BNUMBER:  B-279176.2           
DATE:  July 21, 1998
TITLE: Southwest Anesthesia Services, B-279176.2, July 21, 1998
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Matter of:Southwest Anesthesia Services

File:B-279176.2          
        
Date:July 21, 1998

Lee D. Lantz for the protester. 
Michael Colvin, Department of Health and Human Services, for the 
agency. 
Adam Vodraska, Esq., and James A. Spangenberg, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Record does not support allegation that contracting agency improperly 
canceled solicitation for hospital anesthesia services to avoid 
awarding a contract to the protester and responding to an earlier 
protest of the award of the contract to another firm, where the agency 
reasonably concluded that solicitation no longer meets the agency's 
needs and that services should be performed in-house, based on 
findings and recommendations of an agency medical reviewer concerning 
the anesthesia program at the hospital.

DECISION

Southwest Anesthesia Services protests the cancellation of request for 
proposals (RFP) No. 97-10-VZ, issued by the Indian Health Service, 
Department of Health and Human Services, for anesthesia services at 
the Santa Fe Indian Hospital, and the agency's determination to 
perform the services in-house.  Southwest contends that the 
cancellation lacked a reasonable basis and was motivated by the 
contracting agency's desire to avoid making an award to Southwest and 
having our Office render a decision on Southwest's previous protest.

We deny the protest.

The president and co-owner of Southwest has provided anesthesia 
services to the Santa Fe Indian Hospital since 1981 as a Certified 
Registered Nurse Anesthetist.  His previous long-term contract with 
the hospital expired on October 31, 1996, and thereafter the agency 
ordered anesthesia services from Southwest by purchase order on a 
month-to-month basis.  During 1997, the agency decided to solicit the 
services on a long-term basis, issued the RFP at issue here, and 
requested proposals by October 1, 1997.  Southwest submitted a 
proposal by the due date, participated in discussions, and submitted a 
best and final offer (BAFO) at the request of the agency, but was not 
selected for award.  Instead, the agency awarded the contract to 
Anestat, Inc., which commenced performance on February 1, 1998.

Southwest filed a protest with our Office on February 3, contending 
that the agency acted improperly in not awarding the contract to 
Southwest.  Specifically, Southwest asserted that agency personnel 
exhibited animosity and retaliated against Southwest for revealing 
alleged contracting and fiscal improprieties, such as the delayed 
issuance of purchase orders and subsequent late payments for services 
ordered, which occurred during Southwest's continued performance of 
the anesthesia services after the expiration of its previous long-term 
contract.

On February 13, the agency authorized continued performance of the 
contract by Anestat, notwithstanding Southwest's protest, because of 
the critical nature of the services to the patients at the hospital.

The agency informed our Office on March 3 that in reviewing 
Southwest's protest it discovered inadequacies in the evaluation and 
award selection process.  The agency proposed to take corrective 
action by reevaluating BAFOs, performing a new source selection, and, 
if a different awardee was selected, terminating the contract with 
Anestat for the convenience of the government.  Since these proposed 
actions rendered the protest academic, our Office dismissed 
Southwest's protest on March 6.

Southwest filed a new protest on May 11 because, instead of taking the 
promised corrective action, the agency had decided to cancel the RFP 
and perform the anesthesia services in-house following what the agency 
advises was the March 26 anesthesia-related death of a pediatric 
patient at the Santa Fe Indian Hospital while Anestat was providing 
anesthesia services.[1]  Southwest argues that, based on its long 
affiliation with the hospital, it can provide better quality services 
at a lower cost than the agency will obtain in-house, and that the 
agency's stated reasons for the cancellation of the solicitation and 
determination to perform the services in-house were pretexts to avoid 
our review of Southwest's initial protest to our Office (and as 
additional retaliation for having filed the protest) and to avoid 
awarding Southwest the contract.

The agency responds that it canceled the solicitation and made the 
decision to obtain the anesthesia services in-house due to a 
reassessment of its needs resulting from the findings and 
recommendations in the report prepared by an agency medical reviewer 
investigating the March 26 patient death.  As part of the 
investigation, the reviewer performed an overall examination of the 
anesthesia program at the Santa Fe Indian Hospital and concluded, 
among other things, that the hospital's current staffing plan of one 
nurse-anesthetist under contract was inadequate. 

As a general rule, our Office does not review agency decisions to 
cancel procurements and instead perform the work in-house, since such 
decisions are a matter of executive branch policy.  Mastery Learning 
Sys., B-258277.2, Jan. 27, 1995, 95-1 CPD  para.  54 at 2; Miller, Davis, 
Marter & Opper, P.C., B-242933.2, Aug. 8, 1991, 91-2 CPD  para.  176 at 4.  
However, where, as here, a protester argues that the agency's 
rationale for cancellation is but a pretext--that the agency's actual 
motivation is to avoid awarding a contract or is in response to the 
filing of a protest--we will examine the reasonableness of the 
agency's actions in canceling the procurement.  Mastery Learning Sys., 
supra, at 2-3; Griffin Servs. Inc., B-237268.2 et al., June 14, 1990, 
90-1 CPD  para.  558 at 3, recon. denied, General Servs. Admin.--Recon., 
B-237268.3 et al., Nov. 7, 1990, 90-2 CPD  para.  369 at 2.

We think the agency's reassessment of its anesthesia needs at the 
Santa Fe Indian Hospital resulting from the medical reviewer's 
investigation of the March 26 patient death provides a reasonable 
basis for the cancellation of the solicitation because, as a result of 
the reviewer's report, the solicitation for the contract sought by 
Southwest no longer meets the needs of the agency, given the 
deficiencies reported by the reviewer and his recommended steps to 
address these deficiencies, which would require material changes to 
the solicitation.  For example, the reviewer recommended that the 
agency increase anesthesia staffing above the level of one 
nurse-anesthetist; require that any anesthesia contractor operate as 
an independent practitioner; add coverage to ensure that caesarian 
section cases are handled within 30 minutes and that pediatric cases 
be referred elsewhere or receive the requisite level of specialized 
expertise; and establish policies and procedures for the hospital's 
anesthesia program rather than relying on the contractor's policies 
and procedures.  Although performing the services in-house may not be 
the only way the agency could have addressed the reported 
deficiencies, it is consistent with the reviewer's recommended "long 
term" solution of providing for the services in-house with contractor 
back-up.  To the extent the protester is challenging the agency's 
reliance on the reviewer's recommendations, including that the 
anesthesia services be performed in-house, we view this as a challenge 
to the agency's medical policies and judgments, which we will not 
consider under our bid protest function.  See Bristol-Myers Squibb 
Co., B-275277, Feb. 5, 1997, 97-1 CPD  para.  60 at 9-10 (and cases cited 
therein).[2]

We recognize that, but for the allegedly improper award of the 
contract to Anestat and the subsequent patient death and resulting 
reassessment of the hospital's anesthesia program, Southwest, which 
apparently has a long track record of providing safe anesthesia 
services at the hospital, may have been awarded the contract.  
However, once the agency received the recommendations of the medical 
reviewer that brought to light the deficiencies in the anesthesia 
program at the hospital, we believe the agency had a reasonable basis 
to cancel the existing solicitation.  Accordingly, we do not view the 
proffered rationale for the cancellation of the solicitation as merely 
a pretext by the agency to avoid awarding the contract to Southwest or 
to avoid responding to Southwest's earlier protest.  Further, even if 
we assume, arguendo, that there may have been some personal animus 
towards Southwest on the part of some agency personnel, this does not 
provide a basis to conclude that the cancellation was improper, where, 
as here, the cancellation was otherwise reasonably justified.  See 
Mastery Learning Sys., supra, at 3; Dr. Robert J. Telepak, B-247681, 
June 29, 1992, 92-2 CPD  para.  4 at 4.

Finally, to the extent the protester argues that the agency's decision 
to perform the services in-house is unreasonable because the agency 
failed to conduct a cost comparison to measure the relative costs of 
in-house versus contractor performance of the services, we will not 
review an agency's decision to perform services in-house, absent an 
allegation of a statutory violation (which is not present here), 
because we consider such decisions to be a matter of executive branch 
policy, except where the challenged agency had used the procurement 
system by issuing a solicitation for the purpose of conducting a cost 
comparison under Office of Management and Budget Circular A-76 (which 
did not occur here).  Pemco Aeroplex, Inc., Aero Corp., B-275587.9 et 
al., June 29, 1998, 98-2 CPD   para.  ___ at 8 n.3.  
The protest is denied.

Comptroller General
of the United States

1. The agency then terminated Anestat's contract and requested that 
Southwest resume providing anesthesia services at the hospital.  
Southwest has since been performing these services under purchase 
orders on a month-to-month basis.  The agency plans to continue 
issuing purchase orders to Southwest pending the recruitment and 
hiring of a nurse-anesthetist for the hospital.  The agency states 
that until it decided to perform the anesthesia services in-house, it 
was expecting to make award to Southwest, and that once the services 
are brought in-house it is likely that the agency will turn to 
Southwest in the future for back-up support. 

2. Southwest contends that the medical reviewer's report, which it 
provided to our Office, demonstrates an extension of the prejudice and 
retaliation towards Southwest alleged in its earlier protest.  This 
contention is baseless.  Rather, it is evident from the report that 
the medical reviewer, who was an agency employee from another medical 
facility, performed a comprehensive review of the hospital's 
anesthesia program, including the acquisition of the services, which 
is the type of thorough and comprehensive investigation of the March 
26 tragedy that would be expected under the circumstances.