TriCenturion, Inc.; SafeGuard Services, LLC

B-406032,B-406032.2,B-406032.3,B-406032.4, Jan 25, 2012


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TriCenturion, Inc., of Columbia, South Carolina, and SafeGuard Services, LLC, of Plano, Texas, protest the award of a contract to Cahaba Safeguard Administrators, LLC, of Birmingham, Alabama, under request for proposals (RFP) No. RFP-CMS-2009-0014, issued by the Department of Health and Human Services, Centers for Medicare and Medicaid Services (CMS), for zone program integrity contractor (ZPIC) services. The protesters argue that the agency failed to reasonably evaluate the offerors’ proposed costs, technical proposals, and past performance, and also failed to reasonably address organizational conflicts of interest (OCI) concerning the awardee. In addition, TriCenturion argues that the agency did not provide it with meaningful discussions.

We sustain the protests.

B-406032; B-406032.2; B-406032.3; B-406032.4, TriCenturion, Inc.; SafeGuard Services, LLC, January 25, 2012

The decision issued on the date below was subject to a GAO Protective Order. This redacted version has been approved for public release.


Matter of:   TriCenturion, Inc.; SafeGuard Services,LLC

File:            B-406032; B-406032.2; B-406032.3;B-406032.4

Date:              January 25, 2012

Kenneth D. Brody, Esq., ThomasK. David, Esq., David, Brody & Dondershine, LLP, for TriCenturion, Inc.; andDaniel R. Forman, Esq., Puja Satiani, Esq., Jonathan
M. Baker, Esq., James G. Peyster, Esq., Tony G. Mendoza, Esq., and Derek R.Mullins, Esq., Crowell & Moring LLP, for SafeGuard Services, LLC, theprotesters.
Eric J. Marcotte, Esq., Mark A. Smith, Esq., and Kyle Gilbertson, Esq., Winston
& Strawn LLP, for Cahaba Safeguard Administrator, LLC.
Christian P. Maimone, Esq., Department of Health and Human Services, for theagency.
Jonathan L. Kang, Esq., and James A. Spangenberg, Esq.,Office of the General Counsel, GAO, participated in the preparation of thedecision.


1.  Challenge to the cost realism evaluation of theawardee’s proposed labor costs is sustained where the record does notdemonstrate that the agency’s evaluation was reasonable. 

2.  Challenge to the evaluation of a protester’s technicalevaluation is sustained where the agency does not meaningfully respond to themajority of the protester’s arguments. 

3.  Challenge to the evaluation of the awardee’s pastperformance is sustained where the record provided by the agency does notexplain how it evaluated the relevance of offerors’ past performance, orwhether its proposed subcontractors merited consideration under the terms ofthe solicitation.

4.  Protest that the award wastainted by organizational conflicts of interest is denied where the recordshows that the agency reasonably concluded that the potential areas of concernwere adequately mitigated.


TriCenturion, Inc., of Columbia, South Carolina, andSafeGuard Services, LLC, of Plano, Texas, protest the award of a contract to Cahaba Safeguard Administrators, LLC, of Birmingham,Alabama, under request for proposals (RFP) No. RFP-CMS-2009-0014, issued by theDepartment of Health and Human Services, Centers for Medicare and MedicaidServices (CMS), for zone program integrity contractor (ZPIC) services.  Theprotesters argue that the agency failed to reasonably evaluate the offerors’proposed costs, technical proposals, and past performance, and also failed toreasonably address organizational conflicts of interest (OCI) concerning theawardee.  In addition, TriCenturion argues that the agency did not provide itwith meaningful discussions.

We sustain the protests.


As part of federal Medicare and Medicaid contractingreform, CMS intends to award contracts to entities referred to as ZPICs, whichare to perform program integrity functions for Medicare Parts A, B, C, and D;[1]Durable Medical Equipment Prosthetics, and Orthotics Supplier (DMEPOS); HomeHealth and Hospice (HH+H); and the Medicare-Medicaid Data Matching Program (apartnership between Medicaid and Medicare designed to enhance collaborationbetween the two programs to reduce fraud, waste, and abuse).  RFP § B.1;Contracting Officer (CO) Statement at 1.  CMS has established seven geographiczones under the program, and intends to have one ZPIC serving each zone. According to CMS, the mission of the ZPIC program is to promote the integrityof the Medicare and Medicaid programs by accomplishing the followingobjectives:

· Identify, stop and prevent Medicare and Medicaid fraud, waste andabuse and refer instances of potential fraud, waste and abuse to theappropriate law enforcement agencies.

· Decrease the submission of abusive and fraudulent Medicare andMedicaid claims.

· Recommend appropriate administrative action (e.g., paymentsuspension recommendations and [civil money penalties]) to CMS as necessary inaccordance with Medicare and Medicaid laws and regulations, etc., to ensurethat appropriate and accurate payments for services are made, which areconsistent with all Medicare and Medicaid rules and regulations.

· Coordinate potential fraud, waste and abuse [investigations] withappropriate Medicare & Medicaid Entities.

RFP, Statement of Work (SOW), at 11; CO Statement at 1.

CMS issued the RFP on June 12, 2009, seeking proposals forthe award of ZPIC contracts in zones 3 and 6.  This protest concerns the awardof ZPIC zone 6, which covers the following states:  Pennsylvania,Massachusetts, New Jersey, Connecticut, Rhode Island, New Hampshire, Delaware,District of Columbia, Maine, Maryland, New York, and Vermont.  The RFPanticipated award of an indefinite-quantity/ indefinite-delivery contract withfixed-price and cost-reimbursement task orders, for a base period of 1 yearwith four 1-year options.  The RFP stated that the two task orders would beplaced at the time of award:  task order 0001 for audit services concerningMedicare parts A, B, DMEPOS, and HH+H; and task order 0002 for theMedicare-Medicaid Data Matching Program.  The RFP advised that the agency “mayaward a future task order for Part C and D.”  RFP § L.

The technical evaluation score was based on the followingnon-price factors:  technical understanding and approach (which had 12subfactors, identified below); coordination and communication (which had 2subfactors, identified below); key/essential personnel and staffing; security;ISO/quality assurance and improvement; past performance; small businessutilization; and subcontracting approach.  Each of the factors and subfactorsalso identified a number of sub-criteria, which were called “bullets” inthe agency’s evaluation.  As described in further detail below, each of theevaluation factors was assigned a point score for a total of 3,330 possiblepoints (with the exception of subcontracting approach, which was a pass/failcriterion).  RFP § M.2.A.  The business evaluation factor stated that theagency would consider the reasonableness and the realism of the offerors’proposed cost/price.  For purposes of award, the agency’s cost evaluation wasbased on the offerors’ evaluated costs for the two task orders.  All evaluationfactors other than cost or price, when combined, were “significantly moreimportant than cost or price.”  RFP § M.1.a.

As relevant here, the RFP stated that CMS would revieweach offeror’s conflict of interest submission and “make a determination if theOfferor meets the [conflict of interest] requirements.”  RFP § M.3; see alsoid. § H.2.  The RFP advised offerors that “CMS will not enter into acontract with an entity that CMS determines has, or has the potential for, anunresolved [OCI] unless CMS determines that the risk can be sufficientlymitigated.”  RFP § M.3.A.

CMS received proposals from TriCenturion, SafeGuard, andCahaba by the initial closing date of July 20, 2009.  The agency evaluated eachofferor’s proposal and oral presentation, and conducted discussions.  Followingdiscussions, in early 2011, the agency requested final proposal revisions(FPR).[2]

The agency evaluated the offerors’ FPRs and revised thecost evaluation and technical ratings.  The final technical ratings and costevaluations were as follows:[3] 




Technical Understanding and Approach (1,800)




Technical Understanding (200)  

138 (VG)

119 (S)

119 (S)

Potential Fraud
Investigations (200)

135 (VG)

110 (S)

130 (VG)

Case Referrals to Law
Enforcement (200)

114 (S)

100 (S)

100 (S)

Administrative Actions/ Intermediate Sanctions (200)

136 (VG)

100 (S)

121 (VG)

Law Enforcement Requests (150)

94 (VG)

84 (S)

94 (VG)

Information Technology (IT)/Data Analysis (250)

167 (VG)

125 (S)

181 (VG)

Medical Review for Benefit
Integrity (100)

67 (VG)

50 (S)

62 (VG)

High Risk Areas (150)

98 (VG)

90 (S)

75 (S)

Transition, Risk Analysis and Mitigation Plan (150)

87 (S)

104 (VG)

75 (S)

Public Relations (50)

38 (VG)

41 (VG)

47 (E)

Audits (75)

38 (S)

38 (S)

56 (VG)

Cost Report Audit, Settlement and Reimbursement (75)

38 (S)

38 (S)

56 (VG)

Coordination and
Communication (600)




ZPIC Coordination and Communication  (200)

117 (S)

100 (S)

125 (VG)

Coordination and Communication with Stakeholders/Partners (400)

233 (S)

233 (S)

211 (S)

Key/Essential Personnel and Staffing (200)

100 (S)

100 (S)

100 (S)

Security (100)

50 (S)

50 (S)

50 (S)

ISO/Quality Assurance and Improvement (100)

60 (S)

50 (S)

55 (S)

Past Performance (400)

289 (VG)

316 (VG)

345 (E)

Small Business Utilization (100)

54 (S)


50 (S)

Subcontracting Approach (Pass/Fail)





2,053 (VG)

1,898 (S)

2,052 (VG)









Agency Report (AR), Tab 10a, Source Selection Decision(SSD), at 2-3, 5.[4]

The Contracting Officer (CO), who served as the sourceselection authority for the procurement, concluded that TriCenturion’s andCahaba’s proposals were equal in technical merit, and that “[o]ne proposal wasnot deemed to be superior over the other.”  Id. at 5-6.  The COconsidered the strengths and weaknesses of each offeror’s proposal, andconcluded that, in addition to Cahaba’s status as one of the two mosthighly-technically rated offerors, none of the strengths offered by the otherhigher-cost offerors merited award as compared to Cahaba.  Id. at 17; ARat 2.

CMS advised TriCenturion and SafeGuard that Cahaba hadbeen selected for award, and provided debriefings to each offeror on October13.  These protests followed.


TriCenturion and SafeGuard argue that CMS’s evaluation ofthe offerors’ cost and technical proposals, including past performance, wasflawed.  Because of a largely deficient record, which does not document orsupport the agency’s conclusions, we are unable to determine that theevaluations were reasonable, and therefore sustain the protests.  TriCenturionalso argues that the agency failed to conduct meaningful discussions, and bothprotesters’ argue that the agency failed to reasonably evaluate OCIs arisingfrom the award to Cahaba.  We deny these protest grounds.[5]

Cost Realism Evaluation

TriCenturion and SafeGuard argue that CMS did not performa reasonable evaluation of Cahaba’s proposed costs with regard to the number ofproposed full-time equivalent (FTE) staff.  SafeGuard additionally arguesthat CMS did not reasonably evaluate Cahaba’s proposed other direct costs (ODC). Also, both protesters argue that the agency unreasonably failed to makedownward adjustments to their proposed costs in the cost evaluation, based onthe protesters’ individual technical approaches.  We sustain the protesters’arguments concerning the evaluation of Cahaba’s proposed FTEs, primarily due toan inadequate record; we deny the other arguments. 

When an agency evaluates a proposal for the award of acost-reimbursement contract, an offeror’s proposed estimated costs are notdispositive because, regardless of the costs proposed, the government is boundto pay the contractor its actual and allowable costs.  Federal AcquisitionRegulation (FAR) §§ 15.305(a)(1); 15.404-1(d); Palmetto GBA, LLC, B-298962,B-298962.2, Jan. 16, 2007, 2007 CPD ¶ 25 at 7.  Consequently, the agency mustperform a cost realism analysis to determine the extent to which an offeror’sproposed costs are realistic for the work to be performed.  FAR §15.404-1(d)(1).  An agency is not required to conduct an in-depth costanalysis, see FAR § 15.404-1(c), or to verify each and every item inassessing cost realism; rather, the evaluation requires the exercise ofinformed judgment by the contracting agency.  Cascade Gen., Inc., B-283872,Jan. 18, 2000, 2000 CPD ¶ 14 at 8.  Further, an agency’s cost realism analysisneed not achieve scientific certainty; rather, the methodology employed must bereasonably adequate and provide some measure of confidence that the ratesproposed are reasonable and realistic in view of other cost informationreasonably available to the agency as of the time of its evaluation.  SeeSGT, Inc., B-294722.4, July 28, 2005, 2005 CPD ¶ 151 at 7.  Our reviewof an agency’s cost realism evaluation is limited to determining whether thecost analysis is reasonably based and not arbitrary.  Jacobs COGEMA, LLC,B-290125.2, B-290125.3, Dec. 18, 2002, 2003 CPD ¶ 16 at 26.


Evaluation of Cahaba’sProposed FTEs

As set forth in detail below, TriCenturion and SafeGuard primarilyargue that CMS’s evaluation of Cahaba’s significantly lower levels of proposedFTEs and hours was unreasonable.  In particular, the protesters point to thedisparities between Cahaba’s proposal, their proposals, and the independentgovernment cost estimate (IGCE).  The protesters also argue that the recordprovided by the agency fails to explain how the agency evaluated the offerors’proposed costs.

As discussed above, CMS evaluated offerors based on theirproposed costs for task orders 0001 and 0002.  The agency’s cost realismevaluation provided the following summary of the offerors’ proposed costs,labor hours, and FTEs for these task orders, as well as the agency’s IGCE: 

Task Order0001:





Proposed Costs















Task Order 0002





Proposed Costs















AR, Tab 13e, FPR Cost Realism Evaluation, at 5.

As the tables above show, Cahaba’s proposed hours and FTEsfor task order 0001 are well below those of the other offerors.  In addition,while Cahaba’s FTEs for task order 0001 are relatively close to those in theIGCE, its proposed costs for providing those FTEs are significantly lower thanthe IGCE’s estimated costs.  The protesters target similar discrepancies in theresults for task order 0002.  Despite the disparities in these estimates, CMSmade no adjustments to TriCenturion’s and Cahaba’s proposed costs for the twotask orders, and an upward adjustment of only $[deleted] to SafeGuard’sproposed costs for task order 0002.  Id. at 7.

In answering these protests, CMS argues that it did notrely solely on the IGCE and that it evaluated each offeror’s proposal on thebasis of its own technical approach.  See Supp. CO Statement (Dec. 8,2011) at 13.[6] The agency states that the evaluators used the IGCE as a “starting point” forthe cost realism evaluations, but did not rely on it to conclude whether anofferor’s proposed costs were realistic.  Id.  For these reasons, theagency contends that direct comparisons of the differences between the offerors’proposed costs, or between an offeror’s proposed costs and the IGCE, do notdemonstrate that the evaluations were unreasonable.

We agree with the agency that a cost realism evaluationmust consider the unique technical approaches proposed by each offeror, andthat, to the extent that an agency concludes that an offeror’s proposed costsare realistic for its technical approach, such an evaluation may be reasonabledespite differences as compared to other offerors or a government estimate.  SeeFAR § 15.404-1(c)(1); Systems Techs., Inc., B-404985, B-404985.2, July20, 2011, 2011 CPD ¶ 170 at 5.  Here, however, neither the contemporaneousrecord provided by CMS,[7]nor the testimony provided by agency witnesses,[8]demonstrates how the agency evaluated the offerors’ technical approaches forpurposes of cost realism.  We discuss the deficiencies in the record below.

The agency’s discussion questions requested that Cahabaaddress the agency’s concern that it had proposed “understated/low” FTEs in severalareas.[9] AR, Tab 8.a.2, Cahaba FPR Cost Discussions, at 5,15-17.  For example, the agency advised Cahaba that “[y]ou are encouraged tore-evaluate and make adjustments with rationale or provide an explanation whyyou believe [the] proposed FTEs/hours are sufficient as proposed” for six laborcategories.  Id., at 5.  The discussion questions, however, do not showhow the agency evaluated the proposed labor categories and FTEs; they merelyexpress the agency’s concern regarding the proposed level.  The record thusdoes not demonstrate how the agency concluded that the proposed FTEs identifiedduring discussions may be too low, or why the agency concluded that the FTEsnot identified during discussions were realistic.

Next, the agency prepared business proposal review (BPR)memos concerning each offeror’s proposed costs for the two task orders.  ForCahaba, the BPR memo for task order 0001 was prepared by the TEP chair, and theBPR memo for task order 0002 was prepared by a different TEP evaluator.  SeeAR, Tab 14a2, Cahaba FPR BPR Task Order 0001; Tab 14a3, Cahaba FPR BPR TaskOrder 0002.  Both of the BPR memos recommended to the CO that Cahaba’s proposedcosts for its FPR be accepted as reasonable and realistic.

For task order 0001, the agency concluded that “[t]heofferor’s proposed staffing for the transition period is in accordance with theIGCE and [is] deemed reasonable to perform the SOW activities.”  AR, Tab 14a2,Cahaba FPR BPR Task Order 0001, at 1.  The BPR memo, however, does not addresshow the agency evaluated any of the labor categories or FTEs, or whatinformation the TEP chair relied upon, apart from the IGCE.   

For task order 0002, the agency noted that Cahaba “significantlyincreased” its proposed staffing for the transition period in its revised FPR,and that the agency “finds the level of staffing appropriate.”  AR, Tab 14a3,Cahaba FPR BPR Task Order 0002, at 1.  The agency also noted that althoughCahaba’s proposed staffing was “significantly lower than the IGCE,” the “levelof staffing [was] appropriate for the approach proposed by [Cahaba].”  Id. Here too, the BPR memo does not discuss how the TEP evaluator assessed Cahaba’stechnical approach, or any specific findings or technical details upon whichthe agency relied.

During a hearing conducted by our Office to furtherdevelop the record, both the TEP chair and TEP evaluator provided testimonyconcerning their evaluations.  Each witness, however, provided only generalstatements concerning their evaluations of Cahaba’s proposed FTEs.  

For example, the TEP chair explained that the TEP’sevaluation of Cahaba’s technical proposal identified numerous strengths basedon the awardee’s “Digital Ecosystem,” which the TEP chair understood to be theawardee’s approach to integrating various analytical approaches and systems toimprove effectiveness and efficiency in the investigation work required for theSOW.  See Hearing Transcript (Tr.) at 13:8-14:9, 16:16-18:21.  Ineffect, the TEP chair stated that the agency understood Cahaba’s DigitalEcosystem to be the primary basis for its technical approach.  Tr. at 101:6-19.

With regard to the BPR review, however, the TEP chairacknowledged that the documentation did not address Cahaba’s Digital Ecosystem,or any other specific aspects of Cahaba’s technical approach.  Tr. at80:8-81:3; 82:2-14.  Moreover, the TEP chair’s testimony made only generalreference to Cahaba’s technical approach, and did not explain how she appliedher understanding of the awardee’s technical approach to her evaluation of itsproposed FTE levels.  See, e.g., Tr. at 61:5-14.  Similarly, theTEP evaluator who prepared the BPR memo for task order 0002 stated in only themost general terms that her review of Cahaba’s proposed costs was based on theawardee’s technical approach.  See, e.g., Tr. 227:17-228:20;240:11-241:6.

Both witnesses stated that they believed that there wereadditional documents that either provided more details concerning theirevaluations, or would have aided their recollections during the hearing.  Forexample, the TEP chair stated that she could not recall specific details abouther analysis of Cahaba’s proposed FTEs, but suggested that she might have beenable to do so with the aid of “draft reports” that were not provided by theagency during course of this protest.  Tr. at 62:21-63:4; 84:15-18; 100:2-7. 

When asked to describe how she evaluated Cahaba’s proposedFTEs, the TEP evaluator asked whether she should explain the entire process ofher evaluation, or just the document provided by the agency; in this regard,she noted that the document provided “is the second revision of the document.” Tr. at 226:18-22.  The TEP evaluator later confirmed that the BPR memo for taskorder 0002 produced by the agency was a “revision of the last one,” and thatprior versions of the documents contained details regarding the evaluation thatwere not produced by the agency. 
Tr. at 237:3-238:21.  The TEP evaluator also explained that she prepared a “spreadsheetthat compared the labor categories [and] the costs . . . associated with [Cahaba’sapproach] to see if it comes out to be a reasonable kind of ballpark with theapproach.”  Tr. at 227:18-22; see also Tr. at 231:5-13.  Thisdocumentation was also not provided by the agency during the course of thisprotest.

The next piece of documentation cited by CMS was the costrealism evaluation prepared by the CO, which provided a narrative of herevaluation of the realism of the offerors’ proposed costs.  The CO alsoprepared spreadsheets documenting the offerors’ proposed costs and any costrealism adjustments.  As discussed above, the CO’s cost realism evaluationaccepted Cahaba’s proposed costs and made no adjustments.  AR, Tab 13a, CahabaFPR Cost Realism Spreadsheet; Tab 13e, Cost Realism Evaluation, at 4. 

The CO testified during the hearing that she did notindependently evaluate the realism of Cahaba’s proposed FTEs, and insteadrelied on the judgments of the TEP in concluding that Cahaba’s proposed levelof FTEs was realistic.  Tr. at 292:22-293:7.  The CO generally understood thatthe TEP members’ recommendations concerning the adequacy of the proposed FTEs werebased on their technical expertise and review of Cahaba’s technical proposal. Tr. at 309:12-311:3.  The CO acknowledged, however, that she did not knowspecific details concerning how the TEP chair or TEP evaluator made theirjudgments concerning any particular labor category or FTE level.  SeeTr. at 313:12-314:5. 

The CO’s cost realism evaluation stated that “the TEPfirst considered each offeror’s unique technical approach . . . [and] made anassessment regarding the reasonableness of proposed staffing in terms of laborcategories, FTEs and hours.”  AR, Tab 13e, Cost Realism Evaluation, at 4. Aside from this statement, the cost realism evaluation did not cite anyspecific aspects of Cahaba’s technical approach, or explain how the TEPconducted its evaluation of the offerors’ proposed FTEs. 

The cost realism spreadsheets contained notes regardingthe offerors’ evaluated costs.  With regard to Cahaba, the spreadsheet notesstated as follows:

No adjustments in proposed labor hours[,] as proposed hours have beenapproved . . . based on the effort proposed by [Cahaba].  The hours arereasonable to perform the SOW requirements.  [Cahaba’s] approach to performingthe SOW tasks includes their Digital Ecosystem.  The Digital Ecosystem providesfor more streamlined processes, such as better coordination/communicationacross Medicare lines . . . and Task Orders; higher integration betweeninvestigations, data analysis and medical review and direct, quick access toinformation for stakeholders.  Based on [Cahaba’s] approach, CMS is confidentthat they can perform the work with the proposed staffing.

AR. Tab 13a, Cahaba FPR Cost Realism Spreadsheet, at 2.[10] This reference to Cahaba’s Digital Ecosystem is the only mention of a specifictechnical approach in CMS’s evaluation of Cahaba’s proposed costs.  Asdiscussed above, the TEP chair explained that the Digital Ecosystem was, inessence, the overall technical approach proposed by Cahaba to perform the SOW. Tr. at 101:6-19.  As also discussed above, however, the BPR analyses did notexplain how the agency applied its understanding of Cahaba’s technical approachin its evaluation of the awardee’s proposed FTEs.  Similarly, the TEP chair andTEP evaluator were not able to explain in their testimony how any particularaspect of Cahaba’s technical approach was considered in the BPR analyses.

For the reasons discussed above, we find that neither thecontemporaneous record nor the hearing testimony provide a basis for our Officeto conclude that CMS’s cost realism evaluation was reasonable.  Specifically,to the extent that the CO relied on the judgment of the TEP members inconcluding that Cahaba’s proposed FTEs were realistic, the record does not showhow they reached their judgments or whether they were reasonable. 

We specifically note here that our conclusions are basedon the inadequacies of the contemporaneous record, as produced by CMS.  CMS wasprovided multiple opportunities to ensure that the record was complete.  Where,as here, a protester requests specific documents, the agency is required toprovide 5 days before the agency report due date a list of the documents itintends to provide.  Bid Protest Regulations, 4 C.F.R. § 21.3(c) (2011).[11] As permitted by our regulations, TriCenturion and SafeGuard objected to thescope CMS’s proposed list of documents.  See id.  In particular,the protesters objected to the agency’s statement that it would not produce“drafts prepared and superseded before the evaluation of proposals commenced.” Agency Response to Document Requests (Nov. 10, 2011) at 3. 

During a conference call to resolve the disputes, ourOffice advised that the agency’s intention to produce only “final” documentswas an acceptable approach, provided that the documents were complete,reflected the evaluation of the relevant issues, and represented the documentsreviewed or relied upon by the selection authority.  In particular, the GAOattorney assigned to the protest advised the agency that the documents producedhad to “stand on their own,” that is, fully reflect the agency’s analyses andevaluations.  In addition, GAO provided the agency and the other parties an opportunitybefore the hearing to submit additional documents for the purpose of establishinga clear record for the hearing, and for the ultimate resolution of the protests. GAO Confirmation of Hearing Notice (Dec. 27, 2011) at 3.

Despite these opportunities, CMS failed to provide an adequateand complete record.  That is, the record failed to reflect the analysis thatthe agency claims that it performed concerning Cahaba’s proposed labor costs. Moreover, as discussed above, the agency’s witnesses testified during thehearing that their recollections might have been aided by referring toadditional relevant documents that the agency did not produce.

Our Office’s ability to meet its statutory obligation toresolve protests within 100 days depends, in large part, on an agency’s promptproduction of the relevant records concerning the procurements, as required byour rules.  4 C.F.R. § 21.3(d).  In addition to producing all relevant documents,agencies must, as discussed above, advise protesters of the documents that willbe produced in response to specific document requests.  Upon receipt of theagency’s proposed document production, protesters are permitted to respond orobject to the intended scope of production.  Id. § 21.3(c).  In theevent of an objection, our Office will decide whether the proposed scope ofproduction satisfies the agency’s obligation to provide all relevant documents.

Where an agency represents that it will produce allrelevant documents, and that the documents will fully reflect the agency’sanalyses and evaluations, we will generally accept the agency’srepresentations, based on a presumption of good faith.  We also expect,however, that agencies will complete the record if, during the course of aprotest, it becomes apparent that the record is not complete.

Where an agency fails to document its evaluation, or failsto retain evaluation materials, it bears the risk that there may not beadequate supporting rationale in the record for GAO to conclude that the agencyhad a reasonable basis for the source selection decision.  Systems Research& Applications Corp.; Booz Allen Hamilton, Inc., B-299818 etal. Sept. 6, 2007, 2008 CPD ¶ 28 at 12.  This principle applies with equalforce where, as here, an agency elects not to provide relevant documents.  Asdiscussed above, we find CMS’s production of documents in response to theseprotests to be insufficient to support its evaluation conclusions.

In sum, based on the inadequate and, apparentlyincomplete, contemporaneous record provided by the agency, and on the lack of meaningfultestimony in a hearing called for the purpose of addressing gaps in theagency’s documentation, we cannot conclude that CMS’s evaluation of theofferors’ proposed costs was reasonable.  See National City Bank ofIndiana, B-287608.3, Aug. 7, 2002, 2002 CPD ¶ 190 at 14.  (agency failed toreasonably explain their basis for accepting as realistic the awardee’sproposed staffing levels).  Based on this record, we sustain the protesters’challenges to the adequacy of CMS’s evaluation of Cahaba’s proposed staffinglevels.[12]

Evaluation of Cahaba’sProposed ODCs

Next, SafeGuard argues that CMS did not reasonablyevaluate Cahaba’s proposed ODCs.  Specifically, SafeGuard notes that while itproposed $[deleted] for ODCs, Cahaba proposed only approximately $[deleted]. AR, Tab 13e, Cost Realism Evaluation, at 6.  The protester contends that thelow level of ODCs may indicate that the awardee’s proposed costs did notreflect costs for computer resources, which SafeGuard had included in itsproposed ODCs.

While neither CMS’s contemporaneous evaluation, nor itsagency report, was sufficiently detailed to permit resolution of SafeGuard’schallenge to the agency’s evaluation of Cahaba’s ODCs, the issue was adequatelyaddressed during the hearing.  In her testimony, the CO stated she understoodthat Cahaba and SafeGuard proposed different methods for accounting for theirODCs and indirect costs, which made direct comparisons between their ODCsinapposite.  Tr. at 379:19-382:1.  The relevant costs for the offerors is asfollows:






Fringe Benefits









Facilities Capital Cost of Money



AR, Tab 13e, Cost Realism Evaluation, at 5-6.

The CO acknowledged that her cost realism evaluation didnot specifically consider the level of costs proposed by Cahaba for computerresources.  Tr. at 391:5-21.  The CO stated, however, that based on herexperience with Cahaba on other contracts, she was familiar with the company’scost accounting methods, and understood that it accounted for some costs thatmight otherwise be associated with ODCs as part of its overhead cost pool. 368:20-369:2.  In particular, the CO stated that she understood, at the timeshe made her cost realism evaluation, that Cahaba’s costs for computerresources were included in its indirect costs.  Tr. at 389:4-12.  Additionally,the CO noted that Cahaba’s indirect rates were capped, and that this providedprotection for the government against increases in the awardee’s indirectcosts. Tr. at 374:2-375:6.  For these reasons, the CO states that she was notconcerned with Cahaba’s proposed ODCs, and was not concerned that Cahaba didnot separately identify its costs for computer resources.  Tr. at 374:18-375:6.

During the hearing, the CO also discussed documentationthat showed her understanding of Cahaba’s accounting methods was reasonable. Specifically, the CO states that Cahaba had provided a copy of its costaccounting disclosure statement, as required by the RFP.  Cahaba’s disclosurestatement states that it accounts for “computer operations” as part of itsoverhead cost pool.  AR, Tab 7a, Cahaba Disclosure Statement, at IV-7; Tr. at372:13-16.  The CO also noted that she requested that the Defense ContractAudit Agency (DCAA) conduct a review of Cahaba’s disclosure statement and costaccounting system.  Tr. at 378:13-379:5.  The DCAA report advised that Cahaba’sdisclosure statement “adequately describes the contractor’s cost accountingpractices.”  Supp. CO Statement, exh. B, DCAA Report (Mar. 17, 2011), at 4.  TheCO states that she relied on DCAA’s findings to inform her judgment as to theadequacy of Cahaba’s cost accounting practices.  Tr. at 379:6-15.

We think that the record shows that the CO understood themanner in which Cahaba proposed its ODCs and indirect costs, and that herassumption concerning the costs of the awardee’s computer resources was alsoreasonable.  On this record, we find no basis to sustain this aspect of theprotest.

Downward Adjustments to theProtesters’ Proposed Costs

Finally, TriCenturion and SafeGuard argue that CMS failedto make downward cost realism adjustments to their proposals, based on thepossibility that the government would not incur the costs proposed by theofferors. 

As discussed above, the FAR states that a cost realismevaluation must consider the probable cost to the government for each offeror’sproposal, and that agencies must evaluate offerors’ probable cost by “evaluatingspecific elements of each offeror’s proposed cost estimate to determine whetherthe estimated proposed cost elements are realistic for the work to be performed.” FAR § 15.404-1(d)(1).  The agency must then “adjust[] each offeror’s proposedcost, and fee when appropriate, to reflect any additions or reductions in costelements to realistic levels based on the results of the cost realism analysis.” FAR § 15.404-1(d)(2)(ii).  We have held that agencies should make downwardadjustments to an offeror’s evaluated cost where the proposal shows amisunderstanding of the requirements in a manner which would cause thegovernment to incur a lower cost than that identified in the proposal.  SeePriority One Servs., Inc., B-288836, B-288836.2, Dec. 17, 2001, 2002 CPD¶ 79 at 3-4.  Conversely, we have held that where an offeror’s proposed costsreflects its technical approach, the agency need not make a downward adjustmentbased on the agency’s concerns that the proposed level of effort and costs aremore than the agency believes is necessary to perform the work.  See TheS.M. Stoller Corp., B-400937 et al., March 25, 2009, 2009 CPD ¶ 193at 15; Magellan Health Servs., B-298912, Jan. 5, 2007, 2007 CPD ¶81 at 13-14.

SafeGuard argues that because CMS accepted Cahaba’sexplanation that its Digital Ecosystem would permit it to perform the work inan efficient manner with lower FTEs than the IGCE, the agency should have madea downward adjustment to SafeGuard’s proposed costs to reflect savings from itsuse of a similar technical approach.  However, even if SafeGuard and Cahabaproposed similar technical approaches--a point the agency does notconcede--there would be no basis here for a downward adjustment.  SafeGuard’sproposal assumed that its technical approach would require the level ofstaffing it proposed to implement its technical approach; thus, CMS had noreason to believe that the government would incur lower costs than what theprotester proposed.

TriCenturion argues that the CO unreasonably rejected a recommendationby the TEP that the protester’s proposed costs should be adjusted downward toreflect a lower number of FTEs than it proposed.  See AR, Tab 13c,TriCenturion FPR Cost Realism Evaluation, at Tab TO1/CLINs 0002-0006, TO2/CLIN0001.  In this regard, the TEP concluded that TriCenturion had overstated therequired labor in a number of areas.  The record shows that CO rejected therecommendation because she concluded that TriCenturion’s proposed staffing wasbased on its proposed technical approach, and that there was no basis toconclude that the protester would perform the work in a different manner thanwhat was proposed.  Id. 

Here, the differences between the offerors’ proposalsstemmed from their proposed technical approaches and their assumptionsconcerning the level of effort required to implement those approaches.  On thisrecord, the protesters have provided no basis for our Office to conclude thatCMS unreasonably declined to make a downward adjustment in either of theseprotester’s evaluated costs.  See The S.M. Stoller Corp., supra;Magellan Health Servs., supra.

Evaluation of SafeGuard’s Technical Proposal

SafeGuard argues that CMS’s evaluation of its technicalproposal was unreasonable.  In its supplemental protest, SafeGuard identified15 areas were it contends that the agency’s evaluation was based on thefollowing flaws:  disparate and unequal treatment of its technical proposal ascompared to Cahaba’s and TriCenturion’s proposals; unreasonable assessment ofweaknesses; and an unreasonable failure to recognize strengths for itsproposal.  SafeGuard Comments (Nov. 28, 2011) at 46-70.  These 15 areasconcerned the evaluation of SafeGuard’s proposal under numerous evaluationfactors and subfactors.

Our Office requested that CMS provide a response toSafeGuard’s supplemental protest arguments.  In its supplemental report,however, the agency addressed only three of these arguments, characterizingthese responses as examples of why the evaluation of the offerors’ proposalswas reasonable.  See Decl. of TEP Chair at 2-3.  CMS argued that itsresponse was adequate, because while “[a] re-evaluation or re-scoring assuggested by [SafeGuard] might result in minor deviations in scoring, and even,possibly, the re-ordering of the technical ranking of the three offerors,”there was no basis to conclude that there would be a change in the awarddecision.  Supp. AR (Dec. 8, 2011) at 3.  In effect, the agency appears toargue that even if SafeGuard’s unaddressed arguments alleging unequal andunreasonable evaluation of the offerors’ proposals had merit, there would havebeen no prejudice to SafeGuard because the agency would not have changed itsaward decision.

We first note that CMS’s argument that the award decisionwould not be changed, even if these unaddressed protest contentions had merit,is a post-hoc argument raised in response to the protest.  We generallyaccord such arguments little or no weight.  BoeingSikorsky Aircraft Support,B-277263.2, B-277263.3, Sept. 29, 1997, 97-2 CPD ¶ 91 at 15. 

In any case, because CMS elected not to respond to themajority of the protester’s arguments concerning the evaluation of itstechnical proposal, and does not appear to contest the merits of the protester’sarguments, we view the agency as having effectively conceded that theevaluation of SafeGuard’s technical proposal was not reasonable.  See RadiationOncology Group of WNY, PC, B-310354.2, B-310354.3, Sept. 18, 2008, 2009 CPD¶ 136 at 6-7; Myers Investigative and Sec. Servs., Inc., B-287949.2,July 27, 2001, 2001 CPD ¶ 129 at 2.  Alternatively, to the extent that theagency did not intend to concede this issue, its response does not provide uswith a basis to conclude that the evaluation was reasonable, and we sustain theprotest on this basis.[13]

Past Performance Evaluation

Next, TriCenturion and SafeGuard argue that CMS did notreasonably evaluate the relevance of the offerors’ past performance. Additionally, SafeGuard argues that the agency failed to evaluate whetherCahaba’s proposed subcontractors met the RFP’s threshold requirement forconsideration.   

While, as a general matter, the evaluation of an offeror’spast performance is within the discretion of the contracting agency, we willquestion an agency’s evaluation of past performance where it is unreasonable orundocumented.  Solers, Inc., B-404032.3, B-404032.4, Apr. 6, 2011, 2011CPD ¶ 83 at 8.  Although an agency is not required to retain every documentgenerated during its evaluation of proposals, the agency’s evaluation must besufficiently documented to allow our Office to review the merits of a protest. Apptis, Inc., B-299457 et al., May 23, 2007, 2008 CPD ¶ 49 at10.  Where an agency fails to document or retain evaluation materials, it bearsthe risk that there may not be adequate supporting rationale in the record forus to conclude that the agency had a reasonable basis for its source selectiondecision.  Navistar Def., LLC; BAE Sys., Tactical Vehicle Sys. LP,B-401865 et al., Dec. 14, 2009, 2009 CPD ¶ 258 at 13.

Here, the RFP stated that offerors’ past performance wouldbe evaluated as follows:

The Government’s evaluation will be based on the extent, depth, andquality of past performance within the last two (2) years in performing thesame or similar work as anticipated under this contract.  Past performance ofsignificant and/or critical subcontractors will be considered to the extentwarranted by the subcontractor’s demonstrated involvement in the proposedeffort.

*          *          *          *          *

The evaluation of past performance will be based on the extent to whichthe Offeror has demonstrated, under contracts of a similar nature, scope, andcomplexity as the ZPIC contract, its ability to successfully meet therequirements of the SOW in this solicitation.

RFP § M.2.A.6

The protesters argue that CMS’s evaluation does notdocument how the agency evaluated the relevance of the offerors’ pastperformance references.  For this reason, the protesters argue that the pastperformance rating for Cahaba--which received a rating of excellent, as opposedto very good for the protesters--was not reasonable. 

In its response to the protest,CMS does not dispute that the contemporaneous record fails to document theevaluation of relevance.  Instead, the agency essentially contends that suchdocumentation was not necessary:  “Contrary to the protestor’s claims, whilenot every evaluation or questionnaire has a documented rationale for therelevance rating, many do and many are simply self evident or common sense.” Supp. CO Statement (Dec. 8, 2011) at 19.  The agency further argues that therewas no prejudice to the protesters from the lack of documentation here because:

[E]ven if the Agency made some minor error in their evaluation of oneor another subcontractor, the past performance scores for all offerors werevery strong. A re-shuffling of the final rankings in this factor would not havemade any substantial difference in the final award decision.

Supp. AR (Dec. 8, 2011) at 4.

The record of the agency’s evaluation of offerors’ pastperformance consists of score sheets with handwritten notes for each pastperformance reference.  See AR, Tabs 16b, CahabaPast Performance Evaluations; Tab 16c, SafeGuard Past PerformanceEvaluations; Tab 16d, TriCenturion Past Performance Evaluations.  Eachreference contained sections for information such as “Evaluation Period,” “Descriptionof Work,” “Rational[e] for Assessment,” “Relevance Factor Assessed,” and “Score[].”  See id.  For the vast majority of Cahaba’s past performancereferences, there was no information provided regarding the “Rational[e] forAssessment.” 

For Cahaba’s own past performance--as opposed to the pastperformance of its subcontractors--the majority of the references had noinformation concerning the rationale, while others stated that Cahaba was aprogram safeguard contractor for CMS, or that Cahaba’s reference pertained to “audit”work.  For five of Cahaba’s eight subcontractors, the references had noexplanations for any of the relevance ratings.  For the other threesubcontractors, the majority of the rationales in the references were blank.  SeeAR, Tab 16b, Cahaba Past Performance Evaluations.

Although the CO contends that the relevance ratings were “selfevident or common sense,” Supp. CO Statement (Dec. 8, 2011) at 19, we cannotmake an independent judgment concerning the relevance of the past performancereferences.  We also do not agree with CMS’s position that the offerors’ werenot prejudiced by any errors that might have been made.  In the absence of abasis to evaluate the reasonableness of the past performance evaluations, wecannot conclude, as the agency suggests, that the rankings of the offerorswould be unaffected.  In this regard, Cahaba received the highest ratings forpast performance, and the award decision specifically noted that Cahaba’s pastperformance record, which was rated excellent, was “stronger” than that ofTriCenturion and SafeGuard, which were rated very good.  AR, Tab 10a, SSD, at6, 8, 12.

Additionally, SafeGuard argues that the agency consideredthe past performance of Cahaba’s proposed subcontractors without regard to thesignificance of the subcontractors’ proposed roles.  As discussed above, theRFP stated that the agency would consider the past performance of proposedsubcontractors as follows:  “Past performance of significant and/or criticalsubcontractors will be considered to the extent warranted by the subcontractor’sdemonstrated involvement in the proposed effort.”  RFP § M.2.A.6.

In a protest addressing identical solicitation language,our Office concluded that the agency’s evaluation of the awardee’s pastperformance was not reasonable where neither the contemporaneous record nor theagency’s response to the protest reasonably explained why it considered anawardee’s proposed subcontractor to have a “significant and/or critical” rolethat merited consideration, particularly in light of the small role for whichthe subcontractor was proposed.  See CIGNA Gov’t Servs., LLC,B-401062.2, B-401062.3, May 6, 2009, 2010 CPD ¶ 283 at 10-11.

Here, SafeGuard contends that the work proposed by Cahabafor several of its subcontractors was small, and should not have been viewed as“significant and/or critical.”  Our review of the record shows that three ofCahaba’s six proposed subcontractors for task orders 0001 and 0002, ALPSServices, Inc., Kelly & Associates, LLC, and J. Michael Hardin &Associates, were each proposed to perform less than [deleted] percent of thetotal work for these task orders.  The other three subcontractors proposed forthe task orders, ViPS, Inc., Vista Sciences Corp., and Health ManagementSystems, Inc., were each proposed to perform approximately [deleted] percent ofthe work.  See AR, Tab 13a, Cahaba FPR Cost Realism Spreadsheets. Cahaba also proposed three additional subcontractors that were not proposed toperform work under task orders 0001 and 0002, but whose past performancerecords were evaluated by CMS.  See AR, Tab 16b, Cahaba Past PerformanceReferences.

CMS acknowledges that it did not consider the costs orpercentage of work for which an offeror’s subcontractor was proposed, andstates that “CMS considered all of the subcontractors for Cahaba, SGS andTriCenturion to play a significant/critical role, regardless of the dollarvalue.”  Supp. CO Statement (Dec. 8, 2011) at 17.  The agency also explainsthat because offerors were required to propose costs for task orders 0001 and0002, there were no costs for the proposed subcontractors who would performwork only in the event other task orders were issued.  Id. at 18.  Whileit appears that the agency is correct in asserting that an evaluation based onthe percentage of costs represented by the proposed effort of eachsubcontractor may not have been possible under the terms of the solicitation,neither the contemporaneous record, nor the agency’s response to the protest,explains whether or how it considered that a proposed subcontractor was “significantand/or critical.” 

In sum, we conclude that neither the record provided bythe agency nor its response to the protest, permit our Office to conclude thatthe evaluation of the offerors’ past performance was reasonable, and sustainthe protest on this basis.

Discussions with TriCenturion

Next, TriCenturion argues that CMS did not provide anopportunity for meaningful discussions.  Specifically, the protester contendsthat the agency identified 16 minor weaknesses in its proposal, but did notraise these issues during discussions.  We find no merit to this argument.

The FAR requires agencies toconduct discussions with offerors in the competitive range concerning, “at aminimum . . . deficiencies, significant weaknesses, and adverse pastperformance information to which the offeror has not yet had an opportunity torespond.” FAR § 15.306(d)(3).  When an agency engages in discussions with anofferor, the discussions must be “meaningful,” that is, sufficiently detailedso as to lead an offeror into the areas of its proposal requiring amplificationor revision in a manner to materially enhance the offeror’s potential forreceiving the award.  FAR § 15.306(d); Bank of Am., B-287608,B-287608.2, July 26, 2001, 2001 CPD ¶ 137 at 10-11.  As our Office hasconsistently held, agencies are not required to afford offerorsall-encompassing discussions or to discuss every aspect of a proposal thatreceives less than the maximum score, and are not required to advise an offerorof a minor weakness that is not considered significant.  Apptis Inc., B-403249;B-403249.3, Sept, 30, 2010, 2010 CPD ¶ 237 at4.  In determining whether a concern identified by an agency was a weakness,significant weakness, or deficiency, our Office does not rely solely on thelabel or term used by the agency, but instead looks also to the context of theevaluation.  Raytheon Co., B-404998 July 25,2011, 2011 CPD ¶ 232 at 6.

TriCenturion argues that although the agency labeled theweaknesses as “minor,” they reflected more serious concerns that should havebeen raised during discussions.  The agency counters, and we agree, that theconcerns reflected in the record were minor, correctable weaknesses.  Forexample, TriCenturion contends that CMS cited a weakness based on the protester’s“perceived misunderstanding regarding Parts C & D overpayments,” and thatthis weakness indicates a serious concern regarding its technical approach.  TriCenturion’sComments (Nov. 28, 2011)
at 19.  In fact, the full text of the agency’s evaluation stated as follows: 

Although the offeror provided a good overall understanding of Part C &D administrative actions there was minor weakness associated with a perceivedmisunderstanding regarding Part C & D overpayments.  This issue can beeasily addressed and will not hinder the offeror’s ability to perform the SOWrequirements.

AR, Tab 14c1, TriCenturion FPR Evaluation, at 15.  Inlight of CMS’s view that this issue was “easily addressed” and that it wouldnot hinder performance, we think that it was reasonably classified as a “minorweakness” that did not require discussions.  We conclude that none of thearguments raised by the protester here demonstrate that the agency failed toprovide an opportunity for meaningful discussions.[14]

Organizational Conflicts of Interest

TriCenturion and SafeGuard each argue that the award to Cahabawas tainted by OCIs arising from Cahaba’s status as a wholly-owned subsidiaryof Blue Cross/Blue Shield of Alabama (BCBSAL), and specifically from BCBSAL’sprovision of Medicare part C and D services to its customers.  For the reasonsdiscussed below, we conclude that CMS reasonably evaluated the potentialconflicts posed by award to Cahaba, and concluded that the potential conflictwas reasonably mitigated.

The FAR requires that contracting officers avoid, neutralizeor mitigate potential significant OCIs so as to prevent an unfair competitiveadvantage or the existence of conflicting roles that might impair a contractor’sobjectivity.  FAR §§ 9.504(a), 9.505.  The responsibility for determiningwhether an actual or apparent conflict of interest will arise, and to whatextent the firm should be excluded from the competition, rests with thecontracting agency.  Aetna Gov’t Health Plans, Inc.; Foundation Health Fed.Servs., Inc., B-254397.15 et al., July 27, 1995, 95-2 CPD ¶ 129 at12. 

The protesters’ arguments here concern the categorydescribed in FAR subpart 9.5 and the decisions of our Office as arising fromimpaired objectivity.  An impaired objectivity OCI exists where a firm’s workunder one government contract could entail its evaluating itself. FAR §9.505-4; Aetna Gov’t Health Plans, Inc.; Foundation Health Fed. Servs., Inc.,B-254397.15 et al., July 27, 1995, 95-2 CPD ¶ 129 at 13.  The concern insuch “impaired objectivity” situations is that a firm’s ability to renderimpartial advice to the government will be undermined by its relationship tothe product or service being evaluated.  PURVIS Sys., Inc., B-293807.3,B-293807.4, Aug. 16, 2004, 2004 CPD ¶ 177 at 7.

In reviewing bid protests that challenge an agency’sconflict of interest determinations, the Court of Appeals for the FederalCircuit has mandated application of the “arbitrary and capricious” standardestablished pursuant to the Administrative Procedures Act.  See AxiomRes. Mgmt., Inc. v. United States, 564 F.3d 1374, 1381 (Fed. Cir. 2009). To demonstrate that an agency’s OCI determination is arbitrary or capricious, aprotester must identify “hard facts” that indicate the existence or potentialexistence of a conflict; mere inference or suspicion of an actual or potentialconflict is not enough.  Turner Constr. Co., Inc. v. United States, 645F.3d 1377, 1387 (Fed. Cir. 2011); PAI Corp. v. United States, 614 F.3d1347, 1352 (Fed. Cir. 2010).  In Axiom, the Court of Appeals noted that “theFAR recognizes that the identification of OCIs, and the evaluation ofmitigation proposals are fact-specific inquiries that require the exercise ofconsiderable discretion.”  Axiom Res. Mgmt., Inc., 564 F.3d at 1382. The standard of review employed by this Office in reviewing a contractingofficer’s OCI determination mirrors the standard required by Axiom.  Inthis regard, we review the reasonableness of the CO’s investigation and, wherean agency has given meaningful consideration to whether an OCI exists, will notsubstitute our judgment for the agency’s, absent clear evidence that the agency’sconclusion is unreasonable.  See Enterprise Info. Servs., Inc.,B-405152 et al., Sept. 2, 2011, 2011 CPD ¶ 174 at 8.

TriCenturion and SafeGuard argue that Cahaba’s ownershipby BCBSAL creates a potential conflict in the event that CMS issues Cahaba atask order to perform audits of Medicare parts C or D, which involveprescription drug benefits.  The protesters contend that a conflict would arisebecause BCBSAL:  (1) is a provider of Medicare part C and D services, (2) hasan ownership stake in Prime Therapeutics, a company that providespharmacy-related services, (3) has relationships with pharmacies, and (4)competes with other providers of Medicare part C and D services in zone 6. 

The CO prepared a memorandum documenting potential OCIsconcerning Cahaba.  As relevant here, the CO noted that BCBSAL “acquired 16.78%investment interest in Prime Therapeutics LLC (Prime) in 2010,” and holds oneof the 10 seats on Prime Therapeutics’ board of directors.  AR, Tab 12a, OCIMemorandum, at 11.  The CO found that potential OCIs could arise because “BCBSALcontracted with Prime to provide Pharmacy Benefit Manager (PBM) services forBCBSAL’s members/ subscribers.”  Id.  The CO also found that PrimeTherapeutics “offers pharmacy services, Medicare Part D administration, andother consulting services,” and that specifically “provides PBM services tovarious customer plans, and it provides Medicare Part D rebate and formularyservices to one customer in Zone 6.”  Id. 

During exchanges with Cahaba concerning this subject, Cahabastated that the risk of a conflict arising based on BCBSAL’s ownership stake inPrime Therapeutics was “negligible” because Prime Therapeutics has only onecustomer in zone 6.  Id. at 12.  Cahaba also proposed several mitigationstrategies, including [deleted].  Id.  The CO concluded that theproposed mitigation was not acceptable, in part because of the additionalresources required of CMS to monitor the proposed mitigation, and that “[t]hisconflict remains unmitigated.”  Id.

CMS asked Cahaba to address the potential OCI arising fromBCBSAL’s ownership stake in Prime Therapeutics, and advised that “failure toavoid, neutralize or mitigate a conflict of interest may result in the award ofthis contract to another offeror.”  AR, Tab 12b, Letter from CMS to Cahaba (September28, 2011), at 3. 

In response, Cahaba advised CMSthat BCBSAL had agreed to divest itself of Cahaba upon notice that CMS intendedto issue a task order for Medicare parts C or D.  AR, Tab 12c, Letter fromCahaba to CMS, Sept. 29, 2011, at 1.  Cahaba’s proposed mitigation approachprovided a timeline with five milestones from the date of CMS’s announcement ofits intent to issue a task order:  (1) within [deleted]:  establish the termsof sale, obtain approval of BCBSAL’s Board of Directors, and issue a formalannouncement of the intent to sell Cahaba; (2) within [deleted]:  identify andvet prospective buyers, conduct industry research of prospective buyers, andconduct OCI analyses; (3) within [deleted]:  agree on terms of sale with buyer;(4) within [deleted]:  execute the sale and complete all requiredcorporate actions and approvals; and (5) within [deleted]:  execute statecorporate documents and novate required leases.  Id. at 2-3.  Inaddition, Cahaba provided the following “contingency plan” in the event thatthe milestones are not met:

If BCBSAL cannot identify a buyer within the timeline listed above,BCBSAL shall [deleted].

Id. at 3-4.  Cahaba’s response also included a letterfrom the BCBSAL Senior Vice President and Chief Financial Officer stating thatthe parent company “is in agreement with the mitigation plan being proposed byCahaba . . .  related to any future Part C or Part D task order for theabove-mentioned solicitations [zones 3 and 6].”  AR, Tab 12d, Letter fromBCBSAL to CMS (Sept. 29, 2011), at 1.

The CO concluded that Cahaba’s proposed mitigation planwas acceptable.[15] AR, Tab 12a, OCI Memorandum, at 27.  The CO found that Cahaba’s proposed [deleted]schedule for divestiture was reasonable and realistic.  In this regard, the COnoted that CMS expected that it could take between 7-8 months from announcementof the agency’s intent to issue the task order to develop an SOW, obtainfunding approval, negotiate the task order with Cahaba, and to complete thetransition of the work from the incumbent.  Id. at 26-27. 

The CO also stated that, in the event the divestiturecould not be achieved within the proposed [deleted] time frame, and CMSrequired the services from Cahaba at that time, the cognizant head of the CMScontracting activity (HCA) “will authorize a waiver of the Prime Therapeuticsconflict during the time that the contingency plan is in place.”  Id. at27.  The FAR provides that an HCA may “waive any general rule orprocedure of this subpart by determining that its application in a particularsituation would not be in the Government’s interest.”  FAR § 9.503. Here, the OCI memorandum included a statement from the HCA, which stated asfollows: 

With regard to the mitigation strategy for the OCI caused by BCBSAL’s ownershipin Prime Therapeutics, should it be necessary to afford [Cahaba] additionaltime, in excess of the [deleted] proposed, to finalize the sale of [Cahaba] andshould CMS require [Cahaba] to begin work on a Part C and/or Part D task order,the HCA will authorize a waiver in accordance with FAR 9.503 while thecontractor’s contingency plan is being finalized.  The waiver would be inaffect only until such time as the sale of [Cahaba] is completed.  Once thesale of [Cahaba] is completed, the waiver would no longer be necessary and theconflict would be fully mitigated.

AR, Tab 22d, OCI Memorandum, at 28.

The protesters argue that the CO unreasonably accepted thedivestiture plan because it did not provide adequate details to address theOCI.  In particular, the protesters contend that the plan lacks specificitybecause it does not identify a potential buyer or sales terms.  The protesterscite two decisions in which our Office sustained protests of awards for ZPICzones 1 and 2, based on what the protesters contend were similar OCI concernsand divestiture plans to those at issue here.  See C2C Solutions,Inc., B-401106.5, Jan. 25, 2010, 2010 CPD ¶ 38; Cahaba Safeguard Adm’rs,LLC, B-401842.2, Jan. 25, 2010, 2010 CPD ¶ 39.  As relevant here, weconcluded in both protests that the CO failed to evaluate the awardee’sproposed mitigation approach of divestiture, in part because the proposed planslacked any meaningful detail.  In this regard, the record in the C2CSolutions and Cahaba decisions shows that the CO’s OCI analysismerely observed that “[t]he other mitigation strategy, total divestiture of[the awardee], includes some uncertainties as to the particulars of thedivestiture that are and cannot be known at this time.”  C2C Solutions, Inc.,supra, at 5; Cahaba Safeguard Adm’rs, LLC, supra, at 6. In light of the lack of any meaningful details to support the divestitureplans, we sustained both protests.

In contrast to C2C Solutions and Cahaba,however, Cahaba’s mitigation plan here provided specific details andmilestones.  As discussed above, the awardee stated that BCBSAL would, uponnotice of the agency’s intent to begin the process of issuing a task order forMedicare parts C and D, commence the necessary steps to divest itself ofCahaba.  The mitigation plan included five milestones, which the agencyevaluated and concluded were reasonable.  Additionally, as the intervenornotes, the lack of a specific price or buyer was not unreasonable, as there wasno timeframe for a possible parts C and D task order at the time of the award. On this record, we conclude that the CO acted within the reasonable exercise ofher discretion in concluding that Cahaba’s proposed mitigation plan adequatelyaddressed the OCI concerning BCBSAL’s ownership of Cahaba and its 17 percentstake in Prime Therapeutics.  On this record, we find no basis to sustain theOCI arguments.


For the reasons discussed above, we conclude that CMS’sevaluation of the offerors’ cost, technical and past performance proposals was unreasonable. We recommend that CMS reevaluate the offerors’ cost, technical and pastperformance proposals, consistent with our decision, conduct discussions andobtain revised proposals if appropriate, and make a new selection decision.  Wealso recommend that the agency adequately document its evaluation and selectiondecision.  We further recommend that TriCenturion and SafeGuard be reimbursedthe costs of filing and pursuing their protests, including reasonable attorney’sfees, with regard to the cost and past performance issues, and that SafeGuardalso be reimbursed regarding the technical evaluation issues.  4 C.F.R. §21.8(d)(1).  The protesters should submit their certified claims for costs,detailing the time expended and cost incurred, directly to the contractingagency within 60 days after receipt of this decision.  4 C.F.R. § 21.8(f)(1).

The protests are sustained. 

Lynn H. Gibson
General Counsel

[1]Medicare part A provides hospital care coverage; Medicare part B provides medicalcare insurance coverage; and Medicare part D provides prescription drugcoverage.  Medicare part C is known as the “Medicare Advantage Plan,” and is ahealth plan offered by Medicare-approved private insurers who offer the samecoverage as Medicare parts A and B, with the addition of other benefits such asvision, hearing, dental, and/or health and wellness program, and theprescription drug benefits under Medicare part D.  See MedicareBenefits website, available at:  

[2]SGS submitted its FPR by the closing date.  However, one of SafeGuard’sproposed subcontractors failed to submit its revised business proposal inelectronic format by the closing date, as required.  As a result of the latedelivery of the subcontractor’s revised business proposal, CMS rejected SGS’sproposal as late.  SafeGuard filed a protest with our Office on March 21, 2011,challenging the rejection.  On June 28, we sustained SafeGuard’s protestbecause the record showed that CMS rejected its proposal without determiningwhether it was acceptable without the subcontractor’s revised businessproposal.  SafeGuard Servs., LLC, B-404910, June 28, 2011, 2011
CPD ¶ 132 at 5.

[3]The agency evaluated each offeror’s proposal under the sub-criteria for thefactors and subfactors, and assigned a rating of excellent (E), very good (VG),satisfactory (S), poor (P), and unsatisfactory (U).  AR, Tabs 31, 32, 33,Offeror Technical Evaluations, at 2. 

[4]The SSD incorrectly calculated the number of points assigned to TriCenturion(the total of the scores listed in the chart in the SSD should be 2,053, ratherthan 2,050) and to SafeGuard (the total of the scores listed in the chart inthe SSD should be 1,898, rather than 1,897).  The chart above lists the correctscores.

[5]The protesters raised numerous other collateral arguments concerning theevaluation of the offerors’ proposals and the OCIs relating to Cahaba.  We havereviewed all issues raised in the protests and find that, aside from the issuesdiscussed herein, none provides a basis to sustain the protest.

[6]CMS stated that it had concerns regarding the validity of the IGCE,particularly with regard to task order 2, which the agency found was “miscalculatedand overstated.”  AR, Tab 13e, Cost Realism Evaluation, at 1-4.

[7]The record produced by CMS in response to these protests consisted of:  
(1) the discussion questions provided to the offerors in September 2011, andthe requests for FPRs; (2) the technical evaluation panel (TEP) reports on theofferors’ FPRs; (3) the business proposal analyses prepared by TEP membersfor each offeror for task orders 1 and 2; (4) the cost realism analysisprepared by the CO; and (5) spreadsheets prepared by the CO detailing thecost realism evaluation and adjustments for each offeror.

[8]Our Office conducted a hearing on January 10, 2012, to further develop certainprotest issues, at which the CO, the TEP chair, and a TEP evaluator providedtestimony. 

[9]CMS also identified certain FTEs that may be “overstated/high.”  E.g., AR,Tab 8.a.2, Cahaba FPR Cost Discussions, at 5.

[10]During the course of the hearing, the CO testified that this statement wasadded to the cost spreadsheets at the request of CMS counsel, who advised thatthe existing documentation did not adequately address “how the proposed hoursare reviewed and determined acceptable.”  Tr. at 305:4-21; 307:5-9; seeAR, Tab 15, Email from CMS Counsel to CO (Sept. 29, 2011).  This statement wasintended to reflect that the TEP evaluators relied on Cahaba’s technicalapproach, i.e., its Digital Ecosystem, in making their evaluation of theadequacy of Cahaba’s proposed costs.  Tr. at 308:14-309:11.  As discussedabove, however, the BPR memos and the witnesses’ testimony did not providemeaningful details concerning their evaluations.

[11]In relevant part, our regulation states as follows: 

At least 5 days prior to the filing of the report, incases in which the protester has filed a request for specific documents, theagency shall respond to the request for documents in writing. The agency’sresponse shall, at a minimum, identify whether the requested documents exist,which of the requested documents or portions thereof the agency intends toproduce, which of the requested documents or portions thereof the agencyintends to withhold, and the basis for not producing any of the requesteddocuments or portions thereof. 

4 C.F.R. § 21.3(c).

[12]SafeGuard also contended that CMS’s adjustment of its proposed costs concerningthe information analyst position was unreasonable.  See AR, Tab 14b3,SafeGuard BPR, Task Order 2, at 3.  We do not address this issue here, but inlight of the deficiencies in the record discussed herein, the agency shouldconsider this issue in taking the corrective action recommended below.   

[13] We have reviewed the issues not addressed by CMS, and note that many of them appearto have merit.  For example, one argument raised by SafeGuard, and notaddressed by the agency, concerns a weakness under the key/essential personnelfactor.  CMS identified a weakness because the agency found that “[i]t is notindicated if the proposed [medical review (MR)] manager has an active[registered nurse (RN)] license,” as required by the RFP.  AR, Tab 14b1, SafeGuardFPR Technical Evaluation, at 42.  As SafeGuard notes, however, its proposalclearly states that its proposed MR manager holds an RN license.  See AR,Tab 7b, SafeGuard FPR,
at II-130.  Because CMS’s response does not address the majority of the protester’sarguments, we do not address the three examples cited in the TEP chair’smemorandum.  As the protester notes, however, the responses consist primarilyof general observations of the level of detail provided in Cahaba’s technicalproposal, and a summary comment that SafeGuard’s proposal did not provide thesame level of detail.   

[14]TriCenturion also argues that CMS treated it unequally in discussions ascompared to Cahaba.  TriCenturion Supp. Comments (Dec. 15, 2011) at 18-19. Although the protester was provided the full record of CMS’s discussions withall parties in the agency report on November 18, 2011, the protester did notallege or identify examples of unequal treatment within 10 days of receivingthis information, as required by our Bid Protest Regulations.  See 4C.F.R. § 21.2(a)(2); TriCenturion Comments (Nov. 28, 2011) at 16-19.  Instead,the protester first raised this issue in its December 15 comments.  Wetherefore dismiss this aspect of the protester’s argument as untimely. 

[15]The agency argues that the divestiture plan addresses not only PrimeTherapeutics, but the protesters’ other OCI arguments as well.  CO Statement at5; Supp. CO Statement (Dec. 8, 2011) at 8-9.  Because the protesters’ otherarguments concern conflicts arising from Medicare part C/D coverage, we agreethat the divestiture plan addresses these concerns.