STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

TAMPA BAY HEALTH PLAN, )

)

Petitioner, )

)

vs. ) CASE NO. 87-5524B1D

) THE STATE OF FLORIDA, DEPARTMENT ) OF ADMINISTRATION, )

)

Respondent, )

and )

) HEALTH OPTIONS, INC., d/b/a ) HEALTH OPTIONS OF TAMPA, HUMANA ) MEDICAL PLAN, INC., HEALTH ) ALLIANCE PLAN, INC., AND PRU- ) CARE HEALTH PLAN, )

)

Intervenors. )

)

RECOMMENDED ORDER

A hearing was held in this matter in Tallahassee, Florida, on January 11- 13, 1988, before Arnold H. Pollock, Hearing Officer. The issue for consideration was which bidders, if any, should be awarded the contract to provide health coverage to state employees in the Tampa Bay Area.

APPEARANCES

For Petitioner: Robert C. Bissell, Esquire

Director of Legal Affairs Tampa Bay Health Plan/Equicor

888 Executive Center Drive West, Suite 200 St. Petersburg, Florida 33702

For Respondent: Augustus D. Aikens, Jr., Esquire (DOA) General Counsel

Department of Administration

435 Carlton Building Tallahassee, Florida 32399-1550

For Intervenors: Jann Johnson, Esquire and (Counsel for Robert N. Clark, Jr., Esquire Health Options) Ausley, McMullen, McGee,

Carothers & Proctor Post Office Box 391

Tallahassee, Florida 32302

(Counsel for John R. Marks, III

Humana) Katz, Kutter, Haigler, Alderman, Eaton & Davis

315 South Calhoun Street 800 Barnett Bank Building Tallahassee, Florida 32301

(Counsel for Rhoda Smith Kibler, Esquire and Health Alliance J. Stanley Chapman, Esquire

Plan, Inc.) Ervin, Varn, Jacobs, Odom & Kitchen

305 South Gadsden Street Tallahassee, Florida 32301

(Counsel for John Buchanan, Esquire

Pru-Care Buchanan, Henry, Mick & English Health Plan) 117 South Gadsden Street

Tallahassee, Florida 32301 BACKGROUND INFORMATION

On July 31, 1987, Respondent, Department of Administration, (DOA), issued Request for Proposal No. 88-05, for the provision of health maintenance organization (HMO) services in the Tampa Bay Service area. Bids were filed by inter alia, Tampa Bay Health Plan, (now Equicor), (Tampa Bay), Health Options, Inc., (Health Options), Humana Medical Plan, Inc., (Humana), Health Alliance Plan, Inc., (Health Alliance), and Pru-Care Health Plan, (Pru-Care).

Respondent, DOA, announced its proposed award to Health Options and Humana. Petitioner, Tampa Bay, filed a formal bid protest challenging the proposed award. Health Options and Humana intervened, as did unsuccessful bidders Health Alliance and Pru-Care.

At the hearing, Petitioner presented the testimony of Dennis E. Nye, then Director of DOA's Office of Employee's Insurance; Donna R. Yates, an evaluator of the bids received; Kathy Gilbert, also an evaluator for DOA; Nancy M. Rabess, an evaluator; Marie Walker, HMO administrator for DOA; Robert Johnson, Chief, Bureau of Allied Lines for the Department of Insurance; and Dinkar B. Koppikar, an actuary with the Department of Insurance. Petitioner also introduced Petitioner's Exhibits 1-42, all of which, except No's.35 and 41, were admitted.

Respondent, DOA, presented the testimony of Mr. Nye, and introduced Respondent's Exhibit 1. Health Options introduced one exhibit.

Subsequent to the hearing, Tampa Bay, DOA, Health Options, Humana, and Pru- Care submitted proposed Findings of Fact which have been ruled upon in the Appendix to this Recommended Order.

FINDINGS OF FACT

THE PROPOSAL PROCESS

1. Prior to 1986, all HMOs had to be federally qualified to do business with the State of Florida. That requirement was subsequently changed by the Secretary of Administration who decided that any state licensed HMO could enroll state employees. As a result, the number of HMOs participating in state enrollment jumped from 21 to 64 and there was no one in DOA to oversee this increase. It became obvious that some limitation had to be imposed on the number of HMOs with whom state enrolled employees could do business. As a

   result, in 1987, the Department of Administration proposed to the Florida Legislature that the method for choosing health care providers for state employees be changed. At the time, approximately 115,000 state employees were enrolled in the State Health Plan. Of that number, approximately 27,000 were enrolled in HMO's leaving 98,000 in indemnity plans. Many of these latter employees had no option to select HMO coverage since in 40 counties in the state, no HMO option was available.

   
   

2. DOA proposed to the Legislature to go to a competitive bid process for this service with the goal in mind of reducing the overall cost of health care both to the State and to the employee. The competitive bid, by reducing the number of HMOs providing the service, would help achieve that goal. Another long-term goal was to get all health care programs, including the indemnity plans, into a managed system. This would not, however, include a preferred provider program (PPO).

   
   

3. The Legislature enacted Chapter 87-156, Laws of Florida, effective October 1, 1987, which amended Section 110.123(3)(d), Florida Statutes, to add:

   
   

   "2. Effective January 1, 1988, the Department of Administration shall, by rule, contract with health maintenance organizations to participate in the state group health

   insurance plan through the competitive bid process based on cost, service area, plan benefits, and accessibility. Effective January 1, 1988, all employees participating in the state group health insurance plan, irrespective of whether or not the member participates in a health maintenance organization, shall be subject to the same total premium, regardless of the state or employee's share."

   
   

   DOA thereafter contracted with the Frank B. Hall Co., a consultant firm, which produced the first draft of the Request for Proposal, (RFP), in July, 1987. The Department staff thereafter changed and added to the draft, and after consulting with and securing input from some HMOs, otherwise unidentified, came up with a final draft which was approved by the Secretary.

   
   

4. Consistent therewith, on July 31, 1987, DOA issued "Bid No. 88-05", a Request For Proposals For Health Maintenance Organization Coverage. The RFP indicated a pre-submission conference would be held on August 12, 1987, and proposals must be received no later than August 28, 1987. The contemplated date of award was September 14, 1987, and the contract was anticipated to be effective January 1, 1988.

   
   

5. Objectives of the procurement, as seen by DOA, generally to meet the benefit objections of the department and to provide high quality benefits and services to state employees, were specifically indicated in Section II of the RFP as:

   
   

   "A proactive approach to cost containment, including an emphasis

   on aggressive claims management, utilization review and superior statistical reporting.

   
   

   Quality medical care which encourages health promotion, disease prevention, early diagnosis and treatment.

   
   

   Stability in the financial structure of offered health plans.

   
   

   Professional, high quality service in all administrative areas, including claims processing, enrollment, membership services, grievances, and communications.

   
   

   Competitive premium rates which take into account the demographics and, if appropriate, the claims experience of State employees.

   
   

   as well as to:

   
   

   Have each county or contiguous group of counties be considered one service area.

   
   

   Award no more than two contracts per service area; however, the awards will be based on the HMO's ability to respond to the needs of employees and on accessibility by employees.

   
   

   Have reciprocal agreements between locations if an HMO has multiple service areas. For example, an employee covered dependent living in Gainesville, should be provided similar services.

   
   

   Enter into a two year, non-experience rated contract. A provision will be included tying renewal action at each of the two renewals to the Consumer Price Index (CPI) for medical care services.

   This will become part of the contract."

   
   

6. A proposer was defined as "qualified" under Section III if it was licensed by the Department of Insurance pursuant to Part II of Chapter 641, Florida Statutes. Under subsection C, each proposer was required to submit:

   
   

   1. Form PUR 7033, properly completed and signed.

   2. The completed Questionnaires Requirement Section (with questions answered in the same order as appearing on the form).

   3. The completed cost proposal forms.

   4. The completed Statement of Compliance on P47.

   5. Documentation in support of the above."

      
      

      In subsection N, the department provided:

      
      

      "Proposals are to be submitted only on the forms and formats provided in this RFP. All exhibits requested must be submitted with your proposal along with answers to all questions contained in this RFP.

      
      

7. In Section IV of the RFP, the department provided the award would be in the form of a 24 month contract to be effective January 1, 1988 and the department reserved the right to renew the contract subject to the same terms and conditions of the original contract for two additional one year periods.

   
   

8. Evaluation criteria were outlined in Section IX of the RFP and included:

   
   

   1. Premium cost.

   2. Extensiveness of Service Areas - by county and/or contiguous counties.

      NOTE: The State's objective is to award no more than two contracts per services area; however, the awards will be based

      on the HMO's ability to respond to the needs of employees and on accessibility by employees.

   3. Plan Benefits as follows:

      1. Covered services

      2. Limitations and exclusions

      3. Co-payments, deductible and coinsurance features

      4. Range of providers including specialists and number of hospitals

      5. Out of service area coverage

      6. Grievance procedures

   4. Accessibility as follows:

      1. Reciprocal agreements -

      2. Provider locations

      3. Number of primary care physicians and specialists, in relation to membership.

   5. Completeness of proposals.

No information was provided in the RFP as to the relative importance of price and other evaluation criteria, as required by Section 287.012(11), Florida Statutes."

1. Section VI of the RFP listed the minimum benefits that must be provided, and also required a complete list of all other services intended to be provided for each service area. Section X posed forty-nine questions including such items as the proposer's license status, corporate structure, reserving practices, reinsurance contracts, service area, employee membership and staff, hospital affiliations and other care facilities, physician lists, management information, and statistical information. There was also a request for the submittal of audited financial statements for the two prior fiscal years and the 1st quarter of 1987. By an undated addendum to the RFP, a fiftieth question requested brochure comparison information on specified proposed services and copayments or deductibles to be used by the various HMOs. Cost proposals submitted in a specific format were called for in Section XI.

   
   

2. At the pre-bid conference for representatives of the various proposer HMOs, held on August 12, 1987, Mr. Nye informed them that the two criteria of cost and benefits would be weighed on an equal basis. However, Mr. Nye and his staff changed the weights for several categories thereafter. He instructed the proposers to quote a specific rate for the first year of the multi-year conract, as described above, and a percentage of increase or decrease for each of the succeeding years, but noted that the state would evaluate cost solely on the basis of the first year premium. Mr. Nye also indicated an award would be made to two HMOs per service area, based on the receipt of the highest number of points awarded on the bid evaluation. In response to a specific inquiry, Mr. Nye clearly stated benefits and costs would be weighted higher than other factors. At that point in time, no decision had been made as to how to award actual points for each category, however.

   
   

   THE PROPOSERS

   
   

3. Eleven proposals were submitted prior to the August 28, 1987 deadline. Proposers included Tampa Bay, Petitioner herein; Humana, Health Alliance, Pru- Care, and Health Options, all intervenors herein; and Florida 1st Health Plan, Physician's Health Plan of Florida, AV-MED Health Plan, Cigna Health Plan of Florida, Healthwin, Inc., and MetLife Healthcare Network, all of whom either failed to take part herein or withdrew after filing.

   
   

4. Tampa Bay is a state licensed and federally qualified HMO which was purchased by Equicor in December, 1986. Equicor is a joint venture between Equitable Life Assurance and Hospital Corporation of America. Its service area includes Hillsborough, Pinellas, Pasco, and Hernando counties in which it claims 47,229 members, of whom 2,175 are state employees, retirees or dependents.

   
   

5. Health Options, which submitted two proposals, is a for-profit subsidiary of Blue Cross/Blue Shield of Florida, operating as an HMO since 1984. Its service area includes Hillsborough, Pinellas, and Pasco counties in which it claims 6,734 members, of whom 335 are state employees. It is an IPA model HMO which contracts with individual physicians on a pre- negotiated fee schedule. The member's designated primary care physician directs the patient's care and refers to specialists when necessary.

   
   

6. Humana Health Plan is a subsidiary of Humana, Inc., which got its Florida and federal licenses on June 1, 1987. Its service area includes Hillsborough, Pinellas, and Pasco counties in which it claims 21,564 members, of whom 286 are state employees. It is an IPA model HMO similar to Health Options.

7. Pru-Care being involved herein for the limited purpose of protesting the award and not in support of its own candidacy, particulars pertinent to its makeup, service area, and membership are not now relevant.

   
   

   THE EVALUATION PROCESS

   
   

8. According to the procedure drawn up by Mr. Nye and his staff, a team of three evaluators would evaluate each proposal for a service area and submit his or her evaluation forms to Mr. Nye who would enter the data into the computer. While the law requires each proposal be evaluated by three separate evaluators, it does not say how the evaluation is to be done. Some evaluators used in this case were Donna Yates, a personnel technician III, Kathy Gilbert, a personnel aide, and Nancy M. Rabess, who participated in the second evaluation. The others were not mentioned.

   
   

9. Mr. Nye, assisted by Ms. Marie Walker, an HMO administrator in Mr. Nye's office, trained all the evaluators for the seven service areas in a seminar designed to instruct them on how they would assess points. They were advised to assign a raw point score to each section of every response and to make notes as to why they were assigning points as they did. After the evaluation, Mr. Nye could not and did not overrule the evaluations. He only recorded scores assigned by the evaluators and corrected math errors prior to entering the results in the computer along with the weights to be given each factor. These weights were not discussed with either the secretary or Mr. Hall. Mr. Nye, who decided upon the weights, discussed them only with his staff. He was familiar with the program and was comfortable with it. He believes it resulted in a good weighting analysis.

   
   

10. The first evaluation and its resultant computer rankings was completed by September 11, 1987, and the results were sent by memo to the department's counsel that day for legal review. At this point, with the analysis done and the rankings reached, the contract could have been let upon the approval of the Secretary, prior to September 14, 1987. However, for reasons unknown to Mr. Nye, no action was taken until late in September, 1987. In the interim, Mr. Nye advised the secretary several times that the award was late.

    
    

11. When all the evaluation was done, the weights assigned, and the computer applications run, the rankings of the Proposers for the Tampa Bay Area were:

    
    

    #1 - Health Options Plan 5 - 67.015 pts. #2 - Tampa Bay Health Plan - 65.49 pts. #3 - Pru-Care - 62.23 pts.

    #4 - Health Options Plan 4 - 59.08 pts.

    #5 - Av-Med - 59.04 pts.

    #6 - Humana Hillsborough - 55.945 pts. #7 - Humana Pinellas - 55.915 pts.

    #8 - Cigna Low - 54.25 pts.

    #9 - Humana Pasco - 54.235 pts.

    
    

    These scores are, according to Nye, close, when compared with evaluations done in the other service areas. Errors, then, become more critical the closer the scores are.

    
    

12. Finally, at a meeting held in late September, 1987, the Secretary advised Mr. Nye that the initial evaluations were too subjective and needed to be corrected to make them more objective. Advice to this effect may have come

    from the Assistant General Counsel who indicated that in the first evaluation there were no guidelines as to how many points would be awarded for any one area and the individual evaluators had all come up with different point totals. In addition, the Secretary was concerned about the financial soundness of some HMO proposers and whether they could continue to provide appropriate service throughout the contract term. As a result, each HMO which submitted a proposal was furnished with the process and format for approval of its rates by the Department of Insurance. Mr. Nye also checked with the Department of Insurance to determine the financial soundness of the proposers and had their rates evaluated for soundness by an actuary there. Results indicated that most providers have shown net operational losses for the last few years, but this appears to be symptomatic of conditions in the HMO field in Florida during the period. All of the rates were certified by the actuary at the Department of Insurance.

    
    

13. Mr. Nye was instructed by the Secretary to have second evaluations conducted, which was done. At this point, Mr. Nye made a unilateral decision to increase the weight factor on costs from 2.5 (which it had been in the first evaluation) to 3.5, while leaving the weight factor on benefits at 2.5. This decision was not communicated to any of the proposers or to the Secretary prior to the second evaluation and analysis. However, the Secretary was made aware of the change after she was presented with the analysis of the second evaluation and prior to her making her decision on the award. This was sometime after September 23, 1987.

    
    

14. The training given to the evaluators for the second evaluation was also scanty. Several of the original evaluators were replaced because of unavailability. They were told to look at what was proposed and establish, if possible, what information was factual. Points were to be awarded only on those items which were factually established. Though this may appear nebulous, Mr. Nye is convinced it did away with any dispute. Points were also awarded for completeness. If the question was answered, it received full points. No evaluation was made of the detail of the answer.

    
    

15. When the second evaluation was completed, Mr. Nye again checked the math, ran the information through the computer for rankings, and forwarded the results to the Secretary on October 6, 1987. The package was reviewed by the General Counsel, his assistant, and the Secretary, all of whom indicated they felt the evaluation was fair. Even after this, however, there were several meetings and discussions regarding the reasons for and legal ramifications of Mr. Nye's recommendations, and the Secretary made her decision based on the information presented by Nye. This did not include any new or additional facts relative to proposers. The Secretary's selection was made on November 9, 1987.

    
    

16. Mr. Nye emphasizes that the second evaluations were made of the original submissions without supplementation, and that no additional information was requested of or submitted by the proposers. Any discussions he had with the Secretary or her staff regarding the procurement dealt with the number of HMOs which could be awarded a contract, not with who the selectee should be.

    
    

17. When the results of the second evaluation were scrutinized, it appeared that several errors had been made in the process as regards the submission of Health Options, Pru-Care, and Humana. Health Options did not receive the correct number of points for the hospital deductible, receiving 10 points instead of the appropriate 8. Humana received 5 more points than it should have because of its outpatient deductible, and Pru-Care was penalized 2

    points because the wrong information was picked up in one area. When these errors were corrected the scores were changed as follows:

    
    

    1. Humana (combined) went from 69.315 pts. to 69.214 pts.

    2. Health Options went from 67.015 pts. to 66.952 pts.

    3. Pru-Care went from 62.23 pts. to

       62.30 pts.

    4. Tampa Bay's points remained constant at 65.49.

       
       

       The first points cited as to each proposer refer to its original points on the second evaluation, not the first. In light of the above, even after the correction, the change was slight and had no effect on the rankings of the HMOs in question.

       
       

18. Mr. Nye contends, supported by Ms. Walker, that the individuals selected to do the evaluations were fully qualified to do so and were trained sufficiently to do the job. He asserts they had ample time to carefully do the job, and while it was a priority project, no deadline was set for completion. No one expressed to them any feelings of being rushed. The testimony of some evaluators reflects a somewhat different story, however.

    
    

19. Ms. Donna Yates, a Personnel Technician III for DOA, was contacted for the first time in August, 1987 to attend a meeting of selected evaluators, others of whom she recognized to be personnel technicians as well. At this meeting, they were given copies of the evaluation form, instructed to carefully examine it, and told to utilize one form for each bidder. Ms. Yates was assigned to the Tampa Bay Area.

    
    

20. Ms. Yates had no prior experience in HMO evaluation though she had one prior experience in bid evaluation, and did not feel qualified to do the job even after the minimal instructions she received. However, after reviewing the first proposal, she felt more comfortable with the process. Nonetheless, her unfamiliarity with the process and the subject matter is apparent from her discussion of the term, "additional benefits", an area of evaluation. She indicated she would have awarded an additional 10 points for each service provided beyond the list of required services, as opposed to a total of 10 points for any additional service. She did not, however, have the list of required benefits available to her at the time of the evaluation, so her award of points in that area must be suspect. In addition, she does not know what the statutory requirements were for exclusion of and limitations on organ transplants and cannot recall if she was even told what they were. She also cannot recall what, if anything, she was told about the completeness of the proposals, nor does she recall any discussions about it.

    
    

21. During the first evaluation, each evaluator worked independent of the others, arriving at his or her own point assessment, and no opportunity was given to compare results. Ms. Yates felt somewhat rushed. When completed, each evaluator's forms were taken to the supervisor's office and turned in. During the second evaluation, for which she was again called, the three evaluators worked together, discussing the proposal answers, and arriving at a resolution of questions by joint re- reference to the proposal. She received no instructions from anyone that the three evaluators in a service area should arrive at the same answers. In the group in which she worked, any disagreements were usually resolved through discussion and unanimous agreement reached. The

    second evaluations were on new forms which made no reference to the first evaluation. She did not go back and check her work for errors before turning the forms in to Mr. Nye though she completed the evaluation forms for the three service areas to which she was assigned, (Tampa Bay, Orlando, and Pensacola), in one day. By her own admission, though she did not feel rushed in the second evaluation, Ms. Yates, by this time, was sick of the process and completed it as quickly as possible.

    
    

22. Ms. Gilbert and Ms. Rabess confirm Ms. Yates' testimony. Ms. Gilbert participated in only the first evaluation and Ms. Rabess in only the second. Ms. Gilbert received some instructions prior to her evaluation, but not much. She did, however, feel qualified to do the job and did not feel rushed. Ms.

    Rabess relates she received a considerable amount of instruction from Mr. Nye at an hour-long meeting before her evaluations but cannot remember what it included. Having never done a bid evaluation before, she nonetheless felt qualified to do it this time and was comforted by the fact she could ask Ms.

    Yates or Ms. Gilbert, with whom she was working as a team, if she had any questions. When asked at the hearing how an HMO works, however, she could not say nor could she describe the main benefits of such an organization. It is obvious that this witness, who served as an evaluator, was totally unable to understand the RFP or what she was doing. She could not do the calculations of premium costs nor could she remember, less than four months later, what she or the others did, and can state little more than that they all worked together.

    From the above, it becomes clear that while the method of evaluation may have been well thought out, it's implementation through the use of totally unqualified and untrained personnel was faulty and could not help but result in a flawed evaluation both times it was done.

    
    

23. The form used in the second evaluation was designed to evaluate the four basic categories required by law to be considered. The first is premium cost and the evaluator was to insert this figure from the cost sheet provided by each HMO in its response to the RFP which provided that the family rate could not exceed 2.5 times the individual rate. The evaluator was to perform the calculation to insure that requirement was met. The evaluator next assigned a point score to the proposal in that area. The Department provided the evaluator with a mean value which was assigned a point score of 5. Rates above or below the mean were assigned points from 0 to 10 depending on how far above or below the mean the rate was. If below the mean, the proposer got a higher point assignment and vice-versa. Retiree rates, affected somewhat by Medicare, were also considered with DOA providing the mean cost.

    
    

24. The second section of the form dealt with service area and called for the HMO to get 1 point for each full county served. In the third section, plan benefits were examined. Sub- section (a), dealt with minimum coverage and the evaluator was referred to page 12, paragraph 2 of the RFP which listed the required services and asked the proposer to list any additional services offered. Sub-Section (b) referred to limitations and exclusions, one of which related to organ transplants. Here the evaluator was referred to that portion of the proposal/RFP where the HMO was to state its position on organ transplants. The evaluator was to award 10 points if organ transplants were done and to deduct 2 points for each limitation or exclusion.

    
    

25. As to co-payments and coinsurance, the latter is usually expressed in a percentage of total cost of a service or group of services. A deductible requires a patient to pay a certain amount before any charges are paid by the carrier. A co-payment is the amount the patient pays each time he or she sees a doctor. Coinsurance is usually capped by a stop-loss; a deductible is

    automatic; and a co-payment can be capped several ways, such as percent of premium, set figure, or the like. In this procurement, the HMOs were to provide a list of deductibles and co-payments and the evaluator was to look at the co- payment for physician visit and ER visit and add or subtract points to or from the 5 point mean of $25.00 co-payment. As to hospital co- payments, the evaluator was to initially award 10 points and subtract 2 points for each

    $100.00 of co-payment.

    
    

26. In the case of Health Options, for example, the providers had a

    $100.00 per day co-payment not to exceed $500.00. This limit, in Nye's opinion, was the same as a $100.00 co- payment and the provider should have lost only 2 points. In evaluating the co-payment for prescription drugs of $3.00 per prescription, even if 4 prescriptions were filled the same day, the evaluator should have treated that as being one co-payment deduction.

    
    

27. The evaluators were also to look at the hospitals provided by the HMO and identify them as either "full service" or "other". As to skilled nursing benefits, either they were offered or they were not. If offered, the proposer was awarded 10 points. If not, it received none. The proposer was also to receive one point for each type of physician provided.

    
    

28. Out of area coverage is self-explanatory. If the patient would be covered outside his or her own service area in an emergency, the evaluator was instructed to determine how quickly the service charge would be reimbursed either to the patient or the provider. Accessibility, the ability of the employee to receive service, was considered. Evaluators looked at regional agreements to see if the patient could be covered outside his service area in other than emergencies. Provider locations were examined to see if the provider had a site in each county in its service area, and the HMO got 2 points for each specialty offered in each county and one point for each doctor in each county.

    
    

29. When the scores had been awarded as to each question, those not on the

    10 point basis were converted to it by use of a formula which developed a matrix for measuring the difference between points awarded in a particular area (cost, benefits, accessibility, etc.). This conversion was not done by the evaluators, however, but by Mr. Nye.

    
    

30. No doubt Mr. Nye knew what he was doing and so did Ms. Walker, the HMO administrator in DOA. In this award process she initially reviewed the proposals and commented on them in some cases, and she participated as an evaluator in the second evaluation. She was, as well, deeply involved in writing the recommendations submitted to the Secretary upon completion of the evaluations. In her opinion, the difference between the first and second evaluations was one of methodology. Whereas the first left room for evaluator discretion, the second, while still requiring judgement on the part of the evaluator, was more objective. She felt the evaluators used were equipped to use that judgement, and some may have been. However, it is clear those who testified at this hearing were not sufficiently familiar with the subject matter to appropriately apply even objective standards.

    
    

31. Ms. Walker also established that changes in the second evaluation had a substantial effect on the way the proposers were looked at. For example, benefits and accessibility were now grouped together and viewed against costs, and co-payments were considered an important benefit.

    
    

32. In the Tampa Bay Service Area, Humana received the greatest number of points (69.13) on its combined bid for Pasco, Pinellas, and Hillsborough

    Counties derived from the aforementioned matrix and the score sheets of the evaluators. In his memo of October 6, 1987 to the Secretary, Mr. Nye recommended that four HMOs, (Tampa Bay Health Plan, Health Alliance, Health Options and Humana) be awarded contracts because he included Polk and Hernando Counties to be in this service area. Tampa Bay Health Plan was included because it was the only HMO to propose to provide service in Hernando County, and Health Alliance agreed to provide service in Polk County. Neither Health Options nor Humana proposed service in those two counties. However, a decision was made to award contracts to Humana and Health Options for the three county service area previously described and to enter separate negotiations with the other two for Polk and Hernando Counties.

    
    

    CONCLUSIONS OF LAW

    
    

33. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of these proceedings.

    
    

34. Of initial importance in arriving at a resolution of the issues herein is the applicability of Chapter 287, Florida Statutes, to the procurement in question. Also of importance is Section 110.123(d), which was the pertinent statute relative to state employee membership in health maintenance organizations prior to the enactment of Chapter 87-156, Laws of Florida. Section 110.123(d) as it then read, provided for state employees who were otherwise eligible to participate in the state group health insurance plan, as an optional alternative, to elect membership in a qualified health maintenance organization. This provision was amended by the Legislature, effective January 1, 1988, to provide for the Department of Administration to contract for HMO participation in the state health insurance plan through the competitive bid process. Bids to provide this service, by statute, were to be evaluated on the basis of cost, service area, plan benefits, and accessibility.

    
    

35. DOA determined to solicit competitive proposals pursuant to Chapter 287, Florida Statutes. Specifically, Chapter 287.057 governs the procurement of contractual services and in pari materia, requires awards for contractual services by competitive sealed bidding but authorizes the use of competitive sealed proposals if the use of competitive sealed bidding is not practicable.

    
    

36. Ordinarily, Section 287.012(4)(b), excludes from within the term "Contractual Service", the procurement of which is governed by Section 287.057, "health services involving examination, diagnosis, treatment, prevention, medical consultation, or administration". However, the requirement of Chapter 87-156, that DOA contract with HMOs through "the competitive bidding process", by strong implication requires adherence to Section 287.057, the general statutory authority for competitive bidding.

    
    

37. The use of competitive sealed proposals is authorized if the agency determines that use of competitive sealed bidding is not practicable. The term, "Request for proposals" is defined in Section 287.012(11) in part as follows:

    
    

    "Request for proposals" means a written solicitation for sealed proposals with the title, date, and hour of the public opening designated. The request for proposals is used when the agency is incapable of specifically defining the scope of work for

    which the ... contractual service is required and when the agency is requesting that a qualified offeror propose a ... contractual

    service to meet the specifications of the solicitation document. A request for proposals includes, but is not limited to, general information, applicable laws and rules, functional or general specifications, statement of work, proposal instructions and evaluation criteria. Requests for proposals shall state the relative importance of price and any other evaluation criteria. (emphasis added)"

    Section 287.057 provides in pertinent part as follows: "(3) When an agency determines in

    writing that the use of competitive sealed bidding is not practicable, contractual services shall be procured by competitive sealed proposals. A request for proposals which includes a statement of the services sought and all contractual terms and conditions applicable to the procurement of contractual services, including the criteria, which shall include, but need not be limited to, price, to be used in determining acceptability of the proposal shall be issued. If the agency contemplates renewal of the contract, it shall be so stated in the request for proposals. The

    proposal shall include the price for each year for which the contract may be renewed. Evaluation of proposals shall include consideration of the total cost for each year as quoted by the proposer. To assure full understanding of and responsiveness to the solicitation requirements, discussions may be conducted with qualified offerors. The offerors shall be accorded fair and equal treatment prior to the submittal date

    specified in the request for proposals with respect to any opportunity for discussion and revision of proposals. The award shall be made to the responsible offeror 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 the basis on which the award is made.

    ...

    (16) A selection team of at least three employees who have experience and knowledge in the program areas and service requirements for which contractual services are sought shall in the selection of contractors. "

    
    

38. The evidence presented at the hearing clearly shows that DOA failed to make the required written determination that the use of competitive sealed bidding was not practicable, and no reason was offered for its failure to do so. However, here, it does not appear that this deficiency would affect the validity of the process itself and, accordingly, it is presumed that the agency complied with the provisions of Section 287.057(3).

    
    

39. Further, the DOA request for proposals included the required evaluation criteria of "cost, service area, plan benefits, and accessibility", and an additional criterion not specifically authorized, "completeness of proposals". This addition is considered to be reasonable if superfluous. However, the mandated relationship between price and other evaluation criteria, called for by Section 287.012(11) to be in the RFP, was absent. The only reference to this by the department, was Mr. Nye's response to the question regarding it at the pre-bid conference when he indicated costs and benefits would be weighted equally between themselves and both higher than the other criteria. Even then, when the evaluation was done, benefits and accessibility were initially weighted the same as cost and in the second evaluation, Nye unilaterally increased the weight factor on costs while leaving that for benefits the same. This change was not communicated to the proposers and the omission is considered critical. The competing HMOs were unable to determine the relative importance of each of the criteria and utilize this information in the preparation of their proposals.

    
    

40. Intervenor, Pru-Care, also contends that the department failed to use properly trained or qualified evaluators in its evaluations of the proposals. This contention is well taken. A fair consideration of the testimony of the evaluators who appeared at the hearing clearly indicated they were seriously underqualified to evaluate these proposals using either the original criteria or the more objective second criteria. Notwithstanding Mr. Nye's or Ms. Walker's stated feelings of confidence regarding the ability of the personnel technicians involved to understand the terms and conditions of the evaluations and the ramifications of their ratings, it is clear these feelings of confidence were not well placed.

    
    

41. Such other considerations as the indicated financial shortcomings of the successful proposer and the somewhat unimpressive actuarial evaluation by the Department of Insurance also seem to have been disregarded by the department in its decision to make the award it did. They should have played a more substantial part.

    
    

42. It is well settled that contract award decisions made by state agencies ordinarily will be upheld unless they are arbitrary, capricious, or beyond the scope of agency discretion. System Development Corporation v.

    Department of Health and Rehabilitative Services, 423 So.2d 433 (Fla. 1st DCA, 1982); Capeletti Brothers v. State Department of General Services, 432 So.2d 1359 (Fla. 1st DCA, 1983). In the System Development case, the Court set the standard for judicial review, stating:

    
    

    "So long as the public agency acts in good faith, even though they may reach a conclusion on facts upon which reasonable men may differ, the courts will not generally interfere with their judgment, even though the decision reached may appear to some persons to be erroneous. Volume Services Division v. Canteen Corp.,

    369 So.2d 391, 395 (Fla. 2nd DCA, 1979).

    
    

    This general rule, of course, applies if and when the agency has, itself, in the procurement process, abided by the requirements of the statute. In this case that did not happen. The evidence has shown, and it has been found, that the department failed to advise the proposers in the RFP of the weight to be accorded the evaluation criteria. Therefore, this being a material omission, it rendered the agency's proposed award invalid. In addition, the evaluation and award process was so tainted with inaccuracies and error in grading as to make a rejection of the entire process clearly appropriate.

    
    

43. In light of these conditions, the department can and should reject all proposals, as provided for in the General Conditions section of the RFP.

RECOMMENDATION

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

RECOMMENDED that the Department of Administration issue a Final Order rejecting all proposals submitted to provide HMO service for the Tampa Bay service area and readvertise for new proposals, if appropriate.

Recommended this 26th day of April, 1988, in Tallahassee, Florida.

ARNOLD H. POLLOCK

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 26th day of April, 1988.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-5524BID

The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in this case:

By the Petitioner: Tampa Bay Health Plan

1. A - Accepted. B - Accepted. C - Accepted. D - Accepted.

   E - Accepted and incorporated herein.

2. A - Accepted and incorporated herein. B - Accepted and incorporated herein. C - Accepted.

   1. - Accepted and incorporated herein.

   2. - Rejected as contra to the weight of the evidence. F - Rejected as contra to the weight of the evidence. G - Rejected as unproven.

3. Rejected.

4. Accepted and incorporated herein.

5. Rejected as unidentified and unsupported.

6. Accepted.

By the Respondent: DHRS

1 - 3. Accepted and incorporated herein.

4 - 15. Accepted and incorporated herein.

16 - 19. Accepted and incorporated herein.

20 - 22. Accepted and incorporated herein.

1. Accepted except for finding that second evaluation method "make it much simpler for evaluators to score the proposals.

2. Accepted and incorporated herein.

3. Accepted and incorporated herein.

4. Accepted and incorporated herein.

27 - 28. Accepted and incorporated herein.

29. Accepted.

1. (25) Accepted.

2. (26) Accepted except for second sub-paragraph.

3. (30) Accepted except for second sub-paragraph.

4. (28) Accepted except for second sub-paragraph.

5. (29) Accepted except for second sub-paragraph.

6. (38) Accepted except for second sub-paragraph.

For Intervenor: Health Options

1 - 6. Accepted and incorporated herein.

7 - 9. Accepted and incorporated herein.

1. Accepted.

2. Accepted and incorporated herein.

12 - 19. Accepted and incorporated herein.

1. Rejected as a restatement of evidence and conclusion in last two sentences, is not supported.

2. Rejected.

3. Unused.

4. Accepted and incorporated herein.

5. Accepted.

6. Accepted.

26 - 27. Accepted and incorporated herein.

1. Accepted.

2. Accepted.

For Intervenor: Humana

1. Accepted in that several errors were made.

Accepted in that alternative methods of evaluating were available and used. Balance is rejected.

For Intervenor: Pru-Care Health Plan

1 - 7. Accepted and incorporated herein.

8. Rejected as contra to the evidence (sentence two).

9 - 11. Accepted.

12. Accepted.

13 - 14. Accepted and incorporated herein.

1. Accepted and incorporated herein.

2. Accepted and incorporated herein.

3. Accepted and incorporated herein.

4. Accepted and incorporated herein.

5. Accepted except for last sentence which is not a Finding of Fact.

COPIES FURNISHED:

Robert C. Bissell, Esquire Director of Legal Affairs Tampa Bay Health Plan/Equicor

888 Executive Center Drive West Suite 200

St. Petersburg, Florida 33702

Augustus D. Aikens, Jr., Esquire General Counsel

Department of Administration

435 Carlton Building Tallahassee, Florida 32399-1550

Jann Johnson, Esquire and Robert N. Clark, Jr., Esquire Ausley, McMullen, McGee, Carothers & Proctor

Post Office Box 391 Tallahassee, Florida 32302

John R. Marks, III, Esquire Katz, Kutter, Haigler, Alderman, Eaton & Davis

315 South Calhoun Street 800 Barnett Bank Building Tallahassee, Florida 32301

Rhoda Smith Kibler, Esquire and

J. Stanley Chapman, Esquire Ervin, Varn, Jacobs; Odom &

Kitchen

305 South Gadsden Street Tallahassee, Florida 32301

John Buchanan, Esquire Buchanan, Henry, Mick & English

117 South Gadsden Street Tallahassee, Florida 32301

Adis Vila, Secretary Department of Administration

435 Carlton Building Tallahassee, Florida 32399-1550

Docket for Case No: 87-005524BID

Orders for Case No: 87-005524BID