Memorandum

City of Lawrence

Finance Department

 

To:

David Corliss, City Manager

From:

Brian Watson, Assistant Finance Director

Date:

February 28, 2013

Subject:

Collection Agency Services RFP Findings

 

Background

The City currently has 5,500 delinquent accounts in collections totaling $900,000. Each year, approximately 1,700 delinquent accounts valued at $271,000 are turned over for active collection. On average, $20,000 in costs is paid by the City each year for collection services.

 

The City has been with its current collection service provider, Haase & Long, for over six years. In that time, collection percentages have decreased from 50% to 13% while collection costs have increased from 16% to 30% for any collected amount. In response to the decreasing trend of bad debt collectability and increasing costs of collections with the City’s current provider, the City solicited proposals for the collection of delinquent receivables, including but not limited to utility charges, fire-response fees, ambulance fees and other miscellaneous receivable accounts.

 

Rating Factors

Proposals were evaluated by Finance and Fire Medical Department staff with regard to the following criteria:

·         Agency’s ability to meet requirements listed within this RFP.

·         Quality and scope of service offered, as reflected by responses to the questionnaire.

·         Cost of service and anticipated new return to the City or target recovery rate

·         Service evaluations provided by agency’s references.

 

Analysis

Eleven responses were received, read and scored by staff using the rating factors listed above. The three highest scored proposals, Berlin-Wheeler INC, Pioneer Credit Recovery, and Windham Professionals, were then subjected to a more detailed evaluation and ranked using the following weighted matrix criteria. 

 

·         Experience with Government Collection Activities (Weighted 35%)

·         Proposal Costs and Fees (Weighted 30%)

-       To better compare these three proposals and the resulting yearly collection costs each would charge, three assumptions were made.

 

1.)  $900,000 of old receivables would be turned over at the point of initial service

2.)  $271,000 on average of new receivables would be added to existing receivables over one year’s time

3.)  The average collection rate of existing receivables would be 15% and 30% for new receivables as a stated industry standard for this type of governmental debt collections.

 

·         Collection Plan (Weighted 25%)

·         Proposal Content and Evaluation Matrix (Weighted 10%)

 

Conclusion / Recommendation

Staff ranked all three finalists using the rating factors criteria listed in the RFP. The rankings were then weighted against the stated percentages outlined above.  

 

Windham Professionals was selected by Finance and Fire Medical Department staff as the offering the most value to the City for collection agency services for the following reasons:

·         Experience in collecting of each type of receivables the City currently bills for; utilities, miscellaneous receivables, fire-response fees, and ambulance fees.

·         Out of all the submissions, Windham Professionals was $28,631 more cost effective than the second leading submission.

·         Utilization of progressive collection programs like the Second Look Program – if a debt is not collected within 30 days it is rolled to a new team of collectors resulting in enhanced skip tracing and increased recovery chances.

·         Windham Professionals currently services the University of Kansas. Since many of our collection accounts belong to students, Windham Professionals would merge our bad debtor information with that of the University of Kanas. This strategy would better assist Windham Professionals in skip tracing bad debt accounts which would increase overall collectability for both organizations.

·         Windham Professional’s software interface was the most robust of the three finalist submissions. Windham Professional’s software offered the best reporting features, real-time instant updating and tracking, and ease of use for City staff. 

 

It is recommended that the City Manager be authorized to enter into a contract with Windham Professionals to provide collection agency services for the City.