TITLE: B-299526; B-299526.2, Medical Matrix, LP, June 12, 2007
BNUMBER: B-299526; B-299526.2
DATE: June 12, 2007
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B-299526; B-299526.2, Medical Matrix, LP, June 12, 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: Medical Matrix, LP

   File: B-299526; B-299526.2

   Date: June 12, 2007

   Kenneth Weckstein, Esq., Shlomo D. Katz, Esq., and Tammy Hopkins, Esq.,
   Epstein Becker & Green, PC, for the protester.

   Marcia G. Madsen, Esq., David F. Dowd, Esq., and David B. Robbins, Esq.,
   Mayer, Brown, Rowe & Maw LLP, for SXC Health Solutions, Inc., an
   intervenor.

   Maura C. Brown, Department of Veterans Affairs, for the agency.

   Scott H. Riback, Esq., and John M. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1. Protest challenging reasonableness of agency's past performance
   evaluation is denied where challenge is based on assumption that awardee
   had not previously performed requirements called for in solicitation,
   which is not supported by record.

   2. Protest alleging that agency improperly failed to consider past
   performance in connection with its evaluation of proposals under technical
   evaluation criteria is denied where evaluation scheme included separate
   technical and past performance evaluation criteria, and did not provide
   for evaluation of past performance under technical criteria.

   3. Protest that agency failed to recognize that awardee's proposed price
   was unrealistically low as compared to protester's is denied where record
   shows that, although protester was incumbent contractor, solicitation
   called for work not previously performed by protester; price disparity
   between protester's and awardee's proposals is attributable to this
   component of the requirement; and awardee has previous experience
   performing this aspect of the requirement, which agency recognized as
   basis for price disparity.

   DECISION

   Medical Matrix, LP protests the award of a contract to SXC Health
   Solutions, Inc. under request for proposals (RFP) No. 741-07-05, issued by
   the Department of Veterans Affairs (VA) for services in connection with
   providing and managing pharmaceutical transactions. Medical Matrix asserts
   that the agency misevaluated proposals and made an unreasonable source
   selection decision.

   We deny the protest.

   BACKGROUND

   VA provides pharmacy benefits under three programs that it administers:
   VA's civilian health and medical program, the spina bifida health care
   program, and the children of women Vietnam veterans healthcare program.
   The RFP contemplated the award of a fixed-price contract for a base year,
   with four 1-year options, to provide various services in connection with
   these programs. Specifically, the contractor is to provide: retail
   pharmacy services to the agency's beneficiary population through a
   nationwide network of pharmacies; a range of pharmacy claims transaction
   processing services; help desk services, as well as a web site, for the
   agency's beneficiary population; and various reports that distill
   information relating to the pharmacy transactions being processed. RFP at
   14-27. Offerors were advised that the beneficiary population for the
   programs was 251,108, that the total number of prescriptions for this
   group was approximately 3.5 million, and that, of this number,
   approximately 1.34 million prescriptions would be filled through retail
   pharmacies, 1 million prescriptions would be filled at the VA mail order
   pharmacy, and 1.13 million prescriptions were beneficiary-submitted retail
   or VA in-house treatment initiative paper claims. Id. at 12.

   Offerors were advised that award would be made on a "best value" basis,
   considering technical capability, past performance, and price, with
   technical capability more important than past performance, and technical
   capability and past performance together more important than price. RFP at
   4. The solicitation specified the following weights for the evaluation
   factors and subfactors: network access factor (evaluated on a pass/fail
   basis, with proposals that pass to be scored; 25 percent of the overall
   evaluation); non-network pharmacy services factor (evaluated on a
   pass/fail basis, with proposals that pass to be scored; 10 percent);
   pharmacy benefits management (PBM) services factor (20 percent, with the
   following 10 subfactors each worth 10 percent of the total points for this
   factor: program requirements; pharmacy network services; claim and
   reversal submission to the health administration center ; claim
   reimbursement and recoupment; help desk and phone access for
   beneficiaries; website access; reporting; electronic network vendor file;
   pharmacy ID card plan; and industry participation and knowledge); phase
   transition plans factor (10 percent); past performance factor (10
   percent); and price factor (25 percent, with two equally-weighted
   subfactors: total evaluated administrative price, and network discount
   pricing). RFP at 8-10. Proposals also were to be evaluated for risk at the
   factor and subfactor levels, taking into consideration the offerors'
   proposed approaches or processes, the degree to which the government might
   expend resources to monitor or manage the risk of unsuccessful
   performance, and the amount of PBM-related experience demonstrated by the
   offeror. RFP at 8-10.

   Proposals were to be assigned scores of from 1 point (for a proposal that
   failed to meet minimum requirements and contained significant weaknesses
   that were uncorrectable without a major proposal revision) to 4 points
   (for a proposal that exceeded the agency's minimum requirements in a
   manner that would be beneficial to the government and contained no
   weaknesses) for the factors and subfactors. Agency Report (AR), exh. 21,
   at 10. For the past performance factor, the evaluators could assign scores
   between whole numbers (e.g., 3.5 points). The past performance scores were
   defined as follows: 0 points--neutral confidence; 1 point--no confidence;
   2 points--marginal confidence; 3 points--satisfactory confidence; and 4
   points--high confidence. AR, e.g., exh. 13. The numeric scores were then
   adjusted to reflect the RFP weightings.

   The agency received two proposals, Medical Matrix's and SXC's. After
   evaluation of the proposals, the agency engaged in discussions with the
   firms and obtained revised proposals. The agency ultimately made award to
   Medical Matrix. SXC filed a protest in our Office challenging the award,
   arguing, among other things, that the agency did not provide adequate
   discussions. In response to that protest, the agency proposed to take
   corrective action by reopening discussions and reevaluating proposals; we
   dismissed the protest as academic in light of the proposed corrective
   action. (B-298106, Apr. 11, 2006.)

   After reopening the acquisition, engaging in discussions, and obtaining
   revised proposals, the agency conducted a new evaluation. Both firms'
   proposals received pass ratings for factors one and two (network access
   and non-network pharmacy services), and each received identical scores of
   4 points/low risk under each of the technical evaluation factors and
   subfactors. AR, exhs. 10, 11. For past performance, Medical Matrix's
   proposal received a score of 4 points, and SXC's 3.7 points (satisfactory
   to high confidence). AR, exhs. 12, 13. Medical Matrix proposed a total
   price of $613,374,904 ($[deleted] in development and implementation costs,
   $[deleted] in administrative costs, and $[deleted] in drug costs), while
   SXC proposed a lower total price of $553,263,844.88 ($[deleted] in
   development and implementation costs, $[deleted] in administrative costs,
   and $[deleted] in drug costs). AR, exh. 22, at 22. On the basis of these
   evaluation results, the agency made award to SXC, finding that the firm's
   lower-priced proposal offered the best overall value to the government,
   considering price and the non-price evaluation factors. After receiving a
   debriefing from the agency, Medical Matrix filed this protest.

   Medical Matrix takes issue with numerous aspects of the agency's
   evaluation. In reviewing protests of alleged improper evaluations and
   source selection decisions, it is not our role to reevaluate proposals;
   rather, we will examine the record to determine whether the agency's
   judgment was reasonable and in accord with the stated evaluation criteria
   and applicable procurement laws and regulations. See Abt Assocs., Inc.,
   B-237060.2, Feb. 26, 1990, 90-1 CPD para. 223 at 4. We find that the
   evaluation here was reasonable.

   NON-PRICE EVALUATION

   SXC's Past Performance

   At the heart of many of Medical Matrix's arguments is its assertion that
   SXC lacks the experience and past performance required by the RFP. In this
   connection, the RFP provided, in relevant part, as follows:

     The Contractor shall provide documentation of a minimum of three
     (3) facilities/contracts, demonstrating that it has been performing the
     same or similar Pharmacy Network and/or PBM services for a period of no
     less than 5 years at the [agency's] pharmacy claim volume or greater. If
     a subcontractor was used to meet the requirements of past performance,
     the Prime Contractor should have completed at least 50 [percent] of the
     work for the contract. The Contractor shall provide contact information
     to be utilized during the evaluation process.

   RFP at 29.

   According to the protester, SXC is primarily in the business of providing
   information technology (IT) solutions to firms that actually provide PBM
   services. The protester maintains that SXC offers licenses for various
   proprietary software products that it has developed, as well as "hosting"
   services for IT applications, and that, to the extent SXC does provide PBM
   services, it has only been doing so since 2004. In support of its
   position, Medical Matrix points to the past performance references in
   SXC's proposal, which, it claims, indicate that SXC is selling what the
   protester descirbes as application service provider (ASP) versions of its
   software to other firms that actually provide PBM or pharmacy network
   services.

   The evaluation in this area was reasonable. First, the evidence proffered
   by Medical Matrix in support of its position is primarily anecdotal and is
   comprised of portions of annual reports and press releases from SXC that
   the protester maintains show that SXC is the provider of IT solutions and
   ASP versions of its software. A reading of the firm's proposal, however
   (as well as other evidence in the record), supports the agency's
   conclusion that SXC has experience providing PBM and pharmacy network
   services. For example, SXC's proposal includes as one of its past
   performance references a contract the firm has been performing for Blue
   Cross/Blue Shield of Arizona since 1998. The description of the contract
   in the proposal states:

     SXC Health Solutions is responsible for the complete pharmacy benefit
     management for Blue Cross Blue Shield of Arizona. SXC is performing as a
     contractor for 100 [percent] of the services provided under contract.
     The overall system scope includes pharmacy claims processing, plan
     benefit management, pharmacy network management, rebate management, drug
     utilization review, operational, clinical, and, financial reporting, and
     help desk support. This plan provides pharmacy benefits to more than
     700,000 members and is responsible for the management of more than
     4,400,000 transactions.[1] SXC manages and operates the claims
     processing, rebate management, and, administrative services support for
     [Blue Cross Blue Shield of Arizona] in our Lombard, Illinois Pharmacy
     Benefits Management (ASP) Center.

   AR, exh. 18, sect. VI, at 5. The agency relied on this information to
   conclude that SXC met the past performance requirements. Consistent with
   SXC's proposal, the record also includes an affidavit in which an SXC
   senior employee further describes this contract as follows:

     As the proposal shows, SXC performs PBM services for BCBSAZ [Blue Cross
     Blue Shield of Arizona]. We do not license software to BCBSAZ for its
     use. Rather, as the proposal states, we process the prescription benefit
     claims, handle rebates, and perform pharmacy network administration
     services, among the other tasks.

   SXC Supplemental Comments, May 14, 2006, exh. B, at 6. SXC's senior
   employee explained the firm's use of the term ASP in its proposal as
   follows:

     In this regard, SXC sometimes used the term "application service
     provider" or "ASP" services to refer to its practice of performing PBM
     services for clients using SXC's resources and personnel [including its
     ASP processing center in Illinois and other locations], such as claims
     processing services, as distinct from license arrangements. The term ASP
     is used less today in general. We used the term ASP to refer to a set of
     certain PBM services. We did not use it to refer to licenses of our
     products, in which case the client (rather than SXC) would process the
     claims. We have also used the term "Pharmacy Benefit Administration"
     synonymously with "ASP," both in our proposal to the VA and elsewhere.
     SXC used both terms to refer to PBM services (i.e. claims processing,
     pharmacy network management, benefit plan setup and maintenance, drug
     utilization and review, financial management/ pharmacy payments,
     eligibility determination, etc.).

   Id. Based on the information in SXC's proposal, as well as the above
   explanations, we conclude that the record supports the agency's evaluation
   conclusion that SXC does, in fact, have experience as a provider of PBM
   and pharmacy network services; Medical Matrix has not shown otherwise. [2]

   Altered Scores

   Medical Matrix asserts that, in its source selection document, the agency
   improperly raised the numeric scores given to SXC by the firm's past
   performance references. In this regard, the record shows that, in
   preparing the source selection document, the contract specialist made
   minor upward adjustments to three of the numeric scores assigned to SXC in
   its past performance surveys; the unadjusted scores averaged 3.55 points,
   while the adjusted scores averaged 3.7 points.

   The scoring changes were unobjectionable. For example, the score assigned
   SXC's proposal for its Blue Cross Blue Shield of Arizona contract under
   the assignment of appropriate personnel element of the past performance
   survey was 2.5 points. AR, exh. 12, at 10. The source selection document
   states that this score was raised to 3 points because the original score
   was assigned based solely on the performance of new (as opposed to
   tenured) employees; there was a learning curve for new employees; there
   were no comments relating to any unresolved or ongoing contractual issues;
   the volume of work under the Blue Cross Blue Shield of Arizona contract
   was much greater than that being solicited; and the score under this
   element was comparatively inconsistent with the scores assigned under
   other elements of the past performance survey. AR, exh. 22, at 11. This
   contemporaneous explanation provides a rational basis for the adjustment
   in the point score for this reference. The other minor changes made to
   SXC's past performance numeric scores are similarly supported. Further,
   the record shows that, while the contract specialist made the changes, the
   source selection official expressly concurred in the changes based on all
   of the facts presented to him. AR, exh. 26. Accordingly, we conclude that
   this aspect of the evaluation was reasonable.[3]

   Comparative Past Performance Evaluation

   Medical Matrix alleges that it was unreasonable for the agency to assign
   SXC a past performance score that was so close to the score assigned to
   Medical Matrix (3.7 points relative to its own 4 points). The protester
   asserts that it has far more experience providing PBM services as compared
   to SXC, noting that it has been performing these services for VA for more
   than 13 years. The protester therefore concludes that it was unreasonable
   from a comparative standpoint to have assigned the proposals scores that
   were so close together.

   We find that the agency treated both offerors reasonably when evaluating
   their past performance references, and that its comparative evaluation
   conclusion (that the two offerors were relatively close in their
   respective past performance) was unobjectionable. Both firms included four
   specific examples of past performance in their proposals, and for both,
   only one example met all of the criteria outlined in RFP for past
   performance (at least 5 years of PBM or pharmacy network services at the
   agency's claim volume). With respect to SXC, the volume and type of
   services provided under its Blue Cross Blue Shield of Arizona contract
   since 1998 met the RFP's criteria. SXC's remaining three references, while
   reflecting a volume of transactions far in excess of the volume
   contemplated under the subject RFP (and also reflecting the full spectrum
   of services contemplated under the RFP), were for contracts SXC performed
   for less than 5 years, with the oldest contract dating from only 2002. AR,
   exh. 18, sect. 5, at 6-8.

   As for Medical Matrix, the record shows that, as the incumbent, it has
   been performing most of the services being solicited under the RFP at a
   similar volume since 1992; the protester, like SXC, thus was found to have
   one contract meeting the RFP's past performance criteria of having
   performed PBM or pharmacy network services for a period of at least 5
   years at the volume contemplated under the solicitation. AR, exh. 6, vol.
   II, at 115-16. Its remaining references, while reflecting past performance
   over an adequate period of time, were for PBM or pharmacy network services
   contracts at a dramatically lower volume than that contemplated under the
   solicitation. Id. at 116; AR, exh. 20, app. 2, at 9-10. The record thus
   shows that, while Medical Matrix may arguably have been performing these
   services for a somewhat longer period of time, SXC has performed these
   services at a far greater volume than required by the RFP. We conclude
   that, in view of these considerations, the agency reasonably assigned the
   two offerors similar past performance scores. Accordingly, this aspect of
   Medical Matrix's protest is without merit.

   Technical Proposal Scoring

   Medical Matrix asserts that the agency erred in assigning SXC's proposal
   the maximum score of 4 points under various technical evaluation factors
   and subfactors. According to the protester, the RFP required offerors to
   provide specific examples of how the solicitation's various tasks had been
   accomplished for the same or similar contracts in the past. RFP at 6.
   Medical Matrix maintains that the portions of SXC's proposal addressing
   the statement of work lack the required examples of instances where it
   performed the various PBM services in the past, and concludes that it thus
   was unreasonable for VA to assign SXC's proposal the maximum score in
   these areas of the technical evaluation.[4]

   Medical Matrix misconstrues the terms of the solicitation. The language on
   which it relies appears in the solicitation's general instructions for the
   preparation of technical proposals, RFP at 6, not in the evaluation
   provisions. As discussed above, the RFP included separate technical
   capability and past performance factors, and did not state that
   information regarding performance on prior contracts would be used to
   evaluate proposals under the technical capability factors. To the
   contrary, each technical evaluation factor and subfactor provided that the
   evaluation would be based on the offerors' written proposals, and required
   offerors to provide a plan to address the element of the requirement being
   evaluated. (For example, evaluation factor 3 provided: "Factor 3: PBM
   Services (20 [percent])--Evaluation based on written proposal. Provide a
   clear plan to meet all of the requirements of this section." RFP at 8.) In
   light of this evaluation scheme, the agency reasonably evaluated the
   proposals under the technical factors without reference to information
   regarding offerors' performance of prior contracts. See Raymond Assocs.,
   LLC, B-299496, B-299496.2, May 29, 2007, 2007 CPD para. __ at 5-6. SXC's
   failure to provide this information in the portion of its proposal
   responding to the statement of work thus did not require that its proposal
   be downgraded under the technical capability evaluation factors.[5]

   PRICE

   Medical Matrix asserts that the agency did not adequately evaluate SXC's
   proposed price. The protester focuses principally on SXC's administrative
   price, which was approximately $[deleted], or approximately $[deleted]
   lower than its own proposed administrative price of approximately
   $[deleted]. Medical Matrix asserts that, based on this comparison to its
   own pricing as the incumbent, SXC's administrative price was
   unrealistically low, and that the agency improperly failed to consider
   that this low price reflected a lack of understanding of the requirement.
   [6]

   We find no merit to this aspect of the protest. The RFP provided as
   follows regarding price realism:

     Proposals that are unrealistic in terms of technical capability or are
     unrealistically high or low in cost will be deemed reflective of an
     inherent lack of technical competence or indicative of a failure to
     comprehend the proposed requirements and will be rejected.

   RFP at 7. While the protester is correct that SXC's proposed
   administrative price is approximately $[deleted] lower than its proposed
   administrative price (which was almost identical to the government's
   estimate of $[deleted] for the administrative component of the
   requirement[7]), the contemporaneous record contains a rational
   explanation for the disparity. Specifically, the record shows that the
   primary difference in the two firms' administrative pricing was in the
   requirement for "non-network," or Medicare Part D Plan benefit, services.
   RFP at 18. SXC's administrative price for non-network services was
   approximately $[deleted] over the life of the contract (AR, SXC Cost
   Proposal, exh. 18), while Medical Matrix's was approximately $[deleted]
   (AR, exh. 19, app. 3). The non-network/Medicare services requirement is a
   new component of the agency's requirement that was not included under
   Medical Matrix's prior contract (and, in fact, is a relatively new aspect
   of PBM services that the record shows Medical Matrix has no experience
   providing, AR, exh. 3, at 46; AR, exh. 9 at 4). In contrast, SXC's
   proposal reflects that the firm has provided these services for numerous
   clients (one of which was an SXC past performance reference). AR, exh. 18,
   sect. 2, at 1-4; sect. 5, at 8.

   The agency recognized these considerations in evaluating the proposals and
   making its source selection. Specifically, the source selection authority
   stated with regard to the provision of non-network services:

     Medical Matrix stated in their proposal that they are preparing for
     connectivity and will be ready for testing as mandated. They have an
     action plan, and will be ready to go when [Medicare Part D] is ready to
     go. They were rated as low risk on this based on their history and
     understanding of the requirements. However, SXC has already implemented
     the Medicare Part D program, and in fact were the first vendor approved
     to process Med D claims. They have been doing these since January, 2006.
     In my judgment, as this is a new requirement, SXC clearly has the
     advantage. Like Medical Matrix, the [agency] has no experience with Med
     D, so SXC's experience would be a big benefit to the [agency].

   AR, exh. 22, at 17. The source selection authority went on to discuss
   these considerations in the context of analyzing the offerors'
   administrative prices:

     Taking out the development and implementation fee, SXC's administrative
     costs for the 5 years are $[deleted]; Medical Matrix's are $[deleted], a
     difference of about $[deleted] . . . . While Medical Matrix could be
     seen as having the upper hand in estimating this work as they are the
     current contractor, the additional work added into this contract as
     opposed to what is in the [Medical Matrix] MOU would negate that. SXC
     has been doing similar work to what this solicitation requests, so they
     have good knowledge of the market.

   AR, exh. 22, at 22. It is apparent from these statements that the agency
   was aware that the disparity in the two offerors' prices was attributable
   to their pricing for the non-network/Medicare services, and that it
   determined that SXC's lower administrative pricing was reliable--as
   opposed to indicative of a lack of understanding--because that firm,
   unlike the protester, had performed this work in the past, and therefore
   had "good knowledge of the market." This conclusion is reasonable on its
   face, and the protester has not shown otherwise. It thus provides no basis
   for us to question the evaluation.

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] This contract is responsive to the RFP requirement that the offer has
   performed PBM or pharmacy network services for a period of at least 5
   years at a volume equal to or greater than the volume called for in the
   RFP.

   [2] As discussed further below, the record shows that Medical Matrix and
   SXC each had one prior contract--rather than three, as specified in the
   RFP--that was for a duration of at least 5 years and was at a volume
   comparable to that under the solicitation. However, the record shows that
   the agency did not apply this criterion as a pass/fail requirement for
   either offeror. Medical Matrix does not challenge the evaluation in this
   regard.

   [3] In any case, source selection officials are not bound by numeric
   scores assigned by evaluators. Calspan Corp., B-258441, Jan. 19, 1995,
   95-1 CPD para. 28 at 10.

   [4] In a related allegation, the protester asserts that the agency
   improperly assigned low risk ratings to SXC's proposal based on a finding
   that the firm has more than 20 years of experience. (The RFP stated that,
   in assessing proposal risk, the agency's evaluation may also be affected
   by the amount of experience in performing PBM-related services
   demonstrated by the offeror. RFP at 8.) In support of its assertion,
   Medical Matrix proffered SXC's articles of incorporation to show that the
   firm was only incorporated in 1995. Medical Matrix's Supplemental
   Comments, May 14, 2007, exh. 1. However, SXC has submitted evidence
   showing that in 2001 it acquired another concern, ComCoTec, Inc., which
   was established in 1981; it is ComCoTec's experience--in addition to SXC's
   own--that comprises the firm's more than 20 years of experience. SXC
   Supplemental Submission, May 24, 2007, attach. Thus, SXC had a basis to
   claim in its proposal that it possessed more than 20 years of experience
   performing PBM-related services, and the agency's evaluation conclusion in
   this respect was reasonable. See, Ecompex, Inc., B-292865 et al., June 18,
   2004, 2004 CPD para. 149 at 5.

   [5] We point out as well that, as illustrated by our discussion above
   relating to the agency's evaluation of past performance, the SXC proposal
   did, in fact, include information showing examples of the firm having
   previously performed the various tasks called for under the statement of
   work under similar prior contracts.

   [6] Medical Matrix also alleges broadly that SXC's pricing was so low that
   it should have been found unreasonable. This argument is without merit; it
   is well-established that price reasonableness in a fixed-price setting
   relates to whether a firm's prices are too high, not too low. Sterling
   Servs., Inc., B-291625, B-291626, Jan. 14, 2003, 2003 CPD para. 26 at 3.

   [7] The record shows that the government estimate was developed based on
   historical costs incurred by the agency purchasing these services from
   Medical Matrix. AR, exh. 22, at 22.