Aetna Better Health of PA, Inc. v. DHS

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Aetna Better Health :

of Pennsylvania, Inc., :

:

Petitioner :

:

v. : No. 274 M.D. 2017

: Argued: October 18, 2017

Commonwealth of Pennsylvania, :

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 11, 2018

Aetna Better Health of Pennsylvania, Inc. (Aetna) petitions for review

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

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

bid protests challenging the Department’s decision not to select Aetna 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 Also before the Court is

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:

2

Aetna’s request for declaratory, injunctive, and mandamus relief filed in our original

jurisdiction and the preliminary objections of the Department, Pennsylvania Health

& Wellness, Inc. (PHW), Geisinger Health Plan (Geisinger), and Health Partners

Plans (HPP) filed in response thereto. We reverse the Department’s order, and

dismiss as moot Aetna’s petition filed in our original jurisdiction and the preliminary

objections.

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, Aetna

has contracted with the Department to provide health benefits and administrative

services to more than 200,000 enrollees in all five of these 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

For categorically needy or medically needy persons

eligible for medical assistance, prepaid capitation

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).

3

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.

Aetna submitted a proposal to the Department to provide services in all

of the five Zones. On April 27, 2016, the Department notified Aetna that it had only

accepted Aetna’s proposal for the Northwest Zone and rejected the proposals for the

other four Zones. The Department announced that in addition to selecting Aetna for

the Northwest Zone, the Department selected three other MCOs for that Zone, four

other MCOs for the Northeast Zone, and five MCOs for each of the Southeast,

Lehigh-Capital, and Southwest Zones. On May 4, 2016, Aetna filed a bid protest

and asked for a debriefing conference and a stay of the procurement.

At the debriefing conference on May 9, 2016, the Department told

Aetna that Aetna’s total point score ranked in the top five in the Southeast, Lehigh

Capital, and Southwest Zones, and in the top four in the Northeast Zone.

Nevertheless, the Department stated that it “bumped” Aetna in favor of lower ranked

offerors in those Zones due to a “Heritage Factor” involving offerors who had at

least 25% of the market share in the relevant Zone, regardless of how they scored

under the Original RFP. The Department indicated that it used the Heritage Factor

to avoid disruption of services to HealthChoices enrollees, but the Department did

not disclose in the Original RFP that it would be applying the Heritage Factor in

choosing MCOs for HealthChoices. In response to Aetna’s bid protest, on May 25,

2016, the Department informed Aetna that the bid protest procedures under the

Commonwealth Procurement Code (Procurement Code)4 do not apply to the

4

62 Pa. C.S. §§101-2311. Specifically, Section 1711.1 of the Procurement Code provides,

in relevant part:

4

Original RFP because it was not a procurement within the purview of that statute

and that it would not issue a stay.5

As a result, Aetna filed a petition for review: (1) in this Court’s original

jurisdiction seeking declaratory judgment and a writ of mandamus; or, alternatively

(2) in our appellate jurisdiction from the Department’s determination that the

Procurement Code did not apply and Aetna could not challenge the Department’s

final determination through a protest proceeding. In the petition, Aetna asserted that

the Department’s application of the Heritage Factor was a “secret criterion” that

favored certain offerors and that its refusal to consider the protest and stay under the

(a) Right to protest.—A bidder or offeror, a prospective bidder or

offeror or a prospective contractor that is 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.

***

(l) Applicability.—This section shall be the exclusive procedure for

protesting a solicitation or award of a contract by a bidder or offeror,

a prospective bidder or offeror, or a prospective contractor that is

aggrieved in connection with the solicitation or award of a contract.

The provisions of 2 Pa. C.S. (relating to administrative law and

procedure) shall not apply to this section.

62 Pa. C.S. §1711.1(a), (l).

5

See Section 1711.1(k) of the Procurement Code, 62 Pa. C.S. §1711.1(k) (“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.”).

5

Procurement Code was contrary to law and to its prior practices. Aetna argued that

the Department’s clear violation of law required declaratory and injunctive relief and

an immediate stay of the Department’s decision with respect to the Original RFP and

that it would suffer irreparable harm in the absence of such relief. As a result, Aetna

also filed an application for a preliminary injunction.

In its answer to the application, the Department again asserted that the

Procurement Code did not apply to the Original RFP pursuant to Section 102(e) and

(f), 62 Pa. C.S. §102(e), (f), which exclude “[MA] provider agreements” and grants

from its provisions. However, in considering whether Aetna was entitled to

injunctive relief, we determined that our opinion in Stanton-Negley Drug Company

v. Department of Public Welfare, 927 A.2d 671 (Pa. Cmwlth. 2007) controlled and

estopped the Department from relying on this argument.6 See Aetna Better Health

6

In that case, the Stanton-Negley Drug Company (Stanton) participated in the MA

program, and filed a petition in this Court’s original jurisdiction challenging a Department RFP

seeking preferred providers for prescription medications known as “specialty drugs” to MA

recipients. Stanton argued that the RFP precluded it from participating in the procurement and

would harm its ability to continue providing specialty drugs to its MA recipients and asked this

Court to declare the procurement and/or the RFP unlawful and enjoin the implementation of the

program. The Department filed preliminary objections to the petition, arguing that this Court

lacked original jurisdiction because Stanton’s exclusive remedy was filing a bid protest pursuant

to Section 1711.1 of the Procurement Code. We agreed with the Department that this Court lacked

original jurisdiction based on the protest provisions of the Procurement Code, explaining:

Section 1711.1 of the Procurement Code provides a general right of

protest to “[a]n actual or prospective bidder, offeror or contractor

who is aggrieved in connection with the solicitation or award of a

contract.” The aggrieved party may protest to the head of the

purchasing agency in writing. Section 1711.1(b) of the Procurement

Code. Section 1711.1(l) provides that Section 1711.1 “shall be the

exclusive procedure for protesting a solicitation or award of a

contract by a bidder or offeror[,] a prospective bidder or offeror, or

a prospective contractor that is aggrieved in connection with the

solicitation or award of a contract.” Thus, as this Court has

6

of Pennsylvania Inc., slip op. at 27 (“In short, this Court is bound by Stanton-Negley,

and [the Department] is judicially estopped from challenging that decision. It is

undisputed that [the Department] is refusing to accept Aetna’s bid protest under the

Procurement Code. ‘Failure to comply with a statute is sufficiently injurious to

constitute irreparable harm.’”) (citation omitted).

Following a hearing, and review of the elements necessary to grant the

requested injunctive relief,7 this Court granted Aetna’s request. We noted that “[a]t

this early stage in the proceedings, [we have] real concerns about the credibility of

the procurement process used for [the Original RFP]” because “despite Aetna’s

objection to [the Department]’s unprecedented use of a secret evaluation criterion

through Aetna’s bid protest and the dual jurisdiction action pending before the Court

in this matter, [the Department] plans to move forward with the procurement.” Aetna

Better Health of Pennsylvania Inc., slip op. at 31.

Accordingly, on July 19, 2016, this Court issued the following order:

previously held, the Procurement Code sets forth the mandatory and

exclusive remedy for disappointed bidders, offerors, prospective

bidders or offerors, and prospective contractors, to challenge the

solicitation or award of a contract.

Stanton-Negley Drug Company, 927 A.2d at 673 (footnote omitted).

7

In order to obtain a preliminary injunction, Aetna was required to demonstrate: (1) an

injunction is necessary to prevent immediate and irreparable harm that cannot be adequately

compensated by damages; (2) greater injury would result from refusing an injunction than from

granting it; (3) a preliminary injunction will properly restore the parties to their status immediately

prior to the alleged wrongful conduct; (4) the activity to be restrained is actionable, its right to

relief is clear, and the wrong is manifest; (5) the injunction is reasonably suited to abate the

offending activity; and (6) a preliminary injunction will not adversely affect the public interest.

Aetna Better Health of Pennsylvania Inc., slip op. at 19-20 (quoting Summit Towne Center, Inc. v.

Shoe Show of Rocky Mount, Inc., 828 A.2d 995, 1001 (Pa. 2003)).

7

[Aetna]’s emergency application for special relief in the

nature of a special injunction and preliminary injunction

[(Application)] is GRANTED in part and DENIED in part.

Aetna’s [Application] is GRANTED to the extent that it

seeks to enjoin the execution and implementation of any

agreement resulting from [the Original RFP], pending

further order from the Court. Should [the Department]

elect to hear Aetna’s bid protest in the meantime, [the

Department] should use a hearing officer who is not

employed by [the Department] and who does not have any

connection to or knowledge of the solicitation,

consideration, or award under [the Original RFP]. In all

other respects, the application will be DENIED.

Aetna Better Health of Pennsylvania Inc., slip op. at 33.

In lieu of complying with the foregoing order of this Court, two days

later, on July 21, 2016, the Department issued the Reissued RFP again seeking

MCOs to provide HealthChoices services to MA beneficiaries in the five Zones. 8

The Reissued RFP provides for agreements with a three-year term with an option for

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

Operations, Division of Procurement and Contract Management (Bureau) is 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 50a.

8

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

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)).”).

8

Initially, the Reissued RFP retained consideration of the Heritage

Factor under the RFP and did not provide for a bid protest mechanism; however,

following a protest by Aetna, the Department issued Addendum 1 to the Reissued

RFP which removed the Heritage Factor from consideration and 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 93a.

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);9 (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 84a-86a. In order to be

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

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 86a.

9

Of the 8,000 points, the Department assigned 800 points for the Personnel component;

200 points for the Prior Experience component; and 7,000 points for the Soundness of Approach

component. R.R. at 295a-296a. In turn, the 7,000 total points of the Soundness of Approach

component were allocated as follows: (1) Planned Approach – 150 points; (2) Member

Management – 550 points; (3) Utilization Management – 150 points; (4) Care Management – 600

points; (5) Special Needs – 300 points; (6) Coordination of Care – 400 points; (7) Quality and

Performance Management – 2,325 points; (8) Provider Network Composition and Network

Management – 725 points; (9) Value Based Purchasing – 1,200 points; (10) Pharmacy/Outpatient

Drugs – 250 points; and (11) Management Information Systems – 350 points. Id. at 296a.

9

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 53a.10 However, with respect to “Discussions for

Clarification,” the Reissued RFP states 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.” Id. at 59a-60a.

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 61a. 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 63a.

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. Aetna

10

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

offers 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).

10

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

Zones. Likewise, PHW sought to provide services in all five Zones. On November

18, 2016, the Project Officer notified Aetna that its “proposals were not among those

proposals determined to be the most advantageous to the Commonwealth” and Aetna

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

called Aetna and stated that they would rescind the November Selection

Memorandum due to the error in scoring and the Department sent Aetna a letter the

following day confirming the rescission. As a result, the Department did not issue a

written determination of Aetna’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 1000a-1006a. Deputy

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

readiness to operate as an MCO on a statewide basis. Id. at 1001a-1002a. Allen was

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

implementation of the HealthChoices Program agreements; the significant amount

11

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

implementation of Community HealthChoices Program (CHC), 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 PHW was a

new plan coming into the HealthChoices Program. Id. at 1002a.

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 to conduct business in Pennsylvania, and its approval to operate in specific

counties. R.R. at 1005a. Potential contracting issues in various Zones were

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 96a-105a. 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 97a. Based on the Department’s scoring, Aetna was not selected for

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

12

in the Southwest Zone; seventh in the Lehigh Capital Zone; seventh in the Northeast

Zone; and sixth in the Northwest Zone. Id. at 100a-102a.

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 103a. This determination was based on “discussions between [PHW] and

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

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

On December 29, 2016, Aetna filed a bid protest challenging the

December Selection Memorandum. R.R. at 10a-15a Aetna outlined the procedural

history of the issuance and withdrawal of the Original RFP; this Court’s opinion and

order granting Aetna relief in that matter; the Department’s withdrawal of the

Original RFP and issuance of the Reissued RFP; the Department’s issuance of the

November Selection Memorandum; Aetna’s timely protest of that Memorandum;

the Department’s rescission of that Memorandum; and the Department’s issuance of

the December Selection Memorandum in which Aetna was not selected for

negotiation in any of the Zones. Id.

Aetna asserted that its proposal for all of the Zones “fully and

completely met the requirements of [the Reissued RFP] and demonstrated that Aetna

is fully qualified, responsible and capable of providing physical health services in

every one of the five Zones that encompass the HealthChoices program in the

Commonwealth.” R.R. at 10a. Aetna claimed that “[t]he Department’s latest

decision to not award Aetna a contract for [the Reissued RFP] is part of an ongoing

arbitrary and non-transparent procurement process that began after the Department

issued [the Original RFP],” and that “[t]he Department has yet to provide details

13

concerning the scoring results for [the Reissued RFP], the evaluation of bids for that

process, or the reasons why Aetna was not selected.” Id. at 10a, 14a. Ultimately,

Aetna asked that, “[i]n light of the Department’s recent actions in denying Aetna a

bid protest remedy for [the Original RFP] and its handling of Aetna’s initial protest

for [the Reissued RFP],” the Department stay “the negotiation and award of

contracts” under the Reissued RFP. Id. at 14a. Geisinger, Gateway Health Plan,

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

various reasons why the protest should be denied. Id. at 28a-40a.

On January 20, 2017, the Department held a debriefing conference

regarding Aetna’s bid protest. R.R. at 295a-303a. On January 27, 2017, Aetna filed

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

Department’s December 19th meeting with PHW at that January 20th debriefing

conference, and argued that the December 19th meeting violated the stay provision

of Section 1711.1(k) of the Procurement Code and the “fair and equal treatment”

provision of Section 513(f). Id. at 170a, 174a-175a, 176a-177a.11 Aetna also alleged

that at the debriefing conference it first learned of the technical scoring criteria and

the formula used to compute the scores, which was not disclosed in the Reissued

RFP and which benefitted the same MCOs that the Department improperly favored

by applying the Heritage Factor in the Original RFP. Id. at 170a, 171a-174a. Aetna

11

In this regard, Aetna also alleged that the project manager of the Original RFP was “one

of the architects” of the prohibited Heritage Factor in that RFP and was involved in the creation of

the Reissued RFP and the evaluation and scoring of the proposals submitted in response to the

Reissued RFP. R.R. at 175a-176a.

14

also argued that the Department violated Section 513(g) of the Procurement Code,12

requiring the selection of “responsible offerors,” by failing to evaluate the SDBs

included in the proposals and by accepting PHW’s SDB commitment and calculation

because they were unrealistic. Id. at 178a-179a. Aetna also requested discovery to

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

bid protest pursuant to Section 1711.1(e)13 in order to protect its procedural due

process rights. Id. at 180a.

Finally, Aetna asked the Department to grant the following relief: (1)

stay the procurement process related to the Reissued RFP until its bid protest is

resolved; (2) appoint a hearing officer that is not employed by the Department and

who does not have any connection with or knowledge of the Original RFP or the

Reissued RFP; (3) direct the Department to produce all documents and information

needed by Aetna to prepare for and conduct a proper hearing; (4) conduct a hearing

to obtain all facts and consider all evidence necessary to fairly evaluate Aetna’s

protest; and (5) direct that Aetna be selected for contract negotiations in all five

Zones or, in the alternative, direct that Aetna’s current HealthChoices contracts

remain in effect. R.R. at 180a. OMAP, PHW, Geisinger, and Gateway filed

responses to Aetna’s Supplemental Protest. Id. at 256a-260a, 261a-263a, 264a-270a,

271a-293a.

12

62 Pa. C.S. §513(g). Section 513(g) states that “[t]he 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.”

13

62 Pa. C.S. §1711.1(e). Section 1711.1(e) states, in relevant part, that “[t]he 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.”

15

On February 24, 2017, Aetna filed a reply to OMAP’s response that

included another Supplemental Protest and incorporated its prior protests. R.R. at

450a-477a. In the Supplemental Protest, Aetna raised a new protest ground, arguing

that the Department violated Sections 513(f) and 1711.1(k) by negotiating with

PHW regarding the auto-assignment algorithm that the Department would use as

evidenced by public statements made by PHW on January 10, 2017, and February

7, 2017, and requested the same relief as in the prior Supplemental Protest. Id.

OMAP, PHW, Geisinger, and Gateway filed responses to this Supplemental Protest

as well, id. at 904a-906a, 908a-911a, 954a-959a, 978a-979a, and Aetna replied to

the responses.

On February 27, 2017, the Department’s Director of the Bureau of

Administrative Services (Department’s Director), acting as the Department

Secretary’s designee to review and dispose of Aetna’s bid protests, asked OMAP to

provide redacted SDB/SB Letters of Intent submitted by PHW for the Southeast,

Southwest, and Lehigh/Capital Zones. On March 9, 2017, OMAP submitted the

requested information. R.R. at 912a-951a. Aetna did not file a response although

invited to do so by the Department’s Director. Id. at 952a-953a.

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 993a-994a. The

affidavits were submitted on April 24, 2017. Id. at 1000a-1006a.

16

On April 25, 2017, Aetna filed another Supplemental Protest,

incorporating its prior protest and a protest filed by UnitedHealthcare of

Pennsylvania, Inc. (United), which alleged that United obtained information

demonstrating that PHW may have subcontracted with SDB companies that are not

proper SDBs under the Reissued RFP. R.R. at 1015a-1017a. Aetna requested the

same relief as that in the prior Supplemental Protests. Id. at 1017a.

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

that the parties that were present at the meeting that have made public statements

about the meeting did not submit affidavits. R.R. at 1144a. Aetna also outlined

material inconsistencies between the affidavits indicating that some information

regarding the scoring results was discussed, and regarding the reasons why PHW

was not selected in the Northeast and Northwest Zones. Id. at 1144a-1145a. As a

result, Aetna argued that the Department must hold a hearing to address the issues

raised in Aetna’s protests and the affidavits, and must produce all of the documents

that Aetna has requested including those relating to the December 19 th meeting

between the Department and PHW. Id. at 1145a-1147a. Aetna claimed that the

affidavit of the Department’s Deputy Secretary for OMAP confirms that the meeting

and the side-deal between the Department and PHW violated the Procurement Code

and the Procurement Handbook.14 Id. at 1147a-1148a.

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,”

17

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

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

Determination at 1-24. With respect to Aetna’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

connection with the solicitation or award. 62 Pa. C.S. §1711.1(a) . . . .” Id. at 16

(citations omitted). The Director determined that “Aetna has failed to show or

suggest that it has been ‘aggrieved’ by any contact or discussion between OMAP

and PHW,” that “[t]he non-selection of PHW in two of the five zones conferred a

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] . . . .”).

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).

18

benefit or advantage to Aetna 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 that “Aetna was not aggrieved by not having

a similar meeting with OMAP.” Id.

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 Aetna’s bid protest of the November Selection Memorandum. Final

Agency Determination at 17. 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 “Aetna has not explained why a determination of a moot

protest is required, particularly where, as here, the selections that were protested

were found to be erroneous and corrected.” Id. Accordingly, the Director

concluded, “the Department did not violate the automatic stay by engaging in

discussions or negotiations with PHW because no such stay was in place.” Id. The

Director found that “[e]ven assuming a 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 18.

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 “[f]air and equal treatment does not

mean identical treatment.” Final Agency Determination at 18 (citation omitted).

The Director noted that while “a term of the agreement was discussed [at the

19

December 19th meeting], namely the auto-enrollment algorithm,” the meeting did

not violate Section 513(f) “given that no changes or agreements were made as a

result of that discussion.” Id.

Finally, in this regard, the Director found that the Department’s

selection in three of the five Zones 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 18-19. The Director noted that in the

affidavits, both OMAP and PHW assert that the primary purpose of the December

19th meeting was “to inquire into PHW’s readiness to operate on a statewide basis

and to ensure an adequate network of providers for implementation purposes.” Id.

at 18. 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[15] programs.” Id. at 19. The Director found

that “[t]here is nothing improper in seeking assurances from an MCO that stands to

go from zero to five zones in not just the [HealthChoices] program, but the new

[Community HealthChoices] 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.

Further, the Director determined that Aetna “has presented no evidence

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

15

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 8-9 n.6.

20

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 19 (citations and footnote

omitted). Based on the foregoing, the Director concluded that “Aetna 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 Aetna’s claims in this regard “are without merit.” Id.16

Accordingly, the Director denied Aetna’s bid protests. Id. at 24.

16

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

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

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

to law; (2) 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; (3) the Department’s ongoing

discussion with PHW violates the automatic stay provisions of Section 1711.1(k) of the

Procurement Code; and (4) OMAP acted in a manner that displayed favoritism to certain offerors.

See Final Agency Determination at 11-16, 19-23.

21

In this appeal,17, 18

Aetna 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,19]”

17

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).

18

PHW, United, Geisinger, Gateway, and HPP have intervened in Aetna’s appeal.

Additionally, both United and Vista Health Plan, Inc., another MCO, filed bid protests that were

ultimately denied by the Department. Their appeals of the Department’s Final Agency

Determinations are lodged in this Court at Nos. 790 C.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.

19

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

22

and that “[r]esponsible offers 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).

In Pepco Energy Services, Inc. v. Department of General Services, 49

A.3d 488 (Pa. Cmwlth. 2012), 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

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.

23

Plant to provide electricity, steam, 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.

With respect to subsections (f) and (g) of Section 513 of the

Procurement Code, this Court explained:

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

24

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

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, 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.

25

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

Thus, 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 “that, 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.

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 18. The Director also found that “potential contracting issues were

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

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 19.

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

26

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

true that Section I-5 of the Reissued RFP states 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 53a. See also Section I-26, id. at 63a (“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

84a (“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 “[t]he sole point of contact in the Commonwealth for this RFP shall be . . .

the Project Officer for this RFP.” R.R. at 50a. See also Section I-21, id. at 61a

(“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.”

27

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 60a (emphasis

added). See also Section I-9, id. at 55a (“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

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.

***

28

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 61a (emphasis added). See also Section III-5, id. at 86a, 87a (“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).20]”).

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.”21 See also Part I, Chapter 6(B)(10)(e)(1)(b) of the

20

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

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.

21

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

29

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

Aetna’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

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

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.

30

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

original).22

As a result, the Department’s order denying Aetna’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

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

declaring void any resulting contract.”).23

22

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).

23

We find untenable the Department’s assertion that Aetna has waived all claims of error

in this regard by failing to address the Director’s initial determination that it was not aggrieved

under the Procurement Code. See Final Agency Determination at 16. However, the Director only

determined that Aetna was not aggrieved with respect to the two Zones from which PHW withdrew

its proposal, not addressing Aetna’s aggrievement with respect to the three remaining Zones. See

id. Nevertheless, Aetna has consistently challenged the process by which the selections were made

in all five Zones under the Reissued RFP in the proceedings below, including the December 19 th

meeting, and its claims in this regard were addressed on the merits by the Director. See id. at 17-

19. As a result, Aetna’s claims in this regard have not been waived for purposes of appeal. See

31

generally Section 1711.1(g) of the Procurement Code, 62 Pa. C.S. § 1711.1(g) (“Within 15 days

of the mailing date of a final determination denying a protest, a protestant may file an appeal with

Commonwealth Court. Issues not raised by the protestant before the purchasing agency are

deemed waived and may not be raised before the court.”). Moreover, with respect to Aetna’s

request for a preliminary injunction, we held that the Department’s failure to comply with the

provisions of the Procurement Code constitutes “irreparable injury.” See Aetna Better Health of

Pennsylvania Inc., slip op. at 27 (“Failure to coply with a statute is sufficiently injurious to

constitute irreparable harm. Wyland v. West Shore Sch. Dist., 52 A.3d 572, 583 (Pa. Cmwlth.

2012).”).

Finally, based on our disposition of Aetna’s claim with respect to the Department’s

violation of the Procurement Code, the Reissued RFP and the Procurement Handbook, we will not

address the remaining claims in this appeal or the claims raised in our original jurisdiction. 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).

32

Accordingly, the Department’s order is reversed; Aetna’s petition for

review seeking declaratory, injunctive, and mandamus relief filed in our original

jurisdiction, and the preliminary objections of the Department, PHW, Geisinger, and

HPP, are dismissed as moot.

MICHAEL H. WOJCIK, Judge

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

33

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Aetna Better Health :

of Pennsylvania, Inc., :

:

Petitioner :

:

v. : No. 274 M.D. 2017

:

Commonwealth of Pennsylvania, :

Department of Human Services, :

:

Respondent :

ORDER

AND NOW, this 11th day of April, 2018, the order of the Department

of Human Services (Department) dated June 5, 2017, denying the bid protests of

Aetna Better Health of Pennsylvania, Inc. (Aetna) with respect to the reissued

Request for Proposal No. 06-15 is REVERSED; Aetna’s petition for review seeking

declaratory, injunctive, and mandamus relief filed in our original jurisdiction, and

the preliminary objections of the Department, Pennsylvania Health & Wellness, Inc.,

Geisinger Health Plan, and Health Partners Plans, are DISMISSED as moot.

__________________________________

MICHAEL H. WOJCIK, Judge