LITTLE ROCK — Gov. Asa Hutchinson said Friday the state will take over as the operator of seven Division of Youth Services facilities after a legislative panel rejected a proposed contract with a private company to run them.

Hutchinson also questioned whether the Legislature has the authority to block the contract.

A legislative subcommittee on Tuesday rejected a contract with Indiana-based Youth Opportunity Investments to operate the youth offender and treatment facilities, and on Friday the Legislative Council accepted the subcommittee’s decision.

Two companies that currently operate DYS facilities, South Arkansas Youth Services of Magnolia and Consolidated Youth Services of Jonesboro, have contracts that expire Dec. 31. South Arkansas Youth Services operates two facilities in Mansfield, two in Dermott and one in Lewisville; Consolidated Youth Services operates facilities in Colt and Harrisburg.

South Arkansas Youth Services and Consolidated Youth Services submitted bids for renewal of their contracts. They have twice filed unsuccessful challenges to the rejection of their bids.

Some legsilators have questioned why the Department of Human Services and the Department of Finance and Administration favor awarding a contract to run the seven facilities to the Indiana company when it has proposed charging the state $232 per bed per day, up from the $147 the state pays now per day for each of the 249 beds at the facilities.

State officials have said the Indiana company’s bid was superior in areas other than cost, including the level of services it offered to provide.

In a hastily assembled news conference at the state Capitol late Friday afternoon, Hutchinson said the state will take over running the seven facilities beginning Jan. 1. He said the current employees will be allowed to remain in their current positions, and those who choose to stay will be considered state employees.

Hutchinson said his plan is for the state to operate the facilities for six months and then determine whether to begin a new bidding process.

DHS Director Cindy Gillespie said the money that would have gone to the vendor contract will be used to run the facilities.

The Legislative Council is scheduled to meet again Dec. 30, but Hutchinson said that as far as he is concerned, the bidding process is over.

He also said state law requires the Legislature to “review” state agencies’ contracts but does not say it has power to approve or disapprove them.

“I have questions about whether that law is even constitutional,” he said. “We reserve the right to challenge that in the future.”

More than 190 people are employed by the current vendors at the centers, which have the capacity to house nearly 250 youths.