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BACKGROUND Administration of workers' compensation claims is a complex process due in part to the numerous legal mandates and medical aspects of handling these types of claims. Workers' compensation administrators are expected to interface with medical and legal personnel representing a city and/or injured employees. Delays or mistakes in processing claims may result in severe penalties, financial liability and poor employer- employee relations. Therefore, many municipalities hire professional third-party administrators with the expertise and experience in handling the unique challenges and compliance requirements of the specialized field of workers compensation administration. The City initially retained Innovative Claims Services, Inc. (ICS) in 2001 to provide third- party administration for the City's workers compensation program. The current contract with ICS is due to expire on June 30, 2011. Consistent with the City's purchasing policies, the Human Resources division conducted a request for proposal process (RFP) for third-party administration services for the workers' compensation program. DISCUSSION The City of Pleasanton's Purchasing Procedures Manual requires that three written proposals be obtained for contracts for consultant services in excess of $20,000. A request for proposal process was initiated on April 4, 2011 to seek the services for a third-party administrator for the City's worker's compensation program. The City received six proposals which were reviewed by a panel of representatives from various departments: Fire, Police, Human Resources and the City Manager's Office. Four vendors were chosen to continue to the reference check phase and two firms, ICS and Athens Administrators, were advanced to the interview stage. Both vendors performed well in the process. The annual base fees provided by ICS and Athens Administrators are detailed in the chart below: Term of Contract Innovative Claims Athens Difference _ Services, Inc. Administrators* Year $147,876 $153,205 _ "a Year _ $150,774 $157,501 _ 33r Year _ $153,729 $161,926 _ Total — 3 year contract _ $452,379 $472,632 $20,253 4th Year (optional) $156,744 $166,484 _ 5th Year (optional) $159,818 $171,179 Total — 5 year contract $768,941 $810,295 $41,354 *Includes annual administrative fee of$10,000 Both firms provided quotes for a three year contract and included fees for an optional fourth and fifth year. Annual changes in fees reflect an increase between 2% to 3%. In comparing the annual fees, ICS quoted fees that were slightly lower, by approximately 4.5% for the three-year contract ($452,379 versus $472,632) and 5.4% for a five-year contract ($768,941 versus $810,295). Page 2 of 3