Federal Regulations and TMA Policy Defined the Acquisition Process for TRICARE’s Third Generation MCSCs

Federal regulations—the FAR and DFARS—largely defined the  acquisition process TMA used to obtain health care services through  TRICARE’s third generation MCSCs. This acquisition process included  steps necessary to plan for, develop, and award these contracts. TMA  policy provided further guidance on the acquisition planning and process  steps beyond what was required in the federal regulations. This included  developing additional documentation and obtaining additional approvals  from senior acquisition officials within TMA, as well as conducting peer  reviews of the acquisition process. A Three-Phased Approach Was Used for TMA’s Contract Award Process for TRICARE’s Third Generation MCSCs

TMA’s acquisition staff conducted a three-phased approach to the  contract award process—(1) planning the acquisition, (2) issuing the RFP  and soliciting responses, and (3) awarding the contracts—for TRICARE’s  third generation MCSCs. 1.) The  document outlined a statement of need that identified why health care  services were being acquired and the objectives to be achieved. Request for proposals. Bid Protests for Each of the MCSC Awards in the Three TRICARE Regions Most Often Cited Issues with TMA’s Evaluation of Proposals

For TRICARE’s third generation MCSCs, the offerors that filed the six bid  protests raised various issues and each protest varied in the number of  issues raised. Offerors challenged TMA’s evaluation of network provider discounts in  four protests, two of which were sustained and two of which were denied. TRICARE Acquisition Officials Identified and Applied Some Lessons Learned from the Third Generation MCSC Acquisition

TRICARE acquisition officials reported they have identified several areas  where changes could be made to improve the acquisition process for  future TRICARE MCSC acquisitions, including those scheduled to be  awarded in 2018. According to TRICARE acquisition officials, preliminary  lessons learned from the third generation acquisition process and  resulting bid protests include (1) improvements in communication and  documentation to increase transparency during the evaluation of the  proposals and (2) increases to the length of the acquisition process to  allow for additional time to evaluate proposals and for the transition from  one MCSC to another. Despite the implementation of lessons learned from TRICARE’s third  generation acquisition process and the related bid protests, TRICARE  acquisition officials told us that they cannot confirm which, if any, of these  lessons will be incorporated into the acquisition process for TRICARE’s  fourth generation MCSCs scheduled for 2018. However, these officials  noted that the acquisition process for previous TRICARE MCSCs,  including lessons learned from related bid protests, are generally  considered when initiating the acquisition process for the next generation  of TRICARE MCSCs. Agency Comments

We requested comments from DOD, but none were provided. GAO staff who made key contribution to this  report are listed in appendix II. Appendix I: Description of Bid Protests of TRICARE’s Third Generation Managed Care Support Contract Awards

There were six bid protests filed by unsuccessful offerors across the three  TRICARE regions. In response to decisions  and recommendations made in the sustained bid protest decisions, TMA  implemented corrective actions that resulted in new award decisions in  each of the three TRICARE regions.subsequent bid protest challenges that were filed in two of the three  TRICARE regions, the South and the West. Therefore,  Aetna—Health Net’s competitor—could not have used the information to  its advantage. TMA then reviewed the revised proposals and, based on this  evaluation of revised proposals, awarded the contract to Humana, a  different offeror than was initially awarded the contract. Other. GAO found no merit to these allegations.
Why GAO Did This Study

DOD provides certain health care services through its TRICARE Program, which complements the health care services provided in military treatment facilities. DOD acquires these health care services through MCSCs with private sector companies. As of October 1, 2013, DOD's Defense Health Agency is responsible for awarding, administering, and overseeing TRICARE's MCSCs. Prior to this date TMA handled these duties.
DOD's health care costs have more than doubled from $19 billion in fiscal year 2001 to its fiscal year 2014 budget request of more than $49 billion. Senate Report 112-173, which accompanied a version of the National Defense Authorization Act for Fiscal Year 2013, cited concerns with the growth of DOD's health care costs and identified private sector health care contracts as an area for potential savings and efficiencies.
The Senate report mandated that GAO review DOD's process for acquiring TRICARE's MCSCs. This report examines: (1) TMA's acquisition process to award TRICARE's third generation MCSCs; (2) the extent to which issues were raised in the bid protests involving these MCSCs, including identifying any common themes; and (3) lessons learned from the acquisition process to award these MCSCs and how these lessons may be used in future acquisitions. GAO reviewed relevant federal statutes, regulations, policy documentation, and the bid protest decisions for TRICARE's third generation MCSCs. GAO also interviewed TRICARE officials about the acquisition process and lessons learned.

What GAO Found

The TRICARE Management Activity (TMA) within the Department of Defense (DOD) used the acquisition process prescribed by federal regulations to acquire health care services for the TRICARE Program through the third generation of TRICARE's managed care support contracts (MCSC). This process included a three-phased contract award process outlined in the figure below.
TMA policy also defined steps for the acquisition process beyond what was required in the federal regulations, including developing additional documentation and obtaining additional approvals from senior TRICARE acquisition officials. For example, peer reviews of the acquisition process are conducted and documented for certain DOD contracts, including TRICARE's MCSCs.
TMA awarded a contract for each TRICARE region (North, South, and West), but challenges (bid protests) to the agency's award decisions were filed by unsuccessful offerors in all three regions. Of the six bid protests filed, three were sustained and three were denied. Following the resolution of the bid protests, the MCSCs in all three regions were awarded to a different offeror than was initially awarded the contract. The offerors who filed the bid protests cited various issues, most frequently TMA's evaluation of proposals. For example, four bid protests challenged TMA's evaluation of offerors' proposed network provider discounts, which are discounts of provider payment rates negotiated by offerors to reduce overall health care costs to the government.
TRICARE acquisition officials said that sustained bid protests and TMA's implementation of corrective actions prompted them to identify lessons learned where changes could be made to improve the acquisition process for subsequent TRICARE MCSCs. Lessons learned included (1) improvements in communication and documentation to increase transparency during the evaluation of proposals and (2) increases to the length of the acquisition process to allow for more time to evaluate proposals and for the transition from one MCSC to another. TRICARE acquisition officials also said that some of these lessons have been applied in other contracting activities; however, they could not confirm which, if any, of these lessons will be incorporated into the acquisition process for the next generation of TRICARE MCSCs, scheduled for 2018.
GAO requested comments from DOD on the draft report, but none were provided.