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CONSIDERATION OF AMENDING CHAPTER 2.56 OF THE CHULA VISTA MUNICIPAL CODE - “PURCHASING SYSTEM” - REGARDING CONTRACT LIMITS AND AUTHORITIES ASSOCIATED WITH CITY PROCUREMENT PRACTICES
ORDINANCE OF THE CITY OF CHULA VISTA AMENDING CHAPTER 2.56 OF THE CHULA VISTA MUNICIPAL CODE - “PURCHASING SYSTEM” - REGARDING CONTRACT LIMITS AND AUTHORITIES ASSOCIATED WITH CITY PROCUREMENT PRACTICES (FIRST READING)
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RECOMMENDED ACTION
Recommended Action
Council place the ordinance on first reading.
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SUMMARY
On November, 4, 2014, Chula Vista voters approved modifications to City Charter Sections 1009, 1010 and 1011 (Measure A) that delegated the authority to City Council to make procurement rules for awarding City public works contracts and other types of City contracts. The modifications were related to the City Charter’s outdated provisions governing public works contract limits which required City Council approval. The Charter modifications approved by the voters enable future purchasing limits/requirements to be amended by ordinance allowing for the City to keep up with “best practices”. The currently proposed modifications to the purchasing ordinance would enhance the efficiency and flexibility of the City’s procurement practices while preserving appropriate checks and balances. Staff recommends adding a new approval limit for CIP contracts in addition to other changes to the purchasing ordinance.
ENVIRONMENTAL REVIEW
Environmental Notice
Environmental Notice
The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required. In addition, notwithstanding the foregoing, the “Project” also qualifies for an Exemption pursuant to Section 15061(b)(3) of the California Environmental Quality Act State Guidelines.
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Environmental Determination
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change in the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. In addition, notwithstanding the foregoing, the Director of Development Services has also determined that the “Project” qualifies for an Exemption pursuant to Section 15061(b)(3) of the California Environmental Quality Act State Guidelines. Thus, no environmental review is required.
BOARD/COMMISSION RECOMMENDATION
Not Applicable
DISCUSSION
The modifications to the purchasing ordinance relate to the Purchasing Agent’s, City Manager’s and City Council’s authority limits associated with public works contracts and general, material & services contracts. Staff recommends new approval authority limits for public works contracts and others as described below. Increasing these limits would give Public Works and Engineering the ability to expedite delivery of Measure P work.
New approval authority for CIP contracts.
Staff recommends adding a new approval limit for CIP contracts. The Purchasing Agent would have authority to approve CIP contracts up to $2 million for public works contracts that are formally advertised by receiving sealed and competitive bids. City of San Diego has staff approval thresholds for “task order” contracts below $1 million, “job order” contracts below $10 million, or CIPs contracts below $30 million when implementing a CIP program.
Increasing this threshold supports the goal of continuous improvement in streamlining the process in which Public Works is able to strategically select qualified, cost effective and available contractors for CIP projects up to $2 million to the lowest bidder without City Council approval. Staff would still bring forward to City Council agreements that are related to CIP projects, but are not for the actual construction or repair of public works facilities. This might include agreements with other agencies or utilities. Staff would also continue to submit to Council project-related items that require public notice, need additional funding, or otherwise warrant further Council consideration.
Increasing approval authority for non-CIP public works contracts.
Staff’s research revealed that the following cities had non-CIP public works contracts, such as plumbing, auto-body repairs, and electrical work, with approval thresholds by staff as follows: Vista, $75,000; Escondido, $100,000; Carlsbad, $175,000; Oceanside, $175,000; San Marcos, $250,000, and Irvine, $1 million.
Currently, the approval threshold for Chula Vista is $25,000 for all public works contracts. Staff recommends increasing the approval authority for the Purchasing Agent from $25,000 to $100,000 and increasing the City Council’s required approval from greater than $25,000 to greater than $100,000 for non-CIP public works contracts. The bid threshold would remain at $10,000 to preserve checks and balances and ensure the City is getting the best prices. These changes would allow staff to complete contractual work as needed in a timely and efficient manner.
In order to maintain transparency, staff will submit to City Council a list of CIP projects and who they were awarded to as part of the Finance Department’s Quarterly Fiscal Report.
Change Orders.
Currently, the Director of Public Works can approve individual public works contract change orders up to $50,000 and cumulative contract change orders up to an aggregate amount based on the original contract amount. Staff recommends revising the current approval limits by allowing the Director of Public Works and/or City Engineer to approve change orders up to the remaining CIP budget available for each individual CIP project.
This change, for example, would allow staff to expedite rehabilitation of additional streets or repair additional storm drain pipes due to favorable contract unit prices. Staff would also be able to complete necessary work due to unforeseen circumstances without the need to return to City Council for approval of additional work or change in scope. This is consistent with current practice where City Council waives this requirement as part of their approval on all CIP projects.
Cooperative Purchasing Agreements.
Cooperative Purchasing Agreements currently require City Council approval on amounts greater than $100,000. Based upon staff’s recommendation to increase the approval thresholds for CIP contracts, it is recommended that the Cooperative Purchasing Agreement threshold also be raised to $2 million. This will allow staff the option to use Cooperative Purchasing Agreements not only on public works projects, but also on purchases, including Measure P purchases, of vehicles and equipment greater than $100,000.
General Supplies, Services and Equipment.
Staff recommends increasing the Purchasing Agent’s threshold from $50,000 to $100,000, the City Manager’s threshold from $100,000 to $250,000, and the City Council’s approval threshold from $100,000 and above to greater than $250,000. However, the bid threshold would remain at $10,000 to preserve checks and balances and ensure the City is getting the best prices. These changes would provide administrative savings both in less staff time allocated to prepare and review staff reports as well as the ability to move forward on projects more quickly.
Increasing these thresholds would provide flexibility in the City’s procurement practices to allow staff to purchase equipment, materials and contract services needed in an efficient manner.
Construction Index.
Staff recommends increasing all public works contracts and cooperative purchasing agreements limits annually based on the Engineering News Record (ENR) Construction Index. These limits would increase starting on October 1, 2018, and on each October 1st thereafter, based on the one-year change (from July to July) in the Los Angeles Construction Cost Index as published monthly in the Engineering News Record (“LA ENR CCI”) by rounding up to the nearest $1,000.
The table below summarizes the proposed changes to the Purchasing Ordinance:
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site specific; consequently, the 500 foot rule found in California Code of Regulations section 18704.2(a)(l) is not applicable to this decision. Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City’s Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong & Secure Neighborhoods and a Connected Community. This amendment supports the goal of a Strong & Secure Neighborhoods by enabling Public Works and Engineering to respond to and repair critical CIP projects up to $2 million based on the lowest bid without delays seeking Council’s approval. Increasing the threshold for Council approval also supports the goal of Operational Excellence by using the continuous improvement tools to streamline the process in which Public Works and Engineering staff is able to strategically implement cost effective change orders without the need of additional administrative costs associated with submitting items to Council for approval.
CURRENT YEAR FISCAL IMPACT
No current year impacts are anticipated.
ONGOING FISCAL IMPACT
If approved, the revised ordinance would result in significant efficiencies gained both in staff time allocated to prepare and review staff reports as well as the ability to move forward on projects more quickly. Staff estimates the ongoing savings at 275 hours ($40,000) in staff time each fiscal year.
ATTACHMENTS
Exhibit A - Proposed Modifications to Chapter 2.56 of the Purchasing Ordinance (Underline Strikeout)
Exhibit B - Summary of City Purchasing Procedures
Staff Contact: Robert Beamon, Public Works