B-126528, FEB. 17, 1956

B-126528, FEB. 17, 1956

TO MR. ERWIN H. LEIWANT:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 30, 1955, WITH ATTACHMENT, PROTESTING THE PROCUREMENT PROCEDURE BEING FOLLOWED BY CERTAIN HOUSING AUTHORITIES IN THE STATE OF NEW JERSEY, IT BEING CLAIMED THAT AWARDS OF CONTRACTS ARE BEING MADE TO OTHER THAN THE LOWEST BIDDER AT A CONSIDERABLE ADDITIONAL EXPENSE TO THE GOVERNMENT.

THE PUBLIC HOUSING ADMINISTRATION HAS STRONGLY URGED LOCAL HOUSING AUTHORITIES TO TAKE COMPETITIVE BIDS FOR THEIR FIRE AND EXTENDED COVERAGE AND PUBLIC LIABILITY INSURANCE AND TO AWARD THE COVERAGE TO THE LOWEST RESPONSIBLE BIDDER IN EACH CASE. HOWEVER, IT HAS RECOGNIZED THAT ALTHOUGH ASSISTED BY FEDERAL SUBSIDIES THE LOW-RENT HOUSING PROGRAM IS A LOCAL PROGRAM AND THAT, IN CERTAIN CIRCUMSTANCES, LOCAL HOUSING AUTHORITIES MAY FIND THE PURCHASE OF INSURANCE FROM AGENTS OR COMPANIES OF THEIR OWN CHOOSING WILL RESULT IN MORE ADEQUATE SERVICE AND PROTECTION OR OTHERWISE BE IN THE PUBLIC INTEREST. IN VIEW OF THIS FACT AND TAKING INTO CONSIDERATION THE DIFFERENCE IN UNDERWRITING PRACTICES OF THE VARIOUS TYPES OF COMPANIES, BIDDING PROCEDURES HAVE BEEN ADOPTED WHICH PERMIT LOCAL HOUSING AUTHORITIES TO PURCHASE INSURANCE AT OTHER THAN THE LOWEST COST, PROVIDED THE INSURANCE IS OBTAINED AT A COST REASONABLY WITHIN RANGE OF THE LOWEST COST, WHICH HAS BEEN DEFINED AS MEANING THAT THE LOWEST COST IS NOT MORE THAN 20 PERCENT LESS THAN THE NET COST AT WHICH THE INSURANCE IS CURRENTLY BEING PURCHASED.

THE PURCHASE OF INSURANCE IS THE RESPONSIBILITY OF THE LOCAL HOUSING AUTHORITIES AND IS NOT SUBJECT TO SECTION 3709 OF THE REVISED STATUTES, AS AMENDED, OR OTHER STATUTES REQUIRING ADVERTISING FOR BIDS AND AWARD TO THE LOWEST RESPONSIBLE BIDDER. IT IS PUBLIC HOUSING ADMINISTRATION'S RESPONSIBILITY TO SEE THAT ADEQUATE PROTECTION IS SECURED FROM FINANCIALLY RESPONSIBLE INSURANCE COMPANIES AND AT A REASONABLE COST.

IN THE CASE OF THE HOUSING AUTHORITY OF GUTTENBERG, PUBLIC LIABILITY INSURANCE WAS AWARDED TO A LOCAL AGENT WHO HAD BEEN CARRYING THE INSURANCE SINCE THE INCEPTION OF THE HOUSING PROGRAM IN GUTTENBERG. THE AWARD WAS MADE TO A STOCK COMPANY ON ITS FLAT COST BID OF $989.04 AS COMPARED TO YOUR BID IN THE GROSS AMOUNT OF $1,086.40 WITH AN ESTIMATED DIVIDEND OF $217.30 AND AN ESTIMATED NET COST OF $869.18. THE BID PRICE OF $989.04 WAS APPROVED AS THE COST WAS REASONABLY WITHIN THE RANGE OF THE LOWEST COST AVAILABLE.

IN THE CASE OF THE HOUSING AUTHORITY OF THE CITY OF NEWARK, NEW JERSEY, THE HOUSING AUTHORITY REJECTED YOUR BID ON PROJECT NJ-2-13 BECAUSE YOUR QUOTATION CONTEMPLATED A POLICY WITH A $50 PER BUILDING PER LOSS DEDUCTIBLE CLAUSE UNDER THE WINDSTORM AND HAIL PORTION OF THE POLICY WHICH WAS NOT PROVIDED IN THE ADVERTISED BID SPECIFICATION.

UNDER THESE CIRCUMSTANCES AND HAVING REGARD FOR THE FACT THAT THE PUBLIC HOUSING AUTHORITIES IN QUESTION WERE NOT REQUIRED TO AWARD CONTRACTS FOR INSURANCE COVERAGE TO THE LOWEST BIDDER IN EACH CASE, IT IS OUR OPINION THAT THERE IS NOT SUFFICIENT LEGAL JUSTIFICATION FOR OUR OFFICE TO OBJECT TO THE ACTION TAKEN IN THE MATTER.