The Issue Whether Florida Power & Light Company (hereinafter referred to as "FPL") properly refused the request of Globe International Realty & Mortgage, Inc. (hereinafter referred to as "Globe") to supply electric service to the premises located at 808 Northeast Third Avenue, Fort Lauderdale, Florida?
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Kenneth V. Hemmerle, Sr., is a real estate developer. Matthew Renda is a real estate and mortgage broker. Hemmerle and Renda have known each other since about 1986. At the suggestion of Hemmerle, in February of 1993, Renda, along with Hemmerle, formed Globe. At the time, Hemmerle was involved in a development project on the west coast of Florida and he wanted Renda, through Globe, to handle "the selling and so forth for the project." Globe was incorporated under the laws of Florida. The articles of incorporation filed with the Department of State, Division of Corporations (hereinafter referred to as the "Division of Corporations") reflected that: Renda was the president of the corporation; Hemmerle was its secretary; Renda and Hemmerle were the incorporators of the corporation, owning 250 shares of stock each; they also comprised the corporation's board of directors; and the corporation's place of business, as well as its principal office, were located at 808 Northeast Third Avenue in Fort Lauderdale, Florida (hereinafter referred to as the "808 Building"). Globe is now, and has been since its incorporation, an active Florida corporation. Annual reports were filed on behalf of Globe with the Division of Corporations in both 1994 (on April 19th of that year) and 1995 (on March 23rd of that year). The 1994 annual report reflected that Renda and Hemmerle remained the officers and directors of the corporation. The 1995 annual report reflected that Renda was still an officer and director of the corporation, but that Hemmerle had "resigned 9-2-93." Both the 1994 and 1995 annual reports reflected that the 808 Building remained the corporation's place of business and its corporate address. The 808 Building is a concrete block building with a stucco finish housing eight separate offices. The entire building is served by one electric meter. At all times material to the instant case, Southern Atlantic Construction Corporation of Florida (hereinafter referred to as "Southern") owned the 808 Building. Southern was incorporated under the laws of Florida in June of 1973, and administratively dissolved on October 9, 1992. Hemmerle owns a majority of the shares of the corporation's stock. The last annual report that Southern filed with the Division of Corporations (which was filed on June 10, 1991) reflected that: Hemmerle was the corporation's president and registered agent; he also served on the corporation's board of directors; Lynn Nadeau was the corporation's other officer and director; and the corporation's principal office was located in the 808 Building. From 1975 until September 6, 1994, FPL provided electric service to the 808 Building. Charges for such service were billed to an account (hereinafter referred to as the "808 account") that had been established by, and was in the name of, Hemmerle Development Corporation (hereinafter referred to as "HDC"). HDC was incorporated under the laws of Florida in 1975, and administratively dissolved on October 9, 1992. At the time of HDC's incorporation, Hemmerle owned 250 of the 500 shares of stock issued by the corporation. The last annual report that HDC filed with the Division of Corporations (which was filed on June 10, 1991) reflected that: Hemmerle was the corporation's president and registered agent; he also served on the corporation's board of directors; Lynn Nadeau was the corporation's other officer and director; and the corporation's principal office was located in the 808 Building. Following the administrative dissolution of the corporation, Hemmerle continued to transact business with FPL in the corporation's name, notwithstanding that he was aware that the corporation had been administratively dissolved. At no time has Renda owned any shares of HDC's stock or served on its board of directors. He and Hemmerle have served together as officers and directors of only two corporations: Globe and Hemmerle's Helpers, Inc. The latter was incorporated under the laws of Florida as a nonprofit corporation in March of 1992, and was administratively dissolved on August 13, 1993. Its articles of incorporation reflected that its place of operation, as well as its principal office, were located in the 808 Building. Pursuant to arrangements Renda and Hemmerle had made (which were not reduced to writing), Globe occupied office space in the 808 Building from March of 1993, through September 6, 1994 (hereinafter referred to as the "rental period"). Renda and Hemmerle had initially agreed that the rent Globe would pay for leasing the space would come from any profits Globe made as a result of its participation in Hemmerle's Florida west coast development project. Renda and Hemmerle subsequently decided, however, that Globe would instead pay a monthly rental fee of $300 for each office it occupied in the building. 1/ Globe (which occupied only one office in the building during the rental period) did not pay in full the monies it owed under this rental agreement. The office Globe occupied in the 808 Building was the first office to the right upon entering the building. It was across the lobby from the office from which Hemmerle conducted business on behalf of his various enterprises. Globe voluntarily and knowingly accepted, used and benefited from the electric service FPL provided to its office and the common areas in the building during the rental period. Under the agreement Renda and Hemmerle had reached, Globe was not responsible for making any payments (in addition to the $300 monthly rental fee) for such service. On July 26, 1994, the 808 account was in a collectible status and an FPL field collector was dispatched to the service address. There, he encountered Hemmerle, who gave him a check made out to FPL in the amount of $2,216.37. Hemmerle had noted the following on the back of the check: "Payment made under protest due to now [sic] owning [sic] of such billing amount to prevent discontinuance of power." The check was drawn on a Sunniland Bank checking account that was in the name of Florida Kenmar, Inc., (hereinafter referred to as "Kenmar"), a Florida corporation that had been incorporated in May of 1984, 2/ and administratively dissolved on November 9, 1990. (The last annual report that Kenmar filed with the Division of Corporations, which was filed on June 10, 1991, reflected that: Hemmerle was the corporation's president and registered agent; he also served on the corporation's board of directors; and the corporation's principal office was located in the 808 Building.) Hemmerle told the field collector, upon handing him the check, that there were no funds in the Kenmar checking account. Nonetheless, the field collector accepted the check. FPL deposited the check in its account at Barnett Bank of South Florida. The check was subsequently returned due to "insufficient funds." On the same day that he was visited by the FPL field collector, Hemmerle telephoned Sandra Lowery, an FPL customer service lead representative for recovery, complaining about, among other things, a debit that he claimed had been improperly charged to the 808 account. As a result of her conversation with Hemmerle, Lowery authorized the removal of the debit and all late payment charges associated with the debit from the 808 account. Following the July 26, 1994, removal of the debit and associated late payment charges, the balance due on the account was $1,953.91, an amount that Hemmerle still disputed. In an effort to demonstrate that a lesser amount was owed, Hemmerle sent Lowery copies of cancelled checks that, he claimed, had been remitted to FPL as payment for electric service billed to the 808 account. Some of these checks, however, had been used to pay for charges billed to other accounts that Hemmerle (or corporations with which he was associated) had with FPL. As of August 29, 1994, the 808 account had a balance due of $2,387.47. These unpaid charges were for service provided between March of 1993 and August 10, 1994. On August 29, 1994, Hemmerle showed Renda a notice that he had received from FPL advising that electric service to the 808 Building would be terminated if the balance owing on the 808 account was not paid within the time frame specified in the notice. Hemmerle suggested to Renda that, in light of FPL's announced intention to close the 808 account and terminate service, Renda should either apply for electric service to the 808 Building in Globe's name or relocate to another office building. Renda decided to initially pursue the former option. Later that same day, Renda telephoned FPL to request that an account for electric service to the 808 Building be opened in Globe's name. Gigi Marshall was the FPL representative to whom he spoke. She obtained from Renda the information FPL requires from an applicant for electric service. During his telephone conversation with Marshall, Renda mentioned, among other things, that Globe had been a tenant at the 808 Building since the previous year and that it was his understanding that FPL was going to discontinue electric service to the building because of the current customer's failure to timely pay its bills. Renda claimed that Globe was not in any way responsible for payment of these past-due bills. From an examination of FPL's computerized records (to which she had access from her work station), Marshall confirmed, while still on the telephone with Renda, that the 808 account was in arrears and that FPL had sent a disconnect notice to the current customer at the service address. Marshall believed that, under such circumstances, it would be imprudent to approve Globe's application for electric service without further investigation. She therefore ended her conversation with Renda by telling him that she would conduct such an investigation and then get back with him. After speaking with Renda, Marshall went to her supervisor, Carol Sue Ryan, for guidance and direction. Like Marshall, Ryan questioned whether Globe's application for service should be approved. She suggested that Marshall telephone Renda and advise him that FPL needed additional time to complete the investigation related to Globe's application. Some time after 12:30 p.m. on that same day (August 29, 1994), Marshall followed Ryan's suggestion and telephoned Renda. Ryan was on the line when Marshall spoke with Renda and she participated in the conversation. Among the things Ryan told Renda was that a meter reader would be dispatched to the 808 Building the following day to read the meter so that the information gleaned from such a reading would be available in the event that Globe's application for service was approved. At no time did either Marshall or Ryan indicate to Renda that Globe's application was, or would be, approved. Ryan referred Globe's application to Larry Johnson of FPL's Collection Department, who, in turn, brought the matter to the attention of Thomas Eichas, an FPL fraud investigator. After completing his investigation of the matter, which included an examination of the Broward County property tax rolls (which revealed that Southern owned the 808 Building), as well a search of the records relating to Globe, HDC and Southern maintained by the Division of Corporations, Eichas determined that Globe's application for service should be denied on the basis of the "prior indebtedness rule." Eichas informed Johnson of his decision and instructed him to act accordingly. Electric service to the 808 Building was terminated on September 6, 1994. As of that date, the 808 account had a past-due balance that was still in excess of $2,000.00. Although he conducted his business activities primarily from his home following the termination of electric service to the 808 Building, Hemmerle continued to have access to the building until March of 1995 (as did Renda). 3/ During this period, Hemmerle still had office equipment in the building and he went there on almost a daily basis to see if any mail had been delivered for him. It was his intention to again actively conduct business from his office in the building if electric service to the building was restored. Hemmerle (and the corporations on whose behalf he acted) therefore would have benefited had there been such a restoration of service. After discovering that electric service to the 808 Building had been terminated, Renda telephoned FPL to inquire about the application for service he had made on behalf of Globe. He was advised that, unless FPL was paid the more than $2,000.00 it was owed for electric service previously supplied to the building, service to the building would not be restored in Globe's name. Thereafter, Renda, on behalf of Globe, telephoned the PSC and complained about FPL's refusal to approve Globe's application for service. FPL responded to the complaint in writing. In its response, it explained why it had refused to approve the application. On or about November 15, 1994, the Chief of PSC's Bureau of Complaint Resolution sent Renda a letter which read as follows: The staff has completed its review of your complaint concerning Florida Power & Light's (FPL) refusal to establish service in the name of Globe Realty, Inc. at the above- referenced location. Our review indicates that FPL appears to have complied with all applicable Commission Rules in refusing to establish service. Our review of the customer billing history indicates that the past-due balance is for service at this location and not attributable to the judgment against Mr. Hemmerle for service at another location. The interlocking directorships of Globe International Realty & Mortgage, Inc. and Hemmerle Development, Inc. suggest that the request to establish service in the name of Globe Realty is an artifice to avoid payment of the outstanding balance and not a result of any change in the use or occupancy of the building. Thus, FPL's refusal to establish service is in compliance with Rule 25-6.105(8)(a), Florida Administrative Code. Please note that this determination is subject to further review by the Florida Public Service Commission. You have the right to request an informal conference pursuant to Rule 25-22.032(4), Florida Administrative Code. Should that conference fail to resolve the matter, the staff will make a recommenda- tion to the Commissioners for decision. If you are dissatisfied with the Commission decision, you may request a formal Administrative hearing pursuant to Section 120.57(1), Florida Statutes. After receiving this letter, Renda, on behalf of Globe, requested an informal conference. The informal conference was held on November 30, 1994. At the informal conference, the parties explained their respective positions on the matter in dispute. No resolution, however, was reached. Adopting the recommendation of its staff, the PSC, in an order issued January 31, 1995, preliminarily held that there was no merit to Globe's complaint that FPL acted improperly in refusing to provide electric service to the 808 Building pursuant to Globe's request. Thereafter, Renda, on behalf of Globe, requested a formal Section 120.57 hearing on the matter.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the PSC enter a final order dismissing Globe's complaint that FPL acted improperly in refusing to provide electric service to the 808 Building pursuant to Globe's request. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 4th day of December, 1995. STUART M. LERNER 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 4th day of December, 1995.
Findings Of Fact Since 1976, DHRS has leased two Xerox 9200 copy machines for its Tallahassee headquarters. The two units together rent for a total of $9,945.11 per year. On September 27, 1984, Mr. Charles A. Stryker, account manager for Xerox in Tallahassee, by letter to the director of central general services for DHRS in Tallahassee, proposed several alternative plans for DHRS to obtain the equipment necessary to handle its central reproduction duplicating needs. Among the proposals submitted by Mr. Stryker was a purchase of the present Xerox 9200 units currently being leased from Xerox. This proposal pointed out that the machines in question had reached the maximum equity per machine that they could earn on a rental basis and that among other things, Xerox would be willing, if DHRS were to buy them, to provide nine months free maintenance on the units and a guaranteed 50 percent trade-in value if the units were to be traded in on new units from Xerox within 12 months from date of purchase. DHRS officials, recognizing the fact that maximum equity on the machines had been realized and foreseeing the opportunity to obtain the machines at a substantial dollar saving to the State, by letter dated October 10, 1984, contacted the appropriate officials at the Department of General Services (DGS), requesting authority to procure these particular used units from Xerox on a sole source procurement. On November 1, 1984, DGS responded denying sole source procurement authority, but granting authority to purchase two suitable duplicating systems through the competitive bid process. It was the opinion of DGS that the equipment was available and the fact that the total cost of the acquisition exceeded the upper limit of $2,500.00, the competitive bid process was necessary. Thereafter, a purchase requisition was submitted on November 2, 1984, by Mr. Vick which was approved. On November 7, 1984, Mr. Vick forwarded a memorandum to Mr. Cox which stated: "Please determine how we are going to purchase the (2) Xerox 9200's. Their offer ends December 15, 1984." An Invitation to Bid on Bid No. 85-41 BC for two used high speed, high volume xerographic duplicating systems was mailed to Xerox and Kodak on November 19, 1984. The Invitation to Bid form reflected the bids would be opened on December 7, 1984, at 2 p.m. The Invitation to Bid forms were sent to Xerox and Kodak only because they were the two companies in the area which manufactured and supplied equipment which would meet the specifications required by DHRS. Both Xerox and Kodak submitted their bids on December 6, 1984. Xerox's bid price was $29,764.00 per machine for a total price of $59,528.00 for the used machines that were currently in use at DHRS headquarters. As a part of its bid, Xerox offered a rebate voucher in the amount of $5,990.75 to cover the purchase of 4 620 Memorywriter typewriters and 7 printwheels. This rebate was part of a National promotion to all government customers. Kodak's bid was for $134,280.00 per machine for a total price of $268,560.00 for new Kodak model 250AF machines. Mr. Goodrich admits that Kodak does not manufacture a xerographic which meets the technical qualifications contained on page 5 of the Invitation to Bid. In addition to this, he points to the specifications listed in the special conditions and technical specifications section of the IFB contained on pages 3 and 4, specifically number 3 which calls for full maintenance for a period of 9 months following installation at no expense to the department and a guaranteed 50 percent trade-in allowance within 12 months of purchase. Kodak contends that since as Kodak has its own price specials which it could have offered if the terms of the IFB were not so narrowly defined, and it was thereby precluded from competitively bidding on this contract, the inclusion of those terms mentioned above effectively negated the competitive bidding process. Admittedly, Kodak did not submit a proposal to DHRS at the time Xerox did prior to the issuance of the IFB. It is for this same reason that Kodak's bid referred to new equipment rather than the used equipment called for under the IFB because at the time, Kodak did not have any used equipment which would meet the terms and conditions of the invitation to bid. Mr. Goodrich admits also that Kodak did not compete for the original contract to provide xerographic equipment in 1976 because it, was not in operation in the Tallahassee area at that time and could not have bid competitively. However, they have equipment which can do substantially what the Xerox 9200, in use since 1976, can do and more, and this was the item they offered in their response to the IFB. The IFB in this procurement was developed by Mr. Cox who built the solicitation utilizing the general conditions dictated by DGS for all procurements, the technical specifications developed by DHRS' technical services division, and the special conditions which he developed to satisfy the needs of the department in this procurement. Specifications calling for used equipment was utilized because it was felt that a purchase of the used, in place xerox equipment would permit a substantial monetary savings while still getting equipment which had been proven satisfactory to do the job. Nonetheless, if new equipment from either Xerox or Kodak would have done the job required and still saved money, that would have been the route taken. This was not the case, however. According to Mr. Vick, the request to go sole source on this procurement was prompted by a desire to take advantage of the Xerox proposal of late September 1984 which, it was felt, would result in a substantial dollar savings for the State while still providing equipment which was satisfactory for the task required. DHRS maintains an open door policy toward vendors to encourage them to come in and attempt to sell their product. Mr. Cox has dealt with Kodak on several occasions in the past but never in the area of copying equipment. At the time in question, there was nothing at all to preclude Kodak from coming in with their own offers. DHRS officials do not deny that they wanted to accept Xerox's proposal. Offers by several other vendors had been turned down in the past, but this one looked so good and appeared to have the promise of substantial dollar savings to the State, that a request was made to DGS to go single source procurement so that this proposal could be accepted. However, once this request was turned down, an Invitation for Bids was sent out to competing vendors and while the terms paralleled those offered by Xerox and it was obvious that Xerox's bid would comply with them, there was nothing in the procedure on DHRS' part that would preclude Kodak from offering the same terms. The officials at DHRS had no way of knowing that Kodak's internal policies would not permit the meeting of the same terms as to free maintenance and trade in allowance. If Kodak had been willing to meet those terms, it could thereafter have battled Xerox head to head on the one issue where they could compete - price. DHRS also admits that generally, it is reluctant to make outright purchases of technical equipment, preferring to lease as was done here for several years, because of the changing state of the art. It is for that reason that the invitation to bid specified used equipment here to keep costs down and to allow upgrading in the reasonably near future. To go even further, Mr. Cox admitted that while the bid was open to others, it was aimed at getting the Xerox proposal which would save a total of $76,000.00 on this purchase and trade-in. Considering the evidence in its totality, it is clear that the officials at DHRS were attempting to save state funds in this procurement. Their method of handling this procurement lacks finesse, perhaps, but cannot be said to be ill-motivated, arbitrary, capricious, or unreasonable.
The Issue The issue in these cases is whether the Agency for Health Care Administration's (AHCA) proposed award of a contract to Caremark, Inc., based on evaluations of proposals submitted in response to a Request for Proposals (RFP), is clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact AHCA is the single state agency in Florida authorized to make payments for medical assistance and related services under Title XIX of the Social Security Act (the "Medicaid" program). In order to participate in the federal Medicaid program, AHCA is required to maintain a state plan for Medicaid in compliance with Title XIX of the Social Security Act. AHCA is required to operate the Florida Medicaid program in compliance with the state plan. AHCA is apparently concerned by costs associated with the Florida Medicaid program's hemophilia population. Florida's Medicaid hemophilia beneficiaries constitute a relatively small, but costly population to serve. Hemophilia is a bleeding disorder caused by a deficiency in one of numerous "clotting factors," which normally causes a persons' blood to coagulate. Hemophilia is treated by administration of the deficient clotting factor to the person with the disorder. AHCA seeks to control the cost of providing hemophilia-related services to this population through a combination of case management and medication discounts known as the Medicaid Comprehensive Hemophilia Management (MCHM) program. AHCA believes that a single vendor responsible for operation of the MCHM program can provide managed care to the population while achieving significant drug-cost savings. Through a federal requirement referred to as "freedom of choice," Florida's Medicaid program state plan must provide that any individual eligible for medical assistance (including drugs) may obtain such assistance from any institution, agency, community pharmacy, or person qualified to perform the service and who undertakes to provide such services. The freedom of choice requirement is subject to being waived in accordance with applicable federal law. Such waiver requires approval by the Centers for Medicare and Medicaid Services (CMS). AHCA began seeking approval from CMS for an amendment to an existing "Managed Care Waiver" to implement the MCHM program in October 2002. By letter dated May 22, 2003, CMS approved AHCA's request to amend the existing waiver to permit implementation of the MCHM program. Subsequent correspondence between the agencies has further established AHCA's authority to implement the MCHM program. AHCA issued the RFP ("RFP AHCA 0403") on October 1, 2003. The RFP seeks to implement the MCHM program. There were no timely challenges filed to the terms and specifications of the RFP. Section 287.057, Florida Statutes (2003), requires that an agency must make a written determination that an invitation to bid is not practicable for procurement of commodities or contractual services prior to issuance of an RFP. AHCA did not make such a written determination prior to issuance of the RFP. Under the terms of the RFP, AHCA will contract with a single provider for a period of two years, with an option to extend the contract for an additional two-year period. RFP Section 10.2 sets out an extensive list of vendor requirements designed to provide care to Medicaid hemophilia beneficiaries and better management of related costs. The RFP provides that the successful vendor will be paid only on the basis of the factor products dispensed to eligible Medicaid beneficiaries. All other services required by the RFP must be delivered within the revenue provided by AHCA's reimbursement for factor product costs. No additional payment beyond payment of factor product costs will be provided. The RFP stated that the successful vendor would be reimbursed for factor product cost based on the average wholesale price (AWP) of the factor product minus a minimum discount of 39 percent. The RFP provided that vendors may offer a greater discount than 39 percent. An Addendum to the RFP indicated that if a vendor proposed a discount greater than 39 percent, the increased discount must apply to all factor products and that vendors could not propose varying discounts for individual factor products. The RFP contains language in the background section referencing budget "proviso" language adopted by the Legislature and referring to the MCHM program as a "revenue enhancement program." HHS asserts that because this RFP does not create a revenue enhancement program, AHCA had no authority to proceed with the RFP. The evidence fails to establish that this program will enhance revenue. The evidence fails to establish that based on the "proviso" language, AHCA is without authority to issue the RFP. RFP Section 20.11 sets forth the "proposal submission requirements." The section included a number of requirements set in capital letters and highlighted in boldface. The terms of each requirement indicated that failure to comply with the requirement was "fatal" and would result in rejection of the proposal submitted. None of the proposals submitted by the parties to this proceeding were rejected pursuant to RFP Section 20.11. The evidence fails to establish that any of the proposals submitted by the parties to this proceeding should have been rejected pursuant to RFP Section 20.11. RFP Section 20.16 provides that AHCA may waive "minor irregularities," which are defined as variations "from the RFP terms and conditions, that [do] not affect the price of the proposal or give one applicant an advantage or benefit not enjoyed by others or adversely affect the state's interest." RFP Section 20.17 provides as follows: Rejection of proposals Proposals that do not conform to all mandatory requirements of this RFP shall be rejected by the Agency. Proposals may be rejected for reasons that include, but are not limited to, the following: The proposal was received after the submission deadline; The proposal was not signed by an authorized representative of the vendor; The proposal was not submitted in accordance with the requirements of Section 20.11 of this RFP; The vendor failed to submit a proposal guarantee in an acceptable form in accordance with the terms identified in Section 20.12 of this RFP or the guarantee was not submitted with the original cost proposal; The proposal contained unauthorized amendments, deletions, or contingencies to the requirements of the RFP; The vendor submitted more than one proposal; and/or The proposal is not deemed to be in the best interest of the state. None of the proposals submitted by the parties to this proceeding were rejected pursuant to RFP Section 20.17. The evidence fails to establish that any of the proposals submitted by the parties to this proceeding should have been rejected pursuant to RFP Section 20.17. RFP Section 30.1 provides that the "total cost of the contract will not exceed $36,000,000 annually." RFP Section 30.2 provides in part that the "total cost for the contract under any renewal will not exceed $36,000,000 per year." The RFP's contract amount apparently was based on historical information and assumed that some level of cost control would occur through case management. The contract amount cannot operate as a "cap" because Medicaid hemophilia beneficiaries are an "entitled" group and services must be provided. If the amount of the contract is exceeded, AHCA is obliged to pay for necessary factor products provided to the beneficiaries; however, in an Addendum to the RFP, AHCA stated that if the contract fails to contain costs "there would be no justification to renew or extend the contract." The RFP required vendors to submit a performance bond based on 20 percent of the $36 million contract amount. The RFP stated that proposals could receive a maximum possible score of 2000 points. The proposal with the highest technical evaluation would receive 1340 weighted points. The proposal with the lowest cost proposal would receive 660 weighted points. The combined technical and cost proposal scores for each vendor determined the ranking for the proposals. The RFP set forth formulas to be used to determine the weighted final score based on raw scores received after evaluation. AHCA conducted a bidder's conference related to the RFP on October 8, 2003. All parties to this proceeding attended the conference. At the conference, AHCA distributed a copy of a spreadsheet chart that listed all factor products provided to Florida's Medicaid hemophilia beneficiaries during the second quarter of 2003. The chart identified the amount of each factor product used and the amount paid by AHCA to vendors for the factor product during the quarter. The chart also showed the amount that would have been paid by AHCA per factor product unit had the vendors been paid at the rate of AWP minus 39 percent. AHCA received six proposals in response to the RFP. The proposals were received from Caremark, HHS, Lynnfield, PDI Pharmacy Services, Inc., Advance PCS/Accordant, and Coram. RFP Section 60 contained the instructions to vendors for preparing their responses to the solicitation. As set forth in RFP Section 60.1, the technical response was identified as "the most important section of the proposal with respect to the organization's ability to perform under the contract." The section requires vendors to include "evidence of the vendor's capability through a detailed response describing its organizational background and experience," which would establish that the vendor was qualified to operate the MCHM program. Vendors were also directed to describe the proposed project staffing and the proposed "technical approach" to accomplish the work required by the RFP. Vendors were encouraged to propose "innovative approaches to the tasks described in the RFP" and to present a detailed implementation plan with a start date of January 10, 2003. The technical responses were opened on October 29, 2003. AHCA deemed all six proposals to be responsive to the technical requirements of the RFP and each technical proposal was evaluated. For purposes of evaluation, AHCA divided the technical requirements of the RFP into 50 separate criteria. AHCA assembled the technical evaluators at an orientation meeting at which time an instruction sheet was issued and verbal instructions for evaluating the technical proposals were delivered. The instruction sheet distributed to the evaluators provided that the evaluators "should" justify their scores in the "comments" section of the score sheets. The five AHCA employees who evaluated the technical proposal were Maresa Corder (Scorer "A"), Bob Brown-Barrios (Scorer "B"), Kay Newman (Scorer "C"), Jerry Wells (Scorer "D"), and Laura Rutledge (Scorer "E"). AHCA employees Dan Gabric and Lawanda Williams performed reference reviews separate from the technical evaluations. Reference review scores were combined with technical evaluation scores resulting in a total technical evaluation score. Reference review scores are not at issue in this proceeding. Kay Newman's review was limited to reviewing the financial audit information provided by the vendors. Technical evaluators reviewed each technical response to the RFP and completed evaluation sheets based on the 50 evaluation criteria. Other than Mr. Wells, evaluators included comments on the score sheets. Mr. Wells did not include comments on his score sheet. The technical proposal scoring scale set forth in the RFP provided as follows: Points Vendor has demonstrated 0 No capability to meet the criterion 1-3 Marginal or poor capability to meet the criterion 4-6 Average capability to meet the criterion 7-9 Above average capability to meet the criterion 10 Excellent capability to meet the criterion Each evaluator worked independently, and they did not confer with each other or with anyone else regarding their evaluations of the responses to the RFP. Janis Williamson was the AHCA employee responsible for distribution of the technical proposals to the evaluators. She received the completed score sheets and evaluation forms from each of the technical evaluators. The RFP set forth a process by which point values would be assigned to technical proposals as follows: The total final point scores for proposals will be compared to the maximum achievable score of 1340 points, and the technical proposal with the highest total technical points will be assigned the maximum achievable point score. All other proposals will be assigned a percentage of the maximum achievable points, based on the ratio derived when a proposal's total technical points are divided by the highest total technical points awarded. S = P X 1340 N Where: N = highest number of final points awarded to t technical proposal P = number of final points awarded to a proposal S = final technical score for a proposal According to the "Summary Report and Recommendation" memorandum dated December 4, 2003, after application of the formula, Caremark received the highest number of technical points (1340 points). Of the parties to this proceeding, HHS was ranked second on the technical proposal evaluation (1132.30 points), and Lynnfield was ranked third (1101.48 points). Lynnfield and HHS assert that the scoring of the technical proposals was arbitrary based on the range of scores between the highest scorer and the lowest scorer of the proposals. Review of the score sheets indicates that Scorer "A" graded "harder" than the other evaluators. The scores she assigned to vendor proposals were substantially lower on many of the criteria than the scores assigned by other evaluators. The range between her scores and the highest scores assigned by other evaluators was greater relative to the Lynnfield and the HHS proposals than they were to the Caremark proposal, indicating that she apparently believed the Caremark technical proposal to be substantially better than others she reviewed. There is no evidence that Scorer "A" was biased either for or against any particular vendor. The evidence fails to establish that her evaluation of the proposals was arbitrary or capricious. The evidence fails to establish that AHCA's evaluation of the technical proposals was inappropriate. After the technical evaluation was completed, cost proposals were opened on November 21, 2003. Section 60.3 addressed the cost proposal requirements for the RFP. RFP Section 60.3.1 provides as follows: The cost proposal shall cover all care management services, hemophilia specific pharmaceuticals dispensing and delivery, and pharmacy benefits management activities contemplated by the RFP. The price the vendor submits must include a detailed budget that fully justifies and explains the proposed costs assigned. This includes salaries, expenses, systems costs, report costs, and any other item the vendor uses in arriving at the final price for which it will agree to perform the work described in the RFP. The maximum reimbursement for the delivery of services and factor products used in factor replacement therapy (inclusive of all plasma-derived and recombinant factor concentrates currently in use and any others approved for use during the term of the contract resulting from this RFP) will be at Average Wholesale Price (AWP) minus 39%. Proposals may bid at a lower reimbursement but not higher. All other drugs not otherwise specified in factor replacement therapy will be paid at the normal Medicaid reimbursement. RFP Section 60.3.2 provides as follows: A vendor's cost proposal shall be defined in terms of Average Wholesale Price (AWP) and conform to the following requirements: The first tab of a vendor's original cost proposal shall be labeled "Proposal Guarantee" and shall include the vendor's proposal guarantee, which shall conform to the requirements specified in this RFP, Section 20.12. Copies of the cost proposal are not required to include the proposal guarantee. The second tab of the cost proposal shall be labeled "Project Budget" and shall include the information called for in the RFP, including the total price proposed, a line item budget for each year of the proposal, a budget narrative, and other information required to justify the costs listed. The RFP does not define the "detailed" budget mentioned in RFP Section 60.3.1 and does not define the "line item" budget mentioned in RFP Section 60.3.2. No examples of such budgets were provided. RFP Section 80.1 provides as follows: Evaluation of the Mandatory Requirements of the Cost Proposal Upon completion of the evaluation of all technical proposals, cost proposals will be opened on the date specified in the RFP Timetable. The Agency will determine if a cost proposal is sufficiently responsive to the requirements of the RFP to permit a complete evaluation. In making this determination, the evaluation team will review each cost proposal against the following criteria: Was the cost proposal received by the Agency no later than time specified in the RFP Timetable? Did the vendor submit an original and ten copies of its cost proposal in a separate sealed package? Was the vendor's cost proposal accompanied by a proposal guarantee meeting the requirements of the RFP? Did the cost proposal contain the detailed budget required by the RFP? Does the proposal contain all other mandatory requirements for the cost proposal? The AHCA employee who opened the cost proposals apparently determined that each proposal met the requirements of RFP Section 80.1, including providing a "detailed" budget. The RFP set forth a process by which point values would be assigned to cost proposals as follows: On the basis of 660 total points, the proposal with the lowest total price will receive 660 points. The other proposals will receive a percentage of the maximum achievable points, based on the ratio derived when the total cost points are divided by the highest total cost points awarded. Where: S = L X 660 N N = price in the proposal (for two years) L = lowest price proposed (for two years) S = cost points awarded The cost proposal scoring process clearly required comparison of each vendor's total price for the initial two-year portion of the contract. Caremark's proposal included estimated total costs of $44,797,207 for FY 2002-2003, $43,245,607 for FY 2003-2004, and $44,542,975 for FY 2004-2005. According to RFP Section 30.1, the maximum annual contract was not to exceed $36,000,000. All of Caremark's estimated annual costs exceeded the contract amount set forth in the RFP. Caremark's proposal also provided as follows: The above budget includes all salary expenses for Caremark employees involved in providing services for the program including the Contract Manager, Clinical Pharmacist, Care manager, additional pharmacist(s), Client Service Specialists in Florida for the expanded hemophilia program. Also included are the support staff such as pharmacy technicians, materials management, field service representatives, warehouse, reimbursement, marketing, sales and administrative staff. Also included are all delivery, data and report development, educational and marketing communication expenses. Product costs including medically necessary ancillary supplies, medical waste disposal and removal, protective gear and therapeutic devices. Caremark's proposal did not include information sufficient to assign specific costs to any of the items that Caremark indicated were included in its annual cost estimate. The HHS proposal projected estimated costs identified by month and year. The HHS proposal estimated total first-year costs of $14,261,954 and second-year costs of $27,333,389. HHS did not propose to assume responsibility for serving all Medicaid hemophilia beneficiaries at the start of the contract, but projected costs as if beneficiaries would "migrate to our service at a rate of 20 per month" during the first year and that full service provision would begin by the beginning of year two. RFP Section 10.2 provides as follows: The purpose of this RFP is to receive offers from qualified vendors wishing to provide the services required by the Florida Medicaid Comprehensive Hemophilia Management Program. The contract resulting from this RFP shall be with a single provider for up to two years commencing on the date signed, with an option to renew for two additional years. Otherwise stated, all Medicaid hemophilia beneficiaries would be served though the program's sole provider from the start of the contract period. The RFP provides no option for a vendor to gradually increase service levels through the first half of the two-year contract. The HHS proposal also included a breakdown of costs by factor product unit, identifying the AWP for each listed factor product and applying a discount of between 39 percent and 45 percent to indicate the product cost-per-unit that would be charged to AHCA. In Addendum 2 to the RFP, AHCA stated that it has received a written inquiry as follows: Knowing that the minimum accepted discount is AWP less 39%, can different products have different discounts. AHCA's response to the inquiry was as follows: No. The proposed discount will apply to all factor products. As to the costs included in the proposal annual total, the HHS proposal provided as follows: The product price above will include the following costs incurred in servicing the patients: The cost of the product dispensed to the patient. The cost of freight and other delivery expense of transporting the product to the patient. Pharmacy, warehouse and patient supplies. Cost incurred for patient protective gear and education materials Salary costs for the following: o Project/Contract Manager Clinical Pharmacist Staff Pharmacist Case Management Coordinator Pharmacy Care Coordinators Shipping Clerk Warehouse Coordinator Community Advocates Insurance Reimbursement Specialist The cost of Information Technology support for systems and reporting The cost of rent, office supplies, equipment, postage, printing. The HHS proposal did not include information sufficient to assign specific costs to any of the items that HHS indicated were included in its annual cost estimate. Lynnfield's proposal estimated total costs of $34,000,000 for calendar year 2004 and $36,000,000 for calendar year 2005. Lynnfield's budget proposal included information identifying the specific expense lines which form the basis for the cost estimation, including salary costs by position, travel costs, employee insurance, postage, equipment costs, and various office expenses. Lynnfield's budget proposal included a significantly greater level of detail than did either the Caremark or the HHS proposals. Jerry Wells was assigned the responsibility to evaluate the cost proposals. Mr. Wells failed to review the RFP or the related Addenda prior to evaluating the cost proposals submitted by the vendors. Mr. Wells asserted that it was not possible, based on the information submitted by the vendors, to perform an "apples- to-apples comparison." Each vendor set forth information in its proposal sufficient to calculate a total price for the initial two-year portion of the contract. Mr. Wells testified at the hearing that his cost review was intended to determine what AHCA would be paying for each of the individual factor products that AHCA provides hemophiliacs through Medicaid because the cost of the products was all AHCA would be paying to the vendors. The RFP did not require vendors to include a detailed list of, or unit prices for, factor products. The RFP specified only that factor products be provided at a minimum of AWP minus 39 percent. AHCA employees, under the direction of Mr. Wells, created a cost comparison chart which purported to identify the price proposed by each vendor for certain factor products and which projects an estimated quarterly factor product cost for each vendor. HHS's cost proposal included a listing of specific prices to be charged for factor products. The list was based on products being used by existing HHS patients. Caremark offered to provide all products at the AWP minus 39 percent cost required by the RFP. Caremark also suggested various "innovative cost savings," which specified use of factor products and indicated discounts greater than the 39 percent required by the RFP. Lynnfield did not include a product-specific listing of factor costs in its proposal, but offered to provide all products at the AWP minus 39 percent cost required by the RFP. The AHCA employees used the HHS cost proposal, including the HHS range of discounts, as the basis for preparation of the cost comparison chart that included the other vendors. The factor products listed on the AHCA cost comparison mirror those listed in the HHS cost proposal. AHCA employees apparently applied the factor product usage information from the second quarter of 2003 that was included on the spreadsheet distributed at the bidder's conference to the HHS factor product list. The AHCA spreadsheet distributed at the bidder conference lists 29 factor products by name and dosage. Of the 29 products, 15 are listed in the HHS cost proposal. The AHCA cost comparison created at Mr. Wells' direction includes only the 15 factor products listed on the HHS cost proposal. AHCA's cost comparison assumed no costs would be incurred, where the AHCA spreadsheet information indicated no usage of the factor product that had been included on the HHS cost proposal. AHCA's cost comparison did not include factor products which have been supplied by AHCA to Medicaid beneficiaries, but which do not appear on the HHS list. Mr. Wells relied on this cost comparison to determine that the cost proposal submitted by HHS offered the lowest cost to the agency and was entitled to the 660 points. Lynnfield and Caremark were both ranked according to cost proposals of AWP minus 39 percent, and according to the Summary Report and Recommendation memorandum, were awarded 652.74 points. Calculation of the points awarded to Lynnfield and Caremark in the Summary Report and Recommendation memorandum does not appear to comply with the formula set forth in the RFP. The AHCA cost comparison spreadsheet identifies the HHS proposed cost as $10,706,425.66 and identifies the AWP minus 39 percent cost as $10,795,477.48 (assigned as the Lynnfield and Caremark cost proposal). The Summary Report and Recommendation memorandum states the lowest cost proposal to be $10,706,405.66 (perhaps a typographical error). The methodology applied by AHCA assumed that all vendors would utilize identical quantities of identical factor products (based on historical usage in Quarter 2 of 2003 of those listed in the HHS cost proposal) and that there would be no cost savings related to disease management. The application of methodology to compare vendor cost proposals outside the process established by the RFP is clearly erroneous, arbitrary, and capricious. The vendors who are party to this proceeding assert that each other vendor's budgetary submission is insufficient, flawed, or unreliable for varying reasons. It is unnecessary to determine whether the budgetary information submitted by the vendors meets the requirements of the RFP because, despite having requested the information, AHCA has no interest in the data. There is no evidence that in making an award of points based on the cost proposals, AHCA relied on any of the budgetary information required by the RFP or submitted by the vendors.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order rejecting all proposals submitted in response to the RFP AHCA 0403. DONE AND ENTERED this 29th day of April, 2004, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of April, 2004. COPIES FURNISHED: Anthony L. Conticello, Esquire Thomas Barnhart, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Geoffrey D. Smith, Esquire Thomas R. McSwain, Esquire Blank, Meenan & Smith, P.A. 204 South Monroe Street Post Office Box 11068 Tallahassee, Florida 32302-3068 Linda Loomis Shelley, Esquire Karen A. Brodeen, Esquire Fowler, White, Boggs, Banker, P.A. 101 North Monroe Street, Suite 1090 Post Office Box 11240 Tallahassee, Florida 32301 J. Riley Davis, Esquire Martin R. Dix, Esquire Akerman & Senterfitt Law Firm 106 East College Avenue, Suite 1200 Tallahassee, Florida 32301 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3431 Tallahassee, Florida 32308
The Issue As described in the parties' Prehearing Stipulation Petitioners are challenging the Respondent's (SJRWMD) solicitation process with regard to the "Invitation to submit an Offer to Purchase property known as the Zellwin Airstrip." Petitioners seek to set aside the award of purchase to Intervenors and to have the solicitation process re-advertised. The issue for resolution is whether Petitioners are entitled to that relief.
Findings Of Fact In 1996 the Florida Legislature mandated that the St. Johns River Water Management District (SJRWMD) attempt to purchase farms on the north shore of Lake Apopka as part of a long-term restoration and reclamation project. Petitioners, Rex Shepherd and Dale Harper, are pilots and owners of an aerial advertising business, American Outdoor Aerial Advertising. In early 1998 the business was operating out of Crakes field, a small airstrip owned by Kent Crakes as part of Crakes' North Lake Apopka farm. Petitioners' business owned airplanes and banners which it flew for its advertising clients such as Sears and GEICO. Sometime in early 1998 it became obvious that Petitioners would need to move their operation to another field. There were break-ins at the hanger, and the airstrip was beginning to flood as a result of the reclamation project. Kent Crakes referred Rex Shepherd to Leonard Freeman, the individual with SJRWMD who was involved with land acquisition in the area. Around March or early April 1998 Petitioners commenced discussions with Mr. Freeman regarding their use of the farm airstrip at Zellwin Farms, also part of the SJRWMD Lake Apopka farms acquisition program. Mr. Freeman was the SJRWMD point of contact for the Zellwin Farms acquisition. By early 1998, the property was already under contract and was scheduled to close some time around June 1998. Mr. Freeman and the Petitioners met at the Zellwin Farms airstrip in June 1998, and Petitioners determined the property would be suitable for their operation. Eager to accommodate Petitioners because of their predicament and also in anticipation of the SJRWMD's eventual sale of the Zellwin parcel, Mr. Freeman gave permission for Petitioners to store their equipment on the site and gave them a key. Because Zellwin Farms was beyond what SJRWMD considered to be the lake's historic shoreline, the SJRWMD knew that it would need to dispose of its 1400 acres as surplus, in whole or part. Mr. Freeman's desire was to find a way to dispose of the property as the best thing for the SJRWMD. Thus, because of the Petitioners' immediate interest in relocating their business, Mr. Freeman began negotiating with them for their purchase of the airstrip and related buildings. In September 1998, Mr. Freeman met again with Petitioners at the airstrip and discussed a specific proposal. Petitioners talked about offering $250,000 under a lease-purchase arrangement, and sent a letter dated September 10, 1998, to Mr. Freeman with that offer. Mr. Freeman later suggested that since the appraised value was $275,000, an offer in that amount would be easier to get approved. Mr. Freeman did not have the authority to obligate the SJRWMD to sell the property and Petitioners understood that. Still, Petitioners felt they were negotiating in good faith with staff who could make a strong recommendation to the board. Petitioners believed in early October that they had a hand-shake deal subject to further discussions regarding specific terms. They knew that a competitive solicitation might be an option for the SJRWMD but they also believed that they would be given an opportunity to meet another third party's offer. This belief was based not on some specific agreement for a "right of first refusal," but rather on Mr. Freeman's good-natured assurances that they would work it all out. Mr. Freeman requested that the SJRWMD special counsel develop a draft contract based on Petitioners' offer. The offer would then need to be signed by Petitioners and approved by Mr. Freeman's supervisor before going to the SJRWMD governing board. The counsel never finished the draft and it was never given to Mr. Freeman or the Petitioners. By the end of October 1998, Robert Christianson, Mr. Freeman's supervisor and director of the SJRWMD Department of Operations and Land Resources, learned that Petitioners were flying in and out of the Zellwin airstrip and using it for their business base of operations. This activity was beyond the storage permission that Mr. Freeman had granted. (Even that permission was beyond his individual authority.) Mr. Freeman and Mr. Christianson met with Petitioners on October 27, 1998, to work out a license agreement for their use of the airstrip. Such an agreement was necessary to protect the parties' respective interests and to cover the SJRWMD for any liability in the landlord/tenant relationship. The result of that meeting was a written license agreement for Petitioners to use, maintain, and provide protection for the property for a period from October 30, 1998, to April 30, 1999, subject to revocation with advance notice. Petitioners used the airstrip property under that agreement and made improvements, mostly cleaning up the facility so it could be used. At the October meeting it became obvious to Petitioners that the informal negotiations for their purchase were terminated and that the SJRWMD was going to solicit competitive offers for the purchase. This concerned the Petitioners and they felt let- down by Mr. Freeman. Still, they concentrated on getting the license agreement worked out. Rex Shepherd's account of the October meeting was that Mr. Christianson was very clear about the fact that the SJRWMD had to go for competitive bid, that they were bound by a board and rules and regulations even though both he and Mr. Freeman would like for Petitioners to have the airport, and that they should be able to work it out. At the end of the meeting, and as they were leaving the trailer, Mr. Shepherd commented to Mr. Freeman that he really did not want to lose the airport and wanted to be apprised of what was going on so that if there were a higher bid, he could have the opportunity to match it, or if it were too high, that they would have 30 or 60 days to vacate the property. According to Mr. Shepherd, Mr. Freeman simply responded, "We'll work all that out, don't worry about it." On November 11, 1998, the SJRWMD governing board voted to surplus the Zellwin Farms property with direction to the staff that the sale be widely advertised in the aviation community and not be a sole source deal. Consistent with the board's direction and pursuant to Section 373.089(3), Florida Statutes, the SJRWMD advertised a "Notice of Intention to Sell" the airstrip property in the Orlando Sentinel for three consecutive weeks, November 9, 16, and 23, 1998. The notice identifies the airstrip property as an "Approximately 47-acre agricultural airport facility, 2,200'? square feet asphalt runway, 5,250 ? square feet metal hanger, 2,048 ? storage square feet building, well and septic tank at a location of northwest Orange County, Florida, Sections 20 and 29, T-20-S, R-27-E, on Jones Avenue, 1 ? mile west of U.S. Highway 441, Zellwood." The Notice of Intention to Sell states that "[a]ll interested persons are invited to submit an offer to the District for purchase of said lands. Contact the District . . . and request an Airport Sales Package." Both the Airport Sales Package and the Notice of Intention to Sell state that the airport property will be sold for the highest price obtainable. The sales package states that full cash offers to be paid at closing will be given first consideration and that 10 percent of the purchase price must be paid when the offeror was notified that it was successful. The sales package also states that any person adversely affected by an offer solicitation shall file a Notice of Protest, in writing, prior to the date on which the offers are to be received, and shall file a formal written protest within ten (10) days after filing the Notice of protest pursuant to Florida Administrative Code Rule 40C-1.801. * * * Failure to timely file a notice of protest or failure to timely file a formal written protest shall constitute a waiver of proceedings under Chapter 120, Florida Statutes. (SJRWMD Ex. 3). Both the Notice of Intention to Sell and the sales package require that sealed "offers for purchase" be submitted to the SJRWMD prior to 2:00 p.m. on December 4, 1998, the advertised time for opening of the offers. Nothing in the Notice or sales package reserves a right of first refusal for any person. Instead, both plainly state "no offer will be accepted after the date and hour specified for submittal of offers." (SJRWMD Exhibits 1 and 3) Although Petitioners did not see the newspaper notice, they had knowledge that the SJRWMD advertised the sale of the airstrip property through a competitive solicitation process in the newspaper. They had been clearly informed of need for the competitive process by Mr. Christianson at the October meeting and they were present when a pre-solicitation meeting/inspection took place at the airstrip in November prior to the offers being accepted by the SJRWMD. Intervenors requested a sales package from the SJRWMD on November 30, 1998, and December 2, 1998. Petitioners requested and received a sales package prior to the opening of the offers to purchase. The sales packages were not available to the public until December 2, 1998, the same day Petitioners received their package. Mr. Freeman told Petitioners they needed to submit their bid. Although the sales package stated that facsimile offers would not be accepted by the SJRWMD, Leonard Freeman informed Petitioners that they could fax their Offer to Purchase. The SJRWMD did accept a facsimile offer to purchase from Petitioners on December 4, 1998, at 1:07 p.m. Offers to purchase were opened by the SJRWMD at 2:10 p.m. on December 4, 1998. Petitioners submitted an offer to purchase the airstrip property for $275,000, where Petitioners would pay $1,500.00 per month for 60 months ($90,000 with $72,000 applied toward principal) with a balance of $203,000 cash to be paid at the end of the 60-month term. Intervenors submitted an offer to purchase the airstrip property for $310,000, where Intervenors would put 10 percent down ($31,000 earnest money deposit) at award of Agreement of Purchase and Sale and the balance of $279,000 cash would be paid at closing on or before May 1, 1999. Petitioners' offer to purchase was not the highest offer; it did not provide for cash at closing; and it did not meet the requirement of 10 percent to be paid upon notification. Staff recommended to the SJRWMD board that it award the purchase of the airstrip property to the highest offeror, Intervenors. The governing board approved staff's recommendation at its regularly scheduled meeting on December 9, 1998. On December 9, 1998, Petitioners filed a Notice of Protest. On December 18, 1998, Petitioners filed a copy of their Formal Bid Protest with the SJRWMD. Petitioners never grasped the implications of the competitive solicitation process until after the offers were opened and the award was made to Intervenors. Even if Petitioners had seen the newspaper notice and had received the sales package sooner, they still would not have protested because they understood that their "agreement" was outside of the process. That is, they mistakenly perceived that after the offers were in they could negotiate further to exceed the high offer. Chagrined, and genuinely regretful of the misunderstanding, Mr. Freeman had to tell Petitioners that further negotiations were foreclosed after the offers were opened. Mr. Freeman's earlier assurances to Petitioners were the result of an excess of bonhomie rather than any deception. He wanted them to have the airport and he wanted to work out the sale of surplus property. Petitioners were aware that he did not have the authority to bind his agency to an agreement. Mr. Freeman never specifically told Petitioners they had a right of first refusal; they wanted that advantage and surmised agreement from Mr. Freeman's and Mr. Christianson's vague counsel to not worry and that it would all be worked out. The SJRWMD devised a competitive process for disposition of the Zellwin airstrip that was consistent with its statute and with the direction of its governing board. Intervenors responded with an offer that met all the published requirements. Petitioners did not, and any culpability of SJRWMD's staff for Petitioners' misunderstanding is not so egregious as to require that the process begin again. Petitioners occupied the property, used it, and made improvements to enhance their use. This, however, was in reliance on their license to use the property and not on some certainty that they would ultimately be able to own the property. As Petitioners testified at hearing, they were disappointed that the SJRWMD decided to solicit competitive proposals; they knew that it was possible someone would offer more than they could match. (Harper, Transcript pages 117-120).
Recommendation Based on the foregoing, it is RECOMMENDED: that the SJRWMD enter its final order denying Petitioners' request to reject all bids and re-advertise the sale. DONE AND ENTERED this 24th day of June, 1999, in Tallahassee, Leon County, Florida. MARY CLARK 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 24th day of June, 1999. COPIES FURNISHED: Henry Dean, Executive Director St. Johns River Water Management District Post office Box 1429 Palatka, Florida 32178-1429 John W. Williams, Esquire St. Johns River Water Management District Post Office Box 1429 Palatka, Florida 32178-1429 Clayton D. Simmons, Esquire Stenstrom, McIntosh, Colbert, Whigham And Simmons, P.A. Post Office Box 4848 Sanford, Florida 32772-4848 Stanley Dollen 1230 Kelso Boulevard Windermere, Florida 34786 Herbert Clark 5416 Trimble Park Road Mt. Dora, Florida 32757
The Issue The issues to be resolved in this proceeding are delineated with particularity in the Joint Pre-hearing Stipulation executed by all parties; however, the issues generally are as follows: Whether Experior has standing to challenge the RFP Process. Whether Promissor was a qualified or responsive proposer. Whether Experior's cost proposal was entitled to the maximum points if Promissor's proposal is determined to be unqualified or non-responsive. Whether the scoring of the proposals by Evaluator three was affected by his bias or was so aberrant as to be unsupportable or illogical or in violation of the RFP. Whether DBPR's award of MBE/WBE preference points to Experior and PSI was inappropriate and should be eliminated. Whether Experior suffered an unfair competitive disadvantage.
Findings Of Fact The Department first decided to seek proposals for computer-based testing (CBT) services on March 29, 2002, when it issued RFP 01-02-001. General Condition Number Seventeen of that RFP stated that any material submitted in response to the Request for Proposal will become a public document pursuant to Section 119.07, including any material which a responding proposer might consider confidential or a trade secret. Any claim of confidentiality was waived upon submission. Experior never protested that General Condition Number Seventeen in that first RFP. The cost proposals submitted by all proposers in response to that first RFP became public record after the Department posted the notice of intent to award the contract to Experior on September 17, 2002. Promissor and PSI filed notices of intent to protest and formal written protests. In response to those protests, however, the Department decided to reject all proposals. Experior then challenged the rejection of all proposals by filing a notice of intent to protest on October 24, 2002, but ultimately withdrew that protest on October 31, 2002. Thereafter on January 13, 2003, the Department issued requests for proposal RFP 02-03-005 (the RFP), seeking proposals for the provision of computer-based testing services for several professions regulated by the Department. That is the RFP with which this case is concerned. Questions arose by potential vendors at a Pre-Proposal Conference, which was held on January 21, 2003. Representatives of the Department, Experior, Promissor, and PSI attended. Amendment One to the RFP grew out of that conference and was issued on February 3, 2003. This amendment contained the written questions and the Department's answers and the minutes of the Pre-Proposal Conference. The Department appointed certain employees to serve on the evaluation committee. The employees who were appointed were Karen Campbell-Everett; Steven Allen; Mollie Shepard; Alan Lewis; Milan Chepko (alternate) and Joe Muffoletto (alternate). Additionally, Department employee Valerie Highsmith was appointed to evaluate proposer references. Ultimately, alternate evaluator Joe Muffoletto replaced evaluator Steven Allen due to the death of Mr. Allen's father. Amendment One to the RFP then identified the evaluators and informed all proposers that the educational and professional background of each evaluator could be obtained by making a public records request. The protest filed by Experior alleges that evaluator Joe Muffoletto was not appropriately qualified. Experior did not file a challenge to the evaluators within 72 hours after they were identified in RFP Amendment One. Realistically this would have been difficult to do unless they already knew what the objections to qualifications might be, since Amendment One, in identifying the evaluators, informed the proposers that they would need to make a public records request to obtain the educational and professional background of each evaluator. In any event, preponderant evidence shows that Mr. Muffoletto's experience is sufficient to constitute "experience and knowledge in program areas and service requirements" for the CBT contract within the meaning of Section 287.057(17)(a) (which only requires that evaluators "collectively" have such experience). Mr. Muffoletto has a bachelor's degree, with a major in English and a minor in psychology. He holds a master of science degree in education and master of arts degree in multi- disciplinary studies and has completed the graduate level course called "assessment of learning outcomes" at Florida State University. Before working for DBPR, in 1996, he was a junior high and high school English teacher for 30 years. He has worked as a computer trainer for students taking the New York State Regents Competency Exam. In 1996-1997 he was an OPS test editor with DBPR and from 1997 to 1999 worked for the Florida Department of Education as a coordinator of test development, where he trained consultants on how to write test items, review test items, and amend test content outlines and blue prints. While in that position, he also wrote an RFP and developed a set of exams. Since 1999 he has been a psychometrician with DBPR and currently develops computed-based examinations for landscape architects and auctioneers and regular examinations for electrical contractors. Promissor, Experior and PSI each submitted responses to the second RFP. The technical proposals were distributed to members of the evaluation committee for review sometime after a standardization session for evaluators was conducted on February 11, 2003. The members of the evaluation committee separately conducted an analysis of each proposal and awarded points based on their review. Each evaluator submitted his or her completed technical evaluation guides or score sheets to Lyra Erath, who then forwarded the score sheets to the lead evaluator, Molly Shepard. The evaluation of the proposer references was completed by Valerie Highsmith and her score sheets for such evaluations were submitted to Bobby Paulk. On February 27, 2003, the Department opened the cost proposals, which reflected the following prices proposed per hour: Promissor: $9.00; Experior: $10.50; PSI: $11.35; and NCS Pearson: $14.75. The score for each cost proposal was calculated in accordance with a mathematical formula set out in the RFP. Promissor proposed the lowest cost and thus received the maximum cost score of 175 points. Experior received 150 points, PSI 138.77 points, and NCS Pearson 106.79 points. Upon concluding the evaluation process established by the RFP, Promissor's proposal was ranked first with 490.08 points out of a maximum available 555 points. PSI was second place, being awarded 461.40; Experior was awarded 440.03 points and NCS Pearson, 305.16 points. The bid/proposal tabulation was posted by the Department on March 12, 2003. Therein it indicated its intent to award the contract for CBT Services to Promissor. On March 17, 2003, Experior and PSI filed notices of intent to protest the intended award to Promissor. Experior thereafter timely filed a formal written protest, although PSI did not. ISSUES TO BE RESOLVED The Time Period for Contract Implementation Experior's protest alleges that the time period for contract implementation was allegedly "too aggressive" (short). The RFP however, repeatedly notified all proposers that they would waive any protest of the terms and specifications of the RFP unless they filed such protest within 72 hours of receiving notice of the specifications, as provided in Section 120.57(3). Similarly, RFP Amendment One informed the proposers that the RFP was amended to include "changes and additions" and that failure to file a protest within the time specified in Section 120.57(3) would constitute a wavier of Chapter 120 proceedings. RFP Section V, states "A. DBPR estimates that the contract for the RFP will be effective on or about March 17, 2003, and the testing services begin May 19, 2003." The 30- day periods the protest claims were "too aggressive" (i.e. too short) were specifically disclosed in RFP Section X concerning "scope of services." The time period of which Experior now complains was apparent on the face of the RFP. Indeed, when Experior's personnel first read the RFP, they had a concern that the time period might give Promissor a competitive advantage. At the Pre-Proposal Conference on January 21, 2003, Mark Caulfield of Experior even expressed concern that the 60 days allowed for implementation was a very aggressive schedule and asked the Department to reconsider that time period. The concern over the implementation schedule was documented in written questions which DBPR answered in Amendment One, telling all proposers that the implementation schedule was fair, in its view, and would not be changed. Experior did not protest the RFP's implementation time period within 72 hours of first reading the RFP and never filed a protest to any term, condition or specification of RFP Amendment One, including the Department's notice that it felt that the implementation schedule was fair and that it would not be amended. Thus, any challenge to the implementation schedule was waived. Even had Experior not waived its challenge to the implementation schedule, there is no persuasive evidence that the schedule would give Promissor an unfair competitive advantage over Experior and PSI. The DBPR tests are already finalized and would simply have been transferred to a new vendor if a new vendor had been awarded the CBT Services Contract. Experior failed to adduce persuasive evidence to show that any proposer was advantaged or disadvantaged by the implementation schedule which applied to all proposers. Evaluation of the MWBE Submittals RFP Section XIV.Q. encouraged minority and women-owned businesses (MWBE) to provide work goods, or services associated with services contemplated by the RFP. Proposers were to be awarded additional points for committing to use MWBEs, based on the percentage of the business under the contract the MWBE would perform. Experior, Promissor and PSI each proposed to use MWBEs to supply goods or services needed to perform the CBT contract. Promissor indicated that it would use one MWBE for 30 percent of the contract value. Resultingly, the Department awarded Promissor 16.5 MWBE preference points (30 percent x 55 maximum points). Experior presented no persuasive evidence showing how the Department interpreted and applied the MWBE provisions of the RFP or showing that the Department acted in excess of its authority in determining the award of MWBE points, as described in Amendment One. Experior offered no evidence concerning whether the Department considered or applied the "two subcontractor" limitation in RFP Section VI.5 ("no more than two subcontractors may be used") when it evaluated the Experior and PSI MWBE proposals, nor how it applied that limitation. Experior and PSI both indicated they would use three MWBE vendors. Experior proposed to use JR Printers (Printing Services); Colamco, Inc. (computer equipment for testing centers); and Workplace Solutions, Inc. (furniture for testing centers). (Furniture is a commodity, not a service.) PSI proposed to use Victoria and Associates (staffing services); Franklin's Printing (printing/mailing services); and National Relocation Services, Inc. (furniture, computers, delivery and installation [commodities, not services]). Based on the proposals, the Department awarded Experior 7.15 points and awarded PSI 17.48 points. Although Experior claims that it and PSI each exceeded the two subcontractor limitation by proposing to use three MWBEs, RFP Section XIV.Q. did not specifically require that proposed MWBEs be subcontractors, but rather only required that MWBEs be utilized by the primary vendor (contractor) to provide work, goods or services. Thus a vendor of goods or a supplier of services could qualify as an MWBE (and, implicitly, not necessarily be a subcontractor). Experior did not prove that any of the MWBEs proposed by PSI or Experior were actually subcontractors on an ongoing basis. The parties stipulated that the companies that each proposed to use were vendors. Moreover, when questioned about the provisions of Section VI regarding sub- contracting of services under the RFP, Jerome Andrews, chief of purchasing and human resources, differentiated the purchase of services from the purchase of commodities as being defined by statute. (See Sections 287.012(4) and 287.012(7).) Experior did not explain or offer persuasive evidence relating to its allegation that PSI's proposal for MWBE services was misleading. Experior did not show that PSI's MWBE proposal did not conform to the RFP requirements or, if there were a defect, how many points, if any, should be subtracted from PSI's total. Moreover, to the extent that Experior claims that the proposal was defective because PSI's proposed suppliers would not provide services over the course of the entire contract, Experior's proposal suffers the same defect, as Experior's proposal admits that "[c]omputer equipment and furniture services will be performed during the implementation phase of the contract." Thus, if PSI's MWBE point award had to be reduced, so would Experior's. Experior fail to carry its burden to show any error in the scoring of the PSI MWBE proposal. It did not establish that these vendors were subcontractors and thus did not establish that the relevant vendors were of a number to exceed the subcontractor limitation in the RFP. It did not persuasively establish that such would have been a material defect, if it had been exceeded. Completion of Evaluation Sheets Some of the RFP's evaluation criteria identified the number of points available and state that such points would be "awarded as a whole and not broken down by sub-sections." In contrast, the remainder of the evaluation criteria simply stated that a specific number of points was available for each specified criterion. In each instance where the evaluation criteria stated that points are "awarded as a whole and not broken down by subsections," the corresponding section of the RFP was broken down into two or more subsections. In each instance where the evaluation criteria simply listed the number of points available, the corresponding section of the RFP was not broken down into subsections. Experior alleged that the evaluators did not properly score Experior's proposal in instances where the evaluation sheet indicated "points are to be awarded as a whole and not broken down by subsections." Experior offered no proof regarding how the Department interpreted that provision or the manner in which the scoring was actually conducted, however. The score sheets reflect that the evaluators actually did award points "as a whole," not broken down by subsections, for those evaluation criteria where that was required. The record does not support any finding that the Department or its evaluators violated the requirements of the RFP, Department policy or controlling law and rules in this regard. Issue of Bias on the Part of Evaluator Three Experior contends that Evaluator Three, Mr. Muffoletto, was biased against Experior. The persuasive evidence does not support that allegation. During his employment with the Department, Mr. Muffoletto interacted with Experior on one occasion regarding reciprocity of an out-of-state examination. This experience left him with the impression that Experior was "proprietary" because it was protective of the content of its examinations. The evidence did not show he had any other impressions, positive or negative, concerning Experior or misgivings about Experior being selected in the first RFP. The mere fact that his total score for Experior was lower than those awarded by other evaluators does not establish bias or irrationality in scoring. The evidence shows that Mr. Muffoletto scored the proposals in a rational manner. He appeared to evaluate criteria comparatively and gave a proposer more points if that proposer was more convincing than another on a particular criteria or point of evaluation. He gave lower scores when the proposer simply copied the text of the RFP and then stated that the proposer would meet or exceed the criteria; in accordance with instructions that evaluators could give lower scores in such cases, so long as the scoring was consistent between proposals. Mr. Muffoletto gave higher scores when the proposers gave more individualized responses, provided more thorough statistics and ways to interpret those statistics, gave numerous specific examples and had a more attractive presentation. Even if Mr. Muffoletto had been biased, it has not been persuasively shown that such would have a material impact on the outcome of the evaluation. If the scores of Evaluator Three were completely eliminated for both PSI and Experior, which is not justified, PSI's point total would be 459.12 and Experior's point total would be 453.54. If Evaluator Three were deemed to give Experior scores equivalent to the highest scores awarded to Experior by any other evaluator, PSI's total would be 461.42 and Experior's point total would be 458.87. Even if Evaluator Three had given Experior the maximum points for each criterion, PSI's point total would have been 461.42 and Experior's point total would have 461.12. Issue of Prior Knowledge of Experior's Prior Cost Proposal Experior contends that Promissor's knowledge of Experior's cost proposal submitted in response to the first RFP in 2002 gave Promissor an unfair competitive advantage. Experior waived that challenge, however, when it withdrew its protest to the rejection of all bids submitted in response to the first RFP. Experior knew when it filed and withdrew its protest to the first RFP decision that all cost proposals had become public record and so it was incumbent on Experior to have challenged the issuance of a second RFP, if it had a legal and factual basis to do so. At the latest, Experior should have challenged the second RFP specifications when issued (within 72 hours) as Experior had already obtained the other proposers' cost proposals and so it knew then that the prior cost proposals were available to all for review. Even if Experior had not waived that challenge, the evidence does not support a finding that Promissor gained any competitive advantage. Although Experior attempted to show, through the testimony of Mark Caulfield, that Promissor could not perform the CBT Services Contract at a profit at the $9.00 per hour price it proposed, Mr. Caulfield actually testified that it would be possible for a company to perform the services for $9.00 per hour, and he did not know what Promissor's actual costs were. Moreover, there is no persuasive evidence that Experior's prior cost proposal played any role in Promissor's determination of its bid for the second RFP or, if it did, that such consideration would have violated any provision of the RFP, governing statutes or rules or Department policies, under the prevailing circumstances, if it had occurred. Alleged Improper Scoring of Experior's Proposal with Respect to Criterion VII.A. Experior alleged that Evaluator One should have awarded 15 points instead 11 points for Experior's proposal format, criterion VII.A., but Experior did not offer the testimony of Evaluator One or any other evidence supporting that allegation. Experior failed to carry its burden of showing that the award of 11 points to Experior for criterion VII.A., was irrational or violated the requirements of the RFP or controlling policies, law or rules of the Department. Even if Evaluator One had awarded 15 points for that criterion, Experior admitted it would have no material impact on the outcome of the procurement, given the more than 21 point advantage PSI enjoyed over Experior. Responsiveness and Qualification The preponderant evidence does not establish that Experior was entitled to but did not receive the additional 21.38 points that it would have to earn to score higher than PSI and move into second place. Experior did not establish error in the evaluation or scoring of its proposal or PSI's proposal that alone, or collectively, would be sufficient for Experior to overtake PSI. As a result, Experior could only prove its standing ahead of PSI by having the Promissor proposal disqualified, which would move it to the first-ranked position because of accession of the full 175 points for having what, in that event, would be the lowest cost proposal. Experior's objection to the Promissor proposal is not meritorious. Its protest alleges that "because Promissor will [allegedly] subcontract for services representing more than 33 percent of contract value, Promissor is disqualified from submitting its proposal and its proposal must be stricken from consideration." Experior did not allege any error in the scoring of Promissor's proposal and so Promissor's highest score cannot be changed. Indeed, even if Experior were awarded the maximum technical score of 325 points, Experior's score would be 482.15 points, still less than Promissor's score of 490.08 points. Experior, as a practical matter, cannot earn enough points because of the disparity in final cost proposal scores to overtake Promissor, unless it can prove Promissor should be disqualified. Experior's proof did not amount to preponderant, persuasive evidence that the Department erred in determining that Promissor's proposal was responsive and that Promissor was a qualified proposer. The Department did an initial review of the proposals to determine if they were responsive to all mandatory requirements, and any proposer determined non-responsive would have been excluded at that point. Promissor's proposal contained all required information in the required format and was deemed responsive. The preponderant evidence shows that the Department's determination that Promissor was responsive and qualified comported with the requirements of the RFP and controlling policy, rules and law. Promissor expressly stated that it would comply with the RFP's subcontracting guidelines upon performing the contract wherein it stated "Promissor agrees and commits to meet the requirement of the RFP." Promissor's proposal stated its intent to subcontract less than 33 percent of the contract value, and that was all that was required for the proposal to be responsive. There is nothing in the Promissor proposal that indicated that Promissor would not comply with the subcontracting guidelines. Experior's entire challenge to the Promissor proposal is based on the contention that Promissor intended to use a subcontractor to provide call center services under the Florida contract but did not say so in its proposal. The Promissor proposal actually stated that Promissor would use its "proprietary scheduling system" or "proprietary reservation system" to service the Department's contract as it was currently doing, not that it would use any particular call center. These representations appear to be true, as Promissor's "scheduling system" or "reservation system" (the proprietary software Promissor uses to take reservations) that it said it would use for the new Florida contract is the same system used under the prior contact with the Department. Ordinarily, whether or not Promissor would actually comply with the subcontractor guidelines could not be determined until Promissor actually performs the contract. It is an issue of contract compliance and not responsiveness or qualification. Here the evidence shows that Promissor was in compliance with the 33 percent maximum subcontracting requirement before the originally scheduled contract implementation date. Since Promissor wished to obtain the maximum points for minority participation, Promissor decided to subcontract to the maximum possible extent with an MWBE. In doing so, Promissor wanted to assure that the use of Thompson Direct, Inc., for call center services did not make it exceed the 33 percent subcontractor standard. Thus, Promissor decided, before it submitted its proposal, to perform the call center services from one of its three regional centers and this decision was communicated internally before Promissor prepared its proposal. Promissor initially intended to perform the call center services from its regional offices in Atlanta, Georgia. In order to implement that decision, senior executives of Promissor, including its president, toured that office in early March, before the Department posted its notice of intent to award to Promissor. After the notice of award was posted on March 12, 2003, Promissor promptly posted an employment advertisement on its website seeking persons to act as call center representatives to service the Florida contract from the Atlanta office. That advertisement was posted on March 14, 2003, a day before Experior filed its notice of intent to protest. In early to mid-April, the manager of the Georgia regional office prepared a project plan that revealed that the Georgia regional office might not be ready to perform call center services by the May 20th contract implementation date. Promissor then decided to use its Maryland regional office to perform the call center services. Regardless of the location of the call center, the scheduling system used by Promissor would be the same as under the prior contract and the same as Promissor promised in its proposal. The Scranton call center and the three regional offices use the same proprietary scheduling system provided by Promissor and run from servers located at Promissor's headquarters in Bala Cynwyd, Pennsylvania. Even at the Scranton call center that was previously used, Promissor trained all of the employees, who handle calls only for Promissor, wrote the scripts for their use and provided the proprietary scheduling software. The Maryland call center was actually accepting all calls for the Florida programs to be serviced pursuant to the RFP by May 19th, before the May 20th contract implementation date. Since the call center services were actually being provided by Promissor's Maryland regional office before the contract implementation date, Experior's claim that Promissor would provide those services through a subcontractor is not supported by preponderant evidence. Allegations that Promissor Made Misrepresentations Regarding Subcontractors In light of Promissor's actual provision of call center services from its regional office before the contract implementation date, Experior's contention that alleged misrepresentations occurred in the Promissor proposal are without merit. Even if Promissor had not actually performed, however, Experior failed to prove that Promissor made any misrepresentations or was unqualified. In support of its claim that Promissor was unqualified, Experior introduced into evidence three proposals that Promissor or ASI (a corporate predecessor to Promissor) had submitted to agencies in other states in the past three years. Experior argues that Promissor/ASI made misrepresentations in the other proposals and, therefore, Promissor made misrepresentations in the proposal at issue in this proceeding. Its basis for alleging that Promissor made misrepresentations in the Florida proposal at issue is its contention that Promissor/ASI made misrepresentations in other proposals to other states. No evidence was offered that Promissor had made a misrepresentation to the Department as to this RFP, however. In light of Promissor's actual performance in accordance with its proposal and the RFP requirements, the proposals from the other states have little relevance. Experior did not prove that Promissor made misrepresentations in the other proposals, particularly when considering the timing of those proposals and Promissor's corporate history. Promissor's corporate history must be considered in evaluating the claim of misrepresentation to the other state agencies in other states. In 1995, Assessment Systems, Inc., or "ASI," was acquired by Harcourt Brace Publishers. In June of 2001, ASI was sold with a number of other Harcourt companies, including a company called Harcourt Learning Direct, to the Thompson corporation. Harcourt Learning Direct was re-named Thompson Education Direct. Soon after, the federal government required, for anti-trust reasons, that Thompson divest itself of ASI. Accordingly, ASI was acquired by Houghton Mifflin Publishers in December 2001, and its name was later changed to Promissor. Up until December 2001, the entity now known as Promissor and the entity now known as Thompson Education Direct were corporate affiliates under the same corporate umbrella. The Kansas Proposal Experior's Exhibit five was ASI's Proposal for Agent Licensing Examination Services for the Kansas Insurance Department dated May 8, 2000. A letter that accompanied the proposal stated that ASI would not engage a subcontractor for examination development or administration services. Mark Caulfield testified that he did not know whether or not what was said in this letter was true on the date it was written. He testified that he did not know if ASI was using any subcontractors or any outside contractors for any purpose in May of 2000. In fact, as of May 2000, ASI did not subcontract for any call center services; at the time that the letter was written, all of the representations in the letter were true. ASI was awarded the Kansas contract and Experior did not protest. Experior did not offer any evidence related to the requirements in the Kansas RFP and is not aware of any issues between Kansas and Promissor regarding the contract. There is no evidence that the Kansas request for proposals had any subcontracting limitations in it. The proposal that ASI submitted to Kansas in May 2000 listed a phone number for ASI's call center. In preparation for the hearing, witness Mark Caulfield called that phone number and claimed that a person answered the phone "Promissor," and said she was located in Scranton, Pennsylvania. Experior did not show that the person that answered the phone was an employee of Promissor. Whether or not the person who answered the phone in that example was or was not an employee of Promissor and could or could not bind Promissor with any statement as a party admission, is beside the point that it has not been shown who would have answered the phone in May 2000, or where they would have been located, as to whether or not that person was the employee of Promissor or its immediate corporate predecessor in interest or whether that person was employed by some subcontractor. That is immaterial, however, in the face of the fact that it has not been proven that the Kansas request for proposals had any subcontracting limitations in the first place and, therefore, no misrepresentation in the Kansas situation has been proven on the part of Promissor. The Maine Proposal Experior's Exhibit seven is ASI's proposal to provide real estate examination administration and related services for the Maine Department of Professional Regulation and is dated August 1, 2001. As of August 1, 2001, ASI did not subcontract for call center services. On pages 2-10 of the Maine proposal, there is a reference to ASI having an extensive network of program-specific, toll-free telephone lines and program-dedicated customer care representatives. This statement was shown to be accurate and was an accurate statement when made on August 1, 2001. The statement refers to the monitoring of the reservation process done by ASI management. Experior admitted that it had no reason to believe that in August of 2001, ASI did not have an extensive network or program-specific toll-free telephone lines and program-dedicated customer care representatives, and Experior did not prove that to be currently untrue. Experior's Exhibit eight is Promissor's Real Estate Candidate handbook regarding the Maine procurement dated April 2003. As of April 2003, the statements made in the handbook were accurate and correct. The handbook listed on page 11 a customer care phone number of 877-543-5220. Experior provided no evidence as to the location where that phone number rang in April of 2003. Experior did not show persuasive evidence regarding the requirements in the Maine RFP and there is no evidence that the Maine RFP had any subcontracting limitations as are in question in the instant case. The Oklahoma Proposal Experior's Exhibit nine was Promissor's response to Bid No. N031354 for License Testing Services for the Oklahoma Insurance Department. It is dated December 18, 2002. Promissor did not state in the proposal that it would not use subcontractors. There is no need to reference subcontractors in the Oklahoma proposal as the Oklahoma RFP did not contain subcontracting limitations. Oklahoma has approved the manner in which Promissor is performing under that contract and Experior did not establish that the statements in Promissor's proposal were false when made or now. The Texas Proposal Experior's Exhibit twelve is Promissor's press release titled "Texas Selects Promissor as Exclusive Provider for Insurance License Testing," dated October 1, 2002, in which Promissor referred to "the Promissor Call Center." Experior did not establish that Texas was not served by a Promissor call center or that Promissor was not performing in the manner its Texas proposal promised. In fact, Texas has approved Promissor's performance under the Texas contract. Even if the proposals Promissor offered had stated that Promissor would provide call center services through a specified entity (which they did not do), and then Promissor later performed such services through another entity, such evidence would be insufficient to prove that Promissor would not comply with the Florida RFP's subcontracting guidelines, especially given Promissor's actual performance in accordance with its proposal. Experior did not establish with preponderant evidence a "routine business practice" of Promissor to make misleading or false promises in proposals to evade subcontracting guidelines. There is no evidence in any of the four states concerning which Experior provided evidence, that they had any subcontracting limitation in their RFPs. The evidence showed that the statements in each of these proposals were undoubtedly accurate at the time they were made; to the extent that the provision of call center services differs from what was promised (although the evidence does not establish that), such difference is explained by the changes in corporate structures that have occurred since the proposals were submitted. Additionally, the evidence established that Promissor has submitted between 70 and 120 proposals since the beginning of 2000 across the nation. The documents relating only to other proposals to other states that were not even proved to have requirements similar to Florida's are insufficient to establish that Promissor had a "routine" practice of making misleading promises about its call center services. Accordingly, the Petitioner has not offered preponderant, persuasive evidence that Promissor is unqualified as a proposer.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Business and Professional Regulation denying the Petition and approving the intended award of the contract to Promissor, Inc. DONE AND ENTERED this 22nd day of August, 2003, in Tallahassee, Leon County, Florida. S P. MICHAEL RUFF 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 Clerk of the Division of Administrative Hearings this 22nd day of August, 2003. COPIES FURNISHED: Wendy Russell Weiner, Esquire Mang Law Firm, P.A. 660 East Jefferson Street Tallahassee, Florida 32301 Joseph M. Helton, Jr., Esquire Michael J. Wheeler, Esquire Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2022 Paul R. Ezatoff, Esquire Katz, Kutter, Alderman & Bryant, P.A. 106 East College Avenue, Suite 1200 Tallahassee, Florida 32301 Michael P. Donaldson, Esquire Carlton Fields Law Firm 215 South Monroe Street, Suite 500 Tallahassee, Florida 32301 Hardy L. Roberts, III, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202
Findings Of Fact DOT is an agency of the State of Florida responsible for the construction and maintenance of roads designated as part of the State Highway System. Clark is a road and bridge construction company located in Dozier, Alabama, and certified to bid on DOT contracts. On January 23, 1991, Clark submitted its bid on DOT Project No. 61530- 3601 for the construction of two adjacent bridges (Holmes Creek Bridge and Holmes Creek Relief Bridge) located in Washington County, Florida. On April 4, 1991, DOT and Clark entered into a contract for this project. The construction on the project was to take 400 contract days. On December 8, 1991, DOT advised Clark of its intention to declare Clark delinquent for unsatisfactory progress on the project. The contract required Clark to submit a construction schedule for approval by DOT. Under its approved construction schedule, Clark anticipated that it would commence its pile driving activity on the tenth day of the contract. Clark also proposed beginning the superstructure 40 days after beginning the substructure. The contract provides in part as follows: 8-7.3.2 . . . The Department may grant an extension of contract time when a controlling item of work is delayed by factors not reasonably anticipated or foreseeable at the time of bid. Such extension of time may be allowed only for delays occurring during the contract time period or authorized extensions of the contract time period. * * * Delays in delivery of materials or competent equipment which affect progress on a controlling item of work will be considered as basis for granting a time extension if such delays are beyond the control of the Contractor or supplier. * * * 8-8.2 Regulations Governing Suspension for Delinquency: Under the relevant rule provisions, a contractor is delinquent when unsatisfactory work progress is being made under these conditions: * * * (3) The allowed contract time has not expired and the percentage of dollar value of completed work is 15 percentage points or more below the dollar value of work which should have been completed according to the approved working schedule for the project. After falling 15 percent behind, the delinquency continues until the percentage points of the dollar value of completed work is within five percentage points of the dollar value of work which should have been completed according to the approved working schedule for the project. The contract required Clark to procure pilings for the project from a certified prestressed concrete manufacturer. The concrete mix design used by the prestress manufacturer had to be approved by DOT before construction could begin. At the time Clark prepared its bid, there were no preapproved prestressed concrete manufacturers in Florida or Alabama in the reasonable vicinity of the project. In preparing its bid, Clark contacted Sherman International (Sherman), a prestressed concrete manufacturer with headquarters in Birmingham and a plant in Mobile, Alabama. Immediately upon being awarded the contract, Clark notified DOT that Sherman would be its prestress supplier. Sherman had experience in fabricating prestressed products for states other than Florida and therefore believed it would not have a problem meeting Florida's certification requirements. The certification process requires inspection and approval by DOT officials of the manufacturer's equipment, material suppliers, plant operations, concrete mix, etc. The certification process also involves the production and pouring of test batches which must be reviewed by DOT officials who note problems with the product and direct resolution of the problems. The certification process involves a minimum of 28 days to allow the test batches to cure. After Sherman went through two unsuccessful 28-day curing periods in its effort to meet DOT approval, it retained an expert more familiar with DOT procedures and requirements and was finally able to obtain DOT approval on July 10, 1991. DOT's district engineer recognized that Clark reasonably would have anticipated that Sherman would be approved without delay. Neither Sherman nor Clark had reason to anticipate the approval of Sherman would take an extended length of time. Due to the delays in the approval of Sherman, Clark was unable to begin pile driving until August 14, 1991, the 98th day of the contract. Under the contract, piling had to be driven to depth until it met a specified bearing capacity, but still maintained the necessary height above ground to support the superstructure. The work on the foundation began by driving test piles. Once the test piles were driven, DOT was responsible for determining the order lengths for the piling. The order lengths were supposed to be long enough so that the piles would reach bearing and also maintain the specified height, above ground. Immediately upon commencing pile driving, Clark ran into problems because the piles were not long enough to be driven to bearing. The piles which did not meet bearing had to be spliced and redriven until they reached bearing. The contract contemplated that as many as seven splices would be required, 2 on the relief bridge and 5 on the creek bridge. The contract therefore identified splicing as an item for which the bidders were required to submit a unit price. In fact, on the creek bridge, 43 of the 96 piles had to be spliced. DOT was responsible for determining the additional pile lengths for the splices and it took DOT at least a week to make the determination once it realized a splice was required. Sherman had to manufacture the splices piecemeal as the orders came in to do so. Once manufactured, the pile splice had to cure for seven days then be shipped to the contractor. The contractor then affixed the pile splice to the original piling by the use of dowels and epoxy which had to cure for 48 hours. Construction of the substructure consisted of driving the piles, splicing and pouring concrete caps on which the bridge superstructure would rest. Before construction of the superstructure (decks) of the bridge could begin, pile caps had to be constructed. It took anywhere from two weeks to two months between the time the parties discovered that a pile or group of piles would have to be spliced and the time the spliced pile could be redriven. The pilings are constructed in clusters known as bents. Every bent on this project required splicing and therefore, construction of every bent was delayed. Before Clark could begin construction of the superstructure, it was necessary to have a consecutive series of bents completed including the caps. Even though Clark anticipated that it would commence construction on the superstructure 40 days after beginning the substructure, Clark was unable to start on the superstructure until 92 days after it started the pile driving operations because of the delays caused by the excessive splicing. Clark expected to be able to begin the superstructure on one end of the bridge while it was working on the substructure at the other end. However, Clark's planned, efficient progress was impeded because of ongoing driving operations of spliced pilings. Clark could not pour the caps while pile driving was going on within 100 feet of the bent where caps were to be poured. Clark continued on with its pile driving while it ordered splices for the previous bents. As soon as Clark was able to pour caps it did so and as soon as there were a sufficient number of completed successive bents available, Clark began work on the superstructure. Clark requested time extensions due to the delays, but the requests were denied. Clark ultimately was delayed in the progress of its work due to the unanticipated pile splices which exceeded the estimated quantity by more than 800 percent. DOT granted Clark nine additional contract days as the result of a supplemental agreement which did not include any additional time for the delays due to the excessive splicing. At the time of the notice of delinquency, Clark requested a 45-day extension of time due to the splicing. By a letter dated December 4, 1991, the DOT project engineer acknowledged that Clark was entitled to some time extension due to the splicing, but DOT proposed only a 9-day extension. In fact, no such extension was ever granted. DOT determined Clark delinquent on day 210. According to the engineer's weekly summary, on day 210, the percentage of the dollar value of completed work was 39.5 percent and the total allowed number of contract days was 403. By DOT's own calculations, if Clark had been given the nine days proposed for the supplemental agreement and the nine days suggested in the project engineer's letter of December 4, 1991, the project would have only been delinquent by 17 percent. It is not necessary for the trier of fact herein to determine the exact number of days which should have been granted for the pile splicing. It is enough to find that the 9 days suggested by DOT are inadequate and that the appropriate figure, based on the engineer's progress notes and reports, is at least twice that. DOT's witnesses offered explanations of why Clark was entitled to no extension in contract days because of the pile splices. However, their suggestions was beyond the realm of credibility in light of the actual extent of work and time required. Credibility determinations being within the exclusive province of the Hearing Officer, it is determined that DOT's testimony regarding the reasons for DOT's refusal to extend the contract time to reflect the inordinate number of pile splices is simply not credible or entitled to any weight. Additionally, neither of the main DOT witnesses had adequate knowledge of this specific project. If DOT had granted Clark an adequate number of days extension for the pile splices, that number plus the additional 9 days would result in an adjusted number of contract days of over 430. If Clark were granted the appropriate number of additional contract days, the percentage of dollar value of completed work would be less than 15 percentage points below the dollar value of work to be completed according to the contractor's schedule. This is calculated as follows: 210/430=48.6 percent. (Actual work completed of 39.5 percent or uncompleted percent of total contract amount of 60.5 percent.) 60.5-48.6=11.9 percent.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the DOT enter a Final Order determining that Clark is not delinquent and dismissing the delinquency determination against Clark Construction Co., Inc., on State Project No. 61530-3601. DONE and ENTERED this 14th day of July, 1993, in Tallahassee, Florida. DIANE K. KIESLING 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 14th day of July, 1993. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 92-1592 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on the proposed findings of fact submitted by the parties in this case. Specific Rulings on Proposed Findings of Fact Submitted by Petitioner, Department of Transportation Each of the following proposed findings of fact is adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 1-5(1-5); 15(8); 18(8); 32(17); and 34(19). Proposed findings of fact 7-14, 19, 20, 22-31, 33, 35-37, and 40 are subordinate to the facts actually found in this Recommended Order. Proposed finding of fact 6 is unnecessary. Proposed findings of fact 16, 38, 39, and 42 are unsupported by the credible, competent and substantial evidence. Proposed findings of fact 17, 21, 41, and 43 are irrelevant. Specific Rulings on Proposed Findings of Fact Submitted by Respondent, Clark Construction Co., Inc. Each of the following proposed findings of fact is adopted in substance as modified in the Recommended Order. The number in parentheses is the Finding of Fact which so adopts the proposed finding of fact: 2-6(9-13); 8-13(14-19); 14(6); 15(7);. 16-28(20-32); 30-33(33-36); 34(8); 35(37); 36-40(39-43); and 46(38). Proposed findings of fact 1, 29, 41, 42, and 45 are subordinate to the facts actualloy found in this Recommended Order. Proposed findings of fact 7 and 47 are unsupported by the credible, competent and substantial evidence. Proposed findings of fact 43 and 44 are unnecessary. COPIES FURNISHED: Reynold D. Meyer Genie L. Buckingham Assistant General Counsels Department of Transportation 605 Suwannee Street, MS-58 Tallahassee, FL 32399-0458 Mary Piccard, Attorney at Law Cummings, Lawrence & Vezina, P.A. 1004 DeSoto Park Drive P.O. Box 589 Tallahassee, FL 32303-0589 Ben G. Watts, Secretary Department of Transportation Haydon Burns Building 605 Suwannee Street Tallahassee, FL 32399-0458
The Issue The issue in this proceeding is whether the proposed action of the Department with regard to procurement of the State of Florida Statewide Law Enforcement Radio Communications System, DMS Number 21-725-001-W, is contrary to the Department's governing statutes, rules, policies, or any applicable bid or proposal specification.
Findings Of Fact General Background Pursuant to Section 282.1095, Florida Statutes, the State of Florida established the State Agency Law Enforcement Radio Trust Fund (Trust Fund) in the Department to fund the construction, maintenance, or support of a statewide law enforcement radio system. On or about January 31, 2000, the Department issued RFP No. 21-725-001-W entitled "Statewide Law Enforcement Radio Communications System." The RFP sought proposals for providing the statewide law enforcement radio communication system. The purpose of the proposed radio system is to allow various state law enforcement officers to communicate from one end of the state to the other. Motorola was the vendor responsible for the construction and operation of Phases I and II of the radio system. In this procurement, the Department sought proposals for continued maintenance and operation of Phases I and II and completion of Phases III, IV, and V of the radio system. The Department sought "innovative proposals from the private sector that will result in a more economical and timely completion of a statewide radio communications system." The Department stated that it would "consider all approaches, methods, alternative technologies . . . provided that the proposal is reasonable, clearly achievable, and can be accomplished with minimal or no cost to the State of Florida to the extent permitted by law." On March 7, 2000, Com-Net and Motorola submitted proposals in response to the RFP. Com-Net and Motorola were the only two vendors that submitted proposals. On April 4, 2000, the Department posted a notice terminating the RFP and declared both proposals non-compliant. On April 5, 2000, the Department sent a letter to Com- Net and a letter to Motorola, advising each vendor of the major areas of the proposals deemed non-responsive. The letters also informed the vendors that the Department had determined to follow a negotiation process pursuant to Section 287.057(4), Florida Statutes. On April 10, 2000, the Department sent a letter to Com- Net and a letter to Motorola, advising each vendor of the procedures for the negotiation process. The letters included a list of questions and vendor evaluation guidelines and advised the vendors to bring their proposals into compliance with the specifications and requirements of the terminated RFP document. The April 10, 2000 letters also advised Com-Net and Motorola that the Department reserved the right to negotiate concurrently or sequentially with the vendors. On April 19, 2000, Com-Net and Motorola each submitted responses to the questions in the Department's April 10, 2000 letters, revisions to technical and financial proposals, and other information. After Motorola and Com-Net submitted their respective modified proposals on April 19, 2000, the Department conducted an initial meeting on May 12, 2000, with both vendors to provide further direction on how the negotiation process would work and to answer questions. At the May 12, 2000 meeting, the Department introduced a five-member evaluation team. The Chairman of the evaluation team, Roy Cales, explained to the proposers that there would be an evaluation process followed by a negotiation process. During that process, focus would initially be on the technical proposals, while later consideration would focus on cost proposals. Each member of the evaluation team brought different relative strengths and perspectives to the decision process. Kourosh Bastani's primary expertise was technical. As the coordinator of Phase I and II, field manager of the radio system, and twenty years' experience in the Florida Highway Patrol, Captain Keith Gaston brought the skills and perspective of a system user and manager. Lisa Saliba has an extensive background in state budgeting, planning, and coordination of projects with agencies. Rick Blankenship is an investment banker and brought considerable financial expertise to the process. As Chairman of the evaluation committee and Chief Information Officer for the State of Florida, Roy Cales possesses technical expertise and experience with state procurement of technology products. The evaluation team was assisted by a technical advisory team composed of technical experts employed by the state, Bruce Meyers and J.P. Saliba, and external technical consultants, Jeff Ellis and Mike Thayer of the Gartner Group. From May 12, 2000 to June 22, 2000, representatives of the evaluation team and technical advisory team met on several occasions with the proposers, both individually and together. During these meetings, the parties engaged in discussions regarding changes to both technical/financial aspects of the proposals and potential contract. After the series of meetings with one or both vendors present, the evaluation team met in private on June 22, 2000, to review the proposals one last time and to make certain all team members understood the financial aspects of both proposals. On June 23, 2000, the evaluation team met in public and voted to rank Com-Net's proposal first and Motorola's proposal second, and to negotiate sequentially beginning with Com-Net. On that same day, the Department posted notice of its proposed agency action which stated that if the negotiations with Com-Net were successful, a contract would be awarded to Com-Net. If the negotiations with Com-Net were not successful, the Department would proceed to negotiate with Motorola and, if successful, a contract would be awarded to Motorola. On July 10, 2000, Motorola filed its Petition to Formally Protest Decision to Negotiate Sequentially, and Initially, with Com-Net Ericsson Critical Radio Systems, Inc. The sole relief sought by Motorola in its Petition is a final order "declaring that the Department is required to conduct concurrent negotiations with both Com-Net and Motorola . . . and that Motorola be ranked No. 1." On or about July 19, 2000, the Department referred Motorola's protest to the Division of Administrative Hearings and requested that an Administrative law Judge be assigned to conduct a hearing. On August 9, 2000, the Administrative Law Judge entered an Order granting the Petition of Com-Net to intervene in this proceeding. The Evaluation Process Motorola's Allegations The Department terminated the RFP with its April 4, 2000 posting, and any specific scoring or weighting stated in the RFP. The Department's April 10, 2000 letter, explicitly advised that the state would use the attached evaluation criteria only as a "negotiation guideline" and that "these guidelines may not be all-inclusive of the criteria to be considered. Further not all of these criteria will necessarily be considered with the same weighting." Motorola, in its Petition acknowledges that it "was directed [by the Department's April 10, 2000 letter] to forget the RFP, think out of the box, and be creative." By Motorola's own admission, the Department's clear direction to "forget the RFP" and "think out of the box" put Motorola squarely on notice that the RFP was at most a guideline in the Section 287.057(4), Florida Statutes, negotiation process. In internal e-mails, Motorola personnel stated that the Department had "given us the opportunity to change the assumption of our models, get outside the bounds of the RFP and find ways to reduce costs . . . ." Motorola understood that in addition to its response to the April 10, 2000 letter, it had the opportunity to submit technical and financial alternatives "outside the boundaries of the RFP and current technical question submittals." Motorola cited no provision which would prohibit the Department from disregarding the RFP and negotiating in the best interests of the state. Motorola alleged that the Department impermissibly permitted Com-Net to materially alter its proposal after the April 19, 2000 deadline for re-submission of modified proposals during "improper negotiations not in accordance with the procedures set forth in the April 10, 2000 letter." Motorola, however, presented no evidence at hearing as to what "improper negotiations" occurred. The evidence presented does establish that Motorola availed itself of an opportunity to significantly change its April 19, 2000 cost proposal. A simple comparison of Motorola's April 19, 2000 and June 22, 2000, cost proposals reveals substantial differences. Motorola did not establish at any time in this proceeding an absence of Department authority to allow proposers to change their proposals after April 19, 2000. Both proposers were clearly on notice that the Department was seeking changes to the proposals. Both proposers were informed of the process and had an equal opportunity to respond. There was no advantage to one proposer over another when the Department sought modifications to proposals during the negotiation process under Section 287.057(4), Florida Statutes. Evaluation Team Determination Four out of five members of the evaluation committee voted for sequential negotiations and ranked Com-Net first and Motorola second. The only member of the evaluation committee who did not rank Com-Net first and vote for sequential negotiations was Kourosh Bastani. Mr. Bastani ranked Motorola first and voted for concurrent negotiations, although he acknowledged that the rankings were meaningless in concurrent negotiations. He had concerns about both proposals, describing Motorola's technical proposal as "acceptable" and Com-Net's technical proposal as "viable," yet believed that both vendors "provided good proposals, and they were worthy of further consideration." Despite being the only team member who did not rank Com-Net first and vote for sequential negotiations, Mr. Bastani unequivocally expressed his belief in the fairness of the evaluation process and respect for the votes of the other members by stating: I believe that the process provided me an opportunity to objectively review both proposals and provide an opportunity for both vendors to provide clarifications and answer questions. And I was able to, in a fair and objective manner, arrive at my decision. So I believe in the integrity of the process, whether I agree with their vote or not, I think they reached it in an informed manner. Mr. Bastani could think of no basis or prejudice in the process that would undermine the validity of the decision. Captain Gaston voted to negotiate sequentially with Com-Net first because he felt the cost difference between Motorola and Com-Net was so great it was unlikely Motorola was going to get within the "ballpark." His interest is in securing a contract as quickly as possible and he believed concurrent negotiations would delay the final outcome. Ms. Saliba voted to negotiate sequentially with Com-Net first because she wanted the opportunity to concentrate on negotiations with a single vendor without the distraction of lobbying and external communications from representatives of competing vendors. In addition to the cost factor, she favored Com-Net because Com-Net is attempting to gain a "foot-hold" in the industry through this contract to establish itself as a credible provider and therefore is committed to reaching an agreement that will satisfy the state's needs. She did not have that confidence in Motorola. Mr. Cales voted to negotiate sequentially with Com-Net first based on a determination of the overall best value for the state. He informed the vendors from the beginning of the evaluation process that if one stood out above the other, the negotiations would be sequential. In that circumstance, concurrent negotiations would have penalized the vendor that stood out and Mr. Cales determined that Com-Net stood out. Additionally, in Mr. Cales' view, concurrent negotiations (e.g., double sessions with a single DMS negotiation team) would take twice as long and time is a critical factor. Com-Net's proposal stood out because it guaranteed a system that would do the job, guaranteed a cost within the trust fund revenue stream and guaranteed the state would have the level of service it would contract for without additional cost to the state. Motorola's proposal did not provide those guarantees. In fact, the only way the Motorola proposal would not cost the state millions of dollars more than Com-Net would be if projected tower lease revenue was realized, and those projections were unreasonable and unsubstantiated in Mr. Cales' assessment. Mr. Blankenship voted to negotiate sequentially with Com-Net first based on a determination that doing so would be in the best interests of the state because Motorola required the state to assume risk while Com-Net did not; Motorola required the state to borrow money which was not authorized; Motorola's proposal entailed operating at a deficit for years three through seventeen; Motorola's tower revenue projections were unreasonable and unreliable; and Com-Net's proposal included technology refreshers that Motorola did not. Technical Proposals After several meetings with both vendors to review their technical proposals and after considering the input of the technical committee, the evaluation team determined that the two technical proposals were either equivalent or that, if not equivalent, both vendors could do the job. The responsiveness of both vendors' technical proposals is not at issue in this proceeding. Both vendors met any "threshold" requirements in the Department's April 10, 2000 letter, and were eligible to be considered for negotiation. Cost Proposals Motorola alleges that the Department "failed to properly calculate the cost to the State of Motorola and Com- Net's proposals," and the Department "improperly assigned a zero revenue figure to the revenue sharing financial component of Motorola's June 22, 2000 financial proposal." Both Com-Net and Motorola submitted cost proposals on April 19, 2000, and submitted revised cost proposals on June 22, 2000. Both Com-Net and Motorola outlined modifications to their respective cost proposals during meetings with the Department evaluation team on June 22, 2000. The major components of both vendors' cost proposals are similar, including up-front cash payments from the vendor to the state, an initial first-year payment from the state to the vendor of a portion of the current balance in the Trust Fund, continuing payments from annual Trust Fund revenues to the vendors, and sharing with the state of revenues that the vendors expect to derive by renting excess tower space to third party users of "tower tenants." While the major components in the two proposals are similar, the dollar figures and guarantees differ substantially. The proposals can be fairly summarized based on the major components which most greatly affect the cost to the state. On April 19, 2000, Com-Net's proposal was for revenue sharing to the state of 33 percent, an initial capital contribution from Com-Net to the state for tower upgrade and enhancement, an initial payment to Com-Net of $39 million from the current Trust Fund balance, and annual payments to Com-Net of all Trust Fund revenues, plus $2 million per year. On June 22, 2000, Com-Net reduced the revenue sharing component to 15 percent, eliminated the $2 million per year payment, and proposed to charge the state the annual net revenues from the Trust Fund. Com-Net represented to the evaluation team that this proposal would give the state its "entire wish list within the confines of the trust fund." Com-Net proposed to build, operate, and maintain the radio system for no more than the amount of the current balance and annual revenues in the Trust Fund. Steve Savor, Chief Executive Officer of Com-Net, told the evaluation team on June 22, 2000: We want you to be in a position where you do not have to go back to the Legislature. We are guaranteeing a position where we do not come back to you. Regardless of whether the state ever receives a single dollar of revenue sharing, it can obtain the radio system from Com-Net without exceeding the confines of the Trust Fund. The total cost to the state of Com-Net's June 22, 2000 proposal as calculated by the evaluation team was approximately $331 million. Com-Net's June 22, 2000 proposal included an initial contribution from Com-Net to the state of $20 million, a first-year payment to Com-Net from the Trust Fund of $39 million, and annual payments from the state to Com-Net of all future Trust Fund revenues over twenty years totaling $348 million. Com-Net also proposed to include two features not included in Motorola's June 22, 2000, proposal - a mobile data system valued between $25 million to $40 million and "technology refreshes" valued between $10 million and $50 million. Motorola's April 19, 2000 cost proposal included two alternates. The cost of the primary proposal was approximately $80 million more than the cost of the alternate. Motorola acknowledges that its cost proposal as of April 19, 2000 was "considered outrageous" by the Department. At the June 22, 2000 evaluation team meeting, Motorola presented a revised cost proposal which it explained to the team. Motorola proposed a total cost of $418 million. This figure exceeded the projected Trust Fund revenues of $348 million by $70 million. Because the proposed annual payments to Motorola would exceed available monies to the state in the early years, Motorola proposed to loan the state the funds to cover these shortfalls, and charge the state an estimated total of $55 million in interest. In that the interest cost is only an estimate and funds available to the state could differ from that projected by Motorola, the actual interest cost to the state could increase. Motorola's witness, David Kliefoth, testified that despite the cost of $418 million offered to the Department in Motorola's June 22, 2000 proposal for the project, Motorola's real or "net" price is actually $364 million. Even after making adjustments to the costs of both proposals, Mr. Kliefoth admitted that Motorola's "net price" was $34 million more than Com-Net's price. In order to pay for the radio system, Motorola proposed three sources of funds: i) Trust Fund current balance and projected annual revenues of $348 million, ii) revenue sharing from third party tower rentals of $68 million, and iii) an initial cash contribution from Motorola of $32 million, for a total of $448 million. Although the annual Trust Fund revenues are not sufficient to cover the annual payments to Motorola, the company contends that its proposal provides the state with ample revenue sharing that will allow the state to have a $30 million positive balance in the Trust Fund at the end of twenty years. Yet, despite repeated requests by the evaluation team, Motorola failed to guarantee the projected amount of revenue sharing required to "make the deal work" within the confines of the "Trust Fund. As Motorola representatives told the evaluation committee on June 22, 2000, if Motorola's projected third party tower rental revenues or the projected Trust Fund revenues did not materialize, the state would be expected to make up the difference. The most Motorola was willing to do was to say they "could talk about it." As a basis for its third party tower rental revenue projections, Motorola told the evaluation team on June 7, 2000, that its tower company partner, Pinnacle Tower, had an average of 4.9 tenants per tower nationally and an average of 3.9 tenants per tower in Florida. On June 22, 2000, just two weeks later, Motorola doubled the estimate, claiming that Pinnacle Tower would average 10 tenants per tower in Florida. Motorola raised its estimate without any explanation and despite the fact that tower industry financial research analysts, such as Lehman Brothers, limit their estimates to a more conservative five tenants per tower. In contract to Motorola, Com-Net used a more conservative figure of 1.1 to 2.4 tenants per tower when estimating future third party tower rental revenues. As Com-Net stated to the evaluation team at its June 22, 2000 meeting, third party revenues are "speculative at best." Because they considered both vendors' projections of potential future revenues to be speculative and because neither vendor could guarantee the projections, the evaluation team decided to disregard both vendors' revenue sharing projections and evaluate both proposals based on cost alone. On that basis, the evaluation team determined that the Motorola proposal would be significantly more expensive to the state. Depending on how the proposals were viewed and the assumptions made, most of the evaluation team members determined that the Com-Net proposal would cost the state approximately $91 million less than the Motorola proposal. Each of the evaluation team members decided that the two technical proposals were either equivalent or that, while not equivalent, both vendors could do the job. Having determined that both proposers could do the job, the paramount consideration for most team members became cost. Motorola's internal e-mails demonstrate that it fully understood the importance of cost to the state. Motorola's June 9, 2000 internal e-mail states that the evaluation committee "continues to place higher percentage priority on cash flow of the trust fund and revenue sharing funds versus technology, system performance and long-term maintenance" and that "the State is trying to back into the completion of [the radio system] by using funds available and doing the best they can [to] reduce the scope of work and technology if that's what it takes to finish the State buildout." Motorola alleges that the Department impermissibly altered Motorola's financial proposal such that Motorola's true financial proposal was not fairly considered. Specifically, Motorola argues that the evaluation team disregarded Motorola's revenue-sharing projections by assigning a zero revenue figure. Yet Motorola points to no statute, rule, or policy which would prohibit the Department from such flexibility in evaluating the proposals. Motorola refused to guarantee the revenue-sharing projections and the Department was free to accept or reject such projections. Motorola also complains that the evaluation committee did not inform Motorola of its decision to disregard revenue-sharing projections; yet again Motorola points to no authority imposing an obligation on the committee to do so. The evaluation team treated Motorola and Com-Net equally in this regard by ignoring both vendors' revenue projection and focusing instead on cost. The team recognized the risks and speculation involved in predicting market conditions and revenue streams twenty years into the future. Motorola also alleges that it was told to provide a stronger revenue-sharing model, and thus having been explicitly solicited, its revenue-sharing projections should not be disregarded. However, Mr. Cales established in his testimony that what he asked for was not a higher percentage of revenue sharing or for the state to bear more risk, but rather by "stronger model" he meant he wanted to see the numbers and assumptions behind the projections. Mr. Cales was especially concerned that Motorola kept changing its projected tower revenue figures and that except for changes in the sharing percentage, the total revenue projections should not change. At 6:51 p.m., on June 22, 2000, Motorola transmitted by e-mail to a Department technical consultant additional information from Pinnacle Tower relating to tower tenants. At the time of the e-mail the evaluation team was in session and the team did not know of the information that night. Some of the team members saw it at some point, but the information would not have affected their votes. Pinnacle Tower had a full opportunity to state its case for tower revenues at the June 7, 2000, meeting and at that time projected only five tenants per tower. Moreover, Pinnacle Tower was present at the meeting site on June 22, 2000, but Motorola elected not to have them present in the meeting room even though Motorola understood the team had serious concerns about the revenue projections. As Mr. Cales made clear in his testimony, the last-minute information from Pinnacle Tower concerning tenant projection did not resolve concerns over the substantial increases in projections or their speculative nature. Further as to Motorola's tower revenue projections of June 22, 2000, Mr. Bastani believed the projection of 10 tenants per tower was unrealistic. The other team members likewise did not accept Motorola's assumption that it would achieve 10 tenants per tower. Ultimate Findings of Fact Motorola's June 22, 2000 proposal did not guarantee that the cost of the contract would be within the revenue from the Trust Fund. Motorola's projections of revenue from tower leases was not reliable and was not guaranteed by Motorola. Com-Net's cost proposal of June 22, 2000, was substantially less costly than Motorola's proposal and provided a guarantee that the cost of the contract would not exceed the revenue from the Trust Fund. The decision to negotiate sequentially beginning with Com-Net was logical and reasonable.
Recommendation Based upon the findings of fact and conclusions of law, it is RECOMMENDED: That the Department of Management Services enter a final order denying Motorola's protest. DONE AND ENTERED this 3rd day of October, 2000, in Tallahassee, Leon County, Florida. DON W. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 3rd day of October, 2000. COPIES FURNISHED: C. Everett Boyd, Jr., Esquire Melissa Fletcher Allaman, Esquire Ervin, Varn, Jacobs & Ervin Post Office Drawer 1170 Tallahassee, Florida 32302 W. Robert Vezina, III, Esquire Mary M. Piccard, Esquire Vezina, Lawrence & Piscitelli, P.A. 318 North Calhoun Street Tallahassee, Florida 32301 William E. Williams, Esquire J. Andrew Bertron, Jr., Esquire Huey, Guilday & Tucker, P.A. 106 East College Avenue, Suite 900 Tallahassee, Florida 32301 Alan C. Sundberg, Esquire Mark K. Logan, Esquire Smith, Ballard & Logan, P.A. 403 East Park Avenue Tallahassee, Florida 32301 Shari M. Goodstein, Esquire Shipman & Goodwin, LLP One Landmark Square Stamford, Connecticut 06901 Pennington G. Kamm, Esquire Terry A. Stepp, Esquire Office of the General Counsel Department of Management Services 4050 Esplanade Way, Suite 260 Tallahassee, Florida 32399-0950 Bruce Hoffmann, General Counsel Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950 Cynthia Henderson, Secretary Department of Management Services 4050 Esplanade Way Tallahassee, Florida 32399-0950
