UnitedHealthcare of PA, Inc. v. DHS

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

UnitedHealthcare of :

Pennsylvania, Inc., :

:

Petitioner :

:

v. : No. 790 C.D. 2017

: Argued: October 18, 2017

Department of Human Services, :

:

Respondent :

BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge

HONORABLE ROBERT SIMPSON, Judge

HONORABLE P. KEVIN BROBSON, Judge

HONORABLE PATRICIA A. McCULLOUGH, Judge

HONORABLE ANNE E. COVEY, Judge

HONORABLE MICHAEL H. WOJCIK, Judge

HONORABLE ELLEN CEISLER, Judge1

OPINION NOT REPORTED

MEMORANDUM OPINION

BY JUDGE WOJCIK FILED: April 10, 2018

UnitedHealthcare of Pennsylvania, Inc. (United) petitions for review of

the order of the Department of Human Services (Department)2 denying United’s bid

1

This case was argued before an en banc panel of the Court that included former Judge

Joseph M. Cosgrove. Because Judge Cosgrove’s service on the Court ended January 1, 2018, this

matter was submitted on briefs to Judge Ellen Ceisler as a member of the en banc panel.

2

Pursuant to Section 201 of the Administrative Code of 1929, Act of April 9, 1929, P.L.

177, as amended, 71 P.S. §61(a), “[t]he executive and administrative work of this Commonwealth

shall be performed by the Executive Department, consisting of the . . . Department of Public

protests challenging the Department’s decision not to select United to progress to

agreement negotiations with respect to reissued Request for Proposal No. 06-15

(Reissued RFP) in which the Department sought managed care organizations

(MCOs) to provide HealthChoices Physical Health Program (HealthChoices)

services to Medical Assistance (MA) beneficiaries.3 We reverse.

Welfare . . . .” Pursuant to Section 103(a) of the Act of June 13, 1967, P.L. 31, added by the Act

of September 24, 2014, P.L. 2458, 62 P.S. §103(a), “[t]he Department of Public Welfare shall be

known as the Department of Human Services.”

3

As this Court has explained:

[The Department], formerly known as the Department of

Public Welfare (DPW), is the state agency that administers the

Commonwealth’s Medicaid program. “Medicaid is a joint state-

federal funded program for [MA] in which the federal government

approves a state plan for the funding of medical services for the

needy and then subsidizes a significant portion of the financial

obligations the state agreed to assume.” [The Department] delivers

Medicaid benefits in Pennsylvania through either (1) a “fee for

service” payment program, where the provider of care is paid by [the

Department] on a claim-by-claim basis; or (2) a “managed care”

program where [an MCO], under contract with [the Department], is

paid on a monthly, fixed-fee basis per enrollee, and the MCO pays

the provider pursuant to the terms of an agreement between the

MCO and the provider. Pennsylvania’s Medicaid managed-care

program is HealthChoices.

***

Section 443.5 of the Human Services Code, Act of June 13,

1967, P.L. 31, added by the Act of July 15, 1976, P.L. 993, 62 P.S.

§443.5, relating to prepayment for contracted medical services,

authorizes [the Department] to enter into contracts with insurers,

such as MCOs, through a competitive bidding process. Section

443.5 of the Human Services Code provides, in relevant part:

For categorically needy or medically needy persons

eligible for medical assistance, prepaid capitation

2

Under the HealthChoices Program, the Department contracts with

MCOs to administer health services to those eligible for Medicaid in five “Zones,”

Northeast, Southeast, Lehigh-Capital, Southwest, and Northwest. Currently, United

operates as an MCO in the Southeast, Lehigh/Capital, and Southwest Zones.

On September 16, 2015, the Department issued Request for Proposal

No. 06-16 (Original RFP) seeking MCOs to administer HealthChoices in all five

Zones beginning in 2017. The Original RFP stated that the Department would award

three-year contracts to up to five MCOs in each Zone and identified the following

criteria: (1) technical criteria comprising 80% of the total points; (2) Small Diverse

Business Participation with a weight of 20% of the total points; and (3) Domestic

Workforce Utilization consisting of “bonus points” to a maximum of 3% of the total

points. To qualify as a responsible offeror, the Original RFP stated that an MCO’s

technical submission must receive a total score of at least 70% of the available points

allotted in the evaluation.

On July 21, 2016, the Department issued the Reissued RFP again

seeking MCOs to provide HealthChoices services to MA beneficiaries in the five

Zones.4 The Reissued RFP provides for agreements with a three-year term with an

payments or insurance premiums for services under

the medical assistance State plan may be made on

behalf of eligible persons through competitive

bidding with profit or non-profit contractors,

insurers, or health maintenance organizations. Profit

and non-profit insurers must be approved under

applicable State laws. (Emphasis added.)

Aetna Better Health of Pennsylvania Inc. v. Department of Human Services, (Pa. Cmwlth., No.

351 M.D. 2016, filed July 6, 2016), slip op. at 1-3 n.1, 2 (citations omitted).

4

See Section 521 of the Procurement Code, 62 Pa. C.S. §521 (“[A] request for proposals

or other solicitation may be canceled . . . at any time prior to the time a contract is executed by all

3

option for one additional renewal two-year term. The Department’s Bureau of

Financial Operations, Division of Procurement and Contract Management was the

Issuing Office of the Reissued RFP, and “[t]he sole point of contact in the

Commonwealth for th[e Reissued] RFP” is Erin Slabonik, the Project Officer for the

Reissued RFP. Reproduced Record (R.R.) at 192a.

Initially, the Reissued RFP did not provide for a bid protest mechanism;

however, the Department issued Addendum 1 to the Reissued RFP which states that

“[i]n the event an Offeror elects to file a bid protest, the Department will accept the

bid protest. The Department will address the merits of the bid protest if the bid

protest is timely filed.” R.R. at 235a.

The Reissued RFP states that the following criteria was to be used to

evaluate the proposals: (1) technical criterion based on a Work Statement

Questionnaire/Soundness of Approach, Personnel Qualifications and Staffing, and

Prior Experience and Performance (80% or 8,000 of the possible 10,000 total

points); (2) Small Diverse Business and Small Business (SDB/SB) Participation as

determined by the Department of General Services’ (DGS) Bureau of Diversity,

Inclusion and Small Business Opportunities (BDISBO) (20% or 2,000 of the

possible 10,000 total points); and (3) Domestic Workforce Utilization bonus points

(up to 3% of the possible 10,000 total points). R.R. at 226a-228a. In order to be

considered a responsible offeror, “and therefore eligible for selection for agreement

parties when it is in the best interests of the Commonwealth. . . . The reasons for the cancellation

or rejection shall be made part of the contract file.”). See also Scientific Games International, Inc.

v. Department of Revenue, 66 A.3d 740, 758 (Pa. 2013) (“The Legislature has deliberately

excluded Section 521 cancellations from the scope of the right of protest. See 62 Pa. C.S.

§1711.1(a) (prescribing that bidders, offerors, and certain others “aggrieved in connection with the

solicitation or award of a contract, except as provided in section 521 (relating to cancellation of

invitations for bids or requests for proposals), may protest to the head of the purchasing agency in

writing” (emphasis added)).”).

4

negotiations,” the total score for the technical submission in a proposal for each Zone

“must be greater than or equal to 75% of the available technical points.” Id. at 228a.

The Reissued RFP specifically provides that “[t]he Department, in its

sole discretion, may undertake negotiations with Offerors whose proposals, in the

judgment of the Department, show them to be qualified, responsible, and capable of

providing the services.” R.R. at 195a.5 However, with respect to “Discussions for

Clarification,” the Reissued RFP states, “Offerors may be required to make an oral

or written clarification of their proposals to the Department to ensure thorough

mutual understanding and Offeror responsiveness to the solicitation requirements.

The Project Officer will initiate requests for clarification.” Id. at 201a-202a.

Additionally, the Reissued RFP provides that “[f]rom the issue date of this RFP until

the Department selects proposals for award, the Project Officer is the sole point of

contact concerning this RFP. Any violation of this condition may be cause for the

Department to reject the offending Offeror’s proposal.” Id. at 203a. Finally, the

Department would “notify the selected Offerors in writing of their selection for

negotiations after determining those proposals that are most advantageous and in the

best interest of MA beneficiaries and the Commonwealth.” Id. at 205a.

5

Section 513(f) of the Procurement Code states:

As provided in the [RFP], discussions and negotiations may be

conducted with responsible offerors for the purpose of clarification

and of obtaining best and final offers [(BAFOs)]. Responsible

offerors shall be accorded fair and equal treatment with respect to

any opportunity for discussion and revision of proposals. In

conducting the discussions, there shall be no disclosure of any

information derived from proposals submitted by competing

offerors.

62 Pa. C.S. §513(f).

5

The Department received proposals from eleven different MCOs: nine

for the Southeast Zone; ten for the Lehigh/Capital Zone; seven for the Southwest

Zone; six for the Northwest Zone; and seven for the Northeast Zone. United

submitted a proposal in response to the Reissued RFP to provide services in all five

Zones. Likewise, Pennsylvania Health & Wellness, Inc. (PHW) sought to provide

services in all five Zones. On November 18, 2016, the Project Officer notified

United that its “proposals were not among those proposals determined to be the most

advantageous to the Commonwealth,” and United filed a bid protest based on the

Department’s November Selection Memorandum.

However, the November Selection Memorandum revealed that

BDISBO scored the SDB/SB portion of the proposals on a 200-point scale and not

a 2,000-point scale as provided in the Reissued RFP. On December 12, 2016, the

Department notified BDISBO of the scoring error and asked BDISBO to correct the

mistake. On December 15, 2016, the Department’s Secretary and DGS’s Secretary

notified United that the November Selection Memorandum would be rescinded due

to the error in scoring. As a result, the Department did not issue a written

determination of United’s bid protest stemming from the November Selection

Memorandum.

On December 19, 2016, Leesa Allen, the Department’s Deputy

Secretary for the Office of Medical Assistance Programs (OMAP), and Sallie

Rodgers, Deputy Chief Counsel in the Department’s Office of General Counsel, met

with Michael Neidorff, Chairman and CEO of Centene Corporation (Centene),

PHW’s parent corporation, and Brent Layton, an Executive Vice President and the

Chief Business Development Officer of Centene. R.R. at 5333a-5337a. Deputy

Secretary Allen requested the meeting with PHW to discuss PHW’s operational

6

readiness to operate as an MCO on a statewide basis. Id. at 5334a-5335a. Allen was

concerned about PHW’s readiness because of: the abbreviated time frame for the

implementation of the HealthChoices Program agreements; the significant amount

of resources that were necessary for a successful Readiness Review; the planned

implementation of Community HealthChoices Program (CHC),6 a new managed

care initiative separate from the HealthChoices Program that will begin

implementation in 2018 and for which PHW is a selected offeror in all five Zones;

and the fact that PHW was a new plan coming into the HealthChoices Program. Id.

at 5335a.

From Layton’s perspective, the December 19th meeting with the

Department’s Deputy Secretary and Deputy Chief Counsel was generally about

PHW’s readiness to perform in various Zones, the status of PHW’s Certificate of

Authority (COA) to conduct business in Pennsylvania, and its approval to operate in

specific counties. R.R. at 5330a.7 Potential contracting issues in various Zones were

6

As the Department has described, the CHC program is “a new managed care initiative

separate from the HealthChoices [] Program, which will begin implementation in January 2018

and for which PHW is a selected offeror in all five CHC zones.” Final Agency Determination at

9 n.9.

7

Section I-4 of the Reissued RFP states, in relevant part:

Participation in the HealthChoices [Physical Health] Program

will be limited to Commonwealth-licensed [Health Maintenance

Organizations (HMOs)]. All MCOs awarded an agreement for the

HealthChoices PH Program for any zone will be required to have a

[COA] to operate as an HMO in Pennsylvania, as well as

Pennsylvania Department of Health (DOH) operating authority in

each county in each zone for which they are selected, no later than

three months prior to the anticipated implementation date of

04/01/2017. By this date, all MCOs awarded an agreement for

a HealthChoices PH Zone must provide to the Department,

through the Project Officer, a copy of their [COA] to operate as

7

discussed, but PHW did not modify or withdraw its proposal in any Zone. Id.

Layton indicated that if PHW was selected by the Department to proceed to

negotiations, as a new entrant into an existing market, one of the issues that it would

want to understand and discuss is the Department’s auto-assignment algorithm, but

no specific changes to the auto-assignment algorithm were agreed to by the parties.

Id.

On December 22, 2016, the Department issued a new December

Selection Memorandum, which corrected the SDB/SB scoring and made the

recommended selections of MCOs for agreement negotiations for the HealthChoices

Program in all five Zones. R.R. at 238a-247a. The Department selected five MCOs

in the Southeast Zone; four MCOs each in the Southwest Zone and the

Lehigh/Capital Zone; and three MCOs each in the Northeast Zone and the Northwest

Zone. Id. at 239a. Based on the Department’s scoring, United was not selected for

negotiations in any Zone based on its rankings as seventh in the Southeast Zone;

fifth in the Southwest Zone; eighth in the Lehigh/Capital Zone; sixth in the Northeast

Zone; and fifth in the Northwest Zone. Id. at 242a-244a.

In contrast, although the Department’s scoring of PHW’s proposals

were high enough for selection in all five Zones, the Department determined that

PHW would participate in the Southeast, Lehigh/Capital, and Southwest Zones.

R.R. at 245a. This determination was based on “discussions between [PHW] and

an HMO in Pennsylvania, as well as a copy of the

correspondence from the Pennsylvania DOH granting

operating authority in each county in the Zone(s) for which they

were selected for award.

R.R. at 194a-195a (emphasis in original).

8

the Department, [in which] the Department agreed that [PHW] will participate in the

Southeast, Southwest, and Lehigh/Capital zones.” Id.

On December 28, 2016, United filed a Supplemental Protest

challenging the December Selection Memorandum. R.R. at 1a-8a. United claimed

that: (1) its reduction from a selected offeror in all five Zones under the Original

RFP to two Zones and then zero Zones under the Reissued RFP, without any logical

explanation, is arbitrary and capricious, an abuse of discretion, and not in accordance

with the law; (2) its reduction from two Zones under the Reissued RFP to zero Zones

after the December rescoring is arbitrary and capricious, an abuse of discretion, and

not in accordance with the law; (3) the changes between the Original RFP and the

Reissued RFP were inappropriately weighted in the evaluation of the proposals

thereby constituting arbitrary and capricious actions, an abuse of discretion, and

actions contrary to law; and (4) the Department’s failure and refusal to provide any

documents or information to support its evaluation and score of the proposals is

arbitrary and capricious, an abuse of discretion, and contrary to law. Id. United also

reiterated a prior request for all documents relating to the Department’s evaluation,

scoring, and selection of proposals in all five Zones; all proposals submitted by other

offerors; all documents relating to the scoring of the SDB portion of the proposals;

and all documents reflecting or relating to debriefing sessions held with any other

offerors. Id. at 7a. Finally, United also reiterated its prior request for an evidentiary

hearing on its protest. Id.8 Geisinger Health Plan (Geisinger), Gateway Health Plan,

Inc. (Gateway), PHW, and OMAP filed responses to United’s bid protest outlining

8

See Section 1711.1(e) of the Procurement Code, 62 Pa. C.S. §1711.1(e) (“The head of the

purchasing agency or his designee shall review the protest and any response or reply and may

request and review such additional documents or information he deems necessary to render a

decision and may, at his sole discretion, conduct a hearing.”).

9

various reasons why the protest should be denied, id. at 87a-128a, 168a-349a, and

United filed a reply, id. at 425a-448a.

On January 5, 2017, United filed a Supplemental Protest following the

Department’s announcement of the six offerors selected to negotiate contracts in all

of the Zones. R.R. at 51a-56a. United asserted that the Department’s selection of

PHW is arbitrary and capricious, an abuse of discretion, and contrary to law because

PHW is not a “responsible offeror” under the Reissued RFP. Id. at 52a-55a.9 United

also reasserted its requests for documents and for an evidentiary hearing. Id. at 55a.

PHW and OMAP filed responses to United’s bid protest outlining the reasons why

it should be denied, id. at 129a-167a, 449a-480a, and United filed a reply, id. at 522a-

564a.

On January 11, 2017, the Department held a debriefing conference

regarding United’s bid protest. R.R. at 378a-384a. On January 18, 2017, United

filed a Supplemental Protest in which it alleged that it had first learned that the

rescoring of the proposals was the result of the Department’s December 19 th

debriefing with PHW and that PHW was permitted to withdraw the portions of its

proposal relating to the Northeast and Northwest Zones. Id. United claimed that:

(1) the Department acted arbitrarily and capriciously, abused its discretion, and acted

contrary to law by permitting PHW to modify its proposal in violation of Section I-

12 of the Reissued RFP,10 Section 513(f) of the Procurement Code, and case law; (2)

9

See Section 513(g) of the Procurement Code, 62 Pa. C.S. §513(g) (“The responsible

offeror whose proposal is determined in writing to be the most advantageous to the purchasing

agency, taking into consideration price and all evaluation factors, shall be selected for contract

negotiations.”).

10

Section I-12 of the Reissued RFP states, in relevant part:

10

the Department’s review and use of SDB scoring was arbitrary and capricious, an

abuse of discretion, and contrary to law; (3) the Department did not properly apply

and follow the Reissued RFP in its evaluation and scoring of the offerors’ technical

proposals thereby constituting arbitrary and capricious scoring, an abuse of

discretion and scoring contrary to law; and (4) it is entitled to all documents or

information considered by the Department in the issuance or evaluation of bids or

the evaluation of bid protests under the Reissued RFP pursuant to Section 1711.1 of

the Procurement Code. Id. at 351a-369a. United again requested discovery to obtain

additional information from the Department and an evidentiary hearing on its bid

protest. Id. at 369a-370a. Geisinger, Gateway, PHW, and OMAP filed responses to

United’s bid protest outlining various reasons why the protest should be denied, id.

at 481a-521a, 565a-738a, and United filed a reply, id. at 739a-775a.

On February 24, 2017, United filed another Supplemental Protest

arguing that the December 19th meeting violated the “equal treatment” requirement

of Section 513(f) of the Procurement Code; the “blackout period” provided in

For this RFP, the proposal must remain valid for 120 days or until

an agreement is fully executed. If the Department selects the

Offeror’s proposal for award, the contents of the selected Offeror’s

proposal will become, except to the extent the contents are changed

through negotiations, obligations under the agreement.

Each Offeror submitting a proposal specifically waives any right to

withdraw or modify it, except that the Offeror may withdraw its

proposal by written notice received at the Issuing Office’s address

for proposal delivery prior to the exact hour and date specified for

proposal receipt [or] in person prior to the exact hour and date set

for proposal receipt . . . .

R.R. at 199a.

11

Section I-21 of the Reissued RFP;11 and the automatic stay provisions of Section

1711.1(k) of the Procurement Code12 based on the November and December bid

protests. R.R. at 779a-785a. United also claimed that the Department violated the

Procurement Code and the Reissued RFP by unfairly favoring PHW regarding the

required COA to operate as an MCO issued by the Departments of Health and

Insurance, and evidence of network adequacy in the proposal. Id. at 785a-787a.

United again requested discovery to obtain additional information from the

Department and an evidentiary hearing on its bid protest. Id. at 787a. Geisinger,

Gateway, PHW, and OMAP filed responses to United’s bid protest outlining various

reasons why the protest should be denied, id. at 838a-851a, 955a-1021a, and United

sought clarification from OMAP, id. at 1022a-1024a.

On March 3, 2017, United filed another Supplemental Protest stating

that it has raised throughout its prior protests the Department’s failure and refusal to

provide any documents or other information to explain its evaluation and scoring of

the proposals. R.R. at 816a. United outlined the numerous documents that the

11

Section I-21 states that “[f]rom the issue date of this RFP until the Department selects

proposals for award, the Project Officer is the sole point of contact concerning this RFP. Any

violation of this condition may be cause for the Department to reject the offending Offeror’s

proposal.” R.R. at 203a.

12

62 Pa. C.S. §1711.1(k). Section 1711.1(k) states:

In the event a protest is filed timely under this section and until the

time has elapsed for the protestant to file an appeal with

Commonwealth Court, the purchasing agency shall not proceed

further with the solicitation or with the award of the contract unless

and until the head of the purchasing agency, after consultation with

the head of the using agency, makes a written determination that the

protest is clearly without merit or that award of the contract without

delay is necessary to protect substantial interests of the

Commonwealth.

12

Department eventually released due to its requests submitted to the Department

under the Right to Know Law (RTKL)13 and its prior protests. Id. at 816a-818a.

United argued that Section I-4 of the Reissued RFP required the selected offerors to

have a COA to operate as an HMO in Pennsylvania and DOH approval to operate in

the counties comprising the Zone or Zones for which they were selected by January

1, 2017. Id. at 819a. United asserted that the Department inappropriately waived

this technical requirement of the Reissued RFP with respect to PHW’s proposal that

was selected. Id. at 819a-820a. United also claimed that PHW’s failure to meet this

technical requirement in all Zones was magnified by the Department’s favoritism in

the technical scoring of the proposals. Id. at 820a-823a. United also asserted that

the Department’s Deputy Director erred in failing to compel disclosure of

information that was redacted in the documents released pursuant to its RTKL

request relating to the SDB/SB scoring. Id. at 823a-825a. United again renewed its

request for documents and for an evidentiary hearing. Id. at 825a. Geisinger,

Gateway, PHW, and OMAP filed responses to United’s bid protest outlining various

reasons why the protest should be denied, id. at 904a-949a, 952a-1021a, 1025a-

1032a, and United filed a reply, id. at 1035a-1051a.

On April 13, 2017, United filed another Supplemental Protest outlining

the information that it had received which demonstrates that PHW may have

subcontracted with SDB companies that are not proper SDBs under the Reissued

RFP, including a subsidiary of PHW. R.R. at 5236a-5243a. United requested all

records showing a connection between PHW and its affiliated subsidiary companies

listed as SDBs in PHW’s proposal and reiterated its request for an evidentiary

hearing. Id. at 5243a-5244a. Geisinger, Vista Health Plan Inc. (Vista), PHW, and

13

Act of February 14, 2008, P.L. 6, 65 P.S. §§67.101-67.3104.

13

OMAP filed responses to United’s bid protest outlining various reasons why the

protest should be denied, id. at 5327a-5328a, 5338a-5342a, 5345a-5352a, and

United filed a reply, id. at 5459a-5475.

On April 17, 2017, the Department’s Director requested affidavits from

the Department’s Deputy Secretary for OMAP and Centene’s Executive Vice

President and the Chief Business Development Officer regarding the December 19th

meeting to address: (1) the individuals present at the meeting; (2) the meeting’s

purpose; (3) the issues or subject matter discussed; and (4) the agreements or

conclusions reached during or as a result of the meeting. R.R. at 5325a-5326a. The

affidavits were submitted on April 24, 2017. Id. at 5330a-5337a.

On May 5, 2017, United submitted a response to the affidavits, noting

that they demonstrate that the Department violated the Procurement Code and the

Procurement Handbook14 in at least two ways: (1) by conducting unilateral proposal

14

Section 301(a) of the Procurement Code states that the “[f]ormulation of procurement

policy governing the procurement . . . of . . . services . . . for executive . . . agencies shall be the

responsibility of [DGS] as provided for in Subchapter B (relating to procurement policy).” 62 Pa.

C.S. §301(a). In turn, Section 311 of the Procurement Code states that DGS “may promulgate

regulations governing the procurement . . . of any and all . . . services . . . to be procured by

Commonwealth agencies,” and that DGS “shall consider and decide matter of policy within the

provisions of this part.” 62 Pa. C.S. §311. To this end, DGS promulgated the Procurement

Handbook to “provide[] a standard reference to established policy, procedures, and guidelines for

the procurement of . . . services . . . under the authority of the Commonwealth Procurement Code,”

and that “the policies, procedures, and guidelines of this handbook apply to the procurement of all

. . . services . . . in which an executive . . . agency is a participant.” Procurement Handbook Part

I, Chapter 1(A), (B). However, DGS explains that “[t]his handbook constitutes guidelines to . . .

the executive . . . agencies concerning the procurement of . . . services,” but it “is not and does not

purport to operate as a regulation and does not establish a binding norm nor have or purport to

have the force of law.” Id. at Part I, Chapter 1(D). As a result, “[a] procurement or resulting

contract shall not be invalidated for failing to strictly adhere to the provisions of this handbook

provided the procurement or contract otherwise complies with the [] Procurement Code.” Id. See

also id. at Part I, Chapter 1(C)(2) (“The policies, procedures, and guidelines of this handbook will

not apply to . . . [MA] provider agreements administered by [the Department] . . . .”).

14

negotiations with PHW and reaching an agreement with PHW regarding the awards;

and (2) by making a post-hoc change to the evaluation criteria for the required

provider networks. R.R. at 5354a-5360a. United also argued that the Department

must hold a hearing to address the issues raised in United’s protests and the

affidavits, and must produce all of the documents that United has requested,

including those relating to the December 19th meeting between the Department and

PHW, because the affidavits contradict the Department’s and PHW’s statements

regarding the December 19th meeting and raise numerous questions of material fact.

Id. at 5360a-5366a.

Ultimately, on June 5, 2017, the Department’s Director issued a Final

Agency Determination disposing of all of United’s bid protests. Final Agency

Determination at 1-34. With respect to United’s claims regarding the December 19th

meeting, the Director initially noted that “[i]n order to protest the solicitation or

award of a contract or agreement, a bidder or offeror must be ‘aggrieved’ in

Nevertheless, this Court has relied on the Procurement Handbook where the Procurement

Code does not specifically conflict with the relevant Procurement Handbook provision. See, e.g.,

Global Tel*Link Corporation v. Department of Corrections, 109 A.3d 809, 818-19 (Pa. Cmwlth.),

appeal denied, 121 A.3d 497 (Pa. 2015) (“GTL argues that Securus’s participation in its protest

and hearing was unlawful because the only proper parties to a protest are the protestant and the

contracting officer under Section 1711.1 of the Procurement Code, and the selected bidder may

not participate because it is not an enumerated party to a protest under the statute. However, the

Secretary noted that while the Procurement Code does not specifically provide for the participation

of other parties in a protest, Chapter 58(D) of the Procurement Handbook provides for the

participation of ‘all bidders and offerors who appear to have a substantial and reasonable prospect

of winning the award . . . .’ In sum, the Secretary did not err in permitting Securus to participate

in the instant protest or hearing because its participation is not prohibited by the Procurement Code

and is specifically provided for in the Procurement Handbook.”) (citations omitted). The

Procurement Handbook may be found on DGS’s website at

http://www.dgs.pa.gov/State%20Government/Materials-and-Services-Procurement/Procurement-

Handbook/Pages/default.aspx#part1 (last visited March 2, 2018).

15

connection with the solicitation or award. 62 Pa. C.S. §1711.1(a) . . . .” Id. at 26

(citations omitted). The Director determined that United failed to show that it has

been aggrieved by any contact or discussion between OMAP and PHW because

“[t]he non-selection of PHW in two of the five zones conferred a benefit or

advantage to United by rendering an additional ‘slot’ available for selection,” and

that “[t]he only offeror that may potentially have been aggrieved by the non-

selection of PHW in the Northeast and Northwest zones was PHW itself.” Id. As a

result, the Director concluded, “United was not aggrieved by not having a similar

meeting with OMAP.” Id.15

Alternatively, the Director determined that the December 19 th meeting

did not violate the automatic stay provision of Section 1711.1(k) of the Procurement

Code based on United’s bid protest of the November Selection Memorandum. Final

Agency Determination at 26. The Director explained that “[u]pon the rescission of

the original sections [in that Memorandum], the protest of those selections

necessarily became moot thereby eliminating any need for a written determination

of those protests” and that “United has not explained why a determination of a moot

protest is required.” Id. Accordingly, the Director concluded, “[e]ven assuming a

15

We find untenable the Director’s determination that United was not “aggrieved” by the

selection process. First, the Director only determined that United was not aggrieved with respect

to the two Zones from which PHW withdrew its proposal, not addressing United’s aggrievement

with respect to the three remaining Zones. Moreover, in considering a request for a preliminary

injunction with respect to the Original RFP, we held that the Department’s failure to comply with

the provisions of the Procurement Code, as alleged in United’s protest herein, constitutes

“irreparable injury.” See Aetna Better Health of Pennsylvania Inc., slip op. at 27 (“Failure to

comply with a statute is sufficiently injurious to constitute irreparable harm. Wyland v. West Shore

Sch. Dist., 52 A.3d 572, 583 (Pa. Cmwlth. 2012).”).

16

stay was in place, any violation thereof was a mere technical violation and does not

warrant cancelling the selections made under the Reissued RFP.” Id. at 27.

The Director also determined that the December 19th meeting did not

violate the provisions of Section 513(f) of the Procurement Code, requiring that all

offerors “be accorded fair and equal treatment with respect to any opportunity for

discussion and revision of proposals,” because Section I-17 of the Reissued RFP16

“permits the Department to seek oral or written clarifications of an offeror’s proposal

to ensure mutual understanding and responsiveness to the solicitation requirements.”

Final Agency Determination at 27. While Section I-17 “provides that the Project

Officer will initiate requests for clarification,” and “[w]hile OMAP acknowledges

that the December 19 meeting was initiated by Secretary Allen and not the Project

Officer, both OMAP and PHW describe the primary purpose of the meeting as an

inquiry into PHW’s readiness to operate on a statewide basis and to ensure an

adequate network of providers.” Id. (citations omitted).

The Director also found that the Department’s discussions did not

violate Section 513(g) of the Procurement Code requiring the Department to select

a “responsible offeror” for contract negotiations. Final Agency Determination at 28-

29. The Director explained that “[t]here is a distinction between earning a score high

enough in a zone to be a selected offeror under the Reissued RFP, and being able to

ramp up a business operation as complex and demanding as being an MCO in both

the [HealthChoices] and CHC programs.” Id. at 28. The Director found that “[t]here

is nothing improper in seeking assurance from an MCO that stands to go from zero

16

Section I-17 states “Offerors may be required to make an oral or written clarification of

their proposals to the Department to ensure thorough mutual understanding and Offeror

responsiveness to the solicitation requirements. The Project Officer will initiate requests for

clarification.” R.R. at 202a.

17

to five zones in not just the [HealthChoices] program, but the new CHC program, as

well,” and that “[e]ven if the result of the December 19 meeting was that PHW was

not selected in the Northeast zone or the Northwest zone, . . . such result is evidence

that OMAP exercised its judgment when evaluating which proposals were most

advantageous to the Commonwealth.” Id.

The Director also determined that United “has presented no evidence

that the Department offered any quid pro quo in exchange for PHW’s non-selection

in two zones or that PHW altered its proposal to withdraw from those zones,” and

that “[t]he December Selection Memorandum, which still lists PHW in the Northeast

and Northwest zones, demonstrates that PHW did not withdraw or modify its

proposals in those zones.” Final Agency Determination at 28 (citations and footnote

omitted). The Director explained that even if he were to accept United’s

characterization of the meeting, it was permitted under Section I-5 of the Reissued

RFP, which permits the Department, “‘in its sole discretion, [to] undertake

negotiations with Offerors whose proposals, in the judgement of the Department,

show them to be qualified, responsible, and capable of providing the services,’” and

Section 513(f) of the Procurement Code which “permits the Department to conduct

‘discussions and negotiations’ with responsible offerors as long as responsible

offerors are accorded ‘fair and equal treatment with respect to any opportunity for

discussion and revision of proposals.’” Id. (citation omitted).

The Director also determined that “the Department had discretion to

engage in negotiations with PHW” at the December 19th meeting and that it did not

violate Section 513(f) because “[f]air and equal treatment does not mean identical

treatment.” Final Agency Determination at 29 (citation omitted). The Director

noted that while “[i]n the December 19 meeting, a term of the agreement was

18

discussed, namely the auto-enrollment algorithm,” the meeting did not violate “fair

and equal treatment” under Section 513(f) “given that no changes or agreements

were made as a result of that discussion.” Id.

The Director rejected United’s reliance on Pepco Energy Services, Inc.

v. Department of General Services, 49 A.3d 488 (Pa. Cmwlth. 2012),17 stating that

“United’s contention that Pepco stands for the proposition that the contracting office

is precluded from conducting separate negotiations with individual offerors before

determining the offeror’s responsibility is incorrect. Rather, the language of the

Reissued RFP governs whether such discussions may take place.” Final Agency

Determination at 29. The Director explained that Section I-5 of the Reissued RFP

“provide[s] for the opportunity to negotiate with offerors,” and Section I-17 gave

OMAP “the ability to require offerors to make oral or written clarification of their

proposals to ensure mutual understanding and responsiveness to the solicitation

requirements.” Id. at 29-30 (citations omitted). The Director found that, “[g]iven

17

In Pepco, the bidder submitted a proposal to DGS in response to an RFP seeking a Design

Build Contractor to design, finance, construct, own, operate, and maintain a state-of-the-art

Combined Heating, Cooling, and Power Plant to provide electricity, steam, and hot and chilled

water to a proposed State Correctional Facility in Montgomery County. In the proposal, Pepco

stated that it was based on the understanding that it will have the opportunity to negotiate the

Energy Services Agreement, the Ground Lease, and the Surety Agreement prior to selection.

Ultimately, DGS rejected the proposal as non-responsive because the RFP provided that these

provisions were not negotiable and the proposal’s conditional language constituted an

impermissible alternative proposal. Pepco filed a bid protest that DGS denied and appealed to this

Court. On appeal, Pepco argued that DGS erred in rejecting the proposal as non-responsive

because its attempt to negotiate key terms and conditions was valid under Section 513(g) of the

Procurement Code. Ultimately, we rejected Pepco’s “contention that under Section 513(g),

following the submission of a proposal, every term of a contract becomes negotiable, including

provisions that the issuing agency already identified as non-negotiable in its [RFP].” Pepco, 49

A.3d at 493. We also concluded, “pursuant to the provisions of the RFP, [Pepco] had no right to

negotiate the terms of the Design Build Contract and the documents appended to it.” Id. at 494.

19

the broad discretion given to the contracting office under Section 513 and the broad

permissive language of the Reissued RFP, I find that the December 19 meeting did

not violate the tenets of Pepco.” Id. at 30.

Based on the foregoing, the Director concluded that “United has failed

to meet its burden of demonstrating that the Department’s determination to proceed

to negotiations with PHW in three zones was clearly erroneous, arbitrary, capricious,

or contrary to law” and that United’s claims in this regard “are without merit.” Final

Agency Determination at 30. Accordingly, the Director denied United’s bid

protests. Id. at 34.18

18

The Director also denied United’s requests for the production of documents or for an

evidentiary hearing, and rejected as without merit United’s claims that: (1) OMAP’s and the

Department’s misunderstanding of the standard of review, the burden of proof, and what

constitutes the record in a bid protest created a general lack of transparency that violates United’s

procedural due process rights; (2) the Department’s ongoing discussion with PHW violates the

automatic stay provisions of Section 1711.1(k) of the Procurement Code; (3) OMAP’s evaluation

and scoring of the technical submittals was arbitrary, capricious, an abuse of discretion, or contrary

to law; (4) the manner in which OMAP and DGS designed and scored the SDB/SB submittals was

arbitrary, capricious, an abuse of discretion, or contrary to law; and (5) the Department unfairly

favored PHW regarding building the required provider network. See Final Agency Determination

at 11-25, 32-33.

20

In this appeal,19, 20 United claims that the Director erred in denying its

bid protests because the December 19th meeting between the Department’s Deputy

Secretary for OMAP and Deputy Chief Counsel in the Department’s Office of

General Counsel, and Centene’s Chairman and CEO and Executive Vice President

and the Chief Business Development Officer is not authorized by the Reissued RFP

thereby violating the Procurement Code and the Procurement Handbook. We agree.

As noted above, Section 513(f) of the Procurement Code states that

“[a]s provided in the [RFP], discussions and negotiations may be conducted with

responsible offerors for the purpose of clarification and of obtaining [BAFOs,21]”

19

Section 1711.1(i) of the Procurement Code states that this Court “shall hear the appeal,

without a jury, on the record of determination certified by the purchasing agency,” and “[s]hall

affirm the determination of the purchasing agency unless it finds from the record that the

determination is arbitrary and capricious, an abuse of discretion or is contrary to law.” 62 Pa. C.S.

§1711.1(i). See also Section 561 of the Procurement Code, 62 Pa. C.S. §561 (“The determinations

required by the following sections are final and conclusive unless they are clearly erroneous,

arbitrary, capricious or contrary to law: . . . Section 513(a) and (g) (relating to competitive sealed

proposals).”). Purchasing agencies are bound by the express terms of their RFPs. American

Totalisator Co. v. Seligman, 414 A.2d 1037, 1041 (Pa. 1980). An agency abuses its discretion

when it fails to follow its own regulations and procedures. Peoples Natural Gas Company v.

Pennsylvania Public Utility Commission, 542 A.2d 606, 608 (Pa. Cmwlth. 1988).

20

PHW, Geisinger, Gateway, and Health Partners Plans have intervened in United’s

appeal. Additionally, Aetna Better Health of Pennsylvania, Inc. (Aetna) filed a petition for review

in our original jurisdiction, and both Aetna and Vista Health Plan, Inc. have appealed Department

orders denying their bid protests, with respect to the Reissued RFP. Their actions are lodged in

this Court at Nos. 274 M.D. 2017 and 820 C.D. 2017, respectively. By Stipulation and Order

approved by this Court on June 30, 2017, the Department agreed to stay all procurement activities

with regard to the Reissued RFP, including negotiations of any kind or readiness review activities,

until this Court’s disposition of Aetna’s petition for review. The Department also agreed that the

existing HealthChoices agreements will remain in effect and will not be terminated.

21

The Procurement Code does not define “discussions,” “negotiations,” or “clarification.”

As a result, the rules of statutory construction apply. City of Philadelphia v. City of Philadelphia

Tax Review Board ex rel. Keystone Health Plan East, Inc., 132 A.3d 946, 952 (Pa. 2015). ‘“When

statutory words or phrases are undefined by the statute, the Court construes the words according

to their plain meaning and common usage.’ A statute must be given its plain and obvious

21

and that “[r]esponsible offerors shall be accorded fair and equal treatment with

respect to any opportunity for discussion and revision of proposals.” 62 Pa. C.S.

§513(f). See also Part I, Chapter 6(B)(10)(e)(1)(f) of the Procurement Handbook

(“It is imperative that offerors selected to submit a [BAFO] be accorded fair and

equal treatment with respect to any opportunity for discussion and revision of

proposals.”). In turn, Section 513(g) provides that “[t]he responsible offeror whose

proposal is determined in writing to be the most advantageous to the purchasing

agency . . . shall be selected for contract negotiation.” 62 Pa. C.S. §513(g).

We disagree with the Director’s determination that Pepco has no

relevance in this matter. With respect to subsections (f) and (g) of Section 513 of

the Procurement Code, in Pepco this Court explained:

meaning.” Harmer v. Pennsylvania Board of Probation and Parole, 83 A.3d 293, 299 (Pa.

Cmwlth.), appeal denied, 97 A.3d 746 (Pa. 2014) (citations omitted). “[I]t is axiomatic that in

determining legislative intent, all sections of a statute must be read together and in conjunction

with each other, and construed with reference to the entire statute.” Hoffman Mining Company,

Inc. v. Zoning Hearing Board of Adams Township, 32 A.3d 587, 592 (Pa. 2011) (citation omitted).

“Where a court needs to define an undefined term, it may consult definitions in statutes, regulations

or the dictionary for guidance, although such definitions are not controlling.” Adams Outdoor

Advertising, LP v. Zoning Hearing Board of Smithfield Township, 909 A.2d 469, 483 (Pa. Cmwlth.

2006), appeal denied, 923 A.2d 1175 (Pa. 2007).

“Discussion” is defined as “consideration of a question in open usu. informal debate” and

“argument for the sake of arriving at truth or clearing up difficulties.” Webster’s Third New

International Dictionary 648 (1976). “Negotiation” is defined as “a business transaction” and the

“action or process of negotiating or of being negotiated.” Id. at 1514. In turn, “negotiate” is

defined as “to communicate or confer with another so as to arrive at the settlement of some matter;”

to “meet with another so as to arrive through discussion at some kind of agreement or compromise

about something.” Id. See also Black’s Law Dictionary 1150 (10th ed. 2009) (defining

“negotiation” as “[a] consensual bargaining process in which parties attempt to reach agreement

on a disputed or potentially disputed matter” and “[d]ealings conducted between two or more

parties for the purpose of reaching an understanding.”). Finally, “clarification” is defined as “the

act or process of clarifying.” Id. at 415. In turn, “clarify” is defined as “to explain clearly,” to

“make understandable,” or “to make less complex or less ambiguous.” Id.

22

Section 513(g) of the Code [] provides that an offeror

“shall be selected for contract negotiation[.”] Section

513(g) of the Code first requires that the offeror be a

“responsible offeror.” (Emphasis added). The Code

specifically defines “responsible offeror” as “[a]n offeror

that has submitted a responsive proposal and that

possesses the capability to fully perform the contract

requirements in all respects and the integrity and

reliability to assure good faith performance.” Section 103

of the Code, 62 Pa. C.S. §103 (emphasis added). The Code

further defines “responsive proposal” as “[a] proposal

which conforms in all material respects to the

requirements and criteria in the [RFP].” Id. (emphasis

added). By definition, therefore, if a proposal on its face

does not meet the requirements and criteria of a[n RFP],

then it is not considered a responsive proposal and the

offeror cannot be considered a responsible offeror. Thus,

read in concert with Section 103 of the Code, Section

513(g) of the Code establishes a framework whereby the

issuing agency must first determine if the offeror is a

responsible offeror, meaning that its proposal meets the

requirements and criteria of the [RFP]. Then, the

responsible offeror with the most advantageous proposal

is “selected for contract negotiation.” This interpretation

is further supported by the language of Section 513(g),

which provides that the “responsible offeror whose

proposal is determined . . . to be the most advantageous . .

. , taking into consideration . . . all evaluation factors,

shall be selected for contract negotiation.” . . .

[Additionally,] a[n RFP] may provide for contract

negotiations. In Language Line Services, Inc. v.

Department of General Services, 991 A.2d 383 (Pa.

Cmwlth.), appeal denied, [13 A.3d 481 (Pa. 2010)], we

noted that Section 513 of the Code allows an issuing

agency “the opportunity to enter into discussions and

negotiations with responsible offerors ‘[a]s provided in

the [RFP].’” Language Line Services, 991 A.2d at 390

(emphasis added). It also provides that “[r]esponsible

offerors shall be accorded fair and equal treatment.”

Section 513(f) of the Code. In Language Line Services,

when considering whether the issuing agency had violated

the Code and fundamental principles governing public

23

contracting when it requested [BAFOs] from only certain

bidders, this Court looked to the Code and the language of

the [RFP] at issue. The language in the [RFP] in that case

“specifically stated and put offerors on notice that [the

issuing agency] was reserving the right to limit BAFO

discussions to responsible offerors whose proposals were

considered ‘reasonably susceptible of being selected for

award.’” Id. . . .

Based upon the language of Section 513(g) of the

Code and our decision in Stanton–Negley [Drug Company

v. Department of Public Welfare, 943 A.2d 377 (Pa.

Cmwlth.), appeal denied, 959 A.2d 321 (Pa. 2008)], it is

apparent that Section 513, in itself, does not entitle an

offeror to engage in contract negotiations before the

issuing agency makes a determination regarding whether

the offeror is a responsible offeror (i.e., whether the

offeror submitted a responsive or non-responsive

proposal) or before the issuing agency makes a

determination as to which proposal is most advantageous.

An agency, however, through its [RFP], may provide

offerors with an opportunity to negotiate or provide

revised proposals throughout the [RFP] process. See

Stanton–Negley.

Pepco, 49 A.3d at 493-94.

With respect to the December 19th meeting in this case, the

Department’s Director found as fact that the “Deputy Secretary [] had requested the

December 19 meeting with PHW to discuss PHW’s readiness to operate as an MCO

on a statewide basis,” and that she “was concerned with PHW’s operational

readiness because of ‘the abbreviated time frame for the implementation of the new

[] HealthChoices agreements, the significant amount of resources necessary for a

successful Readiness Review, the planned implementation of CHC, and PHW

coming into the HealthChoices Program as a new plan.’” Final Agency

Determination at 9. The Director also found that “potential contracting issues were

discussed, that PHW did not modify or withdraw its proposal in any zone, and that

24

if selected to proceed to negotiations, PHW would ‘want to understand and discuss’

the Department’s auto-assignment algorithm, but no specific changes to the auto-

assignment algorithm were agreed to.” Id. at 10.

Whether the December 19th meeting between the Department’s Deputy

Secretary and Deputy Chief Counsel was a “discussion” or “negotiation” with PHW

“for the purpose of clarification and of obtaining a [BAFO],” or merely to assist in

determining whether PHW was a “responsible” bidder, within the purview of

Section 513 of the Procurement Code, it is clear that the meeting violated the

provisions of the Procurement Code, the RFP and the Procurement Handbook. It is

true that Section I-5 of the Reissued RFP states, “[t]he Department, in its sole

discretion, may undertake negotiations with Offerors whose proposals, in the

judgment of the Department, show them to be qualified, responsible, and capable of

providing the services.” R.R. at 195a. See also Section I-26, id. at 205a (“The

Department will notify the selected Offerors in writing of their selection for

negotiations after determining those proposals that are most advantageous and in the

best interests of MA beneficiaries and the Commonwealth.”); Section III-3, id. at

226a (“The Department will notify in writing of its selection for negotiations the

responsible Offerors whose proposals are determined to be the most advantageous

and in the best interests of MA beneficiaries and the Commonwealth as determined

by the Department after taking into consideration all evaluation and selection

factors.”).

However, Section I-2 of the Reissued RFP states that, prior to such a

determination and written notification, the Department’s Bureau is the Issuing

Office and that “[t]he sole point of contact in the Commonwealth for this RFP shall

be . . . the Project Officer for this RFP.” R.R. at 192a. See also Section I-21, id. at

25

203a (“From the issue date of this RFP until the Department[] selects proposals for

award[,] the Project Officer is the sole point of contact concerning this RFP.”).

Likewise, Part I, Chapter 6(B)(2)(q) of the Procurement Handbook provides that

“[t]he Issuing Office . . . [c]onducts pre-selection negotiations, if desired, consistent

with the terms of the RFP.” Finally, Part I, Chapter 6(B)(10)(e)(2)(c) of the

Procurement Handbook states that “[t]he issuing office, or the evaluation committee

chairperson or designee, will conduct the pre-selection negotiations.”

With respect to the clarification of PHW’s proposal, Section I-17 of the

Reissued RFP specifically provides that “Offerors may be required to make an oral

or written clarification of their proposals to the Department to ensure thorough

mutual understanding and Offeror responsiveness to the solicitation requirements.

The Project Officer will initiate requests for clarification.” R.R. at 202a (emphasis

added). See also Section I-9, id. at 197a (“If an Offeror has any questions regarding

this RFP, the Offeror must submit the questions by email . . . to the Project Officer

named in Part I, Section I-2 of the RFP.”).

Likewise, Part I, Chapter 6(B)(2)(m) of the Procurement Handbook

states that “[t]he Issuing Office: . . . [r]equests clarification of proposals from

offerors as determined necessary to ensure responsiveness to the solicitation and

thorough understanding of the proposals.” Additionally, Part I, Chapter

6(B)(3)(b)(2) of the Procurement Handbook states that “[i]f clarification of a

proposal is needed, [the Evaluation Committee] communicates the need for

clarification to the issuing office and assists the issuing office in communicating

with those offerors whose proposals need clarification.” See also Part I, Chapter

6(B)(10)(c)(1) and (2) (“The evaluation committee may ask the issuing office to seek

clarification from an offeror to assure full understanding of and responsiveness to

26

the RFP. . . . The issuing officer, on behalf of the evaluation committee, shall make

all contacts with the offeror in writing.”).

Finally, with respect to an inquiry into, or a determination of, whether

PHW can adequately perform under the contract or is a “responsible offeror” under

the Reissued RFP, Section I-23 states:

I-23. Issuing Office Participation.

***

Prior to the enrollment of MA consumers in an MCO, the

Department will conduct a readiness review. MA

Consumers will not be able to enroll in a selected MCO

and the Department will not enter into an agreement with

the selected [MCO] until the Department determines that

the MCO has satisfied the readiness review requirements.

. . . At its discretion, the Department may commence

monitoring before the effective or operational dates of the

agreement, and before the formal Readiness Review

period.

R.R. at 203a (emphasis added). See also Section III-5, id. at 228a, 229a (“To be

responsible, an offeror must submit a responsive proposal and possess the capability

to fully perform the agreement requirements in all respects and the integrity and

reliability to assure good faith performance of the agreement. . . . [T]he Issuing

Office will award an agreement only to those Offerors determined to be responsible

in accordance with the most current version of Commonwealth Management

Directive 215.9, Contractor Responsibility Program [(CRP).22]”).

22

Section 321(6) of the Procurement Code states that DGS shall “[p]articipate in the

management and maintenance of a [CRP] in coordination with the Office of the Budget and other

agencies as may be directed by the Governor.” 62 Pa. C.S. §321(6). See also Section 327(b) of

the Procurement Code, 62 Pa. C.S. §327(b) (“The Office of the Budget shall participate in the

management and maintenance of a [CRP] in coordination with [DGS] and other agencies as may

27

Likewise, Part I, Chapter 6(B)(2)(o) of the Procurement Handbook

states that “[t]he Issuing Office: . . . [m]akes a determination of offerors’

responsibility in accordance with Management Directive 215.9 Amended and Part I,

Chapter 14 of this handbook.”23 See also Part I, Chapter 6(B)(10)(e)(1)(b) of the

Procurement Handbook (“In order for an offeror to participate in the [BAFO]

process, the issuing office must determine that the submitted and gathered financial

and other information of the offeror demonstrates that the offeror possesses the

financial and technical capability, experience and qualifications to assure good faith

performance of the contract.”).

Based on the foregoing, it is clear that the Director erred in denying

United’s bid protests. The December 19th meeting between the Department’s

Deputy Secretary for OMAP and Deputy Chief Counsel in the Department’s Office

of General Counsel, and Centene’s Chairman and CEO and Executive Vice

President and the Chief Business Development Officer, which occurred after the bids

had been opened, but before PHW was found to be a “responsible offeror” and before

its proposal was determined to be responsive or the most advantageous, was not

be directed by the Governor.”). Management Directive 215.9 Amended from the Governor’s

Office establishes the policy, responsibilities, and procedures for the operation of the CRP.

23

Part I, Chapter 14(C)(1) of the Procurement Handbook provides:

Since the [Procurement] Code requires award to a “responsible”

bidder or offeror, purchasing agencies are explicitly required to

make an affirmative determination of a bidder or offeror’s

responsibility prior to award. Further, purchasing agencies are

required to make a responsibility determination prior to requesting

a [BAFO] when the [RFP] method of procurement is utilized.

Determining responsibility is an affirmative duty, and the

purchasing agency may not presume that all bidders or offerors are

responsible.

28

authorized by the Reissued RFP thereby violating the Procurement Code and the

Procurement Handbook. See, e.g., Pepco, 49 A.3d at 495 (“Based upon the

numerous provisions of the RFP summarized above, we must conclude that the

provisions of the RFP did not entitle Petitioner to engage in contract negotiations

before the Department made a determination regarding whether Petitioner was a

responsible offeror who submitted a responsive proposal or before the Department

made a determination as to which proposal was most advantageous.”) (emphasis in

original).24 As a result, the Department’s order denying United’s bid protests will

be reversed. See American Totalisator Co., 414 A.2d at 1041 (“When competitive

bidding is used and the procedures followed emasculate the benefits of such bidding,

we believe judicial intervention is proper.”); Hanisco v. Township of Warminster,

41 A.3d 116, 123 (Pa. Cmwlth. 2012) (“A deviation from competitive bidding will

not be countenanced even where there is no evidence of fraud or favoritism.”). See

also Section 1711.1(j) of the Procurement Code, 62 Pa. C.S. §1711.1(j) (“[I]f the

court determines that the solicitation or award of a contract is contrary to law, then

24

See also Stapleton v. Berks County, 593 A.2d 1323, 1331 (Pa. Cmwlth. 1991) (“We

recognize that the procurement process for a complex contract such as the one negotiated in this

case will necessitate some procedures which are not the norm. For this reason, we do not find it

objectionable that the county did not require bid or performance bonds in this case. . . . The events

which transpired after the bids were opened are another matter. Private meetings and negotiations

with some bidders to the exclusion of others before the contract is awarded is precisely the sort of

favoritism and unfair advantage that Harris[ v. Philadelphia, 129 A. 460 (Pa. 1925)] and its

progeny disdained.”); Conduit and Foundation Corp. v. City of Philadelphia, 401 A.2d 376, 380

(Pa. Cmwlth. 1979) (“[W]e believe that the case falls, by analogy, under the line of cases raising

the issue, not as to the city’s discretion, but as to whether a bidder had a competitive advantage in

preparing his bid because of the city’s incomplete or misleading bid specifications or the city’s

having negotiated after the formal bid-opening.”) (citations omitted).

29

the remedy the court shall order is limited to canceling the solicitation or award and

declaring void any resulting contract.”).25

Accordingly, the Department’s order is reversed.

MICHAEL H. WOJCIK, Judge

Judge Fizzano Cannon did not participate in the decision of this case.

25

Based on our disposition of United’s claim with respect to the Department’s violation of

the Reissued RFP, the Procurement Code, and the Procurement Handbook, we will not address the

remaining claims in this appeal. See, e.g., Peoples Natural Gas Co. v. Pennsylvania Public Utility

Commission, 529 A.2d 1176, 1178 (Pa. Cmwlth. 1987) (“As the Commission points out, our

Supreme Court has held with finality that the original jurisdiction of this Court is limited in matters

involving Commonwealth agencies to those actions not within our appellate jurisdiction. We

conclude that Peoples’ Petition clearly sets forth the matter for our appellate review; therefore, we

must sustain the demurrer. [Our ruling with respect to the demurrer makes it unnecessary for us

to rule upon the Commission’s other objections.]”) (citation omitted).

30

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

UnitedHealthcare of :

Pennsylvania, Inc., :

:

Petitioner :

:

v. : No. 790 C.D. 2017

:

Department of Human Services, :

:

Respondent :

ORDER

AND NOW, this 10th day of April, 2018, the order of the Department

of Human Services dated June 5, 2017, denying the bid protests of UnitedHealthcare

of Pennsylvania, Inc. with respect to the reissued Request for Proposal No. 06-15 is

REVERSED.

__________________________________

MICHAEL H. WOJCIK, Judge