Missouri's $2.7 million contract with McKinsey & Co., to perform an assessment review of the state's Medicaid system, was on-hold even before House Minority Leader Gail McCann Beatty asked new Gov. Mike Parson to do "a full and open review into whether standard bidding rules were followed."
Commissioner of Administration Sarah Steelman told reporters Wednesday afternoon, during an hour-long briefing: "One of the losing firms has protested," stopping the project until the state completes a review of the bidding process — using people who weren't involved in the original bidding procedures and reviews.
In a three-page letter to Parson on Tuesday, and released to the media Wednesday, McCann Beatty, D-Kansas City, noted McKinsey has "close ties to a high-ranking staffer in the governor's office" — Chief Operating Officer Drew Erdmann, hired last year by then-Gov. Eric Greitens — "following a highly questionable bidding process initiated under the administration of your predecessor."
Steelman and Karen Boeger, OA's Purchasing Division director, said Erdmann wasn't involved in creating requests for proposals (RFPs) or in reviewing submitted bids for any proposed contracts.
McCann Beatty also told Parson in Tuesday's letter that McKinsey & Co.'s $2.7 million contract was "more than the three lowest bids combined, and more than three and a half times the lowest bid of $750,000. Although the lowest bid isn't always the best bid, given that the three companies with lower bids all have national reputations and offered to do the job for significantly less than McKinsey, it raises red flags as to whether Missouri taxpayers are getting the best deal."
On Monday, McCann Beatty had issued a news release urging Parson to "take a strong stand in defense of Missouri taxpayers by immediately eliminating the unnecessary post of chief operating officer (Erdmann), canceling this shady and expensive deal and demanding openness and transparency in the state bidding process."
However, Parson spokeswoman Kelli Jones said: "The governor's office has a long-standing practice of wholly excluding itself from participating directly or indirectly with the procurement decision-making process.
"It is a process that is exclusively left to the Office of Administration and is a fully transparent process that this office supports."
In her letter to Parson, McCann Beatty noted OA originally issued a request for proposals for the Medicaid study, and the criteria for awarding a final contract was based on the proposed contract costs being 40 percent of the total bid.
That proposal was withdrawn, and a new one issued in April had the cost at only 15 percent of the total.
"This change seems designed to ensure that McKinsey's high-dollar bid wouldn't prove to be a large disadvantage," McCann Beatty told Parson.
Steelman said Wednesday the change occurred because the bidding process was changed, starting last year.
"We made some changes based on how we have a (new) set of criteria," she said, that the Greitens administration developed over the last few months, including more details about how bids are reviewed, "to let potential bidders know what was important in the RFP."
OA spokeswoman Brittany Ruess said, "The new approach includes clearer evaluation criteria.
"For instance, the initial solicitation request did not include weightings between vendor experience and reliability and the expertise of personnel, weightings for different sub-elements within the method of performance, nor specific scoring criteria."
Steelman added, "We want to put more emphasis on the quality of the proposal and the expertise of the team that's doing it, relative to the cost."
The new criteria — developed with input from leaders of all 16 state departments — included a lower emphasis on costs, as reflected in similar rules from other states that also sought Medicaid program reviews.
"This is best practices" in other states, Steelman said, mentioning Alabama, Nebraska, Ohio and Washington.
"The most important thing is to make sure that you get a firm that can actually do the work that they're supposed to be doing."
Boeger said the cost numbers in a bid are reviewed by her office, while people from the department seeking the contract review the details of a bidder's expertise in the area, previous experiences and proposed work plans for the contract being considered.
Steelman said the process meets Missouri's legal requirement that contracts be awarded to the lowest and best bidder.
Boeger said the new criteria gives potential contractors "specific factors (and) how much weight each of those items is worth. Everyone will be rated against these standards, and it's clear to the vendors what those standards are and what the points are associated with each of those."
Steelman said the whole reason for the contract is to improve the way Missouri delivers Medicaid services.
"Medicaid constitutes a third of the budget — approximately $11 billion," she explained. "We need to find different savings in Medicaid and still provide the quality health care that is needed by Medicaid recipients.
"I think it's worth the investment to solve that problem — it's a very big problem, and I would rather have a firm that's done this in other states and has the experience (to) get the job done."