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.