This report details the history of custodial services for City buildings over the past decade. Such services were once provided almost entirely by a contract agency, then shifted to in-house use of part-time workers, evolving over time to what is practiced today: a combination of contractual services, regular part-time City workers (SEIU-represented), "temporary" agency workers, and full-time City staff (SEA-represented). Staff has been exploring various options in terms of custodial services due to concerns regarding service delivery, as well as cost implications.

Council’s policy on contracting services (Attachment A, Council Policy 7.1.2) suggests that "where private sources are available, they should be looked to first to provide commercial or industrial services needed by the City." It further dictates that the intent in contracting services should be cost-based, and that the potential savings estimated to be derived from contract services in any given area be of such amount as to justify the change contemplated.

Staff believes that contracting custodial services could save the City a significant amount of money annually, and that it is an appropriate service to consider for contracting in accordance with Council policy.

Public contact was made through posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City web page, and the availability of the report in the library and the city Clerk’s office.

D.  Existing Program Outcome Measures for Janitorial Services

For as long as anyone can remember, Facilities Management (previously known as Building Services) has been responsible for providing custodial services to the entire City Hall campus (Public Safety, City Hall, Annex, South Annex, Library, and now, 505 W. Olive Ave.), the Corporation Yard, Columbia Center, the Community Center and the Water Pollution Control Plant. Fire Stations and Park Buildings are exceptions to the rule, with each traditionally the responsibility of those City staff assigned to work there.

In the late 1980’s and early 1990’s, the City of Sunnyvale performed all its building custodial services through a contract agency specializing in custodial services. The name of the contract agency was "Service By Medallion." Staff is not sure how many years prior to the late 1980’s a contract was in effect or exactly why the contract with "Service By Medallion" failed, but in Fiscal Year 1993/1994, the City replaced the contract with fifteen regular, part-time (SEIU-represented) positions. While staff would prefer to have employed regular full-time employees in these positions, staff’s challenge at the time was to derive an alternative to contract custodial work without increasing overall costs. This was simply not possible given the higher costs of full-time employees.

It did not take long to determine that a heavy reliance on regular part-time employees for custodial work was not the most effective route to take. This was primarily due to the limitation preventing them from working more than 30 hours per week and the difficulties that created with work schedules (imagine trying to run just about any other full-time service by trying to overlap part-time work schedules on a regular basis). In addition, and again due to their work hour limitations, when one employee was absent due to illness or vacation, none of the others could fill in without exceeding his/her hour limitations. Lastly, most of these regular part-time positions were scheduled to work during the evening, when offices were vacated. Many of them also held second jobs during the day and could not easily adjust their schedules to work additional evening hours when necessary.

As regular part-time employees left City service, staff found it more effective to leave these positions vacant and to use the funds budgeted for them to employ full-time custodial labor through a "temporary" placement firm called "Interim," which later changed its name to "Spherion." The use of such "temporary" labor resolved the issue around work schedules, given that they could work a full 40 hours per week, but it created other problems of its own:

• The assignments weren’t really temporary, and City staff was expected to provide some level of oversight to the agency workers;

• there was a relatively high turnover rate associated with staff hired through a temp agency; and

• the temp agency found it relatively difficult to fill custodial positions.

In July 1999, SEIU noted that the City was no longer filling part-time positions assigned to custodial services and queried why it was not doing so. Staff advised SEIU of the difficulties it had encountered in delivering custodial services with part-time employees and its use of "temporary" staff to perform that work as other options were considered. SEIU subsequently noted that the number of custodial positions it believed it represented was greater than the number of positions indicated by staff in its communications regarding custodial options. During the year 2000, SEIU and City staff met on several occasions to discuss these part-time positions and staff’s intent to explore other means with which to provide custodial services. In these meetings, SEIU was also advised that part of that exploration would include providing custodial services to the City’s Community Center via contract on a trial basis (a two-year contract with option to renew).

Staff has been engaged in good-faith negotiations with SEIU on this subject ever since. Based on its exploration of various options, staff eventually advised SEIU, SEA, and City Council that staff would be recommending a two-year budget for Fiscal Years 2002/2003 and 2003/2004 which assumed contracting for custodial services at the City Hall campus (Public Safety, City Hall, Annex, South Annex, Library, and 505 W. Olive Ave.), the Corporation Yard, Columbia Center, the Community Center and the Water Pollution Control Plant. Staff also conducted a closed session on the status of negotiations with City Council on June 4, 2002. When Council approved the two-year operating budget on June 25, of 2002, it did so with the stipulation that staff return to Council within two or three months with a full report on custodial service options and the understanding that no changes in custodial services would occur until Council was able to consider and act on that report. This report is in response to that Council direction.

As described in the Discussion section below, Council’s policy governing contract services requires that the Council approve any issuance of a call for bid on contract services, and that the Department Director preparing the call for contract bids also prepare an accompanying staff report to the City Council commenting on specific items. This report also serves that purpose.

Council Policy 7.3.16: Managing for Competitiveness (please see Attachment B).

Council has established a comprehensive policy regarding "Managing for Competitiveness" (Please see Attachment B, Council Policy 7.3.16.), the overall goal of which is "to ensure competitive service delivery, regardless of the delivery method used."

The policy requires a "competitive assessment" be completed, followed by a "managed competition process." Several steps are involved in each component. Staff has spent several years performing a "competitive assessment," with much of that time devoted to the implementation of quality and cost-effectiveness improvements related to existing service delivery methods. In other words, staff first spent a great deal of time trying to improve existing service delivery methods before looking to the possibility of contracting for custodial services. This involved schedule changes, new equipment and materials, time in motion studies, and numerous brainstorming sessions with existing employees. During the competitive assessment phase, staff also benchmarked what other cities are doing in terms of service delivery for custodial services.

Staff is now entering the "managed competition process" phase. The Request for Proposals for Janitorial Services reflected in Attachment C is actually one of the first steps of the managed competition process. Were Council to approve it, it would be followed by the implementation of the Request for Proposal process, the selection of a provider (which could be either an external agency or the City’s own workforce), and the subsequent monitoring of performance and costs.

Lastly, this policy provides several guidelines to ensure the fair and respectful treatment of impacted City employees. Those guidelines include notifying and working with appropriate employee associations and the Department of Human Resources, meeting and conferring with employee associations in accordance with state statute, identifying opportunities for moving displaced employees into other City positions, and assisting employees in transition by offering training opportunities.

Council’s Policy governing "Contract Services" is very clear (Please see Attachment A, Policy 7.1.2.), and it is designed specifically "to establish consistent procedures for determining whether or not a City service should be provided in-house or by the private sector."

Council’s policy is based on the premise that "the City’s business is not to be in business. Where private sources are available, they should be looked to first to provide the commercial or industrial goods and services needed by the City to act on the public’s behalf." Private firms specializing in custodial services exist and should therefore be considered for provision of that service to the City.

Council’s policy also acknowledges that "certain functions are inherently governmental in nature, being so intimately related to the public interest as to mandate performance by City employees." The services of a City Clerk or City Manager would apply here, for example, but clearly custodial services are not inherently governmental in nature.

Lastly, Council’s policy requires that staff "aim for economy," indicating that "when private performance is feasible and no overriding factors require in-house performance, the citizens of the City of Sunnyvale deserve and expect the most economical performance, and, therefore, rigorous cost comparison of contract costs versus in-house costs should be used, when appropriate, to decide how the work will be done."

Council’s policy also makes it clear that "the intent in contracting services is ‘cost based’, that is, it contemplates a reduction in cost for a given level of service." The policy further indicates that "the potential savings estimated to be derived from contract services in any given area should be of such amount as to justify the change contemplated." The potential annual savings estimated to be derived from contracting custodial services is significant, and staff believes this justifies the contemplated change.

Council’s policy indicates that "the search for economy and efficiency should be viewed as ‘on-going’. Proposals regarding economy and efficiency may be part of the annual budget process but should not be unnecessarily tied to it. A call for bids may originate at any time of the year in any of the following ways:

1. As directed by Council

2. As directed by the City Manager

3. As requested by a Department Director

4. As a result of an economy and efficiency audit as part of the City’s Performance Budget and Audit System."

This particular call for bids was originally made at the request of the Director of Parks and Recreation, acting on initial information from the Superintendent of Buildings which suggested that significant improvements in both economy and efficiency might be achieved in the area of custodial services if performed through contract service.

Council policy dictates that a certain process be followed in acquiring contract services:

1. A call for bids is prepared by the applicable Department Director—in this case, the Director of Parks and Recreation. (Please see Attachment C, Request for Proposals for Janitorial Services.)

2. The call for bids is reviewed by the City Attorney.

3. The call for bids is approved for issuance by the City Council (as proposed by the alternative actions of this report).

4. The Director calling for the bids provides an accompanying report to City Council (this report).

5. The Director submits a sealed cost estimate to the Purchasing Officer for the same work to be performed as that requested by the private contractor no later than the time of the outside bid opening, clearly disclosing the estimated cost for City supervision in the event a bid is awarded to an outside contractor.

6. The Purchasing Officer makes a bid summary comparing all bids submitted including the cost estimate submitted by the Department Director.

7. The Department of Finance prepares a staff report to City Council recommending award of an outside contractor or retention of the service in-house. Reasons for the recommendations are to be clearly stated in the report.

Steps 1 through 4 are completed with the submission of this Report to Council. Steps 5 through 7 can only be completed subsequent to Council’s issuance of a call for bids in accordance with staff’s recommendation at the end of this report.

Contracting for custodial services should be transparent to the public. Approved service levels would not change, and citizens desiring to contact the City relative to public building conditions or uses would continue to call and be responded to by City staff assigned to the Facilities Management Division.

The "Janitorial Cleaning Specifications" and "Janitorial Frequency and Service Task Master List" (Please see pages 8 and 13 of Attachment C.) are the same standards used by City staff to maintain City facilities. Attachment D depicts existing program outcome measures for janitorial services. City staff would also continue to evaluate all City facilities and report related performance via these established outcome measures, regardless of whether the service is provided by a contract agency or City staff. These same outcome measures would be incorporated into the Draft Request for Proposals for Janitorial Services prior to its issuance for bids.

Similarly, other City Departments should not be impacted by contracting for custodial services. Planned service levels are not expected to change, and other Departments will continue to contact the Facilities Management Division for service-related issues.

The proposed contract service would create no known conflicts with other governmental agencies, City Charter, City Municipal Code, City policy or State law.

Staff has been meeting with SEIU for well over a year regarding issues related to custodial services. SEIU is understandably disappointed that the City is not pursuing the continued use of part-time SEIU-represented employees for custodial services. However, SEIU also appears to understand the reasons for the City’s exploration of alternative means of service. SEIU has also been assured that:

• The custodial classification represented by SEIU is not being eliminated. The City may, in fact, find a use for that classification in the future.

• The City continues to view part-time employment as the most effective means of service delivery under certain circumstances; in fact, Council recently approved staff’s recommendation to budget an additional 10 SEIU-represented positions in the Parks and Recreation Department (2 golf; 2 Senior Center; 3 Community Center; 3 Food Services).

• To the degree that SEA is willing, the City is open to exploring a possible role for SEIU in the provision of input to the development of a new full-time classification specification for janitor/custodian.

SEIU’s primary interest remains in seeing the City retain either part-time or full-time employees to provide custodial services, as opposed to contracting with an outside agency.

Staff has also begun discussions with SEA regarding custodial issues. SEA has expressed its willingness to explore with staff the possible development of a full-time classification and salary range for janitor/custodian.

There is one risk associated with transitioning custodial services to contract, and it could manifest itself in a number of ways. That risk has to do with the quality of service provided to the City. Whenever the City contracts for services, a certain amount of control is lost over the provision of service. This is inherent in contractual services, however, and not specific to this proposed contract.

Staff would take steps to mitigate the possibility of poor quality service through both contract specifications specifying performance standards, through the assignment of in-house staff to monitor contract performance, and by a relatively short-lived contract.

Staff has proposed a one-year contract, with an option to renew for four additional one-year periods, so under worst case scenarios (whether those be due to contractor failure to perform or escalating costs of contractual services), the City could reverse its position and reconsider in-house provision of custodial services at the end of a one-year period.

There is currently $551,701 budgeted in Program 769, Facilities Management, for janitorial services. In Fiscal Year 2001/2002, there was $914,977. Council will recall that it approved the current budget knowing it was predicated on contracting for custodial services, that staff planned to go out for bids at a future date for custodial services, and that Council’s future options relative to providing custodial services would include service delivery by City staff as well as by contract. At the budget hearing, Councilmembers discussed the pros and cons of maintaining the custodial budget at its FY 2001/2002 level for FY 2002/2003, but decided there was no advantage to doing so given the fact that eventual services by either regular full-time staff or agency contract staff would result in changes to that dollar amount. Council was informed that service by in-house staff would likely be significantly more expensive than the contract option (current budget), but that obviously cannot be known for certain until such time as bids for all options are received. Council was advised that until such time as bids are received and all options are reviewed by Council, that staff will continue to provide custodial services via a mix of contract, in-house and temporary agency services. This recommended issuance of a call for bids simply starts the process for reviewing alternative options for providing custodial services, both via contract and via in-house staff.

There is no fiscal impact associated with the issuance of a call for bids to perform custodial services. That is, the recommended action proposed by this report does not obligate the City to any particular fiscal impact. The underlying premise of this report, however, is that the City could possibly save significant sums of money annually were custodial services to be contracted rather than performed in-house. Actual fiscal impacts would be known only following receipt of contract bids and would be included in the Department of Finance’s subsequent report to City Council recommending either award of an outside contractor or retention of the service in-house. Given that staff would be bidding against outside contractors for this service, it would be inappropriate to provide that bid at this time (that would give outside contractors an unfair advantage during the bid process).

It is also important to point out, however, that there would be a rather significant fiscal impact were Council to decide at this point not to issue the call for bids proposed by this report. Such a decision would, in effect, limit the City’s options to either the provision of custodial services with in-house staff, or require a reduction in related service levels. Staff do not believe that it would be prudent to pursue either of these courses of action until after a call for bids and a review of those bids is completed.

Staff does not believe that custodial services can effectively be provided via a heavy reliance on part-time employees. The two realistic options are to perform these services via contract or to employ regular, full-time staff.

Staff concludes that there is sufficient reason, in accordance with City Council’s policy on contract services, to call for bids on contractual custodial services in order that these bids be compared to the cost of providing like services in-house.

Public contact was made through posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City web page, and the availability of the report in the Library and the City Clerk’s office.

Additionally copies of this report have been provided to the presidents of the SEIU and SEA labor associations.

Staff recommends alternative No. 1: Council approves issuance of a call for bids for custodial services to be provided at the City Hall campus (Public Safety, City Hall, Annex, South Annex, Library, and 505 W. Olive Ave.), the Corporation Yard, Columbia Center, the Community Center and the Water Pollution Control Plant.

Prepared by:
Larry Iaquinto
Facilities Management Superintendent

Reviewed by:
Robert A. Walker
Director, Parks and Recreation

Reviewed by:
Mary J. Bradley
Director, Finance