Breakout Session # 1810 Keith Spears, Contract Manager San Diego County Sheriff’s Department - PowerPoint PPT Presentation

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Breakout Session # 1810 Keith Spears, Contract Manager San Diego County Sheriff’s Department PowerPoint Presentation
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Breakout Session # 1810 Keith Spears, Contract Manager San Diego County Sheriff’s Department
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Breakout Session # 1810 Keith Spears, Contract Manager San Diego County Sheriff’s Department

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  1. Developing a Cost Model for Government Services Breakout Session # 1810 Keith Spears, Contract Manager San Diego County Sheriff’s Department Dale Griffin, Senior Account San Diego County Sheriff’s Department Date April 16, 2007 Time 1:30 PM

  2. Learning Objectives At the conclusion of this session you will • Understand the components that make up a good cost model • Understand the importance of transparency in cost model development • Understand how to minimize risk in cost model development

  3. Why Do Governments Provide Contracted Services? • To allow customers to provide their mandated services • To provide a cost savings for customers • Economies of scale • Overhead costs spread over a larger group • Experience • Convenience

  4. Examples of Government to Government Contracted Services • Law Enforcement • Fire Protection • Planning • Building Inspection • Procurement

  5. When Do You Provide Contracted Services? • When it is part of your core mission • When there is a public benefit • When it meets your fiduciary responsibility

  6. A Little History • San Diego County has been contracting out law enforcement services since 1959 • Previous model was not flexible for the County or the cities • The County and the cities worked for two years to develop this new model

  7. San Diego County • San Diego County is located in the southwest corner of California. • Population: 3,098,296 (2nd in state) • Area: 4,526 square miles • Has the worlds busiest border crossing, 75 miles of ocean front, deserts and mountains

  8. San Diego County Sheriff’sDepartment • San Diego County has eighteen incorporated cities • The Sheriff is responsible for providing law enforcement services to the unincorporated area of the county • Incorporated cities are required to provide their own law enforcement services unless they contract for it

  9. San Diego County Sheriff’sDepartment • The Sheriff provides law enforcement services to nine cities under contract • The Sheriff provides law enforcement services to three Indian nations, one school district and North County Transit. • Has 3800 employees

  10. Sworn Staff • Sworn staff are deputies who have arrest powers (including Sergeants, Lieutenants, Captains and Commanders) • They work in patrol, traffic, jails, courts and specialized units like Homicide • There are 2310 sworn staff

  11. Professional Staff • Professional staff are civilian staff who perform various functions such as clerical & forensic investigations • Community Service Officers (CSO) are professional staff who assist deputies with reports and investigations such as non-injury auto accidents • There are 1490 professional staff

  12. What is a cost model? A cost model is a tool with which you can assign, allocate or apportion costs to various programs or activities

  13. Goal of a Cost Model • To know and understand the true cost of the program you are contracting out • To help you identify risks in your program • What costs are critical • What changes will have significant effects • To ensure transparency of your pricing

  14. A San Diego Sheriff Example of Understanding Critical Costs • Labor is 88% of our cost model • A 2% salary increase is significant • All other costs represent 12% • Gas price increases, although large for the organization, do not cause a significant cost increase in this model on a per deputy basis

  15. Cost Model Decisions • They are not black and white • You will need to make decisions about what costs to include or exclude • Federal, state and local laws may impact your allowable costs • Costs can be negotiated with your customers • You decide which managers have their costs allocated to the model • How to choose the basis for allocation

  16. Costs of services provided but not included in Sheriff’s Cost Model

  17. Ensure Transparency • Use real, supportable numbers • Involve stakeholders • Use your own resources • Be consistent

  18. Useful Definitions • Direct Costs • Attributable only to your service unit • Exist because of your service unit • Indirect Costs • Supports your service unit and others like it • Would exist without your service unit but not the program • Management Support • Supports the entire organization • Would exist without your service unit • This also includes administrative and external overheads

  19. How Do I Develop a Cost Model?

  20. Determine What you areSelling (Service Unit) • A fully functional deputy sheriff • A building permit for a house • One fully staffed fire station • One round of golf at a municipal course

  21. What Should Your Cost Model Include • Direct labor • Direct supervision • Direct support • Direct vehicles • Direct services & supplies • Direct facility • Indirect support • Management support

  22. San Diego County Sheriff CostPyramid Management Support Indirect Support Direct Costs Service Unit

  23. City of Vista Station Example Vista is our largest contract city, population 95,000

  24. Calculating Direct Labor • Include all staff involved in providing services including supervision • Don’t forget clerical and other support staff directly involved in the function

  25. What is Included in Direct Labor Cost • Salary & Benefits • Retirement (Including 457 match) • Health Care • Workers Compensation • Sick leave • Vacation & Holidays

  26. Vista Deputy Direct Labor Cost Example

  27. Calculating Direct Support • Staff who directly support what you are selling • Supervisors (Lieutenants & Captains) • Clerical • Contractors

  28. Vista Direct Support Example

  29. Calculate Vehicle Cost • Depreciation or actual cost method • Either method needs to include • Gas • Maintenance • Equipment required in the vehicle • Replacement costs

  30. Vista Station Annual Vehicle Cost Example

  31. Calculating Direct Services & Supplies • Specialized Equipment • Guns & Badges • Safety Equipment • Travel & training • Office supplies • Copiers

  32. Vista Services & Supplies Example

  33. Calculating Direct Facility Costs • Mortgage or rent payments (FMV) • Utilities • Insurance • Maintenance (including common area) • Can be an allocated amount if you occupy part of a building

  34. Vista Station Facility Example

  35. Calculating Indirect & Support Costs

  36. Allocation Basis • The number of service units over which you allocate indirect costs • Can be different for each item you are allocating • Should be based on a logical and measureable basis (staff count, square footage) • Can be negotiated

  37. How Allocation Works • Assume everyone uses services equally • Determine costs of staff or service you want to allocate to your service units • Determine how many service units over which you are going to spread costs (allocation basis)

  38. How Allocation Works • Divide the cost by the allocation basis to determine the cost per unit • Multiply the service units in your program by the cost per unit • This total is added to your service unit costs

  39. San Diego Sheriff Allocation Example

  40. Calculating Indirect Support • Staff or services that support your program and others within your organization • May not support everyone in the organization • Cost will be allocated based on your use of the staff or services

  41. Sheriff Indirect Support Example • These units support all law enforcement services so they are allocated to all sworn staff only • Homicide $1,505,971 • Domestic Violence Unit $1,578,397 • Family Protection $3,445,022 • Communications Center $6,987,800 • Other $3,773,502

  42. Vista Indirect Support Example

  43. Calculating Management Support • Staff and services that support the entire organization • Functions that are required to operate a business • Fiscal & accounting • Personnel & payroll • Executive management

  44. Example of ManagementSupport Allocated over all nine contract cities • Personnel $801,773 • Financial Services $351,469 • Data Services $1,157,716 • Contract Management & Admin $469,849 • Other $105,343

  45. Vista Management Support Example

  46. Pulling it all together

  47. Cost of Deputy Sheriff

  48. Cost of Operations forCity of Vista

  49. Risk Factors

  50. Cost Model Risk Factors • Negotiating away your costs • Forgetting that everything costs money • Poor cost control • Not supporting your numbers • Lack of internal controls • Lack of flexibility to react to unexpected events