REPORT TO THE CITY COUNCIL
November 20, 2014
FROM: Michael Lima, Controller/Finance Director
Finance Department
BY: S. Kim Jackson, Management Analyst III
Finance Department
SUBJECT
Title
Award two (2) collection agency contracts on behalf of all City of Fresno Departments to RSI Enterprises, Inc., and Financial Credit Network, Inc.
Body
RECOMMENDATION
Staff recommends that the City Council approve and award two (2) Collection Agency Contracts, each consisting of an initial three-year term, with three (3) one-year extension options available for each. Staff recommends the award go to RSI Enterprises, Inc. and Financial Credit Network Inc. Each agency would be available to provide collection services on outstanding unpaid and delinquent accounts for all City of Fresno Departments and divisions on an as-needed basis.
EXECUTIVE SUMMARY
Staff is recommending the award of two contracts to the collection agencies that were the most responsive and responsible to the Request for Proposals (RFP) for collection services and who demonstrated comprehensive compliance with the requirements set forth in the RFP. The selection of these two agencies will enable various City departments to take advantage of each collection agency's individual strengths and experience in dealing with the diversity and types of receivables due to the City, as well as the City's broad customer base.
BACKGROUND
The goal of the RFP was to solicit proposals from qualified collection agencies to provide collection services on a contractual as-needed basis. Each agency would accept the assignment of unpaid and delinquent accounts from various City departments. Reputation, efficiency, thorough knowledge of all facets of collection requirements including current laws and regulations, (such as the Fair Debt Collection Practices Act), experience in working with municipal governments, and a demonstrated high rate of successful collections were desired attributes. In addition, the "ideal" collection agency would have the capability to report unpaid accounts to the major credit bureaus as well as provide the City with online access and the ability to review account status at all times. Proposers were advised that the City reserved the right to award one all-encompassing contract for the entire city or numerous non-exclusive contracts for each department to choose from based on collection expertise and fit, whichever the City deemed to be in its best interest. Six (6) proposals were received and were subsequently opened on the proposal submission deadline of July 5, 2014.
With the exception of the Fire Department, each department performs its own billings. The Fire Department utilizes Extended Business Office services (EBO) for billings and collections, when warranted. The preponderance of departments performs their own collection efforts through letter and telephone contacts in an attempt to collect on unpaid and delinquent accounts. Referral to a collection agency will be at the City's discretion by means of a formal assignment of the account. Depending on the individual department/division, collection agency assignment will commence usually after 30 days to six (6) months after the original invoice date.
The RFP Collection Agency review committee is recommending the award of contracts to the following two collection agencies:
RSI Enterprises, Inc.
This proposer is the City's current incumbent collection agency. This proposer offered the lowest rates for regular collections and was tied for the lowest rates for legal collections. In addition, they offered special low rates for Utility accounts. RSI has municipal government experience, specializes in skip tracing, online information/transmittal capabilities and has a large staff of collectors. RSI reports to credit bureaus after a 30-day dispute period, which enhances their collection efforts. This agency's low rates, large staff, extensive municipal experience, state of the art collection system, and Extended Business Office (EBO) services meets the needs of the City of Fresno. The Committee recommends award to RSI on a contingency basis. Their proposal meets all the RFP requirements and offers the lowest rates. This company has provided acceptable service in the past with the City of Fresno and they are a full service agency. Their references were checked and the responses were excellent.
Financial Credit Network, Inc.
This proposer offered the fourth lowest rates for traditional, regular collections and was tied for the lowest rates for more complex legal collections. They offered special low rates for Utility accounts, based on the date of assignment. They have two offices in California, with a local office in Visalia, CA. They have over 60 years' experience in the collection industry and have sufficient qualified staff and online capabilities to assist the City, as well as report to credit bureaus. The Committee was impressed with the experience and qualifications of Financial Credit Network, Inc. It was clear that Financial Credit Network, Inc. understands local government operations. They have an effective stratified company-wide organizational structure that would provide expertise and management support throughout the contract. The Committee recommends awarding a contract to Financial Credit Network Inc. on a contingency basis. Their proposal meets all the RFP requirements and offers the City good collection rates and a Central Valley presence. Their submitted references were contacted and the responses given for their overall service was excellent.
The Committee determined that the four other respondents, HS Financial Group, LLC, Linebarger Goggan Blair & Sampson, LLP, NCO Financial Systems, Inc. and Sequoia Financial Services were deemed to be non-responsive due to one or more of the following reasons: Submission of the cost proposal on a form other than the one required based on an addendum; submission of the proposal on forms other than those required in the RFP; and/or exception to the Statement of Acceptance of Terms and Conditions within the Sample Agreement.
ENVIRONMENTAL FINDINGS
By the definition provided in the California Environmental Quality Act Guidelines Section 15378 this item does not qualify as a "project" and is therefore exempt from the California Environmental Quality Act requirements.
LOCAL PREFERENCE
The local preference criteria were not implemented as there were no proposals submitted by local businesses.
FISCAL IMPACT
The firm and consistent pursuit by collection agents pays off in enabling the City to receive more of the money that it is owed and having to write off less bad debt. In the last two calendar years, the Fire Department has utilized the Extended Business Office collection services and realized approximately $500,000 per year in revenue for the General Fund. The Business Tax Division of the Finance Department was able to recognize uncollected revenue of $200,000 in 2012 and $150,000 in 2013 with the assistance of collection services. The agencies follow standard processes in an effort to collect the City's funds, and are paid a fee/percentage commission on the amount collected.
At this time, the financial impact for future years cannot be enumerated other than to note that the expertise and experience of an agency is proven to exceed what is available in-house. This improves the City's potential of receiving some or all of the amounts owed to it. The primary benefit of using a collection agency is improved chances of collecting money due the City. Without the tools of collection agents, debtors may be less concerned about the risks of not paying what they owe.
Attachments: Committee Selection Matrix, Committee Report