BLUE CROSS AND BLUE SHIELD OF MD. v. US DHHS
| Decision Date | 17 July 1989 |
| Docket Number | Civ. A. No. 89-1260. |
| Citation | 718 F. Supp. 80 |
| Parties | BLUE CROSS AND BLUE SHIELD OF MARYLAND, INC., Plaintiff, v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendant. |
| Court | U.S. District Court — District of Columbia |
Caryl A. Potter, III, Elizabeth A. Ferrell, Piper & Marbury, Washington, D.C., for plaintiff.
John M. Facciola, Asst. U.S. Atty., Washington, D.C., for defendant.
In this action for declaratory and injunctive relief, plaintiff Blue Cross and Blue Shield of Maryland, Inc. ("Maryland") challenges the award of a contract to Empire Blue Cross and Blue Shield ("Empire") by defendant United States Department of Health and Human Services, Health Care Financing Administration ("HCFA") for the maintenance and enhancement of the Medicare Common Working File ("CWF") system, a data file containing Medicare beneficiary information. Maryland claims that the selection of Empire was improper because defendant did not evaluate the submitted proposals in accordance with the criteria set forth in the solicitation document. The matter now comes before the Court on the parties' cross-motions for summary judgment, the oppositions, replies, and the numerous surreplies and responses thereto.1 For the reasons stated below, plaintiff's motion is granted and defendant's motion is denied.
Medicare is a program under which the Government provides health care benefits to the aged and disabled. The Medicare Act, 42 U.S.C. § 1395, et seq., establishes two parts of the Medicare Program. Part A provides for basic hospital and other institutional and home health services and is administered under agreements with organizations known as "Intermediaries." 42 U.S.C. § 1395h. Part B is a voluntary supplemental program providing reimbursement for the covered services of physicians and other health care professionals, and medical supplies and equipment and is administered by organizations known as "Carriers." 42 U.S.C. § 1395u(f).2
The Health Care Financing Administration is the agency within the Department of Health and Human Services which is responsible for the administration of Medicare. The HCFA currently has contracts with both Maryland and Empire as "Carriers" under Part B of the Medicare Program. Empire administers Part B in a large portion of the State of New York under a contract entered into on October 1, 1987. Maryland administers Part B for most of the State of Maryland under a contract entered into on October 1, 1987. Both contracts have expiration dates of September 30, 1989.3 By a Memorandum of Understanding dated September 30, 1987, and an amendment to Maryland's Part B Carrier Contract of October 1, 1987, Maryland undertook the development, installation, and initial implementation of the Common Working File ("CWF") system on a pilot basis.4
On September 30, 1988, defendant issued Proposal Submission Requirement number 88-04-A, B ("PSR") to solicit proposals for the maintenance and enhancement of the Medicare CWF system. The solicitation was made only to existing Medicare Intermediaries and Carriers. The PSR stated that the proposals would be evaluated in three major areas: technical, experience, and cost, in descending order of importance.5 The PSR also stated that the award would be made to the offeror whose proposal was technically acceptable and whose technical/experience/cost relationship was the "most advantageous to the Government."6 Six proposals were received by the closing date of November 28, 1988. On December 20, 1988, defendant established a competitive range of three offerors, including Maryland and Empire. Best and Final Offers ("BAFO") were submitted on January 18, 1989. The three offers were rated as follows7:
Maryland Empire Arizona
Technical 486 449 500
Experience 258 300 246
Cost 193 200 167
_____ ___ ___ ___
Total 937 949 913
On February 3, 1989, defendant awarded the CWF maintenance and enhancement contract to Empire. By letter dated February 21, 1989, Maryland filed a protest with the General Accounting Office ("GAO") challenging the award to Empire as inconsistent with the express evaluation factors set forth in the PSR. As a result of this protest, defendant suspended performance of the contract by Empire on March 1, 1989. The contracting officer then sought and obtained approval from the HCFA on March 22, 1989, pursuant to 48 C.F.R. § 333.104(c), to proceed with the contract to Empire notwithstanding the pending protest at the GAO.
Maryland filed the instant complaint on May 8, 1989 seeking (1) a declaration that the contract award to Empire was contrary to applicable law, (2) an injunction preventing Empire from performing the contract, and (3) an order terminating the contract between defendant and Empire.8
Kentron Hawaii, Ltd. v. Warner, 480 F.2d 1166, 1169 (D.C.Cir.1973). This deferential standard requires that "so long as there is a reasonable basis for an agency's action in matters involving procurement, `the court should stay its hand even though it might, as an original proposition, have reached a different conclusion as to the proper administration and application of the procurement regulations.'" Prudential-Maryland Joint Venture Co. v. Lehman, 590 F.Supp. 1390, 1401 (D.D.C.1984) (quoting M. Steinthal & Co. v. Seamans, 455 F.2d 1289, 1301 (D.C.Cir.1971)). This standard is a restatement of the standard of review set forth in the Administrative Procedure Act which provides that a reviewing court may hold unlawful and set aside agency action which is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). Choctaw Manufacturing Co., Inc. v. United States, 761 F.2d 609, 616 (11th Cir.1985).
As previously observed, the PSR provided that the proposals would be evaluated on three distinct criteria: technical, experience, and cost. Plaintiff originally claimed that defendant improperly evaluated both the cost and experience factors in violation of applicable procurement law. However, based on the revelations made by defendant in its subsequent pleadings and submissions to the Court as to the basis for its award of the contract to Empire, plaintiff has abandoned its argument as to the experience factor of its proposal,9 and now bases its claim on two separate grounds. First, Maryland claims that the HCFA improperly evaluated the cost proposals in violation of the applicable law and procurement regulations. Second, Maryland challenges, as contrary to established procurement law, defendant's application of a "tie-breaking" factor that was not included in either the PSR or the BAFOs. Both arguments are based, in whole or in part, on defendant's asserted justification for awarding the contract to Empire.10
Although Empire's proposal received a rating of 949, twelve points higher than Maryland's rating of 937, the HCFA claims that it treated the two proposals as essentially equal. The HCFA asserts that it then applied a "tie-breaking" factor to determine which of the two offerors should be awarded the contract. The submissions to the Court reflect otherwise. In her affidavit, attached to defendant's opposition to plaintiff's motion for preliminary injunction, Barbara J. Gagel, the Government Contracting Officer for the Medicare Intermediary and Carrier Contracts who was responsible for selecting Empire over Maryland, explains her decision as follows:
Declaration of Barbara J. Gagel ("Gagel Decl."), ¶¶ 3-4 (emphasis added). It was not until a subsequent pleading that defendant's counsel posited the "tie-breaker" theory:
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