title
AUTHORIZE THE CITY MANAGER TO EXECUTE A 5-YEAR CONTRACT WITH CB MERCHANT SERVICES FOR DEBT COLLECTION SERVICES
recommended action
RECOMMENDATION
It is recommended that the City Council approve a motion to:
1. Approve the findings that support an exception to the competitive bidding requirement pursuant to Stockton Municipal Code section 3.68.070(A)(3) for negotiated contracts following solicitation of competitive proposals.
2. Authorize the City Manager to execute a 5-year contract with CB Merchant Services for debt collection services.
3. Authorize the City Manager to take appropriate and necessary actions to carry out the purpose and intent of this motion.
body
Summary
The City contracts with CB Merchant Services (CBMS) for the collection of outstanding third-party debts owed to the City of Stockton (City), and the contract expires March 31, 2018. Staff conducted a procurement and a recommendation to award a contract was presented to Council January 23, 2018. Council considered the recommended award along with additional factors, and instead directed staff to award the contract to the local provider, CB Merchant Services.
Staff subsequently negotiated a new five-year agreement with CBMS that will commence on April 1, 2018, and continue for five years until June 30, 2023 (Attachment A).
It is recommended that Council approve a motion to authorize the City Manager to execute a Professional Services Agreement with CB Merchant Services.
DISCUSSION
Background
The City annually generates over 1.1 million invoices with an approximate dollar value of $284 million for services provided to the public. The invoices are for administrative citations, utility billing (water, sewer, stormwater, and solid waste), code enforcement, other recoverable services, and subrogation against third parties that have caused damage to City property and/or injury to City employees. If the customer does not pay the invoice timely, the City typically attempts to notify the customer several times before sending the delinquent account to its third-party collector. The collector then attempts to recover the amount owed to the City. If the debt is not paid within four years, the City then writes the debt off on its financial statements (the third-party collector continues to attempt to collect). The City writes off approximately $3.8 million each year.
Present Situation
CBMS has been the City’s third-party debt collector since 2000. The current agreement expires March 31, 2018. CBMS currently charges the City 25% on amounts it collects and has collected on approximately 10% of the delinquent accounts the City has sent.
Any fees or commissions payable to CBMS for its services are deducted from the debt it recovers. However, if a collection is initiated by CBMS on one of the City’s customers and the City’s customer remits payment directly to the City, CBMS will invoice the City for collections fees due CBMS. The contract specifies a 21.5% recovery fee on all accounts sent from the City.
Assuming a 15% recovery rate on new accounts, revenues to the City will be approximately $281,000, while CBMS will retain approximately $79,000 in fees annually ($392,000 over the term of the agreement).
Findings:
Stockton Municipal Code Section 3.68.070(A)(3) authorizes the City Council to award contracts without competitive bidding in cases where the City Council has approved findings which support and justify exceptions to the competitive bidding process. The following findings support an exception for negotiated contracts following solicitation of competitive proposals:
1. CBMS has provided debt collection services for the City of Stockton since 2000.
2. CBMS can accommodate the high level of service, including system integration and quantity of accounts required by the City.
3. CBMS is a collection service that provides account data system integrity and compatibility, can report results, provide continuity of current services, and maintains organizational stability.
4. CBMS is an experienced professional firm that can provide these specialized services for an organization of the size and complexity of the City.
5. CBMS is a local firm located in Stockton.
6. The City does not currently have the necessary resources or capacity to provide the services internally.
FINANCIAL SUMMARY
All fees and commissions are charged to 010-1331-510 and amounts collected are recorded to 010-0000-319.30-10 before being netted. The budget in these accounts is sufficient to cover the financial activity of this contract.
There are no additional impacts to the General Fund or any other City funds with the execution of this agreement.
Attachment A - Agreement with CB Merchant Services