In December, the state of Missouri sought a cure for its Medicaid problem.
The Department of Social Services believes there is too much waste, fraud and abuse in the program that serves mostly as a pass-through for federal money to provide health care to the state’s poorest residents, to children and seniors, and people with disabilities.
So the Office of Administration solicited a bid from the country’s biggest management consultants to perform a “rapid response” assessment of the health care program. Like many such requests for proposal, it offered a point system to grade the bids. Forty points would be awarded based on cost, 40 points on methodology and 20 more points for experience.
Within days, the bid was pulled back.
It was reissued in April.
Cost, apparently, was no longer much of an issue.
“What we’re saying is: Missouri wants the best there is,” said Sarah Steelman, head of the state’s Office of Administration, which administered the bid. The new bid issued in April only graded cost as 15 percent of the overall bid. Steelman said that the change was part of an overhaul in how the state seeks bids on some contracts. “Medicaid is a third of the budget. We want to get the best help we can.”
That help won’t come cheap.
On June 7, the state awarded the contract to consultant McKinsey & Co., for a price of $2.7 million. The cost was more than three of the other companies’ bids combined. All of the companies are big-name international consulting companies. There was one bid, from Accenture, that was slightly higher than McKinsey. All the others were significantly lower. Deloitte Consulting bid $981,000, Navigant bid $898,000; and KPMG bid $750,000.
McKinsey is the consulting company where the state’s chief operating officer, Drew Erdmann, worked before former Gov. Eric Greitens created a $130,000-a-year position in state government for him. Since Erdmann was hired, McKinsey has become a major player in Missouri state government. A key feature of their work appears to be secrecy. The state has a contract with McKinsey to manage a new human resources management system — apparently at no cost — but the survey of state employees that led to the program and the contract that created it is shrouded in secrecy.
So is McKinsey’s bid to study the state’s Medicaid program.
It is the only company that submitted redacted information to the state. Dozens and dozens of pages of the McKinsey bid are posted on the state’s bidding website, but blacked out entirely.
Steelman says the final bid, also on the website, has very little redaction, to protect “proprietary information.” But none of the other companies that bid redacted anything in their proposals.
On Wednesday, I asked Steelman if she had a problem with the redactions.
She did not. I asked her if she thought one of the other companies would protest the award.
“I would be surprised if they did,” she said.
On Thursday, the first protest came.
Dave Mosley, a managing director with Navigant, asked that the contract with McKinsey be rescinded and rebid.
“A bid process is required to be open and transparent once completed,” Mosley wrote. “This is anything but that. The documents online are unclear as to what was submitted by McKinsey and when. It is impossible for anyone, other than the State, to know what was submitted by the deadline of April 16, and what was submitted later.”
Mosley found multiple problems with the McKinsey bid. In its letter of submission, the company said it would only agree to the contract if the state agreed to certain “preconditions.” The other companies didn’t get that opportunity, Mosley said, and such preconditions render the bid unresponsive. Also, the state appears to have not followed state law requiring the “lowest and best” bid to be accepted, Mosley wrote, but instead the “best value” standard that is the law in some other states.
Mosley isn’t the only one concerned with the bid.
Asked by the Post-Dispatch to examine the bid documents, both Auditor Nicole Galloway, a Democrat, and Attorney General Josh Hawley, a Republican, expressed concern with the process.
“The attorney general’s office does not discern any basis for redaction in the bid proposal provided by the Office of Administration,” said Hawley spokeswoman Mary Compton.
Galloway declined to speak on the specific bid because her office is currently performing an audit on state contracting processes. But she pointed out that this contract is an example of why her office opposed attempts by the Office of Administration to pass a bill last legislative session to allow the commissioner to award some contracts up to $2 million without bidding.
“This type of situation is exactly why I’ve worked on legislation to bring a greater — and much-needed — level of openness to the state contract process,” she said.
One of the most unusual elements of the bid is its scoring on methodology.
McKinsey received perfect scores in every category, with identical comments that were copied and pasted in each section. Every other company was graded down — in some cases significantly — in each category, with specific criticisms outlined in each comment section.
The perfect grading allowed McKinsey to easily overcome its significantly higher cost.
Asked about that oddity, Steelman said, “I don’t know what went on in the meeting.”
The Office of Administration would not make Erdmann available for an interview. Steelman said he had no influence in the bid award.
She defended the process as completely above board.
“This is good government,” Steelman said. “It really is.”