18-002671BID Pediatric Services Of America, Inc., A/K/A Psa Healthcare, A Foreign Corporation Organized Under The Laws Of Georgia vs. Escambia County School District Status: Closed Recommended Order on Tuesday, July 24, 2018.

Summary: Petitioner proved by a preponderance of evidence, that the award of the contract was arbitrary, capricious, and erroneous.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

PEDIATRIC SERVICES OF AMERICA,

INC., a/k/a PSA HEALTHCARE, A

FOREIGN CORPORATION ORGANIZED

UNDER THE LAWS OF GEORGIA,

Petitioner,

vs. Case No. 18 - 2671BID

ESCAMBIA COUNTY SCHOOL DISTRICT,

Respondent.

_______ ________________________/

RECOMMENDED ORDER

Pursuant to notice, a final formal administrative

hearing was conducted in this case on June 28 and 29 , 2018 , in

Pensacola , Florida, before Administrative Law Judge R. Bruce

McKibb en of the Division of Administrative Hearings ( Ð DOAH Ñ ) .

APPEARANCES

For Petitioner: Linda Wade, Board Certified

Trial Lawyer

14 North Palafox Street

Pensacola, Florida 32502

For Responde nt: Joseph L. Hammons, Esquire

The Hammons Law Firm, P.A.

17 West Cervantes Street

Pensacola, Florida 32501 - 3125

STATEMENT OF THE ISSUE

The issue in this case is whether the agency action taken

by Respondent , Escambia County School District (the Ð District Ñ),

concerning the award of a contract pursuant to bid was clearly

erroneous, contrary to competition, arbitrary, or capricious .

PRELIMINARY STATEMENT

On April 12, 2018, the District iss ued Request for Proposal

(ÐRFPÑ) No. 181001 . A single agenda item was added to the RFP

on April 19, 2018. Upon consideration of the responses to the

RFP, the District awarded a contract to Aloa Care Group

(ÐAloaÑ). Pediatric Services of America, Inc. , a /k/a PSA

Healthcare, a foreign corporation organized under the laws of

Georgia (ÐPSA Ñ or ÐPediatric ServicesÑ), timely filed a Notice

of Intent, protesting the intended decision. This proceeding

ensued.

At the final hearing, PSA called seven witnesses: Tracy

Parker, area director for PSA; Jodi Kendrick, owner of Aloa; and

the following District employees: Martha Hanna, health services

coordinator; Teri Szafran, director of Exceptional Student

E ducation; Laura Colo, director of the Title I program; Brad ley

Mostert, senior auditor; and John Dombro skie, purchasing

director. The following PSA E xhibits were admitted into

evidence: 1 through 36, 39, 41 through 43, 56 through 62,

and 66. The District did not call any additional witnesses.

Its Exhibits 4 th rough 7 were admitted. (All hearsay evidence

was admitted subject to corroboration by competent, non - hearsay

evidence. To the extent that evidence did not supplement or

explain non - hearsay evidence , such evidence will not be solely

used as a basis for an y finding herein.)

The parties advised the undersigned that a transcript of

the final hearing would be ordered. B y rule , parties are

allowed 10 days from the date the transcript i s filed at DOAH to

submit proposed recommended orders . The T ranscript was filed on

July 5, 2018 . Each party timely submitted a p roposed

r ecommended o rder and both parties' submissions were given due

consideration in the preparation of this Recommended Order.

FINDINGS OF FACT

1 . The District is responsible for issuing and proc essing

all RFPs or other contract offers concerning contracted work for

the school district.

2 . Early in calendar year 2018, the District determined

that changes in federal law would require all healthcare

services provided to students in the District s chools be done

pursuant to a competitive bid. The District prepared RFP

No. 181001 , and it was issued on April 12, 2018. An evaluation

committee was formed to review any responses to the RFP. The

committee consisted of: Martha Hanna, Laura Colo, Teri S zafran,

and Bradley Mostert. John Dombroskie served as the chair of the

review committee and also performed the calculation of program

costs associated with each responsive bid.

3 . There were two responses to the RFP: one by the then -

current provider of healthcare services, PSA; one by Aloa. The

responses were to be reviewed independently by each individual

committee member and then discussed at a meeting of the

committee held on April 30, 2018. Based on the committeeÓs

findings, the bid was awarded to Aloa.

PEDIATRIC SERVICES OF AMERICA, INC.

4 . PSA was fo rmed in 1989 as a Georgia corporation.

The original goal of PSA was to provide home health care to

pediatric patients. In 1997, PSA collaborated with Locklin

Technical Institute, the Santa Rosa Co unty School District, and

the Santa Rosa County Health Department to develop a model for

providing health services at all the Santa Rosa County schools .

PSA began providing health services to Santa Rosa County schools

in 1998, adding Okaloosa County schoo ls in 2009, and then

Escambia County in 2013. PSA provides pediatric healthcare to

students and homebound individuals across the United States.

5 . From 2013 until the present year, PSA provided

healthcare services to all schools governed by the Distric t.

There ha ve been no notable or significant problems during this

tenure. The District is generally very pleased with the quality

of services provided by PSA , as expressed by Ms. Hanna in a

letter of recommendation she prepared for PSA .

6 . In its RFP re sponse, PSA discussed its origin, its

experience with the District and other nearby counties, and its

overall organization. As a nationwide company, PSA has in place

all the accoutrements of a larg e corporate business, such as

a human relations department , compliance officer, financial

officers, internal general counsel, information officer, and the

like. Its team of leaders was described in PSAÓs RFP response.

PSA also has insurance in place to cover any potential claim

that might arise, opting to have far more coverage than required

by the District.

7 . PSAÓs financial condition is solid. It has over

$355 million in assets, according to its 2016 audited financial

statement . With about $ 259 million in liabilities, PSA has over

$95 million in equity. PSA has been involved in mergers and

acquisitions, being somewhat aggressive but well within its

capabilities. PSA could easily cover its operating costs under

the healthcare contract for the 45 days the District may lag

behind payments under a new contr act.

8 . PSA has in place the employees and contract ed

individuals necessary to provide services under the RFP. Many

of those persons are already working, providing the same

services under PSAÓs existing contract with the District. PSA

also has a managem ent team in place for the District services,

led by Lori Shanahan. Starting work under the RFP would be a

seamless transition.

ALOA CARE GROUP

9 . Aloa was formed by Jodi Kendrick, who, coincidentally,

managed PSAÓs contractual healthcare services with th e District

for the past decade. Ms. KendrickÓs employment with PSA was

terminated sometime in May 2017 , for undisclosed reasons.

Oddly, neither PSA nor Aloa alluded to the reasons for

Ms. KendrickÓs termination at final hearing.

10 . Aloa has o nly two current employees: Ms. Kendrick

acts as the a dministrator; her husband, Ben, who will be the

operations m anager. Neither Ms. Kendrick nor her husband ha s

any experience operating a healthcare company. It is their

intention to hire the 50 to 70 persons n eeded to fulfill the RFP

services once the contract is awarded. As of the date of final

hearing, just three days before AloaÓs contract with the

District was to go into effect, Ms. Kendrick was interviewing

some prospective employees but had not hired any one yet .

11 . Aloa did not submit any financial information in the

RFP response by which its financial st ability and long - term

finan cial viability could be measured. Aloa noted that it was

applying for a Small Business Association - backed loan to ensure

i ts ability to cover three months of expenses . Ms. Kendrick

said she was receiving counseling from the Small Business

Development Center at a local college as well.

12 . Aloa provided a quote for insurance from a legitimate

insurance agent. Aloa indicate d that it has established a

relationship with a local accounting firm for the purpose of

assistance with financial matters and had Ðtasked Regions

Bank/PayCor with catering to the HR and payroll needs of our

company . Ñ During the de novo final hearing, Ms. Kendrick did

not provide any updated or more specific information on those

generalized statements of intent .

13 . Aloa presented three letters of recomme ndation with

its RFP response, including one from Ms. Hanna, who also served

on the review committee for the District. The instructions

provided to the review committee contained the following

cautionary language concerning conflicts of interest and ethical

considerations:

A conflict of interest or the appearance of

a conflict of interest may occur if y ou are

directly or indirectly involved with an

organization that has submitted a proposal

for evaluation. Prior to reviewing any

proposals , you must inform Purchasing of any

potential conflicts of interest or the

appearance thereof. If you become aware o f

any potential conflict of interest as you

review a proposal, you must immediately

notify the Purchasing Agent leading the

evaluation effort. You may be disqualified

as an RFP evaluator if you conduct yourself

in a way that could create the appearance of

bias or unfair advantage with or on behalf

of any competitive bidder, potential bidder,

agent, subcontractor, or other business

entity, whether through direct association

with contractor representatives, indirect

associations, through recreational

activit ies or otherwise. Examples of

potentially biasing affiliations or

relationships are listed below:

A. [Acceptance of benefits]

B. [Direct employee/ownership affiliation]

C. Your rela tionship with someone who has

a personal interest in this proposal. This

includes any affiliation or relationship

by marriage or through family membership,

any business or professional partnership,

close personal friendship, or any other

relationship that you think might tend to

affect your objectivity or judgment or may

give an appearance of impropriety to someone

viewing it from outside the relationship.

14 . In this case, in addition to writing a letter of

reference for Ms. Kendri ck, Ms. Hanna also assisted Ms. Kendrick

with information concerning provision of the very services for

which Aloa submitted a bid. The information and discussions

occurred prior to the RFPÓs posting, but the conversations were

specifically about t he school health services. Ms. Kendrick

expressed an interest in applying for a contract to prov ide

those services; Ms. Hanna attempted to assist her. They

exchanged information via email and met personally on occasions.

When the RFP was posted, Ms. Hanna should have disclosed her

discussions with Ms. Kendrick, but did not.

15 . The obvious appear ance of conflict in this situation

was not addressed by the District or by the review committee

during its discussion of the bids . Not one of the reviewers

even commented on the letter by one of its members; they only

noted that Î as Ms. Hanna interjected Î one of PSAÓs letters of

recommendation was not from a professional person or group.

According to Ms. Hanna, she did not know that Ms. Kendrick would

use the recommendation letter as part of her RFP response, but

once that fact was known, Ms. Hanna shou ld have recused herself

from further involvement. That she did not reeks of

impropriety.

16 . Mr. Dombroskie drafted a Ð cone of silenceÑ email on

April 10, 2018, two days prior to release of the RFP. The email

reminded the committee members of their comm itment to maintain

confidentiality and to avoid any conflicts. The email was not

sent , apparently, 1/ until the day after the RFP was released even

though it would usually have been sent out prior to or

contemporaneously with the RFP issuance. This is jus t one more

odd occurrence relating to this particular RFP process .

THE REVIEW COMMITTEE

17 . The review committee was comprised of the four

previously identified individuals and it was overseen by

Mr. Dombroskie. Ms. Hanna had selected Ms. Sz afran and M s. Colo

as members of the committee ; Mr. Dombroskie had chosen

Mr. Mos t ert. The reviewersÓ experience relating to review of

these RFP responses was minimal: Mr. Mos t ert knew little about

school health services and had only served on one RFP committee

bef ore; Ms. Szafran had served on Ðmaybe three committeesÑ in

the past and her expertise was in Exceptional Student Education;

and Ms. Colo had no prior experience with RFP reviews and was

not familiar with school health services.

18 . Each of the members completed a scoring sheet that

addressed three areas of consideration from the RFP , assigning

points for each. Responses to t he Company Experience/References

section could generate up to 10 points. That section asks the

applicant for :

A narrative letter which profiles the

background, experience and qualifications of

the Responder. Include a brief description

of all lawsuits th a t are pending and/or

filed against the Responder over the last

three years and any disciplinary action

taken against the Responde r. Provide a

minimum of three references that use your

School Health Services (preferably in

Florida). [P]rovide a brief outline of each

contract with information regarding student

population, program operati on s, staffing

patterns, costs and any other in formation

deemed relevant. Additionally, include

agency contact names , titles and phone

numbers. Furthermore, list any contracts

which have been terminated early or upon

renewal within the past five years.

19 . The Financial Ability section also provide d for up to

10 points. That section requires the applicant to:

Provide evidence of your companyÓs financial

stability and long term viability. Provide

proof of your companyÓs insurance as

required in Section XIV of this RFP or

submit a letter of your int ention to have

the required insurance prior to start of any

work under this agreement.

20 . The Proposed Serv ice Model section gave up to

45 points and was the most extensive section of the RFP,

requiring bidders to :

Identify the proposed management and office

support team that will be responsible for

providing required contract administrative

services. General information is required

for the management/administrative personnel

at the regional or corporate levels.

Indicate the proposed specific individu al

who would serve as the day - to - day contact

and be responsible for the operation of the

overall program. Provide an organizational

chart. Provide a detailed narrative

addressing your firmÓs understanding of the

DistrictÓs needs and of your plan to meet

the school health needs of the District:

a staffing matrix, medical oversight,

supervision, hierarchy, implementation

deadline, description of training support

provided to employees during implementation

and afterwards, etc. [D]escribe the level

of custo mer service to be provided, list the

hours customer support will be available, is

customer support available via the internet

and/or telephone? Quality Sustainment

Operations Plan shall describe the system ic

approach to keep the service level at target

to prevent unexpected operation problems and

to implement additional quality and

improvements.

21 . A fourth sect ion, Program Cost, was worth 35 points

but was not directly graded by the review committee. It w as

completed by John Dombro skie based on progr am cost data

submitted in sealed packages by each applicant.

22 . A meeting of the commit tee was held to discuss and,

if desired, adjust the scores given for each bidder. Following

the discussion at that meeting, t he total points on each

reviewerÓs scor ing sheet, including the prog ram cost points

assigned by Mr. Dombro skie, were totaled. Aloa received

94 points; PSA received 9 5 .83 points. PSAÓs number was later

adjusted downward to 94.22 based, incredibly, on a post - review

committee determination by Ms . Hanna that Mr. Dombro skieÓs

calculations - Î which were not part of the review committeeÓs

purview - - were in error. Although the manner in which the

correction was done was not terribly egregious, 2/ it was outside

the prescribed process for an RFP review.

23 . There are several o ther findings by the committee that

warrant discussion.

24 . First, the financial review by committee members

strains all credulity. PSA, which submitted an audited

financial statement showing over $95 million in net worth,

garne red scores of 8, 8, 8, and 5 from the reviewers (out of

10 possible points). Conversely, Aloa, which provided no

financial information whatsoever and only an expressed intent to

seek a loan for needed capital , received points of 10, 7, 7,

and 6 from the r eviewers .

25 . AloaÓs RFP response did not include a balance sheet,

profit and loss statement, evidence of cash on hand, any

identification of a bank account, or any other information from

which its financial stability and long - term viability could be

me asured. The committee members noted only that the winning

bidder would be required to have available assets to pay

employeesÓ salaries for the first 45 days of the contract,

pending payment by the District for services provided. The only

suggestion that Aloa could satisfy this requirement was that it

had applied for a loan. Period. By any conceivable objective

and unbiased measure, as compared to PSAÓs financial condition,

as proven by its audited financial statement, AloaÓs financial

position was woefu lly inferior. That fact is not reflected in

the scores assigned by the reviewers.

26 . Next, several of the committee members noted that the

recommendation letters submitted by PSA were ÐweakÑ due to the

fact that one of them came from a studentÓs pare nt rather than

from a professional. The RFP requires applicants to p rovide

references that use thei r s ervices (preferably in Florida).

There is no requirement in the RFP that the letters be from

professionals. PSA provided three such letters, including one

from a studentÓs parent who knew firsthand how PSAÓs services

had been used. For committee members to d iscredit PSA for

insufficient letters of rec ommendation is not reasonable. By

contras t, the letters from Aloa addressed Ms. Kendrick

personally, no t her company (which of course had no history to

be addressed) . Those letters commended Ms. Kendrick for her

work done while an employee of PSA; there are no recommendation

letters for work done on her own behalf or by Aloa. The letters

were, in essence, laudatory comments about PSAÓs operations in

which Ms. Kendrick was involved. The Aloa letters were not

technically responsive to the RFP.

27 . It should be noted that the committee credited

Aloa with having past experienc e solely because its owner,

Ms. Kendrick had experience working with PSA. The committee did

not compare PSAÓs decades of experience and 4,000 - plus skilled

caregivers, nor their established management team and operation

establishment . The review results in this area do not seem

legitima te.

28 . T he proposed service models described by both

applicants were quite similar in nature, which is not surprising

as AloaÓs principal developed her proposed service model while

working for PSA. The committee noted with favor that Aloa was

going to be totally focused on providing school health care .

PSA , by contrast, had other endeavors and interests , e.g., home

pediatric health care services. The committee did not

acknowledge that PSA is a nationwide company and its other

ventures did not detract fr om its ability to provide school

healthcare under the contract. Nor did AloaÓs stated inten tion

to enter into mental healthcare services in the next two or

three years seem to warrant disapproval by the committee. The

reviews showed an unearned and unwar ranted bias in favor of Aloa

on all accounts.

29 . All of AloaÓs Ðcompany experienceÑ was based on

her work as an employee of PSA. All of her successes were

associated with how PSA operated. There was no testimony or

evidence that PSAÓs success was due s olely or largely because

Ms. Kendrick was involved. And the fact that Ms. KendrickÓs

employment with PSA was term inated cannot be ignored. Looking

at the RFP review as a whole, it does not seem completely

aboveboard and believable.

CONCLUSIONS OF LAW

30 . DOAH has jurisdicti on over this matter pursuant

to s ections 120.569 and 120.57 (1) , Florida Statutes, and

pursuant to a contract between DOAH and the District . Unless

specifically stated otherwise, all references to Florida

Statutes will be to the 20 1 8 codification.

31 . PSA, whose bid was rejected in favor of another

bidder, has standing in this proceeding. See Westinghouse Elec.

Corp., v. Jacksonville Transp. Auth. , 491 So. 2d 1238 (Fla. 1st

DCA 1986).

32 . PSA has the burden of proof in this matte r as it is

protesting the proposed agency action. § 120.57(3) (f) , Fla.

Stat . See also DepÓt of Banking & Fin., Div. of Servs. & Inv.

Prot. v. Osborne Stern & Co. , 670 So. 2d 932 (Fla. 1996) . The

standard of proof is by a preponderance of the evidence . See

Cisneros v. Sch. B d. of Dade Cnty. , 990 So. 2d 1179, 1183 (Fla.

3d DCA 2008); McNeill v. Pinellas Cnty. Sch. B d. , 678 So. 2d

476 (Fla. 2 d DCA 1996); and § 120.57(1)(j), Fla. Stat. PSA must

prove in this case that the DistrictÓs decision to award the

c ontract to Aloa was clearly erroneous, contrary to competition,

arbitrary, or capricious . § 120.57(3)(f), Fla. Stat.

33 . The final hearing in this matter is de novo in nature.

Its purpose is to evaluate the action taken by the District.

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

2d 607 (Fla 1st DCA 1998). Still, the District has wide

discretion in its review of RFP responses and the award of a

contract. DepÓt of Transp. v . Groves - Watkins Constr . , 530 So.

2d 912, 913 (Fla. 1988).

34 . An agency decision is "contrary to competition" when

it unreasonably interferes with the objectives of competitive

bidding. Those objectives have been stated to be:

[T]o protect the public against collusive

contracts; to secure fa i r competition upon

equal terms to all bidders; to remove not

only collusion but temptation for collusion

and opportunity for gain at public expense;

to close all avenues to favoritism and fraud

in various forms; to secure the best values

for the [public] at the lowest possi ble

expense; and to afford an equal advantage to

all desiring to do business with the

[government] by affording an opportunity for

an exact comparison of bids.

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

1190, 1192 (Fla. 2d DCA 1977) ( qu oting Wester v. Belote , 138 So.

721, 723 - 724 (Fla. 1931) ) .

35 . To determine whether an agency acted in an arbitrary

or capricious manner, it must be dete rmined "whether the agency:

(1) has considered all relevant factors; (2) has given actual,

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

reason rather than whim to progress from consideration of these

factors to its final decision." Adam Smith Enters. v . DepÓt of

Envtl. Reg. , 553 So. 2d 1260, 1273 (Fla. 1st DCA 1989).

However, if a decisio n 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 n.3 (Fla. 2d DCA 1992).

36 . The actions of the Dist rictÓs review committee, as

set forth above, are clearly erroneous. For whatever reason,

the committee completely ignored AloaÓs lack of financial

stability or long - term viability. Despite all of Ms. KendrickÓs

experience bei ng under the tutelage of PSA, PSA was given

inferior consideration for its programs. The similarity of

comments by reviewers (despite their representations that all

reviews were independent) raises questions. For example, why

would committee members ques tion a non - professional letter of

recomme ndation when the RFP did not have that requirement? And

why would no member of the committee even comment on the fact

that one of its members had written a letter of recommendation

for one of the competing applican ts? Very questionable.

37 . Public officers and employees (including District

employees) are subject to the code of ethics in chapter 112,

Florida Statutes. There are proscriptions therein against a

public employee having a business relationship with an yone with

whom the employee is procuring business. While there is no per

se violation of that chapter concerning Ms. HannaÓs pre - RFP

discussions with Ms. Kendrick, the appearance of impropriety

cannot be ignored. This is especially so when considering

Ms . HannaÓs letter of recommendation on AloaÓs behalf .

38 . The award of the contract to Aloa was arbitrary

and capricious , i.e., as defined in BlackÓs Law Dictionary ,

10 th Edition (2014) : Ð Characterization of a decision or action

taken by an administrati ve agency . . . meaning willful and

unreasonable action without consideration or in disregard of

facts or without determining principle.Ñ The facts set forth in

the RFP proposals are not consistent with the findings of the

committee. The scoring sheets l ack credibility under the

circumstances described herein.

39 . T he District has opted to commence its contract with

Aloa prior to the fina l resolution of this challenge. The most

efficient remedy is for the RFP to be re - posted , allowing all

interested b idders to submit their bids. A totally new review

committee should be convened in order to avoid any conflict or

appearance of impropriety.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that a final ord er be entered by Petitioner,

Escambia County School District , declaring the award of a

contract under RFP No. 181001 to Aloa Care Group erroneous,

ar bitrary and capr ic ious .

DONE AND ENTERED this 24th day of July , 2018 , in

Tallahassee, Leon County, Florid a.

S

R. BRUCE MCKIBBEN

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 24th day of July, 2018 .

ENDNOTES

1/ The copy of the email introduced into evidence has a date of

April 10, 2018 , at 10:01 a.m., but Mr. Dombroskie testified that

it did not go out u ntil later. There was no explanation for

that discrepancy. A follow - up email from ÐLauren Î Joe Hammons

OfficeÑ states, ÐThe April 10, 2018 (10:01 a.m.) email (Cone of

Silence Concerning RFP 181001 Î School Health Services) from

John Dombroskie you inqui red about was sent to the following

[people].Ñ

2/ Ms. Hanna expressed surprise when she saw Mr. DombroskieÓs

findings, as if she had expected a different result. She said

the calculations just didnÓt look right, so she took it upon

herself to recalcul ate the numbers. Her changes did not affect

the outcome Î Aloa still prevailed, but by a wider margin.

COPIES FURNISHED:

Joseph L. Hammons, Esquire

The Hammons Law Firm, P.A.

17 West Cervantes Street

Pensacola, Florida 32501 - 3125

(eServed)

Linda Wade , Board Certified Trial Lawyer

14 North Palafox Street

Pensacola, Florida 32502

(eServed)

Malcolm Thomas, Superintendent

School District of Escambia County

75 North Pace Boulevard

Pensacola, Florida 32505

Matthew Mears, General Counsel

Department of E ducation

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

10 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.