State Contracting and Engineering Corp. v. Department of Transp.

• Citation: 709 So.2d 607
• Decision Date: 09 April 1998
• Docket Number: No. 97-1768,97-1768
• Parties: 23 Fla. L. Weekly D942 STATE CONTRACTING AND ENGINEERING CORPORATION, Appellant, v. DEPARTMENT OF TRANSPORTATION and Gilbert Southern Corporation, Appellees.
• Court: Court of Appeal of Florida (US)

Page 607

709 So.2d 607

23 Fla. L. Weekly D942

STATE CONTRACTING AND ENGINEERING CORPORATION, Appellant, v. DEPARTMENT OF TRANSPORTATION and Gilbert Southern Corporation, Appellees.

No. 97-1768.

District Court of Appeal of Florida First District.

April 9, 1998.

Brant Hargrove, Tallahassee, for Appellant.

Pamela S. Leslie, General Counsel and Vance W. Kidder of the State of Florida, Department of Transportation, Tallahassee, for Appellees.

PADOVANO, Judge.

The appellant, State Contracting and Engineering Corporation, challenges a final order of the Department of Transportation approving the acceptance of a competitive bid by Gilbert Southern Corporation, for construction work on a state road project. The Department held that Gilbert's bid complied with its requirements for subcontract work by disadvantaged business enterprises. Although the Department rejected a recommended order to the contrary, the final decision was based on an interpretation of an agency rule and not on displaced findings of fact. We conclude that the Department interpreted the rule correctly, and, therefore, we affirm.

In the summer of 1996, the Department solicited bids for the replacement of toll booths on State Road 93, commonly known as Alligator Alley. As with other construction projects, the Department established a goal for participation by disadvantaged business enterprises. For this project, the bids were to include at least four percent participation by African-American subcontractors and at least eight percent by female subcontractors. State Contracting and Gilbert each submitted timely bids matching these required percentages. Other qualified contractors submitted bids, as well. Gilbert's bid was the lowest, at $9,153,215.07, and State Contracting's bid was the second lowest at $9,566,051.25. When the parties completed the submission of their bid documents, the Department announced that it was awarding the contract to Gilbert.

State Contracting filed a formal bid protest on October 2, 1996, contending that Gilbert's disadvantaged business enterprise (DBE) forms failed to meet the minimum requirements set by the agency. Based on the alleged deficiency in the bid forms, State Contracting argued that Gilbert's bid was nonresponsive and that it should have been rejected. The dispute was referred to the Division of Administrative Hearings, and eventually Gilbert was allowed to participate in the proceeding as an intervenor.

The central issue addressed in the hearing was the proper application of rule 14-78, Florida Administrative Code, entitled "Participation by Socially and Economically Disadvantaged Individuals in Department of Transportation Contracts." State Contracting argued that Gilbert did not deserve full credit for the work it had attributed to disadvantaged subcontractors, because some of those subcontractors would be purchasing material and labor from non-qualifying sources. The ultimate point of this argument is that Gilbert's bid did not truly reflect the proper allocation of work to disadvantaged enterprises.

In contrast, the Department maintained that Gilbert's bid was responsive because the DBE Utilization Forms submitted in support of the bid were facially sufficient to meet all of the requirements of the rule. Kenneth Sweet, a specialist in the Department's minority affairs office, testified that the purpose of the DBE Utilization Forms is "to have the contractor commit to a DBE for an amount of money in a general category of work." He explained that the Department considers only the sufficiency of the bid documents at the time of the award, and that the contractor's ability to meet the applicable bid percentages is a compliance issue. Failure to meet the terms of the bid can result in a financial penalty or a loss of the contract, but those issues are not addressed initially when the bid is accepted.

The administrative law judge determined that Gilbert could not meet the required level of participation by disadvantaged business enterprises as represented in its bid forms. The judge concluded that the Department's interpretation of rule 14-78 was incorrect, and held that the accuracy of representations in the bid forms could be challenged in a formal bid protest proceeding. Because the evidence showed that some of Gilbert's disadvantaged subcontractors would be obtaining labor and materials from non-qualifying sources, Gilbert was not entitled to full credit for the participation by those subcontractors. When reduced according to this principle, Gilbert's bid fell below the minimum level of participation by disadvantaged business enterprises. Hence, the administrative law judge concluded that the bid should have been rejected.

The Department disagreed with the administrative law judge's conclusions of law in the recommended order and rejected them completely. Instead, the Department found that Gilbert's bid was responsive and therefore was properly accepted, because the DBE Utilization Forms submitted in support of the bid were sufficient to meet all of the requirements of rule 14-78. The Department concluded that the administrative law judge had failed to show that the Department's interpretation of the rule was clearly erroneous, and that the judge had exceeded the scope of his authority in the de novo proceeding by substituting his interpretation of the rule for the agency's interpretation.

A bid protest before a state agency is governed by the Administrative Procedure Act. Section 120.57(3), Florida Statutes, (Supp.1996) provides that if a bid protest involves a disputed issue of material fact, the agency shall refer the matter to the Division of Administrative Hearings. ¹ The administrative law judge must then conduct a de novo hearing on the protest. See § 120.57(3)(f), Fla.Stat. (Supp.1996). In this context, the phrase "de novo hearing" is used to describe a form of intra-agency review. The judge may receive evidence, as with any formal hearing under section 120.57(1), but the object of the proceeding is to evaluate the action taken by the agency. See Intercontinental Properties, Inc. v. State Department of Health and Rehabilitative Services, 606 So.2d 380 (Fla. 3d DCA 1992) (interpreting the phrase "de novo hearing" as it was used in bid protest proceedings before the 1996 revision of the Administrative Procedure Act).

The burden is on the party protesting the award of the bid to establish a ground...