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).