Covered California Abuses No-Bid Contract Policy

Covered California views transparency as an obstacle to be overcome and no-bid contracts as a perk to abuse. 

That's the lesson to be learned after an audit released Tuesday by the state auditor that questioned a broad policy that allowed the use of no-bid contracts at the health exchange, which contracted $198 million worth of bids, out of $989 million in total, for these type of sole-bid contracts during a three-period of time. Astonishingly enough, or maybe brazenly, the agency and its executive director, Peter Lee, continued with the policy until January, after they reviewed the auditor's report. 

We write "astonishingly" because Covered California was called out for its use of no-bid contracts – in 2014 – by Consumer Watchdog. The advocacy group demanded an investigation by the Attorney General's office after the Associated Press reported that the exchange awarded $184 million in contracts without the competitive bidding and oversight that is standard practice across state government, including deals that sent millions of dollars to a firm whose employees have long-standing ties to the agency's executive director. Many of those no-bid contracts went to a company run by a former colleague of Lee who ended up working at Covered California 

The current auditor's report encompassed the fiscal years of 2012-13 to 2014-15, so it's unclear which contracts overlap between the $198 million reported for the auditor's report on Tuesday and the $184 million reported by the AP in 2014. 

Regardless, Covered California knew that its no-bid contracts policy was too broad, proffering the excuse that the shortened timeline to get the exchange up and running forced it to give out the contracts, and didn't stop until this year. But as the state auditor wrote: " Of the 40 sole-source contracts and amendments we reviewed, Covered California did not sufficiently justify the need for nine (or nearly 25 percent) and, for another three, we questioned the validity of the justification because there was time to use a competitive process or the vendor was not unique."

Last year, the Legislature required the exchange to change its policy by April 2016 and follow the state's policy. Under those rules, no-bid contracts are allowed only in emergencies affecting public health and safety, or when there are no known competitors. 

Unsurprisingly, Cover California tried to hide the fact that it was changing its policy in January. Anyone reading January's agenda would have never known (see below), and the exchange notoriously waits until the day before, or even minutes before, its meeting to post backup materials about the agenda online. 

Covered California's disdain for transparency is readily apparent. Why lawmakers refuse to crack down on the health exchange is harder to understand. 

Capitol Watchdog is owned and operated by nonprofit Consumer Watchdog. For more information about Consumer Watchdog visit