You've just submitted a multimillion-dollar proposal to provide healthcare services to a federal agency for five years that your team has been working on for months. Now what?
In the typical negotiated procurement, the agency will have one team reviewing technical elements and past performance, and another reviewing the price proposal. Every request for proposal will include a set of stated evaluation factors and/or subfactors. It is critical to address all of the stated factors as thoroughly as possible—even though you may think other factors are more important.
Lesson One: Agencies don't always include evaluation factors that an offeror might consider most important, and one of the most important lessons about federal contracting is to at least respond to what they ask for. Then—and only then—can you include what you think is really important. Ignoring something you think is irrelevant or relatively unimportant can be a fatal flaw. Evaluators will often have a checklist of each of the stated evaluation factors, and will begin to see whether, and to what extent, you addressed each of those.
All RFPs should indicate the relative importance of stated evaluation criteria, such as all technical factors are of equal importance; or all technical factors are listed in descending order of importance; or all technical factors, plus past performance, are significantly more important than price.
Lesson Two: While price is always important, many federal contracts for healthcare services are not awarded to the lowest bidder.
After initial review, the agency may find it has questions and needs to hold "discussions" with offerors. Discussions can be in person, by teleconference, or in writing, and are intended to give a company the chance to explain elements of its proposal that the government found unclear, incomplete, or deficient. Don't plan on the opportunity to discuss, though, as RFPs often state that the government reserves the right to award without discussions based on initial proposals alone. In that case, you need to ensure that your initial proposal is complete, clear, consistent, and thorough, and that your price is the best that you can offer.
Whether there are discussions or not, results of the technical and price evaluations ultimately go to a "source selection authority," who is often the contracting officer. The SSA then reviews the evaluations and selects the successful company. If the procurement is for services, as is the case for most healthcare contracts, the successful company almost always is the one that the SSA feels represents the "best value" to the government. This means that the government can award a contract to a company whose price is higher than its competitors if the government decides that the company's technical proposal is superior to the competition.
How does a company outshine the competition to be designated the "best value"? One of the most important elements is to carefully describe how you will best meet the government's requirements. That means not "parroting" the RFP language itself (you'd be surprised to learn exactly how many bids do just that), or simply stating that you can do whatever the agency needs. You need to explain in detail how you're going to do it, what resources you bring to the table, what experience your company has had in providing these services in the past, what innovative ways you've come up with to provide the services, and whether and how your company actually can exceed the government's requirements.
There are numerous areas in which a proposal can be found "deficient" or "downgraded." Complicating this issue is the all-too-frequent reality that evaluation of proposals does not always occur the way it is supposed to; i.e., in accordance with the Federal Acquisition Regulation.
In our next article, we'll discuss how an unsuccessful company can "protest" an agency's evaluation and/or award decision, if it believes the process has not been conducted properly.
Scott Honiberg is president and Jeff Weinstein is counsel at Potomac Health Associates, Inc. They can be reached at S.Honiberg@PHAInc.com or J.weinstein@PHAInc.com, respectively.For information on how you can contribute to HealthLeaders Media online, please read our Editorial Guidelines.
Public companies announced more than 100,000 layoffs last week, and you can be sure that private companies are following, or have followed, suit. Not a day goes by that I don't read in HealthLeaders Media's daily e-newsletter about some hospital or health system laying off dozens, sometimes hundreds, of workers.
If you're reading this newsletter, you're likely among the decision-makers at these hospitals who are making these tough decisions. If you're taking the drastic step of laying off workers, clearly you don't think that your organization's financial health is going to improve anytime soon. But when you're being buffeted by the winds of increasing bad debt, declining volumes, drastically declining philanthropy, and an inability to access the capital markets, your hands are tied. Staffing reductions are the only place to make a quick impact on your rapidly deteriorating balance sheet.
When will things get better? Who knows? But as I pondered these thoughts during two days of listening to healthcare industry analysts at two events here in Nashville last week, I was reminded of Homer Simpson's wisdom during an episode in which his daughter Lisa reminded him that the Chinese use the same word for "crisis" and "opportunity."
"Yes," Homer says, jubilantly, "crisatunity!" I don't mean to trivialize the issues we're all facing in this depressed economy, but I couldn't help myself thinking of Homer's quip when Harry Jacobson, a healthcare entrepreneur and Vanderbilt University Medical Center's vice chancellor for health affairs, got up last Wednesday to moderate the Nashville Healthcare Council's annual Wall Street Analysts' Panel. Jacobson began his remarks by reminding the capacity crowd that with problems, come opportunities.
But you wouldn't know it from the flood of bad news these guys talked about. The Council's annual analyst session is where healthcare analysts make their predictions for the coming year. Safe to say very few saw the rapid destruction of credit coming at this time last year, nor did they see the cascade of negativity and value destruction that followed the credit crisis—which is still full steam ahead, by the way. Similarly, no one really sees a quick recovery on the horizon this year, but they did manage to point out some bright spots.
To wit:
The medical arms race has been flattened. With credit super-dear, no one's willing to go out on a limb with huge bricks and mortar or technology projects. That means you can shepherd your remaining capital for strategic acquisitions of the weak players.
The employment picture has brightened considerably. If you need physicians and nurses, there's certainly still a shortage, but for the rank-and-file, you don't have to worry about upward pressure on wages as unemployment reaches 8%-10%.
Valuations have come down sharply. Where strategic acquirers largely sat out the acquisition binge in recent years because they weren't willing or able to compete with levered up private equity shops paying unprecedented 10-12X multiples for healthcare acquisitions, now valuations are half that level, and strategic acquirers are more ready to participate in the fire sale.
Nonprofits that counted on easy access to cheap capital to remain solvent no longer can count on that, so they're acquisition targets.
Debt covenants coming due in the next few years will require harsh refinancing terms, if you can even refinance, meaning less debt-heavy players will have further discounts to look forward to.
As weaker players are eliminated, the stronger players have an opportunity to build their war chests for better times ahead.
Those who can afford to delay or go without heavy layoffs are making investments in perhaps the most valuable currency these days: human capital.
We're returning to an environment in which companies will be bought and sold based on fundamentals, not who can get the cheapest leverage by selling debt providers a "story."
So the silver linings mentioned here might be of cold comfort when you feel it's only prudent to lay off valued staff and cut back on needed investment. But you have to take your victories where you can get them in this environment. There will be better days ahead.
Just don't let your crisatunities pass you by while you're waiting for those days to come.
Philip Betbeze is finance editor with HealthLeaders magazine. He can be reached at pbetbeze@healthleadersmedia.com.Note: You can sign up to receiveHealthLeaders Media Finance, a free weekly e-newsletter that reports on the top finance issues facing healthcare leaders.
In early 2005, Tom Daschle, the former Democratic Senate leader, teamed up with his close friend Leo Hindery. Daschle agreed to become the founding chairman of "a world-class executive advisory board" of "industry and regulatory experts" for a new investment firm run by Hindery, according to a news release announcing its inception and seeking investors. The partnership has now come back to haunt Daschle, with the disclosure that he had failed to pay $128,000 in taxes on the car and driver Hindery's firm provided him, threatening to derail his confirmation as secretary of health and human services.
Grady Memorial Hospital officials expect to release patient numbers they hope will clarify a lengthy, continuing dispute with Fulton County, GA, on what services the hospital provides and how much taxpayer money Fulton should contribute. How many indigent patients Grady treats, and where they live, have been in question for at least five years as the hospital and the county work under a 25-year-old contract for financial support that each agrees is vague and flawed. Efforts to rework the deal gained new energy when Fulton voted to withhold $26.5 million from the public hospital until it showed greater transparency and accountability.
Physician leaders at three hospitals run by Saint Thomas Health Services in the Nashville area have cast votes of no confidence in management over concerns that an ongoing budget review may lead to deep cuts that damage patient care and alter how the hospitals' medical staffs operate. The hospital system's top administrator, Chief Executive Officer James P. Houser, responded by putting the review process on hold for 30 days, until early March, to allow for better communication of the reasoning behind it "to all our stakeholders." The recent votes by the medical leadership at Saint Thomas Hospital, Baptist Hospital and Middle Tennessee Medical Center called into question Houser's leadership and amount to an attempt by top doctors to influence the hospital system's board before any budget cuts are made.
MetroWest Medical Center—which has two campuses, Framingham (MA) Union Hospital and Leonard Morse Hospital in Natick, MA—is opposing its rival's bid to build a 24,000-square-foot outpatient treatment and surgical center in Framingham. Newton-Wellesley, owned by Partners HealthCare, says the surgical center is needed to alleviate long waits for orthopedic and gastrointestinal procedures at the hospital's main campus. The dispute is being watched closely within the healthcare industry as community hospitals fight for turf against Boston teaching hospitals.