STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HEMOPHILIA HEALTH SERVICES, INC.,

Petitioner,

vs.

AGENCY FOR HEALTH CARE ADMINISTRATION,

Respondent,

and

LYNNFIELD DRUGS, INC. d/b/a HEMOPHILIA OF THE SUNSHINE STATE AND CAREMARK, INC.,

Intervenors.

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RECOMMENDED ORDER

On October 13 and 14, 2005, an evidentiary hearing in this case was held in Tallahassee, Florida, before Bram D.E. Canter, Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner Hemophilia Health Services, Inc.:

J. Riley Davis, Esquire Martin R. Dix, Esquire Akerman Senterfitt, P.A.

106 East College Avenue, Suite 1200 Tallahassee, Florida 32301

For Respondent Agency for Health Care Administration:

Anthony L. Conticello, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

For Intervenor Caremark, Inc.:

Linda Loomis Shelley, Esquire Karen A. Brodeen, Esquire

Fowler, White, Boggs, Banker, P.A. Post Office Box 11240

Tallahassee, Florida 32302

For Intervenor Lynnfield Drugs, Inc.:

Kellie D. Scott, Esquire Blank, Meenan & Smith, P.A.

204 South Monroe Street Post Office Box 11068

Tallahassee, Florida 32302-3068

STATEMENT OF THE ISSUE

The issue in this case is whether the proposed award of contracts by the Agency for Health Care Administration (AHCA) to Caremark, Inc. (Caremark), and Lynnfield Drugs, Inc., d/b/a Hemophilia of the Sunshine State (Lynnfield), pursuant to AHCA's Request For Proposal (RFP) 0507, was contrary to AHCA's governing statutes, AHCA's rules or policies, or the solicitation specifications.

PRELIMINARY STATEMENT

Prior to the issuance of RFP 0507, AHCA issued RFP 0403, which solicited proposals to operate Florida's Medicaid Comprehensive Hemophilia Management (MCHM) Program. Following

its evaluation of proposals for RFP 0403, AHCA proposed to award a single contract to Caremark. Two vendors, Lynnfield and Hemophilia Health Services, Inc. (HHS), challenged the proposed contract award. AHCA referred the case to the Division of Administrative Hearings (DOAH), and an evidentiary hearing was held. Following the hearing, the Administrative Law Judge recommended that AHCA reject all proposals received for

RFP 0403. On August 10, 2003, AHCA issued a Stipulated Final Order rejecting all proposals.

On December 8, 2004, AHCA issued RFP 0507 to operate the MCHM Program. The RFP was amended by 11 addenda. On May 31, 2005, following its evaluation of proposals, AHCA posted a Notice of Intent to award contracts to Caremark and Lynnfield. HHS was ranked sixth by the AHCA evaluators. HHS timely challenged the proposed contract awards, and AHCA forwarded the case to DOAH. Caremark and Lynnfield intervened.

The Intervenors filed a Joint Motion For Summary Final Order contending that HHS lacked standing to challenge the contract awards and that the issues raised by HHS were untimely, beyond the jurisdiction of DOAH, or otherwise without merit based on undisputed facts. Following oral argument on the motion, an Order was issued by the undersigned on September 15, 2005, treating the motion as a motion in limine and granting it in part. At the hearing, HHS was allowed to present a written

proffer of factual allegations it would have attempted to prove had it not been precluded from doing so by the September 15, 2005 Order.1/

The issue remaining for hearing was whether the scoring of the proposals by AHCA was clearly erroneous, contrary to competition, arbitrary, or capricious, so that AHCA is required to reject all proposals. Much of the witness testimony and argument of counsel at the hearing dealt with the manner in which HHS presented information in its proposal. AHCA and the Intervenors claim that the information in HHS's proposal was so poorly organized that the required information was difficult to find, and the relatively low scores received by HHS from AHCA's evaluators were justified. HHS claims that AHCA's evaluation elevated form over substance, and HHS's proposal was judged more on its aesthetics than on its content.

At the hearing, Joint Exhibits 1 through 5, 8, 10, 11,

13 through 24, and 26 through 29 were admitted into evidence.

Joint Exhibits 6 and 7 were admitted for the limited purpose of demonstrating how the questions were organized in RFP 0403 and in the evaluation sheets for RFP 0403. Joint Exhibit 9 was admitted for the limited purpose of demonstrating how HHS organized its response to RFP 0403. HHS presented the testimony of seven witnesses. AHCA presented the testimony of two witnesses. The Intervenors presented no witnesses.

A three-volume Transcript of the hearing was filed on October 27, 2005. The parties' Proposed Recommended Orders were timely filed on November 14, 2005, and considered in the preparation of this Recommended Order.

FINDINGS OF FACT

1. AHCA is the state agency authorized to make payments for medical assistance and related services under Title XIX of the Social Security Act (the "Medicaid" program).

2. There are approximately 250 Medicaid-eligible individuals ("beneficiaries") in Florida who have hemophilia. Hemophilia is a bleeding disorder caused by a deficiency in one of numerous clotting proteins or "factors" that contribute to the ability of a person's blood to clot. The disease is treated by administration of the deficient clotting factor to a person. The costs for hemophilia medicines ("factor products") and treatment for this relatively small group of beneficiaries are extremely high, estimated to be $46 million in 2005. Half of these costs are paid by Florida, half by the federal government.

3. Section 287.057, Florida Statutes (2004),2/ requires an agency to make a written determination that an Invitation to Bid is not practicable for procurement of commodities or services prior to issuance of an RFP. On August 24, 2004, AHCA made the written determination that an Invitation to Bid was not

   practicable for procurement of the services called for in the MCHM program.

4. Pursuant to Subsection 120.57(3)(b), Florida Statutes, a challenge to the terms and specifications of an RFP must be filed within 72 hours of notice of the posting of the RFP. There were no challenges filed to the terms and specifications of RFP 0507.

5. RFP 0507 contemplates a statewide hemophilia management program that combines pharmaceutical management and disease management. Section 5.0 of the RFP identifies the two fundamental requirements for vendors responding to the RFP:

   The vendor must demonstrate that it has the capability to design, implement, monitor and evaluate a comprehensive hemophilia management program. The vendor must demonstrate that it has the experience in designing and implementing projects similar to the one prescribed in this RFP.

   
   

6. Under the terms of the RFP, AHCA was to contract with up to three experienced vendors for a period of two years, with an option to extend the contract for an additional two-year period. Beneficiaries of the hemophilia services will be notified and instructed to choose one of the winning vendors or, for beneficiaries who do not make a choice, AHCA will assign a winning vendor on an equal, rotational basis.

7. The RFP provides that the successful vendors will be paid 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 of factor product costs.

8. Originally, RFP 0507 called for the submission of a technical proposal and a separate cost proposal. The cost to the State for the services provided was not to exceed the total cost of the factor products dispensed, discounted to the Average Wholesale Price (AWP) of the factor product, minus 39 percent. Cost proposals would have been scored separately from technical proposals, and then the two scores were to be combined to determine the ranking of the competing vendors.

9. On January 21, 2005, prior to the deadline for responses to RFP 0507, AHCA issued Addendum 5 to the RFP, which eliminated the requirement for a separate cost proposal. All vendors were required to provide the technical services for the revenue they would receive under a reimbursement methodology set forth in Addendum 5. The reimbursement methodology makes AWP, minus 39 percent one of several measures of cost, the lowest of which determines the maximum reimbursement that Florida will pay the vendor.

10. The change to RFP 0507 brought about by Addendum 5 did not change the fundamental nature of the RFP. Both the original RFP and the revised RFP created a competition among vendors to provide the best hemophilia management services to the State for

    a maximum cost. Addendum 5 changed the maximum cost from AWP, minus 39 percent, for factor products to a cost determined by the reimbursement formula.

11. Under both the original RFP 0507 and the RFP as modified by Addendum 5, vendors could propose to provide factor products at a cost to the State lower than AWP, minus

    39 percent. However, greater weight or importance would have been given to a proposal to provide factor products at a lower cost under the original RFP, because it called for cost proposals to be separately presented, evaluated, and scored. Based on the maximum scores attainable for the technical and cost proposals (1000 and 500, respectively), the cost proposal would have accounted for a third of a vendor's total score under the original RFP.

12. Under the revised RFP, cost-saving measures offered by a vendor were relevant to only a few of the technical items in the RFP, such as those related to the management and dispensing of factor products. Even in the aggregate, these evaluation criteria allowed for the award of relatively few points for

    cost-saving measures contained in a proposal.

    
    

13. AHCA received eight proposals in response to RFP 0507.

    
    

    One proposal was rejected by AHCA because it was determined to be non-responsive. The seven remaining proposals were made a part of the case record.

14. Although RFP 0507 stated that up to three contracts would be awarded, AHCA decided to award contracts only to Caremark and Lynnfield. In a memorandum dated May 16, 2005, AHCA explained that "the points awarded indicate the top proposals scored significantly higher than the others. A difference of 124 points between the number two and the number three ranked proposal indicates a measurable difference in quality."

    The Organization of HHS's Proposal

    
    

15. Section 6.0 of the RFP sets forth "Proposal Instructions." These instructions include a requirement to submit the proposal in a three-ring binder and to number the pages of the proposal. Another requirement imposed on the form of the proposal, as opposed to its content, was that the proposal had to use four tabs with specified titles.

16. Tab 4 was to contain each vendor's technical response to the RFP. The RFP stated, "This is the most important section of the response with respect to the organization's ability to perform under the contract." Section 6.1E of the RFP describes the various categories of information that are required to be part of the vendor's technical response. There are eight general categories: Summary; Organizational Background and Experience; Project Staffing; Technical Approach; Innovations; Implementation Plan; Systems, Security and Confidentiality; and

    Certification Relating to Contracts. Some of these general categories were broken down further into separately numbered items of required information. For example, under the heading "Organizational Background and Experience," there are 11 numbered paragraphs describing the information required to be included in the proposal. Some of the numbered paragraphs are further divided into information requests identified by letter, such as item 9, which is divided into 23 information requests, lettered a through w.

17. A logical manner in which to organize a proposal would be to present the information in the same order as the information is requested in the RFP, using the same headings, numbers, and letters that are used in the RFP. All the vendors, except HHS, organized their proposals so that the technical information required by Section 6.1E of the RFP was located under a divider or page labeled "Tab 4" or "Technical Proposal," and presented in the same order as the information was requested in the RFP.

18. HHS's proposal has a "Tab 4" with a first page that includes the title "Technical Proposal" and begins with the required "Summary." Following the summary, however, HHS skips items 1 through 8 that were set forth in the RFP under the general category "Organizational Background and Experience" and

    presents a response to item 9. Then, HHS skips other items set forth in the RFP and presents information about "Innovations."

19. At the end of HHS's Tab 4 is the heading "Additional Requested Information," followed by a list of seven appendices. Some of the information required to be in HHS's technical proposal is contained in these seven appendices. HHS's proposal included a table of contents that listed 31 other appendices, with subject titles, that contained more of the information that the RFP required to be included in each vendor's technical proposal.

20. HHS chose to organize its proposal as it did because it believed the information it placed in the appendices was responsive to several parts of the RFP, and it would "irritate" the evaluators to see the same information repeated in several places. However, HHS's proposal did not always include notations that directed the evaluators to the appendices where relevant information was located. HHS acknowledged that it could have done "a much better job" in organizing its proposal.

21. In the case of some items of requested information, very little effort was required for the evaluators to find the information in HHS's technical proposal. For example, it was relatively easy for an evaluator looking for information related to project staffing to find it in HHS's Appendix AG, entitled "Project Staffing."

22. In other cases, however, greater effort was needed to find the information HHS says was relevant to a particular information request in the RFP. For example, HHS did not include behind Tab 4 a direct response to item 5 under "Organizational Background and Experience," which requests a detailed description of the vendor's organizational structure and ownership, and HHS did not refer the evaluator to a particular appendix. HHS contends the requested information is provided in Appendix AL, entitled "2004 Accredo Annual Report," which contains the Form 10-K for Accredo Health, Inc., HHS's parent company.

23. Another example is HHS's response to item 8 under "Organizational Background and Experience," which requests a plan for the use of woman- or minority-owned businesses. HHS did not respond directly to this request under Tab 4 of its proposal, and its proposal merely contains a letter in Appendix AJ, entitled "Ethnically Diverse Utilization," from a woman-owned business to Accredo Health, Inc., acknowledging an existing relationship with HHS's parent company.3/

24. One of AHCA's evaluators said she gave HHS a score of zero for 27 evaluation criteria because she could not find the relevant information in HHS's proposal. The record evidence does not show that any other evaluator was unable to find information presented in HHS's proposal or failed to review the

    proposal in its entirety and score the proposal on its substantive merits.

    Whether HHS's Proposal Was Non-Responsive

    
    

25. AHCA and the Intervenors claim that HHS's proposal was non-responsive to RFP 0507 because it does not include information required by Sections 7.2I and 7.2L of the RFP. Section 7.2 is entitled "Evaluation of the Mandatory Requirements of the Technical Proposal" and states in relevant part:

    During this phase, the Agency will determine if the technical proposal is sufficiently responsive to the technical requirements of the RFP to permit a complete evaluation. In making this determination upon opening the technical proposal, the overseer(s) will check each technical proposal against the following list:

    
    

    * * *

    
    

    1. Does the proposal include a table of contents listing sections included in the proposal and the corresponding sections of the RFP to which they refer?

       
       

       * * *

       
       

       L. Does the technical proposal include a description of the vendor's corporate background and experience at the level outlined in Section 6.1E of the RFP?

       
       

26. Section 7.3 states that only those technical proposals determined to meet the mandatory technical requirements set out in Section 7.2 will be further evaluated. Presumably, AHCA

    determined that HHS's technical proposal included all mandatory requirements, because the proposal was not rejected.

27. The table of contents in HHS's proposal accurately describes the information that is presented in its proposal. However, it does not list all the headings and information items as they appear in the RFP.

28. There are over 30 itemized information requests in Section 6.1E related to the vendor's background and experience. HHS's proposal included information about its corporate organization and experience. However, the organization of the proposal made some of the information difficult to find.

29. Sandra Berger, the AHCA employee who has coordinated contracts and procurements for the Medicaid program, stated that AHCA's policy regarding the review of RFPs is that the evaluator is to review the entire proposal; and if information is not found where it should have been presented, the evaluator will look elsewhere in the proposal for the information. AHCA's expectation is that the evaluator will read every sentence in every paragraph of each proposal.

    AHCA's Consideration of HHS's Guarantees

    
    

30. HHS contends that three cost-saving measures that it offered in its proposal were not considered at all or not fairly considered by the evaluators. HHS offered an "assay management

    guarantee," an emergency room visit guarantee, and an outdated product guarantee.

31. Because clotting factors are proteins or "biologics," the manufacturers of factor products cannot create a precise potency; they can only target potency. In the same sense that ore is assayed to determine its content of gold or other mineral, factor products are assayed to determine their content of clotting factor (potency). A manufacturer of factor products will generally produce products with low range, mid-range, and high-range potencies. Even within a targeted range, there will be variances of potency between particular vials of product that are dispensed. The recommended potency for some hemophilia treatments, such as a prophylactic regimen, is less than for others, such as for break-through bleeding. Therefore, "assay management" for factor products is a fundamental component of the current treatment of hemophilia.

32. AHCA has established 105 percent as a threshold for evaluation of assay management. That means AHCA has an expectation that the factor dispensed to a patient will generally deviate less than five percent above the factor assay or potency prescribed for the patient by the physician. The 105 percent figure is a monitoring and evaluation threshold, not an absolute maximum. The State is required to pay for factor

    products exceeding the 105 percent threshold if they were medically necessary.

33. HHS offered an "assay management guarantee" to repay AHCA on a quarterly basis for the cost of factor product that exceeded 102 percent of the target dose. Based on an HHS study done with 56 patients, the guarantee would have created a cost savings of $154,000. If a similar savings rate were realized for the approximately 250 Medicaid-eligible hemophilia patients in Florida, the savings would be approximately three times greater. Caremark also offered an assay management guarantee, but structured differently.

34. However, AHCA does not view this particular type of guarantee as necessarily beneficial. AHCA believes it could create an incentive for the provider to withhold care, not based on medical considerations, but on financial considerations. A provider might reduce factor products dispensed to the patient in order to avoid exceeding a guarantee and having to repay the State.

35. HHS also offered an emergency room visit guarantee so that AHCA would not have to pay for unnecessary emergency room visits. HHS defined unnecessary emergency room visits as those caused by the patient not having the correct amount or type of factor or a sufficient amount or type of infusion "ancillaries." HHS offered to credit AHCA $500 for each unnecessary visit.

    Another cost-saving measure offered in HHS's proposal was to replace outdated product without cost to AHCA. AHCA did not dispute that these two cost-saving measures would be of benefit to the State. No evidence was presented regarding the estimated value of the benefit.

36. Few of the evaluation criteria for RFP 0507 related directly to the cost-saving measures offered by HHS. HHS presented information about its assay management guarantee in items 9.j and l, under "Organizational Background and Experience." Information about HHS's outdated product guarantee was presented under item 9.k. Information about HHS's emergency room visit guarantee was presented under item 9.v. The maximum score that HHS could have received for these four items was

    20 points, out of a total score of 1000 for all criteria.4/

    
    

    The Scoring Criteria

    
    

37. For purposes of evaluation and scoring of proposals, AHCA formed the technical requirements of the RFP into 50 separate criteria, each worth from zero to 10 points, for a maximum possible score of 1000 points. The scoring scale for the 50 criteria was 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 capability to meet the criterion

    10 Excellent capability to meet the criterion

38. Each of the 50 criteria was set forth on a separate evaluation sheet used by the evaluators. Each evaluation sheet identified from where in the RFP the criterion came. The 50 criteria in the evaluation sheets, however, did not correspond to 50 evaluation criteria, identified as such, in the RFP.

    RFP 0507 rarely uses the term "criteria." Instead, the itemized information requests in the RFP are alternately referred to as "instructions" (Section 6.0), as "specifications" (Section 6.1E), and as "requirements" (Section 7.3).

39. In seven instances, two or more itemized information requests in the RFP were combined to form one criterion on an evaluation sheet. An example is page 13 of the evaluation sheets that grouped together items 9.e, f, g, and h, under "Organization Background and Experience." Judith Saltpeter, the AHCA employee who was principally responsible for the creation of the evaluation sheets, grouped these items together because they all related to vendor assistance to "physicians, specialists and other providers." Another example is the combination of items 9.j, k, and l into one criterion for scoring on page 15 of the evaluation sheets. These three items were combined by Ms. Saltpeter because they were all related to the vendor's proposed handling of factor products.

40. There were two instances in which a single information request in the RFP was divided into more than one criterion for

    scoring on the evaluation sheets. For example, the evaluation criteria on pages 25, 26, and 27 of the evaluation sheets are derived from a single paragraph of the RFP under "Project Staffing":

    2. Identification of staff along with details of training and experience of those individuals who will serve as the Project/Contract Manager, Clinical Pharmacist Coordinator, and Care Management Coordinator. Resumes and relevant licensure of all identified/named staff shall be included in an appendix to the proposal.

    
    

    AHCA made each of the three positions named in this paragraph a separate criterion for evaluation and scoring because of the perceived importance of these positions to the quality of the vendor's performance.

41. The 50 evaluation criteria used for RFP 0507 were almost identical to the 50 evaluation criteria used for RFP 0403, in which HHS participated.

42. Section 7.3 of the RFP, entitled "Evaluation of Technical Proposals," states in relevant part:

    Only those technical proposals determined to meet the technical requirements of this RFP will be further evaluated. Evaluation of technical proposals will involve the point scoring of each proposal by component specified in the RFP.

    
    

    The Agency will evaluate the extent to which the services offered in the proposal and the procedures and methods for performing such services meet the requirements of the RFP. For this purpose, evaluators will judge a

    vendor's description and explanation of the services it will perform to meet the service requirements of each component.

    
    

43. Included in Addendum 5 to RFP 0507 and made a part of the RFP are "Agency Responses to Bidders' Questions," which include questions asked by the vendors at the vendors conference held prior to submittal of proposals and AHCA's answers. Two questions and answers are relevant here:

    Question: How will scoring for the technical proposal be evaluated? Do some [technical] questions have higher weight: If so provide weighting.

    
    

    Answer: All technical items have equal weight.

    
    

    Question: What specific factors will be used for the technical proposal evaluation pursuant to Section 7.3 of the RFP? What will be the relative weight of each factor?

    
    

    Answer: Equal consideration will be given to all items found under Section 6, excluding 6.3 Cost Proposal Requirements and 6.4, Cost Proposal Instructions.

    
    

44. The organization of the technical requirements of the RFP into itemized lists and AHCA's statements to the vendors that "All technical items have equal weight" and "Equal consideration will be given to all items found under Section 6," communicated to the vendors a scoring process that was not followed by AHCA. There is nothing in the RFP that informs prospective vendors of the scoring process that was actually used.

45. The combining and dividing of the information requirements in the RFP for scoring purposes affected their relative importance, but no prospective vendor would know from reading RFP 0507 that some of the requirements of the technical proposal would be combined for scoring and other requirements would be divided for scoring. No prospective vendor would know which items in the RFP would be worth up to 10 points, which items were worth only 1/3 or 1/4 as much and which items were worth twice as much.

46. There is no evidence that AHCA acted arbitrarily or capriciously in combining and dividing the technical requirements of the RFP to create the 50 evaluation criteria. There was a rationale behind the combinations and divisions. However, RFP 0507 did not indicate the relative importance of the criteria. Their relative importance was only determinable by reviewing the evaluation sheets, which were not made a part of the RFP.

47. Nevertheless, HHS failed to demonstrate that this error by AHCA made any difference to the contract awards under RFP 0507. The combining and dividing of technical requirements affected all vendors equally. Adjusting the scores so that every itemized technical requirement from the RFP is given equal value would not change the rankings. For example, if an evaluator gave a score of "5" for a criterion that was created

    from four requirements set forth in the RFP, the score was adjusted to 20 (four times five), and this kind of adjustment was made to all scores for all affected criteria, HHS would still finish in sixth place. Even if the actual scores might have varied from the adjustment just described, there is no evidence to explain how the variance could be more than de

    minimus or could change HHS's ranking.

    
    

48. A related issue concerns item 3 under "Project Staffing" and item 20 under "Technical Approach," also related to staffing, that did not become evaluation criteria for scoring purposes. HHS claims that AHCA's decision to not make these items evaluation criteria was prejudicial to HHS because its proposal regarding project staffing was superior to what was offered by the other vendors. However, if these two items had become two evaluation criteria, they would have been worth a maximum of only 20 points. Even assuming that HHS had been given the highest points by all four technical evaluators for these two items, HHS's ranking would not have changed.

    Scoring by the Evaluators

    
    

49. The four AHCA employees who evaluated the technical proposals were Linda Barnes, a registered pharmacist

    (Scorer "A"); Maresa Thomas, a registered nurse (Scorer "B"); Bruce McCall, who holds a doctorate in pharmacy (Scorer "C"); and Nancy Knox, a registered nurse (Scorer "D"). Kay Newman, a

    certified public accountant, reviewed only the financial information provided by the vendors.

50. The evaluators were each provided a copy of the seven proposals, the original RFP, Addendums 5 and 11 to the RFP, an evaluation packet, and a conflict of interest form. The technical evaluators were given an instruction sheet and verbal instructions for evaluating the technical proposals. The instruction sheet distributed to the evaluators provided that the evaluators "should" justify their scores in the "comments" section of the score sheets. Some of the evaluators made comments, others did not.

51. Each evaluator worked independently. The evaluators did not confer with each other or with anyone else during their evaluation of the proposals. The evaluators conducted their evaluations over a period of three weeks.

52. Because each evaluator worked independently, the scores on each proposal differed. It can be expected, and was true in this case, that some evaluators will generally assign lower scores than other evaluators; some evaluators will tend to assign higher scores. There was no evidence that any evaluator for RFP 0507 was inconsistent in the application of his or her scoring approach to all proposals.

53. In addition to the points awarded by the technical evaluators for the 50 criteria, each proposal also received

    "Financial Audit" points (between one	and ten) from Kay Newman.
    Ms. Newman scored the seven proposals	as follows:
    Caremark	9
    Lynnfield	9
    AmeriHealth	0
    OptionCare	8
    Maxim	8
    HHS	9
    PDI Pharmacy	4

    
    

54. Points were also assigned to the vendors based on telephone "reference reviews" conducted by AHCA employees Hope Chukes and Patricia Morena. Two references were selected for each vendor from the references listed in the proposals. The reviewers used a form with questions related to whether the vendor had fulfilled its obligations under previous contracts. In most cases, three points were given to the vendor when the reference reported that the vendor had performed the particular obligation; otherwise, a score of zero was given. The maximum score that could be obtained for the reference review was 19 points.

55. Some questions on the reference review form were not relevant to the previous contract between the vendor and the reference organization. In those instances, Ms. Chukes was directed to give vendors a score of "3" for the question, rather than penalize the vendors with a score of zero. Because the reference reviews indicated that all vendors had performed their

    obligations under previous contracts, AHCA gave all vendors the maximum total score of 19.

56. Following the conclusion of the technical evaluations, Ms. Chukes tallied the scores from the four technical evaluators, the financial audit scores from Ms. Newman, and the reference review scores. The resulting total scores and ranking of proposals were as follows:

    1 Caremark	1437.2
    2 Lynnfield	1384.9
    3 AmeriHealth	1207.83
    4 OptionCare	1107
    5 Maxim	964.3
    6 HHS	889.3
    7 PDI Pharmacy	774.55

    
    

57. There are some fractional scores, because Ms. Thomas (and only Ms. Thomas) scored multi-part criteria by initially assigning a score to each subpart, using the zero-to-ten scale, and then averaging the result. Although this scoring approach would have caused a variance, in some cases, from the score that Ms. Thomas would have assigned if she had simply scored the criterion as a whole, the variance would have been de minimus. It would not have changed HHS's ranking.

58. For reasons not explained in the record, AHCA manipulated the raw scores by averaging them, assigning the highest ranked vendor a score of 1000, and dividing the average scores of the other vendors by 1000. These manipulations did

    not change the ranking that resulted from the total raw scores as indicated above.

59. None of the evaluators ranked HHS higher than fourth.

    
    

    One evaluator ranked HHS fourth, one ranked HHS fifth, and two ranked HHS seventh (last).

    Scoring by Ms. Thomas

    
    

60. Ms. Thomas assigned HHS's proposal a zero for 27 of the 50 evaluation criteria. In her notes on the evaluation sheets and in her testimony at the hearing, Ms. Thomas explained that she gave HHS zeroes because she could not find HHS' responses for these criteria, and she assumed they had been omitted. For example, because she did not see information under Tab 4 of HHS's proposal numbered 1 through 7 to correspond to paragraphs 1 through 7 of the RFP, she assumed that the information had been omitted from HHS's proposal.

61. Ms. Thomas did not always look through HHS's entire proposal to determine whether the information she expected to see in Tab 4 was located in an appendix or elsewhere. When she did not find information where she expected it, she often made a notation "nothing presented" on the evaluation sheet and assigned a zero for the criterion. There was no evidence that any other evaluator did the same. The other three evaluators apparently looked through HHS's entire proposal, found the

    relevant information, and assigned points for each criterion based on their review of the information.

62. As stated above, AHCA's policy regarding the review of a proposal is that the evaluator is to review the entire proposal and, if information is not found where it should have been presented, the evaluator will look elsewhere in the proposal for the information. AHCA's expectation is that the evaluator will read every sentence in every paragraph of each proposal.

63. There is no evidence that Ms. Thomas was biased either for or against any particular vendor. However, it was the duty of the evaluators to read each proposal in its entirety. Nothing in the RFP instructions authorized the evaluators to ignore information in a proposal if it were in the "wrong" place. In most cases, the information Ms. Thomas claims she could not find required little effort to find and was found by the other three evaluators.

64. Ms. Thomas' failure to consider all the information presented in HHS's proposal when assigning scores under the 50 evaluation criteria was contrary to agency policy. Her assignment of a zero to HHS in 27 categories was arbitrary. However, HHS failed to demonstrate that, but for the arbitrary scoring by Ms. Thomas, HHS would have been awarded a contract under RFP 0507. If all of Ms. Thomas's scores are deleted, HHS

    still ranks sixth. If all of the zeroes that Ms. Thomas gave HHS were converted to tens, HHS would only move up to fourth place and would still not win a contract under RFP 0507.

65. HHS complained of other aspects of the evaluation process used for RFP 0507, such as the separate financial audit performed by Ms. Newman and the reference review. However, HHS failed to prove that if all these alleged errors by AHCA were eliminated, HHS would have been a winner under RFP 0507.

    CONCLUSIONS OF LAW

    
    

66. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding pursuant to Subsections 120.57(1) and 120.57(3), Florida Statutes (2005).

67. Section 409.912, Florida Statutes, requires AHCA to purchase goods and services for Medicaid beneficiaries in the most cost-effective manner consistent with the delivery of quality health care.

68. 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).

69. Public agencies and authorities have the responsibility to prepare and disseminate clear and precise procurement instructions. See Aurora Pump v. Goulds Pumps, Inc., 424 So. 2d 70 (Fla. 1st DCA 1982). RFP 0507 did not contain a clear and precise instruction that all technical proposals must be presented in the exact outline format used in the RFP. HHS's proposal could not be rejected or penalized for failing to follow precisely the format of the RFP. However, to the extent that the information in HHS's proposal was more difficult to find and evaluate because of the format chosen by HHS and that difficulty contributed to lower scores from evaluators who made good faith efforts to consider the proposal in its entirety, the scores are not thereby made clearly erroneous, contrary to competition, arbitrary, or capricious.

70. Subsection 287.012(25), Florida Statutes, defines a "responsive proposal" as a proposal "that conforms in all material respects to the solicitation." HHS proposal substantially complied with the instructions in RFP 0507, and the irregularities complained of were not of sufficient materiality to render it non-responsive. There was no alleged fraud or other misconduct on HHS's part and no competitive advantage inuring to HHS. See Liberty County, supra.

71. These proceedings are governed by Subsection 120.57(3)(f), Florida Statutes, which provides, in relevant part, as follows:

    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 statutes, 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.

    
    

72. A decision is clearly erroneous when it is based on substantial error in the proceedings. Black's Law Dictionary, Rev. 4th Ed. (1968). An agency's decision is "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., 333 U.S. 364, 395 (1948).

73. An act is contrary to competition when it offends the purposes of competitive procurement process. Those purposes have been described as the protection of the public from collusive contracts, the prevention of favoritism toward contractors by public officials, the securing of fair competition upon equal terms to all bidders, and the removal of

    the temptation of public officers to seek private gain at the taxpayers' expense. Liberty County, supra; Wester v. Belote,

    103 Fla. 976, 138 So. 721, 723-4 (Fla. 1931); Harry Pepper & Assoc., Inc v. City of Cape Coral, 352 So. 2d 1190, 1192 (Fla. 2d DCA 1977).

74. An arbitrary decision is one not supported by facts or logic, or is despotic. A capricious action is one which is taken without thought or reason or irrationally. Agrico Chemical Co. v. State Department of Environmental Regulation, 365 So. 2d 759, 763 (Fla. 1st DCA 1978), cert. den., 376 So. 2d 74 (Fla. 1979).

75. AHCA and the Intervenors assert that the RFP did not expressly prohibit it from combining or dividing information items listed in the RFP for scoring purposes. That assertion misses the point, which is that the combination and division of information items for scoring was contrary to the solicitation specifications. Subsection 287.057(2)(a), Florida Statutes, requires every RFP to indicate the "relative importance of price and other evaluation criteria." The organization of the technical requirements of the RFP into itemized lists and AHCA's statements to the vendors that all technical items had equal weight and equal consideration would be given to all items, constituted a solicitation specification regarding scoring that was not followed by AHCA.

76. Whether HHS was aware of the evaluation criteria used for RFP 0403 and should have presumed they would be used again for RFP 0507, is irrelevant to the issue of whether AHCA's scoring was contrary to the solicitation specifications.

77. Reasonable persons could disagree as to whether AHCA should have placed more importance on reducing the costs of the MCHM Program. Reasonable persons could also disagree as to whether AHCA should have assigned more weight to the kinds of cost-saving measures offered by HHS. However, HHS did not demonstrate that the manner in which AHCA sought to control costs through RFP 0507, by obtaining the best care management for beneficiaries for a cost based on a discounted price for factor products, is contrary to AHCA's governing statutes, AHCA's rules or policies, or the solicitation specifications of RFP 0507.

78. HHS asserts that the evaluation of the technical proposals was illogically flawed and, therefore, arbitrary. The evidence establishes only that the evaluation of HHS's proposal by Ms. Thomas was arbitrary because she failed to consider all the information presented in HHS's proposal. Her failure to read and consider HHS's proposal in its entirety was also contrary to agency policy.

79. HHS claims the scoring of the other evaluators was flawed because the scores it received on various evaluation

    criteria should have been higher, but HHS failed to prove by a preponderance of the evidence that any of these scores was clearly erroneous, contrary to competition, arbitrary, or capricious. With few exceptions, the 50 criteria used for RFP 0507 required the evaluators to exercise professional judgment. In the absence of evidence showing fraud or misconduct, or evidence of mistake or illogical reasoning by evaluators, it is not the role of the Administrative Law Judge to second guess the evaluators to determine whether their judgments about competing proposals were reasonable or whether

    other well-informed persons might have reached contrary results. See Scientific Games, Inc. v. Dittler Brothers, Inc., 586 So. 2d 1128 (Fla. 1st DCA 1991).

80. No evidence was presented to show that any evaluator was inconsistent in his or her scoring of the seven proposals. With the exception of Ms. Thomas's zeroes, HHS did not explore any evaluator's reasons for giving lower scores to HHS's technical proposal than to the proposals of other vendors. The unexplained reasoning used by an evaluator will not be assumed to be erroneous or arbitrary.

81. A vendor who responds to an RFP does not have standing, on that basis alone, to protest the agency's determination of a winner or winners. In order to establish the required substantial interest for standing, a protester must

    demonstrate that, but for the agency's errors, the protester would have been a winner. Preston Carroll Company, Inc. v.

    Florida Keys Aqueduct Authority, 400 So. 2d 524 (Fla. 3rd DCA 1981).

82. Because RFP 0507 provided for the award of contracts to a maximum of three vendors, HHS had to prove by a preponderance of the evidence that it would have come in first, second, or third, but for the errors in AHCA's evaluation and scoring of the proposals. However, the preponderance of the competent and persuasive evidence in the record demonstrates that even under assumptions favorable to HHS, the errors by AHCA did not affect the outcome for HHS. HHS would not have been awarded a contract under RFP 0507. Therefore, HHS did not demonstrate the requisite substantial interest for standing as enunciated in Preston Carroll.

83. HHS argues that the use of the term "adversely affected" in Subsection 120.57(3)(b), Florida Statutes, means that Preston Carroll is no longer controlling. The argument is not persuasive because Subsection 120.57(3)(b), Florida Statutes, must be read in para materia with Section 120.569, Florida Statutes, which applies to all "Decisions which affect substantial interests," including an agency's award of a contract in a public procurement process. Furthermore, it is unlikely that the Legislature would have intended, even under an

"adversely affected" test for standing, to allow a losing bidder to initiate an administrative proceeding if no agency error was identified or if the only agency errors identified had no effect on the outcome.

RECOMMENDATION

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

RECOMMENDED that the Agency for Heath Care Administration enter a final order awarding contracts under RFP 0507 to Caremark, Inc., and Lynnfield Drugs, Inc.

DONE AND ENTERED this 2nd day of December, 2005, in Tallahassee, Leon County, Florida.

S

BRAM D. E. CANTER

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 2nd day of December, 2005.

ENDNOTES

1/ HHS's written proffer refers to the deposition testimony of certain individuals, but all statements in the proffer are mere allegations, disputed by the other parties.

2/ Unless otherwise indicated, all references are to Florida Statutes (2004).

3/ HHS admitted that this letter does not constitute a detailed plan as requested by the RFP.

4/ HHS contends that its guarantees were also related to five other items of the RFP. If true, the relative weight of all these items was still small.

COPIES FURNISHED:

Anthony L. Conticello, Esquire

Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

Linda Loomis Shelley, Esquire Karen A. Brodeen, Esquire

Fowler, White, Boggs & Banker, P.A. Post Office Box 11240

Tallahassee, Florida 32302

Kellie D. Scott, Esquire Blank, Meenan & Smith, P.A.

204 South Monroe Street Post Office Box 11068

Tallahassee, Florida 32302-3068

J. Riley Davis, Esquire Martin R. Dix, Esquire Akerman Senterfitt, P.A.

106 East College Avenue, Suite 1200 Tallahassee, Florida 32301

Richard Shoop, Agency Clerk

Agency for Health Care Administration 2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

Christa Calamas, General 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: 05-002804BID

Orders for Case No: 05-002804BID