SR-602-008 (3)
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Council Meeting:
3/24/87
Santa Monica, California "-0
MAR 2" 191
TO:
Mayor and City Council
FROM:
City Staff
SUBJECT:
Recommendation to Authorize City Manager to
Negotiate and Execute a Contract with Gates,
McDonald & Company for Workers' Compensation Claims
Administration Services
Introduction
This report recommends that the City Manager be authorized to
negotiate and execute a contract with Gates, McDonald and Company
for workers' compensation claims administration services.
Background
The City of Santa Monica began to self insure its workers I
compensation program on July 1, 1976.
As a result, it became
necessary to procure the services of a claim administration firm
to perform the necessary claim processing services previously
performed by the insurance carrier.
Brown Brothers, Inc., provided claims administration services
from
July
1,
1976
through
June
30,
1979.
Fitzpatrick
Self-Insurance Administrators provided the administration of
claims from July 1,
1979 through October I,
1982.
ComCo
Management, Inc., has been the claims administrator since that
time and is currently under contract through June 30, 1987. The
claims
administration
services
provided
have
included
investigation and determination of compensability of claims,
monitoring treatment programs for injured employees, coordination
wi th City staff concerning the return of injured employees to
work, providing timely payment of benefits in accordance with
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6IAA 241367
statutory laws, assisting legal counsel in preparation of cases
for trial, recommending settlement of claims when appropriate,
and providing data processing services to comply with financial
and regulatory requirements.
During the past year there has been increasing concern over the
quality of service provided to the City by ComCo Management, Inc.
It is apparent that the claims adjusting staff has not been
sufficiently experienced, technical staff turnover has been high,
and the response to the service needs of the City has not been
adequate or timely. With these reasons in mind, as well as the
fact that it has been over 5 years since the last request for
proposal, it was determined by City staff that a new request for
proposal for workers' compensation claims administration services
should be issued.
Request for Proposal Process
Requests
for
proposals
were
mailed
to
twenty
claim
administrators.
These firms were identified based on knowledge
of City staff, use by other municipalities in the area, and
professional publications.
Staff and an independent rater from
another city reviewed the written responses received from
fourteen firms, interviewed five finalists selected based on
their
suitability
given the
staff's
established
selection
criteria, and ranked the five firms in the following order:
Firm
Fees
New Claims Pending
Total
1-
2.
3.
4.
5.
Gates, McDonald & Co.
Colen and Lee
Bierly & Associates
Claims Admin. Systems, Inc.
Fred S. James & Company
$ 66,000
$153,444
$ 80,000
$144,664
$63,730
$29,600
$35,000
$ 4,000
$l29,730
$183,044
$168,000
$l15,000
$148,664
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Staff believes that overall Gates, McDonald and Company is
superior based on an evaluation of both service and fees. It is
recommended that Gates, McDonald be awarded the contract to be
effective May 1, 1987, because of the experience of the firm with
public agency claim administration; the proximity of the firm's
branch office (Marina Del Rey) to the City; the financial
stability of the corporation (over 50 years in insurance and self
insurance administration); the excellent quality of their
electronic data processing capabilities; the stability and
experience level of their supervisory and claims personnel; their
excellent references from existing clientele which include both
public agencies and private industry.
Gates, McDonald will provide the City with a contract option for
the second and third years not to exceed a 10% increase on the
new claims fees only. No increase in the pending claim fee will
occur in the second and third year contract options.
Staff recommends that the City exercise
the contract with ComCo Management, Inc.,
written notice, effective April 30, 1987.
its option to terminate
subject to thirty days
Financial Analysis
Sufficient funding is available in the FY 86-87 budget allocation
for the workers' compensation self insurance fund. Funds will be
budgeted as appropriate out of the Workers' Compensation Self
Insurance Fund (59-700-235-000-202) for the next fiscal year.
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Recommendation
It is recommended that the City Council:
l. Authorize the City Manager to negotiate and execute the
contract with Gates, McDonald and Company for workers'
compensation claims administration services effective
May 1, 1987.
2. Authorize the City Manager to terminate the contract
with ComCo Management, Inc., effective April 30, 1987.
PREPARED BY: Tom Phillips
Risk Manager
Barbara Trujillo
Workers' Compensation Analyst
(WCTPA3)
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