This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h1057.GOS
DATE: 1/25/2022
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: HB 1057 Evidence of Vendor Financial Stability
SPONSOR(S): Andrade
TIED BILLS: IDEN./SIM. BILLS: SB 1952
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Government Operations Subcommittee Roth Toliver
2) State Affairs Committee
SUMMARY ANALYSIS
Florida law requires state agencies that wish to procure commodities or contractual services in excess of
$35,000 to use a competitive solicitation process. A competitive solicitation is the process of requesting and
receiving two or more sealed bids, proposals, or replies submitted by responsive vendors in accordance with
the terms of a competitive process. Depending on the type of contract and scope of work or goods sought, an
agency may use one of three procurement methods: invitation to bid, request for proposals, or invitation to
negotiate.
A competitive solicitation for contractual services in excess of $35,000 must be evidenced in writing by a
written agreement embodying all provisions and conditions of the procurement of such services.
Currently, when agencies are conducting procurements for large dollar projects that rely on a single vendor for
performance, agencies may, but are not required to, consider a test of financial stability as part of the
procurement.
The bill requires agencies that mandate vendors in a particular competitive solicitation to demonstrate financial
stability to accept any of the following documents as evidence of the vendor’s stability:
Audited financial statements demonstrating generally accepted financial stability criteria.
Documentation of an investment grade rating from a credit rating agency that is designated as a
nationally recognized statistical rating organization by the Securities and Exchange Commission.
For a vendor with annual revenues exceeding $1 billion, a letter issued by the chief financial officer or
controller of such vendor demonstrating generally accepted financial stability criteria.
The bill does not appear to have a fiscal impact on the state or local governments. STORAGE NAME: h1057.GOS PAGE: 2
DATE: 1/25/2022
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
Competitive Solicitation for Commodities or Contractual Services
Florida law requires state agencies that wish to procure commodities or contractual services in excess
of $35,000
1
to use a competitive solicitation process.
2
A competitive solicitation is the process of
requesting and receiving two or more sealed bids, proposals, or replies submitted by responsive
vendors in accordance with the terms of a competitive process, regardless of procurement method.
3
Depending on the type of contract and scope of work or goods sought, an agency may use one of three
procurement methods: invitation to bid,
4
request for proposals,
5
or invitation to negotiate.
6
Invitation to Bid
When an agency is capable of defining the scope of work or specific commodity sought, then an
agency must use an invitation to bid (ITB). An ITB must include a detailed description of the commodity
or contractual service sought and whether the agency contemplates renewal of the contract. If the
agency contemplates renewal of the contract, then each bid submitted in response to an ITB must
include the price for each year for which the contract may be renewed. Bid evaluations must include
consideration of the total cost for each year of the contract, including renewal years, and the contract
must be awarded to the responsible
7
and responsive vendor
8
who submits the lowest responsive bid.
9
Request for Proposals
An agency must use a request for proposals (RFP) when the purposes and uses for the contractual
service or commodity sought can be specifically defined and the agency is capable of identifying
necessary deliverables. A vendor may respond with various versions of services or commodities to
meet the specification of the solicitation document. Before issuing an RFP, the agency must specify in
writing the reasons an ITB is not practicable. An RFP must include a statement describing the
commodities or contractual services sought, the relative importance of price and other evaluation
criteria, and whether the agency contemplates renewal of the contract. The contract is awarded by
written notice to the responsible and responsive vendor whose proposal is most advantageous to the
state.
10
Invitation to Negotiate
An invitation to negotiate (ITN) is a solicitation used by an agency that is intended to determine the best
method for achieving a specific goal or solving a particular problem. It identifies one or more responsive
vendors with which the agency may negotiate in order to receive the best value. Before issuing an ITN,
the agency head must specify in writing the reasons an ITB or an RFP are not practicable. An ITN must
include questions being explored, the facts being sought, and the specific goals of the solicitation. The
agency may select one or more vendors to begin negotiations and then award the contract to the
responsible and responsive vendor that the agency determines will provide the best value to the
state.
11
1
See s. 287.017, F.S., for a list of purchasing categories and their corresponding threshold amounts.
2
Section 287.057(1), F.S.
3
Section 287.012(6), F.S.
4
Section 287.057(1)(a), F.S.
5
Section 287.057(1)(b), F.S.
6
Section 287.057(1)(c), F.S.
7
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. Section 287.012(25), F.S.
8
A “responsive vendor” is a vendor that has submitted a bid, proposal, or reply that conforms in all material aspects to the solicitation.
Section 287.012(27), F.S.
9
Section 287.057(1)(a), F.S.
10
Section 287.057(1)(b), F.S.
11
Section 287.057(1)(c), F.S. STORAGE NAME: h1057.GOS PAGE: 3
DATE: 1/25/2022
Contract Evaluations and Negotiations
For a contract in excess of $195,000, the agency head must appoint at least three people to
independently evaluate proposals and replies who collectively have experience and knowledge in the
program areas and service requirements for which commodities or contractual services are sought.
12
In
addition, the agency head must appoint three persons to a negotiation team to conduct negotiations
during an ITN procurement who collectively have experience and knowledge in negotiating contracts,
contract procurement, and the program areas and service requirements for which commodities or
contractual services are sought.
13
If the value of a contract is in excess of $1 million in any fiscal year, at least one of the persons
conducting negotiations must be certified as a Florida certified contract negotiator (FCCN)
14
in order to
ensure that certified contract negotiators are knowledgeable about effective negotiation strategies,
capable of successfully implementing those strategies, and involved appropriately in the procurement
process.
15
If the value of a contract is in excess of $10 million in any fiscal year, at least one of the
persons conducting negotiations must be a Project Management Professional
certified by the Project
Management Institute.
16, 17
Contracts
A competitive solicitation for contractual services in excess of $35,000
18
must be evidenced in writing
by a written agreement embodying all provisions and conditions of the procurement of such services.
19
The written agreement must include, but not be limited to, a provision:
That bills for fees or other compensation for services or expenses be submitted in detail
sufficient for a proper preaudit and postaudit thereof.
That bills for any travel expenses be submitted in accordance with the law on per diem and
travel expenses of public officers, employees, or authorized persons.
20
Allowing unilateral cancellation by the agency for refusal by the contractor to allow public access
to all documents, papers, letters, or other material made or received by the contractor in
conjunction with the contract, unless the records are exempt.
Specifying a scope of work that clearly establishes all tasks the contractor is required to
perform.
Dividing the contract into quantifiable, measurable, and verifiable units of deliverables that must
be received and accepted in writing by the contract manager before payment.
Specifying the criteria and the final date by which such criteria must be met for completion of the
contract.
12
Section 287.057(17)(a)1., F.S.
13
Section 287.057(17)(a)2., F.S.
14
A person must meet the following requirements for FCCN Certification, which is valid for five years or until the expiration date
stated on the person’s FCCN certificate, whichever is later:
Successful completion of the FCCN certification course;
At least 12 months’ experience as a purchasing agent, contract manager, or contract administrator for an agency or local
government entity, where the job description for the position required that at least half of the employee’s designated duties
included procuring commodities or contractual services, participating in contract negotiation, contract management, or
contract administration, or working as an agency attorney whose duties included providing legal counsel to the agency’s
purchasing or contracting staff; and
Experience during the preceding five years in leading at least one federal, state, or local government negotiation team through
a negotiated procurement, or participation in at least two federal, state, or local government negotiated procurements.
Negotiated procurements include those from a single source; those negotiated when fewer than two responsive bids,
proposals, or replies are received; and contract renewals. Employees must provide documentation to show compliance with
the experience and participation requirements when submitting the application.
Rule 60A-1.041(3), F.A.C.
15
Section 287.057(17)(b)1., F.S.
16
See Project Management Institute, available at https://www.pmi.org/ (last visited January 20, 2022).
17
Section 287.057(17)(b)2., F.S.
18
There is an exception for the written agreement for contractual services that provide health and mental health services or drugs in
the examination, diagnosis, or treatment of sick or injured state employees or provide other benefits as required by ch. 440, F.S.
19
Section 287.058(1), F.S.
20
See s. 112.061, F.S. STORAGE NAME: h1057.GOS PAGE: 4
DATE: 1/25/2022
Specifying that the contract may be renewed for a period that may not exceed three years or the
term of the original contract, whichever is longer.
Specifying the renewal price for the contractual service as set forth in the bid, proposal, or reply.
Specifying that costs for the renewal may not be charged.
Specifying that renewals are contingent upon satisfactory performance evaluations by the
agency and subject to the availability of funds.
Specifying the financial consequences that the agency must apply if the contractor fails to
perform in accordance with the contract.
Addressing the property rights of any intellectual property related to the contract and the specific
rights of the state regarding the intellectual property if the contractor fails to provide the services
or is no longer providing services.
21
The written agreement must be signed by the agency head or designee and the contractor before the
rendering of any contractual service in excess of $35,000.
22, 23
Unless otherwise provided in the
General Appropriations Act (GAA) or the substantive bill implementing the GAA, the Chief Financial
Officer (CFO) may waive these requirements for services, which are included in law for procurement of
commodities or contractual services.
24
A contract may not prohibit a contractor from lobbying the
executive or legislative branch concerning the scope of services, performance, term, or compensation
regarding any contract to which the contractor and a state agency are parties, after contract execution
and during the contract term.
25
Each public agency contract for services must authorize the public agency to inspect the:
Financial records, papers, and documents of the contractor that are directly related to the
performance of the contract or the expenditure of state funds.
Programmatic records, papers, and documents of the contractor that the public agency
determines are necessary to monitor the performance of the contract or to ensure that the terms
of the contract are being met.
26
The contract must require the contractor to provide the records, papers, and documents requested by
the public agency within 10 business days after the request is made.
27
Contract Renewals
Current law allows contracts for commodities or contractual services to be renewed for a period that
does not exceed three years or the term of the original contract, whichever is longer. Renewal of a
contract for commodities or contractual services must be in writing and is subject to the same terms
and conditions set forth in the initial contract and any written amendments signed by the parties. A
renewal contract may not include any compensation for costs associated with the renewal, is
contingent upon satisfactory performance evaluations by the agency, and is subject to the availability of
funds.
28
If a contract amendment results in a longer contract term or increased payments, an agency may not
renew or amend a contract for the outsourcing of a service or activity that has an original term value
exceeding $5 million before submitting a written report concerning contract performance to the
Governor, the President of the Senate, and the Speaker of the House of Representatives. The written
report must be submitted at least 90 days before execution of the renewal or amendment.
29
Tests of Financial Stability
21
Section 287.058(1)(a)-(i), F.S.
22
There is an exception in the case of a valid emergency as certified by the agency head.
23
Section 287.058(2), F.S.
24
Section 287.058(5), F.S.
25
Section 287.058(6), F.S.
26
Section 216.1366(1), F.S.
27
Section 216.1366(2), F.S.
28
Section 287.057(14), F.S.
29
Id. STORAGE NAME: h1057.GOS PAGE: 5
DATE: 1/25/2022
Currently, when agencies are conducting procurements for large dollar projects that rely on a single
vendor for performance, agencies may consider a test of financial stability as part of the procurement.
30
Some of the financial viability tests suggested by the Department of Management Services are:
31
Audited financials, where the vendor provides financials audited by an independent auditor, and
the independent auditor offers an opinion as to the financial viability of the vendor.
Unaudited financials, where the vendor provides financials prepared internally and no opinion is
provided as to the financial viability of the vendor.
32
Certification by company officers, where the vendors with over one billion dollars in annual
revenue may be required to provide a written certification by their CEO, CFO, or Comptroller
that the company meets generally accepted financial stability criteria.
Performance bonds, where the resultant contract would require the provision of a performance
bond that may be used to provide a source of funds to the agency if the vendor fails to
perform.
33
State Purchasing (PUR) Forms
All formal solicitations issued by an agency must include the standard “General Contract Conditions”
Form PUR 1000, and the standard “General Instructions to Respondents” Form PUR 1001.
34
The
instructions must apply to all formal solicitations and the conditions must be part of all resulting
contracts.
35
PUR 1000
36
contains standard terms and conditions that will apply to the contract which results from
the solicitation event.
37
The agency must attach additional contract terms and conditions specific to
each particular solicitation.
38
These additional terms are commonly referred to as “Special
Conditions.”
39
PUR 1001
40
contains instructions explaining the solicitation process and the actions necessary to
respond.
41
The agency must attach additional materials specific to each particular solicitation, including
but not limited to contact information, a solicitation timeline, a location for the public opening, evaluation
criteria, required information regarding renewal of the contract, and any other necessary information.
42
These additional instructions are commonly referred to as “Special Instructions to Respondents.”
43
In addition to including the PUR 1001 and PUR 1000, all formal solicitations issued by an agency must
include an Introductory Section, a Special Conditions Section and a Technical Specifications or
Statement of Work Section.
44
The Introductory Section must include an overview of the solicitation and
a timeline or calendar of events relevant to the solicitation.
45
30
Department of Management Services, Division of State Purchasing, Information for Agencies Regarding Tests of Financial
Viability, on file with the Government Operations Subcommittee.
31
Id.
32
Agencies typically review the financials provided and may employ their own external expert to test against specific standards
specified in the procurement.
33
Agencies often set the bond at ten percent of the value of the contract, but the amount may vary depending on the particulars of the
project. The bond may be imposed for the length of the contract or may be reduced over the term of the contract. Provisions requiring
performance bonds should include clear and binding contractual terms for when and how the agency may access the funds.
34
Rule 60A-1.002(7), F.A.C.
35
Id.
36
See Department of Management Services, State Purchasing (PUR) Forms, available at
https://www.dms.myflorida.com/business_operations/state_purchasing/state_agency_resources/state_purchasing_pur_forms (last
visited January 21, 2022).
37
Rule 60A-1.002(7)(b), F.A.C.
38
Id.
39
Id.
40
PUR Forms, supra, at FN 36.
41
Rule 60A-1.002(7)(a), F.A.C.
42
Id.
43
Id.
44
Rule 60A-1.002(8), F.A.C.
45
Id. STORAGE NAME: h1057.GOS PAGE: 6
DATE: 1/25/2022
Effect of the Bill
The bill requires agencies that mandate vendors in a particular competitive solicitation to demonstrate
financial stability to accept any of the following documents as evidence of the vendor’s stability:
Audited financial statements demonstrating generally accepted financial stability criteria.
Documentation of an investment grade rating from a credit rating agency that is designated as a
nationally recognized statistical rating organization by the Securities and Exchange
Commission.
For a vendor with annual revenues exceeding $1 billion, a letter issued by the chief financial
officer or controller of such vendor demonstrating generally accepted financial stability criteria.
The bill does not prohibit agencies from accepting additional documentation as evidence of financial
stability.
B. SECTION DIRECTORY:
Section 1: Amends s. 287.057, F.S., relating to procurement of commodities or contractual services.
Section 2: Provides that this act shall take effect upon becoming a law.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
None.
2. Expenditures:
None.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
None.
D. FISCAL COMMENTS:
None.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
Not applicable. The bill does not appear to affect county or municipal governments. STORAGE NAME: h1057.GOS PAGE: 7
DATE: 1/25/2022
3. Other:
None.
B. RULE-MAKING AUTHORITY:
There is neither rule-making authority granted in the bill nor does there seem to be a need for rule-
making.
C. DRAFTING ISSUES OR OTHER COMMENTS:
None.
IV. AMENDMENTS/COMMITTEE SUBSTITUTE CHANGES
Not Applicable.