HomeMy WebLinkAbout0428.095•
TO:
FROM:
City of Palo Alto
City Manager's Report
HONORABLE CITY COUNCIL
CITY MANAGER
8
DEPARTMENT: UTILITIES
AGENDA DATE! OCTOBER 10, 1995 CMll:428:95
SUBJECT:
REOUllST
Review or the Utilities Organizational Review Reqnest FO<"
Proposals
At its February 13. 1995 meeting, the City Cou.n<-il assigned the administration of the
Utilities Organizational Review 10 the Utilities Advisory Commission (UAC). Coun!:il
direcled the UAC to review and comment on staff's Draft RFP and relUrn 10 Council for
input on !he RFP pIiO£ its being mailing 10 prospective consultants.
This repOrt requests Council review and comments on the attached RFP that bas been
reviewed and approved by the U AC.
RECOMMENDATIONS
Staff recommends tba1 the Council review and coounent on the attached Utilities
o.ganizationaJ Review Draft R-FP. Incorporated in this repon: are all comments
recommended by the U AC with one exception. One commenl regarding compensation is
not included in the RFP. The area 0( compensation is not an organizational issue and has
no relevance as to the most effectivelefficient way to organize staff resources.
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POLICY IMPLICATIONS
While I1le RFP does 001 have any policy implications. the organizational review conclusions
an.! any subseqllen! actions by the Council could have policy implications k>r the Utilities
organization.
EXF£UITYE£lMMA,BY
At its May 3, 1995 meeting. the Utilities Advisory Commission appointed I five member
commi~. includlng "ne UAC member, to serve on a Utilities Organiz.ational Review
C<JmmiItee (Committee) 10 review -..nd comment on staff's Draft Req1Iest f<lr Prcposal
(RFP). The Committee will also be involved with the inlerview process with I1le VAC and
recommend I coosultanl 10 perform !he organizatiooal review. The five members of the
Committee selected by the UAC are:
Paul Grimsrud; UAC
Raben I Mning; Hewlett Packard Energy Manager
Louis Saksen; Stanford Health Servic<:s AdminisLralor
Mary Dimit; Resident
Charles Powars; Resident
The Commit'.ee members met at !he July S UAC meeting 10 <fISCuss an.! comment on the
.initial draft RFP. After the Committee submitted !heir comments, !he UAe made additional
revisions and .pproved • Draft RFP at !heir September 6 meeting fOr submittal 10 the City
Council. After comments are received from the Council, staff will begin the consultant
selection process.
FISCAL IMPACI
The Utilities Department has included funding for an organizational miew in the proposed
FY 1995-96 Budget.
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1) 0Nft Request For Proposals 10 perfoon an OrganizatiOnal Review of !be Utilities
Department.
2) VAC minutes ol1uly:5, 1m and Septembet 6, 1996 meeting discussions on !be RFP_
CC:UAC
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REQUEST FOR PROPOSAL
TO
PERFOR\i AN
ORGANIZATIONAL REVIEW
OF THE
CITY OF PALO ALTO
tmLITIES DEPARTMENf
I. GE."/ERAL
A. PURPOSE
o
REQUEST FOR PROPOSAL
TO
PERFORM AN
ORGANIZATIONAL REVIEW
OF THE
CITY OF PALO ALTO
liTILlTIES DEPARTMENT
TARlE OF OOl\'TENTS
B. BACKGROUND
c. CITY ORGA."'1ZA TiON
D. BUOOET.oo FINANCIAl. INFOR."IA TION
III. DEUVERABLES
IV. TARGET SCHEDULE
v. GENER.U COMMENTS
VI. SCOPE Of SERVICES
VII. RFP ~NSE REQUIREMEI'ITS
\'Ill. EVALUATiON CRITEIUA
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REQUEST FOR PROPOSAL
TO
PERFORM AN
ORGANIZATIONAL REVIEW
OF TIlE
CITY OF PALO ALTO
urJLJTIES DEPARTMENT
The Ci<y of Palo AM. California (Ci<y) COUJl<ij is seelcing the servic<s of. qualified cor.sultanl
'" conduct an Organiz:ltiooal Review of the Ci<y" Utilities o.p.runem (Utilities). tkillties
maoage:s And q;c:rates &:he EJectrlc. Gas, Water and W.astel\o'aier CoDec60n services. The
prlmary objecti .... e 0( this levle'a' is to review boy..' me department is Of.lWzed. l!etermine illhe
UtI1ities is perfurmirl& ... blgh level of efficiency and effectiveness in providing =poDSive and
reliable serv1cc expected by the customers (c:1ectric. p, Wale!, wastewater coDection). This
detmnination will address the cumtt serY>« Iev,l, being prm'idcd and whether they are being
><Ilieved lit the lowest p<>osible C<l5t appropriately balanced bc/. ..... opentional requi1ernen1s,
fina.nciJ] teSpOfISibilities and tnv1r~ corssilierations. I'M review will also include ill
evaluation of how che Utilities is preparing ror future competition in dtc efectric industry and
• !he Utilities has the abiJily to meet custaffier"s service e-xpectatiortS efficiently wbtle remalning
competitive. A more detailed dl5CUSSloo of die locus of lhe review hi provided' under Secti\Jd
IV. SCOPE Of SliRVlCES.
This RFP is inJenckd '" be osed to .. lee! • firm '" perfonn '" Organizational Review. The
"ad. will ellC<!!DpaS' the prepara<iOn of. report 11-"" oddros= the areas listed in the Scope of
Wod.
.. BACK~QliND
The C"ity of Palo Abo is located appro.timalely lS miles south of San Fr.mc'isco and lS miles.
DOrtbwest of San jose. 1be Ci<y is adjacent to the San Francisco Bay to the east. OJ<leoo.
iateralIy ""'1m the San FI1lncisoo Peninsula. and .",.00. into the foothill> of the Coastal Range
Moumains. to the west. The City ooven an area of approUmately 26 ~ miles and has a
popula:ion of app[Q>Jmately S7,OOO.
The high r.chnologkal industIy fo< !be Sao Francisco PeDinsul. is ceruen:<l in !be CiT] of Palo
Aho. partly because of its proximity 10 Stanford UnI\!eISity. lbe 650-acrt Stanford Researck
Parte, whicl! is provided utillti .. sexvke by me C"JI includes bead'!"'rte" for fIn'lei! Packard,
and Variw Associ.ales. The City is, major errq:.1oymem ceoter "'iLh appro:tifr.ateIy 6g,OOO jobs .
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No Aho residents pta.:e a hiih prioriry on the quality of City servk:es and in protecting the
character of residential nelg'hoorhcl(,.js.
.. Crrx ORG"-WATl9W
The City of PaIo Aho .,as increporated in 1894 • .and ~:ues under a c:h.aru:.r granted by the
State ;;;f California in 1909. The City oper.4eS Wlder the Council-manager fonn of government
with nine counci\members ekcte<! at large fOf: 1f:lur-j'ea:I terms. Th: MayO{ and Va-Mayor .are
seleded from among the cotmc-.iImembers annu.ally _ The City Manager is responsible foe an
Irnmidpal function> <>:c<p< Ih< offices of Ih< Ci<y At".:>rn<y. Ctty ADdjlO< and Ci<y Clerk. These
officials are appointed by and "'PCrI .rtrealy 10 Ih< Ci<y C""",iL
A five person Utilities Advisory Commince is appoirued by Ihe City COUllCH to review and
make recom.-nendaijons lQ the Council on kmg range Uttllly PllnnIng i!5\le!i.
Approximately 205 employees wor1 in lrtIlides.
.. BtrOGET AND fINANCiAL INFOMfA TION
The FYI99S-96 bOOgd for Utilities re!lec!> total revenues Df $109,354,000 with $21,143,000
dedicated 10 capital improvement prlJjects, S3S,801.000 dedicated to electric purchases,
$10,304.000 dook.,ed 10 tWuraI g" putcl>ase> and $4,606,000 dedicated 10 .,.ler purchases.
!lased on tbe cur;cnt ""rl<}' and rate of rerum !ever. adopted by Ih< CoouciI, <he Ekctri<:. Gas
and Water budgets incJude a ttansfer to Ihe General Fund IIOtafmg SlO,791,OOO. The budges
ShO~'5 the: fonowing Enterprise fund bJ\.'Udovw.u:
Elearic
Water
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WamW.aler (Collection)
ToW budge<
5 11. l56,ooo
13,331,000
19,984 ,()()()
10 674 ()()()
$115.145000
n. PROJECT TEAM}MUTINGS
~ Pi.OJEC'I DAM
The 1Jtiliti .. Adviso<y Committee (U .~C) .. ith the "'WOrI of the Cio] M>na~er bas been
assigncdas the admlnistrator of chis Review. Work specified under this requesa for proposal
shall beg:1n OD or aboUI Deceroher 15, 1995, after me notice to proceed bas been issued and .'ill
be completed by September. 1996.at whlell: time the fina1 report and UAC recQnunendaf:ions .are
,<Viewed by <he City Council.
ThIs project is supported by a five IIlf'Il1bez VAC appoi:r1led Selection Comminee (Tast Force)
(:omprised of -ODe member of me UAC .and two commercial .and two resldenttaI utilitles .
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customcrJ. The Task Force /OeI'Ves as an lnteIvieW.'Sela.."tiOD Committee and wiD make
recommendations 10 ihe UAC. The UAC will make I fmaJ recommendation on the Consultant
sel<ctlon lO the City Coonc8. Upon approval 0(. contract by the City Cou",,~.the oonsultan<
wlII ,,0<\ ~ with "'" UAC.
The UAC and !be Task Focc.e arc an integral part of lht s.e1~Jon process. A$ such. consultants
interested in sUbmitting. pruposat are asked DOt to contact members. of [be lTAC and Ta5-k
Force.
Tho TaU FoIU will _w the IIlOSI q.wifi«! u.poOOeots II the City" offices II • <We and
lime 10 be _ We"
.. ". MEETINGs
The selected roosill_ .lw! meet with the UAC <luring !lie OrienIatiO!ll'!lllse and with tl'.e
UAC an<Ilhe City CO'lncil fo< thei<;"pU1 on !lie WO!k Plan during the Review OW..m Phase.
Tbe oocsultant may also meet with the UAC pe.ri<xfic.aIly to dIs.cuss progress and issues
identified '" <We, Upon completion of the projea, the final report .,rnbe present<d '" the U AC
and the City C<lIlncij, The .. !ected consultant wi/l prepare an oral presemation of fin<flDgs and
recor:nnendatio '" the UAC and !he City CO<mcij,
Tho IODowing will be tho: minimum mnnbe, of meetings 10 be scheduled by !he ConsuIt_.
• OrietTtation ~ion with che UAC.
• Pr.esentation of OrganIzafianal .Rtv1ew crir:eria wiIh ~ U.A£.
• PreseruaJjoP of Organizariona1 J.ev1ew crlteIia wUh tht City Cooocil.
• lleview of o..lt Ittport ..-ith tile UAC,
• IIeview and l'reset'llItiOO of final Report with !he UAC.
• _ and ~on of Fmal Ittport with the City Councij,
m, D£UYERABLES
The 4 c.onsWtanI is responsible foe dJe ~nowmg de!lverables in keeping 'With the scl!edutc
~ in Section N below:
I, Mon<hly _progress report '" the \.lAC { .. .,1<ibk 1m the UAC pac'" th< Friday before
the first Wednesday of eaclo month) in<l\llfmg:
• A wmmary of "'crl,; ~!eted during the previous moruh.
• DiscussIon o( any signifkant problems encountered Of' issues arising from the project.
• p."cent3ie of p,oject completed,
2. -.C meetings os required by Ille VAC,
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3. Ten (10, copies of the draft report includIr.g Executive Swnma..-y. findings, recommendations
and Implementation plan.
4. Thirty five (J~) ~ies of the final report including Executive Summary. finding,.
recommendarions and implementariOD p!an.
S. Oral p~ of findingJ and ""omrnel1datiollS 10 the UAC arul the Cit)< Council.
Additiooal meeting:slprcseru:ations ... jtb empioyee groups IIlR)' be required.
IV. TARGET SCHEI>ULE
The fcl10wIng are key a.... to< the Utilities Oo-ganizatiooal Review f<>< tlle Cit)< of Palo Aho:
Cit)< issues RFP: November. 1995
CoosuItanl selection: No\'ember, 1995 -January. 1996
A",.,d ofCon\ra>:t: Feb""",. 1'/%
Organizaliomi 1Ievl<,.: February -October. 1'/%
Project Progress Rq>orts: Momhly
Meetings: Upoo ~
Wod: Plan to UAC~ Three .... eeks from project inltiation date.
Wod PI;;n to Council: nue. weeb after UAC review.
Draft Report to UAC for<:ommenU: 18-20 .eels from project initiation date:.
Final Report to UAC: 24-28 weeks from projea initiation dare,
Fmal R<port .00 UAC r~ns to Council; 32 woe1ts from pmject initiation dale.
V. GENERAL COMMENl'S
.Although the objectives and scape of fhls. review may inclurIe many aspec:ts of traditional
organizatiooal review5. ttve City is 5et.ung • ecnsut~ that "ill in'YCNe City trutr,.Jgement and
employees in ~eJoping new and .ir.no\;d..ive appr<iacbes to improving operations 3.Od provIding
Utility services. Based on the results of the review. the coru.uftant sbould provide reaf"lStk
teCOOJInendaticos. Benefits from implementIng the recommeOOatioos. including improved
sen.ice levels or WSI s.avings~ should be described. Additionally. me c.onsultan1 will work with
City sUff in developing • plan for lmplemen<ing the>e recommendations. This plan should
address tbe um.ir:g .and' personnel' for implementation .as wen as £be: related cost and service
impacts.
To colltrol <:oDS'Jltal1t". fees. every effon should be made to utiliz.c: avaHable information,
Including in-bouse data, repcrts, and documeClU. The consultam"s efforts should focus on
analY-Dng and inte~~reting !his information.
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VL SCOPE OF SERVICES
Ui"'n direction by tile UAC and ihe City Manager, <he se1ecteJ consul""" "m b< 'xr«'ed 10
provide Ihe City with all serviccs &p<Cificd in this proposal. "" Omview of Ihe Coasulurtt
Services kI be provided is present~ bclow fQOol"'~ by I detailed Scope 0( Work,
OVERVIEW OF CONSULT ANT SER\1CES TO BE PROVIDED
PKo\.SES DElNERASlES
1. Orientation Detailed Wed PLan
.It .Review Criteria Repol"! and presellt.ation 10 Ihe UAC and Counc~
ffi. Draft Report Draft Report
N. Final R<port Final Report
Scope of Work: Tbe primary objectiv~ of this review are t) to deternline if Utilides are
~ at OU! op!imum Jevcl of efficiency and effectiveness in providing responsive and
reriable service expcctt.d by We CUSlomcn (.eJectric, ,as, water r wastewaier collection) .. 2) to
propose 3Dy recommendatiom to improve service: 1eYc:1s a.."ldJOf roms, 3) to prepare for rhe
clwlging electric utility r<guW0fJI environment and 4) '" <IeIertnine Ihe """ crgamz.tiona!
strJdUre to accomplisb "'" above. These cbj<Ctlves mus! zIsa baJonco operational requirnnenLs.
financiaI responsibilities and eaviromnentaJ coI'lSlderatioDS. Study Areas lo be inc1udafin reView
iooIudo:
• Utilities Organizational Stru<:ture.
• General AMUnistration.
• Aiministrative Services &: Customer SeJ"Vk.e
• Distribution (Water, 0.. & Ekaric) and Ccll<dion (Wastewater}.
• II<sourct Mmagemenr ,Supply. Tr.IIlSmission and Demand Side Management) for lire
Water. 0.. '" EleotrN:.
• $opper! servic<o from o<hcr Depar.rnent>.
• Support Senrices from Jotol: Action AgeDCies.
Specif>e ..... include:
J. OrientationIit.iew of Past Stua\eS and P1ans: Review the various studies, evalu.a60ns~
strategic plans. and' other .audits performed by or for the Uulirtes during l1Ie last four years,
cr currently ill progress. Dererm1ne Ihe Eff~-tivcness wich whick the Uu1ities have:
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imJ?IC1tIen1ed' and .addressed recommendations and findIngs (I( these stUdies. Meet "With the
U AC in an Orientation session fIX input.
A. Give 1he City CouncQ and other interest«! City offiGiaIs m opportunily to <lUcus, dleir
c:oo.:ems with the Utilities' operations-10 insure that [hose issues are being addressed in
the revic-w.
B. 'Identify. explain and justify !he crir:eria used 10 evaluate the current Utiliri-es organir.atiorW
, snuctur< and use 0( penonnd resources and functions,
C, ldentiJY. <;q>hin and justify til< criteri.a .... to C'lIJuart Ill< Util;'ies' perf""""""" Focus
00 major cost faaors b~. down into 'Various-1l.-'lit measurements, sucb as cost per
O~, cost per employee. cosa per mile (eJec".r-;c ~kcurr or gas majn or "ater maJn,
ctc ,) and overtime per activily, lnclud. operating ratios, bendu='<ing and besI pra<:tices
that compare the UtiUtles wl1ll otht:: utl1iry servkes of similar size and opt.rat1on.
A. Benchmark tey measures of perfortnance sud .as refiabiliry standards DC level of servia.
E"""I'1es 0( Ill< Iwet includt lUlderst>nd"Ulg customers' '-BY .equimnenrs and opt1ollS,
response-times for \'arious customer requestS; the lengtb and frequency of \'arious types
of outages; and surveys of other types of customer satisfaction.. Comment 00 ..-bicll areas
of supericr customer .service are ~--effective.
B. ~ng the increasing deregula100 env1ronmeot in ... ruck Q)e Utilities is operating;
primarily in Iil<: gas lndusuy and mote recontly in Iil<: electric iudu-itry, evaluate the
or~ona1 and planning actions bleR by !he Uti1itlc:s.SO meet these compctltivc issues
and recomrnetld: an)' needed additional ..... --uons.
C. Compare the Utilities transfers 10 the GeDt'ral' Fund wIth Munkipal Utilities transfers
in other C.aIiforrua ckies.
D. Compare the Utilities rates by customer clas_5eS ... ith odIcr Municipal and Investor
Owned U"1ities in CaIiforniL
E. Review and evaluate cos: factors for services pilld by Utilities and prO\ided by the Cir;y
<Jenera! Government. Socll areas include. but are no( lim1ted lO: Legal Services, fln&nce.
Account1ng. Purclta5ing, Fla:s )Wmer.ance. InfOrmiOOD S)'stcms and Tree Trimming
services..
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f. ~. evaluate and henchmark the Utilities crga..."lizarion ,strllcrure and perfonn.tDCe,
A. Idcll1ify lhe areas in .,;hich !be Utilities .are perfonning wen and thO$e in wbicll
DppOrtunities for improve.me.nu exist. Base performance on ley prerfonnana mea.s;.u-es
relative to practices and iUrldards of other utillties. When making cornpam.ons wIth omer
Vtt1i<ks, identify by dlilo.'tn= ",biclI may accoun: k>r perfonnan.:< measur. variability_
Provide recommend.atioDli and alternatives for improving the Utilities operations: and
services_
B_1<Ientify factors tlIat are mosIlil:eJy 10 affect the Utilities' rornpetitiv. positico with respect
~ other $Uppr~rs.. ReoJ,gnizing the increasing deregulated environment: in which the
Unlirie3 is operating. whlclt factors wiD cause increa:sed competitioQ in the future and tbe
potenda! Cl'otiion of c.ritical ~enuc resourCtS1 Eva1l!ate the UtJ1ities· current and
anticipated expend .... tures relative to heightened competition ~'i.tb other utfHties and' sen-ices..
C, Evaluate the currenr: organIzation. C1early clpfafn the pros and cons of me
.recommendation and n::1atiocsbip ID other programs. departmerus and agencies and
e>pab~ities as !llI:) <Xis! today and fDt \he futur._
\'n. RFP RESPONSE REQUIREMENTS
l_ The proposal sball be os brief as possible and bound in • siogle volume_ Sopplementary
information.. brochUIe5, and $0 on., may be: submittcd ~ desired, but: should be proYide4 in
a ~e pacb&e. In addltioo to dle Purchasing and COntracl AdmiIlistration n:quiremerus
outflIlOd in ...-A. the !olIowlog ronna< aOO proposal «Intent shall be adhere<! to by
eacl! firm and pr=<d in the foOowlog onl<r:
A. Exccutiy. Summary: An Executive SUmmary (letter) not 10 uC<ed two pag'" in lengtll
sboold include by clement< of \he r"'POndcnt<' F.oposat The le"", must be signed by the
indivi\lual author.zed 10 bind \he respondent_ The Icttet m\lSt stipulate tlIat \he propos«!
price wiD be valid for • p<riod of 90 day,_ Indicate !be address and te!q>booc number of
the u:spoDdml"s office Ioc.!t:ed nurest kl Palo Alto, CaIiforrua, and the office from whick
the prop will be managed.
B_I!!cl<2'ound and UrulerstaOOm£ oCllevje,., The Bodground and Und.rml1<fmg of Review
Section >houId de=ibe your understan<fmg of tile cay. L'>e work 10 be done. and the
objectivep to be ~omplished in the OrganizatIonal' Review.
C. Approac):
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I) MetbOOQfogyfIe$): This section sh,')Cld clearly des.c:ribe the methodology or
meeod'ctog~e$ YOI1 plan \0 use to carry out tht spedfic w.""..s desc.Ilbed in the Work
PLan.
2) Work Plan: Describe the ",<'entio! tasks Y"" plan 10 carry cur in accomplishing !his
project Indicate an key detwerabJes and their contents. Identify bow muctt of [be
,"'ork will be doce OEl site.
3) Project Orxanil!tioo and Sta.."fmg: Describe your approacl2:.and metbods for managing
!he project.. Provide an -ocganiz.a.tio!l chart mow ing an proposed project tum members.
Describe the responsibl1ities of eaclJ. person on the project ceam. Idemify t:be Project:
DiRctor and/or Manager and the person w1l0 ... ·in be the 'key coMaCt with the City.
Indicate bow manJi hours each ~ member will devOCc to 1M project by task. along
.. itll • _ indlcating the ,vaiWlillty of the membe" of dIe project I<3m fOr the
dun(lIln or !he projoct. InclWc =urnes or cadi memlm or Ille project ,,""'-List the
portion of the work ro be subcoctracted and information descnbing the quzIificatfons
and relatiyc experience of any proposed subcootracto['$. Include information that
consu1tan'..s would fe>.1Uire from City staff.
D. PrQiect Scbedute: Provide I scbedul'e for completing eacs task in the wor}: program.
iDcltlding deadlines fOr preparing aD project defivenbles,
E. Cost Pm' Indicate !he to<al cost fOr whia yo. "m cooollC1llle pmject b~ phose, Identify
by project learn member: na.me, cIw.ification, and !be number of hours each member ,ill
sPend un &::11 task. Indicate separately. total cost for rees and experues. including
proposed fee 1f1SCOUDl
F ~ ltefatsd Experience: Descn'be recent, dIrectly related experleoce. 1nc1ude oc. each listing
the name of the clIent, description of lhe .... or1: done, primary <:rlelli contact,. address
and lelephooe cumber, dales of che project. samples of progress ieports. and the namt: of
the Project Director W/'or M.a:nager and memben of the project team who worted on the
project. IS weD as Elleir respective responsibilities, In addition to l.'le above description.
cop1es of receru:1y completed relevant: ~eports should be pro\lided.
Alleast five references shocld be induded. A&ntionaI references may be .requested and
~ntacted. For eacll reference. in\f1ca1.t. the reference"s name. organUation affdla1.e, title~
complete mailing address and le1epbooe number+ The City reserv~ the right to cootact
any organiz;ttioll$ or individua1s listed,
o. Statement of CompIiang;; Respondents must submir I .$.(atemeilt of Compfiance wtoh an
:parts of the Request for Proposal k."'tIllS an6 cOrlditioos, or I flSting of exceptions and
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sugge:.1ed changes. along with • dcscripdOD of any cost tmpUC3tiow or schedule changes
!:be ~tq:ltion and/or chmgca cawc. The Statement: of Compliance must d'ec!;m: Ehaf: either;
I) this proposal is in stria comp;;ooc< .'ith me R<quesI for Proposal and no exc<p1ions
are prDpOSed; or-
2) this proposal is in stria compfiance with me R<quesl for Propcsaluapt for the ~ems
listed,
For cacll exceptiOD. md/Ol suggested c.hang~. lite respoodetl: must inctuck:
I) The suggest:ed change in me RFP or rewording of the coouactu.al' obligations.
2} Reasons for submitting me propooed oxuption Of <bang.,
3) Any impact the change Of' cxcepdotl IF".ay have OD projed costs, s.:;htdWirlg or ether
CCtCISi(fcratioc;.s..
vm. EVAUJATION CIUTElI1A
Proposals will be evaluated on me basis of their =ponse " .n pro";'io", of this RFP, ~
en may use some 9I an. of (be foOQw\ng criteria in 1t! eva!\1ation and mmparlscn of prpoosaIs
,u!rmjttal. 'l'hese are [J)e maIor crir.:ria and !be order in ...mu tlJey appear is not intended to
iDdicale !bel< relative ~,
f, Qualificatio .. and experi~ of fum in<luding:
• The orpnit.atlon struclure of me propooed prop team.
• Qualifications of me specifi<: indMduaIs ""'" will be assigne;l to this proj<cl
• DemonstraI:ed record of success performed previously by the consu1t.arn: DD projects of
, similar scope. complexi£y and magnitu<le,
2, QualiIJ of proposal:
• A demonstrated under.stancfmg of the projea'. objectives and scope
• .Responsiveness to the requ:iremertts of the project as set forth in the RFP.
• Demonstrued familianty with 1lu: policies and procedures and me be~ of service
level standards of comparable O:tilities.
• The quafl!y of the team., presentation and interview if an interview is requested. The
consultn must bring k1 die Interview the Project Manager as .'eIJ as the person who will
be me key manag"',
3. Value of .. 'or~ per cost:
• JleasonabJ.encss ollhe fee requested to complete this work wlthin !he .approved schedule.
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• A 1ogi<:aI. proves _ogy fer =;"8 out the <oS'" "escribed in the prcpoW and
dev.lapins proj«t doliverabks.
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MUriNe, Of JUI.l ~. 1995
•• Orgapizational R.view Task POre" Comment. on Draft Request ~
'rooo •• 1 (RiP)
commieaioner Grfm.rud .eked Ed Mrizek to introduce thi. by going over the
lcope of the overall ta.k of the Blu~ Ribbon Committee. After be baa laid
• few word'l Z would like to have an open di,cuI.ion among the Beven of
u .... includ.1ng Dick RoaeZlllau:m. We rill be feeding co:maent. back t.o Ed •
!!l:.! KriEekt 1 will briefly run down the .Itlignmer..t of the Blue Ribbon
Com3ittee. The UAC did .elect the committee at their May meeting. I hope
I have thoei:r namell epelled co-,"rec:tly here. We have two member. of the
committee ~th UI thi' evening. That 1_ Mary D~it and AOb~rt LannIng.
The other two membere dld Ind.1c.e.te to UII that they would be out of town,
and '-ant thei.!: apologie.. 'I'here are comments from Charles Powara at your
pl.ee lettinga.
S~e the June CAe meeting w.. caneellea. we move~ forward tb~ review of
the draft RPP to tonight. TAe firat &B.ignmen~ of the committee was to
make comment. OIl the draft that atllff prepared. Once the c:ammittee and the
tJ'AC have lIubmitted their comments .. we will then prepare a staff report • .tId
carry thea. c~ent. forward to the Council. We will request that they
alao lIubadt comm.ent. on the RFP. We plan to do this prior to the couneil r •
vacation in Augu.t 80 that we can then 90 out and begLn the consultant
.election dur1n9' the months of Auguat and September.
All of the consult.ants who <So submit proposals will be reviewed by the Blue
Ribbon Ccmm.ittee. That can be done during .. l1AC lIe811'10n and <Call be: ..
combined review, or whatever the commi •• loo. desires. It could be done
LDdividually_ Once .. recammendat10c on seleeting a consultant haa been
made by the trAC.. that. recommendation will be ca:rrie4 forward with a
contract price to the coun~il to initiate. contract. At that t~e, the
Blue Ribbon COIfIIIdtteera ••• ignment8 are basically completea~ Then the tJAC
~ll be direoting the COft.ult&nt~. activities.
The item. that i. going t~ be reviewed and which you found in the packet i.
really an R7P. There are" cAree seet-ion. to an UP. The Scope of Services
i. Sect.ion :lI r the section that i. being' reviewed. by the Blue Ribbon
Com:m.ittee and by the commi.BIOJl~ Seetion I i •• letter Req'.lest for
Proposal that i. put out by Purch&.ing and Contraet Administration,
detailing the project titler a brief deacription of the projectr when the
submittals have to be sader all thoae various details. Al.eo.. the.
~,Jrcha.ing Depar~ent has a boilerplate Section III .. inatru~tion. to each
of ~e consultant. and .11 of ~he neeeseary fo~ that they muet prepare.
That ia a atandard Section Ill. So it 1a Section II you find before you
oa wblch we w~11 b. asking for comment •.
cp"'rdlsioaer GriNru4: Hr. Lanning .. ain~e you put a letter together~ wouleS
you like to comment on it? We can comment, one by one .. to Ed.
Robert Lanning: I did not find a lot wroog with ~is RYP~ I thought it
was pretty well dcne~ The only exception Z would like to Bee added which
Z think would help with th. aelection process 18 an interview process in
this.,. when we c:ome dow:o. to a 8hor.t list.,. which i. basically t.he point bei~
made in thia letter. There are t~ plaees where it would be addressed in
tbe .RFP, followed by the response requirements and the evaluation criteria.
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We would solieit ~he r •• pondent •• and then •• k for a one-hou~ pr~8entation
of •• bert liat which, again, vould be approx~tely three people. three
organizatloa8. rhat interview should include a presentation of not more
than an hOUX'. About 40 winute. would be for the!1' deli ...... ery of what they
think this job i. about, including the pricing. the staffing. all those
point. yeo had. in the UP.. "then there 'WOuld be 2Q a1nute. of queetiona we
might have OIl things -that. were not clear in the prese.ntatiotl.
An tmportant piece of this i. fer them to bring their project manager or
director. the key contact person. ~hlch ~y be the same per80~~ to U. 80
we can see bow ~he interaction 90&&. You really need to ••• thea. people
face to face. We go ~ough a lot of this in my job. It makes good sense
to know who your partner in this really i... Outl!lllde of that., .I cannot find
anything to comment; on ~
Co-i.stoner Griml!lrud.: Do you have any eomments., Ed?
Hr. Mrizels:-: rell. b I Indie .. tad l the Part 3 instructions and form
section., the .tandard ~ilerplate., I believe covers ~.t already by st.ff~
I appreciate the cv=ment • ., beceuae ve will b~ asking the con6ultmnta that
are aelected by ~e VAC or tbe Blue Ribbon Commdtte. for interviews to
prapare for &Q oral interview board.. That will be conducted for all
finalist. select.ed.. Their coat e..,ti.mat •• vill be inc:luded and broken dQwn.
besed on the type and experienc:e of the staff that the coosultant ~ll be
providing for the study.. That will also be ine~uded in their propoE&ls ..
Commi •• iop.er Gr i !ll8rud,: Possibly. you. m.igh~ .. dd eometb..1ng to the eva~ua.tioa
~riterl&, as tar .. II the oral presentation?
Kr. Lf'nping = Yell., I had Bet down here t,o add a ten th i te.m. to tha t Seetioa
VI that should read something like., -The qua1.ity of the team pre.enta.t.ion
and iaterv:lew .. if the interview i. requested.. Quality is kind of .. 100&e
term., but you are t.ryi.ng t.o not pin it down to .peeifles .,0 that you den't
get any kind of nitpicking going 0Il 1 but you can see if this ia working or
nc;t ..
x.ry Di;p..it= 1: have two pages of written comment!!! w-hieh I can submit
attervarc:U.. I have tWG types of comment_. one concerns »lOre general
iasue.. We did not see the boilerplate., .0 r am not Bure if some o£ these
may be addressed. The other ill specifically on ~he Scope Qf Work.
So addressing the Scope of Work i •• uea firat., one of my questions ~s on
Page " of the UR.. under SCope of Work., where it says -The primary
objective of thia review .... • I thought it should be clear that we want the
consultant to describe 'the benefits that 'WOuld result from .implementing the
recommendation.. including improv~ service levels andior cost savings.
ThAt. would be part of what we want thi. proposal to do.. one of our
objectives. Alao. under the Scope of Work. the way it is set up nov, at
the very beginning there ia an overview of ecnsultant services .. and it i.
two aeetion5_ One i. ·Phaeea-and oa~ is -ne~1ver&bles.-Then~ when it
goes into the more specific detail. of the Scope of Work., it ie net really
cl.ar how those r~late to t.he overview summary. What. I wo-u1d rec-ommend is
that the four ~ •• kB that follow .. the Review of Past Stu4ies and Plans, the
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14entifieat.{on of Organisational It..view, P&rfcrmanee of Org&niz.at.ional
•• vi~w, and Concluaions aDd ~ecommend.tion. be reatructured to have more
8p6Cif!c t. ... k. of what. lohe work would ~c:tu.lly be, and hAve each one of the
t •• k. have .. deliverable ••• oc!at.4 with it. r have an example herel A
projeet initi&tion ~eting. a work plan propoBal. determine the %eview
erit.ria .. conduct. the <Uta collection and eval\1~tioc, which would have many
au.bta.1ts to it.. It. would be the largeat t .. ek. Also ... p-r~pa.re draft and
ft..nal reports. and project maDagem:ent and reporting. Then each of tho_e
c.ould. have specific deliverables, an4 you could. tie: the pay::a.ent of iDvoic:e.s
to the completion of the dellverables. rt makes it • lot cleaner for the
lU'P. and proposal.. 'I. bave had to deal vi t.h in tbe past a
C !,.ioper Grimlru4= 'I. have .. COJmnent OIl tl::.t. 'I. guess th(ilre. 1s ..
tradeoff b.t.wel!n almost writing their proposal for them. I guee8 what you
va.nt. t.o 40 i. to make clear ~a general eonc$pt, but perhaps give tbem sCJII,e
laeway •• to how exactly they want to reply. III other words, pa.rt of
writing a propos .. l i.8 coming out with a goo4 •• t of tasks and deliverable.
that. respond. to your objectivea. Doing it the way you are outlining t.e.c.d.e
to re4uce ~e ri.k ~bat they are not very respon5ive. 1 could go either
way on t.hat. but I am. not sure I ,.,.nt to 90 overboa.rd and aa.y", you"ve got
to 60 thia. this and thla. and bave this 4eliver~1e at tbi5 milestone or
that a Wa are doing all of the work and not letting them use their own
special b.ckgr~s to come up ~tb innovative approaches.
Xa. Dia1t: Deliverab~e8 'Would be fairly general iII nature. They wou1d not
have anything on content. For example, ·Prepare Draft and Final Reports·
would be to prepare .. draft report and prepare a final report. I have used
aimilar typea of UP, in working with proposale of anywhere from $25 .. 000
to $600.COO.
The other thing that goe. more into the general •• pect. on the response
requir~t, you ~an respond with Iota of pagea. ~nerally. one o~ the
thing_ 1. bave found t.o be goo4 1. to h& .... ~ • l.l..m1t or at le.a8t .. guidelines ..
to give the proposera an id •• on how IDU-ch detail you want to go .into. SO
if you have 2S pages or 40 pag~s. whatever. for the body of the propos.l
lIneS limited appendicee. t"l1a.t will make .it easier both for reviewing Cld
.1.ao to make sure t.he propo.er is concise and doe. no,t just add filler.
Then ~ere are a few other things with the ev&luation criteria. I thoughe
there were approx~tely ciDe or ten there. My recommendation is to have
f.wer c&tegories that would combine 80me of theBe. The committee that is
going to rank these proposals Deeae: to have iI more limitea number 'Of
crite):'ia to respond to. 1. don-t k:nov if the rating sheet has been devised ..
but you didn"'t items related to the qualification. and experience of the
fira. qu_lity of the proposa1. cost. .oundnes& of metbodology~ that type
of ~. -
The fir~ei.l stability of respondent. i. going to be a difficul~ one. I
don" t knc:ow what you can ask them. That llIay be a. little tou:zhy with so..e
people. But ycu can have other criteria, such as reputation of the f!r.m~
that you can use as regards that.
Cosmai,aioner Gri~: One -thing tbat bring" to mind .. Ed~ is that ""hen we
actually go to evaluate the proposal. a lot of times there are weights tha.t
you put; on certain criteria. 1:. am wor..dering who should do tha.t. Maybe ycu
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would boll this down to, .&y~ six eriteri&_ A l¢t of time., REPs wi11
.et~ll)" have po1t1te or 'Weighting. on • 100 percent basie .. i.e .. ., 20 percent
for ~1 ... lQ ~erceut for that. We dOn't have ~o give that out in th~ aFP.
but it :a!ght be worthwhile to bounce that off of thi. committee .a t.o Yhat
th. w.lghtinga ahould be. Do you feel., Mary. that~. ahould come up with
that? Hay~e eh.y should euggeilt it and bounce it off the cDm!lL1tte ••
~~ D~t: That .tafl sbould .ugge~t it? (res) yes. I agree. Then have
it for your review. There &re three gener~l area •• too (&nd I ~ no~ aure
what ia covered in that boilerplate) but one i. that all data documentation
should be the property of tha. City a.ud ahou1d be. aub1:nitted .. One. thins U:...t
we have done 80metimes 18 to ~thhold 10 percent ~f the f~e fer the entire
pro1ect until everything b •• been completed and ~. fin~1 report h~. been
don ••
Another it .. ~t I think i. important im to give the proposers an idea of
what the budget i.~ I have .1.0 been on thd aide ~ere t ~4ve responded
to p~opc.al.. ~t can either be _ range or • not-to-excee~ number. You
C=&D have the .am. Scope of Work written out. and you can respond 111 &.
$50.000 f •• hien or in a $250,000 f.shion. I think that would improve the
quality of Yhat you would get.
The l •• t itea I think i. good. to do voul~ be to have an opportunity .. before
the pr~8.1 is due ~ after it i. rele&sed r to have a date by ~h!ch any
qu •• eiona e~ be asked by con.ultants. Tbey would have to sUbmit them in
writing by a date c.rtaiD~ a •• ponses would then be ment to all proposers
by another date. Both would be in writing 110 there would be no coecern
that one propo.er would know 80mething that ~he others did not. We have
QaQ15 that at t!&e., and. it has worked out wel.!.
Xr. )(r-izek: Probably the Il\3.jority of those itQ1.ll are i.n the boilerplate.
We hay. a fora. in the boilerplate ... -Experienoe of Financial Qualifications
that • CQnsult&nt must complete. The fee. are paid baeed on deliverable.
or on .. JDOtI!:hly basi. based on percentage of vc-rk completed. We 40
~~ld a ~tmum of ~o pe~ce~t of the eotal contract until the final
report has been delivered and accepted by th. City.
As far .e: the review .. with the General .Fun4 organizationa.l review just
completed last year r ~ believe the City auditor did review the consultant
propcBal. an4 came to that Blue Ribbon Committee with some rec:om:endatlons
OD which consultants should be in the final round ef intervIews. That
-commit.tee and. the Finance Committee then d;_d hold intervie",s. Staff would
be happy t.o 40 that:. to review th!! consultant proposal. firat. and bring
• shorter list to the committee and the tTAC.. whatever the commis.ion
de. ires.
Cammiss!oner Grimsrud: One thing Mary brought up was the dollar range.
Y believe it va. in oce of the letters that we got from oeher people .... e
wall. Z know that in the communications cons~ltant effort, we g~t dollAr
v~lue8 .11 over the place~ I don·t know if that !~ good or bad~ Xn a
sense, it might be bad. What 1s your thought on that?
Mr· Mrizek: What sta£f attempted to do {and we did contact some other
utilities on -what they have done on organizational revie'tll'sj is to have
dollar ranges anywhere from $50.QOO up to almost a half mdllion dvllars.
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So v. .. ~. ra.ther reluctant. to, .peeify a doll.&r figure.. W. di.d put a dolla:r
figure in our buc!g'et lor the c.ew yea:r for thla atudy_ but it wall' a
srue •• tiJaate mor. than anything. I f •• 1 'We would rather .ee wbat the
con.ultant aUhmitll,. aL4 tb.elJ go f-rom th.&t point ..
Chairm'n JobA,top: I t4!!I1d to .bare the comment. of Mary and Hr. Powara on
t.h1. i.aua'. I t.hink .consultants do try to gues.. Tbey try to call people~
'l'h~y t.ry 'Whatever 'W1I.y t.bey e~ to have .. feeling for what the number might.
be~ I don"t know that thia 'WOu.ld be a line item in their budget that they
would b. &ble to get &hold of,. but it ce:rta1nly give. an opportunity for
you to 108. some good consultant. becau •• they ••• entlally ehooee to bid
on • 4!ffer.ant level of .tudy. ThAt 1 ... shame.. What happen. i. that a
lot of good. cOIl.ult.anta are ruled out .!..ply bec:aul!le they are: trying to
giv. & .tudy in more detail than you felt you c.eeded. So there i. & rea1
rl.k in do1~ that.
The problem i. tbat it i. not easy to figur. out what the right solution
.1 __ • You 4on" t know whetber you v-ant to 8.Y .. $50 .. DOD to $100 .. DOQ or whether
you want. to .ay,. .We won' t c.onaide-l' propc ... l. above a ce::ta.in amount .. • etc ..
But .~ -guidance would be helpful. ().the:r people do it in different ~ye.
Other people do it by •• ying. ·We antieipate a etudy would take 500 man
hours.-There are a variety of way. of getting at it. If you do find a
way to provide some guida:n-ce .. it -would be helpful. I think you wlll get:
more focused p~opotlal. tly doing that" and you will be the winner in the
long run.
Z have to •• 7 that I am giving these commentl!l fr~ the standpoInt of being
.. con.sultant and: having had to propel-e OIl lD&l1y ,obs myilelf.. 80 to the
exteDt that you .feel it i.e out of my f:r-uatratio:D from being in that
poel.t1.on,. you are wel.C01\lft to ta.ke tho ... c.omment. any 'WlLY you wieh. But 1.
do th1l>l< that some guidanc:. II>.igbt be worthwhile.
Mr. Lepning: on that. i •• ue .. Z tend to di.agree with that. 1. underatand
t.he C:r1,latra.t.ion from t.he consultant'. point of View .. but you see .. when you
are there either looking at. what i. c¢m1ng along Oll paper or in the
i..c..ta"i.", ~. really giv.. you & handle OIl. knowing whetber this
couaul.t,ant has '& gy ... p on -,rhat you a.re wanting.. So tlie piece • .nd parte
are .1.n the propo.al here right. c.ow.. I think that 1_ 8uffic:ie:c.t. So we are
really challenging t.he c:on.ultant. to look ic.to what this ia.. Xf this
cOJlllultant kn<Ne utilities_ knows the auniclpalities, know. hoy munill lrICIrk ..
h .. i. -going t.o be c.ap&l11. of eo:lli.ng up with aom.ething. although you might.
get a pretty ~id. band8pread. I have bad occur ~th me 6 &lao. But that
also tell. you they have mi8.ed aomething, or they are padding it. We see
right. here that we have & time-frame. 'that. i. established. We &1.1 get a.
graap here after awhil. of wh~t the slee of this jOb iB. If you get man
hour.,. like h. va. suggesti.ng,. that ahocld give u. in our ¢'ro"ll mic.d set $10'0
per hou:J' or vhatev6r it 1. going to be.. So t.hat i. vbere I am at. wit.b that
one.
Crymrni88ioper GrLmsrud: SO the last part of YQur co~ent ~~ •• even giving
8 guideline on man hour. is not 4esirab1e ..
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C ,.,ioner OrLmPrud: I lee the arguments either way. % den't think the
out.eame on the communication project was baa" We got. wiCle spect.rum .. and
we found .omeon. who wal technically good and also reasonably p.riced. I
am not .ur. th~t w. had thi. Icenario where there w.~ aomeone elee who wa.
really highly qualified but they mined the boat completely. n.ey probably
ai •• ed t.he boat because they did not bid it lean and mean &ll.d: very foeus.,j;
ou this problem.. S-o Z can go either way.
Cqmp, •• ioper Chandler; I thInk the situation where it become. ~ i •• ue
Whether you give that EUch Infor.mation about the .cop' of what you vant
aria •• when there i. lack of clarit.y in the description of the services and
the .cope of the work. I mean -scope· in a alightly different sen.e than
it 1. u.ed in the headings here. ~t concerns ~e about this is .. if Paul
read thi_ R.P'.P and came away confused as to what the. scope was .... th1nk1ng you
could either go very big or very Ala11 .... the problem is with the del!lcripti~
here not being fOCtl8ed. ellough .... rather than on whether 'We put in exactly how
:much we want to apend or • range of how :ouch we W1Lnt t.o spend.
I have .om.e lJPecific concerns about substance, Alld r realize we are talking
about procedure now.; but I t.hink we ought to keep ill mind, as we do thia ..
addre •• 1.ng this concern about cost througb descriptioll of the time we
expect it to take and the specific prObl~ we want to focus on (although
I hate to eay ·prObl~· because it Bounds lIke something is broken) .... the
specific issuea we ~t tQ have addressed. Z like the ide~ of Ilot putting
in a ~umber. Th1t i. sort of a poor way to addre •• what ~y be & lack of
clarity in the description •
... Dimit: A few mcm.ths ago .... I valli proj ect -.a.nager fer a $295 .... 000 UP thilt
went out. W. received aille proposals. The Scope of Work vas ~h more
det&i1ed 'than thi8 .... &r1d in addition .. there were certain sta.nd .. rd. methodolo
gies that had to be followed to aocomp11sh this. There was Btill quite a
range in the quality of the proposal. that we received .... ev~ though they
had a not-to-exceed level in the proposal. Even though ~ felt the Scope
of Work was relatively detailed .... ~ere still wer~ different vaya Qf going
about things. whether you interview every single at.aff ~ember versua
Intervl~ng five percent. There are w.y. of going in depth or not in
depth in a number of ~he8e l •• ue. that came up. ..ying how =uch original
research that you do verBU. exi.ting .... even though this proposal did 5tate
that ehey wanted to rely on existing. To me .... at least a range .. a $50,000
range or a $25 .... 000 range would b. useful.
£mppti "!lionel' Gri~~ One area that I alao wonder abou.t is when you look
at the Scope of Work, one could consider much better ways of benchmarking ....
D~eh more detail and may~e varioue levels of quality of results. I guess
the question Is whether the benefits vary as much ~. the eClBt.. I am
wondering. what if we got a $10D .... 000 proposal thilt potentially coul4 Bave
us more money in the long run than & $100 .... 000 proposal? The $200.000 is
trivial compared to all the CQsta we would save. So by biDding things and
a.ylng we want something b.etween $100 .... 000 and. $125.000 .... we have limited our
Scope of Work~ Xaybe someone would. come in with fantastic ideas which
m!gh~ coat & little more, but in the long run~ it would be better. So by
li.aiting the eClat .... one of the down sides to that is limiting the methodolo
gies t.ha.t one might do. Ed, do you have any feeling about thilt? I do not
have a lot of experience in organizational reviews.
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Kr .. Mri.ek: r can .only go by JII'f conv.reation8 with people wbo 'Were
involved wi~ the General ~d organ1zatio~al ~ev1ew and the met~logy
they employed.. Of co,..r.6, there i. the moat current one we did wiUl fiber
optic •• where •• y~u .a1c~ we had bida anywbere from $lOO~COQ to reveral
aililon dollar... To liadt the dollar., I would have to have a better teel
of what we are going' to get for t.b-oee dollar.. Aa you Baid~ someone could
<:ome in with a higher number but give 118 .ome better bellefit.. :Rigbt nov,
.taf! 41d not plan on putting in a dollar figure, but we could put in a
rang., if tb4t i. tbe de.lre. We could put $50.000 to whatever the t~
lialt fa. We could 1I.}eet a lower end. upper lia1t. and bopefully get
cOCAult-ant.. to come in within tMt range. But there will be other
COIl.ulta:nt. who JDay C:01II.e in ahove that ra.nge with 10000e good Ideal that the
commlaalon aay want to co~.!d.r in theIr .eleetion. SO we could put in a
rang_ and ev.n consider those above th. range if the eo~ •• ion finda a
good coa8\lltant 0"..Jt, there t.bat wP'.J.ld give ua a better organizational
report.
Chairmen Jobp.t.O'Q.: The general debate on this topic i. clearly not
wlardmou • .in any direction. Ed. you have heard the argument. for aIld.
again.t~ and % would auggeat that ~e rely on your be8t j~dgment o~ how to
h",,<ile it.
Commi •• ioner lyerly I In ~iBtening to the di8c~.sion~ a few commants have
run thrcugh my min.a. Firat of all. my feeling 'Waa that the UP .. aa W'%itten
by the ataff. was quite well done. Now ~e &r~ getting some critiqu~. of
it, so ~ am n¢t .ure about it~ &s I do not have the expertise as some of
these people do to critique it~ I YOuld be interested, Ed~ in ~e thing.
Charlea Powa,ra. who pre •• nted a letter and 18 on the Blue Ribbon committee.
he. 4. numbor .of thing. that he haa mentioned in t.her~ ... 1. don·t know if you
are prepared to reapond to aome of those itams tonight.
Oce·!s.ua that. he raises that I wiah you would re~nd to ia the wording
on 15 ... the loea.t.ion of the ..,."t,er treatment plant. Be has a fee1.ing, frora
what he has written, that ~e RFP waffle. on it and doe. not spell out what
we are t.rying to do or 'W'here it ought: to be~ That concerns me a bit. j,n
view of the tLme that the eommlaaion haa .pent on that item in the last
yea.r ... and·a·b&l.f" You might waDt to JIl,A'ke some commenta on that.
My gane~al feeling on wbe~her we sbou1d put in ... range in price i. that r
don·t believe r favor it. after listening to everyone~ The reason I do not
il! that we ba.ve a t.re:mendoua amount of <=banges cODdng up ... particularly in
the electric utility.. We do not koow Where we are going to go~ and we de
DOt knew Wh~ther we hav~ enough staff to cover all the baseB with all the
d~. that staff is going to have to face. If you get an aggre •• ive
cODAu1tant Who really l~ks at the utllitiea that we handle. he i8 going
to analyse that e.n4 he is probably going to bring back a lot more work than
soaaeone who i. just going to give you 11 report on the way our 'Ctilities are
etructured nov and how they inter~ct with each ether. I really prefer to
leave it open for domecne wbo want~ ~o get into more depth with some of the
rema.rJts they aight make in a report::. That might be ve%y helpful. to U8 as
we go down .tream.
Cqmmf •• ioper Sah~: I would like to amplify on that co~ent. I agree
with that. r ~hink tbe depth with ~ich a ~on6ultant is 9~ing ~o look ~t
th!8 i. going to vary from consultant to consultant~ depending upon their
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knowledge of the !ndu.try~ It 1. better to leave the price undefin.~~ and
certainly not aet a range. % aleo would like to add to the commeot in
Powar.-letter. Z thougbt Item .3 ~. particularly relevant. When Z read
the RPP. Z came away vithout .. ~ •• lly clear feeling for the .p~eiflc Scope
of Wort. mia ia .~thing Powara articulated.
The R7P was well written~ but it was very general in nature. Again, not
having had the benefit of being here when t.he original study va. diaC'u!I!IIed
in chambers, r expect tha't. 00_ of the key i •• ues in the study va!ll to
addreS8 t.he regu1atory ehang •• t.hat are going to be com..1ng about and try
t.o addre.. aome of the organiz:ational i.eue. and atr.tegiee that are
outlined in the PhaBe 1 repert that we r.celved~ I feel that reslly need.
to be woven into this organizatIonal study. particularly some of t.he
organizational i •• ues ~t are raised on Page '6 of the Phase 1 report.
Al.o, some of the 'option. that are raised on Page 70. I think there are
.¢me very g?Od thoughts there OD how the Utilities Department might be
orguJ.iz-ed to effectively addres. those issues. To me .. that vas OQ,e of tbe
key drivers behind t.he concept of commissioning the study t.o begin ~th.
So ~Be .r~ th~s tbat 8omehow sbould be more clearly articulated in the
UP.
Co:aaia,ioner Chandler: .I agree completely 'With what Jim Sabagiw..c. juat
focused. on. But t.o take & slightly different "Cut. I !lee issues at the
procedural lavel.. th. type of person we vant, and what 'We want them to be
doing. At t.he procedural level, .I agree wholeheartedly ~th what you were
saying about an interview process and withholding 80me f-unds until the end,
just things that ereate a cOlDpetitive enviro-nment and help dri"-e anybody
who is doing WQrk for you to do the job efficiently~ I thought Mary'.
comment. were very appropriate in t.hat regard, an4 I hope those things are
implemented a. a matter of course.
In t.er.ma of who we want, my sense is that it should be someone who comes
with .. lot. of expertise .. but i. in a position to take a very fresh 10Clk at
what we are doing .. and give same perspective. Squally lJDportant 18 someone
who is going to work very well with our staff. because any organization,
no matter bow good, has a lot of l1o,t-lnvented-here response to outside
input. r have worked ~th some of the best people in the world who have
gone out and looked for help .. and then when they got advice, they spent the
next year figuring out why they aid not need the adyice. That is Dot a
eritlci~ oL any organizatio~. That Is fUlt the way people respond. We
need to have a consultant ~ will pre.ent things in a way that is going
to be received cooperatively. That ls not going to be shown in the RYR ..
but that is going to be of the utmost i.mportance in getting a good reau.lt ..
In term. of the aubstance of it.. I .. too .. ~. struck by the Phase 1 report
And by t.he summary of it. The issuea that are raised in terms of sett.ing
up .. marketing effort and do we ~ave the resources, internally, to do a
marketing effort. nov. How do you structure yourself when you are very
focused on marketing to customers .. Unlike the way we have been in the past.
That i. a broad brush i~8ue .. but it 1s of 8u~h critical importance in the
era we are entering into that all of the other lI!Iervice issues we are
vor.:-ied about could amount to fixing the arriLD.gement of the deck cha.ir8 on
tbe ritanic if ~ do not get the big picture right i~ the next couple of
year.. At the .ame timer I think it is Lmport&n~ to put forth the effort
and koow how ~e can provide better cu.to~er service. Cculd we change the
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way w. re.-poDd to cu.tomer requirement. at t.he micro level? I thought that.
latter p&rt~. add%e •• edvezy well l so I con~ur completely in terms of the
lowar. comment. and Jia'. elaboration on them. I would like to see more
of 'tout. I. alao think that on the proce4u.ral .ide. a1.1 the interview. and
dollar .tructuring ought to be implemented. I think thol. are all vdry key
to JDald.Jlg thl .. 'Work. aut I .. leo VUtt. Ed t.o comment. little on tbi. i.eue
ef il'1eeractlOll and how he Ieee that. workl:1g.
¥r, MriF.kr Let me go back to Fred l
• commeat first on the water quality
coatrol plant aDd. the commenta tha~ were in the letter from. Charles Powarl ..
We mad •• broad .tatement in the Scope of Work, Item 3&. W. ~re •• king
for a rev!ew of Where the Regional Water Quality Control Plant ehould be
located organiz:.aticcally.. Thia qu •• tioc. came up during the revie ... betweeIl
the City Couneil and the commi •• ion approxis&tely one year ago whan the
City manager Bubadtted her initial report of the commie.ion's first two
yearl of operation. The council va. very interested in 'Whether the
tr •• tmant plant .hould continue to remain in the PUblie Works Department
01' retu.rn t.o the Utillti •• Dep .. rtm.:1t where it func:tioned approxi:na.tely
leven years .. go. So we made a very ganer .. l request for tbe eon8ultant to
look at it orga.nizationally to detenrlne what fit be.tt.r~ whether it should
remain wher. it is or return to th~ Utilltle.. We did not 90 into detail
on the Scope of Work there. We would leave that up to the eonBult~t to
review the operation under either dep&r~ent.
Ali far a. the ~tl!. Item 3 of Mr. POloR.ra" letter rega.rding .MitiOtlA.l
SCope of Work because-of deregulation taking place with the utilities, when
t.he ~eeQll!llne.ndation t.o do our orgeni:r.&tional review..,... :.ad. by the Counci.l
(they have been aeking for a couple of years), they were in ebe midst of
doing an org&nisationa.l review of th. general gQvermne-nt ~ 'I. rem~er
h.,ar.1ng 80me :member_ of the Council Baying that tTtilitioe. were next.
Deregulation r.al~y was ~ct being ~alked about ~~cb at tbat time. ~t was
aore a question of whether we were organized rlght~ were we fUDcti~ning
right. I .re we doing a good. 'ob~ that. type of organization ... l review, not
bec,auee of aeregulation or the thing_ that are taking plaoe now in the
State of Ca.lifornia. W. did aM .ame verbiage 'to our UP because of
deregulation, however, the utili tie. have moved forward. We are not
waiting for a cooBultant to ~ook at our organization. We have already
reorganized ~. department to be ready for deregulatioD4 We bave added a
~rketiD9 group to the Utilities. We have taken all of our c?n.ervation
etaff, and they are now a marketicg group under our R •• ource Management
Cliv1.iOD~
The Pha •• 1 r~rt~ whl~h ~ll be disousseo later tonigbt, is & report we
reque.ted and. had performed by a eoc.sultant. We did not see a need to Wilit
for thl. organiFat.ioa&l review consultant to come forward and aay that ve
'-hou1d he re-organized. We ~ann()t wait a yei!lr for thill report. We have to
lIQVe forward now.. That ie why we e.re movin.g separately with separate
.tudie. and reorgani:zing thee departme.c.t ;at t.his time. If the ot"g&n:iZ"atio.c.
a1 review come. out 'Vith sOIrIe additional 8uggestion. for a better
erga.nizatiol1 to dea.l with dez-:egulation .. we will be happy to implement those
recom=~d4tion •.
C~'8iODer Chandler: I certainly would not suggest that we wa,it in any
way.. All of those thing_ are necessary. and the fa-ct that t.b.is ia in front
of Ue i. a sign t.hat Ithose things are happening, but l: 00 think it i8
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lome thing that ve C&.ll benefit from if we have .. consultant aboard who haa
confronted. thl. or 'Who ha. resources av.llable to h.1m or her who has
coafroct&d th~ •• type. of iesu6s 1 whether it i. in England or eleewhere in
the United State. today. althougb no one is really ahead of u.~ if ·.h~sd·
I, ~. right word to ule.
In looking .p~clfic.l1y at Sections III and IV of the RP~. my view la that
II. C aDd D under '3 are alzoat more cat. cQllection than analyels. .I wa.
not lure that w.. lomething I ~ted .. consultant to .pend .. lot of t1&e
on. I thought A and B were appropriatel .1~ough ~ is not as 81gnlfic&nt
an i •• u.. ]: would. want to fleah out It. a little more in t.erms of what we
are looking for in that type of evaluation. It~ A and B, to m., are the
JD.icroev..lu.&tion t.hat X think i.!l tls.ful.
In Conelusion. and aeeommendati~n •• Section IV here. It~ B doe. deal vith
the l •• ue of deregulation and cQmpetition. It ought to be moved up to fl.
There ought eo be an eval.uation of the way ,.,e are re8ponding It" to 4a.t.a.
be~au.e you have 40Ge • lot to try and respond to that environment. I
think a lot of it hA. ~ee~ very effective. Tbl. 1. a eisn of it. but it
would be valuable to have .. consultant to take .. look at that. especially
if it 11 Bomeone who h •• experienee in dea1ing ~~ thoae kinde of iB5U~ ••
someone who dght say. -If 'We take thl. kind of approa~h aDd etrueture it
.lightly differeo.tly, we can. get thie kind of re.sult.· Tha.t mi.gllt b ..
useful. Those would be my specifics in lookIng at tlliB in terma of what I
would like t.o ae. the. consultant focus upon.
Mr. Krizek.:: 'l"hat i. a very &ppropriste comm..e.nt .. and we. will e.dd that..
Co=!"ioner Grlm.'~d: .I will take .. sl.1.ghtly diffeTent apin on thi ••
although I have the Bam. feeling. My feeling i. that the background
.ecti01l ought to put t.h1a atud.y more in the -context of cCGpetition. In
other words. w. are not just Looking for reorganization. We are looking
for ways to ~ the utility 80 that we can better meet the cba11enge of
competition.
Hy comment on section II.! i.e that t.here !, a lot of eJfIphl!u!lis o;c
benebmarking and eompa.ring .. and that is 'Useful. .. a. Zlece-B8ary condition. but
to me. it ie not a sufficient condition. A Buff!el~t condition might be
to push for organiz&tion effieieney ~u order to better meet competition.
I c::an viaualize eome very innovative ways cf doing that Z::es!.des:
beuch1u.rk!.ng rates and compariug n-umbers of people. ete. One thing 1: t.hinlc
the JUI'P ought t.o push for i8 people with innovative ideas ... n¢,t just
benchmarking. Ill.though there may be ~nteresting wa.~s to bencbJna.rlt. My
remark_ seUL t.o go along in the SAme train of thought as the otbera-..
including ~. PowarB. I think he i. on track ... &s we11 as the others.
M%*'Lanninql OCe train of thought I am picking up is that tbis consultant
haa been there before. and will get us on line. But we are out in a new
frontier here. Otber :'..mialD.igbt be at this poll:l.t .. but 1. don~t think U:.ere
are any beyond thi. point. I can tell you that right nov. the Ioos are
not. They are out the.e floundering. trying to figure out how to cb~ge
~heir charaoter from a captive monopoly audience to a free enterprise.
derived market attitude. So your comments rega.ding the Scope of Work &t
the front end of competitivene8S~ that is right on track. As for the reat;
Z don~ t knew how tbey are geing to find benehmark.e: to compare against. It
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1. going to b. allover the board~ I know where PG~B atand_. where they
think thq a:re going t.o go. SOUthern C .. lifornia Sdi80n an<! San Oi4!lgQ a.r.
entren~hed. ~~t in Colorado, they are .tarting to look at that with the
pul>lic: •• rvice comai •• J.or. out there. They are kind of wondering. too. yet
in the pu.bllc •• rvice in Colorado .. their basic rate Ie .. 0175C. Tho ••
priee •• re probably going to go up ~th d.regulati~. the point being that
th.y are all trying t.o (1::1.1:1 out wbere to look. What i. thl. free
enterpris.) What is thi. open ~rket1 Their minds are not set that way~
7ear hal changed PG&E around pretty we11~ We bave not leen tbat _how up
anywher. _lie.
C!mrm1.aiop.e; GrI.m..rud: I don't knoW" that I agree ritb you~ l" th!n1c a lot
cf utilities are turning, ~a turning pretty fa.~. 1 have bad meetings
'With Loa Angelea Oepe..rt.ment of Water a.n.<5. Power.. They ha.ve Proet SysteGlS
ill and. .. re r.,ally doing it. 'rhing. have be~n moving' fast and furious over
the I •• t .lx month.. Z aa .ure there .re c¢nsultL~t. out there that bave
come up with .om. Idea.. I think tbe key i. that we are not going to look
.. t the old at&ndard. ben-ehm.arkiu.g or the olel at.anda.rd wayll. We 'Vant to be
able to look at way. to make thi. utility more efficient. rf that mean.
bringing in the sewage treatment plant~ and that brings efficiency to tbe
City. t.hat 1. good ... too.. That vas my feel-ing about it .... but you are right. ....
the.e ia .. l.ot of confulion. Iiifferant utilities are in d.ifferer.t atagea.
1 am dealing with some that do;opt have. clue. but. there are Bome cut there
that are looking hard at these iaBu •••
Your .tatemellt. are 21.180 'CQrrect about benchmarking. For certain kInd. of
banehmarking. who eares? They are not very meaningful. That 1a one thing
you might get ill a proposal.. peep!.e ,..ho bave inslgbt into 'frIhat is
meaningful and what. is not a.eaningful.
Xc. Lanning: You don't want to ben~~rk against an old premi •• ~ It must
~ against what is going to be tbere in the future.
rmrm1.sioner Grimsrud: That i. right. Ben.cbm&rking on 1952 dat.a, who
cares? Or 1S93~ So benchmarking does have Bome u5efulneas to it. but it
i. not •• ufficlent thing to QO~ You mu.t ~, some o~ber thing.~
Commissioner Sahagian: I might aM that it might 1::e worthwhile to provid411
to wbateve.r consultant we choose. or maybe at the onset in the UP proceta'li,
to the consul.tants that are being Bolieit-ed ... a copy of tbis Phase 1 report.
Ag&in~ aame of the potential directions and aetions that are delineated in
the latter aection. of this report could p:rovide acme useful Ineight into
what aspect. of the organizational issuel {or the £uture that ~ght be
relevant to focus on. They might be able to addreBs~ or9&nlzaticna1~y.
what WQu1d be involved in implementing the specific actions. Admittedly.
aame of thea are &lre~dy starting to take place. They 'Can address what is
b.ppening and what additionally needs to happen and whether it can be done
with a&iBttng .t.&f£.. Would staff have to b_ added to? Does &ddition&l
help have to be hrought in of a special nature?
Comqiesi9Qer G~~rud; Who wrote this Pha$e 1 report? Is this B~ethin9
we can distribute?
Mr. Krizek:
)fanagament.
The Phase 1 report was written by a co-nsultallt ... Resource
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Cemm".loper Sal:.aglan: They did an excelle.nt job .. only I would request.
~t in the future .. they in~lvd ... glo ••• ry o~ acronyms at the back of the
report. There are _0 many acronyma that after awhile .. when you get into
It. yo~ _tart lo.lng your gr •• p.
~oupel'.'n ~os.nb.um: I am not .ure what the rest of the city Council i.
thinking. but I &l:I inter •• ted in what we might think of a •• aomewb4.t more
mundAne analysis. We run a di8tribution eyatem. We maintain the linea.
We trim the trees and read meters. Bow are w-.. doing that job in compariaoc.
t.o other municipal utilities? .I think t~l. i. something we e.re very
int.erested ie. We ret:a.ember all of the dilcu •• ion about the excea8
overt.be. How ia our overt.ime in eompariaon with other munia? Aa we .11
read in the paper, PGax hal cut back very aever$ly. Are we overst.ffed ..
relative to Where PGkB i.? So wher~.. I appreeiate the forward-loo~ing
thoughts here as to hoW' we are going to survive in the competitive
environment. that may be another atu<ly. Ind.ed. Ph.iSe 1 is perhill.ps .. start.
at anBWering those que8tion8~ but I certainly would like to 8ee us look
ln~ti.lly at the more ~r.ditional things.
With reepeet t.o the ~ter quality treatment plant. I was surpriaed to eee
that here. Clearly, there waa .ome discus.ion with the Council and the lJ'AC
aa to whether the UAC .hould have ~thin ita purview the ~ter quality
plLDt. ~ donrt think we considered the question of whether it ought to be
under Public Works or under Utilities~ To acme degree, I think that would
sidetrack the consultant. That is 8omet.hing that you and. Glenn and June
can get together on and .malte a reeommendatio:l. J" don" t. kne-.. that we would
gaIn a great de.l from having the outside consultant look at that unless
you have 80mething else in mind.
Another thought .I had iS r who i. -going to run the .tudy? When we did the
organizational review for the General Fund ... it was perhap. a higher profile
~~. Xt had been a political iaaue in election campaign.. Clearly. the
City Manager did not want to be r •• ponsible for running the review of her
departlDent. We had a. very c:oc.ve:=ien't person r the City auditor ... who handled
it al1~ Ln thI. case, I do not Bee the City auditor herer and indeed~ it
would probably be helpful. Z don~t know if we will have another opport-..mi
ty to meet and .tt~t to gain from the experienee he. had ~th the General
FUnd review.
With respect to intervie .... , as :I reoall,. the Blue Ribbon Committee did
ill.tervie'4' the five finalists. The fiv'!!-we_r~ probably .elected by stilff.
We had oc.e-hour interviews with the five of them over two different
maetlng8. It va. a somewhat tedious process. That completea my c~ente
fer the motIlellt..
Chairmrn Johnston: I would like to second one of Dickrs comments on the
iaaue of whether this i. a competitiveness atudy from the standpoint of
being fo~rd looking r or i8 it a litel. more mundane. I think there are
B8pee~s of the utility where, clearly~ we do need to look f~rward~ We
OlJght to be looking forward on everything .. but some thing_ are moving
forward fa8t.er than o·there. I think we ought to be careful not to get
people too focused on jU8t the electric utility. Z know the ga8 is in a
somewhat 81milar~ somewhat different competitive situation. But there is
alao the wa8tewate:r collection and there is the .... ter utility. Since a
large part of what they are doing is looking at our internal costs .. and
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.1.ne. our internal COlt. repre.ent a JIf'.,J.olo. gr.at • ..: percentage of the total
coat in yater, for example, than th~y do in electricity, one ~gh~ a~lt
make ~ argument ~at tuere i. ao~. to look ~t there ... although the total
4011.~. would be le._r
So J think that 80m. of the comment. t.hat bave be_n made here about almost
ve.tLting t.o dea:tgn thi. new utility and how :It llbould be structured are well
taken, but tb~y need to be v~ry e&refully b.lan~ed .0 that we do nQt tilt
thl. too iar~ That ia quit. important.
Cq,pf •• 1op.er Grfm'rY1:: In SectiOl1 yO' Page , .. it .ays" hecutive S'UlDZIt&ry.
Than you u •• the ~rd -letter,-Za the Executive summary and the letter
~e aame ~ing? III it .. 1etter that i. to be signed?
Mr. Kr',ek: Ie 1. b •• ically a two·page letter.
C99'!'!.S81oner GrWrud, 'l'hen I believe 'You .bould ea.y that. t1'eually ... when
I do propo •• l .... there :t. a ba.ckground. &%14 objective. BeeticD. Usually the
app.o&ch .ectlon ~. the methodologl •• , &0 ratber than ~ave the .pproaeh
in SeetioA S, X would think the technic.l approach would be in Section C.
That would detail a~l ~f the ~ethodologi •••
It follow. on What I wa. saying earlier. It ~ld e~~Qur.ge the proposer.
to demonstrate thelE understanding af benchmarking and hcv they have done
it b9fore, in tbi .. approach •• etion. A1ao d~n.tr ... t. t.heir in-depth
!:e. • .ight ... both in t.he background and i.o the approaeh, -.nd. t.beir experienee
in .!adler projects. rhat ~ampletes my comments. .d, wbat is the next
.t~. given &11 of thia input?
IX. Mrizek~ Staff Can take all of the.e comments and put th .. in • new
UP. and come back to you at the Augu.t meetIng for a final review. Then
". would t.ake tltl. t.o the Council. once they return from vacation in early
September. It delay. the proeees for a ~th or .0. That would b~ ~e
best approach. 1 do need a litt.le more 9'\l-i~ee. bas.4 on Dic.k·. C'Oumlents
about how much depth do you want •• far ... the deregulation comment. .. I have
heard. verau. looking at ju.t the .. y we do btlaine •••• ehe tree trimming
and our other int.real distribution coate. and .llo~ th~ regi~al water
quality coatrol plant c~ent. That~. pu~ in by the City Manager and
myself .nd the Pub~lc works Directo~6 baeed on comcent_ tbat yere made in
the past on where that abO"..lld be. organizationally. That is the only
reason it is ~ here. If there ta • d.slr. not to have that in there. W8
could look at t.hat in anotber process. ba.ically int.~ally. between th~
City Manager and aepartment beads.
C~i •• ioner Ch'p 4 1er: X heard what Oick was .aying~ and Paul echoed vhat
Dick wae saying. That:l.. right. r den! t want my eont::c.euts in that.
direction t:o b. ov.r.tated about the competitive environmel')t~ I feel that.
in te~ of the ~enchmark of key measurea of perfo~~e~ tied to that
should. be & .ugg •• tion a. t-o way. cf t..king' into account the changing
competitive envi~onm~nt in making organizational reeom=en4ations to
:l\aint .... ln or i.mprove levels of peTfonea.nce. Tha.t 1s how I would articulate
what Z would like to .ee~ It just needs to be a factor that is taken into
.ccount look~ at the ~y We do it. I do not believe this consultant
study i. designed to duplicate thi. one O~ to fcr11~ up on the potential
re8ponees h.re~ except in the organiza.tio:n&-l context~ Some of tho&e things
are going t.o be bencbmarked. are going to be affected by t.he changing
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environment. The &n~ly.il nee4s to. be dynamie enQug~ to reeogui%e th&t,
and .. ke the tecommendationl in that context. So~ •• xperl.nc~ And ability
in loo~lu9 .t that i. 90ing to be importAnt in doing &n organil~tion.l
review in the dynamic environment in which ~ find ouraelve.. !ut r am
91.6 that Paul res!nded me th~t we have &ore than an .leetric utility here
and ~t th.~. are a l~t of b4.!C~ gut level organizational i •• u~. tha~
ne.d to be looked at, wher. it wcu14 help to bave & fr68h perspective. if
only to •• y. -There ain't no ODe doing it better.-That i. likely to be
the an.wer in many .~ea.~
lk .. Laping\ You 'Z:Ientioned & reorganil&tion that ia going on. i alD. ...
little concerned about a consultant looking at a moving t.rget~ What i_
the nature. of this reorsia.ni'Jation that you have been tal.king a.l:.o-ut that was
In this Ph.ee 1 report l and your changeover per year up thro~~h the end of
19;'~ Ie that not an le.ue?
Cgmm',.ioper GrLmArnd: Z. there a reorgani&ation1
Mr" ¥Xis.X, CUrrently. no~ The util1tle. baa reorganized over the la~t
two years .. We combined eng1neeJ"iug and opera.tions into one diviaic;.c; where
~ did have two. That organiza.tional review ha. been complete4 Tbe
organiratioaal reviews that are being talked about in tbe Phase 1 report
ave to do wit.h the Aeuource MaJlage:m.ellt Division and how 'We are orS"iUlising
that particular -diviaion to %Il9'!!t the competition and the deregulatioc.
qu •• ~iOD. that are taking pl.ace~ We vere organizing a reaource ;lanning
seetioD. and 3: eonserv_tioD .ect-ioo .. &n-d that ia now being change,:: into ...
new fODU.t. which ia taking place at thia time by that ae.18ta_'''1't c.:'rector4
Be is ba.Ically eonferring with me and hi. Btatf.
C9!!mds.:i on er Grimsrud: To briDg thi. item
~11 ne~d to get back togetber next montb4
.hould be ~hus informed.
to • ~lose, it .ppear~ that we
So l:he Blue Ribbon C~ttee
Mr· Mrizek~ We .will be happy to t.ke the minutes ana try to come up with
a new d,ra f t R]IIP by then and have it in the packe t and ou t to t:.!Ii 21 ue
R~ Committee to see if ve can get a product tbat we can then ~ake to
the Council.
8. Hew Business
.~ Elect%omasp,tie Fields Inforr.atipn Report
Hr. Mrizeekl The two etaff membeJ"iI who wi11 be covering t:his item. '''e have
Mr4 Larry Starr. A.Billilltant Direct-or of .Enginee:rillg and Operaticns~ illso Hr.
Hike Be&D~&nd1 Engineering Manager ~f the Electric Utilities.
Mr. Starr: We 40 not have a presentation tonigbt. We are here t~ answer
your questions. This 1. an inforsnaticnal reporL We also hase a new
booklet that we jUlt got from tbe federa1 gQver.nmact. copies of ~~ch yeo
have just received.
C~ssioner Grimsrud: On Page 3 1 you talke about customer =e~e3ts for
measuring elect:romagc.etit: fields. What kind of cost are we ta.lkit:.; there?
Al.o. is that indoor, outdoor2 wnat is the nature of t:hat~
Chairma.n Jobntlton called. tb6 meeting to QrdeJ at 7:. 30 p.at~ :Ln the COI'lrlcll
ch~.r.~ 250 ~lton Avenue 6 R.l0 Alto 6 C •. itom! ...
1. Roll Call
PRESENT: Comal • .,iooer. Chandler,. Eyerly -':;rimsrud, Johnston, Sahagian
ABS EN"!', Non.
cot1NCIL KEMBER PRESENT: Jtol!lenbaum
2. Oral Cgmmn-leatio!11
Noae.
l~ Approval of Hinute.: July 5, 1995.
m"lm'n John.tOD: Are there any <comments on the JIlinutes?
Cgmm',.loner GrLmsrud: I must eay that even on the first draft, this was
about the best job r have ever seen. I only had one small comment on the
first draft .. BO I would like to co~liment your work on that.
MOTION:: Comm..is"r.oner Chandler:. X InOve approval of the mlllutea of July 5,
1"5.
SECOND: By Commill!lllioner Grlmsrud.
MOTION PMSlm 5 -0 •
... Agenda Rerl. aM :R!:vi.lon ..
Chaiman John.ton: There 1s one item I wish t.o add to the a.genda ... that i.
a brief discussion of an laBue that come up each year called Council
Priorities. Siuce the dat~ of thi. agenda was prepared, the coun~i1 hal
started to move on this iSSue. We do not. need to reach any final
~onelusion. tonight, but Z would 1ike to be able to discuss that iSD~e a
little. I suggest that we add it a. Item 7.&.
s. Consent Calendar
S. Ucfinished Business
s. Organizational Review Task Force Comments on R?P
Chairmap John, top: i welcome back members of the Blue Ribbon committee.
Wba~ 1 would like to do i5 turn thia i.sue over to Paul G~imsrud.
Commi •• iqner Grim.arud: 'What 'We ha,,-e done is to ::review this UP o:n.ee, and
now it has come back t.o UB. I would like to take comments from the
committee one at a t~e, and theD have a general discussion and have &ome
feedba.ck.
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Xary D!mi~1 Thank you. I already passed commeDts to Bd xri%ek and the
.taff, aome of ~ieh were in~orpor&ted into the review of the revised RFP~
Z did have one coneern which I ,ust discussed.. and I accept the deei.ion
to not add a dollar coat to tha budget. I still thInk it would be a good
id •• # but I underet&nd why ataff has decided cot to do that.
Commia.£ouar Grimsrud: Mr. Pawar.# you were not here the last t~.# 80
thi. i. new to you.
Hr. Powara: Not completely. X apologize that I was not able to be present
at the July 5th meeting. .I did .. ~'e"\""er, .end in my written comments, some
of which were incorporated .. and .ome of which were not. Some of the latter
were 111 advr.ed on my part ~ecau.~ Z did not have a portion of the RPP ••
provided by Purch.sing .. whleh Answered. about half of my con.cerclil.
Since then.. I sent in a few more COlMtent.s of & ~\J.ch less .significant
nature ... some of which were in-corporated ... some of which were not. So:r bave
very little more to contribute. I muet say that I do share the con~ern ...
but it i. certainly .taff .... deci.ion to decide whethez or not to give an
indication of the scope of a job like this. In my experience ... it would be
very hard for a bidder to guess the scope. It might be that & highly
qualified bidder would decide not to make the very substantial investMent
of preparing a proposal ... simply because they are con~erned that they could
mis. t.he scope by a whole bun-ch of doll.r .... and therefore ... not. win the bid.
1 hope t.h.t i8 taken into consideration. We may not get the moLSt qu.a.l:l~f.ed
cODsultant if we do not give a hint of ~e scope.
Another thing that tends to give concern ('WlC!lear -something about wired
for somebody else). X find that by far. the most important thing 1. to
protect: the integrity of the procurement process and in no way have it be
what communities call wired :for somebody ahead of time {un-clear).
CommIssioner Grimsrud: One of the concerns that I have is th~t we do not
know for sure the dollar range that is appropriate ... either.
Hr. PowarB: I made a gue8s in my first sUbmission. I ~uld think that if
..,taff has .no idea ... it mlght be even hardar for cotlsultants to make a guess.
Many of the ~ing. are very elastic. You could spend a week on them or an
hour OD. them.
Commissioner Gri.J:lsru~: We went ba_ck and forth on this ...... "ith people OIl both
sides of t.he question. Z made the statement that I could go either way on
it. I am a consultant and have responded to many RFPs. Most of th~ do
Dot give a cost. In reality. with most of th~$ you come up with the best
bid anQ the best technical approach ... and presumably, the reviewer looks at
both teohnioill quality and cost. I suppose that if the first round of bids
is bad ... ycu could always go out with ano·ther UP.
commi ssioner Grim§.E;_<!: Hr. Saksen.
Mr. Saksen: Z was here for the discussion the last time. but I was seated
in the audience. Z do think that having put out a number of RFPs for the
hospital, that many owners feel that putting a price in an RFP ~ll set a
ceiling, a~ hopes that it will set a ceiling. In fact~ it works in just
the reverse. It sets a floor ... and consultants feel uncomf~:tahle having
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at least. that lIluch Ito start coIf with. I%'!, my opinion, you really are better
off not. having .. dolla.r value, and just try to cSo-the .cope of the
deliverable., which I feel are we11 defined in here... an4 let the consul·
tant. take it from there. It may range. and the potential riak: you r\:l.tl i.
that. you will get .. very vie .. range. But you mcly not, a.nd it may be fine ..
I think you are .afer this way.
~. Pi.it~ I have one compromise to suggest. Without putting a dollar
lta1t on it ... maybe offer the consultants that ~ are looking for the most
value tor the l •• st cost.. They could: su.bmlt more than Q!le level of effort ..
wh.1cb "Ou14 allow them to submit two or three options .. one at $25 .. 000 .. one
at $50,000, one at $100 ... 000, etc. We wouldn't have to be 8pecific.
c ..... , •• 1000er GXi.msrud; Well .. certainly, making the st.tement about value
per 4011ar which I believe iii in there .. giving t.he opport.unity to have more
than one option .. r think people will te.od to tha.t. anyway if they are very
concerned about that. Is there going to be a bidders' meeting?
~. Mri.ek~ If ~e commission or committee would lite to have a meeting
prior to ~.ir bids.
mm' •• loner Gri.maru4: I did n-ot m~an it to be 80 much for us. but. €or you
to answer questions from potential bidders.
Nt. Krizek: We did not plan to have a m~eting ~or bidd~r. prior to ~eir
.Ubadtti~ their proposals to the c~ttee.
Xr' POWI,r.: :I am DOt clear on the ialportant matter of how the source list
for the recipients of this REP 18 generated.
Xr. Xrl,.k: O\!r Purchasing Department has a list of consultants who
pertor.. studies such as thIs. There was an organizational review of the
general government of the City of Palo Alto just completed laat year.
Ther~ va. a .ubat~tial liat of con5ultants for that atudy. We .. in the
'C't.llities .. have c-ontaeted other utilities throughout California t.o ge.t
additiOD.i&l consultant.s added to that list.~ Then we will send this UP out
to the complete list. Staff's concern ha.s been that a lot of the
consultants on the orIginal liat that did the org&ni~.tlonal revie~ of
general government have very little utilities type experience. So we are
look~ for organizational consultanta ~th some utility background. We
are generating a list~ Xf the commission has any a~itlonal names for us ..
we will add those to the list to send out to a. many possible e&Qdidates
as we can ..
Coeaaf.l.loner GrLmsru4: .In my revieW" of t.bis, I found no substantive
negative comments. y~ have pretty much incor,porated our comments. On
Page 5 .. I found a few 6mall things. There are three headings below ·Scope
of Services.-None of them are consistent in for.mat, and none of them are
conal. tent in headings with sUbheadings of earlier seetions. I don't ~QV
What heading structure we are using .. but csually .. after .. heading such as
~OVerview of Consultant Services,-there is text before you give a table.
You donPt just g1ve a table ~ithout an introduction as to what it is.
":In the ·Study Areas to be In.el'Oded in .Review .. -I think .I understand it .. l:.ut
again .. it is a list with-out a heading. Are these parts of the organiza-
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tion1 I am not sure if ~hese are study .r~&.~ or wh&t t. this & lIst of?
It iu~t seemed. little ~haky to me. The re.t of it 1. just fin~.
Are there any other comment. from C~8.iooer.?
Camad,.ioper Eyerly: I have a que8tlcn &bout P~gea 6 and 7. We hay. a
couple of gr.ye~ areas. Are those to be added i or Bre they to be ta~en
out"
Hr. X:'l,.ltt: Those were additions baaed upon the: last review that we mailed
OQt. They were additional co=mente that Ye received.
Cemrn'.,ioner Eyerly: Regarding the concerna of the Blue Ribbon Comaittee
about not having a ca.p on th.e review. We spent quit.e a bit of tilDe on that
when we ~i,c:us8ed t.his:. Z felt, aod eviden!.ly the IIlajority of the
comadaaion felt, that we have so many changes in regulations comi~g forth
&nd we are not quIte sure where we are ~thiD the utility. tb&t to put a
csp on it, a respondent to a proposal might li~t £ome of the ideas that
would be belpful if they were to. bring them fcrth~ X notice in the Scope
of Service-s.. Pagea 5 and 5.. Items 3 and 4 OD Pa.ge 5 addresses that
somewhat .. that. they are expected to delve into t.he changing regulations and
how it ~ll ~act the orqanisation~ Eor those rea.cns. I believe we felt
we wanted to leave off a C!!lP BO they V'ould Z10t limit their work If they had
idea.~
Later on a.t t.ha.t. m.eeting. we had a report on a study t.hat Ed had contracted.
for on all of the problems that deregulation ia having~ There are a vaet
number of thing_ that sta.ff can VQrk on. X vas hoping that with that in
hand, and in referring to chat .. the consultant ~ght have 8o~e leada as to
~t. ought to be the priorities in that 10n9 list. Those thing&, to ~y
mind .. are why we voted to leave .off a cap~ That may be helpful to. the Blue
Ri~ committee.
<:91"1'!'" •• iOPB' fbandler: 1. alii. very impressed vi th the change.. from the l.a;:t
RFP ~t we had at the July meeting~ In going through it in preparation
for this meeting. there Yere three items in the Seope of Servi~es that I
had .. problem ~th. They are all under Section 3. X .ill be interested
in the cODmlit-te.·. view of this .. 4e well 45 the Commissi<>nerB.
In looking at c. D an4 XI regarding ·Compare the utllltiee transfer to tbe
General Fund witb municipal utilities transfere in other California
cities.-"Compare utilities rat.es by cu.e:tomer classes v:ith other mun.ic:ipsl
investor .. owned. utilities in California. .. -and -Review cost filctora fer
services in o-ther city goveroment 4epartments wbicb bill utilities~· Those.
~e. item. s.~ .. first of all.. to be highly interrelated and dependent
upon each other. 80 I am not sure that infonnation abo ... t one of them
nece.sa.rily· reflects anything other than Infornation ~t the othe%".~ For
instance. the ,,_tellll are going to reflect bow mu-ch gets charged t.o the
Utilit.ie.s by .other aervices end the amount of transfers to the General
Fund. But sore tban the interrelationship bet~een them.. I am con~erned
that those are politically policy-determined outcomes that do not really
have to do with the .organization of the uti1ities department itself. r ~8
not sure what role they had in an ¢rg~nizational review of the ut~litie8.
It .e~ed to me that you could do ~he organization revlev, _nd that might
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affect how you view those different items and bow the city wants to handle
tham. I La not wure that they matter for organizational pur;pese~.
~'lrman JOhn.toll: 1 actually feel that they matter a lot .. I am glad they
are in here, beeau •• it ee~ to me that a part of what you ~t to do in
your organizational review ia to look at all of the coats that make up the
budget for the utility, and to try &D.d assesa: where the ~tility is
~ffieient Or inefficient in compa.rison to its peers. Wben one finds
ineffieienei •• or one finds higher c¢sts l it is • clue, not an end in
it.elf~ but it i •• strong clue that one might 8p~Ld more time understand·
ing, and thereforel delving into the organization to understand why it is
that you spent more on whatever the item might be. Some .of those items
adght very wel~ be internal transfers. In Bome ca.ses, it ~ght be that
aome utilit.ies have their own fina.nce department. a.nd. with other utilI tie ....
the fin&nee department Is • tran5fer to another part of city sovernment.
I~ either e&5 .... it i. a cost to the utility~ and I think it is ~rtant
to evaluate it.
So I would like there to be nothing in the utilities budget that i8 off
limit. from. the .tan.dpoint of the review. From. that standpoint, I am quite
happy to eee all of theae it~.
Commissioner O,;mdler: I understand your point on Item:8". but: eo we really
want to do a study of our utility ratea? Is that what this about, or a
atudy o~ transfers to th. General Fund? Neither of them 1s • kudget itew
or an organizational i.sue. On your other poi:ct. to the exte.nt that t.here
are internal transfers. pu.hlng one ~y or another is not going to
:c.eceallarily change the citY'1!I overall dollara.. which 'Was why :I was
concerned that it went beyond. the scope here. Could you focus p&rticularly
on :Item.a C And D1
Chat!"'-? Jolmst:.Qp:' Yea. .If w. talk &bout Item D, that one. is pa.rticularly
~rt&Qt~ because it is an isaue which we have tried to deal with quite
a bit. That i.~ how do you deal with cost of service in terms of setting
rates for individual culltOlDer clasllea? Clearly, If you have aotle customer
claa8e. where uur rates are substantially different in some way, compared
t.o another utility, it l!Iugge.tlS per}-.aps that we perhaps focua a litt.le
harder on how t.o devel~ t.he coat of eervice or ~hat goea into ~he cost of
service for that particul.r class.
In terms of Item C~ ~e transfers to the General FundI I personally 40 not
see that ~ere 1 •• lot of wgrk to be done there. There i. a !igure l and
I would agree that there il!l no great organizational i8&Ue thEre~ It is
just t.he remAining balan.oing number that makes t.he whole budget, so why not.
just. tabulate that ... too. I 40 net aee it as a major work item. It could
just go along for the ride. That ~4y, there is no particular Eacred COY;
.11 o~ the data are going to get evaluated in comparisoI! to other
utilitie8.
Cl"!mmi •• ioner Grimsrud~ rheae are little indices that we can. use to compare
this ut.ility wi ttl o·ther utilities. The thing is that with the transfers
to the General Fund~ a lot of it i8 already not towards perfennan~e but
towards the way they do it or the way they compute it, or ~ha~ is in the
city charter. So it :may not necessarily represent perf-:.rman-ce or
organizat.ion.
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Cgmp! •• lgper Chandler: That is exactly ~ point about these three it~.
It .e&med to me that they did net tie in directly to the ~y the utilities
de~rtment perfo~ ita fun~tion.. Ky concern i8 Dot that we 8bouldn·t
e\".luate our rate .truc:ture and how we develop our cost of service,. because
if .omeone were to pr~se that we bave some kind of out.ide evaluation of
that# I could be very supportive of it. I just ~8 not sure hew it fit in
with what we are doing' here. By itself. it could be a very large and
important study, but bow ~ develop coat of service &DO allocate that
be~een customer cl ••••• i8 .. poltcy i.sue that i8 differe~t from how we
organize our department.
I r~ember th~t at the laat meeting,. I •• id I thought we ehoula do more on
the issue of looking at the eompetitlve environment aDd how that affects
tha utilities. coun~ilmember Rosenbaum said, what we really need 1. a
garden va.riety organizational review.. We have so m.ilDy differe:c.t utilities
here. That 18 ... nice big policy i8S 1J., but that 111 not what we are after ..
Ed .aid that ~at kind of i •• ue 1 •• day· to-day isaue that he aeal. with
everyday. We are doing that 0:1 an ongoing basis, and that showed. up in the
comments tonight on why you did net add mQre. I tbougbt the~e things fit
a little bit in ~t c.t~ry of defoculling on the organizaticnal mission
that we have here. Not that I don't tbink they are important.
Commissioner SabaqilUl: In addr ••• ing X:llrk" _ point on Items C a..:ld P" I do
not feel that the magnitude of transfer. to the General Fund and compara
tive rates really give ua what we are looking for here. If -you look at the
purpose of the general statement. at the beginning .. the purpose of the study
1., to evaluate efficieu<:y and effectiveness.. Z do not believe that looking
at the magnitude of those transfer. necesBarily tells you anything about.
the efLiciency and effectiveness of what ia being done~ That should be
more of the focus of the study.. It is really on the effectiv~.sa of the
service.. Transfer magnitudes, by them.elves~ are not going to tell you
that. It is a number without looking at how it relates to the overall
costa. Efficiency 1. different from magnitude of monetary tr-ansfer.
Mr. Powara: I would comment that a qualified ooceultant would ~ertainly
be able to put that in conte.x't, 80 even if some of the cot!'l:lZlissicn felt that
these data were marginally utility~ I sUbmit that a qualifiee ccnsultant
would certainly knew What to con~lude from and what not to conclude from.
As haa been pointed oUt. in the li8t of objectives in the Scope of Work~
the very fir~t objective ~8 to deter.mina if utilities are pe:forming at
an. optimum. level of e,fflciency and effectiveness.. It seems like some
quantitative data, 1I000e quantitative benchma.rks~ even thou£D t.hey are
mutually dep~ant ~antitie8~ might be of some benefit in ~eetin9 the
objective. Again~ .. qualified consultllDt should be able to p\lt. t.hose in
context. r would not worry too I<n.lCh about it.
Commissioner Grimtlrud: That is somewhat the way I lean, also.. We are not
putting a propQsal together. We are just trying to put ~t ~ RFP that
ma...l[ea sense. One t.hing that .came to mind is that I had 17.:.:l.ch vi th a.
college friend of ~ne who i8 the CEO of the largest indep~dent power
producer in the ~rld. He says that typically. if they buy a ~Qwer plant
from a utility. they get rid of half of the employees~ and staff it at
sCi percent of what wall done previously. and they have 97 perc en: ... railabil
ity.. So that says... here we are benchmarking against othe= municipal
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utllltie.l Maybe we 8~ld benchmark against something else. Tbe. qt.:elJtioll
would then be~ what do we benchmArk against?
Mr. Pgwar.: A qualifi.d conau1t&nt ought to ~e Able to tell you what th~
Palo Aleo utilIty .~uld be able to benchmark ag.inst~
C2T?i •• lgper Grimsrud: Is there something about Bugge,ting other
benchmarking _ppro.ches in one of these Items A, B, CJ 01
Mr. Xrlsnl 1f'e just .. 19k thea to belJchmarlt the key measurements 1:0 Item A ..
camrJ.lioner GrLmsrud: X guess the organizational and review criteri.,
tOOl might help to come ~p ~th tbat. This just It.ts lome of the Obvi~.
ClA_S.
)(r, Mr:l.zekt These are the obvious ones. YO\1 will be all!lking the consultant
to come back to you with. work plan that y~ will review prior to their
proceeding with their study.
Mr. Sak,en: Paul, if you look at the way Item D 1s worded, it .aye,
·Compare tbe 'Ottlit!e. rates with other m1.!.Dlclpal and iuyestor-owned
utilities in California.-So we &re going to get mo~e than just other
~leipal utilities in there. The point that both Items C and D make is
that they are just benehmarks~ _They mayor may not imply efficiencies.
They may imply some poli~y ~h~es for Whieb we have 80m~ ~ording up front
that .aya, ~ere may be sama purpose of th!., but we may be able to get
some data ~t of bere t.hat does iJDply 1I!I0lnf!' poliey things that the
coami •• lon can then t.ake ~p with the Coun.cil.. .It would be an outcome of
t.he r.port. that. i. go.ing to be there. becau8e we d.id a. more complete
financial analysis and ben~hmarkl~g.
Co:ma.ls.lOP.er Grimsrud: In thinJd:r.g about t.his meeting J: had witb 1lJ"/
friend. one of the things is that scmething thAt always iucerests me ie,
bow do ~ motivate people to do really excellent work.. W. pay th~ big,
I que... We give t.hem ineentiv.es. One of t.he things 'I run into with
municipal utilities ia that a~e of them are just horrendous. People are
Bitti~ around, hoptng they have a. job ne.z.t yea:r, etc, There ia :not ~uch
incentive to do very well.. $0 one area of intere.t to me ie, how can ve
ruA thia mun~cip&1 utility like .. lean .n4 ~e&n IP~ from the standpoint of
ma.ld.ng people really perfora and l:.ave f'W:::l in t.heir performance. To a
certain extent. mayb.e ~ Ilre doing t.hat here, and t.hat is why it i& going
10 well. Z am not .~~e that it ia reflected in this review, the way it is
right nOW'~
Mr. Mrlz§k; If X sdght comment, we .re hoping to get ~ome~bing out of the
org&llizati~al revieW' along those lines, Paul. We did reorgani%'!! the
utilities over the 1ast two years; ~e did reduce staff; we did make 80me
major changes t.o our operational eltpec.ses, reducing ou:r COliSts in areas
-where we fe1t ..,e were :net lean.. We are more efficient with competition now
in California. .In the utility industry throughout the naticn, we JlI,ust
op.e:ra.t.e in auch a mAnner. To ::.ctivate people, management is always
particularly .concerned about that, and we are always looking at how to
increase efficiency and motivate o~~ staff 80 tbat they are a ~appy group
and do a good. job. We. hope we a::-e doing that .. but maybe C'.lt of this
review~ we vi1-l. get some :more inpu:.
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~,.loc.U Chapdler: I view what; CoJ:IDL.isISioner Grimsrud. i.s saying as
b.lng very po.ltive~ no·t nece •• arily a e,.use to defend what has been done
to datel but to take ~e ~rtunity to use a revl~ like thi. to identify
t:hinga that c:an stIll be improved~ Adding .. specific: ,.t.temE!!nt to look at
compeQ&~t:lo.c. .truct'ure i. probably & very posit.iv~ thIng to do.. Compared
to the things I vas commenting on before. I think it i, something much more
fit for t.hi. type of .'tudy. We are obviously not looking at Ol.Jr purchasing
pollei •• or our energy supply source •• a part of this .tudy.. I think that
the internal organizational focus i8 what we c.n get here t.hat we do not
get anyYhere else. So I certainly BUppo~t .dding lomethtng like that.
~omm.:! •• ioner Gria'rud: Compen£ation structure not jU5t bencbma.rked against
municipal •• but in general, ~th the ~rient&t!on toward incentive.
Commi.sioner Eyerly: You are ¢ff in the wild blue yonder. but under Item
F. you probably C!ould include some wording if you wanted to C!ompare
salarie. for particular jobs, etc. That could get iJlto a pretty big study.
What ~ really want to talk about is what Kark broughl up under Items C and
0'. First, in Item P, in comparing utility ratee. I think. it. is ve.ry
apropos to ha~e ~hat in tb.re at thie time. since we have deregulation.
We know. from what staff bal been telling U8. t.hat we are going to have to
drop .ome rate. to be competitive. We ~t to retain the customers that
we have. and thI8 is an opportune tLme to have a con8ultant overview of
that, rather than going back to our ratemaker and our own st.ff to take
tLme to study ~&t. That could be helpful.
:til Item C, comparing t.he transfers. PrIce Waterho!.lBe set up -the system: that.
we had some ye.ara ago, and it. has worked very well and has kept. us out .of
legal battles && far .e the transfers. I think staff has been doing a good
job keeping those transfers within. -the scope of a return. on investment ..
-which ~hey could defend if they were challenged ,.5 to whether it was a tax
or a utility rate. But I think it i. time to have some Observation aa to
what ~e other cities .~e doing in the munIcipalities so we ~11 have a
comparison. ~ don't thInk We have done that for 10 or 15 year.. So Z
rea11y BuppQrt leaving in Itema C Lnd D~
Nt. ~izek: On the suggestion of comparing compensation structures, tbe
Cpuncil doe. have a policy OD eatablf..sh.ing 1Ja.1_ries for sta.ff. We do
ccmp.5rc O" .. l'r key poaitions with other ailnilar type utilities, and tb"!
salaries in Palo Alt.o are benchmarked, based. C'n that. Going out to
inveet.or .. owned utilities Y do not believe 'WoullS be aceep,table for
comparison purpo~ell with the Palo Alto municipal utjlity.
C9!!!!!laaioner Grimsrud: Maybe I am. too far out in the ozone,. b":.lt the point
ie, eoapa.l"ing t.hings with muniCipals vhi1e the world i. gOi.Dg towa.rd a -much
more efficient 'ituatiOJ:l.~ we might be left in the dust~ Actually. I don·t
t.hink 'We vi1-1 be, but .. let of municipal. will be. To ha.ve an organizati~n
look at .ome of these things might be worthwhile~
Mr. Krizek; Po you want to have tha.t added?
Commissioner Grimsrud: Regarding compensation?
Kr. xriz:ek: Do you want some vilrbiage comparing compensation?
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~ •• ion.r GrIHrud: Ye.~
c9mDl111.ioper Cba.ndlert Do you want to f()Cu15 on performance i.ncentives. all
oppo.~ ~o making it like a wage .tudy? Perfor.manee inceneivea rel .. tive
eo the li~ely .ource. of competition for tbe city utilitIes depar~ent?
Comr:aJ. •• ioper GriJurud: "les, and orIented towa.rd., giving people incentives
for high performance. That i. baaieally it.
~ •• iop.er Chandler: I a-gr-ee with Ed that ZOO. might be the wrong
comparilon point, but not tor th<l! re .. so.c. Ed •• id. 1: sbare wit.h you that
going beyond that to look at aome of the independent power generator. who
.re cbviou..ly In .. very different business tha.n we .. re because th-!'y Ilre :co·t
providing retsl1 .ervice and they do net have that kind of cost .trueture.
I understand .11 of !that, but we are sti 11 entering a competitive
enviroam~t where ~r. analogies to business._ in the competitive
ttllvironment might be uaetul.
Commi.sloner G=i~rud: r am thinking about the municipal utility of the
future. somehow we have to mix the old comfertable~ government job ~th
being lean .and mean, and how we: WQuld do that.
Xa. Dbrlit: Do X understand that you are not a,sklng for & wage comparison.
You are •• king ~re to look at the methods of compensation1
Cgmgf.,lOPer Byerly: Let me add on eo that. Ed, when you make up your
budget for utility .alar!as and wages, is it developed on .. predication ef
cost of living plu8 ,.:oae me.it raises'?
Mr~ .Krizek: That i. correct • .A:rlrlually. when the budget 18 developed, this
year, a 2 percent cost ~f living was autboriEed by ~he city Councl1~ Xn
eaeh ye&~'. budget, a certain percentage fer a coat of living increase is
added. Tbe budget dollars are based on the top step of each posit.ioc.~
Those ar_lI __ the dollar.. Bven though a. position may be paid less than t.hat
position •• a beginning position, they have an opportunity to be promoted
up to that top .tep~ Each year, we do add & cost of living approved by the
Coun-<::il.
Comry;Rsloner Eyerly: What I wanted to bring out is that we have ~ pretty
modern, up-to-d&te sy.tem al to how the wages are set. They are not set
by the poaltlon and What that bears~ necessarily. There is a ~hance fer
m.rit increAses. Z£ we arE going to bave a consultant Btudy ~hi •• I really
feel that when you .are -trying to get more esprit de ~Orp5 and more
effician~y, it depends b •• ically on wages~ It has to be a good place to
work, and we all know palo Alto iEl a good place -to work.. Maybe Boce
supervisors are not 80 good to work for~ but basically. it i. the mocey
fector as to wbat really i. the incentive. r have a feeling that ~e are
probably.40ing a good job. We ~ll want to study that. along vith otber
citie., .. and have the consultant study 'Wh8_t be can .. but I feel it illl kind
of a fruitless venture ..
Cqmm'aalooer ChapAle;: I don·t think anyone is a1m~ng at a wage study. per
lie, but ~e type of idea that comes to mind. for instan~e, is that we are
going to be developing a set of metrics here that not only compare us but
establish whe~. we are on certain performan~e measuree, c~st per mite for
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electric circ~it. or gal line •• all the~~ different m~tric.~ To my .ind~
it ~ght be worth looking to .ee if other people in the other inatltutioci
in the Indu.try are providing aome in~entives, where, if th~re are laving.
in & year.. 1f tho_. metrice are improved in .. year, that a pool of
resource. ia made .available to be .ha-red in the df'~partment amoog tbe people
wbo are responsible for it, 80 that .. piece of compensation i. tied to
performance against .ome of these particular org&nizat!o~.l goal. that ~
have. That i. very different from laying, -This person i~ thi. jOb should
be paid $2,500 more,-or ·Your wages are slightly oct of line.-MOre a
look at what i. going O~ in ccmpeneation incentives aoross the relevant
industry, which include. inveator-ow&ed utilities and other ent~rprieee
involved in similar .~tivitles~ to identify ideas that we might want to
employ that will provide motiv.tion~ rather than looking at a wage study.
Commissioner Eyerly: Do you think that if we weDt i~to that. we ahould
in~orpor.te the length of t.ime that employees Berve~ sinc~ that is an
indication that they are happy?
commi,.iog~r Ch4ndl_~: I am not as concerned about that 80 mu~h in this
particular case" but. ill general,. one ts C:OII,cernecl about having a happy work
force and a work f.orce that maintains a certa.in tenure .. &ince one bas. lot
of experienc~ an~ knowl.dg~. But I certainly think it would be useful to
"W:I.de::-st.and what other people in the industry are using as aMitional
motivater. to get exceptional per!o~ce. Certainly. all of the things
that go into our traditional ~y of determining compensation
what ~ are trying to eva.luate .s much as trying to establish whether there
are some ideas out there. looking comparstively at organizational
.tru~ture~ that we ought to be looking at here to generate the kiDd of
performance that we want~ We just might not have thought of something.
If we have t.hought of everything already. we do not. need to do a st>;;.cy.
commissIoner Sahaqi~; Some referenee ~8 made to what is being done In
some of the other ger.eration .ectors in the industry~ In my experience ...
currently and in the past... compensation or special consideration for
additional compenaatioa is usually tied to the net cost of generation~
That ia what 1: am. currently doing i:c. the areas that .I manage very
effectively. It is resulting in people coming up with a lot of creative
ideol!.s on how to get better net perfo~ee and lower cost. Then at the end
of the year ... there is a value plac9d on that~ It is~ if you ~ll~ some
sharing of that creative ef£ort. It has worked very ~ell. That is the
crux of what i. bei.:ng suggested bere. that "We have a cost of service tod.ay~
and in & changing industry. the~e are going to be opportunities to get ehe
cost of that. .eervlc. down through efficiency and better ma..::t.ageme:c.t and
taking advantage of new opportunities &nd for supply o~ the ~upply side ..
as well as on the marketing ~ide in op~rations. There may be some way to
quantitatively meaBure that and what the net benefit to the city ia, and
how that .ight be set up on an incentive basis to keep people "Working
towards those goa18. That i. what is being .uggeBted~ as i understand it.
That is being done commonly in the indue try.
Hr. Krizek: I understand what you are saying~ Jim. It is rather
difficult, with a. government agency. to do somethi.ng like that ..... here we are
aealing ~th public £unds,. where at the eod~ we would set a collar figure
that can be distributed that is not in a compensation package. Something
like that~ i bel1eve~ "Would have to be reviewed by cur legal ~epartment as
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tar ae what type of progr&m could ~e eatabllehed. That is what concern.
m. wb&n we are asked to introduce such an item •• sharing saving. with
employeea. Thia h •• been discu •• ed in the past --how we can motivate
employees with 80me type of compensatIon. There ha-"'e been eon<:ern8 in that
area.
C9lP"'ssi9ner Or-imarue: OUr idea i. to make this utility the most efficient
poa.iblew If it requires doIng so.tl.ethlng differeJ:2t, then maybe we ought
to do it. At this point, it i. just An analy.iB. Aa usual, I bring up a
little idea., and Mark JIIXPr&I!IQea it much :IlCre articulately. I think it
might b. WQrth adding that in there.
Hr' Mrizelp. We can prepare. c:ouple of aentencea c'r a paragraph and paaa
it back: by mail to .e. if that i. what you W&nt.. Then we can add: it to the
UP.
Mr' Sak.en: I am sympathetic: with Ed"a concern about ita 1::e1ng a part of
the ci~y. rt is v6ry'much different from an independent power producer or
any private enterprise. For example, one thing that would come up right
if" you have an incentive and C'ompen.ation progr8.lll that. fluctua.ted very
JDUeh ... you get equal pay for equal work kind of legal issuee which have come
up before in Palo Alto ... creatLng a big bruhaha. So we have to realize how
much the ut.ilities' hands ;are. tied in this regard ... being a part of the City
of Palo Alto. zt WQul~ not bother me at all if it vere not added. It
strikes me overwhe~ngly like an important thing to be ineentivized is
C:Olltrecting for cheap gaa and electricity and keeping big <::Ot:isumer
eust.omera on board. {unclear) Probably a consultant would conclude that.
that 1s the only thing that. r •• lly counts, although I may be way off baae.
If it Is ineluded... Z think it shou14 be just one of .. list of things that
~~ld fit... for example, initially under 2C. where they give this laundry
list. of figure. and merit.s .. maybe in-centive programs ... and then ... in the
reca!rlmeDdatio:D.s, incentive programs .. and not: be .. big new item. I am too
concerned. that it is just no-t realistic that. we can do t.he -innovat.ive ki%lda
of ~. that private industry can.
Commdsaiqger Grimsrud: I don·t ~t ~o make a big deal out of it. It i.
just an idea --put some~!ng in there ~ let the consultant h~lp us. It
i. something to think about .t aome point. X don·t know what ia legally
pol!Isibl.. .It 18 very hard to do things that are really appropria.te .. but
you can see it workicg in private e:lterpriae. You can see how in a lot of
municipal utilities, there aeems te be somet.hing like that happening. I
&m not .aying that about this utility, but there are others.
Chaiz:mAn Johl1ston: Ed ... how .so you loI~t to bring this t.o a close? Are you
looking for .. vote from both the cc=mittee and from the UAC?
Mr. Krizek", X would like to hilV'! a motion, first of all .. from the
committee recommending to the UAC t~at they feel comfortable with the RFP
the ¥lay it ia, to bring it forwa:-:i to the commission. The..c it mot.ion
.tating t.hat t.he Utilities Advise:-./' Comaission 'WOuld llke to bring it.
forward to the Council. The next atep would be to ask for city Council
input ... which is tentatively schedu:ed fer the secend Tuesday in October.
We would ask t.hat Paul or ano-ther Ele.:lher of the UAC be there to ~reBent the
RFP to the Council and ask for the~~ comments.
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MQTIOlfI Cmrm' "loner Grimarud: We have had plenty of opportunity t.:>
receIve th.!r comment.. There are no m4jor. substantial changes to the
aPp, .0 I ~ve that tha Blue Ribbon Committee .pprov~ the F~P. ~th the
mdnor change. luggemted.
SECOND: By Xary llimi t.
MOTION £ASSED 5-0.
Comm, •• ioper Grim.rud: Doem this committee meet again?
Hr. Mr!s.c!= Te8.1' the next step for the committee,. on-ce t.he Council
approvem the UP. it will be mailed out. Wh.en we get the consultant
proposal. back.. theoy will be reviewed~ At t.he last meeting, it was
.~gge.ted that .taff make the prellainary review of all of the pr~s.l.
and come up ,~Lh a abort li&t~ We ~ll then bri~g that list ba~k to the
c:omm.itt.ee tor revl ..... ,. and we will ,et up a.n interview time for tbe
committee to interview-t.he c$ndidates ~ Once the consultant is selected &no
the Council bas approved the contract. the work of thla: committee will be
Hn18hed.
Chairman John_ton: Is there any further discussion?
MOTION: Commissioner Chand1er: I znove that we adopt what has been
approved by the Blue 'aibboo. Committee.
SECOND:: By Commissioner JohnBton~
!<O'!'ION PASSE 6 -a.
Oa!rm'';' §ohnston: Thank you very mueh~ We 100k forward to seeing you
agai.Jl when th.1. itea comes 1:lilck to us.
1. a. ~&rterly Water rssue. Update
Hr~ 5.b •• hi: Por the past year er two l ~e h~ve provided the commission
with • quarterly report regarding Western issues. Xn the last couple of
report-8 1 'We ha.ve ~anded somewhat to ma."ke them covet: a. lot. of supply
re8ource.~ Jane Ratchye, our guru of water issues, pointed out that m~ybe
it WGuld be a good idea to give the co~s81on a quarterly report on ~at~r
i.sues. ~e liked t.bat ide. very mueh~ &nd decided to give you a quarterly
report. not oa1y for water isaues. bu.t another on. for sa. tssues,. &. "IIe11.
We will be .taggering the three qua.rterly reportlS coming before the
commI •• lon so that you wil.l only get one quarterly report. pe.r montb.~
Without fur~er ado. J would like Jane to give you the water quarterly
report~
~~: The report is f"airly self-explanatory .. Z would like to point
out the one item that has appea.red in tne news that may be more interesting
to you. That is. water qua1ity. That baa &ppeared in th~ San Franeisco
Chronicle in an editorial ~ in other news items suoh as the Mercury News 1
and probably in almost every news ~ediwn around here. .incloding the
oational AWWA,. ~hicb I S4W recently.
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