HomeMy WebLinkAbout02/18/1992, C-11 - USE OF PRIVATE SECTOR CONTRACTS MEETING DATE:
�llu►�►�►ii►�IIIIIIIIII�� �II�Ii� city O f san WIS OBISPO 2-,p-9Z
COUNCIL AGENDA REPORT ITEM NUMBER I '
FROM: John Dunn, City Administrative Officer
Prepared by: William C. Statler, Director of Financd.4,2S__
SUBJECT: USE OF PRIVATE SECTOR CONTRACTS
CAO RECOMMENDATION
Receive and file this report on the use of private sector contracts in delivering City services.
OVERVIEW
At the January 7, 1992 Council meeting, the Mayor requested staff to prepare a report on
the City's use of private sector contractors, including consultants, in delivering municipal
services. Implicit in subsequent articles and editorials in the press is the apparent belief
that the use of contracts with the private sector is undesirable and should be avoided.
Actually, using the private sector to deliver City services has been formally adopted by the
Council as a key strategy in reducing costs and increasing productivity. The use of this
strategy is clearly stated in the 1991-93 Financial Plan in both our Productivity and
Contracting for Services policies (Attachment A). As such, in implementing this cost
containment approach, our use of private sector resources in delivering City services is likely
to increase - not decrease - over time.
With regard to private sector contracts for consultant services, this report shows that the
vast majority of these services have been related to designing capital projects and the
General Plan update. The use of consultants for such services is necessary and consistent
with the practices of both private and public sector organizations. Other consultant
contracts are few, and were recommended and approved based solely on factors related to
expertise, independence, timeliness, cost-effectiveness, or other special circumstances. i
DISCUSSION
Why use the private sector?
As discussed in the Contracting for Services policy, there are a variety of reasons to contract
with the private sector in delivering City services, including:
■ Legal Requirements. There are several circumstances where contracting with the
private sector is legally required. ' For example, under the City's Charter and state
law, construction projects costing in excess of $5,000 must be let by contract to
private contractors. Because of this requirement alone, 24% ($21.7 million) of the
City's planned expenditures for 1991-93 will be performed by the private sector.
■ Independence. Although staff resources may be available, sometimes an independent,
third-party viewpoint is desirable. For example, the City's Charter requires an annual
audit by an independent accountant. Why? Because an independent audit report
provides the kind of credibility necessary to assure our citizens that we have been
faithful stewards of the public resources that have been entrusted to us. There are
similar circumstances where independence is a critical aspect in achieving work
product goals and objectives such as EIR's and organizational audits. 1 /H
CITY of San Luis OBISPO
COUNCIL AGENDA REPORT
■ Expertise. It is not realistic nor cost-effective to expect that the City should retain
on staff all of the technical resources required to deliver City services. The City is
primarily staffed to provide day-to-day services: for example, fire suppression and
medical emergency response in the Fire Department, patrol services in the Police
Department; water treatment and distribution in Utilities; adult softball, kids
basketball, childcare, classes, and swimming in Recreation; and paying invoices,
issuing paychecks, and processing utility bills in Finance. To ensure cost-effective
delivery of services, very few resources are allocated - by design - to handle peaks
in workload for specialized skills. Why? Because in many cases, the kind of
expertise we need is not constant; it varies from year-to-year depending upon the
kinds of programs and projects being undertaken by the City. For example, we don't
have a predictable, constant, or ongoing need for civic center architects, wastewater
treatment plant design engineers, water rights legal services, parks master planning,
or cable franchise negotiations. Accordingly, when we do need these types of
specialized skills, it is much more cost-effective to contract temporarily with the j
private sector to provide them than to retain this type of expertise on staff.
■ Timeliness. Even if legal requirements, independence, or expertise are not issues,
contracting with the private sector may be the preferred approach due to time
constraints - more specialized resources may be required to accomplish a project in
a shorter timeframe than would be possible by using City staff resources.
■ Workload. Peaks and valleys can occur in delivering services that we may normally
provide using in-house staff resources. When these situations occur, using private
sector contracts can be a more effective way to accommodate workload increases
than adding to our staff. The use of contract plan check services is a recent example: i
during the 1987-89 Financial Plan, over $200,000 was allocated for contract plan
check services in our building & safety program; no contract resources are allocated
for this service at all in 1991-93. Through the use of private sector contracts, we
were able to accommodate a significant increase in plan check activity during the late
1980's without adding staff.
■ Cost-Effectiveness. As discussed in the Financial Plan policy "Contracting for
Services", use of private sector resources in delivering operation and maintenance
services provides the City with a significant cost reduction opportunity. The City has
extensively used this approach in the past, and will be even more active in using this
approach in the future. Current examples of contracting with the private sector to
deliver day-to-day services include:
Transit operations and maintenance Coin counting
Janitorial services Parking citation processing
Landscape maintenance Data processing services
Recreation classes Water meter repair
Employment physical examinations Street maintenance
Vehicle maintenance Downtown sidewalk cleaning
Printing Promotional, cultural, and social
Laboratory analysis services
Parking meter collections Ordinance codification
Il�h��i�H►�illllllll��' jl�Ill city of San WIS OBISp0
COUNCIL AGENDA REPORT
How much do we spend on private sector contracts?
Operating Programs. The use of contract services is identified for each of the City's 66
operating programs on pages D-15 through D-116 of the 1991-93 Financial Plan; any
significant changes in the City's use of contract services are also highlighted in each of these
program narratives. To supplement this information, a detailed listing of the use of contract
services for each operating program is provided in Attachment B. As summarized in this
listing, 12.9% ($3.8 million) of the City's $29.5 million operating budget for 1991-92 will be
spent on contract services. (It should be noted that not all of these contracts are with the
private sector; some of them are with other governmental agencies - such as $175,000
annually for booking fees and $68,000 annually for animal regulation to the County). As
noted above, this percentage of our operating expenditures allocated for contract services
will increase over time if we are successful in our strategy to use the private sector even
more in delivering City services.
Capital Improvement Plan. On the capital side ($24.3 million in CIP expenditures for
1991-93), all funds will be spent through the private sector for study, design, acquisition,
or construction as summarized below:
1991-92 1992-93 Total Percent
Study $ 270,000 $ 45,000 $ 315,000 1.3%
Design 65,000 65,000 0.3
Acquisition 1,126,300 1,061,600 2,187,900 9.0
Construction 10.117,200 11.616,000 21.733.200 89.4
TOTAL $11,578,500 $12,722,600 $24,301,100 100.0%
As detailed on pages E-6 through E-10 of the 1991-93 Financial Plan, study and design costs
(which account for only 1.6% of CIP expenditures and only 0.4% of total City expenditures
over the two year Financial Plan period) have been designated for the following purposes:
■ Design heating, ventilation and air-conditioning (HVAC)
improvements at the Police Station $ 20,000
■ Prepare environmental impact report (EIR) for the
Salinas Reservoir expansion 200,000
■ Prepare EIR for Laguna Lake dredging 40,000
■ Design seismic safety corrections for City facilities 45,000
■ Analyze telecommunication needs and recommend improvements
(Note: these funds were used to implement the conversion
to Centrex rather than preparing a plan.) 30,000
■ Prepare a long-range plan for our information system needs 45,000
0 / 1 -3
II�N�r�III�111111111I�I �IIIIIII city of san Luis osispo
I...F.-i-iN COUNCIL AGENDA REPORT
What about consultant services?
Even though the Mayor's request was to prepare a report on our overall use of contract
services, there was a special interest in our use of consultants. Under our financial
management policies, all professional service contracts in excess of$10,000 require Council
approval, and all contracts less than $10,000 require CAO approval. In either case, funding
for consultant services is subject to Council approval in the Financial Plan and Budget.
The detailed listing provided in Attachment B includes consultant services. To further
augment this detailed listing, provided in Exhibit C is a listing of all consultant service
contracts approved by the Council and CAO during 1991. As reflected in this listing, each
of these contracts meets the criteria for using contracts as discussed above, and more
specifically, enables the City to accomplish high-priority goals and objectives as approved
by the Council.
In total, these services - including those for the design and construction of major facilities
such as the $319,500 contract to Brown Caldwell related to the City's wastewater treatment
plant project - account for only 2% of the City's total budget for 1991-92. Excluding
contracts related to capital projects, these services account for less than 1% of the City's
1991-92 budget, and most of these remaining services are related to the General Plan
update as summarized below:
Council CAO Percent of
Approved Approved Total City Budget
Capital Project Services
Wastewater Projects 457,100 - 4579100 . 1.0%
Water Projects 100,900 15,300 116,200 0.3
Seismic Improvements 46,100 5,600 51,700 0.1
Other Projects 8,200 11,200 19,400 -
General Plan Update 160,600. 7,000 167,000 0.4
Other Services
Organizational Analysis 28,900 - 28,900 0.1
Planning/EIR Services 349400 - 341400 0.1
Student Housing Study 37,000 37,000 0.1
Legal Services - 20,000 20,000 -
Other Services - 26,000 26,000 0.1
2.2%
It should be noted that due to our current concern with reducing expenditures in
preparation for the mid-year budget review, the CAO has directed that all requests for
consultant services must fully address why the workscope is a high priority, what critical
service the consultant will perform, and why the City staff cannot or should not perform the
service.
i�u���ri►►i�illlll►ll�° ►IUIII MY Of San WIS OBISVO
COUNCIL AGENDA REPORT
SUMMARY
The City uses contract services for a variety of purposes - to meet legal requirements, get
an independent viewpoint, receive technical assistance, and meet deadlines - but our overall
objective is to deliver important services to our community in the most cost-effective way.
Maximizing our use of the private sector is one of the key tools available to us in achieving
this objective. Not only does it establish a competitive process for pricing City services, but
it allows us to maintain a smaller workforce for day-to-day operations than would otherwise
be the case.
In summary, contracting out for services is part of the "privatization" concept that has
dominated the professional literature for years. It is a goal pursued by many public
agencies, though less successfully than in San"Luis Obispo. With respect to consultant
services, while the word "consultant" carries a certain stigma associated with it, the use of
such services in our City has been neither "epidemic" (as characterized by the local media)
nor without merit. Staff recommends that the Council judge the use of such services on a
case-by-case basis, taking into account not only the basic contractual cost, but also the cost
of not bringing the appropriate resources to bear on complex and high-priority programs
and projects.
ATTACHMENTS
A. Financial Plan Policy - Contracting for Services
B. Detail Listing of Contract Services by Operating Program
C. Consultant Service Contracts Approved During 1991
1. By the Council
2. By the City Administrative Officer
AGR\2CNTRCTPR.WP2
POLICIES AND OBJEC, i IVES Attachment
GENERAL BUDGET POLICIES (continued)
CONTRACTING FOR SERVICES
A. General Policy Guidelines
1. Contracting with the private sector for the delivery of services provides the City with a
significant opportunity for cost containment and productivity enhancements. As such,the
City is committed to using private sector resources in delivering municipal services as a
key element in our continuing efforts to provide cost-effective programs.
2. Private sector contracting approaches under this policy include construction projects,
professional services, outside employment agencies, and ongoing operating and
maintenance services.
3. In evaluating the costs of private sector contracts compared with in-house performance
of the service, indirect, direct, and contract administration costs of the Citywill be
identified and considered.
4. Whenever private sector providers are available and can meet established service levels,
they will be seriously considered as viable service delivery alternatives using the
evaluation criteria outlined below.
5. For programs and activities currently provided by City employees, conversions to contract
services will generally be made through attrition, reassignment, or absorption by the
contractor.
B. Evaluation Criteria
Within the general policy guidelines stated above, the cost-effectiveness of contract services
in meeting established service levels will be determined on a case-by-case basis using the
following criteria:
1. Is a sufficient private sector market available to deliver this service?
2. Can the contract be effectively and efficiently administered?
3. What are the consequences if the contractor fails to perform, and can the contract
reasonably be written to compensate the City for any such damages?
4. Can a private sector contractor better respond to expansions, contractions, or special
requirements of the service?
5. Can the work scope be sufficiently defined to ensure that competing proposals can be
fairly and fully evaluated, as well as the contractor's performance after bid award?
6. Does the use of contract services provide us with an opportunity to redefine service
levels?
7. Will the contract limit out ability to deliver emergency or other high priority services?
8. Overall, can the City successfully delegate the performance of the service but still retain
accountability and responsibility for its delivery?
B-16 ^ �/
Attachment
OPERATING PROGRAM CONTRACT SERVICES
1991 - 1992 APPROVED BUDGET
EXECUTIVE SUMMARY
PUBLIC SAFETY $ 389,100
PUBLIC UTILITIES 700,900
TRANSPORTATION 1,123,900
LEISURE, CULTURAL & SOCIAL SERVICES 542,900
COMMUNITY DEVELOPMENT 709,100
GENERAL GOVERNMENT 393.100
TOTAL CONTRACT SERVICES $3,859,000
PUBLIC SAFETY
PROGRAM PAGE # $ AMOUNT
Police Administration D-15 280,800
County Booking Fees (SB2557) 175,000
County Animal Control 68,000
County Bomb Task Force 4,500
Western Alarm Tracking 2,000
Hepatitis Vaccinations 11200
Temporary Employment Agencies 1,000
Other Contract Services 29,100
Police Operations D-17 22,900
City Share - Narcotic Task Force 9,600
Vehicle Tow Contract 2,000
Investigation/Polygraph Exams 2,000
Lab Fees - Investigations 5,200
Other Professional Services 41100
Fire Administration D-19 235700
Planning & Research 5 Year Plan 10,000
Personnel Services 1,000
Laundry & Linen Services 7,000
Equipment Maintenance 1,900
Misc. Contract Services 3,800
Fire Emergency Response D-20 63000
EMSA Contribution 4,500
Medic Continuing Education 1,500
Hazard Prevention D-21 45300
Fire Prevention Week 3,000
Misc. Contract Services 1,300
Fire Training D-23 113600
Medical Services 6,300
Other Equipment Maintenance 2,300
Lecture and Lab Fees 2,100
Misc. Contract Services 900
Technical Services D-25 29,600
Major Equipment Repairs 9,300
Minor Maintenance & Equipment Repairs 9,200
Special Equipment Installation 2,500
Computer/Network Maintenance 8,000
Misc. Contract Services 600
PUBLIC SAFETY (continued)
PAOGRAM PAGE # $',AMOUNT
Disaster Preparedness D=26 1-01200
Planning and Research 1.0;000
Mutual Aid Agreement 200
Total Public Safety $389,100
PUBLIC UTILITIES
PROGRAM PAGE # $ AMOUNT
Groundwater Supply D-28 $45,000
Repair & Maintenance of Wells $45,000
Water Conservation D-29 $30,000
Public Relations Contract $10,000
Graphic Artist Svcs - Brochures, Ads $4,000
(Each change in consery level requires new literature)
Xeriscape Demonstration Garden $5,000
Drought Patrol Vehicles $1,200
Showerhead Retrofit Program $4,000
Best Management Practices - Prog Development $5,800
Water Treatment D-31 $44,000
Equipment Maintenance (Routine Equip Maint) $1,000
Laboratory Services (Water Samples/Analyses) $10,800
Building & Construction Contracts $2,500
Blacksmith & Machine Shop Contract (Pump Repair) $500
Contract Labor - Emergency repair at WTP $17,000
Laundry & Linen Svc (Uniforms) $2,200
Annual Permits, Garbage, Rentals $10,000
Power Generation D-32 $9,100
Maintenance of Hydropower Units $9,100
Water Distribution D-33 $80,500
Office Equipment Maint $500
Equipment Maintenance $2,000
Inspection Services (County Cross Connection) $10,000
Blacksmith & Machine Shop Contracts $1,000
Contract Labor $2,500
Laundry & Linen Svc (Uniforms) $2,000
Telemetry Upgrades $8,500
Spoils Removal $14,000
Trench Repair $25,000
Tank Cleaning & Painting $15,000
Water Customer Service D-35 $19,200
Meter Test, Repair & Calibration (Cmpound Mtr Prog/ $15,000
63 meters/on rotating basis, all tested in 4 yrs)
Office Equipment Maint - Utilicorders Maint $2,700
Laundry & Linen Svc (Uniforms) $1,500
PUBLIC UTILITIES
PROGRAM PAGE # $ AMOUNT
Water Administration & Engineering D-36 $2183200
Cloud Seeding Program $160,700
Legal Services on Water Rights Issues $30,000
Tipping Fees $15,000
Engineering Services (Downtown Fireflows, Wells) $12,500
Wastewater Collection D-37 $14,000
Laundry & Linen Svc (Uniforms) $2,000
Emergency pipe repair $5,000
Drinking Water $300
Pager maintence & repair $400
Septic pumper services $2,500
Repair & maintence $3,800
Wastewater Pretreatment D-37 $19,400
Laboratory Services:
Annual Priority Pollutants $5,000
Local Limits Development & Adjustment $5,000
Misc Compliance Investigations $5,000
Annual State Fee for Pretreatment Program $3,800
Laundry & Linen Svc (Uniforms) $600
Wastewater Treatment D-40 $132,900
Equipment Maintenance (electronic meter calibrations) $6,000
Laboratory Services (91/92 mandatory NPDES monitoring) $38,000
Development of air quality inventory & mgmt program for APCD $15,000
Minor repairs to WWTP structures, incl digesters, clarifiers $3,000
Blacksmith & Machine Shop (pump, motor repair) $3,200
Contract Labor (CMC crews, landscape maint, sludge dsposal) .$52,400
Laundry & Linen Svc (Uniforms, shop towels) $3,200
Other - Calibration & certification of metering equip, hazardous
waste disposal, soft-water service, fire extinguisher service,
laboratory equipment calibration & certification, gas detection
meter service and APCD, NPDES and laboratory permits) $8,200
Trash and Grit Removal $3,900
Wastewater Administration and Engineering D-42 $35,000
Engineering Services for Reclamation Program $10,000
Legal Services (Consent Decree compliance) $10,000
Tipping Fees $15,000
PUBLIC UTILITIES
PROGRAM PAGE # $ AMOUNT
Whale Rock Reservoir Operations D-44 $483100
Engineering (maintenance & operation of ponding area and wells related to $2,500
Cayucos Area Water rights)
Equipment Maintenance (electrical & mechanical repair of booster pumps,
hydrogenerator, regulating valves, etc) $7,000
Laboratory Services -Annual lab fees to meet.State Dept of Heath reqmnts $1,500
Building & Construction - minor electricl repair, access road repair, pond dredging $1,400
Contract Labor - CMC crews assist with general cleanup, heavy
maintenance, weed abatement, fence repair $2,500
Laundry & Linen Svc (Uniforms, shop towels) $1,300
Seismic Study - CA Div of Dam Safety reqmnt . $5,300
Fence replacement (ongoing program) $13,000
Cathodic protection $11,600
Other - includes Copy maintenance contract $2,000
Whale Rock Fishing D-46 $2,500
Drinking water for fishing facility visitors, fish enhancement $2,500
studies, access road maintenance, sanitation control
Solid Waste Management D-47 $33000
Total Public Utilities $700,900
c-11 -1
TRANSPORTATION
PROGRAM PAGE # $AMOUNT
Street/Pavement D-49 241,300
Cold Canyon Tipping Fees 60,000
Pavement Maintenance 162,000
Equipment Maintenance 5,800
Other Contract Services 13,500
Streets/General D-51 1153300
Sidewalk Repair Contracts 60,000
Other Contracted Maintenance 55,300
Signal and Street Lights D-53 283700
Contract Support for Signal Upgrade and Traffic Loop Repair 28,700
Flood Control D-54 113400
California Mens Colony Services 11,400
Parking D-55 235,700
Citation Processing 109,000
Coin Collection 51,500
Garage & Office Cleaning 35,000
Security Services 20,000
Alarm Services 2,500
Bond Trustee 5,000
Elevator Maintenance Contract 4,000
Uniform Service 3,700
Coin Counting by Bank 5,000
Transit D-57 4913500
Bus Operations and Maintenance 491,500
Total Transportation 11123,900
LEISURE, CULTURAL & SOCIAL SERVICES
PROGRAM PAGE # $ AMOUNT
General Recreation D-62 20,000
Services for monthly alarm maintenance and
operations several facilities, garbage -
service, and drinking water 20,000
Aquatics D-64 45200
Swim Club for Master's Swim Program 4,200
Special Instruction D-65 65,000
Fine Arts, Dance, Exercise, and Tennis Instruction 65,000
Sun and Fun D-70 1,700
Parks and Landscape D-71 102,300
Restroom Cleaning 18,000
Weed Control 15,000
Irrigation Consultant 10,000
Other Maintenance Contracts 59,300
Swim Center D-73 16,000
Trees D-74 125900
Golf Course D-76 43600
City/County Library D-77 12000
Cultural Activities D-78 102,300
LaFiesta Activities 15,000
Public Art Program 10,000
Other Grants-In-Aid 77,300
Human Relations D-79 2123900
Homeless Shelter Contract 120,000
Other Grants-In-Aid 92,900
Total Leisure, Cultural & Social Services 542,900
COMMUNITY DEVELOPMENT
PROGRAM PAGE # $ AMOUNT
Current/Advanced Planning and Enforcement D-83 365,300
EIR for Land Use, Circulation and Open Space Elements 145,000
Revise Existing Topographic Maps and Aerial Photographs 125,000
EIR for Broad Street Annexation 20,000
Planning and Financial Services for Open Space Element 35,000
Contract for Circulation Element Revision 10,000
Bicycle Coordinator 23,700
Other Contracted Services 6,600
Building and Safety D-86 16,600
Engineering D-88 63000
Business Improvement Area D-90 31500
Community Promotion D-92 221,700
Annual Advertising Contract 86,400
Chamber Visitor Center Contract 52,000
Chamber Promotion Contract 30,275
VCB Contract 50,925
Other Contracted Services 2,100
Economic Stability * D-93 96,000
Total Community Development 709,100
* As noted in the program narrative, specific activities are yet to be defined, and
expenditure of those funds requires Council approval on a case-by-case basis.
GENERAL GOVERNMENT
PROGRAM PAGE # $ AMOUNT
City Administration D-96 75,300
Consultant for Cable Negotiation Services 25,000
Management Analysis Services/Productivity Review 22,000
Community Newsletter and Printed Materials 26,600
Other Public Information Programs 1,700
Public Works Administration D-98 11000
City Attorney D-100 171100
City Clerk - Records D-101 4,800
Personnel Administration D-104 84,700
Pre-employment Physicals 13,200
Labor Negotiations 38,000
Grievance Hearings 7,000
Legal Support Services 12,200
City-wide Employee Training 10,000
Special Projects 2,000
Data Processing Services 2,300
Risk Management D-106 239100
Financial Administration D-108 121,000
Auditing Services, KPMG PEAT Marwick 35,900
IBM System Maintenance 18,800
FMIS Software Maintenance, BRC 48,800
Sales Tax Monitoring 5,000
MPI Microfilming 4,200
SB90 Service 1,000
Temporary Employment Services 4,000
File Storage 2,400
GFOA Awards Program 800
Other Contract Services 100
Buildings D-112 29,600
Energy Conservation Coordinator 29,600
Vehicle & Equipment Maintenance D-114 363500
Total General Government 393,100
Attachment(-�-
COUNCIL APPROVED CONSULTANT SERVICES (Over $10,000)
Calendar Year 1991
DATE VENDOR PURPOSE $ AMOUNT
01/15/91 Boyle Engineering Amendment #2 to agreement
pertaining to groundwater
program, Hansen/Gularte Creek
Water Rights & SLO Creek
assessment $ 30,000
02/07/91 J.R. Associates Geotechnical services for
investigation of additional
groundwater supply 26,325
02/19/91 Tenera Environmental EIR Hansen/Gularte Creek
Services Diversion 14,755
04/16/91 C.A.Singer & Assoc. Archaeological services during
Units 3 and 4, Wastewater
Treatment Plant Improvements 78,000
04/16/91 Jay Farbstein & Assoc. Amendment to Community/Senior
Center Agreement to include
supplemental work plan 8,175
05/21/91 Crawford, Multari & Continued support for
Starr downtown physical plan
design committee 12,500
05/21/91 Technical Analysis Corp. EIR-Stenner Canyon water
treatment plant 29,820
05/21/91 G.S. Dodson & Assoc Value engineering analysis,
unit #4, wastewater treatment
plant improvements 28,000
07/02/91 Mundie & Assoc. Economic information for Land.
Use Element 40,000
07/02/91 J.L. Wallace & Assoc EIR-Broad Street annexation 21,920
07/02/91 MPC & Assoc. Poly housing preference study
(City's 1/2 share of cost) 37,000
08/01/91 FGL, Inc. Wastewater treatment plant,
laboratory analysis 31,559
COUNCIL APPROVED CONSULTANT SERVICES (Over $10,000) continued
DATE VENDOR PURPOSE $ AMOUNT
08/06/91 Brown & Caldwell Eng. Follow-on engineering services for
implementation of the wastewater
management plan 319,500
08/20/91 Fugro-McLelland EIR-General plan land use element 85,000
09/03/91 Peter Dangermond Open space element workshop 10,000
09/03/91 Economic Research Assoc Financial analysis for open
space element 25,000
10/01/91 Howard Stup & Assoc. Design services - seismic safety 46,116
Improvements to City facilities
10/29/91 Hughes Heiss Organization and management review of
Community Development, Public Works,
and Recreation Departments 28,940
a:\council.con
AttachmenL�Z
CAO APPROVED CONSULTANT SERVICES (Under $10,000)
Calendar Year 1991
DATE VENDOR PURPOSE $ AMOUNT
01/18/91 Pacific Geoscience, Inc Soils engineering investigations
fire stations #2 & #4 5,600
02/05/91 Hatch and Parent Legal services for special water
rights and related issues 10,000
03/05/91 Black & Veatch Consultant services for water
system hydraulics review 9,500
03/25/91 David M. Griffith Consultant services for
traffic impact fees 9,780
05/02/91 Mundie & Assoc. Initial consultation for general
plan update economic studies 7,000
06/05/91 Converse Consultants Evaluation of instrumentation data
for Whale Rock Dam 5,870
07/23/91 Pacific Geoscience Consultant services for
two monitoring wells 5,467
10/02/91 Leibert, Cassidy & Frierson Legal services pertaining to Not to exceed
employment relations 10,000
10/11/91 Dill Commercial Properties Property management agent for
space in Marsh Street parking
structure 1,200
10/31/91 Woodward-Clyde Inc Consultant services for Salinas
Dam community relations program 9,455
12/03/91 Earth Systems Consultants Geotechnical services related
to Laguna Lake dredging project 6,250
12/12/91 H.J. Degenl:old Assoc. Consulting services for Palm Street
parking structure 5,000
a:\caocon.91
SIM BY: 2-11-91 2:21PM :ASSOCIATION HEaf 'S— 805 549 7109:= 2/ 8
MEETING AGENDA
DATE '1' 2- ITEM S
THE MERCER GROUP, INC.
1990 Pri va tiza tion Survey
October, 1990
THE MERCER GROUP, INC.
One Lakeside Commons
990 Hammond Drive
Suite 510
Atlanta, Georgia 30328
Telephone: (404) 551-0403
FAX: (404) 399-9749
RECEIVED
FEB 1 1992
SAN? OUNCIL
BISPO, CA
SEINT BY: 2-11-91 2:28PM :ASSOCIATION HE' 'RTS 805 349 7109:4� 3/ 8
TRE MERCER GROUP, INC.
1990 Privatization survey
The Mercer Group, Inc. , an Atlanta-based management consulting
firm, has recently updated a survey of 120 cities, counties and
special districts in 34 states and 30 experts in the privatization
field to learn about their experiences with contracting out.
The original survey was taken in 1988 and reflected contracting out
practices at that time. The present survey is an update of the
original data.
The report will be of great use to local and state governments and
special districts that are considering whether or not to contract
out services. It examines services currently being contracted out
and those most likely to be contracted in the future; lists
companies with. track records in contracting; describes the average
size, length and form of service contracts and the factors
considered to be critical to success; surveys evaluation methods,
rates of renewal, and competitive bidding procedures. In addition,
the report presents findings on bid advertising; local government
bid evaluation practices; political considerations in the contract-
ing-out decision; in-house costing and contracting-out decision
methodology; problems encountered in the contracting-out process;
optimum contracting-out characteristics; regional variances;
overall results; future trends and plans; and likely business
opportunities in this field.
These were the key findings of that survey, as reported by 82
municipalities, 24 county governments and ten special districts:
What's Being contracted out
o Virtually all local governments surveyed contracted out
at least one service to a private company. The vast
majority of respondents had contracted out engineering
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and management consulting as well as major construction.
More than half the surveyed cities also contracted out
food services, often in the form of vending machines and
concessions; counties and special districts frequently
contracted out legal and architectural services as well.
Some 26 percent or more of the respondents were likely to
have contracted out janitorial services, solid waste
collection, building maintenance, security services,
towing services, management and maintenance of parking
garages and grounds maintenance. At least one-quarter of
surveyed counties also contracted out some human resourc-
es services, landscaping and parks maintenance, food and
medical services, services for the aging, special
consulting, landfill, data processing, and wastewater
services.
Contract specs
o The average size of the contract varies, depending on the
nature of the service being contracted out. Multi-
million dollar contracts are most likely to be found in
these service areas: construction, fire protection,
transportation, data processing, human resources,
landfill operations, street maintenance and repair, solid
waste collection, and certain social services.
o More than half of all city, county and special district
contracts are in effect for one year. Between 27 percent
and 40 percent of the rest last from one to three years.
Wastewater treatment contracts, however, usually last
from 20 to 30 years. Contracts are quite likely to be
renewed, although market conditions, service elimination
and political factors sometimes result in non-renewal.
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o Almost all contracts specify fixed prices for services
rendered. About 12 percent of county contracts are on a
cost-basis; another 11 percent include incentive clauses.
What !Sakes It Work
o Local governments are most likely to contract out if they
have: a council/manager form of government or a strong
mayor; enlightened management; relatively few unions; no
well-entrenched power base; a financial crisis; autono-
mous decision-making capacities; progressive attitudes;
prior positive experiences; and a relatively well-to-do
economy.
o The results of privatization have been overwhelmingly
positive. That's the word from 97 percent of the cities,
99 percent of the counties and 81 percent of the special
districts that have tried it. Financial savings were
reported by loft percent of the participants, and quality
of the work was cited as a positive factor by 45 percent
of respondents. Other factors contributing to success
are: a contractor's past experience, his ability to
follow specs, to be flexible, and to get the job done on
time and the extent to which he is politically attuned.
o Specific sources of cost savings were: reduced personnel
and equipment needs, the capacity to pay only for work
done, more work for the same dollars, no start-up costs,
reduced internal workload, and generally fewer service
problems.
o The availability of a sufficient number of contractors to
ensure competitive bidding is an infrequent problem,
although it is more likely to arise in small communities
and in special districts.
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what the obstacles Are
O more than half of all cities and three-quarters of all
counties that contract for services have encountered some
problems. Cities, counties and special districte all say
that obstacles from employees and unions head the list.
citizen opposition and opposition from elected officials
are aleo cited frequently.
o Paradoxically, 100 percent of all cities, counties and
special districts surveyed complained about some compo-
nent of work quality. Many specifically cited unreli-
ability, slow response time, underpaid employees, high
turnover, illegal aliens and citizen complaints.
o Contractors often complained about slow payments arid- the
extensive paperwork and red tape of the government
bureaucracy.
Updated Trends
o Some slight falling back of 1988 trends is seen because
of the reduction in the "fiddichnoss" of the privatiza-.
tion concept. xuwever, this is being replaced by a wider
use of contracting out among individual jurisdictions and
a proliferation of'the concept among additional, particu-
larly smaller jurisdictions.
o More use of the privatization concept in infrastructure
areas such as•waztewater treatment and facilities. Also,
private companies building infrastructure (e.g. , toll
roads) on a lease-back or pay-back concept.
o Some uee of reverse privatization (i.e. , selling public
services to raise revenues, such as. excess data process-
ing capacity or crime lab use to neighboring jurisdic-
tions) .
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o More use of the concept by state governments.
In Conclusion
Contracting out and privatization present a means of providing
services at lower cost, and the potential for increases in the
level of service quality. Many local and state governments and
special districts are utilizing the practice based on the apparent
cost efficiency inherent in contracting out of services.
Despite this recognition, local and state governments and special
districts are generally averse and non-responsive to pressure from
the private sector for contracting out and privatization. As a
result of diminished capital, lack of facilities and a rise in the
demand for public services, an enormous market for privatization
has emerged over the past years. Fiscal stress can often exert a
positive influence in the economy in terms of innovation and we are
certainly undergoing fiscal stress at the present time. This will
undoubtedly lead to more use of the privatization option in the
future.
For more information, contact James L. Mercer, President, The
Mercer Group, Inc. , One Lakeside Commons, 990 Hammond Drive, Suite
510, Atlanta, Georgia 30328.
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A CHECKLIST FOR PRIVATIZATION
r Understand concept
Clarify process
Assess opportunities
+� Select function(s)
�( Conduct cost/benefit analysis
- Determine cost of in-house provision
- Determine criteria for successful provision
- Assess outside contractors
- Determine scope of function (s) to be contracted-out
- Prepare request for proposals
Evaluate proposals and price
Compare with in-house provision
Decide on in-house vs. outside
f If outside, select contractor and negotiate contract
{ Execute agreement
{ Implement approach/monitor
r Evaluate results
1 Evaluate process/adjust as necessary
+� Repeat cycle
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