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Home My WebLink About10/18/2005, C5 - REQUEST FOR PROPOSALS: COST OF SERVICES STUDY l I council D� 10-18-05 j acenaa REpoRt CITY OF SAN LUIS OBISPO FROM: Bill Statler, Director of Finance & Information Technology Carolyn Dominguez, Finance Manager SUBJECT: REQUEST FOR PROPOSALS: COST OF SERVICES STUDY CAO RECOMMENDATION 1. Approve issuing a request for proposals (RFP) for preparation of a comprehensive cost of services study. 2. Authorize the CAO to award the contract if the best overall proposal is within the approved budget of$47,500 for this project. DISCUSSION Under the City's user fee cost recovery policy (page B-7 of the 2005-07 Financial Plan), we should review and update service charges on an ongoing basis to ensure that they keep pace with changes in the cost=of-living as well as changes in service levels and delivery methods. In implementing this policy, the City has adopted the strategy of comprehensively analyzing service costs at least every five years ("benchmark analysis"), with interim adjustments annually based on changes in the consumer price index. Maximus, Inc (formerly DMG-Maximus) completed our last "benchmark analysis'' in November 2000. Accordingly, it is time to prepare a comprehensive evaluation of service costs and related revenues. The Council approved this work effort as part of the 2005-07 Financial Plan and appropriated $47,500 for this purpose. Moreover, completing this analysis is a key "Action Plan" task in the 2005-07 Major City Goal for Long-Term Fiscal Heath,.. Project Workscope The purpose of this project is to answer four basic questions: 1. What does it cost the City to provide various services? 2. Are these costs reasonable? 3. What are current cost recovery levels? 4. What fee changes are necessary to achieve adopted cost recovery policies? This study focuses on General Fund services (such as public safety, development review and recreation); however, we have also included in the workscope selected services and related charges in our enterprise operations (such as setting meters, starting new accounts and disconnecting service for non-payment) that reduce general-purpose rate requirements. t� � � I Request for Proposals: Cost of Services Study Page 2 In most studies of this type, preparing a "cost allocation plan" that distributes indirect costs (like legal services, personnel, accounting and insurance) to direct cost programs (like police protection and street maintenance) in order to determine "total" service costs would be a major (arid expensive) part of the workscope. However, we prepare our cost allocation plan in-house, and we plan to use it in preparing this study. This will result in lower costs and quicker project completion. As set forth in the attached excerpt from the RFP (Attachment 1), specific consultant tasks include: 1. Reviewing existing policies, plans and cost of service information, and recommending improvements as appropriate. 21. Identifying the total cost of providing various City services at the lowest reasonable activity level. In preparing_ this analysis, the consultant will use existing policies, plans and service cost information to the maximum extent feasible. 3. Forming an opinion of the reasonableness of City costs in light of our service levels and policies as well as practices in other agencies in California. 4. Comparing these costs with existing recovery levels. This should include service areas where the City is currently charging .for services as well as areas where we do not but perhaps should in light of our cost.recovery policies and practices of other cities. 5. Evaluating rate structures and making recommendations as appropriate. 6. Comparing existing and proposed fees in key benchmark areas with those charged by other agencies in San Luis Obispo County aswell as comparable cities outside of the County. 1. Recommending appropriate fees and charges based on this analysis in order to achieve adopted cost recovery levels. 8. Developing and presenting findings in a manner that ensures understanding, confidence and credibility by operating staff, interested community members and policy-makers in the. overall work product. 9. Reporting on other matters that come to their attention in the course of their evaluation that. in their professional opinion the City,should consider. Evaluation and Selection Process Proposal Evaluation. A review team composed of representatives from Administration, Finance, Community Development, Public Works and Parks & Recreation will consider the following factors in evaluating proposals and making their contract award recommendation to the CAO: 1. Understanding of the work required by the City. 2. Quality, clarity and responsiveness of the proposal. - ers-z Request for Proposals: Cost of Services Study Page 3 3. Demonstrated competence and professional qualifications necessary for successfully performing the work required by the City. 4. Recent experience in successfully performing similar services. 5. Proposed approach in completing the work. 6. References. 7. Background and experience of the specific individuals to be assigned to this project. 8. Proposed compensation. As reflected above, we will not award the contract based solely on price,but on a combination of factors that represent the best overall value in completing this work. Proposal Review and Award Schedule. The following summarizes our anticipated schedule for proposal review and contract award: Issue RFP 10/19 Hold pre-proposal teleconference 1.1/2 Receive proposals 11/14 Complete "desk top" proposal evaluation 11/29 Conduct finalist interviews. 12/19. Finalize staff recommendation 12/22 Award contract 12/29 Execute contract 1/4 Start-work 1/9 Based on a 90-day timeframe for completing this project, we plan to present the study findings and recommendations to the Council in April 2006. f`E-Process" Using Technology for a More Efficient Selection Process. We plan to use our technology tools for this selection process. The RFP will be distributed through e-mail and advertised on the City's website (along with publishing a standard notice requesting proposals in The Tribune). The pre-proposal conference will be held via teleconference, with participants receiving a PowerPoint presentation via e-mail on which they can follow along. Lastly, all proposals will be received electronically. While this "e-process" is not appropriate for price-sensitive contract awards such as construction projects or equipment purchases, we have used it successfully in several recent consultant selections. Prospective Proposers In addition to publishing a formal notice requesting proposals in The Tribune and advertising on the City's website, we will email the RFP to a limited number of firms specializing in this type of review who have indicated their interest in performing this work. A list of prospective proposers is provided in Attachment 2. Request for Proposals: Cost of.Services Study Page 4 FISCAL IMPACT The projected cost for this work is $47,500. The Council has already approved funding for this work in the 2005-07 Financial Plan, which is a key "Action Plan"task in the Major City Goal for Long-Term Fiscal-Health (pages B-64 and D-162). ALTERNATIVES The Council previously considered the following alternatives as part of the 2005-07 Financial Plan process: 1. Do nothing. We can continue using the existing 2000 Maximus cost analysis as the basis for our current fees as modified by changes in the consumer price index. Based on our current policy that we should perform_ a comprehensive review.at least every five years, we do not recommend this alternative. 2. Use in=house staff resources. Although City staff is capable of.performing this type of analysis in-house, it would be a major staffproject consuming considerable resources. As such, basic day-to-day core services would suffer as well as our ability to achieve other major goals and objectives. Additionally, it would take longer to complete the analysis. Lastly, there are significant advantagesfrom a"credibility" perspective in preparing this type of analysis by an independent, third party. Based on existing staff resources and commitments—and the need for confidence in the findingsof this study by operating staff, community groups and policy makers—we continue to recommend preparation of this study by an independent firm specializing in this type of analysis. ATTACHMENTS 1. Workscope Excerpt from the RFP for the Cost of Services Study 2. Proposers List AVAILABLE FOR REVIEW IN THE COUNCIL OFFICE Cost of Services Study RFP G:Cost of Services Study/2006/Consultant Selection/CAR Issue RFP.2005 Section A DESCRIPTION OF • - 1. OVERVIEW Under the City's user fee cost recovery policy, the City reviews and updates service charges on an ongoing basis to ensure that they keep pace with changes in the cost-of-living as well as changes service levels and delivery methods. In implementing this policy, the City has adopted:a strategy of comprehensively analyzing service costs and related revenues every five years, with interim adjustments annually based on changes in the consumer price index. Maximus prepared our last "benchmark" analysis under this approach in 2000. Consequently, it is time to prepare a comprehensive evaluation of service costs and related revenues. 2. PROJECT GOALS The primary purpose of this project is to answer four basic questions: a. What does it cost the City to provide various services? b. Are these costs reasonable? C. What are current cost recovery levels? d. What fee changes are necessary to achieve adopted cost recovery policies? 3. GENERAL FUND FOCUS—OPERATING PROGRAMS Rate setting for our enterprise operations (water, sewer, parking, transit and golf)is not part of the workscope of this project; its primary focusis on General Fund operating services-public safety, development review, parks & recreation, and other General Fund operations. However, selected services and related charges in our enterprise operations (such as setting meters, starting new accounts, disconnecting service for non-payment), which reduce general-purpose rate requirements, are included in the workscope. Since the focus is on cost recovery for ongoing services; evaluating development impact fees related to capital improvement financing is not part of this workscope. 4. WORK ALREADY PERFORMED BY THE CITY a. User Fee Cost Recovery Policy. The City has adopted a comprehensive user fee cost recovery policy, which sets forth an overall framework for evaluating cost recovery factors, and establishes specific user fee goals. Although we want the consultant's review and comments on this policy, we expect it to form the primary foundation for determining cost recovery levels. The policy for user fees and enterprise fund charges is provided in pages 134 through B-11 of the 2005-07 Financial Plan; and provided in Attachment 1. b. Cost Allocation Plan. The City has developed an in-house model for allocating organization-wide indirect costs to direct costs. Again, although we want the consultant's review and comments on this plan, we anticipate continuing to use this plan in allocating indirect costs in the future and expect it to be used in identifying service costs as part of this study: The 2003-05 Cost Allocation Plan is provided in Attachment 2. City staff is preparing an update to this plan for 2005-07, which should be complete by mid-January 2006. /attachment -� C. Labor Rates. The Cost Allocation Plan includes a comprehensive listing of labor rates for all City positions based on salary;benefits and indirect costs. d. Comprehensive Fee Listing.. As part of our Revenue Management Manual, we have compiled a comprehensive listing of City service charges; which is provided in Attachment 3. e. Program and Activity Costs. As part of the 2005-07 Financial Plan, the City has identified direct costs for over 70 programs.and approximately 600 activities. Operating program goals and costs are comprehensively set forth in Section D of the 2005-07 Financial Plan. This document is on our web site at www.slocity.org/finance/budget-.asp. 5. CONSULTANT WORKSCOPE a. .Review existing policies, plans and cost of service information, and offer comments and recommendations for improvement as appropriate. b. Identify total cost of providing various City services at the .lowest reasonable activity level. As discussed' above, the primary focus of this analysis is on General Fund fees; although selected enterprise fund charges will be included. In preparing this analysis, the consultant should use existing policies, plans and service cost information to the maximum extent feasible. C. Form an opinion of the reasonableness of City costs, given City service levels and policies as well as practices in other agencies in California. d. Compare these costs with existing recovery levels. This should' include service areas where the City is currently charging for services as well as areas where we do not but perhaps should in light of our cost recovery policies and practices of other cities: e. Recommend appropriate fees and charges based on,this analysis in order to achieve adopted cost recovery levels. f. Evaluate rate structures and make recommendations as appropriate. g. Compare existing and proposed fees in key benchmark areas with those charged by other agencies in San Luis Obispo County as well as comparable cities outside of the County. Comparable Cities San Luis Obispo County Agencies Davis Arroyo Grande Monterey Atascadero Napa Grover Beach Palm Springs Morro Bay Santa Barbara Paso Robles Santa Cruz Pisrno Beach Santa Maria County of San Luis Obispo Ventura b. Develop and present findings in a manner that ensure understanding, confidence and credibility by operating staff, interested community members and,policy-makers in the overall work product.. - 2 C�_ Attdchment -� C. Produce a final report that summarizes key results and findings; describes each service; identifies its cost, key cost components and current cost recovery level;.recommends new fees based on thisanalysis and the City's cost recovery goals; assesses the reasonableness of City costs; and compares current and recommended fees wiff,benchmark fee areas in identified agencies. d. Report on other matters that come to your attention in the course of your evaluation that in your professional opinion the City should consider. In summary, we expect a final product that reflects technical excellence as well as a strong policy orientation. 6. PROJECT COMPLETION We would like to complete this project—including presentation of findingsand recommendations. to the Council—within 90 days after contract execution. Assuming a contract award date of December 29, 2005,policy recommendations would be presented to Council in April 2006. -3 - ��'� Attachment PROPOSERS s , COST OF SERVICES STUDY SPECIFICATION NO. 90605 Maximus,Inc. 4320 Auburn Blvd.Suite 2000 Sacramento,CA 95841 Allan Burdick,Vice President allahburdick@maximus.com FCS Group 50 California St. Ste 1500 San Francisco,CA 94111 Jeanette Hahn j eangtteh @ fcse.-roup.com 1vluniFinancial 2399 Gateway Oaks Drive,Suite 210 Sacramento,CA 95833 Brian Jewett brianj@muni.com Revenue Cost Specialists,LLC 2545 E.Chapman,Suite 103 Fullerton,CA 92831 Phone No.71499279020 Fax No.714-992-9021 Albert R Keymer Jr;President rkermer@cs.com Public Resource Management Group,LLC(PRM) 1380 Lead Hill Blvd.Suite 106 Roseville,CA-95661 Brad Wilkes bradwilkes@[Irrn--roup.net Wohlford Consulting 372 Florin Road#293 Sacramento,CA 95831 Chad Wohlford chad @ woh 1 fordconsul tin r.com Conrad and Associates,LLP 2301 Dupont Drive,:Suite 200 Irvine;CA 92612 Ken Al-Imam,Partner kalimam@cbiz.com