Panel picks Alvarez & Marsal for efficiency study

? A Kansas legislative panel selected the New York-based consulting firm Alvarez & Marsal for a contract worth up to $3 million to perform an efficiency study study of Kansas state government and make recommendations to the 2016 Legislature.

That firm, which has offices in several cities in the U.S., South America and Europe, will focus primarily on state spending on education, health care and transportation, the three largest segments of the state budget, lawmakers said.

Rep. Ron Ryckman, Jr., R-Overland Park, who chairs the Legislative Budget Committee, said Alvarez & Marsal were chosen based on, “their breadth of knowledge in the Medicaid field, education, as well as transportation.”

“We had very good applicants to choose from,” Ryckman said. “Based on comments from the committee, Alvarez rose to the top.”

Kansas lawmakers set aside up to $3 million in this year’s budget to pay for an efficiency study.

The exact amount Alvarez & Marsal will be paid is still subject to negotiating a final contract. In fact, committee members did not release the prices that any of the four bidders offered, saying that information will remain confidential until the final contract is approved.

Lawmakers noted that the firm has done similar work for other states, particularly New York and Louisiana, and had produced what they said were impressive results.

But that work has not been without controversy.

In Louisiana, for example, Republican Gov. Bobby Jindahl’s administration hired Alvarez & Marsal for $4.2 million in 2014, with a stipulation that the firm find at least $500 million in annual savings.

The final report, issued a few months later, stated it had identified $2.7 billion in savings over five years. But that report was criticized in some media outlets for repeating proposals that had been mentioned in numerous earlier reports, and for making claims of cost savings with little supporting documentation.

Also in 2014, the firm received a $6.8 million no-bid contract to find savings and efficiencies in the North Carolina Medicaid program. That contract met with stern skepticism from state lawmakers who said the services the firm provided could have been purchased for a much lower cost.

But officials at the North Carolina Medicaid agency defended the contract, saying Avarez & Marsal provided much-needed expertise and were able to perform their work quickly for an agency that was severely understaffed at the time.

Although each of the four firms made brief public presentations to describe themselves and the type of work they do, most of the detailed questioning took place during closed-door executive sessions.

That was based on an exception in the Kansas Open Meetings Act which allows closed-door meetings for discussion of, “confidential data relating to the financial affairs or trade secrets of corporations, partnerships, trusts, and individual proprietorships.”

Sen. Laura Kelly of Topeka, the ranking Democrat on the Senate budget committee, said she had been skeptical of the idea from the time it was proposed. But she said she now accepts the fact that the study will be done, and she supported hiring Alvarez & Marsal.

“They just seemed more hands-on, in the trenches, face-to-face with the folks who are actually going to be impacted by the recommendations that they make,” Kelly said. “I also like the fact that they weren’t taking a slash-and-burn method. It was, find efficiencies someplace, and then reallocate those funds where they were needed.”

“If we keep our hands off of it and really let them do their work and not try to influence the process, I think we might actually get a very good product,” Kelly said.

Ryckman said he expects the contract to be finalized sometime next week.