BNUMBER:  B-278189.3; B-278189.4 
DATE:  February 4, 1998
TITLE: Foundation Health Federal Services, Inc.; Humana Military, B-
278189.3; B-278189.4, February 4, 1998
**********************************************************************

DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective 
Order.  This redacted version has been approved for public release.
Matter of:Foundation Health Federal Services, Inc.; Humana Military 
          Healthcare
            Services, Inc. 

File:     B-278189.3; B-278189.4

Date:February 4, 1998

Thomas P. Humphrey, Esq., Robert M. Halperin, Esq., Christopher M. 
Farris, Esq., Lloyd M. Weinerman, Esq., Frederick W. Claybrook, Esq., 
Alan W.H. Gourley, Esq., Benjamin T. Butler, Esq., and Raymond F. 
Monroe, Esq., Crowell & Moring, for Foundation Health Federal 
Services, Inc., and Alan C. Brown, Esq., Thomas C. Papson, Esq., 
Patrick K. O'Keefe, Esq., Kevin C. Dwyer, Esq., Jeffrey P. 
Hildebrandt, Esq., Suzanne L. Karbarz, Esq., Jonathan L. Diesenhaus, 
Esq., and Joanne Zimolzak, Esq., McKenna & Cuneo, for Humana Military 
Healthcare Services, Inc., the protesters.
Marcia G. Madsen, Esq., David F. Dowd, Esq., Kathy Bucher, Esq., Mark 
Lesko, Esq., Ross Branstetter, Esq., Stephanie P. Gilson, Esq., 
Jessica C. Abrahams, Esq., and Scott E. Pickens, Esq., Miller & 
Chevalier, for Anthem Alliance for Health, Inc., an intervenor.
Kenneth S. Lieb, Esq., and Gerald A. Wesley, Esq., TRICARE Support 
Office, for the agency.
David A. Ashen, Esq., and John M. Melody, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protest of award is sustained where agency failed to disclose the 
relative importance of the significant evaluation considerations as 
applied in the evaluation, and based the source selection decision 
partly on unwarranted [deleted] ratings in functional experience and 
performance areas, where the solicitation required a neutral rating 
because the offeror lacked relevant experience as defined by the 
solicitation.

DECISION

Foundation Health Federal Services, Inc. and Humana Military 
Healthcare Services, Inc. protest the TRICARE Support Office's (TSO) 
award of a contract to Anthem Alliance for Health, Inc., under request 
for proposals (RFP) No. MDA906-95-R-0005.   The RFP sought proposals 
to provide health care and associated administrative services in the 
states of North Carolina, Wisconsin, Michigan, Illinois, Indiana, 
Ohio, and Kentucky, and in portions of Virginia, West Virginia, 
Tennessee, and Missouri (Managed Care Support Regions 2 and 5) for 
Military Health Services System (MHSS) beneficiaries, who include 
military service retirees, their dependents, and dependents of active 
duty members.  Humana and Foundation challenge the evaluation of cost 
and technical proposals and the acceptability of Anthem's proposal.

We sustain the protests.

BACKGROUND

Under the RFP, issued on January 16, 1994, offerors were required to 
propose three health care options--the TRICARE options--for MHSS 
beneficiaries.  Specifically, the RFP required offerors to propose a 
health care system under which MHSS beneficiaries could opt to obtain 
services:  (1) from providers of their own choosing on a 
fee-for-service basis (the TRICARE Standard program); (2) from members 
of the contractor's preferred provider organization (the TRICARE Extra 
program); or (3) from a contractor-established health maintenance 
organization (the TRICARE Prime program).  Under the latter, TRICARE 
Prime program, enrollees agree to seek all primary, non-emergency, 
non-mental health care from a designated primary care manager or 
gatekeeper.

The RFP stated that the government intended to award a fixed-price 
contract (with the price subject to specified adjustments during 
performance) for a base period with five 1-year options.  The 
fixed-price nature of the contract, however, was modified by a 
risk-sharing arrangement under which, in the event of health care cost 
overruns, the government and the contractor will share responsibility 
for absorbing the overrun in excess of the contractor's profit and 1 
percent of the adjusted health care price.  Responsibility would 
continue to be shared under a formula set out in the RFP until the 
contractor absorbed overruns equal to its cumulative net gains under 
the contract and the amount of contractor equity that it put at risk 
in its proposal.  At that point, the contract would begin to function 
on a cost reimbursement basis, with the government assuming total 
responsibility and paying for all additional health care costs.  The 
RFP required that offerors place a minimum of $75 million at risk.[1]

The RFP stated that the agency intended to award a contract "to the 
offeror whose proposal is most advantageous to the Government, price 
and other factors considered," and further stated that in this 
determination, technical content would be more important than cost.  
Specifically, the weighting ratio was set out as 60 percent for 
technical and 40 percent for cost.  The solicitation set forth seven 
"major technical factors for the evaluation," and the evaluated 
technical score was the result of the evaluation of 11 tasks that are 
to be performed, plus experience and performance, all of which were 
listed as subfactors.

TSO received proposals from Anthem, Humana, and Foundation by closing 
time on August 2, 1996.  All proposals were included in the 
competitive range.  At the conclusion of discussions, the agency 
requested submission of best and final offers (BAFO).

Based upon the evaluation of BAFOs, the source selection advisory 
council (SSAC) recommended to the source selection authority (SSA) 
that award be made to Anthem, whose proposal was evaluated as offering 
the lowest total expected government cost and received the highest 
technical score and highest overall "best buy" score.  According to 
the SSAC, neither Foundation's nor Humana's higher cost proposals 
offered significant advantages to the government which outweighed 
Anthem's cost advantage.  The specific results of the evaluation as of 
the time of award, and as subsequently corrected in response to the 
bid protests, are as follows:

                  Anthem 
                  (original/
                  corrected)    Humana
                                (original/
                                corrected)   Foundation
                                             (original/
                                             corrected)

    Evaluated Cost$3,631,409,997/
                  $3,659,380,726$3,855,809,818/
                                $3,870,444,156$3,886,720,190/
                                             $3,917,232,685

    Cost Score[2] 1,000/1,000   942/945      934/934

    Technical Points[deleted]   [deleted]    [deleted]

    Technical Score[3]1,000/1,000977/984     980/988

    Overall Best Buy Score1,000/1,000963/968 962/966
Based upon his review of the strengths and weaknesses of each 
proposal, the SSA concurred in the recommendation of the SSAC, 
concluding that, "given the relative equality of the technical 
proposals," the substantially lower expected cost of Anthem's proposal 
justified award to that firm.  Upon learning of the award to Anthem, 
Humana filed its protest with our Office.  Foundation, after first 
filing a protest with the agency, then filed its protest with our 
Office. 

EVALUATION CRITERIA

Humana and Foundation assert that the solicitation did not advise 
offerors of the evaluation criteria TSO actually used and the relative 
weights it assigned the criteria.  In this regard, the solicitation 
advised offerors as follows:

     The eleven (11) Tasks of Section C plus the Experience and 
     Performance Factor have been grouped into the following major 
     technical factors for the evaluation:

        (1) Health Care Providers--Organization, Operations and 
        Maintenance (Task # I) and Health Care Services--Utilization 
        and Quality Management (Task # III);

        (2) Management (Task # VIII), and Start-up and Transition 
        (Task # XI); 

        (3) Claims Processing (Task # V), Reimbursement (Task # IX), 
        and Program Integrity (Task # VI); 

        (4) Contractor Responsibilities for Coordination and Interface 
        with the Lead Agents and MTFs (Task # II);

        (5) Experience and Performance;

        (6) Enrollment Marketing and Support Services (Task # IV); 
        [and] 

        (7) Fiscal Management and Controls (Task # VII), and Automated 
        Data Processing (Task # X).

     The seven major technical factors are listed in their descending 
     order of importance.  Within the seven technical factors, the 
     Health Care Providers--Organization, Operations and Maintenance 
     (Task # I) and Health Care Services--Utilization and Quality 
     Management (Task # III) will have a higher technical weighting 
     than the other Tasks.  The subfactors provided under each of the 
     major factors are not listed in
      any specific order of importance and are only included for 
     purposes of amplification.  The offeror must respond 
     satisfactorily to all requirements.

The actual evaluation weights of the tasks and experience/performance 
factor, which were not disclosed in the solicitation, were as follows:

 MAJOR TECHNICAL FACTORTASK                         WEIGHT 

First             Task I/Health Care Providers      20 percent

                  Task III/Utilization and Quality Management10.1 
                                                    percent

Second            Task VIII/Management              10 percent

                  Task XI/Start-up and Transition   7.9 percent

Third             Task V/Claims Processing          10.8 percent

                  Task IX/Reimbursement             2.9 percent

                  Task VI/Program Integrity         1.8 percent

Fourth            Task II/Lead Agents and MTF Coordination and 
                  Interface                         12.5 percent

Fifth             Experience/Performance            12 percent

Sixth             Task IV/Enrollment, Marketing and Support Services10 
                                                    percent

Seventh           Task VII/Fiscal Management        1 percent

                  Task X/Automated Data Processing  1 percent

Humana and Foundation officials responsible for preparing their 
proposals testified during a hearing in this matter that they 
interpreted the solicitation as providing that the tasks within any 
major factor were of equal importance.  Hearing Transcript (Tr.) at 
21-22, 62, 67-68, 100, 113-114, 141-146. 

Section 2305 of Title 10 of the United States Code requires that 
solicitations "at a minimum" include "a statement of--(i) all 
significant factors and significant subfactors which the head of the 
agency reasonably expects to consider . . . ; [and] (ii) the relative 
importance assigned to each of those factors and subfactors. . . ."  
10 USC  sec.  2305(a)(2)(A) (1994).  Where an agency fails to advise 
offerors of the evaluation factors and the relative importance of 
those factors, there is no assurance that in selecting an offer for 
award it is obtaining what is most advantageous to the government, all 
factors considered.  Richard S. Cohen, B-256017.4, B-256017.5, June 
27, 1994, 94-1 CPD  para.  382 at 6; see generally Fiber Materials, Inc., 57 
Comp. Gen. 527, 530 (1978), 78-1 CPD  para.  422 at 5. 

The RFP did not disclose the relative importance of the significant 
evaluation considerations.  Although the solicitation stated that the 
seven major technical factors were listed in descending order of 
importance, an offeror could not ascertain from the solicitation the 
relative weight of each task/subfactor.  Thus, for example, one could 
not tell that Task I/Health Care Providers was nearly twice as 
important as Task III/Utilization and Quality Management; that Task 
IV/Enrollment, Marketing and Support Services, a subfactor under the 
sixth most important major factor, was more important than Task 
XI/Start-up and Transition, a subfactor under the second most 
important major factor; or that Task V/Claims Processing was six times 
more important than Task VI/Program Integrity, another subfactor under 
the same major factor.  The agency maintains that offerors were on 
notice that the tasks/subfactors were not of equal weight by virtue of 
the RFP statement that "[t]he subfactors provided under each of the 
major factors are not listed in any specific order of importance and 
are only included for purposes of amplification."  Where the 
solicitation is silent as to the relative importance of the 
subfactors, as was the case here, Serv-Air, Inc., B-194717, Sept. 4, 
1979, 79-2 CPD  para.  176 at 5, 8, offerors can assume that the subfactors 
are approximately equal.  Stone & Webster Eng'g Corp., B-255286.2, 
Apr. 12, 1994, 94-1 CPD  para.  306 at 5; Informatics, Inc., B-194734, Aug. 
22, 1979, 79-2 CPD  para.  144 at 6.

We conclude that TSO improperly failed to adequately disclose the 
weights of the significant evaluation factors and subfactors applied 
in the evaluation.                
                      
EXPERIENCE AND PERFORMANCE

Humana and Foundation argue that the evaluation of Anthem's experience 
and performance was inconsistent with a solicitation provision 
requiring a neutral rating for offerors lacking relevant experience.

Section M of the solicitation, "Evaluation Factors for Award," 
provided for the agency to evaluate an offeror's experience and 
performance in eight functional areas:  health care delivery, provider 
networks, providing resources, enrollment and marketing, beneficiary 
education and services, quality management monitoring and utilization 
management, claims processing, and management information systems.  
Offerors were required to describe relevant experience in each of 
these functional areas, including experience with other than military 
health care contracts.  Section M of the solicitation, however, was 
amended to state that "[o]fferors who do not have any CHAMPUS 
[Civilian Health and Medical Program of the Uniformed Services]/MCS 
[Managed Care Support]/CRI [CHAMPUS Reform Initiative]/MHSS [that is, 
military health care] experience in the following eight (8) functional 
areas will receive a neutral rating."

TSO reports that its evaluation of experience and performance was 
comprised of three components:  (1) the evaluation of experience and 
performance in the eight functional areas using offeror-provided 
documentation, reports and references for interviewing; (2) the 
evaluation of CHAMPUS/MHSS experience and performance (if any) in the 
eight functional areas using government-developed references and 
CHAMPUS/TRICARE reports; and (3) the evaluation of the experience and 
performance with respect to the five largest accounts of the prime 
contractor and the subcontractors.  For the first component, 
offeror-provided information, offerors received an adjectival 
rating--unsatisfactory, less than satisfactory, satisfactory, more 
than satisfactory, or exceptional--which was then translated into a 
numerical score.  For the second component, government-developed 
information, TSO applied a multiplier based on the quality of the 
performance (e.g., 1.10 for satisfactory experience, 1.15 for more 
than satisfactory, and 1.25 for exceptional) to the numerical score 
from the first component.  For example, according to the agency, if an 
offeror with satisfactory CHAMPUS/MHSS experience for health care 
delivery, for which it would have received 90 unweighted points, 
received a more than satisfactory rating with respect to 
government-developed information in that area, the offeror would have 
received an additional 14 point (rounded up) bonus for a total 
unweighted score in that area of 104 points.  For the third component, 
experience with the five largest accounts, offerors received a 
separate adjectival rating which translated into a numerical score 
that was added to the score derived from the first two components to 
arrive at the total unweighted experience and performance score.  This 
specific evaluation methodology was not disclosed in the solicitation.                             

Anthem was incorporated solely to bid on this procurement.  It had no 
prior military health care experience.  Anthem was evaluated with 
[deleted] ratings for three functional areas--[deleted]--based on the 
experience of subcontractors which did not have military health care 
experience in those areas.  (Anthem did not receive a bonus in those 
areas under the second, government-developed information component 
because it lacked such experience.)

Humana and Foundation argue that it was inconsistent with the neutral 
rating provision of the solicitation to evaluate Anthem as [deleted] 
with respect to functional areas in which neither Anthem nor its 
subcontractors possessed military health care experience.  We agree. 

Although during the protest it became clear that the agency did not 
believe that offerors without military health care experience should 
be limited to only a neutral rating, the RFP provided otherwise.  It 
stated that offerors without CHAMPUS/MCS/CRI/MHSS experience in the 
eight functional areas would receive a neutral rating.  Consequently, 
proposals submitted by offerors lacking relevant past performance 
history could neither be penalized nor credited with regard to the 
past performance factor.  C.W. Over and Sons, Inc., B-274365, Dec. 6, 
1996, 96-2 CPD  para.  223 at 6-7; see generally Excalibur Sys., Inc., 
B-272017, July 12, 1996, 96-2 CPD  para.  13 at 3-4.  It was inconsistent 
with the concept of a neutral rating for Anthem to be able to earn 
[deleted], which translated into a [deleted] increase in score over a 
satisfactory rating, for functional areas in which neither it nor its 
subcontractors possessed relevant experience as defined by the 
solicitation.  

TSO argues that denial of the bonus available to offerors with 
successful military health care experience where an offeror lacked any 
military health care experience in one of the functional areas was the 
equivalent of awarding a neutral rating in that area.  Further, TSO 
points out that the solicitation contemplated that offerors would 
furnish information concerning other than military health care 
experience, in addition to information concerning their military 
health care experience.  The agency argues that this request for 
information concerning other experience indicates that such other 
experience was considered relevant, and since such other experience 
was relevant, it was not reasonable for offerors to assume that an 
offeror with only such other experience, that is, without military 
health care experience, could not receive other than a neutral rating.  
TSO's arguments, however, ignore clear language of the solicitation 
which required that "[o]fferors who do not have any 
CHAMPUS/MCS/CRI/MHSS experience in the following eight (8) functional 
areas will receive a neutral rating."  The award of [deleted] even 
when accompanied by the denial of a military health care experience 
bonus, was not the equivalent of the required neutral rating.[4] 

As a result of receiving the three unwarranted [deleted] ratings in 
the experience and performance area, Anthem's weighted technical score 
was increased by [deleted].  In addition, the SSA, in his source 
selection decision, placed considerable emphasis on Anthem's [deleted] 
scores in concluding that there was a "relative equality of the 
technical proposals," such that the lower evaluated cost of Anthem's 
proposal justified award to that firm.  Specifically, the SSA noted 
that in evaluating the relative technical merit of proposals, "special 
focus was paid to . . . [deleted].  With respect to the latter 
element, he noted that "Anthem scored [deleted] in the Experience and 
Performance areas of [deleted] and [deleted].  This favorable emphasis 
on Anthem's unwarranted [deleted] ratings was inconsistent with the 
solicitation's neutral rating requirement.

COST EVALUATION

Humana and Foundation assert that TSO's cost evaluation was 
unreasonable because it was based on a flawed, methodology which did 
not reasonably determine the most probable cost to the government of 
an offeror's approach, and which in fact resulted in a number of 
arbitrary evaluated cost elements.  

Actual health care costs will be a function of a large number of 
variables, such as the number of MHSS beneficiaries (and, in 
particular, the participation of beneficiaries in the Prime and Extra 
options), inflation, and the contractor's ability to manage health 
care utilization.  The RFP explained that offerors were to propose 
"trend factors," with appropriate justification, for many of these 
variables. (There were more than 3,000 evaluated trend factors among 
the three proposals.)  Each trend factor was to represent the 
offeror's prediction as to what it would achieve for a given variable 
in relation to performance in the data collection period (DCP), that 
is, the projection of health care costs for the 12 months immediately 
preceding the start of health care under the awarded contract (the DCP 
data was set forth in the solicitation).  A trend factor of .95 
indicated that the offeror was estimating that it would achieve 
savings of 5 percent for that variable relative to the DCP, while a 
trend factor of 1.05 indicated that not only was the offeror 
estimating no savings, but indeed it was estimating that costs would 
be 5 percent higher than the DCP for that variable.  The RFP advised 
offerors that the agency would substitute its independent government 
cost estimate (IGCE) factors for those proposed by offerors in the 
case of trend factors over which the contractor was unlikely to have 
control (such as inflation).  With respect to the trend factors under 
the contractor's control (including utilization management, the 
percentage of beneficiaries participating in the Prime and Extra 
options (penetration rates), discounts offered by health care 
providers, coordination of benefits with other insurance, claims 
management, and health care cost savings resulting from resource 
sharing expenditures that facilitate utilization of excess MTF 
capacity), the RFP provided for the agency to evaluate the realism of 
each proposed factor based on the agency's judgment about "the likely 
trends under the offeror's approach" and make appropriate adjustments. 

TSO's Region 2/5 Price Evaluation Methodology memorandum provided for 
evaluation by the business proposal evaluation team (BPET) of 
[deleted].  In cases where an offeror proposed a trend factor that 
assumed [deleted], the memo provided for assignment of [deleted].

Although a significant number of evaluated ratings of the trend 
factors in the initial proposals were [deleted], nearly all of the 
evaluated ratings of the trend factors in the BAFOs were [deleted].  
For example, with respect to [deleted],[5] the BPET evaluated 
[deleted]; and it evaluated [deleted].

The protesters generally argue that in focusing the evaluation on 
[deleted] the proposed trend factors and [deleted] would achieve the 
proposed factors, the agency's cost realism evaluation failed to 
reasonably calculate the most probable cost to the government.  
Further, pointing out that nearly all of the evaluated BAFO trend 
factors were [deleted] that lacked the flexibility to arrive at a 
reasonable estimate of the most probable cost and, indeed, [deleted].

TSO argues that its evaluation methodology essentially was the same as 
that which was the subject of our decision in QualMed, Inc., 
B-257184.2, Jan. 27, 1995, 95-1 CPD  para.  94 at 6-10, in which we denied a 
protest against the agency's cost evaluation.  In addition, TSO 
defends the reasonableness of the challenged evaluation judgments as 
to specific trend factors.

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 likely true cost to the government.  CACI, Inc.--Fed., 64 Comp. 
Gen. 71, 75 (1984), 84-2 CPD  para.  542 at 5-6; Blue Cross Blue Shield of 
Texas, Inc., B-261316.4, Nov. 9, 1995, 95-2 CPD  para.  248 at 10-11.  
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 reasonable.  General Research Corp., 70 Comp. Gen. 
279, 282 (1991), 91-1 CPD  para.  183 at 5, aff'd, American Management Sys., 
Inc.; Department of the Army--Recon., 70 Comp. Gen. 510 (1991), 91-1 
CPD  para.  492; Grey Advertising, Inc., 55 Comp. Gen. 1111, 1126 (1976), 
76-1 CPD  para.  325 at 18.

Our Office held in QualMed that in view of the very large number of 
health care cost trend factors to be evaluated, TSO was not required 
to evaluate proposed trend factors using a continuous scale approach 
in which the agency calculated a precise figure to replace each of the 
trend factors found to be inadequately supported.  QualMed, Inc., 
supra, 95-1 CPD  para.  94 at 7-8.  As we explained in our decision: 

     In our view, the agency's approach was similar to a rating system 
     in which a feature in a proposal must be assigned a score of 1, 
     2, 3, 4, or 5, with no possibility of fractional scores in 
     between.  While such a system is not perfectly precise, it is not 
     unreasonable.  Developing precise numbers here would have been an 
     immense undertaking of questionable value.  There were hundreds 
     of specific trend factors to be evaluated in each proposal:  for 
     each controllable trend factor, such as utilization management, 
     there were permutations for a substantial number of variables 
     (for example, option year 1 vs. other years, active duty 
     dependent vs. non-active duty dependent, inpatient vs. 
     outpatient, medical/surgical vs. mental health).  Moreover, since 
     the figures selected here were predictions of future events that 
     are by their nature uncertain (for example, the number of active 
     duty dependents who would be admitted to hospitals for surgical 
     procedures in the fifth year of the contract), there would be no 
     reasoned basis to impose further precision.

Id.

We found no basis in QualMed to object to the use in these 
circumstances of an evaluation methodology that was not perfectly 
precise.  The record here, however, indicates that the evaluation 
methodology as applied by TSO can be so imprecise as to fail to ensure 
a reasonable cost realism analysis in some circumstances.

In this case, some evaluated trend factors appear to have been the 
result of an arbitrary application of the evaluation methodology.  For 
example, [deleted], even though [deleted].  Testimony by the agency's 
lead cost evaluator suggested that there should not be a significant 
difference between the two, and [deleted] (rather than vice versa, as 
the agency concluded).  The resulting discrepancy appears to be the 
result of the application of [deleted].  For example, for [deleted][6] 
Anthem proposed [deleted] was evaluated at [deleted].  In contrast, 
[deleted] Anthem proposed [deleted] and was evaluated at [deleted].  
According to the leading cost evaluator, the "potential anomaly" in 
this regard:

     is completely caused by the fact that [deleted].  They assumed 
     [deleted] agree in general . . . that [deleted].

Tr. at 250.  

Likewise, Anthem was evaluated as [deleted] testimony by the agency's 
lead cost evaluator suggested that any difference should not be 
significant, [deleted].[7]  The resulting discrepancy again appears to 
be primarily the result of the application of [deleted].  Although the 
agency's leading cost evaluator testified that [deleted] he agreed 
that the differences "typically are fairly small."  Tr. at 254.  
Moreover, [deleted].[8]

The record indicates that the possible prejudice to the protesters 
from the discrepancies with respect to the evaluation of Anthem's 
[deleted] trend factors amounted at most to an approximately $15 
million difference in the evaluated cost.  That is, if one assumes 
that Anthem's evaluated trend factor should have been the trend factor 
that assumes the lowest evaluated savings when comparing comparable 
categories, then Anthem's evaluated cost would have been approximately 
$15 million higher.[9]

Although the impact here of these discrepancies therefore was limited, 
similar discrepancies resulting from the relative inflexibility of 
TSO's evaluation approach may be more material in future procurements 
in the TRICARE program.  In this regard, testimony from agency 
witnesses at the hearing indicated that additional flexibility which 
might avoid or mitigate discrepancies could be incorporated into the 
methodology without undue burden.  For example, as noted above, TSO's 
Region 2/5 Price Evaluation Methodology memorandum provided that the 
evaluated trend factor would be determined [deleted] where the 
evaluators were [deleted] and where the evaluators [deleted].  
Although the leading cost evaluator stated that [deleted] "is rarely 
used," Tr. at 204, the record indicates that [deleted] was potentially 
available for use in a broad range of circumstances.  As noted by 
agency cost evaluators in their testimony at the hearing, [deleted] 
where [deleted] and "we don't think that the application of the 
[deleted] is rational," then there is "the option of using judgment to 
go outside of that framework."[10]  Tr. at 202, 352, 401-402, 504, 
899.  According to the leading cost evaluator, when used, [deleted] 
"can have a significant effect."  Tr. at 204.  

In addition, testimony from agency witnesses indicates the existence 
of alternate cost evaluation methodologies that would produce more 
accurate estimates for individual trend factors, without imposing an 
undue burden on the agency, than is possible with the agency's current 
methodology using [deleted].  The agency's leading cost evaluator 
testified that "there is probably more uncertainty in the use of 
[deleted].  Tr. at 416.  He stated that in response to instances in 
prior procurements where there were [deleted] the agency considered 
using a methodology [deleted] but did not adopt that method because "I 
think we felt that it was not sufficiently a common occurrence."  Tr. 
at 425-426.  However, he agreed that there were examples of [deleted] 
this procurement [deleted].  Tr. at 432.  Further, as the following 
question and answer indicates, he agreed that [deleted] would produce 
a more accurate estimate in such circumstances of a [deleted]:

     Question:  [deleted].

     Answer:  [deleted].

     The answer to your question is yes . . . .

Tr. at 431-432.

Likewise, an agency cost evaluator for [deleted] testified that 
[deleted] "would capture the additional flexibility that might be 
desirable in the methodology with that level of detail" and "probably 
would" result in a more accurate evaluated trend factor.  Tr. at 
794-798.  [deleted]  (Tr. at 794-795.)  Although [deleted] testified 
that he was not convinced that the accuracy of the overall, 
bottom-line evaluated cost would be significantly increased [deleted], 
he conceded that "there might be" an increase in accuracy.  Tr. At 
797-798.  Further, when asked [deleted] "I don't think that would take 
significantly more time to do."  Tr. at 433.

In summary, our review of the record indicates that the cost 
evaluation methodology as applied by TSO contained weaknesses, and the 
resulting cost evaluation contained elements that lacked a reasonable 
basis, such that Anthem's evaluated costs may have been understated.

PREJUDICE 

Our Office will not sustain a protest unless the protester 
demonstrates a reasonable possibility that it was prejudiced by the 
agency's actions, that is, unless the protester demonstrates that, but 
for the agency's actions, it would have had a substantial chance of 
receiving the award.  McDonald-Bradley, B-270126, Feb. 8, 1996, 96-1 
CPD  para.  54 at 3; see Statistica, Inc. v. Christopher, 102 F. 3d 1577, 
1581 (Fed. Cir. 1996).

Although TSO and Anthem argue that there was no reasonable possibility 
of prejudice here, our review of the record convinces us that when 
considered in the totality, there was a reasonable possibility of 
prejudice to the protesters as a result of the identified deficiencies 
in the procurement.  Again, TSO failed to disclose the relative 
importance of the significant evaluation considerations.[11]  It also 
based the source selection decision partly on unwarranted [deleted] 
ratings in functional experience and performance areas where the 
solicitation required a neutral rating because Anthem and its relevant 
subcontractors lacked military health care experience as defined by 
the solicitation.  In addition, TSO applied a cost evaluation 
methodology which caused some cost evaluation judgments to be 
unreasonable.

The protesters assert, and offered testimony to the effect, that they 
would have allocated their proposal preparation resources differently 
and would have restructured their proposals, if they had been aware of 
the actual relative importance of the significant evaluation 
considerations.  Tr. at 12-19, 23-39, 92-114, 123-125, 152-161.  We 
obviously have no basis for determining the magnitude of any proposal 
changes, but given that the evaluation scheme is the starting point 
for the development of proposals, we think it is reasonable to accept 
that offerors would in fact have formulated their proposals 
differently in response to reordered evaluation criteria.  Further, we 
previously have recognized that where an agency fails to advise 
offerors of the evaluation factors and the relative importance of 
those factors, there is no assurance that in selecting an offer for 
award it is obtaining what is most advantageous to the government, all 
factors considered.  Richard S. Cohen, supra, at 6.

We recognize that TSO, in responding to a related protest by 
Foundation against the award of a contract to provide health care in 
Managed Care Support Region 1, and in particular against the agency's 
alleged failure to disclose the relative importance of the significant 
evaluation considerations in that procurement, has questioned whether 
some of the enhancements Foundation has indicated it would have 
offered in Region 1 would in fact have resulted in a significant 
improvement in its competitive position.  Because those objections are 
relevant here as well, we have considered them in reaching our 
decision in this case.[12]  We conclude that, while the agency has 
raised legitimate questions about some of the possible changes in 
Foundation's proposal, the record indicates a reasonable possibility 
that Foundation could have achieved an overall material improvement in 
its competitive position had it been aware of the actual relative 
importance of the significant evaluation considerations.  For example, 
Foundation asserts that had it been aware that Task I/Health Care 
Providers was nearly twice as important as Task III/Utilization and 
Quality Management and, indeed, that it was worth 20 percent of the 
entire technical evaluation, it would have [deleted].  Although the 
record indicates that this enhancement would carry a "very substantial 
price tag," Tr. at 112, since technical considerations were more 
important than cost considerations in the evaluation scheme (60 versus 
40 percent), and since Task I/Health Care Providers was significantly 
more important than any other technical consideration, an increased 
emphasis on this area could have resulted in an improvement in 
Foundation's competitive position.  Likewise, there appears to be a 
reasonable possibility that, as claimed by Foundation, it could have 
improved its rating under Task IV/Enrollment, Marketing and Support 
Services had it been aware of the actual relative importance of that 
task and consequently offered [deleted].  We conclude that Foundation 
could have reshaped its proposal to take advantage of the weighting 
scheme actually used by the agency.

As for Anthem's unwarranted [deleted] experience/performance ratings, 
they were cited by the SSA as a significant factor in the source 
selection decision.  In addition, the protesters assert, and offered 
testimony to the effect, that had they been aware of the agency's 
actual interpretation of the requirement for a neutral rating for 
offerors without military health care experience, they would have 
altered their proposals to take into account the loss of a perceived 
advantage (on account of their military health care experience), 
including reducing profit level or price.  Tr. at 26-29, 36-39, 
122-123, 137-141.  Further, as noted above, it appears that Anthem's 
evaluated cost advantage was based in part on cost evaluation 
judgments which were unreasonable.  In these circumstances, where 
there were significant deficiencies in a number of areas, we conclude 
that the record indicates that but for these significant deficiencies, 
the protesters would have had a substantial chance of receiving the 
award.

We recommend that if, as represented during the protest, the agency 
believes that a requirement for a neutral rating for offerors without 
military health care experience does not reflect its actual needs, it 
should amend the solicitation to reflect any changes in this regard.  
In addition, it should amend the solicitation to advise offerors of 
the significant evaluation factors and subfactors and their relative 
importance, reopen negotiations with offerors, and request a new round 
of BAFOs.  If, upon reevaluation, the agency determines that Anthem's 
proposal does not represent the best value, we recommend that the 
agency terminate Anthem's contract for convenience.  We also recommend 
that Humana and Foundation be reimbursed the costs of filing and 
pursuing their protests, including reasonable attorneys' fees.  Bid 
Protest Regulations, 4 C.F.R.  sec.  21.8(d)(1) (1997).  Humana's and 
Foundation's certified claim for such costs, detailing the time and 
costs incurred, should be submitted within 60 days after receipt of 
this decision.  4 C.F.R.  sec.  21.8(f)(1).
 
The protests are sustained.

Comptroller General
of the United States  

1. The fixed-price nature of the contract was also modified by 
adoption of a revised financing approach to the provision of medical 
care by Military Treatment Facilities (MTF).  Under this approach, 
MTFs will receive funding for those beneficiaries who enroll in 
TRICARE Prime with an MTF primary care manager, and the MTF, not the 
contractor, will have sole financial responsibility for the provision 
of care to those enrollees.  In contrast, the contractor will be 
responsible for the provision of care to those enrollees in TRICARE 
Prime with a civilian primary care manager ("at-risk" beneficiaries), 
as well as for other beneficiaries who select either TRICARE Extra or 
Standard.

2. Cost Score=1,000 times low price divided by offeror's price.

3. Technical Score=1,000 times offeror's score divided by high score.

4. Further, TSO's argument with respect to the request for information 
concerning  other, non-military health care experience ignores at 
least one possible use for such information.  Specifically, we note 
that the solicitation did not preclude the use of other than military 
health care experience as a factor in assigning a positive or negative 
rating for functional areas in which an offeror possessed the 
prerequisite military health care experience.

5."Pure" in the context of utilization management is intended to 
distinguish utilization management trend factors in which the effects 
on utilization of the Point-of-Service option available to Prime 
enrollees have not been taken into account.  Thus, the overall 
utilization management trend factor is developed as the product of two 
factors:  (1) a pure utilization management factor and (2) a 
Point-of-Service factor.  

6. Region 2, active duty dependents, category of care 1 (inpatient 
medical/surgical), option year 5.

7. For example, for [deleted], Anthem proposed a [deleted] was 
evaluated at the [deleted].  In contrast, for the corresponding 
[deleted] where the IGCE also was [deleted], Anthem proposed a 
[deleted].  

8. As another example, for [deleted] where the IGCE was [deleted], 
Anthem proposed [deleted], but was evaluated [deleted].  In contrast, 
[deleted] where the IGCE was [deleted], Anthem proposed a trend factor 
of [deleted].  Although in this instance, Anthem assumed [deleted] and 
was evaluated as likely to achieve [deleted] Anthem had [deleted] 
would be similar, which was consistent with the general expectation in 
this regard--yet TSO's [deleted] created a significant difference in 
result.  We note that the [deleted] discrepancy arose [deleted] the 
agency, after having accepted [deleted], determined that the proposed 
[deleted] for [deleted] was excessive and instead evaluated [deleted].  
The resulting unsupported and illogical increase in the evaluated 
trend factor from [deleted] in [deleted] to [deleted] in [deleted] 
appears to be the result of a mechanical application of the evaluation 
methodology. 

9. The agency has calculated that, if one assumes that Anthem's 
evaluated trend factor should have been the trend factor that assumes 
the lowest evaluated savings when comparing comparable categories, 
then Anthem's evaluated cost would have been approximately $14.88 
million higher.  Humana has challenged this calculation, arguing that 
it ignores several categories of health care, but the protester has 
not submitted its own calculation as to the effect on the evaluated 
cost of the identified discrepancies.

10.[deleted]

11. Anthem has calculated the change in the technical evaluation 
scores if the tasks within a major technical factor had been given 
equal weights.  (Anthem's calculation, when combined with the 
reduction in Anthem's technical score to account for the unwarranted 
[deleted] ratings in functional experience and performance areas and 
the potential increase in its evaluated cost to account for the cost 
discrepancies discussed above, results in the following approximate 
best buy scores:  Anthem--[deleted]; Humana--[deleted]; and 
Foundation--[deleted].)  This approach, however, does not address the 
fundamental consideration here with respect to prejudice, that is, 
what the protesters would have done if they had been aware of the 
actual relative importance of the significant evaluation 
considerations and what impact any consequent changes in the 
protesters' approaches would have had on the protesters' relative 
competitive positions.  

12. We will discuss the agency's arguments at greater length in our 
subsequent decision with respect to Foundation's Region 1 protest.