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Healey relied on ‘unlawful’ no-bid contracts to manage shelter crisis, state auditor says
Healey's use of no-bid emergency procurements led to "unnecessarily high costs" and a "lack of transparency," a newly released audit found.
The Healey administration failed to “adequately assess” the heightened need for shelter services in recent years, State Auditor Diana DiZoglio’s office said in a sharply-worded report released Tuesday. This caused the administration to unlawfully use no-bid contracts to secure food and transportation services for the families staying in these shelters, the audit conducted by DiZoglio’s office found.
The state’s housing office bypassed competitive bidding processes, mismanaged contracts, and did not keep sufficient documentation, according to the report. These factors led to excessive costs and a lack of transparency, the audit found. All in all, the findings indicate a “lack of administrative oversight” at the Executive Office of Housing and Livable Communities (EOHLC) during the recent emergency shelter crisis.
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That crisis, which was caused by a surge in immigration and the high cost of living in Massachusetts, has defined much of Gov. Maura Healey’s first term. The state is legally obligated to shelter families in need, and the emergency shelter system became severely overburdened. Healey declared a state of emergency, imposed shelter stay limits, reformed the “right-to-shelter” law, and opened up new shelters at hotels around Massachusetts. The number of families in the system is finally decreasing, and Healey recently announced plans to close all hotel shelters early.
Healey administration pushes back
EOHLC Secretary Ed Augustus forcefully pushed back on many of the assertions made by DiZoglio’s office, saying that the emergency procurements were lawful and necessary. The surge in shelter demand was not as predictable as DiZoglio’s office made it out to be, Augustus said in a letter responding to the findings. He called some of the findings “fundamentally wrong and unfounded.”
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The EOHLC was faced with an unprecedented crisis and had to make quick decisions in order to provide legally mandated services to families in the shelter system, administration officials said. They highlighted the fact that Massachusetts saw its largest population increase in 60 years from July 2023 to July 2024.
The details were laid out in a 74-page report that also includes numerous recommendations and thorough responses from EOHLC officials. It concerns a period of time from July 2021 through June 2024. Healey took office in January 2023.
“The Healey-Driscoll administration inherited an unprecedented surge in families due to failed immigration policies and a flawed shelter system not equipped to handle it. Since that time, we have made major changes to make the system safer and protect taxpayers,” an EOHLC spokesperson said in a statement.
DiZoglio has clashed with lawmakers on Beacon Hill for months over her efforts to audit the Legislature. With the release of this audit, tensions between her and the Healey administration are now rising.
“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 move away from its defensive posture and instead embrace recommended reforms,” DiZoglio said in a statement.
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Her office asserted that the EOHLC should have been able to read the writing on the wall when shelter caseloads started trending upwards in early 2023. The administration should have used normal procurement processes, but delayed until August 2023 to issue no-bid contracts. Emergency contracts are meant to address immediate needs and “buy time” for more permanent solutions to be found, DiZoglio’s office said. But the EOHLC’s delay for much of 2023 led to rushed and overly costly no-bid contracts.
Augustus insisted that the auditor was relying on a small slice of data to suggest that the rise in demand was a predictable trend. He pointed to a surge in demand for shelter space that occurred in 2014 that then leveled off without reaching the levels seen in 2023 and 2024.
The EOHLC maintained an open procurement for shelter services as demand grew, Augustus said, but longstanding providers began struggling to meet the needs of the state, and the number of new vendors willing to step in was limited. During the peak of the emergency, EOHLC had to place families in some hotel shelters that could not offer access to refrigeration or cooking facilities. Therefore, the office needed to find food vendors quickly.
Food and cab concerns
This led to an emergency $10 million contract with Spinelli Ravioli Manufacturing. Significant portions of the audit report concerned Spinelli. DiZoglio’s office found that the EOHLC did not “perform its due diligence” before reaching the agreement with Spinelli, and that it “exercised insufficient oversight” of the contract, resulting in overpayments on 9.6% of deliveries.
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EOHLC officials contend that Spinelli was a trusted vendor, one that the Baker administration relied on during the height of the COVID pandemic. The EOHLC did not overpay Spinelli to a meaningful extent, the officials said. They point to the alleged overpayments in the report amounting to just 0.02% of the overall contract.
A Boston Globe investigation from last year found that Spinelli served raw chicken to homeless families, even as it cost taxpayers $19.38 a meal. A competitor called the situation an “effective monopoly” that drove up later food costs for the state.
The audit also found problems concerning a contract the state signed with a company called Mercedes Cab, now operating as Pilgrim Transit. The administration did not provide sufficient documentation to support its decision to enter into a no-bid contract with Mercedes Cab, according to the report.
DiZoglio’s office found “excessive” charges tied to work Mercedes Cab did for the state: it once billed the state $140 for a 223-foot drive across a parking lot. The audit report identified 501 trips that were “no-shows,” which cost the state $73,890. It also found that 2,315 canceled rides resulted in $277,800 in charges.
Augustus said that the audit report lacked important context, and that Mercedes Cab was “uniquely qualified” to meet the needs of the state in the midst of a crisis. The EOHLC questioned Mercedes Cab on cancellations and worked to reduce “no-shows,” he said.
Blowback on Healey
The findings are sure to give Healey’s opponents plenty of fodder. She is running for reelection next year, and already has two high-profile Republican challengers. One of those challengers, Mike Kennealy, served in the Baker administration as Secretary of Housing and Economic Development. Kennealy said in a statement that he “personally warned” Healey about the looming crisis before she took office.
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“Governor Healey allowed this program to spiral without proper oversight, wasting millions that taxpayers will never recover. Massachusetts deserves better,” Kennealy said. “This audit has revealed gross financial mismanagement by the Healey administration. But further investigation is needed of the severe and pervasive impacts of this crisis on public safety, education, and healthcare.”
A spokesperson for the other major Republican running for governor, Brian Shortsleeve, did not return a request for comment.
Massachusetts Republican Party Chair Amy Carnevale piled on Healey as well.
“Today’s report is a startling reminder that taxpayers will never get back the billions of dollars Maura Healey wasted by cheering the arrival of countless migrants and declaring that Massachusetts will remain a sanctuary state,” she said in a statement.
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