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Medicaid consulting contract with McKinsey under fire for cost

JEFFERSON CITY, Mo. — The Chief Operating Officer of Missouri’s ties to his former employer are under fire again after the awarding of a consulting contract to a bid that was the second highest bid and nearly four times the low bid.

House Floor Minority Leader Gail McCann Beatty is calling on Gov. Mike Parson to eliminate  Drew Erdmann’s position — a $130,000 a year position created by former-Gov. Eric Greitens.

“New Gov. Mike Parson must take a strong stand in defense of Missouri taxpayers by immediately eliminating the unnecessary post of chief operating officer, canceling this shady and expensive deal and demanding openness and transparency in the state bidding process,” said McCann Beatty.

At issue is a consulting contract to perform a rapid response of the state’s Medicaid program. Out of the five companies that submitted bids, the contract was awarded to McKinsey & Co., Erdmann’s former employer, for a price of $2.7 million. McKinsey was the second highest bid, with only Accenture bidding higher.

The other three companies bid significantly lower: Deloitte Consulting bid $981,000, Navigant bid $898,000; and KPMG bid $750,000. In fact, combining the three lower bids is still less than McKinsey’s bid.

Cost was only graded at 15 percent of the overall bid score, which is a dramatic turnaround from the original request for proposal — solicited in December and promptly withdrawn — that would have graded cost of 40 percent of the overall bid.

While the scoring method varies depending on the RFP, the state does have a law requiring the “lowest and best” bid to be accepted. The Office Administration’s emphasis on “lowest” actually came under fire earlier this year when a St. Louis-based technology company lost a state contract to an out-of-state firm that had the low bid.

McKinsey had a significantly higher bid than the majority of those submitted bids, yet easily came out on top. The company received perfect scores in every category not related to cost with identical comments in each section. The other four companies were marked down and had specific criticism outlined in each section.

The awarded bid was also the only one with redacted information. None of the other companies redacted any portion of their proposal.

This isn’t the first time a bid with McKinsey has been shrouded in secrecy and taken public scrutiny. The state has a contract with McKinsey to manage a new human resources management system, apparently at no cost. The contract for the employee survey that led to the program has very little details publicly available.

Navigant had lodged a formal bid protest and is asking that the contract with McKinsey be rescinded and rebid.

Sarah Steelman, who heads OA, told the St. Louis Post-Dispatch that Erdmann had no influence on the bid.

“With the revelation that the former administration apparently rigged state bidding rules to award a bloated $2.7 million consulting contract to the COO’s former employer while keeping key portions of the bidding documents secret from the public, Missouri taxpayers should demand action to prevent the disgraced former governor’s cronies from further raiding the state treasury,” said McCann Beatty.