STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AIDS HEALTHCARE FOUNDATION ) DISEASE MANAGEMENT OF FLORIDA, ) INC., )

)

Petitioner, )

)

vs. )

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent, )

)

and )

) SPECIALTY DISEASE MANAGEMENT ) SERVICES, INC., )

)

Intervenor. )

Case No. 07-2650BID

)

RECOMMENDED ORDER

Pursuant to notice, a final hearing was conducted on July 12, 13, 16, 17, and 19, 2007, at Tallahassee, Florida,

before Claude B. Arrington, a duly-designated Administrative Law Judge of the Division of Administrative Hearings (DOAH).

APPEARANCES

For Petitioner: Stephen C. Emmanuel, Esquire

C. Gary Williams, Esquire Douglas L. Kilby, Esquire Ausley & McMullen

227 South Calhoun Street Post Office Box 391

Tallahassee, Florida 32302-039

For Respondent: Daniel Lake, Esquire

Brevin Brown, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Suite 3431

Fort Knox Building III, Mail Station 3 Tallahassee, Florida 32308

For Intervenor: Martin R. Dix, Esquire

Felicia LeBorgne Nowels, Esquire Pamela Marsh, Esquire

Akerman Senterfitt, P.A.

106 East College Avenue, Suite 1200 Post Office Box 1877

Tallahassee, Florida 32302-1877 STATEMENT OF THE ISSUES

Whether, in making a preliminary decision to award a contract for the subject services, Respondent acted contrary to a governing statute, rule, policy, or project specification; and, if so, whether such misstep(s) was/were clearly erroneous, arbitrary or capricious, or contrary to competition. Also at issue is whether Petitioner’s response to the subject Request for Proposal (RFP) was responsive and whether Petitioner has standing to bring this proceeding.

PRELIMINARY STATEMENT

On February 20, 2007, Respondent issued RFP 0720.

Following appropriate publication of the RFP and a vendors’ conference, two vendors responded. Following an evaluation of the responses, Respondent determined to award the subject contract to Intervenor. Petitioner thereafter timely filed this challenge to the proposed award, the matter was referred to

DOAH, and this proceeding followed. No vendor filed a timely challenge to the specifications of the RFP.

On June 18, 2007, Intervenor moved to intervene in this proceeding. That motion, which was treated as a petition, was granted by the undersigned.

Intervenor and Respondent filed a Joint Motion for Summary Recommended Order of Dismissal on June 18, 2007. Among other issues, this motion alleged that Petitioner was a non-responsive bidder because its cost proposal was non-responsive and because it failed to include a copy of its accreditation with its transmittal letter. The motion argued that Petitioner lacked standing to bring this bid protest. The undersigned denied that motion based on the existence of disputed issues of material fact.

Petitioner likewise filed a motion for Summary Recommended Order on June 26, 2007. The undersigned also denied that motion based on the existence of disputed issues of material fact.

Prior to the formal hearing, Petitioner filed its Second Amended Motion for Leave to Amend its Petition for Formal Administrative Hearing. Finding no prejudice to Respondent or Intervenor, the Motion, with the exception of new allegations pertaining to staffing of call centers, was granted. Succinctly stated, Petitioner contends that Intervenor should be found to be a non-responsive bidder on grounds that will be discussed

below and that Petitioner should be awarded the bid. In the alternative, Petitioner argues, on grounds that will also be discussed below, that the bid process was flawed and that the procurement process should be re-started, beginning with a new procurement document.

Respondent and Intervenor contend that the bid process was not flawed and that Intervenor should be awarded the procurement. They also argue, on the grounds alleged in their motion to dismiss, that Petitioner lacks standing because it is a non-responsive bidder. Whether the second argument was properly raised by the pleadings will be discussed in the Conclusions of Law section of this Recommended Order.

At the formal hearing, the parties submitted the following composite Joint Exhibits: 1, 2, 3a, 3b, and 4. In addition, Petitioner offered 14 sequentially-numbered Exhibits, 13 of which were admitted into evidence. Petitioner’s Exhibit 7 was a proffered exhibit. Petitioner called the following witnesses: Cathy McEachron (Respondent’s Procurement Director), Richard Law (a Certified Public Accountant retained by Petitioner), Kay Newman (a Certified Public Accountant employed by Respondent), Brenda Jones-Garrett (an employee of Respondent who served as an evaluator), Talisa Hardy (an employee of Respondent who served as an evaluator), Vivian Booth (an employee of Respondent who served as an evaluator), Donna Marie Stidham (Chief of Managed

Care for Petitioner), and Frederic S. Goldstein (President of Intervenor). At the request of Petitioner, official recognition was taken of printouts from the Secretary of State’s office reflecting the dissolution of certain of Intervenor’s subsidiary corporations and showing the incorporation of Petitioner.

Respondent called no witnesses. Respondent offered two sequentially-numbered exhibits. Respondent’s Exhibit 1 was a demonstrative exhibit. Respondent’s Exhibit 2 was admitted into evidence.

Intervenor re-called Mr. Goldstein and presented the additional testimony of Frank Mercer (a Certified Public Accountant retained by Intervenor). Intervenor offered two Exhibits, each of which were admitted into evidence.

A Transcript of the proceedings, consisting of seven volumes, was filed August 7, 2007. Each party filed a Proposed Recommended Order, which has been duly-considered by the undersigned in the preparation of this Recommended Order.

FINDINGS OF FACT

1. Pursuant to Section 409.902, Florida Statutes,1 the Respondent is the state agency charged with the responsibility and authority to administer the Medicaid program in Florida.

2. On February 20, 2007, Respondent issued the RFP to select a vendor for the Florida Medicaid HIV/AIDS Disease

   Management Program. Cathy McEachron, Director of Respondent’s Procurement Office, served as the Issuing Officer for the RFP.

3. The RFP requests that vendors submit proposals to provide disease management (DM) services to Florida’s Medicaid patients suffering from HIV/AIDS outside of Broward and Duval Counties (where Medicaid reform has been enacted) as well as services under the Project AIDS Care Services (PAC services) throughout the state. DM involves registered nurses who assess a patient’s condition, develop a plan of care, and implement that plan to ensure that the patient receives the care he or she needs. There are two goals or reasons for having a DM program. First, a DM program helps to hold down costs because the enrollees in the program (HIV/AIDS patients) who follow a plan of care are less likely to require more costly treatment, such as hospitalization. Second, DM tends to improve the outcome for the patients being managed.

4. By memorandum from Roberta Kelly of Respondent’s Bureau of Health Systems Development, Respondent explained why an invitation to bid was not being used for the subject procurement:

   The Agency [Respondent] has a solid and satisfactory history with its contracts for HIV/AIDS disease management. Program evaluations and outcome measurements have shown the services to be beneficial to the health and outcomes of Medicaid enrollees while helping to control the costs of

   medical care. Given past performance the Agency knows that vendor qualifications, experience, and quality of services are more important than price for the procurement of said services, therefore a Request for Proposals is the appropriate method for procurement.

   
   

5. There was minimal confusion as to the term of the RFP. In one place, the RFP indicated that it was for a one-year term while in other parts of the RFP the reference was to a two-year term. That erroneous statement was corrected. Proposed vendors were clearly notified by an addendum that the term was for two years. The addendum superseded the erroneous statement that the RFP was for a one-year term.

6. Following the receipt of proposals, the two responding vendors were e-mailed about a possible change Respondent was contemplating to the scope of the services. The inquiry was whether the contemplated change, if put into place, would change the response of either vendor. Respondent made no change to the RFP. The subject e-mail did not flaw the procurement process.

7. The RFP was divided into three parts: a Transmittal Letter, a Technical Proposal, and a Cost Proposal. The scores for all three parts were combined for the evaluation.

8. Two responses to the RFP were received. Petitioner filed a response, as did Intervenor.

   MANDATORY CRITERIA

   
   

9. Attachment E of the RFP, entitled Evaluation Criteria, provides in paragraph E.1 the following:

   Responses to this solicitation will be evaluated against the mandatory criteria found in Part I, Mandatory Criteria.

   Responses failing to comply with all mandatory criteria will not be considered for further evaluation.

   
   

10. The checklist for the Mandatory Criteria is set forth in Part I of Attachment E (page 3 of 11). Four items are listed on the checklist with Item Three having four subparts. Only Items Three and Four are relevant to this proceeding. Item Three includes as a mandatory criteria that the transmittal letter include a copy of the vendor’s current accreditation. Item Four asks whether the response included a three-page Cost Proposal, as required in Section C.38. These mandatory requirements will be discussed in more detail below. PETITIONER’S HISTORY

11. Petitioner is a newly formed corporation. Its parent corporation, AIDS Healthcare Foundation, Inc. (AHF), is the incumbent provider of the services sought by the RFP pursuant to a contract with Respondent. There has been no issue with regard to the quality of care provided by AHF under that contract. AHF caused Petitioner to become incorporated because the RFP contained a provision that a direct pharmaceutical provider

    could not be considered for the contract. AHF is a direct pharmaceutical provider. Petitioner is not a direct pharmaceutical provider.

12. Petitioner’s response to the RFP proposed to transfer the program (personnel, facilities, accreditation, and other assets) that AHF is currently utilizing to provide the services required by the RFP from AHF to Petitioner. Further, Petitioner’s financing is dependent on AHF.

    PETITIONER’S COST PROPOSAL

    
    

13. Attachment J to the RFP is incorporated herein by reference. Pursuant to Attachment C.38C (Attachment C, page 22 of 23) under the heading: “Cost Proposal (Must be submitted on page provided as Attachment J.[2]),” the following appears:

    The respondent [the vendor submitting the proposal] shall submit a cost proposal, as outlined in Attachment J., with each technical response. The cost proposal shall be labeled and tabbed separately and shall include a proposed unit price for each specified PAC served, a per member - per month case management fee for DM Program enrollees, and a detailed budget. The annual cost for each year will be added together to arrive at a two-year total cost, which shall not exceed $9.95 million.

    
    

    FAILURE TO SUBMIT ATTACHMENT J, COST PROPOSAL, INCLULDING THE DETAILED BUDGET FORM, SHALL RESULT IN THE REJECTION OF A PROSPECTIVE VENDOR’S RESPONSE.

    
    

14. On page 1 of Attachment J the vendors were instructed to complete and return three tables. Table 1, pertaining to

    costs for PAC services, and Table 2, pertaining to costs for DM services, are found on page 2 of Attachment J. Table 3, pertaining to the detailed budget, is found on page 3 of Attachment J.

15. Table 1 required the vendor to propose a unit price for each PAC service included in the RFP, to calculate the total cost for each category of service, and to show the grand total for all categories of PAC services. Table 1 included three categories of services. For each category of service, Table 1 provided an anticipated enrollment figure that was to be used in calculating the total cost for each category of service and in calculating the grand total for the PAC services. The total cost for a category of service was to be determined by multiplying the unit price by the anticipated enrollment figure.

16. For the category “PAC Assessments”, Table 1 provided the anticipated enrollment figure of 6,334. For the category “Re-Assessments”, Table 1 provided the anticipated enrollment figure of 6,334. For the category “Exception Request Processing”, Table 1 provided the anticipated enrollment figure of 4,000. Table 1 required the vendor to calculate the grand total of the proposed costs for the three categories of PAC services. Table 1 also contained the caveat that the grand total could not exceed the sum of $950,000.

17. Petitioner inserted a proposed per unit cost for each category. For the category “PAC Assessments”, the unit cost was

    $100.00. For the category “Re-Assessment”, the unit cost was

    
    

    $70.00. For the category “Exception Request Processing”, the unit cost was $25.00. However, in calculating the total cost for each category of service and the grand total for the PAC services, Petitioner did not use the anticipated enrollment figure set forth in Table 1, but, instead, used a lower anticipated enrollment figure that does not appear anywhere in the RFP. Instead of using Respondent’s anticipated enrollment figures, Petitioner made its own estimate of those figures.

18. For the category “PAC Assessments”, Petitioner used the anticipated enrollment figure of 5,278 (as opposed to Respondent’s figure of 6,334) and the unit price of $100.00. By using its lower anticipated enrollment figure, Petitioner calculated the sum of $527,800.00 as the total cost for this category of service. Had it used Respondent’s anticipated enrollment figure, the calculation would have been $633,400.00.

19. For the category “Re-Assessments” Petitioner used the anticipated enrollment figure of 5,000 (as opposed to Respondent’s figure of 6,334) and the unit price of $70.00. By using its lower anticipated enrollment figure, Petitioner calculated the sum of $350,000.00 as the total cost for this

    category of service. Had it used Respondent’s anticipated enrollment figure, the calculation would have been $443,380.00.

20. For the category “Exception Request Processing” Petitioner used the anticipated enrollment figure of 2,664 (as opposed to Respondent’s figure of 4,000) and the unit price of

    $25.00. By using its lower anticipated enrollment figure, Petitioner calculated the sum of $66,600.00 as the total cost for this category of service. Had it used Respondent’s anticipated enrollment figure, the calculation would have been

    $100,000.00.

    
    

21. By using the lower anticipated enrollment figures, Petitioner was able to propose a higher per unit cost for each category of service and stay below the not to exceed figure of

    $950,000. Petitioner’s grand total for the PAC services, using its anticipated enrollment figures, equaled $944,400.00. Had Petitioner used the Respondent’s anticipated enrollment figures for each category of service, the grand total would have been

    $1,176,780.00, which exceeds the not to exceed figure of

    
    

    $950,000.00.

    
    

22. Petitioner completed Table 2, pertaining to DM services as instructed. Table 2 contained the caveat that the grand total for DM services was not to exceed $9,000,000.00.

    The grand total of the proposed services as reflected by Table 2 was $8,999,965.00, which is below the not to exceed figure.

23. However, if Petitioner had used the Respondent’s anticipated enrollment figures in calculating the grand total costs for the PAC services in completing Table 1, its proposed total costs for the PAC services ($1,176,780.00) and its proposed costs for the DM services ($8,999,965.00) would have totaled $10,176,745.00, which exceeds the do not exceed figure of $9,950,00.00, for all categories of services.

24. Section 287.012(26), Florida Statutes, defines the term “responsive vendor” as being “. . . a vendor that has submitted a bid, proposal, or reply that conforms in all material respects to the solicitation.”

25. The undersigned rejects the argument that Petitioner was free to use its own anticipated enrollment figures since it would not be able to collect more than the not to exceed figure of $950,000.00 for the PAC services regardless of the unit price and regardless of the number of enrollees. Petitioner’s use of the lower anticipated enrollment numbers enabled it to propose a higher unit cost than it could have proposed had it used Respondent’s anticipated enrollment figures, thereby providing Petitioner with an unfair competitive advantage. This higher unit cost would enable Petitioner to collect its funds more quickly during the term of the contract than it could have with a lower unit cost rate. The higher unit cost rate would also have resulted in Petitioner collecting more than it could have

    if the actual number of enrollees is less than the Respondent’s anticipated enrollment figure.3

26. Petitioner’s failure to use the Respondent’s anticipated enrollment figure in completing Table 1 of Attachment J is a major deviation from the solicitation document that renders Petitioner’s cost proposal non-responsive. Petitioner is a non-responsive bidder because the cost proposal is a mandatory item.

27. After the deadline for the submission of responses, Ms. McEachron reviewed Petitioner’s response and Intervenor’s response to determine whether the responses met all mandatory criteria. Ms. McEachron determined that both responses met all mandatory criteria. Ms. McEachron testified at the formal hearing that she made a mistake in reviewing Petitioner’s cost proposal in that she did not notice that Petitioner had not used Respondent’s anticipated enrollment figures in completing Table

    1 of Attachment J. Ms. McEachron testified, credibly, had she not made that mistake, she would have determined Petitioner’s response to be non-responsive and that Petitioner’s response would not have been submitted for further evaluation. PETITIONER’S LACK OF ACCREDITATION

28. Attachment D, page 2 of the RFP requires that a vendor must be experienced in the delivery of HIV/AIDS services,

    accredited by a recognized entity such as URAC, JCAHO, or NCQA, and be a financially sound DM organization.

29. As stated above, the Mandatory Criteria set forth in Attachment E, page 3 of 11, requires that a vendor’s transmittal letter include a copy of the vendor’s current accreditation. Petitioner did not include a copy of its accreditation in its transmittal letter. Instead, Petitioner inserted the following:

    AIDS Healthcare Foundation (AHF), the current holder of the Disease Management contract, operates that program with NCQA accreditation. As laid out in detail in the application, all of AHF’s Disease Management operations in Florida are being transferred to AHFDM [Petitioner], a wholly separate corporation from AHF. Under the rules set forth by the NCQA, the accreditation can be transferred within 30 days by applying for transfer to the NCQA. AHFDM [Petitioner] is in the process of making this transfer. The transfer will be accomplished by the anticipated July 1, 2007 contract start date.

    
    

30. Respondent and Intervenor correctly argue that Petitioner’s failure to have accreditation prior to submitting its proposal is a deviation from the RFP specifications.4 While Ms. Stidman’s testified that AHF had agreed to this procedure, there was no documentary evidence to support her testimony. Petitioner’s failure to comply with this mandatory item rendered its response non-responsive.

    INTERVENOR’S 2004/2005 FINANCIAL STATEMENT

    
    

31. Petitioner challenged the sufficiency of Intervenor’s response to the requirement of Attachment C, paragraph 38.B.2.c, (Attachment C, page 15 of 23) that each vendor responding to the RFP file “[a] copy of the vendor’s most recent financial statement or audit” (the financial requirement).

32. In response to the financial requirement, Intervenor submitted an audited financial statement for the Intervenor and its subsidiaries for the calendar years 2004 and 2005. Because Intervenor’s subsidiaries were included, the audited financial statements were considered to be consolidated financial statements. The audited financial statement provided by Intervenor for those two years was the most recent audited financial statement available to Intervenor. Intervenor had more recent financial statements, but those financial statements were not audited.

33. Ms. McEachron, as the agency procurement director, interpreted the financial requirement to require a vendor to provide its latest unaudited financial statement or its latest audited financial statement without regard to whether one statement was more recent than the other. Ms. McEachron testified that Intervenor complied with the financial requirement because it submitted its most recent audit despite the fact that the audit was for the years 2004/2005.

    Ms. McEachron’s interpretation is consistent with the plain reading of the provision.

34. Ms. Newman evaluated Intervenor’s financial condition based on the information that had been provided to her by Intervenor. Ms. Newman testified that she was not concerned that the audited financial statement was for years 2004/2005. She further testified that audited financial statements are frequently required for the type evaluation at issue in this proceeding. Ms. Newman awarded Intervenor a rating of 2, which signified that its financial condition, based on the information available to her, was below average. Ms. Newman has, in other procurements, used a score of 2 or below to reflect her opinion that the bidder is “not financially stable.” There was no evidence as to the evaluation criteria for those other procurements. Ms. Newman testified that for the subject procurement, she did not evaluate Intervenor as being “not apparently financially stable” she evaluated its financial condition as below average.5

35. Mr. Law, who has considerable experience dealing with agency procurements, reviewed Intervenor’s 2004/2005 audited financial statement on behalf of Petitioner. Mr. Law opined that the audited financial statement demonstrated that Intervenor was not a responsible vendor, and explained his opinion. Mr. Law believed that Intervenor had insufficient

    working capital to perform the contract. He was concerned that Intervenor had a net profit of $29,732.00 in 2004 and a net loss of $273,213.00 for 2005. At the end of 2004, Intervenor had working capital of $512,000.00. At the end of 2005, Intervenor’s working capital had been reduced to approximately

    $265,000.00. Mr. Law opined that Intervenor would need

    
    

    $660,000.00 in upfront working capital to fund the contract in the first year.6

36. Mr. Mercer, who also has extensive experience, reviewed Intervenor’s 2004/2005 audited financial statement on behalf of Intervenor. Mr. Mercer opined that the financial statement Intervenor provided as part of its response to the RFP demonstrated that Intervenor was a responsible bidder, and explained the rationale for his opinion. Mr. Mercer testified to the following:

    • Intervenor had a Current Ratio of 3.23 at the end of 2005, which showed a strong working capital relationship;[7]

      
      

    • Intervenor needed working capital of $250,000.00 to fund the contract. It had working capital in the amount of $265,000.00 at the end of 2005;[8]

      
      

    • Intervenor had a positive asset to debt ratio of .32;

      
      

    • Intervenor was creditworthy based on its ratio of assets to liabilities, its amount of working capital, its positive ratio of assets to liabilities, and its history;

    • Intervenor’s Defense Interval ratio of 25 days was average;[9]

      
      

    • Intervenor’s Debt to Equity ratio of .46 was positive;

      
      

    • Intervenor’s Collection Period of 19 days was positive;[10]

      
      

    • Intervenor had the necessary capital to purchase needed equipment;

      
      

    • Intervenor’s financial condition would benefit by the subject contract; and

      
      

    • The appearance of Intervenor’s financial strength at the end of 2005 was diminished by the payment of discretionary bonuses to avoid taxation at the corporate and individual shareholder level.

      
      

37. Both Mr. Law and Mr. Mercer agreed that Intervenor would need an infusion of start-up capital for the contract. Both agreed that most lenders would require more recent financial information than the 2004/2005 audited financial statement prior to lending money to Intervenor. Mr. Mercer opined that Intervenor would require approximately $150,000.00 in capital as opposed to Mr. Law’s opinion that $660,000.00 would be needed. Mr. Mercer testified that Intervenor was creditworthy based on its 2004/2005 financial statement.

    Mr. Law testified that further information would be required to make that determination.

38. The undersigned has carefully considered the testimony of Ms. Newman, Mr. Law, and Mr. Mercer. The conflicting evidence is resolved by finding that Ms. Newman correctly

    evaluated Intervenor’s financial condition based on her review of the 2004/2005 audited financial statements. The 2004/2005 audited financial statement reflected that Intervenor’s financial condition is “below average.” The financial statement did not establish that Intervenor was a non-responsive bidder due to a lack of financial stability to complete the contract.

    IS INTERVENOR A RESPONSIBLE BIDDER?

    
    

39. Section 287.012(24), Florida Statutes, defines the term “responsible vendor” as follows:

    (24) “Responsible vendor” means a vendor who has the capability in all respects to fully perform the contract requirements and the integrity and reliability that will assure good faith performance.

    
    

40. Section 287.057(2)(b), Florida Statutes, requires that contracts be awarded to responsible vendors as follows:

    (b) The contract shall be awarded to the responsible and responsive vendor, whose proposal is determined in writing to be the most advantageous to the state, taking into consideration the price and the other criteria set forth in the request for proposals. The contract file shall contain documentation supporting the basis on which the award is made.

    
    

41. Six subsidiaries were shown on the consolidated financial statement submitted by Intervenor. Each subsidiary was a limited liability company that Intervenor had established. Each subsidiary was established to provide DM services in a specific state pursuant to a subcontract between the subsidiary

    and a company named McKesson Health Solutions, LLC (McKesson). McKesson, in turn, had a contract with the specific state to provide DM in that state. During 2005, Intervenor controlled subsidiaries that had subcontracts with McKesson to provide DM services in each of the following states: Mississippi, Montana, New Hampshire, Texas, and Washington.

42. The 2004/2005 audited financial statement demonstrated that in 2005, approximately 87 percent of the total revenues on a consolidated basis came from the five subsidiaries for the states mentioned above, and not from Intervenor. Intervenor’s reliance on these subsidiaries for income was heavy.

43. For the year ending December 31, 2005, the consolidated financial statement reflected a negative net income of $273,000.00. For the year ending December 31, 2004, the consolidated financial statement reflected a small profit. The consolidated financial statement reflected a downturn between those two years.

44. At the time Intervenor filed its response to the RFP, its contracts with McKesson had been terminated and each of its subsidiaries had been dissolved.11

45. Ms. Newman testified that it would be highly unlikely that the audited consolidated financial statement for the years

    2004/2005 fairly represented the financial condition of Intervenor in 2007.

46. Petitioner proved that Intervenor’s financial condition experienced substantial and material changes between the ending date of the audited financial statement and the date of Intervenor’s response to the RFP. Because of those changes, Respondent has relied on stale financial information.

    Respondent does not, without updated financial information, have sufficient information to determine whether Intervenor is a responsible vendor with the requisite financial stability to perform the subject contract.12

47. While Respondent acted within its discretion in allowing a vendor to use stale financial information as part of its evaluation process, it does not have such discretion in determining whether a vendor is a responsible vendor within the meaning of Section 287.012(24), Florida Statutes, as required by Section 287.057(2)(b), Florida Statutes. The statutory requirement that an agency deal only with responsible vendors cannot be waived by a vendor or ignored by an agency.

    Petitioner established that Respondent failed to ensure that Intervenor is a responsible vendor.13

48. The evidence established that but for the missing up- to-date financial information, Intervenor is a responsive bidder.14

    THE EVALUATION

    
    

49. For a procurement of the nature and dollar amount of this procurement, Respondent’s agency head is required by the provisions of Section 287.057(17)(a), Florida Statutes, to appoint:

    (a) At least three persons to evaluate proposals and replies who collectively have experience and knowledge in the program areas and service requirements for which commodities or contractual services are sought.

    
    

50. By memo dated March 16, 2007, Thomas W. Arnold, Respondent’s Deputy Secretary for Medicaid, appointed the following to serve on the evaluation team for the subject procurement as follows:

    1. Brenda Jones-Garrett, Medical Health Care Program Analyst, Bureau of Medicaid Services, Division of Medicaid. Responsible for the Project AIDS Care Waiver service oversight. Ms. Garrett-Jones previously worked in AHCA’s division of Quality Management and had been working with HIV/AIDS prior to coming to the Agency.

    2. Talisa-Hardy, Clinical Program Manager, Bureau of Medicaid Pharmacy Services. Dr. Hardy has a doctorate in pharmacy and has been practicing for seven and a half years in several areas including HIV/AIDS.

    3. Vivian Booth, Nurse Consultant, Bureau of Medicaid Health Systems Development. While employed with AHCA, Ms. Booth provides RN consulting service and is the contract manager for the Minority Physician Network Program. She has served on the HIV/AIDS Title II Collaborative as the Agency representative for approximately one year,

       and participated in the on-site monitoring of the HIV/AIDS disease management program, Positive Health Care.

    4. Gayle McLaughlin, Nurse Consultant, Florida Department of Health, HIV/AIDS Bureau. Dr. McLaughlin has worked for seven years as a nurse consultant with the Bureau of HIV/AIDS. She functions as a primary clinical resource for public and private sector medical providers involved in HIV/AIDS care. She is also currently a member of HRSA Title II Collaborative which is a national initiative focused on improvement of the quality of HIV/AIDS care.

    5. Kay Newman, Senior Management Analyst, Office of the Deputy Secretary for Medicaid. Ms. Newman is a certified public accountant, who will evaluate the solvency of the respondents via review of their financial statements.

    
    

51. Ms. Newman’s evaluation was limited to the financial evaluation. There was no contention that Ms. Newman lacked the qualifications and training to conduct her evaluation.

52. As discussed above, Ms. McEachron reviewed the proposals to determine whether the vendor met all mandatory items and Ms. Newman evaluated the vendors’ financial statements.

53. Paragraph E.2 provided instructions as to how each response was to be evaluated. The following point system was to be utilized:

    Points

    
    

    0 The component was not addressed.

    1. The component contained significant deficiencies.

    2. The component is below average.

    3. The component is average.

    4. The component is above average.

    5. The component is excellent.

    
    

54. Part II of Attachment E (page 4 of 11) set forth the areas of the proposal to be evaluated, gave the maximum raw score possible for each area, and provided a weight factor for each score. Each evaluator could award a maximum of 325 points for a proposal. The four evaluations would then be added for the final tally.

55. The “Detailed Evaluation Criteria Components” are set forth in Attachment E, pages 5–11.

56. Attachment D of the RFP discusses in detail the Scope of Services to be provided and the requirement that staffing levels be sufficient to complete all of the responsibilities outlined in the RFP. Each vendor is required to discuss its proposed staffing for the project and its service delivery approach. The RFP does not contain minimum staffing requirements.

57. Paragraph 3 of the Detailed Evaluation Criteria Components (Attachment E, pages 5 and 6), under the heading Project Staffing, instructs the evaluators as to how they are to evaluate the portion of the vendor’s response that addresses its proposed staffing. Paragraph 4 of the Detailed Evaluation Criteria Components (Attachment E, pages 6 – 8) instructs the

    evaluators as to how they are to evaluate the portion of the vendor’s response that addresses its service delivery approach.

58. There was no independent training of the evaluators.

    
    

    The evaluators were not provided materials outside of the RFP and the responses thereto. Each evaluator independently evaluated the responses. As instructed, no evaluator discussed her evaluations with the other evaluators.

59. Petitioner presented the testimony of Ms. Garrett- Jones, Dr. Hardy, and Ms. Booth. Dr. McLaughlin was not called as a witness.

60. The testimony of Ms. Jones-Garrett established her educational background and her experience. Ms. Jones-Garrett is the analyst in charge of the PAC services waiver for Respondent. One of the major components of the RFP was for the delivery of waiver for PAC services. Ms. Jones-Garrett has five and a-half years experience working in the public health department and an immunology/AIDS clinic in Orlando. During her time working there, she supervised an LPN, who was responsible for adherence to AIDS medication. She has knowledge of HIV care and regimens. She has a good understanding of the PAC services waiver and PAC waiver assessments. Based on her background and experience, the undersigned finds that she was qualified to sit as an evaluator.15 There was no evidence that she failed to follow the instructions given to her in performing her evaluation.

    Petitioner failed to establish that the evaluation process was flawed by the manner in which Ms. Jones-Garret performed her evaluation of the two responses.

61. The testimony of Dr. Hardy established her educational background and her experience. Dr. Hardy has a Doctor of Pharmacy degree, is a licensed pharmacist, and has served as clinical pharmacy program manager for Respondent, where she oversees the delivery of medical and pharmaceutical services to Florida recipients suffering from co-morbid diseases. Dr. Hardy was previously employed by Florida State Hospital as a clinical pharmacist. While there, she dealt with patients, many of whom had HIV or AIDS. Their drugs, because of the clinical effects and drug interactions with psychotropic medications, were closely monitored. As a pharmacist, Dr. Hardy performed drug counseling for HIV/AIDS patients, drug utilization reviews, and other critical components involved in assisting in the management of an HIV/AIDS patient’s disease. Based on her background and experience, the undersigned finds that she was qualified to sit as an evaluator. There was no evidence that she failed to follow the instructions given to her in performing her evaluation. Petitioner failed to establish that the evaluation process was flawed by the manner in which Dr. Hardy performed her evaluation of the two responses.

62. The testimony of Ms. Booth established her educational background and her experience. Ms. Booth has served as a contract manager for disease management projects, has been involved in assessing HIV/AIDS patients for medical care or disease management purposes. She has developed care plans for disease management programs requiring the coordination of physicians, therapists, nurses, and aides. She has significant experience supervising nurses and determining their staffing schedules. Ms. Booth is also a certified contract manager with training in procurement of disease management services. Based on her background and experience, the undersigned finds that she was qualified to sit as an evaluator. There was no evidence that she failed to follow the instructions given to her in performing her evaluation. Petitioner failed to establish that the evaluation process was flawed by the manner in which Ms. Booth performed her evaluation of the two responses. INTERVENOR’S STAFFING PROPOSAL

63. Paragraph C.38.B of Attachment C of the RFP sets forth Technical Response requirements, beginning on page 14. Sub- paragraph 3 thereof (on page 15) pertains to Project Staffing and provides, in part, as follows:

    The respondent [vendor] shall demonstrate its capability by describing the qualifications and experience of its proposed staff, as stated in Attachment D,

    Section D.8. The description shall include, at a minimum:

    * * *

    
    

    d. The number, qualifications and credentials of the proposed RNs/LPNs, and how each area of the state will be served by the HIV/AIDS disease management program staff, number of staff for each area, the percentage of time to be devoted to this Program, information on the lead case manager (RN/LPN) in each geographic area, ability to be available 24 hours per day, seven (7) days per week, and where they will be located in Florida.

    
    

64. Intervenor’s response to the RFP contained a detailed description in compliance with this requirement. The Detailed Evaluation Criteria Components, found beginning at page 5 of Attachment E, established that each evaluator could award a maximum of 45 points for the Project Staffing category. Since there were nine subparts to the category, each category, including the category pertaining to the nursing staff, could be awarded a maximum of five points. Each evaluator was to score Intervenor’s response to this category on the 0 to 5 scale set forth above.

65. Ms. Stidman testified at length as to the deficiencies in Intervenor’s staffing plan for nurses. This testimony did not establish that Intervenor was a non-responsive bidder or that any evaluator failed to properly score this category. Intervenor was awarded a total of 14 points for this category from the four evaluators.

    THE FINAL TALLY

    
    

66. Following the evaluation, Intervenor was awarded a total of 985 points. Petitioner was awarded 943 points. Petitioner failed to establish that the evaluation process was materially flawed. Petitioner failed to establish that it should have been awarded more points than Intervenor.

    CONCLUSIONS OF LAW

    
    

67. The Division of Administrative Hearings has jurisdiction of the parties to and the subject matter of this proceeding pursuant to Sections 120.569 and 120.57(1), Florida Statutes.

68. Paragraph 28 of Petitioner’s Second Amended Formal Written Protest and Petition for Formal Administrative Hearing alleges that Petitioner timely submitted a responsive proposal to the RFP. Pursuant to Florida Administrative Code Rule 28- 106.203, Respondent was not required to file an answer to the amended petition. Respondent and Intervenor timely raised the issue of the responsiveness of Petitioner’s cost proposal and its failure to include a copy of its accreditation in their Joint Motion for Recommended Order of Dismissal. The undersigned denied the motion solely because disputed issues of fact existed. Petitioner was adequately put on notice that the responsiveness of its cost proposal and the failure to include its accreditation were at issue.

69. Because the undersigned has concluded that Petitioner’s bid was not responsive, no recommendation can be made that Petitioner be awarded the bid. The finding of non- responsiveness does not mean that the entire proceeding should be dismissed. Petitioner does have standing to request that both proposals be rejected and that the procurement be re-bid. See The NTI Group, Inc., v. Dept. of Education, DOAH Case

    No. 06-4449BID (Recommended Order Jan. 9, 2007; Final Order Jan. 31, 2007); Vertex Standard v. Fla. Dept. Transportation, DOAH Case No. 07-0488BID (Recommended Order April 30, 2007; Final Order May 30, 2007); and NCS Pearson, Inc. v. Dept. of Education, DOAH Case No. 04-3976BID (Recommended Order Feb. 8, 2005; Final Order Feb. 21. 2005). See also Capeletti Bros., Inc. v. Dept. of Gen. Services, 432 So. 2d 1359 (Fla. 1st DCA 1983).

70. Pursuant to Section 120.57(3) (f), Florida Statutes, the burden of proof rests with the party opposing the proposed agency action, here Petitioner. See State Contracting and Engineering Corp. v. Department of Transportation, 709 So. 2d 607, 609 (Fla. 1998). Petitioner must sustain its burden of proof by a preponderance of the evidence. See Department of

    Transportation v. J.W.C. Co., Inc., 396 So. 2d 778, 787 (Fla. 1st DCA 1981).

71. Section 120.57(3)(f), Florida Statutes, spells out the rules of decision applicable in bid protests. In pertinent part, the statute provides:

    In a competitive-procurement protest, other than a rejection of all bids, the administrative law judge shall conduct a de novo proceeding to determine whether the agency's proposed action is contrary to the agency's governing statutes, the agency's rules or policies, or the bid or proposal specifications. The standard of proof for such proceedings shall be whether the proposed agency action was clearly erroneous, contrary to competition, arbitrary, or capricious.

    
    

72. The foregoing requires the party protesting the intended award to identify and prove, by the greater weight of evidence, a specific instance or instances where the agency's conduct in taking its proposed action was either:

    1. contrary to the agency's governing statutes;

    2. contrary to the agency's rules or policies; or

    3. contrary to the bid or proposal specifications.

    
    

    Further, the protester must establish that the agency's misstep was:

    1. clearly erroneous;

    2. contrary to competition; or

    3. an abuse of discretion.

    
    

73. An agency enjoys wide discretion when it comes to soliciting and accepting proposals in response to competitive procurement. The agency’s decision, when based on an honest

    exercise of such discretion, should not be set aside even if it appears erroneous or reasonable people may disagree.

74. Pursuant to Section 287.057(2)(b), Florida Statutes, Respondent has a statutory obligation to determine that a vendor is a responsive and a responsible vendor. Respondent found Intervenor to be a responsive and responsible vendor. The greater weight of the credible evidence supports the determination that Intervenor is a responsive bidder. However, Respondent has insufficient information to determine that Intervenor is a responsible vendor. Without such a determination, Respondent should not award the subject contract to Intervenor.

75. Because its response was non-responsive, Petitioner lacks standing to challenge the evaluation score awarded by Ms. Newman for its financial condition. It also lacks standing to challenge the scores awarded for Intervenor’s staffing proposal. Even if Petitioner had standing to challenge those issues, Petitioner failed to establish that its response should be awarded more points than Intervenor’s response.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of Law, it is RECOMMENDED that Respondent enter a final order that adopts the Findings of Fact and Conclusions of Law set forth herein. It is further recommended that Petitioner’s proposal be

rejected because it is non-responsive. It is further recommended that Intervenor’s proposal be rejected because Respondent has insufficient information to determine whether it is a responsible vendor.

DONE AND ENTERED this 6th day of September, 2007, in Tallahassee, Leon County, Florida.

S

CLAUDE B. ARRINGTON

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 6th day of September, 2007.

ENDNOTES

1/ All statutory references are to Florida Statutes (2007).

2/ Attachment J actually consists of three pages.

3/ Petitioner was not free to rewrite the specifications of the RFP, and the attempted rationale for having done so set forth by Ms. Stidham (Petitioner’s authorized representative) is not persuasive. Ms. Stidham testified that Petitioner did not use the anticipated enrollment figures in Table 1 of Attachment J for three reasons. First she asserts, there was no specific instruction to do so. That assertion is rejected. Table 1 of Attachment J clearly anticipated that the figures derived by Respondent be utilized. The other two reasons are irrelevant

because they pertain to the reasons Petitioner believes the actual figures will be less than the anticipated figures.

4/ Ms. McEachron did not disqualify Petitioner following her review of proposals to ensure compliance with the mandatory criteria. As noted above, she found both proposals to meet all mandatory criteria. She further testified that she had not conducted a second review of the transmittal letters, but that a vendor would be non-responsive if that vendor failed to include a copy of its accreditation.

5/ The following testimony was elicited from Ms. Newman by counsel for Petitioner, beginning at Volume 3 of the Transcript, page 245, line 17:

Q What would be the number you would give to a vendor who submits a proposal and you conclude the vendor is not apparently financially stable?

A It would be a number below 3. Q I am sorry?

A It would be a number below 3. Q Below 3?

A Yes.

Q Okay. And when you scored SDM [Intervenor], did you score SDM below a 3?

A Yes.

Q And would your score of below a 3 reflect your opinion as the Agency’s financial reviewer that the vendor was not apparently stable?

A Well, that’s not the conclusion I made.

I made the conclusion that their resources were less than average in comparison to the amount of the contract.

Q Okay. But isn’t it correct that in giving them a score, your score of 2 reflected your opinion that the vendor is not apparently stable?

A Well, that’s not the way I evaluated it.

6/ In response to a question from Petitioner’s counsel as to how he would calculate the amount of needed working capital, Mr. Law answered, in Volume 5, page 530, beginning on line 16:

. . . this was a fixed fee contract over two years. I would look at the cost proposals

[sic] submitted by the vendor for this contract, looking at the nature of the costs, anticipated by the different cost categories.

I would then look at the revenue stream that is likely to result as a part of this contract. And what I mean by that is when is the money going to flow into the business to pay the bills? And this contract provides that payment will be made in arrears after each month, so no upfront funding.

I would also look at the existing book of business, if you will, to see if there is sufficient working capital generated by its existing business to help support the new business cash flow scenario. Of course, in this case, it appears that the working capital was minimal for the existing business, so that really was no help.

And the last point would be to try to anticipate if you are going to be paid in arrears, at what day of the month are you going to get that check in the next month? That could be probably no sooner than the 15th of the next month or maybe longer.

In the cost proposal provided by [Intervenor] their total projected expenses in the first year of the contract was about

$5.4 million. [Mr. Law subsequently corrected this figure to $5.35 million.]

7/ Mr. Mercer explained the term “current ratio” in Volume 7, page 742, beginning at line 21 as follows:

A. The current ratio is the current assets to current liabilities and it is a measure of a company’s liquidity; in the next 30 days will they be able to pay the bills as they come due with the assets they have available.

8/ Mr. Mercer subsequently testified that he thought Intervenor would require an infusion of capital in the approximate amount of $150,000.00. See, Volume 7, page 781, beginning at line 4.

9/ Mr. Mercer explained the term “Defense Interval ratio” in Volume 7, page 746, beginning at line 12 as follows:

A. That’s a ratio, assuming that no further revenues are collected by the company, how long could they sustain the same level of expenses as they had in the past year.

10/ Mr. Mercer explained the term “collection period” in Volume 7, page 749, beginning at line 11 as follows:

A. It is the number of days that the company has taken in the past year to collect its accounts receivable.

11/ The undersigned does not view Intervenor’s use of the 2004/2005 audited financial statement to be an attempt to mislead Respondent as to its financial capacity. Intervenor merely selected one of two available options in responding to the financial requirement. Intervenor’s response to the RFP, at pages 22 and 35 of Joint Exhibit 3a referred to the McKesson subcontracts in the past tense when describing its experience.

The response also described the contracts it had as of the date of the response. Those new contracts are not included in the 2005/2005 audited financial statement because they did not exist at the time of the audit. Testimony from Mr. Goldstein and Mr. Mercer established that it is not unusual for a company such as Intervenor to complete contracts and thereafter enter into new ones.

12/ Attachment A to the RFP sets forth certain instructions to vendors. Paragraphs 11 and 15 of those general instructions give Respondent the right to request additional information or clarification of information relating to a vendor’s ability to perform the contract. Respondent has refused to require Intervenor to supplement its financial information.

13/ In reaching this finding, the undersigned has considered the nature of the subject procurement and the necessity that the subject services be performed timely by competent persons.

14/ In reaching this finding, the undersigned has considered that Intervenor fully complied with the requirements of the RFP, has been in existence for approximately ten years, and has completed contracts of a similar size in the past. The undersigned has also considered Intervenor’s description of its

history, its organization, and its experience, including its dealings with McKesson.

15/ In reaching this finding and the similar findings as to Dr. Hardy and Ms. Booth, the undersigned is persuaded by the procurement document that sets forth adequate evaluation

criteria and by the education, background, and experience of the witness. The undersigned is also mindful of Petitioner’s examination of this witness and her inability to answer or recall questions pertaining to certain technical aspects of the subject programs.

COPIES FURNISHED:

Daniel Lake, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Suite 3431

Fort Knox Building III, Mail Station 3 Tallahassee, Florida 32308

Stephen C. Emmanuel, Esquire Ausley & McMullen

227 South Calhoun Street Post Office Box 391

Tallahassee, Florida 32302-039

Martin R. Dix, Esquire Akerman Senterfitt, P.A.

106 East College Avenue, Suite 1200 Post Office Box 1877

Tallahassee, Florida 32302-1877

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration 2727 Mahan Drive

Fort Knox Building III, Mail Station 3 Tallahassee, Florida 32308

Dr. Andrew C. Agwunobi, Secretary Agency for Health Care Administration 2727 Mahan Drive, Suite 3116

Fort Knox Building III Tallahassee, Florida 32308

Craig H. Smith, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Suite 3431

Fort Knox Building III, Mail Stop 3 Tallahassee, Florida 32308

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

10 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.

Docket for Case No: 07-002650BID

Orders for Case No: 07-002650BID