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3 Table of Contents
1. Introduction ................................................................................................................... 4
2. Purpose and Overall Approach........................................................................................ 4
3. Precursors to Outsourcing............................................................................................... 5
3.A Annual Budget Cycle Review .............................................................................................. 5
3.B Initiating New and Unbudgeted Projects ........................................................................... 6
3.C Financial Tracking of Contracts........................................................................................... 7
4. The Outsourcing Process................................................................................................. 7
4.A Developing the RFP Scope of Services................................................................................ 7
4.B Selection of Contract Terms and Conditions...................................................................... 9
4.C Scoping Community Engagement..................................................................................... 10
4.D Finalizing the Scope of Services........................................................................................ 11
4.E Service Provider Selection and Potential Efficiencies....................................................... 11
4.F Handling Inadequate Proposals........................................................................................ 12
4.G Finalizing the Scope of Services and Contract .................................................................. 12
5. Contract Management.................................................................................................. 13
5.A Budget Adherence and Invoicing...................................................................................... 13
5.B Performance Management, Quality Control, and Timeliness.......................................... 13
5.C Managing High-Visibility and Controversial Projects........................................................ 14
5.D Stakeholder Engagement.................................................................................................. 16
5.E Closeout and Evaluation ................................................................................................... 16
6. Appendices *Finalization of appendices is currently in progress and therefore not included* ............................................................................................................................ 16 4 1. Introduction
This document provides a guide for City of Palo Alto staff on methods to ensure effective and valuable engagement with professional consultants. It is intended to provide a comprehensive guide and continuous improvement approach to decision-making and staff responsibilities for budgeting, contracting, relationship and project management, and interface with community members. This guide focuses specifically on consultants engaged in the preparation of studies, plans, and similar types of services.
This resource provides citywide guidance on best practices, and the interdepartmental team that contributed to its development can be appropriately proud of setting a new standard in municipal management. It should be recognized, however, that even a well-executed project can sometimes experience a negative outcome. Misaligned stakeholder expectations, shifting goals, and community division are some of the factors that could lead to poorly received work products. In addition, not every project requires extensive management. City staff are responsible for balancing competing needs, so the tools and practices reflected in this guide should be considered resources where needed rather than a performance standard. Individual departments may also provide more specific direction reflecting specialized work that supplement the guidance provided here.
2. Purpose and Overall Approach
The purpose of this guide is to set clear guidance and expectations in consultant engagement while maintaining flexibility for specific situations and promoting professional growth. The effective use of consultant services requires the involvement of organizational practices, expectations, and responsibilities of City project managers, management, and others involved.
Overall, the practices and tools provided through this guide reflect the following key principles:
● Contracting is a partnership, requiring engagement and diligence from both the City and consultants (service providers).
● Service providers bring subject matter experience, technical expertise, frequently professional licenses, and proprietary tools.
● Staff bring local knowledge, including, an understanding of community expectations, sources of available information, City resources, Council priorities, and established practices. While consultants may perform specific tasks, the City retains ownership, accountability, and informed oversight of the work and its outcomes. ● Balancing these perspectives requires engagement, skill, regular training, and teamwork.
5 Reflecting the common steps through which consultant projects are planned and implemented, this guide focuses on enhancing organizational effectiveness and practices across the typical life cycle of consultant engagements.
3. Precursors to Outsourcing
3.A Annual Budget Cycle Review
On an annual basis, the City Council has two primary touchpoints on overall consultant usage.
These are the annual budget adoption that occurs before the beginning of each fiscal year, and the other is the annual priority setting that occurs at the beginning of each calendar year.
Budgeting for consultant services is typically handled through the annual budget process at an aggregated level, with funding needs appropriated through each department’s Contractual Services line item. Contractual Services currently includes all contract services, so professional services are likely a subset of department line-item budgets and require specific review.
Alternatively, a special funding allocation may be made as a result of a grant or special City Council action.
Each fiscal year, the Office of Management and Budget will issue guidance to departments on budget development. Through each annual budget development process, Departments review Contractual Services line items with the Budget Office and City Manager’s Office to (a) discuss anticipated consultant projects and funding required, and (b) to determine whether fundings would be better allocated toward hiring in-house staff to complete the required work on an ongoing basis. The following considerations can guide this review:
a. Distinguishing Staffing/Augmentation and/both Technical/Subject Matter Experts:
Staffing augmentation contracts temporarily increase workforce capacity without permanent hires. Technical services contracts allow the City to gain technical expertise from firms or subject matter experts who have special skillsets, capabilities, or deep knowledge in specific areas not available in-house. Both types of contracts allow the City to respond efficiently to varying workload demands and specialized project requirements. Lead departments should consult with the City Attorney’s Office and Human Resources Department to ensure the terms of the staffing augmentation align with the City's legal, labor, and operational requirements. b. Ensuring Comprehensive Budget Estimates: Staff time required for project management, oversight, and coordination must also be accounted for in workplans through FTE (fulltime equivalent) staff allocation and should reflect realistic estimates that incorporate contingencies and additional services as needed. Absent specific estimates, staff time 6 equal to 10-20% of anticipated consultant costs should be allocated for staff project management. If not included in consultant costs, budgets must account for all applicable resources required for anticipated projects such as technology licenses, office space, and vehicles. Including administrative costs and timelines associated with outsourcing is necessary for a comprehensive evaluation of trade-offs. c. Balancing Consultant Services and In-House Staffing: Staff should evaluate where on-call services might be more effective if converted to additional in-house staffing. This may depend on skills required as well as the frequency of services required. Adding staff may be justifiable when the resources involved are expected to be required for 3-5 years or more. Where specialties may be needed, overall consultant costs may be reduced by City staff handling administrative and other elements including community engagement.
The results of this evaluation will be integrated into the existing budget planning workflow and discussed among departments, the Budget Office, and City Manager’s Office in preparation of the annual proposed budget. Appendix A – Professional Services Cost Evaluation provides the overview of the expected additions to the budget review.
The current approach to large contract budget appropriation is an overall review and justification for the entire project. Future budget development will include evaluation of the contract by each line-item.
d. Developing an Initial Scope: Large, complex, or high-risk projects can benefit from development of an initial scope of work for department management and City Manager’s Office (CMO) review. Similar to a budget justification, this would be a short internal summary of the business need, desired outcomes, why consultant support is needed, anticipated deliverables, and the expected roles of city staff versus the consultant. Incorporating this step will help align expectations early, support budgeting and staffing estimates, as well as result in a clearer, more focused final scope of work.
As referenced above, at the beginning of each calendar year the City Council annually sets priorities for the upcoming year. As a part of this process, specific projects (or objectives) may be identified that staff anticipates will require consultant assistance. In order to enable the City Council to select priorities with awareness of consultant needs, staff will include this information as part of the priority-setting process.
3.B Initiating New and Unbudgeted Projects
Consultant engagements may also be initiated outside the annual budget process, typically as a result of City Council direction, involving budget amendments where needed. Where such project assignments arise, departments should use the evaluation method described in Section
4.A to estimate staff allocation required for project management. 7 At the start of each calendar year, the City Council sets priorities for the year. Given recent increased interest in monitoring the use of consultants, staff will identify priority projects that will likely involve consultants. This enables the City Council to consider this when determining how many and which initiatives should be prioritized for the year.
3.C Financial Tracking of Contracts
Effective in 2026, all professional service engagements are assigned internal order number “90240 - Professional Services” to individual contract requests. This practice will remain in effect while SAP is the current system and will be updated as systems evolve. Staff will provide the City Council a consolidated summary report semiannually to promote ongoing awareness and decision-making.
Private development professional agreements will be excluded from reporting as this activity is exempt from competitive solicitation requirements (Municipal Code Section 2.30.360(h). These agreements are funded wholly by private developers for private development related studies and services. Community Services Department service contracts for specific individual’s unique skills or creative output such as recreation instructors, art instructors and performers will also be excluded from the reporting and Legal Services contracts that are exempt per PAMC
2.30.360(g).
Master agreements are consultant contracts established for “as needed” or “on-call” services, where a contract is established without a specific scope of services. The City has used master agreements as an efficient means of completing the procurement process in order to have one or several consultants ready to start when specific projects are initiated. Task orders are then issued to the consultant with a specific scope of services and budget. In order to ensure consistent practices, all task orders valued at $100,000 or higher require City Manager approval. This threshold will be periodically reviewed and subject to change (Appendix B – Task Order Template).
4. The Outsourcing Process
4.A Developing the RFP Scope of Services
Once the decision to engage consultant services has been made, a scope of services must be developed in order to conduct a Request for Proposals (RFP) or other solicitation. In the infrequent case of a consultant being pre-selected, this section nonetheless provides guidance for negotiating a scope of services that supports an effective outcome and staff meeting project management responsibilities.
8 The scope of services is a critical element of successful consultant engagement, as it provides the “roadmap” of tasks and deliverables to be provided. It also represents a critical step at which expectations of the products and services can be confirmed. Failure to adequately anticipate these expectations can lead not only to unsuccessful outcomes, but also the need to repeat steps and incur unnecessary costs.
Project managers should develop scopes that are outcomes-driven and reviewable, with particular attention to the following:
a. Describe deliverables with measurable indicators of sufficiency. b. Identify key milestones and timelines, including any critical deadlines. c. Structure compensation to the completion of defined tasks. d. Specify internal (“administrative”) reviews of draft deliverables where applicable, including sufficient lead time.
e. Specifically address stakeholder engagement including public meetings (see Section
4.B4.B below).
f. Where workable, structure scopes to facilitate knowledge transfer through tactics such as staff shadowing, co-facilitation, and training deliverables, especially for recurring work.
g. Consider the role of intellectual property and Artificial Intelligence in the project with clarity regarding ownership and access to work products following project completion.
It is common that scopes from prior contracts are used as a starting point. However, it is critical that such drafts be updated for current circumstances and to address the issues above.
Staff may wish to consult peer agencies for examples and lessons learned. Staff may also leverage the Scope Template Library (Appendix C), which includes examples demonstrating effective project structure and risk allocation, and productive peer reviews received prior to RFP issuance. If staff have examples of excellent work to contribute to the library, they may contact the CMO coordinator to add them to the appendix SharePoint folder.
A key consideration in developing a scope of work is defining the role of City staff relative to the consultant. In particular, the scope should reflect how staff will bring local knowledge (possessed by staff or other stakeholders) to inform the work. Here are elements to consider in defining the scope:
a. Identify prior work such as studies or plans that should be shared and reviewed with the 9 consultant.
b. In addition to direct references, are there indirect but relevant recent events or circumstances that the consultant should be aware of? Consider “onboarding” meeting(s) between the consultant and key stakeholders early in the work to provide the consultant with any needed context.
c. The scope of services should provide an initial outline of stakeholder engagement, to be refined collaboratively with the consultant, as the City will typically have a better sense than the consultant of community expectations and more effective communication methods. This is described further in the next section. d. Clearly identify expected products/deliverables, such as memos, reports, and plans, including progress drafts. Also set expectations for City review of draft products and the consultant’s responsibility to respond to comments, both in terms of timeframes as well as the expected handling of feedback to the consultant. Scopes should articulate any essential stakeholder touchpoints, and where applicable, how this feedback may affect subsequent steps. The level of detail to be provided in deliverables (such as format and analysis detail) should be specified at the outset to the extent applicable to the project. e. The requested deliverables should be structured in a way that is easily translated to contract sections. Task 1 should correspond to a similar label in the contract, and have its pricing clearly marked, and so on. This is meant to minimize back and forth with Purchasing and the consultant later in the process.
Artificial Intelligence (“AI”) is playing an evolving and increasing role in the workplace, and the potential effect on the scope of service should be considered: Might some of the required work be generated by AI and how will this be quality-checked? How would this affect the cost of the required services? Questions such as these should be considered when developing the scope of work. The City Attorney’s Office and Procurement staff have developed general disclosure requirements to be incorporated into RFPs.
4.B Selection of Contract Terms and Conditions
Once a consultant is selected, the City and consultant must enter into a contract with the consultant before work can begin and payment for services can be made. Project managers should familiarize themselves with the contract terms and conditions that their consultants will be required to meet. Pre-approved contract templates are available from Purchasing and can be found in Appendix D. The template selected will depend on the type of engagement with the consultant (e.g., professional services, IT services). The scope of services, timeline of completion, and payment terms will be included as contract exhibits. 10 The overall value of the contract will determine who has authority to approve the contract. In addition, all contracts over $25,000 will need to be approved as to form by the City Attorney.
Consult with the City Attorney’s Office if any changes to the template are requested by the consultant.
The determined scope of the project requires approval of the relevant department director or their designee before proceeding.
4.C Scoping 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 should consult with the City Manager’s Office communications staff to review the community engagement plan for a project. Project managers should use the Project Coordination Plan Worksheet (Appendix E) to outline anticipated community engagement efforts. Additional resources and training on community engagement are under development.
Roles of the consultant and staff in community engagement should be carefully considered. In general, staff should take the primary responsibility for identifying key stakeholders and arranging for meeting venues and logistics. Any online engagement tools should be coordinated with the City Manager’s Office communications staff.
Palo Alto is uniquely fortunate to have residents and other community stakeholders with specific expertise and interest in volunteering to assist the City on related initiatives. Should project managers encounter a situation in which unique resident involvement might apply, they should consult with the City Manager’s Office to structure such involvement. The City’s goal would be to leverage resident expertise to support engagement and project success while ensuring objectivity and appropriate access to products in progress.
To ensure comprehensive notification of community stakeholders, project managers should reference the developed Community Engagement Guide (Appendix F). It outlines standards for what level of community engagement is required for different project types. Staff should reference the training in community engagement strategies to develop a clear scope of work that outlines project goals and anticipated levels of effort.
Engagement should be calibrated to decision points and led by City staff. Project managers should define who needs to be informed, consulted, or asked to decide, and they should schedule outreach at milestones where input will shape outcomes. Materials should be 11 accurate, accessible, and consistent with Council-adopted policies; consultants should support creation and logistics while the City sets the message and remains the primary voice of the project. The handling of stakeholder feedback should also be intentional, with responsibilities assigned as appropriate to the consultant for documenting comments and responses to comments.
4.D Finalizing the Scope of Services
Once drafted, project managers should consider the level of stakeholder engagement that should be undertaken on the RFP itself prior to issuance. In some cases, a formal review up to City Council approval of the scope of services may be warranted to ensure that the scope aligns with expectations of the work product. If required approvals are uncertain, departments should consult the City Manager’s Office.
4.E Service Provider Selection and Potential Efficiencies Consultant selection should prioritize expertise, cost, and alignment with project objectives.
The selection process is managed by the Administrative Services Department Purchasing Division, and references and training for staff to navigate this process are provided in the Purchasing Manual (Appendix G). In particular, Chapter 8 – Professional Services provides comprehensive guidance and procedures for the procurement of consultant services.
For efficiency, the City may also procure services by utilizing the competitive bidding process undertaken by another government entity (known as Piggybacking) or through a joint purchase agreement with one or more public agencies (Cooperative Purchasing).
Piggybacking: The City's utilization of the competitive solicitation process undertaken by another public entity to award a contract for goods or services.
Cooperative (Joint) Purchasing (Co-op): Procuring goods or services through a regional or national purchasing cooperative or by directly joining with one or more public agencies.
These alternative procurement methods are permissible, subject to the Municipal Code and requirements including that the other government entity or Cooperative conducted a competitive solicitation that are substantially the same as those required by the City, and that process must have been substantially similar to the competitive bidding requirements; the City will realize overall value; and that the awarding agency is preferably governed by California law.
Before moving forward with a Piggybacking process or Cooperative agreement, the Procurement Officer and/or the City Attorney’s Office must evaluate the timeliness and the ability to negotiate additional pricing reductions or more favorable contract terms (e.g., liability, indemnification, performance guarantees) beyond those in the original award.
Master Agreements: As noted previously in Section 3.C, the City may use Master Agreements 12 to secure services. Master Agreements are consultant contracts established for “as-needed” or “on-call” services, where a contract is established without a specific scope of services. This can be an efficient means of completing the procurement process in order to have one or several consultants ready to start when specific projects are initiated. Task orders are then issued to the consultant with a specific scope of services and budget.
Project managers should consult with the Procurement team on the applicability of these procurement options.
4.F Handling Inadequate Proposals
At various points in the consultant selection process, circumstances can arise that warrant a change in direction. Project Managers should evaluate these circumstances and take appropriate action to balance tensions between completing tasks and reconsidering the path forward. During the outsourcing process, some of the issues that can arise include:
• Whether budget allocations are sufficient to achieve project objectives; • Whether consultant interest in a project is sufficient to generate competitive and worthwhile proposals;
• Whether the project scope is sufficiently defined to allow consultants to prepare responsive proposals;
• Whether significant changes in project priorities, funding, schedule, or other requirements have occurred since the solicitation was developed; • Whether the proposals received demonstrate the qualifications, experience, or technical approach necessary for successful project completion.
4.G Finalizing the Scope of Services and Contract
Following selection, the selected proposal is translated into the final scope of services attached to the consultant’s contract. For simple projects this could be the consultant’s proposal as submitted. For more complex projects, however, staff will discuss and finalize the scope of services with the consultant. This provides and opportunity to confirm that the final scope of services addresses:
a. Key elements described in Section 4.D, such as deliverables and progress payments; b. Project staffing and key personnel;
c. Confirm the expected value of deliverables relative to cost, with an understanding of the consultant’s cost to produce the needed work versus work produced previously for other clients as well as AI-generated products;
d. Confirm community meetings and other engagement, boards and commission reviews, council meetings;
13 e. Comparison of costs relative to other similar work, using both internal and external references.
5. Contract Management
Effective contract management requires clear and mutually reinforced alignment between milestones, deliverables, payments, and other contract terms.
5.A Budget Adherence and Invoicing
The handling of invoices is an integral part of the client-consultant relationship. Progress payments demonstrate the City’s satisfaction with consultant work, consistent with the scope of services and compliance with agreed-upon terms. Project managers should verify invoice consistency with the following:
a. Payments for the invoiced period (e.g. monthly) should be consistent with progress toward deliverables. This should be confirmed quantitatively if provided for in contract terms, or qualitatively if not.
b. Project managers should reconcile invoices with contract milestones, verify hourly rates, and maintain a concise change log that explains scope and budget adjustments.
c. Expiration checks should be calendared, and amendments initiated early to prevent service gaps.
d. Project managers should also track payments to ensure timely payment of invoices. e. Ensure any new tasks are properly approved before authorizing work to proceed. f. At the department level, shared dashboards should show contract value, burn rates, pending invoices, and critical dates.
One of the leading causes of increased consultant costs occurs through the inconsistent handling of change orders, amendments, and additional work. The City’s Purchasing Manual (Appendix G) defines how to properly organize and execute these auxiliary steps that can become necessary for project success. The Public Works Consultant Management Guide (Appendix H) outlines things to look out for and contingencies to manage.
Contract Management Training Resources and Templates are provided in Appendix I. Invoice and Payment Tracking Tools are provided in Appendix J.
5.B Performance Management, Quality Control, and Timeliness Performance management refers to the activities involved in ensuring quality deliverables and 14 timeliness. Expectations should be measurable and reinforced in both the scope and working cadence.
The project kick-off meeting is an important first step in the successful completion of a consultant engagement. This meeting should include the primary points of contact on both the City’s and consultants’ teams and review the scope and key understandings needed for the project. See Kick-off Meeting Agenda Template (Appendix K). Among the topics to be covered are:
a. Review scope of services, schedule, and deliverables as well as roles, responsibilities, and expectations. The RACI (Responsible, Accountable, Consulted, Informed) matrix is one such method for clarifying task ownership by mapping each project task to a team role to reduce redundancies and unclaimed responsibilities. b. Discussion of escalation paths - who to contact for inadequate responsiveness, delays in projects and performance concerns. Establish standing meetings or other means of progress coordination.
c. Documentation responsibilities, including agendas and meeting notes. d. Lead time and turnaround expectations for scheduling meetings, review of deliverables. e. Discussion of any key contract terms, if needed.
Project managers should ensure that consultant work products are tailored to the City’s specific project, policy context, and stakeholder conditions. Project managers should establish the City’s expectation for originality in work products and ensure against the appearance of repackaged materials from prior engagements. In the case that deliverables appear insufficiently customized, the project manager should request revision before accepting the product.
While projects are intended to proceed smoothly, it is common for issues to arise. It is, therefore, important for protocols to be in place and proactive management to address issues before they threaten successful and timely project completion. Escalation paths provide important secondary points of contact if 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. While strict enforcement can be challenging in a collaborative environment, contract terms can reinforce expectations when needed. See example letters and guides for escalating inadequate consultant performance in Appendix L.
5.C Managing High-Visibility and Controversial Projects A key challenge that can arise in consultant engagements is how the work can proceed through 15 projects that involve a high level of community scrutiny or controversy. This can range from consultant-staff disagreements involving professional differences to public criticism of the work that can become personal in nature.
The City hires consultants to take on complex and contentious projects, to leverage their expertise that staff do not have, to provide objective and expert advice. The projects provide an outlet for residents and other stakeholders to express their advocacy, sometimes deeply emotionally expressed. Consultants often absorb a portion of that pressure, allowing staff to continue to maintain productive relationships with stakeholders they must work with on other issues.
To help navigate these dynamics, the following practices are particularly important:
a. Set expectations early in the engagement for quality of deliverables and responsiveness to issues as they arise.
b. Maintain regular progress meetings involving management from both the consultant and City, with meeting summaries and action items distributed for broader awareness and aligned goals.
c. Progress payments are linked to acceptance of deliverables, as well as payment turnaround times monitored.
d. Interdepartmental review, including CMO as well as any departments with relevant expertise are scheduled in advance to avoid delays. Project managers should consult with CMO staff to review applicability.
e. Consider a two-step process for City Council, Boards and Commissions using study sessions or committee hearings prior to action, in order to • Provide structured opportunities for technical clarifications and response from the consultant and staff, and
• allow the body to deliberate on policy direction after establishing a shared baseline of understanding
f. Structure the handling of public feedback Consider public comment period on draft products to ensure transparent community review. Particular attention should be paid to handling of comments received and other stakeholder feedback, including City Council feedback received through study sessions as well as commissions and community members. As applicable, a structured approach to capturing comments and documenting responses to comments should be incorporated into the consultant scope of services.
16 5.D Stakeholder Engagement
When consultant projects involve stakeholder engagement, in most circumstances staff must remain the primary interface with the community. Adequate time for stakeholder feedback, responses to this feedback, and adjustments to next steps should be anticipated and built into schedules.
Stakeholder engagement should proceed as described in the Project Coordination Plan Worksheet (Appendix E) referenced in Section 4.B. Should issues arise that require variance from this plan, project managers and department management should determine whether revising the worksheet would be prudent to support project completion. Approaches and methods that the City uses for community engagement are broad and tailored to the audience, type of input sought, and timing available to gain the feedback to help inform decision-making.
5.E Closeout and Evaluation
Project closeout should include confirmation of objectives met, review of team performance, and feedback to consultants. A standardized evaluation form ensures consistent reflection and improvement. This could additionally include a periodic meeting with key city staff project participants to develop lessons learned for continual training for subsequent projects.
Closeout should confirm delivery, capture learning, and inform future selections. Staff should verify that all deliverables are accepted, files are archived to the designated repository, and intellectual property and data handoffs are completed. A short performance evaluation should record quality, timeliness, collaboration, and budget stewardship and should be shared with the consultant along with any constructive feedback (Appendix M – Consultant Completion/Evaluation Template). When appropriate, a lessons-learned note should identify process improvements for internal teams and should be indexed so that future scopes and evaluations can reference it.
6. Appendices *Finalization of appendices is currently in progress and therefore not included* A. Professional Services Cost Evaluation
B. Task Order Template
C. Scope Template Library
D. Purchasing Contract Templates
E. Project Coordination Plan Worksheet
F. Community Engagement Guide
G. Purchasing Manual
17 H. Public Works Consultant Management Guide
I. Contract Management Training Resources
J. Invoice and Payment Tracking Tools
K. Kickoff Meeting Agenda Template
L. Sample Consultant Performance Escalation Letter
M. Consultant Completion/Evaluation Template
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