberg. DMS 0020 through DMS 0023 refer to the maintenance and service prices for the "Application"-based products, such as education systems, tutor products, and health care systems. Currently, Tandberg only focuses on the education and health care systems as part of its "Application" products. DMS 0024 through DMS 0027 are fees for the installation and on-site support for the Tandberg system throughout the world. Tandberg only manufactures the products listed on TRI Exhibit 5, DMS 0006-0027. However, Tandberg sells, but does not manufacture, other products such as "accord bridges," which are not included on these DMS pages. The Bids TRI TRI has been selling Tandberg video teleconferencing systems since February of 1998. TRI currently has the contract with the State of Florida for video teleconferencing equipment. TRI submitted a pricing sheet for videoconferencing systems and, in part, proposed to offer a 29.4 percent discount for "Tandberg Vision Business Solution Systems," the brand name for the bid. The discount applied to the "systems" products listed in the one-page, April 1, 2000, Tandberg price list. TRI's one-page price list, (TRI Exhibit 2, BID 0033), is the same as the first page of FREBON's Tandberg price list. (TRI Exhibit 5, DMS 0006). However, the second page of FREBON's price list (TRI Exhibit 5, DMS 0007), includes three (3) portable products which were included with the FREBON bid, but not included in the TRI bid. TRI felt that portables were not desktop, set-top, or room systems. Further, the products listed on TRI Exhibit 5, DMS pages 0007 (after the "portables" section) through DMS 0027, included by FREBON, were not included by TRI because they are not desktop, set-top, or room systems. TRI defines video teleconferencing systems to include only desktop, set-top, and room systems. Also, the terms videoconferencing systems and equipment are used interchangeably. Accordingly, TRI, consistent with its understanding of the Department's ITB, submitted a one-page price list for Tandberg desktop, set-top, and room system products. Having reviewed the ITB, TRI thought the Department, in requesting bids for video teleconferencing systems, was requesting a manufacturer's, here Tandberg's desktop, set-top, and room "systems" products only, and not the manufacturers, here Tandberg's, special "Application" products. TRI also offered a price list for optional items, which were accessories that could be attached and used as part of a system, with brand names including, but not limited, to Panasonic, Tandberg, and ELMO. TRI also provided a price schedule, 4.1.00, Exhibit A, which provided net prices for described systems, portables, CODEC's, for example. TRI's 29.4 percent discount does not apply to these items. FREBON, GLOBAL, and DIGITAL Three other vendors submitted bids offering discounts for the Tandberg line of video teleconferencing equipment. FREBON offered a 22.3 percent discount off Tandberg's price list consisting of twenty-two (22) pages of Tandberg products. Page one of FREBON's submission (TRI Exhibit 5, DMS 0006), provides the same information set forth in TRI's one (1) page price list, Exhibit B (TRI Exhibit 2, BID 0033). The remaining pages (TRI Exhibit 5, DMS 0007-DMS 00027), were not provided by TRI. GLOBAL offered a 21 percent discount off of Tandberg's price list for eight (8) pages of Tandberg products. (TRI Exhibit 5, DMS 0031-0038). DMS 0031-0032 provide the same information as TRI's price list, although GLOBAL adds three (3) products under the heading "portables," which are omitted from the TRI price sheet. DIGITAL also submitted a bid for video teleconferencing equipment offering the Tandberg line of products. However, DIGITAL offered multiple discounts. DIGITAL provided twelve (12) pages of Tandberg products. The Initial Bid Tabulation Posting On July 20, 2000, the Department posted the initial bid tabulation form for the video teleconferencing equipment. TRI received a copy of the bid tabulation. DIGITAL'S bid was deemed non-responsive because DIGITAL offered multiple discounts within the same product line, whereas the bid called for a single discount. The Department accepted the GLOBAL and FREBON bids. The Department rejected TRI's bid with a discount of 29.4 percent because TRI did not supply, at a discount, the complete, unaltered manufacturer's (Tandberg) price list with the bid offering all of the videoconferencing equipment and products manufactured by Tandberg, i.e., the twenty-two (22) pages offered by FREBON. This was the sole reason given by the Department for finding TRI's bid to be non-responsive. TRI's bid complied with all the other technical requirements required of the ITB. TRI filed a timely notice of protest, followed by a formal petition, challenging the Department's intended action to award the bid the FREBON and finding TRI's bid non-responsive. The Second Bid Tabulation Posting Unknown to TRI, on August 1, 2000, the Department posted a second bid tabulation involving the same bid and the same vendors. During the interval between the first and the second postings, the Department re-reviewed the bids. In the second posting, the Department again noticed its intent to award the contract to FREBON as an "SBN" i.e., "single bid negotiated," having determined that FREBON was the only responsive bidder. This was the only factor considered by the Department. In fact, the Department acknowledged that the products were available from multiple sources. Also, this bid was not an "exceptional purchase." Aside from the reference to "single bid negotiated" in the second tabulation, there is no written explanation for the Department's decision. See Section 287.057(4), Florida Statutes (". . . The agency shall document the reasons that such action [negotiate if less than two responsive bids are received] is in the best interest of the state in lieu of resoliciting competitive sealed bids. . . ."); Florida Administrative Code Rule 60A-1.002(5)(requiring, in part, the agency to document the conditions and circumstances when less than two (2) responsive bids are received). The Department changed its mind about the responsiveness of the GLOBAL bid and found GLOBAL's bid to be non-responsive on the ground that GLOBAL did not supply the complete manufacturer's price sheet with the bid. Mr. Hinson said that DIGITAL's bid was rejected on the same ground, although there is no documentation to support this testimony. The Department did not furnish TRI with a copy of the second posting nor notify TRI of the posting because the Department felt, pursuant to an unwritten policy, that TRI was not adversely affected by the decision, because the Department previously found TRI's bid non-responsive. FREBON and GLOBAL were notified of the second posting pursuant to the same policy. Resolution of the Conflict Between TRI and the Department It is undisputed that FREBON offered a discount for the entire product line price list for all of the "Business Solutions" and "Applications" products manufactured by Tandberg. The price lists include, among other products, Tandberg health care and education products. Conversely, TRI offered a discount based on a complete, unaltered price list for all of the videoconferencing systems manufactured by Tandberg, and, from a systems standpoint, all of the "Business Solutions" products sold by Tandberg. Specifically, TRI offered a discount for all of the desktop, set-top, and room systems manufactured by Tandberg. The resolution of this matter is not without some difficulty. We have heard from only one (1) vendor, TRI. All of the vendors offered different discounts for various products manufactured by Tandberg and no two vendors furnished the same Tandberg price list for the same products, although there was some overlap among the vendors. Yet no one, including TRI and the Department, suggests that the ITB was ambiguous or not clearly understood. Nonetheless, the ITB is not a model of clarity and, on this record, the ITB did not convey the intent of the Department expressed during the hearing. Notwithstanding the Department's expression of intent articulated during the final hearing, a plain reading of the entire ITB leads to several conflicting conclusions. The stated material objective of the ITB is to establish a contract for the purchase, installation, and maintenance of video teleconferencing systems, not video teleconferencing equipment, although the bid title says otherwise, and the purpose of the bid is to establish a contract for the purchase of video teleconferencing equipment. Another objective required each vendor to offer the complete line of videoconferencing products to configure desktop and/or room videoconferencing systems. Further, each vendor was required to offer a percentage discount for the entire Tandberg line of videoconferencing equipment. Stated differently within the ITB, the award is made by manufacturer's products, based on the highest discount given from the manufacturer's list price sheet for each item. But which item? The terms "videoconferencing systems" and "videoconferencing equipment" are used interchangeably in the ITB. The specifications were written specifically for two (2) categories of equipment, material here, videoconferencing systems, which include, set-top, desktop, and room systems, the only "systems" discussed within the four (4) corners of the ITB. The "systems" products offered by TRI, for a discount, are the only desktop, set-top, and room systems manufactured by Tandberg, and, from a systems standpoint, are the only videoconferencing systems that Tandberg manufactures. Thus, it follows that TRI provided the Department with a discount for the complete, unaltered list price sheet for these Tandberg products. While a decision to award the contract to TRI is contrary to the Department's intent expressed in the final hearing through its representatives, it is consistent with the ITB. The Manufacturer's Certificate A special condition of the ITB required each bidder to furnish a manufacturer's certificate, which certifies that a bidder is authorized to sell the manufacturer's equipment in the State of Florida. Mr. Hinson was advised by Mr. Grace of Tandberg that as of June 14, 2000, FREBON was authorized to sell and service Tandberg "Application" products, i.e., Tandberg's health care and education series products, only to the federal government in the State of Florida, and not to state governments, including the State of Florida. However, the Department accepted FREBON's certificate based solely on the representations made by Tandberg regarding FREBON's authorization. The Department feels it is unnecessary to investigate the veracity of a manufacturer's certificate because the Department can pursue a remedy against the vendor, here FREBON, if the vendor is not authorized after the contract is awarded. When he signed the manufacturer's certificates for the three (3) vendors, including FREBON, Mr. Grace meant the vendors were authorized resellers of Tandberg's products. Mr. Grace sent a memorandum of June 9, 2000, to any vendor who sent him the State of Florida's manufacturer's certificate for signature authorizing them to participate in the bid. Mr. Grace explained in his memorandum and during deposition, that authorization to act as an "Applications" dealer did not allow the vendor to sell "Business Solutions" products and vice-versa. For example, FREBON was limited to selling the Tandberg "Business Solution" products to the State of Florida and could not sell the Tandberg health care and intern products or education and tutor products to the State of Florida. Tandberg is in the process of discussing with FREBON to expand their capabilities of selling the "Application" products. Mr. Grace would discuss additional authorization with any vendor who wins the bid. Mr. Grace received and signed manufacturer's certificates for TRI, FREBON, and DIGITAL, because they were "authorized resellers of Tandberg's product that was being asked for in the statement of the work," i.e., for the "Business Solution" products that, in his judgment, the Department was requesting in the bid, and he "would sign them again under that" premise. TRI and DIGITAL are authorized to sell Tandberg's "Business Solution" and "Applications" products to the State of Florida.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Management Services enter a final order and award the contract to TRI because TRI offered the lowest discount for the required Tandberg products. If the Department declines to award the contract to TRI, it is further recommended that the Department re-bid the contract because an award to FREBON cannot be justified as a "single bid negotiated." DONE AND ENTERED this 14th day of December, 2000, in Tallahassee, Leon County, Florida. CHARLES A. STAMPELOS 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 14th day of December, 2000. COPIES FURNISHED: F. Alan Cummings, Esquire Daniel Te Young, Esquire Cummings & Thomas, P.A. 1004 DeSoto Park Drive Post Office Box 589 Tallahassee, Florida 32302-0589 Terry A. Stepp, Esquire Department of Management Services 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399-0950 Cynthia Henderson, Secretary Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 Bruce Hoffmann, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
Findings Of Fact Invitation to Bid (ITB) DOT Contract Number 7578 involves the mowing of various state roads in Citrus County, Florida. Citrus County is in District Seven of DOT. The ITB requires mowing, edging, sweeping and litter removal along state roads in Citrus County. The Petitioner, All Seasons is the current contractor performing the mowing services which are the subject of this protest. However, the ITB called for expansion of those services. The mowing contract had to be relet because All Seasons, opted not to renew its current contract because it felt that it was not making enough of a profit. The budget amount for the Contract Number 7578 protest was $180,000. The budget amount is the amount of money DOT has preapproved to spend for the contract. It is not the estimated amount DOT projects a contractor can perform the mowing contract for. The estimated amount is secret, but is generally close to the budgeted amount. Four bids were submitted for the mowing contract. The four bids were: Imperial Cabinets $ 70,201.05 Horticultural Industries $ 90,845.58 All Seasons $171,233.95 Mark Dunning Industries $181,119.61 In this instance, there was a large discrepancy among the bids on contract E-7578. The two lowest bidders were Imperial Cabinets and Horticultural Industries and were well below he budgeted amount. These two low bids were closer in proximity as to dollar amounts to each other and All Seasons and MDI's bids were closer in proximity to each other. The technical review committee (TRC) analyzed the bids and discussed whether or not the two lowest bidders were able to perform the contract. The TRC was concerned about whether the lowest bidder could perform the work required in the ITB at the price it bid. The TRC asked for information on the two lowest bidders from other districts. It did not receive any useful information. DOT did not inquire of the two low bidders. 1/ The TRC also consulted with DOT staff on the lowest bidder's prices. The staff thought the prices were low but could not state that the contract could not be performed the amounts which were bid. However, the TRC recommended rejection of all the bids to the awards committee. The TRC's recommendation was based on the speculation that the low bidders did not understand the scope of the mowing contract and that lack of understanding resulted in the bid prices of the two lowest bidders. However, there was nothing unique or confusing contained within the specifications of the ITB which would lead to the conclusion that a reasonable person could not understand. There is no way, just by looking at the bid proposal, to tell whether or not either firm could perform the contract at the prices. Additionally, there was no way to determine from the face of either firms bid if they did or did not understand the contract. In short, there was no factual basis for the TRC to find the low bids non-responsive and to recommend rejection of all the bids. The awards committee followed the recommendation and rejected all the bids. The awards committee utilized the same speculation the TRC had used its decision is as faulty. In this case, Petitioner relied on the same "evidence" as DOT regarding the inability of the two low bidders to perform the contract in order to demonstrate that the two low bidders were non-responsive. The evidence simply does not support a finding of non-responsiveness. Petitioner being the third place bidder has no substantive interest in this proceeding since it could not be awarded the mowing contract. Therefore, the bid protest should be dismissed.
Recommendation Based upon the findings of fact and the conclusions of law, it is, RECOMMENDED: That the contractors protest bid for Contract Number E-7578 be dismissed. DONE and ENTERED this 27th day of November, 1996, in Tallahassee, Leon County, Florida. DIANE CLEAVINGER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 27th day of November, 1996.
Findings Of Fact On an undisclosed date, respondent, Department of Transportation (DOT), gave notice to qualified contractors that it would receive sealed bids on State Project Job No. 26000-3624. The job called for removing and replacing the roof on the DOT warehouse at Gainesville, Florida. Such bids were to be filed with the agency no later than January 23, 1985. As is pertinent here, the specifications called for the following type of flexible sheet roofing system: minimum Elastomeric sheet material, manufacturer's standard thickness but not less than 42 mils, 400 psi minimum tensil strength, 250 percent elongation (ASTM D 412), ultraviolet and ozone resistent, low temperature brittleness of -40 F (-40 C)(ASTM D 746), integral color white or aluminum. W. R. Grace and Company (Grace) is one of several companies who manufacture single-ply roof membranes that are generally compatible with DOT specifications. One of its factory representatives, John Cunningham, reviews all bid notices issued by DOT to determine what materials are required for a given project. The representative then calls DOT approved contractors in his service area who use Grace products and advises them of the requirements for the job. In this particular case, Cunningham read the specification for elastomeric sheet material and was initially confused as to whether DOT wanted a factory finish on the membrane or to have it coated in the field. This confusion arose since the specification called for an "integral color" on the material and a "manufacturer's standard thickness, but not less than 42 mils." Grace manufacturers two single-ply roof membranes, one having a 40 mil thickness with a factory applied coating (GRM-500), and one having a 50 mil thickness with a field applied coating (GRM-120). When DOT prepared the bid proposal, it was under the impression that the GRM-500 system would meet the specifications. However, if a factory applied coating on the membrane was desired, the GRM-500 system would not meet the specification as to thickness. Because of this, Cunningham contacted a DOT representative who advised that DOT wanted a factory applied coating, and that all bidders should base their bid using the GRM-500 product even though this appeared to be inconsistent with the specifications. The representative also told Cunningham it was too late to issue an addendum to clarify the matter. Based upon the above representation Cunningham telephoned each qualified contractor in his sales area who used Grace products, including petitioner Cheesbro Roofing, Inc. (Cheesbro), a roofing company located in Ormond Beach, Florida. He told them that DOT apparently wanted a factory applied coating, even though this was inconsistent with the specification as to thickness and that the GRM-500 system should be used. He also advised them that at least one bidder interpreted the specification differently, and was preparing its bid using the GRM-120 product so that the thickness specification as written could be met. Cheesbro had never bid a DOT project and was confused as to the type of product to use in preparing its bid. In an abundance of caution, Cheesbro submitted alternate bids, one with prices based on the GRM-500 system and the other using the GRM-120 system. This resulted in bids of $84,560 and $102,661, respectively. The alternate bid (using the GRM-120 product) was typed on the firm's letterhead and inserted in the bid proposal since the bid form did not contain a place to write an alternate bid. The $84,500 figure was the lowest dollar bid on the project out of twelve bids submitted. At about the same time, a second Grace sales representative, Richard Bray, contacted users of Grace products in his service area including Kent Construction Company, Inc. (Kent) of Chipley, Florida. Bray advised his customers to write their bids using the GRM-500 system. Kent had originally interpreted the specification as requiring the GRM-120 system, but, based upon Bray's representation, it submitted a bid of $86,800 using the GRM-500 system. This was the second lowest dollar bid on the project. By law DOT cannot design specifications with the object of soliciting products made by a specific manufacturer. Even so, there are only a few other manufactured roofing systems which have a factory applied coating and a thickness of at least 42 mils. However, most of the twelve bidders, including the two lowest, submitted bids using Grace products. After the bids were filed and reviewed, DOT noted that Cheesbro had submitted alternative bids. Because this is a ground for rejection, the bid was reviewed initially by a DOT technical awards committee which recommended the bid be rejected as being "irregular". That committee's decision was affirmed by the contract awards committee which reached the same conclusion. Accordingly, Cheesbro's bid, although the lowest, was rejected on February 11, 1985 and Kent's bid accepted on March 6, 1985 as being the lowest and most responsible bidder on the project. That prompted the instant proceeding. DOT bids are governed by the Standard Specifications for Road and Bridge Construction, 1982 Edition. Section 2 - 6 of that document provides as follows: A proposal will be subject to being consid- ered irregular and may be rejected if it shows omissions, alterations of form, addi- tions not called for, conditional or unau- thorized alternate bids, or irregularities of any kind; also if the unit prices are obvi- ously unbalanced, either in excess of or below the reasonable cost analysis values. DOT has relied upon this section as authority for rejecting Cheesbro's bid. Cheesbro did not read this document before submitting its bid. According to DOT, the purpose of the section is to obtain standard bids from all contractors, and to prevent one bidder from having an unfair advantage over others through the use of alternate bids.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that all bids on State Job Project No. 26000-3624 be rejected, and the project be relet for bids. DONE and ORDERED this 1st day of July, 1985, in Tallahassee, Florida. Hearings Hearings DONALD R. ALEXANDER Hearing Officer Division of Administrative The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative this 1st day of July, 1985. COPIES FURNISHED: David H. Burns, Esquire p. O. Box 1694 Tallahassee, Florida 32302 Larry D. Scott, Esquire Haydon Burns Bldg., M.S. 58 Tallahassee, Florida 32301
The Issue Whether the State of Florida, Department of Law Enforcement (FDLE), issued a Notice of Intent to Award a contract, pursuant to an Invitation to Negotiate (ITN), to LexisNexis (Intervenor), which was contrary to FDLE’s governing statutes, rules, polices, or any applicable bid or proposal specification.
Findings Of Fact Stipulated Facts FDLE issued Invitation to Negotiate #B1003 (the ITN) on November 2, 2005, seeking detailed and competitive proposals to provide information and technology services to support domestic security and other criminal investigations. FDLE received and evaluated responses to the ITN from six firms, including Petitioner and Intervenor. On January 25, 2006, FDLE posted its notice of intent to enter into negotiations with Petitioner and Intervenor. FDLE issued final instructions to Petitioner and Intervenor, including a request for BAFOs on February 15, 2006. Petitioner and Intervenor submitted timely BAFOs on February 23, 2006. FDLE posted a notice of intent to award the contract to Intervenor on March 7, 2006. Petitioner timely filed a notice of intent to protest followed by a formal written protest and appropriate protest bond. Intervenor filed a petition to intervene, which was granted. Other Facts Initial replies to the ITN were received, reviewed for responsiveness, evaluated, and ranked by FDLE. Both Petitioner and Intervenor replies to the ITN were deemed to be responsive, and, subsequently, to constitute the top two proposers. In accordance with the ITN specifications, negotiations ensued with both Petitioner and Intervenor. FDLE’s negotiation team met with Petitioner representatives and then with Intervenor representatives between February 6 and 8, 2006. During the negotiations, the vendors and FDLE’s negotiation team engaged in substantive discussions regarding the vendors’ respective proposals. Both vendors agreed to changes both in technical areas and in pricing. Both vendors had the opportunity to fully explain the merits of their respective proposals and to discuss with the negotiation team FDLE’s needs and concerns. The negotiation process was conducted in accordance with the terms of the ITN and the requirements of Section 287.057(3), Florida Statutes. After the negotiations were completed and as a result of the information gained through these negotiation meetings, FDLE prepared and issued Addendum 7 to the ITN, which requested a BAFO from each vendor. Addendum 7 modified certain provisions of Section 6 of the ITN. FDLE received and evaluated the BAFOs submitted by Petitioner and Intervenor. Mark Scharein, Kevin Patten, and Larry Shaw, FDLE employees and members of the FDLE negotiation team, prepared a memorandum to Mark Zadra, Chief of Investigations for the Office of Statewide Intelligence, providing a recommendation for award to Intervenor and the rationale for that recommendation. Zadra concurred, and FDLE ultimately decided to award the contract to Intervenor and issued an official intent to make such an award. Alleged Deficiencies of Intervenor BAFO Petitioner’s protest with respect to Intervenor’s BAFO centers around two provisions of the ITN – section 6 (C)(7) and section 6 (F)(1). Sections 6 (C)(7) of the ITN was revised in Addendum Section 6 (F)(1) was not, however, revised in Addendum 7. Section 6 (C)(7) of the ITN, as revised by Addendum 7, provides: The solution shall include proactive notification capability. This will include flagging subjects individually or batch via user interface or FTP site. The system will match these records against new public records data at regular intervals (such as each 24 hours). Notifications will then be sent on matching records to the user with this new information. This capability will be made available to selected users as enabled by an FDLE administrator. Intervenor’s response in its BAFO to Section 6 (C)(7) provides: This functionality, which describes our Accurint Watchdog service, has not been previously discussed and is outside of the scope of requirements in the original ITN. However, this functionality is available for an additional fee and [Intervenor] is open to negotiating supplying this service. This response occurred during the negotiation phase and is included in the final, firm price proposal submitted by Intervenor. FDLE properly considered that price proposal binding and used that firm price proposal in reaching its determination that Intervenor offered the best value to the state. Section 6 (F)(1) of the ITN provided that “[t]he system shall provide support structured as well as unstructured (free-text) search capabilities.” This requirement in the ITN was not altered by Addendum 7, and Intervenor’s BAFO response to this requirement, the same response that was in its original reply to the ITN, was not timely subjected to challenge. BAFO Evaluation By FDLE After FDLE received the BAFOs, they were reviewed by FDLE personnel which then undertook a cost analysis to determine which offer provided the best value to the state. The analysis is memorialized in a memorandum dated March 7, 2006, and a summary chart. FDLE undertook the cost analysis fully cognizant of its experience and knowledge of the existing system, its experience with replacement contracts, and its reasonable understandings with respect to future needs. As a first step in the process, a comparison was made of the price offered by each vendor as derived directly from their respective BAFOS. Committed to paying no more than the amounts denoted in the vendors’ BAFO price sheets, FDLE could move to final negotiation with Petitioner in the event that Intervenor refused to contract for the price listed in its pricing sheet. The second step in FDLE’s pricing analysis was consideration of implementation costs that are internal to FDLE. FDLE had asked both vendors to identify the amount of time and effort required of FDLE for development and implementation of their respective systems. Utilizing this information provided by the vendors, the implementation costs were calculated by analyzing the implementation requirements in terms of man-hours as provided by the vendors. FDLE multiplied the man-hours provided by the vendors with the average salary rates of the various FDLE employees needed to complete implementation of the system. As a result of this exercise, FDLE concluded that the implementation costs to FDLE for Petitioner’s system was $340,000. The implementation costs to FDLE for Intervenor’s system was $0. In the third step of FDLE’s exercise to determine the real cost impacts of contracting with the respective vendors, FDLE considered the cost of purchasing licenses for additional users over the full term of the contract. Based on experience, FDLE personnel determined an additional 1000 users could be reasonably anticipated over the next ten (10) years. Accordingly, the original ITN called for pricing based on a minimum of 1000 users. Section 6 (L) of the ITN specifically states that FDLE shall have the option to acquire additional licenses for additional users. The vendors were informed during negotiations that FDLE would like to know the price for additional users beyond 1000. Neither vendor was informed how many more users FDLE anticipated adding over the next ten years. Both vendors knew, however, that FDLE currently has demand for additional users to its system. Both vendors were told that FDLE would likely add more users to the system. FDLE was seeking a system capable of supporting at least 1000 simultaneous users and with the option of purchasing rights for additional users who could use the system simultaneously. Opportunity for Petitioner was available to find out the historical growth rate of users during the negotiation phase if that was information of interest to that vendor. Prior to issuance of the ITN, FDLE informed potential vendors that it was reasonable to assume that the number of users would grow beyond 1000 and that FDLE could have 1500 users over time. Petitioner received that pre-ITN information which was made public as part of a request for information relating to the ITN. Based on FDLE’s experience, it is common for a software vendor to be required to offer a price per user without any idea as to how many licenses for users the state will eventually need. Petitioner offered a price of $9,000,000 based on 1000 users, with a price of $1400 for each additional user over the first 1000. By contrast, Intervenor offered a price of $10,379,658.62 based on 1500 users, with a price of $1028 for each additional user over the first 1000 -- a forty (40) percent difference in favor of Intervenor for the price of each additional user. Without even considering the 500 additional users included in Intervenor’s BAFO, FDLE determined that Intervenor provided a lower total cost to FDLE by almost one million dollars. Further, if an additional 500 users are included in the analysis, the price difference spreads to as much as five million dollars in favor of Intervenor. FDLE appropriately and properly concluded that Intervenor offered the best overall value to the state.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Respondent enter a final order denying Petitioner's protest. DONE AND ENTERED this 12th day of July, 2006, in Tallahassee, Leon County, Florida. S DON W. 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 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 12th day of July, 2006. COPIES FURNISHED: John P. Booth, Esquire Department of Law Enforcement Post Office Box 1489 Tallahassee, Florida 32302-1489 J. Stephen Menton, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. Post Office Box 551 Tallahassee, Florida 32302 W. Robert Vezina, III, Esquire Vezina, Lawrence & Piscitelli, P.A. 413 East Park Avenue Tallahassee, Florida 32301 Michael Ramage, General Counsel Florida Department of Law Enforcement Post Office Box 1489 Tallahassee, Florida 32302 Gerald Bailey, Commissioner Florida Department of Law Enforcement Post Office Box 1489 Tallahassee, Florida 32302
Findings Of Fact On October 26, 1976, the School Board of Orange County and ITEL Data Product Corporation (ITEL) entered into a lease agreement providing for the lease of data processing equipment to the Board from ITEL by which ITEL supplied a computer central processing unit (CPU) and related equipment. Concomitantly, by agreement, ITEL provided for servicing and maintenance of the equipment. In October, 1977, IBM announced its new 303X series of computers with delivery schedules to customers for the newly introduced equipment to take up to two years. IBM has had a long-standing policy, well-known in the data processing industry, of filling customer orders for equipment in the sequence in which they are received, called "sequential delivery." With public agency customers, such sequential orders are not envisioned by the agency nor IBM to be a firm order because of the often protracted procurement process, involving competitive bidding, that public bodies typically have to engage in before making such a major purchase. IBM therefore permits public agencies, such as the School Board in this case, to place non-binding orders in anticipation of a future procurement so that a sequential delivery position will be available to the public agency and thus cause no delay in acquisition of the equipment should IBM become the successful bidder upon a particular procurement. On October 6, 1977, the School Board placed a "reservation" for an IBM 3031 CPU and related data processing equipment. In a letter of October 11, 1978, the School Board informed IBM that this equipment would be needed in approximately November, 1979, subject to availability of funds and subject to IBM being selected as a winning vendor in a competitive bidding process. There was no executed contract or other commitment between IBM and School Board at this point in time. Sometime in the summer of 1979, the School Board, which had become dissatisfied with the service and maintenance it had received from ITEL pursuant to the ITEL lease, engaged certain members of its staff in a study regarding its future data processing equipment needs. The School Board staff study resulted in a determination by the staff, and ultimately by the Board, to acquire additional data processing equipment capacity in excess of the capacity supplied under the ITEL lease. On August 28, 1979, the School Board terminated the ITEL lease effective December 31, 1979, and on or about September 5th, notified ITEL of that termination. On or about October 2, 1979, after determining that it wished to lease new and greater capacity equipment, the School Board Issued an "Invitation to bid" to eleven vendors, providing for the leasing, with option to purchase, of an IBM 3031 CPU and related equipment "or their equal." In response to this invitation to bid, ITEL, Menrex Corporation, as well as IBM, submitted bids and on November 13, 1979, the School Board rejected all the bids as being not responsive, as it had reserved the right to do in the invitation to bid document. The rejection of these bids on November 13, 1979, provided only slightly over a month during which the School Board would have to acquire equipment by rental or purchase and have it installed, since the ITEL lease would be terminated on December 31, 1979. Accordingly, acting on the advice of counsel, the School Board determined that it could legitimately develop an interim emergency leasing plan for meeting its data processing needs upon the expiration of the ITEL lease starting December 31, 1979. This leased equipment was expected to be in place for approximately three to six months or until such time as a new bidding effort and procedure could be developed. The School Board, upon advice of counsel, determined that under its procurement regulations, it could rent equipment on a month to month basis without engaging in a competitive bidding process if it solicited quotations from at least three vendors. Thus, on November 13, 1979, the School Board solicited quotations from three potential vendors, Comdisco, ITEL and IBM, for purposes of securing an interim rental of an IBM 3031 CPU, "or equal", and related equipment. IBM and the Petitioner herein, NAS, which is the successor in interest to ITEL, responded to the solicitation of quotations and NAS informed the Board that it could not supply the particular equipment specified, but offered a NAS CPU at a monthly charge and suggested other related equipment to the Board that NAS considered to be suitable. The School Board staff informed NAS that the CPU unit itself would be a suitable alternative to the IBM 3031 CPU mentioned in the solicitation of quotations. On November 20, 1979, the School Board elected to select IBM's quotation and entered into the lease arrangement with IBM on a month-to-month rental basis. NAS did not challenge that action by the School Board. This rental agreement was entered into on or about December 7, 1979. It was a standard IBM lease and contained a provision whereby IBM offered the customer an option to purchase the equipment, although there was no obligation imposed therein on the customer to purchase the equipment, which was the subject of the lease. The agreement provided that the customer would be contractually entitled to certain "purchase-option credits" or accruals if it was leasing the equipment on a long-term basis and subsequently elected to exercise the option to purchase that same equipment. IBM grants such purchase-option credits as a general rule in month-to-month rental situations such as this, although they are not always a matter of contractual right on behalf of the customer. In any event, no consideration was shown to have been given at the time of entering this rental agreement to the existence or non-existence of any purchase-option credit provision since the only authorized contract at that time was a month-to- month rental agreement. No purchase or option to purchase which would be binding on either party was contemplated since both IBM and the School Board were aware that before a purchase of this magnitude could be made, that a competitive bidding procedure must be utilized. Equipment was installed pursuant to the rental agreement in December, 1979. Neither at the time of the contracting, nor at the time of the installation of the IBM 3031 CPU, did NAS or Comdisco challenge the award of the month-to-month rental contract to IBM. In early 1980, the rental agreement being only temporary, the School Board began studying various alternatives for making a permanent acquisition of needed data processing equipment. In early May of 1980, upon advice of its attorney and various staff members assigned to study the matter, the School Board determined that it would be more economical for the School Board to purchase a CPU and related equipment and service either by cash or installment payment, than to continue renting a CPU and related equipment or to lease those items with an option to purchase as had originally been contemplated in the October, 1979, aborted procurement effort. Thus, it was that on about April 20, 1980, the School Board appointed a committee of five persons to help draft technical specifications to ultimately be promulgated in bidding invitation documents with a view toward acquiring the required data processing equipment through competitive bidding and ultimate purchase. The committee included School Board employees and outside consultants with knowledge of the field of data processing. The members were: Louis Nall, Education Consultant with the Florida Department of Education; Kim Anderson, Information Systems Consultant with the Florida Department of Education; David Andrews, Coordinator, Systems Support, School Board; Mike Staggs, Coordinator, Operations for the School Board; and Craig Rinehart, Director of the Systems Development/Systems Support staff of the School Board. Upon this committee agreeing upon required specifications for the equipment to be acquired, the bidding documents or "invitation to bid" and related supporting documents were developed by the committee in conjunction with assistance of certain other members of the staff of the Board as well as the School Board's attorney. The bid documents were approved by the School Board on May 27, 1980, and they were issued on May 23, 1980, to eight potential vendors, including NAS, IBM, and Amdahl Corporation. The bid documents invited bids for the sale of an IBM 3031 CPU and related equipment "or their equal" (plus service and maintenance) for delivery no later than July 15, 1980. In addition to specifying an IBM 3031 CPU and related equipment "or their equal.," the pertinent specifications contained in the invitation to bid documents provided as follows: The manufacturer of the equipment described in the bid was required to currently manufacture it and offer for sale or lease along with it, an upgradable attached word processor subsystem the same as, or equal to, the IBM 3031 "attached pro- cessor." The Central Processing Unit, or CPU, being bid had to be capable of hosting or accommodating an attached processor. (The purpose of requiring this was so that the School Board could later ob- tain more processing capability if and when it needed it, rather than having to pay for more capacity than it needed at the time of the initial purchase. The vendors were not required by the bidding documents, however, to bid at the time of this procurement for the actual sale of such an attached processor, to be added later.) The School Board reserved the right to reject any and all bids and to waive any informal- ity in any bid. The bid documents initially stated that the School Board would not pay any separately stated interest or finance charges in arriving at its total purchase price for all equipment to be bid. Each bidder was required to offer a certain number of support or maintenance personnel in the Orlando area at the time the bid was submitted and the Board would enter into a separate service and maintenance agreement with the successful vendor. NAS did not protest the bid specifications contained in the invitation to bid documents. NAS did request and receive several interpretations and clarifications of the bid documents from the Board in a manner favorable to NAS. These favorable clarifications or interpretations were as follows: The unavailability of serial numbers for data processing equipment at the time the bid was prepared would not adversely affect the bid's validity. NAS could temporarily rent equipment from other manufacturers which it could not itself deliver by the July 15, 1980, date required in the bid documents. (emphasis supplied) NAS would be deemed by the Board to comply with the requirement that support personnel be present in the Orlando area, provided it had the required support personnel in the area at the time the equipment was actually delivered, rather than at the originally stated time of submission of the bid. The NAS 7000N CPU, which was a computer of greater capacity than the IBM 3031, even after the IBM had the attached processor added, was specifically determined by the Board to be con- sidered as equivalent to the IBM 3031 and thus ap- propiately responsive to that specification and the invitation to bid documents. NAS would be deemed by the Board to comply with the term "manufacturer" even though NAS did not in itself manufacture the equipment, but only marketed it for the maker, Hitachi Corporation. IBM also had a role in determining and securing clarifications or interpretations of the specifications in the invitation to bid from the School Board. Thus, it was that IBM suggested that the Board could save money if it allowed each vendor (not just IBM) to separately state an interest or finance charge in its bid, since IBM was of the opinion that the Internal Revenue Service would not tax as ordinary income to the vendor any separately stated interest charges or financing charges received by such vendor from a public governmental body such as the School Board. Thus, to the extent that vendors could save on income taxes from the total payment, if successful, then the School Board could reasonably expect all vendors to submit correspondingly lower bids in response to the invitation to bid. In response to IBM's request, the School Board amended the bid documents to allow a "separately stated time-price differential" for any item of equipment, not to exceed seven and one-half percent of that item of equipment. At NAS' request, the School Board also amended the bid documents to state that a single central processor (the NAS 7000N), with equivalent power to the IBM 3031 CPU, which was upgradable in the field, would be an acceptable alternative to the requirement that a separate processor must be capable of being attached to the CPU in order to increase data processing capacity. In fact, the NAS 7000N actually has somewhat greater data processing capacity than the IBM 3031. A further amendment to the bid documents provided that in determining the lowest and best bid, the Board would consider each vendor's total charges for service, maintenance and support of the equipment for a one- year period following the award of bids. Additionally, at the request of IBM, an amendment was approved to the bid documents stating that instead of seeking equipment "new and not refurbished," that that requirement would be changed to "new and not refurbished or not more than one-year old." These amendments were sent to all potential bidders. Prior to disseminating the May, 1980, invitation to bid documents, the School Board established an Evaluation Committee to review and analyze bids to be received in response to those documents. The Committee was composed of the following individuals: David Brittain, the Director of the Educational Technology Section, Florida Department of Education; William Branch, Director of Computer Service, University of Central Florida; Louis Nall, Education Consultant, Florida Department of Education; Ronald Schoenau, Director of Northeast Regional Data Center, Florida University System; Craig Rinehart, Director of Systems Development/Systems Support of the Orange County School Board; Mike Staggs, Coordinator, Operations of the School Board; David Andrews, Coordinator, Systems Support, School Board; Dale Brushwood, Director of Production Control, School Board; and David Brown, Attorney for the School Board. The Evaluation Committee was charged with conducting a review and analysis in accord with certain instructions given by the Board and to recommend to the Board the bid the Committee believed was the lowest and best bid. The Committee was instructed that objectivity is of prime importance. Five vendors submitted bids in response to the Invitation documents, as amended. They were NAS, IBM, Amdahl, CMI and Memorex. On June 17, 1980, the bids were opened by the Board. On a recommendation of the Evaluation Committee, the School Board found the bids submitted by CMI and Memorex to be not responsive to the bid documents. The bids submitted by NAS, IBM and Amdahl Corporation were found responsive to the bid document. The Evaluation Committee met for approximately 5 hours evaluating the bids by a number of different criteria, including the consideration of both a one-year and a three-year maintenance cost, as well as an assumption arguendo that the bid documents did not merely call for the IBM 3031 CPU upgradable by the addition of an attached processor, as the specifications actually requested, but instead that the $330,000 (estimated) attached processor was to be bought at the outset from IBM. The result was that the Evaluation Committee reported that the IBM bid was the lowest and best response, even if the cost of a $330,000 attached processor was added to their bid, which was not actually to be the case because the attached processor was not included in this procurement process. Even had that been added to the IBM bid, making it the second lowest dollar bidder, the Evaluation Committee still felt it to be the lowest, best bid. The IBM bid for the 3031 CPU and related equipment was $1,412,643 plus a time-price differential of $58,738 for a total of $1,471,381. The related bid for service, maintenance and support for the first year was $74,201.34, making a grand total for IBM's bid of $1,545,582.34. The NAS bid for the sale of an NAS 7000N CPU and related equipment was the next lowest bid at $1,575,751 plus a time-price differential of $74,722 for a total of $1,650,473. The accompanying bid for service, maintenance and support for the first year was $64,603. The total of the NAS bid was thus $1,715,076. The Amdahl Corporation's bid was higher than either IBM or NAS. In evaluating and in arriving at the decision that the IBM bid was the lowest and best, the Evaluation Committee was concerned with the previous poor record of maintenance and support provided by NAS's predecessor in interest, ITEL Corporation, as well as by the fact that there were then no NAS 7000N computer systems installed in the United States, so that some knowledge of its performance record could thus be gained. Further, the residual value for NAS' equipment had not yet been proven to the extent that IBM's had. Thus, the Committee determined that the IBM bid would still be the lowest and best even had the attached processor, at an estimated cost at time of $330,000, been added to the bid, making it the second lowest in dollar terms because the IBM bid combined the least risk, with the maximum equipment capacity growth flexibility at maximum benefit to the School Board in terms of financial flexibility. The NAS machine would provide more capacity than the Board needed for several years at higher cost, without the Board having an option regarding when that extra capacity should be obtained. The financial flexibility benefit of the IBM bid in terms of allowing for future capacity growth was borne out because the attached processor, by the time it was actually acquired from IBM in 1982, only cost $172,000, due to price decreases made possible by technological advances. The Evaluation Committee unanimously recommended acceptance of the IBM bid as the lowest and best received, and in official session on June 24, 1980, after hearing presentations by an NAS representative, the School Board unanimously voted to award IBM the contract for the subject equipment. On July 1, 1980, the contract submitted by IBM was executed by IBM and the School Board. It provided for a purchase by the Board of the equipment and services described above, payable in two installments, $600,000 on or before August 15, 1980, and the balance on or before July 5, 1981. On July 16, 1980, NAS filed a petition for administrative hearing with the Board, also filing an emergency motion for stay with the School Board, seeking a stay of all further agency action on the contracts with IBM, including any payment, pending disposition of the case. On July 29, 1980, the School Board, after hearing argument of NAS counsel, denied that petition for Administrative Hearing and motion for stay on the basis that the contract between the Board and IBM had already been executed and that the NAS request for a 120.57(1), Florida Statutes, hearing was not timely. On August 4, 1980, NAS appealed the Board's decision to deny a hearing to the Fifth District Court of Appeal and also filed an emergency motion for stay pending appeal. The emergency motion requested the court to prohibit any further action pursuant to the contract, including payment of any sums pending determination of the issues raised in the appeal. On August 15, 1980, the court granted the emergency motion for stay on the condition NAS post a supersedes bond on or before August 18, 1980. On August 26, 1980, the court vacated that order because of failure to timely post the supersedes bond. The School Board then paid IBM the first installment payment of $600,000, when due, shortly thereafter. On May 6, 1981 the Fifth District Court of Appeal ultimately rendered a decision that NAS ". . . should have an opportunity to present evidence and arguments, pursuant to Section 120.57(1)(b)4, Florida Statutes, (Supp. 1980), that its bid was the lowest and best response to the bid document." Thus, the case was remanded to the Board to conduct an administrative hearing, and the Board referred the matter to the Division of Administrative Hearings. On June 4, 1981, NAS filed with the Board a motion for stay to prevent the Board from making the final payment to IBM on the purchase price. After hearing arguments of NAS' attorney, the Board, on June 23, 1981, denied the motion for stay and NAS appealed. On July 3, 1981, the Fifth District Court of Appeal affirmed the School Board's denial of the stay. Final payment was thereafter made by the Board to IBM, thus completing the purchase and all performance of the contract.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence in the record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is RECOMMENDED: That a final order be entered by the School Board of Orange County denying the relief requested by the Petitioner. DONE and ENTERED this 22nd day of September, 1983, in Tallahassee, Florida. P. MICHAEL RUFF, 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 22nd day of September, 1983. COPIES FURNISHED: John A. Barley, Esquire 630 Lewis State Bank Building Post Office Box 10166 Tallahassee, Florida 32302 William M. Rowland, Esquire Post Office Box 305 Orlando, Florida 32802 Peter J. Winders, Esquire Nathaniel L. Doliner, Esquire Post Office Box 3239 Tampa, Florida 33601 Daniel E. O'Donnell, Esquire 400 Colony Square, Suite 1111 Atlanta, Georgia 30361 James L. Scott, Superintendent Orange County Public Schools Post Office Box 271 Orlando, Florida 32802
The Issue Whether the decision of Respondent, the Florida Department of Financial Services (“DFS”), to award the contract contemplated in its Invitation to Negotiate No. 1819-01 ITN TR, e-Payment Collection and Processing Services, to Intervenor, NIC Services, LLC (“NIC”), is contrary to governing statutes, rules, or policies, or the solicitation specifications; if so, whether that decision was clearly erroneous, contrary to competition, arbitrary, or capricious; and whether Petitioner, PayIt, LLC (“PayIt”), has standing to protest DFS’s decision.
Findings Of Fact The Parties and Claims at Issue DFS, through Florida’s Chief Financial Officer (“CFO”), is authorized to contract with vendors that process and collect electronic payments by credit card, charge card, debit card, and funds transfer (“e-Payment services”). § 215.322(4), Fla. Stat. DFS issued Invitation to Negotiate No. 1819-01 ITN TR (“ITN”) to procure a new contract for those services. NIC, headquartered in Olathe, Kansas, is an e-Payment services company focusing exclusively on government procurements. NIC is the intended recipient of the e-Payment services contract. PayIt, headquartered in Kansas City, Missouri, is also an e-Payment services company focusing exclusively on government procurements. DFS eliminated PayIt from negotiations after the first round. PayIt timely protested the intended award after receiving DFS’s notice of intent to award the contract to NIC. PayIt raises the following four claims: DFS did not make an appropriate best value determination by failing to: (A) consider vendor pricing before eliminating seven vendors during negotiations; (B) understand the pricing of the five remaining vendors before determining that NIC provided the best value to the State; and (C) consider whether making multiple awards would result in the best value to the State; DFS made the following material changes to the ITN during negotiations that improperly gave NIC a competitive advantage: allowing NIC to propose different pricing structures for individual agencies; (B) allowing NIC to waive the limitation of liability and parent company guarantee terms; and (C) allowing NIC to propose pricing based on a promise of exclusivity; DFS violated Florida law and the ITN by awarding the contract to NIC, a non-responsive vendor; and DFS violated Florida law and the ITN by failing to conduct the procurement in a transparent manner by: (A) holding a public meeting where no meaningful discussion occurred as to the reasons the negotiation team members voted in favor of an award to NIC; and (B) failing to prepare a short plain statement detailing the basis of its decision prior to awarding the contract to NIC. E-Payment Services and the ITN DFS is the state agency in charge of procuring contracts for and managing the processing and collection of e-Payment services, which include credit card, debit card, e-Check, and ACH transfer payments made in person via a point-of-sale device (“POS”), over the phone, or online. All state agencies and the judicial branch are required to use the e-Payment services vendor(s) with whom DFS has contracted unless otherwise approved. Local governments may choose to use the vendor(s), too. Approximately 20 state agencies and 95 other government entities use the e-Payment services contract. Each agency has unique needs depending on the type and number of transactions. The Department of Transportation (“DOT”) processes about 80 percent of the State’s e-Payment transactions per year, whereas the Department of Revenue (“DOR”) processes the largest dollar amounts per transaction. Some agencies have more web-based transactions while others have more POS transactions. In 2019, the State processed 1.7 billion transactions in e-Payments totaling about $52 billion. Bank of America (“BOA”) is DFS’s current e-Payment services vendor and its contract expires in 2021. BOA generally provides the services needed, but it uses subcontractors to manage different platforms utilized by the government entities, which has created continuity and reliability issues. BOA also replaced its dedicated team in Tallahassee with employees in Tampa and Orlando, which DFS believes has reduced the level of service it expected. DFS began the competitive procurement process in early 2018 to ensure a smooth implementation of a new e-Payment services contract. In March 2018, DFS conducted a business needs analysis and chose to use an ITN so it could negotiate with multiple vendors to meet the goals of the e-Payments program and provide the best value to the State. DFS wanted the best solution, not the lowest price. That is why it decided against an invitation to bid (“ITB”), as an award would have to go to the lowest bidder rather than the one with the best solution. DFS also decided against a request for proposals (“RFP”), as it could not define the specific services needed. DFS drafted the ITN over three to five months. DFS relied on its own experience, but also received input from DOT, DOR, and other agencies that utilize the contract so it could accommodate their needs and preferences. Based on that process, DFS finalized its primary needs and desires. Specifically, it wanted a single company that would: (1) perform all of the required services, in part to avoid difficulties it experienced by the current vendor’s use of subcontractors and multiple platforms; (2) provide customization to individual agencies and meet their customer service needs, including a year’s worth of data migration to the new platform, at least 15 participant-defined fields, and a dedicated team in Tallahassee; (3) provide contactless-capable POS devices, of which there are currently 600-800 in use; provide interactive voice response software (“IVR”) in at least English and Spanish so that individuals could make payments over the phone, which is consistently used; (5) have experience implementing a contract of this magnitude, given the billions of transactions and dollars processed each year; and (6) ensure the best value to the State. In November 2018, DFS issued the ITN. The ITN specifications detailed the procurement process, the selection methodology, and the award. Numerous sections of the ITN reflected the preferences just discussed, including 1.2 – Solicitation Objective, 1.3 – Background, 1.4 – Questions Being Explored, 1.5 – Goals of the ITN, 3.5.2 – Mandatory Criteria, 3.5.4 – Business References, 3.6.1 – Narrative on Experience and Ability, 3.6.2 – Respondent’s Proposed Solution, and 4.6 – Selection Criteria. The Solicitation Objective stated that DFS intended to make a single award using the Standard Contract, though it reserved the right to make multiple awards or no award at all. The ITN attached the Standard Contract, including a Statement of Work and Standard Terms and Conditions with several provisions of particular relevance: (1) Guarantee of Parent Corporation - requiring the vendor’s parent company (if any) to guarantee the vendor’s obligations under the contract; (2) Limitation of Liability – limiting DFS’s liability for any claim arising under the contract to the lesser of $100,000 or the unpaid balance of any compensation due for the services rendered to DFS under the contract; and (3) Nonexclusive Contract – providing that the contract would not be an exclusive license to provide e- Payment services, as DFS could contract with other vendors to provide similar or the same services. The ITN made clear that vendors had to notify DFS in their responses of any exceptions they had to the Standard Contract or its attachments. The ITN noted that the terms of the Statement of Work, the conditions, costs, different price adjustments, and related services may be negotiated, and required vendors who successfully negotiated such terms and conditions to submit a revised Statement of Work and attach it to their best and final offer (“BAFO”). The ITN also gave DFS discretion to negotiate and finalize terms with the vendor to whom it decided to award the contract. The ITN process involved three phases: solicitation, evaluation, and negotiation. DFS assigned Amy Jones as the procurement officer. She became the sole point of contact during the procurement process. The Solicitation Phase During the solicitation phase and prior to submitting responses, potential vendors could submit questions about the ITN. In response to 90- plus questions, many of which concerned pricing, DFS published answers to the following questions, among others, in a written document (“Q&A”): In response to a question as to whether DFS was open to a more simplified transaction pricing approach that provided a standard/blended rate across all card types and authorization levels, it clarified that it was interested in potential options that may exist and expected responses to propose the solution/approach the vendor believed provided the greatest value to the State. DFS confirmed that if the vendor did not charge a per transaction fee, it should enter a “0” on the spreadsheet but include the cost in the Total Fees. In response to questions concerning the ability to negotiate the terms of the Statement of Work, the contractual documents, or the Guarantee of Parent Corporation, DFS again confirmed that it reserved the right to negotiate the Standard Contract and that vendors had to fully describe any exceptions to such terms in their responses. In response to a question concerning the effective date, DFS indicated that it would be the date of contract execution, which should be in June 2019, but depended on the length of the ITN process. In response to a question as to the start date, DFS stated that the Project, defined in the Standard Terms and Conditions as the activities required to transition all agencies from the current vendor’s platforms to the new vendor’s platforms, should begin immediately upon contract execution. The Evaluation Phase DFS set the deadline for responses and the evaluation stage ensued. The ITN required each response to include three volumes: (1) Response Qualification Documents; (2) Technical Response; and (3) Price Response. The Response Qualification Documents had to contain financial documentation, including three years of audited financial statements, a completed business reference form, and a signed mandatory criteria certification, among others. The Technical Response had to include a narrative on the vendor’s experience, ability, proposed solution, any value-added services offered, any proposed exceptions to the terms and conditions in the Standard Contract, the requisite bond, and a security audit. The ITN stated that a vendor may be rejected if its “past performance, current status, or [r]esponse do not reflect the capability, integrity, or reliability to fully and in good faith perform the requirements of a contract.” The ITN, thus, gave DFS authority to reject a vendor regardless of its price if it could not fully perform the contract. The Price Response detailed the pricing requirements and confirmed that vendors had to complete an Excel spreadsheet provided by DFS. The spreadsheet had sheets for POS pricing, tiered pricing, non-tiered pricing, additional tiered pricing, and additional non-tiered pricing. All fees and pricing for each category, including credit card usage fees, had to be listed and additional rows had to be added if necessary. Tiered pricing represented the transaction-based services whereas non-tiered pricing represented the unit-based services. Pricing had to reflect the cost of the services as described in the Statement of Work. Any additional services had to be included in either the tiered or non-tiered pricing sheets depending on how they would be charged. The tiered and non-tiered sheets automatically populated a summary sheet based on a flat fee-per-transaction model, which would be used to compare the vendors’ pricing. Although the spreadsheet had to be completed as directed, the ITN did not prohibit more detailed explanations as to pricing elsewhere in the response. The Q&A also made clear that DFS encouraged alternative pricing arrangements. DFS received responses from 13 vendors, including BOA, Govolution, Alacriti Payments, NIC, PayIt, Fidelity Information Services (“FIS”), JetPay, JP Morgan, Official Payments, Point & Pay, Suntrust, Hancock Whitney, and Wells Fargo. As the ITN required, many of the vendors listed exceptions to the Standard Terms and Conditions and Statement of Work in their responses. NIC noted that it wanted to revise the language of the limitation of liability term and strike the parent guarantee term in its entirety, among other exceptions. PayIt chose not to list any exceptions in its response. Ms. Jones conducted an administrative review and identified deficiencies with ten of the responses, including PayIt’s. Ms. Jones did not deem NIC’s response deficient. Of particular relevance here, NIC listed four states and two federal agencies as business references to highlight its experience with payment processing services. NIC noted that these partners represented a small sample of the more than 50 governmental agencies that use its payment processing platform. NIC is a wholly-owned subsidiary of NIC, Inc., which has a number of other subsidiaries. Of the agencies listed in its response, NIC has contracts with only two of them. Although the other agencies listed have entered into contracts with NIC-related entities, NIC owns the payment-processing platform and provides e-Payment services to all of the agencies through those related entities. Based on the weight of the credible evidence, NIC accurately listed its experience providing the same e- Payment services at issue here in the states listed in its response. Ms. Jones notified the deficient vendors and gave them an opportunity to cure.1 At the end of the cure period, Ms. Jones deemed all but one vendor (Alacriti Payments) responsive, though the ITN authorized DFS to reconsider responsiveness and responsibility at any time during the procurement. Ms. Jones also reviewed the Price Responses and realized that the spreadsheet formulas had issues that could render the pricing information inaccurate. Several vendors utilized percentage-based pricing per transaction while others put text in the fields. Because the tiered pricing sheet formula only could use fees expressed in dollars and cents, the use of percentages or other text resulted in inaccurate pricing information and rendered the spreadsheet practically meaningless for scoring the Price Responses. 1 As explained later, PayIt’s responsiveness and responsibility (or alleged lack thereof) are not relevant considerations because it challenges the fundamental fairness of the process and seeks a re-bidding. However, for purposes of a complete record, PayIt’s deficiency concerned its failure to include three years of audited financial statements. Upon receipt of the deficiency notice, PayIt timely submitted audited financial statements for 2016 and 2017 (2016 was its first year being audited) and an unaudited financial statement for 2018. PayIt informed DFS that it would submit the audited 2018 statement in April 2019 once the auditors were finished. DFS waived this deficiency as a minor irregularity and moved PayIt on to negotiations. Although PayIt never ultimately submitted the 2018 audited financial statement, DFS ended negotiations with it on other grounds, as detailed below. For instance, PayIt utilized a percentage fee per credit card transaction. When it included the percentage in the tiered pricing spreadsheet, the spreadsheet automatically converted the percentage to pennies and inaccurately reduced its pricing for credit card transactions. NIC also utilized a percentage fee per credit card transaction. Instead of including the percentage in the spreadsheet, it included an “N/A” notation in the description column, which resulted in $0 being calculated for credit card fees in the spreadsheet. Although the Q&A instructed vendors to use $0 if they “would not charge a per-transaction fee for different card types and authorization levels,” it required them to provide “instead a total cost for Total Fees.” NIC failed to include the total fees that it would charge for credit card transactions elsewhere in the spreadsheet, resulting in a tiered pricing sheet that included fees only for ACH transactions and inaccurately reduced its total pricing. That said, NIC explained elsewhere in its response that it charged percentage fees for credit card transactions and described generally how those fees would apply. DFS did not issue deficiency notices to PayIt, NIC, or any other vendor as to the Price Response. However, because the spreadsheet could not accurately depict pricing for many of the vendors, making it impossible to accurately score this component during the evaluation phase, DFS had to make a decision. It could reject all bids and start over, create a revised spreadsheet that could suffer from similar formulaic errors, or issue an addendum that removed consideration of pricing from the evaluation phase. DFS chose the latter because it would allow for and encourage vendors to use creative pricing without having to start the procurement process over. It issued Addendum 4, which confirmed that pricing would not be scored or considered during the evaluation phase. Instead, technical scores would be utilized to establish a competitive range and pricing would be addressed in the negotiation phase. Although Addendum 4 noted that the Price Response would be used, it deleted the form’s instructions and confirmed that vendors did not need to resubmit it. The weight of the credible evidence showed that this decision was reasonable; it ensured that all vendors were treated fairly and equally when it came to pricing, were not excluded from negotiations simply because the spreadsheet was too rigid to accurately score their pricing, and it allowed all vendors to address and answer questions about their specific pricing during negotiations. Addendum 4 provided the requisite notice about filing a specifications challenge within 72 hours. No vendor filed such a protest. Ms. Jones sent the remaining 12 responses to the evaluation team for a qualitative review. The evaluation team reviewed the responses against the evaluation criteria and completed score sheets for each vendor. The scores ranged from 66 to 99 out of 141 possible points. Ms. Jones reviewed the scores to establish a competitive range of vendors that appeared reasonably susceptible to an award. Because there was no natural break in the scoring, Ms. Jones included all 12 vendors within the competitive range and DFS commenced negotiations with all of them. The Negotiation Phase The negotiation team included Jennifer Pelham, Teresa Bach, Tanya McCarty, and Rick Wiseman, who collectively have substantial experience in negotiating contracts, procurement, and e-Payment services. The team also invited subject matter experts, including individuals from the three largest users, DOT, DOR, and the Department of Highway Safety and Motor Vehicles (“DHSMV”), to participate in the negotiation and strategy sessions and provide their input. The ITN required the team to conduct the negotiations and make an award recommendation after determining which vendor presented the best value to the State in accordance with the following Selection Criteria: The Respondent’s articulation, innovation, and demonstrated ability of the proposed solution to meet the Department’s Solution goals and the requirements of this ITN; Experience and skills of the Respondent’s proposed staff relative to the proposed solution; and The Respondent’s pricing and overall cost to the State. The ITN gave DFS substantial discretion. It could eliminate vendors from further consideration, end negotiations at any time and proceed to a contract award, or reject all responses and start the process over. It could request clarifications and revisions to any vendor’s response (including BAFOs) until it believed it had achieved the best value. It could negotiate different terms and related price adjustments if it believed such changes provided the best value. And, it could arrive at an agreement with a vendor and finalize principal terms of the contract. The team conducted its first round of negotiations with the 12 vendors. Prior to the meetings, the negotiation team closely reviewed the vendors’ responses and prepared agendas with questions as to their ability to fully perform the required services, their proposed solutions, and their pricing models, among other things. The agendas asked the vendors to explain their pricing and each had that opportunity during their presentations. The team met immediately after each presentation to discuss the vendor, its ability to meet the Statement of Work and provide all of the required services, its experience, and any other issues that arose during the presentation. The team conducted a strategy session after the first seven presentations to discuss the same issues and tentatively decided with which vendors to move forward. The team conducted a similar strategy session after the final five presentations. Despite responses indicating otherwise, it became clear that several vendors did not fully understand or appreciate the scope of the required services. Several vendors also lacked the capability or demonstrated ability to perform all of the required services. Based on the presentations and strategy discussions, the team ended negotiations with seven vendors—i.e., BOA, JP Morgan, Govolution, Point & Pay, Suntrust, Hancock Whitney, and PayIt—for the following reasons: PayIt – did not offer IVR in Spanish, as required; claimed experience with POS devices, but failed to answer questions about that experience or about the specific types of equipment it could offer; failed to follow the agenda and answer specific questions/concerns raised by the team; experience limited to web and mobile, rather than POS or IVR; limited experience with individual agencies in states, but not an entire state contract, and only had been in business for a few years; lacked adequate resources and staff to handle the contract at the time, with only a promise to hire more staff later. BOA – did not offer IVR; could not provide all requested services, so BOA proposed two contracts with other entities, which would cause additional administrative difficulty. JP Morgan – lacked an understanding of the Statement of Work or the ITN; lacked a detailed implementation plan; could not offer participant defined fields for agencies to customize the platform or the required data migration; offered only a piecemeal solution relying on the current vendor to continue providing services. Govolution – lacked an understanding of the Statement of Work or the ITN; only offered payment technology, but lacked the ability to provide the processing component; lacked a detailed implementation plan; could not offer the required data migration. Point & Pay – lacked experience with both government contracts and contracts of the scope, complexity, and scale of this contract; focused more heavily on payment technology, rather than processing. Suntrust - lacked an understanding of the Statement of Work or the ITN; offered only a piecemeal solution relying on the current vendor to continue to provide services; could not provide data migration for the 15 participant fields needed for agency customization; lacked a plan to replace POS devices. Hancock Whitney - lacked an understanding of the Statement of Work or the ITN, including that the contract included SunPass or that local governments had to be converted during the implementation period; could not provide required data migration or 15 participant fields needed for agency customization. Based on the weight of the credible evidence, the team asked the vendors to discuss their pricing and considered it, but reasonably decided to end negotiations with these seven vendors—who could not offer all of the required services, lacked an understanding of the required services or a solid plan for providing them, failed to follow the agenda and provide the specific information requested, or lacked sufficient experience—consistent with the ITN and Florida law. The team continued negotiations with NIC, FIS, Official Payments, JetPay, and Wells Fargo. The team created agendas for the second round of negotiation sessions so that it could delve deeper into the vendors’ ability to perform all of the required services, their unique solutions for doing so, and their pricing. The team created a chart to conduct a side-by-side comparison of the vendors’ experience, their individual solutions, and their ability to provide the requisite services and value-added services. Although not required by the ITN, the team also created a chart listing the five vendors’ prices for the required services to try to do an apples- to-apples comparison. However, doing such a comparison remained a challenge because of the vendors’ different pricing structures. But, the team generally understood what the vendors charged for the services, including that Wells Fargo and FIS had cheaper transaction fees than NIC. After the second round, the team ended negotiations with JetPay and Wells Fargo for the following reasons: JetPay – Did not meet the information transfer requirements, forcing agencies to undergo extensive programming efforts to switch over; lacked experience with contracts of this size and scope; would not commit to a dedicated staff in Tallahassee. Wells Fargo – Did not use a single platform and had a multi-vendor solution; lacked a plan for replacing POS devices; could not meet the requirements for data migration or copies of batch files for processing payments that agencies requested; elaborate and extensive pricing. Based on the weight of the credible evidence, the team understood and considered the vendors’ pricing, but reasonably decided to end negotiations with JetPay and Wells Fargo—two vendors who lacked the demonstrated ability and experience to perform all of the required services of the ITN— consistent with the ITN and Florida law. The third round of negotiations continued with FIS, Official Payments, and NIC. The team met with each vendor again to obtain additional information about their ability to provide all of the required services, their solutions, and their pricing. In order to focus more closely on pricing, the team provided the vendors with past monthly invoices for DOT, DOR, and DHSMV and each completed the invoices based on their own pricing. This exercise allowed the team to understand the total cost to the State that each vendor would charge based on the services currently provided by BOA and compare those total costs both amongst each other and with BOA. Based on the weight of the credible evidence, the team reasonably decided to do this pricing exercise only with these three vendors because they were the only ones that it believed at the time were reasonably susceptible to an award. Nothing in the ITN required the team to conduct this pricing exercise with all vendors, much less those who already had been reasonably eliminated for failing the other two selection criteria. After the third round, the team ended negotiations with Official Payments for several reasons. First, it could not commit to a deliverable for next-day settlement of transactions, which BOA currently provided to agencies. Second, some of its references confirmed that it had not implemented the number, level, and complexity of services required by the ITN. Third, it offered to provide only one representative in Tallahassee who only had one year of experience with e-Payments. Based on the weight of the credible evidence, the team reasonably decided to end negotiations with Official Payments consistent with the ITN and Florida law. The team continued negotiations with FIS and NIC. It met with both vendors, checked their references, and reviewed their pricing exercises. The team understood that FIS offered lower prices than NIC, but decided to end negotiations with FIS for the following reasons distinct from price: FIS had no contactless payments or IVR services currently available and the team remained concerned that it had never implemented these services before. Although FIS promised to make those services available later in 2020, the team preferred (and, based on the language of the ITN and its answers in the Q&A, believed that the ITN required) that vendors be able to provide the services on the date they signed the contract to ensure implementation could begin immediately and the transition run smoothly. The team had concerns about FIS’s ability to live up to its promises, as it twice delayed meetings during negotiations and its references noted a lack of responsiveness to issues and implementing new services. FIS only offered one representative in Tallahassee and, at that, only during the implementation period. PayIt argues that the team misunderstood how much cheaper FIS was than NIC and ignored merchant fees during the pricing exercise. The weight of the credible evidence showed otherwise. PayIt contends that the team misunderstood FIS’s price because a spreadsheet it utilized contained an error as to FIS’s fee per transaction, which rendered FIS’s costs lower than the team realized. However, the team already knew that FIS’s prices were generally lower than NIC’s and the testimony confirmed that the error had no effect on their decision. Indeed, the team utilized the spreadsheet merely as a tool. It also cannot be ignored that, although NIC charged higher fees per transaction, FIS charged fees for monthly maintenance and equipment replacement, and charged hourly fees for customization development, which NIC offered for free. More importantly, based on the weight of the credible evidence, the team reasonably chose to eliminate FIS from negotiations despite its lower price because it fell short on the other two selection criteria—demonstrated ability and experience to meet the requirements of the ITN—and the team acted within its discretion under the ITN and Florida law in doing so. The team continued negotiations with NIC and solicited a BAFO only from it because no other vendor was reasonably susceptible to an award. NIC submitted its BAFO in December 2019. Consistent with its initial response, NIC proposed adjustments to the limitation of liability term and removed the parent guarantee term, and it attached those changes in its proposed Standard Terms and Conditions, as the ITN required. Although NIC understood that it would be the single awardee, its proposed Standard Terms and Conditions included the original non-exclusivity provision, making it clear that DFS was not granting NIC an exclusive license to provide the e-Payment services at issue. The BAFO also included a pass-through plus pricing model, which NIC proposed back in July 2019 during the pricing exercise. This pricing model passed through banking and merchant fees, reduced its fees per transaction from its original proposal, and included a discounted fee for DOT transactions. These adjustments generated significant savings to the State as compared to what the State currently pays BOA, which is exactly why DFS encouraged vendors to propose creative pricing in the ITN and the Q&A. PayIt argues that the team irrationally ignored merchant fees associated with credit card transactions during the pricing exercise, which would be a pass-through cost to the State. However, the weight of the credible evidence showed otherwise. Unlike processing fees (charged by NIC) and interchange fees (charged by the credit card company), merchant fees are charged by the intermediary that provides security and tokenization for the credit card transaction. Although the sample invoices submitted by FIS, Official Payments, and NIC during the pricing exercise did not itemize merchant fees, the total cost shown on the invoices included those fees. Thus, the team understood how the merchant fees would impact the total cost to the State, even if they did not understand exactly what those fees were. More importantly, agencies have the option to pass through merchant fees to the customer through a convenience fee and many of them do just that. In fact, agencies charged approximately $8.3 million in convenience fees in 2017-2018. By passing those fees through to the customer, they are not costs borne by the State. Because it is up to the agency to choose whether to pass through such fees, it is impossible to determine whether and to what extent the State will be responsible for those fees and how much they would cost the State. The Best Value Determination The team reviewed NIC’s BAFO and determined that it represented the best value to the State. The weight of the credible evidence established the following justifications for that decision: NIC was the only vendor that could provide all of the required services and exceed them, including contactless payments, POS devices, IVR in 21 languages, and next-day settlement with midnight cut-off so payments would be disbursed to the agency within one business day. NIC had over 25 years of government experience with states as large as Florida and had the demonstrated ability to perform all services effectively and immediately. NIC owned a single proprietary platform designed specifically for government entities with over 200 configurable elements that agencies could tailor to their own individual needs. NIC proposed a dedicated four-person team in Tallahassee for the duration of the contract, which was important due to the number of agencies utilizing the contract and the number of moving parts. NIC had a detailed project management plan for implementing the services to the agencies and local governments. NIC offered value-added services exceeding those required by the ITN, such as free replacement of all POS devices, a yearly device allowance, a mobile platform, and payment through text messages, among others. Although the team understood that choosing NIC may be more expensive than FIS, it determined that it was willing to pay more for a better solution that exceeded all of the ITN’s requirements from a more established vendor. The team did not want Florida to be a test case and it had confidence that NIC was battle-ready on day one. Given the importance of this billion- dollar contract and the number of agencies involved, the weight of the credible evidence showed that the team reasonably made this determination. The team’s almost year-long effort culminated in a public meeting on January 3, 2020. At that point, the team had conducted over 30 negotiation sessions with vendors, many of which spanned an entire day, and held over 100 strategy sessions averaging around four to six hours each. At the meeting, Ms. Pelham reviewed the selection criteria and each team member voted in favor of NIC. Although the team members did not detail the reasons for their vote at the meeting, they had spent hundreds of hours meeting with vendors and strategizing about their capabilities, solutions, and pricing, and discussing these issues at length during the strategy sessions. It is true that the team was to arrive at its recommendation by “discussion” during a public meeting, but the ITN did not define that term or require a specific level of detail. In any event, the failure to provide such details during the meeting resulted in no prejudice to any other vendors, all of whom already had been reasonably eliminated from negotiations. After the meeting, Ms. Pelham drafted a memorandum recommending the award to NIC. The memorandum confirmed that NIC provided the best value to the State based on its price and the selection criteria. Although the memorandum did not provide a more detailed explanation, the ITN contained no such requirement. Instead, the ITN stated that the negotiation team would make an award recommendation after determining which vendor presented the best value in accordance with the selection criteria and that the CFO or his designee will make the final determination based on that recommendation. Mr. Fennell, the deputy CFO, was tasked with making the final decision. As the deputy CFO of a large agency, he must rely on the advice of the division directors, deputies, and bureau chiefs who oversee the day-to-day operations of the divisions within his purview; this procurement was no different. Based on his confidence in the team and Mr. Collins, who had been involved throughout the ITN process, participated in some of the strategy sessions, and provided high-level updates to Mr. Fennell about the progress of the procurement, Mr. Fennell approved the team’s recommendation. Based on the weight of the credible evidence, DFS did not contravene the ITN, let alone in a material or prejudicial way, through the process by which it recommended the award. The negotiation team followed the dictates of the ITN by holding the public meeting, at which the selection criteria were reviewed and the team voted for the recommended action, which was then set forth in the team’s memorandum. Mr. Fennell complied with the ITN by making a final decision based on the memorandum and the confidence he had in the negotiation team’s recommendation. On January 13, 2020, DFS issued its notice of intent to award the contract to NIC. Upon receipt thereof, PayIt timely filed its bid protest. Assuming that DFS and NIC are successful in this protest, they will execute the contract. Thereafter, DFS will create a contract file, place the contract in it, and confirm that it contains a short plain statement explaining the basis for the award, as required by section 287.057(1)(c)5., Florida Statutes. The contract itself is often sufficient to meet this requirement. Based on the weight of the credible evidence and the language of the statute, the undersigned finds that DFS has no obligation to create such a file or prepare the statutory statement until the contract is signed, which cannot occur until this protest is finally resolved.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services issue a final order dismissing PayIt, LLC’s Amended Formal Written Protest Petition. DONE AND ENTERED this 6th day of August, 2020, in Tallahassee, Leon County, Florida. S ANDREW D. MANKO 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 6th day of August, 2020. COPIES FURNISHED: Brittany B. Griffith, Esquire Department of Financial Services Office of the General Counsel 200 East Gaines Street, Room 612B Tallahassee, Florida 32399-0950 (eServed) James A. McKee, Esquire Foley & Lardner LLP 106 East College Avenue, Suite 900 Tallahassee, Florida 32301 (eServed) Eduardo S. Lombard, Esquire Radey Law Firm, P.A. 301 South Bronough Street, Suite 200 Tallahassee, Florida 32301 (eServed) Alexandra Akre, Esquire Ausley & McMullen, P.A. 123 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302 (eServed) Eugene Dylan Rivers, Esquire Ausley & McMullen, P.A. 123 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32301 (eServed) Erik Matthew Figlio, Esquire Ausley & McMullen, P.A. 123 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32301 (eServed) Mallory Neumann, Esquire Foley & Lardner LLP 106 East College Avenue, Suite 900 Tallahassee, Florida 32301 (eServed) Marion Drew Parker, Esquire Radey Law Firm, P.A. 301 South Bronough Street, Suite 200 Tallahassee, Florida 32301 (eServed) John A. Tucker, Esquire Foley & Lardner, LLP One Independent Drive, Suite 1300 Jacksonville, Florida 32202 (eServed) Julie Jones, CP, FRP, Agency Clerk Division of Legal Services Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 (eServed)
Findings Of Fact The Respondent issued an Invitation to Bid by which sought to lease approximately 21,000 net useable square feet of office space to be located in Tampa, Florida. This Invitation to Bid is referred to as Lease Number 590:1946. Three bids were received in response to the Invitation to Bid, and they were opened on July 29, 1988. Bids were received from the Petitioner, Structures, Inc., and a third bidder that has not filed a protest, and is therefore not relevant to this proceeding. All bidders were initially determined to be responsive to the Invitation to Bid. Petitioner and Structures, Inc., submitted bids involving the same office space and real property. Petitioners' bid for this space was lower that the bid filed by Structures, Inc., when compared on a present value rental cost analysis. Despite Petitioners' lower bid, Respondent awarded this lease to Structures, Inc., due to the receipt of a letter dated August 2, 1988, from Intervenor, the owner of the subject property, stating that, "Mr. Hartley (Petitioner) has no right to propose this property to the Department as Mr. Hartley and I have no agreements with respect to my leasing the property to him." On the basis of this letter, the Respondent concluded that Petitioners had no legal interest in the subject property and therefore did not have the requisite control over the property to submit this bid. The Petitioners' bid was determined to be nonresponsive. Petitioners did not present competent substantial evidence to discredit or refute Intervenor's contention that they lacked any legal interest in this property. It is undisputed that Intervenor owns the property, and Intervenor was present at the hearing to confirm that the letter of August 2, 1988, was, in fact, his letter. The Petitioner, James C. Hartley, was not present at the hearing. The only evidence presented by Petitioners of any alleged interest in this property is a copy of a telecopy letter dated June 29, 1988, filed with its bid, which purports to express the intention of Intervenor and Petitioner Hartley to enter into a lease for certain property described on an Exhibit A, which was not presented in evidence. Thus, there is no indication on the face of this document that the telecopy letter relates to the subject property. However, even if the letter does relate to the property owned by Intervenor, the agreement specifically states that Intervenor's obligation to enter into a lease with Petitioner is expressly conditioned upon Intervenor's approval, In his sole discretion, of any sublease with the Respondent. If for any reason the Intervenor disapproved of the Petitioners' bid and lease with the Respondent, according to this agreement, he could simply refuse to enter into any lease of the subject property with Petitioners, and thus, Petitioners would have no interest or control over the property, and could not then sublease it to the Respondent. Finally, there is no recital of consideration in the purported agreement set forth in the telecopy letter. Based upon a complete review of the evidence presented, it is found that Petitioners did not have a valid, legal interest in the subject property which would be sufficient to allow them to file this bid and propose this lease to the Respondent. As such, Petitioners' bid was unresponsive.
Recommendation Based upon the foregoing, it is recommended that Respondent enter a Final Order dismissing Petitioners' protest Lease Number 590:1946. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 3rd day of November, 1988. DONALD D. CONN 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 3rd day of November, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-4645BID Rulings on Petitioners' and Intervenor's Proposed Findings of Fact: Petitioners and Intervenor did not timely file a Proposed Recommended Order containing proposed findings of fact. Rulings on the Respondent' Proposed Finding of Fact: Adopted in Findings of Fact 1 and 2. Adopted in Finding of Fact 3. 3-5. Rejected as irrelevant and unnecessary. 6-8. Adopted in Finding of Fact 4. 9. Rejected in Finding of Fact 2, and as irrelevant. COPIES FURNISHED: Joseph D. McFarland, Esquire 520 Second Avenue, South St. Petersburg, Florida 33701 Robert L. Rocke, Esquire Post Office Box 3433 Tampa, Florida 33601 Jack Farley, Esquire W. T. Edwards facility 4000 West Buffalo Fifth Floor, Room 520 Tampa, Florida 33614 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
The Issue Did Respondent Department of Labor and Employment Security (Department) properly reject the response submitted to the Department's Request For Proposal No. RFP 96-033-VA, For Computer Hardware and Related Equipment Maintenance Including Operating Software (RFP) by Petitioner Knaus Systems, Inc. (Knaus)? Did the Department provide Knaus with a clear point of entry to challenge the Department's decision, and, if so, did Knaus timely file its notice of protest or formal written protest?
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: On January 29, 1996, the Department issued an RFP which requested a Vendor Technical Proposal (technical proposal) and a Vendor Cost Proposal (cost proposal). Knaus was on the Department's bidder's list and received a copy of the RFP around the end of January, 1996. Knaus is engaged in the business of selling and servicing computer hardware, and currently has nine contracts with the State of Florida in response to requests for proposals. As required by Rule 60A-1.002(9)(a), Florida Administrative Code, the original RFP contained the Department of Management Services' Form PUR 7033, revised 1/9/95, (cover sheet), which in pertinent part provides: PROPOSALS WILL BE OPENED 3:00 P.M., MARCH 19. 1996 and may not be withdrawn within 30 days after such date and time. POSTING OF PROPOSAL TABULATIONS Proposal tabulations with recommended awards will be posted for review by interested parties at the location where proposals were opened and will remain posted for a period of 72 hours. Failure to file a protest with- in the time prescribed in Section 120.53(5), Florida Statutes shall constitute a waiver of proceedings under Chapter 120, Florida Statutes. Posting will be on or about MARCH 21, 1996 In pertinent part, Sections 2 and 5 of the RFP provide: 2.1 RFP Submission Date Vendors shall submit their proposals on or before the date and time indicated in Section 5.9 and to the location indicated in Section 5.12 of this Request For Proposal. * * * 2.5 Addenda All addenda to this Request For Proposal will be in writing, with content and number of pages described, and sent to all Vendors known to be in receipt of this Request For Proposal. The Vendor must acknowledge receipt of all addenda in in writing and submit with the Proposal. * * * 5.1 Bid Evaluation and Award Proposals which do not meet the requirements specified in this Request for Proposal will not be considered for award. Please return your sealed bid response in the enclosed self-addressed envelope labeled: BID: RFP 96-033-VA TIME: 3:00 p.m. DATE: March 19, 1996 The Proposal number must be clearly marked on the outside of the vendors submittal. Failure to identify a Proposal in the above prescribed manner shall result in automatic disqualification of the Proposal. * * * 5.9 Calendar of Events Listed below are the important date and times by which actions noted must be taken or completed. If the Department finds it necessary to change any of these dates or times, the change will be accomplished by addendum. Date/Time Event February 13, 1996 Written Vendors Inquiries Due February 22, 1996 Pre-proposal Conference (Vendor attendance is mandatory) February 28, 1996 Addenda issued by Department March 19, 1996 Opening of Vendor 3:00 p.m Technical Proposals April 2, 1996 Opening of Vendor 10:30 a.m. Cost Proposals April 4, 1996 Posting of RFP Award * * * Responsiveness and Rejection of Proposals All proposals must be in writing. A responsive proposal is an offer to perform the scope of services called for in the Request For Proposal. A Proposal may be rejected if it fails to meet the general requirements and mandatory specifications as stated in this Request for Proposal. . . . Submission of Proposals Sealed proposals must be received by the Department of Labor and Employment Security at the address noted below, on or before the date and time shown in Section 5.9 "Calendar of Events". . . . * * * The vendor must submit both a technical proposal for evaluation and a cost proposal. Both proposals must be in a separate sealed envelope and clearly marked on the outside stating technical proposal or cost proposal Both proposals must be delivered as stated above. * * * Proposals, including amendments, may be mailed or hand-delivered, but in either case must be received no later than 3:00 P. M. on March 19, 1996. . . . NUMBER OF COPIES: 1 original and 5 copies for each category bid SUBMIT TO: Vonnie Allen -- DLES Computer Maintenance, Department of Labor and Employment Security, 2012 Capitol Circle S.E. 104 Hartman Building, Tallahassee, Florida 32399-2169 DEADLINE: March 19, 1996 at 3:00 p.m * * * 5.16 Posting of Recommended Award Proposal tabulation with recommended award will be posted for review by interested parties at the Department's Office of Purchasing on or about the date noted on the cover sheet of this RFP, and will remain posted for a period of seventy-two (72) hours, not including weekends or holidays. [Emphasis supplied] In accordance with the initial RFP, the technical and cost proposals were to be submitted in separate sealed envelopes within a single envelope to the Department on or before 3:00 p.m. on March 19, 1996, which was also the date for opening the technical proposals. All vendors, including Knaus, understood that for their response to the RFP to be timely both the technical proposal and the cost proposal had be received by the Department on or before 3:00 p.m. on March 19, 1996, the time and date scheduled for opening the technical proposals set out in Section 5.9. The date (March 21, 1996) shown on the cover sheet of the RFP for posting proposal tabulations with recommended awards is different from the date (April 4, 1996) shown in Section 5.9 of the RFP for posting RFP award. It is unclear whether these are two separate events requiring separate dates or a conflict as to the posting date. In accordance with the terms of the RFP, the Department conducted a mandatory Pre-proposal Conference on February 22, 1996. Knaus was represented at this conference. Questions raised by Knaus and other vendors at this conference necessitated an amendment to the RFP. On March 13, 1996, the Department issued Addendum [No.] 1 to the RFP, a copy of which was received by Knaus. In pertinent part, Addendum [No.] 1 provides: March 13, 1996 Addendum: [No.] 1 Bid: [No.] 96-033-VA Opening Date/time: March 19, 1996, changed (Technical) to April 2, 1996 April 2, 1996 changed to April 16, 1996 (Cost) Dear Sir or Madam: The subject Request for Proposal is hereby amended as follows: * * * 5.1, 5.9, 5.12 RFP Technical Opening is to be changed from 3:00 p.m. on March 19, 1996 to 3:00 p.m. on April 2, 1996. The Cost Opening is to be changed from 10:30 a.m. April 2, 1996 to 10:30 a.m. April l6, 1996. Addendum [No.] 1 did not amend or delete the requirement of the RFP that the technical and cost proposals be sealed in separate envelopes and both envelopes to be placed in the self-addressed envelope furnished with the RFP and submitted to the Department. All vendors, other than Knaus, relying only on the RFP and Addendum [No.] 1 concluded that both the technical and cost proposal were to be submitted on or before the opening of the technical proposal and therefore, submitted their technical and cost proposals on or before 3:00 p.m. on April 2, 1996. None of the vendors, including Knaus, submitted their response to the RFP on or before March 19, 1996, the original submittal date for responses and the original opening date for technical proposals. The Department received Knaus' technical proposal on April 1, 1996, and Knaus' cost proposal on April 5, 1996. On April 11, 1996, Vonnie Allen, the Department's Purchasing Specialist, telephoned Anthony J. Knaus, President and Chief Executive Officer for Knaus, to advise him that the Knaus proposal was non-responsive because the Department had not received both the technical and cost proposal before the opening of the technical proposals at 3:00 p.m. on April 2, 1996. During this telephone conversation, Anthony Knaus expressed his understanding of Addendum [No.] 1 as not requiring receipt of the cost proposal by the Department before the opening of the technical proposal at 3:00 p.m. on April 2, 1996. After his conversation with Vonnie Allen on April 11, 1996, Anthony Knaus wrote Allen a letter advising her that based on Addendum [No.] 1 that Knaus intended to file a protest in regards to the RFP. On April 15, 1996, Anthony Knaus again wrote Allen a letter in regards to the April 11, 1996, telephone conversation advising Allen that he had not received written notification from the Department of Knaus' noncompliance with the RFP but that Knaus would proceed with the protest. The letter further advised Allen that Knaus intended to file a formal protest. On April 19, 1996, Barbara Chance, Purchasing Director for the Department, wrote Knaus a letter advising Knaus that its response to the RFP was non-responsive due to the cost proposal not being submitted as stated in the RFP, and returning Knaus' certified check that had been submitted with its proposal. No further explanation of the basis for this determination was included in the letter. Likewise, there was no notice of Knaus' right to challenge the Department's determination as required by Section 120.53(5)(b), Florida Statutes, and Rule 60A-1.001(7) and (8), Florida Administrative Code. On April 23, 1996, the Department issued what is titled "NOTIFICATION [No.] 2" concerning Cost Opening Date which advised Responsive Vendors that the cost opening had been moved to 9:00 a.m. on April 24, 1996, and such opening was to be held at the Hartman Building, 2012 Capital Circle, Southeast. The letter further advised the Responsive Vendors that posting of the intended award would be "approximately Thursday, April 25, 1996 at 9:00 a.m.". Since the Department did not consider Knaus a responsive vendor, Knaus did not receive a copy of "NOTIFICATION [No.] 2". Knaus was never advised by the Department of the change in dates for the posting of intended award prior to or during the time of posting. On April 25, 1996, Dennis H. McVeen, General Manager for Knaus, wrote the Department's General Counsel concerning Barbara Chance's letter of April 19, 1996, and requested that Knaus be advised of the exact deadline for filing its protest. The Department never responded to this letter. The Department did not respond to any of Knaus' letters, and has yet to advise Knaus of its right to contest the Department's determination that because Knaus' cost proposal was not received by the Department on or before the opening of the technical proposal at 3:00 p.m. on April 2, 1996, Knaus' response to the RFP was non-responsive . On April 25, 1996, the Department posted the bid tabulations for the RFP, which, in pertinent part, states: "FAILURE TO FILE A PROTEST WITHIN THE TIME PRESCRIBED IN SECTION 120.53(5). FLORIDA STATUTES, SHALL CONSTITUTE A WAIVER OF PROCEEDINGS UNDER CHAPTER 120, FLORIDA STATUTES." The Bid Tabulation indicated a Posting Time/Date from 8:00, 4/25 until 8:00, 4/30. The Bid Tabulation does not indicate whether 8:00 was a.m. or p.m. However, Allen testified that it was intended to be a.m. Knaus was listed on the Bid Tabulation as to "Technical only" and was shown as NR or non-responsive. The Department has not fully evaluated Knaus' response to the RFP. Knaus obtained a copy of the Bid Tabulation sometime after 8:00 a.m. on April 30, 1996, which was after the time for posting. Obtaining a copy of the Bid Tabulation was the result of Knaus' own efforts and cannot be attributed to any efforts on the part of the Department. Knaus filed its Petition For Administrative Proceedings, Notice of Protest and Formal Written Protest on May 13, 1996, with the Department. Knaus did not file a Notice of Intent to Protest or Formal Protest addressed to the specifications contained in the RFP or Addendum [No.] 1. There was no evidence that Knaus gained any advantage by submitting the cost proposal after the technical proposals were opened. There is sufficient evidence to establish facts to show that Knaus knew or should have known that the RFP as amended by Addendum [No.] 1 required that both the technical and cost proposal be submitted together on or before April 2, 1996.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law it is recommended that the Department of Labor and Employment Security enter a final order that Knaus' failure to timely submit its cost proposal was a minor irregularity and is waived, and directing staff to reevaluate all responses, including Knaus', under the RFP, as amended. RECOMMENDED this 24th day of July, 1996, at Tallahassee, Florida. WILLIAM R. CAVE, 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 24th day of July, 1996. APPENDIX TO RECOMMENDED ORDER CASE NO. 96-2365BID The following constitutes my specific rulings, pursuant to Section 120.59(2), Florida Statutes, on all of the proposed findings of fact submitted by the parties in this case. Knaus' Proposed Findings of Fact. Proposed findings of fact 1 through 37, 44, 45 and 47 are adopted in substance as modified in Findings of Fact 1 through 25. Proposed findings of fact 38 through 43 go to the weight of the testimony of witness and are not considered as proposed findings of fact. Proposed finding of fact 46 is neither material nor relevant. Proposed finding of fact 48 is covered in the Preliminary Statement. Department's Proposed Findings of Fact. 1 Proposed findings of fact 1 through 14 and 16 through 21 are adopted in substance as modified in Findings of Fact 1 through 25. 2. Proposed finding of fact 15 is neither material nor relevant. COPIES FURNISHED: Douglas L. Jamerson, Secretary Department of Labor and Employment Security Suite 303, Hartman Building 2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152 Edward A. Dion, General Counsel Department of Labor and Employment Security Suite 307, Hartman Building 2012 Capital Circle, Southeast Tallahassee, Florida 32399-2152 Daniel H. Thompson, Esquire Berger and Davis, P.A. 215 South Monroe Street, Suite 804 Tallahassee, Florida 32301
The Issue The Issue in this case is whether the subject bid protest should be sustained.
Findings Of Fact On January 22, 1991, Respondent issued Specifications for Replacement of Air Conditioning, Apopka School, Apopka, Florida. The specifications were contained in a spiral-bound book, which contained bidding and contract requirements and technical descriptions of mechanical systems and electrical systems. A set of drawings dated January 22, 1991, accompanied the spiral-bound book. Collectively, these documents constitute the invitation to bid (ITB). 1/ The ITB announced that Respondent would receive bids for the replacement of air conditioning and related systems until February 11, 1991, which evidently was later extended to February 19. The ITB scheduled a pre-bid conference on January 31, 1991. Section A-3.6 of the ITB provides: For clarity of description and as a of comparison, certain equipment, materials, etc., have been specified by trade names or manufacturers. To insure a uniform basis for bidding, the Bidder shall base his Proposal on the particular system, equipment or material specified. After the contract is let, other equipment, materials, etc., as manufactured by other manufacturers may be accepted only if, in the opinion of the Engineer, same is equivalent in quality and workmanship and will perform satisfactorily in its intended purpose. Section A-3.8 of the ITB states: Except as provided in Paragraph A3.(3, above each bidder represents that his bid is based upon the materials and equipment described in the [ITB]. Prior approval of substitution of other materials and equipment will be considered if written request is submitted to the Engineer for approval at least twelve days prior to the date for receipt of bids. If the Engineer approves any such proposed substitution, such approval will be set forth in an Addendum and will be forwarded to all bidders . . .. If any bidder is unable to procure written approval of any substitution from the Engineer prior to the opening of bids, he shall base his bid on the Exact items specified; if said bidder wishes to bid substitutes, he must then do so as alternates to the base bid, and so note. Each such alternate submitted shall include a complete description of the proposed substitute, the material or equipment for which it is to be substituted, drawings, cut sheets, performance or test data other data or information necessary for a complete evaluation. If additional information is required by the engineer for a complete evaluation, in his sole judgment, the Contractor shall submit such additional information as required within five (5) days of such notification, or the Alternate will not be considered. Alternates requested on the Bid Proposal Form which are approved for construction will be incorporated into the contract with the successful bidder. Alternates offered by the Bidder may be accepted and incorporated into the contract with the successful bidder. Any Substitutions which are felt by the Bidder to offer significant additional value and advantage to the Owner are encouraged to be submitted as Alternates with the Bid Proposals. Section A-14.1 contains the bid form. The first blanks are reserved for the Base Bid. Alternate #1 is for the installation of a variable air volume system, which permits localized control of air flow and temperature. Alternate #2 is for reciprocating chillers. The remaining alternates are irrelevant to this case. The bid form states that Respondent may "award such alternates that in its judgment will be for the best interest of [Respondent]." Section 1.01 of the General Requirements, which are part of the ITB, describe the work of the contract as Installing "nominal 200 ton air cooled reciprocating chillers" and related equipment. Section 1.03 A. of the Basic Mechanical Requirements, which are part of the ITB, states that the "plans and specifications are a general description of the work to be performed." Sections 2.01 under "Pumps" and "Motor," which are parts of the ITB, list several "acceptable manufactuiers" for pumps and motors. Elsewhere the ITB also lists varibus acceptable manufacturers for different types of equipment. Sometimes, as in the case of motors, the specifications describing the particular item of equipment expressly allow substitutions upon "prior approval of required submittal data by Engineer." Sometimes, as in the case of pumps, the specifications describing the particular item of eguipment are silent as to substitutes. Section 2.01 of Air Cooled Water Chillers, which is part of the ITB, describes "acceptable manufacturers" as follows: Base Bid: Bohn Heat Transfer/Wickes Manufacturing Co., air cooled screw chilled. Alternate Bid: Carrier Corp, air cooled reciprocating chiller. Other Alternates: Only as approved by Engineer. Section 2.02 B. requires that the contractor provide "three (3) nominal 200 ton air cooled water chillers" meeting certain technical specifications not relevant to this case. Section 2.03 A. sets forth requirements for reciprocating chillers, and Section 2.03 B. sets forth requirements for screw chillers. On page M-8 of the drawings included in the ITB, the "air cooled chiller schedule" notes "Bohn" as the manufacturer and provides a model number for the Bohn chiller. The schedule states that the cooling capacity of the chiller is 194.7 tons. The cooling capacity stated in the schedule was intended to describe the cooling capacity of the Bohn model air chiller noted in the schedule. The capacity of a chiller depends upon various factors, including ambient air temperature. Under certain operating conditions, the Bohn chiller noted IA the schedule operates at a 200 ton capacity, and no evidence suggests that this model chiller was not a nominal 200 ton chiller. General Note 13 on page M-7 of the drawings states: This contractor shall base his proposal upon the equipment as scheduled or specified, using the manufacturers and model numbers as called for in the specification and scheduled on the drawings. (Add alternate design is separate). If more than one manufacturer of equipment is specified, any one of the manufacturers of equipment may be used in this contractor's proposal. If this contractor wishes to use equipment not specified he must, at the time of bidding, submit separately on letterhead stationery of the bidder, the equipment he would substitute and the cost to be added or deducted from his proposal. On February 11, 1991, Respondent issued Addendum #2 to the ITB. 2/ Among other things, Addendum #2 adds to Section 2.01 A. of Air Cooled Water Chillers: "ADD Trane Co. Model No. RTAA-200 as an approved Base Bid unit for the air cooled screw chillers. Petitioner picked up the ITB on February 18, 1991. Petitioner and Intervenor submitted timely bids by the deadline of February 19. Each bidder was qualified and each bid was responsive. 3/ Petitioner's base bid was $1,539,000. Alternate #1, which was the variable air volume system, added $120,307. Alternate #2, which was the reciprocating chiller, subtracted $41,424. Next to Alternate #2 on the form, Petitioner wrote in, "Carrier." With Alternate #1 only, Petitioner's bid was $1,659,307. Alternate #1 and 2 were $1,617,883. With Alternate #2 only, Petitioner's bid was $1,497,576. Intervenor's base bid was $1,547,300. Alternate #1 added $109,000. Alternate #2 subtracted $25,000. With Alternate #1 only, Intervenor's bid was $1,656,300. Alternate - 1 and 2 were $1,631,300. With Alternate #2 only, Intervenor's bid was $1,522,300. Following review of the bids, Respondent's Engineer sent a letter dated February 25, 1991, to Respondent's director of construction. The letter recommends the acceptance of Alternate #1 because the cost is within Respondent's budget and the benefit of increased comfort is worth the cost. The Engineer's letter also recommends that Alternate #2 (as well as Alternate #3 regarding a certain type of dampers) be rejected. The letter explains: "Discussions with [Respondent's] personnel in the days prior to bid time indicate that the use of these chillers has liabilities attached (principally noise and maintenance requirements) in excess of the savings in first cost. The Engineer's letter concludes that Respondent should award the contract to Intervenor because of its apparent low bid of $1,656,300 on the Base Bid with Alternate #1. The Engineer notes that the award would result in the installation of an "essentially identical system" as that installed in another high school in the district, which would save costs in training and parts inventory. Following Respondent's decision to award the contract to Intervenor, Petitioner timely filed a written protest and formal written protest concerning Respondent's intended decision to award the contract to Intervenor. Although the record is not entirely clear, it does not appear that Petitioner filed, within three days of receipt of the ITB, a written protest of the specifications. A chiller cools water used for air conditioning. An important part of the chiller is the compressor. The reciprocating compressor operates with pistons in a back-and- forth movement. The screw compressor operates with a screw that churns continually in one direction. Reciprocating compressors, which are the older technology, contain more components, including motors, than the screw compressors, which have been available for abort ten years. The life expectancy of the screw compressor is about three to four years longer than that of the reciprocating compressor. Evidently, little data are yet available comparing the life cycle costs of the reciprocating and screw air chillers. Given the mechanical actions and numbers of parts of the compressors, as well as Respondent's experience with, screw compressors, Respondent's projection of lower costs with the screw chiller is not unreasonable. Respondent included the reciprocating chiller alternate in the ITB because of concerns that the project would cost more than Respondent had available to spend. The same motivation prompted the inclusion of Alternate #1 for the variable air volume system. Once the bids were received, Respondent determined that it could afford the enhancements of a screw chiller and variable air volume system and consequently selected the lowest bid for this package.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Orange County School Board enter a final order dismissing the bid protest of Lake Plumbing, Inc. ENTERED this 5th day of July, 1991, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of July, 1991.
