Company: Board ‘rubberstamped’ $659M state contract

Jonathan Oosting
Detroit News Lansing Bureau

Lansing — A board representing top Michigan officials this week approved a $659 million contract for child Medicaid dental services despite a lawsuit from a competing company claiming “blatant favoritism” during the competitive bidding process.

The Healthy Kids Dental contract includes $237 million for Blue Cross Blue Shield of Michigan, $237 million for Delta Dental of Michigan and another $185 million to be allocated based on actual enrollment in the program for children in low-income families.

Florida-based MCNA Insurance Co. took the Michigan Department of Technology, Management and Budget to court last month, arguing the bidding process “unlawfully” favored Blue Cross, a Detroit-based nonprofit mutual health insurance company with significant “political clout.”

The appeal accused the state of holding secret discussions with Blue Cross during bidding, giving the insurer the exclusive ability to change its bid and choosing Blue Cross even though it intends to farm out much of the work to a subcontractor that may not have qualified on its own.

Chief Procurement Officer Jim Colangelo had already reviewed and rejected many of MCNA’s claims when he denied a company protest in late December.

“DTMB often reaches out to individual bidders as a matter of course and asks that they reconsider their red-line suggestions to the Standard Contract Terms,” Colangelo told an MCNA attorney Dec. 26. “Bidders remain within their rights to request modifications.”

The State Administrative Board approved the contract Tuesday despite the active litigation and a Jan. 31 letter from MCNA Senior Vice President Carlos Lacasa, who criticized award notice and asked to speak before the board, which noted his letter but did not hear directly from the company prior to approval.

“The manner in which DTMB has managed this procurement raises serious questions about the fairness, impartiality and sanctity of Michigan’s procurement process,” Lacasa wrote.

Colangelo told the board the bidding process for the Healthy Michigan contract followed standard policies and procedures, according to minutes from the meeting.

A representative for Attorney General Bill Schuette’s office, which is representing the budget department in court, abstained from the vote. But the award was otherwise unanimously approved by officials from the offices of Gov. Rick Snyder, Lt. Gov. Brian Calley, Secretary of State Ruth Johnson, Treasurer Nick Khouri, Superintendent Brian Whiston and Transportation Director Kirk Steudle.

Lacasa said Wednesday that MCNA is deeply disappointed the board chose to “rubber stamp” the contract “despite strong evidence of improprieties and illegalities during the bidding process.”

The “rushed approval, and rejection of our request to appear before the Board, furthers the disturbing perception that state officials and the Department of Technology, Management and Budget collectively dictated the outcome of the procurement process in favor of an unqualified bidder with political clout,” he said in a statement.

But budget department spokesman Caleb Buhs argued “the opposite” is true, saying the board likely would already have approved the contract if it were not for the MCNA protest, which was denied.

“We’ve actually delayed this to ensure that we fully responded to all their inquiries and their protest,” Buhs said. “We have followed our normal, due process here and don’t feel that this has been rushed.”

The Healthy Kids Dental program is a top priority for Gov. Rick Snyder, who signed a 2017 budget with extra funding to expand the program statewide. The $659 million contract mostly allocates federal Medicaid funding, with 35 percent coming from the state.

State attorneys from Schuette’s office representing the budget department are asking Ingham County Circuit Judge William Collette to dismiss MCNA’s appeal over the contract notice. They argue a “disappointed bidder” does not have grounds to challenge a public bid process. A hearing is set for Feb. 21 in Mason.

Blue Cross has declined to comment on the litigation, saying it “will let the legal system follow its course.”