BNUMBER:  B-278189.5 
DATE:  July 13, 1998
TITLE: Anthem Alliance for Health, Inc.; TRICARE Management, B-
278189.5, July 13, 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:Anthem Alliance for Health, Inc.; TRICARE Management
             Activity--Reconsideration     

File:     B-278189.5

Date:     July 13, 1998

Marcia G. Madsen, Esq., Scott E. Pickens, Esq., and David F. Dowd, 
Esq., Miller & Chevalier, for Anthem Alliance for Health, Inc., a 
requester.
Kenneth S. Lieb, Esq., TRICARE Management Activity, for the agency, a 
requester.
Thomas P. Humphrey, Esq., Crowell & Moring, for Foundation Health 
Federal Services, Inc., an intervenor.
Glenn G. Wolcott, Esq., and John M. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Joint request for reconsideration of decision sustaining protests on 
the basis that the agency failed to disclose the relative importance 
of evaluation criteria, evaluated the awardee's proposal contrary to 
the solicitation's requirements, and conducted a cost evaluation that 
contained arbitrary assessments, is denied where the requesting 
parties do not demonstrate that our prior decision contained factual 
or legal errors.

DECISION

Anthem Alliance for Health, Inc. and the Department of Defense's 
TRICARE Management Activity (TMA),[1] jointly request reconsideration 
of our decision Foundation Health Fed. Servs., Inc.; Humana Military 
Healthcare Servs., Inc., B-278189.3, B-278189.4, Feb. 4, 1998, 98-1 
CPD  para.  ___, in which we sustained Foundation's and Humana's protests 
against the award of a contract to Anthem under request for proposals 
(RFP) No. MDA906-95-R-0005, for health care and associated 
administrative services for Military Health Services System (MHSS) 
beneficiaries.
 
We deny the request.

BACKGROUND

Under the RFP, offerors were required to propose three health care 
options for MHSS beneficiaries in geographic Regions 2 and 5.  
Specifically, the RFP required offerors to propose health care systems 
under which beneficiaries 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).  The RFP provided that the agency would award a 
contract to the offeror whose proposal was most advantageous to the 
government, stating that technical factors would be worth 60 percent 
of the total evaluation score and evaluated cost 40 percent.  The 
technical scores were derived by evaluating 11 performance tasks, 
along with experience and performance, all of which were listed as 
evaluation subfactors within seven "major technical factors."  

We sustained the protests on the bases that:  (1) the agency did not 
accurately disclose the relative importance assigned to the 
significant technical evaluation factors and subfactors, as required 
by 10 U.S.C.  sec.  2305(a)(2)(A) (1994); (2) the agency's evaluation of 
Anthem's experience and performance was contrary to the express 
provisions of the solicitation; and (3) portions of the agency's cost 
evaluation lacked a reasonable basis. 

Relative Weights of Evaluation Subfactors 

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 U.S.C.  sec.  2305(a)(2)(A).  Where the solicitation is silent as to the 
relative importance of the subfactors, offerors can only assume that 
the subfactors are of approximately equal importance.  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  para.  144 at 6.

The solicitation stated that the "major technical factors" were listed 
in descending order of importance, but provided no meaningful 
information regarding the relative importance of the tasks/subfactors.  
Consistent with the authority referenced above, the protesters 
interpreted the solicitation as providing that the tasks/subfactors 
within each major factor were of equal importance.  In actuality, 
however, the agency's evaluation scheme did not accord equal weight to 
the tasks/subfactors within each major factor.[2]  Thus, offerors were 
unaware that, for example, 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 factor; or that Task V/Claims Processing was six times more 
important than Task VI/Program Integrity, another subfactor under the 
same major factor.  In short, the agency failed to comply with the 
statutory requirement that offerors be advised of the relative 
importance of the evaluation criteria.  

Experience and Performance

Section M of the solicitation stated:  "[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."  
Thus, proposals submitted by offerors lacking relevant past 
performance should have been neither penalized nor credited with 
regard to the experience and performance evaluation 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.  Although neither Anthem nor its subcontractors possessed 
military health care experience in three of the eight rated areas 
([deleted]), Anthem's proposal was rated [deleted] in each of those 
areas.[3]  Thus, the evaluation of Anthem's proposal under the 
experience and performance evaluation factor was contrary to the 
solicitation's stated provisions.

Cost Evaluation

The solicitation required that the offerors' cost proposals project 
health care costs regarding numerous variables--some of which are 
within the offerors' control (for example, the percentage of 
beneficiaries participating in the Prime and Extra options and the 
level of discounts offered by health care providers), and some of 
which are beyond their control (for example, inflation).[4]  The RFP 
provided that the agency would evaluate the realism of each proposed, 
controllable trend factor based on the agency's judgment regarding 
"the likely trends under the offeror's approach."  The protest record 
established that the agency's evaluation of cost proposals included a 
number of arbitrary assessments.  Specifically, in virtually every 
situation (99.5 percent) where Humana, Foundation or Anthem proposed a 
controllable trend factor which reflected savings greater than 
anticipated by the Independent Government Cost Estimate (IGCE), the 
evaluated cost for that factor was either:  (1) [deleted], or (2) 
[deleted].  That is, rather than evaluating "the likely trends under 
[each] offeror's approach," the agency conducted a mechanical, 2-point 
cost evaluation under which essentially all of the controllable trend 
factors were evaluated as one of two alternative costs.  The impact of 
this approach was that unrealistically optimistic offerors were 
effectively rewarded with evaluated costs which incorporated a 
significant part of the unrealistically high proposed savings.[5]  We 
concluded that the agency's cost evaluation contained elements that 
lacked a reasonable basis.    

Prejudice

In sustaining the protests, we specifically considered whether the 
protesters had demonstrated a reasonable possibility of prejudice; 
that is, whether, but for the agency's actions, the protesters would 
have had a substantial chance of receiving the award.  See 
McDonald-Bradley, B-270126, Feb. 8, 1996, 96-1 CPD  para.  54 at 3; 
Statistica, Inc. v. Christopher, 102 F.3d 1577, 1581 (Fed. Cir. 1996).  
In considering the issue of prejudice, we were cognizant of the 
agency's final evaluation results, which are summarized below.  

                  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[6] 1,000/1,000   942/945      934/934

    Technical Points[deleted]   [deleted]    [deleted]

    Technical Score[7][deleted] [deleted]    [deleted]

    Overall Best Buy Score1,000/1,000963/968 962/966
We specifically considered the [deleted] technical scores; the fact 
that Anthem's evaluated cost was less than 6 and 7 percent, 
respectively, below Humana's and Foundation's evaluated cost; that the 
solicitation provided for greater weight to be accorded technical 
factors; and that the protesters made specific representations 
regarding how their proposals would have been altered had they known 
of the agency's actual intentions.  In the context of the record as a 
whole, we concluded that, if the agency had properly advised offerors 
of the relative importance of the evaluation criteria, had properly 
evaluated Anthem's experience and performance, and had conducted a 
cost evaluation that did not contain arbitrary assessments, there was 
a substantial chance that one of the protesters would have been 
awarded the contract.  

RECONSIDERATION REQUEST

Application of the Prejudice Standard

In requesting reconsideration, Anthem and the agency primarily 
challenge our conclusion regarding prejudice.[8]  In this regard, 
Anthem and the agency first complain that the protesters should have 
been required to provide "a precise showing of impact," and that "GAO 
never determined any specific impact from the alleged errors."  

To establish prejudice, a protester is not required to show that, but 
for the alleged error, the protester would have been awarded the 
contract.  Management HealthCare Prods. & Servs., B-251503.2, Dec. 15, 
1993, 93-2 CPD  para.  320 at 4; Manekin Corp., B-249040, Oct. 19, 1992, 
92-2 CPD  para.  250 at 5.  Such a rule would make it virtually impossible 
for a protester ever to prevail, no matter how egregious the error in 
the procurement process.  Further, GAO's determination regarding 
whether a given protester would have a substantial chance of receiving 
the award, but for the procurement flaws, is frequently not 
susceptible to a precise mathematic calculation.  Indeed, the very 
description of the applicable prejudice standard--"substantial chance 
of receiving the award"[9]--denotes a determination that, of 
necessity, must be based on judgment rather than precise calculations.  
Here, mathematical calculations would require definitive projections 
regarding how the protesters' proposals would have differed, and how 
the agency would have evaluated such differences.  In this 
procurement, such projections were not possible.[10] 

Regarding the protesters' representations, Anthem and the agency 
complain that our decision is based on a "misreading" of the 
protesters' testimony.  Specifically, they complain that GAO "relied 
upon mere general discussion of what the protesters might have done," 
(emphasis in reconsideration request), and improperly equated the 
protesters' use of the words "might" and "may" with the word "would."  
Anthem and the agency are in error.

Our decision concluded that:

     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."  

The record shows that Humana's representative unambiguously testified, 
among other things, that if he had known the actual weighting of the 
evaluation criteria, that information would have "absolutely" affected 
his proposal effort, Hearing Transcript (Tr.) at 13, explaining that 
Humana "spent more time on those [tasks] that [Humana] believed were 
of higher value."  Id. at 13-14.  Noting that the RFP weightings 
provided a framework for allocation of resources in preparing the 
proposal, he further testified that, had the actual criteria 
weightings been disclosed, Humana "would have also changed the 
involvement [in proposal preparation] of [Humana's] senior staff."  
Id. at 13.  Similarly, Foundation's representative testified, among 
other things, that his understanding of the criteria weightings 
"determined how I used internal resources and bought external 
resources [for proposal preparation]," and that "[i]f I had known that 
the government was going to evaluate with these relative weights, I 
would have restructured my proposal . . . ."  Id. at 92, 93.  
Specifically with regard to Task I, Health Care Providers--which the 
agency accorded twice the weight accorded the other task contained 
within the "major evaluation factor"--Foundation's representative 
testified that Foundation considered, but rejected, a more expensive 
approach to meeting the requirements for this task based on 
Foundation's understanding that the two tasks were of equal 
importance.   Id. at 112.  Based on the record as a whole, we found 
these representations credible.   

Anthem and the agency also complain that our conclusion regarding 
prejudice here is "starkly at odds" with our decision in Hughes 
Missile Sys. Co., B-272418 et al., Oct. 30, 1996, 96-2 CPD  para.  221.  
There, we found that the Department of the Air Force, in evaluating 
proposals to provide certain missiles, essentially eliminated a 
solicitation requirement regarding the proposed missiles' capability 
to destroy "Target X," but denied Hughes's protest on the basis that 
it was not prejudiced by the agency's error.

Our factual determinations in Hughes were materially different than 
our determinations here.  In Hughes, we expressly rejected the 
protester's representations that, had it known of the agency's actual 
requirements, it would have proposed a different warhead.  
Specifically, we concluded that "Hughes would not have offered a 
different warhead," elaborating that:

     Since the record--including Hughes's contemporaneous 
     documentation---indicates that Hughes's [proposed] warhead 
     remained its most effective warhead even after removal of Target 
     X . . ., and given the substantial effort required to change 
     warheads, we simply do not find credible Hughes's claim that 
     elimination of Target X would have led it to alter its proposal 
     to its significant competitive advantage.  

In contrast, on the record before us here, we found no basis to 
question the credibility of the protesters' representations that they 
would have altered their proposals had they known of the agency's 
actual requirements. 

Anthem and the agency next complain that our decision failed to give 
proper consideration to what they refer to as Anthem's "mammoth" and 
"tremendous" cost advantage.  Referring to a recently published 
opinion of the United States Court of Federal Claims, Alfa Laval 
Separations, Inc. v. United States, 1998 U.S. Claims LEXIS 7 (Fed. Cl. 
Jan. 23, 1998), Anthem asserts that "a significant price differential 
precludes a finding of prejudice." 

This argument is without merit.  In Alfa Laval, the Court concluded 
that, although the procuring agency improperly found the awardee's 
proposal acceptable, the record did not reflect a reasonable 
likelihood that the plaintiff would have received the award but for 
the agency's error.[11]  In reaching this conclusion, the Court noted 
that the plaintiff's price was 29 percent higher than the awardee's, 
that the agency had previously rejected as too high a price lower than 
that offered by the plaintiff, and that the Navy retained the option 
to cancel the solicitation and recompete the contract.[12]    

Here, in contrast, Anthem's evaluated cost advantage was less than 6 
and 7 percent, respectively, with regard to Humana's and Foundation's 
evaluated costs; [deleted]; and the RFP established that cost was less 
important than technical factors.  Thus, on this record, we reject the 
assertion that Anthem's "tremendous" cost advantage precluded a 
finding of prejudice.[13]   

Finally, Anthem and the agency assert--as they argued during the 
protest--that our conclusion regarding the flawed cost evaluation is 
inconsistent with our prior decisions, most notably QualMed, Inc., 
B-257184.2, Jan. 27, 1995, 95-1 CPD  para.  94.  Specifically, Anthem and 
TMA assert that the cost evaluation employed here "was the very same 
one that GAO found reasonable in QualMed, Inc.," in which we denied 
the protest challenging the agency's cost evaluation.  

In QualMed, we held that the agency was not required to evaluate 
proposed trend factors by independently calculating a factor to 
replace each proposed trend factor, noting that, there, the agency's 
evaluators chose from 1 of 5 possible evaluation
points in assigning evaluated costs for proposed trend factors.[14]  
We concluded that such an approach was similar to a rating system 
under which a proposal feature must be assigned a score of 1, 2, 3, 4, 
or 5, and concluded that, "[w]hile such a system is not precise, it is 
not unreasonable." 

In contrast to the 5-point evaluation scheme employed in QualMed, the 
agency here extended the level of imprecision found reasonable in 
QualMed to a system which essentially permitted only two evaluation 
points:  [deleted].  This imprecision led to anomalies in the cost 
evaluation.  Further, the agency was aware that alternative cost 
evaluation methodologies (including the use of a multi-point system, 
as in QualMed) would have produced more accurate estimates for 
individual trend factors without imposing an undue burden on the 
agency.  We thus were unwilling to accept as reasonable the agency's 
expansion of the permissible imprecision associated with the 5-point 
evaluation system employed in QualMed, to the greater imprecision 
created by the 2-point evaluation system employed here.  The 
requesters have not established that our conclusion in this regard was 
erroneous.  

In summary, to prevail on a request for reconsideration, the 
requesting party or parties must show that our prior decision contains 
factual or legal errors or failed to consider information that 
warrants reversal or modification of our decision.  4 C.F.R.  sec.  21.14 
(1998).  Upon consideration of the arguments presented in the 
reconsideration request, we find that Anthem and the agency have 
failed to make the requisite showing.  

The request for reconsideration is denied.
  
Comptroller General
of the United States

1. At the time our prior decision was issued, the agency was known as 
the TRICARE Support Office.  The agency has recently been renamed the 
TRICARE Management Activity.  

2. The actual evaluation weights applied by the agency were as 
follows:

        MAJOR TECHNICAL FACTORTASK                         WEIGHT 

       First             Task I/Health Care Providers      20 percent

                         Task III/Utilization and Quality 
                                                           Management1
                                                           .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 
                         Services                          10 percent

       Seventh           Task VII/Fiscal Management        1 percent

                         Task X/Automated Data Processing  1 percent

3. During the protest it became clear that, despite the RFP's express 
provision, the agency did not believe that offerors without military 
health care experience should be limited to a neutral rating.

4. The RFP required that offerors propose a "trend factor" for each 
variable.  Each proposed trend factor represented the offeror's 
prediction of the costs that would be incurred in relation to baseline 
cost data set forth in the RFP.  A trend factor of .95 indicated that 
the offeror was projecting a 5-percent savings over the baseline data; 
a trend factor of 1.05 indicated that the offeror was projecting 5 
percent higher costs than those reflected in the baseline data.

5. For example, [deleted].  

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

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

8. The request for reconsideration was submitted jointly by Anthem and 
the agency on February 17, 1998.  On March 19, Foundation submitted a 
response to the joint reconsideration request.  On April 16, Anthem 
submitted a reply to Foundation's response to the reconsideration 
request. 

9. The prejudice standard has also been described as requiring a 
"reasonable likelihood" of award.  See Data Gen. Corp. v. Johnson, 78 
F.3d 1556, 1562 (Fed. Cir. 1996).  We, like the Court of Appeals for 
the Federal Circuit, view these alternative articulations of the 
standard to be essentially synonymous.  See Statistica v. Christopher, 
102 F.3d 1582.

10. Anthem and the agency refer to Geonex Corp., B-274390.2, June 13, 
1997, 97-1 CPD  para.  225, as authority for their assertion that "in 
assessing prejudice, GAO must quantify the alleged impact of the 
errors."  (Emphasis in reconsideration request.)  In Geonex, we found 
the agency's evaluation was flawed regarding a single, specific 
evaluation factor.  Nonetheless, we found no prejudice because the 
record established that even if the protester had received the maximum 
possible score under that evaluation factor, the relative competitive 
positions of the offerors would not have been reversed.  Contrary to 
Anthem's and the agency's assertions that the impact of procurement 
errors must be quantified, Geonex simply stands for the proposition 
that we will find no prejudice flowing from an agency's flawed 
evaluation where the record establishes that, even if the protester 
had received the maximum possible score under the factor containing 
the evaluation flaw, the protester would not be in line for award.  
Such is not the case here.   

11. Although we are not bound by the decisions of the Court, we view 
our standard for establishing prejudice to be essentially the same as 
that applied by the Court.

12. In reaching its conclusion, the Court referenced its decision in 
Analytical Research Tech., Inc. v. United States, 39 Fed. Cl. 34 
(1997), where a 35-percent difference in proposed costs existed and no 
prejudice was found by the court.

13. Similarly, Anthem and the agency argue that our decision failed to 
properly consider Anthem's [deleted].  Anthem and the agency complain 
that our decision [deleted].  Our decision is not at odds with the 
view that [deleted] was a clear discriminator in the procurement.  As 
we found in our decision, however, the agency improperly failed to 
advise the offerors of the relative importance of that discriminator.

14. Specifically, we stated:

            In determining the probable figure for each trend factor, 
            the evaluators chose among a limited number of 
            possibilities ([deleted]).  

QualMed, Inc., B-257184.2, Jan. 27, 1995, at 7 (protected decision).