Oct 31, 2007 - 04:05:24 CDT
The city of Mandan will outsource its payroll and human resources services to Fargo-based CBI Inc., an administrative services organization.At Tuesday's meeting, the city commission went along with a management team recommendation to choose CBI over the Billings, Mont.-based Avitus Group, a professional employer organization.
City Administrator Jim Neubauer explained how staff had brought to the commission in September the concept of outsourcing human resources and payroll. Commissioners then approved issuing a request for proposal, to which two companies replied, CBI and Avitus.
The management team, led by Neubauer and composed of department heads, heard the proposals from the two companies, and through a straw poll decided to recommend CBI to the commissioners.
"While we felt both companies can provide quality services, CBI can do it at a lesser cost," Neubauer said.
As a PEO, Avitus would charge the city based on 1.88 percent of its payroll, amounting to about $93,000 annually. CBI based its fees on $50 per employee per month or an annual cost of about $75,000.
To satisfactorily carry out the functions of human resources and payroll, the city would need a minimum of one and a half staff positions, Neubauer said. Total cost of those positions would exceed $100,000. The city currently has only one person handling payroll, and it will be through attrition that the city will eventually see the resulting savings, according to the city administrator.
It was noted that CBI does not have a membership in the National Association of Professional Employers, which was an indicated preference in the request for proposals.
CBI president Kevin Wilson said that the association membership was voluntary.
"My staff has MBAs and professional human resources designations, and I'd put them up against any industry designation," Wilson said.
CBI has been around since 1966 and provides services in 27 states, with offices in Sioux Falls, Wilson said. He has been president the past 11 years, following 15 years of employment with Blue Cross and Blue Shield.
Avitus representative Brian Reinbold argued that the city wasn't comparing apples to apples. He did provide the commission a quote for providing only payroll services, which Mayor Ken LaMont accepted, though it was provided at the last moment.
Morton County outsourced its human resources and payroll to Avitus earlier this year, and the arrangement appears to working well. Avitus has an office in Bismarck with a full-time human resources officer, David Stephens.
"The one thing we haven't heard about (from CBI) is safety and risk management," Reinbold said. "We have trainers that come out and provide classes on CPR and blood-borne pathogens. We have a tremendous menu of what we can offer. That's a large part of what we do as a co-employer. Also, as a co-employer we have a responsibility to the 6,000 employed members of our groups, which are also our employees."
Wilson said that CBI would also be able to provide safety training. He said he believes the biggest difference between the two philosophies is that as an ASO, CBI's operations are more transparent than Avitus'.
While Avitus said it carried a portion of the liability related to an employer, Wilson said the city would not experience any savings, still having to maintain its liability insurance for employees. He said that CBI also paid employee taxes when they were due, and couldn't hold the funds and collect interest on them, something Avitus can do because of its status as a co-employer.
Reinbold replied that client employees did become the responsibility of Avitus and that part of the client's liability does shift to Avitus.
"The payment of taxes, unemployment insurance does become the responsibility of a PEO," Reinbold said.
It was Commissioner Tim Helbling who made the motion to go along with the management team's recommendation of CBI. The commission, which was minus Commissioner Dan Ulmer, approved the motion unanimously.
(Reach reporter Gordon Weixel at 250-8255 or gordon.weixel@;bismarck tribune.com.)
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