A ‘pricey’ contract to overhaul Southeast D.C. hospital hit barriers

D.C. officials awarded a $12.7 million contract to overhaul chronically troubled, city-owned United Medical Center to an out-of-town firm that failed to meet minority subcontract requirements, according to local competitors citing city law.

The D.C. Council must approve the recent selection of Chicago-based Huron Healthcare and its local partner, Compass Solutions, by March 4, according to council member Yvette M. Alexander, Ward 7 Democrat and chairwoman of the Committee on Health, who described the contract as “quite pricey for what they are tasked to do.”

Wayne Turnage, director of the Department of Health Care Finance who oversees the Southeast hospital — the only one east of the Anacostia River — said the “turnaround” contract is necessary to get the facility in shape for sale to a private operator. A recent report shows the hospital lost more than $13 million in fiscal 2012.

“There are three options: Do nothing and watch the losses grow, try and sell it as-is — which is unlikely — or fix it and make it sustainable so we have options,” said Mr. Turnage, who deferred questions about the contract award process to James Staton, director of the Office of Contracts and Procurement.

Multiple emails directed to Mr. Turnage, Mr. Staton and numerous council members question whether Huron should have been disqualified at the outset of the selection process because its bid did not include a certified minority subcontractor.

Huron officials did not return calls seeking comment.

In September, four national firms submitted bid proposals for the contract: Huron, Navigant Consulting Inc., FTI Consulting and Quorum Health Resources, according to sources familiar with the process. After a review, Huron and Navigant were chosen as finalists, those sources said, although only Quorum and Navigant, a firm with more than 500 employees in the District, had included subcontractors that city records show as being certified as local minority firms.

Huron’s bid included a local subcontractor, but it was not a certified minority firm, according to city records. The D.C. Code states that contract bids “shall be deemed non responsive” if a prime contractor submits a subcontracting plan that does not include a current, certified minority firm as part of its bid or proposal.

In November, a subcontractor with Navigant emailed D.C. Council members and stated that, according to D.C. law, Huron’s bid should be deemed “non-responsive.” The emails, obtained by The Washington Times, requested that Mr. Turnage and Mr. Staton ensure compliance with D.C. law.

While the bid issue lingered, another irregularity arose: In late December, the city's contracting office decided to redo the “best and final offer” stage, which is supposed to involve interviews with a technical review panel of representatives from the Department of Health Care Finance and United Medical Center, according to those familiar with the process.

According to a D.C. official with knowledge of the matter, the do-over was prompted by an unrelated adverse ruling from the city’s Contract Appeals Board that prompted Mr. Staton to reassess all pending contract awards.

The effect of the second “best and final offer” — usually intended to elicit the lowest-priced offer with the most favorable terms — was to delay the selection process and, according to critics, provide Huron with a competitive advantage unrelated to price. In fact, Huron’s price exceeded the original $10 million budget.

During the delay, Huron dropped subcontractor HGM Management and Technologies, which city records show was not certified as a local minority business, and added Compass Solutions, which is. Eventually, the company was awarded the contract, with an additional $2.7 million added to the price.

A spokeswoman for the city's contracting office said bidders are “permitted to amend a subcontracting plan” until the “final round” of best and final offers. The Office of Contracts and Procurement’s “priority is to get the best possible value for the District’s dollars,” she said.

Mr. Turnage said he was unaware of any problems that would have prompted a second best and final offer, but he did acknowledge receiving emails pointing to alleged flaws in the selection process. Still, he vouched for Compass as a reputable local company and for the process in general.

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