16-004982BID Prince Contracting, Llc vs. Department Of Transportation Status: Closed DOAH Final Order on Tuesday, January 3, 2017.

Summary: Petitioner failed to prove that the various procedures implemented by the agency to internally manage its procurement process were unadopted rules.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

PRINCE CONTRACTING, LLC,

Petitioner,

and

HUBBARD CONSTRUCTION COMPANY,

Intervenor,

vs. Case N o. 16 - 4982BID

DEPARTMENT OF TRANSPORTATION,

Respondent.

_______________________________/

FINAL ORDER

Pursuant to notice, a formal hearing was held in this case

on October 31 and November 4, 2016, in Tallahassee, Florida,

before Lawrence P. Stevenson, a duly - designated Administrative

Law Judge of the Division of Administrativ e Hearings.

APPEARANCES

For Petitioner: Eduardo S. Lombard, Esquire

Bradley S. Copenhaver, Esquire

Megan S. Reynolds, Esquire

Vezina, Lawrence & Piscitelli, P.A.

413 East Park A venue

Tallahassee , Florida 32301

For Respondent: Susan Schwartz, Esquire

Douglas Dell Dolan, Esquire

Department of Transportation

Haydon Burns Building, Mail Station 58

605 Suwannee Street

Tallahassee, Florida 32399 - 0450

For Intervenor: Frederick J ohn Springer, Esquire

Zachary W ells Lombardo, Esquire

Bryant Miller Olive, P.A.

101 North Monroe Street, Suite 900

Tallahassee, Florida 32301

STATEMENT OF THE ISSUE

Whether certain procedures of the Department of

Transportation (ÐDepartmentÑ) constitute rules that have not

been properly adopted through form al rulemaking procedures.

PRELIMINARY STATEMENT

On April 15, 2016, the Department issued an Invitation t o

Bid on Contract T7380, a road - widening project on U.S. Highway

301 in Hillsborough County. Bids were opened on June 15, 2016.

On June 29, 2016, the Department posted its notice of intent to

award the contract to Astaldi Construction Corporation

(ÐAstaldiÑ).

On July 5, 2016, Prince Contracting, LLC, (ÐPrinceÑ), the

second lowest bidder, filed its notice of intent to protest and

a protest bond. On July 15, 2016, Prince filed its formal

written protest, followed by an amended petition on August 1,

2016. On August 29, 2016, the Department referred the original

petition to the Division of Administrative Hearings (ÐDOAHÑ) for

assignment of an Administrativ e Law Judge to conduct a formal

administrative proceeding. The final hearing was initially

scheduled for September 19 through 21, 2016, but was continued

to October 21 through 23, 2016, upon PrinceÓs stipulated motion.

The Department provided notice of th e proceeding to the

five other construction companies that had submitted bids on the

project, including Astaldi. On September 14, 2016, Hubbard

Construction Company (ÐHubbardÑ), the third lowest bidder, filed

a petition to intervene, which was granted by O rder dated

September 15, 2016. On September 22, 2015, the Department filed

PrinceÓs amended petition at DOAH.

On October 13, 2016, Prince filed a motion for leave to

file a second amended petition to include a challenge to

Department procedures and proto cols as unadopted rules. By

Order dated October 14, 2016, PrinceÓs second amended petition

was accepted.

A final hearing on the bid protest and unadopted rule

challenge was held in Tallahassee, Florida, on October 31, 2016 ,

and November 4, 2016.

At the hearing, Prince presented the testimony of its

executive director, Jack Calandros; bid estimating expert , John

Armeni; the DepartmentÓs contracts administration manager, Alan

Autry; and the DepartmentÓs state estimates engineer, Greg

Davis. The p arties of fered designated portions of the

deposition testimony of AstaldiÓs chief estimator, Ed Thornton,

in lieu of live testimony, and the designations were accepted

into evidence as PrinceÓs Exhibit 5. PrinceÓs Exhibits 7, 11 ,

and 12, containing quotes from Wes tra Construction Corporation

and Ferguson Waterworks, were admitted into evidence without

objection. Prince Ós Exhibit 16, a cost summary spreadsheet, was

admitted into evidence under seal, over the DepartmentÓs

objection.

Hubbard did not present any exhib its or witnesses, but did

fully participate in the cross - examination of the other partiesÓ

witnesses.

The Department was allowed to extend the cross - examination

of Mr. Davis into direct testimony for its case - in - chief. The

Department also called Mr. Autry to testify as its corporate

representative. The Department Ós Exhibit 3 was accepted into

evidence over PrinceÓs objection.

The three - volume T ranscr ipt of the hearing was filed at

D OAH on November 10, 2016. Two versions of V olume I were filed,

one under seal containing confidential bid information , and a

public version without the confidential information. The

parties timely filed their P roposed R ecommended O rders on

November 21, 2016. The DepartmentÓs P roposed R ecommended O rder

addressed the issues in the unadopted rule challenge. Prince

timely filed a separate P roposed F inal O rder on September 21,

2016, in which Hubbard joined.

A separate R ecommended O rder addressing the bid protest

issues will be issued.

References to the Florida Statutes are to the 2016 edition,

unless otherwise noted.

FINDING S OF FACT

Based on the oral and documentary evidence presented at the

final hearing and on the entire record of the proceeding, the

following F indings of F act are made:

1. The Department is a state agency autho rized by section

337.11, Florida Statutes, to contract for the construction and

maintenance of roads within the State Highway System, the State

Park Road System, and roads placed under its supervision by law.

The Department is specifically authorized to aw ard contracts

under s ection 337.11(4) to Ðthe lowest responsible bidder . Ñ

2. On April 15, 2016, the Department advertised a bid

solicitation for Contract T7380, seeking contractors for the

widening of a 3.8 mile portion of U . S . Highway 301 in

Hillsborough County from two lanes to six lanes between State

Road 674 and County Road 672 and over Big Bull Frog Creek. The

advertisement provided a specification package for the project

and the ÐStandard Specifications for Road and Bridge

ConstructionÑ (ÐStandard S pecificationsÑ) used on Department

roadway projects.

3. Prince is a Florida highway and site development

contractor that works almost exclusively for public owners

throughout the state, including the Department, the Central

Florida Expressway Authority, a nd Hillsborough County. Prince

is an experienced roadwa y contractor employing over

700 Floridians throughout the state and has gross revenues of

over a quarter billion dollars. Prince has bid on numerous

Department jobs in the past, is currently working on bids that

it will submit to the Department in the upcoming weeks and

months, and intends to continue bidding on Department projects

in the future.

4. Astaldi, Prince, Hubbard, and other potential bidders

attended the mandatory pre - bid meeting. Prequ alified

contractors were given proposal documents that allowed them to

enter bids through BidExpress, the electronic bidding system

used by the Department.

5. Bids were opened on the letting date of June 15, 2016.

Bids for Contract T7380 were received f rom Astaldi, Prince,

Hubbard, and three other bidders. The bids were reviewed by the

DepartmentÓs contracts administration office to ensure they were

timely, included a unit price for each line item, and contained

the completed certifications required by the specifications.

Bidders were checked against the DepartmentÓs list of

prequalified bidders to confirm they possessed a certification

of qualification in the particular work classes identified by

the bid solicitation. Each bidderÓs total current work under

contract with the Department was examined to ensure that award

of Contract T7380 would not place the bidder over its

Department - designated financial capacity limit.

6. Astaldi submitted the lowest bid, a total amount of

$48,960,013. Prince submitte d the next lowest bid, a total

amount of $57,792,043. HubbardÓs total bid was the third lowest

at $58,572,352.66. The remaining three bids were significantly

higher than HubbardÓs. The contracts administration office

confirmed that all bidders were preq ualified in the appropriate

work classes and had sufficient financial capacity, in

accordance with section 337.14, and Florida Administrative Code

chapter 14 - 22.

7. The DepartmentÓs construction procurement procedure,

from authorization to advertisement t hrough contract execution,

is outlined in the DepartmentÓs ÐRoad and Bridge Contract

ProcurementÑ document (ÐContract Procurement ProcedureÑ). The

scope statement of the Contract Procurement Procedure provides:

ÐThis procedure applies to all Contracts Adm inistration Offices

responsible for advertising, letting, awarding, and executing

low bid, design - bid - build, construction, and maintenance

contracts . Ñ Limited exceptions to the procedure may be made if

approved by the a ssistant s ecretary for Engineering a nd

Operations. If federal funds are included, the Federal Highway

Administration d ivision a dministrator, or designee, must also

approve any exceptions from the procedure. The stated

objectives of the Contract Procurement Procedure are: Ðto

standardize a nd clarify procedures for administering low - bid,

design - bid - build, construction, and maintenance contractsÑ and

Ðto provide program flexibility and more rapid response time in

meeting public needs.Ñ

8. The DepartmentÓs process for review of bids is set

fo rth in the ÐPreparation of the Authorization/Official

Construction Cost Estimate and Contract Bid Review PackageÑ

(ÐBid Review ProcedureÑ). The scope statement of the Bid Review

Procedure states:

This procedure describes the

responsibilities and activitie s of the

District and Central Estimates Offices in

preparing the authorization and official

construction cost estimates and bid review

packages from proposal development through

the bid review process. Individuals

affected by this procedure include Centra l

and District personnel involved with

estimates, specifications, design,

construction, contracts administration, work

program, production management, federal aid,

and the District Directors of Transportation

Development.

9. The Bid Review Procedure cont ains a definitions section

that defines several terms employed by the Department to

determine whether a bid , or a unit item within a bid , is

Ðunbalanced.Ñ Those terms and their definitions are as follows:

Materially Unbalanced: A bid that generates

reaso nable doubt that award to that bidder

would result in the lowest ultimate cost or,

a switch in low bidder due to a quantity

error.

Mathematically Unbalanced: A unit price or

lump sum bid that does not reflect a

reasonable cost for the respective pay item ,

as determined by the departmentÓs

mathematically unbalanced bid algorithm.

Official Estimate: DepartmentÓs official

construction cost estimate used for

evaluating bids received on a proposal.

Significantly Unbalanced: A mathematically

unbalanced bid that is 75% lower than the

statistical average.

Statistical Average: For a given pay item,

the sum of all bids for that item plus the

DepartmentÓs Official Estimate which are

then divided by the total number of bids

plus one. This average does not inclu de

statistical outliers as determined by the

departmentÓs unit price algorithm.

10. For every road and construction project procurement,

the Department prepares an Ðofficial estimate,Ñ which is not

necessarily the same number as the Ðbudget estimateÑ fou nd in

the public bid solicitation. The Department keeps the official

estimate confidential pursuant to section 337.168(1), which

provides:

A document or electronic file revealing the

official cost estimate of the department of

a project is confidential an d exempt from

the provisions of s. 119.07(1) until the

contract for the project has been executed

or until the project is no longer under

active consideration.

11. In accordance with the Bid Review Procedure, the six

bids for Contract T7380 were uploaded into a Department computer

system along with the DepartmentÓs official estimate. A

confidential algorithm identified outlier bids that were

significantly outside the average (such as penny bids) and

removed them to create a Ðstatistical averageÑ for each pay

item. AstaldiÓs unit pricing was then compared to the

statistical average for each item.

12. The computer program then created an ÐUnbalanced Item

ReportÑ flagging AstaldiÓs Ðmathematically unbalancedÑ items,

i.e., those that were above or below a c onfidential tolerance

value from the statistical average. The unbalanced item report

was then reviewed by the district design engineer for possible

quantity errors. No quantity errors were found. 1/

13. The Department then used the Unbalanced Item Repor t

and its computer software to cull the work items down to those

for which AstaldiÓs unit price was 75 percent more than , or

below , the statistical average. The Department sent Astaldi a

form titled ÐNotice to Contractor,Ñ which provided as follows:

The F lorida Department of Transportation

(FDOT) has reviewed your proposal and

discovered that there are bid unit prices

that are mathematically unbalanced. The

purpose of this notice is to inform you of

the unbalanced nature of your proposal. You

may not mod ify or amend your proposal.

The explanation of the bid unit prices in

your proposal set forth below was provided

by ASTALDI CONSTRUCTION CORPORATION on ( )

INSERT DATE.

FDOT does not guarantee advanced approval

of:

(a) Alternate Traffic Control Plans (TCP),

if permitted by the contract documents;

(b) Alternative means and methods of

construction;

(c) Cost savings initiatives (CSI), if

permitted by the contract documents.

You must comply with all contractual

requirements for submittals of alternat ive

TCP, means and methods of construction, and

CSI, and FDOT reserves the right to review

such submittals on their merits. As

provided in section 5 - 4 of the Standard

Specifications for Road and Bridge

Construction you cannot take advantage of

any apparen t error or omission in the plans

or specifications, but will immediately

notify the Engineer of such discovery.

Please acknowledge receipt of this notice

and confirmation of the unit bid price for

the item(s) listed below by signing and

returning this doc ument.

14. Section 5.4 of the Bid Review Procedure describes the

Notice to Contractor and states: ÐContracts are not considered

for award until this form has been signed and successfully

returned to the Department per the instruction on the form . Ñ

Stat e estimating engineer Greg Davis testified that the stated

procedure was no longer accurate and Ðneed[s] to be correctedÑ

for the following reason:

Since the procedure was approved back in

2011, weÓve had some subsequent

conversations about whether to just

automatically not consider the award for

those that are not signed. And since then

we have decided to go ahead and just

consider the contract, but we are presenting

a notice, of course, unsigned and then let

the technical review and contract awards

commi ttee determine.

15. Astaldi signed and returned the Notice to Contractor

and noted below each of the ten listed items: ÐAstaldi

Construction confirms the unit price.Ñ

16. Section 6.6 of the Contract Procurement Procedure sets

forth the circumstances un der which an apparent low bid must be

considered by the DepartmentÓs Technical Review Committee

(ÐTRCÑ) and then by the Contract Awards Committee (ÐCACÑ).

Those circumstances include: single bid contracts; re - let

contracts; Ðsignificantly mathematical un balancedÑ bids; bids

that are more than 25 percent below the DepartmentÓs estimate;

10 percent above the DepartmentÓs estimate (or 15 percent above

if the estimate is under $500,000); materially unbalanced bids ;

irregular bids (not prepared in accordance w ith the Standard

Specifications); other bid irregularities 2/ ; or Ð[a]ny other

reason deemed necessary by the chairperson.Ñ 3/ Bids that are not

required to go before the TRC and CAC are referred to as

Ðautomatic qualifiers.Ñ

17. Because it was mathematic ally unbalanced, the Astaldi

bid was submitted to the TRC for review at its June 28, 2016,

meeting. The TRC is chaired by the DepartmentÓs contracts

administration manager , Alan Autry , and is guided by a document ,

entitled ÐTechnical Review CommitteesÑ (Ð TRC ProcedureÑ). The

TRC Procedure sets forth the responsibilities of the TRC in

reviewing bid analyses and making recommendations to the C AC to

award or reject bids. The TRC voted to recommend awarding

Contract T7380 to Astaldi.

18. The TRCÓs recommend ation and supporting paperwork was

referred to the CAC for its meeting on June 29, 2016. The

duties of the CAC are described in a document , entitled

ÐContracts Award CommitteesÑ (ÐCAC ProcedureÑ). Pursuant to the

CAC Procedure, the CAC meets approximatel y 14 days after a

letting to assess the recommendations made by the TRC and

determines by majority vote an official decision to award or

reject bids. The CAC voted to award Contract T7380 to the low

bid submitted by Astaldi. A Notice of Intent to award t he

contract to Astaldi was posted on June 29, 2016.

19. Prince argues that the Contract Procurement Procedure,

the Bid Review Procedure, the TRC Procedure, the CAC Procedure,

and the computer algorithms in the DepartmentÓs bid software

that identify outli er bids and the tolerance percentages used to

identify unbalanced items, are all unadopted rules. The four

challenged procedures are available to the public on the

DepartmentÓs website. The computer algorithms are kept

confidential pursuant to section 33 7.168.

Contract Procurement Procedure

20. The Contract Procurement ProcedureÓs stated purpose is

to Ðprovide procedures for contract procurement of

Department . . . low bid, design - bid - build, construction, and

maintenance contracts for work performed on roads and bridges in

Florida.Ñ The Contract Procurement Procedure cites sections

20.23(3)(a) and 334.048(3), Florida Statutes, as its authority.

Section 20.23(3)(a) provides, in relevant part:

(3)(a) The central office shall establish

departmental polic ies, rules, procedures,

and standards and shall monitor the

implementation of such policies, rules,

procedures, and standards in order to ensure

uniform compliance and quality performance

by the districts and central office units

that implement transportat ion programs.

21. Section 334.048(3) provides:

The department shall implement the following

accountability and monitoring systems to

evaluate whether the departmentÓs goals are

being accomplished efficiently and cost -

effectively, and ensure compliance wi th all

laws, rules, policies, and procedures

related to the departmentÓs operations:

* * *

(3) The central office shall adopt

policies, rules, procedures, and standards

which are necessary for the department to

function properly, including establishing

accountability for all aspects of the

departmentÓs operations.

22. The Contract Procurement Procedure establishes

procedures for, among other things : advertising; determining

which specifications packages apply; adding addenda to and

amending solicitati ons; bid letting; reviewing bids (which must

be done in accordance with the Bid Review Procedure); verifying

the low bidderÓs status as to suspension or debarment, its

presence on the Scrutinized Companies List, its DBE/Affirmative

Action Plan, and its cap acity; recommending award; deciding to

award; rejecting all bids; awarding the contract; and executing

the contract.

23. The Department stipulates that it uses and applies the

Contract Procurement Procedure in all road construction

procurements. Mr. Autr y testified that he lacks the discretion

to disregard the Contract Procurement Procedure for a given

procurement. The Contract Procurement Procedure is signed by

and considered a directive of the Secretary of the Department.

24. Prince asserts that the Contract Procurement Procedure

imposes specific requirements on contractors. It cites as an

example section 3.6, which gives district engineers or the

contracts administration office the option of holding pre - bid

meetings. If the bid advertisement state s that such a pre - bid

meeting is mandatory, then bidding documents are provided only

to those contractors who attend the meeting. Under section 3.6,

a contractorÓs late arrival at a mandatory pre - bid meeting also

precludes the contractor from submitting a bid.

25. The Department contends that the Contract Procurement

Procedure is an internal operating manual setting forth the

standard processes to be followed by Department personnel from

authorization to advertisement through execution of the

contract. The Contract Procurement Procedure is used to

minimize the variances between contract lettings as required by

s ection 337.015(2), which states, ÐIn order to increase

competition and maximize the utilization of personnel, the

department shall minimize the v ariances between contract

lettings.Ñ

26. The Department agrees that the Contract Procurement

Procedure includes items that are required of a bidder, such as

attendance at pre - bid meetings, submission of a proposal

guaranty, and verification of capacity and prequalification.

However, the Department argues that these items are not

directives to the bidder but are there to inform contract

administration staff on the process to be followed.

27. The Department notes that Contract Procurement

Procedure req uirements for each individual contract are placed

in the bid advertisement, which potential bidders have the

ability to accept or decline. The Department argues that this

ability to walk away means that the Contract Procurement

Procedure lacks the force a nd effect of law and does not

otherwise mandate compliance.

Bid Review Procedure

28. The Bid Review ProcedureÓs stated purpose is to

Ðprovide standard procedures for preparing the authorization and

official construction cost estimates and bid review packa ges for

Central Office Let (Class 1) construction contracts advertised

for competitive bidding and considered for contract award.Ñ The

Bid Review Procedure cites sections 20.23(4)(a) and 334.048(3)

as authority for the procedures set forth in the manual.

Section 334.048(3) is set forth in full at Finding of Fact 21,

supra . Section 20.23(4)(a) provides:

(4)(a) The operations of the department

shall be organized into seven districts,

each headed by a district secretary, and a

turnpike enterprise and a rail enterprise,

each enterprise headed by an executive

director. The district secretaries and the

executive di rectors shall be registered

professional engineers in accordance with

the provisions of chapter 471 or the laws of

another state, or, in lieu of professional

engineer registration, a district secretary

or executive director may hold an advanced

degree in a n appropriate related discipline,

such as a Master of Business Administration.

The headquarters of the districts shall be

located in Polk, Columbia, Washington,

Broward, Volusia, Miami - Dade, and

Hillsborough Counties. The headquarters of

the turnpike ente rprise shall be located in

Orange County. The headquarters of the rail

enterprise shall be located in Leon County.

In order to provide for efficient operations

and to expedite the decisionmaking process,

the department shall provide for maximum

decentrali zation to the districts.

29. As described at Findings of Fact 8 - 15, supra , the Bid

Review Procedure makes use of the official cost estimate, which

is confidential and exempt from disclosure until a contract has

been executed or until the project is no lo nger under active

consideration. § 337.168(1), Fla. Stat. 4/

30. The Department stipulates that it uses and applies the

Bid Review Procedure in all low - bid road construction

procurements. Mr. Davis, the state estimates engineer,

testified that he lacks t he discretion to disregard the Bid

Review Procedure for a given procurement. The Bid Review

Procedure is signed by and considered a directive of the

Secretary of the Department.

31. The Department states that the Bid Review Procedure,

like the Contract Procurement Procedure, is directed to

Department staff to ensure consistency in compiling estimates

and reviewing bid packages. Prince is at most tangentially

affected by the Bid Review Procedure when Department staff uses

the procedure to evaluate bids. However, the Bid Review

Procedure sets out no compliance requirement for an outside

entity , such as Prince, nor does it impose any penalty for

noncompliance.

Computer A lgorithms

32. As described in more detail at Findings of Fact 11 - 13,

supra , the Depar tment employs a software program to analyze

bids. The software includes a set of algorithms used to

identify outlier bids and tolerance parameters used to create

the unbalanced item report. The algorithms identify pay items

that are at variance with the official estimate and extremely

low bids. The tolerance parameters determine the degree of

variance from the official cost estimate that will trigger an

unbalanced items report, a desk item review, or a Notice to

Contractor. The software produces various reports identifying

the deviations.

33. The Department agrees that it uses the algorithms to

review and analyze bids and proposals in every road construction

procurement. Mr. Davis testified that his office lacks the

discretionary authority to decide n ot to apply the algorithms in

a given procurement. The Bid Review Procedure requires use of

the algorithms to generate the unbalanced bid report. The

algorithms unquestionably play a central role in the decision to

award a contract.

34. The Department c ounters that its computer processes

for bid evaluation are confidential in accordance with s ection

337.168(3), which provides:

The bid analysis and monitoring system of

the department is confidential and exempt

from the provisions of s. 119.07(1). This

ex emption applies to all system

documentation, input, computer processes and

programs, electronic data files, and output,

but does not apply to the actual source

documents, unless otherwise exempted under

other provisions of law.

35. The Department argues that adoption of its bid

analysis software into a rule would violate the statutory

confidentiality requirement. The Department states that its

computer program and supporting elements do not impose a duty on

any individual or company. They do not regulat e or require

compliance by anyone outside the Department.

TRC Procedure

36. As stated at Finding of Fact 17, supra , the TRC

Procedure sets forth the responsibilities of the TRC in

reviewing bid analyses and making recommendations to the C AC to

award or re ject bids. The TRC Procedure cites sections

20.23(4)(a) and 334.048(3) as authority for its stated

procedures. Section 20.23(4)(a) is set forth in full at Finding

of Fact 28, supra . Section 334.048(3) is set forth in full at

Finding of Fact 21, supra .

3 7. The TRC Procedure applies to all bids that meet the

criteria for consideration by the TRC. See Finding of Fact 16,

supra . The TRC Procedure is a four - page document that provides

direction for TRC meetings. It names (by job position) the

Department e mployees who sit and vote on the TRC, states the

criteria requiring a TRC review, and provides that the TRC will

consider all information submitted and arrive at a decision by

majority vote. The TRC Procedure requires that minutes be kept

of TRC meetings, with redactions in respect of section

337.168(1). Each member of the TRC is required to certify that

he or she does not have a conflict of interest with any

contractor being evaluated.

38. The Department points out that the TRC Procedure

applies only after all bids have been submitted and does not

impose any further obligations on persons outside the

Department. The TRC Procedure directs Department employees to

meet and make recommendations on bids that meet select criteria.

39. The Department conce dedly uses and follows the TRC

Procedure in all road construction procurements. The Department

also concedes that the TRC lacks discretion to decide for a

given procurement not to apply the TRC Procedure, which is

signed by , and constitutes a directive fr om , the Secretary of

the Department.

CAC Procedure

40 . The CAC Procedure is a three - page document, the stated

purpose of which is to describe the responsibilities of district

and central CACs in determining whether to award construction

and maintenance co ntracts. The CAC Procedure cites sections

20.23(4)(a) and 334.048(3) as authority for its stated

procedures. Section 20.23(4)(a) is set forth in full at Finding

of Fact 28 , supra . Section 334.048(3) is set forth in full at

Finding of Fact 21, supra .

41. The CAC Procedure names (by job position) the

Department employees who sit and vote on the CAC. It provides

that the CACÓs official decision will be made by majority vote

and recorded by the chairperson. The CAC Procedure requires

that minutes be kept of CAC meetings, with redactions in respect

of section 337.168(1). Each member of the CAC is charged with

keeping the official estimate confidential until it is no longer

deemed confidential under section 337.168(1). Each member of

the CAC is required to certify that he or she does not have a

conflict of interest with any contractor being evaluated.

42. The Department states that the CAC Procedure does not

require compliance by anyone outside of the Department. It

simply directs members of the CAC to meet and consider

recommendations presented by the TRC. The CAC Procedure does

not provide criteria that must be considered in awarding or

rejecting a bid, but only directs the committee to meet, decide

matters by a majority vote, and keep the minutes recording its

decision. The Department concludes that the CAC procedure is an

internal guidance document, imposing no duty or obligation on

persons outside of the Department.

CONCLUSIONS OF LAW

43. DOAH has jurisdiction over the parties to and subject

ma tter of this proceeding pursuant to sections 120.57(1)(e) and

120.56(4), Florida Statutes.

44. Section 120.52(16) sets forth the following

definition, in relevant part:

"Rule" means each agency statement of

general applicability that implements,

interpret s, or prescribes law or policy or

describes the procedure or practice

requirements of an agency and includes any

form which imposes any requirement or

solicits any information not specifically

required by statute or by an existing rule.

The term does not include:

(a) Internal management memoranda which do

not affect either the private interests of

any person or any plan or procedure

important to the public and which have no

application outside the agency issuing the

memorandum.

45. Section 120.52(20) p rovides:

ÐUnadopted ruleÑ means an agency statement

that meets the definition of the term

Ðrule,Ñ but that has not been adopted

pursuant to the requirements of s. 120.54.

46. Section 120.54(1)(a) provides, in relevant part:

Rulemaking is not a matter of agency

discretion. Each agency statement defined

as a rule by section 120.52 shall be adopted

by the rulemaking procedure provided by this

section as soon as feasible and practicable.

47. Section 120.56(4)(a) provides:

Any person [5/] substantially af fected by an

agency statement may seek an administrative

determination that the statement violates

section 120.54(1)(a). The petition shall

include the text of the statement or a

description of the statement and shall state

with particularity facts suffic ient to show

that the statement constitutes an unadopted

rule.

48. The Department is an ÐagencyÑ as defined in section

120.52(1).

49. To demonstrate that he is "substantially affected" by

an agency statement, a person must establish Ð(1) a real and

suff iciently immediate injury in fact; and (2) that the alleged

interest is arguably within the zone of interest to be protected

or regulated.Ñ Lanoue v. Dep't of Law Enf. , 751 So. 2d 94, 96

(Fla. 1st DCA 1999) ( quoting Ward v. Bd. of Trs. of the Int.

Imp ust Fund , 651 So. 2d 1236, 1237 (Fla. 4th DCA 1995)).

50. To establish a Ðreal and immediate injury in fact,Ñ a

petitioner must Ðallege that he has sustained or is immediately

in danger of sustaining some direct injury as a result of the

challenged offici al conduct.Ñ Village Park Mobile Home AssÓn v.

DepÓt of Bus. Reg. , 506 So. 2d 426, 433 (Fla. 1st DCA 1987).

51. The Department applied the challenged procedures and

algorithms to award Contract T7380 to Astaldi rather than to

Prince, meaning that Prince has arguably suffered a sufficiently

real and immediate injury in fact to prove it is substantially

affected by the DepartmentÓs procedures. Prince is a

responsible, prequalified contractor engaged in the roadway

construction business that regularly submi ts bids in response to

the DepartmentÓs road construction project solicitations and

intends to submit bids on pending solicitations. Therefore,

PrinceÓs interest is arguably within the zone of interest to be

protected or regulated by the procedures and al gorithms.

52. It is noted at the outset of this analysis that Prince

has challenged the procedures and algorithms conceptually, in

their entirety. The undersigned has therefore taken PrinceÓs

challenge as he found it, feeling no obligation to engage

inde pendently in a line - by - line reading of each procedure in an

attempt to pick out severable portions that may run afoul of the

prohibition on unadopted rules. The procedures and algorithms

will each stand or fall in its entirety, as Prince has chosen to

att ack them.

53. Prince contends that the Ðinescapable conclusionÑ is

that the challenged procedures are unadopted rules. T hey are

used and applied by the Department in every road construction

procurement throughout the state. Prince asserts that, by thei r

own terms, the procedures implement, interpret, or prescribe law

or policy or describe the DepartmentÓs procedure or practice

requirements. The procedures themselves identify their

authorizing statutes.

54. The Department, on the other hand, generally

characterizes its procedures as internal operating manuals that

directly implement the statutory directive in section 337.015(2)

that the Department minimize the variances between contract

lettings. The procedures demand nothing of a bidder that is not

al ready required by the bid specifications, which Prince did not

challenge.

55. Prince argues that the procedures formulate agency

action and affect private interests, as they are applied by the

Department to determine whether a bidder , such as Prince , is

awarded or denied a contract. Prince points to Dep artmen t of

Bus iness & Professional Reg ulation v. Harden , 10 So. 3d 647

(Fla. 1st DCA 2009), which affirmed a DOAH F inal O rder

determining that the Construction Industry Licensing BoardÓs

(ÐCILBÑ) use of a n application committee to review and make

recommendations to the full board constituted an unadopted rule.

No statute or rule expressly authorized the application review

committee and the CILB failed to establish that rulemaking was

neither feasible nor practical. Id . at 648. Explaining that

the process affected the agencyÓs ultimate decision to approve

or deny a license application and therefore affected applicantsÓ

private interests, the court rejected the agencyÓs contention

that the process was exem pt from rulemaking requirements under

section 120.54Ós internal management memorandum exception. Id .

at 649.

56. Prince goes on to argue that Ða contract award for a

low - bid project -- to which Prince is entitled if it meets the

criteria -- is not unlike a general contractorÓs license, to which

an applicant is entitled if the applicant meets certain

criteria.Ñ This analogy is rejected. A competitive bidding

situation is very different from a licensing scenario. Prince

is correct that a license applicant is entitled to a license if

it meets the licensing criteria. Twenty applicants for general

contractorÓs licenses may all obtain licenses if they all meet

the licensing criteria. They are not all competing against each

other for a single available licens e.

57. A bidder on a low - bid project is in a very different

position. The bidder may be qualified, responsible , and

responsive, in compliance with every criterion set forth in the

bid specifications, yet still not win the contract. A bidder is

not Ðen titledÑ to win a contract in the same way that an

applicant may be ÐentitledÑ to a license. The Legislature has

expressly stated that the opportunity to bid on Department

contracts Ðis a privilege, not a right.Ñ £ 337.164(2), Fla.

Stat. To the extent th at a bidder has a cognizable Ðprivate

interestÑ in the bidding process, that interest is in competing

for the contract in a fair, even - handed process, not in winning

the contract.

58. The Legislature has recognized the stateÓs overriding

interest in a f air and honest competitive bidding process for

state road construction. Chapter 83 - 4, Laws of Florida, enacted

a suite of statutes, sections 337.164 - 337.168, designed to

further the goal of integrity in Department of Transportation

contracting. Section 3 37.164 provides as follows:

Legislative intent with respect to integrity

of public contracting process. -- Recognizing

that the preservation of the integrity of

the public contracting process of the

department is vital to the development of a

balanced and ef ficient transportation system

and is a matter of interest to all the

people of the state, the Legislature

determines and declares that:

(1) The procedures [6/] of the department for

bidding and qualification of bidders on

department contracts exist to sec ure the

public benefits of free and open competition

and to secure the quality of public works.

(2) The opportunity to bid on department

contracts or to supply goods or services to

the department is a privilege, not a right.

(3) The privilege of transa cting business

with the department should be denied to

persons or firms involved in contract crime

in order to preserve the integrity of the

public contracting process.

(4) Persons or firms involved in contract

crime should be denied both the privilege o f

transacting business with the department and

the opportunity of obtaining economic

benefit through the transaction of business

by their affiliates with the department.

To this end, it is the intent of the

Legislature to provide sufficiently broad

author ity to the department to ensure the

integrity of its public contracting process.

59. Section 337.168, originally part of the 1983 suite of

contract integrity statutes, provides:

Confidentiality of official estimates,

identities of potential bidders, and bid

analysis and monitoring system. Ï

(1) A document or electronic file revealing

the official cost estimate of the department

of a project is confidential and exempt from

the provisions of s. 119.07(1) until the

contract for the project has been execute d

or until the project is no longer under

active consideration.

(2) A document that reveals the identity of

a person who has requested or obtained a bid

package, plan, or specifications pertaining

to any project to be let by the department

is confidentia l and exempt from the

provisions of s. 119.07(1) for the period

that begins 2 working days before the

deadline for obtaining bid packages, plans,

or specifications and ends with the letting

of the bid. A document that reveals the

identity of a person who has requested or

obtained a bid package, plan, or

specifications pertaining to any project to

be let by the department before the

2 working days before the deadline for

obtaining bid packages, plans, or

specifications remains a public record

subject to s. 119.07(1).

(3) The bid analysis and monitoring system

of the department is confidential and exempt

from the provisions of s. 119.07(1). This

exemption applies to all system

documentation, input, computer processes and

programs, electronic data files, an d output,

but does not apply to the actual source

documents, unless otherwise exempted under

other provisions of law.

60. Section 337.168 makes confidential and exempts from

disclosure the DepartmentÓs official cost estimate and its bid

analysis and moni toring system, including computer processes and

programs. The DepartmentÓs official cost estimate and bid

analysis and monitoring system are therefore not subject to

rulemaking that would violate the statutory confidentiality

requirement. The undersigned is unable to square the circle and

imagine a meaningful rule as to the official cost estimate and

bid analysis and monitoring system that would not breach section

337.168.

61. This conclusion means that, at the very least, the

DepartmentÓs cost estimate and the challenged computer

algorithms are not subject to rulemaking due to their

confidential nature. PrinceÓs challenge as to these items will

be dismissed, leaving for decision those aspects of the Contract

Procurement Procedure, the Bid Review Procedu re, the TRC

Procedure, and the CAC Procedure that are not confidential

pursuant to section 337.168.

62. In determining whether the Contract Procurement

Procedure is an illicit rule, the overriding concern is its

effect, not the DepartmentÓs characterizati on of it. DepÓt of

Rev. v. Vanjara , 675 So. 2d 252, 255 (Fla. 5th DCA 1996). An

agency statement is a rule if it Ðpurports in and of itself to

create certain rights and adversely affect othersÑ or serves Ðby

[its] own effect to create rights, or to requi re compliance, or

otherwise to have the direct and consistent effect of law.Ñ

DepÓt of Transp. v. Blackhawk Quarry , 528 So. 2d 447, 449 (Fla.

5th DCA 1988) ( quoting Balsam v. DepÓt of HRS , 452 So. 2d 976,

977 - 978 (Fla. 1st DCA 1984 ) ). A procedural manual is not the

equivalent of a rule where it merely informs of a process or

procedure without imposing a penalty for noncompliance.

Coventry First, LLC v. Of f . o f Ins. Reg. , 38 So. 3d 200, 204

(Fla. 1st DCA 2010) ( citing DepÓt of Rev. v. Novoa , 745 So. 2d

37 8, 382 (Fla. 1st DCA 1999) ) .

63. By its terms and by Department stipulation, the

Contract Procurement Procedure applies Ðto all Contracts

Administration OfficesÑ that advertise, let, award and execute

low - bid, design - bid - build, construction and ma intenance

contracts. It does not directly require any action by bidders

and does not, in and of itself, create or adversely affect any

rights of Prince. The one portion specifically cited by Prince,

the mandatory pre - bid conference provision, is an inter nal

Department instruction stating how the contract s administration

office should proceed if in its discretion it elects to hold

such a conference. Any terms from the Contract Procurement

Procedure that impose a requirement on a bidder are also

included i n the bid solicitation documents, which the bidder is

free to walk away from or to protest under section 120.57(3) .

The Contract Procurement Procedure is an internal management

memorandum, not a rule.

64. By its terms and by Department stipulation, the B id

Review Procedure applies to all low - bid road construction

projects. Many of its provisions reference and incorporate the

official bid estimate and the algorithm Department uses to

determine whether a bid is unbalanced, both of which are

confidential an d not proper subjects for rulemaking. The Bid

Review Procedure is directed to Department staff and is to be

applied in the interest of maintaining consistency in estimating

and evaluating bids. The Bid Review Procedure imposes no

compliance requirement o n Prince. By its terms, it requires

nothing of anyone outside the Department. The Bid Review

Procedure is an internal management memorandum, not a rule.

65. Both the TRC Procedure and the CAC Procedure apply

only after the bids have been submitted. The y do not even

arguably require any compliance requirement on the bidder. They

set forth no contract award criteria. They create no rights nor

do they adversely affect any existing right of a bidder. These

procedures direct certain Department employees t o meet and vote

on the award of a contract. The TRC Procedure and the CAC

Procedure are internal management memoranda, not rules.

66. It may be objected that the instant case is

distinguishable from cases in which the courts decided that a

policy or pr ocedure was not a ÐruleÑ in part because its

application was discretionary. See , e.g. , Ag. for Health Care

Admin. v. Custom Mobility, Inc. , 995 So. 2d 984, 986 (Fla. 1st

DCA 2008)(cluster sampling formula for purpose of calculating

Medicaid overpayments w as Ðsubject to discretionary

applicationÑ). In the instant case, the Department conceded

that its employees were without discretion to use or not use the

procedures in question.

67. This distinction is not controlling under the facts of

this case. The Department of Transportation is not here acting

primarily in a regulatory or disciplinary capacity, as is the

circumstance in most cases involving alleged unadopted rules.

The Department is operating a vast procurement process in which

it contracts direc tly with hundreds of private entities. The

Legislature has directed that the process be efficient,

effective, and consistent. Section 337.015 recognizes that

inefficient and ineffective administration of public contracts

Ðinconveniences the traveling p ublic, increases costs to

taxpayers, and interferes with commerce.Ñ 7/

68. Section 337.015(2) requires the Department to minimize

variances between contract lettings in order to increase

competition and efficiently employ Department personnel.

Section 337.164(2) declares that the opportunity to bid on

Department contracts is a privilege, not a right. Section

337.168 recognizes that certain information should be withheld

from the public generally in the interest of ensuring a fair and

even - handed bid pr ocess. In light of legislative directives to

uniformly administer the bidding process and to keep a great

deal of estimating and evaluative information confidential, the

DepartmentÓs internal management memoranda understandably

provide a minimum of discre tion as to their application.

69. For the reasons stated above, it is concluded that the

procedures and computer systems relied upon by the Department

for consistency in bid evaluation do not meet the definition of

a rule.

ORDER

Based upon the foregoing Findings of Fact and Conclusions

of Law set forth herein, it is

ORDERED that the portion of Prince Contracting, LLCÓs ,

second amended formal written protest challenging the procedures

and computer processes of the Department of Transportatio n is

dismissed.

DONE AND ORDERED this 22nd day of December , 2016 , in

Tallahassee, Leon County, Florida.

S

LAWRENCE P. STEVENSON

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalac hee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 22nd day of December , 2016 .

ENDNOTE S

1/ If quantity errors had been found o n any of the mathematically

unbalanced items, the bid would have been recalculated using

AstaldiÓs unit prices and the correct quantities to determine

whether the bid rankings would change. A mathematically

unbalanced bid that affects the ranking of the l ow bid is

"materially unbalanced , " and subject to rejection.

2/ Standard Specification 2 - 6, titled ÐRejection of Irregular

Proposals,Ñ provides as follows in relevant part:

A proposal is irregular and the Department

may reject it if it shows omissions,

alterations of form, additions not specified

or required, conditional or unauthorized

alternate bids, or irregularities of any

kind; or if the unit prices are obviously

unbalanced, or if the cost is in excess of

or below the reasonable cost analysis

values .

3/ Section 6.6 does not specify whether it is referring to the

ÐchairpersonÑ of the TRC or the CAC.

4/ As noted in the companion Recommended Order in this case,

there was a discovery issue as to the disclosure of the cost

estimate and items employed to arrive at that estimate. At

issue was not the estimateÓs uncontested confidentiality under

the statute, but whether that confidentiality rendered it immune

to discovery, subject to a confidentiality agreement. The

undersigned, concluding that section 337.168(1) was not an

absolute bar to discovery, ordered the Department to either

disclose the estimate or forego reliance on it at the final

hearing. The Department elected not to disclose the cost

estimate, thereby foregoing reliance on it at hearing.

5/ The term "person" includes "individuals, children, firms,

associations, joint adventures, partnerships, estates, trusts,

business trusts, syndicates, fiduciaries, corporations, and all

other groups or combinations." §§ 1.01(3) & 120.52(14), Fla.

Stat. Prince comfortably satisfies the definition of a

"person."

6/ The Department contrasts this reference to ÐproceduresÑ for

bidding on contracts with the express directive to adopt Ðby

ruleÑ procedures to administer design - build contracts in section

337 .11(7)(b). The Department also points out that section

20.23(3)(a) directs it to adopt such Ðpolicies, rules,

procedures, and standardsÑ as necessary for the proper

functioning and accountability of the Department. The

Department suggests these statutes indicate that the Legislature

Ðrecognizes that not all statements are rules merely because

they are consistently applied,Ñ and that Ðprocedures , Ñ as well

as Ðrules , Ñ are necessary to maintain accountability. These

points are of passing interest but are no t persuasive proof of a

legislative intent to exempt the Department from rulemaking

where section 120.54(1)(a) would otherwise apply.

7/ It is noted parenthetically that contractors are not

mentioned in the LegislatureÓs list of stakeholders.

COPIES F URNISHED:

Eduardo S. Lombard, Esquire

Vezina, Lawrence and Piscitelli, P.A.

413 East Park Avenue

Tallahassee, Florida 32301

(eServed)

Susan Schwartz, Esquire

Department of Transportation

605 Suwannee Street, Mail Stop 58

Tallahassee, Florida 32399 - 0458

(eServed)

Frederick John Springer, Esquire

Bryant Miller Olive, P.A.

Suite 900

101 North Monroe Street

Tallahassee, Florida 32301

(eServed)

Zachary Wells Lombardo, Esquire

Bryant Miller Olive, P.A.

201 North Franklin Str eet, Suite 2700

Tampa, Florida 33602

(eServed)

Megan S. Reynolds, Esquire

Vezina, Lawrence and Piscitelli, P.A.

413 East Park Avenue

Tallahassee, Florida 32301

(eServed)

William Robert Vezina, Esquire

Vezina, Lawrence and Piscitelli, P.A.

413 East Park Avenue

Tallahassee, Florida 32301

(eServed)

Douglas Dell Dolan, Esquire

Florida Department of Transportation

Mail Stop 58

605 Suwannee Street

Tallahassee, Florida 32399 - 0458

(eServed)

Bradley S. Copenhaver, Attorney

Vezina Lawrence & Piscitelli, P.A.

413 East Park Avenue

Tallahassee, Florida 32301

(eServed)

Andrea Shulthiess, Clerk of Agency Proceedings

Department of Transportation

Haydon Burns Building

605 Suwannee Street, Mail Stop 58

Tallahassee, Florida 32399 - 0450

(eServed)

James C. Boxold, Secretary

Department of Transportation

Haydon Burns Building

605 Suwannee Street, Mail Stop 57

Tallahassee, Florida 32399 - 0450

(eServed)

Tom Thomas, General Counsel

Department of Transportation

Haydon Burns Building

605 Suwannee Street, Mail Stop 58

Tal lahassee, Florida 32399 - 0450

(eServed)

NOTICE OF RIGHT TO JUDICIAL REVIEW

A party who is adversely affected by this Final Order is

entitled to judicial review pursuant to section 120.68, Florida

Statutes. Review proceedings are governed by the Florida Rules

of Appellate Procedure. Such proceedings are commenced by

filing the original notice of administrative appeal with the

agency clerk of the Division of Administrative Hearings within

30 days of rendition of the order to be reviewed, and a copy of

th e notice, accompanied by any filing fees prescribed by law,

with the clerk of the District Court of Appeal in the appellate

district where the agency maintains its headquarters or where a

party resides or as otherwise provided by law.