1 City of Palo Alto
Office of the City Auditor
Contract Solicitation and Authority Levels Advisory
Report
November 25, 2025
Contents
Baker Tilly Advisory Group, LP and Baker Tilly US, LLP, trading as Baker Tilly, operate under an alternative practice structure and are members of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. Baker Tilly US, LLP is a licensed CPA firm that provides assurance services to its clients. Baker Tilly Advisory Group, LP and its subsidiary entities provide tax and consulting services to their clients and are not licensed CPA firms.
EXECUTIVE SUMMARY .................................................................................................. 1 PURPOSE OF THE ASSESSMENT ........................................................................................................ 1 REPORT HIGHLIGHTS ............................................................................................................................... 1 INTRODUCTION ............................................................................................................... 5 OBJECTIVE ................................................................................................................................................... 5 BACKGROUND ............................................................................................................................................. 5 SCOPE AND PROCEDURES ................................................................................................................... 6 DETAILED ANALYSIS ..................................................................................................... 7 APPENDICES .....................................................................................................................
APPENDIX A: CITY OF PALO ALTO CURRENT STATE ................................................................ 16 APPENDIX B: BENCHMARKING SUMMARY ..................................................................................... 17
1 Executive Summary
Purpose of the Assessment
Baker Tilly Advisory Group, LP (Baker Tilly), in its capacity serving as the Office of the City Auditor (OCA) for the City of Palo Alto (the City or Palo Alto), conducted a Contract Solicitation and Authority Levels Advisory Project based on approved Task Order 4.40 as part of the City’s Fiscal Year (FY) 2026 Audit Plan. The objective of this project was to assess and benchmark the City’s current solicitation and signature authority thresholds.
Report Highlights
Observation 1:
(Page 5)
Updating the City’s procurement procedures will improve purchasing processes, eliminate administrative inefficiencies and better align the City with peer and industry best practices.
The City’s procurement procedures, primarily codified under Chapter 2.30 of the Municipal Code, Contracts and Purchasing Procedures ordinance1, were last updated in 2016 and no longer fully reflect current market realities. Since the last revision, costs have risen significantly, by an estimated 35–67%, while purchasing thresholds have remained unchanged. This gap has led to increased administrative steps and delays, making routine purchases more cumbersome and reducing vendor engagement.
Compared to 15 benchmarked jurisdictions, Palo Alto’s competitive bidding thresholds are among some of the lowest in the region. The City is one of only two jurisdictions that have not updated their procedures since 2021. In addition, exemptions and purchasing card (P-Card) limits have not kept pace with operational needs or inflation, further constraining flexibility and efficiency.
Many peer cities have updated their procedures within the past five years, adopting higher thresholds and flexible frameworks, such as the California Uniform Public Construction Cost Accounting Act (CUPCCAA), to improve efficiency and responsiveness.
Current limits require formal solicitation for General Services and Goods contracts exceeding $50,000 and Professional Services and Public Works contracts exceeding $85,000. Informal bidding for purchases as low as $10,000 is required for Public Works, Goods and General Services, which forces staff to engage in time-consuming processes for relatively small transactions. These requirements divert resources from higher-value priorities and increase staff workload According to staff, rising costs for goods and services, combined with unchanged thresholds, have further amplified these challenges, reducing flexibility and slowing project delivery.
Benchmarking against peer jurisdictions shows that most comparable cities set informal bid thresholds between $15,000 and $75,000 and formal bid
1 Chapter 2.30 CONTRACTS AND PURCHASING PROCEDURES*
2 EXECUTIVE SUMMARY
thresholds between $100,000 and $250,000, often incorporating annual inflation adjustments and streamlined processes for amendments and change orders. In contrast, Palo Alto’s limits result in more frequent formal solicitations, longer procurement cycles, and increased administrative burden. These practices not only strain internal resources but may also risk discouraging vendor participation if the process is seen as too complex and/or not worth the effort for the size of the opportunity. This could potentially lead to reduced competition and vendor attrition.
Additionally, the City’s P-Card transaction limit of $10,000, unchanged since 2016, has lost more than 25% of its purchasing power due to inflation. This erosion results in staff having to initiate formal procurement processes for routine purchases that previously fell under the P-Card threshold, adding unnecessary steps and delays.
Finally, the City’s signature authority levels are also among the lowest in the region, creating administrative inefficiencies and operational delays. Contract signature authority is divided between the Procurement Officer, City Manager, and City Council. In general, the Procurement Officer may award most public works, goods, general services, and professional services contracts up to $85,000 per contract year for terms up to three years. The City Manager has signing authority up to $85,000 for general and professional services contracts and up to up to $250,000 per year for Public Works and goods contracts.
Contracts exceeding $250,000 per year require Council approval. For many peer cities, the City Manager has signing authority up to $100,000 or more for all contracts.
3 EXECUTIVE SUMMARY
Recommendation:
We recommend the City conduct a comprehensive review of its Contracts and Purchasing Procedures ordinance and related policies, update solicitation requirements and authority levels to reflect current market conditions and consider adopting best practices from peer cities. In updating the procurement policy and related City ordinance, the City should consider the following elements:
Increase Bid and Signature Authority Level Thresholds
The City should raise informal and formal solicitation thresholds and related authority levels to align with regional practices and reduce administrative burdens, shorten processing times, and reduce the number of contracts requiring Council review . In conjunction with raising bid thresholds, the City should consider increasing the City’s signature authority levels to align with procurement processes, increase efficiency and reduce operational delays.
Annual CPI Adjustment
The City should consider incorporating an inflation-based adjustment mechanism into the City’s Municipal Code which would ensure thresholds remain current without requiring frequent ordinance amendments. This approach is consistent with practices observed in cities such as Redwood City and San Jose, which adjust thresholds annually based on cost indices.
Consider CUPCCAA Adoption
Seven of the 15 benchmarked jurisdictions have adopted the CUPCCAA. This framework allows informal bidding for public works projects up to $220,000 and formal bidding only above that amount, significantly reducing administrative steps for smaller projects.
Expand Exemptions
Adding exemptions for IT-related purchases (such as software renewals and subscriptions), and specialized services would reduce delays for routine or unique needs. Benchmarking shows that several peer cities include these exemptions to improve efficiency and vendor engagement.
Increase P-Card Thresholds
The City should consider updating the City’s P-Card transaction limit from $10,000 to at least $15,000, or to the inflation-adjusted equivalent, to restore purchasing power lost since 2016. The City should also establish a process for periodic review and adjustment of P-Card limits based on inflation and benchmarking data to ensure thresholds remain relevant and effective over time.
Standard Review Process
The City should consider the feasibility of establishing a formal review cycle requiring the City’s procurement ordinance be evaluated and
4 EXECUTIVE SUMMARY
updated at least every five years. This process should include benchmarking thresholds against current market conditions, integrating regulatory changes, assessing staff workload, and documenting revisions for transparency.
5 Introduction
2 See Ordinance 5387 of the Council of the City of Palo Alto Amending Chapter 2.30 of the Palo Alto Municipal Code 3 Department of General Services (DGS) California Construction Cost Index CCCI, DGS California Construction Cost Index CCCI 4 Municipal Cost Index (MCI), developed by American City & County, The Municipal Cost Index | Smart Cities Dive 5 U.S. Bureau of Labor Statistics, Employment Cost Index, ECI, ECI Home : U.S. Bureau of Labor Statistics 6 Procurement Thresholds Reimagined: Implementing the Ideal Approach for Your Government Objective The purpose of this assessment was to assess and benchmark the City’s current contract solicitation and approval authority level thresholds.
Background The City is required to follow procurement rules and regulations outlined in the Municipal Code and applicable State laws to ensure fair competition, transparency, and cost-effective use of taxpayer dollars. These requirements govern how goods, services, and public works projects are solicited and awarded, including thresholds for informal and formal bidding and authority levels for contract approval.
The City’s procurement procedures were last amended in 20162. Since then, market conditions and costs have changed significantly. According to industry cost indices and economic benchmarks, construction costs have increased by approximately 67%3, goods and general services by 41%4, and professional services by 35%5. Despite these changes, solicitation thresholds and authority levels have remained static, creating inefficiencies and administrative burdens.
According to research from the Partners for Public Good’s Procurement Excellence Network
6, benefits of regularly reviewing and updating procurement thresholds include increasing administrative efficiency by reducing time spent on lower-risk purchases, adapting to inflation to ensure thresholds don’t become obsolete, and improving responsiveness by allowing agencies to meet operational needs more quickly for routine purchases. While determining how much to increase thresholds, cities should consider the need for oversight and transparency, maintaining visibility over competitive purchases, and continuing to ensure accountability.
The OCA assessed the City’s contract solicitation requirements and authority levels to evaluate their effectiveness and alignment with best practices. The review included analysis of policies, municipal code, contract inventory, and benchmarking against peer jurisdictions. The assessment found that Palo Alto’s procurement thresholds, summarized in Table 1 (on page 5), are significantly lower than those of comparable cities. These low thresholds may have resulted in high administrative burden, longer procurement cycles, and reduced operational efficiency.
6 INTRODUCTION
Table 1: Palo Alto Solicitation Processes & Thresholds
Purchase
Category
Estimated Dollar
Amount Solicitation Method
Goods
$0 to $10,000 None, price comparisons encouraged
$10,001 to $50,000 Informal request for quotations (RFQ) Greater than $50,000 Formal RFQ
General
Services
$0 to $10,000 None, price comparisons encouraged
$10,001 to $50,000 Informal RFQ or RFP
Greater than $50,000 Formal RFQ or RFP
Professional
Services
$0 to $50,000 None, best value comparisons encouraged
$50,001 to $85,000 Informal RFP
Greater than $85,000 Formal RFP
Public Works
Construction
$0 to $10,000 None, price comparisons encouraged
$10,001 to $85,000 Informal invitation for bids (IFB)
Greater than $85,000 Formal IFB or formal RFP design-build
Departments report spending increasing time on solicitation processes, diverting resources from core responsibilities and voiced concerns that vendors may be discouraged from bidding due to lengthy processes.
Scope and
Procedures
The OCA performed the following procedures:
• Reviewed the City’s procurement policies, procedures, and Municipal Code to understand current solicitation requirements and approval authority levels. • Interviewed key stakeholders, including department managers, purchasing staff, and the City Attorney’s office, to gain insight into workflow challenges and operational impacts of existing thresholds.
• Benchmarked Palo Alto’s thresholds against peer cities and counties, including bid and approval limits, P-Card limits, and practices such as inflation adjustments and exemptions for specialized contracts (See Appendix A for Palo Alto current state and Appendix B for benchmarking results).
• Reviewed current procurement processes and analyzed contract inventory data to evaluate timeliness of contract execution and administrative burden. • Performed analysis of solicitation and contract data to determine the frequency of formal versus informal bids, identify bottlenecks, and assess the potential impact of raising authority levels on efficiency and compliance.
• Completed this assessment report based on supporting evidence gathered from policies, interviews, benchmarking, and data analysis.
The OCA greatly appreciates the support of the many departments who helped in conducting this assessment.
Thank you!
7 DETAILED ANALYSIS
Detailed Analysis
Updating the City’s procurement procedures will improve purchasing processes, eliminate administrative inefficiencies and better align the City with peer and industry best practices.
Background
Palo Alto’s procurement procedures were last comprehensively reviewed and updated in 2016, as reflected in Ordinance No. 5387. The Municipal Code establishes requirements for competitive solicitation, approval authority levels, and contract management for goods, services, and public works.
Current thresholds require informal bidding for purchases above $10,000 and formal bidding for contracts exceeding $85,000. Professional services and goods contracts above $50,000 also trigger additional formal bidding requirements. The Municipal Code allows for a one-time, six-month extension of contracts without increasing the budget, but any increase in contract value requires full City Council approval. Exemptions exist for emergency procurements, sole-source contracts, and certain legal and utility agreements, but routine purchases and amendments often require multiple layers of review and Council involvement. The policy does not include automatic inflation adjustments or separate thresholds for IT purchases, which has led to increased administrative workload and delays as costs have risen since the last update. Compared to peer cities, Palo Alto’s thresholds are among the lowest in the region, and the policy has not kept pace with changes in market conditions or best practices.
Outdated Policy and Static Thresholds
The City’s procurement procedures have not been updated to reflect significant changes in the cost of goods, services, and construction since 2016. According to industry cost indices and economic benchmarks, cost indices have increased significantly since the City’s last policy update in 2016: the California Construction Cost Index (CCCI) for Public Works rose by 67%, the Municipal Cost Index (MCI) for goods and general services increased by 41%, and the Employment Cost Index (ECI) for professional services rose by 35%. Despite these substantial increases, Palo Alto’s solicitation thresholds have remained static.
Benchmarking against 15 peer jurisdictions (See Appendix B for detailed benchmarking results) shows that Palo Alto’s thresholds are among the lowest in the region, and the City is one of only two jurisdictions that have not updated its procurement procedures since 2021. Additionally, as seen in Table 2 below, most peers revised their policies between 2021 and 2025, and nearly half have adopted the CUPCCAA, which allows for higher thresholds which may reduce the time it takes for these procurements as it reduces the number of steps staff need to complete.
8 DETAILED ANALYSIS
Table 2: CUPCCAA Adoption and Policy Revision by Agency
Benchmarked City CUPCCAA Year of Last Policy
Revision
City of Palo Alto No 2016
City of Campbell No 2024
City of Cupertino Yes 2024
City of Fremont Yes 2021
City of Gilroy Yes 2023
City of Hayward No 2024
City of Los Altos No 2016
City of Milpitas Yes 2021
City of Mountain View Yes 2025
City of Redwood City No 2021
City of San Jose No 2021
City of San Mateo No Not publicly available
City of Santa Clara No 2021
City of Sunnyvale No 2021
County of San Mateo Yes Not publicly available
County of Santa Clara Yes 2021
Operational Inefficiencies
The current procurement procedures creates inefficiencies that affect day-to-day operations and the City’s overall ability to deliver services. As noted in walkthroughs with key personnel, some routine purchases and professional service contracts can take up to five months to complete, capital improvement project contracts often take up to six months, and even emergency purchases are delayed, sometimes resulting in additional costs, due to the current contracting processes and thresholds. It should be noted that many purchases are made within reasonable timeframes. In general, there are many steps in the procurement process that are necessary to support the City’s overall public procurement objectives of transparency and government fiscal oversight.
Departments are also seeing more instances where no bids are submitted, leading them to bundle contracts to attract vendor interest. Because solicitation thresholds remain low, staff must conduct formal solicitations or full RFP processes for relatively small purchases, diverting time and resources from core program work and discouraging vendor participation, particularly among smaller providers who find the process burdensome.
Procurement Timeliness and Contract Inventory
According to the Key Performance Measures as published on the City’s budget document, the average time from receipt of a Purchase Requisition to a Purchase Order is 21 days, however, some procurements can take longer depending on their complexity. In FY 2024, the City processed 1,578 Purchase Orders and Purchase Requisitions and an estimated 1,600 in FY25. Staff interviews and process reviews indicate that routine purchases are delayed, and resources are diverted from higher- value activities to manage solicitation paperwork and approvals.
The volume of purchase orders and requisitions, combined with processing times, highlights inefficiencies created in the current procurement process due to unchanged limits. Staff report that the time spent on procurement activities detracts from their ability to focus on core job duties and strategic
9 DETAILED ANALYSIS
initiatives. The City’s thresholds and approval processes are not scaled for current market realities, resulting in unnecessary delays and increased workload for both operational departments and central purchasing.
Low Authority Levels Compared to Peer Agencies Creating Administrative Inefficiencies
According to the City’s Municipal Code, Palo Alto’s procurement authority levels are defined by both contract type and dollar threshold. The code differentiates between Public Works (construction), Professional Services, Purchase of Goods, and General Services, each with its own solicitation and approval requirements. Purchases up to $10,000 do not require competitive bidding; those between $10,001 and $85,000 require informal bidding; and contracts exceeding $85,000 must undergo formal solicitation. While the code provides exemptions for situations such as emergencies, sole-source procurements, and certain legal or utility agreements, staff noted that obtaining approval for these exemptions can be challenging and time-consuming, often causing delays in routine purchases and adding administrative burden. To support low-dollar, routine purchases, the City sets a P-Card transaction limit of $10,000, aligning it with the no-bid threshold in the municipal code.
The following table provides an overview of Palo Alto’s contract solicitation and award limits as outlined in the Palo Alto Municipal Code (PAMC). It summarizes the competitive solicitation requirements for informal and formal processes, as well as signature authority thresholds for designated employees, the Purchasing Manager, City Manager, and City Council. These limits vary by contract type: Public Works, Purchase of Goods, General Services, and Professional Services, and establish the monetary and term parameters for approvals and oversight.
Table 3: Competitive Solicitation Process and Signature Authority by Contract Type
Contract Type7
Competitive Solicitation
Process
Signature Authority
PAMC § 2.30. 200; § 2.30. 210, § 2.30. 220
Informal Formal Designated
Employees
Purchasing
Manager City Manager City Council
Public Works
PAMC § 2.30.300
$10,001 –
$85,000
Over
$85,000
N/A Up to $85,000/yr
(up to 3 years)
PAMC § 2.30. 200
Up to $250,000/yr
(up to 3 years)
Over $250,000/yr
or over 3 years
Purchase of
Goods PAMC §
2.30.310
$10,001 –
$50,000
Over
$50,000
Up to $10,000
(up to 1 year)
Up to $85,000/yr
(up to 3 years)
Up to $250,000/yr
(up to 3 years)
Over $250,000 or
over 3 years
General Services
PAMC § 2.30.320
$10,001 –
$50,000
Over
$50,000
Up to $10,000
(up to 1 year)
Up to $85,000/yr
(up to 3 years)
Up to $85,000/yr
(up to 3 years***)
Over $85,000/yr
or over 3 years***
Prof. Services
PAMC § 2.30.330
$50,001 –
$85,000
Over
$85,000
N/A Up to $85,000/yr
(up to 3 years)
Up to $85,000/yr
(up to 3 years)
Over $85,000/yr
or over 3 years
7 *Informal Procedure:
• § 2.30.400 - Requires solicitation of 3 bids
• § 2.30.360 - subdivisions (i) and (l), create exceptions for all contracts below $10,000 in total expenditure and for professional services contracts below $50,000 in total expenditure
**Formal Procedure: § 2.30.410 and 2.30.420 – Posting on the City’s website at least five days before bid date. Special procedures apply for design-build projects (§ 2.30.490)
*** 7-year limit for: Software/hardware purchase and maintenance contracts (§ 2.30.210(l)) and contracts to lease personal property (i.e. equipment) (§ 2.30.210(l)(c))
10 DETAILED ANALYSIS
The City’s current authority levels are significantly lower than those of peer jurisdictions, resulting in administrative inefficiencies and operational challenges. Staff must devote substantial time to solicitation activities for relatively small purchases, diverting effort from core responsibilities. The City Attorney’s Office also reviews a high volume of agenda reports for routine contracts, drawing attention away from higher-value legal work. Meanwhile, staff report that rising costs for goods and services, along with outdated procurement thresholds, have lengthened project timelines and reduced staff efficiency.
These factors can discourage vendor participation, limit competition, and contribute to delays that affect service delivery. Overall, the City’s outdated authority levels drive administrative burden, reduce operational effectiveness, and increase the risk of vendor attrition.
Benchmarking against peer cities indicates that Palo Alto’s thresholds are among the lowest in the region, and the City has not adopted practices such as annual inflation adjustments or exemptions for specialized contracts that are common elsewhere. Based on interviews with staff, these factors may have contributed to delays in project execution, increased workload for staff, and potential vendor attrition. Benchmarking analysis shows that cities of similar size (See Appendix B for detailed benchmarking results) have adopted higher thresholds for informal and formal procurement, often $15,000–$75,000 for informal and $100,000–$250,000 for formal bids, as compared to Palo Alto’s $85,000 threshold. Many cities also allow for annual inflation adjustments and have streamlined approval processes for contract amendments and change orders. Palo Alto’s thresholds are among the lowest in the region, resulting in more frequent formal solicitations and slower procurement cycles.
The table below compares Palo Alto’s current procurement authority levels with those established under the CUPCCAA. It illustrates the differences in thresholds for when bids are not required, when informal bidding applies, and when formal bidding is mandated. CUPCCAA provides significantly higher limits, offering greater flexibility and efficiency for smaller projects compared to Palo Alto’s current thresholds.
Table 4: Bid Thresholds for Palo Alto vs. CUPCCAA Standards
Bid Not Required Informal Bid Formal Bid
Palo Alto <= $10,000 $10,001 - $85,000 Over $85,000 CUPCCAA <= $75,000 $75,001 - $220,000 Over $220,000
To evaluate the potential impact of raising solicitation thresholds, the OCA analyzed FY 2024 and FY 2025 contract data by dollar ranges. The table below summarizes the total value and count of contracts within each band.
11 DETAILED ANALYSIS
Table 5: FY2024 – FY2025 Palo Alto Contract Inventory Analysis
Contract Levels Sum of Total Contract
Value Count of Total Contracts
< $10,000 $ 3,940,161 1,219 Between $10k and $25k $ 6,192,058 409 Between $25k and $40k $ 5,445,840 174 Between $40k and $55k $ 8,630,636 184 Between $55k and $70k $ 3,400,334 54 Between $70k and $85k $ 6,599,229 84 Between $85k and $100k $ 3,864,291 43 Between $100k and $115k $ 3,065,924 29 Between $115k and $130k $ 2,792,671 23 Between $130k and $145k $ 1,628,213 12 Between $145k and $160k $ 3,199,049 21 Between $160k and $175k $ 3,679,467 22 Between $175k and $190k $ 2,755,697 15 Between $190k and $200k $ 389,920 2 Between $200k and $300k $ 11,546,854 48 Between $300k and $400k $ 5,758,887 17 Between $400k and $500k $ 12,209,163 27 Between $500k and $1 million $ 22,778,435 34 Between $1 million and $2 million $ 24,362,352 17 Between $2 million and $3 million $ 17,474,801 7 Between $3 million and $4 million $ 6,225,140 2 Between $4 million and $5 million $ 8,814,023 2 Greater than $5 million $ 146,268,277 12 Grand Total $ 311,021,419 2,457
If Palo Alto were to increase its formal bid requirement to $100,000, based on FY 2024 contract data, 43 contracts (1.75%) currently requiring formal bidding would shift to informal solicitation. This change would eliminate the need for Council agenda reports and possibly reduce processing time by several
12 DETAILED ANALYSIS
months per contract, freeing staff resources for higher-value work. Alternatively, if Palo Alto were to adopt CUPCCAA thresholds for Public Works contracts, the impact could be far greater.
Purchasing Card Limit – Reduced Purchasing Power
The City’s P-Card transaction limit of $10,000, set in 2016, has not been adjusted for inflation or rising costs. Based on the U.S. Bureau of Labor Statistics CPI Inflation Calculator8, $10,000 in 2016 is equivalent to approximately $13,500 in 2025, reflecting a loss of more than 25% in real purchasing power. This erosion means the current cap now limits rather than facilitates efficient purchasing, requiring staff to initiate formal procurement processes for transactions that previously fell under the P-Card threshold. These additional steps increase administrative burden, delay service delivery, and create inefficiencies for routine purchases.
By contrast, peer cities (see Appendix B for detailed benchmarking results) have recognized this need and adjusted their limits. For example, the City of San José sets its P-Card limit at $15,000.
Similarly, the City of Sunnyvale is conducting a benchmarking review to inform their upcoming update.
In August 2025, the City Auditor’s Office reported to the Policy and Services Committee on the City’s Purchasing Card Program and found that raising the City’s P-Card limit could save significant staff time and recommended the City consider updating the P-Card limit to $15,000 in line with the Federal Acquisition Regulation
9 which was updated in October 2025.
Exemptions Misaligned with Operational Needs
The Municipal Code allows exemptions for emergency purchases, sole-source procurements, and certain legal and utility agreements, however, the code does not currently provide broad exemptions for IT-related purchases (e.g., software renewals, subscriptions) or specialized services like recreation instructors. These categories often require going through the full solicitation process, even when competitive bidding offers little value. Benchmarking shows that peer jurisdictions provide broader exemptions for these types of purchases, including IT services, specialized professional services, and unique personal services. For example, cities such as Fremont, Redwood City, Sunnyvale, and Gilroy allow exemptions for software renewals, subscriptions, specialized instructors, and other categories where competition is limited or impractical. These targeted exemptions reduce administrative burden and speed up routine procurements, enabling staff to focus on higher-value activities rather than lengthy solicitations for non-competitive items.
Updating the City’s procurement procedures will help to eliminate operational risks by incorporating best practices, regulatory changes, and/or technological advancements. This should help reduce potential operational inefficiencies and inconsistency across departments and updating cost and threshold limits can reduce unnecessary approvals for routine purchases.
Recommendations
We recommend the City conduct a comprehensive review of its procurement procedures, update solicitation requirements and authority levels to reflect current market conditions and consider adopting best practices from peer cities.
The City should consider the following elements when reviewing and updating the policy:
8 U.S. Bureau of Labor Statistics CPI Inflation Calculator 9 Effective October 1, 2025, FAR Amendment: Micro-purchase threshold limit increased to $15,000
13 DETAILED ANALYSIS
Increase Bid and Signature Authority Level Thresholds
The City should raise informal and formal solicitation thresholds to align with regional practices. For example, adopting a $15,000 threshold for informal procurement and $100,000 or more for formal procurements. This change would reduce administrative burden, shorten processing times, and eliminate the need for Council review on these contracts. In conjunction with raising bid thresholds, the City should consider increasing the City’s signature authority levels to align with procurement processes, increase efficiency and reduce operational delays.
While higher thresholds may require enhanced oversight, risk remains controlled due to departmental spending is constrained by approved budgets. Additionally, training and clear compliance protocols, particularly for federally funded projects10, would ensure accountability as the City transitions to a more efficient procurement framework.
Annual CPI Adjustment
The City should consider incorporating an inflation-based adjustment mechanism into the Municipal Code which would ensure thresholds remain current without requiring frequent ordinance amendments. This approach is consistent with practices observed in cities such as Redwood City and San Jose, which adjust thresholds annually based on cost indices.
Consider CUPCCAA Adoption
Adopting the CUPCCAA like seven of the 15 benchmarked jurisdictions would allow for informal bidding on public works projects up to $220,000 and formal bidding only above that amount, significantly reducing administrative steps for smaller projects.
Expand Exemptions
Adding exemptions IT-related purchases (such as software renewals and subscriptions), and specialized services would reduce delays for routine or unique needs. Benchmarking shows that several peer cities include these exemptions to improve efficiency and vendor engagement.
Increase P-Card Thresholds
Palo Alto should consider updating the City’s P-Card transaction limit from $10,000 to at least $15,000, or to the inflation-adjusted equivalent, to restore purchasing power lost since 2016.
Increasing the limit would reduce administrative burden by minimizing unnecessary formal solicitations for routine purchases, improve operational efficiency, and align Palo Alto with the Federal Acquisition Regulation limit updated in October 2025. , which currently sets its P-Card limit at $15,000. The City should also establish a process for periodic review and adjustment of P-Card limits based on inflation and benchmarking data to ensure thresholds remain relevant and effective over time.
Standard Review Process
The City should consider the feasibility of establishing a formal review cycle requiring the procurement ordinance to be evaluated and updated at least every five years. This process
10 Projects receiving federal funds can be subject to federal procurement requirements, which may override the City’s procurement ordinance.
14 DETAILED ANALYSIS
should include benchmarking thresholds against current market conditions, integrating regulatory changes, assessing staff workload, and documenting revisions for transparency.
Implementing a periodic review system will ensure policies remain relevant, reduce operational strain, and mitigate financial and compliance risks.
15 Appendices
16 Appendix A: City of Palo Alto Current State
Table 6: Authorities and Responsibilities for Competitive Solicitations and Sourced Procurements by Category
Procurement Category
Goods/General
Services between
$10,001 and $50,000
Goods/General
Services greater
than $50,000
Professional
Services between
$50,001 and $85,000
Professional
Services greater
than $85,000
Public Works
Construction greater
than $10,000
Responsibility for preparing bid
ready specifications Departments Departments Departments Departments Departments Responsibility for conducting
solicitation Departments* Purchasing Departments* Purchasing Purchasing Competitive solicitation method Informal Formal Informal Formal Informal, up to
$85,000; Formal,
greater than $85,000
Cooperative purchasing methods Informal Informal Informal*** Not Applicable Not applicable Competitive bidding exemptions Informal** Informal** Informal** Informal** Not applicable
Reference Key:
*Departments may request that Purchasing conduct a solicitation or Purchasing may be required to conduct the solicitation. **Requests for competitive bidding exemptions must be approved by Procurement Officer and City Manager. ***Cooperative purchasing methods for Professional Services between $50,001 and $85,000 are Informal.
17 Appendix B: Benchmarking Summary
I. Bid and Approval Limits
Table 7: Approval Limits by Agency and Contract Type
Agency Public Works Material Equipment Supplies
(MES) / Goods General Services Professional Services
Formal Informal Formal Informal Formal Informal Formal Informal City of Palo Alto > $85,000 < $85,000 but >
$10,000 > $50,000 < $50,000 but >
$10,000 > $50,000 < $50,000 but >
$10,000 > $85,000 < $85,000 but >
$50,000
City of Mountain View Per CUPCAA11 Per CUPCAA Per CUPCAA Per CUPCAA but < $20,000 Per CUPCAA Per CUPCAA
but > $20,000 Per CUPCAA Per CUPCAA
but > $20,000
City of Cupertino > $220,000 < $220,000 > $220,000 < $220,000 > $220,000 < $220,000 Exempt Exempt City of Gilroy Per CUPCAA Per CUPCAA > $100,000 < $100,000 but > $5,000 > $100,000 < $100,000 but
> $5,000 None None
City of Santa Clara > $250,000 < $250,000
but > $15,000 > $250,000 < $250,000
but > $15,000 > $250,000 < $250,000
but > $15,000 N/A N/A
City of Sunnyvale > $250,000 < $100,000
but > $15,000 > $100,000 < $100,000
but > $15,000 > $100,000 < $100,000
but > $15,000 None None
City of Milpitas Per CUPCAA Per CUPCAA > $50,000 < $50,000 > $50,000 < $50,000 > $100,000 < $100,000 City of Fremont Per CUPCAA Per CUPCAA > $25,000 < $25,000 but > $5,000 > $100,00 < $100,000 >$100,000 < $100,000
City of San Jose None None > $250,000 < $250,000 but
> $10,000 > $250,000 < $250,000 but
> $10,000 None None
City of San Mateo > $100,000 < $100,000 > $100,000 < $100,000 > $100,000 < $100,000 > $100,000 < $100,000 County of Santa Clara Per CUPCAA Per CUPCAA > $100,000 < $100,000 > $100,000 < $100,000 > $300,000 < $300,000 County of San Mateo > $200,000 < $200,000 > $200,000 < $200,000 but > $5,000 > $200,000 < $200,000
but > $5,000 > $200,000 < $200,000
but > $5,000
City of Campbell > $100,000 < $100,000 > $100,000 < $100,000 > $100,000 < $100,000 > $100,000 < $100,000 City of Redwood City > $100,000 < $100,000
but >$10,000 > $100,000 < $100,000
but > $10,00 > $100,000 < $100,000
but > $10,00 N/A > $10,000
City of Los Altos > $75,000 < $75,000 but >
$5,000 > $75,000 < $75,000 but >
$5,000 > $75,000 < $75,000 but >
$5,000 > $75,000 < $75,000
City of Hayward > $35,00012
> $10,00013
< $35,000
< $10,000 > $150,000 < $150,000 > $100,000 < $100,000 > $100,000 < $100,000
11 CUPCCAA is a voluntary program that promotes uniformity in cost accounting standards and bidding procedures for public construction work performed or contracted by public agencies in California. Under CUPCCA, projects up to $75,000 may be performed by a public agency’s own workforce or through negotiated contracts or purchase orders; projects up to $220,000 may use informal bidding procedures; and projects exceeding $220,000 must follow formal bidding procedures. CUPCCAA is updated annually to increase thresholds. 12 New construction
13 Maintenance, replacement, or repair
18 Table 8: General Exemptions from Competitive Solicitation Requirements by Agency
Agency Exemptions from Competitive Solicitation Requirements City of Palo Alto
• Emergency contracts (FEMA compliance required).
• Impracticable or impossible solicitations (e.g.,
unique specifications, time constraints, grant
conditions).
• Documentation required for all exemptions.
• No bids received after solicitation.
• Sole source procurements (e.g., proprietary
products, unique parts, compatibility requirements).
• Standardization approved by City Manager.
• Insurance and bonds.
• Legal services (outside counsel, consultants,
experts).
• Private development studies funded by developers.
• Professional services ≤ $50,000.
• Cooperative purchases with other agencies.
• Piggybacking on other agency contracts.
• Utility and energy contracts (NCPA, TANC, WAPA,
PG&E, CAISO).
• Public agency construction using similar methods.
• Public utility or franchise work.
• Developer-constructed public improvements.
• City-performed public works.
• Small purchases ≤ $10,000.
• Feed-in tariff energy program purchases.
• Personnel-related professional services
(recruitment, investigations, safety).
City of Mountain View
• Professional or specialized services (e.g., attorneys, architects, engineers).
• Situations where bidding is undesirable or
impossible.
• Sole source for patented articles or processes.
• Emergency situations.
• Real property transactions serving public interest.
City of Cupertino
• Emergency purchases for operational continuity or
safety.
• Recurring or essential services with unpredictable
costs (e.g., utilities, insurance, payroll).
• Legal services per Chapter 2.18.
• Purchases from other public agencies.
• Specialized services under Gov. Code §37103.
• Sole source purchases for unique capabilities or
compatibility.
• Cooperative purchasing using other agencies’
competitive processes.
• General law city
City of Gilroy
• Emergency procurements; impracticable
solicitations.
• Professional or specialized services; public library
materials.
• Insurance, bonds, financial services; sole source
goods/services.
• Highly specialized equipment for unique activities or compatibility.
• Grant-funded procurements with conditions; surplus
property; memberships/travel; works of art; goods
for resale.
• No bids received; software renewals; HR
investigations; legal/medical services; regulatory
permits; subscriptions; reimbursements/refunds.
• Council-authorized exemptions over $100,000.
City of Santa Clara • Emergency purchases.
• Public agency purchases.
• Sole source purchases.
• Other exemptions per SCCC §§2.105.260–290.
19 City of Sunnyvale
• Professional or specialized services.
• Emergency procurements.
• Impracticable solicitations.
• Sole source goods/services.
• Insurance and bonds.
• Library materials.
• Grant-funded procurements.
• Intergovernmental agreements.
• Works of art, entertainment, or performance.
• Surplus property.
• Memberships/travel; advertisements; goods for
resale.
• No bids received.
City of Milpitas • Emergency authority.
• Public agency purchases.
• Sole source procurements.
• Council-authorized exemptions.
• General law city
City of Fremont
• Utility services.
• Equipment maintenance by manufacturer/dealer.
• Software upgrades/license renewals.
• Insurance and bonds.
• Legal services.
• Private development studies.
• Unique personal services (e.g., instructors,
performers).
• Purchases under price contracts.
• Personal property/services ≤ $5,000.
• General law city
City of San Jose
• Intergovernmental contracts.
• Public utility contracts.
• Developer contracts.
• Specialty work.
• Urgent necessity.
• Idle act situations.
City of San Mateo
• Emergencies.
• Impracticable solicitations.
• Insurance.
• Franchises.
• Attorney/expert employment.
• Community service funding.
• Intergovernmental contracts.
• Use of State or other city bids.
County of Santa Clara • No exemptions beyond standard provisions.
County of San Mateo
• Emergencies.
• Impracticable solicitations.
• Insurance.
• Franchises.
• Attorney/expert employment.
• Community service funding.
• Intergovernmental contracts.
• Use of State or other city bids.
City of Campbell • No exemptions beyond standard provisions. • General law city City of Redwood City
• Sole source purchases (requires City Manager
recommendation and approval by five Council
members).
• Purchases ≤ $10,000 for goods, services, or public
works.
• City Council may waive bidding if in City’s best
interest or less expensive alternatives exist.
• Emergency procurements when immediate action is
required
• Other exemptions per City Charter
• Purchases not suited to competitive bidding
City of Los Altos • Emergency purchases from nearest available source.
• Purchases below Council-set threshold.
• Sole source purchases when only one vendor exists.
• General law city
City of Hayward • No exemptions beyond standard provisions.
20 Table 9: Sole Source and Proprietor Procurements Ordinances by Agency
Agency Sole Source and Proprietor Procurements
City of Palo Alto
• Contracts for goods, wholesale commodities and services, general services or professional services available from only one source, where the Procurement Officer has determined in writing that there are no adequate substitutes or equivalent providers.
City of Mountain View
• Contracts involving the obtaining of professional or specialized services, including, but not limited to, services rendered by attorneys, architects, engineers, accountants and specialized consultants, except contracts for "certain services" as defined in Section 2.204
City of Cupertino
• Specialized Services Purchase: Specialized services and advice, in accordance with Government Code Section 37103, for financial, economic, accounting, or administrative matters are exempt from a competitive process.
• Sole Source Purchase: Purchases from a single entity that possess the unique ability, capability, equipment, technology, patent or copyright to O31meet the City’s need based on standardization, compatibility or operational requirement.
City of Gilroy
• Single or sole source goods or services as defined herein • Highly specialized equipment developed or designed for a special activity or function or whose purpose is in the best interests of the City due to compatibility with existing equipment or training of personnel.
City of Santa Clara
• A procurement shall be exempted from the requirements of subsection (a) of this section if the Purchasing Division Manager has determined that a particular product or general service may be specifically designated by reason of one or more of the following purposes:
• To acquire a specific product or performance for the purpose of conducting a field test or experiment to determine the product’s suitability for use
• When required to ensure operation or function to match other products with respect to the repair, expansion or completion of a system, existing structure or program currently in use by the City, including, but not limited to, utility and technology purchases required to achieve interoperability with existing systems or programs • When the purchase of an item is only available from one source (sole source) • When a service is considered unique or unusual such that requirements for competitive procurement are contrary to public interest; and
• In order to make an emergency purchase pursuant to this chapter City of Sunnyvale • Professional or specialized services • Sole source goods or services
City of Milpitas
• A contract may be awarded without competition when the Purchasing Agent determines in writing, after conducting a good faith review of available sources, that only one viable source exists for the required supplies, material, equipment, or general service, or that there is a compelling reason for using only one source.
21 City of Fremont
• The city may enter into a contract for personal property or services without complying with the competitive procurement requirements of this chapter in accordance with the following:
• The requesting department shall evaluate available sources to determine whether there is only one source capable of competently and efficiently providing the required personal property or service. • If it is determined that there is only a single source for the purchasing of a particular item or service, the requesting department shall prepare a request for exemption from competitive solicitation and submit it to the purchasing manager.
• If it is determined that there is only a single source for the purchasing of a particular item or service, upon review and approval of the request by the purchasing manager and the city manager, the city may award the contract to the sole source vendor or service provider without competitive procurement. • Examples of acceptable sole source purchases are: equipment for which there is no comparable competitive product, proprietary products sold directly from the manufacturer, a component or replacement part for which there is no commercially available substitute and which can be obtained only from the manufacturer, items where there is only one authorized distributor in the area, and items where compatibility with items in use by the city is an overriding consideration. (Ord. 2494 § 1, 12-3-02; Ord. 8-2011 § 14(D), 7-12-11. 1990 Code § 2-9703.)
City of San Jose • Procurement authority may make purchases of supplies, materials or equipment which can be obtained from only one vendor or manufacturer
City of San Mateo • None
County of Santa Clara • None
County of San Mateo • Contractor is a sole source
City of Campbell • None
City of Redwood City
• A purchase may be made or contract awarded without a competitive bidding process when there is only one (1) reasonable and practicable source for the required goods, materials, equipment, supplies or support service because of its uniqueness, quality, durability, availability, compatibility with existing City programs, equipment or systems or fitness for a particular use. Such a sole source purchase must be determined to meet these requirements and be recommended for approval by the City Manager and shall be approved only on the affirmative votes of at least five (5) members of the City Council.
City of Los Altos • None
City of Hayward • None
22 Table 10: Exemptions Continued – Community Services Department and Information Technology
Note: The benchmarked cities excluded from this summary were found to have no CSD or IT exemptions, including: City of Palo Alto, City of Mountain View, City of Cupertino, City of Gilroy, City of Santa Clara, City of Sunnyvale, City of Milpitas, City of San Jose, City of San Mateo, County of San Matro, County of Santa Clara, City of Campbell, City of Los Altos, City of Hayward
Agency Community Services Department Information Technology City of Fremont
Contracts for services where selection is based on a
unique personal accomplishment or characteristic
such as guest speakers, performers, artists,
recreation instructors, trainers, and facilitators.
Software upgrades and maintenance, software license renewals, and operating system maintenance services where the city has previously procured software and operating systems.
City of Redwood City
N/A Purchases Not Susceptible to Competitive Bidding Process:
Except where otherwise required by federal law or by reason of the source of funding for the project, goods and services may be obtained without a competitive bidding process where such purchases are not readily adaptable to the open market and bidding processes. Such purchases include, but shall not be limited to:
1. Utility services (telephone, gas, water, sewer and electricity) provided to City buildings and facilities;
2. Franchises awarded by the City Council;
3. Insurance or bond premiums; and
4. Subscriptions, memberships, software licenses,
advertisements and travel expenses.
23 II. Purchasing Card Survey
Table 11: Purchasing Card Survey Results
The table below summarizes P-Card limits and related practices for Palo Alto and selected peer cities. It includes daily or transaction limits, monthly limits, effectiveness of current limits, the date of the last increase, and how limits are established. This information provides insight into how other jurisdictions manage purchasing flexibility and administrative efficiency. OCA contacted 15 peer jurisdictions and received responses from the following agencies.
Agency Daily / Transaction
Purchase Limits
Monthly Purchase
Limits
Effectiveness of
Limits in the City
Date of Last
Purchasing Limit
Increase
How Are Card Limits
Established
City of Palo Alto
$10,000 Data not stated in
municipal code
Currently under review by
OCA for adequacy
2016 Set through policies in the
Purchasing Manual and
delegated by the City
Manager and
Procurement Officer
City of Cupertino
No daily limit; single
transaction limit $1,000
Monthly limit of $2,000;
higher amounts approved
based on transaction
needs
Current limits meet the
needs of most P-card
holders. Flexibility to
increase single-
transaction or monthly
limits, with approved
justification, reduces the
need to modify the
standard limits.
September 2025 Determined as an
administrative decision
informed with knowledge
from other city’s standard
limits
City of Gilroy
No daily limit; single
transaction limit $1,000
Varies by department;
generally, $2,500–
$10,000
Limits currently in use;
functioning for City needs
During COVID Based on internal process
and City Administrator
City of Sunnyvale
No daily limit; single
transaction limit $1,000
Monthly limit of $2,000 Increasing limits based on
benchmarking study of
surrounding cities
Last increased over 12
years ago
Based on internal analysis
and benchmarking; not
tied to federal or
association standards
City of San Jose
No daily limit; single
transaction limit $10,000
No monthly limit at
program level
Planning to raise single
transaction limit to
$15,000 to align with
updated Municipal Code
April 2024 Based on Municipal Code
and City policies