A DIFFERENT POINT OF VIEW: Bid Protests from the Vendor’s Perspective

1. 14th Annual Florida Government Purchasing Conference September 14, 2006 Karen D. Walker, Partner Holland & Knight LLP 315 S. Calhoun St., Suite 600 Tallahassee, Florida 32312 (850) 425-5612 karen.walker@hklaw.com A DIFFERENT POINT OF VIEW: Bid Protests from the Vendor’s Perspective

2. Introduction to the Vendor’s Perspective • Nobody likes bid protests (including vendors). • Bid protests are expensive. • Vendors know they have a high burden of proof in a bid protest. • Vendors want their customers to like them. • Vendors typically don't like uncertainty.

3. If Nobody Likes Protests, Why Do We Have Them? • Money is a big factor. • Protection of market share. • Vendor moving into new line of business. • Vendor feels that competition was unfair. • Vendor believes the competitor can't do the job.

4. Three Types of Protests • Protest of Specifications. • Protest of Rejection of All Bids. • Protest of Intended Award.

5. What Does a Vendor Do When It Receives the Specifications? • Technical staff conducts review of the technical requirements. • In-house legal staff (and possibly outside counsel) reviews the proposed contract terms and conditions. • Vendor considers possible teaming or subcontracting relationships. • Decision is made whether or not to respond to the solicitation. • Decision is made whether or not there is anything in the specifications that warrant a protest of the specifications. • Vendor begins developing questions for bidder's conference and/or the question and answer period of the procurement.

6. Why Most Vendors Don’t Protest the Specifications • Vendors don't want to irritate the procuring entity. • Vendors anticipate that many issues with the specifications can be addressed through the question and answer period. • Protest bond is steep and it is difficult to justify incurring significant expense early on in the process. • Vendors don't know or don't understand that if they don't timely protest the specifications they waive their right to complain about the specifications later. • The end result of a successful protest of the specifications is amended specifications – there is no guarantee that the vendor will be awarded the contract.

7. Why Some Vendors Do Protest the Specifications • The specifications make it impossible for the vendor to submit a responsive bid, proposal or reply. • The vendor believes the specifications are written to benefit a particular competitor. • The vendor believes that the specifications do not provide for a level playing field. • The specifications are so vague or confusing that the vendor believes it does not have the information it needs to formulate a response. • The vendor can't live with the proposed contract terms and conditions. • Vendors know that almost all specification protests are resolved through settlement prior to hearing.

8. Standard of Proof for Specifications Protest Whether the proposed agency action is clearly erroneous, contrary to competition, arbitrary or capricious. • Florida courts have defined an arbitrary action as "one not supported by facts or logic, or despotic." A capricious action is one "which is taken without thought or reason or irrationally." Agrico Chem. Co. v. Department of Envtl. Regulation, 365 So. 2d 759 (Fla. 1st DCA 1978).

9. To succeed in a specification protest, Florida courts have indicated that the bidder must show that: • The specifications are so vague that bidders cannot formulate an accurate bid; or • That the specifications are so unreasonable that they are either impossible to comply with or too expensive to do so and to be competitive. Advocacy Ctr. for Persons With Disabilities, Inc. v. Dep't of Children & Family Servs., 721 So. 2d 753 (Fla. 1st DCA 1998).

10. Examples of Recent Protests to Specifications Hadi v. Liberty Behavioral Health Corporation, 927 So. 2d 34 (Fla. 1st DCA 2006). Challenge to specifications in a RFP by the incumbent operator of a sexually violent predator facility. Challenged specifications required potential vendors to realize a substantial portion of their annual revenues from managing American Correctional Association ("ACA") accredited private correctional facilities, and that the sexually violent predator facility be designed to meet the ACA prison standards for security. DCF conducted an informal administrative hearing and upheld the specifications as drafted. The First DCA affirmed finding that DCF's decision to include the challenged RFP specifications was rational and supported by logic and reason even if the specifications may preclude the protesting vendor from bidding.

11. Miami-Dade County School Board v. School Food Service Systems, Inc., DOAH Case No. 05-4571BID, 2006 WL 352220 (Fla. Div. Admin. Hrgs. Feb. 13, 2006). Challenge to specifications in ITB for dry cereal. Challenged specifications: (1) requiring a manufacturer to offer at least eight varieties of cereal that meet Nutritional Standards, and (2) specifying certain approved brands. ALJ found that there was a rational basis for the Board selecting a specified number of flavors that met Nutritional Standards. ALJ concluded that the ITB was not intended to mean that the approved brands specifically identified in the specifications were the only responsive brands. However, the ALJ noted that if the specifications did require certain brand name cereals to be responsive, the specifications might violate federal procurement standards as restrictive of competition.

12. Example of a Successful Specifications Protest Bay Point Schools, Inc. v. Department of Juvenile Justice, DOAH Case No. 05-1540BID, 2005 WL 2477499 (Fla. Div. Admin. Hrgs. Oct. 4, 2005). Challenge to RFP for an 88-slot conditional release program. Protest alleged that provisions in RFP vested unbridled discretion in the agency allowing it to apply hidden conditions and arbitrarily award the contract. ALJ found that RFP did not comply with legislative directives requiring success criterion based on recidivism. For the same reason, the ALJ found that the RFP was contrary to competition. ALJ found that the RFP was clearly erroneous, contrary to competition, arbitrary, and capricious by delegating the scoring of the financial responsibility section of the RFP to Dun & Bradstreet pursuant to an undisclosed formula and undisclosed weighting of factors.

13. Tips for Avoiding Specification Protests • Design specifications to promote maximum competition. • Do not design specifications to favor one prospective vendor or a limited group of prospective vendors. • Clearly describe the product and/or services being procured so that prospective vendors can formulate bids. • Clearly describe evaluation and scoring criteria including factors that will be evaluated and weight that will be applied to the factors. • Include language in specifications putting prospective vendors on notice that specification protests must be filed within a certain period of time or the right to challenge specifications is waived. • Include a question and answer period in the procurement process.

14. Protests to Rejection of All Bids • Vendors rarely protest a rejection of all bids because they are very difficult, and almost impossible, to win. Standard of review is higher than in other protests. The protesting vendor must show that the agency's intended decision to reject all bids is illegal, arbitrary, dishonest or fraudulent. § 120.57(3)(f), Fla. Stat. (2005); Department of Transportation v. Groves-Watkins Constructors, 530 So. 2d 912 (Fla. 1988). Case law recognizes that agencies are afforded wide discretion to reject all bids. See Gulf Real Properties, Inc. v. Department of Health and Rehabilitative Services, 687 So. 2d 1336 (Fla.1st DCA 1997) (rejection of all bids must stand unless protestor shows that the purpose or effect of the rejection of all bids is to defeat the object and integrity of competitive bidding).

15. Legislative Update Relating to Rejection of All Bids HB 1369 – In a procurement involving the rejection of all bids, proposals or replies in which the agency concurrently notices its intent to reprocure (and in the case of an ITN reissues an ITN within 90 days), the rejected bids, proposals or replies remain exempt from the Public Records Act until: (1) the agency provides notice of a decision or intended decision concerning the reissued solicitation, or (2) the agency withdraws the reissued solicitation. For this exemption to apply with respect to ITBs or RFPs, it appears that the rejection of all bids must occur prior to 10 days after bid or proposal opening when the bids or proposals will otherwise become public record.

16. Tips for Avoiding a Protest for Rejection of All Bids • Expressly reserve the right to reject all bids in the solicitation document. • In notice of intent to reject all bids, concurrently indicate the agency's intent to reprocure if that is the agency's intent at the time of the rejection. • Don't reject all bids in order to subsequently attempt a sole source or other non-competitive procurement of the products or services that were the subject of the procurement for which bids were rejected.

17. Protests of Intended Awards

18. What Does the Winning Vendor Do When the Intent to Award a Contract is Posted? • Celebrate (understanding that award is not final until protest period runs). • Wait to determine if a protest will be filed challenging the intended award. • Line up legal counsel if vendor anticipates the intended award will be challenged. • File a public records request. • Begin gearing up to perform the contract unless a protest seems imminent.

19. What Does a Losing Vendor Do When a Notice of Intent to Award a Contract is Posted? • Retain legal counsel if the vendor has not done so already. • File a public records request. • Conduct a technical review of the winning vendor's bid or proposal to determine possible grounds for protest. • Conduct a legal review of the winning vendor's bid, proposal, or reply to determine possible grounds for protest. • Review procuring entity's documents in determining possible grounds for protest. • Follow company procedures for decision-making relating to whether or not the vendor will file a protest. - Note: This may take some time and notice of intent to protest may be filed before this decision is made in order to preserve rights. • Line up the required bid protest bond (assuming decision is to file a protest).

20. Standard of Proof for Protest to Intended Award Whether the proposed agency action is clearly erroneous, contrary to competition, arbitrary or capricious. §120.57(3)(f), Fla. Stat. (2005). Legislative Update: HB 755 – Different standard of proof for protests to Department of the Lottery procurements. Standard for all competitive procurement protests involving the Department of the Lottery is now whether the intended agency action is "illegal, arbitrary, dishonest, or fraudulent."

21. To succeed in a protest of an intended award, the protesting bidder must show that the procuring agency's proposed action is contrary to: • the agency's governing statutes, • the agency's rules or policies, or • the solicitation specifications. § 120.57(3)(f), Fla. Stat. (2005).

22. Possible Grounds for Protest of an Intended Contract Award

23. Responsiveness of Winning Vendor's Response to the Solicitation A responsive bid, proposal or reply is "a bid, or proposal, or reply submitted by a responsive and responsible vendor that conforms in all material respects to the solicitation." § 287.012(25), Fla. Stat. (2005). In evaluating possible protest grounds based on responsiveness, a vendor will look to see if there were material deviations in the winning vendor's response to the solicitation. Agencies can waive minor irregularities, but cannot waive material deviations. A minor irregularity is an irregularity which does not: • affect the price of the bid; • give the bidder an advantage or benefit not enjoyed by other bidders; or • adversely impact the interests of the procuring agency. Intercontinental Properties, Inc. v. Department of Health and Rehabilitative Services, 606 So. 2d 380 (Fla. 3d DCA 1992).

24. Tips for Avoiding a Protest Based on Responsiveness • If you have mandatory criteria, make sure they are truly mandatory. • Review each proposal against all criteria in the solicitation. • Do not waive any irregularity that affects price. • When in doubt, seek legal advice regarding whether an irregularity is minor or material.

25. Responsibility of the Winning Vendor A responsible vendor is "a vendor who has the capability in all respects to fully perform the contract requirements and the integrity and reliability that will assure good faith performance." § 287.012(24), Fla. Stat. (2005). Things that may render a vendor not responsible: • Financial inability to perform the contract. • Ethics or integrity issues. • Terminations for default on other government contracts. • Debarment by other governmental entities.

26. Tips for Avoiding a Protest Based on Responsibility • Ask for financial information from bidders as part of the specifications and review the information submitted. • Include specifications that require representations from bidders regarding terminations for default on government contracts and debarment proceedings. • Establish a process during the procurement for determination of responsibility.

27. Scoring of Proposals or Replies Vendors typically know that it is very difficult to prevail at a bid protest hearing when the protest is essentially a request that the proposals/replies be re-scored. SeeSouth Fla. Limousines, Inc. v. Broward County Aviation Dep't, 512 So. 2d 1059, 1062 (Fla. 4th DCA 1987) (a judge will not substitute his or her judgment for that of a public agency when it exercises its discretion in a procurement in good faith). Examples of scoring issues raised in protests: • Evaluators not technically qualified. • Procuring agency did not follow procedures in solicitation. • Procuring agency used criteria to evaluate proposals/replies in addition to, or other than, the criteria set forth in the solicitation. • Evaluators did not correctly apply the scoring scale. • Mathematical errors in tabulation of scoring. • Bias reflected in scoring.

28. Tips for Avoiding a Protest Based on Scoring Issues • Use evaluators with the knowledge and experience needed to fully and accurately evaluate proposals or replies. • Use only evaluators who will be impartial. • Ensure that solicitation includes all scoring and evaluation criteria that will be used. • Train evaluators on scoring and evaluation criteria. • Ensure that evaluators follow the scoring and evaluation criteria in the solicitation. • Use evaluation and scoring criteria that provide for flexibility. • Use a scoring scale that is large enough to ensure that scoring is fair and accurate. • Have more than one person tabulate scores and confirm that math is accurate. • Ensure that all evaluators sign conflict of interest forms. • Avoid having staff direct the evaluation and scoring by the evaluators, particularly if there is the possibility for an argument that the staff member may not be impartial.

29. Appearance of Impropriety Several recent DOAH decisions suggest that actual bias or favoritism need not be shown, but that proof of an appearance of impropriety may be sufficient to overturn an intended contract award. Compass Environmental, Inc. v. Department of Environmental Protection, DOAH Case No. 05-0007BID, 2005 WL 678870 (Fla. Div. Admin. Hrgs. March 21, 2005) (Recommended Order found that there was an appearance of impropriety where an evaluator had a professional relationship with a proposed subcontractor) (recommendation not adopted by agency in Final Order). Transportation Management Services of Broward, Inc. v. Commission for the Transportation Disadvantaged, Case No. 05-0920BID, 2005 WL 1210021 (Fla. Div. Admin. Hrgs. May 20, 2005) (appearance of impropriety where evaluator had on-going business, personal and professional relationship with the principal of a proposed subcontractor).

30. Tips for Avoiding a Protest Based on Appearance of Impropriety • Require all evaluators to complete a conflict of interest form. • Establish a procedure for evaluators to reveal any conflict or potential appearance of impropriety that develops in the course of an evaluation. • Remove anyone with a conflict or potential appearance of impropriety from the process.

31. Ex Parte Communications Legislative Update: SB 2518: All solicitations under Chapter 287 must now include the following provision: "Respondents to this solicitation or persons acting on their behalf may not contact, between the release of the solicitation and the end of the 72-hour period following the agency posting the notice of intended award, excluding Saturdays, Sundays and state holidays, any employee or officer of the executive or legislative branch concerning any aspect of this solicitation, except in writing to the procurement officer or as provided in the solicitation documents. Violation of this provision may be grounds for rejecting a response."

32. Tips for Avoiding a Protest Based on Ex Parte Communications • Include language now required by SB 2518 in all solicitations. • Enforce requirement that all communications regarding the procurement be conducted through the sole point of contact. • Train staff and any Board members on ex parte communication policy applicable to the procurement. • Ensure staff other than the sole point of contact do not engage in e-mail communications with prospective vendors regarding a procurement after the solicitation is issued.

33. Sunshine Law Violations Open questions as to whether DOAH has jurisdiction to address Sunshine Law issues. Clearly, action for violation of the Sunshine Law can be brought in circuit court. If the protesting vendor is successful in a Sunshine Law claim, the result is that the procuring agency's action taken out of the sunshine is void. • Meetings of procurement evaluation committees are subject to the Sunshine Law. Silver Express Co. v. District Bd. of Lower Tribunal Trustees, 691 So. 2d 1099 (Fla. 3d DCA 1997). • The Sunshine Law might apply to a procurement evaluation committee even if a meeting is never held. Leach-Wells v. City of Bradenton, 734 So. 2d 1168 (Fla. 2d DCA 1999). • Oral presentations to an evaluation committee must be open to the public and officials from the procuring agency cannot suggest that bidders not attend presentations by competing bidders. Port Everglades Authority v. International Longshoremen’s Ass’n Local1922-I, 652 So. 2d 1169 (Fla. 4th DCA 1995).

34. Sunshine Law Legislative Update HB 1369: A meeting at which a negotiation with a vendor is conducted in an ITN is exempt from the Sunshine Law. A complete recording must be made of the meeting. The recording remains exempt from the Public Records Act until the agency posts a notice of decision or intended decision or 20 days after the final competitive sealed replies are opened.

35. What Protesting Vendors Look for in Determining If There was a Sunshine Law Violation • Were all meetings of the procurement evaluation committee publicly noticed? • Were all meetings of the procurement evaluation committee open to the public? • Are there minutes of all meetings of the procurement evaluation committee? • Were there communications between members of the procurement evaluation committee outside of a public meeting?

36. Tips for Avoiding a Sunshine Law Claim • Train evaluators and agency personnel on the Sunshine Law. • Publicly notice all meetings of any procurement evaluation committee. • Do not hold any meetings of any procurement evaluation committee that are not public meetings (except negotiations in ITNs). • Record minutes of each meeting of a procurement evaluation committee. • Ensure there is no e-mail traffic among procurement evaluation committee members or Board members relating to the procurement.

37. Discovery in a Bid Protest from the Protesting Vendor's Perspective • Records will be obtained through public records request instead of Request for Production of Documents. • Initial interrogatories and/or requests for admissions will be served shortly after the ALJ issues his or her procedural order. • Expect the sole point of contact for the procurement and all members of any evaluation committee or negotiation committee to be deposed. Protesting vendor may also depose a corporate representative of the procuring agency. • Corporate representative of winning vendor will typically be deposed.

38. Discovery in a Bid Protest from the Winning Vendor's Perspective • Winning vendor's role is to support agency and its decision. • Winning vendor will want to coordinate discovery with procuring agency. • Joint defense agreements cannot be absolute because of Public Records Act. • Winning vendor will typically seek to limit information being discovered.

39. The Bid Protest Hearing from the Protesting Vendor's Perspective If the protesting vendor has endured the cost of discovery, the protesting vendor likely will not spare any expense at the administrative hearing. Because the protesting vendor has the burden of proof, the protesting vendor will frame the issues and evidence for hearing.

40. The Bid Protest Hearing from the Winning Vendor's Perspective Winning vendor will be reacting to case presented by protesting vendor. Stipulated exhibits are helpful to the winning vendor. Winning vendor will want its case to be consistent with that presented by the procuring agency.

41. Questions?