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HomeMy WebLinkAboutItem 11b - Increasing Purchasing Thresholds DATE: July 20, 2021 TO: Honorable Mayor and City Council FROM: Dominic Lazzaretto, City Manager Hue Quach, Administrative Services Director By: Vanina Rynkiewicz, Purchasing Officer SUBJECT: ORDINANCE NO. 2379 AMENDING ARTICLE II, CHAPTERS 8, 8.5, AND 8.7 OF THE ARCADIA MUNICIPAL CODE INCREASING THE PURCHASING THRESHOLD FOR NO BIDS/OPEN MARKET PURCHASES TO $5,000 AND FOR PROFESSIONAL SERVICES AGREEMENTS AWARDED BY CITY COUNCIL FOR CONTRACTS GREATER THAN $30,000 Recommendation: Adopt SUMMARY At the July 6, 2021, meeting, the City Council introduced Ordinance No. 2379 to amend Article II, Chapters 8, 8.5, and 8.7 of the Arcadia Municipal Code regarding purchasing threshold limits, increasing the no bids/open market purchases to $5,000 and for professional services agreements awarded by City Council for contracts greater than thirty thousand dollars $30,000. This agenda item would provide for second reading and adoption of the Ordinance. The July 6 staff report and proposed ordinance are attached to this report for review. RECOMMENDATION It is recommended that the City Council adopt Ordinance No. 2379 amending Article II, Chapters 8, 8.5, and 8.7 of the Arcadia Municipal Code to increase the purchasing thresholds for no bids/open market purchases to $5,000 and professional services agreements awarded by City Council to $30,000. Ordinance No. 2379 increasing Purchasing Thresholds July 20, 2021 Page 2 of 2 Attachments: Ordinance No. 2379 July 6, 2021, City Council Staff Report (without attachments) dollars ($30,000) may be awarded by the requesting department, subject to written approval by the City Manager, or their designee." Section 12. The City Clerk shall certify to the adoption of this Ordinance and shall cause a copy of same to be published in the official newspaper of said City within fifteen (15)days after its adoption. This Ordinance shall take effect on the thirty-first (31st) day after its adoption. Passed, approved, and adopted this ATTEST: City Clerk APPROVED AS TO FORM: �0-� Stephen P. Deitsch City Attorney 4 day of July, 2021. Mayor of the City of Arcadia 20th DATE: July 6, 2021 TO: Honorable Mayor and City Council FROM: Dominic Lazzaretto, City Manager Hue Quach, Administrative Services Director By: Vanina Rynkiewicz, Purchasing Officer SUBJECT: ORDINANCE NO. 2379 AMENDING CHAPTERS 8, 8.5, AND 8.7 OF THE ARCADIA MUNICIPAL CODE INCREASING THE PURCHASING THRESHOLD FOR NO BIDS/OPEN MARKET PURCHASES TO $5,000 AND FOR PROFESSIONAL SERVICES AGREEMENTS AWARDED BY CITY COUNCIL FOR CONTRACTS GREATER THAN $30,000 Recommendation: Introduce SUMMARY Article II, Chapters 8, 8.5, and 8.7 of the Arcadia Municipal Code set forth the City’s purchasing and procurement procedures, including contract award authority and competitive solicitation requirements. Chapter 8 – Purchasing System was overhauled in 2002 following an effort to clarify and define purchasing procedures adding Chapters 8.5 – Professional Service Contract Procedure and 8.7 – Maintenance Service Contract Procedure with Ordinance No. 2160. Recently, the current purchasing processes were evaluated for effectiveness, efficiency, and relevancy to the changing times. Based on this study, it is recommended that the City Council increase current purchasing thresholds to further streamline procedures by introducing Ordinance No. 2379 amending Chapters 8, 8.5, and 8.7 of the Arcadia Municipal Code. BACKGROUND In 2002, Ordinance 2160 was introduced to amend sections of Chapter 8 that outline general purchasing requirements. The Ordinance made changes to clarify and distinguish between formal and informal contract procedures, amending purchasing thresholds to different price points, and added sections that cover Exceptions and Exemptions for situational emergency cases, where the City Manager has the ability to purchase without complying with bidding procedures. Ordinance 2160 also included the addition of Chapter 8.5 for Professional Service Contract Procedures and Chapter 8.7 for Maintenance Service Contract Procedures. Ordinance No. 2379 Amending Chapters 8, 8.5, and 8.7 of the Arcadia Municipal Code Increasing Purchasing Thresholds July 6, 2021 Page 2 of 4 Staff recently reviewed all sections of Chapters 8, 8.5 and 8.7 of the City’s Municipal Code, relating to the City’s Purchasing System, the Purchasing Procedure Manual, and current practices to determine overall effectiveness, efficiency, and relevancy to today’s environment. Based on this review, minor changes are recommended for Chapters 8, 8.5, and 8.7 of the Arcadia Municipal Code. DISCUSSION Presently, Chapters 8, 8.5 and 8.7 of the Arcadia Municipal Code set forth the purchasing procedures and dollar thresholds for all purchases made by the City. The existing procedures state: • Purchases for supplies, materials, and equipment, in an amount equal to or less than $2,500 may be awarded by the City departments using an open market procedure where no bids are required but are highly encouraged. • Professional service contracts of more than $2,500 and less than $15,000 may be awarded by the requesting department, subject to written approval by the City Manager. • Professional service contracts more than $15,000 shall be awarded by the City Council. Representatives from each department were organized to discuss ways that the current procurement process could be streamlined for additional efficiency and effectiveness. It was the consensus and recommendation from all participants that the purchasing dollar threshold limits needed to be updated and increased to adjust for inflation and current market rate adjustments related to labor and other special services. These suggestions would allow staff to streamline purchasing processes for small dollar item purchases, allow staff to quickly obtain informal bids to secure products and materials for necessary services, and to bring aboard professional assistance swiftly to lessen or avoid delays to City programs or services. To determine what that appropriate level is for these monetary thresholds, a review of the inflationary component was determined by using the All Urban Consumers index for the Los Angeles - Long Beach – Anaheim area, and by applying the month of May going back to 2002. In addition to the inflationary adjustment, a survey of surrounding cities was conducted for their purchasing thresholds, using factors such as size of budgets and city services, to provide a comparative of cost in relation to the “local” economy. Between 2002 and 2021, the All Urban Consumers cumulative rate of inflation increased by 57.5%, reducing the City’s purchasing power by more than half since the procurement limits were set in place. A survey of surrounding cities’ bidding threshold limits showed that the vast majority of cities have set the no bids or open market threshold limit at or Ordinance No. 2379 Amending Chapters 8, 8.5, and 8.7 of the Arcadia Municipal Code Increasing Purchasing Thresholds July 6, 2021 Page 3 of 4 above $5,000. Some of these cities have smaller budgets and are not full-service cities like Arcadia. The same survey for Professional Services contracts awarded by City Council show an average above $40,000. The results of the survey are presented in the table below: Open Market Threshold Prof. Services Council Approval FY20/21 General Fund Budget Full-Service City City Amount Police Fire Water Arcadia (current) $2,500 $15,000 $63,881,700 Yes Yes Yes Alhambra $3,500 $50,000 $69,790,649 Yes Yes Yes Azusa $5,000 $25,000 $48,751,588 Yes No Yes Baldwin Park $7,500 $25,000 $29,077,554 Yes No No Chino $10,000 $100,000 $72,136,251 Yes No Yes Diamond Bar $5,000 $45,000 $25,811,159 No No No Monrovia $5,000 $25,000 $41,882,610 Yes Yes Yes Rosemead $5,000 $30,000 $24,743,150 No No No Temple City $5,000 $25,000 $14,730,490 No No No Yorba Linda $5,000 $75,000 $40,150,519 No No No Average: $5,350 $41,500 $43,095,567 - - - Arcadia (Requested) $5,000 $30,000 $63,881,700 Yes Yes Yes The following are proposed updates to the current purchasing thresholds as specified in Chapters 8, 8.5 and 8.7 of the Municipal Code: I. Changes to Non-Competitive Bids Dollar Limit a. That the City’s buying of materials, equipment, and services of less than $5,000 be done by an open market procedure; and b. That the City’s buying of materials, equipment, and services in excess of five thousand dollars $5,000 be done by through an informal competitive bid procedure. Ordinance No. 2379 Amending Chapters 8, 8.5, and 8.7 of the Arcadia Municipal Code Increasing Purchasing Thresholds July 6, 2021 Page 4 of 4 II. Changes to Council Approval Dollar Limit for Professional Services Agreements a. That the Professional Service Agreement in excess of $5,000 and less than $30,000 may be awarded by the requesting department, subject to written approval by the City Manager, or their designee; and b. That the Professional Service Agreement in excess of $30,000 shall be awarded by the City Council. A revised Ordinance governing Purchasing thresholds has been prepared, amending Chapters 8, 8.5, and 8.7 of the Arcadia Municipal Code to update and increase the purchasing thresholds to streamline and expedite the informal and formal bidding process for retaining goods or services and to maintain a focus on the best use of every taxpayer dollar. ENVIRONMENTAL ANALYSIS The proposed action does not constitute a project under the California Environmental Quality Act (“CEQA”), and it can be seen with certainty that it will have no impact on the environment. Thus, this matter is exempt under CEQA. FISCAL IMPACT There is no immediate fiscal impact; however, it is believed that the amendments will result in a more efficient and cost-effective process for citywide procurements. RECOMMENDATION It is recommended that the City Council determine that this action does not constitute a project and is therefore, exempt under, the California Environmental Quality Act (“CEQA”); and introduce Ordinance No. 2379 amending Chapters 8, 8.5, and 8.7 of the Arcadia Municipal Code to increase the purchasing thresholds for no bids/open market purchases to $5,000 and for Professional Services Agreements awarded by City Council for contracts greater than $30,000. Attachments: Ordinance No. 2379 (first reading) Current Chapter 8, 8.5, 8.7 Purchasing System of the Municipal Code