HomeMy WebLinkAbout- - Award RFP 1134- Contract for Third Party - 1/5/2010CITY COUNCIL AGENDA REPORT
MEETING DATE: JANUARY 5, 2010 ITEM NUMBER:
SUBJECT: AWARD RFP 1134 - CONTRACT FOR THIRD PARTY WORKERS'
COMPENSATION CLAIMS ADMINISTRATION SERVICES
DATE: DECEMBER 21, 2009
FROM: ADMINISTRATIVE SERVICES — HUMAN RESOURCES DIVISION
FINANCE DEPARTMENT — FINANCIAL PLANNING DIVISION
PRESENTATION BY: DEBRA YASUI, HUMAN RESOURCES ADMINISTRATOR/RISK
FOR FURTHER INFORMATION CONTACT:
RECOMMENDATION:
DEBRA YASUI, HR ADMINISTRATOR (714) 754-5052
DON STOCKER, BUYER (714) 754-5227
1. Award contract for Third Party Workers' Compensation Claims Administration Services
per Request for Proposal (RFP) 1134 to CorVel Corporation of Rancho Cucamonga,
California, 91730. The term of the contract is from January 1, 2010, through December
31, 2013, with the option to extend the contract for two additional one-year terms.
2. Authorize the Mayor and the City Clerk to execute the Professional Services
Agreement for the contract (Attachment 1).
3.Authorize the City Manager to extend the contracts for two additional one-year terms upon
recommendation from the Administrative Services Department.
BACKGROUND:
The City of Costa Mesa is a self-insured public entity that contracts with a Third Party
Administrator (TPA) to provide necessary claims adjusting services. The City has contracted for
these services with Hazelrigg Risk Management Services and then CorVel Corporation since
1995, under a cooperative professional services agreement with the City of Newport Beach.
The original contract was awarded to Hazelrigg Risk Management Services which was acquired
by CorVel in February 2007. The contract expired on December 31, 2008. On January 20,
2009, City Council approved agreements with CorVel extending services through December 31,
2009. The claims needs of both Costa Mesa and Newport Beach provided an opportunity for
CorVel to establish a dedicated claims unit that could exclusively handle the workers'
compensation injury claims for both cities.
The last RFP process was conducted in late 2005, and there are no remaining extensions on
the contract. As such, it was appropriate and in the City's best interest to conduct a formal
request -for -proposal process to see what other claims administration companies offer, the
quality of services available and comparisons of pricing. The City of Newport Beach expressed
interest in participating in a cooperative solicitation with the City of Costa Mesa serving as the
lead agency.
As required by the Costa Mesa Municipal Code, staff sent the "Request for Proposals" (RFP)
(electronically) to twenty-nine (29) prospective California TPA firms including qualified providers
whose names were on the bidders' list, and other vendors requesting information. To ensure
adequate notice and competition, the RFP was also posted on the public bulletin board in City
Hall and published in the Daily Pilot. A downloadable version of the RFP was also made
available on the City's website.
On August 19, 2009 a non -mandatory pre -proposal meeting was held in Conference Room 1A.
The purpose of the pre -proposal meeting was to provide an opportunity for third party claims
administration providers to request clarification and explanation of RFP requirements. Thirteen
prospective firms were represented by the fifteen attendees at the pre -proposal meeting. The
Buyer served as the meeting chair with Human Resources staff from both cities to answer
technical questions. An addendum was issued on August 26, 2009, to address the clarifications
discussed in the pre -proposal meeting. On September 4, 2009, the City received thirteen (13)
proposals. Of the thirteen proposals received, three were disqualified due to non-compliance
with the RFP. One provider did not have a current California TPA license, and one did not have
business offices in Southern California as required in the RFP. The third disqualified provider
was non-compliant in both criteria above.
ANALYSIS:
The cities jointly participated in a comprehensive formal RFP process which began in August
2009 and concluded in November 2009 with final selection and price negotiations. The intent of
the solicitation was to award a contract to one of the highest scoring TPA providers that could
best meet the needs of both agencies. In order to ensure a fair and objective RFP process, the
evaluation process was facilitated by Costa Mesa purchasing staff. Although pricing is an
essential part of the contract, the RFP process allowed staff to consider additional factors during
the evaluation process. The criteria used for evaluating the proposals included method of
approach, pricing, support and services, and qualifications and experience. A five -person
evaluation team was assembled and all members were instructed to conduct their evaluations
independently of each other. The evaluation team included representation from both Costa
Mesa and Newport Beach Human Resources/Risk Management and two additional evaluators
from outside agencies with expertise and experience in workers' compensation TPA contracts
and services. The top six (6) firms were recommended for advancement in the evaluation
process and were invited to an oral interview.
Upon the conclusion of the oral interviews, the candidate pool was narrowed to two firms: the
incumbent CorVel Corporation and AdminSure. Both firms appeared well qualified and capable
of providing the cities with the claims administration services for this program. The two providers
were invited back for second interviews and were given the opportunity to submit a Best and
Final Offer.
After careful review and consideration of the best and final offers, Costa Mesa and Newport
Beach both recommend awarding the contract to CorVel Corporation. It will be a cooperative
agreement that allows for the dedicated unit currently in place to serve both cities. Overall, the
cities are satisfied with the services that have been provided by CorVel. Their assigned staff
have demonstrated professionalism, expertise and consistency in claims adjusting.
Another factor taken into consideration was the disruption that may occur with a change of
claims administrators and the additional costs that will be incurred for the data transfer and
conversion of files. Continuing with CorVel should provide for stability and efficiency of the
program. Further, the RFP process requested "proportionate" pricing and as a result, CorVel's
Best and Final Offer resulted in a reduction of Costa Mesa's current fees as Newport Beach has
a greater caseload than Costa Mesa. Costa Mesa's average cost during the first year (of the
contract) from all proposals received was $190,776. The Best and Final Offer pricing provided
by CorVel was $22,776 less than this average.
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At the conclusion of their final discussions with CorVel, the City of Newport Beach made a
recommendation to their City Council on December 8, 2009, and the contract was approved. As
the deadline for the December Costa Mesa City Council meeting had passed, approval of the
new agreement was postponed until the first meeting in January. In the interim, an amendment
to extend the current agreement with CorVel until January 5, 2010, was prepared and approved
by the City Manager (Attachment II).
ALTERNATIVES CONSIDERED:
Qualified staff members from multiple agencies have invested numerous hours independently
evaluating and scoring the solicitations received. The Purchasing Division served as the facilitator
of the solicitation to ensure the process was fair and thorough.
During the evaluation process, the alternative of awarding separate contracts was considered;
however based on the Best and Final Offer and further negotiations with CorVel, it has been
determined that all parties prefer to keep this a cooperative contract with a dedicated claims unit
specific to Costa Mesa and Newport Beach.
FISCAL REVIEW:
Funds for workers' compensation claims TPA services for Fiscal Year 2009-2010 were budgeted in
the self-insurance fund based on the amount of the prior agreement and an estimated increase for
the first half of 2010. As part of the Best and Final Offer, staff requested that the pricing be
proportionate based on each City's respective caseloads. For 2010, this new proportionate pricing
of $168,000 will result in a cost savings for Costa Mesa of $92,669 from the amount of $260,669
paid in 2009. CorVel has proposed three percent (3%) cost increases in the second and third years
of the contract which result in costs of $173,040 and $178,231, respectively. Pricing adjustments
for years four and five will be two percent (2%). This contract will result in a savings to Costa Mesa
of $262,736 during the first three years of the contract based on the fees paid in 2009.
LEGAL REVIEW:
The attached Professional Services agreement has been reviewed and approved as to form by
the City Attorney's Office.
CONCLUSION:
After thorough evaluation, review and scoring of the thirteen proposals received, it is recommended
that the City Council award a three-year contract per RFP 1134 for third party workers'
compensation claims administration services to CorVel Corporation, effective January 1, 2010. In
addition, it is recommended that City Council authorize the Mayor and the City Clerk to execute the
Professional Services Agreement and to authorize the City Manager to extend the contract for two
additional one-year terms upon recommendation by the Administrative Services Department.
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STEPHEN N. MANDOKI
Director of Administrative Services
COLLEEN O'DONOGHUE
Assistant Finance Director
KIMBERLY HALL BARLOW
City Attorney
DISTRIBUTION: City Manager
City Attorney
City Clerk
Assistant Finance Director
DEBRA M. YASUI
Human Resources Administrator/Risk
DONALD L. STOCKER, C.P.M., CPIM
Buyer
ATTACHMENTS: I - Professional Services Agreement
11 — Amendment Number Two to Agreement for Workers' Compensation
Claims Administration
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