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Daily Record: Franchot says contract board ruling means MIA lease should be nixed

Renewing the Maryland Insurance Administration’s lease at a building in downtown Baltimore violated procurement law, the state’s contract appeals board has ruled, but it’s up to the Board of Public Works to decide if the contract stands.

Comptroller Peter Franchot, one of three members on the Board of Public Works, said in light of the appeals board’s ruling the spending panel needs to reconsider MIA’s office lease with Kornblatt Co. The comptroller said it would be “highly irregular,” and that he’d be “shocked” if the board does not reconsider the lease.

“It’s the right thing to do, period,” Franchot said.

When the Board of Public Works considered the contract on Jan. 8 Franchot was the lone vote against awarding the sole-source 10-year lease priced at $1.68 million annually to Kornblatt Co.

At the time he argued against awarding the contract until after the Maryland Board of Contract Appeals ruled on objections to the lease filed by Montgomery Park, which had earlier appeared to be the winner in a bidding process.

The spending board’s other two members, Gov. Larry Hogan and Treasurer Nancy Kopp, voted in favor of the lease. Hogan and Kopp said they were concerned Kornblatt could lose control of the building if they didn’t approve the lease because other state agencies at St. Paul Plaza may end up “homeless.”

A spokesman for Hogan said the Department of General Services will review the ruling and confer with the Office of the Attorney General on next steps. Kopp’s office did not immediately respond to a request for comment on Monday afternoon.

Maryland’s Board of Contract Appeals, in a decision issued Friday, found the state wrongfully nixed a competitive bid process that initially awarded MIA’s lease to Montgomery Park, a renovated Montgomery Ward complex in Pigtown.

After dumping the bid process the Department of General Services negotiated a contract with Kornblatt Co., the agency’s current landlord, to keep MIA at St. Paul Plaza.

“We do not make decisions in a vacuum, and we cannot ignore the unreasonable, arbitrary, and capricious determination by the (procurement officer) to cancel the solicitation in the prior competitive procurement that would likely have resulted in award of the MIA lease to (Montgomery Park),” according to the board’s decision.

Montgomery Park LLC, which is owned by developers Sam Himmelrich and David Tufaro, contends the contract appeals board’s opinion means MIA’s lease reverts back to their south Baltimore development. Himmelrich said in a statement on Sunday Montgomery Park is the best place for MIA to operate, and that the move will save Maryland taxpayers millions of dollars.

“We were selected fair and square under the procurement, and the Board of Contract Appeals has now ruled twice that the state violated procurement law in awarding a sole source lease to St. Paul Plaza. The BPW should void the sole source lease at St. Paul Plaza and relocate to MIA to Montgomery Park,” Sam Himmelrich said.

In a footnote in the contract board’s opinion, however, the panelists leave the fate of the contract between Kornblatt Co. and MIA up to the Board of Public Works.

“The extent to which the issue may now be moot or whether there is an effective remedy is the province of BPW to determine, not this Board,” according to the contract board’s decision.

Kornblatt Co. President and CEO Tim Polanowski declined to comment for this story.

If the board decides not to review the contract with Kornblatt Co., Franchot said, it hurts Maryland’s reputation with businesses in the state. It sends a negative message to businesses, he said, when the Department of General Services puts a property owner through a competitive bid process, calls that property owner to tell them they’ve been selected to receive a contract and then reverses that decision without good reason.

“It was a clearly wrong to go ahead and award a 10-year contract to a losing bidder with no real justification,” Franchot said.

The contentious battle over whether MIA should remain downtown has lasted for nearly two years. Officials with the state Department of General Services in the spring of 2018 officially informed Kornblatt Co. they intended to move MIA from the building.

MIA has roughly 250 employees who work at St. Paul Plaza and leases 68,771 square feet of the building’s 260,000 square feet of rentable space. Trustees of developer David Kornblatt tried to sell the 28-story Class A building in 2017, but the property was pulled off the market when the landlord couldn’t secure an extension of MIA’s lease.

News that MIA would be departing downtown for Montgomery Park, however, sparked a concerted effort by groups such as the Downtown Partnership of Baltimore, downtown businesses and commercial real estate brokers to keep the agency in the neighborhood.

After MIA employees threatened to quit over the move, and the insurance companies that fund the administration balked at paying to relocate to Montgomery Park, Secretary Al Redmer said, MIA reconsidered moving.

In April 2019 MIA announced its intention to stay at St. Paul Plaza, but Kornblatt Co. and the agency were unable to work out a deal. Then on Jan. 8 Kornblatt Co. went before the Board of Public Works and said it needed a lease approved or its lenders would force the landlord to start charging MIA double rent.

https://thedailyrecord.com/2020/03/02/maryland-insurance-administration-lease/

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