96-004668 Lynne&Apos;S Pipe And Supply vs. Department Of Transportation Status: Closed Recommended Order on Wednesday, April 9, 1997.

Summary: Applicant is not entitled to Disadvantaged Business Enterprise (DBE) certification as supplier of concrete pipe because it was neither a small business concern nor a regular dealer.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

)

LYNNE’S PIPE & SUPPLY, )

)

Petitioner, )

)

vs. ) CASE N O. 96-4668

)

DEPARTMENT OF TRANSPORTATION, )

)

Respondent. )

__________________________________ )

RECOMMENDED ORDER

Pursuant to notice, a Section 120.569/57(1) hearing was

conducted in this case on February 19, 1997, by telephone

conference call before Stuart M. Lerner, a duly designated

Administrative Law Judge of the Division of Administrative

Hearings.

APPEARANCES

For Petitioner: Lynne Bohnsack, President

Lynne’s Pipe and Supply

705 Hibiscus Lane

Vero Beach, Florida 32963

For Respondent: Murray M. Wadsworth, Jr.

Assistant General Counsel

Department of Transportation

Haydon Burns Building, Mail Station 58

605 Suwannee Street

Tallahassee, Florida 32399-0458

STATEMENT OF THE ISSUE

Whether Petitioner is entitled to certification as a

Disadvantaged Business Enterprise pursuant to Section 339.0805,

Florida Statutes, and Rule Chapter 14-78, Florida Administrative

Code?

PRELIINARY STATEMENT

By letter addressed to Lynne Bohnsack, Petitioner’s

president, dated August 23, 1996, the Department of

Transportation (Department) advised Petitioner of its intent to

deny Petitioner’s application for Disadvantaged Business

Enterprise certification (as a supplier of concrete pipe) on the

following grounds:

(1) Your firm does not appear to be a regular

dealer as required by Rule 14-78.005(7)(g)

and Rule 14-78.002(15), Florida

Administrative Code (F.A.C.). . . .

(2) Your firm does not appear to be a “small

business concern” as required by Rule 14-

78.005(7)(a), F.A.C. . . .

(3) You, the qualifying owner of this firm,

do not appear to possess the technical

expertise, specialized knowledge, training,

education or experience to make decisions in

critical areas of operation for a firm which

specializes in pipe supply as required by

Rule 14-78.005(7)(e), F.A.C. . . .

By letter dated September 6, 1996, Petitioner requested a “formal

hearing pursuant to Chapter 120, Florida Statutes,” on the

Department’s proposed action. On October 1, 1996, the matter was

referred to the Division of Administrative Hearings for the

assignment of an Administrative Law Judge to conduct the hearing

Petitioner had requested.

The final hearing in this case was originally scheduled for

December 16, 1996, but was thrice continued. The hearing was

ultimately held, as noted above, on February 19, 1997. A total

of seven witnesses testified at the hearing: Lynne Bohnsack,

Thomas Valdes, James DeForest, Al Doll and Dennis Hill,

testifying on behalf of Petitioner; and Howard Jemison, the

Department’s DBE Certification Manager, and John Goodeman, a

Certification Consultant with the Department, testifying on

behalf of the Department. In addition to the testimony of these

seven witnesses, a total of 18 exhibits (Petitioner’s Exhibits 1

through 7) and (Respondent’s Exhibits A through K) were offered

and received into evidence

At the conclusion of the evidentiary portion of the hearing,

the undersigned, on the record, advised the parties of their

right to file proposed recommended orders and established a

deadline (20 days from the date of the Division of Administrative

Hearings’ receipt of the transcript of the hearing) for the

filing of such proposed recommended orders.

The transcript of the hearing was filed on March 7, 1997.

The Department and Petitioner filed their proposed recommended

orders on March 25, 1997, and March 27, 1997, respectively.

These post-hearing submittals have been carefully considered by

the undersigned..

FINDINGS OF FACT

1. Lynne Bohnsack is the president and sole owner of

Lynne’s Pipe and Supply (Lynne’s).

2. Bohnsack is a woman and a citizen of the United States.

3. She formed Lynne’s with the intention of it becoming a

supplier of concrete pipe.

4. She did so upon the advice of her brother, Dennis Hill.

5. Unlike Hill, Bohnsack had no prior experience in the

concrete pipe supply business at the time she established

Lynne’s. 1

6. She has since learned about the business through

discussions she has had with both Hill and James DeForest, an

acquaintance who has been in the highway construction business

for over 40 years.

7. Hill has not only provided Bohnsack with information

concerning the concrete pipe supply business, he is now also

employed by Lynne’s as an estimator working on a commission (33%

of profit) basis

8. Al Doll is another individual currently affiliated with

Lynne’s. He is its vice president in charge of customer

relations.

9. Doll, however, has thus far not had the opportunity, in

his capacity as Lynne’s vice president, to deal with any

customers because Lynne’s has not had any.

10. Lynne’s has yet to sell any concrete pipe (although it

has recently attempted, albeit unsuccessfully , to do so by

“bid[ding] on some jobs”), nor has it made any payments to

employees or paid any taxes

11. Lynne’s, which operates out of Bohnsack’s residence in

Vero Beach, does not maintain an inventory of concrete pipe.

12. It has entered into a lease agreement with Pan American

Engineering, Hill’s former employer, to rent space to store

concrete pipe, but it has never used the storage area which is

the subject of the lease for any purpose, nor has it made any

payments under the lease.

CONCLUSIONS OF LAW

13. The Department is authorized to certify disadvantaged

business enterprises pursuant to Section 339.0805(1)(c), Florida

Statutes, which provides as follows:

The [D]epartment shall certify a socially and

economically disadvantaged business

enterprise, which certification shall be

valid for 12 months, or as prescribed by 49

C.F.R. part 23. The [D]epartment’s initial

application for certification for a socially

and economically disadvantaged business

enterprise shall require sufficient

information to determine eligibility as a

small business concern owned and controlled

by a socially and economically disadvantaged

individual. For recertification of a

disadvantaged business enterprise, the

[D]epartment may accept an affidavit, which

meets [D]epartment criteria as to form and

content, certifying that the business remains

qualified for certification in accordance

with program requirements. A firm which does

not fulfill the [D]epartment’s criteria for

certification shall not be considered a

disadvantaged business enterprise. An

applicant who is denied certification may not

reapply within 6 months after issuance of the

denial letter or the final order. The

application and financial information

required by this section are confidential and

exempt from s. 119.07(1).

14. The “[D]epartment’s criteria for certification” are

found in Rule Chapter 14-78, Florida Administrative Code.

15. Rule 14-78.002, Florida Administrative Code, provides

definitions of various words and phrases used in Rule Chapter 14-

78, Florida Administrative Code.

16. Subsection (2) of Rule 14-78.002, Florida

Administrative Code, defines “business concern” or “concern” as

follows:

(a) A business concern eligible for

assistance as a small business is a business

entity organized for profit, with a place of

business located in the United States and

which makes a significant contribution to the

U.S. economy through payment of taxes and/or

use of American products, materials and/or

labor.

(b) Such business entity may be in the legal

form of an individual proprietorship,

partnership, corporation, joint venture,

association, trust or a cooperative, except

that where the form is a joint venture there

can be no more than 49 percent participation

by foreign business entities in the joint

venture.

17. Subsection (9) of Rule 14-78.002, Florida

Administrative Code, defines “disadvantaged business enterprise”

as “a small business concern organized for profit:”

(a) Which is at least 51 percent owned by

one or more disadvantaged individuals, or, in

the case of any publicly owned business, at

least 51 percent of the stock of which is

owned by one or more disadvantaged

individuals; and

(b) Whose management and daily business

operations are controlled by one or more of

the disadvantaged individuals who own it.

18. Subsection (15) of Rule 14-78.002, Florida

Administrative Code, defines “regular dealer” as follows:

[A] “Regular Dealer” means a firm that owns,

operates, or maintains a store, warehouse, or

other establishment in which the materials or

supplies required for the performance of the

contract are bought, kept in stock, and

regularly sold to the public in the usual

course of business. To be a regular dealer,

the firm must engage in, as its principal

business and in its own name, the purchase

and sale of the products in question. A

regular dealer in such bulk items as steel,

cement, gravel, stone, and petroleum products

does not need to keep such products in stock,

if the dealer owns or operates the 2

appropriate distribution facility. Brokers

and packagers shall not be regarded as

manufacturers or regular dealers within the

meaning of these rules.

19. Subsection (18) of Rule 14-78.002, Florida

Administrative Code, defines “socially and economically

disadvantaged individuals.” It provides, in pertinent part as

follows:

“Socially and Economically Disadvantaged

Individuals” means those individuals:

(a) Who are citizens of the United States .

. . and who are women. . . . Individuals in

the following groups are presumed to be

disadvantaged; however, this presumption is

rebuttable: . . .

6. Women.

20. Subsection (20) of Rule 14-78.002, Florida

Administrative Code, defines “critical areas of operation” as

follows:

The “Critical Areas of Operation” are those

areas required for production and delivery of

the primary product or service of the firm

and may include, at a minimum, estimating,

bidding, and field supervision. The areas of

administration and financial management are

not critical areas of operation unless they

constitute the firm’s primary product or

service.

21. Rule 14-78.005, Florida Administrative Code, sets forth

the “Standards for Certification of DBE’s.” It provides, in

pertinent part, as follows:

(7) [A] firm seeking certification and

recertification as a DBE shall meet the

following standards. A firm which does not

fulfill all of the Department’s criteria for

certification shall not be considered a

Disadvantaged Business Enterprise.

(a) The firm must be a small business

concern. . . .

(e) [T]o be certified under this rule

chapter, the DBE shall be one in which the

disadvantaged owner shall also possess the

power to direct or cause the direction of the

management, policies, and operations of the

firm and to make day-to-day as well as major

business decisions concerning the firm’s

management, policy, and operation. . . .

2. In assessing the power of the

disadvantaged owner to direct or cause the

direction of the firm, the Department will

look past stock ownership and consider the

minority applicant’s ownership interest,

knowledge of the particular business,

background, involvement in the business on a

day-to-day basis, expertise, involvement by

the non-disadvantaged owners, employees or

non-employees, other full or part-time

employment by the minority applicant and size

of the applicant’s business. . . .

4. The disadvantaged owners shall have

managerial and technical expertise in the

form of knowledge, training, education and/or

experience required to make decisions in the

critical areas of operation. The level of

expertise required must be such that the

disadvantaged owners possess the specialized

knowledge, attributes, and skills necessary

to critically evaluate and independently

utilize information supplied to the

disadvantaged owner by its subordinates.

Administrative and managerial expertise will

not suffice as a substitute for technical

expertise. In determining the applicant’s

eligibility, the Department will review the

prior employment and educational backgrounds

of the disadvantaged owners, the professional

skills, training and/or licenses required for

the given industry, the previous and existing

managerial relationship between and among all

owners, especially those who are familiarly

related, and the timing and purpose of

management changes. . . .

(g) Disadvantaged owners seeking

certification as a supplier of products which

are required for DBE contracts, must be a

regular dealer as defined in Rule 14-78.002.

22. In determining whether an applicant is eligible for

certification as a Disadvantaged Business Enterprise, the

Department must examine the certification application in light of

the standards set forth in Rule Chapter 14-78, Florida

Administrative Code. See State v. Jenkins , 469 So.2d 733, 734

(Fla. 1985)("agency rules and regulations, duly promulgated under

the authority of law, have the effect of law"); Buffa v.

Singletary , 652 So.2d 885, 886 (Fla. 1st DCA 1995)("[a]n agency

must comply with its own rules"); Decarion v. Martinez , 537

So.2d 1083, 1084 (Fla. 1st 1989)(“[u]ntil amended or abrogated,

an agency must honor its rules").

23. An applicant for certification as a Disadvantaged

Business Enterprise whose application is preliminarily denied by

the Department is entitled to notice of the grounds for the

proposed denial of its application and to an opportunity to have

a Section 120.569/57 hearing on the Department’s proposed action.

See Section 120.60(3), Fla. Stat.

24. At the Section 120.569/57 hearing, the applicant has

the burden of proving by a preponderance of the evidence that it

is entitled to the certification it has requested. See

Department of Banking and Finance v. Osborne Stern and Company ,

670 So.2d 932, 934 (Fla. 1996); Pershing Industries, Inc., v.

Department of Banking and Finance , 591 So.2d 991, 994 (Fla. 1st

DCA 1991); Cordes v. Department of Environmental Regulation , 582

So.2d 652, 654 (Fla. 1st DCA 1991); Department of Transportation

v. J.W.C. Co., 396 So.2d 778, 787 (Fla. 1st DCA 1981);

Department of Health and Rehabilitative Services v. Career

Service Commission , 289 So.2d 412, 414-15 (Fla. 4th DCA 1974).

25. In the instant case, Lynne’s has not met its burden of

proof.

26. It appears from the record that Lynne’s is not a “small

business concern,” as required by Rule 14-78.005(7)(a), Florida

Administrative Code, inasmuch as it is not making a “significant

contribution to the U.S. economy.”

27. It further appears from the record that Lynne’s is not

a “regular dealer,” as required by Rule 14-78.005(7)(g), Florida

Administrative Code, inasmuch as it does not own, operate or

maintain a store, warehouse, or other establishment in which it

maintains an inventory of concrete pipe that is regularly sold to

the public in the usual course of business.

28. Because Lynne’s is neither a “small business concern”

nor a “regular dealer,” as those terms are defined in Chapter 14-

78, Florida Administrative Code, it “does not fulfill the

[D]epartment’s criteria for certification . . . as a

[D]isadvantaged [B]usiness [E]nterprise” that are applicable to

suppliers of concrete pipe and its application for such

certification should therefore be denied. 3

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is hereby

RECOMMENDED that the Department issue a final order denying

Petitioner’s application for certification as a Disadvantaged

Business Enterprise

DONE AND ENTERED IN Tallahassee, Leon County, Florida, this

9th day of April, 1997.

___________________________________

STUART M. LERNER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 9th day of April, 1997.

ENDNOTES

1 Before starting Lynne’s, Bohnsack had held a marketing

position with a manufacturer of telephone equipment, managed

apartment complexes, worked in an art gallery, and tended bar.

2 Unlike steel, cement, gravel, stone and petroleum products,

concrete pipe is not sold in bulk.

3 Whether Lynne’s application for certification should be denied

for the additional reason that, as alleged in the Department’s

notice of intent to deny the application, Bohnsack, its owner,

does not have the “technical expertise, specialized knowledge,

training, education or experience to make decisions in critical

areas of operation for a firm which specializes in pipe supply as

required by Rule 14-78.005(7)(e), F.A.C.,” is a question that the

undersigned need not, and therefore will not, answer in this

Recommended Order.

COPIES FURNISHED :

Lynne Bohnsack, President

Lynne’s Pipe & Supply

705 Hibiscus Lane

Vero Beach, Florida 32963

Murray M. Wadsworth, Jr.

Assistant General Counsel

Department of Transportation

Haydon Burns Building, Mail Station 58

605 Suwannee Street

Tallahassee, Florida 32399-0458

Ben G. Watts, Secretary

Department of Transportation

c/o Diedre Grubbs

Haydon Burns Building, Mail Station 58

605 Suwannee Street

Tallahassee, Florida 32399-0458

Pamela Leslie, General Counsel

Department of Transportation

Haydon Burns Building, Mail Station 58

605 Suwannee Street

Tallahassee, Florida 32399-0458

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15

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.

1 Before starting Lynne’s, Bohnsack had held a marketing position

with a manufacturer of telephone equipment, managed apartment

complexes, worked in an art gallery, and tended bar.

2 Unlike steel, cement, gravel, stone and petroleum products,

concrete pipe is not sold in bulk.

3 Whether Lynne’s application for certification should be denied

for the additional reason that, as alleged in the Department’s

notice of intent to deny the application, Bohnsack, its owner,

does not have the “technical expertise, specialized knowledge,

training, education or experience to make decisions in critical

areas of operation for a firm which specializes in pipe supply as

required by Rule 14-78.005(7)(e), F.A.C.,” is a question that the

undersigned need not, and therefore will not, answer in this

Recommended Order.