$30M New Brunswick health contract awarded without bidding

The New Brunswick government gave itself 24 months to design and hold a competition for a 10-year, $30-million health services contract, but has reversed itself and awarded the work to Moncton's Medavie Blue Cross without seeking any bids.

Explanations about why have been limited

"On April 25, 2023, Finance and Treasury Board signed a new contract for health, travel, and dental benefits with Medavie Blue Cross," said Alycia Bartlett, the department's communications director, in an email.

"The contract did not go out to RFP [request for proposals]."

The contract, which Medavie Blue Cross has held without interruption since the 1960s, pays the company about $3 million per year. For that, it administers approximately $80 million in health, dental and other benefits that the New Brunswick government provides to its employees and and their families.

In a report last year, Paul Martin, the auditor general for New Brunswick, raised a number of concerns about the contract, including the fact it was not put out for competitive bidding in time to take effect in June 2021, when the previous 10-year contract with Medavie Blue Cross expired.

Instead, the province negotiated a temporary two-year extension until June 2023 to give itself time to solicit bids from all potential suppliers and make a selection of the most qualified.

"Although the contract with Medavie Blue Cross expired on June 30, 2021, it was extended until June 30, 2023, to allow the province enough time to complete a new request for proposal to procure a new contract," noted the auditor general in his report.

According to Martin, a bidding process to meet the June 2021 deadline should have begun in June 2019 but wasn't, and when COVID-19 pandemic lockdowns began in March 2020, it became difficult to organize one in time.

But competition for the contract was considered important, so the two-year extension was negotiated as a compromise to ensure bidding on a full 10-year contract could take place.

The extension came "without an evaluation of Medavie Blue Cross's performance," according to Martin, but was necessary because "should Medavie Blue Cross not be the successful proponent, the province would run out of time for a successful transition to a new provider."

Despite those accommodations, no other provider was allowed to bid in the end.

In an email to CBC News last week, Martin's office reconfirmed that it had been told directly by New Brunswick Finance and Treasury Board officials during its audit that "a new request for proposals to procure a new contract" was being prepared and would be issued.

Martin did not offer a reaction to the fact bidding never took place, but his office did reiterate several concerns it found with the way the province manages the health and dental benefit plan, including concerns with the old contract Medavie Blue Cross had to administer it.

Martin's audit uncovered "no documentation" to support claims made by the province that having the company run the program saves "millions," or any proof that the long-running arrangement is "best value for money" for taxpayers.

"We concluded Finance and Treasury Board did not have effective oversight over the plan," said Jolyne Roy, a communications officer with the auditor general's office.

Martin's office was interested in the plan partly because of ongoing multimillion-dollar deficits it has been running, primarily in its provision of prescription drug coverage for employees. 

During the audit the province blamed those shortfalls on "larger claims than originally projected by Medavie Blue Cross actuaries."

Medavie is one of the largest private suppliers of health care to the New Brunswick government, billing $336.2 million to four departments for a variety of services in the fiscal year ended in March 2022.

Generally, the government procurement policies require bids for services that cost $121,200 or more, although a number of exceptions are allowed.

According to Service New Brunswick, bids are conducted "to maximize competition to achieve the best value for money, while ensuring that all suppliers and contractors who wish to compete for government contracts have a fair and open opportunity to do so."

The province hasn't said if it is relying on an exception to the procurement policy in selecting Medavie Blue Cross without a competition, only that its plan to hold a competition was reversed.

"Upon review, the decision was made to negotiate with the current New Brunswick provider to achieve administrative cost savings and financial stability," Bartlett said.