Santa Clara County Grand Jury
• 2006-2007
2006-2007 Santa Clara County Civil Grand Jury Report City Fails to Hold Team San Jose Accountable
⚠️ Translation Notice: This content has been automatically translated. The original English text is the official version. Translation may contain errors.
⚠️ Este contenido ha sido traducido automáticamente. El texto original en inglés es la versión oficial. La traducción puede contener errores.
Findings and Recommendations 6 findings
F1
TSJ has failed to meet its contractual obligations to the City.
Related Recommendations (1)
R1
Not renew the contract with TSJ when the contract period expires in June 2009.
F2
The RFP did not include significant information that was necessary for responders to prepare accurate financial proposals.
Related Recommendations (1)
R2
Begin working immediately with the Procurement Department and the Auditor, in accordance with the new City procurement policy, to prepare a new RFP that better reflects the directives of the City Council and that includes necessary and sufficient information to select the most qualified responder.
F3
TSJ, while intending to reduce operating loss, placed undue restrictions on itself regarding salaries and benefits by retaining specific City employees who had been working for CAE. These restrictions have had a negative impact on its ability to control expenses.
Related Recommendations (1)
R3
Validate financial assertions by responders that have economic consequences to the City. Follow new City procurement policy that requires validation of financial projections by the appropriate financial department within the City.
F4
In selecting the operator, proposals were not evaluated equally for all responders. • During negotiations, it was found that TSJ’s projected net loss was inaccurate by more than 100 percent. • Even though marketing was an explicit component of the RFP, marketing costs were left out of the TSJ proposal, thereby allowing it to present a more attractive proforma than other responders. • TSJ was deemed the most qualified of those competing for the contract even though it had no previous experience operating or managing any event facility.
Related Recommendations (1)
R4
Ensure that all responders meet all qualification requirements established in the RFP and that all selection criteria are applied equally to all responders.
F5
The measures used to evaluate TSJ’s contractual performance are inadequate and ineffective.
Related Recommendations (1)
R5
Establish performance measures that accurately reflect the intent and terms of the contract.
F6
Rather than cancel the contract as allowed under the terms of the Management Agreement, the City has chosen to support TSJ at more than double the anticipated subsidy at taxpayers’ expense. 9
Related Recommendations (1)
R6
Enforce contractual agreements to protect taxpayers from supporting failed operations. 10
Conclusions 1
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CL1 Page 8The City failed its responsibility in selecting TSJ as the best qualified operator for SJCC/CF. The RFP was poorly written and the selection criteria were applied inequitably. TSJ was selected in large part on the strength of its financial estimates, but it was allowed to more than double its estimated loss with information provided only to it during the negotiation process; in fact, its estimated losses would have been even higher had they been required to include the CVB marketing costs. Likewise, its marketing plan represented another significant factor in selecting TSJ, even though CVB continues responsibility for marketing the facilities as a separate entity from TSJ and continues to be subsidized by the City for its work. Finally, 20 percent of the scoring in the selection process was based on experience in the industry, even though TSJ was a new company that had never managed an event facility. The City has also failed to enforce the TSJ contract at the expense of taxpayers. It is disconcerting that the City constructed a Management Agreement with specific performance requirements, and then fails to enforce the contract when requirements are not met. The Management Agreement states that TSJ must produce a certain level of revenue and must not exceed a certain level of loss or the contract may be cancelled. TSJ agrees that it has failed on both counts and that the subsidy it requires is double what the City agreed to pay. There has been no consequence to TSJ for its failure to perform, since the City continues to pay the extra subsidy and TSJ retains its contract. The Grand Jury recommends that when the contract period ends in June 2009, the City should not renew the contract with TSJ. The City should issue a new RFP for this contract to identify a new operator that can achieve the original objectives of City Council, namely, decreasing costs of operation and increasing the occupancy and revenue producing capabilities of the facilities. According to the new policy adopted by the Procurement Department and approved by the City Council, any service contract valued at more than $250,000 must have Procurement Department involvement with help from the Auditor as needed. The City should take advantage of such professional expertise in preparing the new RFP to ensure that terms and conditions of service, and performance measures in the Management Agreement are understood and examined before seeking proposals. 8
No Responses Found 2
Government entities assigned to respond to this report. No response documents have been linked in our database.
San Jose
City
Santa Clara County Auditor-Controller
Elected County Office