ALBANY – State auditors have scuttled a multimillion-dollar, no-bid contract to find cost savings at Roswell Park Cancer Institute just weeks after the hospital’s Chicago-based consultant was alleged to have charged exorbitant consulting fees at a downstate utility agency.
State Comptroller Thomas DiNapoli said a series of problems with the way Roswell Park and Navigant Consulting wrote up a contract to eke out efficiencies and cost controls at the Buffalo hospital left the state fiscal watchdog no choice but to kill the deal.
Roswell Park officials Thursday evening said the canceled contract will now be put out to competitive bid, a process expected to take up to three months as the institution faces a January deadline to provide a cost-cutting package to state officials as part of 2012 state law requiring the facility to become less dependent on state aid.
DiNapoli’s office cited possible runaway costs, revolving door concerns involving a former top Roswell Park official now employed by a subcontractor of Navigant and vague benchmarks for performance.
In a letter obtained by The Buffalo News sent to a top Roswell Park official this week, DiNapoli’s office said it could not even say how much the Roswell Park contract with Navigant might cost, but that it would be far more than the $3 million purported by the cancer treatment and research facility.
The comptroller’s office called the proposed contract with Navigant “potentially detrimental’’ to Roswell Park’s finances and said the deal, which needs DiNapoli’s sign-off to go forward, had “serious flaws’’ and that the contract was “significantly favorable’’ to Navigant as the only firm in the running for what’s known as a single-source bidding selection process.
“Roswell Park’s process for awarding contracts should be fair and get the best deal for taxpayers. This contract failed to do this so the contract was rejected. It had serious flaws and contained provisions significantly favorable to Navigant,” DiNapoli said Thursday.
Roswell Park officials said they went with Navigant for the more expensive second phase of a cost-cutting effort because the firm already had staff on the ground in Buffalo and came up with a series of savings ideas as part of a competitively bid, $900,000 contract the company won more than a year ago.
Michael Sexton, Roswell Park’s chief operations officer and general counsel, said the comptroller’s office was “emphatic” that the decision to kill the Navigant contract was unrelated to the firm’s recent controversial troubles with a downstate utility authority. He said DiNapoli’s staff raised as their major concern Roswell Park’s failure to competitively bid such a large contract.
The scrubbing of the Roswell Park contract comes amid troubled times for Navigant, a company with long ties to state agencies; the firm has been used by Thruway Authority administrations of current Gov. Andrew M. Cuomo and former Gov. George E. Pataki to issue reports the agency held out as evidence to justify the need for big toll increases.
Last month, a special state panel formed by Cuomo to investigate utility companies’ response to Hurricane Sandy found Navigant had billed huge fees and travel costs to the Long Island Power Authority, including $550-per-night Manhattan hotel rooms and a seaplane trip to a Puerto Rican island. One Navigant consultant billed LIPA for an average of 70 hours of work a week while another ran up a consulting tab of $4.5 million over five years.
The findings by the Moreland Commission involving LIPA and Navigant have since been turned over to federal prosecutors. LIPA and the New York Power Authority have since halted work with the company, though the firm still has active contracts with other state agencies, including the Department of Financial Services, a review of state records showed.
In the case of Roswell Park, DiNapoli’s contract review office found the deal would cost far more than the $3 million the hospital was claiming. They cited up to $2.7 million in additional “success fees” that also could go to Navigant – “apparently regardless of results.” Part of the success fees would be paid up front, with the remaining three-quarters of those fees to be paid by Roswell Park after four months of “sustainable results.” DiNapoli’s office called the results to be achieved vague as written up in the contract.
While the fixed and success fees could add up to a total contract worth $5.7 million, DiNapoli’s office warned Roswell Park that the costs could be far higher because of provisions it agreed to with Navigant calling for “unlimited” travel, subcontractor and other expenses, and other costs, including temporarily placing a Navigant executive on Roswell Park’s payroll.
The comptroller’s office said the Roswell Park deal with Navigant put no cap on expenses by the Chicago firm, such as total travel costs beyond mileage, or on the use of outside subcontractors. It said one of those subcontractors was proposed to be Freed, Maxick and Battaglia, a Buffalo accounting firm whose employees include Jack Sieber, a former top finance official at Roswell Park. The contract rejection letter states that Roswell Park noted the state government’s two-year revolving door ban for Sieber has expired, but said it is “not clear” that the arrangement with Sieber and his firm is allowed under state law limiting appearances by former officials before their agency.
Roswell, formerly part of the state Health Department, is a public benefit corporation under state law.
A Navigant spokesman did not respond to email or voicemail messages.
Sexton said state officials last year made clear that Roswell Park should be using an outside consulting firm to find cost savings to try to meet the terms of a 2012 law that seeks to make the facility more financially independent from the state. Navigant was chosen as the best and lowest bid last year for the first phase of that work, and helped to identify about $20 million in savings – about 3.5 percent of Roswell Park’s operating revenues.
The second phase of the contract – implementing the savings ideas – was the contract scuttled this week by DiNapoli’s office.
Sexton said Roswell Park will abide by DiNapoli’s concerns and bid out the second phase of the project. “If that’s what the comptroller wants us to do, that’s what we’re going to do,” Sexton said. The first-phase contract did not need approval from DiNapoli’s office.
But Sexton said Roswell Park will still move ahead with cost-saving plans as it goes through a new bidding process.
“The January 2014 deadline for submitting a plan to the state to become less financially dependent is in the law. So it’s not like we can miss it,” he said.
The comptroller’s office, calling the now-scuttled contract a draft document, declined to release the written deal between Roswell Park and Navigant. But DiNapoli’s reviewers criticized the deal on a number of other fronts, including failure to set a firm delivery of work by Navigant or an end date to the contract or caps on hourly rates. Navigant, under the Roswell Park deal, also would be able to terminate the contract at will, a move that still could leave Roswell Park on the hook for payment of fixed fees, the comptroller’s office said in a letter this week to Roswell Park’s Sexton.
The agency said the scuttled contract included a provision to have Navigant “procure” a specialty pharmacy service for Roswell Park, but that the deal included no written protections to ensure an independent and competitive procurement process is performed by the firm.