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Home My WebLink AboutB6 Ordinance Amendment Fleet Coop PurchaseCity of San Luis Obispo, Council Agenda Report, Meeting Date, Item Number FROM: Daryl Grigsby: Public Works Director Prepared By: Tim Bochum, Deputy Director Public Works Dave Smith, Interim Fleet Supervisor SUBJECT: MUNICIPAL CODE AMENDMENT REGARDING COOPERATIVE PURCHASING PROCEDURES RECOMMENDATION Introduce an ordinance amending Municipal Code Section 3.24.060(E) regarding cooperative purchasing procedures. DISCUSSION Background Government Code Sections 54021 requires each local agency, including cities, to adopt policies and procedures, including bidding regulations, governing the purchase of supplies and equipment by the local agency. These provisions do not specifically require local agencies to competitively bid such items although such procedures are typically included in most purchasing policies. In other words, competitive bidding for these items is a local regulation; Chapter 3.24 of the City’s Municipal Code sets forth the City’s policies and procedures for the purchase of goods and services and requires competitive bidding with some exceptions. Exception for Cooperative Purchasing City Municipal Code Section 3.24.060.E provides that the formal bidding procedures in Article III of Chapter 3.24 are not required when the purchase will be made cooperatively with one, or more, other units of government. There are two key benefits associated with cooperative purchasing: 1. It significantly reduces the staff resources required to prepare bid documents, notice and invite bids, evaluate proposals and award contracts. It also significantly reduces the time required to perform these functions, which can take up to 12 weeks for formal bids. 2. It can also provide the City with significant cost reduction opportunities by using the bid results from purchasing efforts by much larger organizations, such as the State of California. Cooperative purchasing is a widely accepted “best practice” in improving productivity and reducing costs. For this reason, the City has made extensive use of cooperative purchasing for a broad range of goods and services, including office supplies, computer equipment and vehicles. One of the common sources for cooperative purchasing is the California Multiple Award Schedule (CMAS) but there are other sources as well. The use of cooperative purchasing has become so common that specifications and pricing are readily accessible over the Internet. August 19, 2014 B6 B6 - 1 Municipal Code Amendment Regarding Cooperative Purchasing Procedures Page 2 In alignment with this practice, Section 405-I of the City’s Fleet Management Policy (last reviewed and adopted by the Council in February 2009 via Resolution No. 10057) calls for fleet purchases to generally be made via cooperative purchasing. However, to assure best pricing and provide local vendor access to large dollar purchases, it also calls for contacting: “any local dealers that might have been potential bidders to ensure that the cooperative contract price is a good value and prudent alternative to advertising for bids.” A “local” dealer in this context means vendors within the City limits. As discussed below, this process has led to a dilemma and additional work when the local dealers are the same or lower than the cooperative purchase price. Unanticipated Consequences The City’s vehicle purchasing policy recommends that new equipment “... should be generally acquired through State of California Multiple Award Schedule (CMAS) contracts” or other cooperative purchasing agreements. The policy has been adopted based upon the belief that cooperative purchases offer reasonable and competitive prices that usually lead to the lowest available. There have been occasions where local dealers have been able to meet or deliver prices below the cooperative agreements. This causes a dilemma since the current policy only states that the City should contact local dealers to ensure the price is “…a good value and prudent alternative to advertising for bids.” As a result, staff has had to stop the cooperative purchasing process and decide if it is necessary to formally bid the purchase pursuant to Article III of Chapter 3.24. This requires staff to then draft a formal bid document, seek Council approval and re-solicit new quotes in order to make the purchase from the broader market. This can add significantly to the time to complete procurement and, if each bid package must come to Council for authorization, requires a substantial amount of additional time and money to complete the process. In effect, these policies and procedures result in duplicative efforts and inefficient purchasing. Cooperative Purchase pricing from sources like CMAS are determined from a legitimate, competitive process that can be used for direct purchase by government agencies. If a lower price can be obtained from the local dealer then it should be able to be awarded instead of requiring a second formal bid process. Proposed Amendment to the Cooperative Bidding Procedures Staff is recommending the following additions (underlined) to Municipal Code Section 3.24.060.E: E. When the purchase will be made cooperatively with one, or more, other units of government, or from a local dealer within the City limits that can provide the same brand, model and configuration of item(s) identified in cooperative purchase agreement(s) at or below the cooperative purchasing net cost within the same terms and conditions.” The amendment clarifies that if the Purchasing Authority has gone through the cooperative purchase process on a validly established purchasing pool and determines the lowest price B6 - 2 Municipal Code Amendment Regarding Cooperative Purchasing Procedures Page 3 available but then receives the same or better price at a local dealer, it may then purchase the item(s) directly from the local dealer without a subsequent rebid. This both supports the goal that local vendors receive an opportunity to compete for City contracts and clarifies the process for purchase when they can effectively match or beat other competitively established cooperative pricing programs. If the Council adopts the proposed code amendment, the Fleet Management Policy will be changed to reflect this amendment and brought to the City Council upon final adoption of the proposed Ordinance. Focusing on Local Dealers Local fleet dealers are unique in that they pay City business taxes, are often involved in community events and organizations, are the resource for contract maintenance and generate significant sales tax revenues for the City. They are also subject to municipal requirements that may be unique to our City, such as land use and signage regulations. This requested action enables local dealers to compete with cooperative purchasing prices, which can lead to positive growth in the local economy. FISCAL IMPACT There is no fiscal impact associated with the proposed policy change. ALTERNATIVES 1. Discontinue Local Price Checking. Amend the Fleet Management Policy to no longer request local dealer pricing against cooperative purchasing prices. This is not recommended since supporting local economic development is a Major City Goal. 2. Do Not Amend Cooperative Purchasing Procedures. Make no changes and leave current policies and procedures in place. This is not recommended because existing municipal code and Fleet Management policies will continue to create ambiguity. ATTACHMENT 1. Municipal Code Amendment Regarding Cooperative Purchasing Procedures t:\council agenda reports\2014\2014-08-19\ordinance amendment fleet coop purchase (grigsby-smith)\_car-fleet-coop-purchase-ordinance-amend-intro-v4-jdclean.docx B6 - 3 ORDINANCE NO. (2014 Series) AN ORDINANCE OF THE CITY OF SAN LUIS OBISPO AMENDING SECTION 3.24.060 OF THE MUNICIPAL CODE REGARDING COOPERATIVE PURCHASING WHEREAS, Municipal Code Section 3.24.060(E) provides that the bidding procedures set forth in Section 3.24.010 are not required when the purchase will be made cooperatively with one, or more, other units of government; and WHEREAS, the City’s fleet management program (adopted via Resolution 10057) calls for generally purchasing vehicles via cooperative purchasing while also providing local fleet dealers with an opportunity to compete with cooperative bidding pricing; and NOW, THEREFORE, BE IT ORDAINED by the Council of the City of San Luis Obispo as follows: SECTION 1. Section 3.24.060(E) of Chapter the Municipal Code is amended as follows in dispensing with bidding requirements (added text underlined): E. When the purchase will be made cooperatively with one, or more, other units of government, or from a local dealer within the City limits that can provide the same brand, model and configuration of item(s) identified in cooperative purchase agreement(s) at or below the cooperative purchasing net cost within the same terms and conditions. SECTION 2. A summary of this ordinance, together with the names of Council members voting for and against, shall be published at least five (5) days prior to its final passage, in The Tribune, a newspaper published and circulated in this City. This ordinance shall go into effect at the expiration of thirty (30) days after its final passage. INTRODUCED on the day of 2014, AND FINALLY ADOPTED by the Council of the City of San Luis Obispo on the day of 2014, on the following vote: AYES: NOES: ABSENT: Mayor Jan Howell Marx B6 - 4 ATTEST: Anthony J. Mejia City Clerk APPROVED AS TO FORM: J. Christine Dietrick City Attorney B6 - 5 Page intentionally left blank. B6 - 6