TITLE:  Novartis Pharmaceuticals Corporation, B-285038.4; B-285038.5, February 1, 2002
BNUMBER:  B-285038.4; B-285038.5
DATE:  February 1, 2002
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Decision

Matter of: Novartis Pharmaceuticals Corporation

File: B-285038.4; B-285038.5

Date: February 1, 2002

Ronald K. Henry, Esq., Kaye, Scholer, Fierman, Hays & Handler, for the
protester.

Donald A. Tobin, Esq., and Lori Ann Lange, Esq., Bastianelli, Brown &
Kelley, for the intervenor.

Maura C. Brown, Esq., and Phillipa L. Anderson, Esq., Department of Veterans
Affairs, for the agency.

John L. Formica, Esq., and James A. Spangenberg, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

The protester was not prejudiced by the agency's alleged defective
evaluation of the offerors' proposed implementation and small disadvantaged
business plans submitted in response to a solicitation, where the record
reflects that, even if the protester had been aware of the manner in which
the agency evaluated proposals, it would not have submitted a different
proposal that would have had a reasonable possibility for award,
particularly given its significantly high price.

DECISION

Novartis Pharmaceuticals Corporation protests the award of a contract to
Mylan Pharmaceuticals Inc. under request for proposals (RFP) No.
797-NC-00-0043, issued by the Department of Veterans Affairs (VA), for the
drug clozapine. [1] Novartis argues that the agency's evaluation of
proposals and selection of Mylan's proposal as representing the best value
to the government was unreasonable and not in accordance with the evaluation
factors set forth in the solicitation.

We deny the protest.

BACKGROUND

The RFP provided for the award of a fixed-price contract for a base period
of 1 year with four 1-year options. The RFP, as amended, contemplated
establishing a source to provide an estimated 20,040 bottles of clozapine
tablets per year for purchase through VA's Pharmaceutical Prime Vendor (PPV)
program. [2] RFP at 3; amend. 4 at 2. The solicitation stated that award
would be made to the offeror submitting the proposal determined to be most
advantageous to the agency. The RFP provided that price was the most
important factor; less important were the past performance and
implementation plan evaluation factors, which were equal in importance; and
the small disadvantaged business (SDB) factor, which was significantly less
important than the other factors; price was said to be more important than
the combined weight of the other factors. [3] RFP at 32.

The solicitation requested that offerors submit technical proposals that
included completed past performance forms and an implementation plan. RFP at
31. The RFP stated that the implementation plan was to detail how the
offeror would satisfy the RFP's requirements regarding the operation and
maintenance of a clozapine registry, such that each issue addressed would be
complete and detailed enough to assure the agency of the offeror's
understanding and capability to perform the cited requirements, and to
"substantiate that the contract will be fully operational on the contract
start date." [4] RFP at 4, 31. The RFP included a detailed six-page
specification of the registry requirements, and stated that "by signing this
solicitation and providing a proposal the offeror assures the VA that their
registry meets the [listed registry] requirements." RFP at 5-10.

Proposals were received from five firms by March 31, 2000. The agency
evaluated the proposals received, conducted discussions with the three
offerors whose proposals were found in the competitive range (including
Novartis and Mylan), and requested and evaluated final revised proposals.

Before an award selection was made, the agency became aware of various
medical studies that caused it to review its requirements and obtain
additional information from the offerors and the Food and Drug
Administration. Based on the results of this review, VA amended the RFP on
March 30, 2001 to provide that while "[a]ll new patient starts will be
prescribed the awardee's product," the "VA has made the medical decision not
to make it mandatory that physicians switch patients to the awarded drug due
to the highly sensitive nature of this drug," and that "the decision to
switch patients must be physician driven." This amendment changed the
estimated quantity of clozapine to be purchased by the agency from 33,401 to
20,040 bottles per year, and provided revised price schedules to be
completed by the offerors. Additionally, the amendment made a number of
changes to the "registry requirements" section of the RFP by deleting or
revising some provisions and adding new ones. Offerors were requested to
acknowledge the amendment by April 20, 2001, in order to remain in the
competition. RFP amend. 4.

After receiving the amendment, Novartis sent the agency a letter dated
April 12, 2001, stating that Novartis was confused "with respect to the
operation of the registry" as required by the amended RFP, and posing a
number of questions.
AR (Dec. 17, 2001), Tab 6, Novartis Letter to VA, at 1 (April 12, 2001). The
agency responded by explaining with regard to the amendment's effect on the
"registry requirements" that "[t]he amendment does not request any
additional technical information from any offerors. However, if you want to
submit additional data you may do so." AR (Dec. 17, 2001), Tab 7, Agency
Letter to Novartis (April 17, 2001), at 2.

The three competitive range offerors submitted signed copies of amendment
No. 4 with completed price schedules only. AR (Dec. 17, 2001), Tabs 8 and
10, Offerors' Responses to Amend. No. 4. None submitted a revised technical
proposal addressing the amended registry requirements.

Subsequently, in response to further protests by Novartis, the agency issued
amendment Nos. 5 and 6 to allow for the submission of revised technical
proposals and prices. Mylan and the third offeror responded by submitting
signed copies of the amendment with completed price schedules only. AR (Dec.
17, 2001), Tabs 8 and 10, Offerors' Responses to Amend. No. 6. Novartis
responded by submitting, in addition to a signed copy of the amendment and a
completed price schedule, a two-page cover letter providing certain "[n]ew
information," such as Novartis's research on potential additional uses of
Clozarilï¿½ and copies of certain testimony before Congress. AR (Nov. 19,
2001), Tabs 15 and 22, Novartis Response to Amend. No. 6.

The agency reconvened the TEP (which had previously completed its evaluation
of the final revised technical proposals) to evaluate the information
provided by Novartis in response to amendment No. 6. The TEP concluded that
Novartis's response "provided no new insight," and accordingly, that the
proposal's "previous technical rating require[d] no changes." AR (Nov. 19,
2001), Tab 18, Memo for the Record (Sept. 20, 2001).

The proposals of all three offerors received ratings of "highly acceptable"
under the past performance factor, "acceptable" under the implementation
plan factor, and "acceptable" overall. [5] AR (Nov. 19, 2001), Tab 13, Memo
for Record (Oct. 12, 2001), at 2-5. Novartis's proposed price based upon the
estimated quantities set forth in the solicitation was [DELETED] per year,
the third offeror's price was [DELETED], and Mylan's price was $1,090,365.
AR (Nov. 19, 2001), Tab 14, Price Analysis. The agency determined that
Mylan's proposal represented the best value to the government, and awarded a
contract to that firm. AR (Nov. 19, 2001), Tab 13, Memo for Record (Oct. 12,
2001), at 6.

After requesting and receiving a debriefing, Novartis filed these protests.
Novartis protests that the agency's evaluation of proposals under the past
performance, implementation plan, and SDB factors was unreasonable.

PAST PERFORMANCE EVALUATION

With regard to the agency's evaluation of proposals under the past
performance factor, Novartis generally complains that Mylan should not have
received the same "highly acceptable" rating as Novartis because Mylan has
"essentially no experience 'under procurements of a same or similar nature
to the proposed procurement,'" which was one of the considerations in
evaluating past performance under the RFP. Protester's Comments/Supplemental
Protest at 15; see RFP at 32.

The evaluation of past performance is a matter within the discretion of the
contracting agency. In reviewing an agency's evaluation of past performance,
we will not reevaluate proposals, but instead will examine an agency's
evaluation to ensure that it was reasonable and consistent with the
solicitation and with applicable procurement statutes and regulations.
Acepex Mgmt. Corp., B-283080 et al., Oct. 4, 1999, 99-2 CPD para. 77 at 3.

The solicitation provided that proposals would be evaluated under the past
performance factor to "determine whether the offeror has consistently
demonstrated adherence to contract terms and conditions and a commitment to
customer service," and that "the offeror [would] be evaluated on the
depth[,] breadth and relevance of its experience and performance under
procurements of a same or similar nature to the proposed procurement." RFP
at 32.

The record reflects that Mylan has performed a number of contracts involving
the supply of pharmaceuticals, including clozapine, with estimated values
that exceed Mylan's proposed price for this solicitation by a significant
amount.
AR (Nov. 19, 2001), Tab 29, Mylan's Past Performance Questionnaires. The
agency noted, in evaluating Mylan's proposal as "highly acceptable" under
the past performance factor that that firm's references reported that it is
"very customer orient[]ed" and is "willing to make changes [that its]
customer required." The agency added that, according to the references,
Mylan's products were "consistently in good condition, on time, [with] no
recalls," and that Mylan was an "excellent company to do business with." AR
(Nov. 19, 2001), Tab 13, Memo for Record (Oct. 12, 2001), at 5. Based upon
the record here, which reflects that Mylan has performed contracts for the
supply of pharmaceuticals with estimated values that exceed Mylan's proposed
price here, and that the references' responses were quite favorable, the
agency's evaluation of Mylan's proposal as "highly acceptable" under the
past performance factor was reasonable.

IMPLEMENTATION PLAN EVALUATION

Protest Contentions and Agency Response

Novartis next objects to the agency's evaluation of proposals under the
implementation plan factor. Specifically, the protester argues that the
agency failed to evaluate proposals in accordance with the terms of the RFP
because it did not evaluate whether the proposals met the mandatory
clozapine registry requirements set forth in the solicitation as issued and
modified by amendment No. 4. In support of this argument, Novartis provides
an analysis detailing what, in its view, are each of the "mandatory minimum
requirements" set forth in the six pages of registry specifications in the
RFP with particular reference to those in amendment No. 4. The protester
next provides a detailed review of Mylan's proposal, pointing out each
instance where, in the protester's view, Mylan's proposal fails to
specifically address, or takes exception to, what the protester has
identified as a mandatory minimum requirement. Novartis also states that its
proposal should have received a higher rating under this factor because of
its superior ability to implement the mandatory minimum requirements, given
that Novartis's registry is already in place. The protester concludes that
it was prejudiced by the agency's failure to conduct a rational evaluation
of the implementation plan because Mylan's proposal should have been
rejected as unacceptable, and because in any case a rational technical
evaluation would have demonstrated the superiority of Novartis's
implementation plan over Mylan's, which would have led to an award to
Novartis.

The agency responds that its evaluation of proposals under the
implementation plan factor was reasonable and included an adequate
assessment of whether the proposals met the agency's requirements for the
registry as set forth in the solicitation. The agency asserts that it was
not required to evaluate proposals to determine whether they affirmatively
demonstrated compliance with each and every term in the registry
requirements section of the solicitation that could be construed as creating
a requirement. In this regard, the agency points out that the section of the
solicitation providing the registry requirements began by stating that "[b]y
signing this solicitation and providing a proposal the offeror assures the
VA that their registry meets the following requirements." See RFP at 5. The
agency adds with regard to amendment No. 4 that "VA added these requirements
fully intending them to be [contract] requirements," and that "[i]t was
never VA's intent to evaluate and rate them." AR (Dec. 17, 2001) at 3. The
agency argues that because Mylan signed both the original solicitation and
amendment No. 4, it was obligated to provide a registry that meets the
solicitation's requirements. AR (Dec. 17, 2001) at 6. The agency points out
here that the offerors' understanding of amendment No. 4 was in apparent
agreement with the agency's, given that none of the offerors, including
Novartis, submitted a revised technical proposal addressing the amendment's
additions and deletions to the registry requirements. Finally, the agency
argues that, despite Novartis's claims to the contrary, Mylan's proposal did
not take exception to any of the solicitation's requirements.

Implementation Plan Evaluation Record

In our view, with regard to the solicitation as issued, Novartis is correct
in asserting that the agency did not perform the type of detailed evaluation
of proposals under the implementation plan factor that would ensure that the
proposals affirmatively demonstrated compliance with each and every term in
the RFP that could be considered as creating a mandatory requirement.
Rather, the record reflects that the TEP engaged in a more generalized
review of proposals. Specifically, the evaluation summaries included in the
record reflect that the TEP evaluated the proposals' implementation plans by
reviewing them to determine how they approached the transfer of data, report
transmission modes, report transmission requirements, and data security. AR
(Nov. 19, 2001), Tabs 20, 25, 30, Revised TEP Scoring. We note that while
Novartis's implementation plan was considered acceptable, Mylan's initial
proposal was found technically unacceptable under the implementation plan
factor, and that Mylan, in response to the discussion questions posed by the
agency, submitted a lengthy and detailed revised proposal that was
ultimately evaluated as acceptable. AR (Nov. 19, 2001), Tabs 25-28, Mylan's
Initial Technical Proposal, TEP's Evaluation of Mylan's Initial Technical
Proposal, Mylan's Revised Technical Proposal, TEP's Evaluation of Mylan's
Revised Proposal. The record also evidences that Novartis is correct in
contending that the agency did not perform any evaluation to determine
whether the proposals met the registry requirements added by amendment No.
4; indeed, there effectively was nothing to evaluate, given that none of the
offerors, including Novartis, submitted a revised technical proposal
responding to the amendment.

Lack of Prejudice

We need not decide whether the agency was obligated to perform the type of
detailed evaluation of proposals under the implementation factor as argued
for by Novartis, or whether the agency was remiss in failing to evaluate
proposals to determine whether they met the registry requirements added by
amendment No. 4. 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 prospect of receiving
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). As
explained below, and as argued by the agency, the record demonstrates that
Novartis was not prejudiced by the manner in which the agency evaluated
proposals under the implementation plan factor.

Alleged Exceptions by Mylan to Registry Requirements

First, from our review of the record and as illustrated by the following
examples, we agree with the agency that while Mylan's proposal (and those of
the other offerors, including Novartis) did not affirmatively demonstrate
compliance with each and every term in the registry requirements section of
the RFP that could be construed as creating a requirement, Mylan's proposal
did not, despite the protester's view to the contrary, take exception to any
of the RFP's terms.

For example, the protester asserts that Mylan's proposal is inconsistent
with certain of the clozapine registry "data security" requirements
contained in the initial RFP (and not modified by amendment No. 4).
Specifically, the protester points out that Mylan's proposal included the
statement that [DELETED], and argues that this statement effectively takes
exception to the solicitation's provision that "[d]ata must be secured in a
storage system which restricts access to direct clozapine registry employees
and prevents unauthorized alterations, misuse, or transmissions."
Protester's Comments/Supplemental Protest at 13-14; see RFP at 10; AR
(Nov. 19, 2001), Tab 26, Mylan's Revised Technical Proposal, at 4 of 6.
However, this section in Mylan's proposal begins with the statement that
Mylan understands [DELETED], and continues with the explanation that
[DELETED]. AR (Dec. 17, 2001) at 17; AR (Nov. 19, 2001), Tab 26, Mylan's
Revised Technical Proposal, at 3 of 6. Accordingly, we agree with the agency
here that Mylan's proposal can reasonably be read only as making the agency
aware of an [DELETED], rather than as taking exception to the statement in
the RFP providing for restricted access to the registry.

As another example, the protester asserts that Mylan's proposal is
inconsistent with the clozapine registry "data security" provision which
states that "[d]ata supplied to the clozapine registries . . . is subject to
the Privacy Act of 1974." Protester's Comments/Supplemental Protest, at
11-12; see RFP at 9. The protester, while conceding that Mylan's proposal
"described the capability of its system" with regard to the provisions of
the RFP relating to data security as well as Mylan's "understanding that
disclosure is illegal," nevertheless argues that Mylan's proposal is
unacceptable with regard to this aspect of the data security requirements
solely because it "did not promise protection from disclosure." Protester's
Comments/Supplemental Protest, at 11-12; Protester's Reply to Supplemental
Agency Report (Dec. 21, 2001) at 16.

In evaluating Mylan's proposal, the agency found it "very detailed" with
respect to these data security provisions. AR (Nov. 19, 2001), Tab 25, TEP's
Evaluation of Mylan's Revised Proposal. Specifically, the agency points out
that Mylan's proposal states with regard to data security that [DELETED]. AR
(Nov. 19, 2001), Tab 26, Mylan's Revised Proposal, at 9 of 10. The agency
also points out that Mylan's proposal "included an overview of the Privacy
Act," and stated that it would provide appropriate National Clozapine
Coordinating Center personnel, who are authorized to access the data,
[DELETED]. Id.; AR (Nov. 19, 2001), Tab 25, TEP's Evaluation of Mylan's
Revised Proposal at 4; AR (Dec. 17, 2001) at 14. Despite the protester's
view to the contrary, we cannot find the agency's evaluation of Mylan's
proposal as "acceptable" with regard to these data security provisions
objectionable, given that, as reflected above, the agency reasonably
determined that the proposal reflected an adequate understanding of, and
approach to, accomplishing the agency's data security needs.

Mylan's Failure to Address Registry Requirements

Novartis also points to a number of separate registry provisions, contained
in either amendment No. 4 or in the initial clozapine registry
specifications unchanged by amendment No. 4, and asserts that Mylan's
proposal should be considered unacceptable because it did not specifically
address these provisions in its proposal. For example, Novartis claims that
Mylan did not show in its proposal that it complies with registry provision
in amendment No. 4 providing that "[t]he clozapine registry of the offeror .
. . [m]ust be able to issue authorization numbers via telephone and
facsimile at a minimum." The protester claims that "[n]one of the materials
provided in the Agency Report indicate[] that . . . Mylan . . . has complied
with this mandatory minimum requirement, or is willing and able to comply
with this requirement in the future." Protester's Comments/Supplemental
Protest at 5.

Although the RFP may have contemplated more detailed responses to the
registry provisions, we cannot find unreasonable the agency's effective
determination that Mylan's proposal would meet VA's clozapine registry needs
as reflected in the RFP. As discussed previously, Mylan's proposal included
a relatively detailed implementation plan that did not take exception to any
of the terms of the solicitation. It also included a signed copy of the
solicitation that, according to the RFP (at 5), assured that Mylan's
registry met the solicitation's registry requirements. As such, the fact
that Mylan's proposal did not specifically address each and every term in
the registry requirements section of the solicitation that could be
construed as creating a requirement (just as Novartis's proposal did not
address each and every one of these provisions) does not render unreasonable
the agency's judgment that Mylan's proposal offers a registry that will
satisfy the agency's needs.

Protester Not Prejudiced

There is nothing in the record that suggests that Novartis would have
submitted a different offer that would have had a reasonable possibility of
award, even if it had known that the agency would not perform the type of
detailed evaluation of proposals under the implementation factor as argued
for by Novartis, or perform any evaluation to determine whether the
proposals met the registry requirements added by amendment No. 4. In this
regard, none of the offerors, including Novartis, submitted a revised
technical proposal that addressed the revised "registry requirements" set
forth in amendment No. 4. See Hollingsead Int'l, B-227853, Oct. 19, 1987,
87-2 CPD para. 372 at 7 (protester was not prejudiced by the agency's failure to
evaluate certain information required by the solicitation where each of the
offerors, including the protester, submitted proposals that were deficient
in this regard).

Moreover, Novartis did not submit the kind of detailed response to the
registry requirements that it claims was required, but admits that there
were "gaps" in its proposal. Specifically, Novartis concedes that it "would
have been wise for Novartis to submit more technical information about its
existing registry," instead of assuming the agency was fully aware of the
registry's details, and that this lack of detail resulted in its proposal
receiving only an "acceptable" rating for its implementation plan.
Protester's Reply to Supplemental Agency Report (Dec. 21, 2001) at 10. Thus,
it is not at all clear that Novartis's proposal should have been rated
superior to Mylan's under the implementation plan factor, even if the
detailed evaluation argued for by Novartis had been performed.

Additionally, the solicitation specified that price would be more important
than all other factors combined in determining which proposal represented
the best value to the agency. Indeed, as compared to the 60 percent weight
attributed to price, the implementation plan was worth only 17 percent.
Novartis's proposed price of [DELETED] for each year's estimated quantity
was more than [DELETED] Mylan's proposed price of $1,090,365, and there is
no indication in the record or reason to believe that Novartis would have
priced its offer differently, had it been aware of how the agency would
evaluate proposals under the implementation plan factor. [6] Moreover, as
discussed above, the protester has not shown the two offerors' equal

"highly acceptable" ratings for past performance (worth 17 percent) were
unwarranted. Thus, given that the agency reasonably determined that Mylan's
proposal did not take exception to the RFP's requirements and thus met its
needs as reflected in the solicitation, the tremendous difference in the
prices proposed by Novartis and Mylan, and the absence of any evidence of
how Novartis could have improved its competitive posture if the
implementation plan had been evaluated in the detail argued by Novartis, we
fail to see any reasonable possibility that Novartis was prejudiced by the
agency's actions here. See SOS Interpreting, Ltd., B-287477.2, May 16, 2001,
2001 CPD para. 84 at 4; Instrument Control Serv., Inc., B-285776, Sept. 6, 2000,
2000 CPD para. 186 at 4.

SDB FACTOR EVALUATION

The protester also contends that the record does not evidence any meaningful
evaluation of proposals under the SDB factor. As mentioned previously, the
RFP stated that the SDB factor was significantly less important than the
past performance or implementation plan factors. RFP at 32. Consistent with
this, the source selection plan provided that the SDB factor was to receive
a weight of only 6 percent. AR (Nov. 19, 2001), Tab 17, Source Selection
Plan, at 1. In evaluating proposals, the agency found that Novartis proposed
to subcontract [DELETED] worth of work, or [DELETED] percent of the total
contract value, to an SDB.
AR (Nov. 19, 2001), Tab 13, Memo for Record (Oct. 12, 2001), at 3. With
regard to Mylan's proposal, the agency noted that "Mylan indicated that they
could not attribute any goals specific to the product Clozapine although
their subcontract goals are 5% for SDB." Id. at 5. The record does not
include an adjectival rating for any of the proposals under the SDB
evaluation factor. Although the record indicates that the contracting
officer, who served as the source selection authority for this acquisition,
was aware of the offerors' SDB plans, it is unclear from the record how the
competing approaches were considered in the source selection decision or
whether they were considered at all. Id. at 3, 5-6.

Again, given the relatively low weight the SDB factor was accorded in the
evaluation, the fact that Novartis's proposed SDB plan provided for a total
of only [DELETED] worth of work to be subcontracted to an SDB concern, and
the significant overall price difference between Mylan's and Novartis's
proposal, we fail to see how Novartis was prejudiced by the apparent lack of
attention to this factor paid by the agency in determining that Mylan's
proposal represented the best value to the agency (even considering this
problem in conjunction with the implementation plan evaluation).

The protest is denied.

Anthony H. Gamboa

General Counsel

Notes

1. Clozapine, originally manufactured only by Novartis under their trademark
Clozarilï¿½, is used for the treatment of schizophrenia. Novartis currently
supplies virtually all of the clozapine required by the VA for its patients.
Agency Report (AR) (Nov. 19, 2001) at 2 n.1.

2. Under the PPV Program the VA awards separate contracts for the product
distribution and for the product itself. Once a supply source is obtained
for a product, it is distributed for use nationwide. RFP at 3.

3. Although not disclosed in the RFP, the record reflects that the
evaluation factors, consistent with the source selection plan, were accorded
the following weights in the source evaluation: price (60 percent); past
performance (17 percent); implementation plan (17 percent); SDB (6 percent).
AR (Nov. 19, 2001), Tab 17, Source Selection Plan, at 1.

4. We denied Novartis's protest of an alleged ambiguity in the solicitation
regarding the submission of the implementation plan. Novartis Pharm. Corp.,
B-285038, July 6, 2000, 2000 CPD para. 116.

5. The possible ratings were outstanding, highly acceptable, acceptable,
poor, and unsatisfactory. AR (Nov. 19, 2001), Tab 13, Memo for Record (Oct.
12, 2001), at 2.

6. For example, we do not see how Novartis could credibly claim that its
proposed price would have been less had it known that the agency would not
evaluate proposals to ensure that they specifically complied with the
registry requirements as amended by amendment No. 4, given that Novartis did
not revise its technical proposal to address these amended requirements.