04-000017BID Hemophilia Health Services vs. Agency For Health Care Administration Status: Closed Recommended Order on Thursday, April 29, 2004.

Summary: Respondent`s failure to evaluate cost proposals according to the Request for Proposals method is clearly erroneous, arbitrary, and capricious.

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.