CHARLESTON (AP) — West Virginia’s Medicaid agency is fumbling the awarding of one of the state’s most lucrative government contracts, according to a Tuesday audit that advises the Legislature to consider repealing a law that’s allowed it to bypass the normal contract bidding process.

The Bureau of Medical Services has so far botched two attempts to request bids for a Medicaid Management Information System, which is supposed to process claims and oversee records for the health coverage program, the report presented to lawmakers said.

The 2009 exemption it sought has failed to aid its efforts, and the agency suffers from inadequate staff expertise as well as potential conflicts of interest, Tuesday’s report said. While questioning some of the audit’s findings, acting Secretary Rocco Fucillo of the Department of Health and Human Resources, which oversees the Medicaid bureau, agreed to the recommended repeal in a written response.

In the meantime, Legislative Auditor Aaron Allred told a joint meeting of House-Senate oversight committees that there may be problems with the agency’s ongoing third try at soliciting bids. But Allred stopped short of recommending whether it should be halted.

“I’m not going to sit here and guarantee you that this third (request for bid proposals) is going to come to fruition,” Allred said. “We may be back here in six months with a fourth (bid request round).”

Allred and Shannon Landrum, his office’s senior health policy analyst, both stressed the contract’s importance. The agency wants to award it for 10 years, with up to three annual extensions. Its current version is worth $20 million a year, but that’s expected to increase because of the federal health care law.

The auditors also cited how the handling of this massive information system — West Virginia covers 330,000 people through Medicaid — has become a nightmare in at least a half-dozen other states.

“Other states have seen the departure of their selected vendor, have been forced to terminate projects in the middle of an extended contract, or have experienced significant delays and cost overruns causing great harm to state programs that many of their constituents depend on,” the report said.

As a result, the audit faults the agency for failing to require whichever firm wins the contract to post a performance bond to offset costs from system problems. The agency instead plans to keep a portion of the eventual vendor’s monthly administrative fee.

Bureau Commissioner Nancy Atkins has removed herself from the bidding process, as she previously worked for a potential vendor while in the private sector. Tuesday’s audit notes that the agency’s policy under the exemption calls on that official or someone she designates to pick the committee that evaluates bids. Fucillo’s predecessor altered the policy so he helped appoint the person to choose that committee, Deputy Commissioner Tina Bailes told lawmakers.

But the report also cites how a private consultant, Phil Weikle, helped develop the agency’s contract bidding process but also works for Fenwick Technologies, which was listed by a vendor during the second round of bidding as a subcontractor. The agency threw out those bids after Allred raised concerns about that situation, the audit said.

“It is of the opinion of the Legislative Auditor that if Phil Weikle assisted in any way in the preparation or review of (contract bids) prior to January 2012, then Fenwick Technologies may not benefit as a subcontractor,” the report said.

The agency has yet to explain why it scrapped the initial round of bidding, the audit also said.

Brian Rosen, the agency’s procurement chief, noted to the lawmakers Tuesday that state law exempts around 30 other agencies or programs from the normal contract bidding process. Landrum said the Medicaid bureau and others have historically had problems with the Division of Purchasing, which runs that process, and the agency sought the 2009 legislation while arguing it could not work with that office.

“The Division of Purchasing is the procurement experts. They are not the subject matter experts. The subject matter experts are here, with the agency,” Landrum said, gesturing to Bailes and Rosen.

If the Legislature decides not to repeal the 2009 exemption, it should consider adding safeguards or adopting a model contract law for the Medicaid bureau and other exempted agencies to follow. Neighboring Kentucky has such a model law, and the National Conference of State Legislatures can help with that as well, Landrum said.