CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
2/26/2024
1 SUBJECT:
Modifications to the City of Pacifica Purchasing Policy RECOMMENDED ACTION:
Adopt a Resolution Approving Modifications to the City of Pacifica Administrative Policy No. 76 (Purchasing Policy).
STAFF CONTACT:
Yulia Carter, Assistant City Manager
(650) 738-7402
[email protected] <mailto:[email protected]>
BACKGROUND:
The purchasing procedures of the City are governed by the City of Pacifica Municipal Code, Chapter 4, Purchasing System, and Chapter 15, Bidding Procedures for Public Projects, as well as California Government Codes Sections 54201 et seq. The Government Code requires that every local agency adopt policies and procedures to govern their purchases of supplies, equipment, and services.
On November 27, 2014, the City Council adopted Resolution No. 53-2014, which established administrative policy #76, entitled Purchasing Policy, covering regulations, purchasing officers’ and departments’ responsibilities, and purchasing approval limit guidelines. The policy was later amended in 2019 to add section 3-15.10, “Federal Procurement,” and find the provisions exempt from the California Environmental Quality Act (CEQA), and in 2021 by adding article 13, “Recovered Organic Waste and Recycled-Content Paper Procurement Policy” in compliance with Senate Bill 1383. However, the purchasing limits and other key provisions and policy guidelines have remained unchanged over the last decade.
DISCUSSION:
Enhancing Organizational and Fiscal Stability is one of the City Council’s Strategic Goals, which includes pursuing operational efficiencies and making staff workload more manageable, recognizing staffing limitations citywide.
After reviewing the purchasing limits guidelines, staff recommends making several updates to streamline purchasing procedures, while still retaining appropriate controls and accountability.
The recommended policy updates will help streamline onerous administrative procedures and achieve better operating effectiveness while increasing accountability and transparency in the City’s procurement process.
Summary of Policy Changes
The attached red-lined copy of the purchasing policy illustrates the modifications for Council consideration (Attachment A). These changes are summarized below.
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February 26, 2024
1. Purchase Order Threshold
The most significant change proposes raising the dollar threshold requirement for a purchase order from $5,000 to $15,000. A purchase order is an arrangement between a purchasing agent (buyer) and a vendor (seller), specifying details such as items, quantity, and price. It helps with expense control for larger purchases, projects, and services, as it requires approval and supporting documentation such as contracts, bids and quotes, business licenses, and insurance certifications.
However, in small purchases, these requirements can become cumbersome, resulting in counterproductive paperwork. Achieving the necessary controls for smaller purchases below the PO limit would be more feasible through the existing Accounts Payable process, which includes multiple levels of approval to ensure proper oversight (supervisor/department director/deputy Finance Director), expense monitoring, record-keeping of invoices and receipts, and adhering to internal policies.
The preparation and processing of a purchase order entail substantial administrative work involving forms and workflows. This not only affects Finance staff but also impacts line staff members in operating departments responsible for the purchases. Every City department is heavily involved in the purchase order processing and workflow. The current low threshold often leads to delays in the City’s payment of invoices, as invoices cannot be processed without a purchase order in place. This often results in tedious back-and-forth between operating departments and Finance, causing delays in processing payments to vendors and often requiring extensive paperwork for purchases as small as $5,000. Additionally, with the San Francisco-Oakland Consumer Price Index approaching as high as 7% in 2022, the costs of goods and services have increased significantly, causing nearly every purchase made in operating departments to meet the outdated purchase order requirements and triggering higher levels of processing and paperwork.
Staff conducted an analysis for purchase order counts by dollar value over the last three fiscal years. The findings indicate that, on average, raising the purchase order (PO) threshold requirement to above $15,000 would alleviate the administrative burden by eliminating the need to create 101 purchase orders per year, which is approximately 41.1% of the total POs requiring preparation, processing, and monitoring in a fiscal year. Notably, about 55 of these POs (54.5%) originated in Public Works, one of the major operating departments tasked with promptly responding to critical infrastructure failures and other emergencies involving repairs and maintenance of City assets.
PO Value FY2021-22 FY2021-22 FY2022-23 Average
% of
Total PO
Under $10,000 69 76 67 71 28.9%
$10,001-$15,000 33 18 39 30 12.3%
$15,001-$20,000 16 23 19 19 7.9%
Over $20,001 131 119 124 125 51.0%
Total 249 236 249 245 100%
Increasing the PO threshold will alleviate unnecessary administrative burdens on the limited Finance staff, as well as operating departments, City vendors, and consultants, while proper oversight and operational efficiency in the accounts payable business process will still be Pacifica City Council 3
February 26, 2024
maintained through the existing internal control procedures and regulations. Therefore, the language in Article 2 of the attached policy has been amended to adjust a PO threshold amount to $15,000, accompanied by corresponding modifications to section 3.3.1 which sets for the dollar values for the purchasing order limits.
2. Purchasing Limits
City Manager recommends that the approval authority for Department Heads, Assistant City Manager and City Manager for contracts for goods and services increase. The Department Head authority would increase from up to $10,000 to between $15,001 -$25,000. The Assistant City Manager authority would increase from up to $25,000 to between $25,0001 -$40,000 and the City Manager authority would increase from $50,000 to up to $75,000.
Consistent with the abovementioned reasons, this adjustment would significantly improve the City’s efficiency and timeliness in managing and overseeing departmental purchases. On average, staff brings forward for City Council approval approximately 15 new agenda items per year, seeking approvals for new contracts within the $50,000 to $75,000 range. A similar number of staff reports are generated for task orders and contract amendments related to existing contracts. Agendizing these purchasing agreements and preparing associated reports and agenda materials result in longer project timelines and delays in project delivery, in addition to staff resources spent on administrative tasks instead of direct service delivery duties.
Increasing the purchasing authority limits to align with the other San Mateo agencies will significantly reduce the administrative overhead and enhance service delivery without compromising transparency in managing public funds. Financial oversight, fairness, and accountability will be maintained through existing internal control procedures and multiple levels of approval that are already in place and verified through the annual independent audit process.
Before formulating this recommendation, staff conducted research on the City Manager’s level of purchasing authority among Pacifica’s 12 benchmark cities in San Mateo County. The average purchasing authority among these cities is $80,000. As illustrated in the table below, Pacifica ranks among the four cities with the lowest City Manager’s authority, set at $50,000.
Notably, the other three cities in this category (Millbrae, Belmont, and Foster City) are substantially smaller in population than Pacifica. Other cities smaller than Pacifica (San Carlos, Burlingame, and Menlo Park) have a City Manager’s authority of at least $75,000. Finally, the City Manager’s authority in cities slightly larger than Pacifica varies, reaching up to $100,000 in Redwood City and San Mateo to $150,000 in South San Francisco.
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February 26, 2024
City Population
City Manager's
Authority
City of South San Francisco 66,105 150,000
City of Redwood City 84,292 99,999
City of San Mateo 105,661 99,999
City of Menlo Park 33,780 79,000
City of San Carlos 28,557 75,000
City of Burlingame 31,386 75,000
City of San Bruno 43,908 75,000
City of Daly City 104,901 75,000
City of Millbrae 23,216 50,000
City of Belmont 28,335 50,000
City of Foster City 33,805 50,000
City of Pacifica 38,640 50,000
Based on this analysis, the City Manager recommends Council consideration of new threshold language as shown in sections 3.3 and 3.4. The recommended policy revisions also specify that contracts for ongoing services will be assessed on a per-contract-year basis rather than for the entire term, while one-time services will continue to be determined by maximum compensation.
This revision will provide more clarity on when a contract for ongoing services falls within the City Manager’s signing authority.
The City Manager also recommends incorporating language to allow a 10% contingency for both Purchase Orders and Change Orders and Contract Amendment sections (3.3.5 and 3.5.1) provided that the increase does not cause the total amount of the Purchase Order or Contract to exceed the authority maximum. Including an optional contingency will also significantly improve the delivery of projects and services. This flexibility acknowledges that actual cost may occasionally surpass the initial estimate due to last-minute changes in scope or unforeseen circumstances necessitating modifications to tasks and services.
The primary objective of these proposed changes is to achieve greater efficiency within City operations and optimize the time of limited staff resources, directing their focus towards direct municipal service delivery rather than administrative overhead. Unlike larger agencies that often have a dedicated purchasing division, the City lacks the resources and capacity for such a standalone department.
All purchase orders are processed by a single staff member in the Finance Department who manages Purchasing and Accounts Payable responsibilities, and often requires overtime to meet the increasing demands for processing POs and weekly checkruns. Implementing the recommended amendments to the purchasing policy would eliminate the need to process over 40% of annual purchase orders. This adjustment would also free up at least 25% of this position’s daily workload, enabling their focus on other critical Finance tasks. This gain in efficiency is particularly critical as the department is currently in the process of a critical and time-consuming Enterprise Resource Program (new financial system) implementation.
All recommended changes directly contribute to achieving the City Council’s goal of Enhancing Organizational and Fiscal Stability, aiming to improve staff retention and recruitment and promote mental health by creating a sustainable workload. Furthermore, all changes align with purchasing practices in other cities in San Mateo County.
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February 26, 2024
ALTERNATIVE ACTION:
City Council may choose not to amend the Purchasing Policy at this time or may decide to approve some amendments but not others. Continuing under the old Purchasing Policy will not allow staff to achieve these potential administrative efficiencies and will contribute to further delays in delivering projects, municipal services, and Finance staff’s ability to adhere to the planned timeline and budget for the ERP implementation.
CEQA:
This policy amendment is not subject to review under the California Environmental Quality Act (CEQA) pursuant to Public Resources Code Section 21000, et seq. and the CEQA Guidelines (14 Cal. Code Regs. §§ 15000 et. seq.), including without limitation, Public Resources Code section 21065 and California Code of Regulations 15378 as this is not a “project” that may cause a direct, or reasonably foreseeable indirect, physical change in the environment.
RELATION TO CITY COUNCIL GOALS AND WORK PLAN:
This item furthers the City’s efforts toward Organizational and Fiscal Stability FISCAL IMPACT:
There is no direct fiscal impact associated with the Council’s amendment of the Purchasing policy. However, significant operational efficiencies are expected to be achieved citywide if the amendments are accepted.
ORIGINATED BY:
City Manager's Office
ATTACHMENT LIST:
Attachment A: Pacifica Purchasing Policy (Admin Policy No. 76) (Redline)(PDF) Pacifica City Council 6
February 26, 2024
RESOLUTION NO.______
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PACIFICA REVISING ADMINISTRATIVE POLICY NO. 76, “PURCHASING POLICY”
WHEREAS, the City of Pacifica first adopted Administrative Policy No. 76 (Purchasing Policy) on November 27, 2014, with the latest revision on December 13, 2021; and
WHEREAS, the Council-adopted purchasing approval limits for all city purchases, including but not limited to supplies, equipment, and non-consultant and consultant services and professional design projects, have not been reviewed in the last ten years; and WHEREAS, the purchasing policy needs to be amended to improve operational efficiencies while providing financial oversight and ensuring fairness, accountability, and transparency in the City’s procurement process.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Pacifica hereby adopts the revisions to the Administrative Policy No. 76,” as set forth in Attachment A “Purchasing Policy”.
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Pacifica, California, held on the 26th day of February 2024, by the following vote:
AYES, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
ABSTAIN, Councilmembers:
_________________________
Sue Vaterlaus, Mayor
ATTEST: APPROVED AS TO FORM:
_________________________ _________________________
Sarah Coffey, City Clerk Michelle Kenyon, City Attorney Pacifica City Council 7
February 26, 2024
ATTACHMENT A