Following the Great Recession, a city in the southwest U.S. faced a major operating budget crunch. By law, municipalities in this city’s state receive little in the way of property tax revenues, and the recession had severely inhibited the city’s sales tax collections and ability to sustain important services. To reverse this trend, the city sought to develop strategies to reduce municipal service costs while maintaining or even increasing service quality. Identifying a cost-effective provider of maintenance services for the City Hall building, which also counted several major corporations as tenants, was also a city priority.
In the spring of 2011, the city enlisted Faegre Baker Daniels Consulting Senior Director Mike Brink — who at the time was serving as an independent consultant — to assist with identifying and capturing municipal process efficiencies. Over the next four years, Brink led various projects that contributed to the improving financial health of the city.
Engaging city leaders, line managers, unionized employees and industry contractors, Brink led the process by which the city conducted a managed competition for the right to provide maintenance services for its City Hall facility — a 15-story office building constructed in 2001 that hosted major technology and consulting companies as co-tenants. The scope of work included mechanical, electrical, plumbing and carpentry services at City Hall. In response to the Request for Proposals (RFPs), the city received proposals from three property management private companies as well as a proposal from the existing city staff to maintain the facility. After comparing the proposals based on cost and quality, the evaluation team made the award to the city staff team. The city’s fully-loaded cost proposal represented significant savings compared to both the private sector bids and the city’s baseline estimate.
With the award of the agreement to its employees, the city estimated approximately 11% savings versus the baseline cost estimate. In addition, the city defined a series of service quality performance metrics to confirm that the services provided to city agencies and private sector building tenants were maintained.
As a component of the city’s Memorandum of Understanding (MOU) with its employees, the city agreed to a gain-sharing agreement with its employees that awarded the employee team 50% of the project savings above and beyond the service cost savings committed to in the employee proposal. This was, of course, contingent on maintenance of the service quality standards as well as good conduct on the part of the employees.
The results were significant. Approximately one year later, the seven participating City Hall building maintenance employees were awarded gain sharing payments exceeding $3,800 each. Because of this managed competition process, the city estimated that it saved more than $224,000 in the first year of the agreement and $900,000 over five years, savings that significantly exceeded the initial estimates. Most importantly, the city was able to retain its crucial private sector tenants in City Hall.