Link: GAO Opinion
Agency: Department of Defense
Disposition: Protest sustained.
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GAO Digest:
1. Protest is sustained where the agency credited the awardee with past performance of its parent and corporate affiliates, yet record did not establish which entities were involved with performing the prior contracts submitted by the awardee, nor did it establish the roles that the various entities would have in awardee’s performance of the contract.
2. Agency’s past performance evaluation of the awardee was flawed where the record shows that, although it gave awardee the highest past performance rating, agency failed, as contemplated by the solicitation, to consider the fact that awardee’s past performance references were very small in relation to the size of the contract to be awarded.
3. Price realism evaluation was flawed where it did not reasonably consider whether the awardee’s staffing, as related to its price/cost proposal, reflected a lack of understanding of the agency’s technical requirements or presented technical risk.
4. Agency failed to consider risk associated with awardee’s proposed plan to hire large percentages of the incumbent workforce, which the agency considered to be a
beneficial approach, where the agency did not consider awardee’s ability to hire the incumbent workforce with lower compensation rates.
5. Protest challenging agency evaluation of protester’s proposal in procurement for TRICARE managed health care support services is sustained where the record shows that the agency did not consider the network provider discounts associated with protester’s existing TRICARE network, in accordance with the solicitation.
6. Protest that awardee’s use of a former high-level government employee in preparing its proposal created an appearance of impropriety based on the unfair competitive advantage stemming from the individual’s access to non-public proprietary and source selection sensitive information is sustained where the contracting officer never considered the matter–because the awardee did not bring it to his attention–and the record shows that the individual had access to non-public proprietary information concerning the protester’s performance of the incumbent contract, which appears relevant to the challenged procurement.
General Counsel P.C. Highlight:
Health Net first argues that TMA’s evaluation of AGHP’s past performance was fundamentally flawed and that it was not entitled to a High Confidence past performance rating. Among other things, Health Net argues that it was unreasonable for TMA to consider contracts performed by entities other than AGHP in evaluating AGHP’s past performance. Health Net also maintains that TMA failed to meaningfully consider the limited size of the prior contracts, as reflected by the relatively small beneficiary populations covered by the contracts, when it assigned AGHP the highest past performance rating. GAO states that where a solicitation requires the evaluation of offerors’ past performance, GAO will examine an agency’s evaluation to ensure that it was reasonable and consistent with the solicitation’s evaluation criteria. The critical question is whether the evaluation was conducted fairly, reasonably, and in accordance with the solicitation’s evaluation scheme.
In its proposal, AGHP indicated that it had not had any active business operations in the past three years. As a consequence, AGHP did not have any relevant past performance of its own under the terms of the RFP, which defined relevant past performance as limited to contracts concluded within the last three years. Lacking relevant past performance of its own, AGHP submitted past performance information for its team. GAO finds that an agency properly may attribute the experience or past performance of a parent or affiliated company to an offeror where the firm’s proposal demonstrates that the resources of the parent or affiliate will affect the performance of the offeror. The relevant consideration is whether the resources of the parent or affiliated company–its workforce, management, facilities or other resources–will be provided or relied upon for contract performance such that the parent or affiliate will have meaningful involvement in contract performance.
The record reflects that for each of the five contracts identified by AGHP for the purpose of evaluating its past performance, AGHP identifies the contract as having been performed generically by Aetna. Elsewhere in its proposal, however, AGHP explains that its ultimate parent is currently Aetna, Inc., and the term Aetna is the brand name used for one or more of the Aetna group of subsidiary companies, which include Aetna Life Insurance Company, as well as the following HMO entities that are licensed or otherwise qualified to provide health care coverage in the states that comprise the TRICARE North Region: Aetna Health Inc. (CT), Aetna Health Inc. (ME), Aetna Health Inc. (NY), Aetna Health Inc. (NJ), Aetna Health Inc. (PA, IN, KY, MA & OH), Aetna Health Inc. (DE), Aetna Health Inc. (MD, D.C. & VA), Aetna Health of the Carolinas Inc. (NC & SC), Aetna Health of Illinois Inc. (IL & IN), and Aetna Health Inc. (MI). The flaw with TMA’s analysis originates in the complex network of corporate entities which comprise the Aetna brand, AGHP’s general references to Aetna’s role in performing the requirements, and the general references to Aetna past performance information. Given the repeated use of the general reference to Aetna throughout AGHP’s proposal, the PAG did not know the specific roles, if any; the various Aetna entities would have in performance of the T-3 effort. Nor did the performance assessment group (PAG) have any insight regarding which specific Aetna entities had performed the contracts referenced in AGHP’s past performance proposal; therefore, the PAG could not know what role, if any, the entities that had performed the prior contracts would have in performance of AGHP’s T-3 contract. Given this lack of information, TMA’s reliance on past performance by Aetna in its assessment of AGHP effectively attributed to AGHP the past performance of other Aetna corporate entities based on the mere fact of their corporate affiliation. Absent some more definitive indications of what entities performed what contracts and what roles they would have in performing the T-3 effort, there was no basis for TMA to consider, let alone give credit in the evaluation for, the generic Aetna past performance submitted with its proposal.
Health Net contends that TMA failed to reasonably take into account the size of the prior contracts submitted by AGHP. The RFP indicated that for the purpose of evaluating past performance, TMA would consider an offeror’s performance on relevant contracts, which was generally defined to mean contracts similar to the T-3 requirements and specifically request offerors to submit their five largest relevant contracts. In its evaluation of relevance, the agency’s methodology reflects that the size of the beneficiary population covered by a particular contract was a significant consideration, as evidenced by the fact that to achieve a rating of relevant, an offeror’s contract had to have covered a beneficiary population which was at least 75% the size of the T-3 contract population.
In challenging the agency’s evaluation of AGHP’s past performance, Health Net highlights the fact that AGHP’s contracts involved beneficiary populations that are a small fraction of the size of the beneficiary population covered under the T-3 contract. The record reflects that all but one of AGHP’s contracts were for beneficiary populations that are less than 3% the size of the T-3 population, with the one larger contract equal to 11% of the T-3 population. Given that none of AGHP’s contracts were comparable to the T-3 effort in terms of the size of the covered beneficiary population, Health Net contends and GAO agrees that it was unreasonable to have assigned AGHP the highest past performance rating of High Confidence, which was defined as no doubt exists that the offeror will successfully perform the effort.
Health Net next challenges TMA’s price/cost evaluation in several respects. Among other things, Health Net contends that TMA’s price realism evaluation regarding AGHP’s proposal was flawed because it failed to reasonably consider AGHP’s low staffing for Per Member Per Month (PMPM). Health Net also argues that TMA failed to reasonably consider whether AGHP’s proposed employee compensation posed a risk to AGHP’s proposed plan to hire large numbers of incumbent employees. GAO states that price realism is not ordinarily considered in the evaluation of proposals for the award of a fixed-price contract, because these contracts place the risk of loss upon the contractor. However, in light of various negative impacts on both the agency and the contractor that may result from an offeror’s overly optimistic proposal, an agency may, as here, expressly provide that a price realism analysis will be applied in order to measure the offeror’s understanding of the requirements and/or to assess the risk inherent in an offeror’s proposal. Although the FAR identifies permissible price analysis techniques, it does not mandate any particular approach; rather, the nature and extent of a price realism analysis, as well as an assessment of potential risk associated with a proposed price, are generally within the sound exercise of the agency’s discretion. In reviewing protests challenging an agency’s evaluation of these matters, GAO’s focus is whether the agency acted reasonably and in a way consistent with the solicitation’s requirements.
Evidently, in an effort to assess whether AGHP’s staffing was too low for the PMPM CLIN, and thereby reflected a lack of understanding of the technical requirements or created performance risk, the price/cost Chairperson compared all offerors’ proposed staffing across all regions. Although unstated, it appears that given her lack of technical understanding, the price/cost Chairperson’s rationale for performing this high level comparison across regions was that if Health Net’s and AGHP’s total staffing, (which the TET had found to be adequate) was in line or out of line with the proposed staffing of other offerors, then, by analogy, one could conclude that Health Net’s and AGHP’s PMPM staffing was similarly either in line or out of line with other offerors’. Depending on the outcome of this comparison, the price/cost Chairperson would then be able to determine whether the staffing difference was meaningful. Ultimately finding that Health Net had the [Deleted], and AGHP did not have the lowest total staffing, it appears that the price/cost Chairperson concluded that the PMPM staffing differential was likely due to the fact that Health Net’s overall approach was based on using higher staffing, and thus while AGHP had lower PMPM staffing, AGHP’s staffing was not indicative of a lack of understanding nor would it appear to present technical risk. As an initial matter, GAO finds such a high level comparison of total staffing to be of limited value in analyzing the realism associated with staffing for individual CLINs. Rather, one would expect the TET to have considered the offeror’s staffing at the CLIN level to assess whether the proposed staffing was realistic, or reflected a lack of technical understanding or created performance risk based on the specific technical approach of the offeror. Thus, any comparison of offerors’ staffing for the purpose of assessing realism is an inherently limited methodology given the requirement to consider each offeror’s unique technical approach. As a consequence, on the record here, GAO finds that TMA failed to consider the realism of AGHP’s proposed approach based on hiring the incumbent workforce.
Health Net asserts that TMA’s technical evaluation unreasonably failed to account for the advantages offered by its established TRICARE network of providers, particularly given its record of obtaining significant network provider discounts from members of its network. The record is clear that TMA did not adequately account for the network provider discounts associated with Health Net’s existing TRICARE network. First, the technical evaluation and resulting best value analysis failed to acknowledge the significant potential cost benefit from Health Net’s record of obtaining an average overall network provider discount of [Deleted] for its TRICARE network [Deleted], estimated by Health Net to total [Deleted]. In this regard, while the solicitation required offerors to furnish a compliant network, and indeed included contract incentives encouraging network provider discounts through provisions for sharing resulting savings when the discounts exceeded 2%, as TMA recognizes, nothing in the solicitation required offerors to propose a network that offered any particular level of provider discount. Thus, Health Net’s proposal of an existing network offering [Deleted] network provider discounts exceeded the solicitation requirements, and should have been considered.
Health Net argues that the award to AGHP has been irreparably tainted by AGHP’s unfair competitive advantage due to its hiring–and using to prepare its T-3 proposal–a former –top-level— government employee with access to inside, non-public source selection information and contractor proprietary information. GAO states that one of the guiding principles established by the decisions of the courts and GAO is the obligation of contracting agencies to avoid even the appearance of impropriety in government procurements. In this regard, where a firm may have gained an unfair competitive advantage through its hiring of a former government official, the firm can be disqualified from a competition based on the appearance of impropriety which is created by this situation, that is, even if no actual impropriety can be shown, so long as the determination of an unfair competitive advantage is based on facts and not mere innuendo or suspicion.
Whether the appearance of impropriety based on an alleged unfair competitive advantage exists, depends on the circumstances in each case and ultimately, the responsibility for determining whether to continue to allow an offeror to compete in the face of such an alleged impropriety is a matter for the contracting agency, which will not be disturbed unless it shown to be unreasonable.
Here, the agency acknowledges that the contracting officer, who would be responsible for making such a determination, has not in fact investigated or considered the allegations in this case. Rather, TMA maintains that the facts do not suggest an unfair competitive advantage based on AGHP’s hiring of TMA’s former Chief of Staff.
As a general matter, in determining whether an offeror obtained an unfair competitive advantage in hiring a former government official based on the individual’s knowledge of non-public information, GAO has considered a variety of factors, including whether the individual had access to non-public information that was not otherwise available to the protester, or non-public proprietary information of the protester, and whether the non-public information was competitively useful. The record reflects that the individual in question was the Chief of Staff at TMA from early 2005 until March 2007 when he left this position to become the SSA for the TDEFIC contract through August 2007. A draft of the T-3 RFP was issued on June 12, 2007, the former Chief of Staff began working at AGHP on November 19, 2007, and the very next day, he began working on certain projects related to AGHP’s T-3 proposal. The final RFP was issued on March 24, 2008. The former Chief of Staff was in fact a member of AGHP’s proposal preparation team, principally responsible for working to address subfactor 5, beneficiary satisfaction/customer service. The record also demonstrates that the former TMA official continued to have access to his TMA e-mail account, and in fact accessed that account on at least three occasions, after he began working for AGHP. In his role as Chief of Staff, the individual in question attended at least four meetings among high level DOD and TMA officials who were members of what was referred to as the T-3 Executive Council (TEC). Although it was not possible to recreate the specific conversations that took place during the meetings, it is apparent, from the documents produced by TMA in connection with these meetings and testimony that the role of the TEC was to develop the government’s policy and goals for the T-3 procurement, which served to guide the T-3 procurement. The record reflects that the former Chief of Staff received briefings and position papers in advance of these meetings, which identified problems and weaknesses in the current TRICARE managed contractor system, discussed particular approaches and options for resolving the concerns, and debated the pros and cons and impacts of particular approaches.
Because the record shows that the former government employee, at a minimum, did in fact have access to Health Net’s non-public propriety information regarding its performance of the T-Nex contract, which would appear to be relevant to the T-3 procurement, and therefore competitively useful information, Health Net has established a prima facie case that an appearance of an impropriety was created as a result of AGHP’s use of the former government employee in question for the purpose of preparing its proposal. Moreover, GAO notes that the information attributed to the former TMA Chief of Staff was contained in his TMA e-mail account, which, as noted above, he continued to have access to after he began working for AGHP. GAO therefore sustains the protest to the extent the contracting officer has not, as the agency recognizes, reviewed the matter consistent with his obligation under FAR sect. 3.101-1 as established by the decisions of the courts and GAO, and therefore has not had an opportunity to make any determinations or findings regarding Health Net’s allegations in this regard. The protest is sustained.