HomeMy WebLinkAbout1997-09-16 City CouncilCity of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
ATTENTION: FINANCE COMMITTEE
AGENDA DATE: SEPTEMBER 16, 1997 CMR:379:97
SUBJECT:APPROVAL OF AMENDMENTS TO THE PALO ALTO
MUNICIPAL CODE RELATED TO CONTRACTS AND
PURCHASING PROCEDURES
This report requests that Council approve revisions to Palo Alto Municipal Code (PANIC)
Chapter 2.30 related to contracts and purchasing procedures, and Chapter 2.31 pertaining to
property control, and approve revisions to the City consultant selection process.
RECOMMENDATION
Staff recommends that Council:
1)Approve the proposed amendments to Palo Alto Municipal Code Chapter 2.30~
Contracts and Purchasing Procedures, and Chapter 2.31, Property Control; and
2)Waive the requirement for Council standing committee particiPation in the
consultant seleetion process for the Utilities Department; increase the level
requiring standing committee review to $65,000 for other departments; and
direct staffto modify the City’s Policy and Procedures, Section 1-10 (Selection
Procedures for Professional Consultants) to reflect these changes.
CMR:379:97 Page I of 8
POLICY IMPLICATIONS
This report recommends policy changes related to purchasing policies and procedures as
specified in the PAMC. The most significant change proposed is increasing the contract
approval authority of the City Manager and her staff. Other changes include extending the
term of sottware maintenance contracts, eliminating bid bond requirements for suppliers of
standard commercial products, and allowing the delegation of the Administrative Services
Department Director’s approval authority for disposal of surplus properties (other than real
estate)..Other modifications to the PAMC reflect changes in the City’s organizational
structure (job titles). The report also recommends excluding the Utilities Department from
the requirement of a Council standing committee review of consultant contracts, and
increasing the level requiring standing committee review to $65,000 for other departments.
BACKGROUND
In March 1996, the Administrative Services Department initiated a project for redesigning
the City’s Purchasing processes. The redesign effort was initiated for several reasons: an
audit conducted by the City Auditor, which identified process problems and internal control
weaknesses; Council concerns with the competitive bid process; and perceptions of City
departments that the purchasing process was complex and slow.
An interdepartmental steering committee was formed, comprised of high-level managers in
key customer groups: Public Works, Administrative Services, Human Resources,
Community Services, Police, and Utilities Departments, and the Attorney’s Office. Other
department staffpartieipated in developing recommendations on specific issues.
An initial effort developed a customer service survey, directed to the customers of the
Purchasing organization: user departments, and companies providing goods and services to
the City. The survey of City departments focused on experiences that departments had with
Purchasing and Contract Administration, and their satisfaction level or concerns related to
those experiences. An informal survey of suppliers centered on the City’s current bid and
proposal processes, and identified barriers suppliers noted regarding doing business with the
City.
Based on the survey results, a department staffcfitique of the purchasing processes, and the
Purchasing Section’s own assessment of problem areas, the Steering Committee identified
a number of issues for further study. The issues ranged from procedural changes for
improving efficiency and simplifying the purchasing processes for departments, to proposed
policy changes and modifications to the PAMC. Simple procedural issues were implemented
immediately, while more complex issues and policy changes warranted further study and
Council approval.
CM~:379:97 Page 2 of 8
Process changes which have been implemented to improve customer service to user
departments include: expanding hours of service at the City’s Stores warehouse; simplifying
the blanketpurchase order process, which is used to obtain services or materials from the
same vendor on a routine basis over a specified period of time; implementing a procurement
card pilot program which allows the Purchasing staff to purchase small dollar items using a
credit card; and establishing a single point of contact in Purchasing for .each departm.ent.
Process changes that are underway include: improving the process for vendor payments;
simplifying the purchase request input and tracking system; revising contract forms;
publishing a revised, expanded purchasing manual for departments; improving
communication channels and eliminating duplicate efforts between Purchasing and
departments; establishing contracts/purchasing training classes for City staff; establishing a
centralized petty cash fund for small dollar purchases; and reducing the number of.signatures
required on contracts to simplify contract execution.
DISCUSSION:
Thereare several areas of proposed process changes that require modification of the PAMC
and approval by the City Council. These proposals include:
O
O
an increase in the threshold level at which the City Manager may approve
contracts for services (or a combination of services and supplies);
an increase in the threshold level at which the Manager of Purchasing and-
Contract Administration may approve contracts; ..,,
o lengthening the duration of contracts for computer sottware maintenance;
o elimination of the bid bond requirement for standard commercial products; and
o allowing the Director of Administiative Services to designate authority for the
sale of surplus City properties.
A further process change, not covered by the PAMC, is increasing from $25,000 to $65,000
the level at which departments must present to Council consultant contracts for consideration
of Council standing ¢ornmittee participation in the consultant selection process. Staff also
recommends waiving this requirement for the Utilities Department.
CMR:379:97 Page 3 oi~ 8
City Manager Contract Approval Levels:
The City Manager has the authority to contract for the purchase of any level of Supplies not
made in combination with the provision of services. The Purchasing Steering Committee
recommends increasing the City Manager’s approval level authority for contracts for services
(or a combination of services and supplies) from $25,000 to $65,000. Service contracts in
excess of $65,000 would continue to require Court.oil approval. Tables showing current and
proposed contract approval levels for services and/or supplies are included as Attachment 1
to this report.
The contract approval level authority of the City Manager was last increased in 1989. Since
that time, the purchasing power of the dollar has decreased by 26 percent, and the number
of contracts presented to Council has doubled. The City has embraced Mission Driven
Budgeting and its premise of instilling responsibility and accountability at the department
level. The Purchasing Section has been reorganized to add contract administrators and
provide additional oversight to City contracts. The Utilities Department has been impacted
by deregulation and the necessity to respond quickly to a changing competitive environment.
These factors, combined with the effort, time and project delays associated with obtaining
Council approval for lower dollar-value contracts, indicated that the time was appropriate for
re-evaluating which contracts should be brought to Council.
Staff surveyed other California municipalities to determine their requirements for council
approval of contracts. An attempt was made to fred cities with at least one utility and with
a budget level comparable to that of Palo Alto. The survey included: Alameda, Mountain
View, Pasadena, Riverside, Roseville, Sunnyvale and Santa Clara. (The survey results are
in Attachment 2.) The council approval levels ranged from a low of $14,000 to a high of
$100,000, with an average of $51,000. The average is closer t0560,000 if staffwere to
eliminate Roseville from the survey, as its level of $14,000 is significantly lower than that
of other cities surveyed. Five of the seven cities have a threshold higher than Palo Alto’s
$25,000 level, and .three of them are contemplating further increases in the near future.
Mountain View’s level is indexed to the Consumer Price Index (CPI) and increases annually
as CPI .goes up. Staff concluded that the survey supported the need for Palo Alto to
reconsider its current practice of requiring Council approval for contracts in the $25,000
range.
The number of contracts submitted to Council has steadily increased over time. Factors such
as program growth within the City, an increased use of consultants, the transition from in-
house to contract services, and an increased amount of capital improvement activity
contributed to .this administrative workload increase. Using the proposed threshold of
$65,000, staff found that the number of contracts presented to Council would be reduced by
CMR:379:97 Page 4 o~’ 8
approximately 60 percent, or to fewer than 100 per year. This level is consistent with the
number of annual contracts that Council was reviewing in 1989, prior to its earlier increase
in contract approval authority.
The entire Council review process adds at least 4 to 6 weeks to the normal procurement
timeline, thereby delaying the initiation of City programs and projects. Furthermore, staff
estimates that at least 10 hours of additional stafftime (equivalent to about $500) is spent to
bring a contract to Council. This time includes preparation of the City Manager’s Report
(CMR), City Attorney review, Department head review, City Manager review, and printing
of reports. The time required is relatively fixed, regardless of the contract amount, and does
not include Council time spent on this administrative activity. Through implementation of
the proposed approval structure, with only contracts greater than $65,000 being presented to
Council, the total number of contract CMR’s prepared would decrease by about 105, thereby
saving the City over 1000 hours in stafftime (valued at approximately $50,000) during the
year. This time could be redirected to higher value-added activities, such as managing
contracts and programs, while Council is allowed to focus on policy issues associated with
higher dollar value transactions.
During the past year, the Purchasing Section has gone through an organizational restmctuxing
to increase Purchasing’s involvement in contracts administration and to ensure that the bid
process is effective and competitive, consistent with City.policy. Two additional contract
administrators have recently been added to the Purchasing Section to provide improved
objectivity and oversight during the vendor selection and contract preparation processes. The
contract administrators are responsible for negotiating advantageous prices for the City and
ensuring that all contract conditions are met. Improved purchasing procedures are in place,
and additional internal controls have been implemented. If Council approves staffs
recommendation, staff would continue to provide Council with information (e.g., number of
bids sent, bidding ped0d, number of responses, etc.) regarding the competitive bid process
for contracts from $25,000 to $65,000. This information would be provided quarterly,
showing details onthe bid process for all contracts awarded for services (or a combination
of services and supplies) in an amount greater than $25,000, and for all supplies contracts
exceeding $65,000 (revised PANIC Section 2.30.130 c). All purchases in excess of $25,000
would continue to conform to the City’s formal bidding process.
A summary of the benefits of adopting higher contract approval levels includes: allowing
Council to focus on .high dollar-value purchasing transactions; elimination of administrative
delays during the inception phase of City projects; reduced administrative workload for
Council and staff; and the increased ability to respond promptly to Utility deregulation
requirements.
CMR:379:97 Page ~ or" 8
Purchasing Staff C ntr t A r I Lev Is:
In conjunction with increasing the City Manager’s contract approval level, staffrecommends
increasing the contract authority of the Manager of Purchasing and Contract Administration
from $5,000 to $25,000. This authority would cover all contracts for supplies and/or
services. In addition, staffproposes modifying PAMC Section 2.30.80 to allow the Manager
of Purchasing and Contract Administration to de, legate approval authority of up to $10,000
to the contract administrators and buyers on his staff. The current and proposed approval
levels are outlined in Attaehrnent I to this report. The Purchasing Section processes more
than 7,000 purchase orders and contracts annually. Under the City’s current procedures, each
of the purchases must be signed directly by the Purchasing Manager. Delegation of a large
portion of this review responsibility would improve his ability to provide oversight, direction,
technical consultation and customer service, without exposing the City to higher risk or
reduced savings. The Manager of Purchasing and Contract Administration would continue
to personally review and approve all higher-dollar documents.
Continuing Contracts for Software Maintenance
PAMC Section 2.30.100 defines "continuing contracts" for the purchase of supplies or
services to be rendered over a period of time, with a limit of 3 years. Staff proposes
eliminating the 3-year limit for contracts covering software maintenance to allow the
continued maintenance and update of software the City utilizes for an extended period of
time. When the City purchases proprietary sottware, it typically contrae~ with the software
vendor for maintenance and system upgrades. This maintenance usually cannot be provided
by the City or an alternative vendor because of the proprietary nature of the sottware code
and potential violation of warranties. In earlier years, alternative vendors could modify and
maintain each other’s software; present-day programming codes ~d technologies no longer
allow this.
Staffalso recommends modifying PANIC Section 2.30.140 to specify information technology
consultants on the list of professional consultants, along with attorneys, accountants, auditors
and engineers. Such specialized or professional consultants are exempt from the restrictions
and provisions of competitive bidding.
PAMC Section 2.30.130 (b) currently requires bid bonds in the amount of 5 percent of the
bid value for any bids in excess of $25,000. This requirement was instituted to cover the
City’s administrative costs in the event a vendor failed to accept a contract award. The City
Manager is authorized to waive the bid bond requirement in eases where it is determined that
it will not be detdrnental to the interests of the City, and for many years has waived the bid
CMR:379:97 Page
bond when purchasing standard commercial products ("off-the-shelf’ items). Staff
recommends modifying the PAMC to remove the bid bond requirement for such standard
commercial products.
The City’s exposure to loss is negligible when purchasing standard commercial products.
If a bidder were to fail to consummate a contract, the City would simply contract with the
next lowest bidder for the same product. Requiring bid bonds for standard commercial
products places an unreasonable administrative burden on both the City and product
suppliers. Prospective bidders have expressed a concern with such a requirement.
Modification of the PAMC would ensure that the City’s standard practice conforms with the
Code; .bid bonds would continue to be required for transactions including real estate,
construction, and any materials custom-designed to City specifications.
Surplus Properties
PANIC Section 2.31.010 provides the Director of Administrative Services (previously called
the Director of Finance) authority to sell all property (excluding real estate) no longer used
by the City. Property is sold by public auction, negotiated sale, sealed bid, or trade-in. The
proposed modification to this section allows the Director of Administrative Services to
delegate this authority for any items valued at less than $5,000, thereby allowing the sale of
surplus property to be managed by Purchasing staff. The abandonment, destruction or
donation of surplus City property would remain under the authority of the City Manager.
Council Committee Review of Consultant Contracts
In 1994, Council directed staffto establish a policy that Council standing committees should
have the opportunity to review the proposed scope of services for consultant projects before
a Request for Proposals (RFP) is issued, if the consultant contract is anticipated to exceed
$25,000. This requirement is outlined in the City’s Policy and Procedures Manual, Section
1-10. Each year, after adoption of the budget, staff provides the Council with a list of
approved projects and programs from the Capital Improvement Program and the Operating
Budget, for which consultant services are expected to exceed $25,000. Council identifies any
projects of special interest; the draft RFP’s for these projects are then referred to the
appropriate Council standing committee for approval before being finalized and issued. Staff
recommends that this limit be increased to $65,000 to remain consistent with the proposed
approval authority level of the City Manager.
Given the new deregulated utilities environment, staff also recommends that Council waive
the requirement for Standing committee RFP review for Utilities consultant projects. The
Utilities Department now finds itself in a more competitive environment requiring quick
response to customer needs and new services to attract and retain customers. Required
CMR:379:97 P~ge 7 ot" 8
standing committee review of the consultant scope of services can add several months to the
consultant selection process. Utilities staffwould continue to bring consultant contracts over
$65,000 to Council for final review and approval.
I PA
There are no direct fiscal impacts of the recommendations contained in this report. Staff
estimates that over $50,000 worth of administrative time (more than 1,000 hours) could be
redirected to other aspects of contract and project management if the recommendations are
adopted.
NVIR NME AL
This does not constitute a project under the California
Therefore, no environmental assessment is needed.
Environmental Quality Act.
1)
2)
3)
Current and Proposed City Contract Approval Levels
Survey of Contract Approval Levels of Califomia Municipalities
Ordinance of the City of Palo Alto amending Palo Alto Municipal Code Chapter 2.30,
Contracts and Purchasing Procedures, and Chapter 2.31, property Control
PREPARED BY: Libby Dame, Sr. Financial Analyst
DEPARTMENT HEAD APPROVAL: "xk~--~.,_t.~... ~ ~~ )
Melissa Cavallo
Acting Director
Administrative Services
CITY MANAGER APPROVAL:
CC:n/a
Flelhing
ity Manage1
CMR:379:97 Page 8 of 8
ATTACHMENT 1
CONTRACT APPROVAL LEVELS
FOR SERVICES AND SERVICES/SUPPLIES COMBINATIONS
AUTHORITY CURRENT APPROVAL PROPOSED APPROVAL
LEVELS LEVELS
City Council greater than $25,000 greater than $65,000
City Manager $5,001 - $25,000 $25,001 - $65,000
Mgr. of Purchasing $0 - $5,000 $10,001 - $25,000
Contract none up to $10,000
Administrators/Buyers
APPROVAL LEVELS
FOR THE PURCHASE OF S ~UPPLIES AND MATERIALS
AUTHORITY CURRENT APPROVAL PROPOSED APPROVAL
LEVELS ’ :’LEVELS
City Manager greater than $5,000 greater than $25,000
Mgr. of Purchasing up to $5,000 $10,00i - $25,000
Contract none up to $10,000
Administrators/Buyers
ATTACHMENT 2
ATTACHMENT 3
ORDINANCE NO.
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AMENDING CHAPTER 2.30 AND SECTIONS 2.31.010 and
2.31.090 OF THE PALO ALTO MUNICIPAL CODE RELATING
TO PURCHASING PROCEDURES AND DISPOSITION OF
SURPLUS PROPERTY
The Council of the City, of Palo Alto does ORDAIN as
follows:
SECTION i. Chapter 2.30 of Title 2 (Administrative Code)
of the Palo Alto Municipal Code is hereby amended to read as
follows:
CHAPTER 2.30
CONTRACTS AND PURCHASING PROCEDURES
2.30.01 Validity of contracts and purchase orders.
The city shall not be and is not bound by any contract,
purchase order or any other document unless the same shall be made
in-writing by order of the city council and signed by a duly
authorized officer in behalf of the city, except as hereinafter
provided.
2.30.020 Unauthorized purchases - ExceptiOns.
It shall be unlawful f~r any officer or employee to
purchase or contract for supplies or services for the city other
than through the manager of purchasing and contract administration
(hereinafter manager of purchasing), except: ~’
(b) Emergency purchases made in conformance with control
procedures established by the city manager; or
(c) Contracts for legal services as authorized by this
Chapter 2.30.
Any purchases, contracts or obligations to pay made
contrary to the provisions of this chapter shall be null and void.
2.30.030 Definitions.
(a) The following words and phrases whenever used in this
chapter shall be construed as defined in this section:
(I) "Emergency" means an unforeseen situation which
threatens life or property.
9709101~ 0031847
(2) "Public works project" means:
(A) Construction, alteration, demolition or repair work
done for the city under contract with the city and paid for in
whole or in part out of public funds;
(B) Street, sewer or other improvement work done under
the direction and supervision or by, the authority of any officer of
the. city;
(C) The laying of carpet in a city building and paid for
in whole or in part out of public funds.
(3) ..s~lies,. means and includes all supplies, materials
(4) "Services" means and includes labor, professional
services- and consulting services and includes public works
projects. Services shall not include labor incidental to the
purchase of supplies such as set-up, installation, testing, and
maintenance of supplies where the primary purpose is to purchase
(5) "Recycled product," "post-consumer waste" and
"secondary waste" shall have the meanings set forth in Section
12200 of the California Public Contract Code, as it .may be amended.
(6) "Recyclable" means oa product that is able to be
recycled through one of the city of PaloAlto’s recycling programs,
or another readily available local recycling program b~ving no cost
to the city.
2.30.040 Real property contracts -Leases, rentals orpurchases of real property.
The city manager is authorized to lease or rent city
property to third parties for terms not in excess of one year
provided, however, that city property at the Cubberley site may be
leased or rented by the city manager to third parties for terms not
in excess of five years, and to lease, rent, acquire or purchase
real property from others .where the lease, rental or ~urchase price
does not exceed.~.~~iIIi~~ dollars
in one transactlon unless otherwlse
A written report of all such transactions shall be made annually by
the city manager to the city council. All other real property
970910 I~ 0031847
transactions or contracts must be approved by the city council and
signed by the mayor.
2.30.050 Subdivision and demolition agreements.
The city manager is further authorized to negotiate the
terms and conditions of and sign on behalf of the city all
contracts with subdividers for the installation of improvements and
all agreements for the demolition of buildings made pursuant to
this code.
2.30.060 Supplies.
(a) Purchase. The city manager is authorized to bind the
city in written contract, without previous action by the cit~
council, for the purchase of any
~~!iii~~!ii .not ~de in
...... 10.:~:~.~:~:~::N~N~:~:~ ~ ~ supply purchases in excess of
twenty- fi@~"~~:~~~~: d~:~:":::~:iars ~ii comply with the bid procedure
specified in Section 2.30.130, unless they are excepted ~y Section
2.30.~40.
(b) Rental. The city manager may rent supplies from
others for the city-for a term not to exceed one .year where the
total of all rent payable within any twelve-month ~eriod for those
supplies does not exceed ......................... ~. ,~ ............... ~.e...,..:.:.~...s~..... . .................... .................. ...................... .............~ml ~m~’mZ:.::{.’:’~ ~-- ~%-~ ~--^~ --,..~--1.~,~ .-,,~ --~^--4 4=4 ^~ 4 "4&’"’"’6"A"~4"~-"I’~’~’"’"’~’""~"~%’""W’~"6 ....
~~iiiili~ii~..’~ ~ the te= of the rental exceeds one y~ar~’@ ~’H~’"’~5~’~£ of @~~~ ......for those supplies exceeds twenty-fxve
thousand dollars in any twelve-month period’, the competitive
bidding process in Section 2.30.130 shall be followed.
(c) The authorization to the city managercontained in
subsections (a) and (b) does not include installment purchases
which involve the payment of interest or leases with an option to
purchase, which shall be subject to approval by the city council.
2.30. 070 Services or co~blna~ion of services and supplies.
~. :::.’.:.: .’..:~:: :~ ::: ::::::",,,¯, ,¯il~iii!iliiiiiiiii!I!::~Theclty manager is authorized to blnd the clty by
written ......~6~~~act for services involving an expenditure not
one nransaction,exclusive oz sal~~’~~~5~~W~~hout ~
council
in
the value of the supplies
)e inc.purposes of calculating servlces.
3
970910 !~ 0031847
~~:’°~~dH~d to bind the city by written contract for legal
services to be provided to the city, involving an expenditure not
dollars anyexceeding ~=~y--~k~hg~4 ~~~ in onetransaction, without adve~~~~:~:::~6:~::~:::~:~lo~ action by the city
council, for the payment of such services. The city attorney is
authorized to bind the city by written contract for legal services
to be provided to the city, involving an expenditure of any amount,
provided the city council has first approved the use of .such
services.
.i~i~i~ii~i~iWit~ the exception of contracts for legal services,
as prov~’’~"~ie~section libel!, the award of all contracts forservices or a comb~tion of::::::~rvices and supplies
~~ involving an expenditure exceeding t~=nty
~~~~ dollars, exclusive of sales or use tax, shall
~"~~"’~’’~’"~~’"council and the contract shall be signed by the
mayor or, in the ~yor’s absence, by the vice-~ayor.
2.30.075 .Contracts for special studies
applications for private development projects.
relating to
The city manager is authorized to bind the city by written
contract, without advertising or previous action by the city
council, and without following the provisions of Sections 2.30.130
and 2.30.150, for all services involving the preparation of
environmental assessments and other studies deemed necessary by the
director of planning and community environment for the processing
of applications for private development projects. The city
manager’s authority under this section shall not be limited by the
amount of the expenditure authorized by each contract. This section
does not authorize the city manager to bind the city to a contract,
unless the applicant for the private development project agrees, to
bear responsibility for the entire cost of such contract, and such
contract will not require the expenditure of ’city funds in any
amount.
2.30.080 Approval of city manager or ~
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2.30.090 Emergencies.
In emergency situations, the city manager is authorized to
expend city funds without limitation by way of amount and without
the requirement for either formal bids or informal quotations. The
city manager is authorized to conclude that an emergency exists
without further declaration by the city council. Expenditures made
during an emergency must be reported to the city council at the
next regular meeting if such expenditure would otherwise have been
made by the city council.
2.30.100 Continuing contracts; cooperative purchases;
mutual aid and Joint underground installations.
or
~re amount due over the term of the contract, or the
contract is made subject to appropriation by the city council of
amounts to become due in fiscal years subsequent to the contract’s
execution, said appropriation occurring at a time when said funds
are needed for expenditure for the current services or
~red or
970910 i~ 0031847
5
~i~ii~i~!!~i!~iCooperative Purchases. The manager of purchasingis author1£~ ......... ~ participate with other public agencies in
purchasing supplies, services, or a combination thereof, including
contracting therefor, provided at least one participant therein
substantially follows the bid and award requirements in this
chapter, and the contract is executed on behalf of the city by the
appropriate official.
~e~i~iilli iili!i!!iiiI~.:M, u ~ u a I Aid. The manager of purchasing isauthorized ’~~::"~~iclpate with other public agencies in an "open
stores" mutual aid policy, provided that the disbursement of any
city supplies to other agencies shall not affect city services.
Supplies may be disbursed to any other agency on a loan basis or
sold to the agency at the current replacement cost to the city at
the time of replacement°
44~.i~i~ii~i~!~i~iJomnt Installatmon of Underground Facilities
System. The"~"~~’’’manager is authorized to participate with the
local telephone utility and/or any cable television operator in the
joint purchase and installation of underground utility and
communication ~facilities pursuant to a master agreement for
installation of underground facility systems which has been
approved by the city council; provided, that the city’s estimated
share of such ~ystem does not exceed the sum of ~
2.3 0. ii0 Open market purchases o
Except as otherwise directed by the city manager, or by the
city attorney solely with respech to legal services, supplies or
services, or any combination of supplies and services involving a
total expenditure of city funds in an amount of $25,000.00 or less,
exclusive of sales or use tax, shall be purchased, when feasible
and when in the best interest of the city, in the open market by
written quotation or telephone solicitation, without posting at
civic center or newspaper advertisement and without observing the
procedure prescribed for the award of formal bid purchases.
Open market purchases, whenever possible and practicable,
shall be based on at least three competitive quotations and shall
be awarded by the manager of purchasing to the person, firm or
corporation submitting the lowest responsible quotation. In
determining the lowest responsible quotation, the city shall do so
based on the factors set forth in Section 2.30.150 for determining
the lowest responsible bidder used in formal bid purchases.
The manager of purchasing shall keep a record of all open
market orders and the quotations submitted in competition thereon.
Such records shall be open to public inspection during business
hours. Records of such open market orders or purchases may be
disposed of by the manager of purchasing in the manner provided by
law.
9709101~: 0031847
2.30.120 Open purchase contracts.
An open purchase contract is a written agreement with a
vendor that establishes a quoted or maximumprice on "any quantity"
or an "annual requirements" basis for parts, commodities, or
services or combinations thereof. Separate open purchase contracts
shall be used for the grouping of parts or commodities of a like
kind, or annual maintenance, based on predetermined cumulative
quantities to be used or consumed by the city within a set period
of time. Open purchase contracts for services, supplies or
combination thereof may be entered into for a period of up to
thirty-six months!i~iii provided the term of the agreement and
conditions of renewal or extension, if any, are included in the
solicitation document and funds are available for the first fiscal
year at the time the open purchase contract is issued. Pa~ent and
performance for succeeding fiscal periods (h~p~-e
twenty-four months) shall be subject Lto the
appropriation of funds by the city council. Open purchase contracts
with a value exceeding twenty-five thousand dollars for services,
supplies or any combination thereof shall conform tothe bidding
requirements of Section 2.30.130. Open purchase contracts valued at
less than twenty-five thousand dollars for services, supplies or
any combination thereof shall conform to the open market purchase
requirements of Section 2.30.110.
2.30.130 Bid procedure.
(a) When Advertising Required. Where the cost of services
or supplies exceeds the amounts set forth in Sections 2.30.060,
2.30.070 and 2.30.120 for open market purchases, the manager of
purchasing shall call for bids by posting at civic.center or by
advertising "at least once in a daily newspaper of general
circulation in the city not less than five days prior to the date
set for receiving bids.
(b) Bid Bond or Deposit. Unless waived .by the city
manager, in cases where it is determined that such waiver will not
be detrimental to the interests ~f city, all
~y casH, a certificate of deposit or certified check or draft, or
a cashier’s check or draft of or on some responsible bank in the
United States, in favor of and payable at sight to the city, in an
amount not less than five percent of the aggregate amount of the
bid. If the bidder to whom the contract is awarded, for fifteen
days after the posting of such contract, or within any other time
frame specified in the notice inviting bids, fails or neglects to
enter into the contract and to file the required bonds, the
director of ~ ~~i~~iii~~ shall draw the money
due on such cert~f~c~:~:::~~-~6<~~~:~~ or draft and pay the
same or any cash deposited into the treasury, and under no
circumstances shall it be returned to the defaulting bidder. In
lieu of the foregoing, any bid may be accompanied by a surety bond
in said amount furnished by a surety authorized to do surety
business in the state of California, guaranteeing that said bidder
will enter into the contract and file the required bonds within
9709101~ 0031847
said period or said amount shall be forfeited. With the approval of
the city manager, prospective bidders may file annual or continuous
surety bonds covering all bids to be made during the period that
the surety bond is in effect. Upon failure of the bidder to whom
the contract is awarded to execute the contract and file the
required bonds, the city council or the city manager as the case
may be, may, in its discretion, award the contract to the next
lowest responsible bidder, or upon failure of such bidder to
execute the contract and return the appropriate bonds within the
designated time, to the third lowest responsible bidder, if any
there be.
(c) Opening of Bids and Awards. All bids shall be sealed,
identified as bids on the envelope and shall be submitted to the
manager of purchasing at the place and time specified in the public
notice inviting bids. Bids shall be opened ~by the manager of¯"~ A ~ ~ ~ ~ ~ ~ ~ ~ .....~ ~ ~ ~ 4 ~ r~i:~:!:~:’~i:::::~i:~ :::::::::::::::::::::::::::::::’urchas~n or h~s ........................~s~ ~,~n atPg~~ ......................!i.::i.~ .............public,
the :time and place designated in the noti~-i~ing bids. Bids
received after the specified time shall not be accepted and shall
be returned to the bidder unopened. The contract shall be let to
the lowest responsible bidder, as defined in this chapter, either
by the city council, if the is for services in excess of
...... ~ ..............dollars, or a combination
of services and in excess of t-we~
fiv~~.are, :exclusive of sales or
use tax, or in any cases by the city manager. ~
...... 4_ ~,_~dc ~.. ~_ The contract shall be let by the city council
or the city manager on the basis described in the notice inviting
sealed bids to the lowest responsible bidder, as defined in this
chapter or in the city charter for those contracts governed by the
city charter. At the time of award, the city council may authorize
the city manager, or in contracts awarded by th~ city manager, the
city manager may authorize ~i~ ....~’: des~gneei~!~ito negotiate and executeone or more amendments or chang~ orders t~ the contract, the scope
of which amendment or change order shall be within or incidental to
the scope of the.contract awarded, and the value of which shall be
within the amount appropriated for the contract. The city council
or the city manager, as the case may be, may reject any and all
bids and waive any informalities or minor irregularities in the
bids.
(d) Disposition of Bid Bond or Deposit. All deposits and
bonds shall be returned after execution of the contract by the
successful bidder and deposit of the necessary bonds.
(e) Approval of Faithful Performance and Labor and
Materials Bonds Waiver. Faithful performance or labor and material
bonds required by city specifications or contract shall be approved
as to form by the city attorney. The city manager may waive the
furnishin~ of a faithful performance bond
~iiiii~~ii!~ such waiver will not be detrlmental to
8
970910 !~ 0031847 "~,
(f) No Bids. If no bids are received or if no bids
meeting the specifications are received, the city manager may
proceed to have the services performed or the supplies purchased
without further competitive bidding.
2.30.140 Exceptions to competitive bidding.
(a) The restrictions and provisions of Section 2.30.130
requiring competitive bidding shall not apply to the following
contracts, purchases or transactions:
(i) To contracts involving the obtaining of professional
or specialized services such as, but not limited to, services
rendered by architects, attorne[s, accountants, auditors,
engineers, ~~~i i!!i!~~~iiii~!iiii!!ili~i~~ii~!ii and other
(2) Where calling for bids on a competitive basis is, in
~the opinion of the city manager, impracticable, unavailing or
impossible;
(3) Where the city’s requirements can be met solely by a
single patented article or process;
(4)Placement of insurance coverage;
(5) When the public work is performed by the city with
its own employees;
(6) Purchase of utility commodities for resale.
2.30.150 Lowest responsible bidder.
(a) In addition to price, in determining the lowest
responsible bidder, consideration will be given to quality and
performance of the supplies to be purchased or services, provided by
the seller. Criteria for determining low bid shall include, but not
be limited to the following:
(I) The ability, capacity and skill of the bidder, to
perform the contract or provide the supplies or services required;
(2) The ability of the bidder to provide the supplies or
services promptly, or within the time specified, without delay or
interference;
(3) The character, integrity,
experience and efficiency of the bidder;
reputation,judgment’,
9
9709101~ 0031847
(4) The quality of bidder’s performance on previous
purchases or contracts with the city;
(5) The ability of the bidder to provide future
maintenance, repair parts and services for the use of the supplies
purchase;
(6) Current compliance by the bidder with federal acts
and executive orders and state of California statutes governing the
subject~of nondiscrimination in employment, provided that the city
manager shall recognize as proof of noncompliance only the final
decisions and orders of those federal and state agencies empowered
under the law to make such findings;
(7) Certification by.the successful bidder that ~e ~
~~will pursue an affirmatlve course of action as required:’:~
~~~;~:tive action guidelines provided hereinafter reasonably
pertainin~ to the work of the contract and to the nature and size
of ~ie ~~~~ii~i work force, to ensure that applicants are
sought ~ .............. ~:~:~, and that employees are treated during
employment, without regard to their race, color, national origin or
ancestry, or religion;
(8) Compliance by the bidder with the city’s policy for
PUrchasing recycled products as specified below:
(A) In deter~n, ining the lowest responsible bidder, a five
percent price preference shall be given to recycled products, and
to reusable products offered as alternatives to disposable
(nonreusable). products. If no recycled product is available, a five
percent price preference shall be given to recyclable products when
they are offered as alternatives to nonrecyclable products. The
price preference shall be determined based upon the lowest
responsible bid or price quoted by suppliers offering nonrecycled
products. The maximum amount of price preference shall not exceed
ten thousand dollars per purchase.
(B) Persons bidding to provide products or services to
the city shall be notified of the city’s preference for the use of
recycled products, including price preference~ Bidders shall be
asked to provide information on recycled products that would be
used on the project.
(C) - No price preference shall be given for bids which
include subcontractors, but the use of recycled products shall be
considered when determining the lowest responsible bidder, if all
other factors,~including price, are equal.
(D). Persons bidding to provide a recycled product shall
certify in writing to the city the percentage and contents of
post-consumer and secondary recycled material in the product.
(b) Under this section, specific guidelines will b~
adopted by council resolution from time to time, identifying the
nature and scope of "affirmative action" desired by the city.
970910 lao 0031847
(C) Such guidelines shall be made available to all
persons desiring to bid on city business.
(d) Such certification shall be provided only by that
bidder who is determined to be the successful bidder pursuant to
all other criteria. The provisions of this subsection must be met
and the information provided shall be evaluated prior to a final
determination that such bidder is .in fact the lowest responsible
bidder for purposes of an award of the contract.
2.30.160 Certificate of nondiscrimination.
The bidder to whom the contract is to be awarded, shall
provide a certificate stating!:i!I
nondiscrimination in ~lo~ent, and that ~ ~~@~}}will pursue
an affi~tive course of action as re~ired’~""~’~fi~tive action
~idelines as set forth in Section 2.30.150 and resolutions adopted
pursuant theret ~
not disc~:~~e in the employment of any person
because of race, color, national origin or ancestry, or religion,
of such person~il and
~~i! ~e ~iiii~~ wlll partlclpate,
pre-award’"9~:~:~w of hi~:~~itions under the provisions of this
section.
The requirement of this section shall apply only to contracts in
excess of $5~000.00. Notwithstanding the fact that an award is to
+be made by the city council or the city manager, a failure to meet
the requirements of this section shall disqualify the bidder from
further consideration.
2.30.170, Penalties for discrimination in employment.
Any contractor who is found in violation of the
nondiscrimination provisions Of the State of California Fair
Employment Practices Act or similar provisions of federal law or
executive order in the performance of any contract with the city,
thereby shall be found in material breach of such contract and
thereupon the city shall have the power to cancel or suspend the
contract, in whole or in part, or to deduct from the amount payable
to such contractor the sum of $25.00 dollars for each person for
each calendar day during which such person was discriminated
against, as damages for said breach of contract, or both. Only a
finding of the State of California Fair Employment Practices
Commission or the equivalent federal agency or officer shall
constitute evidence of a violation of contract under this section.
970910 [~ 003 [847
11
2.30.180 Penalties for violation of affirmative action
provisions.
Any contractor who is found by the city manager to be in
violation ?f ~i~~iii!Bgreement to pursue an affirmative course of
action or in viol~~~n of any provision of the affirmative action
guidelines pertaining to his contract shall be found in material
breach of such contract and thereupon the city shall have the power
to cancel or suspend the contract, in whole or in part, or to
deduct from the amount payable to such contractor the sum of
$250.00 for each calendar day during which the contractor is found
to have been in noncompliance, as damages for said breach of
contract, or both.
2.30.190 Control procedures.
The type of written contracts to be used for all purchases
shall be in conformance with control procedures established by the
city.manager, city attorney, and finance director, provided that
all contracts for services or a combination of services and
supplies ~~~!iiii~~ when the total cost exceeds ee~
thousand ~~i~i~i~!~~~’"dollars, exclusive of sales or use
tax, shal~’"5~"’~~~"::~::::~£oved by the city attorney. The city
attorney shall approve the form of all contracts and agreements.
2.30.200 Avoidance of losses or liability.
Any contract, purchase order or .other document c~erin~~ the
procurement or use of services, supplles, ~~~~~i~or
property for the city or the providing of
~~!i~~i~i or property for the city shall remove
~~~:::::~r~=~6~::~::~-hity insofar as practicable,.all risk of loss,
liability and cost of defense. The city ’may purchase, at
contractor’s expense, insurance covering the course of construction
of public works where superior coverage, lower premium, consent of
the contractor, or other factors justify such purchase.
2.30.210 Inspection and testing.
The city department receiving or utilizing services or
supplies shall inspect supplies delivered and Services performed to
determine their conformity with the specifications applicable
thereto or set forth in the contract and shall report any
deficiencies to the manager of purchasing. The city may require
chemical and physical tests of supply samples submitted with bids
and samples of supply deliveries which are necessary to determine
their quality and conformance with specifications.
2.30.220 Contract splitting prohibited.
It is unlawful to split or separate into smaller portions,
work orders, projects, purchases, contracts or any public work
project for the purpose of evading the provisions of this chapter.,
including the splitting of work or services between or among
departments or divisions or other organizational units of the city.
12
970910 lao 0031847
2.30.250 Purchasing manual.
The manager of purchasing shall prepare a purchasing manual
which will clearly define and describe the aims and purposes of
this chapter. The purchasing manual shall describe and explain in
detail the procedures that the using departments must follow in the
procurement of supplies and services, and shall include, among
other things, control procedures established under authority of
this chapter. ’
SECTION 2. Section 2.31.010 of Chapter 2.31 (Property
Control) of Title 2 of the Palo Alto Municipal Code is hereby
amended to read as follows:
2.31.010 Surplus property and equipment - Disposal or
destruction.
(a)Authority of director of ~
~~.All )artments shall
of .........at such times and in such
form as ~e p~cribe, reports showing all
property ~s no .onger used or which has been obsolete or
have authority to sell all propertg-WHi~-"~H6£"-5~-~~d-Sy any
department or which has become unsuitable for city use, by
negotiated sales, through the acceptance of sealed bids, by
public auction, or e or ~-in for new
(b) Authority of city manager. The clhy manager may
authorize the abandonment, destruction or donation to public
bodies, charitable, civic or nonprofit organizations, of city
property which has no commercial value or of which the estimated
cost of continued care, handling, maintenance or storage would
exceed the estimated proceeds of sale. Such determination shall
be made in writin~ and countersigned by the director of ~
~~~ii~~~. The city manager may delegate any
~ECTION ~. Section 2.31.090 of Chapter 2.31 of Title 2
-of the Palo Alto Municipal Code is hereby amended to read as
follows:
2.31.090 Sale to vest title.
On payment of the price bid for the property sold,
delivery of the property sold with a bill of s~le signed by the
manager of purchasing ~ii~iiii~!~iiii~~i~~ shall vest
title in the purchaser:~’ ............................................................................................................................................................................
9709101~ 0031847
13
SECTION 4o The Council finds that this is not a project
pursuant to the California Environmental Quality Act ("CEQA") and
that no environmental assessment is necessary.
SECTION 5. This ordinance shall be effective on the
thirty-first day after the date of its adoption.
INTRODUCED :
PASSED:
AYES :
NOES :
ABSENT:
ABSTENTIONS :
ATTEST:APPROVED:
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
Mayor
City Manager
Acting Director of
Administrative Services
14
9709101~ 0031847