Maryland EBT Contract Fight Delayed Chips as Theft Hit $12.6M
Summary
Maryland's Department of Human Services awarded a $20 million contract to run its electronic benefits cards in July 2024 to the same vendor it had used since 2008 -- even though the vendor's bid looked $11.1 million cheaper than a rival's only because it left out required costs, according to a July 2026 fiscal compliance audit by the Maryland Office of Legislative Audits. A rival's protest succeeded within weeks, but the resulting legal fight and vendor transition dragged on for more than a year, delaying a security upgrade to harder-to-clone chip cards -- and the state paid $12.6 million to replace stolen benefits in the year that followed. The same audit found 1,858 Marylanders kept receiving food and cash assistance after being incarcerated, and $7.1 million in Medicaid claims paid out after recipients' eligibility should have been re-checked.
How a $20 million contract went sideways
contracts with a vendor to administer the state's EBT system for , Temporary Cash Assistance (TCA), and the Temporary Disability Assistance Program. When the department presented the July 2024 award to the Maryland Board of Public Works, the pricing gap was raised -- responded that "we would not bring to you, the constitutional officers of Maryland, an unlawful contract to sign." The losing bidder disagreed and filed an appeal with the Maryland State Board of Contract Appeals (MSBCA), arguing 's evaluation of the financial proposals materially violated state procurement law. MSBCA ruled for the losing bidder that August, a decision the Baltimore City Circuit Court affirmed in March 2025. then awarded a new $38.4 million contract to the winning challenger, covering November 2025 through June 2035 with renewal options -- while the original incumbent kept running the system under its old contract through the transition, collecting $10.9 million between July 2024 and December 2025.
View data as table
| Bid gap DHS should have investigated | 11,100,000 | omitted pricing info made the winning bid look $11.1M cheaper |
|---|---|---|
| Paid to the ousted vendor mid-fight | 10,900,000 | July 2024-Dec 2025, while the award was under protest |
| Stolen benefits replaced by the State | 12,600,000 | Feb 2025-Jan 2026, while secure-chip cards sat delayed |
What the delay cost
The dispute's real cost, auditors found, was time: the improper award delayed 's planned rollout of EBT cards with secure chip technology, which makes cards far harder to clone or skim. Without it, Maryland paid $12.6 million in state funds to replace stolen EBT benefits between February 2025 and January 2026 alone. The audit cites a 2026 California Governor's Office press release reporting an 83 percent drop in EBT theft after that state adopted the same chip technology -- the scale of what a faster rollout might have blunted. 's own July 9, 2026 written response pushes back on the framing, calling the finding a mischaracterization: "the Department has significant concerns regarding the assertion that our 2024 Electronic Benefit Transfer (EBT) contract procurement is evidence of a systemic failure of our procurement review process. Labeling a single procurement interpretation error as a failure to follow RFP terms significantly oversimplifies the procurement process."
The same audit found people falling through the cracks
Beyond the contract fight, OLA's own Data Analytics Unit ran an independent check that FIA itself hadn't managed: it matched incarceration records from the Department of Public Safety and Correctional Services against benefit rolls covering July 2022 to March 2025, and found 1,858 people had kept receiving and/or cash assistance more than 30 days into incarceration -- the point at which federal rules cut off eligibility. FIA's own weekly matching process should have caught this, but the incarceration data it relied on was missing Social Security numbers for 11,594 of the 31,290 people incarcerated as of May 2025, more than a third of that population. In a 20-case test of the 1,858 flagged recipients, auditors found FIA's own match had missed 15 of them outright and had identified but never stopped benefits for the other 5.
View data as table
| Missed entirely by FIA's own match | 158,000 | 15 of 20 tested recipients, as of November 2025 |
|---|---|---|
| Identified but never stopped | 46,000 | 5 of 20 tested recipients FIA had already flagged |
A separate finding traced a similar gap in Medicaid: 1,950 recipients processed by the state's local departments of social services had gone without the annual eligibility redetermination federal and state rules require between December 2023 and September 2025, and the Maryland Department of Health paid roughly $7.1 million in Medicaid claims for 546 of them after their redetermination came due.
The takeaway
- awarded a $20 million EBT-services contract in July 2024 over a bid gap auditors say should have been caught. The omission made the winning bid look $11.1 million cheaper than the rival's; a state contract-appeals board ruled for the challenger within about a month, but didn't have a replacement contract in place until November 2025 -- over a year later.
- The fight delayed anti-theft chip cards, and the state paid $12.6 million to replace stolen benefits in the year that followed (Feb 2025-Jan 2026) -- against a backdrop where California reported an 83% drop in EBT theft after adopting the same chip technology.
- An independent OLA data match -- not FIA's own process -- found 1,858 incarcerated Marylanders had kept receiving and/or cash benefits past the 30-day federal eligibility cutoff; a 20-case test found FIA's own matching missed three-quarters of the tested cases outright.
- A separate Medicaid finding paid out $7.1 million to 546 recipients after their eligibility redeterminations came due but weren't completed.
- disputes the severity of the procurement finding, calling it a single interpretation error rather than a systemic procurement failure, while pointing to nearly 200 new caseworkers hired and a vacancy rate cut by roughly three-quarters since the audit period.
This is a fiscal compliance audit covering June 1, 2021 to February 28, 2025, not a full financial-statement audit; a tenth finding, related to cybersecurity, is redacted from the public report under Maryland's State Government Article 2-1224(i) and is not discussed here. The $204,000 combined total in the incarceration test, and other case-level dollar figures cited here, come from targeted samples the auditors explicitly say should not be projected onto the full population of 1,858 incarcerated recipients or any other finding's full population. The $28 million payment-error penalty referenced in this same audit (Finding 7) is covered in depth in BlackLeaf's separate reporting on Maryland's FY2025 budget closeout review and is not the focus of this piece.
Sources(1) ▾
- Maryland Office of Legislative Audits, Department of Legislative Services, Audit Report: Department of Human Services -- Family Investment Administration (period June 1, 2021 to February 28, 2025) (2026-07-15) — A fiscal compliance audit by the nonpartisan Office of Legislative Audits (OLA), transmitted July 15, 2026 to the Maryland General Assembly's Joint Audit and Evaluation Committee and signed by Legislative Auditor Brian S. Tanen, CPA, CFE. Covers the Department of Human Services' Family Investment Administration (FIA), which supervises the 24 local departments of social services administering , Temporary Cash Assistance, the Temporary Disability Assistance Program, and home energy assistance. Nine numbered findings (a tenth, cybersecurity-related finding is redacted from the public version under State Government Article 2-1224(i)); includes 's July 9, 2026 written response as an appendix. ola.maryland.gov · original document
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Maryland's Department of Human Services () awarded a roughly $20 million contract in July 2024 to run the state's electronic benefits transfer (EBT) cards -- the debit-style cards that carry , cash assistance, and disability-assistance benefits to recipients -- to the same vendor that had held the job since 2008. According to a July 2026 audit⧉ by the Maryland Office of Legislative Audits (OLA), the vendor's winning bid looked $11.1 million cheaper than its rival's only because it left out pricing information the request for proposal required -- a gap auditors say should have caught before signing. A rival's procurement appeal ultimately succeeded, but the year-plus fight over who ran the system delayed a security upgrade to harder-to-clone chip cards, and the state spent $12.6 million replacing stolen benefits in the year that followed.