1 City of San José
Procurement
Improvement Initiative
Status Update
May 10, 2022
2 Executive Summary
Within the scope of this report
Purchasing Division
City Departments
Public Works
The City of San José has a decentralized procurement model, with the Purchasing Division maintaining responsibility for all non-consulting and non-public works procurements.
The Purchasing Division is responsible for procuring goods and services not covered by other two procurement
processes, along with administering the P-Card program.
City departments are responsible for procuring all consulting services. Additionally, departments may run procurements for Purchasing at Purchasing’s request.
The Public Works Department is responsible for
procurements relating to public works projects, including the construction, improvement, or demolition of structures. • Number of Procurement Staff: 15 Staff
• Oversight Authority: Finance Department
• Contracting Responsibility: Negotiates Contracts
• Number of Yearly Procurements: 89 RFxs & 2,054 POs
• Total Value of Procurements: $450 Million
• Number of Procurement Staff: Staffing Varies by Department • Oversight Authority: City Manager’s Office
• Contracting Responsibility: City Attorney’s Office
• Number of Yearly Procurements: 205 Contracts & 620 Adjustments • Total Value of Procurements: $169 Million
• Number of Procurement Staff: 3 Staff (1 of 3 Positions is Open) • Oversight Authority: Director of Public Works
• Contracting Responsibility: City Attorney’s Office
• Number of Yearly Procurements: 78 RFxs
• Total Value of Procurements: $151 Million
May 10, 2022
Note: Due to data limitations, data for the Purchasing Division and Public Works is based on FY2021, whereas the City Departments data utilizes calendar year 2021.
The City of San José has three different procurement processes Low Competitive Procurement Threshold ($10K)
3 Executive Summary
The current state of procurement within the City of San José Current State Context:
The City's 2016 Smart City Vision identified streamlining procurement processes as a critical element of the City's innovation strategy. In response to growing demand for City procurement services, the City launched a procurement improvement initiative in 2018, seeking to streamline procurement processes to help departments secure goods and services more efficiently and standardize procurement processes.
The Coronavirus Pandemic exacerbated the existing situation, delaying procurements and saddling the City’s Purchasing Division with a three-month backlog. The City Council approved procurement Improvement as a City Roadmap priority in March of 2021. An October 2021 memo issued by the Mayor's Office directed the Finance Department to report back to the Smart Cities and Service Improvement Committee and City Council on procurement improvement recommendations and strategies..
Procurement Delays
High Turnover
Understaffed
Onboarding & Training
Customer Education
Missing Oversight
Obscure
Lack of Defined Processes
Disparate Processes
Lack of Process Transparency
Outdated Technology
Lack of KPI Tracking
No Automation
CMO Contract Authority
Difficult to Implement Policies
Limited Ability to Leverage Cooperative Agreements
Lack of Long-term Plan to Resolve
Risk of Department Shutdowns
No Plan to Address Surges (Open Season)
Risk of Purchasing Staff Burnout
Chart Key
- Purchasing-managed
- Department-led
People Process Technology
Policies Backlog
Current State Assessment Key Themes
The City of San José’s procurement challenges fall into five main categories, including people, process, technology, policies, and backlog. While many challenges span the Purchasing Division-managed and department-led processes, certain challenges are unique to a specific process (e.g., backlog).
Current Procurement Challenges:
May 10, 2022
4 Executive Summary
A shared future vision for procurement within San José
Provide consultative procurement
expertise to departments as they
navigate the procurement process
Core Procurement Components
Mission
Act as stewards of public funds by
ensuring the City spends money in
a manner that safeguards the best
value to the City
Decrease procurement processing
times to allow departments to
obtain needed goods and services
in a timely manner
Develop a vendor pool that
represents the diversity of San
José’s businesses and residents
Serve as a strategic procurement
resource during the planning and
execution of City Roadmap
initiatives
Goals
Objectives
Procurement Processing
Times
Develop a Representative
Vendor Pool
Ensure the Efficient Use
of City Funds
Support the City RoadmapAssist City Staff 53 41 2
As stewards of public funds, the City of San José facilitates a transparent, competitive process that responsibly, equitably,and efficiently procures goods and services at the best value for the City.
1. Decrease time to process
purchase orders
2. Decrease procurement
dwell times
3. Decrease procurement lead
times
4. Leverage technology to
increase staff productivity
5. Track time spent
negotiating agreements
1. Improve vendor customer
service
2. Increase equity throughout
the procurement process
3. Track core vendor
participation metrics
4. Develop new vendor
outreach practices
5. Examine relaxing policies
and practices to improve
vendor participation
1. Ensure the City receives
the best possible value
2. Increase P-Card
compliance
3. Identify spend consolidation
opportunities
4. Develop a compliance
scoring methodology
5. Leverage technology
solutions to improve
compliance
1. Ensure that City staff have
the support they need
2. Transition Purchasing to a
consultative model
3. Centralize consulting
services procurements
4. Develop procurement tools
and trainings
5. Effective triaging of
procurement requests
1. Include the Purchasing
Division earlier
2. Align Purchasing Division
staffing to City Roadmap
3. Leverage outcome-based
procurements
4. Reduce resistance to
involving Purchasing
5. Develop clear procurement
escalation pathways
May 10, 2022
17 Mission Statement in Practice
The implementation of San José’s future state procurement vision Purchasing Division City Manager’s Office
• The Purchasing Division is
appropriately staffed
• The Division’s staffing
model allows for close
coordination with customer
departments
• The Division leverages
technological tools to
unlock efficiencies
• Purchasing Division staff
are well supported
City Departments Vendors City Residents
• Departments get needed
goods and services in a
timely manner
• Purchasing is attuned to
department needs and
collaborates to find best
value procurement
solutions
• There are designated
procurement resources
departments can leverage
for support
• Consulting procurements
are centralized with the
Purchasing Division
• The City Manager’s Office
helps set the strategic
direction for procurement
within San José
• The City Manager’s signing
authority is reviewed and
updated regularly
• Vendors participate in a
transparent and fair
procurement process that
ensures the best value for
the City
• The City attracts a wide
breadth of vendors that
represent San José’s
diverse economy and
population
• Local Business Enterprises
(LBEs) and Small Business
Enterprises (SBEs) are well
represented in the process
• The procurement process
allows the City to deliver
exceptional services to City
residents, with a focus on
customer service
• Procurement professionals
act as stewards of public
funds
• Procurement processes
are compliant and have
sufficient oversight
Procurement Mission Statement: As stewards of public funds, the City of San José facilitates a transparent, competitive process that responsibly, equitably, and efficiently procures goods and services at the best value for the City.
May 10, 2022
The Future of Procurement in San José:
5 Executive Summary
Positioning procurement to maximize value within the City Key Future State Recommendations:
Transitioning the Purchasing Division to a new staffing model focused on close collaboration with customer departments, while increasing the Purchasing Division’s staff to reduce backlog and improve oversightStaffing Leveraging an outcome-based procurement process that positions the Purchasing Division as a strategic advisor for procurement throughout the City, while working to increase oversight of the consulting services procurement process Procurement
Consistency
Implementing changes to policies and practices to streamline procurement within the City and building a review process to regularly update Title 4 of the City’s Municipal Code to meet the needs of a continuously innovating city Procurement
Streamlining
Developing comprehensive, broadly available training for various stakeholder groups (e.g., Purchasing Division staff, procurement stakeholders, procurement customers) that is attuned to the unique needs of each stakeholder groupTraining Using technology to automate key performance indicator tracking and unlock additional efficiencies through automating time intensive procurement processesTechnology
Assessed Importance
The future state recommendations are centered around five pillars. Each pillar represents a key component of developing and refining the City’s procurement processes. Full details and recommendations are available in the corresponding section of the Future State Vision.
Future State Recommendations:
Project Context:
The Procurement Future State Report provides a modernized vision of procurement within the City of San José. The goal is to create a procurement process that is agile, responsive to the needs of customers, compliant with all City policies, and furthers San José’s goal of being the most innovative City in the United States. Driven by input from over seventy City staff members, direction from City leadership, a comprehensive current state assessment, and visioning sessions, the future state vision aims to be actionable and implementable. The future state vision will come to fruition through a focus on centralizing procurement processes, staff, and leadership within the areas of the City with specific subject matter expertise.
May 10, 2022
69 Procurement Technology
Leveraging technology to drive process efficiencies
Quick Wins (1 Year)
Objective: Better leverage existing tools to
improve KPI tracking and document
management practices
Recommendations:
• Data Cleansing: Clean existing data to improve reliability and allow for more accurate output reporting
• Automate KPI Tracking – Develop dashboards using existing software tools to automate the tracking of procurement-related KPIs • Centralize Documentation – Using SharePoint, centralize procurement documentation in a single location to make it easily referenceable Medium-Term (1-2 Years)
Objective: Begin assessing opportunities to replace
existing systems that no longer meet the City’s needs
Recommendations:
• Procurement Management Requirements Gathering – Gather requirements and develop an RFP for a procurement management solution • Process Automation – Leverage process automation technologies to explore opportunities to automate processes to save time and reduce City procurement workload
Long-Term (2-5 Years)
Objective: Implement a software solution to
streamline and automate procurement-related
business processes
Recommendations:
• Implement Procurement Management System – Implement a new procurement management solution to help streamline processes, improve accountability, and reduce workload
Leveraging technology throughout the procurement lifecycle represents an opportunity to unlock efficiencies, enhance collaboration, and drive further compliance with City policies. Recommendations to improve how the City leverages technology are included below:
May 10, 2022
59 Procurement Training
Getting stakeholders trained on policies and procedures Quick Wins (1 Year)
Objective: Improve access to procurement
training and resources to increase policy
compliance
Recommendations:
• Intranet Redesign – Redesign the Purchasing Division’s intranet around the needs of Purchasing Division customers and procurement stakeholders • Overhaul P-Card Trainings – Revamp P-Card trainings by consolidating disparate documentation and making the yearly P-Card exam more difficult • Procurement Trainings – Introduce procurement and contract management trainings at regular intervals and begin developing module-specific trainings Medium-Term (1-2 Years)
Objective: Increase the consistency of training and
work to better anticipate citywide procurement training needs
Recommendations:
• Disparity Study – Fund the current City disparity study proposal to understand disadvantaged business participation in the procurement process • Internal Training Program – Develop a yearly training program for Purchasing Division staff that is centered around executing on Division goals • Vendor Engagement – Increase vendor engagement efforts throughout the procurement lifecycle and track vendor participation
Long-Term (2-5 Years)
Objective: Implement formal training programs and
processes to standardize the training experience
across stakeholder groups
Recommendations:
• Onboarding Standardization – Standardize the onboarding experience within the Purchasing Division to maximize effectiveness • Vendor Outreach: Develop a formal vendor outreach program with a particular emphasis on reaching disadvantaged businesses • Implement a Learning Management System – Implement a learning management system to standardize and formalize training across the City Procurement is complex, detail-focused, and has little margin for error. To ensure City staff and the Purchasing Division team successfully navigate the intricacies of procurement, the City should refine its procurement training curriculum.
May 10, 2022
51 Streamlining Policies
Increasing efficiency by streamlining and clarifying policies Quick Wins (1 Year)
Objective: Develop compliant workarounds to
the most burdensome policies and critically
examine the City’s risk posture
Recommendations:
• Risk Posture Examination – Examine if there are opportunities to take minimal risks to increase procurement speed and decrease acquisition cost • Wage Theft Policy – Modify the City’s wage theft policy as the current policy makes certain procurements impossible
Medium-Term (1-2 Years)
Objective: Develop and implement improvements to
the City’s Municipal Code to streamline procurement
processes
Recommendations:
• Competitive Procurement Threshold – Increase the competitive procurement threshold to account for inflation
• Local Business Preference – Modify the City’s Local Business Enterprise preference program to focus on companies that prioritize San José Long-Term (2-5 Years)
Objective: Regularly review Title 4 of the City’s
Municipal Code to ensure it continues to meet the
City’s procurement needs
Recommendations:
• Municipal Code Review Process – At regular intervals evaluate the relevancy of Title 4 of the Municipal Code and propose necessary changes to Council
• Council Approval Process – Streamline the process for contracts to be approved by City Council to minimize staff time required, while still preserving the City Council’s oversight of the process
Title 4 of the City’s Municipal Code governs goods and services procurements within the City of San José. Given how infrequently Title 4 is updated, there are multiple opportunities to revise policies to streamline procurements without increasing risk.
May 10, 2022
39 Increasing Procurement Consistency
Altering processes to regularly achieve optimal value for the City Quick Wins (1 Year)
Objective: Once staffing is sufficient, increase
usage of cooperative agreements and the
informal procurement process
Recommendations:
• Informal Procurement Redesign – Implement a redesigned informal procurement process that encourages department compliance • Expand Usage of Cooperative Agreements – Make greater use of cooperative agreements for simple, low-risk commodity procurements • Consulting Procurement Oversight – Increase the Purchasing Division’s oversight of the consulting procurement process to reduce risk Medium-Term (1-2 Years)
Objective: Move to a business needs oriented
model for procurements within the City
Recommendations:
• Business Needs Focus – Transitions to a business need-focused model where the Purchasing Division selects procurement strategies based on a department’s identified business need
• Collaborative Scope Development – Transition to a model where the Purchasing Division is involved in scope development from the outset to reduce the likelihood of departments developing non-compliant scopes Long-Term (2-5 Years)
Objective: Centralize consulting procurements with
the Purchasing Division to reduce risk to the City
Recommendations:
• Centralize Consulting Procurements – When the Purchasing Division is sufficiently staffed, processes are improved, and there is no backlog, centralize consulting services procurements under the Purchasing Division To reduce risk to the City, maximize value, and consistently deliver exceptional customer service, the City of San José should look to refine its procurement processes to center on department’s business needs. Many of these recommendations are predicated on the City having sufficient staffing.
May 10, 2022
22 Purchasing Division Staffing
Getting departments needed goods and services in time
Quick Wins (1 Year)
Objective: Eliminate the backlog of requisitions
to get departments the goods and services they
need before the end of the fiscal year
Recommendations:
• Staff Augmentation – Leverage staff augmentation to clear the current requisition backlog
• Additional Staff – Hire three new buyers or analysts and convert the current overstrength analyst position to a permanent role • Develop a Competency Framework – Create a competency framework for all roles within the Purchasing Division
Medium-Term (1-2 Years)
Objective: Optimize staffing to ensure staffing levels
align with Division goals and procurement demand
from departments
Recommendations:
• Additional Analysts – Hire two new analysts or senior analysts to account for growth in IT procurements
• Demand Management and Staffing Plan – Leverage demand management and a staffing plan to staff the Purchasing Division to demand • Division Restructure – Transition the Purchasing Division to a new structure based on procurement teams, which would each be assigned to departments Long-Term (2-5 Years)
Objective: Attract new candidates from diverse
backgrounds by leveraging new recruitment and
retention strategies
Recommendations:
• Alternative Entry Buyer Program – Launch a program to recruit and train buyers that may not have a Bachelor’s Degree
• Alternative Recruitment Strategies – Consider leveraging alternative recruitment strategies to attract candidates from unconventional backgrounds
The current Purchasing Division backlog presents a challenge to departments that rely on the Purchasing Division for the to get needed goods and services within a timely manner. The recommendations below focus on eliminating the backlog.
May 10, 2022
19 Consulting Services Procurement Centralization
Centralization occurs along a spectrum
Currently, consulting procurements are decentralized within the City of San José, which introduces significant risk as processesare not standardized across the City. Moving towards a more centralized model allows the City to standardize processes and ensure consulting services are procured in a compliant manner.
Degrees of Centralization:
• Departments are responsible for procuring consulting services without oversight or throughput assistance from the Purchasing Division.
• Each department is responsible for developing the process they need to conduct consulting procurements. • The Purchasing Division provides oversight of the consulting services procurement process through spot audits, engagement with departments, and training to ensure departments are conducting compliant procurements. • Departments continue to be responsible for developing process documentation and procurement resources. • The Purchasing Division develops process documentation, procurement resources, and training materials to allow all City departments to follow a consistent process for consulting procurements. • Departments would still administer the procurement over the full duration of the procurement’s lifecycle. • As smaller City departments may lack the capacity to effectively conduct compliant consulting procurements, the Purchasing Division would provide limited consulting services procurement throughput support. • Larger departments would still be responsible for conducting consulting services procurements. • To minimize the risk of non-compliant procurements, all consulting services procurements are run by the Purchasing Division with input from City departments.
• Departments would treat consulting services procurements similarly to any non-public works procurement.
Decentralized
Procurement
Oversight
Process
Standards
Throughput
Support
Full
Centralization
Degree of Centralization
Purchasing Division Involvement
May 10, 2022
77 Implementation Guide
Next steps to improve procurement performance
Backlog Process Policies People Technology
Key:
Hire Staf f
Augmentation Redesign Intranet
Centralize
Documentation
Modif y Wage
Thef t Policy
Hire Analy sts
Expand usage of
Cooperativ e
Agreements
Cleanse Data
Inf ormal
Procurement
Redesign
Dev elop
Competency
Framework
Dev elop Demand
Management
Update P -Card
Training
Dev elop
Additional
Trainings
Automate KPI
Tracking
Transition to
Business Needs
Focus
Adjust
Competitiv e
Procurement
Threshold
Dev elop
Procurement
Training Program
Dev elop Vendor
Outreach
Program
Procurement
Management
Sy stem
Dev elop Future
Staf f ing Plan
Staf f f or Demand
Growth
Rev ise City
Manager Signing
Authority
Consulting
Procurement
Ov ersight
Rev ise Local
Business
Pref erence
Dev elop
Alternativ e
Recruitment
Strategies
Centralize
Consulting
Procurements
Onboarding
Standardization
Dev elop
Alternativ e Entry
Buy er Program
Dev elop
Municipal Code
Rev iew Process
LMS
Implementation
Workf low
Automation
Quick Wins (0-1 year) Medium-Term (1-2 years) Long-Term (3+ years) The Implementation Guide details a phased approach to implementing this report’s recommendations for improving and maturing the City’s procurement processes. Each task highlights a specific recommendation designed to address a unique need within the City.
Quick wins are lower effort remediations that can be implemented within a year and help address immediate needs of the City.
Medium-term and Long-term tasks are more complex and require increased coordination.
May 10, 2022
Consulting
Procurement
Centralization
Consulting
Procurement
Ov ersight
Consulting
Process
Standardization
Consulting
Procurement
Throughput
Support