Idaho dental contract contested; claims of unfair bidding

BOISE – A $50 million-a-year state contract to provide dental insurance coverage for Idaho’s poor is on hold amid complaints of unfair bidding competition.

Blue Cross had held Idaho’s Medicaid dental contract since 2010, but lost its hold on the program serving 277,000 people to Florida-based MCNA Dental, which has been winning similar contracts around the country.

Blue Cross has filed a lawsuit contending that while most of its bid is a matter of public record, MCNA and another company, Liberty Dental Plan of Nevada, submitted information kept confidential under the guise of trade secrets.

MCNA’s original submission redacted all or part of 507 of the 709 pages in the bid proposal and all attachments. Among the items deemed trade secrets were nearly 40 pages listing the qualifications of its personnel. Liberty, scored second by the state, redacted all or part of 55 pages of its 206-page proposal, plus 22 of the 63 attachments. The items claimed as trade secrets ranged from the project management team and organizational structure to the company’s business references.

Idaho regulators asked the companies to rethink the redactions – a request the companies met. MCNA, for example, agreed to open up 26 of the 34 attachments to its proposal, plus all or parts of 50 more pages.

Blue Cross filed a public records request in May for all the bids and scoring, after losing out on the contract. The state Department of Administration responded that it couldn’t provide the portions of the bids that the firms had identified as trade secrets.

“They over-redacted their trade secret information,” said Richard Boardman, attorney for Blue Cross. “The reason that my client wants to get the information that we don’t think is protected … is so that we can evaluate a possible bid protest or appeal.”

He added, “We just cannot believe that all these redactions are legitimate trade secrets.” He said Blue Cross of Idaho “redacted some information, but it was only a handful of pages.”

MCNA and Liberty have strenuously objected, saying they redacted the same items they’ve redacted when bidding on similar contracts in other states.

“Blue Cross knows it is not going to get this bid – it is a third-place bidder, not even close,” Kevin West, attorney for MCNA, argued in court this week. “So why does it want this information? It wants it to obtain competitive advantage. This is not John Q. Public asking for public records. This is a competitor whose only goal is to obtain a competitive advantage going forward in future bids.”

The state Department of Administration has taken the position that it’s not up to the state to determine whether the records in question are trade secrets or not – it’s up to the companies, which must defend their claims in court.

But Deputy Attorney General Carl Withroe also urged caution.

“If vendors would lose the ability to keep those protected, they either will not bid, which harms competition, or they would not provide those secret formulas, and the state and the people end up losing,” he said.

Carlos Lacasa, senior vice president and general counsel for MCNA and a former Florida state lawmaker, said, “It’s about anyone who wants to come to Idaho to bid on a contract but would not be able to do it” without risking trade secrets.

There is also litigation pending in Florida over similar issues.

Fourth District Judge Samuel Hoagland said the Idaho Public Records Act promotes “transparency in government … to serve the citizens.” But, he said, “businesses ought to be able to legitimately protect their trade secrets in the interest of competition and effective businesses. While those interests don’t always run head-on into each other, in this kind of a situation they have.”

While the public records case is pending, the Idaho judge hearing the Blue Cross suit is preventing the state from issuing the new contract.

“I can report to the court that the state and the current Blue Cross provider of the contract have entered into a contract that extends the time under the current incumbent coverage,” Boardman said. Plus, Blue Cross has posted a $100,000 bond to cover any damages that might occur.

Tom Shanahan, spokesman for the state Department of Health and Welfare, said the current contract actually runs through Aug. 31, but the process of awarding the new contract – which was to have gone forward now in anticipation of a Sept. 1 changeover – is on hold. Hoagland ruled this week that the restraining order will extend until two days after a final decision is entered in the case.

According to documents submitted to the court by the state, MCNA scored a technical rating of 600, compared with Liberty, 492.78, and Blue Cross, 475.52. Cost scores for the three were nearly identical: 399.6 for Blue Cross, and 400 each for Liberty and MCNA.

“The pricing stuff is open and disclosed,” said West, the MCNA attorney. “But the distinguishing elements are those carefully developed trade secrets, which we’re trying to protect here.”

MCNA’s attorney said the company spent $1 million preparing its Idaho bid.

“This involved an intensive team effort – you’ll hear about people being in a room together for six weeks,” West said.

Boardman, the Blue Cross attorney, said with so much of its competitors’ bids kept secret, it’s impossible to know if the state chose a winner fairly.

“We all know that the transparency element is critical to making sure that all aspects of government govern as they are supposed to, and that there isn’t some unfair advantage taken by anyone. That really is the basis for why we have a bidding process,” Boardman said. “That’s all we’re trying to do here.”