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AUTHORIZE THE CITY MANAGER TO APPROVE A PROFESSIONAL SERVICES AGREEMENT WITH GEORGE HILLS AS THE CITY'S THIRD-PARTY ADMINISTRATOR (TPA) FOR THE CITY'S SELF-INSURED GENERAL LIABILITY PROGRAM
recommended action
RECOMMENDATION
It is recommended that the City Council approve a motion to:
1. Approve findings pursuant to Stockton Municipal Code section 3.68.070 in support of an exception to the competitive bidding process.
2. Approve entering into a Professional Services agreement with George Hills, Third-Party Administrator (TPA), to administer the City's General Liability program.
3. Award a Professional Services Agreement to George Hills for a term of five (5) years with the option of two (2) one-year extensions. The five-year contract amount will not exceed $2,504,768.64 for the term of the agreement.
It is also recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of this motion.
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Summary
The Human Resources Department has selected a Third-Party Administrator (TPA) to oversee the City's General Liability Program. We are seeking approval to enter into a five-year agreement, with the option of two additional one-year renewals.
The proposed contract is valued at $453,300 for the initial year, with annual cost adjustments tied to the Consumer Price Index (CPI), ranging from 3% to 5%. This represents a savings of $20,238 compared to the City's current annual cost of $473,538 with the existing TPA, Sedgwick. The total not-to-exceed amount for the full term of the agreement is $2,504,768.64.
George Hills Company will be responsible for the administration of general liability, subrogation, and property claims in accordance with applicable state laws, regulations, and the City's policies and procedures. As part of their subrogation services, George Hills will seek reimbursement from responsible third parties, including individuals, agencies, insurers, and their representatives for damage to City property. This recovery effort will continue up to the point at which legal representation becomes necessary.
On July 7, 2025, the City issued a Request for Proposal (RFP) for TPA services and received three submissions. Following a comprehensive evaluation process, George Hills was selected through the City's formal procurement process. With 70 years of experience serving both public entities and private organizations throughout California, George Hills is a recognized leader in the industry, known for driving best practices and delivering innovative, full-service TPA and subrogation recovery solutions.
DISCUSSION
Background
The City currently contracts with Sedgwick as its Third-Party Administrator (TPA), with the agreement set to expire on May 13, 2027. During the recent transition to the Public Risk Innovation, Solutions, and Management (PRISM) General Liability 2 (GL2) program, the City identified several discrepancies in the claims data reported by Sedgwick. These inaccuracies resulted in erroneous information being submitted to PRISM.
In the process of seeking acceptance into the GL2 program, the City was required to clarify and reconcile these discrepancies. The responsibility for ensuring accurate data submission to PRISM rested with the TPA. While the City was ultimately accepted into the GL2 program, PRISM imposed a condition of acceptance: the City must issue a Request for Proposals (RFP) for TPA services and conduct a formal evaluation of all submitted proposals.
Present Situation
On July 7, 2025, Human Resources, in coordination with the Procurement Division, issued a Request for Proposals (RFP) for Third-Party Administrator (TPA) services. All submitted proposals were deemed responsive and responsible and underwent a competitive evaluation process conducted by a review committee. The committee consisted of representatives from Human Resources, Administrative Services, the City Attorney's Office, and Information Technology.
The City received proposals from three (3) firms: Sedgwick, George Hills, and Carl Warren & Company. Following a thorough evaluation, George Hills received the highest overall score and was selected through the City's formal RFP process.
Should the City Council approve entering into an agreement with George Hills and authorize the City Manager to take all necessary and appropriate actions, a 30-day termination notice (Attachment B) will be issued to Sedgwick in accordance with the terms of the existing contract. The agreement with George Hills will commence immediately upon the termination of the Sedgwick contract.
Findings
Pursuant to Stockton Municipal Code (SMC) section 3.68.070, Council may approve findings that support an exception to the competitive bidding process.
These findings include:
1. The City negotiated a contract following solicitation of competitive proposals in accordance with SMC section 3.68.070.A.3.
2. Use of the RFP process is appropriate for this agreement because, in addition to cost, it relies on the evaluation of professional qualifications and performance for the selection of a General Liability TPA.
3. Selection based on cost alone does not take into account public sector experience or the ability to provide consistent quality claims administration.
4. Services such as general liability claims administration and subrogation recovery require experienced professionals who have handled such services for other public entities and can work closely with City staff, which is in the public interest.
5. The RFP process allows the vendors to specify what services they can provide to the City rather than the City bidding on specific services.
FINANCIAL SUMMARY
The initial contract term is valued at $453,300 for the first year, with annual increases indexed to the Consumer Price Index (CPI) ranging from a minimum of 3% to a maximum of 5%. The maximum not-to-exceed amount over the full term of the five-year agreement is $2,504,768.64. If exercised, contract extensions will be budgeted through the annual budget process. Funding for the general liability third-party administration service is budgeted out of the General Liability Special Services Internal Services Fund account number 2510-000-630006-520-000-00-25-000-000-, which is adequately funded for the term of this agreement.
Attachment A - George Hills Contract 2025
Attachment B - Sedgwick Termination Letter