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Protest challenging agency’s evaluation and assessment of an OCI is denied. The protester challenged the agency’s adjustment of its proposed labor rates, but GAO found the adjustment was reasonable based on the rates the protester used in a different but related contract. The protester alleged the awardee had an impaired objectivity conflict because as part of its performance of a different contract, the awardee would be evaluating its own performance under the awarded contract. GAO, however, found that the awardee’s responsibilities under the other contract did not involve an evaluation of its performance under the awarded contract. The protester alleged the agency disparately evaluated technical approaches and past performance. GAO reasoned that the differences in ratings were based on material differences between the protester’s and awardee’s proposals.

The Centers for Medicare and Medicaid Services (CMS) issued a solicitation seeking a Medicare Administrative Contractor (MAC) to provide health insurance benefit administration services, including Medicare claims processing and payment services. After receiving proposals, CMS established a competitive range consisting of two offerors: CGS Administrators, LLC and Noridian Healthcare Solutions, LLC. CMS ultimately awarded the contract to Noridian, finding that its superior technical approach and past performance was worth the price premium. CGS protested.

CGS objected to a $42 million upward adjustment that CMS made to the company’s proposed cost. CMS adjusted CGS’s labor rates finding that they did not align with rates the company had used on another MAC contract. CGS contended the adjustment was based on a misapprehension that the company would have to provide abnormally large pay raises to new employees to match the long-tenured employees who were working on its different MAC contract in a different city.

GAO did not find the adjustment of labor rates problematic. CGS proposed to use new hires to keep prices low. CMS appropriately determined that CGS’s plan to use new hires while assuming increased productivity was unreasonable. CMS rationally concluded that a new employee performing at the level of long-tenured on CGS’s other MAC contract should be paid at a rate commensurate with their productivity.

CGS also challenged CMS’s decision to increase the company’s proposed direct labor escalation rate. CMS found that CGS’s proposed escalation rate was inconsistent with industry benchmarks. CGS argued that the escalation rate was consistent with the rate it had used on another MAC contract, which provided a good point of comparison. GAO, however, reasoned that it was not unreasonable for CMS to find that the historical and more consistently-used benchmark provided a better comparison than the rate the company had proposed on another contract.

CGS also alleged that CMS failed to engage in meaningful discussion with regard to its concerns with the labor and escalation rates. CGS contended that none of the questions it received form the agency addressed the productivity rate of new hires or the proposed escalation rate.

But GAO found that the discussion questions expressly asked CGS to provide a comparison between  its proposed labor rates and the rates in its other MAC contract. The agency also asked CGS to explain where its proposed rates were lower than the rates on the other contract and why those lower rates were reasonable. These questions alerted CGS to the agency’s concerns with the labor rates.

CGS further alleged that Noridian had a disqualifying organizational conflict of interest. Noridian had another contract with CMS as a Supplemental Medical Review Contractor (SMRC). CGS argued that this other contract created an impaired objectivity OCI because as a MAC contractor Noridian would be processing Medicare claims while as an SMRC contractor, it would monitoring the Medicare system for fraud, waste, and abuse. Thus, CGS concluded, as an SMRC contractor Noridian would be reviewing its own claims determination made as a MAC contractor, essentially evaluating itself.

GAO determined that Noridian’s work as a SMRC contractor did not create an impaired objectivity OCI. The medical review that Noridian performed as an SMRC contractor involved the review of beneficiary information and medical providers to determine whether they supported the payment of a Medicare claim. Essentially, as an SRMC contractor, Noridian was reviewing whether a provider had complied with specific procedures. It would not be evaluating MAC contractor’s determination as to whether a claim should be paid. In other words, Noridian’s work as an SRMC contractor did not involve evaluating the work of a MAC contractor. Thus, Noridian’s role as an SRMC did not conflict with its work as a MAC contractor. CMS reasonably concluded that the there was no impaired objectivity OCI.

The solicitation required offerors to disclose all known violations and alleged acts within the past five years related to the False Claim Act, civil penalties, criminal investigations, and other misconduct. CGS contended that Noridian had failed to disclose that it was the subject of a fraud investigation related to its implementation of healthcare exchange. But GAO found that the disclosure of this investigation was not necessary because it fell outside of the five-year window contemplated by the solicitation.

CGS asserted that CMS disparately evaluated proposals. GAO, however, found that the differences in ratings stemmed from differences in CGS’s and Noridian’s proposals. For instance, CGS complained that Noridian had been assessed a strength for it approach to delivering a focused education. CGS claimed that it program also provided education. GAO, however, found Noridian’s approach to education was more comprehensive.

CGS also alleged that CMS disparately evaluated proposals with respect to past performance. CGS contended that CMS had noted that Noridian’s comprehensive error rate testing scores exceeded government performance goals on the incumbent MAC contract. CGS argued that its scores also exceeded the government goals, but CMS did not properly credit the company for those high scores. GAO reasoned that there was a distinction between CGS’s and Noridian’s scores. Noridian’s scores were on a Medicare A/B MAC contract, the same type of contract contemplated by the solicitation. CGS’s scores were for a DME Medicare contract. Noridian’s contract was more relevant than CGS’s.

Finally, CGS challenged the best value determination, arguing that CMS had applied an unstated incumbent preference in selecting Noridian. GAO disagreed, noting that Noridian had proposed experienced staff that would be ready to start immediately. In contract, CSG had proposed several new hires. CMS reasonably concluded that Noridian’s proposal was superior because it required no recruitment or training of new employees. While this advantage may have arisen from Noridian’s incumbent status, it did not mean the agency had applied an unstated incumbent preference.

CGS is represented by Craig A. Holman, Kara L. Daniels, and Nathaniel E. Castellano of Arnold & Porter Kaye Scholer, LLP. The intervenor, Noridian, is represented by Paul F. Khoury, Kathryn Bucher, Brian G. Walsh, Cara L. Lasley, Lindy C. Bathurst, Adam R. Briscoe, and Jennifer Eve Retener of Wiley Rein LLP. The agency is represented by Douglas W. Kornreich, Pamela Waldron, and Martin McEnrue of the Department of Health and Human Services. GAO attorneys John Sorrenti and Christina Sklarew participated in the preparation of the decision.