This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its January 2007 decision in Magellan Health Services, the U.S. Government Accountability Office (GAO) ordered the Department of Health and Human Services to conduct a re-evaluation after finding that the Department’s original evaluation of “best value” was unreasonable. The case involved a Request for Proposals (RFP) for services for an employee assistance plan that set out a number of criteria and sub-criteria for determining which proposal represented the “best value”:
The RFP established three evaluation factors: technical; small disadvantaged business (SDB) participation plan; and cost. RFP § M.3.4.
The technical factor in turn consisted of four subfactors, with various assigned point weights: technical approach and management plan (40 points); key personnel and personnel management (25 points); past performance (20 points); and continuous quality improvement process (15 points). RFP § M.5.A. The SDB participation plan factor was worth 5 points. RFP § M.4. The RFP expressed the relative importance of the evaluation factors as follows:
The technical proposal (including the Small Disadvantaged Business (SDB) Plan) will receive paramount consideration in the selection of the Contractor(s) for this acquisition, although estimated cost will also be considered. In the event that the technical evaluation reveals that two or more Offerors are approximately equal in technical ability, then the estimated cost, and SDB Plan of the Offeror will become paramount.
The complainant, Magellan Health Services, was the incumbent service provider. It submitted a proposal for the new contract but lost to a competing proposal. Magellan challenged the Department’s evaluation, alleging that the evaluation of “best value” was unreasonable because it had failed to properly take into account Magellan’s superior technical evaluation in a manner consistent with the RFP criteria. The GAO agreed:
Magellan asserts that the agency’s source selection decision was unreasonable. Specifically, the protester argues that the contracting officer’s determination that Magellan’s and Ceridian’s FPRs were technically equal is not supported by any documentation that demonstrates a reasonable basis for such a determination. Magellan contends that HHS’s failure to provide a basis for its conclusions that the offerors’ proposals were technically equal, notwithstanding the difference in technical ratings, resulted in an improper award decision. We agree.
The GAO found that rather than giving the technical evaluation the weighting contemplated under the RFP, the Department ranked the competing proposals equally on the technical factors and made price the determining factor for the contract award. Furthermore, this departure from the stated evaluation criteria was conducted without any supporting documentation:
[T]he contracting officer prepared no contemporaneous documentation indicating that Ceridian’s and Magellan’s proposals were technically equal as part of the agency’s best value award determination. Nothing in the TEP report shows that the agency evaluators concluded the proposals were technically equal; in fact, the point scores suggest otherwise. Notwithstanding the fact that Magellan’s FPR was scored higher than Ceridian’s FPR, as documented by the TEP, the source selection decision is devoid of any discussion as to how, or even if, the contracting officer determined before award that the offerors’ proposals were technically equal.… [W]e note that the TEP never concluded that offerors’ proposals were technically equal, but only that Ceridian’s proposal offered the best combination of value and price to the government. Further, the fact that the technical proposals of Ceridian and Magellan demonstrated that both offerors would be able to perform the work requirements very well is not relevant to the determination which the agency made here without explanation—that the proposals of Magellan and Ceridian were technically equivalent.
In light of the absence of any documentation or support for the purported technical equality of the offerors’ proposals, the RFP award language that the technical proposal would receive paramount consideration, and the fact that Magellan’s technical proposal was higher-rated, we view the selection decision here as unsupported.
The GAO therefore ordered a re-evaluation and, in the event that the new evaluation produced a different outcome from the original flawed evaluation, ordered the award of a new contract based on the new evaluation.
As this case illustrates, purchasing institutions should be careful to clearly establish the ranking criteria to determine “best value.” Once established, competing proponents should be ranked in accordance with those criteria. Purchasing institutions should not introduce “best value” criteria if, in the final analysis, their contract award decision will be based on the lowest bid.
