HomeMy WebLinkAboutCompetitive Services Model and Managed Competition Guideline Y F H NTIN T N BEA al 9 C�MAKT)N ��,��V O U G O C�
MEETING DATE: January 16, 2001 DEPARTMENT ID BE� � rfi/ M)N,
Council/Agency Meeting Held: — —b)
Deferred/Continued to:
ro ed ❑ Condi ' Wally Approved ❑ Denied �Y- Cit Cler ' Signature
Council Meeting Date: January 16, 2001 Department ID N mber:
CITY OF HUNTINGTON BEACH
REQUEST FOR COUNCIL ACTION
SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS
SUBMITTED BY: RAY SILVER, CITY ADMINISTRATORa6--' -
PREPARED BY: CLAY MARTIN, ACTING ADMINISTRATIVE SERVICES DIRECTOR
SUBJECT: ADOPT COMPETITIVE SERVICES MODEL
[statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachment(s)
Statement of Issue:
Should the City Council adopt the Competitive Services Model?
Funding Source:
Not applicable.
Recommended Action:
Motion to:
1. Adopt the Competitive Services Model as recommended by the Managed
Competition Committee.
Alternative Action(s):
The City Council may make the following alternative motion(s):
1. Do not approve the recommended action and provide staff with appropriate
direction.
RCA for CSM Adoption -2- 12/26/00 10:54 AM
&UEST FOR COUNCIL ACT&
MEETING DATE: January 16, 2001 DEPARTMENT ID NUMBER:
Analysis:
BACKGROUND
The Competitive Services Model (CSM) was developed by the city's Organizational
Effectiveness department and unanimously approved by the City Council's Managed
Competition Committee in July 2000.
PURPOSE & FUNCTION
The CSM builds upon the process previously developed for managed competition. It has
been designed to create a more comprehensive approach to ensuring the competitiveness
of city services. The CSM also provides a balance between the goals of providing an
agreed-upon level of service at the least cost (competitiveness), and the impact on the
organization from managed competition efforts.
The CSM defines the city's approach to addressing competitiveness and will be employed
if concerns are raised regarding a city service. The City Administrator and Director of
Organizational Effectiveness are responsible for initiating the model. Candidate services
will be considered based on findings from the city's annual State of Contracting and
Benchmarking Reports, by departments, or by the Competitive Services Committee.
However, staff does not expect that any new service will be considered before the end of
the FY 2000-01.
OTHER REVIEWS OF THE COMPETITIVE SERVICES MODEL
In addition to its review and adoption by the Managed Competition Committee, the
Competitive Services Model has been presented to the city employee groups most likely
impacted by the model, the Municipal Employees Association and the Management
Employees Organization. Neither of the employee groups expressed any concerns with
the model.
Attachment(s):
City Clerk's
Page Number No. Description
1. Competitive Services Model
RCA for CSM Adoption -3- 1/4101 11:21 AM
A
TTACHMENT #1
CITY OF
HUNTINGTON BEACH
COMPETITIVE SERVICES MODEL
MANAGED COMPETITION GUIDELINES
Presented to the
City Council Subcommittee
on Managed Competition
Department of Organizational Effectiveness July 2000
THE COMPETITIVE SERVICES MODEL (Attached)
The Competitive Services Model (CSM) describes a process designed to ensure the
competitiveness of city services. The City Council's goal in adopting the Competitive
Services Model is to provide the best service at the least cost. Best service is defined
as meeting or exceeding the defined service level. The CSM has no bias toward higher
levels of service or lower costs. Its intent is to ensure that the city delivers municipal
services in a manner that preserves the best interests of our residents, employees, and
organization. The CSM is attached as pages 7-11.
BENCHMARKING
The first step in the CSM is to benchmark a service against its peers in both the public
and private sectors. The goals of benchmarking include:
• Establishing service and performance levels at the start of the CSM process.
• Determining the city's cost to provide a service as compared to other
agencies and private businesses that provide a similar level of service.
• Comparing the city's service level to service levels in cities similar to
Huntington Beach.
The CSM approaches the steps following benchmarking from an "if it isn't broken don't
fix it," perspective. That is, the model generally envisions beginning process
improvement efforts only when benchmarking results indicate the need to do so.
PROCESSIMPROVEMENT
Process improvement may be initiated under the following circumstances:
• Benchmarking reveals inefficiencies in the city's current method of service
delivery (by public or private sector).
• Benchmarking reveals a best practice standard the city's current method of
service delivery does not incorporate.
• Benchmarking reveals the need to provide a different level of service that may
require revised operating procedures.
At the completion of the process improvement, the CSM calls for the improved service
to be benchmarked a second time. The second benchmark should be scheduled to
allow time for the process improvements to be thoroughly incorporated into the service
delivery area.
If the second benchmark effort indicates that the process improvement efforts failed to
raise the service to industry averages level, the CSM process continues.
CONTRACT OPTIONS
The contract options phase of the CSM provides a gradual approach to contracting. In
particular, contacting options may be examined when:
1
• Vacant positions exist in a service delivery area.
• Equipment required to deliver a service requires replacement.
• Service can be easily divided along geographic boundaries.
• Services levels are being increased.
The contracting options phase may represent an end to the CSM should the city elect to
provide service using both the public and private sector. If the contracting options point
toward superior service delivery from the private sector, the service may be selected for
managed competition.
MANAGED COMPETITION
The decision to undertake a managed competition process of an existing service will be
made only after the service has undergone the benchmarking, process improvement,
and contracting option elements of the CSM. The CSM is designed to ensure that the
city has positioned itself to provide the most appropriate level, lowest cost, and highest
quality service prior to initiating the competitive process.
After a service has completed the CSM cycle, the City Council will review
recommendations from the Managed Competition Subcommittee and staff to determine
if a service should enter into the managed competition process.
New services (those currently not provided by the city or provided through the private
sector) that may be competed will process through a modified version of the CSM
focused on benchmarking other agencies and service providers to the city's desired
level of service and anticipated expenditure.
When presented with certain overriding considerations, the CSM recognizes that the
city may elect to forego managed competition. These considerations include:
• Avoiding risks associated with delivering or contracting a service.
• Carefully controlling service provision (e.g. emergency service).
• Maintaining or enhancing flexibility in service and staff levels.
The CSM also acknowledges that a range of issues beyond, but related to, level of
service and cost must be considered with managed competition. These issues include:
• Labor agreements.
• Performance contracts.
• Performance guarantees.
• Inherent differences between the public and private sectors that prevent apples-
to-apples or level playing field comparisons.
• Potential controversy associated with the decision to compete or stop providing a
service.
2
MANAGED COMPETITION GUIDELINES
1. The City Council should assess the relationship of a service being considered for
competition with other city priorities and policies.
2. The option of service delivery by city staff or the private sector will be compared
through the competitive bidding process.
3. Efforts should be made to minimize the impact on city employees affected by
managed competition. Each managed competition recommendation should
include an assessment of the effect on employees and mitigation
recommendation.
4. When considering a service for managed competition, and when comparing
service providers, the city will consider the potential impact a change in service
provider could have on our customers and how any impact may be mitigated.
This consideration should include preparing to provide the service without
interruption should the provider fail to perform.
5. The city is committed to providing an open, fair, and equitable bid process. This
includes providing equal access to information to all interested public and private
bidders. Private bidders will not have access to working papers developed by
the city department in preparing its proposal or calculating its bid.
6. The bid evaluation process will be conducted in accordance with the city's
standard formal bidding process. The Director of Organizational Effectiveness
and Central Services Manager will manage the bid process.
7. For each bid determined to be a finalist in the competitive bid process, the
Director of Organizational Effectiveness will oversee the preparation of an
Employee Impact Plan. The Employee Impact Plan will determine the impact of
the bids on city staff. If a bid will displace city employees, the Plan should
assess the city's ability to mitigate this impact and the cost to provide severance
to impacted employees. The city's goal is to not eliminate any employees as a
result of a managed competition process.
8. A cost comparison model developed for the city's Competitive Services Model
should be based on the concept of avoidable and unavoidable costs. These
concepts recognize that there are costs that cannot be eliminated by the
privatization of a single service but may be reduced were more services provided
by the private sector.
MANAGED COMPETITION PROCESS
This summary assumes that the service in question has completed the Competitive
Services Model, and the city has determined that it should be evaluated through the
competitive bid process.
3
1. Develop Scope of Service
a. Current service level defined and benchmarked by the CSM.
b. Determine the level of service.
2. Prepare RFP
a. Adhere to Managed Competition Guidelines regarding a level playing field.
b. Determine:
1. Who is responsible for preparing bid specifications?
2. The contract period.
3. Will pre-qualification be required.
4. Performance criteria and reporting, including customer service
standards and performance measures.
5. Any special circumstances
3. Develop Transition Plan (concurrent with Step 4)
a. Identify any costs associated with a service provider change.
b. Determine how the contract will be administered and monitored.
c. Develop a contingency plan for service delivery.
4. Issue RFP (concurrent with Step 3)
a. Central Services Manager is responsible for coordinating answers to
questions from bidders and disseminating information. �.
5. Receive and Open Bids
a. Appoint team to evaluate bids.
6. Evaluate Bids
a. Evaluation process may involve interviews with finalists determined best able
to provide the service based on a review of bids.
b. Develop Draft Employee Impact Plan, Transition Plan, and Cost Elimination
Plan for top three bids.
c. Evaluation team makes recommendation to the Managed Competition
Committee.
d. Managed Competition Committee makes recommendation to the City
Council.
e. Final Employee Impact Plan, Transition Plan, and Cost Elimination Plan
developed for the bid that the Managed Competition Committee
recommends.
7. City Council Awards Contract
8. Implement Employee Impact, Transition, and Cost Elimination Plans
9. Contract Period Begins
a. Contract administration and performance measures monitored.
10.Managed Competition Process Evaluation
a. Evaluation to involve competing department, top bidders, evaluation team,
and Managed Competition Committee.
11.Reporting
a. Contract costs and performance measures reported in accordance with
schedule set by Managed Competition Committee.
4
Employee Impact Plan
The city is committed to using the Competitive Services Model and managed
competition as tools to deliver municipal services in a manner that preserves the best
interests of our employees. As such, every managed competition process will take
steps to minimize impacts on employees.
When presenting recommended bids to the Managed Competition Committee and the
City Council, staff will prepare an Employee Impact Report. The report will identify
impacts on city staff from the award of a bid. The report will be prepared when either
sector (public or private) is awarded a bid. The report will detail any reduction or
addition to the city work force and will recommend strategies on how departments may
add, reassign, or reduce personnel.
If, as the result of a department losing a bid, a reduction of force is necessary, the
following strategies (at a minimum) will be considered to ease the impact:
• Private sector bidders will be encouraged to consider displaced city employees to
deliver service in Huntington Beach.
• Staff will recommend a strategy to provide job placement assistance to affected
employees.
• Departments should consider holding positions vacant during managed
competition processes to offer displaced employees transfer opportunities.
Service Transition Plan
Upon issuing an RFP, the Director of Organizational Effectiveness and representatives
from the department involved in the managed competition process (separate from those
who may be preparing a city bid) will develop a draft Service Transition Plan. This plan
will provide for the transition of a service from one service provider to another, from one
service level to another, or for a combination of service providers.
The final Service Transition Plan will be negotiated between staff, the winning bidder
(public or private), and the prior service provider.
Cost Elimination Plan
Upon issuing an RFP, the Director of Organizational Effectiveness and representatives
from the department involved in the managed competition process (separate from those
who may be preparing a city bid) will develop a draft Cost Elimination Plan.
The Cost Elimination Plan should identify costs staff expects would be eliminated were
the service provider or methods of service provision to change. The information in the
Cost Elimination Plan may be used by staff, the Managed Competition Committee, and
the City Council in evaluating and awarding bids.
The plan will be negotiated between staff, the winning bidder, (public or private) and the
prior service provider.
5
Cost Methodology
Attached as pages 12-15.
Level Playing Field
The city is committed to providing an open, fair, and equitable bid process. Commonly
referred to as a level playing field, the city's commitment extends to:
• Clearly communicating expected levels of service, customer service standards,
and performance measures.
• Applying evaluation criteria equally to all bidders and to the winning bidder's
performance.
• Ensuring that all bidders are provided equal access to information.
The city's commitment to a level playing field does not, however, imply it will consider
bids solely on price. The city has an obligation to guarantee consistent and high quality
municipal services and may be predisposed toward these values when examining bids.
Contingency Plan
As detailed in the discussion of a level playing field, the city must concern itself with
more than the cost of providing municipal services. The city must ensure services are
provided in a manner acceptable to the city and its residents. In order to accomplish
this goal, the Director of Organizational Effectiveness and representatives from the
department involved in the managed competition process (separate from those who
may be preparing a city bid) will develop a draft Contingency Plan to ensure the delivery
of the competed service should the winning bidder (public or private) fail to perform their
duties.
The Contingency Plan may involve division of service provision between different
bidders and/or sectors, or requiring performance bonds or other financial guarantees.
Contract Administration
The Director of Organizational Effectiveness and representatives from the department
involved in the managed competition process (separate from those who may be
preparing a city bid) will develop an estimate of the costs associated with administering
both city and private sector contracts.
The final Contract Administration Plan will be negotiated between staff and the winning
bidder.
Performance Measurements
The Competitive Services Model places great emphasis on carefully benchmarking and
improving any service prior to considering it for a managed competition process. The
customer service standards and performance measures drawn from the CSM should be
included in the managed competition process. Bidders may be asked to guarantee
performance at these levels.
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Benchmarks ,<. . ,h
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Process Measurement
Mapping
7
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Yes Service continues
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Connect to Benchmarks,
Contract and
Options Performance
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8
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Process
Mapping r:
Review
Review Contract Options '
}
Contract
Vacant Implement Define
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Evaluate
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Geographic
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Contract to
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�z
Define Option
Approval for Option
Pilot Option
Benchmark
Evaluation &Recommendations
Further Review No
Yes
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Competition Performance
Measurement
9
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Options '
Internal/External Notification of Intent Implement Review
to Implement Managed Competition Communication f, ,
Plan
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Develop Draft Request for Proposal Implement Define
(RFP)
Ongoing
Finalize Request for Proposal
(RFP) Evaluate
Develop Implementation Plan
(timeline of RFP process)
Implement Request for Proposal
Process
City Service Prepares Proposal
Appoint Evaluation Team
External Providers Prepare Proposals
Proposals Received
Develop Transition Plan
(details of transition costs)
Develop Cost Elimination Plan
(details of avoidable costs)
Connect to
Managed
Competition
10
Connect from
Managed
Competition ,_
t
Review
Evaluation &Recommendations
Approval of Service Provider Implement Define
Contract Begins
Evaluate
Benchmark
Evaluation &Recommendations
Further Review No
Yes
Service continues
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ebid or begin Benchmarks,
Process and
Mapping Performance
Measurement
11
Managed Competition
Cost Comparison Methodology
Budget Item Avoidability Method
Program Salaries Avoidable Determination of actual budget or bid for the defined scope of
Wages, benefits, overtime. services.
Program Supplies & Services Avoidable Determination of actual budget or bid for the defined scope of
services.
Program Equipment Avoidable Determination of actual budget or bid for the defined scope of
Lease cost, equipment maintenance. services.
i
HProgram Utilities Potentially Avoidable Assumed to be unavoidable unless facilities and apparatus
Telephone, electricity, gas, other. will not be used by contractor or have alternate use. In such
Ocases, Program Utility costs will be considered avoidable.
V Prior 12 to 24 month history will be used.
N
L �
L
WProgram Facility Potentially Avoidable Assumed to be unavoidable unless facility will be sold. In
Debt service,facility maintenance. such cases, Program Facility costs will be considered
avoidable. Funds realized from sale will pay debt service with
any negative remainder considered a loss.
Program Supervision Partially Avoidable Assumed to be unavoidable unless line personnel are greater
Supervisor and lead personnel. than 10 FTE. In such cases, Program Supervision will be •
considered partially avoidable. Third party review, in
consultation with the affected program's department,will
determine the net of supervision vs.contract management.
Managed Competition
Cost Comparison Methodology
Budget Item Avoidability Method
Division Overhead Partially Avoidable Assumed to be unavoidable unless line and supervision
Manager plus support staff. personnel(FTE's)are greater than 20%of the Division. In
such cases, Division Overhead will be considered partially
avoidable. Third party review, in consultation with the affected
program's department,will determine the net of Division
oversight vs. contract oversight.
Department Overhead Partially Avoidable Assumed to be unavoidable unless line,supervision,and
Department Head plus support staff. management personnel(FTE's)are greater than 50%of the
Division. In such cases, Department Overhead will be
considered partially avoidable. Third party review, in
consultation with the affected program's department and the
City Administrator,will determine the net of Department
N oversight vs. contract oversight.
M
O
V Support Services Partially Avoidable Assumed to be unavoidable unless line personnel(FTE's)are
H Accounts Payable greater than 25 employees. In such cases,the cost of
WAccounts Receivable Support Services will be considered partially avoidable. Third
Budget party review, in consultation with the affected program's
W Finance department,the Director of Administrative Services and the
F3 Information Systems City Administrator,will determine the net of Department
Z Payroll oversight vs.contract oversight.
Personnel
Purchasing •
Risk Management
Warehouse
City Overhead Unavoidable Assumed to be unavoidable in all cases.
City Council
City Attorney
City Clerk
City Treasurer
City Administrator
Managed Competition
Cost Comparison Methodology
Budget Item Avoidability Method
Sale or Purchase of Assets N/A Revenue generated from the sale of any assets associated
with the program will be considered along with the cost of
purchasing assets to bring a program back in-house. This
W information will not be used directly in the decision to change
service providers.
U)
General Conversion Costs N/A The personnel cost from changing to a contract service
Severance, leave buy-outs,other. provider will be considered along with the cost of recruiting
O personnel to bring the program back in-house. This
information will not be used directly in the decision to change
Nservice providers.
W Revenue N/A Any revenue generated in the normal operation of the program
will be assumed to be the same regardless of service
Z provider. If circumstances indicate that there might be an
0 effect on revenue from the service provider selected,then
V revenue will be evaluated.
•
Managed Competition
Cost Comparison Methodology
COST COMPARISON REPORT:
Total(Full) In-house Cost Total(Full)Contract Cost
Avoidable Cost Avoidable Cost
Partially Avoidable Cost Partially Avoidable Cost
Unavoidable Cost Unavoidable Cost
Analysis of any applicable conversion issues. Analysis of any applicable conversion issues.
•
SERVICE PROVIDER DECISION:
In-house: Total Avoidable Cost+avoidable portion of Partially Avoidable Cost =
Contract: Total Avoidable Cost+avoidable portion of Partially Avoidable Cost `^
A result greater than 110%supports a recommendation to change service provider.
GT�
RCA AOUTING &iE
INITIATING DEPARTMENT: Administration
SUBJECT: Competitve Services Model
COUNCIL MEETING DATE: January 16, 2001
RCA ATTACHMENTS STATUS
Ordinance (w/exhibits & legislative draft if applicable) Not Applicable
Resolution (w/exhibits & legislative draft if applicable) Not Applicable
Tract Map, Location Map and/or other Exhibits Not Applicable
Contract/Agreement (w/exhibits if applicable)
(Signed in full by the City Attorne ) Not Applicable
Subleases, Third Party Agreements, etc.
(Approved as to form by City Attorne ) Not Applicable
Certificates of Insurance (Approved by the City Attorney) Not Applicable
Financial Impact Statement (Unbud et, over $5,000) Not Applicable
Bonds (If applicable) Not Applicable
Staff Report (If applicable) Attached
Commission, Board or Committee Report (If applicable) Not Applicable
Find in s/Conditions for Approval and/or Denial Not Applicable
EXPLANATION FOR MISSING ATTACHMENTS'
REVIEWED RETURNED FOR RDED '
Administrative Staff 3a
Assistant City Administrator Initial
City Administrator (Initial)
City Clerk ( )
EXPLANATION FOR RETURN OF ITEM:
Only)(Below Space For City Clerk's Use
rf
RCA Author: Grant