B-310801; B-310801.2, NHIC Corporation, February 12, 2008

B-310801; B-310801.2, NHIC Corporation, February 12, 2008 TITLE: B-310801; B-310801.2, NHIC Corporation, February 12, 2008 BNUMBER: B-310801; B-310801.2 DATE: February 12, 2008 ********************************************************* B-310801; B-310801.2, NHIC Corporation, February 12, 2008 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. Decision Matter of: NHIC Corporation File: B-310801; B-310801.2 Date: February 12, 2008 Daniel R. Forman, Esq., John E. McCarthy Jr., Esq., Shauna E. Alonge, Esq., and Jonathan M. Baker, Esq., Crowell & Moring LLP, for the protester. W. Jay DeVecchio, Esq., Kevin C. Dwyer, Esq., Daniel E. Chudd, Esq., Eric R. Haren, Esq., and James C. Cox, Esq., Jenner & Block LLP, for Palmetto GBA, LLC, an intervenor. Christine Simpson, Esq., and Douglas Kornreich, Esq., Department of Health & Human Services, for the agency. Sharon L. Larkin, Esq., and James A. Spangenberg., Esq., Office of the General Counsel, GAO, participated in the preparation of the decision. DIGEST Protest challenging cost realism analysis is denied, where agency performed a comprehensive analysis of all major cost elements and relied on subject matter experts to reasonably determine that proposed costs were consistent with each offeror's technical approach and were realistic for the work to be performed. DECISION NHIC Corporation protests the award of a contract to Palmetto GBA, LLC, issued by the Department of Health & Human Services, Centers for Medicare & Medicaid Services, for the administration of Medicare claims. NHIC challenges the agency's cost realism evaluation. We deny the protest. The RFP provided for award of a cost-plus-award-fee contract for the combined administration of Part A and Part B Medicare fee-for-service claims. Under this contract, a "Medicare Administrative Contractor" (MAC) is to provide claims processing, payment, and other administrative services for "Jurisdiction 1," which consists of California, Nevada, Guam, Northern Mariana Islands, American Samoa, and Hawaii. RFP sections B.1, B.2. Both NHIC and Palmetto previously provided these services for various jurisdictions under separate contracts for Part A and Part B Medicare claims[1]; this is the first time that Parts A and B have been combined under a single contract. Transcript (Tr.)[2] at 13-14, 33. The RFP contemplated a 5-year period of performance, which included a 12-month "implementation" period, a 9-month "base period," four 1-year option periods, and a 6-month period for "outgoing contractor workload transition activities." RFP sect. F.2. The RFP provided that award of the contract would be made on a best-value basis, considering the equally weighted factors of technical approach, implementation, management controls, past performance, and corporate experience; when combined, these factors were more important than cost, which was not a weighted factor. Id. sections M.2(a), M.3(a). The technical factors (which included equally weighted subfactors and sub-subfactors) were assigned adjectival ratings of outstanding, very good, good, marginal, or poor; and cost, which was not assigned an adjectival rating, was evaluated to determine each offeror's "total proposed estimated cost/price." Id. sect. M.2(d) and (e). With regard to the evaluation of cost, the RFP required the agency to perform a "cost reasonableness and realism" analysis, id. sect. M.2(a), and further stated that [t]he purpose of this cost realism [analysis] will be to determine what the Government should realistically pay for the proposed effort, if the offeror's proposed costs reflect the offeror's understanding of the Government's requirements, and if the proposed costs are consistent with the various elements of the offeror's technical proposal. Id. sect. M.2(e). Risk, although not a separately rated factor, was to be considered and "integrate[d]" into the rating assessments of each of the factors for award. Id. sect. M.2(b). The RFP instructed each offeror to provide a technical proposal explaining its technical approach to performing the requirements described in the statement of work, and a business proposal explaining the bases for its proposed costs. To prepare the cost estimates contained in the business proposal, offerors were instructed to use the "annual workloads" for the base and option years as provided in the RFP.