SunnyvaleRTC

June 21, 2005

SUBJECT: Authorization to Amend an Existing Contract for Temporary Personnel Placement Services (F0406-69)

REPORT IN BRIEF

Approval is requested to amend an existing contract with Randstad US, LP, to provide temporary personnel placement services for the Department of Human Resources. Although headquartered in Atlanta, Georgia, Randstad provides services to the City through its Santa Clara office. The requested amendment authorizes increases in allowable mark-up rates.

BACKGROUND

For many years, the City has contracted with temporary personnel placement agencies to enhance and supplement its regular workforce. Agency pricing structures are typically based upon a percentage mark-up over temporary employee hourly salary rates.

On April 30, 2002, Council awarded a three-year contract (with an option to extend the contract for two additional two-year periods) to Randstad US, LP. This contract was the result of a competitive proposal process. Randstad was selected as the firm offering the best of nineteen proposals received in response to the City’s Request for Proposals (RFP). Areas in which Randstad exceeded the abilities of other proposers included its exceptional level of technological competency, including web-based requisitioning, invoicing and reporting; its well-developed implementation plan; and its ability to be flexible to meet the City’s requirements. Randstad also had strong municipal experience and offered very competitive mark-up rates.

The first two-year extension of the contract was exercised on May 1, 2005, as authorized by Council when the contract was awarded in April 2002 and with no change in the original contract terms and conditions.

Staff now recommends modification of the original contract terms and conditions which requires Council approval and is the subject of this report.

DISCUSSION

During the initial three-year contract term, Randstand provided temporary staffing to the City with mark-up rates of 30 to 38 percent, depending upon the labor category. Its low rates were based upon the City’s Request for Proposals which indicated that the City anticipated annual expenditures of $2.5 to $3 million for temporary staffing. This amount represented accurate expenditures during the previous several years. However, the RFP also clearly stated: “…the City makes no commitment or guarantee as to the number of personnel that will be requested or the total number of hours required under any contract(s) issued as the result of this RFP.”

In fact, due to budget reductions as well as changes in the City’s temporary personnel policy, expenditures have been considerably less than anticipated:

Time Period

Expenditures

7/12/02 through 12/31/02

$1,228,339

1/1/03 through 12/31/03

$1,103,509

1/1/04 through 12/31/04

$673,557

1/1/05 through 5/31/05

$252,574

In early April 2005, Randstad requested a 10% increase in its mark-up rates, effective May 1, 2005, citing the following reasons for this request:

A dramatic increase in the cost of Workers’ Compensation Insurance.
A five-fold increase in the cost of State Unemployment Insurance.
The tremendous decrease in the City’s use of temporary staffing.

Staff declined this request and exercised the City’s option to extend the contract at the original mark-up rate. However, staff has been satisfied with the services provided by Randstad over the past three years and is sensitive to the fiscal circumstances in which the firm now finds itself. Staff, therefore, recommends amendment of the existing contract to authorize a 3% across-the-board increase in mark-up rates, effective July 1, 2005, with an additional 3% across-the board increase, effective January 1, 2006.

FISCAL IMPACT

Based upon the City’s current levels of temporary staffing, the total additional cost to the City for the recommended increases will be approximately $40,000 through April 30, 2007, the contract expiration date. In early 2007, staff will review the situation with regard to temporary staffing and either re-bid temporary personnel placement services or exercise the City’s option to extend the Randstad contract for a final two-year period.

Funds are available in operating accounts throughout the City.

ALTERNATIVES

1. Authorize the amendment of an existing contract with Randstad US, LP, in substantially the same form as the attached draft, to increase its mark-up rates by 3% across the board, effective July 1, 2005, through December 31, 2005, with an additional 3% increase, effective January 1, 2006.

2. Do not authorize an increase in mark-up rates for Randstad US, LP, and require rates to remain the same as originally proposed in Randstad’s 2002 response to Request for Proposals No. F0202-42. Should Council choose this alternative, Randstad would be legally obligated to go forward with the contract with the original mark-up rates.

RECOMMENDATION

Staff recommends Alternative No. 1.

Prepared by:

Elaine Wesely

Purchasing Officer

Reviewed by:

Mary J. Bradley

Director, Finance

Reviewed by:

Jane Fleenor

Interim Director, Human Resources

Approved by:

Amy Chan

City Manager

Attachments

A. Draft Agreement Amendment (.pdf format)

B. Service Agreement (.pdf format)

Exhibit A (.pdf format)

Exhibit B (.pdf format)

Exhibit C (.pdf format)

Exhibit D (.pdf format)