Bid Protests Under the Administrative Procedure Act: The Standard of Review, the Protest Hearing, and Further Review
The touchstone of our democracy is federalism with powers within the government separated horizontally and vertically. The purpose of such separation is to ensure that each branch of government, both at the federal and state levels, functions efficiently without becoming too powerful. That stated, the Administrative Procedure Act (APA) was adopted in Florida in 1961, and codified in F.S. Ch. 120, to serve this principle of separation of power.
With the APA in effect, Florida citizens are equipped with the ability to interact with public agencies in their decision-making processes and challenge their decisions should they act arbitrarily or capriciously. Conversely, public agencies are empowered with rule-making authority so long as they act in accord with the procedures provided for by F.S. §120.54.1
In the context of bid protests, as addressed in this article, the APA oversees procedures for which purchasing contracts for goods or services may be solicited, evaluated, awarded, and protested. This article presents and analyzes the current procedures for bid protests under the APA or similar local procedures for protests that follow its most important aspects.
Governing Laws and Jurisdiction
Public agencies have no common law duty to offer competitive bidding for every purchase of goods or services.2 Competitive bidding is statutorily mandated for the protection of the public, not only by ensuring fair costs, but also by protecting against collusion, favoritism, and fraud in the award of public contracts.3 In Florida, the four main statutes that govern competitive bidding are 112.08, Ch. 255, Ch. 287, and Ch. 120, where the APA is codified. Section 112.08 covers the purchase of group insurance for public officers, employees, and certain volunteers. Chapter 255 provides the procurement process for public construction works. It also provides for a scenario in which proposals are unsolicited by a public agency.4 Part I of Ch. 287 governs procurement of personal property and services. Section 287.055, also referred to as Consultants’ Competitive Negotiation Act, covers professional services. Regarding Ch. 120, it is important to note that municipalities are not automatically bound by the APA, but they may adopt relevant parts under their own ordinances and codes.
Section 287.001 reflects the legislative intent that maintaining fair and open competition in public procurement through the use of competitive solicitations is essential for the effective and ethical procurement of commodities and contractual services.5 Section 287.001 states that, to accomplish this objective, part I of Ch. 287 provides a system of uniform procedures to be used by state agencies in managing and procuring their commodities and contractual services, requires that detailed justification of an agency’s decisions in those procurements be maintained, and requires adherence by the agency and the vendor to specific ethical considerations.6 Per 287.057, a competitive solicitation process must be used for the procurement of commodities or contractual services in excess of the threshold amount set forth in 287.017(2), which is currently $35,000.
The three main competitive solicitation processes, as set out in 287.057, are 1) invitation to bid (ITB); 2) request for proposals (RFP); and 3) invitation to negotiate (ITN). Each of these processes has its own criteria as defined within the same statutory provision. Public contracts of the state of Florida are also subject to Ch. 120, including 120.569(1), which governs “proceedings in which the substantial interests of a party are determined by an agency.” Additionally, 120.57(3) provides the specific procedures for protests to contract solicitations or awards. These procedures apply to state agencies and other organs of the state executive branch; while at the local level, cities and counties may adopt their own processes for bid protests.7
Under 120.569 and 120.57(1) and (3), the Division of Administrative Hearings (DOAH) has jurisdiction to hear procurement protests and issue recommended orders for the same. The DOAH conducts a de novo proceeding to decide whether a public agency acted “contrary to the agency’s governing statutes, the agency’s rules or policies, or the [procurement] specifications.”8 In such proceedings, deference is given to the agency’s decision.9 DOAH does not substitute its judgment for that of the agency.10
What Can Be Protested?
Parties to a competitive procurement process can protest the decision of a public agency regarding a solicitation (an ITB, RFP, or ITN), a recommendation for award, and a rejection of all bids, proposals, or replies.
The filing of a bid protest operates as a stay of the contract award process and prevents final agency action from being taken until after the protest proceeding is concluded.11 For example, in U.S. Service Industries-Florida v. State of Florida Dept. of Health and Rehabilitative Services, 385 So. 2d 1147 (Fla. 1st DCA 1980), the court held that the state agency was required to grant the losing bidder on a janitorial service contract an informal hearing on its protest that the award was improper, and that the agency’s action in awarding the contract prior to doing so was not final agency action. The only exception to the rule that the contract award process is stayed is when the agency head determines that, under the particular circumstances, continuing the contract award process is necessary to “avoid imminent and serious danger to the public health, safety, or welfare.”12
While a bidder has a right to protest an intended agency decision to reject all bids, no bidder has a statutory right to a contract award when the agency rejects all bids.13 Per Dep’t of Trans. v. Groves-Watkins Constructors, 530 So. 2d 912, 914 (Fla. 1988), there are various justifications for the rejection of all bids: the low bid may have exceeded the agency’s budgetary amount allotted for the project; the low bidder may have failed to demonstrate requisite concurrence with the agency’s requirements; or the agency may be seeking increased competition. The standard of review for rejection of all bids is deferential to the agency. A rejection of all bids for any rational reason is generally upheld. Only when the rejection of all bids is illegal, arbitrary, or capricious will the hearing officer impact that decision.14
Under 120.57(3)(f), the rejection of all bids is excepted from the de novo standard of review conducted by an administrative law judge.15 Therefore, the stringent Groves-Watkins standard has been codified by statute and remains applicable to a rejection of all bids.16 Under this standard, considerable latitude is afforded the agency that rejects all bids. The protestor carries a heavy burden to overturn such decision.
The closure of a solicitation process and the evaluation of the response submittals received affects “competition” because once bids are formally open, all bidders are made aware of the terms and any advantages of their competitors. The reason is that proposals become subject to public records disclosure at the time the agency provides notice of an intended decision or 30 days after opening proposals, whichever is earlier.17 However, when an agency rejects all proposals and concurrently provides notice of intent to reissue the solicitation, rejected proposals remain exempt from public records disclosure until the agency gives notice of its intended decision on the reissued solicitation or withdraws the reissued solicitation, for a period not to exceed 12 months from the agency’s original decision to reject all bids.18
Who Can Protest?
Per 120.57(3)(b), any person adversely affected by an agency decision, or intended decision, can protest by first filing a notice of protest within 72 hours after the decision, or intended decision. In addition to a notice of protest, a formal written protest must also be filed within 10 days.19
In Preston Carroll Co. v. Florida Keys Aqueduct Authority, 400 So. 2d 524 (Fla. 3d DCA 1981), the court held that only the second-ranked bidder may protest a recommended award. In this case, the Preston Carroll, an unsuccessful bidder for a water supply contract, challenged the Florida Keys Aqueduct Authority’s denial of its protest of the award of a contract to the successful bidder.The court held that, to contest the award of a public contract to an apparent low bidder, Preston Carroll was required to establish that it submitted the second lowest bid, not the third lowest, in order to establish it had a substantial interest to be determined by the agency.20
In Westinghouse Elec. Corp. v. Jacksonville Transportation Authority, 491 So. 2d 1238 (Fla. 1st DCA 1986), nonbidder Westinghouse Electric Corporation submitted a protest against the Jacksonville Transportation Authority and the successful bidder, which actually submitted a proposal. In this case, the court held that a party must have a substantial interest that is determinable by the agency responsible for the public proposal in order to have standing to protest the lowest bid, and that Westinghouse lacked such standing as a nonbidder. Similarly, in Fort Howard Co. v. State of Florida Department of Management Services, 624 So. 2d 783 (Fla. 1st DCA 1993), the court held that a nonbidder, who was listed as a supplier in proposals submitted by two unsuccessful bidders, lacked standing to file a bid protest concerning an ITB for paper products.
far one of the most important Florida cases concerning public procurement is City of Miami Beach v. Klinger, 179 So. 2d 864 (Fla. 3d DCA 1965). In this case, the City of Miami Beach published an invitation for bid — very comparable, if not identical to the ITB — for dockage concession of for-hire charter fishing boats for what was solicited as a sole term of five years. The city then proceeded to award the contract, inclusive of an option to renew term, for yet an additional term of five years. The appellant, Klinger, filed a complaint claiming he was interested in bidding for the concession and did not do so because the specifications only provided for a sole five-year term. Ultimately, the court found against the city and ordered that if the city still desired said concession, with the option to renew term, new specifications and a new solicitation would need to be prepared and advertised. Generally, a nonbidder does not have the requisite standing or interest to protest.21 However, a nonbidder, similar to the one in Klinger, can bring a legal challenge if the nonbidder can argue that the new terms are materially different from what the agency originally solicited, and they would have bid on these terms.
Per 120.57, upon receipt of the written protest, if there is no disputed issue of material fact, an informal proceeding is conducted under applicable agency rules; however, if there is a disputed issue of material fact, the agency refers the protest to the respective division concerned.22 Furthermore, as previously stated, per 120.52, the APA is applicable to the state and its subdivisions and agencies.23 Once all administrative remedies have been exhausted, judicial remedies may be sought under 120.68.
Under 120.57(3)(b), the following are the requirements of the formal written protest: 1) It must state with particularity the facts and law upon which the protest is based, whether concerning the terms, conditions, or specifications contained in the solicitation, including any provisions governing the methods for ranking the bids, proposals, or replies, awarding contracts, reserving rights of further negotiation, or modifying or amending any contract; 2) it must be timely filed; 3) it must be submitted to the proper entity or official; 4) an opportunity to resolve the protest by mutual agreement must be provided; and 5) ultimately, if still unresolved and depending on whether an issue of material fact remains in dispute, either an informal hearing before a person as prescribed by agency rules or a formal proceeding before an assigned administrative law judge. Klinger demonstrates how the first statutory requirement of particularity would function. The appellant, Klinger, filed a complaint claiming with particularity that he was interested in bidding for the concession and did not do so because the solicitation specifications only provided for a sole five-year term, in sharp contrast with the contract the city was awarding.24 As previously stated above, the court found against the city and ordered that new specifications and a new solicitation be prepared and advertised if the city still desired said concession with the additional option to renew.25
Standard of Review
F.S. §120.57(3)(f) provides that:
In a competitive-procurement protest, other than a rejection of all bids, proposals, or replies, 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 solicitation specifications. The standard of proof for such proceedings shall be whether the proposed agency action was clearly erroneous, contrary to competition, arbitrary, or capricious.In any bid-protest proceeding contesting an intended agency action to reject all bids, proposals, or replies, the standard of review by an administrative law judge shall be whether the agency’s intended action is illegal, arbitrary, dishonest, or fraudulent.26
• Competitive Procurement Protests — Other than a Rejection of All Bids — Because bid protests are de novo proceedings, the sole duty of an administrative judge, as trier of fact, is to “ascertain from the competent, substantial evidence in the record what actually happened in the past or what reality presently exists, as if no findings previously had been made.”27 Therefore, all the statutory standards of review, as established above, are meant to provide a level of deference to the agency’s decision as far as reviewing a finding of fact.28 Without meeting these standards, the protest must be dismissed, and the agency’s decision upheld.29
1) Clearly Erroneous: The essence of “clearly erroneous” is that an agency has committed a mistake.30 The U.S. Supreme Court has previously explained the term “clearly erroneous” as follows: “A finding is ‘clearly erroneous’ when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.”31 The Florida Supreme Court has also adopted similar language: “[If] an express or inferential finding of the trial court is without support of any substantial evidence, is clearly against the weight of the evidence or that the trial court has misapplied the law to the established facts, then the decision is ‘clearly erroneous.’”32
2) Contrary to Competition: An act is contrary to competition if it 1) “create[s] the appearance of and opportunity for favoritism”; 2) “erode[s] public confidence that contracts are awarded equitably and economically”; 3) “cause[s] the procurement process to be genuinely unfair or unreasonably exclusive”; or 4) is “unethical, dishonest, illegal, or fraudulent.”33
3) Material vs. Nonmaterial Irregularities — To Waive or Not to Waive: After Groves-Watkins and before the 1996 amendments to F.S. Ch. 120, an agency’s decision was generally held not to be interfered with absent a finding of illegality, fraud, dishonesty, or arbitrariness. It did not matter if there was an immaterialirregularity that could have been waived; nor did it matter if the agency would have to spend more money on a project. After the 1996 amendments to 120.57(3)(f), providing for a de novo proceeding, the general rule is that the bidder who submits the lowest materially responsive bid is entitled to the contract; or in the context of an RFP, when factors other than price are considered, the best overall value to the public agency prevails.
4) Arbitrary or Capricious: An arbitrary decision is one that is not supported by facts or logic, or is despotic.34 The inquiry is of basic rationality.35 Concerning the same, “[t]he reviewing court must consider whether the agency: 1) has considered all relevant factors; 2) has given actual, good faith consideration to those factors; and 3) has used reason rather than whim to progress from consideration of each of these factors to its final decision.”36
• Protest Concerning an Agency’s Decision to Reject all Bids Fraudulent, Arbitrary, Illegal, or Dishonest —Bid acceptance under the APA differs from bid acceptance under the rules of local governmental bodies. For example, in Gulf Real Properties, Inc. v. Dep’t of Health & Rehab. Servs., 687 So. 2d 1336, 1337 (Fla. 1st DCA 1997), the court held that the Department of Health and Rehabilitative Services (HRS) did not accept a bid on a construction project when it advised a bidder of its intent to award the project to it, when another bidder had filed a formal protest, and HRS had subsequently exercised its right to reject all bids. The court in Gulf Real Properties reasoned that an agency’s rejection of all bids must stand absent a showing that the “purpose or effect of the rejection is to defeat the object and integrity of competitive bidding.”37 A disappointed bidder seeking to overturn an agency’s decision to reject all bids must show that the agency “acted fraudulently, arbitrarily, illegally, or dishonestly.”38
In contrast, whether a county board has acted “arbitrarily” in awarding a [bid] is generally controlled by a determination of whether the board complied with its own proposal criteria, as outlined in its solicitation documents.39 Moreover, the court measures conduct that is “arbitrary or capricious” as being based upon a misconception of law, upon ignorance through lack of inquiry, a violation of law, or the result of improper influence.40
Burden of Proof
Under 120.57(3)(f), “[u]nless otherwise provided by statute, the burden of proof shall rest with the party protesting the proposed agency action.”
While comprehensive procedures have been provided with the goal of protecting public interest, the reality is that administrative procedures are time-consuming and provide very limited remedies for protestors. This article addresses the several procedures, arguments, and nature of a bid protest. Other remedies beyond the scope of this article, which can challenge a bid award on legal grounds, include injunction and declaratory judgment action for damages. This gap between law-making and its application has yet to be filled by any efficient solutions. Even when the agency’s decision resulted from fraud, illegality, or misconduct, the courts do not and cannot simply order the agency to award a contract to the successful protestor.41
The question of damages recoverable by protestors has yet to arrive at any uniform conclusions. In Miami-Dade County School Board v. J. Ruiz School Bus Service, Inc., 874 So. 2d 59 (Fla. 3d DCA 2004), the Third District reversed the trial court’s award of lost profits and remanding for equitable relief for bid preparation and protest costs. In Baxter’s Asphalt & Concrete, Inc. v. Liberty County, 406 So. 2d 461 (Fla. 1st DCA 1981), the First District upheld an award of reliance damages, including bid preparation costs, court fees, and attorneys’ fees. In Groves-Watkins Constructors v. State, Dept. of Transportation, 511 So. 2d 323 (Fla. 1st DCA 1987), the First District specified that the successful protestor was entitled to lost profits for breach of contract. However, the Florida Supreme Court reversed both Baxter and Groves-Watkins without handling the damage issue.
Ultimately, when a protestor prevails in the bid protest, the protestor cannot obtain an order entitling it to receive the contract, and the public agency cannot proceed with its advertised project under its overturned intended decision. The legislature should consider making changes to increase efficiency in public procurement processes and reduce time-consuming bureaucracies.
1 Fla. Stat. §120.54 (2017).
2 Dep’t of Trans. v. Groves-Watkins Constructors, 530 So. 2d 912 (Fla. 1988).
4 Fla. Stat. §255.065 (2017).
5 Fla. Stat. §287.001 (2017).
8 Fla. Stat. §120.57(3)(f) (2017).
11 Fla. Stat. §120.57(3)(c) (2017).
13 Groves-Watkins Constructors, 530 So. 2d at 914.
14 See Asphalt Pavers, Inc. v. Dep’t of Transp., 602 So. 2d 558, 560 (Fla. 1st DCA 1992); Optimum Tech., Inc., v. Dep’t of Health, No. 11-0257BID, 2011 WL 840815, at *25 (DOAH Mar. 8, 2011).
15 Fla. Stat. §120.57(3)(f) (2017).
16 Groves-Watkins Constructors, 530 So. 2d at 914.
17 Fla. Stat. §119.071(1)(b)(2) (2017).
18 Fla. Stat. §119.071(1)(b)(3) (2017).
20 Preston Carroll Co., 400 So. 2d at 524.
21 Westinghouse Elec. Corp. v. Jacksonville Trans. Auth., 491 So. 2d 1238 (Fla. 1st DCA 1986).
22 Fla. Stat. §120.57(3)(d)(2)-(3) (2017).
23 Fla. Stat. §120.52(1)(c) (2017).
24 Klinger, 179 So. 2d at 864.
26 Emphasis added. See also Syslogic Tech. Servs., Inc. v. South Fla. Water Mgmt. Dist., No. 01-4385BID (DOAH Jan. 18, 2002); Sunshine Towing v. Dep’t of Transp., No. 10-0134BID, 2010 WL 1417770, at *8 (DOAH Apr. 6, 2010).
27 Sunshine Towing, 2010 WL 1417770, at *9.
30 Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573 (1985) (citing United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948)).
32 Holland v. Gross, 89 So. 2d 255, 258 (Fla. 1956).
33 Syslogic Tech. Servs., Inc., Case No. 01-4385BID at 15.
34 Sunshine Towing, 2010 WL 1417770 at *10.
37 Gulf Real Properties, 687 So. 2d at 1338.
39 Emerald Corr. Mgmt. v. Bay Cnty.,955 So. 2d 647, 653 (Fla. 1st DCA 2007).
40 Berbusse, Jr., Inc. v. N. Broward Hosp. Dist., 117 So. 2d 550 (Fla. 2d DCA 1960).
41 See Courtenay v. Dep’t of Health & Rehabilitative Servs., 581 So. 2d 621, 622 (Fla. 5th DCA 1991).
VICTORIA MÉNDEZ city attorney, City of Miami, is Florida Bar board certified in city, county, and local government law.
PABLO R. VELEZassistant city attorney, City of Miami, is assigned to the General Government and Complex Transactions divisions.
RAFAEL E. SUAREZ-RIVAS chief assistant city attorney, City of Miami, is Florida Bar board certified in city, county, and local government law.
The authors thank Yung Truong, a law student at St. Thomas University School of Law and a former legal intern for the City of Miami, for her contributions to this article.
This column is submitted on behalf of the City, County and Local Government Law Section, Michele L. Lieberman, chair, and Ellie Neiberger, editor.