Department of Parking and Traffic_Section 5
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PRWT Contract
In August of 1998, the Board of Supervisors and the Mayor authorized the DPT to execute a four year contract between the City and PRWT Services, Inc., for an automated parking citation processing and collections system, to include three major system components:
- A handheld parking citation issuance and reporting system, consisting of electronic handheld ticket writers, personal computers, supporting software, networking capabilities, and support services;
- A parking citation processing system to serve as a central repository of information about citations issued and consisting of a variety of computer and hardware, software, management, and support services; and
- An Out-of-State and Special Collections Program to pursue collections from vehicles registered out of State and from motorists that have relocated, transferred vehicle ownership, or are otherwise difficult to collect.
The four year contract with PRWT commenced September 24, 1998. Use of the handheld ticket writers is to be achieved in phases, with groups of PCOs to complete training and begin use of the handhelds every four weeks starting October 26, 1998. During the first training session, PRWT will run test reports to confirm that different modules, or subsets of programming, are working as specified in the contract. DPT expects all PCOs will be trained and using the handheld ticket writing devices by May 1, 1999.
On November 16, 1998, PRWT began conversion to the new system. Upon full acceptance of the new system by DPT, PRWT will assume responsibility for all citation processing. In December of 1998, existing parking citation data was fully converted to the Ticket Management System (TMS), which allowed PRWT to begin Special Collections in April, 1999, an important component in meeting the increased revenue projections. All citation payments have been entered into the TMS and staff in Administrative Review have been using the hardware and software since December of 1998. Links for Residential Permit Parking and the Hearing Division are expected to be complete in January of 1999.
Contract Cost
One month after PRWT assumes citation processing, DPT will receive the first monthly invoice from PRWT. Invoices from PRWT will include three elements: (1) the per citation fee, described in the table below, multiplied by the number of citations processed, (2) a 34 percent payment for Special Collections, and (3) a postage passthrough amount. DPT"s contract administrator will have the responsibility of confirming the number of citations processed by using data gathered from the handheld network, handwritten tickets, and total collection amounts received by the Treasurer. Contract Fees Per Citation Processed
| Citation Processed per Year | PRWT Year 1 Fees | PRWT Year 2Â Fees | PRWT Year 3 Fees | PRWT Year 4 Fees |
| First 2 million | $2.39 | $2.34 | $2.29 | $2.29 |
| Next 250,000 | $2.19 | $2.14 | $2.09 | $2.09 |
| Next 250,000 | $1.69 | $1.64 | $1.59 | $1.59 |
| Next 250,000 | $1.18 | $1.14 | $1.13 | $1.13 |
| Next 250,000 | $0.93 | $0.93 | $0.93 | $0.93 |
| Over 3 million | $0.73 | $0.73 | $0.73 | $0.73 |
Using the pricing structure above and assuming issuance of 2,274,000 citations based on existing volumes, the total costs for the first year of the PRWT contract are projected to be $5,368,060. Such costs will decline each year, until year four when the cost of processing the same 2,274,000 citations would be $5,140,660. By pricing the contract using a fee-per-citation-structure, the contract provides that if fewer citations are issued, the cost is reduced. If ticket issuance is higher than expected, the cost (and related revenue) increases.
The total fine value of the 2,274,000 citations issued annually is approximately $72.2 million. Of this total value, $49.8 million is typically collected, or approximately 69 percent, with 31 percent or $22.4 million uncollected.
In addition to the fee per citation, PRWT will receive 34 percent of all fines collected for Out-of-State and Special Collection citations that are referred by DPT and for which DPT and the City is otherwise unable to collect through its regular collection processes. The City will receive the remaining 66 percent on such Special Collections.
Projected Revenues
Under the proposed contract with PRWT, DPT estimates that an additional two percent of parking fine revenue will be collected in the first contract year, increasing to eight percent by the fourth contract year, for a final collection rate of 77 percent for all citations issued .[1] Collections will increase due to better citation noticing, enforcement, and fewer PCO errors. DPT estimates that the two percent increased collection rate will yield increased revenues to DPT of $1,227,960 in the first contract year.
The PRWT contract will also bring DPT additional revenue resulting from Special Collections, which include citations give to vehicles with Out-of-State licenses, to vehicles with owners that have relocated, transferred vehicle ownership, or received citations in rental cars. DPT will receive 66 percent of fees collected by PRWT for Special Collections, which represent citations that DPT is otherwise unable to collect through its regular collection processes. Special Collection activities performed by PRWT are expected to yield additional revenues to DPT of $3,811,500 in the first contract year.
Therefore, total estimated increased revenues in the first year equals $5,039,460 ($1,227,960 from the two percent increase in the collection rate and $3,811,500 from Special Collections).
Reduced DPT Costs
In addition to the above described collection and revenue enhancements, the proposed contract with PRWT includes provisions which will lead to savings in current DPT costs as follows: (1) PRWT would assume the $300,000 annual fee for Lockbox processing, (2) PRWT will provide the special paper used to print the new electronic citations, a savings of $300,000 annually, (3) the use of handheld ticket writing devices will reduce the data entry requirements by $400,000, and (4) various savings in microfilm costs, DPT forms, and production and mailing of notices which total $300,000, for a total annual savings in current DPT costs of $1,300,000.
Summarized Cost-Benefit Analysis
A summarized Cost-Benefit Analysis for the proposed contract with PRWT, as prepared by DPT, is as follows:
Â
| Year 1 | Year 2 | Year 3 | Year 4 | Total | |
| Contract Cost | ($5,368,060) | ($5,254,360) | ($5,140,660) | ($5,140,660) | ($20,903,740) |
| Additional Revenues | 5,039,460 | 5,095,920 | 4,508,880 | 4,911,840 | 19,556,100 |
| Reduced DPT costs | 1,300,000 | 1,300,000 | 1,300,000 | 1,300,000 | 5,200,000 |
| Net Revenue | $ 971,400Â | $ 1,141,560Â | $ 668,220Â | $ 1,071,180Â | $ 3,852,360Â |
DPT"s estimate shows additional costs of $5,368,060 to process tickets, offset in the first contract year by savings of $1,300,000 and additional revenues (benefits) of $5,039,460, for a net revenue gain of $971,400 in the first contract year. Additional revenues are the result of increased collection rates, which are currently at 69 percent and are projected to increase by two percent per year, up to a peak collection rate of 77 percent in Year 4.
Other Benefits
Implementation of the PRWT contract offers the potential for significant improvement in operational efficiency in all DPT divisions, in customer service and in parking enforcement. In addition to increased revenue as described above, integrated electronic data management offers the following non-quantifiable benefits to the public and the City:
- Significant reduction in the number of citation errors caused by handwriting and data-entry practices as a result of implementing handheld ticket writing devices;
- More responsive, efficient and timely service to citizens paying or protesting citations;
- DPT will be able to identify stolen and abandoned vehicles more efficiently;
- New management reports will be used to make better decisions about PCO deployment and staff activities, resulting in improved enforcement in problem areas;
- Integrated and shared databases for the Residential Parking Program and Citations Divisions; and
- Expanded information management to support decision making in Administrative Review, the Hearing Division, and Traffic Operations.
Evaluation of Contractor Performance
When the PRWT contract was considered by the Board of Supervisors" Finance Committee in July, 1998, the Budget Analyst disclosed that the proposed contract included no guarantees of performance, as measured by the projected net revenue increases described above. If the contractor fails to meet the increased revenue collections, the result could be a reduced expected net gain to the City, no net gain to the City, or even a reduction in net revenue. The Budget Analyst believes that the contract should therefore be closely monitored to permit ongoing evaluation and to formulate a basis for continuation or renewal of the contract.
Evaluation of PRWT"s performance should be based primarily on the contractor"s ability to meet increased revenue projections, which includes both revenue generated as a result of increased collection rates (projected to increase two percent a year) and revenue generated by Special Collections. If PRWT meets or exceeds the increased revenue projections, then the net benefit of the contract would be increased. Increased revenue will also indicate a corresponding improvement in enforcement, operational efficiency, and customer service.
Changes in DPT"s collection rate will serve as a reliable indicator of PRWT"s performance for several reasons: (1) DPT"s baseline collection rate of 69 percent will allow an accurate measurement of changes in the collection rate under PRWT; (2) any improvement in the collection rate can be used to compare the contractor"s performance in San Francisco with other cities using the same contractor and configuration of equipment; and, (3) changes in the collection rate can be used to measure San Francisco against other cities, either using other contractors or performing their own processing and collection activities.
Special Collections activities will generate revenue in two ways: (1) PRWT will apply special collection activities to the $70 million in outstanding unpaid parking citations issued over the last five years, which the City has heretofore been unable to collect, and (2) PRWT will apply special collection activities to current citations issued to vehicles with Out-of-State licenses and to vehicles with owners that have relocated, transferred vehicle ownership, or received citations in rental cars. DPT and PRWT predict that the collectible portion of the $70 million in outstanding parking citations will be fully realized by the end of the third year of the contract. In the fourth year and thereafter, if the City renews the PRWT contract, DPT projects that increased net revenues would plateau at approximately $1,000,000 annually.
In addition to the contractor"s ability to meet the projected revenue increases, an evaluation of PRWT"s performance in San Francisco should also include an analysis of their payment of performance penalties, default remedies, and other fees or reductions in invoiced amounts. Section 5 of the contract includes a provision allowing payment to the vendor to be withheld if promises and warranties made as part of the contract are not met. Such payment withholdings would indicate an inability to meet the specific requirements of the contract and, over the term of the contract, would be an indication of the contractor"s performance relative to DPT"s expectations.
DPT"s Contract Administrator, in cooperation will division heads, will be responsible for monitoring the performance of PRWT and deducting penalties as appropriate from the contractor"s monthly invoice. The Contract Administrator should prepare a comprehensive monthly and annual report including each incident of invoice reduction, with explanation of the type of default, penalty amount, and description of the problem resolution, as well as the collection rate for that period, the total revenue collection for that period, and the total revenue collection to date.
Lastly, contract evaluation should include measurement of increased enforcement (such as identification of stolen and abandoned vehicles and parking "scofflaws") and improvements to customer service (reductions in time and effort responding to citizen inquiries, more efficient and timely service to citizens paying or protesting citations, etc.).
At the end of the PRWT contract, policy makers should receive a report summarizing such data for use as a tool in consideration of renewing the contract with PRWT.
Conclusion
Implementation of the PRWT contract for parking citation processing services has proceeded on schedule during the completion of this performance audit. However, the contract includes no guarantees that projected net revenue increases will be achieved. If the contractor fails to meet the increased revenue collections, the result could be a reduced expected net gain to the City, no net gain to the City, or even a reduction in net revenue.
Contractor performance should therefore be closely monitored to permit ongoing evaluation and to formulate a basis for continuation or renewal of the contract.
Recommendations
5.2 DPT should develop similar monthly and annual reports providing comparisons for out-of-state and special collection revenues.
5.3 DPT should monitor and evaluate improvements resulting from increased enforcement (such as identification of stolen and abandoned vehicles and parking "scofflaws") and improvements to customer service (reductions in time and effort responding to citizen inquiries, more efficient and timely service to citizens paying or protesting citations, etc.).
Benefits
Satisfactory monitoring and evaluation of contractor performance will allow measurement of net City revenue gains, or losses, as well as projected improvements to parking enforcement and customer service. Such information will be useful to formulate a basis for future decisions to continue or renew the PRWT contract.