The state is taking over operation of seven Division of Youth Services (DYS) residential facilities for at least six months after the Arkansas Legislative Council declined Friday to act on a $159 million contract with a private provider, which Gov. Asa Hutchinson said would have resulted in those facilities shutting down at the end of the month.
The Council failed to review the seven-year contract with Indiana-based Youth Opportunity Investments to operate residential treatment and facilities management services at seven locations for juveniles who had been committed through the juvenile justice system. The contracts with current providers expire Dec. 31, and notices have gone out to more than 190 employees.
After the Council meeting, Hutchinson, the Department of Human Services (DHS), which is the umbrella agency for DYS, and the Department of Finance and Administration (DFA) crafted a solution, Hutchinson announced in a hastily called press conference Friday with DHS Director Cindy Gillespie and DFA Director Larry Walther.
“We are currently headed for a government shutdown of youth services because there is no contract, and there will be no employees after the end of this year unless action is taken,” Hutchinson said.
That action was a plan for the state to take over operating the facilities in Colt, Dermott, Harrisburg, Lewisville, and Mansfield.
The facilities had been managed by longtime private operators South Arkansas Youth Services of Magnolia and Consolidated Youth Services of Jonesboro before Youth Opportunity Investments was announced as the winning bid.
Some legislators balked at the process that led to the Indiana-based company winning the contract and at the higher fees it was charging. At the ALC meeting, legislators voted to split the vote between the House and the Senate. House members supported the contract review, but senators voted it down.
Sen. Bruce Maloch, D-Magnolia, who voted against the review, later said some legislators questioned the procurement process, saying there were changes made between the bid submission and the awarding of the contract, favoring Youth Opportunity Investments. The increased price of the contract was a concern.
“I think when we left this morning, we anticipated the procurement office issuing some emergency procurement contract that we would come back and review on the 30th,” he said.
Legislators had visited with DFA and the Bureau of Legislative Research about different possibilities, which they were told could include an emergency procurement, temporary contracts with existing providers, or a new contract with a third party, Maloch said.
“There were different options that were discussed and given to us. The direct takeover by the state was not mentioned,” he said.
Hutchinson said there will not be an opportunity to award another contract.
“The process has ended, and so the state will take over these facilities. We will operate those, and the Legislature in essence killed the bid process,” he said.
The facilities will be managed by current DHS managers who will be stretched thin, said Hutchinson. The employees at those facilities will become state employees. Funding will come from money that had been set aside for the contract, said Gillespie.
Gillespie said more than half of DHS’ employees – more than 3,000 – already work at facilities, including the state psychiatric hospital, the Arkansas Health Center, and five human development centers.
“This is not something that is foreign to us. This is what we do,” she said at the press conference.
Hutchinson expressed frustration with the Legislature for declining to review the contract. He said the contract originally was an open bid contract that was competitively bid, rebid after a challenge, re-awarded and then protested, which was then denied.
The state will manage the programs for the next six months, at which time it will evaluate the advantages of returning the contract to the private sector, Hutchinson said. Managing the process for six months will make the state better able to provide oversight if the facilities return to the private sector, he said.
Senate President Pro Tempore Jonathan Dismang, R-Searcy, said he believes the administration could have moved forward even without the Council’s blessing.
He said the Council’s review authority is simply to make sure the procurement process is followed, which he believes it was. He said legislators cannot approve or reject contracts and “should not be in the middle of trying to pick who gets a contract and who doesn’t.”
Hutchinson said the legislative review process takes too long, is cumbersome, and is too influenced by lobbyists.
“It all fundamentally violates the procurement process that we try to set up that is rules based and is based upon qualifications and scoring,” Hutchinson said.