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PROFESSIONAL SERVICES AGREEMENT
THIS AGREEMENT, entered into this 27 day of March, 2002, by and between CITY OF
NEWPORT BEACH , a Municipal Corporation ( "CITY "), and Hilton Farnkopf & Hobson,
LLC whose address is 3990 Westerly Place, #195, Newport Beach, California, 92660
( "CONSULTANT "), is made with reference to the following:
RECITALS
A. CITY is a municipal corporation duly organized and validly existing under the
laws of the State of California with the power to carry on its business as it is now
being conducted under the statutes of the State of California and the Charter of
CITY.
B. CITY is planning to audit records of Solid Waste Franchise Holders.
C. CITY desires to engage CONSULTANT to audit Solid Waste Franchise Holders
records pursuant to Section Nine of the Solid Waste Franchise Agreement.
D. The principal members of CONSULTANT, are for purpose of this Project, Laith
Ezzet and Darrell Bice.
E. CITY has solicited and received a proposal from CONSULTANT, has reviewed the
previous experience and evaluated the expertise of CONSULTANT, and desires to
contract with CONSULTANT under the terms of conditions provided in this
Agreement.
NOW, THEREFORE, it is mutually agreed by and between the undersigned Parties as
follows:
1. TERM
The term of this Agreement shall commence on the 27 day of March, 2002, and
shall terminate on the 31 day of December, 2002, unless terminated earlier as
set forth herein.
2. SERVICES TO BE PERFORMED
CONSULTANT shall diligently perform all the duties set forth in the scope of
services, attached hereto as Exhibit "A" attached hereto and incorporated herein
by reference.
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3. COMPENSATION TO CONSULTANT
CITY shall pay CONSULTANT for the services in accordance with the provisions
of this Section and the scheduled billing rates, attached hereto as Exhibit "B" and
incorporated herein by reference. No rate changes shall be made during the
term of this Agreement without prior written approval of CITY. CONSULTANT's
compensation for all work performed in accordance with this Agreement shall not
exceed the total contract price of fifty -five thousand dollars ($55,000).
3.1 CONSULTANT shall maintain accounting records of its billings which
includes the name of the employee, type of work performed, times and
dates of all work which is billed on an hourly basis and all approved
incidental expenses including reproductions, computer printing, postage
and mileage.
3.2 CONSULTANT shall submit monthly invoices to CITY payable by CITY
within thirty (30) days of receipt of invoice subject to the approval of CITY
and based upon the following payment schedule: time and materials.
3.3 CONSULTANT shall not receive any compensation for extra work without
prior written authorization of CITY. Any authorized compensation shall be
paid in accordance with Exhibit "B ".
3.4 CITY shall reimburse CONSULTANT only for those costs or expenses
which have been specifically approved in this Agreement, or specifically
approved in advance by CITY. Such cost shall be limited and shall
include nothing more than the following costs incurred by CONSULTANT:
A. The actual costs of subCONSULTANTs for performance of any of
the services which CONSULTANT agrees to render pursuant to
this Agreement which have been approved in advance by CITY and
awarded in accordance with the terms and conditions of this
Agreement.
B. Approved computer data processing and reproduction charges.
C. Actual costs and /or other costs and /or payments specifically
authorized in advance in writing and incurred by CONSULTANT in
the performance of this Agreement.
3.5 Notwithstanding any other paragraph or provision of this Agreement,
beginning on the effective date of this Agreement, CITY may withhold
payment of ten percent (10 %) of each approved payment as approved
retention until all services under this Agreement have been substantially
completed.
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4. STANDARD OF CARE
4.1 All of the services shall be performed by CONSULTANT or under
CONSULTANT's supervision. CONSULTANT represents that it possesses
the professional and technical personnel required to perform the services
required by this Agreement, and that it will perform all services in a
manner commensurate with the community professional standards. All
services shall be performed by qualified and experienced personnel who
are not employed by CITY nor have any contractual relationship with
CITY. CONSULTANT represents and warrants to CITY that it has or shall
obtain all licenses, permits, qualifications and approvals required of its
profession. CONSULTANT further represents and warrants that it shall
keep in effect all such licenses, permits and other approvals during the
term of this Agreement.
4.2 CONSULTANT shall not be responsible for delay, nor shall
CONSULTANT be responsible for damages or be in default or deemed to
be in default by reason of strikes, lockouts, accidents, or acts of God, or
the failure of CITY to furnish timely information or to approve or
disapprove CONSULTANT's work promptly, or delay or faulty
performance by CITY, contractors, or governmental agencies, or any
other delays beyond CONSULTANT's control or without CONSULTANT's
fault.
4.3 The term Construction Management or Construction Manager does not
imply that CONSULTANT is engaged in any aspect of the physical work of
construction contracting. CONSULTANT shall not have control over or
charge of and shall not be responsible for the project's design, the CITY's
project contractor ( "Contractor "), construction means, methods,
techniques, sequences or procedures, or for any health or safety
precautions and programs in connection the work. These duties are and
shall remain the sole responsibility of the Contractor. CONSULTANT
shall not be responsible for the Contractors' schedules or failure to carry
out the work in accordance with the contract documents. CONSULTANT
shall not have control over or charge of acts or omissions of the CITY,
Design Engineer, Contractor, Subcontractors, or their Agents or
employees, or of any other persons performing portions of the work.
5. INDEPENDENT PARTIES
CITY retains CONSULTANT on an independent consultant basis and
CONSULTANT is not an employee of CITY. The manner and means of
conducting the work are under the control of CONSULTANT, except to the extent
they are limited by statute, rule or regulation and the expressed terms of this
Agreement. Nothing in this Agreement shall be deemed to constitute
CONSULTANT or any of CONSULTANT's employees or agents, to be the
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agents or employees of CITY. CONSULTANT shall have the responsibility for
and control over the details in means of performing the work provided that
CONSULTANT is compliance with the terms of this Agreement. Anything in this
Agreement which may appear to give CITY the right to direct CONSULTANT as
to the details of the performance of the services or to exercise a measure of
control over CONSULTANT shall mean that CONSULTANT shall follow the
desires of CITY only with respect to the results of the services.
6. COOPERATION
CONSULTANT agrees to work closely and cooperate fully with CITY's
designated Project Administrator, and any other agencies which may have
jurisdiction or interest in the work to be performed. CITY agrees to cooperate
with the CONSULTANT on the Project.
7. PROJECT MANAGER
CONSULTANT shall assign the Project to a Project Manager, who shall
coordinate all phases of the Project. This Project Manager shall be available to
CITY at all reasonable times during the Project term. CONSULTANT has
designated Darrell Bice to be its Project Manager. CONSULTANT shall not bill
any personnel to the Project other than those personnel identified in Exhibit "B ",
whether or not considered to be key personnel, without CITY's prior written
approval by name and specific hourly billing rate. CONSULTANT shall not
remove or reassign any personnel designated in this Section or assign any new
or replacement person to the Project without the prior written consent of CITY.
CITY's approval shall not be unreasonably withheld with respect to removal or
assignment of non -key personnel.
CONSULTANT, at the sole discretion of CITY, shall remove from the Project any
of its personnel assigned to the performance of services upon written request of
CITY. CONSULTANT warrants that it will continuously furnish the necessary
personnel to complete the Project on a timely basis as contemplated by this
Agreement.
8. TIME OF PERFORMANCE
Time is of the essence in the performance of the services under this Agreement
and the services shall be performed by CONSULTANT in accordance with the
schedule specified in Exhibit A. The failure by CONSULTANT to strictly adhere
to the schedule, may result in termination of this Agreement by CITY, and the
assessment of damages against CONSULTANT for delay. Notwithstanding the
foregoing, CONSULTANT shall not be responsible for delays which are due to
causes beyond CONSULTANT's reasonable control. However, in the case of
any such delay in the services to be provided for the Project, each party hereby
agrees to provide notice to the other party so that all delays can be addressed.
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8.1 CONSULTANT shall submit all requests for extensions of time for
performance in writing to the Project Administrator not later than ten (10)
calendar days after the start of the condition which purportedly causes a
delay, and not later than the date upon which performance is due. The
Project Administrator shall review all such requests and may grant
reasonable time extensions for unforeseeable delays, which are beyond
CONSULTANT's control.
8.2 For all time periods not specifically set forth herein, CONSULTANT shall
respond in the most expedient and appropriate manner under the
circumstances, by either telephone, fax, hand delivery or mail.
9. CITY POLICY
CONSULTANT will discuss and review all matters relating to policy and project
direction with the Project Administrator in advance of all critical decision points in
order to ensure that the Project proceeds in a manner consistent with CITY goals
and policies.
10. CONFORMANCE TO APPLICABLE REQUIREMENT
All work prepared by CONSULTANT shall conform to applicable CITY, county,
state and federal law, regulations and permit requirements and be subject to
approval of the Project Administrator and CITY.
11. PROGRESS
CONSULTANT is responsible to keep the Project Administrator and /or his /her
duly authorized designee informed on a regular basis regarding the status and
progress of the work, activities performed and planned, and any meetings that
have been scheduled or are desired.
12. HOLD HARMLESS
CONSULTANT shall indemnify, defend, save and hold harmless CITY, its CITY
Council, boards and commissions, officers and employees from and against any
and all loss, damages, liability, claims, allegations of liability, suits, costs and
expenses for damages of any nature whatsoever, including, but not limited to,
bodily injury, death, personal injury, property damages, or any other claims
arising from any and all acts or omissions of CONSULTANT, its employees,
agents or subcontractors in the performance of services or work conducted or
performed pursuant to this Agreement. This indemnity shall apply even in the
event of negligence of CITY, or its employees, or other contractors, excepting
only the sole negligence or willful misconduct of CITY, its officers or employees,
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and shall include attorneys' fees and all other costs incurred in defending any
such claim. Nothing in this indemnity shall be construed as authorizing, any
award of attorneys' fees in any action on or to enforce the terms of this
Agreement.
13. INSURANCE
Without limiting CONSULTANT's indemnification of CITY, and prior to
commencement of work, CONSULTANT shall obtain and provide and maintain
at its own expense during the term of this Agreement policy or policies of liability
insurance of the type and amounts described below and satisfactory to CITY.
Certification of all required policies shall be signed by a person authorized by
that insurer to bind coverage on its behalf and must be filed with CITY prior to
exercising any right or performing any work pursuant to this Agreement. Except
workers compensation and errors and omissions, all insurance policies shall add
CITY, its elected officials, officers, agents, representatives and employees as
additional insured for all liability arising from CONSULTANT's services as
described herein.
All insurance policies shall be issued by an insurance company currently
authorized by the Insurance Commissioner to transact business of insurance in
the State of California, with an assigned policyholders' Rating of A (or higher)
and Financial Size Category Class VII (or larger) in accordance with the latest
edition of Bests Key Rating Guide: unless otherwise approved by the CITY Risk
Manager.
A. Worker's compensation insurance covering all employees and principals
of CONSULTANT, per the laws of the State of California.
B. Commercial general liability insurance covering third party liability risks,
including without limitation, contractual liability, in a minimum amount of
$1 million combined single limit per occurrence for bodily injury, personal
injury and property damage. If commercial general liability insurance or
other form with a general aggregate is used, either the general aggregate
shall apply separately to this Project, or the general aggregate limit shall
be twice the occurrence limit.
C. Commercial auto liability and property insurance covering any owned and
rented vehicles of CONSULTANT in a minimum amount of $1 million
combined single limit per accident for bodily injury and property damage.
D. Professional errors and omissions insurance which covers the services to
be performed in connection with this Agreement in the minimum amount
of One Million Dollars ($1,000,000).
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Said policy or policies shall be endorsed to state that coverage shall not be
canceled by either party, except after thirty (30) days' prior notice has been given
in writing to CITY. CONSULTANT shall give CITY prompt and timely notice of
claim made or suit instituted arising out of CONSULTANT's operation hereunder.
CONSULTANT shall also procure and maintain, at its own cost and expense,
any additional kinds of insurance, which in its own judgment may be necessary
for its proper protection and prosecution of the work.
CONSULTANT agrees that, in the event of loss due to any of the perils for which
it has agreed to provide comprehensive general and automotive liability
insurance, CONSULTANT shall look solely to its insurance for recovery.
CONSULTANT hereby grants to CITY, on behalf of any insurer providing
comprehensive general and automotive liability insurance to either
CONSULTANT or CITY with respect to the services of CONSULTANT herein, a
waiver of any right of subrogation which any such insurer of said CONSULTANT
may acquire against CITY by virtue of the payment of any loss under such
insurance.
14. PROHIBITION AGAINST TRANSFERS
CONSULTANT shall not assign, sublease, hypothecate or transfer this
Agreement or any for the services to be performed under this Agreement,
directly or indirectly, by operation of law or otherwise without prior written
consent of CITY. Any attempt to do so without consent of CITY shall be null and
void.
The sale, assignment, transfer or other disposition of any of the issued and
outstanding capital stock of CONSULTANT, or of the interest of any general
partner or joint venturer or syndicate member or cotenant if CONSULTANT is a
partnership or joint- venture or syndicate or cotenancy, which shall result in
changing the control of CONSULTANT, shall be construed as an assignment of
this Agreement. Control means fifty percent (50 %) or more of the voting power,
or twenty -five percent (25 %) or more of the assets of the corporation, partnership
or joint- venture.
15. OWNERSHIP OF DOCUMENTS
Each and every report, draft, work product, map, record and other document
reproduced, prepared or caused to be prepared by CONSULTANT pursuant to
or in connection with this Agreement shall be the exclusive property of CITY.
Documents, including drawings and specifications, prepared by CONSULTANT
pursuant to this Agreement are not intended or represented to be suitable for
reuse by CITY or others on any other project. Any use of completed documents
for other projects and any use of incomplete documents without specific written
authorization from CONSULTANT will be at CITY's sole risk and without liability
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to CONSULTANT. Further, any and all liability arising out of changes made to
CONSULTANT's deliverables under this Agreement by CITY or persons other
than CONSULTANT is waived against CONSULTANT and CITY assumes full
responsibility for such changes unless CITY has given CONSULTANT prior
notice and has received from CONSULTANT written consent for such changes.
CONSULTANT shall, at such time and in such form as CITY may require, furnish
reports concerning the status of services required under this Agreement.
16. CONFIDENTIALITY
The information, which results from the services in this Agreement, is to be kept
confidential unless the release of information is authorized by CITY.
17. CITY'S RESPONSIBILITIES
In order to assist CONSULTANT in the execution of his responsibilities under
this Agreement, CITY agrees to provide the following:
A. Access to, and upon request of CONSULTANT, one copy of all existing
record information on file at CITY. CONSULTANT shall be entitled to rely
upon the accuracy of data information provided by CITY or others without
independent review or evaluation. CITY will provide all such materials in a
timely manner so as not to cause delays in CONSULTANT's work
schedule.
B. Blueprinting, CADD plotting, copying and other services through CITY's
reproduction company for each of the required submittals.
CONSULTANT will be required to coordinate the required submittals with
CITY's reproduction company. All other reproduction will be the
responsibility of CONSULTANT and as defined above.
C. Usable life of facilities criteria and information with regards to deficient
facilities.
D. Street base digital file in AutoCAD (DXF) compatible format.
18. ADMINISTRATION
This Agreement will be administered by the Administrative Services Director.
The Administrative Services Director shall be considered the Project
Administrator and shall have the authority act for CITY under this Agreement.
The Project Administrator or his /her authorized representative shall represent
CITY in all matters pertaining to the services to be rendered pursuant to this
Agreement.
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19. RECORDS
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CONSULTANT shall keep records and invoices in connection with the work to be
performed under this Agreement. CONSULTANT shall maintain complete and
accurate records with respect to the costs incurred under this Agreement. All
such records shall be clearly identifiable. CONSULTANT shall allow a
representative of CITY to examine, audit and make transcripts or copies of such
records during normal business hours. CONSULTANT shall allow inspection of
all work, data, documents, proceedings and activities related to the Agreement
for a period of three (3) years from the date of final payment under this
Agreement.
20. WITHHOLDINGS
CITY may withhold payment of any disputed sums until satisfaction of the
dispute with respect to such payment. Such withholding shall not be deemed to
constitute a failure to pay according to the terms of this Agreement.
CONSULTANT shall not discontinue work as a result of such withholding.
CONSULTANT shall have an immediate right to appeal to the CITY Manager or
his designee with respect to such disputed sums. CONSULTANT shall be
entitled to receive interest on any withheld sums at the rate of seven percent
(7 %) per annum from the date of withholding of any amounts found to have been
improperly withheld.
21. ERRORS AND OMISSIONS
In the event of errors or omissions that are due to the negligence or professional
inexperience of CONSULTANT which result in expense to CITY greater than
would have resulted if there were not errors or omissions in the work
accomplished by CONSULTANT, the additional design, construction and /or a
restoration expense shall be borne by CONSULTANT. Nothing in this paragraph
is intended to limit CITY's rights under any other sections of this Agreement.
22. CITY'S RIGHT TO EMPLOY OTHER CONSULTANTS
CITY reserves the right to employ other CONSULTANTs in connection with the
Project.
23. CONFLICTS OF INTEREST
A. The CONSULTANT or its employees may be subject to the provisions of
the California Political Reform Act of 1974 (the "Act "), which (1) requires
such persons to disclose financial interest that may foreseeably be
materially affected by the work performed under this Agreement, and (2)
prohibits such persons from making, or participating in making decisions
that will foreseeably financially affect such interest.
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B. If subject to the Act, CONSULTANT shall conform to all requirements of
the Act. Failure to do so constitutes a material breach and is grounds for
termination of this Agreement by CITY. CONSULTANT shall indemnify
and hold harmless CITY for any and all claims for damages resulting from
CONSULTANT's violation of this Section.
24. SUBCONSULTANT AND ASSIGNMENT
A. Except as specifically authorized under this Agreement, the services
included in this Agreement shall not be assigned, transferred, contracted
or subcontracted without prior written approval of CITY.
25. NOTICES
All notices, demands, requests or approvals to be given under this Agreement
shall be given in writing and conclusively shall be deemed served when delivered
personally or on the third business day after the deposit thereof in the United
States mail, postage prepaid, first class mail, addressed as hereinafter provided.
All notices, demands, requests or approvals from CONSULTANT to CITY shall
be addressed to CITY at:
Glen Everroad, Revenue Manager
City of Newport Beach
3300 Newport Boulevard
Newport Beach, CA, 92658 -8915
(949) 644 -3141
Fax 723 -3544
All notices, demands, requests or approvals from CITY to CONSULTANT shall
be addressed to CONSULTANT at:
Attention: Mr. Laith Ezzet
HILTON FARNKOPF & HOBSON, LLC
3990 Westerly Place, #195
Newport Beach, CA 92660
Telephone: (949)251 -8628
Facsimile: (949)251 -9741
26. TERMINATION
In the event either part hereto fails or refuses to perform any of the provisions
hereof at the time and in the manner required hereunder, that party shall be
deemed in default in the performance of this Agreement. If such default is not
cured within a period of two (2) days, or if more than two (2) days are reasonably
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required to cure the default and the defaulting party fails to give adequate
assurance of due performance within two (2) days after receipt of written notice
of default, specifying the nature of such default and the steps necessary to cure
such default, the nondefaulting party may terminate the Agreement forthwith by
giving to the defaulting party written notice thereof.
26.1 CITY shall have the option, at its sole discretion and without cause, of
terminating this Agreement by giving seven (7) days' prior written notice to
CONSULTANT as provided herein. Upon termination of this Agreement,
CITY shall pay to the CONSULTANT that portion of compensation
specified in this Agreement that is earned and unpaid prior to the effective
date of termination.
27. COMPLIANCES
CONSULTANT shall comply with all laws, state or federal and all ordinances,
rules and regulations enacted or issued by CITY.
28. WAIVER
A waiver by either party of any breach, of any term, covenant or condition
contained herein shall not be deemed to be a waiver of any subsequent breach
of the same or any other term, covenant or condition contained herein, whether
of the same or a different character.
29. INTEGRATED CONTRACT
This Agreement represents the full and complete understanding of every kind or
nature whatsoever between the Parties hereto, and all preliminary negotiations
and agreements of whatsoever kind or nature are merged herein. No verbal
agreement or implied covenant shall be held to vary the provisions herein. Any
modification of this Agreement will be effective only by written execution signed
by both CITY and CONSULTANT.
32. PATENT INDEMNITY
The CONSULTANT shall indemnify CITY, its agents, officers, representatives
and employees against liability, including costs, for infringement of any United
States' letters patent, trademark, or copyright infringement, including costs,
contained in CONSULTANT's drawings and specifications provided under this
Agreement.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on
the day and year first written above.
APPROVED AS TO FORM AND
CONTENT:
Ro6iClauson,
Assistant City Attorney
for the City of Newport Beach
LaVonne Harkless
CITY Clerk
F:\users\cat\shared\da\Ag\Templates\ProfServices.doc
Rev: 03 -27 -02
CITY OF NEWPORT BEACH
A Municipal Corporation
By: v
Tod Ridg y, Mayor
for the CI of Newp. t Beach
CONSUL
Senior Vice President
HILTON FARNKOPF & HOBSON, LLC
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EXHIBIT A
SCOPE OF WORK & SCHEDULE
Agreed -Upon Procedures on the
City of Newport Beach's Solid Waste Haulers' Fee Payments
BACKGROUND
The City provides residential solid waste collection services to all residential
premises and to multi- family housing projects of four or less units. The City
requires that solid waste haulers desiring to provide solid waste handling or
collection services in the City enter into non - exclusive solid waste collection
franchise agreements with the City. The term of these franchise agreements does
not exceed ten years and all franchisees may reapply for new non - exclusive
franchises within six months of expiration. All of the agreements expire on
January 9, 2006.
During the term of the franchise agreement, the hauler pays a franchise fee and
an environmental liability fee to the City. The combined fee is currently 16% of
gross receipts from solid waste services performed in the City. (The franchise fee
is 10.5% and the environmental liability fee is 5.5 %). Fees are remitted quarterly,
accompanied by a solid waste franchise statement and a separate tonnage report.
Each franchisee independently calculates its fee payments to the City based on
internal accounting records and remits these fees to the City. Section 9 of each
agreement states that the franchisee's records shall be made available to
authorized City officers, employees or consultants, for the purpose of inspection
or audit for verification and accuracy of the fees paid by the franchisee under the
agreement. Section 9 further states that if franchise fees paid to the City are
understated by $1,000 or more, the contractor will reimburse the City for the cost
of the audit.
A recent report prepared by City staff showed that franchise fees paid to the City
for the period from July 1, 2000 to June 30, 2001 totaled $867,640. The four
franchisees with the largest fee payments (Waste Management of Orange
County, Ware Disposal Company, Inc., Rainbow Disposal Company, Inc. and
CR &R, Inc.) represented 96% of the total payments to the City.
The City has requested HF &H to perform agreed -upon procedures on the fiscal
year 2001 quarterly fee payments received from eight of the haulers.
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STUDY OBTECTIVE
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The objective of this study is to apply the agreed -upon procedures described in
Exhibit A to the quarterly fee payments for fiscal year 2001 (12 months ended
June 30, 2001) submitted by eight of the waste haulers currently operating in the
City:
• Waste Management of Orange County
• Ware Disposal Company
• Rainbow Disposal Company
• CR &R (Haulaway and ORCO)
• Federal Disposal Services
• Key Disposal Inc.
• Briggeman Disposal Services Inc.
• Ocean Waste and Recycling
Based on the error rate in fiscal year 2001, an estimate of the fees due to the City
will be made for the two prior fiscal years (1999 and 2000) by applying the 2001
error rate for each company to the fee payments submitted to the City in 1999
and 2000.
SCOPE & APPROACH
This section describes the scope and approach by workplan task.
Task 1- Initiate the Project and Plan Site Visits
We will obtain from the City the "Solid Waste Franchise Statements' and the
tonnage reports that accompanied the selected franchisees' fee payments for the
period under study.
We will review the City's fee payment data and calculate financial ratios of
receipts -to- tonnage to assess the reasonableness of each franchisee's submittal,
and prepare a testing plan for use during our site visits. We will also use this
initial data analysis to identify any inconsistencies to resolve during our site
visits.
We will meet with City staff at a kickoff meeting to discuss our site visit plans
and confirm the schedule.
We will prepare a letter of introduction for City staff to send to the franchisees
notifying them of the site visit and review. After the franchisees have received
this letter, we will attempt to contact each franchisee twice to schedule our site
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visit. We will notify the City of any problems regarding franchisee cooperation
and ask the City to follow -up in these instances.
Task 2 - Conduct Site Visits and Perform Agreed -Upon Procedures
We will visit the local offices of the franchisees (within reasonable geographic
limits) to apply the following agreed -upon procedures to the fee payment
information for the period under review:
• We will test the mathematical accuracy of the fee payment calculations
submitted by each franchisee.
• We will test the data used by the franchisee to report gross receipts from City
customers and examine the source documents that support this information
on a sample basis.
• We will attempt to resolve any inconsistencies identified.
• We will identify adjustments to the fee payment amounts, if any.
The specific procedures we perform in the field will vary depending on the
selected hauling company's accounting procedures, internal controls and
available records. The financial accounting policies vary significantly among the
companies, and most, if not all, of the companies do not have audited financial
statements for services provided in the City of Newport Beach.
We will attest to the accuracy of our calculations, and while we believe our
procedures will be sufficient to meet the City's study objectives at minimum cost,
our work will not constitute an audit in accordance with Generally Accepted
Auditing Standards.
If, during the course of our work, something comes to our attention which we
believe should be expanded on or clarified in the franchise agreements or the
City's ordinance, we will bring it to the attention of City staff.
Task 3 - Perform Electronic Matching of Service Addresses to City List for One
Hauler with the Largest Fee Payments
In fiscal year 2001, Waste Management remitted approximately 70% of the total
waste hauler fees received by the City. Additionally, Waste Management is the
new residential contractor in the recently annexed Newport Coast area. Effective
January 1, 2002, the customers in Newport Coast served under this contract are
exempt from the franchise fee.
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We will perform computerized matching of Waste Management's service
location records against the City's "official" list of commercial addresses to
identify all of the locations subject to the City's fee and agree the results to Waste
Management's billing records to determine that all of the Waste Management
accounts located in Newport Beach have been properly coded for purposes of fee
determination. This procedure will help ensure that accounts with service
locations within the City that are billed to addresses outside the City are
correctly included in the fee calculation.
In order to perform this task, we have assumed that:
Waste Management will download for us, in a delimited file format that can
be imported into Microsoft Excel or Access, its service locations records, after
performing an initial sort by postal codes that overlay the Newport Beach
area. Since postal codes do not exactly match city limits, the sort by postal
codes will contain all of the Newport Beach service locations as well as some
locations outside of Newport Beach. Secondly, Waste Management will
separately provide a download of its billing records (the same electronic
format) that have been coded as Newport Beach that the company uses to
determine its fee payment.
The City will download for us, in a delimited file format that can be imported
into Microsoft Excel or Access, a list of all service addresses within the City
limits that are subject to the City's fee. The City's list should exclude
addresses that receive municipal solid waste collection service and addresses
that receive residential collection service from Waste Management under
contract to the City in the annexed area.
Task 4 - Document Procedures and Adjustments
We will document the procedures we perform and any necessary adjustments to
the quarterly fee payments for the period under study.
Task 5 - Prepare Estimates of Fees Due for the Past Three Years from Sample
Based on the Error Rate for 2001
The City has requested that we estimate the amount of fees that would be due
from the franchisee if the error rate observed in 2001 were applied to fiscal years
1999 and 2000. We will prepare a schedule that calculates the estimated amount
of the fees due based on fee payment and gross receipts data provided by the
City for fiscal years 1999 and 2000. The sum of the estimates from 1999 and 2000,
plus the results from the 2001 review, will result in the total estimated amount
due for the three -year period.
3/28/02 Page A - 4
Task 6 - Review Additional Documentation at One Company in Response to
Three -Year Estimate of Fees Due
One or more haulers may claim that to utilize the 2001 error rate (Task 5) to
calculate fees due from a prior year is not representative to their unique
circumstances, particularly if it has acquired other companies that serve Newport
Beach. In such a case, the waste hauler will be given the opportunity to make
available records and show an alternative calculation of the fees due. We have
budgeted to review such records from one company during one subsequent site
visit. If more than one company claims an alternative calculation, or if more than
one return site visit is required, then our estimated study cost will increase.
Task 7 - Prepare Letters Documenting Results
We will prepare a brief letter to each of the franchisees reviewed, to be mailed by
the City, that describes our findings and the reasons for any adjustments. The
letter will summarize the fee payment amount, with documentation of the fee
adjustment calculations provided in an accompanying exhibit. The City will be
responsible for collection or refunding related to any fee adjustments.
Task 8 - Administer Project
We will administer the project, conduct internal quality reviews and prepare our
project work papers at the engagement's conclusion.
Task 9 - Contingency for Additional Follow -up
We have budgeted 22 hours for additional follow -up activities that may be
necessary to complete the reviews at waste haulers that provide incomplete or
inaccurate records during our scheduled review and require a return visit or
subsequent review of additional records.
CITY RESPONSIBILITIES
The City will be responsible for:
• Providing us copies of all of the audit result letters prepared the last time the
haulers were audited.
Providing us a hard copy and diskette of a spreadsheet file documenting all of the
franchisees' reported receipts, tonnage and fee payments by quarter for the three
fiscal years 1999, 2000 and 2001, including those franchisees no longer providing
service in the City.
3/28/02 Page A - 5
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• Providing us photocopies of the quarterly reports remitted by the eight
franchisees to be reviewed for fiscal year 2001.
• Sending a letter of introduction (prepared by HF &H) to the franchisees.
• Following up with franchisees that are uncooperative in scheduling or
performing the reviews.
SCHEDULE
We anticipate initiating this engagement within two to three weeks of receipt of a
City purchase order or executed consulting contract, and completing the
engagement approximately four months from project initiation, assuming timely
cooperation from the City's franchisees.
3/28/02 Page A - 6
Meeting Date: March 26, 2002
Agenda Item No. 7
CITY OF NEWPORT BEACH
ADMINISTRATIVE SERVICES DEPARTMENT
Resource Management • Fiscal Services • M.I.S. • Revenue • Accounting
DATE: March 26, 2002
TO: MAYOR AND CITY COUNCIL MEMBERS
FROM: Glen Everroad, Revenue Manager
RE: SOLID WASTE AUDITS
Recommendation
MAR 2 6 2002
Authorize staff to execute the professional services agreement with Hilton Farnkopf & Hobson,
LLC to conduct audits of solid waste franchise holders.
Background
Newport Beach Municipal Code Chapter 12.63 requires solid waste haulers to obtain a non-
exclusive solid waste collection franchise agreement. The solid waste collection franchise
agreements are administered by the General Services Department. The term of these franchise
agreements does not exceed ten years and all franchisees may reapply for new non - exclusive
franchises within six months of expiration. All of the franchise solid waste franchise agreements
expire in 2006. During the term of the franchise agreement, the hauler pays a franchise fee and
environmental liability fee to the City. The combined fee is currently 16% of the gross receipts
from solid waste services performed in the City. Fees are remitted quarterly, accompanied by a
solid waste franchise statement and a separate tonnage report. The City currently has 18
franchisees. Four of those account for 96% of the franchise payments made to the City. Eight
franchisees regularly generate gross receipts subject to franchise fee calculation, while ten
franchisees (e.g. construction contractors) routinely do not have gross receipts subject to franchise
fees. Each agreement provides that the franchisee shall maintain records for verification by the City
of the amounts of fees paid and solid waste reported. If the franchise fees paid to the City are
understated by $1000 or more, the franchisee will reimburse the City for the cost of the audit. The
agreements also provide that the records accessed by the City or its contractors in the conduct of the
audit shall remain confidential.
Solid waste collection franchisees were last audited in 1997 by a contingent fee based contractor to
the City. That audit identified a number of procedural issues with the franchisees at that time, and
several franchisees expressed concern about the objectivity of a contingent fee auditor.
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Very few (staff has identified two) audit firms have expertise in solid waste audits. One is the firm
that performed the audit in 1997 (Municipal Resource Consultants) and the other is Newport Beach
based Hilton Farnkopf & Hobson, LLC (HFH). The General Services Director reviewed a list of all
the franchisees and agreed that just the eight franchise haulers regularly reporting franchise fees
during the past three years should be audited. Revenue staff solicited bids from both Municipal
Resource Consultants and Hilton Famkoph & Hobson. Municipal Resource Consultants proposed to
provide either contingent fee audits or fixed fee audits, while HFH only proposed a fixed fee. Staff
recommends, based on the concerns related by franchisees audited in 1997, to pursue fixed fee
audits. Municipal Resource Consultants bid on a fixed fee to audit of the eight solid waste
franchisees was $72,000. The attached proposed agreement from HFH proposes to audit the
franchise fees and tonnage reports provided by the eight franchisees for a fixed fee of $55,000. A
list of the proposed franchisees to be audited, the procedures, cost breakdown and time schedule is
detailed in the attached proposed agreement with HFH. Based on the results of the last audit, staff
anticipates that approximately half of the audit costs will be recovered from the franchisees audited.
The balance of the audit costs are proposed to be paid from additional franchise fees realized from
the audit. Staff has checked two of the references provided by HFH (Beverly Hills and Burbank)
and received positive reports of HFH's performance from those references. The proposed
agreement has been reviewed and approved by the City Attorney's Office.
le hLerroad
Revenue Manager
Attachment: Proposed Agreement
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PROFESSIONAL SERVICES AGREEMENT
THIS AGREEMENT, entered into this day of 2002, by and between
CITY OF NEWPORT BEACH, a Municipal Corporation ( "CITY "), and Hilton Farnkopf &
Hobson, LLC whose address is 3990 Westerly Place, #195, Newport Beach, California,
92660 ( "CONSULTANT "), is made with reference to the following:
RECITALS
A. CITY is a municipal corporation duly organized and validly existing under the
laws of the State of California with the power to carry on its business as it is now
being conducted under the statutes of the State of California and the Charter of
CITY.
B. CITY is planning to audit records of Solid Waste Franchise Holders.
C. CITY desires to engage CONSULTANT to audit Solid Waste Franchise Holders
records pursuant to Section Nine of the Solid Waste Franchise Agreement.
D. The principal members of CONSULTANT, for purposes of this Project, are Laith
Ezzet and Darrell Bice.
E. CITY has solicited and received a proposal from CONSULTANT, has reviewed
the previous experience and evaluated the expertise of CONSULTANT, and
desires to contract with CONSULTANT under the terms of conditions provided in
this Agreement.
NOW, THEREFORE, it is mutually agreed by and between the undersigned Parties as
follows:
1. TERM
The term of this Agreement shall commence on the _ day of ,200_,
and shall terminate on the day of , 200_, unless terminated
earlier as set forth herein.
2. SERVICES TO BE PERFORMED
CONSULTANT shall diligently perform all the duties set forth in the scope of
services, attached hereto as Exhibit "A" attached hereto and incorporated herein
by reference.
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3. COMPENSATION TO CONSULTANT
CITY shall pay CONSULTANT for the services in accordance with the provisions
of this Section and the scheduled billing rates, attached hereto as Exhibit "B" and
incorporated herein by reference. No rate changes shall be made during the
term of this Agreement without prior written approval of CITY. CONSULTANT's
compensation for all work performed in accordance with this Agreement shall not
exceed the total contract price of Fifty -five thousand dollars ($55,000).
3.1 CONSULTANT shall maintain accounting records of its billings which
includes the name of the employee, type of work performed, times and
dates of all work which is billed on an hourly basis and all approved
incidental expenses including reproductions, computer printing, postage
and mileage.
3.2 CONSULTANT shall submit monthly invoices to CITY payable by CITY
within thirty (30) days of receipt of invoice subject to the approval of CITY
and based upon the following payment schedule: time and materials.
3.3 CONSULTANT shall not receive any compensation for extra work without
prior written authorization of CITY. Any authorized compensation shall be
paid in accordance with Exhibit "B ".
3.4 CITY shall reimburse CONSULTANT only for those costs or expenses
which have been specifically approved in this Agreement, or specifically
approved in advance by CITY. Such cost shall be limited and shall
include nothing more than the following costs incurred by CONSULTANT:
A. The actual costs of CONSULTANT for performance of any of the
services which CONSULTANT agrees to render pursuant to this
Agreement which have been approved in advance by CITY and
awarded in accordance with the terms and conditions of this
Agreement.
B. Approved computer data processing and reproduction charges.
C. Actual costs and /or other costs and /or payments specifically
authorized in advance in writing and incurred by CONSULTANT in
the performance of this Agreement.
3.5 Notwithstanding any other paragraph or provision of this Agreement,
beginning on the effective date of this Agreement, CITY may withhold
payment of ten percent (10 %) of each approved payment as approved
retention until all services under this Agreement have been substantially
completed.
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4. STANDARD OF CARE
4.1 All of the services shall be performed by CONSULTANT or under
CONSULTANT's supervision. CONSULTANT represents that it possesses
the professional and technical personnel required to perform the services
required by this Agreement, and that it will perform all services in a
manner commensurate with the community professional standards. All
services shall be performed by qualified and experienced personnel who
are not employed by CITY nor have any contractual relationship with
CITY. CONSULTANT represents and warrants to CITY that it has or shall
obtain all licenses, permits, qualifications and approvals required of its
profession. CONSULTANT further represents and warrants that it shall
keep in effect all such licenses, permits and other approvals during the
term of this Agreement.
4.2 CONSULTANT shall not be responsible for delay, nor shall
CONSULTANT be responsible for damages or be in default or deemed to
be in default by reason of strikes, lockouts, accidents, or acts of God, or
the failure of CITY to furnish timely information or to approve or
disapprove CONSULTANT's work promptly, or delay or faulty
performance by CITY, contractors, or governmental agencies, or any
other delays beyond CONSULTANT's control or without CONSULTANT's
fault.
4.3 The term Construction Management or Construction Manager does not
imply that CONSULTANT is engaged in any aspect of the physical work of
construction contracting. CONSULTANT shall not have control over or
charge of and shall not be responsible for the project's design, the CITY's
project contractor ( "Contractor'), construction means, methods,
techniques, sequences or procedures, or for any health or safety
precautions and programs in connection the work. These duties are and
shall remain the sole responsibility of the Contractor. CONSULTANT
shall not be responsible for the Contractors' schedules or failure to carry
out the work in accordance with the contract documents. CONSULTANT
shall not have control over or charge of acts or omissions of the CITY,
Design Engineer, Contractor, Subcontractors, or their Agents or
employees, or of any other persons performing portions of the work.
S. INDEPENDENT PARTIES
CITY retains CONSULTANT on an independent consultant basis and
CONSULTANT is not an employee of CITY. The manner and means of
conducting the work are under the control of CONSULTANT, except to the extent
they are limited by statute, rule or regulation and the expressed terms of this
Agreement. Nothing in this Agreement shall be deemed to constitute
CONSULTANT or any of CONSULTANT's employees or agents, to be the
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agents or employees of CITY. CONSULTANT shall have the responsibility for
and control over the details in means of performing the work provided that
CONSULTANT is compliance with the terms of this Agreement. Anything in this
Agreement which may appear to give CITY the right to direct CONSULTANT as
to the details of the performance of the services or to exercise a measure of
control over CONSULTANT shall mean that CONSULTANT shall follow the
desires of CITY only with respect to the results of the services.
6. COOPERATION
CONSULTANT agrees to work closely and cooperate fully with CITY's
designated Project Administrator, and any other agencies which may have
jurisdiction or interest in the work to be performed. CITY agrees to cooperate
with the CONSULTANT on the Project.
7. PROJECT MANAGER
CONSULTANT shall assign the Project to a Project Manager, who shall
coordinate all phases of the Project. This Project Manager shall be available to
CITY at all reasonable times during the Project term. CONSULTANT has
designated Darrell Bice to be its Project Manager. CONSULTANT shall not bill
any personnel to the Project other than those personnel identified in Exhibit "B ",
whether or not considered to be key personnel, without CITY's prior written
approval by name and specific hourly billing rate. CONSULTANT shall not
remove or reassign any personnel designated in this Section or assign any new
or replacement person to the Project without the prior written consent of CITY.
CITY's approval shall not be unreasonably withheld with respect to removal or
assignment of non -key personnel.
CONSULTANT, at the sole discretion of CITY, shall remove from the Project any
of its personnel assigned to the performance of services upon written request of
CITY. CONSULTANT warrants that it will continuously furnish the necessary
personnel to complete the Project on a timely basis as contemplated by this
Agreement.
8. TIME OF PERFORMANCE
Time is of the essence in the performance of the services under this Agreement
and the services shall be performed by CONSULTANT in accordance with the
schedule specified in Exhibit A. The failure by CONSULTANT to strictly adhere
to the schedule, may result in termination of this Agreement by CITY, and the
assessment of damages against CONSULTANT for delay. Notwithstanding the
foregoing, CONSULTANT shall not be responsible for delays which are due to
causes beyond CONSULTANT's reasonable control. However, in the case of
any such delay in the services to be provided for the Project, each party hereby
agrees to provide notice to the other party so that all delays can be addressed.
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8.1 CONSULTANT shall submit all requests for extensions of time for
performance in writing to the Project Administrator not later than ten (10)
calendar days after the start of the condition which purportedly causes a
delay, and not later than the date upon which performance is due. The
Project Administrator shall review all such requests and may grant
reasonable time extensions for unforeseeable delays, which are beyond
CONSULTANT's control.
8.2 For all time periods not specifically set forth herein, CONSULTANT shall
respond in the most expedient and appropriate manner under the
circumstances, by either telephone, fax, hand delivery or mail.
9. CITY POLICY
CONSULTANT will discuss and review all matters relating to policy and project
direction with the Project Administrator in advance of all critical decision points in
order to ensure that the Project proceeds in a manner consistent with CITY goals
and policies.
10. CONFORMANCE TO APPLICABLE REQUIREMENT
All work prepared by CONSULTANT shall conform to applicable CITY, county,
state and federal law, regulations and permit requirements and be subject to
approval of the Project Administrator and CITY.
11. PROGRESS
CONSULTANT is responsible to keep the Project Administrator and /or his /her
duly authorized designee informed on a regular basis regarding the status and
progress of the work, activities performed and planned, and any meetings that
have been scheduled or are desired.
12. HOLD HARMLESS
CONSULTANT shall indemnify, defend, save and hold harmless CITY, its CITY
Council, boards and commissions, officers and employees from and against any
and all loss, damages, liability, claims, allegations of liability, suits, costs and
expenses for damages of any nature whatsoever, including, but not limited to,
bodily injury, death, personal injury, property damages, or any other claims
arising from any and all acts or omissions of CONSULTANT, its employees,
agents or subcontractors in the performance of services or work conducted or
performed pursuant to this Agreement. This indemnity shall apply even in the
event of negligence of CITY, or its employees, or other contractors, excepting
only the sole negligence or willful misconduct of CITY, its officers or employees,
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and shall include attorneys' fees and all other costs incurred in defending any
such claim. Nothing in this indemnity shall be construed as authorizing, any
award of attorneys' fees in any action on or to enforce the terms of this
Agreement.
13. INSURANCE
Without limiting CONSULTANT's indemnification of CITY, and prior to
commencement of work, CONSULTANT shall obtain and provide and maintain
at its own expense during the term of this Agreement policy or policies of liability
insurance of the type and amounts described below and satisfactory to CITY.
Certification of all required policies shall be signed by a person authorized by
that insurer to bind coverage on its behalf and must be filed with CITY prior to
exercising any right or performing any work pursuant to this Agreement. Except
workers compensation and errors and omissions, all insurance policies shall add
CITY, its elected officials, officers, agents, representatives and employees as
additional insured for all liability arising from CONSULTANT's services as
described herein.
All insurance policies shall be issued by an insurance company currently
authorized by the Insurance Commissioner to transact business of insurance in
the State of California, with an assigned policyholders' Rating of A (or higher)
and Financial Size Category Class VII (or larger) in accordance with the latest
edition of Bests Key Rating Guide: unless otherwise approved by the CITY Risk
Manager.
A. Worker's compensation insurance covering all employees and principals
of CONSULTANT, per the laws of the State of California.
B. Commercial general liability insurance covering third party liability risks,
including without limitation, contractual liability, in a minimum amount of
$1 million combined single limit per occurrence for bodily injury, personal
injury and property damage. If commercial general liability insurance or
other form with a general aggregate is used, either the general aggregate
shall apply separately to this Project, or the general aggregate limit shall
be twice the occurrence limit.
C. Commercial auto liability and property insurance covering any owned and
rented vehicles of CONSULTANT in a minimum amount of $1 million
combined single limit per accident for bodily injury and property damage.
D. Professional errors and omissions insurance which covers the services to
be performed in connection with this Agreement in the minimum amount
of One Million Dollars ($1,000,000).
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Said policy or policies shall be endorsed to state that coverage shall not be
canceled by either party, except after thirty (30) days' prior notice has been given
in writing to CITY. CONSULTANT shall give CITY prompt and timely notice of
claim made or suit instituted arising out of CONSULTANT's operation hereunder.
CONSULTANT shall also procure and maintain, at its own cost and expense,
any additional kinds of insurance, which in its own judgment may be necessary
for its proper protection and prosecution of the work.
CONSULTANT agrees that, in the event of loss due to any of the perils for which
it has agreed to provide comprehensive general and automotive liability
insurance, CONSULTANT shall look solely to its insurance for recovery.
CONSULTANT hereby grants to CITY, on behalf of any insurer providing
comprehensive general and automotive liability insurance to either
CONSULTANT or CITY with respect to the services of CONSULTANT herein, a
waiver of any right of subrogation which any such insurer of said CONSULTANT
may acquire against CITY by virtue of the payment of any loss under such
insurance.
14. PROHIBITION AGAINST TRANSFERS
CONSULTANT shall not assign, sublease, hypothecate or transfer this
Agreement or any for the services to be performed under this Agreement,
directly or indirectly, by operation of law or otherwise without prior written
consent of CITY. Any attempt to do so without consent of CITY shall be null and
void.
The sale, assignment, transfer or other disposition of any of the issued and
outstanding capital stock of CONSULTANT, or of the interest of any general
partner or joint venturer or syndicate member or cotenant if CONSULTANT is a
partnership or joint- venture or syndicate or cotenancy, which shall result in
changing the control of CONSULTANT, shall be construed as an assignment of
this Agreement. Control means fifty percent (50 %) or more of the voting power,
or twenty -five percent (25 %) or more of the assets of the corporation, partnership
or joint- venture.
15. OWNERSHIP OF DOCUMENTS
Each and every report, draft, work product, map, record and other document
reproduced, prepared or caused to be prepared by CONSULTANT pursuant to
or in connection with this Agreement shall be the exclusive property of CITY.
Documents, including drawings and specifications, prepared by CONSULTANT
pursuant to this Agreement are not intended or represented to be suitable for
reuse by CITY or others on any other project. Any use of completed documents
for other projects and any use of incomplete documents without specific written
authorization from CONSULTANT will be at CITY's sole risk and without liability
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to CONSULTANT. Further, any and all liability arising out of changes made to
CONSULTANT's deliverables under this Agreement by CITY or persons other
than CONSULTANT is waived against CONSULTANT and CITY assumes full
responsibility for such changes unless CITY has given CONSULTANT prior
notice and has received from CONSULTANT written consent fpr such changes.
CONSULTANT shall, at such time and in such form as CITY may require, furnish
reports concerning the status of services required under this Agreement.
16. CONFIDENTIALITY
The information, which results from the services in this Agreement, is to be kept
confidential unless the release of information is authorized by CITY.
17. CITY'S RESPONSIBILITIES
In order to assist CONSULTANT in the execution of his responsibilities under
this Agreement, CITY agrees to provide the following:
A. Access to, and upon request of CONSULTANT, one copy of all existing
record information on file at CITY. CONSULTANT shall be entitled to rely
upon the accuracy of data information provided by CITY or others without
independent review or evaluation. CITY will provide all such materials in a
timely manner so as not to cause delays in CONSULTANT's work
schedule.
B. Blueprinting, CADD plotting, copying and other services through CITY's
reproduction company for each of the required submittals.
CONSULTANT will be required to coordinate the required submittals with
CITY's reproduction company. All other reproduction will be the
responsibility of CONSULTANT and as defined above.
C. Usable life of facilities criteria and information with regards to deficient
facilities.
D. Street base digital file in AutoCAD (DXF) compatible format.
18. ADMINISTRATION
This Agreement will be administered by the Administrative Services Director.
The Administrative Services Director shall be considered the Project
Administrator and shall have the authority act for CITY under this Agreement.
The Project Administrator or his /her authorized representative shall represent
CITY in all matters pertaining to the services to be rendered pursuant to this
Agreement.
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19. RECORDS
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CONSULTANT shall keep records and invoices in connection with the work to be
performed under this Agreement. CONSULTANT shall maintain complete and
accurate records with respect to the costs incurred under this Agreement. All
such records shall be clearly identifiable. CONSULTANT shall allow a
representative of CITY to examine, audit and make transcripts or copies of such
records during normal business hours. CONSULTANT shall allow inspection of
all work, data, documents, proceedings and activities related to the Agreement
for a period of three (3) years from the date of final payment under this
Agreement.
20. WITHHOLDINGS
CITY may withhold payment of any disputed sums until satisfaction of the
dispute with respect to such payment. Such withholding shall not be deemed to
constitute a failure to pay according to the terms of this Agreement.
CONSULTANT shall not discontinue work as a result of such withholding.
CONSULTANT shall have an immediate right to appeal to the CITY Manager or
his designee with respect to such disputed sums. CONSULTANT shall be
entitled to receive interest on any withheld sums at the rate of seven percent
(7 %) per annum from the date of withholding of any amounts found to have been
improperly withheld.
21. ERRORS AND OMISSIONS
In the event of errors or omissions that are due to the negligence or professional
inexperience of CONSULTANT which result in expense to CITY greater than
would have resulted if there were not errors or omissions in the work
accomplished by CONSULTANT, the additional design, construction and /or a
restoration expense shall be borne by CONSULTANT. Nothing in this paragraph
is intended to limit CITY's rights under any other sections of this Agreement.
22. CITY'S RIGHT TO EMPLOY OTHER CONSULTANTS
CITY reserves the right to employ other CONSULTANTs in connection with the
Project.
23. CONFLICTS OF INTEREST
A. The CONSULTANT or its employees may be subject to the provisions of
the California Political Reform Act of 1974 (the "Act "), which (1) requires
such persons to disclose financial interest that may foreseeably be
materially affected by the work performed under this Agreement, and (2)
prohibits such persons from making, or participating in making decisions
that will foreseeably financially affect such interest.
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B. If subject to the Act, CONSULTANT shall conform to all requirements of
the Act. Failure to do so constitutes a material breach and is grounds for
termination of this Agreement by CITY. CONSULTANT shall indemnify
and hold harmless CITY for any and all claims for damages resulting from
CONSULTANT's violation of this Section.
24. SUBCONSULTANT AND ASSIGNMENT
A. Except as specifically authorized under this Agreement, the services
included in this Agreement shall not be assigned, transferred, contracted
or subcontracted without prior written approval of CITY.
25. NOTICES
All notices, demands, requests or approvals to be given under this Agreement
shall be given in writing and conclusively shall be deemed served when delivered
personally or on the third business day after the deposit thereof in the United
States mail, postage prepaid, first class mail, addressed as hereinafter provided.
All notices, demands, requests or approvals from CONSULTANT to CITY shall
be addressed to CITY at:
Administrative Services Department
City of Newport Beach
3300 Newport Boulevard
Newport Beach, CA, 92658 -8915
(949) 644 -3141
Fax 723 -3544
All notices, demands, requests or approvals from CITY to CONSULTANT shall
be addressed to CONSULTANT at:
Attention: Mr. Laith Ezzet
HILTON FARNKOPF & HOBSON, LLC
3990 Westerly Place, #195
Newport Beach, CA 92660
Telephone: (949)251 -8628
Facsimile: (949)251 -9741
26. TERMINATION
In the event either part hereto fails or refuses to perform any of the provisions
hereof at the time and in the manner required hereunder, that party shall be
deemed in default in the performance of this Agreement. If such default is not
cured within a period of two (2) days, or if more than two (2) days are reasonably
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required to cure the default and the defaulting party fails to give adequate
assurance of due performance within two (2) days after receipt of written notice
of default, specifying the nature of such default and the steps necessary to cure
such default, the nondefaulting party may terminate the Agreement forthwith by
giving to the defaulting party written notice thereof.
26.1 CITY shall have the option, at its sole discretion and without cause, of
terminating this Agreement by giving seven (7) days' prior written notice to
CONSULTANT as provided herein. Upon termination of this Agreement,
CITY shall pay to the CONSULTANT that portion of compensation
specified in this Agreement that is earned and unpaid prior to the effective
date of termination.
27. COMPLIANCES
CONSULTANT shall comply with all laws, state or federal and all ordinances,
rules and regulations enacted or issued by CITY.
28. WAIVER
A waiver by either party of any breach, of any term, covenant or condition
contained herein shall not be deemed to be a waiver of any subsequent breach
of the same or any other term, covenant or condition contained herein, whether
of the same or a different character.
29. INTEGRATED CONTRACT
This Agreement represents the full and complete understanding of every kind or
nature whatsoever between the Parties hereto, and all preliminary negotiations
and agreements of whatsoever kind oe nature are merged herein. No verbal
agreement or implied covenant shall be held to vary the provisions herein. Any
modification of this Agreement will be effective only by written execution signed
by both CITY and CONSULTANT.
32. PATENT INDEMNITY
The CONSULTANT shall indemnify CITY, its agents, officers, representatives
and employees against liability, including costs, for infringement of any United
States' letters patent, trademark, or copyright infringement, including costs,
contained in CONSULTANT's drawings and specifications provided under this
Agreement.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on
the day and year first written above.
APPROVED AS TO FORM AND
CONTENT:
Robin Clauson,
Assistant City Attorney
for the City of Newport Beach
ATTEST:
LaVonne Harkless
CITY Clerk
F:\users\cat\shared\da\Ag\Templates\ProfServices.doc
Rev: 02 -13 -02
CITY OF NEWPORT BEACH
A Municipal Corporation
By:
Todd Ridgeway, Mayor
for the City of Newport Beach
CONSULTANT
By:
Mr. Laith B. Ezzet
Senior Vice President
HILTON FARNKOPF & HOBSON, LLC
1A
EXHIBIT A
SCOPE OF WORK & SCHEDULE
Agreed -Upon Procedures on the
City of Newport Beach's Solid Waste Haulers' Fee Payments
BACKGROUND
The City provides residential solid waste collection services to all residential
premises and to multi- family housing projects of four or less units. The City
requires that solid waste haulers desiring to provide solid waste handling or
collection services in the City enter into non - exclusive solid waste collection
franchise agreements with the City. The term of these franchise agreements does
not exceed ten years and all franchisees may reapply for new non - exclusive
franchises within six months of expiration. All of the agreements expire on
January 9, 2006.
During the term of the franchise agreement, the hauler pays a franchise fee and
an environmental liability fee to the City. The combined fee is currently 16% of
gross receipts from solid waste services performed in the City. (The franchise fee
is 10.5% and the environmental liability fee is 5.5 %). Fees are remitted quarterly,
accompanied by a solid waste franchise statement and a separate tonnage report.
Each franchisee independently calculates its fee payments to the City based on
internal accounting records and remits these fees to the City. Section 9 of each
agreement states that the franchisee's records shall be made available to
authorized City officers, employees or consultants, for the purpose of inspection
or audit for verification and accuracy of the fees paid by the franchisee under the
agreement. Section 9 further states that if franchise fees paid to the City are
understated by $1,000 or more, the contractor will reimburse the City for the cost
of the audit.
A recent report prepared by City staff showed that franchise fees paid to the City
for the period from July 1, 2000 to June 30, 2001 totaled $867,640. The four
franchisees with the largest fee payments (Waste Management of Orange
County, Ware Disposal Company, Inc., Rainbow Disposal Company, Inc. and
CR &R, Inc.) represented 96% of the total payments to the City.
The City has requested HF &H to perform agreed -upon procedures on the fiscal
year 2001 quarterly fee payments received from eight of the haulers.
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STUDY OBJECTIVE
The objective of this study is to apply the agreed -upon procedures described in
Exhibit A to the quarterly fee payments for fiscal year 2001 (12 months ended
June 30, 2001) submitted by eight of the waste haulers currently operating in the
City:
• Waste Management of Orange County
• Ware Disposal Company
• Rainbow Disposal Company
• CR &R (Haulaway and ORCO)
• Federal Disposal Services
• Key Disposal Inc.
• Briggeman Disposal Services Inc.
• Ocean Waste and Recycling
Based on the error rate in fiscal year 2001, an estimate of the fees due to the City
will be made for the two prior fiscal years (1999 and 2000) by applying the 2001
error rate for each company to the fee payments submitted to the City in 1999
and 2000.
SCOPE & APPROACH
This section describes the scope and approach by workplan task.
Task 1 - Initiate the Project and Plan Site Visits
We will obtain from the City the "Solid Waste Franchise Statements' and the
tonnage reports that accompanied the selected franchisees' fee payments for the
period under study.
We will review the City's fee payment data and calculate financial ratios of
receipts -to- tonnage to assess the reasonableness of each franchisee's submittal,
and prepare a testing plan for use during our site visits. We will also use this
initial data analysis to identify any inconsistencies to resolve during our site
visits.
We will meet with City staff at a kickoff meeting to discuss our site visit plans
and confirm the schedule.
We will prepare a letter of introduction for City staff to send to the franchisees
notifying them of the site visit and review. After the franchisees have received
this letter, we will attempt to contact each franchisee twice to schedule our site
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visit. We will notify the City of any problems regarding franchisee cooperation
and ask the City to follow -up in these instances.
Task 2 - Conduct Site Visits and Perform Agreed -Upon Procedures
We will visit the local offices of the franchisees (within reasonable geographic
limits) to apply the following agreed -upon procedures to the fee payment
information for the period under review:
• We will test the mathematical accuracy of the fee payment calculations
submitted by each franchisee.
• We will test the data used by the franchisee to report gross receipts from City
customers and examine the source documents that support this information
on a sample basis.
• We will attempt to resolve any inconsistencies identified.
• We will identify adjustments to the fee payment amounts, if any.
The specific procedures we perform in the field will vary depending on the
selected hauling company's accounting procedures, internal controls and
available records. The financial accounting policies vary significantly among the
companies, and most, if not all, of the companies do not have audited financial
statements for services provided in the City of Newport Beach.
We will attest to the accuracy of our calculations, and while we believe our
procedures will be sufficient to meet the City's study objectives at minimum cost,
our work will not constitute an audit in accordance with Generally Accepted
Auditing Standards.
If, during the course of our work, something comes to our attention which we
believe should be expanded on or clarified in the franchise agreements or the
City's ordinance, we will bring it to the attention of City staff.
Task 3 - Perform Electronic Matching of Service Addresses to City List for One
Hauler with the Largest Fee Payments
In fiscal year 2001, Waste Management remitted approximately 70% of the total
waste hauler fees received by the City. Additionally, Waste Management is the
new residential contractor in the recently annexed Newport Coast area. Effective
January 1, 2002, the customers in Newport Coast served under this contract are
exempt from the franchise fee.
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We will perform computerized matching of Waste Management's service
location records against the City's "official" list of commercial addresses to
identify all of the locations subject to the City's fee and agree the results to Waste
Management's billing records to determine that all of the Waste Management
accounts located in Newport Beach have been properly coded for purposes of fee
determination. This procedure will help ensure that accounts with service
locations within the City that are billed to addresses outside the City are
correctly included in the fee calculation.
In order to perform this task, we have assumed that:
• Waste Management will download for us, in a delimited file format that can
be imported into Microsoft Excel or Access, its service locations records, after
performing an initial sort by postal codes that overlay the Newport Beach
area. Since postal codes do not exactly match city limits, the sort by postal
codes will contain all of the Newport Beach service locations as well as some
locations outside of Newport Beach. Secondly, Waste Management will
separately provide a download of its billing records (the same electronic
format) that have been coded as Newport Beach that the company uses to
determine its fee payment.
• The City will download for us, in a delimited file format that can be imported
into Microsoft Excel or Access, a list of all service addresses within the City
limits that are subject to the City's fee. The City's list should exclude
addresses that receive municipal solid waste collection service and addresses
that receive residential collection service from Waste Management under
contract to the City in the annexed area.
Task 4 - Document Procedures and Adjustments
We will document the procedures we perform and any necessary adjustments to
the quarterly fee payments for the period under study.
Task 5 - Prepare Estimates of Fees Due for the Past Three Years from Sample
Based on the Error Rate for 2001
The City has requested that we estimate the amount of fees that would be due
from the franchisee if the error rate observed in 2001 were applied to fiscal years
1999 and 2000. We will prepare a schedule that calculates the estimated amount
of the fees due based on fee payment and gross receipts data provided by the
City for fiscal years 1999 and 2000. The sum of the estimates from 1999 and 2000,
plus the results from the 2001 review, will result in the total estimated amount
due for the three -year period.
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Task 6 - Review Additional Documentation at One Company in Response to
Three -Year Estimate of Fees Due
One or more haulers may claim that to utilize the 2001 error rate (Task 5) to
calculate fees due from a prior year is not representative to their unique
circumstances, particularly if it has acquired other companies that serve Newport
Beach. In such a case, the waste hauler will be given the opportunity to make
available records and show an alternative calculation of the fees due. We have
budgeted to review such records from one company during one subsequent site
visit. If more than one company claims an alternative calculation, or if more than
one return site visit is required, then our estimated study cost will increase.
Task 7 - Prepare Letters Documenting Results
We will prepare a brief letter to each of the franchisees reviewed, to be mailed by
the City, that describes our findings and the reasons for any adjustments. The
letter will summarize the fee payment amount, with documentation of the fee
adjustment calculations provided in an accompanying exhibit. The City will be
responsible for collection or refunding related to any fee adjustments.
Task 8 - Administer Project
We will administer the project, conduct internal quality reviews and prepare our
project work papers at the engagement's conclusion.
Task 9 - Contingency for Additional Follow -up
We have budgeted 22 hours for additional follow -up activities that may be
necessary to complete the reviews at waste haulers that provide incomplete or
inaccurate records during our scheduled review and require a return visit or
subsequent review of additional records.
CITY RESPONSIBILITIES
The City will be responsible for:
• Providing us copies of all of the audit result letters prepared the last time the
haulers were audited.
Providing us a hard copy and diskette of a spreadsheet file documenting all of the
franchisees' reported receipts, tonnage and fee payments by quarter for the three
fiscal years 1999, 2000 and 2001, including those franchisees no longer providing
service in the City.
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• Providing us photocopies of the quarterly reports remitted by the eight
franchisees to be reviewed for fiscal year 2001.
• Sending a letter of introduction (prepared by HF &H) to the franchisees.
• Following up with franchisees that are uncooperative in scheduling or
performing the reviews.
SCHEDULE
We anticipate initiating this engagement within two to three weeks of receipt of a
City purchase order or executed consulting contract, and completing the
engagement approximately four months from project initiation, assuming timely
cooperation from the City's franchisees.
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• •
EXHIBIT B
PROTECT COSTS
We will perform the agreed -upon procedures based on time and materials. Our
fee estimate to review the fee payments from 8 haulers is $55,000, based on the
tasks and level of effort in the attached workplan on the following page. If the
number of reviews is increased or decreased above or below the budgeted eight
reviews, our estimated fee will increase or decrease by $4,000 per review.
Our fees include preparation of a letter of our findings and adjustments to each
of the franchisees selected for a site visit, including an exhibit that explains the
basis for the fee adjustment. During our site visits to the hauling companies, we
will inform them of any expected increase in their fees due to the City. We will
meet with City staff once at the engagement's conclusion to discuss the results.
Any additional written work products or meetings will increase our scope of
work and our fee.
We will bill you once per month based on the number of hours worked
multiplied by our hourly billing rates, plus expenses incurred. Standard hourly
rates for our consultants are as follows:
Staff Level
Senior Vice President
Senior Associate
Associate
Professional Assistant
Out of pocket expenses will be billed as follows:
Mileage:
Document Reproduction (over 25 pages /run)
Postage and overnight mail couriers
All other out of pocket expenses
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Hourly
$200
$155
$135
$70
$0.365 per mile
$0.15 per page
Actual
Actual