‘Poor’ state communication clouded Utah’s no-bid COVID-19 tech contracts, report says

SALT LAKE CITY — Poor communication between state departments and a lack of collaboration with health officials compounded issues around a pair of controversial, multimillion-dollar coronavirus contracts with tech companies, according to a limited legislative review released Tuesday.

The review by legislative auditors found that of the more than $97.3 million state agencies doled out in emergency spending to respond to the COVID-19 pandemic from March to July, many contracts were “executed without significant concerns.” But two contracts “would have benefitted from better communication, collaboration, and direction if all relevant state entities were included in decisions.”

Those contracts include the over $4 million partnership with Twenty Labs on the Healthy Together App, and the $9.6 million partnership with Nomi Utah on the TestUtah initiative.

“What we found is there was really a need for greater collaboration,” legislative auditor general Kade Minchey told lawmakers on the Legislative Audit Subcommittee. “We understand there was a lot going on during that time, but we still feel like for those contracts in particular, if there had been collaboration with the entities at play there, there could have been some opportunities to avoid some pitfalls.”

The contract with Twenty to develop the Healthy Together App was intended to assist with COVID-19 contact tracing efforts, among other features, but has not been a successful tool for state health officials. The tracking feature that was initially pitched to aid contact tracing has since been turned off, which state officials attributed to privacy concerns that had turned many Utahns away from the app. The app was recently revised to use Bluetooth.

While questions and concerns swirled around the app, another Utah businessman offered the same service for free.

To date, the state has paid over $4 million for the Twenty app and continues to pay an ongoing $300,000 monthly maintenance fee.

According to the review, Utah Department of Health officials were not included in contract negotiations with Nomi Utah and the TestUtah initiative, which included $2 million for the creation of TestUtah.com, $3 million for the first month of five drive-thru testing locations and lab services, and an additional $600,000 a month for each active testing location, even though the effort was initially pitched as one that would be crowdfunded.

Questions and concerns have also swirled around TestUtah’s COVID-19 testing accuracy, though lab officials vehemently defend their test’s integrity.

While legislative auditors wrote in their report that “a full audit of all contracts would be needed to identify deep-rooted questions,” Utah State Auditor John Dougall has been conducting an audit of COVID-19 emergency spending for several months now. His office has not provided a timeline of when that audit will be complete.

However, in their limited review, legislative auditors found the contracts with Twenty and Nomi — and over $64 million in emergency purchases for personal protective equipment — did not violate state emergency procurement statutes.

“However, while the state took advantage of the flexibility component (of emergency procurement codes) with the Twenty contract, based on interviews we conducted and documentation we reviewed we believe there could have been more room for competition,” auditors wrote.

Auditors indicated that their limited review found the Utah Department of Health wasn’t fully looped in on the contracts, and “greater collaboration” between the Governor’s Office of Management and Budget and the Division of Purchasing “should have happened in the early stages of the pandemic.”

“For example, the Healthy Together app negotiations for contact tracing did not involve purchasing or DOH until the final formation of the Twenty contract,” auditors wrote. “Although emergency procurement requirements found in Utah Code do not require specific entities be involved in contracting, we believe it would have helped secure a better contract and better align state actors to a common vision.”

Auditors also wrote the Department of Health “did not fully engage in initial negotiations for the original Nomi contract when they could have provided subject matter expertise on testing setup and protocols” and the state’s technology services department was not involved in the initial contracting with Nomi.

“Another area of poor collaboration we found is with the ongoing use and monitoring of these contracts,” auditors wrote. “It was reported to us that one state entity continued to work with one vendor, soliciting additional work and reprioritizing some of the original terms of the agreement without the knowledge of other state agencies.”

While one state agency oversaw the app’s contract, another agency handled payment.

“This contributes to confusion and decentralizes the efficacy of monitoring a contract for compliance,” auditors wrote. “Agencies should communicate on contract revisions and assign a single entity to oversee and monitor the contract.”

The Governor’s Office of Management and Budget spearheaded the initial contract negotiations for both Twenty and Nomi, before the Utah Department of Health began handling the contracts.

Rep. Suzanne Harrison, D-Draper, and Rep. Andrew Stoddard, D-Sandy — who have both been outspoken critics of the Twenty and Nomi contracts — again expressed their concerns during a briefing of no-bid contracts given to the Government Operations Interim Committee on Tuesday.

Stoddard said the state has now paid over $4 million on Twenty’s “app that doesn’t do what it was supposed to do,” and asked Phil Dean, interim executive director of the Governor’s Office of Management and Budget, if there has been “consideration for breaking those contracts or renegotiating them?”

Dean, who took over the role of the management and budget office’s executive director Kristen Cox when she left the last month, said, “The simple answer is yes. There have been discussions of ensuring the apps meet their purpose. It’s also fair to say there are ongoing discussions about that.”

Asked specifically about the free offer from another business to develop a contact tracing app, Dean said “there have been multiple conversations about other opportunities,” but noted the state is no longer operating under emergency procurement processes, and so it would need to go through a competitive bidding process.

Harrison raised concerns about how “these companies had absolutely no background in health care, yet they were awarded multimillion-dollar contracts for medical services.”

“Could you comment on what kinds of consultations were made by health experts to argue those were wise contracts to enter into in a no-bid contract process?” Harrison asked Dean.

Dean said he was not “personally involved in those aspects, so I can’t immediately respond to that question directly.”

“I think it would have been a wiser use of taxpayer dollars to invest in existing public health infrastructure and, at a bare minimum, consult with experts from the Department of Health before entering into no-bid contracts with companies that have no expertise in these areas,” Harrison said.

Legislative auditors in their report offered several “lessons learned” — summed up with the heading, “Improved communication and collaboration were a consistent theme.” They recommended the Legislature “consider these lessons learned to determine whether more guidance is needed to direct how the executive branch uses emergency procurements in the future.”

In a written response to the legislative review, Division of Purchasing officials said the agency “is committed to make the Utah Procurement Code efficient and effective for all procurements, emergency and nonemergency.”

In a separate audit subcommittee meeting Tuesday, House Speaker Brad Wilson, R-Kaysville, pointed out that the legislative review showed “no misappropriation of funds, no blatant violation of state procurement code or state law, but even under the umbrella of a state emergency, not all procurement decisions are created equal.”

Wilson said while some purchase decisions like for personal protective equipment were timely and needed, others “maybe could have been made a bit slower and had a little bit more collaboration.”

“I do think there were a lot of decisions that needed to be made quickly, and I think by and large the decisions were made well,” Wilson said. “I think it’s incumbent on us as a legislative branch to take the lessons that we can learn and make sure we put those in place perspectively for any future times that are similar to this, heaven forbid.”

Senate Minority Leader Karen Mayne, D-West Valley City, said there could be additional guardrails put into place in state statute to avoid future problems. In her assessment, the problems came from turf battles and personality issues.

“If it’s not a virus, it’s going to be something, and we need to put things in place,” she said, echoing the recommendation to “put a structure in place so they can work together and not step on each other’s toes and not get into personalities and turf and all of that.”

She called it a “wake-up call” to state agencies to better work together.

“This was awful, but I think our procedures are going to be better for this,” she said.

Katie McKellar

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