Citizens Insurance Hands Out Another No-Bid Contract

May 25--Under public pressure, Citizens Property Insurance Corp. backed down late last year on plans to award a no-bid $60 million contract for managing home reinspections to an inexperienced Jacksonville company.

Citizens, the state's largest property insurer, was forced to reduce the agreement with Inspection Depot to a pilot program involving no more than 1,500 homes and ending in March.

Citizens also promised to put the remainder of the work out to competitive bid, as required by Florida law. The goal is to reinspect up to 400,000 policyholders to make sure they qualify for wind mitigation credits, which cost Citizens $700 million a year in reduced premiums.

But in late April, just days before opening the competitive solicitation process, Citizens handed Inspection Depot another plum assignment: permission to continue the pilot program through the end of the year, performing up to 15,000 inspections each month.

At an average of $120 per inspection, the potential value of the contract is $12.6 million.

Inspection Depot, which retains $25 per inspection for its management services, could earn up to $2.6 million under the new agreement. The remainder goes to the people conducting the inspection.

A spokeswoman for Citizens said its board, which is supposed to approve all contracts over $100,000, had authorized the extension of Inspection Depot's contract as an "emergency" until the winner of the competitive bid is chosen. The long-term project is expected to start in 2011.

Competitors eager to break into the lucrative home reinspection business were outraged by Citizens' latest deal with Inspection Depot.

Frederick Bateman, a Tallahassee lawyer who has sued Citizens on behalf of SagoTec, a Georgia company, called the new contract, "flagrantly illegal and beyond egregious in nature."

"The only beneficiary is not the policyholder and not Citizens but Inspection Depot," he said.

Bateman and others also fear that the solicitation process now under way heavily favors Inspection Depot. Citizens is requiring that vendors have two years of experience managing inspections, which few potential bidders other than Inspection Depot have.

"Citizens has created a model for Inspection Depot, now they're asking who else has that experience," Bateman said.

Michael Rowan, Inspection Depot's owner, did not return a call seeking comment.

While Inspection Depot completed only about 600 reinspections through April -- far short of the 1,500 allotted under the pilot program -- Citizens said the effort was paying off.

Of 566 homes reviewed, 375 will have their premiums raised upon renewal because they did not qualify for wind mitigation credits. Citizens estimated the net impact, after paying Inspection Depot, would be about $350,000 in increased premiums.

Bateman said he never questioned the need for a reinspection program or the possibility of savings.

"They may be saving money, but not as much as they would have done if this had been a competitive bidding process," he said.

Kris Hundley can be reached at [email protected] or (727) 892-2996.

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