98-002570BID Lockheed Martin Information Systems vs. Department Of Children And Family Services Status: Closed Recommended Order on Monday, December 21, 1998.

Summary: Case discusses material irregularity that is fatal, material irregularity that is of no consequence, minor irregularity, correction of scoring error, and "significant (internal) inconsistency" of two Requests for Proposals (RFP). Reject all bids.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LOCKHEED MARTIN INFORMATION )

SYSTEMS, )

)

Petitioner, )

)

vs. ) Case No. 98-2570BID

)

DEPARTMENT OF CHILDREN AND )

FAMILY SERVICES, )

)

Respondent, )

)

and )

)

SAGEM MORPHO, INC., )

)

Intervenor. )

___________________________________)

RECOMMENDED ORDER

Upon due notice, this cause came on for formal hearing on

September 22-23, 1998, in Tallahassee, Florida, before Ella Jane

P. Davis, a duly assigned Administrative Law Judge of the

Division of Administrative Hearings.

APPEARANCES

For Petitioner: William E. Williams, Esquire

Timothy L. Strum, Esquire

Huey, Guilday & Tucker, P.A.

Post Office Box 1794

Tallahassee, Florida 32302

For Respondent: William A. Frieder, Esquire

Melease Jackson, Esquire

Department of Children

and Family Services

1317 Winewood Boulevard

Building 2, Room 204

Tallahassee, Florida 32399-0700

For Intervenor: W. Robert Vezina, III, Esquire

Mary M. Piccard, Esquire

Veniza, Lawrence & Piscitelli, P.A.

318 North Calhoun Street

Tallahassee, Florida 32301

STATEMENT OF THE ISSUE

Whether the Department of Children and Family Services'

(FDCF) notice of intent to award the contract for RFP No. MF650TH

was contrary to the agency's rules or policies, or the proposal

specifications and whether the Petitioner established that FDCF's

decision was clearly erroneous, contrary to competition,

arbitrary or capricious.

PRELIMINARY STATEMENT

This case concerns a protest filed by Lockheed Martin

Information Systems (Lockheed) in response to the Department of

Children and Family Services' (FDCF's) notice of intent to award

a contract to apparent low bidder Sagem Morpho, Inc. (Morpho), as

a result of a request for proposal issued January 23, 1998,

Request For Proposal No. MF650TH (RFP), Automated Fingerprint

Identification System (AFIS).

Lockheed complied with all protest time frames, and the

cause was referred to the Division of Administrative Hearings on

June 8, 1998. Morpho was granted Intervenor status.

Pursuant to the parties' request, the disputed facts hearing

was not convened until September 22-23, 1998. Petitioner

presented the oral testimony of Jayne Paris and had Exhibits 1-19

and 21-29, including two deposition transcripts, admitted in

evidence. Respondent presented the oral testimony of Connie

Reinhardt. Intervenor presented the oral testimony of Thomas

Ruggles and Richard Woodard.

A transcript was filed on October 9, 1998. All parties

filed Proposed Recommended Orders on October 26, 1998, pursuant

to the extended period agreed upon at the close of the disputed

fact hearing.

On October 28, 1998, Intervenor filed a Motion to Strike

paragraphs 60-69 of Petitioner's Proposed Recommended Order which

addressed whether Morpho had modified the terms and conditions of

the AFIS RFP and conditioned its prices in its proposal.

Petitioner's Response was filed November 3, 1998. These motions

will be resolved within this Recommended Order.

FINDINGS OF FACT

1. The parties' Joint Prehearing Stipulation specified, in

pertinent part, as follows:

E. ADMITTED FACTS

The following facts are admitted by all

parties and will require no proof at hearing:

1. On or about January 23, 1998, the

Department issued RFP No. MF650TH ("the

RFP"), Automated Fingerprint Identification

System (AFIS). The purpose of the RFP was to

solicit proposals from qualified proposers to

design, develop and implement an automated

fingerprint identification system, or AFIS,

and to procure a statewide fingerprint

identification capability for applicants and

recipients of public assistance.

2. The RFP was subsequently amended by

Addendums 1, 2, 3, and 4 dated February 18,

February 26, March 9, and March 16, 1998,

respectively.

3. Two vendors, Lockheed Martin and Sagem

Morpho, submitted proposals in response to

the RFP on March 23, 1998.

4. The Department posted notice of its

intent to award the contract described in the

RFP to Morpho on April 17, 1998.

5. On April 22, 1998, Lockheed Martin timely

submitted a notice of intent to protest the

proposed award to Sagem Morpho, pursuant to

the terms of the RFP and Section 120.57(3),

Florida Statutes.

6. On May 1, 1998, Lockheed Martin filed its

Formal Written Protest and Petition for

Formal Administrative Proceeding.

7. Jayne Paris served as Procurement Manager

for the AFIS RFP.

8. Connie Reinhardt served as Project

Manager for the AFIS project.

F. AGREED UPON ISSUES OF LAW

The parties have agreed on the following

issues of law:

1. The Administrative Law Judge shall

conduct a hearing pursuant to Section

120.57(3), Florida Statutes.

2. All parties have standing to participate

in this proceeding.

G. ISSUES OF FACT WHICH REMAIN TO BE

LITIGATED .

The following issues of fact remain to be

litigated:

1. Whether Morpho's AFIS proposal was

responsive to the RFP.

2. Whether Lockheed Martin's AFIS proposal

was responsive to the RFP.

Lockheed Martin contends that the following

additional facts remain to be litigated:

3. What the Department's policy is with

respect to evaluation of cost proposals on

RFPs.

4. Whether and when the Department altered

its method of evaluating the AFIS cost

proposals.

5. The reason the Department decided not to

use the cost proposal ranking and fatal

criteria checklist which had been previously

prepared.

6. Whether the addenda to the RFP provided

supplemental RFP instructions and

incorporated clarifications in response to

questions submitted by potential proposers.

H. ISSUES OF LAW WHICH REMAIN FOR

DETERMINATION BY THE JUDGE

The following issues of law remain for

determination by the Court:

1. Whether Morpho's AFIS proposal was

materially responsive to the RFP.

2. Whether Lockheed Martin's AFIS proposal

was materially responsive to the RFP.

Lockheed Martin contends that the following

additional issues of law remain for

determination by the Judge:

3. Whether any minor irregularities waived

by the Department in evaluating and scoring

the AFIS proposals met the definition of a

"minor irregularity" under Rule 60A-

1.002(16), F.A.C.

4. Whether the Department may alter its

proposal evaluation methods after proposals

have been received by it.

5. Whether the Department's proposed award

of the AFIS contract to Morpho is contrary to

the Department's governing statutes, rules,

or policies, or the AFIS RFP specifications.

6. Whether the Administrative Law Judge

shall conduct a de novo proceeding pursuant

to Section 120.57(3), Florida Statutes, to

determine whether the Department's proposed

action is contrary to its governing statutes,

rules, or policies, or the AFIS RFP

specifications.

Lockheed's unilateral statements of issues do not bind the

parties or the undersigned but are included so that the pending

Motion to Strike may be addressed in the Conclusions of Law,

infra .

2. At formal hearing, Petitioner Lockheed contended that

Morpho's proposal was not responsive to the RFP and that Lockheed

should be awarded the contract. Intervenor Morpho contended that

its proposal was responsive and that Lockheed's proposal was not

responsive. FDCF contended that both proposals were responsive

and that the proposed final agency action to award the contract

to Morpho should be carried out.

3. The RFP solicited proposals from qualified proposers to

design, develop and implement an Automated Fingerprint

Identification System (AFIS) and to procure a statewide

fingerprint identification capability for applicants and

recipients of public assistance. (Agreed Facts). AFIS is

intended to support the client certification process for the

benefit programs delivered through the Department's electronic

Benefits Transfer program (EBT). The current EBT programs

include Food Stamps, Temporary Assistance to Needy Families --

Work and Gain Economic Self-Sufficiency (TANF-WAGES), and the

Refuge Assistance (RA) programs. The Department had determined

that AFIS is the only acceptable biometric technology.

4. The RFP included the following pertinent provisions:

1.1 General Provisions –

The procurement process will provide for the

evaluation of proposals and selection of the

winning proposals according to applicable

state and federal laws and administrative

regulations. All responses received by the

closing deadline, unless determined to be

non-responsive will be evaluated by an

evaluation team. (Exhibit P-1. pp. 66-67).

1.2 Statement of Purpose

The objective of this Request for Proposals

(RFP) is to obtain proposals from qualified

proposers to design, develop and implement

the AFIS in accordance with the requirements

defined in Section B of this RFP. FDCF

intends to procure a statewide fingerprint

identification capability for applicants and

recipients of public assistance programs as

stated above. Through this competitive

solicitation, the FDCF desires to obtain a

comprehensive identification service which

represents the best value for the state, and

which provides all hardware, (with the

exception of existing administrative

terminals as discussed in RFP Section B,

subsection 6), software, communications

networks, central site operations, terminal

operations training, system administration

training, operational support, maintenance,

and other services. State personnel will be

utilized to operate the system's imaging,

fraud investigation, and administrative

workstations located at state facilities.

The system will include a central

identification system to maintain fingerprint

and photographic identification records and

perform duplicate fingerprint record search

and verification. It will also include

workstations for creation of the fingerprint

and photo identification records and for

support of administrative and fraud

investigation activities.

1.3 Evaluation of Technical Proposals

1.3.1 Part A Fatal Criteria

Failure to comply with all Fatal Criteria

will render a proposal non-responsive and

ineligible for further evaluation. For a

list of Fatal Criteria, see Appendix XIX.

Any technical proposal that is incomplete,

non-responsive, contains cost or pricing

data, or in which there are significant

inconsistencies or inaccuracies will be

rejected by the FDCF. No points will be

awarded for complying with the Fatal

Criteria.

1.7 Acceptance of Proposals

. . . Untimely proposals will be rejected as

unresponsive.

* * *

All responsive proposals timely submitted

will be evaluated. No proposed changes to

the terms and conditions set out in this RFP,

its appendices and any addenda will be

accepted and submission of a proposal which

purports to do so will make the proposal non-

responsive. The FDCF may waive minor

irregularities, but need not do so.

Where the FDCF waives minor irregularities,

such waiver shall in no way modify the RFP

requirements or excuse the proposer from full

compliance with the RFP specifications and

other contract requirements if the proposer

is awarded the contract.

* * *

The FDCF reserves the right to reject any or

all proposals, cancel the RFP, or waive minor

irregularities when to do so would be in the

best interest of the State of Florida. Minor

irregularities are those which will not, in

the opinion of the contact person, have

significant adverse effect on overall

competition, cost or performance.

2. Proposal Format

* * *

The proposal should be prepared concisely and

economically, providing a straightforward

description of services to be provided and

capabilities to satisfy the requirements of

this RFP. Emphasis should be on completeness

and clarity of content. In order to expedite

the evaluation of proposals, it is essential

that proposers follow the format and

instructions contained herein. For purposes

of this section, the terms "shall, will and

must" are intended to identify items that are

required to be submitted as part of the

proposal. Failure to comply with all such

requirements will result in the proposal

being rejected as non-responsive.

3.3 Tab ansmittal Letter

Each copy of the proposal must include a

transmittal letter in the form of a standard

business letter and must be signed by an

individual authorized to legally bind the

proposer. It shall include at a minimum:

* * *

2. A statement indicating that the proposer

and any proposed subcontractors are

corporations or other legal entities and that

each satisfied all licensing requirements of

state or federal law and that they are

authorized to do business within the State of

Florida. All subcontractors must be

identified.

3. A statement indicating the percentage of

work to be done by the proposer and by each

subcontractor as measured by the percentage

of total proposed price.

4. A statement identifying the proposer's

and any proposed subcontractor's federal tax

identification number(s).

3.12 Tab 11. Technical Proposal: Corporate

Qualifications

. . . This section must also identify and

describe the corporate capabilities of any

proposed subcontractors and must include

three (3) references for each subcontractor

including names, addresses, and telephone

numbers, and a description of the services

which are being provided. Subcontractors not

identified in the proposal will not be

permitted to perform any work under any

contract which results from the RFP.

4. Cost Proposed Format

The following information is intended to

provide proposers with instructions and a

format for submitting cost quotations. Cost

quotations must be submitted using the

provided pricing schedules. Responses that

do not provide cost proposals in the required

format will be rejected. Unless otherwise

noted, the costs quoted shall apply for the

entire term of the contact. Proposers are

encouraged to identify means to reduce the

cost of AFIS services in Florida. As part of

the cost proposal, proposers should identify

cost reduction factors, the rationale for

costs savings, and any options in service

that would produce such cost savings.

In order to assess FDCF options, proposers

are requested to submit AFIS system costs in

two ways—as a bundled price per add

transaction and as an unbundled price. The

selection of the contract pricing method—

either bundled or unbundled—shall be at the

sole discretion of the FDCF.

The FDCF will not make any corrections to

arithmetic or other errors in the cost

proposal. All numbers submitted will be

assumed by the FDCF to be accurate even if an

error appears likely. Proposers are

cautioned to assure the accuracy of any

amounts submitted because they will be held

to the amounts which appear in the cost

proposal throughout the term of any contract

which results from this RFP as well as any

extension or renewals of that contract.

5. The RFP provided blank pricing schedules in the required

format for submitting bundled and unbundled proposals. The RFP

required proposers to submit prices based on alternative bundled

and unbundled methods.

6. Under the first method, proposers were to provide one

lump sum price per record added to the AFIS database. An "add"

is the function by which a fingerprint image is programmed into

the computer and no match is found, indicating that fingerprint

is not already in the system. Under that method, the provider

was to be paid based on the number of fingerprints added to the

database. (Schedules 1A and 1B).

7. Under the second method, proposers were to provide a

price per add, a price per inquiry (when the system searches the

existing database), and prices for all hardware, broken down by

type of hardware. This is called unbundled pricing. (Schedules

2A and 2B).

8. As to unbundled pricing, the RFP specifically provided:

Proposers must also provide unbundled pricing

under the two communications network

assumptions. Unbundled pricing includes a

unit price per record added to the database,

a unit price per workstation, and a unit

price per printer. The cost of system

development, implementation and operations

must be reflected in the unit prices per add

or inquiry.

9. Schedule 3 applied to a POS Verification Study.

10. The RFP also required a way to resolve smudged print

identifications:

5.3.7. Identification Searching

c) Workstations must provide the capability

to launch identification search transactions

using selected client records with or without

minutiae editing.

11. The RFP also required proposers to submit a thumb print

option:

Option to Add Thumb Prints

. . . The department is also considering the

option of capturing and storing both thumb

prints, in addition to both index fingers,

for each applicant household member required

to comply. In order to help the department

assess this option, the proposer shall

provide an incremental price per record added

to the database. . . There is no guarantee

that the department will exercise the option

to capture and store thumb prints. However,

should the department decide to exercise this

option, the successful proposer's system must

be capable of supporting this option.

12. The proposer was to provide the incremental price to

capture and store thumb prints in Schedule 4.

13. The RFP required proposers to submit a technical

proposal and a separate sealed cost proposal.

14. The RFP contemplated FDCF doing a completeness review

against the "Fatal Criteria" provided in the RFP before the

agency technically evaluated the proposals. The RFP presumed

that those proposals which failed the completeness review would

not be technically evaluated. No points were to be assigned via

the completeness review. The RFP also contemplated that the cost

proposals would remain sealed unless, and until, a proposer had

passed the technical evaluation with at least 400 points.

15. The evaluation system set out in the RFP provided for

ranking proposals based on 600 possible points for the technical

proposals and 400 possible points for the cost proposals. Any

score less than 400 points on the technical proposal would mean

the proposer could not be evaluated for cost.

16. On March 23, 1998, the day of submittal, the technical

responses were opened by Jayne Paris. She was FDCF's Procurement

Manager and contact person for this RFP. In doing the

completeness review, Ms. Paris compared the technical proposals

with the Fatal Criteria checklist for completeness. She also

reviewed each proposer's Supplemental Proposal Sheet for

completeness and to be sure each proposer had promised compliance

with all RFP requirements. She also reviewed each proposer's

transmittal letter to be sure neither proposer intended to

deviate from the RFP requirements. This completeness review was

witnessed by Project Director, Connie Reinhardt, to assure the

integrity and accuracy of the process.

17. Although a consultant's checklist geared to federal

contract review of cost proposal compliance was in the contract

file which FDCF is required to maintain on every project, this

checklist was only a suggestion which FDCF had rejected and had

not included in the RFP. Ms. Paris did not apply it.

18. Both Morpho and Lockheed used conditional language in

their respective transmittal letters.

19. Morpho's transmittal letter stated, "In the event that

these stated requirements and assumptions are subsequently

altered by the issuing agency, or are proved [sic] to be invalid

due to actual experience, Sagem Morpho, Inc. reserves the right

to make appropriate modifications to its scheduling or pricing."

Lockheed asserts that by this language Morpho attempted to change

the terms of the RFP, condition Morpho's prices, and include

"pricing information" contrary to the RFP.

20. The RFP required that each proposer identify in its

transmittal letter all proposed subcontractors by name, corporate

status, eligibility through licensure for state projects, the

percentage of subcontract work each subcontractor would be doing,

and federal tax identification number, and also provide three

references for each contractor. It also provided that any

subcontractors not identified by the proposer could not work on

the contract. Lockheed's transmittal letter did not propose any

subcontractors. It merely stated that Lockheed anticipated the

need for a maintenance subcontractor beginning in June 1999,

approximately 13 months after the start of the contract, and that

Lockheed anticipated submitting a request for approval of a

subcontractor by March 1999. Lockheed stated as its reason for

the absence of subcontractor information that waiting until June

1999 would result in selection of a subcontractor that would

provide the service levels demanded by Lockheed and FDCF.

21. FDCF concedes that if a proposer intended to deviate

from the RFP requirements, i.e. if the transmittal letter created

a significant variance from the RFP specifications, that variance

would have rendered that proposal substantively unresponsive at

the completeness review, and no further evaluation of that

proposal should have taken place. (TR-133; Exhibits P-2; P-3;

DCF's PRO at page 7)

22. However, in her initial completeness review of the

respective proposals for the Fatal Criteria, signed management

summary material checklist, and transmittal letter, Ms. Paris, in

fact, only considered whether all necessary parts of each

proposer's response were included. The Fatal Criteria only

applied to the technical response. Ms. Paris deferred

consideration of the content or effect of each proposer's

"extraneous language" related in Findings of Fact 18-20 to the

subsequent technical and cost evaluations. Therefore, Lockheed

and Morpho were treated equally at the completeness review,

because neither was disqualified as non-responsive nor docked any

points on the basis of their respective transmittal letters.

23. Ms. Paris' reason for not finding the transmittal

letters unresponsive was apparently based at that stage on

Section 1.7 of the RFP, which would hold the proposer to the RFP

specifications despite waivers of irregularities.

24. The next day, March 24, 1998, Ms. Paris provided the

technical evaluation team with Sections I and III of an

Evaluation Manual, which included the introduction and the

substantive Evaluation Criteria Parts C-K. Ms. Paris also

conducted a training session during which she provided a briefing

on the evaluation process and instructions to the evaluation team

members.

25. The evaluation team was to evaluate only the technical

merit of each proposal. Sections II and IV of the Evaluation

Manual, which had been prepared for FDCF by outside consultants,

were removed before the manual was distributed to the evaluation

team on the basis that these sections were cost-related and the

technical evaluation team members, whose duties did not include

consideration of cost, were not to use them.

26. The technical evaluation team members individually and

independently evaluated the technical portion of each proposal

and scored each technical response using a scale of 0 to 4

points, as instructed in Part I of the Evaluation Manual. With

the exception of questions requiring a "yes" or "no" answer,

scores were assigned as follows:

0 = no value; proposer demonstrated no capability to satisfy

the Department's needs, ignored this area, or has so poorly

described the proposal for this criteria that understanding it is

not possible.

1 = poor; proposer demonstrated little or no direct

capability to satisfy the Department's needs, or has not covered

this area, but there is some indication of marginal capability.

2 = acceptable; proposer demonstrated adequate capability to

satisfy the department's needs

3 = good; proposer demonstrated more than just adequate

capability and good approach to satisfy the Department's needs.

4 = superior; proposer demo nstrated excellent capability and

an outstanding approach to satisfy the Department's needs.

This scoring concept comports with the RFP, pp 67-68.

27. A proposer had to receive a minimum score of 400

technical points before FDCF would open, review, and rank that

proposer's cost proposal. FDCF determined that both Petitioner

and Intervenor met this requirement. Morpho received 582.99

points out of a possible 600 points. Lockheed received 559.88

points.

28. Under the scoring system, neither the Fatal Criteria

nor the management summary were entitled to any points, so

neither proposer was scored any points on those bases during the

technical evaluation.

29. "Minutiae editing" is the process of correcting

misinformation details in an original fingerprint image which is

smudged. Under Section 5.3.7 of the RFP, the system's

workstations were required to have the capability to launch

identification searches of fingerprint images "with or without

minutiae editing." Morpho's system as proposed can launch a

search and find a match after minituae editing. Lockheed's

system could search, but its proposal candidly admitted that the

Lockheed system could not match prints after minutiae editing.

FDCF waived this technical problem with Lockheed's proposed

system as an "immaterial irregularity" because the RFP expressly

provided that proposers would be bound by the terms of the RFP.

30. The RFP required submittal of a thumb print option but

reserved the right of FDCF to unilaterally exercise the option.

Lockheed submitted Schedule 4, providing for the thumb print

identification option, quoting a cost of $0. However, Lockheed

conditioned that $0 quote on FDCF accepting Lockheed's proposal

at the time of the initial contract. Morpho did not submit any

Schedule 4, and Morpho's technical proposal shows this omission

was probably inadvertent. FDCF waived as "immaterial" Lockheed's

extraneous language conditioning the thumb print option in its

proposal and likewise waived Morpho's complete failure to submit

a Schedule 4 for the thumb print option pursuant to the RFP.

31. The optional thumb print function had no impact on

ultimate scoring of the respective proposals because no value was

assigned to it.

32. FDCF has taken the position that since the technical

evaluation team did not consider either proposal to be

technically "nonresponsive," then all flaws or omissions were

properly waived.

33. The cost proposals remained sealed until after the

technical proposals were scored by the technical evaluation team.

34. At formal hearing, FDCF personnel testified that it was

never FDCF's intent to enter into a contract for the thumb print

option at the time of the initial contract and that the thumb

print option was purely for future informational purposes.

35. The RFP used mandatory language to ensure that cost

proposals would be submitted in two ways -- a bundled price and

an unbundled price. The bundled and unbundled pricing schedules

were mutually exclusive, and the point system set up in the RFP

assigned equal weight to the scoring of the bundled and unbundled

price schedules. FDCF reserved the unilateral right to select

either bundled or unbundled pricing as its procurement method.

36. Cost proposals were to be scored using a formula which

compared each proposer's price to the lowest price proposal. Of

the 400 points possible for cost proposals, 195 points were

allocated by the RFP to the bundled pricing schedules (Schedules

1A and 1B), 195 points were allocated to the unbundled pricing

schedules (Schedules 2A and 2B), and 10 points were allocated to

the POS Verification Study (Schedule 3).

37. The RFP clearly indicated that both bundled and

unbundled prices were required to be submitted on the provided

Schedule format "in order to assess FDCF options."

38. FDCF did not decide until after scoring the cost

proposals and immediately before it was ready to post the Notice

of Intent to Award to Morpho, that it would elect to contract

based on the bundled cost proposals. Up until that moment, the

bundled and unbundled price schedules had some significance to

FDCF, if only for flexibility in procurement.

39. The RFP specified that FDCF would not own any of the

equipment (hardware) for which it was seeking single unit prices

in the unbundled schedules.

40. Nonetheless, on the unbundled pricing schedules

provided in the RFP, proposers were required to provide an

unbundled unit price per workstation and unit price per printer.

41. On Schedules 2A and 2B, "Unbundled Pricing," Morpho did

not provide an entry in dollars and cents for fraud workstation

printers or administrative workstation printers. Rather,

Morpho's schedule inserted in those spaces, "included in w/s

(workstation) price" or "included above."

42. Lockheed also had some extraneous language on one of

its schedules as opposed to just a dollar amount, but cost

breakout was clear.

43. Morpho considered the printers part of the imaging and

fraud investigation workstations because the RFP required a

dedicated printer for each workstation and the RFP specified FDCF

would not own or maintain any hardware.

44. Ms. Paris reviewed each cost proposal for compliance

with Section C of the RFP. She was concerned about whether

Morpho's "unbundled" schedules complied with the RFP.

45. The RFP defined waiveable "minor irregularities" as

"those which will not, in the opinion of the contact person, have

significant adverse effect on the overall competition, cost or

performance."

46. Upon advice of her supervisor, Connie Reinhardt, and

FDCF's General Counsel, Ms. Paris determined both proposals to be

responsive, and substituted a price of "zero" in the questionable

spaces on Morpho's "unbundled" schedules, despite the absence of

a pricing break-out between the fraud workstations and printers

or between the administrative workstations and printers on

Morpho's "unbundled" schedules.

47. Ms. Paris conceded that she was never referred to Rule

68-1.001(16) Florida Administrative Code, 1 which defines "minor

irregularity" in terms of effect on cost .

48. Ms. Paris was told that only items which had an effect

on the overall scores of the responding proposers' cost proposals

could not be waived.

49. The cost proposals were not evaluated and scored

subjectively as the technical proposals had been. No Fatal

Criteria applied to this third review phase. Scoring was to be

based on a purely mathematical formula devised prior to

distributing the RFP. The RFP drafters had contemplated ranking

the respective cost proposals by simply inserting the dollar

values each proposer placed on the unbundled unit price list into

a computer program.

50. Ms. Paris attempted to rank the cost proposals. To

assure the integrity of the process, Chris Haggard, Automation

Specialist, physically entered cost proposal figures into the

computer program. Ms. Paris instructed him to ignore any

"extraneous language" on the schedules of both proposers.

51. The computer program would not accept the "zeros"

inserted by FDCF.

52. Without any substitutions by Ms. Paris, Morpho had bid

"zero" in the space indicating there would be no charge for the

unbundled unit price per inquiry, thereby intending to signify

that there would be no charge for this function. The record does

not suggest that this proper use of "zero" had any effect on the

computer program.

53. Ms. Reinhardt viewed the problem with FDCF's imputed

zero components as a purely technical problem with the computer

program and not an "irregularity" under the RFP. The computer

program was adjusted to accommodate the imputed zeroes and

produce a spreadsheet.

54. On unbundled Item 14, FDCF ranked Morpho with a score

of one and Lockheed with 15, the maximum. On Item 15, the fraud

workstation color printer, Morpho was ranked 15 and Lockheed was

ranked zero. On Item 16, the administration workstation, Morpho

was ranked three; Lockheed was ranked 15. On Item 17, the

administration workstation printer, Morpho was ranked 15 and

Lockheed was ranked zero.

55. Pursuant to the adjusted spreadsheet, Morpho received a

score of 343 for its cost proposal, and Lockheed received a score

of 240. Even if Morpho had received zero points for the printers

and work stations (lines 14-17 of the Unbundled Schedules), and

if Lockheed had received the maximum number of points available

on these items, Morpho still would have received the higher score

for its cost proposal.

56. At the disputed fact hearing, FDCF gave as its

justification for imputing "zero" for bundling language in

Morpho's "unbundled" schedules the following reasoning: because

FDCF had requested unbundled prices purely for future contracts,

not the contract to arise out of this RFP, for informational

purposes, or for a cost benefit analysis for state budget

purposes; because the RFP specified that FDCF would neither own

nor maintain any of the hardware proposed for this RFP; because

Morpho's failure to conform to the unbundled price format was not

"irregular" if Morpho did not sell printers independently and

Morpho used the unbundled schedules in a manner consistent with

Morpho's offer; because the zero imputed by FDCF reflected

accurately the integrated costs in effect; because Morpho was not

charging separately for the printers; because FDCF's insertion of

"zero" constituted no unfair economic advantage to Morpho; and

finally, because having chosen the bundled option, FDCF believed

the Morpho proposal will save a great deal of money and

"represent the best value for the state." 2

57. The RFP specified that the successful proposer would be

responsible for the "cost of system development, implementation,

and operations" for the contract term as well as any extensions

and include that cost in either the unbundled unit price per

record added (per add) or the price per inquiry (per inquiry) in

Schedules 2A and 2B. There is no RFP requirement that the

maintenance portion be "unbundled" further. "Cost of . . .

operations" meant "cost of maintenance."

58. According to Richard Woodard, who was responsible for

the Morpho cost proposal, including Item 9, Morpho's price per

add of $6.70 on Schedule 2A included $.80 for maintenance.

59. However, at formal hearing, Lockheed elicited from

Ms. Paris testimony that even though Morpho had indicated that

maintenance was not included in its unbundled schedules, FDCF had

decided to hold Morpho to the prices shown in their per add or

per inquiry line item (TR-61), and that because of Morpho's own

extra schedule attached to the bottom of unbundled pricing

Schedule 2A, Morpho's maintenance price over 5 years could be

calculated on current maintenance prices. (TR-62) When the

prices are calculated mathematically over the life of the

contract they do not correspond to the $.80 per add testified to

by Mr. Woodard. 3

60. Morpho's maintenance cost schedule and the provisions

within Morpho's "Comments on Unbundled Pricing" indicated that

only 12 months of warranty were included with the equipment

identified in Morpho's unbundled pricing schedules and that after

12 months, maintenance contracts would be negotiated. FDCF

ignored this as "extraneous language," and did not consider it to

be a material irregularity.

61. The Morpho bundled cost proposal was calculated on an

average of 2.2 persons per file who would require finger imaging

and matching. Morpho asserted that these calculations had been

made on a "worst case scenario" based on RFP Addendum 3's

specification that

an actual number cannot be provided. It is expected

that less than 2.2 persons per case will be printed.

Lockheed selected a number less than 2.2 per file, and asserted

that Morpho's "worst case" scenario is, in effect, a "best case"

scenario because the higher the number of prints, the less Morpho

can afford to charge per add; that by selecting the 2.2, Morpho

has materially failed to comply with the RFP specification which

estimated less than 2.2 persons per file, and that because Morpho

also inserted the extraneous language in its transmittal letter

as set out in Finding of Fact 19, supra ., Morpho's proposal not

only varied the express terms of the RFP by the use of "2.2" but

also included "pricing information" in its transmittal letter and

conditioned its prices on the potentially false assumptions

stated or on a figure greater than a figure " less than 2.2," as

required by the RFP.

CONCLUSIONS OF LAW

62. The Division of Administrative Hearings has

jurisdiction over the parties and subject matter of this cause,

pursuant to Sections 120.57(1) and (3), Florida Statutes.

63. All parties have standing in this cause.

64. All time frames were met by the Petitioner.

65. The duty to go forward and prove its position by a

preponderance of the evidence is upon Petitioner Lockheed.

66. Section 120.57(3) provides, in pertinent part:

Unless otherwise provided by statute, the burden of

proof shall rest with the party protesting the proposed

agency action. In a competitive-procurement protest,

other than a rejection of all bids, the administrative

law judge shall conduct a de novo proceeding to

determine whether the agency's proposed action is

contrary to the agency's governing statutes, the

agency's rules or policies, or the bid or proposal

specifications. The standard of proof for such

proceedings shall be whether the proposed agency action

was clearly erroneous, contrary to competition,

arbitrary, or capricious.

69. An agency action is clearly "erroneous" if it results

from substantial procedural error or a clear misapplication of

the law or is contrary to the clear weight of the evidence.

Black's Law Dictionary 228 (5th Ed. 1979).

70. "A capricious action is one which is taken without

thought or reason or irrationally. An arbitrary decision is one

not supported by facts or logic, or despotic." Agrico Chemical

Co. v. State Department of Environmental Regulation , 365 So. 2d

759, 763 (Fla. 1st DCA 1978), cert. den, 376 So. 2d 74 (Fla.

1979).

71. "Contrary to competition" is best understood by its

plain and obvious meaning, i.e., against or in opposition to

competition. "The purpose of the competitive bidding process is

to secure fair competition on equal terms to all bidders by

affording an opportunity for an exact comparison of bids." Harry

Pepper and Associates, Inc. v. City of Cape Coral , 352 So. 2d

1190 (Fla. 2nd DCA 1977) (emphasis supplied).

72. Intervenor's Motion to Strike Paragraphs 60-69 of

Petitioner's Proposed Recommended Order was based on Morpho's

assertion that a) Lockheed's position statement in the Prehearing

Stipulation was expressly limited so as to remove from

consideration the issue of whether or not Morpho modified the

terms and conditions of the AFIS RFP and conditioned its prices

in its proposal, an issue clearly raised in the original

Petition; and that b) Lockheed did not present evidence on this

issue at formal hearing.

73. I conclude that this cause can only be resolved upon

evidence actually presented at formal hearing, but that if

evidence fits the category raised by Lockheed's protest of

Morpho's cost proposal's compliance "with the cost proposal

format requirements and other substantive requirements of the

RFP," then that evidence may be argued in the respective

proposals of fact and conclusions of law. Also, upon Finding of

Fact 1, supra , one would be hard put to say that a conditioned

cost proposal, if proven , is not an attack upon the cost proposal

itself. Likewise, the facts as found in Finding of Fact 1, as

well as the parties' opening statements at the disputed fact

hearing clearly demonstrate no unfair surprise to the Agency and

Intervenor Morpho by Lockheed's assertions in paragraphs 60-69 of

Lockheed's Proposed Recommended Order. The Motion to Strike is

denied.

74. However, I also conclude with regard to Paragraphs 60-

69 of Lockheed's Proposed Recommended Order, that Morpho's

interpretation of the RFP that it was free to base its

calculations of the potential number of adds upon "2.2 persons

per file" is at least as valid as Lockheed's decision to

calculate on less than 2.2 persons per add. (See Finding of Fact

61). The RFP's specification stated that "an actual number

cannot be provided. It is expected that less than 2.2 persons

per case will be printed," is only an estimation. By definition

and function, RFPs permit more fluidity of response than ITBs.

Lockheed's concern over Morpho's interpretation of FDCF's

estimate, in the face of FDCF's lack of concern, is akin to the

undersigned's wondering why Lockheed elected to compute much of

its proposal on a seven-year contract instead of a five-year

contract, a fact that was never explained at the disputed fact

hearing but a fact which FDCF apparently also found of no

consequence. Lockheed's protest on the isolated issue of "2.2"

is unnecessarily hypertechnical.

75. Throughout these proceedings, FDCF has taken the

position that any omissions or flaws of either proposer were

waiveable minor irregularities, and although the reasons FDCF

advanced for this view have varied, FDCF has been consistent that

its overriding reasons are because the RFP specified the AFIS

contract would be a fixed price contract and the proposers would

be held to the dollar amounts stated in the respective cost

proposals throughout the term of the contract, including any

extensions or renewals, none of the omissions or flaws of either

proposer represented a detriment to the State. Morpho, on the

other hand, asserted that its proposal's flaws, if any, were

properly waiveable minor irregularities, whereas the flaws Morpho

assigned to Lockheed's proposal were major, substantive,

nonwaiveable irregularities. Lockheed likewise asserted that

Lockheed's flaws, if any, were properly waiveable and Morpho's

flaws were nonwaiveable.

76. This case hangs on what the words "shall, will, and

must" mean in this particular RFP, what constitutes a material

deviation from the specifications of the RFP, and how waiver of

such terms affect cost and competitive bidding.

77. Courts favor an interpretation of bid contract

provisions using the plain meaning of the words. Quesada v.

Director, Federal Emergency Management Agency , 577 F.Supp. 695

(S.D. Fla. 1983), and Tropabest Foods, Inc. v. State, Department

of General Services , 493 So. 2d 50 (Fla. 1st DCA 1986). Common

sense suggests that a straight-forward analysis of bid language

is always best, but not every failure of a proposer to adhere to

"shall, will, and must" language is a fatal deviation. Some can

be corrected by adjusting the points awarded. See Amdahl Corp.

v. Dept. of Highway Safety and Motor Vehicles , DOAH Case No. 95-

5382BID (RO 1/29/96).

78. A variance is material only when it gives the bidder a

substantial advantage over other bidders and restricts or stifles

competition. See Tropabest Foods, Inc. v. State of Florida,

Department of General Services , supra . A bid containing a

material variance is unacceptable. The courts have applied two

criteria to determine whether a variance is substantial and hence

cannot be waived.

[F]irst, whether the affect of a waiver would be to

deprive the municipality of its assurance that the

contract would be entered into, performed and

guaranteed according to its specified requirements, and

second, whether it is of such a nature that its waiver

would adversely affect competitive bidding by placing a

bidder in a position of advantage over other bidders or

by otherwise undermining the necessary common standard

of competition.

See Robinson Electrical Company, Inc. v. Dade County , 417 So. 2d

1032, 1034 (Fla. 3d DCA 1982) and Harry Pepper and Associates,

Inc. vs. City of Cape Coral , supra .

79. If Morpho prevails, FDCF's waivers for Lockheed become

moot, but the chronology and accumulation of waivers for both

responding proposers matters for assessing the affect of agency

action on the competitive bid process.

80. Morpho's general conditional language in its

transmittal letter is boilerplate language which is commonly used

to provide a hedge on future contract negotiations. In a flat-

price contract such isolated language by itself has no ability to

change the terms of the RFP or relate significant cost or pricing

data, and FDCF was not arbitrary in letting it pass.

81. FDCF's failure to immediately rule Lockheed's proposal

materially unresponsive on the basis of its transmittal letter's

omission of subcontractor information mandated by the RFP was

clearly erroneous and contrary to competition. The omission

constituted a material deviation. Had other potential proposers

known FDCF would waive this RFP requirement, they might have

submitted proposals. Any bidder might prefer to wait to qualify

its subcontractors until after getting the bid award. See North

Florida Construction v. Pro-Steel Builders, Inc. , DOAH Case No.

94-2353BID (RO 6/13/94; FO 9/12/94). Requiring subcontractors

and their eligibility to be in effect on the date proposals are

opened ensures competitive bidding objectives are met and

prevents unscrupulous persons from manipulating the process to

their own advantage. Waiving this vital requirement gave

Lockheed an unfair cost advantage over Morpho and otherwise was

not in the best interests of the State because the RFP

requirement had conceivably eliminated potential bidders who

could have competed had there been no such requirement in the

RFP. E.M. Watkins & Co. v. Board of Regents , 414 So. 2d 583

(Fla. 1st DCA 1982). More dangerous to the State's interest,

however, would be if Lockheed were to be awarded the bid and then

unable to perform because the RFP also banned undisclosed

contractors. See also City of Opa Locka vustees of the

Plumbing Industry Promotion Fund , 193 So. 2d 29 (Fla. 3d DCA

1996).

82. FDCF's failure to rule materially unresponsive

Lockheed's inability to match prints after minutiae editing and a

search was clearly erroneous. It also gave Lockheed an advantage

over Morpho because Morpho had incurred costs in developing a

workable system and had complied with the mandatory technical

language of this RFP requirement. It is disingenuous to suggest

the RFP did not specify that FDCF wanted this part of the total

system to work. Waiving this mandatory RFP requirement was

contrary to competition because in effect, it altered the RFP

requirements after proposal submission. There is no telling how

many proposers FDCF might have had for its RFP if potential

proposers had known in advance that FDCF would throw out this

mandatory requirement.

83. Lockheed's language conditioning the time for

implementing its thumb print option is a minor irregularity in

the same way as Morpho's transmittal letter language. However,

even though the technical thumb print option offered by Morpho

would work, Morpho failed to submit Schedule 4 permitting a cost

analysis. Because Schedule 4 was not ranked for either

responding proposer, Morpho and FDCF have argued that waiving the

mandatory language to submit an option constituted waiving only a

minor irregularity. Morpho's failure to submit Schedule 4 here

is not akin to the situation in Overstreet Paving v. Department

of Transportation , 608 So. 2d 851 (Fla. 2d DCA 1992), where a

proposer's submitted document was lost after bid opening by the

Agency and there was affirmative evidence that no competitive

advantage accrued from submitting the document. Herein, we have

a classic case of an incomplete proposal due to the proposer's

inadvertence to include a required schedule. The situation is

not solveable in the Amdahl mode since it deals with a mandatory

requirement and neither responding proposer was ranked.

84. Waiving the mandatory RFP requirement to submit a thumb

print option, even though the RFP reserved to the Agency the

unilateral right to not exercise that option, amounted to

rejecting all bids and chills competitive bidding because there

is no way for potential bidders to guess which RFP requirements

are "really" mandatory.

85. An agency abuses its discretion when that agency does

not use the standards contained in the invitation to bid or

request for proposal in evaluating the various submittals, and

the agency's decision would be arbitrary and capricious under

those circumstances. Aurora Pump Division of General Signal

Company v. Gould Pumps, Inc. , 424 So. 2d 70 (Fla. 1st DCA 1982);

Eccelstron Properties Ltd. v. HRS , 11 FALR at 1184, 1195 (1989);

Wharton Investment Group, Inc. vs. HRS , 12 FALR 5001, 5008

(1990). Using improper award factors, incorrect weighting of

criteria, and erroneous or inaccurate information in its

evaluation also constitutes arbitrary and capricious action by

FDCF. Dr. D.C. Courtney v. HRS , 12 FALR 2226 (1988).

86. Here, FDCF suggests that since it did not really want

the thumb print option anyway, it was free to waive that

mandatory requirement after the proposals were opened, but that

position is contrary to competitive bidding, and true competitive

bidding is always in the State's best interest and "represents

the best value for the State.

87. Let there may be no misapprehension concerning the

foregoing conclusions with regard to FDCF's waiver of the

mandatory thumb print option requirements. Agencies are able to

draft RFPs in order to legitimately accomplish what was done in

this case. Agencies that know they do not want a possible option

at the present time, can a) omit that requirement from their RFP,

or b) include the option in their RFP using permissive, rather

than mandatory, language and provide for

optional/bonus/additional points in the RFP ranking system for

proposers who choose to offer such a function, or c) include the

option in the RFP in mandatory language, and if no proposals are

made, then eliminate the option from the RFP and reissue it

without the option. Any of these time-honored methods would

encourage competitive bidding and all are reasonable for agencies

to pursue, but waiver of mandatory requirements after opening of

proposals is neither fair nor reasonable.

88. FDCF's solution of correcting omissions in Morpho's

unbundled schedules should not be encouraged. The competitive

bid process will fail if vendors believe that agencies are free

to unilaterally change the dollar value on line items in

proposals after opening.

89. The required schedules, specific RFP instructions, and

the problems with the original computer program which arose from

FDCF's substitution of zero on Morpho's behalf clearly show that

the drafters intended the RFP to compare bundled and unbundled

prices. However, since no decision to use the bundled price was

made until after the rankings, and since removal of any

adjustments FDCF made to Morpho's unbundled schedules would not

alter Morpho's rank as apparent low bidder, the Amdahl solution

of removing any altered points scored by Morpho is reasonable

except for the discouraging message it sends to potential

proposers and the problem with maintenance costs.

90. Morpho's extra maintenance cost schedule and

conditional language with regard to offering only initial 12

month warranties and subsequent negotiation of maintenance

contracts constitute material irregularities in Morpho's

proposal, but they are material irregularities which would be of

no real world consequence except for the mathematical

contradictions resulting therefrom. The mathematical

contradictions constitute a "significant inconsistency" within

Morpho's proposal, which confuse what bottom-line price Morpho

actually is offering. Such a "significant inconsistency" by the

terms of the RFP, is fatal to Morpho's proposal.

91. Whether the RFP standard (Finding of Fact 45) or Rule

16A-1.001(16)'s definition (Finding of Fact 47) is applied, the

test of materiality in RFP compliance is not just whether the

proposers' scores are affected but whether the cost to the Agency

is affected by a proposal's irregularities.

92. Accordingly, the only two proposals FDCF received were

each materially and substantively nonresponsive in one or more

respects. In individual instances as related above, and by the

cumulative effect of so many waivers for both responding

proposers, FDCF's handling of this proposal evaluation, while

consciencious and innovative, has been contrary to competition.

RECOMMENDATION

Upon the foregoing findings of fact and conclusions of law,

it is

RECOMMENDED that the Florida Department of Children and

Family Services enter a final order rejecting all proposals.

DONE AND ENTERED this 21st day of December, 1998, in

Tallahassee, Leon County, Florida.

___________________________________

ELLA JANE P. DAVIS

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 Hearin gs

this 21st day of December, 1998.

ENDNOTES

1 / Rule 68-1.001(16), Florida Administrative Code is not

contained in the RFP but applies to all competitive procurements

under Chapter 283, Florida Statutes. It defines "minor

irregularity" as

a variation from the ITB/RFP terms and conditions which

does not affect the price of the bid proposal or give

the bidder or offeror an advantage or benefit not

enjoyed by other bidders or offerors or does not

adversely impact the interest of the Agency

2 / Because FDCF has determined to exercise the option of

"bundled" pricing, as defined by the spreadsheet, the cost for

the system, if it is awarded to Morpho, will be less than one-

half of the cost of the system if awarded to Lockheed and a 121%

difference in overall cost offer exists, and that difference will

remain constant regardless of the numbers of transactions the

system performs.

3 / If FDCF's adjusted spreadsheet is to be believed, the

difference between the cost proposed by Lockheed under the

bundled option is 121% more than the cost proposed by Morpho, and

under that option, the difference would remain constant if

bundled prices are selected. However, under the terms of the

RFP, FDCF should have been able to compare the two options

adequately before making its choice "to bundle or not to

unbundle." The mathematical discrepancies pointed out by

Lockheed constitute a material flaw in Morpho's proposal that

affects Morpho's "bottom line."

COPIES FURNISHED:

William E. Williams, Esquire

Huey, Guilday & Tucker, P.A.

Post Office Box 1794

Tallahassee, Florida 32302

William F. Frieder, Esquire

Melease Jackson, Esquire

Department of Children and

Family Services

Building 2, Room 204

1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

Mary M. Piccard, Esquire

Vezina, Lawrence & Piscitelli, P.A.

319 North Calhoun Street

Tallahassee, Florida 32301

Gregory D. Venz, Agency Clerk

Department of Children

and Family Services

Building 2, Room 204

1317 Winewood Boulevard

Tallahassee, Florida 32399-0700

Richard A. Doran, General Counsel

Department of Children

and Family Services

Building 2, Room 204

1317 Winewood Boulevard

Tallahassee, Florida 32399-0700

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 10

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

this Recommended Order should be filed with the agency that will

issue the final order in this case.