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On May 1, CGI Federal Inc., the Region B Recovery Auditor (RAC), elevated its pre-award bid protest over re-procurement of the RAC contracts to the Court of Federal Claims.

The lawsuit asks the court to order an injunction against the U.S. Department of Health and Human Services’ (HHS) award of the new RAC contracts and to eliminate the payment terms that prohibit RACs from being compensated until after the second level of appeal.

A request for quotes (RFQ) for the new RAC contracts was issued by the Centers for Medicare & Medicaid Services (CMS) sometime between mid-December 2013 and mid-January of this year. The Statement of Work (SOW) accompanying the RFQ contained a number of changes, the most significant of which is a change to the payment terms.  Currently, RACs bill and receive their contingency fees after the first level of appeal of a claim determination has been exhausted – which is to say in roughly 120 days. The new contracts will specify that payment cannot be made until after the second level of appeal is exhausted – which could be anywhere from 120 to more than 400 days.

CGI and HMS Holdings submitted pre-award protests to the federal Government Accountability Office (GAO) asking for a change to the new payment terms. On April 23, the GAO denied the protests. On May 1, CGI took its case to the court of jurisdiction – federal claims court. 

The lawsuit is very similar to the pre-award protest. CGI claims that the payment terms violate federal procurement law because they are inconsistent with customary commercial practices and restrict competition for the contract. To be consistent with its allegation on the latter point, CGI refused to submit an RFQ for the contract, indicating that the payment terms ”present an intolerable revenue flow model that … renders it commercially impracticable” for CGI to submit a quote.

This legal challenge is not likely to be too much of an obstacle for the government. The first hearing in the case (presumably on the question of injunctive relief) is scheduled for June 6. The judge could grant an injunction if he or she determines that irreparable harm would be done if the contracts are awarded. The government is likely to argue that irreparable harm would be done if the contracts were not awarded, as the program does support the anti-fraud, waste, and abuse efforts of the federal government. If the court does not award injunctive relief, CGI still could press its case, but resolution will not come quickly.

The lawsuit may delay award of the RAC contracts slightly. CMS previously indicated that the DME/HH RAC contract would be awarded in May. The A/B contract awards were expected in May or June. So the government may, out of respect for the court, await a decision on injunctive relief until the court rules in early to mid-June.

Either way, the lawsuit proves how hard it can be to serve the various constituencies in the RAC process. 

About the Author

Emily Evans is a partner at the Obsidian Research Group.

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