Electronic Data Sys. Corp. v. MS DIV. OF MEDICAID

• Decision Date: 11 September 2003
• Docket Number: No. 2001-CA-01941-SCT.,2001-CA-01941-SCT.
• Citation: 853 So.2d 1192
• Parties: ELECTRONIC DATA SYSTEMS CORPORATION v. MISSISSIPPI DIVISION OF MEDICAID, Rica Lewis-Payton, In Her Official Capacity as Executive Director of the Division of Medicaid, and Consultec, LLC.
• Court: Mississippi Supreme Court

853 So.2d 1192

ELECTRONIC DATA SYSTEMS CORPORATION v. MISSISSIPPI DIVISION OF MEDICAID, Rica Lewis-Payton, In Her Official Capacity as Executive Director of the Division of Medicaid, and Consultec, LLC.

No. 2001-CA-01941-SCT.

Supreme Court of Mississippi.

September 11, 2003.

Steve J. Allen, Edmund L. Brunini, Jr., Jackson, attorneys for appellant.

John L. Maxey, II, Jackson, Donna Ross Philip, Office of the Attorney General by Harold Pizzetta, III, Gwendolyn G. Combs, attorneys for appellees.

EN BANC.

CARLSON, Justice, for the Court.

¶ 1. Aggrieved by the chancellor's entry of a final judgment affirming the Division of Medicaid's award of its fiscal agent contract to Consultec, LLC, Electronic Data Systems Corporation has appealed, asserting several errors supposedly committed by the chancellor. Upon a careful review of the record and consideration of the applicable law, we find no reversible error and thus affirm the final judgment of the Chancery Court of the First Judicial District of Hinds County.

FACTS AND PROCEEDINGS IN THE ADMINISTRATIVE AGENCY AND THE CHANCERY COURT

¶ 2. Electronic Data Systems Corporation (EDS) had served as the fiscal agent for the Mississippi Division of Medicaid (DOM) since 1994. DOM is but one of many state administrative agencies required to procure personal and professional services, such as fiscal agent services, pursuant to the State of Mississippi Personal Service Contract Procurement Regulations (PSCPR), which provides that the contracting for such services may be accomplished by (1) "Competitive Sealed Bids," (2) "Competitive Sealed Proposals," (3) "Small Purchases," (4) "Sole-Source Procurement," or (5) "Emergency Procurement."¹

¶ 3. EDS was initially awarded the DOM fiscal agent contract in 1994 using the sole-source procurement method.² The primary task of the DOM fiscal agent is to maintain and operate DOM's Medicaid Management Information System (MMIS), which consists of computer hardware and software used to process the numerous "Medicaid claims from providers of medical care and services for the medical care and services furnished to recipients under the medical assistance program."

¶ 4. Helen Wetherbee (Wetherbee) was the DOM Executive Director until August 13, 1999. While Wetherbee was Executive Director of DOM, she was responsible for submitting to the Health Care Financing Administration (HCFA), the federal source of financial assistance, DOM's Advanced Planning Document (APD) for certain vendor services. An APD is a concise written "plan of action" submitted by a state division of Medicaid seeking federal funding from HCFA to determine need, feasibility and cost factors for the acquisition of automatic data processing equipment or services. The APD submitted by Wetherbee was dated May 4, 1999, and sought permission from HCFA "to request proposals for Fiscal Agent services for the period January 1, 2001, through June 30, 2005." HCFA approved the DOM's APD on May 18, 1999. Upon receiving HCFA approval of its previously submitted APD, DOM prepared and issued a Request for Proposal (RFP) on July 1, 1999, inviting vendor proposals for the contract to serve as DOM's fiscal agent.³ Three parties submitted proposals in response to the RFP, EDS (the incumbent), Unisys, and Consultec, LLC (Consultec).⁴ However, none of these parties met the minimum technical scores for the RFP, and thus the procurement was cancelled by the Governor. DOM provided notice to HCFA of the cancellation of the 1999 fiscal agent procurement. EDS's contract was to expire by its terms on December 31, 2000; therefore, because no new contract was awarded from the 1999 RFP, DOM extended EDS's contract through December 31, 2001.

¶ 5. After leaving DOM, Wetherbee went to work in the private sector before accepting a position as Consultec's Account Manager in early 2001; however, employment with Consultec was contingent upon Consultec being awarded the DOM contract. As a potential account manager, Wetherbee was required to participate during portions of Consultec's preparation and presentation of materials in the oral interview process in the bid for DOM's fiscal agent contract.

¶ 6. Under a new agency administration with Rica Lewis-Payton (Lewis-Payton) serving as executive director, DOM, as required by federal regulations, submitted to HCFA the 2000 RFP for review and approval. By letter dated August 25, 2000, HCFA approved the 2000 RFP and thus, a new RFP was once again issued on September 8, 2000, seeking vendor proposals for the DOM fiscal agent contract to render services commencing on January 1, 2002. However, the new RFP was issued under the same APD which had been utilized in issuing the 1999 RFP. DOM did not submit another APD or an APD update to HCFA because, according to DOM officials, the federal funding limits had already been established. This time only EDS and Consultec submitted bids.

¶ 7. On March 9, 2001, DOM stated its intent to award the fiscal agent contract to Consultec, which would take over the fiscal agent services on January 1, 2002, while EDS would continue to serve out its contract extension. Lewis-Payton informed the Personal Services Contract Review Board (PSCRB or the "Board") that there was little difference between the proposals submitted by EDS and Consultec. However, Lewis-Payton stated Consultec submitted a bid $20 million lower than that submitted by EDS. Consultec stated this bid was a "rock bottom" price with the expectation that it would receive additional revenue from future enhancements of the contract.

¶ 8. As required by statute, DOM sought the approval of the PSCRB. Pursuant to Miss.Code Ann. § 25-9-120(3)(b), the PSCRB has the authority and responsibility to "[a]pprove all personal and professional services contracts involving the expenditures of funds in excess of One Hundred Thousand Dollars ($100,000.00)."⁵ The PSCRB also provides the standards for the "issuance of requests for proposals, the evaluation of proposals received, consideration of costs and quality of services proposed, contract negotiations, the administrative monitoring of contract performance by the agency and successful steps in terminating a contract." Id. § 25-9-120(3)(e). The PSCRB is also statutorily obligated to "[d]evelop standards with respect to contractual services personnel which require invitations for public bid, requests for proposals, record keeping and financial responsibility of contractors...." Id. § 25-9-120(3)(c). The PSCRB may, in its discretion, reserve the right to reject any or all bids. Id. ¶ 9. On March 15, 2001, the Board considered DOM's award of the fiscal agent contract to Consultec. Included as part of the minutes of the Board's meeting was a letter from EDS's counsel outlining EDS's concerns regarding Wetherbee's involvement and certain ethical violations EDS believed to have occurred which would render an award of the contract to Consultec void.⁶ The gist of EDS's concerns was whether certain ethical standards had been violated due to Wetherbee having participated in the issuance of the first RFP while at DOM, only to have her future employer, Consultec, be the ultimate successful bidder for the DOM fiscal agent contract awarded pursuant to a separate RFP which was issued after Wetherbee had left DOM, but under the same APD which had received HCFA approval while Wetherbee was still at DOM. The Board determined this letter represented the only objection received regarding DOM's fiscal agent contract. The Board then inquired as to whether the Ethics Commission had been consulted regarding the issue raised in the letter. Gwen Combs, counsel for DOM, advised the Board that she had consulted with certain individuals at the Mississippi Ethics Commission. Counsel for EDS requested that the Board postpone taking any action regarding the fiscal agent contract until such time as all the parties were able to address each issue of concern with the award of the contract. However, the Board determined that DOM had complied with all rules and regulations required by the PSCRB; therefore, in the Board's opinion, no issues presented before the Board justified postponing taking action regarding the contract. At the conclusion of that portion of the meeting pertaining to this contract, the PSCRB approved DOM's award of its fiscal agent contract to Consultec.

¶ 10. On May 1, 2001, EDS filed a complaint in the Hinds County Chancery Court disputing DOM's decision to award its fiscal agent contract to Consultec. EDS filed its original complaint against DOM and Consultec alleging that by Consultec's hiring Helen Wetherbee as account manager, Consultec violated state laws as well as DOM's RFP and the PSCPR. EDS argued that as a result of this alleged improper hiring of Wetherbee, Consultec had an illegal competitive advantage with respect to other potential bidders for the fiscal agent services contract.⁷ On June 4, 2001, DOM and Consultec filed separate answers denying these allegations. ¶ 11. EDS amended its complaint several times. EDS's first amended complaint included an additional claim that Consultec provided a deceptively low bid and planned to "backload" the contract with exorbitantly priced future enhancements. EDS's second amended complaint expanded its theory of liability to include alleged tortious actions by Consultec involving "breach of duty" to EDS under the Ethics in Government Law, state procurement regulations, breach of duty of good faith, tortious interference with contract and prospective business relations and negligent or intentional misrepresentations. The third amended complaint added Lewis-Payton, in her official capacity as DOM Executive Director, as a party defendant. EDS also included a charge of breach of implied contract against DOM in awarding the contract to Consultec, which EDS claimed created a situation wherein Consultec became a non-responsive bidder.

¶ 12. On July 13, 2001, Consultec moved for the issuance of a...