City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: JUNE 13, 2023 FROM: FINANCE DEPARTMENT WARDS: ALL
SUBJECT: ELECTRIC AND WATER CENTRAL STORES ANNUAL PURCHASE ORDERS TOTALING $21,365,100 AND A NOT TO EXCEED 15% ALLOWANCE FOR PRODUCER PRICE INDEX (PPI) INCREASES FOR THE 2023-2024 FISCAL YEAR ISSUE:
Approval of Electric and Water Funds Central Stores Annual Purchase Orders totaling $21,365,100 and a not to exceed 15% allowance for Producer Price Index (PPI) increases for the 2023-2024 Fiscal Year.
RECOMMENDATIONS:
That the City Council:
Approve Electric and Water Funds Central Stores Annual Purchase Orders for an estimated total of $21,365,100 for FY 2023/24; Approve a not to exceed 15% allowance for Producer Price Index (PPI) increases for the FY 2023/24; and Authorize the City Manager, or designee, to award the purchase orders for procurements for the items designated.
BOARD RECOMMENDATION:
Riverside City Charter Section 1202(b) requires that the Board of Public Utilities (Board) approve all expenditures in excess of $50,000. Purchasing Resolution No. 23914 Section 404 Utilities Exception, recognizes that there are certain supplies and materials which are “peculiar to the needs” of the City’s Public Utilities Department (RPU) and may be acquired through an open market procurement process, so long as the expenditures have been approved by the Board and City Council. Categories for such supplies and materials are listed in that resolution.
This report is published on June 1, 2023 for the June 13, 2023 City Council meeting.
On June 12, 2023, the Board of Public Utilities will hear an item for consideration to approve expenditures associated with these Annual Purchase Orders. If the Board approves the expenditures, we respectfully request the City Council consider approval of the Annual Purchase Orders at the June 13, 2023 meeting.
DISCUSSION:
Central Stores issues annual purchase orders for goods and materials routinely used by the Public Utilities Department during the fiscal year for its daily utility operations. The City’s Purchasing Division selects vendors via a competitive bid process which can be informal or formal.
Informal bids apply to either purchases of goods and services of $50,000 or less and purchases of any amount falling under the Purchasing Resolution 23914 Section 404 for Utilities Exception, which have no monetary cap. Informal bids mean that the City receives a minimum of three price quotes from vendors outside of the formal procurement process and may negotiate terms, conditions, and pricing with the vendors.
Formal bids apply to all other purchases over $50,000.
Informal bids for purchases under Purchasing Resolution 23914 Section 404 as noted above are those that may be placed on an annual purchase order. The Utilities Exception relates to supplies, equipment, and materials that are peculiar (i.e. specific) to the needs of RPU for daily routine operations such as chemicals, meters, utility poles, road and backfill materials, transformers and other similar items as outlined in the resolution. Formal bidding requirements are waived regardless of amount; however, informal bids are obtained at the time of requisition from the vendor community to ensure competitive pricing. This may include direct negotiation with one vendor. In addition, items are approved by the Board of Public Utilities (Board) for capital work orders over $50,000 and all expenditures are incorporated into the FY 2023/24 operating budget.
Annual Purchase Orders – Electric and Water
Annual purchase orders for FY 2023/24 are listed in Attachment 1 totaling an estimated amount of $21,365,100. The vendors listed are the current vendors for each of the goods and materials but may not be the vendor selected at time of the procurement. Bids will be evaluated and awarded in compliance with purchasing policy and procedures. Items that require formal bidding and that are not exempt under the Utilities Exception in the Purchasing Resolution will be brought to the Board and City Council for individual action throughout the fiscal year.
As the current market fluctuates, vendors have found the need to pass on manufacturer increases at an average rate of 6% per month. In anticipation of the fluctuating market during FY23/24, Central Stores will need to adjust the pricing on annual purchase orders on a quarterly basis, based on the U.S. Bureau of Labor Statistics Producer Price Index (PPI). Requests for increases from vendors will be verified by the Purchasing Division based on the current PPI index and the commodity being adjusted.
Purchasing Resolution 23914, Section 1104 states, “Unless otherwise specifically authorized by the Awarding Entity, Change Orders which cumulatively exceed the following will require Awarding Entity approval:…(c) 10% of the original contract price for Contracts and/or Purchase Orders previously approved by the Awarding Entity and the total Change Order amount will not exceed $150,000.” The Purchasing Manager concurs that the recommended actions are compliant with Purchasing Resolution No. 23914.
STRATEGIC PLAN ALIGNMENT:
This item contributes to Strategic Priority 5 – High Performing Government and the following goals:
Goal 5.2 - Utilize technology, data, and process improvement strategies to increase efficiencies, guide decision making, and ensure services are accessible and distributed equitably throughout all geographic areas of the City.
Goal 5.3 - Enhance communication and collaboration with community members to improve transparency, build public trust, and encourage shared decision-making.
This item aligns with each of the five Cross-Cutting Threads based as follows:
Community Trust – Annual PO report provides a transparent view and communication of Central Stores annual procurements in a forum that accommodates community engagement and the involvement of Board of Public Utilities and City Council.
Equity – Annual PO report is available to all members of the public via the City website, and the presentation of the proposed budget in a public forum accommodates community engagement from all members of the public.
Fiscal Responsibility – Annual PO report demonstrates commitment to responsible management of Central Stores’ financial resources.
Innovation – Annual PO report will help in meeting the community’s changing needs as the Utility’s infrastructure needs are projected to grow as the system continues to age, and Central Stores stays active to supply materials to RPU to easily facilitate maintenance and repairs.
Sustainability & Resiliency – Annual PO report demonstrates Central Stores commitment to the long-term fiscal health of the Utility and preservation of Utility services by keeping material and equipment readily available for use.
FISCAL IMPACT:
Total fiscal impact of this recommendation is $21,365,100. Sufficient funds have been budgeted in the proposed FY 2023/24 budget that will be brought to Council on June 27, 2023 for adoption.
Prepared by: Jennifer McCoy, Purchasing Manager Certified as to
availability of funds: Edward Enriquez, Interim Assistant City Manager/Chief Financial Officer/City Treasurer
Approved by: Edward Enriquez, Interim Assistant City Manager/Chief Financial Officer/City Treasurer
Approved as to form: Phaedra A. Norton, City Attorney Attachment: Fiscal Year 2023-2024 Annual Purchase Orders for Electric and Water Central Stores Annual Purchase Orders – Page 2