Rancho Palos Verdes City Council



DATE: MAY 6, 2003


Staff Coordinator: Gary Gyves, Senior Administrative Analyst


Approve the attached Consultant Services Agreement (hereafter the "Proposed Agreement") with MAXIMUS for the preparation of a Cost-Based Fee Study (hereafter the "Study").


City Council Approval Of Request For Proposal For A Cost Based Fee Study, February 18, 2003

The City Council took the following action at its February 18, 2003 meeting:

  1. Approved a Request for Proposal (hereafter "RFP") for the Study;
  2. Authorized Finance staff to interview and select a consultant for the Study, subject to approval by the City Council; and
  3. Authorized Finance staff to negotiate the terms, conditions and scope of the associated contract, subject to approval by the City Council.

Legal Authority To Charge Fees For Services

Cities have the general authority to impose fees, sometimes called charges or rates, under the Constitution of the State of California. Fees are distinguished from taxes in two principal ways: (1) the amount of the fee may not exceed the estimated reasonable cost of providing the particular service or facility for which the fee is charged, while the amount of a tax is not subject to any such restriction; and (2) the service or facility for which the fee is charged bears a relationship to the person or entity paying the fee.

Cost-Based Fee Study

The Study will calculate the full (100%) cost of providing certain City services as well as a proposed fee to recover such costs. However, the City Council may always choose to subsidize a service by establishing a fee less than its cost. Upon completion of the Study, the selected consultant will present a report of its findings, including a comparison of the City’s current fees, proposed fees, estimated revenue impact, as well as similar fees charged by other comparable California cities, including neighboring cities.

The Request For Proposal Process

Finance staff distributed the RFP to four consultants specializing in Cost-Based Fee Studies. Three consultants submitted a proposal. Two consultants were selected to participate in the interviewing stage of the selection process. The fee quotation of the third consultant was approximately $10,000 greater than the two consultants selected for interviews.

Consultant Selection

As detailed in the attached RFP, the following criteria was used to select the consultant:

  1. Thoroughness and understanding of the tasks to be completed;
  2. Background, experience and results of reference checks;
  3. Staff expertise and overall experience of personnel assigned to complete the tasks;
  4. The ability to meet the Study completion date;
  5. Recent public sector experience, preferably in a municipal setting, conducting similar studies; and
  6. The "not to exceed" fixed fee to complete the Scope of Services.

Based on the aforementioned consultant selection criteria, the results of the interview process and reference calls, MAXIMUS was selected for the following reasons:

  1. MAXIMUS clearly exhibited the most knowledge related to the processes and procedures required to conduct Cost-Based Fee Studies.
  2. Based on staff resumes and reports received during reference checks, staff assigned by MAXIMUS to complete the Study is highly competent and have worked on similar studies throughout the State of California.
  3. Finance staff negotiated MAXIMUS’ fixed fee amount to equate to that of the lowest bidder ($23,750), which is sufficient to allow for a complete and accurate Study.
  4. MAXIMUS offered the software used to complete the Study at no additional cost to the City, while the other consultant interviewed proposed a $10,000 fee for their software. The software will enable the City to periodically update the Study as cost factors change.

MAXIMUS is the largest firm in the United States specializing in federal, state and local government consulting. MAXIMUS was founded in 1975 and has more than 5,000 employees located in more than 170 offices across the United States. MAXIMUS is viewed as one of the foremost firms for preparing Cost-Based Fee Studies, as well as providing other fiscal and management consulting services. MAXIMUS estimates the Study completion date to be three to four months from the time the contract is signed.

Services To Be Performed By The Selected Consultant

As detailed in the attached Proposed Agreement, the following services would be performed by MAXIMUS:

  1. Conduct an initial work session with department heads and designated City staff to discuss and define the purpose, use and goals for the Study. Meet with City staff as needed to ensure the proper and accurate development of the Study. Review user fee service cost calculations, determined in accordance with this Study, with individual department heads or their designees;
  2. Develop a recommended fee schedule that represents full recovery of the City’s costs. Prepare a report that identifies the present fees, costs, recommended fees, percentage change, estimated revenue impact and comparison information from neighboring and other similar California cities;
  3. Develop a report summarizing the analysis and present the amount that fees would need to be increased to recover full costs given the City's current fee structure and assuming that the frequency of service usage would not be affected by fee changes. The report shall also depict potential recoveries at options less than full cost, (e.g. such as sixty and eighty percent of full cost) as agreed upon between Consultant and City staff;
  4. Provide the proposed fee schedule in a usable Excel electronic file format;
  5. Provide the City with the computer program to enable updates of the Study;
  6. Present the Study’s findings to staff and management. A total of two such presentations will be made, if requested by the City; and
  7. If requested by staff, present the final study’s findings to the City Council at a public hearing.

Reference Material

The RFP, MAXIMUS’ proposal and Proposed Agreement are attached for review by the City Council.


The "not to exceed" fixed fee proposed by MAXIMUS to perform the scope of services detailed in the attached Proposed Agreement is $23,750. The FY 2002-2003 budget includes an appropriation of $25,000 for the Study. Also, assuming that costs have increased at the rate of one (1%) percent annually, the Study may provide fee increases of $100,000 annually, based upon $1.0 Million of annual fee revenue X ten (10) years X one (1%) percent rate of increase.

Respectfully submitted,
Dennis McLean
Director of Finance and Information Technology

Les Evans
City Manager