BNUMBER: B-261316.4
DATE: November 9, 1995
TITLE: Blue Cross Blue Shield of Texas, Inc.
**********************************************************************
REDACTED DECISION
A protected decision was issued on the date below and was subject to a
GAO Protective Order. This version has been redacted or approved by
the parties involved for public release.
Matter of:Blue Cross Blue Shield of Texas, Inc.
File: B-261316.4
Date: November 9, 1995
Thomas G. Jeter, Esq., Patrick K. O'Keefe, Esq., and Mark J. Meagher,
Esq., McKenna & Cuneo, L.L.P., for the protester.
Thomas P. Humphrey, Esq., Robert M. Halperin, Esq., Peter J.
Lipperman, Esq., Stephanie V. Corrao, Esq., and Nabil W. Istafanous,
Esq., Crowell & Moring, for Foundation Health Federal Services, Inc.,
an interested party.
Kenneth S. Lieb, Esq., and Philip E. Adams, Esq., Office of the
Civilian Health and Medical Program of the Uniformed Services, for the
agency.
Glenn G. Wolcott, Esq., and Paul Lieberman, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Agency was not obligated to advise offeror that its price for a
portion of the proposal was higher than the government estimate where
agency did not consider the price unreasonable.
2. Agency's methodology for assessing a risk premium associated with
each offeror's projected costs was reasonable and consistent with the
evaluation scheme set forth in the solicitation.
3. Awardee's reduction in price between initial proposals and best
and final offers was reasonable where government estimate during this
period decreased in an amount greater than the awardee's price
reduction.
4. Where one element of awardee's proposed pricing methodology
significantly exceeded the government's estimate, agency's evaluation
of awardee's proposal was reasonable where agency recognized and
quantified the risk associated with awardee's proposed high price and
considered that risk in making its source selection decision.
5. [Deleted]
6. Agency reasonably evaluated awardee's proposal as offering a "net"
savings approach to resource sharing expenditures.
7. Agency reasonably determined that award to offeror submitting
lower-rated, lower-price proposal was in the government's best
interest.
DECISION
Blue Cross Blue Shield of Texas, Inc. (BCBSTX) protests the award of a
contract by the Office of the Civilian Health and Medical Program of
the Uniformed Services to Foundation Health Federal Services, Inc.
(FHFS) under request for proposals (RFP) No. MDA906-93-R-0004.[1] The
RFP sought proposals to provide managed health care services for
CHAMPUS beneficiaries in Arkansas, Oklahoma, Louisiana, and Texas.
The RFP contemplated award of a contract for a base period with five
1-year options. BCBSTX protests that the agency failed to conduct
meaningful discussions, improperly evaluated various aspects of its
and FHFS' proposals, and failed to perform an appropriate
cost/technical tradeoff.
We deny the protest.
BACKGROUND
The RFP was issued on November 1, 1993, and sought proposals for the
development and operation of a health care delivery and support system
for CHAMPUS beneficiaries in the States of Oklahoma and Arkansas and
major portions of the States of Texas and Louisiana, which are
collectively referred to as Region 6. Offerors were required to
submit proposals in two parts: one part to perform administrative
functions (primarily claims processing and support services) and one
part to provide health care services. Separate technical and business
proposals were required and the RFP provided that, in the source
selection decision, technical factors would be given a weight of 60
percent and business factors a weight of 40 percent.
Regarding the health care portion of the contract, proposals were
required to offer CHAMPUS beneficiaries three health care options with
increasing levels of managed care. The required options were (1)
"TRICARE Standard," under which beneficiaries select providers of
their own choosing who are compensated on a fee-for-service basis; (2)
"TRICARE Extra," under which the beneficiaries' health care is to be
provided by members of the contractor's preferred provider
organization (PPO); and (3) "TRICARE Prime," under which the
beneficiaries' health care is to be provided through a
contractor-established health maintenance organization (HMO).
The RFP stated that the government intended to award a fixed-price
contract (with the price subject to specified adjustments during
performance). For the administrative portion of the business
proposal, the RFP required conventional firm, fixed-price proposals.
Under the health care portion of the contract, the fixed-price nature
of the contract was modified by a risk-sharing arrangement which is a
key characteristic of OCHAMPUS managed-care solicitations. Under this
arrangement, in the event of health care cost overruns or underruns,
the government and the contractor will share the responsibility or
benefits respectively through application of loss-sharing or
gain-sharing formulas.
In the event of cost overruns, responsibility for excess costs will be
shared by the government and the contractor, pursuant to the
established formula, until the contractor has absorbed overruns equal
to the amount of equity which the contractor offered to put at risk in
its proposal.[2] At that point, the contract will begin to function
on a cost reimbursement basis, with the government paying for all
additional health care costs.
Actual health care costs will be a function of a large number of
variables, such as the number of CHAMPUS beneficiaries who enroll in
the HMO or PPO options, the level of provider discounts, inflation,
and the contractor's ability to manage health care utilization.
Offerors were required to propose "trend factors" (which are
essentially multiplication coefficients) for each of the variables;
the proposed trend factors represented the offerors' prediction of its
cost performance in comparison to the agency's experience during the
12-month period immediately preceding contract performance. Data
estimates regarding the government's experience during the preceding
12-month period (referred to as the "data collection period" or "DCP")
was provided as part of the RFP. Thus, in the event an offeror was
predicting that its costs would be identical to those experienced in
the DCP, its proposed trend factor would be 1.0. If the offeror was
predicting a cost decrease, its proposed trend factor would be less
than 1.0, while if it was predicting a cost increase its proposed
trend factor would be greater than 1.0.[3]
The RFP distinguished between trend factors over which the contractor
was likely to have control and those over which the contractor was
unlikely to have control.[4] Specifically, in projecting actual
health care costs, the RFP stated that offerors' proposed controllable
trend factors would be evaluated "based upon the justification and
documentation provided for the trends in the business proposal" and
upon "the government's estimate of the likely trends under the
offeror's approach." Based on this assessment, the agency would
adjust the offeror's proposed figures to reflect the agency's judgment
regarding the actual costs that would be incurred under each offeror's
approach. Regarding evaluation of the uncontrollable trend factors,
the RFP stated that the agency would substitute its independent
government cost estimate (IGCE) for those proposed by offerors, except
in instances in which an offeror had "a signed capitation agreement
with specified capitation rates." The agency's final assessment of
projected actual health care costs for each offeror would reflect the
costs proposed, as modified by the agency's adjustments of either
controllable or uncontrollable factors.
The RFP further explained that, after calculating the projected costs
associated with each proposal (including the fixed-price
administrative area and health care profit), the agency would estimate
the cost to the government (pursuant to the risk-sharing formula) of
various percentages of overruns and underruns relative to each
offeror's projected cost. This analysis was performed in order to
assess each proposal's "sensitivity" to cost overruns or underruns.[5]
The resulting calculation would lead to a further adjustment to the
total probable cost for the proposal through the addition of a "risk
premium."
Initial proposals were received from five offerors, including BCBSTX
and FHFS, by August 31, 1994. Following evaluation, all five
offerors' proposals were determined to be within the competitive
range and discussions occurred between October 1994, and February
1995. Best and final offers (BAFO) were submitted on February 27.
Following BAFO evaluation, FHFS' and BCBSTX's proposals were
determined to be the two proposals offering the greatest value to the
government. BCBSTX's proposal received a final technical score of
610.177 at a total evaluated price of $2.361 billion; FHFS' proposal
received a technical score of 566.239 at a total evaluated price of
$1.988 billion. A best buy analysis was performed, applying the
appropriate weighting factors to the cost and technical scores, which
resulted in a best buy score of 956.795 for the FHFS proposal and
936.824 for the BCBSTX proposal.
After considering underlying reports and analyses of the business
proposal evaluation team (BPET) and the source selection evaluation
board (SSEB), the source selection advisory council (SSAC) recommended
that the source selection authority (SSA) award a contract to FHFS,
stating
"(1) While BCBSTX has significant strengths in the administrative
areas, these strengths were not perceived to be worth an
additional $120 million in costs to the Government. (2) In the
area of health care delivery, the strengths of FHFS, plus their
lower cost of approximately $370 million represent substantial
cost savings to the Government."[6]
The SSA reviewed the complete file and recommendations and selected
FHFS for contract award. The contract was awarded on April 28. On
May 8, BCBSTX filed its initial protest. Following an agency
debriefing, BCBSTX filed its first supplemental protest on May 19.
The agency responded to BCBSTX's initial and first supplemental
protests in its report to our Office on June 23. In a letter dated
July 10, BCBSTX stated
"In light of the expansive Agency Report and documents supporting
that report, as well as our conclusion that certain of the grounds
raised in the original and first supplemental protest have been
adequately addressed by the agency, these comments focus only on
those remaining grounds of protest . . . [on] which [BCBSTX]
requests the GAO to render a decision."[7]
On July 10, BCBSTX filed a second supplemental protest based on
information obtained from the June 23 agency report.
DISCUSSION
Meaningful Discussions
BCBSTX first protests that the agency failed to engage in meaningful
discussions regarding the price it proposed to perform the
administrative portion of the contract. In this regard, BCBSTX's
initial price for administrative services exceeded the government's
estimate by approximately [deleted] percent. BCBSTX asserts that "[an
offeror's] price should be the subject of discussions if that price
exceeds the government's own corresponding price estimate" and, on
that basis, maintains that the award to FHFS should be overturned.[8]
The agency responds that although BCBSTX's initially proposed price
for administrative services exceeded the IGCE by approximately
[deleted] percent, the agency did not view that price as unreasonably
high. Accordingly, the agency concluded that any specific advice to
BCBSTX's regarding its proposed administrative price would have,
effectively, communicated to BCBSTX that its price was too high in
relation to another offeror.[9]
An agency may not inform an offeror of a cost it must meet to obtain
further consideration or of its relative price standing, Innovative
Training Sys., B-251225.3, Oct. 19, 1993, 93-2 CPD 232, and need not
inform an offeror that its cost is too high unless the government has
reason to think the cost is unreasonable. Price Waterhouse, 65 Comp.
Gen. 205 (1986), 86-1 CPD 54; Applied Remote Technology, Inc.,
B-250475, Jan. 22, 1993, 93-1 CPD 58; Warren Elec. Constr. Corp.,
B-236173.4; B-236173.5, July 16, 1990, 90-2 CPD 34. Further, an
agency has no duty to enter into price discussions with an offeror
solely because its price is significantly higher than the prices
proposed by other offerors. In fact, pursuant to Federal Acquisition
Regulation (FAR) 15.610(e)(2), an agency is prohibited from
informing an offeror that its price is high in relation to another
offeror's, unless its price is unrealistic for what is offered.
Here, the RFP did not designate a particular approach which offerors
were required to employ in performing the administrative services;
rather, each offeror was responsible for preparing its own technical
approach and proposed price based on its analysis of what would be
most advantageous to the government. The agency found that BCBSTX's
technical approach to performing the administrative functions was
superior and its overall technical rating reflected numerous
strengths. In this context, the agency did not view BCBSTX's price
for administrative services as unreasonably high; rather, it simply
concluded ultimately that the associated technical benefits were not
worth the additional cost to the government. On this record, given
that an agency is not required to inform an offeror that its price is
higher than the government estimate unless the agency believes the
price is unreasonable, the agency's decision not to advise BCBSTX that
its administrative price was higher than the IGCE is unobjectionable.
Agency's "Sensitivity Analysis"
BCBSTX next challenges the "sensitivity analysis" employed by the
agency to assess a "risk premium" for each proposal. BCBSTX protests
that the agency's analysis in this regard was flawed in that it
"assume[d] that BCBSTX and FHFS were equally likely to overrun or
underrun health care costs."
BCBSTX's complaint fails to recognize that, before performing the
sensitivity analysis, the agency conducted an extensive evaluation of
each offeror's projected health care costs, thoroughly considering the
unique aspects of each offeror's proposed controllable trend factors.
Specifically, the agency adjusted each offeror's proposed price in
each instance where it was not fully persuaded that the costs proposed
accurately reflected the costs likely to be incurred, given the
offeror's proposed approach. The result of this evaluation was a most
probable cost for each offeror's proposal which reflected the agency's
best judgment as to the likely costs to be incurred by each offeror.
Accordingly, the agency's subsequent sensitivity analysis assumed that
the likelihood of overruns or underruns, in relation to the agency's
best judgment of the offerors' respective costs, would be the same for
all offerors. In essence, the agency reasonably believed that its
individual assessments of the offerors' likely costs were equally
reliable. See QualMed, Inc., B-257184.2, Jan. 27, 1995, 95-1 CPD
94. Accordingly, we find no basis to question this aspect of the
agency's cost analysis.
FHFS' BAFO Price Reduction
BCBSTX next protests that the agency erred in its cost evaluation of
FHFS' proposal by failing to specifically evaluate the reasons for
FHFS' reduction in health care costs in its BAFO. BCBSTX accurately
notes that FHFS' health care costs were reduced by approximately
[deleted] percent between submission of its initial proposal and its
BAFO. BCBSTX asserts "there is nothing in the record that shows that
[the agency] questioned this reduction, evaluated whether it was
reasonable, or assessed the impact of the reduction on FHFS' technical
capabilities."
This allegation is inconsistent with the record. First, the final
BPET report specifically listed the differences in FHFS' health care
costs between its initial proposal and BAFO, by option period and
contract line item, reflecting the agency's individual assessment of
each aspect of FHFS' revised price. More importantly, BCBSTX's
protest fails to take into consideration the fact that the
government's IGCE for health care costs decreased by approximately
[deleted] percent between submission of initial proposals and BAFOs.
This reduction was based on revised DCP data as well as changes in the
RFP requirements.[10] Finally, in raising this issue, BCBSTX neglects
to mention that its own proposed health care costs decreased between
submission of initial proposals and BAFOs by almost [deleted] percent.
On the record presented here, this portion of BCBSTX's protest is
without merit.
Evaluation of DRG Capital/DME Costs
BCBSTX next protests that the agency failed to reasonably evaluate
FHFS' proposal with regard to one of the cost categories--diagnostic
related group (DRG) capital and direct medical education (DME)
costs.[11] BCBSTX notes that FHFS' proposal was significantly higher
than the agency's IGCE for DRG capital/DME costs and maintains that
the agency failed to properly consider the risk associated with this
aspect of FHFS' proposal.
The estimated data in the DCP period regarding DRG capital/DME costs
supported the agency's IGCE of [deleted] million in DRG capital/DME
costs for the base period and [deleted] million over the entire
contract period. FHFS' proposed costs for the entire contract period
amounted to [deleted] million. As discussed above, the RFP provided
for adjustments to offerors' proposed prices on the basis of changes
in DCP data. Because FHFS' proposed DRG capital/DME costs were
significantly greater than the government's IGCE, a change in the
baseline DCP data would have a magnifier effect on FHFS' proposed
price.[12] BCBSTX asserts that the agency failed to give appropriate
consideration to this risk during its evaluation of FHFS' proposal.
Contrary to BCBSTX's allegation, the agency did, in fact, thoroughly
consider the potential impact of FHFS' proposed DRG capital/DME costs.
The BPET report specifically stated
"There is one additional element of risk we wish to bring to the
attention of the SSAC concerning [FHFS] . . . . There is an
issue concerning [FHFS'] proposed prices for DRG capital and
Direct Medical Education (DME) costs which creates some additional
risk to the Government, as follows: . . . [FHFS] formally
proposed approximately [deleted] million for DRG capital/DME costs
over the life of the contract. This amount is approximately
[deleted] times the level of DRG capital/DME costs that we
estimated that FHFS would experience under our cost realism
estimates ([deleted] million). While our cost realism methodology
reflects our estimate for these costs rather than [FHFS'] estimate
(because these costs are classified as an uncontrollable cost
factor), our methodology does not take into account the risk
associated with the fact that, under the RFP's bid price
adjustment provisions, the contractors' proposed prices for DRG
capital/DME in each Option Period will be multiplied by the ratio
of the actual level of these costs in the DCP to the DCP level
projected in the RFP. Further, while the [deleted] million of DRG
capital/DME costs projected for the DCP is relatively low compared
to health care costs overall, the effect of this DCP adjustment
would be magnified because of FHFS' significant overestimate of
these costs during the Option Periods."
Consistent with this recognition of risk, and properly taking into
account the risk-sharing provisions of this procurement, the agency
calculated that FHFS' proposed DRG capital/DME costs added a risk
factor of approximately [deleted] million to FHFS' proposed price;
FHFS' final evaluated price properly reflected this assessment. In
the context of evaluating FHFS' DRG capital/DME costs, the agency also
considered whether FHFS' status as the incumbent health care services
provider for approximately 15 percent of the Region 6 CHAMPUS
beneficiaries affected its risk assessment.[13] Noting that DRG
capital/DME costs are controlled by hospitals rather than the
contractor and that FHFS does not own any hospitals in Region 6, the
agency concluded that it would not assess further risk based on FHFS'
status as the health care provider for BRAC sites in Region 6.
Finally, the agency noted that FHFS' high estimate for DRG capital/DME
expenses would have an equally magnified impact on its adjusted price
in the event the actual DCP data was lower than the government's
estimate--that is, if actual DRG capital/DME costs for the DCP were
lower than estimated, FHFS' adjusted price would decrease
significantly. Given that the DCP estimate represented the most
accurate information available regarding what the actual DCP data
would be, the agency concluded there was the same likelihood that the
actual DCP data would be less than the initial estimate as there was a
likelihood that the data would be greater than the initial estimate.
When agencies evaluate proposals for award of contracts with cost
reimbursement aspects, the agency must perform a cost realism analysis
to determine the extent to which an offeror's proposed costs represent
the true cost to the government. CACI, Inc.--Fed., 64 Comp. Gen. 71
(1984), 84-2 CPD 542. Because the contracting agency is in the best
position to make this cost realism determination, our review of an
agency's exercise of judgment in this area is limited to determining
whether the determination was reasonably based and not arbitrary.
General Research Corp., 70 Comp. Gen. 279 (1991), 91-1 CPD 183,
aff'd, American Management Sys., Inc.; Department of the Army--Recon.,
70 Comp. Gen. 510 (1991), 91-1 CPD 492; Grey Advertising, Inc., 55
Comp. Gen. 1111 (1976), 76-1 CPD 325.
Here, we find the agency's evaluation of the risk associated with
FHFS' proposed DRG capital/DME expenses reasonably based. As noted
above, the agency did, in fact, consider the potential impact that
FHFS' proposed DRG capital/DME costs could have on the government's
costs, accurately calculating a potential [deleted] million additional
risk to the government under the appropriate risk-sharing provisions
of the RFP. This assessment was properly reported to and considered
by the SSA in the ultimate decision to award the contract to FHFS.
Regarding the agency's assumption that increases or decreases in
relation to its estimated DCP data were equally likely, BCBSTX offers
no evidence that the DCP data would be more likely to be either higher
or lower than the initial estimate. Accordingly, we find no basis to
question the agency's evaluation of this portion of FHFS' proposal.
[Deleted]
Evaluation of FHFS' Resource Sharing
BCBSTX next protests that award to FHFS was improper because FHFS'
proposal "made inconsistent and ambiguous representations concerning
resource sharing." BCBSTX maintains that the agency was obligated to
reject FHFS' proposal because it could not reasonably evaluate what
FHFS intended to propose in this regard.
Under the provisions of this RFP, resource sharing refers to the
contractor's placement of resources--that is, personnel and/or
equipment--at military treatment facilities (MTFs) with the purpose of
encouraging beneficiaries to use the MTFs. Because costs associated
with MTFs are easier to control, such expenditure of resources can
result in net program savings; that is, the level of resources spent
to encourage MTF use may be less than the savings resulting from those
expenditures.
This portion of BCBSTX's protest is based on the fact that, in one of
the exhibits which the RFP required offerors to submit, FHFS proposed
"0" resource sharing expenditures; yet, its proposal contemplated
program savings based on resource sharing expenditures. Thus, BCBSTX
asserts that FHFS' proposal was internally inconsistent and,
therefore, should have been rejected as unacceptable.
The agency responds that it evaluated FHFS' "0" entry as reflecting a
"net" approach to resource sharing.[14] The agency notes that this
interpretation of FHFS' proposal was consistent with other portions of
FHFS' business and technical proposal in which it clearly contemplated
resource sharing expenditures. Specifically, FHFS' business proposal
explicitly stated that FHFS intended to incur [deleted] million for
resource sharing in option year 1; [deleted] million in option year 2;
[deleted] million in option year 3; [deleted] million in option year
4; and [deleted] million in option year 5. Similarly, FHFS' technical
proposal devoted [deleted] pages to discussing how it intended to
coordinate with MTFs to identifying resource sharing opportunities and
specifically stated that FHFS would "project the amount of resources
and actual cost of obtaining them" and "subtract the resource sharing
expense from the projected CHAMPUS cost."
In determining whether a proposal must be rejected as technically
unacceptable a procuring agency must assess whether the proposal,
reasonably read as a whole, offers to perform all material terms of
the solicitation without exception. See, e.g., Keyes Fibre Co.,
B-225509, Apr. 7, 1987, 87-1 CPD 383. Here, we conclude that the
agency reasonably determined, based on its review of FHFS' entire
proposal, that FHFS' "0" proposal for resource savings in one of the
required exhibits represented a "net" savings approach.[15]
Accordingly, we find no merit in this portion of BCBSTX's protest.
Cost/Technical Tradeoff
Finally, BCBSTX protests that the agency failed to conduct a
reasonable cost/technical tradeoff. BCBSTX notes that the RFP
provided that technical factors would be given a weight of 60 percent
and cost/price factors a weight of 40 percent for purposes of the
cost/technical tradeoff, and that its proposal was rated technically
superior to FHFS' proposal. In view of this, BCBSTX asserts that the
agency failed to adequately justify its decision to award a contract
on the basis of FHFS' lower technically rated, lower-priced proposal.
In responding to this portion of BCBSTX's protest, the agency has
provided a detailed description, along with supporting documentation,
describing the analysis it performed in arriving at the source
selection decision. As discussed above, the BPET and the SSEB
performed evaluations of the individual aspects of each offeror's
technical and business proposals. During the evaluation there were
"crosstalks" among the evaluators to ensure a complete understanding
of each offeror's approach. The conclusions of the BPET and the SSEB
were formally documented, extensively detailing the perceived
strengths and weaknesses of each proposal, and were included in the
final reports which were forwarded to the SSAC. In instances where
the SSAC had questions or concerns regarding the evaluation, questions
were sent back to the BPET or SSEB for appropriate written responses.
In addition, the SSAC was briefed extensively by the BPET and the SSEB
in face-to-face meetings. After determining that FHFS' and BCBSTX's
proposals offered the greatest value, the SSAC focused on the various
strengths of each proposal. In performing this analysis, the SSAC
prepared two tables, which listed each of BCBSTX's and FHFS' proposal
strengths by technical task and, under the heading "value to the
government," specifically assessed each strength as having low,
medium, or high value to the government. Finally, based on its review
of the entire record before it, as well as its own documented
analysis, the SSAC concluded
"Analysis of the strengths of the technical proposals of [BCBSTX]
and FHFS reveals savings to the Government in two areas. (1)
While BCBSTX has significant strengths in the administrative
areas, these strengths were not perceived to be worth an
additional $120 million in costs to the Government. (2) In the
area of health care delivery, the strengths of FHFS, plus their
lower cost of approximately $370 million, represent substantial
costs savings to the Government."
The SSA executed the source selection statement on April 28, 1995. In
that statement, the SSA stated that he had reviewed all of the SSEB,
BPET and SSAC reports, along with various other documents. In his
statement, he summarized the strengths of both BCBSTX and FHFS, as
well as each offeror's expected costs and various aspects of those
costs, concluding
"I believe that the Best Buy Analysis clearly substantiates award
to the number one best buy offeror, FHFS. The difference in total
proposed price of FHFS' proposal ($1.822 million) versus that of
BCBSTX ([deleted] million) of [deleted] million is a very
significant factor of this final award decision. While the cost
realism analysis decreases this difference to $373 million, the
proposal submitted by FHFS continues to provide a very
advantageous price to the Government."
In a negotiated procurement, an agency may make award to a
lower-priced, lower technically rated offeror if it determines that
the price premium involved in awarding to a higher-rated,
higher-priced offeror is not justified given the acceptable level of
technical competence obtainable at the lower price. Securiguard,
Inc.; Vance Uniformed Protection Servs.; MVM, Inc., B-254392.8 et al.,
Feb. 9, 1994, 94-1 CPD 92; W.M. Schlosser Co., Inc., B-247579.2,
July 8, 1992, 92-2 CPD 8. We will review such tradeoffs to assure
that they are reasonable in light of the evaluation scheme. Lockheed
Corp., B-199741.2, July 31, 1981, 81-2 CPD
71.
Here, the record amply supports the reasonableness of the agency's
cost/technical tradeoff. The record specifically reflects that the
SSA reviewed and considered each of the BPET, SSEB, and SSAC reports
which extensively documented the strengths and weaknesses of each
offeror. In this regard, the SSAC report included a head-to-head
comparison of BCBSTX's and FHFS' respective strengths, by task to be
performed, assessing a relative value to the government applicable to
each strength. Accordingly, we find without merit BCBSTX's assertion
that the agency failed to perform or adequately document its
cost/technical tradeoff.
The protest is denied.
Comptroller General
of the United States
1. Throughout this decision, we refer to the program as CHAMPUS, and
the agency as OCHAMPUS.
2. The RFP required offerors to place a minimum of $60 million of
equity at risk with at least $15 million pledged per year, but
permitted them to exceed this minimum in order to make their proposals
more attractive to the government.
3. Because the DCP data provided in the RFP was preliminary, the RFP
stated that the data would be revised at two specified points during
contract performance. The revised data would lead to adjustments in
the contractor's proposed price for purposes of applying the risk
sharing formula. Thus, the contractor's actual performance would be
more accurately measured in light of its required operating
environment.
4. Controllable trend factors included provider discounts, resource
sharing, and penetration rates. Uncontrollable trend factors included
inflation, volume tradeoff, and diagnostic related group capital and
direct medical education expenditures.
5. For example, a proposal that offered more than the minimum required
level of equity at risk would be less "sensitive" to cost overruns
since the point of total government responsibility for costs would be
delayed.
6. This $370 million figure represents the overall evaluated cost
differential, which includes the $120 million in administrative costs.
7. Accordingly, our decision today does not address the issues raised
in BCBSTX's initial and first supplemental protest which BCBSTX did
not pursue following receipt of the agency report. Datum Timing, Div.
of Datum, Inc., B-254493, Dec. 17, 1993, 93-2 CPD 328; Heimann Sys.
Co., B-238882, June 1, 1990, 90-1 CPD 520.
8. In its July 10 comments, BCBSTX for the first time asserted that
certain questions posed by the agency during discussions were designed
to affirmatively mislead BCBSTX. The record is clear that BCBSTX knew
all of the information on which this allegation is based after the
agency debriefing on May 5. Accordingly, BCBSTX was required to raise
this issue within 10 working days after the debriefing. 4 C.F.R.
21.2(a)(2) (1995). Since BCBSTX did not raise this allegation until
July 10, the issue is untimely raised and will not be considered.
9. The records shows that, in fact, two other offerors proposed
administrative prices significantly higher than BCBSTX, and a third
offeror's proposed administrative price was virtually identical to
BCBSTX.
10. For example, the RFP requirements were changed between submission
of initial proposals and BAFOs to incorporate a "uniform benefit" in
the CHAMPUS program. This change provided a basis for some cost
reduction.
11. DRG payments are prospective payments for hospital operating costs
that are based on the diagnosis of the patient and resources routinely
needed to treat that condition; DRG payments generally do not vary.
DRG capital/DME payments are retrospective payments to hospitals that
are not included in prospective DRG hospital payments; DRG capital
costs include interest, rent and depreciation. DME costs are expenses
directly related to conducting graduate medical education programs,
such as the salaries of interns and residents. Hospitals submit
invoices for DRG capital/DME costs directly to the contractor. The
portion of a hospital's DRG capital/DME costs applicable to the
CHAMPUS program is determined by multiplying the hospital's total DRG
capital/DME costs by the ratio of CHAMPUS patient days to total
patient days. Thus, DRG capital/DME costs are controlled by the
hospital, not the contractor. Consistent with this, the RFP provided
that DRG capital/DME costs were to be treated as an uncontrollable
trend factor.
12. That is, a 50-percent increase or decrease in the DCP data, which
would result in a [deleted] million increase or decrease to the IGCE
(50 percent of [deleted] million), would result in a [deleted] million
increase or decrease in FHFS' proposed price (50 percent of [deleted]
million).
13. FHFS is the incumbent contractor providing health care services to
CHAMPUS beneficiaries in Base Realignment and Closure (BRAC) sites in
Region 6. The BRAC sites account for approximately 15 percent of the
DCP health care costs in the Region.
14. That is, the agency evaluated FHFS' proposal as anticipating
savings as a result of its resource sharing expenditures at a level in
excess of its resource sharing expenditures. Thus, the agency
concluded that FHFS' proposed savings due to resource sharing were
decreased by the amount of its expenditures; accordingly, its resource
sharing expenditures were proposed at "0" to ensure that the agency
did not inadvertently subtract those expenditures from its proposed
savings a second time.
15. In QualMed, Inc., B-257184.2, Jan. 27, 1995, 95-1 CPD 94, we
similarly rejected the argument BCBSTX now raises under virtually
identical circumstances.