sr-012610-8cCity Council Meeting: January 26, 2010
Agenda Item: ~-t/
To: Mayor and City Council
From: Joan L. Akins, Director, Community Maintenance
Subject: Custodial Services at the Public Safety Facility (PSF) and the Santa
Monica Pier
Recommended Action
Staff recommends that the City Council:
1. Review the costlbenefit analysis of contracted and in-house custodial services at
the Public Safety Facility and Santa Monica Pier, and, if appropriate, direct staff
to proceed with actions necessary to contract for custodial services at the Public
Safety Facility and Santa Monica Pier; and
2. Authorize the City Manager to extend the term of the interim month-to-month
purchase order with High Tech Building Maintenance from July 1, 2010 until
September 30, 2010 in an amount not to exceed $145,000 and extend the term
of the interim month-to-month purchase order with L.A. Cha from July 1, 2010
until September 30, 2010 or until. a new contract is awarded, whichever comes
first.
Executive Summary
On September 22, 2009, the City Council requested that staff prepare a detailed
cost/benefit analysis for contracted and in-house custodial services at the Public Safety
Facility and the Santa Monica Pier. Staff conducted an analysis of the advantages and
disadvantages, including costs and operational issues, of contracting for services
compared to providing in-house- custodial services. In accordance with Council-
approved contracting criteria related to pooling of contracted employees, transfer of risk,
capital investment, space requirements to house staff and equipment, staff
recommends that the City Council authorizes the issuance of a Request for Proposals
for contracted custodial services at the Public Safety Facility and the Santa Monica Pier.
These services have been provided by contract for six and a half years at the Pier and
for three and a half years at the PSF. City Council authorization to proceed with a
Request for Proposals would be a .continuation of this service delivery option.
Contracted services will provide the City with lower costs, prevent initial capital
investment, assist with pooling of contracted employees and transfer risk for specialized
custodial services. Any eventual contracts will have a 30-day provision to cancel.
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Background
Custodial Services for the PSF and the Pier have been delivered by custodial
contractors for the last several years, during which time staff has determined that the
existing specifications for both locations needed to be revised to reflect adequate
minimum staffing levels and to clarify the specified work. In addition, the recent
construction of the expanded restroom complex at the Pier requires more staffing to
clean those additional facilities.
City Council held study sessions to review previous Council discussions and existing
policies on contracting on January 6, 2007, October 13. 2007, and January 17. 2009.
On June 27. 2006, formal Bid# 2899 was awarded to L.A. Cha Maintenance for
custodial services at the PSF. Since L.A. Cha Maintenance was not able to honor their
renewal options, staff has returned to City Council on July 8, 2008, on November 11.
2008, and on September 22, 2009 for various extensions. At that time, Council
requested that staff prepare a detailed cost/benefit analysis for contracted and in-house
custodial services.
In addition, the City Council approved an interim month-to-month custodial services
agreement with High Tech Building Maintenance at the Santa Monica Pier on July 28.
2009.
In January 2009 Council considered and adopted criteria for contracting for public
services. Services may be outsourced when the following conditions apply.
• Pooling of contracted employees would provide significant benefits that City
staffing could not provide
• Contractor staff does not have significant interaction, communication or
engagement with the community, as is currently the case at the PSF
• Service requires significant equipment or other capital investment and
maintenance
• Service entails a certain level of risk that the City would rather transfer to an
outside company.
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Discussion
The Custodial Services Division was officially formed on July 1, 2007 to consolidate in-
house and contract custodial services previously delivered by several City maintenance
divisions into one division that is solely responsible for improving the coordination,
development, and delivery of these fundamental services.
The primary responsibility of the Custodial Services Division is to provide for the
cleaning of alt walls, floors, ceilings, furnishings and features in various City facilities
including restrooms and locker rooms, windows, blinds, doors, carpet and tile, stairwells
and staircases, elevators, and emptying trash and recycling containers.
During the two-and-a-half-year period since the division was formed, staff has evaluated
the delivery of both in-house and contract services, identified areas of improvement,
and developed methods to make those improvements. The division has been
implementing these methods and will continue to make steady improvements with either
service delivery option.
Whether custodial services are provided by in-house or contracted staff, the Division's
standard is that all maintenance services should have:
1) Comprehensive, clearly documented contract specifications/performance
standards;
2) Proper staffing and supervision levels to perform and oversee the specified work
to the prescribed standards;
3) Regular inspections by management of the facilities to verify and measure the
work performed; and
4) Consistent enforcement of the provisions contained in the
specifications/performance standards and all policy mandates that govern the
provision of a public service.
This standard meets the Council adopted criteria related to adequate monitoring,
oversight, and reporting of contract services.
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Custodial Services can be delivered by either City staff or contracted staff, and the City
has utilized both workforces to deliver these services City wide. In-house staff is
supervised and in-house facilities are regularly inspected by Lead Workers, Custodial
Supervisors, the Custodial Superintendent and the Custodial Services Manager.
Contracted staff is supervised by the contractor and contract facilities are regularly
inspected by the Custodial Contracts Administrator and the Custodial Services
Manager, who regularly meet with the contractor's supervisors and managers for
inspection of contract sites. However, there are differences between in-house and
contract services. The following is an analysis of the advantages and disadvantages
associated with contracted services and in-house services.
Labor Costs
Analysis of contractor and in-house services, based on bid results from 2008,
demonstrates that custodial contractors typically cost less than in-house custodians to
pertorm the same work. Staff estimates that in-house custodial services for the PSF
cost $692,000, whereas contractual bids ranged from $278,508 to $463,122 in 2008.
Contract employees are only paid for the actual hours worked. Contractors are required
to have apre-screened pool of employees ready to fill in for any vacancies. Whenever a
contract employee is absent, the contractor is responsible for providing coverage for
that absence; with no overtime or other additional costs.
However, contract employees are paid less than City employees for providing
essentially the same services. Contract employees are paid in accordance with the
Living Wage Ordinance. The Living Wage Ordinance adopted by Council in 2005 was
meant to address high housing costs and low-income workers in the Los Angeles region
by establishing a minimum wage that is higher than the federal and California minimum
wages and is adjusted every July according to the previous year's change in the
Consumer Price. Index for Urban Wage Earners and Clerical Workers in Los
Angeles/Riverside/Orange County. Custodial contract workers are eager to work for the
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City of Santa Monica due to the higher living wage rate compared to surrounding cities.
Previous bid results from 2008 for the PSF from 11 separate bidders showed that all 11
paid less in hourly wages than the City does for comparable positions, even with the
Living Wage Ordinance provision. In addition, contract lead workers were paid a smaller
supervisory differential over their subordinates compared to City lead workers and the
contractors did not pay shift differentials.
City employees are paid a higher average hourly rate ($19.67) than the average wage
rate paid. to contract employees ($13.28). In addition, in-house permanent employees
receive a comprehensive benefit package that includes health insurance, retirement
benefits, vacation, sick, and holiday pay. These factors provide employees, as well as
candidates who already live in Santa Monica, more of an opportunity to live and work in
the same city.
CONTRACTOR IN-HOUSE
Working Supervisor Custodian II
HrI~F?afe ~ Annual; Rate HrIRate '"hnnual Rate ~ Variance
Hourly Rate $ 13.50 $ 28,080.00 $ 20 44 $ 42,515.20 51%
Fringe Benefit.(stt & cash outs ~~yy~~pp
~..'f~ ~ LY4f~Id.~~~~'~~,7L*','Y~M~y ~ ,~ ~ ~ $ - $ -
~~ s ~ kyj~~~t $ 11.18 $ 223,248.00
.> t~ ~~r.~~„by uux~S~~~~~4
~~
h t.~i ltGivti'
Custodian
Hrl Rate Annual Rate Custodian I
Hr~,R~te, ~Arinual Rate
~faXiance
Hourly Rate $ 13.05 $ 27,144.00 $ 18.90 $ 39,312.00 45%
Fringe Benefits & cash outs
..fbi}}~$ j^pv~ y~ ~}4 ('{(T t X p{~ Y
y2"""f .. ~FSS~~fI~I~~L~v~"~~~{~U .r~.v $ -
~pnj,' '1 .S P i T zf. ~"${fi. (y~
T:e~ii L'~~#~.~1~ $ 10.85 $ 22,573.00
~^~y, M1 °R f } 4 ayff^l~b^r.
t~?.uh~ni.~.rk~.ri r~!»~~~35:...v
~y~~¢"'2i e~-a~
~~y L4~L 9ti
• Does not include overhead costs
• Contract figures based on hourly rate paid to PSF and Pier custodial contract employees
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City employees are paid a higher hourly rate for providing essentially the same duties
that a contractor can provide. The City employee benefit package adds substantial
additional costs to the hourly wage. In addition, the City pays approximately 17% of the
2080 regular hours budgeted annually for each permanent employee in vacation time,
sick time, holidays, and other hours not actually worked, as well as the cost to back-fill
these positions.
Employee Benefits
Contract employees, who essentially perform the same work as in-house staff, do not
typically receive the same benefit package as City employees. Previous bid results from
2008 for the PSF from 11 separate bidders showed that eight companies offered no
health benefits to their workers, and three offered limited benefits.
In comparison, the City offers employees paid medical insurance and other significant
fringe benefits, which provide the employee with a comprehensive benefit package. City
benefits translate to an additional 56% hourly rate increase for a City Custodian over the
average hourly rate for a contract custodian. These benefits increase the total average
hourly rate for City custodians from $19.67 to $30.68.
Specialized Service
Contractors can provide specialized services, such as multi-story exterior window
washing, that require specialized equipment and present an unusual risk to City
employees. Contractors can also provide one-time services such as post construction
clean-ups and additional staffing for special events. One time services can supplement
in-house services and lessen the amount of deferred maintenance or overtime.
Contracted, specialized services offer services on an interim .basis as well as technical
expertise, and may be provided with a contractor, rather than City equipment, all of
which are key factors in working with contractors, per Council direction.
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Additionally, contracted services allow for the pooling of employees and for adding
services on an interim or emergency basis, which are also adopted contracting criteria.
This was essential when The Resource Collection went bankrupt in May 2009 and staff
had to ensure uninterrupted services at the Pier within a short period of time. However,
challenges arise when contractors do not perform as specified or go out of business and
have to be replaced.
City staff can also perform specialized services such as carpet cleaning, interior window
washing, and one-time clean-ups. However, these services occur on schedule only
when there are no staff absences. Staff absences require other employees to cover for
that absence and defer other scheduled activities, perform the absent employee's work
on overtime or with as-needed employees at additional cost, or to defer the work until
the employee returns.
Recruitment. Supervision. Management and Liability Issues
An in-house custodial work force requires support services from several City
departments. Custodial staff are initially recruited by Human Resources, and continue
to interact with Human Resources staff regarding benefits, disciplinary procedures, and
certain trainings. Custodial staff are fundamentally trained, scheduled, supervised, and
managed by Community Maintenance. There are ongoing expenditures for uniforms,
vehicles, and cleaning equipment. Operational and liability issues require the support of
Risk Management, the City Attorney's office, Finance, and other divisions within
Community Maintenance, such as Fleet Maintenance. Disciplinary procedures and
employee complaints must be founded or unfounded and result in significant additional
time and cost factors, such as those associated with personnel investigations. For
example, one investigation process for an appealed termination recently cost the City
$40,000 in independent investigator fees. The termination was ultimately upheld by the
Personnel Board.
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8y contracting -for services, recruitment, training, employee supervision, employee
behavior, workers compensation and liability issues become the primary responsibility
of the contractor. This results in a significantly reduced need for support services and
personnel from other City departments. Employee lost time, work related injury, and
public liability claims are assumed by the contractor, who is required to have a screened
pool of candidates available to fill in for any vacancies or deficiencies.
The City has had problems with contractors that did not perform as specified, did not
correct their deficiencies as directed, and needed to be replaced by a more responsible
contractor. In addition, a contractor may file for bankruptcy without informing its
employees or the City of their financial standings. Contracted services increase the
work load for Purchasing.
Filling in-house vacancies can take a long time. The length of time from request to hire
can take anywhere from 3-4 months. A staff vacancy can result in deferred cleaning
tasks and reduced cleaning frequencies, or in other employees covering the vacancy
with hours in excess of their regular Schedule at an overtime rate and/or paying as-
needed workers to perform the tasks.
Result of Analysis
A comparison of hourly rates and benefits, excluding overhead costs, demonstrates in-
house services cost 131% more than contracted custodial services. In light of the
current economy, and based on the contracting criteria adopted by Council, including
the benefits that pooling of contract employees provides, the capital investment and
equipment purchases that are passed on to the contractor, and the transference of
liability and special risk services such as exterior window washing at the PSF, staff
recommends continuing to deliver the custodial maintenance services for the PSF and
Pier by contract.- These services have been provided by contract for six and a half
years at the Pier and for three and a half years at the PSF. A Request for Proposals and
new contracting process would continue this service delivery option.
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The Custodial division would continue to manage custodial services contracts and
ensure that contractors are compliant with contract specifications. Contracts would have
a 30-day provision to cancel and a provision to immediately remove and replace any
incompetent contract employee.
Based on 2008 bids, costs for contracted services at the PSF are estimated to be in the
range of $278,508 to 463,122. Pier costs are unknown as no formal bids have recently
been undertaken and the scope of work has changed due to completion of central
restroom construction.
Alternatives
If the City were to bring custodial services for the PSF and the Pier in-house, staff
estimates that the on-going cost will be approximately $692,000 at the PSF and
approximately $909,000 at the Pier. In addition, one-time start-up costs are estimated to
be approximately $68,600 at the PSF and approximately $21,100 at the Pier.
Staff city-wide have .been directed to explore and take advantage of cost recovery,
operational efficiencies and savings opportunities to balance the budget. Bringing
services in-house would increase costs. Additional savings would need to be identified
to fund the increases for custodial services at the PSF and the Pier. Cuts within the
Custodial division would result in a drastic reduction in cleaning frequencies as well as
an associated reduction in workforce.
Financial Impacts & Budget Actions
Staff has requested an additional appropriation in the amount of $82,500 as part of the
Mid Year Budget staff report for Council's consideration on 1/26/2010 in order to
continue custodial contract services through June 30, 2010 at the Santa Monica Pier.
Funds to extend the interim month-to-month purchase order with High Tech Building
Maintenance in an amount of not to exceed $145,000 from July 1, 2010 until September
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30, 2010 will be included in the FY2010/11 Proposed Budget. Additional funds for
custodial services, either in-house or by contract, will be necessary for the remainder of
FY2010/11
Depending on the direction from the City Council, staff will request additional funds to
cover increased costs for moving these services in-house or to cover increases in
contractual costs that are unknown until bids are received. These costs will be included
in the Community Maintenance Department's Maintenance of Effort FY2010-11
Proposed Budget.
Prepared by: Joe McGrath, Custodial Services Manager
Approved: Forwarded to Council:
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Jo`~n L. Akins "'P.,L~ayv(ont Ewell
Director, Community Maintenance Ci anager
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