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State-benefits computer contract draws protest

by Andy Davis | October 20, 2018 at 3:15 a.m. | Updated October 20, 2018 at 3:15 a.m.

The award of a contract to replace several computerized systems for enrolling people in government assistance programs, including Medicaid, has drawn a protest from one of the losing bidders.

The contract, awarded Oct. 4, calls for the state to pay Deloitte Consulting $95.9 million to install the system and about $30 million a year for maintenance and operations, for a total of up to $342.8 million over seven years.

The system would replace a Medicaid enrollment system that the state began installing in 2013 but never finished because of complaints about its performance and cost overruns.

In its protest submitted Thursday, an attorney for the consulting firm Accenture complained that the cost for the new contract is more than $96 million higher than what Deloitte estimated when it submitted its proposal on June 30, 2017.

At that time, Deloitte estimated that its seven-year cost would total $246.3 million -- about $87,000 less than the estimated cost of Accenture's proposal.

Deloitte's estimated costs then grew after state officials began negotiating with the firm and added items to the contract, including $3.7 million to create a new system for tracking compliance with the Arkansas Works work requirement.

Accenture wasn't given an opportunity to revise its bid in response to the changes as state law requires, the firm's attorney Michael Shannon of Little Rock wrote.

He cited Arkansas Code 19-11-230, which requires bidders to be allowed to revise their bids and submit a "best and final offer" when negotiations result in "material revisions" to a competitor's bid.

"Unless this process is reopened to Accenture, the State will enter into a $100 million no-bid contract," Shannon wrote.

Deloitte also failed to disclose information about problems with an eligibility system it installed in Rhode Island in 2016, Shannon said.

The poor functioning of that system led to a lawsuit by the American Civil Liberties Union alleging that the state was not processing applications for food stamps within the time frames mandated by federal law.

The judge in that case in November appointed a special master to develop a plan to speed up the processing of applications and ensure the state provides accurate reports on its compliance.

The federal government also ordered Rhode Island to submit a plan to fix problems with the system, Shannon wrote.

But when questioned about it by Arkansas officials, Deloitte said in a written response that it had not had to implement a corrective action plan for an eligibility system it had installed in the past five years.

Arkansas officials had also asked the company to include "a description of the circumstances surrounding the issues" with the system in Rhode Island. Deloitte said in a written response that the system "went live via a statewide 'big bang'" in September 2016, but didn't mention any problems.

Department of Finance and Administration spokesman Scott Hardin said protests are expected "anytime we're working with a contract in excess of a million dollars."

"It's just simply a chance for state procurement to go in, and the leadership to go in, and further audit and review those documents and make a determination of whether or not to sustain that challenge," he said.

The department's office of state procurement hadn't ruled on the protest Friday.

Problems with the installation of Arkansas' current Medicaid enrollment system initially led to widespread delays in processing applications and checking the eligibility of people already enrolled.

In late 2014, the state fired the lead contractor on the project, EngagePoint of Calverton, Md., and replaced it with Princeton, N.J.-based eSystems.

After the cost of the project almost doubled, to $200 million, Gov. Asa Hutchinson ordered much of the work to stop while state officials solicited a new contract.

Currently the state uses the system to process applications for some types of Medicaid, including Arkansas Works, which covers people who became eligible for the assistance under the expansion of the Medicaid program in 2014.

Applications for other types of Medicaid, including coverage for the elderly and disabled, are processed using an older system.

While Deloitte proposed installing new software, Accenture said it would complete the system using the same IBM software that's in place now. ESystems and IBM would be subcontractors.

"A 'rip and replace' approach at this point in your project evolution is risky, costly, and unnecessary," Accenture wrote in its proposal.

A seven-member committee, including staff members from the state departments of Human Services and Information Systems, evaluated proposals submitted by five firms, Hardin said.

Deloitte, a division of New York-based Deloitte Touche Tohmatsu, received the highest technical score, followed by Accenture, which has a corporate headquarters in Dublin.

The two firms and Optum, a division of Minnetonka, Minn.-based United Health Group, submitted cost proposals, with Optum's coming in the lowest at $144.6 million over seven years.

The award went to Deloitte based on a combined score that factored in the cost and technical evaluation.

Rep. Kim Hammer, R-Benton, who led a committee that investigated the implementation of the current system, said the contract with Deloitte protects the state if the firm doesn't deliver on its promises.

"It's a lot of money, but I think we're going to get our money's worth this time," he said.

A Section on 10/20/2018

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