HAS BISD ADMINS LET FIRM "TIE UP" $3.4 MILLION CONTRACT?

By Juan Montoya
As the Brownsville Independent School District stumbles along trying to cover the tracks of administrators who have knowingly allowed one broker to monopolize the $3.3 million windstorm, machinery, and boiler insurance contract, the cozy relationship between McGriff and Seibels and Williams of Houston, Texas, may be costing the district more for the same coverage.
The policies are currently running on inertia on a 90-day basis after from January 31 after administrators acted on their own to continue the coverage and issued a $3.$3,277,604.54 million check to McGriff that was later returned because the signatures approving it were stamped and the contract had not been approved by the BISD board.
The contract snafu and the 90-day span has allowed critics to take a closer look at the arrangement worked out by the BISD with McGriff that has allowed that company to hold a virtual monopoly on the business at an economical disadvantage to the district.
Of the four companies who bid for the coverage, two, Bordon's and McGriff, listed the same companies as the carriers for the insurance. The other two, the Klements Agency and Montlavo Agency, were declared non-bids by Employee Benefits administrator Judy Cuellar. Administration evaluation committee members who participated in the decision included Cuellar, Payroll Administrator Kenneth Lieck, Warehouse Adm. Kent Wittenmore, CFO Lucio Mendoza, Finance Coordinator Mark Alaniz, and Belia Rodriguez, a representative from the purchasing dept.
The three BISD board members who head the insurance committee are Cesar Lopez, Jose Chirinos and Carlos Elizondo.
The two companies who were not considered, according to Cuellar, was because they did not have the authority or permission to approach the companies McGriff already had contacted to be in their bid. Many companies, insurance experts say, only allow one agent to approach them and will not consider any others.
At least one representative of the companies excluded, Greg Kelment, of Klements Insurance, said the set up in effect prevents other brokers or their agents to offer any bids because McGriff has already "tied up" the bids.
"If I was a board member, I would question why BISD has not had any alternative proposals over the past few years for a $3.5 million contract," he wrote in a letter to the insurance committee. "The current system of how the coverage is placed is the problem. Insurance companies will  only work with one broker at a time. Companies require detailed information from the clients to provide accurate quotes. McGriff has tied up the market by submitting detailed information about BISD's ran account prior to the Confidential Sealed Proposal (CPS) being released."
When another agent send in a submission, Klements said,  "they hear the market is already 'reserved or blocked' bu another agent. McGriff has the advantage of a captive customer, which in  my opinion has resulted in the BISD paying more for their property insurance than necessary."
An example of the tied in costs with McGriff was the $139,000 in brokerage fees and an additional $39,000 paid for "inspection fees," Klements wrote. With an average of $170,000 in combined brokerage and inspection fees, his company has submitted a bid that limited the fees in both categories to $15,000 each, saving the BISD an estimated $150,000 (Click on graphic to enlarge).
Additionally, Klements said his company's proposal included a 7 percent commission instead of the 15 percent McGriff charged, saving the district an additional $100,000.
During the January 25 insurance committee meeting, BISD board member Chirinos complained that the board was being put in a tight spot because the administration had not given the members enough time to mull over the limited choices and were being place in position where they had to reach a decision before the January 31 policy lapse, six days from the meeting.
"We have to have a plan B if we don't like the bids," he told Cuellar.
BISD general counsel Baltazar Salazar said the arrangement with McGriff amounted to the company having "a cornered market" and "tying our hands."
"The district is not given the option to go outside the McGriff circle," Salazar said. "McGriff has the market cornered."