State Politics

NC audit faults DHHS no-bid contracting

In an audit of no-bid contracts the state Department of Health and Human Services awarded, the state Auditor’s office found multiple instances of the agency skirting rules in handing out millions of dollars in business.

Auditor Beth Wood’s office reviewed 59 DHHS contracts from 2012-14 at legislators’ request. The Joint Legislative Program Evaluation Committee had been reviewing state agencies’ contracting practices.

The audit released Monday found no evidence that a $6.8 million no-bid contract with the consulting firm Alvarez & Marsal was negotiated. DHHS hired the consulting firm to perform a number of functions for the Medicaid office. In the DHHS response, Secretary Rick Brajer said the contract was negotiated, but documentation of DHHS counter-offers was missing from the file.

No evidence of negotiation was found for a $6.9 million contract with Quadel Consulting Corp. That company is working with DHHS on the Transitions to Community Living program, moving people with mental illnesses from institutions to community settings. About 30 smaller contracts, most for temporary medical staff, had no documentation indicating they were negotiated.

Under certain circumstances, agencies are allowed to award contracts without open bidding. But state laws, administrative codes and other regulations require reviews before no-bid contracts are signed. Many of the no-bid contracts that required reviews by the Attorney General’s office, the Division of Purchase & Contract, or another office didn’t get them, the audit said.

Of the 59 contracts reviewed, 27 lacked written justification to waive competition. Twenty-five of the 27 were for doctors, nurses or interpretation services at DHHS facilities. No-bid contracts are allowed in emergencies, but DHHS used that explanation for 13 that were not emergencies, the audit said.

The audit cited two such contracts that were with former DHHS employees. Competition was waived for a $1 million contract due to an emergency need, even though the state had had agreements with the same person for 11 years.

Brajer said in the agency response that an exemption from the usual review process for contracts for direct medical services has been in place since 1991. That exemption covered 25 of the 27 contracts cited in the audit, he wrote.

Brajer said in his response that DHHS started reassessing its contracting and procurement practices in November 2015. “The initiative will strengthen policies and procedures to ensure required approvals are obtained,” he wrote.

Lynn Bonner: 919-829-4821, @Lynn_Bonner