01-001099F Telecom Response, Inc. vs. Department Of Management Services Status: Closed DOAH Final Order on Thursday, April 19, 2001.

Summary: Department was substantially justified in initially rejecting Telecom bid as non-responsive. Therefore, fees and costs not awarded.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

TELECOM RESPONSE, INC., )

)

Petitioner, )

)

vs. ) Case No. 01-1099F

)

DEPARTMENT OF MANAGEMENT )

SERVICES, )

)

Respondent. )

)

FINAL ORDER

This cause came before the undersigned for consideration of

a Petition for Attorney's Fees and Costs filed on March 16,

2001, on behalf of Petitioner, Telecom Response, Inc. (TRI),

pursuant to Section 57.111, Florida Statutes.

APPEARANCES

For Petitioner: F. Alan Cummings, Esquire

Daniel Te Young, Esquire

Smith, Currie & Hancock LLP

1004 DeSoto Park Drive

Post Office Box 589

Tallahassee, Florida 32302-0589

For Respondent: Terry A. Stepp, Esquire

Department of Management Services

4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950

STATEMENT OF THE ISSUE

The issue presented is whether TRI should be awarded

attorney's fees and costs pursuant to the Florida Equal Access

to Justice Act (FEAJA), Section 57.111(4)(a), Florida Statutes.

PRELIMINARY STATEMENT

On or about July 20, 2000, Respondent, Department of

Management Services (Department), posted a bid tabulation sheet,

rejecting TRI's bid as non-responsive, and noticing the intent

to award a contract for video teleconferencing equipment to

Frebon International Corporation ( FREBON ).

On August 3, 2000, TRI timely filed a Formal Written

Protest to contest the Department's intent to award a contract

pursuant to Invitation to Bid (ITB), Bid No. 33-840-980-E, to

FREBON , the second low bidder by price discount, and to reject

the bid offered by TRI, the low bidder by price discount. The

Formal Written Protest was forwarded to the Division of

Administrative Hearings (Division) for the assignment of an

Administrative Law Judge. A final hearing was held in the

matter on September 11, and 19-20, 2000.

On December 14, 2000, a Recommended Order (RO) was issued

with the following recommendation:

RECOMMENDED that the Department of

Management Services enter a final order and

award the contract to TRI because TRI

offered the lowest [sic] [highest] discount

for the required Tandberg products. If the

Department declines to award the contract to

TRI, it is further recommended that the

Department re-bid the contract because an

award to FREBON cannot be justified as a

"single bid negotiated."

(RO, page 34).

On January 16, 2001, the Department filed a Final Order

adopting the findings of fact (FOF) and conclusions of law set

forth in the Recommended Order. The Department also concluded

that "[t]he Department of Management Services shall either award

the contract to Telecom [TRI], or, in the alternative, re-bid

the contract." TRI did not seek judicial review of the Final

Order.

On March 16, 2001, TRI filed a Petition for Attorney's Fees

and Costs. The Department filed a Response to the Initial Order

issued by the Division, which also responds to the Petition.

TRI and the Department waived an evidentiary hearing. TRI also

filed a Reply.

On April 16, 2001, a telephone conference was held to

discuss the status of the case, and the record which would be

considered. This Final Order is based upon a review of TRI's

Petition and Reply and the Department's Response filed in DOAH

Case No. 01-1099F. The undersigned has taken off icial

recognition of the Division's file in Telecom Response, Inc. v.

Department of Management Services , Case No. 00-3439BID. The

Transcripts of the final hearing in Case No. 00-3439BID have

been re-filed in Case No. 01-1099F and have also been

considered. The parties agreed that the final hearing exhibits

filed in Case No. 00-3439BID, which were forwarded to the

Department with the Recommended Order on December 14, 2000,

would not be re-filed in Case No. 01-1099F.

FINDINGS OF FACT

1. During the Spring of 2000, the Department developed an

ITB, including specifications, for video teleconferencing

equipment and video bridging equipment for all State of Florida

agencies and other eligible users. The ITB was a revision of

the existing contract held by TRI. During the

ITB/specifications review process, a new condition was added to

require vendors to give a percentage discount from a

manufacturer's product list price to assist users in getting

more choices and complete systems.

2. On May 9, 2000, the Department advertised ITB 33-840-

980-E actively soliciting bids. The stated "purpose of this bid

[was] to establish a 12-month contract for the purchase of Video

Teleconferencing Equipment & Video Bridging Equipment by all

State of Florida agencies and other eligible users . . .."

3. The staff of the Department drafted the specifications

and intended that each vendor offer a complete line of a

manufacturer's video teleconferencing equipment and systems,

which might be included under these categories. No specific

manufacturer was required. The Department's Mr. Steve Welsh

knew that state agencies have differing needs for video

teleconferencing equipment and systems to communicate more

effectively. Importantly, it was his intent to draft flexible

and wide-open specifications to meet the various needs of the

agencies. It was equally important, from the Department's

standpoint, that each vendor offer a complete line of the

manufacturer's products with an appropriate discount. In this

manner, the Department could compare each vendor's

manufacturer's price list and then apply the vendor's discount

in order to appropriately compare their bids.

4. Four vendors, including TRI and FREBON, submitted bids

offering discounts for the Tandberg line of video

teleconferencing equipment. Each vendor offered different

discounts for the Tandberg line of products offered in each bid.

However, TRI submitted a one-page price list for Tandberg video

teleconferencing systems. Global Communications Technologies,

Inc. offered a discount for eight (8) pages of Tandberg

products. Digital Video Systems, a Division of NuPhase

Electronics, provided multiple discounts for twelve (12) pages

of Tandberg products and FREBON offered a discount for twenty-

two (22) pages of Tandberg products.

5. Ultimately, the Department chose FREBON as the only

responsive bidder to have submitted a discount for the complete

line of Tandberg products. The Department justified the

intended award of the contract to FREBON as a "single bid

negotiated."

6. Notwithstanding the resolution of this matter as set

forth in the Recommended and Final Orders, the undersigned finds

that the Department, in drafting the ITB and specifications, was

well intentioned and attempted to deal with a highly technical

subject in a professional manner. If the ITB and specifications

were ambiguous, the vendors had the opportunity to timely

request clarification. Yet, no vendor challenged the

specifications nor timely sought clarification. See , e.g. (RO,

FOF 16 and 17).

7. Although the Department expressed its intent during the

final hearing regarding the scope of the ITB, that intent was

not clearly articulated in the ITB. There is a fair inference

that the four vendors must have been confused because each

submitted what they necessarily believed was a discount for the

complete price list for the Tandberg products. 1 The evidence

showed that only FREBON offered the complete Tandberg line of

products although, in retrospect, FREBON's price list included

products which were not required to be offered at a discount by

the ITB.

8. As of the posting of the initial bid tabulation, there

was a legitimate dispute regarding whether any vendor, including

TRI, submitted the complete line of Tandberg products within the

meaning of the ITB . It was clear, however, that each vendor,

offering Tandberg products, was required to offer a percentage

discount for the complete line of Tandberg video

teleconferencing equipment. The problem was, which Tandberg

systems, equipment, or products? See (RO, FOF 62-64).

9. The protest could not be definitively resolved until

representatives of the parties and Tandberg explained, during

the final hearing, the various components of the Tandberg

product line within the meaning of the ITB. Mr. Richard Grace,

of Tandberg, explained that TRI's one-page price list included

all of the video teleconferencing systems manufactured and sold

by Tandberg which included only desktop, set-top, and room

systems manufactured by Tandberg, the only systems required to

be offered for a discount pursuant to the ITB. (RO, FOF 33-42,

63). However, TRI was the only vendor offering a discount for

one page of Tandberg products. The Department, at the time of

the initial posting of the bid tabulation, reasonably determined

that the TRI's one-page submission was not the complete Tandberg

line, given the Department's interpretation of the ITB.

10. Based upon the foregoing, although the ultimate

resolution of the bid protest by the Department was contrary to

the Department's initial position, the Department's action, to

initially reject TRI's bid as non-responsive, was "substantially

justified."

11. Nevertheless, the Department suggests that TRI was not

a prevailing small business party pursuant to Section 57.111,

Florida Statutes. The ultimate issues presented in the bid

protest were whether the Department's intent to award the

contract to FREBON , and to reject the bid offered by TRI, was

contrary to the Department's governing statutes, rules,

policies, or the ITB and, further, whether the Department's

proposed action was clearly erroneous, contrary to competition,

arbitrary, or capricious. See (RO, Statement of the Issues,

page 2).

12. As a matter of fact and law, TRI prevailed in its bid

protest pursuant to the Final Order because TRI's bid was found

to be responsive, and the Department did not award the contract

to FREBON . See n. 1.

13. In its Final Order, the Department chose to award the

contract to TRI, or, in the alternative, to re-bid the contract.

The Department advises that it has elected to re-bid the

contract, part of the relief requested by TRI. See n. 1. In

any event, TRI prevailed in the bid dispute because the contract

was not awarded to FREBON as a direct result of TRI's successful

bid protest. Stated differently, the Final Order was in TRI's

"favor." Therefore, TRI is a "prevailing small business party." 2

14. The bid protest process was "initiated" by the

Department when the initial bid tabulation was posted. The

Department concedes the reasonableness of the fees and costs

requested by TRI, which, by statute, may not exceed $15,000.

The Department also admits that TRI is a small business party

within the meaning of Section 57.111, Florida Statutes. The

Department also admits that it was not a nominal party.

CONCLUSIONS OF LAW

15. The Division of Administrative Hearings has

jurisdiction over the subject matter of this proceeding, and the

parties thereto, pursuant to Section 57.111(4)(b)1., Florida

Statutes, and Section 120.57(1), Florida Statutes.

16. Section 57.111 (4)(a), Florida Statutes, states:

(4)(a) Unless otherwise provided by law, an

award of attorney's fees and costs shall be

made to a prevailing small business party in

any adjudicatory proceeding or

administrative proceeding pursuant to

chapter 120 initiated by a state agency,

unless the actions of the agency were

substantially justified or special

circumstances exist which would make the

award unjust.

(emphasis added).

17. Material here, Section 57.111(3)(c)1., Florida

Statutes, defines "prevailing small business party" as follows:

(c) A small business party is a "prevailing

small business party" when:

1. A final judgment or order has been

entered in favor of the small business party

and such judgment or order has not been

reversed on appeal or the time for seeking

judicial review of the judgment or order has

expired[.]

(emphasis added).

18. "The purpose of [Section 57.111] is to diminish the

deterrent effect of seeking review of, or defending against,

government action by providing in certain situations an award of

attorney's fees and costs against the state." Section

57.111(2), Florida Statutes. 'The [FEAJA] is designed to

discourage unreasonable governmental action, not to paralyze the

necessary and beneficial work of government.' State, Department

of Health and Rehabilitative Services v. South Beach Pharmacy,

Inc. , 635 So. 2d 117, 121 (Fla. 1st DCA 1994)(citation omitted).

19. TRI has the burden to prove that the Department

initiated the main or underlying administrative proceeding and

that it is a prevailing small business party pursuant to the

Department's Final Order, i.e. , the Final Order was entered in

TRI's "favor." Once TRI proves that it qualifies as a

prevailing small business party, the Department "has the burden

to show substantial justification or special circumstances . . .

in order to avoid liability for fees and costs." South Beach

Pharmacy, Inc. , 635 So. 2d at 121.

20. By law, the Department posted the initial bid

tabulation and advised TRI, and other vendors, of a point of

entry to challenge the agency action. TRI requested an

administrative proceeding pursuant to pursuant to Section

120.57(1) and (3), Florida Statutes. Therefore, the underlying

administrative proceeding was initiated by the Department.

Sections 57.111(3)(b)3. and 120.57(3)(a), Florida Statutes. See

also Mid American Governmental Group v. Daytona Beach Community

College , Case No. 96-1335F, 1996 WL 1060269, at * 5 (Fla. Div.

Admin. Hrgs. Final Order Oct. 18, 1996).

21. Also, TRI is a "prevailing small business party"

because the Final Order was entered in TRI's "favor." Rudloe v.

Department of Environmental Regulation , Case No. 88-3421F, 1988

WL 617627, at * 5 (Fla. Div. Admin. Hrgs. Final Order Nov. 8,

1988).

22. Section 57.111(3)(e) of the FEAJA states: "A

proceeding is 'substantially justified' if it had a reasonable

basis in law and fact at the time it was initiated by a state

agency." The FEAJA is generally modeled after its federal

counterpart, 5 U.S.C. Section 504 (the Federal Act). It is

instructive to look to the decisions of federal courts, which

have construed the meaning of the language of the Federal Act.

Gentele v. Department of Professional Regulation , 513 So. 2d

672, 673 (Fla. 1st DCA 1987).

23. In discussing the meaning of the term "substantially

justified," regarding the Federal Act, the United States Supreme

Court in Pierce v. Underwood , 487 U.S. 552, 565-566 (1988)

stated:

We are of the view, therefore, that as

between the two commonly used connotations

of the word "substantially," the one most

naturally conveyed by the phrase before us

here is not "justified to a high degree,"

but rather "justified in substance or in the

main"--that is, justified to a degree that

could satisfy a reasonable person. That is

no different from the "reasonable basis both

in law and fact" formulation adopted by the

Ninth Circuit and the vast majority of other

Courts of Appeals that have addressed this

issue . . .. To be "substantially

justified" means, of course, more than

merely undeserving of sanctions for

frivolousness; that is assuredly not the

standard for Government litigation of which

a reasonable person would approve.

(citations omitted). See also Helmy v. Department of Business

and Professional Regulation , 707 So. 2d 366, 368 (Fla. 1st DCA

1998)(quoting Pierce ).

24. Similarly, under Florida Law, "'the substantially

justified' standard falls somewhere between the no justiciable

issue standard of section 57.105, Florida Statutes (1991), and

an automatic award of fees to a prevailing party." Helmy , 707

So. 2d at 368. It is also erroneous to equate "a finding of 'no

frivolous purpose' with a finding of 'substantial

justification,' as that phrase is defined in subsection

57.111(3)(e)." Department of Health and Rehabilitative Services

v. S.G. , 613 So. 2d 1380, 1386 (Fla. 1st DCA 1993).

25. Based upon the findings of fact made herein and the

legal standard to be applied, the Department had a reasonable

basis in law and fact to believe that the rejection of TRI's bid

was consistent with the Department's interpretation of the ITB

and specifications. Therefore, the action of the Department was

"substantially justified."

ORDER

Based upon the foregoing, TRI's Petition for Attorney's

Fees and Costs is denied.

DONE AND ORDERED this 19th day of April, 2001, in

Tallahassee, Leon County, Florida.

___________________________________

CHARLES A. STAMPELOS

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 19th day of April, 2001.

ENDNOTES

1/ In paragraph 7 of its Formal Written Protest, TRI suggested

that "[a]s a consequence of the ambiguity of the ITB, all bids

should be rejected and the ITB should be re-bid." The

Department seems to agree.

2/ Notwithstanding the Department's decision to re-bid the

contract, the undersigned's intent was to recommend that the

Department accept TRI's bid as a responsive bid, award the

contract to TRI because TRI offered the highest discount for the

required Tandberg products, and to re-bid the contract only if

the Department rejected ["declines to award"] TRI's bid by

rejecting one or more findings of fact and conclusions of law in

the Recommended Order, regarding the responsiveness of TRI's bid

or other material issues.

COPIES FURNISHED :

F. Alan Cummings, Esquire

Daniel Te Young, Esquire

Smith, Currie & Hancock LLP

1004 DeSoto Park Drive

Post Office Box 589

Tallahassee, Florida 32302-0589

Terry A. Stepp, Esquire

Department of Management Services

4050 Esplanade Way, Suite 260

Tallahassee, Florida 32399-0950

Cynthia Henderson, Secretary

Department of Management Services

4050 Esplanade Way

Tallahassee, Florida 32399-0950

Mallory Roberts, General Counsel

Department of Management Services

4050 Esplanade Way

Tallahassee, Florida 32399-0950

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial review pursuant to Section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules

of Appellate Procedure. Such proceedings are commenced by

filing one copy of a notice of appeal with the Clerk of the

Division of Administrative Hearings and a second copy,

accompanied by filing fees prescribed by law, with the District

Court of Appeal, First District, or with the District Court of

Appeal in the Appellate District where the party resides. The

notice of appeal must be filed within 30 days of rendition of

the order to be reviewed.