A contract the Jefferson Parish Council approved with a financial consultant last week does not contain measures that would ensure the parish gets its money’s worth, the parish’s inspector general said.
Inspector General David McClintock was harshly critical of the agreement, worth $50,000 a month plus expenses, between the parish and Josh Nemzoff, who was hired to aid with negotiations to lease parish-owned West Jefferson Medical Center to Louisiana Children’s Medical Center.
“It’s an abhorrent example of the government contracting process,” McClintock said.
Those concerns were shared by council Chairman Elton Lagasse, who has been critical of Nemzoff in the past and who said his issues with the contract led him to have his name removed from the deal.
McClintock said the idea of adding a financial analyst to the negotiations was a good one, and he did not criticize the selection of Nemzoff. However, the contract, which was approved Wednesday, does not include any substantial way to ensure the consultant is doing his job, McClintock said.
The contract calls for Nemzoff to be paid $50,000 for each month he works on the negotiations, up to a maximum of $635,000. That money will come from West Jefferson Medical Center.
Nothing in the contract requires Nemzoff to do any specific amount of work to receive those payments, McClintock said. In theory, he would be paid the same for working a single hour as for working full time all month on the negotiations.
“This type of contract should be approached with a much higher level of caution than what we saw here,” McClintock said.
Nemzoff declined to comment on the terms of the contract.
Typically, contracts like the one with Nemzoff should include either of two methods for ensuring the parish is getting value for its money, McClintock said.
One method is to pay by the hour, so the government knows exactly what it is paying for, he said.
Alternatively, the Parish Council could have included specific goals, or “deliverables,” in the contract that Nemzoff would have to meet so that the council could gauge his progress over the course of the contract, McClintock said. That was the case with the hospitals’ previous contract with Kauffman Hall, a consulting firm that helped narrow down the list of potential partners for the two medical centers.
In the Nemzoff contract, however, the only goal is to complete the negotiations, which would happen at the end of the consultant’s work.
Because of the nature of the work, McClintock said, the council should have set an hourly rate.
The original version of the contract included a general set of services Nemzoff was to provide, although they were vaguer than the typical deliverables such a contract would include. Those specifics were amended out of the contact before it was approved by the Parish Council.
The council also amended the contract Wednesday to specify that Nemzoff, who lives in Pennsylvania, will be reimbursed for travel expenses at state-set rates. He also will be required to send the council monthly invoices explaining his work on the contract, though those will not affect how much he is paid.
Those amendments came after the council held a executive session with McClintock to discuss the agreement. McClintock declined to comment on what was discussed during the closed-door session.
The parish can end the agreement on its own, but it has to provide at least 30 days’ notice, meaning Nemzoff would receive another $50,000 for the month after he was fired.
Joining Lagasse in voting against the contract were Chris Roberts and Ricky Templet. Voting for it were Paul Johnston, Cynthia Lee-Sheng, Mark Spears and Ben Zahn.
Nemzoff originally was hired in the spring to analyze proposals by LCMC, HCA and Ochsner — the three finalists for leasing the two parish hospitals. At the time, supporters of LCMC said his past work negotiating with for-profit hospital companies could bias him toward HCA, the only for-profit company in the running.
Those council members later raised concerns that Nemzoff’s analysis was too harsh toward LCMC and went too easy on HCA.
Critics of LCMC, who generally supported HCA before that company dropped out of the selection process, have argued that having someone on the negotiating team who is skeptical of LCMC’s proposal would benefit the parish’s negotiating stance.
Lagasse said he shared some of the inspector general’s concerns, which influenced his decision to vote against the deal.
Lagasse also asked that his name be taken off the contract, which typically would be signed by him as council chairman. That’s a highly unusual move — council chairmen typically sign ordinances and contracts even if they disagree with them — but will not affect the validity of the agreement.
Lagasse also argued that Nemzoff was not needed on a negotiating team that already included a mergers and acquisitions law firm that would be bringing its own financial experts.
“It’s nothing personal against him. I just don’t think we need him here to do that,” he said.
The council is expected to vote this week on a proposal to make Nemzoff the lead negotiator on the contract, putting him in charge of the negotiations rather than the other firms hired by West Jefferson Medical Center.
McClintock said he understands that council members want to move quickly to finalize the deal between LCMC and West Jefferson, but he said that should not lead to contracts without protections for the parish.
“When we are trying to be expedient, that expediency should never be allowed to override the inclusion of oversight,” he said.
Follow Jeff Adelson on Twitter, @jadelson.