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.
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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.