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County of Los AngelesCHIEF EXECUTIVE OFFICE
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Kenneth Hahn Hall of Administration500 West Temple Street, Room 713, Los Angeles, California 90012
(213) 974-1101http://ceo.lacounty.gov
WILLIAM T FUJIOKAChief Executive Offcer
Board of SupervisorsGLORIA MOLINAFirst District
MARK RIDLEY-THOMASSecond District
September 1, 2009 ZEV YAROSLAVSKYThird District
DON KNABEFourth District
The Honorable Board of SupervisorsCounty of Los Angeles383 Kenneth Hahn Hall of Administration500 West Temple StreetLos Angeles, CA 90012
MICHAEL D. ANTONOVICHFifth District
Dear Supervisors:
CONTRACT EXTENSIONS/COST REDUCTIONS RECOMMENDATIONS:BOARD LETTER NO.1
(ALL DISTRICTS AFFECTED) (3 VOTES)
SUBJECT
Based on Board direction from your meeting of June 16, 2009, this letter includes the first set ofrecommended contract amendments offering term extensions in consideration for immediate costreductions. This, and subsequent Board letters recommending contract amendments pursuant tothis initiative, will identify projected savings for 2009-10 (as well as future years as applicable);savings will be incorporated into Supplemental Changes for the 2009-10 budget.
IT IS RECOMMENDED THAT YOUR BOARD:
1. Approve and delegate authority to the affected department heads -to execute contractamendments described in Attachments I, II, and IIi, as recommended by the Chief ExecutiveOfficer and approved as to form by County Counsel, to extend terms and reduce the annualcontract amount under your Board's contract cost reduction initiative effective for 2009-1 O.
2. Instruct the affected department heads to notify your Board and the Chief Executive Office,
in writing, within ten business days after execution of such amendments.
PURPOSE/JUSTIFICATION OF RECOMMENDED ACTION
On June 16, 2009, your Board directed the Chief Executive Officer, working with theInternal Services Department, County Counsel, Auditor-Controller, and other departments, asneeded, to develop the parameters for a contract cost savings initiative for existing contractors.Your Board also directed the Chief Executive Officer to provide all departments with a "model" letterto send to contractors by early July, requesting that contractors reduce their rates in exchange forterm extensions without competitive bidding.
"To Enrich Lives Through Effective And Caring Service"
Please Conserve Paper - This Document and Copies are Two-SidedIntra-County Correspondence Sent Electronically Only
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The Honorable Board of SupervisorsSeptember 1, 2009Page 2
On June 25, 2009, this Offce provided instructions to departments, establishing the criteriapertaining to these contracts and a timeline for reporting back on those contracts recommended forextension/cost reduction. Departments subsequently canvassed their contracts and solicited offersfrom contractors which met the appropriate criteria, requesting price reductions in exchange for one-year and/or two-year extensions. Contractors responded with varying degrees of price reductions,and upon consideration and further negotiations by departments, contract amendments for thefollowing departments are recommended:
. Chief Executive Office Contract Amendments (Attachment I)
. Public Works Contract Amendments (Attachment II)
. Treasurer and Tax Collector Contract Amendments (Attachment II)
As referenced above, attached to this letter are memoranda from the affected departments, eachproviding:
. Background on the subject contract(s);
. Identification of the proposed cost reduction/extension and the related fiscal impact; and
. A discussion of the analysis and due diligence conducted by the department to justify the
recommended amendment( s).
Upon your Board's authorization, affected department heads will execute the contract amendmentsto effect the changes described in their memoranda.
FISCAL IMPACT/FINANCING
This transmittal references 125 contract amendments that, if approved, would result in an estimatedtotal annual savings of $3,939,752 which includes net County cost (NCC) savings of $731,563 for2009-10. Subsequent submittals will identify cumulative projected savings as a result of thisinitiative, and the projected savings will be included in recommendations consistent withSupplemental Changes to the 2009-1 0 budget. Departments have prioritized affected contracts onthe basis of potential NCC savings.
FACTS AND PROVISIONS/LEGAL REQUIREMENTS
This effort pertains to current contracts which were planned to be competitively rebid upon expirationand for which a competitive solicitation process was not already underway. The cost reductionswould need to be implemented for 2009-1 0 and throughout the extended period. Living Wage rateswill not be reduced as part of this effort.
Departments were directed to exclude from consideration contracts for which:
~ A more favorable cost may be obtained via a competitive bid process;
~ Departments have identified contractor performance issues with the current contractor;
~ Departments are uncertain if the services will be needed for the extended term; and
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The Honorable Board of SupervisorsSeptember 1, 2009Page 3
~ Reductions have already been imposed as part of the 2008-09 or 2009-1 0 County budgets.
IMPACT ON CURRENT SERVICES (OR PROJECTS)
This effort is intended to produce immediate cost savings in light of the fiscal challenges faced bythe County. The proposed contract amendments should not have a negative impact on the level orquality of service provided to the County by the affected contractors.
CONCLUSION
This Office will continue to package and forward additional contract amendments consistent with thiseffort, for Board approval, as they become available.
Respectfully submitted,
WTF:ES:MKZFC:JH:pg
Attachments (3)
c: All Department HeadsAdministrative DeputiesContract Managers' Network
2009-09 - 09-01-09 Contract Extensions/Reductions Recommendations - Board Letter NO.1
ATTACHMENT I
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CHIEF EXECUTIVE OFFICE CONTRACT AMENDMENTS
The Chief Executive Officer recommends the following proposed contract amendmentswhich would generate net County cost savings of $690,969 for 2009-10, with additionalfuture year savings as noted.
Contract No. 745354 - Automobile and General Liabilty Claims Administrationand Legal Defense Management
Background
Contract No. 745354 was awarded to Carl Warren & Co. to provide automobileand general liability claims administration and legal defense managementservices, effective August 15, 2003. The contract term is five years with two one-year renewal options. The contract is currently in its second option year whichwill expire on August 14, 2010. The annual cost of this contract is $1,913,229.
Recommended Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, Carl Warren is offering an immediate 7% reduction beginning onthe effective date of the amendment. The projected savings have beenapproximated as follows:
2 Yr Extension 7%
2009-10 Savings: $133,9262010-11 SavinQs: $133,9262011-12 Savings $133,926
$401,778
Justification
The County utilizes a third party administrator to provide claims administrationand legal defense management services for its automobile and general liabilityself-insurance program. These services are needed to control the County'sliability costs through early investigation and quick resolution of incidents, claimsand lawsuits filed against the County and to ensure a continuation of qualityservice to the Chief Executive Office, County Counsel and all other Countydepartments.
An analysis was performed by Chief Executive Office - Risk ManagementBranch (CEO-RMB) and concluded that recommending this contract extension iseconomically advantageous to the County because it will result approximately$401,778 in net County cost (NCC) savings. The amendment wil also delay thepossible, and expected, cost increase following a new solicitation. In addition,the recommended contract extension will ensure automobile and general liability
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claims administration and legal defense management services stability. CarlWarren & Co. has proven to be a responsive contractor.
Contract No. 75380 - Third Party Workers' Compensation Claims Administration
Background
Contract No. 75380 was awarded to Tristar Risk Management #2 (Tristar #2) toprovide workers' compensation third party claims administration serviceseffective January 1, 2006. The contract term is five years. This contract iscurrently in the fourth year and will expire December 31, 2010. The annual costof this contract is $7,366,884.
Recommendation Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, Tristar #2 is offering an immediate 5% reduction beginning on theeffective date of the amendment. The projected savings have been approximatedas follows:
2 Yr Extension 5%
2009-10 Savings: $184,1722010-11 Savings: $368,3442011-12 Savings $368,3442012-13 Savinqs $184,172
$1,105,032
Justification
Workers' compensation claims administration services are required to provideclaims management for existing and newly reported workers compensationclaims. In addition, such services are required to maintain compliance with
California labor code and regulatory requirements.
An analysis was performed by CEO-RMB and concluded that recommending thiscontract extension is economically advantageous to the County because it willresult approximately $1,105,032 in NCC savings. The amendment will also delaythe possible, and expected, cost increase following a new solicitation. Inaddition, the recommended contract extension will ensure workers'compensation claims administration services stability. Tristar #2 has proven tobe a responsive contractor.
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Contract No. 75381 - Third Party Workers' Compensation Claims Administration
Background
Contract No. 75381 was awarded to Tristar Risk Management (Tristar) to provideworkers' compensation third party claims administration services effectiveJanuary 1, 2006. The contract term is five years. This contract is currently in thefourth year and will expire December 31, 2010. The annual cost of this contractis $4,597,499.
Recommendation Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, Tristar is offering an immediate 5% reduction beginning on theeffective date of the amendment. The projected savings have beenapproximated as follows:
2 Yr Extension 5%2009-10 Savings: $114,9382010-11 Savings: $229,8752011-12 Savings $229,8752012-13 Savings $114,938
$689,626
Justification
Workers' compensation claims administration services are required to provideclaims management for existing and newly reported workers compensationclaims. In addition, such services are required to maintain compliance with
California labor code and regulatory requirements.
An analysis was performed by CEO-RMB and concluded that recommending thiscontract extension is economically advantageous to the County because it willresult approximately $689,626 in NCC savings. The amendment will also delaythe possible, and expected, cost increase following a new solicitation. Inaddition, the recommended contract extension will ensure workers'compensation claims administration services stabilty. Tristar has proven to be aresponsive contractor.
Contract No. 75951 - Third Party Long-Term Disabilty, Survivor Income Benefitsand Short-Term Disabilty Claims
Background
Contract No. 75951 was awarded to Sedgwick Claims Management Services,Inc. (Sedgwick) to provide third party long-term disabiliy, survivor income
benefits and short-term disability claims services, effective January 1, 2007. The
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contract term is three years with three one-year renewal options. The contract iscurrently in its third year, with a final expiration date of December 31, 2012. Theannual cost of this contract is $1,191,408.
Recommended Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, Sedgwick is offering an immediate 5% reduction beginning on theeffective date of the amendment. Additionally, they have offered to forfeit anyfuture cost of living increase. The projected savings have been approximated asfollows:
2 Yr Extension 5%2009-10 SavinQs: $29,7852010-11 SavinQs: $59,5702011-12 SavinQs $59,5702012-13 SavinQs $29,785
$178,710
Justification
Short-Term and Long-Term Disability claims administration services are requiredto adjudicate claims submitted by eligible County employees who becomedisabled, due to industrial and non-industrial illness or injury, and are unable toperform the essential duties of their County position. The claims adjudicationservices are required to comply with the provisions of the Los Angeles CountyCode, as established by your Board.
An analysis was performed by CEO-RMB and concluded that recommending thiscontract extension is economically advantageous to the County because it willresult approximately $178,710 in NCC savings. The amendment will also delaythe possible, and expected, cost increase following a new solicitation. Inaddition, the recommended contract extension will ensure uninterruptedcontinuation of third party long-term disabilty, survivor income benefits and short-term disability claims services. Sedgwick has proven to be a responsivecontractor.
Contract No. 73275 - Risk Management and Claims Information System
Background
Contract No. 73275 was awarded to Risk Technologies, Inc. (RTI) to provide aRisk Management and Claims Information System effective March 6, 2001. Thecontact term is nine years and nine months. The contract is in its ninth year andwill expire on December 6, 2010. The annual cost of this contract is $948,000.
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Recommended Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, RTI is offering an immediate 7.5% reduction beginning on theeffective date of the amendment. The projected savings have beenapproximated as follows:
2 Yr Extension 7.5%2009-10 Savings $59,2502010-11 Savings $71,1002011-12 Savings $71,1002012-13 Savings $35,550
$237,000
Justification
The Risk Management Information System manages all County data related toliability claims and lawsuits. The system is utilized by the County's liability claimsthird party administrators, County Counsel, and CEO staff to manage claims andlawsuits. In addition, the system provides reports to the Board, departments,County Counsel and CEO management related to liability claims/litigationperformance.
An analysis was performed by CEO-RMB and concluded that recommending thiscontract extension is economically advantageous to the County because it willresult in approximately $237,000 in NCC savings. Renewal of the Contract willensure uninterrupted continuation of critical services to the CEO, CountyCounsel, County departments, and third party administrators related to liabilityclaims and litigation management activity. RTI has proven to be a responsivecontractor.
Contract No. 76117 - Broker Services for Fine Arts Insurance Program
Background
Contract No. 76117 was awarded to Wilis Fine Arts, Jewelry & Specie - Wilis ofMaryland Inc., (Willis) to provide insurance broker services to purchase andadminister the County's Fine Arts Insurance Program, effective July 1, 2007.The contract term is two years with three one-year optional extensions. Thecontract is currently in its first extension year. The contract will expire on June30, 2012. Based on current insurance premium, contract cost for this policyperiod is $229,628.
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Recommended Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, Wilis has agreed to reduce its commission by 6%. The projectedsavings have been approximated as follows:
2 Yr Extension 6% of Commission (u. S.)2009-10 Savings: $1,3452010-11 SavinQs: $1,3452011-12 Savings $1,3452012-13 SavinQs $1,345
$5,380
Justification
This insurance covers County collection as well as objects on loan or on
exhibition at the Museum of Natural History facilities against loss or damage dueto fire, flood, earthquake, explosion or similar perils. Approximate value ofCounty collection insured under this program is $1 billion.
An analysis was performed by CEO-RMB and concluded that recommending thiscontract extension is economically advantageous to the County because it willresult in approximately $5,380 in NCC savings. Wilis has demonstrated it hasthe resources, experience, knowledge, and professional personnel needed toprovide the required broker services to continue to effectively administer the FineArts Insurance Program.
Contract No. 75306 - Broker Services for Consolidated Property and BoilerlMachinery Insurance Program
Background
Contract No. 75306 was awarded to Willis Insurance Services of California, Inc.(Willis to provide broker services to purchase and administer the County'sconsolidated property and boiler machinery insurance program, effective July 1,2005. The term is two years with three one-year renewal options. The contractis currently in its second option year. The contract will expire June 30, 2010.The annual contract amount is $500,000.
Recommended Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, Willis is offering to reduce its commission by 10%. The projected
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savings have been approximated as follows:
2 Yr Extension: 10%2009-10 Savings: $50,0002010-11 Savings: $50,0002011-12 Savings $50,000
$150,000
Justification
This insurance provides all-risk property damage coverage, including earthquakeand flood, and loss of use coverage to comply with finance and leaseagreements, and covers facilities and personal properties that departmentsdesire to insure. Current value of properties insured under this program is
approximately $4.2 billion.
An analysis was performed by CEO-RMB and concluded that recommending thiscontract extension is economically advantageous to the County because it willresult in approximately $150,000 in NCC savings. Renewal of the Contract wilensure uninterrupted continuation of critical broker services to the County's
consolidated property and boiler machinery insurance program. Willis hasdemonstrated it has the resources, experience, knowledge, and professionalpersonnel needed to provide the required broker services to continue toeffectively administer the Consolidate Property and Boiler Machinery InsuranceProgram.
Contract No. 75950 . Broker Services for Aircraft and Airport Insurance Program
Background
Contract No. 75950 was awarded to Aon Risk Insurance Services West, Inc.,(Aon) to provide insurance broker services to purchase and administer theCounty's Aircraft and Airport Insurance Program, effective January 1, 2007. Thecontract term is three years with two on-year renewal options. The contract is inits third year and if both one-year extensions were utilized, the contract wouldexpire on December 31, 2011. Based on current insurance premium, contractcost for this policy period is $201,394.
Recommended Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, Aon is offering to reduce its commission by approximately 10%.
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The following is the projected savings based on the current insurance premium of$1,814,360:
2 Yr Extension: 10% of Commission2009-10 Savings: $10,3452010-11 Savinas: $20,6892011-12 Savings $20,6892012-13 Savinas $20,6892013-14 Savinas: $10,345
$82,757
Justification
This insurance provides $100 milion of liability coverage for County airports andaircrafts, and hull physical damage coverage for the County aircraft fleet that hasa total insured value of over $147 million.
CEO-RMB recommends extending this broker services agreement because it wilresult in approximately $82,757 in NCC savings. Aon has demonstrated it hasthe resources, experience, knowledge, and professional personnel needed toprovide the required broker services to continue to effectively administer theAircraft and Aircraft Insurance Program.
Contract No. 75622 . Broker Services for Crime Insurance Program
Background
Contract No. 75622 was awarded to Hub International of California InsuranceServices, Inc., (Hub) to provide insurance broker services to purchase andadminister the County's Crime Insurance Program, effective April 22, 2006.The contract term is for three years with two one-year extensions. The contract isin its first extension year. The contract will expire on April 21; 2011. Based oncurrent insurance premium, contract cost for this policy period is $15,221.
Recommended Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, Hub is offering to reduce the insurance premium by approximately10%. The following is the projected savings:
*Consists of $20,294 premium reduction for 2009-10 and 2010-11 fiscal years.
2 Yr Extension: 10%2009-10 02010-11 $40,588*2011-12 $20,5882012-13 $20,588
$81,764
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Justification
This insurance covers loss of money, securities, negotiable instruments andother similar properties of the County due to criminal acts. The insuranceprovides up to $10 million for employee dishonesty, forgery and alteration, theft,disappearance and destruction, robbery and burglary, and counterfeit currencyand $22 million for employee theft, computer fraud and funds transfer fraudcoverage.
CEO-RMB recommends extending this broker services agreement because it wilresult in an estimated cost reduction of approximately $81,764. Hub hasdemonstrated it has the resources, experience, knowledge, and professionalpersonnel needed to provide the required broker services to continue toeffectively administer the Crime Insurance Program.
Contract No. 75416 - Employee Medical Examination and Evaluation Services
Background
Contract No. 75416 was awarded to Community Hospital of Long Beach toprovide employee medical examination and evaluation services effective January10, 2006. The contract term is three years with two one-year optional extensions.The contract is currently in its first option year. The contract will expire onDecember 31,2010. The annual contract amount is approximately $150,000.
Recommended Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, Community Hospital of Long Beach is offering an immediate 10%reduction beginning on the effective date of the amendment. The projectedsavings have been approximated as follows:
2Yr Extension: 10%2009-10 Savinqs: $11,2822010-11 Savinqs: $15,0422011-12 Savinqs $15,0422012-13 Savinqs $7,521
$48,887
Justification
Community Hospital of Long Beach is currently the County's only provider ofFirefighter Wellness examinations in the south-east area of the County. Therecommended contract amendment is economically advantageous to the Countybecause it will result in a total NCC savings of $48,887 through the extensionperiod. Additionally, granting the extension will defer the significant staff timerequired to solicit for a new contract in 2010, and eliminate the risk of subsequentcost increases.
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Contract No. 75418 - Employee Medical Examination and Evaluation Services
Background
Contract No. 75418 was awarded to Glendale Adventist Occupational MedicineCenter to provide employee medical examination and evaluation serviceseffective January 10, 2006. The contract term is three years with two one-yearoptional extensions. The contract is currently in its first option year. The contractwill expire on December 31,2010. The annual contract amount is approximately$172,000.
Recommended Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, Glendale Adventist Occupational Medicine Center is offering animmediate 10% reduction beginning on the effective date of the amendment.The projected savings have been approximated as follows:
2Yr Extension: 10%2009-10 Savings: $12,9362010-11 Savings: $17,2482011-12 Savings $17,2482012-13 Savings $8,624
$56,056
Justification
Glendale Adventist Occupational Medicine Center is currently the County's onlyprovider of OSHA and DMV mandated examinations in the north half of theCounty. They also provide mobile testing throughout the County. Therecommended contract amendment is economically advantageous to the Countybecause it will result in a total NCC savings of approximately $56,056 through theextension period. Additionally, granting the extension will defer the significantstaff time required to solicit for a new contract in 2010, and eliminate the risk ofsubsequent cost increases.
Contract No. 75420 - Employee Medical Examination and Evaluation Services
Background
Contract No. 75420 was awarded to Intercare Medical Group to provideemployee medical examination and evaluation services effective January 10,2006. The contract term is three years with two one-year optional extensions.The contract is currently in its first option year. The contract will expire onDecember 31,2010. The annual contract amount is approximately $465,000.
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Recommended Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, Intercare Medical Group is offering an immediate 5% reduction onpre-placement examination and a 10% reduction on Firefighter Wellnessexaminations beginning on the effective date of the amendment. The projectedsavings have been approximated as follows:
2Yr Extension: 5%- Preplacement & 10% Fire WeI/ness2009-10 Savinqs: $21,6312010-11 Savinqs: $28,8422011-12 Savinqs $28,8422012-13 Savinqs $14,421
$93,736
Justification
Intercare Medical Group is currently the County's primary provider of pre-placement examinations. They are also the only provider of Firefighter Wellnessexams in the downtown Los Angeles area. The recommended contractamendment is economically advantageous to the County because it will result ina total NCC savings of approximately $93,736 through the extension period.Additionally, granting the extension will defer the significant staff time required tosolicit for a new contract in 2010, and eliminate the risk of subsequent costincreases.
Contract No. 75421 - Employee Medical Examination and Evaluation Services
Background
Contract No. 75421 was awarded to Irwindale Industrial Clinic to provideemployee medical examination and evaluation services effective January 10,2006. The contract term is three years with two one-year optional extensions.The contract is currently in its first option year. The contract will expire onDecember 31,2010. The annual contract amount is approximately $306,000.
Recommended Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, Irwindale Industrial Clinic is offering an immediate 5% reduction onFirefighter Well ness examinations beginning on the effective date of the
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amendment. The projected savings have been approximated as follows:
2Yr Extension: 5%2009-10 Savings*: $11,4812010-11 Savings: $15,3082011-12 Savings $15,3082012-13 Savings $7,654
$49,751*Assumes savings start Oct 1, 2009
Justification
Irwindale Industrial Clinic is currently the County's only provider of FirefighterWell ness exams in the San Gabriel Valley area of the County. Therecommended contract amendment is economically advantageous to the Countybecause it will result in a total NCC savings of approximately $49,751 through theextension period. Additionally, granting the extension will defer the significantstaff time required to solicit for a new contract in 2010, and eliminate the risk ofsubsequent cost increases.
Contract No. 2007.03 - Employee Medical Examination and Evaluation Services
Background
Contract No. 2007-03 was awarded to SCV Quality Care to provide employeemedical examination and evaluation services effective May 10, 2006. Thecontract term is three years with two one-year optional extensions. The contractis currently in itS' first option year. The contract will expire on December 31,2010.The annual contract amount is approximately $212,000.
Recommended Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, SCV Quality Care is offering an immediate 5% reduction onFirefighter Well ness examinations beginning on the effective date of theamendment. The projected savings have been approximated as follows:
2Yr Extension: 5%2009-10 Savinqs*: $7,9582010-11 Savinqs: $10,6102011-12 Savinqs $10,6102012-13 Savinqs $5,305
$34,483*Assumes savings start Oct 1,2009
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Justification
SCV Quality Care is currently the County's only provider of Firefighter Well nessexams in the northern area of the County. The recommended contractamendment is economically advantageous to the County because it will result ina total NCC savings of approximately $34,483 through the extension period.Additionally, granting the extension will defer the significant staff time required tosolicit for a new contract in 2010, and eliminate the risk of subsequent costincreases.
Contract No. 75423 - Employee Medical Examination and Evaluation Services
Background
Contract No. 75423 was awarded to U.S. HealthWorks Medical Group to provideemployee medical examination and evaluation services effective January 10,2006. The contract term is three years with two one-year optional extensions.The contract is currently in its first option year. The contract will expire onDecember 31,2010. The annual contract amount is approximately $11,000.
Recommended Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, U.S. HealthWorks Medical Group is offering an immediate 5%reduction on OSHA and DMV examinations beginning on the effective date of theamendment. The projected savings have been approximated as follows:
2Yr Extension: 5%2009-10 Savinç¡s*: $4052010-11 Savinç¡s: $5412011-12 Savinç¡s $5412012-13 Savinç¡s $270
$1,757*Assumes savings start Oct 1, 2009
Justification
U.S. HealthWorks Medical Group is currently the County's only provider of OSHAand DMV exams in east L.A. The recommended contract amendment iseconomically advantageous to the County because it will result in a total NCCsavings of approximately $1,757 through the extension period. Additionally,granting the extension will defer the significant staff time required to solicit for anew contract in 2010, and eliminate the risk of subsequent cost increases.
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Contract No. 75424 - Employee Medical Examination and Evaluation Services
Background
Contract No. 75424 was awarded to Westchester Medical Group to provideemployee medical examination and evaluation services effective January 10,2006. The contract term is three years with two one-year optional extensions.The contract is currently in its first option year. The contract wil expire onDecember 31,2010. The annual contract amount is approximately $554,000.
Recommended Amendment/Fiscal Impact
CEO recommends amending this contract by adding two additional option years.In exchange, Westchester Medical Group is offering an immediate 10% reductionon pre-placement and Firefighter Well ness examinations beginning on theeffective date of the amendment. The projected savings have beenapproximated as follows:
2Yr Extension: 10%2009-10 Savings*: $41,5152010-11 Savinçis: $55,3532011-12 Savinçis $55,3532012-13 Savinçis $27,677
$179,898*Assumes savings start Oct 1,2009
Justification
Westchester Medical Group is currently a major provider of pre-placementexaminations, and the County's only provider of Firefighter Well nessexaminations in the South Bay. The recommended contract amendment iseconomically advantageous to the County because it will result in a total NCCsavings of approximately $179,898 through the extension period. Additionally,granting the extension will defer the significant staff time required to solicit for anew contract in 2010, and eliminate the risk of subsequent cost increases.
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ATTACHMENT II
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COUNTY OF LOS ANGELESDEPARTMENT OF PUBLIC WORK
"To Enrich Uves Through Effctve and Caring SeNice'
GAI FARBER, Diector
900 SOUT FRMONT AVEALHRA CALIFORN 91803-1331
Telephone. (626) 458-5100htt://dpw.launty.goy ADDRES AL CORRSPONDENCE TO:
P.O. BOX 1460AlBRA, CAIFORN 91802-1460August 13, 2009
IN REPLY PLESE
REFER TO FILE: AS-O
TO' Willam T FujiokaChief Executive Officer
FROM: Gail FarberDirector of Public Works
CONTRACT EXTENSIONS AND COST REDUCTIONS APPROVAL REQUEST
On June 16, 2009, the Board, on motion of Supervisor Mark Ridley-Thomas, instructedthe Chief Executive Office (CEO), working with Internal. Services Department,County Counsel, Auditor-Controller, and other departments as needed, to develop theparameters for a contract cost-savings initiative by requesting that contractors reducecontract costs effective in Fiscal Year 2009-10 in return for contract extensions. TheBoard also authorized any contract extensions authorized under this initiative beexecuted without competitive bidding and directed the CEO to include any resultingreductions in Supplemental Changes for the Fiscal Year 2009-10 County budget.
On June 25, 2009, the CEO, acting on the Board's direction, provided instructions forimplementation of this cost savings initiative requesting that contractors reduce contractcosts effective in Fiscal Year 2009-10 in return for contract extensions. The instructionsdirected departments to canvass their contracts that met the appropriate criteria, andsolicit offers from those affected contractors to reduce the cost of the contracts inexchange for one-year and/or two-year extensions.
Accordingly, I am recommending that the CEO propose to the Board the followingcontract amendments listed in the attachment to reduce cost and extend terms only(amendments will be approved as to form by County Counsel):
Contract Information
Our attachment contains information on contract background, contract number,
contractor, name of contract, contract start date, contract expiration date, total amountof contract, and Net County Cost (NCC). In addition, the attachment containsinformation on the recommended amendment/fiscal impact detailng the recommendedexten~ion term(s) and the percentage and dollar cost reduction for Fiscal Year 2009-10(and Fiscal Year 2010-11 if applicable), distinguishing between NCC savings andnon-NCC savings.
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Wiliam T FujiokaAugust 13, 2009Page 2
Justification
The attachment contains one or more justifications from the list below for each contractthat supports the recommendation by the Department of Public Works concluding thatthe contract amendment (extension/cost reduction) is economically advantageous to theCounty as compared to the potential results of conducting a new solicitation.
1. Extending the contract will lock in a lower price immediately and provide instantsavings that can be utiized to provide services.
2 Extending the contract provides additional savings beyond the immediate cost
reduction. There is value added by locking in old rates for future years. The NetPresent Value of future savings is considered an added value because thecontract has one or more years left in the contract, and the extension wil pròvidecost savings for several years, in addition to the extension year(s). The
cumulative cost savings is significant.
3. When comparing the current contract rate/cost to the rate/cost from the previouscontract, the rate/cost is higher than the previous contract providing evidencethat the cost of this service has increased over time and is expected to continueto increase.
4- During the last couple of solicitations for this service, Public Works experiencedlittle interest from proposers and received few or no proposals. The work is highlyspecialized and very few, if any, proposers showed interest.
5. The contract costs consist mainly of wages, equipment, and fueL. None of these
costs is likely to decrease during the life of any new contracts, and it is expectedthat over the span of a contract there wil be significant increases in these
costs
that wil be reflected in any new proposals. Accordingly, we expect the contractcost to increase when we re-bid.
6. Public Works wil realize cost savings and increased efficiencies, withoutinterrupting critical services, by eliminating the cost of conducting re-solicitations.These cost savings include the cost of advertising, reproducing and distributingRFP documents, County Counsel billing, postage, as well as freeing staff timethat can be used on additional projects for classifications ranging from clerical toDeputy Director
- - ----.-
Wiliam T FujiokaAugust 13, 2009Page 3
7 The contract is a prevailng wage contract with labor rates mandated by State orFederal agencies. Our experience has been that the mandated prevailng wageshave increased over time and that it is highly likely that the new solicitation willresult in a higher cost to the Public Works than existing contracts.
8. The contract is a Living Wage contract. The Living Wage mandates a minimumwage rate for contract labor The Living Wage wil not decrease; therefore thelabor cost of such a contract wil not be lowered through a re-solicitation since thecontractor is obligated to continue to pay the Living Wage.
9 The contract is funded whole or in part through the Fiscal Year 2009-10 Road
Fund and any savings realized is critical and imperative so that services can becontinued to be provided Due to the impact of the final State budget's deferral ofrevenue, the Road Fund is facing multiple negative budgetary cash flow impacts.Therefore, any savings through the recommended contract amendment
(extension/cost reduction) to a contract paid by the Road Fund is economicallyadvantageous to the County as compared to the potential results of conducting anew solicitation without the cost reduction offered by the contractor
10 The contract is funded through a Public Works fund that wil experience somenegative cash flow impact during Fiscal Year 2009-10 due to the impact of thefinal State budget's shifting of property tax - revenue. Therefore, any savingsthrough the recommended contract amendment (extension/cost reduction) to acontract paid by anyone of these impacted funds is critical and imperative sothat services can be continued to be provided.
11 This contract has received a negative COLA during the current contract period.This negative COLA remains in effect even though prices for items such as fuelhave increased substantially in the interim- The cost reduction would fock inthese already lowered rates as well as provide for increased savings.
Please contact me if you have any questions, or your staff may contactGhayane Zakarian, Administrative Services Division, at (626) 458-4078 orgzakaricædpw.lacounty.gov.
JC:plp'\aspub\CONTRACT\Jesus\Contract Cost Reducton Lettrs\Contract Exensions Cost Reductions Dept Memo Template 1 (2).doc
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Pro
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um.
I, ..
10 o
f 10
ATTACHMENT II
- - --':.'
COUNTY OF LOS ANGELESTREASURER AND TAX COLLECTOR
MARK J. SALADINOTREASURER AND TAX COLLECTOR
August 14, 2009
TO: Willam T FujiokaChief Executive Offcer
Mark J. Saladino /1Treasurer and Tax Colle~
CONTRACT EXTENSION AND COST REDUCTION APPROVAL REQUEST
FROM:
On June 16,2009, the Board, on motion of Supervisor Ridley-Thomas, instructed theChief Executive Office (CEO), working with the Internal Services Department, CountyCounsel, Auditor-Controller, and other departments as needed, to develop theparameters for a contract cost savings initiative by requesting that contractors reducecontract costs effective in Fiscal Year 2009-2010 (FY 2009-2010) in return for contractextensions. The Board also authorized any contract extensions authorized under thisinitiative be executed without competitive bidding and directed the CEO to include anyresulting reductions in Supplemental Changes for the FY 2009-2010 County Budget.
On June 25, 2009, the CEO, acting on the Board's direction, provided instructions forimplementation of this cost savings initiative requesting that contractors reduce contractcosts effective in FY 2009-2010 in return for contract extensions. The instructionsdirected departments to canvass their contracts which metthe appropriate criteria, andsolicit offers from those affected contractors to reduce the cost of the contracts inexchange for one-year and/or two-year extensions.
Accordingly, i am recommending that the CEO propose to the Board of Supervisors thefollowing contract amendment to reduce cost and extend terms only (amendment hasbeen approved as to form by County Counsel):
Contract No. #75266 . All Direct Mail Services, Inc.
Background
Contract No. #75266 was awarded to All Direct Mail Services, Inc. (ADMSI) toprovide mailing services effective June 1,2005. The contract term is one (1) yearwith four (4) one-year renewal options and six (6) month-to-month extensions fora maximum total contract term of five (5) years and six (6) months. The contractis currently in the final option year and wil expire on May 31, 2010. The total
- - --","
Mr. Willam T FujiokaAugust 14, 2009Page 2 .
amount of the contract sum is $1,375,000 for five years ($275,000 per year). Thenet County cost (NCC) for FY 2009-2010 is $114,600.
Recommended Amendment/Fiscal Impact
TTC recommends amending this contract by adding two (2) additional optionyears, for a total of six (6) one-year renewal options. In exchange, ADMSI isoffering an immediate 12% per unit cost reduction, to be effective after Boardapproval of the extension. The projected gross savings wil be over a two yearand nine month period as follows:
9 month's savings in 2009.2010*:/*Estimate based upon Board approval by September 1,2009.)
S&S Revenue NCeDecrease Decrease Decrease
12% cost reduction $ 15,000 $ 6,000 $ 9,000
12 th' . 20102011mon s savlnQs in .~
S&S Revenue NeeDecrease Decrease Decrease
12% cost reduction $ 19,000 $ 8,000 $ 11,000
12 th' . 2011 2012mon s savings In .S&S Revenue NCe
Decrease Decrease Decrease12% cost reduction $ 19,000 $ 8,000 $ 11,000
Justification
Mailng services are required in order for TTC to meet legal deadlinerequirements and to manage TIC's workload due to the volume of mailngs.
An analysis was penormed by TIe to conclude that the recommended contractamendment is economically advantageous to the County as compared to thepotential resuits of conducting a new solicitation.. The amendment will also delaya possible cost increase following a new solicitation. In addition, therecommended contract amendment wil ensure a continuation of quality mailngservices to TIC. ADMSI has proven to be a responsive contractor.
Please let me know if you have any questions, or your staff may contactW. Michael Harman at (213) 974-2030 or mharman(Wttc.lacounty.gov.
f
c: County Counsel
