[EDITOR’S NOTE: The following is a Letter to the Editor, written by a Reader. It does not necessarily reflect the opinion of The SeaTac Blog nor its staff:]
Doing business in a businesslike fashion
I have recently undertaken a review of the process used to enter into one of the largest single contracts that the city has with the vendor, the ILA with the Kent Regional Fire Authority. While my review is not complete at this time I am disturbed at the manner and methodology used to aggregate information that was presented to the City Council regarding this $10 plus million a year contract. In my 45 years in business, it was always the responsibility of the people preparing any presentation to document their sources and calculations as being factual and correct. I have not found that to be the case of the work leading up to the final vote to enter into the contract with the Kent RFA. While I will be using the information obtained in that investigation, it is important that this input is not a condemnation of the decision to enter into that agreement, but rather a comment on the methodology used in creating the proposal. It is a statement of how un-businesslike the methods of the city seem to be to the eyes of a businessman.
The majority of the information presented to the Council for this issue consisted of many PowerPoint presentations, which included graphed spreadsheets. Spreadsheets while being a phenomenal asset for calculating what-ifs are only as good as the accuracy of the formulas and data used within them. In business it is normal for significant analysis to include documentation of source and verification of accuracy. When references are made to “savings”, “equipment value”, or effect of future costs, it is the responsibility of the author to document that the data provided has at least 1 foot in reality, by documenting the source, setting forth precedent, or including opinions from experts in the field. The Kent RFA presentations allude to “insurance savings” but include no identification of which insurances would be reduced or in what amount and have no statement of accuracy from the broker selling the city the insurance. When data is placed on a spreadsheet and graphed the data utilized must be verified for input correctness and graphing accuracy. Businesses examining presentations in the range of $10 million a year for 20 years usually have at least two different individuals verify the documents accuracy. Considering SeaTac has a city manager and director of finance, I would expect that the minimum that one employee from each office verified the data used in the spreadsheet calculations and that the structure of the calculations and the spreadsheet, were verified. I would also expect to see sign offs by all parties for accountability.
Another aspect of working with spreadsheets is their ability to model long-term data. I use the term “modeling” which involves creating a spreadsheet of all items that effect the bottom line for each scenario (in this case the cost of the Kent RFA verses the SeaTac FD.) This allows a line by line breakout of the similarities and differences. When costs, expenses or benefits are being projected for contract term of 20 years and there is an annual modifier (such as the Seattle/Tacoma/Bremerton CPI-W) it is paramount that an accurate estimate of total costs is identified, and that projection of variance in the modifier is included. To assume that any modifier will remain stagnant for 20 years is folly. A good example of the effect of a modifier would be gas. In 20 years gas prices have gone from $1.12 in December of 1995 to $4.12 in July of 2008 and down to $2.06 in January 2016.
In the case of the Kent RFA, there are a number of key points that should have been modeled beside the example above. The ILA must run a minimum of five years before it can be terminated and after that time a two-year period is required to disentangle SeaTac from the Kent RFA. In this writer’s opinion, at minimum, the projected cost for the first seven years of the ILA should’ve been modeled against 7 years cost for continuing the SeaTac Fire Depart, including a variance in the CPI. A cost of disentanglement should’ve been estimated so that the Council would be able to view what they spent and what they would have to spend to undo the contract. Modeling provides decision-makers with multi perspective insight into what is, what can be and what it will cost to change direction in the future. There is no doubt that this type of work would have been a significant additional amount of work for the city manager.
In the alternative, the city could have hired a third-party consultant with experience regarding decisions of dismantling or maintaining fire departments. I do not know if this was considered but it seems to me that there were few experts in City Hall who had the ability to analyze the question in front of them, using the cities available resources (staff) and the ability to develop a fully explored presentation compiled from verifiable information.
Running the city is not that much different than running a business. The Council looks at information and makes decisions based on presentations created by others. Validation, alternate perspectives, verification of information, and use of methodologies not found within the four walls of City Hall seem not to being embraced. In business, the search for the right answer requires accountability. Accountability is achieved by using business like methods which check and verify that information calculations are correct and come from a source that is capable of expertly analyzing the issue.
It is clear to this writer that in order to become fiscally responsible to the taxpayers, the city must start to question the accountability of anyone presenting information for decision-making. Within the city standards for bringing any form of data to the Council must be established. The finance department and the city manager’s office should be responsible for vetting the data of all matters brought to the Council in a transparent process. To do any less would be un-businesslike.
– Joel Wachtel
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