STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GTE DATA SERVICES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 87-3188BID

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent, )

and )

)

CONSULTEC, INC., )

)

Intervenor. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this cause August 31 - September 4, 1987, in Tallahassee, Florida, before Diane A. Grubbs, a Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner H. Michael Madsen, Esquire GTE Data Services, Inc: James Hauser, Esquire

MESSER, VICKERS, CAPARELLO, FRENCH AND MADSEN

Post Office Box 1876 Tallahassee, Florida 32302-1876

For Respondent

State of Florida, DHRS: M. Stephen Turner, Esquire

Douglas L. Mannheimer, Esquire BROAD AND CASSEL

300 East Park Avenue Tallahassee, Florida 32301

For Intervenor, C. Gary Williams, Esquire Consultec, Inc.: Jann Johnson, Esquire

Steven C. Emmanuel AUSLEY, McMULLEN, McGEHEE, CAROTHERS AND PROCTOR

Post Office Box 391 Tallahassee, Florida 32302

ISSUES

1. Whether the proposals submitted by Consultec and EDS met the mandatory requirements of the Request for Proposals, and, if not, whether the proposal submitted by GTE met the mandatory requirements; (2) Whether the evaluation of the proposals by HRS was infected with substantial, material irregularities which resulted in an arbitrary scoring and evaluation process; (3) Whether GTE has standing to contest the award of the contract to Consultec; and (4) Whether GTE has waived any of the issues it has raised due to its failure to timely challenge the terms and conditions of the Request for Proposals.

BACKGROUND

By Formal Written Protest and Request For Administrative Hearing, dated July 24, 1987, GTE Data Services, Inc. (GTE) protested the decision of the State of Florida, Department of Health and Rehabilitative Services (HRS) to award a contract for the development and operation of the Florida Medicaid Management Information System (FMMIS) to Consultec, Inc. (Consultec), under a Request For Proposals (RFP) issued January 6, 1987, by HRS under RFP No. HRS/PDDM87-01, entitled "Florida Medicaid Program Fiscal Agent Services."

The Formal Written Protest alleged that GTE was one of three contractors which submitted proposals in response to the RFP; that the proposal submitted by Consultec failed to meet the mandatory requirements of the RFP and should have been rejected; that the other proposed contractor, EDS Federal Corporation (EDS) also submitted a proposal that failed to meet the mandatory requirements of the RFP; and that GTE was in fact the only proposed contractor which submitted a proposal meeting all of the mandatory requirements of the RFP. GTE further alleged that substantial, material irregularities occurred in the evaluation and ranking of the proposals by HRS, and as a result of these irregularities, GTE's proposal received the lowest ranking of the three proposals. GTE alleged that had the irregularities not occurred, GTE's ranking would have been either first or second.

Specifically, GTE alleged that Consultec's proposal was unresponsive to the mandatory requirements of the RFP in the

following respects: (1) By submitting the financial statements of its parent corporation, General American Life Insurance Company, Consultec failed to comply with Section 70.420 of the RFP which required that the proposed "contracting entity" submit financial statements for the past three years; (2) Consultec failed to comply with Sections 90.500 and 90.510 of the RFP, which required that the business proposal and the technical proposal be consistent, in that Consultec "front-end loaded" its proposal so that monies properly allocable to operation of the system over the life of the contract were allocated to the design and implementation phases; (3) Section 60.100 of the RFP required

that each corporate offeror be duly registered to do business in Florida, and Section 70.100 required that the transmittal letter contain the Florida corporate charter number for the offeror.

However, the corporation registered under the charter number provided by Consultec is "General American Consultec, Inc."; (4) Consultec failed to comply with Section 70.100 of the RFP, which required that each offeror's transmittal letter identify and explain each deviation from the requirements of the RFP, in that Consultec failed to identify any of the above deviations; and (5) Consultec failed to comply with Section 80.010, which required that each offeror submit price information in the form of pricing schedules contained in the RFP, in that Consultec modified several of the pricing schedules in its proposal so that the cost categories submitted were different from those required.

GTE alleged that EDS's proposal was unresponsive to the mandatory requirements of Section 50.900 of the RFP, which required that complete ownership rights in the system be transferred to the State, in that EDS proposed to supply one element of the FMMIS by using a subcontractor's "proprietary" software. By amendment to the Formal Written Protest, GTE alleged that EDS also failed to comply with the mandatory requirements of Section 70.420, which required that the "contracting entity" submit the required financial statements.

GTE also alleged that the evaluation of the proposals by HRS was infected with substantial, material irregularities in the following respects: (1) Although Section 90 of the RFP contained a detailed statement of the criteria by which technical proposals would be evaluated and scored, HRS used a scoring manual to evaluate the proposals which contained criteria that were materially different than those set forth in the RFP; (2) the criteria scored in accordance with the manual were "weighted" by a multiplier to reflect the importance of the particular factor, but the weighting factors were not contained in the RFP and were known only to the RFP Issuing Officer who was to apply the weighting factors to the raw scores submitted by the HRS evaluation committee; (3) The RFP did not indicate that the evaluation of many of the criteria contained in the manual would be based on

information received by telephone from the references provided by the offerors, and there was little or no consistency in the manner in which the references were contacted and their responses evaluated or checked for accuracy, resulting in the scores for the evaluation criteria being assigned arbitrarily and presenting the appearance of bias in the evaluation process; and (4) HRS failed to evaluate the contract costs using present value methodology, as required by Section 287.0572, and due to the "front-end loading" of Consultec's proposal, the present value of all payments to be made under GTE's proposal would be lower than the present value of the payments to be made to Consultec.

Based on the allegations set forth in its petition, GTE requested that HRS either award the contract to GTE or reject all proposals and issue another RFP.

On August 3, 1987, HRS referred the petition to the Division of Administrative Hearings for further proceedings, and on August 4, 1987, Consultec moved to intervene. In its petition to intervene Consultec raised two additional issues: (1) Whether GTE has standing to challenge the award of the contract to Consultec; and (2) Whether GTE's proposal met the mandatory requirements of the RFP. Consultec was granted leave to intervene on August 5, 1987. EDS did not protest the agency's intent to award the contract to Consultec, and did not move to intervene in this proceeding.

At the hearing, GTE called as its witnesses Dr. Elton Scott, an expert in finance and statistics; Phyllis Clark, a data processing operator for The Computer Company (TCC) and an expert in data entry staffing and productivity; Mike Brandenburg, GTE's Medicaid Project Manager; and George Strickland, Contract Manager for HRS Fiscal Agent Services and an HRS evaluator. GTE's exhibits 1-8 and 10-17 have been admitted into evidence. The exhibits included the depositions of Tom Arnold, the acting Deputy Assistant Secretary for Medicaid with HRS; Tom Wallace, Administrator of the Medicaid Program Analysis Section of HRS; Richard Martz, Senior Vice President of Consultec; Roy E. Stockstill, an HRS employee and member of the evaluation team; Diana Flagg, an HRS employee and member of the evaluation team; George Strickland; Joel Schnedler, Director of the Medicaid Management Information System in the State of Missouri; Jeff Harriott, Medicaid Management Information System Coordinator in the State of Montana; Helen Condry, the Managing Director of the Medicaid office in West Virginia; Ruth Fischer, Medicaid Director of the State of Delaware; and Robert Kelly, Director of Medical Assistance Operations for the State of Pennsylvania. Petitioner's exhibits 18-22 were rejected, and Petitioner's exhibit 9 was withdrawn.

HRS called as its witnesses Dr. James T. McClave, an expert in econometrics, Tom Arnold and Tom Wallace. HRS's exhibits 1-83 were received into evidence and included the depositions of Merrill Moody, the Assistant Secretary for Administration of HRS, and Larry W. Platt, the Contracts/Budgets Specialist with the Health Care Financing Administration in the Department of Health and Human Services.

Consultec called as its witnesses Dr. James E. Pitts, an expert in economics, and Don Bruns, the Consultec Account Manager for the Missouri Medicaid Account and an expert in data entry staffing. Consultec's exhibits 1-3 were received into evidence, including the deposition of Dean E. Williams, Executive Vice- President of General American Life Insurance Company and Chairman of the Board of Consultec.

A 9-volume transcript of the hearing was filed on September 14, 1987, and all parties timely filed proposed findings of fact and conclusions of law. A ruling on each of the proposed findings of fact has been made in the appendix to this order.

FINDINGS OF FACT

General Background of the RFP

1. On January 6, 1987, HRS released a Request for Proposals for Florida Medicaid Program Fiscal Agent Services (RFP) for qualified organizations to implement and operate a certifiable Medicaid Management Information System (MMIS) for the Florida Medicaid Program. There were several reasons why HRS wanted a new MMIS system for the Florida Medicaid Program. First, the current system was more than ten years old and, although enhanced and modified numerous times, had been determined to be archaic. Second, the federal government indicated to HRS that it would not participate in future funding of the operation of the current system. Third, the federal government recommended that Florida purchase a new system.

   
   

2. In February 1986, HRS began the process of preparing the RFP to be used in selecting the fiscal agent for the new MMIS. The process began with the development of an Advanced Planning Document (APD). Since the federal government pays for the large majority of Medicaid services, the federal Health Care Financing Administration (HCFA) of the Department of Health and Human Services (HHS) is very much involved in the various stages of the state procurement process. The purpose of the APD, which describes in detail the planned procurement process, is to obtain federal approval of the procurement process proposed by the state to ensure federal financial participation. The APD was submitted to and approved by HCFA.

3. After approval of the APD, HRS contracted with Peat, Marwick, Mitchell and Company-Compass Consulting Group (PMM Compass) for consultant services regarding HRS's Medicaid fiscal agent procurement. PMM Compass is a nationally known consulting firm in Medicaid procurements. Its function was to review the proposed evaluation section of the RFP and to prepare a detailed evaluation plan, including written evaluation instruments and an evaluation manual, evaluation procedures, and evaluation training and materials, which would be used in evaluating the fiscal agent business and technical proposals.

   
   

4. After the RFP was prepared, it was submitted to HCFA for approval. HCFA oversees federal financial participation in the Medicaid program and reviews state RFP's for MMIS systems to ensure that federal acquisition regulations have been met. The HCFA approved the RFP on November 28, 1986. On December 8, 1986, the Information Technology Resource Procurement Advisory Council of the Department of General Services approved the RFP.

   
   

5. On January 6, 1987, the RFP was issued. Section 60.800 of the RFP provided that any party adversely affected by the bid solicitation must file a notice of protest within 72 hours after receipt of the RFP. No one filed a protest contesting any of the provisions of the RFP.

   
   

6. On April 6, 1987, proposals were received from the following three offerors: Consultec, Inc. (Consultec), EDS Federal Corporation (EDS), and GTE Data Services, Inc. (GTE), subcontracting with The Computer Company (TCC).

   
   

   The RFP

   
   

7. The RFP was issued for the procurement of fiscal agent services for the Florida Medicaid Program. The contractor chosen will serve as the HRS fiscal agent to administer the state's Medicaid program. The contractor must furnish all computer hardware, computer software, personnel, and other necessary resources to process approximately 24 million Medicaid claims each year and to keep current track of all Medicaid providers and recipients. The contractor must design and implement the computer and personnel systems to provide these services, must implement necessary changes to the system during the life of the contract, and must perform certain tasks to turn the system over to the state or to the new contractor at the end of the contract term. The total dollar amount paid during the contract will be approximately 45 to 50 million dollars.

8. The RFP is a two-volume document containing approximately

   500 pages, including the Appendix which is Volume II. The RFP

   consists of nine sections which are numbered 10, 20, 30, and so forth through 90. Section 10 provides an administrative overview; Section 20 provides a summary of the present system; Section 30 outlines the scope of the work required setting forth the responsibilities of the contractor and of the state; Section 40 sets forth the Florida MMIS System requirements; Section 50 contains the terms and conditions of the contract; Section 60 sets forth the procurement procedures; Section 70 contains the required contents of the technical proposal, which includes sections concerning corporate background and experience, project organization and staffing, project management and control, work plan and schedule, MMIS system description, and data processing; Section 80 sets forth the required content and format of the business proposal, which contains each offeror's price information; and Section 90 relates to the manner in which the proposals will be evaluated.

   
   

9. The RFP provided that the proposal should be submitted in two parts: the technical proposal and the business proposal. The technical and business proposals had to be sealed separately, though submitted simultaneously, and would be open at different stages. The technical proposals were opened on April 6, 1987; the business proposals were opened on June 15, 1987, after scoring of the technical proposals was completed. Each technical proposal was several volumes in length.

   The Evaluation Process

   
   

10. The evaluation process was conducted in accordance with the formal evaluation plan developed by the RFP Project Director, Tom Arnold, and PMM Compass. Section 90 of the RFP set forth the manner in which proposals would be evaluated. The evaluation was conducted in five phases: Phase 1, Evaluation of Mandatory Requirements of Technical Proposals; Phase 2, Evaluation of Technical Proposals; Phase 3, Evaluation of Mandatory Requirements of Business Proposals; Phase 4, Evaluation of Business Proposals; and Phase 5, Ranking of Proposals. The way in which the proposals would be evaluated in each of the five phases was described in Section 90 of the RFP.

    Phase 1

    
    

11. The first phase of the evaluation process was to review the technical proposals submitted by the offeror to ascertain whether the proposals complied with all the mandatory requirements of the RFP. The purpose of Phase 1, as stated in Section 90.200 of the RFP, was to determine whether each technical proposal was sufficiently responsive to the RFP to permit a complete evaluation. This phase of the evaluation was performed on a

    "pass-fail" basis and was conducted immediately following the

    proposal due date. Section 90.200 of the RFP lists the 27 questions that would be used to determine whether the technical proposals met the mandatory requirements of the RFP. HRS considered that an offeror met the mandatory requirements for the technical proposals if an affirmative answer could be given to all

    27 questions.

    
    

12. The 27 questions were divided into two categories, proposal submission and technical proposals. The questions under the proposal submission category were questions such as the following:

    
    

    1. Was the proposal received by HRS no later than 2:00 P.M. (Eastern Standard Time) on April 6, 1987?

    2. Did the vendor submit separate, sealed business and technical proposals and the required proposal bond?

    3. Is this the only proposal? (Alternate proposals not allowed).

    4. Are there fifteen (15) copies of the technical proposal?

    5. Does each copy of the technical proposal contain the required transmission letter?

       
       

       The questions under the technical proposal category were simply questions to ensure that each of the sections required to be included in the technical proposal had in fact been included.

       There were eight questions to correspond to the eight sections that were required. Each question was worded in the same manner, such as, "Is a Corporate Background and Experience section included?

       
       

13. All three offerors submitted technical proposals that were determined to be sufficiently responsive to the RFP to permit a complete evaluation. Each offeror received a "pass" designation for all questions except GTE. GTE did not receive a pass on Question No. 4, which required that 15 copies of technical proposal be submitted. GTE submitted only 14 complete copies of its technical proposal by the deadline. However, HRS determined this was a minor irregularity, and GTE was allowed to submit the missing volume of its technical proposal the following day. In the appendix to the RFP a "minor irregularity is defined as follows:

    
    

    Minor irregularities are those exceptions which will not have an adverse effect on costs or performance.

14. The first phase of the evaluation process was conducted by Tom Arnold, Tom Wallace, and Barbara Thrower of HRS. This phase was completed within 3 or 4 hours after the proposals had been opened. The mandatory requirements portion of the HRS evaluation manual was used in determining whether each offeror met the mandatory requirements. The same 27 questions listed in the RFP were contained in the evaluation manual. The evaluators were instructed in the manual to assign a "pass" score to each item for which their response to the question defined in the item is "yes."

    Phase 2

    
    

15. After determining that all of the technical proposals met the mandatory requirements and were sufficiently responsive to permit a complete evaluation, Phase 2 of the Evaluation Process was begun. The purpose of Phase 2 was to measure the individual merit of each technical proposal in each of several areas according to preestablished criteria. A maximum of 2,000 points could be received for each technical proposal. The basic categories evaluated and their maximum number of points were:

    
    

    Corporate Background and Experience	200	pts.
    Project Organization and Staffing	225	pts.
    Technical Approach	225	pts.
    Project Management and Control	150	pts.
    Work Plan and Schedule	200	pts.
    MMIS Description	800	pts.
    Data Processing	200	pts.

    
    

16. Proposals were evaluated through four separate methods:

    (1) Review of the written response to the RFP; (2) Oral presentation; (3) Visits to sites where each offeror operated a baseline system; and (4) Reference checks.

    
    

17. The RFP advised the offeror of the scoring system for the technical proposals and the ways in which information would be obtained. The offerors were advised by the RFP that detailed evaluation criteria had been developed for each of the categories listed. Further, for each of the categories listed, the RFP contained a paragraph which was meant to "describe generally the factors covered by the detailed criteria."

    
    

18. Section 90.390 of the RFP set forth the manner in which points would be assigned to the technical proposal. Section

    90.390 reads as follows:

    
    

    Scoring of the seven areas in each technical proposal shall be done using preestablished criteria and predefined scoring values. Each criterion within an area will be

    independently scored by evaluators. Indivi- dual raw scores from the evaluators, for each criterion, for each offeror's proposal,

    will be averaged then multiplied by a predetermined weight to get a weighted point value for that criterion. Scoring weights will not be available to the evaluation committee, but will be applied to raw scores by other designated staff. Weighted point values for all criteria in an offeror's proposal will then be tallied. The final technical score for each proposal is then calculated using the following methodology:

    
    

    A maximum of two thousand (2,000) weighted points will be assigned to the highest passing technical proposal. . . .

    
    

    The formula to be used to award all other offerors a proportional amount of points was also included.

    
    

19. The formal evaluation and initial scoring of the technical and business proposals was performed by a Technical Evaluation Committee (Evaluation Committee) appointed by the Secretary of HRS. The Committee consisted of eleven members with backgrounds and experiences in MMIS program development, data processing, and financial analysis. While the members of the Evaluation Committee did not formulate the evaluation criteria which were used, they were well-qualified to apply the evaluation criteria provided. Further, on March 24-27, 1987, prior to the receipt of Proposals on April 6, HRS Sponsored a three and one- half day training session for the members of the Evaluation Committee. Judith Hansen, a consultant with PMM Compass, headed the training sessions. During the course of these training sessions, the evaluators went over each of the criteria on which proposals were to be judged to ensure that all of the evaluators understood the scoring criteria in the categories they would be scoring.

    
    

20. Ten of the Evaluation Committee members were responsible for evaluating the technical proposals in Phase 2 of the evaluation process. The individuals were divided into subgroups representing each of the seven categories to be evaluated. Five of the categories had three evaluators. The MMIS Description category had six evaluators, and the Technical Approach category had five evaluators. None of the members of the Evaluation Committee was an evaluator in each of the seven categories; the most categories scored by any one evaluator was four.

21. Each member of the Evaluation Committee scored each of the proposals in the categories to which they were assigned; however, to ensure that each proposal was judged solely by the detailed evaluation criteria provided rather than against each other, an evaluator was permitted to have only one proposal before him to score at a time. Evaluators were also instructed not to discuss their scoring with the other evaluators but to independently score each proposal.

    
    

22. The Evaluation Committee began reviewing the technical proposals on April 7, 1987, the day after proposals were submitted. Proposals were evaluated by the committee members at the Government Employee's Credit Union, a location away from their normal work place. Each evaluator was given a technical proposal and was allotted two days simply to read the particular proposal and become familiar with it. They then began to evaluate the proposal in the categories assigned. When the evaluators had finished the first proposal, they turned in both the proposal they were reviewing and their scoring manual for that proposal and received another offeror's technical proposal to read and evaluate.

    
    

23. Each evaluator was given a separate scoring manual for each of the offerors which contained the criteria to be used in scoring the proposal in the assigned categories. Each category had criteria to be scored. Different categories had a different number of criteria. For example, the Corporate Background and Experience category had fifteen criteria; the Project Management and Control had eight; and the MMIS Description had 49 criteria. Each criterion in every category was to be scored from zero to ten by the evaluator. A zero was to be given when the offeror had omitted the particular aspect of the area or did not establish the capability to perform it. One to three points was "poor," four to six points was "average," seven to nine points was "good," and ten points was excellent. The scoring manual was organized with the criterion to be scored, and matters that might be considered under that criterion, on the left-hand page. The scoring sheet for that criterion was on the right-hand page. The scoring sheet contained a space for the numerical points awarded and also provided space for comments to indicate the reason for the score given.

24. All proposals were initially scored based on the information provided in the proposals. The scores were Subsequently reviewed and revised, if appropriate, as additional information became available through the reference checks, the oral presentations, and the on-site visits. The evaluations of the technical proposals took over two months to complete. Throughout this period, but after the initial scoring was completed, debriefing sessions were conducted with the evaluators

    to ensure that the evaluators neither misunderstood nor overlooked relevant information from the proposals, reference checks, oral presentations, or site visits.

    
    

25. Reference checks were conducted to verify both the corporate capabilities of the offeror and the qualifications of proposed senior project personnel. The reference checks were conducted by two members of the Evaluation Committee, Diana Flagg and George Strickland. These two individuals were chosen to conduct the reference checking because of their skills and abilities--they both had experience in contract management functions and dealing with state agencies-- because their workload was such that they had the time available.

    
    

26. Ms. Flagg and Mr. Strickland were given a reference check manual that had been prepared as part of the evaluation package which contained the questions to be asked; however, they were not told which references to call. After discussing the matter, they decided to contact three (3) different states as corporate references for each of the bidders. They used the following criteria to determine which states to contact: (a) whether the state used the same baseline system proposed by the offeror for Florida; (b) whether the state had recent experience with the offeror; and (c) whether the state had experience with the development and operations of MMIS systems that would be similar to Florida's. The term "baseline system" refers to the proposed subsections of a certifiable, operational MMIS. An MMIS is comprised of six to seven federally required general system design subsections. The RFP defined "Baseline System" as "[t]he basic systems code used for the FMMIS consisting of, at the minimum, the Claims Processing Subsystem, the Reference Subsystem and the MAR Subsystem." The RFP required offerors to propose a certifiable operational MMIS and stated that the baseline system had to be operational in some state. Therefore, contacting the states that had the same or a similar baseline system as that proposed for Florida was the important factor in choosing the states to be contacted. Based on the three criteria stated, HRS decided to contact Montana, Ohio and Washington for Consultec; Georgia, Tennessee and Virginia for GTE/TCC; and Arkansas, Kentucky and Georgia for EDS.

27. The corporate reference checks were conducted in the following manner: After deciding the states to be contacted, Ms. Flagg and Mr. Strickland jointly called the person listed by the offeror as the corporate reference for that state. Upon reaching the listed person, Mr. Strickland asked the corporate reference the predetermined questions in the reference check manual regarding that state's experience with the offeror. The reference was asked to rate the offeror on a scale of 0 to 4 and to give comments supporting the score where appropriate. To insure

    accuracy, both Ms. Flagg and Mr. Strickland recorded both the scores and the comments given by the reference for each offeror. After each call was completed, they compared their notes to make sure the reference's scores and comments were accurately transcribed.

    
    

28. The personnel reference checks were conducted by Ms. Flagg and Mr. Strickland in the same manner. The personnel references called were those listed as references in the proposal for the individual, except in one case the listed reference referred the evaluators to another individual who had worked more closely with the person being checked.

    
    

29. After the corporate and personnel reference checks were completed, the reference check manual containing the information received was made available to all of the evaluators for use in scoring the proposals.

    
    

30. Oral presentations by each offeror were held on May 26, 27, 28, 1987. The orals provided the offerors with a chance to present their proposals and provided the committee with an opportunity to obtain answers to questions developed during their initial review of the proposals, to observe the offerors in action, and to request clarification of an offeror's proposal. The offerors were advised at the beginning of the presentation that any answers given at the oral presentation would be considered part of the proposal.

    
    

31. In addition to the oral presentation, six members of the Evaluation Committee, plus the project director and the evaluation oversight manager, made visits to one installation site where each offeror's baseline system was operational. The site visits gave the evaluators an opportunity to see the offerors in action and to speak with state personnel in person about the offeror. The following site visits were made:

    
    

    June 1-2 EDS

    Little Rock, Arkansas

    
    

    June 3-4 GTE Data Services/The Computer Company

    Nashville, Tennessee

    
    

    June 8-9 Consultec, Inc.

    Jefferson City, Missouri Columbus, Ohio

    
    

    For Consultec, two locations rather than one were visited because while Ohio utilizes the Consultec baseline system bid in Florida, Consultec does not-run the system. In Missouri, on the other

    hand, Consultec is operating an MMIS system originally designed by EDS. Thus, by visiting two locations, HRS was able to evaluate Consultec's baseline system and analyze Consultec's operations and capabilities as a fiscal agent.

    
    

32. The information received as a result of the site visits was recorded in the Site Visits Manual for each offeror. The manual contained the questions to be asked at each site and was part of the evaluation package. As with the Reference Check Manual, the Site Visits Manual was made available to all of the evaluators.

    
    

33. On June 15, 1987, after the scoring of the technical proposals was completed by the Evaluation Committee, the raw scores assigned by each evaluator for each criterion were transferred to a summary scoring document. The scores were averaged then multiplied by the weight factor assigned to that criterion. The weighted scores for each of the criteria in each category were then added together, providing a total score for category. The following are the weighted scores received by each offeror, rounded to the nearest whole number:

received 2,000 points for its technical proposal. The others received a comparable point value determined by dividing the offeror's score by EDS's score and multiplying the result by 2,000. Consultec received 1,828 points, and GTE received 1,747 points. The completed technical evaluation points were locked in a bank vault and were not disclosed.

1. On June 15, 1987, the business proposals were publicly opened. Prior to that time the sealed business proposals had been kept in the vault. Thus, no one knew the contents of the business proposals while the technical proposals were being evaluated. At the public opening, the business proposal summary pricing schedules were read to all offerors and posted at HRS.

   
   

   Phase 3

   
   

2. Following the public opening of the business proposals, HRS reviewed the business proposals for compliance with the mandatory requirements for business proposals contained in the RFP. HRS conducted this "pass-fail review" of the business proposals by determining whether the business proposals submitted by each offeror complied with the requirements of Section 90.400 of the RFP. The first two paragraphs of this Section read:

   
   

   The purpose of this phase is to determine if the business proposal is sufficiently responsive to the RFP to permit a complete evaluation.

   
   

   The following items will be reviewed as mandatory requirements:

   
   

   Section 90.400 of the RFP then lists 19 questions regarding the business proposals submitted by offerors. HRS considered an offeror as having met the mandatory requirements for the business proposals if an affirmative answer could be given to all 19 questions contained in Section 90.400. All three offerors submitted business proposals which were determined to have met the mandatory requirements for business proposals contained in the RFP.

   Phase 4

   
   

3. The business proposals then underwent a more detailed review by three of the HRS evaluators, all of whom were accountants and two of whom were CPAs. This review was to determine whether the business proposal for each offeror was consistent with that offeror's technical proposal and whether the calculations in the pricing schedules contained in the business proposals were accurate. For each offeror, the overall business proposal was determined to be consistent with the technical proposal. Minor arithmetic errors and inconsistencies were noted by the evaluators on each of the business proposals. For example, GTE's installation task salaries appeared to be unreasonable compared to the effort required to complete the tasks proposed in the technical proposal. Although all three evaluators noted this

   problem, it was determined that the inconsistency was not significant enough, considering the entire project, to merit rejection of the bid. The evaluators noted that Consultec had combined the building and utility categories on the pricing schedules, but found this also to be insignificant Section 90.520 of the RFP provides as follows:

   
   

   "Any business proposal that is incomplete or in which there are significant inconsisten- cies or inaccuracies may be rejected by HRS. (e.s.)

   
   

4. As specified in the RFP, points were awarded for the business proposal as follows: the lowest evaluated operational price, the total fixed price per claim for the five-year contract period, was awarded 850 points; the lowest total installation price, the sum of the planning, design and development, acceptance testing and implementation tasks, was awarded 50 points; the lowest systems personnel billing rate was awarded 50 points; the lowest total field representative price was awarded 25 points; and the lowest hourly cost of CPU time was awarded 25 points. The other offerors in each category were awarded a proportional share of the maximum points allowable.

   
   

5. The price per claim category received 850 of the 1,000 possible points because this payment represents the most important work to be performed under the contract and because payment will occur during at least five years of the contract. The fixed price per claim is of vital importance to the state because it allows the risk of claims volume variance to be transferred to the contractor. A 10 million variance in annual claims volume, from

   19 million to 29 million was established in the RFP, with provision for dealing with claims volume outside the range parameters. There is considerable risk for abnormal claims variance due to program changes that can occur during the life of the contract such as federal establishment of new eligibility groups, new services, or redefined claims definitions. The state legislature may require additional Medicaid services or additional eligibles. However, a fixed price per claim limits the cost of handling increased processing services.

   
   

6. The following table displays the points awarded for the business proposals by offeror:

   
   

   Consultec EDS GTE

   
   

   Installation Price	23	43	50
   	($7,439,321)	($4,030,129)	($3,433,822)

   Price Per Claim	850	620	689
   	($.2652)	($.3637)	($.3270)

   
   

   Composite Hourly Rate 29 21 50

   for Systems Personnel ($95/hr) ($134/hr) ($55/hr)

   
   

   Provider Field Reps	23	25	21
   for Five years	($1,892,820)	($1,810,380)	($2,124,450)
   Price for CPU Time	25	13	4
   	($1,100)	($3,625)	($400)

   
   

   TOTAL 951 722 814

   
   

   Phase 5

   
   

7. After the proposals were rated by the Technical Evaluation Committee, points awarded to the business proposals were added to the technical points to determine the ranking and recommendation of the committee. The ranking and recommendation of the committee along with supporting materials were conveyed to the Steering Committee, composed of four HRS executives. The Proposal Evaluation Committee's Report to the Steering Committee provided a 116 page detailed summary of the overall evaluation results, concluding with the Evaluation Committee's ranking of proposals, which were as follows:

   Consultec EDS GTE

   
   

   Technical Proposal	1,828	2,000	1,747
   Business Proposal	951	722	814
   Total	2,779	2,722	2,561

   
   

   Ranking 1 2 3

8. In addition to receiving the Evaluation Committee's report, the Steering Committee, through Mr. Moody, one of its members, became aware of a letter written by Senator Grant to the Secretary of HRS concerning the evaluation of the proposals. Attached to the letter was a position paper prepared by GTE which attempted to compare the business proposals submitted by Consultec and GTE by considering the "future value of funds" or "time value of money" based on interest that could be earned on the difference between Consultec's installation price and GTE's installation price. Mr. Moody, a CPA, had been assigned the task of responding to the letter and the position paper. Mr. Moody raised the topic with the Steering Committee and also explained the deficiencies in the GTE analysis.

9. After a thorough review of the Evaluation Committee's report, the Steering Committee was satisfied with the evaluation process. The Steering Committee unanimously recommended the selection of Consultec as the contractor for fiscal agent services for the State of Florida. The Secretary of HRS concurred with the recommendation, and by letter dated July 9, 1987, the offerors were notified of the intent to award the contract to Consultec. GTE filed its notice of protest on July 15, 1987, and its Formal Written Protest on July 24, 1987.

   
   

10. After announcing its decision to award the contract to Consultec, HRS informed HCFA of its choice and submitted to HCFA a revised APD reflecting the costs contained in Consultec's business proposal. After reviewing this document and, having previously approved the evaluation process used in selecting the successful offeror, HCFA informed HRS that it did not need any additional information in order to approve the contract award and that the initial review indicated that approval would be granted at the appropriate federal financial participation rate. However, HCFA cannot give the state final approval while the contract award is being disputed.

    
    

    DID THE PROPOSALS SUBMITTED BY CONSULTEC MEET THE MANDATORY REQUIREMENTS OF THE RFP?

    
    

    1. FINANCIAL STATEMENTS

       
       

11. Among the several sections required in each technical proposal was one entitled "Corporate Background and Experience." The required contents of this section were set forth in Sections

    70.400 through 70.440 of the RFP. Section 70.400 stated:

    
    

    The Corporate Background and Experience section shall include for the offeror and each sub-contractor (if any): details of the background of the company, its size and resources, details of corporate experience relevant to the proposed fiscal agent contract, financial statements, and

    a list of all current or recent Medicaid or related projects.

12. The detailed requirements for each of the required elements listed in Section 70.400 was contained in the subsequent sections to the RFP. The requirement for financial statements was detailed in Section 70.420 as follows:

    
    

    Financial statements for the contracting entity shall be provided for each of the last three years, including at a minimum:

    • balance sheets

    • statement of income

    • statements of changes in financial position

    • auditors' reports

    • notes to financial statements

    • summary of significant accounting policies

      
      

      The word "shall" is defined in the Glossary of the RFP as "[i]ndicates a mandatory requirement or condition to be met."

      
      

13. After the RFP was released but prior to the submission of bids, HRS provided an opportunity for all prospective offerors to submit written questions to HRS regarding the terms and conditions of the RFP. After receiving these questions, HRS sent all prospective offerors both the written questions submitted by the various prospective offerors and HRS' written responses to them. During this process, one bidder, EDS, submitted the following question to HRS:

    
    

    Since our parent corporation does not publish financial statements for each of its individual subsidiaries, will the financial statements for the parent company be satisfactory?

    
    

    In response, HRS provided all prospective bidders with the following answer:

    
    

    It is the department's intent to review the financial stability of each offeror.

    Offerors should present appropriate documen- tation to meet this requirement.

    
    

    From the answer given, it is apparent that HRS did not intend to preclude the submission of consolidated financial statements but did intend that each offeror should include "appropriate documentation" to allow HRS to review, and evaluate, the financial stability of the offeror.

    
    

14. Like EDS's parent corporation, Consultec's parent, General American Life Insurance Company (General American), has a policy of not releasing the financial statements of its

    subsidiaries. Based on this policy and HRS' written response to the EDS question, Consultec submitted with its proposal the consolidated financial statements of its parent, General American. Consultec also submitted an annual report showing Consultec achieved a before tax income of $3.4 million in 1985. In its response to the RFP, Consultec indicated that the financial resources of General American backed any agreement Consultec entered into, as follows:

    
    

    The considerable resources of General American ensure Consultec's financial stability. Additionally, our access to the resources of our parent company (including manpower, data processing facilities, and financial support) ensures

    the successful performance of any contractual obligations. Because of this support,

    Consultec has greater capacity now

    than at any time in its corporate history to meet any and all contractual requirements and commitments.

    
    

    However, the General American consolidated, audited financial statements contained in the Consultec proposal contained no ascertainable information about the separate financial condition or financial performance of Consultec.

    
    

15. Section 90 of the RFP explained how the technical proposals would be evaluated and specified what items would be considered "mandatory requirements." Technical proposal Mandatory Requirement No. 21 asks only the general question, "Is a Corporate Background and Experience section included? (Section 70.400)". A Corporate Background and Experience section was included in Consultec's submission. The detailed evaluation of criteria under the Corporate Background and Experience section occurred under the Phase 2 Evaluation of Technical Proposals. Oral presentations were considered a part of the technical proposal evaluation process.

    
    

16. During Consultec's oral presentation, HRS asked Consultec to clarify its proposal by stating whether General American would be financially responsible for the Florida MMIS project. In a follow-up question, Mr. Tom Arnold asked Consultec if it would consider either submitting separate financial statements for Consultec or agreeing that General American would guarantee Consultec's performance if Consultec were awarded the contract. Consultec responded to this request by submitting a letter to HRS wherein Consultec stated that General American was

    willing to guarantee Consultec's performance under the contract. This letter was signed by Richard Martz, Senior Vice President of Consultec.

    
    

17. RFP specifically stated that the state reserved the right to request amendments to the proposals or to waive minor irregularities. The purpose of the oral presentations was to clarify any information provided in the technical proposals. Further, the financial statements were considered in scoring only one criterion in the Corporate Background and Experience section which was worth a total of 10 points. Finally, GTE included in its proposal the financial statements of its parent, GTE Corporation, and all three evaluators considered the financial strength of GTE's parent in award points for that criterion. GTE also scored more points in this area than Consultec. Consultec received no material advantage over other offerors by submitting consolidated financial statements.

    
    

18. If Consultec's failure to include its own financial statements in the technical proposal can be considered a deviation at all from the requirements of the RFP, in light of HRS's clarification of those requirements, it certainly cannot be considered a deviation that would require the rejection of its proposal.

    
    

    1. CONSISTENCY OF THE BUSINESS AND TECHNICAL PROPOSALS

       
       

19. Sections 90.500 and 90.510 of the RFP provide:

    
    

    90.500.--Each business proposal successfully meeting the mandatory requirements reviewed in Phase 3 will be examined to determine if the business proposal is consistent with the technical proposal and its calculations are accurate.

    
    

    9O.510--Any business proposal that is incomplete or in which there are significant inconsistencies or inaccuracies may be rejected by HRS. The state reserves the right to reject all proposals.

    
    

20. In its Formal Protest, GTE alleged that Consultec's business and technical proposals were not consistent because Consultec "front-end loaded" its proposal. "Front-end loading" means moving a cost from the later part of a contract to the front or charging for a cost that will not be incurred until later in the contract.

21. Section 80 of the RFP describes the RFP's requirements for the business proposals. In the business proposal, each offeror sets forth the costs of its proposed FMMIS. The RFP directs each offeror to include in its business proposal "a firm fixed price for each of the requirements contained on the pricing schedule. . . ." One of the five requirements is installation costs.

    
    

22. Section 81.210 of the RFP states that Pricing Schedule B of the business proposal summarizes the four major tasks involved in the installation phase of the Florida MMIS system as described in the RFP. Those four major tasks are described in the RFP at Sections 30.120 through 30.450. The offeror is directed to "schedule the fees for each of these tasks on the detailed Schedules B-1 through B-4" and is told that "[t]hese fees will form the basis from which the installation price is determined." Section 80.120 similarly states that "the installation price will be calculated as the combined sums of the prices of the Planning Task, Design and Development Task, Acceptance Testing Task and the Implementation Task."

    
    

23. As required by the RFP, Consultec submitted a business proposal including Pricing Schedule B, which set out the price components of its installation price by task. One line item of the price components is labeled "computer resources." GTE's argument is that the cost of certain computer equipment (computer hardware and software) which Consultec included in the installation price under "computer resources," should have been allocated over the life of the contract and included in the operational price.

    
    

24. Consultec's total price bid for the installation phase was $7,439,321, as compared to $4,030,129 for EDS and $3,433,822 for GTE. These differences are largely explained by differences in the cost item, "computer resources." These costs total

    $3,049,809 for Consultec, $1,130,856 for EDS, and $608,493 for GTE.

    
    

25. The treatment of the acquisition price of the computer equipment to be purchased by Consultec is not consistent with generally accepted accounting practices. Proper accounting practices would distribute the cost of the equipment over its useful life rather than charging the entire purchase price as an initial cost in the installation period. Nevertheless, nothing in the RFP required the use of "generally accepted accounting practices" in allocating costs. Nothing in the RFP required that the costs of purchasing the computer equipment be made a part of the operations costs, by allocation over the life of the contract, as opposed to being charged as an installation cost at the time of purchase. Section 30.220 specifically states that it is the

    contractor's responsibility in carrying out the Design and Development Task, described as part of the installation phase, to [a]cquire the equipment to be used for the design, development, implementation, and operation of the new system."

    
    

26. GTE has failed to show how Consultec's business proposal was inconsistent with its technical proposal. The purpose of requiring consistency between the two proposals, generally, is to ensure that each bidder has sufficient funds in its business proposal to perform the tasks required in the technical proposal. If computer hardware to be used during the life of the contract is purchased during the installation phase, the expense is incurred and paid for at that time, and inclusion of such cost as an installation cost is appropriate.

    
    

27. GTE also argues that Consultec's business and technical proposals are inconsistent because Consultec has failed to provide sufficient data entry operators in their proposal. GTE attempted to establish this shortage through the testimony of Ms. Clark. However, there were discrepancies in her calculations and she was confused in her testimony. Further, her testimony was based on several assumptions that Consultec did not necessarily make or have to make. Finally, Ms. Clark's calculations indicated that Consultec was short 10 data entry operators in the first year of operation, yet Consultec provided 49 data entry operators the first year--the same number provided by both EDS and GTE in their proposals. In short, there was no competent evidence presented to show that Consultec's proposal provided for an insufficient number of data entry operators.

    
    

28. After HRS announced its intent to award the contract to Consultec, HCFA reviewed Consultec's technical and business proposals to determine whether they were consistent with one another. After conducting this consistency review, it was HCFA's conclusion that Consultec's technical and business proposals were consistent.

    
    

    1. PRICING SCHEDULES - CORPORATE REGISTRATION

    
    

29. In its formal protest, GTE alleged that Consultec "modified several of the pricing schedules in its proposals so that the cost categories submitted were different from those required." This was not included as an issue in respondent GTE's prehearing statement, and at the hearing, GTE presented no evidence that any such modifications were material or gave Consultec an advantage.

    
    

30. In its formal protest GTE alleged that the corporate charter number provided by Consultec in its transmission letter was for a corporation named "General American Consultec, Inc."

    This was not included as an issue in GTE's prehearing statement, and there was no evidence presented to support this allegation.

    
    

    WAS THE EVALUATION OF THE PROPOSALS BY HRS INFECTED WITH SUBSTANTIAL, MATERIAL IRREGULARITIES?

    
    

    1. CRITERIA USED IN THE TECHNICAL EVALUATION.

       
       

31. In evaluating the technical proposals, the HRS evaluators used an evaluation or scoring manual which contained the criteria to be used in scoring the technical proposal in each of the seven sections or categories. In its Formal Protest, GTE alleged that the scoring manual used by the HRS evaluators contained criteria and tests which were materially different from those set forth in RFP.

    
    

32. The RFP evaluation criteria for the "Corporate Background and Experience" section of the proposal included, among others: (a) large scale data processing development and implementation experience, (b) medical claims processing experience, and (c) medicaid and MMIS experience. The RFP evaluation criteria for the "Data Processing" section of the proposal included, among others: (a) telecommunications network support, and (b) telecommunications experience.

    
    

33. GTE has no previous MMIS contracts, but is the country's fourth-largest data processing company. It designed and submitted its proposal expecting to be graded on large-scale data processing experience, telecommunications network support and telecommunications network experience. Mr. Brandenburg, a Medicaid project director for GTE, testified that he felt HRS' scoring manual did not give any weight to an offeror's large scale data processing experience or telecommunications network experience even though these were listed as items HRS would consider in the RFP. However, several of the scoring criteria reference communication links, telecommunications network support, telecommunications network experience and number of persons engaged in claims processing operations. Further, in scoring GTE on criteria 8, 13 and 5 under the Data Processing section, the evaluators referred to GTE's section on telecommunciation experience and support.

    
    

34. Section 90 of the RFP made it quite clear that proposals would be evaluated based on preestablished criteria that had been developed for each of the various sections of the technical proposals. The RFP stated that paragraphs 90.320 - 90.380 described "generally" the factors covered by the criteria. In essence, because "large-scale data processing development and implementation experience" was listed as one of the factors that would be covered by the criteria under Corporate Management and

    Experience, GTE assumed that it would be accorded more weight than it was in the evaluation criteria. Mr. Brandenburg felt that too much consideration was given to MMIS experience in the evaluation process and not enough to experience outside the MMIS industry.

    However, section 90.310 of the RFP provides:

    
    

    Offerors should note that the entire evaluation will place considerable emphasis on demonstrated experience directly applicable to MMIS transfer

    or replacement, modification development, and Medicaid fiscal agent operations.

    
    

35. In summary, there was no competent evidence presented to support GTE's allegation that the scoring manual used to evaluate the proposals contained criteria that was materially different than those set forth in the RFP.

    
    

    1. THE EVALUATION PROCESS AND REFERENCE CHECKS

    
    

36. Although the RFP set forth generally the criteria to be used in evaluating the technical proposal, the specific criteria used in evaluating the proposal were not included in the RFP. However, the RFP made it clear to offerors that there were predetermined criteria that would be used. The RFP indicated that information would be obtained from reference checks, from the proposal itself, from site visits, and from oral presentations. The RFP specified that the raw scores from the evaluators for each criterion would be averaged and then multiplied by a predetermined weight to get the point value for each criterion. None of the offerors protested the method of evaluating the proposals. Further, there was no evidence presented to suggest that the use of undisclosed weights was irregular. The initial recommended weights from the evaluation expert, PMM Compass, were modified by the Issuing Officer to reflect the areas most important to Florida, then reviewed with and approved by HCFA officials. Mr. Larry Platt of HCFA confirmed that the use of non-disclosed weights is very typical. Indeed, he had not been involved in any procurements in which weights were disclosed to offerors. He also confirmed that it was customary not to include the detailed evaluation criteria in the RFP.

37. GTE also challenged the manner in which corporate reference checks were conducted. In this regard, Dr. Elton Scott testified that it would have been better if the HRS evaluators had contacted all the states where the offerors had certifiable MMIS systems even though this would result in as many as 18 states being contacted for one offeror and as few as 3 for another. Dr. Scott admitted, however, that if, due to time restraints or other reasons, less than all of the listed references could be

    contacted, it was reasonable to contact those states which used a baseline system similar to the offeror's proposed system for Florida, to contact states with recent experience with the offeror, and to contact states with experience similar to Florida's. Larry Platt has had extensive experience with state RFPs in his position with HCFA and his testimony is accepted. He testified that it was important that an equal number of references be contacted for each offeror and that a state's decision to contact three corporate references for each offeror was reasonable. He further testified that contacting states with recent experience with the offeror and states with the same baseline system were the criteria normally used in determining which states should be contacted as references.

    
    

38. In support of its contention that the corporate reference checks were unreliable due to the number of references contacted, GTE introduced into evidence the depositions of Joel Schnedler, Jeff Harriott, Helen Condry, Ruth Fisher, and Robert Kelly, to show that, had additional references been contacted, GTE's corporate reference checks would have been better. However, with one exception, these individuals are Medicaid officials in states purposefully not contacted by HRS as corporate references. Mr. Schnedler is employed by the State of Missouri, which was not contacted because the baseline system operated by Consultec in Missouri was designed and installed by EDS. Ms. Condry is employed by the State of West Virginia, which was not contacted as a corporate reference for GTE/TCC because TCC's responsibilities in West Virginia are limited--TCC does not perform many of the provider relations and some of the other operations. Ms. Fisher is employed by the State of Delaware, which was not contacted as a corporate reference for GTE/TCC because the baseline system used in Delaware has not been certified by the federal government, a requirement for the baseline system proposed for Florida. Robert Kelly is an employee of the State of Pennsylvania, which was not contacted as a corporate reference for GTE/TCC because the baseline system operated in Pennsylvania was not developed, designed or installed by GTE or TCC.

39. GTE contended that it received lower scores on the corporate background and experience questions dealing with MMIS experience solely because the experience shown in its proposal for that area was that of a subcontractor, TCC. In fact, the evaluators did not penalize GTE's proposal in this or any other manner. If the evaluators had not considered the MMIS experience of TCC in evaluating GTE's proposal, GTE would have received zero points in this area for the simple reason that GTE had no previous MMIS experience. Although Ms. Flagg testified that her scoring might have been different if GTE's and TCC's roles were reversed, it does not mean GTE did not receive proper credit for TCC's

    experience. If their roles were reversed, GTE and TCC would be performing different functions, and thus the scoring would very likely be different.

    
    

40. The evaluation of the technical proposals in this case may not have been perfect; however, a review of the entire evaluation package and the evaluation manuals completed by the individual evaluators reveals that the evaluation was thorough and fair. The evaluation package was reviewed by HCFA section by section to determine whether the evaluation process ensured open and free competition. The evaluation package was approved by HCFA. Mr. Platt felt that the evaluation manual was "a very thorough job." Mr. Platt reviewed the evaluation itself after it was completed to ensure that the evaluation plan had been followed. He was satisfied with the process. The completed evaluation manuals show that the evaluators performed their tasks conscientiously and were well-informed. The analyses performed by Dr. McClave revealed high consistency among evaluators and good inter-evaluator reliability. These results support the conclusion that the evaluation procedure was reliable. There was no evidence to suggest that scores were assigned arbitrarily or that the evaluation process was infected with substantial material irregularities.

    PRESENT VALUE EVALUATION:

    
    

41. As stated previously, the RFP provided that business proposals would be scored according to a preestablish point system for the five different types of costs required to be bid. The various categories of costs and the maximum number of points to be awarded to the low bidder for each category were:

    
    

    Max. Pts. Available

    Installation Price 50

    Price Per Claim 850

    Hourly Rate for Systems Personnel 50

    Provider Field Representatives 25

    Price for CPU Time 25

    From the above scoring system contained in the RFP, prospective offerors knew or should have known that the State did not propose to evaluate bids on a present value basis. At the time that the RFP was developed, Mr. Arnold was aware of Section 287.0572, Florida Statutes, which requires the use of present value methodology to evaluate the cost of contracts "which require the payment of money for more than 1 year and include provisions for unequal payment streams or unequal time payment periods." Mr.

    Arnold did not believe that the statute applied to this RFP, and therefore did not change the scoring system.

42. Merrill Moody is the Assistant Secretary for Administration. In that capacity, Mr. Moody oversees personnel, budget, finance, accounting, staff development and training, revenue enhancements, contracting, purchasing, leasing, management systems, audit, and quality control for HRS. Mr. Moody is a CPA, has been employed by HRS for nine years, and oversees a 60 million dollar budget. Like Mr. Arnold, Mr. Moody had considered whether Section 287.0572, Florida Statutes, applied to this procurement prior to the issue being raised by GTE. It was Mr. Moody's considered opinion that the statute did not apply because the contract does not call for an uneven payment stream.

    
    

43. Dr. McClave, an expert in econometrics, testified that there is not enough certainty in this RFP to say whether or not there are unequal payment streams, and, accordingly, whether or not the statute applies. He also explained why the application of the statute would be an exercise in futility. First, the only part of the contract arguably subject to present value analysis is the installation phase. This takes place within the first year of the contract and, accordingly, makes it practically impossible to do a useful present value analysis. Furthermore, even if the installation phase payments could be construed as an unequal payment stream within the meaning of the statute, the statute does not require a present value analysis to be applied to unequal payment streams which are to take place under a contract whose duration is less than one year.

    
    

44. To apply a present value analysis to the installation phase price would be counterproductive. During the installation phase, the contractor is to be paid at certain points during the first year at which milestones or tasks are completed. At such points, the contractor is to be paid a certain percentage of the total installation price. If a present value analysis were performed, the proposal most highly valued would be that in which all tasks would be finished on the last day of the contract, clearly not a result in the state's best interest.

    
    

45. The application of present value analysis to the remaining four fixed price components of the bids is simply not necessary. Each one of the remaining categories called for a fixed price for a certain unit of services to be delivered to HRS by the contractor. There is clearly not an unequal payment stream or unequal time payment periods for these items. Where there is a fixed price for a unit of service, there is obviously no need to apply a present value analysis. If, for example, HRS knows that it will be charged $.2652 per claim by Consultec as opposed to

    $.3270 per claim by GTE, Consultec's price will always be lower regardless of claim volume.

46. To apply a present value analysis to the cost per claim, systems personnel hourly rate, and CPU hourly rate would create uncertainty in the cost evaluation. This is because the RFP did not specify the number of claims or hours involved. The RFP contained an estimate of between nineteen and twenty-nine million Medicaid claims per year, a ten million claim difference. Likewise, the number of hours of systems personnel time and CPU time is not specified. To conduct a present value analysis assumptions would have to be made. If the assumptions prove wrong, the lowest present value cost bid could become the most costly contract.

    
    

47. Dr. James E. Pitts, an expert in the field of economics, agreed with Dr. McClave's conclusion that given the range of possible volumes on the number of claims as well as in systems personnel and computer time, a present value analysis would provide a "horrendous" range of possible present values and the analysis would be extremely sensitive to the assumptions that would be made.

    
    

48. Although a present value analysis of the cost of the proposal would require certain assumptions to be made, and thus swould provide a comparison of costs that is not as accurate as comparing the fixed rate costs, a present value analysis can be performed using reasonable assumptions. However, the present value analyses of both GTE and HRS show that Consultec's business proposal yields the lowest present value. Accordingly, had a present value analysis been performed, Consultec would remain the lowest bidder. GTE's expert Dr. Scott, HRS' expert Dr. McClave, and Consultec's expert Dr. Pitts all agreed that even when a present value analysis was used, Consultec's bid remained less than GTE's.

    THE EDS BID

    
    

49. GTE alleged that the proposal submitted by EDS did not comply with the mandatory requirements of the RFP in two respects:

    (1) It submitted consolidated financial statements; (2) it proposed to supply one element of the FMMIS by using a subcontractor's "propriety" software. The first allegation has been previously discussed in reference to the Consultec proposal. The submission of consolidated financial statements did not make EDS's proposal unresponsive. The financial statements were used as a source of information from which the financial stability and corporate background of the offeror could be evaluated.

    
    

50. As to the second allegation, GTE has simply failed to show how EDS's proposal materially deviated from the requirements of the RFP. EDS's transmittal letter stated that EDS would use Health Information Designs (HID) as a subcontractor to produce

    Drug Utilization Review Reports, thus subcontracting out a total of .78 percent of the work as measured by total contract price. The letter from HID stated that it would not "convey access to or title in any of HID's proprietary DURbase software or system documentation." When EDS was questioned at the oral presentation about how it would comply with Section 50.900, which would be part of the contract to be entered into and requires that HRS shall receive "a royalty-free, nonexclusive, and irrevocable license to reproduce, publish, or otherwise use . . . all software . . . and documentation comprising the Florida MMIS", EDS responded that the purchase of DUR-based services was the procuring of services, not software. Further, if the subcontractor's statement in its letter is considered a deviation from the requirements of the RFP, then EDS complied with the requirements of Section 70.100 of the RFP by identifying and explaining the deviation in the transmittal letter. There was no evidence presented to show that the deviation was material or that the state could not accept the proposal with the deviation. Section 50.000 provides that modification of the contract can be made by mutual agreement of the state and contractor.

    CONCLUSION

    
    

51. There was no evidence presented to establish that GTE's proposal was improperly ranked below the proposals submitted by EDS and Consultec. The evidence presented does not establish that either EDS's proposal or Consultec's proposal should be rejected. To the contrary, the evidence establishes that it would be in the best interest of the state to award the contract to Consultec as intended.

    
    

    CONCLUSIONS OF LAW

    
    

52. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. Section 120.57(1), Florida Statutes.

    
    

53. In its proposed Conclusions of Law, GTE argues that the failure of EDS and Consultec to submit separate financial statements is a material deviation rendering the Consultec and EDS proposals non-responsive. GTE argues that the deviation is material because Section 287.057(3), Florida Statutes, which governs this procurement, requires that the contract shall be made to the "responsible" offeror whose proposal is determined to be the most advantageous to the State. Rule 13A-1.001(13)(b), Florida Administrative Code, provides:

    
    

    Responsible or qualified bidder/offeror means a person or firm with the capability in all respects to perform fully the contract

    requirements and the integrity and reliability to assure good faith performance. Failure to provide information to determine responsibility in response to a condition

    of a bid/proposal requiring information may be cause for such bid/proposal to be rejected.

    
    

    In Couch Construction Company, Inc. vs. Department of Transportation, 361 So.2d 184 (Fla. 1st DCA 1978), the Court cited the following definition of responsible:

    
    

    The term 'responsible'. . . is not limited in its meaning to financial resources and ability. . . authorizations of this kind are held to invest public authorities with discretionary power to pass upon the honesty and integrity of the bidder necessary to a faithful performance of the contract--upon his skill and business judgment, his experience and his facilities for carrying out the contract, his previous conduct under other contracts, and the quality of his previous work--as well as to pass upon his pecuniary ability. . . .

    
    

    In this case a good portion of the evaluation process was directed at obtaining the information necessary to determine whether an offeror was responsible. The financial statements were only one source of information to be used in making such a determination.

    The failure of EDS to supply its separate financial statements, especially in view of HRS' response to a specific question regarding the submission of consolidated financial statements, must at the most be considered a "minor irregularity." It certainly cannot be considered sufficient grounds to determine that the offeror is not "responsible".

    
    

54. GTE also argues that Consultec's proposal must be rejected because its proposal was front-end loaded, making its technical proposal and business proposal inconsistent. GTE failed to prove, however, that any of the expenses credited by Consultec to the installation phase would not, in fact, be incurred during that phase.

    
    

55. GTE asserts that any award of a contract under this RFP is void because the costs were not analyzed using present value methodology. The fact that the business proposals would not be evaluated using present value methodology was apparent at the time the RFP was issued. GTE did not timely protest the provisions of the RFP which established how the business proposals would be

    evaluated and, therefore, has waived its right to raise the issue at this time. Capelettti Bros., Inc. vs. Dept. of Transportation, 499 So.2d 855 (Fla. 1st DCA 1986). Further, the evidence in this case clearly shows that evaluating the costs of the proposals using present value methodology results in Consultec's proposal being the lowest costs bid.

    
    

56. The evidence in this case established that there were no material irregularities in any of the proposals submitted; that the evaluation of the proposals was performed in accordance with the procedures set forth in the RFP; that the scoring of the technical proposals was not done in an arbitrary manner; and that the RFP and evaluation criteria provided a fair and competitive method of selecting the fiscal agent.

    
    

57. Furthermore, GTE failed to prove at the hearing the facts necessary to establish its standing to challenge the award of the bid to Consultec. Consultec's proposal was ranked highest; EDS's proposal was ranked second; GTE's proposal was ranked third. The evidence presented at the hearing did not show that EDS's proposal should be rejected or that GTE's proposal should be ranked above EDS's proposal. Therefore, GTE has failed to establish that its substantial interests will be affected by the award of the bid to Consultec. See Westinghouse Electric Corp. vs. Jacksonville Transportation Authority, 491 So.2d 1238 (Fla. 1st DCA 1986); Preston Carroll Company vs. Florida Keys Aqueduct Authority, 400 So.2d 524 (Fla. 3rd DCA 1981).

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED that the Department of Health and Rehabilitative Services enter a Final Order awarding the contract for the Florida MMIS system to Consultec.

DONE and ENTERED this 19th day of November, 1987, in Tallahassee, Florida.

DIANE A. GRUBBS

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 19th day of November, 1987.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-3188BID

GTE's proposed findings of fact

1-19. Accepted generally, though not with same wording or quotations.

20-21. Rejected due to contrary findings.

22-27. Accepted as true but not included in detail in RO because unnecessary.

28-33. Rejected as irrelevant, except to the degree these paragraphs reflect that Consultec intends to purchase computer equipment in the installation phase and charge the cost during the installation phase.

1. Rejected - no competent substantial evidence (CSE) that Florida will pay

   for costs not attributable to this contract.

2. Accepted in part; rejected in part by contrary finding.

36-40. Rejected as unnecessary.

1. Rejected as not supported by CSE.

2. Accepted.

3. Rejected as not supported by CSE. 44-45. Accepted.

46-53. Rejected as unnecessary.

1. Accepted.

2. Rejected as unnecessary.

3. First sentence accepted, second rejected.

4. Rejected.

58-59. Rejected as irrelevant.

1. Accepted to the degree relevant.

2. Accepted generally.

3. Rejected as unnecessary.

4. Accepted generally.

5. Accepted generally.

6. Rejected.

66-70. Accepted to the degree relevant.

71. Rejected.

72-73. Accepted, except for last sentence which is rejected as not supported by CSE.

74-77. Accepted generally.

78. Rejected as irrelevant, there was no evidence of bias in scoring.

79-81. Rejected generally by contrary finding.

1. Rejected as unnecessary, last part of last sentence rejected for lack of CSE.

2. Accepted generally.

84-85. Rejected by contrary findings.

HRS's proposed findings of fact 1-26. Accepted generally.

27-34. Accepted to the degree that Dr. McClave's analyses support the conclusion that the evaluation process was reliable.

1. Accepted generally.

2. Rejected, not supported by cited reference. Though criterion 2 related to the prime contractor, the criterion also related to financial resources not MMIS experience. Last part of paragraph accepted.

37-39. Accepted generally.

1. Accepted generally; however, first sentence rejected because the evaluation manuals of all three evaluators reflect that the guarantee was factor in scoring. However, the comments also reflect that it was not the only consideration.

2. Accepted in part. Part relating to GTE rejected as unnecessary. Last sentence rejected in that letter is not in the exhibit cited.

42-51. Accepted generally.

52. Rejected as unnecessary.

53-54. Accepted generally that Consultec had computer equipment costs in installation phase.

1. Unnecessary.

2. Accepted generally.

3. Unnecessary.

4. Unnecessary.

59-60. Accepted generally.

61-80. Accepted generally.

81-82. Unnecessary.

Consultec's proposed findings of fact 1-18. Accepted.

19. Accepted, except as to date and when scoring was begun.

20-38. Accepted generally.

39. Accepted generally, except third from last sentence.

40-42. Accepted generally.

1. Rejected, in that was not reflected in

   information known at time of evaluation.

2. Accepted generally.

3. Rejected as unnecessary, but accepted as true.

46-55. Accepted to the degree necessary considering Ms. Clark's testimony was not credible.

56-98. Accepted generally but included in order only to the degree necessary.

COPIES FURNISHED:

Douglas L. Mannheimer, Esquire

M. Stephen Turner, Esquire BROAD AND CASSEL

300 E. Park Avenue

Post Office Drawer 11300 Tallahassee, Florida 32302

C. Gary Williams, Esquire Jann Johnson, Esquire Steven C. Emmanuel, Esquire AUSLEY, McMULLEN, McGEHEE CAROTHERS AND PROCTOR

Post Office Box 391 Tallahassee, Florida 32302

H. Michael Madsen, Esquire James Hauser, Esquire MESSER, VICKERS, CAPARELLO, FRENCH AND MADSEN

First Florida Bank Building Suite 701

215 South Monroe Street

P. O. Box 1876

Tallahassee, Florida 32302-1876

Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

Docket for Case No: 87-003188BID

Orders for Case No: 87-003188BID