STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS HEMOPHILIA HEALTH SERVICES, ) INC., ) ) Petitioner, ) ) vs. ) Case No. 04 0017BID ) AGENCY FOR HEALTH CARE ) ADMINISTRATION, ) ) Respondent, ) ) and ) ) CAREMARK, INC., ) ) Intervenor. ) ) LYNNFIELD DRUGS, INC., d/b/a ) HEMOPHILIA OF THE SUNSHINE ) STATE, ) ) Petitioner, ) ) vs. ) Case No. 04 0018BID ) AGENCY FOR HEALTH CARE ) ADMINISTRATION, ) ) Respondent, ) ) and ) ) CAREMARK, INC., ) ) Intervenor. ) ) RECOMMENDED ORDER On February 23 and 24, 2004, an administrative hearing in these cases was held in Tallahassee, Florida, before William F. Quattlebaum, Administrative Law Judg e, Division of Administrative Hearings. APPEARANCES For Hemophilia Health Services, Inc.: J. Riley Davis, Esquire Martin R. Dix, Esquire Akerman and Senterfitt Law Firm 106 East Co llege Avenue, Suite 1200 Tallahassee, Florida 32301 For Lynnfield Drugs, Inc.: Geoffrey D. Smith, Esquire Thomas R. McSwain, Esquire Blank, Meenan & Smith, P.A. 2 04 South Monroe Street Post Office Box 11068 Tallahassee, Florida 32302 3068 For Agency for Health Care Administration: Anthony L. Conticello, Esquire Thomas Barnhart, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 For Caremark, Inc.: Linda Loomis Shelley, Esquire Karen A. Brodeen, Esquire Fowler, White, Boggs, Banker, P.A. 101 North Monroe Street, Suite 1090 Post Office Box 11240 Tallahassee, Florida 32301 STATEMENT OF THE ISSUE The issue in these cases is wh ether the Agency for Health Care Administration's (AHCA) proposed award of a contract to Caremark, Inc., based on evaluations of proposals submitted in response to a Request for Proposals (RFP), is clearly erroneous, contrary to competition, arbitrary, or capricious. PRELIMINARY STATEMENT On October 1, 2003, AHCA issued an RFP seeking proposals to operate the Medicaid Comprehensive Hemophilia Management Program. On December 9, 2003, AHCA posted a Notice of Intent to award the contract to Caremark, Inc. ( Caremark). Both Hemophilia Health Services, Inc. (HHS), and Lynnfield Drugs, Inc., d/b/a Hemophilia of the Sunshine State (Lynnfield), filed challenges to the proposed contract award. AHCA forwarded the cases to the Division of Administrative Hearings on January 5, 2004, which consolidated the cases and scheduled the hearing to commence on February 4, 2004. On January 7, 2004, Caremark filed a Petition to Intervene in the cases, which was granted by Order entered January 12, 2004. In response to a Joi nt Motion to Continue Hearing filed on January 15, 2004, the hearing was rescheduled to commence on February 23, 2004. At the hearing, Joint Exhibits numbered 1; 2; 3A B, with Appendix; 5A B; 6A C; and 7 through 18 were admitted into evidence. Lynnfiel d presented the testimony of three witnesses and had Exhibits numbered 1 through 3 admitted into evidence. HHS presented the testimony of five witnesses and had Exhibits numbered 1 through 10 admitted into evidence. AHCA presented the testimony of four w itnesses and had Exhibits numbered 1 and 2 admitted into evidence. Caremark presented the testimony of one witness and had Exhibit numbered 1 admitted into evidence. A Transcript of the hearing was filed on March 9, 2004. Proposed recommended orders we re to be filed by March 19, 2004. By joint motion filed on March 15, 2004, the parties stipulated to extending the deadline for filing proposed recommended orders to March 31, 2004. AHCA and Caremark filed a joint Proposed Recommended Order and Lynnfield filed a Proposed Recommended Order on March 31, 2004. HHS filed a Proposed Recommended Order on April 1, 2004. FINDINGS OF FACT 1. AHCA is the single state agency in Florida authorized to make payments for medical assistance and related services under T itle XIX of the Social Security Act (the "Medicaid" program). 2. In order to participate in the federal Medicaid program, AHCA is required to maintain a state plan for Medicaid in compliance with Title XIX of the Social Security Act. AHCA is required to operate the Florida Medicaid program in compliance with the state plan. 3. AHCA is apparently concerned by costs associated with the Florida Medicaid program's hemophilia population. Florida's Medicaid hemophilia beneficiaries constitute a relatively sm all, but costly population to serve. Hemophilia is a bleeding disorder caused by a deficiency in one of numerous "clotting factors," which normally causes a persons' blood to coagulate. Hemophilia is treated by administration of the deficient clotting fa ctor to the person with the disorder. AHCA seeks to control the cost of providing hemophilia related services to this population through a combination of case management and medication discounts known as the Medicaid Comprehensive Hemophilia Management (M CHM) program. AHCA believes that a single vendor responsible for operation of the MCHM program can provide managed care to the population while achieving significant drug cost savings. 4. Through a federal requirement referred to as "freedom of choice, " Florida's Medicaid program state plan must provide that any individual eligible for medical assistance (including drugs) may obtain such assistance from any institution, agency, community pharmacy, or person qualified to perform the service and who under takes to provide such services. 5. The freedom of choice requirement is subject to being waived in accordance with applicable federal law. Such waiver requires approval by the Centers for Medicare and Medicaid Services (CMS). 6. AHCA began seeking app roval from CMS for an amendment to an existing "Managed Care Waiver" to implement the MCHM program in October 2002. By letter dated May 22, 2003, CMS approved AHCA's request to amend the existing waiver to permit implementation of the MCHM program. Subse quent correspondence between the agencies has further established AHCA's authority to implement the MCHM program. 7. AHCA issued the RFP ("RFP AHCA 0403") on October 1, 2003. The RFP seeks to implement the MCHM program. There were no timely challenges f iled to the terms and specifications of the RFP. 8. Section 287.057, Florida Statutes (2003), requires that an agency must make a written determination that an invitation to bid is not practicable for procurement of commodities or contractual services pri or to issuance of an RFP. AHCA did not make such a written determination prior to issuance of the RFP. 9. Under the terms of the RFP, AHCA will contract with a single provider for a period of two years, with an option to extend the contract for an addi tional two year period. 10. RFP Section 10.2 sets out an extensive list of vendor requirements designed to provide care to Medicaid hemophilia beneficiaries and better management of related costs. 11. The RFP provides that the successful vendor will be p aid only on the basis of the factor products dispensed to eligible Medicaid beneficiaries. All other services required by the RFP must be delivered within the revenue provided by AHCA's reimbursement for factor product costs. No additional payment beyon d payment of factor product costs will be provided. 12. The RFP stated that the successful vendor would be reimbursed for factor product cost based on the average wholesale price (AWP) of the factor product minus a minimum discount of 39 percent. The RFP provided that vendors may offer a greater discount than 39 percent. An Addendum to the RFP indicated that if a vendor proposed a discount greater than 39 percent, the increased discount must apply to all factor products and that vendors could not propose varying discounts for individual factor products. 13. The RFP contains language in the background section referencing budget "proviso" language adopted by the Legislature and referring to the MCHM program as a "revenue enhancement program." HHS asserts that because this RFP does not create a revenue enhancement program, AHCA had no authority to proceed with the RFP. The evidence fails to establish that this program will enhance revenue. The evidence fails to establish that based on the "proviso" langua ge, AHCA is without authority to issue the RFP. 14. RFP Section 20.11 sets forth the "proposal submission requirements." The section included a number of requirements set in capital letters and highlighted in boldface. The terms of each requirement ind icated that failure to comply with the requirement was "fatal" and would result in rejection of the proposal submitted. 15. None of the proposals submitted by the parties to this proceeding were rejected pursuant to RFP Section 20.11. The evidence fails to establish that any of the proposals submitted by the parties to this proceeding should have been rejected pursuant to RFP Section 20.11. 16. RFP Section 20.16 provides that AHCA may waive "minor irregularities," which are defined as variations "from the RFP terms and conditions, that [do] not affect the price of the proposal or give one applicant an advantage or benefit not enjoyed by others or adversely affect the state's interest." 17. RFP Section 20.17 provides as follows: Rejection of proposals Proposals that do not conform to all mandatory requirements of this RFP shall be rejected by the Agency. Proposals may be rejected for reasons that include, but are not limited to, the following: 1) The proposal was received after the submission deadline ; 2) The proposal was not signed by an authorized representative of the vendor; 3) The proposal was not submitted in accordance with the requirements of Section 20.11 of this RFP; 4) The vendor failed to submit a proposal guarantee in an acceptable for m in accordance with the terms identified in Section 20.12 of this RFP or the guarantee was not submitted with the original cost proposal; 5) The proposal contained unauthorized amendments, deletions, or contingencies to the requirements of the RFP; 6) T he vendor submitted more than one proposal; and/or 7) The proposal is not deemed to be in the best interest of the state. 18. None of the proposals submitted by the parties to this proceeding were rejected pursuant to RFP Section 20.17. The evidence fa ils to establish that any of the proposals submitted by the parties to this proceeding should have been rejected pursuant to RFP Section 20.17. 19. RFP Section 30.1 provides that the "total cost of the contract will not exceed $36,000,000 annually." 20 . RFP Section 30.2 provides in part that the "total cost for the contract under any renewal will not exceed $36,000,000 per year." 21. The RFP's contract amount apparently was based on historical information and assumed that some level of cost control woul d occur through case management. The contract amount cannot operate as a "cap" because Medicaid hemophilia beneficiaries are an "entitled" group and services must be provided. If the amount of the contract is exceeded, AHCA is obliged to pay for necessar y factor products provided to the beneficiaries; however, in an Addendum to the RFP, AHCA stated that if the contract fails to contain costs "there would be no justification to renew or extend the contract." 22. The RFP required vendors to submit a perfor mance bond based on 20 percent of the $36 million contract amount. 23. The RFP stated that proposals could receive a maximum possible score of 2000 points. The proposal with the highest technical evaluation would receive 1340 weighted points. The propo sal with the lowest cost proposal would receive 660 weighted points. The combined technical and cost proposal scores for each vendor determined the ranking for the proposals. The RFP set forth formulas to be used to determine the weighted final score bas ed on raw scores received after evaluation. 24. AHCA conducted a bidder's conference related to the RFP on October 8, 2003. All parties to this proceeding attended the conference. 25. At the conference, AHCA distributed a copy of a spreadsheet chart t hat listed all factor products provided to Florida's Medicaid hemophilia beneficiaries during the second quarter of 2003. The chart identified the amount of each factor product used and the amount paid by AHCA to vendors for the factor product during the quarter. The chart also showed the amount that would have been paid by AHCA per factor product unit had the vendors been paid at the rate of AWP minus 39 percent. 26. AHCA received six proposals in response to the RFP. The proposals were received from Caremark, HHS, Lynnfield, PDI Pharmacy Services, Inc., Advance PCS/Accordant, and Coram. 27. RFP Section 60 contained the instructions to vendors for preparing their responses to the solicitation. 28. As set forth in RFP Section 60.1, the technical respons e was identified as "the most important section of the proposal with respect to the organization's ability to perform under the contract." The section requires vendors to include "evidence of the vendor's capability through a detailed response describing its organizational background and experience," which would establish that the vendor was qualified to operate the MCHM program. Vendors were also directed to describe the proposed project staffing and the proposed "technical approach" to accomplish the wo rk required by the RFP. 29. Vendors were encouraged to propose "innovative approaches to the tasks described in the RFP" and to present a detailed implementation plan with a start date of January 10, 2003. 30. The technical responses were opened on Octob er 29, 2003. AHCA deemed all six proposals to be responsive to the technical requirements of the RFP and each technical proposal was evaluated. 31. For purposes of evaluation, AHCA divided the technical requirements of the RFP into 50 separate criteria. 32. AHCA assembled the technical evaluators at an orientation meeting at which time an instruction sheet was issued and verbal instructions for evaluating the technical proposals were delivered. The instruction sheet distributed to the evaluators provi ded that the evaluators "should" justify their scores in the "comments" section of the score sheets. 33. The five AHCA employees who evaluated the technical proposal were Maresa Corder (Scorer "A"), Bob Brown Barrios (Scorer "B"), Kay Newman (Scorer "C") , Jerry Wells (Scorer "D"), and Laura Rutledge (Scorer "E"). 34. AHCA employees Dan Gabric and Lawanda Williams performed reference reviews separate from the technical evaluations. Reference review scores were combined with technical evaluation scores r esulting in a total technical evaluation score. Reference review scores are not at issue in this proceeding. 35. Kay Newman's review was limited to reviewing the financial audit information provided by the vendors. 36. Technical evaluators reviewed each technical response to the RFP and completed evaluation sheets based on the 50 evaluation criteria. Other than Mr. Wells, evaluators included comments on the score sheets. Mr. Wells did not include comments on his score sheet. 37. The technical proposa l scoring scale set forth in the RFP provided as follows: Points Vendor has demonstrated 0 No capability to meet the criterion 1 3 Marginal or poor capability to meet the criterion 4 6 Average capability to meet the criterion 7 9 Above average capabili ty to meet the criterion 10 Excellent capability to meet the criterion 38. Each evaluator worked independently, and they did not confer with each other or with anyone else regarding their evaluations of the responses to the RFP. 39. Janis Williamson wa s the AHCA employee responsible for distribution of the technical proposals to the evaluators. She received the completed score sheets and evaluation forms from each of the technical evaluators. 40. The RFP set forth a process by which point values woul d be assigned to technical proposals as follows: The total final point scores for proposals will be compared to the maximum achievable score of 1340 points, and the technical proposal with the highest total technical points will be assigned the maximum ach ievable point score. All other proposals will be assigned a percentage of the maximum achievable points, based on the ratio derived when a proposal's total technical points are divided by the highest total technical points awarded. S = P X 1 340 N Where: N = highest number of final points awarded to t technical proposal P = number of final points awarded to a proposal S = final technical score for a proposal 41. According to the "Summary Report and Recommendation" memorandu m dated December 4, 2003, after application of the formula, Caremark received the highest number of technical points (1340 points). Of the parties to this proceeding, HHS was ranked second on the technical proposal evaluation (1132.30 points), and Lynnfie ld was ranked third (1101.48 points). 42. Lynnfield and HHS assert that the scoring of the technical proposals was arbitrary based on the range of scores between the highest scorer and the lowest scorer of the proposals. Review of the score sheets indic ates that Scorer "A" graded "harder" than the other evaluators. The scores she assigned to vendor proposals were substantially lower on many of the criteria than the scores assigned by other evaluators. The range between her scores and the highest scores assigned by other evaluators was greater relative to the Lynnfield and the HHS proposals than they were to the Caremark proposal, indicating that she apparently believed the Caremark technical proposal to be substantially better than others she reviewed. 43. There is no evidence that Scorer "A" was biased either for or against any particular vendor. The evidence fails to establish that her evaluation of the proposals was arbitrary or capricious. The evidence fails to establish that AHCA's evaluation of the technical proposals was inappropriate. 44. After the technical evaluation was completed, cost proposals were opened on November 21, 2003. 45. Section 60.3 addressed the cost proposal requirements for the RFP. RFP Section 60.3.1 provides as follows: The cost proposal shall cover all care management services, hemophilia specific pharmaceuticals dispensing and delivery, and pharmacy benefits management activities contemplated by the RFP. The price the vendor submits must include a detailed budget that fully justifies and explains the proposed costs assigned. This includes salaries, expenses, systems costs, report costs, and any other item the vendor uses in arriving at the final price for which it will agree to perform the work described in the RFP. T he maximum reimbursement for the delivery of services and factor products used in factor replacement therapy (inclusive of all plasma derived and recombinant factor concentrates currently in use and any others approved for use during the term of the contra ct resulting from this RFP) will be at Average Wholesale Price (AWP) minus 39%. Proposals may bid at a lower reimbursement but not higher. All other drugs not otherwise specified in factor replacement therapy will be paid at the normal Medicaid reimburse ment. 46. RFP Section 60.3.2 provides as follows: A vendor's cost proposal shall be defined in terms of Average Wholesale Price (AWP) and conform to the following requirements: A. The first tab of a vendor's original cost proposal shall be labeled "Pr oposal Guarantee" and shall include the vendor's proposal guarantee, which shall conform to the requirements specified in this RFP, Section 20.12. Copies of the cost proposal are not required to include the proposal guarantee. B. The second tab of the co st proposal shall be labeled "Project Budget" and shall include the information called for in the RFP, including the total price proposed, a line item budget for each year of the proposal, a budget narrative, and other information required to justify the c osts listed. 47. The RFP does not define the "detailed" budget mentioned in RFP Section 60.3.1 and does not define the "line item" budget mentioned in RFP Section 60.3.2. No examples of such budgets were provided. 48. RFP Section 80.1 provides as follo ws: Evaluation of the Mandatory Requirements of the Cost Proposal Upon completion of the evaluation of all technical proposals, cost proposals will be opened on the date specified in the RFP Timetable. The Agency will determine if a cost proposal is suff iciently responsive to the requirements of the RFP to permit a complete evaluation. In making this determination, the evaluation team will review each cost proposal against the following criteria: A. Was the cost proposal received by the Agency no later than time specified in the RFP Timetable? B. Did the vendor submit an original and ten copies of its cost proposal in a separate sealed package? C. Was the vendor's cost proposal accompanied by a proposal guarantee meeting the requirements of the RFP? D. Did the cost proposal contain the detailed budget required by the RFP? E. Does the proposal contain all other mandatory requirements for the cost proposal? 49. The AHCA employee who opened the cost proposals apparently determined that each proposa l met the requirements of RFP Section 80.1, including providing a "detailed" budget. 50. The RFP set forth a process by which point values would be assigned to cost proposals as follows: On the basis of 660 total points, the proposal with the lowest total price will receive 660 points. The other proposals will receive a percentage of the maximum achievable points, based on the ratio derived when the total cost points are divided by the highest total cost points awarded. S = L X 660 N Where: N = price in the proposal (for two years) L = lowest price proposed (for two years) S = cost points awarded 51. The cost proposal scoring process clearly required comparison of each vendor's total price for the initial two year portion o f the contract. 52. Caremark's proposal included estimated total costs of $44,797,207 for FY 2002 2003, $43,245,607 for FY 2003 2004, and $44,542,975 for FY 2004 2005. 53. According to RFP Section 30.1, the maximum annual contract was not to exceed $36 ,000,000. All of Caremark's estimated annual costs exceeded the contract amount set forth in the RFP. 54. Caremark's proposal also provided as follows: The above budget includes all salary expenses for Caremark employees involved in providing services f or the program including the Contract Manager, Clinical Pharmacist, Care manager, additional pharmacist(s), Client Service Specialists in Florida for the expanded hemophilia program. Also included are the support staff such as pharmacy technicians, materi als management, field service representatives, warehouse, reimbursement, marketing, sales and administrative staff. Also included are all delivery, data and report development, educational and marketing communication expenses. Product costs including med ically necessary ancillary supplies, medical waste disposal and removal, protective gear and therapeutic devices. 55. Caremark's proposal did not include information sufficient to assign specific costs to any of the items that Caremark indicated were in cluded in its annual cost estimate. 56. The HHS proposal projected estimated costs identified by month and year. The HHS proposal estimated total first year costs of $14,261,954 and second year costs of $27,333,389. 57. HHS did not propose to assume r esponsibility for serving all Medicaid hemophilia beneficiaries at the start of the contract, but projected costs as if beneficiaries would "migrate to our service at a rate of 20 per month" during the first year and that full service provision would begin by the beginning of year two. 58. RFP Section 10.2 provides as follows: The purpose of this RFP is to receive offers from qualified vendors wishing to provide the services required by the Florida Medicaid Comprehensive Hemophilia Management Program. Th e contract resulting from this RFP shall be with a single provider for up to two years commencing on the date signed, with an option to renew for two additional years. 59. Otherwise stated, all Medicaid hemophilia beneficiaries would be served though th e program's sole provider from the start of the contract period. The RFP provides no option for a vendor to gradually increase service levels through the first half of the two year contract. 60. The HHS proposal also included a breakdown of costs by facto r product unit, identifying the AWP for each listed factor product and applying a discount of between 39 percent and 45 percent to indicate the product cost per unit that would be charged to AHCA. 61. In Addendum 2 to the RFP, AHCA stated that it has recei ved a written inquiry as follows: Knowing that the minimum accepted discount is AWP less 39%, can different products have different discounts. 62. AHCA's response to the inquiry was as follows: No. The proposed discount will apply to all factor products. 63. As to the costs included in the proposal annual total, the HHS proposal provided as follows: The product price above will include the following costs incurred in servicing the patients: · The cost of the product dispensed to the patient. · The cost of freight and other delivery expense of transporting the product to the patient. · Pharmacy, warehouse and patient supplies. · Cost incurred for patient protective gear and education materials · Salary costs for the following: o Project/Contract Manager o Clinical P harmacist o Staff Pharmacist o Case Management Coordinator o Pharmacy Care Coordinators o Shipping Clerk o Warehouse Coordinator o Community Advocates o Insurance Reimbursement Specialist · The cost of Information Technology support for systems and reporting · The cost of r ent, office supplies, equipment, postage, printing. 64. The HHS proposal did not include information sufficient to assign specific costs to any of the items that HHS indicated were included in its annual cost estimate. 65. Lynnfield's proposal estimated total costs of $34,000,000 for calendar year 2004 and $36,000,000 for calendar year 2005. 66. Lynnfield's budget proposal included information identifying the specific expense lines which form the basis for the cost estimation, including salary costs by position, travel costs, employee insurance, postage, equipment costs, and various office expenses. Lynnfield's budget proposal included a significantly greater level of detail than did either the Caremark or the HHS proposals. 67. Jerry Wells was assi gned the responsibility to evaluate the cost proposals. Mr. Wells failed to review the RFP or the related Addenda prior to evaluating the cost proposals submitted by the vendors. 68. Mr. Wells asserted that it was not possible, based on the information submitted by the vendors, to perform an "apples to apples comparison." 69. Each vendor set forth information in its proposal sufficient to calculate a total price for the initial two year portion of the contract. 70. Mr. Wells testified at the hearing th at his cost review was intended to determine what AHCA would be paying for each of the individual factor products that AHCA provides hemophiliacs through Medicaid because the cost of the products was all AHCA would be paying to the vendors. 71. The RFP d id not require vendors to include a detailed list of, or unit prices for, factor products. The RFP specified only that factor products be provided at a minimum of AWP minus 39 percent. 72. AHCA employees, under the direction of Mr. Wells, created a cost c omparison chart which purported to identify the price proposed by each vendor for certain factor products and which projects an estimated quarterly factor product cost for each vendor. 73. HHS's cost proposal included a listing of specific prices to be c harged for factor products. The list was based on products being used by existing HHS patients. 74. Caremark offered to provide all products at the AWP minus 39 percent cost required by the RFP. Caremark also suggested various "innovative cost savings, " which specified use of factor products and indicated discounts greater than the 39 percent required by the RFP. 75. Lynnfield did not include a product specific listing of factor costs in its proposal, but offered to provide all products at the AWP minus 39 percent cost required by the RFP. 76. The AHCA employees used the HHS cost proposal, including the HHS range of discounts, as the basis for preparation of the cost comparison chart that included the other vendors. The factor products listed on the A HCA cost comparison mirror those listed in the HHS cost proposal. 77. AHCA employees apparently applied the factor product usage information from the second quarter of 2003 that was included on the spreadsheet distributed at the bidder's conference to th e HHS factor product list. 78. The AHCA spreadsheet distributed at the bidder conference lists 29 factor products by name and dosage. Of the 29 products, 15 are listed in the HHS cost proposal. The AHCA cost comparison created at Mr. Wells' direction includes only the 15 factor products listed on the HHS cost proposal. 79. AHCA's cost comparison assumed no costs would be incurred, where the AHCA spreadsheet information indicated no usage of the factor product that had been included on the HHS cost pr oposal. AHCA's cost comparison did not include factor products which have been supplied by AHCA to Medicaid beneficiaries, but which do not appear on the HHS list. 80. Mr. Wells relied on this cost comparison to determine that the cost proposal submitted by HHS offered the lowest cost to the agency and was entitled to the 660 points. Lynnfield and Caremark were both ranked according to cost proposals of AWP minus 39 percent, and according to the Summary Report and Recommendation memorandum, were awarded 6 52.74 points. 81. Calculation of the points awarded to Lynnfield and Caremark in the Summary Report and Recommendation memorandum does not appear to comply with the formula set forth in the RFP. The AHCA cost comparison spreadsheet identifies the HHS pr oposed cost as $10,706,425.66 and identifies the AWP minus 39 percent cost as $10,795,477.48 (assigned as the Lynnfield and Caremark cost proposal). The Summary Report and Recommendation memorandum states the lowest cost proposal to be $10,706,405.66 (per haps a typographical error). 82. The methodology applied by AHCA assumed that all vendors would utilize identical quantities of identical factor products (based on historical usage in Quarter 2 of 2003 of those listed in the HHS cost proposal) and that th ere would be no cost savings related to disease management. 83. The application of methodology to compare vendor cost proposals outside the process established by the RFP is clearly erroneous, arbitrary, and capricious. 84. The vendors who are party to this proceeding assert that each other vendor's budgetary submission is insufficient, flawed, or unreliable for varying reasons. 85. It is unnecessary to determine whether the budgetary information submitted by the vendors meets the requirements of the RFP because, despite having requested the information, AHCA has no interest in the data. There is no evidence that in making an award of points based on the cost proposals, AHCA relied on any of the budgetary information required by the RFP or submitted b y the vendors. CONCLUSIONS OF LAW 86. The Division of Administrative Hearings has jurisdiction over the parties to and subject matter of this proceeding. §§ 120.57(1) and 120.57(3), Fla. Stat. (2003). 87. This de novo proceeding was conducted for the p urpose of evaluating the action that was taken by AHCA to determine whether that action is contrary to the agency's governing statutes, the agency's rules or policies, or the RFP specifications. See State Contracting and Engineering Corporation v. Departm ent of Transportation , 709 So. 2d 607 (Fla. 1st DCA 1998). 88. An agency is given wide discretion in soliciting and accepting bids and its decisions, when based on an honest exercise of its discretion, will not be overturned even if the decision may appear erroneous and reasonable people may disagree. Liberty County v. Baxter's Asphalt & Concrete , 421 So. 2d 505 (Fla. 1982) 89. The purpose of the competitive bidding process is to secure fair competition on equal terms to all bidders by affording an opport unity for an exact comparison of bids. Harry Pepper and Associates, Inc. vs. City of Cape Coral , 352 So. 2d 1190 (Fla. 2nd DCA 1977). 90. Section 120.57(3)(f), Florida Statutes (2003), provides as follows: In a protest to an invitation to bid or request f or proposals procurement, no submissions made after the bid or proposal opening which amend or supplement the bid or proposal shall be considered. In a protest to an invitation to negotiate procurement, no submissions made after the agency announces its i ntent to award a contract, reject all replies, or withdraw the solicitation which amend or supplement the reply shall be considered. Unless otherwise provided by statute, the burden of proof shall rest with the party protesting the proposed agency action. In a competitive procurement protest , other than a rejection of all bids, proposals, or replies, 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 statu tes, the agency's rules or policies, or the solicitation specifications. The standard of proof for such proceedings shall be whether the proposed agency action was clearly erroneous, contrary to competition, arbitrary, or capricious. In any bid protest p roceeding contesting an intended agency action to reject all bids, proposals, or replies, the standard of review by an administrative law judge shall be whether the agency's intended action is illegal, arbitrary, dishonest, or fraudulent. (Emphasis supplie d). 91. Otherwise stated, Petitioners have the burden of establishing that AHCA's proposed action was clearly erroneous, contrary to competition, arbitrary or capricious. § 120.57(3)(f), Fla. Stat. (2003). 92. A decision is clearly erroneous when it is based on substantial error in proceedings. Black's Law Dictionary, Rev. 4th Ed. (1968). An agency's decision or intended decision will be found to be "clearly erroneous," if it is without rational support; and consequently, the Administrative Law Judge has a " definite and firm conviction that a mistake has been committed." See U.S. v. U.S. Gypsum Co. , 68 S. Ct. 525 ( 1948). 93. Here, the RFP provides a clear methodology for the awarding of points based on the cost proposals submitted by the vendor. T he cost proposal scoring process set forth in the RFP requires a comparison based on each vendor's total price for the two year contract. Each vendor's proposal set forth an annual estimated price for its proposal. AHCA did not follow the cost proposal s coring methodology set forth in the RFP. The cost evaluation performed by AHCA relied on comparing limited data taken from the HHS proposal with information extrapolated from the Caremark and Lynnfield proposals. The failure to follow the process set for th in the RFP is clearly erroneous. 94. A capricious action is one which is taken without thought or reason or irrationally. An arbitrary decision is one not supported by facts or logic, or is despotic. Agrico Chemical Co. vs. State Department of Envir onmental Regulation , 365 So. 2d 759 (Fla. 1st DCA 1978), cert. den. , 376 So. 2d 74 (Fla. 1979). 95. The AHCA employee assigned to review the cost proposals did not even read the RFP or the Addenda before beginning to analyze the cost proposals. The method ology utilized to compare cost proposals essentially ignored most of the information provided by the vendors and relied on information extrapolated from their submissions. The failure to even review the RFP's cost analysis methodology prior to evaluating the vendor's cost proposals is arbitrary and capricious. 96. Had the cost review methodology applied by AHCA been consistent with that set forth in the RFP, two of the parties to this proceeding should have been rejected as non responsive based on their co st proposals. 97. Section 287.012(24), Florida Statutes (2003), defines a "responsible vendor" to be "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." Section 287.012(25), Florida Statutes (2003), defines a "responsive proposal" as a proposal "submitted by a responsive and responsible vendor that conforms in all material respects to the solicitation." Section 287.012(26), Florida Statute s (2003), defines a "responsive vendor" as a vendor that has submitted a proposal "that conforms in all material respects to the solicitation." 98. RFP Section 20.16 provides that AHCA may waive "minor irregularities," which are defined as variations "fro m the RFP terms and conditions that does not affect the price of the proposal or give one applicant an advantage or benefit not enjoyed by others or adversely affect the state's interest." 99. Caremark's cost proposal is not responsive to the RFP because i t projects costs in excess of the maximum annual contract amount set forth in the RFP. The failure to offer a proposal within the contract limits set forth in the RFP is not a minor irregularity and may not be waived. 100. The HHS cost proposal was not responsive to the RFP because the HHS cost proposal did not comply with the requirement that a single provider service all Medicaid hemophilia beneficiaries from the beginning of the contract period. The failure to service all Medicaid hemophilia benefic iaries from the start of the contract period clearly affected the first year price of the HHS cost projection and is not a minor irregularity that can be waived. 101. Further, contrary to the directions set forth in Addendum 2 of the RFP, the HHS proposal did not provide for a single proposed discount from AWP to apply to all factor products. Permitting HHS to propose discounts at varying levels, contrary to the Addendum directions, gave an advantage to HHS over Caremark and Lynnfield, both of which propo sed the factor product unit price required by the RFP. 102. Lynnfield asserts that the Caremark and HHS proposals are non responsive because neither submitted the "detailed" budgets or "line item" budgets required by the RFP. Although Lynnfield's budget clearly provides a greater level of specificity than the Caremark or HHS proposals, the RFP did not define either term or include examples of acceptable budget submissions. Each vendor submitted material that they believed complied with the requirements o f the RFP. 103. Public agencies and authorities have the responsibility of preparing and disseminating clear and precise bidding instructions. Aurora Pump v. Goulds Pumps, Inc. , 424 So. 2d 70 (Fla. 1st DCA 1982). Even AHCA acknowledges that the RFP's budget requirement was unclear. As the AHCA/Caremark Proposed Recommended Order acknowledges at paragraph 127: With no definition of "detailed budget" or "line item budget" in RFP 0403 and no examples of those budgets provided to the vendors, it is unders tandable that the vendor would respond to the requirement in different ways given the lack of clarity in the RFP instructions at Section 60.3. 104. In any event, it is not necessary to determine whether any of the budget submissions are "detailed" or "li ne item." AHCA's review of the cost proposals establishes that AHCA actually has no interest in the budgets. Based on the review performed by Mr. Wells, AHCA's sole interest regarding costs of the MCHM program is directed to the unit price to be charged for factor products. The RFP did not require vendors to include a detailed list of, or unit prices for, factor products. The RFP specified only that all factor products be provided at a minimum of AWP minus 39 percent. Because AHCA's interest is in limi ting the per unit factor product costs, vendors should be given a clear opportunity to compete on that basis. 105. HHS and Lynnfield assert that the evaluation of the technical proposals was illogically flawed and therefore arbitrary. The evidence esta blishes only that one of the grader's scores reflects a greater range between the highest and lowest scores she awarded than do the scores assigned by the other evaluators. There is no evidence that the grader was biased either for or against any vendor. There is no evidence of any collusion between any of the scorers or with any other party. 106. HHS asserts that the proposed award in this case should be rejected because AHCA failed to follow Section 287.057, Florida Statutes (2003). Section 287.057, Florida Statutes (2003), creates a structure for the state's competitive bidding system, which requires that an agency determine in writing that an objective "invitation to bid" process is not appropriate before issuing a "request for proposal." In this case, AHCA did not comply with the requirement prior to issuing the RFP. 107. Section 120.57(3)(b), Florida Statutes (2003), provides that any "protest of the terms, conditions, and specifications" of an RFP, "including any provisions governing the mann er of ranking bids, proposals, or replies, awarding contracts, reserving rights of further negotiation, or modifying or amending any contract" must be filed within 72 hours after the posting of the RFP solicitation. None of the parties involved in this pr oceeding filed any challenge to the RFP within the 72 hour period following the solicitation. The time for challenging AHCA's failure to comply with Section 287.057, Florida Statutes (2003), was the point at which the RFP was issued. HHS failed to do so. 108. HHS also asserts that AHCA has not obtained the appropriate waiver to permit contracting with a sole provider of hemophilia related services. The greater weight of the evidence establishes that AHCA has obtained a waiver sufficient to allow the a gency to issue an RFP. RECOMMENDATION Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order rejecting all proposals submitted in response to the RFP AHCA 0403 . DONE AND ENTERED this 29th day of April, 2004, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkw ay 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 29th day of April, 2004. COPIES FURNISHED : Anthony L. Conticello, E squire Thomas Barnhart, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3 Tallahassee, Florida 32308 Geoffrey D. Smith, Esquire Thomas R. McSwain, Esquire Blank, Meenan & Smith, P.A. 204 South Monroe Street Post Office Box 11 068 Tallahassee, Florida 32302 3068 Linda Loomis Shelley, Esquire Karen A. Brodeen, Esquire Fowler, White, Boggs, Banker, P.A. 101 North Monroe Street, Suite 1090 Post Office Box 11240 Tallahassee, Florida 32301 J. Riley Davis, Esquire Martin R. Dix, Esquire Akerman & Senterfitt Law Firm 106 East College Avenue, Suite 1200 Tallahassee, Florida 32301 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Valda Clark Christian, G eneral Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3431 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: 04-000017BID

Orders for Case No: 04-000017BID