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HomeMy WebLinkAbout2011-07-19; City Council; MinutesMINUTES SPECIAL MEETING: CARLSBAD CITY COUNCIL WORKSHOP DATE: JULY 19, 2011 TIME: 11:00 AM PLACE: CITY ADMINISTRATION BUILDING, ROOM 173A, 1635 FARADAY AVENUE, CARLSBAD, CA The Mayor called the meeting to order on April 19, 2011 at 11:00 a.m. Present: Hall, Kulchin, Packard and Blackburn. Absent: Douglas. REGIONAL REPORTS Kulchin: No report. Hall: Council Member Hall, Carlsbad representative on the SANDAG Board of Directors and SANDAG Transportation Committee, reported that 1-5 funding of approximately $800 million would not be available until 2035. Packard: No report. Blackburn: No report. PRESENTATION - BEST VALUE SERVICES The following records were submitted for this discussion and are on file in the Office of the City Clerk: • Approaches to Delivering Best Value Services, Power Point presentation, July 19, 2011. • Delivery of Best Value Services -July 8, 2011, City Council Workshop, Memorandum to Mayor and City Council from City Manager, July 8, 2011. • Approaches to Delivering Best Value Services-July 15, 2011, Memorandum to City Manager from Cradock Stropes, Management Analyst and Greg Hermann, Senior Management Analyst. Council received a presentation from Deputy City Manager Cynthia Haas, Assistant City Manager John Coates, Senior Management Analyst Greg Hermann and Management Analyst Craddock Stropes. Staff explained that a broad range of cities and processes were researched in order to provide Council with a comprehensive report. Carrollton, Texas, was identified as a city similar to Carlsbad in characteristics and demographics, and Carrollton's Director of Competition Tom Guilfoy was in attendance to explain Carrollton's Best Value Service program and answer questions from the Council. City Council Workshop July 19, 2011 Mr. Guilfoy outlined goals, processes and review and evaluation techniques used for their managed competition model and explained his role in assisting departments to operate more efficiently and to stay competitive. He stated that services were designed to fit the needs of the community and that "quality" was written into all contracts. Of the eleven business units/departments evaluated for managed competition, four were outsourced. In response to questions from Council, Mr. Guilfoy explained Carrollton's "better, faster, friendlier, cheaper" philosophy, the importance of staff training and coaching to operate in a new environment and the gap between the private and public sectors. Mayor Hall, with Council concurrence, directed staff to provide an initial recommendation for proceeding with a managed competition program, and the pros and cons of committees to assist in the running of the program. PROPOSED SENATE BILL NO. 833 The following document was distributed for this item and is on file in the Office of the City Clerk. • Senate Bill No. 833 as amended in Senate April 25, 2011. Joshua Clevert, representing the San Diego Sierra Club came forward to address Council regarding the Senate Bill, water supplies and the relocation of aquaducts. Mayor Hall, with Council concurrence, directed staff to send written opposition to Senate Bill No. 833 on behalf of the Council. Council Member Blackburn stated that he needed more information on this item. COUNCIL PRIORITY PROJECTS The above document was distributed to Council Members and is on file in the Office of the City Clerk. Mayor Hall adjourned the meeting at 1:00 p.m. Donna Heraty II Deputy City Clerk 7/18/2011 Approaches to Delivering Best Value Services July 19, 2011 Agenda • Carlsbad's current approach to contracting for services • Research on approaches to providing best value services 7/18/2011 Carlsbad's Current Approach to Contracting for Services Cynthia Haas, Deputy City Manager Carlsbad's Approach to Contracting • Definitions • When we contract • Current contracts 7/18/2011 Important Work Accomplished by Many People... • Full-time • Part-time • Seasonal • Temporary • Volunteers • Elected and Appointed Officials • Independent Contractors & Consultants Definitions • Contractor- Includes vendors and means any business entity/party that has entered into a contract with the city for the provision or disposition of goods, services, professional services and/or construction projects. • Only responsible for the results rather than method and supply their own labor, materials, supplies, equipment and office space. • Includes "consultants" or advisors 7/18/2011 We May Contract When... We lack the knowledge or expertise on a subject. Liebert Cassidy Wfirtmore* -, We May Contract When... We need a third party to do the work: neutral, independent, unbiased Financial audits Business . Process Reviews J Surveys CM Environmental Review [bw]RESEARCH PARTNERSHIP 7/18/2011 We May Contract When... It is more cost effective and quality can be maintained CARLSBAD We May Contract When... It is necessary to maintain optimal staffing levels during times where workload is unusually high - Emergencies - New Programs/Mandates - Special Projects City Employee Contractors 7/18/2011 Example Questions Contracting • Special knowledge or skills? • Need control? • Multiple contractors available? • Appropriate quality? • Less cost? • Special equipment required? • Do we have the staff to do it? • Stand alone service? • Meet the schedule? Current Contracts FY 2011 contracted for $25 million in general fund services - $3 million in wastewater treatment - $1 million in planning services - $850,000 in landscape maintenance - $8.5 million in solid waster disposal Also contract for $20 million in services for CIP 7/18/2011 Research on approaches to providing best value services Craddock Stropes, Management Analyst Greg Hermann, Senior Management Analyst John W. Coates, Assistant City Manager Research Findings Service Evaluation Processes Who Guides the Process Service Delivery Options 7/18/2011 Methodology • Quantitative and qualitative research studies conducted by other cities and trade organizations • Academic research • Articles from newspapers and trade publications • Case studies from other cities and public agencies • White papers compiled by industry experts • Interviews with representatives of cities Methodology - Cities Included Bloomington, IL Carrollton, TX Centennial, CO Charlotte, NC Chula Vista, CA Colorado Springs, CO Corpus Christi, TX Costa Mesa, CA Escondido, CA La Quinta, CA Long Beach, CA Newport Beach, CA Oceanside, CA Phoenix, AZ Rockford, IL San Diego, CA San Marcos, CA Ventura, CA Vista, CA Tifton, GA Yuma, AZ 7/18/2011 Methodology - Resources • International City/County Management Association • League of California Cities • National League of Cities • Government Finance Officers Association • Reason Foundation • National Council on Public-Private Partnerships • Academic research and white papers • Newspaper and trade publication articles • Conference presentations Service Evaluation Processes • Internal review • Competitive analysis • Managed competition 7/18/2011 Internal Review • Self-assessment of a service's current level of effectiveness and efficiency • Completed upon assignment, often under regular annual review ICMA leaders at the Core of Better Communities 'VISTA BOOflFCRD iSBSSSSTCityoflort.CgjHnj Competitive Analysis • Compares a department's current capabilities, costs and performance with other potential providers to determine the level of competitiveness • Short-term approach; limited time frame • May not lead to sustained efforts cm-ofCHUIA VISTA City of YUM A 10 7/18/2011 Managed Competition Guided process in which private-sector providers are encouraged to compete with city departments to provide public services Long-term strategy; involves significant cultural change CARROLLTON CityofPhoenix TEXAS TKC CTTY or SAN Who Guides the Process • Staff • City Council / elected officials • Citizen committees 11 7/18/2011 Staff • Provide data and background knowledge necessary for services evaluation • May involve all levels of an organization City Council/ Elected officials Can have varying levels of responsibility depending on process selected Typically make final policy decisions regarding service delivery options 12 7/18/2011 Citizen Committees Can advise on appropriate service levels, efficiencies and outsourcing opportunities CITY OF COLORADO SPRINGS Service Delivery Options • In-house services • Contracted services • Shared services • Privatization 13 7/18/2011 In-house Services A service delivery option that utilizes city staff exclusively Contracted services Involves a competitive bidding process in which requests for proposals are disseminated to eligible vendors 14 7/18/2011 Shared Services Concentrates related resources performing like-activities in order to service multiple partners at lower cost and with higher service levels Privatization Service provision is completely transferred from the public sector to the private sector 15 7/18/2011 Service Evaluation Processes Summary Who Guides the Process Service Delivery Options Questions 16 All Receive For the Information of the' City Manager £^-~ TO: CITY MANAGER FROM: Human Resources Director CITY COUNCIL POLICY ON REHIRING OF RETIRED ANNUITANTS This memorandum is prepared in response to a request by the Mayor and City Council to explore the possibility of creating a City Council policy concerning the rehiring of retired City employees. There are essentially two ways that a retired city employee can be reemployed by the city - as a part-time/hourly employee or as an "independent contractor". Those retirees employed on an hourly basis must adhere to the rules and regulations concerning reemployment as outlined by the California Public Employees' Retirement System (CalPERS); those who are reemployed as independent contractors are not subject to the CalPERS rules regarding reemployment but instead must adhere to the requirements for independent contractor status as outlined by the Internal Revenue Service and by the City of Carlsbad's Purchasing Ordinance. Some factors that indicate that a retiree is operating as an independent contractor include possession of a City of Carlsbad business license, a place of business separate from City facilities, and other business clients in addition to the City of Carlsbad. This memo will address the current practices associated with the reemployment of retired employees on an hourly or part-time basis only - guidelines concerning the process for hiring independent contractors can be found in the Purchasing Ordinance. The City of Carlsbad adheres to the rules and regulations outlined in the California Government Code and the California Public Employees' Retirement System (CalPERS) law regarding working after retirement. Generally, a retired annuitant (i.e. a person receiving a pension under the CalPERS system) may not work for a CalPERS employer without reinstatement. However, there are several exceptions to this rule that have been established by CalPERS that permit the reemployment of retired annuitants under certain circumstances. Some of the most common exceptions that allow for a retired annuitant to be hired back with a CalPERS agency on a part- time basis include the following: • Leave of absence of regular employee exception (the retired annuitant is filling in when a regular full-time employee is on a leave of absence) • Litigation exception (the retired annuitant is being retained because he/she is involved in litigation on behalf of the agency and the agency desires to preserve his/her testimony) • Special skills or to prevent stoppage of work (21221(h)) exception (the retired annuitant is appointed by the governing body (City Council) and has the skills needed to perform work for a period not to exceed 12 months) • "Special position" exception (the retirad annuitant is reemployed into a position designated as acceptable by CalPERS, including reemployment as a member of the governing board of the contracting agency (e.g. as a City Council member), as an appointed member of the governing body of a contracting agency, as a crossing guard, a juror, a member of a legislative committee, among others) • Disability retirement exception (allows a person retired for disability to work in a position that is significantly different from that which the member retired until he/she has reached the mandatory retirement age in the position he/she will be reemployed) • Special skills or to prevent stoppage of work (21224) exception (the retired annuitant is appointed by the "appointing power" of a public agency (City Manager/City Attorney) and has the skills needed to perform work of limited duration) The last exception listed (the special skills (21224) exception) has been used for many years at the City of Carlsbad in order to enable retired annuitants to be reemployed on a part time basis under certain circumstances. Under this exception, retired annuitants have been called to assist the city on a temporary basis when there are spikes in workload, work-related injuries, leaves of absence, and vacations. Retired annuitants have also filled in when the city is recruiting for hard-to-fill positions, provided help on limited term special projects, and conducted background investigations. If the retired annuitant falls under one of these exceptions, he/she may be reemployed by the agency under the following general CalPERS regulations: J The retired annuitant must be of "normal retirement age" which, in the case of Carlsbad employees, is 50 for safety employees and 60 for miscellaneous and management employees S If the retired annuitant is not of "normal retirement age", he or she may still be reemployed as a retiree as long as 1) there was no agreement to return to work as a retiree before the employee retired and 2) there is a bona fide break in service of 60 days or longer between the date of retirement and the date the retired annuitant returns to work J The retired annuitant's assignment will not exceed 960 hours in a fiscal year Under Option #3 above, there are a number of ways that the City Council could opt to make the provisions for reinstatement more restrictive for retired annuitants. These include reducing the number of hours that can be worked in a fiscal year to a number less than 960, limiting the number of fiscal years that can be worked in succession, or imposing a waiting period between the date of retirement and the date of rehire. The City of Carlsbad is currently in compliance with CalPERS rules and regulations concerning the reemployment of retired annuitants, and regulations in this area are extensive and subject to change periodically. Therefore, if the City Council direction is to continue the city's current practice of adhering to the provisions outlined in the California Government Code and CalPERS law concerning the reemployment of retired annuitants, staff's recommendation is that we do not attempt to formalize the current processes and procedures within a Council policy. However, if the City Council desires to make the provisions for reinstatement more restrictive, it is staff's recommendation that a Council policy be drafted and adopted to reflect the guidelines that would be unique to Carlsbad. Please let me know if there is any additional information you require. JULIE CLARK •S The retired annuitant is not filling a regular, part time position but instead is performing work that is on call, as needed, supplemental or used to fill gaps for regular employees V The retired annuitant's rate of pay will not be less than the minimum, nor exceed the maximum that is paid to employees performing comparable duties. There are a number of advantages to using retired annuitants to supplement the city's regular workforce. In addition to giving us flexibility to addrers temporary hiring needs as previously described, retired annuitants possess institutional knowledge that can often not be duplicated, and the use of their services often provides cost savings to the city. One example of this can be found in the way that the city conducts its background investigations. Our practice has been to use retired annuitants who have formerly served in the fire and police departments to conduct background investigations of safety job applicants. This work is done on an "as-needed" basis whenever potential new hires are being processed, and it is work that must be done by a sworn safety officer or a hired private investigator. Using retired annuitants in this capacity results in a financial savings when compared to using an outside firm to perform the same type of work. Currently, the City of Carlsbad is guided by the provisions outlined above in the employment of retired annuitants. This information is accessible on the CalPERS website and is included in the CalPERS publication called "Employment After Retirement." In cases where it has been determined that specialized skills are needed and that a retired annuitant can provide such skills, the city has employed retired annuitants on an hourly basis for periods that do not exceed the 960 hour limitation. As there are penalties for both the retired annuitant and the employer if these rules are not followed, the Human Resources Department oversees both the hourly rate paid to retired annuitants and the number of hours worked in each fiscal year. There are several options for Council consideration in terms of creating a Council policy addressing the rehiring of retired annuitants: 1. Continue the city's current practice of adhering to the provisions outlined in the California Government Code and CalPERS law concerning the reemployment of retired annuitants without codifying them in a Council policy 2. Formalize the city's position to follow the established rules and regulations by restating the current restrictions in a City Council policy 3. Draft a City Council policy to make the provisions for reinstatement for City of Carlsbad more restrictive than those outlined by the California Government Code and CalPERS law or to prohibit the reemployment of retired annuitants altogether. CITY OF CARLSBAD Memorandum July 8, 2011 To: Mayor and City Council From: City Manager f Re: July 19th Council Workshop - Articles Relating to Public Agencies and the Delivery of Best Value Services At the Council's workshop on July 19th, staff will be presenting a summary of the results of the research that has been done on public agencies' approaches to delivering best value services. In preparation for that meeting, I am providing you a few of the articles that were used in preparing the report in case you would like to do some advance reading on the topic. The articles are: • Government Finance Officers Association Best Practice Statement on managed competition • A report on outsourcing written by Public Financial Management, Inc. for the city of Colorado Springs • Two documents from Carrollton, TX about their managed competition process • A report compiled by the city of Bloomington, IL on managed competition (while not a source document in itself, it is a nice summary of their research into the topic) Please let me know if you have any questions about the information. C: City Attorney |Date; 7////// City Clerk • .T~\. / /I Distribution: ; Attachments (4) I City Clerk | Asst. City Clerk LH/src j Deputy Clerk City Hall 1200 Carlsbad Village Drive I Carlsbad, CA 92008 I 760-434-2820 I 760-720-9461 fax I www.carlsbadca.gov GFOA of the US & Canada - GFOA Best Practices and Advisories Page! of2 GFQA of the US & Canada HOME CONTACT US JOIN GFOA MEMBER DIRECTORY PUBLICATIONS TRAINING CONSULTING search... Home Join GFOA About Us Contact Us Annual Conference Adv. Govt. Finance Institute Award Programs Best Practices & Advisories • Accounting. Auditing. Financial Reporting Budgeting and Fiscal Policy Debt Management Economic Development and aoital Planning Retirement and Benefits Treasury and Investment Management Budget Practices Certification (CPFO) Committees/Groups Employment Ads Consulting Services e-Store Federal Government Relations Government Finance Review Links Newsletter OPEB Toolkit Publications Public Policy Statements Research Resources Recovery from Financial Distress State/Provincial Assn. Events Student Opportunities Topic Search Training Communities GFOA Best Practices and Advisories In 1993, the Government Finance Officers Association (GFOA) Executive Board directed the association's staff to work with the GFOA standing committees to develop a body of recommended practices in the functional areas of public finance to give GFOA members and other state and local governments more guidance on sound financial management practices. This effort represented a fundamental new direction for GFOA and one that is still evolving. In 2009, the GFOA's Executive Board determined that GFOA's Recommended Practices should be reclassified as Best Practices and Advisories. A GFOA Best Practice identifies specific policies and procedures as contributing to improved government management. It aims to promote and facilitate positive change rather than merely to codify current accepted practice. Partial implementation is encouraged as progress toward a recognized goal. A GFOA Advisory identifies specific policies and procedures necessary to minimize a government's exposure to potential loss in connection with its financial management activities. It is not to be.interpreted as GFOA sanctioning the underlying activity that gives rise to the exposure. The ongoing and nature work of the standing committees will be the development of Best Practices and Advisories. This resulting collection of Best Practices and Advisories have been approved by the GFOA Executive Board after careful development by the standing committees. Each practice and advisory was developed drawing on the collective wisdom of more than 50 persons with extensive and diverse experience in public finance. The best practices are intended to identify enhanced techniques and provide information about effective strategies for state and local government practitioners. These Best Practices and Advisories are written as guidance for our members. You should check with your own professionals about specific issues related to your government. May 2011 - GFOA's Executive Board Approves New Best Practice: Designing and Implementing Sustainable Pension Benefit Tiers Best Practices and Advisories By Category Accounting, Auditing, and Financial Reporting Budgeting and Fiscal Policy Canadian Issues Debt Management Economic Development and Capital Planning Retirement and Benefits Administration Treasury and Investment Management GFOA Best Practices and Advisories that were approved by the Committee on Canadian Issues as applicable to Canadians are also available in the Canadian section. 1 Back 1 i : J_1 7/1 BEST PRACTICE Managed Competition as a Service Delivery Option T2006) (BUDGET) Background. Governments are continually tasked with providing high quality services within the constraints of limited financial resources. In order to meet this challenge, many governments have turned to the private sector or other governments as an alternative to in-house service delivery as potential ways to save money or improve services. One choice within potential service delivery options is managed competition, in which governments require in-house service units to compete with external providers. Recommendation. The Government Finance Officers Association (GFOA) recommends that governments systematically identify and evaluate the major factors in considering a managed competition option. Service level, cost, efficiency, effectiveness, quality, customer service, and the ability to monitor the service provider's work should be essential components of any managed competition decision. In addition, governments should clearly define the service parameters in the expected service delivery. When evaluating whether to undertake a managed competition initiative, governments should consider the following key points: 1. Executive Direction. The heads of government must support a move toward a managed competition service delivery model. Support from the government's executive and legislative leadership is essential. The governmental leaders should establish clear expectations and standards for such an initiative. It is necessary to have a transparent process. 2. Environmental Consideration. Consideration must be given to how managed competition is affected by demographics, the economy, geography, citizen sensitivity and the local political environment. Organizations are encouraged to closely evaluate the strengths and weaknesses of the jurisdiction relative to the managed competition option. Consideration should also be given to an analysis of opportunities and threats on the environment external to the organization. A look at how other communities have fared with managed competition for that particular service may be necessary. 3. Stakeholders' Support. Stakeholders need to be appropriately involved. Stakeholder groups may include unions, employees, media, advocacy groups, local businesses, and the public. By involving stakeholders in the managed competition process, governments will have a better opportunity to convince stakeholders of the value of a competitive service model. 4. Legal Ramifications. Issues associated with employment law compliance and existing labor agreements must be considered. If a switch to managed competition affects union employees, options like workshops, meetings, and open forums should be considered to communicate to labor unions the possible benefits of managed competition. Human resource impacts should be a factor when making the determination whether to go ahead with managed competition. As part of the negotiations with potential contractors, thought should be given to hiring the current workforce or retraining current employees for reassignment. It should be noted that shifting a service to a contractor might transfer liability and other risks to the contractor (even though these risks are likely built into the contract price). 5. Service Availability. The services considered for managed competition should be measured against the availability of the service in the market place. Some services, such as trash collection and building construction, may lend themselves to competition. Fairness of competition should also be analyzed. In addition, consideration should be given to the total investment that the government has made in the current service delivery. A substantial prior investment may preclude the government from entering into a competitive situation. 6. Cost The cost decision as to whether to perform a service "in house" or outsource it to an external provider involves four basic steps. Determining the different cost structures is necessary before proceeding with the request for proposal (RFP). However, cost should not be the only basis in comparing competitive bids. Governments should develop a decision-making process that seeks to account for all relevant factors. • Service definition. The first step in a cost analysis is to clearly define the government service that is being considered for outsourcing. A thorough analysis of the service level and performance standards will provide the best framework for evaluating the full cost of the service, whether it continues to be delivered in-house or it is outsourced to an external provider. • Calculate the in-house costs that could be avoided by outsourcing the service. GFOA's Best Practice, Measuring the Cost of Government Services, defines the full cost of a service, as that which encompasses all direct and indirect costs related to that service. Governments should understand that not all indirect costs would be avoided if the service were outsourced. • Estimate the total costs of outsourcing. The costs of outsourcing include the contractor's bid price, the government's contract administration costs, and the government's transition costs, less any new revenue generated from outsourcing. • Compare the cost savings from outsourcing to the costs incurred. The final step in a make-versus-buy cost analysis is to calculate the difference between the costs saved by outsourcing a service and the costs incurred. If the costs saved are significantly greater than the costs incurred, then outsourcing may make financial sense. 7. Transition Process. Governments must be fully prepared to allow for a smooth transition if a change in a service delivery provider takes place. It is essential that initial monitoring occur to make sure that no disruption in service arises. 8. Performance Metrics. Governments must employ performance metrics as a means of comparing and evaluating efficiency and effectiveness standards for service activities. Elements like productivity, quality, timeliness, and desired outcomes are needed. Contract staff must be prepared to develop and manage a competitive services agreement. The success of competitive service delivery often rests on the ability of the organization to develop and manage a strong performance based services agreement (including appropriate incentives and penalties). It is imperative that an organization develops the skills to design relevant performance metrics that ensure service quality. The establishment of consistent benchmarks that measure service performance is essential. References • GFOA Best Practice, "Performance Management: Using Performance Measurement for Decision Making, 2002 - Updated Performance Measures," 1994. • GFOA Best Practice, "Measuring the Cost of Government Services," 2002. • "Make or Buy? Using Cost Analysis to Decide Whether to Outsource Public Services, " Government Finance Review, August 2004. • GFOA Best Practice, "Establishment of Strategic Plans," 2005. Approved by the GFOA's Executive Board, October 6, 2006. PUBLIC FINANCIAL MANAGEMENT, INC. Outsourcing Methods & Case Studies City of Colorado Springs Sustainable Funding Committee 04/10/2009 OUTSOURCING Overview 3 Types of Outsourcing 3 When to Outsource 4 When not to Outsource 5 Outsourcing Guidelines 6 Case Studies 11 Managed Competition 15 Public-Private Partnerships 17 Outsourcing Advisory Boards 18 Outsourcing in Colorado Springs 19 Conclusion 20 Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 2 of 21 OUTSOURCING Overview Outsourcing is a useful tool employed by cities across the country to cut costs, improve quality of service, and raise revenue. Approximately 80 percent of all U.S. cities outsource some services1. It also can help free up limited city resources for more critical public goals such as improving overall quality of life, maintaining public safety, and sustaining economic growth. Although outsourcing has in recent years been a subject of controversy, engendering the opposition of municipal and private sector labor unions alike, it has the potential to depoliticize certain aspects of service delivery, as fixed contracts allow for better budget control and reduce the need for controversial service cuts. In addition, it reduces the need for direct personnel management by shifting these responsibilities to the contractor. Outsourcing is not simply limited to private vendors; services can be outsourced to other public entities as well. When correctly applied and executed, it can maximize performance, increase operational efficiency, and better deploy resources to meet critical goals. However it should only be applied carefully and selectively to those areas where significant cost and efficiency gains can be attained. Types of Outsourcing Outsourcing can occur in many forms, as listed below: » Contracting out typically involves a competitive bidding process in which RFPs (Requests for Proposals) are disseminated to eligible vendors. Some city and state governments require contractor registration prior to bidding while others independently select potential contractors based on experience and reputation. Contractor proposals are then evaluated and a decision is made based on either a cost or "best value" basis. Contractor performance is then monitored and managed in view of predetermined service goals. • Public-Private Partnerships are cooperative arrangements between governments and private organizations to jointly fund or operate a particular program, project, or service. Public-private partnerships typically involve concerned local stakeholders helping to provide a program, project, or service of a particular value to a local community or neighborhood. Such arrangements benefit both the government and the private organizations involved by 1 Outsourcing in State and Local Governments: A Literature Review and a Report on Best Practices. University of Tennessee Center for Business and Economic Research. September 21, 2006. ftp://ftp.nashville.gov/web/sserv/Outsourcing_Lit_Review_Final_0926.pdf Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 3 of 21 undertaking a valuable service, project, or program that could not be carried out independently by either entity. • Volunteers or volunteer associations are often called on to provide public services highly valued by community members for no cost to the city. Many cities use volunteers for park maintenance, recreational programs, and neighborhood watch activities among other programs. • Load shedding involves government relinquishing the responsibility for providing services or operating a program. Most often, this is done with the understanding that another entity, public or private, will buy the public assets associated with the service or program and offer these itself2. An example would be handing off of a city museum to a private museum foundation or control of a city park to a local parks conservancy. • Franchising involves the licensing of private service providers to exclusively provide public services in a particular area. Private vendors then charge city residents fees for the services they provide. Although rarely used by city governments, franchising can sometimes be a more efficient way for larger cities to organize residential waste collection and hauling. • Vouchers involve government payments to third parties for goods or services provided to residents. Vouchers are often used to enhance the competition and availability of a service to residents without direct government service provision3. While commonly used by school districts, housing, and social service agencies, vouchers can also be used to provide municipal employee benefits. When to Outsource Outsourcing has been used by cities to solve various problems ranging from a Jack of internal expertise to a need for significant cost reductions. Many cities have found that equipment, maintenance, or labor costs for providing a service have risen faster than budgeted revenues. In these cases, some have found that the economies of scale and resulting efficiencies enjoyed by private vendors can be brought to bear on behalf of city agencies, reducing the cost of providing services and shielding cities from labor and equipment cost increases over the length of the contract. Other cities have found that outsourcing allows them to improve quality, by utilizing a contractor with more knowledge and expertise in providing a particular service. City 2 Richard D. Wertz and Charlie Tyer. "The Privatization of Local Government Services: A Growing Trend," The South Carolina Policy Forum Magazine, Vol. 8, no. 2. Spring 1997: 30-41. J Kevin R. Kosar. "Privatization and the Federal Government: An Introduction." Congressional Research Service. December 28, 2006. http://fas.org/sgp/crs/misc/RL33777.pdf Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 4 of 21 agencies faced with providing a new service can lack the skills, experience, and expertise necessary to produce quality results, making a contractor a more practical option. Moreover, a contractor's profit motive often leads it to offer the best product at the lowest price in order to obtain future business. Shifting responsibility for service delivery to a contractor can also allow city agencies to focus more on achieving their core missions rather than spending time on administrative tasks. In general, private contractors operate under fewer bureaucratic and regulatory constraints than public entities. They are less likely to be bound by inflexible collective bargaining agreements and civil service regulations, and therefore have more flexibility in adjusting staffing levels. In addition, they are less restricted by strict procurement regulations and operational procedures that can slow down service delivery and inhibit the development of more effective solutions. This yields greater potential for increased innovation and flexibility in improving service delivery. Outsourcing also enables cities to increase accountability for service delivery. It is often difficult to terminate city employees for poor performance. However, contracting allows cities to hold the service provider accountable for service delivery, through the use of contract renewal, performance bonds, and lateness penalties. Rebidding a contract on a regular basis enables a city to compare performance and hold existing contractors accountable by regularly subjecting them to competition. In addition, performance bonds and lateness penalties protect cities from the effects of poor performance; in contrast, these costs are often not recovered under in-house operation. When not to Outsource Outsourcing is not a universal panacea for all cost and performance problems. In many cases, it can be an inappropriate option for certain city services and carries with it a great deal of risk, which, unmitigated, can produce catastrophic results. There are several instances in which the risk of contractor failure will outweigh the potential benefits from outsourcing. Cities should never outsource functions that are inherently governmental, such as law enforcement, policy making, and public safety. These functions are essential to the well being and quality of life of citizens and therefore should never be subjected to the risk of contractor failure. In addition, maintaining city control over these functions is a critical component of maintaining democratic control and accountability over city services. For this reason, it is often best to first identify and evaluate services that are the best candidates for outsourcing, and exclude those for which these risks are unacceptable. In general, outsourcing should never be considered for areas where there is not sufficient private sector expertise and experience. Often, in-house staff have years of valuable experience and know-how that cannot be replicated in the private sector. Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 5 of 21 Losing this expertise when engaging a contractor can be very regretful in the event the contractor fails to meet minimum performance standards. Contracting should be used to select only experienced, well-qualified vendors with a proven methodology- when they are available. In addition, outsourcing should not be used for new programs and initiatives with undefined goals and expectations. This precludes the ability to hold contractors accountable for results and creates an enormous potential for waste, fraud, and abuse. The fixed nature of contracts also locks the city into financial obligations that exist even after new programs are redesigned, scaled back, or eliminated. Moreover, when there is a significant risk of city administrative upheaval, outsourcing is not an advisable option. Sometimes high turnover among contract negotiation, supplier management, and contract enforcement staff can obviate the development of institutional knowledge and memory that ensures effective contractor monitoring and management. Frequent changes in contract management staff and policies sometimes lead governments to overlook critical cost overruns, quality management, and performance problems. Outsourcing a function carries with the loss of certain advantages derived from in-house work. For example, outsourcing often leads to a loss of control over personnel, work practices, and quality control. The consequences of this loss can vary depending on the type of service outsourced. In addition it can entail a substantial commitment of administration and oversight, which will vary with the risk of contractor failure and the potential consequences of that failure. Administration requires extra time and effort to be spent drafting RFP's, soliciting bids, writing specifications, and setting performance standards. Disputes with contractors can also sometimes saddle the city with the unexpected liability of contesting civil litigation. In addition, since contractors are not accountable to the public and have only the profit motive as a driving force, they may be less likely to be responsible with the public assets and taxpayer dollars they receive. Furthermore, there is the genuine risk of contractor bankruptcy or failure that can put the provision of critical city services in jeopardy without adequate stop-gap measures in place. With these considerations in mind, there are several steps that cities can take to minimize the effect of these disadvantages and protect against these risks. Outsourcing Guidelines In advance of any outsourcing consideration, certain issues should be taken into account before deciding whether contracting will work in a particular service area. Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 6 of 21 In-house versus Outsourced Service Delivery An outsourcing decision should be based on the fact that the service cannot be performed more efficiently in-house. In order to determine this, a city should fully estimate the internal cost-of service and weigh this against the cost of engaging a contractor. Often, public agencies find that it is more cost-effective to reorganize or improve operations than turn to a third party contractor. The potential costs and benefits of an internal improvement initiative should be considered before making a final outsourcing decision. When estimating the in-house cost of service, a city should include some measure of the costs related to managing employee payroll, pension and health benefits, workmen's compensation claims, and other personnel management functions to accurately compare with indirect costs borne by contractors, not immediately apparent in the contractor quote. In addition, when weighing the costs and benefits of in-house versus contracted service delivery, it is essential to incorporate any additional contract administration costs into a contracting estimate. Adequate contractor monitoring and management can often incur significant costs that should be fully incorporated into the outsourcing estimate. Procurement regulations and existing contractual arrangements can be significant impediments to the advancement of an outsourcing initiative. It is critical that legal limitations and requirements be considered when evaluating or implementing an outsourcing option. Additionally, the political viability of any large scale outsourcing of services should also be considered. Outsourcing initiatives have the potential to decrease employee morale and often incur strong opposition from municipal employee unions. These political factors should always be planned for and considered in advance of an initiative, with sufficient attention paid to employee and union concerns. Deciding on a Contractor When initiating the RFP process, it is best to send out the RFP to a wide array of potential vendors, to prevent a monopoly bid and increase the number of viable options before the city. Obtaining a sufficient number of proposals is critical to realizing the benefits of contractor competition. However, the RFP submittal should also be restricted to vendors reasonably experienced and qualified to provide the service. When soliciting bids, checking the track records and past clients of contractors can be a helpful way to restrict bids to qualified, higher quality contractors. Doing preliminary Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 7 of 21 research on a contractor can weed out questionable contractors and simplify the decision-making process in the final evaluation. In addition, fully recognizing the city's strategic interests and performance goals can be key in selecting the right contractor. Selecting a contractor who fully meets and aligns with city goals and expectations is critical to maximizing performance and preventing future problems and delays. Furthermore, the lowest bid contractor is not always the best contractor. Low bid contractors are often inexperienced, underestimate the cost of service, and sometimes pass on significant additional costs in the form of cost overruns, delays, and poor quality work needing remediation. In addition to cost, including quality ranking factors that identify and incorporate vendors' strengths and weaknesses in the final evaluation can mitigate this risk. Post Selection When outsourcing a particular program or service, cities often have to reduce their workforce associated with that area. The prospect of mass layoffs or forced retirements can be very controversial and endanger the success an outsourcing initiative. Many cities have dealt with this by adding a provision to the contract requiring that existing city employees be given first preference for hiring by the private vendor. Others have sought to reduce their existing workforce through attrition, hiring freezes, early retirement incentives, or employee retraining. In implementing an outsourcing initiative, a city should be mindful of the effects it will have on current city employees and plan accordingly. When outsourcing a service area, it is important to retain key managerial functions in- house. Budget control, business planning, policy making, supplier management, and performance management should always be under the control of city staff, in order to hold contractors accountable and align program activities with established city goals4. With any contracting initiative, there is the real risk of change orders and cost overruns that can unexpectedly increase the cost of the contract. To avoid this, the city should negotiate contracts that do not hold the city liable for significant cost overruns and minimize or otherwise restrict the number of allowable change orders. Sometimes, loose contract provisions enable contractors to bill for additional personnel, supply, or material costs not included in the original bid that significantly increase the overall cost to the city. Negotiated contracts should have fixed cost provisions that protect the city from such an event, as well as fully specify the work to be performed. In addition, the city should consider negotiating performance-based contracts that withhold payments 4 Paul Lauria. "Fleet Management that Should Never Be." Automotive Fleet. September 2002. http://www.mercury-assoc.com/resources/fleet-mgmt-n.mctions-not-outsource-l .pdf Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 8 of 21 to vendors until specified performance goals and metrics are met. Adopting this type of contract can further protect the city against cost, schedule, and performance risk. Sometimes, contractors pull out of contracts when they find they are ill-equipped to perform their assigned tasks. In these events, cities are often left with little or no remaining internal capacity to step in and provide the service. Retaining some staff in- house protects against this, while allowing for in-house professional advice to be provided to the contractor when needed. In addition, requiring a performance bond from contractors can also protect a city financially in the event of an abrupt pull-out. A city should fully gauge and plan for unanticipated liabilities and risks associated with a contract. As with any contract, lax standards, corruption, graft, and failure to meet performance goals and deadlines are distinct possibilities. To mitigate these effects, cities should fully plan for these contingencies as part of an overall risk management strategy for each contract. It is also important that a city actively manage its relationship with contractors. Communication of goals and expectations to contractors is critically important to successful outcomes. Lapses in communication can easily lead to unnecessary disputes in which the contractor fails to meet the goals, standards, and expectations of the city. Also critical to any successful outsourcing is adequate contract oversight and contractor monitoring to foster contractor accountability and implement quality management. Lax oversight can lead to major problems later in a project or program's life. Making sure that contractors live up to the terms of the contract and deliver the specified products and services on time is critical to ensuring a successful outcome. However, it is also important to strike a balance between tight regulation and providing the flexibility to get the job done more efficiently and at a lower cost. The following examples show common problems governments have faced when they have undertaken poorly executed and badly applied outsourcing initiatives: • Washington D.C negotiated a 7 1/z year contract with Affiliated Computer Services to install and maintain 16,500 parking meters in 1999. A recent report by the D.C Auditor revealed that from 1999 to 2005, almost 7,000 tickets were issued to vehicles parked at broken meters and the number of citizen complaints jumped from 3,652 to 89,840s. The report found that ACS suffered from a wide array of problems and inefficiencies that went unnoticed by DCDOT, the agency responsible for monitoring the contractor. ACS consistently failed to repair parking meters within the 72-hour period specified in the privatization contract, yet DCDOT remained disengaged from the quality of ACS' performance. During 5 Paul Duggan. "Parking Meter Outsourcing Costs City, Report Says." Washington Post. February 28, 2007. http://www.washingtonpost.com/wp-dyn/content/article/2007/02/27/AR2007022702115.html Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 9 of 21 the 7 1/2 year period, ACS billed the District $644,952 in bagged meter fees, which under the contract it was not entitled to, and received payment without any formal investigation. In the end, the Auditor estimated that if parking meter management had been retained in-house for the seven year period, it would have cost the city $8.8 million less than the contract with ACS6. Denver began a contract with Redflex Traffic Systems to administer its new red light traffic photo enforcement program in 2008. However, a few months into the contract, Redflex had failed to deliver key data and statistics required in the contract as well as provide support staff, maintenance reports, equipment certifications, and access to live video and still images. Under the contract, Redflex must reimburse the city $25 each time it fails to photograph all but 2 percent of detected violations. Yet the data to make this determination was never delivered to the city, making enforcement of this provision impossible to determine. At the same time, the Police Department, responsible for enforcing the contract, failed to demand any of the required reports and data until a newspaper investigation of the contract began in December 2007. The lack of data from Redflex has prevented Denver from knowing whether the red-light cameras actually deter traffic violations, the chief goal of the program7. San Diego engaged Grant Thornton, LLP to build the framework for its voter- approved managed competition program in 2007. The $658,515 contract, negotiated by the Mayor's Office, was later deemed to be illegal by the City Attorney's Office, as it was not approved by City Council as mandated by the city code8. Council members have in turn been angered by city staff's inability to tell them what products and series the city has yet received from Grant Thornton or what the City would receive in the future. Almost two years into the contract, Grant Thornton had only managed to deliver a managed competition guide and identified a few city departments as candidates for managed competition, while the Mayor's Office twice missed self-imposed deadlines to advertise for bids9. Texas negotiated a seven-year $863 million contract with IBM to transfer state records to a centralized computer system. Severe problems soon developed under the contract, including the temporary loss of half of 8 months worth of Medicaid fraud records and a failure to meet server backup timeliness targets, 6 Ibid. 7 Kevin Flynn. "Do Denver Red-Light Cameras Deter Violations?" Rocky Mountain News. January 4, 2009. http.7/www.rockymountainnews.com/news/2009/jan/04/denver-collecting-75-fines-not-red-light-traffic- d/ 8 David Washburn. "Privatization Consultant's Contract Comes Under Scrutiny" Voice of San Diego. June 20, 2008. http://www.voiceofsandiego.org/articles/2008/06/20/news/02grantthornton062008.txt 9 Helen Gao and Craig Gustafson. "Bid to outsource operations stalls amid opposition."5on Diego Union Tribune. March 23,2009. http://www3.signonsandiego.com/stories/2009/rnar/23/lrn23contract222537- bid-outsource-operations-stalls/?zlndex=71164 Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 10 of 21 for which IBM was fined $900,000. In addition, the Governor's Office found that IBM project overseers failed to implement the necessary checks and balances to ensure the project's security. As a result, the Governor recently suspended the transfer of state records to IBM10. Case Studies Several cities have had successful experiences with outsourcing in a variety of program areas: Internal City Administration Services • Atlanta, GA outsources its records management functions. With the projected sale of its City Hall East building in summer 2009, Atlanta lost its primary records storage facility. In response, the City negotiated a $150,000,10 year contract with Iron Mountain, Inc to store City records in a secure facility. A Records Management Administrative Committee composed of representatives from various City departments was created to oversee the contract. As a result, Atlanta eliminated the need for its Records Management Division, while preserving City oversight of records management activities. • Richmond, VA has in recent months moved to privatize its municipal fleet operation. The initial request for information called for mandatory performance standards that would tie full payment to meeting time and quality performance benchmarks. Under a contracting agreement, the City would retain a fleet operations manager and staff to oversee and support the private operation while the contractor would be responsible for preventive maintenance, minor and major repairs, body repairs, tire inspection and replacement, and overall management of the operation. A May 2007 report by the City Auditor estimates a potential savings of $2.6 million from contracting out these operations11. In addition, the cities of Dallas, TX, Huntingdon Beach, CA, and Montgomery County, MD have each successfully outsourced select fleet management functions. • Sandy Springs, GA completely outsources IT services for City network systems. Under a five year, $1 million contract that began in 2006, CH2M HILL provides personnel, applications, security, disaster recovery and remote infrastructure 10 Paul McDougall. "Texas Halts Work on IBM Outsourcing Contract." Information Week. October 29, 2008. http://www.informationweek.com/news/global- cio/outsourcing/showArticle.jhtml?articlelD=211800068 " "City of Richmond Moves.to Outsource Vehicle Services." Government Fleet. July 9, 2008. http://www.government-fleet.com/Channel/Maintenance/News/Story/2008/07/City-of-Richmond-Moves- to-Outsource-Vehicle-Services.aspx Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 11 of 21 support for the City's IT needs12 Outsourcing IT functions as part of an overall full-scale outsourcing of non-public safety functions enables Sandy Springs to keep service costs low, maintain a lower tax burden, and preserve adequate service quality. • New York, NY has partially outsourced its 311 municipal call center. In 2001, New York had 45 citywide call centers staffed by almost 1,000 employees. With the election of Mayor Michael Bloomberg ii, November 2001, came a complete reorganization of the City's call centers into a single 311 service center. Due to the huge volume of calls to the system for a city of over 8 million people, New York outsourced a portion of call center operations to private vendors for peak periods. At particularly busy times, contracted call assistants assist callers. In addition, New York contracts with Language Line, a translation and interpretation services company, to handle foreign-language calls. New York found that using contracted call assistants reduces the need for costly permanent personnel during peak periods and services to non-English speaking City residents. Transportation and City Infrastructure Services • Sunnyvale, CA completely outsources traffic signal maintenance. The preventive maintenance and repair of the city's traffic signals have been outsourced for over 10 years. The contract is subjected to a competitive bidding process every one to three years, and is overseen by the city's Division of Transportation and Traffic. Sunnyvale typically negotiates fixed price contracts and requires contractors to put up a performance bond, to protect the City against cost and performance risk. In addition to Sunnyvale, the cities of Newport Beach, CA and Lakewood, CA have also completely outsourced this function. " Dallas, TX outsources 60 percent of its street sweeping operations. In recent years, the City negotiated three year contracts for street sweeping services on select City streets. Due to a very competitive bidding process, Dallas has seen its cost per gutter mile swept fall from $20 in 2004 to $17.44 in 2007. Like Dallas, many other cities have also found it more cost effective to outsource this function rather than fully retain it in-house, given the significant cost of sweeper maintenance and labor. • Philadelphia, PA recently contracted out operation of its waste treatment plant. Previously, the City experienced complaints about the odor and bad aesthetics of its sludge processing facility. In addition, the plant lacked the capacity to fully 12 Brad Jones. "CH2M HILL Managed Services awarded SI million contract to provide IT services for the City of Sandy Springs, Georgia." CH2M HILL. June 2, 2006. http://www.ch2m.net/Default.aspx?tabid=150. Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 12 of 21 process liquid sludge into exceptional quality biosolids and reuse the processed biosolids effectively. Under the terms of the contract, a contractor will take over plant operations and construct a new facility to convert treated waste into pellets that qualify as fertilizer for a broader range of uses. In the end, the privatization is estimated to yield cost savings ranging from $100 million to $200 million over the life of the 23-year contract13. Public Safety Services • Houston, TX outsources background checks for incoming fire cadets. Houston admits approximately 375 new cadets into its fire academy each year out of about 2,000 applicants. In 2002, Houston paid local companies Joe Winter Investigations and Boyd Smith & Associates $480,000 over three years to take over screening functions. The move is estimated to free the department's 70 arson specialists from routine administrative tasks to concentrate on investigating the City's approx. 18,000 fires per year14. • Lakewood, CO uses volunteer labor for certain police activities. The City uses trained citizen volunteers for police administrative work, such as fingerprinting citizens and issuing parking tickets to violators of handicapped parking. Training comes in the form of a citizen police academy and a police ride-along program. Volunteers are currently employed in all divisions of the Police Department, doing clerical work, computer entry, statistical analysis, investigative assistance, community presentations, and neighborhood speed control under the supervision of City personnel. Volunteers also manage the neighborhood watch program and create and distribute newsletters and brochures for the program. As a result, Lakewood has realized cost savings in multiple areas, targeting resources to core police services. Engaging talented citizens committed to public service has proved to be an excellent means to cut staffing costs, reduce administrative overhead, and concentrate existing police staff on directly improving public safety. Although Lakewood is a much smaller city than Colorado Springs, the model can be tailored to adapt to Colorado Springs' unique circumstances. • Chelsea, MA has outsourced its entire parking enforcement operation. In 1992, Chelsea's parking enforcement program operated at a deficit and annual collections totaled $150,00015. In 2006, after outsourcing parking enforcement, 13 City of Philadelphia: Office of the Controller. Analysis of the Water Department Biosolids Recycling Center Privatization Proposals. November 2006. http://www.philadelphiacontroller.org/publications/audits/02_2006_Analysis_of_the_Water.pdf 14 Jenna Colley. "Fire Department takes new cadet screening private." Houston Business Journal. February 22,2002. http://houston.bizjournals.com/houston/stories/2002/02/25/story5.html 15 Municipal Management Associates. Chelsea Case Study. 2008. http://municipalmanagement.com/Chelsea-Case-Study-41 .htm Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 13 of 21 the City collected over $1.5 million and received a net surplus of over $1 million16. Private operators are often more willing to invest in capital equipment and technology that eventually improve productivity and efficiency, thereby reducing cost. The cities of Anaheim, CA, West Hollywood, CA, and Montgomery County, MD, have also outsourced parking enforcement and realized substantially increased revenues and a lower parking enforcement cost per hour. Most recently, Atlanta, GA moved ahead with plans for a parking ticket and meter collection privatization initiative that is projected to increase revenue for the City. • Berkeley, CA uses private security guards at some city facilities. In 2005, the City contracted with Securitas Security Services, USA to provide security guards at two city office buildings. The guards were responsible for monitoring traffic, providing information to visitors, directing citizens to appropriate city offices, and securing public restrooms at the end of the day17. Berkeley has found it more cost effective to use a contractor to secure public buildings than have City employees provide service for very brief periods of time. Using contracted security guards has also allowed for the flexibility to absorb staffing reductions mandated by budget cuts, without the need to terminate unionized City employees. In addition, the state governments of Kansas, New Mexico, and Missouri also use private security guards at state office buildings, due to the flexibility and cost savings offered by contracted security. Parks and Recreation Services • Los Angeles County, CA contracts out management and operation of 16 of its 19 county golf courses to small firms, groups of individuals, and larger management firms. The contracting effort was intended primarily as a means to raise revenue, and in very short time met that goal. By 1996, seven years after the privatization, the County realized a 146 percent increase in annual revenue for its Mountain Meadow Course18. Privatizing golf courses has also been a popular means for cities to increase user fee revenue. From 1987 to 1995, the percentage of cities contracting out for golf course services increased from 15 percent in 1987 to 25 percent in 199519. Other major cities such as New York, Chicago, and Detroit 16 Ibid. City of Berkeley, CA; Office of the City Manager. Contract No.6818 Amendment: Securitas Security Services USA Inc. April 22, 2008. http://www.ci.berkeley.ca.us/uploadedFiles/Clerk/Level_3_-_City_Council/2008-04- 22_Item_33_Contract_No._6818_Amendment_Securitas_Security_Guard_Services_US A_Inc._for_l 947 _Center_Street_and_2180_Milvia_Street.pdf 18 Privatization of Municipal Golf Courses. Reason Foundation. 2006. http://www.privatization.org/database/policyissues/golfjocal.html 19 Contracting Public Services Survey: 1995 Update. Mercer Group, Atlanta, GA. Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 14 of 21 have contracted out municipal golf courses and seen notable improvements in facilities, conditions, and more importantly, annual revenue. Transit • Washington, D.C. has partnered with commercial landowners to finance construction of a new transit station. In 1998, the government of the District of Columbia developed a Citizens Plan for Prosperity in the 21st Century that identified areas of the District in need of economic development. The Plan called for the construction of a new, in-fill Metro station at New York Avenue to spur development in the underdeveloped North of Massachusetts (NoMa) corridor. In response, the District's Department of Housing and Community Development and Department of Transportation worked with area commercial landowners to come up with a creative solution to finance the project's projected $100 million cost. The landowners agreed to donate land for the new station and pay an annual development fee that generated $25 million toward the project. In the end, the project was projected to generate more than $1 billion of total public- private investment and over 5,000 permanent jobs in the area around the new station. Managed Competition Managed competition is a competitive bidding model employed by some cities to test the market for improved service delivery and lower cost. It is a structured, actively managed, and transparent process allowing for comparison of in-house staff and contractors and their abilities to deliver quality public services at a reasonable cost. When implemented correctly, managed competition has the potential to produce annual savings of 10-30 percent20. Typically, managed competition is restricted to areas seen as not inherently governmental, such as public works, park management, and transportation. Under the process, a Statement of Work is distributed by a city to both private vendors and in- house staff. When drafting a proposal, in-house staff are often forced to restructure organizations and processes in a way that is more competitive with private vendors21. Often, cities establish a "firewall" between Statement of Work and in-house proposal draft teams, to ensure that in-house staff do not get an advantage through access to internal information. Next, in-house and contractor proposals are evaluated by an independent board. The board then selects a "best value" service provider according to predetermined cost, experience, and quality criteria. 20 Elliott Sclar. The Privatization of Public Services: Lessons from Case Studies; Economic Policy Institute. 2004. 21 City of San Diego, CA. Mayor's Announcement of the Managed Competition Process. September 7, 2007. http://www.sandiego.gov/mayor/pdf/mcbrief070907.pdf Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 15 of 21 Managed competition has the potential to transform in-house service delivery, making it more efficient, accountable, and cost effective. In addition, it forces city agencies to examine service quality and gauge the full cost of providing a service, enabling them to take active steps to improve performance. However managed competition also takes a significant amount of planning to be successful. Reliable structures must be set up to monitor, manage, and regulate the competitive process that can be costly to construct and maintain. However these costs should be weighed against the potential benefits from the program. When feasible, introducing the competitive mechanisms and efficiencies of the private sector in city agencies can be a powerful means to reduce costs and improve in-house operations22. Examples: • San Diego, CA has introduced managed competition to a host of city services, including trash collection and street sweeping. Under Mayor Jerry Sanders' 2007 plan, private contractors compete with City staff for a range of non- governmental service contracts, including one-fifth of San Diego's trash collection routes. The City develops a Statement of Work and acquisition plan, and disseminates an RFP to a City agency and private vendors. An independent evaluation board, the Managed Competition Independent Review Board (MCIRB), evaluates the proposals to ensure a level playing field, and then recommends the "best value" proposal to the Mayor. The Mayor then either accepts or rejects the MCIRB recommendation. If accepted, he forwards it on to City Council for final approval. The Reason Foundation estimates that with an expanded scope, the City has the potential to save $80 to $200 million per year through the program23. • Pittsburgh, PA has managed competition processes for select city services. Under the City's program, City unionized employees and private firms competed for contracts to provide fleet maintenance, animal control, and solid waste collection services. In the end, the City selected a private vendor for fleet maintenance services, with savings estimated to exceed $1.4 million a year. City employees won the award for animal control services, with a proposal to save over $50,000 the first year, and almost $500,000 over six years through a plan to redesign existing operations. • Charlotte, NC has a comprehensive managed competition program for a wide variety of city services. Each of the City's Key Business Units (KBU'S) develops a competition plan outlining what services will compete with the private sector during the coming year. The plans contain a timetable for subjecting a service to 22 E.J. McMahon, A. Moore, & G. Segal. Private Competition for Public Services: Unfinished Agenda in New York State; Civic Report 4. December 2003. http://www.manhattan-institute.org/html/cr_41.htm 23 Reason Foundation. "Study: Managed Competition Can Save San Diego S80-S200 Million a Year." September 12, 2007. http://www.reason.org/news/san_diego_managed_competition_091207.shtml Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 16 of 21 competition, a strategy for making business practices more competitive, a justification for retraining service in-house without competition, and the reasons to contract with a private firm without managed competition24. Within three years of the start of the program, the City had conducted 34 competitions, 24 of which were awarded to the City agency and 10 to a private vendor. City workers alone were able to achieve $2.4 million in savings in other services that were not subjected to competition25. • Indianapolis, IN began a managed competition process for fleet services in 1995. The City gave its Fleet Services Division (IPS) three years to prepare for a competitive bidding process. As a result, IPS focused its efforts on implementing employee-generated reforms and strengthening its cost record-keeping and performance measurement system. These innovations enabled IPS to develop an accurate annual budgeting method and performance-based incentives. IPS also implemented a market-based rate structure for its customers, which resulted in the outsourcing of 20 to 25 percent of its work. By the end of the initial contract period, IPS had reduced its total costs by 35 percent and managed to successfully underbid all private vehicle repair firms that submitted bids. Public-Private Partnerships As mentioned earlier, public-private partnerships are unique ways of organizing public and private stakeholders to provide valuable programs, projects, or services. These partnerships have been used to advance a number of major civic projects that have enhanced infrastructure, fostered community development, and improved public safety. Public-private partnerships are particularly useful for achieving projects with high upfront costs, but broad, long-term benefits. Several major cities have adopted public-private partnerships to achieve goals in a variety of program areas: • Houston, TX's Project Houston Hope rehabilitates vacant tracts in inner-city neighborhoods into affordable housing and then sells them to middle and low income families. Since 2005, the city's Land Assemblage Redevelopment Authority (LARA) has worked with Linebarger Goggan, the law firm responsible for collecting delinquent taxes, to acquire tax delinquent, derelict properties and redevelop them into attractive middle and low income housing. LARA and Linebarger Goggan developed a legal process to sell a bundle of properties below the amount of taxes owed and transfer them to LARA. LARA then engaged local community development corporations to manage construction of affordable housing on the properties. The City in turn utilized two of its homebuyer 24 E.S. Savas. "Competition for Municipal Services in Charlotte." National Council for Public-Private Partnerships. http://www.ncppp.org/resources/papers/Savas_Charlotte.pdf25 Ibid. Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 17 of 21 assistance programs to secure buyers for the new homes. As a result, the formerly blighted properties are back on the tax rolls at a higher value, while saving the city $1 million each year in mowing and demolition costs26. Private investment in inner city properties has also soared, raising property values and attracting new businesses to the area. • Washington D.C's Metropolitan Police Department partnered with Lockheed Martin IMS to develop a red light photo enforcement program. In 1999, the District negotiated an agreement with IMS under which IMS covers all up-front capital expenses for the system in return for a contingency fee for each fine it collects from violators. In addition, IMS handles all aspects of the program including installation, image processing, vehicle owner identification, issuing notices, and collecting fines at no cost to the District. In about one year, IMS mailed 133,732 notices and collected $6,104,839 in fines, while red-light violations at intersections with cameras dropped by an average of 47 percent27. • Chicago, IL worked in partnership with major local corporations to develop a popular new downtown park. The City was able to obtain $200 million of the $450 million construction cost in private financing for the internationally acclaimed Millennium Park28. In addition, during the construction phase, URS Corporation provided complimentary staff for program and construction management. The park has since caused a dramatic rise in surrounding property values, an influx of new residential development, and a notable increase in tourism. The park is also predicted to attract $1.4 billion in residential development, 36 million visitors, and $1.9 billion in revenue from hotel, restaurant, shopping, and entertainment venues over ten years29. Outsourcing Advisory Boards Outsourcing advisory boards are government commissions that oversee, plan, coordinate, and assist outsourcing efforts. These boards have been used by states across the nation to coordinate broad outsourcing efforts. At least 14 states have boards and commissions related to competition and privatization, many of which provide assistance to agencies in implementing outsourcing initiatives30. While not commonly adopted by cities, an outsourcing advisory board can be an excellent way to coordinate 26US Conference of Mayors. "Houston's Hope for Affordable Housing."2007. http://www.usmayors.org/bestpractices/buscouncil/pubpri07/houston07.pdf 27 National Council for Public-Private Partnerships. "Automated Traffic Photo Enforcement." 2000. http://www.ncppp.org/cases/trafrlc.shtml28 Neighborhood Capital Budget Group. "Following the Money for Millennium Park." 2005. http://www.ncbg.org/public_works/millennium_park.htm 29 Ibid. 30Gordon Higgins. "Privatization Proposals in Other States." Montana Legislative Services Division. http://leg.mt.gov/content/publications/research/past_interim/blacrecomms.pdf Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 18 of 21 and sustain a broader outsourcing effort. In addition, they can provide the political leadership for advancing an outsourcing initiative in a difficult environment. Outsourcing in Colorado Springs has at times been executed on a relatively ad hoc basis, with the Traffic Engineering Division noting that engineering contracts have been executed that cost the City more than providing a service in-house. Outsourcing advisory boards provide guidance, direction, and coordination for individual agencies, ensuring that outsourcing is executed to produce the best results for a city. They are also an excellent way to organize outsourcing efforts around a set of key contracting principles. Furthermore, they can be used to undertake citywide planning on what can effectively and affordably be outsourced and what should be retained in-house. The net result might not always be the large-scale outsourcing of major city functions, but rather a fundamental examination and reorganization of current business practices, policies, and modes of organization in line with what is competitive. Outsourcing in Colorado Springs Colorado Springs currently makes extensive use of outsourcing. A significant portion of the City budget is allocated to contract expenditures. In 2008, the City spent $178.1 million on outsourcing, including 410 contracts, 3,370 purchase orders, and over 55,000 credit card transactions. By comparison, the 2008 All Funds budget was $359.8 million31. In the past, the City has tried to strike a balance between outsourcing contracts and in- house work, as each option has certain advantages and disadvantages. Below is an overview of the use of outsourcing in each selected City department or division: • City Clerk- The City Clerk's Office limits its use of outsourcing to ballot processing and printing. • Engineering- In the Engineering Division, outsourcing is used extensively for design and construction work as well as for some project management. Approximately 80% of engineering project work is outsourced. Some signal construction and maintenance, the school safety program, the traffic count, and much public infrastructure work for new developments are also typically outsourced. In addition, project studies, reports, analyses, and designs are typically contracted out to private vendors. • Fire- Outsourcing in the Fire Department is limited to contracts for recruitment exam testing, facility maintenance and repair, and engineering, and construction 31 Fiscal Year 2008 accounts for the period of July 1st, 2007 through June 30th, 2008. Outsourcing expenditures are only for calendar year 2008. Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 19 of 21 services. However, emergency medical transport is outsourced by El Paso County to a private operator, American Medical Response • Parks, Recreation, and Cultural Services - Parks, Recreation, and Cultural Services uses outsourcing in areas such as recreation programs, median mowing, fence repair, and golf course operations. • Fleet Management- Fleet Management uses contractors for some vehicle repair work and inspections as well as all towing, acquisitions and disposals, and fuel site maintenance. • Streets - The Streets Division makes very limited use of outsourcing, engaging Colorado Springs Utilities for major facilities work. • Police - The Police Department uses outsourcing for non public related functions such as IT, document shredding, towing, janitorial services, uniforms, fleet equipment, property code violation clean-up, facilities repair and maintenance, and outstanding fee collection. In addition, CSPD uses private security guards at its vehicle impound lot. • Transit - All Transit Services operations are contracted out to First Transit and Veolia Transportation. These operators are responsible for all operations, management, equipment, and maintenance of transit vehicles. Outsourcing in Colorado Springs has historically been used for a variety of reasons, ranging from the inability for the City to directly use unionized workers to a lack of in- house time and expertise to provide a service. Although the City in the past has used outsourcing on a case by case basis to reduce costs and the burden on in-house staff, there remain select opportunities for expanded use of outsourcing, discussed in the expenditure chapters. This would be greatly helped by a systematic examination of the City's current use of outsourcing, the costs and benefits it imposes, and how it can be better tailored to meet the city's service needs. The net result might not necessarily be an increase in outsourcing expenditures, but perhaps a recalibration of the city's outsourcing practices to produce better results. Conclusion In sum, outsourcing can be a powerful tool to improve municipal performance. Cities across the nation have successfully used it to improve quality of service, raise new revenues, reduce costs, and refocus on more critical priorities. When executed carefully with certain guidelines in mind, outsourcing can be effective in achieving the City of Colorado Springs' service delivery goals. Outsourcing is not something that can be done passively; it requires a significant amount of preparatory work, management, and attention to ensure it yields positive results. Although not always the best solution for Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 20 of 21 the City's service delivery problems, it can yield positive results when applied to select service areas needing improvement. The City already makes very extensive use of outsourcing; however there is an opportunity to use it a smarter and more effective way to target areas in need of genuine improvement or significant cost savings. Selectively harnessing the power of the private sector to add public value can only make Colorado Springs a better place to live, work, and play. Colorado Springs Sustainable Funding Committee - Services Subcommittee Page 21 of 21 Managed Competition...An "Outside-In" Perspective 3 July 2006 At the direction of the Mayor and City Council, the city of Carrollton, TX (pop. 118,576) is in the process of transforming the city's organizational culture from a traditional government model to a strategically led competitive "service business" model. At the direction of the Mayor and City Council, the city of Carrollton, TX (pop. 118,576) is in the process of transforming the city's organizational culture from a traditional government model to a strategically led competitive "service business" model. To start this process, the city has created an internal Managed Competition program, which is a competitive process where private service providers are encouraged to compete with city departments for the opportunity to provide similar services, What is Managed Competition? Managed Competition means, quite simply, that each employee takes responsibility to manage service delivery and internal operations in such a way to ensure that the city is competitive: that is, competitive with the private sector; competitive with other organizations in the public sector; competitive within Carrollton's own organization; and competitive in the sense that the city can demonstrate that they are the very best at what they do in striving to offer the "best value" to their customers. City managers are trained to look at their operations from an "outside-in" perspective. This means looking at service delivery from both customer- and competitive service provider perspectives to ensure that city services are provided efficiently and effectively. "The primary objective of our Managed Competition process is not outsourcing but to ensure that the city is receiving the "best value" service available in the marketplace from all city operations," said Tom Guilfoy, Director of Competition for the city. "We help our internal units become more competitive by helping them identify and benchmark against best-in-ciass competitors (both public- and private-sector), restructure and re-engineer business processes and operating practices and improve management and leadership capabilities. We involve front-line employees in the solution-building process and create more of a 'one team' approach." How does it workPThe continued provision of services through public employees must be justified through the competitive evaluation process. Unlike traditional privatization or outsourcing, managed competition allows for the governmental business unit currently providing the service(s) to participate in a competitive bidding process with the private-sector to retain the right to continue providing services. Each bidder is evaluated on the same service requirements including price, quality, competency and capability of the provider, etc. The winning bidder is awarded the business for a defined period of time by a written contract including measurable performance standards and budget parameters. Business resources suggest that the presence and degree of competition leads to improved service quality and lower service costs. A 2003 BusinessWeek article argued that "the public sector has not been able to improve productivity as fast as the private sector - and certainly not fast enough to hold down fiscal pressures." This may be true of other cities, but Carrollton is different. The introduction of a "competitive mindset" within the city and the utilization of tools like benchmarking and performance management have contributed to significant productivity gains in many city business units. Rather than simply cutting services or service levels in response to budget constraints, city managers are finding creative ways to restructure their operations and maintain or improve services by "doing more with less." A great example of the Managed Competition program is its effect on the city's Water Utilities Division (WUD). An extensive 3-year managed competition process has resulted in Carrollton's Water Utilities Division being declared substantially competitive. The endeavor involved a nine-member employee committee—the Competitive Readiness Team—comprised of line and staff support personnel across the city. Project milestones included: • From 2001 to 2004, several internal and external operational studies and pre-competition assessments were conducted that identified strengths and weaknesses and resulted in changes to work processes and staffing levels to improve quality and cost-competitiveness. • An internal Managed Competition Feasibility Study found WUD to be 'partially competitive' in December 2004. • A WUD Re-engineered Work Plan was completed in January 2005 and the annual operating budget was reduced by $605,000. • Water operations management consulting firm, Brown and Caldwell, was hired to further define service levels, performance measures and targets and to evaluate WUD's market competitiveness. Brown & Caldwell's final report was issued in August/September 2005. • The Managed Competition feasibility study team recommended to the city manager that WUD be declared 'substantially competitive.' • The City Council declared WUD competitive on November 1, 2005. • In December, 2005 the City Manager's Office signed a five-year service and maintenance agreement with the Water Utilities Division. All managers and employees signed the agreement. "The Water Utilities Division is running like a business!" - Carl Carpenter, Water Utilities service technician "Employee attitudes have changed for the positive." - Tracy Moore, Wastewater Vactor Operator Guilfoy said, "Over the past four years, we have evaluated the competitiveness of four city business units, outsourcing one (our Solid Waste Division) and retaining three (Traffic Operations, Parks Maintenance Operations, and Water/Wastewater Utilities). Currently, our internal Facility Services unit is preparing for a competitive bidding process later this year to determine the 'best value' provider. We are also evaluating the competitiveness of our Utility Billing and Collections operation." In addition, Carrollton's Water Utilities Division is piloting a new "Employee Gainsharing" program, in which "net gains" from internally generated cost reductions and incremental earned revenues are shared equally between the employees and the city. If this program is successful, it will be expanded to other business units that have proven they are "market competitive." The Benefits of Managed Competition include: • Reducing Waste, Surplus Assets and Inefficiencies - "Doing More with Less" • Operating with a Greater Sense of Urgency • Improving Inter-departmental Cooperation and Coordination • Involving and Empowering Front-line Employees Today, the city's public services are delivered in a variety of ways: by public employees, by contractors, through partnerships, grants, inter-governmental agreements, contracts and regional collaborations. As City Manager Leonard A. Martin has said, "The city's responsibility is not to provide all services internally but to ensure that reliable, quality services are provided to our customers in the most cost efficient and effective means possible. Our goal is to produce a value-driven government product—the highest quality service at the lowest price possible." To that end, the city of Carrollton now utilizes many approaches to deliver a variety of customer services - from solid waste, to parks mowing to water line replacement to traffic operations and on and on... Carrollton also provides services under contract to Denton County, The Colony, Farmers Branch and other public entities. "The city already competes, and very successfully in providing a variety of services," said Guilfoy. "We are becoming a high-performance service business. It is important that we continue this effort, and utilize all the tools at our disposal to adopt "best practices," learn new things, and continue our legacy of change and innovation." "Our city's Managed Competition has been a great success in helping city business units operate more efficiently and effectively, which translates into better services for our customers at a lower total cost for our taxpayers," he said. For more information, contact Tom Guilfoy, Director of Competition for the City of Carrollton, TX at 972.466.3015 or email torn, auilfov&citvofcarrollton. com. CARROLLTON TEXAS Creating Competitive and Sustainable Communities Washoe County/Reno/Sparks NV Briefing April 19-20, 2011 Tom Guilfoy, Director of Competition Desired Outcomes • What Is Managed Competition(MC)? • Why others have Implemented MC? • What are the Results and Benefits of MC? • What are Critical Success Factors? • Carrollton's MC Process • Employee roles & responsibilities • Outsourcing - Pros & Cons • Answer your questions and concerns How our journey started... City Council Strategic Goals FY2001-02: 1. Transform city organization to a service business • Managed Competition program and attitude • Create a sense of urgency among staff • Stop studying things to death • Focus on essential services • Provide services with a large customer base • It's OK to say 'No' politely and explain why • If a service competes with the private sector -- drop it or price it at market • Create business plans for all departments Only Two Choices? 1. Cut services or programs? OR 2. Raise Taxes? 3. Transform culture to a Competitive Service Business -- reduce costs, streamline processes, adopt best practices, leverage technology and increase employee productivity... The operating environment Outstanding People Regular Improvement Flexibility What do today's citizens expect of city government ? Accuracy Seamless Delivery Competitive Customized Solutions AAZIMUTHGROUP Key Leadership Challenges * Tighter budgets will be the norm for several years * Need to separate essential from non-essential services * Efficient and competitive service delivery is more critical than ever * Lower revenue and reduced staffing when citizen demands are increasing * Citizens are demanding higher government accountability (No new taxes!) * New service-delivery models needed to balance budgets * Change the culture to a competitive "service business" What is Managed Competition? "A guided process where private-sector providers are encouraged to compete with city departments to provide public services/' Our goal is not outsourcing but getting the Best Value available in the marketplace MC- A Brief History Pioneered by the City of Phoenix's Public Works Department in the late 1970s Indianapolis's competitive services program success (Mayor Stephen Goldsmith, 1992- 2000) Other cities: Atlanta, GA; Chicago, IL; Jacksonville, FL; Charlotte, IMC; San Diego, CA; Arlington, TX; Glenview, IL; Germantown, TN How is MC different than Outsourcing and Privatization? In outsourcing; the organization has already made the decision to use an outside contractor but is still responsible to ensure customer satisfaction In privatization, the organization sells the operation's assets and exits the business In managed competition, in-house units restructure, innovate and compete against external contractors to provide services under contract MC Toolkit Operational Assessment/Best Practices Competitive Assessment/Benchmarking Cost-of-service analysis Performance improvement plan & coaching Competitive safeguards in place Competitive readiness period Performance measures and targets Signed service agreements Contract management <v CARROLLTON A' TEXAS Managed Competition Process Step 1: Select a candidate for evaluation Step 2: Conduct in-depth operational and competitive assessment • Define all current services and functions. Group into lines-of-business • ID service costs; allocate all equipment & personnel. Determine costs by LOB • Benchmark against competitive service providers; ID competitive gaps • ID industry best practices and trends; ID gaps. CARROLLTON TEXAS Managed Competition Process Step 3: Strategic review with CMO; Options considered: • Reengineer Compete • Retain as is • Outsource/Partner • Privatize Step 4: Develop RFP or Reengineering work plan during Competitive Readiness Period (3 mos- 3 years) Step 5: Implement Work Plan; close gaps; measure results Step 6: Sign Service Agreement; monitor contract Managed Competition Progress 2002-2010 The Honor Roll 1. Solid Waste Operations (2002-03) 2. Traffic Operations (2004) 3. Parks Maintenance Operations (2004) 4. Water/Waste water Operations (2005) 5. Utility Billing & Collections (2006) 6. Facility Maintenance Services (2007) 7. Workforce Services (2008) 8. Payroll Accounting (2009) 9. Fleet Maintenance (2010) 10. Building Inspection & Planning (2010) 11. Risk Management (2010) Cost Savings = $25+ Million and counting Preparing Government Units for Competition Questions about current operations: • What core businesses are we in? • What level of service is currently being provided? What is mandated by law? • When was the last time we calibrated our current service levels? • What levels of service should we be providing? Customer/Council expectations? • What are our full costs? • How can we streamline our internal business processes to deliver services more efficiently? Costs & Benefits of Allowing In-house Competitive Bidding Advantages of MC: - Provides access to alternate suppliers - Provides a level of safety when unsure of external market - Spurs more internal reforms, culture change - Gives in-house provider a chance to retain the business - Employees are actively involved Costs of MC: - Increased costs for internal unit to prepare for competition - Perception that in-house unit will get preference - Competitive bidding process needs to be carefully managed MC: Critical Success Factors • Political leadership must be committed and involved • Community political climate must be open to change Stability = high probability for success • Favorable marketplace dynamics • Top management must be courageous and leaders of change • Employee communication, involvement, motivation are key How to Change the Culture... 1. Educate to the need for change 2. Define the new culture (vision and values) 3. Create strategic alignment at all levels 4. Build leadership/management skills and solve problems (application) 5. Communicate continuously (never ending) 6. Systematize (implement changes in measurements, systems and processes) 7. Coach to the desired behaviors tt te a taw iive one ttvie fo -President John F. Kennedy Change is a Process Awareness Interest/Desire Knowledge Ability Reinforcement Shifting the Paradigm... Traditional Gov't -> Service Business • Service Based on • Business Based on Tradition Community Needs • Compare to other cities • Compare to private- sector • Expenditure focused • Cost conscious, creative solutions Meeting Citizen Needs with Fewer Employees 130,000 120,000 60,000 - CTl (7> Ol Oi CT1 Ol Ol s § t Population ••fitotfulltlme Equivalent 1050 1000 700 Cost Savings & Efficiencies Since 2001 Business Unit j Reductions Accounting & Budget Facilities Maintenance Fleet Services Public Works Library Parks - FY2001FTES ••^••^i^raMMMHi^^^P^i^BMIBMBiMHVH^MMiMHMHMMHBi^B^BH 12 11 22 151 66.5 121.5 S^yaoiiFTEs .' •(^•^•^^HBHBRaMKMMHMHMIMBMMIHHM^BMMHMMBMM^HMH^ 10 7 11* 115.5 37.75 84.25 Increases: 388 420 FT * Outsourced in 2010 1000 FTE Comparison by Type 900 800 700 600 500 400 300 200 100 FY04 FY07 FY10 Managed Competition Scorecard Outsourced or Subcontracted IT Operations (1998, 2010) Solid Waste (2003, 2010) Golf Course Maintenance (2006) Fleet Maintenance (2010) Risk Management (2010) iI Insourced & Retained Traffic Operations Parks Maintenance Water & Sewer Line Maintenance Utility Billing & Collections Facility Services Workforce Services (HR) Payroll Accounting Building Inspection & Planning ••""••ramnB*""^ COPY Effective City Leaders Visionary ("Create the Future") - Grounded in reality - Creative, "out-of-the-box" thinking - Action-oriented Team Builders ("Develop Partnerships") - Internal cooperation and resource sharing ("One Team") - Networked at the local, regional and state levels - Works with public & private partners to get results Re-engineering & Restructuring ("Continuous Improvement") - Streamline business processes - Focus on core businesses MC Program Building Blocks A strong leader/communicator and a political champion Council Buy-in & Consistent Message Must have uniform guidelines for how to conduct fair, transparent public-private competitions Change management is ultimately the responsibility of senior leadership Training for staff Managed Competition Guide and Oversight Team Cost Analysis, Benchmarking Strong contract management Q&A Contact Information: TOM GUILFOY *> Director of Managed Competition, Strategic Planning and Organizational Development CITY OF CARROLLTON, TEXAS 972-466-3015 TOM.GUILFOY@CITYOFCARROLLTON.COM * Managing Partner THE GUILFOY GROUP LLC (OPERATIONAL AND COMPETITIVE ASSESSMENTS, LEADERSHIP DEVELOPMENT) 972-571-7174 T.GmLFOY@VERIZON.NET CITY OF BLOOMINGTON City Manager's Office Managed Competition thSeptember 13m, 2010 Prepared By: Ben McCready, Administration Todd Greenburg, Corporation Counsel CITY OF BlOOMiNGTON Managed Competition Executive Summary Managed competition is an "umbrella" term, which describes the practice of conveying competitive market principles to specific quantifiable services provided by the public sector. The purview of managed competition includes many unique approaches to introducing competitive market forces into the provision of public services. Not necessarily intended as a means to remove a service from public provision, managed competition often reflects the dynamic relationship between the public and private sector1. Managed competition encourages a service to be provided at a competitive and cost effective rate, outperforming private sector counterparts. It encompasses multiple approaches and is beholden to no one paradigm. Managed competition is capable of being applied to a number of services. A successful managed competition program is characterized by the significant investment in time, staff, and resources utilized to design guidelines that will insure both quality and dependability. Definition Although the term "managed competition" is often associated with "privatization", the two concepts imply distinctly unique approaches to altering the relationship between government and the provision of services. Managed competition provides government the opportunity to test the market for improved service delivery and pricing options by allowing both public and private entities to compete1. Business process re-engineering (BPR) is a constant companion to managed competition, a process by which processes are mapped and improvements are initiated2. BPR, acting as the base of a competitive program, provides the quantifiable measures and analysis an organization requires to remain competitive and innovative in the search for greater efficiencies. In a simple view, "managed competition" is a term which falls under the umbrella of privatization. Privatization by itself refers to a change in the producer or arranger or public goods8. Just as the services provided by government are heterogeneous in nature, there are many methods by which privatization takes places in the public sector. There are three types of privatization; delegation, divestment, and displacement8. Managed competition would best be described as "delegation". Under delegation a government body maintains an active role, weather by promoting consumption of the service or regulating its production via contract oversight and management. Managed competition theory is rooted in the belief that if a private firm can successfully reduce costs and return a profit, then government should be able to reduce costs by an even greater degree3. The practice of managed competition is supported by the belief that the private sector may be capable of adopting new technologies and implementing innovative operating procedures that the public sector may be reluctant to adopt due to policy constraints. The fundamental basis for managed competition requires that the costs CITY OF BLOOMJNGTON and benefits of providing a service via contracting and providing a service in house be objectively compared. This has been the case in Charlotte, North Carolina, where a combination of appointed committee members and audit staff continually revisit services and assess their eligibility for managed competition. Managed competition works with the dynamic nature of municipal organizations, revisiting, reexamining, and altering the provision of services on a continual basis. In the Charlotte model, a service provided by managed competition is not destined to be indefinitely provided by private sector competitors, while no service provided by City staff is guaranteed to continually be provided by the public sector. Managed competition theory does not assume private business can perform more efficiently at providing all services. By competing against the private sector to provide services, the public sector gams the opportunity to challenge well established rules, regulations, policies, practices, and organizational culture that creates the "way things have always been done". Private providers often have a far greater degree of control regarding pay and benefit structures compared to public sector organizations9. The nature of the private sector relationship with labor allows private organizations to be more flexible and respond to changing market conditions quickly9. Competition fostered by managed competition is intended to provide the highest level of service at the lowest cost possible. Managed competition is the means to an end, a way to infuse market-based competition into a public service without promoting the wholesale transition of all public services to private providers. Process (See attached chart for more information) The implementation of managed competition is a process, which is tailored to the services and cities where it is being utilized. Guidelines should be detailed and understandable4. The process typically begins with the creation of a committee, the composition is determined by staff and elected officials, whose mission is to evaluate the merits of service provision by both the public and private sector. The process also includes a cost analysis phase, dependent upon industry data or local pricing. A detailed cost analysis includes evaluating the total cost of ownership, taking into account the direct and indirect costs11. After conducting a thorough cost analysis and audit of eligible services, those identified as having a higher in-house cost compared to private sector providers may be given a number of options. Staff may be afforded the opportunity to improve operations or reduce costs, an informal bidding process may take place, or a formal bidding process may begin. An informal bidding process evaluates fixed prices provided by private firms to cost estimates from in-house departments. The formal bidding process makes a fair and equal comparison between bids submitted by in-house departments and private firms. Indianapolis experienced outstanding levels of success introducing a managed competition environment to their fleet services division, without ever contracting the service to an outside organization. City leadership allowed the division three years to become competitive. After three years the in-house service not CITY Of BLOOM1NGTON only produced a winning bid by a $76,000 margin, but found an additional $75,000 worth of efficiencies throughout the next year5. The managed competition process does not end with the award of a contract. Managed competition involves time, expertise, and staff to continually audit, benchmark, analyze costing methodology, standards, evaluate proposals, and make recommendations to service providers. Managed competition does not always result in the selection of the "lowest" bid6. Municipalities may choose to take several factors in consideration. Factors that the City of Charlotte consider include; past performance, financial stability, staffing levels, and contract language exceptions6. The implementation process takes time. In order to gauge efficiency, foster innovation, and gauge responsiveness, assessments are required. The initial stage of managed competition is characterized by awarding competitive contracts to one or more service providers for short periods of time covering different segments of the community. This method allows a municipality to adapt to the new environment, lowering the risk of failure due to oversight or inexperience. A mature program will implement these reforms on a broader basis. Evaluating Each step in the implementation process is unique and should be able to meet high standards of reliability. Glenview, a community which has implemented some managed competition programs, spent a significant amount of time reviewing candidate services prior to implementing managed competition in select departments. The process is described as being both length and painful9. Glenview relied on a Process Evaluation and Efficiency Team (PREET)9. The team was responsible for answering difficult questions which included; • Are the levels of service appropriate for the needs of the customers? • Is the service necessary? • Is this the best way to provide the service? • Are there efficiencies that are not being realized? Determining the answers to difficult questions provided Glenview with the justification for changes in service level, changes in the provision of a service, or the continuation of a service. This phase laid the foundation for the cost accounting and implementation of performance standards which would be used to guide any competitive bidding between the traditional public provider and private sector counterparts. Services Creating a managed competition program involves addressing multiple issues. One of the most prevalent issues is selecting the services which are most likely to achieve positive results in a competitive environment. Municipalities provide a wide array of services, staff with expertise in street paving, teaching swim lessons, preparing budgets, and CITY OF BLOOMINGTON writing tickets are all part of a municipal organization. Although most services deemed eligible for managed competition tend to be ancillary services, an extensive list of services are eligible for consideration. A service which already has reliable performance indicators is likely to be a successful candidate for managed competition. A recent study conducted in Seattle revealed that 67 services were identified as gooa candidates, but only 23 of them were compared to the private sector. After completing their studies, 10 of the services remained in house, 5 were awarded to outside contractors, and 8 are now provided by a mix of public and private staff7. Some services which are often cited as candidates for "managed competition" include: solid waste collection/disposal, custodial services, printing services, street sweeping, sewer maintenance, security, vehicle maintenance, billing, and public transportation. Indianapolis began developing a managed competition program in the 1990's. Throughout the life of the program Indianapolis experienced an average 25% cost savings for services eligible, overall Indianapolis has credited a 7% reduction in their overall budget between 1992 and 1997 to managed competition7. Considerations A successful managed competition program requires commitment and that leaders confront contentious issues. Multiple areas of concern are brought to the forefront when considering managed competition; leaders are often faced with difficult decisions between lower costs and policy priorities. One area of concern is "flexibility", while government employees are capable of making immediate changes in service delivery a private contractor may require changes in service level be negotiated. Additionally a private contractor may not place the same emphasis on community goals that the leadership values. Contracting with a vendor always involves the potential risk of vendor failure, creating a situation where the City would immediately become responsible for the continued provision of a service4. Managed competition inherently implies additional contract administration, transition, and monitoring expenditures. In order to foster an innovative and competitive environment, staff must routinely negotiate, interpret, and monitor contracts. The costs of contract administration should be factored into the cost analysis. Investments in other resources may include staff to conduct internal audits, provide legal expertise, manage procurement, and other department specific staff. These resources are often required to enable the municipality to negotiate with contractors on equal terms. Additional considerations may include legislative restrictions, resistance to change, and public perception. Moving a service from public to private provision may also carry with it a "go away" cost, or any costs associated with labor contracts, selling equipment, or meeting other statutory obligations. Managed competition is not often described as a "silver bullet" or "one size fits all" solution. The examples cited in this report are excellent examples of the many alternatives, processes, and wide ranging applicability of managed competition. The CITY OF BLOOMiNGTON diversity of these examples includes not only their geographic location, but their population and state legislative environment. In contrast to Illinois, North Carolina is a "right to work" state. In Illinois, Washington and Indiana some employees may be required to be part of a union as a condition of employment, in North Carolina this is not the case. The City population and "right to work" status are outlined here; Charolette, NC* 630,478 *Right to Work State Seattle, WA 582,454 Indianapolis, IN 785,597 Bloomington, IL 74,975 Managed competition may precipitate changes in the provision of traditional publically provided services. When a public organization provides services, it is often provided to "residents", while when a private company provides a service that service is provided to "customers". At a philosophical level how the "end users" of a service are viewed may imply other changes. There are social values that are implicit with the provision of a good or service, which may extend beyond the provision of the service10. Managed competition inherently alters the role of government in the provision of a service and thus perceptions of accountability. Under the guise of managed competition, local government transitions from being a provider of a service to that of a roll of an observer. EmpJoyee Union Impact Two major laws regulate the relationship between Illinois governmental employers and their employees; the Illinois Public Labor Relations Act (5 ILCS 315) and the Illinois Educational Labor Relations Act (115 ILCS 5). These two acts are quite similar. When a union is certified as the exclusive representative of a unit of public workers, the governmental employer must bargain all decisions involving those workers which directly affect the "wages, hours, and terms and conditions of employment" of the represented workers. It must also bargain management decisions which impact wages, hours and terms and conditions of employment. If a governmental employer refuses to do either of these actions, it can be found guilty of an unfair labor practice, which could results in the employer having to rescind the unlawful action and, possibly, having to pay the legal expenses of the union in obtaining the judgment. In all of the current City union contracts, the contract lists the workers classifications represented by that particular union. The union contracts currently in effect permit the City to decide how many workers are needed to perform the tasks those workers perform. The union contracts also give the City the ability to lay off unionized workers. However, the City does not have the ability under any of the current collective bargaining agreements to lay off workers and then outsource jobs to outside contractors. Requiring unionized employees to compete in the future with private vendors for the privilege of continuing to provide services currently provided by those City employees is possible 6 CITY OF BiOOMINGTON under Illinois labor law, but current law will not permit the City to undertake managed competition in a unilateral manner. In some cases the City must raise the issue of possible outsourcing during collective bargaining, and the current contract language probably permits the union to refuse to discuss outsourcing until negotiations commenc-? on the terms of a new collective bargaining agreement. The City may raise the issue of possible outsourcing in its current negotiations. Once negotiations commence on the issue of outsourcing union jobs, the City could not commence bidding or procurement procedures with third parties which could lead to possible outsourcing until agreement or impasse with the union(s) had been reached. Summary As previously stated, managed competition is intended to expose a public organization to private sector market forces. Managed competition is a means by which the public sector may challenge the status quo or "the way things have been done". As a managed competition program matures it begins to face a new gauntlet of obstacles, one being the availability of participating vendors. Throughout the life of the program organizations will ideally adapt and become increasingly efficient, with the potential to realize a natural competitive edge which the private sector may be unable to duplicate. If the private sector can perform more efficiently and earn a profit, then the public sector should be able to perform equally as well at a lower cost3. CITY OF BLGOA'UNGTO^ 1. Deloitte & louche LLP Website (2008). Managed Competition: Proceed with Caution. http://wvv'w.deloitte.com//view/en_CA/ca/;mdustries/govemment/0290a7d2770fbl 1 OVgnVCM 1 OOOQOba42fOOaRCRD.htm 2. City of San Diego (2007). Managed Competition Guide v 6.4 http://www.sandiego.gov/mayor/pdf/mcguide 3. Jensen, Ron. Managed Competition: A Tool for Achieving Excellence in Government 4. Braun, John (2009). Office of the Inspector General, City of Jacksonville, Florida. 5. Hai-Chiao Chang, Youhei Itou, Velika Kabakchieva, Lesia Lozowy, Ramon Munoz- Raskin, Rene Ramos, Mark Seaman, Yasemin Tugce Turner (2005). Managed Competition in Indianapolis: The Case of Indianapolis Fleet Services. 6. Elmore, David (2007). City of Charlotte's Privatization and Competition Advisory Committee. httD://reason.org/news/show/1002747.html 7. Making Effective Use of Managed Competition (1995). Office of the City Auditor, City of Seattle. http://www.seattle.gov/audit/report files/950 l-ManageCompete.pdf 8. Savas, E.S. (2000). Privatization and the Public-Private Partnerships, Chatham House. 9. Piercy, Kate. (2009). Beyond "Business as Usual". Illinois Policy Institute. 10. Warner, M.E. and Robert Hebdon. (2001). Local Government Restructuring: Privatization and Its Alternatives. Journal of Policy Analysis and Management 20(2) 11. Government Finance Official's Association. (2008). An Elected Officials Guider: Competitive Options From Managed Competition to Privatization. Managed Competition Process *77us document reprcsnvs an example of a managed competition pwctss and is not intiicatrve of all managed comptatiior. programs AH Receive For the Information of the: %l CITY OFCITY COUNCIL V CARLSBAD ACM Tt <> Ci Memorandum July 15, 2011 To: Lisa Hildabrand, City Manager From: Craddock Stropes, Management Analyst Greg Hermann, Senior Management Analyst Re: _ APPROACHES TO DELIVERING BEST VALUE SERVICES __ The City of Carlsbad, like public agencies throughout the country, is challenged to maintain its high quality services with fewer resources. The prolonged economic downturn coupled with the city's transition from a growing city to one focused on maintenance requires the city to make a permanent shift in how it does business. Cost has become an even greater focus while city leaders remain committed to meeting the community's high expectations for top notch city services. In February 2011, the Carlsbad City Council directed staff to research how other cities have approached cost-effective service delivery as a first step in identifying possible models that could be considered a good fit for Carlsbad. This report contains the findings of this research. City of Carlsbad »1200 Carlsbad Village Drive » Carlsbad, CA 92008 » www.carlsbad.ca.gov (t CITY OF CARLSBAD Approaches to Delivering Best Value Services July 19, 2011 BACKGROUND In this challenging economic climate, cities must re-examine their business models, processes and capabilities to maximize efficiencies in service delivery. Innovation, flexibility and best practices must be embraced in this new era of accountability and austerity. Today cities are considering a broad array of alternatives to the traditional government model of service delivery. Because cities vary widely in their service portfolios, relationships to other agencies, and community values and expectations, no one method works across the board. Instead, successful cities have chosen a combination of approaches tailored to their needs. This report presents several approaches cities have taken toward delivering best value services. The research examined how cities go about evaluating services; who the key decision makers were; and the resulting service delivery options. This report is not intended as an exhaustive study of all options available, but rather a summary of some of the prevalent strategies in use. Service Evaluation Processes Internal review Competitive analysis Managed competition Process Owners Staff City Council / Elected officials Citizen committees Service Delivery Options • In-house services • Contracted services • Shared services • Privitization SERVICE EVALUATION PROCESSES Performing a service evaluation, or assessment, is a critical first step toward identifying areas in which cities may improve their ability to provide best value services. Service evaluations typically include: • Analysis of current service levels and their alignment to community values and expectations (should we be in this business?) • Evaluation of current methods of service delivery: quality, costs, unique circumstances • Analysis of current business processes and areas for increased efficiency • Development of future service delivery expectations (benchmarks and quality measures) • Completion of fully loaded cost analyses by service Cities typically employ one of the following processes in order to evaluate their services. Internal Review An internal review provides a self-assessment of a service's current level of effectiveness and efficiency. Internal review may include an evaluation of current performance measures, benchmarking against other agencies, and application of best practices. For example, the city of Vista recently used a peer-review process for evaluating a department's effectiveness. Departments were asked to examine what services are provided and evaluate the reasons why the service is being offered, along with a services cost analysis. The information was then reviewed by two other department heads to provide an outside perspective to the department's operations. A common resource used by cities performing internal reviews is the International City/County Management Association (ICMA) Center for Performance Measurement. This organization is dedicated to helping local governments measure, compare, and improve municipal service delivery and regularly produces reports and analysis on best practices in benchmarking and business process review. Competitive Analysis A competitive analysis compares a city department's current capabilities, costs and performance with other potential providers to determine the city's level of competitiveness. Often potential providers participate in an RFP (Request for Proposal) or RFQ (Request for Qualifications) process to allow cities to assess current market pricing for a service. In the city of Vista, comparisons to private sector providers through a RFP process revealed opportunities for cost savings in public works, parks maintenance, recreation, janitorial and street striping. In addition, a reduction in service levels was accepted in some cases. A comparison of in- house Information Technology.(IT) services to private sector providers did not show significant cost savings would be achieved by contracting out the services. By contrast, in the city of Costa Mesa, city staff were asked to perform analyses after receiving layoff notices, which resulted in a severe undermining of staff morale and public trust. Atypical competitive analysis process is illustrated below. Perform Services Assessment Service remains in- Determine candidates for competition Conduct competitive analysis Develop competition materials Solicit and evaluate only external proposals Select vendor Develop transition plan Monitor cost performance measures for accountability Managed Competition Managed competition is a guided process in which private-sector providers are encouraged to compete with city departments to provide public services. While internal review and competitive analysis are fairly common practices among cities, managed competition is less familiar and requires greater explanation. Managed competition allows city departments to compare efficiency and effectiveness to "best in class" service providers, regardless of whether they are in the public or private sector. While competition may lead to an alternate service delivery option, such as contracting out, the ultimate goal of managed competition is to receive the "best value" available in the marketplace no matter who provides the service. Under managed competition, a business unit or department is selected for evaluation based on the potential for cost savings and performance improvements. An in-depth operational and competitive assessment is performed that includes comprehensive cost-accounting analysis, competitive benchmarking against private sector competitors, and comparisons to industry best practices and trends. If the unit is not deemed to be sufficiently competitive with the private sector (within 10 percent cost margin), then the unit is given a competitive readiness period in which unit managers may work on ways to become more competitive, such as changing business processes or staffing re- organizations. The competitive readiness period may vary from a few months to a few years. During this period, the city will develop an RFP outlining the performance expectations. At the end of the competitive readiness period, if the unit is deemed "competitive" it may win the contract and all employees in the unit sign the service agreement with the city. Managed competition began in 1978 with the city of Phoenix, AZ. The initial efforts were in the field of solid waste collection. After losing several bids, the city's Public Works Department increased its efficiency by introducing new skill sets, changing systems and using new technology. Over time, the department won back all of the contracts previously lost to private firms. Since that time a number of other cities including Indianapolis, IN, Philadelphia, PA and San Diego, CA have all implemented forms of managed competition. The City of Carrollton, TX has become a model for managed competition in mid-sized cities. Carrollton has a population of 129,209 and a general fund budget of $74.9 million for fiscal year 2010-11. Following a population boom in the 1980s, city residents enjoyed a high quality of life with services provided primarily by city employees. As the city approached build out, the severe downturn in the dot-corn and telecom industries left city officials looking for more efficient solutions for service delivery. Several City Council members supported the city manager's new approach: to hire a director of competition to develop a managed competition program. The program would change the culture from one of entitlement to a "service business" model, in which everyone strives to deliver the highest quality of service at the lowest cost. Over the past nine years, the City of Carrollton has successfully evaluated 11 areas under managed competition. Of those, five areas were ultimately contracted to the private sector: IT, solid waste, golf course maintenance, fleet maintenance and risk management. The result has been a reduction of 118.5 FTE and more than $25 million since 2001. The six areas retained in-house were traffic operations, parks maintenance, water/wastewater operations, facility services, payroll accounting, and building inspection and planning. By contrast, managed competition in the City of San Diego has become a politically charged, slow- moving process. In November 2006, San Diegans voted to approve Proposition C by a 60 percent to 40 percent margin, thereby allowing the city to utilize competition among city agencies and the private sector with the goal of delivering quality services in the most efficient and economical means possible. Objections by city employees' labor unions, dissention among city staff and elected officials, and mismanagement of consultants has resulted in a contentious Managed Competition Guide that stirred public controversy over the guide's fairness and effectiveness. In the City of San Diego, managed competition is a public process managed by a seven-member Managed Competition Independent Review Board that advises the city manager whether a city department's proposal or an independent contractor's proposal will provide the services to the city most economically and efficiently while maintaining service quality and protecting the public interest. The first managed competition process was completed in May 2011 for printing and reprographic services. The city department won the bid by reducing its budget by $1.08 million. Other services to be examined include fleet, public utilities, street sweeping, street and sidewalk maintenance, and landfill operations. A typical managed competition process is illustrated below. The differences between this flowchart and the previous competitive analysis flowchart are the additions of the business process analysis, competitive readiness period and the ability for internal groups to submit proposals. Perform Services Assessment Service remains in- Determine candidates for competition Conduct business process analysis Implement new work plan/ competitive readiness period Develop competition materials I Solicit and evaluate employee and external proposals Select vendor Service remains in- Develop transition plan Monitor cost and performance measures for accountability mmm^ The table below summarizes some considerations for each service evaluation process: Considerations Internal review Typically part of regular annual review Focus on continuous improvement Offers perspective on performance as compared to other cities Typically only compares cities to other cities, rather than to best in class providers Challenging to ensure consistent methodology across all departments Due to routine nature, tendency to continue "business as usual" Competitive Analysis Provides snapshot of potential cost savings Limited time frame Allows for isolated examination of very specific areas of service Can be performed by in-house staff Short-term approach May not lead to sustained effort In-house analytical tools may not be comparable to private sector Comparisons may not be "apples to apples," as in-house service delivery model will likely differ from private sector Managed Competition Long-term strategy Transforms the organizational culture Improves internal coordination and cooperation and empowers employees Creates desire for innovation and change Requires significant time investment Can negatively impact morale in the short-term May cause reductions in staffing or increase employee turnover Perception that in-house unit will receive preference PROCESS OWNERS Cities have made different choices regarding the roles of staff, elected officials and citizens in the service evaluation process and the selection of appropriate service delivery options. Rigorous and thorough analysis using valid methodologies is vital to the ultimate success of any effort, no matter who performs the analysis. Staff Staff typically plays a critical role in service evaluation processes, providing the data and background knowledge necessary for the evaluation. Some cities have engaged staff at all levels, from line workers to department heads. Many cities studied for this report utilized teams of analysts across various departments supervised by an administrative services director or deputy city manager to perform the services evaluation. Often the lead role in these teams was assumed by staff from finance or the department head of the service area being studied. A city manager, or executive team, may be a final decision maker for staffing and contracting decisions that fall within their range of authority. Engaging staff throughout the services evaluation process and selection of service delivery options builds buy-in, and creates a sense of transparency and fairness that contributes to the success of any effort. A perception of favoritism may exist when staff is exclusively responsible for evaluating their own performance; therefore a mechanism for independent audit is also necessary, whether the auditor is internal or external to the organization. City Council / Elected Officials A city council or other elected officials are typically responsible for making final policy decisions regarding service delivery methods. As stewards of taxpayer resources, a city council or elected body often initiates efforts to improve a city's effectiveness and efficiency in response to community needs, economic realities, or a desire for continuous improvement. The council or elected body then approves policies regarding various service delivery options, and awards contracts. The degree to which elected officials become directly involved in service evaluations and selection of service delivery options varies. In Redding, CA, all five city council members served on a privatization committee along with two former city council members, a former city department head and two former mayors to identify outsourcing opportunities. However the committee disbanded within a few months due to an overly broad scope. Some city councils designate a council liaison to work with staff or a citizen committee to perform research and make recommendations on service delivery options. The city council in the City of Rockford, IL tasked its Budget and Finance Advisory Committee to create an Outsourcing Subcommittee to select and work with a contractor to identify and study potential service delivery options and opportunities. Subcommittee members included three council members and five community members with staff support from the city's director of administrative services. After delivering the results of the consultant's assessment and making recommendations to the City Council the Outsourcing Committee continued to meet, monitor progress and provide guidance as services moved from RFP to contract. City Councils provide leadership and guidance to an efficiency effort; however elected officials should take care to avoid any conflicts of interest that may arise from their involvement in the research and services evaluation process. Maintaining openness and transparency throughout the process is vital to the credibility of the outcome. Citizen Committees Some cities have utilized citizen committees to advise them on identifying appropriate service levels, efficiencies and outsourcing opportunities. Such committees can be used to coordinate and sustain broad efficiency efforts, and offer leadership for advancing efficiency initiatives. In Charlotte, NC, the Mayor and City Council appoint an 11-member Privatization and Competition Advisory Committee. Members include three technology professionals, two bankers, two small business owners, two real estate professionals, one attorney and one purchasing professional. Staff support is provided by the assistant city manager and two department heads. The full committee meets monthly, while sub-committees assigned to specific key business units (departments) meet on an ad hoc basis. The role of the committee is to evaluate the city's five-year competition plan to determine which services should be considered for competition. The committee monitors staff reports on benchmarking, MOUs, costing methodology, production standards as well as development and evaluation of RFPs and final selection of service providers. The committee also has oversight of department performance, and may influence service delivery levels. The City of Colorado Springs, CO, appointed a 20-member Sustainable Funding Committee to study ways the city could become more self-sustaining through adoption of operational efficiencies and innovation, outsourcing and consolidation of services, and new revenue sources. The committee met over the course of a year and worked with a financial consulting firm to deliver a comprehensive list of recommendations to achieve financial sustainability. SERVICE DELIVERY OPTIONS The results of a service evaluation often cause cities to further examine the feasibility of various service delivery options. During the process of identifying appropriate service delivery options, cities have generally focused on the following key factors: • Potential for cost savings and performance improvements as identified through operational assessments; • Availability of reasonable competitors; • Ability to clearly articulate desired outcomes through clear performance measures; • Level of expertise in contract negotiations, management and monitoring Although some cities may favor one approach to service delivery more than others, most cities use a combination of methods to deliver services in the most effective and efficient manner in line with their community's values. In-House Services In-house services are those provided by entirely by city staff. Functions such as budget control, business planning, policy making, and performance management are typically considered best performed by city staff to hold contractors accountable and maintain public trust. A 2007 study by the International City/County Management Association (ICMA) revealed the most common services provided in-house included: inspection and code enforcement; crime prevention; traffic control and parking enforcement; administrative support; personnel support; public information; water distribution; fire suppression; recreation facilities operation and maintenance; data processing and building security. Retaining services in-house affords greater direct control over employee work assignments and availability, and allows agencies to immediately deploy resources in the event of an emergency. It also facilitates the growth of historical or institutional knowledge, which supports a sense of continuity of services. In-house staff generally has a greater sense of pride and ownership over their work, which contributes to high quality levels and customer service. Fostering staff loyalty to a common organizational vision, mission and strategic goal creates a team environment that often allows agencies to leverage shared knowledge and quickly repurpose available staff that is already familiar with the agency's values and expectations. Contracted Services Contracting typically involves a competitive bidding process in which requests for proposals or bids are disseminated to eligible vendors. Proposals are evaluated and a contract is awarded to an appropriate vendor is selected to perform the work. Contractor performance is monitored and managed by city staff with pre-defined performance standards. Contracting is used by cities across the country to reduce costs, improve or maintain quality of service, and raise revenue. Contracting services, however, does not relieve cities of the responsibility for the quality, responsiveness and cost of a service; but rather allows cities to provide the services with external rather than internal resources. According to the 2007 ICMA study, half of all chief administrative officers have studied the feasibility of contracting services within the past five years. Although nearly 80 percent of cities that have moved toward contracting have reported cost reductions of an average 15 to 20 percent, 22 percent ended up returning contracted services in house due to unsatisfactory service quality and insufficient cost savings. Common services that are contracted include: building inspection, collections, cultural arts programs, fleet management, IT, parks maintenance and tree trimming, senior services, sewage collection and treatment, solid waste, street sweeping and maintenance, tax assessments and bill processing, utility billing, water treatment, and workforce training and development. Contracting services carries benefits such as access to specialists who would not normally be on staff; shifting of liability risks; and the potential for significant cost savings. Among the disadvantages are loss of direct control over staff availability; loss of city identity or character as a result of diffused service providers that residents may not associate with the city; and the increased risk for contractors 10 to be subjected to economic impacts on their businesses that may in turn impact their ability to fulfill their contract obligations. A thorough and accurate analysis of internal cost-of-service that calculates the "true" fiscal impact of going to an outsourced model, including contract administration costs, is a necessary first step toward adopting a contracted services model. Complete evaluation of procurement requirements, legal limitations and other requirements is also valuable. Success factors for a contracted services model include developing measures and standards that hold contractors accountable to performance levels; clearly articulating outcomes such as improved effectiveness, improved efficiency or new capabilities; continuous communication with contractors over performance expectations and regular re-evaluation of contract scope; and keen oversight and monitoring of contractor performance, including prompt corrective actions when contract performance measures are not met. Shared Services Shared services, or consolidation, is a collaborative strategy that concentrates related resources performing like-activities, to service multiple partners at lower cost and with higher service levels. Services may be shared among cities, with a county or state agency, or private entities. Implementation methods include sharing functions between entities, merging multiple entities into a single entity, transferring management and execution to an outside provider, or creating a new entity to serve a specific purpose. In order to successfully implement a shared services solution it is critical that agencies find partners of similar size and capabilities and define power and cost sharing structures early in the relationship. It is also important to engage or gain public credibility regarding the feasibility or appropriateness of a particular shared service. An inappropriate assessment of the scope of services or selecting partners incompatible with organizational values and expectations can lead to inconsistent levels of service and a severing of the relationship. Shared services are common in service areas, such as records management, human resources and finance. These areas allow agencies to realize cost savings through consolidation of management FTE and balancing of workloads for line staff. Privatization Privatization refers to a shift in responsibility for service provision from the public sector to the private sector. In general, there is no control by a public agency over how services are provided or if they are provided at all. One form of privatization are franchise agreements which typically award a private firm an exclusive right to provide a public service or operate a public asset, usually in return for an annual lease payment (or a one-time, upfront payment) and subject to meeting specific performance expectations. In many jurisdictions common utility services—such as telecommunications, gas, electricity and water—are provided through long-term franchise agreements. Franchise-based privatization initiatives may involve the privatization of an existing government asset, such as a toll road, water/wastewater plant or airport, though similar arrangements can be used to finance, build and deliver new infrastructure assets as well. Chicago's $1.8 billion lease of its Chicago Skyway toll 11 road, $1.15 billion lease of its downtown parking meter system, and $560 million lease of four downtown parking garages are recent examples of the franchise approach. Privatization may involve government getting out of a service, activity or asset entirely. This is accomplished by eliminating a service (such as recreation programs) and referring the public to private providers, or through sales of aging or underutilized land, buildings, and equipment and returning the assets to private commerce where they may be more productively used. SERVICE EVALUATION AND DELIVERY IN CARLSBAD The City of Carlsbad has held a steadfast commitment to continuous improvement, and offering top quality services. Steps the city has taken over the years to maintain or improve effectiveness and efficiency include: • Citywide annual performance measurement system • Annual citywide surveys • Citywide staff realignment • Routine benchmarking against other cities/agencies • Routine reviews and updates of business policies, processes and procedures • Contracted services totaling approximately $25 million in FY 11 in operating costs (see Appendix A) • Shared services examples include Encina Wastewater Joint Powers Authority, Fire Service Boundary Drop, Carlsbad Watershed Urban Runoff Management Program In addition, a team of city staff worked on a goal team to study managed services. The team produced a manual containing consistent guidelines departments can use to evaluate the costs and benefits of providing programs and services in-house versus through a contractor. It was determined that at a minimum, the managed services process would be used when departments need additional resources to implement new mandates or introduce new or expanded programs or activities. The services assessment and cost analysis tools from the managed services process could serve as a good first step in evaluating existing programs for their appropriateness for alternative methods of service delivery. SUMMARY The City of Carlsbad is committed to providing excellent service at the best value to taxpayers. Although the recession is officially over, the economic environment is forever changed. Economists predict a long, slow recovery. Residents are demanding more accountability than ever from local government. High levels of service are expected, despite fewer resources available to provide them. Ensuring the city's long term financial health requires a permanent shift in how the city does business. The city is transitioning to a new model for local government that combines the spirit of public service with an increased focus on innovation, efficiency and value for the taxpayer's dollar. The city's 12 ultimate goal is to continue to deliver the same high levels of service and resident satisfaction, but at lower cost to taxpayers. Research conducted for this report offers several approaches cities have taken toward delivering best value services. Approaches varied depending on several conditions, including but not limited to, community values and expectations, economic need and availability of reasonable competitors. The first step is a service evaluation process which may take the form of an internal review, competitive analysis or managed competition. Stakeholders in this process include staff, elected officials, citizens and businesses; the level at which each stakeholder group is involved has varied among cities with the city council or an elected body typically taking on the ultimate responsibility for accepting the results of a service evaluation and making policy decisions regarding service delivery options. Following the completion of a service evaluation, cities determine the appropriate mix of service delivery options. Many cities opt for some combination of in-house, contracted and shared services; although some cities have gone a step further and made policy decisions that indicate a preference for a particular service delivery approach. The cities most successful at sustaining the delivery of best value services routinely undergo consistent service evaluations to achieve their goals. 13 KEY TERMS Internal Review A service evaluation process that involves a self-assessment of a service's current level of effectiveness and efficiency; often includes performance measurement systems, benchmarking against other cities, or best practices Competitive Analysis A service evaluation process that compares the city department's current capabilities, costs and performance with other potential providers, often through an RFQ (Request for Qualifications) process Managed Competition A service evaluation process that guides city departments through competition with the private sector; typically provides guidance for restructuring, training, innovation or other support necessary to become competitive In-House Services A service delivery option that utilizes city staff exclusively Contracted Services A service delivery option that involves a competitive bidding process in which RFPs (Requests for Proposals) or bids are disseminated to eligible vendors and a contract is issued to the successful bidder Shared Services A service delivery option that concentrates related resources performing like-activities in order to service multiple partners at lower cost and with higher service levels Privatization A service delivery option in which service provision is completely transferred from the public sector to the private sector, i.e. franchising, sales, divesture 14 METHODOLOGY The research presented in this paper was distilled from a broad review of available data, including: • Quantitative and qualitative research studies conducted by other cities and trade organizations • Academic research • Articles from newspapers and trade publications • White papers compiled by industry experts • Case studies from other cities and public agencies • Interviews with representatives of cities Resource Articles and Presentations Accenture, "Cross-Jurisdictional Collaboration: New Models for the New Normal", presentation for Alliance for Innovation Alternative Service Delivery Options workshop, Feb. 17, 2011 Breier, Michelle, San Diego Union-Tribune, "Escondido identifies potential services for outsourcing," April 11, 2011 Brown, Trevor and Potoski, Matthew, Public Administration Review, "Contract-Management Capacity in Municipal and City Governments", March/April 2003 Brown, Trevor; Potoski, Matthew, and Van Slyke, David, "Managing Public Service Contracts: Aligning Values, Institutions and Markets," presented at 2005 National Public Management Conference City of Colorado Spring Sustainable Funding Committee, "Outsourcing Methods & Case Studies", April 10, 2009 Deloitte & Touche LLP, "Managed Competition: Proceed - But With Caution", 2005 Elmore, David, "City of Charlotte's Privatization and Competition Advisory Committee", 2007 Foley, Sarah, Caller.com, "Privitization: the outsourcing of some city-run service," Jan. 30, 2011 Gilroy, Leonard, Reason Foundation, "Annual Privatization Report 2010: Local Government Privatization" Government Finance Officers Association, "Managed Competition as a Service Delivery Option", Oct. 6, 2006 Greenburg, Todd and McCready, Ben, City of Bloomington, IL Managed Competition report, Sept. 13, 2010 Guilfoy, Tom, American City & County, "Managed Competition: An 'Outside-in' Perspective", July 3, 2006 Guilfoy, Tom, "Creating Competitive and Sustainable Communities," presentation to Washoe County/Reno/Sparks, NV, April 19-20, 2011 Howland, Lance, Public CEO, "Cities move towards contracting out library systems", Nov. 22, 2010 ICMA Profile of Local Government Service Delivery Choices, survey of county and municipal chief administrative officers, 2007 Jensen, Ron, Michigan State University, "Managed Competition: A Tool for Achieving Excellence in Government", 1995 Johnston, Jeff, American City & County, "New City, New Rules", Dec. 7, 2010 Lauria, Paul, Automotive Fleet, "Fleet Management Functions T hat Should Never Be Outsourced", September 2002 Lobeck, Joyce, Yuma Sun, "City found outsourcing would increase cost of services," Feb. 5, 2011 National Council on Public-Private Partnerships, American City & County, "6 Keys To Public-Private Partnership", April 21, 2010 Padovani, Emanuele and Young, David, "Managing High Risk Outsourcing", presentation to International Research Symposium on Public Management, April 8, 2005 15 Serna, Joseph, Daily Pilot, "Almost half of city work force gets pink slips," March 2, 2011 Staley, Samuel, Reason Foundation, "Cities Privatize to Fill Budget Gaps", Aug. 22, 2010 Thrive Washington/Washington Research Council, "The Case for Contracting Out: A Vital Tool to Help Balance Washington's Budget and Improve Public Services", December 2010 Titch, Steven, Reason Foundation, "How IT Outsourcing Succeeds", March 30, 2011 16 APPENDIX A Contracted Services CATEGORY FY 10 FY 11 ACTUAL ESTIMATE Administrative Support Animal Control Services Arts/Entertainment Audio/Visual Equipment Benefits Administration Building Maintenance Catering Services Classes/Camps/Leagues Coastal Monitoring & Issues Communications Concrete Saw Cutting Custodial Design Services Electrical Services Engineering Services Equipment Maintenance Fence Work Financial Services Graphic Design HHW Programs Hiring Recruitment Inspection Services Lab Testing Landscape Maintenance Landscaping Legal Services Legislative Programs Management Consulting $ 17,100 $ 500,849 $ 247,550 $ 43,500 $ 193,732 $ 480,875 $ 184,000 $ 573,100 $ 40,000 $ 146,077 $ 10,820 $ 242,730 $ 7,026 $ 293,719 $ 164,665 $ 563,326 $ 16,070 $ 641,341 $ 80,050 $ 216,988 $ 16,311 $ 195,597 $ 85,036 $ 730,000 $ 47,784 $ 181,314 $ 144,845 $ 216,350 $ 24,000 $ 495,970 $ 242,290 $ 47,000 $ 214,000 $ 460,610 $ 184,000 $ 609,000 $ 52,000 $ 69,815 $9,127 $ 244,718 $ 5,184 $ 270,335 $ 59,198 $ 619,616 $ 12,000 $ 649,700 $ 82,000 $ 200,712 $ 13,500 $ 135,747 $ 93,404 $ 854,000 $ 61,882 $ 177,343 $ 122,940 $ 63,520 Misc. Outside Services Misc. Prof. Services North County Dispatch JPA Plan Check Services Planning Services Printing Services Recycled Water Facility Regulatory Compliance Security Software Hosting Software Programming Solid Waste Storm Drain Maintenance Street Maintenance & Repair Street Sweeping Study/Analysis Survey Technology Services Testing Traffic Signal Maintenance Training/Certification Tree Trimming Vehicle Maintenance Video Production Wastewater Maintenance Wastewater Treatment Water Maintenance Web Services $ 777,723 $ 302,676 $ 439,144 $ 319,805 $ 304,529 $ 66,434 $ 846,013 $ 238,272 $ 202,840 $ 142,200 $ 138,034 $8,491,955 $ 105,476 $ 151,830 $ 278,823 $ 348,561 $ 83,965 $ 175,385 $ 19,510 $ 487,536 $ 218,803 $ 129,000 $ 645,291 $ 142,000 $ 31,877 $3,134,528 $ 134,688 $ 48,600 $ 766,444 $ 273,964 $ 443,000 $ 690,000 $ 415,048 $ 69,000 $ 800,000 $ 185,110 $ 210,342 $ 143,325 $ 135,561 8,511,947 $ 118,240 $ 164,915 $ 282,000 $ 264,381 $ 58,555 $ 137,614 $ 25,000 $ 611,590 $ 244,791 $ 329,000 $ 510,913 $ 205,500 $ 86,386 $3,075,830 $ 298,132 $ 74,000 Grand Total $24,686,2$! $25,204,199 17 AMENDED IN SENATE APRIL 25, 2011 SENATE BILL No. 833 Introduced by Senator Vargas (Coauthor: Assembly Member Hueso) February 18,2011 An act to amend Section 44002 of add Section 44000.6 to the Public Resources Code, relating to solid waste. LEGISLATIVE COUNSEL'S DIGEST SB 833, as amended, Vargas. Solid waste: disposal facilities permit.; San Diego County. 1 nc (1) The California Integrated Waste Management Act of 1989 regulates the management of solid waste. The act authorizes that the California Integrated Waste Management Board may designate and certify a local enforcement agency within each county to cany out SpCCinCQ pOvVCiS (ItlQ OilLlC3? atlQ rCCjUlrCS IfiC DOclrCl flJlCi CCfilTlCu 10C9.J. cniorccmcirc agencies to pcnorin spcciiicci ruiiciioiis iviiii rc^cirQrio iric regulation of solid waste management, including the issuance of solid waste facilities permits. Existing law prohibits the operation of a solid waste facility without a solid waste facilities permit and authorizes an enforcement agency to issue 3. soiiQ vVcistw inciiitics pciiiiii oniy ir it dciciiiiiiics trizit ixic pcrmiT application is consistent with the requirements of the act prohibits a person from disposing of solid waste, causing solid waste to be disposed of, arranging for the disposal of solid waste, transporting solid waste, or accepting solid waste for disposal, except at a permitted solid waste disposal facility. A violation of the provisions prohibiting the disposal of solid waste is a crime. 98 SB 833 — 2 — This bill would additionally prohibit an enforcement agency from issuing a solid waste facilities permit, on or after January 1, 2012, if thai permit would allow the disposal of solid waste within 500 feet of a river that supplies any aquifer that provides drinking water for more than 50,000 persons, or within 1,000 feet of a site considered to be 33.CFCCL cHlQ OI SplTlvUcil llllporiclilCC lO ft ICQCiclIiy rCCOglllZiCCl IriQlclIl LI IDC. prohibit a person from constructing or operating a solid waste landfill disposal facility located in the County of San Diego if that disposal facility is located -within 1,000 feet of the San Luis Rey River or an aquifer that is hydrologically connected to that river and is within 1, 000 feet of a site that is considered sacred or of spiritual or cultural importance to a tribe and is listed in the California Native American Heritage Commission Sacred Lands Inventory. The bill would require the enforcement agency to enforce a violation of this prohibition by the immediate issuance of a cease and desist order, thereby imposing a state-mandated local program by imposing a new duty upon local agencies. The bill would make a declaration of legislative findings regarding why a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution. Because a violation of this bill 's requirements would be a crime, the bill would impose a state-mandated local program. (2) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for specified reasons. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: The people of the State of California do enact as follows: 1 SECTION 1 . Section 44000. 6 is added to the Public Resources 2 Code, to read: 3 44000.6. (a) Notwithstanding any other provision of this 4 division, a person shall not construct or operate a solid waste 5 landfill disposal facility in the County of San Diego if that disposal 6 facility meets both of the following conditions: 98 — 3— SB 833 1 (1) Any portion of the disposal facility is located on or within 2 1,000 feet of the San Luis Rey River or an aquifer that is 3 hydrologically connected to that river. 4 (2) The disposed facility is located on or within 1,000 feet of a 5 site that is considered sacred or of spiritual or cultural importance 6 to a tribe, as defined in Section 44201, and that is listed in the 1 California Native American Heritage Commission Sacred Lands 8 Inventory. 9 (b) This section does not apply to a permitted disposal facility 10 at which solid waste was disposed of before January 1, 2012, or 11 to the expansion of that facility. 12 (c) The enforcement agency shall enforce a violation of this 13 section by the immediate issuance of a cease and desist order 14 pursuant to Section 45005. 15 SEC. 2. The Legislature finds and declares that, due to the 16 unique circumstances arising from a proposal to construct and 17 operate a solid waste landfill that would be located adjacent to 18 the San Luis Rey River and its drinking water supplies and to sites 19 considered sacred by numerous Native American tribes, and given 20 the unique relationship between the state government and tribal 21 governments in the state, a statute of general applicability cannot 22 be enacted within the meaning of subdivision (b) of Section 16 of 23 Article IV of the California Constitution, and therefore this special 24 statute is necessary. 25 SEC. 3. No reimbursement is required by this act pursuant to 26 Section 6 of Article XIIIB of the California Constitution because 27 the costs may be incurred by a local agency or school district 28 because this act creates a new crime or infraction, eliminates a 29 crime or infraction, or changes the penalty for a crime or 30 infraction, within the meaning of Section 17556 of the Government 31 Code, or changes the definition of a crime within the meaning of 32 Section 6 of Article XIIIB of the California Constitution or because 33 a local agency or school district has the authority to levy service 34 charges, fees, or assessments sufficient to pay for the program or 3 5 level of service mandated by this act, within the meaning of Section 36 1 7556 of the Government Code. 37 SECTION 1. Section 44002 of the Public Resources Code is 38 amended to read: 98 SB 833 —4 — 1 44002. (a) (1) A person shall not operate a solid waste facility 2 without a solid waste facilities permit if that facility is required to j iicivc ci pciiiiit pu.rsv*tirii TO inis Qivision. 4 (2) The prohibition specified in paragraph (1) includes, but is 5 not limited to, the operation of a solid waste facility without a 6 required solid waste facilities permit or the operation of a solid 7 waste facility outside the permitted boundaries specified in a solid 8 waste facilities permit. 9 (b) If the enforcement agency determines that a person is 10 operating a solid waste facility in violation of subdivision (a), the 11 c 11 tor cement tiscncysriciiiiiiiiiiCQicirciy issuedcctisc3.110.desist 12 order pursuant to Section 45005 ordering the facility to I j Hiiiiicciicitciy cCcisc ail flciiviiics lor \vmcn « soiict AVctsic iciciiin.cs 14 permit is required and desist from those activities until the person 15 obtains a valid solid waste facilities permit authorizing the activities 16 or has obtained other authorization pursuant to this division. 17 (c) Notwithstanding any other provision of this division, an i o cniorcciTicrii u.£cncy snail nor issue n soiio. vvcisic lacmiics pcnnic^ 17 t?n or iiitcr jciii\i«.ry i, £\) JTX», 11 trifli pcriniz would aiiow inc ciispos3.t 2t\j 01 soiiQ. Vvflstc wiiriiii DUU icci oi ail ticjuiicr Liicii provicics «. source 21 of drinking water for more than 50,000 persons, or within 1,000 22 feet of a site considered to be sacred and of spiritual importance 2f3 \\j oi icdtriii.iy ivw o 98 COUNCIL PRIORITY PROJECTS FY 11/12 Priority Goal/Project Title Status Responsible Dept.Team Leader Current Milestone Complete (month/year) Estimated Project Completion (month/year) CORE WORK ECONOMIC DEVELOPMENT * * * * Partner with property owners in the Village to create a "Main Street" type program to spur local investment and foot traffic. Launch a business attraction and retention program. Streamline city processes to support faster turnaround times & more efficient handling of business requests: - Development Review Process Recommendations - Prop D Implementation - CCC Process - Business License Process Streamline - Car Country Carlsbad Working Group Expand the amount and quantity of useful city information available to businesses: - Economic Development Communications Plan - Development Services Manager Communications Plan CURRENT MILESTONE: Request for Proposals issued June 1 with responses due August 1 . Housing and Redevelopment Commission to appoint three to five citizens to join sub- committee and review proposals. NEXT MILESTONE: Seat citizen members on sub-committee, receive and evaluate proposals, recommend successful proposal to HRC. CURRENT MILESTONE: Outreach visits ongoing - next scheduled visits are with CRC (07/13) & ViaSat (08/30). Analyzing city's existing business segments to determine best types of companies to attract and grow in Carlsbad. NEXT MILESTONE: Develop list of target type companies for attraction & develop a communication outreach strategy. CURRENT MILESTONE: Title 20 CMC amendments for Vesting TM's scheduled for 07-26-1 1 CC Hearing. NEXT MILESTONE: Submit LCPA CMC Amendments to CCC. CURRENT MILESTONE: Preparing submittal of LCPA to California Coastal Commission. NEXT MILESTONE: Submit LCPA to CCC in July 201 1 . CURRENT MILESTONE: Review & document existing Business License process. NEXT MILESTONE: Identify improvement and streamlining measures. CURRENT MILESTONE: Staff working on work program schedule and cost estimates for CC consideration in 1st Quarter FY 11/12. NEXT MILESTONE: Work program schedule and cost estimates to CC for consideration by end of 1st Quarter FY 11/12. CURRENT MILESTONE: Developing and refining Economic Development Communications Plan to expand the amount, quantity, and accessibility to useful business information. NEXT MILESTONE: Complete development of ED Communications Plan. CURRENT MILESTONE: CBJ article to run in July edition. Developing a "how to" guide for homeowners and developers explaining the development permit process and the types of available services and assistance. NEXT MILESTONE: "How to" guide available in July. Update website pages to provide clear information. CM CED CED CED CED CED CED CED J.Coates K. Dodson G. Barberio G.Barberio K. Dodson G. Barberio K. Dodson M. Peterson Aug. 2011 Sept. 2011 July 2011 July 2011 Sept. 2011 Sept. 2011 Sept. 2011 July 2011 Jan. 2012 June 2012 Dec. 2012 Dec. 2012 June 2012 June 2012 June 2012 June 2012 = FY 11/12 Priority 07/22/2011 1 of 5 COUNCIL PRIORITY PROJECTS FY11/12 Priority Goal/Project Title Proposed Power Plant - Power Plant State permitting - Power Plant Land Use Amendments Westfield Lease and Project Review Envision Carlsbad Phase II - General Plan Update Status CURRENT MILESTONE: Energy Commission Deliberation. NEXT MILESTONE: Regional Water Quality Control Board NPDES Permit CURRENT MILESTONE: Draft text changes for PC considersation in Sept. and CC consideration in Oct. Final report on moritorium to CC on Oct. 11. NEXT MILESTONE: PC hearing in Sept. CURRENT MILESTONE: Finalize lease deal points with Westfield. NEXT MILESTONE: Return to Council in closed session to review final deal points. CURRENT MILESTONE: Task II - Land Use Alternatives underway; PC to brainstorm alternatives on 07/13. New re-evaluation of scope, schedule, & budget, proposal to CC for consideration on 07/26. NEXT MILESTONE: PC alternatives brainstorming workshop in July. New proposed scope, schedule, & budget to CC in Aug. 201 1 . Responsible Dept. PEM CED PEM CED Team Leader J.Garuba D. Neu J. Garuba G. Barberio Current Milestone Complete (month/year) Nov. 2011 Oct. 201 1 July 2011 July 2011 Estimated Project Completion (month/year) TBD Dec. 2012 TBD Dec. 2013 = FY 11/12 Priority 07/22/2011 2 of 5 COUNCIL PRIORITY PROJECTS FY 11/12 Priority Goal/Project Title Status Responsible Dept.Team Leader Current Milestone Complete (month/year) Estimated Project Completion (month/year) FINANCIAL HEALTH * * * Streamline city operations to ensure balanced budget & most efficient use of resources: Complete a plan to maximize the value & use of city- owned real estate Implement golf course operational improvements to reduce operating subsidies Constituent Relationship Management Program Maintenance and Operations Center Construction Desalination Plant Review Human Capital Management System Hydro Electric Project Labor Negotiations CURRENT MILESTONE: Present research findings at 7/19 workshop. NEXT MILESTONE: Dependent on direction given at workshop. CURRENT MILESTONE: Prepare RFP and solicit for financial property consultant firm. NEXT MILESTONE: Retain financial property consultant and initiate highest and best use analysis. CURRENT MILESTONE: Council Workshop to discuss dedicated player's lounge. NEXT MILESTONE: 18th hole green design. CURRENT MILESTONE: Release RFP for CRM solution. NEXT MILESTONE: Evaluate CRM proposals and negotiate with vendor; secure services of external proiect manaqer. CURRENT MILESTONE: Prepare Design-Build performance specifications and complete the Request for Proposal documents for the M&O Center Design-Build contract. NEXT MILESTONE: Establish the competitive prequalification selection process and criteria for the desiqn-build entities. CURRENT MILESTONE: Revising proposed agreement with CWA. Meet w/ CWA representatives to resolve outstanding issues. NEXT MILESTONE: Take agreement to CWA Board for approval. CURRENT MILESTONE: Finish integration testing. NEXT MILESTONE: Go live with all of Phase I deliverables no later than January 1 , 201 2. CURRENT MILESTONE: Working with Canyon Hydro and Zeropex to refine their generator equipment submittals. Resolving outstanding F&WS issues to complete FERC process. NEXT MILESTONE: Select power generation equipment, finalize design and advertise project. CURRENT MILESTONE: Finish contract reopener with Police to address retirement formula for CPOA-represented miscellaneous members and HCMS changes for all CPOA represented employees. NEXT MILESTONE: CM PEM PARKS & REC LIBRARY PEM UTILITIES HR UTILITIES HR CMT D.Hauser C. Hazeltine D.Curtis J.Garuba G. Pruim J. Clark B. Plummer J. Clark Aug. 2011 July 201 2 Sept. 201 1 Aug. 2011 Oct. 2011 July 2011 Aug. 2011 July 2011 Aug. 2011 Ongoing Winter 20 11 Apr. 2012 Oct. 2012 Winter 201 5 Sept. 201 1 TBD Aug. 2012 Aug. 2011 = FY 11/12 Priority 07/22/2011 3 of 5 COUNCIL PRIORITY PROJECTS FY11/12 Priority Goal/Project Title Status Responsible Dept.Team Leader Current Milestone Complete (month/year) Estimated Project Completion (month/year) TRANSPORTATION AND CIRCULATION * * Improve traffic flow by upgrading & synchronizing all traffic signals on major thoroughfares throughout the city, beginning with Palomar Airport Road and El Camino Real. Install lighted, pedestrian friendly crosswalks along Carlsbad Boulevard in the Village & other areas with heavy foot traffic. La Costa Avenue Traffic Calming CURRENT MILESTONE: Received bids for wireless and video detection equipment. NEXT MILESTONE: Council award contracts for wireless and video detection equipment. CURRENT MILESTONE: Prepare staff report outlying ped crossing options. NEXT MILESTONE: Present staff recommendations to TSC. CURRENT MILESTONE: Interim re-striping plan. Submit community vision plan for La Costa Ave. for Council consideration. NEXT MILESTONE: Depends on Council direction. TRANSPORTATION TRANSPORTATION TRANSPORTATION D.Bilse Bryan Jones D.Bilse July 2011 July 2011 Sept. 2011 7/2013 12/2012 9/2011 PARKS, OPEN SPACES AND TRAILS * * * Alga Norte Community Park: - Finalize Alga Norte Park operating plan - Construct Alga Norte Park Create new coastal land for recreation & economic development by completing land exchange w/ the state for the Manzano property & realigning Carlsbad Blvd.: - Carlsbad Blvd. Preliminary roadway design and environmental review to facilitate land exchange Expand the amount of open space & trails in the city through active monitoring of potential acquisition sites and partnering with others, where possible, to leverage taxpayer funds. - Lake Calavera Master Plan Implementation Landscape improvements to Pine Park (Madison Property) New restrooms at Pine Park CURRENT MILESTONE: RFP currently being developed and will be distributed in July 201 1 . NEXT MILESTONE: Pre-submittal meeting 8/1 1/11. CURRENT MILESTONE: Approve contract amendment with architect to update plans NEXT MILESTONE: Update plans and have Council authorize project bidding. CURRENT MILESTONE: Complete appraisal of lands. NEXT MILESTONE: Identification of lands to be exchanged. CURRENT MILESTONE: Submit PSA contracts for CC consideration. NEXT MILESTONE: Consultants update land exchange schedule. CURRENT MILESTONE: Staff continues to explore potential open space acquisition and partnerships as opportunities become available. NEXT MILESTONE: Scheduled first of on-going quarterly meetings with appropriate staff. CURRENT MILESTONE: Submit permit applications for wetland boardwalk. NEXT MILESTONE: Authorization to bid for wetland boardwalk. CURRENT MILESTONE: Four bids received June 28th, low bid $28,000. NEXT MILESTONE: Award of contract and complete landscape improvements. CURRENT MILESTONE: Prepare plans and specifications. NEXT MILESTONE: City Council to authorize bid. PARKS & REG PEM CM TRANSPORTATION PARKS & REC PARKS & REC PARKS & REC PARKS & REC C. Hazeltine D. Mauser C.Haas S. Hammann C. Hazeltine L. Ketabian M. Steyaert M. Steyaert July 2011 July 2011 Sept. 2011 July 2011 Aug. 2011 Oct. 2011 July 201 1 Oct. 2011 Dec. 2011 Fall 2014 Ongoing July 201 3 Ongoing May 201 2 Sept. 2011 Aug. 2012 BALANCED COMMUNITY DEVELOPMENT Housing Element Program Implementation CURRENT MILESTONE: Preparing amendment to HE to update timelines as directed by court order in Friends of Aviara lawsuit; to be considered by CC On 07/26. NEXT MILESTONE: Implement various programs in adopted Housing Element. CED D. de Cordova July 2011 Apr. 2013 = FY 11/12 Priority 07/22/2011 4 of 5 COUNCIL PRIORITY PROJECTS FY11/12 Priority Goal/Project Title Status Responsible Dept.Team Leader Current Milestone Complete (month/year) Estimated Project Completion (month/year) ENVIRONMENTAL MANAGEMENT Agua Hedionda dredge project Solid waste strategy and contracts Vista-Carlsbad interceptor Sewer Master Plan CURRENT MILESTONE: Secure agency permits. NEXT MILESTONE: Council approve plans and authorize project bidding. CURRENT MILESTONE: Prepare long term collections and disposal draft agreements with WM and Allied. NEXT MILESTONE: Approval of agreements by Council. CURRENT MILESTONE: Planning Commission Approval of Mitigated Negative Declaration. NEXT MILESTONE: Council approval of MND, resolve outstanding utility issues, acquire necessary easements. CURRENT MILESTONE: Complete Encina Canyon Multi-Agency Relief Sewer Study. NEXT MILESTONE: Integrate above study into Sewer Master Plan and prepare required EIR. UTILITIES UTILITIES UTILITIES UTILITIES G. Pruirn C. Ruess T.Smith T.Smith Sept. 2011 Oct. 201 1 Oct. 201 1 Aug. 2011 Aug. 2012 TBD May 201 3 Dec. 201 1 SAFE COMMUNITY Joint First Responders Training Facility (JFRTF): - Construct JFRTF - Prepare Operations Plan Fire Station 3 relocation CURRENT MILESTONE: Under construction - completion scheduled for 1st Qtr. 2012. NEXT MILESTONE: Deliver project to owner for operation. CURRENT MILESTONE: Obtain approval for Operation Manager job specification. NEXT MILESTONE: Prepare draft Operations Plan. CURRENT MILESTONE: Execute design contract with architectural firm. NEXT MILESTONE: Complete project design. TRANSPORTATION PEM PEM P. Vaughan D. Mauser D. Mauser Mar. 2012 Aug. 2011 Aug. 2011 Mar. 2012 Spring 2011 Summer 2013 WATER Water Master Plan Recycled Water Master Plan Recycled Water Phase III Feasibility Study and North County Cooperative Use Project CURRENT MILESTONE: Complete Draft Master Plan. NEXT MILESTONE: Obtain CEQA clearance (1 2/201 1 ). CURRENT MILESTONE: Complete Draft Master Plan. NEXT MILESTONE: Obtain CEQA clearance (12/2011). CURRENT MILESTONE: Complete Phase III Feasibility Study. NEXT MILESTONE: With Council approval, select preferred project, apply for grants/loans, obtain agreements/letters of intent from recycled water purchase partners. UTILITIES UTILITIES UTILITIES B. Plummer D.Ahles D.Ahles July 2011 July 2011 Aug. 2011 Dec. 2011 Dec. 201 1 Dec. 201 1 = FY 11712 Priority 07/22/2011 5 of 5