deputy finance officer from the department of public health. this item we are asking for approval for a number of our contracts for community behavioral health services. is contras are a result of a large rfp process that we referred to as our mega rfp, where most of our favor help services were rebid this fiscal year. these are results of that rfp process and they represent most of the contracts that will be going to the board for approval. i would also like to introduce joe robinson. she is our new direction of community behavioral health services. she and i are available to answer questions. supervisor avalos: let's go on to the budget analyst report. i think we could probably have a robust discussion based on the report. we would like to hear your

response and see where we can find a pathway to possibly approve the contract today. mr. rose? >> the best way to summarize the report is to go to page 4-16. based on our increase, the budget analysts increase, the number opposed contracts will be revised numerous times by the department of public health. we have had this item in our office or close to six months. the proposed 22 contracts between the dph and other organizations equal $688,000, which is 14.7% less than the original dph total of $77 million.

that is the number that was submitted to the board of supervisors for approval. i believe the department now concurs with this final revision, which is a reduction of $160 million, or 14.7%. the total amounts of $674 million, includes $602 million for the paper health services under 22 contracts, and on top of that, there is a 12% contingency for each of the 22 contracts, $72 million. on page 17 of our report, we point out during the budget and finance committee meeting on october 27 of 2008, the budget and finance committee requested dph submit report to the board of supervisors on the use of 12%

contingencies in service based contracts. we were questioning the contingency because we do not know what it was used for and the budget finance committee decided, rather than to eliminate the contingency, to get more information on it. however, d p h has not submitted any such reports to the board of supervisors. i would also point out, it is unknown now how much of the 12% contingency in the proposed contract is actually warranted. i mention that is about $72 million. our recommendations on page 17 are that you amend the proposed resolution to state revised total amount of $602 million for the riposte 22 contracts without the 12% contingency awarded by d p h to the 19 contractors and identify the name of each contractor, the actual amount to be awarded under each contract, and the length of contract. legislation was couldn't --

submitted to the board of supervisors, i believe it was one page. without specifying what contractors or who gets what. since back in 2008, the budget and finance committee previously requested dph submit report to the board of supervisors on the use of the 12% contingencies. dph immediately submitted such reports to the board of supervisors. we recommend you approve the resolution as amended, and this would be retroactive to july 2010, for a total not to exceed $602 million. since the prior use of a call% contingency in an existing contract is unknown, we consider approval of the call% contingency for each of the proposed 22 contracts totaling

$70 million to be a matter of the board supervisors. i would further add, it is unusable for professional service contracts, and these are behavior health service contracts, to have contingencies. and i understand the department wants contingencies. one nonprofit is not doing a good job. it gives them the flexibility to move money to another nonprofit. but typically in the board of supervisors wants oversight, and there is nothing wrong, in my judgment, of approving the contracts in the finalized amounts. then if the department needs more money, they should come back to the board of supervisors -- and this is not the money -- but they would have to come back and justify what they need, why they need the additional contingency, what additional amount they need.

supervisors, i would be glad to respond to any of your questions. supervisor avalos: thank you. i would just be curious to hear from dph. certainly, we have an allocation, and contracts fall within that part of dph. >> certainly, we agree with the budget analyst on the amount of $674,000. -- six under $74 million. the department is requesting the contingency be included. let me tell you a bit about the contingency. the 12% contingency is only used as needed. and it is if there is additional funding available. typically, what we used a contingency for is to add back funding. this year, the budget analyst

report did indicate $4 million in these specific contracts that were added back, allocated in the budget this year. those are things that are foreseeable things happening each year. we also used the contingency for -- if one contractor is under delivering services and we transfer the units of service to another contractor, we use the contingency for that. basically, this was cited by the nonprofit contacting task force as a best practice. it is a way to process contracts faster. i would like to point out, if the contingency is not included in the contracts, we are required to come back to the board so that anything of it -- under a $500,000 modification. these are large contracts.

without the contingency, we will probably be required to come back to the board often to add money back to these contracts. many of -- the one advantage of the contingency is that it avoids these multiple contract modifications. unlike the first speaker talked about contingencies for the foreseeable future, the contingency for our professional service contracts is specifically for foreseeable things like cola's, board addbacks. we do not put contingency funding into a contract without the appropriation. as you know, you give us a budget. we are held to that budget. we are basically moving one money from one contractor to another, 11 contractor either

cannot deliver the services or we have new services that are appropriated in our budget that go to a specific -- supervisor avalos: part of this contingency has not even been appropriated yet. >> that is correct. all it does is gives us the flexibility to modify contracts. i forget how many professional services contracts we have. probably 50 with behavioral health providers. we constantly move money from one provided to the other. we are given an appropriation. let's say we have $100. if we give $50 to one contractor and $50 to another, and during the year we find out one contractor is not delivering services, then we will move 20 of those dollars to another contractor. the total dollars are controlled by the appropriation the board gives us.

supervisor elsbernd: if you had $100, 50/50, and then one program is not delivering and you want to go to another program, you shift the money. where is the extra contingency money coming in? you are using the same $100. >> for contractor a, if the contract was approved at $50, and contractor b $50, if we wanted to shift $20, we would have to come back to the board to ask for a $78 contract for contractor b. it allows us to move money between contractors about asking for a modification. >> through the chair to supervisor elsbernd, the department could not increase one contract without reducing another. i think that is the answer to your question. it would be a reduction to the

contractor that it is not performing, not providing the service. supervisor elsbernd: so if they are increasing the cost from one and reducing the cost from another, it seems to me you are still using the same total amount of money. why do you need a contingency pile? >> because the contractor dollar is capped at the amount through this resolution. in order for the department to move money from one contractor to another, they are asking for this contingency that would enable administratively those contracts to be increased. i understand what your asking -- if we have a contract with the abc company and it has a $50 maximum not to exceed amount, and we decide another contractor is under delivering, we reduce

the second contract. but in order to increase the contract for abc, it says it is $50. we would have to come back to the board to ask, can you increase contractor abc, to $70,000. supervisor elsbernd: i understand procedurally what you have to do, but what i am not understanding -- what happens if you are reducing program a to those dollar that you are now saving? does that go into the contingency fund? >> no, we reduced the contract for the other contractor and remove the dollars. supervisor elsbernd: so if you are moving those dollars, other than the procedural point of not having to come back to the board of supervisors, why do you need a contingency pop? it seems this is purely about procedure. if it is just about procedure,

there has to be a way we can fix the procedure so we do not have to appropriate 12% of the money you are not using. i am not hearing you tell me that you're spending that money. i am here you tell me that you just need the money available to procedurally avoid having to come back to us. that money is not being drawn down. >> i think the confusion is, the money does not exist in a pot. it is just a not to exceed authority in the event that we need to modify a contract. we have the authority to modify the contract. dollars are a completely separate process. this contingency had nothing to do with a pot of money sitting there. it is just a not to exceed amount. supervisor elsbernd: so you're giving yourself the flexibility to increase contracts up to 12%? >> yes.

over the five and half years, we are expecting these contracts to increase. the way we figured out the amount of the five and half years, we take the current year. if it is $100, a contract would be 500 plus half. if -- supervisor elsbernd: ok, i get it. i am not quite there, but i want to move onto something else that you said that created more questions. the add backs that you use in this contingency to appropriate add backs. >> it is not appropriate the board added tax. the board appropriates adds back. supervisor elsbernd: give me a specific example. i do not want generalities. >> if this contract was $10 for

one year, $55 for five years. if the board ads back money in your two, then we do not have the money in the contract not to exceed amount in the contract in the future years to accommodate -- supervisor elsbernd: monique, can you give this a shot? this is not working for me. >> looking at a million-dollar contractor, allocated $5.5 million. if there is an add back or additional money grant funds that the department would like to add, they would have to come back -- even if the money was appropriated. supervisor elsbernd: that is the problem i am having right now. my understanding of board add

backs, the money being added back is dollars that we have cut from someone else. >> the health department is getting a different appropriation. that is fine. the cap on those contracts lasts for a five-year period. if there is no growth allowed, the board would have to come -- we would have to come back to the border supervisors to get those contracts approved at a higher amount. whether there was a cola, if they decided to give a grant to a contractor. every time the contracts are increased, the department would have to come back to the board of supervisors for an amended resolution. supervisor avalos: supervisor mirkarimi? supervisor mirkarimi: supervisor elsbernd touched on a few things that i am interested in. the 12% contingency fee practice, how well is that

understood, in terms of how that was applied in the past? >> let me give you another example in a different department. child services, when they come to you for a multi-year contract, they assume growth. they assume growth for cola and additional services, so they may ask you for the approval of a contract amount that is greater than the current dollar value, and it is explain that way. the health department here is saying, for this year, we are paying this amount of money to these contracts as a total. they are estimating, over the next five and half years, any one of those contractors might be receiving up to 12% more than the first year amount, because of colas, add backs, grants,

shifting from one agency to another. supervisor mirkarimi: in the process of trying to figure out the add backs, which is among the most high-profile debates regarding our budget process, cut from dph budget and then add back to that, is their money returned, reallocated? it had already been thought of as a contingency, but it seemed unnecessary because of an add back fill the particular needs? >> if the grand does not come madin, funds are not transferreo a different agency -- supervisor mirkarimi: but if it is made, we often restore -- >> that is in the budget -- supervisor mirkarimi: the

contingency would be placed to air that maybe would not have received an add back? >> it would depend on the contractor. if they had a million-dollar contract and you provided services for substance abuse, then that contract would have had to come back to the board of supervisors before the health department was able to give that add back to that particular agency. again, the way the calculation is done is the department is looking at the first year dollar amounts. then it is essentially growing that authority at the departmental level to allow them to increase any one of those contracts over the course of the five and half years, only as money becomes available. the money would become available from the an ad back, grant,

shifting of funds, additional appropriations that may occur in the year. >> mr. chairman, supervisors, let me make one other point. the department represents that they will not -- this does not result in real dollars because they are just moving money around. in fact, if the board of supervisors authorizes these contingency amounts, there is nothing to preclude the department, whoever might be there, to come back to the board of supervisors and say, supervisors, you authorized a $77.2 million contingency. we need that money. i am requesting your authorization to appropriate enough might to extend that $77 million. the whole process, in my judgment, is flawed. supervisor mirkarimi: part of what mr. rose just said resonates with me, in the respect that i understand the

need to streamline, so that it is not onerous to dph in case they need to operate a maneuver as they see fit, with that contingency as a latitude to do what they feel is best. but it does feel that we are a bit divorced from a process where we take such painstaking effort to try to create a level of sunshine and backstop. is there something in this conversation that would help activate our ability to at least a prove that use of a contingency without making it that much more onerous? >> the contingency cannot be used some -- beyond the amount appropriated by the board of supervisors. if you approve a budget next year that grows the contract by 2%, then the health department would use their contingency in

order to grow those contract amounts by 2%. supervisor avalos: are we making restoration's -- when we make restoration's and add backs, we have not been funding specific ordered -- organizations. we give it to a general service and it is up to them to make the decisions, based on the performance of contractors, the work that needs to get >> so me it seems important to be able to give the department that kind of flexibility to carry out that service. i guess the mechanism of how we call it a contingency, certainly we don't have money set aside for fiscal year 2011-2012 yet. only for fiscal year 2010-2011, and that is only a certain amount of money. i feel somewhat comfortable,

you could explain if there is a way we can set up some mechanism to better understand what is going on orchestrative process for this to carry forward. if there is not one, i might be comfortable approving as-is. >> the department currently has approve from the board of service in terms of dollars to fund the agencies at the $602 million level. if next year there is a contract cola, they will have to bring the contracts back before the board, all those that exceed the $10 million over the course of five years to get that approval even though you have already approved it in the budget. again, that is what the department is asking for. perhaps the reporting neck nix might be the way to give the board of supervisors the information it is looking for. perhaps every year the department should compare the original dollar amount by

agency and the final amount by agency to show how that flexibility has been used. but again, the department cannot increase any of these contracts without an additional appropriation, whether it is grans, add-back, supplemental appropriation or the movement of money from one agency to another. supervisor avalos: you are saying we approved up to $602 million for the current fiscal year. so the contingency of $702 million doesn't exist? >> it does not exist unless the department approves it. so $602 million is the amount for that particular line item across the department. what the health department is doing is looking forward in five years, what is going to happen to the dollar amounts in the next five years. they want the ability to grow

any one of those agencies' budgets by that amount as money becomes available. as the department changes its service delivery, maybe one day aids services will not be necessary because of the new prevention that is going on with the pharmacuticals, and maybe they want to eliminate that service and put the money some place else, and the contingency allows that to happen. what is being capped is the total dollar amount by the resolution by this board of service as to what the dollar amount of the agency contracts should be. and the department has incorporated this flexibility to be able to increase those dollars so long as those dollars are appropriated. supervisor mirkarimi: through the chair, is that practice then extended to say another department like h.s.a., who also has quite an extensive network of social service providers?

>> no. one of the things that human services agency does for child care, for example, it does combine them, and it estimates some cost of living adjustments over the course of the 3-5-year period, which is another way of doing it. so when you approve the dollar amount for three years, the only thing the department has appropriateded is the first year, and they can only increase it the second and third year if that money is appropriated. so departments do, when they come to the board for a multiyear contract assume some growth generally, and those are aed proved. it is not called a contingency, and it is likely not 12%. supervisor mirkarimi: no. in my whole time on the budget committee, i've never seen a contingency of 12%. this is unique, and trying to disseminate with how this might be practiced with some of the

other departments who may find themselves in a similar prickment. >> the 12% is only a 2% increase for any contractor over the coors of the period. supervisor mirkarimi: thank you. supervisor avalos: so the $17 million is spread over five years? this flexibility we are built in not to exceed amounts is spread over five and a half years? we are giving the department the flexibility to make those decisions? >> that's right, over the life of the contract. supervisor avalos: let's open this up for public comment. any member of the public who would like to comment on item number four >> good afternoon, supervisors. i am a resident, p.i.c., a.r.e., l.l.o. with the new mayor and board of

service next year, i hope 2011 will be the year of transparency and accountability. this item on the agenda and the discussion that i've heard the last 20 minutes lacks both. the questions i have is, number one, why five-year contracts? why not two and then see how these 20 service providers are doing? and then maybe there would be less of an issue regarding a contingency fee. the other question is why 20 non-profits? why not 10? when you fund 20 non-profits, perhaps you have a duplication of services that that money could be used in a better way to provide behavioral services to the city's most vulnerable.

i think you're going to shirk your responsibility by just allowing the representations of d.p.h. and passing this on to the full board. thank you. >> walter paulson. i guess there must be 20 ways to have good health if you have it. 20 ways to be healthy. just live out the back, jack. make money plans, stan. we need more money there. just hop on the clipper bus, gus. we sure need a lot of money. it means so much. and i'm sorry to see you in such mental health pain, which is something i am going to make you smile again. and i say we appreciate that.