TITLE: B-298962; B-298962.2, Palmetto GBA, LLC, January 16, 2007
BNUMBER: B-298962; B-298962.2
DATE: January 16, 2007
*********************************************************
B-298962; B-298962.2, Palmetto GBA, LLC, January 16, 2007

   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: Palmetto GBA, LLC

   File: B-298962; B-298962.2

   Date: January 16, 2007

   W. Jay DeVecchio, Esq., Kevin C. Dwyer, Esq., Edward Jackson, Esq., and
   Sharmila Sohoni, Esq., Jenner & Block LLP for the protester.

   Craig A. Holman, Esq., Kara L. Daniels, Esq., and David J. Craig, Esq.,
   Holland & Knight, LLP, for CIGNA Government Services, LLC, an intervenor.

   Jeffri Pierre, Esq., and Anthony Marrone, Esq., Department of Health and
   Human Services, for the agency.

   Jonathan L. Kang, Esq., and Glenn G. Wolcott, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1. Protest challenging agency's cost realism and technical evaluations is
   denied where the record supports the reasonableness of the agency's
   determinations.

   2. Protest that agency was required to amend solicitation to include
   performance of optional/specialty services is denied where solicitation
   did not require offerors to submit proposals for such services and the
   agency had not yet determined how the optional/specialty services will be
   obtained.

   DECISION

   Palmetto GBA, LLC protests the award of a contract to CIGNA Government
   Services, LLC, by the Department of Health and Human Services, Centers for
   Medicare & Medicaid Services (CMS), under request for proposals (RFP) No.
   CMS-2005-0012 to provide Medicare claims processing and services related
   to claims for suppliers and beneficiaries of durable medical equipment.
   Palmetto challenges the agency's cost realism and technical evaluations,
   and further argues that the agency was required to amend the solicitation
   to include what Palmetto asserts are changed requirements.

   We deny the protest.

   BACKGROUND

   In December 2003, Congress enacted the Medicare Prescription Drug
   Improvement and Modernization Act of 2003 (MMA). Among other things, this
   legislation requires that CMS use competitive procurement procedures,
   pursuant to the Federal Acquisition Regulation (FAR), to replace the
   fiscal intermediaries and carriers on whom CMS has historically relied for
   claims processing services, and who have been selected under other than
   competitive procedures. The replacement contractors under the MMA are
   referred to as "Medicare Administrative Contractors" (MACs).[1]

   In April 2005, CMS issued RFP No. CMS-2005-0012, seeking proposals, for
   each of four geographic jurisdictions, to provide specified health
   insurance benefit administration services, including Medicare claims
   processing and payment services related to durable medical equipment,
   prosthetics, orthotics and supplies (DME).[2] RFP sect. B.1. The RFP
   anticipated the award of a cost-reimbursement plus award-fee contract,
   with a 1-year base performance period and four 1-year option periods.

   The procurements for each jurisdiction were conducted as separate
   competitions, but offerors were permitted to submit proposals for any or
   all of the jurisdictions. The solicitation provided that the source
   selection decision for each jurisdiction would be made on the basis of the
   proposal offering the best overall value to the government, considering
   cost/price and the following non-cost/price factors, listed in descending
   order of importance: offeror capability, implementation, quality control
   plan, corporate experience, past performance, and small disadvantaged
   business utilization plan.[3] RFP sect. M.4. The solicitation provided
   that non-cost/price factors, when combined, were significantly more
   important than cost/price, and that cost/price would not be point scored
   but would be evaluated for cost realism. RFP sections M.2, M.7.

   In addition to the claims processing and contractor interface services
   described above, referred to in the solicitation as "core" services, the
   solicitation also outlined the following four "optional/specialty"
   services: data center; medicare electronic data interchange system
   (MEDIS); national supplier clearinghouse; and data analysis and coding.
   The solicitation provided that offerors for the DME contracts were
   required to submit proposals for the data center, and were permitted to
   submit proposals for any or none of the other optional/specialty
   services.[4] RFP Cover Letter, April 15, 2005. As relevant here, the MEDIS
   option addressed the agency's needs for electronic data interchange (EDI)
   services, which are integral to the "front end" of the claims submission
   process. Second Contracting Officer's Statement para. 1. The agency has
   historically obtained EDI services on a "contractor-specific" basis,
   meaning that each of the various CMS contractors provided their own EDI
   services.[5] Decl. of Medicare Contractor Management Group Director paras.
   8-9; Contracting Officer's Second Statement para. 1. In seeking proposals
   for the MEDIS option, the agency sought to obtain a single contractor to
   provide standardized EDI services for each of the four DME MAC
   jurisdictions.[6] The solicitation provided that the evaluation for the
   core and optional/specialty services would be separate, referring to them
   as "mutually exclusive." RFP sect. M.6.

   In June 2005, CIGNA and Palmetto each submitted proposals to perform the
   "core" DME requirements in jurisdiction C. In addition, Palmetto submitted
   a proposal to perform the non-mandatory optional/specialty services,
   including MEDIS, in all four jurisdictions; CIGNA submitted a proposal to
   perform the "core" DME requirements in jurisdiction C, but not for the
   non-mandatory optional/specialty services.

   In January 2006, the agency awarded Palmetto the DME MAC contract for
   performance of the "core" services in jurisdiction C; at that time
   Palmetto was also awarded the contract to perform the optional/specialty
   services in all four jurisdictions. Thereafter, CIGNA filed a protest,
   challenging the award of the DME contract to Palmetto for jurisdiction
   C.[7] Our Office sustained that protest, concluding that the agency had
   conducted improper discussions with Palmetto regarding its price proposal.
   See CIGNA Gov't Servs., LLC, B-297915.2, May 4, 2006, 2006 CPD para. 74.

   CIGNA's protest of the award to Palmetto resulted in a stay of performance
   with regard to Palmetto's jurisdiction C DME contract; because of the
   requirement that the contractor for the optional/specialty services be one
   of the four DME MACs, performance of Palemtto's contract for the
   optional/specialty services was also suspended. As relevant here, the stay
   of performance regarding Palmetto's contract to perform optional/specialty
   services required the agency to make alternative arrangements to obtain
   EDI services in each of the four jurisdictions. Specifically, in
   jurisdictions A and B, the DME contracts were amended to require each DME
   MAC to provide their own EDI services. For jurisdiction D, CMS entered
   into a contract with CIGNA to provide EDI services for Noridian, the DME
   MAC in that jurisdiction. For jurisdiction C, the agency modified
   Palmetto's incumbent DMERC contract to provide continued claims processing
   services, including the necessary EDI services. Agency Report, Nov. 8,
   2006, at 22; Contracting Officer's Second Statement para. 12.

   Following our decision sustaining CIGNA's protest, the agency implemented
   corrective action by reopening discussions with offerors and requesting
   the submission of final revised proposals for the "core" DME requirements
   in jurisdiction C. In response to a specific request by Palmetto, the
   agency advised offerors that it would not seek or accept proposal
   revisions regarding the optional/specialty services. AR, Nov. 8, 2006, at
   13; AR, Tab 23J, Letter from Contracting Officer to Palmetto, May 11,
   2006.

   In May 2006, CIGNA and Palmetto each submitted revised cost and technical
   proposals. Thereafter, the agency conducted several rounds of discussions
   with each offeror. For the recompetition, the agency did not conduct
   entirely new proposal evaluations, but rather updated the prior
   evaluations to reflect the revised or updated portions of the offerors'
   proposals, along with consideration of the offerors' responses to the
   agency's various discussion questions.

   In its final proposal revision, CIGNA reduced its total proposed
   cost/price from $[deleted] to $143,568,466. AR, Tab 25A, Business
   Evaluation Panel (BEP) CIGNA Cost Realism Report, Attach. A, 1-4.
   Specifically, CIGNA proposed significant reductions to its direct labor
   costs and to its proposed general and administrative (G&A) rates. Id.

   In evaluating the offerors' cost/price proposals, the agency performed a
   cost realism analysis which examined each offeror's proposed costs and
   prices with regard to the following categories: labor hours, labor rates,
   fringe benefits, indirect rates, other direct costs, travel, subcontract
   costs, general and administrative rates, and award fees. AR, Tab 25A, BEP
   CIGNA Cost Realism Report, at 1. As discussed in more detail below, the
   agency conducted discussions with CIGNA, during which the agency
   requested, and CIGNA provided, substantial information regarding the basis
   for its proposed cost/price reductions. In general, CIGNA stated that the
   reductions in its proposed cost/price reflected specific operational
   efficiencies that were incorporated in CIGNA's proposal which would result
   in reduction of direct labor through business process improvements and
   increased automation.

   Based on all of the information CIGNA provided, the agency concluded that
   CIGNA had adequately supported most of its proposed cost/price reductions,
   including its proposed reductions of direct labor. AR, Tab 25A, BEP CIGNA
   Cost Realism Report, at 1-2. With regard to CIGNA's proposed reduction to
   its G&A rate, the agency concluded that CIGNA's proposal was too
   "aggressive," and upwardly adjusted CIGNA's proposed G&A costs by
   approximately $4.1 million, thereby increasing its evaluated cost/price to
   $147,691,661. Id. at 15. The agency made no cost realism adjustments to
   Palmetto's proposal. See AR, Tab 25B, BEP Palmetto Cost Realism Report.

   As a result of the agency's reevaluation, the offerors' final revised
   proposals were scored as follows:

   +------------------------------------------------------------------------+
   |                                 |     Palmetto     |       CIGNA       |
   |---------------------------------+------------------+-------------------|
   |Technical Score                  |                  |                   |
   |---------------------------------+------------------+-------------------|
   |Offeror Capability               |       505        |        522        |
   |---------------------------------+------------------+-------------------|
   |Implementation                   |       155        |        146        |
   |---------------------------------+------------------+-------------------|
   |Quality Control Plan             |        95        |        97         |
   |---------------------------------+------------------+-------------------|
   |Corporate Experience             |        80        |        76         |
   |---------------------------------+------------------+-------------------|
   |Past Performance                 |        67        |        71         |
   |---------------------------------+------------------+-------------------|
   |SB & SDP Participation Plan      |        17        |        19         |
   |---------------------------------+------------------+-------------------|
   |Total Technical Score            |       919        |        931        |
   |---------------------------------+------------------+-------------------|
   |Proposed Cost/Price              |    $[deleted]    |   $143,568,466    |
   |---------------------------------+------------------+-------------------|
   |Evaluated Cost/Price             |    $[deleted]    |   $147,691,661    |
   +------------------------------------------------------------------------+

    

   AR, Tab 23D, Source Selection Decision (SSD), at 3.

   Based on its evaluation summarized above, the agency selected CIGNA for
   award of the contract for "core" DME services in jurisdiction C based on
   its higher technical rating and lower evaluated cost/price. Id.
   Thereafter, the agency terminated Palmetto's contract for the jurisdiction
   C DME MAC "core" services, as well as Palmetto's contract for the
   optional/specialty services. AR Tab 26A. At the time of award, the agency
   had not made a final determination as to how it will obtain the necessary
   EDI services for the jurisdiction C DME contract.[8] Id. para. 50. The
   agency states that it may elect to modify CIGNA's contract to include EDI
   services,[9] but maintains it is "equally possible" it will contract for
   those services with a third party --similar to the approach CMS has taken
   with regard to EDI services in jurisdiction D. AR, Nov. 8, 2006, at 27-28.

   DISCUSSION

   Cost Evaluation

   Palmetto first protests the agency's cost realism evaluation, arguing that
   the agency failed to reasonably consider whether CIGNA adequately
   supported its proposed cost/price reductions. In sum, Palmetto maintains
   that the agency failed to perform a meaningful analysis of CIGNA's
   proposed cost/price. See National City Bank of Indiana, B-287608.3, Aug.
   7, 2002, 2002 CPD para. 190.

   When an agency evaluates a proposal for the award of a cost-reimbursement
   contract, an offeror's proposed estimated costs are not dispositive
   because, regardless of the costs proposed, the government is bound to pay
   the contractor its actual and allowable costs. FAR sections 15.305(a)(1);
   15.404-1(d); Tidewater Constr. Corp., B-278360, Jan. 20, 1998, 98-1 CPD
   para. 103. Consequently, the agency must perform a cost realism analysis
   to determine the extent to which an offeror's proposed costs are realistic
   for the work to be performed. FAR sect. 15.404-1(d)(1). An agency is not
   required to conduct an in-depth cost analysis, see FAR sect. 15.404-1(c),
   or to verify each and every item in assessing cost realism; rather, the
   evaluation requires the exercise of informed judgment by the contracting
   agency. Cascade Gen., Inc., B-283872, Jan. 18, 2000, 2000 CPD para. 14 at
   8. Further, an agency's cost realism analysis need not achieve scientific
   certainty; rather, the methodology employed must be reasonably adequate
   and provide some measure of confidence that the rates proposed are
   reasonable and realistic in view of other cost information reasonably
   available to the agency as of the time of its evaluation. See SGT, Inc.,
   B-294722.4, July 28, 2005, 2005 CPD para. 151 at 7; Metro Mach. Corp.,
   B-295744; B-295744.2, Apr. 21, 2005, 2005 CPD para. 112 at 10-11. Because
   the contracting agency is in the best position to make this determination,
   we review an agency's judgment in this area only to see that the agency's
   cost realism evaluation was reasonably based and not arbitrary. Hanford
   Envtl. Health Found., B-292858.2, B-292858.5, Apr. 7, 2004, 2004 CPD para.
   164 at 8-9.

   Here, as noted above, the agency conducted several rounds of discussions
   with CIGNA, focusing in particular on the proposed operational
   efficiencies that CIGNA maintained will lead to lower costs. See, AR,
   CIGNA Discussions Responses, June 14, 2006, July 11, 2006, August 4, 2006,
   August 9, 2006. At the conclusion of these discussions, the agency's
   business evaluation panel (BEP) concluded that CIGNA's "level of effort
   hours proposed in its final proposal revision . . . (1) is deemed
   realistic for the work to be performed (2) reflects a clear understanding
   of the [SOW] requirements and (3) is consistent with the unique methods of
   performance described within its technical proposal." AR, Tab 25A, BEP
   CIGNA Cost Realism Report, at 2. In this regard, the BEP report references
   the research, review and analysis performed, and separately documented, by
   the BEP's technical advisor. Id.

   In reviewing CIGNA's proposed cost/price reductions, the BEP technical
   adviser concluded that there were three primary factors that supported
   CIGNA's cost/price reductions: (1) CIGNA's adoption of a business
   management process known as [deleted],[10] (2) CIGNA's historical
   experience with cost reductions, and (3) the input of agency subject
   matter experts (SMEs) who were consulted for their views regarding CIGNA's
   proposed operational efficiencies [deleted]. Decl. of BEP Technical
   Advisor paras. 8-10. After considering these factors, the BEP technical
   advisor concluded that he could not reasonably question CIGNA's
   assumptions regarding operational efficiencies. AR, Tab 25C, BEP Technical
   Advisor Report for CIGNA, at 11.

   With regard to the [deleted] business management process, CIGNA stated
   that it had, in 2006, "implemented [deleted] processes such as [deleted]
   and [deleted] as tools to solve systematic business problems." AR, Tab 27,
   CIGNA Discussion Questions Responses, July 11, 2006, at 52. The BEP
   technical advisor stated that his review of this aspect of CIGNA's
   proposal included consideration of a treatise--portions of which were
   provided for the record by the agency in its report responding to this
   protest. See [deleted]. During a telephone hearing conducted by this
   Office in connection with this protest,[11] the BEP technical advisor
   testified that he reviewed the treatise prior to drafting his final report
   on CIGNA's proposed costs. Hearing Transcript (Tr.) at 13:18-14:1. Among
   other things, the BEP technical advisor referred to the treatise's
   assertion that companies working towards the [deleted] "will experience .
   . . a 12 percent reduction in the number of employees."[12] [Deleted],
   supra, at 2; Tr. at 14:16-15:14.

   Palmetto complains that the treatise referenced by the BEP technical
   adviser fails to specify whether the efficiencies contemplated are
   reasonably applicable to the particular type of labor at issue here, and
   that CIGNA's proposal did not clearly identify the manner in which its
   program will be implemented. In this regard, the BEP technical advisor
   testified that he understood [deleted] to refer to "general principles,"
   which supported CIGNA's proposal in light of CIGNA's proposed approach to
   achieving generally-applicable efficiencies for all labor categories.
   Tr. at 15:6-14. Although Palmetto expresses disagreement with the agency's
   review and analysis regarding the potential for CIGNA to effect the
   efficiencies proposed, it has not established that the agency's
   consideration of this particular aspect of CIGNA's proposal was
   unreasonable.

   In addition, the BEP technical adviser considered the historical
   efficiencies CIGNA has experienced in connection with its prior
   performance of its DMERC contract for jurisdiction D. AR, Tab 25C, BEP
   Technical Advisor's Report, at 11. During discussions, in response to the
   agency's questions, CIGNA stated that during the period from December 2005
   through May 2006, CIGNA has implemented various specified business
   methodologies,[13] and successfully achieved reductions in full-time
   equivalent employee (FTE) workloads. AR, CIGNA Discussions Responses, Aug.
   4, 2006, at 81-83. More specifically, CIGNA provided supporting data
   indicating that it had achieved an across-the-board workload reduction of
   [deleted] during those 6 months, and stated that, on an annualized basis,
   CIGNA's savings would exceed the approximately [deleted] operational
   efficiency [deleted] reflected in its cost/price proposal. Id. at 81.

   The agency indicates that it understood CIGNA to be correlating the
   achievement of prior savings to its ability to achieve savings in the
   future, stating:

     CIGNA data showed that in the first half of 2006 CIGNA, while
     implementing the business improvement models, was attaining reductions
     and efficiencies of [deleted]. I feel it was reasonable to assume that,
     based on the quality processes CIGNA was implementing, CIGNA could
     achieve its goal of [deleted].

   Decl. of BEP Technical Advisor para. 8.

   In his report, the BEP technical advisor stated that, although CIGNA's
   "support for historical efficiency improvements only indicates a recent
   (since late 05) focus on improvements," there was "no basis to question
   the basic assumption that these efforts will continue." AR, Tab 25C, BEP
   Technical Advisor Report for CIGNA, at 11.

   In conjunction with his consideration of CIGNA's historical data regarding
   cost reductions during performance of its prior DMERC contract, the BEP
   technical adviser stated that he reviewed information from the agency's
   Contractor Administrative and Financial Management (CAFM) system, which
   the agency uses to monitor contractor cost and workload information, and
   concluded that the data

   supported CIGNA's claims regarding workload reduction. See, e.g., Tr. at
   25:18-26:1; 27:14-37:11; see also, AR, Tab 25A, BEP CIGNA Cost Realism
   Report, at 2.

   Palmetto complains that the historical cost data provided by CIGNA
   reflected an insufficiently lengthy period to be meaningful, that the
   proposed cost reductions are not tied to specific activities, and that the
   reductions identified may have been one-time achievements in efficiency.
   Nonetheless, the record shows that the agency consulted data that it
   believed were relevant to support CIGNA's contention that it had achieved
   cost efficiencies during the first half of 2006, and that those
   efficiencies reasonably supported CIGNA's assumptions for future
   operational efficiencies.

   The FAR specifically provides that an agency's required cost realism
   analysis should consider the separate cost elements of an offeror's
   proposal, along with the agency's application of judgment, and provides
   that an agency may use various techniques and procedures, including
   consideration of actual/historical costs that have been incurred by the
   offeror or other contractors for the same or similar work. FAR
   sect. 15.404; see CIGNA Gov't Servs., Inc., B-297915, May 4, 2006, 2006
   CPD para. 73; DATEX, Inc., B-270268.2, Apr. 15, 1996, 96-1 CPD para. 240.
   Accordingly, while recognizing that the efficiency information is for a
   relatively short period, we have no basis to question the agency's
   reliance on CIGNA's historical data in this matter.[14]

   Finally, the agency states that it consulted several agency officials that
   were subject matter experts (SME) in areas related to performance of the
   contract requirements at issue, and who were knowledgeable of CMS
   activities. AR, Tab 25C, BEP Technical Advisor Report for CIGNA, at 11.
   The agency states that none of the SMEs consulted had any specific
   objection to CIGNA's proposed efficiencies.[15] Id.

   The agency's contemporaneous record further documents the agency's
   assessment of CIGNA's proposal. For example, the notes of a claims
   processing SME state that, based on her conversation with the BEP
   technical advisor, "I do think that these projections are reasonable." AR,
   Tab 26D, Note from Claims Processing SME to BEP technical advisor. The
   claims processing SME further indicated that she believed the claims
   processing rates discussed in CIGNA's proposal appeared reasonable due, in
   part, to automation and electronic claims processing. Id. Similarly, an
   email from a contracting operations SME stated that she had reviewed
   CIGNA's discussion responses regarding its operational efficiencies
   [deleted], and concluded that "it seems reasonable that the operational
   efficiencies could be achieved if their [deleted] processes become
   `[deleted].'" AR, Tab 26D, Email from Contracting Operations SME to BEP
   Technical Advisor, Aug. 16, 2006. Although the protester argues that the
   views of the SMEs are conclusory, and do not reflect meaningful analysis,
   the record shows that the SMEs considered the relevant portions of CIGNA's
   proposal and discussions responses, and provided their views that
   specifically addressed issues relevant to the evaluation of the
   operational efficiency [deleted].

   Overall, the record reasonably supports the agency's position that it
   properly considered, and reasonably understood, the basis for CIGNA's
   proposed cost/price reductions. See AR, Tab 25A, BEP CIGNA Cost Realism
   Report, at 5-7; Tab 25F, BEP Cost/Price Analyst Report for CIGNA, August
   22, 2006, at 2-4; Tab 25F, BEP Cost/Price Analyst Report for CIGNA, August
   18, 2006, at 1-2. Based on our review of the entire record, we cannot
   conclude that the agency's review, consideration, and analysis with regard
   to the realism of CIGNA's proposed cost/price was unreasonable. Palmetto's
   assertions to the contrary are an insufficient basis to sustain the
   protest.

   Technical Evaluation

   Palmetto next protests that the agency erred in its evaluation of CIGNA's
   technical proposal. As discussed above, the agency did not perform a
   complete reevaluation of offerors' technical proposals during the
   recompetition; rather, the agency evaluated the changes to offerors'
   proposals and determined whether any aspects of the previous evaluation
   required amendment.

   The evaluation of technical proposals is a matter within the agency's
   discretion, since the agency is responsible for defining its needs and the
   best method for accommodating them. U.S. Textiles, Inc., B-289685.3, Dec.
   19, 2002, 2002 CPD para. 218 at 2. In reviewing a protest against an
   agency's evaluation of proposals, our Office will not reevaluate proposals
   but instead will examine the record to determine whether the agency's
   judgment was reasonable and consistent with the stated evaluation criteria
   and applicable procurement statutes and regulations. See Shumaker Trucking
   & Excavating Contractors, Inc., B-290732, Sept. 25, 2002, 2002 CPD para.
   169 at 3. A protester's mere disagreement with the agency's judgment in
   its determination of the relative merit of competing proposals does not
   establish that the evaluation was unreasonable. C. Lawrence Constr. Co.,
   Inc., B-287066, Mar. 30, 2001, 2001 CPD para. 70 at 4.

   Here, Palmetto asserts that the agency failed to reasonably consider the
   effect of CIGNA's proposed labor reductions in its evaluation of the final
   proposal revision. In this regard, Palmetto asserts that the agency's
   evaluation was cursory and failed to meaningfully assess whether CIGNA
   understood and could perform the solicitation requirements.

   Contrary to the protester's assertions, the TEB's evaluation of CIGNA's
   final revised proposal specifically addressed CIGNA's ability to meet the
   solicitation's stated requirements, concluding that improvements to
   CIGNA's business processes allowed CIGNA to reduce the number of labor
   hours while still performing the solicitation requirements at the same, or
   a higher, level compared with CIGNA's previous proposal, stating:

     The TEB also noted improvement in [CIGNA's] combined business standards
     and methods from three organizations: the International Standards
     Organization (ISO) (http://www.iso.org), [deleted]. Each of these
     companies has a specific focus that is briefly described as follows:

     o     ISO -- Concerned with "quality management" in what an organization
     does to fulfill its mission and goals.
     o     [Deleted] -- Helps businesses to maximize value and minimize
     waste.
     o     [Deleted] -- Provides a methodology and measurement-based strategy
     focused on process improvements and [deleted].

   AR, Tab 24A, TEB Report at 2.

   In documenting its evaluation, the agency cited several areas in which
   CIGNA had applied its new business standards and methods, including
   [deleted]. Id. at 2-3. With regard to these tools and their
   implementation, the TEB stated that it was satisfied that CIGNA could
   successfully perform with reduced personnel, stating:

     The Panel was familiar with these business tools and strategies as other
     Medicare contractors use them, and efficiencies and savings are often
     found among these contractors. Furthermore, both the TEP and BEP
     consulted, separately, with CMS experts about the soundness of the
     [CIGNA] standards and methods, and resultant savings. There was
     agreement, among those consulted, and the two Panels on these points.

   Id. at 3.

   Finally, the agency's review addressed CIGNA's reductions in labor hours,
   stating:

     The TEB would note that while the above discussion (regarding the
     technical approach in the May 15, 2006 proposal submission and
     subsequent responses to discussion questions) focuses on new
     efficiencies presented by [CIGNA], the technical approach itself is the
     same as considered in December 2005. That is under the Corrective
     Action, [CIGNA] shows how it has improved the ways in which it will do
     the work required by the RFP. As noted above, both the TEB and BEP,
     along with other CMS experts, find that [CIGNA] continues to be
     responsive while becoming more efficient in its proposed work.

   AR, Tab 24A, Technical Evaluation, at 4.

   In sum, the agency's contemporaneous evaluation record demonstrates that
   the agency specifically considered the changes to CIGNA's technical
   proposal during the corrective action recompetition, and specifically
   concluded that CIGNA could perform the work notwithstanding the reduced
   level of personnel reflected in its cost/price proposal. Although Palmetto
   asserts that the level of detail in the TEB report is insufficient to
   support the agency's conclusions, the protester's disagreement with the
   agency's documented assessments in this regard does not provide an
   adequate basis to sustain the protest.

   Palmetto next argues that the agency improperly credited CIGNA for cost
   savings under the technical evaluation. The protester argues that the
   RFP's instructions to offerors that "[t]he written Technical Proposal must
   NOT contain reference to price/cost," RFP sect. L.12.a, prohibited the
   agency from giving offerors credit regarding cost or price in the
   technical evaluation. As the protester notes, the TEB report contains
   numerous references to "efficiencies" and "savings" that the TEB indicated
   would result from CIGNA's business process techniques. Thus, Palmetto
   argues, the agency inappropriately "double counted" cost savings under the
   technical evaluation.

   The agency's discussion of savings and efficiencies, however, addressed
   CIGNA's proposal in the context of its ability to perform the solicitation
   requirements: "The TEB also noted improvement in [CIGNA's] ability to
   execute CMS contract requirements. This is particularly true with regard
   to changes in business methods and standards intended for greater
   efficiencies and savings." AR, Tab 24A, TEB Report, at 2. The record shows
   that the agency considered the business management techniques as
   enhancements to CIGNA's ability to perform the work within the context of
   the offeror capability technical evaluation factor, citing the benefits of
   CIGNA's implementation of various business process improvement models. AR,
   Tab 24, TEB Report at 2-3. In this regard, an agency is not precluded from
   considering a proposal element, such as operational efficiencies, under
   more than one evaluation criterion when the element is, as here, relevant
   and reasonably related to each criterion under which it is considered.
   RAMCOR Servs. Group, Inc., B- 276633, et al., Mar. 23, 1998, 98-1 CPD
   para. 121 at 9.

   Finally, the protester argues that the agency treated CIGNA and Palmetto
   unequally in the evaluation of the offerors' technical proposals.
   Specifically, the protester argues that the agency gave CIGNA credit for
   being certified as ISO 9001:2000 compliant, but did not give Palmetto
   similar credit. [16]

   CIGNA stated in its proposal that it had implemented the ISO 9001:2000
   standard, and expected certification in 2006. The TEB report discussed
   CIGNA's implementation of the ISO business process in the context of
   CIGNA's operational efficiencies, and ability to perform the solicitation
   requirements. AR, Tab 24A, TEP Report, at 2. We believe that it was
   reasonable for the agency to do so because, as discussed above, this
   evaluation was within the scope of the offeror capability evaluation
   factor.

   Contrary to Palmetto's assertion regarding allegedly unequal treatment,
   the agency's initial evaluation of Palmetto's proposal discussed
   Palmetto's ISO 9001:2000 certification, identifying it as a strength in
   the initial TEP report; because the TEB report for the recompetition only
   discussed changes to the score, there was no reason to readdress this
   issue in the new evaluation report. AR, Tab 5, TEB Report at 6 (Aug. 17,
   2005); see decl. of TEB Chair, para. 13. In contrast, the agency noted
   that CIGNA had stated in its 2005 proposal that it would be certified for
   ISO 9001:2000 in 2006; thus, for the recompetition, the agency noted
   CIGNA's ISO status for the first time. AR, Tab 24A, TEP Report, at 2. On
   this record, there is no merit to Palmetto's assertion of unequal
   treatment.[17]

   MEDIS Option

   Palmetto argues that the agency was required to amend the solicitation to
   reflect what Palmetto asserts were changed requirements with regard to
   performance of EDI requirements for jurisdiction C. Specifically, Palmetto
   asserts that the agency had determined, prior to award, that it will amend
   the jurisdiction C contract for "core" services to include the EDI
   services that would otherwise have been provided by the MEDIS option. The
   record is to the contrary.

   As discussed above, the agency has taken differing approaches to providing
   the necessary EDI services for the DME contracts in the other three
   jurisdictions--modifying the DME contract to include those requirements in
   two of the jurisdictions, and contracting with a third party to provide
   the services in the third jurisdiction. As also noted above, the agency
   has expressly stated that it has not yet determined what approach it will
   take with regard to the EDI requirements in the jurisdiction C. That is,
   the agency states that it may, in fact, modify CIGNA's DME contract, but
   that it is "equally possible" it will contract for those services with a
   third party. See Decl. of Medicare Contractor Management Group Director
   para. 12; AR, Nov. 8, 2006, at 27. Palmetto's protest does not establish
   that the agency's representations in this regard are inaccurate.
   Accordingly, we cannot sustain the protest on the basis of allegedly
   changed requirements.[18]

   The protest is denied.

   Gary L. Kepplinger

   General Counsel

   ------------------------

   [1] In general, fiscal intermediaries have been responsible for processing
   Medicare payments for institutional providers, e.g., hospitals and skilled
   nursing facilities, under Part A of the Medicare program; carriers have
   been responsible for processing payments for professional providers (for
   example, physicians and diagnostic laboratories) under Part B of the
   Medicare program. More specifically, contractors known as "Durable Medical
   Equipment Regional Carriers" (DMERCs) have been responsible for processing
   Medicare claims for DME under Part B of the Medicare program. RFP,
   Statement of Work (SOW), at 11-12.

   [2] The solicitation's statement of work provided an overview of the
   required tasks, stating as follows:

     The Contractor shall receive and control Medicare claims from [DME]
     suppliers and beneficiaries within its jurisdiction, as well as perform
     edits on these claims to determine whether the claims are complete and
     should be paid. . . . In addition, the Contractor calculates Medicare
     payment amounts and remits those payments to the appropriate party. . .
     . The Contractor also conducts a variety of different suppliers
     services, such as answering written inquiries, and educating them on
     Medicare's rules and regulations and billing procedures.

   RFP, SOW, at 14.

   [3] For the technical evaluation, offerors' proposals were evaluated on
   the basis of the six factors, for a total of 1000 points. The offeror
   capability factor was worth 545 points, and had subfactors for
   understanding the requirement (300 points), project management (75
   points), key personnel (75 points), information security (50 points), and
   compliance plan (45 points). The implementation factor was worth 170
   points, and had subfactors for implementation plan (70 points), key
   personnel (60 points), and implementation risk (40 points). The quality
   control plan factor was worth 100 points, the corporate experience factor
   was worth 80 points, the past performance factor was worth 80 points, and
   the small disadvantaged business utilization/ participation plan factor
   was worth 25 points. RFP sect. M.4.

   [4] The solicitation also provided that only a DME contractor in one of
   the four jurisdictions would be eligible for award of the contract to
   provide the optional/specialty services.

   [5] An early version of the RFP for the DME MACs required offerors to
   propose front-end EDI processing as part of the core services.

   [6] CMS states that it has a long-term goal of having one contractor to
   perform "front-end" EDI services for all Medicare contractors. Agency
   Report, Nov. 8, 2006, at 5.

   [7] At that time, CIGNA also protested the award of the DME contract in
   jurisdiction D to Noridian Administrative Services, LLC; our Office denied
   that protest. See CIGNA Gov't Servs., LLC, B-297915, May 4, 2006, 2006 CPD
   para. 73.

   [8] As noted above, the agency has made various, differing arrangements to
   obtain the necessary front-end services in each of the four jurisdictions.

   [9] Among other things, the RFP stated: "CMS reserves the right to
   exercise [the MEDIS option] at the time of contract award or at any time
   during the period of performance of the resultant contract." RFP at 143.

   [10] [Deleted]. Id.

   [11] In resolving this protest, our Office conducted a telephone hearing,
   on the record, during which the BEP technical advisor provided testimony
   regarding the protest issues.

   [12] CIGNA's final revised proposal was based on the premise that it could
   reduce labor costs by approximately [deleted] per year over the course of
   the contract. More specifically, CIGNA's proposal reflected a [deleted]
   increased efficiency during the base contract year and first, third and
   fourth option years, and a [deleted] increased efficiency during the
   second option year. AR, CIGNA Final Proposal Revision, Vol. II, Tab D,
   Cost Realism Narrative, at 8-9.

   [13] In addition to [deleted], CIGNA referenced ISO 9000:2001, the
   [deleted] and [deleted] as other examples of business process
   improvements, and provided specific examples regarding its experience in
   applying these programs.
   AR, CIGNA Discussion Response, June 14, 2006.

   [14] Palmetto argues that certain of the data analyses are flawed. For
   example, the protester argues that certain of the cost categories reviewed
   by the BEP technical advisor to analyze CIGNA's cost history relate to
   work that will no longer be provided by the DME MAC contractor. However,
   the BEP technical advisor did not suggest that his analysis was intended
   to mathematically prove that the cost efficiencies would equal [deleted],
   nor that CIGNA had historically achieved a particular level of efficiency.
   Rather, the agency states that the analysis provided general support for
   the efficiencies proposed. See Tr. at 37:5-22. In this context, the
   agency's review was reasonable and supportive of the cost realism
   analysis.

   [15] Specifically, the BEP technical advisor stated: "I also discussed
   CIGNA's responses to discussion questions regarding [deleted] and the
   [deleted] efficiency [deleted] both orally and in writing with several CMS
   Subject Matter Experts (SMEs) . . . [in the areas of] Contracting
   Operations . . . Claims Processing . . . MSP . . . Beneficiary Inquiries
   and . . . Provider Communications. None voiced any objections to the
   reasonableness of CIGNA's assumptions." Decl. of BEP Technical Advisor
   para. 10.

   [16] ISO standards, such as 9001:2000, are issued by the International
   Organization for Standardization. The 9000 series of standards relates to
   quality control.

   [17] The protester also argues that a comment by one of the technical
   evaluators in the context of the ISO certification indicated potential
   bias or undue pressure to increase CIGNA's rating. The evaluator
   referenced the fact that she had not previously credited CIGNA with ISO
   certification, and that as part of the recompetition evaluation, she was
   raising her score, stating: "At this time I could raise my score to 47 in
   each category giving a total of 94 due to having [deleted] and now that we
   are in 2006 Cigna should also be ISO 9001-2000 compliant. Not that I feel
   any pressure here to change my original score!" AR, Tab 26E, Email from
   TEB Evaluator to TEB Chair, June 28, 2006. The evaluator states in a
   declaration that the comment regarding pressure was a "joke," and that
   "[a]t no time during my service as a TEB member did I feel any pressure
   from anyone to increase my original score or otherwise change CIGNA's
   score." Decl. of TEB Evaluator paras. 6-7. The record here does not
   provide sufficient support for Palmetto's allegation of bias to warrant
   sustaining the protest. In any event, as discussed above, the improvement
   in CIGNA's rating was supported by the evaluation record.

   [18] Palmetto separately complains that the agency stated, at various
   points during the competition, that it intended to award the MEDIS option
   at the time of the jurisdiction C contract award, but has not done so. It
   does not appear that Palmetto's complaint regarding the decision not to
   award the MEDIS option constitutes a basis for protest or that the
   decision prejudices Palmetto. The RFP specifically stated that the
   proposal for the optional/specialty services would be evaluated separately
   from the proposals for DME "core" services. RFP sect. M.6. Accordingly,
   consistent with the express provisions of the solicitation, any agency
   evaluation of the MEDIS option would not properly affect the relative
   standings of Palmetto or CIGNA with regard to the jurisdiction C DME
   contract. Our Office will not sustain a protest absent a showing of
   competitive prejudice, that is, unless the protester demonstrates that,
   but for the agency's actions, it would have a substantial chance of
   receiving award. McDonald-Bradley, B-270126, Feb. 8, 1996, 96-1 CPD para.
   54 at 3; see Statistica, Inc. v. Christopher, 102 F.3d 1577, 1681 (Fed.
   Cir. 1996).