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‘There’s a lot of smoke here’: RI lawmakers push for answers on brand-new firm’s $5M consulting contract

Target 12

PROVIDENCE, R.I. (WPRI) — Rhode Island lawmakers grilled state purchasing officials Tuesday over a controversial contract awarded to a newly founded consulting firm, zeroing in on a Zoom meeting held by Gov. Dan McKee that spawned the idea of launching a competitive bidding process to award the deal.

The Senate Oversight Committee held the first of three legislative hearings scheduled this week to scrutinize the $5.2 million contract awarded to ILO Group LLC. The firm incorporated on March 4, two days after McKee took office.

“The objective of the hearing is to get all the facts,” said Oversight Committee Chairman Lou DiPalma, D-Middletown, as the panel began a roughly three-hour examination of the contract.

Calendar entries released by the governor’s office show that on March 5, a day after ILO was incorporated, McKee had a scheduled Zoom meeting with ILO managing partner Julia Rafal-Baer and Mike Magee, a longtime McKee adviser who at the time was also Rafal-Baer’s boss at the nonprofit Chiefs for Change. Also on the invite list were McKee’s then-chief of staff Tony Silva, R.I. Department of Administration Director Jim Thorsen and Nancy McIntyre, the state’s head of purchasing.

The governor’s office has said Rafal-Baer did not show up for the Zoom meeting. But at Tuesday’s hearing, Thorsen revealed that Magee brought up ILO Group by name on the call.

“That was the first I had heard about ILO,” Thorsen said under sharp questioning from Sen. Stephen Archambault, D-Smithfield, in one of multiple contentious exchanges during a hearing.

Archambault told the witnesses, “All the deflecting here is frustrating.”

Thorsen and McIntyre both testified that Magee mentioned ILO in the broader context of how McKee could get outside help with the task of reopening schools safely in the fall amid the pandemic. But beyond that, the two said they could not remember anything Magee said during the meeting.

While committee members expressed concern that Magee’s early knowledge of the forthcoming RFP could have given ILO an unfair advantage, Thorsen emphasized that Magee has no direct role with ILO and said he had no way of knowing if Magee ever discussed it with Rafal-Baer. She continued to work for Magee until June 28, shortly after ILO had won its state contract.

However, the purchasing officials did recall encouraging McKee at the meeting to draft a formal request for proposals, or an RFP, if he wanted to hire consultants for his education initiatives. In addition to assistance with reopening schools, the RFP ultimately sought help replicating a municipal education office that McKee and Magee created when the former was serving as Cumberland mayor.

“I did not know Mike Magee, I did not know Julia Rafal-Baer, I did not look at the individuals who were attending this meeting beforehand,” McIntyre told senators. She acknowledged it was the first time in her years of working for the state that she had ever been invited to a meeting with a governor about RFPs.

McIntyre also said she didn’t realize Rafal-Baer’s involvement with ILO until after the bids came into her office weeks later. If she had known Rafal-Baer and her ties to ILO at the time the company was discussed on March 5, McIntyre said she would have recused herself from the meeting.

However, McIntyre said she felt that her attendance was ethically sound since Rafal-Baer didn’t show up, and since it gave her the opportunity to recommend the RFP process to the governor and his team.

“Once there was a discussion to move forward with this initiative, I spoke about the RFP process and that again was my intent: to drive a competitive process,” McIntyre said.

Sen. Jessica de la Cruz, R-North Smithfield, was among the lawmakers who weren’t satisfied with the answers. She suggested the bidding process had been designed to benefit one company, ILO, despite arguments otherwise from McKee administration officials.

“My mom always used to say, where there’s smoke there’s fire, right?” de la Cruz said. “And there’s a lot of smoke here.”

The purchasing officials who testified Tuesday included Thorsen’s legal counsel, Daniel Majcher, who was part of the four-member review team that reviewed the bids and eventually suggested awarding a contract to ILO.

North Providence Mayor Charles Lombardi, a close confidante of the governor’s, also served on the review team at the request of the McKee administration. Lombardi’s inclusion was the first time any of the state officials who testified Tuesday said they could remember an elected official serving on an RFP review team.

Majcher, Thorsen and McIntyre emphasized that the governor’s office drafted the initial RFP, which the review team later described as too “broad and vague,” causing confusion among the vendors and forcing them to award the final contract through an alternative mechanism. Thorsen also said officials at the R.I. Department of Education “were not deeply involved” with drafting the RFP.

Majcher, who said he himself was “not involved in the drafting of the RFP,” pushed back at criticism that the process to select ILO and a second consulting firm that put in a lower bid, WestEd, was handled improperly.

“The evaluation itself was handled by four experienced individuals, it was extremely comprehensive, it was fair, it was thorough — we did everything we normally do as part of our process,” he said.

But Thorsen acknowledged they were under significant pressure from McKee and his staff, attributing that to the limited time they had to hire consultants early enough to still help local school districts prepare for the new school year in the fall.

“This was one of the first things he did in the office,” Thorsen said of McKee.

While McKee did not testify at the Senate hearing, he reiterated his support for ILO at a news conference earlier Tuesday. The governor pointed back to March, saying there was widespread uncertainty at the time about the trajectory of the pandemic, and arguing his decisions since then have shown he’s making the right choices for Rhode Islanders.

“We got really good skilled people where we needed them and they’re doing really important work,” McKee said.

Yet ILO had worked on reopening plans with only six of the state’s 36 districts when schools reopened last month, which triggered widespread criticism from local education officials and lawmakers after Target 12 first reported about the contract on Sept. 7.

Testimony at the hearing, as well as emails obtained by Target 12 through a public-records request, show how McKee’s office played an integral role throughout the procurement process that led to the ILO contract.

During the hearing, the administration witnesses disclosed that Afonso, the governor’s current chief of staff, and McKee’s former special adviser on education, Christine Lopes Metcalfe, made the decision on the value of ILO’s contract after the original RFP process turned into a master price agreement. (Afonso was senior deputy chief of staff at the time; Lopes Metcalfe has since resigned.)

Majcher said while the four-member review panel ultimately recommended giving contracts to both ILO and WestEd, they left it to the governor’s staff to decide how much money to award each company. WestEd was awarded $940,000 to help reopen colleges, while ILO was awarded up to $5.2 million.

“Once they were deemed eligible, the agency — in this case the governor’s office — had further discussions with the vendors and then decided how to break up the work,” Majcher said.

The ILO and WestEd contracts are funded with federal coronavirus relief money.

According to Thorsen, Afonso and another staffer in the governor’s office, Elizabeth Winangun, are currently the point persons managing the ILO contract. That led to criticism from some committee members about why no one from the governor’s office had appeared to testify at the hearing.

“Some of the questions we’re asking you, you don’t have answers to, and it seems like you’re deflecting a bit,” said de la Cruz, adding later that it “wreaks of cronyism” to spend taxpayer money paying consultants for what she said were tasks existing state employees already do.

“Rhode Islanders have yet again been fleeced by a corrupt deal,” she said.

In addition to a focus on the web of personal relationships surrounding the ILO contract, lawmakers also scrutinized why the state picked the brand-new firm when it proposed doing the work for millions of dollars more than WestEd, which has more than two decades of experience working with the state.

“Why would we pick someone who’s twice as expensive on an hourly basis?” asked Sen. James Seveney, D-Portsmouth, comparing ILO’s hourly rate to WestEd’s.

Noting that the two companies received nearly identical scores in their technical proposals, Seveney asked the procurement officials, “Where is ILO more than two times better from a best-value perspective than WestEd?”

“If you can’t show me that, from my view, this is a flawed process,” he added. “You took it to a point, and you didn’t know what to do next, so you gave both companies a contract, and in my view one is exorbitantly expensive.”

“I’m not here to defend it,” Majcher responded, insisting he was testifying only about the procurement process rather than the administration’s policy decisions.

Majcher helped pen the technical evaluation that recommended awarding the contracts to ILO and WestEd, a decision he defended because the two companies were so far apart on cost and the governor’s office didn’t want to waste any more time. Canceling the RFP and rebidding the contract wasn’t an acceptable course of action, he said.

Still, Majcher said procurement officials “did not shortchange or do anything less” on the ILO contract, arguing the awarding of a master price agreement is a no less rigorous process than an RFP. It simply allowed them to award the bid without having to restart the process, he said.

DiPalma pushed back at that, saying it “failed to hold water” to claim WestEd couldn’t have been selected when it was less expensive and similarly qualified.

The committee chairman also took issue with the fact that ILO was picked soon after Rafal-Baer served on the state’s education LEAP task force, a group of education experts put together in February to identify educational issues caused by the coronavirus pandemic.

The connection between the LEAP task force and the state’s RFP process was noted in the emails obtained by Target 12. One review team member — Thomas McCarthy of the R.I. Department of Health — asked Lopes Metcalfe for help defining engagement for the bidding companies.

“We want to make sure we’re fully aligned with the Governor’s expectations,” McCarthy wrote, describing the goals of the contract as “supporting municipalities in fully reopening schools next year, building upon the outcomes of the LEAP task force, and working to establish municipal education departments.”

DiPalma said that connection, along with all the other revelations surrounding the bidding process that led to ILO’s selection, begged more questions that needed answering.

“Dr. Baer was involved in the LEAP effort, was going to be at the meeting on March 5, her partner was there from Chiefs for Change, she made ILO and was with Chiefs for Change for the next two months,” DiPalma said, before asking whether all that constituted “a conflict of interest.”

DiPalma suggested the McKee administration should consider terminating ILO’s contract in light of the controversy.

“I can’t answer that question emphatically to my constituents, that this was an open, fair, transparent process,” he said. “I can’t.”

Eli Sherman (esherman@wpri.com) is an investigative reporter for WPRI 12. Connect with him on Twitter and on Facebook.

Ted Nesi (tnesi@wpri.com) is a Target 12 investigative reporter and 12 News politics/business editor. He co-hosts Newsmakers and writes Nesi’s Notes on Saturdays. Connect with him on Twitter, Facebook, LinkedIn and Instagram

Tim White contributed to this report.

Copyright 2021 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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