SR-11-D (11)
TO-
Mayor and City Council
Santa Monica, California
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2 o~O({) ef
November 30, 1978
JI D
DEe 1 2 1978
FROM' City Staff
SUBJECT. Recommendation to amend purchasing provisions of the
Municipal Code.
Introduction
This report concerns amendment of Sections 2506, 2507 and 2508
of the Santa Monica Municipal Code to compensate for inflation
since the time these sections were adopted and to identify the
authorized exceptions to competitive bid procedure
Background
Section 2507, relating to open market orders under $2,000.00 was
adopted August 10, 1948, when the Consumer Price Index - Los Angeles
was 70 3
The September 1978 Index, 197.3, indicates that the 1948
purchasing limit has diminished to $703.00. A revised limit of
$5,600 00 would restore the purchasing level in effect at the time
this section was adopted. $5,000.00 is suggested.
The Cities of Long Beach, Torrance, Pasadena, Burbank and Glendale
currently permit informal competitive bid procedure at or above the
proposed $5,000.00 limit. lnglewood and Downey have maximums of
$2,500 00.
The competitive aspects of purchasing are retained for major purchases
as was intended by the original law. This revision will eliminate both
the delay and expense associated with formal bid purchases of similar
size to that originally intended by the legislation. Authorized
exceptions to competitive bid procedure are proposed to identify
products and services where competition does not exist, where the
City may take advantage of the prices previously obtained by Federal,
State or Los Angeles County agencies, or where the time and expense
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I/O
DEe 1 2 1978
TO. Mayor and City C~cil
NoJltoer 3D, 1978
involved offset the potential lower cost that might be obtained from
competitive bidding. Competitive bid procedure is not considered
applicable to purchases from other governmental agencies, membership
in professional organizations, meetings, conventions, travel, legal
advertising, public utilities, or original equipment manufacturers
and/or their authorized distributors. Items purchased for resale
also are recommended for exclusion from competitive bid requirements.
In the case of the Civic Auditorium snack bar items particularly,
customer familiarity with the brand names offered has a definite
bearing on sales volume. In the case of the Airport, petroleum
products (etc.) dictates stocking the brands that the public will buy
rather than lesser-known and lesser cost comparable items for which
no demand exists. It is considered to be in the City's interest to
authorize the Purchasing Agent to issue purchase orders without calling
for bids for materials or services currently available to the Federal,
State or County government provided that these materials or services
are supplied at the same price as those enjoyed by these senior agencies
and provided that the items purchased by said agencies have been
procured through competitive bidding
It should be recognized that the diversity of the City's maintenance
requirements preclude stocking material for all contingencies and
that either the dollar amount involved is so low or the pressing need
to restore equipment to service is such that any competitive bidding
would be impractical "Convenience" purchase orders to local vendors,
with a suggested individual purchase limit of $250.00 are proposed as
authorized exceptions to the competitive bid requirement.
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TO. Mayor and City Co~l
Nove~r 30, 1978
The Cities of Long Beach, Torrance, Pasadena, Inglewood, Burbank,
West Covina and Bellflower have competitive bid thresholds of S250.00
or more.
Although it is difficult to attribute specific costs to individual
elements of the purchasing cycle, significant real dollar savings can
be anticipated if the proposed amendments are approved. Of the last
one hundred (100) formal bids published since October, 1977, eighteen
(18) were awarded for less than five thousand dollars ($5,000.00).
It is estimated that the advertising, printing and mailing costs for
each formal bid is one hundred dollars ($100.00) more than that of an
informal bid. This does not include the additional technical and
stenographic effort required
Review of informal purchase orders issued during the first five months
of the current fiscal year indicated that 41.16% (797 of 1936 total)
were for sums less than $250.00. This indicates that approximately
1900 orders each year would be under the $250.00 threshold. It is
estimated that at least 250 of these orders could be processed either
without issuing an informal request for quotation or through issuing
a warrant at a savings of $5.00 each
Reduction in the number of formal bids and revision of the informal
bid requirements can be expected to effect an estimated minimum
annual savings of three thousand dollars ($3,000.00).
It is emphasized that the proposed changes will give the Purchasing
Agent freedom to direct his energies in the areas where the greatest
savings will accrue and to eliminate the need to seek competition in
areas where competition in reality does not exist. The competitive bid
procedure, both informal and formal, will be employed in all instances
where the savings potential justifies this action.
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TO.
Mayor and City Cou~il
tltember 30, 1978
Recommendation
It is recommended that the City Attorney be directed to prepare an
ordinance amending sections 2506, 2507 and 2508 of the Santa Monica
Municipal Code to exempt purchases up to $250.00 from competitive bid
procedure, to authorize open market orders through informal competitive
bidding up to $5,000.00 and to identify the authorized exceptions to
competitive bid requirements as described in the preceding section.
Prepared By: R.N Aronoff,
Purchasing Agent
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