February 8, 2008

REPORT OF THE RULES, POLICY AND INDUSTRIAL
RELATIONS COMMITTEE/COMMITTEE OF THE WHOLE

Honorable Board of Directors
Golden Gate Bridge, Highway
  and Transportation District

Honorable Members:

A meeting of the Rules, Policy and Industrial Relations Committee/Committee of the Whole was held in the Board Room, Administration Building, Toll Plaza, San Francisco, California, on Friday, February 8, 2008, at 9:30 a.m., Chair Pahre presiding.

Committee Members Present (7): Chair Pahre; Vice Chair Hernández; Directors McGoldrick, Newhouse Segal, Sanders and Sandoval; President Moylan (Ex Officio)
Committee Members Absent (2): Directors
Other Directors Present (9): Directors Boro, Brown, Cochran, Dufty, Eddie, Kerns, Middlebrook, Reilly and Stroeh

Committee of the Whole Members Present (16): Directors Brown, Cochran, Dufty, Eddie, Hernández, Kerns, McGoldrick, Middlebrook, Newhouse Segal, Pahre, Reilly, Sanders, Sandoval and Stroeh; First Vice President Boro; President Moylan
Committee of the Whole Members Absent (3): Directors Grosboll and McGlashan; Second Vice President Ammiano

Staff Present: General Manager Celia G. Kupersmith; District Engineer Denis J. Mulligan; Auditor-Controller Joseph M. Wire; Secretary of the District Janet S. Tarantino; Attorney David J. Miller; Deputy General Manager/Bridge Division Kary H. Witt; Deputy General Manager/Bus Division Susan C. Chiaroni; Deputy General Manager/Administration and Development Teri W. Mantony; Procurement and Retail Operations Director Lori Murray; Assistant Clerk of the Board Karen B. Engbretson; Executive Assistant to the General Manager Amorette Ko

Visitors Present: None

       
1.

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:

       
  a.
Increase procurement thresholds for informal bid requirements: Ms. Murray stated that with the current process, it takes a considerable amount of staff time to prepare written solicitations, and that the recommended change would allow more flexibility to use telephone quotations for bids up to $10,000. She noted that AC Transit’s policy is to seek only one quotation for bids up to $10,000, but that the District’s policy would be to seek three quotations at this higher threshold. Staff recommends increasing the cap for the use of telephone solicitations from $5,000 to $10,000 in lieu of the procedure for a written Informal Bid Form.
  b.
Increase procurement threshold for not obtaining competitive quotations for professional services: Ms. Murray stated that using the higher threshold of $10,000 for the procurement of professional services will give staff greater flexibility, and that both AC Transit and Santa Clara Valley Transit Authority use this higher threshold for these types of professional services contracts. Staff recommends increasing the threshold from $7,500 to $10,000 for professional services that may be retained without obtaining competitive quotations
  c.
Increase procurement threshold for simplified negotiations for service contracts: Ms. Murray stated that this change would allow staff more flexibility to use telephone solicitations, in addition to written solicitations, for this type of procurement. Staff recommends increasing the threshold for this type of procurement from contracts ranging between $7,500 and $20,000 to contracts ranging between $10,000 to $25,000.
  d.
Advertising of bid notices: Ms. Murray stated that the use of the District’s web site has been a great timesaver for the Procurement staff, since now the entire Request for Proposal (RFP) or Bid Documents, in addition to the Notice, are posted to the web site. The District Secretary’s Office, in collaboration with the Marketing and Communications Department, created this new and innovative method of disseminating RFP and Bid documents. Staff recommends utilizing the District’s web site to decrease advertising costs, by minimally describing bid opportunities in the legal notices, and referring the potential Bidder/Proposer to the web site for particular details.
  e.
Review of methods for evaluating requests for proposals: Ms. Murray stated that in some past instances, when price was a predominant criterion, the District received substandard service from the vendor. Staff recommends that in determining the criteria for evaluating proposals for both professional and non-professional services, the price should not be more important than the Proposer’s qualifications, experience, and technical merits.
  f.
Procurements over $100,000: Ms. Murray stated that oftentimes, the procurement process for routine, recurring contracts over $100,000, which require Committee and Board approval, can be delayed due to the timing of the meeting schedule. She also stated that by delegating authority to the General Manager for these types of contracts, the efficiency of the procurement process can be improved. Staff recommends delegating authority to the General Manager to award contracts over $100,000 for the routine replacement of equipment, supplies and materials, or for routine, recurring services which do not have a policy impact, provided they are included in the District’s approved annual budget.
       
 
After the completion of Ms. Murray’s presentation, Ms. Kupersmith stated that, with respect to the selection criteria for RFPs, it has been the practice that the “Office of Primary Interest,” the department originating the RFP, would set the selection criteria. She noted that with the recommended change, the Procurement and Retail Operations Department, which is trained in establishing such criteria, would make the final decision with respect to the selection criteria for a particular RFP. She further clarified that it is District policy to establish criteria individually for each RFP, rather than use a blanket criteria for all RFPs, an approach used by many public agencies.

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

       
  a.
The following motion to amend the recommendation listed in the staff report was made and seconded by Directors SANDERS/STROEH:

“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

       
  b.
The following motion was made and seconded by Directors SANDOVAL/DUFTY:

“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

       
  c.

The following motion was made and seconded by Directors MIDDLEBROOK/STROEH to forward the recommendation as presented in the staff report, including the changes presented by the General Manager at the meeting as stated above, and the amended language to the recommendation made by Directors McGOLDRICK/NEWHOUSE SEGAL, to report back after a one-year period on the impact of these changes, as concurred with by the makers of the motion, as follows:

RECOMMENDATION

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:

       
    a.
Amend Section III.B.4., of the Procurement Manual, Informal Bidding – Purchases Over $2,500 But Not Exceeding $20,000, to increase the threshold for telephone quotations for small purchase procurements from $5,000 to $10,000;
       
    b.
Amend Section III.C.1., Professional Services not Exceeding $7,500, to increase the threshold for professional services that do not require competitive quotations from $7,500 to $10,000;
       
    c.
Amend Section III.C.2., of the Procurement Manual, Service Contracts Not Exceeding $20,000, to increase the threshold from $20,000 to $25,000 for retaining services using a simplified negotiations process, and to revise the process to allow the District to solicit by oral or written request, proposals from an adequate number of qualified sources;
       
    d.
Amend Section IV.D.1., of the Procurement Manual, Notice Inviting Sealed Bids, to change the way sealed bids are advertised by minimally describing the contract in the advertisement, and referring the potential Bidder to the District’s website for the particulars;
       
    e.
Amend Section V.E., of the Procurement Manual, Request for Proposals (RFPs), 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, with the understanding that the Procurement and Retail Operations Director will review and approve the weighted selection criteria for all RFPs, with the exception of the RFPs administered by the Engineering Department, which in that case, the weighted selection criteria will be reviewed and approved by the District Engineer;
       
    f.
Amend Section I.B., of the Procurement Manual, Organizational Structure, and Rule V of the Rules of the Board, Duties of the General Manager, to delegate authority to the General Manager to award contracts over $100,000, for the routine replacement of equipment, supplies and materials that result in a defined product only, with the understanding that said equipment, supplies and materials contracts should not have a policy impact and provided that such procurements are included in the District’s approved annual budget (examples of such contracts to include, but not be limited to: computers, compressors, printing of transit system timetables and guides, trucks, fuel and dry-docking); and with the further understanding that the Board of Directors’ approval will be required for all other contracts over $100,000, regardless of inclusion in the approved annual budget, including routine, recurring service contracts that do not result in a defined product at their conclusion (examples of such contracts to include, but not limited to: janitorial services, window washing services, revenue collection services and security guard services); and,
       
    g.

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

       
 
AYES (15): Directors Brown, Cochran, Dufty, Eddie, Hernández, Kerns, McGoldrick, Middlebrook, Newhouse Segal, Pahre, Reilly, Sandoval and Stroeh; First Vice President Boro; President Moylan
NOES (1): Director Sanders
       
2.

Public Comment

There was no public comment.

       
3.

Adjournment

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

 

Respectfully submitted,
/s/ Barbara L. Pahre, Chair
Rules, Policy and Industrial Relations Committee