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HomeMy WebLinkAboutC-3522 - PSA to conduct audits of solid waste franchise holdersC �Ja � r 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. 9 0 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. Q 9 0 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 3 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. ll 0 0 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, 4W 0 0 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). 11 0 0 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 7 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. R 0 19. RECORDS E 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. N 0 Ll 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 10 9 41 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. 11 E 11 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 12 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. 3/28/02 Page A -1 0 STUDY OBTECTIVE E 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 3/28/02 Page A - 2 0 0 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. 3/28/02 Page A - 3 0 0 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 0 0 • 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. • 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 0 0 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. 0 9 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. 2 0 0 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 0 0 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. 9 rI 0 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, 61 0 0 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). 11 0 0 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 7 0 0 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. 0 • 19. RECORDS 0 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. ten 0 L 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 10 0 0 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. 11 0 9 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. 3/18/02 Page A -1 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 3/18/02 Page A - 2 0 0 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. 3/18/02 Page A - 3 0 0 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. 3/18/02 Page A - 4 0 0 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. 3/18/02 Page A -5 0 0 • 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. 3/18/02 Page A - 6 • • 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 3/18/02 Page B -1 Hourly $200 $155 $135 $70 $0.365 per mile $0.15 per page Actual Actual