Was 21CT Contract Built on Lie to Federal Agency?

Three years ago, when the Texas Health and Human Services Commission wanted software that investigators in its Office of Inspector General could use to track down Medicaid fraud, it asked the federal government to foot most of the $20 million bill.

In its request, the agency assured its Washington counterparts — in writing — that the contract had been competitively bid out.

That was not true.

"HHSC OIG reviewed several vendors via a competitive, best value procurement," the agency wrote in its August 2012 Advance Planning Document submitted to the federal Centers for Medicare and Medicaid Services, detailing how the agency settled on software being sold by little-known 21CT.

"That information is inaccurate," agency spokeswoman Stephanie Goodman said of the language in the nearly three-year-old document. Although the document's author was not specifically listed, Goodman said it was written by staff in the agency's inspector general's office, now the epicenter of a contracting scandal rocking the agency.

In its request, the agency said it developed a "statement of work" and provided it to several vendors listed by the Texas Department of Information Resources before settling on 21CT.

But Goodman confirmed on Tuesday that the agency issued only one "statement of work," a list of the agency's software requirements. That single statement of work, she said, was provided to only one vendor: 21CT. 

"OIG decided to send the statement of work to only one vendor. The staff who made that decision are no longer with the agency, and those types of decisions are now the subject of investigations," Goodman said.

The agency and its procurement practices are the subject of at least three investigations after questions were raised as to whether the agency improperly awarded the software contract to 21CT. 

So did the inspector general's office lie to the federal government to land 90 percent of the $20 million needed to buy the software? Or was it a simple mistake? So far, no one is talking on that issue, as the investigations proceed. 

However, that's likely one of the central questions being considered by criminal investigators with the state's public integrity unit, one of three entities reviewing HHSC contract procedures. The investigations began after the Austin American-Statesman reported that agency chief counsel Jack Stick was once a business partner with 21CT's lobbyist.

"We are looking at all aspects of the procurement process with respect to this contract and I can't comment more specifically than that," said Gregg Cox, head of the unit, which is part of the Travis County district attorney's office. 

Stick has insisted all contracting rules were followed. He declined to answer questions about the APD document. "I can't speak for OIG or the commission on the question you asked," he told The Texas Tribune.  

Last December, both agency Inspector General Doug Wilson and Stick were asked to resign, and agency Executive Commissioner Kyle Janek told reporters that he was "misled" in briefings about the 21CT deal, which was to be extended last year for another $90 million. 

The extension was canceled by the agency, which asked the State Auditor's Office to review contracting procedures in addition to the criminal investigation that was requested by state Sen. John Whitmire, D-Houston.

Last month, Gov. Greg Abbott picked his own team to review procedures within the $34.5 billion health services system and its four sister agencies: the Department of Aging and Disability Services, Department of State Health Services, Department of Assistive and Rehabilitative Services and Department of Family and Protective Services.

In the fiscal year that ended Aug. 31, 2013, there were about 34,000 contracts system-wide worth more than $24 billion.

But it's the contract with 21CT that has raised the issue of contract reform not only for HHSC but all state agencies.

21CT was selected from a list of software vendors precleared by the Texas Department of Information Resources. While the department recommends that agencies look at more than one vendor when selecting from their list, it is not required. 

"The information indicating OIG provided a statement of work to multiple vendors on the DIR list is not accurate," Goodman said. 

It is also not clear whether the federal government will be asking for its money back. The federal CMS declined to comment.

Goodman said HHSC officials have had conversations with CMS about the 21CT contract, but offered little detail.

"CMS has many of the same questions we do about how the vendor was selected and how effective the system is," she said. "We’ve assured CMS that once the investigations are complete, we’ll be able to provide more information to help answer those questions."