Approve Amendments to the Procurement Manual and the Rules of the Board Regarding Procurement Processes

In a memorandum to Committee, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith provided staff’s recommendation to approve several amendments to the Procurement Manual and the Rules of the Board regarding procurement processes. The report stated that the District’s Mid-Manager’s Group, comprised of Department Managers, Deputy General Managers, Officers, and the General Manager, meet quarterly to discuss District business, increase communication within the Divisions and to seek ways to improve District operations. As part of these quarterly meetings, a Procurement Subgroup was formed and assigned the task of reviewing the District’s procurement processes and identifying ways to improve and streamline the processes. The Procurement Subgroup devised a set of recommended changes to the procurement processes, which changes are consistent with best procurement practices. The report provided a detailed description of these recommended changes.

The report stated that the Board of Directors will review, on a quarterly basis, the status of all contracts and purchase orders over $20,000 that have not been presented to the Board. Currently, the Board of Directors reviews, on a quarterly basis, the status of all contracts exceeding $20,000 up to $100,000. The report noted that by implementing the suggested changes described in the staff report, it is anticipated that the streamlining of the procurement process will allow staff to perform the procurement functions in a more efficient and timely manner, as well as increase the overall District productivity and responsiveness. A copy of the report is available in the Office of the District Secretary and on the District’s web site.

At the meeting, Celia Kupersmith provided a brief introduction regarding staff’s recommendation, noting that historically, procurement processes were spread out throughout the District, with general purchasing done by the District Services Department, the precursor to the Procurement and Retail Operations Department. Ms. Kupersmith stated that over the past few years, staff has been consolidating and refocusing its procurement operations throughout the District, under the leadership of the Procurement and Retail Operations Director. She further stated that the recommendations being presented today were the result of the Procurement Subgroup’s efforts over the past several months.

Procurement and Retail Operations Director Lori Murray summarized the staff report, noting that with the implementation of new systems, such as the Purchasing Module and the Inventory and Materials Module, the District has streamlined certain procurement processes using information systems technology. She noted that it is now appropriate to streamline other procurement processes through changes to the Procurement Manual and the Rules of the Board.

Ms. Murray provided details regarding the recommended changes as follows:

Ms. Kupersmith also stated that, with respect to procurements over $100,000, several Board members have expressed concerns over the amendment that would delegate authority to the General Manager to award contracts over $100,000, without Board approval, for the routine replacement of equipment, supplies and materials, or for routine, recurring services which do not have a policy impact, provided such procurements are included in the District’s approved annual budget. In response to these concerns, she is recommending that this proposed amendment would only apply to procurements of equipment or commodities that are routine and recurring, such as air compressors or tow trucks. She stated that certain service contracts, such as Janitorial, Security Guard or Window Washing, although routine and ongoing in nature, would remain subject to Board approval.

Discussion ensued, including the following:

• Director Stroeh inquired as to whether there would be a cap on purchases over $100,000 that would be subject to the authority of the General Manager. In response, Ms. Kupersmith explained that although there is no cap, the routine and recurring nature of these types of procurements would effectively limit the cost of purchases that the General Manager could authorize. As an example, Ms. Kupersmith described the difference between the purchase of 30 new desktop computers, which would be a routine and recurring procurement under the General Manager’s authority, and the purchase of a new information system, which would be a multimillion-dollar capital expenditure subject to Board approval.

• Director Boro stated that, with respect to the selection criteria for evaluating proposals, staff should ensure that such criteria are objective, not subjective. He further stated that it is important for the District to have procurement practices in place to be able to defend its proposal evaluation methods if challenged. In response, Attorney Miller stated that the proposed amendments would not fundamentally change the policy in the District’s Procurement Manual, which provides for objectively evaluating such factors as technical qualifications and experience, in addition to price. He further stated that the recommended amendment would simply ensure that price does not have a disproportionate influence in the setting of criteria.

• Director Sanders made the following inquiries and requests:

  • She expressed her concerns that the criterion of price would be given less weight in the context of the other selection criteria, such as qualifications, experience and technical merits. She stated that in her opinion, if a prospective Proposer does not have lengthy experience or an established relationship with the District, the Proposer could be at a disadvantage if the competitive price in the proposal was not given sufficient weight.
  • She suggested that the item pertaining to amending the selection criteria for Requests for Proposals be severed from the staff recommendation.

• Director Hernández made the following inquiries and requests:

  • She commented that, in her experience monitoring a variety of contracting opportunities, it is often the case that a Proposer with a lower price may be lowering the price of its proposal at the expense of the Proposer’s workers’ salary and benefits.
  • She stated that prospective Proposers would be aware of the weight given to each of the components of the selection criteria before they submit their proposal.
  • She suggested that the District’s procurement process be improved to require training certifications on the part of prospective Proposers who are responding to Requests for Proposals (RFPs).
  • She expressed her concerns regarding streamlining the informal bidding process through the use of limited telephone quotations, noting that such targeted solicitation might unfairly disadvantage certain small businesses and Disadvantaged Business Enterprises (DBEs). In response, Attorney Miller clarified that staff’s recommended approach regarding selection criteria would also consider such factors as the ability to do the job, the time to do the job and the financial capacity of the organization, while still maintaining the opportunities for small businesses, new businesses and DBEs.
  • She expressed her concerns as to how prospective vendor lists and DBE lists are compiled and maintained, and urged staff to ensure that such lists are accurate, comprehensive and up-to-date.
  • She stated that the suggested amendments represent a significant change in approach to the District’s procurement process.
  • She expressed her support for staff’s recommendation, as modified by the General Manager, although she had some concerns regarding the proposed changes to the selection criteria for RFPs, as well as to the contracts over $100,000 that would be delegated to the General Manager’s authority.

• Director Newhouse Segal made the following inquiries and requests:

  • She concurred with Director Hernández that Proposers who lower their price may be compromising the salaries and benefits of their employees.
  • She concurred with Director Sanders that it is important to encourage entrepreneurial and innovative first-time Proposers who may not have done business with the District before.
  • She suggested that the proposed amendments be undertaken for a one-year period only, after which time staff would report to the Rules, Policy and Industrial Relations Committee as to whether any staff time and cost savings occurred as a result of the changes to the procurement process.

• Director Middlebrook expressed her support for staff’s recommendation, noting that the proposed amendments do not represent a radical change in the District’s procurement process.

• Director McGoldrick made the following comments and inquiries:

  • He expressed his concerns that oversight by the Board of Directors is a necessary component of the District’s procurement process. In response, Ms. Kupersmith that the District’s Procurement process already has many safeguards in place, particularly in the area of allowing unsuccessful bidders an opportunity to protest a particular contract award prior to action by the Board of Directors to award the contract.
  • He inquired as to whether staff had any way to measure the amount of staff time that would be saved by implementing the proposed changes to the procurement process. He also inquired as to whether any staff time savings would lead to any staff reductions. In response, Ms. Kupersmith emphasized that there would be no staff reductions resulting from the proposed amendments to the procurement process. She stated that the time savings is expected to enable staff to process more procurements in a timely manner and could possibly reduce overtime expenses.
  • He requested that the recommendation include a provision for submittal of a report to the Rules, Policy and Industrial Relations Committee, after a one-year period, regarding the cost savings in staff time realized as a result of the proposed amendments.

Motions Acted Upon Following Staff Presentation and Committee Member Discussion

“Sever Item No. 5, ‘Amend Section V.E., Request for Proposals, to provide that the selection criteria should not weigh price as more important than the Proposer’s qualifications, experience, and technical merits, if it may result in substandard service to the District’ from the staff recommendation”

AYES (7): Directors Brown, Cochran, McGoldrick, Newhouse Segal, Reilly, Sanders and Stroeh
NOES (9): Directors Dufty, Eddie, Hernández, Kerns, Middlebrook, Pahre, Sandoval; First Vice President Boro; President Moylan

Failed

“Continue the matter of, Approve Amendments to the Procurement Manual and the Rules of the Board Regarding Procurement Processes, for one month to the March 14, 2008, meeting of the Rules, Policy and Industrial Relations Committee.”

AYES (8): Directors Cochran, Dufty, Hernández, McGoldrick, Newhouse Segal, Reilly, Sanders and Sandoval
NOES (8): Directors Brown, Eddie, Kerns, Middlebrook, Pahre and Stroeh; First Vice President Boro; President Moylan

Failed

The Rules, Policy and Industrial Relations Committee recommends that the Board of Directors approve the following amendments to the Procurement Manual and the Rules of the Board:

After a one-year period, staff will submit a report to the Rules, Policy and Industrial Relations Committee outlining the impacts of these changes to the Procurement processes, identifying cost or time savings achieved through this efficiency initiative.

Action by the Board at its meeting of February 8, 2008 – Resolution
NON-CONSENT CALENDAR

Public Comment

There was no public comment.

Adjournment

All business having been concluded, the meeting was declared adjourned at 10:35 a.m.