City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: JUNE 11, 2024 FROM: FINANCE DEPARTMENT WARDS: ALL
SUBJECT: APPROVAL OF ELECTRIC AND WATER CENTRAL STORES ANNUAL PURCHASE ORDERS TOTALING $21,703,681.87 AND A NOT TO EXCEED 20% ALLOWANCE FOR PRODUCER PRICE INDEX (PPI) INCREASES FOR THE 2024/25 FISCAL YEAR ISSUE:
Approval of Electric and Water Central Stores Annual Purchase Orders totaling $21,703,681.87 and a not to exceed 20% allowance for Producer Price Index (PPI) increases for the 2024/25 Fiscal Year.
RECOMMENDATIONS:
That the City Council:
Approve Electric and Water Central Stores Annual Purchase Orders for an estimated total of $21,703,681.87 for FY 2024/25; Approve a not to exceed 20% allowance for Producer Price Index (PPI) increases for the FY 2023/24; and Authorize the City Manager, or his designee, to award the purchase orders for such procurements for the items designated.
BOARD RECOMMENDATIONS
This report is published on May 30, 2024, for the June 11, 2024, City Council meeting. On June 10, 2024, the Board of Public Utilities will hear this item for consideration to recommend that the City Council approve the Electric and Water Central Stores Annual Purchase Orders totaling $21,703,681.87 and a not to exceed 20% allowance for Producer Price Index (PPI) increases for the 2024-2025 Fiscal Year.
BACKGROUND:
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. 24101 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.
DISCUSSION:
In accordance with this authorization, Central Stores issues annual purchase orders for such goods and materials routinely used by the Riverside 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 Purchasing Resolution 24101 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 falling under Purchasing Resolution 24101 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 for capital work orders over $50,000 and all expenditures are incorporated into the FY 2024/25 operating budget.
Annual Purchase Orders – Electric and Water
Annual purchase orders for FY 2024/25 are listed in Attachment 1 totaling an estimated amount of $21,703,681.87. The vendors listed are the current vendors for each of the goods and materials but may not be the vendor actually selected for such 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 will be brought to the Board and City Council for individual action throughout the fiscal year.
As the market fluctuates, vendors have found the need to pass on the manufacturer increases and have been seen at an average rate of 2% increase per month. In anticipation of the fluctuating market during the 24/25 FY, Central Stores will need to adjust the pricing on the annual purchase orders on a quarterly basis, based on the U.S. Bureau of Labor Statistics Producer Price Index. The request for increase from the vendors will be verified by the purchasing division on the current PPI index and the particular commodity being adjusted.
Purchasing Resolution 24101, Section 404 Utilities Exception, states. “The Water, Electric and Sewer Utilities have a need for compatibility within their respective systems for uniform operation, maintenance and replacement, and this need can be met by procuring certain supplies, equipment, and materials supplies through Informal Procurement or Negotiated Procurement. If it appears to the Manager to be in the best interest of overall economy and efficiency of the City to do so, and it is within existing budget appropriation, the following supplies, equipment, and materials are determined to be peculiar to the needs of the Water Utility, the Electric Utility, and the Sewer Utility and may be acquired by Informal Procurement or Negotiated Procurement, regardless of their estimated Procurement expenditure amounts, provided that the City’s Board of Public Utilities or City Council shall have approved the proposed acquisition if required under the provisions of the City Charter, either by approval of the procurement contract or approval of annual purchase orders.” In addition, items are approved by the Board for capital work orders over $50,000 and all expenditures are incorporated into the Fiscal Year 2024-25 operating budget.
The Purchasing Manager concurs that the recommended actions are compliant with Purchasing Resolution No. 24101.
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 not hinder 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.
FISCAL IMPACT:
The total fiscal impact of this recommendation is $21,703,681.87 Sufficient funds have been included in the proposed FY 2024/25 budget scheduled for Council adoption in June 2024.
Prepared by: Jennifer McCoy, Purchasing Manager Approved by: Kristie, Thomas, Finance Director/Assistant Chief Financial Officer Certified as to
availability of funds: Kristie, Thomas, Finance Director/Assistant Chief Financial Officer Approved by: Edward Enriquez, Assistant City Manager/Chief Financial Officer Approved as to form: Phaedra A. Norton, City Attorney Attachment: Fiscal Year 2024-2025 Annual Purchase Orders Electric and Water Central Stores Annual Purchase Orders – Page 2