Capitol Alert

California’s health exchange bent own rules in awarding big contracts

Covered California has been working with marketing firms and public relations companies to boost enrollment.
Covered California has been working with marketing firms and public relations companies to boost enrollment.

A new audit slams Covered California, the agency tasked with enrolling state residents in Obamacare, for not following rules when awarding lucrative contracts without a competitive-bidding process.

The report discovered nine out of 40 justifications given for the sole-source contracts were insufficient based on the agency’s own standards. Covered California’s policy at the time allowed sole-source contracts, but generally only when timeliness or unique expertise were required for the job.

“In some instances the justifications asserted reasons that the board had not approved for using a noncompetitive procurement process,” the report from state Auditor Elaine Howle stated. “In other instances the justifications failed to explain why Covered California was using a sole-source contract at all.”

Covered California officials did not dispute the audit but said they have adopted new contracting policies and have improved staff training on the subject.

Without competition between prospective firms, the health insurance exchange couldn’t be assured its contractors were the most qualified – or cost-effective – auditors said. They cited the example of the agency’s third-largest overall contract, a marketing and outreach pact with Weber Shandwick for nearly $134 million.

Weber Shandwick was given the job in May 2013, about a year after officials chose Ogilvy Public Relations in a competitive process to work on marketing and outreach. The agency told auditors it went in the new direction after determining Weber Shandwick would be better suited to carry out a high-stakes advertising campaign. However, none of the reasons the agency provided were justified under the board-adopted policy.

Covered California, following a competitive process, has since awarded its advertising and marketing work to Campbell Ewald Company for some $150 million. Ogilvy is now focused on public relations as part of its three-year, $6 million contract.

Exchange spokesman Roy Kennedy said the agency recently adopted a new contracting manual similar to the one used by the state.

The manual requires written justification for all noncompetitive bid contracts that exceed $25,000. Exchange officials have also developed a new form that gives specific guidance to staff when preparing justification in favor of a sole-source pact.

Christopher Cadelago: 916-326-5538, @ccadelago