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Home My WebLink About2001-11-05 - AGENDA REPORTS - ERNST & YOUNG INSURANCE (2)CITY OF SANTA CLARITA AGENDA REPORT City Manager Approval Item to be presented by: Carl K. Newton UNFINISHED BUSINESS DATE: November 5, 2001 SUBJECT: CONSIDERATION OF MODIFICATION OF INSURANCE/INDEMNITY REQUIREMENTS FOR PROFESSIONAL SERVICE PROVIDER CONTRACT WITH ERNST & YOUNG FOR SOLID WASTE AUDIT DEPARTMENT: City Attorney RECOMMENDED ACTION Receive report by City Attorney and consider modification of City's standard insurance and indemnification requirements for professional service provider, Ernst & Young, regarding the proposed Solid Waste Audit Contract. BACKGROUND The City's standard indemnification requirement for professional service providers is unlimited in amount. This means that the professional service provider, as a condition of contracting with the City, agrees to protect and insulate the City from any liability or risk of loss resulting from the professional's performance of or failure to perform the contract, regardless of the level of liability or loss which the City may experience. Ernst and Young is unwilling to enter into the Solid Waste Audit Contract without some limit on the indemnification level of liability or loss which the City may experience. Ernst & Young has suggested that the Council authorize modification of the City's policy re: indemnification requirements for professional service providers for the Solid Waste Audit Contract by reducing Ernst & Young's indemnification requirement to the fees paid for deficient services. Ernst & Young has also requested that the agreement provide for a limitation on aggregate liability to fees paid by the City to Ernst & Young under the agreement and that any liability or obligation of Ernst & Young be limited to assets of Ernst & Young without recourse to partners or assets of partners of Ernst & Young. (See attached portions of Ernst & Young's response to Proposal for Service, pages 8 of 8, 9 of 9, and 10 of 10, dated September 19, 2001.) Agenda Item ANALYSIS The modifications requested by Ernst & Young to the City's standard indemnification requirements for professional service providers represent a significant departure from protections consistently imposed upon such contractors and therefore presents a policy issue for the Council. Considerations which can be weighed against the reduction in protection and increase in risks to the City may include the size, professional standing and demonstrated integrity of Ernst & Young together with an assessment by the Council of risks which may be associated with the performance of the contract. FISCAL IMPACT Fiscal impact would be contingent upon any claims or litigation which may arise out of the performance of the contract by Ernst & Young. ATTACHMENT Portions of response by Ernst & Young to Proposal for Service 11/05/2001 11:24 FAX 213 230 2700 NOV 05 101 13;07 FR 0ct-24-01 0100m Proa-EOMST YOUOS UP Ernst & Y aaa% I -LP Proposal for Service tot Re-- P341-02-03 SrpamDet 10, 2001 Listint ofReforeneea BURKE WILLIAM De9Psx1 • Ps 3/5 Michels R. Vadon. Esq. gwke, Winans & Sorensen. LLP 3200 Pmic Center Drive, Suite 750 Cosa Mesa. Calitomia 92626 Karl Rubitatein, Esq- RuWustcur k P4rty (Ra&mb P.O. gmt 18657 Carpus Guist;. Taws 78880 Bllerr Richey, EOq. ywAdisn rmwial Corporatist tot Mission Street Sen Francisco, California 94105 Section 13—AAIVMBOW PMP"al8 Now Sectian 14- Conf/kt of interest IM002/004 TO 912132362100 P.02/04 +2132771300 1-147 P.03/00 F-01 Our subCOOM&C n and we have undenaken a limited inquiry of our taoords m rlenatmino court le witb this "40ouam'• &N has, sad may coptimMIC. to pafwm Qwgstim advisory services for Wiam Mwsawwa. lm_ The very taamm divasiTY. 0340Ttlde, and volume of Str+srA Yatmg LLP and in pm and pramS elferns rind Frofessi WA relationships does trot Wow us m be certain that eaeb sad avert' rm de relationship or potential cashier baa come to Our Klcudoo. In rhe event that additional rvlatiariships or potctnial conflictS Ca1ne to our atreutioe, we vdll 0awody n011fy you• Section 15—Ad000nal DOW 1. . Zile Resposm submitted hereby is "ALL OROM s8M to any modifieadow to the RFP or tho szpe f wortwitltsu its prior written coageal Pace a of 8 11/05/2001 11:24 FAX 213 290 2700 NOV 05 101 13:07 FR Ott -24-01 01110pa Frw[MOT MING LLP Ernst & Young LLr Proposal for Service In Act P641-0-03 5CPS swr- 39, 2063 BURKE WILLIAM 2003/004 TO 912132362700 P.03/o4 [rGlPaat • P5 6/5 t21347nast T -44r P, 04105 P-s5l The fees and OdW terms of EY's respnow are based upon the RFP and scope of eke a MIL Any chane therein could change the fees and time of perfotmmnce. r2. 1 Wturatmr attd 191itation on Liabilioa. The Indemnities (including ` Sectiun 11, Proposal losbuedons; Section 3, Proposal Terms and Condidoem Sectio[ 7, Sample Contract) sbould be limited to bodily injury, death or physical damage to nal or tangible paweal property, to rhe extent such injury. death or damage is caused by the negligent or inuntional (if wrongful) an or omissoon or wilW mitcouduct of Ernst & Young act the performance of the services. The Agreemem should include a warranty that EY win exercise due professional care and competence in cite performance of the services, and the City should notify EY of any deficiencies in the services within 9(3 days of performance of The services. For any breach of such aarrauty, the Cily's remcdy alwll be re-perfomtarwe of the services. If BY is unable to re -perform tore services The Cirr shall be entitled m recover the fees paid for the deficient services. EY will disclaim all otber warranties, whether express or implied, Including the watramies of merchantability or I imen for a particular purpose. The Agreenenr should also include a cap on liability. To rhe fullest extent permitted by applicable law, the wtal aggregate liability of SY wM1 res 5OW0111ract0ra, collectively. should be limited do fees paid by The City to EY uredos the Agreement. 11ft City's TOOMM With.eayect to arty liability or obligation of By sban be limitcd to The assets of EY, and the City shall have no nxounc against, and shall bring no claim agrirtw, any patmrr of JEW or any of cite assets thereof. in no evem will EY or its sa wantranos be liable for conacquoxniai, incidental, indirect, punitive or special damages. EY believes that Lha above IStaiwiooa represent as equitable and standard allotation of eke �rislc 3. l st • lade . Any dispute regardins the Agreement or the cervices should be submitted firs to:,tediatiott. EY believes rim snob an alternative disputer provision will minimize the time and cost awoolated with dispute msoluti0n. g. Cg*NCOSI'sl rA islon. To the maximum exi nt permitted by law, the City should not disckae EY's ooufrdetttial information. EY's eouildamial information atehtdes mfolml6oa wbich is marked emOdential or which under the eircurnstames ought reasonably be deemed confidemial. By desitas to protect its confidential Wannotion, in parti Ww. from its competitors, to me maximum extent possible. Page 9 of 9 11/03/2001 11:24 FAX 213 236 2700 BVRKE WILLIAM 0004/004 N13V M '01 13.07 FR TD 912132362706 P.04/24 DCR►a>it ` to 3/i Oat -24-01 Shlba Frow-INST YOUNG LLP a2131773349 T -44T P. HAS F-951 Ernst Q Young W Proposal forsiwviee IA Be PS47-02*= SW*mbw 19, 2001 5 t .aT +_�*T�. l7pon PeYa EX will assign Owners* in the ddiverabin unlet Ow Ap eaaem to the City. pY will retain all ri$W w its tocWcal al mmu (including dam modules, components,a3abodoingl s and the wills the CC(itIEY will license She technical sign em to the iadepetdeauy BromVM. itit mood or dq!vck*cd by UY Pd" TICIP Of s esgageuteat ry• City 10 le the ger integssiled ; d4welaped inn thene angaBaaanm. OW ZY mains the 119M to itsknowledgc expetitne Mow - how developed in the Boum of pafa+mms sarvicat. Sieco By provides p2 oteessloraal services to Tunny elieme, it must ptosmc iw Y*W w its T n4alyiag technical cltsuents :red knawlefte, which it lues in other engagements. 6- The ptopesal bmId should be waived, in aceordace with Que scan $2 to lbc Questions and Responses frays: Brown. Vance & Assmi3aes, dated AuSM 30,2M]. 7. EY �ramid not be able to provide a specific P01=11009 bond Its favor of the F ity- A"do"". EY WOW tot be sbtc to provide an endatswoeat to its irtsurarxe to ptirvvida e City as an additimms) insured. S. CWWjMWMdRdRV6The period ofpafamttoee should be macndcd to the extant say delays in EY's services result floe a failure ar 121tdmah' pe rib"e amt by the City. (Seedy 2. proposal Terms and Conditions). The RFP and Sample Professional Setv(cas AVtaoem Provide that time is Oftbe esstskc and do deliverables are due within go days after award of canumt. A time cxwAsim ler delays ameed by the City is r.wonabte under such circumgances. 9. . PY ahould receive chitty (30) toys Hill" and the right w sues any defauk. (Section 6. pngm]k i IaseueTtena, Section 1. Tema and Candia OM Section 9. Prafessiuxal Services Agaeroest)• EY should bane A teasonahle appottitnity w address and cons defaults before the City can ext=isc remedies. Neither rlrbrateslaa bySYaaF amprorac? by the CV, ,ofthtrp/opasA in whole ar In per, eoarrlaeres awepianre by Ey4axy cvarraaemi rases coassterd br rhe Cry's Regrew j w P4tipaanl andrime sha n nap aa of force a bindbw arrirommr benwom the parries. Such as agreeam slwll 0* ads � a mua/ailreeaa NWe murm by both she Cay and BY It 'rk:b groie'{'i sve 6y Jr.,,- by Tle- t /a t. Tt L,I O s 7t i. a a& E .Y. i s o.ti 1 e� n 9 -r -L t t. Q14 it i6mij vatv.`�l tE.tjtabistetilat'is &••. 'true �'+tr atm 'E.?:rS gt�+t>rli 1aR`��;'ty 3:, 8*4�neetlji�! �, li.�:�i•}i ,$ail e-1 ate. Page IS> of l0 ** TaTPL PaGE.04 **