05-002804BID Hemophilia Health Services, Inc. vs. Agency For Health Care Administration Status: Closed Recommended Order on Friday, December 2, 2005.

Summary: Respondent`s award of contracts was not shown to be clearly erroneous, contrary to competition, arbitrary, or capricious. Petitioner would not have been awarded a contract even in the absence of the errors that were proven.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HEMOPHILIA HEALTH SERVICES, )

INC., )

)

Petitioner, )

)

vs. ) Case No. 05 - 2804BID

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent, )

)

and )

)

LYNNFIELD DRUGS, INC. d/b/a )

HEMOPHILIA OF THE SUNSHINE )

STATE AND CAREMARK, INC., )

)

Intervenor s . )

)

RECOMMENDED ORDER

On October 13 and 14, 2005, an evidentiary hearing in this

case was held in Tallahassee, Florida, before Bram D.E. C anter,

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 Senter fitt , 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 Ca re 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 3230 2

For Intervenor Lynnfield Drugs, Inc.:

Kellie D. Scott, Esquire

Blank, Meenan & Smith, P.A.

204 South Monroe Street

Post Office Box 11068

Tallahassee, Florida 3230 2 - 3068

STATEMENT OF THE ISSUE

The issue in this case is whether the proposed award of

contracts by the Agency for Health Care Administration (AH CA) 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 c ontrary to AHCA's

governing statutes, AHCA's rules or policies, or the

solicitation sp ecifications.

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 , AH CA 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 he aring was

held. Following the hearing, the A dministrative L aw J udge

recommended that AHCA reject all proposals received for

RFP 0403. On August 10, 2003, A H CA issued a Stipulated Final

Order rejecting all proposals.

On December 8, 2004, AHCA issued RFP 0 507 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 a ward contracts to Caremark and Lynnfield.

HHS was ranked sixth by the AHCA evaluators. HHS t imely

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 th at the issues raised by HHS were untimely,

b eyond 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 d ealt 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 th at the required information was difficult to

find, and the relatively low score s recei ved 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 2 4, and 26 through 2 9 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 l imited 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 heari ng 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 m edical 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 ca used 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 f ederal g overnment.

3. Section 287.057, Florida Statutes (2004 ), 2/ requires an

agency to make a written determination that an I nvitation to B id

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 I nvitation to B id was not

practicable for procurement of the services called for in the

M C HM 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 t he 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 require ments for vendor s respon ding 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 ex perience 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 ad ditional 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 . Th e 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 facto r product costs.

8 . Originally, RFP 0507 called for the submission of a

technical proposal and a separate cost proposal. The co st 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

eliminat ed the requirement for a separate cost proposal. A ll

vendors were required to provide the t echnical services for the

revenue they would receive un der 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. Ad dendum 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

produc ts 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. Un der 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. E ven in the aggregate, these evaluation

criteria allowed for t he 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 proposa ls 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

1 5 . 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 co ntent, was that the

proposal had to use four tabs with specified titles.

1 6 . 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

Experienc e ; 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 informa tion requests identified by letter,

such as item 9 , which is divided into 23 information requests,

lettered a through w.

1 7 . A logical manner in which to organize a proposal would

be to present the information in the same order as the

information is reque sted in the RFP, using the same headings ,

n umber s , 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 label ed "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." Follo wing the summary, however, HHS skips

item s 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 in formation about "Innovations."

1 9 . 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 appendi ces. 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 in clude

notations that directed the evaluators to the appendices where

relevant information was located. HHS acknowledge d that it

could have done "a much better job" in organizing its proposal .

2 1 . In the case of some items of requested information,

very l ittle 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 S taffing."

2 2 . In other cases, however, greater effort was needed to

find the information HHS says was re levant 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, ent itled "2004 Accredo Annual Report,"

which contains the Form 10 - K for Accredo Health, Inc., HHS's

parent company.

2 3 . 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/

2 4 . On e 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

do es 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 I ntervenors claim that HHS's proposal was

no n - 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 sta tes 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 propo sal, the overseer(s) will

check each technical proposal against the

following list:

* * *

I. Does the proposal include a table of

contents listing sections included in the

proposal and the corresponding sections of

the RFP to wh ich 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

determine d 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 relat ed 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 empl oyee 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 - sav ing 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 f actors are proteins or "biologics , "

t he 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 particu lar 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 fundament al 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 p ercent 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 thr eshold if they were

medically necessary.

3 3 . 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 guar antee 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 assa y management guarantee,

but structured differently.

3 4 . However, AHCA does not view this particular type of

gua rantee as necessarily beneficial. AHCA believes it could

create an incentive for the provider to withhold care, not based

on medical considera tions, but on financial considerations. A

provider might reduce factor product s 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 credi t 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 w ould be of benefit

to the State. No evidence wa s 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

item s 9.j and l, unde r "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 rec eived 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, eac h 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 criterio n

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 . E ach evalu ation 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 item ized

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 inf ormation

requests in the RFP were co mbined to form one criterion on an

evaluation sheet. An example is page 13 of the evaluation

sheets that grouped together item s 9. e, f, g, and h , under

" Organization Background and Experience. " Judith Saltpeter, the

AHCA employee who was principally resp onsible 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 fo r

scoring on page 15 of the evaluation sheets. These three items

were combined b y Ms. Saltpeter because t he y were all related to

the vendor's proposed handling of factor products.

40 . There were two instances in which a single in formation

request in the RFP w as divided into more than one criterion for

scoring o n 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. Identific ation 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. R e sum e s and relevant licensure

of all identified/named staf f 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 perform ance.

41. T he 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:

O nly 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 evalua te 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 wil l 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 prio r 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: A ll t echnical 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 in to itemized lists and AHCA's statement s to the vendors

that " A ll technical items ha ve equal weight" and " E qual

consideration will be given to all items found under Section 6, "

communicate d to the vendors a scoring process that was not

followed by AHCA. T here is nothing in the RFP that informs

prospective vendors of the scoring process t hat was actually

used.

45. The combining and dividing of the information

requirements in the RFP for scoring purposes affected their

relative importance , but n o prospective vendor would know from

reading RFP 0507 that some of the requirements of the techn ical

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

wo rth 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.

Ho wever, 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

err or 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 w ould 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 evaluat ion 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 poin ts. 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 f our AHCA employees who evaluated the technical

proposal s were Lind a Barnes, a r egistered p harmacist

(Scorer "A") ; Maresa Thomas, a r egistered n urse (Scorer "B") ;

Bruce McCall, who holds a d octorate in p harmacy (Scorer "C") ;

and Nancy Knox, a r egistered n urse (Scorer "D"). Kay Newman, a

c ertified p ublic a ccountant, revie wed only the financial

information provided by the vendors.

5 0 . 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 evaluat ors 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 sheet s. 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 ove r 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 evaluato rs will tend to

assign higher scores. There was no evidence that any evaluator

for RFP 0507 was in consistent in the application of his or her

scoring approach to all proposals.

53 . In addition to the points awarded by the t echnical

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

5 4 . 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 u s ed 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. S ome q uestion s 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 th e

reference reviews indicated that all vendors had performed their

obligations under previous contr acts, 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 sc ores. 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, f rom 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 s cores 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. Non e 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

6 0 . 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 in formation 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 det ermine 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

a ssigned 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 infor mation .

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 fo r 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 ev aluators 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 li ttle 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 th e 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 s eparate financial audit

performed by Ms. Newman and the reference review. However, HHS

fail ed to prove that if all these allege d errors by AHCA were

eliminated, HHS would have been a winner under RFP 0507.

CONCLUSIONS OF LAW

66 . The Division of Administra tive 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 b e 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 prepar e and disseminat e cl ear 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 i n

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 .

7 0 . 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 p art and no competitive

advantage inuring to HHS. See Liberty County , supra .

71 . These proceedings are governed by Subsection

120.57(3)(f), Florid a 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. Th e 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. B lack's Law Dictionary,

Rev. 4th Ed. (1968). An agency's decision is "clearly

erroneous" if it is without rational support; and , consequently,

the A dministrative L aw J udge 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

purpose s of competitive procurement process . Th ose purpose s

ha ve been described a s the protection of the public from

collusive contracts , the prevention of favoritism toward

contractors by public officials , the secur ing of fair

competition upon equal terms to all bidders, and the remov al of

the temptation o f 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 D CA 1977) .

7 4 . 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 1 978), cert. den. , 376 So. 2d

74 ( Fla. 1979).

7 5 . 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 tha t 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 in to itemized lists and AHCA's

statement s to the vendors that a ll technical items ha d equal

weight and e qual consideration w ould be given to all items ,

constituted a solicitation specification regar ding scoring that

was not followed by AHCA.

7 6 . Whether HHS was aware of the evaluation criteria used

for RFP 0403 and should have presumed they would be use d again

for RFP 0507 , is ir relevant to the issue of whether AHCA's

scoring was contrary to the sol icitation specifications.

7 7 . 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 t he 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.

7 8 . HHS asserts that the evaluation of the technical

proposals was illogically flawed and , therefore , arbitrary. The

evid ence establishes only that the evaluation of HHS's proposal

by Ms . Thomas was arbitrary because she fail ed 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 ag ency 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

clear ly erroneous, contrary to competition, arbitrary, or

capricious. With few exceptions, the 50 criteria used for

RFP 0507 required the evaluators to exercise p rofessional

judgment. In the absence of evidence showing fraud or

misconduct, or evidence of mist ake or illogical reasoning by

evaluators, i t is not the role of the A dministrative L aw J udge

to second guess the evaluator s to determine whether the ir

judgments about competing proposals were reasonable or whether

other well - informed persons might have rea ched contrary result s.

See Scientific Games, Inc. v. Dittler Brothers, Inc. , 586 So. 2d

1128 (Fla. 1st DCA 1991) .

8 0 . No evidence was presented to show that any evaluator

was inconsistent in his or her scoring of the seven proposals.

With the exception o f 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.

8 1 . 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 f or 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 ) .

8 2 . 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 e rrors in AHCA's evaluation and

scoring of the proposals . However, the preponderance of the

competent and persuasive evidence in the reco rd 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 stan ding as

enunciated in Preston Carroll .

8 3 . 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 " D ecisions which affect

substantial interests," including an agency's award of a

contract in a public procurement process. Furthermore, i t 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 Dr ugs, Inc.

DONE AND ENT ERED 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 refer s 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 lett er 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. Contic ello, 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, F lorida 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, Suit e 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 ag ency that

will issue the final order in this case.