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Item 1.J.
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| City Council Regular | |
| Date: | 05/12/2025 |
| Title: | Outsourcing of Custodial Services at Billings Operations Center |
| Presented by: | John Caterino, Facilities Manager |
| Department: | City Hall Administration |
| Presentation: | No |
| Legal Review: | Yes |
| Project Number: | N/A |
RECOMMENDATION
Staff recommends that Council approve and award a contract for the outsourcing of custodial services at the Billings Operations Center (4810, 4845, 4848, 4850 Midland Rd.) to ABM Industry Groups, LLC for $439,006.71 for a three-year term, with an option to extend for an additional two years for a total contract cost of $754,067.18.
BACKGROUND (Consistency with Adopted Plans and Policies, if applicable)
It is important to note that the terms custodian/custodial and janitor/janitorial are used interchangeably in the Facilities Management industry, but for the purposes of this memo, “custodian/custodial” is defined as work that is inclusive of cleaning services and consumables inventory management.
The City strives to adopt cost-effective practices relating to municipal operations for the benefit of taxpaying citizens of Billings. One such operation involves contracting or subcontracting after evaluating the economics involved. Currently, the Facilities Division provides custodial services at the Billings Operations Center (BOC). It is becoming increasingly difficult to provide a level of custodial service that meets customer satisfaction while maintaining a cost-effective bottom line. A few variables make this mission challenging:
Expanded amount of space occupied by BOC tenants
Facilities staff service the Administration and Police Barn buildings Monday through Friday and the Evidence building Tuesday and Thursday only, and at a much lower level of service compared to the other two buildings. Currently, the Division services approximately 37,000 square feet at the BOC. This location is unique in that it supports operations of a more industrial nature so the type of cleaning services provided are different than would be provided in a typical office building. The majority of time and effort is dedicated to floor care and restroom/locker room cleaning as opposed to a more routine office building scope of work. Industry benchmark standard for custodial work in an office building is 1 FTE for 28,000 sf (reference attachments B and C). However, since the needs at this location are different, we would require 3 FTEs to effectively service the BOC. In the past four years, the City has willingly sought approval for the addition of 39 Teamster positions when there was justified need and available funding for the positions. The Facilities Division is not equipped to tackle the BOC needs under the current staffing model, nor is adding FTEs cost effective at this time.
Knowing the current model and staffing will not provide the level of custodial services we need; we analyzed two options: increase FTEs or outsource this scope of work to a vendor. The Facility Division’s goal was to determine the most cost effective and efficient service model, while providing the same or better service that City staff and public visitors expect.
After performing a cost benefit analysis of the two options (reference attachment A), it was determined that outsourcing custodial services to a vendor would be more cost effective. Additionally, by outsourcing custodial work, the Division can focus more effort and resources on repairs, maintenance, and capital projects.
Benefits of outsourcing include:
Drawbacks of outsourcing include:
Outsourcing and contract management of third-party vendors is not new to the Division. Services that are currently outsourced include snow removal, compulsory systems testing (elevators, FACP), pest control, renovation projects, access control installation, security, lawncare and landscaping, and highly skilled mechanical/electrical/plumbing repairs.
Facilities advertised a Requests for Proposal (RFP) on 01/03 and 01/10/2025 in Yellowstone County News and on the City’s Website. Proposal submission date was 01/24/2025.
Five (5) firms submitted responses.
A review committee unanimously selected ABM Industry Groups, LLC, based on the following criteria:
The City anticipates that four Facilities Division – Maintenance Support I positions will be impacted by this situation, with three FTE employees being offered Maintenance Support I positions in other City work locations. These FTE employees will not lose their seniority should they accept the position. The fourth impacted FTE employee recently submitted their voluntary resignation to pursue employment elsewhere.
The City strives to adopt cost-effective practices relating to municipal operations for the benefit of taxpaying citizens of Billings. One such operation involves contracting or subcontracting after evaluating the economics involved. Currently, the Facilities Division provides custodial services at the Billings Operations Center (BOC). It is becoming increasingly difficult to provide a level of custodial service that meets customer satisfaction while maintaining a cost-effective bottom line. A few variables make this mission challenging:
Expanded amount of space occupied by BOC tenants
- Increasing cost associated with Facilities Maintenance Support I salaries
- Difficulty hiring qualified personnel
- Ensuring coverage of sick and/or vacation time of staff
- Goal of stabilizing charges for tenants
- Unable to provide adequate amount of supervision time for training, quality control checks, and leadership without a dedicated supervisor position
- Shift coverage at City Hall with BOC personnel
Facilities staff service the Administration and Police Barn buildings Monday through Friday and the Evidence building Tuesday and Thursday only, and at a much lower level of service compared to the other two buildings. Currently, the Division services approximately 37,000 square feet at the BOC. This location is unique in that it supports operations of a more industrial nature so the type of cleaning services provided are different than would be provided in a typical office building. The majority of time and effort is dedicated to floor care and restroom/locker room cleaning as opposed to a more routine office building scope of work. Industry benchmark standard for custodial work in an office building is 1 FTE for 28,000 sf (reference attachments B and C). However, since the needs at this location are different, we would require 3 FTEs to effectively service the BOC. In the past four years, the City has willingly sought approval for the addition of 39 Teamster positions when there was justified need and available funding for the positions. The Facilities Division is not equipped to tackle the BOC needs under the current staffing model, nor is adding FTEs cost effective at this time.
Knowing the current model and staffing will not provide the level of custodial services we need; we analyzed two options: increase FTEs or outsource this scope of work to a vendor. The Facility Division’s goal was to determine the most cost effective and efficient service model, while providing the same or better service that City staff and public visitors expect.
After performing a cost benefit analysis of the two options (reference attachment A), it was determined that outsourcing custodial services to a vendor would be more cost effective. Additionally, by outsourcing custodial work, the Division can focus more effort and resources on repairs, maintenance, and capital projects.
Benefits of outsourcing include:
- Cost savings of approximately $55,360 for the first year
- Vendor guarantees pricing for 5 years at a 3% escalator
- Less administrative time spent managing custodial issues, including:
- Coordination of shift coverage
- Laundry service
- Daily check-in and weekly sync meetings
- Dispenser replacement
- Safety Data Sheet inventory and updates
- Staffing
- Vendor recruits, hires, trains, and supervises cleaning crew
- Management team provides quality control and oversight
- Facilities will not need to overstaff to ensure proper coverage
- Facilities will not need to pay shift differential for later shifts
- Results
- Vendors can have better control over results by using the ISSA 612 standard
- Equipment
- Vendor will provide all equipment to service building
- Facilities will not need to maintain, repair, procure, or replace equipment
- Uniforms and Shoes
- Facilities will not need to pay for uniforms or shoes
- Approximately $600 is paid for 11 kits per the Union contract for each new FTE
- Facilities Division provides $100 annually for replacement of worn uniforms
- Facilities Division reimburses shoes up to $200 per FTE annually per the Union contract
- Hours
- Vendor can clean after hours to lessen the impact on City staff during working hours
- Facilities will not need to pay overtime for coverage during certain City holidays
- Experience
- Vendor knows how to appropriately build workload to ensure maximum efficiency
- Vendor knows how to schedule cleaning tasks to provide consistent results
Drawbacks of outsourcing include:
- Will have to bid work via an RFP
- Vendor can give thirty days’ notice and terminate contract
- Prevailing wages could outpace City wages over the 5 years
Outsourcing and contract management of third-party vendors is not new to the Division. Services that are currently outsourced include snow removal, compulsory systems testing (elevators, FACP), pest control, renovation projects, access control installation, security, lawncare and landscaping, and highly skilled mechanical/electrical/plumbing repairs.
Facilities advertised a Requests for Proposal (RFP) on 01/03 and 01/10/2025 in Yellowstone County News and on the City’s Website. Proposal submission date was 01/24/2025.
Five (5) firms submitted responses.
A review committee unanimously selected ABM Industry Groups, LLC, based on the following criteria:
- Thoroughness of response
- History of firm
- Firm experience with similar scope and magnitude
- Qualifications
- Approach and methodology to cleaning
- Personnel and staffing
The City anticipates that four Facilities Division – Maintenance Support I positions will be impacted by this situation, with three FTE employees being offered Maintenance Support I positions in other City work locations. These FTE employees will not lose their seniority should they accept the position. The fourth impacted FTE employee recently submitted their voluntary resignation to pursue employment elsewhere.
STAKEHOLDERS
City:
External Parties:
City Council as approving body
Facilities Division as Contract Administrator
BOC Tenants (Police, Parks, Fleet, Public Works)
Facilities Division as Contract Administrator
BOC Tenants (Police, Parks, Fleet, Public Works)
External Parties:
ABM Industry Groups, LLC
ALTERNATIVES
Alternatives include:
1. Reject contract and increase the staffing level to 3 FTEs assigned to BOC and only have a vendor at City Hall. This would add about $30,500 annually to BOC charges.
2. Reject both City Hall and BOC contracts and keep current staffing levels, which cannot meet the needs of the increased scope of work.
3. Reject both City Hall and BOC contracts and approve the Facilities Division to hire additional staff to provide adequate services at both locations.
2. Reject both City Hall and BOC contracts and keep current staffing levels, which cannot meet the needs of the increased scope of work.
3. Reject both City Hall and BOC contracts and approve the Facilities Division to hire additional staff to provide adequate services at both locations.
a. This would require adding 2 Facility Maintenance Support I positions and a supervisory position at an estimated cost of $227,628 for the first year.
FISCAL EFFECTS
Hiring a vendor will save approximately $55,360 in the first year of the BOC contract, and an estimated $264,401 over 5 years. Cost savings will be passed on to Tenants at BOC by reducing their annual charges.
The pricing in RFP was an annual lump sum for services for 3 years, with options to extend into years 4 and 5. Therefore, the incurred expenses will be as follows:
Staff requests that both vendor contracts for City Hall and BOC be approved to realize the maximum cost savings. If City Hall contract is approved and BOC contract is not, there will be additional costs incurred due to reassignment of staff to BOC that is currently shared between the two sites. There will be 3 FTE assigned to BOC instead of the current 2.5 FTE and BOC tenant charges will increase to cover that cost.
The pricing in RFP was an annual lump sum for services for 3 years, with options to extend into years 4 and 5. Therefore, the incurred expenses will be as follows:
| Year | Price |
| 1 | $142,032.00 |
| 2 | $146,292.96 |
| 3 | $150,681.75 |
| 4 | $155,202.20 |
| 5 | $159,858.27 |
Staff requests that both vendor contracts for City Hall and BOC be approved to realize the maximum cost savings. If City Hall contract is approved and BOC contract is not, there will be additional costs incurred due to reassignment of staff to BOC that is currently shared between the two sites. There will be 3 FTE assigned to BOC instead of the current 2.5 FTE and BOC tenant charges will increase to cover that cost.
Attachments
- Contract - ABM
- Attachment A - Economic Analysis
- Attachment B - IFMA Benchmark
- Attachment C - Facilities Net Benchmark