D.C. hospital contract exposes defects

Insiders call process ‘broken,’ ‘illogical’

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In Horace McCormack’s mind, the lucrative contract to “turn around” city-owned United Medical Center was in the bag.

Chicago-based Huron Healthcare, a finalist in a competitive bid process overseen by the D.C. Office of Contracts and Procurements, had partnered with Mr. McCormack’s firm, HGM Management and Technologies, to comply with a small and local business set-aside requirement.

But the multimillion-dollar contract aimed at salvaging the only hospital in the District east of the Anacostia River suddenly slipped through Mr. McCormack’s grasp when he discovered his firm did not meet the District’s certification requirements for small businesses.

For Huron, the consequences appeared equally grim: D.C. procurement law states that failure to include a certified local small business in an original bid proposal can be grounds for disqualification.

Instead, the defect in Huron’s bid, the steps that contracting officials took to rectify it and the response among competitors typified what is wrong with local small-business involvement in city contracts and the procurement process in general, according to elected officials and members of the business community.

Among those problems, critics say, is the involvement of well-connected “consultants” outside the contracting process who become a distraction or cause of anxiety for competitors wary of improper influence.

Huron executives testified Thursday at a D.C. Council hearing that they partnered with HGM as the local firm was in the process of becoming recertified by the Department of Small and Local Business Development.

In reality, HGM was having its certification denied when best-and-final offers were being presented to contracting officials.

In an email dated Dec. 12, Melissa Resil, a business certification manager with the small-business department, wrote to Mr. McCormack and asked why he had failed to confirm that 100 percent of the firm’s revenue was “derived from transactions in the District.”

She also asked him to submit tax returns from Virginia, where officials located a residence and storage facility apparently connected to HGM’s revenues.

When Mr. McCormack was unable to satisfy the agency’s requirements, he was informed Feb. 8 that the small-business department intended to deny HGM’s certification.

“This is totally unprofessional and unjust!” he wrote. “We intend to fight this CASE!!! The PROCESS IS BROKEN! It needs to be fixed!!!”

That denial caused Huron to turn to controversial mayoral campaign fundraiser Reuben O. Charles for help in seeking a replacement — a move that competitors claimed should not have been allowed.

After contracting officials ordered a second round of best-and-final offers that allowed Huron to stay in the competition, and Huron went on to win the award, the contract price jumped from $10 million to $12.7 million.

Mr. McCormack was not the only small-businessman crying foul.

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