HomeMy WebLinkAbout0421.095I
TO:
FROM:
City of Palo Alto
City l\1anager's Summary Report
HONORABLE CITY COUNCIL
CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
AGENDA DATE: SEPTEMBER2fi,I995 CM~421:9S
SUBJECJ:
BWVEST
APPROVAL OF CONTRACT AGREEMENT FOR
COLLECTION SERVICES V.TfH CREDIT BUREAU OF PALO
ALTO
This reporl requests Coun<:il appi"oval 0( a contract with Credit Bureau 0( Palo A1to for
collection services (Attachment A). This request is lOr • continuation 0( service Ibat has
been provided by various collections agencies since"August 1987 .
RECOMMENDATION
Staff recommends that Council authorize the M.),or 10 execute !be attached contract with
Credit ~ 0( Palo Aha ($45,000) lOr collection services fo< • OI)e-),e&r term, with the
optioo 10 renew for two additional one-year Ienns.
POUCV IMPJ.JCADONS
This contract does not represent any change 10 existing policy.
EXECUTIVE. SUMMARY
The AdmirUstrative Services Department is responsible for the co!iection 0( the City',
delinquent 8CCOW1ts receivable invoices. To enhance revenue recovery ;md minimize losses,
the services or. co!lectioo agetlC)l are used. The mosI recent contracts expired in 'une 1995,
at whieh time staff entered into. 3-month agreement with Credit Bureau 0( Palo Alto and
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Professional R="'Y Systems through September 30,1995, in order 10 .r.ow staff sufficient
time to complete t1:e Request for Proposal (RFP) process.
O:lIune 30, 1995, the City of Palo Aho issued • Request b Prorosal foe Collection Servi<'es
10 21 firms. The RiP opening date was established as July 25, 1995. Five firms submitted
proposals in respoose 10 the City's RFI'. The live proposals were reviewed and rated by.
selectiou COIl'.mittee which induded staff from the Administrative Services. Utilities and Fire
Departmen1ll. Each firm was rated based on its service !evel, fee for service, orgar izatk>nal
plan, and expcrieoce in managing the collection of dermque~ a<:counts. References were
conlacted and questioned regararng the firms' service level and commitment 10 customer
service. Upon completioo of the re>iew prev.ess, the selection committee recommended
continuing the City', relationship with the Credit Bure<lu of Palo Alto and Professional
Re<:ov",y S)"!<ms. Experience has shown that using two firms encourages cornpetitioo and
ensures compliance 10 the City's standard of prcvid"mg exceptional customer service.
Because of their superior collection rate, staff is recommen<fmg thaI H percent of the City's
,",counts be referred 10 the Credit Bureau of Palo Aho. The remaining accounts will be
referred 10 Professional Recovery Systems for coUection.
USCAI. IMPACT
Funds for this contract are included in the FY 1995-96 Administrative Services, Fire. and
Utilities Departments budgets.
~OMWDITALA~E~MEm
This request does nol constjMe a project onder the California Environmental Quality AcL
Therefore, DO environmental assessment is needed.
PREPARED BY: Joyee1. WIllte, SeniocFinancialAnalyst
DEPARTMENT HEAD APPROVAL: ~-""-~ (1.0=&41
Mclifsa-Cavall<>
"cling Director, /
A. f., ministrati"'i7 .... es
~M~U ("JUne Fleming I -
\ City Manager '
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CITY MANAGER APPROV At:
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City of Palo Alto
City Manager's Report
APPROVAL OF CONTRACT AGREEMENT FOR COLLECTION SERVlC£S
WITH CREDIT BVREAU OF PALO ALTO
RECOMMENDATION
Staff re<:ommends that Cou!lcil aU1llorizc the Mayor to cxeClrte the attached contract with
Credit Bureau of Palo AIIo ($45,000) fOr collection servlees for a one-year term. wit!! the
optioo to =-for tw" additional one-year 1Ums.
BACKGROllNQ
Prio< to 1981, the Treasury Division of Ibe Finance Department (Administrative Setvices
Department IS of July 1995) was respoosi'tole for collection of a limited number of defmquent
secounts receivii!11e invoices. As the Ciry ex 'Ponded Ibe scope of s.rviees provided 10
residents, the ,'olume of delinquenlllCCOWlts receivable onv"i""" dramatically increased.
To manage the i'lCreOSC effectively, the Rev.n~ CoUections Offi<:e of the Finance
Department was reorganized to fOrm • collections unit; and responsibility (0< centralized
collection activit) was assigned 10 the new unit Since its fOrmation, the unil has assumed
responsibility fOr managing the collection of paramedic, hazardous materials and public
assembly invokes from the Fire Department, as wen as false alllItll and Driving Under me
Influence (Dl..JI) invoices from the Police Department. In addition. staff has assumed
responsibility for collection of delinquent parking citations issued 10 vehicles with out-<>f
state .registration. To enhaoce the recovery of revenue, staff recognized the need lOr
assistan« in managing delinquent accounts receivable invokes. Collection assis.tance has
been provided \0 the City by various firms since 1987. nw, most recent contracts expired on
June 30, 1995, 81 which time staff entered into • J-month agreemenl .. ith Credit Bureau of
Palo Alto and Professional Recovery Systems through September 30, 1995, 10 allow staff
adequate time 10 complete lb. Request fOr I'roposal (RFP) process.
POlley JMPUqUONS
This contraCt does not r~t Bll)" change t<> existing poEey_
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DISCILSSJQN
City CoDedion poncy _nd ProcedRre
The objective of the co!Iections unit is \0 recover the IIUlXimum amount of revenue from
delinquent accounts. To enhance revenue J'eCO'w'ery and minimize losses due to slow or non·
paying accounts, the servkes of a collection agency are u=l \0 \ocate assets for debt
recovery purposes and verilY property ownership; \0 provide ~sklp \racL,g~ services in order
10 locate elusive debtors; and 10 report QutstaJ1(fmg debt \0 credit reporting agencies.
Invoices are referred 10 • collection agooey by the Revenue Collections Supervisor, after
delinquent accoonts have completed the City', internal collection cycle and in attempts \0
secure paymem have been CM.austed. The Ci!:y'~ collection policy is based 00 a 30-60--9()
day collection cycle, which is consistent with indusll)' standards This requires that a
customer with an outstanding Invoice receive a notice of delinquency when the invoice is
30 days pas! due, fo!iowed by personal contact aJ1(! wrinen cornmurJcations at 60 and 90
days dermquent. Staff uses various collection IOOls and strategies 10 assist in !he recovery
of dermquenl revenue. Foe example, it is customary for staff \0 inlerface with insurance
companies and medical care providers prior 10 reco\-ering revenue from delinquent
paramedic oe property damage invoices. Unpaid invoices under $S,OOO are either referred
10. collection agency for further action (non-responsive debton, eIC.) (J( prepared for Small
Claims Court. l1Je Small Claims Court adjucf1C8tion process is used to determine liability
when the debtor denies responsibility for the outstanding debt. Unpaid invoices over $S,OOO
are referred to the City Altocney's 0fIke for appropriate legal action.
Request For Proposal Proce ..
On June 30, 1995, the City issued. Request for Proposal (RFP) to 21 coIkction agencies,
seeking a qualified agooey with demonstrated collection expertise 10 provide assistance to
the City witb the recovery 0{ delinquent accounts receivable invoices The proposal opening
<!ate was established as July 25. 1995, proviOmg proposer> • four-week response time. As
specified in the RFP, • pre-proposal conference was held on July 10, 1995. Representatives
frocn four collections agencies were in attendance. AI'.a<:hment A summarizes the RFP
1Ill\11ing and respoose.
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Sereclioa Pro<es.
Five proposals were received in response \0 !he RiP. Four of the proposals were foe Lie
collection of delinquent acrounts receivable invoices, while the fifth proposal was submitted
for !he collection of delinquent citations issued to vehicles with out<>f·state registrations,
Six1een !inns did noI respood 10 the CiIy's RiP. Staff contacted each firm 10 determine why
proposals were not submitted, Five firms r .. led to respond 10 !he City', i.,quiry roc
additiooal t'lformation, representatives liom 4 firms indicated that they were not interested
in responamg 10 the RFP at this time, S otlJers stated thal they did noI meet the City', criteria
(e,g, lecbnology requirements, etc,) and 2 !inns were ou! ofbusines3,
The five proposals were ~ed and rated by • selection committee, wbich included staff
from !he Administrative Services, Utilities and fire Departments, Each firm was rated based
on its service level, fcc for service, organizational plan. and experience in ma.,.ging
collection of delinquent accounts, Customer service was one of the primary consideratioos
in the se1ectioo process. since the City's reputation can be adverselyaflected by the se1ectioo
of. firm that does noI share til. City's commitment to customer service, After a review of
the prop<>sa1s, each finn was invited to make an oral presentation to the selection committee,
In addition, references were contacted and questioncd regarcfmg the flffil's service levels,
After inteMewing each ficm, completing I thorough r<View of the proposals, and contacting
references, !he se1ectioo committee unanimously agreed 10 recommend cootinuing the City's
relationship will> bo!h the eredi. Bureau of Palo Alto and Professional RecQve')' Systems,
These firms received the highest rating against the City's rdting criteria, have provided
exceHent service 10 the City, and recognize the need to coodUCI debt colJection L, an booest,
ethical manner. In addition, both firms bave demonstrated professionalism and •
commitment to customer service by respooding 10 requests in • timely manner. assisting
Ci!y sfaffwith in-bouse collection issues, communicating with debtors to resolve disputes,
assisting debtors with filing private insurance company claims, and advising City staff of
legislative mandates affecting coIl",,-6on law. Staffs recommendation will allow the City
10 cootinue 10 maintain relationships with ag<'llCies that provide. seamless extension of the
City's in-bouse coHection efiCrts,
The committee's rating scale is illustrated below:
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Snk: l-illa4ltqutl: Credit PRS ConectioD Data Transworld
t·5I1r Barel1l of Burtlillf Ticket Systenu -.......... P.I. Alt. ors.1II: lose
FOOl 2 3 2 () Q
Repom 3 3 3 2 2
Location 3 2 2 2 2
SonicU
EsperieDw 3 3 3 2 I
Orpnizatioa
References 3 3 3 2 2
Collectio.
Ro.t .. 3 I I I 1
TOTAL 17 i5 14 9 I
FEES
Each finn is paid a fee based on • percentage of the revenue it recovers f<l< the City. As
sbown below. the proposed fees beach of the five firms are c<mlpetitive. The fees range
frOm 25 to 50 percent, which are consistent with fees cbarged by other finns in the collection
induslly.
The Credit Bureau of Palo Alto's fee lOr the collection of delinquent paramedic receivables
is 3:) percent, 5 percent more than the lowest proposed fee. However, the Credit Bure.u of
Palo Alto has coosistently maintained an ",'erage collection rate of 52 perceDl. which is 34
percent above the national average. Based on the City's annual paramedic referraJs of
approximately $251,000, al a co!lection rate of 52 percent, the Oedit Bureau of Palo Alto
will re<:<Jver approximately $131,000 in delinqucnl revenue, $85,000 above the national
average. While the rate of return lOr ProfesslonaJ Recovery Systems and Collection Bureau
of San Jose is close 10 the national average. both are well below the exceptionally high rate
or return maintained by the Oedit Bureau of Palo Aho, After faclcring ~coIJectioo rates"
into the analysis of lees. the Oedit Bureau of Palo Alto would generate at least $47,000 in
a<IditiooaJ revenue annually for the City.
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Recovery
Rate Fee Schedu!e
Average
Finns Collection All
ltate Paramedic Misc. Items Parking Referral
CBofPA 52 30 30 ,0 4S nla
FRS 21 25 28-29 25 35 nla
CBofSJ 22 25.5 27.5 27.5 35 4()
Transworld 56 6.75 per 2,000 35-SO nli
lransmittals
DataTlCket SO
Staff recommends using !he services of twa C<>!Je<:tion firms, in order to promote
"",""petition and to ensure compliance 10 the City's standard of providing exceptional
CUSlODM:r service. Because of their superior collection rate, staff is recorruneooIng that 75
percent of!he City's accoonts (a contract amount of $45,000) he referred to the Credit
Bureau ofFalo Alto. The remaining ICCou.,ts (a coolract amounl of$J 6,000) "ill he refened
to ProCessional RecovCI)' Syst.-ms fur collections.
Although the Collection Bureau of San Jose received good re rerences, offered competitive
fees, and bas extensive experience in the collection of outstanding medical invoices, staff
was coocerned that !heir large client base (600 customers) and their extensive use of
pred'lCtive d'UIftng (approximately 10,000 automated calls each day) would adversely affect
customer service and the Co!lectioo &.aeau', ability!o provide llte individual attention that
City accaunts require.
FISCAL IMPACT
Funds lOr this contract are included in !he f'Y 1995-96 Administrative Services, F;'-., and
UtIlities Departments budgets,
ENYJRONMENTAL ASSF,SSMENJ:
1'his request does not constitute I project under the California Environmental Quality Act.
Therefore, no environmental assessment is needed.
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AUACHMENTS
AIt1!dunent A -Request for Pr~ Response Summary Sheet
Attachment B -Credit Bureau 0( Palo Alto Agreement
CMIt;.421M P.ag~ I ~.
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ATTACHMENT A
COMPANY RESPONSE
Professional Recovery Systems, San Jose Submitted proposal
Credit Bureau of Palo Aho, Palo Aho Submitted proposaJ
Oedit Bureau of San Jose, San Jose Submitted proposal
Transworkl Systems, San Francisco Submitted proposa/
Data TICket, Laguna Beach Submitted proposal
Rickenbacker Collections, San Jose Not interested
I Day Co. Inc, Redwood City Not interested (RFP 100
cumbersome)
Liptoo Law Offices, San Jose Not interested
Bureau of Medical Economics, San Jose Nee interested
Legal Recc\'ery Systems, San Jose Did ll(J( meet qualification.
Col1etech Systems Inc, Calabases Did no( meet qualifICations
S.C. Valley Co!1ectioo Services, San Jose Did ll(J( mee! se1ecUw. criteria
Co!Iectal Associates, San Jose Did not meet selection criteria
Bay Area Credit Service, San Jose Can not compete with other
agency's technology
Accl3. Receivable Coos., Inc., Santa Clara Out of Busmess
Economic Recovery Services, Menlo Park Out of Business
Parson BisIlop Services No response to 3 messages
Claims Resource Services, San Jose No response 10 message
National Financial Mgml Co, San Jose No a.nswer ~ caned 3 times
VICtoria Collection Agency, San Jose No answer, caned twice
ALL-Phase Recovery Services, San Jose No answer to telephone, fax
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~ ~ ATIACHIOT I
AGREEMENT
BV THlS AGREEMENT WAOE AtOD EH7ERED INTO QIoj"i"l-E _ DAY OF ___ _
BY NaI ~ tHE CITY OF PALO .AJ.. TO (HEAEINAF"fE.A ~A.EO lOAS CHY. AND
No.~ __ -,
(1o/NIoIElfll CRED~1 BUREAU OF PAUl IILTO C2l _________________ _
~SSiI ,," $A!! ooON.la ROM ________ !CI":Yl PAlQ &10
~ REFEMEC 10 AS CONTRACT~ . .., CON5OEAAToON OF" rHElR IoI'IJTlJAL. COVE"'IANTS, TrE PARTIES fiE~ETO fj.QRE£ AS FOUQ¥IS.
• CONTRACTOR SHAU. PAOVIOE OA F~ 1M£ rouOWlNG $PR:FIEO SE~.cS ANO~ lUI i""EPJAl.S SPK:1F1EO Jltj.EN-tlSrT ____ _
AtTACHED HEFIElO NCl NCORPOAAlEl H:R£~ iJ't' nitS ~fNCE TliE: (REIHl BlREAu OF PALO ALTO SHAlt fURNISH ,I.ll LABOR .. ~TERIAlS .. f~JIPM£)j,T AND EXPERTiSE NE;~ TO ~..A.XIMIZt
taliCTlCfi or ACCOOOS REC£IVIY!lE HOO ~FERkED 8Y Tr£ CtiY or PAlO ALTO~ n£ Co...1RACTOR SHAlL Ut~Dt'l.TAAE T~
0)U..ECl1~ OF T~ CiT'r'.s DELlrtQUOlT ACCOlJOTS LHi Ti-£ ~ AND ~ jli[ rE~S AN/) CCNOITIOt6 AS 5£T FOR"!"H I" THE
OHIBIT$ ATTACHLD HERETO~ C\it4PEtlS.'JlotI ~ll BE I" ACCQlWANCE 'nTI! TI£ COKPH!S.-.TlQN S<:HEtlll.E AS SET FORTH 1M TI£
EXHrBll~ NO LAWStJH SHALl B£ HLrn Ott B&..ALf Of rHE ClOY rIT7"()l.,'T i'l!10R. COOt.'l.TATION. W~TH THE CITY ATTORNeY .. Wl-(l
HAY ~1 WiTH T1£ tlTY CCol.N:IL. CREDIT BLRUiU Dr PAlO ALto .ILL M/I.I~AJII ERRO~ AND OMI'IISSI0N5 1NSl../RANCE Of NOT
lESS tKA/II U .... OOO.OOO~ All OTHER INStI'.At¥.:E ItEQUIiID'tENTS WIll. 13[ MBIT .. l:i1'£I) Ar Sl .. (!'l)O~f100. £ACH.
• EXHIBIT., "11£ FOLL0WN3 AITACHED EXH8ITS ~v.u:lf ru.oe P.fJUOF Tl1L5 MiRaM.ENT:
OEPARmEWT OF FINIIHCE lEQUESl FOft PRorosAl.. D.'o.jED JUNiE :W .. 199:5.
0IE;)1l BlIREA!.I OF P.U AL10 PRClF'OSAL OATED JUl' 25 .. 19'95.
• TERMS "Dif SEJ'!VlCej ~ WA-re~ R..JRNtSHfO 1.-'tWe~ TI'1I5 AGREBt9ro"T St-WL ~ ClfIj
NroSHAlL8eecM"t..Elm8EFORE SfPT9I5ER 31)t ,~
• COM PENSA 1lON FOR THE F\..U PCJFOfWA,'IICf OF Tl1tS AGrI.EEM£NT. o CHYSHAUPA'f~ CONTRACTOR s.rL\Ll ROUT ,!;LL COLLECT£!) Rf\I£NtJE TO Thi. CITY' BY THE_ 5jH DAY OF THE MO~TH
FOUG .. ·I NC, THE. CLOSE Or Tr-tE PREVIOUS MOMTH. Cln' S<1AlL PAY CONTRACTOR lPO'" RECEIPT
OF ./'KJ'fl"KLT j~ICE. o ~ SHI\U PAY CITY~
• PA YIIIENT RECORD _Alm.."" USE 'IEve\SE S<CE,
• CITY ACCOUNT HUMBER:
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• GENERAL TERMS AND CONDITIONS ARE". INClUDED ON BOtti SIDES OF THIS DOCUMENT
ll-HS ,t,GF\EEMEKT SHAU.. SECONE fA'ECTI\fE 1.:"0'" FrS APf>J:lO ... ~ AND EXfCtmOfi &v eJTY. III IWlTNESS TliERfOf, THE PARTIE'S R. ... \IE eX:ECUTED THiS
AillU:EMEICT ll-f: DAY, Mmffi(, 00 vtAA FJRST WRITTSI ABOVE
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any na"lure, inducflrllj wfoogM 1Se3:!!. Qu:led' I:ri 01" IPis~ out of CO'-LTJV.crOR·S.!:s al'!"lcers·.~· OJ ernpr~· Il~gngerrt letS. erT(l.-s. II" omiS5l1ins, ~ ItIlrtt..,
mi5OOncfud, (»' corn.\Id ror ~!he law I!!'~ Witt rlii~illtJ' 00 COfrt1RACTOR in:ht .Pel1orrnanc..e '""ta~u~ ttl !JErfOnil ttliS -ilgrel!rneffl by CO'il1!.-'lCT(lf;.
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~aliolflOllS iIIlI1 :mdaf\aI(in~ ~trlE orai CJ"wrttWl a!! StlJX'!lsedeij h~"~
JOlC£ .1U1 E/SlP[lW I SOR ~2~:<a<4'fL • PROJECT MANAGER I.NO ~A.ml: FOf:I c~-;y
0EPT. ____ 1tE\IDU" CO!.!..EClIO!§
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PALO,q lCl, C'" 94..~3
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TTTl£ ~$'/~t;JfEIy_L
~.~S~r: 7?-<¥'7~$l~_
• INVCHC-ING SEND ,IJ..l1N'-I{;MCES TO rrlt CITY. A:TN. PFlOJECT ~
• CITY OF PALO ALTO APPROVALS: ",oorr F~ SfGN.l:TUR£S ACCQPOI"«i;.o NlJMSERS rN APPROVAl.. BaKES SEJ.OW,
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F OVI:R 15._ ~ CITY MANAGER'S ~=.J\JRE""~+_--~IF OVER RS.3OCi, RfOUJA.ES li!AY~ ANP em ATlVRNEv SIGNA71..!~""'ii;S;:;;;;;;;_-I
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