During my time at the Statehouse I have it my top priority to demand
accountability with your tax dollars. I know its tough for you to give that
money to us every month. It’s tough for me too. That’s why we must demand
that our elected officials spending it wisely and effectively.
In 2007 it came to my attention that South Carolina was contracting work to
an insurance broker without seeking competitive bids from other brokers.
Because the broker did not have any competition, he was providing property
insurance coverage to the state at a much higher rate than we should have
been paying. Experts say that the unfair and irresponsible practice may have
cost us millions of dollars over the past 25 years.
Even more disturbing is that the broker has ties to a former legislator,
obvious to any observer as another example of good-ole-boy politics. To
fight back and to protect your tax dollars, I forced legislation through the
General Assembly that makes our Budget & Control Board stop its no-bid
contracting practice. Now we bid out contracts for this type work, saving
millions of dollars, and protecting taxpayers.
Here’s the article that ran in the Charleston Post and Courier describing my
work:
State’s no-bid contract takes fire
Some wonder if S.C. paid too much to insure property
By Yvonne Wenger
Saturday, July 21, 2007
Some wonder if S.C. paid too much to insure property
COLUMBIA — South Carolina hired an insurance broker with ties to a former
legislator to provide coverage without seeking competitive bids, a practice
that may have cost millions of dollars during the past 25 years.
The state Budget and Control Board contracted with Columbia’s Competitive
Insurance Group LLC, formerly known as the Thomas Brown Agency, to provide
the reinsurance for state-owned property without opening up the process to
competitive bid since the late 1980s.
The annual contract was worth $20.8 million last year. One of the company
principals is Bobby Kneece Jr., son of the late Rep. Robert Kneece of
Richland, who served in the state House of Representatives from 1966 to
1976.
“We’ll be happy to participate in any type of review process that the state
deems necessary to satisfy their needs in receiving a valuable service at a
fair price,” Kneece said Thursday.
The Government Efficiency and Accountability Review Committee, ordered by
Gov. Mark Sanford, issued a report earlier this month that estimates that
the state could save more than $2 millionlion a year by bidding out the
contract. It is not clear how much commission the company has collected.
“Any time that there’s a process where somebody is selected without a
competitive bid process, it looks suspect,” said Rep. Murrell Smith,
R-Sumter. “Everything needs to be out in the open.”
Smith, who originally looked into the issue after it was raised by one of
his constituents, wrote a directive that was passed by the Legislature,
ordering the Budget and Control Board to rework its practices. The contract
will be put out for bid next month.
Still, Smith noted that just because the contract wasn’t put out to bid
doesn’t necessarily mean the state didn’t get the best coverage at the best
price. Rather, the process is what raises concern.
“We don’t know if we’re overpaying on this insurance,” Smith said.
Reinsurance is an industry term that means insurance coverage for insurance
companies. The state insures its own property but pays a premium to an
outside company to share in the risk.
Competitive Insurance Group, under its old name, has been awarded the
reinsurance contract for the last 25 years. The Budget and Control Board has
relied on an exemption to award the contract without bid for the last 19
years.
Herbert Hayden, executive director of the State Ethics Commission, said he
sees no conflict of interest. No prohibition exists for a company with ties
to a former lawmaker to receive a government contract as long as that
official does not participate in the decision to issue the work, Hayden
said.
About the Budget and Control Board
The board manages the state’s government account transfers, building
projects and procurement, the vehicle fleet, and the employee health
insurance system, among other duties.
A governor-appointed committee evaluated the board in February. It released
a nearly 100-page report this month outlining an estimated $643 million
savings by overhauling the agency.
The impact of the accountability report is still undetermined.
According to a 2001 agenda, the board was given information that a bid
process could fail to yield a reinsurance contract because of troubles in
the market. The staff recommended the board extend the contract through an
existing exemption, as it had done twice before.
“The insurance staff has felt this is a very unique product, a very specific
need, and it required someone with specific knowledge and background,” said
Michael Sponhour, spokesman for the Budget and Control Board. “Some states
have had trouble getting all the reinsurance they need, and we have not had
that problem here.”
House Speaker Bobby Harrell, R-Charleston, said he is disappointed to learn
about the practice. “Frankly, this says we have to take a close look at
other contracts the Budget and Control Board is responsible for as well,” he
said.
Kneece stressed that although his company has continued to receive the
contract through the exemption, the process was open.
“The details are there for review on an annual basis,” he said. “Again, we
believe we’ve provided a valuable service at a fair price.”
The governor’s accountability report estimates the annual projected savings
based on Kneece’s company collecting 10 percent commission on the premium,
and also recommend the state pre-negotiate a flat fee with a broker.
Kneece said the report’s estimates are speculative.
“Any assumption that there is an exorbitant amount of money being made on
this is incorrect,” Kneece said.
Sanford wants to dissolve the Budget and Control Board. He argues that
putting control of administrative spending under the executive branch would
provide more accountability and efficiency.
