(ALL DISTRICTS) (3 VOTES) SUBJECT
This recommendation by the Chief Executive Officer (CEO) seeks the Board’s approval to enter into a contract with Carl Warren and Company (Carl Warren) for automobile and general liability claims administration and legal defense management services, for a base term of five years, at an annual cost of $1,727,328, with an option to extend the contract up to six months, in any increment, on a prorated cost basis (Attachment I).
IT IS RECOMMENDED THAT THE BOARD:
1. Find that these services can be more economically performed by an independent contractor than by County of Los Angeles (County) employees.
2. Approve and instruct the Chairman to sign the attached contract with Carl Warren for a five-year term, commencing on August 15, 2013, at an annual cost of $1,727,328, with the option to extend the contract for six months in any increment.
3. Authorize the CEO or his designee to approve and execute all extension options and change notices pursuant to the provisions of the contract.
DRAFT
500 West Temple Street, Room 713, Los Angeles, California 90012 (213) 974-1101
http://ceo.lacounty.gov
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PURPOSE/JUSTIFICATION OF RECOMMENDED ACTION
The purpose of this recommendation is to replace the existing contract with Carl Warren, which expires on August 14, 2013. The County has utilized a third-party administrator since 1983 to provide claims administration and legal defense management services for its automobile and general liability self-insurance program.
This contract will provide continued services to the CEO, County Counsel, and other County departments.
Implementation of Strategic Plan Goals
This recommendation supports the County’s Strategic Plan Goal 1, Operational Effectiveness; and Goal 2, Fiscal Responsibility, allowing continuous cost-effective and high-level service to the County.
FISCAL IMPACT/FINANCING
On July 12, 2012, the Board approved an extension of the existing contract, which was due to expire on August 14, 2012, for a period of one year, at a reduced rate. The new rate, a 4 percent reduction of the then existing annual rate of $1,799,303, was to be effective for the period of August 1, 2012 through August 14, 2013. On a straight 12-month basis, this reduction was equal to $72,075, at a cost of $1,727,328.
Under this new contract, Carl Warren will be paid a flat annual fee of $1,727,328 for each year of the base term to provide all contract services to resolve approximately 1,650 pending claims and incidents, as well as administer all new cases. This annual fee is based on an annual maximum limit of 2,100 new non-employee liability cases and 150 new employee liability cases. The new contract cost is the same as the current rate being paid under the existing contract. There will be no fee or cost-of-living increases for the term of the contract.
The contract provides for a fee of $700 for each additional new non-employee case exceeding the maximum limit of 2,100 new cases, and $1,400 for each additional new employment liability case exceeding the maximum limit of 150 new cases. In the last five years, the number of new cases has not exceeded the maximum limits, nor do we anticipate exceeding the maximum annual new case limits and incurring the additional per-case fees under this contract.
The first year of funding for this contract has been included in the CEO Fiscal Year 2013-14 budget. The CEO will continue to include funding for this contract in future years.
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The total paid to Carl Warren for Fiscal Year 2011-12 was $1,799,303. This rate reflects the period before the 4 percent reduction was effective.
FACTS AND PROVISIONS/LEGAL REQUIREMENTS
The CEO has been contracting third-party administration services for automobile and general liability claims and legal management services since 1987.
The services being provided under this contract will be at the direction of CEO and County Counsel. These services include, but are not limited to, the following:
1. Third-party administration services for incidents, claims, and lawsuits, for automobile, employment, and general liability matters. These include entering and updating incident, claim and lawsuit activities, reserves, expenses, and other data in County Counsel’s matter management database and County’s claim information system; conducting investigations, as required; providing reports; and identifying, pursuing, and collecting subrogation recovery for damages to County property.
2. Litigation management support services for the Department of Children and Family Services and employment matters. These include tracking litigation costs and expenses, participating in roundtable meetings, and attending and monitoring legal proceedings.
3. Financial and administrative services, such as retention and storage of incidents, claims and case records; arranging and purchasing annuity policies for structured settlements; and payment of authorized indemnity, legal defense fees, and expenses.
County Counsel determined that this contract falls under the “Proposition A”
requirements, and therefore includes Living Wage requirements.
The contract includes all required Board provisions and has been approved as to form by County Counsel.
CONTRACTING PROCESS
On March 27, 2012, the CEO sent a Notice of Intent to release a Request for Proposals (RFP) for automobile and general liability claims administration and legal defense management services to 47 firms who provide those services. At that time, we intended to release the RFP in April 2012.
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However, it took CEO, working with County Counsel, longer than anticipated to define the Scope of Work. The RFP was released on June 29, 2012, and posted on the County’s website and advertised in the Los Angeles Times, Los Angeles Sentinel, La Opinion, Los Angeles Daily News, San Gabriel Valley Tribune, and the Press Telegram.
On July 12, 2012, the Board approved an extension of the existing contract, which was due to expire on August 14, 2012, for one year in order to complete the solicitation for this new contract, and to allow for full testing of County Counsel’s matter management database (Attachment II).
On July 31, 2012, two vendors attended the Mandatory Proposers Conference.
Two proposers submitted proposals on or before August 28, 2012. Both proposals met minimum requirements and were subsequently reviewed and evaluated by representatives of the CEO, Internal Services Department, Department of Health Services, and Department of Public Works.
The proposal submitted by Carl Warren was rated the highest, even though its proposed pricing was not the lowest. The CEO recommends awarding the contract to Carl Warren, as it is highly qualified to provide the services.
The CEO had one debriefing with the other proposer on its proposal ratings, and there were no protests filed.
The “Proposition A” cost analysis (Attachment III) demonstrates an estimated annual cost savings of $140,478. The Auditor-Controller has reviewed the cost comparison and concurs that the contract is cost-effective.
Carl Warren will fully comply with the Living Wage Program and agrees to pay a living wage to their employees providing County services.