Nebraska lawmakers took a step Monday toward updating the process that put a troubled Kansas-based nonprofit in charge of child welfare cases in the metro area and led to other major contract failures.
State senators gave the first of three rounds of approval to LB461, sponsored by Speaker of the Legislature John Arch of La Vista. It advanced on a 45-0 vote. He introduced the bill last year but the session ended before it could be considered.Â
Arch said the measure provides "a much-needed, long-overdue update" to state procurement laws, most of which were written in the 1940s. Most importantly, he said, it eliminates language in current law requiring the state to award contracts to the lowest responsible bidder.
Under LB461, state officials could reject bids if the price offered was not reasonable or not realistic and they could only give contracts to responsible bidders. A reasonable price would not exceed the market rates. A realistic price would be sufficient to get the job done properly.
Such language could have prevented the Department of Health and Human Services from awarding a contract to St. Francis Ministries in 2019, Arch said.Â
The nonprofit offered to manage the care of abused and neglected children in the Omaha area for 40% less than the Omaha-based agency that had been doing the job. No state official publicly questioned the bid, which was the lowest offered, despite concerns raised by outside child welfare advocates.Â
HHS signed a five-year, $197 million contract with St. Francis in July 2019 but was later forced to sign a new, emergency contract when financial shortfalls nearly forced the nonprofit's Omaha operations to shut down. The new 25-month, $147.3 million contract erased the original 40% cost difference.
Meanwhile, St. Francis never met contract terms or complied with state laws limiting caseload sizes. The contract has since been terminated.
The legislative investigation that followed uncovered a history of problems with the state's procurement process.
Along with the St. Francis contract, other notable procurement failures include the state’s 2007 contract to develop a major Medicaid claims processing and information system and a 2014 contract for a new Medicaid eligibility and enrollment system.
In the first case, state officials signed a $45 million contract with FourThought Group, based in Arizona. HHS officials terminated the contract in July 2009, after only 15 months, saying the company “did not have the capacity to deliver the system they proposed." The state paid the company more than $11 million.Â
In the second case, state officials signed an $80 million contract with Wipro, based in India. Four years later, HHS officials ordered a review of the project, which concluded there was no evidence Wipro had completed any part of the project. HHS terminated the contract in December 2018, after having paid Wipro $58.6 million. The state agreed to pay another $5.5 million last year as part of a settlement with Wipro.Â
A bill passed in 2022 required the state to evaluate the state procurement process. Ikaso Consulting, which did the evaluation, made 33 recommendations to improve the state’s contracting process and practices. LB461 would implement several of the recommendations, while the Department of Administrative Services is working on the rest.Â
Along with changing language about low bids, the bill would require state agencies to prove that a contract was needed before signing a contract, rather than after. It also would remove bidding preferences given to Nebraska vendors. Such preferences make it harder for Nebraska vendors to get contracts with other states.Â