TITLE: ACS State Healthcare, LLC; PharmaCare Government Services, Inc.; PGBA, LLC; Humana Military Healthcare Services, Inc., B-292981; B-292981.2; B-292981.3; B-292981.4; B-292981.5; B-292981.6; B-292981.7; B-292981.8; B-292981.9 B-292981.10, January 9, 2004
BNUMBER: B-292981; B-292981.2; B-292981.3; B-292981.4; B-292981.5; B-292981.6; B-292981.7; B-292981.8; B-292981.9 B-292981.10
DATE: January 9, 2004
**********************************************************************
ACS State Healthcare, LLC; PharmaCare Government Services, Inc.; PGBA, LLC;
Humana Military Healthcare Services, Inc., B-292981; B-292981.2; B-292981.3;
B-292981.4; B-292981.5; B-292981.6; B-292981.7; B-292981.8; B-292981.9
B-292981.10, January 9, 2004
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.
Decision
Matter of: ACS State Healthcare, LLC; PharmaCare Government Services,
Inc.; PGBA, LLC; Humana Military Healthcare Services, Inc.
File: B-292981; B-292981.2; B-292981.3; B-292981.4; B-292981.5;
B-292981.6; B-292981.7; B-292981.8; B-292981.9 B-292981.10
Date: January 9, 2004
Robert J. Sherry, Esq., Kathleen M. Paralusz, Esq., Dylan B. Carp, Esq.,
and Marc R. Baluda, Esq., Kirkpatrick & Lockhart, for ACS State
Healthcare, LLC; Gerard R. Doyle, Esq., and Ron R. Hutchinson, Esq., Doyle
& Bachman, for PharmaCare Government Services, Inc.; Kathleen E. Karelis,
Esq., W. Jay Devecchio, Esq., Robert K. Huffman, Esq., Lisanne S.
Cottington, Esq., Edward Jackson, Esq., Christine S. Ricci, Esq., Jeffrey
C. Walker, Esq., and Alexa Zevitas, Esq., Miller & Chevalier, for PGBA,
LLC; Thomas P. Barletta, Esq., Peter L. Wellington, Esq., Daniel C. Sauls,
Esq., Paul R. Hurst, Esq., Michael C. Drew, Esq., Paul I. Lieberman, Esq.,
and Dianne L. Herz, Esq., Steptoe & Johnson, and Alan C. Brown, Esq.,
Duane Morris, for Humana Military Healthcare Services, Inc., the
protesters.
Thomas B. Smith, Esq., Thomas M. Susman, Esq., Scott A. Shepard, Esq., and
Ryan M. Malone, Esq., Ropes & Gray; and Clayton S. Marsh, Esq., and Janice
C. Forsyth, Esq., for Express Scripts, Inc., the intervenor.
Lynn T. Burleson, Esq., and Kenneth S. Lieb, Esq., TRICARE Management
Activity, Department of the Defense, for the agency.
Sharon L. Larkin, Esq., Guy R. Pietrovito, Esq., and James A. Spangenberg,
Esq., Office of the General Counsel, GAO, participated in the preparation
of the decision.
DIGEST
1. In negotiated procurement under which the contractor will acquire
pharmaceuticals for Department of Defense (DoD) using DoD funds, and where
solicitation requests offerors to propose discount rates and dispensing
fees for pharmaceuticals in addition to their fixed prices, and provides
for evaluation of government*s projected future costs for pharmaceuticals
(*Total Expected Government Cost* (TEGC)) as a technical factor, agency
reasonably assessed likelihood that offerors could provide pharmaceuticals
at their proposed discount rates and dispensing fees; cost realism
analysis of offerors* TEGCs was not required, where solicitation did not
require such an analysis.
2. Source selection authority (SSA) performed reasonable cost/technical
tradeoff in determining the awardee*s proposal for supporting
pharmaceutical program represented best value, where the SSA*s judgment,
based upon the results of a reasonable, well-documented technical
evaluation, is set forth in a detailed decision document that demonstrates
the SSA*s understanding of the evaluated strengths and weaknesses of the
respective proposals, and that shows a reasonable weighing of the
offerors* respective technical and price advantages consistent with the
solicitation*s evaluation criteria.
DECISION
ACS State Healthcare, LLC; PharmaCare Government Services, Inc.; PGBA,
LLC; and Humana Military Healthcare Services, Inc. protest the award of a
contract to Express Scripts, Inc. (ESI), under request for proposals (RFP)
No. MDA906-03-R-0002, issued by the TRICARE Management Activity,
Department of the Defense (DoD), for support of the TRICARE Retail
Pharmacy (TRRx) program.
We deny the protests.
BACKGROUND
The TRICARE program is a managed health care program implemented by DoD
for active duty and retired members of the uniformed services, their
families, and survivors. 32 C.F.R. S: 199.17 (2003). TRICARE is a blend
of the military*s direct care system of hospitals and clinics (known as
Military Treatment Facilities) and the Civilian Health and Medical Program
of the Uniformed Services (CHAMPUS). The TRICARE program includes
pharmacy benefits, which were being provided as part of TRICARE*s Managed
Care Support (MCS) contracts until the award under this RFP was
implemented.[1]
Solicitation
This RFP was to obtain a contractor to support the TRRx program, which
provides for the acquisition, delivery and distribution of prescriptions
to beneficiaries. The contractor will be the Pharmacy Benefits Manager
(PBM) for the TRRx program and will use its own retail pharmacy network to
support the TRRx program nationwide (including Puerto Rico, Guam, and the
U.S. Virgin Islands).[2] The RFP contemplated the award of a fixed-unit
price, incentive contract for a 6‑month base period with 5 option
years. The contractor will use DoD funds to pay for each prescription
after receiving government verification of an individual beneficiary*s
eligibility and authorization for payment, and provide other services to
support the program. The contractor will operate a pharmacy help desk,
verify beneficiary eligibility, process claims, provide clinical services
(processing prior authorization and medical necessity determination
requests), provide information technology services, perform marketing and
education services, process appeals, and perform record management
services.
The RFP provided for award on the basis of a cost/technical tradeoff, and
stated that the agency intended to evaluate proposals and make award
without conducting discussions. The RFP identified the following six
evaluation factors and associated subfactors:
+------------------------------------------------------------------------+
|(1) Network Access | |
|------------------------------------------| |
|(2) Network Reimbursement | |
|------------------------------------------------------------------------|
|(3) PBM Services |
|------------------------------------------------------------------------|
| |Claims Processing |
| |--------------------------------------------------------|
| |Quality Assurance Plan |
| |--------------------------------------------------------|
| |Disaster Recovery Plan |
| |--------------------------------------------------------|
| |Phase-in Plan |
|------------------------------------------------------------------------|
|(4) PBM Operations |
|------------------------------------------------------------------------|
| |Pharmacy Help Desk |
| |--------------------------------------------------------|
| |Prior Authorization |
| |--------------------------------------------------------|
| |Medical Necessity Determination |
| |--------------------------------------------------------|
| |Management |
| |--------------------------------------------------------|
| |Beneficiary Services |
|------------------------------------------------------------------------|
|(5) Past Performance | |
|------------------------------------------| |
|(6) Price | |
|------------------------------------------+-----------------------------|
+------------------------------------------------------------------------+
Offerors were informed that factors (1) and (2) were of equal weight and
individually were the most important non-price evaluation factors.[3]
Factor (5) was stated to be next in importance and equal in weight to the
combination of factors (3) and (4), which were of equal importance.[4]
Offerors were also informed that factors (1) through (5) combined were
significantly more important than price. Proposals were to be evaluated
under each factor and subfactor to determine the extent to which they
exhibited a clear understanding of the work requirements and the means
required to fulfill the requirements, and the extent to which they
demonstrated an ability to meet or exceed the RFP requirements. RFP
amend. 4, S: M.2.2.
The RFP also provided for an assessment of proposal risk associated with
an offeror*s technical approach and ability to meet the RFP requirements.
The assessment of proposal risk could be affected by the amount of the
offeror*s experience in performing PBM-related services. Proposal risk
was to be evaluated at the factor and subfactor level. Id. S: M.5.
With respect to factor (1), Network Access, offerors were informed that
*the offeror must have an established network in place, at the time of
submission of the technical proposal, sufficient to meet the minimum
access standards* stated in the RFP. Id. S: L.8.2. These minimum access
standards required for an urban setting a pharmacy within 2 miles
estimated driving distance of 90 percent of the beneficiaries; for a
suburban setting a pharmacy within 5 miles estimated driving distance of
90 percent of the beneficiaries; and for a rural setting a pharmacy within
15 miles estimated driving distance of 70 percent of the beneficiaries.
Id. S: C.7. The RFP also required that offerors provide a plan to
minimize the impact of any disruption or inconvenience to beneficiaries
caused by changes to the network structure.
With respect to factor (2), Network Reimbursement, offerors were informed
that a written proposal was not necessary. Under this evaluation factor,
the agency was to assess an offeror*s projected program pharmaceutical
costs based upon the offeror*s proposed guaranteed network reimbursement
rates and the total expected government cost (TEGC) for reimbursement of
network retail pharmacy costs.[5] The proposal risk associated with the
offeror*s ability to obtain and maintain the proposed TRRx network at the
offeror*s guaranteed average discount percentage and guaranteed average
dispensing fee was also to be assessed under this factor.
Under this factor, offerors were directed to complete the solicitation*s
Table L-1, which would detail the offeror*s pricing structure for
pharmaceutical items. Specifically, this table, for each option year,
identified estimated quantities of brand name and generic pharmaceuticals,
and for each group an associated *average wholesale price* (AWP) was
identified.[6] Offerors were required to provide their *guaranteed
average discount percentage* (the offeror*s reimbursement discount factor)
and *guaranteed average dispensing fee* (the offeror*s fee for each
prescription filled). The table then required each offeror to use
algebraic formulae to derive the offeror*s *average drug cost* and
*estimated total drug costs* for each option period.[7] The TEGC was the
sum of the offeror*s estimated total drug costs for the 5 option years.
The RFP required offerors to provide supporting documentation evidencing
their ability to deliver at the guaranteed average discount percentages
and average dispensing fees. Offerors were informed that such supporting
information might include identifying the average discount percentage and
dispensing fee by brand and generic drug categories *for its currently
existing network that is closest in size and scope to the network required
under this RFP.* RFP amend. 4, S: L.8.3.3.1.1.
The RFP provided that the offerors* guaranteed average discount percentage
and guaranteed average dispensing fee for brand name and generic drugs for
each of the 5 option years would be included in the contract for the
purpose of determining incentive payments or deductions from the contract
price. That is, the contractor could earn an *incentive* up to 5 percent
of the difference between the actual costs and expected costs (applying
the contractor*s guaranteed discount percentage and dispensing fee to the
prescriptions filled during that contract period), up to a stated maximum
amount for each contract period (from $1.5 million in the first option
year to $2.5 million in the fifth option year). RFP amend. 1, S: H.2.2.
Conversely, the RFP provided that
the Government will assess a Negative Incentive if the total actual
network reimbursement cost in a contract option period exceeds the [TEGC]
for Reimbursement of Network Pharmacy Costs that would have resulted from
applying the Guaranteed Average Discount Percentage and the Guaranteed
Average Dispensing Fee Per Prescription to the prescriptions filled in the
network during the contract option period. The difference between the
actual costs and Government calculated costs will be deducted from future
payments to the contractor.
RFP amend. 1, S: H.2.3.
With respect to factor (3), PBM Services, offerors were informed that,
among other things, the agency would assess whether each offeror*s
proposed claims processing met or exceeded the minimum processing
standards stated in the RFP*s statement of work for electronic and
beneficiary submitted claims.[8] The RFP also provided for the evaluation
of the offerors* proposed quality assurance plan, disaster recovery
plan,[9] and phase-in plan under this evaluation factor.
The RFP provided that offerors were to address factor (4), PBM Operations,
only in an oral presentation.[10] Among other things, offerors were
required to address their proposed hours of operation for their pharmacy
help desk and to provide data demonstrating call access standards (e.g.,
average wait times and call abandonment rates) for their existing pharmacy
help desks. The RFP also required under this factor that offerors detail
their plans to process prior authorization[11] and medical necessity
determination[12] requests to completion, including identifying the
frequency and number of follow-up attempts with a prescriber. Under this
factor, offerors were also required to describe their proposed management
structure and to *describe [their] systems of management controls for
internal and external business processes.* RFP amend. 4, S: L.8.5.4.
Offerors were also required to describe under this factor their current
beneficiary services operations, their plans to accommodate increased
beneficiary inquiry volume resulting from the TRRx contract, and their
guaranteed performance standards relating to telephone inquiries and
written correspondence.[13] RFP amend. 4, S: L.8.5.5.
With respect to factor (5), Past Performance, offerors were required to
submit performance data from each of their five largest current customers
to whom the offeror or its first-tier subcontractor was providing PBM or
PBM-related services, and to identify all federal, state, and local
government contracts for the provision of PBM services. Offerors were
informed that the agency would assess the past performance data to
determine performance confidence.
Evaluation of Proposals
Proposals were received from seven offerors, including ESI, ACS, Humana,
PGBA, and PharmaCare.[14] The proposals were evaluated by the agency*s
source selection evaluation board (SSEB), which was comprised of a
technical evaluation team (TET), performance risk assessment group (PRAG),
and price evaluation team (PET). All of the offerors* technical
proposals received a *pass* grade under the network access evaluation
factor. The awardee*s and protesters* proposals were evaluated as
follows:
+---------------------------------------------------------------------------------------+
| |(1) |(2) Network |(3) PBM |(4) PBM | | |
|Offeror |Network |Reimbursement |Services |Operations|(5) Past |(6) |
| |Access | | | |Performance[15]|Price |
| |----------+---------------+--------------+----------| | |
| |Merit/Risk|TEGC |Risk[16]|Merit[17]|Risk|Merit|Risk| | |
| |Disruption| | | | | | | | |
|----------+----------+------+--------+---------+----+-----+----+---------------+-------|
|ESI |Green/Low |$15.7B|Low |Green |Low |Green|Low |High |$245.4M|
| |10,757 | | | | | | |Confidence | |
| |(.36%) | | | | | | | | |
|----------+----------+------+--------+---------+----+-----+----+---------------+-------|
|ACS |Green/Low |$15.6B|Low |Yellow |Mod.|Green|Mod.|Satisfactory |$138.0M|
| |20,711 | | | | | | |Confidence | |
| |(.68%) | | | | | | | | |
|----------+----------+------+--------+---------+----+-----+----+---------------+-------|
|Humana |Green/Low |$16.1B|Low |Green |Low |Blue |Low |High |$186.2M|
| |16,173 | | | | | | |Confidence | |
| |(.54%) | | | | | | | | |
|----------+----------+------+--------+---------+----+-----+----+---------------+-------|
|PGBA |Green/Low |$15.8B|Low |Green |Low |Green|Mod.|Satisfactory |$211.1M|
| |46,957 | | | | | | |Confidence | |
| |(1.56%) | | | | | | | | |
|----------+----------+------+--------+---------+----+-----+----+---------------+-------|
|PharmaCare|Green/Low |$15.9B|Low |Green |Low |Green|Low |Satisfactory |$264.3M|
| |25,736 | | | | | | |Confidence | |
| |(.85%) | | | | | | | | |
+---------------------------------------------------------------------------------------+
Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at 10.
The other two offerors* proposals were assessed as having significant
deficiencies or weaknesses that could not be corrected without proposal
revisions and unreasonable proposed prices; these proposals were not
considered for award.
ESI*s Proposal
Under factor (1), Network Access, ESI proposed a network of 55,402 retail
pharmacies and was determined to offer the lowest disruption rate of the
five proposals under consideration for award. Although the TET found that
ESI*s proposal exceeded the solicitation*s *blue level* access standards
for two of the three categories, the proposal was rated green with low
risk under the factor.[18] Id. at 54.
Under factor (2), Network Reimbursement, ESI offered the second lowest
TEGC. The TET compared ESI*s guaranteed discount percentages and
dispensing fees to industry norms (as identified by the Pharmacy Benefit
Management Institute (PBMI), the agency*s consultant), and to the rates
and fees that ESI was currently achieving in a commercial pharmacy network
of similar size and scope; the TET concluded that there was little doubt
that ESI would be able to enroll and retain pharmacies in its proposed
network at its proposed guaranteed average discount rates and dispensing
fees. Id. at 55-56.
The TET noted no strengths or weaknesses in ESI*s proposal under factor
(3), PBM Services, and rated it green with low risk. Under factor (4),
PBM Operations, ESI*s proposal also received an overall green with low
risk rating. However, the TET noted that ESI*s commitment to processing
prior authorization and medical necessity determination requests in
2 working days as compared to the minimum requirement of 5 working days
warranted blue ratings under the prior authorization and medical necessity
determination subfactors to factor (4); the TET noted that there was
little proposal risk in this regard, inasmuch as ESI*s proposal
demonstrated substantial experience related to processing prior
authorization and medical necessity determination requests. The TET also
found two strengths and a weakness under the beneficiary services
subfactor to factor (4), which was rated green; the TET noted that ESI*s
offer to provide beneficiary services 24 hours per day/365 days per year
exceeded in a beneficial way the minimum requirements and that ESI*s
proposal to provide a beneficiary service center that was exclusively
dedicated to the TRRx program also exceeded the minimum requirement to
provide personnel that were primarily responsible for beneficiary
support. The weakness noted under this subfactor was that ESI failed to
propose minimum performance standards for telephone call blockage and call
abandonment rates. Id. at 61-67.
ESI received a *high confidence* rating under factor (5), Past
Performance. This rating reflected the PRAG*s judgment that there was *no
doubt in [ESI*s] ability to successfully perform the required effort in
the TRRx solicitation.* Id. at 67. The PRAG noted that ESI*s past
performance data established strengths in a number of areas, including
*meeting the terms and conditions of the contract* and *performance in a
timely manner.* Id. at 69. Although the PRAG identified no weaknesses,
it noted that three of ESI*s references *indicated that, at one time or
another, ESI experienced problems satisfactorily providing members
services,* but that each reference stated that ESI *had made performance
improvements in this area.* Id. at 70. The PRAG also noted that ESI had
served as a PBM, providing retail pharmacy services *commensurate with the
scope of the functions required by the TRRx solicitation* under a
subcontract with the TRICARE managed care contractor for the central
region and that the contractor had provided a *stellar recommendation.*
Id.
ESI proposed the second-highest price of the offerors whose proposals were
considered for award.
ACS*s Proposal
ACS proposed a network of [Deleted] retail pharmacies and was determined
to offer the third lowest disruption rate of the five proposals under
consideration for award. Like ESI*s proposal, ACS*s proposal was found to
exceed the *blue level* access standards for two categories and it
received a green rating under factor (1), Network Access. Id. at 13-14.
Under factor (2), Network Reimbursement, ACS offered the lowest TEGC,
approximately $75 million lower than the TEGC offered by ESI. The TET
compared ACS*s proposed discount percentages and dispensing fees to the
discounts and dispensing fees that ACS reported for its other pharmacy
networks and found that ACS*s proposed discounts and fees were very
similar. Here too, the TET concluded that there was little doubt that ACS
could enroll and retain pharmacies in the TRRx network at the guaranteed
average discount rates and dispensing fees. Id. at 14-15.
The TET assessed a significant weakness in ACS*s proposal under factor
(3), PBM Services, which resulted in an overall yellow with moderate
proposal risk rating. Specifically, the TET found that ACS*s proposed
disaster recovery plan only partially supported ACS*s ability to resume
services within 24 hours following a catastrophic event; the TET found
that ACS*s plan was
inadequate in regard to beneficiary services and pharmacy help-desk
operations because the [Deleted] locations proposed for the TRRx
beneficiary call center and pharmacy help desk call center . . . are not
sufficiently dispersed to minimize the likelihood that a single
catastrophic event could render all [Deleted] proposed sites inoperable.
The TET identified this flaw in the disaster recovery plan as a
significant weakness because it appreciably increases the risk of
unsuccessful contract performance.
Id. at 18-19.
ACS*s proposal was rated as green with moderate proposal risk under factor
(4), PBM Operations, with moderate risk being assessed under four of the
five subfactors of this factor. Specifically, under the prior
authorization and medical necessity determination subfactors, the TET
found inadequate ACS*s approach of limiting follow-up on incomplete prior
authorization and medical necessity determination requests to only
[Deleted], which the TET found increased the probability that these
requests would be inaccurately or prematurely denied. Under the
management subfactor, the TET assessed as a moderate risk ACS*s proposed
use of [Deleted] because it found that ACS had not provided information
demonstrating that it had experience providing PBM services in concert
with subcontractors in general or these subcontractors in particular.
ACS*s proposal was also assessed as moderate risk under the beneficiary
services subfactor based on two evaluated weaknesses: (1) an apparent
inconsistency between ACS*s proposed guarantee to answer [Deleted] of
beneficiary calls within [Deleted] and its reported less timely
performance for two of ACS*s three current clients; and (2) ACS*s proposed
use of a proprietary call documentation system for the beneficiary
services center. Id. at 21‑29.
ACS was assessed a satisfactory confidence rating under the past
performance factor. This rating was based upon the PRAG*s assessment that
strengths identified by some references for ACS*s *responsiveness to
solving problems* and management were counterbalanced by weaknesses
identified by other references for *performing in a timely manner,*
electronic claims processing, management, disaster recovery, and
phase-in. Id. at 30-33. ACS was provided with an opportunity to address
the adverse past performance information, and ACS provided an explanation,
which the PRAG concluded generally did not refute the existence of the
identified weaknesses. See Contracting Officer*s Statement at 24; Agency
Report, Book 28, Tab 83, Clarification of ACS*s Past Performance, at
38-42. The PRAG concluded that *ACS*s past performance weaknesses,
coupled with its limited prior authorization and medical necessity
determinations and member (beneficiary) services performance history,
create some doubt that ACS will be able to successfully perform the effort
required in the TRRx.* Agency Report, Book 15, Tab 37, SSEB Evaluation
Report, at 60.
ACS proposed the lowest price of the offerors whose proposals were
considered for award.
Humana*s Proposal
Under factor (1), Network Access, Humana proposed a network of [Deleted]
retail pharmacies and was determined to offer the second lowest disruption
rate of the five proposals under consideration for award. Like ESI*s and
ACS*s proposals, Humana*s proposal was found to exceed the *blue level*
minimum access standards for two categories and it too received a green
rating. Id. at 71-72.
Under factor (2), Network Reimbursement, Humana offered the highest TEGC;
the TET found that Humana*s guaranteed discount rates and average
dispensing fees varied somewhat from industry norms, but were consistent
with Humana*s existing pharmacy network agreements, *though not as
aggressive.* The TET concluded that there was little doubt that Humana
would be able to enroll and retain pharmacies in the TRRx pharmacy network
at Humana*s guaranteed average discount percentages and dispensing fees.
Id. at 72-73.
The TET assessed no strengths or weaknesses in Humana*s proposal under
factor (3), PBM Services, which was rated green with low risk. Humana*s
proposal was assessed as blue overall for factor (4), PBM Operations.
This rating reflected the TET*s assignment of blue with low risk ratings
for three of the five subfactors: prior authorization, medical necessity
determination, and beneficiary services. Specifically, the TET found that
Humana*s proposed processing of prior authorization and medical necessity
determination requests exceeded the RFP requirements in a beneficial way,
and that there was low proposal risk for achieving these strengths
because, based upon its experience as a TRICARE managed care support
contractor for five regions, Humana*s plans for processing prior
authorization and medical necessity determination requests were currently
functional *to a large degree.* With respect to the beneficiary services
subfactor, the TET noted that Humana proposed to provide beneficiary
services [Deleted], and guaranteed to [Deleted] required telephonic and
written inquiry response standards. Id. at 79-85.
Humana received a *high confidence* rating under factor (5), Past
Performance. The PRAG noted that there were positive performance comments
and information from references, particularly in the areas of electronic
and paper claims processing, disaster recovery, phase-in, pharmacy and
beneficiary services, and prior authorization and medical necessity
determinations. No weaknesses were noted. Moreover, the PRAG noted that
the
performance history provided, especially Humana*s current performance as a
TRICARE managed care support contractor for five TRICARE regions and
specifically its delivery of the TRICARE retail pharmacy benefit in the
five regions, is commensurate to the size, scope, and complexity for all
functions required by the TRRx solicitation.
Id. at 87.
Humana proposed the second lowest price of the offerors whose proposals
were considered for award.
PGBA*s Proposal
PGBA proposed a network of [Deleted] retail pharmacies and was determined
to offer the highest disruption rate of the five proposals under
consideration for award. The TET found that PGBA*s guaranteed minimum
access standards exceeded the *blue level* minimum access standards for
one category and that its proposal warranted a *green* rating under
factor (1), Network Access. Id. at 106-07.
Under factor (2), Network Reimbursement, the TET found that PGBA offered
the third lowest TEGC. The TET noted that PGBA had proposed [Deleted]
than normal discount rates but [Deleted] than normal dispensing fees; the
TET concluded that PGBA would be able to enroll and retain pharmacies in
the TRRx pharmacy network at PGBA*s guaranteed average discount rates and
dispensing fees. Id. at 107-08.
PGBA*s green low risk rating under factor (3), PBM Services, reflected the
TET*s assessment that there were no strengths or weaknesses in PGBA*s
proposal under this factor. PGBA*s proposal was assessed as having an
overall moderate risk under factor (4), PBM Operations, and under four of
the five subfactors of this factor, primarily because of its lack of
pharmaceutical experience. The TET expressed concern under two of the
subfactors with PGBA*s lack of experience in processing prior
authorization and medical necessity determination requests as a PBM;[19]
the TET also doubted that PGBA had proposed sufficient staff to process
these requests. Id. at 115-19. Moderate risk was also assessed in PGBA*s
proposal under the management subfactor; specifically, the TET noted that
it had
some doubt that PGBA [could] effectively manage the TRRx contract based on
the management structure proposed. PGBA demonstrated an existing
management structure with substantial experience related to health care
and claims processing for health care contracts. However, PGBA
demonstrated no management experience related to managing Pharmacy Benefit
Management functions or managing subcontractors performing complex
portions of the contract.
Id. at 121. PGBA*s proposal was also assessed as having a moderate risk
under the beneficiary services subfactor due to PGBA*s lack of experience
in providing beneficiary services relative to pharmacy services and based
upon the TET*s judgment that significant modifications would be required
in PGBA*s processes and procedures for its beneficiary services center to
become operational under the contract. Id. at 122-23.
PGBA received a *satisfactory confidence* rating under factor (5), Past
Performance. Specifically, the PRAG noted that based upon the information
provided by their references, it appeared that PGBA and its subcontractor,
[Deleted], had performed satisfactorily.[20] Furthermore, the PRAG noted
that PGBA had extensive TRICARE and CHAMPUS experience, but that
experience was primarily related to providing medical claims processing
and not providing pharmacy services. Id. at 123-25. The PRAG was
concerned that
[l]imited information was provided on PGBA*s performance history on
phase-in and member services and no information was provided for prior
authorization/medical necessity determinations and pharmacy audits. The
PRAG considered PGBA*s past performance history to be of limited relevance
due to the absence of pharmacy/PBM performance history. Limited
information was provided on [Deleted] performance history relative to
electronic claims processing. Given the lack of performance history and
the relative importance of network access, prior authorization/medical
necessity determinations, and pharmacy audits in the evaluation, the PRAG
has some doubt that PGBA and [Deleted] can perform these functions as
required in the TRRx solicitation.
Id. at 125.
PGBA proposed the third lowest price of the offerors whose proposals were
considered for award.
PharmaCare*s Proposal
PharmaCare proposed a network of [Deleted] retail pharmacies and was
determined to offer the second highest disruption rate of the five
proposals under consideration for award. The TET found that PharmaCare*s
proposal also warranted a green rating under factor (1), Network Access.
Id. at 126-27.
Under factor (2), Network Reimbursement, the TET found that PharmaCare
offered the second highest TEGC. The TET noted that PharmaCare*s proposed
guaranteed discount rates and dispensing fees varied somewhat from
industry norms, but concluded that the *[Deleted].* This, combined with
PharmaCare*s evidence of existing networks and contracts in place to
support the TRRx network, led the TET to conclude that there was little
doubt that PharmaCare would be able to enroll and retain pharmacies in the
TRRx pharmacy network at PharmaCare*s guaranteed average discount
percentages and dispensing fees. Id. at 127-28.
The TET assessed no strengths or weaknesses in PharmaCare*s proposal under
factor (3), PBM Services, which was rated green with low risk overall,
although PharmaCare*s proposal was assessed as a moderate risk under the
quality assurance subfactor because PharmaCare did not detail the
experience, credentials and training of its quality assurance staff. Id.
at 129-30.
PharmaCare*s proposal was also rated as green with a low risk under factor
(4), PBM Operations. However, the TET noted a weakness under the
beneficiary services subfactor that warranted a moderate risk rating.
Specifically, the TET was concerned that PharmaCare*s proposed telephone
response time of [Deleted] was less stringent than the RFP requirement
that *[w]hen a caller requests to speak with a beneficiary service
representative, the connection will be made within 30 seconds, 95
[percent] of the time.* Id. at 138-39; see RFP, amend. 4, S: C.19.4. The
TET concluded that an *[Deleted] may result in significant periods of time
throughout the year when the contractor is not compliant with its
guaranteed standards, requiring more intensive Government monitoring.*
Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at 140.
PharmaCare received a *satisfactory confidence* rating under factor (5),
Past Performance. The PRAG noted that information provided by
PharmaCare*s references was generally positive. However, the PRAG was
concerned by the lack of performance history identified for PharmaCare for
processing electronic and paper prescription claims volumes commensurate
with the claims volumes that are projected for the TRRx program and by the
lack of any beneficiary services performance history as reported by
PharmaCare*s largest clients. These concerns led the PRAG to have some
doubt about PharmaCare*s ability to successfully perform the TRRx
contract. Id. at 140-42.
PharmaCare proposed the second highest price of the offerors whose
proposals were considered for award.
Cost/Technical Tradeoff Analysis
Following the completion of the technical and price evaluations, the SSEB
performed a cost/technical tradeoff analysis to make a best-value
recommendation to the source selection authority (SSA). The SSEB first
determined which proposals clearly represented less value to the
government as compared to the other proposals and eliminated those
proposals from its review. The SSEB concluded that only the proposals of
ESI, ACS and Humana should be included in the cost/technical tradeoff
analysis. Based upon its detailed tradeoff analysis, the SSEB recommended
to the SSA that ESI*s proposal be selected as reflecting the best value to
the government.[21] Id. at 143‑64.
The SSA received and reviewed the SSEB*s evaluation report and award
recommendation. In a detailed 25-page decision document, the SSA
explained her review of the evaluation results and independent assessment
of the strengths and weaknesses of the respective proposals under the
stated evaluation factors and subfactors. In performing this review, the
SSA did not agree with the SSEB in all respects. For example, the SSA did
not agree with the SSEB that PGBA*s proposal should not be included in the
cost/technical tradeoff analysis, and she therefore included the proposals
of ESI, ACS, Humana, and PGBA in her best value analysis. See Agency
Report, Book 15, Tab 36, Source Selection Decision, at 16. PharmaCare*s
proposal was not included in the SSA*s cost/technical tradeoff assessment
because she agreed with the SSEB that PharmaCare*s proposal *clearly
represents less value to the Government than ESI[*s] and [Humana*s]
because of its lower ratings in Factors 3, 4, and 5 (including
subfactors), and PharmaCare*s higher Total Evaluated Price.* Id. at 16.
The SSA then compared ESI*s highest priced proposal to ACS*s, Humana*s,
and PGBA*s proposals, in turn. As explained below, the SSA agreed with
the SSEB that ESI*s proposal reflected the best value to the government.
ESI/ACS Tradeoff
Comparing ESI*s and ACS*s proposals, the SSA noted that under factor (1),
Network Access, although ESI*s proposal reflected a lower beneficiary
disruption rate than did ACS*s, this was not a discriminator between any
of the proposals, given the low number of beneficiaries disrupted in each
proposal. ACS was found to be have a *slight advantage* under factor (2),
Network Reimbursement, based upon its lower proposed TEGC, which was
approximately $75 million (or .48 percent) lower than ESI*s. ACS was also
found to have a *significant advantage* in proposed price (approximately
$107 million lower than ESI*s proposed price). Id. at 19, 21.
ESI*s proposal was found by the SSA to offer significant technical
advantages over ACS*s under factors (3), (4), and (5). Under factor (3),
PBM Services, ESI*s better disaster recovery plan was considered to be a
distinguishing feature between the firms* proposals; the SSA found that
ACS*s disaster recovery plan, as evaluated by the SSEB, did not ensure
that beneficiary services and the pharmacy help desk would be operational
within 24 hours following a catastrophic event, and would have to be
modified to meet the RFP*s minimum requirements. Id. at 20-22. Under
factor (4), PBM Operations, the SSA noted that ACS received moderate risk
ratings for four of the five subfactors, whereas ESI received all low risk
ratings; discussed in detail the significant discriminators between ACS*s
and ESI*s approaches under these subfactors; and concluded that ESI had
the better technical proposal under this factor. Under factor (5), Past
Performance, the SSA noted that ESI had received a higher confidence
rating than ACS*s satisfactory confidence rating, which reflected the
PRAG*s judgment that although ACS had received a number of positive
comments from its references, there were multiple comments reflecting poor
performance in functional areas required for the TRRx program, which were
not assuaged by ACS*s comments regarding this adverse information. Id. at
22-23.
Weighing the two firms* respective advantages, the SSA concluded that
ESI*s proposal reflected the better overall value to the government,
finding that the
superior technical approach demonstrated by ESI in Factors 3 and 4 and
their significantly better Past Performance (Factor 5) outweighs the
advantage ACS has in Factor 2 for network reimbursement costs. Except for
Factor 2, for which ACS has a slight advantage, ESI has the best technical
approach to accomplish the objectives of this solicitation. The
advantages presented by ESI in Factors 3 and 4, combined with their
outstanding record of past performance (Factor 5), justify the higher
price in ESI*s proposal.
Id. at 25.
ESI/Humana Tradeoff
Comparing ESI*s and Humana*s proposals, the SSA noted that ESI*s and
Humana*s proposals were essentially equal under factors (1), Network
Access; (3), PBM Services; and (5), Past Performance. However, ESI*s
proposal was found to have a significant advantage under evaluation factor
(2), Network Reimbursement, based upon its nearly $360 million (or 2.3
percent) lower TEGC. Both firms were found to have *very similar*
technical approaches under evaluation factor (4), PBM Operations; however,
Humana*s proposal was found to have a slight advantage under this factor,
as indicated by its five strengths and no weaknesses as compared to ESI*s
proposal, which had four strengths and no weaknesses.[22] Humana*s
proposal*s advantage under this factor was based upon the SSA*s conclusion
that Humana offered better guaranteed telephone call blockage and call
abandonment rates and commitment to exceeding the minimum requirement for
responding to routine written beneficiary inquiries. The SSA also found
that Humana also had an advantage under the price factor, offering a price
that was $59.2 million lower than that offered by ESI. Weighing ESI*s and
Humana*s proposals, the SSA found that Humana*s slight technical advantage
under factor (4) and price advantage were outweighed by ESI*s substantial
network reimbursement advantage. Id. at 17‑19.
ESI/PGBA Tradeoff
Comparing ESI*s and PGBA*s proposals, the SSA noted that ESI*s proposal
was assessed as more advantageous than PBGA*s proposal under factors (4),
PBM Operations, and (5), Past Performance. In this regard, the SSA
accepted the TET*s assessment of a moderate risk in PGBA*s proposal under
factor (4) related to PGBA*s lack of experience in processing prior
authorization and medical necessity determination requests and proposed
low staffing for those functions, and lack of PBM experience. With
respect to the past performance factor, ESI received a high confidence
rating and PGBA received only a satisfactory confidence rating. ESI was
also found to offer a lower TEGC than PGBA (approximately $58.2 million
lower), while PGBA proposed a lower price than ESI (approximately $34.4
million lower). Id. at 16-17.
Weighing ESI*s and PGBA*s proposals, the SSA concluded that ESI*s proposal
offered a significant technical advantage based upon the firm*s experience
in processing prior authorization and medical necessity determination
requests and having sufficient staff to process these requests, its higher
past performance rating, and lower TEGC. Noting that technical factors
were more important than price, the SSA determined that ESI*s significant
technical advantage outweighed PGBA*s price advantage. Id. at 17.
In sum, the SSA concluded that ESI*s proposal offered the best value to
the government. ESI was awarded the contract, and these protests
followed.
DISCUSSION
The protesters raise numerous objections to TRICARE*s evaluation of
proposals and source selection decision. In reviewing protests against
allegedly improper evaluations and source selection decisions, it is not
our role to reevaluate proposals. Rather, our Office examines the record
to determine whether the agency*s judgment was reasonable and in accord
with the RFP criteria. Abt Assocs., Inc., B-237060.2, Feb. 26, 1990, 90-1
CPD P: 223 at 4. A protester*s mere disagreement with the agency*s
judgment does not establish that an evaluation was unreasonable. UNICCO
Gov*t Servs., Inc., B- 277658, Nov. 7, 1997, 97-2 CPD P: 134 at 7.
ACS, Humana and PGBA challenge the specific color ratings assigned by the
agency to various factors and subfactors based on asserted strengths and
weaknesses in the proposals. More specifically, the protesters assert
that the agency failed to award blue and yellow ratings in a manner
consistent with the RFP. Citing section M.2.2.2 of the RFP, the
protesters assert that even though the RFP required the agency to evaluate
whether a proposal exceeded the RFP requirements, the agency, in
determining what color rating to assign under a particular factor or
subfactor, evaluated only those requirements that identified numeric
performance standards and ignored all other requirements, and that under a
proper evaluation, their proposals would have received a greater number of
strengths and blue ratings under the various factors and subfactors. The
protesters also argue that ESI*s proposal did not receive yellow ratings
for subfactors, where it failed to satisfy the subfactor*s minimum
requirements.
It is well established that ratings, be they numerical, adjectival or
color, are merely guides for intelligent decision-making in the
procurement process. Citywide Managing Servs. of Port Washington, Inc.,
B‑281287.12, B‑281287.13, Nov. 15, 2000, 2001 CPD P: 6 at 11.
Where the evaluators and the source selection decision reasonably consider
the underlying bases for the ratings, including advantages and
disadvantages associated with the specific content of competing proposals,
in a manner that is fair and equitable and consistent with the terms of
the solicitation, the protesters* disagreement over the actual adjectival
or color ratings is essentially inconsequential, in that it does not
affect the reasonableness of the judgments made in the source selection
decision. See id.; National Steel and Shipbuilding Co., B‑281142,
B‑281142.2, Jan. 4, 1999, 99-2 CPD P: 95 at 15.
In response to the protests, TRICARE provided a voluminous and detailed
record of its evaluation and source selection decision.[23] This
extensive analysis shows that the agency evaluated the relative merits of
each aspect of the proposals, including essentially all of the examples
cited by the protesters, and assessed ratings in a fair and equitable
manner, consistent with both the RFP and the color definitions. That is,
consistent with section M.2.2.2, the record confirms that the agency
evaluated the extent to which the proposals met or exceeded the
solicitation requirements. Although not every advantageous feature of
each proposal was formally labeled a strength and the source selection
decision may not have discussed each and every asserted strength and
weakness, as the protesters would have liked, the record demonstrates that
the SSEB and SSA considered all of the information available, and issued a
well-reasoned and rational SSEB report and source selection decision that
highlighted the key discriminators among offerors* proposals. Based on
this reasonable discussion and assessment of relative advantages and
disadvantages associated with the specific content of proposals, we find
that the protesters* disagreements with the actual color ratings to be
inconsequential, given that they do not affect the reasonableness of the
judgments made in the source selection decision.[24] See Citywide
Managing Servs. of Port Washington, Inc., supra, at 11.
Factor (1) Network Access
PGBA and ACS complain that TRICARE did not credit their proposals for
exceeding the minimum access standards stated in the solicitation, arguing
that they should have received blue ratings for proposing to exceed the
RFP*s minimum access requirements.
As indicated above, although it was not disclosed in the RFP, the record
shows that to warrant a blue rating the evaluators required that an
offeror exceed each of the minimum access standards for the urban,
suburban, and rural categories by a particular specified amount. Agency
Report, Book 15, Tab 37, SSEB Evaluation Report, at 106. The RFP did
state, however, that the agency would evaluate the extent to which an
offeror*s proposal demonstrated the ability to meet or exceed the RFP
requirements. RFP amend. 4, S: M.2.2.2.
The SSEB*s evaluation report provided to the SSA reflects that ACS*s and
ESI*s proposals offered *blue level* access standards for the suburban and
rural categories, but did not meet the *blue level* standard for the urban
category, and that PGBA*s proposal offered *blue level* access standard
only for the suburban category.[25] Thus, under the evaluation plan
employed by the SSEB (which was not disclosed to the offerors),[26] these
proposals were rated only green overall under this factor because they did
not meet or exceed the *blue levels* for all three categories. Agency
Report, Book 15, Tab 37, SSEB Evaluation Report, at 13, 54, 106.
Although PGBA and ACS assert that their proposals should have received
blue ratings under this factor for exceeding some of the minimum and *blue
level* standards, the protesters* disagreement with their assigned color
ratings under this factor is essentially inconsequential. This is so
because these aspects of the protesters* proposals were accurately
described in the evaluation narrative provided to the SSA and did not
affect the reasonableness of her source selection decision. See Citywide
Managing Servs. of Port Washington, Inc., supra, at 11. In any case, we
see nothing in the RFP that required the agency to assign the highest
rating whenever a firm offered to exceed the minimum access standards by
any amount. Moreover, since ESI*s proposal exceeded the *blue level* for
two of the three access standards and only received a green rating, the
record shows that the offerors were treated equally, and does not evidence
that either ACS*s or PGBA*s proposal was superior to ESI*s under this
factor.
Factor (2) Network Reimbursement
Humana and PGBA challenge the evaluation of factor (2), Network
Reimbursement, on several grounds, including that the agency evaluated
this factor as a price factor in a manner inconsistent with the RFP,
failed to perform a cost realism analysis, and failed to properly evaluate
risk.
The assertion that the agency improperly evaluated factor (2) as a price
factor, rather than solely as a technical factor as required by the RFP,
stems from the fact that the agency compared the offerors* TEGCs in
performing its best value analysis. However, this approach was entirely
consistent with the RFP*s evaluation scheme. Although the RFP did provide
that factor (2) would be evaluated as a technical factor and not as a
price factor, it also instructed that the agency would consider the
*projected program pharmaceutical costs* (i.e., the TEGC) under this
factor in the agency*s best-value analysis and in its tradeoff analysis
*against other technical factors, past performance, and price.* RFP
amend. 4, S: M.6.2. As described elsewhere in this decision, the TEGC was
consistently treated as a non-price factor in the source selection
decision*s weighing of the technical and price factors.
We also find that a cost realism analysis of the offerors* proposed TEGCs
was not required. Where, as here, an RFP contemplates the award of a
fixed-price contract, a cost realism analysis is not required, absent a
solicitation provision requiring such an analysis. FAR S: 15.404-1(d)(3);
WorldTravelService, B‑284155.3, Mar. 26, 2001, 2001 CPD P: 68 at 3.
Here, not only does the RFP not provide for a cost realism analysis, but
it specifically precluded factor (2) from being evaluated as a price
factor.
Humana nevertheless argues that factor (2) is inherently a
cost‑reimbursable item that required the agency to perform a cost
realism analysis, even in the absence of a solicitation provision
requiring such analysis.[27] That is, Humana argues that because the RFP
calls for the evaluation of *projected program pharmaceutical costs,* the
evaluation must necessarily include a cost realism analysis in order to
ascertain the probable cost to the government of the pharmaceuticals.
However, the RFP stated precisely how these pharmaceutical costs would be
evaluated--using a formula based on offerors* fixed, guaranteed average
discount rates and dispensing fees--and this approach did not contemplate
the performance of a cost realism analysis. Moreover, we fail to see how
a detailed cost realism analysis could have been performed (or how
offerors could have reasonably expected one to be performed), given that
the RFP did not require the submission of detailed cost information to
enable the agency to perform such an analysis.
Humana also complains that the agency failed to adequately evaluate the
risk of whether ESI could maintain its proposed pharmacy network at the
proposed guaranteed average discount rates and dispensing fees. Judging
an offeror*s performance risk is a matter committed to the contracting
agency*s discretion, subject to the tests of reasonableness and
conformance with the RFP*s evaluation criteria; a protester*s mere
disagreement with the agency*s judgment does not establish that the
judgment was unreasonable or inconsistent with the evaluation criteria.
GTE Gov*t Sys. Corp., B-260022, B-260022.2, May 16, 1995, 95-1 CPD P: 245
at 6-7.
As described above, in evaluating risk, the TET compared each offeror*s
proposed guaranteed average discount rates and dispensing fees with those
of its existing pharmacy network closest in size and scope to that of the
RFP (i.e., comparable network), as well as to industry norms identified by
PBMI. For its comparable network, ESI identified in its proposal discount
rates and dispensing fees for a commercial network slightly larger than
its proposed network under the TRRx solicitation;[28] in contrast, Humana
identified rates and fees from its existing TRICARE retail pharmacy
network, which is significantly smaller in size than that proposed under
the TRRx solicitation.[29] The comparable rates and fees of these
offerors were as follows:[30]
+------------------------------------------------------------------------+
| |Brand |Generic |
| |----------------------+---------------------|
| |Rate |Fee |Rate |Fee |
|---------------------------+-----------+----------+----------+----------|
|ESI Proposed Network |[Deleted] |[Deleted] |[Deleted] |[Deleted] |
|---------------------------+-----------+----------+----------+----------|
|ESI Comparable Network |[Deleted] |[Deleted] |[Deleted] |[Deleted] |
|---------------------------+-----------+----------+----------+----------|
|Humana Proposed Network |[Deleted] |[Deleted] |[Deleted] |[Deleted] |
|---------------------------+-----------+----------+----------+----------|
|Humana Comparable Network |[Deleted] |[Deleted] |[Deleted] |[Deleted] |
|---------------------------+-----------+----------+----------+----------|
|PBMI (Industry Norm) |[Deleted] |[Deleted] |[Deleted] |[Deleted] |
+------------------------------------------------------------------------+
Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at 55, 73; Book 3,
Tab 8, ESI Technical Proposal, at 75; Book 9, Tab 21, Humana Technical
Proposal, Factor 2, at 10.
The TET recognized that ESI*s proposed discount rates were *somewhat
larger* and its proposed dispensing fees were *somewhat smaller* than the
industry norms, but also found that they were *consistent with* the rates
and fees in ESI*s comparable commercial network; ESI*s resulting TEGC,
although not the lowest, was found to be competitive with the other
offerors* TEGCs. Agency Report, Book 15, Tab 37, SSEB Evaluation Report,
at 55-56; Book 15, Tab 36, Source Selection Decision, at 15. The TET
noted that Humana*s proposed discount rates and dispensing fees were
*close to* industry norms and *consistent* with its comparable network,
*though not as aggressive.* Agency Report, Book 15, Tab 37, SSEB
Evaluation Report, at 73. In both instances, these comparisons led the
TET to conclude there was *little doubt* that the offerors would be able
to enroll and retain pharmacies in their TRRx network at their guaranteed
average discount rates and guaranteed average dispensing fees. Thus, both
offerors* proposals were rated low risk under factor (2). Id. at 56, 73.
Humana contends that the agency was unreasonable in concluding that both
offerors* proposals were low risk under this factor for several reasons.
First, Humana argues that ESI*s comparable network discount rates are not
as *predictive* of rates obtainable under the TRRx program as are
Humana*s, because Humana*s rates were based on a TRICARE pharmacy network
similar to that required under the TRRx solicitation, whereas ESI*s rates
were based on a commercial network that is, according to Humana, different
from that required under the RFP. Humana contends that discount rates
obtainable under a commercial pharmacy network, such as ESI*s, are
typically greater due to larger co-pays and rebates that are not available
under the TRRx solicitation, and that this should have been considered in
the evaluation of risk.
As recognized by Humana, this procurement was structured to recognize the
similarities between commercial and TRRx pharmacy practices, and in fact
the acquisition was intended to be *as close to commercial practices as
possible.* Agency Report, Book 2, Tab 2, Pre-Proposal Questions and
Answers, at 19; see Book 15, Tab 52, Acquisition Plan (Change 2, Apr. 14,
2003), at 351 (*resulting contract will adhere as closely as possible to
commercial practices*); Declaration of Humana*s Consultant, Nov. 25, 2003,
at 3. It was thus expected that discounts under a commercial network
would be predictive of those that could be obtainable under the TRRx
program. Humana has not shown that the network that will be required for
the TRRx program is materially different from a commercial network.
In this regard, there is no evidence in the record to confirm Humana*s
speculation that ESI*s comparable commercial network rates reflect rebates
or are affected by large *co‑pays.* Indeed, Humana*s argument seems
to be belied by the fact that Humana*s own comparable network--which
Humana*s argument would suggest is not affected by large *co-pays* or
rebates--shows discount rates [Deleted].[31] As the agency notes, and
Humana does not dispute, if Humana*s TEGC were calculated using Humana*s
commercial network discount rates and dispensing fees, it would be even
lower than the TEGC proposed by ESI,[32] which further confirms that ESI*s
TECG was not unreasonably low.
Humana counters, however, that if the PBMI *industry norm* rates and fees
were used in calculating the TEGC, an amount closer to Humana*s TEGC than
ESI*s would result. Humana argues that this shows that ESI*s TEGC was
more unrealistic than Humana*s and thus ESI*s proposal should have been
considered a higher risk, particularly given that ESI*s TEGC is almost
$356 million lower than this PBMI TEGC. However, the agency considered
the offerors* variance from the PBMI rates in the evaluation together with
other salient considerations, such as comparable network rates, and
concluded that this differential was insufficient to render ESI*s proposal
other than low risk. Agency Report, Book 15, Tab 37, SSEB Evaluation
Report, at 56. While Humana portrays ESI*s proposed discounts
(particularly for brand name drugs) as being significantly greater than
under ESI*s comparable network, the agency considered these differences in
its risk analysis and Humana has not shown the agency*s risk analysis was
unreasonable.[33]
Humana also complains that the agency failed to consider whether ESI had
entered into long-term contracts with its proposed network of pharmacies,
[Deleted], to ensure stability of discount rates and dispensing fees.
Although it is true that the agency did not inquire as to the terms of
ESI*s (or the other offerors*) contracts with its proposed network of
pharmacies, the RFP did not require the agency to evaluate, or even
review, the terms of those contracts, and offerors were instructed that
the contracts did not have to be provided with their proposals. Agency
Report, Book 2, Tab 2, Pre-Proposal Questions and Answers, at 46. To the
extent that Humana objects that the RFP should have provided for the
evaluation of the network contract terms, this ground of protest,
concerning an apparent solicitation impropriety, is untimely filed. 4
C.F.R. S: 21.2(a)(1) (2003). In any event, the record shows that the TET
specifically recognized Humana*s [Deleted] with its network pharmacies as
an *effort to promote stability within its network* in determining that
its proposal represented a low risk under this factor. Agency Report,
Book 15, Tab 37, SSEB Evaluation Report, at 73.
Humana also contends that ESI did not provide *supporting documentation*
evidencing its ability to deliver its proposed discount rates and
dispensing fees as required by section L.8.3.3.1 of the RFP, and otherwise
failed to explain how it would achieve greater discounts than under its
comparable network. However, the record confirms that ESI identified the
average discount rates and dispensing fees of its commercial network, and
provided a brief statement of the differences between this network and
that proposed under the RFP, see Agency Report, Book 3, Tab 8, ESI
Technical Proposal, at 75, which was the only supporting documentation
that section L.8.3.3.1 suggested be provided. Although Humana may have
provided more detail in its proposal concerning its commercial networks,
we agree with the agency that ESI*s proposal contained sufficient
information for the agency to reasonably conclude its TEGC was a low
risk.[34]
Because the agency had no reason to question ESI*s proposal
representations, and ESI*s TEGC (which was not the lowest) was competitive
with all other offerors considered in the tradeoff (except for Humana*s,
which was significantly higher),[35] we find the agency reasonably
concluded that ESI*s proposed discount rates and dispensing fees were
reasonably attainable and posed low risk. Based on our review, we find no
basis to question the agency*s evaluation of factor (2).[36]
Factor (3) PBM Services
Claims Processing Subfactor
Humana asserts that its proposal deserved a blue rating under the claims
processing subfactor because it exceeded the minimum performance standards
set forth in the RFP for processing paper claims.[37] The record shows
that while the evaluators considered this aspect of Humana*s proposal
favorably, the TET, in its overall consensus, did not consider it to be so
beneficial to the government as to warrant a blue rating (although many of
the advantageous features of Humana*s proposal for processing paper claims
were discussed in detail in the SSEB Report). Agency Report, Book 30, Tab
87, Technical Evaluator Working Paper, at 37; Tab 90, Technical Evaluator
Working Paper Notes, at 227; Book 15, Tab 37, SSEB Evaluation Report, at
75; Agency*s Legal Memorandum at 67. Based on our review, we find no
basis to find the agency*s evaluation of Humana*s proposal under this
subfactor was unreasonable. We see nothing in the RFP that required the
agency to assign the highest rating under this subfactor for every
possible advantage or strength in a proposal; nor are we aware of any
requirement that the final evaluation report discuss all possible
advantages or strengths of the proposals.[38]
Humana and ACS also complain that ESI*s proposal should have received
lower ratings for the claims processing subfactor because ESI*s proposal
assertedly did not sufficiently discuss its hardware platform
configuration for claims processing. However, as the agency notes, the
RFP did not contain minimum requirements for platform configuration and
ESI*s proposal described its current configuration and plans for
configuration under the TRRx effort. The evaluation record reflects that
the SSEB noted that ESI*s description of its platform configuration was a
minor weakness, but determined that it was not significant enough to
affect the overall rating for this subfactor, let alone the overall rating
for factor (3). Agency Report, Book 15, Tab 37, SSEB Evaluation Report,
at 83-84. Based on our review, we find no basis to find ESI*s proposal
was unreasonably evaluated under this subfactor.
Phase-In Plan Subfactor
Here, Humana complains that its proposal was not assessed a strength for
*directly address[ing]* the requirements for a phase-in plan identified in
the RFP. Humana Protest (Oct. 14, 2003) at 38. However, our review
indicates that the agency reasonably considered Humana*s proposal to have
satisfied the phase-in plan requirements, but not to have exceeded them in
a beneficial manner; accordingly, we fail to see how a blue rating was
warranted under this subfactor.
Disaster Recovery Subfactor
ACS complains that the agency unreasonably assessed ACS*s proposed
disaster recovery plan as yellow with moderate risk, which resulted in it
receiving an overall yellow with moderate risk rating for factor (3).
As discussed above, this rating was based upon the agency*s determination
that the locations proposed by ACS for the beneficiary call and pharmacy
help desk call centers were not sufficiently dispersed to minimize the
likelihood that a single catastrophic event could render inoperable all of
ACS*s locations. The agency recognized that ACS proposed [Deleted], but
found that the call centers and help desks were both located in
[Deleted]. The agency therefore found that this close geographic
proximity posed an increased risk that TRRx services would be disrupted
for more than 24 consecutive hours in violation of the RFP
requirements.[39]
ACS contends that the agency misread its proposal, arguing that section
4.1.2 of its proposal (which is titled *Platform Configuration* and deals
with the firm*s proposed computer hardware and software system), when read
in conjunction with its disaster recovery plan, shows that ACS*s proposed
help desks would be in a geographic location distinct from its proposed
beneficiary call centers.
However, we find from our review of ACS*s proposal, including section
4.1.2, that ACS did not make clear that it was proposing call centers and
help desks that were in distinct geographic locations; rather, we agree
with the agency that ACS*s disaster recovery plan reasonably led the
agency to believe that the call centers and help desks would be operated
in [Deleted]. See Agency Report, Book 5, Tab 13, ACS Technical Proposal,
at 91-100, 146-58. To the extent ACS believes that it proposed otherwise,
we note that it is an offeror*s obligation to submit an adequately written
proposal for the agency to evaluate, and an offeror fails to do so at its
own risk. United Defense LP, B-286925.3 et al., Apr. 9, 2001, 2001 CPD P:
75 at 19.
ACS also argues that ESI*s proposal was unequally evaluated, inasmuch as
ESI*s proposal did not identify the locations of its call centers, yet the
agency evaluated ESI*s proposal as low risk under the disaster recovery
plan subfactor. We disagree. In contrast to ACS*s proposal, ESI
explained that it had [Deleted] call centers that were geographically
located throughout the United States and that call center applications
would be supported by [Deleted] in [Deleted] geographically disparate
locations. See Agency Report, Book 3, Tab 8, ESI Technical Proposal, at
263. Thus, unlike ACS*s proposal, ESI provided a disaster recovery plan
that was supported by geographically dispersed call centers that were
linked by redundant computer systems and supported by a cross-trained
staff. Although it is true that ESI did not identify the locations of its
call centers, we agree with the agency that it could accept ESI*s express
representation that the centers were located throughout the United
States.[40] Accordingly, we find that the agency reasonably assessed
ESI*s proposed disaster recovery plan as a low risk.
Factor (4) PBM Operations
Prior Authorization and Medical Necessity Determination Subfactors
ACS argues that the agency misevaluated its and ESI*s proposal under the
prior authorization and medical necessity determination subfactors, for
which ACS*s proposal was rated as green with moderate risk and ESI*s blue
with low risk. The SSEB and SSA found that ACS*s proposal to limit
follow-up for incomplete prior authorization and medical necessity
determination requests to [Deleted] could result in unnecessary or
premature denials, with implications for compromised medical care and
beneficiary dissatisfaction. In contrast, ESI proposed to make
[Deleted].
ACS argues that historically there were only a small number of prior
authorization and medical necessity determination requests that ACS had
not been able to resolve within [Deleted], which indicated that there was
little risk in ACS*s approach of limiting follow-up attempts. TRICARE
responds that this argument ignores the fact that ACS*s limitation of
follow-ups to [Deleted] *essentially ensured that some reviews would
remain incomplete.* Agency*s Legal Memorandum at 84. We find no basis to
object to the agency*s conclusion that ACS*s proposal of limited follow-up
could result in unnecessary or premature denials of prior authorization
and medical necessity determination requests, and that this justified the
agency*s assessment of moderate risk, even accepting ACS*s argument
concerning the historically small number of prior authorization and
medical necessity determination requests that were not processed within
[Deleted]. Although ACS clearly disagrees with the agency*s assessment,
its disagreement does not demonstrate that the agency*s judgment was
unreasonable. See UNICCO Gov*t Servs., Inc., supra, at 7.
We also find no merit to ACS*s complaint that ESI*s proposal for
completing prior authorization and medical necessity determination
requests should not have been found by the agency to reflect lower risk
than that proposed by ACS. Not only does this complaint also reflect mere
disagreement with the agency*s judgment, but we think that ESI*s proposed
follow-up process, on its face, reflects a greater opportunity to complete
these requests than ACS*s.[41]
PGBA objects to TRICARE*s moderate proposal risk assessment under the
prior authorization and medical necessity determination subfactors because
PGBA*s proposal did not demonstrate experience in processing prior
authorization and medical necessity determination requests for
pharmaceuticals. PGBA contends that it has significant experience
processing prior authorization and medical necessity determination
requests for health care claims and that section M.5 of the RFP provided
for the evaluation of *PBM related services* in evaluating proposal risk,
not solely PBM experience.
The record shows that TRICARE recognized and credited PGBA*s experience
processing prior authorization and medical necessity determination
requests for health care claims, but found that PGBA demonstrated no
experience processing prior authorization and medical necessity
determination requests for pharmaceuticals. See Agency Report, Book 15,
Tab 37, SSEB Evaluation Report, at 117, 119. PGBA does not assert that it
has such experience.
Section M.5 of the RFP provided that *[p]roposal risk may also be impacted
by the amount of experience in performing PBM related services
demonstrated by the offeror.* RFP amend. 4, S: M.5. Contrary to PGBA*s
assertion, we think that a fair interpretation of this provision allowed
the agency to consider the amount of an offeror*s specific experience, or
lack of specific experience, in its evaluation of proposal risk. See
Omniplex World Servs. Corp., B-290996.2, Jan. 27, 2003, 2003 CPD P: 7 at 6
n.10 (an agency properly may take into consideration specific, albeit not
expressly identified, experience in making qualitative distinctions
between competing proposals, so long as the specific experience is
logically encompassed by, or related to, an RFP*s requirements and stated
basis for evaluation).
PGBA also objects to the agency*s assessment that the firm may not have
proposed sufficient staff to process prior authorization and medical
necessity determination requests. The TET noted as a risk that PGBA*s
proposed staffing level for processing these requests seemed insufficient
when compared to the number of prior authorization and medical necessity
determination requests its current staff processes for medical claims. In
this regard, the TET specifically noted that PGBA provided no explanation
as to how its proposed staff would process prior authorization and medical
necessity determination requests significantly quicker than such requests
for medical claims were processed at the firm*s current staff level, which
is what it would have to do under its proposed staffing levels here. PGBA
argues, however, that the TET erroneously believed that PGBA*s current
staff level to process prior authorization and medical necessity
determination requests was [Deleted] staff members, but in fact, as shown
on its oral presentation slides, PGBA employed a staff of [Deleted]
members to perform this work.
Although TRICARE acknowledges in its report that it believed that PGBA
processed prior authorization requests with a staff of [Deleted] members
and that this may be an error, we agree with TRICARE*s assertion that this
error is harmless. The *correct* staff number (as asserted by PGBA) would
mean that PGBA would have to process prior authorization and medical
necessity determination requests for the TRRx program *three times faster
than it [currently] processes medical* prior authorization and medical
necessity determination requests.[42] Agency Legal Memorandum at 49.
PGBA*s other weaknesses under these subfactors related to its lack of PBM
experience significantly contributed to its moderate risk rating under
this subfactor. As also noted by TRICARE, PGBA did not provide any
explanation as to how it could perform the pharmaceutical prior
authorization and medical necessity determination requests significantly
quicker than it currently processes such requests on medical claims.[43]
Therefore, based on our review, notwithstanding the agency*s minor error
in evaluating PGBA*s staffing level for these functions, we find the
agency*s assessment of PGBA*s proposal as having a moderate risk under
this subfactor to be reasonable.
Management Subfactor
ACS argues that TRICARE erroneously downgraded its proposal under the
management subfactor because ACS assertedly had not shown experience
managing subcontractors. ACS complains that the RFP did not require
offerors to demonstrate such experience under this subfactor.
For this subfactor, the RFP informed offerors that the agency would
evaluate, among other things, the offerors* management structure and
processes and relevant key personnel and organization experience *relating
to management of accounts of similar size and complexity.* RFP amend. 4,
S: M.6.4.4. In addition, offerors were instructed to *describe [their]
systems of management controls for internal and external business
processes.* Id. S: L.8.5.4. Based on our review, we agree with TRICARE
that the RFP provisions encompassed the agency*s evaluation of risk
associated with the managerial burden assumed by ACS in proposing
[Deleted]. We also find that TRICARE reasonably determined that this risk
was not completely mitigated by ACS*s demonstrated management structures
and processes, where ACS*s proposal failed to show any experience
providing PBM services in concert with its subcontractors.
ACS also complains that TRICARE evaluated ESI*s proposal unequally under
the management subfactor because TRICARE failed to downgrade ESI*s
proposed use of Electronic Data Systems Corporation (EDS) as a
subcontractor to assist in claims processing and implementing the disaster
recovery process, because ESI did not explain how it planned to manage EDS
and did not demonstrate that it had experience in providing PBM services
in concert with EDS. The agency responds that ESI did not propose to use
EDS to perform the core TRRx functions, but only proposed EDS as a support
vendor, so the agency did not have the same concerns as it did with ACS*s
proposal under this subfactor. The record supports the agency*s
distinction. As indicated by TRICARE, ESI*s proposal clearly shows that
EDS was proposed by ESI to perform data center operations management. See
Agency Report, Book 3, Tab 8, ESI Technical Proposal, at 92. Thus, unlike
ACS*s [Deleted], EDS will not be performing core TRRx functions. Given
this fundamental difference, we find no basis to conclude that the firms
were treated unequally under the management subfactor with respect to
evaluating their management of subcontractors to perform the TRRx work.
Protesters* Evaluation Under Pharmacy Help Desk Subfactor
ACS, PGBA, and Humana challenge the agency*s evaluation of their proposals
under the pharmacy help desk subfactor. The TET identified no strengths
and weaknesses in these protesters* proposals under this subfactor; ESI*s,
ACS*s, and PGBA*s proposals were rated green with low risk, and Humana*s
proposal was rated green with moderate risk.
ACS and Humana complain that their proposals did not receive a blue rating
under the pharmacy help desk subfactor, even though they offered to
provide service [Deleted]. However, the record shows that ESI also
proposed this coverage under this subfactor and similarly received a green
rating and these offerors* proposed service was reported to the SSA; thus,
we consider the issue of whether the protesters* proposals should have
received a blue rating for this subfactor to be inconsequential. While
ACS points to certain other positive aspects of its proposal under this
subfactor that it claims should have led to a blue rating, the record
shows that the evaluators considered most of these aspects in the
evaluation and discussed them in the SSEB report, and decided they did not
merit a formal strength or a blue rating.[44] Agency Report, Book 17, Tab
58, ACS Technical Evaluation, at 211; Book 15, Tab 37, SSEB Evaluation
Report, at 49; Agency*s Legal Memorandum at 91. The protesters* arguments
here too constitute mere disagreement with the agency*s evaluation
judgment and do not show the judgment was unreasonable. See UNICCO Gov*t
Servs., Inc., supra, at 7.
PGBA complains that it proposed a fully dedicated *[Deleted]* and
*[Deleted],* but that these were unreasonably not acknowledged by the
agency as proposal strengths. TRICARE responds that, because the RFP did
not state a minimum [Deleted] requirement, PGBA*s offer (as well as that
of a number of other offerors) to provide a dedicated [Deleted] was not
evaluated as a strength. PGBA disagrees with TRICARE that the RFP did not
state a minimum requirement, inasmuch as the solicitation required a
beneficiary service unit staffed with personnel whose *primary*
responsibility was to provide beneficiary support, such as the help desk.
We need not address this issue because, even accepting PGBA*s argument
that its proposal of a dedicated [Deleted] and [Deleted] should be viewed
as proposal strengths, this would not have changed its overall rating
under factor (4), PBM Operations. In this regard, as noted above, PGBA*s
proposal received a green/moderate risk rating for four of the five
subfactors and a green/low risk rating for the pharmacy help desk
subfactor. Given that we have denied PGBA*s protest of its moderate risk
rating under the prior authorization and medical necessity determination
subfactors and PGBA does not challenge its moderate risk ratings under the
management and beneficiary services subfactors, we have no basis to
conclude that its overall rating for this factor would be higher than
green with a moderate risk or that this would consequently have affected
the cost/technical tradeoff.
Protesters* Evaluation Under Beneficiary Services Subfactor
ACS complains that TRICARE misevaluated its proposal under the beneficiary
services subfactor, for which ACS*s proposal received a blue with moderate
risk rating. As indicated above, the agency evaluated two weaknesses in
ACS*s proposal under this subfactor, which caused the moderate risk
rating. ACS challenges both of these evaluated weaknesses.
First, the agency noted that ACS had proposed the use of a [Deleted], but
that it was not currently using [Deleted] at this location. The agency
expressed concern that ACS had failed to explain why it was changing its
[Deleted] or how it would transition to the use of [Deleted]. ACS
challenges the agency*s assessment that transitioning to this new
[Deleted] posed risk, arguing that the *fact that staff will require
additional training to perform certain beneficiary services
functions--when training already will be taking place--cannot reasonably
be read to pose an additional risk to overall contract performance.* ACS
Comments at 34. We disagree. Here, ACS indicated that it would be
adopting a new [Deleted], but did not detail how it would transition to
this new system. For that matter, ACS does not contend that it explained
in its oral presentation how it would train its staff in the use of
[Deleted]. We think the agency could reasonably be concerned that this
transition (even accepting ACS*s contention that it will perform training)
entailed risk to the government.[45]
The other evaluated weakness under this subfactor was based on the fact
that although ACS had proposed answering [Deleted], that performance
guarantee exceeded ACS*s reported performance for two of its three current
customers. This was of concern to the agency, given that ACS planned to
staff the TRRx [Deleted] in a manner consistent with its current
[Deleted].
ACS contends that TRICARE unreasonably considered only two of its three
current customers. Although ACS admits its performance for these two
customers is not as good as the [Deleted] performance guarantee it
proposed here, ACS complains that the call volume for these two customers
is in the aggregate less than the call volume for its third customer, for
which it is performing at better than the [Deleted] performance guarantee,
and that if the agency had considered its performance for this third
customer, ACS*s proposal would not have received a moderate risk rating
under this subfactor.
From our review, it does not appear that the SSEB or SSA specifically
considered ACS*s performance for the third, larger-call-volume
customer.[46] However, the record does not show that ACS would have
received a lower risk rating under this subfactor, even if this customer
had been favorably considered. This is so because this weakness was only
one of two weaknesses assessed under this subfactor, and, as stated above,
we find reasonable the agency*s assessment that ACS*s proposed use of
[Deleted] was a weakness. Moreover, given that ACS*s proposal reasonably
received moderate risk ratings under four of the five subfactors of factor
(4), even if its risk was lowered under the beneficiary services
subfactor, it seems certain that ACS*s overall moderate risk rating under
this factor, and thus the cost/technical tradeoff, would not have
changed. Therefore, we do not find that ACS was prejudiced by any failure
of the agency to adequately consider this third customer in evaluating
proposal risk under this subfactor.
Humana references a list of advantageous features reported in the SSEB
report under this subfactor that were not formally reported as strengths.
However, Humana was rated blue with low risk under this subfactor (and
blue with low risk overall under factor (4)), and these advantageous
features were all reported to the SSA. Thus, whether or not these
strengths were formally declared is essentially irrelevant and does not
provide a basis to challenge the evaluation.
ESI*s Evaluation Under Pharmacy Help Desk And Beneficiary Services
Subfactors
Humana, ACS and PGBA protest that ESI*s proposal should have been rated
lower under the pharmacy help desk and beneficiary services subfactors
because ESI failed to propose guaranteed standards for handling blocked
and abandoned calls.
The RFP did not state minimum requirements for blocked calls and call
abandonment rates, but informed offerors that the agency would evaluate
the offerors* proposed call access standards (including call abandonment
rates) under the pharmacy help desk subfactor and guaranteed standards for
handling blocked and abandoned calls under the beneficiary services
subfactor. See RFP amend. 4, S:S: M.6.4.1, M.6.4.5. In its evaluation,
the TET specifically noted that ESI had not proposed guaranteed standards
for blocked and abandoned calls under these subfactors.
With respect to the pharmacy help desk subfactor, the TET correctly noted
that the solicitation instructions did not require offerors to describe
such standards, see id. S: L.8.5.1, and therefore none of the offerors,
including ESI, were penalized for failing to propose standards under this
subfactor (although the TET noted this failure by ESI in the SSEB*s
report). See Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at
61.
With respect to the beneficiary services subfactor, the TET recognized
that offerors were instructed to provide performance standards for blocked
and abandoned call rates. Agency Report, Book 15, Tab 37, SSEB Evaluation
Report, at 66; see RFP amend. 4, S: L.8.5.5. ESI*s failure to provide
such standards was assessed by the TET to be a minor weakness.
Nevertheless, ESI*s proposal received a green with low risk rating under
this subfactor based upon the TET*s finding that ESI*s proposal reflected
two strengths and this one minor weakness, and upon the TET*s judgment
that it had
little doubt that ESI can satisfactorily provide beneficiary services as
required by the TRRx solicitation. ESI*s demonstrated experience and
proposed staffing should allow it to satisfactorily meet the requirements
of this subfactor. The TET did not assess additional risk to ESI*s
proposal for failing to propose blocked and abandoned call standards since
ESI*s current stated performance levels indicates they will be able to
provide acceptable service levels in these two categories.[47]
See Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at 66-67.
The SSA did not agree with the evaluators that ESI*s failure to propose
blocked and abandoned call standards was even a minor weakness because
*[i]n the ESI oral presentation this information is provided on slide
37.* Agency Report, Book 15, Tab 36, Source Selection Decision, at 18.
Nevertheless, the SSA credited proposals that expressly provided these
guaranteed standards; for example, the SSA found that Humana*s proposal
had a slight edge over ESI*s under evaluation factor (4) on the basis of
its proposed guaranteed standards. Id.
The protesters argue that the SSA could not reasonable rely upon ESI*s
slide 37 to determine that the firm*s failure to propose blocked and
abandoned call standards was not a weakness. Specifically, the protesters
contend that this slide does not present guaranteed standards, as required
by the RFP. We agree with the protesters that slide 37 does not provide
guaranteed standards for blocked and abandoned calls for this procurement;
rather, this slide provides ESI*s historical blocked and abandoned call
rates.
Nevertheless, we find no basis in the record to conclude that ESI*s
failure to provide these standards required that ESI*s proposal be rated
lower than it was. As was recognized by both the TET and the SSA, ESI
provided its current blocked and abandoned call rates, which the SSA and
SSEB found demonstrated that ESI had acceptable blocked and abandoned call
rates. Moreover, as indicated above, the SSA specifically credited the
protesters* proposals, over ESI*s, for proposing guaranteed standards.
See Agency Report, Book 15, Tab 36, Source Selection Decision, at 18. The
protesters have not shown the SSEB*s and SSA*s judgment in this regard to
be unreasonable. Instead, the protesters merely complain that ESI*s
failure to provide the guaranteed performance standards should have
resulted in a lower risk rating;[48] we find that this is again nothing
more than mere disagreement with the agency*s evaluation judgment, which
the protesters have not shown was unreasonable.[49]
Factor (5) Past Performance
As noted above, ESI*s and Humana*s past performance were rated high
confidence, and ACS*s, PGBA*s and PharmaCare*s past performance were rated
satisfactory confidence. ACS, Humana and PGBA each protest that their
past performance should have been considered more positively and ESI*s
more negatively, and that past performance was evaluated in an unequal
manner. PharmaCare only challenges its own past performance evaluation.
The evaluation of past performance, including the agency*s determination
of the relevance and scope of the vendors* performance history to be
considered, is a matter of agency discretion, which we will not find
improper unless unreasonable, inconsistent with the solicitation criteria,
or undocumented. Sonetronics, Inc., B‑289459.2, Mar. 18, 2002, 2002
CPD P: 48 at 3; IGIT, Inc., B‑275299.2, June 23, 1997, 97-2 CPD P: 7
at 5. An agency*s past performance evaluation may be based on a
reasonable perception of inadequate prior performance, regardless of
whether the contractor disputes the agency*s interpretation of the
underlying facts, Ready Transp., Inc., B-285283.3, B-285283.4, May 8,
2001, 2001 CPD P: 90 at 5, and the protester*s mere disagreement with the
agency*s judgment is not sufficient to establish that the agency acted
unreasonably. Birdwell Bros. Painting & Refinishing, B-285035, July 5,
2000, 2000 CPD P: 129 at 5.
ESI*s Past Performance
ESI*s past performance references all involved contracts where ESI
processed prescription claims, including its subcontract to provide
TRICARE PBM retail pharmacy network services for the managed care support
contractor for the TRICARE central region.[50] The PRAG properly, in our
view, considered this referenced work, which includes all functions
required under the TRRx RFP, to be so relevant that a high confidence
rating was warranted, given ESI*s generally positive performance history
(discussed below).
ACS argues that in rating ESI*s past performance TRICARE gave too much
credit to positive comments received from ESI*s references and not enough
weight to negative comments. In this regard, ACS points to the PRAG*s
statement that
[t]hree references indicated that, at one time or another, ESI experienced
problems satisfactorily providing customer services, identifying customer
service representative training as the underlying problem. The three
references acknowledged that ESI has made improvements; however, one
reference stated the *need for on-going training of customer service
representatives to consistently respond to members.*
Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at 68. ACS
contends that this comment should have been identified as a *weakness* but
was not. ACS also notes that some negative comments by ESI*s references
were not reported in the PRAG*s report; for example, ACS points to one
reference*s comments that ESI*s management was *not expert at
administering unfunded programs.*[51] See Agency Report, Book 26, Tab 72,
Past Performance Interview Summaries for ESI, at 30, 43‑44. In
ACS*s view, ESI*s past performance should not have received a high
confidence assessment, given these negative comments.
We have reviewed the PRAG*s summaries of interviews with ESI*s references
and its report to the SSA, and find no basis to object to the agency*s
evaluation of ESI*s past performance. The negative comments that were
noted in the PRAG*s report, which ACS believes should have been labeled
weaknesses but were not, were provided to the SSA for her consideration;
although ACS apparently believes that the comments should have been viewed
more negatively by the agency, we again view this as simple disagreement
with the agency*s judgment, which does not show that the judgment was
unreasonable. See Birdwell Bros. Painting & Refinishing, supra. Our
review also shows that the PRAG*s report fairly captures the summaries of
the interviews with ESI*s references, and that the comments in the
interview summaries that were not specifically reported in the PRAG*s
report do not show that the agency*s past performance evaluation was
unreasonable. For example, the reference*s comment that ESI was not
knowledgeable of unfunded programs was not seen as relevant by the PRAG
because the TRRx contract will only have funded programs. Agency*s Legal
Memorandum at 126 n.47. In sum, as reported by the PRAG, the comments of
ESI*s five references were all generally positive (as opposed to the more
negative comments of ACS*s references (discussed below)) and support a
high confidence past performance rating.
ACS and Humana argue that the agency ignored published media accounts of
lawsuits filed against ESI, which are currently pending in Massachusetts
and New York. ACS asserts that there are allegations in these lawsuits
that ESI has been involved in *improper pricing and illegal kickback
arrangements.* ACS Comments at 57-58. The protesters contend that the
RFP provided that the agency would consider relevant information beyond
the information received from references.
The RFP provided that past performance would be evaluated based upon
information obtained from the proposals and *information obtained from
other sources that may have useful and relevant input.* RFP amend. 4, S:
M.7.1. Offerors were further informed that the agency *may, at its
option, obtain past performance data* from other sources. Id. S: L.9.1.
Thus, we disagree with the protesters that the RFP required TRICARE to
consider the lawsuits in its past performance evaluation. In any event
there has been no showing that TRICARE was either aware, or should have
been aware, of the lawsuits. Moreover, as reported by ESI, similar media
reports of highly negative performance by other offerors, specifically
Humana and ACS, were also publicly available, but were similarly not
considered in the past performance evaluation. ESI Comments at 17.
PGBA and Humana contend that ESI should have been downgraded because it
failed to provide past performance information for one of its support
vendors, EDS. The RFP provided that the agency would evaluate the past
performance of the offeror and its first-tier subcontractors that would be
performing PBM functions. RFP amend. 4, S: L.9.1. The agency did not
consider EDS to be such a first-tier subcontractor because, as discussed
above, it will not be performing core PBM functions, but was proposed only
as a support vendor that will perform data center operations management
functions. See Agency Report, Book 3, Tab 8, ESI Technical Proposal, at
92. Based on our review, we find no basis to disagree with the agency*s
judgment in this regard.
Therefore, we find the agency determination that it had high confidence in
ESI*s past performance was reasonable and supported by the record.
Humana*s Past Performance
Humana contends that the agency failed to perform a proper comparative
assessment of past performance, essentially arguing that it has more
relevant and superior past performance than ESI and therefore should have
received a higher rating. We disagree.
As the PRAG recognized, Humana was the incumbent TRICARE managed care
support contractor for several regions, where it has been providing retail
pharmacy benefits to approximately 2.6 million TRICARE beneficiaries.
Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at 87. The PRAG
also noted that only a small portion of this incumbent contract relates to
PBM services. Humana has not been performing the pharmacy-related
services itself; rather, those services have been performed by its
subcontractor, Argus Health Systems. Nevertheless, the PRAG considered
the performance of Argus and Humana to be relevant, and assessed the team
a rating of high confidence.[52] Agency Report, Book 18, Tab 61, Humana
Past Performance Evaluation, at 321, 328.
The record shows that the agency performed a proper comparative evaluation
of past performance, taking into account the relevance of each contract
reference as well as the quality of performance. In this regard, each
contract was reviewed for relevance by the PRAG, and strengths and
weaknesses were assessed based upon the comments received from past
performance references. Agency Report, Book 16, Tab 57, ESI Past
Performance Evaluation; Book 18, Tab 61, Humana Past Performance
Evaluation; Book 27, Tabs 78 and 80, Past Performance Summaries for ESI
and Humana. The PRAG*s evaluation reports, consisting of hundreds of
pages of detailed analysis, were independently reviewed by the SSEB and
SSA, in performing the comparative analysis of proposals. The SSEB
evaluation report, which was adopted in large part by the SSA, highlights
the significant discriminators in past performance among the offerors, and
in the case of ESI and Humana, provides an overall rating of high
confidence that we find supported by the record. Although Humana contends
that ESI*s past performance should have been found less relevant than
Humana*s because ESI is serving fewer beneficiaries (800,000 as opposed to
2.6 million), this constitutes mere disagreement with the agency*s
reasonable judgment that ESI*s contracts were relevant. See Birdwell
Bros. Painting & Refinishing, supra. Based on our review, we think that
the SSA was reasonable in finding Humana*s and ESI*s proposals to be
relatively equal under this factor in her tradeoff analysis.
ACS*s Past Performance
ACS contends that TRICARE did not use consistent standards in assessing
past performance and that, in contrast to its evaluation of ESI*s past
performance, the agency ignored positive comments made by ACS*s references
and emphasized negative comments made by other references. Furthermore,
ACS complains that the agency failed to give adequate consideration to the
rebuttal information that ACS provided in response to the agency*s
identification of adverse past performance information.
The PRAG noted that, although it received some positive comments from
ACS*s references, it also received some negative comments demonstrating
poor performance by ACS in several functional areas required in the TRRx
solicitation, and that all the weaknesses identified were attributed to
performance by ACS itself, not to its subcontrators. See Agency Report,
Book 15, Tab 37, SSEB Evaluation Report, at 30. The interview notes for
ACS*s references show that ACS received a number of positive comments,
which the PRAG identified to be strengths in ACS*s past performance. See,
e.g., Agency Report, Book 26, Tab 73, Past Performance Interview Summaries
for ACS, at 160-61. The PRAG also received a number of negative
comments: for example, one reference stated that ACS had problems with
electronic claim processing due to *insufficient personnel support,* and
another stated that *ACS demonstrated poor planning, development,
execution, and reporting on agreed upon (contract) requirements* and that
one has *to stay on top of ACS operations to get the job done.* See id.
at 164, 170.
ACS was given an opportunity during the competition to specifically
comment upon its adverse past performance information. See Agency Report,
Book 28, Tab 83, Clarification of ACS Past Performance, at 5-8. The PRAG
found that although ACS offered a number of explanations and reasons for
the negative comments of its references, it *did not refute the existence*
of the weaknesses identified by the PRAG and that *some of the information
provided by ACS actually substantiated circumstances where ACS[*s] past
performance was less than acceptable to its clients.* Id. at 42. For
example, the PRAG noted that it had received negative comments regarding
ACS*s performance of disaster recovery requirements, which resulted in the
assessment of $[Deleted] in monetary penalties; in response, ACS stated
that it has not yet been officially assessed, nor paid, a monetary
penalty, but that the amount of the penalty was currently being negotiated
(although ACS stated that the penalty amount would not be more than
$[Deleted]). Id. at 24. Likewise, ACS disagreed with the PRAG*s reported
negative comment regarding ACS*s *demonstrated poor planning, development,
execution, and reporting on agreed upon (contract) requirements,* by
stating in its clarification response that it *strongly disagrees that ACS
staff has not responded to Division staff regarding problems and
difficulties in meeting schedules.* Id. at 26. We find, as did the PRAG,
that ACS*s clarification responses did not refute the existence of the
identified problems and therefore conclude that the agency*s assessment of
ACS*s past performance was reasonable.
In sum, there is no basis to object to the agency*s past performance
assessment of ACS vis-`a-vis ESI.[53]
PGBA*s Past Performance
PGBA argues that TRICARE failed to credit the years of TRICARE/CHAMPUS
experience that PGBA and its first‑tier subcontractor have in
handling health care claims.
The record shows that the PRAG recognized that the comments from
references for PGBA and its subcontractor, [Deleted], were generally
positive, and that PGBA had extensive TRICARE and CHAMPUS experience; the
PRAG noted, however, that PGBA performed only medical claims processing
for its customers, and not pharmacy claims processing, which was handled
by another vendor. The SSA similarly noted that PGBA and its
subcontractor *generally demonstrated positive relevant past performance,
[although it] primarily related to provider and hospital services rather
than to pharmacy services.* Agency Report, Book 15, Tab 36, Source
Selection Decision, at 11. Furthermore, the PRAG expressed concern that
none of PGBA*s references provided information regarding the firm*s
performance of prior authorization and medical necessity determination
requests and pharmacy audits.[54] The PRAG also stated that it could not
completely evaluate [Deleted]*s ability to provide network access and
electronic claims processing (which the subcontractor was proposed to
perform) because *[a]ccording to the information provided by the [Deleted]
references, [Deleted] did not perform [the] network access function for
any of the five references,* and [Deleted]*s references had provided
limited information regarding the volume of electronic claims processed by
[Deleted].[55] Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at
124.
Based on our review, the agency*s evaluation of PGBA*s past performance as
being of satisfactory confidence was reasonable, particularly given the
reasonable concerns about the apparent gaps in PGBA*s and [Deleted]*s
PBM-related experience. Although PGBA apparently believes that the agency
should have given more weight to PGBA*s successful performance of related
claims processing than it did, we think that the agency could give more
credit to offerors, such as ESI and Humana, with more specific PBM
experience. Where, as here, the solicitation provided for the evaluation
of the comparative merit of offerors* past performance, the relative
relevance of the past performance is logically encompassed by and related
to the past performance factor, whether or not specifically identified in
the RFP, and offerors with successful past performance on more relevant
contracts can be rated higher than offerors with less relevant
experience. See J. A. Jones Mgmt. Servs., Inc., B‑284909.5, Oct. 2,
2000, 2001 CPD P: 64 at 4.
PharmaCare*s Past Performance
PharmaCare also challenges the evaluation of its past performance.[56]
PharmaCare complains that the PRAG unreasonably identified as a concern
PharmaCare*s *lack of performance history for processing electronic and
paper prescription claims volume commensurate with the respective claims
volumes that are projected for TRRx.* See Agency Report, Book 15, Tab 37,
SSEB Evaluation Report, at 141. PharmaCare contends that the RFP did not
provide for consideration of claims volume in the evaluation of an
offeror*s past performance. Also, PharmaCare argues that the PRAG failed
to consider the information concerning claims volume provided by
PharmaCare in its proposal.[57]
We need not consider these arguments because PharmaCare was not
prejudiced, even if the arguments had merit. This is so because they
provide no basis to question the SSA*s determination that PharmaCare*s
proposal was not competitive and should not be included in the SSA*s
cost/technical tradeoff. That is, PharmaCare*s proposal would continue to
be higher-priced and technically inferior to ESI*s, even if the two firms*
proposals were considered equivalent under the past performance
factor.[58]
Cost/Technical Tradeoff
ACS and Humana challenge the reasonableness of the cost/technical
tradeoff.[59] Selection officials have considerable discretion in making
cost/technical tradeoff decisions. Their judgments in these tradeoffs are
by their nature subjective; nevertheless, the exercise of these judgments
must be reasonable and must bear a rational relationship to the announced
criteria upon which competing offers are to be selected. Award may be
made to a firm that submitted a higher-rated, higher‑priced proposal
where the decision is consistent with the evaluation criteria and the
agency reasonably determines that the technical superiority of the
higher‑priced offer outweighs the price difference. Northrop
Grumman Tech. Servs., Inc.; Raytheon Tech. Servs. Co., B‑291506 et
al., Jan. 14, 2003, 2003 CPD P: 25 at 35-36.
As detailed in this decision, the contemporaneous record evidences a
thorough evaluation, which provided the SSA with a substantial basis upon
which to weigh the relative merits of the firms* proposals. From our
review of the SSA*s detailed 25‑page source selection decision
document, we find that her decision was reasonable and consistent with the
evaluation criteria. That is, this written determination reflects the
SSA*s understanding of the evaluation criteria (and their relative
weights) and the evaluated strengths and weaknesses, as well as some of
the advantageous and disadvantageous features of each of the competing
proposals, and reasonably states the basis for the SSA*s decision.
ACS/ESI Tradeoff
ACS contends that the cost/technical tradeoff was unreasonable and not in
accordance with the RFP*s evaluation scheme. The SSA found that ESI*s
proposal was technically superior to ACS*s, giving due consideration to
the fact that ACS proposed a lower TEGC (approximately $75 million) under
factor (2), which the SSA recognized as *one of the two most important
non-price factors.* In this regard, ACS*s proposal was reasonably
evaluated as inferior to ESI under factors (3), (4), and (5). The
evaluated weaknesses and risks in ACS*s proposal under these factors (such
as, for example, ACS*s moderate risks for its disaster recovery plan and
limitations on follow-ups for prior authorization and medical necessity
determination requests) were viewed by the SSA as significant
distinguishing features between ESI*s and ACS*s proposals. In addition,
the strengths in ACS*s proposal (for which ACS argues it should have
received higher color ratings) were specifically noted in the SSEB*s
evaluation report, which was considered by the SSA in making her decision.
The SSA weighed ESI*s evaluated technical superiority against ACS*s lower
proposed price (approximately $107 million lower). Contrary to ACS*s
arguments, the SSA specifically recognized and credited ACS*s price
advantage, which the SSA viewed as *significant,* as well as its TEGC
advantage under *one of the two most important non-price factors.* Agency
Report, Book 15, Tab 36, Source Selection Decision, at 19, 21. Weighing
the proposals under all the evaluation factors and noting that the RFP
provided that the non-price evaluation factors were in the aggregate
significantly more important than price, the SSA determined that ESI*s
proposal reflected the best value to the government based upon its
evaluated technical superiority. Id. at 19-25. Although ACS disagrees
with the SSA*s judgment, its disagreement does not demonstrate that her
tradeoff assessment was unreasonable; rather, we find that the decision
reflects a reasonable cost/technical tradeoff assessment.
Humana/ESI Tradeoff
Humana asserts that the SSA*s cost/technical tradeoff determination was
unreasonable and gave undue weight to factor (2), Network Reimbursement.
As noted above, the SSA found that ESI and Humana were *essentially equal*
for factors (1), (3), and (5), and that ESI had a *significant advantage*
over Humana for factor (2) because Humana*s TEGC was approximately $360
million higher than ESI*s. The SSA found that, with regard to factor (4),
Humana*s proposal had a *slight edge* due to proposed performance
standards for blocked and abandoned calls and responding to
correspondence. The SSA also noted Humana*s proposal*s nearly $60 million
price advantage. However, in considering the relative weights of the
evaluation factors under which strengths and weaknesses were assessed, as
well as the nature of those strengths and weaknesses, the SSA concluded
that the slight advantages Humana offered in factor (4) and the price
factor were offset by the significant advantage ESI offered under factor
(2). The record does not support Humana*s assertion that factor (2),
which is one of the two most important non-price factors, was accorded too
much weight in the cost/technical tradeoff. Given the SSA*s reasoned and
well-documented analysis, we find this tradeoff to be reasonable and
consistent with the RFP.
Discussions
ACS complains that TRICARE should have either asked the firm for
clarifications or conducted discussions with it regarding a number of its
proposal*s evaluated weaknesses, such as its disaster recovery plan,
subcontractor management experience, and proposal to use its [Deleted],
inasmuch as TRICARE assertedly did not understand the firm*s proposal in
these areas.
As ACS recognizes, the RFP specifically informed offerors that the agency
intended to make award without conducting discussions and cautioned
offerors that their initial proposals should contain their best terms from
a cost or price and technical standpoint. See RFP amend. 4, S: L.6.1.2.
In such cases, the burden is on the offeror to submit an initial proposal
that adequately demonstrates its merits. Norden Sys., Inc.,
B‑255343.3, Apr. 14, 1994, 94-1 CPD P: 257 at 7-8. As discussed
above, we find that ACS did not satisfy this burden with respect to the
aspects of its proposal which ACS now argues it should have an opportunity
to address in discussions. Rather than demonstrating that the agency did
not understand ACS*s proposal, we find that the record shows that the
agency reasonably assessed the proposal that ACS submitted.
An agency has broad discretion to make award on the basis of initial
proposals where the solicitation informs offerors that such an award is
contemplated, and we will question the exercise of this discretion only
where the record establishes that a reasonable cost/technical tradeoff
judgment cannot be made without discussions. See International Data
Prods., Corp.; I-NET, Inc.; and Dunn Computer Corp., B‑274654 et
al., Dec. 26, 1996, 97-1 CPD P: 34 at 16-17. That is not the case here.
Although ACS would prefer to have had the opportunity to address the
agency*s concerns with its proposal, this does not provide us with a basis
to conclude that the agency was required to conduct discussions.
We also do not agree with ACS that the agency should have provided the
firm with an opportunity to clarify the firms* proposal with respect to
its disaster recovery plan, subcontractor management experience, and use
of its [Deleted]. From our review of the record, we think that allowing
ACS to address these evaluated weaknesses in its proposal could not have
been accomplished through clarifications, but rather would have
constituted discussions. In this regard, the acid test for deciding
whether an agency has engaged in discussions is whether the agency has
provided an opportunity for proposals to be revised or modified. See,
e.g., Priority One Servs., Inc., B-288836, B‑288836.2, Dec. 17,
2001, 2002 CPD P: 79 at 5. Based on our review, we conclude that ACS
would have needed to revise its proposal (and not merely clarify it) to
address the agency*s evaluated concerns.
Veterans Health Care Act of 1992
PharmaCare complains that the record establishes that the Department of
Veterans Affairs determined that the TRRx Retail Pharmacy Contract would
qualify for federal pricing of retail pharmaceuticals under the Veterans
Health Care Act of 1992, 38 U.S.C. S: 8126 (2000), but that this
determination was not communicated by TRICARE to the offerors.[60]
PharmaCare argues that knowledge of the application of this Act to the
TRRx program, which would lower the contractor*s risk under the contract*s
negative incentive provisions, would have resulted in higher proposed
guaranteed average discount percentages and lower proposed dispensing
fees, such that PharmaCare could have submitted a lower proposed TEGC than
ESI.[61] See PharmaCare Comments, exh. A, Statement of PharmaCare*s
Director of Finance, at 2.
TRICARE states that notwithstanding the Department of Veterans Affairs*
determination, TRICARE is not certain of the extent to which, or when, the
Act will apply to the procurement,[62] and argues that, in any event, this
protest ground is untimely under our Bid Protest Regulations.
Generally, protests challenging alleged apparent solicitation
improprieties must be filed before the time set for receipt of proposals
in response to the solicitation. 4 C.F.R. S: 21.2(a)(1). Other protest
grounds must be filed not later than 10 days after the basis of protest is
known or should have been known (whichever is earlier). 4 C.F.R. S:
21.2(a)(2).
TRICARE asserts that PharmaCare*s protest ground concerns either a
solicitation impropriety or a basis of protest that PharmaCare should have
known no later than October 22, 2003, when the protester received the
agency*s written determination overriding the stay on continued
performance of ESI*s contract notwithstanding the protests, which informed
offerors of the determination of the Secretary of Veterans Affairs that
the Veterans Health Care Act would apply to the TRRx contract. TRICARE
contends that to be timely this ground of PharmaCare*s protest was
required to be filed either prior to the June 11, 2003 closing date for
receipt of initial proposals or in any case no later than November 3
(within 10 days of October 22), and that the protest ground is untimely,
since it was first raised in PharmaCare*s supplemental protest filed on
November 10.
PharmaCare states that its complaint is not a challenge to the terms of
the solicitation, but concerns the agency*s withholding of information
that adversely affected PharmaCare*s ability to competitively price its
proposal. We disagree. PharmaCare*s complaint is that the solicitation
should have disclosed the application of this Act to the offeror, so that
it is an alleged solicitation impropriety.[63]
However, this is not the type of solicitation impropriety that must be
protested prior to the time set for receipt of proposals. This is so
because the RFP informed offerors that *[t]he PBM fees will not be related
directly or indirectly to DoD*s acquisition costs of pharmaceuticals under
Section 603 of the Veterans Health Care Act of 1992,* see RFP amend. 4, S:
C.1.1, and the agency*s response to pre-proposal questions informed
offerors that *[r]ebates from pharmaceutical manufacturers to the
Government are not applicable to this solicitation.* Agency Report, Book
2, Tab 2, Pre-Proposal Questions and Answers, at 29-30. The result was
that no basis of protest was apparent to PharmaCare from the face of the
solicitation. Where this is the case but a firm later learns of what it
believes is a solicitation defect, a protest, to be timely, must be filed
within 10 days of when the protester becomes aware, or should have become
aware, of its protest basis. LBM, Inc., B-290682, Sept. 18, 2002, 2002
CPD P: 157 at 6-7.
Here, PharmaCare should have learned the basis of its complaint that the
agency believed that the Veterans Health Care Act may apply to this
procurement when the protester received the agency*s written override
determination on October 22.[64] Because PharmaCare did not file its
supplemental protest until more than 10 days later, this protest ground is
dismissed as untimely.
CONCLUSION
In sum, from our review of the record and considering the protesters*
arguments, we find that TRICARE*s evaluation and source selection decision
was reasonable. Accordingly, we deny the protests.
Anthony H. Gamboa
General Counsel
------------------------
[1] There were seven MCS contracts with four different companies covering
various regions. The seven MCS contracts have been or will be replaced by
the *next generation* of TRICARE contracts (frequently referred to as
*T‑Nex* contracts). In replacing the expiring contracts, and as a
part of a broader transformation of DoD*s military health care system, DoD
has made various program changes, including the consolidation of its
current 11 TRICARE regions into 3 regions. Further, unlike the prior MCS
contracts that incorporated various unique services performed by
specialized subcontractors, DoD has elected to *carve out* such services
for separate, nationwide contracts. One of these specialized services was
for the provision of pharmacy benefits, which is the subject of this RFP.
Mail order pharmacy services were also originally part of the MCS
contracts, but were removed in 1997. A separate TRICARE Mail Order
Pharmacy contract was awarded to ESI in 2002. (Mail order pharmacy
services are not included in this RFP.)
[2] The contract will provide for the delivery of retail pharmacy benefits
to an estimated 8.9 million eligible beneficiaries in the United States,
Guam, Puerto Rico, and the U.S. Virgin Islands. It was estimated that 2.5
million beneficiaries currently use retail pharmacy services.
[3] Offerors were informed that factor (1) would be first evaluated on a
pass/fail basis.
[4] The subfactors within factors (3) and (4) were stated to be of equal
importance.
[5] The RFP also provided that the TEGC was not a priced contract line
item and would not be part of the evaluation under the price evaluation
factor.
[6] An AWP is established by drug manufacturers for each drug. For the
first option year, the average AWP reflects a weighted average of the AWPs
of all drugs in each group in effect as of January 2003, rounded to the
nearest whole dollar. The remaining option years were escalated using a 5
percent factor. RFP amend. 4, Table L-1, note (b).
[7] For the first option year, Table L-1 appeared as follows:
+------------------------------------------------------------------------+
|Type of |Estimated |Average|Guaranteed|Guaranteed |Average |Estimated|
|Rx |Quantity |AWP |Average |Average |Drug |Total |
| | | |Discount |Dispensing |Cost |Drug Cost|
| | | |Percentage|Fee | | |
|--------+----------+-------+----------+-----------+-----------+---------|
| |(a) |(b) |(c) |(d) |(e) = |(f) = |
| | | | | |[(b) x |(a) x (e)|
| | | | | |(1-(c))]+d)| |
|--------+----------+-------+----------+-----------+-----------+---------|
|Brand |20,441,546|$111 | | | | |
|--------+----------+-------+----------+-----------+-----------+---------|
|Generic |16,724,901| $41 | | | | |
|--------------------------------------------------------------+---------|
|Subtotal Option 1 | |
+------------------------------------------------------------------------+
RFP amend. 4, Table L-1.
[8] The RFP provided that, as measured on a monthly basis, 99 percent of
electronic claims must be processed to completion within 5 seconds of
receipt and 100 percent of electronic claims must be processed to
completion within 5 working days of receipt. With respect to paper
claims, 95 percent of paper claims must be processed to completion within
10 working days of receipt and 100 percent of paper claims must be
processed to completion within 20 working days. RFP amend. 4, S: C.8.8.
[9] The RFP required that, effective with the beginning of the first
option year, the contractor must ensure that services would not be
disrupted for more than 24 consecutive hours throughout the life of the
contract. RFP amend. 4, S: C.16.3.3. Offerors were required to provide
in their proposals a detailed disaster recovery plan that discussed
staffing, processes, facilities, testing redundancy, and back-up hardware
and that addressed the continuity of beneficiary service functions in the
event of a disaster. RFP amend. 4, S: L.8.4.3.
[10] The oral presentations included up to 50 PowerPoint slides that were
submitted by the offerors with their written proposals.
[11] The RFP provided that the agency might designate certain drugs as
requiring prior authorization before being dispensed and that the
contractor would, based upon government-established criteria, approve or
disapprove prior authorization requests from beneficiaries. RFP amend. 4,
S: C.11.
[12] The RFP provided that upon the request of a beneficiary, the
contractor would use government-provided criteria to determine whether
medical necessity substantiated *the need to provide the beneficiary with
a non-formulary drug at the formulary co‑pay.* RFP amend. 4, S:
C.12.
[13] The contractor is required to implement a beneficiary services unit
to respond to beneficiary inquiries. The RFP provided that if the
contractor used an automated response unit to answer beneficiary calls,
100 percent of all telephone calls must be acknowledged within 20 seconds
and that the first menu choice presented to a caller must allow the caller
to be transferred to a customer service representative. Requests to speak
with a customer service representative were required to be connected
within 30 seconds, 95 percent of the time. RFP amend. 4, S: C.19.
[14] PharmaCare also submitted an alternate proposal. Because the RFP did
not permit alternate proposals, the agency did not consider PharmaCare*s
alternate proposal. PharmaCare originally challenged the agency*s
decision not to consider the firm*s alternate proposal, but later withdrew
this protest ground.
[15] Past performance was assessed as either high confidence, satisfactory
confidence, marginal confidence, no confidence, or, if an offeror had no
past performance history, neutral. *High confidence* reflected the PRAG*s
judgment that no doubt existed that the offeror will successfully perform
the required effort, while *satisfactory confidence* reflected that there
was some doubt that the offeror will successfully perform the required
effort. Agency Report, Book 15, Tab 55, Source Selection Evaluation
Guide, at 452-53.
[16] *Low* risk reflected the evaluators* judgment that little doubt
existed that the offeror could execute the requirements of the evaluation
factors and subfactors using the methods and/or techniques proposed.
*Moderate* (Mod.) risk reflected the judgment that some doubt existed
regarding the offeror*s performance, which could potentially cause
disruption of schedule, increase in cost, or degradation of performance,
although special contractor emphasis or government monitoring could
alleviate the difficulties. Agency Report, Book 15, Tab 37, SSEB
Evaluation Report, at 8.
[17] A *blue* rating reflected the evaluators* judgment that the proposal
exceeded minimum requirements in a manner beneficial to the agency and
contained no weaknesses. A *green* rating reflected that the proposal met
the minimum requirements and that any requirements exceeded in the offer
were offset by one or more weaknesses, but that the weaknesses were
readily correctible. A *yellow* rating reflected that the proposal failed
to meet minimum requirements and contained significant weaknesses that
were not correctible without a major proposal revision. Agency Report,
Book 15, Tab 37, SSEB Evaluation Report, at 7.
[18] Under factor (1), Network Access, proposals were first evaluated as
to whether they satisfied the minimum access standards for each of three
categories (urban, suburban, and rural) on a pass/fail basis. Proposals
were then evaluated under each category as to whether offerors* proposed
standards exceeded the RFP*s minimum standards by certain percentages
(called *blue levels*), which levels were not disclosed to the offerors.
Under the undisclosed evaluation scheme, if a proposal exceeded the *blue
level* percentage under each of the three categories, it would receive a
blue rating.
[19] The TET noted that PGBA had extensive experience processing prior
authorization and medical necessity determination requests for medical
purposes, but no experience relative to processing these requests for
pharmaceuticals. Agency Report, Book 15, Tab 37, SSEB Evaluation Report,
at 117, 119.
[20] [Deleted] was proposed to perform electronic claims processing.
[21] The contracting officer concurred in this recommendation. Agency
Report, Book 15, Tab 41, Contracting Officer*s Award Memorandum (Sept. 25,
2003).
[22] As indicated above, the TET assessed a weakness in the ESI proposal
under the beneficiary services subfactor of factor (4) based on the TET*s
finding that ESI had not provided a guaranteed standard for telephone call
blockage and call abandonment rate, as contemplated by the RFP. The SSA
disagreed with this assessment, noting that ESI had provided information
addressing these requirements in its oral presentation. Agency Report,
Book 15, Tab 36, Source Selection Decision, at 18; see Agency Report,
Book 3, Tab 8, ESI Technical Proposal, Oral Presentation Slide 37.
[23] In response to our request, TRICARE provided the protesters under our
protective order with the core documents of its evaluation and source
selection in advance of the date for filing its agency report. This
allowed the protesters to expeditiously supplement their protest grounds
and the agency to address all of the protest grounds in a single
comprehensive report.
[24] ACS identifies a number of instances of asserted unequal treatment in
the agency*s evaluation of ACS*s proposals and the proposals of Humana and
PharmaCare. TRICARE*s evaluation of Humana*s and PharmaCare*s proposals
is not relevant to ACS*s challenge to the evaluation of its proposal
vis-`a-vis ESI*s proposal. ACS*s initial protest also asserts that ESI
had an unmitigated organizational conflict of interest. Since the agency
responded in detail to ACS*s assertions in this regard and ACS provided no
further comments, we consider this argument to be abandoned. Atlantic
Coast Contracting, Inc., B-291893, Apr. 24, 2003, 2003 CPD P: 87 at 4 n.3.
[25] The precise access standards proposed by the offerors was also
reported in the SSEB*s report.
[26] Although PGBA states that the agency*s failure to identify the
particular access levels that would warrant a blue rating constituted an
improper unstated evaluation factor, it does not allege that it would have
modified its proposal in a manner that would be superior to ESI*s under
this factor had it known of the precise *blue levels.*
[27] The cases cited by Humana in support of its position are
distinguishable in that, in those protests, all of the solicitations
contained provisions requiring that a cost realism analysis be performed.
See, e.g., Foundation Health Fed. Servs., Inc.; Humana Military Healthcare
Servs., Inc., B-278189.3, B-278189.4, Feb. 4, 1998,
98-2 CPD P: 51 at 9; KPMG Peat Marwick, LLP, B-259479.2, May 9, 1995, 95-2
CPD
P: 13 at 4.
[28] ESI*s proposed TRRx network contains 55,402 participating pharmacies;
its comparable commercial network contains 56,224 participating
pharmacies. Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at
55; Book 3, Tab 8, ESI Technical Proposal, at 75.
[29] Humana proposed a network of [Deleted] participating pharmacies; its
comparable commercial network consists of [Deleted] participating
pharmacies. Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at
71; Book 9, Tab 21, Humana Technical Proposal, Factor 2, at 9-10.
[30] Over the 5-year option period, Humana*s proposed discount rates
[Deleted] while its dispensing fees [Deleted]. ESI*s proposed discount
rates and dispensing fees remained the same over the 5-year period.
[31] According to Humana*s consultant, rebates are generally available
only for brand name drugs. Declaration of Humana*s Consultant, Nov. 25,
2003, at 5 n.3.
[32] Although Humana argues that its current network discount rates are
higher than what could be achieved under the TRRx effort because larger
networks (such as TRRx) usually result in smaller discounts, it also
states in its proposal that larger discounts can be expected through
leveraging negotiations on behalf of the additional 8 million TRRx
beneficiaries. Agency Report, Book 9, Tab 21, Humana Technical Proposal,
Factor 2, at 15.
[33] Humana also argues that the agency did not consider the financial
viability of ESI as a result of potential negative incentives that ESI
might incur during performance. By way of example, it explains that if
ESI*s proposed discount rates are overstated by 1 percent, ESI could incur
penalties under the negative incentive provisions of the RFP of as much as
$200 million, which would wipe out nearly all of ESI*s administrative fees
earned under the contract and could affect its financial viability.
However, Humana*s argument presumes that ESI cannot obtain or maintain its
discount rates and dispensing fees; but, as discussed above, the agency
reasonably found ESI*s ability in this regard was low risk. In any event,
ESI*s financial viability, and that of the other offerors, was considered
by the agency. See, e.g., Agency Report, Book 32, Tab 102, Defense
Contract Audit Agency Financial Viability Assessment of ESI.
[34] Despite its more detailed proposal, Humana itself failed to provide
much of the information that Humana asserts ESI should have provided. For
example, Humana criticizes ESI*s proposal for not providing evidence of
long‑term network contracts, but other than asserting that it has
[Deleted] with its network providers, Humana did not provide evidence
[Deleted]. Similarly, Humana criticizes ESI*s proposal for not providing
information on plan sponsors, beneficiaries, rebates, and co-pays
concerning its comparable networks, but Humana did not provide this
information in its proposal. See Agency Report, Book 9, Tab 21, Humana
Technical Proposal, Factor 2, at 3-18.
[35] Humana*s TEGC was approximately $300 million higher than that of the
next lowest offeror considered in the cost/technical tradeoff and
approximately $360 million higher than ESI*s. Agency Report, Book 15, Tab
36, Source Selection Decision, at 15.
[36] Humana also complains that the agency should have conducted
discussions with ESI to understand that firm*s proposal under factor (2).
However, the record shows that the agency reasonably understood ESI*s
proposal and that there was no need for discussions.
[37] The RFP required that 95 percent of paper claims be processed to
completion within 10 working days, and 100 percent processed to completion
within 20 days. RFP amend. 4, S: C.8.8. Humana proposed to process
[Deleted] percent of paper claims to completion within [Deleted] working
days, and [Deleted] percent within [Deleted] working days. The agency
notes that this means that only [Deleted] out of every 100 claims will be
processed [Deleted] days sooner, which was not considered to be so
beneficial to the government as to warrant a strength. Agency*s Legal
Memorandum at 67.
[38] In any event, we do not see how changing the rating under this
subfactor to blue could reasonably have altered Humana*s overall rating of
green/low risk for factor (3), given that Humana*s proposal received
green/low risk ratings for all other subfactors.
[39] The TET noted that ACS had mentioned in its proposal that in the
event of a major failure at its TRRx call centers ACS would have available
the [Deleted]. The TET did not find this offer adequate given ACS*s
failure to explain how these other resources would be available to ensure
that call center operations would be able to resume within 24 hours of a
catastrophic event that rendered the [Deleted] proposed call center sites
inoperable. Agency Report, Book 15, Tab 37, SSEB Evaluation Report,
at 20.
[40] While not considered by the TET in the evaluation of ESI*s disaster
recovery plan ESI identified, in its oral presentation, its geographically
dispersed locations for its help desk locations, which it stated would
support its disaster recovery plan. See Agency Report, Tape No. 4, ESI*s
Oral Presentation, at 3:07-30.
[41] In any case, as noted above, other strengths in ESI*s proposal, i.e.,
its commitment to process prior authorization and medical necessity
determination requests in 2 working days, led to its blue rating under
these subfactors.
[42] The TET originally believed that PGBA*s proposed staff would have to
process these requests four times faster than the rate at which its
current staff was processing these requests for health care claims. See
Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at 116, 118.
[43] In its comments, PGBA asserts that processing pharmacy claims is
simpler and less expensive than processing medical claims and that this
supports the reasonableness of PGBA*s staffing levels to process prior
authorization and medical necessity determination requests under this
RFP. We do not view this point as establishing the unreasonableness of
the agency*s assessment, particularly since this point was not mentioned
in PGBA*s proposal.
[44] While we find nothing in the record demonstrating the evaluators
specifically discussed two of the alleged strengths under this
subfactor--[Deleted]--there is no basis to believe that these two aspects
of ACS*s proposal, which ACS has not shown to be other than minor, would
warrant a strength, much less a blue rating, under this subfactor.
[45] ACS also contends that ESI was treated unequally under this subfactor
because there was no inquiry of ESI during the oral presentation of what
[Deleted] system ESI would use. Unlike ACS, however, ESI did not indicate
that it would be changing the [Deleted] system it uses at its [Deleted].
[46] It is true, as TRICARE asserts, that the SSEB specifically recognized
ACS*s performance of this third contract and the call volume associated
with it. Nevertheless, the record does not demonstrate any specific
consideration of ACS*s performance under this contract with respect to the
[Deleted] performance guarantee and whether, considering the larger call
volume associated with this contract, ACS*s performance under this
contract indicated an ability to comply with the [Deleted] requirement.
[47] In its oral presentation, ESI described its current annual
performance standards for blocked and abandoned calls. See Agency Report,
Book 3, Tab 8, ESI Technical Proposal, Oral Presentation Slide 37.
[48] To the extent that the protesters complain that the agency
effectively waived this requirement for ESI, the protesters have not
stated that they would have changed their proposals in any way had they
known that the proposal of blocked and abandoned call rates was not
required.
[49] Humana also complains that it was treated unequally under the
pharmacy help desk subfactor since it proposed call access standards and
received only a moderate risk rating, whereas ESI received a low risk
rating, even though it did not propose any standards. We do not agree
that this evidences unequal treatment. As the record shows, Humana failed
to adequately explain to the agency how it would achieve these proposed
standards, given that its current performance levels were far below what
was proposed, whereas ESI*s current performance levels indicated to the
agency that it could effectively provide the service at the required
performance levels under this subfactor. Based on our review, we find the
agency*s assessment of risk to Humana*s proposal under this subfactor to
be reasonable.
[50] ESI has also implemented a TRICARE mail order pharmacy program, which
includes dispensing over 100,000 prescriptions per week. Agency Report,
Book 3, Tab 7, ESI Technical Proposal, at 60-61.
[51] This reference also noted that ESI was *very responsive.* See Agency
Report, Book 26, Tab 72, Past Performance Interview Summaries for ESI,
at 30.
[52] Contrary to Humana*s assertions, the record does not show that the
agency overlooked relevant contractor performance assessment report
information relating to Humana*s TRICARE contracts. See Agency Report,
Book 18, Tab 61, Humana Past Performance Evaluation, at 323, 330.
[53] ACS complains that, in assessing information received from the
interviews, the PRAG did not have defined standards governing what it
judged to be a weakness. The crux of this argument is founded upon ACS*s
allegation that it and ESI were treated unequally. We find that the firms
were not treated unequally. Rather, the record reflects that in assessing
the past performance information received in the interviews, the PRAG
reasonably considered the significance and relevance of the performance
problems identified in the context of the TRRx functional areas.
[54] PGBA states that its past performance proposal indicated that the
firm had experience performing prior authorization and medical necessity
determination requests, and complains that the PRAG did not credit the
firm for this reported experience. See PGBA*s Comments at 13, citing
Agency Report, Book 10, Tab 25, PGBA*s Past Performance Proposal, at 375,
379, 396, 419, 442. We have reviewed the cited pages in PGBA*s past
performance proposal and find that most of these pages do not reference
prior authorization and medical necessity determination requests. It is
true that PGBA*s proposal, for one identified reference, identifies the
performance of prior authorization and medical necessity determination
requests--but by PGBA*s subcontractor, not PGBA--and that another page
states that PGBA has such experience in performing other government
contracts. However, we do not find that these PGBA statements discredit
the PRAG*s finding that none of PGBA*s references, despite being
specifically asked during the interviews, identified that these functions
were performed.
[55] PGBA complains that the PRAG ignored information in its past
performance proposal concerning [Deleted]*s past performance. PGBA does
not dispute that [Deleted]*s references provided limited information and
admits that [Deleted] provided no network access functions for these
references, but contends that PGBA*s past performance proposal identified
claims volume for [Deleted] and stated that [Deleted] had network access
experience. Based on our review of the record, we find that the agency
could reasonably conclude that its concerns arising from the interviews
with [Deleted]*s references were not alleviated by PGBA*s proposal.
[56] In its comments on the agency*s report, PharmaCare withdrew its other
protest grounds relating to the evaluation of its proposal.
[57] PharmaCare does not dispute that the information received from
PharmaCare*s five largest customers supported the PRAG*s concern.
[58] TRICARE found that PharmaCare*s proposal was higher priced than ESI*s
($18.8 million higher), and that its proposal was technically inferior to
ESI*s proposal under factor (2), Network Reimbursement (PharmaCare*s TEGC
was $218.5 million higher than ESI*s); factor (3), PBM Services
(PharmaCare*s proposal received a moderate risk rating under the quality
assurance subfactor); factor (4), PBM Operations (PharmaCare*s proposal
received a moderate risk rating under the beneficiary services subfactor);
and factor (5), Past Performance (PharmaCare*s past performance was
assessed as satisfactory confidence because of its lack of claims volume
history and the lack of *any* beneficiary services performance history).
Moreover, PharmaCare*s protest concerns only one of the two problems
identified by the PRAG with respect to PharmaCare*s past performance and
we therefore do not see a reasonable possibility that the PRAG would view
PharmaCare*s and ESI*s proposal as being equivalent under the past
performance factor, even if PharmaCare*s protest of one of the problems
with its past performance were meritorious.
[59] We do not address further ACS*s and Humana*s challenges to the
cost/technical tradeoff premised upon their allegations of evaluation
error addressed above. In addition, we do not consider any of PGBA*s
challenges to the cost/technical tradeoff, inasmuch as they are all
premised on the evaluation of its and ESI*s proposals, which we have found
reasonable or unobjectionable.
[60] The Veterans Health Care Act provides in pertinent part that each
manufacturer of covered drugs is required to enter into a master agreement
with the Secretary of Veterans Affairs, under which the manufacturer would
make available for procurement on the Federal Supply Schedule (FSS) each
covered drug and under which, with respect to each covered drug of the
manufacturer that is purchased by a federal agency under *depot
contracting systems* or listed on the FSS, the manufacturer has entered
into and has in effect a pharmaceutical pricing agreement with the
Secretary of Veterans Affairs that essentially limits the price that the
manufacturer can charge for the covered drug. 38 U.S.C. S: 8126(a).
[61] Ignored by PharmaCare is that none of the offerors, including ESI,
was informed of the application of the Veterans Health Care Act.
Presumably, all of the offerors could have offered lower TEGCs, if
PharmaCare*s arguments concerning the Act and its effect upon risk to the
contractor were accepted.
[62] TRICARE states that it has no assurance of the extent or the point in
time at which the government will be able to take advantage of the
benefits of the Act and anticipates that pharmaceutical manufacturers may
mount a legal challenge to the Act*s applicability.
[63] That this is true is highlighted by PharmaCare*s requested relief, in
which PharmaCare asks that our Office recommend that TRICARE amend the
solicitation to inform offerors of the application of the Act and solicit
amended proposals. See PharmaCare Comments at 32-33.
[64] PharmaCare argues that it could not know the basis of its protest
allegation until it had received the agency*s acquisition plan showing
that the agency had previously been aware of the Act*s applicability and
not advised offerors. (This document was provided to PharmaCare after the
date the protester received the agency*s override determination). We
disagree. TRICARE*s override determination clearly informed PharmaCare of
the potential application of this Act to this procurement and therefore
PharmaCare should have known upon receipt of the override determination of
its concern that it had not been informed of this application by the
agency prior to the submission of its proposal. That the agency may have
known of the Act*s applicability earlier does not provide an independent
protest basis. We note in this regard that Humana timely raised this same
objection after receipt of the override determination; however, Humana
withdrew this protest ground after receiving the agency*s report.