AUGUSTA, Maine — The Maine Department of Health and Human Services announced Friday that it has terminated the controversial Alexander Group contract after revelations that portions of the report were plagiarized.

Democrats who have been calling for a full refund from the Alexander Group praised the decision but said it was too late and didn’t go far enough. Since the contract was made public in November 2013, opponents have questioned its worth and labeled the group’s leader, Gary Alexander — who led welfare departments in Rhode Island and Pennsylvania — a conservative ideologue hired to reinforce Republican Gov. Paul LePage’s campaign themes.

The department, in a written statement, said the Alexander Group will be penalized $450,000, which is approximately what still remained unpaid in the $925,000 contract with the Rhode Island-based firm. DHHS notified the Alexander Group of the decision in a letter dated Thursday.

“We determined there was value contained in the content that was produced under this agreement,” reads a statement from DHHS. “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.”

Alexander said in a written statement Friday that despite the problems, he remains proud of the content of the report.

“We hold ourselves to the highest possible standard of professional conduct,” he wrote. “So much as a comma out of place in a report, or in this case, missing some citations, is a failure on our part to live up to that standard. … But grammatical errors do not undermine the substantive analysis and policy recommendations offered by the reports. Our goal was to give Maine practical reforms to help lift the poor out of poverty and support the neediest like the intellectually disabled, poor children and elderly while delivering value to the taxpayers.”

The total amount paid to the Alexander Group for the contract, after the penalties, will be $474,760, about $239,000 of which was state funds, according to DHHS. The rest came from federal Medicaid and Temporary Assistance for Needy Families accounts.

Last month, Phil Coyne, assistant special agent in charge of the federal Health and Human Services Office of the Inspector General in Boston, said investigators would be reviewing whether federal funds spent on the contract were used appropriately.

In addition to terminating the contract — including payments — DHHS levied a penalty of 40 percent for the most recent “Baseline Analysis” report, which contained plagiarized sections uncovered by the BDN. That penalty equates to about $145,000, which had not yet been paid to the Alexander Group.

The department also levied a 25 percent fine for a previous “Medicaid Expansion Analysis,” which equals about $27,000 in state and federal funds. That amount has been reimbursed to DHHS with a check from the Alexander Group.

The Alexander Group was awarded a $925,000 no-bid contract last year to study the state’s social services programs and come up with recommendations to save money. The contract was controversial from the start, but came under withering scrutiny last month after the Bangor Daily News discovered that portions of the report had been plagiarized. On May 23, LePage stopped payments on the contract while the allegations were examined.

On Thursday, LePage said during a business trade show in Lewiston that he was disappointed with the state’s handling of the contract and hoped it would become an “education moment” about the necessity of requiring deposits from state contractees and guaranteed coverage of legal costs.

“I do believe that we need to be a little bit tougher and use a little bit more foresight when we sign contracts,” LePage said. “I’m trying to work with those that negotiate contracts instead of just saying, ‘You have to.’ I’m trying to get them to understand the rationale and how it works.”

LePage said that as governor he takes responsibility for the flawed contract.

LePage spokesman Peter Steele wrote in response to emailed questions late Friday afternoon that no actions had been taken so far to improve or alter the development and administration of contracts but that “this is something that will be worked on.”

Democrats and others, including House Minority Leader Ken Fredette, R-Newport, have called for the Alexander Group to reimburse the state in full, which will not happen, according to Friday’s announcement.

House Speaker Mark Eves, D-North Berwick, has been one of the loudest critics of the contract, which he has argued was designed to affirm positions already taken by LePage and many Republicans, including their opposition to expanding Medicaid in Maine under the federal Affordable Care Act. On Friday, Eves said the contract “has been an egregious waste of taxpayer dollars.”

“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,” said Eves. “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.”

Christopher Cousins

Christopher Cousins has worked as a journalist in Maine for more than 15 years and covered state government for numerous media organizations before joining the Bangor Daily News in 2009.