When Low Bids Fail: Incumbent Awarded Do-Over Contract

Yesterday, the Maryland Board of Public Works approved a short term contract with former incumbent vendor Behavioral Interventions Inc. to provide electronic home monitoring services for the state Department of Juvenile Services. The emergency agreement comes after the Board terminated the contract which was originally awarded to Sentinel Offender Services, the lowest bidder at the time, who failed to perform.

Sentinel’s bid originally came in 40 percent lower than Behavioral Interventions’. Comptroller Franchot questioned the extremely low bid when it came in last April. Upon executing the contract with Sentinel six months ago, Sentinel rolled out untested, new technology, testified Department of Juvenile Services Secretary Sam Abed – in what Governor Larry Hogan referred to as “kind of a bait and switch.” The state cancelled the contract only 17 days later. Secretary Abed described the situation as “fairly unique.” The Daily Record reports that Comptroller Franchot praised the Secretary for “taking quick action and accepting responsibility for it;” stated Abed:

It’s a tough situation because we do want to save money and get low bids and we certainly want to look into those. In some cases they work. In this case, it did not. In terms of moving forward, I think we want to put a little more scrutiny on those providers and try to balance that with trying to encourage smaller businesses to come in and compete. I think it’s been a bit of a mixed bag for us, but we have had. some success by stimulating competition and getting more bids.

Work Group Investigates Residential Clean Energy Loan Program

MACo participated in what is likely the final meeting of the House Bill 387 Residential PACE Study Work Group Meeting last Thursday, October 13 in Annapolis. The work group, convened and chaired by the Maryland Clean Energy Center, consults with the Center as it fulfills its obligation to “conduct a study to determine optimal design and implementation strategies for a residential clean energy program in the State” under House Bill 387 (Chapter 593), Clean Energy Loan Program – Residential Property – Study.

What is PACE?

Property Assessed Clean Energy Finance (PACE) is a loan program used to finance property improvements that facilitate clean energy and conservation measures, and counties can collect the repayments for these loans through a surcharge on the property owner’s tax bill. The unpaid surcharge is treated as a lien on the owner’s property and is given first priority for repayment in the same manner as the local property tax. Maryland law has enabled counties to establish PACE programs for commercial properties since 2009, and currently Montgomery County has an active commercial PACE program. Under the above-mentioned Act, enacted last session, The Maryland General Assembly tasked The Maryland Clean Energy Center with investigating the potential for extending this program to residential properties.

Residential PACE Concerns

Many mortgage lenders and the Maryland Bankers Association object to the concept of allowing Residential PACE loans super-priority over a home’s mortgage, meaning that the mortgage lender would recover less in the event of foreclosure because the residential PACE lender would recover first. In fact, the Federal Housing Finance Agency, which regulates Fannie Mae, Freddie Mac and the Federal Home Loan banks, bars Fannie Mae and Freddie Mac from acquiring mortgages on a property with a residential PACE lien. Since Fannie Mae and Freddie Mac purchase, guarantee or securitize such a large percentage of single family mortgages, this severely limits the ability of a property owner to sell or refinance a home carrying a residential PACE lien. For this reason, the Maryland Realtors Association also expressed concerns with the program.

As part of the Obama Administration’s Clean Energy Savings for All Initiative, the U.S. Department of Energy (DOE) released best practice guidelines for Residential PACE programs on July 19, 2016. The guidelines suggest:

In states where non-acceleration of the assessment is standard for other special assessments, it should also be standard for PACE assessments. After a foreclosure, the successor owners are responsible for future assessment payments. Non-acceleration is an important mortgage holder protection because liability for the assessment in foreclosure is limited to any amount in arrears at the time; the total outstanding assessed amount is not due in full. In cases of foreclosure, priority collection of delinquent payments for the PACE assessment may be waived or relinquished.

For Maryland counties, non-acceleration of the assessment may be difficult or wholly infeasible.

Next Steps

The Maryland Clean Energy Center is due to release its report to the Maryland General Assembly on November 15, 2016.


Save on Athletic Supplies & Physical Education Equipment Through U.S. Communities

uscomm_7-2016_horiz-cmykU.S. Communities has announced that Gopher has been awarded a multi-year contract for athletic supplies and physical education equipment. This contract was awarded through a competitive solicitation process and detailed evaluation conducted by lead public agency, Harford County Public Schools, Maryland. The contract term is for three years with a start date of October 1, 2016, with the option to extend the contract for two additional two year periods.

From athletics to fitness to physical education, Gopher offers over 7,000 products from 75 product categories, including 3,500 products that are unique to Gopher and you won’t find anywhere else. Gopher’s passion is to help professionals achieve better results in the gym, on the playground, and on the field by providing them the equipment they need and the service and support they deserve.

Join U.S. Communities for a 30-minute webinar to learn more about Gopher and this new contract. If you are unable to attend one of the webinar dates, click here for additional information.

Maryland Secures Federal Disaster Declaration for Ellicott City

A federal disaster declaration has been approved to assist with the response and recovery efforts after flooding in Ellicott City. Maryland and Howard County will now be eligible for federal assistance to help pay costs associated with the response to and recovery from the July 30 flooding event that damaged much of Main Street in Ellicott City as well as surrounding areas.

From a Howard County Press Release,

By granting the declaration, federal assistance will be made available for expenses related to infrastructure repair and replacement, hazard mitigation projects, debris removal, and other costs associated with the storm. Kittleman said a FEMA declaration means that Howard County will be able to recover 75 percent of FEMA eligible costs.

“This is welcome news for the people of Ellicott City,” said Kittleman.“This Declaration will help us coordinate and take advantage of the many Federal resources available to us. These resources will help us implement long-term flood mitigation projects to rebuild Ellicott City to become a model resilient community. I am thankful to Governor Hogan and our Federal delegation for their continued support throughout this process.”

Kittleman, along with Senators Barbara Mikulski and Ben Cardin and representatives from Hogan’s and Congressman Elijah Cumming’s offices, met with FEMA on Wednesday where Kittleman stressed the urgency of receiving the disaster declaration.

Kittleman also noted that Howard County already had a head start on recovery efforts, with former State Senator and County Executive Jim Robey serving as a special advisor, a Community Advisory Group in place, and a list of possible mitigation projects put together by the Historic Ellicott City Flood Work Group that Kittleman established in 2015.

Read the full press release for more information.

Millstein: Time To Invest In Our Infrastructure

America needs to start spending on infrastructure to get out of its rut, opines former Treasury Department Chief Restructuring Officer Jim Millstein in a Washington Post editorial this week. First, he emphasizes the need:

After World War II, America’s periods of greatest economic growth coincided with a much higher level of public investment in infrastructure and research and development than has been made over the past 16 years. The persistent shorting of funds for infrastructure modernization and repair has left us with a huge hole to fill: The American Society of Civil Engineers estimates that the federal government needs to spend an additional $140 billion a year for the next 10 years to fill the gap.

Secondly, he points out the timeliness and appropriateness of debt financing for infrastructure investment, despite legitimate concerns about the trajectory of the federal budget deficit and increase in federal debt as a percentage of gross domestic product, which inevitably bog down the political process to succeeding with any major spending program. However:

Given the parlous state of America’s infrastructure, a solution cannot await some “grand bargain” that brings all aspects of the federal budget into long-term balance. Debt financing is not only needed but appropriate.

At the historically low interest rates at which the federal government can now borrow, there is no better time to incur long-term debt for the construction of long-term assets. And because of the positive effects on productivity and economic growth that public infrastructure creates, we need not worry about the implications of this spending for debt sustainability in the long run. A well-designed program of infrastructure modernization can pay for itself in economic activity and the tax revenue that results from that activity.

Read the full editorial here.

Retiree Health Care Costs Loom Large Over Governments

Governments face sizable shortfalls in funding retiree health insurance liabilities.

The financial services firm Standard & Poor’s recently released a report detailing state government long-term liabilities for OPEB (“other post-employment benefits” defined to exclude pensions). Their conclusions:


  • While overall unfunded state OPEB liabilities have increased, many states have taken action to mitigate rising costs.
  • Liabilities measured on a per capita basis remain low for most states, with several notable exceptions.
  • OPEB expenditures make up a small share of overall general spending, but a significant share of liabilities, and these costs could pressure state budgets if fully funded.
  • Analysis of OPEB pressure requires a variety of measures.
  • Despite many states’ ability to change OPEB benefits, thus reducing liabilities, OPEB ratios still matter to credit quality.

An article on Route Fifty puts the S&P analysis into broader context:

OPEB liabilities represent the cost of benefits that will come due in future years.

Unlike pensions, where money is set aside in advance to cover expenses owed when employees retire, OPEB costs are more commonly covered on a “pay-as-you-go” basis—meaning the expense of the benefits is paid when it comes due.

The Pew Charitable Trusts published a brief in May that noted states had paid $18.4 billion during 2013 for worker retirement benefits other than pensions with most of that total spent on healthcare. OPEB liabilities totaled $627 billion that year, according to the brief. All together, states had set aside enough assets to fund about 6 percent of that sum.

Saving for OPEB in advance, the Pew brief said, “can both make costs more predictable for taxpayers and make benefits more secure for retirees.”

Recognizing the need for ready-to-use investment options for Maryland local governments, MACo recently launched the MACo OPEB Investment Trust — a stand-alone entity offering investment and related financial service for jurisdictions making advance contributions toward these long term liabilities. The Trust setup enables investment in longer-term instruments, that are not suitable under state law for true “public funds” available for short term use.

Read more about MACo’s OPEB Investment Trust.

S&P Report – September 2016
Pew Brief – May 2016
MACo OPEB Investment Trust

Commission Entrenched In Modernizing Procurement

The Commission to Modernize State Procurement met on Thursday, August 25 at 3 pm, where commissioners reported out on the Initiatives, Efficiencies and Workforce workgroups’ recommendations responding to the duties listed in Governor Larry Hogan’s Executive Order forming the Commission.

Regarding Duty (C)(1)(h), “expansion of the Small Business Reserve [(SBR)] Program to all agencies,” Special Secretary of Minority Affairs Jimmy Rhee reported recommendations by the Commission’s Initiatives Workgroup to increase the SBR goal from 10 to 15 percent, require a mandatory SBR set-aside, and brand the SBR Program as a premier diversity contracting program.

Regarding Duty (C)(1)(m) to simplify the Minority Business Enterprise (MBE) certification process, Rhee reported workgroup suggestions to improve applicants’ access to information by improving electronic communications, eliminate a requirement for applicants to release business ownership details in a public forum, and provide applicants with advanced notice of questions to be asked by the MBE Advisory Committee (MBEAC) during the evaluation process.

Regarding Duty (C)(1)(o) to establish “standards allowing the State to obtain the overall best value instead of only the lowest price,” commissioners discussed implementing additional measures in the bid evaluation process other than lowest cost, and providing procurement officers with greater discretion to determine the best procurement method on a solicitation-by-solicitation basis.

David Brinkley, Secretary, Maryland Department of Budget & Management reported that the Workforce Workgroup had met twice since the Commission’s previous meeting, and is refining its recommendations, particularly on Duty (C)(1)(d), “development of a statewide procurement training curriculum centered around a statewide procurement manual that prepares agency procurement staff to perform the procurement function at all levels of purchasing.” However, the workgroup required more information about whether the Commission would recommend centralizing procurement functions across the State to supply sufficient recommendations on this latter topic. He suggested that his workgroup favored centralization over the status quo.

In line with Duty (C)(1)(j), “simplification of the current Request for Proposal (RFP) template to make it easier for businesses to understand and respond,” the Efficiencies Workgroup is refining the State’s standardized RFP language,  and reducing the terms and conditions in line with Duty (C)(1)(l), “review the mandatory terms and conditions of procurement contracts.” The workgroup evaluated Duty (C)(1)(k), “reduction in the number of documents businesses are required to submit with proposals prior to a contract award,” but thus far has only identified two documents it could recommend eliminating. However, some reports and documents could be automated to improve efficiencies, it was reported to the Commission.

The workgroup is also evaluating existing law to see whether it accommodates existing and proposed information technology procurement, and taking a deep look into A&E processes, which were described as “broken, but not as broken as the universities’.” The workgroup’s technology subgroup is benchmarking existing state procurement programming, which was described as highly functional, but cumbersome and unintuitive. The workgroup will likely recommend that the Administration commission a more comprehensive cost-benefit analysis of existing and potential State procurement programs.

Finally, it was reported that the Efficiencies Workgroup looked into Duty (C)(1)(p), “development of a mechanism that would deter bidders from submitting frivolous protests,” and had concluded that evidence from other states did not indicate that requiring protests bonds deterred unwanted behavior significantly.

Public comment was delivered by Dr. Andrew Ross of the Children’s Guild, who requested that the Commission give attention to improving value-based (rather than cost-based) procurement of human services, and Scott Livingston, Esquire of Rifkin Weiner Livingston LLC. Livingston provided a number of recommendations, such as favoring competitive negotiations over two-step bidding, evaluating suitability and legal basis for utilizing bridge contracts in between awards, improving the speed with which agencies deliver procurement records in cases of appeal, and evaluating the appropriateness of the 30-day limitation for construction contractors to make a claim when the State requests changes in work. He also recommended that the State fund attorneys’ fees when a protester wins an appeal due to State illegal action, which engaged Commission Chair Lt. Governor Boyd Rutherford in a back-and-forth and gave attendees, including Livingston, the opportunity to appreciate the Lt. Governor’s extensive background in government procurement.

Green purchasing and veteran-owned business initiatives are among topics to be discussed at the Commission’s next meeting on Tuesday, September 20.

Minutes from previous meetings are available on the Commission’s website.

Questions, comments, or concerns about the Commission may be sent to Commission staff at procurement.modernization@maryland.gov.



Thursday Webinar: Take Control Of Your County Investments


MBS endorsement image

Introducing the Public Funds Investor Guide, a free online resource for treasurers and financial officers of all experience levels to help fulfill their investment responsibilities. The Maryland Association of Counties (MACo) and Multi-Bank Securities, Inc. (MBS) will present a special, free webinar to unveil this new educational guide and review new features of eConnectDirect®, including a new online investment policy tool that can help make your investing decisions easier and more efficient. MACo members and any other Maryland local government investment officers who have previously attended an eConnectDirect webinar are urged to attend.

MACo is pleased to have endorsed eConnectDirect as an essential online investment solution designed to help Maryland county treasurers manage their investment needs. This proprietary platform, developed by MBS, provides treasurers access to thousands of fixed-income offerings and the ability to invest county funds in a more effective and transparent way.

MBS has enhanced this offering with its Multi-Bank Securities Institute, Public Funds Investor Guide and new features that will help you keep your portfolio in compliance with statutes and policies. We are delighted to host this 30-minute session to demonstrate how this unique resource can help you maximize your investment portfolio at no cost.*


Who should attend the webinar to learn more about this free tool? This webinar is open to any local government Treasurers and Officers with investment responsibility including:

Finance Directors
Investment Officers
Deputy Treasurers & Staff
Investment Committee Members

Click the date below to register!

Thursday, August 25, 2016 at 1:00 p.m. EDT

For a link to MACo’s endorsement of eConnectDirect, click here.


About MBS
MBS is an independent, fixed-income securities broker-dealer that has been serving institutional investors across the U.S. for more than 28 years. The company’s customers include counties, municipalities, credit unions, banks, money managers and other institutional investors. MBS also underwrites U.S. agency bonds and distributes FDIC-insured CDs for thousands of community and national banks. Member of FINRA & SIPC; MSRB Registered.
*There may be costs associated with other products/services offered by MBS.

LGIT Hits 100% Retention 6 Years In A Row

For the 6th consecutive year, all members of the Local Government Insurance Trust  (LGIT) have renewed their property & liability coverage with the Trust.  LGIT Executive Director Tim Ailsworth attributes the success in retention to loyal members, attentive staff and products customized to benefit Maryland local governments.

LGIT is a non-profit Trust created, owned and governed by Maryland local governments and endorsed by MACo to provide various liability and property insurance and health benefits coverage at stable and competitive rates.

LGIT is a MACo Gold Corporate Partner and sponsor of the 2016 MACo Summer Conference, this August 17-20 in Ocean City, MD. Thanks, LGIT!

Learn more about MACo’s Summer Conference:


800 Attend Port Covington TIF Hearing; Chair Affirms No Vote Anytime Soon

Last night’s Baltimore City Council hearing on Sagamore Development’s controversial tax increment financing (TIF) request for Port Covington attracted 800 concerned attendees and lasted four hours before the Taxation, Finance and Economic Development Committee recessed. The hearing had to be relocated to the War Memorial Building’s large auditorium to accommodate the large crowds. Affirmed Committee Chair Carl Stokes,

We are not going to vote tonight. We are not going to vote next week.

Public testimony covered topics such as affordable housing, jobs, labor negotiations and profit sharing. The Baltimore Business Journal reports,

Much of the testimony centered on requests to strengthen the legislation to include citywide community benefits and job guarantees as well as a better understanding of the complex and lengthy 535-page TIF application.

Under Armour CEO Kevin Plank owns Sagamore Development, which is requesting the $660 million TIF to support its Port Covington development.  The 266-acre, $5.5 billion redevelopment in South Baltimore will hold Under Armour’s new corporate headquarters. Plans include:

  • 5.5 million square feet of office space,
  • about 14,000 residential units,
  • retail space,
  • two hotels,
  • 40 acres of parks,
  • 17 new streets,
  • an internal trolley system, and
  • Maryland Transit Administration Light Rail extension.

Sagamore Development Vice President Caroline Paff reported that the project will spur 42,000 jobs over 25 years and then install 25,000 permanent jobs at the site. Paff testified,

Under Armour has aggressive growth plans. And it’s either grow here or grow somewhere else. All of us want that growth right here in Baltimore City … We are asking for $535 million to help leverage a $5.5 billion deal — without anything else, that’s a good deal.

Chair Stokes announced that the hearing will resume on August 3 at 5 pm.