Findings Of Fact Petitioner, Golfcrest Nursing Home (Golfcrest), is a properly licensed 67-bed nursing home located in Broward County, Florida. Respondent, the Department of Health and Rehabilitative Services (HRS), was the state agency responsible for administration and implementation of the Florida Medicaid Program. Those responsibilities have been transferred to the Agency For Health Care Administration. Golfcrest participates in the Florida Medicaid Program and provides inpatient nursing home services to Medicaid eligible persons. Golfcrest is entitled to reimbursement in accordance with the Florida Title XIX Long-Term Care Reimbursement Plan (Plan) which has been adopted and incorporated by reference in Rule 10C-7.0482, Florida Administrative Code. The Plan contains provisions which authorize a nursing home participating in the Medicaid Program to request an interim change in its Medicaid reimbursement rate when it incurs property related costs which would change its reimbursement rate by one percent (1 percent) or when it incurs costs resulting from patient care or operating changes made to comply with existing state regulations, and said costs are at least $5,000 or one percent (1 percent) of its reimbursement rate. In 1980 Americare Corporation (Americare) purchased Golfcrest. In 1983 or 1984, Americare did some cosmetic renovations at Golfcrest. Portions of the facility are 45 years old. Americare contracted with Diversicare Management Services to manage the operations of Golfcrest. In 1988-1989, Joann Verbanic, a regional vice- president for Diversicare Management Services, recommended to the Board of Directors of Americare that major renovations to the Golfcrest facility be done. On March 19, 1990, Americare sent a team to Golfcrest to survey the facility for needed renovations. Later a plan was presented to Americare's Board of Directors and permission was given to proceed with a major renovation. In May of 1990 and July of 1991, HRS conducted its annual licensure surveys at Golfcrest. As a result, HRS identified several licensure deficiencies. Correction of these deficiencies was mandated by HRS. Failure to correct these deficiencies would have resulted in sanctions against Golfcrest's nursing home license, including administrative fines, a reduction in licensure rating, other civil penalties, and a reduction in Medicaid reimbursement. In order to correct the licensure deficiencies, Golfcrest incurred substantial property costs and costs due to patient care and operating changes. By letter dated January 6, 1992, Golfcrest submitted to HRS a request for an interim rate increase for patient care costs, operating costs, and property costs incurred or to be incurred to comply with existing state regulations and to correct identified licensure deficiencies. By letter dated April 14, 1992, Golfcrest provided additional information which had been requested by HRS. Golfcrest requested that the following costs be included in the calculation of its interim rate: Operating Costs Office Furniture $ 896.45 3 Laundry Carts 696.31 Office Door 125.00 Light Fixtures 1,067.30 Laundry Table 482.00 Structural Repairs 100.00 Repairs for Boiler 390.00 42 Overhead Lights 11,861.07 Patient Care Costs 57 Hi-Lo Beds 19,301.40 Blinds 5,145.02 Dining Room Furniture 3,167.70 Lobby Furniture 2,500.00 Bedspreads 3,404.78 Valances 3,472.05 Cubicle Curtains, Tracks 9,579.51 Activity Furniture 1,000.00 Property Costs Bldg. Imp. Depreciation 16,356.00 HRS denied in part and granted in part, Golfcrest's interim rate request by letter dated June 15, 1992, as revised by letter dated July 1, 1992. HRS granted the patient care costs for the 57 Hi-Lo beds and for the cubicle curtain and tracks and the property costs for the building improvement depreciation. In its proposed recommended order, Golfcrest withdrew its request for costs of the boiler leak, the lobby furniture, folding table for the laundry, and structural repairs. Golfcrest incurred the costs for which the interim rate is requested. Golfcrest requested that the purchase of office furniture be accepted as an allowable cost. Golfcrest did not specify what office furniture was purchased nor did it adequately relate such a purchase to a cited deficiency in either the 1990 or the 1991 survey. Additionally, Golfcrest did not establish that the cost of the office furniture was what a prudent and cost-conscious buyer would pay for office furniture. In the 1990 survey report, Golfcrest was cited for having linen stored on dressers in residents' rooms. There was insufficient space to store the linen in the laundry area so Golfcrest purchased three laundry carts to store the linens in the hallways. The purchase of the laundry carts was necessary to correct the deficiency cited in the 1990 survey. However, no evidence was presented to establish that the amount paid for the laundry carts was what a prudent and cost-conscious buyer would pay for the item. In the 1991 survey, Golfcrest was cited for having exit doors with screens missing and broken jalousie slats; therefore, it did not meet the requirement that the facility must provide housekeeping and maintenance services necessary to maintain an orderly and comfortable interior. Golfcrest relies on this cited deficiency to support its claim for the cost of replacing a new office door. Golfcrest's reliance is misplaced. The deficiency is the failure to perform ordinary maintenance services. The replacement of the office door is not necessary to comply with the cited licensure requirements. Golfcrest stated in its plan of correction that it would repair the cited doors by replacing the screens. Additionally, Golfcrest did not establish that the cost of the door was what a prudent and cost-conscious buyer would pay for the door. Rule 10D-29.121(7)(d), Florida Administrative Code, required that renovations to restore a nonconforming building to its condition previous to deterioration must minimally meet standards for a new facility. The unrebutted testimony was that termites had damaged the wall studs and the walls had to be torn out and replaced. In order to meet the required NFPA standards and building code requirements for lumens and wiring, it was necessary to replace 42 overbed lights and 14 light fixtures for 3-bed wards. The purchase of this lighting was necessary to correct deficiencies that would result if the old lighting were retained after the renovations. However, no evidence was presented that would establish that the cost of the lighting fixtures was what a prudent and cost-conscious buyer would pay for the lighting. In the 1990 survey report, Golfcrest was cited for having broken venetian blinds in rooms 6 and 33. Golfcrest stated in its plan of correction that "broken blinds are repaired/replaced as needed." Golfcrest requested that in its interim rate request that $5,145.02 be considered an allowable cost for the replacement of blinds. Although there was a deficiency noted concerning broken venetian blinds, Golfcrest did not establish that the cost for the blinds was what a prudent and cost-conscious buyer would pay for the blinds. In the 1991 survey, Golfcrest was cited for not being adequately furnished in the dining areas and not having sufficient space to accommodate all activities. In order to provide more space in the dining areas, Golfcrest purchased ten collapsible dining tables which could be easily removed to provide more space for large group activities in the dining room. The purchase of the dining tables was necessary to correct the deficiency of inadequate space, however, Golfcrest did not establish that the cost of the dining tables did not exceed the level of what a prudent and cost-conscious buyer would pay for dining tables. Golfcrest purchased 67 dining room chairs. However, Golfcrest did not establish how the purchase of the dining room chairs corrected the cited deficiency and did not establish that the cost of the dining room chairs was what a prudent and cost-conscious buyer would pay for dining room chairs. In the 1991 survey report, Golfcrest was cited for not providing clean beds. As an example of this deficiency, the survey listed torn blankets, threadbare sheets, pillow cases and towels and sunrotted sheets. Golfcrest purchased 104 bedspreads to replace all the bedspreads in the facility and to maintain an inventory of bedspreads to be used while bedspreads was being laundered. The purchase of the bedspreads were related to a cited deficiency, but Golfcrest did not establish that the cost of the bedspreads was what a prudent and cost-conscious buyer would pay for the bedspreads. Golfcrest requested that the purchase of valances be considered an allowable cost in its interim rate request. In its proposed recommended order, Golfcrest relied on the deficiencies cited in the 1991 survey report relating to the life safety survey dealing with privacy curtains which did not have netting at the top for support of its request for the valances. Golfcrest did not establish that the valances purchased were part of the cited privacy curtains. Given the fact that Golfcrest's request for replacement of cubicle curtains and tracks, was a separate request from the valances, it is reasonable to infer that the valances did not relate to the licensure requirement relied upon by Golfcrest. Additionally, Golfcrest did not establish that the cost of the valances was what a prudent and cost-conscious buyer would pay for valances. Golfcrest requested that the purchase of furniture for the activities area be considered an allowable cost in the calculation of its interim rate. Golfcrest did not establish what furniture was purchased for the activity area; thus, it did not establish how the purchase of the furniture was necessary to correct the deficiency that Golfcrest did not provide sufficient space and equipment and did not adequately furnish recreation and program areas to enable staff to provide residents with needed services as required. Additionally, Golfcrest did not establish that the cost of the furnishings for the activity room was what a prudent and cost-conscious buyer would pay for the furnishings. In its January 6, 1992 letter requesting an interim rate request, Golfcrest used 22,676 patient days to calculate the per diem rate for property costs. This number was taken from the July 31, 1990 cost report. HRS used 23,010 patient days to calculate the per diem rate. This number was taken from the last cost report dated July 31, 1991 and is the appropriate number to use in calculating the interim rate. The total per diem reimbursement rate for Golfcrest which was in effect at the time of the interim rate request was $71.2565. The per diem reimbursement for the property component is not one percent or more of Golfcrest's total per diem reimbursement rate.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered by the Agency for Health Care Administration as successor in interest for the Department of Health and Rehabilitative Services determining the interim rate for Golfcrest to be $1.2551. DONE AND ENTERED this 3rd day of August, 1994, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND 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 3rd day of August, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-847 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact Paragraphs 1-6: Accepted. Paragraph 7-9: Accepted in substance. Paragraph 10: Rejected as unnecessary detail. Paragraph 11-16: Accepted in substance. Paragraphs 17-19: Rejected as subordinate to the facts actually found. Paragraph 20: Accepted in substance. Paragraph 21: Rejected as constituting a conclusion of law. Paragraph 22: Accepted in substance. HRS had allowed the cost of the Hi-Lo beds, thus, those costs were not in dispute. Paragraph 23: Accepted in substance as to the blinds but not as to the shades and shower curtains. The shades and shower curtains were not part of the interim rate request, thus whether they were necessary to correct a deficiency is not addressed in this Recommended Order. Paragraph 24: Accepted in substance as it relates to the dining tables but not as to the dining chairs. Paragraph 25: Accepted in substance. Paragraph 26: Accepted in substance as it relates to the cubicle curtains and tracks but not as it relates to the valances. The cubicle curtains and tracks were allowed by HRS as a cost and thus was not in dispute. Paragraphs 27-28: Accepted in substance. Paragraph 29: Rejected as not supported by the greater weight of the evidence. Paragraph 30: Accepted in substance. Paragraph 31: Rejected as not supported by the greater weight of the evidence. Paragraphs 32 and 33: Accepted in substance. Paragraph 34: The first two sentences are accepted in substance. The third, fifth, sixth and seventh sentences are rejected as constituting conclusions of law. The fourth sentence is accepted. Paragraphs 35-36: Rejected as not supported by the greater weight of the evidence. Paragraph 37: The first sentence is accepted. The second sentence is rejected as not supported by the greater weight of the evidence. Paragraph 38: Rejected as subordinate to the facts actually found. Paragraph 39: With exception of the last sentence the paragraph is rejected as unnecessary detail. The last sentence is rejected as constituting a conclusion of law. Respondent's Proposed Findings of Fact. Paragraph 1: Accepted in substance. Paragraphs 2-9: Accepted. Paragraph 10-11: Accepted in substance. Paragraph 12-22: Rejected as unnecessary detail. Paragraphs 23-28: Accepted in substance except in paragraph 24 the reference to floor coverings should be to light fixtures. Paragraph 29: Rejected as not supported by the greater weight of the evidence. Paragraph 30: Accepted in substance. Paragraph 31-33: Rejected as subordinate to the facts actually found. Paragraph 34: Accepted in substance. Paragraph 35: Rejected as subordinate to the facts actually found. Paragraphs 36-39: Accepted in substance. COPIES FURNISHED: Alfred W. Clark, Esquire 117 South Gadsden, Suite 201 Tallahassee, Florida 32301 Karel Baarslag, Esquire HRS Medicaid Office 1317 Winewood Boulevard Building Six, Room 233 Tallahassee, Florida 32399-0700 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Esquire Agency For Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
The Issue The issues are whether any Petitioner has proved by clear and convincing evidence that he timely submitted a request to purchase "Additional Accrual Service" (AAS) credit to the Board of Trustees (Board) of the City of Hallandale Beach Police Officers' and Firefighters' Pension Plan (Plan) in writing or at a public meeting and whether the Board prohibited such Petitioner from purchasing the requested AAS credit.
Findings Of Fact At all material times, Respondent has maintained city police and fire departments.3 Respondent sponsors the Plan to provide defined benefits, mostly on retirement, to members of the Plan, who are current and former city police officers and firefighters. Respondent primarily documents the Plan in ordinances that it enacts from time to time--as relevant in this case, in 2008 and 2011.4 Changes to the Plan may result from negotiations between Respondent and the police and firefighters unions, and the collective bargaining agreement may document the new provision until it is enacted by ordinance. The relevant agreement is the Collective Bargaining Agreement between Respondent and the Hallandale Beach Professional Fire Fighters Metro Broward Local 3080 District 10 for October 1, 2005 through September 30, 2008, as executed on October 3, 2006 (CBA).5 The Plan and the funds associated with the Plan are "under the exclusive administration and management" of the Board.6 The "responsibility for the proper effective operation of the … Plan and for making[7] the provisions of this Ordinance is vested in [the] Board."8 The 3 Subsequent to the timeframe at issue, the city fire department merged with the Broward County fire department. 4 For most of the time in question, the relevant Plan was documented in City of Hallandale Beach Ord. Nos. 2008-29 and 2011-11. Provisions material to this case were unchanged in the 2011 ordinance. References to the "Plan" are to the 2011 ordinance due to its superior formatting and ease of use. All references to "section" or "§," such as "section 8.08," are to the Plan, as codified by the ordinance, unless the reference is to Florida Statutes. 5 Presumably, Respondent negotiated identical language in the collective bargaining agreement with the police union, but this contract is not part of the record. 6 § 2.01. 7 "Making" probably means "implementing," because Respondent, not the Board, "makes" or enacts ordinances. 8 § 3.01. Board consists of one trustee elected by the police, one trustee elected by the firefighters, two trustees appointed by Respondent, and a fifth trustee, who is selected by the other four trustees and appointed by Respondent.9 The Plan authorizes the Board "to take such action as may be necessary to carry out the provisions of the Plan and all decisions of the Board … , made in good faith, … shall be final, binding and conclusive on all parties."10 The Board may "establish and maintain communication with [Respondent's] departments and other agencies of government as is necessary for the management of the … Plan," but the Board must "determine all questions relating to and process all applications for … benefits."11 However, "[i]f an action of the Board has an impact on [Respondent's] contribution the action must be approved by the City Commission. [Respondent] retains the right to obtain independent actuarial services to determine financial impact." Despite this exception to the Board's administrative authority, only the Board, not Respondent, is a fiduciary of the Plan, so as to be subject to the obligation "to discharge its responsibilities solely in the interest of the members and beneficiaries of the Plan for the exclusive purpose of providing benefits to the members and their beneficiaries and to defray the reasonable expenses of the Plan."12 As authorized by the Plan,13 the Board retained, at all material times, the services of independent counsel, actuarial firms, and pension services 9 § 3.02. See also §§ 175.061(1)(b)2.; 185.05(1)(b)2., Fla. Stat. Chapter 175 applies to a city pension plan for firefighters, and chapter 185 applies to a city pension plan for police officers. 10 § 3.09. 11 § 3.11(f) and (g). 12 § 3.10. This section continues: "The [Board] shall exercise those fiduciary responsibilities with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a similar character and with similar aims." 13 § 3.12. companies to assist in the administration of the Plan. Board counsel and a representative of the pension services company routinely attended Board meetings. The Plan's primary retirement benefit, which is payable for the remaining life of the member, but not less than ten years,14 is based on a formula that, for a vested member,15 multiplies the member's final average compensation by the member's credited years of service by the applicable annual accrual rate, which is typically 3.2%.16 For instance, the lifetime benefit payable to a member earning annual compensation of $50,000 with 20 years of service at an accrual rate of 3.2% would be $32,000 annually or $2667 monthly.17 The Plan's funding is more complicated and requires the services of an actuary to calculate the assets and liabilities of the Plan, which are held by a trust.18 For a fully funded plan providing a defined benefit, the assets--the 14 § 6.04. 15 The vesting period for the Plan is generally ten years. §§ 1.31, 1.32, and 8.01. 16 § 6.02. 17 The annual benefit is the product of $50,000 x 20 x .032. 18 For an excellent discussion of the responsibilities of an actuary in determining the proper funding of a pension plan, see Vinson & Elkins v. Comm'r of Int. Rev., 99 T.C. 9, 15-16 (1992), which cites the following legislative history concerning the treatment of actuaries in The Employee Retirement Income Security Act of 1974: In estimating pension costs, actuaries must make assumptions (“actuarial assumptions”) about a number of future events, such as the rate of return on investments (“interest”), employees' future earnings, and employee mortality and turnover. Actuaries also must choose from a number of methods to calculate future plan liabilities. The amounts required to fund any given pension plan can vary significantly according to the mix of these actuarial assumptions and methods. As a result, the assumptions and methods used by actuaries are basic to the application of minimum funding standards for defined benefit pension plans. [citations omitted] contributions of the plan sponsor; the contributions of members; for a local pension plan for police officers and firefighters, the plan's share of state excise taxes that are imposed on insurers19 or local excise taxes that may be imposed on local insurance premiums;20 forfeitures, usually of the sponsor's contributions on behalf of members whose service terminated prior to vesting;21 and the expected investment returns on these contributions and forfeitures, from receipt until payout--will provide adequate funds for the plan's trust to pay all liabilities, or benefits, when due. The benefits include projections and estimates of how many members will become vested; the retirement benefits due based on the members' final compensation levels, years of service, and form of benefit--disability, early retirement, normal retirement, and enhanced retirement benefits, such as from additional accrual rate or additional years of service; and the remaining life expectancies of members when they start receiving retirement benefits.22 19 §§ 175.1215 and 185.105, Fla. Stat. 20 §§ 175.101 and 185.08, Fla. Stat. 21 The Plan seems to preclude a forfeiture of the sponsor's contributions on behalf of even an unvested member. Section 8.03 provides that "[e]very member shall have the right to receive, in lieu of all benefits under the plan, a return of the member's accumulated contributions." If the member terminates with less than five years' service, the member is entitled "to a return of the contributions" without interest. If the member terminates with more than five years' service and elects a lump-sum "return of contributions," the member receives interest. Section 1.01 defines "accumulated contributions" as "the sum of all amounts deducted from a member's compensation or picked up on behalf of a member." Section 4.01 states that Respondent "shall pick-up, rather than deduct from each member's pay," specified percentages of pensionable earnings, so the pick-up amount appears to be Respondent's contribution on behalf of a member. As discussed below, this case presents another category of forfeitures--members' payments for additional accrual rate that cannot be applied due to insufficient years of service at the time of retirement. 22 See, e.g., Vinson & Elkins, 99 T.C. at 13 ("The amount estimated to fund a defined benefit plan is calculated by the plan's actuary and is determined based upon actuarial assumptions about a number of future events, such as rates of return on investments, the benefit commencement date, future earnings, and member mortality, among other things."). This case involves an optional enhanced retirement benefit in the form of additional accrual rate. As noted below, eligible members have previously been able to purchase additional accrual rate, but this case concerns a pricing change that went into effect for police officers hired after January 1, 2006, and firefighters hired after January 1, 2007.23 Section 8.08 authorizes such persons to purchase up to five years' additional accrual rate--so as to add 3.2% accrual rate to the Plan's 3.2% accrual rate, for a total 6.4% accrual rate--for each year of service that the member completes from his or her 16th through 20th years of service or, if fewer than five years' accrual rate is purchased, for the purchased number of years constituting the final years of service within the 16th through 20th years of service.24 Taking the example in paragraph 6, if a member purchased five years' additional accrual rate and retired with 20 years of service, the benefit would be $40,000 annually or $3333 monthly.25 In this illustration, the enhanced retirement benefit would increase the member's monthly benefit by $666 and would produce a retirement benefit, at 20 years' service, that would be the equivalent of the retirement benefit, at 25 years' service, without the additional accrual rate purchase.26 23 The difference of one year reflects the one-year difference in the commencement date of each union's collective bargaining agreement. 24 Section 8.08 does not so clearly limit the member purchasing fewer than five years' additional accrual rate to the corresponding number of years in the member's 16th through 20th years of service, but the parties seem to share this interpretation. Thus, it appears that a member purchasing three years' additional accrual rate would be required to apply the additional rate to the member's 18th through 20th years of service. 25 The 3.2% accrual rate for the first 15 years at $50,000 would produce an annual benefit of $24,000, and the 6.4% accrual rate for the final five years at $50,000 would produce an annual benefit of $16,000. 26 The total annual benefit of $40,000, as calculated in the preceding footnote illustrating the effect of five years' additional accrual rate, is identical to the total annual benefit of a 3.2% accrual rate for 25 years at $50,000. Section 8.08 imposes three conditions on the purchase of additional accrual rate. The member must have been employed as a police officer or firefighter with Respondent for at least one year, the member "must exercise this option within [90] days after completion of probation," and the member "shall contribute the full actuarial cost of the benefit for each of year enhanced multiplier purchased," which the member may pay over ten years or prior to entry into DROP,27 whichever occurs first. During the time in question, it appears that probation ran one year from the date of hire. Section 8.07 authorizes an eligible member to purchase additional years of service based on prior years of service with certain employers, such as the military or other law enforcement agencies. Section 8.07 limits this "buyback" of prior service to four years' qualifying service and requires a member to pay 8.4% of the member's current annual compensation for each year of prior service purchased. Section 8.07 allows a member five years to pay the purchase price and limits a member to the purchase of no more than a total of five years' additional accrual rate and additional years of service. Nomenclature problems render some of the minutes of Board meetings discussed below difficult to understand. The problem starts with "AAS," which misleadingly refers to "service," not rate, so as to encourage the reference to the purchase of additional accrual "rate" as the purchase of "service," which properly applies only to the purchase of additional years of service. The confusion is compounded by the use of the term, "buyback" to apply to the purchase of additional accrual rate, as well as to the purchase of additional years of service. The sense of reacquisition in the term, "buyback" limits its use to the purchase of additional years of service, because a member is not reacquiring anything when she purchases additional accrual rate. The Plan appropriately describes the purchase of additional years of service as a "buyback," but does not use this term to describe the purchase of 27 DROP is the Deferred Retirement Option Program. additional accrual rate, although the Plan elsewhere uses "buyback" to refer to the purchase of both additional years of service and additional accrual rate.28 Distinguishing between these two enhanced benefits was less important for police officers hired on or before January 1, 2006, and firefighters hired on or before January 1, 2007. For them, each year of additional accrual rate cost 8.4% of compensation and payment of the purchase price was limited to five years--the same terms that applied and apply to the purchase of each year of additional service. Another common feature between the two optional benefits is their monetary value to the member. At all material times, for identically situated members, the purchase of an additional year of accrual rate has resulted in the same increased benefit as the purchase of an additional year of service.29 Respondent introduced the 2005 and 2006 changes to end its subsidy of members' purchases of additional accrual rate,30 but obviously chose not to end its subsidy of members' purchases of additional years of service--an option that is obviously available only to new hires with qualifying past employment. Calculating the full actuarial cost of additional accrual rate should not have been inordinately difficult. Compensation levels for the members would have been relatively easy to project due to the nature of their 28 § 1.01 ("Accumulated contributions shall … include buy-back amounts paid under sections 8.07 and 8.08."). 29 Assume that the members are the same age, retire on the same date with 20 years of service, commence benefits at retirement, and earned $50,000 at all times during employment with Respondent. As noted above, the annual retirement benefit for such a member who did not purchase additional accrual rate or additional years of service would be $32,000. The purchase of one year of additional accrual rate would raise the member's annual retirement benefit to $33,600: ($50,000 x 19 years x .032) + ($50,000 x 1 year x .064). The purchase of one year of additional year of service also would raise the member's annual retirement benefit to $33,600: ($50,000 x 21 x .032). 30 Minutes of Board meeting on Aug. 27, 2007. employment with expected raises based mostly on years of service. Normal retirement under the Plan is the earlier of 25 years of service or 52 years of age with at least ten years of service, and there is no mandatory retirement age.31 A member's age at retirement would not have been difficult to project due to the necessity that, for additional accrual rate, a member must work at least through her 16th through 20th years of service and the knowledge of the age of a member at the time of her employment. A member's age at retirement is especially important because a lifetime enhanced monthly benefit of, say, $666 is far more costly to the Plan, for a member who is 52 years old at retirement than for a member who is 70 years old at retirement, given the large difference in remaining life expectancies between these two retirees. With this information, coupled with standard mortality tables and an assumed investment return, an actuary could readily determine the sum required to support the enhanced monthly benefit payment. Estimating the contribution required to generate the sum determined in the preceding paragraph also should have been straightforward. If a member paid the contribution in a lump sum, the main task would be settling upon a reasonable investment return from the contribution until payout, more than 19 years later. If a member paid the contribution by installments over ten years, the investment return would apply to each payment, upon receipt, as payments made in the first year would produce more total investment return than payments made in the tenth year. As detailed below, two issues emerged that interfered with the rollout of the revisions to the purchase of additional accrual rate. The first issue, which was first seen in April 2007, was whether a vested member forfeited her payment or payments if she retired prior to the 16th through 20th years of service. If a member forfeits her payment or payments, an actuary could 31 § 6.01. consider projected forfeitures in calculating the full actuarial cost of the additional accrual rate purchase; this would lower the cost to a member, whose enhanced benefit would be partly paid by such forfeitures. This issue may have been more theoretical, unless the Plan had had sufficient experience with such forfeitures to allow an actuarial assumption as to the amount that would be forfeited over a specific interval. In any event, Plan provisions clearly would have supported the Board's determination that such forfeitures were not permitted by the Plan.32 The second issue, with which the Board wrestled from at least September 200833 through February 2009,34 is whether a member who pays the full actuarial cost by installments must pay interest on the installments. This issue raises questions about the communications between the Board and its actuaries,35 who, if asked, should have promptly advised the Board that their actuarial calculations already captured the time value of money, so as to dispense with the necessity of charging interest.36 32 See footnote 21. 33 Minutes of Board meeting on Sept. 8, 2008. 34 Minutes of Board meeting on Feb. 23, 2009. 35 A couple of years later, relations between the Board and its actuaries were decidedly suboptimal when the actuary informed the Board that his firm would require an additional $100 per calculation of the full actuarial cost of additional accrual rate, the Board told the actuary that his firm needed to live up to its contract, a motion to approve the fee increase died for lack of a second, and the actuary told the Board that the firm would resign, if the Board failed to approve the fee increase. Minutes of Board meeting on Oct. 10, 2011. 36 This assumes that Respondent or the trust did not effectively lend the purchase price to the member--perhaps, to simplify the actuarial calculations--and, if not, that the actuaries made some attempt at pricing the full actuarial cost based on how long the trust held each installment payment. Because the full actuarial costs reflects the amount necessary to produce the defined benefit, the member who pays over ten years already will pay more than the member who pays in a lump sum at the time of purchase; the former's final year's installment payments will support investment return for nine fewer years than any payments in the year of purchase. Charging interest on deferred payments would have imposed duplicative exactions upon the member. Nevertheless, the available minutes do not document how the Board resolved this issue. Given one year's probation for new hires, the above-described changes to Section 8.08 would have applied to police officers starting in 2007 and firefighters starting in 2008. Although Respondent did not enact the first ordinance with these changes until 2008, the operative language had been incorporated into the CBA, which adequately captures the new provisions governing additional accrual rate purchases, so as to permit immediate implementation. The CBA provides: For employees hired after 01/01/2007, modify the Additional Accrual Service (AAS) Buyback percent the employee pays from 8.4% to the actual actuarial cost of the benefit and allow the member to pay for this in 10 years instead of 5 years. Effective 11/01/2006, continue the current prior service credit buyback provision … .[37] The record contains no minutes for Board meetings prior to 2007, but, in minutes of a meeting in early January 2007, the Board recognized that it could not provide a member with the purchase price of additional accrual rate until an actuary calculated the full actuarial cost.38 This was a good start. The next month's Board meeting, though, provided evidence of poor communications with the actuaries on the crucial issue of Plan provisions. In February 2007, an actuary performing an audit of the trust fund complained that the Plan was unclear in its treatment of the "buyback [of] service," and he could not reconcile his determination of the present value of benefits with the same determination by another actuary, who had a different interpretation of this buyback provision. Due to confused use of nomenclature, as described above, it is unclear whether this complaint pertained to additional accrual rate, additional years of service, or both 37 Coyle Ex. 11, Bates Stamp, p. 296. 38 Minutes of Board meeting on Jan. 8, 2007. optional benefits, but, given the recent change as to the accrual rate, it likely pertained to the optional benefit at issue in this case. The response of the Board's counsel was not to refer the actuary to language in the ordinance or a collective bargaining agreement, but to a recommended clarification of the "service buyback" within the Summary Plan Description,39 which, as the name implies, is intended to be merely a synopsis of provisions in the operative Plan, not a source of Plan provisions.40 In a Board meeting in April 2007, a Board trustee asked whether a vested member who terminated service was entitled to a refund of the member's contributions as part of a "five year buyback," which likely referred to the additional accrual rate purchase, as a member may purchase five years of that optional benefit, but only four years of additional years of service. Construing the question to pertain to the purchase of additional accrual rate, Board counsel referred to a Draft Summary Plan Description from October 2006 that provided clearly that such contributions were forfeited if a member elected to receive a retirement benefit prior to the completion of the 16th through 20th years of service, but member contributions were not forfeited if the member elected to receive a refund of all contributions instead of a pension benefit.41 Rather than accept this substantive guidance or argue for a different policy, another Board trustee 39 Minutes of Board meeting on Feb. 26, 2007. 40 Nor may a collective bargaining agreement have been the sole alternative source of important Plan provisions. On one occasion, the minutes state that an important provision regarding DROP was addressed only in "a contract"--presumably, a collective bargaining agreement--not in any "ordinance," and Mr. Antonio suggested that Respondent and the union enter into a "letter of understanding" on the matter. Minutes of Board meeting of Oct. 15, 2007. 41 Neither the Draft Summary Plan Description nor any written opinion of Board counsel is part of the record. It seems odd that a vested member would not receive a refund of her payments, but an unvested member would. See footnote 22. The last sentence of section 1.01, which defines the "accumulated contributions" that are to be returned to a member, states: "Accumulated contributions shall also include buy-back amounts paid under sections 8.07 and 8.08." responded that Respondent had never adopted this Draft Summary Plan Description. The discussion ended, and the forfeiture issue remained unresolved for an extended period of time, even though Board counsel had provided the Board with an unequivocal opinion that a vested member forfeited her payments, and the implementation of this opinion would not have impacted--i.e., increased--Respondent's contribution, as addressed in Section 3.16. The Board's nondecision on forfeitures deprived the actuaries of important information needed to price the full actuarial cost of additional accrual rate purchased. Poor communications with the actuaries may have resulted from direct communications that they received, not from Board representatives, but from representatives of Respondent. At times during the hearing, Petitioners' witnesses described how well the Plan was administered when Respondent's employee, Marc Antonio, was available to prepare cost worksheets for the optional benefits and help new hires complete their applications. In 2007, Mr. Antonio was an assistant City manager; by August 24, 2009, he was in the Finance Department. But Mr. Antonio was still regularly attending Board meetings during the period that the full actuarial cost was in effect, and neither he nor the Board was able to provide this information to interested members. The record does not reveal whether Mr. Antonio contributed to confusion among the actuaries. However, another employee of Respondent did. According to Board minutes in 2018, Mr. Cowley recalled speaking ten years earlier to a former human resources director who had become active in Plan business. Mr. Cowley mentioned to the director the need of the Board to be able to present full actuarial costs to members seeking to purchase additional accrual rate, but any deadlines for producing this information "kept getting pushed back." A Board trustee familiar with the director added that he had "always deferred sharing the specifics of the buyback procedures and had trouble conveying the information to the actuary."42 Nevertheless, in early 2007, the actuaries began to develop a method to calculate the full actuarial cost of the purchase of additional accrual rate. Minutes of a Board meeting on August 27, 2007, reveal that, at the previous month's meeting, the Board had been presented with a draft ordinance, perhaps of the Plan or at least Section 8.08, as well as "buy-back tables" that appear to pertain to the purchase of additional accrual rate for a member who retired at age 52. An actuary referred to these tables as applicable to members purchasing "additional service," but these comments pertain to the purchase of additional accrual rate. Mr. Antonio replied that the "dynamic created by eligibility makes the cost very difficult to … estimate,"43 perhaps accurately commenting on the impact of the member's age at retirement on the full actuarial cost of the optional benefit. The actuary asked that each member seeking to purchase additional accrual rate be required to submit an application. At the time a Board trustee, Mr. Cowley asked for the chart as a guide for all members, even though the chart would overstate the cost for older members at retirement. Mr. Antonio seemed to discourage the broader use of a chart designed for a 52-year-old retiree, but incorrectly explained that, while he thought the chart would be accurate, the benefit and cost could be difficult to explain to members--obviously true if someone tried to explain the cost to a 65-year-old retiree based on a chart prepared for a 52-year-old retiree. The actuary said that she would expand the chart to include older members at retirement, and the Board agreed that members older than the oldest age used in the revised chart would apply for an individual calculation of the full actuarial cost. Mr. Antonio concluded the discussion by saying that he 42 Minutes of Board meeting on Nov. 26, 2018. 43 Minutes of Board meeting on Aug. 27, 2007. wanted "the chart" to be a fixed cost to members with Respondent bearing the financial burden of what he termed, "minor variations in experience." It seems as though Mr. Antonio was referring to the relatively minor cost of preparing a chart, rather than to a directive that the full actuarial cost disregard the age of the retiree--as before, at the expense of Respondent. The actuaries expended considerable time preparing the age-based "Buy Back Tables,"44 and the work proved to be much more difficult than they had initially expected. During a Board meeting in October 2007, the actuary, by letter, asked the Board to approve an increase in actuarial fees for this service from the quoted $2500 to $3000 to $19,424 for 89 hours of work already completed. The letter explained that "the unusual nature of the Plan's buyback provision" had necessitated "much more extensive testing than is required for other plans." Even though this optional benefit should have been rolled out for police officers months earlier, the Board deferred action on the request.45 These are all of the minutes of Board meetings in 2007 that are in the record. For all of 2007, the development of the full actuarial cost of additional accrual rate purchase indisputably remained a work in progress. Regardless, Respondent contends, in derogation of the Board's minutes, that an interested member could, in late 2007, obtain the full actuarial cost of additional accrual rate. In support of this fanciful contention, Respondent produced four exhibits. Respondent Exhibits 1 through 3 purport to be worksheets showing the calculation of the full actuarial cost of additional accrual rate purchased 44 If Mr. Antonio's "fixed cost" reply ended the investigation into charging the full actuarial cost for the purchase of additional service years, this reference to "Buy Back Tables" is to the purchase of additional accrual rate. Otherwise, the tables might pertain to the purchase of additional accrual rate and additional years of service. 45 Minutes of Board meeting on Oct. 15, 2007. by three police officers: John Cameron,46 Marco McAdam,47 and Victor Lynch,48 respectively. In each case, the worksheet indicates that the member had completed probation less than 90 days earlier. The Cameron and McAdam worksheets depict four years' additional service and one year's additional accrual rate, and the Lynch worksheet depicts five years' additional accrual rate. There is no evidence about the authorship of these worksheets or, for the Cameron and McAdam worksheets, that the members were able to purchase the service and rate credit at the prices quoted. Respondent Exhibits 1 and 2 are thus entitled to no weight. By contrast, the Lynch worksheet is supported by Respondent Exhibit 4, which is documentation of actual payroll deductions. Both documents are consistent, showing a total cost of $55,840.50, 260 payroll deductions of $214.77 each, and a start date of October 15, 2007. However, Respondent Exhibits 3 and 4 do not support Respondent's claim that, in the fall of 2007, members were able to obtain the full actuarial cost of additional accrual rate purchases, and, if they failed to do so, it was due to a lack of interest in this optional benefit. Given the timing of the Lynch worksheet and the request of the actuary for Board approval of fees over six times higher than the actuary had quoted for working up the full actuarial cost, the Lynch worksheet likely was a prototype that the actuary prepared in trying to develop a method for calculating full actuarial costs. Noticeably missing from the record is any indication that the calculations for the prototype Lynch worksheet proved reliable or the workup could be used for other members. Judging from the absence of Board-approved purchases the 46 Resp. Ex. 1. 47 Resp. Ex. 2. 48 Resp. Ex. 3. following year, either the Lynch calculations were unreliable or at least premature. Minutes of a Board meeting years later, in November 2018, address the Lynch worksheet. In this meeting, Mr. Dodea told Petitioner Roccisano that Mr. Dodea had found one early calculation of full actuarial cost--a calculation done by actuary, Chad Little, in 2008 for Victor Lynch, which the Board had approved. It seems that Mr. Dodea was off by one year in his description of Respondent Exhibit 3. Aptly, Petitioner Roccisano replied that all that this proved is that Mr. Lynch had found a "different channel" by which to obtain a calculation of the full actuarial cost of his purchase of additional accrual rate.49 The minutes of the Board meeting in January 2008 revealed progress in the preparation of an age chart for determining the full actuarial cost of additional accrual rate for a span of ages at retirement. The Board agreed that any member over the ages shown on the chart should receive an individual calculation.50 The next Board meeting for which minutes are available took place in August 2008, and they confirm that, besides Mr. Lynch, no one had obtained the full actuarial cost of additional accrual rate, so as to be able to make an informed purchase decision. An actuary stated that he would charge $600 for each such "buyback" calculation. Told that members had been waiting "for over a year" for an estimate of the full actuarial cost of a purchase of additional accrual rate, the Board agreed to send the information for these members to the actuary for calculations of their purchase prices. The motion 49 These minutes suggest that, contrary to Mr. Dodea's testimony (Tr., pp. 598, 601), he did not discover the Lynch worksheet on the day prior to the last day of the hearing, but, at best, he "rediscovered" it at that time. Given the treatment of the Lynch worksheet, Respondent's failure to disclose the existence of this exhibit in a more timely fashion is immaterial. 50 Minutes of Board meeting on Jan. 14, 2008. that passed specifically approved sending the information for members who "are past their one year anniversary since 9/30/06 through 9/30/08."51 In September 2008, a Board trustee raised the issue of interest on installment payments for "buyback purchases" and stated that the installment payments must not impact the trust assets. "Buyback purchases" may refer to the purchase of additional accrual rate, additional years of service, or both. Interest on the purchase of additional years of service makes sense, because 8.4% per year purchased does not seem to reflect the time value of money. Again, the full actuarial cost of additional accrual rate purchased should reflect the time value of money, although nothing in the record clearly confirms that actuaries calculated a considerably higher full actuarial cost for installment payments than for a lump sum.52 This issue should have been resolved at this time--ideally based on the approach of the actuary calculating the full actuarial cost, but practically with a decision either to charge interest or not to charge interest. Instead, as detailed below, this issue lingered, unresolved, until February 2009. The same Board trustee raised the forfeiture issue by suggesting that members be allowed to obtain a refund of their payments toward additional accrual rate, presumably if they were unable to qualify for the rate due to insufficient years of service. The minutes state: "The City does not agree, 51 Minutes of Board meeting on Aug. 11, 2008. 52 Nine years later, in 2017, an actuarial letter prepared for Petitioner Manny Gonzalez alludes to this issue. Coyle Ex. 1, Bates Stamp, p. 5. The letter quotes nearly $80,000 as the cost of five years' additional accrual rate for retirement benefits commencing 11 years later. Given that the full actuarial cost likely approximated Mr. Gonzalez's annual salary, the letter unrealistically "recommend[s] … payment … be made as a lump sum within six months of the request." This seems like wishful thinking by the actuary, but was it to spare the actuary the task of recalculating the full actuarial cost if paid over ten years, running a simple installment payment plan with interest, running a simple installment payment plan without interest (and ignoring the time value of money), or avoiding the interest issue with Respondent? until they can resolve a separate issue related to interest on buyback payments over time." This quote marks the end of a documented, evidently brief discussion about interest and forfeitures--over one-and-one-half years after the Board initially referred the matter to its actuaries. The Board does not explicitly defer to Respondent's objection to refunds and claim that it must resolve the interest issue, but, characteristically, the Board took no action. At this point, both of these issues were overripe for resolution,53 and the Board's failure to proceed appears at least partly attributable to Respondent's refusal to agree--even though, two years earlier, Respondent had completed its relevant work when it incorporated the change, in implementable form, in the CBA. The next Board meeting for which minutes are available took place in January 2009. The actuary discussed the calculations of the full actuarial cost of additional accrual rate purchases--work that was still "in the process." Someone asked whether a vested member would receive a refund of the purchase price if the member's services terminated, presumably prior to the 16th year of service. The Board attorney said that the member would receive a refund, but Mr. Antonio disagreed, adding that Respondent was negotiating this issue with the unions. A Board trustee raised the issue of interest, and Mr. Antonio replied that Respondent was negotiating this with the union. No one on the Board displayed the initiative to resolve the issues at this time. A Board trustee mentioned that two persons were "currently buying back time" and were not paying interest. Once again, a lack of clarity with nomenclature precludes a finding that Mr. Lynch had been joined by 53 It seems that these issues should have arisen and been resolved under the prior Plan provisions authorizing the purchase of either optional benefit at 8.4% of compensation per year purchased, even though the maximum repayment period for both options was only five years. It is unclear if the provision as to the 16th through 20th years of service previously applied to the purchase of additional accrual rate, but, if not, the forfeiture issue would have arisen at least when an unvested member terminated service. another lucky member; again, a member "buys back time" when purchasing additional years of service and buys rate when purchasing additional accrual rate. Rather than resolve the issue, the Board agreed on an impractical temporary fix: to provide members with two purchase prices--one with interest and one without interest. At the end of the minutes, a Board trustee noted that new employees did not know the cost of additional accrual rate, and the "Board must first retain an actuary"54--precisely what the Board had done two years earlier. At the Board meeting on the following month, the same Board trustee complained about the "buyback" calculations that had recently been completed for 14 members. Because Respondent had failed to indicate whether these installment payments would be charged interest, the calculations were done in the alternative, and the difference between each pair of calculations was "huge," thus demonstrating the impracticality of this "solution." However, this discussion concluded with an observation that "[s]ome members have already started buying back time."55 At a meeting in August 2009, the Board deferred the approval of "buyback statements" that had been prepared by an actuary.56 At the Board meeting the following month, the Board discussed a request of a member currently "buying back time." Without terminating employment, the member wanted to stop the purchase and obtain a refund of all payments previously made. The member added that he was under the old purchase price of 8.4%, suggesting that he was purchasing additional accrual rate, not years of service. The Board deferred action, but relieved the member from the responsibility of making further payments.57 54 Minutes of Board meeting on Jan. 5, 2008. 55 Minutes of Board meeting on Feb. 23, 2009. 56 Minutes of Board meeting on Aug. 24, 2009. 57 Minutes of Board meeting on Sept. 29, 2009. The next Board meeting for which minutes are available took place in January 2010. Board counsel informed the Board that the actuary had increased the cost of a calculation of additional accrual rate purchase to $350, but all other calculations would remain $100 per calculation.58 It seems, finally, that the Board had sorted out the remaining problems that had prevented the presentation of the full actuarial cost to a member purchasing additional accrual rate. By mid 2010, another issue had arisen, though. In July 2010, the Board considered the timeliness of a request to purchase an optional benefit relative to the expiration of probation. As noted above, a request for either optional benefit must be filed within 90 days of the completion of probation. An employee of the Board or Respondent advised the Board that members had been told to wait to purchase additional years of service until Respondent entered into a new collective bargaining agreement with the unions and, now that the parties had concluded a new agreement,59 the members wanted to proceed with their purchases of additional years of service. The Board agreed that it would allow these purchases to take place, but would need a list of these members.60 In August 2010, the Board was informed that a vested member had complained to the Florida Division of Retirement that, upon termination of employment, he had not received a refund of his payments for additional accrual rate. The Board declined to change its earlier decision, which evidently was not to refund the payments. In response to the business taken up at the July 2010 meeting, Mr. Dodea distributed a list of members who 58 Minutes of Board meeting on Jan. 11, 2010. 59 It is possible that a new collective bargaining agreement had resolved the issues of forfeitability of payments for additional accrual rate by a vested member and whether the installment payments bore interest. But the record contains no collective bargaining agreements subsequent to the CBA. 60 Minutes of Board meeting on July 12, 2010. wanted to purchase additional years of service, even though they were past 90 days from the end of their probation. Board counsel advised the Board that this process was being undertaken because, when the probation had ended for these members, a "final contract" was not in place.61 In any event, in October 2010, Board counsel presented lists of members who wanted to purchase additional accrual rate or additional years of service, but who were past 90 days from the end of their probation. The minutes reflect that Respondent had questioned by what authority the Board could "impasse [bypass?] the Ordinance," which probably means disregard the 90-day limitation periods, and Board counsel replied that Respondent would not have to amend the ordinance to authorize this extension of these two 90-day deadlines. Apparently mollified, Respondent insisted that the Board communicate a firm deadline to members by which they would have to elect one or both options. In other related business, the actuarial firm reported that it had completed its "first buyback calculation." But the actuary asked if the calculation was based on the member's base pay or pay with benefits. Suggestive of a program that was rolling out, finally, the Board told the actuary to use base pay--and not to charge interest on the installment payments.62 In April 2015, Board counsel stated that letters that the Board had sent to eligible members "a couple of years ago," advising them of the 61 Minutes of Board meeting on Aug. 23, 2010. Regardless of the status of any effort to document a collective bargaining agreement, the law unsurprisingly requires that, at all times, the provisions of a pension plan of the type at issue be documented, not open-ended. Section 175.261(2)(a)1. requires an annual filing with the Division of Retirement of "each and every instrument constituting or evidencing the plan." Chapter 175 applies to firefighters, and this requirement applies to "local law" plans, not "chapter" plans, which merely incorporate the relevant provisions of chapter 175. See § 175.032(4), (14) (definitions of "chapter plan" and "local law plan"). Similar provisions govern police pensions. See § 185.221(2)(a)1. 62 Minutes of Board meeting on Oct. 11, 2010. reopening of the window to purchase optional credit, had limited the reopening to the purchase of additional years of service. As noted above, four and one-half years earlier, the Board had approved such letters to members interested in purchasing either option. It seems that Board staff or the pension services representative had taken two years to mail or email these letters and had mistakenly dropped the option for the purchase of additional accrual rate. Board counsel asked if the Board wished to reopen the window for members interested in purchasing either option, and the Board agreed to do so.63 In May 2015, the Board clarified that, when the purchase window was reopened, the purchase price for additional years of service would be based on the member's current income, not the member's income in 2010.64 In its August 2015 meeting, Board staff informed the Board that buyback applications for the purchase of additional accrual rate and additional years of service had been emailed to all members with a deadline of September 18, 2015. Board staff advised that it would forward timely filed applications to the actuary for the calculation of the purchase price and then forward the price to the member, who would decide whether to complete the purchase.65 Minutes of the next month's Board meeting indicate that this process was continuing.66 In its August 2018 meeting, the Board was addressed by Petitioner Roccisano, who complained that the purchase price that he had been given for additional accrual time was based on current conditions, not the conditions when he first had the right to purchase additional accrual rate. By now a former Board trustee, Mr. Cowley confirmed that "the City" never 63 Minutes of Board meeting on Apr. 6, 2015. 64 Minutes of Board meeting on May 18, 2015. 65 Minutes of Board meeting on Aug. 24, 2015. 66 Minutes of Board meeting on Sept. 30, 2015. decided on the cost method, which "prohibited" a member from completing a timely purchase of additional accrual rate.67 Its own minutes reveal a Board that, sluggish, reactive, and aimless, failed to discharge its responsibility to implement the revision in the Plan requiring that members pay the full actuarial cost of additional accrual rate purchased. There were suggestions during the hearing that perhaps problems with certain actuaries or certain plan services representatives impeded this effort, but these advisors, like Board counsel, served the Board, and, if they failed to discharge their duties, it was the Board's job to replace them promptly with professionals who would timely do their jobs. From the minutes, the more prominent problem involving a third party was Respondent--specifically, the Board's reliance on Respondent's approval for administrative decisions that are assigned to the Board, not the Plan's sponsor. Respondent discharged its responsibilities with the documentation in the CBA of the changes to the purchase of additional accrual rate, as later enacted in Section 8.08, but the Board failed to discharge its responsibilities in the timely implementation of these changes--for years, not weeks or months. For these reasons, the Board prohibited members from purchasing additional accrual rate at all material times. On the other hand, no Petitioner ever submitted to the Board a request to purchase additional accrual rate in writing or at a Board meeting. 67 Minutes of Board meeting on Aug. 13, 2018. These comments get to the crux of the dispute from the perspective of Petitioners. They do not merely seek another reopening of the window to purchase additional accrual rate; now that this purchase is priced at full actuarial cost, Respondent may not even oppose such a remedy. Petitioners want to purchase additional accrual rate at the full actuarial cost, but as it would have been calculated when each petitioner first became eligible to purchase additional accrual rate--say, 12 or 13 years ago, not now. This administrative proceeding cannot reach such an issue. The Board did not contract with DOAH to address this issue and such a remedy likely represents damages, which are reserved for the judicial branch, not the mere application of basic principles of actuarial science, where investment returns, like time, wait for none of us, even the ever-youthful Petitioner Roccisano. The facts pertaining to each Petitioner are very similar. While still on probation, each Petitioner learned from more senior police officers or firefighters about the optional benefit for the purchase of additional accrual rate. If a police officer, the Petitioner contacted Mr. Cowley; if a firefighter, the Petitioner contacted Jim Bunce. Mr. Cowley was a Board trustee at all material times until at least early 2010. Mr. Bunce became a Board trustee by September 29, 2009, and remains on the Board; from 2007 until 2020, Mr. Bunce was the district president of the firefighters' union. Prior to the expiration of 90 days following the end of probation, each Petitioner contacted Mr. Cowley or Mr. Bunce, depending on whether Petitioner was a police officer or firefighter, and asked about purchasing additional accrual rate. In each case, Mr. Cowley or Mr. Bunce told the Petitioner that the optional benefit was not available due to problems in calculating the cost of the benefit and the absence of a procedure for applying for the benefit; each Petitioner was advised--or directed--to be patient. Sometimes, a Petitioner contacted an employee of Respondent, but was told the same thing. Petitioners completed their probations from March 12, 2008, in the case of Petitioner Pan, through June 8, 2010, in the case of Petitioner Bruce. At least 12 other members, who completed their probations from 2008 to 2012, are identically situated to Petitioners.
Recommendation It is RECOMMENDED that the Board enter a final order determining that Petitioners have failed to prove that they timely submitted a request to 68 See footnote 2. purchase additional accrual rate in writing to the Board or orally at a Board meeting. DONE AND ENTERED this 11th day of February, 2021, in Tallahassee, Leon County, Florida. COPIES FURNISHED: S ROBERT E. MEALE Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of February, 2021. Michael Allen Braverman, Esquire Michael Braverman, P.A. 2650 West State Road 84, Suite 104 Fort Lauderdale, Florida 33312 Brendan Michael Coyle, Esquire Law Office of Brendan M. Coyle, P.A. 407 Lincoln Road, Suite 8-E Miami Beach, Florida 33139 Teri Guttman Valdes, Esquire Teri Guttman Valdes LLC 1501 Venera Avenue, Suite 300 Miami, Florida 33146 Brett J. Schneider, Esquire Weiss Serota Helfman Cole & Bierman, P.L. 1200 North Federal Highway, Suite 312 Boca Raton, Florida 33432 Garth Bonner (Address of Record) Luis Acosta (Address of Record) Janira Camero (Address of Record) Miguel Cordova (Address of Record) John Faul (Address of Record) Philip Rothman (Address of Record) Yvette de la Torre (Address of Record) Wissem Mejdoub (Address of Record) Gabriel Castillo (Address of Record) Gary di Lella (Address of Record) Robert David Klausner, Esquire Klausner & Kaufman, P.A. 7080 Northwest 4th Street Plantation, Florida 33317 Michelle Rodriguez, Plan Administrator City of Hallandale Beach Police Officers’ and Firefighters’ Pension Plan Foster and Foster Plan Administration Division 2503 Del Prado Boulevard South, Suite 502 Cape Coral, Florida 33904 Pietro G. Roccisano (Address of Record) Anthony Gonzalez (Address of Record) Stephen Sanfilippo (Address of Record) Eric Bruce (Address of Record) David DeCosta (Address of Record)
The Issue The issues to be considered here are those associated with the appropriate disposition of RFP-DOT-88-01 (the RFP), related to proposals received from Planning Research Corporation (PRC), AGS Information Services, Inc., (AGS), and which originally involved the proposal by Cubic Western Data, Inc., (Cubic).
Findings Of Fact THE RFP In October 1988 DOT put out a RFP requesting responses from 52 potential offerors. This solicitation garnered responses from three offerors, PRC, AGS, and Cubic. Those responses were received in March 1989. As described in the RFP, DOT desires to acquire a new barrier and ticket toll collection system which would automate the toll collection operations and retrieval of toll audit data, having in mind increased reliability and performance. This project is principally one which envisions the purchase of commodities. It also has associated service requirements. Those service items are principally involved with training and maintenance. This purchase would update technology in the existing toll system which is basically 1950's technology. The existing equipment presents maintenance problems and accounting problems. Those accounting problems are associated with an inaccurate portrayal of the monies collected and the monies that were not collected. The latter item is significant as it relates to the opportunity for potential theft of toll revenue by employees. In addition, there are problems with traffic counts. There are problems with report processing time for management and revenue reports. In the southern end of the turnpike there is the specific problem wherein the DOT is converting from a ticket type system to a coin operated system, and until the barrier type or coin collection equipment contemplated under the RFP is installed, the DOT will be manning those toll collection lanes that are designed for automatic or machine operation. Those lanes are manned by OPS personnel. A copy of the basic RFP may be found as PRC Exhibit 3 admitted into evidence. It does not contain addenda. Within the RFP is found a form which is entitled "State of Florida Request for Proposal Commodities Acknowledgment Form." Under General Conditions, at paragraph 5, it directs the offerors to submit any questions concerning the provisions and specifications in writing to DOT for receipt at a time no later than ten days prior to the proposed opening. It cautions the offerors that if they dispute the reasonableness, necessity, or competitiveness of the terms and conditions in the RFP or the contract award recommendation, to offer that opposition in accordance with Rule 13A-1.006, Florida Administrative Code, and within the time requirements of Section 120.53(5), Florida Statutes. In that same form, paragraph 17 references the liability question and reminds the offerors that any contract resulting from this proposal is designed to hold and save the State of Florida harmless against claims by third parties that resulted based upon a contractor's breach of contract or negligence. Under Special Condition 2.04 DOT reserves the right to reject all proposals. It also speaks to the ability to waive minor irregularities which are seen as those variations from the terms and conditions of the RFP which are not price effective or advantageous to the offeror or beneficial in a way not enjoyed by other offerors or to the extent that the irregularities do not adversely impact the DOT. It reminds the offerors that departure from the RFP requirements other than minor variations cannot be waived. It further states that an offeror cannot modify its proposal after the opening. Special Condition 2.05 follows up the previous condition by stating that nonresponsive proposals will not be considered for the award. Proposals are seen as being subject to rejection in that they may be rejected if found irregular and not in conformance with the requirements and instructions set out in the RFP. Those items may be found to be irregular and nonresponsive in the instance of conditional proposals and indefinite or ambiguous proposals, among other things. Two Special Conditions which are involved with DOT's right to cancel the contract are as follows: Cancellation for Unappropriated Funds The performance by the Department of any of its obligations pursuant to this RFP is subject to and contingent upon the availability of monies lawfully appropriated for the purpose. If the Department deems at any time during the proceedings that funds are not available, the Department will notify the Proposers of such status, and all obligations of the parties, if any, shall end as cancelled by mutual consent. Cancellation for Other Causes A contract arising from this RFP may be cancelled by the Department at any time for failure of the Contractor to complete specified work in accordance with the provisions of the contract and this RFP. Cancellation for such cause shall occur immediately upon Contractor's receipt of written notification thereof from the Department to the Contractor by certified mail, return receipt request. Special Condition 2.12 identifies the terms of a general or prebid conference that calls for mandatory attendance of the offerors and indicates that the members of the Technical Review Committee will be available to respond to questions that the offerors have which relate to clarification of the details of the specifications. Affiliated with that section is Special Condition 2.13 which relates to the offerors' inquiries. It reminds those offerors to examine the RFP to determine whether the DOT requirements are clearly stated. It invites the offerors to state in writing any belief that the requirements of the RFP are restrictive to competition. If the offeror wishes to change any specification, it is required to identify that specification and describe why it is difficult to meet the specification and to give a detailed explanation of why the change is justified. The offeror in that instance also provides what is referred to as a recommended change to the specification. A suggested change must be received by the DOT no later than the date shown as the last date for inquiries and questions set out in the schedule of RFP events. Under the amended schedule of RFP events, the date for last inquiries and questions to the DOT was November 28, 1988. If an offeror failed to request the change by the deadline specified, the offeror is seen to accept the Department's specifications. The DOT is to decide which changes would be acceptable. If necessary, the DOT would issue an addendum reflecting acceptable changes to the RFP, as was done in the instances referred to before. Any changes through an addendum are sent to all offerors to make certain that the offerors are given the opportunity of making proposals that deal with a common set of specifications. Special Condition 3.04 identifies the fact that the price proposals would not be opened until after completion of the evaluation and rating of technical proposals. An offeror's price would not be considered if the technical proposal was rejected during the evaluation. Special Condition 4.01 identifies the stages of the evaluation process. The first stage examines the qualifications of all offerors. The second stage examines technical proposals. The third stage examines price proposals. The fourth stage looks at the remaining proposals in the review process and rates them to arrive at the best overall proposal. Special Condition 6.01.02 speaks to indemnification and states: The contractor shall indemnify, defend, save and hold harmless, the state, the Department and all of its officers, agents, or employees from all suits, actions, claims, demands, liabilities of any nature whatsoever arising out of, because of, or due to breach of, this Agreement by the Contractor, its subcontractors, agents or employees or due to any act or occurrence of omission or commission of the Contractor, its subcontractors, agents or employees. Neither the Contractor nor any of its subcontractors will be liable under this section for damages arising out of injury or damage to persons or property directly caused or resulting from the sole negligence of the Department or any of its officers, agents or employees. The parties agree that 1% of the total compensation [sic] to the Contractor for performance of this agreement is the specific consideration from the Department to the Contractor for the Contractor's indemnity agreement. Special Condition 6.01.03 deals with liabilities for wrongful or criminal act by the Contractor and its language is to this effect: The bond shall be subject to the additional obligation that the principal and surety executing the bond shall be liable to the State in any civil action which might be instituted by the Department or any officer of the State authorized in such cases, for double any amount in money or property the State might lose, or be overcharged, or otherwise be defrauded of by any wrongful or criminal act of the Contractor, his agent or his employees. The parties agree that 1% of the total compensation to the Contractor for performance of this agreement is the specific consideration from the Department to the Contractor for the Contractor's indemnity agreement. General Provision 5.07.02 deals with failure to remove and renew defective materials and work, and it states: Should the Contractor fail or refuse to remove and renew any defective materials used or work performed, or make necessary repairs in an acceptable manner and in accordance with the requirements of the specifications, within the time indicated in writing, the Engineer shall have the authority to cause the unacceptable or defective materials or work to be repaired, removed and renewed, as may be necessary; all at the Contractor's expense. Any expense incurred by the Department in making these repairs, removals, or renewals, which the Contractor has failed or refused to make, shall be paid for out of any monies due or which may become due the Contractor, or may be charged against the contract bond. Continued failure or refusal on the part of the Contractor to make any or all necessary repairs promptly, fully and in an acceptable manner shall be sufficient cause for the Department, at its option, to perform the work with its own organization, or to contract with any other individual, firm or corporation to perform the work. All costs and expenses incurred thereby shall be charged against the defaulting Contractor and the amount thereof deducted from any monies due or which may become due him, or shall be charged against the performance bond. Any work performed subsequent to forfeiture of the contract, as described in this section, shall not relieve the Contractor in any way of his responsibility for the work performed by him. Under General Provision 8.08 dealing with default and termination of contract, for reasons described, DOT has the right to take the contract work away from that Contractor and declare the contract in default within ten days of notice that the complained-of conditions have not been corrected. General Provision 8.09 speaks to the Department and states: Upon declaration of default the Department will have full power to appropriate or use any of all materials and equipment on the site which are suitable and acceptable, and may enter into an agreement with others for the completion of the work under the contract, or may use other methods which in the opinion of the Engineer are required for the completion of the work in an acceptable manner. All costs and charges incurred by the Department because of the Contractor's default, including the costs of completing the work under the contract, shall be charged against the Contractor. In case the expense so incurred by the Department is less than the sum which would have been payable under the contract if it had been completed by the defaulting Contractor, the defaulting Contractor shall be entitled to receive the difference. In case the expense exceeds the sum which would have been payable under the contract, then the Contractor and the surety shall be liable and shall pay the Department the amount of the excess. If after the ten calendar day notice period, and prior to any action by the Department to otherwise complete the work under the contract, the Contractor should establish his intent to prosecute the work in accordance with the Department's requirements. The Department may elect to permit the Contractor to resume the work, in which case any costs to the Department incurred by the delay, or from any reason attributable to the delay, will be deducted from any monies due or which may become due under the contract. General Provision 8.10 deals with the amount of liquidated damages and it states: Such liquidated damages shall be the amounts established in the following schedule which shall apply to each project and retainage. Daily Charge Per Original Contract Amount Calendar Day $50,000 and under ................. $ 200 over $50,000 but less than $250,000 ................... 300 $250,000 or more but less than $500,000 ........................ 400 $500,000 or more but less than $2,500,000 ...................... 550 $2,500,000 or more but less than $5,000,000 ...................... 650 $5,000,000 or more but less than $10,000,000 ..................... 750 $10,000,000 or more but less than $15,000,000 ................ 1,000 $15,000,000 or more but less than $20,000,000 ................ 1,250 $20,000,000 or over ............ 1,250 plus 0.005 percent per day for any amount over $20,000,000 Under the section in the RFP dealing with the Contract Agreement is found Section 14.00 which contains the language set out in Special Conditions 6.01.02 previously quoted. Under the Contract Agreement at Section 19.00 is found a statement of further emphasis about the ability of the DOT to proceed premised upon available funding wherein it is stated: The Department during any fiscal year, shall not expend money, incur any liability, or enter into any contract which, by its terms, involves the expenditure of money in excess of the amounts budgeted as available for expenditure during such fiscal year. Any contract, verbal or written, made in violation of this subsection shall be null and void, and no money shall be paid on such contract. The Department shall required a statement from the comptroller of the Department that funds are available prior to entering into any such contract or other binding commitment of funds. Nothing herein shall prevent the making of contracts for periods exceeding one year, but any contract so made shall be executory only for the value of the services to be rendered or agreed to be paid for in succeeding fiscal years, and shall be contingent upon an annual appropriate of the legislature. THE FIRST EVALUATION COMMITTEE: ITS DECISIONS The committee that was formed to evaluate the several responses had strong technical expertise and limited contractual or administrative experience. Its members were Debra Stemle, Deputy Director Office of Toll Operations; Richard Humphry, head of the facilities and equipment section with toll operations; Scott Love, a data processing manager in the Fort Lauderdale toll operation; Bernard Schmit, a toll technical supervisor; Herb Pressly, associated with the DOT information system and service office; and James Anderson, internal audit staff. Non-voting members included persons from the consulting groups, Post, Buckley, Shue, and Jernigan and Palmer and Associates. Woody Lawson from the DOT Office of Contractual Services served as a liaison to the evaluation committee to address contract questions should they arise. In the experience of DOT it is unusual to purchase commodities by use of an RFP. Moreover, it is unusual to have a commodities purchase in which the Purchasing Division within DOT is not involved. It was not involved on this occasion and the liaison and advisory functions concerning the purchase were through the Contractual Services Division. The evaluation committee began its work within a week of receipt of the proposals. After its first week of review it had made certain discoveries concerning the proposals that can be characterized as problem areas. Those discoveries are outlined in the memorandum prepared through the offices of Post, Buckley, Shue and Jernigan. The operative terms of that memorandum are based upon observations by the evaluation committee. A copy of that memorandum may be found as PRC Exhibit No. 4 admitted into evidence. Cubic's responsiveness was called to question for reasons outlined in the memorandum attachments. In addition, under paragraphs 21-27 attached to the memorandum, certain comments were offered about AGS and its suggestion of changes to the RFP filed with its proposal. A copy of those items that are alluded to in those paragraphs 21-27 may be found as PRC Exhibit No. 5 admitted into evidence. In the attachment to the memorandum, PRC 4, there were observations to the effect that AGS was taking exception to some of the terms of the RFP. Quoting from those paragraphs 21-27, they remarked: AGS - Special conditions Proposal Page No. FDOT TSC-1 Takes exception with RFP 2.008 Need Purchasing and Attorney's office to review. AGS - Special condition Proposal Page FDOT TSC-1 Request Addition to SEC. 2.09 AGS - Special Condition Proposal Pg FDOT TSC-1 Request changes in Section G.01.02 of RFP. [sic] AGS - Special Condition Proposal Pg. FDOT TSC-2 Request Changes in Section 6.01.03 of RFP. AGS - General Provisions Proposal Pg. FDOT TSC-2 Request Changes in Section 5.07.02 AGS - General provision Proposal pg FDOT - 2 Request changes - Section 8.08 Section 8.09 Section 8.10 Refer to Purchasing and Attorney AGS - Proposal Pg FDOT TSC-3 Request Contract Agreement Sec. 22.00 Sec. 14.00 Sec. 19.00 Go to cubic western data Vol 1 CWD Qualification Statement These relate back to sections within RFP already described. As can be seen the evaluation committee was persuaded that it needed the assistance of the Purchasing Division and attorneys within DOT to examine the problems with the AGS suggestions. This is somewhat misleading, because assistance was provided from contractual services, not purchasing. It also felt the need for consultation concerning the responsiveness of Cubic. Ms. Stemle's testimony describes the evaluation committee's reaction to the Cubic and AGS proposals as an attempt by Cubic to change the documentation of the DOT and for AGS to propose a language change to the contract document. In its effort to have the matters examined the evaluation committee contacted Woody Lawson and asked if the evaluation committee should have any real concern about Cubic and AGS. Lawson advised that the evaluation committee should move forward to examine the technical proposals of the three offerors and that the problems that had been seen in the responses might not in their own right constitute a matter of concern. The observation by Ms. Stemle was that this meant, if the proposals in their terms complied in all respects with the RFP, that DOT would be contracting with an offeror for what the RFP called for. This specifically refers to compliance with the technical aspects of the RFP. In essence, the method contemplated by Mr. Lawson's advice to the evaluation committee was one in which the issue of overall responsiveness in view of the problem language in the Cubic and AGS responses related to administrative or contractual requirements was set aside until the technical proposals could be examined. That examination revealed that the technical proposal by Cubic related back to the problems of changes to the contract format and caused the evaluation committee great concern about the responsiveness of Cubic. The technical aspects of AGS were not found to present sufficient problems, in the mind of the evaluation committee, to cause a re-examination of the contract or administrative issues that were addressed in the memorandum attachments within PRC No. 4 as they describe the suggestions in PRC No. 5 that had been promoted by AGS in its response. From Ms. Stemle's point of view, the, problems that existed with the AGS suggested contractual changes or administrative changes that could be addressed in the course of a negotiating phase leading to a contract should AGS be found to be the most advantageous offeror. Persons within DOT who might have a greater appreciation of the significance of the AGS suggestions, that is to say persons from the contracting services or legal arm within DOT did not make a critical examination of the AGS suggestions. By contrast to the circumstance with the AGS proposal, a meeting was convened to consider the responsiveness of Cubic following the assessment of its technical terms. Out of that meeting a decision was reached to reject the proposal of Cubic. These activities are described in the composite PRC No. 7, which includes a memorandum of May 16, 1989, concerning the meeting to discuss the responsiveness issue and a May 18, 1989 letter advising Cubic of the decision to reject its proposal. This decision was met with a protest filed by Cubic. The terms of that formal written protest are described in the Cubic Exhibit No. 3 admitted into evidence. That protest was voluntarily dismissed on July 31, 1989 as shown in Cubic's Exhibit No. 4 admitted into evidence. The case had been forwarded to the Division of Administrative Hearings for consideration as Cubic Western Data, Petitioner vs. Department of Transportation, Respondent, DOAH Case No. 89-3852BID. With the advent of the notice of voluntary dismissal, the case was dismissed before the Division of Administrative Hearings by order, shown in Cubic Exhibit No. 5 admitted into evidence. Following the notice of voluntary dismissal of the Cubic protest the evaluation committee proceeded with the work of examining the remaining proposals and the office of contractual services opened the price proposals. The office of contractual services was made aware of the scoring in the technical aspects of the two remaining proposals and conducted the opening of the price proposals at a public session. The office of contractual services and the evaluation committee conducted independent examinations of the pricing. In doing this work those groups had an engineer's estimate of the cost which was based upon all unit rates which had been requested in the RFP. In effect, there was a comparison of the proposals against the engineer's estimate. The committee had in mind making certain that the pricing was in keeping with the technical proposal. Through this process DOT derived its proposal tabulation, a copy of which may be found as PRC Exhibit No. 8 admitted into evidence. It shows that out of a possible 2,000 points PRC achieved 1,830 and AGS 1,304. This document reminds those concerned that any intended award of the contract is contingent upon and subject to the Governor and Cabinet's approval under the authority of Section 287.073, Florida Statutes, and Rule 13N-1.005, Florida Administrative Code. This exhibit constituted a statement of the DOT intent to award to PRC. The bids had been opened on September 11, 1989, and the posting time ran from 8:00 a.m., November 21, 1989 until 8:00 a.m., November 28, 1989. CUBIC RETURNS Notwithstanding the voluntary dismissal of its challenge to the agency decision finding it unresponsive, as noticed July 31, 1989 and the resultant lack of involvement of Cubic in the review process associated with examination of the price quotation and comparison to the remaining offerors, Cubic attempted to resurrect its participation in the administrative process. This was done by a letter of protest on November 27, 1989, which may be seen as Cubic Exhibit No. 6 admitted into evidence, and a formal written protest dating from December 6, 1989, Cubic Exhibit No. 7 admitted into evidence. The case was referred to the Division of Administrative Hearings and became Cubic Western Data, Petitioner vs. Department of Transportation, Respondent, and Planning and Research Corporation, Intervenor, DOAH Case No. 89-6926BID. On January 2, 1990, the Hearing Officer recommended the dismissal of the protest by Cubic and by Final Order of January 22, 1990, the Secretary of DOT dismissed the protest and ordered that the contract be awarded to PRC. That order did not contain the caveat found in the notice of intent to award tabulation that reminded interested persons that the decision was contingent upon approval by the Governor and Cabinet pursuant to Section 287.073, Florida Statutes, and Rule 13N-1.005, Florida Administrative Code. A copy of the Recommended Order and Final Order may be found as Cubic Exhibit No. 8 admitted into evidence. Having determined to award the contract to PRC and in anticipation of that outcome, DOT provided documentation to the Director of the Division of Purchasing of the Department of General Services in support of its choice on November 15, 1989. A copy of that information with a transmittal letter may be seen as PRC Exhibit No. 10 admitted into evidence. This was followed by a February 7, 1990 letter to the Director of the Division of Purchasing of the Department of General Services requesting that the item be agendaed before the Governor and Cabinet for its February 20, 1990 meeting. The letter mentioned the fact that court action which had been commenced by PRC attempting to prohibit the disclosure of the details of its proposal had been dismissed. Thus, the cabinet aides and the Governor and Cabinet would be able to examine the details of PRC's submission. The correspondence points out that the Cubic price proposal had never been examined by DOT and remained unopened. The correspondence; included a copy of the January 22, 1990 Final Order dismissing the Cubic protest. A copy of the February 7, 1990 correspondence was admitted as PRC Exhibit No. 1. The record does not reveal that the Governor and Cabinet sitting as the State of Florida, Department of General Services has ever acted to approve or disapprove the intended contract award to PRC. As of the week of the final hearing it was still a deferred agenda matter in front of that body. Secretary Benjamin J. Watts, agency head for DOT, had his first involvement in this case in the summer of 1989 at about the time Cubic brought its initial challenge to the decision finding it unresponsive. In the absence of the then Secretary Kaye Henderson he spoke with the General Counsel to DOT, Tom Bateman, and advised Bateman to make the decision that Secretary Henderson contemplated; that decision being one where the agency moved forward with the decision making process concerning this RFP. Following that circumstance Watts received a number of telephone calls from different offices or individuals in the legislature inquiring about whether the DOT properly reviewed this case and if Cubic had been treated fairly. Watts replied in the affirmative. Sometime around Christmas of 1989, Watts met with Cubic, PRC and AGS to discuss the pending case and upon the advice of an attorney within DOT, Bob Daniti, decided to leave matters to the Hearing Officer. This pertained to Cubic's existing case which was eventually dismissed on January 22, 1990. Watts then received a telephone call on February 14, 1990, from Brian Ballard of the Governor's office. Watts had a meeting with Ballard to describe Watts' impression of the case. Ballard requested that DOT do a side-by-side comparison of the proposals based upon information that Cubic had supplied Ballard and his office, according to Ballard. Watts is unaware of who Ballard may have met with from the Cubic firm. This inquiry by Ballard was made at a time beyond which DOT had declared its intention to award the contract by entry of its Final Order on January 22, 1990. From what Ballard said to Watts, Cubic had given Ballard two or three exhibits out of the proposal and highlighted certain areas and within those exhibits told Ballard that if Cubic is being declared unresponsive, then some of the other firms should have been found unresponsive as well. The opposition to the DOT choice to award to PRC as expressed by persons who communicated their point of view to Watts was not based upon any concerns as to the technical analysis. It was premised upon concerns about procedures. Ballard also informed Watts that he wanted the review done and a recommendation made about this matter on Monday following that Wednesday, which would have been February 19, 1990. As Ballard expressed it this would allow him to get back with Cubic on February 20, 1990. Watts responded to these instructions by telling a second committee which he selected on February 14, 1990 to make a further review and that he wished to have their recommendations by February 19, 1990, if possible. He told them that if that was not possible, then their reasons should be provided by the end of the upcoming weekend. In anticipation of the discussion with the Governor's office, Watts told his personnel that he wanted them to give him some estimate of how long it would take. If the review could not be completed by the designated time, Watts said that he intended to simply go back to Ballard and tell him that it was not possible to give an impression of this case by the deadline which Ballard had imposed. In furtherance of the instructions which he had been given by Ballard, Secretary Watts convened the second evaluation committee which was constituted of persons who had stronger grounding in administrative and contract matters. This group included George Lovett, the General Counsel for District V; John Ellis, Professional Services Coordinator in that same District; Brant Hargrove, General Counsel for District II; Nodrie Moses, from the procurement office; Jack Monpetit, Professional Services Coordinator, District II and Marly Eichhoefler, from the DOT Auditor's office. Secretary Watts issued a memorandum which gave a written indication of his intentions about the duties of the second evaluation committee. A copy of that memorandum may be found as DOT Exhibit No. 1 admitted into evidence. He charged that group with the responsibility to review the RFP and all proposals, to include the Cubic proposal which had been rejected in the final order entered cutting off the participation of Cubic in the process. He told them to review and compare major elements of each proposal and determine how responsive each offeror had been in completing the RFP. He indicated that they should identify any problem areas, procedures, questions or etc. that revealed themselves. He allowed them to question the first review committee as well as others who had been involved in the process to gain information about background and technical matters, and provided a list of names of persons who could be contacted to include the members of the first evaluation committee. The Secretary did not intend that the second review committee look carefully at the technical side of the proposals. Being uncertain of their charge in that respect, the second evaluation committee came back to the Secretary early on in their review process and asked for clarification on that point and were told that they need not concern themselves with the particulars of the technical aspects of the proposals. It was not the intention of Secretary Watts that the second evaluation committee get involved in any in-depth discussion or analysis of the choices of the first evaluation committee or to offer a specific critique of the work done by that group. His intention was that the second evaluation committee operate independent of the activities of the first evaluation committee. Watts even went so far as to instruct his second evaluation committee not to ask questions of the first evaluation committee about what conclusions the initial group had reached and not to get information or documents from the first group that would reveal what the prior group had done. The second evaluation committee pursued its responsibilities for several days. On February 17, 1990, it wrote a memorandum to Secretary Watts with its recommendations. A copy of that memorandum may be found as DOT Exhibit No. 2 admitted into evidence. The second evaluation committee did not draw any different conclusions about the responsiveness of the Cubic proposal, nor ascertain any impropriety in treatment that Cubic received in the evaluation process. It did determine that AGS was also nonresponsive for reasons that will be discussed more thoroughly. The evaluation of the PRC proposal by the second evaluation committee lead to the conclusion that the PRC proposal was responsive. That perception was held by the first evaluation committee as well. It is accepted here, together with the opinion of the unresponsiveness of Cubic. After receipt of the report from the second evaluation committee, Secretary Watts held an exit interview with those persons. In the course of that exit interview the conclusions reached by the second evaluation committee were explained to Watts. It was at that point that Watts gave this group some insight into the history of the case in terms of the contentions that had been made about DOT and its first assessment of these proposals. At this juncture, he asked the second evaluation committee if they discovered anything improper with the bidding or anything in the way of influencing that process, taken to mean improper influence. The second evaluation committee told him that there did not appear to be any impropriety or undue influence. That perception is in accord with the assessment of the present record, in that it has not been revealed that the DOT participated in any impropriety or was susceptible to undue influence in the process of the initial evaluation of the responses. Likewise, nothing in the activities of the second evaluation committee is seen to be inappropriate in terms of the portions of this project that they examined related to the administrative or contractual portion of the RFP. The conclusions that they reached are correct in academic terms. Their ability to proceed to evaluate as a jurisdictional matter is not acceptable for reasons that will be discussed in the conclusions of law. More particularly, the second evaluation committee in its exit conference with Secretary Watts told him that their impression of those persons that they had spoken with from the first evaluation committee did not lead them to conclude that there was any pressure on or undue bias exercised by that group. Secretary Watts described for the second evaluation committee what he called rumors around Tallahassee of political influence used to find Cubic nonresponsive and apparently the suggestion that this would work somehow to the advantage of PRC. Again, to the extent that form of commentary was being pursued, it does not comport with the facts in this case. The second evaluation committee in its conclusions about the work of the first evaluation committee determined that the first group had not spent as much time in analyzing procedural and administrative issues as the second group did and saw this as being the reason the first evaluation committee did not discover the unresponsive nature of the AGS proposal. The second evaluation committee did not look closely at the AGS technical proposals to see how those might have an influence on its proposed contract language. Nonetheless, explanation of the AGS bid with the suggested contractual arrangement which AGS has advanced (See PRC Exhibit No. 5), reveals that a consideration of the technical aspects of the AGS bid would not save the proposal from a declaration that it is unresponsive. With the determination that AGS was not responsive, DOT was left with one responsive offeror. Secretary Watts had a conversation with Ronnie Thomas, Director of Purchasing for the Department of General Services. The recommendation that Thomas made to Watts was to re-advertise in that there were three offerors basically capable of doing the work and it would be in the best interest of the taxpayers to re-advertise. The choice to re-advertise would be in lieu of the award of the contract to PRC. That contract would not be for a sole-source purchase. In would be under the guise of what is referred to in Section 287.062(2), Florida Statutes, as a negotiated purchase. In addition to discussing the situation with the second evaluation committee, Secretary Watts sought the advice of his legal staff. He decided to re-advertise because he felt that DOT had not followed its own procedures, as it relates to examination of the AGS proposal by the original evaluation committee and its failure to deal with the problems in that proposal. Under the circumstances, Watts did not believe that he would be able to support the decision to award to PRC, before the public and the Governor and Cabinet. In his mind this outweighed any decision in favor of PRC as being an arrangement that would be advantageous to the State. He believes that there is a benefit to be derived by competition, whether re-advertising leads to a better price advantage or not. Secretary Watts believes that even though the matter has been referred to the Governor and Cabinet for its decision, DOT has the ability to reject all proposals and re-advertise. On February 21, 1990, all three offerors were informed of the agency decision to reject all bids. The correspondence directed to PRC may be found as PRC Exhibit No. 9 admitted into evidence. The correspondence directed to Cubic may be found as Cubic Exhibit No. 9 admitted into evidence. In its operative terms, that correspondence is the same and in pertinent part states: Further review of the proposals submitted in response to RFP-DOT-88-01, Toll Collection System, revealed that the proposals submitted by AGS Information Services, Inc., and Cubic Western Data were non-responsive. In order to have competitive offers there must be two or more offers submitted by responsive and qualified offerors. As a result, we do not have two competitive proposals. The Department has determined that the commodities which were the subject of this request for proposals are available from more than a single source. Therefore, the Department has decided to withdraw its notice of intent to award RFP-DOT-88-01 to Planning Research Corporation, which was contingent on Governor and Cabinet approval. This letter is your notice of our decision to reject all proposals. It is our intent to issue a new Request for Proposals for a Toll collection System. On that same date an amended final order was issued signed by the same person who had authored the letter notifying the parties of the decision to reject all proposals, as designee of Watts. The amended final order in its substance is associated with DOAH Case No. 89-6926BID and differs from the January 22, 1990 final order to the extent of reminding those parties that the award to PRC is contingent upon approval by the Governor and Cabinet in accordance with Section 287.073, Florida Statutes and Rule 13N-1.005, Florida Administrative Code. Secretary Watts perceives the amended final order as establishing a correction to the January 22 order, concerning advice to the parties that the contract must be approved by the Governor and Cabinet. He does not perceive this as being a continuing statement of the intention to award to PRC in the face of a contradictory decision to reject all bids, as evidenced in the correspondence of that same date. The DOT estimate concerning the time necessary to re-advertise contemplates an intent to award by December 7, 1990, with no time allowance for a protest from a disappointed offeror. PROBLEMS WITH THE AGS PROPOSAL Based upon an examination of the testimony of Secretary Watts, Terry Cappellini, Director of Purchasing within DOT, and members of the second evaluation committee, together with an analysis of the overall record concerning the RFP language and policy matters associated with the RFP process, the AGS proposal is not responsive. As alluded to before, PRC Exhibit No. 5 sets out the suggestions which AGS had in mind when it submitted its proposal. It calls them exceptions. In Special Condition 2.08, the language of which is found at page 6, AGS has recommended insertion of additional language to the affect that: In the event the Department cancels for unappropriated funds this RFP or any contract entered into with Contractor pursuant thereto, the Department will, within 30 days of notification of such cancellation, pay Contractor for all work actually performed. Such payment shall be in accordance with the payment terms specified in the Contract between the Department and the Contractor. Similar language is contemplated as being added to Section 19.00 under the Contract Agreement which language in the Contract Agreement has been recited at page 11 in the recommended order. In describing the reasons for the suggested additional language AGS states that it is requiring assurance that if the RFP or any contract with DOT and AGS is cancelled because of a problem of funding, AGS insists on being paid for work that is actually performed. In furtherance of that arrangement it recommends insertion of the above-quoted language. With respect to Special Condition 2.09, which is quoted at page 6 in this recommended order, AGS vies for cancellation after allowing AGS a reasonable opportunity to remedy the problems contemplated, instead of the right to cancel immediately. It recommends the insertion of additional language to the affect: In the event the Department intends to cancel a contract arising from the RFP due to Contractor's alleged failure to complete specified work in accordance with the provisions of the contract or this RFP, the Department shall notify Contractor of such intention, identifying the alleged deficiency, and allow the Contractor a period of 30 calendar days form the date of such notice to remedy the deficiency. In the event Contractor fails to remedy the deficiency within such 30 day period, the Department may cancel the contract effective immediately. Related to Special Condition 6.01.02 dealing with indemnification, as related on page 8 in the recommended order, AGS states that it finds that the idea of indemnification associated with the sole negligence of the Department is not appropriate and would recommend that the word "sole" be substituted for by "or primary." A similar change is recommended for Section 14.00 under the Contract Agreement which has the same language as Special Condition 6.01.02. In discussing Special Condition 6.01.03, the text of which is found at page 8 in the recommended order, AGS attempts to clarify that the one percent reference at special Condition 6.01.03 is in addition to the one percent total compensation for performance that is set out in Special Condition 6.01.02 by the insertion of additional language in Special Condition 6.01.03 in this way: Section 6.01.03 specifies that 1% of total compensation to the Contractor is the agreed compensation for performance by Contractor of the Indemnity Agreement set forth therein. AGS would like to make clear that this 1% is in addition to the 1% of total compensation for performance of the Indemnity Agreement set forth in Section 6.01.02. Accordingly, AGS recommends insertion of the following additional language in Section 6.01.03: `This 1% in addition to 1% of total compensation specified in Section 6.01.02 above.' General Provision 5.07.02 is associated with the failure to the contractor to remove or renew defective materials and work, the text of which section is set out at page 9 of the recommended order. AGS expresses the belief that the contractor should be given a reasonable period of time to remove or renew before rights of the DOT are triggered. It recommends the insertion of language to the effect: The Department's rights under this Section shall be triggered only in the event Contractor fails to remove or renew defective material and/or work within a reasonable period of time from the date of request for such removal or renewal. Engineer and Contractor shall agree upon the duration of such time period on a case by case basis. By remarks directed to General Provision 8.08 of the General Provisions related to the 10 day grace period to cure the defaults, AGS states its belief that 30 days is more reasonable and requests that the grace period be extended to 30 days. In discussion of General Provision 8.09 dealing with the ability of the DOT to complete work after default, found at page 10 of the recommended order, AGS describes its belief that contract law and equitable considerations mandate that DOT is required to use its best efforts to mitigate damages and recommends insertion of the language to the effect: The Department shall use best efforts to mitigate damages in performing or arranging to have work performed as provided in this Section. Discussion is made by AGS of General Provision 8.10, which is described at page 11 in the recommended order. AGS believes that the schedule of liquidated damages should discharge the contractors liability for acts or admissions unless the law requires otherwise. AGS commends insertion language to the effect: Except as otherwise provided by law, payment by Contractor of liquidated damages in accordance with this schedule shall fully discharge Contractor's liability for acts or omissions giving rise to such damages. In discussing the Contract Agreement AGS requires the addition of a Section 22.00 which has this language: In no event will contractor be responsible for any special indirect, incidental or consequential damages resulting from loss of use or opportunity, data or profits arising out of or in connection with the use or performance of the products or services proposed to be delivered hereunder, even if contractor was informed, knew or should have known of the possibility of such damages. In no event will the liability of contractor in connection with the work proposed to be performed hereunder exceed amounts paid by the Department to contractor for such work. This limitation applies to all causes of action in the aggregate, including, without limitation, breach of contract, breach of warranty, negligence, strict liability and other unintentional torts. Finally, under the Contract Agreement is found this comment by AGS wherein it says: AGS requires that the contract define the work AGS will perform. We have priced the work with the understanding that our Technical Proposal defines the work. If we will be required to do work not defined, we will be willing to review our price proposal. In the provisions within the RFP that were referred to in the initial discussion of its terms, the offerors were given adequate opportunity to discuss and clarify those provisions which they did not understand or agree with. Absent success in the attempt to try to persuade DOT to change its position concerning those items within PRC 5 that AGS takes exception to, it had the ability to make a timely challenge to those terms and conditions. From the record, AGS did not attempt to persuade DOT to make changes nor did it pursue challenges to the terms and conditions excepted to. As a consequence, according to Special Condition 2.13, AGS has acquiesced in the terms and conditions. Absent a challenge within 72 hours of the date for submitting requested changes, which date according to PRC Exhibit No. 3 was November 28, 1988, no challenge may be pursued. To allow AGS to advance these recommendations and requirements set out in PRC 5 through the submission of its proposal, would be to condone a material departure from the requirements of the RFP. These items constitute other than minor irregularities which may not be waived. As described in Special Condition 2.04 these arrangements which AGS promotes could affect the price of the proposal and give the offeror an advantage over the other offerors, benefits not enjoyed by the competition. Of course Cubic sought similar advantage, so it is PRC who bore the brunt of these attempts by the competition. To allow AGS to require items or bargain for items in its favor that are not enjoyed by its competitors at a time beyond the acceptable place at which these adjustments could have been allowed or mandated by a decision honoring a challenge to the specifications, would be violative of Special Condition 2.13. It would also adversely impact the interest of the DOT described in Special Condition 2.04, in that the items which AGS would change are extremely important to DOT as a policy matter. These are items that DOT would not wish to surrender through negotiation. This speaks in particular to changes to Special Condition 2.08, General Condition 8.09, the addition of Section 22.00 under the Contract Agreement and the required deference to the technical proposals of AGS instead of the RFP. Moreover, under Special Condition 2.05 the AGS attempt constitutes a nonresponsive proposal in that it is a conditional proposal and is indefinite and ambiguous. Under the scheme contemplated by the RFP, it would be inappropriate to wait until the time of intended contract award to AGS, as hypothetical winner, before making the final decisions on the recommendations that AGS had made to change the terms of the RFP. Regardless, in those instances which have been identified wherein AGS required a certain outcome associated with the RFP terms, this potential bargaining session is not contemplated and a decision on responsiveness would have to be reached without regard for such a bargaining session. In either event, whether referring to the recommended changes or required changes, AGS did not pursue these matters appropriately and they are items which are material, which may not be waived as minor irregularities and which cause the AGS bid to be unresponsive. As generally described before, in the event changes are requested as contemplated by Special Condition 2.13, DOT determines if those changes are acceptable and to the extent that they are found to be acceptable they are incorporated as an addendum to the RFP, thus allowing all offerors the opportunity to submit proposals to the same controlling specifications. When AGS mandated a different set of requirements or requested them, it deprived the other offerors of the opportunity to submit proposals associated with the same specifications. This created an advantage and benefit for AGS not enjoyed by PRC. In summary, none of the items that the first evaluation committee and the second evaluation committee discovered about the PRC proposal constituted other than minor irregularities. As described by Terry Cappellini, who is the Manager of the Office of Contractual Services for DOT, the PRC proposal is advantageous to the state in the sense of being the high technical low priced proposal.
Recommendation Based upon the Findings of Fact and the Conclusions of Law, it is, RECOMMENDED: That a Final Order be entered leaving in place the final order dated January 22, 1990 as amended by the February 21, 1990 order, in which the decision was made to recommend the intended award of a contract to PRC to the Governor and Cabinet; which sets aside the decision to reject all proposals, takes the necessary action to arrange for the item to be agendaed before the Governor and Cabinet; and foregoes further action until the Governor and Cabinet has made its decision. DONE and ENTERED this 22nd day of May, 1990, in Tallahassee, Florida. CHARLES C. ADAMS, 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 22nd day of May, 1990. APPENDIX TO RECOMMENDED ORDER, CASE NO. 90-1583BID The following discussion is given concerning the proposed facts of the parties. Petitioner's Facts Paragraph 1 Reference to a September 23, 1988 publication in the Florida Administrative Weekly is not necessary in that the start-up date of October, 1988 has been Established in the recommended order and that suffices. Otherwise this paragraph is subordinate to facts found. Paragraphs 2 through 16 are subordinate to facts found. Paragraphs 17 and 18 are not necessary to the resolution of the dispute. Paragraph 19 in its first and third sentence is subordinate to facts found. The second sentence is not necessary to the resolution of the dispute. Paragraphs 20 through 25 are subordinate to facts found. Paragraph 26 is contrary to facts found. Paragraphs 27 through 31 are subordinate to facts found. Paragraph 32 is subordinate to facts found except to the extent it suggests that the AGS proposal is responsive. In that way it is contrary to facts found. Paragraph 33 is subordinate to facts found with the exception that the problem with the AGS proposal in its suggestive contract language were not answered by the review. In Paragraph 34, the impression by the initial evaluation committee that the AGS problem areas could be worked out later was erroneous. The discussion in Paragraphs 35 through 39 concerning the ability of the agency to reconcile the problems with the change to the specified contract language and conditions contained within the RFP does not comport with the facts in the recommended order. The idea of default by an awardee and collection of the bid bond does not come into play because there is no opportunity to wait that long before resolving the issue of responsiveness of the offer concerning those contract terms and conditions set forth in the RFP. Paragraph 40 is subordinate to facts found. Concerning Paragraph 41, notwithstanding the fact that the agency has no specific policy about indemnification language, if an offeror wanted to modify the suggested language within the contracts and conditions found in the RFP it had to do so in accordance with the discussion in the recommended order. Concerning Paragraph 42, even though there is no definitional statement of what an additional proposal may be, this does not preclude the opportunity to examine that issue on a case by case basis. That was done here. The suggestion by Paragraph 43 that the proposed section 22.00 is other than part of a conditional proposal by AGS is rejected, as is the notion that this language in the proposed section 22.00, described by AGS as required, can be rejected at the time of a contract execution with AGS. It would be inappropriate to wait that long to decide the issue of the acceptability of that proposed section 22.00. That arrangement is not in keeping with the discussion in the recommended order. Paragraph 44 is accepted with the exception that AGS and the DOT could not consider contract changes at the time of potential contract award to AGS. Paragraphs 45 through 48 are subordinate to facts found. Paragraph 49 is contrary to facts found. Paragraphs 50 through 52 are subordinate to facts found. Concerning Paragraph 53, the only thing unique about the Cubic circumstance is its prior participation in the process. Paragraphs 54 through 56 are subordinate to facts found. Paragraph 57 is subordinate to facts found with the exception of the significance of the failure of the second evaluation team to appreciate that the first evaluation team had some knowledge of the problems of the AGS proposal. A clear impression of what was done by the first evaluation team would not appear to have promoted a different result in the analysis made by the second evaluation team. Paragraphs 58 through 60 are subordinate to facts found. Paragraph 61 is contrary to the impression described in the recommended order, in that both Cubic and AGS were unresponsive. The suggestion in Paragraph 62 that a complete evaluation of the technical matters would have caused a different impression of the problems with the AGS proposal is not accepted. Paragraphs 63 through 65 are contrary to facts found. Respondent's Facts These facts are subordinate to facts found. Intervenor's Facts Paragraphs 1 through 21 are subordinate to facts found. Paragraph 22 in the sense of suggesting immediate availability of John Berry to advise the first evaluation committee is not an accurate portrayal and it is that immediate advice which became significant in this case. That advise was provided by Woody Lawson. Paragraph 23 is not necessary to the resolution of the dispute. Paragraphs 24 through 27 are subordinate to facts found. It is accepted that the original evaluation committee perceived the AGS proposed addition of section 22.00 in the Contract Agreement as a recommendation; however, the more pertinent concern was the overall attitude of the first evaluation committee and its actions pertaining to the entire set of issues that were described in PRC 5. Paragraphs 25 and 30 are subordinate to facts found. Paragraph 31 is accepted wherein it describes the lack of contact with the DOT legal office. It is not accepted where it suggests that there was not contact with the purchasing office as having any significance. It sufficed to contact the contractual services office for advice without resort to discussions with the purchasing office. Paragraphs 32 through 43 are subordinate to facts found. Concerning Paragraph 44 it is not considered unusual that in the posting of the proposals, there rating and the statement of intended contract award that mention would be made of the decision being contingent upon approval of the Governor and Cabinet. Paragraphs 45 through 52 are subordinate to facts found. Paragraph 53 is incomplete in its depiction of the reasons for the request of Watts to reevaluate responsiveness. A more complete explanation is set forth in the recommended order. Paragraphs 54 through 61 are subordinate to facts found. Paragraph 62 is not necessary to the resolution of the dispute. Paragraphs 63 through 76 are subordinate to facts found. Paragraph 77 is contrary to the impression of what Secretary Watts concluded. The impression given and found as fact in the recommended order is that his principal concern with the activities of the first evaluation committee were those associated with the failure to ascertain the problems with the AGS proposal. In determining responsiveness the steps for that determination were identified in the RFP as being offeror qualification, responsibilities of the technical proposal, price responsiveness, followed by decision in a comparison of those offerors who had met those first three requirements. In that sense as described in the recommended order declarations regarding Cubic's responsiveness were not dependent on the impression of AGS and the declaration of non- responsiveness of AGS was not dependent on the treatment of Cubic. To the extent that Cubic by the report of those suggested facts is trying to describe some perceived unfairness in the treatment that Cubic received by either evaluation committee or anything that was done in the process in the review of Cubic's proposal, it is rejected as an inferential fact. Paragraph 78 is rejected for reasons as stated above. Paragraph 79 is subordinate to facts found. Paragraph 80 is not necessary to the resolution of the dispute. Paragraphs 81 and 82 are subordinate to facts found. Paragraph 83 is not necessary to the resolution of the dispute. Paragraph 84 is subordinate to facts found with the exception of the statement by Secretary Watts with the ability to reject a contract award once it had been made. That circumstance does not exist here and is not reported factually. Paragraph 85 is not necessary to the resolution of the dispute. Paragraphs 86 and 87 are subordinate to facts found. Paragraph 88 is rejected to the extent that it suggests that Secretary Watts could not defend the award to PRC. More properly stated he chose not to defend an award to PRC. Paragraphs 89 through 92 are subordinate to facts found. Paragraph 93 is rejected for reasons described in discussion of Paragraph 77. Paragraphs 94 through 97 are subordinate to facts found. Paragraph 98 is envisioned by the overall facts found in the recommended order. While the facts suggested in Paragraph 99 are acknowledged, they are not found to be necessary factual findings for the recommended order. Paragraphs 100 and 101 are subordinate to facts found. COPIES FURNISHED: Ben G. Watts, Secretary Department of Transportation Haydon Burns Building, M.S.-58 605 Suwannee Street Tallahassee, FL 32399-0458 Deborah A. Getzoff, Esquire Hala Ayoub, Esquire Richard C. Bellak, Esquire Fowler, White, Gillen, Boggs, Villareal and Banker, P.A. 101 North Monroe Street Tallahassee, FL 32301 Paul J. Martin, Esquire Susan P. Stephens, Esquire Department of Transportation Haydon Burns Building, M.S.-58 605 Suwannee Street Tallahassee, FL 32399-0458 Frank A. Shepherd, Esquire Gary M. Pappas, Esquire Popham, Haik, Schnobrich and Kaufman, Ltd. 4100 One CenTrust Financial Center 100 Southeast Second Street Miami, FL 33131
The Issue Whether Petitioner's "change of status" application should be denied for the reasons set forth in the Notice of Intent to Deny.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following findings of fact are made: Petitioner has an undergraduate and master's degree in civil engineering from the Georgia Institute of Technology (received in 1962 and 1964, respectively) and a law degree from Emory University (received in 1980). In 1968, Petitioner went into the consulting business, and he has had his own business ever since. Since 1968, Petitioner has been licensed as a professional engineer, at one time or another, in approximately 20 different states, including Florida. He has held his Florida license since 1970. The other states in which he is currently licensed are Georgia, Alabama, New York, and Maryland. Petitioner is licensed to practice law in Georgia, but is on inactive status. Petitioner has been licensed as a real estate broker in Florida since 2001 or 2002. Petitioner has been certified as a general contractor in Florida since 1980. He was the qualifier for McKinney Drilling Company from 1980 until 1994. Since 1994, he has been the qualifier for Pressure Concrete, Inc. (Pressure), which approximately a year ago was purchased by Proshot Concrete, Inc. (Proshot). Petitioner has never received any discipline in connection with any of the professional licenses he has held over the years, including the certification allowing him to engage in general contracting in Florida; nor does he have any criminal record. Petitioner has not undertaken any construction or consulting project that has resulted in a lawsuit, judgment, or lien being filed. Petitioner has not been involved in any project where there has been a default triggering a claim against a payment or performance bond. All of the vendors and suppliers he has used on construction projects have been paid. Petitioner has never filed for bankruptcy. There are no lawsuits now pending against Petitioner. In or around September 2006, Petitioner completed and submitted an application to the Board seeking a "change of status" in his certification to enable him (as a general contractor) to qualify Proshot instead of Pressure. Petitioner used a Board-generated form, DBPR CILB 4363-Change of Status Application From One Business Entity to Another (Form), to apply for such a "change of status." The "Financial Responsibility" section of the Form contained the following questions and accompanying instructions: NOTE: If you answer "Yes" to any of the questions below, you must provide an explanation on DBPR 0060-General Explanatory Description form and attach legal documentation, i.e., satisfaction of lien, judgment, payment schedule, etc. If you have been convicted of a felony, you must submit proof of reinstatement of civil rights. The following persons must answer the financial responsibility questionnaire: Qualifying Agent All Owners/Partners Have you, or a partnership in which you were a partner, or an authorized representative, or a corporation in which you were an officer or an authorized representative ever: Undertaken construction contracts or work that a third party, such as a bonding or surety company, completed or made financial settlements? Had claims or lawsuits filed for unpaid past-due bills by your creditors as a result of construction operations? Undertaken construction contracts or work which resulted in liens, suits, or judgments being filed? (If yes, you must attach a copy of Notice of Lien and any payment agreement, satisfaction, Release of Lien or other proof of payment.) Had a lien filed against you by the U.S. Internal Revenue Service or Florida Corporate Tax Division? Made an assignment of assets in settlement of construction obligations for less than the debts outstanding? Been charged with or convicted of acting as a contractor without a license, or, if licensed as a contractor in this or any other state, been subject to any disciplinary action by a state, county, or municipality? (If yes, you must attach a copy of any state, county, municipal or out- of-state disciplinary order or judgment.) Filed for or been discharged in bankruptcy within the past five years? (If "yes," you must attach a copy of the Discharge Order, Order Confirming Plan, or if a Corporate Chapter 7 case, a copy of the Notice of Commencement.) Been convicted or found guilty of or entered a plea of nolo contendere to, regardless of adjudication, a crime in any jurisdiction? Note: If you, the applicant/licensee, have had a felony conviction, proof that your civil rights have been restored will be required prior to Licensure. Petitioner answered "No" to all of these questions, believing, in good faith, that such information was accurate. The final page of the Form contained the following "Attest Statement," which Respondent signed: I have read the questions in this application and have answered them completely and truthfully to the best of my knowledge. I have successfully completed the education, if any, required for the level of licensure, registration, or certification sought. I have the amount of experience required, if any, for the level of licensure, registration, or certification sought. I pledge to comply with the applicable standards of practice upon licensure, registration, or certification. I understand the types of misconduct for which disciplinary proceedings may be initiated. As part of the application process, Petitioner made the necessary arrangements with Advantage Information Services, LLC (Advantage) to directly provide the Board with a credit report. On or about October 26, 2006, Advantage sent the Board a two-page Transunion credit report (Transunion Report) containing Petitioner's "credit profile," along with a one-page report of the results of a "check[]" of public records at the "local, statewide, and national level" (Records Check Report). The Transunion Report revealed a federal tax lien in the amount of $35,100.00 that had been filed against Petitioner in 1997 for unpaid personal income taxes. Petitioner was aware of this lien at the time he filled out the Form, but did not report it in response to Question 4 of the "Financial Responsibility" section because he did not understand the question to ask about liens such as this one which were unrelated to his business activities. The Internal Revenue Service is withholding 15% of Petitioner's monthly Social Security benefit and applying it to reduce the amount Petitioner owes for his unpaid personal federal income taxes. The Records Check Report read as follows: Public records have been checked on a local, statewide, and national level and are incorporated within the report. Additional records are as follows: Cheatham Register of Deeds, TN - Federal Tax Lien Release, 01/11/2005, Case #74147 - Book/Page 131/552 - $30,908.00 - Not Paid. Plaintiff: IRS Walton County Superior Court GA - County Tax Lien, 03/12/1998, $387.00 - Not Paid. Case Number - B3P253C, Book/Page - 3/253 Plaintiff: County Tax Assessor Dekalb County State Court, GA - Civil Judgment, 05/01/1991, $49,283.00 - Not Paid. Case Number - 814497 Plaintiff: Bank South The 1998 Walton County Tax lien noted in the Records Check Report concerned an assessment made on tangible personal property in the form of an airplane owned, not by Petitioner, but by a corporation of which he was the president. The lien did not arise out of any activities in which Petitioner was engaged as a general contractor. The 1991 Dekalb County civil judgment noted in the Records Check Report required Petitioner to repay a bank loan Petitioner had co-signed for a friend. It too had nothing to do with his activities as a general contractor. It was only after the Board had provided Petitioner with a copy of the Records Check Report that Petitioner first became aware of the existence of the 1998 Walton County Tax lien and the 1991 Dekalb County civil judgment.2 As noted above, on April 18, 2007, the Board issued its Notice of Intent to Deny Petitioner's "change of status" application.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Board find Petitioner qualified for the "change of status" for which he has applied. DONE AND ENTERED this 1st day of November, 2007, in Tallahassee, Leon County, Florida. S STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of November, 2007.
The Issue Whether City of Belleair Beach Treasurer Robert K. Hebden was an independent contractor or an employee of the city.
Findings Of Fact The Petitioner City of Belleair Beach (City) is a participating local agency of the Florida Retirement System (FRS) and is subject to the laws applicable to the FRS. The City began participating in the FRS through the adoption of City Ordinance 99 in 1973. The Respondent Division of Retirement (Division) is the state agency charged by statute with the administration of the FRS. On a date unspecified, the Division's Management Review Section audited the City as required by statute. Based on the audit, the Division concluded that Mr. Hebden was not an independent contractor, but was a part time employee of the City. The Division communicated this information to the City by letter of May 27, 1992. The Division's Enrollment Section, responsible for enrolling employees in the FRS, conducted an analysis of the materials obtained by the Management Review Section, and concurred in the initial employment status determination. By letter of October 11, 1993, the Director of the State Division of Retirement notified the City that the Division had determined Mr. Hebden to be have been an employee in a regularly established position for purposes of the FRS from July 1979 through February 1991, and that FRS contributions were due for that period. On October 15, 1993, Mr. Hebden signed an FRS application for service retirement. The application was filed with the FRS. Mr. Hebden completed the application on the suggestion of the Enrollment Section Administrator. Mr. Hebden considers himself to have worked for the City as an independent contractor and would not have filed an FRS application without the request by the enrollment administrator. In concluding that Mr. Hebden was an employee, the Division reviewed all materials furnished by the City. Such materials included copies of contracts, billing statements and IRS forms. At all times, the Division has been amenable to reviewing any additional documents submitted by the City. Beginning in 1972, and continuing to February of 1991, Robert K. Hebden provided various services to the City. Beginning in July 1979, Mr. Hebden served as the City Treasurer. The position of Belleair Beach City Treasurer is established by city ordinance. The position description for the City Treasurer sets forth duties as follows: The treasurer works on a daily basis primarily under the mayor's supervision but is ultimately accountable to the city council. Compiles operating and capital expense estimates for annual budget. Forecasts problem areas of income and expense and proposes possible solutions. Maintains general accounting system and appropriate operating cash balances. Submits to council a monthly detailed statement of revenue and disbursements in contrast with annual budget. Prepares for submission to council a detailed financial statement as of the end of each fiscal year. Invests surplus General Government Funds in conjunction with the Mayor or Deputy Mayor and recommends investment of Sewer Trust Funds in conjunction with the approved Trustee. Provides for payment of bonds and interest and maintains files for cancelled coupons and bonds. Maintains capital assets inventory including acquisition and disposition. Between July 1, 1979 and February 12, 1991, Mr. Hebden was the Belleair Beach City Treasurer. He performed the duties of the position description and such additional duties as were assigned at the discretion of the Mayor and Council. In February 1983, Mr. Hebden and the City entered into a written contract regarding his service as Treasurer. The initial contract was retroactive to October 1, 1982. Prior to this point, Mr. Hebden acted as City Treasurer under an oral agreement with the City officials. The February 2, 1983 contract identifies Mr. Hebden as "the Contractor." The contract is for the one year period of October 1, 1982 to September 30, 1983 and provides as follows: The Contractor will be allowed twelve (12) days of paid sick leave and at times mutually agreeable fifteen (15) days of vacation without adjustment to the monthly fee. Absence in excess of this amount will be adjusted on a prorata basis. The work week will be 8:30 A. M. to 12:30 P. M. daily, Monday through Friday, except for legal holidays recognized by the City. In addition, attendance will be required at Council meetings, work sessions and committee meetings, as may be determined by the Mayor. Services will be reimbursed on a monthly basis at the rate of SEVEN HUNDRED DOLLARS ($700.00) per month, plus an allowance of SEVENTY DOLLARS ($70.00) for expenses upon receipt of a statement. This agreement may be extended beyond the original term of One (1) year upon such terms and conditions as the parties shall mutually agree between them. Beginning with the subsequent agreement dated July 14, 1983, all contracts identify Mr. Hebden as "the City Treasurer" rather than "the Contractor." The July 14, 1983 contract provides as follows: That Robert K. Hebden shall serve the City of Belleair Beach as the City Treasurer, appointed by the City Council. The services of the City Treasurer shall be performed between the hours of 8:30 a.m. to 12:30 p.m. daily, Monday through Friday, except for legal holidays recognized by the City. In addition, attendance will be required at Council meetings, work sessions and committee meetings, as may be determined by the Mayor. The duties of the City Treasurer shall include but not be limited to: -compilation of current and capital expense estimates for the annual budget -maintenance of a general accounting system -submission to the city council of a monthly detailed statement of revenue and disbursements in contrast with the annual budget -preparation for submission to council of a detailed financial statement as to the end of each fiscal year A RETAINER fee shall be paid by the City of Belleair Beach to the City Treasurer for the above service which shall be EIGHT HUNDRED THIRTY DOLLARS AND NO/100 ($830.00) per month. THIS AGREEMENT shall be reviewed annually by the Personnel Committee of the City Council, the Mayor and the City Treasurer. THIS AGREEMENT shall expire on September 30 of each year unless renewed by Council prior to that time. THIS AGREEMENT shall be cancelled by either party upon a thirty (30) day notice of intent to do so. The September 10, 1984 contract for the one year period to September 30, 1985 is identical to the agreement of July 14, 1983 except that the retainer fee was increased to $900.00 monthly. The July 15, 1985 contract for the one year period to September 30, 1986 is similar to the agreement of September 10, 1984. The retainer fee was increased to $1100.00 monthly and paid leave was again included. The agreement provides as follows: ....In addition, the City Treasurer shall receive three work-weeks vacation annually (allowing for a base figure of 3 work-weeks for the current fiscal year) and twelve work-days sick leave annually (allowing for twelve work-days for the current fiscal year). THIS AGREEMENT shall be reviewed annually by the Personnel Committee of the City Council, the Mayor and the City Treasurer. THIS AGREEMENT shall commence October 1, 1985, and shall expire on September 30 of each year unless renewed by Council prior to that time. THIS AGREEMENT shall be cancelled by either party upon a thirty (30) day notice of intent to do so. The September 23, 1986 contract for the one year period to September 30, 1987 is substantially similar to the preceding contract, however, an amendment was made to the paid leave provisions. The agreement provides as follows: That Robert K. Hebden shall serve the City of Belleair Beach as the City Treasurer, appointed by the City Council. The services of the City Treasurer shall be performed between the hours of 8:30 a.m. to 12:30 p.m. daily, Monday through Friday, except for legal holidays recognized by the City. In addition, attendance will be required at Council meetings, work sessions and committee meetings, as may be determined by the Council or Mayor. The duties of the City Treasurer shall include but not be limited to: compilation of current and capital expense estimates for the annual budget maintenance of a general accounting system submission to the city council of a monthly detailed statement of revenue and disbursements in contrast with the annual budget preparation for submission to council of a detailed financial statement as to the end of each fiscal year A RETAINER fee shall be paid by the City of Belleair Beach to the City Treasurer for the above service which shall be ELEVEN HUNDRED THIRTY DOLLARS AND NO/100 ($1100.00) per month. In addition, the City Treasurer shall receive three work-weeks vacation annually and twelve work-days sick leave annually. Annual leave, which will only be applied against working days, and shall be taken in not less than four (4) hour increments, may accrue to a maximum of fifteen (15) days. Annual leave in excess of fifteen (15) days will be forfeited on the following anniversary date after the year in which earned. The August 3, 1987 contract for the one year period of October 1, 1987 to September 30, 1988 is substantially similar to the preceding contract except that the work hours were amended to 8:00 a.m. to 12:30 p.m. and monthly payment was increased to $1300.00. The September 12, 1988 contract for the one year period of October 1, 1988 to September 30, 1989 is substantially similar to the preceding contract except that monthly payment was increased to $1350.00. In 1989, some Council members questioned Mr. Hebden's performance and considered termination of his contract. The September 25, 1989 contract for the one year period of October 1, 1989 to September 30, 1990 is substantially similar to the preceding contract except that the agreement provides "for a six months performance evaluation." Apparently, the concerned Council members were satisfied with the review and the contract was again renewed. The September 10, 1990 contract reflected Mr. Hebden's intention to leave his position. The contract provides as follows: That Robert K. Hebden shall serve the City of Belleair Beach as the City Treasurer, appointed by the City Council. The services of the City Treasurer shall be performed between the hours of 8:00 a.m. to 12:30 p.m. daily, Monday through Friday, except for legal holidays recognized by the City. In addition, attendance will be required at Council meetings, work sessions and committee meetings, as may be determined by the Council or Mayor. The duties of the City Treasurer shall include but not be limited to: compilation of current and capital expense estimates for the annual budget maintenance of a general accounting system submission to the city council of a monthly detailed statement of revenue and disbursements in contrast with the annual budget preparation for submission to council of a detailed financial statement as to the end of each fiscal year * A RETAINER fee shall be paid by the City of Belleair Beach to the City Treasurer for the above service which shall be [[THIRTEEN HUNDRED AND FIFTY DOLLARS AND NO/100 ($1350.00)]] <<FOURTEEN HUNDRED FIFTY DOLLARS AND NO/100 ($1450.00)>> per month. In addition, the City Treasurer shall receive [[three work-weeks vacation annually and twelve]] <<three>> work-days sick leave [[annually. Annual leave, which will only be applied against working days, and shall be taken in not less than four (4) hour increments, may accrue to a maximum of fifteen (15) days. Annual leave in excess of fifteen (15) days will be forfeited on the following anniversary date after the year in which earned.]] <<Annual leave earned through September 30, 1990 and not taken will be paid on completion of this contract.>> [[THIS AGREEMENT shall provide for a six months performance evaluation.]] [[THIS AGREEMENT shall be reviewed annually by the personnel committee of the City Council, the Mayor and the City Treasurer.]] THIS AGREEMENT shall commence October 1, 1985, and shall expire on <<December 31, 1990>> [[September 30 of each year unless renewed by Council prior to that time.]] THIS AGREEMENT shall be cancelled by either party upon a thirty (30) day notice of intent to do so. * Note: In the above quotation, language which has been added is within the <<>>; deleted language is within the [[]]. All the contracts identified herein were between the City and Mr. Hebden personally. Mr. Hebden signed the contracts. Except as otherwise stated herein, the terms of the contracts were negotiated between Mr. Hebden and the City. Mr. Hebden performed all the responsibilities of the contract personally. For a brief period, he was assisted by a man identified as "Mr. Denman," a person employed by the City. He hired no assistants. Mr. Hebden performed his responsibilities according to practices and procedures he created. He was not provided instructions by the City on how to perform his tasks. The City provided no training to Mr. Hebden. Prior to terminating his tenure as City Treasurer, Mr. Hebden trained his successor in the practices and procedures Mr. Hebden had developed. At all times during Mr. Hebden's employment with the City, he worked the hours specified by the contracts in his office at City Hall. Mr. Hebden testified that he could not recall how his office hours had been determined. The space was provided by the City. The responsibilities of Mr. Hebden's position required utilization of city records, and it was therefore appropriate for such tasks to be performed in an office at City Hall. All furnishings for the office and materials used in performing his tasks were provided by the City. During the period between July 1979 and February 1991, Mr. Hebden submitted to the City statements for payment. Generally, the statements were submitted on a monthly basis. Mr. Hebden had no risk of profit or loss based on any actions of the City. He had no personal investment in the City. Mr. Hebden was paid according to the terms of the contract. He did not receive additional remuneration for his appearance at or participation in Council meetings, work sessions or committee meetings as directed by the Council or Mayor. In the first written contract, Mr. Hebden received a payment for "expenses" in addition to the monthly remuneration. Additionally, Mr. Hebden was reimbursed for personal expenses related to City business use of his car and his boat. Although only one formal performance evaluation was completed during his service, the contracts provide for annual review, except for the final contract which terminated Mr. Hebden's service to the City. Upon said termination, Mr. Hebden was paid for the accrued annual leave. Under the terms of the contract, Mr. Hebden's services could be terminated without penalty upon thirty days notice by either party. Mr. Hebden did not advertise his services to the general public, because he was not interested in taking on additional work, however, for a time, he provided accounting consulting services to the Indian Rocks Fire Control District and was compensated for his work. He also provided volunteer services to the Church of the Isles. During the period relevant to this proceeding Mr. Hebden held no business or occupational licenses. For the years 1979 through 1982, the City reported Mr. Hebden's compensation to the Internal Revenue Service Form by using IRS Form 1099-NEC, the form used to report "Nonemployee Compensation." For the years 1983 through 1991, the City reported Mr. Hebden's compensation to the Internal Revenue Service Form by using IRS Form 1099-MISC, the form used to report "Miscellaneous Compensation." The City did not provide health or life insurance coverage to Mr. Hebden. The City did not pay federal social security or withholding taxes for Mr. Hebden. The City did not provide or pay workers compensation benefits or unemployment benefits for Mr. Hebden. The City did not pay retirement contributions to the FRS for Mr. Hebden.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Management Services, Division of Retirement, enter a Final Order determining that as City Treasurer of the City of Belleair Beach from July 1979 through February 1991, Robert K. Hebden was an employee of the City, and as such was a compulsory member of the Florida Retirement System for which contributions from the City are due. DONE and RECOMMENDED this 21st day of March, 1994, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of March, 1994. APPENDIX TO CASE NO. 93-6518 The following constitute rulings on proposed findings of facts submitted by the parties. Petitioner The Petitioner's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 3. Rejected, contrary to the greater weight of the evidence. Mr. Hebden submitted invoices for payment as early as July, 1979. 11. Rejected, not supported by greater weight of the evidence. Because Mr. Hebden developed his own procedures for performing the duties of the City Treasurer, and trained his successor in performing the tasks of City Treasurer, it is not possible to conclude that Mr. Hebden's services were "not essential to the success or continuation of the City's operation." Rejected, irrelevant. Rejected, contrary to greater weight of evidence. Mr. Hebden testified on direct examination that he could not recall who chose the work hours set forth by contract. All contracts specify the hours to be worked. As to leave time, the first contract provided that such leave could be used only "at times mutually agreeable...." Subsequent contracts required annual leave to be used in four hour increments. Rejected, contrary to greater weight of evidence. Mr. Hebden testified that some auto and boat expenses had been reimbursed. First contract and invoices for payment through September 30, 1982 include payment of sums for "expenses." Rejected, contrary to greater weight of evidence. The contracts specify standard hours of employment and require attendance at meetings as directed by the Mayor and Council. The Respondent's assertion that Mr. Hebden "could make a profit or suffer a loss" is unsupported by credible evidence. Respondent The Respondent's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 5. Rejected, as to employment status of Mr. Hebden's predecessor or successor as City Treasurer, irrelevant. 28, 30. Rejected, as to employment status of Mr. Hebden's successor as City Treasurer, irrelevant. COPIES FURNISHED: A. J. McMullian, III, Director Division of Retirement Cedars Executive Center, Bldg. C 2639 N. Monroe St. Tallahassee, Florida 32399-1560 William H. Lindner, Secretary Knight Building, Suite 307 Koger Executive Center 2737 Centerview Drive Tallahassee, Florida 32399-0950 Paul A. Rowell, General Counsel Knight Building, Suite 312 Koger Executive Center 2737 Centerview Drive Tallahassee, FL 32399-0950 Thomas J Trask, Esquire Frazer, Hubbard, Brandt & Trask 595 Main Street Dunedin, Florida 34698 Jodi B. Jennings, Esquire Division of Retirement Cedars Executive Center, Building C 2639 North Monroe Street Tallahassee, Florida 32399-1560
The Issue Whether various statements or policies attributed to the Department of Health (Department) and the Board of Medicine (Board) in connection with the assessment of costs related to the investigation and prosecution of disciplinary cases coming before the Board are unpromulgated rules in violation of Section 120.54(1)(a), Florida Statutes.1
Findings Of Fact Petitioner is a Florida licensed physician, who received his Florida medical license numbered ME 46054 in 1985. He currently practices medicine at 620 Eichenfeld Drive in Brandon, Florida. Petitioner is currently the subject of a pending disciplinary action initiated by the Department against his medical license. The disciplinary case is styled Department of Health vs. Mohamed I. Abdel-Aziz, Department of Health Case No. 2000-07849, DOAH Case No. 02-4429PL. On June 2, 2003, a Recommended Order was issued in DOAH Case No. 02-4429PL, finding that Petitioner violated Subsection 458.331(1)(t), Florida Statutes. Petitioner is subject to the assessment of the costs related to the investigation and prosecution of his case pursuant to Section 456.072(4), Florida Statutes, should the Board adopt the finding of a violation. Neither the Department nor the Board has promulgated a rule defining "costs related to the investigation and prosecution of the case." Petitioner has challenged the validity of the following statements, which he attributes to Respondents. Complaint Cost Summary. Costs of the investigation and prosecution that are incurred as a part of a license disciplinary case include the costs of the time (salary and benefits) spent by employees of the Department of Health Prosecution Services Unit. Costs of the investigation and prosecution that are incurred as a part of a license disciplinary case include the "overhead expense" of the Prosecution Services Unit. Costs of the investigation and prosecution that are incurred as a part of a license disciplinary case include the "OPS expense" attributable to the Prosecution Services Unit. Costs of the investigation and prosecution that are incurred as a part of a license disciplinary case include the salary and benefits paid by the Department of Health on behalf of employees who have no time keeping responsibility with respect to the time tracking maintenance system of the Department of Health. Costs of the investigation and prosecution that are incurred as a part of a license disciplinary case include the salary and benefits of the attorneys who have been assigned responsibility for and/or who have provided services in connection [sic] a license disciplinary case. Costs of the investigation and prosecution that are incurred as a part of a license disciplinary case include the "expense" of the individual components of the Prosecutions Services Unit. Time Tracking Report. Methodology for Calculating Rate for Billable Hours (pre-January 13, 2003) assessed as costs of the investigation and prosecution. The Department of Health, Board of Medicine procedure for the assessment of costs of the investigation and prosecution of a licenses [sic] found to have violated the disciplinary provisions of Chapters 456 and 458, Florida Statutes, as set forth in the Notice of Voluntary Dismissal of Paragraph (G) of the Prayer for Relief of the Administrative Complaint. Methodology for Calculating Rate for Billable Hours (effective January 24, 2003) assessed as costs of the investigation and prosecution. Notice Regarding Assessment of Costs which stated: Respondent is placed on notice that Petitioner has incurred costs related to the investigation and prosecution of this matter. Pursuant to Section 456.074(4), Florida Statutes, the Board shall assess costs related to the investigation and prosecution of a disciplinary matter, which may include attorney hours and costs, on the Respondent in addition to other discipline imposed. The Department and its predecessor agencies, the Agency for Health Care Administration and the Department of Business and Professional Regulation, have been keeping data of direct and indirect expenses incurred by the Department since at least 1988. Historically, the reason this cost data has been kept is for use in billing the various boards for the amount spent in investigating and prosecuting each board's cases. Section 456.025(8), Florida Statutes, and its predecessors Sections 455.220 and 455.587, Florida Statutes, require that the Department maintain an accounting, by profession, of the expenses incurred by the Department to regulate those professions. These expenses are then, to the maximum extent possible, charged back to the accounts of each regulated profession. Direct expenses include, but are not limited to, costs for investigations, examination, and legal services. For indirect expenses, the Department is to proportionally allocate to the boards the expenses incurred by the Department in the performance of its duties with respect to the regulation of each of the professions. The Department is required to maintain sufficient records to support its allocation of agency expenses and to provide each board an annual report of revenues and direct and allocated expenses related to the operation of that profession. The Department or its predecessors have been keeping data of the costs related to the investigation and prosecution of professional license disciplinary cases. The collection of data includes determining an hourly rate for those persons whose activities are directly attributable to individual and specific cases and an hourly overhead rate for administrative costs and indirect costs. The overhead rate includes salaries plus benefits of clerical staff, rent, office supplies, OPS expense, telephone services, utilities, copier maintenance fees, and other similar expenses. From 1994 until January 13, 2003, the methodology for calculating the overheard hourly rate, called "Methodology for Calculating Rate for Billable Hours," provided as follows: Determine the number of timekeepers and non-timekeepers. Determine the rate for non-timekeepers (annual rate plus + benefits [27.5%]) ? number of timekeepers ? 2080 hours = hourly rate. Determine the rate for expenses (budget expenses and OPS) from operating budget ? number of timekeepers ? 2080 = hourly rate. Add results of steps 2 & 3, for total hourly rate per timekeeper. All employees of the Department's Medical Quality Assurance (MQA) Enforcement Program, which consists of the Consumer Services Unit, the Investigative Services Unit, and the Prosecution Services Unit, are designated either as timekeepers or non-timekeepers. Timekeepers are those employees who perform activities directly related to specific cases. All other employees are considered to be non-timekeepers, and their salary and benefits are part of the costs that are apportioned within the overheard rate calculation. The hourly rate for a timekeeper is calculated by dividing that timekeeper's salary plus benefits by the total annual hours. Under the pre-January 13, 2003, methodology, the total number of hours used was 2080. Benefits were determined based on 27.5 percent of the timekeeper's annual salary. In October or November 2002, James D. Hentz, the Financial Manager for the trust fund of the MQA section of the Department saw this methodology for the first time. He believed that the use of 2080 hours in the methodology was flawed because it included holidays, annual leave, sick leave, and non-billable administrative time, thereby, precluding any possibility of recovering all the costs. Mr. Hentz believed that using 1720 hours better represented the number of hours available to be worked and billed to specific cases, and he proposed that the methodology be adjusted by using 1720 hours instead of 2080 hours. The adjusted methodology proposed by Mr. Hentz was disseminated to the enforcement program units of the Department by Charlene G. Willoughby to be effective January 13, 2003. The methodology, also entitled "Methodology for Calculating Rate for Billable Hours" provided as follows: Determine the number of timekeepers and non-timekeepers. There are 1720 billable hours per year (2080 possible hours worked minus average annual, sick and holiday leave). Determine the rate for non-timekeepers (annual rate + benefits [28%]) ? number of timekeepers ? 1720 hours = hourly rate). Determine the rate for expenses (budget expenses, including OPS) from operating budget ? number of timekeepers ? 1720 hours = hourly rate Add results of steps 3 & 4 for total hourly overhead rate per timekeeper. Add overhead rate to hourly salary + benefits of each timekeeper for individual timekeeper rate. This methodology proposed by Mr. Hentz differed from the previous methodology by the use of 1720 hours instead of 2080 hours and the use of 28 percent of the annual salary to calculate benefits rather than 27.5 percent. These changes resulted in an increase in both the overhead hourly rate and the timekeepers' hourly rate, thereby, increasing the total hourly rate per timekeeper, which is also known as staff rate. The methodology that was disseminated on January 13, 2003, was not implemented by the Investigative Services Unit or the Prosecution Services Unit at the Department. On January 24, 2003, Mr. Hentz sent out another methodology for use in computing overhead and timekeepers' hourly rates. He drafted the methodology in a narrative form, which Ms. Willoughby converted to a format similar to the previous formulas. The January 24, 2003, methodology provides as follows: Determine the number of timekeepers and the non-timekeepers. There are 1720 billable hours per year (2080 possible hours worked minus average annual, sick and holiday leave). Determine the rate for non-timekeepers (annual rate + benefits [as reflected in the COPES Report] ? number of timekeepers ? 1720 hours = hourly rate. Determine the rate for expenses (budget expenses, including OPS) from operating budget ? number of timekeepers ? 1720 hours = hourly rate. Add results of steps 3 & 4 for total hourly rate per timekeeper. Add overhead rate to hourly salary + benefits of each timekeeper for individual timekeeper rate. The salary plus benefits associated with each individual position number for each employee is reported on the COPES Report. In calculating the timekeepers' hourly rate and the overhead hourly rate, the January 24 methodology uses the actual salary plus benefits from the COPES Report instead of calculating benefits by using a percentage of salary as was done in previous methodologies. Timekeepers maintain and submit a daily activity report (DAR) which identifies the cases on which they worked, the activities they performed, and the amount of time they spent in six-minute increments. The DARs are entered into a data system called the Time Track System, where that data is kept by timekeeper identification number, case number, activity, and time spent on each activity. The total hourly rate is also entered into the Time Track System so that the rate can be applied to the time spent on a case by each timekeeper. The total hourly rate is updated at least annually when the new spending plan or budget is issued. It is also reviewed quarterly to make adjustments for salary or benefit changes. The compilations of data from the Time Track System at issue are the Time Tracking Report and the Complaint Cost Summary. The Time Tracking Report is a detailed time accounting report and has two components, the Itemized Cost by Complaint and the Itemized Expense by Complaint. The Itemized Cost by Complaint itemizes the specific activities that have been performed on a specific case by activity code and description, the date of those activities, the timekeeper who performed the activities, the amount of time spent on those activities, and a staff rate for each timekeeper who worked on a specific case. The Itemized Cost by Complaint contains a column that reports "Cost," which is the time spent by a timekeeper for a particular activity multiplied by the staff rate. The Itemized Cost by Complaint is subtotaled by each unit in the MQA Enforcement Program and is finally totaled for all the time spent on a particular case to the date that the report is printed. The Itemized Expense by Complaint itemizes the expenses directly attributable to the specific case. Typical direct expenses would include expert witness fees, travel, and court reporting services. These expenses are ones for which an invoice has been received and paid for a specific expense on a specific case. The Complaint Cost Summary is a summary of the accounting information contained in the Time Tracking Report. It summarizes the total hours spent on a case, by unit, the cost per unit, and the expenses. The total reflected in the Complaint Cost Summary corresponds to the individual subtotals by unit, plus the expenses, which are detailed in the Time Tracking Report. When a specific case goes before the Board for entry of a Final Order that will impose some discipline, various procedures have been used to bring the data concerning the costs related to the investigation and prosecution of that case before the Board. The procedures have varied over time and type of case. For example, when the Board considers defaults and informal hearing recommended orders, it may be informed about the costs in one of several ways, including by written motion, ore tenus motion, or simple statement of the costs. Consent agreements may be considered for assessments of costs in other ways because the amount of the costs would be included in the consent agreement. In the past, cost summaries have not been presented to the Board in cases involving recommended orders; however, more recently cost summaries are being provided to the Board and may include additional materials such as an affidavit from Ms. Willoughby. In some cases, there have been motions to assess costs filed and in others there were oral presentations made to the Board regarding the costs. In the last 13 months, there has been no consistent procedure used by the Department to request the assessment of costs related to the investigation and prosecution by the Board. However, the Department has consistently included its direct and indirect expenses, including an attorney's time in its requests for costs. In Petitioner's disciplinary case, the Department originally requested the assessment of the costs related to the investigation and prosecution in the prayer for relief in the Administrative Complaint, Paragraph (G). Prior to the final hearing, the Department filed a Notice of Dismissal of Paragraph of the Prayer for Relief of the Administrative Complaint, stating that it was dismissing the request concerning the assessment of the costs for the investigation and prosecution of the case. The Department further included the following in the motion: Should the Board enter a final order imposing discipline in this matter, the [Department] intends to request the Board of Medicine to assess costs in the following manner: Upon entry of Recommended Order by the Division of Administrative Hearing, an appropriate Motion to Assess Costs shall be filed with the Board to be considered immediately following Board consideration of said Recommended Order. The motion shall provide [Dr. Abdel-Aziz] an opportunity to file timely written objections to the amount of costs incurred by the Petitioner related to the investigation and prosecution of the case. If a timely written objection to the assessment of costs incurred by the Petitioner related to the investigation and prosecution of the case is filed by [Dr. Abdel-Aziz], the Department shall request the Board to conduct a hearing on the assessment of costs. That hearing shall be conducted either after consideration of the Recommended Order and prior to entry of the Final Order disposing of the case or [sic] a part of a separate bifurcated proceeding if it is appropriate to enter a Final Order before the hearing can be conducted. If a disputed issue of material fact arises, then the matter concerning such dispute shall be forwarded to the Division of Administrative Hearings for a formal hearing. The Department has filed similar notices in at least two other cases before the Division of Administrative Hearings. The Board has not used a specific procedure in the manner in which it addresses the issue of costs related to the investigation and prosecution. It has considered written motions, oral motions, and has, at least on one occasion, just asked the Department representative at the Board meeting what the amount of the costs were. The Board has been interpreting Section 456.072(4), Florida Statutes, to require the inclusion of the direct and indirect expenses of the Department, including those costs listed in subsections b, c, d, e, f, and g of paragraph 4 of this Final Order, when assessing the costs related to the investigation and prosecution of a case against a physician, who is before the Board as a result of a recommended order. In doing so, the Board has implicitly adopted those costs appearing in subsections b, c, d, e, f, and g of this Final Order as the costs it will assess related to the investigation and prosecution of a case.
The Issue The issue is whether Petitioner showed by a preponderance of the evidence that it is entitled to a refund of $1,500,216.60 in sales and use tax paid during the period from January 2005 through January 2007 to purchase industrial printing machinery that allegedly satisfied the statutory requirement for a 10 percent increase in productive output for printing facilities that manufacture, process, compound or produce tangible personal property at fixed locations in the state within the meaning of Subsection 212.08(5)(b), Florida Statutes (2005), and Florida Administrative Rule 12A-1.096.1/
Findings Of Fact Respondent is the agency responsible for administering the state sales tax imposed in Chapter 212. Petitioner is a "for profit" Florida corporation located in St. Petersburg, Florida. Petitioner is engaged in the business of publishing newspapers and commercial printing. Petitioner derives approximately 85 percent of its revenue from advertising and approximately 15 percent of its revenue from circulation subscriptions. In April, 2007, Petitioner requested a refund of $403,780.05 in sales and use taxes paid for the purchase of industrial machinery and equipment during the period from January, 2005, to January, 2006. In October, 2007, Petitioner requested a refund of $1,096,436.61 in sales and use taxes paid for the purchase of industrial machinery and equipment for the period from January, 2006, to January, 2007. The first refund request in April, 2007, became DOAH Case Number 08-3938, and the second refund request in October, 2007, became DOAH Case Number 08-3939. The two cases were consolidated into this proceeding pursuant to the joint motion of the parties. The parties stipulated that the only issue for determination in this consolidated proceeding is whether Petitioner satisfied the requirement for a 10 percent increase in productive output in Subsection 212.08(5)(b) and Rule 12A- 1.096. If a finding were to be made that Petitioner satisfied the 10 percent requirement, the parties stipulate that the file will be returned to Respondent for a determination of whether the items purchased are qualifying machinery and equipment defined in Subsection 212.08(5)(b) and Rule 12A-1.096. The issue of whether Petitioner satisfied the statutory requirement for a 10 percent increase in productive output in Subsection 212.08(5)(b) and Rule 12A-1.096 is a mixed question of law and fact. The ALJ concludes as a matter of law that Petitioner did not satisfy the 10 percent requirement. The ALJ discusses that conclusion briefly, for context, in paragraphs 6 and 7 of the Findings of Fact, and explains the conclusion and the supporting legal authority more fully in the Conclusions of Law. It is an undisputed fact that Petitioner counts items identified in the record as "preprints," "custom inserts," and "circulation inserts" separately from the "newspaper" as a means of exceeding the 10 percent requirement in Subsection 212.08(5)(b). Respondent construes the 10 percent exemption authorized in Subsection 212.08(5)(b) in pari materia with the exemption authorized in Subsection 212.08(5)(1)(g) for "preprints," "custom inserts," and "circulation inserts" (hereinafter "inserts"). The latter statutory exemption treats inserts as a "component part of the newspaper" which are not to be treated separately for tax purposes. For reasons stated more fully in the Conclusions of Law, the ALJ agrees with the statutory construction adopted by Respondent. That conclusion of law renders moot and, therefore, irrelevant and immaterial, the bulk of the evidence put forth by the parties during the two-day hearing because the evidence assumed arguendo that Petitioner's statutory interpretation would be adopted by the ALJ, i.e., inserts would be counted separately from the newspaper for purposes of satisfying the 10 percent requirement in Subsection 212.08(5)(b). In an abundance of caution, the fact-finder made findings of fact based on the legal assumption that inserts are statutorily required to be counted separately for purposes of the 10 percent requirement in Subsection 212.08(5)(b). Those findings are set forth in paragraphs 9 through 11. The verification audit by Respondent's field office was able to verify an output increase of only 4.27 percent for 2005 and only 8.72 percent for 2006. A preponderance of evidence in this de novo proceeding did not overcome those findings. The trier of fact finds the evidence from Petitioner during this de novo proceeding to be inconsistent and unpersuasive. For example, Petitioner inflated production totals by counting materials printed for its own use, and materials in which the unit of measurement was inconsistent. In other instances, production totals for printing presses identified in the record as Didde and Ryobi presses varied dramatically with circulation. In other instances, Petitioner's reporting positions changed during the course of the proceeding. There is scant evidence that the alleged increase in production created jobs in the local market in a manner consistent with legislative intent. Rather, a preponderance of evidence shows that when Petitioner placed the equipment in service it was job neutral or perhaps reduced jobs.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a final order finding that Petitioner did not satisfy the requirement for a 10 percent increase in productive output defined in Subsection 212.08(5)(b) and Rule 12A-1.096, and denying Petitioner's request for a refund. DONE AND ENTERED this 20th day of October 2009, in Tallahassee, Leon County, Florida. S DANIEL MANRY 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 20th day of October, 2009.
