01-000371BID Phoenix Mowing And Landscaping, Inc. vs. Department Of Transportation Status: Closed Recommended Order on Wednesday, April 25, 2001.

Summary: Petitioner showed the agency failed to follow bid proposal`s terms.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

PHOENIX MOWING AND )

LANDSCAPING, INC., )

)

Petitioner, )

)

vs. ) Case No. 01-0371BID

)

DEPARTMENT OF TRANSPORTATION, )

)

Respondent. )

___________________________________)

RECOMMENDED ORDER

Pursuant to notice, a final hearing was held in this case

in Tallahassee, Florida on March 16, 2001, before the Division

of Administrative Hearings by its duly-designated Administrative

Law Judge, Stephen F. Dean.

APPEARANCES

For Petitioner : Julius F. Parker, III, Esquire

Pennington, Moore, Wilkinson,

Bell & Dunbar, P.A.

215 South Monroe Street, Suite 200

Tallahassee , Florida 32301

For Respondent : Brian A. Crumbaker, Esquire

Dep artment of Transportation

Haydon Burns Building

605 Suwannee Street

Tallahassee, Florida 32399-0450

STATEMENT OF THE ISSUES

The issues in this case are whether the Department of

Transportation ("Department") erred by considering Willeby

Construction, Inc. (" Willeby ") a qualified bidder; whether the

requirement to submit a bid bond or certified funds check or

draft (hereafter "security on the bid") with the bid was a

material requirement; whether the Department erred in treating

Willeby’s failure to include security on the bid with its bid

proposal as a minor, and, thereby, an irregularity which could

be waived; and whether said decision of the Department was

contrary to the terms of the bid, contrary to law, or arbitrary

and capricious.

PRELIMINARY STATEMENT

Phoenix Lawn and Landscape Service, Inc. ("Phoenix" )

petitions for a formal administrative proceeding pursuant to

Section 120.57(3) Florida Statutes (2000), protesting the

Department’s rejection of its bid and its intent to award

Financial Project No. 40509417201/Contract No. E3A78 for the

mowing and litter removal of roadsides in Gadsden and Leon

Counties to another bidder. Phoenix alleges that, contrary to

the Department's determination, the winning bidder was

unqualified and did not present a valid bid because it did not

submit a bid bond or certified funds in the bid package.

Further, Phoenix alleges that the Department improperly

permitted the winning bidder to cure its defective bid after all

bids had been opened, thereby giving the winning bidder an

unfair advantage over all other bidders, and that this action by

the Department was clearly erroneous, contrary to competition,

arbitrary or capricious pursuant to Section 120.57(3)(f),

Florida Statutes (2000).

The Department forwa rded this case to the Division of

Administrative Hearings which noticed the case for hearing on

March 16, 2001. The case was heard as noticed.

The Petitioner called two witnesses: (1) Kelly Herman

Pullam, owner and president of Phoenix Lawn & Landscaping

Service, Inc., and (2) Richard Norris, contracts administrator,

Florida Department of Transportation. The Petitioner placed

five exhibits in evidence.

The Respondent called four witnesses: (1) Wilson Carraway,

vice-chairman, Farmers & Merchants Bank, in Thomasville Georgia;

(2) Ben "Billy" Willeby, owner, Willeby Construction;

(3) Richard Norris; and (4) Patty Vickers, assistant contracts

engineer, Florida Department of Transportation. Respondent

placed five exhibits in evidence.

Both parties su bmitted proposed findings which were read

and considered.

FINDINGS OF FACT

1. On November 14, 2000, the Department issued a bid

solicitation notice for Financial Project No.

40509417201/Contract No. E3A78, a contract for routine mowing of

grassed and vegetated roadside areas and litter removal from

within the Department’s highway right-of-way in Gadsden and Leon

Counties.

2. The invitation to bid stated:

In a letter dated November 17, 2000 from

Richard Norris of the Department District

Contracts Office to all prospective bidders,

the Department reiterated the bid bond

requirement stating "[i ]f your bid is over

$150,000, a Bid Bond of 5 percent of the bid

amount is required and must be attached to

your bid proposal. Failure to submit this

with your bid will result in your bid being

rejected ." (Emphasis is in original.)

3. The invitation to bid further stated:

BID OR PROPOSAL BOND (If bid is

over $150,000) :

1. Must be completely executed if bid is

over $150,000. This 5 percent bid bond is

required and must be included in your bid

package . If bid is less than $150,000 no

bid bond shall be necessary , however, the

successful bidder shall be required to

obtain a performance bond upon execution of

the contract.

4. The purpose of the requirement for se curity on the bid

is to compensate the Department for damages in the event the low

bidder fails to enter into the contract.

5. The Department received bid proposals from six firms in

response to its bid solicitation by the due date of December 7,

2000.

6. The lowest bidder for Contract No. E3A78 was Willeby.

Willeby submitted a business check drawn on Willeby’s business

account no. 02-140168-01 with Farmers & Merchants Bank. This

was an unsecured, personal check.

7. At the time the bids were opened, Willeby’s Account No.

02-140168-01 contained insufficient funds to cover the check

Willeby submitted as its bid bond in the amount of $11,996.52

for Contract No. E3A78.

8. Willeby failed to submit the required security on the

bid in the form of a cashier’s check, bank money order, bank

draft of any national or state bank, or surety bond, payable to

the State of Florida, Department of Transportation as required

by the solicitation.

9. The Petitioner, Phoenix, was the second lowest bidder.

Phoenix submitted a bid bond equal to 5 percent of its total bid

with its bid package. Phoenix fully complied with all the

requirements of the invitation to bid.

10. Bids for Contract No. E3A78 were opened on Thursday

December 7, 2000. At that time, the Department's personnel

discovered that Willeby had failed to submit security on bid as

required by the terms of the bid solicitation.

11. On December 15, 2000, eight days after the Department

discovered that Willeby’s bid submittal was deficient, Starsky

Harrell, the contract specialist with the District III office of

the Department, telephoned W.J. Willeby, the president of

Willeby Construction. Harrell informed Mr. Willeby that

Willeby’s bid was non-conforming, and gave Willeby the

opportunity to cure its non-responsive bid by submitting a check

for certified funds or a bid bond as required by the bid

solicitation.

12. Willeby, at this point, had the opportunity to cure

the defect or refuse to cure the defect, thereby, negating his

bid. This gave Willeby an advantage not enjoyed by the other

bidders. Willeby chose to cure its non-responsive bid, and

submitted a certified check as its security on the bid.

Willeby, thereafter, entered into the contract with the

Department on Monday, December 18, 2000 , eleven days after the

bids were opened.

13. The Department posted its intent to award Contract

No. E3A78 on December 21, 2000, indicating its intent to award

the contract to Willeby Construction.

14. Phoenix timely filed this formal protest in opposition

to the award of Contract No. E3A78 as contrary to Section

120.57(3)(f), Florida Statutes (2000).

15. Regarding the requirements for security on the bid

required in the solicitation for the bid and accompanying

materials, Richard Norris, the contracts administrator, made the

decision to emphasize the language by having it in bold-face

type and underlined. His purpose for underlining and placing in

bold-face type this language was to "put some accent on it, to

make it stand out."

16. A basic tenet of competitive procurement is to protect

the integrity of the bidding process and ensure open and fair

competition.

17. A responsive bid is one which meets all the

requirements of the proposal documents.

18. Mr. Willeby has entered bids on Department contracts

seventeen times in the past. Willeby is an experienced

participant in the bid process.

19. A bidder who has the option of taking a contract or

not taking a contract after the bidder knows what the other bids

are on a project has a competitive advantage over other bidders.

If the bidder has bid too close to the profit margin, the bidder

can refuse to cure the bid defect and avoid performance on the

unprofitable contract.

20. It is not only less expensive for a person to submit a

personal check for security on a bid, but a stop payment order

can be issued on a personal check.

21. The bid bond posted by the Petitioner cost $800.00.

This amount is not refundable. However, the proposal provides

alternatives to a bid bond to establish security on the bid;

therefore, paying the cost of the bond is not a competitive

disadvantage.

22. It is noted that a personal check is not among the

alternatives, and the bid proposal's provisions for bid security

specifically provide that checks or drafts for less than 5

percent of the bid amount will invalidate the bid. The only

checks or drafts permitted under the terms of the bid proposal

are those checks secured by the banking institution's funds and

not subject to stop payment orders of the person in whose behalf

the check is issued.

23. It is consistent with the stated terms of

invalidation, that, in addition to an insufficient amount, that

an instrument not meeting the stated terms of the provision

would also invalidate the bid. If being a dollar short on the

secured amount is disqualifying, being short the entire amount

in secured funds would be similarly disqualifying.

24. Evidence was received regarding whether Willeby was a

qualified bidder. This information related to the nature and

amount of the equipment which Willeby had, and its financial

ability to obtain additional equipment. Although Willeby did

not have some of the equipment necessary to handle this job and

its other contract obligations, he had ordered this equipment

and his bank indicated that it would loan him the money. It was

not developed whether the bank's willingness was dependent upon

the pendency of the challenged contract award, and it is

concluded that Willeby is a qualified bidder.

CONCLUSIONS OF LAW

25. The Division of Administrative Hearings has

jurisdiction over the subject matter and the parties to this

case, pursuant to Section 120.57, Florida Statutes (2000).

26. Subsection 120.57(3), Florida Statutes (2000), governs

the dispute at issue in the case. Subparagraph 120.57(3)(f),

Florida Statutes, provides the standards for determining a bid

dispute. It provides as follows:

(f ) In a competitive-procurement protest,

no submissions made after the bid or

proposal opening amending or supplementing

the bid or proposal shall be considered.

Unless otherwise provided by statute, the

burden of proof shall rest with the party

protesting the proposed agency action. In a

competitive-procurement protest, other than

a rejection of all bids, the administrative

law judge shall conduct a de novo proceeding

to determine whether the agency's proposed

action is contrary to the agency's governing

statutes, the agency's rules or policies, or

the bid or proposal specifications. The

standard of proof for such proceedings shall

be whether the proposed agency action was

clearly erroneous, contrary to competition,

arbitrary, or capricious. In any bid-

protest proceeding an intended agency action

to reject all bids, the standard of review

by an administrative law judge shall be

whether the agency's intended action is

illegal, arbitrary, dishonest, or

fraudulent.

27. The Petitioner has the burden of proof.

28. The Agency's proposal provides as follows:

Bid Bond Requirements

A proposal Guaranty of not less than five

percent of the total actual bid in the form

of either a certified check, cashier’s

check, trust company treasurer’s check, bank

draft of any national or state bank, or a

Surety Bid Bond made payable to the Florida

Department of transportation must accompany

each bid in excess of $150,000. A check or

draft in an amount less than five percent of

the actual bid will invalidate the bid. Bid

bonds shall conform to DOT Form 375-020-09

furnished with the proposal forms.

29. The provisions of the proposal are quite specific. By

the proposal's own terms the failure to provide security for the

bid by the submittal with the bid package of a bid bond or check

for 5 percent of the bid amount invalidates the bid.

30. In context, "check" refers to a cashier's check,

certified check, trust company treasurer's check, or bank draft

of any national or state bank. The tender of a personal check

is not a stated option. Additionally regarding this bid's

security provision, because non-compliance invalidates the bid,

it is a material provision.

31. As stated in the Findings, above, the failure to

present a check of the type stated was as much a failure to

present sufficient security, in fact more so, as the failure to

be a dollar under the 5 percent limit. In the latter case, the

security was only shy one dollar. In the case of the personal

check, the security was shy the entire 5 percent.

32. It is well settled law in Florida that a cashier's

check is the same as cash. See Warren Finance, Inc. v. Barnett

Bank, 552 So. 2d 194 (Fla. S. Ct. 1989) . A stop-payment order

may be issued on a personal check, and it is much less secure.

Id. In fact, substitution of a cashiers check for a personal

check has been determined to be consideration in a contract

case. See Langel v. Hastings, 537 So. 2d 1113 (Fla. 4th DCA

1989) . Where the terms of the contract or agreement specify

payment by cashier's check or certified check, tender of a

personal check maybe rejected. See Summa Investing Corp. v.

Resolution Trust Corp., 586 So. 2d 1278 (Fla. 3d DCA 1991) and

Hudgins v. Fla. Fed. Sav. and Loan Ass'n, 339 So. 2d 990, 991

(Fla. 5th DCA 1981) .

33. Therefore, under the terms of the proposal, the

Willeby bid should have been invalidated.

34. Further, as stated in the Findings, above, there is a

notable advantage to a bidder who is permitted to "cure" a

material defect. The bidder gets to opt to cure and perform, or

not cure without penalty because technically the bid was never

conforming and the bidder's security on the bid was never in

jeopardy. The bidder gets a double benefit at no risk.

35. Because the Department permitted Willeby to cure the

material defect, the Department's action was clearly erroneous,

contrary to competition (it gave unfair advantage to Willeby),

and was arbitrary and capricious because it violated the stated

standards of the bid proposal.

36. Where the Department has elected not to reject all

bids, but instead has chosen to award the contract to one bidder

to the detriment of the Petitioner, the role of a Hearing

Officer (now Administrative Law Judge) is to sit on behalf of,

and in the place of, the agency head and should examine the bid

evaluation process de novo . See Capeletti Bros. v. Department

of General Services , 423 So. 2d 1359 (Fla. 1st DCA 1983). This

standard differs from the standard of review in place where an

agency elects to reject all bids, as was the case in Dept. of

Transportation v. Groves-Watkins Constructors , 530 So. 2d 912

(Fla. 1988), where the court stated that hearing officers are to

inquire if the purpose of competitive bidding has been subverted

and to ascertain whether the agency acted fraudulently,

arbitrarily, illegally, or dishonestly.

37. Although the Department has broad discretion to waive

minor or technical irregularities encountered in the course of

evaluating competitive bids for public procurement of services

and materials, see Liberty County v. Baxter’s Asphalt , 421 So.

2d 505, 507 (Fla. 1982), the failure of a bidder to submit

enforceable security on a bid is not a minor or technical

irregularity that the Department may waive. The Department’s

actions were contrary to the agency’s governing statutes, the

agency’s rules or policies and the bid or proposal

specifications.

38. The standard in Florida to determine what is a

material or substantial irregularity in a bid proposal on the

one hand, or a minor or technical irregularity on the other, was

articulated in Robinson Electrical Co, Inc. v. Dade County , 417

So. 2d 1032, 1034 (Fla. 3d DCA 1982). The Robinson test asks:

(1) whether the effect of a waiver would be to deprive the

entity requesting bids of its assurance that the contract will

be entered into, performed and guaranteed according to its

specified requirements; and (2) whether the waiver is of the

nature that, if granted, would adversely affect competitive

bidding by placing a bidder in a position of advantage over

other bidders or by otherwise undermining the necessary common

standard of competition. Id. A variance is material if it

gives the bidder a substantial competitive advantage over the

other bidders, and thereby restricts or stifles competition.

See Id.

39. Although the Florida courts have held that a certified

check submitted instead of a bid bond does not constitute a

material variance, see Robinson Electrical , 417 So. 2d at 1034,

the Florida courts also recognize a significant difference

between a certified check and a personal check. Because a stop

payment order may be issued on a personal check, it is not the

same as cash, which the Florida courts recognize a certified

check to be.

40. The question of whether a public agency may waive

strict compliance with bid specifications that require a bid

bond or certified funds as a bid guaranty, and accept an

uncertified business check or personal check is one which has

not been decided by any Florida court.

41. Decisions from appellate courts in other states

support the conclusion that failure to submit a binding bid

guaranty is not a minor irregularity, but a material, non-

waivable defect. In Gaeta v. Ridley Sch. Dist. , 757 A.2d 1011

(Pa. Comm. Ct. 2000), the bid specification stated that bid

bonds must come from a surety with an "A-" rating or better.

The low bidder, IBE Construction, submitted a bid from a "B"

rated surety. After the bids were opened, IBE was told by the

school district of the deficiency in its bid, and was allowed to

submit a new bond from an "A" rated company which was then

accepted by the school board. The Commonwealth Court held that:

(1) the trial court erred in determining that IBE’s bid proposal

was responsive and (2) the trial court erred by holding that the

school board was allowed to enable IBE to cure its defective bid

after bids were opened. See Id. at 1014. In so holding, the

court stated that where a competitive advantage is gained by a

non-responsive bidder, the defect is material. The competitive

advantage gained there, the court noted, was that a bid bond was

easier to obtain from a "B" rated surety than an "A" rated

surety and some bidder may have been discouraged from bidding at

all because it could not obtain the required grade of bid bond.

The court concluded by stating that "[t ]he preservation of the

integrity of the competitive bidding process far outweighs the

potential cost differential between the lowest bid and the

lowest responsive bid." Id. at 1016.

42. In Bodine Electric of Champaign v. City of Champaign ,

711 N.E.2d 471 (III. App. 4th 1999), the 4th District Court of

Appeal of Illinois considered the question of whether submission

of a bid bond covering 5 percent of the base bid was a material

variance where a 10 percent bid bond was required by the bid

specification. The Petitioner, Bodine Electric, originally

submitted the 5 percent bid bond on a bid that was $78,000 less

than the next lowest bidder. Five days after the bids were

opened, Bodine was allowed to correct the problem and submitted

a 10 percent bond to comply with the bid specification.

43. In Bodine , the bid review authority that received the

corrected bid bond expressed three concerns about accepting the

amended bond after the opening of bids: (1) future bidders

would not have any reason to submit the required 10 percent bid

bond if lower amounts were accepted; (2) contractors would take

more risks with their bids by submitting smaller bid bonds or no

bond at all, if amendment after opening of bids were allowed;

and (3) future bid bonds and requirements would be suspect in

that any amount could be submitted and accepting lower amounts

might undermine the city’s ability to require a 10 percent bid

bond. See Id. at 473.

44. As noted by the court in Bodine , the test in Illinois

as to the materiality of a variance is virtually identical to

the standard in Florida, that is "whether it gives a bidder a

substantial advantage or benefit not enjoyed by other bidders."

See Id. at 475 , citing Leo Michuda & Son Co. v. Metro. Sanitary

Dist. of Greater Chicago , 422 N.E.2d 1078 (III. App. 3d 1981).

Also in Illinois, as in Florida, a bid that contains a material

variance is an unresponsive bid and may not be corrected after

bids have been opened. See Id. The court ultimately reasoned

with respect to the variance that Bodine did receive a

substantial advantage because it stood to lose significantly

less money if it walked away from the deal compared with other

bidders and "[j ]ust because Bodine did not actually realize

these advantages by breaching its offer does not mean that

Bodine could not exercise these advantages if it desired."

Id. at 477.

45. This is a clear statement of what is implied in

Florida decisions, i.e ., that it is the option to walk without

penalty that matters, not the actual act of walking away from

the deal. Because Willeby’s bid was not responsive, he enjoyed

the benefit of being able to take a second look and decide

whether or not to accept the contract. That he chose to stand

by his bid does not cure the fact that he gained a substantial

competitive advantage over all the other bidders for this

contract, including the Petitioner.

46. The final analogous out-of-state case is DeSapio

Constr., Inc. v. Township of Clinton , 647 A.2d 878 (N.J. Super.

Ct. 1994). In DeSapio , bids were taken for alterations to the

town hall building. The bid specification specifically required

a bid bond, certified check, or cashiers check for 10 percent of

the bid amount and a "proposition of surety" assuring the

Township that if the contract were awarded, the surety would

provide a performance bond and maintenance bond. The bid

proposal submitted by DeSapio contained a letter from its surety

stating that "they did not anticipate any difficulty in

providing bonds" for the project. Id. The court applied a two

prong test identical to the test set forth in Robinson

Electrical Co, Inc. , 417 So. 2d at 1034, supra. See Id. at 880.

The court found the conditional language in the bond letter from

DeSapio to be a material defect and further found that the

municipality had "no assurance" the bond would be provided and

that this gave the bidder a competitive advantage in that

" DeSapio was free to bid and, even if awarded the contract,

could unilaterally 'cancel' the award by failing to obtain the

bid bond." Id. at 880-81. The court reasoned that while the

taxpayers would benefit by getting the lowest price for services

if DeSapio were allowed to amend his bid package, the greater

public good is in ensuring the integrity of the bidding process

by enforcing strict standards so that there is "no opportunity

for unfettered discretion or favoritism in the public bidding

process." Id. at 881.

47. From the foregoing authorities, it is clear that

Willeby’s tender of a personal check with the invitation to bid

was a material defect which could not be waived by the

Department. By allowing Willeby to cure this material defect in

its bid, the Department subverted the competitive bidding

process. Its actions were contrary to the bid or proposal

specifications, and therefore, contrary to competition.

Section 120.57(3)(f), Florida Statutes (2000).

RECOMMENDATION

Based upon the findings of fact and conclusions of law, it

is

RECOMMENDED:

That the bid of Willeby Construction on Contract No. E3A78

be rejected, and the contract be awarded to the Petitioner.

DONE AND ENTERED this 25th day of April, 2001, in

Tallahassee, Leon County, Florida.

_________________________ __________

STEPHEN F. DEAN

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) 921-68 47

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 25th day of April, 2001.

COPIES FURNISHED:

Julius F. Parker, III, Esquire

Pennington, Moore, Wilkinson,

Bell & Dunbar, P.A.

215 South Monroe Street, Suite 200

Tallahassee, Florida 32301

Brian A. Crumbaker, Esquire

Department of Transportation

Haydon Burns Building

605 Suwannee Street

Tallahassee, Florida 32399-0450

James C. Myers, Clerk

Department of Transportation

Haydon Burns Building, Mail Station 58

605 Suwannee Street

Tallahassee, Florida 32399-0450

Pamela Leslie, General Counsel

Department of Transportation

Haydon Burns Building, Mail Station 58

605 Suwannee Street

Tallahassee, Florida 32399-0450

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

10 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.