Approval of Change Order for the Minimum Wage Impact Study Professional Services Contract

1. Approval of Change Order for the Minimum Wage Impact Study Professional Services Contract with Rounds Consulting Group, Inc.; and
2. Authorize the City Manager to execute the necessary documents.

Expanded Options and Alternatives:

1. Approve the Change Order as recommended. Approval will allow for timely completion of the study, including third party collaboration; or
2. Reject the Change Order and leave the original professional services contract as awarded.  This would eliminate a third party collaboration at this time; or
3. Reject the Change Order and direct staff to procure services for an external review of the completed study. This would lengthen the period of time to complete the third party review and potentially add additional costs.

The City of Flagstaff (hereby “the City”) has launched an impact evaluation of the Flagstaff minimum wage in order to gather more data and knowledge on the subject. The study has three primary objectives; 1) to provide information on the existing and future impacts of Flagstaff’s incrementally increasing minimum wage on businesses, workers and general economic health; 2) to provide best practice recommendations for local businesses, non-profit organizations and state-subsidized programs as they navigate the current and future minimum wage increases; and 3) to provide best practice recommendations for the City to support local businesses, including potential policy measures that could be implemented to foster a more robust and diverse economy.
 
After following the established rules and regulations of public procurement, the City contracted with Rounds Consulting Group, Inc. (hereby “Rounds”) to conduct a minimum wage impact study. Throughout the contract, Rounds has used subconsultant, Mode Public Affairs, LLC (hereby “Mode”) to aid in public outreach and development of policy recommendations.
 
Following the Council discussion on the study at the December 17, 2019, Council meeting, staff sought an additional organization to participate in the analysis of the minimum wage impact study. The Seidman Research Institute of Arizona State University (hereby "Seidman") was asked to perform this analysis, and after consultation with all parties, agreed to join the study.  Staff now seek a Change Order to the professional services contract to allow Seidman to subcontract with Rounds. Seidman will be able to join Rounds and Mode as one of the authors of the study’s final report and provide recommendations.  It is noted that Rounds has a working relationship with both Seidman and the Morrison Institute for Public Policy – another potential consultant that was referenced during the December 17th meeting. 
 
Due to the addition of this subcontractor, there is a need to revise the timeline for completion. A PowerPoint presentation on the progress of the study and its preliminary findings will be presented to Council on February 11th, 2020. A final report is scheduled to be received no later than February 21st, 2020. Under the Change Order, after the final report is received, the City will have 90 days to accept the document, reducing the term of the professional services contract to a total of 220 days or until May 21, 2020. In terms of budget, the current contractor is making an adjustment to reduce its fees and allocate the difference to the sub-contracting cost. This will result in a net increase to the contract cost of $15,000. 

The signed Change Order Form and the quote from Rounds Consulting for the addition of a subcontractor are attached. 

None. 

Previous discussions on the proposed minimum wage study occurred during the February and March FY20 budget retreats. The Flagstaff City Council approved this as an FY20 council objective to be completed.
 
In December 2019, Council discussed the contract granted to Rounds to conduct the minimum wage impact study and determined that the study should proceed. Council also directed staff to contact other research firms active in the field to conduct an independent audit of the final report once it was received.

In accordance with the passage of Proposition 414, a citizen’s initiative, a new hourly minimum wage schedule was established on July 1, 2017, for individuals who worked or are expected to work 25 hours or more in a given calendar year within the city limits of Flagstaff, AZ. Incremental increases in the minimum wage are scheduled through 2022 and on January 1^st, 2023, the Flagstaff minimum wage will be indexed to changes in the Consumer Price Index or will be $2.00 above the State of Arizona minimum wage (whichever is higher).
 
Using the experience of Flagstaff and the experiences of other similar cities around the country, the City decided to seek the services of a consultant to analyze the current and future economic impacts of the City’s incrementally increasing minimum wage and to equip businesses and local government alike with mitigation strategies. The scope of work was broken into five (5) parts.

1. Baseline measurements: From 2011-2016, measure variables to describe the City’s economic status before its minimum wage began increasing.
   1. Variables requested include unemployment (disaggregated by age), job availability, employee sick hours, average earnings (minimum wage and non-minimum wage workers), turnover rate, average hours worked, consumer spending and prices of goods, cost of living, amount of commercial construction and number of enterprises (disaggregated by size, including any state-subsidized enterprises).
2. Analysis of current and future impacts: Examining the 2017-2019 period,
   1. Compare the City’s economic status before its minimum wage increased to its current economic status using the variables identified in part 1. Any losses in employee qualification for public benefits or increases in automation within businesses should also be included in the analysis.
   2. Compare changes in Flagstaff to changes in appropriate control groups, using variables identified in part 1. The contractor will create or identify applicable control groups, including the state of Arizona.
3. Analysis of projected future impacts: Examining the 2023 period and beyond,
   1. Evaluate the impact of continued minimum wage increases after the minimum wage is indexed to changes in the CPI in 2023, using the variables identified in part 1.
   2. Compare Flagstaff’s 2026 economic status in the case of continued minimum wage increases (as called for by Prop 414) versus maintaining the current 2019 minimum wage using the variables identified in part 1.
4. Case studies: Provide a series of short case studies on the impacts of minimum wage in cities around the US that have implemented a higher minimum wage than their state.
   1. Using variables such as unemployment rates, earnings, job availability and cost of living, findings will provide narrative on the unique circumstances these cities experienced and their outcomes.
5. Best practices toolkit: Provide a best practices toolkit for Flagstaff stakeholders affected by minimum wage increases, including:
   1. Best practices (as adopted in other cities) for for-profit, non-profit and state-subsidized organizations in adapting to an increased minimum wage and managing compaction effects.
   2. Best practices (as adopted in other cities) for municipal government in supporting businesses during a minimum wage increase and attracting new businesses or industries.

On August 28, 2019, the City's Purchasing Section published the RFP in PlanetBids and advertised it in the Arizona Daily Sun on September 1, 2019. Direct email notifications were sent to 3 potential firms as well.  These firms were the Alliance Bank Economic Policy Institute (NAU); Rounds Consulting Group, Inc; and Elliot D Pollack & Company. Two firms participated in the pre-proposal meeting, and the City received a total of one (1) proposal response. The evaluation committee was comprised of five (5) evaluators, all of whom are City employees. Once the evaluation and scoring were completed and the scores were aggregated into a matrix, the evaluation committee determined Rounds to be both responsive and responsible with high scores given by all five (5) evaluators. The professional services contract with Rounds was signed in early October 2019. The procurement for these services, resulting in contracting with Rounds, was conducted appropriately and well within rules and regulations of public procurement. 

Community benefits from a study of Flagstaff’s minimum wage may include enhanced understanding of the past, present and future impacts of Flagstaff’s incrementally increasing minimum wage and Proposition 414, in addition to the provision of techniques and methods that could be utilized by for-profit organizations, non-profit organizations, state-subsidized services and municipal government in adapting to an increased minimum wage and managing compaction effects.

The community will be provided with the results of the finalized study, however, was not involved in developing the scope of work or RFP.