State officials are seeking a contract extension to maintain the state’s electronic benefits system after a contract approved in July was declared illegal and voided.
The Maryland State Board of Contract Appeals voided the five-year deal with Conduent State and Local Solutions, citing concerns with how the procurement was handled. As a result, the Department of Human Services is asking the Board of Public Works to approve a six-month extension with Conduent, who is the incumbent vendor, while the agency appeals the decision in a Baltimore City court.
In documents filed with the Board of Public Works, the agency said it needs the extension, valued at more than $3.8 million, because “Conduent has ceased engaging in any work under the new contract.”
“DHS is requesting to exercise the remaining six-month renewal option on the current contract to ensure DHS is able to continue providing cash and SNAP Benefits to our Customers,” according to documents filed with the three-member board.
The Board of Public Works in July approved a five-year, $11.1 million deal with Conduent to provide electronic benefits services — including Supplemental Nutrition Assistance Program payments — to roughly 930,000 state residents. The contract included two optional renewals valued at an additional $9 million for Conduent, who was the incumbent contractor at the time.
The board approved the deal over the objections of Fidelity Information Services. The Milwaukee-based company was the only other bidder, and it asked the board to defer a decision on the contract pending its appeal to the Maryland State Board of Contract Appeals. In its appeal, Fidelity alleged problems with the procurement including contingent pricing and a bias for Conduent.
But Maryland Department of Human Services Secretary Rafael J. Lopez told the Board of Public Works at its July meeting that officials from Fidelity Information Systems had misrepresented the procurement process.
“We would not bring to you — the constitutional officers of Maryland — an unlawful contract to sign,” Lopez told the board then. “We just wouldn’t do it. Saying so doesn’t make it true.
“What they’ve done, sadly, is sow doubt, and at the end of the day, we lead with integrity. So, coming after my or our team’s integrity will not work,” Lopez said.
Conduent’s pricing came in 36% lower than the bid submitted by Fidelity but contained options with costs that would be negotiated in the future.
Lopez told the board that Conduent would incorporate security features including chip technology to prevent fraud.
Maryland ranked second in the number of claims of stolen food assistance benefits over the past two years, according to the U.S. Department of Agriculture. From the second quarter of 2023 to the third quarter of 2024, according to USDA, there were 48,732 stolen benefits claims made in Maryland, second only to New York’s 90,677 claims.
“If we fail to act now, Maryland will pay more for extension of the current system contract, which does not provide enhanced security features to protect Marylanders from benefit theft,” said Lopez told the Board of Public Works in July. “This will likely result in a nine- to 24-months delay.
The Board of Public Works unanimously ratified the deal with Conduent despite members’ reservations about getting involved while there was an active appeal. The panel justified the vote, saying the state had a “substantial interest” in moving forward.
“This is a serious and important contract,” Comptroller Brooke Lierman (D) said at the time. “There’s a huge risk in the state not proceeding.”
It was the second time in a month that the panel approved a contract under appeal. At a board meeting a month earlier, Lierman expressed concerns about departments bringing contracts that are subject to appeal before the board and warned losing bidders to not file frivolous appeals.
The appeals board, in an August ruling, sided with Fidelity Information Services. In a 15-page decision, it called the department’s award recommendation to Conduent “arbitrary, capricious, unreasonable or in violation of the law and/or biased.”
The panel also found that justifications for the award by a state procurement officer were “nebulous at best.” That same official noted that the chip technology required by the General Assembly and lauded by Lopez was “not part of the scope of work in the contract.”
As part of the ruling, the panel wrote that Conduent included conditional pricing in its bid, in violation of the request for proposal. Such language should have rendered the bid ineligible, the board ruled.
Conduent and Fidelity were the only two bidders presented as recommendations to Lopez. But in its recommendation, the department wrote that Lopez had two options: Approve the contract with Conduent or rebid — a process that could take two years.
“Because both offerors were deemed susceptible for award, the absence of FIS [Fidelity] as an alternative awardee implies bias in favor of Conduent,” the appeals board wrote in its ruling. “In short, the recommendation read: Conduent or nothing.”
The state appealed the contract board’s ruling. It also asked a Baltimore City Circuit Court Judge to stay the board’s order pending the outcome of the appeal. That request was denied.