State probes $68M HHSC contract

Two agency managers, company under scrutiny.

Two state health workers are being investigated for potential conflicts of interest involving how a $68 million contract was awarded by the Health and Human Services Commission, a massive agency struggling to rebuild after becoming the focus of a contract scandal and subsequent criminal investigations.

Technology service managers Jean Garcia and Pam Lamb remain in their jobs while investigators at the commis- sion’s Office of Inspector General look into their potential relationship with a ven- dor competing for state business, officials told the American-Statesman on Monday.

“There is an open investigation by the inspector general’s office — really into two areas,” Executive Commissioner Chris Traylor said. “One is whether evaluators conducted themselves appropriately in the

process and whether or not vendors involved in the procurement conducted themselves appropriately.”

The investigation was triggered last week after the Statesman asked questions about two contracts — one worth $68 million for technology services and another worth $30 million for office furniture — signed last month with SHI Government Solutions.

Both Garcia and Lamb were involved in a grading process that led to the $68 million contract, records show. Officials said both are being investigated for a possible conflict of interest with another vendor that was competing for that business, Austin Ribbon & Computer.

“There is potential that evaluators and vendors may have compromised the procurement in some way,” Traylor said.

Responding to the Statesman’s questions last week, officials discovered Garcia had sent an email to an Austin Ribbon & Computer employee in which she provided her daughter’s résumé and inquired about a job for her, Traylor said. The email was sent well before the bidding process began, he said.

Lamb, who works for the Department of State Health Services, is being investigated because as SHI was poised to get the contracts, she tried to boost her score for Austin Ribbon & Computer, said Ron Pigott, the commission’s top contract oversight manager.

Had she been allowed to update her score, SHI would have lost the $68 million deal to Austin Ribbon & Computer, Traylor said.

Why Lamb asked to change her score is unclear. Neither employee responded to emails sent by the Statesman.

Attempts to reach Austin Ribbon & Computer were unsuccessful.

The inquiry is the latest contract hiccup after a year of scandal following the commission’s contract with 21CT, an Austin data analytics company hired to help detect Medicaid fraud. A $90 million contract extension with 21CT was canceled in December following a Statesman investigation that revealed problems with the deal, including the lack of a traditional bidding process, little oversight and a possible conflict of interest.

Investigations by the FBI and the Public Integrity Unit of the Travis County district attorney’s office continue.

The contract with SHI was brokered through the same program as the 21CT deal, through a so-called master contract awarded to the company by the Department of Information Resources. Unlike the 21CT deal, however, officials say SHI faced significant vetting and competition before being given a state contract.

Rival bidder protests

Questions about the $68 million SHI deal emerged in September, when another bidder, CSI Leasing, filed a protest over the technology contract. The company accused the state of not following new contract rules created by the Legislature in the wake of the 21CT debacle. The state contests that.

A director for SHI Government Solutions — which has been paid at least $445 million by Texas agencies — said the company won the contract fair and square.

“We are confident that the bidding process was conducted properly and that we were awarded the contract on the merits of our terms,” Darron Gross, director of sales for the company, told the Statesman.

But CSI also argues that SHI was falsely described as a historically underutilized business in the company’s bid.

Historically underutilized businesses are womenand minority-owned businesses that receive special consideration when competing for state contracts. They must be designated by the state as a small business — criteria can vary — and the company owner must live in Texas.

Health commission officials say they didn’t give more preference or points to SHI because of that status, but state agencies often prefer to contract with businesses classified as historically underutilized because of internal benchmarks for giving a certain percentage of work to local companies owned by minorities and women.

CSI says SHI isn’t the sort of company that is supposed to be helped by the program. First, CSI representatives say, owner Koguan Leo does not live in Texas. So on Sept. 29, the Texas comptroller’s office — which approves historically underutilized business designations — sent a letter to SHI’s Austin office asking Leo to prove his residency by providing tax forms, his license, identification or voter’s registration card, and other information.

When comptroller officials didn’t receive those documents by Oct. 15, the agency pulled the company’s historically underutilized business status.

But the state reinstated that status Monday after Leo’s lawyer said his client had not received the state’s letter and accused the agency of failing to follow its own rules.

“Remedying your premature certification revocation is paramount to my client,” Leo’s lawyer wrote to the state. “Accordingly, my client will provide the requested documentation as soon as possible.”

CSI also contends that SHI is too big to be a small business.

SHI Government Solutions, based in Austin, is an affiliate of SHI International, a $6 billion, New Jersey-based company founded by Leo and Thai Lee. In its bid to the state, SHI Government Solutions stated that it is affiliated with the larger company and that it handles some of the Austin office’s administrative work, such as paying rent, leases and other expenses.

The Austin company files separate tax forms, said comptroller spokeswoman Lauren Willis. Because of that, she said, the state doesn’t have to consider SHI International’s finances when determining historically underutilized business designation. Thus, SHI Government Solutions meets the size requirements, she said.

Subsidiary evidence

Dozens of records reviewed by the Statesman give the appearance that the Texas office is a subsidiary of the multinational company:

SHI International’s website refers to SHI Government Services as a regional office.

The New Jersey company advertises for Austin jobs online, noting that SHI International is a $6 billion company.

SHI International’s career page states that the company was “recognized by our employees as one of the best places to work in both Austin, Texas, and New Jersey.”

The company shares key employees with Government Solutions, including Gross, who is described on SHI International’s website as “responsible for SHI’s government and academic business across seven states.” A contract specialist listed in the Texas bid documents works on SHI International deals across the county and an IT security employee named in SHI Government Service’s bid has a New Jersey address.

The domain registration for SHI Government Services was paid for and registered in New Jersey.

Gross said in an email last week that “for more than 15 years and through multiple re-certifications, SHI Government Solutions has met the qualifications for HUB designation.”