from the United States Court of Federal Claims in No.
1:18-cv-00200-MMS, Chief Judge Margaret M. Sweeney.
Matthew Hillel Solomson, Federal Government Solutions,
Anthem, Inc., Baltimore, MD, argued for plaintiff-appellant.
Also represented by Monica Rose Sterling, Anuj Vohra, Crowell
& Moring, LLP, Washington, DC.
William Porter Rayel, Commercial Litigation Branch, Civil
Division, United States Department of Justice, Washington,
DC, argued for defendant-appellee. Also represented by Robert
Edward Kirschman, Jr., Douglas K. Mickle, Joseph H. Hunt.
Prost, Chief Judge, Moore and Wallach, Circuit Judges.
bid protest, National Government Services, Inc.
("NGS") appeals the decision of the Court of
Federal Claims ("Claims Court") denying NGS's
pre-award bid protest. Nat'l Gov't Servs., Inc.
v. United States, 137 Fed.Cl. 715 (2018)
("Decision"). We reverse the decision of
the Claims Court and remand for further proceedings.
Centers for Medicare & Medicaid Services
("CMS") is an agency of the U.S. Department of
Health and Human Services ("HHS"). CMS uses
contractors to administer claims and benefits related to the
the inception of Medicare in 1965 until implementation of the
Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 ("Medicare Modernization Act"), CMS
procured contractors to administer Medicare claims and
benefits through noncompetitive contracts. Decision,
at 2. In the Medicare Modernization Act, however, Congress
added Section 1874A to the Social Security Act (Title XVIII)
to create the Medicare administrative contractor
("MAC") program. See Medicare
Modernization Act, Pub. L. No. 108-173, § 911(a)(1), 117
Stat. 2066, 2378-83 (codified as amended at 42 U.S.C. §
1395kk-1 ("the MAC Statute")).
companies that process Medicare claims on behalf of CMS are
called Medicare administrative contractors or MACs.
See 42 U.S.C. § 1395kk-1(a)(3). An
"A/B" MAC provides services with respect to
Medicare Parts A and B. See 42 U.S.C. §
1395kk-1(a)(4); see also id. §§ 1395h(a),
1395u(a). The MAC Statute generally requires CMS to "use
competitive procedures when entering into contracts with
[M]edicare administrative contractors [MACs] under this
section, taking into account performance quality as well as
price and other factors." § 1395kk-1(b)(1)(A).
nationwide MAC contract market is currently divided into
twelve geographic jurisdictions: 5, 6, 8, and 15, plus E, F,
H, and J-N. Decision, at 3. For example,
Jurisdiction H represents 13.5% of the current A/B Medicare
workload and covers Arkansas, Colorado, Louisiana,
Mississippi, New Mexico, Oklahoma, and Texas. Meanwhile,
Jurisdiction 8 represents 5.9% of the current A/B Medicare
workload and covers Indiana and Michigan. Decision,
at 3. CMS solicits contracts for each jurisdiction.
2010, CMS began preparing for its second round of
solicitations to replace the original A/B MAC contracts as
they expired. In July 2010, CMS issued a Request for
Information ("RFI") that described changes to
CMS's approach to the A/B MAC procurements and provided
an opportunity for potential offerors to give input on those
changes. One of CMS's proposed changes was to implement a
contract award limit for the A/B MAC contracts to be included
in all A/B MAC solicitations. J.A. 11465 (RFI). The purpose
of this award limit was "to place a limit, in all A/B
MAC Round II solicitations, on the amount of A/B MAC contract
responsibility that any single entity can win . . . in a
'prime contractor' capacity." Decision,
at 5 (quoting J.A. 11465 (RFI)).
August 2010, CMS issued another RFI regarding this proposed
award limitations policy ("Award Limitations
Policy" or "Policy"). See J.A.
11472-82 (RFI). CMS indicated that this Policy would be
included in all solicitations for the second round of MAC
contracts. Decision, at 9 (citing J.A. 11478). After
making some revisions to the Policy, CMS included the Policy
in the Jurisdiction F solicitation, which CMS issued in
October 2010. According to the Policy, CMS would not award
more than 26% of the national A/B Medicare workload to any
single contractor or more than 40% of the national A/B
Medicare workload to any one set of affiliates.
Decision, at 10 (quoting the Jurisdiction F
designed the Award Limitations Policy to address two market
concerns: (1) "business continuity concerns with
awarding an overly-large share of the Medicare claims
administration workload to any one entity (or set of
affiliated entities)"; and (2) "maintain[ing] a
dynamic, competitive marketplace, where no single entity (or
set of affiliated entities) control/s so much of the
agency's MAC business that all or most other players are
driven from the market, returning the agency to a
less-than-competitive environment." J.A. 11801 ¶ 7
continued to incorporate the Award Limitations Policy into
solicitations for other jurisdictions, including Jurisdiction
H ("JH"). See J.A. 15546-48. As stated in
the JH solicitation, the Policy explains:
CMS will not award more than 26% of the national A/B Medicare
workload, in A/B MAC prime contracts, to any single
contractor (single corporate entity). In addition, CMS will
not award more than 40% of the national A/B Medicare
workload, in A/B MAC prime contracts, to any one (1) set of
CMS is placing no limitation on the number of A/B MAC prime
contracts for which any entity, or entities, may submit
proposals. As A/B MAC prime contracts are awarded, the
awardee's Medicare workload base will be appropriately
adjusted, thereby potentially impacting other pending
15546. The workload percentages assigned to each
MAC jurisdiction are included in the solicitation. J.A.
solicitation explains that "CMS will determine whether
Offerors exceed the limitation on workload at the time of
award, and will exclude Offerors from consideration on such
basis at that time." J.A. 15547. Moreover, the
solicitation includes an "Exception," which states:
In order to ensure continuity in Medicare Fee-for-Service
operations, CMS retains the discretion to award a particular
A/B MAC prime contract to a particular contractor, even where
doing so would otherwise exceed the A/B MAC prime contract
Medicare workload allowed by this policy.
15548. We refer to this exception as the "Continuity
an offeror for the JH solicitation. NGS is also the current
contractor for Jurisdiction 6 (which represents 7.8% of the
current A/B Medicare workload), as well as Jurisdiction K
(which represents 12% of the current A/B Medicare workload).
Based on the Award Limitations Policy and NGS's current
contracts, NGS cannot win the MAC contract for Jurisdiction H
(which represents 13.5% of the current A/B Medicare workload)
because winning would cause NGS to exceed the Policy's
November 2017, NGS filed a pre-award protest with the
Government Accountability Office ("GAO"), arguing
that the Award Limitations Policy in the Jurisdiction 8
solicitation did not allow for full and open competition
because it precludes a successful best value offeror from
receiving a MAC award where the contract award would cause
that offeror to exceed the Policy's workload caps. GAO
denied the protest in January 2018.
then filed suit in the Claims Court on February 8, 2018.
Before the Claims Court, NGS challenged the Jurisdiction 8
solicitation as well as the Jurisdiction H solicitation
(which also included the Award Limitations Policy and remains
at issue in this appeal). The Claims Court rejected NGS's
timely appealed. We have jurisdiction under 28 U.S.C. §
reviewing a grant of judgment upon the administrative record,
we review the Claims Court's determination without
deference, reapplying the same standard of review applicable
in the Claims Court. Weeks Marine, Inc. v. United
States, 575 F.3d 1352, 1358 (Fed. Cir. 2009) (citing
Bannum, Inc. v. United States, 404 F.3d 1346, 1351
(Fed. Cir. 2005)). We therefore review the agency's
actions according to the standards set forth in the
Administrative Procedure Act, 5 U.S.C. § 706.
See 28 U.S.C. § 1491(b)(4). Under that
standard, we ask whether the agency's action was
arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law. 5 U.S.C. § 706(2).
applying this standard of review, we determine whether
"(1) the procurement official's decision lacked a
rational basis; or (2) the procurement procedure involved a
violation of regulation or procedure." Weeks
Marine, 575 F.3d at 1358 (quoting PGBA, LLC v.
United States, 389 F.3d 1219, 1225 (Fed. Cir. 2004)).
appeal requires us to analyze the propriety of the Award
Limitations Policy included in the JH solicitation. As
explained above, CMS developed the Policy to include in
all MAC contract solicitations. It is not tailored
to any solicitation. The rationale behind the Policy is
two-fold. First, the agency has business continuity concerns
related to overreliance on a particular MAC (i.e., that
Medicare claims operations will be put at risk if a MAC with
many contracts fails). Second, the agency has concerns about
maintaining a competitive, dynamic MAC marketplace over the
long term. The Award Limitations Policy attempted to address
these concerns by setting workload caps so that a particular
MAC cannot be awarded more than a certain percentage of the
total A/B Medicare market.
explained below, we reverse the Claims Court's decision
in this case. In doing so, however, we find it important to
delineate the bounds of what we do-and do not-decide.
outset, we take no issue with the particular concerns
animating the Award Limitations Policy or with CMS's
general ability to consider and address such concerns.
Indeed, NGS concedes that CMS may take appropriate steps to
address those very concerns. Appellant's Br. 12; see
also Oral Arg. at 12:29-12:48. In our view, the issue
presented is simply a procedural one-whether the agency
complied with the Competition in Contracting Act
("CICA") and the Federal Acquisition Regulation
("the FAR") when it attempted to address its
concerns by developing a blanket policy applicable to
all MAC solicitations that effectively excludes
offerors from competing, without documenting the need for
such action in light of a particular contract or a particular
offeror. We do not hold that agencies cannot ...