Consideration and Adoption of Resolution No. 2019-03:  A resolution of the City Council of the City of Flagstaff, Arizona amending the Procurement Code Manual, Article 25, Change Orders, Sections 25.1 Change Order Process, Section 25.2 Change Order Conditions, and Section 25.3 Change Order Membership and establishing an effective date.

This Resolution is to amend the City's Procurement Code Manual Article 25, "Change Orders".  Staff has reviewed the Change Order section to improve clarity, understanding, use of, and documentation requirements for Contract Allowances, Administrative Change Orders, Owner's Contingency and Contractor's Contingency.  The updated thresholds for these options include a requirement to provide written justification for the request related to the contract being considered.  The changes also remove the ability to add the Administrative Change Order Authority to certain types of contracts including Construction Manager at Risk (CMAR) and Design/Build (DB).

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Per City Code, Chapter 1, Section 20-001-0004, a Resolution is required to adopt changes to the Procurement Code Manual.

Council Goals Community Outreach--Enhance public transparency and accessibility.  

Strategic Plan Strategic Priorities
Provide exceptional service: Foster Clear and consistent communication and Demonstrate respect, equity, and strong ethics 
Foster a resilient and economically prosperous City: Deliver outstanding services through a healthy environment, resources, and infrastructure and Promote policies that reflect a positive and safe community    
Work in partnership to enhance a safe and livable community: Promote the high quality of life through consistent standards, rules, and regulations

• On February 6, 2018, a Future Agenda Item Request (F.A.I.R.) that was introduced to discuss the current and past practices for the assignment of Contract Allowances, Owner and Contractor Contingencies, and Change Order Percentages and received two votes to continue.
• On July 3, 2018, there was further Council discussion and the F.A.I.R. received four votes from Council.
• On October 16, 2018, staff presented a resolution with proposed changes to Article 25 of the Procurement Code Manual.  Council discussed staff's recommendation and provided some additional changes for consideration.  The adoption of the resolution was postponed to allow staff time to make the changes.

1.  Adopt Resolution 2019-03 as submitted.
2.  Recommend revisions to Resolution 2019-03 then adopt.
3.  Do not adopt Resolution 2019-03 and provide staff with direction for future changes.

At your June 3, 2018, Council Meeting, staff listened to the Council conversation related to Contract Allowances, Owner and Contractor Contingencies, Change Order Authority and change order percentages.  From that meeting staff from Management Services, Community Development, Water Services, and Public Works reviewed our Procurement Code Manual related to the topics discussed.  Staff reviewed the Change Order article and determined there are ways to improve this article that would enhance the understanding of and limit the use of certain change order options for contracts.  We also added a requirement to provide written justification when it is deemed that a Contract Allowance, Administrative Change Order, Owner's Contingency and/or Contractor Contingency is recommended.  In addition, at the October 16, 2018, Council meeting, Council provided additional amendments and recommendations to update the Procurement Code Manual.   At the April 9, 2019, Work Session staff presented the recommended updates to Council and reviewed a draft resolution for consideration. 

The City has a formal, comprehensive, Procurement Code Manual which was approved and adopted by City Council under Resolution No. 2013-19 on July 16, 2013.  Any and all proposed amendments are required to be adopted per City Code, Chapter 1, Section 20-001-0004.  Since the June 2013 adoption, there have been two updates to the Procurement Code Manual.  These occurred on June 2, 2015, by Resolution No. 2015-24 and on May 1, 2018, by Resolution No. 2018-11.    This proposed Resolution No. 2019-03 is to obtain approval and adoption of the proposed amendments applicable to Article 25, Sections 25.1, 25.2 and 25.3 within the City's Procurement Code Manual that are outlined in the attached Resolution.

Adopting the proposed language as amendments to Article 25 within the City's Procurement Code Manual will:
1.  Provide better clarity and help eliminate varying interpretation to certain language applicable to Article 25, Sections 25.1, 25.2 and 25.3 within the City's Procurement Code Manual;
2.  Incorporate additional requirements to justify and approve allowance, administrative change orders, and contingency, for construction-related projects.

Additionally, the proposed changes include a suggestion received at the October 16, 2018 meeting related to the dollar amount of change orders brought to Council for approval.  Current practice is to bring back a change order of any dollar amount that cumulatively increases by $50,000 the total amount of changes to a contract since the time of Council approval.  The proposed change would have staff only bring to Council change orders that individually increase the contract by $50,000.  If adopted, this change would result in Council seeing fewer change orders of less than $50,000, but there would be no limit to the amount a contract could increase without Council approval so long as the individual changes were each less than $50,000.  This change would have no impact on contracts not approved by the Council.  Because City Charter requires that Council approve all contracts of $50,000 or more, change orders of any amount that increase the value of the contract to $50,000 will be brought to Council for approval. 
 

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Improved transparency with the City's Procurement practices, as well as strengthening justification for approval of adding contract allowance, administrative change order authority and contingencies for construction contracts.

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