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The City of Cincinnati in January 2003 invited PSG to submit a proposal to assist in developing and implementing a managed competition initiative in which in-house and private sector providers would compete to provide services through an ongoing, systematic process. PSG's proposal included two parts. The first part was for assistance in designing the system, in which we would be paid a fee for service. The second part of PSG's proposal was for assistance in running the process once it was designed. For the second part, PSG proposed to be paid on based on receiving a share of savings the City would realize compared to current costs. If the savings were small, PSG's compensation also would be small. If savings were large, PSG would earn more. Both minimum and maximum compensation levels were set.
The share of savings pricing plan from PSG's proposal is below.
Performance Pay Component:
Under the fixed-price component, PSG will work with the City to develop a standard process for running the managed competition program. Under the performance pay component, PSG will provide support and assistance in running each managed competition project according to the standard process.
Even though the standard process we and the City develop will be used for each competition, each project will have unique characteristics, depending on the kind and complexity of the service, desired service specifications, and cost. To accommodate these unique characteristics, we propose three performance pay scenarios, described below and summarized in the following table.
Under all scenarios, PSG will provide advisory and support services to the BET in running competition projects, according to the procedures that will be developed as described in previous sections of this contract. In each scenario, PSG would be compensated by receiving a share of "projected savings."
Shared savings scenarios:
Projected Savings are less than $1 million.
PSG will receive 25 percent of total projected savings, but not less than $30,000 and not more than $100,000. PSG would be paid its share of the total projected savings in equal quarterly payments beginning the first day of the first month following the City's signing of the managed competition contract.
Projected Savings are between $1 million and $5 million.
PSG will receive 10 percent of total projected savings for the managed competition contract. PSG would be paid its share of the total projected savings in equal quarterly payments beginning the first day of the first month following the City's signing of the managed competition contract.
Projected Savings exceed $5 million.
PSG would receive 10 percent of total projected savings, not to exceed $1.5 million. PSG would be paid in equal quarterly payments beginning the first day of the first month following the City's signing of the managed competition contract.
For more information about the Cincinnati proposal, email us. |
