95-003362RX Mary Ann Talmadge And Dunbar Electric Supply, Inc. vs. Dade County School Board Status: Closed DOAH Final Order on Thursday, February 29, 1996.

Summary: Challenged rules found to be valid. Portions of instructions to bidders are unpromulgated rules.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MARY ANN TALMADGE and )

DUNBAR ELECTRIC SUPPLY, INC., )

)

Petitioners, )

)

vs. ) CASE NO. 95-3362RX

)

DADE COUNTY SCHOOL BOARD, )

)

Respondent. )

___________________________________)

THOMAS W. TALMADGE, )

)

Petitioner, )

)

vs. ) CASE NO. 95-4834RX

)

DADE COUNTY SCHOOL BOARD, )

)

Respondent. )

___________________________________)

FINAL ORDER

Pursuant to notice, the Division of Administrative Hearings,

by its duly designated Hearing Officer, Claude B. Arrington, held

a formal hearing in the above-styled case on October 17, 1995, in

Miami, Florida.

APPEARANCES

For Petitioners: John A. Margolis, Esquire

Case 95-3362RX: Law Office of John A. Margolis

9990 Southwest 77nd Avenue

Miami, Florida 33156-2699

For Petitioner: Thomas W. Talmadge, pro se

Case 95-4834RX 7065 Southwest 46th Street

Miami, Florida 33155

For Respondent: Phyllis O. Douglas, Esquire

Twila Hargrove Payne, Esquire

1450 Northeast Second Avenue, Suite 400

Miami, Florida 33132

STATEMENT OF THE ISSUES

As to Case 95-3362RX: 1. Whether the portion of School

Board Rule 6Gx13-3C-1.08 pertaining to vendors who have defaulted

on contracts for commodities is an invalid exercise of delegated

legislative authority. 2. Whether the instructions to bidders

issued by the School Board as part of its invitation to bid on

commodities constitute inadequate, unpromulgated rules.

As to Case 95-4834Rx: Whether an amendment to School Board

Rule 6Gx13-3C-1.08 (adopted July 12, 1995) that purports to

disqualify as bidders for 14 months the principals of defaulted

vendors is an invalid exercise of delegated legislative

authority.

PRELIMINARY STATEMENT

These proceedings, consolidated without objection, challenge

the validity of portions of School Board Rule 6Gx13-3C-1.08 and

portions of the School Board's "Instructions to Bidders." The

challenged rule pertains to vendors who have been awarded a

contract for the sale of commodities as a result of an invitation

to bid (ITB) and who subsequently default on the contract.

Dunbar Electric Supply, Inc. (Dunbar) has, over the years,

been a regular bidder on School Board contracts. Mary Ann

Talmadge has also been a bidder on School Board ITBs. Ms.

Talmadge is the president and one of the principal shareholders

of Dunbar. Thomas W. Talmadge, the husband of Mary Ann Talmadge,

is a corporate officer and the other principal shareholder of

Dunbar. That the Petitioners have standing to bring these

challenges is not at issue.

Succinctly stated, the challenged rule gives a defaulted

vendor of commodities two options. As the first option, the

defaulted vendor can pay to the School Board a sum of money that

is based on a calculation set forth in the rule. The School

Board considers this payment to be liquidated damages. The

Petitioners consider this payment to be a penalty that is unduly

harsh and contrary to public policy. If this option is exercised

and the payment is made, the defaulted vendor remains in good

standing with the School Board and is permitted to bid on

subsequent ITBs. If the first option is not exercised, the rule

authorizes the School Board to disqualify the defaulted vendor

from bidding on ITBs for a period of 14 months. 1/

By letter dated June 19, 1995, the Petitioners in Case 95-

3362RX challenged the validity of School Board Rule 6Gx13-3C-

1.08, and the matter was referred to the Division of

Administrative Hearings. Thereafter, the School Board timely

moved for a more definite statement. That motion was granted and

Petitioners' filed an amended pleading consisting of three counts

that purported to clarify their positions. The School Board

timely moved to dismiss Count I of the amended pleading, which

was an untimely proceeding over which the undersigned would not

have final order authority. After it was determined that Count I

was improperly brought, a recommended order of dismissal of Count

I was thereafter entered. The remaining issues as to Case 95-

3362RX are set forth above in the statement of issues.

Prior to July 12, 1995, the challenged rule barred only the

bidding entity in circumstances where a defaulted vendor elected

not to pay what the School Board considers to be liquidated

damages. The amendment of July 12, 1995, added to the rule a

provision extending the 14-month disqualification to the

principals of a defaulted vendor and defines the term

"principal". It is the addition to the rule by this amendment

that Mr. Talmadge challenges in Case 95-4834RX. In his petition,

Mr. Talmadge also attempted to challenge certain bid awards over

which the Division of Administrative Hearings had no

jurisdiction. The undersigned ruled that the award of those bids

were not properly at issue in this proceeding, and the only

matter at issue at the formal hearing as to Case 95-4834RX is set

forth above in the statement of issues.

At the formal hearing, Mr. Talmadge testified and offered,

on behalf of all Petitioners, nineteen exhibits, numbered

sequentially from 1 through 19. Of these Petitioners' exhibits,

numbers 5, 6, 8, 10, 11, 12, 13, 17, and 19 were admitted into

evidence. The remaining Petitioners' exhibits were rejected.

The School Board presented the testimony of Donnie Carter and

Peri Cushman. Mr. Carter is the School Board's Associate

Superintendent Bureau of Procurement Management. Ms. Cushman is

the School Board's clerk. The School Board introduced eleven

exhibits, marked Exhibits 1, 1a - 1i and 2. All School Board

exhibits were admitted into evidence. At the request of the

School Board, Official Recognition was taken of Rule 6A-1.012,

Florida Administrative Code, 48 C.F.R. Section 14.404-2(1994), 48

C.F.R. Subpart 9.1 (1994), 48 C.F.R. Subpart 9.4 (1994), Division

of Purchasing Rules 60A-1.006, Division of Purchasing Clause

entitled "Acknowledgment, Delivery and Liquidated Damages",

pertinent School Board rules in 6Gx13-8C.

A transcript of the proceedings has been filed. At the

request of the parties, the time for filing post-hearing

submissions was set for more than ten days following the filing

of the transcript. Consequently, the parties waived the

requirement that a final order be rendered within thirty days

after the transcript is filed. Rule 60Q-2.031, Florida

Administrative Code. Rulings on the parties' proposed findings

of fact may be found in the Appendix to this Final Order.

FINDINGS OF FACT

THE PETITIONERS

1. Petitioners Mary Ann Talmadge and Dunbar Electric

Supply, Inc., are vendors who have bid on invitations to bid

(ITBs) issued by the School Board. Ms. Talmadge is an officer

and principal shareholder of Dunbar. Thomas W. Talmadge is the

husband of Ms. Talmadge and is also a principal shareholder and

officer of Dunbar. The Petitioners have standing to bring these

rule challenges.

THE SCHOOL BOARD - GENERAL AUTHORITY

2. The Respondent is a duly constituted school board with

the authority to enact rules, including those relating to the

procurement of commodities.

3. Article IX, Section 4, Florida Constitution, provides,

in pertinent part, as follows:

4.(a) Each county shall constitute a school

district. . . . In each school district there

shall be a school board. . . .

(b) The school board shall operate, control

and supervise all free public schools within the

school district. . . .

4. Section 230.03, Florida Statutes, provides, in pertinent

part, as follows:

The district school system shall be managed,

controlled, operated, administered, and

supervised as follows:

* * *

(2) SCHOOL BOARD. - In accordance with the

provisions of s. 4(b) of Art. IX of the State

Constitution, district school boards shall

operate, control, and supervise all free public

schools in their respective districts and [may

exercise any power except as expressly

prohibited by the State Constitution or general

law.] [Emphasis added.]

5. Section 230.22(2), Florida Statutes, confers rulemaking

authority on school boards as follows:

(2) ADOPT RULES AND REGULATIONS. - The school

board shall adopt such rules and regulations

to supplement those prescribed by the state

board as in its opinion will contribute to

the more orderly and efficient operation of

the district school system.

SCHOOL BOARD PURCHASES - IN GENERAL

6. Section 230.23(2), Florida Statutes, confers upon school

boards the authority to contract, to sue, and to purchase

commodities as follows:

The school board, acting as a board, shall exercise

all powers and perform all duties listed below:

* * *

(2) CONTROL OF PROPERTY. - Subject to regulations

of the state board, retain possession of all property

to which title is now held by the school board and

to obtain possession of and accept and hold under

proper title as a body corporate by the name of

"The School Board of _______ County, Florida,"

all property which may at any time be acquired

by the school board for educational purposes in

the district; manage and dispose of such property

to the best interests of education; [contract,

sue, receive, purchase], acquire by the institution

of condemnation proceedings if necessary, lease,

sell, hold, transmit, and convey the title to real

and personal property, all contracts to be based on

resolutions previously spread upon the minutes of

the school board; receive, hold in trust, and

administer for the purpose designated, money, real

and personal property, or other things of value

granted, conveyed, devised, or bequeathed for

the benefit of the schools of the district or any

one of them. [Emphasis added.]

7. Section 237.02(1)(a), Florida Statutes, pertains to

purchases by school boards and provides as follows:

(1) PURCHASES. -

(a) Each district school board shall develop

and adopt policies establishing the plan to be

followed in making purchases as may be prescribed

by the state board.

8. The state board rule pertinent to this proceeding is

Rule 6A-1.012, Florida Administrative Code, which provides, in

part, as follows:

Purchasing Policies. Each district school board

shall establish purchasing rules which shall

include but not be limited by the following:

* * *

(6) Except as authorized by law or rule, bids

shall be requested from three (3) or more sources

for any authorized purchase or contract for

services exceeding ten thousand (10,000) dollars.

. . . The school board shall have the authority

to reject any or all bids and request new bids.

In acceptance of bids, the school board shall

accept the lowest and best bid from a responsive

and responsible bidder. . . .

9. The School Board's Department of Procurement Management

is responsible for administering and managing all of the

purchases of materials and services for the school district of

Dade County, Florida. School Board Rule 6Gx-3C-1.14 designates

the Department of Procurement Management as the official

purchasing agency for the School Board and requires it to make

such purchases in compliance with Florida Statutes, State Board

of Education Rules, School Board Rules, and administrative

directives and manuals.

10. The School Board has the authority to determine which

bidders are responsible, the authority to reject bids from

irresponsive bidders, and the authority to enact rules pertaining

thereto.

THE CHALLENGED RULE

11. Rule 6Gx13-3C-1.08, is styled "Performance and Payment

Security, Declining a Bid Award, and Bonding Company

Qualifications". The rule, initially adopted in 1974 and

subsequently amended, was adopted pursuant to the authority of

Section 237.02(1)(a), Florida Statutes, and Rule 6A-1.012,

Florida Administrative Code. The rule is divided into three

parts. Part I pertains to performance security on construction

bids and awards. Part II, the portion of the rule being

challenged in this proceeding, pertains to performance security

on awards other than construction. Part III pertains to bonding

company qualifications.

12. The rule, as amended on July 12, 1995, has been duly

adopted by the School Board following all pertinent rulemaking

procedures.

13. The rule reasonably relates to one subject matter,

protecting the School Board against defaults by parties who have

been awarded contracts.

14. Prior to its amendment on July 12, 1995, School Board

Rule 6Gx13-3C-1.08 provided for performance security on awards

other than construction, in pertinent part, as follows:

Bid security is not required. However, a

bidder who declines an award shall either

(1) pay a bid default penalty of five percent

of the unit price bid times the quantity, or

$10, whichever is greater, or (2) lose

eligibility to transact new business with

the Board for a period of 14 months from date

of award by the Board.

A bidder who accepts an award but fails to

perform shall either (1) pay a performance

default penalty of 25 percent of the unit price

of the item(s) awarded times the quantity, or

$25, whichever is greater, (where partial ship-

ment of items awarded has been made, the default

penalty shall be applied to the balance remaining

after items received have been deducted from the

estimated quantity(ies),) or lose eligibility to

transact new business with the Board for a period

of 14 months from date of the cancellation of

award by the Board.

15. The School Board amended Rule 6Gx13-3C-1.08 on July 12,

1995, to provide as follows:

Bid security is not required. However, a

bidder who declines an award shall either

(1) pay a bid default penalty of five percent

of the unit price bid times the quantity, or

$10, whichever is greater, or (2) lose eligi-

bility to transact new business with the Board

for a period of 14 months from date of award

by the Board.

A bidder who accepts an award but fails to

perform shall either (1) pay a performance

default penalty of 10 percent of the unit

price of the item(s) awarded times the

quantity, or $25, whichever is greater,

(where partial shipment of items awarded

has been made, the default penalty shall be

applied to the balance remaining after items

received have been deducted from the estimated

quantity(ies),) or lose eligibility to transact

new business with the Board for a period of

14 months from date of the cancellation of

award by the Board. [The ineligibility shall

be applicable to the principals individually

and the entity, as well as any other firm in

which a principal of a defaulting firm is a

principal.

For purposes of this rule principal is defined

as an executive officer of a corporation,

partner of a partnership, sole proprietor of

a sole proprietorship, trustee of a trust, or

any other person with similar supervisory

functions with respect to any organization,

whether incorporated or unincorporated].

[Emphasis added.]

THE AUTHORITY OF THE SCHOOL BOARD TO IMPOSE LIQUIDATED

DAMAGES OR TO DISQUALIFY DEFAULTED VENDORS FOR FOURTEEN MONTHS

16. A provision for liquidated damages is not against

public policy and is not prohibited by law or by state board

rules. Pursuant to the provisions of Sections 230.03(2),

230.22(2), and 230.23(2), and 237.02(1)(a), Florida Statutes, the

School Board has the authority to provide for liquidated damages

in its purchasing contracts.

17. A provision disqualifying vendors for a reasonable

period of time based on prior performance is not uncommon in

government contracts. The period of disqualification for

defaulted vendors was for a one year period when the rule was

first adopted. In 1987, the period of disqualification was

extended from one year to fourteen months. The notice of

intended action pertaining to this amendment provided, in

pertinent part, as follows:

PURPOSE AND EFFECT: This amendment extends

the period of time a vendor is penalized for

failing to accept a bid award or performing

(sic) after a bid award has been made. This

will give the Board more leverage in penalizing

a vendor when necessary.

SUMMARY: This amendment extends the penalty

period for declining a bid award or failing to

perform once a bid is awarded, from the current

one (1) year period to a fourteen (14) month

period, which will result in the vendor being

precluded from the current contract and the

subsequent contract.

18. Such a provision disqualifying vendors for a reasonable

period of time is not against public policy and is not prohibited

by law or by state board rules. The period of fourteen months is

a reasonable period for the term of disqualification. The School

Board selected a period of fourteen months because many of its

contracts are for one year terms. The rationale was to prevent a

defaulted vendor from bidding on the ensuing year's contract.

Pursuant to the provisions of Sections 230.03(2), 230.22(2), and

230.23(2), and 237.02(1)(a), Florida Statutes, the School Board

has the authority to provide for the disqualification of

defaulted vendors for a fourteen month period.

19. The determination that a bidder has failed to perform

the terms of a contract is initially made by a buyer in the

School Board's Department of Procurement Management. Efforts are

made to bring a defaulted vendor into compliance with the

contract. If that cannot be done, the defaulted vendor is

informed that it may either perform the contract, pay liquidated

damages, or face disqualification. If the vendor performs or

pays liquidated damages, the matter is ended. If the vendor

refuses to perform or to pay liquidated damages, the School Board

determines whether the vendor should be disqualified. A vendor

who is subject to disqualification has the opportunity to address

the School Board on that matter and has the right to challenge

the agency action pursuant to Section 120.57(1), Florida

Statutes. A principal of a disqualified vendor who is also being

disqualified also has the right to address the School Board on

that matter and has the right to challenge the agency action

pursuant to Section 120.57(1), Florida Statutes. 2/

LIQUIDATED DAMAGES OR PENALTY

20. Petitioners assert that the provision that gives a

defaulted vendor the option to pay a sum equal to 10 percent of

the bid price of undelivered commodities constitutes a penalty

and is void. 3/ In support of their position, Petitioners

correctly assert that the rule itself refers to this provision as

a "default penalty." Notwithstanding that reference, the greater

weight of the competent evidence in this proceeding established

that the purpose of this provision of the challenged rule is to

provide for reasonable liquidated damages so that the School

Board can recoup its damages when a contract is breached. That

the School Board has made an effort to set a reasonable amount is

established by the research done by Mr. Carter in reviewing

similar provisions in other government contracts and by the

action of the School Board on July 12, 1995, in reducing the

percentage from 25 percent to 10 percent. What has been referred

to as a defaulted vendor's Option 1 is the payment of liquidated

damages, not the payment of a cash penalty.

21. The default provision serves three valid School Board

purposes. First, it discourages vendors from defaulting on

contracts. Second, it provides for liquidated damages if a

vendor wants to keep its good standing as a vendor. Third, it

prevents a vendor that has defaulted on its contract and

thereafter has declined to pay the School Board's liquidated

damages from securing other School Board contracts for at least

14 months following the default, thereby ensuring that the School

Board will not have to deal with such a vendor during the period

of disqualification.

THE EXTENSION OF THE DISQUALIFICATION TO PRINCIPALS OF

DEFAULTED VENDORS

22. The extension of the disqualification to the principals

of a defaulted vendor was enacted in response to problems the

School Board experienced with the principals of certain vendors

who, having defaulted on contracts in the name of one bidding

entity, thereafter obtaining contracts under other vendor names

and defaulted on the subsequent contracts. The extension of the

disqualification serves a valid School Board purpose in that it

prohibits the individuals who control various bidding entities

from defaulting on a contract by one bidding entity while

continuing to bid on other contracts through other entities. The

amendment was duly adopted. The rule provides a definition of

the operative term "principal" so that it is not vague and does

not vest unbridled discretion in the School Board. It is within

the School Board's authority to adopt this amendment pursuant to

the provisions of Sections 230.03(2), 230.22(2), and 230.23(2),

and 237.02(1)(a), Florida Statutes. Petitioner, Thomas Talmadge,

has failed to demonstrate that the amendment is an invalid

exercise of delegated legislative authority within the meaning of

Section 120.52(8), Florida Statutes.

THE INSTRUCTIONS TO BIDDERS

23. Each ITB contains "Instructions to Bidders" that become

part of the contract once the contract is awarded. Pertinent to

this proceeding, the Instructions to Bidders that accompany each

ITB for commodities, contain "instructions" as to the filing of

objections to bid specifications (Section I.C.2.), the place,

date, and hour for the submission of bids (Section II.C.), the

method for filing objections for the award of bids (Section

IV.D.), and the default provision (Section IV.F.).

24. Section I.C.2. contains an agency statement of general

applicability that is not found in any promulgated rule as

follows:

2. OBJECTION TO BID/SPECIFICATION. Any objections

to specifications and/or bid conditions must be

filed in writing and must be received by the

Superintendent of Schools no later than 9:00 A.M.

on the date specified for acceptance of bid.

25. Section II.C. contains an agency statement of general

applicability that is not found in any promulgated rule as

follows:

C. PLACE, DATE AND HOUR. Bids shall be

submitted by U.S. Mail, Courier/Express

Service, or deposited in the BID receiving

slot located in Room 352, 8:00 A.M. to

4:30 P.M., Monday through Friday, SCHOOL

BOARD ADMINISTRATION BUILDING, 1450 N.E.

Second Avenue, Miami, Florida 33132. Bids

received after the date and hour specified

in the BIDDER QUALIFICATION FORM will not

be considered.

26. Section IV.D. contains an agency statement of general

applicability that is not found in any promulgated rule as

follows:

D. FILING OF OBJECTION. Any objections to an

award by the Board must be filed in writing and

must be received by the Superintendent of Schools

no later than 9:00 A.M. on the first Monday

following the award. 4/

27. Section IV.F. contains three sentences. The first two

sentences merely repeat the default provisions contained in

School Board Rule 6Gx13-3C-1.08. The final sentence, however,

contains an agency statement of general applicability that is not

found in any promulgated rule. The rule does not state that the

vendor will be disqualified if it does not pay the liquidated

damages within fifteen days of the default. Section IV.F. of the

Instructions to Bidders is as follows:

F. DEFAULT: In the event of default, which

may include, but is not limited to non-

performance and/or poor performance, the

awardee shall pay to the Board as liquidated

damages an amount equal to 10 [percent] of

the unit price times the quantity, or $25,

whichever amount is larger. Where partial

shipment of items awarded has been made, the

default penalty shall be applied to the balance

remaining after the items received have been

deducted from the estimated quantity(s).

[Where no performance bond or check has been

acquired (sic), each awardee who fails to pay

the penalty within 15 days after it is invoked

shall lose eligibility to be awarded new

business by the Board for a period of 14

months from the date of cancellation of

award by the Board]. [Emphasis added.]

CONCLUSIONS OF LAW

28. The Division of Administrative Hearings has

jurisdiction of the subject matter of and the parties to these

consolidated proceedings. Chapter 120, Florida Statutes.

29. Petitioners have the burden of proving by a

preponderance of the evidence that the challenged rules are

invalid exercises of delegated legislative authority. Rule 28-

6.08(3), Florida Administrative Code. See also, Florida

Department of Transportation v. J.W.C., Co., 396 So.2d 778 (Fla.

1st DCA 1981). Petitioners have failed to meet that burden.

30. The term "invalid exercise of delegated legislative

authority", is defined by Section 120.52(8), Florida Statutes, as

being:

(8) "Invalid exercise of delegated legislative

authority" means action which goes beyond the

powers, functions, and duties delegated by the

Legislature. A proposed or existing rule is an

invalid exercise of delegated legislative

authority if any one or more of the following apply:

(a) The agency has materially failed to follow

the applicable rulemaking procedures set forth in

s. 120.54;

(b) The agency has exceeded its grant of rule-

making authority, citation to which is required

by s. 120.54(7);

(c) The rule enlarges, modifies, or contravenes

the specific provisions of law implemented, cita-

tion to which is required by s. 120.54(7);

(d) The rule is vague, fails to establish

adequate standards for agency decisions, or

vests unbridled discretion in the agency; or

(e) The rule is arbitrary or capricious.

31. School Board rule 6Gx13-3C-1.08, as amended, does not

meet the foregoing definition of "invalid exercise of delegated

legislative authority". All actions pursuant to this rule are

acted upon by the School Board and are subject to being

challenged like other agency action pursuant to Chapter 120,

Florida Statutes. The rule is not against public policy and has

not been shown to be unduly harsh.

32. Section 120.52(16), Florida Statutes, defines the term

"rule" and provides, in part, as follows:

(16) "Rule" means each agency statement of

general applicability that implements, inter-

prets, or prescribes law or policy or describes

the organization, procedure, or practice

requirements of an agency and includes any

form which imposes any requirement or solicits

information not specifically required by statute

or by an existing rule. The term also includes

the amendment or repeal of a rule. . . .

33. Section 120.535, Florida Statutes, provides, in

pertinent part, as follows:

(1) Rulemaking is not a matter of agency

discretion. Each agency statement defined

as a rule under s. 120.52(16) shall be adopted

by the rulemaking process provided by s. 120.54

as soon as feasible and practicable. . . .

* * *

(4) When a hearing officer determines that all

or part of an agency statement violates subsection

(1), the agency shall immediately discontinue all

reliance upon the statement or any substantially

similar statement as a basis for agency action.

(5) Subsequent to a determination that an

agency statement violates subsection (1), if

an agency publishes, pursuant to s. 120.54(1),

proposed rules which address the statement and

proceeds expeditiously and in good faith to

adopt rules which address the statement, the

agency shall be permitted to rely upon the

statement or a substantially similar statement

as a basis for agency action. . . .

34. Petitioners assert that the School Board is required to

adopt rules that mirror the procedural protection afforded

bidders by the provisions of Section 120.53(5), Florida Statutes.

5/ This assertion is based on the argument that the provisions

of Section 120.53(5), Florida Statutes, apply to school boards

because they make purchases of commodities pursuant to the

provisions of Chapter 287, Florida Statutes. Contrary to

Petitioners' assertion, school boards do not purchase commodities

"pursuant to" the provisions of Chapter 287, Florida Statutes.

Chapter 287, Florida Statutes, pertains to purchasing by agencies

of the executive branch of state government. A school district

is separately created by Section 4 of Article IX, Florida

Constitution and is specifically authorized to make adopt rules

and regulations pursuant to Section 230.22(2), Florida Statutes,

and to contract and make purchases pursuant to Section 230.22(4),

Florida Statutes. Although a school board may make purchases of

commodities consistent with the provisions of Chapter 287,

Florida Statutes, its authority to make such purchases is found

in Chapter 230, Florida Statutes. It is pursuant to that

authority that school boards purchase commodities.

35. While a school board is required to adopt procedural

rules that afford bidders due process, it is not required to

adopt rules that mirror the provisions of Section 120.53(5),

Florida Statutes.

36. The "instructions" found in Sections I.C.2., II.C.,

IV.D., and the final sentence of IV.F. of the Instructions to

Bidders are "rules" as that term is defined by Section

120.52(16), Florida Statutes. These "instructions" meet the

statutory definition of rules found at Section 120.52(16),

Florida Statutes, in that they impose procedural requirements on

bidders and purport to limit bidders' rights by provisions that

are not found in a statute or a duly promulgated rule. These

"rules" have not been promulgated as required by the provisions

of Section 120.535, Florida Statutes. Consequently, it is

concluded that Sections I.C.2., II.C., IV.D. the final sentence

of IV.F. of the Instructions to Bidders are unpromulgated rules

within the meaning of Section 120.535, Florida Statutes.

37. Because the balance of Section IV.F. of the

Instructions to Bidders recites the content of the default

provisions enacted as School Board Rule 6Gx13-3C-1.08 and does

not impose any requirement or solicit information not

specifically by this existing rule, that portion of the

"instructions" is not a separate, unpromulgated rule within the

definition of Section 120.52(16) or the meaning of Section

120.535, Florida Statutes.

38. The School Board's right to rely on these unpromulgated

rules is limited by the provisions of Section 120.535(4) and (5),

Florida Statutes. The issue as to whether the procedural

requirements set forth in the instructions to bid provide bidders

due process needs not be reached in this proceeding because the

School Board cannot rely upon those provisions until the School

Board has undertaken rulemaking as required by Section 120.535,

Florida Statutes.

ORDER

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

ORDERED that the challenges by the Petitioners to School

Board Rule 6Gx13-3C-1.08 are DISMISSED. It is further ORDERED

that Sections I.C.2., II.C., IV.D., and the final sentence of

IV.F. of the Instructions to Bidders are unpromulgated rules

within the meaning of Section 120.535, Florida Statutes, and that

the School Board shall refrain from relying on said unpromulgated

rules as required by the provisions of Section 120.535, Florida

Statutes.

DONE AND ENTERED this 29th day of February, 1996, in

Tallahassee, Leon County, Florida.

____________________________________

CLAUDE B. ARRINGTON, Hearing Officer

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 29th day of February 1996.

ENDNOTES

1/ There was testimony that the School Board requires each

vendor that has been disqualified to appear before and be

approved by a committee before its disqualification is lifted

even if the 14-month period has expired. This School Board

policy is not part of the challenged rule or the instructions to

bidders and, consequently, is not at issue in this proceeding.

The existence of such an unwritten policy would likely constitute

an unpromulgated rule in contravention of Section 120.535,

Florida Statutes.

2/ The School Board is in the process of revising its rules

pertaining to formal administrative hearings.

3/ Provisions for liquidated are permitted by the Uniform

Commercial Code. Pertinent to this provision, Section

672.718(1), Florida Statute, provides:

(1) Damages for breach by either party may be liquidated in

the agreement but only at an amount which is reasonable in the

light of the anticipated or actual harm caused by the breach, the

difficulties of proof or loss, and the inconvenience or

nonfeasibility of otherwise obtaining an adequate remedy. A term

fixing unreasonably large liquidated damages is void as a

penalty.

The following general statement is taken from 45 Fla. Jur.

2d, Sales and Exchanges of Goods, Section 193:

It is well settled that parties to a contract of sale may

provide for liquidated damages in case of a breach of contract.

The courts give effect to such provision when under the

circumstances the provision is reasonable and it is apparent that

it was not the intention of the parties to provide for a penalty.

. . .

* * *

There is no fixed or general rule to determine whether a

stipulation is a penalty or for liquidated damages; each case

must be governed by its own facts and circumstances. Whether the

amount mentioned in a sales contract to be paid on a breach by

nondelivery thereof is to be considered as liquidated damages, or

as a penalty merely, is a question of law for the court to

determine from the nature of the contract, the terms and purpose

of the whole instrument, the natural and ordinary consequences of

a breach, and the peculiar circumstances attending each case as

it arises. (Footnotes omitted).

4/ Bid awards are usually made by the School Board on

Wednesdays.

5/ Section 120.53(5), Florida Statutes, provides as follows:

(5) An agency which enters into a contract pursuant to the

provisions of ss. 282.303-282.313, chapter 255, chapter 287, or

chapters 334-349 shall adopt rules specifying procedures for the

resolution of protests arising from the contract bidding process.

Such rules shall at least provide that:

(a) The agency shall provide notice of its decision or

intended decision concerning a bid solicitation or a contract

award as follows:

1. For a bid solicitation, notice of a decision or

intended decision shall be given by United States mail or by hand

delivery.

2. For any decision of the Division of Purchasing of the

Department of General Services concerning a request by an agency

for approval of an exceptional purchase under part I of chapter

287 and the rules of the Division of Purchasing, notice of a

decision or intended decision shall be given by posting such

notice in the office of the Division of Purchasing.

3. For any other agency decision, notice of a decision or

intended decision shall be given either by posting the bid

tabulation at the location where the bids were opened or by

certified United States mail or other express delivery service,

return receipt requested.

The notice required by this paragraph shall contain the

following statement: "Failure to file a protest within the time

prescribed in s. 120.53(5), Florida Statutes, shall constitute a

waiver of proceedings under chapter 120, Florida Statutes."

(b) Any person who is affected adversely by the agency

decision or intended decision shall file with the agency a notice

of protest in writing within 72 hours after the posting of the

bid tabulation or after receipt of the notice of the agency

decision or intended decision and shall file a formal written

protest within 10 days after the date he filed the notice of

protest. With respect to a protest of the specifications

contained in an invitation to bid or in a request for proposals,

the notice of protest shall be filed in writing within 72 hours

after the receipt of notice of the project plans and

specifications or intended project plans and specifications in an

invitation to bid or request for proposals, and the formal

written protest shall be filed within 10 days after the date the

notice of protest is filed. Failure to file a notice of protest

or failure to file a formal written protest shall constitute a

waiver of proceedings under this chapter. The formal written

protest shall state with particularity the facts and law upon

which the protest is based.

(c) Upon receipt of the formal written protest which has

been timely filed the agency shall stop the bid solicitation

process or the contract award process until the subject of the

protest is resolved by final agency action, unless the agency

head sets forth in writing particular facts and circumstances

which require the continuance of the bid solicitation process or

the contract award process without delay in order to avoid an

immediate and serious danger to the public health, safety, or

welfare.

(d) The agency, on its own initiative or upon the request

of a protestor, shall provide an opportunity to resolve the

protest by mutual agreement between the parties within 7 days,

excluding Saturdays, Sundays, and legal holidays, of receipt of a

formal written protest.

1. If the subject of a protest is not resolved by mutual

agreement within 7 days, excluding Saturdays, Sundays, and legal

holidays, of receipt of the formal written protest, and if there

is no disputed issue of material fact, an informal proceeding

shall be conducted pursuant to s. 120.57(2) and applicable agency

rules before a person whose qualifications have been prescribed

by rules of the agency.

2. If the subject of a protest is not resolved by mutual

agreement within 7 days, excluding Saturdays, Sundays, and legal

holidays, of receipt of the formal written protest, and if there

is a disputed issue of material fact, the agency shall refer the

protest to the division for proceedings under s. 120.57(1).

(e) Upon receipt of a formal written protest referred

pursuant to this subsection, the division director shall expedite

the hearing and assign a hearing officer who shall conduct a

hearing within 15 days of the receipt of the formal written

protest by the division and render a recommended order within 30

days after the hearing or within 30 days after receipt of the

hearing transcript by the hearing officer, whichever is later.

The provisions of this paragraph may be waived upon stipulation

by all parties.

(f) The Administration Commission shall promulgate model

rules of procedure pursuant to the provisions of s. 120.54(10)

for the filing of notice of protests and formal written protests.

APPENDIX TO THE FINAL ORDER,

CASES NO. 95-3362RX AND 95-4834RX

The following rulings are made as to the proposed findings

of fact submitted by the Petitioners.

1. The proposed findings of fact in paragraphs 1, 2, 3, and

55 are adopted in material part by the Final Order.

2. The proposed findings of fact in paragraphs 4, 5, 6, 25,

62, and 64 are subordinate to the findings made.

3. The following paragraphs consist of recitation of

testimony, commentary on evidence, or argument: 7, 8, 9, 10, 11,

12, 13, 14, 15, 16, 17, 18, 19, 20, 22, 23, 27, 28, 30, 31, 32,

33, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 47, 49, 51, 52, 53,

54, 56, 57, 58, 59, 60, 61, 63, 65, 67, 68, 69, 70, 71, 72, and

73.

4. The proposed findings of fact in the paragraphs 21, 24,

26, 29, and 66 are unsubstantiated by the record, refer to

exhibits that were not admitted into evidence, or fail to

appropriately reference the record.

5. The proposed findings of fact in paragraphs 34, 35, and

46 are, in part, subordinate to the findings made, but are

rejected to the extent they are contrary to the findings made.

6. The proposed findings of fact in paragraph 48 are

rejected as being unsubstantiated by the record or as being

argument.

7. The proposed findings of fact in paragraph 50 are

adopted in part, but are rejected to the extent they are

unnecessary to the findings made.

The following rulings are made as to the proposed findings

of fact submitted by the Respondent.

1. The proposed findings of fact in paragraphs 1, 2, 3, 4,

5, 6, 7, 8, 9, 22, 23, 24, 26, 27, 29, 31, 32, 33, 34, 35, 36,

37, 38, 39, and 40 are adopted in material part by the Final

Order.

2. The proposed findings of fact in paragraphs 10, 11, 12,

13, 14, 15, 17, and 30 are subordinate to the findings made.

3. The proposed findings of fact in paragraphs 16, 18, 19,

20, and 21 are rejected as being unnecessary to the conclusions

reached or are treated as preliminary matters.

4. The proposed findings of fact in paragraph 25 are

adopted in part by the Final Order or are subordinate to the

findings made.

5. The proposed findings of fact in paragraph 28 are

adopted in part by the Final Order. The proposed findings are

rejected to the extent they infer that the Instructions to

Bidders are merely informative or advisory.

COPIES FURNISHED:

Mr. Thomas W. Talmadge

7065 Southwest 46th Street

Miami, Florida 33155

Ms. Mary Ann Talmadge

Dunbar Electric Supply, Inc.

7065 Southwest 46 Street

Miami, Florida 33155-4613

John Alan Margolis, Esquire

9990 Southwest 77th Avenue, Suite 330

Miami, Florida 33156

Phyllis O. Douglas, Esquire

Twila Hargrove Payne, Esquire

Dade County School Board

1450 Northeast Second Avenue, Suite 400

Miami, Florida 33132

Liz Cloud, Chief

Bureau of Administrative Code

The Elliot Building

Tallahassee, Florida 32399-0250

Carroll Webb, Executive Director

Administrative Procedures Committee

Holland Building, Room 120

Tallahassee, Florida 32399-1300

Octavio J. Visiedo, Superintendent

Dade County School Board

1450 Northeast Second Avenue, Suite 403

Miami, Florida 33132-1308

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 one copy of

a Notice of Appeal with the Agency Clerk of the Division of

Administrative Hearings and a second copy, accompanied by filing

fees prescribed by law, with the District Court of Appeal, First

District, or with the District Court of Appeal in the appellate

district where the party resides. The Notice of Appeal must be

filed within 30 days of rendition of the order to be reviewed.

=================================================================

DISTRICT COURT OPINION

=================================================================

NOT FINAL UNTIL TIME EXPIRES

TO FILE REHEARING MOTION

AND, IF FILED, DISPOSED OF.

IN THE DISTRICT COURT OF APPEAL

OF FLORIDA

THIRD DISTRICT

JANUARY TERM, A.D. 1997

DUNBAR ELECTRIC SUPPLY, INC.,

MARY ANN TALMADGE, and THOMAS

W. TALMADGE,

Appellants,

vs. CASE NO. 96-834

LOWER

THE SCHOOL BOARD OF DADE TRIBUNAL NO. 95-3362RX

COUNTY, FLORIDA,

Appellee.

_____________________________/

Opinion filed March 19, 1997.

An appeal from The Florida Division of Administrative

Hearings and The School Board of Dade County, Florida.

John A. Margolis, for appellants Dunbar Electric Supply,

Inc. and Mary Ann Talmadge; Thomas W. Talmadge, in proper person.

Twila Hargrove Payne, for appellee.

Before COPE, GODERICH, JJ., and BARKDULL, Senior Judge.

COPE, J.

Appellants Dunbar Electric Supply, Inc., Mary Ann Talmadge and

Thomas W. Talmadge appeal orders entered by the Florida Division

of Administrative Hearings and the School Board of Dade County.

We conclude that School Board Rule 6Gx13 -3C -1.08, as

amended, is a valid exercise of delegated legislative authority.

The School Board and the hearing officer properly rejected

appellants' challenges to the validity of the Rule. See §§

230.03, 230.22(2), 230.23(2), 237.02(1)(a), Fla. Stat. (1995);

Fla. Admin. Code R. 6A 1.012.

Appellants have made claims against the School Board on the

premise that the School Board violated subsection 120.53(5),

Florida Statutes (1995), relating to "resolution of protests

arising from the contract bidding process." Ids Appellants point

out that subsection 120.53(5), Florida Statutes, is applicable

for purchasing which takes place under chapter 287, Florida

Statutes. Appellants argue that School Board purchasing is

governed by part I of chapter 287, Florida Statutes. The parties

agree that (with one exception) chapter 287, part I, is addressed

to the executive branch of state government. 1/ See id. §§

287.001, 287.012(1). Appellants claim that school boards are part

of the executive branch of state government.

Appellants are incorrect. School boards are constitutional

entities created by Article IX, Section 4 of the Florida

Constitution. School boards do not fall within the executive

branch of the state government. Op. Att'y. Gen. Fla. 84 -68

(1984); See Art. II, § 3, Art. IV, Art. IX, § 4, Fla. Const.; ch.

20, Fla. Stat. (1995); see also Canney v. Board of Public

Instruction, 278 So. 2d 260, 263 (Fla. 1973). That being so,

part I of chapter 287 does not apply to the School Board. 2/

This in turn means that the School Board is not covered by

subsection 120.53(5), Florida Statutes, and relief under that

subsection was correctly denied.

We find no merit in appellants' remaining arguments on

appeal.

Affirmed.

ENDNOTES

1/ The School Board concedes that it is covered by section

287.055, Florida Statutes, which regulates the purchase of

certain professional services, because by its express terms,

section 287.055 applies to school boards. See Id. §

287.055(2)(b). That provision has no application to the present

case, because the present case involves the School Board's

purchase of electrical supplies.

2/ Subject to the exception mentioned in footnote 1.

M A N D A T E

DISTRICT COURT OF APPEAL OF FLORIDAA

THIRD DISTRICT

DCA# 96-834

DUNBAR ELECTRIC SUPPLY, INC., et al.

vs.

THE SCHOOL BOARD OF DADE COUNTY, FLORIDA

This cause having been brought to this Court by appeal, and

after due consideration the Court having issued its opinion;

YOU ARE HEREBY COMMANDED that further proceedings be had in

said cause in accordance with the opinion of this Court attached

hereto and incorporated as part of this order, and with the rules

of procedure and laws of the State of Florida.

Case No. 95-3362RX, 95-4834RX DEPT.

WITNESS, T he Honorable Alan R. Schwartz

Chief Judge of said District Court and seal of said Court at

Miami, this 9th day of May, 1997.

(SEAL) ___________________________________________________

LOUIS J. SPALLONE, Clerk

District Court of Appeal of Florida, Third District