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SR-11-11-2014-3ECity of Report ID i it 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, 1 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. 3 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: cg Rod Gould City Manager Reference: Contract No. 9995 (CCS)