The controversy over the nation's flood insurance program, which appeared settled last week following a decision issued by Housing and Urban Development Secretary Patricia Roberta Harris, is not over yet.
Aides to several House and Senate members on Friday charged HUD with misrepresenting the cost of the contract it intends to sign next month with EDS Federal Corp. of Dallas. The department said the cost was $15 million less than the bid by the current program operator, the National Flood Insurers' Assa. of Committee.
But, one House Banking Committee staff member said, "if you evaluate the bids by the two firms side by side, there are significant questions raised that the Secretarys justification report to Congress dissued Wednesday, does not answer."
The national flood insurance program has provided federally-backed insurance for 1.2 million policyholders in flood plain areas, primarily in the Midwest, since 1963. Since that time, the program has been operated by a consortium of 132 insurance companies, NFIA, which administers the program and writes policies. The consortium also has $48 million of capital at risk in the program.
Under the proposal offered by FDS, HUD would assume all underwriting risks, while EDS would be a fiscal agent charged only with administering the program.
Among the unexplained discrepancies between the two contracts cited by Hill sources are:
NFIA's provision for more than $3.5 million in state premium taxes that have been paid annually since the inception of the program, while EDS' proposal makes no provision for such taxes and assumes instead that Congress would exempt the premiums from state tax.
FNIA's provision for $1 million for flood plain maps against EDS' $440,720. A Hill source who questioned the difference since both companies would use the same map distributor, said he was told by the distributor that NFIA intended to buy twice as many maps as EDS. "HUD supposedly checked both budgets line by line," he said, "Don't you think they would have found out how many maps are needed and agreed on the number? If they had, the figure would be the same for NFIA and EDS."
NFIA made provision for $6.9 million for servicing carries and $1.35 million for claims adjusting, based on historical costs, while EDS made no provision in these areas. A Hill source noted that under the proposed contract, these costs are to be competitively bid. HUD officials testified during hearings before the House Banking Subcommittee on Housing in September that competitive bidding would cut cost. The NFIA proposal was not modified to show the lower costs under such a system and the EDS proposal did not make any provision for the costs with competitive bidding.
Severals members of Congress indicated Friday that they will erite to Secretary Harris, requesting a delay in the signing of a contract with EDS, which is owned by Texas multi-millionaire H. Ross Perot, until the General Accounting Office undertakes a complete audit and review of the two proposals.
Spokesmen for Reps. Garry Brown (R. Mich.) and Lawrence Coughlin (R-Mass.) said the congressmen doubted that a $15 million annual difference existed between the two proposals and would like to verify the figures before contract is signed.
Ruth Prokop, HUD's general counsel said HUD "would welcome a GAO audit" of the figures, but that such a study would not require any delay in the signing of the contract.
"I think I speak for the Secretary when I say that a letter from individual members of Congress at this time would not be sufficient to delay the contract," she said.
"The Secretary has made her decision as mandated by the statue and now it is up to Congress by resolution to either approve or disapprove of the decision."
The Congress has 30 days to review the Secretary's report on the flood insurance program. If her decision is approved, a contract with EDS may be signed after Dec. 2, a HUD source said.