State Purchasing Public Purchasing in Florida The Legal
State Purchasing Public Purchasing in Florida The Legal Context September 14, 2005
Public Purchasing in Florida The Legal Context - Agenda § Welcome / Session Overview § Navigating the Maze § Key Operational Statutes 2
Overview Important Disclaimer • These materials are not intended to provide legal advice about any particular situation. • The law can have important impacts on you and your agency. If you have any questions or doubts in a particular situation, consult your agency attorney or supervisor. 3
Overview Topics Already Covered in NIGP Material • • • • Purchasing and Its Relationship to the Law Sources and Types of Law History of Government Purchasing The Government’s Authority to Contract The Law of Agency Other Types of Applicable Law Types and Sources of Contract Law Creating a Contract Written Documentation Interpreting the Contract Mistakes in Contracts More About the Uniform Commercial Code Breach of Contract Anti-Competitive Practices Laws Other Applicable Laws 4
Overview Roadmap to Excellence Audit Report (6/03) Recurring Deficiencies - Procurement Methodology The way agencies choose contractors is governed by a myriad of statutory mandates which attempt to ensure the selection process provides both the best value to the state and fair and open competition to vendors. These overlapping mandates create loopholes and confusion, contributing to this core activity’s prevalence. Risks include diminished competition, limited availability of commercial sources and failure to obtain desired performance due to selection of less-than-optimal vendors and contractors. 5
Overview Roadmap to Excellence Audit Report (6/03) Procurement Methodology Problems: Contributing Factors Current statutes and rules were developed piecemeal over time to address specific abuses and concerns rather than to establish a comprehensive and cohesive statewide procurement/ contracting system. Consequently, poor contracting practices have resulted from fragmented implementation and inadequate procedures over purchasing mechanisms such as state term contracts and invitations to negotiate. We recommend an initiative, led by DMS and a core group of procurement staff, to monitor outsourcing practices for inadequacies and inconsistencies, and propose improved legislative and regulatory changes. This process, over time, could replace the myriad of overlapping and conflicting statutes and guidelines with one unified, effective system of controls. 6
Overview Why is This Important? • Professionalism • Job Security - Rule 60 L-36. 005(3) (e) Violation of law or agency rules (f) Conduct unbecoming a public employee (g) Misconduct • Personal Liberty 7
Session Objectives Increase Understanding of … • The sources of law that apply to purchasing in Florida • The key operational statutes that affect purchasing personnel in Florida 8
Public Purchasing in Florida The Legal Context - Agenda § Welcome / Session Overview § Navigating the Maze § Key Operational Statutes 9
Navigating the Maze Positive Law Federal • Constitution of the United States (1787) • United States Code (statutes) • Code of Federal Regulations (rules) State • Constitution of the State of Florida (1968) • Florida Statutes • Florida Administrative Code Local 10
Navigating the Maze Common Law Federal • Supreme Court of the United States • United States Court of Appeals (11 th Cir. ) • United States District Court (N. , S. , & M. Dist. Fla) • Specialized tribunals (e. g, Bd. Contract Appeals, Comp. Gen. ) State • Supreme Court of Florida • District Court of Appeals (5) (esp. 1 st DCA) • Circuit Court (20) • County Court • Specialized tribunals (e. g, Div. Admin. Hearings (DOAH)) 11
Navigating the Maze Laws to Master • Organic Statute – creates the agency • Authorizing Statute – grants powers and duties • Operational Statutes – core activities • Implementing Rules • Key Court Decisions 12
Navigating the Maze DMS Purchasing Example • Constitution Art. II. , s. 3 – branches of government • Florida Statutes, Title IV – Executive Branch – Chapter 20: organizational structure § 20. 04 – structure of executive branch § 20. 05 – heads of departments; powers and duties § 20. 22 – Department of Management Services [Organic] • Florida Statutes, Title XIX – Public Business – Chapter 287: Procurement of Personal Property and Services § 287. 042 – powers, duties, and functions [Authorizing] § 287. 057 – procurement of commodities or contractual services [Operational] • Florida Administrative Code, Title 60 - DMS – 60 A: Division of Purchasing Chapter 60 A-1: General Regulations 13
Public Purchasing in Florida The Legal Context - Agenda § Welcome / Session Overview § Navigating the Maze § Key Operational Statutes 14
Public Purchasing in Florida Key Operational Statutes • Chapter 287 (Purchasing) • Chapter 120 (APA) • Chapters 119 and 286 (Public Records and Sunshine Law) • Chapters 671 and 672 (UCC) • Chapter 112 (Ethics) • Chapters 838 and 839 (Criminal Misconduct) 15
Chapter 287 Common Law Background • Absent positive law requiring competition, public body has no legal obligation to procure competitively • Public body has wide discretion in soliciting and accepting bids -- honest exercise of this discretion will not be overturned by a court even if it appears erroneous or reasonable persons may disagree • Required only to act in good faith and in the best interests of the public 16
Competitive Bid Policy Wester v. Belote (Fla. 1931) Laws … requiring contracts to be let to the lowest bidder are based upon public economy, are of great importance to the taxpayers, and ought not to be frittered away by exceptions. They originated, perhaps, in distrust of public officers whose duty it is to make public contracts, but they also serve the purpose of affording to the business men and taxpayers of the counties and other governmental subdivisions affected by them a fair opportunity to participate in the benefits flowing from such contracts, which are nowadays amongst the most important items of the present day business world. 17
Competitive Bid Policy Wester v. Belote (cont. ) In so far as they thus serve the object of protecting the public against collusive contracts and prevent favoritism toward contractors by public officials and tend to secure fair competition upon equal terms to all bidders, they remove temptation on the part of public officers to seek private gain at the taxpayers' expense, are of highly remedial character, and should receive a construction always which will fully effectuate and advance their true intent and purpose and which will avoid the likelihood of same being circumvented, evaded, or defeated. 18
Competitive Bid Policy Wester v. Belote (cont. ) [I]t is the duty of public officers charged with the responsibility of letting contracts under the statute to adopt, in advance of calling for bids, reasonably definite plans or specifications, as a basis on which bids, may be received. Such officers, in view of such requirement, are without power to reserve in the plans or specifications so prepared in advance of the letting the power to make exceptions, releases, and modifications in the contract after it is let, which will afford opportunities for favoritism, whether any favoritism is actually practiced or not. Neither can they include other reservations which by their necessary effect will render it impossible to make an exact comparison of bids. 19
Competitive Bid Policy Wester v. Belote (cont. ) But it by no means follows that a competitively awarded contract must in every instance be set aside …, where what has been done by the board appears to have been done as the result of a bona fide effort … to comply with the statute, and no actual fraud, misconduct, favoritism, prejudice, or discrimination is charged with reference to the transaction as completed. 20
Chapter 287 Nutshell Summary • In general, statute requires state agencies to procure goods and services competitively • Mandated for the protection of the public to ensure fair and open competition -- reduces the appearance of and opportunity for favoritism, collusion, and fraud in the award of public contracts 21
Chapter 287 One of Various Statutory Sources • Chapter 287, F. S. – agency’s purchases of commodities and contractual services [defined] • Chapter 255, F. S. -- construction of public buildings • Chapter 337, F. S. – road and bridge construction • Your agency…? • ABA, Model Procurement Code for State and Local Governments (2000) -- sixteen states have adopted in full, several have adopted in part, and many local jurisdictions follow 22
Chapter 287 Legislative Intent (p. 46) • Fair and open competition is a basic tenet of public procurement • Such competition reduces the appearance and opportunity for favoritism and inspires public confidence that contracts are awarded equitably and economically • Documentation of the acts taken and effective monitoring mechanisms are important means of curbing any improprieties and establishing public confidence in the procurement process. 23
Chapter 287 Legislative Intent (p. 46) Essential to effective and ethical procurement: • A system of uniform procedures for managing and procuring • Detailed justification of agency procurement decisions • Adherence by agency and vendor to ethical considerations (see also § 287. 132) 24
Chapter 287 Definitions • § 287. 012 (p. 46) • Know the meaning of words you use! 25
Chapter 287 Purchasing Categories – 287. 017 • $15, 000 • $25, 000 **Formal Competition** • $50, 000 • $150, 000 • $250, 000 26
Chapter 287 Consultant’s Competitive Negotiation Act • § 287. 055 (p. 57) • More definitions to master! • Applies only to professional services as defined in 287. 055(2)(a) • Separate implementing rules (Ch. 60 D-13) • Still necessary in the age of ITNs? 27
Chapter 287 State Term Contracts and Purchasing Agreements • § 287. 042(2)(a) (p. 51) and § 287. 056 (p. 62) • Leveraging the State’s buying power • New State Purchasing Agreement program (replaces SNAPS II program, see State Purchasing Memo No. 2 (03 -04)) 28
Chapter 287 The Competition Requirement: § 287. 057 (p. 63) • Cited in 42 other sections of Florida Statutes – If those other sections apply to your agency, you must know whether the cites mandate compliance with, or authorize deviation from, § 287. 057 • Defines basic competitive methods § 287. 057(1) - ITB § 287. 057(2) - RFP § 287. 057(3) - ITN 29
Chapter 287 § 287. 057 (4) Authorizes pre-bid conferences and Q&A (5) Requires competition over $25, 000 unless – – – – Emergency From STC or other agency contract Single source Insurance Prescriptive assistive devices Exempted list Continuing education events 30
Chapter 287 § 287. 057 (6) Less than two bids (7) DMS oversight (8) Minority set-aside (primes) (9) Minority set-asides (subs) (10) Prohibition against improper dividing (11) Another exemption to competition – law designates vendor or payment (12) Minority tie-breaker (13) Contract extensions (14) Contract renewals (see also 287. 058(1)(f)) 31
Chapter 287 § 287. 057 (15) Contract manager (16) Contract administrator (17) Evaluation and negotiation teams (18) Conflict of interest (bidders) (19) Category III (+$50, 000) service contract review and approval process (20) Conflict of interest (noncompetitive) (21) Pre-1990 contracts (22) Contracting with private colleges and universities (23) Electronic procurement (24) Strategic IT alliances 32
Chapter 287 Contract Document: § 287. 058 (p. 70) (1) Required contract clauses if over Category II ($25, 000) -- See also § 287. 0582! (2) Time for signing (see Comptroller’s Memoranda No. 07 (02 -03) and 04 (87 -88) if service predates signing) (3) Health exception to (1) and (2) (4) Writing requirement if Category II or below (5) CFO authority to waive 33
Chapter 287 Other Statutes that Come into Play • Chapter 282 – STO (p. 86) • Chapter 283 – printing (p. 110) • Chapter 413 – RESPECT (p. 114) • Chapter 946 – PRIDE (p. 117) • Other? ? – e. g. , § 215. 964 (p. 85) • Chapter 215 – payment and audit (pp. 73, 77) 34
Public Purchasing in Florida Key Operational Statutes • Chapter 287 (Purchasing) • Chapter 120 (APA) • Chapters 119 and 286 (Public Records and Sunshine Law) • Chapters 671 and 672 (UCC) • Chapter 112 (Ethics) • Chapters 838 and 839 (Criminal Misconduct) 35
APA Separation of Powers • Literally, separation of powers would prohibit each branch from exercising powers of any of the others • Rigid formalistic approach not practical -- one branch on occasion may exercise some aspect of the powers of other branches • Classic example is delegation of quasi-legislative authority to executive branch so it may promulgate rules to implement statutes 36
APA Affects Agency’s Exercise of Discretion • Requires agency to adopt as rules its policy statements of general applicability • Prescribes the process by which disputed facts are found • Requires agency to explain exercise of its discretion and subjects explanation to judicial review 37
APA Ultra Vires Actions • Legislature creates agencies and grants all the powers they exercise • Agencies must follow legislatively established procedure for exercising rulemaking power • Administrative rule cannot enlarge, modify, or contravene provisions of statute 38
APA Invalid Exercise of Delegated Authority • § 120. 52(8) • Page 121 of materials 39
APA Agency Actions • Agency Action (p. 120) • Rule: § 120. 52(15) (p. 122) • Final Order: § 120. 52(7) (p. 121) • Recommended Order: § 120. 52(14) (p. 122 and p. 137) 40
APA Free Form Proceedings • “[T]he necessary or convenient procedures, unknown to the APA, by which an agency transacts its day-to-day business” – letters, telephone calls, emails, conversations, and other communications through which most of an agency’s business is transacted • Decision reached through free form proceedings will be conclusive if a party does not challenge it by requesting a hearing – but a party’s opportunity to request a hearing does not expire until a “clear point of entry” has been offered and accepted or waived • When an agency’s free form proceeding has reached a point that it is appropriate for parties to request a hearing, the agency must so advise them 41
APA Who Gets a Hearing? • A hearing must be afforded when the “substantial interests of a party are determined by an agency” • Two-pronged test for “substantial interest” – Degree of injury: party will suffer injury in fact which is of sufficient immediacy – Nature of injury: party’s substantial injury is of the type or nature which the proceeding is designed to protect • Preston Carroll (p. 157) – “standing” to protest 42
APA What Kind of Hearing? • § 120. 573 – mediation • § 120. 574 – summary hearing • §§ 120. 569 and 120. 57 43
APA Section 120. 57 • Pages 124 -128 of materials • § 120. 57(1) – disputed issues of material fact • § 120. 57(2) – no disputed issues of material fact • § 120. 57(3) – protests to contract bidding or award 44
APA Uniform Rules of Procedure • Chapter 28 -110, Bid Protests (p. 130) • Required “point of entry” language in rule 28110. 055(3) adds to what is required by § 120. 57(3)(a) • Never amended to reflect electronic posting practices adopted by HB 1977 in 2002 • Current project underway to amend (non-DMS) 45
APA Section 120. 57(3) (a) required “point of entry” notice (p. 127) (b) timing of protest (Capeletti Bros. , p. 154) (c) effect of protest once filed (d) timing and steps agency takes to resolve (e) timing and steps upon referral to DOAH (f) burden of proof, standard of proof 46
APA DOAH’s Role • Rejection of all bids – whether action is illegal, arbitrary, dishonest or fraudulent – DOT v. Groves-Watkins (p. 159) • All other – whether action is contrary to agency’s governing statutes, the agency’s policies or rules, or the solicitation specifications – whether action is clearly erroneous, contrary to competition, arbitrary, or capricious (compare Baxter’s Asphalt (p. 162) with Harry Pepper (p. 165)) • Recommended order: 120. 57(1)(k) and (l) (p. 126 and p. 137) 47
APA Judicial Review • Pages 151 -152 of materials • § 120. 68(7) • § 120. 68(10) 48
Public Purchasing in Florida Key Operational Statutes • Chapter 287 (Purchasing) • Chapter 120 (APA) • Chapters 119 and 286 (Public Records and Sunshine Law) • Chapters 671 and 672 (UCC) • Chapter 112 (Ethics) • Chapters 838 and 839 (Criminal Misconduct) 49
Public Records/Sunshine Law Overview • State constitutional basis – Art. I, § 24 • Public Records – pages 169 -175 of materials – § 119. 07(6)(m) – bid materials exempt until earlier of 10 days or notice of decision (p. 175) • Sunshine Law – pages 176 -177 of materials 50
Public Records/Sunshine Law Short-listing Proposals • Silver Express – pages 178 -182 of materials • Leach-Wells – pages 183 -185 of materials • Participating in the decision-making process: strictly fact -finding only vs. review plus recommendation • Compare Knox (p. 186) and Capeletti Bros. (p. 154) • What about a non-collegial executive branch agency? 51
Public Records/Sunshine Law Trade Secrets • “Public officials have a duty to conduct meetings in the sunshine. They also have a duty to protect the trade secrets of the vendors with whom they do business. Doing both is not always easy. ” (p. 190) • § 812. 081 – criminalizes stealing trade secrets (dfn. ) • § 815. 045 – exempts trades secrets from Public Records requirements • Se. PRO Corp. v. DEP (p. 195) – vendor’s obligation to identify/assert in writing 52
Public Purchasing in Florida Key Operational Statutes • Chapter 287 (Purchasing) • Chapter 120 (APA) • Chapters 119 and 286 (Public Records and Sunshine Law) • Chapters 671 and 672 (UCC) • Chapter 112 (Ethics) • Chapters 838 and 839 (Criminal Misconduct) 53
UCC Death of Sovereign Immunity (Contracts) Pan-Am Tobacco v. DOC (pages 200 -201) • Legislature has authorized agencies to enter into contracts • Must have intended that such contracts be valid and binding on both parties (mutuality) • Therefore, sovereign immunity does not protect the agency from an action arising from the agency’s breach of contract 54
UCC Sovereign Immunity (Torts) • § 768. 28 – limited waiver of sovereign immunity against tort liability (9)(a), F. S. • “Torts” are non-criminal, non-contract wrongs • Subsection (9)(a) (p. 202 of materials): individuals are shielded from personal liability – IF in the scope of employment or function – UNLESS in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property 55
UCC Electronic Commerce • Chapter 668 – not part of UCC, but modern trend of commercial relations (pages 203 -216 of materials) • Electronic Signature Act of 1996 • Uniform Electronic Transaction Act 56
UCC Chapter 671 – General Provisions (p. 217) • Purpose - § 671. 102 • General definitions - § 671. 201 • Course of dealing and usage of trade – § 671. 205 57
UCC Chapter 672 – Sales (p. 218) I: General Construction and Subject Matter II: Form, Formation, and Readjustment of Contract III: General Obligation and Construction of Contract IV: Title, Creditors, and Good Faith Purchasers V: Performance VI: Breach, Repudiation, and Excuse VII: Remedies 58
Public Purchasing in Florida Key Operational Statutes • Chapter 287 (Purchasing) • Chapter 120 (APA) • Chapters 119 and 286 (Public Records and Sunshine Law) • Chapters 671 and 672 (UCC) • Chapter 112 (Ethics) • Chapters 838 and 839 (Criminal Misconduct) 59
Chapter 112 Code of Ethics • Overview – pages 271 -273 of materials • Section 112. 313 - Standards of Conduct (pages 275 -279 of materials) • Much more detail after lunch! 60
Chapter 112 Other Important Codes • Governor Bush’s Code of Ethics http: //www. myflorida. com/myflorida/government/polici es/ethicscode. html • Your own agency’s Code of Ethics • NIGP Code of Ethics http: //www. nigp. org/genlinfo/2001 Codeof. Ethics. pdf • FAPPO and UPPCC Codes (pp. 288 -289) 61
Public Purchasing in Florida Key Operational Statutes • Chapter 287 (Purchasing) • Chapter 120 (APA) • Chapters 119 and 286 (Public Records and Sunshine Law) • Chapters 671 and 672 (UCC) • Chapter 112 (Ethics) • Chapters 838 and 839 (Criminal Misconduct) 62
Criminal Misconduct Chapter 838 - Bribery, Misuse of Public Office • Pages 280 -284 of materials • Unlawful compensation or reward • Official misconduct • Commercial bribe receiving • Bid tampering 63
Criminal Misconduct Chapter 839 – Offenses by Public Officers and Employees • Pages 285 -287 of materials • Extortion • Falsifying records • Withholding records • Misusing confidential information 64
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