Costly low bid for Nebraska child services may cause changes

LINCOLN, Neb. -- Some Nebraska lawmakers on Friday called for changes in how the state picks contractors, after a child welfare service that succeeded in winning a contract with an unusually low bid failed to deliver and cost taxpayers millions of dollars.

Members of a special legislative committee said they’d like to see changes to the process to ensure that bidders can reasonably deliver what they promise. Specifically, they said they’d like to see more teeth in the appeals process with big contracts so that losing bidders can try to prove that the winner’s proposal wasn’t the best.

The committee was formed after the Kansas-based child welfare contractor St. Francis Ministries won the Nebraska job in 2019 by offering to do it for less than 60% of the bid from PromiseShip, an Omaha-based agency that had served the state since 2010.

St. Francis signed a five-year, $197 million contract with the state in July 2019 to serve neglected and abused children in the Omaha area.

But in January, state officials announced that they agreed to pay an additional $147.3 million to keep St. Francis from running out of money and shuttering its operations.

They also approved $10.5 million to cover an old shortfall from 2020. The extra money wiped out the proposed cost difference between St. Francis and PromiseShip, which had scored higher in all other areas of the state’s review.

The St. Francis officials involved in the bid have since been fired and new executives have acknowledged that the contract was underbid. PromiseShip filed a formal protest to challenge the winning bid, but state administrators rejected it.

Sen. Mark Kolterman, of Seward, introduced a bill this year that would require state officials to create formal rules to let bidders appeal a decision involving contracts of more than $10 million. The bill didn’t advance during this year’s session, but Kolterman said he still plans to pursue it.

“Something needs to be done, obviously,” he said, expressing concern that the current system could discourage companies from bidding for contracts.

Tom Kenny, an Omaha attorney who represented PromiseShip in a lawsuit against the state, said it’s unlikely that potential contractors would abuse extra appeals. He said preparing formal bids is expensive and time-consuming, and appeals after losing would only add to the cost.

“They’re only going to invest the money if they feel they have a good shot at winning,” he told the committee.

Despite the problems, state officials have said they need to continue working with St. Francis to ensure continuity of services for the children, families and caseworkers involved in the two counties’ foster care and child welfare systems.

The provider has also faced scrutiny from Kansas officials, who reported in December that an employee of St. Francis Ministries falsified documents to show visits with families that never took place.

In a deposition from the PromiseShip lawsuit, a state administrator said officials have the right to review the reasonableness of a cost proposal, but he was not aware of any requests to do so.

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