Company disputes allegations over computer system contract
CHARLESTON, W.Va. -- A California-based health care company is fighting allegations it improperly won what is perhaps the largest government contract in West Virginia history.
Last month, Atlanta-based Xerox challenged the outcome of a $248 million computer contract the state Department of Health and Human Resources recently signed with California-based Molina Medicaid Solutions.
In a Jan. 7 letter to DHHR's purchasing director, Molina said it is victim of an "evidence-free smear campaign" by Xerox.
In the letter, Molina reveals that DHHR paid for a multi-million dollar upgrade to an aging computer system because of "delays" by state officials who had failed to buy a new one in a timely manner.
The Molina-Xerox dispute involves a computer system that will process claims for the state's 420,000 Medicaid recipients. The system, known as a Medicaid Management Information System, or MMIS, will process more than 18 million claims a year for the next decade.
Molina runs the current MMIS, but the state now wants to replace that aging system.
Xerox — represented by Charleston attorney and former U.S. Sen. Carte Goodwin — alleged Molina won the new contracts after a number of DHHR missteps.
Xerox's protest was the latest twist in a bidding process that has dragged on for nearly two years. The contract has been bid out three times because of problems with two initial bids.
First, Xerox alleged Molina cut a $10.5 million deal in summer 2011 that allowed Molina to upgrade its system on the state's dime and later underbid its competitors because of that upgrade.
Molina said the multi-million dollar upgrade was necessary only because the state was behind schedule in signing a contract to build a new computer system. Because the state did not have a new computer system ready in time, it had to spend millions to upgrade its old one in order to comply with federal guidelines.
"As Xerox knows, because of the delays in the MMIS procurement, federal regulatory timelines forced (DHHR) to upgrade the state's then-current system before the new MMIS contract was awarded," Molina said.
Second, Xerox alleged DHHR gave Molina access to Xerox trade secrets in 2011.
Molina's letter shows DHHR's purchasing director Bryan Rosen sent the company bid documents that contained trade secrets during the first round of bidding in May 2011. The disclosure appears inadvertent, but Rosen is in the middle of at least one other major purchasing controversy involving a marketing contract that DHHR awarded last summer to the highest bidder.
Xerox alleged Molina used the information Rosen sent. Xerox alleged Molina used the information to beef up Molina's own bids in the second and third rounds of bidding.
Molina said its staff immediately reported that they had received trade secrets and did not comb through the material or use it against Xerox.
"Of the two Molina employees who reviewed any portion of the materials that might conceivably have given Molina competitive advantage as alleged by the (Xerox) protest, one saw a single executive summary for mere seconds and the other briefly reviewed certain materials but made no copies, took no notes and did not participate in the preparation of Molina's subsequent bid," Molina said.
Third, Xerox alleges Molina had special access to DHHR officials who awarded the recent contract.
Molina said that is simply a side effect of being the incumbent contact holder. Molina said Xerox's allegations amount to nothing more than "vague supposition and broad innuendo."
Not only is the fight between two high profile companies, it also includes well-connected players on both sides.
Xerox, of course, has Goodwin, who briefly served in the U.S. Senate in 2010. The company's legal team also includes a lawyer who used to work for the state and handle purchasing matters.
Molina's legal team includes Taunja Willis-Miller, who was the treasurer for Gov. Earl Ray Tomblin's 2011 and 2012 campaigns. She also is former DHHR secretary.
Molina was also a "gold sponsor" of Tomblin's inauguration ceremony on Monday.