Changes in state procurement sought after failed Omaha-area child welfare contract | Local

A state lawmaker on Thursday called for changes in the process that selected a troubled Kansas-based nonprofit to oversee care of abused and neglected children in the Omaha area and led to other major contract failures.

St. Francis Ministries won a five-year, $197 million contract in July 2019, based on bidding 40% less than the previous contractor. But the agency’s tenure was troubled from the start, and in December, state officials announced an early termination of the contract. 

The announcement came almost one year after Nebraska had been forced to sign a new, emergency contract with St. Francis to keep the agency operating. The 25-month, $147.3 million contract erased the original 40% cost difference.

Meanwhile, the agency never met caseload standards set by state law and continually fell short on other contract requirements. Child welfare advocates said the situation put children at risk.

At a Thursday public hearing, State Sen. John Arch of La Vista said this was not the first time that Nebraska’s procurement process led to the selection of a low-cost bidder that ended up failing to do the job.

He said a legislative investigation into the St. Francis contract found a history of what he called “procurement failures.” He said the problems spanned multiple administrations, involved multiple people in key roles and cost the state millions of dollars. 

“It became apparent we have a system issue,” said Arch, who led the investigative committee. “We did the process and checked all the boxes, and it led to a poor outcome.”

In its December report, the investigative committee recommended a thorough evaluation of the state’s procurement process and practices to address areas of potential improvement. Legislative Bill 1037, which Arch introduced, was the result.

The bill would require the Department of Administrative Services, which handles procurement for the state, to hire a consultant to do the recommended evaluation. The consultant’s report would be due by Nov. 15, giving lawmakers time to craft legislation for the 2023 session.  

On Thursday, Arch told members of the Government, Military and Veterans Affairs Committee that the evaluation offers an opportunity to improve state government. He said the potential $400,000 cost of the consultant would be a good investment. 

“This is an opportunity to correct things,” he said. “Yes, we want to save the taxpayer money, but we want to get the outcome we paid for.”

Administrative Services Director Jason Jackson testified in favor of the bill, saying it fits within Gov. Pete Ricketts’ interest in process improvement in state government. He said that state procurement laws have not been significantly altered in 20 years and that having clear guiding principles for the process would be helpful.

But he also defended the decision to contract with St. Francis, a decision in which his department worked with the Department of Health and Human Services. 

The contract “was made in good faith by child welfare experts and procurement professionals, doing what they believed the law and procedure obligated them to do,” he said.

HHS case managers are taking back responsibility for child welfare cases in Douglas and Sarpy Counties. The transition began in January and is slated to be completed by the end of June. HHS workers already handle cases in the other 91 counties.

Other notable procurement failures predated Jackson and Ricketts. They include the state’s 2007 contract to develop a major Medicaid claims processing and information system and a 2014 contract for a new Medicaid eligibility and enrollment system. 

In the first case, state officials signed a $45 million contract with FourThought Group, based in Arizona. HHS officials terminated the contract in July 2009, after only 15 months, saying the company “did not have the capacity to deliver the system they proposed.”

Kerry Winterer, the former CEO of HHS, told the investigative committee that the company “had never implemented such a contract and that many of their representations as to having products available to apply to the project were simply not true. The company appeared to be poorly capitalized and understaffed.”

By then, the state had paid FourThought more than $6.8 million in state and federal money. Later in 2009, the state reached a settlement to pay another $4.75 million.

In the second case, state officials signed an $80 million contract with Wipro, based in India. Four years later, HHS officials ordered a review of the project after Wipro requested a fifth amendment to its contract, which the state said would have delayed completion of the project by two years and added $28 million to the project total.

Officials concluded that there was no evidence that Wipro had completed any part of the project, despite the company reporting it had put 200,000 hours into the project. HHS terminated the contract in December 2018, after having paid Wipro $58.6 million.

The company filed a lawsuit alleging that Nebraska had failed to pay $15.5 million for work completed. The case is still pending.