The Issue Whether the Department of Management Services’ intended decision to award a contract to CR MSA, LLC, a subsidiary of Harris Corporation, under ITN number DMS-13/14-024 is contrary to the Department’s governing statutes, rules, policies, or the ITN specifications.
Findings Of Fact Background The Department manages and operates the SUNCOM Network, Florida’s state enterprise telecommunications system. § 282.703, Fla. Stat. (2014).2/ The Department’s existing network management contract with AT&T Services Inc., known as “MyFloridaNet” (MFN-1), expires in September 2016. The current ITN involves the Department’s efforts to procure a new telecommunications infrastructure to provide SUNCOM Network services. The ITN On June 6, 2014, the Department released the ITN for MFN-2. The ITN consists of a 30-page document and several attachments. The technical aspects of the ITN are included in the statement of work, which is attachment A to the ITN. Pursuant to section 287.057(1)(c), Florida Statutes, the Department specified objectives and goals for the MFN-2 ITN which include, without limitation, the goal of maintaining or reducing the total cost for each customer. Responsiveness of Replies The Department received replies to the ITN from two vendors: AT&T and Harris. Section 3.1 of the ITN, as noted below, identifies the process by which the responsiveness of the vendors’ initial responses (“Reply” or “Replies”) to the ITN would be determined: 3.1 Determination of Responsiveness Failure to comply with and acknowledge each of the requirements in the Qualification Questions will result in the Reply being deemed non-responsive. As indicated in Section 2.13, “Qualification Questions,” DMS will not evaluate replies from Respondents who answer “No” to any of the Qualification Questions listed in Attachment K. Failure to provide any other information required by this ITN may also result in a determination of non-responsiveness. The Department’s designated procurement officer, Mrs. Jesse Tillman, determined responsiveness of the Replies in accordance with the “pass/fail requirements” set forth on the responsiveness checklist attached to the ITN as attachment K. Mrs. Tillman reviewed relevant provisions of the Replies and determined that both AT&T and Harris met the responsiveness requirements. Evaluation Phase In accordance with section 2.1.2 of the ITN, the Department, after determining that the Replies submitted by AT&T and Harris were responsive, commenced the evaluation phase of the procurement process. The evaluation phase is described in the ITN as follows: 2.1.2 Evaluation Phase – All responsive Replies will be evaluated against the evaluation criteria set forth in this ITN to establish a competitive range of Replies reasonably susceptible of award. DMS may then select Respondents within the competitive range (pursuant to Section 3.4) with which to commence negotiations. The ITN requires the appointment of a five-member evaluation team to review and evaluate the vendors’ Replies. The evaluation team was composed of: Abdul Majid; Eric Larson; Adam Jones, the network and information security manager for the Florida Department of Environmental Protection; Bret Hart, the network services administrator for the Florida Department of Health; and Troy Berry, the data processing manager for the Florida Department of Law Enforcement. The Department provided the evaluators with detailed instructions for evaluating the ITN. The instructions given to the evaluators expressly provided that, “[t]he written information submitted will be the sole basis upon which Replies are evaluated and scored.” Evaluators were not responsible for determining responsiveness of Replies or conducting independent research to verify information provided by the proposers. The ITN directed the evaluation team to evaluate each Reply based on the following three categories: Category 1 – Statement of Work (Technical Solution) – 1,700 points Category 2 – Performance Measures (Service Level Agreements) – 250 points Category 3 – Migration and Transition Planning (Support Services) – 550 points Each of these categories contain a number of specific subjects which the evaluators were to score. These scoring questions correspond with subsections of the ITN, and were set forth in attachment C, the evaluator score sheet workbook. Evaluators were directed to score Replies on a defined scale ranging from “0” to “4” in accordance with the scoring guidelines set forth in the evaluator instructions. In addition, the ITN also provides that Replies are scored on pricing via an automated price workbook included with the ITN. Pricing scores were broken into the following categories, with the following number of points available: Category 4 – Price: E-rate Eligible Items – 1,750 points Category 5 – Price: Non E-rate Eligible Items – 250 points Category 6 – Price: Snapshot Comparison Items – 500 points The pricing scores were then added to the technical scores to reach a total score, with 5,000 being the maximum total number of obtainable points. The evaluators worked independently from one another in their review of the Replies and scored each section in accordance with the scoring guidelines. Based on the scoring of the Replies, including both technical scores and pricing scores, the Department determined both vendors to be reasonably susceptible of award. Posting the Notice of Intent to Negotiate On January 5, 2015, the Department posted a Notice of Intent to Negotiate which provides in relevant part as follows: The Department of Management Services hereby provides Notice of Intent to Negotiate with the following vendors: AT&T Corporation CR MSA, LLC. Failure to file a protest within the time prescribed in [s]ection 120.57(3), Florida Statutes, or failure to post the bond or other security required by law within the time allowed for filing a bond shall constitute a waiver of proceedings under [c]hapter 120, Florida Statutes. Any protest must be timely filed with the Department of Management Services Agency Clerk listed at: Http://www.dms.myflorida.com/agencyadmini stration/generalcounsel No protests to the Department’s Notice of Intent to Negotiate with AT&T and Harris were filed. Erik Lindborg testified that the individuals responsible for managing AT&T’s Reply to the ITN conducted research into the corporate identity of CR MSA, LLC (CR MSA), at the time the Notice of Intent to Negotiate was released. Mr. Lindberg’s research revealed that CR MSA had been incorporated less than 5 years prior to the submission of Replies in response to the ITN. Negotiation Phase The ITN provides for negotiations using a four-member negotiation team. The negotiation team consisted of: Chuck Hartsfield, the bureau chief of engineering within the Department’s Division of Telecommunications; Mark Lovell, a contract manager within the Department’s Division of Telecommunications; Coleman Ayers, the systems project administrator for the Office of Agriculture Technology Services within the Florida Department of Agriculture and Consumer Services; and Kasey Bickley, the bureau chief of the Information Technology/Telecommunications Bureau within the Department’s Division of State Purchasing. Ms. Bickley left the negotiation team following the first negotiation session. The negotiation team was assisted by the Department’s purchasing officer, Jesse Tillman. The negotiators were also assisted by subject matter experts, including Abdul Majid, Amir Qureshi, Tammy Williams, Kevin Langston, Jonathan Rakestraw, and Tabitha Hunter. The negotiation team held a total of 22 negotiation sessions, 11 with each vendor. The negotiation team also held 50 strategy sessions where they discussed questions for the proposers, potential negotiation strategies, and options for achieving the best value for the State. During the negotiation sessions, the negotiation team reviewed each vendor’s technical proposals and sought innovative suggestions from the vendors as to how cost could be reduced. Because cost was a significant consideration, and the Replies indicated that costs would be higher than the Department expected, the negotiation team requested that each proposer submit a list of potential cost savings solutions that could be considered by the Department to reduce the cost for MFN-2. Each proposer submitted such a list proposing certain changes to the statement of work. Among the suggested cost savings suggestions was the possibility of reducing the minimum number of core facilities required by the ITN and the removal of “session initiation protocol core routing [(SCR)].” On May 11, 2015, following the completion of 10 negotiation sessions with each vendor, the Department issued a Request for Revised Replies to each vendor pursuant to its reserved right to do so under section 3.5(B) of the ITN. Section 3.5(B) provides that the Department reserves the right to “[r]equire any or all responsive vendors to provide additional, revised or final written replies addressing specified topics.”3/ The Department’s Request for Revised Replies made certain revisions to the statement of work in an effort to achieve cost savings and best value for the State, including reducing the minimum number of required core facilities from 10 to 5. Both vendors responded to the Request for Revised Replies. In its Revised Reply, Harris reduced the number of proposed core facilities from 11 to 6. AT&T revised certain aspects of its Reply and elected to maintain a 10-core facility proposal. On July 2, 2015, following the completion of all negotiation sessions with the vendors, and further consideration by the negotiation team of cost savings possibilities, the Department issued a RBAFO, pursuant to section 3.6(A) of the ITN. Section 3.6 authorizes the RBAFO, and subpart (A) of this section provides that a vendor’s BAFO must contain all negotiated terms and conditions that will be included in the final contract, as well as all revisions to the statement of work. The RBAFO includes a revised attachment A, statement of work, which reflects the negotiated changes from the original statement of work. The revised statement of work incorporates the changes that were discussed during negotiations, including specifically the removal of SCR and the reduction in the minimum number of core facilities from 10 to 5. Each vendor submitted its BAFO on July 10, 2015. Each vendor removed SCR in their BAFO. However, like with its Revised Reply, Harris, in its BAFO, reduced the number of core facilities it proposed from 11 to 6, while AT&T continued to propose a 10-core facility solution. The BAFOs were scored in accordance with section 3.7 of the ITN. AT&T received a total technical score of 42.9 from the negotiators, while Harris received a total technical score of 42.2 from the negotiators. BAFO pricing was scored using the Department’s automated price workbook scoring. AT&T received a price score of 34.8, while Harris received a price score of 41.9. The technical and price scores of each vendor were combined, with Harris receiving a total score of 84.1, and AT&T receiving a total score of 77.7. DMS then held a final public meeting on July 20, 2015, at which the negotiation team discussed its award recommendation and prepared its award memorandum. The memorandum provided a summary of the procurement and negotiation processes, recited the scoring of the Replies and BAFOs, and memorialized the negotiation team’s recommendation that, based on total BAFO scores, including both technical and price, the contract be awarded to Harris as the vendor representing the best value to the State. The Department accepted the negotiation team’s recommendation, and on August 11, 2015, posted the Notice of Intent to Award indicating its intent to award the contract to Harris. The Protest On August 24, 2015, AT&T filed its Formal Written Protest and Petition for Formal Administrative Hearing in this matter. On September 30, 2015, AT&T filed an Amended Formal Written Protest. Based upon the Amended Formal Written Protest and the issues preserved for hearing by AT&T in the Pre-Hearing Stipulation, the following four categories of issues are being determined in this proceeding: (1) whether Harris was responsive in light of the decision to submit the Harris Reply “by and through” its wholly-owned subsidiary, CR MSA, LLC; (2) whether the Harris Reply complied with the technical requirements of the statement of work; (3) whether the Department was permitted to negotiate changes to the statement of work during the negotiation phase of the ITN; and (4) whether the Harris’ BAFO complied with the revised statement of work included in the RBAFO. The undersigned finds that none of the four issues raised by AT&T presents a basis for overturning the Department’s intended award. Corporate Identity Issues AT&T alleges that the Harris Reply should have been evaluated for responsiveness based solely on the qualifications of its subsidiary, CR MSA, because the Harris bid was made “by and though CR MSA.” AT&T argues that if only CR MSA is considered as submitting the Reply, then it failed to satisfy the ITN’s requirements that vendors: (1) possess a minimum of 5 years of experience as either a prime contractor or subcontractor providing services on an MPLS enterprise services network with at least 800 sites (attachment K, qualification question 4); and (2) submit a letter from a surety or bonding agent documenting its ability to obtain a performance bond for the contract in an amount of at least $60 million. The evidence presented at the final hearing established that the Department’s responsiveness determinations, as to both Harris and AT&T, were based on a careful and even-handed review of the Reply documents and clarifications received from both vendors. Jesse Tillman, the Department’s procurement officer for the ITN, reviewed each vendor’s Reply for responsiveness and determined that both Harris and AT&T were responsive. The Department concluded, as to each vendor, that the information supplied in the respective Replies was sufficient, and any irregularity was minor. The Department’s responsiveness determination relied in part on responses provided by each vendor to a request for clarification regarding the role that affiliated companies would play in providing services to the Department. The Harris response explained that its Reply was submitted through its subsidiary, CR MSA, for business and accounting reasons, but that “Harris will ensure that all appropriate Harris entities and personnel are assigned to MFN-2.” Harris’ corporate representative at the final hearing also testified to these circumstances. Harris also provided an absolute guarantee to the Department confirming that Harris stood behind the proposal it had submitted through its wholly-owned subsidiary. The Department’s responsiveness determination as to Harris is also consistent with the documentary evidence admitted at hearing, including the cover letter on Harris letterhead with the subject line “Harris Reply to MFN-2 ITN”; the Harris narrative response to section 2.2 of the statement of work (referring to Harris as the prime contractor); the Harris response at page 4 through 7 (indicating Harris as the prime contractor); the business references set forth in section 2.2 (identifying Harris as the prime contractor for the business references); and the proof of credit letter (indicating that it concerns the bonding ability of Harris, by and through its subsidiary, CR MSA LLC). AT&T nonetheless argues that Harris’ submission in this manner was not permitted by the ITN. As support for its assertion, AT&T cites to the ITN definition for “respondent,” which is defined as “[a] vendor who submits a Reply to this ITN,” and to the definition of “vendor” as “an entity that is capable and in the business of providing a commodity or contractual service similar to those within the solicitation.” While AT&T accurately cites to the definitions, nothing in these definitions, nor anything contained elsewhere in the ITN, prohibits the submission of a reply in the manner that Harris elected (i.e., submission of a reply on behalf of the Harris by and through its wholly-owned subsidiary, CR MSA). The Department’s even-handed review of the vendors is reflected by the testimony and documentary evidence that AT&T’s Reply similarly referred to affiliated business entities and that the Department provided AT&T the same opportunity to provide clarification regarding the role affiliated companies would play. As to the corporate identity issues, the undersigned finds that the testimony and exhibits demonstrate that the Department complied with the terms of the ITN and Florida law in determining that both AT&T and Harris were responsive as to these issues. The Department treated both vendors equally in this regard. Finally, as discussed in the Conclusions of Law below, the undersigned concludes that AT&T has waived the issue of Harris’ responsiveness by failing to protest on these grounds at the point of entry accompanying the Notice of Intent to Negotiate. Section 2.5 of the ITN allowed AT&T to request the Harris Reply following the completion of the evaluation phase of the ITN, which would have revealed the issues of responsiveness that AT&T now complains about. Moreover, AT&T had actual knowledge, at or near the time the Notice of Intent to Negotiate was posted, of issues related to CR MSA’s corporate identity, yet AT&T failed to timely protest this issue, electing instead to take an impermissible “wait and see” approach. Statement of Work Issue Generally, AT&T argues that the initial Harris Reply to the ITN failed to comply with certain technical requirements of the ITN, and was therefore non-responsive. The statement of work, attachment A to the ITN, consists of 192 pages of technical details concerning MFN-2. The ITN clearly provides that statement of work requirements are not responsiveness requirements whose omission would render a vendor’s bid non- responsive. Instead, the ITN provides that statement of work requirements are to be scored by the evaluators and the negotiators as part of the ITN’s evaluation and selection process. Responsiveness was determined based upon the responsiveness requirements (attachment K) of the ITN, while the technical solutions were scored by the evaluators and the negotiators in both the ITN reply and BAFO stage. Each of the evaluators and negotiators who testified in this proceeding, as well as the Department’s procurement staff, uniformly stated that any deficiencies in a vendor’s response to a statement of work requirement was to be addressed in the scoring of the response, and was not a responsiveness issue. This point is underscored by the scoring guidelines themselves, which specifically contemplate that Replies might contain technical solutions that do not meet the technical requirements of the ITN, as the scoring guidelines provide for a possible score of 0, indicating that a response was “Inadequate” and demonstrated “Below minimum required functionality” or “Fail[ed] to demonstrate capability.” If, as AT&T argues, a reply was required to be judged non-responsive for failure to meet a statement of work requirement, there would be no need for the ITN to contemplate a score of “0,” because that failure would eliminate the vendor from further evaluation. Furthermore, if a failure to comply with the statement of work requirements is fatal to an entity’s proposal, AT&T’s Reply would itself have to be rejected as non-responsive. The record demonstrates that AT&T refused to provide a response, in either its Reply or BAFO, to the section 2.2.5 statement of work requirement that vendors disclose their dispute history. AT&T also failed to comply with the section 5.1 statement of work requirement for vendors to provide a proposed migration plan. AT&T left this part of its Reply intentionally blank, contending a migration plan was unnecessary. Harris Complied With Core Facilities Requirements Specifically, as to Harris’ initial Reply to the statement of work, AT&T argues that Harris failed to satisfy the requirements of section 2.7.12, which require a minimum of 10 geographically dispersed core facilities throughout the state. This requirement provides: “The Respondent may propose changes to the selected cities in the diagram section 2.7, but the number of core facilities shall not be altered unless the Respondent includes more core facilities than those provided in MFN.” The Harris Reply complied with this requirement, providing for 11 core facilities. The narrative text of the Harris Reply provides that: “Our proposed MFN-2 design places core nodes in the following cities: Pensacola, Panama City, two core nodes in Tallahassee, Jacksonville, Gainesville, Daytona, Tampa, Orlando, Ft. Myers, and Miami,” thus providing for a total of 11 core facilities. AT&T argues that Harris’ Reply failed to meet the requirements of 2.7.12 because of the labeling used by Harris to describe the routing equipment in its proposed facilities, identifying some of the facilities as “aggregation nodes,” and others as “core nodes.” According to AT&T, Harris’ proposed “aggregation nodes” do not meet the requirements of a “core facility,” and that Harris’ Reply, therefore, did not propose at least 10 core facilities. All witnesses testified, however, that the ITN does not define what constitutes a “core facility,” a “core node,” or an “aggregation node.” The witnesses likewise agreed that there is no consensus industry definition for these terms. Abdul Majid credibly testified that each of the facilities proposed by Harris--whether labeled by Harris as a “core node” or an “aggregation node”--satisfies the core facility requirements of the ITN. Mr. Nick Platt, a former Department employee who helped draft the ITN statement of work, testified that his intention was to have dual routers at each core facility, and for the nodes to be able to inter-operate with one another and transfer inter-LATA traffic. The routers proposed by Harris in its Reply, whether identified as "aggregation nodes" or "core nodes," satisfy these requirements. Harris Complied With IDS Requirements AT&T contends that the Harris Reply failed to comply with the intrusion detection system (IDS) requirements set forth in section 2.7.7 of the ITN. This argument, however, is based upon AT&T’s mistaken contention that the ITN required IDS equipment to be located at each core facility. Section 2.7.7 does not require IDS equipment to be included at each core facility, but instead requires only that all traffic be IDS-monitored. Mr. Majid specifically confirmed this fact. Indeed, the statement of work contemplates flexibility in the monitoring solutions proposed by vendors, as illustrated in section 2.7.7(d), which directs that vendors “[i]nclude a discussion of how and where backbone traffic is captured, plus how and where local traffic is captured.” Both Scott Morris, AT&T’s expert, and Mr. Sullivan, its lead MFN engineer, agree that section 2.7.7 does not require IDS hardware to be located at each core facility, but only that all traffic be IDS-monitored. Further, both of AT&T’s experts agree that Harris’ design would result in all traffic being IDS-monitored. Harris Complied With Access Requirements AT&T argues that the Harris Reply does not satisfy section 2.7(o) of the statement of work because the Reply does not provide frame relay access at all core facilities. Section 2.7(o) requires that the proposed network provide access to all forms of technology that might be used by the State’s agencies and departments, which could include frame relay access. Frame relay access is, as even AT&T’s experts acknowledge, an older technology that is being phased out and replaced by newer access technologies, such as Ethernet. Harris’ Reply specifically addresses frame relay access, and states that all traffic using frame relay access is to be routed to either a core node or the Orlando aggregation node, which would have the capability to provide such access. To avoid the cost of providing access for this legacy technology that is being phased out, Harris expressly states that access will not be provided at its other aggregation nodes. However, because Harris’ design provides access to the network for frame relay technology, Harris’ Reply satisfies the section 2.7(o) requirement. Long Haul Circuits AT&T argues that the State would be harmed by the inclusion of long haul circuits in Harris’ six-facility architecture. The evidence does not support this argument. Mr. Graham testified that because pricing is not based on distance (such that longer distance access costs the same as shorter distance access), the inclusion of long haul circuits would not impact price. Additionally, because optical signals travel at nearly the speed of light, the distance of such circuits would be covered faster than the blink of an eye and would not impact network speed. While the evidence establishes that the Department initially wanted to avoid long haul circuits because of previous experience with outages, the Department softened its position regarding this issue when Harris presented a solution that both allayed the Department’s concerns and reduced costs. AT&T enjoyed the same opportunities as Harris, but decided to stay tethered to a solution that more closely resembles the existing MFN product. Unavailability of Harris’ Network Mr. Turner expressed concern that Harris’ proposed network may be unavailable while updates are being applied to IDS software. The suggestion is that any such system unavailability would negatively impact the functionality of MFN-2. This concern is not supported by the evidence. Mr. Graham noted in his testimony that Harris specifically addressed this issue in its BAFO, and its design includes bypass switches to re-route traffic if IDS equipment were to fail or go offline during any software updates. Changes to the Statement of Work AT&T asserts that it was improper for the Department to negotiate changes to the statement of work during the negotiation phase of the ITN. These arguments do not present a basis for overturning the Department’s intended award. The ITN process was specifically designed to provide agencies with the flexibility to negotiate requirements in order to receive the best value for the State under circumstances where there are multiple methods available for meeting a specified goal of the agency. The process recognizes that negotiation on terms that differ from those of the procurement, or the initial written response, may be necessary. The plain language of the ITN statute supports this understanding, noting that the ITN: “is intended to determine the best method for achieving a specific goal or solving a particular problem and identifies one or more responsive vendors with which the agency may negotiate in order to receive the best value.” § 287.057(1)(c), Fla. Stat. Thus, State agencies are specifically authorized by statute to negotiate the requirements and contractual terms in ITN procurements to identify and obtain the best method for achieving the procurement goal at the best value for the State. Changes to requirements during the negotiation process are an integral and necessary part of the ITN procurement process, as the agency gains more information from vendors regarding the alternatives available to meet its goals. Consistent with the statutory purposes of the ITN procurement, the ITN at issue in this dispute provides, in a multitude of places, that changes to the statement of work could occur during the negotiation phase of the ITN. For example, section 3.4 of the ITN provides: Negotiations will include discussions of the Statement of Work and related services to be provided by the Respondent until acceptable terms are agreed upon, or it is determined that an acceptable agreement cannot be reached. The negotiation process will also include negotiation of the terms and conditions of the Contract. As this is an ITN, the Department reserves the right to negotiate the terms and conditions determined to be in the best interest of the State. The ITN further provides in section 2.4 that: The awarded contract will consist of Attachment A (Statement of Work) as modified through negotiations, Attachment B (Contract), Attachment H, Special Conditions, and the revised Attachment E (Price Workbook) submitted with the Best and Final Offer. Moreover, the Department, in section 3.5(B) of the ITN, expressly reserves the right at any time during the negotiation process to “[r]equire any or all responsive vendors to provide additional, revised or final written replies addressing specified topics.” Furthermore, section 3.5(B) of the ITN also reserves to the Department the right to award a contract for all, or part, of the work contemplated by the ITN. Additionally, the evidence does not establish that the revisions to the statement of work constitute a material change to the procurement. The goals and questions being explored by the ITN remained unchanged, as did the selection criteria upon which the best value decision was determined. Simply put, the ITN sought a network to process the State’s telecommunications traffic while meeting certain high-availability and high- reliability requirements.4/ Neither the reduction in the number of core facilities included within the network, nor the removal of the SCR functionality, affected the fundamental nature of what was being procured. BAFO and Revised Statement of Work AT&T argues that Harris’ BAFO design fails to satisfy the requirements of the RBAFO statement of work with regards to the high-availability (HA) and high-reliability (HR) requirement. The evidence establishes that the Department acted rationally and reasonably in negotiating revisions to the statement of work. Because the negotiation team was concerned with the costs of the initial proposals, the team explored potential cost-saving ideas with both Harris and AT&T. The suggestion to reduce the number of required core facilities made financial sense, as long as the HA/HR requirements of the ITN could still be met. Indeed, the ITN business case, attachment G to the ITN, recognizes that “[r]equiring high numbers of nodes in the procurement specification should be avoided as this could inadvertently inject higher cost structures from the prospective vendor to recover the cost of deployment of necessary infrastructure to support the core routing design.” There is no record evidence suggesting that this language was inserted in the business case study in order to provide a competitive advantage to Harris. To address the ITN’s HA/HR requirements with a design involving fewer core facilities, Harris performed extensive modeling and analyzed several designs potentially using 5 to 10 core facilities. Based on this extensive analysis, which Harris shared with the negotiation team as it was considering a revision to the required number of core facilities, Harris ultimately concluded that a six-core facility design was optimal. Harris’ analysis was thoroughly considered and reviewed by the negotiation team, and through this process, the Department decided to reduce the number of core facilities required by the statement of work. The negotiation team’s decision to revise the statement of work in this regard was well-considered, rational, and reasonable. Also, the process utilized by the Department in reaching its decision to reduce the number of core facilities afforded both vendors the same opportunity to propose a design with fewer core facilities, and therefore, provided no competitive advantage to either vendor.5/ Indeed, by not allowing vendors the flexibility to consider and propose alternate designs that could accomplish the same goals, and instead requiring all vendors to mirror the design chosen by the incumbent vendor, this likely would have hindered competition and certainly would not have served the State’s interests. Further, the evidence demonstrates that Harris’ six-core facility BAFO design met, and in fact exceeded, the statement of work HA/HR requirement. Harris conducted a statistical availability analysis, and detailed this analysis and the results in presentations to the negotiation team during negotiations, and later in its BAFO. Harris’ expert, Dr. Rupe, confirmed that Harris’ assumptions and information were reasonable. Dr. Rupe conducted his own statistical analysis of Harris’ BAFO core design and independently verified the results reached by Harris. The Department’s decision to remove SCR functionality from the statement of work was likewise not improper. SCR was merely an add-on to the network and the negotiation team, after due consideration, made the decision to delete this requirement. As testified to by Mr. Ayers, a number of factors played into the negotiators’ decision to remove SCR functionality, including the fact that: (1) the technology is fairly expensive today; (2) technology changes could result in lower prices in the future; (3) the Department was not capable of adequately defining their parameters and/or what SCR functionality it required; (4) the functionality would be paid for from the time the contract was signed, notwithstanding that it was not required to be in place for three years; and (5) the State could easily obtain SCR functionality through another procurement if it ultimately determined that the functionality was needed. This analysis, and the negotiation team’s decision to remove this requirement, was rational, reasonable, and did not create any competitive advantage to either vendor, both of whom did not include this functionality in their BAFOs. Ultimate Findings of Fact Based on the foregoing, the undersigned finds that Harris was a responsive and responsible vendor who submitted a fully responsive reply to the ITN. The undersigned further finds that the Department’s negotiations and negotiation phase revisions to the statement of work were consistent with Florida law and the rights reserved to the Department by the ITN. Finally, the undersigned finds that the BAFO submitted by Harris was fully responsive to the RBAFO and, pursuant to the selection criteria set forth in the ITN, the solution proposed by Harris represented the best value to the State of Florida. Simply stated, the record evidence failed to expose the existence of any shenanigans in the instant procurement. Based on the above, the Department’s decision to award a contract to Harris fully complied with applicable law, rules, and terms and conditions of the ITN and was not arbitrary, capricious, clearly erroneous, or contrary to competition.
Recommendation Based on the Findings of Fact and Conclusions of Law, it is recommended that Petitioner’s protest be dismissed. DONE AND ENTERED this 25th day of November, 2015, in Tallahassee, Leon County, Florida. S LINZIE F. BOGAN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 25th day of November, 2015.
The Issue The issues are whether Respondent violated Sections 489.129(1)(i), (l), (m) and (o); 489.119(2); 489.1195(1)(a); and 489.1425(1), Florida Statutes, for the reasons stated in the Administrative Complaint and, if so, what penalty should be imposed.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record of this proceeding, the following findings of fact are made: Petitioner is the state agency responsible for regulating the practice of contracting in the State of Florida. At all times material hereto, Respondent was licensed as a certified general contractor in the state, pursuant to license number CG C008922. Respondent's license is currently inactive. Respondent has been a contractor for nearly 30 years, and has never been subject to disciplinary action against his license until this proceeding. Respondent was licensed as the licensed qualifying agent for ECE from January 1998 through February 2001, for a fee of $400.00 per month. As the qualifying agent, Respondent was responsible for all of ECE's contracting activities, in accordance with Section 489.1195(1)(a), Florida Statutes, which states: "All primary qualifying agents for a business organization are jointly and equally responsible for supervision of all operations of the business organization; for all field work at all sites; and for financial matters, both for the organization in general and for each specific job." Respondent did not obtain a certificate of authority for ECE. On November 16, 1998, ECE entered into a contract in the amount of $15,577.00 with Carl and Darlene Weinzierl to install aluminum siding at their residence in Terra Ceia, Florida. The contract specified that ECE would use Reynolds brand siding in the construction. ECE actually used an inferior grade of aluminum siding. The contract did not contain a notice explaining to the Weinzierls their rights under the Construction Industry Recovery Fund. Such notice is required by Section 489.1425, Florida Statutes. ECE represented to the Weinzierls that they would receive a mortgage to pay for the aluminum siding and to consolidate their other debts at an interest rate of 6.5 percent. The actual interest rate on the mortgage was 18 percent. On December 14, 1998, ECE commenced work on the Weinzierls' house. ECE never completed the work. On January 22, 1999, ECE filed a lien against the Weinzierls' property in the amount of $15,577.00. Respondent had no knowledge of the project on the Weinzierls' house, of the mortgage arrangement made by ECE, or of the lien filed by ECE against the Weinzierls' property. On November 5, 1998, ECE entered into a contract in the amount of $3,624.00 with Barbara Lewis to install soffit and fascia at her residence in Bradenton, Florida. The contract did not contain a notice explaining to Ms. Lewis her rights under the Construction Industry Recovery Fund, as required by Section 489.1425, Florida Statutes. ECE represented to Ms. Lewis that she would receive financing to pay for the soffit and fascia at an interest rate of 11 percent. The actual interest rate of the financing was 18 percent. ECE performed the work on Ms. Lewis' house in one day. Respondent had no knowledge of the project at Ms. Lewis' house or of the financing arrangement made by ECE. On August 16, 1998, ECE entered into a contract in the amount of $13,250.00 with John Maxwell to install aluminum siding at his residence in Bradenton, Florida. The contract did not contain a notice explaining to Mr. Maxwell his rights under the Construction Industry Recovery Fund, as required by Section 489.1425, Florida Statutes. ECE commenced work at Mr. Maxwell's house on August 18, 1998, and completed the project on August 27, 1998. On August 31, 1998, ECE recorded at the Manatee County Circuit Court a mortgage on Mr. Maxwell's property in the amount of $13,427.55 for the installation of aluminum siding. Mr. Maxwell had signed no documents to place a mortgage on his property, and received a satisfaction of mortgage on May 19, 1999. Respondent had no knowledge of the project to be completed at Mr. Maxwell's house or of the mortgage recorded by ECE. On October 10, 1998, ECE entered into a contract in the amount of $3,663.00 with Richard Lanois and Beverly Carroll to install soffit and fascia on their residence in Bradenton, Florida. The contract did not contain a notice explaining to Mr. Lanois and Ms. Carroll their rights under the Construction Industry Recovery Fund, as required by Section 489.1425, Florida Statutes. ECE commenced work at the house on October 13, 1998, and completed the project on October 15, 1998. ECE recorded a financing statement to obtain a lien on the property of Mr. Lanois and Ms. Carroll with the Manatee County Circuit Court on October 22, 1998. Neither Mr. Lanois nor Ms. Carroll had signed the financing statement that ECE filed at the court. Respondent had no knowledge of the project at the residence of Mr. Lanois and Ms. Carroll, or of the financing statement filed by ECE to obtain a lien on their property. On December 2, 1998, ECE entered into a contract in the amount of $5,739.00 with Paul and Linda Porter to install Reynolds brand thermal double pane windows at their residence in Bradenton, Florida. The contract did not contain a notice explaining to the Porters their rights under the Construction Industry Recovery Fund, as required by Section 489.1425, Florida Statutes. ECE commenced work at the Porters' house on December 5, 1998, and completed the project on December 17, 1998. ECE installed BetterBilt brand windows rather than Reynolds windows, without the Porters' approval. On December 17, 1998, ECE recorded at the Manatee County Circuit Court a mortgage on the Porters residence in the amount of $5,775.80. The Porters had signed no documents to allow this mortgage to be placed on their property. Respondent had no knowledge of the project at the Porters' residence or of the mortgage recorded by ECE on the Porters' residence. On November 2, 1998, ECE entered into a contract in the amount of $6,426.00 with William C. Roach to install Reynolds thermal double pane windows on his residence in Bradenton, Florida. The contract did not contain a notice explaining to Mr. Roach his rights under the Construction Industry Recovery Fund, as required by Section 489.1425, Florida Statutes. ECE commenced work at the Roach residence on November 2, 1998, and completed the project on November 3, 1998. ECE installed BetterBilt brand windows instead of Reynolds windows, without Mr. Roach's permission. ECE represented that Mr. Roach would receive financing to consolidate the cost of the windows, his mortgage, and his credit card debt. In fact, Mr. Roach received financing only for the cost of the windows. Respondent had no knowledge of the project at Mr. Roach's residence or of the financing arrangement that ECE entered into with Mr. Roach. On November 28, 1998, ECE entered into a contract in the amount of $3,635.90 with Carol Lipp to install Reynolds brand soffit and fascia on her residence in Bradenton, Florida. The contract did not contain a notice explaining to Ms. Lipp her rights under the Construction Industry Recovery Fund, as required by Section 489.1425, Florida Statutes. ECE commenced work at Ms. Lipp's residence on November 30, 1998, and completed the project on December 7, 1998. ECE recorded a financing statement with the Manatee County Circuit Court in order to obtain a lien against Ms. Lipp's property. Ms. Lipp had not signed the financing statement. Respondent had no knowledge of the project at Ms. Lipp's residence or of the financing statement filed by ECE on Ms. Lipp's residence. On January 22, 1999, ECE entered into a contract in the amount of $13,504.00 with Shirley G. Bradley to install 11 Reynolds thermal double pane windows and to enclose the lanai and front entry of her residence in Englewood, Florida. The contract did not contain a notice explaining to Ms. Bradley her rights under the Construction Industry Recovery Fund, as required by Section 489.1425, Florida Statutes. ECE commenced work at Ms. Bradley's residence on January 25, 1999, and completed the project on February 9, 1999. ECE installed BetterBilt brand windows instead of Reynolds windows, without Ms. Bradley's permission. ECE represented to Ms. Bradley that she would receive financing for the project at an interest rate of 16 percent. In fact, ECE obtained a loan for Ms. Bradley at an interest rate of 21 percent. Respondent had no knowledge of the project to be completed at Ms. Bradley's residence or of the financing arrangement between ECE and Ms. Bradley. On October 13, 1998, ECE entered into a contract in the amount of $6,511.10 with George Haight to install Reynolds thermal double pane windows on his residence in Bradenton, Florida. The contract did not contain a notice explaining to Mr. Haight his rights under the Construction Industry Recovery Fund, as required by Section 489.1425, Florida Statutes. ECE installed BetterBilt brand windows instead of Reynolds windows, without Mr. Haight's permission. Respondent had no knowledge of the project to be completed at Mr. Haight's residence. On December 7, 1998, ECE entered into a contract in the amount of $15,216.00 with Shirley Behen to install Reynolds thermal double pane windows on her residence in Bradenton, Florida. The contract did not contain a notice explaining to Ms. Behen her rights under the Construction Industry Recovery Fund, as required by Section 489.1425, Florida Statutes. ECE represented to Ms. Behen that she would receive financing for the windows that would also consolidate her roof payments and credit card debt. ECE provided none of the promised financing. ECE installed BetterBilt brand windows instead of Reynolds windows, without Ms. Behen's permission. On December 15, 1998, ECE recorded a mortgage on Ms. Behen's residence with the Manatee County Circuit Court in the amount of $10,713.95. Ms. Behen had not signed any document to secure a second mortgage on her property. Respondent had no knowledge of the project to be completed at Ms. Behen's residence or of the mortgage filed on her property by ECE. On November 17, 1998, ECE entered into a contract in the amount of $7,845.00 with Debby and Wally Keefe to install Reynolds thermal double pane windows on their residence in Bradenton, Florida. The contract did not contain a notice explaining to the Keefes their rights under the Construction Industry Recovery Fund, as required by Section 489.1425, Florida Statutes. ECE represented to the Keefes that they would receive a mortgage to pay for the windows and consolidate their credit card debt at a rate of 6.5 percent. In fact, ECE provided a mortgage with an actual interest rate of 18 percent. Respondent had no knowledge of the project to be completed at the Keefes' residence or of the mortgage arrangement between the Keefes and ECE. On September 29, 1998, ECE entered into a contract in the amount of $8,531.00 with Joe and Laura Poulin to install vinyl siding on their three duplexes in Bradenton, Florida. The contract did not contain a notice explaining to the Poulins their rights under the Construction Industry Recovery Fund, as required by Section 489.1425, Florida Statutes. ECE recorded a financing statement with the Manatee County Circuit Court, obtaining a lien against the Poulins' property. The Poulins did not sign the financing statement. Respondent had no knowledge of the project to be completed at the Poulins' residence or of the financing statement filed by ECE. In August 1998, ECE entered into a contract in the amount of $8,307.00 with Darwin and Joyce Wilson to install 17 Reynolds thermal double pane windows on their residence in Sarasota, Florida. The contract did not contain a notice explaining to the Wilsons their rights under the Construction Industry Recovery Fund, as required by Section 489.1425, Florida Statutes. ECE commenced the project on September 5, 1998, and completed the project on September 7, 1998. ECE installed BetterBilt brand windows instead of Reynolds windows, without the Wilsons' permission. Respondent had no knowledge of the project to be completed at the Wilsons' residence. Also in August 1998, ECE entered into another contract with the Wilsons, in the amount of $14,000.00, to install Reynolds vinyl siding on their residence. The contract did not contain a notice explaining to the Wilsons their rights under the Construction Industry Recovery Fund, as required by Section 489.1425, Florida Statutes. ECE began installing the vinyl siding on October 15, 1998, and completed the project on November 15, 1998. ECE represented to the Wilsons that they would receive a new first mortgage that would include the price of the windows, the siding, their house payment, and their credit card debt. In fact, ECE provided no such mortgage. Respondent had no knowledge of the second project to be completed at the Wilsons' residence. On October 7, 1998, ECE entered into a contract in the amount of $5,171.00 with Derek Campagna to install vinyl siding and fascia on his residence in Bradenton, Florida. The contract did not contain a notice explaining to Mr. Campagna his rights under the Construction Industry Recovery Fund, as required by Section 489.1425, Florida Statutes. ECE commenced work on October 8, 1998, and completed the project on October 10, 1998. On or about January 5, 1999, ECE filed a lien against Mr. Campagna's property in the amount of $5,171.40. Respondent had no knowledge of the project to be completed on Mr. Campagna's residence or of the lien filed by ECE. The misrepresentation of the actual interest rate to be charged for financing the above projects was the commission of fraud or deceit in contracting by ECE and its representatives. The installation of BetterBilt windows in those houses the owners of which had contracted for Reynolds windows constituted the commission of fraud or deceit in contracting by ECE and its representatives. Respondent was unaware of ECE's fraudulent activities in the Bradenton/Sarasota area at the time they were occurring. Respondent believed that ECE did business exclusively in Indian River, St. Lucie, and Martin counties on the east coast of Florida. Respondent submitted the proper forms for the relevant permits and actively supervised ECE's construction work on the east coast of Florida. There was no evidence that ECE used Respondent's license to obtain permits for the projects it undertook in the Bradenton/Sarasota area. The evidence established that ECE pulled no permits at all for those projects. From all the evidence presented at the hearing, the inference may fairly be drawn that ECE purposely kept Respondent in the dark concerning its activities in the Bradenton/Sarasota area. Respondent first learned of ECE's activities in Bradenton/Sarasota through a telephone conversation with a friend, Peter Green. Mr. Green was a mortgage broker, and told Respondent that he was trying to secure financing for some of the ECE clients named above. Mr. Green told Respondent that some of these clients were very upset with ECE, and asked Respondent if he was aware of the problems. Respondent told Mr. Green that he was unaware ECE was doing any work on the west coast of Florida. Mr. Green gave Respondent the phone number of Darlene Weinzierl, one of the disgruntled ECE customers. Following her own bad experience with ECE, Ms. Weinzierl had undertaken an investigation of the company. She searched courthouse records for liens filed by ECE and contacted all the individuals whose names she found. Ms. Weinzierl heard "horror stories." A woman who could barely speak English told her that ECE had slapped siding over rotting woodwork, sent her a bill for $20,000, then filed a lien on her house. Another woman told Ms. Weinzierl that when she attempted to cancel her contract, the ECE salesman showed up at her door accompanied by a man ostentatiously wearing a gun in a shoulder holster. Other customers told Ms. Weinzierl that ECE had forged mortgages on their property. Ms. Weinzierl's hearsay testimony is unsupported by other competent substantial evidence and therefore cannot be relied on for the truth of the statements contained therein. However, it is undisputed that Ms. Weinzierl later conveyed this information to Respondent. Respondent telephoned Ms. Weinzierl on January 23, 1999. Ms. Weinzierl conveyed to Respondent everything she had learned about ECE. The next day, Respondent spoke with James Pizzo, Jr., one of the principals of ECE. Mr. Pizzo told Respondent that he had a very aggressive salesman who "had made a lot of promises to people," but that he was in the process of responding to the complaints and correcting the situation. Respondent asked Mr. Pizzo why ECE was doing business on the west coast of Florida. Mr. Pizzo replied that ECE's telemarketing effort had saturated the east coast, and he believed there was a fresh market on the west coast. Because he had worked with Mr. Pizzo for over a year and had a good working relationship with ECE, Respondent took at face value Mr. Pizzo's promise to correct the problems. Respondent took no action on his own, and continued to act as the qualifying agent for ECE. Respondent did not visit any of the west coast job sites or make any independent effort to contact ECE's victims. FDLE commenced a RICO investigation of ECE in the spring of 1999. Special Agent Charles Leonard, the FDLE investigator, first interviewed Respondent on May 10, 1999. Respondent was never a target of the investigation, and cooperated fully. Respondent did not sever his relationship with ECE until February 2001. By this time, 14 complaints had been filed against ECE by customers in the Bradenton/Sarasota area, and ECE had taken no action to address the situation beyond ceasing to do business in the area. In mitigation of his failure to take any action for two years after he became aware of ECE's fraudulent practices, Respondent pointed to the precarious state of his health. In January 2000, Respondent's car was stopped on I-95 when it was rear-ended by a truck traveling at 50 to 60 miles per hour. Respondent received a concussion and suffered excruciating headaches. His neurologist ordered an MRI and found a brain tumor. The tumor could not be removed entirely. Respondent is also a diabetic. Respondent continues to have headaches so severe that he requires trigger point injections of pain medication and epidural injections in his neck and upper spine every few months. He regularly takes Tylenol III with codeine. He requires an MRI every six months to monitor his brain tumor. Prior to his brain surgery, Respondent managed his diabetes through oral medication; however, since the surgery he has needed three injections of insulin daily. At the same time he severed his relationship with ECE, Respondent notified Petitioner that he was transferring his license to inactive status. Respondent no longer actively practices contracting. However, his current position as a construction project manager for the Broward County School Board requires that he hold at least an inactive general contractor's license. Respondent credibly testified that if he were to lose his current job, and the health insurance that goes with it, he could not pay his medical bills.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a final order finding Respondent guilty of violating Section 489.129(1)(l) and (m), Florida Statutes, suspending Respondent's license for three years from the date that Respondent re-activates his license, imposing an administrative fine in the amount of $3,000.00, and requiring Respondent to pay costs of Petitioner’s investigation. DONE AND ENTERED this 12th day of March, 2002, in Tallahassee, Leon County, Florida. LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 12th day of March, 2002. COPIES FURNISHED: Michael Martinez, Esquire Department of Business and Professional Regulation 1940 North Monroe Street, Suite 60 Tallahassee, Florida 32399-1007 E. Cole Fitzgerald, III, Esquire Fitzgerald, Hawkins, Mayans & Cook Post Office Box 3795 West Palm Beach, Florida 33401 Hardy L. Roberts, III, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-2202 Suzanne Lee, Executive Director Construction Industry Licensing Board Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792
The Issue Whether the Florida Fish and Wildlife Conservation Commission’s (“Respondent” or “FWC”) determination that Tallahassee Corporate Center, LLC (“Petitioner” or “TCC”), submitted a nonresponsive reply to FWC’s Invitation to Negotiate (“ITN”) No. 770-0235 is contrary to the Commission’s governing statutes, the agency’s rules or policies, or the solicitation specifications; and, if so, whether it was clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact The following Findings of Fact are based on exhibits admitted into evidence, testimony offered by witnesses, and admitted facts set forth in the pre-hearing stipulation. ITN No. 770-0235 and Background FWC is a state agency that seeks office space to be occupied by personnel from six of FWC’s divisions. FWC currently leases office space from TCC, which expires in October 2019. On July 19, 2017, FWC issued ITN No. 770-0235, seeking vendors that could provide 53,000 square feet of office space for lease. FWC anticipates occupying the space by November 1, 2019. Between August 15, 2017, and November 2, 2017, FWC issued four addenda to the ITN, which contained amendments, modifications, and explanations to the ITN. There were no bidders that challenged the terms, conditions, or specifications contained in the ITN or its amendments. TCC and NLH were two of the potential lessors that submitted replies in response to the ITN. FWC seeks to lease either a building that already exists or a non-existing building to be constructed in the future. The ITN describes the proposals requested as follows: Competitive proposals may be submitted for consideration under this Invitation to Negotiate (ITN) for the lease of office space in either an existing building or a non- existing (build-to-suit/turnkey) building. NOTE: All buildings must comply with the Americans with Disabilities Act (ADA) as stated in Attachment A, Agency Specifications, Section 6.D., page 32. OPTION 1 - an ‘existing’ building: To be considered an ‘existing’ building, the facility offered must be enclosed with a roof system and exterior walls must be in place at the time of the submittal of the Reply. OPTION 2 - a ‘non-existing’ building: Offeror agrees to construct a building as a ‘build-to-suit’ (turnkey) for lease to FWC. Each applicant that submitted a proposal in response to the ITN was required to meet the specification in Attachment A of the ITN. The ITN provides as follows: FWC is seeking detailed and competitive proposals to provide built-out office facilities and related infrastructure for the occupancy by FWC. As relates to any space that is required to be built-out pursuant to this Invitation to Negotiate in accordance with this Invitation to Negotiate, see Attachment ‘A’ which includes the FWC Specifications detailing the build-out requirements. The specifications in Attachment A provided the basic requirements for the potential leased space such that proposals offering existing or non-existing building may be compared and evaluated together. The ITN included certain provisions to clarify the rights contemplated by the ITN, and included the following disclaimer: This ITN is an invitation to negotiate and is for discussion purposes only. It is not an offer, contract or agreement of any kind. Neither FWC nor the Offeror/Lessor shall have any legal rights or obligations whatsoever between them and neither shall take any action or fail to take any action in reliance upon any part of these discussions until the proposed transaction and a definitive written lease agreement is approved in writing by FWC. This ITN shall not be considered an offer to lease. The terms of any transaction, if consummated, shall not be final nor binding on either party until a Lease Agreement is executed by all parties. This ITN may be modified or withdrawn by FWC at any time. The ITN also included a provision expressly reserving FWC’s “right to negotiate with all responsive and responsible Offerors, serially or concurrently, to determine the best-suited solution.” The term “Offeror” was defined by the ITN to mean “the individual submitting a Reply to this Invitation to Negotiate, such person being the owner of the proposed facility or an individual duly authorized to bind the owner of the facility.” This reservation of rights placed interested lessors on notice that only responsive lessors could be invited to negotiations. While TCC and NLH were two of the potential lessors that submitted replies in response to the ITN, the bidders submitted different proposals. TCC submitted a proposal for an existing building, and NLH submitted a proposal for a non- existing building. During an initial review of all replies, FWC determined TCC’s reply to be nonresponsive based on TCC’s response to ITN section IV.G (Tenant Improvements) and a statement titled “Additional Response” that TCC submitted with its reply. As a result, FWC did not evaluate or score TCC’s reply. After TCC’s reply was declared nonresponsive, there were no further negotiations with TCC regarding the ITN. NLH’s reply passed the initial responsiveness review and was then evaluated and scored by FWC. FWC ultimately issued an intended award of the contract to NLH after conducting negotiations. Tenant-Improvement Cap The ITN prohibited vendors from proposing conditional or contingent lease rates that included a tenant-improvement cap, or allowance. A tenant-improvement cap reflects the maximum amount the landlord is willing to spend to make improvements to leased space. Mr. Hakimi asserted that the tenant-improvement cap would be an incentive to FWC to enter a lease. However, the tenant-improvement cap would also place a limit on improvements. According to ITN section IV.E, any reply offering a lease rate with a tenant-improvement cap would be deemed nonresponsive: FULL SERVICE (GROSS) RENTAL RATE The Offeror shall provide FWC with a Full Service (gross) lease structure. Therefore, the lease rate must include base rent, taxes, all operating expenses (including, but not limited to, janitorial services and supplies, utilities, water, insurance, interior and exterior maintenance, recycling services, garbage disposal, pest control, security system installation and maintenance, and any amortization of required tenant improvements to the proposed space). There shall be no pass through of additional expenses . . . . Offerors must provide their best, firm lease rates. Lease rates that are contingent, involve a basic rate plus “cap” or “range” for such things as tenant improvements will be deemed nonresponsive. The ITN also provided, in section IV.G, that any current lessor must meet all ITN requirements, including those set forth in ITN Attachment A: TENANT IMPROVEMENTS The State requires a “turn-key” build-out by the Landlord. Therefore, Offeror shall assume all cost risks associated with delivery in accordance with the required specifications detailed in this ITN, including Attachment A (see pages 28-45). Additionally, replies for space which is currently under lease with, or occupancy by, the Florida Fish and Wildlife Conservation Commission does not exclude the Offeror from meeting the requirements specified in this ITN document. Offeror agrees to provide “turn-key” build-out/improvements in accordance with the specifications detailed in this ITN. (use an X to mark one of the following): YES or NO TCC responded “NO” to the statement “Offeror agrees to provide ‘turn-key’ build-out/improvements in accordance with the specifications detailed in this ITN.” Additional Response Not only did TCC include a barred tenant-improvement cap, but TCC also attached an addendum to its proposal, which provided the following: The reality is that as the current Landlord, it would be impossible to ask FFWCC to move out of its existing office space in order to meet the requested Agency Specifications in Attachment A. If this condition makes our response to the Invitation to Negotiate (ITN) “non-responsive”, we stand willing to continue further negotiations with FFWCC. There was no provision in the ITN for additional responses outside what was requested in the ITN. More importantly, the addendum indicated TCC could not comply with the ITN, unless certain conditions were met. Mr. Hakimi confirmed the effect of what was written in the addendum when he testified that TCC is unable to meet Attachment A’s specifications because it presently has a tenant in place (i.e., FWC) that prevents it from constructing the building improvements necessary to comply with ITN Attachment A. Proof of Ownership of Property The ITN also provided that to be responsive, each lessor was required to submit certain documentation demonstrating the lessor’s control of the property proposed for the leased space: Replies must completely and accurately respond to all requested information, including the following: (A) Control of Property (Applicable for Replies for Existing and/or Non- Existing Buildings). For a Reply to be responsive, it must be submitted by one of the entities listed below, and the proposal must include supporting documentation proving control of the property proposed. This requirement applies to: The real property (land); The proposed building(s) (or structure(s); The proposed parking area(s). Control of parking includes the area(s) of ingress and egress to both the real property and the building(s). The owner of record of the facility(s) and parking area(s) – Submit a copy of the deed(s) evidencing clear title to the property proposed. The authorized agent, broker or legal representative of the owner(s) – Submit a copy of the Special Power of Attorney authorizing submission of the proposal. The Special Power of Attorney form was attached to the ITN as Attachment K. TCC’s certification was executed by TCC president, Lyda Hakimi. However, TCC did not execute Attachment K or include an executed power of attorney to demonstrate that TCC has control of the property. The evidence offered at hearing of the property’s ownership contained in TCC’s reply was a deed showing DRA CRT Tallahassee Center, LLC to be the property owner. Respondent argued that although TCC owns DRA CRT Tallahassee Center, LLC, the two are different legal entities. Because these were two different legal entities, TCC was required to provide a copy of Attachment K to its response to be deemed responsive. Broker Commission The ITN required lessors to agree to execute a broker- commission agreement, which was attached to the ITN as Attachment J: Offeror understands FWC is utilizing the services of a Tenant Broker representative for this lease space requirement and the successful Offeror shall execute a Commission Agreement, in coordination with FWC’s Tenant Broker representative, within fifteen (15) business days of notification of Award. Offeror agrees and acknowledges that a Tenant Broker Commission Agreement is a requirement and the successful Offeror shall be required to execute a Commission Agreement as described above. (use an X to mark one of the following): YES or NO The ITN included a schedule for the commission rate based on the total aggregate gross base rent that could be paid ranging from 2.50 percent to 3.50 percent. TCC conditioned its reply by agreeing to pay a two-percent broker commission, which is inconsistent with the commission schedule. By offering a lower commission rate, TCC could save money. TCC would then have a competitive advantage over other bidders. TCC’S Bid was Nonresponsive Based upon the foregoing, TCC’s bid submission added a tenant-improvement cap, failed to comply with the broker commission rate, failed to provide supporting documents to demonstrate proof of property ownership, and added additional conditions regarding compliance with the ITN requirements. The information requested and terms of the ITN were required for TCC’s bid to be responsive. TCC did not file a challenge to the specifications or any of the requirements of the ITN. It is now too late for such a challenge. TCC’s inclusion of a tenant-improvement allowance limits the amount that would pay for improvements. The lower broker commission increases the profit advantage for TCC more than for other bidders, which would be an unfair advantage over other bidders. TCC’s failure to comply with the terms of the ITN and failure to provide the required attachment to show proof of ownership were not minor irregularities, which FWC could waive. Therefore, FWC properly determined that TCC’s bid submission was nonresponsive. Standing TCC submitted a bid proposal that did not conform to the requirements of the ITN and it seeks relief that includes setting aside FWC’s rejection of its proposal. Therefore, TCC has standing to bring this protest. If it is determined that TCC was nonresponsive, NLH has standing to the extent the procurement process could be deemed contrary to competition.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Florida Fish and Wildlife Conservation Commission enter a final order dismissing Tallahassee Corporate Center, LLC’s Petition. DONE AND ENTERED this 27th day of March, 2018, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of March, 2018.
The Issue The issue in this case is whether, in making an award of a lease for office space, the Respondent acted according to the requirements of law.
Findings Of Fact In February, 1993, the Department of Labor and Employment Security ("Department") issued a Request for Proposal and Bid Submittal No. 540:0969 ("RFP") seeking to lease approximately 18,684 square feet of office space in Jacksonville, Florida, for a period of six years. The space was to house the Office of Disability Determinations ("ODD"), which processes disability claims and determines whether claimants are eligible for Social Security and Supplemental Income benefits. The office has minimal contact with the general public. The RFP provided that all bids were subject to conditions stated within the RFP. Bids not in compliance with RFP conditions were subject to rejection. RFP Article D, General Provisions, Paragraph 8 provides as follows: The Department reserves the right to reject any and all bid proposals for reasons which shall include but not be limited to the agency's budgetary constraints; waive any minor informality or technicality in bids' to accept that bid deemed to be the lowest and in the best interest of the state, and if necessary, to reinstate procedures for soliciting competitive proposals. A pre-bid conference was conducted by the Department on February 16, 1993. Representatives from the vendors involved in this proceeding attended the conference. Bids were opened on March 5, 1993. The Department received five responses, three of which were deemed to be responsive and which were evaluated. The remaining two responses were determined to be nonresponsive and were not evaluated. On or about March 10, 1993, based on the evaluations, the Department proposed to award the bid to Koger Properties, Inc. On or about March 17, 1993, the Department notified the vendors of the intended award. The Petitioners filed timely notices protesting the intended award. TOWNCENTRE PROPOSAL Paragraph 13 sets forth conditions to which a bidder must agree in order to be awarded a bid. Subsection "a" of the paragraph states, "[i]f successful, bidder agrees to enter into a lease agreement on the Department of General Services Standard Lease Agreement Form BCM 4054 (Attachment F - Do not complete)." The copy of the Department of General Services Standard Lease Agreement Form which was included in the RFP was a poorly reproduced copy. Article III of the Lease Agreement Form provides as follows: III HEATING, AIR CONDITIONING AND JANITOR SERVICES 1.a. The Lessor agrees to furnish to the Lessee heating and air conditioning equipment and maint(illegible) in satisfactory operating condition at all times for the leased premises during the term of the lease at the (illegible) of the Lessor. b. The Lessor agrees to maintain thermostats in the demised premises at 68 degrees Fahrenhe(illegible) the heating season and 78 degrees Fahrenheit during the cooling season; and certifies that boilers the(illegible) been calibrated to permit the most efficient operation. The Lessor agrees to furnish janitorial services and all necessary janitorial supplies for the leased (illegible) during the term of the lease at the expense of the Lessor. All services required above shall be provided during the Lessee's normal working hours, whic(illegible)marily from 7:30 a.m. to 5:30 p.m., Monday through Friday excluding state holidays. Also attached to the RFP was a copy of an addendum to the lease, also poorly reproduced. The addendum provides as follows: Article III, Paragraph III Addendum for Full Service Lease The lessor and lessee mutually agree that the described prem(illegible) leased in this lease agreement shall be available to the department (lessee) for its exclusive use twenty four (24) (illegible) per day, seven (7) days per week during the lease term. T(illegible) space to be leased by the department will be fully occupied during normal working hours from 7:30 a.m. to 5:30 p.m., Mo(illegible) through Friday, excluding holidays, Saturdays and Sundays, (illegible) may be fully or partially occupied during all other periods (illegible) time as necessary and required at the full discretion of th(illegible) department. Accordingly, services to be provided by the le(illegible) under the terms of the lease agreement, including electrici(illegible) other utilities, will be provided during all hours of occup(illegible) at no additional cost to the department (lessee). Although the copy of the lease agreement and addendum included in the RFP were poorly reproduced, it is clear that the addendum modifies the paragraph of the lease agreement related to provision of heating, air conditioning and janitorial services to require that HVAC services be provided throughout the premises during all hours of occupancy at no additional cost to the Department. The proposal submitted by Towncentre included an "Attachment Z" which states as follows: The following represent exceptions and/or clarifications to the terms of the Request for Proposal and Bid Submittal Form ("RFP") for the referenced Lease. Except as noted herein, Bidder shall comply fully with the terms of the RFP..." Item #7 of Attachment Z states as follows: The Building in which the space is offered is serviced by central heating, ventilating and air conditioning; therefore, no separate thermostats will be provided in the space other than in the computer room. However, the required temperature standards will be maintained and satisfied. The computer room HVAC shall be available 24 hours a day. Otherwise, after-hours HVAC is billed at $80 per hour. Attachment Z also included additional exceptions to the provisions of the RFP. Contrary to the requirements set forth in the addendum attached to the lease form included in the RFP, the Towncentre proposal included additional charges for after hours uses. The Department determined that the Towncentre proposal was nonresponsive and disqualified the proposal from further consideration. Because the Towncentre proposal includes HVAC charges which are specifically prohibited under the terms of the RFP, the Towncentre proposal is nonresponsive to the RFP. Towncentre asserts that other sections of the RFP indicate that, within the leased premises, only the computer room is required to be heated or cooled on a continuous basis. Vendors had an adequate opportunity to direct questions regarding the RFP to Department officials. There is no evidence that Towncentre sought clarification from the Department related to this matter prior to submitting the bid proposal. In the notification to Towncentre that the bid had been determined to be nonresponsive to the RFP, the Department identified the other exceptions as additional reasons for the determination of nonresponsiveness. At hearing Towncentre introduced no evidence related to the remaining items included within Attachment Z. BRYAN SIMPSON JR. FOR P.V. ASSOCIATES The Simpson bid was deemed to be responsive and was evaluated. The evaluations were performed by three Department employees, Dorea Sowinski, Albert Cherry, and Tom Mahar. On March 9, 1993, the evaluators visited the physical locations of the three responsive bids. (Although the bid had been declared nonresponsive, they also visited the Towncentre site, apparently as a courtesy.) The Simpson space is located in downtown Jacksonville. After completion of the site visits, the evaluators separately and independently completed their evaluation sheets. The evaluators awarded a total of 262 points to Koger Properties and 248 points to Simpson. Page 7 of the RFP sets forth the evaluation criteria which were considered in awarding evaluation points. The RFP stated as follows: The successful bid will be the one determined to be the lowest and best. All bids will be evaluated based on the award factors enumerated below: Rental, using Present Value methodology for basic term of lease (See D, General Provisions Items 3 and 4) applying the present value discount rate of 5.6 per cent. (Weighing: 35) Conformance of and susceptibility of the design of the space offered to efficient layout and good utilization and to the specific requirements contained in the Invitation to Bid. (Weighing: 20) The effect of environmental factors, including the physical characteristics of the building and the area surrounding it on the efficient and economical conduct of the Departmental operations planned for the requested space. (Weighing: 20) Offers providing contiguous space within preferred boundaries. (Weighing 5) Frequency and availability of satisfactory public transportation within one block of the offered space. (Weighing 15) Availability of adequate dining facilities within one mile of the offered space. (Weighing: 2) Proximity of offered space to the clients served by the Department at this facility. (Weighing: 3) Proximity of offered space to other Department activities as well as other public services. (Weighing: 0) TOTAL POINTS: 100 Simpson asserts that the evaluators acted improperly in awarding points in categories 3, 5, 6 and 7. Category 3 relates to the effect of environmental factors, including the physical characteristics of the building and the area surrounding it on the efficient and economical conduct of the Departmental operations planned for the requested space. Although Simpson asserts that category 3 is vague and ambiguous, there was no objection to the category prior to the submission of the bid responses and the announcement of the proposed lease award. Each evaluator could award up to 20 points in this category for a total of 60 available points. Koger was awarded 55 points. Simpson received 27 points. As to individual evaluators awards, Tom Mahar awarded Simpson five points, Albert Cherry awarded Simpson ten points, and Dorea Sowinski awarded Simpson 12 points. Based on the written memo dated March 10, 1993, identifying the reasons for the recommended bid award, two of the three evaluators considered the Koger space to be located in a safer area than the Simpson facility, and, at least in part, based their point awards on this factor. The two evaluators cite minimal anecdotal information in support of their opinions. The evaluators undertook no investigation related to safety issues and there are no facts to support their opinions. Their award of points for "environmental factors" is arbitrary. Category 5 relates to the frequency and availability of public transportation within one block of the offered space. Each evaluator could award up to 15 points in this category for a total of 45 available points. Both Koger and Simpson received the maximum 45 points. RFP Page Two, question 8 provides as follows: Public Transportation availability: BIDDER RESPONSE: (Check appropriate box) Taxi , Bus , Frequency of service closest bus stop . Both Koger and Simpson indicate service by taxi and bus. The Koger proposal indicates a frequency of service as "8 BUSES" and the closest bus stop as "IN FRONT OF BUILDING ON WOODCOCK DRIVE." Simpson indicates a frequency of service as "15 minutes" and the closest bus stop as "front of building." The Department asserts that the Koger level of transportation access, albeit less than that serving the Simpson site, is satisfactory and therefore entitled to an award of all points available. Simpson asserts that the greater availability of public transportation to the Simpson site should result, under the terms of the evaluation criteria, in Simpson receiving more points than the Koger site for this category. The evaluation criteria clearly requires consideration of both the frequency and availability of satisfactory public transportation. Simpson asserts that in considering the transportation category, the evaluators should have reviewed local public transportation schedules. Review of such schedules establishes that the Simpson site is served more frequently by public bus transportation than is the Koger site, and further establishes that the number of bus routes directly serving the Simpson property far exceeds the routes serving the Koger site. Simpson did not include the schedules in the RFP response. The Simpson site is also located nearby the downtown public transportation transfer station at which point many, perhaps all, local bus routes connect. Simpson did not denote the location of the transfer station in the RFP response While the evaluation committee is not required to consider the bus schedules in reviewing bid proposals, the evaluation committee failed to consider the substantially greater frequency and availability of public transportation to the Simpson site relative to the Koger site, as set forth in the respective RFPs. The Department's position is contrary to the specific criteria identified in the RFP. The award of equivalent points for transportation access to both Simpson and Koger is unsupported by fact or logic and is arbitrary. Category 6 relates to the availability of adequate dining facilities within one mile of the offered space. Each evaluator could award up to two points in this category for a total of six available. Koger was awarded six points. Simpson received one point. When the evaluators rated the adequacy of dining facilities, they considered only those dining facilities which were located within two blocks of the offered space. Such is contrary to the clear terms of the RFP. The Department offered no rationale for the decision to amend the RFP criteria after submission of the proposals. The Simpson RFP response states only that there are adequate dining facilities within walking distance of the offered facility. The Koger response states that there are "three (3) sandwich shops within walking distance in the Koger center and other numerous restaurants within one (1) mile." As to individual evaluators awards, Tom Mahar awarded Simpson one point, while both Albert Cherry and Dorea Sowinski awarded Simpson zero points. Mahar's award was based on his opinion, again based on alleged safety concerns, that employees would be hesitant to walk to nearby restaurants and that driving and parking presented a problem in the downtown location. Cherry voiced a similar opinion. As to alleged safety concerns, Mahar and Cherry again based their opinions on minimal anecdotal information, supported by neither fact nor logic. Neither evaluator undertook any factual analysis of the safety issues relative to the proposed site. Their award of points for this category is arbitrary. On the other hand, Sowinski did not see any restaurants close to the Simpson site during the site visit. In excess of 40 restaurants are located within one mile of the Simpson site. The restaurants provide a variety of dining options both as to expense and fare. Sowinski's failure to observe restaurants located across the street from the Simpson site is, although difficult to understand, apparently a simple mistake on her part. Category 7 relates to the proximity of offered space to the clients served by the Department at this facility. Each evaluator could award up to three points in this category for a total of nine available. Simpson offered no evidence that the determination of points awarded for category 7 was inappropriate.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Department of Labor and Employment Security enter a Final Order DISMISSING the protest filed by Towncentre Venture, and WITHDRAWING the proposed award of lease contract based on the Request for Proposal and Bid Submittal No. 540:0969. DONE and RECOMMENDED this 28th day of June, 1993, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM 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 28th day of June, 1993. APPENDIX TO CASES NO. 93-2015BID and 93-2106BID The following constitute rulings on proposed findings of facts submitted by the parties. Petitioner Towncentre Venture Towncentre Venture's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 4. Rejected, second sentence is irrelevant. 5-7. Rejected, irrelevant. Taken as a whole, the RFP indicates that HVAC services are to be provided throughout the leased premises during all hours of occupancy at no additional cost to the Department. The evidence fails to establish that the vendors were confused about the terms of the RFP. There were apparently no related questions addressed to Department personnel during the pre-bid conference or at any time subsequent to the conference and prior to the bid opening. 10. Rejected. Not supported by the document cited which does not identify the attachment by letter. 13. Rejected, irrelevant. The standard form lease included in the RFP was a sample document. None of the blank spaces were completed. 16. Rejected, irrelevant. The attendees at the conference were provided an opportunity to inquire as to all matters. There were apparently no questions asked related to the RFP's requirement that HVAC services be provided throughout the facility during all hours of occupancy at no additional cost to the Department. 17-18, 20-21. Rejected, irrelevant. The terms of the RFP are clear. 19. Rejected, irrelevant. The terms of the addendum for full service lease clearly indicate that such HVAC services were to be provided at no additional charge, not just in the computer room, but throughout the entire leased facility. 22. Rejected. The Towncentre bid was nonresponsive to the terms of the RFP. Petitioner Bryan Simpson, Jr., for P. V. Associates P. V. Associates' proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 3. Rejected, not supported by the greater weight of the evidence which establishes that the RFP was issued seeking space for the Jacksonville Office of Disability Determinations. 4, 23, 24. Rejected, unnecessary. Respondent Department of Labor and Employment Security The Respondent's proposed findings of fact are accepted as modified and incorporated in the Recommended Order except as follows: 17. Rejected. The decision to award equivalent points for public transportation access fails to reflect the substantially greater access provided to the Simpson site and is arbitrary. 20-21. Rejected, not supported by greater weight of evidence which establishes no evidence that safety concerns were based on a reasonable evaluation of facts. There are no facts to support the conclusion that the Simpson location if less safe than the Koger site. COPIES FURNISHED: Shirley Gooding, Acting Secretary Suite 303, Hartman Building 2012 Capital Circle S.E. Tallahassee, Florida 32399-2152 Cecilia Renn Chief Legal Counsel Suite 307, Hartman Building 2012 Capital Circle, S.E. Tallahassee, Florida 32399-2152 Thomas M. Jenks, Esquire Pappas and Metcalf, P.A. 1 Independent Drive, Suite 3301 Jacksonville, Florida 32202 Nathan D. Goldman, Esquire Marcia Maria Morales, Esquire 200 Laura Street Post Office Box 240 Jacksonville, Florida 33202 Edward Dion, Esquire Assistant General Counsel Suite 307, Hartman Building 2012 Capital Circle S.E. Tallahassee, Florida 32399-2189
The Issue Whether the Florida Department of Transportation’s (“Respondent” or “Department”) intended award of a contract for integrated corridor management modeling software to Aimsun, Inc. (“Intervenor” or “Aimsun”), is contrary to the Department’s governing statutes, rules, policies, or the solicitation specifications; and, if so, whether the decision was clearly erroneous, contrary to competition, arbitrary, or capricious.
Findings Of Fact The Department is the state agency responsible for coordinating and planning a safe, viable, and balanced transportation system serving all regions of the state, and to assure the compatibility of all components of the system. See § 334.044, Fla. Stat. (2018). The RFP On February 22, 2018, the Department posted the RFP to the state vendor bid system, seeking vendors that could provide Integrated Corridor Management Modeling (“ICMM”) software. There were no challenges to the terms, conditions, or specifications contained in the RFP. The RFP describes the overall goal to acquire ICMM for the Central Florida Regional Integrated Corridor Management System (“ICMS”), which is initially centered on the I-4 Corridor and its “influence area,” including the interstate, a commuter- rail line, transit bus service, park-and-ride lots, major regional arterial streets, toll roads, and other transportation facilities. While the ICMS project focuses on the Orlando region initially, the goal of the Department is to develop a modular approach to ICMS which will be scalable to District 5 in its entirety. As summarized by Shaleen Srivastava, Petitioner’s Vice President, the Department is building a “model of the actual traffic situation [in the I-4 corridor] in the virtual world.” The ICMS is composed of three main systems, the relevant one being the Decision Support System (“DSS”). The DSS will be developed to provide a system to review and evaluate the current and predicted conditions of the Central Florida transportation network in order to help operators make smart decisions in managing both recurring and non-recurring congestion conditions. The DSS components are an Expert Rules Engine (“ERE”), a Predictive Engine (“PRE”), and an Evaluation Engine (“EVE”) that will build and select response plans to be evaluated, model the predicted outcomes of the selected response plans, evaluate and score the plans, coordinate with operators and local agency maintainers, and invoke the approved response plan actions. Through the RFP, the Department seeks a vendor to supply a Commercial Off-the-Shelf (“COTS”) software product which will be the core of the PRE. The RFP Exhibit A contains the scope of services for the project and describes in detail the requirements for the PRE. The PRE is envisioned to provide predictions of the network performance 30 minutes into the future. The PRE will have three main functions that must be met by the COTS software: 1) maintenance, 2) evaluation, and 3) offline signal simulations. The third role of the PRE is to simulate and provide measures of effectiveness for the optimized signal timing plans and coordination that will be developed by the signal optimization tool that will be part of the ICMS. The PRE is an integral component of, and must interface seamlessly with, the DSS. All of the technical requirements for the PRE/COTS are listed in Exhibit A, Table 2. The proposer must verify that its software is demonstrated to meet each of the 55 requirements. The RFP incorporates a number of required forms, including a Proposed Staffing and Availability worksheet (“staffing worksheet”), which directs proposers to provide the following information for up to 10 core staff members: List the Key Personnel, including job titles, of the Team that will be involved with this contract. Include the number of years of experience each person has in the specific job title and the type of experience they have, as well as any certifications and education. List the availability for each team member in percentage of hours per year. According to the RFP, proposals may be found to be irregular or non-responsive if they do not utilize or complete prescribed forms. Processing of Responses Both PTV and Aimsun are potential vendors which submitted timely proposals to the District 5 Procurement Unit in response to the RFP. The Procurement Unit opened the technical proposals on April 10, 2018, then distributed the proposals to the members of the Technical Review Committee (“TRC”), who evaluated and scored the technical proposals. The TRC was composed of District 5 staff with technical expertise relevant to traffic management: Traffic Design Engineer Ayman Mohamed, Transportation Modeler Jason Learned, and Freeways Engineer Jeremy Dilmore. TRC members evaluated and scored the technical proposals on a scoresheet template provided by the Procurement Unit. The template was divided into three sections, which correspond with the three sections of the RFP: Software Description and Functionality, Support and Integration Approach, and Software Deployment/Project History. The maximum score for each section was 35 points. TRC members completed their evaluation and scoring and returned their evaluation, and summaries thereof, to the Procurement Unit on April 17, 2018. Aimsun received a total score of 93 for its technical proposal. PTV received a total score of 78.67. Following opening of the price proposals, Aimsun was selected to receive the ICMM contract. Responsiveness of Aimsun’s Proposal Petitioner’s first contention is that the Department’s intended award to Aimsun is contrary to the bid specifications because Aimsun did not include the staffing worksheet, which rendered Aimsun’s proposal non-responsive. It is undisputed that the Aimsun proposal considered by the TRC did not include the required staffing worksheet. According to the Procurement Supervisor, the TRC is responsible for determining responsiveness of proposals.1/ In scoring section 2, Support and Integration Approach, Mr. Mohamed noted, “Aimsun provided general description of their supporting staff. Aimsun did not provide staffing plan showing key staff members and their availability toward the project.” Mr. Mohamed gave Aimsun 31 out of 35 possible points on this section. Mr. Learned gave Aimsun 30 out of a possible 35 points on this section. Mr. Learned noted, “Has staffing plan, but does not show availability – staff has worked on projects listed in the project history. Support staff housed in NYC office, which will facilitate communication with FDOT.” Mr. Dilmore gave Aimsun 33 out of a possible 35 points on this section. Mr. Dilmore noted, “Aimsun’s product requires development. It is unclear about availability of staff.” Despite the absence of the staffing worksheet from Aimsun’s proposal, Mr. Mohamed was satisfied Aimsun could support the COTS product identified in this proposal. In arriving at his conclusion, Mr. Mohamed considered the information contained in Section 2.4 of Aimsun’s proposal, which listed each staff member who would support the project, as well as each component of the project which they would support. Both Mr. Learned and Mr. Dilmore also relied upon the staffing information contained in Section 2.4 of Aimsun’s proposal in arriving at their scores of 30 and 33, respectively. Despite the absence of the required staffing worksheet, each evaluation committee member was satisfied that Aimsun demonstrated the ability to support the COTS software solution proposed. The record does not support a finding that Aimsun’s failure to include the required staffing form gave Aimsun a competitive advantage or benefit over PTV. Arbitrary Scoring Petitioner next contends that the Department scored its proposal arbitrarily, or otherwise in error, compared to its scoring of Aimsun. Staff Availability Petitioner cites, as the most egregious example, the TRC scores it received for section 2. This section requires the proposer to discuss how they will support the implementation of the modeling software as part of the ICMS development and deployment, as well as a description of how the proposer supports software integrations, application development, and general modeling support. This is the section which required the inclusion of the staffing worksheet. On this section, Petitioner received a 10 out of a possible 35 points from Mr. Dilmore. Mr. Dilmore noted, “The development staff generally has low availability. Their approach to training is 4 week courses. The implementability will be difficult [but] is generally acceptable. PTV takes exception to the SLAs [which] are part of the contract.” PTV takes umbrage at Mr. Dilmore’s severe deduction of points for perceived “lack of staff availability” when Aimsun received only minor point deductions, even though it wholly failed to include the required form detailing its staff availability. While PTV’s proposal does, in fact, propose low availability of staff,2/ that shortcoming was not the sole basis for the low score Mr. Dilmore’s assigned. As Mr. Dilmore noted on his score sheet, and explained at final hearing, in addition to availability issues, his score reflected concerns with PTV’s failure to agree to the Department’s Service Level Agreement (“SLA”), proposed approach to training, and issues with implementing the software. Department SLA The Department’s SLA sets the required timeframes for response to, and repair of, system maintenance requests and system failures. For example, the SLA sets a maximum response time of 15 minutes, during normal operating hours, for priority one failures. Likewise, the SLA sets a maximum repair time of one hour for such failures during normal operating hours. Rather than agreeing to the Department’s SLA, PTV stated that it “adopts its own standard [SLA] terms,” and explained that it is “open to discussion” on the content and terms of a final agreement. PTV did not include a copy of its standard SLA for review by the Department, but instead noted that it could be “provided upon request.” The SLA is critical to the Department. If a vendor does not agree to the Department SLA, the Department is not assured that the failures in the PRE software function, which drives the DSS, will be repaired timely. The SLA is so critical that it includes a liquidated damages clause for damages caused by the vendor’s failure to comply with the required timeframes. In contrast to PTV, Aimsun took no exception to the Department’s SLA and agreed to comply with it. The Department’s scoring of PTV’s proposal was reasonable, especially in light of the importance of the Department’s SLA. Training The vendor is required to operate, maintain, and support the COTS software system for two years after its deployment. The vendor must provide at least two training courses on the DOT premises in the use of the planning aspects of the software. Additionally, the vendor must provide administrator training for the PRE on Department premises after the integration with ICMS is complete. Mr. Mohamed gave PTV a 32 out of 35 points on this section. Mr. Mohamed’s concern was with PTV’s approach to training of Department staff. PTV proposed two separate training sessions for Department staff, each lasting four weeks. Mr. Mohamed commented that the trainings “could be unfeasible for most of the essential senior staff.” Mr. Learned gave PTV a 25 out of 30 points on this section. He also noted that the proposed trainings were not optimal and that the preferred approach was tiered training based on the Department staff member’s “level of use,” meaning that the amount of training should correlate with the staff member’s responsibilities related to the software. In contrast to PTV, Aimsun proposed two tiers of training: a first-level training for staff to master all the basic concepts of the software, and a second level which includes a detailed walk-through of the methodology and workflow for modelers who have previous practical experience. The Department’s scoring of PTV’s proposal on this issue was reasonable based on the level of training proposed. Software Description and Functionality The Department also reasonably deducted points from PTV’s proposal in section 1, Software Description and Functionality. Mr. Mohamed, Mr. Learned, and Mr. Dilmore scored PTV’s proposal 32, 30, and 30 out of 35, respectively, on section 1. PTV failed to verify that its software met all of the technical requirements for the PRE/COTS listed in Exhibit A, Table 2. Of the 55 requirements, PTV indicated that its COTS was only partially compliant with seven of the technical requirements. Further, PTV’s proposed software, DATEX2, is a European data format, which will require conversion to interface with the Department’s U.S. data format.3/ Mr. Learned testified that these conversions would require the Department to incur additional costs--both monetary and temporal. It also raised the questions of whose task it would be to complete the conversion and when conversion would take place. In addition, since the PRE is the driver of, and a critical interface with, the DSS, the necessity for conversion is not advantageous to the Department. In comparison to PTV’s proposal, Aimsun’s proposal verified that its COTS complied with all 55 technical requirements. The Department’s scoring of PTV’s proposal was reasonable and supported by the importance of the interface between the PRE and the DSS. Software Deployment/Project History PTV also received lower scores than Aimsun on section 3, Software Deployment/Project History. Mr. Mohamed, Mr. Learned, and Mr. Dilmore assigned scores of 27, 25, and 25, respectively. PTV has not previously deployed DATEX2 anywhere in the United States. All of its prior deployments were in Europe and the Middle East. This is significant because traffic operations (i.e., signal systems) and driver behavior are significantly different in North America than in Europe and the Middle East. By contrast, Aimsun’s project history includes two prior U.S. deployments, along with its European and Australian experience. The most relevant project is that of the San Diego I-15 ICMS, where Aimsun’s COTS was deployed successfully in 2013 and serves as the real-time modeling tool for the DSS in the San Diego interstate corridor ICMS project. That project is the exact model the Department is seeking to construct for the I-4 Corridor ICMS. Aimsun is currently involved in ongoing maintenance of the San Diego project. The Department did not arbitrarily score PTV’s proposal regarding section 1. Aimsun’s experience was the most relevant and demonstrated success with deployments interfacing with the DSS to support an ICMS. Scoring Contrary to RFP Criteria In scoring the proposals on availability, the TRC members also considered that most of the key PTV staff are not located in the United States. Only two key staff members, Shaleen Srivastava and Chetan Joshi, are located in the U.S., and those two members were proposed to devote to the project 15 percent and 30 percent of their annual work hours, respectively. TRC members expressed concern that international time zone differences would affect the responsiveness and availability of PTV to support the project, especially in the event of system failures. PTV posits that, in deducting points for the location of its staff outside of the U.S., the Department applied criteria that were not contained in the RFP. PTV argued that if the Department only wanted U.S.-based staff, it must have included that in the RFP criteria. Mr. Srivastava testified that someone on his staff, not necessarily someone listed on the worksheet, would be available 24 hours a day to take the Department’s calls and address any maintenance or failure issues. While Mr. Srivastava’s testimony was credible, it does not erase the Department’s reasonable concern with the availability of key staff. Mr. Srivastava conceded that the key staff listed on the worksheet would not always be available to the Department because of differences in international time zones. That, coupled with PTV’s lack of commitment to the Department’s SLA, justifies the TRC members’ deductions on section 2 of PTV’s proposal. The Department did not impose criteria which were outside of the RFP.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Transportation enter a final order dismissing PTV America, Inc.’s Petition. DONE AND ENTERED this 2nd day of November, 2018, in Tallahassee, Leon County, Florida. S SUZANNE VAN WYK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of November, 2018.
Findings Of Fact Findings regarding the ITB and its Addendums On or before May 11, 1995, the Department of Transportation issued ITB- DOT-95/96-9002, seeking a contractor to provide Statewide Full Service Repair and Support Under the Classifications of PC Maintenance, LAN Server Maintenance, and Novell LAN Support including All Parts and Labor Required for Inspection, Repair/Replacement of Defective, Missing or Worn parts. The ITB contained, inter alia, the following requirements in sections 1.5.1 and 1.5.2 regarding technical qualifications: GENERAL Bidders should meet the following minimum qualifications: Have been actively engaged in the type of business being requested for a minimum of two years. Be a certified Novell OEM Dealer, maintaining a certified Novell Support Center, and have at least three (3) certified Novell Engineers. RESPONSIVENESS OF BIDS When submitting the bid, each bidder should submit a written statement (FORM "E"), detailing their qualifications which demonstrate they meet the minimum qualifications contained in Subparagraph 1.5.1.1. Bidders failure to provide the above item(s) will constitute a non-responsive deter- mination. Bids found to be non-responsive shall not be considered. The ITB also contained the following requirements regarding the qualifications of key personnel in section 1.5.3: QUALIFICATIONS OF KEY PERSONNEL Those individuals who will be directly involved in the project should have demonstrated experience in the areas delineated in the scope of work. Individuals whose qualifications are presented will be committed to the project for its duration unless otherwise excepted by the Department's Project Manager. Where State of Florida registration or certification is deemed appropriate, a copy of the registration or certificate should be included in the bid package. Form "E", referred to in the above-referenced portions of the ITB, provided, in pertinent part, the following: When submitting the bid, each vendor must furnish proof that he/she is capable of performing the work described in the attached specifications in a satisfactory manner. * * * The vendor shall provide the State with documented proof that the vendor is a certified Novel OEM dealer, maintains a certified Novell support center, and has at least 10 Certified Novell Engineers. On or about May 9, 1995, Bell Atlantic submitted certain questions to the Department, including the following: Bell Atlantic Business Systems intends to participate in the subject ITB. The following is a list of questions that need further clarification. * * * 2. FORM E: a. What form of documentation is the Department requiring as written proof that vendor is a certified Novell OEM dealer, Novell support center and has ten (10) Certified Novell Engineers? * * * c. Are the ten (10) required CNE's to be located in the state of Florida? In response to the questions raised by Bell Atlantic, the Department issued Addendum #1 to the ITB, which provided, in pertinent part, the following: FORM E Where it reads: The vendor shall provide the State with documented proof that the vendor is a certified Novel OEM dealer, maintains a certified Novell support center, and has at least 10 Certified Novell Engineers. Shall be changed to read as follows: The vendor shall provide the State with documented proof that the vendor is a certified Novell Authorized Service Center (NASC), maintains a certified Novell support center, and has at least 3 Certified Novell Engineers available in the State of Florida. At least one of the Certified Novell Engineer[s] must be available in the Tallahassee area. The terms "available in the State of Florida" and "available in the Tallahassee area" are not defined in the ITB or in the Addendums. Addendum 1 also affected the description of scope of services contained in Exhibit A to the ITB. This description is contained in Section 2.4.4.2, LAN Server Maintenance and Novell LAN Support. As initially issued, this section read: Novell certified personnel must respond within thirty minutes. If deemed necessary by the Department, vendor must dispatch adequately trained personnel to the site of reported problems within one hour of notification. The quoted section was changed by Addendum 1 to read as follows: Novell certified personnel must respond within thirty minutes by telephone. If deemed necessary by the Department, vendor must dispatch adequately trained personnel to the District Office sites (see Attachment A) of reported problem within one hour of notification. Vendor must dispatch adequately trained personnel to all remote locations not listed in Attachment A within four hours of notification. Attachment A, as referenced in this paragraph, identifies DOT district offices and other key offices at 14 locations in nine cities in Florida: Tallahassee, Lake City, Fort Lauderdale, Miami, Bartow, Chipley, Deland, Tampa, and Boca Raton. Section 2.4.4.2 does not specify that the "adequately trained personnel" who must be dispatched by the vendor to district office sites within one hour of notification must be CNE's. "Adequately trained personnel" does not necessarily mean CNE's, and CNE's are not necessarily required to perform LAN maintenance. DOT has used non-CNE's to service its LAN's. Section 1.15.1 of the ITB provides that the Department intends to award the subject contract "to the responsible and responsive bidder who bids the lowest cost. " To be responsive, bidders had to complete Form E, as stated in Section 1.5.2 of the ITB. The ITB did not require the bidders to include in the bid the residence addresses of any of the three required CNE's. One of the Departments main reasons for requiring bidders to demonstrate that they had at least three CNE's available in the State of Florida was the Department's belief that a bidder who met that requirement would probably be qualified to perform the subject contract. Facts regarding Kennsco's bid Kennsco submitted the lowest bid of the seven vendors bidding: $163,600.00. Kennsco's bid included the following language in the transmittal letter submitted as part of its bid: Kennsco has read, understands and accepts the terms and conditions of the Department's ITB. Kennsco currently has 4 CNE's, 1 of which is in his final phase of becoming a ECNE. Kennsco is a authorized service center and is a authorized Novell Dealer. In response to the requirements of sections 1.5.1, 1.5.2, and Form E, Kennsco attached to is bid the CNE certificates of the following individuals: Steve Deal Allan Sellers C. Mark Robinson David R. Dremann, Jr. Kennsco did not include any information in its bid regarding where these four individuals lived or worked. Messrs. Deal, Sellers, and Dremann are residents of St. Louis, Missouri, and work out of Kennsco's offices there; Mr. Robinson is no longer employed by Kennsco, but at the time of the submission of Kennsco's response Mr. Robinson was a resident of Minnesota and worked out of Kennsco's offices in that state. On June 14, 1995, the Department posted its decision of intent to award the contract to Kennsco, and Bell Atlantic timely filed its Notice of Intent to Protest. On June 26, 1995, Bell Atlantic timely filed its Formal Written Protest regarding the instant ITB alleging, inter alia, that the CNE's whose certificates were attached to Kennsco's bid were not available in Florida and not even one was available in Tallahassee as required by the ITB. Shortly after receipt of Bell Atlantic's Formal Written Protest, a conversation occurred between Mr. Oscar Arenas, of the Department, and Greg Blanc, representative of Kennsco. That conversation resulted in correspondence of June 26, 1995, which provided as follows: As per our telephone conversation on June 26, 1995, regarding the availability of Novell Certified Network Engineers (CNE). Kennsco Engineering Services, Inc. has a minimal of one CNE available to serve the Department of Transportation on-site in Tallahassee within one hour of notice, and has four CNE's that are available to work in any area of Florida. In addition to this Kennsco has two other engineers that will be certified within the next 60 to 90 days, and one of our current engineers is one test away from becoming a ECNE. The names and location of these CNE are as follows: Mr. Mark Hansel - Tallahassee Mr. John Strobel - Tallahassee Mr. Mike Deshazo - Tallahassee, also a Banyan Certified Engineer Mr. Orlando Cone - Orlando The names submitted by Kennsco in its conversation and correspondence of June 26, 1995, (Hansel, Strobel, Deshazo, and Cone) are different from those submitted with the bid documents (Deal, Sellers, Robinson and Dremann). Messrs. Hansel, Strobel, Deshazo and Cone do not work for Kennsco, but work for other companies. Kennsco proposes to arrange for their services through subcontract agreements. Kennsco has never submitted any certificates evidencing the qualifications of Messrs. Hansel, Strobel, Deshazo and Cone. Facts regarding Bell Atlantic's bid Bell Atlantic submitted the second-lowest bid, $301,180.00. Bell Atlantic's bid included the following language as part of its response to the requirements of Form E: Bell Atlantic understands and will comply with the above requirements [the requirements printed on Form E] throughout the contract period. As requested above, we have provided the proof of our capabilities of performing the work described in the ITB document in a satisfactory manner on the following pages. In further response to the requirements of Form E, Bell Atlantic also included the following language in its bid: Bell Atlantic has included herein documented proof that Bell Atlantic a certified Novell Authorized Service Center (NASC), maintains a certified Novell support center, (please reference Exhibit A, letter from Novell Corporation); and has at least 3 Certified Novell Engineers available in the State of Florida. At least one of the Certified Novell Engineers is available in the Tallahassee area, (please reference Exhibit B for the Novell Certificates/letter/Identi- fication Number of certified field engineers.) All Bell Atlantic personnel represented herein, have been actively engaged in the type of business being requested for a minimum of two years. These individuals, who will be directly involved in the project, have demonstrated experience in the areas delineated in the scope of work. These individuals whose qualifications are presented herein will be committed to the project for its duration unless otherwise excepted by the Department's Project Manager. Bell Atlantic also included with its bid four CNE certificates of CNE's available in Florida, at least one of which was also available in the Tallahassee area. Facts regarding other matters After opening the bids, the Department reviewed Kennsco's bid and concluded that it was responsive. Among the factors that influenced the Department's conclusion in this regard was the language in the Kennsco bid reading: "Kennsco has read, understands and accepts the terms and conditions of the Department's ITB." Kennsco's use of CNE's other than those identified in its bid would not affect the price the State would pay for Kennsco's services. The ITB did not prohibit the use of subcontractors, nor did it require that the CNE's who perform services under the contract be employees of the contractor. The CNE's who were to be available in Florida were the only personnel for whom the bidders were required to submit evidence of qualifications.
Recommendation On the basis of all of the foregoing, it is RECOMMENDED that the Department of Transportation issue a Final Order in this case concluding that the bid submitted by the Intervenor Kennsco Engineering Services, Inc., was not responsive to the requirements of ITB-DOT-95/96-9002 and either awarding the subject contract to the lowest responsive bidder or rejecting all bids and readvertising for bids with improved bid specifications. DONE AND ENTERED this 28th day of November 1995 in Tallahassee, Leon County, Florida. MICHAEL M. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of November 1995. APPENDIX The following are the specific rulings on all proposed findings of fact submitted by all parties. Proposed findings submitted by Petitioner: Paragraphs 1 through 5: Accepted. Paragraph 6: Rejected as unnecessary summary of testimony or as subordinate and unnecessary details. Paragraphs 7 through 16: Accepted in whole or in substance, with some small modifications in the interest of clarity. Paragraph 17: Rejected as subordinate and unnecessary details or as irrelevant to the dispositive issues in this case. Paragraph 18: Accepted. Proposed findings submitted by Respondent: Paragraphs 1 through 5: Accepted. Paragraph 6: Rejected as not supported by persuasive competent substantial evidence. While there was testimony to the effect proposed in this paragraph, that testimony was not persuasive, largely because it is illogical in view of the manner in which the word "available" is used in Addendum #1. Paragraph 7: Rejected as not completely accurate. The Department's witnesses testified to the effect that the Department interpreted the ITB as not requiring the CNE's to reside in Florida at the time the bids were submitted. That interpretation is inconsistent with the plain language of the ITB and Addendum #1. Paragraph 8: Accepted, but with additional facts to put this fact into proper context. Paragraph 9: Accepted in substance. Paragraph 10: Rejected as either subordinate and unnecessary details or as irrelevant to the issues in this case. Paragraphs 11 through 19: Accepted in whole or in substance. Paragraph 20: Rejected as not completely accurate. While Bell Atlantic did not state the addresses of its CNE's, it did state that they were all available in Florida and that one was available in Tallahassee. Paragraphs 21 and 22: Rejected as subordinate and unnecessary details or as irrelevant to the issues in this case. Paragraphs 23 through 31: Accepted in whole or in substance. Paragraph 32: Rejected because it reflects a Department interpretation of the ITB and Addendum #1 that is contrary to the plain language of those documents. Proposed findings submitted by Intervenor: Paragraphs 1 through 3: Accepted. Paragraph 4: First sentence is accepted in substance. Second and third sentences rejected as argument about the meaning of language in the ITB and Addendum #1. Last sentence rejected as subordinate and unnecessary details or as irrelevant to the issues in this case. Paragraphs 5 through 8: Accepted in substance. Paragraph 9: Rejected as subordinate and unnecessary details or as irrelevant to the issues in this case. Paragraph 10: First three sentences accepted in substance. Last sentence rejected as constituting a "non-fact" based on the absence of evidence. (Absence of proof of inability is not evidence of ability.) Paragraph 11: Rejected as a combination of subordinate and unnecessary details and argument. Paragraph 12: First and second sentences rejected as contrary to the language of the ITB and its Addendums. Third and fourth sentences rejected as subordinate and unnecessary details or as irrelevant to the issues in this case. Paragraph 13: Rejected as argument about subordinate details, some of which argument is inconsistent with the language of the ITB and its Addendums. Paragraph 14: Accepted in part and rejected in part. Accepted that Kennsco's use of other CNE's would not affect the price to the State. However, exempting Kennsco from requirements of the ITB and its Addendums would give Kennsco an advantage over other bidders and would be adverse to the State's interest in maintaining the integrity of the bidding process. COPIES FURNISHED: Gregory P. Borgognoni, Esquire Ruden, Barnett, McClosky, Smith 701 Brickell Avenue, Suite 1900 Miami, Florida 33131 Thomas H. Duffy, Esquire Department of Transportation Haydon Burns Building, MS 58 605 Suwannee Street Tallahassee, Florida 32399-0458 M. Christopher Bryant, Esquire Oertel, Hoffman, Fernandez & Cole, P.A. Post Office Box 6507 Tallahassee, Florida 32314-6507 Ben G. Watts, Secretary Department of Transportation Haydon Burns Building Attn: Diedre Grubbs, M.S. 58 605 Suwannee Street Tallahassee, Florida 32399-0450 Thornton J. Williams, General Counsel Department of Transportation 562 Haydon Burns Building Tallahassee, Florida 32399-0450
Findings Of Fact The Department of Health and Rehabilitative Services ("DHRS") administers Florida's Medicaid program and licenses nursing homes to participate in the program. Florida's Medicaid program operates pursuant to the Florida Title XIX Long-Term Care Reimbursement Plan ("Plan"). The Plan expressly incorporates numerous Medicare statutes and other provisions. Medicare reimbursement principles, set forth in the Medicare Provider Reimbursement Manual ("HIM-15"), are applicable to this case. The Plan governs reimbursement for nursing homes participating in Florida's Medicaid program. Participating nursing homes are required to submit cost reports to the DHRS, which audits the reports to assure that such costs are allowable under Medicaid program regulations. Beverly submits such reports on behalf of Suwanee to the DHRS. Prior to August 1, 1986, the Beverly California Corporation ("Beverly") owned and operated Suwanee Health Care Center ("Suwanee"). Suwanee is licensed to participate in the Florida Medicaid program. Suwanee was constructed in 1983 and was financed through the sale of bonds. In 1985, Beverly organized a real estate investment trust ("REIT"), Beverly Investment Properties, Inc. 2/ An REIT raises capital funds through the sale of stock and pays dividends to shareholders. The payment of dividends constitutes the shareholder return on the invested funds. At all times relevant to this proceeding, the REIT, created to provide capital financing for long term health care facilities, constituted a valid real estate investment trust. The REIT purchased the Suwanee facility using funds raised from investors through the sale of stock, and to whom the REIT paid dividends. At the time the REIT was organized in 1985, Beverly owned 5% of the REIT's stock (although at the time of hearing, it held two and one-half percent of the stock). Five of the nine directors and officers of the REIT were associated with Beverly3. The REIT was advised by Beverly Advisors. LTD., a wholly owned subsidiary of Beverly. 3/ On August 1, 1986, Beverly sold Suwanee to the REIT. 4/ On the same date, Beverly leased Suwanee back from the REIT. The sale and leaseback transaction extinguished Beverly's debt on the property. The lease has a fixed term of 14 years with an optional extension for an additional 40 years. Monthly payments are set forth in the lease and escalate over time. The REIT assumed the debt at the time of the sale. The bonds securing the debt were defeased on August 26, 1986. Beverly properly provided notice to the DHRS prior to the execution of the transaction and reported the sale-leaseback arrangement as a related party transaction. The DHRS indicated that no certificate of need or change in licensure was required. On the cost report submitted by Beverly for Suwanee's annual reporting period ending June 30, 1987, Beverly included one month of actual interest and eleven months of "imputed" interest. Beverly based the imputed interest calculation on dividends paid to REIT investors for the period subsequent to the August 1st sale and leaseback. Prior to the sale and leaseback transaction, Beverly received reimbursement from the Florida Medicaid program for property costs related to the Suwanee facility. Such costs included depreciation on the building and equipment, interest expense on the debt incurred to finance the building and equipment, insurance costs and property taxes. In preparing the Suwanee facility's fiscal 1987 cost report, Beverly determined that it should report the lesser of either the property costs prior to the sale and leaseback, or the property costs to the REIT. The costs to the REIT included the cost of dividends paid to investors. The REIT costs were lower that Suwanee's previous property costs. Beverly included the REIT costs on Suwanee's fiscal 1987 cost report. 5/ The initial program audit for the Suwanee fiscal 1987 cost report was performed by Peat Marwick, which provided to Beverly a summary of proposed audit adjustments prior to the audit exit conference. The audit adjustment which is the subject of this case was neither identified in the summary nor discussed at the Peat Marwick-Beverly exit conference. When the DHRS reviewed the Suwanee cost report audit, the DHRS determined that the imputed interest should be disallowed because Beverly's debt on the Suwanee facility had been extinguished by the sale of the property to the REIT. The DHRS determined that Beverly's equity position related to the "debt- free" facilities should be correspondingly increased. The result of the DHRS adjustment is a reduction in Beverly's property cost basis of more than $242,000. The evidence establishes that, under applicable reimbursement principles, DHRS appropriately disallowed the imputed interest reported by Beverly and appropriately increased Beverly's equity position in the Suwanee facilities.
Recommendation Based on the foregoing, it is hereby recommended that the Department of health and Rehabilitative Services enter a Final Order dismissing the Petition of Beverly California Corporation filed in this case. RECOMMENDED this 17th day of May, 1991, in Tallahassee, Florida. WILLIAM F. QUATTLEBAUM Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of May, 1991.
The Issue Whether proposed rules 25-4.300 ("Scope and Definition"); 25-4.301 ("Applicability of Fresh Look"); and 25-4.302, ("Termination of Local Exchange Contracts"), Florida Administrative Code, known as "The Fresh Look Provision," constitute an "invalid exercise of delegated legislative authority".
Findings Of Fact Telecommunications carriers/providers may "wear different hats," dependent upon what function they are performing at a given time. Local exchange carriers are abbreviated "LECs" in the proposed rules. For purposes of this case only, Time Warner is an Alternative Local Exchange Carrier ("ALEC") and GTE and BST are Incumbent Local Exchange Carriers ("ILECs"). Both types of companies provide local telephone service over the public switch network. On February 17, 1998, Time Warner filed a Petition to Initiate Rulemaking. Time Warner's Petition requested that the Commission adopt what it described as a "Fresh Look" rule, under which a customer a/k/a "patron" a/k/a "end user" of an ILEC who had agreed to a long-term, discounted contract would have an opportunity to abrogate that ILEC contract without incurring the liability to the ILEC which the customer had agreed to, so that the customer could then enter a new contract with an ALEC. On at least one prior occasion, the Commission had elected to reach a similar result by a Final Order, rather than by enacting a rule. This time, the Commission granted Time Warner's Petition, and the Commission began the rulemaking process. Other states have adopted "Fresh Look" rules or statutes with varying degrees of success. The legislative, administrative, or litigation histories of these extraterritorial matters are immaterial to the rule validity issues herein, which are governed by Chapter 120, Florida Statutes. Those histories are likewise non-binding on this forum. The Commission has no way of identifying, let alone notifying, ILEC contract customers as a separate class of the public or as a separate class of potentially interested parties. However, the public, including customers and carriers, received the required statutory notice(s) at each stage of the rulemaking process, and only the following dates and occurrences have significance within the rulemaking process for purposes of the issues herein. A Notice of Rulemaking Development was published in the Florida Administrative Weekly on April 3, 1998. Commission staff held a Rule Development Workshop on April 22, 1998. Based on information received from carriers in response to staff data requests, the rules as proposed April 3, 1998, were revised by staff. On March 4, 1999, staff recommended that the revised rules be adopted by the Commission. At its Agenda Conference on March 19, 1999, the Commission set the rulemaking for hearing. On March 24, 1999, the Commission issued a Notice of Rulemaking, which included further revisions to the proposed rules. The Commission received a letter from JAPC dated April 28, 1999 ("the JAPC letter") which stated, in pertinent part: Article 1, Section 10 of the Florida Constitution prohibits the passage of laws impairing the obligation of contracts. Inasmuch as the rules effectively amend the terms of existing contracts, please reconcile the rules with the Constitution. The JAPC letter was not placed into the rulemaking record, responded-to by the Commission, or specifically addressed on its merits by any interested parties. Interested parties did not find out about it until many months later. A rulemaking hearing on the proposed rules was held before the Commission on May 12, 1999. Interested persons submitted written and oral testimony and comments at the hearing. No customer with a contract that would be affected by these rules participated in the rulemaking proceedings, including the hearing, before the Commission. At no time did anyone formally submit a lower cost regulatory alternative, but it was clear throughout the rulemaking process that Petitioners herein opposed the adoption of the proposed rules. Two Statements of Estimated Regulatory Cost ("SERCs") were prepared by Commission staff. The proposed rules were further revised after the May 12, 1999, hearing. On November 4, 1999, Commission staff issued a recommendation that the Commission adopt the latest rules draft, in part on the basis that the proposed rules will implement the "regulatory mandates" of Section 364.01, Florida Statutes, that the Commission should "promote competition by encouraging new entrants" and "encourage competition through flexible regulatory treatment among providers of telecommunication services." Attached to this recommendation was a revised SERC, dated September 13, 1999. The September 13, 1999, SERC addressed the alternative of not adopting the proposed rules, and found such an alternative was not viable because it would not foster competition. In preparing both SERCs, Commission staff relied solely on market share data for analyzing competition and did not fully account for revenues to which ILECs were contractually entitled, but which potentially could be unilaterally cancelled by the ILEC customer as a result of the proposed rules. Staff did not ask for such data for estimating cost of the proposed rules to the ILECs. At its November 16, 1999, Agenda Conference, the participation of interested parties was limited to addressing the new SERC. During this Agenda Conference, the Commission revised the rules further, limiting the contracts affected by them to contracts entered into before July 1, 1999, and voted to approve the proposed rules as revised. The exact language of the proposed rules under challenge, as published in the December 3, 1999, Florida Administrative Weekly, pursuant to Section 120.54(3)(d), Florida Statutes, is as follows: PART XII - FRESH LOOK: 25-4.300 Scope and Definitions. Scope. For the purposes of this Part, all contracts that include local telecommunications services offered over the public switched network, between LECs and end users, which were entered into prior to June 30, 1999, that are in effect as of the effective date of this rule, and are scheduled to remain in effect for a least one year after the effective date of this rule will be contracts eligible for Fresh Look. Local telecommunications services offered over the public switched network are defined as those services which include provision of dial tone and flat-rated or message-rated usage. If an end user exercises an option to renew or a provision for automatic renewal, this constitutes a new contract for purposes of this Part, unless penalties apply if the end user elects not to exercise such option or provision. This Part does not apply to LECs which had fewer than 100,000 access lines as of July 1, 1995, and have not elected price-cap regulation. Eligible contracts include, but are not limited to, Contract Service Arrangements (CSAs) and tariffed term plans in which the rate varies according to the end user's term commitment. The end user may exercise this provision solely for the purpose of obtaining a new contract. For the purposes of this Part, the definitions to the following terms apply: "Fresh Look Window" - The period of time during which LEC end users may terminate eligible contracts under the limited liability provision specified in Rule 25- 4.302(3). "Notice of Intent to Terminate" - The written notice by an end user of the end user's intent to terminate an eligible contract pursuant to this rule. "Notice of Termination" - The written notice by an end user to terminate an eligible contract pursuant to this rule. "Statement of Termination Liability" - The written statement by a LEC detailing the liability pursuant to 25-4.302(3), if any, for an end user to terminate an eligible contract. 25-4.301 Applicability of Fresh Look. The Fresh Look Window shall apply to all eligible contracts. The Fresh Look Window shall begin 60 days after the effective date of this rule. The Fresh Look Window shall remain open for one year from the starting date of the Fresh Look Window. An end user may only issue one Notice of Intent to Terminate during the Fresh Look Window for each eligible contract. 25-4.302 Termination of LEC Contracts. Each LEC shall respond to all Fresh Look inquiries and shall designate a contact within its company to which all Fresh Look inquiries and requests should be directed. An end user may provide a written Notice of Intent to Terminate an eligible contract to the LEC during the Fresh Look Window. Within ten business days of receiving the Notice of Intent to Terminate, the LEC shall provide a written Statement of Termination Liability. The termination liability shall be limited to any unrecovered, contract specific nonrecurring costs, in an amount not to exceed the termination liability specified in the terms of the contract. The termination liability shall be calculated as follows: For tariffed term plans, the payments shall be recalculated based on the amount that would have been paid under a tariffed term plan that corresponds to the actual time the service has been subscribed to. For CSAs, the termination liability shall be limited to any unrecovered, contract specific nonrecurring costs, in an amount not to exceed the termination liability specified in the terms of the contract. The termination liability shall be calculated from the information contained in the contract or the workpapers supporting the contract. If a discrepancy arises between the contract and the workpapers, the contract shall be controlling. In the Statement of Termination Liability, the LEC shall specify if and how the termination liability will vary depending on the date services are disconnected pursuant to subsections (4) and (6). From the date the end user receives the Statement of Termination Liability from the LEC, the end user shall have 30 days to provide a Notice of Termination. If the end user does not provide a Notice of Termination within 30 days, the eligible contract shall remain in effect. If the end user provides the Notice of Termination, the end user will pay any termination liability in a one-time payment. The LEC shall have 30 days to terminate the subject services from the date the LEC receives the Notice of Termination. (Emphasis provided only to facilitate the following discussion of "timed" provisions) "Tariff term plans" or "tariffed term plans" are telecommunication service plans in which the rate the customer pays depends on the length of the service commitment. The longer the service commitment the customer makes with the company, the lower the monthly rate will be. Ninety-eight percent of the contracts affected by the proposed rules are tariff term plans filed with the Commission. Contract service arrangements (CSAs) have many functions. By tariff term plans and CSAs, carriers and their customers formalize a negotiation whereby the customer signs-on for service for an extended period, in exchange for lower rates than he would get if he committed to shorter periods or under the regular tariff. Both tariff term plans and CSAs are subject to the Commission's regulatory oversight. No reason was given for use of the "included but not limited to" language added in the rules' current draft. The Commission has published that the "specific authority" for the proposed rules is Sections 350.127(2) and 364.19, Florida Statutes. The Commission has published that the "law implemented" by the proposed rules is Sections 364.19 and 364.01, Florida Statutes. The proposed rules would allow customers of ILECs, including Petitioners GTE and BST, to terminate their contracts and tariffed term plans for local exchange services without paying the termination liability stated in those contracts and tariffs. Instead, customers would only be required to pay the ILEC "any unrecovered, contract specific nonrecurring costs" associated with the contracts. (Proposed rule 25-4.302(3)(b)). For tariffed term plans (but not contracts), termination liability would be recalculated as the difference, if any, between the amount the customer paid and the amount he would have paid under a plan corresponding to the period during which he actually subscribed to the service. (Proposed rule 25- 4.302(3)(a)). The "Fresh Look" rule applies to agreements entered into before June 30, 1999, and that remain in effect for at least one year after the date the rule takes effect. (Proposed rule 25-4.300(1)). The window for contract termination starts 60 days after the rules' effective date and lasts for one year thereafter. (Proposed rule 25-4.301). In the case of ILEC customers who may exercise the "opt-out early" (termination) provisions of the proposed rules, the proposed rules would provide the ILECs with the compensation they would have received if the contracts had been made for a shorter period than for the period of time for which the parties had actually negotiated. The proposed rules clearly modify existing contracts. Indeed, they retroactively impair existing contracts. It may reasonably be inferred that the retroactive elimination of the respective durations of the existing contracts would work to the detriment of any ILECs which have waived "start up costs" on individual contracts or which planned or invested in any technological upgrades or committed to any other business components (labor, training, material, development, expansion, etc.) in anticipation of fulfilling the contracts and profiting over the longer contract terms legally entered-into prior to the proposed rules. The purpose of the proposed rules, as reflected in the Commission's rulemaking notices, is to "enable ALECs to compete for existing ILEC customer contracts covering local exchange telecommunications services offered over the public switched network, which were entered into prior to switch-based substitutes for local exchange telecommunications services." However, the Commission now concedes that switch-based substitutes for the ILECs' local exchange services were widely available to consumers prior to June 30, 1999, the date provided in the proposed rule. At hearing, the Commission asserted that it is also the purpose of the proposed rules to actively encourage competition, and that by proposing these rules, the Commission deemed competition to be meaningful or sufficient enough to warrant a "fresh look" at the ILECs' contracts, but not so widespread that the rules would not be necessary. In effect, the Commission made a "judgment call" concerning the existence of "meaningful or sufficient" competition, but has not defined "sufficient" or "meaningful" competition for purposes of the proposed rules. The Commission's selection of June 30, 1999, as the cut-off date for contract eligibility was motivated primarily by a concept that using that date would render approximately 40 percent of existing ILEC contracts eligible for termination. The rulemaking process revealed that the terms of so- called "long-term" agreements range from six months to four years in duration. The Commission selected a one-year term for eligible contracts subject to the proposed rules as a compromise based on this spread of actual contract durations. The one-year window of opportunity in which a customer will be permitted to terminate a contract was selected by the Commission as a compromise among presenters' views expressed during the rulemaking process. The one-year window is to be implemented 60 days after the effective date of the rule to avoid the type of problems incurred when a "fresh look" was previously accomplished by a Commission Order and to allow the ILECs and ALECs time to prepare. Tariffed term plans were developed as a response to competition and have been used at least since 1973. As early as 1984, the Commission had, by Order, given ILECs authority to use CSAs for certain services, upon the condition that there was a competitive alternative available. The Commission has long been aware of the ILECs' use of termination liability provisions in CSAs and tariff term plans, including provisions for customer premises equipment (CPE), and has not affirmatively determined that their use is anticompetitive, discriminatory, or otherwise impermissible. Private branch exchanges (PBXs), which are switches, competed with the ILECs' Centrex systems for medium- to large- size business customers and key telephone systems for smaller businesses, from the early 1980's, as recognized by a Commission Order in 1994. Commission Order No. PSC-94-0285-FOF-TP, dated March 3, 1994, in Docket No. 921074-TP, permitted a "fresh look" for customers of LEC private line and special access services with terms equal to, or greater than, three years. Customers were permitted a limited time to terminate their existing contracts with LECs to take advantage of emerging competitive alternatives, such as alternative access vendors' (AAVs') ability to interconnect with LECs' facilities. Termination liability of the customer to the ILEC was limited to the amount the customer would have paid for the services actually used. Prior to 1996, only ILECs could offer dial tone service, which enables end users to communicate with anyone else who has a telephone. Chapter 364, Florida Statutes, Florida's telecommunication statute, was amended effective January 1, 1996, to allow ALECs to operate in Florida. ILECs had offered tariffed term plans and CSAs for certain services before the 1996 revision of Chapter 364, Florida Statutes, but effective 1996, substantial amendments allowed the entry of ALECs into ILECs' markets. The new amendments codified and expanded the ILECs' ability to use CSAs and term and volume discount contracts in exchange for ILECs losing their exclusive local franchises and deleted statutory language requiring the Commission to determine that there was effective competition for a particular service before an ILEC could be granted pricing flexibility for that service. Tariff filings before the amendments had required Commission approval. The federal Telecommunications Act of 1996 also opened the ILECs' local exchange markets to full competition and imposed upon the ILECs a number of obligations designed to encourage competitive entry by ALECs into the market, including allowing ALECs to interconnect their networks with those of ILECs; "unbundling" ILEC networks to sell the unbundled elements to competitors; and reselling ILEC telecommunications services to ALECs at a wholesale discount. See 47 U.S.C. Section 51 et seq. "Resale" means taking an existing service provided by a LEC and repackaging or remarketing it. The requirement that ILECs resell their services, including contracts and tariffed term plans, to competitors at a wholesale discount, has been very effective in stimulating resale competition, but to resell or not is purely an internal business decision of each ALEC. For instance, Time Warner has elected not to be involved in "resales," and is entirely "facility based." Since 1996, competing carriers could and do sell additional (other) services to customers already committed to long-term ILEC contracts. They may also purchase ILEC CSAs wholesale at discount and resell such agreements to customers. Market share data demonstrates that there has been greater ALEC competition in Florida since the 1996 amendments, but typically, ALECs target big cities with denser populations and denser business concentrations. There is no persuasive evidence that any of the affected ILEC contracts (those post-June 30, 1999) were entered into by customers who did not have competing alternatives from which to choose. In fact, testimony by Commission staff supports a finding that since LECs' CSAs are subject to Commission review and their service tariffs are filed with the Commission, the Commission has not authorized CSAs unless there was an "uneconomic bypass" or competition. "Uneconomic bypass" occurs where a competitor can offer service at a price below the LEC's tariffed rate but above the LEC's cost. The Commission presented an ILEC customer, Mr. Eric Larsen of Tallahassee, who testified that he had had the benefit of competition, not necessarily from an ALEC, when he had entertained a bid from a carrier different from his then-current ILEC in 1999. However, at that time, he renegotiated an expiring contract with his then-current ILEC instead of with the competitor. This renewal contract with an ILEC would not be affected by the proposed rules. Business customers, such as Mr. Larsen, may reasonably perceive business trends. They could reasonably be expected to have factored into their negotiations with competing carriers at the time the contracts were formed that a potential for greater choices would occur in the future, even within the life of their long-term contracts with an ILEC. As of 1999, 80 ALECs were serving Florida customers, 100 more had expressed their intention of serving Florida before the end of the year 2000, and ALECs had obtained some share of the business lines in many exchanges. While this does not mean that every area of Florida has every service, it is indicative of a spread of competition. Petitioner GTE is anchored in the Tampa Bay area. By June 30, 1999, the date expressed in the proposed rules, nine facilities-based competitors were in the same geographic area. One ALEC (MCI) was serving 10,000 lines. Competitors operated 20 switches and 83 percent of the buildings in GTE's franchise area were within 18,000 feet of a competitor's switch. However, in most cases, GTE's CSA or tariff term agreements had been successful against specific competing bids for the respective services. Market share data showed that by June 30, 1999, Petitioner GTE had executed 101 agreements allowing ALECs to provide service by inter-connecting their networks with GTE's networks, reselling GTE's services, and/or taking "unbundled" parts of GTE's network. While market share data is not conclusive, in the absence of any better economic analysis by the Commission or other evidence of existing ALEC presence or of a different prognosis for ALEC penetration, market share is at least one indicator of the state of competition when the contracts addressed by the proposed rules were entered into. The Commission has no data about how many customers currently opt-out of their ILEC contracts prior to natural expiration and pay the termination liability to which those ILEC agreements bind them in order to accept a competing offer from another carrier, but clearly, some do. This evidences current competition. Competing carriers can and do sell to ILEC customers at the natural expiration of their long-term agreements. This evidences current competition. The Commission has no data predicting how many more customers would opt-out if the proposed rules are validated. Therefore, the presumption that "if we publish a rule they will come" is speculative. Likewise the Commission's presumption that customers regard termination liability provisions in ILEC contracts as a barrier to their choices and a bar to competition was not proven. Some of the factors that went into that presumption were speculative because the Commission has not reviewed the termination liability provisions of Petitioners' contracts and has offered no evidence of formal complaints to the Commission by customers who want to opt-out of ILEC contracts. "Informal communication" with Commission staff by customers was undocumented and unquantified. The Commission did present the testimony of Mr. Larsen who explained that because he needs to keep the same business telephone number, he feels that it is not economically feasible for him to opt-out of his several overlapping ILEC contracts unless he can synchronize all his existing contract termination dates and that the proposed "fresh look" rules would permit him to do that. However, his testimony provided no valid predictor that even if the termination of all his existing ILEC contracts were enabled by the proposed rules he would, in fact, be able to find a competitor in his area whose contract(s) were more to his liking. The proposed rules, with their arbitrary date of June 30, 1999, would not allow Mr. Larsen to terminate, without liability, the one ILEC contract he entered into after that date. (See Finding of Fact No. 47). Based on his sincere but unfocused testimony, it remains speculation to presume that Mr. Larsen would be willing to incur contractual liability by early termination of his single non-qualifying ILEC contract just because the proposed rules would let him "opt-out" of the several qualifying ILEC contracts. It is indicative of the proposed rules' possible effect on future competition that Mr. Larsen speculated that if he could terminate all his qualifying ILEC contracts simultaneously under the proposed rules, he might be able to persuade a competitor, perhaps an ALEC, to pay his termination costs on his single non- qualifying ILEC contract if he renegotiated all his business away from his ILEC and to that competitor. The introduction of the proposed rules into the market place could create a "competitive edge" not anticipated by the Commission. Other carriers, including ALECs competing with ILECs, can and do enter into contracts with their customers which, like the contracts which would be affected by the proposed rules, are long-term contracts subject to termination liability, but the long-term contracts of carriers other than ILECs would not be affected by the proposed rules. The proposed rules pertain only to ILECs and their business customers. In effect, the proposed rules apply predominantly to ILECs' large business customers. Under the proposed rules, competitors which had originally bid against the ILECs for an affected contract at the time it was entered-into could get "a second bite at the apple" occasioned solely by the application of the proposed rules.
