CITY COUNCIL STAFF REPORT
Meeting: February 21, 2024
Subject
Amendments to the Cupertino Municipal Code Chapter 3.22 (Purchase of Supplies, Materials, Equipment and Services) and Chapter 3.23 (Public Works Contract and Bidding Procedures) of Title 3 (Revenue and Finance) Recommended Action
Conduct the first reading of Ordinance No. 24-XXX: “An Ordinance of the City Council of the City of Cupertino Amending Chapters 3.22 and 3.23 of the Municipal Code regarding the purchase of goods and services, and contract and bidding procedures for public work contracts.” Reasons for Recommendation
Background
The Cupertino Municipal Code (CMC) Chapter 3.22, last amended in 1992, directs the purchase of goods and services. CMC Chapter 3.23, which directs the contract and bidding procedures for a public work project, was also amended in 1992, with additional amendments in 2016. The administrative purchasing policy that governs and guides the purchases outlined in these chapters was last updated in 2013.
The following audits were completed between 2019 and 2022 which highlighted areas of risk and recommended improvements in the procurement process, contract management and vendor management.
March 2019 - Internal Controls Review presented to the Audit Committee on April 24, 2019.
December 2020 - Enterprise Risk Assessment presented to City Council on July 20, 2021.
February 2022 - Procurement Operational Review presented to City Council on April 19, 2022.
May 2022 - Fiscal Policy Inventory and Gap Analysis presented to City Council on July 19, 2022.
Staff responded to the various audits and made changes to administrative practices and invested staff resources to address the items identified. In May 2023, the Purchasing Manager was hired to evaluate and revise City policy, introduce standardization in the procurement process and propose improvements that demonstrate best practices, provide clarity in the purchasing process and support staff through the various procurement actions. In January and February 2024, after a thorough review by staff and additional review by Moss Adams, two administrative policies, a new Public Works Purchasing Policy (Attachment B) and an updated Purchasing Policy (Attachment A), were approved by the City Manager. These policies administratively guide staff’s purchasing decisions and align with CMC 3.22 and 3.23, respectively.
Discussion
The concerns identified in the various audits and analysis have created an important guidepost and roadmap to improvements and best practices in our financial practices and citywide purchasing activities. In response, staff have and are addressing these items through changes in internal practices, development of standard operating procedures through policy review and development, and by adding a purchasing approval role in the financial system. To continue that effort, this report focuses on proposed changes to the Cupertino Municipal Code (CMC) Chapter 3.22 and Chapter 3.23 that will provide further clarity to current practices, incorporate best and common practices for a government entity and differentiate the purchase of goods and services and a public work construction project.
Developing improved administrative policies to guide procurement activities is an important step to ensure alignment with the CMC. The revised Purchasing Policy and new Public Works Purchasing Policy address many of the elements of risk identified with purchasing and contracting activities in the audits and analysis while incorporating clarity and government best practices for procurement. In addition, these policies provide important details in the procurement process to ensure fair and open competition. The proposed CMC edits will introduce improvements, clarity and best practices for the purchase of goods, services or public work contracts. The proposed amendments are included as Attachment C, summarized in Table 1 and discussed further in this report.
Table 1. Summary of proposed edits to the CMC
Proposed changes to Chapter 3.22
Proposed changes to Chapter 3.23
Purchasing Manager defined
Public Work project definition updated
Introduction of Request for Proposal procurement
Public Works Director included in definition of Purchasing Officer Informal and Formal Bidding Procedures moved to Purchasing Policy Bids are posted on City website or online bid platform and accepted electronically Clarification and addition of exemptions to competitive procurement Maintenance and Professional Services are deleted from Exemptions Public Works Director can extend project timeline as needed or issue additional work up to approved contract amount plus contingency Beginning with Chapter 3.22, there are several proposed edits to the CMC to highlight. These include the identification of a Purchasing Manager, clarification that vendors may be solicited either through a low bid or qualifications-based procurement, migration of procurement procedures for informal and formal solicitations to the Purchasing Policy, clarification of existing exemptions, and introduction of new exemptions to the competitive procurement requirement. There are additional minor clean up items and re-organization of content to assist in the presentation of information. These proposed changes do not impact Council’s current authority to award contracts that exceed the formal threshold amount stated in Public Contract Code 22032 (b), which is currently $200,000 but may be amended by the State from time to time.
The Purchasing Manager position is identified as the principal purchasing official that will lead, assist and support the procurement process citywide. This position has responsibilities identified in Chapter 3.22 and administratively to perform oversight and ensure adherence to the purchasing policies throughout the purchasing process.
The proposed Ordinance also provides that vendors may be selected through an informal or formal qualifications-based procurement, using a Request for Proposal process which staff currently utilize as an exemption to the bid process. Using a low bid or qualification-based procurement method allows staff to determine the appropriate approach for soliciting a vendor, consultant or service provider. To adequately detail the requirements for a fair and competitive procurement process, staff recommends enacting the informal and formal procurement process for bidding or proposal procedures via the Purchasing Policy.
Allowable exemptions to the required procurement process are identified in the current Chapter 3.22. The proposed Ordinance introduces legal services as governed by Chapter 2.18 and exempt from a competitive process in accordance with Government Code § 37103. Additional specific exemptions are defined which include those in accordance with Government Code § 37103.
The proposed amendments to CMC Chapter 3.23 introduce important definitions, clarifications, and improvements. The definition of a public work project is modified to align with the current Public Contract Code 22002 definition. The definition of Purchasing Officer is included in this chapter and specifically includes the Director of Public Works who would be responsible to oversee and manage public work projects.
The Notice Inviting Bids process is clarified to specifically include posting of bids electronically on the City’s website or another public bidding platform to encourage broad contractor outreach. Additionally, if the lowest bids are equal in amount and from responsive and responsible contractors, the Purchasing Officer or Purchasing Manager will select the low bidder through a blind selection process.
The performance of additional work simplifies the language and intention that the Director of Public Works has authority to complete the contracted project, including any necessary change orders, up to the total amount of contract award and approved contingency. The Director of Public Works retains authority to extend the contract date when necessary, and now without a time restriction.
Staff recommends that Council introduce Ordinance No. 24‐XXX and conduct a first reading of the Ordinance. If Council votes to conduct the first reading, the Ordinance will return to Council for the second reading at its March 5 meeting.
Sustainability Impact
No sustainability impact.
Fiscal Impact
No fiscal impact.
California Environmental Quality Act
Not applicable.
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Prepared by: Gregory Card, Purchasing Manager
Reviewed by: Kristina Alfaro, Director of Administrative Services Reviewed by: Christopher Jensen, City Attorney
Reviewed by: Matt Morley, Assistant City Manager
Approved for Submission by: Pamela Wu, City Manager
Attachments:
A – Administrative Purchasing Policy
B – Administrative Public Works Purchasing Policy
C – Draft Ordinance (Redline)
D – Draft Ordinance (Clean)