Protest challenging the terms of a solicitation as unduly restrictive of competition is denied, where the agency reasonably concluded that its need to maintain business continuity and a robust marketplace for services required that the solicitation include language capping the percentage of work that would be awarded to a single corporate entity or set of affiliated companies.
National Government Services Inc. protested the terms of a solicitation issued by the Centers for Medicare and Medicaid Services for Medicaid administrative services, alleging that the inclusion of an award limitation provision was unduly restrictive of competition.
The provision provided, with limited exceptions, that CMS would not award more than 26 percent of the national MAC workload to a single corporate entity, and would not award more than 40 percent of the workload to any single set of affiliated companies. NGS argued that the caps on the percentage of workload were far broader than necessary to satisfy the agency’s needs. NGS also expressed concern that that the provision drew a distinction between single entities and sets of affiliated entities, which placed single entities, such as NGS, at a disadvantage.
In response, CMS explained that its MAC contracting authority provided benefits to the Medicare program, but also created concerns, including maintaining business continuity and a dynamic, competitive marketplace. Further, the scope and scale of the Medicare program, and the MAC contracts, creates significant risk. In addition, CMS noted that entering and reentering the MAC acquisition environment is difficult. Further, CMS expressed concern that a single entity, given too large a share of the Medicare national workload, could exert significant leverage in business dealings and in pricing. CMS also noted that it based the percentage caps, in part, from industry feedback in response to a request for proposals.
GAO denied the protest, finding that the agency properly established a clear policy to accommodate its needs and that the agency’s contract award limitation provision was not unduly restrictive. According to GAO, the provision was reasonably related to the agency’s need for business continuity and maintenance of a competitive, dynamic marketplace. Finally, GAO concluded that while workload caps effectively created partial set-aside contracts for less-qualified offerors, the agency had a rational basis for including the contract award limitation clause in the solicitation. That certain entities, including NGS, may be precluded from receiving an additional award, does not mean that the contract award limitation provision is objectionable.
National Government Services Inc. is represented by Anuj Vohra and Andrew Guy of Covington & Burling, LLP. The government is represented by Jonathan A. Baker and Douglas Kornreich, Department of Health and Human Services. GAO attorneys Heather Weiner and Jennifer D. Westfall-McGrail participated in the preparation of the decision.
