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Open landscape work to competitive bids

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POSTED April 19, 2009 2:27 a.m.

Editor, Manteca Bulletin,
Mayor Willie Weatherford’s proposal and your support for opening landscape district work to competition is probably the most effective way to help ensure taxpayers and homeowners get good value for tax and fee dollars. Without competition, ongoing large cost increases could make cost and fee disclosure misleading to home buyers. If Manteca’s internal studies show city estimates, costs, or both are within 5 percent of fixed-price bids to do the work, the city will have an incentive to bid and perform within those fixed-price bid amounts. Flexible cost budgets continually increase without incurring any penalty or risk of loss. Contractors also will be required to perform at the written work standard within their fixed-price award amounts.

Which costs and portions are excluded from city comparisons? How are “loaned equipment” use and operator costs accounted for? Why would the city need an unspecified annual Consumer Price Index (CPI) adjustment plus an inflationary 3%? Fee-paying homeowners and renters also pay the taxes which buy and maintain city equipment. Paying our required share once is a sufficient burden. Instead of trying to “fire” the city in the future, we should work to hire the responsible, responsive firm (or the city) promising to complete the work, as measured by an objectively-written work specification, for the lowest total price to the (landscape maintenance district) LMD.

The many references to and examples of city costs and savings claimed and reported tend to be confusing and misleading without an objective standard for measurement and comparison. A reliable standard federal agencies use for paying claimed city and local government costs is the OMB Circular A-87, available at http://www.whitehouse.gov/omb/management/. I briefly reviewed the Bulletin’s April 12 report of the  $86,426 Woodbridge LMD city cost estimate using OMB A-87 Parts C--D selected basic criteria as a guide to help learn whether city-proposed, recorded and reported work costs are:

•Necessary to properly, efficiently perform and administer the work, and reasonable to a prudent person for this commercial service in the current market.

•Consistently treated (assigned as either a direct or indirect cost only) and compliant with accepted accounting principles.

•Assigned as direct costs only if identified specifically with the job final cost objective (occur as a result of doing the work).

•Allocated as indirect costs only proportionately with relative benefits received (causal-beneficial relationship) by the job.

•Charged as total costs to the work as only the sum of direct costs plus indirect costs, less any applicable credits.

The Bulletin’s April 12 story reported city cost estimated/proposed dollars for the Woodbridge LMD and my preliminary comments by reported cost category follow below.

Direct costs
•Physical work and improvements:   $22,052. Usually includes only touch labor and materials, and could include dedicated tools. Unless specified in the agreement, improvements should be voted on and priced/charged separately.

•Landscape repair and contingency: $5,000. Include touch labor and materials only. Contingencies reduce the need to manage costs and are often misused. As a direct cost, this one also collects an indirect cost allocation.

•Capital replacement costs: $4,925. Probably corresponds to a depreciation charge for taxpayer-purchased equipment item, and is normally an indirect charge based on use levels. If indirect, no second indirect allocation is appropriate Is this the city’s charge for “loaned equipment”?

•Electricity and Water cost:s $16,200.  Combined utilities costs should be charged based on the required landscape level and are the same to the LMD, whether maintenance is done by private contract or the city.

•Total Reported Direct Costs: $48,177.

Indirect costs
•Personnel and overhead costs: $15,703. Indirect personnel costs are normally included in overhead rates and amounts. Costs are probably based on the city’s accounting system reports, which should exclude any duplicated charges.

•Consultant costs: $14,250. If city staff lacks adequate resources to accumulate and report specific job costs and applicable rate reports monthly from an automated system, outside help might be necessary. Vote counting might also be an in-house item. On the surface, $14,250 appears to be excessive for the small Woodbridge agreement.

•County administration costs and professional fees: $965.

•Miscellaneous and rounding costs: $207

•Total Reported Indirect Costs: $31,125.

Operating Reserve Fund
Operating reserve collection fund: $7,125.  This reserve collection fund appears to be another contingency to cover anything the city might have missed in its cost estimate. Are these contingency costs direct, indirect, or some combination? Like the direct cost contingency fund, a combined reserve fund can be misused. Reserves also reduce cost visibility, and the resultant need to actively manage and control costs.  

Total respective Reserve Fund and Total Costs: $7,125 and $86,426.

 This preliminary summary review is strictly qualified by the total lack of accounting information, cost history and cost composition information. My comments are very limited and only intended to serve as a starting point for one of many possible methods of evaluating what we could or should pay for the services we need or want. Various options and combinations are widely available for consideration.
 Guy Donovan
Manteca
April 18, 2009
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