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Palmetto GBA, LLC; CGS Administrators, LLC, B-407668, -.2, -.3, -.4, January 18, 2013

  • By GCPC GovCon Legal Team
  • February 20, 2013
  • Best ValueCost EvaluationPast PerformanceTechnical Evaluation

Link:         GAO Opinion

Agency:    Department of Health and Human Services

Disposition:  Protests denied.

General Counsel P.C. Highlight: 

GAO denied the protests of Palmetto GBA, LLC, and CGS Administrators, LLC, based on the award of a contract to Noridian Administrative Services, LLC, under a request for proposals (RFP), issued by the Department of Health and Human Services, Centers for Medicare and Medicaid Services (CMS), to obtain a Medicare Administrative Contractor (MAC) to provide services for the administration of Medicare Part A and Medicare Part B (A/B) fee-for-service benefit claims.

The RFP provided for the award of a cost-plus-award-fee contract for an implementation period of up to six months, a base period of one year with four one-year option periods, and an optional outgoing contractor transition period of up to six months, for A/B MAC services. The RFP stated that award would be made to the offeror submitting the proposal found to provide the best value to the agency, based upon cost, and the following non-cost evaluation factors: past performance, technical understanding, and implementation. The RFP further provided that as part of the evaluation of each of the non-cost factors, the agency would consider four common elements: customer service, financial management, operational excellence, and innovations and technology. Offerors were informed that the non-cost factors, when combined, were significantly more important than cost.

The protesters first challenged CMS’s past performance evaluation. In doing so, the protesters argued that the process by which the agency calculated the offerors’ baseline numeric scores under the past performance factor was flawed and, and consequently rendered the final past performance evaluation scores unreasonable. GAO addressed the past performance of each offeror. For Palmetto, GAO found that the record showed that the TEP reasonably considered its findings regarding Palmetto’s past performance, and concluded that although it had calculated a baseline numeric score for Palmetto’s past performance, a lower numeric score of was warranted in light of the strengths, weaknesses, and significant weaknesses highlighted above. The TEP specifically noted its concerns, and the CO agreed with the TEP’s concerns. Therefore, GAO, despite Palmetto’s numerous arguments, found nothing unreasonable in the agency’s evaluation. As for CGS, the agency’s evaluation of CGS’s past performance was comprehensive, and contrary to CGS’s assertions and based upon a review of the record, well documented.

CGS argued that CMS’s evaluation of its proposal and the proposal submitted by Noridian under the implementation factor was unreasonable. In arguing that the agency’s evaluation of its proposal under the implementation factor was unreasonable, CGS just repeated many of the features of its approach as set forth in its proposal and its oral presentation, and asserted that the agency’s assignment of a numeric rating of 0.8 to CGS’s proposal under the implementation factor, rather than the maximum available rating of 0.9, was unreasonable. However, GAO’s review of the record showed that CGS’s arguments evidenced nothing more than a disagreement with this aspect of the agency’s evaluation, and as such, provided no basis to find the agency’s evaluation unreasonable. Noridian’s proposal and oral presentation, on the other hand, included detailed explanations as to how it intended to retain, or recruit, hire, and train, the personnel necessary to perform the contract. The agency also pointed out that Noridian’s proposal included a description of a specific technical innovation to assist in transitioning the EDI, and that contrary to CGS’s assertion, Noridian’s oral presentation specifically mentions its provision of a risk mitigation plan as a deliverable under the contract. Therefore, GAO concluded that CGS’s arguments evidenced nothing more than a mere disagreement with this aspect of the agency’s evaluation, and as such, GAO had no basis on which to find the agency’s evaluation of Noridian’s proposal, and assignment of a numeric score of 0.7 to that proposal under the implementation factor, to be unreasonable.

The protesters argue that CMS’s evaluation of proposals under the technical understanding factor was unreasonable, with each protester making multiple challenges to the evaluation of its own and Noridian’s proposals. As to Noridian’s proposal, Palmetto and CGS focused on the agency’s evaluation of Noridian’s proposal and its conclusion that an innovation proposed by Noridian applicable to the provider enrollment process, termed RapidApp, constituted a strength. However, the record showed that the CO was aware and considered the available information regarding Noridian’s RapidApp innovation, including the above-referenced “new information” set forth in emails between CMS personnel stating that CMS “may” withdraw its support of Noridian’s RapidApp pilot project, and discussing the effect of that withdrawal of support on the viability of Noridian’s RapidApp and its claimed efficiencies.  Although the protesters clearly disagreed with the CO’s conclusion that Noridian’s RapidApp remained a strength, they did not show it to be unreasonable, and their arguments reflected nothing more than their disagreement with the agency’s ultimate evaluation. The protesters raised a number of other issues challenging the propriety of CMS’s evaluation of proposals under the technical understanding factor, arguing that the agency’s evaluation of proposals was unreasonable or evidenced unequal treatment. GAO ultimately agreed that the TEP considered and adopted the findings of the CMS SME, and concluded that a weakness was merited for both Palmetto’s and CGS’s proposals because its subcontractor’s  “assumptions pose the risk that a large portion of the institutional provider community may not be adequately audited resulting in the Agency reimbursing these providers more than they are entitled to receive.”

Palmetto and CGS lastly contend that CMS’s evaluation of Noridian’s and the protesters’ cost proposals was unreasonable. Although the arguments span a variety of cost elements, such as productivity rates and indirect rates, the protesters focus on the agency’s determinations regarding provider enrollment productivity. The protesters mainly argued that the agency’s upward adjustment to Noridian’s proposed costs was inadequate, and that the agency’s upward adjustment to their respective proposed costs for the same function was excessive. The protesters argued that the agency should have rejected Noridian’s assumption that the RapidApp innovation would have resulted in increased productivity, and therefore adjusted Noridian’s costs upwards based upon the application of Noridian’s “historic” provider enrollment productivity rate of five applications per day. The protesters further argued that the agency’s adjustment of Noridian’s proposed costs upwards based upon the application of the agency’s calculated “national average of 12 applications per day” lacked a reasonable basis. As pointed out by the agency in response to the protests, and as explained previously with regard to the technical factor, the agency did not reject Noridian’s RapidApp innovation. Nor did the record reflect that the agency rejected, in their entirety, the proposed productivity gains that Noridian claimed had been achieved and would be achieved as the result of its RapidApp innovation, GAO noted. Rather, GAO continued, the record reflected that the agency reasonably found that while Noridian’s RapidApp was a technical strength and may result in certain efficiencies, Noridian’s claimed efficiencies were “overstated,” and a partial adjustment to Noridian’s proposed costs was thus appropriate. While the protesters clearly disagree, and believed that the agency should have adjusted Noridian’s proposed costs based upon Noridian’s historic provider enrollment productivity rate, and without consideration of Noridian’s RapidApp innovation, GAO could not concluded that the agency’s conclusion that a partial adjustment to the agency’s calculated average of 12 applications per day was unreasonable. Although the protesters clearly disagreed with the agency’s evaluation of its subcontractor’s proposal and its upward adjustment to their costs, GAO also noted that it could not find the agency’s actions here to be unreasonable.

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