Staff periodically reviews City Code, Chapter 3, to ensure language reflects existing practices and a balance between City Council policymaking and staff accountability through a review of procurement thresholds. Following is an overview of historical procurement thresholds, inflation impacts, and recommended updates to City Code, Chapter 3. In 2002, the requirement for the approval of City Council of contracts for consultants and professional services valued at $30,000 or greater was established. In 2003, the requirement for City Council approval of contracts for construction valued at $50,000 or greater was established. Finally, in 2009, the requirement for City Council approval of contracts for materials, services, and equipment valued at $50,000 or greater was established. Formal solicitations are also required for contracts and agreements valued at $50,000 or greater. This threshold was established for construction procurements in 2003 and for materials, services, and equipment procurements in 2009. Inflation has increased the cost of goods and services an average of 38% since 2002 and 28% since 2009, resulting in an increased number of agreements requiring City Council approval. As inflation continues to impact costs in the future, many contracts now valued under the current Council approval thresholds will soon exceed them, resulting in additional increases in the number of items presented to City Council for approval, many of which are agreements for routine purchases of materials and services. Chapter 3, Section 3-8, of City Code states that all purchases valued over $5,000 require a written contract. Sections 3-9.1 through 3-9.4 establish the requirements for City Council approval of contracts or agreements for materials, services, equipment, and construction valued at $50,000 or more, of contracts or agreements for consultant and professional services valued at $30,000 or more, and of amendments or change orders in excess of 10% of the amount originally approved by City Council. The recommended changes to these sections will raise these thresholds and empower staff to deliver services and capital improvements to the public more efficiently and effectively. Chapter 3, Section 3-11, sets the current requirement to conduct an informal solicitation process (three quotes) for procurements valued at $5,000 or more and to conduct a formal solicitation for procurements valued at $50,000 or more. The recommended changes will allow for greater opportunity for small and local businesses to compete to do business with the City through the informal procurement process. Chapter 3, Section 3-15, sets the current general standards of ethical conduct for public procurement employees. The recommended changes would expand this to all public employees and procurement professionals. Chapter 3, Section 3-16, currently states that general procurement requirements are not applicable for funds received by the City in accordance with the Federal American Recovery and Reinvestment Act of 2009 (ARRA). The recommended changes would remove the language specific to ARRA and provide more general language regarding federal or state grant procurement procedures. Chapter 3, Section 3-17, establishes the current circumstances and procedures for the suspension or debarment of individuals or businesses from contracting with the City. The recommended changes remove the administrative procedure language from City Code to be instead documented in policy. |
A City Council Innovation and Technology Subcommittee meeting was held on August 29, 2022, to present these recommended changes and solicit feedback. The following discussion explains the proposed changes by section in Chapter 3 of City Code. Section 3-8 Written Contracts This section includes the requirement that all contracts valued at $5,000 and above be in writing was established in 2005. Since that time, inflation has increased costs an average 33%. Written contracts require time to create, negotiate, and execute, delaying service delivery resulting from small dollar purchases. The recommended change will raise the threshold for the requirement for written contracts to $10,000 and will enable staff to deliver services resulting from small dollar purchases more efficiently and effectively. Section 3-9 Approval of City Council The recommended changes to Section 3-9.1 raise the threshold for Council approval of contracts or agreements for materials, services, and equipment from $50,000 to $100,000, and of amendments or change orders to agreements previously approved by Council from 10% of approved amount, to additional approval if $100,000 or more over the agreement amount originally approved by Council. During the Council Subcommittee held August 29, 2022, moving the 10% to 30% was discussed, but after additional review, staff is recommending amendments or change orders totaling $100,000 or more should go back to City Council for approval. Overall, the changes in this section account for the inflationary increases already experienced, anticipate the future impact of inflation, minimize operational impacts, and provide staff with the ability to deliver services to the community more efficiently and effectively. Section 3-9.1.E allows for no prior Council approval for purchase of bulk gasoline fuel. This section is recommended to be expanded to exempt statutory fees required by federal or state law, and memberships, subscription fees or dues that serve a public purpose. A new Section 3-9.1.F will establish the requirement for prior Council approval of contracts or agreements for non-routine matters of public interest and policy. The recommended changes to Section 3-9.2 through 3-9.4 will raise thresholds for Council approval of contracts or agreements for construction from $50,000 to $100,000; of contracts or agreements for professional services (i.e. architects, engineers) from $30,000 to $100,000; of design/build and construction manager at risk contracts or agreements from $50,000 to $100,000; and of amendments or change orders to agreements previously approved by Council from 10% of approved amount to additional approval if $100,000 or more over the agreement amount originally approved by Council. These changes account for the inflationary increases already experienced, anticipate the future impact of inflation, minimize capital project impacts, and provide staff with the ability to deliver services to the community more efficiently and effectively. To determine whether a contract or agreement will require City Council approval, staff reviews the value of the agreement in each one-year period. The current business practice is to bring forward for Council approval contracts and agreements valued over $50,000 in a one-year period of its lifecycle. The recommended changes to Section 3-9.1 through 3-9.4 clarify that contracts valued at $100,000 or more in each term of the contract require Council approval, in alignment with the business practice. Section 3-11 Procurement Procedures The current thresholds at which informal and formal solicitation processes are required were also established in 2002, 2003, and 2009, at the same time as the current Council approval thresholds. Formal solicitation processes (i.e.: Request for Proposals, Request for Qualifications) are resource-intensive to respond to for companies interested in doing business with the City. This, in addition to their being complex and intimidating, deters many small and local businesses from responding to formal solicitations. The process of reviewing responses to solicitations is time-consuming, resulting in prolonged delays in awarding contracts and delivering projects and services. Alternatively, responding to an informal solicitation is simple and does not require the same resource effort. Quotes from informal solicitations can be reviewed and awarded rapidly. To encourage local and small business participation, and to increase service delivery efficiency, the recommended changes to Section 3-11 is to raise the threshold for formal solicitations for materials, services and equipment from $50,000 to $100,000, and raise the threshold for the requirement for three quotes from $5,000 to $10,000. Throughout this section, the words "bid" and "bidder" are used to describe responses to solicitations and the individuals and entities responding to solicitations. This language is antiquated and could limit the solicitation methods available for use by staff. The recommended changes update the language and ensure that the City is able to employ the solicitation method most appropriate for each procurement. Section 3-13.3 Special Circumstances; Emergencies Section 3-13.3 provides for the procurement of services, supplies, materials, and equipment required to protect people or property in the event of an emergency. The recommended changes add construction to this section and clarify both the definition of emergency situations and the responsibility of staff to obtain City Council approval and ratification of procurements in response to an emergency as defined in this section. Section 3-15 General Standards of Ethical Conduct Section 3-15 establishes the general standards of ethical conduct for public procurement employees, as well as individuals and entities doing business with the City. The recommended changes expand to include all public employees, as well as procurement professionals, and align the format of this section with the format of the other sections of Chapter 3. Section 3-16 The Capital Fund Stimulus Grant Policy Section 3.16 establishes the inapplicability of the procurement policies and standards set in City Code Chapter 3 to goods and services procured with Federal American Recovery and Reinvestment Act of 2009 (ARRA). ARRA funds are no longer available. However, the procurement requirements of some Federal and State grants conflict with those set out in Chapter 3. The recommended changes remove the language specific to the Federal American Recovery and Reinvestment Act of 2009 and allow State or Federal procurement procedures to prevail and control in the event of a conflict between State and Federal grant procurement procedures and City procurement procedures. Section 3.17 Suspension; Debarment Related to Award of City Contracts Section 3.17 establishes the circumstances under which an individual or entity may be suspended or debarred from contracting with the City, as well as the administrative procedures for the suspension or debarment. The administrative procedures are more appropriately documented in a policy. The recommended changes remove the administrative procedures from City Code, but retain the core elements that would be required of the policy. The administrative procedures will be documented in an administrative policy. Additional Discussion In response to the Council Subcommittee's suggestions, the following additional changes to Chapter 3 have been made: To aid in the transparency to the higher procurement thresholds, staff will prepare an Informational agenda item for each Council meeting detailing the administrative approvals of contracts and agreements valued between the current and recommended approval thresholds. In addition, the informational item will include a listing of items within this value range that experienced substantial price increases of 50% or more. A draft Council Informational Item is attached. As is current practice, regardless of the value of the contract or agreement, or the threshold requiring City Council approval, non-routine matters of public interest and policy will be brought to Council for approval, as noted in Section 3-9.1.F. Finally, a City comparison is attached showing what other community procurement thresholds are currently. Staff is aware of at least two other Valley communities currently reviewing this topic as well. This Ordinance was introduced and tentatively adopted on October 27, 2022. |