14-ORD-251

14-ORD-251

December 31, 2014

In re:        Express Scripts, Inc./Finance and Administration Cabinet

Summary:  The Finance and Administration Cabinet did not violate the Open Records Act in withholding pricing terms and performance guarantees as confidential and proprietary information. The record is insufficient to support a finding that the Finance and Administration Cabinet violated the Open Records Act in failing to provide documents concerning the evaluation of cost proposals in the possession of a contractor, and documents concerning the evaluation of technical proposals that it stated do not exist.

Open Records Decision

        The question presented in this appeal is whether the Finance and Administration Cabinet (“Finance”) violated the Open Records Act in withholding pricing schedules, performance guarantees, documents concerning the evaluation of cost proposals in the possession of a contractor, and documents concerning the evaluation of technical proposals which it stated do not exist. We find that Finance did not violate the Open Records Act in withholding pricing terms and performance guarantees as confidential and proprietary information. The record is insufficient to support a finding that Finance violated the Open Records Act in failing to provide documents concerning the evaluation of cost proposals in the possession of a contractor, and documents concerning the evaluation of technical proposals that it stated do not exist.

Background

        On July 18, 2014, Express Scripts, Inc. (“Express Scripts”) submitted an open records request to Jodyi S. Hall of Finance by email. Express Scripts requested:

The Proposal and Contract with CVS Caremark.

1.       The Proposals in response to the RFP received from all bidders. This includes all follow-up responses after the initial Proposal was submitted and all Best & Final Offers.

2.       The proposals, evaluations of all bidders including but not limited to point scores on question-by-question, category, and total bases, as well as additional written commentary or notes, executive summaries, any deviations to the Proposal, contract terms, and financial proposals.

This includes:

·       Proposals

·       The final evaluation

·       Interim evaluations before and after the finalist interviews

·       Evaluations of the finalist interviews

·       Evaluation of the initial Proposals

·       Documents or correspondence related to any parties contesting the award of the contract

We would also like to receive all segregable portions of otherwise exempt material. We would prefer to receive these documents electronically, if possible.

Ms. Hall responded on July 21, 2014 that “all Open Records Requests must be submitted to our Office of General Counsel.” On July 21, 2014, Express Scripts submitted a request to the General Counsel of Finance, requesting “RFP #758 1400000202 for Commonwealth of Kentucky PBM Proposals Evaluations Contract,” and forwarded its prior email request to the General Counsel of Finance.¹ 

        After requesting additional time to respond, Finance produced a CD with responsive documents to Express Scripts on Aug. 22, 2014. Finance produced the Request For Proposal (“RFP”) documents, the six proposals submitted, the Determination and Finding dated July 18, 2014, the Master Agreement, the final scoring sheet, and the final contract between the Commonwealth and CaremarkPCS Health, L.L.C. (“Caremark”). Finance indicated in an accompanying letter that it was withholding documents under KRS 61.878(1)(i) as preliminary drafts, KRS 61.878(1)(j) as preliminary documents, KRS 61.878(1)(c)(l) as confidential or proprietary, and KRS 61.878(1)(a) as personal information. Each proposal submitted contained several pages that were either redacted or identified by the bidders as containing confidential and proprietary information, including Express Scripts’ proposal, and the underlying information was not provided. Finance also produced a letter from Caremark, dated July 21, 2014, requesting to exempt Schedules C and D of the final contract from the Open Records Act as proprietary and confidential, with an accompanying legal analysis. Finance did not produce any notes or other memoranda regarding evaluation of the proposals.

        On Sept. 8, 2014, Express Scripts sent a letter to Finance alleging deficiencies in Finance’s response. Express Scripts objected on the grounds that Finance did not provide “anything and everything having to do with the price and technical proposals” or “notes, memoranda, or emails . . . . upon which those scores were purportedly based.” Express Scripts further objected that Finance’s response “did not identify the documents redacted or withheld, provide any basis for the extensive redactions or withholding, or state who determined what was to be redacted or withheld.”² Specifically, Express Scripts objected that Finance “produced nothing at all from AON Hewitt, the consultant that scored the cost proposals,” and that “at least a portion of AON Hewitt’s communications or memoranda to the Cabinet were part of the basis for final agency action, and thus should have been disclosed.” Express Scripts generally argued that “end bid prices as distinguished from ‘costing and pricing strategy’ are public records which must be available for inspection,” and cited to § 40.110 of the RFP for the proposition that the terms of the contract become open to the public upon signing.

        Finance responded on Oct. 1, 2014, determining that additional records could be released as non-exempt. On a CD, Finance provided a letter dated May 26, 2014 from Aon Hewitt detailing its summary analysis of cost proposals, seventy-two emails on a variety of subjects, Caremark’s Cost Proposal and Technical Proposal with significant portions redacted, as well as Express Scripts’ Cost and Technical Proposals with significant portions redacted. One of the emails contained as an attachment an Excel file entitled “Official Scoring Sheet – RFP 857 1400000202 – Pharmacy Benefits Manager Services.” The Excel file contained sheets concerning the evaluation of the technical proposals, with a few pages of brief notes for each proposal evaluating the responses to the technical questionnaire and providing consensus scores, as well as summary pages of scores. Finance stated that “emails being withheld include attorney client privileged communications, non-responsive emails, and preliminary communications that were not the basis of a final action or incorporated into scoring.” Finance further stated that “the enclosed materials exclude or redact only material printed on green sheets . . . . Schedule C and Schedule D of the contract, containing pricing terms and performance guarantees, have also been excluded as proprietary documents.”³

        On Oct. 14, 2014, Express Scripts sent another letter to Finance, detailing both objections to Finance’s response to the open records request and the pending initial and preliminary protest. Express Scripts again argued that Schedules C and D of the contract with Caremark are “end bid prices as distinguished from ‘costing and pricing strategy,’” and that § 40.110 of the RFP provided that the contract would become public upon signing. It further objected that Finance withheld “information concerning Aon Hewitt’s methodology, assumptions, and formula” and “documents showing any individual judges’ scoring . . . or showing precisely how points were awarded and deducted” for the technical proposals. Express Scripts again also argued that Aon Hewitt’s methodology and scoring were adopted as the basis for a final action, and therefore no longer preliminary. Finance subsequently informed Express Scripts that the “Official Scoring Sheet” provided in the Excel file was not the final version of the document, and supplemented its response with the final version of the scoring sheet for the technical proposals.⁴ On Oct. 24, 2014, Finance responded that Schedules C and D of the contract with Caremark were similar to those withheld by other bidders, including Express Scripts, and Caremark had provided a sufficient legal analysis as to why they were confidential and proprietary. Regarding Aon Hewitt’s methodology, formulas, and the judges’ individual scoring documents, Finance stated that “additional records regarding internal processes and procedures AON Hewitt utilized in issuing the Analysis of Cost Proposals are not in the care or custody of the Finance Cabinet and the Cabinet has no obligation under the Open Records Act to obtain such records.”

        On Nov. 21, 2014, Express Scripts initiated this appeal, objecting to Finance’s withholding of Schedules C and D, documents regarding Aon Hewitt’s evaluation of the cost proposals, and notes and memoranda regarding the cost and technical proposals. Express Scripts again argued that “end bid prices as distinguished from ‘costing and pricing strategy’ are public records which must be made available for inspection.” Express Scripts also again cited to § 40.110 of the RFP, which stated “upon signing of the Contract by all Parties, terms of the Contract become available to the public, pursuant to the provisions of the Kentucky Revised Statutes.” Express Scripts also stated that it: 

finds it exceedingly difficult to believe that the Cabinet has no records or documents reflecting (i) information concerning AON Hewitt’s methodology, assumptions, and formula used in arriving at its final prices, (ii) individual judges’ scoring that underlies the consensus scores, or (iii) how points were awarded and deducted to arrive at the final scores for each section of the Technical Proposal.

Express Scripts concluded by requesting that “the Attorney General make an independent review of all documents in the Cabinet’s possession or control to determine whether the Cabinet has inappropriately withheld any documents subject to disclosure.”

        Caremark responded to the appeal on Dec. 4, 2014. Caremark argued that the information in Schedules C and D is confidential and proprietary pricing information under KRS 61.878(1)(c)(1), that Finance properly stated that it did not possess any additional information concerning Aon Hewitt’s analysis, and that it is not the Attorney General’s role to review another agency’s documents to find documents which the agency states do not exist. Finance responded to the appeal on Dec. 5, 2014. Finance argued that KRS 61.878(1)(c)(1) continues to apply after a contract is awarded, and that the information in Schedules C and D is negotiated network drug rate/discount pricing guarantees and performance guarantees, which are confidential and proprietary. Finance reiterated that it did not have any additional documents in its possession concerning Aon Hewitt’s methodology and scoring, and the consensus scoring of the technical proposals was done in group meetings and not individually.

Analysis

I.       Schedules C and D of the Contract

        KRS 61.878(1)(c)(1) exempts from the Open Records Act “records confidentially disclosed to an agency or required by an agency to be disclosed to it, generally recognized as confidential or proprietary, which if openly disclosed would permit an unfair commercial advantage to competitors of the entity that disclosed the records.” “Although this exemption has not generally been construed to exclude bid proposals, once those bids are open and a vendor selected, this office has recognized that bid proposals which contain secret commercial valuable plans and formulas may qualify for exclusion under KRS 61.878(1)(c) 1.” 96-ORD-135. Schedule C is entitled “Pricing Terms” and contains negotiated network drug rate/discount pricing guarantees and rebate guarantees. Schedule D is entitled “Performance Guarantees.” 

        First, the schedules were confidentially disclosed to Finance as part of their bids. Section 50.220 of the RFP provides that “if a proposal contains information that a Vendor declares proprietary in nature and not available for public disclosure under the Kentucky Open Records Act, each sheet containing such information must be clearly designated as proprietary and printed on green paper.” Section 50.220 of the RFP expressly contemplates submission of confidential and proprietary information and the manner in which it is to be submitted. Caremark’s compliance with that section indicates that it intended the material to be submitted confidentially.

        Second, the information in the schedules is also generally recognized as confidential or proprietary. Caremark claims “pricing strategy utilized, and performance guarantees offered, can each vary significantly among vendors . . . . Such information speaks . . . to the detailed pricing strategy and solution architecture of the vendor.” “Information concerning the inner workings of a corporation is ‘generally recognized as confidential or proprietary’ . . . .’” Hoy v. Kentucky Indus. Revitalization Auth., 907 S.W.2d 766, 768 (Ky. 1995). The fact that all of the other bidders, including Express Scripts, redacted similar information is additional evidence that it is generally recognized as confidential or proprietary.

        Third, if disclosed, the Schedules would give an unfair commercial advantage to Caremark’s competitors. Caremark states that “knowledge of this pricing information would likely be used to attempt to undercut Caremark . . . to the great competitive detriment of Caremark.” “Pricing schedules can be considered as secret commercially valuable plans and formulae which if openly disclosed would permit an unfair advantage to competitors . . . .” OAG 88-1. Accordingly, all three of the elements for the application of KRS 61.878(1)(c)(1) are met.

        Express Scripts first argues that “Schedules C and D to the Contract are not ‘records confidentially disclosed or required by an agency to be disclosed to it.’ . . . As schedules C and D were not ‘disclosed’ to the Cabinet, but were simply drafted as a part of the Contract . . . the Cabinet has no basis for withholding them from public disclosure.” However, this is refuted by Caremark’s submission of the schedules on green sheets as required by § 50.220 of the RFP. Express Scripts next cites to § 40.110 of the RFP, which states that “upon signing of the Contract by all Parties, terms of the Contract become available to the public, pursuant to the provisions of the Kentucky Revised Statutes.” Express Scripts interprets this section to require that the entire contract be made open to the public. Express Scripts neglects the latter portion of this section, which indicates that the Kentucky Revised Statutes, including the exemption for confidential and proprietary information in KRS 61.878(1)(c)(1), still apply. 

        Express Scripts then cites to 03-ORD-235 for the proposition that “end bid prices as distinguished from ‘costing and pricing strategy,’ are public records which must be made available for inspection.” More fully, 03-ORD-235 stated that “the RFP . . . and the resulting contract, including end bid prices as distinguished from ‘costing and pricing strategy’ . . . are public records which must be made available for inspection, but the underlying proposal may be exempt if it falls within the parameters of KRS 61.878(1)(c) 1.” 03-ORD-235 stands for the proposition that end bid prices are public records, but costing and pricing strategy are not. Caremark’s end bid price has been made publicly available and is not in dispute. Schedules C and D detail Caremark’s costing and pricing strategy, which meets the elements for the exemption in KRS 61.878(1)(c)(1). Further, 03-ORD-235 expressly held that the “denial of the request . . . ‘including Schedule B pricing . . .’ was proper under KRS 61.878(1)(c) 1 and did not constitute a violation the Act.” 03-ORD-235 actually supports Caremark’s denial of Express Script’s request. 

        Express Scripts also argues that “there is little to no explanation of how or why the redacted information would actually provide competitors with an ‘unfair commercial advantage.” . . . CaremarkPCS’s invocation of keywords without actual explanation is insufficient to meet the Cabinet’s burden of proof.” In its letter to Finance requesting to keep Schedules C and D confidential and in its response to this appeal, Caremark has adequately explained how the information would provide competitors an unfair commercial advantage. Again, the fact that all bidders withheld similar information is evidence that they all regarded it as confidential and proprietary information which they did not want competitors to have.

        Schedules C and D of Caremark’s proposal meet the elements of the exemption in KRS 61.878(1)(c)(1) for confidential and proprietary information. Accordingly, Finance did not violate the Open Records Act in withholding them.

II.       Aon Hewitt Documents

        Express Scripts also appeals Finance’s denial of its request for notes, memoranda, emails, and other documents relating to Aon Hewitt’s scoring of the cost proposals. Express scripts “finds it exceedingly difficult to believe that the Cabinet has no records or documents reflecting . . . Aon Hewitt’s methodology.” 

Aon Hewitt’s letter dated May 26, 2014 providing its analysis of cost proposals states that “as requested, Aon Hewitt has completed the analysis of cost proposals.” In its Determination and Finding dated July 18, 2014, Finance stated that “the cost scores for all proposals were determined by the Personnel Cabinet’s actuary, Aon Hewitt. Aon Hewitt provided a final cost for each vendor with the associated score based on the method outlined in Appendix 17A and Section 70 of the RFP.”⁵ Aon Hewitt analyzed the cost proposals at the request of Finance and scored them according to the criteria provided. 

        Although the Open Records Act applies to documents that are held “at the instance of and as custodian on the agency's behalf,” 05-ORD-007, it “applies only to records which are in existence, and in the possession or control of a public agency. It does not impose an obligation on agencies to create, procure, or retrieve a record to accommodate a request.” 08-ORD-206; 05-ORD-157; 99-ORD-139. “A private contractor . . . cannot be properly characterized as a ‘public agency’ . . .  such records are not ‘public records’ . . . as they are not ‘prepared, owned, used, in the possession of or retained by a public agency.’” 08-ORD-206. There is no evidence that Finance prepared, requested, or used any of Aon Hewitt’s internal documents other than the summary analysis provided. ⁶ We are not “empowered to declare, in the context of an open records appeal, that [a public agency’s] failure to require that the records be submitted to it, and managed and maintained as public records, constitutes a violation of the Open Records Act.” 09-ORD-073; 08-ORD-206; 99-ORD-202. The criteria used in the scoring of the cost proposals, and Aon Hewitt’s summary analysis of them, have already been provided to Express Scripts. Although Aon Hewitt may have prepared internal documents as part of scoring the cost proposals according to the criteria provided, the record is insufficient to demonstrate that Aon Hewitt held such internal documents at the instance of and as custodian of Finance. Accordingly, Finance did not violate the Open Records Act in failing to request documents in the possession of its contractor.

III.       Technical Proposal Documents

        Express Scripts also appeals Finance’s denial of any individual judge’s scoring or how points were awarded in the technical proposal. Section 60.000 of the RFP states that “the Commonwealth has established a Proposal Evaluation Committee to review, evaluate, and verify” the technical proposals, and § 60.010 of the RFP provides the scoring criteria for the technical proposals. Finance’s Determination and Finding states, “the evaluation committee met for scoring and the consensus scoring for all proposals is included in the attached ‘Official Scoring Sheet.’” The Official Scoring Sheet contains notes for each technical proposal briefly indicating how the bidders’ responses affected the calculation of the score, and was provided to Express Scripts. Finance argues that it “carefully reviewed the records known to exist regarding RFP 758 1400000202 and was unable to locate any responsive records. Additionally, the Office of Legal Services inquired with the Finance Cabinet procurement staff assigned to RFP 758 1400000202 for conformation that no such records existed.” Finance further argues:

it is not unreasonable that such records would not be created during the course of the solicitation process. A consensus scoring based award typically only generates scoring results for the evaluation team as an undivided whole. As is generally the case with consensus scoring, this evaluation team weighed the relative merits of each bid in group meetings or discussions as a more efficient and expedient alternative to creating and circulating memoranda between members of the evaluation committee.

Finance maintains that it searched the records known to exist and did not find any additional responsive records, other than the Official Scoring Sheet, and that it is not unusual in solicitation processes for there to be a lack of documents reflecting deliberations in scoring.

        “A public agency cannot afford a requester access to a record that it does not have or which does not exist.” 14-ORD-027. Express Scripts concedes that “to the extent that the Cabinet does not possess any such documents . . . there is nothing for the Cabinet to produce. “ However, Express Scripts does not find Finance’s assertion that there are no more responsive documents to be credible. It is not the role of this office to assess an agency’s credibility. “In general, it is not our duty to investigate in order to locate documents which the public agency states that it does not possess.” 09-ORD-032. “It is the function of this office to review the course of action taken by a public agency, not to find the documents that a party is seeking to inspect.” 05-ORD-157.         This office “assumes ‘a modicum of good faith from both parties to an open records appeal: from the requester in formulating his[/her] request, and from the official custodian in providing the records which satisfy the request.’ . . . Further, this office has consistently recognized that ‘it is not, in general, within our statutory charge to resolve questions of fact or to otherwise act as a trier of fact.’” 12-ORD-110. Finance has stated that no documents reflecting the calculation of scores for the technical proposal exist, other than the Official Scoring Sheet, and while Express Scripts may plausibly contend that Finance’s statement may not be credible, it is beyond the purview of this office to resolve that dispute in this limited forum. Accordingly, on this record, we cannot find that Finance violated the Open Records Act in withholding documents regarding the evaluation of the technical proposals which Finance stated do not exist.

Conclusion

        In summary, Finance did not violate the Open Records Act in withholding pricing schedules and performance guarantees from RFP proposals as confidential and proprietary information. The record before us is insufficient to support a finding that Finance violated the Open Records Act in failing to provide documents concerning the evaluation of cost proposals in the possession of its contractor, or documents concerning the evaluation of the technical proposals which it stated do not exist.

        A party aggrieved by this decision may appeal it by initiating an action in the appropriate circuit court pursuant to KRS 61.880(5)(a). The Attorney General should be notified of any action in circuit court, but should not be named as a party in that action or any subsequent proceedings.

                                                Jack Conway

                                                Attorney General

                                                Matt James

                                                Assistant Attorney General

#481

Distributed to:

John David Dyche

Geri E. Grigsby

James A. McKee