IN THE DISTRICT COURT OF SHAWNEE COUNTY, KANSAS
DIVISION TWELVE
FIRSTGUARD HEALTH PLAN KANSAS,
INC.,
Petitioner,
vs. Case No. 06-C-1518
KANSAS DIVISION OF PURCHASES,
Respondent,
and
CHILDREN’S MERCY HEALTH PARTNERS,
INC., and UNICARE HEALTH PLAN OF KANSAS,
INC.,
Intervenors.
MEMORANDUM DECISION AND ORDER
This case is before the Court on FirstGuard Health Plan Kansas, Inc.’s Petition for Judicial Review filed on October 11, 2006. In this action, the Petitioner seeks judicial review of a Letter Decision issued by the Director of the Division of Purchases on October 4, 2006. The Letter Decision was written in response to the Petitioner’s Protest of Contract Award relating to Request for Proposal (RFP) No. 09222. In his Letter Decision, the Director of the Division of Purchases upheld the contract award made by a Procurement Negotiating Committee to Children’s Mercy Health Partners, Inc. (Children’s Mercy) and UniCare Health Plan of Kansas, Inc. (UniCare) pursuant to K.S.A. 75-37,102.
PROCEDURAL HISTORY
On October 17, 2006, the Court granted leave to UniCare to intervene in this case. Likewise, on October 19, 2006, the Court granted leave to Children’s Mercy to intervene. On November 6, 2006, the Division of Purchases filed an Answer to the Petition for Judicial Review and filed a Certified Copy of the Agency Record with the Clerk of the Shawnee County District Court. The Court notes that the Agency Record in this case consists of eleven (11) volumes and more than 10,000 pages. (A copy of the Agency Record on CD-ROM was also provided by the Petitioner immediately following the Final Hearing and it has been helpful to the Court in reviewing the voluminous record.) On November 8, 2006, UniCare and Children’s Mercy filed their respective Answers to the Petition for Judicial Review.
The Court held a Case Management Conference with counsel by telephone on November 13, 2006. During the telephone conference, the Court placed this action on an expedited schedule since the contracts which were awarded pursuant to RFP No. 09222 will become effective on January 1, 2007. The Petitioner filed a Brief in support of the Petition for Judicial Review on November 22, 2006. The Division of Purchases filed a Brief in opposition to the Petition for Judicial Review on December 1, 2006. Both Children’s Mercy and UniCare also filed Briefs on December 1, 2006. The Final Hearing was held on December 4, 2006. Thus, since the issues presented have now been fully briefed and argued, they are hereby deemed to be submitted to the Court for decision.
RELATED LITIGATION
It should be recognized that this action is a companion to Case No. 06-C-1408. In that case, FirstGuard sought judicial review of the actions taken by the Kansas Health Policy Authority arising out of the same Request for Proposal which is at issue in this judicial review action. The primary issue raised by the Petitioner in Case No. 06-C-1408 was whether the Kansas Health Policy Authority had properly entered into the contracts which were awarded to Children’s Mercy and UniCare pursuant to RFP No. 09222. In a Memorandum Decision and Order issued in Case No. 06-C-1408 on October 31, 2006, this Court held that “the Petitioner failed to pursue its remedies available under Kansas Administrative Procedures Act to challenge the alleged actions of the Kansas Health Policy Authority.” Therefore, since the Petitioner had failed to exhaust its administrative remedies, the Petition for Judicial Review in Case No. 06-C-1408 was denied for lack of subject matter jurisdiction.
FINDINGS OF FACTS
In Case No. 06-C-1408, the Stipulated Statement of Facts filed by the parties was adopted as this Court’s Findings of Fact. Although the Division of Purchases was not a party to Case No. 06-C-1408, the Court finds that the facts which were adopted by this Court in the companion case should also be adopted as the Findings of Fact in this action. In addition, the Court finds that the Certified Copy of the Agency Record contains additional evidence which was available to the Procurement Negotiating Committee in considering the award of the contracts in question and which was available to the Director of Purchases for his review in considering the Protest of Contract Award filed by the Petitioner. In deciding the issues presented in this action, the Court has reviewed both the Stipulated Facts and the Agency Record.
STANDARD OF REVIEW
“Judicial review in an administrative agency context is usually a classical exercise in judicial restraint.” Kansas Appellate Practice Handbook (Second Edition), Chapter 6, Section 6.1, p. 6-1 (Kansas Bar Association 1994). Such “restraint” is also reflected in the Kansas Act for Judicial Review and Civil Enforcement of Agency Action (“KJRA”), K.S.A. 77-601 et seq. Thus, the Court’s review is statutorily limited and the burden is upon the Petitioner to prove the invalidity of an agency’s action in this case.
K.S.A. 77-621( c ) provides, “the Court shall grant relief only if it determines any one or more of the following: (1) The agency action, or the statute or rule and regulation on which the agency action is based, is unconstitutional on its face or as applied;
(2) the agency has acted beyond the jurisdiction conferred by any provision of law;
(3) the agency has not decided an issue requiring resolution;
(4) the agency has erroneously interpreted or applied the law;
(5) the agency has engaged in an unlawful procedure or has failed to follow prescribed procedure;
(6) the persons taking the agency action were improperly constituted as a decision-making body or subject to disqualification;
(7) the agency action is based on a determination of fact, made or implied by the agency, that is not supported by evidence that is substantial when viewed in light of the record as a whole, which includes the agency record for judicial review, supplemented by any additional evidence received by the court under this act; or
(8) the agency action is otherwise unreasonable, arbitrary or capricious.”
In reviewing an agency action, the Court is not permitted to substitute its judgment for that of the agency. Brewer v. Schalansky, 278 Kan. 734, 743, 102 P.3d 1145 (2004). Rather, a “rebuttable presumption of validity attaches to all actions of an administrative agency. . . .” Kansas Racing Mgmt. Inc. v. Kan. Racing Comm’n, 244 Kan. 343, 365, 770 P.2d 423 (1989). Although an agency’s interpretation of the law is not binding upon the Court, if there is a rational basis for the agency’s interpretation, it should be upheld on judicial review. Hawley v. Kan. Dep’t of Agriculture, 281 Kan. 603, 611, 132 P.3d 870 (2006). “Deference to an agency’s interpretation is especially appropriate when ‘the agency is one of special competence and experience.’” Id. (citing Blue Cross & Blue Shield of Kansas, Inc. v. Praeger, 276 Kan. 232, 247, 75 P.3d 226 (2003)). See also Mitchell v. Liberty Mutual Ins. Co., 271 Kan. 684, Syl. 4, 24 P.3d 711 (2001).
ANALYSIS AND CONCLUSIONS OF LAW
A. Standing, Exhaustion of Remedies and Timeliness.
K.S.A. 77-607(a) provides that one “who qualifies under this act regarding (1) standing (K.S.A. 77-611), (2) exhaustion of administrative remedies (K.S.A. 77-612) and (3) time for filing the petition for judicial review (K.S.A. 77-613) and other applicable provisions of law . . . is entitled to judicial review of final agency action, whether or not the person has sought judicial review of any related non-final agency action.” Since the Letter Decision issued by the Director of Purchases on October 4, 2006, addresses FirstGuard’s Protest of the contracts awarded under RFP No. 09222, the Court finds that the Petitioner has sufficient standing to seek judicial review of his decision. Similarly, since the Director of Purchases specifically wrote that the Letter Decision “represents the final agency action on this matter,” the Court finds that the Petitioner has adequately exhausted its administrative remedies within the Division of Purchases. Finally, the Court finds that this action for judicial review was timely filed by the Petitioner on October 11, 2006.
B. Relationship Between Case No. 06-C-1408 and this Action.
In its Brief filed on November 22, 2006, the Petitioner represented to the Court that it is only challenging actions relating to RFP No. 09222 which “occurred prior to July 1, 2006.” However, counsel for the Petitioner advised the Court at the Final Hearing that this statement had been made in error and requested that it be stricken from the Brief. Although it will not order that the statement be stricken from the Brief since it is unknown as to whether the statement was truly a mistake or whether the Petitioner simply wishes to change its position, the Court will review all of the actions taken by the Division of Purchases related to RFP No. 09222 - regardless of when they occurred.
Notwithstanding the above, it should be recognized that the Kansas Health Policy Authority is not a party to this action for judicial review. As such, it would not be appropriate for the Court to review the actions of that agency in this case. Moreover, as indicated above, the Court previously held in Case No. 06-C-1408 that the Petitioner had failed to exhaust its administrative remedies with the Kansas Health Policy Authority, as provided in K.S.A. 75-7414(d) (2006) and K.S.A. 75-37, 121(h)(2) (2006), since the issues presented in that action involved the powers, duties and functions which were transferred to it from the Division of Health Policy and Finance on July 1, 2006. Thus, the Court will not permit this action for judicial review of a Letter Decision issued by the Director of Purchases to be used as a “back door” attempt to reassert the issues relating to the powers, duties and functions of the Kansas Health Policy Authority which were previously asserted in Case No. 06-C-1408.
C. Use of Procurement Negotiating Committee.
K.S.A. 39-7,112(a) provides as follows:
“Subject to applicable federal guidelines and regulations, the provisions of appropriations acts and the provisions of this section, the secretary of social and rehabilitation services shall, consistent with guidelines developed by the managed care implementation committee established under subsection (d), negotiate and enter into contracts with one or more service providers to implement a managed care system in accordance with this section to provide medicaid services for Kansas medicaid-eligible residents which may utilize capitation and other reimbursement methodologies. No contract entered into under this section shall be subject to the competitive bid requirements of K.S.A. 75-3739, and amendments thereto. The services to be provided for such residents under the contracts shall be provided through a system of managed care as specified in the contracts.” (Emphasis added.)
Although it is arguable that the Kansas Legislature intended subsection (a) of K.S.A. 39-7,112 to be applied only to the initial “implementation” of the managed care system in the early 1990s, the Court will assume for the purposes of this Memorandum Decision and Order that the statute continues to be applicable to the procurement of service providers under the Kansas Health Wave Program. Regardless, the Court finds nothing in K.S.A. 39-7,112(a) which would prohibit the use of a Procurement Negotiating Committee pursuant to K.S.A. 75-37,102 to obtain contracts with Health Wave service providers. Rather, the statute prohibits the use of the low bid process set forth in K.S.A. 75-3739 from being used to procure such services.
As the Petitioner points out in its Brief, the Kansas Medical Assistance Program State Plan under Title XIX of the Social Security Act contains a commitment by the State of Kansas to use a “competitive procurement process” in contracting with service providers. A review of the provisions of K.S.A. 75-37,102 reveals that the procedure set forth in the statute is a “competitive procurement process” as contemplated by the State Plan. In particular, K.S.A. 75-37,102(d) requires that “a notice to bidders first shall be published in the Kansas register” and that after “receipt of bids or proposals, the [Procurement Negotiating Committee] may negotiate with one or more of the firms submitting bids or proposals and select from among those submitting such bids or proposals the party to contract with to provide the services or technical products.” In addition, Section 3.36 of RFP No. 09222 specifically stated that “[t]he purpose of this Request is to seek competition.” (Agency Record, p. 326.) Thus, the Court finds that RFP No. 09222, which was issued pursuant to K.S.A. 75-37,102, used a “competitive procurement process” to award contracts for managed care services.
As the Division of Purchases notes in its Brief, the procurement of managed care services is governed by 45 C.F.R., Part 92. Specifically, Subsection (a) of 45 C.F.R. 92.36 provides that “[w]hen procuring property and services under a grant, a State will follow the same policies and procedures it uses for procurements from its non-Federal funds.” In Kansas, K.S.A. 75-3738(a) requires that the Director of Purchases “shall . . . [p]urchase, rent or otherwise provide for the furnishing of supplies, materials, equipment or contractual services for all state agencies.” Thus, upon reviewing the applicable state laws in conjunction with the applicable federal regulations, the Court finds that the use of a Procurement Negotiating Committee pursuant to K.S.A. 75, 37,102 was an appropriate procedure to be used to procure managed care service providers under the Kansas Health Wave Program.
D. Authority to Issue RFP No. 09222.
The Petitioner contends that the Director of the Division of Health Policy and Finance had no authority to request the issuance of RFP No. 09222. However, as the parties are well aware, the Kansas Legislature enacted House Substitute for Senate Bill No. 242, which was codified in Chapter 187 of the 2005 Session Laws of Kansas, Vol. 2, and can be found in the 2005 Supplement to the Kansas Statutes Annotated at K.S.A. 75-7401, et seq. The stated purpose of this legislation, as set forth in K.S.A. 75-7404, was to “develop and maintain a coordinated health policy agenda that combines effective purchasing and administration of health care with health promotion oriented public health strategies.”
It is important to recognize that House Substitute for Senate Bill No. 242 not only created the Kansas Health Policy Authority, but also created the Division of Health Policy and Finance within the Department of Administration. Specifically, the Division of Health Policy and Finance was created to serve as a transition agency to handle certain duties between July 1, 2005, and June 30, 2006. See K.S.A. 75-7406 to K.S.A. 75-7418. During this one-year period, the designation “as the single state agency for medicaid purposes” was transferred from the Kansas Department of Social and Rehabilitation Services to the Division of Health Policy and Finance pursuant to K.S.A. 75-7413(f).
Hence, while the Division of Health Policy and Finance was in existence, it held all of the “powers, duties and functions” previously possessed by the Kansas Department of Social and Rehabilitation Services relating to the “development, implementation and administration of programs that provide medical assistance, health insurance programs or waivers granted . . . for persons who are needy or uninsured, or both, and that are financed by federal funds or state funds, or both. . . .” K.S.A. 75-7413(a). Furthermore, it was not until the Division of Health Policy and Finance was abolished that the “operational and purchasing responsibility” was transferred to the Kansas Health Policy Authority pursuant to K.S.A. 75-7405(d).
Based on a review of the legislation which created both the Division of Health Policy and Finance and the Kansas Health Policy Authority, the Court finds that it was the Division of Purchases which held the power to request the issuance of RFP No. 09222 in February of 2006. As the Director of Purchases correctly stated in his Letter Decision: “The timing of this procurement was somewhat peculiar in that the process was begun by an agency [Division of Health Policy and Finance] which would, pursuant to statute, become another agency [Kansas Health Policy Authority] before the process was completed. All DHPF’s powers, duties, responsibilities, commitments, and staff transferred to the HPA on July 1, 2006. Therefore, although it was DHPF staff that began work with the Division of Purchases (DOP) on RFP #09222, it was expected that staff would transfer to HPA before the awards were made, and that HPA would be the agency making the award.”
Certainly, the timing of the procurement for Health Wave service providers was unique as a result of the transition process which was in progress. However, the Court finds as a matter of law that it was the Division of Health Policy and Finance had the authority to request the issuance of RFP No. 09222. Therefore, the Court concludes that the Request for Proposal was appropriately requested and issued pursuant to the terms of K.S.A. 75-37,102.
E. Compliance with K.S.A. 75-37,102.
As required by K.S.A. 75-37,102(d), notice regarding the issuance of RFP No. 09222 was provided to potential vendors prior to negotiating for the procurement. In response to the notice, the Petitioner and four (4) other vendors submitted proposals to the Division of Purchases. The proposals were then evaluated for technical compliance in order “to determine which vendors to invite for negotiations if needed.” (Agency Record, pp. 10 - 11.) Since each of the proposals was found to be in technical compliance with RFP No. 09222, all of the vendors were invited to participate in discussions with the Procurement Negotiating Committee.
The record reflects that the Procurement Negotiating Committee was properly composed of John Dixon, the Secretary of Administration’s designee; Angela Hoobler, the Director of Purchases’ designee; and, Bobbie Graff-Hendrixson, the Kansas Health Policy Authority’s designee. (Agency Record, p.13.) According to K.S.A. 75-37,102(d), the role of the Procurement Negotiating Committee was to “negotiate with one or more of the firms submitting bids or proposals and select . . . the party to contract with to provide the services. . . .” Thus, meetings between the vendors and the members of the Procurement Negotiating Committee were scheduled over a three (3) day period between August 8, 2006, and August 10, 2006. (Agency Record, p. 8032.)
On July 31, 2006, Angela Hoobler sent a letter to the Petitioner which set a meeting with the Procurement Negotiating Committee to be held on August 9, 2006. (Agency Record, p. 8098.) Enclosed with Ms. Hoobler’s letter was a summary of the items to be discussed at the meeting. (Agency record, p. 8099.) The Agency Record reflects that five (5) representatives of the Kansas Health Policy Authority and four (4) representatives of the Petitioner were present at the meeting held on August 9, 2006. (Agency Record, pp. 8034 and 8081.)
Following the meetings with the vendors, “best and final offers” were submitted to the Procurement Negotiating Committee. The Agency Record reflects that references listed by the vendors were also contacted. (Agency Record, pp. 8154 to 8156.) Furthermore, cost comparisons of the proposals submitted in response to RFP No. 09222 are contained in the record. (Agency Record, pp. 8475 to 8480.) In addition, the Deputy Director of the Kansas Health Policy Authority, submitted a letter to the Director of Purchases and to the Procurement Negotiating Committee on August 22, 2006, recommending that the Health Wave service provider contracts be awarded to UniCare and Children’s Mercy. (Agency Record, pp. 8481 to 8483.) The following day, Bobbie Graff-Hendrixson and John Dixon both notified Angela Hoobler by e-mail that they concurred with the Deputy Director’s recommendation. (Agency Record, pp. 8484 and 8485.) Thereafter, a “Contract Award” was then issued by the Division of Purchases to Children’s Mercy and UniCare pursuant to RFP No. 09222. (Agency Record, p. 8489.)
In summary, the Agency Record reflects that the procurement process was properly initiated, that a comprehensive Request for Proposal was prepared and that the Request for Proposal was approved by the Centers for Medicare and Medicaid Services. The Agency Record further reflects that adequate notice was provided to potential vendors, that the Procurement Negotiating Committee was properly convened and that the vendors were provided notice of the addenda to the Request for Proposal. In addition, the Agency Record reflects that technical reviews of the proposals were completed, that meetings were held with the vendors, that vendors were given the opportunity to submit final offers following these discussions, that references were checked, that the Procurement Negotiating Committee made a selection from among those submitting proposals and that the Division of Purchases issued a “Contract Award” to the two vendors which had been selected by the Procurement Negotiating Committee. Therefore, based on a review of the Agency Record, the Court concludes that the Division of Purchases and the Procurement Negotiating Committee complied with the provisions of K.S.A. 75-37,102.
F. Consideration of Cost under K.S.A. 75-37,102.
The Petitioner contends that the Procurement Negotiating Committee improperly relied on cost as the determining factor in awarding the Health Wave service provider contracts. In fact, the Petitioner goes so far as to argue that cost was the only factor considered by the Committee. However, as indicated above, the Agency Record establishes that prior to deciding which vendors would be invited to negotiate with the Procurement Negotiating Committee pursuant to K.S.A. 75-37102(d), each of the proposals was reviewed for technical compliance with RFP No. 09222. Although it is understandable why the Petitioner may be disappointed with the scoring of the technical review, which was inherently subjective in nature, it would be inappropriate for this Court to replace its judgment for that of the Procurement Negotiating Committee. Moreover, the Petitioner has failed to establish prejudice from the technical review since it successfully moved on to the negotiation phase of the process.
Although K.S.A. 75-37,102 is not a low bid procurement procedure, this does not mean that cost was not an important factor to be taken into consideration by the Procurement Negotiating Committee. In fact, if “the lowest bid” is not accepted by the Procurement Negotiation Committee, K.S.A. 75-37,102(e) requires the Director of Purchases must submit a report to the Kansas Legislature which explains “why the lowest bidder was not awarded the contract.” Furthermore, it should be recognized that Section 1.6 of RFP No. 09222 listed “cost” first in a list of factors which could be considered in the “Evaluation of Proposals” by the Procurement Negotiating Committee. (Agency Record, p. 325.) Thus, the Court finds that it was appropriate for the Committee to consider “cost” as an important factor in the awarding of the Health Wave service provider contracts pursuant to RFP No. 09222.
G. Review of Letter Decision issued on October 4, 2006.
The Petitioner contends that the Letter Decision issued by the Director of Purchases was not supported by substantial evidence. Likewise, the Petitioner contends that the Director’s decision was arbitrary and capricious. Since the parties have agreed that the Director’s review of the Petitioner’s protest was not subject to the Kansas Administrative Procedures Act, there was no requirement that he conduct a hearing or that he make specific Findings of Fact and Conclusions of Law. Regardless, the Court must examine the Agency Record to decide whether the Director’s “action is based on determinations of fact, made or implied by [him], that are supported by substantial competent evidence.” Blue Cross & Blue Shield v. Praeger, 276 Kan. at 263 (quoting Winston v. Kansas Dept. of SRS, 274 Kan. 396, 415, 49 P.3d 1274 (2002)). “Substantial evidence is ‘such legal and relevant evidence as a reasonable person might accept as being sufficient to support a conclusion.’” Id.
In Praeger, the Kansas Supreme Court held:
“In applying the substantial evidence test under K.S.A. 77-621 (c)(7), courts may not reweigh the facts, try the case de novo, or substitute their own judgment even if they would have found differently. During the process, the courts are not concerned with evidence contrary to the agency findings but must focus solely on evidence in support of the findings. [Citations omitted.] Consequently, the courts must accept as true the evidence and all inferences to be drawn therefrom which support or tend to support the findings of the agency. They are to disregard any conflicting evidence or other inferences which might be drawn therefrom. [Citations omitted.]”
276 Kan. at 263.
In his Letter Decision, the Director of Purchases correctly referenced K.S.A. 75-37,102 as the controlling statute under which the Procurement Negotiating Committee performed its duties in this case. He appropriately found that this procedure was used rather than a “sealed bidding system based on exact specification” due to the “highly technical nature of the services” which the vendors would be required to perform under RFP No. 09222. A review of the Request for Proposal and the addenda certainly confirms the “highly technical nature” of the Health Wave services to be provided by the successful vendors. The “highly technical nature” of the services to be performed is also reflected in the comprehensive proposals which were submitted by the various vendors in response to RFP No. 09222.
After outlining the procedural history of RFP No. 09222, the Director of Purchases noted that “contracts were awarded to the two vendors submitting the lowest price. One vendor provided services to the whole State, the other vendor provided services to the more populous eastern portion of the State.” As indicated above, K.S.A. 75-37,102(e) and the Request for Proposal in question both provide that cost was an appropriate (and extremely important) factor for the Procurement Negotiating Committee to take into consideration in awarding the contracts. Moreover, the number of contracts to be awarded and the regions to be served were matters left to the sound discretion of the Committee. Specifically, Section 5.1 of RFP No. 09222 provided that although the Division of Health Policy and Finance preferred that two vendors provide services “on a statewide basis . . . vendors may at their option submit bids to provide Health Wave XIX an Health Wave XXI services only in one or two of the three regions.” (Agency Record, p. 356.)
Next, the Director addressed the issue of whether the Division of Health Policy and Finance had authority to request the issuance of RFP No. 09222. As set forth above, the Court has found that the Division of Health Policy and Finance had the authority to begin the competitive procurement process for Health Wave services in February of 2006. Likewise, the Court finds that once the procurement process was properly commenced pursuant to K.S.A. 75-37,102, it was appropriate for the Procurement Negotiating Committee to complete its duties notwithstanding the transfer of certain powers from the Division of Health Policy and Finance to the Kansas Health Policy Authority on July 1, 2006.
The Director of Purchases also determined in his Letter Decision that “all [of the state and federal] requirements were met” during the procurement process. This finding is consistent with the Court’s holding in Section C of this Memorandum Decision and Order. In addition, the Director determined that the Procurement Negotiating Committee complied with the requirements that “bidders be treated equally, the same rules apply to all bidders and bidders know the terms of the competition.” Although it is alleged that more weight should have been given to the Petitioner’s experience as a Health Wave service provider in Kansas, the Agency Record contains both positive and negative comments regarding this experience. Regardless, it is apparent from a review of the Agency Record that the Procurement Negotiating Committee had knowledge of the Petitioner’s experience in Kansas prior to the time a decision was made regarding the contracts to be awarded. Hence, the Court yields to the members of the Committee concerning the weight to be given to such evidence.
As the Petitioner recognized at the Final Hearing, there is no allegation in this case of fraud, bias or corruption in the award of the contracts under RFP No. 09222. Moreover, the Court finds that all of the vendors either knew or should have known the terms of the competition. These terms were set out in the comprehensive Request for Proposal and in the addenda provided to the vendors. In addition, the vendors had the opportunity to ask questions during the procurement process and to participate in meetings with the Procurement Negotiating Committee prior to submitting best and final proposals. Thus, the Court finds no justification for an allegation that the Petitioner was treated unfairly during the procurement process.
It should be noted that the first page of RFP No. 09222 made it clear that the Request for Proposal was for “the procurement of Physical Health Capitated Managed Care Services for the Kansas HealthWave Program including T-XIX Medicaid and T-XXI SCHIP funding sources for the Kansas Division of Health Policy and Finance (DHPF)/Health Policy Authority (HPA) during the contract period” of “January 1, 2007 through June 30, 2011 with two (2) additional optional one-year renewal periods (July 1, 2011 through June 30, 2012 and July 1, 2012 through June 30, 2013).” (Agency Record, p. 311.) As such, the Petitioner should have known from the outset that the contract or contracts to ultimately be awarded would be with the Kansas Health Policy Authority since the Division of Health Policy and Finance would no longer be in existence after June 30, 2006.
The terms of REP No. 09222 made it clear that this would be “a negotiated procurement pursuant to K.S.A. 75-37,102" and that “vendors may be required to appear before the PNC to explain the vendor’s understanding and approach to the project and/or respond to questions from the PNC concerning the proposal; or, the PNC may award to the low bidder without conducting negotiations.” (Agency Record, p. 324.) Although the Petitioner asserts that the scoring system used during the technical evaluations of the proposals was flawed, the Agency Record reflects that the technical evaluations and rankings would be used by the Procurement Negotiating Committee “to determine which vendors to invite for negotiations if needed” and to “defend any decision of vendor selection when uninvited vendors inquire about not being invited to negotiations.” (Agency Record, p. 10 -11.) Thus, the Court finds that the Petitioner was not prejudiced by the alleged flaws in the scoring system used during the technical evaluations since it was invited to the participate in the negotiation phase of the procurement process.
From a review of the Request for Proposal, the Petitioner should have also known that those “selected to participate in negotiations may be given an opportunity to submit a best and final offer to the PNC.” (Agency Record, p. 324.) In addition, RFP No. 09222 provided that any award would “be made in the best interest of the State as determined by the Procurement Negotiating Committee or their designees.” (Agency Record, p. 325.) As such, the Petitioner should have known from the outset that those who survived the technical review phase of the procurement process would ultimately be making a best and final offer to be considered by the Procurement Negotiating Committee rather than bidding on exact specifications. Furthermore, the Petitioner should have known from the outset that the final decision would be based on the Procurement Negotiating Committee deemed to be in the best interests of the citizens of Kansas rather than in the best interests of any particular vendor.
The Petitioner contends that at least one of the other vendors was not responsive to the Request for Proposal and should have been found to be ineligible to receive a contract to provide Health Wave services. However, the Director of Purchases found in his Letter Decision that “[a] response that indicates the required criteria will be met . . . is responsive to the RFP.” Since the Director of Purchases has a substantial amount of experience and expertise in procurement for the State of Kansas, the Court will yield to his interpretation regarding this issue. Moreover, it is important to recognize that the Procurement Negotiating Committee specifically reserved “the right to accept or reject any or all proposals or part of a proposal; to waive any informalities or technicalities; clarify any ambiguities in proposals; modify any criteria in [the] Request; and unless otherwise specified, to accept any item in a proposal.” (Id.) Thus, the Court finds that the Procurement Negotiating Committee had the right to exercise discretion in deciding whether a vendor had appropriately responded to the RFP No. 09222.
In summary, the Court finds that the Procurement Negotiating Committee had a duty to exercise its judgment in the best interests of the citizens of the State of Kansas. From a review of the Agency Record, the Court further finds that the Procurement Negotiating Committee appropriately fulfilled its duty to the public. Clearly, it is not the role of this Court to replace its judgment for that of either the Procurement Negotiating Committee or the Director of Purchases. Thus, in light of the standard of review applicable in this case, the Court is satisfied that there is substantial evidence to support the contractual awards made by the Committee and to support the Letter Decision issued by the Director of Purchases on October 4, 2006.
H. Execution of Contracts Awarded.
As the Court has previously noted, the Kansas Health Policy Authority is not a party to this action and it is not appropriate for the Petitioner to use this case to attack the actions of that agency. Notwithstanding, the Court finds that pursuant to K.S.A. 75-37,102, it was the Procurement Negotiating Committee that had the authority to “select from among those submitting such bids or proposals the party to contract with to provide the services. . . .” As such, the Court finds that the Kansas Health Policy Authority had no discretion to reject the “Contract Award” issued by the Division of Purchases on August 22, 2006. Moreover, the Kansas Health Policy Authority has never attempted to renounce the agreements with UniCare and Children’s Mercy. Finally, the Court finds that the Director of Purchases appropriately fulfilled his legal duty pursuant to K.S.A. 75-3744(2) when he signed the contracts with the vendors selected by the Procurement Negotiating Committee. Thus, the Court finds the contracts for Health Wave provider services awarded to UniCare and Children’s Mercy to be valid.
CONCLUSION
For the reasons set forth in this Memorandum Decision and Order, the Court finds that the Petitioner has failed to meet its burden of proof in this action. Furthermore, the Court finds that the Letter Decision issued by the Director of Purchases on October 4, 2006, was reasonably based on substantial evidence contained in the Agency Record. Therefore, the Petition for Judicial Review is denied.
This Memorandum Decision and Order shall serve as the order of the Court. No further Journal Entry is required.
Entered on this ____ day of December, 2006.
CERTIFICATE OF SERVICE The undersigned hereby certifies that on the day of , 2006, she served a true and correct copy of the above and foregoing pleading by fax to:
Timothy J. Sear - (913) 451-6205
Daniel J. Carroll - 296-8575
Thomas E. Wright - 232-2200
John Frieden - 232-5841
H. Philip Elwood - 233-8870
Colleen A. Speaker
Administrative Assistant