AUGUSTA — The Maine Department of Health and Human Services announced Friday that it is terminating a nearly $1 million contract with a group hired to study Maine’s welfare system.

“We determined there was value contained in the content that was produced under this agreement,” according to a statement released by the department. “But serious problems with citations in the text of two reports warranted both financial penalties and an end to future work to be performed under the contract.”

DHHS says it will levy a 40 percent penalty for the most recent “Baseline Analysis” report from the Alexander Group. The $145,153 penalty will be withheld from a payment due to the group. DHHS also plans to issue a 25 percent penalty for the “Medicaid Expansion Analysis.” That $27,000 has been returned by the group.

“The controversial contract with the Alexander Group has been an egregious waste of taxpayer dollars,” said Maine House Speaker Mark Eves, D-North Berwick. “The governor and his administration must be held accountable for using state and federal funds meant for struggling families and hungry children to pay for campaign talking points.” 

Eves added, “It’s a relief to see the contract has finally been canceled. It should have never been issued in the first place. Maine people deserve a full refund. Anything less is not good enough.”

Gov. Paul LePage told reporters Thursday that DHHS Commissioner Mary Mayhew was in talks with Gary Alexander, president and CEO of the Alexander Group. The company was hired to analyze Maine’s public welfare and health care benefit programs and make detailed suggestions that would help save the state money.

LePage in May suspended payments to the company after Alexander acknowledged portions of the five-part study he delivered to the state contained plagiarized information. The state has paid just over $500,000 for the work, and LePage earlier said the state may seek a refund.

He said Thursday that Mayhew and Alexander were in talks and those talks were progressing. LePage said he met with Mayhew last week and gave her guidelines on negotiating with Alexander but didn’t detail them.

“They have been talking, and I understand that their talks are going well,” LePage said. “If they go well, fine; I won’t have to interfere. If they don’t, then I will have to interfere.”

LePage said he had discussed having a meeting with Alexander but decided against it. He also noted that he didn’t sign the $925,200 no-bid contract awarded in November, although his office did sign off on it. The study was to be done in phases, with a payment made when each part was completed.

The early termination of the contract will result in a total loss to the Alexander Group of $450,400. The total amount paid to the group was $474,760. Of that amount, $239,075 was state funds and $235,685 came from federal funds.

State Political Editor Scott Thistle contributed to this report.