Some members of the Jefferson Parish Council say the parish should scrap a recent slate of proposals to manage its almost $1 billion portfolio of financial assets because the solicitation didn't make clear the value of the assets, creating an uneven playing field for those vying for the job.
The council went into its meeting last week with a slate of four firms whose qualifications had been scored by a parish evaluation committee, but after questions were raised about the process, the council opted to defer action until its Aug. 23 meeting.
Sisung Investment Management Service, which has had the contract for the better part of a decade, led the pack with a perfect score of 300 — 100 points from each committee member.
But Gary Welchel, executive vice president of Orleans Capital Management, the firm that finished second with 284 points, alleged the process wasn't fair, telling the council that his firm wasn't given the proper amount of the portfolio, which likely have resulted in a more competitive bid.
Sisung Investment’s proposed fee for the job amounts to $544,700 per year, $900 less than the $545,600 figure submitted by Orleans Capital. The proposed fee is not binding and only a starting point for negotiations, but it counted for a quarter of how the proposals were scored by the committee.
Another 35 percent of the overall score was based on familiarity with Jefferson Parish’s portfolio and investment goals, something Welchel said tilts the playing field in favor of the current contract holder.
“We have some serious concerns about the criteria,” Welchel told council members. “Any well-qualified, experienced, SEC-registered investment manager should easily be able to adhere to applicable parish and state guidelines.”
Welchel said one of the three members of the committee told him in conversation that he felt the familiarity criterion could deter qualified firms from competing for the account.
“And in fact you only had four people bid on almost a billion-dollar account,” he said.
Sisung and Orleans Capital were followed by Vaughan Nelson Investment Management at 251 points and Morgan Stanley Smith Barney at 180 points. Those two firms each proposed charging $694,400.
The contract is for professional services, meaning the council does not have to select the bidder with the best price or the firm that its evaluation committee gave the best score. Rather, it can select whichever firm it deems the most qualified.
The Jefferson Parish Council is expected on Wednesday to award a financial services contract…
Three council members joined the criticism Wednesday, saying the council should consider readvertising the contract.
Councilman Paul Johnston said two of the four bidders thought the value of the portfolio they were bidding on was about $750 million. Had they known it was worth $992 million, “they may have done of better job of bringing in … a lower bid,” he said.
Finance Director Tim Palmatier told Johnston that only one of the companies, Vaughan Nelson, asked in writing what the amount was. It was told $890 million.
Welchel said that when he called the Finance Department and asked, he was told he was bidding on $750 million. “I did not know the amount of the actual portfolio until it was identified by the finance director at the scoring meeting,” he said.
Council Chairman Chris Roberts asked whom Welchel spoke to, and Welchel said he did not know. He said he called the office, identified himself, asked the question and was given a figure.
“I can assure you had we known that it was higher, our bid would have been different,” Welchel said, noting this would probably be true of the other bidders.
“So you’re saying that somebody that bid knew what the amount was, and you didn’t know what the amount was, so you couldn’t accurately bid?” Councilman Jack Rizzuto asked. Welchel said that was correct.
Larry Sisung, of Sisung Investment, took issue with complaints about the process, as well as a number of points Welchel made about the growth of the portfolio and Sisung Investment’s shift in emphasis to municipal bonds while in charge of it.
“He raises several complaints, but they’re all wrong,” he said. “I don’t know what his problem is, but they’re wrong.”
Sisung said any of the firms could have ascertained the amount of the portfolio by examining records available to the public.
Rizzuto asked Palmatier if there was a reason the value of the contract was not on the advertisement for the work. Palmatier said that hasn’t been done in the past but “we can certainly add it in the future.”
Councilwoman Jennifer Van Vrancken also questioned how the process could be fair with three separate values for the portfolio floating around. “I don’t know how they can possibly fairly give the parish a response when they’re not working with the same figures,” she said.
Roberts asked Welchel if he ever raised the same issue about the East Jefferson and West Jefferson hospital districts' asset portfolios, which are managed by Orleans Capital.
“I asked how much money it was and was told,” Welchel replied.
Palmatier, one of the committee members who gave Sisung a perfect score, noted that the council doesn’t have to select the highest-scoring firm or the one proposing the lowest fee. “I don’t know that it’s grounds for disqualification,” he said of the confusion over the portfolio's value.
Rizzuto said he thinks the process should change. “We need to eliminate that problem from here on out,” he said.
Roberts said he doesn’t disagree but that he would move to readvertise the East Jefferson and West Jefferson contracts as well.
Rizzuto noted that would impact existing contracts, but Roberts replied that the parish has the right to terminate the contracts with 30 days' notice.
“The only hesitation I would have is that it wasn’t raised at that point that any different figures were given out,” Van Vrancken said.
“If we’re going to make that part of the requirement, then I think we’re going to need to look at it across the board,” Roberts said.
Sisung's current contract expires at the end of the year.