DHHS defends contract oversight approach, favors partnership over penalties

DHHS staff told the committee the department manages about 845 active contracts and conducts risk assessments and on-site reviews before and after awards. The department described two broad contract types: direct-service or vendor agreements (lower risk) and subrecipient contracts with community organizations (higher risk) and said many agreements are cost-reimbursement to shift financial risk to providers.

A departmental representative explained that DHHS generally withholds payment until deliverables are verified and prefers partnership and training over punitive remedies for smaller subrecipients. "We generally never make any sort of payment until we either see a deliverable, we know the service has been delivered," the presenter said, adding that liquidated-damage clauses appear in a minority of larger contracts. The department noted it conducts risk assessments, reviews audited financial statements and builds contractual mitigations for higher-risk partners.