HomeMy WebLinkAbout10/26/1993, 5 - UPDATED PURCHASING GUIDELINES �IIN�I�ul�lllllnlll „„�I MEETING DATE:
II II f�l Iull City ofSan LllIs 0B1SpO /o-z6 -93
Mamma COUNCIL AGENDA REPORT 'TEM NUMBER:
FROM: William C. Statler, Director of Finance (,{ �
SUBJECT: UPDATED PURCHASING GUIDELINES
CAO RECOMMENDATION
Adopt a resolution updating the City's purchasing guidelines.
DISCUSSION
Overview
The City's purchasing system consists of four basic policy documents:
■ City charter. Section 901 outlines competitive bidding requirements for"public works”
construction projects and Section 903 directs the Council to adopt purchasing policies
and procedures by ordinance or resolution.
■ Purchasing ordinance. Chapter 3.24 of the municipal code sets forth the basic policy
framework for making all City expenditures, including competitive bidding
requirements, as directed by the Charter.
■ Purchasing resolution Adopted in April of 1983, Resolution 5084 establishes the
basic procedures and categories of competitive bidding as required by the municipal
code.
■ Financial management manual Section 200 of the financial management manual
provides detailed procedures for administering the City's purchasing system and for
implementing the policies set forth in the City charter, purchasing ordinance, and
purchasing resolution.
The purpose of this report is to review the City's current purchasing system and to make
recommendations for revision as appropriate.
Review Objectives
As noted above, the City's basic purchasing procedures as set forth in Resolution 5084 have
not been comprehensively reviewed in over ten years. Accordingly, this update has been
prepared to account for the passage of time and to make revisions based simply on this
factor. However, a more fundamental reason for this review is to improve our basic
purchasing system to ensure that it is as efficient and effective as possible. The
recommended changes are consistent with our productivity policy (page B-17 of the 1993-95
Financial Plan) which calls for us to constantly monitor and review our methods of
operations, including the analysis of systems and procedures to identify and remove
unnecessary review requirements.
"N�i�►►�IIIIIII�I► IIUIII city of San lues OBISp0
COUNCIL AGENDA REPORT
Another key component of the City's productivity policy is a general commitment to
organizational decentralization. Under this approach, operating departments are primarily
responsible for implementing the City's purchasing policies; there is no centralized
purchasing function, although purchases are subject to review by Personnel, Finance, City
Attorney's office, and Administration. In order for this decentralized approach to work
efficiently, the City's purchasing system needs to be clear and straight forward, while
ensuring that appropriate internal controls to protect City assets are in place. With recent
reductions in administrative staffing levels, the need for simple but effective procedures is
even more critical in today's organization: by streamlining our purchasing procedures, we
can shift existing resources from "paperwork" to tangible, direct delivery of services.
Accordingly, the primary objective in reviewing the City's purchasing system and
recommending changes has been to:
Reduce the administrative cost of delivering City services by streamlining the City's
purchasing procedures while ensuring appropriate internal controls for the prudent
management of the City's resources.
Current Purchasing System
Provided in Exhibit A is an overview of our current purchasing system. As reflected in this
summary, there are currently five purchasing levels for five different types of purchases.
Potentially, this means that there are 25 different ways of purchasing goods or services,
which is difficult to efficiently administer in a decentralized organizational environment.
Recommended Changes
No changes are recommended in the policy framework set forth in the City's purchasing
ordinance: as a fundamental guide for City purchasing practices, the existing internal
control and competitive bidding requirements established in the municipal code continue
to be appropriate in managing the City's resources. As summarized in Exhibit B, the key
recommendation in improving our purchasing system is to reduce the number of competitive
bidding categories established under the purchasing resolution and financial management
manual to two basic groups: general purchases (supplies, equipment, operating &
maintenance services, and construction projects) and consultant services.
General PW chases
In integrating purchasing categories in this first group, the current requirements for
purchases of supplies and equipment are used as the basic model:
■ Over-the-counter (Department Head approval) Less than $5,000
■ Open market (Finance Director approval) $5,000 to $15,000
■ Formal bids or proposals
CAO approval Greater than $15,000
Council approval Greater than $50,000
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���N�i�Ni�IIIII�IIpNllUlll city of San LUIS OBISpo
WMS COUNCIL AGENDA REPORT
All dollar values for supply and equipment purchases remain unchanged from existing
guidelines except for the over-the-counter and open market categories: in recognition of
the 53% increase in the consumer price index (All Urban Consumers - Los Angeles,
Anaheim, Riverside) since April of 1983, the upper end of these categories has been
increased from $3,000 to $5,000 for over-the-counter purchases and from $10,000 to $15,000
for open market purchases; formal bidding requirements remain essentially unchanged.
The primary effect of this change is to use the same guidelines for construction projects as
currently used for supplies, equipment, and operating & maintenance services. (The only
exception is procedures for the 'open market" category: due to charter requirements,
construction projects with estimated cost in excess of$5,000 must be noticed at least 10 days
before the bid opening date.) Although this change will make our purchasing procedures
easier to communicate to the operating departments, the actual impact is very limited: for
example, of the 82 projects approved in the 1993-95 capital improvement plan, only three
of them would fall into a different purchasing category as a result of this proposed revision.
Conrultma Services
Two key changes in the procedures for awarding contracts for consultant services are
recommended:
Integration with other purchasing procedures. While recognizing that consultant services
are different from other types of purchases, it is recommended that the basic guidelines for
contract award be consistent with other purchasing procedures. Accordingly, the following
authority to award consultant service contracts is recommended:
Current Proposed
■ Department Head Not specifically addressed Less than $5,000
■ City Administrative Officer Not to exceed $10,000 $5,000 to $15,000
■ Council Greater than $10,000 Greater than $15,000
Evaluation and contract award process. The basic process for requesting and evaluating
proposals is also recommended for change. Under existing guidelines as established in
Resolution 5084, requests for proposals (RFP's) for consultant services with an estimated
cost in excess of $10,000 are administratively prepared and issued, and there is a
requirement for a three person review team composed of specifically designated
Management Team members (CAO, department head responsible for developing the
project, and department head responsible for the project upon completion). Upon
completing their evaluation, the review team ranks the proposals and forwards their ranking
- without consideration of cost - to the Council. The Council then authorizes staff to
negotiate with these firms in the order of their ranking. After successful negotiations, staff
returns to Council with a contract award recommendation.
5-3
�,�H���u►rulllii�lili° ��UIII city of san lues oi3ispo
COUNCIL AGENDA REPORT
There are three basic problems with this process:
■ Because the RFP is administratively prepared and issued, there is no opportunity for
the Council to "reaffirm" their commitment to major study projects nor to approve
or modify the proposed workscope until after a significant commitment in purchasing
resources has already been made.
The recommended procedures address this problem by generally requiring RFP's for
consultant services in excess of $15,000 to be approved by the Council, with the
option of award by the CAO if the successful proposal is within the approved budget
amount.
■ It is inappropriate - especially in today's fiscal environment - to assume that cost
should be an irrelevant factor in evaluating proposals and recommending contract
award. Cost should never be the sole factor in awarding consultant contracts, but it
certainly should be one of several factors that are considered in determining 'best
value" for the City.
The recommended procedures address this problem by stating that price will be one
factor among many - such as relevant experience, references, responsiveness of the
proposal, and proposed methodology in performing the work- in making the contract
award decision.
■ Returning to the Council twice after receiving and evaluating proposals (first
receiving authorization to negotiate with the bidders and then returning with a
recommended contract award) is a cumbersome and time-consuming process.
With initial Council approval of the workscope and issuance of well-prepared RFP,
it should be possible to return to the Council once (if award authority has not already
been delegated to the CAO) with an evaluation of the proposals and a
recommendation for contract award. The proposed procedures reflect this approach.
FISCAL IMPACT
There will be no direct fiscal impact associated with adopting the updated purchasing
guidelines. However, there will be an increase in organizational productivity as a result of
the improved system.
CONCURRENCES
The updated purchasing guidelines have been reviewed by the Management Team and
department fiscal officers, and they concur with the proposed revisions.
�,�n�►r►►uulllllllllll►`���U1 city Or San LUIS OBISPO
NMI COUNCIL AGENDA REPORT
ALTERNATIVES
■ Do nothing. The problems identified with our current system will continue, resulting
in lower productivity and higher administrative costs than necessary. Accordingly,
this alternative is not recommended.
■ Establish different dollar limits As long as the integrated approach reflected in the
recommended guidelines is maintained,the recommended dollar limits that establish
purchasing categories could be modified without affecting the fundamental benefits
of changing our purchasing guidelines. However, the proposed revisions closely
follow our existing guidelines, and as such, this alternative is not recommended.
SUMMARY
The City's purchasing system has not been comprehensively reviewed by the Council in over
ten years. In order to account for the passage of time since then, as well as to ensure that
our purchasing system is as efficient and effective as possible consistent with appropriate
internal controls, it is recommended that the Council adopt a resolution updating the City's
purchasing guidelines.
ATTACHMENT
Resolution adopting updated purchasing guidelines
EXHIBITS
A. Overview of current purchasing system
B. Overview of recommended purchasing system
AGR\PURCHNGG.WP
5-5
.:SOLUTION NO. (1993 Seri,
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
UPDATING PURCHASING GUIDELINES
WHEREAS, in the course of conducting City operations it is necessary to purchase
a broad range of goods and services; and
WHEREAS, the Council has adopted purchasing policies and procedures as set forth
in Chapter 3.24 of the municipal code which require the Council to specify by resolution the
dollar amount of purchases and contracts requiring the use of either open market or formal
bidding procedures and the level of authority required to authorize invitations for bids and
award of contracts; and
WHEREAS, the Council desires to update existing guidelines to reflect current
conditions and implement improved procedures;
NOW THEREFORE, BE IT RESOLVED by the Council of the City of San Luis
Obispo that Resolution No. 5084 (1983 Series) is hereby rescinded and the updated
purchasing guidelines provided in Exhibit 1 attached hereto are hereby adopted.
On motion of , seconded by ,
and on the following roll call vote:
AYES:
NOES:
. ABSENT:
the foregoing Resolution was passed and adopted this day of . 1993.
ATTEST:
Mayor Peg Pinard
Diane Gladwell, City Clerk
APPROVED:
eqWyreytity Attorney
6
PURCHASING GUIDELINES mit 1
OVERVIEW
In accordance with the policy framework set forth in Chapter 3.24 of the municipal code, City purchases and
contracts (including rentals and leases) will be made pursuant to these guidelines. Applicable competitive
bidding categories, authorization limits, or contract award procedures will be based on unit cost,total purchase
cost for consolidated bid items,or fiscal year aggregates in the case of blanket purchase orders or similar ongoing
purchasing arrangements. Staging of purchases in order to avoid these competitive bidding procedures or
authorization limits is prohibited.
GENERAL PURCHASES
Purchases and contracts for supplies, equipment,operating and maintenance services, and construction projects
will be made pursuant to the following guidelines.
A. Over-the-counter. Purchases of less than$5,000 may be authorized by the Department Head. Although
no specific purchasing requirements are established for this level of purchase,competitive bidding should
be used whenever practical.
B. Open market. Purchases between$5,000 and$15,000 may be authorized by the Director of Finance(or
her or his designee) pursuant to the open market bidding procedures established in Chapter 3.24
(Article 11)of the municipal code. For construction projects,the following supplemental procedures will
also be applicable in accordance with Charter provisions:
1. A notice inviting bids will be published in the City's official newspaper at least ten calendar days
prior to the bid opening date.
2. A bidders' security equal to at least 10% of the bid amount will accompany each bid.
C. Formal bids or proposals. Purchases in excess of$15,000 will be made pursuant to the formal bidding
requirements established in Chapter 3.24 (Article III) of the municipal code. Authority to approve
specifications, invite bids or request proposals, and award contracts will be as follows:
1. For purchases with an approved budget and a cost estimate of $50,000 or less, the City
Administrative Officer is authorized to invite bids or request proposals, approve specifications,
and award the contract.
2. For purchases in excess of$50,000, Council approval of the specifications and authorization to
in%iie bids or request proposals is required. The Council may authorize the City Administrative
Officer to award the contract if the selected bid or proposal is less than or equal to the
Council-approved cost estimate and there are no substantive changes to the specifications.
Otherwise, Council award of the contract is required.
CONSULTANT SERVICES
Contracts for consultant services will be awarded pursuant to the following guidelines.
A. Contracts for consultant services estimated to cost less than$5,000 may be awarded by the Department
Head. Although no specific purchasing requirements are established for this level of contract,proposals
should be solicited whenever practical.
B. Contracts for consulting services estimated to cost between $5,000 and $15,000 may be awarded by the
City Administrative Officer. Proposals from at least three firms should be solicited whenever practical.
C. Contracts for consultant services estimated to cost more than$15,000 will generally be awarded pursuant
to the following guidelines;however,it is recognized that the City's need for consultant services will vary
from situation to situation, and.accordingly, flexibility will be provided in determining the appropriate
evaluation and selection process to be used in each specific circumstance.
1. The Council should generally approve request for proposal (RFP) documents before they are
issued. The Council may authorize the City Administrative Officer to award the contract if it
is less than or equal to the Council-approved cost estimate and there are no substantive changes
to the approved workscope. Otherwise, Council award of the contract is required.
2. In the event that the timely evaluation and selection of a consultant precludes Council approval
of the RFP before it is issued, the RFP may be approved and distributed by the City
Administrative Officer; however, award of the contract will be made by the Council.
3. Cost will not be the sole criteria in selecting the successful bidder. Consultant proposals will
be evaluated based on a combination of factors that result in the best value to the City,
including but not limited to:
a. Understanding of the work required by the City
b. Quality and responsiveness of the proposal
C. Demonstrated competence and professional qualifications necessary for satisfactory
performance of the work required by the City
d. Recent experience in successfully performing similar services
e. Proposed methodology for completing the work
L References
g. Background and related experience of the specific individuals to be assigned to the
Project
h. Proposed compensation
4. In the event that it is determined that it is in the best interest of the City for services to be
provided by a specific consultant - with contract terms, workscope, and compensation to be
determined based on direct negotiations - contract award will be made by the Council.
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