Health Net v. U.S.: Court Upholds DHA’s Evaluation and Dismisses Protest Claims

Background

In 2019, the Department of Defense (DoD), through the Defense Health Agency (DHA), issued a solicitation for the TRICARE T-5 contracts—large-scale managed care support agreements covering the provision of health services to military service members and their families. The solicitation divided the country into two geographic regions: East and West. Health Net Federal Services, LLC (Health Net) submitted proposals for both regions but was not selected for award. The DHA awarded the East region contract to Humana Military Healthcare Services, Inc., and the West region contract to TriWest Healthcare Alliance Corp.

Health Net filed a bid protest in the U.S. Court of Federal Claims, alleging that the agency’s evaluation of proposals violated the Federal Acquisition Regulation (FAR) and the solicitation’s terms. Health Net asserted that DHA unreasonably evaluated technical factors, failed to conduct a proper cost-realism analysis, and applied unstated evaluation criteria that unfairly favored competitors.

Procedural History

Health Net initially filed a protest with the Government Accountability Office (GAO), which was denied. It then brought its claims before the Court of Federal Claims under 28 U.S.C. § 1491(b). The company requested injunctive relief to prevent contract performance, arguing that DHA’s errors materially affected the outcome of the competition. The government and the awardees, Humana and TriWest, opposed the motion, contending that the agency’s evaluation complied with all legal and procedural requirements.

Evaluation Methodology

The solicitation required evaluation under four primary factors: technical/management approach, past performance, cost/price, and small business participation. The technical evaluation included subfactors addressing network development, claims processing, and customer service. DHA used a consensus evaluation process with adjectival ratings, assigning overall confidence ratings to each offeror.

Health Net argued that DHA failed to meaningfully assess network adequacy and erroneously concluded that Humana and TriWest offered superior provider networks. Health Net also contended that the cost evaluation was flawed because the agency accepted unreasonably low estimates from both awardees without sufficient verification of realism. Additionally, Health Net claimed that DHA treated similar proposal features inconsistently across offerors, violating the FAR’s requirement for equal treatment.

Legal Analysis

The Court of Federal Claims reviewed the agency’s decision under the Administrative Procedure Act (APA) standard, assessing whether it was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. The court emphasized that its role was not to substitute its judgment for the agency’s but to ensure a rational basis for the evaluation and award decisions.

The court rejected Health Net’s argument that DHA used unstated criteria, finding that the evaluation record demonstrated consideration of the specific factors outlined in the solicitation. It noted that the evaluators compared each proposal’s network development plan, provider coverage data, and implementation schedules in detail. The court also held that the agency reasonably relied on the awardees’ past performance in prior TRICARE contracts to assess their ability to perform the T-5 requirements.

Regarding cost realism, the court concluded that the solicitation did not require a detailed cost-realism analysis because it was a fixed-price procurement. Although Health Net argued that unrealistically low pricing posed performance risks, the court found that DHA’s review of cost assumptions satisfied the solicitation’s requirements. The agency verified that all proposed prices were consistent with historical data and sufficient to cover contract performance.

Court’s Findings

The court determined that DHA’s evaluation was consistent with procurement law and supported by the administrative record. It found that Health Net’s allegations largely reflected disagreement with the evaluators’ business judgments rather than evidence of legal error. The court also held that Health Net failed to show prejudice, as it did not demonstrate that correcting any alleged evaluation issues would have changed the outcome of the competition.

Court’s Ruling

On September 25, 2023, the U.S. Court of Federal Claims denied Health Net’s motion for injunctive relief and dismissed the protest. The court upheld DHA’s award of the T-5 TRICARE contracts to Humana Military Healthcare Services, Inc. and TriWest Healthcare Alliance Corp., concluding that the evaluation and selection process had a rational basis and complied with the solicitation and FAR.

Assistance with Bid Protest Matters

If your business is involved in a government contracting dispute or protest, Whitcomb, Selinsky PC assists with bid protest cases. Contact our team to learn how we can help you challenge or defend federal procurement decisions.