HomeMy WebLinkAbout11/3/1999 - STAFF REPORTS (3) DATE: November 3, 1999
TO: City Council
FROM: Assistant City Manager-Operations
INSURANCE BROKER SELECTION
RECOMMENDATION:
It is recommended that the City Council accept the unanimous recommendation of the Insurance
Oversight Committee that AON Risk Services be named the City's Insurance Broker and the staff
be authorized to negotiate an Insurance Services contract for City Council consideration.
BACKGROUND:
In the City's ongoing effort to find better,less costly and more efficient ways to conduct business,
the City Council sought a new approach to acquiring insurance. The City Manager established a
two-pronged approach to evaluate insurance acquisition options. The fast prong was for the
Procurement Manager to research how other California cities acquired insurance and to develop an
RFP document based upon his research. His research foundthatmany California cities were moving
to single rather than multiple brokers and to flat fee arrangements rather than commission-based
insurance acquisition. "RFP 02-00 Property, Liability and Worker's Compensation Brokerage
Services"was prepared and circulated as of June 20, 1999,with proposals due July 20, 1999.
Proposals were received from the following brokerage companies:
ComRM I ocatiog Year 1 Fee
1. Hooper,Hayes&Associates Los Angeles $45,000
2. Arthur L Gallagher&Co. Irvine $55,000
3. Davis&Graeber Insurance Services Redlands $52,000
4. AON Risk Services Los Angeles $75,000
5. Dodge,Warren&Peter Ontario Commission
6. Marsh USA Risk Newport Beach $70,425
The second prong of the City Manager's approach was selection of an Insurance Oversight
Committee to review insurance issues and the RFP submittals. This committee was made up of
Assistant City Manager-Operations(char),Assistant City Manager-Administration,Police Chief,
Fire Chief and Principal Management & Budget Analyst. The committee was devoid of any
participation from staff members currently dealing with insurance procurement or administration to
try and ensure a fresh look at all insurance issues. The committee met with staff currently involved
in the City's insurance programs in an effort to better educate themselves and then the five member
committee independently graded the proposals utilizing a standardized grading format. A summary
of the grades is as follows:
GRADING SUMMARY OF AUGUST 17, 1999
Comminee Gallagher ADN Marsh Hooper Davie Graeber Dodge
Member
A 43 44 47 43 45 N/R
B 43 46 43.5 39 37 Na
C 47 46 45 42 46 N/R(41)
D 38 407 42 362 37 N/R
B 1 47 1 45 41 34 43 N/4
TGTA1.8 218 221.7 2185 1%.2 208 MR
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Three of the firms were graded between 218 and 222. A fourth firm was graded at 208 but was
ranked in the top three by three members ofthe committee. One firm,Dodge,Warren&Peters,was
found non-responsive as they provided a proposal based on a percentage commission rather than a
flat fee as clearly required by the RFP. (Note:Member C graded their non-responsive proposal and
ranked it 6th.) Based on the above and reference checks,the committee established a short list of:
AON
Marsh
Gallagher
Davis/Graeber
The four short-listed firms were invited to interviews held on September 23 and 24, 1999. At the
conclusion of the interviews,again the committee members' grades were compiled as follows:
Company Member A Member B Member C Member D Member E Average
Score
Marsh 97 80 94 83 99 90.6
Davis& 96 71 91 66 81 81
Graeber
Gallagher 96 78 93 83 89 87.8
AON 97 87 93 82 96 91
As can be seen from the scores,it was a virtual dead heat between Marsh and AON. To break the
virtual tie,the committee scheduled a second round of interviews for October 14, 1999. This set of
interviews was designed to evaluate how well the insurance brokers team would work with the City
i.e. flexibility, reasonableness, responsiveness and understanding for the needs of a tourist
community. This time,the committee mandated that the companies' proposed account executive
and two staff members that would work day-today on the City's account be present. In addition,
the committee asked the Procurement Manager,Human Resources Director and Risk Manager to sit
in on this round of interviews to help ask questions. At the conclusion of the interviews,the non-
committee members were excused and the committee prepared its final grades as follows:
Company Member A Member B Member C Member D Average
Marsh 16 15 17 17 16.25
AON 19 20 20 19 19.5
*Note: Only four members of the committee were available for final interviews
The final grades reflect the committee's unanimous recommendation to hire AON Risk Services as
the City's insurance Broker. AON would be paid a flat fee of$75,000 to acquire all of the City
property,liability and workers compensation insurance. In the area of workers compensation,AON
will be tasked to bring a variety of options to the City for review,including first dollar coverage,as
well as third party administration services. AON will also provide a wide variety ofrisk assessment
and training programs as part of their contract.
The Public Entity Division of AON focuses solely on the insurance and risk management needs of
cities,counties and state governments,with 1,000 California public entity clients. The City would
be serviced out of the Los Angeles offices of AON with Mr.Don Shaffer appointed as the City's
account executive. Mr.Shaffer has more than twenty-five years experience and his accounts number
six,which allows for adequate time to service our account.
One of the major issues in this solicitation was that of a fixed fee vs.commission. Each company
was asked directly, "How can we be assured you are not getting our flat fee and a percentage
commission as well?" Attached is a letter from AON which specifically addresses that issue.
A Minute Order concurring with the Insurance Oversight Committee's recommendation is attached
for City Council consideration.
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ALLEN F. SMOOT,AAS HAROLD E.GOOD,CPPO
Assistant City Procurement Manager
Char-In ice Oversight Co
APPROVED
City er
ATTACHMENTS:
1. Minute Order
2. AON Letter
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October 20, 1999
Mr.Al Smoot Via Fax: 760-323-8207
Assistant City Manager Hard copy via mail
City of Palm Springs
3200 East Tahquitz Canyon Way
Palm Springs,CA 92262
Re: Separation of Fee and Commission
Dear Al,
I am responding to your question regarding assurance that,on a fee arrangement with
the City of Palm Springs,Aon would not also take commissions from underwriters.
We guarantee that this would not happen and can provide you the following assurances:
• All premiums to the City of Palm Springs will be net.To confirm this,we can
provide the City with a copy of the Policy Declaration Page for all lines of insurance
where it will show the City that,indeed,the premium is net.
• Additionally,we would welcome the City to audit our negotiation with underwriters
once we place all lines of the City's insurance. We will make our negotiating
documents available to you and then your audit will confirm that we are
negotiating for net premiums for Palm Springs.
I hope this answers any concem of the City's regarding the separation of fee and
commission.
s ty, ASSISTANT C17Y MANAGER
007( 2 5 �xl1
J13:1v1 OPERATIONS
cc:Gary Martin,Executive Vice President
Director,Public Sector Division
Aon Risk Serosat,Inc.of Southffir Cahforma rmrname Servicm
707 Wilshire Blvd.,Ste 6000•Los Angeles,Cahtf)rnia 9W17•tel:(213)630-3200•fax:(213)689-4450
Madtng:PO Box 54670,Lot Angela,Califorma 90054-0670
License No.0530733
CITY OF PALM SPRINGS
REQUEST FOR PROPOSAL (RFP) 02-00
TO PROVIDE
PROPERTY, LIABILITY AND WORKERS' COMPENSATION
INSURANCE BROKERAGE SERVICES
NOTICE IS HEREBY GIVEN that the City of Palm Springs is soliciting proposals from
interested and qualified firms to provide Property, Liability and Workers' Compensation
Insurance Brokerage Services for the City of Palm Springs.
GENERAL INFORMATION:The City of Palm Springs is evaluating its risk financing programs
in terms of protection and cost. The RFP for Insurance Brokerage Services has been
developed out of that process. The RFP document contains the scope of work and
qualification requirements.
IMPORTANT NOTE: This Request for Proposal is not an authorization to approach the
insurance marketplace or service agencies on behalf of the City of Palm Springs. City of
Palm Springs specifically directs that NO contact or solicitation of insurance markets or
market reservations be made on behalf of the City. Failure to comply with this condition will
be grounds for disqualification from this RFP process.
AVAILABILITY OF RFP: The RFP document will be mailed upon request at no charge.
Copies may also be obtained from the Office of Procurement at the addresses below or by
telephone request at (760) 323-8239.
STREET ADDRESS MAILING ADDRESS
CITY OF PALM SPRINGS CITY OF PALM SPRINGS
ATTN: Procurement Manager ATTN: Procurement Manager
3200 E. Tahquitz Canyon Way P. 0. Box 2743
Palm Springs, Ca 92262 Palm Springs, CA 92263-2743
PHONE: (760) 323-8239 PHONE: (760) 323-8239
Responses received which are not in conformance with the instructions outlined in the RFP
document will be rejected as non-responsive.
BASIS OF AWARD: The City reserves the right to award Contract, or make no award,
whichever is in the best interest of the City. The City also reserves the right to negotiate
the terms and conditions of any Contract resulting from this solicitation. Final award, if any,
will be made by the Palm Springs City Council.
EVALUATION CRITERIA: All proposals received by the closing date and time will be
evaluated by an Evaluation Committee who will review and judge the merit of the proposals
received in accordance with all criteria and specifications contained in the RFP document.
Proposals will be judged on the basis of the following criteria.
A. Professional and Technical Insurance Capabilities
B. Risk Management Consulting Capabilities
C. Interpersonal Skills
D. Managerial and Service Skills
E. Proposal Price
F. Proposal Quality
It is the City's intent to create a short-list of qualified firms from the proposals received. The
short-list will consist of the firms which are, in the City's sole judgment, best able to serve
the City's requirements for the services solicited.
An oral presentation and /or more information may be required from the short-listed firms.
DEADLINE: Proposals must be received in the Procurement Office at the street address
above prior to the deadline of Tuesday. July 20, 1999, 5:00 P.M. local time. It is the
responsibility of the Offeror to see that any proposal sent through the mail shall have
sufficient time to be received by this specified date and time. Telegraphic, telephonic or
facsimile (fax) proposals will= be accepted.
Proposers attention is drawn to the fact that all proposal documents submitted are subject
to the California Code Section 6250 at seq, commonly known as the Public Records Act.
Information contained in the proposals may be made public after the review process has
been completed in a recommendation for award to the City Council of the City of Palm
Springs, and/or following award.
COSTS INCURRED BY PROPOSER: All expenses involved with the preparation and
submission of proposal to the City, or any work performed in connection therewith, shall be
borne by the proposer(s). No payment will be made for any responses received, nor for any
other effort required of or made by the proposer(s) prior to commencement of work as
defined by a contract approved by the City Council.
INSURANCE REQUIREMENTS: The successful Offeror must meet all insurance requirements
of the City of Palm Springs.
,V'
HAROLD E. GOOD, CPPO
Procurement Manager
Date: June 17, 1999
Publish in Desert Sun: June 20, 199
MINUTE ORDER
SELECTING AON RISK SERVICES AS THE CITY OF
PALM SPRINGS INSURANCE BROKER AND
AUTHORIZING THE NEGOTIATION OF AN
INSURANCE SERVICES CONTRACT TO BE
BROUGHT BACK TO CITY COUNCIL FOR FINAL
APPROVAL.
I HEREBY CERTIFY that this Minute Order,selecting AON Risk Services as the City of
Palm Springs Insurance Broker and authorizing the negotiation of an Insurance Services
Contract to be brought back to City Council for final approval, was adopted by the City
Council of the City of Pahn Springs,California,in a meeting thereof held on the 31 day of
November 1999.
PATRICIA A. SANDERS
City Clerk
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