02-001610 Everglades Surveying Joint Venture vs. South Florida Water Management District Status: Closed Recommended Order on Wednesday, September 4, 2002.

Summary: Minority owner met all criteria for MBE certification except holding a license in specialty being certified; professional engineering license cannot be used to obtain surveying certification.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

EVERGLADES SURVEYING JOINT )

VENTURE, )

)

Petitioner, )

)

vs. ) Case No. 02 - 1610

)

SOUTH FLORIDA WATER )

MANAGEMENT DISTRICT, )

)

Respondent. )

______________________________)

RECOMMENDED ORDER

Pursuant to notic e, this matter was heard before the

Division of Administrative Hearings by its assigned

Administrative Law Judge, Donald R. Alexander, on July 9,

2002, in West Palm Beach, Florida.

APPEARANCES

For Petitioner: Marlon A. Hill, Esquire

DelancyHill, P.A.

1200 Brickell Avenue, Suite 950

Miami, Florida 33131 - 3255

For Respondent: Catherine M. Linton, Esquire

South Florida Water Management District

Post Office Box 24680

West Palm Beach, Florida 33416 - 4680

STATEMENT OF THE ISSUE

The issue is whether Petitioner's application for

certification as a minority business enterprise should be

approved.

PRELIMINARY STATEMENT

On Marc h 26, 2002, Respondent, South Florida Water

Management District, advised Petitioner, Everglades Surveying

Joint Venture, that its application for certification as a

minority business enterprise had been denied. Thereafter,

Petitioner filed a Petition for Hearing Involving Disputed

Issues of Material Fact. The matter was referred to the

Division of Administrative Hearings on April 18, 2002, with a

request that an Administrative Law Judge be assigned to

conduct a hearing. On July 8, 2002, the case was tran sferred

from Administrative Law Judge J. Lawrence Johnston to the

undersigned.

By Notice of Hearing dated May 8, 2002, a final hearing

was scheduled on July 9, 2002, in West Palm Beach, Florida.

Respondent's Motion for Continuance of the final hearing was

denied by Order dated June 17, 2002. On June 28, 2002,

Respondent's Motion to Amend its Notice of Intent was granted.

At the final hearing, Petitioner presented the testimony

of Ray J. Berryman, chief executive officer and manager of

Berryman & Henigar , Inc., an engineering and surveying

consulting firm, and Mark A. Stokes, a licensed surveyor and

senior vice - president of Berryman & Henigar, Inc. Also,

Petitioner offered Petitioner's Exhibits 1 - 18 and 20 - 23, which

were received in evidence. Respondent presented the testimony

of Candice B. Boyer, staff business operations analyst. Also,

it offered Respondent's Exhibits 1 - 29, which were received in

evidence. Finally, the undersigned took official recognition

of Part VI, Chapter 40E - 7, Florida Administr ative Code.

The Transcript of the hearing was filed on July 24, 2002.

At the request of the parties, the time for filing proposed

findings of fact and conclusions of law was extended to

August 23, 2002. The same were timely filed by the parties,

and they 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 licensing dispute, Respondent, South Florida

Water Management District (District), has proposed to deny an

application of Petitioner, Everglades Surveying Joint Venture

(Everglades), for certification as a minority business

enterprise (MBE) under the District's Supplier Diversity &

Outreach P rogram (Program). If the application is approved,

Petitioner would be listed on the District's contract

solicitation and vendor lists as a minority contractor.

2. In its proposed agency action, as later amended, the

District contends that the applicati on should be denied

because: the minority owner fails to meet the criteria in

Rule 40E - 7.653(5) and (6), Florida Administrative Code; the

documents provided by Petitioner "do not support that the day -

to - day operations are controlled by the minority applic ant,

nor is there evidence that the minority applicant possesses

the authority to direct the management and policy of the

business"; the minority business does not meet the size

standard of a small business as required by Section 288.703,

Florida Statutes; and the minority owner does not possess the

necessary license to qualify the firm in its area of specialty

as required by Rule 40E - 7.653(5), Florida Administrative Code.

In simpler terms, the District has contended that Petitioner's

application is defici ent in the areas of "management and

control, the size standards[,] and the licensure." Petitioner

disputes these allegations and contends that it meets all

criteria for certification. As to the remaining requirements

for certification in Rule 40E - 7.653(4 ), (7), (8), and (9),

Florida Administrative Code, the parties have stipulated that

all of these criteria have been satisfied.

b. The Minority Owner's Corporate Structure

3. Ray J. Berryman, an Asian - Pacific American, is the

minority owner seeking certif ication. Mr. Berryman is a

professional engineer who has been in the engineering and

surveying business for almost forty years. After working with

other engineering firms for over a decade, in 1975 he started

his own firm in California. At that time, th e firm was known

as Berryman & Stevenson, but its name was later changed to BSI

Consultants, and then to Berryman & Henigar, Inc. The firm

provides civil engineering and surveying services to public

agencies on the West Coast.

4. In 1994, Mr. Berryman acquired a Florida corporation

known as Henigar & Ray, Inc., which was engaged in the

business of providing surveying and civil engineering

services. Although the company initially operated under the

name of Henigar & Ray, Inc., doing business as Berryman &

Henigar, in 1998 Mr. Berryman changed its name to Berryman &

Henigar, Inc. (BHI), the same name as the California

corporation. Mr. Berryman serves as director, chief executive

officer, and operating manager of BHI. The firm's

headquarters are in Orlan do, and it has branch offices in

Jacksonville, Tallahassee, Tampa, Ocala, and West Palm Beach.

5. In March 1994, Mr. Berryman formed a Nevada holding

company known as Berryman & Henigar Enterprises (BHE), in

which he owns 77.5 percent of the stock and s erves as chairman

of the board and chief executive officer. BHE owns all of the

stock in Berryman & Henigar, Inc. (the California

corporation); Berryman & Henigar, Inc. (the Florida

corporation); Employment Systems, Inc., a "staff easing

company" incorpor ated in California in 1992; BHE Technical

Staffing, a Nevada corporation; and Therapy Network, a Nevada

corporation. However, BHE Technical Staffing and Therapy

Network are no longer in business. Consolidated financial

statements are issued for all of th e companies.

6. BHE was formed for the purpose of serving as a

vehicle "to allow a relationship to exist" between the Florida

and California corporations. After BHE was formed, Mr.

Berryman changed the name of both the Florida and California

firms (Henig ar & Ray, Inc., and BSI Consultants, respectively)

to Berryman & Henigar, Inc., one a Florida corporation, the

other a California corporation, so that he could have "the

strength, if you will, of both companies with a similar name."

Except for a few admin istrative personnel, BHE has no other

employees and it performs no professional services.

7. Besides being the owner of BHE and the wholly - owned

subsidiaries named above, Mr. Berryman also is a majority

owner of at least one affiliated company known as GovPartner,

a California firm providing "e - Government solutions for

cities, courts, and governmental agencies." Whether Mr.

Berryman controls other affiliated companies was not disclosed

at hearing.

c. Other MBE Certifications

8. In June 1996, or befo re the District had a rule on

MBE certifications, Henigar & Ray, Inc., doing business as

Berryman & Henigar, applied with the District for

certification as a MBE to provide civil engineering,

surveying, environmental sciences, and construction management

s ervices. The application was approved, and a one - year

certification was issued. The District then changed from a

one - year to a three - year certification, and after an

application for recertification was filed in 1997, Henigar &

Ray, Inc., was reissued a c ertification that expired in 2000.

By then, the District had adopted a rule which required, among

other things, that the minority owner have a professional

license in all fields in which the certification was granted.

Through what the District calls an " error" or oversight, it

failed to note that Mr. Berryman did not hold a professional

surveyor's license, and it erroneously continued to certify

BHI in the area of surveying.

9. On August 26, 1999, the firm was given "graduated"

status, which meant that it was no longer eligible for

continued participation in the District's Program as a prime

contractor due to the business having a net worth of more than

$3 million and/or an average net income of $2 million after

federal taxes for the preceding two years. However, the firm

could still be counted (as a subcontractor) towards a prime

contractor's goal attainment. In November 2000, the firm,

then known as BHI, again applied for recertification as a

registered vendor. The application was approved on March 1 ,

2001, for another three - year period, this time in the areas of

surveying, civil engineering, and construction management.

Whether BHI is still in the graduated status is not known.

10. Besides holding MBE status with the District, BHI

has been certifie d as a MBE with several local governments in

Florida, including the City of Tampa, City of Orlando, Tampa

Port Authority, and Orange County. Copies of BHI's

applications filed with those governmental entities have been

made a part of this record.

d. The Joint Venture

11. As an Asian - Pacific American, Mr. Berryman qualifies

for minority status. Although not disclosed by the parties,

but presumably because BHI has graduated status, and cannot

serve as a prime contractor, or because its certification as a

MBE in surveying may be taken away, Mr. Berryman desires to

become a District MBE through another legal entity and provide

surveying services as a prime contractor on the Comprehensive

Everglades Restoration Project (CERP) now being undertaken by

the Distr ict.

12. Before filing his application, Mr. Berryman

considered three options: filing as a corporation, a

partnership, or a joint venture. He chose a joint venture

since it gives the entity "the ability to have control outside

of a corporate board." According to Mr. Berryman, even though

the joint venture is theoretically controlled by a control

board, under the make - up of the venture established here, that

board can only represent "what Berryman & Henigar, Inc.

commands and requires it to represent. " Mr. Berryman also

desired to have other members in the joint venture who would

"provide a unique geographical location for projects being

performed by [CERP]," and thus enhance its "probability of

obtaining work through the District as a minority."

13 . To this end, Everglades was formed as a joint

venture pursuant to a Joint Venture Agreement (Agreement)

executed on October 12, 2001. So that Everglades would have a

"formidable surveying company that would be able to win work,"

its members included BH I; GCY, Inc. (GCY), a Florida

corporation providing surveying services; Jeffrey C. Cooner

and Associates, Inc. (Cooner), a Florida corporation providing

surveying services; and Southern Mapping Technology, Inc.

(Southern Mapping), a Florida surveying corpo ration.

14. According to the Agreement, the ownership of the

joint venture is as follows:

BHI - 51 percent

GCY - 16.33 percent

Cooner - 16.33 percent

Southern Mapping - 16.33 percent

15. Mr. Berryman opted for BHI to have 51 percent

ownership in the j oint venture so that he would control the

entity. At the same time, however, he desired to give the

other participants as much ownership as possible without

giving up control.

16. The Agreement establishes a Board of Control (Board)

which has the respo nsibility and authority for the conduct and

management of Everglades to approve and execute contracts,

formulate and determine the policies of Everglades, approve

consultants and subcontractor agreements, approve budgets and

schedules, determine the alloca tion of work among members of

Everglades, and decide all other matters necessary to its

operations.

17. After the joint venture's formation, five

individuals were appointed to the Board: Mark A. Stokes and

Steve Sharpe, both BHI employees appointed by Mr . Berryman;

George C. Young, Jr., of GCY; Jeffrey C. Cooner of Cooner; and

James S. Richmond of Southern Mapping. All members of the

Board are non - minorities. In response to the District's

proposed denial of the application, in May or June 2002, or

six o r seven months after it was filed, Mr. Berryman assumed a

seat on the Board, replacing Mr. Sharpe. 1 However, because of

a District policy that no amendments to an application will be

considered after the application is filed, the District has

not taken in to account this change in the Board's membership.

Petitioner has not challenged the use of that policy.

18. Paragraph 4.3 of the Agreement provides that the

Board "shall reach decisions by simple majority vote of total

votes cast. BHI shall cast 51 vote s; GCY shall cast 16 votes;

Cooner shall cast 16 votes; and Southern Mapping shall cast 16

votes." Thus, BHI has ultimate control over all of

Everglades' decisions. At the same time, however, there is

nothing in the Agreement which says that the Board mu st

consult with Mr. Berryman, and obtain his approval, before a

decision is taken.

e. Rule 40E - 7.653(5) Criteria

19. Paragraph (5) of the rule requires, among other

things, that the applicant establish that the minority owner

"possess[es] the authority t o control and exercise dominant

control over the management and daily operations of the

business." The District contends that Mr. Berryman does not

exercise such control since he does not sit on the Board,

Mr. Stokes and Mr. Sharpe, both non - minorities, are the

individuals who actually cast votes on behalf of BHI, and

nothing in the Agreement requires Mr. Stokes and Mr. Sharpe to

consult with Mr. Berryman before they make a decision.

20. In reality, Mr. Berryman has absolute control over

all of the decisions made by Mr. Stokes, who occupies one of

the two BHI seats on the Board. This was confirmed by Mr.

Stokes at the hearing and was not contradicted. Even if

Mr. Sharpe (who has been replaced by Mr. Berryman) were still

on the Board, he would be subject to the same constraints.

This is because Mr. Berryman has made it clear that he would

quickly replace any BHI Board member who did not vote in

accordance with his wishes. Since BHI (and Mr. Berryman)

effectively controls the joint venture throug h 51 percent of

the Board's voting power, it is found that the minority owner

exercises dominant control over the management and daily

operations of the joint venture, as contemplated by the rule.

f. Rule 40E - 7.653(6) Criteria

21. Subparagraphs (6)(c) an d (d) of the rule require

that the applicant establish that "the net worth of the

business concern, together with its affiliates, does not

exceed five (5) million [dollars]," and that it "employs two -

hundred (200) or fewer permanent, full - time employees,"

respectively. In determining the net worth, the same rule

provides that the District shall "consider the most recent

federal tax returns or annual financial statements for the

business."

22. After concerns were raised by the District over

BHI's net wor th and number of permanent employees, BHI filed a

letter with the District on April 2, 2002, indicating that it

had 118 full - time employees and a negative net worth of

$1,460,176.00. On June 6, 2002, its counsel also filed an

affidavit by BHE's Controller , together with consolidated

financial reports for the year ending March 29, 2002,

reflecting a negative net worth of $1,293,435 for BHE and all

of its subsidiaries, including BHI. Counsel also provided an

affidavit by the BHE Benefits Coordinator listing 96 full - time

BHI employees as of May 17, 2002.

23. In separate documents submitted earlier by the other

joint venture participants, the net worth and number of

permanent, full - time employees of each of those participants

were as follows: GCY - $553,00 0.00 and 25 employees as of

November 30, 2001; Cooner - $300,000.00 and 8 employees as of

December 31, 2001; and Southern Mapping - $527,000.00 and 6

employees as of December 31, 2001. While the fiscal years of

the participants are not identical, collecti vely these figures

produce a total positive net worth of all Everglades members

(including BHE, the parent of BHI) of $86,565.00 and less than

200 full - time employees at or about the date the application

was filed.

24. Despite this showing by Everglades that it met the

net worth and size thresholds for a MBE, over the past two

years BHI has made a number of filings with the District and

other governmental entities which caused the District to doubt

the veracity of the numbers submitted by Everglades and to

ultimately deny the application.

25. For example, in its application for recertification

filed with the District in November 2000, BHI reflected that

it then had a positive net worth of $1,013,790.00 and 305

full - time employees. In a Statement of In tent to Perform as a

MBE Subcontractor dated October 23, 2001, BHI indicated that

its net worth was $1,012,979.00 and that it employed 102

permanent employees. Almost identical numbers were shown in

other filings made with the District on November 1, 2001 ,

April 18, 2002, May 24, 2002, and May 31, 2002. However, in a

Statement of Intent to Perform as a MBE Subcontractor executed

by a BHI corporate officer (Mr. Stokes) on June 18, 2002, and

filed with the District, the net worth of BHI was shown as

$4,106, 000.00 and the number of permanent, full - time employees

was given as 350. Assuming these latter figures are accurate,

Everglades would have a total net worth exceeding $5 million

and more than 200 full - time, permanent employees, both of

which exceed the thresholds permitted by the rule.

26. In addition, on April 3, 2000, BHI filed

certification documents with Orange County reflecting that it

had 305 full - time employees and a positive net worth of

$123,415.00. Identical figures were reflected in a fil ing

made with the City of Tampa on April 3, 2002. In contrast, in

a MBE certification filing made with the City of Orlando on

May 20, 2002, which included net worth and number of employees

for the latest three - year period, BHI represented that it had

97 e mployees in the years 2000, 2001, and 2002, and that its

net worth for those years was a negative $898,676.00, a

negative $1,376,645.00, and a negative $1,586,216.00,

respectively.

27. To add to the confusion, in an undated document

filed with the City of Tampa, BHI indicated that it had 345

full - time employees and 35 part - time employees. However, in a

June 12, 2002, filing with the Tampa Port Authority, BHI

indicated that it had 116 full - time employees and a negative

net worth of $1,586,216.00.

28. Mr. Berryman conceded that the different filings

were "embarrassing" and confusing, and he attributed them to

mistakes by careless or untrained in - house personnel. As to

the document reflecting a net worth of BHI in excess of $4

million, it was establishe d that a secretary erroneously

filled out the document and Mr. Stokes hurriedly signed it

without verifying the numbers. Mr. Berryman also maintained

that the numbers submitted by BHI to the District in the

April 2, 2002, letter, as supported by the fina ncial reports

and affidavits filed on June 6, 2002, are the most accurate

reflection of its net worth and number of employees. This

assertion is accepted since all of the filings over the years

(except the one on June 18, 2002) have consistently indicated

that the net worth of BHI is far less than the $5 million

threshold. Moreover, the more credible evidence supports a

finding that the number of permanent, full - time employees of

BHI and the other joint venture participants is less than 200.

Based on the se considerations, it is found that Everglades

meets the net worth and employee thresholds prescribed by the

rule.

g. Professional Licensure Requirement

29. Rule 40E - 7.653(5), Florida Administrative Code,

requires that the minority owner (Mr. Berryman) seeking

certification "be the license holder, or the professional

license holder" in the specialty for which certification is

sought. Here, Everglades seeks to provide surveying services.

The application filed with the District identified five BHI

indiv iduals who had professional surveying licenses which

authorized the work, all non - minorities. Mr. Berryman was not

identified as being one of them.

30. The rule itself is clear and unambiguous and

requires no interpretation. Since its adoption in late 1 996,

the District has consistently construed it to mean just what

it says -- that in order for a minority owner to be certified,

the owner must have a professional license in the area being

certified. This interpretation of the rule was not shown to

be un reasonable or clearly erroneous. Therefore, because

Everglades intends to provide surveying services, Mr.

Berryman, as the minority owner, must hold a surveyor's

license under Chapter 472, Florida Statutes, in order to

qualify as a MBE.

31. While it is true that Mr. Berryman is a registered

professional engineer (under Chapter 471, Florida Statutes) in

the State of Florida (as well as 3 other states), and he can

perform almost all of the surveying services under his

engineering license, 2 he does not hol d a Florida surveyor's

license, as required by the rule. While this result may seem

unfair and based on highly technical grounds, it is consistent

with the plain requirements of the rule.

CONCLUSIONS OF LAW

32. The Division of Administrative Hearings has

jurisdiction over the subject matter and the parties hereto

pursuant to Sections 120.569 and 120.57(1), Florida Statutes.

33. As the applicant in this cause, Petitioner bears the

burden of proving by a preponderance of the evidence that it

is entitl ed to the requested certification. See , e.g. , Ferris

v. Turlington , 510 So. 2d 292, 294 (Fla. 1987).

33. The District administers a minority business

enterprise program under Part VI, Chapter 40E - 7, Florida

Administrative Code, which is designed to remed y "documented

disparities in District contracting and the present effects of

past marketplace discrimination." Rule 40E - 7.611(1), Florida

Administrative Code.

34. In order to establish eligibility for certification

as a MBE, an applicant must comply wi th the criteria set forth

in Rule 40E - 7.653, Florida Administrative Code. Relevant to

this controversy are the standards in paragraphs (5) and (6)

which require that the minority owner "be the license holder,

or the professional license holder" in the are as being

certified, that the minority owner "possess the authority to

control and exercise dominant control over the management and

daily operations of the business," and that the applicant

demonstrate that "the net worth of the business concern,

together with its affiliates, does not exceed five (5) million

[dollars]" and that it "employs two - hundred (200) or fewer

permanent, full - time employees." The parties have stipulated

that all other criteria have been met.

35. An agency's interpretation of its rul es which it is

charged to administer is to be given great deference, Griffith

v. Dep't of Bus. Reg. , 613 So. 2d 930, 931 (Fla. 3d DCA 1993),

and unless the interpretation is clearly erroneous, it will

not be overturned. See , e.g. , Eager et al. v. Fla. Key s

Aqueduct Authority , 580 So. 2d 771, 772 (Fla. 3d DCA 1991).

In this case, Petitioner has not shown that the District's

interpretation of Rule 40E - 7.653, Florida Administrative Code,

is clearly erroneous or otherwise impermissible.

37. Rule 40E - 7.653(5) , Florida Administrative Code,

requires that "[a]n applicant must establish that the minority

holder seeking certification be the license holder, or the

professional license holder" in the specialty for which

certification is being sought. Because Mr. Ber ryman does not

hold a surveyor's license under Chapter 472, Florida Statutes,

as required by the rule, he cannot qualify as a minority who

is licensed to provide surveying services. This is true even

though as a professional engineer licensed under Chapte r 471,

Florida Statutes, Mr. Berryman can perform virtually all of

the services provided by a licensed surveyor. Indeed, Section

471.005(6), Florida Statutes (2001), defines the scope of

services that a professional engineer can perform as including

"engi neering surveys," a term not otherwise defined. 3

38. The same rule provides that an applicant must

establish that the minority owner "possess[es] the authority

to control and exercise dominant control over the management

and daily operations of the busi ness." Because the greater

weight of evidence shows that Mr. Berryman has absolute

control over the manner in which the BHI Board members vote,

and BHI controls a majority of the joint venture votes, it is

concluded that Mr. Berryman has real, substantial , and

continuing control over the joint venture, as required by the

rule.

39. Finally, the more persuasive evidence shows that

during its latest fiscal year, Petitioner's net worth was less

than $5 million and that it employed fewer than 200 permanent,

fu ll - time employees. Accordingly, this requirement of the

rule has been met.

40. In summary, except for the requirement that the

minority owner hold a surveyor's license, Everglades meets all

requirements for licensure. Given this deficiency, the

applicat ion must be denied.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions

of Law, it is

RECOMMENDED that the South Florida Water Management

District enter a final order denying the application of

Everglades Surveying Joint Venture for certification as a

minority business enterprise.

DONE AND ENTERED this 4th day of September, 2002, in

Tallahassee, Leon County, Florida.

___________________________________

DONALD R. ALEXANDER

Administrative Law Judge

Division o f Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative He arings

this 4th day of September, 2002.

ENDNOTES

1/ Mr. Berryman did not initially appoint himself to the Board

since he believed he already exercised absolute control over

the votes of Mr. Stokes and Mr. Sharpe, and he does not appoint

himself to ev ery committee, board, or group formed by one of

his companies.

2/ According to Mr. Berryman, he can perform all services

normally done by a surveyor except sign a boundary survey.

This testimony was not contradicted.

3/ At one time, former Rule 21H - 18.11(4), Florida

Administrative Code, provided an extensive definition of the

term "engineering survey," but the rule was later repealed.

COPIES FURNISHED:

Henry Dean, Executive Director

South Florida Water Management District

Post Office Box 24680

Wes t Palm Beach, Florida 33416 - 4680

Catherine M. Linton, Esquire

South Florida Water Management District

Post Office Box 24680

West Palm Beach, Florida 33416 - 4680

Marlon A. Hill, Esquire

DelancyHill, P.A.

1200 Brickell Avenue

Miami, Florida 33131 - 3255

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days of 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.