Missouri is spending roughly $4 million on four consulting contracts aimed at everything from revamping the state’s strategy for economic development to overhauling its Medicaid program.
Each was awarded in a streamlined process that bypassed the state’s normal procedures for bidding on public contracts.
State officials say there was nothing problematic about how the contracts were awarded. The process was fair and followed state law, and the companies that won were the best qualified to perform the job the state needed.
Some Missouri lawmakers aren’t so sure.
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They’ve begun to raise concerns about what they see as a lack of transparency as well as whether the process shut Missouri companies out of competing for the lucrative contracts.
Others take it a step further, questioning the integrity of the process and whether it was tilted in favor of certain companies.
The House budget committee asked pointed questions about one of the contracts last month. It plans to hold another public hearing as early as next month to coincide with the legislature’s annual veto session.
“There are a lot of red flags here,” said House Budget Chairman Scott Fitzpatrick, R-Shell Knob. “I’m not drawing any conclusions, but there are certainly a lot of questions that need to be addressed to ensure the public that everything was on the up and up.”
Rep. Peter Merideth, a St. Louis Democrat who serves on the House budget committee, was more direct.
“Certainly there’s an appearance of corruption,” Merideth said. “But I worry that there could be actual corruption.”
Of the four contracts garnering attention, the one getting the most criticism was awarded to New York-based McKinsey & Co.
For $2.7 million, the company was tasked with assessing Missouri’s Medicaid program to identify any fraud, waste or abuse.
McKinsey & Co. is the former employer of Drew Erdmann, who last year accepted the position of chief operating officer. Missouri’s executive branch had never had a COO before then-Gov. Eric Greitens created the position.
News of the contract drew immediate criticism from Missouri Democrats, who noted that McKinsey’s bid was higher than the combined total of three other bidders. They also noted that the way the bids were scored was changed in the middle of the process to lower the impact of McKinsey’s higher cost.
One of the losing bidders has filed a protest, asking for the contract to be rescinded and rebid.
Erdmann did not respond to a request for comment Friday, but Sarah Steelman, commissioner of the Office of Administration, did.
Steelman has vehemently denied that anything untoward took place during the bidding process.
At last month’s House budget committee hearing, she said flatly that the bidding process was both fair and objective and that Erdmann had no role whatsoever at any stage.
The governor’s office plays no role in any stage in the procurement process, she said, and that includes Erdmann.
“There is just a misunderstanding of the procurement process,” Steelman said. “We take every precaution to protect the process and the integrity of it, and keep any politics out of it.”
But lawmakers’ concerns go beyond just how the contract was ultimately awarded. They are raising questions about how certain companies were allowed to bid on the contracts while others were excluded.
Normally when a state is contracting for services, it creates a request for proposal that is publicized so that any companies interested in winning the contract can submit a bid. Those bids are then scored in an objective process that seeks to ensure that the highest quality and most cost effective proposal is selected.
For the four contracts in question, however, a different process was followed called “cooperative purchasing.”
State law allows Missouri to use contracts awarded by other states after they use their formal, competitive bidding process. In the case of the four consulting contracts, Missouri used a list of preferred vendors vetted by Massachusetts.
The relevant category of the Massachusetts contract had 65 potential vendors.
Only the companies picked to submit bids had a shot at the contracts. Companies that weren’t on Massachusetts’ vendor list were not made aware of the possible contract and were not eligible to submit a bid.
Using this method both expedited the process and helped ensure that only companies that were qualified were involved, Steelman said Friday.
“When I took over, there were some procurements that had taken two years,” Steelman said. “It’s my job to make sure we maintain the integrity, fairness and objectivity of the process but also accelerate the procurement process and get things turned around more quickly.”
Karen Boeger, director of the Office of Administration’s division of purchasing, said the decision about which companies would get to bid was left up to the state agencies seeking the services.
“I have to rely on them and their expertise,” she said. “On the question of which vendors should we send this to, I have to look to them to figure that out.”
For the Medicaid contract, five companies were selected by the Department of Social Services, notified of the possible contract and allowed to submit bids.
How the department narrowed the field from 65 to five is unclear.
Rebecca Woelfel, spokeswoman for the department, said only that department leadership picked five vendors from the list “based on their reputation.” She would not specify who was involved in the decision or what qualifications they used to make their determination.
The same goes for two consulting contracts in the Department of Revenue.
For one contract, which aimed to help the department become “the most effective and efficient state economic development agency in the Midwest,” four vendors were chosen out of the 65 available in the Massachusetts contract.
For the second contract, to study the state’s workforce development needs, five vendors were allowed to bid.
The multinational firm of PricewaterhouseCoopers ultimately won both contracts — earning $650,000 and $400,000 respectively.
Maggie Kost, spokeswoman for the Department of Economic Development, said the vendors were chosen by the department’s leadership team because they had “the qualifications and past experience to meet the project’s needs.”
“Had we not used this process, we would still be in the early phases of the project,” Kost said, “and instead we’re very near to delivering our preliminary recommendations.”
An information technology consulting contract for the Office of Administration also used the Massachusetts contract. Three vendors were allowed to bid, with the $150,000 award going to another multinational firm — Accenture.
Fitzpatrick said he understands why the state would want to use an expedited process.
“There’s merit to what they want to do,” he said. “But whether they are doing it the right way, I don’t know. It’s something that we’re going to be taking a look at.”
Merideth said he understands why the state would use the quicker model to contract for supplies. But using it for consulting contracts, he said, doesn’t seem appropriate.
“If we need staples, and another state has already vetted who has the best price for staples, then that’s great,” he said.
He said there is a lack of transparency in the process.
“There was no need to move so fast for consulting contracts,” he said. “This is not how government is supposed to work. The process has to be done out in the open.”
That’s especially true, Merideth said, given the scandals that plagued Greitens’ administration during his 17 months in office.
Greitens faced nearly constant accusations of corruption, most stemming from his use of dark money nonprofits. Because he was raising so much money from anonymous sources, Greitens was bombarded with questions about his policy positions, appointments and state contracts.
“It’s conceivable that these companies are best equipped to make us more efficient, and then the state streamlined the process to cut through bureaucracy and red tape to get the contracts to the companies they believed deserved them,” Merideth said. “But it’s not hard for me or the citizens of Missouri to look at all this and imagine there was foul play involved.”