WORKERS COMPENSATION THIRD PARTY ADMINISTRATOR CONTRACT

Recommendation:

That the City Council approve a proposal for Third Party Administration of the City's Workers' Compensation claims submitted by Fleming & Associates and authorize the City Manager to negotiate and execute a contract for a three (3) year term commencing January 1, 1998.

Background:

The contract with the existing third party administrator, Hazelrigg Risk Management Services expired on June 30, 1997. Prior to the expiration of the contract, the City Council directed staff to prepare and solicit a Request for Proposals (RFP). A total of nine (9) responses to the RFP were received. On June 24, 1997, the City Council authorized the City Manager to negotiate an extension to the existing contract with Hazelrigg Risk Management Services until such time that the proposals could be evaluated. The extension to the existing agreement expires December 31, 1997.

Analysis:

The lowest bid from the proposals submitted was provided by Fleming & Associates at $28,000 per year for three years. Fleming & Associates also provided a cost per claim fee structure with a minimum and maximum service fee. The flat rate appears to be the most cost effective. The next lowest bid submitted was provided by the City's current third party administrator Hazelrigg Risk Management Services. Hazelrigg Risk Management proposed a fee of $36,340 for the first year, $37,450 for the second year, and $38,575 for the third year.

These two proposals were reviewed to ensure that they were comparable. Other proposals received were reveiwed but were not price competitive. A table comparing these two proposals is attached. A reference check for Fleming & Associates produced favorable results overall. Based on the proposals there does not appear to be any significant difference in the type and/or level of service to be provided under the two proposals which would justify remaining with the current third party administrator. The City has had a six (6) year relationship with the current administrator and staff has been very pleased with the level of service provided.

It is anticipated that a contract can be negotiated with Fleming & Associates which will include provisions for termination should the services provided not be acceptable. A three year contract is proposed with an option for a two year renewal based on performance as recommended by the City Manager and Personnel Director.

Copies of each of the proposals submitted are available for review in the Personnel Office.

Fiscal Impact:

The fiscal impact of approving the proposal with Fleming & Associates will result in a savings of only $3,640 in the current fiscal year. However, over the term of a three year contract beginning on January 1, 1998, and terminating on December 31, 2000, the net savings in service fees will be $28,365.

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Criteria outlined in RFP	Hazelrigg RMS	Fleming & Assoc.
Knowledge and Experience	Current TPA for last 6 years. 15 municipal and 6 special district clients currently. In business for 9 years	11 municipal clients. 35 special district and private industry clients. In business for 22 years.
Creativity, originality & responsiveness	All issues in RFP were addressed.	All issues in RFP were addressed.
Experience of Personnel	Certified Claims Adjusters. Claims Module system of 4 primary personnel. 350 claims per module.	Certified Claims Manager. 3 primary personnel
References	Current Service Provider	Favorable overall
Adjuster Case load	175 indemnity claims per examiner max.	175 indemnity claims per examiner max.
Corporate History	Incorporated 1991	Incorporated 1976
Report Capability	Standard and custom reports available. On-line service available at additional fee.	Standard and custom reports available. May be produced at client location with on-line connection to contractor computer system at no cost.
Loss Control and Prevention Services	Can assist in developing and implementing safety programs. Certified Safety Consultant can be provided at additional cost.	No loss control or safety services provided.
Contract Terms	3 years	3 years with a 2 year option for renewal.
Cost	Year 1: $36,340 Year 2: $37,450 Year 3: $38,575 3 year total cost: $112,365	$28,000 per year for 3 years 3 year total cost: $84,000

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