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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.
ACS State Healthcare, LLC; PharmaCare Government Services, Inc.; PGBA, LLC; Humana Military Healthcare Services, Inc., B-292981; B-292981.2; B-292981.3; B-292981.4; B-292981.5; B-292981.6; B-292981.7; B-292981.8; B-292981.9 B-292981.10, January 9, 2004
Matter of:  ACS State Healthcare, LLC; PharmaCare Government Services, Inc.; PGBA, LLC; Humana Military Healthcare Services, Inc.
File: B-292981; B-292981.2; B-292981.3; B-292981.4; B-292981.5; B-292981.6; B-292981.7; B-292981.8; B-292981.9 B-292981.10
Date:        January 9, 2004

Robert J. Sherry, Esq., Kathleen M. Paralusz, Esq., Dylan B. Carp, Esq., and Marc R. Baluda, Esq., Kirkpatrick & Lockhart, for ACS State Healthcare, LLC; Gerard R. Doyle, Esq., and Ron R. Hutchinson, Esq., Doyle & Bachman, for PharmaCare Government Services, Inc.; Kathleen E. Karelis, Esq., W. Jay Devecchio, Esq., Robert K. Huffman, Esq., Lisanne S. Cottington, Esq., Edward Jackson, Esq., Christine S. Ricci, Esq., Jeffrey C. Walker, Esq., and Alexa Zevitas, Esq., Miller & Chevalier, for PGBA, LLC; Thomas P. Barletta, Esq., Peter L. Wellington, Esq., Daniel C. Sauls, Esq., Paul R. Hurst, Esq., Michael C. Drew, Esq., Paul I. Lieberman, Esq., and Dianne L. Herz, Esq., Steptoe & Johnson, and Alan C. Brown, Esq., Duane Morris, for Humana Military Healthcare Services, Inc., the protesters.

Thomas B. Smith, Esq., Thomas M. Susman, Esq., Scott A. Shepard, Esq., and Ryan M. Malone, Esq., Ropes & Gray; and Clayton S. Marsh, Esq., and Janice C. Forsyth, Esq., for Express Scripts, Inc., the intervenor.

Lynn T. Burleson, Esq., and Kenneth S. Lieb, Esq., TRICARE Management Activity, Department of the Defense, for the agency.
Sharon L. Larkin, Esq., Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. In negotiated procurement under which the contractor will acquire pharmaceuticals for Department of Defense (DoD) using DoD funds, and where solicitation requests offerors to propose discount rates and dispensing fees for pharmaceuticals in addition to their fixed prices, and provides for evaluation of government’s projected future costs for pharmaceuticals (“Total Expected Government Cost” (TEGC)) as a technical factor, agency reasonably assessed likelihood that offerors could provide pharmaceuticals at their proposed discount rates and dispensing fees; cost realism analysis of offerors’ TEGCs was not required, where solicitation did not require such an analysis.

2. Source selection authority (SSA) performed reasonable cost/technical tradeoff in determining the awardee’s proposal for supporting pharmaceutical program represented best value, where the SSA’s judgment, based upon the results of a reasonable, well-documented technical evaluation, is set forth in a detailed decision document that demonstrates the SSA’s understanding of the evaluated strengths and weaknesses of the respective proposals, and that shows a reasonable weighing of the offerors’ respective technical and price advantages consistent with the solicitation’s evaluation criteria.

DECISION

ACS State Healthcare, LLC; PharmaCare Government Services, Inc.; PGBA, LLC; and Humana Military Healthcare Services, Inc. protest the award of a contract to Express Scripts, Inc. (ESI), under request for proposals (RFP) No. MDA906-03-R-0002, issued by the TRICARE Management Activity, Department of the Defense (DoD), for support of the TRICARE Retail Pharmacy (TRRx) program.

We deny the protests.

BACKGROUND

The TRICARE program is a managed health care program implemented by DoD for active duty and retired members of the uniformed services, their families, and survivors. 32 C.F.R. § 199.17 (2003). TRICARE is a blend of the military’s direct care system of hospitals and clinics (known as Military Treatment Facilities) and the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS). The TRICARE program includes pharmacy benefits, which were being provided as part of TRICARE’s Managed Care Support (MCS) contracts until the award under this RFP was implemented.[1]

Solicitation

This RFP was to obtain a contractor to support the TRRx program, which provides for the acquisition, delivery and distribution of prescriptions to beneficiaries. The contractor will be the Pharmacy Benefits Manager (PBM) for the TRRx program and will use its own retail pharmacy network to support the TRRx program nationwide (including Puerto Rico, Guam, and the U.S. Virgin Islands).[2] The RFP contemplated the award of a fixed-unit price, incentive contract for a 6‑month base period with 5 option years. The contractor will use DoD funds to pay for each prescription after receiving government verification of an individual beneficiary’s eligibility and authorization for payment, and provide other services to support the program. The contractor will operate a pharmacy help desk, verify beneficiary eligibility, process claims, provide clinical services (processing prior authorization and medical necessity determination requests), provide information technology services, perform marketing and education services, process appeals, and perform record management services.

The RFP provided for award on the basis of a cost/technical tradeoff, and stated that the agency intended to evaluate proposals and make award without conducting discussions. The RFP identified the following six evaluation factors and associated subfactors:
 

(1)  Network Access
(2) Network Reimbursement
(3) PBM Services
  • Claims Processing
  • Quality Assurance Plan
  • Disaster Recovery Plan
  • Phase-in Plan
(4) PBM Operations
  • Pharmacy Help Desk
  • Prior Authorization
  • Medical Necessity Determination
  • Management
  • Beneficiary Services
(5) Past Performance
(6) Price

Offerors were informed that factors (1) and (2) were of equal weight and individually were the most important non-price evaluation factors.[3] Factor (5) was stated to be next in importance and equal in weight to the combination of factors (3) and (4), which were of equal importance.[4] Offerors were also informed that factors (1) through (5) combined were significantly more important than price. Proposals were to be evaluated under each factor and subfactor to determine the extent to which they exhibited a clear understanding of the work requirements and the means required to fulfill the requirements, and the extent to which they demonstrated an ability to meet or exceed the RFP requirements. RFP amend. 4, § M.2.2.

The RFP also provided for an assessment of proposal risk associated with an offeror’s technical approach and ability to meet the RFP requirements. The assessment of proposal risk could be affected by the amount of the offeror’s experience in performing PBM-related services. Proposal risk was to be evaluated at the factor and subfactor level. Id. § M.5.

With respect to factor (1), Network Access, offerors were informed that “the offeror must have an established network in place, at the time of submission of the technical proposal, sufficient to meet the minimum access standards” stated in the RFP. Id. § L.8.2. These minimum access standards required for an urban setting a pharmacy within 2 miles estimated driving distance of 90 percent of the beneficiaries; for a suburban setting a pharmacy within 5 miles estimated driving distance of 90 percent of the beneficiaries; and for a rural setting a pharmacy within 15 miles estimated driving distance of 70 percent of the beneficiaries. Id. § C.7. The RFP also required that offerors provide a plan to minimize the impact of any disruption or inconvenience to beneficiaries caused by changes to the network structure.

With respect to factor (2), Network Reimbursement, offerors were informed that a written proposal was not necessary. Under this evaluation factor, the agency was to assess an offeror’s projected program pharmaceutical costs based upon the offeror’s proposed guaranteed network reimbursement rates and the total expected government cost (TEGC) for reimbursement of network retail pharmacy costs.[5] The proposal risk associated with the offeror’s ability to obtain and maintain the proposed TRRx network at the offeror’s guaranteed average discount percentage and guaranteed average dispensing fee was also to be assessed under this factor.

Under this factor, offerors were directed to complete the solicitation’s Table L-1, which would detail the offeror’s pricing structure for pharmaceutical items. Specifically, this table, for each option year, identified estimated quantities of brand name and generic pharmaceuticals, and for each group an associated “average wholesale price” (AWP) was identified.[6] Offerors were required to provide their “guaranteed average discount percentage” (the offeror’s reimbursement discount factor) and “guaranteed average dispensing fee” (the offeror’s fee for each prescription filled). The table then required each offeror to use algebraic formulae to derive the offeror’s “average drug cost” and “estimated total drug costs” for each option period.[7] The TEGC was the sum of the offeror’s estimated total drug costs for the 5 option years.

The RFP required offerors to provide supporting documentation evidencing their ability to deliver at the guaranteed average discount percentages and average dispensing fees. Offerors were informed that such supporting information might include identifying the average discount percentage and dispensing fee by brand and generic drug categories “for its currently existing network that is closest in size and scope to the network required under this RFP.” RFP amend. 4, § L.8.3.3.1.1.

The RFP provided that the offerors’ guaranteed average discount percentage and guaranteed average dispensing fee for brand name and generic drugs for each of the 5 option years would be included in the contract for the purpose of determining incentive payments or deductions from the contract price. That is, the contractor could earn an “incentive” up to 5 percent of the difference between the actual costs and expected costs (applying the contractor’s guaranteed discount percentage and dispensing fee to the prescriptions filled during that contract period), up to a stated maximum amount for each contract period (from $1.5 million in the first option year to $2.5 million in the fifth option year). RFP amend. 1, § H.2.2. Conversely, the RFP provided that

the Government will assess a Negative Incentive if the total actual network reimbursement cost in a contract option period exceeds the [TEGC] for Reimbursement of Network Pharmacy Costs that would have resulted from applying the Guaranteed Average Discount Percentage and the Guaranteed Average Dispensing Fee Per Prescription to the prescriptions filled in the network during the contract option period. The difference between the actual costs and Government calculated costs will be deducted from future payments to the contractor.
RFP amend. 1, § H.2.3.

With respect to factor (3), PBM Services, offerors were informed that, among other things, the agency would assess whether each offeror’s proposed claims processing met or exceeded the minimum processing standards stated in the RFP’s statement of work for electronic and beneficiary submitted claims.[8] The RFP also provided for the evaluation of the offerors’ proposed quality assurance plan, disaster recovery plan,[9] and phase-in plan under this evaluation factor.

The RFP provided that offerors were to address factor (4), PBM Operations, only in an oral presentation.[10] Among other things, offerors were required to address their proposed hours of operation for their pharmacy help desk and to provide data demonstrating call access standards (e.g., average wait times and call abandonment rates) for their existing pharmacy help desks. The RFP also required under this factor that offerors detail their plans to process prior authorization[11] and medical necessity determination[12] requests to completion, including identifying the frequency and number of follow-up attempts with a prescriber. Under this factor, offerors were also required to describe their proposed management structure and to “describe [their] systems of management controls for internal and external business processes.” RFP amend. 4, § L.8.5.4. Offerors were also required to describe under this factor their current beneficiary services operations, their plans to accommodate increased beneficiary inquiry volume resulting from the TRRx contract, and their guaranteed performance standards relating to telephone inquiries and written correspondence.[13] RFP amend. 4, § L.8.5.5.

With respect to factor (5), Past Performance, offerors were required to submit performance data from each of their five largest current customers to whom the offeror or its first-tier subcontractor was providing PBM or PBM-related services, and to identify all federal, state, and local government contracts for the provision of PBM services. Offerors were informed that the agency would assess the past performance data to determine performance confidence.

Evaluation of Proposals

Proposals were received from seven offerors, including ESI, ACS, Humana, PGBA, and PharmaCare.[14] The proposals were evaluated by the agency’s source selection evaluation board (SSEB), which was comprised of a technical evaluation team (TET), performance risk assessment group (PRAG), and price evaluation team (PET). All of the offerors’ technical proposals received a “pass” grade under the network access evaluation factor. The awardee’s and protesters’ proposals were evaluated as follows:
 

Offeror (1)

Network Access

(2)

Network Reimbursement

(3)

PBM Services

 

(4)

PBM Operations

 

(5)

Past
Performance[15]

(6)

Price

Merit/Risk Disruption TEGC Risk[16] Merit[17] Risk Merit Risk
ESI Green/Low
10,757 (.36%)
$15.7B Low Green Low Green Low High
Confidence
$245.4M
ACS Green/Low
20,711 (.68%)
$15.6B Low Yellow Mod. Green Mod. Satisfactory
Confidence
$138.0M
Humana Green/Low
16,173 (.54%)
$16.1B Low Green Low Blue Low High
Confidence
$186.2M
PGBA Green/Low
46,957 (1.56%)
$15.8B Low Green Low Green Mod. Satisfactory
Confidence
$211.1M
PharmaCare Green/Low
25,736 (.85%)
$15.9B Low Green Low Green Low Satisfactory
Confidence
$264.3M

Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at 10.

The other two offerors’ proposals were assessed as having significant deficiencies or weaknesses that could not be corrected without proposal revisions and unreasonable proposed prices; these proposals were not considered for award.
ESI’s Proposal

Under factor (1), Network Access, ESI proposed a network of 55,402 retail pharmacies and was determined to offer the lowest disruption rate of the five proposals under consideration for award. Although the TET found that ESI’s proposal exceeded the solicitation’s “blue level” access standards for two of the three categories, the proposal was rated green with low risk under the factor.[18] Id. at 54.

Under factor (2), Network Reimbursement, ESI offered the second lowest TEGC. The TET compared ESI’s guaranteed discount percentages and dispensing fees to industry norms (as identified by the Pharmacy Benefit Management Institute (PBMI), the agency’s consultant), and to the rates and fees that ESI was currently achieving in a commercial pharmacy network of similar size and scope; the TET concluded that there was little doubt that ESI would be able to enroll and retain pharmacies in its proposed network at its proposed guaranteed average discount rates and dispensing fees. Id. at 55-56.

The TET noted no strengths or weaknesses in ESI’s proposal under factor (3), PBM Services, and rated it green with low risk. Under factor (4), PBM Operations, ESI’s proposal also received an overall green with low risk rating. However, the TET noted that ESI’s commitment to processing prior authorization and medical necessity determination requests in 2 working days as compared to the minimum requirement of 5 working days warranted blue ratings under the prior authorization and medical necessity determination subfactors to factor (4); the TET noted that there was little proposal risk in this regard, inasmuch as ESI’s proposal demonstrated substantial experience related to processing prior authorization and medical necessity determination requests. The TET also found two strengths and a weakness under the beneficiary services subfactor to factor (4), which was rated green; the TET noted that ESI’s offer to provide beneficiary services 24 hours per day/365 days per year exceeded in a beneficial way the minimum requirements and that ESI’s proposal to provide a beneficiary service center that was exclusively dedicated to the TRRx program also exceeded the minimum requirement to provide personnel that were primarily responsible for beneficiary support. The weakness noted under this subfactor was that ESI failed to propose minimum performance standards for telephone call blockage and call abandonment rates. Id. at 61-67.

ESI received a “high confidence” rating under factor (5), Past Performance. This rating reflected the PRAG’s judgment that there was “no doubt in [ESI’s] ability to successfully perform the required effort in the TRRx solicitation.” Id. at 67. The PRAG noted that ESI’s past performance data established strengths in a number of areas, including “meeting the terms and conditions of the contract” and “performance in a timely manner.” Id. at 69. Although the PRAG identified no weaknesses, it noted that three of ESI’s references “indicated that, at one time or another, ESI experienced problems satisfactorily providing members services,” but that each reference stated that ESI “had made performance improvements in this area.” Id. at 70. The PRAG also noted that ESI had served as a PBM, providing retail pharmacy services “commensurate with the scope of the functions required by the TRRx solicitation” under a subcontract with the TRICARE managed care contractor for the central region and that the contractor had provided a “stellar recommendation.” Id.

ESI proposed the second-highest price of the offerors whose proposals were considered for award.

ACS’s Proposal

ACS proposed a network of [Deleted] retail pharmacies and was determined to offer the third lowest disruption rate of the five proposals under consideration for award. Like ESI’s proposal, ACS’s proposal was found to exceed the “blue level” access standards for two categories and it received a green rating under factor (1), Network Access. Id. at 13-14.

Under factor (2), Network Reimbursement, ACS offered the lowest TEGC, approximately $75 million lower than the TEGC offered by ESI. The TET compared ACS’s proposed discount percentages and dispensing fees to the discounts and dispensing fees that ACS reported for its other pharmacy networks and found that ACS’s proposed discounts and fees were very similar. Here too, the TET concluded that there was little doubt that ACS could enroll and retain pharmacies in the TRRx network at the guaranteed average discount rates and dispensing fees. Id. at 14-15.

The TET assessed a significant weakness in ACS’s proposal under factor (3), PBM Services, which resulted in an overall yellow with moderate proposal risk rating. Specifically, the TET found that ACS’s proposed disaster recovery plan only partially supported ACS’s ability to resume services within 24 hours following a catastrophic event; the TET found that ACS’s plan was

inadequate in regard to beneficiary services and pharmacy help-desk operations because the [Deleted] locations proposed for the TRRx beneficiary call center and pharmacy help desk call center . . . are not sufficiently dispersed to minimize the likelihood that a single catastrophic event could render all [Deleted] proposed sites inoperable. The TET identified this flaw in the disaster recovery plan as a significant weakness because it appreciably increases the risk of unsuccessful contract performance.
Id. at 18-19.

ACS’s proposal was rated as green with moderate proposal risk under factor (4), PBM Operations, with moderate risk being assessed under four of the five subfactors of this factor. Specifically, under the prior authorization and medical necessity determination subfactors, the TET found inadequate ACS’s approach of limiting follow-up on incomplete prior authorization and medical necessity determination requests to only [Deleted], which the TET found increased the probability that these requests would be inaccurately or prematurely denied. Under the management subfactor, the TET assessed as a moderate risk ACS’s proposed use of [Deleted] because it found that ACS had not provided information demonstrating that it had experience providing PBM services in concert with subcontractors in general or these subcontractors in particular. ACS’s proposal was also assessed as moderate risk under the beneficiary services subfactor based on two evaluated weaknesses: (1) an apparent inconsistency between ACS’s proposed guarantee to answer [Deleted] of beneficiary calls within [Deleted] and its reported less timely performance for two of ACS’s three current clients; and (2) ACS’s proposed use of a proprietary call documentation system for the beneficiary services center. Id. at 21‑29.

ACS was assessed a satisfactory confidence rating under the past performance factor. This rating was based upon the PRAG’s assessment that strengths identified by some references for ACS’s “responsiveness to solving problems” and management were counterbalanced by weaknesses identified by other references for “performing in a timely manner,” electronic claims processing, management, disaster recovery, and phase-in. Id. at 30-33. ACS was provided with an opportunity to address the adverse past performance information, and ACS provided an explanation, which the PRAG concluded generally did not refute the existence of the identified weaknesses. See Contracting Officer’s Statement at 24; Agency Report, Book 28, Tab 83, Clarification of ACS’s Past Performance, at 38-42. The PRAG concluded that “ACS’s past performance weaknesses, coupled with its limited prior authorization and medical necessity determinations and member (beneficiary) services performance history, create some doubt that ACS will be able to successfully perform the effort required in the TRRx.” Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at 60.

ACS proposed the lowest price of the offerors whose proposals were considered for award.

Humana’s Proposal

Under factor (1), Network Access, Humana proposed a network of [Deleted] retail pharmacies and was determined to offer the second lowest disruption rate of the five proposals under consideration for award. Like ESI’s and ACS’s proposals, Humana’s proposal was found to exceed the “blue level” minimum access standards for two categories and it too received a green rating. Id. at 71-72.

Under factor (2), Network Reimbursement, Humana offered the highest TEGC; the TET found that Humana’s guaranteed discount rates and average dispensing fees varied somewhat from industry norms, but were consistent with Humana’s existing pharmacy network agreements, “though not as aggressive.” The TET concluded that there was little doubt that Humana would be able to enroll and retain pharmacies in the TRRx pharmacy network at Humana’s guaranteed average discount percentages and dispensing fees. Id. at 72-73.

The TET assessed no strengths or weaknesses in Humana’s proposal under factor (3), PBM Services, which was rated green with low risk. Humana’s proposal was assessed as blue overall for factor (4), PBM Operations. This rating reflected the TET’s assignment of blue with low risk ratings for three of the five subfactors: prior authorization, medical necessity determination, and beneficiary services. Specifically, the TET found that Humana’s proposed processing of prior authorization and medical necessity determination requests exceeded the RFP requirements in a beneficial way, and that there was low proposal risk for achieving these strengths because, based upon its experience as a TRICARE managed care support contractor for five regions, Humana’s plans for processing prior authorization and medical necessity determination requests were currently functional “to a large degree.” With respect to the beneficiary services subfactor, the TET noted that Humana proposed to provide beneficiary services [Deleted], and guaranteed to [Deleted] required telephonic and written inquiry response standards. Id. at 79-85.

Humana received a “high confidence” rating under factor (5), Past Performance. The PRAG noted that there were positive performance comments and information from references, particularly in the areas of electronic and paper claims processing, disaster recovery, phase-in, pharmacy and beneficiary services, and prior authorization and medical necessity determinations. No weaknesses were noted. Moreover, the PRAG noted that the

performance history provided, especially Humana’s current performance as a TRICARE managed care support contractor for five TRICARE regions and specifically its delivery of the TRICARE retail pharmacy benefit in the five regions, is commensurate to the size, scope, and complexity for all functions required by the TRRx solicitation.
Id. at 87.

Humana proposed the second lowest price of the offerors whose proposals were considered for award.


PGBA’s Proposal

PGBA proposed a network of [Deleted] retail pharmacies and was determined to offer the highest disruption rate of the five proposals under consideration for award. The TET found that PGBA’s guaranteed minimum access standards exceeded the “blue level” minimum access standards for one category and that its proposal warranted a “green” rating under factor (1), Network Access. Id. at 106-07.

Under factor (2), Network Reimbursement, the TET found that PGBA offered the third lowest TEGC. The TET noted that PGBA had proposed [Deleted] than normal discount rates but [Deleted] than normal dispensing fees; the TET concluded that PGBA would be able to enroll and retain pharmacies in the TRRx pharmacy network at PGBA’s guaranteed average discount rates and dispensing fees. Id. at 107-08.

PGBA’s green low risk rating under factor (3), PBM Services, reflected the TET’s assessment that there were no strengths or weaknesses in PGBA’s proposal under this factor. PGBA’s proposal was assessed as having an overall moderate risk under factor (4), PBM Operations, and under four of the five subfactors of this factor, primarily because of its lack of pharmaceutical experience. The TET expressed concern under two of the subfactors with PGBA’s lack of experience in processing prior authorization and medical necessity determination requests as a PBM;[19] the TET also doubted that PGBA had proposed sufficient staff to process these requests. Id. at 115-19. Moderate risk was also assessed in PGBA’s proposal under the management subfactor; specifically, the TET noted that it had

some doubt that PGBA [could] effectively manage the TRRx contract based on the management structure proposed. PGBA demonstrated an existing management structure with substantial experience related to health care and claims processing for health care contracts. However, PGBA demonstrated no management experience related to managing Pharmacy Benefit Management functions or managing subcontractors performing complex portions of the contract.
Id. at 121. PGBA’s proposal was also assessed as having a moderate risk under the beneficiary services subfactor due to PGBA’s lack of experience in providing beneficiary services relative to pharmacy services and based upon the TET’s judgment that significant modifications would be required in PGBA’s processes and procedures for its beneficiary services center to become operational under the contract. Id. at 122-23.

PGBA received a “satisfactory confidence” rating under factor (5), Past Performance. Specifically, the PRAG noted that based upon the information provided by their references, it appeared that PGBA and its subcontractor, [Deleted], had performed satisfactorily.[20] Furthermore, the PRAG noted that PGBA had extensive TRICARE and CHAMPUS experience, but that experience was primarily related to providing medical claims processing and not providing pharmacy services. Id. at 123-25. The PRAG was concerned that

[l]imited information was provided on PGBA’s performance history on phase-in and member services and no information was provided for prior authorization/medical necessity determinations and pharmacy audits. The PRAG considered PGBA’s past performance history to be of limited relevance due to the absence of pharmacy/PBM performance history. Limited information was provided on [Deleted] performance history relative to electronic claims processing. Given the lack of performance history and the relative importance of network access, prior authorization/medical necessity determinations, and pharmacy audits in the evaluation, the PRAG has some doubt that PGBA and [Deleted] can perform these functions as required in the TRRx solicitation.
Id. at 125.

PGBA proposed the third lowest price of the offerors whose proposals were considered for award.

PharmaCare’s Proposal

PharmaCare proposed a network of [Deleted] retail pharmacies and was determined to offer the second highest disruption rate of the five proposals under consideration for award. The TET found that PharmaCare’s proposal also warranted a green rating under factor (1), Network Access. Id. at 126-27.

Under factor (2), Network Reimbursement, the TET found that PharmaCare offered the second highest TEGC. The TET noted that PharmaCare’s proposed guaranteed discount rates and dispensing fees varied somewhat from industry norms, but concluded that the “[Deleted].” This, combined with PharmaCare’s evidence of existing networks and contracts in place to support the TRRx network, led the TET to conclude that there was little doubt that PharmaCare would be able to enroll and retain pharmacies in the TRRx pharmacy network at PharmaCare’s guaranteed average discount percentages and dispensing fees. Id. at 127-28.

The TET assessed no strengths or weaknesses in PharmaCare’s proposal under factor (3), PBM Services, which was rated green with low risk overall, although PharmaCare’s proposal was assessed as a moderate risk under the quality assurance subfactor because PharmaCare did not detail the experience, credentials and training of its quality assurance staff. Id. at 129-30.

PharmaCare’s proposal was also rated as green with a low risk under factor (4), PBM Operations. However, the TET noted a weakness under the beneficiary services subfactor that warranted a moderate risk rating. Specifically, the TET was concerned that PharmaCare’s proposed telephone response time of [Deleted] was less stringent than the RFP requirement that “[w]hen a caller requests to speak with a beneficiary service representative, the connection will be made within 30 seconds, 95 [percent] of the time.” Id. at 138-39; see RFP, amend. 4, § C.19.4. The TET concluded that an “[Deleted] may result in significant periods of time throughout the year when the contractor is not compliant with its guaranteed standards, requiring more intensive Government monitoring.” Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at 140.

PharmaCare received a “satisfactory confidence” rating under factor (5), Past Performance. The PRAG noted that information provided by PharmaCare’s references was generally positive. However, the PRAG was concerned by the lack of performance history identified for PharmaCare for processing electronic and paper prescription claims volumes commensurate with the claims volumes that are projected for the TRRx program and by the lack of any beneficiary services performance history as reported by PharmaCare’s largest clients. These concerns led the PRAG to have some doubt about PharmaCare’s ability to successfully perform the TRRx contract. Id. at 140-42.

PharmaCare proposed the second highest price of the offerors whose proposals were considered for award.

Cost/Technical Tradeoff Analysis

Following the completion of the technical and price evaluations, the SSEB performed a cost/technical tradeoff analysis to make a best-value recommendation to the source selection authority (SSA). The SSEB first determined which proposals clearly represented less value to the government as compared to the other proposals and eliminated those proposals from its review. The SSEB concluded that only the proposals of ESI, ACS and Humana should be included in the cost/technical tradeoff analysis. Based upon its detailed tradeoff analysis, the SSEB recommended to the SSA that ESI’s proposal be selected as reflecting the best value to the government.[21] Id. at 143‑64.

The SSA received and reviewed the SSEB’s evaluation report and award recommendation. In a detailed 25-page decision document, the SSA explained her review of the evaluation results and independent assessment of the strengths and weaknesses of the respective proposals under the stated evaluation factors and subfactors. In performing this review, the SSA did not agree with the SSEB in all respects. For example, the SSA did not agree with the SSEB that PGBA’s proposal should not be included in the cost/technical tradeoff analysis, and she therefore included the proposals of ESI, ACS, Humana, and PGBA in her best value analysis. See Agency Report, Book 15, Tab 36, Source Selection Decision, at 16. PharmaCare’s proposal was not included in the SSA’s cost/technical tradeoff assessment because she agreed with the SSEB that PharmaCare’s proposal “clearly represents less value to the Government than ESI[’s] and [Humana’s] because of its lower ratings in Factors 3, 4, and 5 (including subfactors), and PharmaCare’s higher Total Evaluated Price.” Id. at 16. The SSA then compared ESI’s highest priced proposal to ACS’s, Humana’s, and PGBA’s proposals, in turn. As explained below, the SSA agreed with the SSEB that ESI’s proposal reflected the best value to the government.

ESI/ACS Tradeoff

Comparing ESI’s and ACS’s proposals, the SSA noted that under factor (1), Network Access, although ESI’s proposal reflected a lower beneficiary disruption rate than did ACS’s, this was not a discriminator between any of the proposals, given the low number of beneficiaries disrupted in each proposal. ACS was found to be have a “slight advantage” under factor (2), Network Reimbursement, based upon its lower proposed TEGC, which was approximately $75 million (or .48 percent) lower than ESI’s. ACS was also found to have a “significant advantage” in proposed price (approximately $107 million lower than ESI’s proposed price). Id. at 19, 21.

ESI’s proposal was found by the SSA to offer significant technical advantages over ACS’s under factors (3), (4), and (5). Under factor (3), PBM Services, ESI’s better disaster recovery plan was considered to be a distinguishing feature between the firms’ proposals; the SSA found that ACS’s disaster recovery plan, as evaluated by the SSEB, did not ensure that beneficiary services and the pharmacy help desk would be operational within 24 hours following a catastrophic event, and would have to be modified to meet the RFP’s minimum requirements. Id. at 20-22. Under factor (4), PBM Operations, the SSA noted that ACS received moderate risk ratings for four of the five subfactors, whereas ESI received all low risk ratings; discussed in detail the significant discriminators between ACS’s and ESI’s approaches under these subfactors; and concluded that ESI had the better technical proposal under this factor. Under factor (5), Past Performance, the SSA noted that ESI had received a higher confidence rating than ACS’s satisfactory confidence rating, which reflected the PRAG’s judgment that although ACS had received a number of positive comments from its references, there were multiple comments reflecting poor performance in functional areas required for the TRRx program, which were not assuaged by ACS’s comments regarding this adverse information. Id. at 22-23.

Weighing the two firms’ respective advantages, the SSA concluded that ESI’s proposal reflected the better overall value to the government, finding that the

superior technical approach demonstrated by ESI in Factors 3 and 4 and their significantly better Past Performance (Factor 5) outweighs the advantage ACS has in Factor 2 for network reimbursement costs. Except for Factor 2, for which ACS has a slight advantage, ESI has the best technical approach to accomplish the objectives of this solicitation. The advantages presented by ESI in Factors 3 and 4, combined with their outstanding record of past performance (Factor 5), justify the higher price in ESI’s proposal.
Id. at 25.

ESI/Humana Tradeoff

Comparing ESI’s and Humana’s proposals, the SSA noted that ESI’s and Humana’s proposals were essentially equal under factors (1), Network Access; (3), PBM Services; and (5), Past Performance. However, ESI’s proposal was found to have a significant advantage under evaluation factor (2), Network Reimbursement, based upon its nearly $360 million (or 2.3 percent) lower TEGC. Both firms were found to have “very similar” technical approaches under evaluation factor (4), PBM Operations; however, Humana’s proposal was found to have a slight advantage under this factor, as indicated by its five strengths and no weaknesses as compared to ESI’s proposal, which had four strengths and no weaknesses.[22] Humana’s proposal’s advantage under this factor was based upon the SSA’s conclusion that Humana offered better guaranteed telephone call blockage and call abandonment rates and commitment to exceeding the minimum requirement for responding to routine written beneficiary inquiries. The SSA also found that Humana also had an advantage under the price factor, offering a price that was $59.2 million lower than that offered by ESI. Weighing ESI’s and Humana’s proposals, the SSA found that Humana’s slight technical advantage under factor (4) and price advantage were outweighed by ESI’s substantial network reimbursement advantage. Id. at 17‑19.



ESI/PGBA Tradeoff

Comparing ESI’s and PGBA’s proposals, the SSA noted that ESI’s proposal was assessed as more advantageous than PBGA’s proposal under factors (4), PBM Operations, and (5), Past Performance. In this regard, the SSA accepted the TET’s assessment of a moderate risk in PGBA’s proposal under factor (4) related to PGBA’s lack of experience in processing prior authorization and medical necessity determination requests and proposed low staffing for those functions, and lack of PBM experience. With respect to the past performance factor, ESI received a high confidence rating and PGBA received only a satisfactory confidence rating. ESI was also found to offer a lower TEGC than PGBA (approximately $58.2 million lower), while PGBA proposed a lower price than ESI (approximately $34.4 million lower). Id. at 16-17.

Weighing ESI’s and PGBA’s proposals, the SSA concluded that ESI’s proposal offered a significant technical advantage based upon the firm’s experience in processing prior authorization and medical necessity determination requests and having sufficient staff to process these requests, its higher past performance rating, and lower TEGC. Noting that technical factors were more important than price, the SSA determined that ESI’s significant technical advantage outweighed PGBA’s price advantage. Id. at 17.

In sum, the SSA concluded that ESI’s proposal offered the best value to the government. ESI was awarded the contract, and these protests followed.

DISCUSSION

The protesters raise numerous objections to TRICARE’s evaluation of proposals and source selection decision. In reviewing protests against allegedly improper evaluations and source selection decisions, it is not our role to reevaluate proposals. Rather, our Office examines the record to determine whether the agency’s judgment was reasonable and in accord with the RFP criteria. Abt Assocs., Inc., B-237060.2, Feb. 26, 1990, 90-1 CPD ¶ 223 at 4. A protester’s mere disagreement with the agency’s judgment does not establish that an evaluation was unreasonable. UNICCO Gov’t Servs., Inc., B- 277658, Nov. 7, 1997, 97-2 CPD ¶ 134 at 7.

ACS, Humana and PGBA challenge the specific color ratings assigned by the agency to various factors and subfactors based on asserted strengths and weaknesses in the proposals. More specifically, the protesters assert that the agency failed to award blue and yellow ratings in a manner consistent with the RFP. Citing section M.2.2.2 of the RFP, the protesters assert that even though the RFP required the agency to evaluate whether a proposal exceeded the RFP requirements, the agency, in determining what color rating to assign under a particular factor or subfactor, evaluated only those requirements that identified numeric performance standards and ignored all other requirements, and that under a proper evaluation, their proposals would have received a greater number of strengths and blue ratings under the various factors and subfactors. The protesters also argue that ESI’s proposal did not receive yellow ratings for subfactors, where it failed to satisfy the subfactor’s minimum requirements.

It is well established that ratings, be they numerical, adjectival or color, are merely guides for intelligent decision-making in the procurement process. Citywide Managing Servs. of Port Washington, Inc., B‑281287.12, B‑281287.13, Nov. 15, 2000, 2001 CPD ¶ 6 at 11. Where the evaluators and the source selection decision reasonably consider the underlying bases for the ratings, including advantages and disadvantages associated with the specific content of competing proposals, in a manner that is fair and equitable and consistent with the terms of the solicitation, the protesters’ disagreement over the actual adjectival or color ratings is essentially inconsequential, in that it does not affect the reasonableness of the judgments made in the source selection decision. See id.; National Steel and Shipbuilding Co., B‑281142, B‑281142.2, Jan. 4, 1999, 99-2 CPD ¶ 95 at 15.

In response to the protests, TRICARE provided a voluminous and detailed record of its evaluation and source selection decision.[23] This extensive analysis shows that the agency evaluated the relative merits of each aspect of the proposals, including essentially all of the examples cited by the protesters, and assessed ratings in a fair and equitable manner, consistent with both the RFP and the color definitions. That is, consistent with section M.2.2.2, the record confirms that the agency evaluated the extent to which the proposals met or exceeded the solicitation requirements. Although not every advantageous feature of each proposal was formally labeled a strength and the source selection decision may not have discussed each and every asserted strength and weakness, as the protesters would have liked, the record demonstrates that the SSEB and SSA considered all of the information available, and issued a well-reasoned and rational SSEB report and source selection decision that highlighted the key discriminators among offerors’ proposals. Based on this reasonable discussion and assessment of relative advantages and disadvantages associated with the specific content of proposals, we find that the protesters’ disagreements with the actual color ratings to be inconsequential, given that they do not affect the reasonableness of the judgments made in the source selection decision.[24] See Citywide Managing Servs. of Port Washington, Inc., supra, at 11.

Factor (1) Network Access

PGBA and ACS complain that TRICARE did not credit their proposals for exceeding the minimum access standards stated in the solicitation, arguing that they should have received blue ratings for proposing to exceed the RFP’s minimum access requirements.

As indicated above, although it was not disclosed in the RFP, the record shows that to warrant a blue rating the evaluators required that an offeror exceed each of the minimum access standards for the urban, suburban, and rural categories by a particular specified amount. Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at 106. The RFP did state, however, that the agency would evaluate the extent to which an offeror’s proposal demonstrated the ability to meet or exceed the RFP requirements. RFP amend. 4, § M.2.2.2.

The SSEB’s evaluation report provided to the SSA reflects that ACS’s and ESI’s proposals offered “blue level” access standards for the suburban and rural categories, but did not meet the “blue level” standard for the urban category, and that PGBA’s proposal offered “blue level” access standard only for the suburban category.[25] Thus, under the evaluation plan employed by the SSEB (which was not disclosed to the offerors),[26] these proposals were rated only green overall under this factor because they did not meet or exceed the “blue levels” for all three categories. Agency Report, Book 15, Tab 37, SSEB Evaluation Report, at 13, 54, 106.

Although PGBA and ACS assert that their proposals should have received blue ratings under this factor for exceeding some of the minimum and “blue level” standards, the protesters’ disagreement with their assigned color ratings under this factor is essentially inconsequential. This is so because these aspects of the protesters’ proposals were accurately described in the evaluation narrative provided to the SSA and did not affect the reasonableness of her source selection decision. See Citywide Managing Servs. of Port Washington, Inc., supra, at 11. In any case, we see nothing in the RFP that required the agency to assign the highest rating whenever a firm offered to exceed the minimum access standards by any amount. Moreover, since ESI’s proposal exceeded the “blue level” for two of the three access standards and only received a green rating, the record shows that the offerors were treated equally, and does not evidence that either ACS’s or PGBA’s proposal was superior to ESI’s under this factor.

Factor (2) Network Reimbursement

Humana and PGBA challenge the evaluation of factor (2), Network Reimbursement, on several grounds, including that the agency evaluated this factor as a price factor in a manner inconsistent with the RFP, failed to perform a cost realism analysis, and failed to properly evaluate risk.

The assertion that the agency improperly evaluated factor (2) as a price factor, rather than solely as a technical factor as required by the RFP, stems from the fact that the agency compared the offerors’ TEGCs in performing its best value analysis. However, this approach was entirely consistent with the RFP’s evaluation scheme. Although the RFP did provide that factor (2) would be evaluated as a technical factor and not as a price factor, it also instructed that the agency would consider the “projected program pharmaceutical costs” (i.e., the TEGC) under this factor in the agency’s best-value analysis and in its tradeoff analysis “against other technical factors, past performance, and price.” RFP amend. 4, § M.6.2. As described elsewhere in this decision, the TEGC was consistently treated as a non-price factor in the source selection decision’s weighing of the technical and price factors.

We also find that a cost realism analysis of the offerors’ proposed TEGCs was not required. Where, as here, an RFP contemplates the award of a fixed-price contract, a cost realism analysis is not required, absent a solicitation provision requiring such an analysis. FAR § 15.404-1(d)(3); WorldTravelService, B‑284155.3, Mar. 26, 2001, 2001 CPD ¶ 68 at 3. Here, not only does the RFP not provide for a cost realism analysis, but it specifically precluded factor (2) from being evaluated as a price factor.

Humana nevertheless argues that factor (2) is inherently a cost‑reimbursable item that required the agency to perform a cost realism analysis, even in the absence of a solicitation provision requiring such analysis.[27] That is, Humana argues that because the RFP calls for the evaluation of “projected program pharmaceutical costs,” the evaluation must necessarily include a cost realism analysis in order to ascertain the probable cost to the government of the pharmaceuticals. However, the RFP stated precisely how these pharmaceutical costs would be evaluated--using a formula based on offerors’ fixed, guaranteed average discount rates and dispensing fees--and this approach did not contemplate the performance of a cost realism analysis. Moreover, we fail to see how a detailed cost realism analysis could have been performed (or how offerors could have reasonably expected one to be performed), given that the RFP did not require the submission of detailed cost information to enable the agency to perform such an analysis.

Humana also complains that the agency failed to adequately evaluate the risk of whether ESI could maintain its proposed pharmacy network at the proposed guaranteed average discount rates and dispensing fees. Judging an offeror’s performance risk is a matter committed to the contracting agency’s discretion, subject to the tests of reasonableness and conformance with the RFP’s evaluation criteria; a protester’s mere disagreement with the agency’s judgment does not establish that the judgment was unreasonable or inconsistent with the evaluation criteria. GTE Gov’t Sys. Corp., B-260022, B-260022.2, May 16, 1995, 95-1 CPD ¶ 245 at 6-7.

As described above, in evaluating risk, the TET compared each offeror’s proposed guaranteed average discount rates and dispensing fees with those of its existing pharmacy network closest in size and scope to that of the RFP (i.e., comparable network), as well as to industry norms identified by PBMI. For its comparable network, ESI identified in its proposal discount rates and dispensing fees for a commercial network slightly larger than its proposed network under the TRRx solicitation;[28] in contrast, Humana identified rates and fees from its existing TRICARE retail pharmacy network, which is significantly smaller in size than that proposed under the TRRx solicitation.[29] The comparable rates and fees of these offerors were as follows:[30]
 

 

 

 

 

FOOTNOTES

[1] 

[2] Where an agency conducts a streamlined competition without issuing a solicitation and decides to contract the work out, it may subsequently issue a solicitation to select a particular private-sector provider. See Revised Circular, attach. B, ¶ C.3(d)(1). We would have jurisdiction to consider a protest filed by anyone who qualified as an actual or prospective offeror under that solicitation.