SR-9-B (36)
JUN i 8 1999 98
PURCH PW RAH F \FINANCE\PURCH\STFRPTS\SRBOBIDP WPD
Council Meeting June 8, 1999 Santa Momca, California
TO Mayor and City Council
FROM City Staff
SUBJECT RecommendatIon to Amend the Municipal Code to Provide a 1 % Bidding
Preference for Santa Monica Businesses
Introduction
This report recommends that the City Council direct the City Attorney to amend the
MUnicIpal Code to provide for a 1% bIdding preference for Santa MOnica businesses
submitting Informal and formal bids to the City
Background
On December 14, 1993, Council amended the Municipal Code (Ordinance #1762-CCS) to
proVide a 1 % bidding preference for Santa Monica busmesses submitting Informal and formal
bids to the City The prOVIsion was speCifically limited to a three-year penod It was Intended
to promote local busmesses, generate economic benefits within the City, and mamtam a solid
Sales Tax base within Santa MOnica dUring the recession
The preference was established because the busIness commumty of the City of Santa
MOnica had been adversely Impacted by the recession and subsequent economic slowdown
From FY 1990/91 to FY 1991/92, taxable sales (and Sales Tax revenue to the City), declined
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approximately 5 1 % Companng Calendar Year 1990 to the first eight months of Calendar
Year 1992, the unemployment rate In the City of Santa Monica Increased from 4 1% to 6 9%
While these changes were relatively less severe than many of the City's surrounding
jUrisdictions, staff believed It would be In the Interests of the City and Its bUSIness community
to temporanly provide a 1 % bidding preference to local bUSinesses submitting mformal (up to
$25,000) and/or formal (contracts over $25,000) bids to the City
The three-year term of the preference expired on Aug ust 31, 1997 Ounng those three
years, only two of approximately 13,000 Informal and formal bids were awarded as a result of
application of the 1 % preference In addition, Implementing the preference created additional
administrative work for Purchasing staff Therefore, as an alternative, on February 10, 1998,
Council approved a two-year local bUSiness outreach program agreed to by the Chamber's
Local Government Committee, Board of Directors and CIty staff for achIeVing the anginal
objectives of the 1 % bidding preference Highlights of the program were that the Chamber
would provide to City staff an updated copy of Its Busmess and Membership GUide, and City
staff would send bids to those bUSinesses, where applicable, and the City'S PurchaSing
DIVISion would send notices to local bUSinesses and conduct a workshop on "How to do
BUSiness With the City of Santa MOnica" While these alternatives generally aSSisted Santa
Monica busmesses, staff now believes that With Implementation of the City'S new financial
management system, remstatement of the 1% biddIng preference WIll be more
administratively feasIble and Will better encourage bUSinesses Within the City to do busmess
WIth City government
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Relnstatmg the Bidding Preference
SectIons 2 24 010-2 24 190 of the MUnicipal Code specify that pursuant to the terms of
Section 1503 of the City Charter and m every case, except as stated In Section 224080
(exceptions to competitive blddmg), before making any purchase of, or contract for,
matenals, supplies, and equIpment, the Purchasmg Agent shall give ample opportunity for
competitive blddmg Award shall be made to the person offerrng the lowest responsible bid
Currently, the Municipal Code does not provide for any purchaSing preference
With a 1 % bidding preference, a bid would be evaluated In terms of net cost to the City The
bid With the lowest net cost (all other quality factors being equal) would be accepted The
follOWing three examples show how a 1 % bidding preference would work
CASE #2 CASE #3
CASE #1 CITY BUSINESS CITY BUSINESS
NON-CITY BUT BUT
ITEM BUSINESS = BID AMOUNT HIGHER BID AMT
Cost of Item $ 15,000 00 $ 15,00000 $ 15,13986
Total Sales Tax
Paid by City + 1,237 50 + 1.237 50 + 1.249 04
Total Cost to the
City (Gross) $ 16,237 50 $ 16,23750 $ 16,38890
Less 1 % Sales Tax
Revenue to City -0- (150 00) (151 40)
Total Cost to the
City (Net) $ 16,237 50 $ 16,087 50 $ 16,23750
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Compared to a bid of $15,000 from a "non-City business" (Case #1), the bid would be
awarded to a "City business" which bid the same cost (Case #2) because the net cost to the
City would be less Further. the bid would even be awarded to a "City business" which bid a
slightly higher amount (Case #3) because the net cost to the City would be the same as If the
bid were awarded to a "non-City business"
The potential Increase In purchasing volume from businesses located In the City of Santa
Monica could also result In other fiscal or economic benefits to the City.
BudgetlFlnanclallmpact
ThiS recommendatIon does not have a budget or financial Impact
Recommendation
Staff recommends CouncIl dIrect the City Attorney to amend the MUniCipal Code to provide a
1 % bidding preference for Santa Monica busmesses
Prepared By C M DenniS, Director of Finance
Pam Wortham, Purchasing Agent
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