Pgba, LLC v. U.S.

• Decision Date: 22 November 2004
• Docket Number: No. 04-5101.,04-5101.
• Citation: 389 F.3d 1219
• Parties: PGBA, LLC, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee, and Wisconsin Physicians Service Insurance Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1219

389 F.3d 1219

PGBA, LLC, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee, and Wisconsin Physicians Service Insurance Corporation, Defendant-Appellee.

No. 04-5101.

United States Court of Appeals, Federal Circuit.

DECIDED: November 22, 2004.

Kathleen E. Karelis, Miller & Chevalier Chartered, of Washington, DC, argued for plaintiff-appellant. On counsel were W. Jay DeVecchio and Lisanne E.S. Cottington.

Kyle Chadwick, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee, United States. With him on the brief were Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director; and Brian M. Simkin, Assistant Director.

Steven S. Diamond, Arnold & Porter LLP, of Washington, DC, argued for defendant-appellee, Wisconsin Physicians Service Insurance Corporation. Of counsel on the brief were Walter F. Zenner, Jr., Marc A. Stanislawczyk, Joseph M. Catoe and Matthew H. Solomson.

Before RADER, SCHALL, and PROST, Circuit Judges.

SCHALL, Circuit Judge.

This is a post-award bid protest case. On September 6, 2002, the Department of Defense, Military Health Care System, TRICARE Management Activity ("TMA"), issued a request for proposals ("RFP") for a contract for the handling of claims processing for certain beneficiaries under a military health care benefits program known as "TRICARE." Plaintiff-Appellant PGBA, LLC ("PGBA"), submitted a proposal in response to the RFP, as did Wisconsin Physicians Service Insurance Corporation ("WPS"). On July 25, 2003, TMA awarded the contract to WPS. After unsuccessfully challenging the award before the General Accounting Office ("GAO"), PGBA filed suit in the United States Court of Federal Claims seeking to have the award of the contract to WPS set aside. WPS entered the suit as intervening defendant.

In due course, the parties cross-moved for summary judgment on the administrative record. On March 31, 2004, the Court of Federal Claims granted-in-part and denied-in-part PGBA's motion. Although the court found that TMA had committed errors that materially affected the bidding process adversely to PGBA, it declined to set aside award of the TRICARE contract to WPS. It did, however, rule that PGBA was entitled to recover its reasonable bid preparation and proposal costs. PGBA, LLC v. United States, 60 Fed.Cl. 196 (2004) ("Initial Decision"). Subsequently, on May 12, 2004, the court denied PGBA's second motion for reconsideration.¹ PGBA, LLC v. United States, 60 Fed.Cl. 567 (2004) ("Final Decision"). This appeal by PGBA followed. Because we conclude that the decision of the Court of Federal Claims does not represent an abuse of discretion, we affirm.

BACKGROUND

I.

TRICARE is a military health care benefits program that provides health care benefits to dependents of active duty service members and to retired service members and their dependents. TRICARE is administered within the Department of Defense by TMA. Until recently, the TRICARE system was divided into eleven geographical regions. TMA administered the eleven regions through seven Managed Care Support ("MCS") contracts with prime contractors. The prime contractors, in turn, outsourced the claims processing through subcontracts with one of two private companies, PGBA or WPS. PGBA processed claims under five contracts for nine regions, while WPS processed claims under two contracts for the remaining two regions. Initial Decision, 60 Fed.Cl. at 198.

In October of 2000, Congress enacted legislation known as "TRICARE for Life." Pub. L. No. 106-398, Div. A, Title VII, § 712, 114 Stat. 1654A-176 (2000). The legislation addressed a problem confronting individuals qualifying for both TRICARE and Medicare benefits — individuals known as "dual eligible beneficiaries." Namely, prior to the enactment of TRICARE for Life, beneficiaries lost their coverage under TRICARE upon becoming eligible for Medicare. TRICARE for Life remedies this problem by making Medicare the primary payer and TRICARE the secondary payer for dual eligible beneficiaries. As secondary payer, TRICARE reimburses that portion of a health benefits claim not covered by Medicare. Passage of TRICARE for Life forced TMA to address the processing of the new dual eligible beneficiary claims. TMA did this by modifying the MCS prime contracts. The prime contractors in turn modified their subcontracts with PGBA and WPS. Initial Decision, at 198-99.

In 2002, TMA announced that it would restructure TRICARE under a plan known as "TRICARE Next Generation" or "T-Nex." Under the T-Nex plan, TMA will consolidate the MCS contracts from seven contracts covering eleven regions to three contracts covering three regions. T-Nex also calls for replacing the subcontracting scheme for dual eligible beneficiaries with one standalone contract for processing all dual eligible beneficiary claims, irrespective of geographic region. This new contract is called the "TRICARE Dual Eligible Fiscal Intermediary Contract" or "TDEFIC." TMA estimates that, when fully implemented, TDEFIC will process claims for approximately 1.7 million dual eligible beneficiaries. Id. at 199.

TDEFIC provides for a nine-month transition schedule. The purpose of the schedule is to allow sufficient time to transition the chosen TDEFIC contractor into the new system for processing dual eligible beneficiary claims. During this transition period, PGBA and WPS are to continue processing dual eligible beneficiary claims as subcontractors under the old MCS contracts. In the event more than nine months is needed to make the transition, TDEFIC allows for extension of the transition period, in which case claims processing is to continue under the old MCS contracts. The original transition dates for TDEFIC were: (1) region 11 on April 1, 2004; (2) regions 2 and 5 on June 1, 2004; (3) regions 9, 10, and 12 on July 1, 2004; (4) regions 3 and 4 on August 1, 2004; (5) region 1 on September 1, 2004; (6) regions 7 and 8 on October 1, 2004; and (7) region 6 on November 1, 2004. Evidentiary Hr'g Tr. at 67-68 (Fed.Cl. May 6, 2004) ("Hearing"). On May 12, 2004, the date of the Court of Federal Claims' final decision, region 11 had already transitioned while regions 2 and 5 were within three weeks of transitioning.²

II.

On September 6, 2002, TMA issued a RFP for TDEFIC, to which PGBA, WPS, and Unisys Corporation responded with proposals in February of 2003. Upon receipt of the proposals, TMA conducted an initial evaluation.³ Thereafter, it requested and received final proposal revisions from the three offerors. TMA evaluated the proposal revisions in June of 2003. The Source Selection Authority then conducted an independent evaluation of the proposals over the course of two weeks. TMA ultimately awarded TDEFIC to WPS on July 25, 2003. In total, it took TMA approximately six months to conduct the evaluation and award the contract.

On August 8, 2003, PGBA filed a post-award bid protest with the GAO. The GAO issued an automatic stay of the award to WPS pending resolution of the protest. However, on August 16, 2003, TMA overrode the automatic stay. PGBA responded by bringing an action in the Court of Federal Claims to enjoin the override. On September 15, 2003, Judge Allegra issued an injunction dissolving TMA's override and reinstating the automatic stay. PGBA, LLC v. United States, 57 Fed.Cl. 655 (2003) ("Preliminary Injunction"). The GAO denied PGBA's protest on November 17, 2003, In re PGBA, LLC, Nos. B-292679.2, B-292679.3 (U.S. Gen. Accounting Office Nov. 17, 2003) (filed under seal), at which time the automatic stay and preliminary injunction expired, PGBA, LLC v. United States, No. 03-1986C (Fed.Cl. Nov. 17, 2003) ("Order").

III.

On December 3, 2003, PGBA filed suit in the Court of Federal Claims, praying for the following relief:

(a) A declaratory judgment that TMA's decision to award the TDEFIC Contract to WPS is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law;

(b) an order setting aside the award of the TDEFIC to WPS; and

(c) such other relief as the Court deems appropriate.

(Compl. at 14.) WPS entered the case as an intervening defendant on December 9, 2003. On January 15, 2004, PGBA moved for summary judgment on the administrative record. The United States and WPS responded with their own cross-motions for summary judgment.

On March 31, 2004, the Court of Federal Claims ruled that TMA had acted arbitrarily and capriciously in awarding TDEFIC to WPS. The court determined that TMA had made several prejudicial errors in its evaluation of the technical merits of PGBA's and WPS's proposals. Specifically, the court found that portions of the RFP lacked clarity, resulting in uneven treatment of PGBA, Initial Decision, 60 Fed.Cl. at 204-08, and that TMA had erred in evaluating WPS's claims processing capabilities, id. at 210-17. However, although finding the arbitrary and capricious action by TMA prejudicial to PGBA, the court concluded that the balance of hardships and the public interest favored allowing TMA and WPS to proceed with the contract. Id. at 220-22. Therefore, instead of ordering a new solicitation of the contract, the court limited PGBA's relief to its bid preparation and proposal costs. Id. at 223.

Shortly after the Court of Federal Claims filed its decision under seal, PGBA asked the court to reconsider its decision. Id. at 222. PGBA urged the court to set aside the contract and order a reevaluation (as opposed to a new solicitation, a remedy which the court previously considered and rejected). The court denied the motion, explaining that injunctions do not issue "for every violation of the law," and that, in this case, equity did not warrant an injunction. Id. The court also rejected PGBA's argument that 28 U.S.C. § 1491(b)(4), in combination with 5 U.S.C. § 706(2)(A), required the court to set aside TMA's award of TDEFIC to WPS because the court had found...