16-002762BID Jani-King Gulf Coast Region vs. Escambia County School Board Status: Closed Recommended Order on Friday, August 26, 2016.

Summary: Petitioner established that School District's intended award of contract to a non-responsive bidder was contrary to the RFP specifications and was clearly erroneous, contrary to competition, arbitrary and capricious.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JANI - KING GULF COAST REGION,

Petitioner,

vs. Case No. 16 - 2762BID

ESCAMBIA COUNTY SCHOOL BOARD,

Respondent.

_______________________________/

RECOMMENDED ORDER

A hearing was held pursuant to notice, on June 21, 2016 , in

Pensacola, Florida, before W. David Watkins, the assigned

Administrative Law Judge of the Florida Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Brian W . Hoffman, Esquire

Carver Darden Koretzky Tessler Finn

Blossman & Areaux, LLC

801 W est Romana St reet , Suite A

Pensacola, F lorida 32502

S andra Destin Sims, Esquire

Jani - King Gulf Coast Region

122 W est Pine Street

Ponchatoula, L ouisiana 70454

For Respondent: David C. Wil lis, Esquire

Hannah D. Monroe, Esquire

Rumberger, Kirk & Caldwell, P.A.

300 S outh Orange Avenue, Suite 1400

Orlando, F lorida 32801

STATEMENT OF THE ISSUE S

On January 8, 2016, the Escambia County School District

(District) issued Request for P roposal Number 161301 (RFP) for

custodial services. The RFP was issued to solicit proposals to

clean the DistrictÓs Zone Three schools. After evaluating the

proposals, the District awarded the contract to American

Facility Services, Inc. (AFS) , who was t he h ighest - scoring

proposer. Enmon Enterprises , LLC , d/b/a Jani - King of Pensacola

(Jani - King) , received the second highest score and is protesting

the scoring and proposed award of the contract to AFS. At issue

is whether the DistrictÓs decision to award the cleaning

contract to AFS was contrary to a governing statute, the

DistrictÓs rules or policies, or project specification; and , if

so, whether such action was clearly erroneous, contrary to

competition, arbitrary, or capricious.

PRELIMINARY STATEMENT

O n January 8, 2016, the District issued the RFP to solicit

proposals for custodial services to clean the DistrictÓs Zone

Three schools. The RFP had an opening date and time of March 1,

2016 , at 2:00 p.m., Central Time. On March 14, 2016, an

evaluation com mittee met to grade the submitted proposals. On

April 8, 2016, evaluation tabulations and the recommended award

were posted on - line. The tabulations showed that ten proposals

were submitted, and of those ten proposals, three were

immediately rejected as being non - responsive to the RFP. The

recommended supplier, pursuant to the tabulation results, was

AFS with a score of 94 points. Jani - King was the second highest

scored supplier with a score of 83.65 points.

Jani - King protested the scoring and proposed award of the

contract to AFS. Jani - King argues that AFS submitted a non -

responsive proposal because it submitted reviewed , rather than

audited , financial statements, although the RFP required

submittal of two years of audited financial statements. Jani -

K ing contends that the submission of reviewed, rather than

audited, financial statements was a material deviation from the

requirements of the RFP and , thus, renders AFSÓs proposal non -

responsive. Jani - King argues that because the proposal was non -

responsi ve , it should have immediately been rejected, or at the

least, the company should have received no points in the

Ðfinancial stabilityÑ section of the RFP. Jani - King also argues

that the scoring methodology of the financial statements was

arbitrary and cap ricious.

Jani - KingÓs Protest was referred to the Division of

Administrative Hearings (DOAH) on May 18, 2016, where it was

assigned to the undersigned. By Notice entered on May 20, 2016 ,

the final hearing was scheduled for June 21, 2016.

The final hearing was convened as scheduled. At the

hearing , th e parties submitted a Joint Preh earing Stipulation

which included some stipulated facts. To the extent relevant,

those stipulated facts have been incorporated herein.

At the hearing , the parties called the fol lowing witnesses:

Marvin Beasley (accepted as an expert in accounting and

auditing), Brad Mostert, Terry St. Cyr, John Dombroskie, and

Chance Enmon. The partiesÓ Joint Exhibits 1 through 29 were

received in evidence without objection. PetitionerÓs Exhib its

30 through 32 were received in evidence over RespondentÓs

objections.

The one - volume hearing T ranscript was filed with DOAH on

July 5, 2016. The parties requested an extension of time to

submit proposed orders and were granted 10 additional days,

maki ng their proposed orders due on July 25, 2016. The evidence

presented at the hearing and the submissions from the parties

have been carefully considered in the preparation of this

Recommended Order.

Unless otherwise noted, all statutory references are to the

2015 version of the Florida Statutes.

FINDING S OF FACT

1 . The Escambia County School District is an independent

taxing and reporting public entity managed, controlled,

operated, administered, and supervised by the DistrictÓs school

officials.

2 . Ja ni - King of Pensacola is a master franchise territory

of Jani - King International. Enmon Enterprises , LLC , has bought

the rights to sell franchises in a geographic territory referred

to as ÐJani - King of Pensacola . Ñ Jani - King of Pensacola is one

of 13 terri tories that Enmon Enterprises , LLC , has bought from

Jani - King International.

3 . On January 6, 2016, the District issued the RFP for

custodial services. When the RFP was issued, the District still

had approximately five years left on its contract with th e

incumbent provider of cleaning services.

4 . Once a n R F P is posted, the District gives those

interested in responding an opportunity to ask questions. Those

questions, along with the District Ó s answers, are compiled and

posted on the DistrictÓs website for all to see, creating an

equal playing field. No inquiry was submitted regarding the

requirement that ÐResponder must provide the last two (2) yearsÓ

audited financial statements for the Responder.Ñ

5 . The RFP was created by John Dombroskie, Escambia County

School DistrictÓs d irector of p urchasing, and Jim Beagle, a

custodial manager.

6 . The RFP required vendors to show Ðfinancial ability,Ñ

by demonstrating the wherewithal and knowledge to cover the

expenses associated with fulfilling the terms of the contract.

As noted, part of this requirement included the submission of

two years of audited financial statements. The entire

Ðfinancial abilityÑ section of the RFP was worth ten total

points in the overall evaluation of the bidding companies.

7 . A ccording to Brad Mostert, senior auditor with the

District, the District requested audited financial statements

primarily in order to assess whether a bidding company could

handle the start - up cost of the job, since it would be 45 to 60

days before the win ning company would be paid. Mr. Mostert

testified that the District wanted to ensure that Ðfor the

initial period of their services, 45 to 60 days, that they would

be able to maintain their operations, i.e., pay their payroll

for the folks they would have to hire and invest in the

equipment that they would have to invest in to perform the

duties under the bid.Ñ

8 . The RFP stated that any proposal which did not provide

all of the requested items would be deemed non - responsive.

However, the District expres sly reserved the right to waive any

conditions or criteria set forth in the RFP. The District also

reserved the right to waive any irregularities and

technicalities.

9 . The Evaluation Committee Instructions, which were

provided to each committee member, stated, Ð[e]ach committee

member will review and assign points to the areas giving the

best proposal the highest assigned points for each area

evaluated. Points will be awarded based on the responses that

each proposal received. Lack of a response for a ny item will

receive zero points in that item.Ñ

10 . Within the Financial Ability section of the Evaluation

Committee Instructions it was stated that ÐResponder must

provide the last two (2) yearsÓ audited financial statements for

the Responder . Ñ

11 . The proposals were opened on March 1, 2016. At the

time bids were opened, John Dombroskie , with purchasing , was

present, along with Jim Beagle, with custodial services, and

Michelle Kiker, a senior auditor from internal auditing. These

three individuals ser ved as witnesses to which bids were timely

received by the District, and they also made the initial

determination as to which bids should be rejected as non -

responsive.

12 . Three submitted proposals were immediately rejected

and were not considered as the y were deemed non - responsive. One

proposal submitted by Owens Realty Services was dismissed

because it was not signed, and two other proposals submitted by

ABM Janitorial Services and GCA Services Group were dismissed

for failure to submit a bid bond.

13 . Mr. Dombroskie put together a diverse committee to

evaluate the remaining submitted proposals. The committee

members were: Terry St. Cyr, a ssistant s uperintendent, Finance

and Business, Escambia County School Board; Brad Mostert,

i nternal a uditor for Escambia School Board; Jim Beagle,

m anager III , c ustodial s ervices; Keith Rich, custodial employee;

Chuc k Peterson, m aintenance d irector; Shawn Dennis, a ssistant

s uperintendent; and Margret Warr, a ssistant p rincipal.

John Dombroskie acted as a non - voting supervisor of the

committee. The committee met on March 14, 2016.

14 . Mr. Dombroskie gave the proposals to the committee

members about a week prior to their meeting, along with the

Evaluation Committee Instructions, in the hopes that they would

read and evaluate the proposals on their own. Each committee

member was given evaluation sheets, which contain the criteria

area , plus the points that could be earned by a perfect score in

that area.

15 . Jani - King and AFS both submitted proposals in response

to the RFP. AFS submitted reviewed, rather than audited,

financial statements. Jani - King submitted audited financial

statements. AFSÓs proposal was the lowest in proposed cost and

received the highest total score from the evaluation committee.

Jani - KingÓs proposal was the second highest scored proposal and

it had the second highest proposed cost. The Jani - King proposal

also included 30 percent more staffing than the AFS proposal.

16 . In its proposal, Jani - King submitted three or four

franchise ownersÓ re sumes who could potentially do the work if

Jani - King was the winning bidder. At the time it submitted its

proposal , Jani - King had not yet selected the franchise owner who

would actually service the account.

17 . Jani - King did not supply audited financial statements

or any other financial information for any of the franchise

owners to the District. Jani - King instead submitted audited

financial statements only for Enmon Enterprises, LLC.

18 . AFSÓ proposal deviated from the RFP requirements

because AFS su bmitted reviewed financial statements, rather than

audited financial statements. At least two other bidders also

submitted reviewed financial statements , rather than audited

financial statements.

19 . It is unknown how many prospective bidders did not

sub mit bids because of the requirement that proposals include

(the more costly) audited financial statements. Also unknown is

how many additional bids would have been submitted had the

requirement been for reviewed, rather than audited, financial

statements.

20 . The fact that some companies had submitted reviewed ,

rather than audited , statements arose at the beginning of the

evaluation committee meeting. The issue was raised by committee

member, Bradley Mostert, an auditor for the District , who

understands the difference between an audited and a reviewed

statement. Mr. Mostert explained these differences to the

evaluation committee in relation to the bidder, American

Maintenance Services, who also submitted reviewed, rather than

audited, financial statement s. As the recording of the meeting

reveals, Mr. Mostert explained the differences between reviewed

and audited financial statements, but there was no substantive

discussion among the committee members as to whether non - audited

financial statements would p rovide the necessary assurance that

the winning bidder would have the financial wherewithal to

perform under the terms of the contract. In addressing the

committee members about the issue, Mr. Mostert stated:

[F] or an audit, IÓm testing the material

porti on of all of those transactions that

are relevant to those financial statements .

For a review, IÓm compiling the numbers .

IÓm getting them together . IÓm doing some

analysis, maybe ratios, maybe stuff like

that , but in an audit, IÓm in the nitty

gritty. IÓm looking at documents that

support those numbers in the material

portion. (Oh) present fairly, (um) that

means thereÓs nothing materially out of

compliance with the appropriate rules that

they need. But what IÓm saying is, the

weight behind that opin ion is different than

an audit , and it may not matter , but it is

different. There was less work performed on

those financials.

(Audio recording of March 14, 2016 , meeting at 12:05 - 12:56) .

21 . Mr. Mostert did not explain to the committee members

the dif ference in the opportunity for fraud or material

misstatement with reviewed financial statements as compared to

audited financial statements. According to Mr. Mostert, he

simply wanted to point out to the committee members that there

Ðis a little bit of a differenceÑ between reviewed and audited

financial statements.

22 . At hearing, Jani - King introduced in evidence the

ÐGuide to Financial Statement Services: Compilation, Review and

AuditÑ published by the American Institute of Certified Public

Accountant s. The publication highlights the significant

differences between reviewed and audited financial statements.

The review is the base level of CPA

assurance services.

* * *

A review is substantially narrower in scope

than an audit. A review does not

co ntemplate obtaining an understanding of

your businessÓs internal control; assessing

fraud risk; testing accounting records

through inspection, observation, outside

confirmation or the examination of source

documents or other procedures ordinarily

performed in an audit.

In a review engagement, the CPA will issue a

formal report that includes a conclusion as

to whether, based on the review, he is aware

of any material modifications that should be

made to the financial statements in order

for them to be in ac cordance with the

applicable financial reporting framework.

23 . In contrast to reviewed financial statements, audited

financial statements provide a much higher level of assurance as

to the validity of the financial information presented:

CPA issues a fo rmal report that expresses an

opinion on whether the financial statements

are presented fairly, in all material

aspects, in accordance with the applicable

financial reporting framework.

* * *

The CPA performs procedures in order to

obtain Ðreasonable ass uranceÑ (defined as a

high but no t absolute level of assurance)

about whether the financial statements are

free from material misstatement.

In an audit, your CPA is required to obtain

an understanding of your businessÓs internal

control and assess fraud r isk. Your CPA is

also required to corroborate the amounts and

disclosures included in your financial

statements by obtaining audit evidence

through inquir y , physical inspection,

observation, third - party confirmations,

examination, analytical procedures an d other

procedures.

24 . As between financial statement review and audit, only

audited statements include a licensed professionalÓs assessment

of fraud risk, and a reasonable assurance that the financial

statements are free from material misstatement.

25 . As noted by Jani - KingÓs expert in accounting and

auditing, Marvin Beasley, only an audited report confirms that

Ðthe financial statements present fairly in all respects the

financial condition of the company.Ñ This is because the

financial data present ed in reviewed statements is simply

provided by the client, rather than being independently verified

as required in an audited statement.

26 . Mr. Beasley further noted that the difference in a

review versus an audit is the level of assurance one should

as sociate with those two types of reports because of the amount

of work done by the audit or accounting firm. The work it takes

to issue a reviewed report is substantially less in volume and

scope than the work an auditor or certified public accountant

(CPA ) would be required to do to issue an audited report.

Consequently, the cost of obtaining audited financial statements

is considerably higher than the cost of obtaining reviewed

financial statements.

27 . The CPA on the committee, and the DistrictÓs c hief

f inancial o fficer, Terry St. Cyr, did not consider the

submission of reviewed versus audited statements to be a

material deviation from the RFP. Brad Mostert also did not

think the submission of reviewed , instead of audited , financial

statements should d isqualify the bidders Ðbecause of the nature

of the bid.Ñ The evaluation committee deemed the submission of

reviewed , rather than audited , statements as Ðacceptable for

[their] purposes.Ñ

28 . At hearing, Mr. St. Cyr explained the DistrictÓs

rationale in deciding not to reject proposals that included

reviewed, but not audited financial statements:

Q Did the submission of those reviewed

financial statements instead of audited

financial statements send up any red flags

or give you cause for concern about th ose

bids or proposals?

A It did not concern the District. Even

though it stated audited financials, we were

satisfied, based on the level of testing or

evaluation that we were doing, and the

services to be performed, that we were not

worried about wheth er or not they were

audited, as long as they were reviewed with

the reviewed statement by the auditor that

the financial statements do not have a

material misstatement, we were good with

relying on them.

29 . The reviewed financial statements contained in the AFS

proposal do not include an auditorÓs or CPAÓs statement that the

financial statements do not contain a material misstatement. To

the contrary, on the cover page of the reviewed financial

statements, the accounting firm noted that:

A review is sub stantially less in scope than

an audit, the objective of which is the

expression of an opinion regarding the

financial statements as a whole.

Accordingly, we do not express such an

opinion.

* * *

Based upon our reviews, we are not aware of

any material modifications that should be

made to the accompanying financial

statements in order for them to be in

conformity with accounting principles

generally accepted in the United States of

America.

30 . Committee members were told not to consider price as

part of their scoring, and there was no discussion about pricing

during the committee meeting. At the end of the meeting,

John Dombroskie gave the committee a sheet with the number of

points that was to be given each bidder based on their pricing.

This numbe r was reached by calculating total value based on

total cost and then price per square footage. To calculate the

points that should be assessed to each bidder based on cost,

Mr. Dombroskie took the lowest proposed cost, assigned the

maximum points (in thi s case 30), and then divided the other

costs into that lowest cost. He then multiplied that factor by

the 30 allotted points to reach a scoring amount based on cost.

31 . The recommended supplier, pursuant to the tabulation

results, was AFS with a score of 94 points. Jani - King was the

second highest scored supplier with a score of 83.65 points. No

one on the Evaluation Committee scored AFS a zero in financial

ability for failure to submit audited financial statements.

32 . The Bid Award Notice, provided prior to Jani - KingÓs

protest being filed, stated that if an agreement was not reached

with AFS, the District would negotiate with the second highest

scored bidder.

33 . The District does not have blanket discretion to

decide what requirements of the RFP i t may waive; and

accordingly, the District must adhere to the material

requirements of its RFP.

34 . AFSÓs submission of reviewed, rather than audited

financial statements, was a material deviation from the

requirements of the RFP, and was not a minor irre gularity.

35 . The RFP provided that non - responsive proposals would

be discarded. Nonetheless, the AFS proposal was improperly

reviewed and scored.

36 . The District never informed Jani - King or any other

potential bidders that the requirement for each b idder to

provide audited financial statements would be waived.

37 . The DistrictÓs decision to allow bids with reviewed

financial statements, but without audited financial statements,

was contrary to the requirements of the RFP.

38 . The DistrictÓs decis ion to allow bids with reviewed

financial statements, but without audited financial statements,

was clearly erroneous based upon the requirements of the RFP.

39 . The DistrictÓs decision to allow bids with reviewed

financial statements, but without audited financial statements,

provided a competitive advantage to AFS over other responders

who complied with the requirements of the RFP; and thus, the

DistrictÓs decision was contrary to competition.

40 . The DistrictÓs decision to allow bids with reviewed

fin ancial statements, but without audited financial statements,

is unsupported by facts or logic when the RFP and E valuation

C ommittee I nstructions expressly mandate that each responder

must provide audited financial statements.

41 . If the AFS bid was proper ly deemed to be non -

responsive, then Jani - King would have been the highest scored

responsive bidder.

CONCLUSIONS OF LAW

42 . 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. Stat. (2015); DepÓt

of Lottery v. Gtech Corp. , 816 So. 2d 648, 651 (Fla. 1st DCA

2001) .

43 . As the second highest bidder, Jani - King has standing to

file this bid protest. Section 120.57(3) provides that any

person who is Ðadversely affectedÑ by the agency action may file

a protest. A second ranked low bidder has standing to challenge

an award to the low bidder based on non - responsiveness and other

factors, but a third or lower ranked bidder generally does not

have standing since , ev en if successful in the protest of the

award to the low bidder, the award would then go to the second

ranked low bidder. Preston Carroll Co. v. Fla . Keys Aqueduct

Auth. , 400 So. 2d 524 (Fla. 3d DCA 1981).

44 . Chapter 287, Florida Statutes, establishes th e various

methods for the procurement of commodities and services by

governmental entities. The District utilized a request for

proposals as the method for procurement of the contract at issue.

Section 287.057(1)(b) , Florida Statute, describes that metho d of

procurement as follows:

(b) Request for proposals. An agency shall

use a request for proposals when the

purposes and uses for which the commodity,

group of commodities, or contractual service

being sought can be specifically defined and

the agency is capable of identifying

necessa ry deliverables. Various

combinations or versions of commodities or

contractual services may be proposed by a

responsive vendor to meet the specifications

of the solicitation document.

* * *

4. The contract shall be awarded by written

notice to the res ponsible and responsive

vendor whose proposal is determined in

writing to be the most advantageous to the

state, taking into consideration the price

and other criteria set forth in the request

for proposals. The contract file shall

contain documentation s upporting the basis

on which the award is made.

45 . Section 287.012(26) defines a ÐresponsiveÑ submission

to a solicitation as Ða bid, or proposal, or reply submitted by a

responsive and responsible vendor that conforms in all material

respects to the s olicitation.Ñ A Ðresponsive vendorÑ is defined

by section 287.012(27) as Ða vendor that has submitted a bid,

proposal, or reply that conforms in all material respects to the

solicitation.Ñ

46 . Section 120.57(3)(f) provides that:

[T] he burden of proof s hall rest with the

party protesting the proposed agency action.

In a competitive - procurement protest, other

than a rejection of all bids, proposals, or

replies, the administrative law judge shall

conduct a de novo proceeding to determine

whether the agenc yÓs proposed action is

contrary to the agencyÓs governing statutes,

the agencyÓs rules or policies, or the

solicitation specifications. The standard of

proof for such proceedings shall be whether

the proposed agency action was clearly

erroneous, contrary to competition,

arbitrary, or capricious.

47 . The nature of the de novo review in a bid protest

proceeding has been established as follows:

[T]he phrase Ð de novo hearing Ñ is used to

describe a form of intra - agency review. The

judge may receive evidence, as with any

formal hearing under section 120.57(1), but

the object of the proceeding is to evaluate

the action taken by the agency. See

Intercontinental Properties, Inc. v. State

Department of Health and Rehabilitative

Services , 606 So. 2d 380 (Fla. 3d D CA 1992).

State Contracting and EngÓg Corp. v. DepÓt of Transp. , 709 So.

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

48 . The standard of review of the agencyÓs proposed action

in a bid protest proceeding has been generally described as

follows:

[A] "public body h as wide discretion " in the

bidding process and "its decision, when based

on an honest exercise" of the discretion,

should not be overturned "even if it may

appear erroneous and even if reasonable

persons may disagree." Dep Ó t of Transp . v.

Groves - Watkins C onstructors , 530 So.2d 912,

913 (Fla. 1988) (quoting Liberty County v.

Baxter's Asphalt & Concrete, Inc. , 421 So.2d

505 (Fla. 1982)) . "The hearing officer's

sole responsibility is to ascertain whether

the agency acted fraudulently, arbitrarily,

illegally, or dishonestly." Groves - Watkins ,

530 So.2d at 914.

Scientific Games, Inc. v. Dittler Brothers, Inc. , 586 So. 2d

1128, 1131 (Fla. 1st DCA 1991).

49 . Section 120.57(3)(b) provides in pertinent part that

Ð[t] he formal written protest shall state with part icularity the

facts and law upon which the protest is based.Ñ In order to

place the parties on notice of the issues for disposition in a

bid protest proceeding, a petitioner must allege specific facts

and how the agencyÓs proposed action is contrary to th e agencyÓs

governing statutes, the agencyÓs rules or policies, or the

solicitation specifications. See Hamilton v. DepÓt of Bus. &

ProfÓl Reg. , 764 So. 2d 778 (Fla. 1st DCA 2000), (citing Cottrill

v. DepÓt of Ins. , 685 So. 2d 1371, 1372 (Fla. 1st DCA 1996 ));

Anchor Towing, Inc. v. DepÓt. of Transp. & Sunshine Towing, Inc. ,

Case No. 04 - 1447BID (Fla. DOAH Sept. 23, 2004; Fla. DOT Dec. 1,

2004, remanded on other grounds Apr. 18, 2005 ). Based upon the

partiesÓ Preh earing Stipulation, the issues for considerat ion in

this proceeding are limited to the two remaining issues alleged

by Jani - King in its Formal Bid Protest Petition:

• AFSÓs submission of reviewed rather than

audited financial statement should have

resulted in AFS being deemed non -

responsive. Furthermo re considering and

accepting the AFS bid without audited

financial statements is contrary to

competition and an abuse of discretion;

and

• The scoring methodology of the financial

statements was arbitrary, as evidenced by

AFSÓ receiving superior scores in

financial ability, where Jani - King

produced the requested documentation and

was objectively the better candidate.

50 . Since the undersigned has determined that the AFS

submittal was non - responsive to the RFP, and that determination

is dispositive to t he outcome of this proceeding, it is

unnecessary to address the second issue.

51 . Jani - King, as P etitioner, has the burden to establish

that AFSÓs proposal materially deviated from the terms,

conditions, and specifications of the RFP such that the

Distric tÓs decision to award the contract to AFS was clearly

erroneous, contrary to competition, arbitrary, or capricious.

§ 120.57(3)(f) , Fla. Stat. ; DepÓt of Transp. v. J.W.C. Co., 396

So. 2d 778, 787 (Fla. 1st DCA 1981).

52 . Agency action will be found to b e " clearly erroneous , "

if it is without rational support and, consequently, the

Administrative Law Judge 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); see also Pershing Indus . , I nc. v. DepÓt of

Bank ing & Fin. , 591 So. 2d 991, 993 (Fla. 1st DCA 1991). Agency

action may also be found to be "clearly erroneous" if the

agency's interpretation of the applicable law conflicts with its

plain meaning and intent. Colbert v. Dep't of Healt h , 890 So. 2d

1165, 1166 (Fla. 1st DCA 2004). In such a case, "judicial

deference need not be given" to the agency's interpretation. Id.

53 . An act is "contrary to competition" if it runs

contrary to the objectives of competitive bidding, which have

bee n long held:

to 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 favor itism and fraud

in various forms; to secure the best values

for the [public] at the lowest possible

expense . . . .

Wester v. Belote , 138 So. 2d 721, 723 - 24 (Fla. 1931); see also

Harry Pepper & Assoc., Inc. v. City of Cape Coral , 352 So. 2d

1190, 1192 (F la. 2d DCA 1977). In that regard, public officials

do not have the power Ðto make exceptions, releases and

modifications in the contract after it is let, which will afford

opportunities for favoritism, whether any such favoritism is

practiced or not.Ñ We ster v. Belote , 138 So. 2d at 724. The

public policy regarding exceptions and releases in contracts

applies with equal force to the contract procurement.

54 . An "arbitrary" action is "one not supported by facts or

logic, or despotic." A "capricious" act ion is "one which is

taken without thought or reason or irrationally." Agrico Chem .

Co. v. DepÓt of Envtl. Reg. , 365 So. 2d 759, 763 (Fla. 1st DCA

1978); see also Hadi v. Lib erty Behavioral Health Corp. , 927 So.

2d 34, 38 - 39 (Fla. 1st DCA 2006). If agenc y action is

justifiable under any analysis that a reasonable person would use

to reach a decision of similar importance, the decision is

neither arbitrary nor capricious. Dravo Basic Materials Co.,

Inc. v. DepÓt of Transp. , 602 So. 2d 632, 634 n.3 (Fla. 2 d DCA

1992).

55 . Section 287.001 establishes the legislative intent that

public procurement be intrinsically fair and open, and that it

also eliminate the appearance and opportunity for favoritism so

as to preserve public confidence in the process, and pr ovides

that:

The Legislature recognizes that fair and

open competition is a basic tenet of public

procurement; that such competition reduces

the appearance and opportunity for

favoritism and inspires public confidence

that contracts are awarded equitably a nd

economically; and that documentation of the

acts taken and effective monitoring

mechanisms are important means of curbing

any improprieties and establishing public

confidence in the process by which

commodities and contractual services are

procured.

56 . That legislative intent has been applied to determine

whether an action is contrary to competition as follows:

Thus, from Section 287.001 can be derived an

articulable standard of review. Actions that

are contrary to competition include those

which:

(a) create the appearance of and opportunity

for favoritism;

(b) erode public confidence that contracts

are awarded equitably and economically;

(c) cause the procurement process to be

genuinely unfair or unreasonably exclusive;

or

(d) are unethi cal, dishonest, illegal, or

fraudulent.

Syslogic Tech. Servs., Inc. v. So. Fla. Water Mgmt. Dist. ,

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

2002).

57 . As to the ability of an agency to overlook items in a

proposal that clearly meet t he definition of a Ðmaterial

deviationÑ from its written specifications, it is clear that Ða

public body is not entitled to omit or alter material provisions

required by the RFP because in doing so the public body fails to

Òinspire public confidence in the fairness of the [RFP]

process.ÓÑ Emerald Corr. Mgmt. v. Bay C n ty. Bd. of C n ty.

Comm'rs , 955 So. 2d 647, 652 (Fla. 1st DCA 2007) (c iting DepÓt

of Lottery v. Gtech Corp. , 816 So. 2d 648, 651 (Fla. 1st DCA

2001)) .

58 . Every deviation from the RFP is not m aterial and does

not mandate rejection of the proposal. The District reserved the

right to waive minor irregularities. The standard for

determining whether a variance is a material deviation or a minor

irregularity is as follows:

ÐAlthough a bid contain ing a material

variance is unacceptable, not every deviation

from the invitation is material." Robinson

Elec. Co. v. Dade County , 417 So. 2d 1032,

1034 (Fla. 3d DCA 1982); Tropabest Foods,

Inc. v. State, Dep't of Gen. Servs. , 493 So.

2d 50, 52 (Fla. 1st D CA 1986)(citation

omitted); Glatstein v. Miami , 399 So. 2d 1005

(Fla. 3d DCA) review denied, 407 So. 2d 1102

(Fla. 1981). "It is only material if it

gives the bidder a substantial advantage over

the other bidders and thereby restricts or

stifles competiti on." Tropabest , 493 So. 2d

at 52; Harry Pepper & Assocs., Inc. v. City

of Cape Coral , 352 So. 2d 1190, 1193 (Fla. 2d

DCA 1977).

Procacci Commer. Realty v. DepÓt of HRS , 690 So. 2d 603, 606

(Fla. 1st DCA 1997).

59 . The competitive advantage that is confe rred on a

proposer when an agency chooses to ignore a clear and

unambiguous requirement that is applicable to all other

potential vendors has been described as follows:

59. The touchstone of these tests for

materiality -- substantial advantage -- is an

elusi ve concept, to say the least, easier to

state than to apply. Obviously, waiving any

defect that might disqualify an otherwise

winning bid gives the beneficiary of the

waiver an advantage or benefit over the

other bidders. In practice, differentiating

bet ween, on t he one hand, "fair"

advantages -- i.e. those that are tolerable

because they do not defeat the object and

integrity of the competitive procurement

process -- and "unfair" (or intolerable)

advantages, on the other, is exceptionally

difficult; and, ma king matters worse, there

are not (as far as the undersigned is aware)

many generally recognized, consistently

applied, neutral principles available for

the decision - maker's use in drawing the

distinction between a "substantial"

advantage and a "mere" adva ntage.

60. That said, the undersigned believes

that a bidder's noncompliance with a

specification which was designed to winnow

the field -- especially one which prescribes

particular characteristics that the

successful bidder must possess -- should

rarely, i f ever, be waived as immaterial.

This is because such a provision acts as a

barrier to access into the competition,

potentially discouraging some would - be

participants, namely those who lack a

required characteristic, from submitting a

bid.

PhilÓs Expert Tree Serv . v. Broward C nty . Sch. Bd. , Case No. 06 -

4499BID , RO at 29 - 30 (Fla. DOAH Mar. 19, 2007; BCSB June 11,

2007); see also Syslogic Tech . Servs., Inc. v. So. Fla. Water

Mgmt. Dist. , Case No. 01 - 4385BID , RO at 63 n.23 (Fla. DOAH

Jan. 18, 2002; SFWMD Ma r. 6, 2002)("Of course, it will usually

not be known how many, if any, potential proposers were

dissuaded from submitting a proposal because of one project

specification or another. That is why specifications that have

the capacity to act as a barrier to access into the

competition . . . should generally be considered material and

non - waivable for that reason.").

60 . The audited financial statements specification was

designed to provide credible and independent assurance that the

successful proposer had adequate financial resources to purchase

the necessary equipment and supplies, hire and pay personnel,

and otherwise successfully provide janitorial services to the

District for the initial 45 to 60 days of the contract period.

Those whose financial where withal was not adequate to start up

and sustain operations during this period, a fact which would be

disclosed on audited financial statements, would be discouraged

from expending the substantial effort necessary to develop and

submit a proposal given the likelihood of an adverse

responsiveness determination. Thus, the requirement to submit

audited financial statements could have prevented some

interested vendors from submitting proposals.

61 . A bidder preparing a proposal in response to the RFP

would no t reasonably have expected the requirement for audited

financial statements to be waived by the District. Furthermore,

waiving the requirement of audited financial statements creates

the appearance and opportunity for favoritism, erodes public

confidence that contracts are awarded equitably and

economically, and causes the procurement process to be genuinely

unfair or unreasonably exclusive.

62 . The requirement that all responders provide a copy of

the last two yearsÓ audited financial statements with the ir

proposals was a clear, direct, and mandatory requirement of

section VI.C. of the RFP, and the failure to do so was a

substantial and material deviation from the terms, conditions,

and specifications of the RFP. It was not a minor irregularity.

Such fa ilure requires the rejection of AFSÓs proposal under the

express terms of the RFP, to wit ÐProposals received which do

not contain ALL items listed in this section will be considered

non - responsive.Ñ The DistrictÓs effort to excuse AFSÓs

intentional failu re to meet the reasonable terms of section

VI.C. of the RFP was clearly erroneous, arbitrary and

capricious, and contrary to competition.

63 . Deeming a bid non - responsive for failure to provide

audited financial statements as required by an RFP is support ed

by the findings in other administrative cases. In Syslogic

Tech nology Ser vices , Inc. v. South Fl orida Water M anagement

Dist rict , supra , the ALJ found a bid non - responsive where the

proposal did not include audited financial statements as

required by th e RFP. This was despite arguments from the

District that other portions of the RFP could mean compiled,

reviewed or audited. The ALJ concluded that the DistrictÓs

acceptance of a proposal that was non - responsive due to

non - waivable material irregulariti es was contrary to law and

contrary to competition. As ALJ Van Laningham concluded in

Syslogic:

Second, applying the ejusdem generis

principle, it is evident that unaudited

financial statements (besides being

logically excluded by the requirement that

suc h be independently audited), are simply

not of the same general kind or class as

independently audited financial statements

and annual reports. The items specifically

mentioned carry an indicium of reliability ÏÏ

outside scrutiny or comment ÏÏ that self -

prepa red financial papers lack. (footnote

omitted) . For that additional and

independent reason, it is impermissible to

interpret Subsection 2.5.E.2 in the manner

that the District suggests.

Syslogic Tech nology Services, Inc. , supra ., RO at ¶ 80.

64 . The AFS proposal contained a material deviation from

the RFP. That deviation, involving the failure to provide

relevant, material, and required information in response to

unambiguous instructions to do so, gave AFS a competitive

advantage over the other vendors. The deviation from the terms,

conditions, and specifications was not a minor irregularity.

Thus, the AFS proposal should be rejected.

65 . Finally, at the final hearing the District raised , for

the first time , the issue of whether Jani - KingÓs submittal was

responsive to the RFP, since it did not include audited financial

statements for the Jani - King franchisee that would actually be

performing the contracted labor. The DistrictÓs eleventh hour

attack on the Jani - King submittal is rejected, not only beca use

the issue was not raised in the partiesÓ Pre h earing Stipulation

( see Palm Beach Polo Holdings, Inc. v. Broward Marine, Inc. ,

174 So. 3d 1037 (Fla. 4th DCA 2015)) , but because the Jani - King

submittal has not been timely challenged (by AFS or any other c o -

bidder) and thereby placed at issue in this proceeding.

Moreover, the District itself concluded that Jani - KingÓs

submittal was responsive, and scored it accordingly.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RE COMMENDED that Respondent, Escambia County School

Board, enter a final order that adopts the Findings of Fact and

Conclusions of Law set forth herein. It is further RECOMMENDED

that the contract issued in response to Request for Proposal,

Solicitation Num ber 161301, entitled "Custodial Services" be

awarded to Enmon Enterprises, LLC , d/b/a Jani - King of Pensacola ,

as the highest scoring responsive vendor.

DONE AND ENTERED this 26th day of August , 2016 , in

Tallahassee, Leon County, Florida.

S

W. DAVID WATKINS

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 Cle rk of the

Division of Administrative Hearings

this 26th day of August , 2016 .

COPIES FURNISHED:

David C. Willis, Esquire

Rumberger, Kirk & Caldwell, P.A.

Suite 1400

300 South Orange Avenue

Orlando, Florida 32801

(eServed)

Brian W. Hoffman, Esquire

Carv er Darden Koretzky Tessier Finn

Blossman & Areaux , LLC

Suite A

801 West Romana Street

Pensacola, Florida 32502

(eServed)

Sandra Destin Sims, Esquire

Jani - King Gulf Coast Region

122 West Pine Street

Ponchatoula, Louisiana 70454

Malcolm Thomas, Superintendent

Escambia County School District

75 North Pace Boulevard

Pensacola, Florida 32505

Matthew Mears, General Counsel

Department of Education

Turlington Building, Suite 1244

325 West Gaines Street

Tallahassee, Florida 32399 - 0400

(eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right 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.