03-000614BID Great American Financial Resources, Inc. vs. Broward County School Board Status: Closed Recommended Order on Thursday, October 2, 2003.

Summary: Bid protester failed to prove that responsiveness determination or scoring of proposals was clearly erroneous, contrary to competition, arbitrary, or capricious.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GREAT AMERICAN FINANCIAL )

RESOURCES, INC., )

)

Petitioner, )

)

vs. ) Case No. 03 - 0614BID

)

THE SCHOOL BOARD OF BROWARD )

COUNTY, )

)

Respondent. )

_______________________ _______)

RECOMMENDED ORDER

Robert E. Meale, Administrative Law Judge of the Division

of Administrative Hearings, conducted the final hearing in

Fort Lauderdale, Florida, on April 23 - 25, 2003.

APPEARANCES

For Petitioner: William G. Salim, Jr.

Michael W. Moskowitz

Moskowitz, Mandell, Salim & Simowitz, P.A.

800 Corporate Drive, Suite 510

Fort Lauderdale, Florida 33334

For Respondent: Robert Paul Vignola

Assistant General Counsel

Office of the School Board Attorney

Kathleen C. Wright Administration Building

600 Southeast Third Avenue, 11th Floor

Fort Laude rdale, Florida 33301

STATEMENT OF THE ISSUE

The issue is whether, in connection with a procurement of

vendors of tax - sheltered annuity programs for Respondent's

employees, Respondent's failure to select Petitioner's proposal

instead of, or in addition to, the proposals of ten offerors

that were accepted is contrary to the agency's governing

statutes, the agency's rules or policies, or the solicitation

specifications, in violation of Section 120.57(3)(f), Florida

Statutes.

PRELIMINARY STATEMENT

By Reque st for Proposals 23 - 089V dated October 7, 2002,

Respondent requested proposals from vendors of products for a

tax - sheltered annuity program for Respondent's employees.

Offerors submitted their proposals by October 20, 2002.

Respondent's Insurance Advisor y Committee evaluated the

proposals and negotiated contracts with the ten offerors whose

proposals scored the highest. The next step in the procurement

process would have been for the Insurance Advisory Committee to

recommend these offerors to the Superin tendent for

recommendation, in turn, to the School Board. However, prior to

the recommendation of the Insurance Advisory Committee to the

Superintendent, Petitioner, whose proposal had not been selected

by the Insurance Advisory Committee, filed a notice of intent to

protest and formal written protest, pursuant to provisions of

the Request for Proposals.

At the hearing, Petitioner called 11 witnesses, and

Respondent called three witnesses. The following exhibits were

admitted into evidence: Joint Exhibi ts 1 - 42 and 44 - 59,

Petitioner Exhibits 1 - 14, 16 - 91, 94, and 97, and Respondent

Exhibits 1 - 5, 12 - 15, and 17 - 18.

The court reporter filed the transcript on May 29, 2003.

The parties filed their proposed recommended orders on July 22,

2003.

FINDINGS OF FACT

1. On October 7, 2002, Respondent issued RFP 23 - 089V -- Tax

Sheltered Annuity Program for School Board Employees (RFP). The

purpose of the procurement is to select multiple vendors to sell

tax - sheltered annuities to Respondent's 26,000 fulltime

employees through a payroll - deduction plan. In general,

Respondent sought to improve its existing tax - sheltered annuity

program that it offered its employees by selecting vendors whose

products would improve the quality of investment products,

decrease expenses, es tablish service standards, increase

participation, improve the dissemination of program information,

maintain consistent communications, and ensure compliance with

the applicable provisions of the Internal Revenue Code of 1986,

as amended (IRC).

2. Under the existing tax - sheltered annuity program, 31

percent of Respondent's eligible employees make payroll

deductions totalling about $36 million annually to 21 vendors.

If Respondent does not select an existing vendor in the

procurement that is the subject of this case, the vendor's

enrollment will be frozen, and the vendor may not enroll new

members.

3. RFP Section 2.0 seeks annuities and mutual funds, under

IRC Sections 403(b)(1) and 403(b)(7), respectively

(collectively, TSAs), but not life insurance un less directly

connected to an annuity. Section 2.0 states that Respondent

will not contract with "independent agents or brokers," but will

contract "directly with one or more financial organizations

independently or . . . with multiple financial organizat ions

from the same vendor(s)." Section 2.0 explains that it will be

the "carrier's/company's responsibility to appoint, supervise,

and maintain properly licensed and trained agents to offer these

products." Respondent imposed this requirement on vendors so

that they would be directly responsible for the persons who

undertook the marketing of TSAs to Respondent's employees.

4. RFP Section 1.0 includes a certification from the

offeror. Part of the Required Response Form, the certification

states:

I here by certify that: I am submitting the

following information as my firm's

(proposer) proposal and am authorized by

proposer to do so; proposer agrees to

complete and unconditional acceptance of the

contents of Pages 1 through 19 inclusive of

this Request fo r Proposals, and all

appendices and the contents of any Addenda

released hereto; proposer agrees to be bound

to any and all specifications, terms and

conditions contained in the Request for

Proposals, and any released Addenda and

understand [sic] that the following are

requirements of this RFP and failure to

comply will result in disqualification of

proposal submitted; proposer has not

divulged, discussed, or compared the

proposal with other proposers and has not

colluded with any other proposer or party to

any other proposal; proposer acknowledges

that all information contained herein is

part of the public domain as defined by the

State of Florida Sunshine and Public Records

Laws; all responses, data and information

contained in this proposal are true and

a ccurate.

5. RFP Section 3.4 warns: "Any modifications or

alterations to this form shall not be accepted and proposal will

be rejected. The enclosed original Required Response Form will

be the only acceptable form."

6. RFP Section 3.7 sets forth the "m inimum eligibility"

criteria, which an offeror must meet "[i]n order to be

considered for award . . .." The criteria are:

3.7.1 Insurance carriers must be licensed

in the State of Florida and provide a

copy of your license and/or

certificate.

3.7.2 Insurance carriers must have, and

maintain, a minimum size category of

VI and a financial rating of A - from

A.M. Best.

3.7.3 If proposer is proposing a fixed or

variable annuity program, the

proposer must be licensed as a life

insurance carrier within the State of

Florida.

3.7.4 If the proposer is not an insurance

carrier, it shall represent and

warrant that it is a broker - dealer

registered with the U.S. Securities

and Exchange Commission under the

Securities Exchange Act of 1934 and

with any applicable State securities

commission, and also is a member of

the National Association of

Securities Dealers, Inc.

3.7.5 Proposer must be a direct provider of

the product(s) offered versus a

marketing unit for the product(s)

offered.

7. RFP Section 3.8 requires each offeror to complete the

14 - page que stionnaire attached as Attachment A. Section 3.8

states: "If you are unable to answer a question, indicate why.

If you are unable or unwilling to disclose particular

information asked in a question, indicate why."

8. Question 3 of the "Company Informa tion" part of the

questionnaire asks: "How long has your company (not parent

company) been licensed to do business?"

9. Question 4 of the "Company Information" part of the

questionnaire asks: "How long has your company been licensed to

do business in th e State of Florida?"

10. Question 5 of the "Company Information" part of the

questionnaire asks: "In how many states is your company

licensed to do business?"

11. Question 6 of the "Company Information" part of the

questionnaire asks: "Do you currently have all the necessary

licenses and registration to perform the activities proposed?"

12. Question 7 of the "Company Information" part of the

questionnaire asks: "What is your company's (not parent

company) total assets under management for 403(b) Progr ams

including the number of plans and number of participants as of

December 31, 2001?"

13. Question 8 of the "Company Information" part of the

questionnaire asks: "If applicable, what was your company's

ratings during each of the most recent three years? " This

question contains a matrix with the years 2000 - 2002 and four

sources of ratings: ”A.M. Best," "Moody's," "S&P," and "Duff &

Phelps.”

14. Question 13 of the "Company Information" part of the

questionnaire asks: "Provide the name, address, and tel ephone

number of three public entities (preferably public schools)

403(b) clients we may contact as references."

15. Questions 1 and 2 of the "Contract Overview" part of

the questionnaire ask the offeror to identify its investment

options.

16. Questions 7 - 19 of the "Contract Overview" part of the

questionnaire ask the offeror detailed questions about the

expenses associated with its TSA programs.

17. Question 16 of the "Variable Annuity" part of the

questionnaire asks the offeror to identify each variabl e - annuity

fund, by name, that it offers participants. Question 19 of this

part asks for the rate of return for each investment option for

the period ending June 30, 2002. Question 21 of the "Mutual

Fund" part of the questionnaire asks the offeror to iden tify

each mutual fund, by name, that it offers participants.

Question 25 of this part asks for the total cumulative rate of

return for each investment option for the period ending June 30,

2002. Question 26 of this part asks for the Morningstar Rating

fo r each investment option, as of June 30, 2002, if applicable.

18. Question 29 of the "Contract Overview" part of the

questionnaire asks if the offeror will provide a toll - free and

local number for participants to conduct specified financial

transactions, including changing investment mixes and

beneficiaries. Question 30 of the "Contract Overview" part of

the questionnaire asks the same question regarding internet

access for participants.

19. Question 22 of the "Administration" part of the

questionnaire a sks: "Do you offer electronic investment advice

to program participants? . . ."

20. Question 23 of the "Administration" part of the

questionnaire asks: "Do you offer an asset allocation program?

. . ."

21. Question 10 of the "Enrollment Procedures an d

Services" part of the questionnaire asks: "Do you provide any

communications to participants on a regular basis (e.g.,

newsletters)? Please provide examples."

22. Question 11 of the "Enrollment Procedures and

Services" part of the questionnaire asks: "How will you

restrict your representatives from selling other products to

[Respondent's] employees?"

23. Question 12 of the "Enrollment Procedures and

Services" part of the questionnaire asks: "Has your

organization had a SAS 70 internal controls revie w? Please

attach."

24. RFP Section 3.10 states that the "following services

are requested by" Respondent and asks each offeror to "[c]learly

describe how [it] can accomplish each of the following[.]"

Section 3.10.1 provides a matrix with three columns: "Yes, Can

Comply," "Yes, Can Comply But With Deviations," and "No, Cannot

Comply." The rows describe specific services, such as providing

customer service telephone numbers that are local calls, a toll -

free telephone number for employees who reside outsi de the local

area codes, and videotapes or websites educating participants

about TSAs.

25. RFP Section 3.11 requires each offeror to complete

Attachment C, which is a Financial Response form. This document

requires each proposal to list the "annual parti cipant account

charge," "wrap fees," "mortality, expense, [and] administrative

charges," "total fund management or separate account charges for

each fund offered," "front loads," "CDSC or surrender charges &

terms," "other fees & expenses," and "4th quarte r interest

rate." Section 3.11 also requires each offeror to calculate the

"cumulative account balance," "average compound annual net rate

of return," and "cash surrender value" for a specified sum over

a specified period.

26. RFP Section 3.12 requires e ach offeror to provide the

following information to receive points for minority or women

business enterprises:

3.12.1 Proposers must provide information

regarding diversity of proposer's

company. Complete and submit

Attachment F. Proposer must provide

informati on regarding diversity of

the proposer's local . . . agents

and/or representatives. Complete

and submit Attachment G.

Proposer must provide information

and[/]or documentation of the

Proposing Company's outreach program

for employment and/or contracting o f

local agents.

3.12.2 Proposer shall submit information of

its involvement in the minority

community. Such evidence may

include, but not be limited to,

minority sponsored events, and

purchases made from minority

companies funds targeting minority

students, fin ancial considerations

and/or providing other corporate

resources for minority community

projects.

27. Attachment G provides a chart to be completed by the

offeror. The chart lists "Broker/Agents" and "% of Total

Workforce" and requests the following dat a for each category:

total, non - Hispanic white males, non - Hispanic white females,

non - Hispanic black males, non - Hispanic black females, Hispanic

males, Hispanic females, Asian males, Asian females, American

Indian/Alaskan Native males, and American Indian /Alaskan Native

females.

28. RFP Section 5.0 requires offerors to submit their

proposals by 2:00 p.m. on November 20, 2002. The events

calendar states that, on January 13, 2003, the Evaluation

Committee will review proposals and recommends awards, and, o n

January 21, 2003, Respondent will post the recommendation.

29. RFP Section 6.1 states:

The Superintendent's Insurance Advisory

Committee (hereinafter referred to as

"Committee"), [Respondent], or both reserve

the right to ask questions of a clarifying

n ature once proposals have been opened,

interview any or all proposers that respond

to the RFP, or make their recommendations

based solely on the information contained in

the proposals submitted.

30. RFP Section 6.2 states:

The Committee shall evaluate a ll proposals

received, which meet or exceed Section 3.7,

Minimum Eligibility Requirements. The

Committee reserves the right to ask

questions of a clarifying nature and

interview any or all proposers that meet or

exceed Section 3.7.

31. RFP Section 6.3 st ates that the Insurance Advisory

Committee (Committee) shall evaluate "[p]roposals that meet or

exceed Section 3.7," pursuant to the following criteria (with

maximum points indicated in parentheses): "Experience and

Qualifications" (30 points), "Scope of Services Provided" (30

points), "Minority/Women Business Enterprise -- Diversity of

Proposer's Company" (5 points), "Documentation of the Proposing

Company's Minority/Women Business Enterprise Outreach Programs"

(5 points), and "Cost of Services Provided" (3 0 points).

32. RFP 6.3 warns: "Except for those requirements stated

in Section 3.7 and Section 9.0, the failure to respond, provide

detailed information or to provide requested proposal elements

may result in the reduction of points in the evaluation

pro cess."

33. RFP Section 6.4 states:

Based upon the results of Section 6.3, the

Committee, at its sole discretion, may:

interview; recommend award to the top ranked

proposer; may recommend award to more than

one top ranked proposer; may short - list the

top ranked proposers (short - list number to

be determined by the Committee) for further

consideration or, may reject all proposals

received.

34. RFP Section 6.5 states:

In the event that the Committee chooses to

short - list proposers, the list of short -

listed proposers may be further considered

by the Committee, [Respondent], or both.

The Committee, [Respondent], or both may re -

interview the short - listed proposers in

order to make an award recommendation (by

the Committee) or an award by [Respondent].

During the interview process, no submissions

made, after the proposal due date, amending

or supplementing the proposal shall be

considered.

35. RFP Section 6.6 states:

In the event that an Agreement between the

Committee, [Respondent] or both, and the

selected proposer(s) is deemed necessary, at

the sole discretion of the Committee,

[Respondent] or both, the Committee will

begin negotiations with the selected

proposer(s). The Committee reserves the

right to negotiate any term, condition,

specification or price with the selected

proposer(s). . . .

36. RFP Section 7.4 provides that the term of the contract

will extend through December 31, 2010, plus possible renewals

through December 31, 2015.

37. RFP Section 8.11 states:

The award of this RFP is subject to the

provisions of Chapter 112, Florida Statutes,

as currently enacted or amended from time to

time. All proposers must disclose with

their proposal the name of any officer,

director or agent who is also an employee of

[Respondent]. In addition, Gallagher

Benefit Services, Inc. will be providing

consulting services to [Respondent] in

relation to this RFP. All proposers must

disclose with their proposal the name of any

officer, director or agent, who is also an

employee of Gallagher Benefit Services, Inc.

or any subsidiaries of Gallagher Benefit

Services, Inc.

38. RFP Section 8.13 provides that, in the event of a

conflict among documents, the order of priority is as follows:

the agreement between offeror and Respondent, RFP addenda (the

latest receiving the highest priority), RFP, and offeror's

proposal.

39. RFP Section 8.22 specifies the procedure under which a

person may protest the specifications of the RFP and warns that

the failure to timely protest the RFP specifications "shall

constitute a waiver of proceedings . . .."

40. RFP Section 8.23 provides that Respondent will post

the Committee's recommendations and tabulations on January 21,

2003. Section 8.23 provides that any person seeking to protest

the "decision or intended decision" shall file a notice of

protest and formal written protest within certain time limits.

Citing School Board Policy 3320 and Chapter 120, Florida

Statutes, Section 8.23 warns that the failure to timely protest

the Committee's recommendations "shall constitute a waiver o f

proceedings . . .."

41. RFP Section 8.24 states that Respondent "reserves the

right . . . to directly negotiate/purchase per School Board

policy and/or State Board Rule 6A - 1.012, as currently enacted or

as amended from time to time, in lieu of any offer received or

award made as a result of this RFP if it is in its best interest

to do so."

42. RFP Section 8.28 states:

8.28.1 By [Respondent]: [Respondent]

agrees to be fully responsible for

its acts of negligence, or its

agents' acts or negligence when

acting w ithin the scope of their

employment and agrees to be liable

for any damages resulting from said

negligence. Nothing herein is

intended to serve as a waiver of

sovereign immunity by [Respondent].

Nothing herein shall be construed as

consent by [Respondent ] to be sued

by third parties in any manner

arising out of any contract.

8.28.2 By VENDOR: VENDOR agrees to

indemnify, hold harmless and defend

[Respondent], its agents, servants

and employees from any and all

claims, judgments, costs and

expenses including, but not limited

to, reasonable attorney's fees,

reasonable investigative and

discovery costs, court costs and all

other sums which [Respondent], its

agents, servants and employees may

pay or become obligated to pay on

account of any, all and every claim

or de mand, or assertion of

liability, or any claim or action

founded thereon, arising or alleged

to have arisen out of the products,

goods or services furnished by the

VENDOR, its agents, servants or

employees; the equipment of the

VENDOR, its agents, servants or

employees while such equipment is on

premises owned or controlled by

[Respondent]; or the negligence of

VENDOR or the negligence of VENDOR's

agents when acting within the scope

of their employment, whether such

claims, judgments, costs and

expenses be for damages, damage to

property including [Respondent]'s

property, and injury or death of any

person whether employed by the

VENDOR, [Respondent] or otherwise.

43. RFP Section 8.35.1 provides that Respondent "reserves

the right to request additional info rmation [or] reject any or

all proposals that do not meet mandatory requirements . . .."

44. RFP Section 8.35.2 provides that Respondent "reserves

the right to waive minor irregularities in any proposal,"

although "such a waiver shall in no way modify t he RFP

requirements or excuse the proposer from full compliance with

the RFP specification and other contract requirements if the

proposer is awarded the contract."

45. RFP Section 8.35.3 states that Respondent "may" reject

a proposal "if it does not conf orm to the rules or requirements

contained in this RFP." Section 8.35.3 cites as "[e]xamples for

rejection" such nonconformities as the failure to file the

proposal by the deadline, the failure to execute and return the

Required Response Form described in RFP Section 1.0, the failure

to respond to all subsections of the RFP, or the addition of

provisions by an offeror that reserve the right to accept or

reject an award or to enter into a contract or add provisions

contrary to those in the RFP.

46. RFP Sec tion 8.42 states: "No submissions made after

the proposal opening, amending or supplementing the proposal

shall be considered."

47. RFP Section 8.43 states: "The Committee and/or

[Respondent] reserves the right to waive minor irregularities or

technical ities in proposals received."

48. RFP Section 9.0 states:

Proposer agrees, by submission of their

[sic] proposal, that any Agreement resulting

from this RFP will include the following

provisions, which are not subject to

negotiation.

Proposer agrees to t he following:

-- Obtain and maintain insurance with

coverage limits in Special Conditions 7.6

for the term of any Agreement.

* * *

49. Twenty - three offerors timely submitted offers in

response to the RFP. In addition to Peti tioner, the offerors

were: American Express Financial Advisors (American Express),

Americo Financial Life and Annuity Insurance Company (Americo),

CitiStreet Associates LLC (CitiStreet), Equitable Life Assurance

Society of the United States and AXA Adviso rs LLC (Equitable),

First Investors Corporation (First Investors), Horace Mann Life

Insurance Company (Horace Mann), ING, Life Insurance Company of

the Southwest (Southwest), Lincoln Financial Group (Lincoln),

MassMutual, MetLife, Inc. (MetLife), Nationwid e Life Insurance

Company (Nationwide), New York Life Insurance & Annuity Corp.

(New York Life), PFS Investments, Inc. (PFS), Pioneer Funds

Distributor, Inc. (Pioneer), Putnam Investments (Putnam),

Security Benefit Group of Companies (Security Benefit), The

Hartford (Hartford), The Legend Group (Legend Group), The

Variable Annuity Life Insurance Company (VALIC), TIAA - CREF, and

Veritrust Financial, LLC (Veritrust).

50. The responsibility of the Committee is to score the

proposals, adopt a scoring threshold, negotiate agreements with

offerors scoring at and above the threshold, and recommend to

the Superintendent those offerors with which the Committee

successfully negotiates agreements. The responsibility of the

Superintendent is to recommend to the School B oard the offerors

that it should accept as vendors of TSAs to its eligible

employees.

51. The Committee comprises 15 members, who represent

administrators and nonmanagerial employees of Respondent, as

well as three of Respondent's nine members of the Sc hool Board.

The purpose of the Committee is to provide the Superintendent

with advice regarding insurance matters. The Superintendent

rarely overrides the recommendations of the Committee. In the

present procurement, Respondent makes no financial contri butions

to any vendors, so Respondent's sole interest is the

satisfaction of its employees. Thus, it is highly unlikely that

the Superintendent or even the School Board would override the

recommendations of the Committee.

52. However, as authorized by RFP Section 8.23, Petitioner

has protested the recommendations of the Committee. Neither the

Superintendent nor the School Board has yet considered the

Committee's recommendations, which are the sole subject of this

bid protest.

53. Members of the Commit tee received copies of the

proposals shortly after they were submitted. At the same time,

the Committee chair assigned to Respondent's insurance

consultant, Gallagher Benefit Services, Inc. (Gallagher), the

task of examining and evaluating the proposals.

54. Ultimately owned by Arthur J. Gallagher & Company,

Gallagher is part of a large family of corporations involved in

the financial - services industry. Arthur J. Gallagher's annual

revenues exceed $1 billion. Gallagher is the third largest

insurance bro ker in the United States and the fourth largest in

the world. A fee - based consultant, Gallagher employs 1000

persons, and the Gallagher family of corporations employs over

7000 persons. GBS Retirement Services, Inc., which is a broker -

dealer and part of the Gallagher family of corporations, manages

over $3 billion in retirement plan assets.

55. In examining and evaluating the proposals, Gallagher

prepared an Analysis of Proposals, which it supplied to each

member of the Committee one week prior to its me eting on

January 13, 2003. The Analysis of Proposals contains a useful

glossary of terms, a "Summary of Returns," an "Individual Fund

Expenses Handout," as well as 507 pages of materials consisting

almost exclusively of analysis of offers by way of matric es

reflecting various provisions of the RFP.

56. The Analysis of Proposals comprises four parts:

"Minimum Eligibility," "Experience & Qualifications," "Scope of

Services," and "Cost." The first part corresponds to the

Minimum Eligibility criteria set forth in RFP Section 3.7. The

second, third, and fourth parts correspond to the three 30 - point

scoring categories set forth in RFP Section 6.3 -- omitting only

the two five - point categories for minority or women business

enterprises, which Gallagher did not consider or analyze.

57. As discussed below, Gallagher prepared scoring sheets

for the parts of the Analysis of Proposals corresponding to the

three 30 - point scoring categories. Except for the area of

references, as discussed below, these scoring sheets were

derived from the more extensive information contained in the

Analysis of Proposals. However, Gallagher did not prepare any

synopsis of the Minimum Eligibility analysis contained in the

Analysis of Proposals.

58. Gallagher did not analyze the propos als of New York

Life and Putnam, which submitted proposals, but failed to sign

the Required Response Form. Respondent's Purchasing Department

determined that these unsigned proposals were nonresponsive and

did not forward them to Gallagher for evaluation. Gallagher

determined that each of the 21 remaining proposals met the

Minimum Eligibility criteria. However, as stated in the

Executive Summary of the Analysis of Proposals, Gallagher

relayed the doubts of Respondent's Purchasing Department that

the prop osal of Mass Mutual was signed by an authorized

representative and deferred for the Committee's determination

whether the proposals of PFS, Legend Group, and Veritrust

complied with RFP Section 3.7.5.

59. In general, Gallagher treated the Minimum Eligib ility

criteria as requirements of substance, not form. Thus, if an

offeror neglected to provide the specified documentation in its

proposal, Gallagher researched readily available sources to

determine if the offeror satisfied the criterion.

60. For RFP S ection 3.7.1, which requires that offerors

that are insurers must be licensed in Florida and provide a copy

of their license, Gallagher checked online with the Florida

Department of Financial Services, a publicly available website,

to determine whether eac h such offeror was licensed in Florida.

Gallagher determined that each such offeror was properly

licensed. Gallagher did not recommend the disqualification of

vendors that failed to provide a copy of their current insurance

licenses. By these means, Gal lagher insured that no unlicensed

offeror would be deemed compliant merely by providing an

apparent copy of a license and that no properly licensed offeror

would be deemed noncompliant merely for omitting a copy of its

license or including a copy of an old license.

61. For RFP Section 3.7.2, which requires that offerors

that are insurers have an A.M. Best minimum size category of VI

and financial rating of A - , Gallagher again checked online with

A.M. Best, a subscriber - available website, to determine whe ther

each such offeror was so rated by A.M. Best. Gallagher

determined that each such offeror met the minimum A.M. Best

ratings.

62. For RFP Section 3.7.3, which requires that offerors

that are proposing fixed or variable annuity programs must be

licen sed in Florida as life insurers, Gallagher relied on its

verification under RFP Section 3.7.1. Gallagher reasoned that

Section 3.7.3 was redundant because the sale of such programs

requires licensure only as an insurer, not as a life insurer.

63. For RFP Section 3.7.4, which requires that offerors

that are not insurers must warrant that they are registered

broker - dealers, Gallagher checked other online resources to

verify the status of noninsurer offerors as registered broker -

dealers.

64. For RFP Sect ion 3.7.5, which requires that offerors

must be "direct provider[s] of the product(s) offered,"

Gallagher largely deferred to the Committee because this

criterion is not an industry standard. Finding some doubt as to

two offerors, Gallagher required them to provide letters

clarifying their status as direct providers, but did not analyze

any of the proposals for compliance with this criterion.

65. Gallagher's treatment of the Minimum Eligibility

criteria as requirements imposed upon an offeror's actual

sta tus, and not merely formal requirements imposed upon an

offeror's proposal, is the correct interpretation of RFP

Sections 3.7.1, 3.7.2, and 3.7.3. These sections require that

an offeror, in fact, meet certain requirements. The additional

provision in Sec tion 3.7.1 concerning a copy of an insurance

certificate serves the convenience of Respondent and does not

transform the requirement from one of fact to one of fact and

clerical competence in assembling a proposal.

66. RFP Section 3.7.4 seems to require only a

representation by noninsurer offerors that they are registered

broker dealers. These types of provisions often raise issues in

bid challenges when the procuring agency attempts to verify a

bidder's response. The issue is somewhat simpler in this case,

though, because only four offerors were not insurers: Pioneer,

PFS, Legend Group, and Veritrust. None of these offerors scored

sufficient points to be designated for negotiations. Also,

these four offerors did not compete with Petitioner, which, a s

an insurer, was not required to comply with Section 3.7.4, so

that Gallagher's interpretation of Section 3.7.4, which

effectively recommended that these four offerors proceed to

scoring, was not especially significant to Petitioner. Under

the circumstan ces, Gallagher's interpretation of Section 3.7.4,

which is a reasonable interpretation, if not the better

interpretation, is moot.

67. RFP Section 3.7.5, which requires that the offeror be

a direct provider, was designed by Respondent to ensure

accountabi lity among vendors of TSAs. Gallagher's

determination, in effect, to defer to the Committee any close

determinations concerning an offeror's compliance with this

unusual criterion was entirely reasonable. This decision was

preferable to Gallagher's attem pting to construe this

requirement, with which it had no experience, and possibly

recommend the exclusion of an offeror that Respondent would not

have excluded.

68. Gallagher also prepared "GBS Scoring Sheets" for each

proposal and an overall "Gallagher B enefit Services TSA

Evaluation." Although based on the RFP, the GBS Scoring Sheets

are products of Gallagher's design and are not a comprehensive

restatement of all of the RFP provisions applicable to each

category. The GBS Scoring Sheets identify five s coring items

for Experience and Qualifications, nine scoring items for Scope

of Services Provided, and four scoring items for Cost of

Services Provided. The GBS Scoring Sheets assign a maximum of

ten points for each of the three categories and deduct a

sp ecific number of points from a proposal's score if the

proposal fails to satisfy certain items. For ease of reference,

at the suggestion of Mr. Weintraub, Gallagher tripled its raw

scores, so that the maximum possible scores for each of the

three categori es are 30 points, which is the maximum possible

scores of each of these categories in the RFP.

69. The GBS Scoring Sheets gave each offeror two raw

points in Experience and Qualifications, one raw point in Scope

of Services Provided, and two raw points in Cost of Services.

Petitioner correctly contends in its proposed recommended order

that this feature of the scoring in the GBS Scoring Sheets is

unexplained, but it is also harmless.

70. For each of the three categories, Gallagher identified

items for scoring based in part on the variability of the

proposals concerning their responses to such items. It appears

that Gallagher also drew on its financial expertise in

identifying critical features of the RFP.

71. For Experience and Qualifications, the sco ring items

are: "403(b) Assets," "Number of Participants," "Rating,"

"Years," and "References." For "403(b) Assets," the GBS Scoring

Sheets reduce a score by two points if the value is under $1

billion, by one point if over $1 billion but not over $10

bi llion, and by zero points if over $10 billion. For "Number of

Participants," the GBS Scoring Sheets reduce the score by two

points if less then 100,000 participants or the proposal did not

provide the information, by one point if over 100,000

participants but not over 1,000,000 participants, and by zero

points if over 1,000,000 participants. For "Rating," the GBS

Scoring Sheets reduce the score by one point if the A.M. Best

Rating is A or A - and by zero points if the A.M. Best Rating is

A. For "Years," the GBS Scoring Sheets reduce the score by one

point if less than 10 years. For "References," the GBS Scoring

Sheets reduce the score by two points for "Negative Comments."

72. For Scope of Services Provided, the scoring items are:

"VRS" [Voice Response System], "Internet," "Routine

Communication," "Electronic Investment Advice," "Allocation

Program," "SAS 70," "Restrict Sale of Other Products," "954 Area

Code," and "Video or Website." For "VRS" and "Internet," the

GBS Scoring Sheets reduce the score by one point each for a

limited, rather than full, voice recognition system or Internet

access in terms of the ability of a participant to use this

medium to change his or her beneficiary. For the remainder of

the items, the GBS Scoring Sheets reduce the sc ore by one point

if the proposal fails to comply with the item.

73. For Cost of Services Provided, the scoring items are:

"Fees," "Investment Performance," "Morningstar Ratings," and

"Morningstar Category Rank." For "Fees," the GBS Scoring Sheets

reduce a score by two points if "poor," by one point if

"reasonable expenses relative to universe," and by zero points

if "no front/back end [charge] and competitive total." For

"Investment Performance," the GBS Scoring Sheets reduce a score

by two points if th e proposal did not report performance, by one

point if "wrong date or data," and by zero points if "as

requested." For "Morningstar Ratings," the GBS Scoring Sheets

reduce the score by two points if the average rating is less

than three stars, by one poin t if the average rating is three

stars, and by zero points if the average rating is four or five

stars. For "Morningstar Category Rank," the GBS Scoring Sheets

reduce the score by two points if less than 20 percent of the

funds are in the top half, by one point if more than 20 percent

but not more than 40 percent of the funds are in the top half,

and by zero points if more than 40 percent of the funds are in

the top half.

74. Although the GBS Scoring Sheets obviously produced

scores for the Committee, a p reliminary statement about

Experience and Qualifications in the Executive Summary

underscores Gallagher's intention not to usurp the Committee's

scoring function. Gallagher stated that it was assuming that

Respondent would select multiple vendors to sell TSAs to its

employees; if so, "the experience and qualifications of all

vendors was considered sufficient." If Respondent selected only

one or a more limited number of vendors, Gallagher warned:

"size and experience would become more critical and should be

revisited." In these statements, Gallagher implicitly invited

the Committee to concentrate its scores for Experience and

Qualifications, even though Gallagher's GBS Scoring Sheets did

not do so.

75. The five scoring items for Experience and

Qualificat ions in the GBS Scoring Sheets are fair issues on

which to differentiate proposals. These five scoring items are

derived from provisions of the RFP, and, although other

important provisions are omitted, the included items are

significant. Although perhap s not of direct interest to

Petitioner, which is an insurer, a potential problem existed

with the use of the A.M. Best rating, which is unavailable to

noninsurers. However, Gallagher did not reduce the score of any

of the four noninsurers for lacking a sp ecific A.M. Best rating.

76. Section 403(b) assets and numbers of plan participants

are the subjects of question 7 of the "Company Information" part

of the questionnaire. The A.M. Best rating is a Minimum

Eligibility criterion set forth in RFP Section 3.7.2. Duration

of experience is the subject of questions 3 and 4 of the

"Company Information" part of the questionnaire. References are

requested in question 13 of the "Company Information" part of

the questionnaire.

77. Gallagher's scoring of Experien ce and Qualifications

ranged from a low of 9 points for Americo to a high of 30 points

for Legend Group and TIAA - CREF. Petitioner received a 15, which

is the third lowest score for this section on the GBS Scoring

Sheets. In its proposed recommended order , Petitioner complains

primarily about two aspects of its scoring.

78. First, Petitioner contends that Gallagher incorrectly

deducted two points for the alleged failure of Petitioner's

proposal to state the number of participants. This contention

is co rrect. Petitioner's proposal contained information from

which Gallagher should have determined that the proper score for

Petitioner on this item was - 1 point, not - 2 points, which

Gallagher assigned to Petitioner. When tripled, this deficiency

amounts to three points.

79. However, this scoring anomaly invites consideration of

the relationship of Gallagher's scoring to the Committee's

scoring. As already noted, Gallagher did not attempt to preempt

the Committee's responsibility for scoring. The GBS Sc oring

Sheets assigned Petitioner 15 points for Experience and

Qualifications, but the Committee average score for Petitioner

on Experience and Qualifications was a 19. This was the largest

difference in scoring between the GBS Scoring Sheets and the

Commi ttee average score in Experience and Qualifications. For

only one other offeror, Southwest, did the Committee average

score in this category differ from the GBS Scoring Sheet score

by four points and again the Committee raised Gallagher's score

by this am ount.

80. Overall, though, the average scores that the Committee

assigned each offeror in Experience and Qualifications tracked

the GBS Scoring Sheets scores. Cumulatively, the differences

amounted to only 18 points, so the increases assigned to

Petiti oner and Southwest amount to nearly half of the total

difference between Gallagher and the Committee members. This

fact suggests that the Committee members exercised independence

and may have generated a more reliable score than Gallagher did

for Petition er's proposal for the category of Experience and

Qualifications.

81. Second, Petitioner contends that Gallagher incorrectly

deducted one raw point for references. References was the only

item among the three main scoring categories for which

Respondent's employees collected the data. One of Respondent's

employees in the Benefits Department contacted references for

all the offerors and carefully noted their responses to three

basic questions. The employee consistently applied a simple,

but fair, test for the question at issue, so that an offeror

received credit only if the reference answered, "yes" in

response to a question regarding its satisfaction with the

offeror. One reference of Petitioner answered, "somewhat," and

Petitioner lost credit.

82. Ga llagher merely applied this data to its scoring

matrix when it deducted one raw point from Petitioner's score

for this item in Experience and Qualifications. Petitioner

argues that other offerors would have suffered a reduction in

points, if Gallagher had used another feature to measure

customer satisfaction, such as exclusive reliance on 1 - 800

telephone numbers for service. However, Petitioner has not

demonstrated that reducing credit for the absence of an

affirmative response to a reference check, even in isolation, is

unreasonable, especially when service issues, apart from overall

customer satisfaction, receive considerable attention in the

items cited in the GBS Scoring Sheets for the category of Scope

of Services Provided.

83. In conjunction with it s attack on the reference item

in the GBS Scoring Sheet, Petitioner argues in its proposed

recommended order that investment performance was already

covered in three of four items in the category of Cost of

Services Provided in the GBS Scoring Sheets. How ever,

Gallagher's decision to emphasize performance in its evaluation

of TSAs to be sold to Respondent's employees is entirely

reasonable.

84. The nine scoring items for Scope of Services Provided

in the GBS Scoring Sheets are fair issues on which to

diff erentiate proposals. Telephone and voice response systems

and Internet, as means to change beneficiaries or perform other

transactions, are the subjects of Questions 29 and 30 of the

"Contract Overview" part of the questionnaire. Electronic

investment ad vice and an asset allocation program are set forth

in Questions 22 and 23 of the "Administration" part of the

questionnaire. Routine communications with participants, the

means by which sales representatives will be restricted from

selling other products, and SAS internal controls review are

stated in Questions 10, 11, and 12, respectively, in the

"Enrollment Procedures and Services" part of the questionnaire.

The availability of a local area code and educational video or

website are cited in RFP Section 3.10.1.

85. Gallagher's scoring of the Scope of Services Provided

ranged from a low of 9 points for Americo to a high of 30 points

for Hartford and TIAA - CREF. The next highest score was 27,

which was assigned to CitiStreet, MetLife, Security Benefit, and

VALIC. The next highest score was 24, which was assigned to

five offerors, including Petitioner.

86. Petitioner challenges Gallagher's selection of

criteria, but, for the reasons already noted, they fairly

reflect important features of the RFP concernin g Scope of

Service Provided.

87. Petitioner identifies some scoring anomalies where

other offerors received no point reductions for omissions or

Petitioner received a point reduction when another offeror did

not, although Petitioner handled an item in t he same way.

However, at best, Petitioner showed minor imperfections in

Gallagher's scoring, but did not prove that any such minor

imperfections misinformed the actual scoring by the Committee.

88. Although the average score assigned by the Committee

f or Petitioner in Scope of Services Provided was the same as

that assigned by Gallagher, the difference between the

Committee's average scores and Gallagher's scores was 30 points,

as compared to merely 18 points separating them in Experience

and Qualificat ions.

89. Also, the difference in Experience and Qualifications

between the Committee and Gallagher was the result of nine

increases and one decrease by the Committee. In Scope of

Services Provided, the difference between them was the result of

12 incr eases and 4 decreases. Of the five offerors cited in

Petitioner's proposed recommended order as improperly failing to

receive reductions in the GBS Scoring Sheets, the Committee

reduced the score of one offeror by one point, did not change

the scores of t wo offerors, increased the score of one offeror

by one point, and increased the score of one offeror by two

points.

90. As Petitioner argued in its proposed recommended

order, Gallagher culled a limited number of items from the RFP

for scoring Scope of Services Provided in the GBS Scoring

Sheets. It is as likely as not that the Committee members, many

of whom would be using these vendor services, independently

scrutinized a wider range of services than the nine items

included in the GBS Scoring Sheets.

91. The four scoring items for Cost of Services Provided

in the GBS Scoring Sheets are fair issues on which to

differentiate proposals. "Cost -- Fees" is specified in Questions

7 - 19 of the "Contract Overview" part of the questionnaire and

Attachment C. "I nvestment Performance" is covered in Question

19 of the "Variable Annuity" part of the questionnaire and

Question 25 of the "Mutual Fund" part of the questionnaire. The

"Morningstar Ratings" is the subject of Question 26 of the

"Mutual Fund" part of the q uestionnaire. Although the RFP did

not request any Morningstar Ratings information about variable

annuities or any Morningstar Category Ranks about any mutual or

variable annuity funds, these sources of information about such

investments are readily avail able and reliable. Gallagher's use

of such information as scoring items was reasonable.

92. For "Investment Performance," Gallagher deviated from

its general approach of evaluating actual facts and instead

evaluated formal compliance with the RFP. Point s for this item

reflect the extent to which an offeror reported the information

requested, not the actual performance of the funds. Although

Petitioner argues for a more formal approach elsewhere, it

contends that Gallagher overemphasized form over substa nce by

making this formal item one of only four items that it scored

for Cost of Services.

93. Petitioner's argument is not without its appeal.

However, the RFP amply warned that Respondent might award points

based on formal compliance with the RFP provi sions. Misstated

or omitted data in financial performance is especially

pernicious and, from Gallagher's perspective, probably vexing,

because it impedes analysis of one of the more important

features of the proposed TSAs -- their rates of return. Also, th e

record does not suggest that the Committee members reduced their

scoring exercise to the items used by Gallagher.

94. The three attachments to the Analysis of Proposals all

address cost and performance issues and provide the Committee

members with ample bases on which to score the proposals in

terms of cost and performance, without regard to the four items

selected by Gallagher. The glossary explains common terms,

nearly all of which involve cost and performance. The

Individual Fund Expenses Handout co mprises a series of tables

setting forth specific expenses of specific funds offered by the

offerors. The Summary of Returns lists each fund identified by

each offeror and provides one - , three - , five - , and ten - year

returns.

95. Evidencing perhaps a kee n interest in the cost and

performance of the TSAs in which many Committee members would be

investing, the Committee assigned average scores in Cost of

Services Provided that varied from Gallagher's scores by the

largest amount -- a total of 44 points. The Committee increased

the scores of 15 offerors in Cost of Services and decreased no

scores. Two offerors, TIAA - CREF and Veritrust, received

increases of five points, one offeror, Nationwide, received an

increase of four points, and six offerors, including Petitioner,

received increases of three points.

96. Still, though, Petitioner received an average

Committee score of only 15 points for Cost of Services Provided.

One offeror received the same score, and one offeror received 11

points; the rest of the of ferors received more points, with the

highest score being 26 points.

97. The extensive record on the cost and performance of

the TSAs that offerors proposed to sell to Respondent's

employees provides a rational basis for the low score that

Petitioner re ceived in Cost of Services Provided. The

Individual Fund Expenses Handout reveals that the range of

Petitioner's total fees was from 1.72 percent to 2.69 percent,

with all but three of the funds bearing fees of at least 2.0

percent. Security Benefit, whi ch received the highest score for

Cost of Services, imposed fees ranging from 0.50 percent to 1.94

percent. TIAA - CREF, which received the second highest score for

Cost of Services, imposed fees ranging from 0.34 percent to 0.63

percent. Horace Mann, whic h received the same score as

Petitioner, imposed fees ranging from 1.30 percent to 3.14

percent -- in general, comparable to Petitioner's fees.

98. Likewise, Petitioner imposes the highest back - end load

or surrender charge -- 14 percent -- on its fixed annuity product,

tapering off to 4 percent in the seventh year that the policy

has been in effect. Only three offerors had longer periods

during which they imposed surrender charges.

99. The Summary of Returns reveals the performance among

Petitioner's funds ove r the last ten years. A scorer might

reasonably decide that the high cost of Petitioner's TSAs is not

offset sufficiently by their performance, so as to warrant more

than 15 points. The Summary of Returns lists 33 funds of

Petitioner with total returns f or the past ten years. In

percentages, these cumulative returns, over ten years, are:

- 18.17, - 12.11, - 10.35, - 7.54, - 4.82, - 3.85, - 2.64, - 0.24, 0.41,

1.28, 1.4, 1.54, 4.12, 4.38, 5.2, 5.36, 5.63, 5.92, 5.94, 6.06,

6.37, 6.73, 7.1, 7.87, 8.01, 9.05, 9.21 , 9.96, 9.99, 10.56,

10.6, 10.87, and 13.48.

100. Gallagher did not provide the individual GBS Scoring

Sheets to the Committee. At a Committee meeting on January 13,

2003, Gallagher discussed these individual scoring sheets with

the Committee and prese nted the Committee with a two - page

synopsis of the overall scores of each of the 21 offerors that

it scored for each of the three categories. The two - page

scoring synopsis concludes with the following warning:

This information represents Gallagher

Benefit Services summary comparison of the

proposals and is provided solely to assist

in the evaluation and scoring process. It

is not intended nor should it be construed

as direct guidance as to how these firms

should be scored. As a committee member, it

is wi thin your pervue [sic] to score the

proposals as you deem appropriate using all

of the information and guidance provided to

you. Should you feel based on the

information provided that someone deserves a

significantly greater or lesser score than

might be indicated through our process, you

should rely on your own judgment. Our

ranking was based on a 10 point system. For

illustrative purposes we have multiplied our

rankings by three to more closely reflect

the range on a 30 point system.

101. Overall, given the presence of School Board members

and Respondent's management, as well as the personal attention

that a procurement of this type would generate among

Respondent's nonmanagement employees on the Committee, it is

highly unlikely that Committee membe rs would give undue weight

by the GBS Scoring Sheets or two - page evaluation. It is far

more likely, given the nature of the procurement and membership

of the Committee, that individual members scored these proposals

based on their independent examinations of the proposals.

102. These factors also undermine Petitioner's argument

concerning undisclosed conflicts of interest. As Petitioner

states in its proposed recommended order, no offeror disclosed

the name of any of its officers, directors, or agents we re

employees of Gallagher or its subsidiaries. Employees of

Gallagher serve as agents for many financial service providers,

including some of the offerors in this case. One of Gallagher's

employees is an agent of Petitioner.

103. In its proposed recomme nded order, Respondent states

that the last two sentences of RFP Section 8.11, which impose

the relevant conflict - of - interest provisions, are "ineffectual

and appear to be misplaced." The use of "agent" was ill - advised

because it extends the reach of the conflict - of - interest

provision to a vast number of employees of Gallagher, which is

part of a very large organization, and thus captures mostly

persons who would be unaware of, and uninvolved in, this

procurement.

104. Petitioner argues in its proposed recommended order

that Gallagher failed to disclose the conflicts. RFP Section

8.11 imposes the responsibility to disclose on the offerors, not

Gallagher, and Gallagher was under no responsibility to

discharge an obligation of the financial service provid ers which

it represents. Nondisclosing offerors risked the displeasure of

the Committee, but the failure of the Committee to penalize such

offerors is consistent with the immateriality of these

conflicts, which are the product of an overly broad definitio n.

105. As already noted, Gallagher had no part in the

evaluation of the Minority/Women Business Enterprise -- Diversity

of Proposer's Company (Diversity) and Documentation of the

Proposing Company's Minority/Women Business Enterprise Outreach

Programs (Out reach). Respondent's Minority and Business

Enterprise Contract Compliance Administrator, Michelle - Bryant

Wilcox, initially evaluated the proposals under the Diversity

and Outreach categories.

106. In its proposed recommended order, Petitioner notes

tha t the Diversity and Outreach provisions do not reflect School

Board Policy 7007, which was incorporated by reference into the

RFP. However, no prospective offeror challenged the

specifications of the RFP, which clearly identified the

Diversity and Outreac h scoring categories.

107. However, other challenges of Petitioner concerning

Ms. Wilcox's scoring of the proposals for Diversity and Outreach

are more meritorious. RFP Section 3.12.1 requires offerors to

provide diversity information and outreach info rmation. Section

3.12.2 requires offerors to provide information of their

involvement in the minority community. Respondent's contention

in its proposed recommended order that the flush language on

outreach beneath Section 3.12.1, but above Section 3.12. 2, is

somehow part of Section 3.12.2 is incorrect. Thus, the scoring

categories identified in RFP Section 6.3 clearly draw upon the

two elements of RFP Section 3.12.1, and not upon any part of

Section 3.12.2. Most likely, the language about involvement i n

the minority community was borrowed from another procurement.

108. In any event, Ms. Wilcox decided to count outreach

twice, under both categories, and to count involvement in the

minority community under the Outreach category. These decisions

cannot b e characterized as refinements of the relevant

provisions of the RFP, which already suffered from poor

draftsmanship, but these decisions do not distort or undermine

the procurement process. Outreach is obviously important in

maintaining and increasing th e diversity of a workforce, and

involvement in the minority community may assist in this

important effort.

109. Ms. Wilcox fared more poorly in her construction of

outreach, for which she unduly emphasized internal recruitment

efforts and, thus, the mere existence of antidiscrimination and

affirmative action statements of policy. Also, her counting of

women was unreliable, leaving the impression that, for example,

at times, female blacks might generate double credit and, at

other times, female blacks migh t generate single credit, or

white females might not generate any credit at all.

110. Notwithstanding the shortcomings in Ms. Wilcox's

work, again, the Committee was able to evaluate the proposals

independently when it met on January 13, 2003. At that meeting,

the Committee understood that Ms. Wilcox's analysis was merely

staff analysis. Given the membership of the Committee, each of

the 15 members undoubtedly understood his or her duties to

examine the proposals, not merely Ms. Wilcox's analysis, for

scoring under the Diversity and Outreach categories.

111. Eventually, the Committee assigned Petitioner 3.5

points for Diversity and 3.7 points for Outreach. These were,

respectively, the sixth - and fourth - highest score for these two

categories. The hig her scores for Diversity were 4.5 for VALIC,

4.3 for TIAA - CREF, 4.1 for MetLife, 3.9 for Southwest, and 3.7

for CitiStreet. The higher scores for Outreach were 4.4 for

MetLife, 4.2 for VALIC, and 3.9 for CitiStreet and ING.

112. Even if Petitioner had re ceived the maximum scores

for Diversity and Outreach, its total score would have increased

by only 2.8 points, which would still leave it under the 70 -

point threshold. Petitioner has not demonstrated scoring

irregularities of such a magnitude for itself o r other vendors

with respect to these two categories to require such an

adjustment. Given the resolution of Petitioner's challenge to

the three main scoring categories, Petitioner's challenge to the

Diversity and Outreach categories is therefore immateria l.

113. On January 6, 2003, Respondent sent a letter to all

offerors that the Committee would meet, as disclosed in RFP

Section 5.0, on January 13, 2003, to review proposals and

recommend awards. The letter states that Committee decided to

interview offe rors, so each offeror should have an authorized

representative to speak with the Committee.

114. At the January 13 meeting, the Committee decided to

reject the MassMutual proposal because its Required Response

Form had not been executed by an authorized representative.

With the prior elimination of New York Life and Putnam, the

Committee proceeded to score the remaining 20 proposals.

115. The Committee's average scores were as follows:

TIAA - CREF: 90

VALIC: 88

ING: 86

MetLife: 86

CitiStreet: 82

Security Benefit: 80

Lincoln: 78

Hartford: 75

Equitable: 75

Southwest: 70

Petitioner: 65

Legend Group: 65

American Express: 64

Nationwide: 64

Horace Mann: 63

PFS: 61

First Investors: 60

Pioneer: 56

Veritrust: 51

Americo: 42

116. After examining the scores, the Committee decided to

negotiate contrac ts with the ten offerors that received at least

70 points. Three days later, the Committee successfully

completed negotiations with all ten offerors, and it recommended

that the Superintendent approve these negotiated agreements and

refer them to the Scho ol Board for final approval. Pursuant to

the provisions of the RFP, which provided a point of entry to

protest these actions of the Committee, Petitioner timely filed

a notice of intent to protest and formal written protest.

117. Pursuant to Respondent 's policy, Respondent and

Petitioner presented their dispute to Respondent's Bid Protest

Committee on February 13, 2003. By a two - to - one vote, the Bid

Protest Committee initially decided to lower the scoring

threshold to 65 points, which would include Pet itioner and

Legend Group. However, after receiving advice of Respondent's

counsel concerning the ability of this committee to lower the

scoring threshold set by the Committee, the Bid Protest

Committee rescinded its earlier vote and unanimously voted to

r eject Petitioner's protest. The earlier vote was designed

entirely to mollify Petitioner and was not based on any

determination of a deficiency in the procurement found by the

Bid Protest Committee.

CONCLUSIONS OF LAW

118. The Division of Administrative Hearings has

jurisdiction over the subject matter. Section 120.57(3),

Florida Statutes. (All references to Sections are to Florida

Statutes (2002).)

119. Section 120.57(3)(f) provides:

. . . 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 statu tes, 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 -

protes t proceeding contesting 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.

120. Section 120.57(3)(f) states th at the ultimate issue

in an award case is whether the proposed agency action is

contrary to statutes, rules, policies, or the specifications.

Section 120.57(3)(f) states that the standard of proof in an

award case is whether the proposed agency action is clearly

erroneous, contrary to competition, arbitrary, or capricious

(Clearly Erroneous Standard).

121. Section 120.57(3)(f) also states that an award case,

but not a nonaward case, is a de novo proceeding. In the

typical de novo proceeding, pursuant t o Section 120.57(1)(j),

the administrative law judge finds facts using the preponderance

standard, not a standard more deferential to the agency. In the

typical de novo proceeding, the administrative law judge

determines the basic and ultimate facts, as l ong as they are

determinable by ordinary methods of proof and are not infused

with policy considerations. See , e.g. , Holmes v. Turlington ,

480 So. 2d 150 (Fla. 1st DCA 1985); Bush v. Brogan , 725 So. 2d

1237 (Fla. 2d DCA 1999); Gross v. Department of Healt h , 819 So.

2d 997 (Fla. 5th DCA 2002); South Florida Cargo Carriers

Association, Inc. v. Department of Business and Professional

Regulation , 738 So. 2d 391 (Fla. 3d DCA 1999); and Belleau v.

Department of Environmental Protection , 695 So. 2d 1305 (Fla.

1st DCA 1997).

122. Whether the facts are denominated basic or ultimate,

the factfinding responsibility of the administrative law judge

in the typical de novo hearing encompasses all of the facts that

are necessary to reduce the remaining issues to pure qu estions

of law. Cf. Pierce v. Piper Aircraft Corp. , 279 So. 2d 281

(Fla. 1973). These facts include direct facts and reasonable

inferences drawn from these direct facts. See , e.g. ,

Southpointe Pharmacy v. Department of Health and Rehabilitative

Service s , 596 So. 2d 106 (Fla. 1st DCA 1992), and Heifetz v.

Department of Business Regulation , 475 So. 2d 1277 (Fla. 1st DCA

1985).

123. The Clearly Erroneous Standard, which applies to the

assessment of the proposed agency action, does not conflict with

the re quirement of Sections 120.57(3)(f) and 120.57(1)(j) that

the administrative law judge apply the preponderance standard to

the basic and ultimate facts. The court in Asphalt Pavers, Inc.

v. Department of Transportation , 602 So. 2d 558 (Fla. 1st DCA

1992), held that the administrative law judge retained typical

factfinding responsibility even after Department of

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

(Fla. 1988), in which the Supreme Court held that the hearing

officer occupied a defer ential role in a nonaward case.

(Maintaining the Groves - Watkins deferential standard for a

nonaward case, Section 120.57(1)(j) establishes a less -

deferential standard for an award case.)

124. The Asphalt Pavers court rejected the agency's

attempt, in rel iance upon Groves - Watkins , to preempt the hearing

officer's typical factfinding responsibilities. In Asphalt

Pavers , the agency overturned a finding by the hearing officer

that a bid package had included a disadvantaged business

enterprise (DBE) form. Th e Asphalt Pavers court reaffirmed the

post - Groves - Watkins responsibility of the hearing officer -- as to

factual matters susceptible to ordinary methods of proof and not

infused with policy considerations -- to engage in typical

factfinding, including drawing permissible inferences and making

ultimate findings of fact.

125. In addition to applying the Clearly Erroneous

Standard to the determination whether the proposed decision to

award is contrary to statutes, rules, policies, or the

specifications, the admin istrative law judge applies the Clearly

Erroneous Standard to questions of fact requiring the

application of the agency’s technical expertise, such as

whether, and the extent to which, a specific product or service

qualitatively complies with the specifica tions; questions

infused with agency policy; and all questions of law within the

substantive expertise of the agency, such as the meaning of its

nonprocedural rules.

126. The administrative law judge also applies the Clearly

Erroneous Standard in addres sing mixed questions of fact and

law. In a legal action, a judge resolves mixed questions of

fact and law as a matter of law if only one resolution is

reasonable; if more than one resolution is reasonable, the trier

of fact resolves the issue. See , e.g. , Adams v. G.D. Searle &

Co., Inc. , 576 So. 2d 728 (Fla. 2d DCA 1991), and Hooper v.

Barnett Bank of West Florida , 474 So. 2d 1253 (Fla. 1st DCA

1985).

127. Similarly, in a case requiring the interpretation of

a contract susceptible to more than one interp retation, a judge

determines as a matter of law whether the contract is ambiguous

and, if so, the trier of fact resolves the ambiguity. See ,

e.g. , North Star Beauty Salon, Inc. v. Artzt , 821 So. 2d 356,

(Fla. 4th DCA 2002), and Barclays American Mortgage Corp. v.

Bank of Central Florida , 629 So. 2d 978 (Fla. 5th DCA 1993).

The trier of fact may have to resolve factual disputes to enable

the legal determination of whether a contract is ambiguous.

Board of Trustees of the Internal Improvement Trust Fund v. Lost

Village Corp. , 805 So. 2d 22 (Fla. 4th DCA 2001). These legal

principles governing the interpretation of contracts are

applicable to the interpretation of an agency’s specifications,

bidder’s bid, or offeror’s proposal -- all of which are forms of

off ers to contract.

128. The question often arises whether a deviation in a

bid or offer constitutes a material variance, which the agency

may not waive, or a minor irregularity, which the agency may

waive. Although the ultimate question of responsiveness

r equires the application of a deferential standard, as discussed

below, the fact - intensive determination of such issues as

competitive advantage, which underlie most determinations

concerning the significance of deviations, requires the

application of the p reponderance standard, except in situations

in which the agency’s determination concerning the significance

of a deviation is infused with agency policy or agency

expertise.

129. This dual approach to the standard of proof is

consistent with State Contrac ting and Engineering Corporation v.

Department of Transportation , 709 So. 2d 607 (Fla. 1st DCA

1998). In State Contracting , the court affirmed the agency’s

final order that rejected the recommendation of the

administrative law judge to reject a bid on the ground that it

was nonresponsive. The bid included the required DBE form, but,

after hearing, the administrative law judge determined that the

bidder could not meet the required level of participation by

DBEs. The agency believed that responsiveness dem anded only

that the form be facially sufficient and compliance would be a

matter of enforcement. Rejecting the recommendation of the

administrative law judge, the agency reasoned that the

administrative law judge had failed to determine that the

agency’s interpretation of its rule was clearly erroneous.

130. In affirming the agency’s final order, the State

Contracting court quoted the provisions of Section 120.57(3)(f)

for evaluating the proposed agency action against the four

criteria of contrary to stat utes, rules, policies, and the

specifications and against the Clearly Erroneous Standard.

Addressing the meaning of a de novo hearing in an award case,

the court stated, at page 609:

In this context, the phrase “de novo

hearing” is used to describe a form of

intra - agency review. The [administrative

law judge] may receive evidence, as with any

formal hearing under section 120.57(1), but

the object of the proceeding is to evaluate

the action taken by the agency.

131. The State Contracting court applied th e Clearly

Erroneous Standard to the agency decision to award, the agency’s

interpretation of one of its rules, and the agency’s

determination that the bid was responsive. The State

Contracting case did not feature prominently factual disputes

concerning t he basic and ultimate facts.

132. The present case requires interpretation of the RFP.

Interpretation of the RFP should be "consistent with reason,

probability and the practical aspect of the transaction."

Iniguez v. American Hotel Register Co. , 820 So. 2d 953 (Fla. 3d

DCA 2002) (citing with approval Maines v. Davis , 491 So. 2d 1233

(Fla. 1st DCA 1986).

133. The Committee properly interpreted the RFP to

determine that the 20 offerors met the Minimum Eligibility

criteria. With one exception, the deviati ons did not confer

competitive advantage, and the Committee properly decided to

overlook such technical shortcomings.

134. The lone exception concerns a revision that Equitable

made to the indemnification required of all offerors in the RFP.

This recomme nded order has not addressed the facts concerning

this potentially material deviation. Respondent incorrectly

contends in its proposed recommended order that the deviation is

immaterial because the Committee and Equitable eventually

negotiated it away. H owever, a proposal is not responsive if it

leaves the offeror an option effectively to withdraw its

proposal, post - award, by later declining to remove the

nonresponsive provision from its proposal. The Equitable

modification is not material to the present case because

Respondent awarded contracts to multiple offerors and did not

set ten as the number of desired vendors. Thus, the inclusion

or exclusion of Equitable is irrelevant to Petitioner, absent

evidence, which does not exist, that a significant numb er of

other vendors also submitted nonresponsive proposals.

135. The Commission also properly interpreted the RFP in

connection with its scoring of the various proposals.

136. As for the scoring itself, it is typically easier to

prove that an agency has acted contrary to law or the RFP in

determining whether proposals are responsive than it is to prove

that an agency has acted contrary to law or the RFP in scoring

responsive proposals. The former determination is pass/fail,

but the latter determinati on -- at least with a scoring range of

the scope involved in this procurement -- is a more nuanced

exercise. Also, scoring proposals in response to a reasonably

complex RFP, such as this one, demands application of agency

expertise, so that the bid protestor must prove that the scoring

deviates from law or the RFP by the more deferential Clearly

Erroneous Standard.

137. For the reasons set forth above, Petitioner has

failed to prove, by the Clearly Erroneous Standard, that the

Committee made material scori ng errors in evaluating the

proposals.

138. Petitioner has moved to stay this case until the

Superintendent and School Board act on the recommendation of the

Committee. In its present posture, the agency action falls

short of the intended agency action that normally precedes the

request for a formal administrative hearing. Normally, the

agency has taken the final step toward agency action, and the

only event that prevents the agency action from taking place is

the request of a substantially affected pe rson for a hearing.

139. In this case, pursuant to the RFP, Petitioner has

protested the intended action of the Committee, which,

obviously, is not the intended action of the Superintendent or

School Board. Notwithstanding the improbability of the

Superi ntendent or even the School Board overturning the work of

the Committee, for the reasons previously discussed, the fact

remains that this bid protest has taken place, pursuant to the

RFP, at a stage prior to the end of the agency procurement

process.

140. The administrative law judge declined to stay the

case when presented with this motion at the close of the final

hearing. If the RFP gives an aggrieved party the right to a

hearing prior to the end of the agency process, then the party

and the agency are entitled to such a hearing.

141. Petitioner nonetheless raises a good point in its

request for a stay. Absent the RFP provision creating a point

of entry after the Commission designates successful vendors to

the Superintendent, Petitioner and other lo sing offerors would

have had a chance to argue their cases to the Superintendent and

School Board. In these arguments, Petitioner and other losing

offerors could legitimately make a variety of legal and

political contentions to induce these superior autho rities to

exercise the discretion that Florida bid law vests in them to

evaluate proposals. Petitioner is justifiably apprehensive

that, after a final hearing and recommended order, these

superior authorities may erroneously believe that they now lack

the discretion that they otherwise would have had to evaluate

these proposals.

142. The early point of entry in the RFP is only to

examine the actions of the Committee. Neither the

Superintendent nor the School Board has yet acted on the

Committee's recom mendations, nor may either party act on the

Committee's recommendations until after the disposition of this

case. To avoid the scenario described in the preceding

paragraph, and consistent with the specific agency action

protested (i.e., the Committee's i mminent recommendations to the

Superintendent), this recommended order recommends that the

School Board, on behalf of the Committee, issue the final order

to dismiss Petitioner's protest to the Committee's

recommendations and allow the procurement process to continue

with the Committee's recommendation to the Superintendent, who

may consider the Committee's recommendation, as the School Board

may consider the Superintendent's recommendation, without regard

to this proceeding.

RECOMMENDATION

It is

RECOMM ENDED that, on behalf of the Insurance Advisory

Committee, Respondent enter a final order dismissing the protest

of Great American Financial Resources, Inc., and directing the

Insurance Advisory Committee to proceed to recommend to the

Superintendent the t en offerors of tax - sheltered annuity

programs with which it has negotiated tentative contracts.

DONE AND ENTERED this 2nd day of October, 2003, in

Tallahassee, Leon County, Florida.

S

_______________ ____________________

ROBERT E. MEALE

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

123 0 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 2nd day of October, 2003.

COPIES FURNISHED:

Dr. Franklin L. Till, Jr.

Superintendent

Broward County School Board

600 Southeast Third Avenue

Fort Lauderdale, Florida 33301 - 3125

Daniel J. Woodring, General Counsel

Department of Education

325 West Gaines Street

1244 Turlington Building

Tallahassee, Florida 32399 - 0400

William G. Salim, Jr.

Michael W. Moskowitz

Moskowitz, Mandell, Salim & Simowitz, P.A.

800 Corporate Drive, Suite 510

Fort Lauderdale, Florida 33334

Robert Paul Vignola

Assistant General Counsel

Office of the School Board Attorney

Kathleen C. Wright Administration Building

600 Southeast Third Avenue, 11th Floor

Fort Lauderdale, Florida 33301

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 must be filed with the a gency that

will issue the final order in this case.