Notice Type: Justification and Approval
Posted Date: 07-JAN-13
Office Address: U.S. Department of Veterans Affairs;Strategic Acquisition Center;10300 Spotsylvania Ave;Fredericksburg VA 22408
Subject: R-- Actuarial Services
Classification Code: R - Professional, administrative, and management support services
Contact: Clifford SnipeContract Specialist (540) 479-8450 x248 mailto:Clifford.Snipe@va.gov [Contract Specialist] FAR 6.302-1
Description: Department of Veterans Affairs
VA Strategic Acquisition Center
LIMITED SOURCE JUSTIFICATION
1. Contracting Activity: Department of Veterans Affairs (VA) Veterans Health Administration Strategic Acquisition Center
10300 Spotsylvania Avenue
Fredericksburg, VA 22408
2. Description of Action: The proposed action is for an award of a new General Services Administration (GSA) task order for the procurement of actuarial and modeling services from Milliman, Inc. This effort is proposed to be awarded under a GSA Mission Oriented Business Integrated Services (MOBIS) Schedule 874-1 GS-10F-0224K. In accordance with Federal Acquisition Regulation (FAR) 8.405-6(a)(1)(i)(B) only one source is capable of providing the supplies or services required at the level of quality required because the supplies or services are unique or highly specialized. Milliman, Inc. is the only source capable of providing benchmarking tools to support the 2013 VA Enrollee Health Care Projection Model (ECHPM) and support for previous EHCPMs as necessary. This task order will also include a transition plan in the event that Milliman is not awarded the follow-on competed procurement.
3. Description of the Supplies or Services: The office of the Veterans Health Administration (VHA) Assistant Deputy Under Secretary for Health for Policy and Planning (ADUSH/PP) develops and maintains the VA Enrollee Health Care Projection Model (EHCPM). EHCPM is an actuarial-based model for projecting Veteran demand for VA health care. The EHCPM produces twenty-year projections of Veteran enrollment, utilization, and expenditures at a very detailed level for each fiscal year. The resulting projections are central in the development of the VA medical care budget, strategic and capital planning, and policy analysis. VA is dependent on the EHCPM projections to support the development of approximately 92 percent of the VA medical care budget on an annual basis. In addition, the EHCPM is used to analyze the impact of proposed policies, legislation including the Patient Protection and Affordable Care Act, regulations and external events (economic recession) on the VA health care system.
The EHCPM has been developed with the contracted support of Milliman, Inc. and currently utilizes the Milliman Health Cost Guidelines-"- . The current model is structured around a proprietary set of utilization benchmarking tools based on private sector data and adjusted to reflect demand by an enrolled Veteran population for comprehensive set of services offered by the VA. The utilization benchmarking tools are a component of the Milliman Health Cost Guidelines-"- . The Milliman Health Cost Guidelines-"- come from a variety of sources and are developed through a combination of statistical analysis, actuarial modeling, and the expert judgments of actuaries.
The function of the Milliman Health Cost Guidelines-"- benchmarking tools in the EHCPM is to project Veteran enrollees' total health care needs. Veteran enrollees have many other options for health care coverage (private insurance, TRICARE, Medicare, Medicaid, etc.). As a result, enrollees only receive a portion of the total health care they need through the VA health care system. For example, enrollees only choose to receive approximately 20 percent of all of the inpatient care they need from VA. As a result, VA's internal data sources cannot be used exclusively to project total health care needs of the enrolled Veteran population. The health care utilization benchmarking tools from the Milliman Health Cost Guidelines-"- enable VA to project the total health care needs of the enrolled Veteran population.
The 2013 EHCPM has been under development since June of 2012 and will support the
2015 VA Health Care Budget. The enrollment, utilization, and expenditure projections from the 2013 EHCPM must be delivered to the VHA Office of Finance by April2013. VHA begins the development of the 2015 VA Medical Care Budget in April2013. The
2013 EHCPM is required to support the budget process for fiscal year 2015 and ad hoc
follow up requests possibly continuing after June 2013.
ADUSH/PP requests a limited source procurement of actuarial and modeling services from Milliman, Inc., from January 1, 2013, to June 30, 2013, with a six (6) month option period to provide additional consultation support for the 2013 EHCPM and previous EHCPMs as necessary along with possible transition services.
The estimated total value of this procurement including the option period is $4.75 million. The period of performance is January 1, 2013, to June 30, 2013, with a six (6) month option period until December 30, 2013.
4. Authority: The acquisition is conducted under the authority of the GSA MOBIS Schedule 874-1. The authority permitting this limited source action is Federal Acquisition Regulation (FAR) Part 8.405-6 (a)(1)(i)(B) Only one source is capable of providing the supplies or services required at the level of quality required because the supplies or services are unique or highly specialized.
5. Rationale for Authority: Milliman, Inc., 501 N Broadway Ste 550, Saint Louis, MO
63102-2126, GSA contract number GS-10F-0224K, is the only company with the technical expertise to perform the required services. The 2013 EHCPM was developed and designed to use proprietary health care utilization benchmarking tools from the Milliman Health Cost Guidelines-"- as the starting point for modeling VA health care services for the 2015 VA Medical Care Budget. Further, all analyses supporting the 2013 EHCPM are aligned with the Milliman Health Cost Guidelines-"- health care service
utilization categories. Milliman, Inc. is the only company with expertise to complete the
2013 EHCPM because of the proprietary Milliman Health Cost Guidelines-"- used to create the 2013 EHCPM. There is no other company that could meet the deadlines of the VA to complete the EHCPM by April 2013. Additionally, due to the proprietary nature of the benchmarking tools, only Milliman, Inc. can support the 2013 EHCPM after its development and support previous EHCPMs as necessary.
While VA owns the EHCPM and its software, VA cannot acquire rights to the Milliman Health Cost Guidelines-"- benchmarking tools for its own use. The EHCPM, as currently designed, cannot be used to produce projection scenarios without the proprietary benchmarking tools from the Milliman Health Cost Guidelines-"- . Although
the Milliman Health Cost Guidelines-"- may be leased, its leasing policy is premised on
a number of principles, one of which is that non-Milliman users must be non--governmental clients with experienced health actuaries on staff. Therefore, Milliman, Inc. has precluded leasing to VA.
Market research, which is detailed in Section 8, has not identified any other actuarial firms with the customized health care utilization benchmarking tools that could be quickly and seamlessly integrated into 2013 EHCPM. A new contractor without access
to the proprietary benchmarking tools from the Milliman Health Cost Guidelines-"- would
have to (1) fundamentally restructure the EHCPM to integrate alternative health care utilization benchmarks or (2) develop a new model to estimate the health care that enrollees receive outside of VA without a benchmarking tool.
Based on the technical complexity of the EHCPM, VA's technical experts estimate that a new contractor would need a minimum of 10 months of development time to produce
a new EHCPM. The EHCPM has evolved over time into a very complex health actuarial
model in order to account for all of the known drivers of Veteran demand for VA health care. Projections are developed at a very detailed level: 13 enrollment priorities (1a,
1b, 2, 3, 4, 5, 6, 7a, c, 8a, b, c, d); two genders, 14 five-year age bands, and 501 geographic areas. In addition, projections are developed separately for enrollees who used VA prior to Eligibility Reform and for the Operation Enduring Freedom, Operation Iraqi Freedom, and Operation New Dawn Veteran population. Further, the EHCPM is supported by in-depth analyses of Veteran enrollment rate; enrollee mortality; morbidity; geographic migration; transition among enrollment priorities; reliance on VA versus
other health care providers; and the impact of drive time, unemployment rates, income, initiatives, policies, regulations, and legislation on demand for VA health care. As an example of the complexity of the EHCPM, over 150,000 reliance factors that vary by demographic and geographic detail are used each of the 20 projection years, and these factors vary by projection year.
Further, the EHCPM must produce projections for 20 years to support strategic and capital planning in VA. Most health actuarial models project out three years or less. Also, stakeholders require that the EHCPM separately quantify the impact on enrollment, utilization, and expenditures of all of the key drivers of demand for VA health care. Furthermore stakeholders require that the EHCPM can produce scenarios assuming any or all of those drivers change over the 20-year projection period. As a result, all the drivers of VA health care demand must be analyzed and input into the EHCPM separately. Therefore, based on the technical complexity of the EHCPM, a new contractor cannot begin work on January 1, 2013, and deliver enrollment, utilization, and expenditure projections to the VHA Office of Finance by the mission critical date of April1, 2013.
6. Efforts to Obtain Competition: VA conducted market research; however, market research did not identify any other actuarial firms with comparable health care benchmarking tools that could be quickly and seamlessly integrated into the 2013
7. Actions to Increase Competition: The Government is currently in the process of developing a competitive acquisition strategy for future actuarial services. It is anticipated that a future contract vehicle will be in place in the third quarter of 2013 timeframe which will allow for a transition of actuarial services and development of the
8. Market Research: The VHA ADUSH/PP is continuously monitoring the current market for actuarial services, specifically health care related actuarial services. VA technical experts conducted specific market research from November 8 through 28,
2012 to identify actuarial and modeling services capable of meeting the needs of VA relative to the 2013 EHCPM. VA technical experts utilized GSA search engines to gather information on potential actuarial services companies and compared them to those found on the website for the Society of Actuaries.
Based on the market research, VA technical experts and contracting personnel reviewed the capability of the following actuarial contractors: United Health Actuarial Service, Mercer, The Lewin Group, Actuarial Research Corporation, and Towers Watson Delaware, Inc. All companies were contacted by phone. Market research did not identify any actuarial firms with comparable health care utilization benchmarking tools that could be quickly and seamlessly integrated into the 2013 EHCPM. The other actuarial firms do have benchmark data, but without benchmark tools comparable to Milliman Health Cost Guidelines-"- , the 2013 EHCPM would require restructuring or the development of a new model. Actuarial Research Corporation and Towers Watson Delaware indicated that their companies do not have a benchmarking tool comparable to the Milliman Health Cost Guidelines-"- . Therefore, they are not capable of meeting VA requirements. Mercer indicated that they may have a benchmarking tool, but when asked did not provide VA technical experts with specific details to allow an assessment of their capabilities. United Health Actuarial Service, Mercer and The Lewin Group all stated that it will take three to four months to develop a new tool plus an additional two months to make adjustments/changes. Actuarial Research Corp stated that development of a new tool could take a total of 15 months to complete. VA's technical experts believe that the lower estimates derived from the market research reflect the level of effort required to develop a less complex model than the current EHCPM. VA historical experience from developing previous models indicate that the longer estimate of 10 months better reflects the level of effort required to (1) fundamentally restructure the EHCPM to integrate alternative health care utilization benchmarks or (2) develop a new model to estimate the health care that enrollees receive outside of VA without a benchmarking tool. Based on the technical complexity of the EHCPM, a new contractor cannot begin work on January 1, 2013, and deliver enrollment, utilization, and expenditure projections to the VHA Office of Finance by the mission critical date of April
9. Other Facts: The VA Contracting Officer that awarded the MOBIS Schedule has already determined that the prices are fair and reasonable. The Ordering Contracting Officer will seek additional price discounts and conduct a price analysis using historical pricing data.
10. Technical and Requirements Certification: I certify that the supporting data under my cognizance, which are included in this justification, are accurate and complete to the best of my knowledge and belief.
_________//Signed//_________________ Date: ____12/3/2012_____________
_________//Signed//_________________ Date: ___12/3/2012_______
11. Determination of Best Value: I hereby determine that the proposed contract action will represent the best value to the Government. VA has already determined that the prices on the FSS contract are fair and reasonable. Further price analysis will be conducted and subsequent negotiations held as necessary. Additionally, price discounts will be sought.
James S. O'Quinn
12. Procuring Contracting Officer Certification: I certify that this justification is accurate and complete to the best of my knowledge and belief.
_________//Signed//_________________ Date: ___12/3/2012______
13. Legal Sufficiency Certification: I have reviewed this justification and find it adequate to support a limited source award and deem it legally sufficient.
Iris Cooper Date
Executive Director, Office of Acquisition Operations