D.C. hospital contract exposes defects

In Horace McCormack’s mind, the lucrative contract to “turn around” city-owned United Medical Center was in the bag.

Chicago-based Huron Healthcare, a finalist in a competitive bid process overseen by the D.C. Office of Contracts and Procurements, had partnered with Mr. McCormack’s firm, HGM Management and Technologies, to comply with a small and local business set-aside requirement.

But the multimillion-dollar contract aimed at salvaging the only hospital in the District east of the Anacostia River suddenly slipped through Mr. McCormack’s grasp when he discovered his firm did not meet the District’s certification requirements for small businesses.

For Huron, the consequences appeared equally grim: D.C. procurement law states that failure to include a certified local small business in an original bid proposal can be grounds for disqualification.

Instead, the defect in Huron’s bid, the steps that contracting officials took to rectify it and the response among competitors typified what is wrong with local small-business involvement in city contracts and the procurement process in general, according to elected officials and members of the business community.

Among those problems, critics say, is the involvement of well-connected “consultants” outside the contracting process who become a distraction or cause of anxiety for competitors wary of improper influence.

Huron executives testified Thursday at a D.C. Council hearing that they partnered with HGM as the local firm was in the process of becoming recertified by the Department of Small and Local Business Development.

In reality, HGM was having its certification denied when best-and-final offers were being presented to contracting officials.

In an email dated Dec. 12, Melissa Resil, a business certification manager with the small-business department, wrote to Mr. McCormack and asked why he had failed to confirm that 100 percent of the firm’s revenue was “derived from transactions in the District.”

She also asked him to submit tax returns from Virginia, where officials located a residence and storage facility apparently connected to HGM’s revenues.

When Mr. McCormack was unable to satisfy the agency’s requirements, he was informed Feb. 8 that the small-business department intended to deny HGM’s certification.

“This is totally unprofessional and unjust!” he wrote. “We intend to fight this CASE!!! The PROCESS IS BROKEN! It needs to be fixed!!!”

That denial caused Huron to turn to controversial mayoral campaign fundraiser Reuben O. Charles for help in seeking a replacement — a move that competitors claimed should not have been allowed.

After contracting officials ordered a second round of best-and-final offers that allowed Huron to stay in the competition, and Huron went on to win the award, the contract price jumped from $10 million to $12.7 million.

Mr. McCormack was not the only small-businessman crying foul.

Elected officials say such flare-ups are the province of the Contracts Appeals Board. But in the case of United Medical Center, losing competitors such as Navigant Consulting and Quorum Health Resources — along with their respective local, certified small-business partners — ended up watching as the matter went before the council’s Committee of the Whole, where some members wanted nothing to do with it.

“Inserting these disputes into the political process tells you everything you need to know about the [local small-business] community,” said Council member David A. Catania, at-large independent and staunch advocate for the hospital in question. “They’ll say they don’t want to ’sue the client,’ but the bottom line is the city should get the council out of the process.

“It’s a culture that will use the politics to subvert the legitimate [contracting] process.”

Mr. Catania’s objections over council involvement were echoed by several of his colleagues, yet there was little discussion about what the small-business certification process should look like if the city is going to avoid such disputes — and any liability stemming from them.

“The council acting as an appeals board, this is an abuse of process,” he added. “If a winning bidder has their award overturned, they could have a cause of action against the entity that abused the process.”

That, presumably, could include competitors who steer grievances into the political arena, Mr. Catania said, which is contrary to the intent of the local-business requirement and a disincentive for top-quality companies to compete.

When small-business participation rules were put in place, the idea was to enable local companies to learn, grow and compete elsewhere. But Mr. Catania and other critics say there’s a perception that political connections equal contract certainty.

Present at the hearing last week was Robert C. Bobb, a former D.C. city administrator and former president of the D.C. Board of Education. From his perspective, as a local partner of losing bidder Quorum, the problem is not the politicization of the procurement process or even the involvement of “consultants” and middlemen such as Mr. Charles, but the District’s inability or unwillingness to follow its own rules.

“It appears the District Staff who administered this procurement knowingly did not follow the procurement law which they are sworn to administer,” Mr. Bobb wrote in an email to The Washington Times. “They hijacked what was supposed to be an open competition designed to deliver our citizens and taxpayers the best value and willfully manipulated the selection process to deliver a contract worth 30 percent more than what other qualified bidders proposed.

“They may have opened themselves up to unnecessary criticism and accusations of manipulating the process to get to their preferred choice from the outset. This unfortunate consequence leaves the [small-business] and prime-contractor community unsure of what the requirements are for [small-business] participation on District contracts.”

If there’s anything that competitors such as Mr. Bobb and elected officials such as Mr. Catania have in common, it is the belief that institutions such as United Medical Center are too important to be deprived of a clear vision for improvement and a fair contract procurement process.

But after last week’s hearing and a vote on the turnaround contract scheduled for Tuesday, it does not appear that the District is prepared to get a grip on either of those issues.

“Its unfortunate that this contact will be awarded with so many unanswered questions as to the logic, as to why the process all bidders were required to follow, was not followed,” Mr. Bobb said in his email. “The tendency is to approve the contact and fix the problem later which is illogical. All of the noise could have been avoided if the [contract] was simply rebid.”