MEMORANDUM
DATE: July 8, 2026
TO: Dave Kiff, City Manager
FROM: Matt Schneider, Community Development Director
SUBJECT: Request for Approval of Sole Source Procurement and Artificial Intelligence Pilot Partnership with CrossBeam
RECOMMENDATION:
Approve the use of a sole source procurement to enter into a Professional Services Agreement with CrossBeam for the development, implementation, and evaluation of a twelve-month Artificial Intelligence Pilot Program for the Community Development Department.
BACKGROUND
Over the past year, the Community Development Department has actively evaluated emerging artificial intelligence technologies that have the potential to improve permit processing, customer service, operational efficiency, and consistency in development review.
As part of that effort, staff has researched and received demonstrations on numerous AI solutions entering the Community Development marketplace. This included demonstrations of Tyler Technologies' AI tools within the EnerGov permitting platform, Archistar AI, which has gained attention for assisting jurisdictions processing permits within the Palisades Fire burn scar area, as well as several other commercially available AI plan review products.
While each platform offers promising capabilities, they are generally designed as standardized, offthe-shelf software solutions with limited customization for individual agencies. They largely require jurisdictions to adapt their business processes to the software rather than allowing the software to be developed around the jurisdiction's existing workflows.
Following extensive evaluation, staff believes CrossBeam represents a fundamentally different opportunity.
Sole Source Justification
While the City’s Purchasing System Ordinance generally requires a competitive solicitation process for purchases of goods and services with an estimated cost greater than $10,000, it also includes certain exceptions to the competitive solicitation process when, for example, the City Council or City Manager determines that there is only one source that provides the needed materials and services, or to ensure compatibility with other city products and equipment. (Laguna Beach Municipal Code Sections 2.30.040(c) and 2.30.050(b).) It further notes that sole source procurement may be necessary when the vendor holds a unique set of skills or expertise that makes it impossible/unlikely anyone else can do the work or the same quality of work. (LBMC Section 2.30.050(b)(5).) Staff believes a sole source procurement of Crossbeam satisfies this standard for several independent reasons.
First, CrossBeam is the exclusive developer and provider of its proprietary artificial intelligence platform. The company combines Anthropic's Claude large language model with proprietary software specifically designed for Community Development operations. Second, and more importantly, this engagement is not simply the purchase of software; it is a collaborative technology development partnership. Unlike traditional software vendors that offer standardized products, CrossBeam is proposing to work directly alongside Community Development staff throughout the pilot to develop, refine, test, and continuously improve functionality specifically tailored to Laguna Beach's permitting processes. Many of the deliverables identified within the Scope of Work will be created collaboratively during implementation based upon Laguna Beach's workflows, review standards, templates, and operational objectives rather than being deployed as preexisting commercial software.
In conclusion, because this collaboration depends upon CrossBeam's proprietary platform and direct participation of its development team, staff believes no other vendor could reasonably provide an equivalent service.
Existing Market Evaluation
Staff carefully evaluated multiple competing technologies before recommending this sole source procurement of Crossbeam.
Tyler Technologies
Because Tyler provides the City's EnerGov permitting software, staff reviewed Tyler's recently released AI capabilities.
Although promising, Tyler's solution currently functions primarily as an AI assistant with limited Community Development specific functionality. The platform lacks customized application screening, automated deficiency reporting, iterative plan review learning, customized zoning review capabilities, and collaborative software development.
Archistar AI
Staff also evaluated Archistar AI, which has received positive attention for assisting jurisdictions processing rebuilding permits following the Palisades Fire. While impressive, Archistar follows a fundamentally different business model by charging applicants approximately $200 per plan review.
Staff does not believe shifting plan review costs directly to permit applicants aligns with Laguna Beach's customer service philosophy. Additionally, Archistar remains largely a standardized commercial platform with limited jurisdiction specific customization.
Other AI Platforms
Staff also reviewed demonstrations and publicly available information regarding several additional AI plan review systems including Acela and Upcodes. While these products continue to mature, they generally provide standardized software subscriptions rather than collaborative development partnerships. None demonstrated the willingness to customize software around Laguna Beach's specific operational needs to the extent proposed by CrossBeam.
Why CrossBeam Is Different
CrossBeam's founder has specifically identified Laguna Beach as an ideal founding municipal client.
Rather than marketing a finished software product, CrossBeam intends to use this pilot to collaboratively build and demonstrate the platform before expanding into broader municipal markets.
As a founding client, Laguna Beach will receive unique benefits that would not be available through larger software companies, including:
• Direct access to the company's founder and software developers. • Continuous refinement throughout implementation.
• Rapid software modifications.
• Custom workflow development.
• Priority technical support.
• Influence over future product direction.
This relationship transforms the project from a traditional software purchase into a collaborative innovation partnership.
Building Upon Laguna Beach's Existing Investment
Perhaps the greatest value of the proposed partnership is that it builds upon the significant work already completed by Community Development staff. Over the past several years, the Department has developed standardized review templates, correction letter formats, application requirements, workflow improvements, and one of the City's most comprehensive Residential Zoning Plan Review Checklists consisting of more than 300 individual review items.
Rather than replacing these resources, CrossBeam proposes using them as the foundation upon which the artificial intelligence platform is trained. Instead of asking staff to conform to software, the software is developed around Laguna Beach's existing best practices. As the system reviews additional projects, it continuously improves through staff feedback.
For example, once the system has learned the City's complete review methodology for a reroof permit, future reroof applications can be evaluated almost instantaneously while continuing to improve over time. The same process applies to additions, remodels, accessory dwelling units, retaining walls, pools, and new residential construction. This continual learning capability significantly increases the long-term value of the pilot.
AI Assisted Application Screening
One of the most significant opportunities involves development of an automated application completeness review system. Today, many online permit applications arrive with missing documents, incomplete plans, or insufficient supporting information. Unlike applicants appearing at the public counter, where permit technicians immediately identify deficiencies, online applicants often upload whatever information they believe is sufficient and wait for staff to identify missing items.
Staff estimates that for each incomplete online application, staff spends approximately 2 to 2.5 hours reviewing submitted materials, identifying deficiencies, preparing correspondence, making follow up phone calls, and coordinating multiple resubmittals before the application is complete enough to route internally. CrossBeam proposes developing an AI powered intake screening system that immediately evaluates every online application against City specific submittal requirements.
The system would:
• Identify missing documents.
• Detect incomplete information.
• Prepare a detailed deficiency report.
• Generate a draft applicant email for staff review.
• Track previously identified deficiencies.
• Upon resubmittal, immediately verify whether missing items have been provided.
Staff believes this functionality alone has the potential to save hundreds of staff hours annually while significantly improving customer service, reducing applicant frustration, shortening intake times, and encouraging greater use of online permitting. No competing platform reviewed by staff currently provides this level of customized application screening.
AI Assisted Plan Review
The proposed platform also performs preliminary zoning and building plan review. Rather than replacing professional planners and engineers, the system performs repetitive analytical tasks rapidly, including verification of setbacks, development standards, mathematical calculations, dimensional requirements, and consistency between submitted plans.
The software highlights potential deficiencies while allowing professional staff to focus their expertise on evaluating flagged deficiencies and evaluating discretionary findings, design issues, environmental considerations, policy interpretation, and complex planning analysis. Artificial intelligence becomes a force multiplier rather than a replacement for professional judgment.
Internal Customer Service Chatbot
The pilot also includes development of an internal AI customer service assistant. Community Development staff receive thousands of telephone calls and emails each year requiring navigation between multiple software systems before basic project status can be provided. The proposed chatbot would allow any employee to ask natural language questions such as:
"What is the current status of Fire Department review for 855 La Vista?" The chatbot would retrieve relevant information from the City's permitting system and summarize the current project status without requiring transfers to technical staff. This capability has the potential to significantly improve customer service while allowing planners, engineers, and inspectors to remain focused on technical work.
Competitive Procurement Would Not Produce Equivalent Results Competitive procurement typically encourages innovation and lower pricing. In this circumstance, staff believes the opposite is true.
The principal value of this pilot is not simply the technology itself but the collaborative relationship between the City's staff and CrossBeam's development team. Issuing a Request for Proposals would likely result in responses from companies offering standardized commercial software products rather than the collaborative development model proposed by CrossBeam.
Staff believes the unique opportunity presented by becoming a founding partner would likely be lost through a traditional competitive procurement process.
Fiscal Impact
Staff negotiated a pilot cost of $100,000 for a twelve-month implementation period, representing a significant reduction from the vendor's original proposal of $15six-month a six month engagement.
The negotiated Scope of Work includes development of an AI assisted application screening system, building plan review module, zoning plan review module, automated recheck functionality, chatbot development, implementation support, training, and ongoing refinement throughout the pilot.
Conclusion
Artificial intelligence has the potential to fundamentally change how Community Development services are delivered over the next decade, much like electronic permitting transformed local government fifteen years ago. Jurisdictions that begin evaluating these technologies today will be best positioned to implement them responsibly in the future. CrossBeam presents Laguna Beach with a unique opportunity to become an early leader in municipal artificial intelligence through a carefully controlled pilot that supplements, rather than replaces, professional staff. Every AI generated review will continue to be evaluated by qualified City staff before comments are issued, ensuring professional judgment remains central to every decision.
For the reasons outlined above, staff recommends approval of a sole source procurement with CrossBeam. Staff believes no other vendor currently offers the same combination of proprietary technology, collaborative software development, customized implementation, and commitment to tailoring the platform specifically to Laguna Beach's Community Development operations.