SR 06-28-2016 7B
City Council
Report
City Council Meeting: June 28, 2016
Agenda Item: 7.B
To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Procurement
Subject: Review and give direction on procurement methods; Repeal Resolution
suspending travel to Arizona; and, Introduce for first reading an ordinance
amending Municipal Code Chapter 2.24 to reflect current purchasing
practices.
Recommended Action
Staff recommends that the City Council:
1) Receive the attached report on Santa Monica procurement; and
2) Repeal Resolution No. 10479 (CCS), suspending official travel to the State of
Arizona and developing additional financial sanctions while the Arizona law
SB1070 remains in effect; and
3) Introduce for first reading an ordinance amending Santa Monica Municipal Code
Chapter 2.24 to reflect proposed changes to current purchasing practices; and
4) Give staff direction to pilot or implement new methods of procurement, including
reverse auctions, broad problem statements and partnerships, and an
eMarketplace site, to increase purchasing power, vendor participation and
innovation.
Executive Summary
and sustainable practices have resulted in a growing number of one- and two-bid
alue and inclusivity
in its purchasing. The policies and procedures guiding the procurement process,
including the development of scopes or specifications, the outreach process, proposal
evaluation and contract award, have been established to maximize competition, quality,
fairness and transparency. It is, however, important to review these processes from
time to time to identify opportunities for improvements.
In this report, staff identifies challenges to an effective procurement process. For each
challenge, staff presents a response that includes new ideas, best practices currently
procedures, some of which require Council action, as summarized here:
Technological limitations: Staff recommends process changes to transition from
hard copy to electronic bid submission. This addresses a timing constraint that
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vendors identified as a barrier to submitting bids. This recommendation takes
Disclosure and documentation requirements: Staff recommends the Council
repeal the resolution limiting official travel to Arizona and requiring additional
scrutiny for purchasing from Arizona companies. This will ease the burden on all
vendors, and broaden the potential vendor field.
: The convergence of innovative
practices and traditional procurement processes often results in low response to
bids. Staff recommends increasing the use of more flexible, broader procurement
solicitations, such as requests for qualifications, and incorporating broad problem
statements and partnerships to increase potential responses and solutions that
Lengthy, complicated process: Staff recommends the Council adopt changes to
faster resolution to protest disputes and a faster overall process.
Decentralized purchasing can be inefficient: Staff monitors individual department
purchases to make sure that any standard purchases are combined into citywide
contracts that take advantage of the best possible pricing. This process will be
simpler with the additional technical capa
resource program (ERP) system. Standardized contract management, training,
and contract reporting assist in identifying any areas of inefficiency or where
contracts could be combined.
Limited participation and low purchasing power: Staff will continue proactive
outreach to vendors through its online vendor portal and through local
organizations. Procurement staff will train key staff throughout the City to use its
online market research subscription for better information about scope of work
development and pricing standards for specific commodities and services, and
will be more proactive in pursuing piggybacking and cooperative purchasing
practices. Staff will also identify areas where reverse auctions could lead to
better pricing.
Background
In the past two years, 27% of City procurements received one or two bids, suggesting a
concerns about this trend, and asked staff to provide a
procurement practices as well as efforts to encourage minority, women, veteran, or
disabled-
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urrent procurement policies
and practices.
Purchasing Authority and Competitive Bidding
The City Charter (Sections 608, 1507, and 1508) and the Municipal Code (Chapter
establishes a centralized purchasing system in the Finance Department and requires
that, before making any purchase of, or contract for, materials or services, the City must
provide ample opportunity for competitive bidding within parameters established by
ordinance and through administrative policies and procedures.
The Municipal Code establishes exceptions to the competitive bid procedure in limited
cases. These include where the amount of the purchase is small; competition does not
exist (such as with a proprietary software); competitive bid procedures have already
been formulated by other government agencies (piggybacking or cooperative
purchasing); and in emergency situations.
Cumulative totals apply when a particular vendor, consultant or contractor is used by
the same or several departments for like goods and/or services and without a
competitive process. If a vendor is selected through the competitive process, the
cumulative policy does not apply regardless of how many departments are using the
same vendor. The type of competitive process to be used in a procurement is based on
the type of item being purchased and the dollar amount of the purchase, as follows:
Type of Competitive
Type of Purchase Process
ExemptInformalFormal
Goods and Contractual Services
$0 - $10,000 X
$10,001 - $175,000 X
$175,001 and up X
Professional Services
$0 - $10,000 X
$10,001 - $80,000 X
$80,001 and up X
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exempt
An process does not require multiple price quotes.
informal
An process requires that staff solicit at least three quotes from competing
vendors.
formal
A process requires that staff advertise the proposal, follow strict rules in
opening bids, and request Council authorization to enter into the contract.
In FY 2014-15, the City conducted more than 470 competitive processes for goods,
contractual services, construction and professional services, totaling over $50,000,000.
Type of Agreement Number
Informal Quotes 242
Formal Bids 124
Request for Proposals (RFP) 92
Request for Qualifications (RFQ) 11
Request for Information (RFI) 8
477
TOTAL
Sustainable Purchasing
The Sustainable City Plan (Attachment A) guides City purchasing within the Charter
and Municipal Code guidelines. This plan establishes requirements for categories of
Purchasing Process
City policies and procedures guide the development of scopes or bid specifications, the
outreach process, and proposal evaluation and contract award to ensure competition,
quality, fairness and transparency in City procurement.
Specification/Scope Development
The department purchasing a good or service begins the process by preparing
specifications or a scope of work: a written description of the requirement for materials
and/or services. Procurement staff reviews the description and may require additional
justification if a specific requirement appears to be unreasonably restrictive or
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inappropriate. This oversight is meant to allow for the broadest range of competition
Outreach
Outreach processes are aimed at reaching the largest possible pool of potential
vendors. The City notifies its vendors electronically, through its online vendor portal and
bidding system (PlanetBids), and through newspaper advertising, as the Municipal
Code requires. In addition to those vendors registered on Planet Bids, Procurement
works with staff to identify a list of vendors who provide services like those being
requested and reach out to invite them to join the online bidding system.
Evaluation and Award
Evaluation teams rate bids or proposals based on the quality of the material or service,
qualifications, project plans, financial stability, experience, references, and price. The
criteria play a role in vendor selection, rather than a lowest responsible bidder model
where cost is the primary selection factor. This is to ensure that the City receives the
best possible service and thus most effective use of resources, which is not always
indicated by the lowest cost option.
Staff created this process
competition for all segments of the supplier community; protect against corruption,
waste, fraud and abuse; and ensure appropriate public access to contracting
information. This process should provide the answer to a central question for every
procurement: how can the community be sure that the recommendation represents the
best value?
Discussion
Out of 120 formal bids since 2015, 88 bids received over three responses, while 17
offerings received one bid and 15 received two bids. The one-bid procurements were
for specialized vehicles (25%), specialized goods or services (17%), and services
requiring a particular vendor certification (47%). CNG and electric powered vehicles,
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membrane replacement for the water treatment plant and bus surveillance equipment
maintenance are examples of one- and two-bid awards.
Through discussion with vendors who downloaded bids but chose not to submit
proposals, staff identified 1) technological limitations; 2) disclosures and documentation
he market, as
challenges to attracting more bid offerings.
Also putting the City at a disadvantage are improving market conditions, where vendors
are benefiting from greater demand for their products and therefore do not have the
capacity or interest in participating in a large number of solicitations. In this economic
climate, an efficient, understandable and flexible process has a greater ability to retain
or draw new vendors.
For each challenge, staff presents a response that includes new ideas, best practices
procedures, some of which require Council action. In addition to recommendations tied
directly to these specific challenges, staff identifies innovative practices and process
improvements to further streamline purchasing and to reach a larger range of potential
service providers.
Key Factor No. 1: Technological Limitations
Issue overview
: Vendors indicated that the requirement to submit hard copy bids
prevented them from submitting proposals when they otherwise would have done so.
The City currently requires wet signatures on all documents. This practice has the
negative effect of discouraging vendors from submitting bids because they must build in
extra time to allow for mailing or delivery.
Response
bids electronically. Staff will revise bidding procedures to allow electronic submission
for initial bids, but will continue to require the selected bidder to submit a hard copy of
the signed bid after it is awarded. This transition to a real-time electronic platform
during the selection process will improve customer service and potentially increase the
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number of vendor responses. Electronic submittals would also facilitate data collection
used for reporting and reduce time-consuming and error-prone manual processes.
Key Factor No. 2: Disclosure and Documentation Requirements
Issue Overview
: Vendors who have chosen not to submit a proposal frequently noted
the large number of disclosures as an impediment. With limited exceptions, regulations
require vendors to comply with a number of requirements to do business with the City.
Compared to neighboring cities (see Attachment B), Santa Monica has more
requirements in its bidding process. A number of these requirements are mandated
Initiative Charter Provision), fair wages (the Living Wage Ordinance), and accountability
(the Business License Ordinance), while others protect both the City and vendors (Non-
Discrimination Policy and Insurance documentation). Vendors must also comply with
against Arizona's anti-immigration law, Senate Bill 1070 (SB 1070).
Council adopted Resolution 10479 (CCS) in 2010, denouncing Arizona's anti-
immigration law. The resolution suspends official travel to the State of Arizona and
develops additional financial sanctions until such time as the new law was revoked.
The law remains partially in place. Senate Bill 1070 was immediately challenged after
e
potential to do harm, and subsequent challenges further weakened the law, although
one key negative element related to whether peace officers may check for immigration
son is in the country illegally
remains. The Arizona disclosure requirement negatively impacts the competitive
process in that any vendor located in Arizona is discouraged from bidding, and may not
be selected unless considered a sole source purchase and approved by the City
Manager and/or City Council, depending on the amount of the purchase. Even vendors
not based in Arizona have taken exception to the sanctions, and have refused to sign
the disclosure stating that they are not an Arizona firm, thereby eliminating themselves
.
from the bidding processFinally,the City is legally precluded from imposing the
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Arizona sanctions when using Federal funds. This complicates the process even further
since not all purchases are subject to the Arizona sanctions.
Response
: Staff recommends the City Council repeal Resolution 10479 related to
Arizona sanctions. Other required documents provide necessary transparency and
provide other protections for the City and vendors. To mitigate the difficulty with
required forms, staff has developed instructions, examples, and detailed descriptions to
assist vendors in understanding and completing these documents.
Key head of the Market
Issue Overview
:The City values innovative services and products that are not
currently mass-produced. This can result in low-response bids and less competitive
prices. When Procurement contacted vendors that did not bid in response to one-bid
procurements in the past fiscal year, the vast majority stated the product or service was
too specialized for them. In the past year, these have included CNG and electric
vehicles, LNG tank refurbishments, single jet water meters, and electrical services on
motors for the Water and Wastewater treatment plants.
products has expanded over time, but at times only a limited number of vendors will be
services. Procurement of the following items generally include very limited
specifications:
Vehicle purchases: The
alternative fuels by 2020 as part of its effort to drive down greenhouse gas
emissions and achieve goals set out in the 15 x 15 Climate Action Plan and the
Sustainable City Plan. Alternative fuel vehicles operate on fuels other than
gasoline or diesel to reduce greenhouse gas emissions and pollution. These
vehicles exceed the basic standards all new vehicles must meet to be sold in
California. As a result, the majority of the trucks the City purchases cannot be
simply purchased off the lot or from a regular dealer. Instead, an unleaded fueled
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vehicle on the lot must have its engine and fuel components removed and
replaced with a CNG system. In some cases, a vehicle may be prebuilt as a
CNG vehicle; however, only one brand may offer this option, and then the vehicle
must also be California Air Resources Board (CARB) certified for the specific
model year. Vehicle purchases, which form a significant part of City purchasing
and which can seem simple on the surface, are limited in the context of
sustainability requirements.
Equipment size requirements can also restrict specifications when purchasing a
vehicle that will be used in tight spaces, alleys and buildings that were built to
older code standards regarding height of openings.
The total cost of ownership for vehicles also plays a role in the development of
specifications. Factors such as standardization and worker safety can have a
significant impact on fixed and variable costs over time, as follows:
Standardization: The adoption of a single product or group of products to
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be used by a department or the City as a whole streamlines the training of
mechanics, tools used, and parts, and the inventory for the product.
Worker Safety: For those employees who continuously use a vehicle, and
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repeatedly enter and exit the vehicle, attention to ergonomic and safety
compensation claims.
Other examples of purchases subject to restrictive specifications are those
controlled by the following sustainability-focused policies:
Toxic Use Reduction Policy for City Chemical Purchases
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Janitorial Products Purchasing Criteria
Integrated Pest Management Program
Regulation of Ozone-Depleting Compounds (Section 5.28 of the Municipal
o
Code): Regulates the purchase and recycling of coolants in mobile
refrigerant/air conditioning systems and release of halon from fire
extinguishers
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Fleet Maintenance Policy: Guides the purchase of re-refined oil, retread
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tires, and water-based parts cleaners
Response
:The City is committed to its sustainability principles, and to pursuing
innovative products. However, staff has identified several areas where expanding
existing practices could address this limitation, and where new procurement practices
could open up new solutions.
Specification Review
procurement staff reviews the specifications or scope of work, and requires
additional justification if a specific requirement appears to be unreasonably
restrictive or inappropriate for the specified product. Staff will continue
encourage purchasers in departments to broaden their scope.
Subscription Market Research Service. The City seeks out reliable external
information to inform all aspects of its procurement process. In July 2015, the
City subscribed to International Business Information Services (IBISWORLD), an
online membership that provides market research, market prices and forecasts
for all commodities and services. IBISWORLD gives the City an advantage
during the solicitation, award, and renewal process. During the solicitation
process, the City has access to sample scopes of work for various purchases,
based on market research. During the evaluation and award phase, the City may
access information about supplier performance and price comparisons, in
addition to sample contract terms that might be specific to a particular industry.
Finally, during the renewal phase, the City benefits from market research to
understand whether price escalations are warranted.
Request for Qualification. The City has effectively used requests for qualifications
(RFQs) to establish a short list of vendors for broadly-defined services. The City
solicits vendors to provide their qualifications, often relating to a broad array of
specialized services such as hazardous materials cleanup services or
organizational training, developing short lists that can be referred to as the need
arises and increasing the efficiency of the bidding process. In the future, staff
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anticipates using the RFQ process to solicit qualifications from experts who will
assist us in developing solutions. One such instance could be the
implementation of a performance-based framework for the City a project that is
defined broadly but that will benefit from a more open-ended procurement
process. An RFQ process would provide the City with a range of options and
ideas based on what experts have completed in other areas, and would give the
City the information needed to develop a Request for Proposals for the final
vendor selection.
Staff has also used RFQs to take advantage of time-sensitive electricity rates in
its direct access purchasing of power. Staff established a pre-qualified list of
green power vendors from which pricing can be solicited on an annual basis.
The direct access program enables the City to purchase green power directly
from smaller vendors rather than through conventional electricity providers such
as SCE, enabling the City to buy at less expensive rates. This process could
provide a further opportunity, which the Office of Sustainability is researching, to
combine electricity purchases with other agencies, creating a consortium that
would combine needs and bid for the larger quantity.
Staff will train department purchasers on the benefits of this type of procurement,
and assist them in using this process where appropriate.
Broad Problem Statements and Partnerships. A broad problem statement is an
alternative to highly prescribed requirements that can tend to favor existing
approaches and established vendors. A problem statement informs potential
opens the door for small businesses and entrepreneurs with new ideas,
potentially leading to low-cost, innovative solutions that could improve the way
the public sector has traditionally bought goods and services. Procurement staff
will work with departments to identify procurements where broad problem
statements could be appropriate, like the recent partnership with local business
groups and businesses for the Hack the Beach Challenge (hackthebeach.com),
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five strategic goals. Staff will also consider opportunities to allow unsolicited
proposals from the private sector, as long as other competitors are able to bid on
the same project. Staff will support such practices with a simple and clear guide
to City procurement, to ensure that entrepreneurs get the same information as
established vendors.
Key Factor No. 4: Lengthy, Complicated Process
Issue Overview
:Policies that promote fairness, transparency and accessibility in
procurement can also result in a long and complicated process. On average, a formal
procurement can take from three to six months, depending on the complexity of the
product or service. Research, analysis, and communication needed in various parts of
the process add time. In a typical process, specification development can take one
month, formal processes require ten days to advertise at least twice, vendor proposal
development takes three to four weeks, and evaluation and reference checks may take
two to three weeks. Another factor that adds time to the process is the protest period,
which occurs after the initial contractor selection is made and therefore negatively
impacts customer service as the vendor is now poised to begin work but must wait.
procedures for all
competitively bid contracts, with the exception of Public Works contracts, where the
protest procedure is included in bid documents but is not yet codified. The protest
procedure provides an opportunity for vendors who feel their proposals were not
before the City enters into a contract. The current process takes up to 34 days: seven
days to submit a protest to the Purchasing Services Manager after the City announces a
recommended selection on the days for the City to
the Finance Director, who has another ten days to respond. The lengthy process
delays project implementation and resolution of the concern for the vendor.
Response
:Procurement staff will continue its practice of engaging departments in
planning for future purchases, and recommends a change to the Municipal Code to
streamline the protest procedure.
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Protest Procedure. Staff recommends a change in the Municipal Code that will
add a protest procedure to Public Works contracts and will allow vendors to
address protests directly to the Finance Director for non-Public Works contracts,
and the Public Works Director for Public Works contracts. This change will
shorten the protest process and provide faster resolution. The protester would
then have the opportunity to appeal to the City Council, which is the same
ultimate step as in the current process.
Create Efficiencies. Staff has begun meeting with departments in the beginning
needs. Procurement will continue to collaborate with departments by assisting in
the development of the bid or proposal. In addition to speeding up the process,
this continued facilitation has the ability to increase savings, quality and value
while lowering risk and cost. Additional efforts to speed up the process include
development of bid and proposal templates and a process for departments to
obtain their own quotes for smaller one-time purchases. This process meets the
Charter requirement for a centralized system of supervised purchasing.
Together, these solutions will improve the administration of the current process
and allow the Procurement team to focus on strategic planning and
improvements.
Key Factor No. 5: Managing Decentralized Purchasing
Issue Overview
:While Procurement staff reviews and sets standards for City
purchasing, each City Department initiates and manages its own purchases. This can
lead to inefficiencies if multiple departments purchase similar products at a smaller
volume, as larger value and longer-term contracts generally provide cost savings and
price protections, and lessen the workload from repetitive purchases.
Response
:Procurement staff will continue with current practices that address the
potential for inefficient purchasing, and will research an online purchasing tool that could
provide a new way to manage internal purchases.
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Citywide Contracts. Staff regularly reviews all informal quotes and formal bids to
identify repetitive purchases conducted across multiple departments. Staff then
combines like goods and services into citywide bids. Over the past year, the City
has converted 150 individual bids into 17 citywide bids and saved over $200,000
per year.
Contract Management. Contract management helps ensure effective
management and use of resources. The City conducts quarterly contract
management training sessions and has created standardized contract
documents easily available to all City staff. Over 75 employees have participated
in the training, with another 30 signed up for the fall. A dedicated Contract
Coordinator position ensures frequent monitoring and compliance testing to
will present a contract closeout report to Council along with the Year-End Budget
report in the fall that will include for each closed contract the initial funding
budgeted, the actual funds spent over the term of the contract, and the work
completed.
eProcurement / eMarketplace Site. The City has begun researching an
which the City has bid. If the City implemented such a site, all department staff
could access the webpage and order the supplies directly from the supplier,
charge the appropriate account and send data to Procurement. This tool would
create an automatic approval workflow, improve compliance by using a standard
set of catalogs and pricing, and increase transparency as spending data and
analytic information could easily be converted to management reports. This
method c
cost and time for check printing, improving cash management, increasing the
amount of the rebates earned on purchasing card transactions. Staff will present
the results of research into this option in the next fiscal year.
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Key Factor No. 6: Limited Participation and/or Low Purchasing Power
Issue Overview
:Santa Monica can receive a low number of bids because vendors are
not aware of opportunities or are intimidated by the procurement process. And, Santa
Monica as a smaller city may receive higher prices than would be available for larger
entities with larger volume needs.
Response
:Staff will continue with best practices for proactive vendor outreach to
break down barriers to the bidding process, and will increase use of piggybacking and
take advantage of lower prices.
Vendor Outreach.
PlanetBids.
While many agencies throughout the country are still contemplating
converting to an electronic bidding system, the City has been using PlanetBids,
its online vendor portal, for nine years. PlanetBids reaches a large number of
participants and has the capability to support innovative procurement practices.
Through PlanetBids, the City advertises its formal and informal opportunities,
notifies vendors of any upcoming solicitations, and notifies proposers of proposal
selection. Vendors registered with the system receive automatic email
notifications when opportunities in their selected commodities and services are
available. In this way, the City is able to reach a large number of vendors
quickly, and track the number of vendors viewing and downloading bids. Santa
Monica currently reaches 15,393 vendors, 794 of which are local. The City also
has the ability to send bid notifications to an additional 250 vendors registered
with neighboring cities that also use PlanetBids.
Local Vendor Outreach
. The City holds annual outreach events for Santa
Monica v
staff explains the City purchasing process and the Sustainable Purchasing and
Buy Local resources, and also helps vendors register on PlanetBids or sign up as
a Buy Local vendor and have the
50 people attended the most recent event on October 21, 2015. Staff is working
on additional opportunities to reach the business community in partnership with
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the County, the various Chapters of the Chambe
Business Improvement Districts.
Piggybacking and Cooperative Bidding. Municipal Code Section 2.24.080(b)
establishes exceptions to the competitive bid procedure in limited cases,
including when competitive bid procedures have already been formulated by
other government agencies. Piggybacking is a form of intergovernmental
purchasing in which an agency extends the pricing and terms of its contract to
another agency. Generally, a larger agency will extend its pricing to smaller
agencies, which would otherwise be unable to achieve the economies of scale
achieved by the larger agency with its larger purchase. Using this method, the
City recently purchased 22 Police Interceptor patrol vehicles using the State bid,
resulting in fleet pricing and payment discount, an estimated $11,000 or 1.5%
cost savings. Staff will look to expand use of this method, especially through
other progressive cities or government agencies with similar sustainability goals.
Cooperative bidding, the other exception to competitive bidding, occurs when two
or more agencies combine their requirements to obtain advantages of volume
purchases that usually result in lower pricing. The City can arrange the process
so that various public agencies purchase from the same supplier using a single
bid. The City currently participates in a cooperative office supplies contract with
Staples, which provides discounts for any agency that buys from this government
contract. The City will emphasize not only using these alternative processes, but
also initiating the contracts that facilitate collaborative purchasing, where capacity
exists, thereby helping to expand the market for innovative, sustainable goods
and services.
Subscription Market Research Service. Staff now has access to IBISWORLD, an
online membership that provides market research, market prices and forecasts
for all commodities and services. During the solicitation process, the City has
access to sample scopes of work for various purchases, based on market
research. During the evaluation and award phase, the City may access
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information about supplier performance and price comparisons, in addition to
sample contract terms that might be specific to a particular industry.
Reverse Auction. Reverse auctions are a process whereby cities determine a
base price for a commodity and ask vendors to bid against each other, on an
electronic bidding system, allowing the city to purchase the commodity at the
lowest price. Since these procurements are based solely on price, however, they
could affect the quality of the product being bid on and received. The initial step
of prequalifying the vendors and having the terms and specifications clearly
defined therefore becomes very important, as to leave no room for ambiguity.
Reverse auctions are most effective when used to purchase large amounts of
basic commodities, such as fuel, water treatment chemicals, supplies such as
safety gloves, office paper, traffic signal LEDs, and engineered parts and
equipment that many distributors or suppliers can provide. Goods and services
that can be provided by only a few sellers cannot be acquired by reverse auction.
electronic bidding system and has the ability to accommodate reverse auctions.
Procurement staff will work with departments to identify procurements where a
reverse auction process could yield savings.
Inclusiveness / Preference
At its July 14, 2015 meeting (Attachment C), Council expressed an interest in various
preferences that might broaden and encourage vendor participation. California law and
current experience with preferences in procurements involving federal funds indicate
that additional preference practices could involve significant tradeoffs.
Per SMMC Chapter 2.24, City businesses receive a one and one half percent (1.5%)
price preference (equal to the portion of the sales and use tax rate that returns to the
City) when determining the rank order of the bids in the selection process. If after the
1.5% preference is applied, a City business has submitted a bid that is equal to or is
lower than all other bids, the Purchasing Agent shall award the contract to the City
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business so long as it is otherwise the best bidder. During the past four years, only one
of the bids eligible for local preference consideration has been selected.
the City Council shall adopt procedures that encourage the award of City contracts to
1996, Proposition 209 amended the California Constitution to prohibit public institutions
from discriminating on the basis of race, sex or ethnicity, including in the area of public
contracting. This prohibition includes policies intended to assist minority or women-
owned businesses by providing advantageous bidding conditions, except where such a
prohibition would make an agency ineligible for a federal program or funding. What
State law still allows, and what is required for some Federally-funded programs, is the
Disadvantaged Business Enterprise (DBE) program. To qualify as a DBE, the business
must be owned and controlled by one or more socially and economically disadvantaged
persons. Generally the certification process is done at a local or regional level; Metro
and Cal-Trans, the closest certifying agency is in downtown Los Angeles. The City
currently takes part in the DBE program for transit and construction projects. Federal
law mandates a number of stringent requirements with respect to DBEs. These
requirements include setting DBE use goals; design and implementation of a DBE
program; and outreach, monitoring and reporting. The department receiving the funds
must abide by these requirements, which are under the jurisdiction of the US Federal
program issuing the funds.
To implement a DBE preference for all its competitive processes, the City would need to
meet the requirements listed above and create a program to monitor and report on the
process. Adopting such a program for all City procurements would be prohibitive in
terms of additional staff needs and other resources, and would further limit participation
in City bids or lengthen the amount of time necessary to bid on and complete projects,
or both. At the same time, a large number of vendors on PlanetBids with access to City
solicitations have DBE status (Attachment D). Given the tradeoffs involved, that the
City participates in preference programs through $10 to $20 million annually in federally
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funded programs, and that our vendor portal shows that the City is already reaching a
large number of disadvantaged businesses, staff recommends no changes at this time.
Alternatives
Council could choose to maintain the Arizona exclusion policy and protest procedure as
is, and could direct staff away from pursuing any of the proposed innovative practices in
the report: broad problem statements, reverse auctions, and eProcurement. Finally,
Council could direct staff to implement a DBE preference program in Santa Monica.
Should Council choose any of these options, staff would work within these parameters
and with existing methods to address the problem of limited participation in City bids.
Summary of Recommended Changes
Staff is recommending that the Council consider the following:
Repeal Resolution 10479 restricting business with Arizona-based vendors;
Change Section 2.24.105 of the SMMC to streamline the protest process;
Give staff direction to pilot or implement new methods of procurement
Financial Impacts and Budget Actions
There is no immediate financial impact associated with the staff recommendation.
Prepared By:
Araceli Esparza, Purchasing Services Manager
Approved Forwarded to Council
Attachments:
A. Sustainable City Plan (web link)
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B. Comparison Cities Contracting Information
C. July 14, 2015 Council Agenda (web link)
D. PlanetBids Preference Table
E. Resolution
F. Ordinance
G. powerpoint
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ATTACHMENT B COMPARISON OF BENCHMARK CITIES
CITY SIZE
CITYSpecial Requirements
CITY BUDGET
Santa Monica8.3 Square MilesArizona
Population: 89,736Living Wage
City Budget: $575,637,583 Oaks Inititave
General Fund Budget: $329,259,247 Business License
General Fund Personnel 1,454.5 FTEs PlanetBids
Beverly Hills5.7 Square MilesBusiness License
Population: 34,290
City Budget: $174,199,931
General Fund Budget: $89,800,000
General Fund Personnel 770 FTEs
Burbank17.16 Square MilesBusiness License
Population: 105,543PlanetBids
City Budget: $153,297,900
General Fund Budget: $119,490,634
General Fund Personnel 941.96 FTEs
Culver City5.1 Square MilesBusiness License
Population: 40,000
City Budget: $94,484,903
General Fund Budget: $73,093,510
General Fund Personnel 414.57 FTEs
Glendale30.6 Square MilesBusiness License
Population: 196,021
City Budget: $181,501,527
General Fund Budget: $136,930,957
General Fund Personnel 890.29 FTEs
Long Beach52 Square MilesBusiness License
Population: 465,000BidOnline
City Budget: $391,000,000 General Fund Budget
(Structural) $324,000,000
General Fund Personnel: 2,487 FTEs
Pasadena23 Square Miles Business License
Population: 140,020Living Wage
City Budget: $205,622,000 PlanetBids
General Fund Budget: $127,368,000
General Fund Personnel 937 FTEs
Thousand Oaks56 Square MilesBusiness License
Population: 128,143eBid exchange
City Budget: $70,000,000
General Fund Budget: $28,000,000
General Fund Personnel: 217 FTEs
Torrance21 Square MilesBusiness License
Population: 147,706
City Budget: $176,398,000
General Fund Budget: $133,599,792
General Fund Personnel 920.1 FTEs
59.5 Recurrent Positions
Ventura21.7 Square MilesBusiness License
Population: 108,903
City Budget: $91,730,927
General Fund Budget: $60,200,000
General Fund Personnel: 431 FTEs
Attachment D
Procurement
Challenges and Opportunities
Santa Monica City Council
June 28, 2016
Current Circumstances
Improving market conditions
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Sustainability
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Fleet realignment
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Current Policies
The Charter and Municipal Code
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Centralized Competitive Bidding
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Exempt: $10,000
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Informal: up to $80,000 professional services,
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up to $175,000 goods/contractual services
Formal: over $80,000, $175,000
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Sustainable City Plan
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Current Best Practices
Proactive outreach includes electronic bidding platform
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Citywide bids
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Piggybacking/Cooperative bidding
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Market research subscription
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Contract management
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Key Challenges
Directly tied to 1-/ 2-bid response feedback
1)Technological limitations
2)Disclosure and documentation
3)Needs ahead of the market
Self Assessment
4)Lengthy, complicated process
5)Decentralized purchasing can be inefficient
6)Limited participation and low purchasing power
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1. Technological Limitations
Problem: Hard copy signature requirement
Recommendation: Transition to electronic bid submittal
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2. Disclosure & Documentation
Problem: Large number of disclosures as an impediment
Recommendation:
Repeal Resolution10479suspending official travel to the State
•
of Arizona and asserting additional financial sanctions
Detailed instructions on other forms.
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3. Santa Monica Innovative Needs
Problem: Innovative services and products that are not mass
produced
Recommendation:
Use Market Research
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Expand RFQ use
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Introduce broad problem statements, partnerships
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4. Lengthy, Complicated Process
Problem: Lengthy process with additional time added for
protest procedure
Recommendation:
Changes to Municipal Code to streamline protest procedure
•
Engage departments early in future purchases
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5. Decentralized Processes
Problem: Department-led purchases can lead to inefficiencies.
Recommendation:
Continue to identify citywide bid opportunities
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More SMI training
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Implementing online purchasing tools
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Shop
Check out
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6. Low Participation & Purchasing Power
Problem: Low response / smaller volume linked to higher prices
Recommendation:
Continue outreach and proactive research
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Expand piggybacking and cooperative purchasing
•
Introduce reverse auctions
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Inclusiveness / Preferences
Issue:Minority-/ women-/veteran-owned vendor participation
Recommendation:
Continue to monitor registered vendors
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Vendors qualify as DBE for federal projects
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Next Steps
eMarketplace
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RFQs
•
Broad problem statements and partnerships
•
Reverse Auction
•
Repeal Resolution 10479 (Arizona)
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Change ordinance for protest procedure
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