The Homestead shelter for unaccompanied migrant children has been shrouded in secrecy and cloaked in controversy from the moment it was reactivated in February 2018. Lawmakers scornful of President Trump’s immigration policies have been blocked from visiting. Because it sits on federal land, Florida’s child welfare agency is barred from investigating allegations of abuse.
Rather than close it, as activists have demanded, the feds just gave the operator, Comprehensive Health Services, a brand new contract — one worth $341 million.
There was no competitive bidding and it happened under the radar.
By the time the contract — the latest in a series of short-term deals — runs out in November, CHS will have earned more than half a billion dollars for housing migrant children, a figure that inflames critics while advocates say it is justified by an out-of-control influx on the southern border. The dollar total could rise still higher since the payment escalates if the number of youths increases, as is expected.
The cost per youth, as of last month, amounts to $775 per day, according to the U.S. Department of Health and Human Services.
“The skeptic in me thinks that it might have been a way to fly under the radar and avoid people noticing a half-a-billion-dollar deal,” Scott Amey, general counsel for the Project on Government Oversight, said of the new contract. Amey directs contract oversight investigations at the D.C.-based watchdog group, including reviews of federal spending on products and services.
The center, formally known as the Homestead Temporary Shelter for Unaccompanied Children and actually located outside the Homestead city limits, is the only facility for migrant children operated by a for-profit corporation, another sore point with critics, since they note that the longer a youth is detained, the better it is for the company. (CHS doesn’t decide how long a youth remains.) CHS is a subsidiary of Caliburn International, which itself is under the umbrella of the private equity firm DC Capital Partners, a firm whose advisory panel consists of a battery of top national security, diplomatic and military officials with strong government ties.
The Miami Herald tried repeatedly to get the companies — any of the three — to discuss the lucrative new deal on the record. Neither CHS nor Caliburn responded.
A secretary at DC Capital, who did not give her name, said: “Sorry but we have a blanket policy that we’re not talking to the press, and based on the meeting we just had, especially not about the Homestead shelter. I’m not trying to be condescending, but that’s what it is.”
Originally under Obama
The center actually opened under the Obama administration on a site formerly run by the Job Corps, a vocational training program for young men and women. It was during a prior surge in unaccompanied minors arriving at the border. When the surge ebbed, the compound closed.
It reopened under the Trump administration in February 2018 and became a flashpoint when the controversy over family separations came to a boil. Some youths who had been separated from their parents were housed there.
CHS, at first hired in a competitive bid process, initially was one of several vendors fulfilling divvied-up responsibilities. After the facility closed and reopened, CHS became solely responsible for the operation and was awarded a four-month, $50 million contract. Its most recent contract, a nine-month $222 million deal, was set to expire on April 20 when HHS awarded the company the new seven-month, $341 million “sole-source” contract.
Usually, government contracts are subject to policies, statutes and regulations that encourage competition to ensure proper spending of taxpayer dollars. However, federal officials told the Miami Herald that their decision to issue Comprehensive Health Services the new deal on a no-bid basis was due to an “unusual and compelling urgency.”
HHS emphasized that the lucrative award boiled down to who could take care of immigrant children best as growing numbers of unaccompanied minors arrive at the border, causing shelter populations to balloon.
The center has been the target of frequent protests, including ones by congressional Democrats, most of whom are critical of President Trump’s restrictive immigration policies. Recently, an artist projected the words “Shut it down” onto detention center walls, using light. Lawmakers seeking to tour the facility have at times been turned away.
The Miami New Times reported on an employment ad placed by CHS stating that potential hires must at all times be “physically able to run, jump, lunge, twist, push, pull, apply approved restraint techniques and otherwise manage or coerce the full weight of an infant or adolescent.”
HHS said in a statement: “Currently, [Comprehensive Health] is identified to be the most knowledgeable and experienced in the Homestead service requirements needed and the only source [the Office of Refugee Resettlement] has identified that is capable of meeting the urgent need to increase bed capacity at Homestead in a timely manner.”
In financial records, CHS describes itself as specializing in “consulting, engineering, cost estimating, and project and construction management.”
The private equity company that controls it, DC Capital Partners, has a powerhouse advisory board that includes Richard L. Armitage, former U.S. deputy secretary of state; Michael Corbin; former ambassador to the United Arab Emirates; Michael V. Hayden, former director of the Central Intelligence Agency and of the National Security Agency; Donald M. Kerr Jr., former deputy director of science and technology at the CIA; Anthony C. Zinni, former commander-in-chief of the U.S. Central Command and former U.S. Envoy to the Middle East; and Stephen F. Loftus, former director of the Office of the Budget for the United States Navy.
HHS would not comment on how CHS was deemed most qualified or whether any other providers were considered. The agency also wouldn’t provide compliance reviews for the company because they contain “proprietary information.” Such reviews gauge whether vendors are doing a good job and meeting goals.
Normally, under federal contracting regulations, agencies are supposed to seek proposals from “as many potential sources as is practicable under the circumstances.” Those regulations also say sole-source contracts “may not exceed one year, unless the head of the agency determines that exceptional circumstances apply.”
Issuance of a no-bid contract has to be signed off by someone high up the bureaucratic ladder, said Charles Tiefer, a professor of government contracting law at the University of Baltimore.
“The excuse for not competing, mainly that this is an ‘urgent and compelling need,’ shows that the agency has papered their excuses at a high level,” said Tiefer, who served as deputy general counsel with the House of Representatives for more than a decade and worked as a trial attorney at the Department of Justice. He said he has leveled similar criticism of contracting practices during the Obama administration.
CHS’ new contract may have gone largely unnoticed in the government’s online contract summary database, usaspending.gov, because it was under a new name and identification number. Usually extensions to contracts fall under the previous ID numbers.
But the vendor changed last year from Community Health Services Inc. to Community Health Services LLC.
Kenneth Suh, an attorney who represents the company, offered a “no comment” before hanging up when asked the reason for the change.
There can be tax, record-keeping or other benefits inherent in changing from a corporation to an LLC.
Government officials said the Miami Herald would have to wait 30 days from when the contract was awarded to gain access to the details.
‘A big emergency’
Jessica M. Vaughan, director of policy studies at the Center for Immigration Studies, says these “types of emergency no-bid contracts” do more good than harm and that they “are not as unusual as people may think.”
“Congress has provided this tool of sole-source procurement or accelerated contracting that enables the government to enable a facility to be up and running more quickly than usual,” Vaughan said, adding that the president has the authority to do this differently when there’s an emergency, “and this a big emergency.”
“That’s why they had to acquire this facility in this way. The alternative would be to put kids in inappropriate situations or to just release them and we know already that that doesn’t work. There’s a need for more space because the kids are being held for a little while longer while sponsors are identified.”
On Wednesday, HHS requested an emergency appropriation of $4.5 billion to “address the immediate humanitarian crisis.” This includes $2.9 billion for HHS to increase shelter capacity for migrant children.
“Currently, HHS is at risk of exhausting all of its UAC resources in June. Without additional funds, HHS may be forced to scale back services, may be unable to handle further growth in the number of children in care, and may have to reallocate more funds from refugees and victims of trafficking and torture,” HHS said in a statement.
Added Vaughan: “I believe it was the way to go given the circumstances.”
Florida Democratic Rep. Debbie Mucarsel-Powell, a frequent critic of the administration’s immigration policies, said she objected to any private company “profiting off of the detainment of children.”
Just how much the company will profit off of detainment of children is unclear, although company filings show that Comprehensive Health Services had about a 15 percent profit margin in 2016 and 2017. One way to look at that is: If the company collects half a billion dollars in revenue, that could translate into an added $75 million in profits.
According to federal documents, CHS’ new deal is a “cost plus” contract, which means the the provider charges the government all its costs — labor, materials, rent — in addition to salaries for top management.
A “cost plus” contract means that the government puts a tentative ceiling on what it will pay of the $341 million contract, which could only be raised by some “elaborate and well-justified changes in that figure, perhaps like the addition of beds or a pattern of much-longer stays by the children,” Tiefer added.
“So the longer the children stay, the more money they make. The more beds that come in, the more expenses they run up,” Tiefer said. “If it were a fixed-price contract, meaning, the award amount can’t go up,” Tiefer added, “they’d be saying ‘lock the door.’ ”
“Like other private equity firms, DC Capital raises money from institutional investors like employee pension funds and university endowments and then invests it,” said Jim Baker of the Private Equity Stakeholder Project, a non-profit that works with stakeholder groups that are impacted by private equity groups.
Records show some of the entities investing in DC Capital include the Baltimore police and fire departments, Missouri Department of Transportation and Highway Patrol, Prince George’s County, Police and Fire in Maryland, the University of Oklahoma Foundation and the Fresno City Retirement System in Texas.
“I do have to wonder that in this situation, if public employees know that their pension money is being invested in that sort of detention center,” Baker said.
Tripling its capacity
Rather than face closure, as activists have demanded, the center is growing. It has increased its capacity from about 1,000 to 3,200 — an increase on track with the marked rise in arrivals from Central America and Mexico, including unaccompanied minors.
Recent polls have shown a rise in the percentage of Americans who agree with President Trump that there is an immigration crisis on the border, although there is disagreement on whether Trump or Democrats who oppose his policies are mostly to to blame.
As of mid-April, about 2,200 children were being housed at the complex.
Until last month, Caliburn had planned to sell up to $100 million in an initial public stock offering. However, amid controversy over President Trump’s immigration policies, the company announced in a letter to the SEC that it would cancel that plan.
Now, according to the Financial Times, DC Capital is looking to sell a 75 percent stake in Caliburn, which has grown rapidly by acquiring and combining government contractors. The publication reported that the documents accompanying the sale warned potential investors that the company operates “in a number of challenging and politically charged environments.”
The spotlight fell on the company once again recently when John Kelly, the president’s former chief of staff and the onetime head of both the Department of Homeland Security and the U.S. Southern Command in Doral, was spotted entering the compound on a golf cart. That was in early April. Previously, Kelly was employed as a lobbyist for DC Capital Partners through a subsidiary, but he said he cut ties when he joined the Trump administration. HHS would not disclose who Kelly met with that day.
The company announced on Friday that Kelly had joined the board.