It might seem unlikely that a $1.45 error could cause a $1.37 million difference in government spending. However, according to software company Mitchell International and documents from the Comptroller General’s Office and the National Insurance Institute (INS), that appears to be exactly what happened when the company competed for a contract to provide INS with collision insurance software.
The institute disqualified Mitchell’s bid to continue providing the software, as it had since 1999, because the company’s participation guarantee payment was $1.45 short. As a result of the disqualification, the only other company that presented a bid, California-based Audatex, won the contract – for a price twice that of Mitchell’s, to the tune of hundreds of thousands of extra dollars per year.
“Audatex’s offer was twice as expensive as ours, for the same contract,” said Mitchell Regional Manager Jacqueline Monacell told The Tico Times, adding that by switching companies, INS will also have to retrain its employees on new software. “I think it’s important that the facts are out there. It’s really going to be very expensive for INS and the country to make the change.”
However, Audatex and INS representatives told The Tico Times this week the new service is more complete and a better fit for the institute’s needs.
Mitchell International, represented in Central America by Car-Doc S.A., provided INS with Mitchell GlobeEST software that allows the institute to estimate vehicle damage since 1999, when the company won a five-year contract. In 2005, when the contract expired, the company, along with Audatex, presented another bid, according to Monacell.
“It (wasn’t) a flawless implementation, but (INS has) improved a lot of processes in their claims department, improved relationships with body shops,” she said. “Overall, we’ve built a very good relationship with the automotive department and with claims.” In an email to The Tico Times, she added that the software also helped INS reduce insurance fraud.
When calculating the new bid, however, Monacell said she made an error in Microsoft Excel, placing a decimal point in the wrong place. Because of the error, her calculation of the guarantee payment required as part of the bidding process, equal to 1% of the total yearly cost outlined in the bid ($275,958.64) was off by $1.45 ($2,758.13 instead of $2,759.58).
When she visited INS to check on the documents Dec. 1, about two weeks after filing, she discovered the bid had been disqualified because of the error.
The company filed an appeal, and then a complaint, before the Comptroller General’s Office, which oversees all public contracts in Costa Rica. Both were rejected. The Feb. 8 response to the appeal by Carlos Arguedas, manager of the Comptroller’s Administrative Contract Division – Monacell provided The Tico Times with a copy of the document – informed Mitchell that the missing $1.45 constituted “an insoluble flaw” and provided INS with “sufficient motive for the disqualification of the bid.”
The decision said Costa Rica’s Administrative Contract Law backs up the Insurance Institute’s action.
“It is viable to conclude that the Administration (INS) has done well,” the document continues. “The appealing party would not have any possibility of being re-judged in this bidding process, and therefore lacks due legitimacy to file this (appeal).”
The March 16 response to the company’s complaint before the Comptroller’s Operative and Evaluative Prosecution Division indicated that the complaint “exceeds…the constitutional competence assigned to this office,” and said the division had forwarded the complaint to INS’ Internal Auditing Department for that department’s records.
Audatex’s bid, as outlined in an INS document dated Dec. 7, 2005 and including a price analysis signed by INS information director Miguel Porras, costs $550,800 annually, $274,841.36 more per year than Mitchell’s offer. Part of the cost comes from Audatex’s charges for its Oracle database and the company’s servers, according to the price analysis.
“In general, INS was saving a lot of money” using Mitchell’s software, Monacell said. “In many regards, this is starting all over because this new program doesn’t use the same methodology. You can’t just plug in the information that was used with our program…They’ll have to do some adjustments there as well.”
INS President Guillermo Constenla, who took office in May after the entire contract process had been finalized, told The Tico Times he’d been struck by the difference in price between the two contracts and the weight given to the $1.45 error. He sought out INS employees familiar with Mitchell’s and Audatex’s services and was told the latter company’s offerings were superior. Audatex provides an integrated Web solution, whereas Mitchell’s software had to be installed at each site, he said.
Javier Velasco, who spoke to The Tico Times from Audatex’s offices in Mexico, agreed, saying his company’s services will improve INS’ productivity and competitive edge, while also fighting insurance fraud.
However, the Comptroller documents make no mention of these differences, focusing only on Mitchell’s insufficient guarantee payment. Monacell said the company was never given such rationale for the decision, and that the bid was disqualified before a comparative evaluation could take place.
“There was nothing about why they wouldn’t contract us because of any problems with our service or product,” she said.
“It was all very technical: you (Mitchell) didn’t dot your i’s or cross your t’s.” Constenla said that though Audatex appears to be a better fit for INS, disqualifying a contract for a small miscalculation doesn’t seem reasonable.
“If you’re asking me whether I would have rejected a bid for a $1.45 difference on the guarantee, I would say no,” he said.
