Executive Office of Housing and Livable Communities—Emergency Shelter - Finding 5

The procurement files required by Section 21.05(3) of Title 801 of the Code of Massachusetts Regulations did not contain sufficient evidence or documentation to support the Executive Office of Housing and Livable Communities’ decision to contract with Mercedes Cab Company / Pilgrim Transit. Its emergency no-bid contract for transportation services resulted in excessive costs.

Overview

EOHLC entered into an emergency no-bid contract with Mercedes Cab Company / Pilgrim Transit to provide transportation services for families residing in temporary emergency shelters. The transportation service fees previously outlined are considerably higher than the typical rates observed in the taxicab or ride-sharing industry. In fact, they align more closely with the pricing structures of executive car services.

In addition to the other items identified here, we found an instance where a ride was charged for a trip that appeared to be an extremely short distance (223 feet) within a parking lot owned by Cape Destinations (see image below showing the trip from the origin, point A, to the destination, point B)—the owner of Mercedes Cab Company / Pilgrim Transit owns Cape Destinations. The trip did not start or conclude at a hotel or motel. The charge for this trip was billed at the standard rate under the contract for a nondisabled rider, costing the base fare of $140. This raises concerns regarding the appropriateness of charging for such trips under the emergency transportation service agreement, especially when there does not appear to be a control to ensure that the rider was a covered person under the program. We question why EOHLC would pay for such a questionable charge that has an appearance of impropriety.

We identified a total of 501 vehicle trips identified as no-shows, amounting to $73,890 in charges, and 2,315 canceled rides, totaling $277,800 in charges. While it is acknowledged that some no-shows and cancelations may occur, the volume of these instances appears excessive. Given the lack of controls over the transportation services, we wonder why EOHLC did not question these no-shows or cancelations but instead paid the invoices.

We identified two ride requests in which the Commonwealth was incorrectly billed for the number of riders. The rate sheet indicates that an additional rider should cost $40, instead the Commonwealth was charged $80 each time. There was no evidence that EOHLC reviewed these invoices for accuracy before making payment.

We identified one request for 55 riders from a hotel to a healthcare facility and back. The locations were 3.8 miles apart. In total, this trip for 7.6 miles cost $4,651.30 ($84.57 per person). We conducted an internet search for comparative costs and noted that one Boston bus charter company provides 56-person buses at a cost of less than $200 per hour, or $1,700 for an entire day, a fraction of the cost Mercedes Cab Company / Pilgrim Transit billed EOHLC for this one ride. Our team also discussed with a local regional transit authority its willingness to assist in larger-scale transportation needs such as this, citing that it already has the basic infrastructure in place to be able to build off of to help prevent inefficient, unnecessary, and/or more costly fragmentation of transit services.

Each of the items above demonstrates a lack of proper internal controls related to EA transportation. At a minimum, there does not appear to have been a process to prove that a transportation user was a properly covered person for transportation services under this program. Further, there appears to be a lack of internal controls to review invoices by EOHLC to determine the appropriateness of transportation expenses, resulting in the more egregious ones noted above.

In EOHLC’s justification for its emergency contract with Mercedes Cab Company / Pilgrim Transit, EOHLC acknowledged that this contract was “pending completion of a competitive procurement.” However, we saw no evidence that EOHLC began a competitive procurement process when the emergency contract was signed. EOHLC’s justification for emergency procurement was, “EOHLC anticipates that the emergency contract with Mercedes Cab Company, Inc. will run for a minimum period of six (6) months, which will allow EOHLC to deal with the current emergency while conducting a competitive procurement.” Additionally, the initial term of the contract ran for six months from October 13, 2023 through April 13, 2024 for a cost of $2,800,000 (an approximate estimate cost of $500,000 per month). This contract was amended to increase the cost from $2,800,000 to $3,800,000. In March 2024, the two parties entered into an amendment of this contract to June 30, 2024 and raised the cost to $6,800,000. This third amendment only increased the length of the contract by two months but cost an additional $3,000,000 (an approximate estimate cost of $1,500,000 per month) so the terms of the initial contract and the extensions are not consistent.

EOHLC did use the normal procurement process for transportation services by submitting an RFR on December 15, 2023, approximately two months after EHOLC signed the emergency no-bid contract with Mercedes Cab Company / Pilgrim Transit. However, by entering into the emergency no-bid contract with Mercedes Cab Company / Pilgrim Transit, EOHLC had committed to a six-month contract with this vendor-initially the terms of the contract covered October 13, 2023 through April 13, 2024 with this vendor. EOHLC should have considered using an emergency no-bid contract with shorter terms while it sought to use the normal procurement process. See the table below for a timeline of the contracts and RFR.

 

Timeline of Emergency No-bid Contract for Transportation Services

Date	Action Taken by EOHLC
October 17, 2023	EOHLC entered into an emergency no-bid contract with Mercedes Cab Company / Pilgrim Transit from October 13, 2023 through April 13, 2024.
November 22, 2023	The first amendment to the contract with Mercedes Cab Company / Pilgrim Transit was made for a change to the scope of services.
December 15, 2023	EOHLC posted an RFR for transportation services. No vendor was selected.
February 9, 2024	The second amendment to the contract with Mercedes Cab Company / Pilgrim Transit was made to increase the cost by $1,000,000.
February 16, 2024	EOHLC posted another RFR for transportation services. The contract was awarded to Coordinated Transportation Services on April 26, 2024.
March 24, 2024	The third amendment to the contract with Mercedes Cab Company / Pilgrim Transit was made to increase the cost by $3,000,000 and to extend the terms through June 30, 2024.

In addition, EOHLC could have considered reinvesting into the state’s transportation infrastructure by contracting with the Massachusetts Bay Transportation Authority (MBTA) or local regional transit authorities (RTAs) for some of these transportation needs. This could have served to assist the state’s public transportation system at a time of financial need and when ridership levels across the state were down. While the MBTA’s network does not extend to the western part of the state, or deeply serve the central part of the state, local busing provided by RTAs may have been able to fulfill the need. In fact, 96% of the rides fulfilled were located within MBTA or RTA communities. We identified cost-saving opportunities for contracting with the MBTA. For example, we identified eight instances where transportation was requested for individuals in wheelchairs, resulting in a total cost of $5,186 (including mileage and extra rider fees¹⁸). However, all these requested rides were located in cities¹⁹ that are served by the RIDE.²⁰ The RIDE could have offered the same transportation services at a significantly lower cost, with Americans with Disabilities Act fares starting at $3.35 for a one-way trip and premium non–Americans with Disabilities Act fares²¹ starting at $5.60. The total cost of using the RIDE for these eight instances would, at most, be $45, which is substantially lower than the expenses incurred through the emergency contract with Mercedes Cab Company / Pilgrim Transit. Rather than offering a no-bid contract to a single executive car company, EOHLC may have seen lower costs, had it partnered with government agencies providing these existing services, or multiple regional transportation companies. Traditional cab companies likely would have had cheaper base fares, and at the very least, should have had lower mileage since they would have been located closer to where people were housed. Had a single contract been preferred, EOHLC could have partnered with a transportation company like Uber, which serves the entire state. There may have been multiple cheaper alternatives to contracting with one executive car service, but no evidence was provided to us that EOHLC considered any alternatives.

In fact, EOHLC was unable to provide a sufficient procurement file it used to select Mercedes Cab Company / Pilgrim Transit for transportation services. This file should contain evidence that would show how EOHLC made the determination to use a specific vendor, or vendors, to provide a service. In this case, EOHLC could not demonstrate how the decision was made to accept a no-bid contract with Mercedes Cab Company / Pilgrim Transit. It remains unclear why EOHLC chose to give a no-bid contract to what amounts to a single executive car company to provide transportation for the entire state.

The financial impact of these high fees could limit the agency’s ability to provide sufficient transportation services or exacerbate financial strain on shelter programs. Additionally, the lack of competitive bidding for this contract raises concerns about inflated pricing and a lack of market comparison, further limiting the effectiveness of this arrangement in terms of cost-efficiency and transparency.

The billing inconsistency could result in excessive costs for transportation services under the EA Family Shelter Program. Furthermore, the charge for an intra-parking lot trip may undermine the integrity of the contracting process, as it calls into question the appropriate use of emergency funds for services that do not appear to meet the criteria for emergency transportation.

The substantial charges resulting from no-shows and cancelations represent a significant financial burden on the program. Without a structured process to monitor and address these issues, the potential for continued or increased costs remains, reducing the overall efficiency of the EA Family Shelter program.

The overall lack of internal controls in these transportation services erodes public trust and undermines faith in the validity and accuracy of these services and their costs. It also undermines the public’s faith in government, as there is no reasonable assurance that trips that were charged for were actually appropriate or accurate.

Authoritative Guidance

Subsection 1 of Section II of Attachment A of the Executive Office of Housing and Livable Communities Emergency Assistance Shelter Transportation Service Scope of Services contract states, “The Contractor shall provide transportation services for families and individuals residing in shelters as directed by EOHLC in accordance with the terms of this Contract, as may beamended.”

Further, 801 CMR 21.06(1) requires procuring departments to keep records to support its decision for the selection of a vendor. These records should be maintained in a procurement file as follows:

A Procuring Department shall maintain a paper or electronic procurement file for each Procurement of Commodities or Services, or both. The file shall contain the original, copies or the file location of the RFR and data or other information relevant to the Procurement and selection of a Contractor, the executed Contract form(s), correspondence with the Contractor and any applicable approvals or justifications.

Reasons for Noncompliance

The lack of competitive bidding and reliance on a noncompetitive emergency contract may limit EOHLC’s ability to negotiate more favorable terms or ensure better service quality, leading to inefficiencies such as high levels of cancelations and no-shows. Furthermore, insufficient monitoring of ride services and cancelations means that there is limited visibility into the root causes of these occurrences, leaving the program vulnerable to escalating costs. There appeared to be a lack of any controls to ensure the accuracy of the rides, including the distance traveled or the number of passengers. Additionally, we could not identify any controls to verify the identity of the rider. It is entirely possible for a company to overcharge EOHLC for services without strong controls to ensure the accuracy of the provided services.

Recommendations

1. EOHLC should initiate a competitive bidding process whenever possible to ensure the best value for taxpayers, including more cost-effective contracts based on regional demands for transportation services. While EOHLC argued that there was an emergency and that it needed to provide transportation services to solve a short-term problem, EOHLC should use the normal procurement processes as soon as possible. EOHLC has a fiduciary duty to ensure that no-bid contracts are used sparingly and only when appropriate.
2. EOHLC should create and maintain a sufficient procurement file and should establish a formal process for documenting and considering cost-saving opportunities to avoid wasting taxpayer resources.
3. EOHLC should evaluate the reasonableness of the fare structure in comparison to industry standards and adjust as necessary to ensure that transportation costs do not exceed reasonable limits.
4. EOHLC should review the specific circumstances surrounding the charge for the 223-foot trip with Mercedes Cab Company / Pilgrim Transit to ensure that such charges are reasonable and consistent with the contractual terms.
5. EOHLC should review the ride to a healthcare facility that 55 individuals took in one trip, costing $4,651.30. We recommend establishing a policy to require a review and prior approval for large-scale transportation requests, particularly in cases where the request appears disproportionate to the nature of the event or need.
6. EOHLC should first consider using public transportation options to reinvest in the MBTA and regional transit authorities (RTAs) before entering into a no-bid contract with a more costly, private transportation company.
7. EOHLC should establish clear guidelines to increase accountability regarding the minimum acceptable distance for rides and review the process for approving and billing transportation requests to prevent similar issues from arising in the future.
8. EOHLC should implement enhanced oversight procedures to verify that charges are justified and in line with the stated objectives of the EA Family Shelter program.
9. EOHLC should implement stronger controls and monitoring mechanisms (a) to minimize the occurrence of no-shows and cancelations and (b) for when a ride can be requested, canceled, or classified as a no-show.
10. EOHLC should regularly review cancelation and no-show patterns and work with Mercedes Cab Company / Pilgrim Transit to address any underlying issues contributing to the high volume of cancelations. Implementing these measures could help mitigate unnecessary costs and improve the overall efficiency of transportation services provided under the EA Family Shelter program.

Auditee’s Response

EOHLC did maintain a procurement file documenting its basis for entering into an emergency contract with MCC, but EOHLC agrees on the importance of properly documenting procurement decisions.

In its procurement file for the emergency contract with MCC, EOHLC included the executed contract with MCC and the justification for an emergency contract, both of which were produced to the SAO.⁷ EOHLC acknowledges that additional documentation would further document the basis for procurement decisions. EOHLC commits to further clarifying its internal policies and procedures on the collection and retention of thorough documentation for emergency contract procurement files and to ensuring that cost-saving opportunities are thoroughly evaluated.

EOHLC respectfully disagrees with the report’s assertion that EOHLC paid excessive transportation fees in light of important context not addressed in the audit report. EOHLC needed specialized transportation services and the cost that EOHLC paid was proportionate to the difficulty of the required work. EOHLC required statewide, on-demand transportation services by a vendor able to scale. Transportation services had to be guaranteed to be available between 8 am and 6 pm, Monday to Saturday. The service provider needed to accomplish pick-ups and drop-offs on short notice (with fluctuating demand), and not in close proximity to public transit.⁸ The services provided had to be appropriate and safe for families with children, including access to car seats and booster seats, a fact not included in the report.⁹ EOHLC determined that MCC was uniquely qualified to meet these needs and that its rates were fair.

The isolated invoices and charges that the SAO questions in its report do not undercut EOHLC’s determination. A few examples are instructive:

• MCC provided nearly 16,000 rides. Out of those 16,000 rides, the report identifies just two as incorrectly invoiced. That equates to 0.01% of all rides.
• The report characterizes the rate of “no shows” and canceled rides as excessive, questioning why EOHLC did not question such no shows and cancellations. But EOHLC questioned MCC on cancellations and some cancellations were not charged as a result. EOHLC worked to reduce no shows and cancellations by proactively educating families placed in hotels on access to public transportation, availability of MassHealth transportation, and on the appropriate use of MCC transportation. . . .

EOHLC conducted a competitive procurement process for transportation services after securing the emergency contractor. EOHLC posted a Request for Response for transportation services on December 15, 2023.¹⁰ On January 26, 2024, EOHLC closed the procurement without selection of a vendor because of a lack of satisfactory bids.¹¹

As noted in our response to Audit Finding 4, EOHLC has already strengthened its invoice review processes and implemented formal processes for verifying vendor invoices against contract terms and our data.

[. . .]

7.   The justification itself extensively described the basis under which the emergency contract was utilized, why MCC was selected, and EOHLC’s intent to competitively procure for long term transportation services.

8.   Where there was proximity to public transportation, families were encouraged to utilize such services instead of those provided by MCC as long as their destinations were in or near locations served by public transportation.

9.   The report’s source of comparison to MCC, an established transportation company, is a Boston Police Department’s website with meter rates. The report should consider the fact that the EA Family Shelter program served families and children, who required safety gear, such as car seats. MCC was able to provide transportation for these families with children and provided necessary gear that homeless families often do not possess.

10.  See https://www.commbuys.com/bso/external/bidDetail.sdo?docId=BD-24-1076-OCDDE-HS0 ​ 03-96057&external=true&parentUrl=bid.

11.  The report concludes that it was “unclear” why EOHLC made the decision to utilize the services of MCC without adequate justification or evidence. The lack of satisfactory bids received in response to our competitive procurement speaks volumes to the extremely unique and challenging nature of this service.

Auditor’s Reply

We agree that EOHLC did work to justify the decision to award an emergency no-bid contract to Mercedes Cab Company / Pilgrim Transit. However, this work included only one paragraph with the main points being that Mercedes Cab Company / Pilgrim Transit operated for over four decades and operated over 170 owned vehicles. It is not indicated, however, what led EOHLC to consider this company to be the best choice over other options. Also, there is no information included regarding why the higher rates charged by this company—including rates up to four times those of taxicabs in Boston—made it a better choice than all other potential options for transportation services. EOHLC itself acknowledges that its procurement file was missing documentation as indicated in the finding.

EOHLC suggests that the rates charged by Mercedes Cab Company / Pilgrim Transit were not excessive. It did not justify why it paid for a trip of 223 feet or explain how its internal audit/review procedures did not detect it. In its response, EOHLC stated that this report characterized the no-shows or canceled rides as excessive while in its response stating that it “disagrees with the report’s assertion that EOHLC paid excessive transportation fees.” Since EOHLC paid $351,690 for no-shows or canceled rides, we are indeed suggesting that EOHLC examine its controls to ensure that these types of excessive costs are reined in. Attempts to minimize these issues do not serve the taxpayers or those working to improve these systems—every dollar counts. EOHLC paid $4,651.30 for 55 people to ride to a healthcare facility and, while this one ride may have been necessary, EOHLC could have considered transportation alternatives that would have reduced the cost of this ride. EOHLC failed to address the other excessive rates charged by Mercedes Cab Company / Pilgrim Transit that we raised in this report. EOHLC did not address the other alternatives we identified that could have produced cost savings for EOHLC.

We note that our office spoke with local RTA staff members who confirmed that, as mass transportation providers, they can and do transport people of all ages, including young children. As just one example, the Merrimack Valley Regional Transit Authority confirmed that both migrant housing locations in its service district are along existing fixed bus routes. We encourage EOHLC to demonstrate due diligence in fully examining transportation options, which could prove more cost-effective.

As EOHLC stated in its response, it did conduct the normal procurement process after securing the emergency contractor. However, we question the time it took to do so. EOHLC suggested in its response that the lack of satisfactory bids to the procurement it attempted in December 2023 served as justification for the use of an emergency no-bid contract with Mercedes Cab Company / Pilgrim Transit in October 2023, two months prior. We do not agree. EOHLC may not have received satisfactory bids on its procurement process in December 2023 because it was locked into an emergency no-bid contract with Mercedes Cab Company / Pilgrim Transit through April 2024, or because a lack of transparency in the process created a sense of unfairness in the process that dissuaded other vendors from participating.

EOHLC stated it will strengthen its invoice review process. As part of our post-audit review process, we will follow up on this matter in approximately six months.

18.    The RIDE allows for a personal care assistant or up to two children under the age of 11 who are accompanying a customer to travel without charge. Customers may bring one guest, with additional guests allowed if space is available. Personal care assistant and guests must travel to and from the same destination at the same time as the customer.

19.    The RIDE serves the following cities and towns: Arlington, Bedford, Belmont, Beverly, Boston, Braintree, Brookline, Burlington, Cambridge, Canton, Chelsea, Cohasset, Concord, Danvers, Dedham, Everett, Hingham, Holbrook, Hull, Lexington, Lincoln, Lynn, Lynnfield, Malden, Marblehead, Medfield, Medford, Melrose, Middleton, Milton, Nahant, Needham, Newton, Norwood, Peabody, Quincy, Randolph, Reading, Revere, Salem, Saugus, Sharon, Somerville, Stoneham, Swampscott, Topsfield, Wakefield, Walpole, Waltham, Watertown, Wenham, Weston, Westwood, Weymouth, Wilmington, Winchester, Winthrop, and Woburn. Portions of Abington, Avon, Billerica, Brockton, Stoughton, and Wellesley are also served.

20.    The RIDE paratransit service provides door-to door, shared-ride public transportation, using accessible vehicles, to eligible people who cannot use fixed-route transit (bus, subway, trolley) all or some of the time because of a physical, cognitive, or mental disability. The RIDE is operated by the MBTA in compliance with the Americans with Disabilities Act.

21.    Premium non–Americans with Disabilities Act fares apply if the trip origin and/or destination is greater than three-quarters of a mile from MBTA bus or subway service.

Date published:	May 20, 2025