Case Name: GROVES-WATKINS CONSTRUCTORS, Appellant, v. STATE of Florida, DEPARTMENT OF TRANSPORTATION, Appellee
Court: Florida District Court of Appeal
Jurisdiction: Florida
Decision Date: 1987-06-11
Citations: 511 So. 2d 323
Docket Number: No. BR-163
Parties: GROVES-WATKINS CONSTRUCTORS, Appellant, v. STATE of Florida, DEPARTMENT OF TRANSPORTATION, Appellee.
Judges: BOOTH, C.J., concurs.
Reporter: Southern Reporter, Second Series
Volume: 511
Pages: 323–336

Head Matter:
GROVES-WATKINS CONSTRUCTORS, Appellant, v. STATE of Florida, DEPARTMENT OF TRANSPORTATION, Appellee.
No. BR-163.
District Court of Appeal of Florida, First District.
June 11, 1987.
On motion for Rehearing Aug. 4, 1987.
David S. Dee of Carlton, Fields, Ward, Emmanuel, Smith, Cutler & Kent, P.A., Tallahassee, for appellant.
Robert I. Scanlan, Deputy General Counsel, Dept, of Transp., Tallahassee, for ap-pellee.

Opinion:
SMITH, Judge.
We must determine in this contract bid dispute whether the original low bidder on a highway construction project is entitled to award of a contract for the project where the Department of Transportation, after receipt of the initial bids, rejected all bids as excessive and directed that the project be rebid. An administrative hearing officer assigned to hear the case found that the original low bidder, appellant, was entitled to award of the contract; but the department in its final order declined to adopt the decision of the hearing officer, and denied the award. We reverse.
Appellant, Groves-Watkins Constructors (G-W), contends that the Department of Transportation (DOT) erred in two respects in dismissing its administrative bid protest. First, G-W contends that DOT violated section 120.57(l)(b)9, Florida Statutes (1985), by reweighing the evidence, rejecting the hearing officer's findings of fact, and substituting its own findings of fact even though the hearing officer's findings are supported by competent, substantial evidence in the record. Next, G-W contends that DOT committed reversible error when it based its decision to dismiss G-W's bid protest on new legal and factual issues raised by DOT for the first time in its final order.
G-W is a joint venture comprised of two large corporations which joined together for the purpose of bidding on certain DOT projects, among them "Package U", at issue in this case. Package U involves the construction of a complex highway interchange in Broward County which includes a substantial amount of embankment and many bridges, six of which will be built with pre-cast concrete segments. Three joint ventures bid on Project U, and G-W's bid of $54,472,335.15 was the lowest.
DOT's non-rule policy dictates that, for projects valued at more than $250,000, a contract will be automatically awarded if the lowest bid is no more than seven percent (7%) above DOT's estimate of the project's value. If the lowest bid is more than seven percent (7%) above the DOT estimate, the bidding process is reviewed by DOT, and DOT may or may not award the contract, depending on the circumstances. In this case, DOT's bid estimate for Package U was approximately $41.5 million, making G-W's bid twenty-nine percent (29%) over the bid estimate. When DOT notified G-W of its intent to reject G-W's bid because it was too high and more than seven percent above DOT's estimate, G-W filed a formal bid protest, contending that DOT's bid estimate was arbitrarily and unreasonably low. G-W petitioned for and was granted a formal administrative hearing. Thereafter, the hearing officer entered a comprehensive recommended order setting forth extensive findings of fact substantially establishing the correctness of G-W's contentions, and concluding that G-W was entitled to award of the contract. DOT rejected these findings and conclusions and denied the relief sought by G-W. This appeal followed.
The parties agree that there are three items which accounted for most of the discrepancy between DOT's estimate and GW's bid: (1) the embankment material; (2) the pre-cast concrete bridge segments; and (3) mobilization costs. These discrepancies, in the aggregate, amount to approximately $12.2 million, and account for approximately 95% of the difference between G-W's bid and DOT's estimate.
At the outset, the hearing officer found that G-W has a substantial amount of experience in performing the work involved in Project U and has unique experience in the design, construction, estimating and bidding involving segmented, precast concrete bridges. By contrast, the hearing officer found that DOT had very little experience with segmented bridge construction, especially with regard to the complex-curved segmented bridge construction involved in Package U.
The hearing officer found that G-W arrived at its bid on the embankment fill by using historical data and site-specific data, which was acquired by personally contacting suppliers and subcontractors in the surrounding area of the job site and which was verified only one to two days before the bid submittal. In contrast, the hearing officer found that in arriving at its bid estimate, DOT used historical cost data which involved noncomparable projects, and site-specific data which was outdated. The hearing officer noted that the bids received for embankment on a project known as Package M, a substantially identical interchange located fifteen miles from Package U, were higher than G-W's bid for embankment in Project U, thus corroborating G-W's showing that its embankment bid on Package U was a reasonable one, and based upon the most current market prices, and further, that DOT's estimate was based on out-of-date, not entirely comparable cost information, and is inaccurate. Based on the evidence presented the hearing officer found that DOT underestimated the embankment material costs by $6,000,-000.
Next, the hearing officer accepted the expert testimony of Richard Kelly, the executive vice president of Groves, that on a scale of 1 to 10, the bridgework on Package U would rate at least a "9" in difficulty of execution. DOT arrived at its estimate for the bridge segment portion of this project after retrieving historical price data from its computer concerning other Florida bridge construction projects such as the Sunshine Skyway Bridge and the bridges in the Florida Keys. However, the hearing officer found that these bridges did not present difficulties in construction comparable to the bridges in Package U, in that they were built over water, under conditions of light traffic, and were relatively straight bridges as opposed to the curved bridge surfaces in Project U. On the other hand, G-W's bid price for bridge segments was based on actual quotes from local ma-terialman, suppliers and subcontractors and these quotes were evaluated in light of the historical data and experience that G-W has accumulated in working on other segmental bridge projects. G-W based its price for the bridge segments on: (1) the cost of manufacturing the segments, including labor and equipment; (2) the cost of storing and transporting segments once they were cast; (3) the cost of erecting, grouting, and posttensioning the segments; and (4) the cost involved in subcontracting the painting and finishing work on the bridge surfaces after the segments were erected. The hearing officer found that:
The use of these four factors in Groves' arriving at its price for the segmental portion of the project was thus demonstrated to be reasonable and appropriate. DOT did not challenge the propriety of including these four factors in the estimate of the direct cost for the bridge work and offered no evidence suggesting that the costs assigned to these four elements were inappropriate.
He also found:
The evidence does not clearly reveal the specific manner in which DOT formulated its estimate for the bridge segment portion of this project other than its reliance upon historical pricing information for other bridge-interchange construction projects. That reliance on historical price data, or at least the data relied upon was shown to be inappropriate for the bridge construction involved in this proceeding. Package U involves a complex segmental bridge which is a unique type of construction and design and of which there are few comparable examples thus far in Florida_ The complexities of casting and erecting so many differently configured segments [in Package U] causes substantial increase in manufacturing costs and erection time and difficulty, all of which renders the project substantially more expensive and significantly dissimilar to those projects relied upon by the Department for its historic cost and price examples.
The hearing officer found in his recommended order that DOT had underestimated the precast bridge segment portion of the job by about $5,000,000.
For comparison purposes, the hearing officer received and considered evidence not ing that DOT had grossly underestimated the cost of Package M, which was the only other project identified at the hearing that involved complex, segmental bridge construction. At the first bid letting for Package M, DOT received only one bid, that of G-W, which was approximately $20 million over DOT's estimate of approximately $41 million. DOT rejected G-W's bid, and again solicited bids after raising its estimate to $50 million. Seven bids were received on rebidding, but the lowest bidder was still more than $10 million over DOT's estimate. Although the lowest bid was more than twenty percent above DOT's estimate, DOT awarded the contract in that case. The hearing officer found that:
[DOT's] problems with Package M corroborate the remainder of [G-W's] proof, in showing that the Department erred in estimating the cost of Package U involved herein and relied upon historical price information not shown to be applicable to the unique, complex project like the instant one.
Finally, the hearing officer found, and DOT does not dispute, that DOT's estimate of mobilization costs did not include the costs for the pre-casting yard in the amount of $1.2 million.
The hearing officer summarized the evidence as follows:
[I]t has been established that DOT underestimated the value of Package U in the following manner: (1) embankment was underestimated by about $6,000,000. (2) The pre-cast bridge segment portion of the job was underestimated by about $5,000,000. (3) The cost of mobilization was underestimated by at least $1.2 million. Therefore, the total DOT estimate of a reasonable and appropriate price for this project is at least $12.2 million too low. If the Department's estimate of $41.5 to $42.4 million was corrected by adding this $12.2 million, then the total revised estimate for Package U would be $53.7 to $54.6 million. Groves bid $54.4 million which bid would be no more than 1.3 percent higher than DOT's thus corrected estimate. If the DOT corrected estimate were a total of $54.6 million, it would actually be 3/10 of a percent higher than Groves' bid. Obviously, if the "seven percent policy" of the Department were applied to that corrected estimate, the Department would be required to reward the contract to Groves.
The hearing officer concluded his findings of fact thusly:
The Department offered no evidence in support of its rejection of the bid except for its erroneous analysis of the difference between the bid price and its original estimate. It did not introduce any proof to establish that a rebid of the package would result in more competition between bidders or significantly lower bid price. Since there is no evidence that such an advantage would occur if the project were rebid, a decision to rebid the project instead of award it to the lowest bidder of three qualified bidders would be an unfounded and arbitrary decision. If the Department rebid the package, the Petitioner would have to spend an additional $40,000 to $150,000 to prepare for the new bid and the Petitioner would also suffer a detriment as a result because its competitors would have some advantage in knowing Groves' best prices on the elements of the project. Additionally, Groves would be required to keep its employees, equipment, and bonding capacity committed to this project on reserve while the rebidding process was accomplished, thus diminishing its ability to successfully bid on other projects until a decision was made on the rebidding. It has thus been established that the Department's original estimate was flawed and unreasonable in the circumstances and that that bid submitted by Groves was a responsive, reasonable bid and, without dispute, is the lowest bid submitted.
The hearing officer concluded that DOT had acted arbitrarily and capriciously in rejecting the bid on the basis of its seven percent policy since its estimate was shown to be fatally flawed, and recommended that DOT award the contract to G-W.
In its final order, DOT accepted the hearing officer's findings of fact in part and rejected them in part, and rejected his conclusions of law. Based on substituted findings of fact and conclusions of law, DOT dismissed G-W's bid protest and ordered that Package U be readvertised as soon as possible.
We find after a thorough review of the record below that there was competent, substantial evidence to support the hearing officer's findings of fact and that DOT erred in rejecting those findings of fact and substituting its own findings on the issues presented. As this court has stated:
Factual issues susceptible of ordinary methods of proof that are not infused with policy considerations are the prerogative of the hearing officer as the finder of fact. McDonald v. Department of Banking & Finance, 346 So.2d 569 (Fla. 1st DCA 1977). It is the hearing officer's function to consider all of the evidence presented, resolve conflicts, judge credibility of witnesses, draw permissible inferences from the evidence, and reach ultimate findings of fact based on competent, substantial evidence. State Beverage Department v. Ernal, Inc., 115 So.2d 566 (Fla. 3d DCA 1959). If, as is often the case, the evidence presented supports two inconsistent findings, it is the hearing officer's role to decide the issue one way or the other. The agency may not reject the hearing officer's finding unless there is no competent, substantial evidence from which the finding could reasonably be inferred. The agency is not authorized to weigh the evidence presented, judge credibility of witnesses, or otherwise interpret the evidence to fit its desired ultimate conclusion.
Heifetz v. Department of Business Regulations, 475 So.2d 1277, 1281 (Fla. 1st DCA 1985). Accord, Howard Johnson Co. v. Kilpatrick, 501 So.2d 59, 60 (Fla. 1st DCA 1987); and Tuveson v. Florida Governor's Council on Indian Affairs, Inc., 495 So.2d 790 (Fla. 1st DCA 1986).
DOT has failed to demonstrate that the factual issues in this case are matters of opinion which are infused with policy considerations within the abmit of its expertise. Compare Hammond v. Department of Transportation, 493 So.2d 33, 35 (Fla. 1st DCA 1986). DOT did not claim special expertise in arriving at prices for embankment material or pre-cast concrete bridge segments. In fact, in its final order, DOT recognizes that contractors submitting the low bid will, in one sense, always have the best and most current cost information since they have the beneficial position of bargaining with subcontractors and receiving up to the minute price quotes. Since the determination of this case does not involve factual issues infused with policy considerations, the general rule — that the hearing officer's findings of fact must prevail if supported by competent, substantial evidence — must be applied.
DOT has failed to demonstrate that the hearing officer's findings of fact are not supported by competent, substantial evidence. Instead, DOT maintains that its decision may not be overturned unless it is proven that its decision was made as the result of fraud, corruption, or unfair dealing. Willis v. Hathaway, 95 Fla. 608, 117 So. 89 (1928). DOT argues that even if this court believes that DOT'S exercise of discretion was erroneous, it cannot overturn DOT'S final order since it was based on an honest exercise of discretion, citing Liberty County v. Baxter's Asphalt & Concrete, Inc., 421 So.2d 505, 507 (Fla.1982).
While it is true that DOT has wide discretion in awarding contracts to responsible bidders, it still cannot act arbitrarily and capriciously when deciding whether to award a contract. Willis v. Hathaway, 117 So. at 95. Baxter's Asphalt & Concrete, Inc. v. Department of Transportation, 475 So.2d 1284, 1286-7 (Fla. 1st DCA 1985); Capeletti Brothers, Inc. v. State Department of General Services, 432 So.2d 1359, 1363 (Fla. 1st DCA 1983); and Wood-Hopkins Contracting Co. v. Roger J. Au & Son, Inc., 354 So.2d 446 (Fla. 1st DCA 1978). DOT recognized in its final order that its discretion cannot be exercised arbitrarily or capriciously. Accordingly, DOT does not have unbridled discretion to reject any and all bids with or without cause, Wood-Hopkins, 354 So.2d at 450, and we do not accept DOT's contention that G-W was required to prove fraud, corruption, or unfair dealing to overturn DOT's decision.
DOT's reliance on the Liberty County case for the proposition that it may reject G-W's bid so long as it exercises its discretion honestly is misplaced. The issue in Liberty County was whether the county could waive a minor defect when awarding a contract. Moreover, Liberty County dealt with a dispute arising prior to adoption of section 120.53(5), Florida Statutes (1981), a statute specifically designed to provide a process for resolution of bidding controversies in the administrative arena. The issue in this case is whether DOT can reject G-W's bid after the hearing officer assigned to conduct a de novo administrative hearing pursuant to the applicable statute finds, based upon competent, substantial evidence in the record, that DOT's decision to reject G-W's bid was arbitrary and capricious, and was not based upon facts which reasonably support the conclusion to reject G-W's bid. Here, unlike the Liberty County case, DOT's challenged decision (rejection of all bids and denial of award to G-W), never became final agency action until after completion of the administrative hearing and entry of a final order by DOT. Here again, as we pointed out in Capeletti, 432 So.2d 1359, a party (this time DOT) has misconceived the purpose of a section 120.57 hearing. "As we have previously held, APA hearing requirements are designed to give affected parties an opportunity to change the agency's mind." Id. at 1363.
DOT relies heavily upon Charles Harney, Inc. v. Durkee, 107 Cal.App.2d 570, 237 P.2d 561, 31 A.L.R.2d 457 (Cal.Dist.Ct. App.1951). DOT fails, however, to note that the California case did not involve the use of a statutorily-mandated bidding dispute resolution procedure such as we deal with in the present case. The California case was an action "by writ of mandate," seeking to compel the award of a public contract to the low bidder. The appellate court reversed the trial court's determination that the highway department's action in rejecting all bids was subject to correction by the court, because, the appellate court found, even assuming the department's actions to be controllable by the courts for an abuse of discretion, on the record before it there was "no abuse of discretion." The Durkee case therefore not only does not support DOT's argument that it has unbridled discretion to reject all bids; the case actually has no precedential significance with respect to the issues before us because of the differences in the litigational posture of the two cases. Indeed, in Florida, we might add, a litigant seeking relief on the same basis as did the Harney Company in Durkee would be doomed to failure at the outset, since to obtain relief by writ of mandamus the act sought to be compelled must be one ministerial in character, not one requiring the exercise of discretion. City of Miami Beach v. Mr. Samuels, Inc., 351 So.2d 719 (Fla.1977).
To adopt DOT's argument in this case would make DOT virtually immune from Chapter 120 processes. Section 120.-57(1)(b)9, Florida Statutes (1985), mandates that an agency accept the factual determinations of a hearing officer unless those findings of fact are not based upon competent, substantial evidence. Heifetz, 475 So.2d at 1281. G-W introduced competent, substantial evidence, which the hearing officer relied upon, that its low bid was a responsive, reasonable bid, and that DOT's estimate was erroneously arrived at and unreasonable. In response, DOT simply introduced evidence that it arrived at its estimate by retrieving historical data concerning other projects from its computer. Even though faced with evidence that this historical data did not accurately reflect the cost for this particular project, since the data retrieved by DOT involved dissimilar projects which did not have the degree of complexity that Package U had, DOT failed to present evidence which rebutted the evidence presented by G-W. Further, DOT failed to introduce evidence which explained the discrepancy between its estimate and G-W's bid.
In its final order, DOT introduced factual and legal issues not raised at the administrative hearing, in an attempt to support its contention that it had correctly refused G-W's bid. In its order DOT raises for the first time the necessity for concurrence by the federal highway administration in all contract awards, cites the absence of proof that such concurrence had been given to G-W's bid, and contends that without such concurrence the state will suffer the loss of some $37-$49 million in federal aid for this project. The record is devoid of evidentiary support for the factual assertions made by DOT in reaching this conclusion, and DOT also failed to raise this legal argument before the hearing officer in defense of its rejection of the bid. As stated earlier, the only evidence offered by DOT in support of its rejection of the bid was the difference between the bid price and DOT's estimate. Accordingly, we agree with G-W's contention that DOT's reliance on this untimely asserted reason for rejecting G-W's bid violates procedural due process and Chapter 120, Florida Statutes, and must be disregarded. Thorn v. Florida Real Estate Commission, 146 So.2d 907 (Fla. 2d DCA 1962); see also § 120.57(1), 120.57(1)(b)2.d., and 120.-57(1)(b)4., Florida Statutes.
Finally, we take issue with representations contained in the dissenting opinion with respect to budgetary constraints, changed conditions, or the effect of redesigning or alteration of the project by DOT as offering additional defenses for DOT's rejection of all bids. None of these matters were asserted in defense below, and did not appear from any evidence offered or presented to the hearing officer. Furthermore, there is nothing in the record before us in this case to substantiate the dissenting opinion's reference to actions taken by DOT on rebidding of the project, or the results of those actions. We can and do assume, in the absence of evidence to the contrary, as to which there is none, that G-W, as the initial low-bidder on this project, is as well or better situated than any other contractor to respond to changed conditions which might effect a savings of cost on the project; and we have before us no legal or factual basis for rendering a judgment that any beneficial changes could not just as easily have been made within the framework of the contract that should have been awarded to G-W.
For the reasons expressed, we reverse and remand with directions that DOT award the contract on Project U to G-W.
REVERSED.
BOOTH, C.J., concurs.
ERVIN, J., dissents with Opinion.