Purpose

PMA claimed it saved Downstate $138 million during the period December 1, 2012 through November 30, 2014 through a Restructuring Action Plan (RAP) under contracts CM00939 and TQ00002. The objective of our examination was to determine whether PMA’s implementation of the RAP achieved the claimed savings.

Background

DOH added $435 million in contract amendments for services outside the scope of the original contract. The services were related to the New York Health Benefit Exchange, and were not subject to competitive bidding or OSC approval. The amendments brought the total contract amount to $684 million and extended the life of the contract to August 19, 2017. This is the third in a series of letters related to this contract.

Key Findings

We found Maximus charged DOH a fringe benefit rate of 86.33 percent for Systems staff operating data centers and 47 percent for all other Operational and Systems staff. This occurred because Maximus included the data centers staff in the same cost pool as bonus-eligible executives, even though they did not receive bonuses. As a result of our examination, DOH negotiated a new fringe benefit rate for the Systems staff.

We found Maximus did not charge DOH the negotiated labor rates for temporary personnel. We analyzed the temporary personnel charges for August 2014 and found that, if Maximus had charged DOH the negotiated labor rates, DOH could have saved over $44,000.

Key Recommendations

• DOH should have Maximus adjust its billing practices to move Systems staff out of the bonus-eligible executives’ fringe benefit pool.
• DOH should enforce the labor rate schedule for all labor charges and recover all temporary labor charges which exceed the negotiated labor rate schedule.

DOH was receptive to our recommendations.