Link: GAO Decision
Protestor: Wisconsin Physicians Service Insurance Corp.
Agency: Department of Health and Human Services, Centers for Medicare and Medicaid Services
Disposition: Protest Sustained.
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GAO Digest:
- Protest challenging agency’s cost realism evaluation is sustained where the agency concedes an error in accepting awardee’s proposed labor rates for its existing staff based on market surveys, rather than the actual labor rates for its staff, and where the agency unreasonably ignored assumptions made in awardee’s proposal regarding indirect costs.
- Protest challenging agency’s technical and past performance evaluations is sustained where the record does not demonstrate that the agency reasonably evaluated offerors’ proposals.
- Protest is sustained where agency failed to conduct discussions regarding adverse past performance that the protester had not previously had an opportunity to address.
General Counsel P.C. Highlight:
Wisconsin Physicians Service Insurance Corp. (WPS) protested the award to National Government Services, Inc. (NGS) of a contract for Medicare administrative contractor (MAC) services in jurisdiction 8 (J8), covering Michigan and Indiana, on the grounds that the agency improperly evaluated offerors’ cost and technical proposals and past performance, and conducted unfair and inadequate discussions. The award for J8 was part of a larger solicitation to provide MAC services in several jurisdictions, but which required offerors to submit separate proposals for each jurisdiction. The agency conducted two rounds of discussions with three competitive offerors (including WPS and NGS), with each round of discussions having a series of follow-up exchanges with each offeror. In its technical proposal, NGS indicated that it would perform the contract requirements using its existing staff, but its proposed labor rates were based on market surveys identifying average salary rates, rather than its current labor rates.
The GAO first considered WPS’s objections to agency evaluation of the offerors’ proposed costs. It agreed with WPS’s assertion that the agency unreasonably evaluated NGS’s indirect costs and direct labor rates, but disagreed with the remainder of its arguments. It agreed that the agency ignored assumptions made by NGS regarding the impact of the award of other MAC contracts, failing to consider NGS’s higher indirect costs should it only be awarded the contract for J8. The GAO also agreed that the agency’s evaluation of NGS’s direct labor costs was flawed, because it relied on the labor rates NGS established through market surveys, rather than its current market rates, and then applied this rates to the lower indirect costs assumed if NGS was awarded contracts for multiple jurisdictions. The GAO rejected WPS’s argument that the agency’s evaluation of proposed costs was flawed because the agency did not consider the realism of NGS’s overall cost on a per-claim basis, noting that there is no requirement that an agency follow any particular cost realism evaluation method. Finally, it disagreed that the agency improperly adjusted WPS’s proposed costs for postage, finding the agency’s concerns about the adequacy of WPS’s data reasonable.
The GAO agreed that the agency should have considered an offeror’s experience with the HIGLAS accounting system under the claims processing subfactor of the technical proposal evaluation. It also agreed that the agency should have considered the effect of NGS’s low proposed labor rates on its technical proposal. The GAO then agreed that the agency’s evaluation of WPS’s past performance was unreasonable, because the record did not indicate whether it considered favorable satisfaction survey data provided by WPS in its proposal. Finally, the GAO addressed WPS’s assertions that the agency engaged in improper discussions in three areas, finding only that the agency did not conduct reasonable discussions regarding appeals. While WPS had had an opportunity to address some of its adverse past performance information, the GAO found that WPS had not had an opportunity to respond to a substantial portion of the information upon which the agency relied in assessing a weakness. The GAO recommended that the agency reevaluate cost and technical proposals, and past performance, as well as conduct discussions with WPS regarding the appeals area of adverse past performance. The agency should then obtain revised proposals and make a new selection decision.
If an offeror submits proposals for separate solicitations related to similar procurements, such as solicitations to provide the same services in different jurisdictions, the offeror should make sure that its proposal adequately accounts for differences in cost and technical proposals should the offeror be awarded contract for multiple jurisdictions versus a single jurisdiction. A proposal for a single jurisdiction should not rely on cost efficiencies resulting from multi-jurisdiction award, but provide for differing costs for each scenario and account for these differences throughout the proposal. Failure to properly detail all relevant scenarios in both cost and technical proposals could result at a minimum in the assessment of a weakness and at worst in the determination that the proposal is technically unacceptable.