A Performance Audit
An Audit Report on A Selected Contract at the Department of State Health Services
April 2018
Summary Analysis
The Health and Human Services Commission (Commission) and the Department of State Health Services (Department) had weaknesses in their contract procurement and formation processes related to the contract for the development and maintenance of the Texas Electronic Vital Events Registrar (TxEVER) system awarded to Genesis Systems Inc. on June 1, 2016. Specifically:
- The Commission did not compile and calculate the final evaluation scores for the five vendor proposals accurately.
- While the TxEVER procurement is a major information resources project with an estimated project value of more than $10 million, the Commission did not verify vendors’ reported qualifications and experiences as specified in the solicitation.
In addition, the Department executed a contract with Genesis System Inc. that required the vendor, instead of the Statewide Data Center Services Program, to host TxEVER. However, the Department did not obtain the required exemption from the Governor and the Department of Information Resources that would allow Genesis Systems Inc. to host TxEVER. As a result of not obtaining the required exemption, the Department amended the contract to require TxEVER to be hosted by the Statewide Data Center Services Program. That amendment increased the original contract cost from $15,603,894 to $17,464,398 (a total increase of $1,860,504) and delayed the go-live date for TxEVER from January 1, 2018, to January 1, 2019. In addition, that amendment changed the contract termination date from August 31, 2023, to August 31, 2028. As of August 31, 2017, the Department’s contract payments totaled $4,126,161.
The Commission also did not accurately report the initial contract value to the Legislative Budget Board and it did not certify the contract information that it reported to the Legislative Budget Board as required.
The Commission’s award recommendation was based on an erroneous compilation and calculation of evaluation scores. The evaluation tool that the Commission used to combine and calculate the evaluation teams’ final evaluation scores of each vendor’s proposal were based on inconsistent mathematical formulas, inaccurate information, and it transposed and omitted certain scores as the result of data entry errors. The Commission used those final evaluation scores to support its award recommendation to the Department.
The Commission did not verify the qualifications and experience of the five bidding vendors. The Commission did not use additional methods described in the solicitation that would have allowed the evaluation teams to better evaluate and score a vendor’s qualifications, including the software products offered. Texas Government Code, Section 2157.125, requires an agency to consider prices, past vendor performance, vendor experience or demonstrated capability, and the evaluation factors for award decisions involving automated information systems. While the solicitation specified that the Commission and the Department would be conducting reference checks upon receipt of vendors’ proposals that could result in a vendor’s disqualification if the references did not confirm that a vendor met the minimum qualifications or were inconsistent with a vendor’s representations, the Commission decided not to conduct reference checks.
The Commission and Department complied with requirements for developing a solicitation for the procurement of a major information resources project, including ensuring that the appropriate management and staff were involved in the procurement and that those individuals met requirements for protecting the objectivity of the procurement process.
The Department’s contract with Genesis Systems Inc., executed June 1, 2016, required the vendor to host TxEVER outside the Statewide Data Center Services Program. However, the Department did not obtain the required exemption from the Governor and the Department of Information Resources that would allow TxEVER to be hosted outside the Statewide Data Center Services Program.
On September 1, 2016, the Department of Information Resources sent a written notification to the Department that the contract was non-compliant with state requirements concerning the Statewide Data Center Services Program. On June 22, 2017, the Department executed Amendment No. 1 to its contract with Genesis Systems Inc. Amendment No. 1 changed the contract’s scope of work to require TxEVER to be hosted by the Statewide Data Center Services Program, which led to additional costs and delays for the TxEVER project.
While the Department notified the Quality Assurance Team about the executed contract and Amendment No. 1 as required, the Commission did not comply with other, similar reporting requirements for reporting the contract and amendment. Specifically, the Commission did not provide the Legislative Budget Board the required certification for the executed contract, reported inaccurate costs for the executed contract to the Legislative Budget Board, and did not notify certain state governmental entities about Amendment No. 1 before executing the amendment as required.
The Department performed certain contract oversight functions as required, including providing quarterly status reports on the development of TxEVER to the Quality Assurance Team. The Department also ensured that the assigned contract managers had required certifications and it developed an enhanced monitoring plan for the TxEVER contract as required by the Commission and its Contract Management Handbook. The Department also provided status reports on the development of TxEVER to the Commission’s executive commissioner in compliance with the Sunset Advisory Commission’s recommendations.
However, the Department did not ensure that certain contract monitoring reviews and other selected monitoring activities were performed as required by the Department’s enhanced monitoring plan for the contract.
While the Department generally processed payments to Genesis Systems Inc. in accordance with contract requirements, one payment that auditors tested was missing documentation to show that Department staff had received and accepted the associated deliverable. From June 2016 through August 2017, the Department processed 12 payments to Genesis Systems Inc. that totaled $4,126,161 in accordance with contract requirements. However, one payment that totaled $409,451 was processed without documentation to show that the associated deliverable had been received and accepted by the Department.
The Department completed required contract planning activities necessary for defining the contract objective and the procurement approach for the TxEVER solicitation, including complying with the State’s Quality Assurance Team’s requirements for a major information resources projects.
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