Foundation Health Federal Services, Inc.; Humana Military, B-

Foundation Health Federal Services, Inc.; Humana Military, B- BNUMBER: B-278189.3; B-278189.4 DATE: February 4, 1998 TITLE: Foundation Health Federal Services, Inc.; Humana Military, B- 278189.3; B-278189.4, February 4, 1998 ********************************************************************** 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. Matter of:Foundation Health Federal Services, Inc.; Humana Military Healthcare Services, Inc. File: B-278189.3; B-278189.4 Date:February 4, 1998 Thomas P. Humphrey, Esq., Robert M. Halperin, Esq., Christopher M. Farris, Esq., Lloyd M. Weinerman, Esq., Frederick W. Claybrook, Esq., Alan W.H. Gourley, Esq., Benjamin T. Butler, Esq., and Raymond F. Monroe, Esq., Crowell & Moring, for Foundation Health Federal Services, Inc., and Alan C. Brown, Esq., Thomas C. Papson, Esq., Patrick K. O'Keefe, Esq., Kevin C. Dwyer, Esq., Jeffrey P. Hildebrandt, Esq., Suzanne L. Karbarz, Esq., Jonathan L. Diesenhaus, Esq., and Joanne Zimolzak, Esq., McKenna & Cuneo, for Humana Military Healthcare Services, Inc., the protesters. Marcia G. Madsen, Esq., David F. Dowd, Esq., Kathy Bucher, Esq., Mark Lesko, Esq., Ross Branstetter, Esq., Stephanie P. Gilson, Esq., Jessica C. Abrahams, Esq., and Scott E. Pickens, Esq., Miller & Chevalier, for Anthem Alliance for Health, Inc., an intervenor. Kenneth S. Lieb, Esq., and Gerald A. Wesley, Esq., TRICARE Support Office, for the agency. David A. Ashen, Esq., and John M. Melody, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision. DIGEST Protest of award is sustained where agency failed to disclose the relative importance of the significant evaluation considerations as applied in the evaluation, and based the source selection decision partly on unwarranted [deleted] ratings in functional experience and performance areas, where the solicitation required a neutral rating because the offeror lacked relevant experience as defined by the solicitation. DECISION Foundation Health Federal Services, Inc. and Humana Military Healthcare Services, Inc. protest the TRICARE Support Office's (TSO) award of a contract to Anthem Alliance for Health, Inc., under request for proposals (RFP) No. MDA906-95-R-0005. The RFP sought proposals to provide health care and associated administrative services in the states of North Carolina, Wisconsin, Michigan, Illinois, Indiana, Ohio, and Kentucky, and in portions of Virginia, West Virginia, Tennessee, and Missouri (Managed Care Support Regions 2 and 5) for Military Health Services System (MHSS) beneficiaries, who include military service retirees, their dependents, and dependents of active duty members. Humana and Foundation challenge the evaluation of cost and technical proposals and the acceptability of Anthem's proposal. We sustain the protests. BACKGROUND Under the RFP, issued on January 16, 1994, offerors were required to propose three health care options--the TRICARE options--for MHSS beneficiaries. Specifically, the RFP required offerors to propose a health care system under which MHSS beneficiaries could opt to obtain services: (1) from providers of their own choosing on a fee-for-service basis (the TRICARE Standard program); (2) from members of the contractor's preferred provider organization (the TRICARE Extra program); or (3) from a contractor-established health maintenance organization (the TRICARE Prime program). Under the latter, TRICARE Prime program, enrollees agree to seek all primary, non-emergency, non-mental health care from a designated primary care manager or gatekeeper. The RFP stated that the government intended to award a fixed-price contract (with the price subject to specified adjustments during performance) for a base period with five 1-year options. The fixed-price nature of the contract, however, was modified by a risk-sharing arrangement under which, in the event of health care cost overruns, the government and the contractor will share responsibility for absorbing the overrun in excess of the contractor's profit and 1 percent of the adjusted health care price. Responsibility would continue to be shared under a formula set out in the RFP until the contractor absorbed overruns equal to its cumulative net gains under the contract and the amount of contractor equity that it put at risk in its proposal. At that point, the contract would begin to function on a cost reimbursement basis, with the government assuming total responsibility and paying for all additional health care costs.