Hudson County broke law when seeking prison health service contracts, comptroller says

Hudson County repeatedly violated state procurement laws meant to guard against corruption when awarding contracts worth more than $50 million for health services at the Hudson County Correctional Center, the state comptroller said Thursday.

Meanwhile, when told about the violation, the county’s top attorney told the comptroller’s office that opening up bidding for the contract to the public would have resulted in proposals from vendors the county didn’t want to participate in the bidding process, according to a letter unveiled Thursday by acting State Comptroller Kevin Walsh.

Walsh said Hudson County repeatedly violated the Local Public Contracts Law by misapplying an exception for professional service contracts, illegally extending the improper awards, and repeatedly failing to notify the comptroller of the bidding, as required by state law.

“The County’s closed procurement also purposefully circumvented the transparency required of public entities and resulted in private negotiations with County Counsel’s preferred vendor, leaving County residents in the dark regarding this significant expenditure of approximately $13.5 million,” Walsh said of the latest contract.

The comptroller’s letter targets contracts for health management services that were first issued in 2018 to Wellpath and later renewed four times, as well as a separate solicitation issued in 2023.

It said the county improperly applied a procurement exemption for professional services that allowed it to hand-select a group of vendors to enter bids instead of opening the contract for public bidding.

State law explicitly allows public, competitive bidding for contracts delivering health services at county hospitals, correctional facilities, and long-term care centers, and the comptroller said the professional services exception would not apply to a full-service management company providing a range of services, as Hudson sought in its contract.

The county did not publicly advertise its solicitation because the county “may gave gotten vendors I didn’t really want to participate,” Hudson County Counsel Donato Battista told Walsh’s office. Battista added that the professional services exception in state contracting law allowed him to negotiate with bidders and “do whatever I want as long as I’m not violating the law.”

“County counsel also indicated the county did not use competitive contracting because ‘you also have to open it up to the public,’” the comptroller’s letter says.

A health care consultant for Hudson County found 90 to 95% of the services sought in the county’s 2023 solicitation were professional services, but the comptroller’s office said the consultant’s analysis misapplied two court decisions dealing with state procurement, which is not governed by the Local Public Contracts Law.

The office added the consultant’s unsigned analysis mischaracterized some services as professional services, adding it is unclear whether the analysis whether a range of workers qualified for the exemption.

Battista told the comptroller’s office the decision to issue the solicitation under the professional services exemption was made in concert with county administration and the corrections department.

The county never sought guidance on the bidding from the state’s local government services division, which is authorized to aid local governments in complying with the Local Public Contracts Law.

The comptroller said Hudson County repeatedly renewed the professional service contracts without reopening bids in direct violation of state law.

The Local Public Contracts law imposes limits on contract terms. Those issued under the professional services exception can last up to 12 months and cannot be extended.

Hudson County extended the 2018 contract, worth roughly $8 million annually, four times without reopening bids, and Battista told a bidder the county planned a similar system for the 2023 contract, which is worth nearly $13.5 million a year.

The comptroller added the county repeatedly failed to observe state law that requires local governments to notify his office 30 days before soliciting bids for contracts worth more than $12.5 million.

The county received bids worth between $12.7 million and $16.8 million for the 2023 solicitation and did not inform the comptroller’s office for about two months after receiving the proposals, more than three months after the law required.

When asked about the delay, Battista told the comptroller’s office he did not notify them in hopes of negotiating the price down.

“The County appears to misunderstand that it can accomplish its goals of procuring the services of a vendor capable of providing appropriate health care without violating state law,” the comptroller’s letter says.

In a statement, a spokesperson for Hudson County — which has not submitted a plan to address the procurement problems the comptroller identified — said the comptroller did not object to its one-year contract renewals in earlier years.

“We realize that there is a good faith difference of opinion regarding the proposed [2023] contract and have consistently offered to jointly seek a ruling from the Appellate Division, an offer which the Comptroller’s Office rejected since 2018,” said Mark Cygan, the spokesperson.

The county sued the comptroller in 2019 seeking a declaration that named its 2018 procurement process as proper, but an Appellate Court dismissed the claim, finding the county had failed to state a claim and adding that uncertainty around the 2018 contract was “the result of the county’s failure to fulfill its statutory obligation to provide timely notice to the State Comptroller.”