12-000846BID Labcorp vs. Department Of Health Status: Closed Recommended Order on Monday, May 7, 2012.

Summary: Petitioner failed to prove that the Department's rejection of all bids due to an omitted sentence in the Basis of Award provision is illegal, arbitriary, dishonest, or fraudulent.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LABCORP , )

)

Petitioner, )

)

vs. )

)

DEPARTMENT OF HEALTH , ) Case No. 1 2 - 0846BID

)

Respondent. )

)

R ECOMMENDED ORDER

On April 3 , 201 2 , a duly - noticed hearing was held in

Tallahassee , Florida, before F. Scott Boyd, an Administrative

Law Judge assigned by the Division of Administrative Hearings .

APPEARANCES

For Petitioner: Robert Raymond Hearn , Esquire

Sarah Kathleen Tolle, Esquire

Phelps Dunbar LLP

Suite 1900

1 00 South Ashley Drive

Ta mpa, Florida 33602

For Respondent: Janine Bamping Myrick, Esquire

Abraham Shakfeh, Esquire

Depar tment of Health

Bin A02

4052 Bald Cypress Way

Tallahassee, Florida 32399

STATEMENT OF THE ISSUE

Whether Respondent ' s action to reject all bids submitted in

response to ITB DOH 11 - 004, relating to a multi - year contract to

pro vide laboratory services to state and local government

agencies in the State of Florida, is illegal or arbitrary, as

alleged in the Petition.

PRELIMINARY STATEMENT

On December 20, 201 1 , Respondent Department of Health

(Department) advertised an Invitatio n to Bid to solicit

competitive bids for the award of a three - year contract to

provide clinical laboratory services to Florida ' s 67 county

health departments. On January 20, 2012, the Department

announced its intent to award the contract to Laboratory

Cor poration of America ( LabCorp ) . T he ne x t - lowest bidder, Quest

Diagnostics (Quest) , served the Department with a notice of its

intent to protest the decision to award the contract to LabCorp

on January 20, 2012, and filed a formal b id p rotest on

February 6, 2012.

On February 14, 2012, the Department noticed its intent to

reject all bids and to re - solicit bids for the relevant contract

at a later date. Petitioner LabCorp then filed a Notice of

Protest of Respondent ' s decision to reject all bids on

February 16, 2012, and filed its formal bid p rotest o n

February 24, 2012 . On March 6, 2012 , Petitioner ' s bid protest

was referred to the Division of Administrative Hearings for

assignment of an administrative law judge.

Hearing was set for April 2, 2012, and i n response to an

unopposed Motion for Continuance of one day, was moved to

April 3, 2012. At hearing, Joint E xhibits A through X were

admitted into evidence, including a detailed stipulation . Four

witnesses testified, all employees of the Department of H ealth.

Ms. Susan Renee Gregory, D r. Max Salfinger, and Ms. Cheryl

Robinson were called by both P etitioner and Respondent ;

Ms. Sandra Bailey was called by Respondent.

The one - volume T ranscript of the proceedings was filed with

the Division on April 8, 20 12 .

FINDINGS OF FACT

1 . Respondent Department of Health is an agency of the

State of Florida that requires a broad range of clinical

laboratory testing services for the diagnosis, treatment, or

monitoring of diseases, illnesses, and hazards to human hea lth.

2. Petitioner LabCorp is a for - profit corporation

providing nationwide laboratory testing services. It is

authorized to conduct business and operates in the State of

Florida.

3 . On December 20, 201 1 , Respondent advertised an

Invitation to B id (ITB) to solicit competitive bids for the

award of a three - year statewide contract to provide clinical

laboratory services to the Department of Health, primarily

through its county health departments. Petitioner is the

incumbent contractor , and has bee n providing Respondent with

services substantially similar to those solicited in the ITB

since 2005.

4 . In the ITB, t he contract was estimated to require

approximately 861,000 tests annually and to produce

approximately $9,300,000 in annual sales. In fis cal year (FY)

2010 - 11, the total amount received under the existing contract

was $9,320,522.

5 . A Special Condition of the I TB , Section 6.10, entitled

" Basis of Award , " provided :

The Department anticipates making a single

or multiple Contractor awards ba sed on

services provided. Any award shall be based

on the rates for service r equested herein.

The determination shall be based on a

comparative analysis of submitted bids and

existing pricing. The Department reserves

the right to award to either a singl e or

multiple Contractors to meet the needs and

to serve the State of Florida ' s best

interest.

Bids shall be evaluated on the price

submitted and whether the requirements of

the bid are met the multiple awards may be

allowed if the bids are within 10 % of the

lowest bid for the services.

The Department reserves the right to make

awards as determined to be in the best

interest of the State of Florida, and to

accept or reject any and all offers, or

separable portions, and to waive any minor

irregularity , technicality, or omission if

the Department determines that doing so will

serve the State of Florida ' s b est interest.

Bid price shall include all necessary

supplies and equipment to allow proper

collection, preparation, and transportation

of specimens a nd meet all specifications and

conditions. All cost for transportation for

pick - up/delivery must be included in the

unit cost per test.

6 . Attachment I to the ITB, entitled " Specifications of

Clinical Laboratory Services " included at page 21:

Staffing L evels

Each prospective offeror shall include their

proposed staffing for technical,

administrative, and clerical support. A

Contract Representative, Quality Control

Manager, Staff Pathologist, Project Manager,

Technical Support Manager, Technical Supp ort

Staff and statewide field representatives

shall be required. The offeror is

encouraged to provide on an as needed basis,

as an option to the contract, an on - site

Phlebotomist. The successful offeror shall

maintain an adequate administrative

organizat ional structure and support staff

sufficient to discharge its contractual

responsibilities. In the event the

Department determines that the successful

offeror ' s staffing levels do not conform to

those promised in the proposal, it shall

advise the successf ul offeror in writing and

the successful offeror shall have 30 days to

remedy the identified staffing deficiencies.

The successful offeror shall replace any

employee whose continued presence would be

detrimental to the success of the project as

determined by the Department with an

employee of equal or superior

qualifications. The Department ' s contract

manager will exercise exclusive judgment in

this matter.

7 . Attachment III, entitled the " Bid Price Page, "

con sisted of five pages . Following a certi fication page, it

contained three and one - half pages listing 1 19 " core tests " in a

table format. The table contained column s filled with

information as to the " CPT Codes, " the laboratory test name , and

the estimated quantity of that test, a s well as two c olumns

labeled " Price per Test " and " Extended Price " which contain ed no

information, only blank s quares . The blank columns allowed a

bidder to fill in the price of the test, and then multiply that

value times the estimated quantity of that test that had b een

provided by the Department to determine the Extended Price. On

the bottom half of the final page was a notation o f " Grand

Total " with a n empty square underneath the Extended Price

column, to allow a bidder to compute the Grand Total by adding

together all of the Extended Prices. Below the term Grand Total

were additional notations. There was th e phrase " Balance of

Line Tests " followed by " Minimum fixed volume discount off

current published price list for b alance of tests/non - core

tests: " In the same row as this phrase , in the empty square of

the Extended Price column , was a percentage sign, allowing a

bidder to enter a percentage in that space. Below this, there

was a phrase, " Phlebotomy Services: " followed by " $____ HOURLY

RATE " in the same row in the empty square of the Extended Price

column.

8 . The price of a particular test as entered in the Price

per Test column only applied to instances in which the

Department itself would pay for the test, if a third - party payer

was involved, they would pay t heir customary rate.

9. The Basis of Award as published omitted a sentence from

the second paragraph which the Department had intended to

include. The sentence " S ingle award will be made to the

responsive , responsible bidder offering the lowest grand t otal

for the core tests on attachment III " w as supposed to be

inserted , but was not .

10 . Neither Quest nor any other bidder filed a notice of

protest to the terms, conditions, or specifications contained in

the solicitation, including the Basis of Award provision or the

Bid Price Page , within 72 hours of the posting of the

solicitation.

11 . As provided in the ITB, on January 3, 2012, Quest

submitted questions to the Department to be answered prior to

bidding , which the Department answered in writing on January 6,

2012 . Relevant questions and answers read as follows:

Q1) The third party payer bill mix

percentages for major payer groups

(Medicare, Medicaid, Private Insurance,

Capitation, Patient, Client bill and other)

so contractor can confirm and evalu ate the

payers with whom we will need to process

claims.

A: STATEWIDE PERCENTAGES UNKNOWN SINCE IT

IS HANDLED BY CURRENT VENDOR. HOWEVER, THE

MAJOR PAYER GROUPS ARE MEDICARE AND

MEDICAID.

Q2) A list of Private Insurance payers so

contra ctor can verify certification with

those payers.

A: VARIOUS INSURANCE PAYERS, WILL NEED TO

DETERMINE AFTER THE BID IS AWARDED.

* * *

Q4) The Department' s annual spend on send -

out testing for the each of the past five

years.

A : FISCAL YEAR DEPARTMENT DEPARTMENT/THIRD PARTY

FY 10/11 $4,680,833.00 $9,320,522.00

FY 0910 $4,401,298.00 $9,471,529.00

FY 08/09 $3,897,406.00 NOT AVAILABLE

FY 07/08 $5 , 376,868.00 NOT AVAILABLE

FY 06/07 $5,565,934.00 NOT AVAILABLE

12 . As the manager for the laboratory services contract,

Ms. Cheryl Robinson prepared or gave the responses to both the

written pre - bid questions and subsequent verbal questions posed

at the pre - bid conference on behalf of the Department.

13 . The Department ' s w ritten answer to question 1 was not

completely responsive. Quest had asked for bill mix percentages

for the major third - party payers. The Department stated that

statewide percentages were unknown. As it turned out later, the

Department did have historic al information as to percentages

from fiscal year 2009 - 2010 , information that was a bit dated,

but Ms. Robinson did not realize this when she responded .

However, t he Department did note in its response that the major

payer groups were Medicare and Medicai d , which , based on

historical data, the Department anticipated would continue to be

the major third - party payers. While this response did not

indicate what percentage either of these two third - party payers

co nstituted , it did indicate that these were the two largest.

14 . The Department ' s answer to question 2 was, in one

sense, a technically accurate response to an ambiguous question.

The question asks for a list of Private Insurance p ayers. As

the answer note d , until after the contract was awarded, an d

individuals began utilizing laboratory services under it, it

would be impossible to know what private insurance providers

would be involved prospectively . This answer provided no useful

information. The question did not explicitly ask for a list of

his toric private insurance payers under the existing contract,

though it this was the information actually sought by Quest ,

which the Department should have realized .

15 . The Department ' s answer to question 3 was completely

responsive. It provided exact f igures for the amounts of money

spent by the Department under the contract for the previous 5

years. In fact, it also provided additional information not

actually requested Î - specifically, t he total amount of money

spent by the Department and third parti es combined for each of

the previous two fiscal years.

16 . A t the pre - bid conference for the ITB, conducted on

January 6, 2012, vendors verbally posed questions to the

Department, to which the Department verbally responded. Quest

asked, in essence, " Is it possible to get a breakdown of the

t hird - p arty p ay e rs from LabCorp? " The Depar tment responded, in

substance, " No, it is not possible at this time, but the answer

to Q&A #4 should help you determine what the Department and

t hird - p arty spend is unde r the contract. " Since Quest was

asking for information from Lab C orp, it again was requesting

historical information, not future projections , as the

Department understood .

1 7 . The question posed by Quest at the pre - bid conference

was similar to its earli er question regarding bill mix

percentages for the major third - party payers. Again, the

Department did actually have some historical information

responsive to the question at the time it was asked , but

Ms. Robinson was not aware of that.

1 8 . The Bureau o f Laboratories of the Department of Health

was the program office and was responsible for making the

determination as to which bidder would be awarded the contract.

Dr. Max Salfinger is the Bureau Chief of the Bureau of

Laboratories , Florida Department of Health .

19 . Neither Quest nor LabCorp had any information as to

the pricing methodology that the Department would apply in

assessing bids submitted in response to the ITB that was

different from , or in addition to , that set forth in the Basis

of Award a nd the Bid Price Page of the ITB.

20 . On January 18, 2012, both Quest and LabCorp submitted

bids that the Department accepted as responsive to the ITB.

21 . LabCorp ' s bid package did not include the required

staffing plan.

22 . The Department applied th e same pricing methodology

when assessing both Quest and LabCorp ' s bids.

23 . After reviewing both Quest and LabCorp ' s bid s , the

Department determined that LabCorp was the low bidder.

24 . The bid tabulation sheet dated January 20, 2012 , only

shows the " Gr and Total " values submitted by the bidders . It

lists three bidders, one of whom, CentreWell, has a notation

indicating that it was " non - responsive Î did not attend pre - bid

conference. " The bid tabulation sheet does not indicate any

figures for volume dis cou n t pricing for the Balance of Line

tests. It does not contain any reference to an hourly rate for

phlebotomy services. The bid tabulation compared only the

" Grand Total " amounts, reflecting the total of the bids to

provide the 119 core tests.

25 . Th e Grand Total of LabCorp ' s bid was $6,235,265.99.

26 . The Grand Total of Quest ' s bid was $7,922,533.36.

27 . On January 20, 2012, the Department announced its

intent to award the contract subject to the ITB to LabCorp.

28 . On January 25, 2012, Quest ser ved the Department with

a notice of intent to protest the Department ' s decision to award

the contract to LabCorp.

29 . On January 26, 2012, Quest served the Department with

a public records request seeking 19 categories of information

relating to the ITB a nd the then - existing laboratory services

contract between the Department and LabCorp. Quest ' s

January 26, 2012 public records request sought more information

from the Department than the pre - bid questions that it had asked

the Department.

30 . Between app roximately January 26, 2012 , and

February 2, 2012, the Department provided documents to Quest

that were responsive to Quest ' s public records request.

31 . One of the documents the Department provided to Quest

in response to its public records request was L abCorp ' s complete

bid submitted in response to the ITB, which included the test -

specific pricing that LabCorp had offered to the Department.

32 . Another document the Department provided to Quest in

response to its public records request was a lengthy elec tronic

Excel spreadsheet document . M s. Robinson located the Excel

document in an archive folder , using the computer system to

which she has routine access , o nly after looking for more than a

day.

33 . The Excel document was not a regular utilization

rep ort received from LabCorp, but had been received by the

Department on August 10, 2010, as part of a submission from

LabCorp in support of a proposed price increase. It contained

detailed records of specific payments from various third - party

payers under t he contract for FY 2009 - 2010 and consisted of some

698 pages when printed out . It also contained a summary of

these individual payments, both in actual dollar amounts paid

and as percentages, for major payer groups (Medicare, Medicaid,

and Private Insuran ce , for example ) on a month - by - month basis.

The payers identified in the Excel Document did not necessarily

reflect all the same payers that would be responsible for the

reimbursement of tests ordered pursuant to the contract that

would be awarded under t he ITB. It was only historical data,

and not even the most recent historical data. However, the

historic information it contained was responsive to Quest ' s

first written pre - bid question and its first question at the

pre - bid conference .

34 . Ms. Robins on immediately turned the Excel d ocument

over to the Office of the General Counsel because she had not

recalled having it, and was concerned that the information

should have been given to Quest in response to its pre - bid

questions. The Excel d ocument was the only document or written

record in the Department ' s possession, custody, or control at

the time Quest submitted its pre - bid questions which the

Department believes should have been, but was not, produced in

response to those requests. Ms. R o binson tes tified that she

would have given it to Quest when the questions were asked if

she had been aware of it at that time. Any failure of the

Department to provide Quest with public records responsive to

its pre - bid questions was unintentional.

35 . All public records provided to Quest were

s imultaneously provided, as requested, to LabCorp.

36 . On February 6, 2012, Quest served the Department with

a formal Bid Protest claiming, among other things : that

LabCorp ' s bid was non - responsive because it did not includ e a

staffing plan ; that the Department violated the p ublic r ecords

law by failing to produce certain documents, including the Excel

Document, in response to its pre - bid questions ; and that the

Department ' s pricing evaluation was inconsistent with the terms

of the ITB.

37 . LabCorp sought and was granted permission to intervene

in Quest ' s Bid Protest proceeding.

38 . On or about February 10 , 2012, the D epartment held a

meeting to consider the options available to it in respon ding to

the Quest bid protest . This was the only meeting at which it

discussed whether to reject all bids submitted in response to

the ITB. Dr. Max Salfinger, Ms. Jodi Bailey, Ms. Renee Gregory ,

as well as Ms. Jan Myrick and some staff from the Office of the

General Counsel attended th e meeting. Prior to the meeting,

Dr. Salfinger reviewed Quest ' s bid protest , and reviewed some

documents relating to the drafts of the ITB before it was

posted. In addition, Dr. Salfinger was generally familiar with

the utilization data under the current contract.

39 . A s Ms. Gregory later testified, the problems that had

been raised by Quest in its Bid Protest were discussed at the

meeting. The Department considered: LabCorp ' s failure to

include a staffing plan ; core pricing v. balance of line, and

fail ure to comply with a public records request.

40 . At hearing, there was no testimony regarding LabCorp ' s

failure to submit a staffing plan and it is clear that this

issue played little, if any, role in the Department ' s decision

to reject all bids.

41 . T he failure of the Department to provide the Excel

d ocument in response to Quest ' s pre - bid request s for t hird - party

payer bill mix percentages for the major payer groups was also

discussed . The fact that the Department might have violated the

public reco rds law was of great concern. The Department

concluded that there may have been a violation of the public

records law , and that the Department failed to provide all of

the information Quest had asked for in its pre - bid questions.

D r. Salfinger did not pe rsonally review the Excel d ocument .

D r. Salfinger did not personally consider whether or not th e

Excel D ocument should have been given to Quest in response to

its pre - bid request , and there was no discussion about whether

or not the Department ' s failure t o provide it made the

competition more difficult for Quest.

42 . P rior to rejecting all bids, the Department made no

effort to determine whether the information provided in response

to Quest ' s public records request dated January 26, 2012 , would

have had any impact on Quest ' s ability to submit a competitive

bid in response to the ITB had that information been provided

earlier, in response to the pre - bid questions.

4 3 . A failure, or perceived failure, to comply with the

public records law is a collateral issue. A violation of the

public records law, or concern that the Department might suffer

legal consequences for that violation, could only provide a

rational basis to support a decision regarding the solicitation

to the extent it was relevant to the soli citation. Documents

that were not provided in response to pre - bid questions might be

relevant to the solicitation whether or not there was a

violation of the public records law.

4 4 . A failure to provide documents to Quest could be

rationally related to the solicitation only if the failure was

rationally related to Quest ' s ability to submit a competitive

bid.

45 . A failure to even consider whether there is any

rational connection between facts that are found and the choice

that is then made is illogi cal and arbitrary.

46 . Had Respondent considered no other factors relevant to

the solicitation, but decided to reject all bids solely because

of its failure to provide documents to Quest , without even

considering if th at failure was rationally connected to the

solicitation, the decision would have been arbitrary.

47 . The " quality " of the ITB, specifically including t he

missing sentence in the Basis of Award and the ambiguity in the

Bid P rice P age , was another topic discussed at the meeting . The

Departm ent made no effort to determine whether, or to what

degree, the Balance of Line testing prices that Quest and

LabCorp offered in their respective bids would have affected the

total cost of their respective bids. A nalysis of legal counsel

indicated that th e Department had failed to post a high quality

bid document that clearly explained the criteria that w ould be

used in awarding the contract. Prior to the meeting,

Dr. Salfinger had reviewed documents relating to the drafts of

the ITB before it was publish ed , and he also relied upon legal

counsel ' s analysis. D r. Salfinger was aware that what he

considered to be the " major sentence " in the Basis of Award

provision had been inadvertently omitted. He had concern with

" the ov erall message we [were] sending " i n the solicitation.

4 8 . The language in the Basis of Award and the structure

of the Bid Price Page made it unclear that the Department

intended to award a single contract solely on the basis of the

grand total bid for providing the core tests and would not be

awarding separate contracts for individual core tests . While

there was language in other portions of the ITB that suggested

that only a single contract would be awarded, taken as a whole

the ITB was not entirely clear on this point because of the

o mitted sentence. The ITB similarly was un clear as to how the

percentage discount for Balance of Line tests or the hourly rate

for phlebotomy services would be considered in the award of the

contract, if at all.

4 9 . There was no discussion as to whether t he alleged

flaws in th e ITB had actually harmed Quest ' s ability to provide

a competitive bid.

50 . However, a reasonable person could conclude that the

language in the Basis of Award and the structure of the Bid

Price Page could have been a source of conf usion to potential

bidders even if it did not affect the bids of either LabCorp or

Quest. Potential bidders may not have bid due to these

uncertainties , which c ould have affected the solicitation.

Petitioner did not prove that these factors were not cons idered

by the Department.

51 . During the meeting, there was some discussion about

whether the Department should reject all bids. There was no

discussion regarding whether LabCorp would be harmed in any re -

solicitation if all bids were rejected. There was no discussion

as to what the impact o n competition generally would be in any

re - solicitation . Dr. Salfin ger made the decision to reject all

bids.

52 . The Department did not act arbitrarily in its decision

to reject all bids.

53 . As stipulated, Res pondent did not act dishonestly or

fraudulently in rejecting all bids in response to the ITB.

Aside from its contentions that Respondent acted arbitrarily,

Petitioner did not allege that the Department ' s action in

rejecting all bids was otherwise illegal, and Petitioner

provided no evidence indicating that it was.

54 . LabCorp would likely be harmed in any re - solicitation

of bids relative to its position in the first ITB, because

potential competitors would have detailed information about

LabCorp' s earlier bid that was unavailable to them during the

first ITB.

55 . The State of Florida would likely benefit in any re -

solicitation of bids, because all new bidders would be aware of

the bids that were submitted in response to the first ITB , and

would probably tr y to lower their bids from these levels to

improve their chances of being awarded the contract.

5 6 . On February 13, 2012, the Department, as required by

section 120.57(3)(d), Florida Statutes, convened a meeting of

the parties to the Quest Bid Protest p roceeding.

5 7 . At the beginning of the meeting of the parties,

Department counsel announced the Department intended to reject

all bids unless Quest and LabCorp could reach a voluntary,

amicable resolution of the issues raised by Quest.

5 8 . At the meeting of the parties, counsel for LabCorp

expressed concerns over the possibility of the Department

rejecting all bids due to the unduly prejudicial effect of

the disclosure of LabCorp ' s pricing on its ability to compete in

any future re - solicitation of bids fo r the contract.

5 9 . At the same meeting, LabCorp ' s counsel also expressed

concern that Quest ' s Bid Protest had raised non - meritorious

arguments hoping that the Department would reject LabCorp ' s bid

or would reject all bids.

6 0 . In the absence of an agre e d - upon resolution of Quest ' s

bid protest between Quest and LabCorp, on February 14, 2012,

the Department noticed its intent to reject all bids and to

re - solicit bids for the relevant contract at a later date.

Quest ' s protest, which remained pending, ha d n ot been referred

to DOAH for a formal hearing.

61 . As the bidder initially notified that it would be

awarded the contract, Petitioner ' s substantial interests were

affected by the Department ' s subsequent decision to reject all

bids.

62 . On February 16, 2012, LabCorp filed a Notice of

Protest of the Department ' s decision to reject all bids, and

filed its formal Bid Protest on February 24, 2012.

C ONCLUSIONS OF LAW

63 . The Division of Administrative Hearings has

jurisdiction over the subject matter and the parties in this

case under sections 120.569 and 120.57(1), Florida Statutes .

64 . LabCorp ' s Bid Protest was timely filed, and Petitioner

has otherwise complied with all rules and laws relating to the

filing of its Bid Protest, including the timely pos ting of a

protest bond in the appropriate form and amount.

65 . Petitioner demonstrated standing and entitlement to

hearing on Respondent ' s decision to reject all bids. LabCorp

had been initially notified that it would be awarded the

contract, and its s ub stantial interests were affected by the

Department ' s subsequent c hange of action.

66 . LabCorp bears the burden of proof , which rests with

the party protesting the proposed agency action.

§ 120.57(3)(f); State Contracting and Eng . Corp. v. Dep ' t of

Transp. , 709 So. 2d 607, 609 (Fla. 1st DCA 1998).

6 7 . In a proceeding brought to protest the intended

rejection of all competitive proposals, the applicable standard

of review is that developed in Dep ' t of Transp . v. Groves -

Watkins Constructor s , 530 So. 2d 912, 914 (Fla. 1988), a case in

which the Florida Supreme Court held that the administrative law

judge ' s " responsibility is to ascertain whether the agency acted

fraudulently, arbitrarily, illegally or dishonestly. " The

statute was subsequen tly amended to reflect th at this was the

applicable standard when an agency rejects all bids.

§ 120.57(3)(f).

68 . This is a stringent burden. As the First District has

stated, " an agency ' s rejection of all bids must stand, absent a

showin g that the ' purpose or effect of the rejection is to

defeat the object and integrity of competitive bidding. '" Gulf

Real Props., Inc. v. Dep ' t of Health and Rehab. Servs. , 687

So. 2d 1336, 1338 (Fla. 1st DCA 1997) .

69 . The parties here have stipulated that the Department

did not act fraudulently or dishonestly, leaving only the

question of whether the Department ' s intended decision is

illegal or arbitrary.

70 . Petitioner did not allege that the Department ' s action

in rejecting all bids was illegal , a part from its contention

that Respondent ' s action in rejecting all bids was arbitrary ,

and did not prove it was otherwise illegal.

7 1 . An arbitrary decision is one that is not supported by

facts or logic, or is despotic. Agrico Chem . Co. v. Dep ' t of

En v tl . Reg . , 365 So. 2d 759, 763 (Fla. 1st DCA 1978).

72 . Where an agency, in deciding to reject all replies,

has engaged in an honest, lawful, and rational exercise of its

" wide discretion in soliciting and accepting bids for public

improvements " its d ecision will not be overturned, even if it

may appear erroneous and even if reasonable persons may

disagree. Dep ' t of Transp. v . Groves - Watkins Constructors , 530

So. 2d 912, 913 (Fla. 1988) ( quoting from Liberty Co . v. Baxter ' s

Asphalt and Concrete, Inc. , 421 So. 2d 505, 507 (Fla. 1982) ) .

73 . An agency ' s discretion to reject all bids is not

unbridled , however . In applying the " arbitrary or capricious "

st andard of review , it must be determined whether the agency

has : (1) considered all the rel evant fact ors; (2) given actual,

good faith consideration to those factors; and (3) used reason

rather than whim to progress from consideration of each of these

factors to its final decision. Adam Smith Enterprises, Inc. v.

State Dep ' t of Envtl . Reg . , 553 So. 2d 12 60, 127 3 (Fla. 1s t DCA

1989).

7 4 . Petition er demonstrated that Respondent ' s decision to

reject all bids was not based on any factors other than :

LabCorp ' s failure to submit a staffing plan; the failure of the

Department to provide information to Quest i n response to its

pre - bid questions; and perceived flaws in the Basis of Award and

Bid P rice P age of the ITB. Petitioner can prove the

Department ' s action arbitrary only if it proves that these

factors were irrelevant, that good faith consideration was no t

given to the m , or that the Department did not use reason in

progressing from these factors to its decision.

L ack of Staffing Plan

75. Although Quest ' s assertion that LabCorp ' s bid was not

responsive because it failed to include the required staffing

p lan was discussed at the Department ' s meeting, scant evidence

was introduced regarding this factor.

76 . Had Petitioner proved that the omission in its bid

package was a minor irregularity, and that the Department relied

upon this minor irregularity as i ts sole reason for rejecting

all bids, it might have proved that the Department ' s decision

was arbitrary. Cf. Overstreet Paving Co. v. Dep ' t of Transp. ,

608 So. 2d 851 (Fla. 2d DCA 1992)(no public benefit derives from

rejecting low bidder for technical de ficiency in the absence of

unfair competitive advantage). However, Petitioner only

presented evidence that the Department discussed Quest ' s

allegation. There was no testimony or other evidence that the

omission was a minor irregularity. There was no evi dence that a

minor irregularity was irrelevant to the decision to reject all

bids. There was no testimony or other evidence that the absence

of a staffing plan formed even a partial basis of the

Department ' s decision . There was, in fac t, evidence that th e

Department ' s decision was based on other factors.

P re - Bid Questions and Public Records

77 . Testimony indicated that Respondent ' s action in

rejecting all bids was predicated in significant part upon its

conclusion th at it may have violated Florida ' s pu blic records

law, chapter 119, Florida Statutes. Section 119.10 provides for

penalties against public officers who violate its provisions.

78 . The fact that records were requested as part of a

public procurement process would not shield an agency from

c ompliance with the p ublic r ecords law . The motivation of a

requester or the intended use of the public records is

immaterial to the agency ' s obligation to produce the records.

Microdecisions, Inc. v. Skinner , 889 So. 2d 871, 875 (Fla. 2d

DCA 2004).

7 9 . Assuming that Respond ent ' s failure to provide the

Excel d ocument i n response to Quest ' s pre - bid questions was in

fact a violation of the p ublic r ecords law , 1 / it by no means

follows that this alone would provide a basis for the rejection

of all bids. It would be arbitrary to reject all bids because

of a public records law violation if that violation did not

affect the solicitation in any way. Unlike a failure to follow

the noticing requirements of Florida ' s Sunshine L aw , which may

itself re nder govern ment action taken at th ose meetings void, 2 /

violations of the p ublic r ecords law have no such direct effect

on the validity of government action. It would similarly be

arbitrary to reject all bids simply in an effort to avoid

litigation on the public reco rds violation. Cf. Couch Const .

Co. v. Dep ' t of Transp. , 361 So. 2d 172, 175 (Fla. 1 st DCA

1978).

80 . However , regardless of whether or not the failure to

provide the Excel d ocument was a violation of either the public

records law or of Department policy regarding its responses to

pre - bid questions generally, if the Department, in an honest

exercise of its discretion , could reasonably have concluded that

the failure to provide the information did affect the

solicitation, its rejection of all bids must sta nd. A decision

that failure to provide the requested information affected the

solicitation should not be second - guessed, or overturned simply

because other reasonable and well - informed persons might have

reached a contrary result. Scientific Games, Inc. v. Dittler

Bros., Inc. , 586 So. 2d 1128 , 1131 (Fla. 1 st DCA 1991).

81 . The Department concluded that there may have been a

violation of the public records law , and that the Department had

failed to provide all of the information Quest had asked for in

it s pre - bid questions. The issue, then, is whether the

Department subsequently used reason to arrive at its conclusion

that these Department failures had affected the solicitation

process , so that all bids should be rejected. It is

Petitioner ' s burden to p rove that such reasoned consideration

did not take place.

8 2 . Petitioner met that burden by proving that prior to

rejecting all bids, Respondent made no effort to determine

whether its failure to provide Quest the Excel d ocument prior to

bid submission wo uld have any effect on Qu est ' s ability to

submit a competitive bid . Had the Department given good faith

consideration to this, and then reasonably concluded that it s

failure did have some impact on the solicitation , even if others

might disagree, its deci sion would not be arbitrary. However,

Respondent ' s failure to even determine whether there was any

rational connection between the fa cts it found and the

c onclusion it reached was illogical and arbitrary.

83 . Respondent ' s action in rejecting all bids wo uld be

arbitrary if it had been based solely on the conclusion that

there had been a violation of the public records law or of

Department policies without even considering if such violations

had any effect on the solicitation. T he Department also based

it s decision on an other factor , however .

Basis of Award and Bid Price Page

84 . Another concern of the Department, which appeared to

be secondary in nature, concerned the specifications of the ITB.

The evidence showed that at the time the decision to reject all

bids was made, the Department was aware that a critical sentence

had been left out of the Basis of Award provision and that the

Bid Price Page may have been confusing .

85 . While Petitioner prove d that the Department made no

effort to determine whether, or to what degree, the " Balance of

Line " testing prices Quest and LabCorp offered in their

respective bids would have affected the total cost of their

respective bids, this was not sufficient to prove that the

decision to reject all bids based up on the flawed solicitation

was arbitrary.

8 6 . E ven had Petitioner proved more broadly that

Respondent had made no effort to determine whether any aspect of

the flawed ITB could have affected the bids of either Lab C orp or

Quest in any way , the flaw s in t he ITB might have had the effect

of discouraging other bidders . The Department might therefore

reasonably have concluded that the errors in the Basis of Award

and lack of clarity in the Bid Price Page did not accurately

convey the award criteria to potent ial bidders.

87 . The fact that n either Quest nor any other bidder

timely filed a notice of protest to the terms, conditions, or

specifications contained in the solicitation meant that bidders

waived protest on this groun d. 3/ Consultech of Jacksonville v.

Dep ' t of Health , 876 So. 2d 731, 734 (Fla. 1st DCA 2004) . The

f act that bidders may have waived their right to protest the

specifications does not itself preclude Department action to

reject all bids on the ground that the ITB was flawed.

88 . The De partment generally considered the effect of the

flaws in the ITB on the solicitation. Dr. Salfinger reviewed

documents showing earlier drafts of the ITB as it read before it

was published . He relied upon legal counsel ' s analysis in

concluding that the De partment failed to post a high - quality bid

document. He was aware that what he considered to be the " major

sentence " in the Basis of Award provision had been inadvertently

omitted. Dr. Salfinger had concern with " the ov erall message we

[were] sending " in the solicitation. That message was sent to

all potential bidders, not simply to LabCorp and Quest.

8 9 . Caber Systems, Inc. v. Dep ' t of Gen . Servs . , 530

So. 2d 325 (Fla. 1st DCA 1988) , is similar to the instant case

in several res pects. In that case , as here, the agency decided

to reject all bids after a disappointed bidder had protested the

intended award s . In Caber , too, the agency had determined that

the invitation to bid was flawed and did not clearly reflect the

agency ' s award criteria only aft er the original protests were

filed. The court held that the agency ' s rejection of all bids

based upon the inherent ambiguity of the ITB was founded on a

rational basis and could not be characterized as arbitrary or

capricious.

90 . The decision to reje ct all bids after a notice of

award has already been announced and bids have been made public

harms the bidder who would otherwise have received the

contract. 4/ However, the authority for a public agency to do so ,

unless it acts in an arbitrary fashion, w as established in

Caber , supra.

91 . Rejection of all bids solely on the basis that there

could be a benefit to the State of Florida in the form of lower

bids in a re - solicitation would defeat the object and integrity

of competitive bidding , and would be arbitrary. Although there

was some evidence that the Department may have considered

possible benefits to the public, there was no evidence that this

constituted the sole reason.

92 . Petitioner has not met its burden to show that the

rejection of all b ids is illegal, arbitrary , dishonest, or

fraudulent.

RECOMMENDATION

Upon consideration of the above findings of fact and

conclusions of law, it is

RECOMMENDED:

That the Department of Health enter a final order finding

that the rejection of all bids sub mitted in response to ITB DOH

11 - 004 was not illegal, arbitrary, dishonest, or fraudulent , and

dismissing Lab C orp ' s protest.

DONE AND ENTER ED this 7 th day of May , 2012 , in Tallahassee,

Leon County, Florida.

S

F. SCOTT BOY D

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 7 th day of May, 2012.

ENDNOTE S

1 / Although there was testimony that the Department treat s pre -

bid questions that can be responded to with documents as public

records requests, i t is not entirely clear that this is always

required by th e public records law. While any request for

documents or records should be liberally construed , chapter 119

does not impose any statutory duty on an agency to simply

" correspond " with a questioner in response to inquir ies or

request s for information unles s they constitute request s for

documents or records . See Wootton v. Cook , 590 So. 2d 1039

(Fla. 1st DCA 1991) ; Op. Atty. Gen. Fla. 80 - 57 (1980) . As

discussed in the text, this is not an issue that must be decided

here.

2 / Silver Express Co. v. Dist. Bd. of Trustees of Miami - Dade

Comm. College , 691 So. 2d 1099 (Fla. 3rd DCA 1997) (grant ing

injunction to prohibit the award of a two - year contract based

upon the College ' s violation of section 286.011 in the

procurement process).

3/ Quest ' s protest had not alleged any deficiency in the bid

specifications, but had instead alleged that the Department did

not follow the basis of award in evaluating the bids .

4/ The Legislature has determined that in general it is good

public policy to continue to exempt bids submitted to an agency

from the public records law when an agency rejects all bids and

announces an intention to reissue a competitive solicitation.

See s ec . 119.071(1)(b) 3. , Fl a. Stat. But when an agency first

announces an award, and only afterwards announces a reject ion of

all bids, the bids have already become public under (1)(b)2. ,

and the " ex tension " of the exemption is ineffectual.

COPIES FURNISHED:

Robert Raymond Hearn, Esquire

Sarah Kathleen Toole, Esquire

Phelps Dunbar LLP

Suite 1900

100 South Ashley Drive

Tampa, Florida 33602

[e-mail]

Janine Bamping Myrick, Esq uire

Abraham Shakfeh, Esquire

Department of Health

Bin A02

4052 Bald Cypress Way

Tallahassee, Florida 32399

[e-mail]

Erin Levingston, Agency Clerk

Department of Health

Bin A02

4052 Bald Cypress Way

Tallahassee, Florida 32399 - 17 03

Jennifer A. Tschetter, General Counsel

Department of Health

Bin A02

4052 Bald Cypress Way

Tallahassee, Florida 32399

[e-mail]

Steven L. Harris, Interim Secretary

Department of Health

Bin A00

4052 Bald Cypress Way

Tallahassee, Florida 32399

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to sub mit 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 issue the final order in this case.