DATE: October 15, 2024
TO: Mayor and City Council
FROM: Director of Finance
SUBJECT: Adopt a Resolution Approving Updates to the City of Hayward Procurement Policy
RECOMMENDATION
That the Council reviews and adopts a resolution approving the proposed changes to the City’s procurement policies.
SUMMARY
To align City policies and procedures with current best practices, staff has conducted a thorough review of the Procurement Guidelines manual (manual), which reflects current City purchasing and procurement policies. The manual is an internal document that provides guidance on internal City operations and includes procurement policies established through City Council approval.
Staff proposes that Council consider changes to the threshold and expenditure authority levels. The proposed changes impact the competitive bidding process requirements, as well as authority thresholds of the City Manager. Additionally, proposed changes include establishing signatory authority for the City Attorney for expert witness, settlement claim payments, and outside legal counsel. The proposed changes attempt to correct for inflation while improving effectiveness, efficiency, and consistency within the City’s procurement processes while maintaining appropriate oversight and controls. These changes are in keeping with the related provisions of the City Charter, Article XIII, Sections 1302, 1303, and 1304. Staff presented the Council and Budget Finance Committee with recommended changes on September 18, 2024, and received feedback and direction incorporated into the final recommendation.
BACKGROUND
The City’s purchasing and procurement policies were last updated in November 2015. In response for the need to enhance the City’s procurement and accounts payable processes, the City solicited proposals to perform a thorough assessment of the City’s current processes. Resulting from the RFP process, the City contracted with the 65th North Group, who conducted a Purchasing and Accounts Payable Process Assessment. As part of the assessment, it was recommended that the City consider updating its current purchasing threshold approval authorities, including proposed changes to formal bidding requirements.
On September 18, 2024, staff presented the consultant’s recommended changes to the City’s current purchasing threshold approval authorities to the Council and Budget Finance Committee (Committee) for its review and guidance. The recommendations reflected proposed changes to the City’s formal bidding requirements and purchasing threshold approval authorities.
The Committee supported the recommendation to increase purchasing thresholds for formal bidding process requirements (non-construction projects). However, the Committee provided feedback on the recommended increase in threshold authority for the City Manager and City Attorney. Based on the City’s current business activities, and comparison to other Bay Area cities, the Consultant recommended setting the threshold of authority at $150,000 for the City Manager and City Attorney. While the majority of the benchmarked Bay Area cities were set at $100,000, the Consultant’s recommendation reflected raising costs and current business activities within the City of Hayward to support the higher threshold amount. The Committee supported the increase in threshold authority for the City Manager and City Attorney to be set at $100,000; an increase from the current threshold of $75,000.
DISCUSSION
During the assessment of the City’s procurement and accounts payable process, the consultant recommended that the City consider updating its current purchasing threshold approval authorities. The last update to this policy was conducted in November 2015. A number of factors have contributed to the recommendation to update the thresholds, including benchmarking with other Bay Area cities. The following recommendations are presented for the Committee’s review and consideration:
Bid requirements
Thresholds City Manager and City Attorney
Proposed Changes to Bid Requirements
It is appropriate for the City’s procurement policy to establish levels to determine the type of competitive process necessary to make a purchase. The proposed changes increase the threshold for formal bidding, thereby increasing operational efficiency and reducing staff time by eliminating the volume of time-intensive procurement procedures for lower dollar expenditures. These changes are in keeping with procurement best practices and are similar to levels established by other local cities.
Chart 1: FY 2024 Purchase Orders
As shown in the Chart 1, in FY 2024 the City issued 2,528 purchase orders. Purchase orders for goods and services less than $100,000 make up 97% of the total purchase orders issued in FY 2024. The proposed policy change will increase operational efficiency without jeopardizing fiscal oversight. While most purchases will not be required to follow the stringent guidelines set forth with the formal bidding process, all purchases under the proposed threshold changes will still require that an informal process be conducted to ensure competitive pricing by obtaining quotes for goods and services. Tables 1 provides a comparative summary of the current threshold amounts as it relates to formal bidding requirements.
Table 1: Increase Threshold for Formal Bidding
Type
Current Threshold
Proposed Threshold
Supplies & Equipment
$75,000
$100,000
External Services
$50,000
$100,000
Purchases greater than or equal to $100,001 for supplies and equipment, repair/maintenance, and greater than or equal to $100,001 for consultant services will require a more stringent and formal process for which one of the following two methods of solicitation will be required:
Competitive Bid: Focuses on obtaining the lowest possible price Competitive Process: Focuses on obtaining the best possible value Competitive Bids are for purchases where value dictates formal competition. An Invitation to Bid (ITB) is the solicitation package in the bid process. For example, construction projects often require a competitive bid, which would result in an ITB. A Competitive Process would result in the solicitation of a Request for Proposal (RFP). For example, consultant services often require a competitive process, resulting in the issuance of an RFP. Both require a minimum response period of ten (10) calendar days for vendor responses; however, common practice allows for longer response time to increase the volume and quality of bids received.
Table 2 provides a comparative summary of the current threshold categories of purchases by varying authority levels and corresponding requirements based on authority threshold amounts.
Table 2: Threshold Category of Purchases
Proposed Changes to Thresholds City Manager and City Attorney The City’s procurement policy – as authorized each year in the annual budget resolution – establishes that the City Manager may approve professional services contracts up to $75,000 without Council approval. Hayward has one of the lowest City Manager approval thresholds relative to neighboring East Bay municipalities. This comparative discrepancy is understandable considering the current thresholds were enacted over nine years ago. The City Manager approval thresholds no longer provide the desired monetary threshold intent. Table 3 provides a summary of benchmark cities on current thresholds.
Table 3: Benchmark Cities - City Manager Thresholds
Municipality
Council Approval Threshold
Alameda
Up to $75,000
Hayward
Up to $75,000
San Mateo
Up to $100,000
Fremont
Up to $100,000
San Leandro
Up to $100,000
Redwood City
Up to $106,000
Based on guidance and support from the Committee, staff recommend that the City Manager approval threshold for professional services/consultant contracts be increased to $100,000. Additionally, staff recommend that the City Attorney approval threshold be set at $100,000 for expert witness, settlement claim payments, and outside legal counsel. The proposed change will allow for increases in operational efficiency without jeopardizing fiscal oversight, while improving provision of services to the Hayward community.
ECONOMIC IMPACT
Approval of the attached resolution will not have an economic impact on our community.
STRATEGIC ROADMAP
This agenda item is an operational item and does not specifically relate to any of the six priorities outlined in the Council’s Strategic Roadmap.
FISCAL IMPACT
There is no fiscal impact associated with the proposed changes in policy.
PUBLIC CONTACT
Staff met with the Council and Budget Finance Committee during a public meeting on September 18, 2024. During that meeting, staff presented a recommendation and received feedback from the Committee on proposed changes to the policy.
NEXT STEPS
Upon approval of the attached resolution, the Purchasing Policy will be effective immediately.
Prepared by: Rita Perez, Purchasing Manager
Recommended by: Nicole Gonzales, Director of Finance
Approved by:
____________________________
Dustin Claussen, Interim City Manager
CITY OF HAYWARD - File #: ACT-067 (legistar.com)