Couch Const. Co., Inc. v. Department of Transp.

• Decision Date: 16 June 1978
• Docket Number: No. II-314,II-314
• Parties: COUCH CONSTRUCTION COMPANY, INC., Petitioner, v. DEPARTMENT OF TRANSPORTATION, State of Florida, Respondent, and White Construction Company, Inc., Intervenor.
• Court: Florida District Court of Appeals

Page 172

361 So.2d 172

COUCH CONSTRUCTION COMPANY, INC., Petitioner, v. DEPARTMENT OF TRANSPORTATION, State of Florida, Respondent and White Construction Company, Inc., Intervenor.

No. II-314.

District Court of Appeal of Florida, First District.

June 16, 1978.

As Amended on Denial of Rehearing June 26, 1978.

Robert R. Feagin, III, F. Alan Cummings and John Radey of Holland & Knight, Tallahassee, for petitioner.

H. Reynolds Sampson, Tallahassee, for respondent.

John S. Rawls and Elaine N. Duggar, Tallahassee, for intervenor.

SMITH, Judge.

Couch Construction Company, Inc., petitions for review of a final order entered by the Department of Transportation in a proceeding determining the substantial interests of Couch and respondent White Construction Company, Inc. Sections 120.57(1), .68, Florida Statutes (1977). The order concerns the award of a contract for paving, in Gadsden County, the last uncompleted link of Interstate Highway 10 between Jacksonville and the Alabama line beyond Pensacola.

The agency's order, entered April 25, 1978, adopted without elaboration the recommended order of a hearing officer of the Division of Administrative Hearings (DOAH) and thereby finally rejected all bids submitted by contractors on December 21, 1977, including the apparent low bid of petitioner Couch. In January 1978, while Couch contested the Department's preliminary decision to reject all December bids, the Department readvertised for and received new bids. On rebidding White was the apparent low bidder and the Department preliminarily determined to contract with White. Today's decision in a companion case, Fla.App., 361 So.2d 184 No. KK-100, disposes of the issues arising as a result of the rebidding process. Both the rebidding process and our decision in the companion case are predicated on the assumption that the Department's order rejecting all bids was not arbitrary and was entered in accordance with Chapter 120.

On November 24, 1977, the Department published its advertisement for bids on the Gadsden paving work, stating in part:

NOTE: A PRE-BID CONFERENCE ON THIS PROJECT WILL BE HELD ON WEDNESDAY, DECEMBER 14, 1977, AT 10:00 A. M. IN ROOM 301 OF THE HAYDON BURNS BUILDING, 605 SUWANEE STREET, TALLAHASSEE, FLORIDA. ALL POTENTIAL BIDDERS WILL BE REQUIRED TO ATTEND.

White attended the pre-bid conference and, on December 21, submitted a sealed bid of slightly more than $1.5 million. Couch neglected to attend the pre-bid conference but submitted a bid of slightly more than.$1.4 million. A third contractor submitted the highest bid after also failing to attend the pre-bid conference.

When White and another bidder protested Couch's apparent low bid on the ground that Couch had not attended the required pre-bid conference, the Department officials informally designated the "awards committee" ¹ considered alternative recommendations to Secretary Webb, the Department head. Section 20.23(1), Florida Statutes (1977). Their deliberations are described in the findings of fact later made by the DOAH hearing officer, as incorporated in the Department's final order entered April 25, 1978:

Awards Committee members Brown, Bill Ekey, Peter J. White and Willis Armstrong met on December 21 and 22, 1977. In reaching a determination as to their recommendation to the Secretary, the committee members considered three alternatives awarding the contract to Couch as the apparent low bidder, awarding the contract to White as the next lowest bidder and as the only bidder who attended the pre-bid conference or rejecting all bids received and readvertising for new bids. Each alternative was considered a viable one by the committee members. Although the members felt that the requirement of attendance at a prebid conference was a reasonable requirement due to the uniqueness of the project, no inquiry was made as to what actually transpired at the conference. Nor was any inquiry made as to a reason for petitioner's (Couch's) nonattendance.

It was the unanimous decision of those Committee members present that it would best serve the interests of the State to reject all bids and proceed to readvertise. This decision to recommend rejection and readvertisement was based upon several reasons. The prime consideration was that this project involved the last remaining unopen link in Interstate Highway 10 and time was of the essence. It was felt that if the contract were awarded to Couch or to White, there would be litigation causing delay to the completion of Interstate 10. The Committee members were also concerned with the significant amount of difference between the bids of Couch and White. Rejecting all bids appeared to the Committee members to be the "cleaner" way to go. Mr. Brown testified that the D.O.T. does not generally accept the bid where only one bid is received. Here the apparent low bidder and the highest bidder were considered irregular for failure to attend the prebid conference. Thus, the Department was left with only one bid.

Through Mr. Brown, Secretary Thomas Webb, Jr., was telephonically notified of the recommendation of the Awards Committee. Mr. Webb concurred with the Committee's recommendation because he was concerned with a possible delay to the project due to litigation were the bid to be awarded to either Couch or to White.

The Department's determination to reject all bids was communicated to those affected. Rightly considering that its substantial interests were affected by the determination, Couch regularly filed an administrative complaint ² with the Department, requesting Section 120.57 proceedings on the issue of whether the Department should take final action rejecting all the December bids. The Secretary, doubtlessly considering that request as initiating the litigation which the Department sought to avoid by the action challenged, denied Couch's request for a hearing. Couch petitioned for review of that denial, and on February 24, 1978, we ordered that the Department provide the hearing which it had improperly denied. Those proceedings led eventually to the Department's final order of April 25, 1978.

We affirm that the Department has wide discretion to reject all bids and to call for new bids for public contracts. Section 337.11(3), Florida Statutes (1977); Willis v. Hathaway, 95 Fla. 608, 117 So. 89 (Fla.1928); Berry v. Okaloosa County, 334 So.2d 349 (Fla. 1st DCA 1976); Wood-Hopkins Contracting Co. v. Roger J. Au & Son, Inc., 354 So.2d 446 (Fla. 1st DCA 1978). In making such a determination, the Department cannot act arbitrarily. The Administrative Procedure Act requires that the Department's decision be by a final order that takes account of countervailing evidence and argument. When as here there are no rules which define the circumstances in which the Department will reject all bids and readvertise, the Department's order in Section 120.57 proceedings must provide visible proof that the Department is proceeding rationally within the bounds of its discretion and not arbitrarily. In McDonald v. Department of Banking & Finance, 346 So.2d 569 (Fla. 1st DCA 1977), we pointed to the legislative history:

"Three due process checks to prevent arbitrary agency action are the requirements that reasons be stated for all action taken or omitted, that reasons be supported by 'the record', and that specific judicial review procedures allow the courts to remedy defects of substance." (346 So.2d at 584.)

And we held:

Failure by the agency to expose and elucidate its reasons for discretionary action will, on judicial review, result in the relief authorized by Section 120.68(13): an order requiring or setting aside agency action, remanding the case for further proceedings or deciding the case, otherwise redressing the effects of official action wrongfully taken or withheld, or providing interlocutory relief. (346 So.2d at 584.)

The recommended order of the DOAH hearing officer, dated April 24, 1978, and the Department's final order adopting it April 25, 1978, are inadequate by Chapter 120 standards. Neither order takes account of significant changes in circumstances since the Department's preliminary decision to reject all bids. In December the Department thought to avoid controversy and delay by rejecting all bids. Appeasement and expediency are rarely fruitful as government policies, and they were not in this case; the Department obviously and erroneously assumed that the bids could be rejected without accountability under Chapter 120. So, acting without affording Couch at least an immediate Section 120.57(2) hearing, and consequently without an order expounding the agency's exercise of discretion in the light of events as then understood by the agency, the Department created an opportunity for subsequent events to reveal the folly of rejecting all bids to avoid controversy and litigation.

A final agency order in proceedings which are concerned principally with agency policy must explain the reasons for exercising agency discretion in the chosen way. The order must take account of countervailing evidence and argument. As we said in McDonald, APA hearing requirements are designed to give affected parties an opportunity to change the agency's mind. That being so, the agency's final order must defend its decision on the basis of what it knows at the time the order is entered.

In this case the Department knew, on April 25, 1978, that in January the Department had discontinued all mandatory pre-bid conferences. The Department knew that its failure to provide Couch at least a prompt Section 120.57(2) hearing in December had resulted in the very litigation and delay which its preliminary decision sought to avoid. These and other factors not known to, or considered by the Department Head, at the time he rejected all bids, came to light afterwards, such as the apparent lack of substance to the December conference and the facts as to how the mandatory attendance requirement came to be included in the advertisement for bids...