City Council
Staff Report
From: City Manager
Report Type: STUDY SESSION
Lead Department: City Manager
Meeting Date: October 22, 2025
Report #:2507-4924
TITLE
Reinforcing Best Practices in Managing Consultant Services
RECOMMENDATION
City Council review and discussion of ongoing work to ensure high quality and valuable services developed through the engagement of professional consultants.
EXECUTIVE SUMMARY
This report provides a review of the current and planned work for the consultant engagement review project. At its meeting on May 28, 2025, the Policy & Services Committee received a report on this effort and provided feedback to staff. This report provides an updated status report based on the Committee’s feedback as well as subsequent progress by staff.
BACKGROUND
The City of Palo Alto regularly engages professional consultants for a wide variety of functions.
These include, for example:
Planning, architectural, engineering, and construction management for capital improvement projects;
Specialized and supplemental staffing for land use planning, processing entitlement applications, building permitting and inspection, as well as other operations; Specialized recreation, arts, and enrichment programming for community classes, summer camps, and other public services;
Development of studies and plans on a broad range of topics in areas such as economic development, transportation, and facilities planning.
Attachment A provides a list of consultant contracts approved by the City Council in 2024, reflecting the broad range of consultant services used by the City.
The majority of City Council priority objectives rely on consultant services for their timely completion. The use of consultants is critical to the City’s ability to produce the volume and range of services expected and required by the community. It is equally important that circumstances
under which consultants are engaged be clearly identified and that the quality of work products provide the value expected.
The ongoing work effort described here seeks to enhance the clarity and effectiveness of these engagements. It focuses on elevating the visibility of outsourcing decisions, staff expectations, and strengthening consultant management protocols.
At the May 28, 2025 Policy and Services Committee meeting, the Committee expressed support for improving transparency, staff capacity, and consistency in consultant use, while noting concerns about overreliance and safeguarding community trust. The Committee discussed the interplay of cost and expertise in long-term staff development, having clearer expectations for consultants, and maintaining ongoing public engagement.
ANALYSIS
In order to strengthen the City’s approach to consultant engagement and management, staff is undertaking a structured review of current practices and a path to process improvements. It should be recognized that as indicated by research to date, much of this work is a leading practice. While within the local government management profession there is a wealth of established practices on topics such as procurement and contract management, topics such as ensuring value in products and building organizational capacity are seldomly addressed in the comprehensive manner described here.
The overarching goal is to clarify expectations around consultant management and ensure practices that ensure effective products, meet organizational needs, and support professional growth among the City’s professional staff while also maintaining flexibility for the range of consultant engagements. The priority focus centers on professional services related to studies, plans, and similar scopes of work, with particular attention to the roles and responsibilities of City project managers and supporting departments. This represents a subset of the contract types listed in Attachment A.
To inform this effort, a working group composed of representatives from departments that regularly engage consultants is involved and providing critical feedback and expertise to help shape the resulting recommendations.
Core Principles
At the heart of this work is a recognition that contracting is a partnership. Consultants bring valuable technical and professional expertise, while City staff offer familiarity with local context, including community expectations, data resources, and internal procedures. City staff are also responsible for ensuring that community and other stakeholders are engaged effectively. The effectiveness of consultant engagements depends on the balance of these perspectives through skillful coordination, communication, and teamwork.
Project Timeline and Activities
The following key steps and milestones are guiding the implementation of this workplan:
1. Review of Current Practices: In December 2024, the City’s Management Fellow conducted initial interviews with staff across departments. A follow-up questionnaire with refined and expanded questions was distributed to gather additional insights.
2. Budget Review: As part of the FY 2026 budget development process, the City Manager and Budget Office led a department-by-department review of contractual services line items to assess their necessity and identify opportunities where in-house staffing may be more cost-effective or strategically beneficial. This is expected to be an ongoing part of the City’s annual budget development process.
3. Initial presentation to Policy and Services Committee and implementation of feedback, followed by full City Council study session.
4. Practice Improvements: Into the summer, feedback from departments and management identified priority areas for improvement in consultant engagement. This builds on currently ongoing efforts led by the Administrative Services Department (ASD) and the City Attorney’s Office with training sessions on contract management.
5. Defining the Consultant Management Lifecycle: To ensure all steps are covered in a standard format, city staff are reviewing all elements of the management lifecycle, from the first step of decision to outsource to the final closeout and work review of the project.
6. Interdepartmental Staff Engagement: Staff convened a half-day working session this summer with representatives from departments that regularly engage consultants. The workshop validated the overall approach to the workplan and furthered practical steps toward the goals of this project. Since the initial outline, staff has oriented the effort toward developing visible tools available citywide to project managers and departments.
7. Clarifying Local Knowledge Roles: City staff play a vital role in ensuring that consultants understand Palo Alto’s specific context. Through the Summer, expectations around sharing prior work, guiding community engagement processes, and providing historical knowledge have been explored in order to establish clear expectations for staff that can be communicated throughout the City.
8. Identifying Skill and Role Gaps: Into the Fall, this review will also examine where project managers may require additional training or role clarification to effectively manage consultant relationships and deliverables, as well as review the workload capacity required to fulfill these roles.
9. Training and Tools: Through the Fall and into 2026, potential outcomes of this work include the development of workflow templates, dashboards for progress tracking, and structured training for project managers in collaboration with Human Resources and relevant departments. The development of a best practices guide is under way, and will serve as a training and reference point for all materials related to carrying out effective consultant engagements.
10. Consultant Engagement: Input from consultants will be solicited throughout the process to gather insights from their perspective into what makes engagements successful.
Overview of the Consultant Engagement Process and Areas for Reinforcement The following paragraphs provide an overview of the typical consultant engagement process in the City and provide an initial sampling of specific areas that have been identified for evaluation and reinforcement of best practices.
Precursors to Outsourcing
As part of the annual budget development process, each department’s proposed consultant funding levels is reviewed to assess whether those funds might be more effectively allocated to hiring in-house staff. In some cases, the City outsources as a first step before adding permanent staff due to concerns around long-term financial commitments and the need to sustain consistent workloads. The budget cycle provides a regular opportunity to review this practice in the context of department-specific work forecasts. When consultants perform tasks that are similar in some respects to those of City employees, the annual budget review provides an appropriate point at which to consider whether in-house capacity could better serve the City over time. This informs staffing changes proposed in the City Manager’s Proposed Budget released every April.
In addition, the City Manager recently directed additional internal review and approvals of task orders issued under master agreements. Master agreements are consultant contracts established for “as needed” or “on-call” services, where a contract is established without a specific scope of services. Task orders are subsequently issued to the consultant with a specific scope of services and budget. In order to ensure that best practices are being applied to task orders, task orders at specified thresholds now require City Manager approval.
The Decision to Outsource
The decision to outsource to meet specific project needs is based on the expertise required as well as in-house capacity. Scopes of service are developed in consultation with the Administrative Services Department’s Purchasing Division and the City Attorney’s Office.
Determining a Scope of Services
Departments develop scopes of services that are then used to solicit consultant proposals through issuance of Requests for Proposals (RFPs). Major projects may also involve City Council review of scopes of services. Practices are being reviewed to determine when further refinements in the development of scopes of services would be beneficial. This includes prompts such as:
How to best complement consultant’s specialized skills with in-house staff local knowledge and other roles throughout a project
How artificial intelligence and other technologies might best assist in delivering cost- effective outcomes
How to ensure outsourcing aligns with City long-term goals for building internal expertise Scoping the Approach to Community Engagement
Community engagement is a central element of virtually all studies and planning efforts in Palo Alto. It is therefore important to ensure the consultant is aware of the nature and extent of community engagement expected. Department staff consult with the City Manager’s Office communications staff to develop community engagement plans for RFPs and updated as projects proceed. Roles between the consultant and staff requires specific attention; in general, staff take primary responsibility for identifying key stakeholders and arranging for meeting venues and logistics. Online engagement tools are also coordinated with the City Manager’s Office.
Selecting the Service Provider
In selecting consultants, departments consider not only cost but also expertise, alignment with project needs, and prior performance. The process emphasizes open and fair opportunities to submit proposals that are objectively evaluated and a selection based on the best interests of the City. Practices are being reviewed to determine whether any enhancements to the procurement process would be beneficial.
Managing Contingencies
At various points, circumstances can arise that cause consideration of a change in direction. This could include issues such as cost proposals that exceed budget, and a lack of strong proposals. In such cases, staff must balance the tension between proceeding and changing direction. Project managers must then engage department management and the City Manager’s Office in order to evaluate options and determine appropriate steps forward.
Establishing Points of Contact, Communication Expectations, and Handling Professional Differences
At project kick-off, an important first step in the successful completion of a consultant engagement is establishing primary points of contact on both the City’s and consultant’s teams, and reviewing the scope and key understandings needed for the project. Topics to be covered include: reviewing scope of services, schedule, and deliverables; establishing recurring meetings or other means of progress coordination; project documentation responsibilities; and, lead time and turnaround expectations for follow-up and review of deliverables.
This is also the point at which to establish escalation paths, secondary points of contact when needed due to disagreements or performance concerns from either the City or consultant.
Escalation paths may also be reinforced contractually, including implications for delays in the case of time-sensitive projects. One of the most difficult dimensions of the consultant-client relationship is handling professional differences. Consultants are typically engaged for subject matter expertise, which can conflict with organizational sensitivities and staff perspectives on how issues should be addressed. Escalation paths can be a critical tool for resolving such disagreements.
Contract Management
Contractual terms specify processes such as overall schedules, progress payments, and penalties for non-performance. Project managers and departments ensure that consultant payments align with project milestones, to ensure accountability and timely progress.
Performance Management and Quality Control
Effective performance management requires establishing clear standards for deliverables, timelines, and budget compliance, as well as regular reviews and prompt resolution of issues.
The ongoing review is ensuring that clear expectations are reinforced throughout consultant engagements. This includes staff responsibilities for oversight and quality assurance during the engagement, while recognizing that consultant engagements involve a level of independence to be exercised by the consultant and limitations on staff ability to direct certain elements of work.
Risk Management
Project managers are responsible for identifying, categorizing, and mitigating risks associated with consultant projects. This includes structured risk assessments that weigh probability, impact, and mitigation strategies. Ideally, risks will be surfaced early and reviewed routinely. This is an area that is currently largely handled informally, and therefore a point of review in the current effort.
Closeout and Evaluation
Post-project review assesses the extent to which project objectives were met and identifies lessons learned that can be applied in the future, as well as evaluates consultant performance to provide back to the provider and inform future engagements. The ongoing review is confirming expectations for such review and implementing practices.
FISCAL/RESOURCE IMPACT
The activities described in this report are being conducted within existing city resources.
STAKEHOLDER ENGAGEMENT
Staff invites feedback from City Council and public through this study session and in response to this report, to ensure their perspectives are reflected in the work underway. Looking ahead, staff also intends to seek feedback from consultants the city has worked with in the past and present.
As reflected in the workplan, engagement of City staff and the consultant community is an integral part of ensuring this work is grounded in current practice and results in implementable conclusions.
ENVIRONMENTAL REVIEW
The work is not a project as defined in the California Environmental Quality Act (CEQA).
ATTACHMENTS
Attachment A: Consultant Contracts Approved by City Council in 2024 APPROVED BY: Ed Shikada, City Manager