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CINCINNATIInterdepartment Correspondence Sheet

November 6, 2015

FOR YOUR INFORMATION MEMO

To: Mayor and Members of Council

From: Harry Black, City Manager (4 3Copies: John Juech, Gerald Checco, Patrick Duhaney

Subject: Metropolitan Sewer District Master Servicer Agreements

A number of actions are being taken enhance the City’s procurement process related to theMetropolitan Sewer District (MSD). These actions are part of a more comprehensive effort tomodernize and improve the City’s procurement procedures in general.

Background

MSD, like other City Departments, utilizes as-needed professional services agreements, known asMaster Service Agreements (MSAs), for a variety of support needs that include design services, projectmodeling, labor training and financial and information technology services. These “as-needed”MSAs are typically entered into after a Request for Qualifications- (RFQ) type selection process.Historically, when a need for work arises, a project manager uses his or her own discretion to choose avendor from a list of vendors that have been designated through the RFQ-type process as qualified toperform a specific category of services.

Inrn~st cases~th~term of~thëMS~is compri~d~fãi~iñitiãFterm of a several years wilif ulfi~le one-year extensions that can be exercised by mutual agreement of the parties. Most of theseagreements feature “multipliers” that cover the overhead of the companies providing the services, inaddition to other costs associated with the project. In a given year, the dollar value of work awarded tocontractors under these MSAs range between $30,000,000 and $35,000,000 annually.

Findings

As part of the ongoing effort to revamp and improve the City’s procurement process, a preliminaryanalysis of these MSAs has indicated the following:

1) Only a small number of vendors are being selected to perform the work authorized throughMSAs. This creates an appearance of unfairness regarding how work assignments are awardedand limits the number of vendors able to obtain work for MSD.

2) The multipliers used for some professional service categories have been inflated over theindustry standard, which has resulted in economic inefficiencies for services in somecategories.

3) Large-scale projects that should have been procured via a specifically tailored competitiveprocurement, via a publically advertised RFP/RFQ process, have been initiated and completedunder MSAs, resulting in restrictions on new vendors obtaining MSD work.

4) For many years, a number of vendors have been serving in mission critical positions. However,these positions are more appropriately staffed by City employees. These supplemental staffarrangements are significantly more costly.

5) Contract renewal provisions have allowed many of these agreements to continue for severalyears without a competitive qualifications process that would allow new vendors anopportunity to participate.

Corrective Actions

In response to these findings, I have issued a directive that the MSD MSAs that are set to expire at theend of 2015 not be renewed. Additionally, under Administrative Regulation 62, I have directed thatwork be assigned to contractors that hold MSAs on a rotational basis or via an abbreviated proposalprocess, and economic inclusion goals be applied when feasible. Finally, I have tasked MSD toperform the following:

1) Work with City Purchasing to carefully review MSAs to determine which professional servicecategories are appropriate to have on an as-needed basis and which ones are more appropriatelyprocured via a competitive RFP/RFQ procurement solicitation;

2) Examine the multipliers MSD uses and identify appropriate multipliers for the respective as-needed professional service categories;

3) Work with City Purchasing to issue a new competitive solicitation to procure as-neededprofessional services;

4) Work with the City’s Human Resources department and other appropriate entities to transfer themission critical positions currently filled by consultants into City staff positions; and

5) Execute any future agreements for an appropriate fixed term without optional renewals.

Conclusion

It is anticipated these reforms will save MSD ratepayers significant dollars. In addition, it will makethe process for assigning work to contractors more equitable, transparent, and inclusive.

I want to thank MSD Director Gerald Checco and his team who have been extremely helpful in theseefforts and have pledged full cooperation going forward.

This memo is for information only, no action is needed.