14-002798BID Xerox State And Local Solutions, Inc. vs. Department Of Revenue Status: Closed Recommended Order on Wednesday, February 18, 2015.

Summary: Evidence showed intended ITN award appropriate. Neither statute nor ITN required negotiations to be concluded before intended award posted. Renewal price, unless separately stated, was the proposed contract price.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

XEROX STATE AND LOCAL SOLUTIONS,

INC.,

Petitioner,

vs. Case No . 14 - 2798BID

DEPARTMENT OF REVENUE,

Respondent,

and

SYSTEMS AND METHODS, INC.,

Intervenor.

_______________________________/

RECOMMENDED ORDER

Pursuant to Notice, this cause came on for formal hearing

before Diane Cleavinger, a designated Administrative Law Judge of

the Division of Administrative Hearings, on August 6 and 7, 2014,

in Tallahassee, Florida.

APPEA RANCES

For Petitioner: Eduardo S. Lombard, Esquire

W. Robert Vezina, III, Esquire

Megan Reynolds, Esquire

Andrew Foti, Esquire

Vezina, Lawrence and Piscitelli, P.A.

413 East Park Avenue

Tallahassee, Florida 32301

For Respondent: Cindy Horne, Esquire

Jeffrey Kelly, Esquire

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314 - 6668

For Intervenor: Karen D. Walker, Esquire

Mia McKown, Esquire

Holland and Knight, LLP

Post Office Drawer 810

Tallahassee, Flori da 32302 - 1809

STATEMENT OF THE ISSUE

The issue in this proceeding is whether the Respondent's

intended award of Invitation to Negotiate (ITN) 13/14 - 01 was

contrary to the Department's governing statutes, rules or

policies; contrary to the solicitation sp ecifications; and was

clearly erroneous, contrary to competition, arbitrary or

capricious.

PRELIMINARY STATEMENT

On August 27, 2013, Respondent, Department of Revenue (DOR

or Department), issued Invitation to Negotiate 13/14 - 01, entitled

"State Disbursemen t Unit." On December 2, 2013, replies to the

ITN were submitted. The vendors submitting replies were Xerox

State and Local Solutions, Inc. (Xerox) , and Systems and Methods,

Inc. (SMI). On May 19, 2014, DOR posted its intent to award the

contract to Inte rvenor, SMI.

By Formal Written Protest dated June 2, 2014, Xerox timely

protested DOR's intended decision to award the contract to SMI.

On June 16, 2014, the matter was forwarded to the Division of

Administrative Hearings (DOAH). That same day SMI file d a

Petition to Intervene which was granted by Order issued June 23,

2014.

Prior to hearing, Xerox's Motion for Leave to File Amended

Formal Written Protest Petition was granted by Order dated

August 1, 2014. Additionally, Xerox's Motion for Leave to File

Second Amended Formal Written Protest Petition was granted in

part by Order dated August 16, 2014, but denied as to paragraphs

74 through 82 of the Second Amended Petition since said

paragraphs were untimely challenges to the ITN specifications.

At hearin g, Joint Exhibits 1 through 12 were admitted into

evidence. Xerox called four witnesses to testify: John Kinneer,

Steve Updike, John Polk, and Michael Deckelman. Xerox's Exhibits

numbered 1, 2, 4, 5, 10 through 16, portions of Exhibit 17 1/ ,

Exhibit 32, portions of Exhibit 40 not rela ted to scoring, and

Exhibits 46 through 54 were admitted into evidence. Xerox also

proffered Exhibits 6, 8, 31, 33 through 39, portions of

Exhibit 40 rela ted to scoring, and Exhibits 41 through 45. DOR

called two witnesses to testify: Thomas Mato and Clark Rogers.

Additionally, DOR's Exhibit 5 was admitted into evidence. SMI

did not present any witness test imony. However, SMI Exhibits 1

through 3 were admitted into evidence.

The three - volume Transcript was filed with DOAH on

August 22, 2014. Petitioner and Intervenor filed Proposed

Recommended Orders on September 4, 2014. Respondent filed its

Proposed Recommended Order on September 3 , 2014. After Proposed

Recommended Orders were filed, the case was placed in abeya nce

due to an action in Circuit Court involving Florida's Sunshine

Law. Thereafter, DOR filed a Motion to remove the case from

abeyance. The Motion was granted and the case proceeded to this

Recommended Order which considered the parties earlier - filed

Pr oposed Recommended Orders.

FINDINGS OF FACT

1. The Department is designated by section 409.2257,

Florida Statutes (2014) , as the Title IV - D agency for the State

of Florida. As such, it is responsible for the administration of

the Child Support Enforcemen t program that is required in all

states by the Federal Social Security Act. See § 409.2577, Fla.

Stat.

2 . As part of its duties under c hapter 409, the Department

is authorized to solicit proposals from, and to contract with,

private contractors to devel op, operate, and maintain a state

disbursement unit (SDU). The SDU is responsible for processing,

collecting and disbursing payments for most child support cases

in Florida. The current contractor for the SDU is Xerox whose

contract will expire on Februa ry 28, 2015.

3. In general, Florida procurement law provides a continuum

of competitive procurement processes running from invitations to

bid, through requests for proposals, to invitations to negotiate.

Invitations to bid are used where specifications c an be stated

with certainty with the primary issue being price. Invitations

to negotiate, on the other end of the procurement spectrum, are

used to purchase services when state agencies need to "determine

the best method for achieving a specific goal or s olving a

particular problem." § 287.057(1)(c), Fla. Stat. (2014).

4. In essence, an ITN contains the process a state agency

follows in awarding a contract and the criteria to which a vendor

should reply in order to be considered responsive to the ITN.

Under an invitation to negotiate and even though a reply must be

responsive to the invitation, specifications generally are more

fluid and less mandatory. Price, while important, is negotiable.

Indeed, an agency may "reply shop" the terms, including pri ce, of

one vendor's reply against a competitor's reply in seeking

revisions to that vendor's reply. As such, contract price is a

more fluid concept under an ITN and is not the primary

consideration in an ITN.

5. In this case, the Department was seeking a solution for

processing, collecting and paying child support payments based on

a negotiated per transaction rate resulting from such SDU

services plus negotiated service costs associated with the

operation of the SDU. In fact, contracting for a transac tion -

rate - based price was one of the prime considerations under this

ITN because the Department felt it could gain significant

contract sav ings by utilizing a transaction - rate - based pricing

scheme in its negotiations. Towards that end, the Department

issu ed Invitation to Negotiate 13/14 - 01 on August 27, 2013,

soliciting service solutions for the operation of the SDU.

6. Prior to receiving replies to the ITN, the Department

issued seven addenda to the ITN, provided several replacement

pages to the ITN an d answered numerous vendor questions regarding

the ITN.

7. After the release of the ITN and the seven addenda,

there was no protest filed pursuant to section 120.57, Florida

Statutes, regarding the ITN's specifications. As such, any

objection to those specifications was waived by Petitioner and

Intervenor.

8. In this case, the ITN required a vendor's reply to be in

a particular format. Specifically, the ITN required that a

vendor's reply consist of two comp onents presented in two

multiple - tabbed binde rs: the Administrative/Technical Reply

(Technical Reply) and the Cost Data Reply (Cost Reply).

Technical Replies were to contain non - cost information such as

corporate capability, proposed solution technical components,

quality assurance and monitoring, and a variety of attachments.

Cost Replies were to contain a vendor's Transaction Rate,

Baseline Compensation, Reimbursable Costs, and other cost - related

information as specified by the ITN. Vendors were not permitted

to disclose any cost information in the Technical Reply.

9. Additiona lly, the ITN required that a 15 - page

"Requirements Response Location Form" be completed and provided

by the vendor in its ITN reply. The form listed the section

numbers of the essential criteria of the ITN and the pages o f the

ITN on which each criterion could be found. The form also

contained blank spaces adjacent to each referenced criteria where

the vendor was to list the sections and pages of the vendor's

reply that responded to each of the referenced criteria in the

requirements response form.

10. Relevant to thi s case, Section 1 of ITN 13/14 - 01

contained general definitions of terms used in the ITN. Under

Section 1, a "Responsive Reply" was defined as "[a] Reply

submitted by a responsible Vendor that conforms in a ll material

respects to the solicitation." A "Minor Irregularity" was

defined as "[v]ariations of terms and conditions from the

Invitation to Negotiate which do not affect the price of the

Reply or give the Vendor an advantage or benefit not enjoyed by

th e other Vendors or do not adversely impact the interests of the

State." Additionally, the Department reserved the right to waive

minor irregularities in a vendor's reply.

11. ITN Section 2.4 provided: "The FDOR intends to

negotiate with one or more Vend ors who are compliant with the

mandatory compliance items identified throughout this document."

12. ITN Section 2.5 addressed Desired vs. Mandatory

Requirements and Actions:

Within the ITN the use of "shall" or "must"

indicates a mandatory requirement or

mandatory action. The FDOR may consider

failure to meet a mandatory requirement to be

a material deficiency, in which case the FDOR

may reject the Reply and not consider it

further, or FDOR may have the option to score

that requirement with a zero (0). ( emphasis

added ) .

The use of "should" or "may" indicates a

desired requirement. The FDOR will not

reject a Reply just because it fails to meet

a desired requirement and may result in a

lower score for that requirement.

13. Clearly under the ITN, the man datory nature of a

requirement did not result in the criteria also being material

since the Department could consider failure to meet a mandatory

requirement to be a material deficiency or allow the vendor to

move to the evaluation phase with the materiali ty of such

criteria to be addressed by the evaluators during scoring.

14. ITN Section 3.1.9, titled "Material Requirements

Compliance Review," addressed the ITN's pro - forma review for

responsiveness and provided:

3.1.9.1 Each Vendor shall submit a Repl y

that conforms in all material respects to

this solicitation. Material requirements of

the ITN are those set forth as mandatory or

those that affect the competitiveness of

Replies. All Replies will be reviewed to

determine if they are responsive.

3.1.9 .2 The FDOR will conduct a Material

Requirements Compliance Review of all Replies

submitted in response to this ITN. This

review does not assign scores, but is simply

a pass/fail review. Replies that do not meet

all material requirements of this ITN; fa il

any of the mandatory requirements in this

ITN; fail to timely respond to Reply

Qualification Requests (see Section 3.1.10);

fail to provide the required/requested

information, documents, or materials in the

Reply and/or during the Reply Qualification

Pr ocess; or include language that is

conditional, or takes exception to terms,

conditions and requirements, shall be

rejected as non - responsive and not considered

further.

3.1.9.3 The FDOR reserves the right to

determine whether a Reply meets the material

requirements of the ITN.

15. Addition ally, Section 3.1.10 of the ITN provided that

the Department was to initially review each reply "to determine a

Vendor's compliance with the requirements of the ITN not directly

related to the Technical Specifications and Cost Data of the

ITN." (emphasis added ) . A checklist titled "Material

Requirements Compliance Review" was used to determine the

responsiveness of a reply. The checklist items are not at issue

here. Importantly, per the ITN criteria, the material

r esponsiveness review was a review of the form of a reply and not

a review of the substance of the same. Indeed, deficient replies

could be cured as part of the "Reply Qualification Process."

16. After the responsiveness review, an Evaluation

Committ ee chosen by the Department would score the

Administrative/Technical Volume for each vendor in accordance

with the evaluation criteria in the ITN. Towards that review,

the vendor was required to complete and submit the "Requirements

Response Location Form " as part of its reply. As indicated

earlier, the response location form listed the section numbers of

the essential criteria of the ITN and the pages of the ITN on

which each criterion could be found. The form's criteria

references matched the criteria references in the score sheets to

be used by the individual evaluators to score a vendor's reply.

Further, the evaluation committee used the location form to

locate information within a vendor's reply. In evaluating

replies, the committee members were no t expected to hunt down

information in a vendor's reply outside what was provided by a

vendor on its response location form. Thus, the form is a very

good indication of the materiality or importance of a particular

ITN criteria since those criteria were t he ones on which a

vendor's reply was to be evaluated.

17. Relevant to this case, Section 7.13.1.1 of the ITN

required that a letter of commitment for a surety bond be

submitted with a vendor's cost reply. There was no prescribed

format or wording for th is letter.

18. Additionally, S ection 12 of the ITN contained a table

titled "Attachments and Submittals." According to Section 12,

the table listed a variety of documents "to be completed and

included in Volume One: Administrative/Technical as

indi cated[.]" However, the table clearly listed documents that

the ITN, in other sect ions, required to be in Volume Two , the

Cost Data Reply. In fact, the table itself only indicated who

should complete a document. It did not indicate whether a

document was required , for responsiveness purposes , to be

submitted with a reply. The "as indicated" language, referenced

above, referred to other sections within the ITN to determine if

such documents should be submitted and in what volume they should

be submitted. Other than referral to other sections of the ITN,

Section 12 did not require that any document listed in its table

be attached to the ITN.

19. Two of the documents listed in S ection 12 of the ITN

were "Incident Control Policy and Procedures" and "Ch ange

Management Policy and Procedures." In the column of the table

titled "Attachment" these two documents were listed as "Vendor's

Documents." However, unlike the other documents listed in the

S ection 12 table, these two documents had no attendant

requi rement in other sections of the ITN stating that the two

documents sh ould be provided or where in a v endor's reply the two

documents should be placed.

20. The Department's responses to October 24, 2014, vendor

q uestions 18 and 19 regarding these docu ments were that the two

documents referred to the v endor's corporate documents and that a

copy of such documents were required to be submitted with a

vendor's "proposal." Except for the Department's responses,

there were no written addenda amendments to t he ITN document

making such submission mandatory or indicating in what section of

the vendor's multi - tabbed response the documents should be

included. Further, no addenda amendments were made to the

response location form to cover these documents. Simila rly, no

addenda amendments were made to the evaluator's score sheets to

cover or evaluate these documents. Thus, despite the use of the

word "required" in the Department's response to questions 18 and

19 and in view of the lack of any amendments to the IT N in

relation to these responses, the evidence demonstrated that

submission of these two documents with a vendor's reply was only

desired by the Department and was not mandatorily required under

the ITN for purposes of responsiveness.

21. Section 1 2 of the ITN a lso listed Attachment G,

"Individual Contractor Security and Agreement Form." The form

was to be "completed" by the vendor and subcontractors. As

discussed above, inclusion in the Section 12 table did not

indicate whether a document was req uired for responsiveness

purposes to be submitted with a reply. Those criteria were found

elsewhere in the ITN.

22. Notably, the provision of the standard contract which

would emerge from this ITN required the security form be exe cuted

by subcontr actors within five days of signing the contract. More

importantly, Section 6.6 of the ITN stated that Attachment G

"should" be executed and submitted with a vendor's reply. As

such, the document's attachment was not mandatorily required for

responsivenes s purposes, but was only desired by the Department

at this point in the ITN process since the winning vendor and its

subcontractor's mu st provide the document within five days of

signing the contract.

23. The ITN further provided in Section 10.3.2 that up on

completion of the Administrative/Technical evaluation, the Cost

Data Volume would be publicly opened and scored.

24. Relevant to this case, the ITN addressed renewal cost

and renewal of any future contract in Section 7.4 of the ITN.

Section 7.4 stated , in pertinent part:

RENEWALS

The FDOR reserves the right to renew any

Contract resulting from this ITN. Renewals

shall be subject to the terms and conditions

set forth in the original Contract and

subsequent amendments, . . .

Vendors shall include the cost of any

contemplated renewals in their Reply, . . .

25. In substance the s ection tracked the language of

s ection 287.057(13), Florida Statutes, making any renewal subject

to the same terms and conditions, including price, as the

original contra ct. Th e statute al so requires that the "price" of

any "services to be renewed" be provided in a vendor's reply.

However, if a separate renewal price was not provided in a

vendor's reply, any renewals would be at the price of the

original contract since under th e ITN the original price would be

the renewal price for s ection 287.057(13) purposes.

26. On the other hand, Section 7.4 of the ITN deviated from

the statute's language and required that the "cost" of any

" contemplated renewals" be included in the vendo r's reply.

Such cost information was not part of the criteria requirements

listed for the ITN on the "Requirements Response Location Form"

and was not part of the requirements to be evaluated by the

evaluation committee.

27. Question 39 posited by SMI o n September 18, 2013, asked

about the handling of renewal cost information in the vendor

replies to the ITN. The Department's response to question 39 was

that "renewal rate information" "should" "please" be provided in

summary form in the cost volume of t he vendor's reply to the ITN.

Additionally, the Department's response stated that renewal cost

information was not to be "scored" as part of the transaction

rate. Clearly, the Department in its response viewed this "rate

information" as related to the tr ansaction rate , which was one of

several costs used to calculate total compensation under the ITN.

The Department's ex planation or interpretation of S ection 7.4 has

a reasonable basis since renewal of the contract was statutorily

restricted to the same te rms and conditions of the original

contract, making such renewal cost information immaterial.

Additionally, the renewal information was not part of the scoring

criteria that permitted a vendor to move through the negotiation

process under the ITN and was not required in order for a vendor

to be responsive to the ITN. In essence, the Department's

response made the provision of renewal cost information a non -

essential criteria of the ITN. Non - compliance with such criteria

can be waived by the Department as a minor irregularity. 2/

28. ITN Section 10.3.2.1.4 provided:

Only cost submitted in the prescribed format

will be considered. Alternate cost models

will not be considered for scoring purposes.

Vendors selected for negotiations will be

provided the opportunity to present alternate

costing structures.

"Alternate cost models" referred to models that did not use a

transaction - based rate such as a fixed price model or did not use

the format for calculating compensation required by the ITN.

29. Part o f the format for vendor cost replies included

Attachments K (Transaction Rate Cost Form), L (Baseline

Compensation Form), M (Reimbursable Cost Form), N (Unknown,

Unanticipated, and Unspecified Tasks Cost Form), and O (Total

Compensation Form). Additionall y, after questions posed by the

vendors, the Department supplied an estimate of the number of

transactions it predicted might be processed by the SDU under the

contract. The estimate provided by the Department was 69,425,110

transactions and was based in part on an assumed percentage

increase in actual transactions that occurred under the current

contract in 2012.

30. Attachment K was the form used by a vendo r to explain

and report the per - transaction rate that the vendor would charge

the Department for e ach transaction it processed through the SDU.

The form required disclosure of the costs the vendor included in

determining its transaction rate. The form was required to be

signed by a representative who could bind the vendor.

31. Relative to Attachme nt K under the ITN, neither the

method used nor the costs included by a vendor to calculate its

transaction rate was prescribed by the ITN criteria. There was

no requirement that the Department's estimated number of

transactions of 69,425,110 be used in c alculating the vendor's

transaction rate. The Department only supplied such estimates as

information to the vendor. In fact, a vendor was free to use its

own assumptions regarding the estimated number of transactions

that might be processed through the S DU in its calculation of its

transaction rate. The method of rate calculation did have to be

explained. However, once calculated, the vendor's transaction

rate was carried over to line "B" on Attachment L which, as

discussed below, ultimately filtered th rough to a contract price

and commensurate price of services that might be renewed in

Attachment O.

32. Attachment L was the form used to calculate the

baseline compensation cost for the vendor. The initial form did

not require that the Department's estimate of 69,425,110

transactions be used in the calculation of the baseline

compensation cost. After questions from the vendors and internal

discussions within the Department, Attachment L was revised to

require that the Department's estimated number of transactions be

used on that form. Notably, the Department did not revise

Attachment K to require the use of the estimate when it revised

Attachment L. The formula used to calculate Projected Baseline

Compensation on Attachment L required the vendor t o multiply its

transaction rate from Attachment K by the Department's estimated

transactions of 69,425,110. The requirement to use the

Department's estimated number of transactions on Attachment L

normalized the vendors' baseline compensation calculation so that

an apples - to - apples comparison of baseline compensation could be

made between vendors. Once calculated, the projected baseline

compensation cost calculation was carried over to a line item in

Attachment O , which form calculated the total projected SDU

compensation, the cost factor used in awarding points to evaluate

a vendor's reply.

33. Attachment M was the form on which a vendor was to

submit estimates of actual costs the vendor anticipated it would

expend for performing the contract. Although not specified,

presumably the costs listed by the vendor on Attachment M would

be those not used in the vendor's Attachment K transaction rate

calculation. Ad ditionally, ITN specifications S ections 7.10.4.3

and 10.3.2.3 provided that all vendors "shall ex ecute and submit

Attachment M: Reimbursable Costs." The term "execute" simply

means to complete.

34. Within Attachment M, a list of several anticipated cost

categories (facilities rent/lease, postage, e - disbursement, post

office box fees, etc.) were p rovided by the Department. There

were also several blank fields for additional cost categories

contained on the form. The specifically - listed cost categories

were those categories the Department, in its experience,

anticipated a vendor might incur and fo r which it would reimburse

a vendor. The use of the phrase "will reimburse" in relation to

these anticipated cost categories did not make the reporting of

such costs mandatory given the format of Attachment M and the

instructions later provided on the for m discussed below. Such

anticipation only indicated interest by the Department in those

expense categories but did not create a requirement that those

specific expenses were required to be estimated by a vendor for

purposes of responsiveness to the ITN in order to move forward in

the evaluation and negotiation process. 3/ Indeed, such costs or

expenses were intentionally negotiable under the ITN.

35. Following this list, a box to provide the amount of

each reimbursable cost and ultimate total was provid ed at the end

of Atta chment M. Notably, except for two of the anticipated cost

categories, the box did not include any of the anticipated costs

listed earlier in Attachment M. The two cost categories that

were listed in the reimbursable cost box were "Fa cilities

Rent/Lease" and "CSR Salary Expenses." Both these cost

categories had blank fields where the vendor was required to fill

in an amount in the reimbursable cost box at the end of

Attachment M. Additionally, the instructions for executing the

box c learly stated that amounts for these two categories must be

provided. As indicated, the other anticipated costs contained on

Attachment M were not specifically listed in the reimbursable

cost box. On ly blanks, labeled as "(other)," where amounts for

vend or "proposed" costs could be reported were contained within

the box. Given the format of this form and the instructions at

the top of the reimbursable cost box, amounts for anticipated

cost categories listed in Attachment M, other than the two

required co st categories in the box, were not required to be

proposed by the vendor in completing Attachment M and, as

indicated earlier, such amounts were not required in order for a

reply to be responsive to the ITN. As with the other forms, the

total from the rei mbursable cost box was carried over to a line

item in Attachment O.

36. Attachment O was the form used to calculate the total

projected SDU compensation that constituted the vendor's proposed

contract price. The proposed price was also the price for

se rvices which may be renewed since, unless the vendor proposed a

different renewal price, this was the original price proposed as

a term of the initial contract.

37. Section 10.3.2 sets forth the formula for scoring the

Cost Data Volume of a vendor. The formula was:

Total Available Cost Points x Amount of

Lowest Response Cost/Vendor's Reply Cost

(emphasis in original).

38. The ITN further stated:

"Each Vendor's Cost Data points will be added

to their Administrative/Technical score to

obtain th e Vendor's Total Reply Score. The

Vendor's Total Reply Score will be used to

determine which Vendors the FDOR will

Negotiate with."

Thus, the vendor with the lowest cost would receive the maximum

points available for its Cost Data Volume with all other vendors

receiving a portion of the total available Cost Data points

proportionate to the difference between their proposed cost and

that of the vendor with the lowest cost. Notably, lower cost

points did not disqualify a vendor from selection for

negotia tion. Similarly, a lower Total Reply Score did not

disqualify a vendor from selection for negotiation because the

goal in an ITN procurement is t o develop a range of vendor

replies for negotiation.

39. The ITN, in Section 11.3 , provided broad discretion to

the Department regarding the manner in which negotiations would

be conducted, including obtaining revised offers from v endors.

The section reserved to the Department the right to:

(a) negotiate with one or more, all, or none of the vendors;

(b) elim inate any vendor from consideration during negotiations

as deemed to be in the best interest of the State; and

(c) conduct negotiations sequentially, concurrently, or not at

all.

40. Sections 3.1.19.1 and 11.5 of the ITN provided that at

the "conclusion" of negotiations, the Department would post a

Notice of Intended Agency Decision, as determined to be in the

best interest of the State. However, this language must be read

in conjunction with Section 11.4 of the ITN that authorized the

Department's negot iation team to request a Best and Final Offer

(BAFO) from one or more vendors with which the Department

concluded negotiations. The section reserved to the Department

the right to "request additional BAFO; reject submitted BAFO;

and/or move to the next ve ndor" after a BAFO had been submitted

and negotiations concluded. Additionally, Section 2.6.9

contemplates that discussions, i.e. negotiations, regarding the

form and language of the final contract would continue after the

Notice of Intent to Award was po sted. Section 2.6.9 states:

The FDOR anticipates initially addressing any

contract terms and conditions or concerns

during the Negotiation process and then

continue discussions post award.

Given this language, the Department, in its judgment and acting

i n the best interest of the state, may post an intended award

prior to the complete conclusion of negotiations and finalization

of the contract with a vendor.

41. In this case, SMI and Xerox both timely submitted a

reply to the ITN. Each reply contained a Volume I:

Administrative/Technical; and a Volume II: Cost Data. Both

vendors submitted a completed Requirements Location Response Form

and had information contained in their reply relative to the

references contained in that form. As indicated earlier , under

the ITN's pro forma responsiveness review, the substance of each

vendor's reply was not a determining factor in whether a vendor's

reply was responsive to the ITN for purposes of being accepted

and moving forward in the ITN process.

42. John Kin neer was a purchasing analyst with the

Department. He served as the procurement officer and as a

negotiator with respect to the ITN. Mr. Kinneer reviewed the

technical replies submitted by Xerox and SMI for pro - forma

responsiveness to the ITN sufficient to move forward in the ITN

process. In compliance with the ITN, he checked the Material

Requirements form for both vendors and checked that each vendor

had some information in its technical reply relative to the

response form. Per the ITN, he did not che ck the substance of

that information. In this case, the evidence demonstrated that

both replies met the preliminary responsiveness requirements of

the ITN and properly moved forward in the ITN process to the

evaluation phase.

43. The Department appointed an evaluation team of seven

persons to evaluate and score the Technical Replies. The

Committee consisted of Shannon Herold, Barbara Johnson, Connie

Beach, Stan Eatman, Beth Doredant, Mark Huff, and Craig Curry.

Under the ITN, the evaluation team was tas ked with analyzing the

substance of each reply and scoring them accordingly with any

issues regarding the quality or responsiveness of a vendor's

reply to be addressed in that evaluator's scoring. Each

evaluator reviewed and independently scored each vend or's reply

according to the criteria listed in the "Requi rements Response

Location Form."

44. In this case, both replies contained a surety letter of

commitment as required by Section 7.13.1.1 of the ITN. SMI's

letter was from OneBeacon, the apparent b onding agent in the

letter. Indeed, there was no evidence that OneBeacon was not a

bonding company. The letter indicated that OneBeacon intended to

provide a bond to SMI and that SMI qualified for such a bond in

an amount sufficient to meet the requireme nts of the ITN.

Xerox's letter of commitment was also from an apparent bonding

company and stated only that the bonding company was "prepared to

write the required performance bond" in an unspecified amount and

"subject to standard underwriting conditions ." While one may

quibble about the language used in both Xerox's and SMI's

letters, the evidence showed that both letters were not simply

letters of reference from a bonding company but were letters of

commitment from such companies and were intended as s uch by those

bonding agents. Moreover, the language of both letters was

acceptable to the Department as meeting the requirements of the

ITN. As such, both Xerox and SMI were responsive to the surety

commitment requirements of the ITN.

45. Xerox's reply also attached a copy of its Corporate

Change Control P olicy and Procedures and a copy of its Corporate

Incident Control Policy. These documents were developed by Xerox

over several years of being in the business of providing SDU

services. They were not d eveloped in relation to this ITN and

the evidence did not show that Xerox was disadvantaged either

monetarily or otherwise by producing these documents for the ITN.

On the other hand, SMI did not attach such documents. Instead,

SMI summarized the substan ce of its policy and procedures in

Tabs 3, 10 and 13 of its Technical R eply and included a copy of

SMI's corporate Security Plan encompassing the incident and

control policies of SMI. The quality of SMI's reply was

evaluated by the evaluation committee m embers and scored

according to the criteria relevant to the ITN. Further, the

evidence demonstrated that failure to attach these two documents

would not adversely affect any vendor or impair the procurement

process since a vendor ultimately was required t o agree to adopt

the Department's incident control and change management policies

and procedures. Moreover, as indicated earlier, the documents

were not part of the responsiveness requirements under the ITN.

Therefore, SMI's reply was responsive without the attachment of

these two documents. However, assuming such documents were

required, the evidence demonstrated that the lack of copies of

specific documents titled in a certain way was a minor

irregularity which the Department reasonably waived since SM I

summarized the information relevant to these documents in its

reply. Such waiver was not clearly erroneous, contrary to

competition, arbitrary , or capricious.

46. Additionally, Xerox submitted with its reply an

executed Attachment G, Individual Contrac tor Security Agreement

Form, for both itself and its proposed subcontractors. SMI

submitted an executed Attachment G for itself but did not submit

the attachment for its proposed subcontractors. The form was not

submitted for SMI's proposed subcontractor s because its

subcontractors could not access the Department's online

procurement library to determine what they would be agreeing to

by signing the form. The inaccessibility of the procurement

library was not the fa ult of SMI or its subcontractor s but wa s

due to the Department's failure to provide the policies

referenced. Additionally, the Department's Standard Contract

required Attachment G to be provided within five business days of

contract execution. The evidence did not demonstrate that SMI's

failu re to include an executed Attachment G for its

subcontractors constituted a material deviation from the ITN.

Further, as indicated above, Attachment G was not a mandatory

provision of the ITN for responsiveness purposes. As such, SMI's

reply was responsi ve on this criterion.

47. However, even assuming Attachment G was required under

the ITN, the quality of SMI's reply was evaluated by the

evaluation committee members under the relevant criteria. The

evidence did not demonstrate that SMI obtained an un fair

competitive advantage by not including this form in its reply

since any subcontractor would have to submit the executed form

after contract execution as required by the Department's Standard

Contract. Additionally, the evidence did not demonstrate th at

the procurement process was undermined by the lack of a

subcontractor Attachment G in SMI's reply. Therefore, the lack

of such a document in SMI's reply was reasonably waived by the

Department as a minor irregularity and such waiver was not

clearly err oneous, contrary to competition, arbitrary , or

capricious.

48. The evaluation team completed scoring of the vendor's

technical replies around January 17, 2014. Xerox scored 969

points and SMI scored 943 points. The difference of 26 points

was not shown by the evidence to be significant since both

vendors were experienced and well qualified to perform the

services required to operate the child support State Disbursement

Unit.

49. After the technical replies were evaluated and scored,

the initial Cost Dat a replies of each vendor were opened and the

total costs read aloud at a public meeting. The initial cost

replies were reviewed by Mr. Kinneer to ensure the replies were

mathematically accurate and that the cost forms were used. He

did not review or cons ider the substance of the cost numbers

included on those forms or the narratives in the cost replies.

The substance of the cost replies was left for consideration by

the negotiation team.

50. Xerox's proposed total compensation for years

1 through 5 of the contract was $84,920,072.00. SMI's proposed

total compensation for the same period was $47,996,387.00,

approximately $36 million less than Xerox's proposed

compensation. Neither vendor submitted a separate price for

renewal of the SDU services contr act. Therefore, for purposes of

section 287.057(13), Florida Statutes, the "price" for the

"services to be renewed" was the amount stated above for that

vendor. Both Xerox and SMI were responsive for purposes of the

statutory requirement of section 287.0 57(13).

51. Xerox also submitted a brief summary of renewal cost in

its introductory letter to its cost reply. In essence, Xerox did

not anticipate any renewal cost associated with future renewal of

the contract. SMI, also, did not anticipate any renewa l cost

associated with future renewal of the contract, but did not

submit a statement to that effect. However, as discussed above,

such cost information was not part of the criteria requirements

listed for the ITN on the "Requirements Response Location Fo rm"

and was not part of the requirements to be scored by the

Department for purposes of the cost reply. The evidence

demonstrated that the information was immaterial to the

Department in evaluating these replies. Further, the evidence

did not demonstrate that failure to summarize such renewal cost

information would adversely affect any vendor or impair the

procurement process. Under this ITN and the facts of this case,

the failure to provide such non - essential cost information

constituted a minor irregul arity and was appropriately waived by

the Department. The Department's action in that regard was not

unreasonable and was not clearly erroneous, contrary to

competition, arbitrary , or capricious.

52. The evidence showed that both vendors filled out

Attac hments K, L, M, N , and O. Relative to A ttachment K,

Transaction Rate, both vendors completed the form based on their

unique assumptions regarding the appropriate transaction rate.

Neither vendor used the Department's estimated transaction amount

of 69,42 5,110 transactions. Xerox claimed that its assumptions

took into consideration the Department's estimate and that such

consideration was buried in its ultimate calculation. However,

Xerox's mathematical explanation of its transaction rate

calculation on its Attachment K does not reflect that it used the

Department's estimate in its calculation. In general, the

explanation of its transaction rate contained in its reply

reflects that Xerox based its transaction rate on the current

contract price minus the annualized costs contained in its

Attachment M, divided by the actual number of transactions Xerox

processed in 2012 and discounted by 12% to produce a transaction

rate of 1.150 for the ITN. Clearly, Xerox did not use the

Department's estimate in its calc ulation and, instead, based its

transaction rate on the current contract price, a meth od the

Department warned vendor s against using.

53. Similarly, SMI did not use the Department's estimated

transaction number in its calculation of its transaction rate on

Attachment K. SMI based its proposed rate of .497 on its own

historical transaction volumes from other states. The estimated

number of transactions used by SMI was 45,066,694 transactions.

For unknown reasons, the detailed explanation of the amount of

transactions used by SMI was placed on Attachment L. However,

the explanation was not used on Attachment L and did not impact

the calculation contained on Attachment L. Such misplacement was

immaterial to the ITN and had no impact on the ultimate resu lt in

Attachment O. As such, the misplaced explanation did not render

SMI's Attachment K non - responsive to the ITN and both Xerox and

SMI were responsive to the ITN regarding Attachment K.

54. Likewise, the misplaced explanation of SMI's

transaction volu me did not render SMI's Attachment L non -

responsive to the ITN since it was immaterial to that Attachment.

Further, the evidence demonstrated that both Xerox and SMI used

the Department's estimated transaction volume on Attachment L as

required by the ITN . Therefore, both Xerox and SMI were

responsive to the ITN regarding Attachment L.

55. Relative to Attachment M, Reimbursable Costs, both

vendors supplied cost amounts for rent and CSR salaries as

required by Attachment M. However, neither vendor suppli ed all

of the cost amounts listed in Attachment M's list of anticipated

costs. SMI did not supply amounts for postage associated with

certain services, post office box fees, foreign bank fees , and

hand - signed paper check stock costs. Xerox did not supply

amounts associated with SDU mass mailings as li sted in cost

category two for postage - related items on Attachment M and did

not submit an amount for telecommunications cost. As discussed

earlier, except for two of the anticipated cost categories of

rent a nd CSR salaries, the ITN did not require that amounts be

supplied for those categories in order for a reply to be

responsive to the ITN. Therefore, both Xerox and SMI were

responsive to the ITN regarding Attachment M.

56. Both Xerox and SMI submitted a r esponsive Attachment O

which included line items fro m Attachments K through N.

Attachment O formed the basis for awarding points based on the

lowest cost. As indicated earlier, Xerox's proposed total

compensation for years 1 through 5 of the contract was

$84,920,072.00. SMI's proposed total compensation for the same

period was $47,996,387.00.

57. Under the ITN, the cost replies were scored according

to the ITN specifications in Section 10.3.2 and the formula

contained therein. SMI received a total of 6 60 points as the low

cost reply. As the second lowest cost reply, Xerox received 376

points as a proportion of the total 660 points received by SMI.

Both vendors' scores were added to their technical scores. SMI

received a combined Total Reply score of 1603 points for its

reply. Xerox received a combined Total Reply Score of 1346

points for its reply. As responsible and responsive vendors,

both Xerox and SMI were selected to participate in the

negotiation phase of the ITN, where, under the ITN, the cri teria

and terms of the ITN became negotiable. Further, the evidence

did not demonstrate that either the evaluation scores or the

Total Reply Scores impacted the ITN process beyond qualifying the

vendors to participate in the negotiation process.

58. The Department formed a Negotiation Team consisting of

Thomas Mato, Clark Rogers, Nancy Luja, Max Smart, Steve Updike,

John Kinneer, and Bo Scearce.

59. Several meetings of the Negotiation T eam were held

during which the team evaluated Xerox's and SMI's repli es, posed

written questions to the vendors and discussed technical issues

with technical experts. Face to face negotiating sessions

between the team and the vendors were also held, as well as

meetings to discuss technical issues with the parties.

Additio nally, two rounds of separate demonstrations of a vendor's

proposed system and solution were given to the Negotiation Team

by Xerox and SMI. The Negotiation T eam only observed the

demonstration of each vendor in the first such meeting. During

the second dem onstration by each vendor, the N egotiation T eam

observed the demonstration and asked questions of the vendor.

Based on these demonstrations and meetings, the team elected to

request revised replies from both vendors. At some point prior

to submission of the revised offers and per the ITN, the team

communicated to Xerox that, if it wish ed to stay competitive in

the ITN process, it should bring its price c loser to that of SMI.

The team also communicated its desire to SMI that costs from the

anticipated cost list on Attachment M that SMI had not included

in its initial reply should be included on that form.

60. With that information from the Negotiation T eam, Xerox

and SMI submitted revised cost replies. Xerox's Total Projected

SDU Compensation droppe d from $84,920,072.00 to $48,200,000.00.

Its transaction rate was reduced from $1.150 to $.525. Its

Attachment M cost estimate increased from $5,081,195.50 to

$9,926,119.00. SMI's Total Projected SDU Compensation increased

from $47,996,387.00 to $49,500 ,000.00. Importantly, its

transaction rate remained the same at $.497. Its Attachment M

cost decreased from $13,492,107.00 to $12,433,125.00.

61. After revi ewing the revised replies, the Negotiation

T eam elected to continue to conduct negotiations with SMI first.

Such vendor selection was appropriate under the ITN since its

transaction rate remained lower than Xerox's transaction rate and

the team preferred SMI's solution for a variety of legitimate

reasons to Xerox's solution.

62. Additional negotia tions were conducted with SMI,

resulting in additional terms and cond itions. After several such

negotiation meetings, the evidence showed that the substantive

part of the negotiations, including price and scope of work, had

concluded with only final contr actual language remaining. As

such , the Negotiation T eam requested a Best and Final Offer

(BAFO) from SMI.

63. On May 14, 2014, SMI submitted its BAFO. SMI's Total

Projected SDU Compensation increased from $49,500,000.00 to

$50,700,000.00. Its transact ion rate dropped slightly to $.495

and its Attachment M cost increased from $12,433,125.00 to

$13,740,152.09.

64. The BAFO was acceptable to the negotiation team and

would, along with SMI's technical reply, become part of the

Department's standard contr act under the ITN. The team

reasonably concluded SMI's management team was superior, and its

solution was more customer friendly, intuitive, efficient , and

innovative. The Negotiation T eam documented its reasons for

selecting SMI in a memorandum to the p rocurement file.

65. On May 19, 2014, the Department posted its Notice of

Intended Award to SMI. The evidence did not demon strate that the

award violated s ection 287.057, Florida Statutes , since that

section only requires that negotiations be "conducte d" prior to

an intended award of a contract. Notably, the award is only

intended and is not final since the Department under Sections

3.1.19.2 and 7.3 is not required to enter into a contract if such

a document cannot be finalized. Indeed, the statutory language

of section 287.057(4) and the ITN in Section 2.6.9 permit

continued negotiation and finalization of a contract after the

Notice of Intended Award.

66. In this case, the evidence demonstrated that the

negotiations between the negotiation team an d SMI resulted in a

meeting of the minds regarding the services that SMI would be

performing and the price for those services. Further, the

evidence showed that the negotiations had concluded in all

substantial respects prior to posting of the Notice of I ntent to

Award the contract to SMI. What remained for the Department and

SMI to accomplish was the finalization of the contract a ssembly

by inserting the BAFO, Technical R eply , and p rice into the

contract language; insertion of a start date; and work on

i mplementation issues such as invoices and background screening

of employees. Given these facts, the evidence demonstrated that

the point at which the Department elected to post its Notice of

Intended Award was reasonable since the substantive parts of the

negotiations were complete.

67. Ultimately, the evidence in this case did not

demonstrate that the ITN process followed by the Department was

fundamentally flawed or gave an advantage to one vendor over

another. Further, the actions of the Department in this

procurement were not contrary to the Department's statutes;

contrary to the Department's rules or policies; or contrary to a

reasoned interpretation of the ITN specifications. Finally, the

evidence did not demonstrate that the Department's actions w ere

clearly erroneous, contrary to competition, arbitrary , or

capricious. Given these facts, the protest filed by Petitioner

should be dismissed.

CONCLUSIONS OF LAW

68. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

proceeding. See §§ 120.569 and 120.57, Fla. S tat. (2014 ) .

69. Chapter 287, Florida Statutes, deals with the

procurement of commodities and services by state agencies. In

this case, the Department utilized an invitation to negotiat e as

the method for procurement of the contract at issue. Section

287.057(1)(c) describes how a procurement by invitation to

negotiate is conducted and provides:

(c) Invitation to negotiate. -- The

invitation to negotiate is a solicitation

used by an agenc y which is intended to

determine the best method for achieving a

specific goal or solving a particular

problem and identifies one or more

responsive vendors with which the agency

may negotiate in order to receive the best

value.

1. Before issuing an invi tation to

negotiate, the head of an agency must

determine and specify in writing the reasons

that procurement by an invitation to bid or a

request for proposal is not practicable.

2. The invitation to negotiate must

describe the questions being explored, the

facts being sought, and the specific goals

or problems that are the subject of the

solicitation.

3. The criteria that will be used for

determining the acceptability of the reply

and guiding the selection of the vendors

with which the agency will neg otiate must

be specified.

4. The agency shall evaluate replies against

all evaluation criteria set forth in the

invitation to negotiate in order to establish

a competitive range of replies reasonably

susceptible of award. The agency may select

one or mo re vendors within the competitive

range with which to commence negotiations.

After negotiations are conducted, the agency

shall award the contract to the responsible

and responsive vendor that the agency

determines will provide the best value to the

state , based on the selection criteria.

5. The contract file for a vendor selected

through an invitation to negotiate must

contain a short plain statement that

explains the basis for the selection of the

vendor and that sets forth the vendor's

deliverables an d price, pursuant to the

contract, along with an explanation of how

these deliverables and price provide the

best value to the state.

70. Section 287.012(25) defines a responsive submission to

a solicitation as follows: "Responsive bid," "responsive

p roposal," or "responsive reply" means a bid, or proposal, or

reply submitted by a responsive and responsible vendor that

conforms in all material respects to the solicitation. A

responsive vendor is defined by section 287.012(26) as "a vendor

that has sub mitted a bid, proposal, or reply that conforms in

all material respects to the solicitation." Section 287.012(24)

defines a responsible vendor as "a vendor who has the capability

in all respects to fully perform the contract requirements and

the integrity and reliability that will assure good faith

performance." The statutory definition of a responsive vendor

does not change whether the procurement method is an invitation

to bid, a request for proposals, or an invitation to negotiate.

71. The burden of p roof in a competitive - procurement

protest rests with the party protesting the agency's intended

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

In a competitive - procurement protest, other

than a rejection of all bids, proposals, or

replies, the administrative la w judge shall

conduct a de novo proceeding to determine

whether the agency's proposed action is

contrary to the agency's governing statutes,

the agency's rules or policies, or the

solicitation specifications. The standard of

proof for such proceedings sha ll be whether

the proposed agency action was clearly

erroneous, contrary to competition,

arbitrary, or capricious.

As such, Xerox must establish whether the Department's action to

award the ITN to SMI was contrary to the ITN specifications;

contrary to gov erning statutes, applicable rules , or policies ;

and was clearly erroneous, contrary to competition, arbitrary , or

capricious. § 120.57(3)(f ), Fla. Stat. (2014); Florida Dep't of

Transp. v. J.W .C. Co. , 396 So. 2d 778, 787 (Fla. 1st DCA 1981).

72. An agen cy action will be found to be "clearly

erroneous" if the agency's interpretation conflicts with the

plain and ordinary intent of the law. See Colbert v. Dep't of

Health , 890 So. 2d 11 65, 1166 (Fla. 1st DCA 2004). In such a

case, "judicial deference need not be given" to the agency's

interpretation. Id. An agency action will be found to be

"clearly erroneous" if it is without rational support, and,

consequently, the trier - of - fact has a "definite and firm

conviction that a mistake has been committed." U .S. v. U.S.

Gypsum Co. , 333 U.S. 364, 395 (1948).

73. An act is "contrary to competition" if it unreasonably

interferes with the objectives of competitive bidding, which are:

[T]o protect the public against collusive

contracts; to secure fair competition upon

equal terms to all bidders; to remove not

only collusion but temptation for collusion

and opportunity for gain at public expense;

to close all avenues to favoritism and fraud

in its various forms; to secure the best

values for the county at the lowest possible

expense; and to afford equal advantage to all

desiring to do business with the county, by

affording an opportunity for an exact

comparison of bids.

Wester v. Belote , 103 Fla. 976, 981, 138 So. 721, 723 - 24 ( 1930).

See SYSLOGIC Tech. Servs., In c. v. S. Fl a . Water Mgm t . Dist . ,

Case No. 01 - 4385BID (Fla. DOAH Jan. 18, 2002; SFWMD Mar. 6,

2002).

74. "An action is 'arbitrary if it is not supported by

logic or the necessary facts,' and 'capricious if it is adopted

without thought or reason or is irr ational.'" Hadi v. Liberty

Behavioral Health Corp. , 927 So. 2d 34, 38 - 39 (Fla. 1st DCA 2006)

and Agrico Chem. Co. v. Dep't of Envtl. Reg. , 365 So. 2d 759, 763

(Fla. 1st DCA 1978). Thus, when reviewing a contract award

decision to determine whether it is arbitrary or capricious, it

must be upheld if the action is justifiable under any analysis

that a reasonable person would use to reach a decision of similar

weight. As long as the agency has acted in good faith, its

judgment should not be interfered with, even if reasonable men

could differ and even if the decision may seem erroneous to some

persons. Colbert v. Dep't. of Health , 890 So. 2d 1165 (Fla. 1st

DCA 2004); State Contracting & Eng'g Corp. v. Dep ' t. of Transp. ,

709 So. 2d 607, 610 (Fla. 1st DCA 199 8); and Volume Servs. Div.

v. Canteen Corp. , 369 So. 2d 391, 395 (Fla. 2d DCA 1979) ( quoted

in System Dev. Corp. v. Dep't of Health & Rehab. Servs. , 423 So.

2d 433, 434 (Fla. 1st DCA 1982) ) . In that regard, the ITN in

Section 3.1.9.3 clearly reserves to t he Department the right to

determine whether a reply meets the material requirements of the

ITN. Additionally, Section 2.7 of the ITN, as well as paragraph

16 of the General Conditions, reserve to the Department the right

to waive minor irregularities.

75 . In this case, both replies contained a surety letter of

commitment as required by Section 7.13.1.1 of the ITN. The

evidence showed that both letters were not simply letters of

reference from a bonding company but were letters of commitment

from such co mpanies and were intended as such by those bonding

agents. As such, both Xerox and SMI were responsive to the

surety commitment requirements of the ITN.

76. The evidence also showed that Attachment K did not

require that the Department's estimated number of transactions be

used by a vendor in its transaction rate calculation. Unlike

Veolia Transportation Services, Inc. v. Commission for the

Transportation Disadvantaged , DOAH Case No. 08 - 1636BID (DOAH

July 9, 2008), where the methodology for the rate cal culation by

a vendor was required to be used by that vendor in responding to

a request for proposal, the Department in this ITN did not

require a specific methodology or use of a specific cost estimate

by a vendor in calculating its transaction rate on Att achment K.

The Department's estimate was only required to be used in the

baseline compensation calculation on Attachment L , which use

normalized the baseline compensation calculation so that the

Department could make an apples - to - apples comparison of that

cost. Thus, the Department's calculation requirements on forms K

and L were reasonable and SMI met the requirements of the ITN in

completing its Attachment s K and L. Morphotrust USA v.

Dep't of Transp. and Solutions Thru Software, Inc. , DOAH Case

No. 12 - 2917BID (DOAH Dec. 7, 2012; FDHSMV Jan. 7, 2013).

77. In Morphotrust USA v. Department of Transportation and

Solutions Thru Software, Inc. , the administrative law judge found

that the ITN did not impose a mandatory requirement or condition

as to the substance of a form , or direct that the pricing form be

filled out in a certain way. In reaching the decision, the

administrative law judge recognized that while the use of the

terms, "shall," "must" and "will" in the solicitation indicated a

mandatory re quirement or condition, the only portion of the ITN

that was mandatory was the requirement that "proposal forms must

be submitted with [the] proposal" since it was the only section

in the ITN specification that used the mandatory term. Id. at

21. ¶ 79.

78 . Like Morphotrust , the ITN required that a vendor submit

Attachment M. Except for two categories of costs, the ITN did

not require a vendor to seek reimbursements of any costs or to

complete the form in a specific way. In this case, both SMI a nd

Xero x submitted A ttachment M, did not deviate from the ITN

requirements , and were responsive on this requirement.

79. However, the evidence did demonstrate that SMI's reply

deviated from the ITN since it did not contain renewal cost

information and did not have an attachment containing copies of

SMI's Incident Control Policy and Procedures and Change

Management Policy and Procedures. Importantly, not every

deviation from an ITN makes a reply non - responsive to the ITN.

The court in Robinson Electrical Co. v . Dade County , 417 So. 2d

1032, 1034 (Fla. 3d DCA 1982), discussed the criteria for

determining whether a variance is a material deviation or a minor

irregularity and stated:

Although a bid containing a material variance

is unacceptable, Glatstein v. City of Miami ,

399 So. 2d 1005 (Fla. 3d DCA), rev. denied,

407 So. 2d 1102 (Fla. 1981), not every

deviation from the invitation is material.

In determining whether a specific

noncompliance constitutes a substantial and

hence non - waivable irregularity, the cou rts

have applied two criteria - first, whether the

effect of a waiver would be to deprive the

[government agency] of its assurance that

the contract will be entered into, performed

and guaranteed according to its specified

requirements, and second, whether i t is of

such a nature that its waiver would adversely

affect competitive bidding by placing a

bidder in a position of advantage over other

bidders or by otherwise undermining the

necessary common standard of competition.

In application of the general prin ciples

above discussed, sometimes it is said that a

bid may be rejected or disregarded if there

is a material variance between the bid and

the advertisement. A minor variance,

however, will not invalidate the bid. In

this context a variance is material i f it

gives the bidder a substantial advantage

over the other bidders, and thereby

restricts or stifles competition. 10

McQuillan, Municipal Corporations § 29.65 (3d

Ed. Rev. 1981) (footnotes omitted); see Harry

Pepper & Associates, Inc. v. City of Cape

Co ral , (Fla. 3d DCA 1982).

80. In that regar d, section 287.057(13), Florida Statutes ,

grants an agency the authority to renew a contract under certain

conditions and requires that a reply to an invitation to

negotiate provide the "price" of the "servi ce to be renewed."

Section 287.057(13) states:

Contracts for commodities or contractual

services may be renewed for a period that may

not exceed 3 years or the term of the

original contract, whichever is longer.

Renewal of a contract for commodities or

c ontractual services must be in writing and

is subject to the same terms and conditions

set forth in the initial contract and any

written amendments signed by the parties. If

the commodity or contractual service is

purchased as a result of the solicitation of

bids, proposals, or replies, the price of the

commodity or contractual service to be

renewed must be specified in the bid,

proposal, or reply, except that an agency may

negotiate lower pricing. A renewal contract

may not include any compensation for c osts

associated with the renewal. Renewals are

contingent upon satisfactory performance

evaluations by the agency and subject to the

availability of funds . . . . (emphasis

added ) .

81. In Flordia Department of Environmental Protection v.

ContractPoint Florida Parks, L.L.C. , 986 So. 2d 1260 , 1265 (Fla.

2008), the Florida S upreme Court stated:

This Court has long held that a "statute must

be given its plain and obvious meaning."

Holly v. Auld , 450 So. 2d 217, 219 (Fla.

1984) (quoting A.R. Douglass, In c. v.

McRainey , 102 Fla. 1141, 137 So. 157, 159

(Fla. 1931)). If the language of the statute

is "clear and unambiguous and conveys a clear

and definite meaning" there is no need to

resort to statutory construction. Id.;

accord Forsythe v. Longboat Key B each

Erosion Control Dist. , 604 So. 2d 452, 454

(Fla. 1992). In interpreting section 11.066,

however, we cannot read subsection (3) in

isolation, but must read it within the

context of the entire section in order to

ascertain legislative intent for the

pr ovision. Id. at 455 ("Every statute must

be read as a whole with meaning ascribed to

every portion and due regard given to the

semantic and contextual interrelationship

between its parts." (quoting Fleischman v.

Dep't of Prof'l Reg. , 441 So. 2d 1121, 1123

(Fla. 3d DCA 1983))). A "statute should be

interpreted to give effect to every clause in

it, and to accord meaning and harmony to all

of its parts" and is not to be read in

isolation, but in the context of the entire

section. Jones v. ETS of New Orleans , Inc. ,

793 So. 2d 912, 914 - 15 (Fla. 2001) (quoting

Acosta v. Richter , 671 So. 2d 149, 153 - 54

(Fla. 1996)).

82. Importantly, s ection 287.057(13) is part of a statutory

scheme that provides a continuum of competitive procurement

options to the State. As indicated earlier, that continuum runs

from invitations to bid, through requests for proposals, to

invitations to negotiate. Each of these procurement processes

has statutory requirements associated with it. As part of that

statutory scheme and to unders tand the meaning of the term

"price" used in the above - quoted section, subsection (13) must be

read in pari materia with the rest of section 287.057.

83. Under sections 287.057 (1) (a)2. and (1) (b)3.b.,

governing invitations to bid and requests for proposal s, the

"price" for each year of the re newal must be specified in the

vendor's submission. In section 287.057 (1) (b)3.b. , "price" for

each year of renewal must also be used to evaluate a vendor's

proposal under a request for proposal. Additionally, subsect ions

287.057 (1) (a)3. and (1) (b)3.c. governing invitations to bid and

requests for proposals, require that the vendor's submission be

evaluated based on the total "cost" for each year of the

contract, including renewal years. Importantly, none of the

renew al requirements related to evaluation of renewal prices or

costs associated with the other procurement methods under section

287.057 are required under subsection (1) (c) of the statute

governing invitations to negotiate. Neither price nor cost are

defined in c hapter 287. However, the use of the terms "price"

and "cost" in the same statute indicates that such terms are not

synonymous with each other, but have more specific procurement -

related meanings.

84. In purchasing, price is not the same as cost. Price is

the quantity of one thing, e.g. , money, that is exchanged or

demanded in barter or sale for another thing, e.g. , SDU services,

of which cost is a component. Cost is the monetary value of

material, effort, products, resources, etc. which go into

p roducing and delivering a good or service. See "What is Price?"

BusinessDictionary.com. Web. 16 Feb. 2015.

and

"What is Cost?" BusinessDictionary.com. Web. 16 Feb. 2015.

.

85. In this case, both vendors stated the price of the

service to be renewed in their Attachment O. Like the statute,

the ITN, in this case, provided that renewal was to be on the

same terms and conditions as the initial co ntract. Therefore,

unless a vendor specified a separate section 287.057(13) "price"

for the "service to be renewed," the vendor's original price was

the renewal price under both the statute and the terms of the

ITN. Since neither vendor specified a separ ate "price" for the

"service to be renewed , " the price for such renewal was the

proposed contract price in that vendor's Attachment O. As such,

both Xerox and SMI met the statutory requirement of section

287.057(13).

86. The ITN did require that renewal costs , not price, be

summarized in a vendor's reply. In regards to these costs, the

evidence demonstrated that such costs were non - essential to the

ITN and were not required for a vendor to be responsive to the

ITN. Given the non - essential nature of this information, the

evidence did not demonstrate that any advantage or disadvantage

resulted to any vendor as a result of such information not being

provided by SMI. Similarly, the evidence did not demonstrate

that the competitive procurement process was im paired by SMI not

providing this cost information.

87. Further, the initial cost replies were used to score

vendors for the purpose of the Department determining the vendors

with which it would conduct negotiations. Neither renewal

pricing nor costs we re used in scoring the vendors' replies.

Such scoring demonstrates the insignificance of renewal cost

information under the ITN. The evidence did not demonstrate that

SMI received a competitive advantage by failing to state in its

cost reply that there w ould be no change in its cost during any

renewal period. The evidence did demonstrate that failure to

provide such information was a minor deviation from the ITN

criteria and could be properly waived by DOR. Juvenile Services

Program, Inc. v. Dep't of Ju venile Justice , Case No. 07 - 1975BID,

(DOAH Oct. 31, 2007 ; OJJ Nov. 30, 2007 ). Thus, not providing

such information was properly waived by the Department. The

evidence did not demonstrate that the Department's actions were

clearly erroneous, contrary to c ompetition, arbitrary , or

capricious.

88. Finally, Xerox contends that the posting of the

Department's intended contract award to SMI , before negotiations

were concluded , violated Florida law or materially deviated from

the ITN specifications. However , s ection 287.057 does not

require that posting of an award decision be held until the

conclusion of negotiations with a vendor. Section

287.057(1)(c)4 . states, in pertinent part:

[A ]fter negotiations are conducted , the

agency shall award the contract to the

responsible and responsive vendor that the

agency determines will provide the best value

to th e state . . . (emphasis added ).

Further, the ITN process provides agencies more discretion in

negotiating with vendors than does the RFP process described i n

sect ion 287.057(b) . See Cushman and Wakefield of Fla., Inc. v.

Dep't of Mgmt. Servs. , DOAH Case No. 13 - 3894BID, ¶ 102 (DOAH

Jan. 24, 2014; DMS Feb. 5, 2014) (ALJ re cognized there is no

provision under Florida law that prohibits an agency from

attemptin g to maximize the best value to the state and, as a

result, rejected an argument that an agency is prohibited from

asking vendors to modify their price once a BAFO has been

submitted since this would frustrate the agency's ability to

maximize the best valu e for the state). Thus, the statute does

not require that negotiations be "concluded" but only that they

have been "conducted" prior to the contract award. In that

regard, DOR did not violate the statute by posting its intended

award prior to finalizat ion of the contract with SMI.

89. However in this case, the ITN refers to the

"conclusion" of negotiations prior to the Negotiation Team

requesting a BAFO or posting a notice of intent to award the

contract. On the other hand, S ection 2.6.9 contemplates that

additional discussions regarding the contract could occur after

the contract award. Clearly, the reference to the conclusion of

negotiations in the ITN does not mean that the contract document

itself has been completed.

90. In this case, the evide nce demonstrated that extensive

negotiations were conducted between the Department's Negotiation

Team a nd SMI prior to posting of the Notice of Intent to A ward

the contract to SMI. The evidence further demonstrated tha t the

negotiations between the N egoti ation T eam and SMI resulted in a

meeting of the minds regarding the services that SMI would be

performing and the price for those services. Further, the

evidence showed that the negotiations had concluded in all

substantial respects prior to posting of th e Notice of Intent to

Award the contract to SMI. The evidence did not demonstrate that

such posting was contrary to competition, impeded the nature of

competitive procurement or created an unfair advantag e in the

award. Additionally, t he evidence did not demonstrate that the

timing of t he Department's posting of its Notice of Intent to

A ward the contract to SMI was contrary to any statute, rule,

policy , or ITN specification and was, at worst, a minor deviation

from those specifications.

91. Therefore, th e Department's interpretation of the ITN

as not requiring the contract document itself, including

Attachment A to the contract document, to be finalized prior to

contract award , as long as the substantive terms and conditions

and price have been negotiated , is certainly a rational and

reasonable interpretation of its own specifications that should

not be disturbed.

92. The evidence did not demonstrate that the Department's

intended award of a contract to SMI deviated from governing

statutes, applicable rul es , or policies of the Department or

reasonable interpretations of the ITN specifications. Further,

there was no evidence that the Department's decision was clearly

erroneous, contrary to competition, arbitrary, or capricious.

Therefore, the award of the contract arising out of the ITN to

SMI should stand and this protest should be dismissed.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is, therefore,

RECOMMENDED that the Respondent, Florida Department of

Revenue, en ter a final order dismissing the protest of

Petitioner, Xerox State and Local Solutions, Inc. , and approving

the award of the contract to Intervenor, Systems and Methods,

Inc.

DONE AND ENTERED this 18 th day of February , 2015 , in

Tallahassee, Leon County, F lorida.

S

DIANE CLEAVINGER

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.f l.us

Filed with the Clerk of the

Division of Administrative Hearings

this 18 th day of February, 2015 .

ENDNOTE S

1/ Xerox designated the follow ing excerpt from the audio tape:

17:40 - 20:32. SMI cross - designated the following excerpt to

Xerox's Exhibit 1 7: 17:43 - 23:38. Xerox then added the following

excerpt: 17:39 - 24:31.

2/ Statutory requireme nts such as the requirement in s ection

287.057(13) cannot be waived by an agency.

3/ The Department's response to October 24, 2014, vendor question

24 about Attachment O does not clarify whether amounts for the

cost items in Attachment M were mandatory since the Department's

answer also indicated that Attachment M should include expenses

for which the vendor wishes to be reimbursed. Notably,

Attachment M was not amended as a result of the Department's

response to question 24. Moreover, the Department's response to

October 24, 2014, vendor question 53 does not resolve the issue

regarding Attachment M costs since the Department's response

seemingly made teleco mmunications costs mandatory by use of the

word "shall" in relation to reporting those costs on

Attachment M. Again, Attachment M was not amended as a result of

the D epartment's response to question 53. Thus, Xerox's reply

was responsive to the ITN even though it did not include

seemingly mandatory telecommunications costs in its reply.

COPIES FURNISHED:

Cindy Horne, Esquire

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314 - 6668

(eServed)

W. Robert Vezina, III, Esquire

Vezina, Lawrence and Piscitelli, P.A.

413 East Park Avenue

Tallahassee, Florida 32301

(eServed)

Mia L. McKown, Esquire

Holland and Knight, LLP

Post Office Drawer 810

Tallahassee, Florida 32302 - 1809

(eServed)

Nancy L. Staff, General Counsel

Department of Reven ue

Post Office Box 6668

Tallahassee, Florida 32314 - 6668

(eServed)

Marshall Stranburg, Executive Director

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314 - 6668

(eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the ri ght to submit written exceptions within

1 0 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.