DHHS contract grows to nearly $8 million

A no-bid state consulting contract originally valued at $3.2 million for a Washington, D.C., consulting firm has grown to almost $8 million one year later, records show.

The state Department of Health and Human Services’ Medicaid office extended its contract this month with Alvarez & Marsal, which specializes in “turnaround management” and “performance improvement.”

The contract and extensions, also awarded without competitive bidding, are to oversee Medicaid finances.

The contract was originally signed a year ago. In June, the state expanded the firm’s duties and increased the maximum payment to $6.8 million. This month, the work was extended for another five months at a cost of nearly $1 million more.

The company first had a relationship with the state in 2011 as a subcontractor on a project studying whether the state should consolidate the administration of Medicaid and the State Health Plan.

The extra time in the latest extension is needed to finish a reorganization and to help with the budget and financial forecasting while the work is eventually taken on by newly hired employees, according to DHHS.

Medicaid Director Robin Cummings said in a statement that the work covered by the contract is now in its final phase, and the extension is needed to ensure a smooth transition. That increases the contract by $970,758 to a total of $7.8 million. About $873,000 of that is for services and about $97,000 is for expenses, according to state records.

The company’s three principals have billed the state at rates of $473 an hour; five directors billed at $394 an hour; and nine analysts billed at $242 an hour. At least two of the consultants have since been hired by DHHS in full-time jobs.

DHHS Secretary Aldona Wos told legislators in September that the company was given the no-bid contract because it was an emergency, which made the work not subject to bidding laws.

She said the state agency didn’t have enough people with the necessary skills to oversee the $13 billion health insurance program for the poor, elderly and disabled.

Campaign finance records show that the firm contributed $25,000 to the Republican Governor’s Association in April 2012 as Gov. Pat McCrory was running for office, and that the donation was used in the campaign to help elect him. Alvarez & Marsal has made other contributions to the national association over several years.

Charles Spies, an elections law attorney speaking for Alvarez & Marsal, said the donation was not meant for North Carolina.

“Alvarez & Marsal in 2012 made their annual RGA renewal contribution of $25,000,” he said. “That contribution was not designated or earmarked for any particular state or candidate. The RGA, because of a quirk in North Carolina reporting laws, apparently reported the contribution in North Carolina, but there was no intent of a donor for it to be spent there.”

This story was originally published February 16, 2015 at 10:15 AM with the headline "DHHS contract grows to nearly $8 million."