The Department of Housing and Urban Development will resume negotiations shortly with the National Flood Insurers' Association, while it continues to evaluate three proposals it received from two bidders on a new federal flood program.
NFIA, which has operated the program for about 1.2 million policyholders for 8 years, said yesterday that it's accepting HUD's invitation to reopen talks on a new contract. NFIA's current contract expired yesterday, but under a congressional extension of the program, it will operate the plan through Dec. 30.
At a meeting with HUD general counsel Ruth Prokop Thursday, NFIA said HUD made a counter proposal to one made by NFIA earlier this month. Both proposals are aimed at resolving the single remaining issue - budget control - over which contract talks broke down between the parties in August.
NFIA, which is a consortium of 132 insurance companies, operates the program under a contract with HUD but has $48 million of reserve capital at risk.
Under new regulations proposed this spring by HUD, NFIA's budget, on a line-by-line basis, would be controlled by HUD and the agency would have prior veto power over its expenditures. NFIA balked at this demand on the basis that they handled disaster-area claims and could be forced to make emergency expenditures not set out in a strictly controlled itemized budget.
When the parties reached an impasse on this issue in their bargaining talks. NFIA terminated its contract with HUD, but the negotiations continued until late August. At that point. HUD asked for bids for a fiscal agent to run the flood program.
NFIA's general manager Samuel Weese said in a statement issued yesterday, his organization is "heartened by HUD's willingness to resume discussions. He added by HUD's willingness to resume discussions." He added that he is "optimistic that the exchange of proposals provides a basis for reaching full agreement on a new contract."
NFIA's counsel Frank Nutte, cautioned, however, that HUD is continuing to evaluate other proposals it received during a bidding period which ended Sept. 23. "Even if we resolve the budget issue," he said, "that doesn't guarantee that HUD is going to sign a contract with us."
Considerable congressional pressure has been brought against HUD to force a resolution of the dispute with NFIA because of the considerable costs and administrative work that would result if a new agent was brought in to operate the flood program.
The chairmen and ranking members of two House subcommittees wrote to HUD Secretary Patricia Roberts Harris urging that negotiations be resumed, he letters followed hearings in early September into the flood insurance program by the House Banking Subcommittee on Housing.
Reps. Thomas L. Ashley (D-Ohio) and Garry Brown (R-Mich.), the chairman and ranking member, respectively, of that panel, held private meetings with HUD attoneys over the issue and sent the first letter. Later, Reps Edward P. Boland (D-Mass.) and Lawrence Couglin (R-Pa.), the chairman and ranking member, respectively, of the HUD subcommittee, joined in.
Acting Federal Insurance Administrator Robert Hunter Jr. and HUD procurement officials involved in the bidding for a new agent declined to release the details of the bids.
Sources close to the program, however, said Bradford National Corp., of New York, which had been involved in NFIA's administration of the insurance program, offered one proposal, while EDS Federal Corp. presented two bids. EDS, a Dallas company, is headed by Ross Perot.
There is no deadline on the evaluations of the bids, HUD procurement officials said.
HUD signed a tentative contract with EDS on Sept. 23 to begin the administrative and computer work necessary during the transition period to shift the program from NFIA to another fiscal agent. The letter authorized EDS expenditures of $35,000 pending the signing of a formal transition period to shift the program from NFIA to another fiscal agent. The letter authorized EDS expenditures of $35,000 pending the singing of a formal transition contract with EDS. The formal contract would authorize up to $660,000 of expenditures through Dec. 30, according to mincrity counsel to the housing subcommittee, Anthony Valanzano.