The Healey administration used “improper and unlawful” methods to hire contractors for the state’s emergency shelter system, a new audit released Tuesday found. Those methods led to overcharges and a lack of transparency, Auditor Diana DiZoglio concluded, during a period when the shelter system was tremendously strained by the numbers of unhoused Massachusetts residents and migrant families.
DiZoglio’s office says that as demand grew in 2023, the Executive Office of Housing and Livable Communities “failed to adequately assess and act upon the increased demand for shelter services, resulting in improper and unlawful no-bid emergency procurements for food and transportation services.” That led to two vendors taking in over $14 million in state dollars for food and transit.
“Non-compliance with proper procurement protocols hinders the integrity of the contracting process and undermines the public’s trust in government,” DiZoglio’s office wrote.
Secretary Edward M. Augustus, Jr., who leads the housing office, denied the majority of the findings in a letter to audit manager Elaine Silva.
He said it was important to note the “full context” of the situation the agency faced.
“The Healey-Driscoll Administration inherited two dual challenges when we arrived in office: an unprecedented surge of families seeking emergency shelter and a deeply flawed shelter system that was ill-equipped to handle such a surge,” he wrote. Between July 2023 and July 2024, Augustus says Massachusetts’ population grew by nearly 70,000 residents — “its largest population increase in 60 years.”
He said the finding of “improper and unlawful methods” was “fundamentally wrong and unfounded.”
DiZoglio’s office noted “missing evidence” and lack of documentation to support a no-bid contract with the food vendor, Spinelli Ravioli Manufacturing Company, Inc.
The auditor said the state didn’t consider an opportunity to accept a flat rate with Spinelli’s for food delivery services, resulting in overpayments on 9.6% of deliveries. The company provided nearly 500,000 deliveries and meals, at the cost of about $9.5 million.
Augustus said that longstanding providers began to run out of the ability to provide for food and transit, and the number of new vendors bidding in the open procurement process was “limited.” The agency, he said, was “bound by its statutory obligation to provide shelter and associated services to eligible families.”
As the number of families entering Massachusetts surged, the state settled on a temporary solution: putting families in hotels without kitchens or refrigerators. The agency didn’t have direct contracts for food. That’s why Augustus’s office had to “move quickly to secure food services,” he wrote, starting an emergency contract with Spinelli’s in September 2023. Spinelli’s was an existing government contractor with the state’s emergency management agency, providing services during the pandemic under the Baker administration.
Without making that choice, Augustus said the state would have had to wait at least five to six months to competitively procure food and transit services. That same month, he said, the office started seeking additional food vendors through the normal procurement process and fazed out the emergency contract with Spinelli’s a few months later. He also argued the auditor’s office made an error in its calculation of overpayments.
The auditor’s office also said there was also missing documentation for when the state entered into a no-bid contract with Mercedes Cab Company/Pilgrim Transit for transportation services. This resulted in excessive costs and inflated pricing, the report concluded. The transit company completed nearly 16,000 trips, with the average cost of $155 per trip, for a total cost of $4.7 million.
Spinelli’s and Mercedes Cab Company/Pilgrim Transit didn’t respond to requests for comment.
Augustus wrote that what his agency paid to the transit company “was proportionate to the difficulty of the required work.” That required services by a vendor between 8 a.m. and 6 p.m., Monday to Saturday, with pick-ups and drop-offs on short notice — especially due to the lack of public transit in the areas many of the shelters are in. Of the nearly 16,000 rides, he said only two were incorrectly invoiced.
“We hope, for the sake of history not repeating itself, especially in areas such as the no-bid contracting process, where taxpayers have grown increasingly frustrated and concerned with the appearance of impropriety regarding how and why no-bid contracts were awarded, that this Administration will embrace recommended reforms and move away from its defensive posture,” DiZoglio wrote in a statement.
In a press scrum on Tuesday, Gov. Maura Healey said she hadn’t yet seen the report.
“We’ve made a lot of reforms, a lot of changes, and as a result, you’ve seen numbers going down for folks who are in shelter. You see costs going down, and we’re just going to continue to make progress there,” she said.
Asked if she would consider changes based on the recommendations from DiZoglio, Healey said, “I doubt it. I mean, this has been territory pretty well covered.”
She noted this was because case numbers in shelters and the costs of running them are already down, with closures of hotels coming by summer
One provider said that she believed the auditor’s team didn’t speak with shelter providers during the assessment.
“Auditing an emergency system like this requires a level of expertise to understand the system’s nuances and how they function,” said Danielle Ferrier, CEO of shelter provider Heading Home in a message. “Without having any experts on staff, the methodology appears flawed. There are a number of assertions in the report about the process that are factually incorrect, and lead to inaccurate conclusions.”
She said that the emergency procurement of food and transit services was critical to “keeping people alive.” Based off her prior role at the Department of Children and Families during the Baker administration, which included procurements, Ferrier argued this was an “appropriate use of [them] in this situation.”
The auditor’s office says the review of shelter system spending is the first in a series of performance reviews of the Executive Office of Housing and Livable Communities for the period of July 1, 2021 through June 30, 2024. The state auditor has this power under Chapter 11 of the Massachusetts General Laws.
The purpose of the audit was to focus on issues related to procurement and contracting in the state’s emergency shelter system. That included assessing whether emergency food and transportation services were contracted properly under Massachusetts regulations.
Katie Lannan contributed reporting.
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