02-003790BID Paul J. Sierra Construction, Inc. vs. Southwest Florida Water Management District Status: Closed Recommended Order on Wednesday, December 4, 2002.

Summary: Challenger failed to show that agency`s action in rejecting all proposals to achieve cost savings on project was arbitrary.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

PAUL J. SIERRA CONSTRUCTION, )

INC., )

)

Petitioner, )

)

vs. ) Case No . 02 - 3790BID

)

SOUTHWEST FLORIDA WATER )

MANAGEMENT DISTRICT, )

)

Respondent. )

______________________________)

RECOMMENDED ORDER

This matter was heard before t he Division of

Administrative Hearings by its assigned Administrative Law

Judge, Donald R. Alexander, on October 22, 2002, in Tampa,

Florida.

APPEARANCES

For Petitioner: Stephen H. Kurvin, Esquire

7 South Lime Avenue

Sarasota, Florida 34237 - 6105

For Respondent: Stephen O. Rushing, Esquire

Mark F. Lapp, Esquire

2379 Broad Street

Brooksville, Florida 34604 - 6899

STATEMENT O F THE ISSUE

The issue is whether Respondent's decision to reject all

proposals on RFP No. 008 - 02 to design and build an ancillary

building at the Tampa Service Office was arbitrary, as alleged

by Petitioner.

PRELIMINARY STATEMENT

This matter began on Sep tember 3, 2002, when Respondent,

Southwest Florida Water Management District, advised all

proposers, including Petitioner, Paul J. Sierra Construction,

Inc., that it intended to (1) reject all proposals on RFP No.

008 - 02 to construct an ancillary building at its Tampa Service

Center and (2) revise the scope of the project by combining

the construction of the ancillary building with all other

construction to be taken at the Tampa Service Center. On

September 5, 2002, Petitioner filed a timely Notice of Prot est

to the decision alleging that Respondent's action was

arbitrary. A timely Formal Written Protest was then filed on

September 12, 2002.

After efforts by the parties to resolve the matter were

unsuccessful, the matter was referred by Respondent to the

Division of Administrative Hearings on September 27, 2002,

with a request that an Administrative Law Judge be assigned to

conduct a hearing. By Notice of Hearing dated October 1,

2002, a final hearing was scheduled on October 22, 2002, in

Tampa, Florida.

At the final hearing, Petitioner presented the testimony

of Robert Pellegrino, its division manager; Ricky M. Lawson,

its assistant division manager; Steven M. Long, Mark Leytze,

and Nicholas Spirakis, all employees of Respondent; and

Enrique A. Woodruf f, the project architect. Also, it offered

Petitioner's Exhibits 1 - 9. All were received in evidence

except Exhibit 3. Respondent presented the testimony of Mark

Leytze, a state certified contractor and manager of

Respondent's construction projects, and Thomas G. Dabney, II,

vice - chairman of the Governing Board. Also, it offered

Respondent's Exhibits 2 - 8, 10, 11, and 13, which were received

in evidence. Exhibit 2 is the video deposition of Ronnie E.

Duncan, chairman of the Governing Board, and Exhibit 3 is the

transcription of that deposition.

The Transcript of the hearing was filed on November 10,

2002. Proposed Findings of Fact and Conclusions of Law were

filed by Respondent and Petitioner on November 20 and 27,

2002, respectively, 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:

1. On May 21, 2002, Respondent, Southwest Florida Water

Management District (D istrict), through its contracts manager,

issued an Invitation to Proposal inviting interested persons

to submit competitive sealed proposals on Request for Proposal

No. 008 - 02 (RFP No. 008), which called for the design and

construction of an ancillary buil ding at its District Service

Office (Tampa Service Center) located at 7601 Highway 301

North, Tampa, Florida. The proposed facility is an

approximately 5,000 square foot metal building which will

house the District's field staff. The last paragraph of th e

document provided that "[t]he District shall reserve the right

to reject any or all bids/proposals received with or without

cause."

2. On May 24, 2002, the District placed an advertisement

of its Invitation to Proposal in three local newspapers in

Hil lsborough County. The last paragraph of each advertisement

also provided that the District reserved the right to reject

all bids with or without cause.

3. A mandatory pre - proposal conference was held on

June 6, 2002, which was attended by various inter ested

persons, including Petitioner, Paul J. Sierra Construction,

Inc. (Sierra), a large construction firm located in Tampa,

Florida. Although Sierra engages in general construction, it

also has a division which specializes in projects using Butler

buildi ng systems. A Butler building utilizes a combination of

a metal roof with a pre - engineered structural system.

4. At the pre - proposal meeting, Sierra requested a copy

of RFP No. 008 - 02, which contained the general conditions for

the project, nature of the services required, insurance

requirements, and evaluation procedures. Section 1.13 of that

document provided in relevant part that "the District reserves

the right to reject all proposals and not grant any award from

the issuance of this RFP."

5. Five proposals, including Sierra's, were received and

opened on June 26, 2002. All proposals were reviewed and

independently scored by a three - person selection committee

composed of District staffers. Although Sierra's proposal of

$374,038.00 was not the low est dollar amount submitted, it

received the highest numerical score of 279, edging out two

other proposers who both received scores of 277. The lowest

dollar proposal submitted was $337,000.00.

6. Under the process in place, the selection committee

th en referred the results of its evaluation to a three - person

Facilities Ad Hoc Committee (Committee), comprised of the

Governing Board's chairman, Mr. Ronnie E. Duncan, the

Governing Board's vice - chairman, Mr. Thomas D. Dabney, II, and

the treasurer of the Governing Board, Watson L. Haynes, II.

The Committee was delegated the authority to reject any

proposal without further action by the District's Governing

Board; however, approval of a proposal had to be confirmed by

the Governing Board.

7. Committee mem bers Duncan and Dabney are developers

with extensive experience in construction while Mr. Haynes has

a background in accounting. The Committee was formed in late

2001 for the purpose of achieving more efficiencies in the

construction process, particularly in light of a newspaper's

criticism of the money spent by the District while renovating

Building 2 at its Brooksville office. The Committee was not

obligated to accept the selection committee scoring. Rather,

the Committee had a duty to make the ultimat e decision as to

how taxpayer dollars are best spent.

8. The Committee met on July 30, 2002, to consider the

results of the evaluation. Mr. Haynes was not present. The

two other members voiced concerns regarding the cost of

Sierra's proposal, which wa s more than $74.00 per square foot.

For that reason, the Committee continued the decision on

awarding the contract to its next meeting on August 28, 2002.

It also requested the staff to determine how costs on the

project could be reduced.

9. On July 31, 2002, Sierra contacted the District's

contract manager, Steven M. Long, by telephone and was told

that Sierra had received the highest ranking from the

selection committee, but that the Committee had postponed a

decision until its next meeting because of concerns over the

cost of the project.

10. On August 28, 2002, the Committee reconvened. Due

to a personal conflict, Mr. Haynes was not present. By a 2 - 0

vote, the Committee determined that because of the cost

concerns, all proposals should be rejected, and that the 5,000

square foot ancillary building should be combined with two

other projects being undertaken at the Tampa Service Center

under a single construction manager to reduce costs and

realize other benefits. This decision was conveyed by

teleph one to Sierra on September 1, 2002.

11. On September 3, 2002, formal Notice of Rejection

letters were sent to all five proposers. On September 5,

2002, Sierra filed its Notice of Protest. This was followed

by a Formal Written Protest filed on September 12, 2002, in

which Sierra contended that the Committee's decision was

arbitrary.

12. The Tampa Service Center is a branch office of the

District and includes office, technical, maintenance, and

garage facilities with accompanying parking and roadways.

Existing Building 1 is outdated, crowded, and inadequate and

must be replaced. It will be demolished once the new Building

1 is constructed. Although the District initially decided

that the new building would need 30,000 square feet, it later

determined that the approximately 5,000 square feet needed to

house District field staff could be separated out as an

ancillary building from Building 1 and built as a metal

building. A preengineered metal building was selected since

it would be cheaper and faster to build, and some of the field

staff could be moved out of the crowded existing Building 1 to

the ancillary building while new Building 1 was being

constructed.

13. In addition to the construction of the new Building

1 and the ancillary building, the D istrict intends to re - roof

existing Building 2, demolish Building 1, re - route traffic

flow, install security gates, improve parking, improve the

stormwater system, and install new landscaping.

14. As a general rule, as a project gets larger, there

are eco nomies of scale that result in cost reductions because

the cost per unit becomes less as a greater quantity is

purchased. In deciding to reject all proposals, and combine

all of the work at the Tampa Service Center, the Committee

considered the following advantages to having a construction

manager supervise the entire project:

a. It would reduce potential confusion by better

coordinating the number of contractors and subcontractors on

the job and create a more efficient work flow.

b. Task coordination is essential for safety since

District employees and members of the public will have

continuing access to the Tampa Service Center while all

components of the project are under construction.

c. There will be considerable underground construction

work for the installation of electrical lines, telephone

lines, computer cabling, water lines, fire protection water

service lines, sewer lines, irrigation lines, and stormwater

lines. Improved coordination reduces duplication and the

possibility of putting recen tly completed work at risk for

damage.

d. By working with the architect and the construction

manager, the District could use value engineering to reduce

costs. Value engineering would allow the District to look at

creative ways to reduce costs by subst ituting similar, less

expensive items for more expensive items.

e. Because the District is exempt from paying state

sales tax, the District would save the 7 percent sales tax

since the construction manager sets up accounts with vendors

directly for the District. The District would also save the

contractor's percentage markup that typically encompasses the

7 percent sales tax when it has to be paid.

f. The construction manager system produces a better

selection process and cost savings since the const ruction

manager can be required to obtain at least three proposals for

each of the sixteen divisions of labor.

g. There will be benefits of accountability and

uniformity from having only one person or entity responsible

for any problems encountered.

15 . In addition, the following savings could be realized

through economies of scale by including the ancillary building

in the larger project and under a construction manager:

mobilization; demobilization; site work; excavation for

foundation; concrete for foundation; rough - in electrical work;

rough - in plumbing; fire protection service line; electrical

lines; water lines; computer cabling lines; plumbing;

electrical; insulation; drywall; floor tile; ceiling grid;

ceiling tiles; doors; air conditioning syste m; painting;

landscaping; irrigation sprinkler system; paving work;

stormwater system; and one project manager.

16. At the same time, when the earlier decision was made

to separate the construction of the ancillary building out

from the rest of the Tampa Service Center project to save time

and money, the Committee believed that the ancillary building

would obtain its utility and communication services from an

existing, adjacent building. After later learning that this

was not the case, and that the scope of the work for the

ancillary building had expanded to require considerable

underground site work for its new utility and communication

services, the Committee realized that the cost and other

benefits originally intended had been lost.

17. Finally, new B uilding 1 is only sixty feet from the

ancillary building and will require considerable underground

site work for its new utility and communication services.

Therefore, the Committee concluded that it made more sense to

combine the construction of the new Building 1 and the

ancillary building to achieve cost savings and efficiencies in

the installation of utility and communication services and to

reduce other overlapping aspects of the Tampa Service Center

project.

18. Given the foregoing considerations, t he Committee's

decision to reject all proposals was not arbitrary in any

sense. While it is true that the precise amount of savings to

be realized cannot be quantified, the greater weight of

evidence shows that some savings can be achieved, and that the

C ommittee's decision was based on facts, sound reasoning, and

logic.

CONCLUSIONS OF LAW

19 . 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 Statut es.

20. Section 120.57(3)(f), Florida Statutes (2002),

governs this dispute and provides in relevant part as follows:

(f) In any bid - protest proceeding

contesting an intended agency action to

reject all bids, proposals, or replies, the

standard of revie w by an administrative law

judge shall be whether the agency's intended

action is illegal, arbitary, dishonest, or

fraudulent.

21. Therefore, the District's decision to reject all

proposals, as it did here, will only be overturned if it is

arbitrary, i llegal, dishonest, or fraudulent. In this case,

Petitioner contends that the District's action was arbitrary.

22. An arbitrary decision is one not supported by fact

or logic. Agrico Chemical Co. v. State Dep't of Envir. Reg. ,

365 So. 2d 759, 763 (Fla. 1 st DCA 1978). The inquiry to be

made in determining whether an agency has acted arbitrarily 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 reasonabl e

person would use to reach a decision of similar importance,

the decision is not arbitrary. Dravco Basic Materials Co.,

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

(Fla. 2d DCA 1992).

23. Finally, in reviewing an agency's intended decis ion

to reject all bids, the administrative law judge must give

substantial deference to the agency's determination, owing to

its wide discretion in procurement matters. See , e.g. , BT

Builders, Inc. v. Broward County School Board , DOAH Case No.

01 - 0317BI D (Broward Cty. School Bd., Aug. 7, 2001).

24. Applying the foregoing principles to the facts of

this case, it is concluded that the evidence is insufficient

to show that the District's action was arbitrary. Rather, the

evidence clearly shows that the Committee's decision was an

honest exercise of its wide discretion in the bidding process.

This being so, the decision to reject all bids should be

reconfirmed.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions

of Law, it is

RECOMME NDED that the Southwest Florida Water Management

District enter a final order rejecting all proposals on

RRP 008 - 02.

DONE AND ENTERED this 4th day of December, 2002, 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 (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 4th day of December, 2002.

COPIES FURNISHED:

E. D. "Sonny" Vergara, Executive Director

Southwest Florida Water Management Dis trict

2379 Broad Street

Brooksville, Florida 34604 - 6899

Stephen H. Kurvin, Esquire

7 South Lime Street

Sarasota, Florida 34237 - 6105

Stephen O. Rushing, Esquire

Southwest Florida Water Management District

2379 Broad Street

Brooksville, Florida 34604 - 68 99

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 render a final or der in this matter.