REPORT TO STADIUM AUTHORITY BOARD
SUBJECT
Title
Action on Stadium Manager’s Request to Approve a Second Amendment to the Agreement with ABM Industry Group, LLC for Janitorial Services at Levi’s Stadium to Extend the Term, Increase Compensation Rates, and Ratify the Previous Administrative Exercise of Contract Option
Report
BOARD PILLAR
Ensure Compliance with Measure J and Manage Levi’s Stadium
BACKGROUND
As the Stadium Manager of Levi’s Stadium, Forty Niners Stadium Management Company LLC is responsible for maintaining “the Stadium in the Required Condition and operate the Stadium as a quality NFL and multi-purpose public sports, public assembly, exhibit and entertainment facility” as required by the Stadium Management Agreement between the Stadium Authority, Forty Niners SC Stadium Company, LLC (StadCo), and Stadium Manager.
As described in an April 4, 2017 report to the Stadium Authority Board, the Stadium Manager conducted a Request for Proposal (RFP) process for janitorial services for pre-event, event, and post-event services as well as routine non-event day cleaning for the Stadium and invited six janitorial firms to participate. Two of the six companies attended a mandatory pre-proposal meeting, but one firm withdrew from the bidding process. As such, ABM was selected for being the only firm to complete the RFP process. ABM provided janitorial services for the Stadium for three years before the RFP process in 2017.
On April 4, 2017, the Stadium Authority Board adopted Resolution No. 17-1 that consented to a service agreement between the Stadium Manager and ABM Industry Group, LLC (ABM) for janitorial and building maintenance services at Levi’s Stadium (Agreement). The Agreement had an initial term of five (5) years that ended on March 31, 2022 and included an option to extend the agreement for an additional two years (Attachment 1) at the discretion of the Stadium Manager. A First Amendment to the Agreement was also noted and filed on the same day to include the Stadium Authority in Exhibit C - Insurance Requirements (Attachment 2). On December 10, 2021, the Stadium Manager exercised the option to extend the agreement with ABM for an additional two years, which will end on March 31, 2024 (Attachment 3).
The Stadium Manager began working on developing a new solicitation in August 2023 and had planned to issue it in January 2024; however, due to the Forty Niners’ post-season games and the Stadium Manager’s preparation of their FY 2024/25 budget submittal, the Stadium Manager plans to issue a formal solicitation for janitorial services and bring forth a recommendation for a new janitorial services agreement in June 2024.
In the meantime, the Stadium Manager is requesting approval to execute a Second Amendment to the Agreement with ABM to extend the agreement on a month-to-month basis, beginning April 1, 2024, for up to six months and to formally increase compensation rates to those reflected in Exhibit B (Attachment 4). The proposed Second Amendment provides the Stadium Manager the right to terminate the agreement with thirty days advance notice to the vendor.
A Recommendation Memo was submitted describing the Stadium Manager’s request and plans to implement a new solicitation in more detail (Attachment 5).
DISCUSSION
Janitorial services are critical to the ongoing operation of Levi’s Stadium and are used year-round for daily cleaning services; annual deep cleaning; cleaning at seating bowl events and games which consists of pre-event, event, and post-event cleaning when the seating bowl is utilized for the event; cleaning at catered events such as proms, parties, and receptions; and for ancillary services such as parking lot cleaning, and window washing.
As noted above, the Agreement had an initial term of five (5) years that ended on March 31, 2022 and included an option to extend the agreement for an additional two years. On December 10, 2021, the Stadium Manager exercised the option to extend the agreement with ABM for an additional two years, which will end on March 31, 2024. The Stadium Manager’s exercise of the option was done administratively, and therefore did not come before the Stadium Authority Board for approval.
On October 8, 2019, the City Council approved Ordinance No. 2005 amending Chapter 17.30 of the Santa Clara City Code (Stadium Authority Procurement Policy), which rescinded the delegation to the Executive Director to enter into agreements without prior Board approval. On March 21, 2023, the City Council adopted Ordinance No. 2058 further amending Chapter 17.30 to provide the Executive Director with signature authority to execute contracts up to $100,000 in allocated value to the Stadium Authority. In general, the Stadium Manager has the authority to execute contracts only insofar as the Executive Director has such authority.
As a part of staff’s oversight process, staff requested additional detail on the Stadium Manager’s extension of the two-year extension on December 10, 2021. In response, the Stadium Manager provided the following explanation: “the agreement approved by SCSA Board in 2017 gave Stadium Manager the ‘sole discretion’ to extend the original agreement for one additional 2-year term.” Further oversight discovered that the extension of the term of the Agreement for two years was accompanied by an administrative approval of an increase in the hourly fees associated with the various job categories. Stadium Manager’s explanation for the increase in the hourly fees is described below:
The Stadium Manager confirmed the rates were updated administratively and provided the following information:
“We have been unable to locate the specific documentation for several of the rate adjustments; however, we would note the following factors that have resulted in rate increases for ABM hourly staff.
Rates for hourly workers, such as Day Porters, have increased beyond CPI due to a variety of factors. Coming out of COVID, ABM had to increase pay rates in order to recruit staff. There were a number of factors that caused this upward pressure on wages, including a variety of programs that were implemented during COVID to help workers during the shutdown. You may recall that fast food restaurants were advertising starting wages of nearly $20/hour, and in order to recruit labor, ABM had to compete with those rates. The stadium relies on a large number of hourly workers and many of our vendors, including ABM, increased pay rates beyond CPI, and beyond increases in the minimum wage, in order to recruit staff.
As for the exempt staff positions (Supervisors and Assistant Managers), those rates were increased in 2022 to align with the actual salaries that ABM is paying for those positions. Prior to 2022, ABM’s billing rates were lower than the employee’s pay rate plus benefits. As part of the 2022 extension, those rates were adjusted to align with their actual rates of pay plus benefits, and were approved administratively by the Stadium manager in accordance with the authority under Section 5 of the 2017 ABM agreement approved by the SCSA.”
Specific to parking lot cleaning, the Stadium Manager has provided the following information:
“Charges for cleaning the Main Parking Lot are charged to the appropriate stadium event and are reimbursed by the promoter or the 49ers. Cleaning of the parking lot for events requires additional equipment and resources beyond the labor cost, including commercial street sweepers, pump trucks when the lot floods, vehicles and trailers to move totes and trash bins during set up and load out, etc.
The costs for such cleaning are in accordance with a pre-event NTE quote provided by ABM prior to each event and approved by Stadium Manager and/or the promoter. The actual costs for event parking lot cleaning are then invoiced by ABM and are within the pre-approved NTE quote.
This has been the practice since 2015. It’s important for the Stadium Manager and the promoter to have the flexibility to make purchases for a wide variety of event costs at the last minute in order to ensure a successful show. There are often times last-minute adjustments required for major concerts, to handle requests by the artist/promoter, deal with vendors who don’t show up, handle impacts from weather, etc. Since the stadium opened, the SCSA’s position on these types of charges has been that since the costs are passed through to the promoter or the 49ers, there is no need for SCSA involvement in the contracting process.”
In addition to the month-to-month extension, the proposed Second Amendment to the Agreement will formally increase compensation rates to those reflected under Exhibit B. Through a review of documentation, it was noticed that the proposed rates are already in effect. The rates for FY 2017/18 through FY 2021/22 and proposed rates for the month-to-month extension are summarized in the table below:
The proposed rates specified above are union rates but do not include health and wellness charges, which will be billed at cost as applicable.
Staff does not agree with the Stadium Manager’s determination that authority was unambiguously provided under the existing Agreement to exercise the option to extend and increase the rates of compensation, administratively. Further, it is important to note that these actions occurred in 2021 and there has been a transition of Stadium Manager leadership since then. Additionally, the Stadium Management has implemented Standard Operating Procedures (“SOPs”). The Stadium Authority has and will continue to enhance its oversight function to ensure that the Stadium Manager complies with its delegated signature authority, contract management, and procurement regulations.
Since there was ambiguity between the expressed authority granted in the contract, the actual scope of the administrative action taken, and the status of procurement authority granted in the City Code at the time of the exercise of the option, staff recommends that the City Council ratify the exercise of the option and its terms.
Overall, the services provided by ABM are critical for stadium operations and staff recommends approval of the Stadium Manager’s request to execute a Second Amendment to the Agreement with ABM to ensure the continuity of janitorial services until the Stadium Manager completes its janitorial services solicitation and brings forth a new agreement for Board approval. In the interests of transparency, mitigation of potential risk, and to recognize the fact that the Stadium Authority received the benefit of the contract services over the extension term, staff recommends further that the Board ratify the Manager’s exercise of the two-year option, and more specifically the approval of the increased rates.
Such a ratification would be in the best interests of the Stadium Authority to ensure, among other things, continuity of insurance coverage and reliable continuation of contract clauses over the option period. It is important to note that the employees in the various laborer classifications listed below (porter, general cleaner, picker, sweeper) have in fact been performing work pursuant to the exercise of the option for the benefit of the Stadium Authority.
The Stadium Manager is in the process of reviewing the scope of work for the upcoming janitorial RFP and will share a copy with Stadium Authority staff for review prior to the publication.
The Stadium Authority Counsel’s Office has reviewed the proposed Second Amendment to the Agreement for comparison to the Stadium Authority’s customary language. Nothing in the proposed Second Amendment or existing Agreement changes the Stadium Authority’s rights under the Management Agreement and specifically with respect to any dispute that may arise from the Stadium Manager’s obligations under the Management Agreement.
The Stadium Authority reserves all rights to confirm and dispute charges by and payments to the Stadium Manager during a fiscal year-end reconciliation/true-up, including but not limited to changes based on improper allocation, calculation, lack of support, or failure to comply with the Parties’ contracts or California law. The Stadium Authority may raise related questions before the fiscal year-end reconciliation/true-up, which the Stadium Manager agrees to assess and respond to in good faith.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.
FISCAL IMPACT
The Stadium Authority Fiscal Year (FY) 2024/25 Budget contains Shared Stadium Expenses such as Security, Stadium Operations, Engineering, Guest Services, and Groundskeeping. Shared Stadium Expenses are split 50/50 between the Stadium Authority and StadCo per the Stadium Lease. The monthly expense for routine ABM cleaning services performed in shared spaces in the Stadium used by both Stadium Authority and StadCo on non-event days is in the range of $110,000 - $120,000. The Stadium Authority’s portion is approximately $57,500 per month and is budgeted under the FY 2024/25 Shared Stadium Expenses, Engineering line item.
In addition to the Shared Stadium Expense cost described above, the Stadium Authority or event promoter is responsible for these janitorial costs related to services performed for Non-NFL Events. StadCo is responsible for all costs related to services performed for Tenant’s Exclusive Facilities and NFL events.
COORDINATION
This report has been coordinated with the Stadium Authority Counsel and Treasurer’s Offices.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov>.
RECOMMENDATION
Recommendation
1. Ratify the December 10, 2021, exercise of the option by Stadium Manager increasing hourly rates to those reflected in the Proposed Second Amendment to Agreement with ABM Industry Group LLC; and
2. Approve the Stadium Manager’s request to execute a Second Amendment to the Agreement with ABM Industry Group, LLC to formally increase the rate of compensation and extend the term of the agreement, beginning on April 1, 2024, on a month-to-month basis for up to six months until the Stadium Manager enters into a new agreement for janitorial services, subject to the Stadium Authority Board’s approval.
Staff
Reviewed by: Chuck Baker, Assistant City Manager
Approved by: Jovan D. Grogan, Executive Director
ATTACHMENTS
1. Agreement with ABM Industry Group, LLC
2. First Amendment to Agreement with ABM Industry Group, LLC
3. Stadium Manager’s Notice to ABM Industry Group, LLC to Exercise 2-Year Extension
4. Proposed Second Amendment to Agreement with ABM Industry Group, LLC
5. Stadium Manager’s Recommendation Memo