Another Bid-Rigging Scandal in PWC Government?
By Greg L | 4 June 2009 | Crime, Prince William County | 5 Comments
Back in October of 2008 Prince William County issued Request For Proposal RFP090010 seeking competitive bids on the healthcare benefits provided to all county employees, including those that work for the PWC Service Authority, the Park Authority and Prince William County Schools. Ostensibly the purpose was to provide the best benefits to county employees at the least cost. In actuality, the process ended up ensuring that the incumbent contract holder kept the contract that cost as much as $2.8 million more than competing bids, and allowed the entity scoring the proposals to receive a kickback. We’ve just seen a bid rigging scheme in the county’s Department of Information Technology come to light, and apparently that’s not the end of the story regarding at least fiscal mismanagement, and at worst criminal fraud in our county government.
The county staff doesn’t apparently have sufficient expertise in evaluating proposals regarding health insurance and prescription benefits, so it hired Wachovia Insurance Services to manage the bidding and evaluation process on behalf of the county. As anyone who has been near government contracting is all too aware, the design of the RFP can often favor one of the potential bidders and in this case that design not only favored one of the bidders, it virtually shut out competing proposals. One of the early decisions made in the formulation of this solicitation, and which dramatically restricted the playing field, was that payments by the awardee to any third parties were prohibited. In the insurance industry, most actual sales activities are performed by third-party brokers. By effectively prohibiting the payment of a sales commission, the number of potential bidders was restricted to only those companies relying on internal sales and marketing organizations which might account for about 10% of the potential field of bidders, one of which was the incumbent contract holder.
Another strange feature of this solicitation involved the information that would be released to the bidders. When underwriting large health benefit programs a bidder needs detailed, but not personally identifying claims data that would help the bidder accurately cost the policy. In this case Wachovia and the county staff decided they would restrict this information to the bidders — but the incumbent contract holder Anthem Blue Cross and Blue Shield who was bidding on this solicitation already had this claims data since they had been the ones processing them. Nice competitive advantage, to be the only ones with the necessary information needed to cost the proposal accurately, isn’t it?
It comes as no surprise that Anthem ended up getting awarded the contract as a result, even when there were some competitive bidders whose brokers were effectively working for free because of the structure of the solicitation. What is a huge surprise is that the post-award debrief revealed that Wachovia and Anthem had a financial arrangement in which Wachovia would receive a percentage of the policy premium in return for their assistance of perhaps a half of a percent. Not only does this seemingly violate the terms of the solicitation, but the previously undisclosed financial relationship between the company bidding on the contract and the company evaluating the proposals potentially violates the law under the Virginia Public Procurement Act.
Unethical and potentially unlawful procurement actions by county staff increase costs the taxpayer must bear, decreases the quality of the services that the county provides, and invites corruption within our government. Were this the only procurement scandal surfacing within Prince William County government right now, this might be explained away as incompetence or an aberration. To see it coming to light in the midst of criminal indictments being handed down regarding bid rigging in the Office of Information Technology strongly suggests there’s a pattern here that is far more extensive than a case of a few rogue employees bent on personal financial gain.
That suggestion is only strengthened when the letter quite likely written by Wachovia to explain the reasons for the contract award, but issued under the signature of procurement officer Bill Cleis is examined. For a staff that apparently has so little competence in evaluating complex employee benefits solicitations that they need to hire outside firms to evaluate propposals, Cleis sure seems to demonstrate a deep understanding of the intricacies of insurance underwriting. If we’ve really handed over responsibility for core government functions to commercial entities with financial interests in the outcome, taxpayers ought to know about it and our elected officials sure should have gone on record for endorsing it. Of course that wouldn’t happen, as such practices would never withstand public scrutiny.
This incident raises serious questions about whether there’s a second bid-rigging scandal that would involve the staff of Chief Financial Officer Chris Martino, one of Craig Gerhart’s top lieutenants. Let’s hope that among all the other scandals breaking involving Craig Gerhart’s reign as County Chief Executive there’s still enough manpower left to investigate this while we still can still compel Gerhart to respond to questions as a county employee. Once he leaves public employment, the only way to get Gerhart to answer questions about this is with a subpoena.
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5 Comments
Views: 1487
Wow! Call the Justice Department. This has RICO written all over it.
When the first scandal broke I thought that it was probably only the tip of the iceberg. With Horton and Gerhardt both retiring at about the same time, I would call that suspicious. I’m so sick and tired of corruption in government! Who can you trust?
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Truth to Power said on 4 Jun 2009 at 3:29 pm: Flag comment
Wow! Call the Justice Department. This has RICO written all over it.
Be careful what you wish for!
Don’t forget the scandal at the Gainesville Fire Station–it’s time to audit all departments. Fire & Rescue along with the police have been untouchable. If the accounts are in order, there would be money for the proper equipment and personnel!