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HomeMy WebLinkAbout04/15/2003, BUS 6B - PURCHASING GUIDELINES UPDATE council D� 4-15-03 arenas uEpout ".tea lI CITY OF SAN LUIS OBISPO FROM: Bill Statler, Director of Finance SUBJECT: PURCHASING GUIDELINES UPDATE CAO RECOMMENDATION Adopt a resolution updating the City's purchasing guidelines. DISCUSSION Background The City's core purchasing policies are set forth in two key documents approved by the Council: 1. Purchasing Ordinance. Chapter 3.24 of the Municipal Code establishes the City's basic purchasing policies and procedures. While this chapter creates the framework for purchasing authorization levels, it does not set the specific dollar amounts: these are established by resolution. This approach recognizes that while our basic purchasing framework should remain relatively constant, the dollar amounts are more likely to change over time. 2. Purchasing Resolution. This resolution sets the dollar limits for the authorization levels established under the Purchasing Ordinance for various purchase types and categories. While some changes were made ten years ago in October 1993, the City's purchasing polices remain largely unchanged since 1983. While they have held the City in good stead for the past twenty years, it is timely to revisit and update them for two reasons: 1. Account for the Passage of Time. The consumer price index (CPI) has risen by 81% since 1983, when the basic system was put into place. For example, the CAO's current level of authority to approve the issuance of formal bid and request for proposal (RFP) documents for supplies and equipment, and award contracts was set at $50,000 in 1983. This means that to maintain the same level of authority approved by the Council in 1983, the authorization limit should be updated to$91,500 simply to account for the passage of time since then. 2. Integrate the Proposed Changes for "Job Order Contracts" and 'Alternative Bidding Procedures" into the City's Overall Purchasing System. Within a centralized framework and review process, the City's purchasing system is largely decentralized. Except for those cases where the same services and supplies are used organization-wide (such as office supplies, contract printing services, computers, telephones and copiers), departments are responsible for their own purchasing needs, with oversight by Finance and Administration. We believe that this is the most cost-effective approach for the City for department-specific needs in avoiding the "red-tape" and bureaucracy often associated with centralized purchasing functions. However, in ensuring that we also meet our stewardship obligations Purchasing Guidelines Update Page 2 and comply with the adopted guidelines, this only works because the system is internally consistent for all departments, and for all types of purchases. In short,.while rigorous and subject to centralized oversight, our system is straightforward, which makes it easy to communicate, understand and administer throughout the organization. Because of this, it is regarded as a `-`best practice" by many other cities throughout the State. Accordingly, to keep our system internally consistent in light of proposed changes for construction projects (discussed in the companion agenda report of"Job Order Contracts and Alternative Bidding Procedures"), we recommend updating the City's overall guidelines. Due to the structure of the City's purchasing system, and because we are not recommending any changes in the core policies and procedures, all of the proposed changes can be made via the Purchasing Resolution. Proposed Guideline Changes Provided in Attachment 1 is an overview of the City's current purchasing system and the proposed changes (the Guidelines themselves are provided in Exhibit A of the proposed resolution). As reflected in this chart, very few changes are proposed, summarized as follows: General Purchases These include all purchase types except for consultant services and real property: materials, supplies, equipment, maintenance and operation services, and construction projects. 1. Over-the-counter. We do not recommend any changes in this category ($5,000 or less). 2. Open market. We recommend amending the upper range for this category from $15,000 to $25,000 to reflect changes in the CPI as well as consistency with the proposed alternative bidding procedures for construction projects (which, based on State law, sets a limit for this type of purchase at$25,000). 3. Formal. We recommend amending the upper range for this category under which the CAO is authorized to solicit proposals and award contracts from $50,000 to $100,000. Again, this reflects changes in the CPI (as noted above, a direct application of the CPI would result in a limit of$91,500) as well as consistency with the proposed alternative bidding procedures for construction projects (which, based on State law, sets a limit for this type of purchase at $100,000). It should be noted that as a practical matter, this change will have a very small impact. As summarized in Attachment 2, only thirteen bid or RFP documents went to the Council for approval during the last fiscal year (with the CAO authorized to award the contract if within budget) that would have been approved by the CAO, if the authority to do so had been extended from $50,000 to $100,000. As reflected in this attachment, virtually all these were contracts for ongoing operations for existing programs and services, or were for routine infrastructure maintenance. Further, all of the contracts were within the budgets previously approved by the Council. b-A Purchasing Guidelines Update Page 3 On the other hand, even though the change appears to be immaterial, we believe it is important to make it in the interest of ensuring an internally consistent purchasing system. Consultant Services We do not recommend any changes in Department Head approval authority ($5,000 or less). However, we recommend amending the upper range of the CAO's approval from $15,000 to $25,000. Again, this reflects changes in the CPI as well as consistency with the other proposed changes. Related Change in the Construction Change Order Policy In August 1993, the Council approved the construction change order policy as set forth in Section 225 of the City's Financial Manual Management. Again, as shown in Exhibit B of the proposed resolution (Attachment 3), we are recommending modest changes in approval authority for consistency with the proposed changes in the purchasing guidelines. FISCAL IMPACT There are no direct fiscal impacts in adopting the proposed update to the City's purchasing guidelines. However, there will be indirect cost savings through improved organizational effectiveness and productivity by ensuring that the City's purchasing system is up-to-date and internally consistent. ATTACHMENTS 1. Summary of Proposed Update to the City's Purchasing Guidelines 2. Summary of General Purchases between $50,000 to$100,000 During 2001-02 3. Resolution Updating the City's Purchasing Guidelines Exhibit A: Purchasing Guidelines Exhibit B: Construction Change Orders Note: In all of the documents with changes (Attachment 1 and Attachment 3, Exhibits A and B), all of the changes are highlighted: the new text is `shaded, and the deleted text is struek through. Except for the highlighted text, there are no other changes in current policies. G:Manuals/Financial Management ManualISection200-Purchasing/Proposed Update/Council Agenda Report - Attachment 1 Type _Cate o ._ -- Features- Over-the-Counter ■ No specific requirements;competitive bidding to be used whenever practical.. Less Than ■ Bid award by Department via Voucher or $5,000 Purchase Order. ■ Job Order Contract(LOC)Task.Orders l by the_0ty_Engineer! Open Market ■ Department solicits at.least 3 proposals; $5,000 to (may be verbal with written quotes). $25,000$15000 ■ Bid award by Finance via Purchase Order or Contract(or JQC Task Order bythe_City Engineer)! GENERAL PURCHASES Formal ■ Formal Bid.or RFP documents. ■ Advertising for sealed bids or proposals. Includes supplies, Greater Than (Mailed notice in the case of construction projects.) equipment,operating or $25,000$#6,999 ■ CAO approves soliciting for bids or maintenance services proposals-and awards the contract and construction projects. (or_approves_JOC Task Order) ■ Same as above except the Council approves Bid/RFP documents and soliciting Greater Than for proposals;contract award generally $100,000$59;909 delegated by Council to the CAO. -------- ------- ■ GA-0­'s_authorizedto approve all_JOC Task Orders; noYto exceed_Council-approved-annual limits. ■ No specific requirements; Less Than proposals to be solicited whenever practical. $5;000 ■ Proposal award by Department via voucher or purchase order. ■ Proposals solicited whenever practical. CONSULTANT $5,000 to ■ Contract negotiated by Department. SERVICES $25,000$15.099 ■ Contract award by CAO via purchase order or contract. Includes advisory Formal services from professionals ■ Formal RFP document.. such as engineers, Greater Than ■ Council authorizes staff to request architects,attorneys and $25;000$4 5,000 proposals and generally delegates contract other specialized award to the CAO. consultants. Note: These are general guidelines;the evaluation and selection process for consultant services may vary on a case-by-case basis. 0 Proposed Changes � - J Attachment 2 of - from 1 111 to $100,000 During 2001-02, thirteen bid or RFP documents went to the Council for approval (with the CAO authorized to award the contract if within budget) that would have been approved by the CAO if the authority to do so had been extended from $50,000 to $100,000. As reflected below, most of these were contracts for ongoing operations for existing programs and services, or were for routine infrastructure maintenance. And all amounts were budgeted for and approved by the Council before issuance of the bid or RFP documents. Contract Purpose Amount Operating Programs Landscape and Park Maintenance Services $53,136 Janitorial Services: Various Locations 69,500 Utilities Conservation Public Information and Education Program 65,000 Street Light Maintenance 51,500 Janitorial Services: Parking Facilities 99,000 CIP Projects Relocation and Undergrounding of Utilities.Along Railroad Right-of-Way: Phase H 67,300 Bicycle Path Project(See Note 1) New Sidewalk Installation: Various Locations 92,047 Utility Trench Repair: Various Locations 65,125 Water Storage Tank No. 2 Cleaning and Repair 71,445 Rodriguez Adobe Park Landscape Improvements 63,295 Fire Station 3 Remodel 89,564 Traffic Signal Interconnect Installation: Various Locations 73,800 Backhoe-Loader(See Note 2) 68,127 Note: All contracts were awarded via a competitive bid or RFP process except in the following two circumstances: 1. Railroad ROW Utility Relocation. This was a sole source contract awarded by the Council to Union Pacific Railroad, as they were the only vendor allowed to work in the railroad right- of-way. 2. Backhoe-Loader. This contract was awarded to Quinn Company via cooperative purchasing. Lo� ^� C Attachment 3 RESOLUTION NO. (2003 Series) 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 that 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 (or requests for proposals), award contracts or approve Job Order Contract Task Orders; and WHEREAS, the Council desires to update existing guidelines to reflect current conditions and implement improved procedures, including electing to become subject to the uniform construction cost accounting procedures set forth in the Public Contract Code, commencing with Section 22010, as required by the State_ in order to use the alternative bidding procedures for construction projects set forth in Section 22032 of the Public Contract Code. NOW,THEREFORE,BE IT RESOLVED by the Council of the City of San Luis Obispo that: SECTION 1. Resolution No. 8239 (1993 Series) is hereby rescinded and the updated purchasing guidelines set forth in Exhibit A are hereby adopted. SECTION 2. The construction change order policy set-forth in Exhibit B is hereby amended. SECTION 3. The City hereby elects to become subject to the uniform construction cost accounting procedures set forth in the.Public Contract Code. On motion of seconded by and on the following roll call vote: AYES: NOES: ABSENT: the foregoing resolution was adopted on April 15,2003. David F. Romero,Mayor ATTEST: Lee Price,City Clerk APPROVED AS TO FORM: ilbertA. Trujillo, terim City Attorney i Attachment 3: Exhibit A PURCHASING GUIDELINES In accordance with the policy framework set forth in Chapter 3.24 of the municipal code, City purchases and contracts (including those for rentals and leases, but excluding those for real property) 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 $25,000 $ 5;999 may be authorized by the Director of Finance (or designee) pursuant to the open market bidding procedures established in Chapter 3.24 (Article II) of the municipal code. C. Formal Bids or Proposals. Purchases in excess of$25,00_0$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$100,000$50,009 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$100,000$50,099, Council approval of the specifications and authorization to invite 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. D. Job Order Contracts: Construction Projects. Under the Job Order Contact provisions of Chapter 3.24 (Article III) of the municipal code for maintenance-related construction projects, individual Task Orders up to $25,000 may be approved by the City Engineer,' Individual Task Orders in excess of $25,000__require approval by_the City Administrative Officeri ---- --�—� �___ _ _ — _— CONSULTANT SERVICES Contracts for consultant services will be awarded pursuant to the following guidelines. - I - Attachment 3: Exhibit A PURCHASING 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 $25;000$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 $25;000 $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. I. 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 criterion 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 f. References g. Background and related experience of the specific individuals to be assigned to the project h. Proposed compensation 4. If 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. -2- �P��g Attachment 3: Exhibit B OVERVIEW When the City awards a construction contract, the need for contract change orders (CCO's) is not unusual. CCO's are required whenever the scope of work changes from that in the original contract or an unknown condition of the site requires a change in the scope of work. Usually a contingency amount is established when the project budget is finalized upon contract award to accommodate limited CCO's. The purpose of this policy is to establish limits of authority for approving construction project CCO's. GOALS 1. Ensure appropriate authority and accountability in the approval of change orders. 2. Minimize the time needed to approve a CCO in order to avoid project delays. 3. Establish a system under which the organizational level at which approval is given is commensurate with the size of CCO and size of project. 4. Eliminate the potential for approval of a CCO when contingency funds are insufficient. POLICIES Conditions for Approval of CCO's by Staff 1. Sufficient contingency funds are budgeted and available in order for the Public Works Director or City Administrative Officer(or CAO-approved designees) to approve a CCO. 2. The nature of work in the CCO is not significantly different from that in the contract. 3. Authorization limits are based on an individual CCO amount, not the aggregate amount of all CCO's. 4. Authorization limits apply to CCO's for increases in contract amounts only. 5. When the aggregate amount of CCO's reaches 75% of the contingency, the awarding authority shall be informed of the status of the project and the sufficiency of funding to complete the project. 6. Work will not be broken up into multiple CCO's in order to circumvent this policy. 7. All CCO's must be in writing and approved by the appropriate contract parties consistent with the authorized limits established in this policy. - 1 - Attachment 3 Exhibit B CONSYR-OCTION CONTRACT CHANGE ORDERS 8. A copy of each approved CCO will be transmitted promptly to the Finance Department. 9. The CAO may grant approval of CCO's in excess of;$100,000 $50,000 under the following circumstances (all three factors must be present): a. Immediate approval of the CCO is necessary to avoid delay. b. The CCO is an integral and mandatory component of the project. c. The costs associated with delay of the project would be excessive. The Project Manager is responsible for carrying out this policy. 10. The CAO is also authorized to approve CCO's in excess of $100,000 related to Job Order Contract Task Orders: Authorization.Limits 1. Public Works Director/Approved Designee Not to exceed$25,000 2. City Administrative Officer Not to exceed $100,000$39;008 3. City Council Greater than contract or$100,000* $50;880 *See circumstances above where the CAO may approve CCO's in excess of$100,000. Originally Approved by the Council on August 3, 1993,Revised by the Council on April 15,2003 2- p^ Q