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CR 93-03 Interim Agreement Matt's Towing• ecember 29 1992 Council Report 93 -3 TERMINATE CURRENT TOWING CONTRACT, APPROVE INTERIM AGREEMENT WITH MATT'S TOWING AND APPROVE ORDINANCE #93 -721 FOR FIRST READING Proposed Action Staff recommends that the Council approve the following motion: Move to terminate the current towing contract with Dick's Towing and Starting due to contract . violations concerning insurance and performance bond, approve an interim agreement with Matt's Towing.. and approve Ordinance #93 -721 for first reading This action will terminate the contract with Dick's Towing and Starting, provide towing service to the City until a new contract is signed, and allow the City to enter into a new towing contract without using the bidding process. Overview The City Council awarded the City's towing contract to Dick's Towing and Starting in October of 1992. A contract was signed between Dick Hughes and the City as of December 1, 1992. The contract required, 0 mong other things, that the Contractor have worker's compensation insurance and a $25,000 performance ond. Mr. Hughes provided the City with a certificate indicating that he had worker's compensation insurance through April of 1993. The City later discovered that his worker's compensation insurance had been canceled as of November 20, 1992. He also allowed his performance bond to lapse. The contract allows the City to suspend the contract if insurance policies lapse. It also allows the City to terminate the contract if there is no performance bond. Staff acted to suspend the contract as of December 17, 1992. Staff has been in contact with Mr. Hughes. He stated that as of December 18 his insurance is back in force and that he will be seeking a performance bond. Matt's Towing, the only other bidder, has been providing towing service to the City since December 18. Primary Issues to Consider Can the contract with Dick Hughes be terminated by the City? Can the contract with Dick Hughes be reinstated? Can the City award the towing contract to the other bidder? Is it necessary to solicit competitive bids for this contract? Would the City be better served by soliciting bids for the towing contract or through negotiations? What would be the process for choosing a towing contractor if there was no bidding? `O'er 7 - 7 °- r: s A. Genellie s •ounc Report #93 -3 il age Two Supporting Information Memorandum from Jeremy S. Steiner dated December 18, 1992 Copy of Dick Hughes, Inc. certificate of insurance showing cancellation. • Letter to Mr. Hughes by Jim Genellie dated December 17, 1992 Ordinance #93-721 y'Y • likouncil Report #93 -3 .age Three Primary Issues to Consider Can the contract with Dick Hughes be terminated by the City? A memorandum is attached from Jeremy S. Steiner that indicates that, not only can the City Council terminate the contract, it must terminate the contract. Can the contract with Dick Hughes be reinstated? The Steiner memorandum makes it clear that the contract cannot be reinstated. The deficiencies in insurance and performance bond existed when the contract was signed. There never was a valid contract. Can the City award the towing contract to the other bidder? The Steiner memorandum indicates that there is some question whether the Council can award the bid to Matt's Towing. For this to happen, Matt's Towing would have to agree to abide by all the specifications set out in the bid. Unfortunately, Matt's Towing has taken exception to several of the requirements of the original bid. Staff therefore recommends, and the City Attorney concurs, that the best course is either to rebid the contract or change the City Code to remove the requirement for bidding. Is it necessary to solicit competitive bids for this contract? City Code Section 1325.23 is the only reason that the City must bid out this contract. Neither state law nor the City Charter would mandate bidding for this service. The surrounding cities do not solicit bids for this service. Would the City be better served by soliciting bids for the towing contract or through negotiations? The money spent for this service does not come from the City. The City, therefore, does not directly benefit from the fact that the contractor charging the lowest fees has the City's towing contract. Citizens and visitors to Hopkins whose vehicles are towed do save some money. The City, however, may suffer from the requirement to give the contract to the lowest bidder. The lowest bidder may not charge enough to adequately fund his or her operation resulting in financial difficulties. Negotiating this contract would allow the City to choose the contractor which could best provide service to the City. The process would also be shortened because the publication requirements would no longer exist. What would be the process for choosing a towing contractor if there was no bidding? The City would still solicit proposals from a number of towing contractors. City staff would evaluate these proposals and then make a recommendation to the City Council based upon ability to provide the service to the City, towing charges, and customer service. The City Council would then make the ultimate decision. ouncil Report #93 -3 gage Four. Alternatives 1. Terminate the current contract, approve an interim agreement with Matt's Towing, and approve for first reading Ordinance #93 -721. The only reason the City must solicit bids for towing services is City Code section 1325.23. If this section of the City Code were amended to remove this requirement the City would be able to award the towing contract to whichever firm it wished. If the City Council chose this course of action, a new towing contract could be awarded as early as February 16, 1993, the second Council meeting in February, . 2. Terminate the current contract, approve an interim agreement with Matt's Towing, and authorize staff to rebid the contract. The City Council could choose this alternative if it would prefer to continue to solicit bids for the towing contract. Staff would immediately begin the process of soliciting bids. It is likely that a bid could be awarded at the February 2, Council meeting. The new contract period would begin on March 1. Several minor changes would be made in the bid specifications, e.g. to require proof of insurance paid for at least six months. Staff recommends Alternative #1. DATE: December 18, 1992 TO: Heather Alex j Genellie FROM: Jeremy S. Steiner RE: Towing Contract C I T Y O F H O P K I N S M E M O R A N D U M You have asked that I provide an opinion on the termination of "Towing December 1, 1992 Towing Contract (the Towing Contract ) between the City of Hopkins and Dick Hughes, Inc. ( "Hughes "). It is my understanding that you have learned that Hughes' workers compensation and employers' liability coverage were cancelled on November 20, 1992, had not been reinstated on December 1 and are not in effect at this time. You further indicated that Hughes has not provided the Performance Bond required by Paragraph 14 of the Towing Contract and may not be able to obtain such a bond. This Memo will address three issues. 1. Is the City Council authorized to terminate the Towing Contract as a result of Hughes' failure to provide the insurance coverage and bond required by the Towing Contract? 2. Is the City Council 'authorized to simply suspend the Towing Contract, but reinstate it upon receipt of evidence that the insurance coverage and bond has been obtained? 3. If the Council terminates the Towing Contract, is the Council authorized to award a new contract to the next lowest bidder? 1. Termination of Towing Contract. The Council does have the authority to terminate the Towing Contract for two reasons. First, the provisions of the Towing Contract specifically authorize the City to terminate under these circumstances. Paragraph 12 authorizes the City to terminate "in the event of a breach [of the Contract] by the Contractor . . . ". The failure by Hughes to provide the required bond and insurance constitute a material breach of the Towing Contract and do authorize the City to terminate under this provision. Second, Paragraph 14 of the Towing Contract provides that the City is authorized to cancel the Towing Contract if the . required Performance Bond is cancelled or the 1010 First Street South, Hopkins, Minnesota 55343 612/935 -8474 An Equal Opportunity Employer • Heather Alex Jim Genellie December 18, 1992 Page 2 surety is "relieved from liability because of failure to pay the premium . . ". It is my opinion that the City Council is authorized to cancel the Towing Contract. In fact, as discussed in the next paragraph, I am of the opinion that the Council m cancel the Towing Contract. ust 2. Reinstatement of Towing Contract. In my o Council does not have the authority to reinstate pinion, the the Towing Contract. The insurance and bond requirements were specified in the advertisement for bids that the City published for the Towing Contract. The Council's acceptance of Hughes' bid was subject to the implied condition that Hughes would be in compliance with the bid and Towing Contract requirements and capable of performing at the inception of the Towing Contract. Since Hughes was not in compliance with the Towing Contract and bid requirements on December 1, it is my opinion that the Towing Contract is null and void. In addition, I do not believe the Council is authorized to reinstate the Towing Contract should Hughes provide proof that he is insured and bonded. Because the Towing Contract is null and void, I do not think that the Council may award the Towing Contrct to Hughes unless it rejects all bids and reinitiates the bidding process. A new contract could then be awarded to Hughes if he submitted the lowest responsible bid conforming with the bid requirements. 3. Award of Contract to Next Lowest Bidder. I have researched this issue, and was unable to find any Attorne General's opinion or Appellate Court decision that would clearly authorize the City Council to award the Towing Contract to the second lowest bidder under these exact circumstances. In spite of this, I believe that the Council would be within its authority to award the Contract to the second lowest bidder because it has been determined that the lowest bidder was not a responsible bidder and is not capable of complying with the conditions of the Towin Contract. Before proceeding on this basis, the City should, however, verify that the second lowest bid is still open and that that bidder is prepared to enter into a Towing Contract with the City on the basis of the bid previously submitted. If this is not the case, the only option will be to arrange for towing services on a temporary basis and rebid the Towing Contract. I would also note that the Council did reserve the right to reject all bids and does have the option of simply doing this without considering the second lowest bid. njj Please call if you have any questions. JSS f5 S TYPE OF INSURANCE LIMITS OF LIABrLITY Part One Workers' Compensation Statutory Part Two Employers' Liability Bodily Injury by Accident S 100,000 each accident Bodily Injury by Disease $500,000 policy limit Bodily Injury by Disease S100,000 each employee • Minnesota Workers' Compensation Assigned Risk Plan Standard Workers' Compensation & Employers' Liability Policy Contract Administrator Berkley Administrators formerly EBA P.O. Box 59143 Minneapolis, Minnesota 55459 -0143 Phone (612) 544 -0311 CERTIFICATE OF INSURANCE The Certificate is issued as a matter of information only and confers no rights upon the Certificate Holder. This Certificate does not amend, extend or alter the cover- age afforded by the Policy listed below. BA 314CG (3/92) NAME AND ADDRESS OF INSURED POLICY PERIOD: HUGHES DICK INC TOWI 900 NE 2ND ST HOPKINS MN 55343 This is to certify that the Policy of Insurance described herein has been issued to the Insured named above for the policy period indicated. Notwithstanding any require- ment, term or condition of any contract or other document with respect to which this Certificate may be issued or may pertain, the insurance afforded by the Policy de- scribed herein is subject to all the terms, exclusions and conditions of such Policy. Should the above Policy be canceled before the expiration date thereof, the Plan will endeavor to mail 30 days written notice to the below named Certificate Holder, but failure to mail such notice shall impose no obligation or liability of any kind upon the Plan. Certificate Holder's Name and Address: HOPKINS POLICE DEPT 1010 1ST STREET SOUTH HOPKINS MN 55343 Agent's Name and Address: SARGENT— HUSBANDS ENT 5241 VIKING DRIVE BLOOMINGTON MN 55435 EM111120 FROM : 04/20/1992 TO : 04/20/1993 CONTRACT NO. : - 04- 062831 Date Issued: o Authorized R resentative 92 December 17, 1992 Dick Hughes Dick's Towing and Starting 3635 Hampshire Avenue South St. Louis Park, MN 55426 Dear Mr. Hughes, I understand that your worker's compensation and employer's liability insurance was canceled as of November 20, 1992. Evidently you must reapply for this type of insurance. Simply sending in a payment will not reinstate this coverage. The City has also discovered that you do not have the performance bond that is required by the contract. You are now in violation of your contract with the City of Hopkins. 0 Section 9 of the contract requires you to have worker's compensation and employer's liability insurance. Section 9 also states: "Failure to comply with the provisions of this section shall automatically suspend this Agreement until the insurance has been reinstated." Section 14 requires you to have the performance bond. Section 14 goes on to say that: "This contract shall be subject to termination by the City at any time if said bond shall be canceled or the surety thereon relieved from liability because of failure to pay the premium or termination of the period of the bond without renewal thereof" The agreement between the City of Hopkins and Dick's Towing and Starting is hereby suspended. Staff will recommend that the Hopkins City Council, at its January 5, 1993 meeting, terminate the contract between the City and your firm. Sincerely yours, m Genellie City Clerk C I T Y O F H O P K I N S 1010 First Street. South Hopkins, Minnesota 55343 Phone: 612- 935 -8474 Fax: 612 -935 -1834 An Equal Opportunity Employer BE IT ORDAINED by the Council of the City of Hopkins as follows: SECTION 1. That Section 1325.23, be revised as follows: 1325.23 Designation of City Towing Contractor; Contract Requirements Subd. 1. Bids for Towing Contractor. The City Manager shall advertise for bids by recommend to the City Council that a contract be made with a person, firm, or corporation desiring to act as towing contractor for vehicles impounded under this Ordinance. end the City Council may by motion or resolution contractors of the City authorize the Mayor and City Manager to enter into a contract with the recommended person, firm, or corporation. First Reading: Second Reading: Date of Publication: Date Ordinance Takes Effect: Attest: City Clerk HENNEPIN COUNTY, MINNESOTA ORDINANCE NO. 93 -721 TOWING CONTRACT January 5, 1993 January 19, 1993 January 27, 1993 February 16, 1993 Mayor