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HomeMy WebLinkAbout08.b. Agreement for Cost of Service Study and Staffing Needs AssessmentCentral Contra Costa Sanitary District 3 BOARD OF DIRECTORS POSITION PAPER Board Meeting Date: June 19, 2014 subject: AUTHORIZE THE GENERAL MANAGER TO EXECUTE A PROFESSIONAL SERVICES AGREEMENT WITH RAFTELIS FINANCIAL CONSULTANTS, INC. TO PERFORM A WASTEWATER COST OF SERVICE STUDY AND STAFFING NEEDS ASSESSMENT Submitted By: Danea Gemmell Environmental Services Division Manager REVIEWED AND RECOMMENDED FOR BOARD ACTION: Initiating Dept. /Div.: Engineering /Environmental Services Roger S. BaV ey General Manager ISSUE: In accordance with purchasing procedures, Board authorization is required for the General Manager to execute a professional services agreement in an amount greater than $100,000. RECOMMENDATION: Authorize the General Manager to execute a Professional Services Agreement with Raftelis Financial Consultants, Inc. (RFC) in an amount not to exceed $400,000 to perform a wastewater Cost of Service (COS) Study and Staffing Needs Assessment (SNA). FINANCIAL IMPACTS: Adequate funds to cover this contract are available in the Environmental Services Fiscal Year (FY) 2014 -15 Operations and Maintenance budget, which was approved by the Board on June 5, 2014. ALTERNATIVES /CONSIDERATIONS: The Board could decide not to authorize an agreement with RFC for the COS study and SNA; however this will result in a delay to the overall schedule and would impact rate setting for the FY 2015 -16 sewer service rates. BACKGROUND: On October 22, 2013, at the Board Priorities Workshop, the Board identified a cost of service study and a staffing needs assessment as two of its priorities. Both have been incorporated into the draft Strategic Plan for FY 2014 -15 through FY 2015 -16, which is also scheduled for consideration at the June 19 meeting. The cost of service study is captured under Goal Two, "Ensure Financial Stability ". The staffing needs assessment is captured under Goal Three, "Develop our Human Capital Resources ". The District has internally prepared its previous rate studies, but staff recommends a qualified external consultant to conduct a comprehensive COS study in order to provide an independent assessment of the rates and fees. Objectives for the COS study include C:\ Users \danderson\AppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \DVCG8C5G \PP Raftelis Agreement Approval 6 -19 -14 Final.doc Page 1 of 3 POSITION PAPER Board Meeting Date: June 19, 2014 Subject-' AUTHORIZE THE GENERAL MANAGER TO EXECUTE A PROFESSIONAL SERVICES AGREEMENT WITH RAFTELIS FINANCIAL CONSULTANTS, INC. TO PERFORM A WASTEWATER COST OF SERVICE STUDY AND STAFFING NEEDS ASSESSMENT evaluation of the District's existing customer classes and wastewater rates to provide a fair rate structure that is consistent with Proposition 218, as well as policy recommendation with respect to debt - financing options, reserve levels, capacity fee methodology, recycled water and development fees. Since labor is a significant component of the rate structure, the study will also provide an organizational and SNA which will also establish performance benchmarks with comparable agencies and determine opportunities for operational efficiencies and cost - saving measures. A Request for Proposal was issued to five financial consultants, with experience in providing both COS and SNA, on March 28, 2014. Three responses were received by the due date of April 30, 2014. A four - person panel comprised of the General Manager, Director of Administration, Environmental Services Division Manager and Senior Engineer responsible for Financial Planning conducted interviews on May 19, 2014. The panel selected RFC as the firm best suited to providing services for the District's needs. RFC is one of the largest financial consultants in California and the nation, having worked with more than 500 water and wastewater utilities including San Francisco Public Utilities Commission, as well as the cities of Sacramento and San Diego. RFC has developed sophisticated financial rate models that are user - friendly, non - proprietary and can be customized to the individual agency. RFC has assisted utilities such as Delta Diablo Sanitation District and the cities of Beverly Hills and Baltimore with organizational assessments. RFC project staff are familiar with wastewater treatment plants having held utility operator and management positions. RFC has submitted a proposal in the amounts of $201,158 for the COS study, $176,980 for the SNA, and $20,000 to address unforeseen scope increases and cost overruns, which represents an approximate five percent contingency. Staff has reviewed the total cost proposal of $398,138 for reasonableness and recommends a time and materials contract with a cost ceiling not to exceed $400,000. The study is anticipated to take six months with a draft report due in December 2014. RFC has proposed to form an "Operational Performance Team" (OPT) to play a key role by providing a forum to oversee and provide focused input on the staff assessment. The OPT will be comprised of the executive management team. All staff will have an opportunity to provide general perspectives through a survey structured around the four pillars of SOAR (Strengths, Opportunities, Aspirations and Results). In addition, RFC will conduct interviews with the Board, OPT, and workgroups throughout the District. The information gathered from the surveys, interviews and tours of the current operations will be used to benchmark the District's performance and structure to peers in the industry. Additionally, RFC will identify opportunities to enhance workflows, staff C:\ Users \danderson\AppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \DVCG8C5G \PP Raftelis Agreement Approval 6 -19 -14 Final.doc Page 2 of 3 POSITION PAPER Board Meeting Date; June 19, 2014 Subject. AUTHORIZE THE GENERAL MANAGER TO EXECUTE A PROFESSIONAL SERVICES AGREEMENT WITH RAFTELIS FINANCIAL CONSULTANTS, INC. TO PERFORM A WASTEWATER COST OF SERVICE STUDY AND STAFFING NEEDS ASSESSMENT numbers and allocation, organizational structure, use of outsourced services, application of technologies and other enhancements in support of the District's mission and regulatory/policy compliance. As part of the scope of services, RFC will undertake eight workshops that will be held during regularly scheduled Board meetings to introduce policy elements of the study for guidance from the Board and provide an opportunity for outreach to the District's ratepayers. Topics for the workshops include the following: • Cost of Service Rates 101 (Introduction of alternative rate structures and objectives including equity, affordability, simplicity, ease of implementation and defensibility) • Pricing Objectives • Staffing Assessment Introduction and Methodology • Revenue Requirements (Capital Budget, Operations and Maintenance Budget) • Revenue Requirements (Reserve Policy and UAAL Policy) • Staffing Benchmark Briefing • Cost of Service Study and Rate Scenario Results • Staffing Optimization Results RECOMMENDED BOARD ACTION: Authorize the General Manager to execute a Professional Services Agreement with Raftelis Financial Consultants, Inc. in an amount not to exceed $400,000 to perform a wastewater Cost of Service Study and Staffing Needs Assessment. C:\ Users \danderson\AppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \DVCG8C5G \PP Raftelis Agreement Approval 6 -19 -14 Final.doc Page 3 of 3