Such discussions may have highlighted the need to analyze offerors’ individual cost containment approaches. DOD Actions to Improve and Help Ensure Fairness of the Procurement Process

DOD has made several changes that should improve future procurements. Major changes due to the protest experiences include (1) revising the price evaluation methodology and providing offerors more complete RFP information on how the methodology will be used in evaluating bid prices, (2) adding requirements for discussions between price and technical evaluation boards, and (3) revising both the requirements and the technical evaluation criteria for utilization management. First, unless DOD can avoid further delays in this round of procurements, it may not meet the congressional deadline for awarding all contracts by September 30, 1996. On the other hand, procurements have been delayed to allow offerors to correct errors in their cost proposals and as a result of bid protests. Nevertheless, DOD has acknowledged that offerors have some legitimate concerns. Shortening Post-Award Transition Creates Significant Risk

Because of procurement delays occurring before contract award, DOD has tried to recover lost time by reducing to 6 months its scheduled 8- to 9-month transition period during which contractors prepare to deliver health care. Recommendations

We recommend that the Secretary of Defense direct the Assistant Secretary of Defense (Health Affairs) to weigh, in view of the potential effects of such large procurements on competition, alternative award approaches for the next procurement round; determine whether and, if so, how the next round’s solicitation requirements could be simplified, incorporating the use of potentially better, more economical, best-practice managed care techniques while preserving the system’s overall health care goals; adhere to the 8- to 9- month scheduled transition period and discontinue, whenever possible, reducing such periods to make up for delays incurred before contracts are awarded; and establish general qualification requirements for evaluator appointees. Additional copies are $2 each. Address Correction Requested
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed defense health care, focusing on: (1) procurement process problems identified by the bid protest experiences; (2) the Department of Defense's (DOD) actions to improve and help ensure the fairness of the procurement process; and (3) what problems and concerns remain and whether further actions are needed.

What GAO Found

GAO found that: (1) DOD has changed its managed care procurement process to address such past problems as its failure to evaluate bidders' proposed prices according to solicitation criteria, the lack of communication between technical and price evaluators, and its failure to properly evaluate bidders' cost containment approaches; (2) although DOD has revised its evaluation methodology and has added new discussion requirements to improve future procurements and ensure better treatment of bidders, protests are likely to continue, given the vast sums of money at stake and the relatively small expense of protesting; (3) DOD may have difficulty meeting the congressional deadline for awarding all contracts by September 1996, since procurements have been taking twice as long as planned; (4) DOD has tried to make up for procurement delays by reducing its transition period after contract award for contractors to deliver health care, but this action has created major risks; and (5) DOD must establish required qualifications for evaluation board members, since their tasks have become so specialized.