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Appeals Board Seeks to Overturn BPW Vote on State Lease

The Maryland State Board of Contract Appeals ruled late Friday that the state was in error and violated procurement law when it awarded a sole-source contract to keep the Maryland Insurance Administration (MIA) at its current location in downtown Baltimore.

The fate of MIA’s lease was the subject of a heated hearing in the Board of Public Works early this year. Gov. Lawrence J. Hogan Jr. (R), a veteran of the real estate industry, called the state’s handling of where to house the insurance administration “the worst way to handle a procurement and a lease negotiation since I’ve been governor.”

At that meeting, the board voted 2-1 to approve a proposed 10-year lease to keep the MIA at its current headquarters at St. Paul Plaza, an office tower in downtown Baltimore. Hogan, despite his reservations, and state Treasurer Nancy K. Kopp (D) voted to award the contract as state procurement officials recommended. Comptroller Peter V.R. Franchot (D) roundly criticized the recommendation and voted against it.

That vote superseded a BPW vote in 2018 to move the insurance agency to Montgomery Park, an old Montgomery Ward warehouse south of downtown.

Executives at Himmelrich Associates, which owns Montgomery Park, have said the state would save close to $8.5 million over the 10-year life of the lease. But some state officials began having second thoughts about relocating the 300-employee agency to a different office complex.

So the state terminated the procurement contract with Montgomery Park and fashioned another 10-year lease with Kornblatt Co., which owns St. Paul Plaza, to keep the agency downtown — without going through the bidding process again. Himmelrich filed objections with the state Board of Contract Appeals.

The contract appeals board decision Friday upholds Himmelrich’s appeal. In its written decision, the board said the state procurement officer’s “failure to document the reasons for her determination that it was in the State’s best interest to sole-source the Renewal Lease for St. Paul Place to Kornblatt, rather than award a new lease to Appellant or conduct a competitive procurement for a new lease after the wrongful cancellation of the prior competitive procurement, violated the Procurement Law.”

The appeals board also suggested the state’s action was unfair to the owners of Montgomery Park.

“Absent a written determination that describes the reasons why a procurement officer believes it is in the State’s
best interest to renew an existing lease rather than conduct a competitive procurement for a new lease, a disappointed offeror is unable to evaluate whether that determination is unreasonable, arbitrary, capricious, or unlawful.”

The board decision was written by Judge Bethamy N. Beam, the panel’s chairwoman. Judge Michael J. Stewart concurred. A third judge, Lawrence F. Kreis Jr., dissented, saying Montgomery Park didn’t file a timely appeal and had not exhausted all of its administrative options before seeking this decision.

It is now apparently up to the Board of Public Works to revisit the lease.

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Appeals Board Seeks to Overturn BPW Vote on State Lease