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A recent Florida Division of Administrative Hearings decision clarifies the invitation to negotiate (ITN) process and signals that the state has considerable flexibility in how far it can press ITN bidders to offer value-added services in bids. Dean Mead attorney William D. Hall, III, who represented the Florida Department of Corrections (DOC) in the case, said the decision – if it stands following any appeals – may indicate that vendors should expect to see more ITNs and be prepared for the give-and-take that comes with negotiations.
Hall, a litigator in Dean Mead’s Tallahassee office with extensive experience in administrative law, said the March 2019 decision in Securus Technologies v. Department of Corrections and Global Tel*Link involved the DOC’s contract to provide phone services for inmates in state prisons. The state had long contracted with Securus Technologies Inc. for this service and, while the company performed well, the state decided to test the waters with an ITN when the contract neared its expiration date. The core service in the contract is to provide phone service in which inmates pay per minute for calls to their families or others on the outside. In the past, neither the state nor the vendor paid each other, and the vendor kept all revenue from the inmate charges. This arrangement is common in prisons across the United States. Securus’ main competitor for the contract was Global Tel*Link Corp. (GTL), and both companies were regarded well by the state.
ITN brings flexibility to bid process
An ITN differs in important aspects from a request for proposal or invitation to bid where specifications are not flexible, and the lower bid usually wins. An ITN, explained Hall, is more like buying an automobile, with the buyer and seller discussing various option packages and haggling over pricing. Perhaps the dealer will hold fast to a price but throw in an upgraded sound system to win over the buyer. In this case, the state asked Securus and GTL to include a “commission” to the state of $5 million plus yard radios for prison staff, a biometric exit and entry, and a radio frequency identification system (RFID) – an electronic tag system to track inmates. All were related in some way to the phone system. Specifically, all are helpful in preventing and/or investigating the introduction of contraband cell phones, which present a huge safety problem in prisons.
After extensive negotiating with both companies, the DOC awarded the new contract to GTL in what the state said was a close call. Both companies were offering variations of the same value-added services, but the DOC decided that GTL offered the overall best value for the state based on the difference in base contract length. GTL offered a five-year term and Securus offered a 10-year term. Securus protested, claiming, among other things, that the value-added services were not related to inmate communications, specifically the yard radios, biometric entry and exit, and RFID systems. Securus also said the DOC abandoned its stated ITN goal of lowering the cost of calls for inmates because the value-added services could result in raising the rates for some inmates (although the rate for the most common form of call is reduced in the intended GTL contract).
The administrative law judge came down squarely on the side of the DOC, explaining that the state has considerable flexibility in asking for value-added services as long as the bid process is transparent and fair.
Best negotiator won
To win its protest, Securus had to show the bid award was, according to statute, “contrary to the DOC’s governing statutes, rules or polices, or the solicitation specifications” and, if so, whether it was “clearly erroneous, contrary to competition, arbitrary or capricious.” The ALJ considered each of these standards and concluded that the process was competitive and did not arbitrarily favor any vendor. The ALJ also cited a Florida statute that defines “best value” in bidding as “based on factors that include, but are not limited to, price, quality, design, and workmanship” (emphasis added).
As the ALJ wrote: “That Securus was out negotiated is not a basis upon which a legal challenge may be sustained.”
Bidders: Come prepared to wrangle
Hall said the decision suggests that state agencies can test how much value they can coax from bidders in value-added services, rather than rely on the traditional low-price bid based on set specifications. Still, he cautioned there is a limit to how far value-added services can extend. For example, asking the phone contractor to build a new prison would seem to be going too far afield. An ITN can’t be a Christmas tree loaded up with anything and everything.
For bidders, said Hall, the lesson is to come prepared to wrangle in an ITN. Just as in automobile sales, the better negotiator may come away with the deal.