North Carolina judge denies EDS challenge to ACS award

North Carolina’s Office of Medicaid Management Information System Services

A North Carolina judge has upheld a state Department of Health and Human Services multimillion-dollar award to Affiliated Computer Services (ACS) to revamp the state’s Medicaid management information system.

According to the Jan. 5 decision by Wake County Superior Court Judge Donald Stephens, EDS, one of the bidders that protested the award, “had not produced any substantial evidence” that ACS systems didn’t comply with the state’s technical architectural standards.

Renee Montgomery, a North Carolina attorney who represented ACS in the proceedings, said the company adhered to the state’s standards in its proposal and characterized EDS’ arguments as smoke and mirrors.

She said all three members of the state’s technical architecture committee – which was one of several DHHS evaluation teams – indicated the ACS proposed systems complied with the state’s established standards in the final review.

“They scored ACS close to EDS in terms of technical architecture,” Montgomery added.

The judge also wrote that state government officials did not violate any procedural rules when they held a closed-door meeting with ACS officials that was not recorded or documented. EDS officials had alleged state officials violated their own requirements in the request for proposals when they didn’t record the meeting.

Stephens wrote that state rules required that only oral presentations to the seven-member selection committee, which was charged with several duties including making the final recommendation for the award, needed to be tape-recorded. DHHS wasn’t required to tape record meetings between the technical architectural committee and bidders.

EDS spokesman Bill Ritz said the company is evaluating its options. The company has until Feb. 6 to appeal the decision to the state Court of Appeals.

"It's been a very deliberative process and, in fact, has substantiated our solution in North Carolina," said John Crysler, managing director and senior vice president at ACS Government Healthcare Solutions group. He said the process has unquestionably affected the project because state staff had to turn their attention to the protest.

He said the more modern, Web-based system is scheduled for launch in April 2007.

Following a competitive bid, North Carolina officials awarded ACS the $171 million contract in April 2004. EDS, which had managed the state’s Medicaid information management system (MMIS) for more than 25 years, filed an immediate protest and a stop-work order on implementing the new system. A third bidder, Unisys, did not file a protest.

In June 2004, DHHS Secretary Carmen Hooker Odom rejected EDS’ protest, and the company appealed to George Bakolia, the state’s chief information officer. He referred the matter to Fred Morrison, an independent administrative law judge. In early 2005, Morrison recommended the state conduct a new bid process. But Bakolia rejected that idea, and EDS took the matter to court last October.

EDS and ACS have emerged as the top two vendors in the MMIS market. Crysler said New Hampshire recently awarded his company an MMIS contract, which EDS had held for years. In Florida, where ACS is the incumbent, EDS won the contract. However, following an ACS protest, he said, a Florida judge last week recommended the state award the contract to ACS. Crysler said the state has yet to make a final determination.