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TRICARE Protests: Round 2

Scott Honiberg and Jeff Weinstein, for HealthLeaders Media, February 1, 2010

Several months ago, we wrote about the stunning upset of two of the three managed care support contracts awarded under TRICARE, the military's health program for retirees and dependents of active duty personnel. Neither Health Net Federal Services (HNFS), the incumbent contractor for one of the three contracts with a 21-year track record of performance for DoD, nor Humana Military Health Services (HMHS), another incumbent with a 13-year track record with DoD, were selected in the latest competition.

Both contract awards were protested by HNFS and HMHS and since then the Government Accountability Office (GAO) has upheld both protests. While this does not mean that HNFS or HMHS will automatically retain their contracts, it does keep them in the running for reconsideration. GAO recommended that the government go back and "re-evaluate" proposals by correcting the evaluation deficiencies they identified and make subsequent award decisions.

What's even more stunning than the upset of the initial contract awards is learning about the extent and nature of deficiencies in TRICARE Management Activity's (TMA) evaluation of proposals according to the GAO decisions. Having read GAO protest decisions about federal contract awards in general, and those related to healthcare contracts in particular for some 20 years or so, we find that GAO decisions are not always—to use one of their favorite terms—"persuasive".

So while we find some of the arguments GAO makes in this case to be less than persuasive as well, after reading GAO's decision for HNFS' protest in particular, it's really hard to imagine how the government could have made any more mistakes. The GAO's decision in HNFS' protest of the award to Aetna Government Health Plans (AGHP) was upheld on multiple grounds. Excerpts from selected grounds that were upheld are in italic below and our comments follow:

1. TMA credited AGHP with past performance of its parent and corporate affiliates, yet AHGP's proposal never identified which entities were involved with performing the prior contracts submitted, nor did it establish the roles that the various entities would have in performance of the contract.

While the ambiguity regarding who from the AGHP team did what in past contracts, and who would do what for the future TRICARE contract was sufficiently vague as to raise legitimate questions in the minds of GAO officials, though it's unclear why TMA apparently did not consider the same ambiguities to be deficiencies or have some of the same questions during evaluation and prior to award.

If TMA raised similar questions to those of GAO, TMA could have legally alerted AGHP to preliminary evaluation deficiencies at that point in time, which might have allowed AGHP to remedy them. This seems like a major missed opportunity for TMA to have appropriately allowed an offeror the opportunity to have strengthened their proposal, which would have supported TMA's ultimate conclusions in this area.

2. To be considered "relevant," RFP evaluation criteria required that past performance references be of contracts with at least 2.1 million covered lives. Of the five required references, AGHP reportedly submitted four contracts with less than 3% of the required amount each, and its largest contract had no more than 11% of the minimum required to be considered fully relevant-yet TMA still gave AGHP its highest past performance rating.

Upon initial observation, we find this to be an extraordinary error, first on the part of AGHP, for failing to submit a single "relevant" contract among its past performance references, and second—perhaps even more surprising—for TMA to have accepted them.

It's possible that AGHP submitted references knowing that they would be less than what was required because that's the best they had. Maybe they didn't have a contract in excess of 2.1 million over the last three years; or maybe they knew they wouldn't get positive references from contracts larger than the ones they submitted. It's certainly possible to envision legitimate reasons why they may not have wanted one or more of their contracts meeting the cutoff criteria for relevance to be included.

However, the fact that the largest contract submitted was for no more than 11% of what TMA was looking for boggles the mind, particularly for a company of Aetna's size. Further, that TMA could have "High Confidence" in AGHP to meet the requirements to perform successfully with DoD's population of some 2.9 million people on the basis of these contract references alone is stunning. In this case, we completely agree with GAO's conclusion.

3. HNFS challenged TMA's pricing evaluation for several reasons having to do with staffing and compensation. One of the arguments it made was that AGHP proposed to hire many of HNFS' employees working on the contract at significantly lower compensation. HNFS argued that TMA failed to evaluate such claims reasonably.

If they had, they would have realized that the significant decrease in compensation would have severely compromised AGHP's ability to hire enough adequately qualified employees, thereby creating a significant element of performance risk that should have downgraded a "reasonable" evaluation of AGHP's staffing plans. AGHP's plans to hire the incumbent's staff is a very common, and, in general, acceptable means of proposing to staff large, existing contracts like this.

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