Wellington Council Irked By Insurance Broker Contract

Members of the Wellington Village Council agreed last Tuesday to enter in negotiations for a $198,000 contract with the Gehring Group for insurance brokerage services.

Council members voted 3-1 to move ahead with negotiations, despite concerns about the Florida League of Cities’ involvement in the bidding process. Mayor Bob Margolis did not take part in the discussion because he sits on the league’s Municipal Pension Trust.

The Florida League of Cities, which provides Wellington’s insurance through the Florida Municipal Insurance Trust, told the selection committee that if the Ghering Group was not selected, Wellington would have to work directly with the league, necessitating a new employee.

“It’s a concern of perception to me,” Councilman Matt Willhite said.

Business Services Manager Ed De La Vega told the council that the Florida League of Cities was one of six proposers for services but pulled its proposal before the selection committee ranked the firms vying for the position.

Included in the league’s proposal was a letter.

“Basically, what they wanted to get across to the selection committee members was that if another broker outside the Gehring Group was chosen, the Village of Wellington would have to work directly with the League of Cities,” De La Vega said. “They provided a proposal for informational purposes only. They said the Gehring group was the only one of the proposers that could work directly with the league for workers compensation, property and casualty insurance.”

The selection committee, made up of several village directors, recommended negotiating with the Gehring Group.

De La Vega said hiring another employee to work with the league would cost about $100,000 a year. The Gehring Group’s proposal was $88,000 more than the second-ranked company.

Willhite said he was concerned about the league’s input into the matter.

“It’s the concept that the league put in a proposal knowing they were not going to [offer the services], and then pulled it out and said, ‘You have to work with this company,’” he said. “Coincidentally, that company ends up our number one bidder.”

Willhite noted that Wellington has contracted with the Gehring Group for many years, so he wasn’t doubting its abilities as a brokerage firm.

He added that Wellington has considered in the past becoming self-insured and asked whether an employee hired to work with the league could also work to put the village on that path.

“With the difference in cost [between the Gehring Group and the next-ranked company], you’re almost covering the cost of an employee to work toward us being self-insured,” Willhite said.

Village Manager Paul Schofield explained to the council that self-insurance is an option many municipalities are looking into, mostly because of a provision in the Affordable Care Act that requires governments to pay a premium of around 10 percent on its insurance. “Self-insurers don’t pay that,” he said.

Schofield said Wellington has not begun that process but could if the council consented.

Willhite asked whether the Gehring Group makes recommendations when Wellington solicits proposals for new insurance coverage. De La Vega said they do not.

“They are there to help the selection committee with facts and other questions,” he said. “In no way do they ever make a recommendation.”

Director of Operations Jim Barnes said the company functions in an advisory capacity. “They are subject matter experts,” he said. “They provide information on the mechanics of insurance. They don’t evaluate the proposal.”

Vice Mayor John Greene said he wished the selection committee hadn’t known about the league’s terms when it made its decision.

“I wish the whole discussion had never taken place,” he said. “I don’t know how much weight the selection committee put into that discussion.”

Willhite agreed. “It’s kind of like when a lawyer has someone say something in court and the judge strikes it from the record,” he said. “The jury has already heard it.”

Village Attorney Laurie Cohen said Wellington was not at fault in the matter.

“The village had no control over the submission made by the league,” she said. “The village did nothing wrong and disqualified them as a bidder.”

But council members largely agreed that they trusted members of the selection committee to make the right decision.

“I have no reason at all to question the judgment of the people who did the scoring,” Councilman Howard Coates said.

But council members were concerned about the $88,000 cost difference between the top-ranked companies.

“Are you suggesting the company will provide better service at an $88,000 increase in cost?” Willhite asked.

De La Vega said it was the will of the selection committee. “That was their perception,” he said.

Coates asked about how points were assigned to each item on the selection committee’s evaluation.

De La Vega said he and Finance Director Tanya Quickel typically sit down and assign the points.

“In the last couple of years, we have stuck to a 40-40-20 ratio, with price being the lower component,” he said.

But Coates said he thought price should weigh heavier in the selection of a company.

“When you speak to the taxpayers, I guarantee you price would have more than a 20 percent impact on their decision,” he said. “In some ways, we are handicapped by the way scoring affects our decision. Price is not the be-all-end-all of everything, but it has a very significant impact. I view this as us spending taxpayer money, and a $198,000 contract versus a $110,000 contract is a very hard hurdle to overcome.”

Barnes explained that Wellington had put out a request for proposals, which typically evaluates a total offer, not just the price. For a request for bids, Wellington will typically choose the lowest-priced company that meets the requirements. “We have a fair amount of projects that are awarded on a straight bid,” Barnes said.

Councilwoman Anne Gerwig said there is value that can’t be measured by numbers.

“Are you the cheapest attorney I can hire?” she asked Coates. “Your price point is not going to be at the bottom, but I think we get more value because of the expertise. It’s very hard to rank professional services based on price.”

Greene said he believed Wellington was getting the best value but wanted to be sure it wasn’t staying with a company just because it’s familiar.

“I don’t want to be in a position where the village is held hostage by any vendor because they know the system so well that we have no choice but to go with them,” he said. “I want to be very careful that we don’t enter into a long-term contractual obligation with anyone, because it might cost us more down the road.”

Coates said he didn’t think the $88,000 difference was necessarily merited, but believed staff had room to negotiate the costs down.

He made a motion to negotiate the contract. “Negotiate is the key word here,” Coates said.

Greene seconded the motion, which passed 3-1, with Willhite opposed and Margolis not voting.