An Audit Report on Selected Contracts at the Health and Human Services Commission
Report Number 14-035
The Health and Human Services Commission (Commission) generally complied with state requirements for contract formation and oversight for the two Electronic Benefits Transfer (EBT) system contracts audited. However, for both contracts, the Commission was unable to provide documentation showing that it complied with certain procurement requirements and scored vendors' proposals in accordance with applicable requirements.
The contracts audited were:
- The retailer management services contract, which the Commission executed in March 2007. Initially, that contract had a five-year term and was valued at $19,776,178. However, that amount did not include certain pass-through fees the Commission was required to pay to the contractor. In addition, the Commission later amended the contract to extend the contract term. Through December 31, 2013, the Commission had made payments totaling $43,419,389 on that contract.
- The call center services contract, which the Commission executed in December 2006. Initially, that contract had a five-year term and was valued at $21,685,000. However, that amount did not take into account fluctuations in call volumes and call minutes associated with caseload growth. In addition, the Commission later amended the contract to extend the contract term. Through December 31, 2013, the Commission had made payments totaling $35,306,704 on that contract.
Both of the contracts audited were with Affiliated Computer Services State and Local Solutions, Inc., which later became Xerox State and Local Solutions, Inc. Both of the contracts end in August 2014. The Commission plans to put both contracts out for bids again in June 2014.
Procurement. For both contracts audited, the Commission did not maintain its vendor proposal evaluation summary tool and the related methodology it used to compile the evaluation scoring results. In addition, it was unable to provide documentation showing its compliance with State of Texas Contract Management Guide procurement requirements to:
- Include the weights it would use for each evaluation criterion in its solicitation documents.
- Require all employees involved in the development and evaluation of contract solicitations to sign non-disclosure and conflict of interest forms.
Additionally, the Commission did not reject a vendor proposal for the call center services contract that did not include a Historically Underutilized Businesses (HUB) subcontracting plan. (The Commission did not award the contract to the vendor that submitted that proposal.) Texas Government Code, Section 2161.252 (b), and Title 34, Texas Administrative Code, Section 20.14, require agencies to reject from consideration proposals that do not have HUB subcontracting plans.
For both contracts, the Commission also did not comply with Title 1, Texas Administrative Code, Section 391.715, which requires agencies to include proposal evaluation documentation in their procurement records.
Planning. Auditors were unable to review certain Commission planning documentation for both contracts because the Commission was no longer required to retain that documentation according to its records retention schedule. However, auditors confirmed that the Commission complied with State of Texas Contract Management Guide planning requirements to:
- Present its solicitation documents to the State’s Contract Advisory Team for review.
- Assess contract risks and mitigating actions.
- Develop detailed statements of work.
Contract Oversight. For both contracts, the Commission performed sufficient oversight of contractor operations, made payments to contractors in a timely manner, and retained adequate supporting documentation for contractor payments. However, the Commission made $49,628 in payments on the retailer management services contract that were not authorized by the contract. Those payments, which were related to enabling clients to use their Supplemental Nutrition Assistance Program (SNAP) benefits in other states, were authorized by a prior contract but were not authorized in the current contract.
While the Commission monitors contractor performance, it does not have a formal process for reporting information on contractor performance to executive management. In addition, the Commission should strengthen its process for estimating and reviewing contract costs to help ensure that it considers all costs.
Auditors communicated other, less significant issues separately in writing to the Commission.
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