Second HHSC Contract Scrapped Amid Questions About Open Bidding

_{*Editor's Note: This story has been updated to show when the Department of Family and Protective Services Contract was canceled.}

Nine months before Jack Stick resigned as the top lawyer for the Texas Health and Human Services Commission amid concerns over a $110 million no-bid contract awarded on his watch, he urged the same vendor to contact a sister agency — the Texas Department of Family and Protective Services — for related work.

DFPS, which includes the mammoth Texas Child Protective Services agency, ultimately did sign a $452,000 no-bid contract with the company, 21 Century Technologies Inc., for a pilot program to help it better track families investigated for child abuse. This week, the Tribune asked about the contract, which is listed as an active contract on the DFPS website. One day after the Tribune asked about the contract, it was notified late Wednesday that the DFPS's parent agency — HHSC — had canceled the contract. The HHSC had sent a letter, dated Dec. 12, to 21CT that it was terminating the contract.

"It's a huge disappointment for us," Irene Williams, the company's CEO, told the Tribune. HHSC spokeswoman Stephanie Goodman said the contract was canceled because of concerns that it was made outside of a competitive bidding process.

Williams said she met with Stick about the possible contract in March, shortly after Stick was promoted from deputy inspector general to chief counsel at HHSC. The company already had a larger deal with HHSC to crunch massive amounts of data in an effort to ferret out Medicaid fraud.

Williams said she talked to Stick — and later Doug Wilson, HHSC's inspector general — about her company's idea: meshing Medicaid data with CPS records in search of overlapping information that would help child abuse caseworkers. Caseworkers could be better informed about a family's history with law enforcement and doctors, and better locate where they were living.

Six months later, the DFPS signed a $452,000 contract for a pilot run of 21CT's untested software designed to launch the program. 

"DFPS has chosen to engage in a pilot with 21CT to evaluate the company's Child Protection Analytic Solution (CPAS) during the course of a 6-month period," the purchase order signed on Sept. 22 stated. "CPAS is designed to deliver actionable situational awareness that enables child protection/welfare investigators and caseworks to make better-informed decisions about the safety and wellbeing of children."

How the DFPS contract came to be, and its short lifespan, mirrors that of the larger $110 million contract 21CT won to help HHSC screen for Medicaid fraud. Instead of an open bidding process, the company was awarded the work after passing through the general vetting process of the Department of Information Resources, an agency that compiles lists of vendors approved for use by state agencies.

Stick was also a common thread for both contracts. He resigned last Friday to HHSC Commissioner Kyle Janek. Questions about the March meeting with Williams were sent to him on Wednesday, and he did not immediately respond. He remains at HHSC finishing projects. 

Goodman explained that the DFPS child welfare tool, like the 21CT's Medicaid fraud tool, both were placed on the DIR catalog and purchase orders — not contracts — were made for both. 

"As [HHSC] Commissioner Janek looked at how we decided on the original contract, and raised concerns that the process was not transparent and fair to all vendors, then given the DFPS contract was also done without a competitive procurement on our part, he decided it was best to also cancel that one," Goodman said. 

The cancellation of the DFPS contract does not mean there will not be a competitive bidding process later, she said, "but we want to make sure that any company that could do that work that has the chance to bid for it." 

Questions about 21CT and Stick's involvement in its selection for an earlier contract were the subject of several Austin American-Statesman stories this fall and last Friday. That same day, HHSC announced it would not be extending the Medicaid data-mining contract, which would have meant another $90 million beyond the $20 million already paid to 21CT.

HHSC said it would be offering the work up for competitive bid, something Williams said she looks forward to.

State Sen. Judith Zaffirini, D-Laredo, said she has been watching the situation with 21CT closely, and believes state contracting needs more monitoring, transparency and training for state employees with contracting duties.

“What we were trying to ensure is close monitoring at every stage of the process, beginning with the drafting of the documents and the solicitation and negotiation and management,” Zaffirini said.

“The fact of the matter is our state agencies and our higher ed institution manage thousands of contracts, and they have a value cumulatively of more than $100 billion."

Zaffirini said that while there normally is not a lot of interest in contracting legislation from other lawmakers, she hopes the controversy surrounding the 21CT contract will spark interest. 

"It’s difficult to understand how this could happen in this day and age,” Zaffirini said. “The process that was followed was legal — I don’t know of any law that was broken. But it just doesn’t pass the transparency test."