When DC elected officials passed the 2014 government-contracting law giving preference points to small, disadvantaged businesses and other companies that obtain certification from the Department of Small and Local Business Development (DSLBD), they cited admirable and solid reasons. Lawmakers said they wanted to level the playing field and create opportunities to enhance the performance and competitive capacity of such groups while helping to grow the locally based economy.
Implementation and enforcement have been questionable. Many small, local and minority-owned businesses have been made to scramble for procurement crumbs brushed from the tables of large corporations. On multiple occasions, in pursuit of equity and equitable treatment, those small companies have been forced to battle the government leaders who are supposed to be their champions.
“We’re begging and jumping through hoops all the time,” Mark Jones, president of the National Business League of Greater Washington, told me during a recent interview.
I first met Jones several years ago when he and other businesses were battling the Office of the Chief Financial Officer over a decision to combine the DC Lottery’s numbers game and instant ticket contracts — a move that would have eliminated most minority business participation. Fortunately, the CFO found a workable and satisfactory compromise.
Now, a member of Jones’ organization and several other local, minority-owned or -operated businesses have been decrying the way Mayor Muriel Bowser’s administration has handled the awarding of the District’s $1.5 billion Medicaid managed care contract. At least two complaints, filed by AmeriGroup and Centene, are pending before the city’s Contract Appeals Board (CAB). Centene is the largest managed care corporation in the country; it owns District Community Care.
Truth be told, the managed care contracting process isn’t just a run-of-the-mill fiasco: It stinks. And the more I dig into the details — conducting interviews, reviewing documents — the more it stinks. I’m holding my nose even as I write this.
Two of the three companies temporarily awarded the contracts — MedStar Family Choice and CareFirst BlueCross BlueShield Community Health Plan — are bad actors. CareFirst may owe the city as much as $300 million in cash or services, for example.
Further, it appears that Bowser’s DSLBD provided CareFirst with certified business enterprise (CBE) preference points, violating the intent and spirit of the law. That action may have been a key factor in the company being selected as a winner.
Equally egregious is the fact that DSLBD appears to have decided not to enforce the subcontracting requirements set by law, according to documents submitted to the DC Council on July 17.
The agency mandated that “MedStar subcontract 5.25% of its contract value with Small Business Enterprises/CBEs, AmeriHealth subcontract 5.25% of its contract value with SBEs/CBEs, and all the Eligible Expenditure accrued by Trusted be applied toward the SBE/CBE goal.”
By law, any company with a contract above $250,000 is required to subcontract at least 35% of the contract value with DC certified businesses. Under emergency COVID-19 legislation approved by the council, that mandate was increased to 50%, according to a DSLBD spokesperson.
As I said, this all stinks.
“CareFirst should never have been allowed to be certified. They should be decertified,” said Jones.
Linda Elam is CEO of Amerigroup DC, a minority-operated local company that filed one of the protests. She said her company identified “numerous errors … that we believe warrant a reevaluation and new award selection.”
Former DC Council member Vincent Orange, who helped push through several laws to advantage small, minority businesses, agreed. “CBEs were always part of the equation, and the preference points went to for-profit businesses,” he told me in a recent interview.
“We want to do business with DC entities that are subjected to [District] taxation,” explained Orange, who during his tenure in the legislature chaired the committee that had oversight of DSLBD. “This is a $1.5 billion contract. You want a large percent of that money to circulate in DC.
“It’s one thing for a nonprofit to purchase a for-profit business; but carrying over preference points clearly wasn’t the intent when the law was written,” added Orange, who recently left his post as CEO of the DC Chamber of Commerce and is hoping to return to the legislature. He is one of about two dozen individuals running for the two at-large council seats up in the November general election.
At one point in his previous council stint, Orange called in the city’s inspector general, asking him to investigate whether the mayor at the time was violating the CBE law and how much money wasn’t making it into the coffers of small, local minority businesses as required. “That’s what jump-started the Green Book.” Published annually since 2016, the book documents the amount of money each agency has for procurement and provides guidance to minority companies interested in bidding on contracts.
“You have to have a champion to push agency directors,” added Orange.
DSLBD is supposed to be the champion. However, in my opinion, the agency’s director, Kristi Whitfield, has been engaged in serious CYA since the controversy around the managed care contract blew up in public. She told me that CBE certification is “nontransferable,” which prompts the question about how Trusted Health Plan, a for-profit company, was able to transfer its preference points to CareFirst, a nonprofit. By law, only for-profit companies can secure CBE preference points.
Was Whitfield trying to clear the path for companies desired by the mayor and Deputy Mayor for Health and Human Services Wayne Turnage, who has oversight of the project?
In an email to me, Turnage said he had “no discussions — either by phone, text, email, or in person — with anyone at DSLBD concerning the impact of Trusted’s [or CareFirst’s] status as a CBE.”
“Nor did I instruct anyone on my team to have such discussions with either DSLBD, or the contract specialist who applies the CBE points following DSLBD’s assessment,” he added.
As the person overseeing the project, shouldn’t he have ensured everything was handled properly? Isn’t he ultimately accountable for the results? If he failed to review actions that were taken before the contracts were sent to the council for approval, should he still be in charge?
“There is something about the District’s procurement: Gremlins in the system keep messing it up,” said a former senior-level government official I spoke with earlier this week, joking while shaking his head. There have been multiple attempts to reform the city’s contracting and procurement dating all the way back to the late 1990s when there was a financial control board in charge of the District government.
Like most people, I love a farce. But actions around the managed care contract appear more fraudulent than farcical, with DC taxpayers on the hook.
Blame some of the problems on politics and money: During the past decade Trusted Health Plan and CareFirst BlueCross BlueShield have donated $101,691 to various elected officials — $64,521 of which went to Bowser’s mayoral campaigns, according to DCPowerPlayers.com, a database that tracks political donations and lobbyists’ activities. MedStar and its affiliates donated $86,257 — of which $51,167 was given to Bowser.
Sources told me that Bruce Bereano, a Maryland lobbyist and close friend and fraternity brother of Ward 7 Council member Vincent Gray, may be representing MedStar. Government documents indicate he was a lobbyist for the company in 2012 and 2013.
Bereano donated $500 to Gray’s 2020 council reelection campaign. Gray chairs the council’s Committee on Health.
Companies give to elected officials for various reasons; I understand that. While there may not be a direct connection, claiming the status of donor gets a person or company in the door.
Small and minority businesses don’t have the same size bank accounts as big players such as MedStar and CareFirst. Consequently, there is little doubt they — and people of color — are the losers in the Medicaid contract fiasco.
Three council members — Phil Mendelson, Kenyan McDuffie and Robert White — filed a resolution on July 29 to disapprove the contract. The future of the procurement is unclear, however.
Sources told me that some members of the Bowser administration, including Turnage – who also directs the DC Department of Health Care Finance, which oversees DC’s Medicaid programs — have been discussing how they might persuade at least one of the three to withdraw from the disapproval.
In an email to me, McDuffie said that he remains “deeply concerned about this procurement and am currently undertaking a review of documents provided by the executive in response to several important questions that I raised during, and subsequent to, the public roundtable.”
The council’s rules seem rather confusing about the available courses of action. If members do nothing, the contract will be deemed approved on Sept. 3; members could withdraw their disapproval, or they could seek a vote of the full council. Currently the legislature has recessed for the summer. The next scheduled meeting isn’t until Sept. 22.
Mendelson could call the full council back for a special session. There has been no talk yet about taking such action, however.
When I spoke with McDuffie earlier this week, he was not certain what would be the next move. Neither Mendelson nor White could not be reached for comment.
There are myriad reasons for the council to send the contract back to Mayor Bowser, telling her to rebid it while barring MedStar from the competition for its past behavior, excluding CareFirst unless it settles pending litigation around its excess surplus, and insisting that DSLBD follows the letter — and spirit — of the CBE laws. A prime reason for the mandated redo is equity.
Following the murder of George Floyd by Minneapolis police officers and the rise of Black Lives Matters-fueled demonstrations, there has been handwringing and pontificating by District officials about the need for greater racial equity. If legislators permit the managed care contract to proceed, they will have made clear that equity matters some of the time — but certainly not when a $1.5 billion contract is at stake.