SR-11-11-2014-3ECity of Report
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Santa Monica
City Council Meeting: November 11, 2014
Agenda Item: =
To: Mayor and City Council
From: Gigi Decavalles- Hughes, Director of Finance
Subject: Professional Services Agreement for Cost Allocation Plan and User
Fee /Cost of Services Study
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a professional services agreement with MGT of America, Inc., a Florida -based
company, to develop and prepare a new Cost Allocation Plan and conduct a
comprehensive citywide review of user fees and charges, in an amount not to exceed
$102,100 over a three -year period, with future year funding contingent on City Council
budget approval.
Executive Summary
The purpose of a Full Cost Allocation Plan (CAP) is to recover indirect costs from
enterprise funds, special revenue funds and other funds, as well as to establish user
fees, permits and applications, billing rates, hourly rates, and costs of special services.
Under the Federal Office of Management and Budget (OMB) Circular A -87 guidelines,
which are now codified in the Code of Federal Regulations (CFR) at 2 CFR Part 225,
local governments may recover indirect costs on federal and state grants and awards.
City policy calls for a comprehensive user /cost of services study at least once every five
years to ensure that the City is recovering the appropriate amount of costs related to
services that benefit individuals rather than the community as a whole. The CAP is one
component of the costs used in setting fees for services provided to the public and
services charged by department to non - General Fund departments. Staff recommends
MGT of America, Inc. (MGT) to provide these services over three years, for an amount
not to exceed $102,100.
Background
Santa Monica has been allocating indirect costs since the mid 1980's. Indirect costs
include shared administrative expenses where a department incurs costs for support
that it provides to other departments (e.g., finance, human resources, legal,
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technology). The current Cost Allocation Plan provides both a full cost plan for internal
charging and an OMB A -87 Plan for grant reimbursement. The plan was last updated in
2012.
A comprehensive user fee /cost of services study was last completed in 2013. That
study did not include zoning fees pending the new zoning ordinance, which would be
included in the upcoming study. The upcoming study would include zoning fees as well
as all other appropriate fees.
Discussion
It is both common practice and advantageous to the City for a CAP and fee study to be
contracted together. The cities of Manhattan Beach, Culver City and Santa Clara have
contracted these services together. The fee study must utilize a CAP to ensure that all
applicable costs are included in cost of services calculations. Therefore, a thorough
understanding of the document is required. When the same consultant prepares both
documents, that knowledge is inherent, resulting in fewer consultant hours and lower
costs to the City.
The City plans to prepare a new CAP every two years to align with the biennial budget
cycle. In Year One, the consultant would develop a new Full Cost — Cost Allocation
Plan (CAP) for all funds for the City, develop a new Federal Office of Management and
Budget (OMB) A -87 Cost Allocation Plan (CAP), and conduct a user fee analysis on
zoning fees to tie into the new zoning ordinance currently under revision. In Year Two,
the consultant would conduct a comprehensive cost -based user fee study on all other
user fees, including a comparative analysis of key fees to those of surrounding cities. In
Year Three, the consultant would develop a new CAP as well as review the previously
adopted zoning fees and any other fees that may require review due to new services or
revisions to the costs of providing certain services.
Consultant Selection
On August 5, 2014, the City issued a Request for Proposals (RFP) inviting proposals to
develop and prepare a new Cost Allocation Plan and undertake a comprehensive
citywide review of user fees and charges. The RFP was posted on the City's online
bidding website and notices were advertised in the Santa Monica Daily Press in
accordance with City Charter and Santa Monica Municipal Code (SMMC) provisions. A
total of 39 firms obtained the RFP package. Five proposals were received. A selection
committee comprised of staff from the Finance Department evaluated the proposals
based on criteria listed in the RFP, including qualifications and experience with similar
projects, capacity and technical capabilities, project approach and proposed work plan,
costs, and references.
As a result of this evaluation process and based upon the above criteria, MGT of
America, Inc. is recommended as the best qualified firm to develop and prepare a new
Cost Allocation Plan and undertake a comprehensive citywide review of user fees and
charges.
Although MGT was not the lowest cost proposal, the services included in its proposal
were the most comprehensive, showed the most complete understanding of the
information and resources necessary to complete the projects within the City's required
timeline, and exhibited a comprehensive level of experience in completing similar
projects in California. MGT is thoroughly familiar with all relevant federal and State of
California cost plan requirements, and the legal issues surrounding user fees. The
State of California and several federal districts have approved MGT's cost plan
methodology. MGT has recently completed cost allocation plan studies for over 40
counties and cities in California and user fee /cost of services studies for over 25 cities in
California including Santa Monica. The firm's proposed team has over 50 years of
experience in governmental cost determination. The proposed project manager was
also the project manager on the City's most recent comprehensive citywide user fee
study, completed in 2013.
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Financial Impact & Budget Actions
The agreement to be awarded to MGT of America, Inc. is for an amount not to exceed
$102,100. Funds in the amount of $27,400 are available in the FY 2014 -15 budget in
division 01208. The agreement will be charged to account 01208.555060. Budget
authority for subsequent budget years will be requested in each budget for Council
approval. Future funding is contingent upon Council approval and budget adoption.
Prepared by: Susan Lai, Budget Manager
Approved:
Gigi Decavalles- Hughes
Director of Finance
Forwarded to Council:
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Rod Gould
City Manager
Reference:
Contract No. 9995
(CCS)