First Health Services Corp. v. Commonwealth

35 Va. Cir. 184, 1994 Va. Cir. LEXIS 124
CourtRichmond County Circuit Court
DecidedNovember 14, 1994
DocketCase No. HE-715-4
StatusPublished
Cited by2 cases

This text of 35 Va. Cir. 184 (First Health Services Corp. v. Commonwealth) is published on Counsel Stack Legal Research, covering Richmond County Circuit Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
First Health Services Corp. v. Commonwealth, 35 Va. Cir. 184, 1994 Va. Cir. LEXIS 124 (Va. Super. Ct. 1994).

Opinion

By Judge Randall G. Johnson

This action is brought under the Virginia Public Procurement Act, Va. Code § 11-35 et seq. Under the Act, a procurement award may be reversed if an unsuccessful bidder establishes that the award “is not an honest exercise of discretion, but rather is arbitrary or capricious or not in accordance with the Constitution of Virginia, statutes, regulations or the terms and conditions of the Invitation to Bid or Request for Proposal.” Va. Code § 11-70(C). The award at issue is for the installation, testing, and maintenance support of an integrated interactive computer system to provide fiscal agent services to the Virginia Medical Assistance Program. The procuring agency is the Department of Information Technology, which is one of the defendants in the present suit, and which is charged by statute with responsibility for assisting state agencies in matters related to information and communications systems. There were only two bidders: First Health Services Corporation, which is the plaintiff; and Electronic Data Systems Corporation (EDS), which has intervened as a defendant.

The computer system to be provided in response to DIT’s procurement action is for use by the Department of Medical Assistance Services (DMAS). In basic terms, the purpose of the system is to process Medicaid claims. While the major emphasis in the Request for Proposal (RFP) ap[185]*185pears to have been on the component of the system dealing with Medicaid Management Information System operations (MMIS), the system will also include bank account management, claims processing operations, maintenance and modification, and operation of the State and Local Hospitalization program and the Long Term Care Information System. Since the early 1970’s, these services have been provided to DMAS by First Health. In 1993, however, DMAS decided that the current system was outdated. As stated in the RFP:

The expiration of the current MMIS contract presents the Commonwealth with the timely opportunity to move forward and to take a proactive role in meeting die challenges presented by... new programs. In this undertaking, it is clear that the capacity and capabilities of the current system to meet the new goals, objectives, and standards of the planned Virginia MMIS cannot accommodate the major enhancements needed.

Plaintiffs Exhibit 24, at 1-1.

From the evidence presented by defendants, a major factor in DMAS' decision to obtain a new system was its dissatisfaction with First Health, a point which First Health vigorously contests. In any event, the RFP for a new system was issued on November 30, 1993. As already noted, the only bidders for the new contract were First Health and EDS.

First Health challenges the award on three grounds. First, First Health claims that DIT’s decision to award the contract to EDS was arbitrary and capricious. Second, First Health contends that the award was not in accordance with state and/or agency regulations. And third, Fust Health argues that the award was tainted by an appearance of impropriety which mandates that the award be reversed. Each of these challenges will be discussed separately.

I. Arbitrary and Capricious

First Health’s challenge to DIT’s award on die ground that it was arbitrary and capricious centers around one of the technical requirements of the RFP. Specifically, the RFP requires that when a user of the MMIS system wishes to make an inquiry into the system, the time from the moment he or she presses the “Enter” key on the keyboard until the information is displayed on the monitor must be 2 seconds or less 98% of the time. Plaintiffs Exhibit 24, at 5-146. When a user wishes to make an update onto the system, the response time — again from pressing the [186]*186“Enter” key until monitor display — must be 5 seconds or less 98% of the time. Id. It is First Health’s contention that EDS has consistently failed to demonstrate that it can meet these response times, and that DIFs willingness to overlook that fact shows that the award was arbitrary and capricious. The court disagrees.

Without getting too technical, part of the required system involves a “two-platform” database. One platform is called the Information Retrieval Platform, or IRP. The other platform is called the Transaction Processing Platform, or TPP. hi order to access either platform, a user presses the “Enter” key on a keyboard. The command travels through DMAS’ “local area network,” or “DMAS LAN,” into one of the platforms where the information is retrieved or updated, back onto DMAS LAN, and onto the user’s monitor. As noted earlier, DIFs requirement measures response time from keyboard “Enter” to monitor display. In other words, the time the transaction is in DMAS LAN plus the time it is in one of the platforms must be 2 seconds or less for inquiries, and 5 seconds or less for updates, 98% of the time. In its initial response, EDS stated that for purposes of its proposal, response time consisted only of the time the transaction is in one of the platforms, not the total time it is in tire system. Even then, EDS would not commit to meeting the 2-second requirement. With regard to the IRP platform, and contrary to DIT’s 2-second requirement 98% of the time, EDS said:

The Information Retrieval Platform (IRP) of the new Virginia MMIS will permit inquiry transactions against on-line IRP databases to be performed in two seconds or less, on average.

Plaintiff’s Exhibit 118, at Tab 6, Form 5.6.7, page 1 (emphasis added).

The proposal was even less promising with regard to the TPP platform:

Inquiries against the TPP databases, while routinely available and responsive to DMAS, will not be timely enough to support this specific two-second requirement.

Id., p. 2.

DIT was not satisfied. Accordingly, as was allowed by § 2.9.3 of the RFP (Plaintiff’s Exhibit 24, at 2-10), and as it did with regard to several other matters in both proposals, DIT sent to EDS a request for clarification. Plaintiff’s Exhibit 125, at 14. The request reiterated DMAS’ response [187]*187time requirement, and asked EDS if it would comply. In response, EDS said:

EDS understands the critical nature of a responsive MMIS to DMAS and will meet all response time requirements as defined by DMAS in the RFP.

It is First Health’s position that in light of EDS’ initial equivocation on the response time requirement for the IRP platform, and its actual statement that die requirement would not be met on the TPP platform, DIT’s acceptance of EDS’ final response was arbitrary and capricious. First Health’s argument fails for several reasons.

First, DIT did not simply accept EDS’ bald assertion that it could meet the 2-second requirement. Both Joseph Teefey and Edmund Butler, two members of the selection committee, testified that EDS gave a very lengthy and very technical explanation of the reasons for its initial response, as well as how the requirement would be met. In addition, both men went, with others, on a site visit to Indiana, where EDS had a system in place, and where EDS representatives gave a further explanation. The court accepts the testimony of those witnesses.

Second, several witnesses testified, and several documents show, that EDS’ proposal was technically superior to First Health’s.

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Bluebook (online)
35 Va. Cir. 184, 1994 Va. Cir. LEXIS 124, Counsel Stack Legal Research, https://law.counselstack.com/opinion/first-health-services-corp-v-commonwealth-vaccrichmondcty-1994.