Gov’t. Upholds $20B Military Contract to UHG

Health benefits administrator TriWest formally protested the government’s decision to award a $20.5 billion military contract to UnitedHealth Group, but an independent government agency upheld the decision.

The Government Accountability Office (GAO) on Monday upheld a U.S. Department of Defense decision to award a $20.5 billion contract to UnitedHealth Group, Inc., despite a formal protest by Phoenix-based TriWest Healthcare Alliance Corporation.

The contract—under which health care services will be provided to active duty and retired military service members and their families in 21 western states, including Minnesota—was awarded to UnitedHealth Group in March. But health benefits administrator TriWest, which has managed the military’s health services for 16 years, protested that decision with the independent GAO, claiming that its own bid was “significantly lower” than UnitedHealth’s, and saying it would “cost the government and taxpayers hundreds of millions of dollars simply to change contractors.”

Tricare Management Activity—the military’s health care program—originally awarded the contract to TriWest in 2009, but UnitedHealth formally protested the decision. Tricare agreed to reopen the bidding process and subsequently awarded the contract to UnitedHealth.

In an e-mailed statement, Ralph White, the GAO’s managing associate general counsel, told Bloomberg News that the agency found the Defense Department’s “evaluation was reasonable and denied TriWest’s protest on all counts.”

TriWest, meanwhile, said that it is “extremely disappointed” by the GAO’s decision.

“We will be discussing this decision with our company’s owners and the counsel who represent us, and will, in turn, be making a decision on what, if any, action we will take in response to the GAO’s denial of our protest,” TriWest CEO David McIntyre, Jr., said in a statement.

TriWest spokesman Scott Celley told Twin Cities Business in March that TriWest, which employs 1,700, was founded for the purpose of servicing the contract at stake and described it as the “dominant factor of our business.”

In a separate statement, UnitedHealth said that “the Defense Department chose a private-sector partner who can take a more comprehensive approach to the Tricare program to get the best value for beneficiaries.”

UnitedHealth is scheduled to take over the contract on April 1, 2013. The $20.5 billion overall contract value accounts for the military’s expenditures on health care services; UnitedHealth expects to receive about $1.4 billion for its administrative services over the course of five years under the terms of the contract.

UnitedHealth Group is Minnesota’s largest public company based on its revenue, which totaled $101.9 billion in 2011.