Perseverance Can Result in New Business

So the announcement last month that two of the three incumbent TRICARE contractors did not retain their contracts must be considered a highly unexpected development in military health circles. Since both contract awards have been formally protested, there is a possibility that the award decisions may be reversed. Until the jury is in, however, final judgment must be reserved, but there are several important lessons learned. The first is that no organization has a permanent "lock" on a federal contract, no matter how large, how complex, or how well-connected politically. Conventional wisdom about the power of incumbency, or rumors that the contract was wired from the start notwithstanding, the reality is that no one is always unassailable, and that while an extended track record by an incumbent contractor clearly works to its competitive advantage, it is not a guarantee in perpetuity.

While organizations are always well-advised to respect the power of the incumbency, the decision to walk away should not be based on the intimidation factor that goes along with an incumbent's track record, of, say, 10 or even 20 years. Test your assumptions; walk away if necessary . . . but walk away for the right reasons. This is a valuable lesson for hospitals or physicians that have long coveted a small, but prestigious contract with a local VA or military hospital. While a local provider who's held the contract for years may appear to have the business "locked-up", that assumption may be inaccurate. Time and time again, we see evidence where a longstanding, apparently entrenched contractor is unseated by another competitor that was not dissuaded by the challenge and put together a more attractive proposal.

Adding a fascinating element of intrigue to the TRICARE situation are reports that at least one of the reasons Health Net protested the award of its contract is because DoD posted some of Health Net's pricing information on a public website, an allegation which has actually been confirmed by DoD. Even if true, that does not guarantee a reversal of the decision. Requirements to uphold a protest of a federal contract are complex, and key among the issues likely to be considered include the timing of the release of the information and the extent to which the information can be shown to have had prejudicial impact. Since most of the details of the protests will remain proprietary until a decision is reached, it is really impossible for the general public to know what really took place at this point. Given the magnitude and significance of these contracts, we will continue to follow developments and offer commentary in subsequent articles as information emerges.