May 30, 2006

SUBJECT:  Authorization to Award Contract in the Amount of $64,908 to Collaborative Economics for High-Tech Worker Follow-up Study for Department of Employment Development (NOVA)

REPORT IN BRIEF

As part of its Rapid Response Special Project grant to study structural change in the Silicon Valley workforce, NOVA issued a Request for Proposals for a research organization to perform follow-up research related to its 2005 high-tech downturn report.  NOVA received two proposals, from Godbe Research and Collaborative Economics.  Staff recommends that the Sunnyvale City Council, on behalf of the seven NOVA consortium cities, concur with the decision of the NOVA Workforce Board and authorize the award of a contract to Collaborative Economics in the amount of $64,908.

BACKGROUND

In 2003, NOVA received funding from the California Employment Development Department to undertake a study to examine the technology workforce that fueled this dramatic expansion and suffered from its downfall by focusing on such questions as:

·            How did this business cycle compare to previous cycles experienced in California?

·            How has the composition of Silicon Valley's high-tech firms changed over the course of its rapid economic expansion and abrupt downturn?

·            Which firms led the boom? Were these the firms most affected in the bust?

·            Where did employees come from to fuel the boom? Where did they go in the bust?

·            What were the wage losses (or gains) experienced by workers in the downturn?

The resulting report, available at http://www.novaworks.org/lmi/#downturn, focused on the one million California workers who were employed in high-tech industries at the beginning of 2000, the peak of Silicon Valley employment. The employment experiences of these workers were tracked from 1995 to 2003 including their movements into and out of the high-tech sector.  The study also tracked the experiences of the tech firms employing these workers.

One of the key findings of the study was that of the nearly one million workers employed by high-tech firms in California in the boom of 2000, nearly one quarter had taken non-technology jobs for considerably lower wages by 2004. In addition to this, another 28 percent had left California’s job rolls entirely (as evidenced by lack of wage records), either dropping out of the traditional job market, returning to school, becoming self-employed, joining the ranks of the unemployed, or leaving the state altogether.

The High-Tech Downturn study and others also showed that employment growth in new small businesses drove much of the tech boom and that employment in new firms remained a large share even as the boom ended.  Also, of the 160,000 jobs lost in the heart of Silicon Valley (Sunnyvale-San Jose MSA) from 2001 through 2005, almost 60 percent were in the high-tech industry.  It is apparent that important structural changes have occurred in Silicon Valley and that they are likely to be long lasting.

NOVA has recently received funding from the State of California to study structural changes in the workforce, with a particular emphasis on the workforce needs of the small business sector, and how it supports larger high-tech employers.  In that the workers from the earlier study who could not be located may very well have become independent contractors or consultants, falling into the small business sector, it is important to the overall scope of this project to understand where these individuals have gone.

EXISTING POLICY

The proposed activities are consistent with the City of Sunnyvale's Socio-Economic Goal 5.1F: Provide job training and employment services within constraints of operative, federal regulations and available federal funding, to address the locally-determined employment and training needs of economically disadvantaged residents and others with special needs.

DISCUSSION

On April 26, NOVA issued a Request for Proposals seeking a research organization to perform follow-up work related to NOVA’s April 2005 report, The High Tech Downturn in Silicon Valley: What Happened to All Those Skilled Workers?  Specifically, NOVA wishes to learn more about the workforce status of the 28 percent of California’s 2000 tech workforce that could not be located in California’s wage records at the end of 2003.  The policy issues raised by this large share not found in the Base Wage File differ substantially depending on what happened to these workers.  There are several possible explanations:  They left the state; they left the country; they became self-employed; they left the labor force entirely.

The RFP was issued to locate a contractor to complete the following by October 15:

·        Identify state and national data sources that may provide the necessary data to track the identified cohort of workers.

·        Work with multiple state and national data sources to locate data relative to the workforce status of the identified cohort of workers (in the aggregate).

·        Analyze results and provide a detailed report of findings and implications.

Two proposals were received by the May 10 deadline, from Godbe Research and Collaborative Economics. In their responses, proposers were asked to describe their planned approach to the project, prepare a milestone plan, provide a statement of capabilities, and provide a proposal budget (not to exceed $65,000).

Staff and a NOVA Workforce Board member familiar with economic research reviewed both proposals and scored them in the areas mentioned above.  Based on the results of this review, staff recommends a contract be awarded to Collaborative Economics, for the following reasons:

• Collaborative Economics (CE) provided a detailed approach, including pros and cons of various data sources.  They pointed out that some sources might not be possible to access, especially given the short time frame; however, they do have many relationships in place.
• CE has a staff member who worked on the original project (through the SPHERE Institute).
• CE’s budget includes 930 staff hours at a reasonable average rate of $63 per hour (including fringe).
• CE has extensive experience working with the State’s Labor Market Information Division and performing analyses based on employment and employer data obtained through LMID.
• CE will identify policy implications from the analysis results. 

The NOVA Workforce Board, at its May 24 meeting, authorized the award of a contract to Collaborative Economics.

FISCAL IMPACT

The source of funds for this endeavor is Workforce Investment Act funding targeted for managing worker dislocation and creating new employment opportunities.  These funds were awarded to NOVA and the City of Sunnyvale through a competitive bid process.  As such there is sufficient funding to accomplish the required work, and the funding cannot be used for any purposes not in the original proposal.  There is no negative fiscal impact on the City of Sunnyvale.

CONCLUSION

NOVA issued a Request for Proposals for a research organization to perform follow-up research relative to its 2005 high-tech downturn study.  Two proposals were received, from Godbe Research and Collaborative Economics.  CE has extensive background working with the State’s Labor Market Information Division and performing analyses based on LMID data.  They provided a detailed and realistic approach to the project and appear capable of accomplishing the project objectives.

PUBLIC CONTACT

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's web page and the availability of the report in the Library and City Clerk's Office.

ALTERNATIVES

1.      Council authorizes the award of a contract to Collaborative Economics in the amount of $64,908 to perform high-tech worker follow-up research.

2.      Council does not authorize the contract award to Collaborative Economics.

3.      Other action as determined by Council.

RECOMMENDATION

It is recommended by staff that the Sunnyvale City Council, on behalf of the NOVA seven-city consortium and in concurrence with the NOVA Workforce Board, adopt Alternative 1: Council authorizes the award of a contract to Collaborative Economics in the amount of $64,908 to perform high-tech worker follow-up research.

Reviewed by:

Michael J. Curran, Director

Department of Employment Development

Prepared by: 

Jeanette Langdell

Employment Training Manager

Approved by:

Amy Chan