01-000947BID Universal Precision Industries, Inc. vs. Tampa Bay Water, A Regional Water Supply Authority Status: Closed Recommended Order on Friday, May 4, 2001.

Summary: Failure to supply certain documents with bid proposed wad minor irregularity that could be waived by agency.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

UNIVERSAL PRECISION )

INDUSTRIES, INC., )

)

Petitioner, )

)

vs. ) Case No. 01- 0947BID

)

TAMPA BAY WATER, )

)

Respondent, )

)

and )

)

COMMERCE CONTROLS, INC., and )

TAMPA ARMATURE WORKS, INC., )

)

Intervenors. )

____________________________ )

RECOMMENDED ORDER

This matter was heard before the Division of

Administrative Hearings by its assigned Administrative Law

Judge, Donald R. Alexander, on April 3, 2001, in Tampa,

Florida.

APPEARANCES

For Petitioner : Dominick J. Graziano, Esquire

Bavol , Bush & Sisco , P.A.

100 South Ashley Drive, Suite 2100

Tampa, Florida 33602-5311

For Respondent : Richard A. Harrison, Esquire

Allen, Dell, Frank & Trinkle , P.A.

Post Office Box 2111

Tampa, Florida 33601-2111

Barrie S. Buenaventura, Esquire

Tampa Bay Water

2535 Landmark Drive, Suite 211

Clearwater, Florida 33761-3930

For Intervenor : Stephen D. Marlowe, Esquire

( CCI) Marlowe & McNabb , P.A.

324 South Hyde Park Avenue, Suite 210

Tampa, Florida 33606-4127

For Intervenor : Michael M. MacInnes, Treasurer

(Armature) E. Mark Tempest, Manager

Tampa Armature Works, Inc.

440 South 78th Street

Tampa, Florida 33619

STATEMENT OF THE ISSUE

The issue is whether Tampa Bay Water's award of a

contract to Commerce Controls, Inc. to furnish control panel

fabrications for a regional water treatment plant under

Contract No. 2001-22 was contrary to competition, arbitrary,

or capricious, as alleged by Petitioner.

PRELIMINARY STATEMENT

This matter began on February 5, 2001, when Respondent,

Tampa Bay Water, advised all bidders, including Petitioner,

Universal Precision Industries, Inc., the third lowest

responsive bidder, that it intended to award Contract No.

2001-22 to Intervenor, Commerce Controls, Inc., to provide

certain control panel fabrications. By a written protest

filed on February 13, 2001, Petitioner alleged that the award

of the contract was clearly erroneous, contrary to

competition, arbitrary, and capricious because the apparent

successful bidder had failed to comply with the bid

specifications in three material respects.

On February 21, 2001, Petitioner requested a hearing

under Sections 120.569 and 120.57(3), Florida Statutes (2000),

to contest the proposed action. The matter was referred by

Respondent to the Division of Administrative Hearings on

March 7, 2001, with a request that an Administrative Law Judge

be assigned to conduct a hearing. By Notice of Hearing dated

March 9, 2001, a final hearing was scheduled on April 3, 2001,

in Tampa, Florida. On March 19, 2001, Intervenor, Commerce

Controls, Inc., was authorized to intervene in this

proceeding. On March 30, 2001, the case was transferred from

Administrative Law Judge J. Lawrence Johnston, Jr. to the

undersigned. Intervenor, Tampa Armature Works, Inc., the

second lowest bidder, was authorized to intervene at the final

hearing subject to the issues already raised by Petitioner.

At the final hearing, Petitioner presented the testimony

of John A. Sessa, its chief financial officer; Joseph Kehoe,

instrumentation and control supervisor for Tampa Bay Water;

and Sean Gucken, an employee of Commerce Controls, Inc. The

parties also offered Joint Exhibits 1-19, which were received

in evidence. Exhibits 18 and 19 are the depositions of

Karen R. Lawson, an employee of Commerce Controls, Inc., and

James L. Hall, a consultant with Parsons Engineering Science,

who assisted in the preparation of the Invitation for Sealed

Bids.

The Transcript of the hearing was filed on April 11,

2001. Proposed Findings of Fact and Conclusions of Law were

filed by Tampa Armature Works, Inc. on April 20, 2001, and by

the other parties on April 23, 2001. These filings have been

considered by the undersigned in the preparation of this

Recommended Order.

FINDINGS OF FACT

Based upon all of the evidence, the following findings of

fact are determined:

a. Background

1. In this bid dispute, Petitioner, Universal Precision

Industries, Inc. (UPI), contends that Respondent, Tampa Bay

Water, acted contrary to competition and in an arbitrary and

capricious manner when it proposed to award a contract to

Intervenor, Commerce Controls, Inc. ( CCI), the lowest

responsive bidder. In its petition, UPI alleged that CCI

failed to include in its bid documents "catalog cuts and

information with complete model number, manufacturer's

specifications, and dimension drawings describing the proposed

component," as required by the specifications. As further

clarified at hearing, UPI alleged that CCI deviated from the

specifications in a material respect by submitting a price for

a "customized-made panel" instead of a higher costing Hoffman

panel ( encloser ), and by submitting prices for a mix of AC/DC

surge protectors rather than 100 percent DC surge protectors.

All other allegations in the petition have been abandoned.

UPI goes on to contend that by CCI pricing out the two items

in this manner, CCI gained a competitive advantage of around

$36,000.00 over UPI.

2. Tampa Bay Water is a regional water supply authority

created and existing pursuant to Sections 163.01, 373.1962,

and 373.1963, Florida Statutes, and an interlocal agreement

among Pinellas, Pasco, and Hillsborough Counties and the

Cities of Tampa, New Port Richey , and St. Petersburg known as

the "Amended and Restated Interlocal Agreement Reorganizing

the West Coast Regional Water Supply Authority," dated June

10, 1998. In all, Tampa Bay Water is responsible for meeting

the potable water needs of approximately two million

customers.

3. The controversy began on January 8, 2001, when Tampa

Bay Water issued an Invitation for Sealed Bids for Contract

No. 2001-22 for the fabrication of certain control panels and

associated parts for a regional water treatment plant. In

paragraph 2 of the Instructions to Bidders, Tampa Bay Water

specifically reserved the right "to waive any and all minor

irregularities and technicalities."

4. A mandatory pre-bid conference was held on

January 23, 2001. Representatives of UPI, CCI, and

Intervenor, Tampa Armature Works, Inc. (TAW), attended the

conference and later submitted bids. Thereafter, the sealed

bids were opened publicly on January 30, 2001. CCI submitted

the lowest bid ($469,481.00), TAW the second lowest bid

($486,144.00), while UPI submitted the third lowest bid

($495,000.00).

5. On February 5, 2001, Respondent announced its

intention to award the contract to CCI, who submitted the

lowest responsive bid. After efforts to informally resolve

the dispute were unsuccessful, this action was filed.

b. The bid documents

6. The Instructions to Bidders required that

"[q ] uotations for services are to be provided on the Bid

Schedule included herein." They further provided that

"[p ] roposals must be provided on the Bid Schedule included

with the contract documents." The Bid Schedule form in the

bid documents provided fourteen line items to be completed by

the bidders : one line each for each of the seven control

panels and one line each for the factory acceptance testing on

each panel. The Bid Schedule also provided a pre-determined

Owner's Allowance and then a "Total Contract Price" line for

the fifteen line items.

7. The Instructions to Bidders further required that

"[a ] ll quotations must reflect delivered cost which includes

all packing, handling, shipping charges, taxes, discounts and

delivery to Tampa Bay Water."

8. In a section of the "Conditions of the Contract," the

following requirements were imposed:

The proposal shall include the following:

Catalog cuts and information with complete

model number, manufacturer's

specifications, and dimension drawings

describing the proposed components.

Total cost to Owner of all components

including a separately itemized freight

cost to the project site.

Per diem costs, expenses included, for

supplying an experienced representative to

the project site to assist with startup and

operator training.

Delivery time of all panels following

receipt of purchase order.

9. In the same section of the bid documents, under a

heading entitled "Qualifications of Bidders," there is found a

requirement that "[t ]he Unit Control Panels shall be bid in

detail, depicting a base unit price per device, utilizing an

Excel spreadsheet supplied to the bidder."

10. Finally, the bid documents contained seven

spreadsheets, one for each of the panels, which set forth by

line item a description of each component, its function, the

manufacturer's name and model number, and the quantity

required. The last column of each spreadsheet was blank and

was titled "Costs."

11. The purpose of a bidder submitting spreadsheets was

to ensure that Tampa Bay Water was getting the specific

components identified in those spreadsheets. Therefore, Tampa

Bay Water wanted to ensure that the bidder was furnishing the

parts specified, but it was not concerned with the manner in

which a bidder may have priced any particular components.

12. The specifications also called for a number of surge

protectors for each of the seven panels. However, they did

not specify whether the protectors would be AC or DC, or the

number of each. Because there is a significant difference in

price between the two, a few days before the bids were to be

submitted, a UPI employee, Frank Dressel, made a telephonic

inquiry with James L. Hall, an outside consultant who assisted

in the preparation of the specifications, seeking

clarification. Hall advised Dressel that he should price out

his proposal using all DC surge protectors, even though the

specifications were not clear on that point, and he was unsure

of the exact number of DC surge devices that would ultimately

be used. Hall later conveyed this same advice to all bidders

before the bids were submitted.

c. CCI's bid proposal

13. CCI's bid proposal did not include the catalog cut

sheets (product specification sheets) or the spreadsheets in

its proposal. However, CCI provided a cover letter with its

proposal which stated that

The bid requirements asked for several

items, for which there was no line on the

bid form. This proposal addition serves to

provide the additional information

required.

1. The equipment we are providing is the

exact model as specified by Tampa Bay

Water, therefore, we have not included the

catalog cut sheets or major equipment

listing with our bid. We can, if

necessary, provide the information.

2. Per diem expenses for an electrician

for wiring field terminations to the

control panels $336.00, based on an 8 hour

day.

3. Per diem expenses for a CCI start-up

technician would be $900.00, based upon a

40 hour work week.

4. Freight expenses are $7,000.00.

14. After reading the letter, a Tampa Bay Water

representative, Joseph Kehoe, "felt comfortable" with that

statement and treated it as a representation by CCI that it

would supply the exact parts specified by Tampa Bay Water. In

an abundance of caution, however, Kehoe sought guidance from

his General Counsel regarding the apparent irregularities in

the CCI bid, as well as apparent irregularities in the second

lowest bid submitted by TAW. The General Counsel advised that

the irregularities appeared to be minor and could be waived,

but that further clarification could be sought from the

bidders with respect to any of the omitted information.

15. Kehoe then sought clarification from CCI regarding

the freight charges and delivery schedule. He also requested

the spreadsheets and catalog cut sheets previously offered by

CCI in its response. By letters dated February 2 and 5, and

March 1, 2001, and a "Supplemental Information" submittal

containing the spreadsheets and catalog sheets, CCI provided

the necessary clarification. That information confirmed the

accuracy of the representations in CCI's January 30, 2001,

letter, which indicated that CCI would supply all of the

required equipment at the price stated in its bid.

d. UPI's concerns

16. According to UPI's chief financial officer, John

Sessa, CCI "did not provide pricing or part numbers to

indicate that they were supplying" some of the items required

by the specifications. More specifically, three of the seven

panels required Hoffman enclosures. In reviewing the CCI

proposal, Sessa could find no price quote for a Hoffman

enclosure, but he did find a manufacturer's quote for a

similar enclosure by another manufacturer, Thermal Designs and

Manufacturing ( TDM). Also, Sessa was unable to determine

whether CCI's bid was based on all DC surge protectors.

Therefore, Sessa concluded that CCI was not supplying the

Hoffman enclosures or the required number of DC surge

protectors. By CCI using lower costing parts in pricing out

its bid, Sessa contended that CCI had obtained a competitive

advantage over UPI.

17. The prices used for CCI's bid were prepared by

Karen R. Lawson, a sales engineer in CCI's Plymouth, Michigan

office. Lawson gathered her estimates from catalogs and

vendors and then submitted them to her supervisor, Jerry

Zitterman, who in turn forwarded them to a CCI employee in

St. Petersburg, Florida.

18. Because she either gave the vendor an incorrect part

number for a Hoffman panel, or there was a substantial lead

time in obtaining such a unit, Lawson used a price for a

customized panel made by TDM, and not the price for a Hoffman

panel. That price, however, was later adjusted upward by more

than 25 percent in the bid proposal, presumably to take into

account the labor component. In pricing out the surge

protectors, Lawson used an average unit price, which was

derived by taking "both prices and [using] an average of those

numbers."

19. Notwithstanding the manner in which it had priced

out the panel and surge protectors, CCI unequivocally agreed

that it was obligated to supply all equipment specified by

Tampa Bay Water by manufacturer and part number, and that was

the intent of its January 30, 2001, letter included in its bid

proposal. At the same time, Tampa Bay Water understood that

CCI was supplying all of the items specified in the

spreadsheets and that CCI would be held to its bid price as to

all of the specified components.

20. CCI's failure to supply the spreadsheets and catalog

cut sheets at the time the bid proposal was submitted, and its

manner of pricing out the required panels and surge

protectors, were minor deviations from the specifications, did

not give CCI a substantial advantage over other bidders, and

did not adversely affect the interests of Tampa Bay Water.

This is especially true here since CCI's bid proposal included

a letter which indicated that CCI would provide all required

equipment at the stated price. Under the terms of the

Invitation for Sealed Bids, Tampa Bay Water properly waived

the minor irregularities in order to achieve the purpose of

securing the lowest responsible bid.

e. UPI's bid proposal

21. There were a number of irregularities in UPI's bid

as well. For example, certain items in the spreadsheets had a

dash instead of a price in the "Costs" column. UPI's bid

proposal also failed to provide any information as to the per

diem costs from an experienced representative to assist with

start up and operator training. In addition, UPI changed the

indicated quantities for each component in the spreadsheets

from whatever Tampa Bay Water had specified to a quantity of

one. Finally, as to two of the three different size fuses

required for each of its panels, UPI's spreadsheet failed to

list a price and showed a quantity of zero.

22. A representative of Tampa Bay Water established that

had UPI been the lowest bidder, the agency would have sought

clarification from the bidder as to the above items in the

same manner that it sought clarification from CCI.

f. TAW's bid proposal

23. TAW's bid also omitted the catalog cut sheets and

the spreadsheets, and it failed to provide any information as

to freight charges, per diem start up expenses, or delivery

schedule. Clarification regarding these items would also have

been required, had TAW submitted the lowest bid.

CONCLUSIONS OF LAW

24 . The Division of Administrative Hearings has

jurisdiction over the subject matter and the parties hereto

pursuant to Sections 120.569 and 120.57(3), Florida Statutes

(2000).

25. Tampa Bay Water is a regional water supply authority

established pursuant to Sections 373.1961 and 373.1962,

Florida Statutes (2000). Thus, it is not a state agency and

subject to the competitive bidding requirements found in

Section 287.057, Florida Statutes (2000).

26. There are no provisions in Sections 373.1961 and

373.1962, Florida Statutes (2000), pertaining to burden of

proof, grounds for overturning a regional water supply

authority's preliminary decision, or the standard of proof.

In the absence of specific statutory requirements, public

entities such as Tampa Bay Water have the obligation to engage

in contracting procedures in a manner which is not arbitrary

and capricious. See , e.g. , Volume Services Div. of Interstate

United Corp. v. Canteen Corp. , 369 So. 2d 391, 394 (Fla. 2d

DCA 1979); Eagle Tire & Service Center v. Escambia County

Utilities Authority , DOAH Case No. 00- 0661BID ( Escam. Cty .

Util. Auth ., July 14, 2000).

27. However, by Rule 49B-3.002, Florida Administrative

Code, Tampa Bay Water has submitted to, and adopted, the

procedures and substantive requirements of Section 120.57(3),

Florida Statutes (2000), for purposes of resolving contract

bid disputes. Therefore, that statute controls this

proceeding. Paragraph (3)(f) provides in relevant part as

follows:

(f ) In a competitive-procurement protest,

no submissions made after the bid or

proposal opening shall be considered.

Unless otherwise provided by statute, the

burden of proof shall rest upon 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.

28. Under the foregoing statute, the undersigned is

first obliged to determine, in a de novo setting, whether

Respondent's action is contrary to governing statutes, rules,

policies, or bid specifications. Within that factual

framework, it must then be determined if the Board’s action is

clearly erroneous, contrary to competition, arbitrary, or

capricious. In its Proposed Recommended Order, UPI contends

that Tampa Bay Water's decision to award the contract to CCI

was arbitrary, capricious, and contrary to competition. The

contention that the decision was clearly erroneous has

apparently been abandoned.

29. Under long-standing principles, an arbitrary

decision is one not supported by fact or logic while a

decision is capricious if it is taken without thought or

reason. The inquiry to be made in determining whether an

agency has acted arbitrarily or capricious is whether the

agency has (1) considered all relevant factors; (2) given

actual, good faith consideration to those factors; and (3)

used reason rather than whim to progress from consideration of

those factors to its final decision. Adam Smith Enterprises,

Inc. v. State Dep't of Envir. Reg. , 553 So. 2d 1260, 1273

(Fla. 1st DCA 1989). At the same time, if a decision is

justifiable under any analysis that a reasonable person would

use to reach a decision of similar importance, the decision is

neither arbitrary or capricious. Dravco Basic Materials Co.,

Inc. v. State, Dep't of Trans. , 602 So. 2d 632, 634, fn. 3

(Fla. 2d DCA 1992).

30. An act is contrary to competition when it offends or

subverts the fundamental policies underlying competitive

procurement. Enpower, Inc. et al. v. Tampa Bay Water et al. ,

DOAH Case No. 99- 3398BID (Tampa Bay Water, Nov. 15, 1999).

Those policies have been described as protecting the public

against collusive contracts; securing fair competition on

equal terms for all bidders or proposers ; removing not only

collusion, but the temptation for collusion and the

opportunity for private gain at public expense; closing all

avenues to favoritism and fraud in whatever form; securing the

best value for the public at the lowest possible expense; and

affording an equal advantage to all persons desiring to do

business with the government. Wester v. Belote et al. , 138

So. 721, 723-24 (Fla. 1931).

31. Finally, Tampa Bay Water has specifically reserved

the right "to waive any and all minor irregularities and

technicalities." In doing so, it cannot accept a bid that is

materially at variance with the specifications. But not every

deviation from the bid specifications is material. A

deviation is only material if it gives a proposer a

substantial advantage over the other proposers and thereby

restricts or stifles competition. Tropabest Foods, Inc. v.

Dep't of Gen. Svcs. , 493 So. 2d 50 (Fla. 1st DCA 1986). If a

deviation does not provide a proposer with such a palpable

competitive advantage, it constitutes a minor irregularity

that should be waived. Robinson Electrical Co., Inc. v. Dade

Co. , 417 So. 2d 1032, 1034 (Fla. 3d DCA 1982). See also

Intercontinental Properties, Inc. v. Dep't of Health and

Rehab. Svcs. , 606 So. 2d 380, 387 (Fla. 3d DCA 1992)(there is

a "strong public policy against disqualifying the low bidder

for technical deficiencies which do not confer an economic

advantage on one bidder over another").

32. UPI contends that Tampa Bay Water acted arbitrarily

and capriciously and in a manner which is contrary to

competition by accepting a letter from CCI as an assurance

that the required parts would be supplied, and as a substitute

for the spreadsheets and catalog cut sheets required by the

specifications.

33. Tampa Bay Water's actions were not shown to be

contrary to any statute, rule, or policy. Neither did they

sanction a material variance from the bid specifications. In

the Invitation for Sealed Bids, Tampa Bay Water reserved the

right "to waive any and all minor irregularities and

technicalities." The irregularities in CCI's bid did not give

it a substantial advantage over the other bidders, restrict

competition, affect the price of the bid, or adversely impact

the interests of the agency. Under these circumstances, the

irregularities were clearly minor, and Tampa Bay Water could

waive them in order to secure the lowest responsible bid.

34. The evidence further shows that Tampa Bay Water's

bid reviewer ( Kehoe) acted reasonably under the circumstances

by immediately recognizing the apparent deficiencies in CCI's

bid, seeking guidance from his General Counsel, and requesting

clarification from CCI as to certain items in its bid. Based

on its evaluation of the information, Tampa Bay Water

confirmed the accuracy of CCI's representation in its proposal

that it would supply all of the requested equipment at the

stated price. Therefore, the agency did not act arbitrarily

or capriciously, as alleged by UPI.

35. Finally, the award of the contract to CCI was not

shown to be contrary to competition. More specifically, there

was no evidence of collusion, unfair competition by the

bidders, favoritism, or one bidder having an unequal advantage

over the others. Indeed, in awarding the contract to CCI,

Tampa Bay Water merely secured the best value for the public

at the lowest possible expense.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions

of Law, it is

RECOMMENDED that the Tampa Bay Authority enter a final

order awarding the contract to CCI, the lowest responsive

bidder.

DONE AND ENTERED this 4th day of May, 2001, in

Tallahassee, Leon County, Florida.

___________________________________

DONALD R. ALEXANDER

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 [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative He arings

this 4th day of May, 2001.

COPIES FURNISHED:

Donald D. Conn, General Counsel

Tampa Bay Water

2535 Landmark Drive, Suite 211

Clearwater, Florida 33761-3930

Barrie S. Buenaventura, Esquire

Tampa Bay Water

2535 Landmark Drive, Suite 211

Clearwater, Florida 33761-3930

Dominick J. Graziano, Esquire

Bavol , Bush & Sisco , P.A.

100 South Ashley Street, Suite 2100

Tampa, Florida 33602-5311

Richard A. Harrison, Esquire

Allen, Dell, Frank & Trinkle , P.A.

Post Office Box 2111

Tampa, Florida 33601-2111

Steven D. Marlowe, Esquire

Marlowe & McNabb , P.A.

324 South Hyde Park Avenue, Suite 210

Tampa, Florida 33606-4127

Michael M. MacInnis, Treasurer

Tampa Armature Works, Inc.

440 South 78th Street

Tampa, Florida 33619

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any

exceptions to this Recommended Order should be filed with the

agency that will render a final order in this matter.