Why compete water district legal services?
August 21, 2013Recent dialogue about competing legal services at the water district suggests some clarification of the argument in favor of competition may be in order.
Best, Best and Krieger (BB&K) has been providing legal services to the Valley Center Municipal Water District (VCMWD) for the past 20 years. In 1993, their primary office was located in Riverside. They wanted to expand into Southern California and opened an office in San Diego on October 1, 1993. The new BB&K office was staffed by five attorneys who transferred from Jennings, Engstrand & Henrikson (a San Diego firm that was providing legal services to VCMWD) plus two employees from the BB&K office in Riverside. There was continuity by the fact that Michael Cowett, a long time General Counsel for VCMWD, transferred from Jennings to BB&K. So, why compete legal services?
First Reason – In May 2013, BB&K proposed a two-tier fee structure. The first tier was a fee for VCMWD and the second tier was for Third Party Reimbursable Services, typically charged by VCMWD to third parties such as developers. Their proposal was to increase their second tier fees by approximately 30 percent. Such an increase was unlikely to be endorsed by the board of directors. So, to sweeten the deal, they offered to forgo their scheduled 1.6 percent increase at VCMWD for one year. This would have been a minimal one-time saving to VCMWD of $1,000 to $2,000 and an annual recurring increase to BB&K of several thousand dollars. This became a fiduciary issue since the economics made no sense and it had the appearance of trying to buy our vote.
Second Reason – BB&K is what you might consider to be a full-service provider of legal services. That is, they employ specialists full-time for a variety of legal issues. It is debatable whether it is more economical to employ specialists full-time, who may not be working in their specialty full-time, or to have agreements with full-time specialists who can be called on as needed. Logic would suggest that you should employ a specialist only if needed full-time in that specialty. That is why it may be possible for a smaller firm, with access to a wider selection of full-time specialists, to provide more competent and cost-effective service. Bigger is not always better, so open the competition. There may be other firms who would like to expand in San Diego County.
Third Reason – We were in a similar situation several years ago regarding audit services. It is important to realize that managers of public agencies do not like to change auditors, attorneys or other contract services, unless extenuating issues prevail, due to the added work in source selection and indoctrination of a new provider. However, we did conduct a competition for audit services at VCMWD and selected a new firm. The federal GAO (General Accounting Office) recommends five-year agreements and aggressive competition from all qualified firms, including the incumbent every five years. The Board of Directors has a special fiduciary responsibility to the public for all business conducted on their behalf. Common sense would suggest that all long-term contracts and service agreements be revisited periodically. After 20 years with BB&K, that service agreement review is overdue.
Conclusion – BB&K has provided excellent service to VCMWD for 20 years. They, and others, will be encouraged to submit proposals. As an incumbent, BB&K is clearly in a favorable position to compete. More than half of the agencies we reviewed in San Diego County have smaller legal firms. This should encourage BB&K to sharpen their pencil and present their best proposal to VCMWD. Our fiduciary responsibility demands that all service agreements be given a serious review every 5-10 years.