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State agency told to rebid botched child-support contract

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When a state agency tried to hire a new contractor to run a call center that fields inquiries about child support payments, an appeals panel intervened and called the process "deeply flawed" and "unreasonable, illogical and improper."

The move would have replaced the current company with a less-experienced firm that proposed running the center with about half as many live operators despite a projected increase in call volume. But in a rare move, the panel overturned the decision to award the new contract.

As a result, the state Board of Public Works on Wednesday will be asked to approve a $4.3 million extension of the current contract for more than a year while the Maryland Department of Human Resources takes another try at putting the contract out for bid. The work for now will be left in the hands of the Active Network Inc., which successfully appealed the department's planned award of the contract to Calls Plus-Attiva Soft joint venture.

The botched contract award could prompt questions from the public works board — made up of Gov. Martin O'Malley, Comptroller Peter Franchot and Treasurer Nancy K. Kopp — as much of the agency's expenses and employee time put into the complicated contracting process went essentially for naught.

"While the opinion was rather harsh, we can take it as an opportunity that we can build a world-class call center," Deputy Human Resources Secretary Leonard J. Howie said in an interview. "We just have to take their decision as guidance as what not to do in the future."

Howie said that while the department disagreed with the decision by the Maryland State Board of Contract Appeals, the agency would learn from it.

The board's ruling is the second time in recent months that the Human Resources Department has been criticized by a state watchdog agency for failing to do its job properly. In September, the Office of Legislative Audits found the department's Child Support Enforcement Administration failed to collect more than $1.7 billion in overdue child support payments over three years.

The call center that is the subject of the contract is the place custodial parents must call to report their concerns about missing payments.

Maryland procurement law allows agencies to award contracts based on a combination of technical and economic factors. Thus, if one company is far more qualified but a little more expensive, it can still beat out a less-capable low bidder.

But agencies are required to be fair and above board in conducting their evaluations. If a runner-up bidder thinks it hasn't been treated fairly, it can take its case to the appeals board — which holds broad powers to adjudicate disputes over how the state awards billions of dollars in contracts each year.

The Active Network went to the board when the department proposed handing the multimillion-dollar, five-year contract to a rival in June 2011. The board filed its decision overturning the proposed award in late April.

The company's lawyer, Eric J. Marcotte of Washington, D.C., declined to comment, on the instructions of his client.

Scott Livingston, a veteran procurement lawyer who had no role in the case, said it is rare for the board to overturn an award. It grants only about one in every 10 appeals, he said.

"The Board of Contract Appeals is not looking to overturn state agencies. It wants to uphold state agencies," Livingston said. "It takes a lot of errors on the part of an agency before the Board of Contract Appeals will overrule it."

Such a result, he said, happens only when there are failures at multiple levels — by a department's evaluation committee, procurement officer, agency head and the assistant attorneys general advising them. Howie said he disagreed with that assessment.

Though much of the board's opinion, written by member Dana Dembrow, is couched in the dry language typical of procurement controversies, the three-person appeals board was highly critical of some of the department's decisions about how to spend taxpayers' money.

In one case, the opinion notes, the department ranked the challenger ahead of the incumbent contractor in the key category of "qualifications" because it added up the evaluators' scores incorrectly. Even with that error corrected, the board ruled, the evaluators drastically overscored Calls Plus. The company, the opinion says, had "minimal qualifications" compared with Active Network, which has run the call center for a decade.

From the beginning, when the contract was first put out for bid in December 2010, the procurement was undermined by the department's erroneous estimate that the call center receives 11.6 million calls per year. In June 2011, after bidders had already submitted their "best and final offers," the department revised its estimate more than sixfold — down to 1.8 million.

The appeals board said the best explanation for the "gross error" is that an extra "1" found its way into the original estimate, and nobody at the human resources department noticed for six months. The department compounded that error by estimating that only 1 in 20 calls would require the services of a live operator, then revising that figure to 1 in 2 six months later.

While the board criticized the department for its erroneous and wildly changing projections, it did not base its decision to overturn the contract award on those blunders. "This is because all offerors were treated equally unfairly by DHR's repeated changes to the magnitude of call center services it is soliciting," Dembrow wrote.

The shifting projections contributed to "confusion and chaos" that led to other problems with the contract award.

Specifically, the board found that the late changes to the projected volume of operator-assisted calls — more costly than those resolved through automated systems — "severely altered contract performance needs very late in the procurement process."

It also took note of the department's decision to rank Calls Plus ahead of the much larger and more established Active Network in the category of financial stability.

"The board is mystified at this determination, which is contradicted by the undisputed evidence provided to DHR," Dembrow wrote. A former state delegate, he was joined in the opinion by former Del. Ann Marie Doory and former Sen. Michael J. Collins.

Howie defended the performance of department officials and said no disciplinary action would result from the board's findings. But he acknowledged that the department's changing estimates might have been confusing.

"It probably should have been a bit tighter than that," he said. "Obviously, the board had a serious issue with that."

Howie said he could not estimate the cost to the taxpayers of having to go back and start the contract award process from scratch. He said any costs might be offset by greater savings or expanded services under a revised plan.

"We are determined to make lemonade and to move forward," he said.

michael.dresser@baltsun.com

Copyright © 2014, The Baltimore Sun
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