20-002660BID Gateway Retail Center vs. Department Of Children And Families Status: Closed Recommended Order on Monday, August 31, 2020.

Summary: Gateway has not carried its burden of demonstrating that the Department's intended award to Midtown is arbitrary or capricious.

For Respondent: William D . Hall , Esquire

John L. Wharton, Esquire

Dean, Mead and Dunbar

215 South Monroe Street, Suite 815

Tallahassee, Florida 32301

For Intervenor: Robert H. Hosay, Esqu ire

Benjamin J. Grossman, Esquire

Mallory Neumann, Esquire

Foley & Lardner, LLP

106 East College Avenue, Suite 900

Tallahassee, Florida 32301

John A. Tucker, Esquire

Foley & Lardner, LLP One Independent Drive, Suite 1300

Jacksonville, Florida 32202

S TA TEMENT OF T HE I SSUE

Whether the Department of Children and Families’ (“the Department”)

intent to award the contract associated with Invitation to Negotiate

No. 590:3161 (“the ITN”) to Midtown Centre Office, LLC (“Midtown”) was

arbitrary or capricious , ir rational, or otherwise contrary to the law . 1

P RELIMINARY S TATEMENT

Gateway Retail Center, LLC (“Gateway”) filed an “Amended Petition and

Request for Formal Hearing” (“the Amended Petition”) on June 8, 2020, challenging the Department’s intent to award th e contract at issue to

1 Midtown arg ued on page 2 of its Proposed Recommended Order that Gateway Retail

Center, LLC never asserted that the Department’s intended award was clearly erroneous or

contrary to competition and that the analysis should thus be limited to whether the intended

award was arbitrary or capricious. Because the undersigned agrees with Midtown’s

argument, the “Statement of the Issue” is a slightly revised version of the “ Concise

Statement of the Nature of the Controversy ” as set forth in the parties’ Joint Pre - Hearing

Stipu lation. See Palm Beach Polo Holdings, Inc. v. Broward Marine, Inc. , 174 So. 3d 1037,

1038 - 39 (Fla. 4 th DCA 2015)(stating that “[p]retrial stipulations prescribing the issues on

which a case is to be tried are binding upon the parties and the court, and sho uld be strictly

enforced.”).

Midtown. The Department referred this matter to DOAH on June 10, 2020,

and the undersigned sched uled a final hearing for July 9 and 10, 2020.

Midtown filed a “Notice of Intervention and Appearance” on June 11,

2020, based on the fa ct that it was specifically identified in the Amended

Petition and that its substantial interests were at stake. The undersigned

issued an Order on June 12, 2020, amending the case style and formally recognizing Midtown as an intervenor.

The Department f iled a “Motion for Summary Recommended Order or, in

the Alternative, Motion to Strike Irrelevant Portions of the Amended

Petition, and Motion in Limine” (“the Motion for Summary Recommended

Order”) on July 1, 2020. In support thereof, the Department argued that all of

the arguments raised in the Amended Petition were contrary to the plain

language of the ITN or some other undisputed fact. At the outset of the final

hearing, the undersigned denied the Motion for Summary Recommended Order without prejudice to the arguments therein being raised again.

On July 8, 2020, Midtown filed a “Motion in Limine to Exclude Argument

Related to Gateway’s Offer Submitted After the Notice of Intent to Award”

and a “Motion in Limine.” Both of the aforementioned Motions were denied at

the outset of the hearing with the caveat that the objections therein could be

reasserted if the arguments at issue were raised during the final hearing.

The undersigned accepted Gateway Exhibits 1 through 25 into evidence

but deferred ruling on relevancy objections to Gateway Exhibits 10, 11,

and 23 through 25.

2 Those objections are overruled. The Department’s

2 There is an error in the Pre - hearing Stipulation regarding the numbering of Gateway’s

exhibits. All of Gateway’s exhibits after No. 4 are off by one numerical position. For example,

the document listed by the Pre - hearin g Stipulation as Gateway Exhibit No. 5 should actually

be listed as Gateway Exhibit No. 6, and so forth through the end of Gateway’s exhibits.

Exhibits 1 through 16 were accepted into evidence, and rulings on Midtown’s

relevancy objections to Exhibits 1 and 6 were deferred. Those objections are

overruled. Midtown Exhibits 1 through 22 were accepted i nto evidence

without objection. Joint Exhibits 1 through 52 were accepted into evidence.

Gateway presented testimony from David Hulsey, Jim Goldsmith, Charles

Johnson, and Danie l Mehaffie. The Department and Midtown did not call any

witnesses. Midtown offered portions of depositions from Adam Landa

(Midtown Exhibit 16) and David Berger (Midtown Exhibit 17) in lieu of live

testimony, and the undersigned accepted those designations .

Near the conclusion of the final hearing, Gateway orally moved to amend

the Amended Petition in order to raise a new issue pertaining to parking at

Midtown’s office park. The undersigned denied that motion without prejudice

to Gateway arguing in its pro posed recommended order why that particular

issue should be considered.

The three - volume final hearing T ranscript was filed on July 28, 2020, and

the parties filed timely proposed recommended orders that were considered in the preparation of this Recomme nded Order.

The Department and Midtown filed a “Joint Motion to Strike Portions

of Petitioner’s Proposed Recommended Order” (“the Joint Motion”) on

August 13, 2020. In support thereof, the Department and Midtown noted that

Gateway’s Proposed Recommended Order raised an argument that had not

been previously identified by Gateway in the Amended Petition or the Pre -

hearing Stipulation , i.e . that Midtown’s Best and Final Offer (“BAFO”) was

not submitted in writing, and was therefore non - responsive . As discus sed in

the Conclusions of Law below, the undersigned grants the Joint Motion and

has disregarded any argument pertaining to Midtown’s BAFO not being in

writing.

F INDINGS OF F ACT

Based on the evidence adduced at the final hearing, the record as a whole,

an d matters subject to official recognition, the following Findings of Fact are

made:

The Parties

1. The Department is the state agency charged with working “in

partnership with local communities to protect the vulnerable, promote strong

and economically sel f - sufficient families, and advance personal and family

recovery and resiliency.” § 20.19(1)(a), Fla. Stat. (2019). 3

2. Gateway owns a shopping center in Jacksonville, and Midtown has

owned the Midtown Office Park in Jacksonville since September of 2019.

The ITN

3. The Department posted the ITN on October 9, 2019, in order to obtain

leased space in Jacksonville for its ACCESS Storefront (“the Storefront”) and North Florida Customer Call Center (“the Call Center”) beginning March 1,

2021. The Storefront is expected to serve 350 to 400 clients a day and is

currently located in Building D of Gateway’s Jacksonville shopping center.

The Call Center is currently located in Midtown Office Park’s Brownett

Building.

4. The ITN set forth two options for prospective b idders. Option 1 sought a

location of approximately 26,585 square feet to house the Storefront and the Call Center for 5, 7, or 10 - year lease terms. Option 2 sought one location of

approximately 11,091 square feet for the Call Center and a separate locatio n

of approximately 15,494 square feet for the Storefront. Option 2 also called

for 5, 7, or 10 - year leases.

3 Unless stated otherwise, all statutory references shall be to the 2019 version of the Florida

Statutes.

5. The ITN specified that the Department would evaluate and rank all

submissions deemed responsive to the ITN. Those rankings would serve as

the ba sis for one or more bidders advancing to “the short list” and being

entitled to conduct negotiations with the Department. Section V of the ITN

indicates that negotiations were to begin after the Department evaluated the

initial replies to the ITN.

6. The ITN’s stated goal was to “award a lease that best meets the needs

of the State using a flexible, iterative process.” Therefore, the ITN

established a process in which the Department had a great deal of flexibility

in how it conducted negotiations with the short - listed bidders. For example,

the ITN states that the Department “reserves the right to negotiate with all,

one or none of the respondents in its sole discretion.” The ITN also states

that the Department “has the right, at any time during the process , to reject

any and all proposals that are not, in [the Department’s] sole discretion, in

the best interests of the State.”

7. The Department reserved “the right to seek clarifications, to request

Reply revisions, and to request any information deemed nec essary for proper

evaluation of Replies.” The Department afforded itself “the right to negotiate different terms and related price adjustments if [the Department] determines

that it is in the State’s best interest to do so.” While the ITN provided that “ne gotiations may be conducted serially by order of ranking or concurrently

with all short listed [bidders],” the Department reserved the right to “expand the short list to include additional responsive Offerors for negotiation or

change the method of negotia tion . . . if it determined that to do either would

be in the best interest of the State.” Also, the Department could “[s]chedule

additional negotiating sessions with any or all responsive [bidders].”

8. T he ITN specified that , after the Department complet ed the initial

negotiation session with the selected short - listed bidders , the Department,

“in its sole discretion,” would “determine whether to hold additional

negotiation sessions and with which [bidders] it [would] negotiate.” The ITN

empowered the Depa rtment to “[t]ake any additional administrative steps

deemed necessary in determining the final award, including additional fact -

finding, evaluation, or negotiation where necessary and consistent with the

terms of this solicitation.” Furthermore, any time after the initial negotiating

session, the Department could require all responsive bidders to provide

additional or revised written proposals addressing specific topics and

“[d]ecline to conduct further negotiations with any [bidder].”

9. The Department reserved the right to schedule additional negotiation

sessions in order to finalize contractual terms with bidders identified in a

Notice of Award. In addition, the Department could reopen negotiations with

any bidder at any time prior to executing a contr act or terminate negotiations

with any or all bidders, regardless of the status of negotiations with those

bidders.

10. The Department could “waive minor irregularities when to do so would

be in the best interest of the State of Florida.” The ITN defined a “minor

irregularity” as a “variation from the terms and conditions of this ITN which does not affect the price of the Offer or give the [bidder] a substantial advantage over other [bidders] and thereby restrict or stifle competition and

does not adversely impact the interest of the Department.”

11. The ITN also contained a broad provision providing that :

The Department reserves all rights described

elsewhere in this ITN. The Department has sole discretion in deciding whether and when to take any of the foregoing actions, the scope and manner

of such actions, the responsive [bidder] or [bidders]

affected and whether to provide concurrent public notice of such decision.

12. The end of the negotiation process could lead to the Department

selecting one or m ore bidders “to submit a written best and final offer , to

memorialize all agreements reached during negotiations and to extend

additional benefits to the State.”

13. As for the final selection, the ITN specified that :

The [Regional Director] or her/his designee will

approve an award that will provide the best leasing

value to the State, based on the criteria in

Section V.B.2, taking into consideration the recommended award by the negotiating team. In so

doing, the [Regional Director] or his/her designee is

not required to score the Offerors, but will base his

or her recommendation on the criteria set forth above. If the [Regional Director] or his or her designee determines that two or more Replies most

advantageous to the State are equal with respect to

all relevant considerations, including price, quality, and service, the award will be made in accordance with Rule 60A - 1.011, Florida Administrative Code

and Section 295.187, Florida Statutes.

14. The ITN set out a “general schedule” detailing key dates in the

solicitation process and estimated time periods for when certain events would

occur. For example, the initial schedule established December 9, 2019 , as the

deadline for bidders to submit their replies to the Department. The

Department’s evaluators w ere scheduled to meet on December 16, 2019 , and

complete their evaluation of the replies. It was “anticipated” that the “short list” of bidders would be announced on December 19, 2019. Then, the

“estimated time period for negotiation” would begin on Decemb er 20, 2019,

and conclude on January 23, 2020. Finally, February 14, 2020, was the Department’s “estimated date for posting” it’s Notice of Intent to Award .

15. During the course of this solicitation, the Department revised its

general schedule multiple ti mes via the issuance of addenda. For example,

Addendum 3 was issued on December 6, 2019, and delayed by approximately one month all of the events following the opening of the initial replies to the ITN. Addendum 6 was issued on February 7, 2020, and extend ed the

negotiation period with short listed bidders to February 21, 2020.

Addendum 7 was issued on February 19, 2020, extending the aforementioned

negotiation period to February 28, 2020, and the estimated award date to

March 16, 2020.

16. The D epartment authorized CBRE, Inc. (“CBRE”), the world’s largest

real estate company, to act as its representative during the solicitation and

negotiations. CBRE helps agencies structure bids so they draw as much

interest as possible from prospective bidders. CBRE also assists with

assembling the bid documents that agencies post to the State of Florida’s

Vendor Bid System (“the VBS”). In addition to ensuring th at offers are

technically compl i a nt with the terms of an ITN, CBRE handles negotiations

with short - listed bidde rs and facilitates the receipt of the bidders’ BAFOs.

17. CBRE assigned David Hulsey to be its lead person for the ITN, and

Charles Johnson of the Department was his designated contact. 4

18. The ITN was posted on the VBS on October 9, 2019. Any bidder

objecting to an y of the ITN’s terms, conditions, or specifications had 72 hours

to file a protest, but no protest was filed.

19. Five prospective bidders replied to the ITN. Gateway submitted two

replies, each offering to lease space in Building A of Gatew ay’s Jacksonville

shopping center. As noted above, the Department currently leases space for

the Storefront in Building D in the same shopping center. Midtown submitted

one reply which proposed leasing space in the Dew Building of its Midtown

office park. The Department currently leases space for the Call Center in the Brownett Building of that office park.

4 Mr. Hulsey explained that CBRE does not recommend which bidder should receive the

contract: “I don’t recommend anything. We don’t make any decisions. Once we finish with

negotiations and test fits, we give that to the agency, and they make decisions and

recom mendations. We as tenant brokers don’t have the authority to make any decisions.

We’re not on the evaluation teams, and we just, you know, that’s not part of the scope of our

contract.” When asked if he made any recommendations in the instant case, Mr. Hul sey

testified, “Absolutely not. I don’t have that authority, and quite frankly, we don’t care. We

represent the state, so if bidder A, B, or C wins, we get paid. I have no inclination to – for one

to win over the other. The only thing I care about is whoev er wins can they get the funding

through traditional lending or private equity, do they understand the scope of work and the

cost associated with building out this space.”

20. After receiving replies to the ITN, Mr. Johnson ranked the replies

from highest to lowest based on the criteria set forth in the ITN. He then

transm itted those ranking s and a recommendation about which bidders

should make the short list to the Regional Director overseeing the

Jacksonville area. The Regional Director or his/her designee then selected the

bidders with whom the Department (via CBRE) woul d commence

negotiations.

21. Gateway, Midtown 5 , and Timuquana Marketplace, LLC

(“Timuquana”) advanc ed to the short list on January 13, 2020. 6

Getting BAFOs from Gateway and Midtown

22. The ITN specified that “[ p]rior to final negotiation and selectio n of an

Offer or Offers, a ‘test fit’ of the Proposed Space relative to the need may be

required, the expense of which shall be borne by [the bidder].” The ITN defined a “test fit” as :

the first attempt to show the proposed office space criteria on paper in the form of a preliminary space

plan. The test fit determines if you can “fit” into a specific space or how much space you will actually

need to build out the space.

A test fit ensures that a prospective bidder understands the Department’s

needs and will provide exactly what the Department is seeking.

7

23. Even though the ITN stated that a test fit “may be required,”

Mr. Hulsey considers test fits to be an essential part of the negotiation

process: “I was trying to facilitate test fits, which are the basis for

5 Midtown earned the highest overall score.

6 The subsequent negotiations with Timuquana were not extensive because its proposed

lease rates were substantially higher than those proposed by Gateway and Midtown.

7 Charles Johnson, t he Department’s contact person for the ITN , testified that a test fit

shows “where the seats are, an d where the p eople are going to be sitting. Where . . . rooms

are located, restrooms, [and whether the contemplated arrangement is] conducive to fire

codes.”

negotiations, so that we could get to a final best and final number and feel

confident that they could build it out.”

24. Adam Landa, Gateway’s point - of - contact for this bid, contacted

Mr. Hulsey about revising Gateway’s offer so that it woul d be based on

Building D rather than Building A. Mr. Hulsey resp onded via a February 6,

2020, email stating that the Department was receptive to keeping the

Storefront in Building D, but Mr. Hulsey still wanted Gateway to submit a test fit:

Adam,

Per ou r conversation yesterday afternoon, [the

Department] is open to the idea of keeping the

store front in their current location at Gateway,

with some modifications to the lobby and an expanded area of approximately 3,000sf. [The Department] is requesting tha t you hire an

architect/space planner to complete a “high level” test - fit to show how the storefront and call center

fits into the available vacant space adjacent to the

service center. If your architect/space planner needs to meet with [the Department], I can set that

up. The time period for negotiations ends tomorrow according to the schedule in the ITN; however, we are going to extend that timeframe for a couple of weeks to allow time for the test - fit process. If you

have any questions, please contact me .

Mr. Hulsey provided Gateway with the names of three architects who could

perform the test fit.

8

25. Mr. Hulsey contacted Gateway and Midtown on February 18, 2020, in

order to determine when he could expe ct the first drafts of the test fits that

8 Mr. Hulsey wrote an email to Mr. Landa on February 10, 2020, relaying an architect’s

contact information and stating he was “working to find you a couple more to reach out to.”

Mr. Landa replied 10 minutes later thanking Mr. Hulsey and saying “[w]e will get right on

it.”

h ad been requested. Mr . Hulsey’s February 18, 2020, email to Mr. Landa

asked:

Any idea when we will see the first draft of a “high

level” test fit? No one from [the Department] has been contacted by a space planner or ownership to

give their input. We will be reaching the end of the

period for negotiations this Friday and then the

agency will make their decision. I would assume that you would like for [the Department] to see past the existing conditions before they make their

decision.

26. In lieu of a tes t fit, Mr. Landa submitted via email a “revised site plan”

and what he referred to as “attached test fits” on February 18, 2020. Via the

same email , Mr. Landa asked Mr. Hulsey to “please confirm if we can extend

the negotiations by an additional week.” On February 22, 2020, Mr. Hulsey’s

assistant notified Mr. Landa via email that “[t]he addendum to extend the

deadline for negotiations on the Jacksonville ITN has been posted to VBS, please find a copy attached. The new deadline date is 2/28/2020.”

27. Mr. Landa then transmitted the following email to Mr. Hulsey and his

assistant on February 26, 2020:

Per our conversation today, please see attached a revised site plan and proposed rental structure for

the two proposed spaces in Building D at Gateway

Town Ce nter. Please note that we provided your

client an approximate 1,000 square feet of additional space for non - rentable items such as

bathrooms, etc.

The proposed rentable square feet will be based on your client’s required 26,585 total square feet plus appr oximately 3%, which comes to approximately 27,382 total square feet. To clarify, [the

Department] will be paying gross rent on the basis

of its required 27,382 square feet, as seen on the

proposed rental structure attached. [ 9 ]

28. The documents transmit ted by Mr. Landa did not amount to an actual

test fit because they did not show how the interior of the spaces would be

arranged or anything else contemplated by the ITN’s definition of “test fit.”

29. Mr. Hulsey was frustrated with Gateway’s failure to provide him with

a test fit , testifying that :

Q: Gateway never provided you with a test fit, did

they?

A: No. We tried – we tried. I was so frustrated with

Mr. Landa that I called David Berger and

expressed my frustration. And said, David, I don’t

think that Mr. Landa understands what a test fit

is, because I asked for a test fit and he sends me a

site plan with the vacant space that they have in

the center. And I was just pulling my hair out

trying to communicate.

Q: Okay. And I guess, based on what you just said,

would it be fair to say that you really bent over backwards trying to get a test fit from Gateway?

A: I went beyond. Above and beyond. If the tables

were turned and Gateway was awarded this,

Midtown would probably be protesting saying that

9 Mr. Landa also tran smitted the substance of this email to Mr. Hulsey via a text message

sent on February 26, 2020.

I showed favoritism to Gateway, because I helped

them get in touch with some architects. [ 10 ]

30. In response to an inquiry from Mr. Landa asking if he needed

anything else, Mr. Hulsey email ed the following to Mr. Landa on March 6,

2020, well after the Fe bruary 28, 2020, negotiation deadline :

We have everything we need at this point. [The

Department] is reviewing all of their options and

hope to make an award according to the revised

schedule of events in the ITN. If they request

additional information, I will reach out to you.

10 Mr. Hulsey had relayed his frustration to David Berger, one of Gateway’s partners:

Q: And did David Berger call you during this procurement at

all, to your recollection?

A: Yeah. If David needed something, yo u know, he would call;

and if I didn’t answer, he would text and say, “Call me,” and I’d text and say, you know, “I’m tied up,” “I can’t,” “I will,” but I would rather have reached out. In fact, when I was not getting the responsiveness that I needed from this Adam

Landa, I would call David and say, “David, I don’t know if this

Adam guy understands what a test fit is.” I said, “I’ve given

him three names of three architects and their phone numbers, which is not my responsibility, but Adam told me ‘We don’t

have an architect in Jacksonville.’” So I did his work for him

and we still never got a call or meeting setup with the architects.

Well, I called David and expressed my frustration that we weren’t getting what we needed because I knew David knew the proce ss because I just finished – he was just finishing up

$250,000 in work for DOC.

Q: Do you recall when in time approximately those

conversations were? Were they before or after the BAFO?

A: Oh, before. There’s probably -- I don’t even know how many

calls , you know. You – I’d need something, I’d ask for it and

ask for it. Finally, I wasn’t getting it, I put it in writing in an email towards the end of February, I guess, you know, “When are we going to get this?” so at least I was on record as asking for it for both properties. I was like, you know, “Come on,

Guys, I can’t keep pushing this out more and more. We’re

trying to help you both and at some point we’ve got time

restraints.”

In light of Gateway’s inability to provide the test fit requested by Mr. Hulsey,

his decision to effectively cease negotiations with Gateway was justified.

31. Mr. Hulsey had a different experience obtaining a test fit from

Midtown . His February 18, 2018, email to Daniel Mehaffie, Midtown’s lead

negotiator for this bid, stated the following:

Any idea when we will see the first draft of a “high level” test fit? We will be reaching the end of the period for negotiations this Friday a nd then the

agency will make [its] decision. I would assume

that you would like for [the Department] to see

past the existing conditions before they make their decision.

32. Mr. Mehaffie responded to Mr. Hulsey’s email on February 18, 2020,

by reporting t hat the test fit had revealed a problem with the available space

in the Dew Building. Mr . Mehaffie proposed that the problem could be

substantially alleviated by reducing the size of the Department’s cubicles:

Thanks for speaking with me today. As we disc ussed, I’d like to extend the deadline 1 week so we should hopefully be able to wrap everything up

with the test fit. I’d like to confirm that we are ok

to reduce the cubicle size to 6x6 as opposed to 6x8 to save [approximately] 2,000 sf on the 1 st floor.

Based on John’s visit to the storefront operation,

their cubicles are 6x6 so they wouldn’t actually be

losing space from their current outfit. Please confirm this will be okay so I can inform our architect who is working on the test fit for us.

33. Mr. Hu lsey responded on February 19, 2020, by stating he did not

anticipate that a one week extension of the February 21, 2020, negotiation

deadline would be problematic. Mr. Hul sey copied Mr. Johnson on the email

and asked if he consented to Midway basing its t est fit on the Department

using 6x6 cubicles.

34. The Department issued Addendum 7 on February 19, 2020, extending

the negotiations deadline to February 28, 2020, and the estimated contract

award date to March 16, 2020.

35. The terms of the ITN and th e greater weight of the evidence

demonstrate that the “the initial negotiation session” referred to in the ITN

concluded on February 28, 2020.

36. After transmitting a revised test fit for the Dew Building to

Mr. Hulsey on February 27, 2020, Mr. Mehaffi e email ed Mr. Hulsey on

February 28, 2020, stating that “[a]fter deliberating and taking all things

into consideration with the owners, we’d like to propose the Dew Building for

a 5 yr lease with 3% annual escalations, with a 5 yr option to renew (also

wit h 3% escalations) and a base year price of $20.44.”

37. Midtown’s revised offer presented two issues. The test fit submitted on

February 27, 2020, indicated there was still some uncertainty about the Dew Building having enough space to accommodate the Sto refront and the Call

Center. Also, Mr. Mehaffie’s February 28, 2020, email only offered a 5 - year

lease option while the ITN requested leases of 5, 7, or 10 - year durations.

38. Even though the ITN indicated the Department would be willing to

accept a 5 - year lease option, Mr. Hulsey encouraged Midtown to offer 7 and

10 - year lease opt ions as well. He did so because:

[m]y role is, whether or not his initial offer of a 5 -

year with a 5 - year option, if you read the

negotiation section in the ITN, yeah, probably

w ould be accepted. But I had been directed to get a

5 - ,7 - and 10 - year option. So whether or not the

agency accepted this one, I was going to provide for the agency what was requested in the ITN. What they did with it, that’s out of my hand. We don’t make de cisions.

39. Mr. Hulsey also felt the Midtown offer was incomplete:

I felt like it was incomplete. So, you know, we reach

out. People that have not been involved in the ITN process, we are there to assist and facilitate getting the best deal for the S tate of Florida. And I took as many liberties with Gateway as I did with Midtown

to help out.

40. Midtown ultimately realized that leasing the Dew Building to the

Department was not going to be sufficiently profitable. Therefore, Midtown

transmitted a rev ised proposal via email to Mr. Hulsey on March 3, 2020,

proposing to house the Storefront on the first floor of the Brownett Building

while keeping the Department’s Call Center on the Brownett Building’s

second floor. The revised proposal included leasing options of 5, 7, and 10

years and the rate per square foot for each year.

41. When accounting for the charges associated with the option years ,

Midtown’s revised offer made it the lower cost vender for each time period.

42. Even though the Department w as already in the Brownett Building

and there were no concerns about space given the Brownett Building’s size,

Mr. Hulsey still required Midtown to submit a new test fit based on the

Brownett Building:

With Midtown, I’d never worked with this

ownership gr oup, and when they submitted their

initial offer they estimated – if you look at their

Attachment I where we have the rental rates broken down – they estimated the cost for their

construction would be $250,000. We have a half million square feet. I know wh at it costs, and I

didn’t feel comfortable that they had a clear understanding of what this cost was going to be, so I raised the bar for Midtown very high to ensure

that they understood the scope of work and that

they were going to be required to build it out

according to the agency specification.

And, you know, the worst thing you can do in the

world is get four months down the road with construction documents, lease documents. Time is

clicking away, and somebody all of a sudden says,

oh, wait a minute, we didn’t realize what this was

going to cost, we’re going to have to come back and retrace the deal. We don’t do that. So the more

clarity that we can get at the front end, the fewer

problems we have at the tail end.

43. A test fit based on the Brownett Building was email ed to Mr. Hulsey

and the Department on March 25, 2020.

The Department Intends to Award the Contract to Midtown

44. Mr. Hulsey’s assistant transmitted spreadsheets on March 9, 2020, to

Mr. Johnson listing the BAFOs for Gateway, Midtow n, and Timuquana. 11

Mr. Hulsey called him later that day and expressed no preference for any of

the BAFOs. 12

45. On March 29, 2020, Mr. Johnson wrote the Notice of Intent to Award

the contract to Midtown “in order to establish final contract terms and condi tions, to become the lessor of office space for the Economic Self

Sufficiency Program.”

13 The Department’s Notice of Intent to Award was

posted on the Vendor Bid System at approximately 3:30 p . m ., on March 30,

2020.

46. Mr. Johnson was very familiar with G ateway’s Building D and

Midtown’s Brownett Building because the Department was already leasing

11 The spreadsheets referred to the addresses of the buildings that Gateway and Midtown

had originally proposed, Building A for Gateway and the Dew Building for Midtown.

However, the greater weight of the evidence established that Mr. Hulsey’s assistant erred by not updating the addresses to reflect the new buildings being offere d by Gateway and

Midtown. The Department was well aware that Gateway’s final offer was based on

Building D and Midtown’s final offer was based on the Brownett Building.

12 Timuquana ’s bid was far less desirable than the ones submitted by Gateway and Midtown.

As a result, Mr. Hulsey did not request a test fit from Timuquana because he did not want to

require Timuquana to needlessly spend money.

13 Mr. Johnson made the decision for the Department to post the Notice of Intent to Award

the contract to M idtown. Gateway’s protest brought a halt to the contract award process.

those buildings. In light of that unique situation, the non - price evaluation

criteria in V.B.2 of the ITN ( such as location and parking ) were not at issue ,

and p rice properly became the key factor in deciding between Gateway and

Midtown’s offers:

Q: When did you – did you ever make a

recommendation to select the Brownett Building?

A: Actually, no. This [bid protest] stopped me from it.

Q: Do you provide any inf ormation on the criteria

other than cost to the people in the chain of command who are making the decision?

A: No. Not really. I have a contact, a person that I

work really closely with in Tallahassee. He’s been around for quite a while. He knows these ar eas. We

were in a unique situation here. We had two top

contenders, and we were in both of them.

47. While Mr. Johnson’s decision was largely based on price, he did not

ignore the other criteria set forth in the ITN:

Q: And when you made your recommendat ion, you

were familiar with both the Gateway shopping center and Midtown, because [the Department] had been renting from them for a number of years,

right?

A: Both of them, yes.

Q: And you had been there, you had done visits. I

mean, what might be descri bed as intimately

familiar with these locations?

A: Yes, sir.

Q: And so things such as when you made your recommendation, you were aware of things such as the location, the parking, the facility’s present

condition, those sorts of things, you were aware of

those when you were making your award decision, weren’t you, sir?

A: Yes, sir . . .

Q: My point is, rate was very important to you in

your award decision, wasn’t it sir?

A: Oh, yes.

Q: But it wasn’t blind to all of these other factors or

criteria, r ight? You were aware of those?

A: Oh, no. If I had not – if I had not been paying

one or the other for many years of rent, I would have been looking at it a little differently. You

know, if I had no history with them.

Q: Okay. And your history gave you k nowledge

with regard to all of these other factors that you

were aware of when you were making your award

decision; it that correct?

A: Yes, sir.

Gateway’s “Hail Mary”

4 8 . Over a month after the deadline for transmitting BAFOs and

approximately 15 minute s after the Department posted the Notice of Intent

to Award on the VBS, Gateway transmitted an offer to build out Building D

and other unused space for $16 .00 per square foot on a 5 - year lease term.

That represented an $8.00 per square foot drop from the l owest rental price

proposed in its preceding offer. The March 30, 2020, email from Mr. Landa to

Mr. Hulsey stated the following:

We have been trying to contact you and [the

Department] to review and negotiate our response

to ITN 590:3161. Unfortunately, w e have been

unable to connect, perhaps due to the situation at hand with the coronavirus. Our model has changed

due to lowering costs and interest rates, and we

have greater flexibility to modify the proposed gross rents and agree to a 5 year lease. We hav e

been trying to meet with you and [the Department] to negotiate gross rental rates in good faith, and we have not received a date/time to do so. We understand that negotiations with us as an offeror

[are] contemplated by the Bid Documents. Also, we

have n ot gotten any feedback from [the Department] on our response to the ITN. We are anxious to do so, and we hope [the Department] finds the attached and below revisions to be

compelling.

I refer you to the attachments to this email. In summary, we propose th at the Landlord will be

responsible to build out the expansion to [the

Department]’s current space and propose that [the

Department] pay a gross initial rent of $16.00/square foot on approximately 11,814 square feet. Additionally, we propose that the Landl ord

will be responsible to build out the approximate 17,793 square feet and that [the Department] shall pay $16.00/square foot gross rent only on the basis

of approximately 15,568 square feet. Therefore, the Tenant will have an approximate 2,225 square fee t

of additional space for free (which would cover non -

rentable items such as bathrooms, etc.). So, the Tenant will pay a gross rent on the basis of approximately 27,382 total square feet, which is based on your required 26,585 total square feet

plus 3%.

A s you can see, under our revised proposal, the

Landlord will build out both of the Tenant’s spaces,

and the Tenant will save in gross rent

approximately $1,368,873.86 for the total initial lease term, $4,539,233.58 for the total option term and $5,908,107. 44 for the total initial lease term

and total option term combined.

4 9 . Testimony from James Goldsmith, a partner and president of

Gateway, indicated this offer was an attempt to persuade the Department to

reopen negotiations:

Q: And how did Gateway’s of fer of the D building in

this email come about?

A: We were – after submitting our Building A, we

were expecting to get some negotiation from [the Department]. Not having heard anything, having got an email that they were delayed for COVID, we

were concern ed that something was going on. We

just had an inkling that things were not going

right, or our bid was not received well, because we had no negotiation. When someone says they’re

going to negotiate with you, you expect them to get

back to you.

So in an effort to prod the process, I suggested a week or so before, two weeks before, we start

working on some numbers and see maybe we can –

I don’t know if it was legal or not, or proper, but I

would say let’s get to Building A, but if Building A

is not going t o work for you, here’s what we can do

in Building D. And it was just a Hail Mary trying to

get him to come to the table, but we didn’t know

whether it would be effective or not.

[ 14 ]

50 . As explained in the Conclusions of Law below, Gateway has not

carried its burden of demonstrating that the Department’s intended award to

Midtown is arbitrary or capricious , irrational, or otherwise contrary to the

law .

14 Section 120.57(3)(f), Florida Statutes, barred the Department from considering this final

offer from Gateway. The statute provides , in relevant part , that “[i]n a protest to an

inv itation to negotiate procurement, no submissions made after the agency announces its

intent to award a contract, reject all replies, or withdraw the solicitation which amend or

supplement the reply shall be considered.”

C ONCLUSIONS OF L AW

5 1 . DOAH has jurisdiction over the subject matter of this proceeding and

of the par ties hereto pursuant to sections 120.569, 120.57(1), and 120.57(3),

Florida Statutes (2017).

5 2 . Section 120.57(3)(f) provides , in relevant part:

Unless otherwise provided by statute, the burden of

proof shall rest with the party protesti ng 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 agency’s proposed action is

contrary to the agency’s g overning statutes, the

agency’s 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. In any b id -

protest proceeding contesting an intended agency

action to reject all bids, proposals, or replies, the

standard of review by an administrative law judge

shall be whether the agency’s intended action is

illegal, arbitrary, dishonest, or fraudulent.

5 3 . Gateway , as the party challenging the proposed agency action, has the

burden of proof in this proceeding and must show that the Department’s

proposed action is arbitrary or capricious . § 120.57(3)(f), Fla. Stat .; State

Contracting and Eng’g Corp. v. Dep’t of Transp. , 709 So. 2d 607, 609 (Fla. 1st

DCA 1998). “A capricious action is one taken without thou ght or reason or irrationally. An arbitrary decision is one not supported by facts or logic, or

[one that is] despotic.” Agrico Chem. Co. v. Dep’t of Envtl. Reg . , 365 So. 2d

759, 763 (Fla. 1st DCA 1978).

15

15 As noted in footnote 1, Gateway never asserted that the Department’s intended award was

clearly erroneous or contrary to competition. Therefore, the analysis is limited to whether the

intended award was arbitrary or capricious.

5 4 . Gateway raised numerous arguments in its Amended Petition, the

Pre - hearing Stipulation, its Proposed Recommended Order, and during the

Final Hearing. However, only the four arguments discussed below wi ll be

addressed because they were the only ones set forth in the Pre - hearing

Stipulation and Gateway’s Proposed Recommended Order. Consideration of

any arguments not identified in the Pre - hearing Stipulation would defeat the

purpose of requiring one. See S pitzer v. Bartlett Bros. Roofing , 437 So. 2d 758,

760 (Fla. 1 st DCA 1983)(noting that the law encourages and upholds

stipulations “in order to minimize litigation and expedite the resolution of

disputes,” and “[s]uch an agreement should neither be ignored nor set aside

in the absence of fraud, overreaching, misrepresentation or withholding facts

by the adversary or some such element as would render the agreement

void.”) 16

5 5 . Gateway argues the Department erred by allowing Midtown to submit

a revised offer on March 3, 2020, without notifying Gateway that such an opportunity was available. Gateway further argues that the Department showed favoritism by: contacting Midtown after February 28, 2020, to relay

that Midtown’s bid was incomplete; allowing Midtown to submit an amended

bid; and failing to advise Gateway that it could have submitted a revised bid

after February 28, 2020. Prior to this time, every change to the ITN schedule had been published via a publicly - issued addendum to the ITN.

5 6 . Gateway’s argu ment ignores the considerable discretion afforded to

the Department via the ITN and the stage the negotiations had reached after

16 Gateway extensively argued in its Proposed Recommended Or der that the complete details

of Midtown’s BAFO were not sufficiently memorialized in any written document transmitted

to the Department. The Department and Midtown filed a “Joint Motion to Strike Portions of

Petitioner’s Proposed Recommended Order” (“the Joint Motion”) asserting this argument

should be disregarded because it was not mentioned by Gateway in the Pre - hearing

Stipulation. The undersigned concludes that the Department and Midtown are correct. See Palm Beach Polo Holdings , 174 So. 3d at 10 38 - 39 (stating that “[p]retrial stipulations

prescribing the issues on which a case is to be tried are binding upon the parties and the

court, and should be strictly enforced.”). A s a result, the Joint Motion is granted, and the

undersigned has disregarded any argument that the details of Midtown’s BAFO were not

sufficiently memorialized in a written document submitted to the Department.

February 28, 2020. The terms of the ITN demonstrate that the “initial

negotiating session” referenced in the ITN ended on Febru ary 28, 2020. Even

though Addendum 7 established February 28, 2020, as the deadline for BAFOs, th at date did not mark the end of the Department’s ability to

negotiate with bidders. At that point in time, the aforementioned provisions

of the ITN enabled the Department to decide with whom it would continue to

negotiate. After the Department completed the initial negotiation session

with the selected short - listed bidders, the ITN empowered the Department to

“[t]ake any additional administrative steps deemed ne cessary in determining

the final award, including additional fact - finding, evaluation, or negotiation

where necessary and consistent with the terms of this solicitation.” Also, any

time after the initial negotiating session, the Department could require al l

responsive bidders to provide additional or revised written proposals

addressing specific topics and “[d]ecline to conduct further negotiations with

any [bidder].” These provisions authorized the Department to communicate

with Midtown after February 28, 2020, and encourage Midtown to submit a

revised bid. These provisions also authorized the Department to cease

negotiations with Gateway. That action was justified given Gateway’s failure

to submit the test fit requested by Mr. Hulsey.

5 7 . Gateway also arg ues that the Department failed to negotiate with

Gateway after it made the shortlist. In making this argument, Gateway utilizes an overly restrictive definition of negotiation. That term means more

than simply “haggling” about transactional terms such as p rice and/or

quantity. The online edition of the Merriam - Webster Dictionary defines the

term “negotiate” as “to confer with another so as to arrive at the settlement of

some matter” or “to arrange for or bring about through conference, discussion, and compr omise.” See “negotiate,” https://meriam - webster.com

(last visited August 25, 2020). The extensive communications between

Gateway and Mr. Hulsey about obtaining a test fit and revising Gateway’s

offer so that it would be based on Building D rather than Buil ding A amount

to negotiations within the foregoing definitions.

5 8 . Gateway argues there is nothing proving that Midtown actually

offered the Brownett Building as part of its BAFO. Mr. Hulsey’s assistant

transmitted spreadsheets to Mr. Johnson on March 9 , 2020, listing the

BAFOs for Gateway, Midtown, and Timuquana. Those spreadsheets

erroneously listed the addresses of the buildings that Gateway and Midtown had originally proposed. Mr. Hulsey’s testimony established that his

assistant simply neglected to update the addresses to reflect the buildings

being offered by Gateway and Midtown. Mr. Johnson credibly testified that

the Department was well aware that Gateway’s final offer was based on

Building D and Midtown’s final offer was based on the Brownett Bui lding.

5 9 . Gateway asserts that the Department erred by basing its intent to

award the contract to Midtown exclusively on price. The pertinent portion of

the ITN provided that:

The [Regional Director] or her/his designee will

approve an award that will provide the best leasing value to the State, based on the criteria in

Section V.B.2, taking into consideration the recommended award by the negotiating team. In so doing, the [Regional Director] or his/her designee is not required to score the Offerors, b ut will base his

or her recommendation on the criteria set forth above. If the [Regional Director] or his or her designee determines that two or more Replies most advantageous to the State are equal with respect to all relevant considerations, including pr ice, quality,

and service, the award will be made in accordance with Rule 60A - 1.011, Florida Administrative Code

and Section 295.187, Florida Statutes.

60 . The instant case amounts to a unique situation in that the Storefront

and Call Center are already , respectively , located in Gateway and Midtown

buildings . While criteria other than price were not ignored, the Department

and Mr. Johnson w ere well aware of the non - price attributes associated with

each building. With there being no evidence that either bu ilding or le s sor was

deficient in any respect on non - price criteri a , price appropriately be came the

primary factor in Mr. Johnson’s decision . When Midtown’s revised offer made

it the lower cost vender for each lease term, Midtown be came the low cost

bidder , and there was no need for Mr. Johnson to consider Florida

Administrative Code Rule 60A - 1.011 and section 295.187, Florida Statutes.

6 1 . Based on the F indings of F act established herein, it is concluded that

the Department’s intent to award the contract a ssociated with the ITN to

Midtown was not arbitrary or capricious , irrational, or otherwise contrary to

the law .

R ECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is

R ECOMMENDED that the Department of Children and Families enter a final

order affirming the Notice of Intent to award the contract associated with

Invitation to Negotiate No. 590:3161 to Midtown Centre Office, LLC.

D ONE A ND E NTERED this 31st day of August , 2020 , in Tallahassee, Leon

County, Florida.

G. W. C HISENHALL

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 th e Clerk of the

Division of Administrative Hearings

T his 31st day of August , 2020 .

C OPIES F URNISHED :

Cynthia J. Miller, Esquire

Sweetapple, Broekeer & Varkas, P.L.

Suite D306

4800 North Federal Highway

Boca Raton, Florida 33431

(eServed)

Lacey Kantor, Es quire

Department of Children and Families

Building 2, Room 204Z

1317 Winewood Boulevard

Tallahassee, Florida 32399 - 0700

(eServed)

Robert H. Hosay, Esquire

Foley & Lardner LLP Suite 900

106 East College Avenue

Tallahassee, Florida 32311

(eServed)

Benjam in J. Grossman, Esquire

Foley & Lardner LLP

Suite 900

106 East College Avenue

Tallahassee, Florida 32301

(eServed)

Mallory Neumann, Esquire

Foley & Lardner LLP 106 East College Avenue

Tallahassee, Florida 32301

(eServed)

William D. Hall, Esquire

Dean M ead

Suite 815

215 South Monroe Street

Tallahassee, Florida 32301

(eServed)

Daniel Ryan Russell, Esquire

Dean, Mead & Dunbar

Post Office Box 351

Tallahassee, Florida 32302

(eServed)

John L. Wharton, Esquire

Dean, Mead & Dunbar

Suite 815

215 South Monro e Street

Tallahassee, Florida 32301

(eServed)

Cindy A. Laquidara, Esquire

Akerman LLP

Suite 3100

50 North Laura Street

Jacksonville, Florida 32202

(eServed)

John A. Tucker, Esquire

Foley & Lardner, LLP Suite 1300

One Independent Drive

Jacksonville, Flo rida 32202

(eServed)

Lacey Kantor, Agency Clerk

Department of Children and Families

Building 2, Room 204Z

1317 Winewood Boulevard

Tallahassee, Florid a 32399 - 0700

(eServed)

Chad Poppell, Secretary

Department of Children and Families

Building 1 , Room 202

1317 Winewood Boulevard

Tallahassee, Florid a 32399 - 0700

(eServed)

Javier Enriquez, General Counsel

Department of Children and Families

Building 2, Room 204F

1317 Winewood Boulevard

Tallahassee, Florid a 32399 - 0700

(eServed)

N OTICE OF R IGHT T O S UBMIT E XCEPTIONS

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.