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CITY COUNCIL AGENDA REPORT
City of Anaheim
PUBLIC UTILITIES DEPARTMENT
DATE: OCTOBER 29, 2024
FROM: PUBLIC UTILITIES DEPARTMENT
SUBJECT: ORDINANCE AMENDING CHAPTER 1.04 OF THE ANAHEIM
MUNICIPAL CODE AND PROCUREMENT SERVICES
AGREEMENT FOR UTILITY EQUIPMENT
ATTACHMENT (Y/N): YES ITEM # 26
GOVERNMENT CODE § 84308 APPLIES: YES
RECOMMENDATION:
That the City Council:
1. By Ordinance, amend Section 1.04.310 and add Section 1.04.312 of the Anaheim Municipal Code authorizing the Public Utilities General Manager to contract or procure equipment, materials, supplies, and support services used for emergency repairs to, or operating, maintaining, and constructing, electric and water utility infrastructure, up to $3,000,000 per procurement award;
2. By Motion, approve an Agreement with ProcureAbility, Inc. for strategic sourcing and procurement services (Agreement) for a five-year term and two optional two- year extensions, in an average annual amount of $1,503,704, plus 15% for as- needed extra services;
3. By Motion, authorize the Public Utilities General Manager or designees, on behalf of the City of Anaheim (City), to execute any and all related documents as necessary and take such actions as are necessary or advisable to implement, fund, and administer the Agreement; and,
4. By Motion, determine that the ordinance relates to organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment and therefore is not a project within the meaning of the California Environmental Quality Act (CEQA) and the State CEQA Guidelines, Section 15378(b).
DISCUSSION:
At its meeting on August 28, 2024, the Public Utilities Board recommended that the City Council approve these actions.
Anaheim Public Utilities (APU) strives to provide affordable, reliable, and sustainable electricity and water service to its customers. A critical factor to meeting this goal is procuring and managing utility inventory equipment and materials effectively, enabling Ordinance Amending Chapter 1.04 of the Anaheim Municipal Code and Procurement Services Agreement for Utility Equipment October 29, 2024
utility crews to maintain, repair, and replace system infrastructure, as well as support customer development projects. To address ongoing supply chain issues affecting the utility industry, APU is recommending an amendment to the Anaheim Municipal Code (AMC) authorizing APU to directly procure utility equipment and retention of a professional services firm to manage procurement activities.
Over the last three years, volatile supply chain conditions have impacted APU’s ability to secure utility equipment and materials in a timely and cost-effective manner. Lead times for commonly used equipment which are needed to operate and maintain the electrical system – including transformers, switches, streetlights, and cables – have increased from sixteen weeks to as many as sixty weeks. Per-unit costs for this equipment have also fluctuated on a daily basis, making it difficult to follow standard municipal procurement methods. Supply constraints including the global shortage of raw materials, prioritizing disaster recovery efforts, insufficient manufacturing capacity, and increasingly stringent electric and water regulations have led to challenges for small and mid-sized utilities to procure utility equipment.
While this is an industry-wide issue, the impact is felt locally. In Anaheim, reliability and streetlight projects have been delayed in order to maintain inventory levels for emergency supplies. And because of the supply chain volatility, the City’s procurement process of holding prices firm until the approval process is completed has resulted in vendors pulling out of bids and redirecting supplies to other utilities. In some cases, APU has requested that contractors purchase materials and pay for their overhead, or has had to refurbish previously used inventory which is a temporary solution and does not support grid modernization efforts.
Ordinance Authorizing Utility Equipment Purchases
As a comparison, APU is currently authorized to purchase wholesale power supplies in order to make energy transactions on a daily basis, in some cases as granular as five- minute increments. The authority is necessary to operate a utility and does not conform to standard municipal procurement policies. While long-term agreements are brought forward for Public Utilities Board and City Council consideration, there are spot market purchases that require immediate decision-making. Similarly, procurement of utility equipment and materials is increasingly challenging to fit within the existing City framework due to the supply chain issues, and APU is seeking the authority to directly procure by posting requests for bids and awarding purchases within the limits established in the Ordinance (Attachment 1 and 2).
Amendments to AMC Section 1.04.310 would provide APU with an exemption from standard City procurement through the Purchasing Agent, similar to other departments for their operational needs, including the Chief of Police for purchases needed to remain confidential, special, or covert; the City Clerk for election expenses; the City Librarian for library books and supplies; the Data Processing Manager for computer hardware and software that is leased or purchased; the City Risk Manager for special investigative and rehabilitation services; and the Executive Director of Convention, Sports and Entertainment for food, beverages and recoverable event-related services. In similar fashion, APU proposes an exemption for equipment, materials, supplies, and support services used for emergency repairs to, or operating, maintaining, and constructing, electric and water utility infrastructure.
Ordinance Amending Chapter 1.04 of the Anaheim Municipal Code and Procurement Services Agreement for Utility Equipment October 29, 2024
Section 1.04.312 is recommended to be added to clarify the procurement of utility equipment and limit awards to no more than $3,000,000 per transaction. This threshold amount is recommended to secure sufficient quantities and obtain better pricing for equipment awards. The use of this procurement authority must fit within the annual budget approved by the City Council, which includes approximately $30,000,000 in electric materials and $3,000,000 in water materials. City Council approval is required for purchases that require waiver of competitive bidding requirements.
Controls for accountability and transparency are also included in Section 1.04.312, including periodic reports provided to the Public Utilities Board detailing transaction amounts, vendors, and quantities and descriptions of procurement activity. Transactions and procedures are subject to periodic audits by the City’s Audit Division. Through all phases of the procurement process, the City Attorney’s Office will provide legal oversight and contractual support.
Selection of Procurement Service Firm
APU staff researched and discussed procurement and supply chain strategies with other utilities, equipment manufacturers and distributors, industry trade groups, and organizations specializing in sourcing and procurement. In conducting this research, small and mid-sized utilities have expressed they have similar challenges with procurement and are also seeking solutions. Utilizing a professional services firm with a global network that performs procurement services would not only meet APU’s needs, but also establish a model that other utilities could join on a voluntary basis. As more utilities participate, order sizes would increase, resulting in better pricing and deliverability. Each utility would need to enter into its own agreement with the selected firm in accordance with their approval process; however, APU is establishing the methodology through a competitive process that would be available to other utilities.
A two-stage solicitation request was developed, beginning with a request for qualifications (RFQ) posted on the City’s bid portal in June 2023. The RFQ requested all qualified and interested firms to submit a response demonstrating their experience and qualifications related to providing strategic sourcing and procurement services, including expertise consolidating purchases for clients and supporting municipal-owned utilities. A total of eight firms submitted responses, with APU evaluating and ranking all received submissions, and qualifying the top four firms for the next round of the solicitation, the request for proposals (RFP).
In March 2024, APU posted the follow-up RFP on the City’s bid portal, inviting the four highest ranked firms from the previous solicitation to submit a response, requesting that submittals detail specific strategies and solutions to accomplish APU’s procurement- related goals and measures to mitigate supply chain risks. Two firms withdrew from consideration and did not submit proposals, citing challenges to meeting the service scope. The remaining two firms submitted proposals that were reviewed and ranked based on criteria specified in Council Policy 4.1, including the strength of the overall proposal, experience and expertise of the proposed team, ability to meet the required scope of services, and the anticipated value and price of the proposed services. Part of the evaluation included an interview with both firms to better understand their proposed solutions and procurement services, with the following ranking:
Ordinance Amending Chapter 1.04 of the Anaheim Municipal Code and Procurement Services Agreement for Utility Equipment October 29, 2024
Firm Rank
ProcureAbility, Inc. 1
ExCOMATIX LLC 2
ProcureAbility was the highest ranked firm, and is a global procurement service firm that has operated for over twenty-five years, managing more than $12 billion dollars in annual purchasing volume for clients, with a track record of servicing diverse utility clients across the country including investor-owned utilities in California such as Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric as well as publicly-owned or government agencies nationwide such as Bonneville Power Administration, Jacksonville Energy Authority, Sacramento Municipal Utility District, and Salt River Project. Their expertise in the utility industry is also reflected in the subject matter experts they employ to support procurement of utility materials.
ProcureAbility’s scope of services includes developing a capital sourcing plan, implementing end-to-end procurement services, and providing reporting and data analytics. Their proposal included optimizing APU’s procurement activities based on their expertise and identifying new supply chains including international manufacturers or distributors to provide increased competition. The proposed Agreement is for a five- year term with two optional two-year extensions, in an average annual amount of $1,503,704, and 15% for as-needed extra services (Attachment 3).
A meeting with the American Federation of State, County, and Municipal Employees (AFSCME) Local 2002 was held on October 18, 2024 to discuss this initiative and to address questions regarding its potential implications for AFSCME members who conduct citywide purchasing, including utility equipment. During the meeting, it was clarified that this initiative would not result in any reductions in City of Anaheim employees and they are in concurrence.
The amendments to AMC Chapter 1.04 and the procurement services Agreement support the 2023-24 Strategic Plan, Goal C – Invest in Infrastructure and Amenities, Strategy 13 – Address deferred and ongoing maintenance needs.
IMPACT ON BUDGET:
Sufficient funds are included in APU’s Fiscal Year 2024/25 restricted budget, and future years will be subject to City Council’s approval of budget appropriations.
Respectfully submitted,
Dukku Lee
Public Utilities General Manager
Attachments:
1. Ordinance No._____
2. Ordinance No._____ (Redlined)
3. Agreement with ProcureAbility, Inc.