City Council
Staff Report
From: City Manager
Report Type: STUDY SESSION
Lead Department: City Manager
Meeting Date: October 5, 2026
Report #:2606-6480
TITLE
Best Practices in Managing Consultant Services
RECOMMENDATION
City Council discussion of ongoing work to ensure high quality and valuable services developed through the engagement of professional consultants.
EXECUTIVE SUMMARY
The City of Palo Alto relies on professional consultants to supplement staff capacity, provide specialized expertise, and advance priority projects and services. Consultants support important City work, including capital improvement planning and delivery, specialized planning and permitting services, recreation and arts programming, and community studies and plans.
The City’s goal is to ensure that each engagement is properly scoped, efficiently managed, aligned with City initiatives, and thoroughly evaluated on its outcomes. Strong consultant management practices help the City efficiently use public resources while preserving staff capacity to provide local knowledge, policy direction, community engagement, and accountability.
Since early 2025, staff has reviewed and developed best practices in this field as part of the 2026 Council Priorities workplan. An interdepartmental working group has prepared an internal Best Practices in Managing Consultant Services guide, included as Attachment A. The guide is intended to support staff from the initial decision to use a consultant through project closeout and performance evaluation.
This work has already generated benefits as its principles are being incorporated into recent and ongoing consultant projects. The next phase of work will focus on broader implementation, including staff training, pilot tools, and feedback to refine the guide.
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.
The use of consultants is critical to the City’s ability to produce the volume, pace, and range of services expected and required by the community. Consultants often provide unique skills and experience on topics of importance, such as the City’s Auditor Baker-Tilly, Independent Police Auditor OIR Group, and youth suicide prevention specialist the JED Foundation. At the same time, in order to ensure that consultant engagements produce work products that provide the value expected it is critical that expectations are set appropriately and that services provided meet these expectations.
The City has focused attention on this effort since early 2025. At its May 28, 2025 meeting, the Policy and Services Committee was presented with a workplan and 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. At the October 22, 2025 City Council meeting, City Council raised areas of interest such as when work should be performed by consultants versus City staff, how to account for long-term staffing obligations when comparing alternatives, opportunities to use local and community expertise where appropriate, consultant responsiveness to Council and community input, the availability of future-year consultant data, and the need for a more consistent approach to evaluating consultant performance.
The ongoing work has continued forward as one of the 2026 Council Priorities workplan. At its May 5, 2026 meeting, the Finance Committee discussed consultant services in the context of government efficiency, productivity, staffing impacts, transparency, and the importance of being able to measure impacts going forward.
ANALYSIS
As previously reported to the City Council, 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.
Purpose of the Consultant Management Review
The overarching goal is to clarify expectations around consultant management and reinforce 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. This effort establishes clear, practical expectations for the City staff that engage and manage consultant services. The work helps the City:
Make thoughtful decisions about whether consultant services are needed; Develop clear scopes, schedules, and expected deliverables; Maintain appropriate City oversight while respecting consultants’ professional expertise and independence;
Ensure consultants understand Palo Alto’s local context, policy direction, and community expectations;
Identify and address risks or performance concerns early; Evaluate completed work and apply lessons learned to future engagements; and Consider whether recurring consultant work may be more effectively performed by City staff over time.
The focus is primarily on professional-service engagements for studies, plans, analyses, and similar work products. These engagements require active project management because the quality and usefulness of the final product depend on both consultant expertise and effective management of the engagement by the City.
The staff work completed in keeping with these goals has involved an inter-departmental team that has examined the lifecycle of consultant engagements from initial concept and budgeting to project management, issues resolution, and closeout and evaluation. Attachment A, the Best Practices in Managing Consultant Services Guide, reflects the primary work product of this effort.
City Auditor Baker-Tilly also contributed to this work, and provided the interdepartmental team with an advisory report on best practices related to sourcing and contract administration. Their report is provided as Attachment B.
The Guide is organized along the typical steps involved in consultant engagement, including:
Assessing the need for consultant services;
Developing a clear scope of work and community engagement approach; Selecting the appropriate service provider;
Establishing project roles, communication practices, and performance expectations; Managing scope, schedule, budget, risks, and deliverables; Addressing performance concerns or changes in project direction; and Closing out projects and evaluating consultant performance.
The Guide is intended to be practical and scalable. Not every engagement requires the same level of process, documentation, or oversight. Smaller or routine assignments may require a more routine approach, while major planning efforts and complex professional-service contracts require a more structured project management.
While specifically written for use by City department staff managing projects, the Guide spans topics that involve a variety of stakeholders involved in determining the success of a consultant project. The following table outlines some of the key touchpoints for various stakeholders:
TABLE 1
Key Stakeholders at Various Points in Project Lifecycle Phase Key Stakeholders
Annual Budget, Council Priority-
Setting
City Council, City Manager’s Office, Lead Department
management
Financial Tracking Lead Departments, Administrative Services Outsourcing Process Lead Departments, Administrative Services, Human Resources, City Council (if applicable)
Performance Management, Quality
Control, and Timeliness
Lead Department management, City Manager’s Office
Managing High-Visibility and
Controversial Projects
Lead Department management, City Manager’s Office
Stakeholder Engagement Community members, Lead Department management, City Manager’s Office, City Boards and
Commissions, City Council
Closeout and Evaluation Lead Department management, City Attorney’s Office, Administrative Services
The following points highlight some of the key tactical steps provided in the Guide:
Precursors to Outsourcing
As part of the annual budget development process, staff assesses whether funds might be more effectively allocated to consultant services or hiring in-house staff. Through the City Council’s annual priority setting, projects (“objectives”) requiring consultant assistance will be identified to enable the City Council to select its priorities with this awareness.
Additional internal approvals are required for large task orders issued under master agreements.
The City’s financial tracking system has now been coded to enable ongoing tracking of consultant services expenditures citywide. Additional system enhancements may be implemented in the future for reporting needs.
The Outsourcing Process - Determining a Scope of Services Guidance is provided for staff to develop scopes of service that reinforce clarity and performance measurement.
The role of City staff relative to the consultant is to be clear. In particular, the scope should reflect how staff will bring local knowledge (possessed by staff or other stakeholders) to inform the work.
Scopes of services and roles should align with the City long-term goals for building internal expertise.
The potential effect of Artificial Intelligence (AI) will be considered when defining the scope of services.
Major projects may involve City Council review of scopes of services.
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 consult with the City Manager’s Office communications staff to develop community engagement plans, updated as projects proceed. 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.
Palo Alto is uniquely fortunate to have residents and other community stakeholders with specific expertise and interest in assisting on related initiatives. Where unique resident involvement might apply, staff will consult with the City Manager’s Office to structure involvement, with the goal of leveraging resident expertise while ensuring objective analysis.
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. For efficiency, the City may procure services by utilizing the competitive bidding process undertaken by another government entity or a joint purchase agreement. Circumstances can arise that cause consideration of a change in direction, such as cost proposals that exceed budget, and a lack of strong proposals. Department management and the City Manager’s Office evaluate options and determine appropriate steps forward.
Contract 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
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. Regular coordination meetings are set.
Project managers 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, staff will request revision before accepting the product.
While projects are intended to proceed smoothly, it is common for issues to arise.
Escalation paths provide important secondary points of contact if needed due to disagreements or performance concerns from either the City or consultant.
Managing High-Visibility and Controversial Projects
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.
A two-step process for City Council, Boards and Commissions review may use 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
A structured approach to capturing comments and documenting responses to comments may be incorporated into the consultant scope of services. 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.
Closeout and Evaluation
Project closeout includes confirmation of objectives met, review of team performance, and feedback to consultants. A standardized evaluation form ensures consistent reflection and improvement.
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.
Next Steps
This work has already generated benefits as its principles are being incorporated into recent and ongoing consultant projects. Examples include the synthetic turf study, the South Palo Alto pedestrian/cycling connectivity, and railroad quiet zone project development. In addition, as part of the current budget, staffing in the Office of Transportation was augmented in order to reduce reliance on consultant services.
Staff will continue implementation of the best practices through the following actions:
Distribute the Best Practices guide;
Develop and pilot practical templates and checklists for project managers; Provide training in coordination with the Administrative Services Department, City Attorney’s Office, Human Resources, and relevant departments; Seek feedback from consultants on practices that support successful engagements; Incorporate lessons learned from pilot projects and staff feedback; and Continue to integrate review of consultant services into the annual budget development process.
Training on these best practices must build on current project management training, including any existing certifications, modules, or external programs used to develop project managers. An assessment of current training practices across departments is currently under way. Based on this assessment, Human Resources staff are leading the development of a modular, audience- appropriate training program that incorporates applicable best practices and may include certification. Initial modules are expected to address foundational project planning and pre- engagement activities, with separate modules for financial and relationship management elements. Staff aim to implement citywide training by the end of FY2027.
FISCAL/RESOURCE IMPACT
The activities described in this report are being conducted within existing City resources. No consultants were hired for the completion of this project.
STAKEHOLDER ENGAGEMENT
Teams that work closely with consultant management were asked to give feedback on the consultant review work. 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 advancement of City practices.
ENVIRONMENTAL REVIEW
The work is not a project as defined in the California Environmental Quality Act (CEQA).
ATTACHMENTS
Attachment A: Best Practices in Managing Consultant Services Attachment B: Best Practices in Consultant Management, Baker Tilly Report APPROVED BY:
Ed Shikada, City Manager