There was a good story by Kevin Dayton in yesterday’s Star-Advertiser which traces “irregularities” the bid process that led the city to cancel a contract award for an umbrella “owner controlled insurance program” that would have covered all rail contractors.
Nonsubscribers might try this link: http://fpn.advisen.com/articles/article163579071-2099913611.html
Dayton reported:
An internal investigation by the city Department of Budget and Fiscal Services discovered “irregularities in the evaluation process” that selected Marsh USA Inc. for a $1.68 million contract to serve as broker for the OCIP program.
The investigation found that city risk manager Beverly Braun improperly influenced the ratings by member of the evaluation committee in a way that favored Marsh’s technical score.
Dayton quoted city purchasing administrator, Wendy Inamura, who said they found “no evidence of fraud or bad faith” in the faulty bid process.
It made me wonder how much information about the situation can be found online. You never know what might turn up in a check like this. Probably nothing. But little bits of info can later turn out to be meaningful.
The players include Marsh USA, Aon Risk Services Inc. (the losing bidder that complained), Braun, CALTROP (the consultant recommending the OCIP insurance plan), and the Department of Budget and Fiscal Services, which conducted the internal investigation. The contract would also be interesting to see, along with the original bid results.
I started with the city’s Docushare system, and searched in 2009 documents for “owner controlled insurance,” hoping to find information concerning the original contract awarded at that time.
The only item was Resolution 09-268, “TO RETAIN THE SERVICES OF MCCORRISTON MILLER MUKAI MACKINNON AS SPECIAL DEPUTY CORPORATION COUNSEL FOR THE CITY AND COUNTY OF HONOLULU WITH REGARD TO THE PROCUREMENT BID PROTEST FILED BY AON RISK SERVICES, INC. OF HAWAII,” and an accompanying committee report.
The resolution provides the original RFP number and a few details on the contract award and bid protest.
WHEREAS, the City issued a solicitation for broker services for the Owner Controlled Insurance Program (OCIP) for the Honolulu High-Capacity Transit Corridor Project for the City and County of Honolulu, RFP-BFS-174907, and the contract was awarded to Marsh USA Inc. (“Marsh”) on July 28, 2009.
WHEREAS, a bid protest was filed by Aon Risk Services, Inc. of Hawaii (“Aon”) on August 7, 2009 through its attorneys, the Law Offices of Cades Schutte, in connection with the award of Contract No. CT-BFS-0900306 to Marsh for Owner-Controlled Insurance
Expanding the search to other years found additional information.
Resolution 10-92 traced the subsequent history of competing protests by Marsh and AON filed with the state Department of Commerce & Consumer Affairs, and raised the appropriation for legal fees from $50,000 to $70,000.
There’s also a change order for a contract with Kiewit Infrastructure West Co., referred to in Dayton’s story. In the absence of the planned owner-controlled insurance, Kiewet was paid an additional $4 million to buy its own insurance.
That exhausted documents found by searching for owner-controlled insurance.
Next I tried “Marsh USA Inc.”
There’s a February 2005 letter from the acting director of the city’s Dept. of Budget & Fiscal Services referring to Marsh USA as “our broker.”
There are a couple of references to testimony on different matters by Rocco Sansone, Senior Vice President, and Chad W. Karasaki, Managing Director, of Marsh USA, Inc. in Honolulu.
A search of insurance licenses listed four representatives of Marsh USA Inc: Ronald Keith Beers, Kathy Y Dang, Rocco Sansone, and Marissa G. Mandado.
Here’s an interesting coincidence. Although Chad Karasaki was listed as managing director for Marsh USA in the 2007 testimony referred to above, he is now listed in insurance licensing records as a representative of AON Risk Services of Hawaii, which protested the contract award to Marsh. Meaning? Who knows. Item to note? Yes.
That’s all I’ve got time for right now.
As you can see, building up background on an issue takes time and may require approaching from several different directions. It’s always an interesting process, even if it ultimately doesn’t turn up anything worth reporting.
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Bureaucrats and legislators who mindfully “mess up” should be held accountable.
At this point, they can do anything they want and taxpayers end up paying, including legal fees. Where is the incentive to think smart and be above board?
It’s ridiculous!!!!
Nothing like seeing a change order from Kiewit for $4,000,000 to start your day.
Ian, thank you for the remarkable amount of research and information you managed to uncover here.
I wonder if Kiewit actually spent the whole $4 million it was awarded for its own insurance.
I also thought there should be at least a nod in the direction of holding the City employee responsible for the bid irregularities. I mean, it was a multi-million dollar error. Was there no supervisor?
Nice bit of research! It is interesting how far back their roots go, even if you haven’t found a smoking gun per-say. I think in many was it is an issue that is found in most local government bidding, but often slips through the cracks, as I have seen the way that personal or financial relationships can win contracts with local governments, especially small cities.
I love how when it’s a big snafu, whether regarding the planned rail, the landfill, or one of the “not the landfill” landfills, it’s always the nameless, faceless “City” that messed up.
Yet when it comes time to cut ribbons, make speeches, or pass out plaques, it’s always Mayor Carlisle.
Molehill —> Moutain.
Don’t confuse the CO for insurance costs that Kiewit submitted($4m) with the $1.68M service broker fee for the OCIP. Different animals.
Total insurance costs for the rail project could eventually be upwards of $100,000,000. It is a$6B project.
The $1.6M was the broker fee for administring the OCIP program, not the cost of the insurance.
Since this program was not in place when Kiweit began there contract perfomance they had to buy insurance for the portion the job they already started, this was the $4M. If the OCIP was in place then the city would have had to pay the $4m, not Kiewit.