88-001963RX Ajax Paving Industries, Inc. (13050-3525) vs. Department Of Transportation, Commercial Motor Vehicle Review Board Status: Closed DOAH Final Order on Monday, June 27, 1988.

Summary: DOT rule for shortlisting design-build teams and limiting proposals valid; within statutory authority and statute implemented; not arbitrary or capricious.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AJAX PAVING INDUSTRIES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 88- 1963RX

)

DEPARTMENT OF TRANSPORTATION, )

BUREAU OF CONTRACT ADMINISTRATION, )

)

Respondent. )

___________________________________)

FINAL ORDER

Before J. Lawrence Johnston, Hearing Officer, Division of Administrative

Hearings.

For Respondent: Reynold Meyer, Esquire, of Tallahassee

For Petitioner: James W. Anderson, Esquire, of Tallahassee

A hearing was held in Tallahassee on May 6, 1988, on this challenge to the

validity of the entire Chapter 14-91, Florida Administrative Code, but

particularly with respect to the " shortlisting" of design/build teams (Rules 14-

91.005 and 14-91.006) and the limitation on the number of teams allowed to be

" shortlisted." (Rule 14-91.006(4)).

FINDINGS OF FACT 1/

1. To implement Section 337.11(5), Florida Statutes (1987), the

Respondent, the Department of Transportation (the DOT), promulgated Chapter 14-

91, Florida Administrative Code. Section 337.11(5) authorizes the DOT the

accomplish certain construction projects by requesting proposals for both the

design and construction from design-build teams consisting of a design

consultant, a construction engineering inspection ( CEI) consultant and a

construction contractor. Section 337.11(5) outlines a procedure that would

require prequalification of design-build teams and at least three proposals in

order for the DOT to proceed with the selection process. Chapter 14-91 provides

for a procedure whereby interested design-build teams first submit letters of

interest and the DOT selects ("shortlists") no less than three nor more than six

teams as the most highly qualified. Only teams " shortlisted" are allowed to

submit the proposals from which the DOT chooses.

2. The DOT understood that the Legislature intended design-build projects

to proceed in a manner similar to how the DOT has let contracts for the design

of roads and bridges since 1973 in accordance with Chapter 14-75, Florida

Administrative Code. The design-build concept combines the design and

construction phases of a project, otherwise separate, into a single contract for

the performance of both design work and construction by a design-build team.

Since about 1973, entities seeking to contract with the DOT to do design work

have gone through a selection process, by rule, which provided for submission of

letters of interest and " shortlisting" (selection) of three to six most highly

qualified applicants.

3. A procedure that includes shortlisting, whether for design contracts or

for design-build contracts, has several advantages over a straightforward

request for proposals. In the types of requests for proposals often made by the

DOT, the overall quality of the proposal and the qualifications and capabilities

of the contractor ultimately selected often are of greater importance than the

price of the proposal. " Shortlisting to eliminate lesser qualified offerors

saves offerors unlikely to receive the contract wasted time and money preparing

a proposal and saves the DOT unnecessary time and money reviewing their

proposals. Capping the number of teams shortlisted insures a limit to the

amount of time and money the DOT must spend reviewing proposals for any one

project; meanwhile, in order for the DOT to proceed, the statute requires at

least three teams to submit proposals, enough to insure the DOT of enough

competition among highly qualified offerors and therefore a quality proposal.

4. The Petitioner, Ajax Paving Industries, Inc. (Ajax), is a paving

contractor prequalified to do paving work as a contractor or subcontractor for

the DOT. Ajax has formed a design-build team which has submitted a letter of

interest to contract with the DOT to do a design-build project in Charlotte

County. Although that particular project pre-dated, and is not governed by,

Chapter 14-91, Florida Administrative Code, future design-build projects will be

governed by these rules. Ajax is substantially affected by the rules.

CONCLUSIONS OF LAW

A. The Nature of Rule Challenge Proceedings.

5. Section 120.52(8), Florida Statutes (1987), provides in pertinent part:

"Invalid exercise of delegated legislative

authority" means action which goes beyond the

powers, functions, and duties delegated by

the Legislature. A proposed or existing rule

is an invalid exercise of delegated legisla-

tive authority if any one or more of the

following apply:

(b) The agency has exceeded its grant of

rulemaking authority, citation to which is

required by s. 120.54(7);

(c) The rule enlarges, modifies, or

contravenes the specific provisions of law

implemented, citation to which is required

by s. 120.54(7);

(e) The rule is arbitrary or capricious.

6. A capricious action is one which is taken without thought or reason or

which is taken irrationally. An arbitrary decision is one that is not supported

by facts or logic or that is despotic. Agrico Chemical Company v. State,

Department of Environmental Regulation, 365 So.2d 759 (Fla. 1st DCA 1979) cert.

denied, 376 So.2d 74 (Fla. 1979).

7. Rules will be sustained as long as they are reasonably related to the

purpose of the enabling legislation and are not arbitrary or capricious.

Florida Beverage Corporation v. Wynne, 306 So.2d 200, 202 (Fla. 1st DCA 1975);

Agrico Chemical Company v. State, Department of Environmental Regulation, supra;

Jax's Liquors, Inc. v. Division of Alcoholic Beverages and Tobacco, et al., 388

So.2d 1306 (Fla. 1st DCA 1980); Grove Isle, Ltd. v. State, Department of

Environmental Regulation, 454 So.2d 571 (Fla. 1st DCA 1984). As stated in

Department of Professional Regulation, Board of Medical Examiners v. Durrani,

455 So.2d 515, 517 (Fla. 1st DCA 1984):

The well recognized general rule is that

agencies are to be accorded wide discretion

in the exercise of their lawful rulemaking,

clearly conferred or fairly implied and

consistent with the agencies' general

statutory duties. Florida Commission on

Human Relations v. Human Development

Center, 413 So.2d 1251 (Fla. 1st DCA 1982).

An agency's construction of the statute it

administers is entitled to great weight and

is not be overturned unless clearly

erroneous. Pan American World Airways,

Inc. v. Florida Public Service Commission,

427 So.2d 716 (Fla. 1983); Barker v. Board

of Medical Examiners, 428 So.2d 720 (Fla.

1st DCA 1983). Where, as here, the

agency's interpretation of a statute has

been promulgated in rulemaking proceedings,

the validity of such rule must be upheld if

it is reasonably related to the purposes of

the legislation interpreted and it is not

arbitrary and capricious. The burden is

upon petitioner in a rule challenge to show

by a preponderance of the evidence that the

rule or its requirements are arbitrary and

capricious. Agrico Chemical Co. v. State,

Department of Environmental Regulation, 365

So.2d 759 (Fla. 1st DCA 1978); Florida

Beverage Corp. v. Wynne, 306 So.2d 200

(Fla. 1st DCA 1975). Moreover, the

agency's interpretation of a statute need

not be the sole possible interpretation or

even the most desirable one; it need only

be within the range of possible interpretations

Department of Health and Rehabilitative

Services v. Wright, 439 So.2d 937 (Fla. 1st

DCA 1983) ( Ervin, C. J., dissenting); Depart-

ment of Administration v. Nelson, 424 So.2d

852 (Fla. 1st DCA 1982); Department of Health

and Rehabilitative Services v. Framat

Realty, Inc., 407 So.2d 238 (Fla. 1st DCA 1981)

(Emphasis in original.) Whether an agency's interpretation of a statute is

within the range of possible interpretations--so that it neither illegally

enlarges, modifies or contravenes the statute nor is arbitrary and capricious--

is impacted by how closely the statute circumscribes the agency's discretion in

implementing the statute. As statutes confer broader discretion by broadly

outlining how the agency must act, the range of possible interpretations

available to the agency correspondingly broadens. This is particularly true of

procedures adopted by an agency to implement a program designed to achieve a

legislative objective.

B. The Enabling Statute.

8. Section 337.11(5), Florida Statutes (1987), enacted by Section 87-162,

Laws of Florida (1987), effective June 30, 1987, provides:

(5)(a) If the head of the department

determines that it is in the best interest

of the public to combine the design and

construction of a road, structure, or

building and appurtenant facilities or

equipment into a single contract, the

department may secure such work through a

request for proposals. Factors including,

but not limited to, time savings, cost

reduction, experience to be gained, or use

of state of the art methods shall be

considered when determining the best

interest of the public.

(b) The department shall adopt by rule

procedure for administering combined design

and construction contracts. Such

procedures shall include, but not be

limited to:

1. Prequalification of applicants.

2. Announcement of occasions when a

design and construction contract is

desired.

3. Criteria and personnel to be used for

evaluation proposals and awarding

contracts.

(c) If at least three responsible

proposals are submitted pursuant to a

request for proposals, the department may

proceed to evaluate the proposals as

provided herein. In evaluating proposals,

the department shall consider the cost,

safety, and long-term durability of the

project; the feasibility of implementing

the project as proposed; the ability of the

design and construction teams to complete

the work in a timely and satisfactory

manner; and such other factors as the

department deems appropriate. In

evaluating the capabilities of the design

and construction teams to perform in a

timely and satisfactory manner, the

department shall also consider such factors

as the abilities of the professional

personnel, past performance, capacity to

meet time and budget requirements,

location, recent, current, and projected

workload of the firms, and the volume of

work previously awarded to the firms by the

department.

(d) The department may conduct a

combined design and construction contract

demonstration program not to exceed a total

contract amount of $50 million. Pursuant

to this program, the department may award,

to the qualified firm or joint venture with

the lowest cost and best technical

proposal, combined design and construction

contracts for projects in the department's

current 5-year transportation plan in each

of the following project categories:

1. Resurfacing;

2. Bridge replacement, or new bridge

construction;

3. Multilane new construction or

reconstruction; and

4. Fixed capital outlay and parking

garages.

Annually, the department shall submit to

the transportation committees of the Senate

and the House of Representatives a report

outlining the results obtained from

completed combined design and construction

contracts awarded to that time.

9. Before enactment of Section 337.11(5), Florida Statutes (1987), the DOT

accomplished all of its construction projects in a manner fundamentally

different than the manner now authorized by Section 337.11(5). If the project

were to be designed by outside engineering or architectural consultants, the

design work first was contracted under Section 287.055, Florida Statutes (1987),

the "Consultants' Competitive Negotiation Act."

10. The Consultants' Competitive Negotiation Act purports to govern all

state agencies desiring to contract for certain categories of professional

services. Like the rest of Chapter 287, Florida Statutes, the Legislative

intent is set out in Section 287.001, Florida Statutes (1987):

The Legislature recognizes that fair and

open competition is a basic tenet of public

procurement; that such competition reduces

the appearance and opportunity for

favoritism and inspires public confidence

that contracts are awarded equitably and

economically; and that documentation of the

acts taken and effective monitoring

mechanisms are important means of curbing

any improprieties and establishing public

confidence in the process by which

contractual services are procured. It is

essential to the effective and ethical

procurement of contractual services that

there be a system of uniform procedures to

be utilized by state agencies in managing

and procuring contractual services; that

detailed justification of agency decisions

in the procurement of contractual services

be maintained; and that adherence by the

agency and the consultant to specific

ethical considerations be required.

11. Under Section 287.055(3), an agency first must publicly announce the

need for the design work and solicit "statements of qualifications and

performance data." Then, under Section 287.055(4), the agency evaluates current

statements of qualifications and performance data on file, together with those

submitted in direct response to the public announcement, and select no less than

three consultants considered to be the "most highly qualified to perform the

required services," based on several criteria listed in the statute. Finally,

under Section 287.055(5), the agency negotiates with the most qualified

consultant to arrive at a satisfactory contract. If negotiations with the most

highly qualified consultant on the list are unsuccessful, the agency then

negotiates with the next most highly qualified consultant on the list, and so

on, until it negotiates a satisfactory contract with one of the consultants as

high on the list as possible. If none of the consultants on the list will agree

to a satisfactory contract, Section 287.055(5) authorizes the agency to add more

consultants to the list, in order of their qualifications, and continue to

negotiate with the highest qualified consultant remaining on the list until a

satisfactory contract is reached.

12. After a DOT project has been designed by the more usual methods, the

DOT would advertise for bids to construct the project that has been designed

under Section 337.11(2) and, under Section 337.11(3), either award the

construction contract to the lowest responsible bidder or reject all bids.

Those provisions of Section 337.11 must be read together with Section

287.057(2), Florida Statutes (1987), which provides uniform procedures for use

of all state agencies soliciting bids for contractual services, as defined by

Section 287.012(4), Florida Statutes (1987). See Miami Dolphins, Ltd. v.

Metropolitan Dade County, 394 So.2d 981 (Fla. 1981); Agrico Chemical, supra.

13. As can be seen under the new design-build program authorized and

established by Section 337.11(5), Florida Statutes (1987), the DOT would combine

the design and construction (and construction engineering inspection) components

into one contract. The statute broadly outlines a general procedure for the DOT

to follow in obtaining design-build projects.

C. The Challenged Rule.

14. Although the rule challenge in this case purports to challenge all of

Chapter 14-91, Florida Administrative Code, it actually is directed to two

specific rules in the chapter: Rule 14-91.005, and Rule 14-91.006.

15. Rule 14-91.005, Florida Administrative Code, governs the "Public

Announcement Procedures" and, specifically under challenge here, solicits

letters of interest, not proposals, from design-build teams.

16. Rule 14-91.006, Florida Administrative Code, confirms that the DOT's

rule procedure contemplates an initial review of the letters of interest and

selection (" shortlisting") of not less than three nor more than six design-build

teams to be eligible to submit proposals. Rule 14-91.006, Florida

Administrative Code, provides in pertinent part:

(1) Firms desiring to submit proposals on the

design/build project must submit a letter of

interest setting forth the qualifications of

the entities involved in the firm and provid-

ing any other information required by the

announcement of the project.

(2) There shall be a Certification and

Technical Review Committee comprised of the

following: Director of Construction;

Director of Preconstruction and Design;

Directors of Operations and Production

representing the District in which the

project is located; and other members as

agreed upon by the previously listed

members. For Turnpike projects, the

Turnpike Engineer will serve instead of the

District Directors.

(3) The Certification and Technical

Review Committee shall determine the

relative ability of each firm to perform

the services required for each project.

Determination of ability shall be based

upon staff training and experience, firm

experience, location, past experience with

the Department, financial capacity, past

performance, and current and projected work

load.

(4) The Certification and Technical

Review Committee shall select not less than

three nor more than six firms deemed to be

most highly qualified to perform the

required services, after considering the

factors in 14-91.006(3) above. Each of the

firms will be eligible for consideration in

accordance with rule 14-91.007. The

Committee will report its selection of

finalists to the Deputy Assistant Secretary

for Technical Policy and Engineering

Services and the Deputy Assistant Secretary

representing the District in which the

project is located for their review and

approval. For Turnpike projects the Deputy

Assistant Secretary of Facilities and

Systems will represent the District Office.

D. Validity Of The Shortlisting Procedure.

17. Section 337.11(5), Florida Statutes (1987), does not by its express

terms provide for, or direct the DOT to provide for, a "shortlist" procedure.

18. Just as Sections 337.11(2) and (3), Florida Statutes, must be read

together with Section 287.057(2), Florida Statutes, Section 337.11(5), Florida

Statutes (1987), must be read together with Section 287.057(3), Florida

Statutes, which authorizes, and provides general procedures for, procuring

contractual services by sealed competitive proposals when a state agency

determines that use of competitive sealed bidding is not practicable. Section

287.057(3), Florida Statutes (1987), does not provide for, or direct agencies to

provide for, a " shortlisting" procedure.

19. Subparagraph (a) of Section 337.11(5), Florida Statutes, authorizes

the DOT to secure design-build work "through a request for proposals."

Subparagraph (b) authorizes the DOT to promulgate rule procedures to "include,

but not be limited to: 1. Prequalification of applicants. . . ." From this

authority, the DOT's Rules 14-91.005 and 14-91.006 provide for the "shortlist"

procedure.

20. Rules 14-091.005 and 14-091.006, insofar as they provide for

" shortlisting," do not exceed the DOT's rulemaking authority. Section

120.52(8)(b). Whether it enlarges, modifies or contravenes the specific

provisions of the law implemented, in violation of Section 120.52(8)(c), or is

arbitrary or capricious, in violation of Section 120.52(8)(e), Florida Statutes

(1987), turns on whether the DOT's interpretation of the legislative intent as

contemplating " shortlisting" is within the range of possible interpretations of

the statute. See Department of Professional Regulation v. Durrani, supra.

21. Although neither Section 337.11(5) nor Section 287.057(3), by their

express terms, provide for, or direct the DOT to provide for, a " shortlisting"

procedure, neither does either statute prohibit the use of " shortlisting" as

part of the procedures implementing the design-build program. The statute

merely broadly outlines the procedures the DOT must follow to implement the

program, conferring broad discretion for promulgation of specific procedures.

In addition, Section 337.11(5)(b) specifically authorizes procedures for

" prequalification of applicants." It is not outside the range of possible

interpretations to conclude that the Legislature was authorizing the DOT to

" prequalify applicants" through " shortlisting," either instead of or, as Chapter

14-91 does, in addition to the procedures already in place for prequalification

of contractors to do work under Section 337.11(2) and (3) and of design

consultants to do work under Section 287.055, Florida Statutes.

22. In addition, since Section 337.11(5) combines procurement of design

services and procurement of construction contracting services in one request for

proposals, it is reasonable for the DOT to look to, and attempt to harmonize it

with, Section 287.055, as well as Section 287.057(3). Arguably, design-build is

more akin to the procedure involved in the selection of design consultants and

other professional engineers. Rule 14-75.004(3)(b)2, Florida Administrative

Code, implements Section 287.055 and provides that, with respect to any project

for which the DOT can clearly define the scope of the work required, "the

Department shall select no less than three firms nor more than six firms deemed

to be the most highly qualified and capable of performing the required services

after considering such factors as the technical proposal when requested . . .

As found, this consultant selection process has been in effect since 1973.

23. Finally, although, with respect to the construction component of the

design-build request for proposals, Section 337.11(5) must be read together with

Section 287.057(3), Florida Statutes, it must be remembered that DOT

construction projects proceed under Section 337.11(2) and (3) invitations to

bid, not under Section 287.057(3) requests for proposals. It is reasonable for

the DOT to interpret the legislative intent behind Section 337.11(5) as not to

strictly tie the design-build request for proposal to the Section 287.057(3)

request for proposals but rather to envision closer ties to the procedure for

procuring consultant services under Section 287.055, Florida Statutes.

E. Validity Of The Limitation On Proposals.

24. For many of the same reasons just given, it is reasonable for the DOT

to interpret Section 337.11(5), Florida Statutes (1987), to authorize it to

limit the number of design-build teams eligible to submit proposals to six

although, by its express terms, it only sets a minimum of three proposals. As

previously mentioned, Section 287.055, Florida Statutes (1987), also lacks

express authority to limit the number of consultants to be placed on the list of

those eligible to negotiate with the agency. While recognizing that the

Consultants' Competitive Negotiation Act clearly is different from the request

for proposal process established by Section 337.11(5), Florida Statutes, it is

significant that, as previously mentioned, Rule 14-75.004(3)(b)2., which has

been in effect since 1973, has limited to six the number of consultants placed

on the DOT "shortlist" for further negotiation for contracts whose scope the DOT

cannot clearly define. With presumptive knowledge how the DOT has been

interpreting and implementing Section 287.055, the Legislature has not acted to

curb the DOT. This must be taken as strong evidence that the DOT's

interpretation of Section 287.055 is consistent with the legislative intent.

See State v. Massachusetts Co., 95 So.2d 902 (Fla. 1957), cert. den., 355 U.S.

881 (1957); State v. Stein, 198 So. 82 (Fla. 1940); Walker v. Department of

Transportation, 366 So.2d 96 (Fla. 1st DCA 1979); Austin v. Austin, 350 So.2d

102 (Fla. 1st DCA 1977), cert. den., 357 So.2d 184 (Fla. 1978).

DISPOSITION

Based on the foregoing Findings Of Fact and Conclusions Of Law, Ajax'

petition challenging the validity of Chapter 14-91, Florida Administrative Code,

is dismissed.

DONE AND ORDERED this 27th day of June, 1988, in Tallahassee, Florida.

___________________________________

J. LAWRENCE JOHNSTON

Hearing Officr

Division of Administrative Hearings

The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 27 day of June 1988.

ENDNOTE

1/ Explicit rulings on the Petitioner's proposed findings of fact (the DOT not

having submitted any) may be found in the attached Appendix To Final Order, Case

No. 88- 1963RX.

APPENDIX TO RECOMMENDED ORDER,

CASE NO. 88- 1963RX

To comply with Section 120.59(2), Florida Statutes (1987), the following

explicit rulings are made on the Petitioner's proposed findings of fact (the

Respondent not having filed any):

1. Accepted and incorporated.

2. Accepted but subordinate and unnecessary and, because the facts of the

case pre-date the rule under challenge in this case, perhaps irrelevant.

3-4. Accepted and incorporated.

5. Rejected as being a conclusion of law.

6. Rejected as contrary to facts found. It is one reason, not the only

reason.

7. Rejected as not proven that shortlisting causes the DOT to spend more

time and money, net, than not shortlisting. Accepted that in one case it did,

but unnecessary.

8. Accepted but unnecessary.

COPIES FURNISHED:

Reynold Meyer, Esquire

204-B South Monroe Street

Tallahassee, Florida 32301

James W. Anderson, Esquire

Department of Transportation

Haydon Burns Building

605 Suwannee Street, MS-58

Tallahassee, Florida 32399-0458

Kaye N. Henderson, Secretary

Department of Transportation

Haydon Burns Building

605 Suwannee Street, MS-58

Tallahassee, Florida 32399-0458

Thomas H. Batemen, III, Esquire

General Counsel

Department of Transportation

Haydon Burns Building

605 Suwannee Street, MS-58

Tallahassee, Florida 32399-0458

Liz Cloud, Chief

Bureau of Administrative Code

1802 The Capitol

Tallahassee, Florida 32399-0250

Carroll Webb, Executive Director

Administrative Procedures Committee

120 Holland Building

Tallahassee, Florida 32399-1300

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this recommended

order. All agencies allow each party at least 10 days in which to submit

written exceptions. Some agencies allow a larger period within which to submit

written exceptions. You should contact the agency that will issue the final

order in this case concerning agency rules on the deadline for filing exceptions

to this recommended order. Any exceptions to this recommended order should be

filed with the agency that will issue the final order in this case.