LTC 230-2013 Procurement Update OFFICE OF THE CITY MANAGER _- . -9a
LTC # 230 -2013 LETTER TO COMMISSION la
2013 JUL —8 Are 9: - 58 .
TO: Mayor Matti Herrera Bower and M bers of he City Commission
CITY C;-E E; °S OFF iC
FROM: Jimmy L. Morales, City Manager
DATE: July 2, 2013
SUBJECT: Procurement Update
The purpose of this Letter to Commission (LTC) is to update the City Commission on
current and scheduled process improvements to the City's procurement activities.
Following the commencement of new departmental leadership in . late 2012 and a
resulting assessment of all operational processes, a series of process improvement
measures have either been implemented or scheduled to be implemented in the near
future as noted herein.
Code and Policy Review and Recommendations
The National Institute for Governmental Purchasing (NIGP) has advised public sector
agencies that outdated regulations can impede both the efficiency and effectiveness of
procurement- related activities. To assure the City's Procurement Division is operating in
the most efficient and effective manner possible, NIGP Consulting has been engaged to
complete review of the City's regulations relative to its procurement activities, as well as
other applicable requirements. The scope of the review includes:
• a review of procurement - related ordinances, statutes, policies and procedures to
ensure compliance, consistency and a comparison with industry best practices;
• a high -level comparative analysis that will benchmark the City against other
similar national and local municipalities;
• a review of any constraints that may impede effectiveness and efficiency of the
City's procurement - related functions.
Following the review, a report with recommendations for procurement regulatory
improvements, based in part on the American Bar Association (ABA) Model
Procurement Code, will be presented to the City. At the July 17, 2013 Commission
Meeting, Administration will ask the City Commission to refer an item to the Finance and
City -wide Projects - Committee for discussion of the proposed review and
recommendations.
Solicitation Document Review
The importance of clarity in the City's competitive solicitations cannot be understated.
Clear and reader - friendly bid. documents encourage competition by allowing prospective
vendors to . fully runderstand the City's expectations in any given solicitation and .
minimizes the need to unnecessarily penalize vendors for not complying with unclear
solicitation requirements. With that goal in mind, all competitive solicitation documents
through which the City seeks bids, proposals or quotes for the acquisition of goods or
services are currently under review by a team of independent reviewers with extensive
Commission Memorandum 2
1
Procurement Update
experience in assisting governmental agencies with public procurement projects. The
reviewers have completed procurement - related assignments in a diverse range of
governmental agencies, including: The National Institute for Governmental Purchasing
(NIGP), State of Idaho, State of Texas, State of Missouri, State of Connecticut, State of
South Dakota, Jackson .County (MO), Orlando Aviation Authority (FL), District of
Columbia, Miami -Dade County, Florida Atlantic University, City of Miramar, City of
Homestead, Federal Government General Services Administration, San Diego County,
and the City of Pompano Beach Community Redevelopment Agency. The objective of
the review is to: create consistency and uniformity among City solicitation documents;
incorporate best practices available from NIGP and others; create a simplified process
for vendors to do business with the City; assure that competitive solicitations promote
competition; reduce the possibility of bid rejections caused by inconsistent bid language;
increase the productivity of the Procurement Division staff; and, improve the likelihood
the City will gain maximum benefit from its competitive solicitations.
Contract Negotiations
The transparency of the City's contracting activities is an important part of maintaining a
procurement system based on openness, fairness, ethics and integrity. Florida Statutes
stipulate that most activities of procurement selection meetings are subject to Sunshine
Law requirements for public meetings, except for those meetings at which: 1) a
negotiation with a vendor is conducted pursuant to a competitive solicitation, 2) a
vendor makes an oral presentation as part of a competitive solicitation, or 3) a vendor
answers questions as part of a competitive solicitation. Notwithstanding the exemption
provided in statute for these exempt meetings, Sunshine Law requirements stipulate
that "a complete recording must be made of the exempt meeting; no portion of the
meeting_ may be held off the record." The recordings must be made available pursuant
to any public records request following the conclusion of the solicitation process.
In the past, it has been the City's past practice to allow the vendor negotiations to be
managed by the user department without participation by the Procurement Division.
However, in these cases it is difficult to assure strict adherence to the requirements of
the Florida Sunshine Law. In order to assure statutory requirements, in addition to
assuring negotiations do not deviate from the original scope and intent of the
solicitation, the administration of the contract negotiation process has been assumed by
the Procurement Division, with participation by City staff as necessary.
Contract Administration & Risk Management
It has been the City's practice that much of the administrative contract management
duties are delegated to the user department's contract manager. While it is important to
include the departmental contract manager in the day -to -day management of the
contract requirements, including managing contractor performance, certain aspects of
the .contract administration process should be centralized to assure that the risks to the
City are minimized, including certain risk management considerations (e.g., insurance,
performance and - payment bonds) and timely contract renewals.
t
Commission Memorandum 3
Procurement Update
In an effort to assure that the aforementioned contract administration and risk
management goals are achieved, these activities have been assumed by Procurement
Division. To facilitate contract administration process, the division is finalizing the .
implementation and full use of the City's contract management system that allows the
tracking and maintenance of contractor performance evaluations, contract renewal
periods, and risk management factors.
Construction Procurement Contracting
Since the discontinuation of the Job Order Contracting (JOC) process last fall, the City
has been without a methodology for expediting construction projects. This is especially
problematic for smaller projects and projects, related to unplanned emergency work for
which releasing independent solicitations is not feasible. To address this concern and
expedite the delivery of planned construction projects, the Administration is considering
implementation of a tiered approach to construction contracting which may include a
fixed priced methodology for small (less than $250,000) and emergency projects and an
expedited prequalified process for moderately sized projects ($250,000 to $2 million).
Projects greater than $2 million would be handled through project- specific competitive
solicitations in accordance with the requirements of Florida Statutes. Prior to
implementation, the Administration will ask the City Commission to refer an item to the
Finance and City -wide Projects Committee for discussion of the proposed
recommendations.
Ethics Training
As the City Commission has been previously informed, the City has contracted with the
Miami -Dade Commission on Ethics to provide a series of training sessions to all
regulatory personnel regarding ethical requirements for public employees. In addition to
this training, all Procurement Division personnel have also attended the Procurement
Ethics Training sponsored by Miami -Dade County, The Miami -Dade Commission on
Ethics and the Miami -Dade Office of Inspector General. The Procurement Ethics
Training provides detailed instruction on procurement - related ethical matters, including:
ethical violations; conflicts of interests; gifts by vendors; doing business with one's
agency; and, other relevant matters. The primary focus of the training, in addition to
facilitating an understanding of applicable regulations, is, to help employees be
cognizant of day -to -day circumstances that could lead to actual or perceived ethical
concerns. As of the date of this LTC, Procurement Division personnel have completed
the training.
Financial System Internal Control Improvements
Procurement and Information Technology staff have completed a test of the internal
controls of the City's enterprise resource planning (ERP) system relative to the process
for the acquisition of goods and services. While the system performs well under most
scenarios, the results of the internal control testing resulted in a number of
recommendations that would improve the security of these processes. The
recommended improvements have been discussed with the City's ERP provider, which
has agreed to complete a business process review and assist the City in implementing
Commission Memorandum 14
Procurement Update
improvements to both the acquisition processes and the internal controls related to
these activities.
e- Marketplace
The City requires routine goods and services to support the operations of many City
departments, especially those departments involved in maintaining infrastructure
systems and other City assets. Since the City does not currently maintain an adequate
stocking facility for routine operational requirements, these departments must acquire
the goods and services they require at the time of need, usually through blanket
purchase orders, spot market purchases or procurement card purchases. These
methods are often inefficient or do not provide the internal controls necessary to assure
that sound procurement practices are being adhered to.
In an ongoing effort to increase efficiencies in the acquisition of goods and services by
City departments while assuring that internal controls for a sound procurement process
are in place, the Procurement Division has identified a process for maximizing the
efficiency of MRO purchases through the U.S. Communities Purchasing Alliance (U.S.
Communities) Marketplace system (e- Marketplace). U.S. Communities, founded by the
National League of Cities, The National Institute for Governmental Purchasing (NIGP),
National Association of Counties, and the U.S. Conference of Mayors, is the leading
national government purchasing cooperative, providing procurement resources and
solutions to public sector agencies looking for the best overall supplier government
pricing, while achieving procurement operational efficiencies. U.S. Communities offers
contracts established through competitive bids that aggregate the volume of over
55,000 participating public sector agencies across the country, including state agencies,
municipalities, counties, special districts (e.g., fire, sewer, water, etc.), public schools
(including K -12, colleges and universities) and non - profit organizations.
The e- Marketplace tool allows for routine maintenance, repair and operations (MRO)
purchases to be made in a simplified web -based manner through which the items
available under the competitively bid contracts may be acquired from reputable
suppliers at the best government pricing available, while maintaining tight controls on
expenditures through the approval workflow functionality. e- Marketplace will increase
the efficiency, cost - effectiveness and internal control goals described above by:
• providing online access to all U.S. Communities competitively bid contract prices
which have been guaranteed by the awarded contractors to be the lowest
offered to public sector agencies;
• decreasing "off- contract" spend that results when departments purchase
requirements from other than contract sources;
• maximizing savings through comparison shopping functionality which allows
users to compare specifications and cost of similar items;
• establishing pre - established required approval workflow for all purchases;
• providing free shipping and next day delivery on most items so that the receipt of
routine items can be expedited;
Commission Memorandum 5
Procurement Update
• allowing the department managers and the Procurement Division to manage
spend and consider historical volume for subsequent solicitations and potentially
deeper discounts.
• assuring a fully transparent acquisition process with a verifiable audit trail to
ensure purchases are properly approved, from authorized suppliers, at contract
prices.
The e- Marketplace is a secure and proven solution utilized by public sector agencies
across the country. With a single logon, authorized users can logon to the e-
Marketplace and have access to a number of providers of MRO equipment and supplies
that have been competitively bid to assure that the City is yielding the best possible
public sector pricing, while assuring that required goods are received, in most cases, by
the next business day.
Objective Cost Scoring Criteria
Assuring a fair process for the evaluation of competitive proposals received is a primary
goal of the public procurement process. While some aspects of the competitive proposal
evaluation process are subjective in nature, other aspects are well- suited for a more
objective evaluation process. The scoring of cost proposals is one of those aspects of
the competitive proposal evaluation process that may be evaluated objectively. In the
past, the City has allowed for a more, subjective evaluation of cost proposals by
evaluation committee members. Going forward, the Procurement Division is
implementing a process by which the cost portion of competitive proposals are to be
evaluated in an objective manner based on a common formula utilized by many public
sector agencies as illustrated in the followin example:
Vendor Vendor Maximum Formula for Calculating Points Total Points
Cost Allowable (lowest cost / cost of proposal Awarded
Proposal Points being evaluated X maximum
for Cost allowable points = awarded
Proposal points
Vendor A $100.00 30 $1001$100 X 30 = 30 30
OR
100/100 = 1.0
1.0x30 =30
Vendor B $150.00 30 $1001$150 X 30 = 20 20
OR
100/150 = .667
.667 x 30 = 20
Vendor C $200.00 30 $1001$200 X 30 =15 15
OR
100/200 = .50
.50x30 =15
As the objective formula described above indicates, Vendor A submitted the lowest
overall cost proposal and, therefore, a received the full allocation of allowable points. By
Commission Memorandum 16
Procurement Update
comparison, Vendors B and C submitted cost proposals that were higher than as
Vendor A. Therefore, Vendors B and C received a pro -rated percentage of points. The
objective scoring methodology, used primarily for Request for Proposals or Invitations to
Negotiate, will be incorporated in the solicitations following the document review
described above.
Industry Review Meetings
It is the goal of the Procurement Division to conduct the City's processes related to the
acquisition of goods and services in the most transparent manner possible. The Division
believes the City's is best served when all stakeholders, internal and external, are well
informed of the City's goals in any given competitive solicitation process and the City
has taken into account any potential pitfalls or available best practices that may exist
when creating specifications for the solicitation. Accordingly, the Division has instituted
an industry review process through which vendors in any given field are invited to
discuss with City staff how best to accomplish the goals of a forthcoming solicitation.
The industry review meetings allow the City to consider ways of achieving a particular
goal which maximizes the value of the competitive solicitation process and minimizes
the potential for specifications that are difficult to achieve or limit competition.
The industry review meetings also help vendor outreach efforts by increasing the
transparency of the City's procurement processes. In this effort, meetings send a
message to vendors that may have previously resisted participation in the City's
solicitations that it is the City's intent to assure a fair and transparent environment in all
activities related to the acquisition of goods and services.
Procurement Liaison Program
It is the Administration's goal to assure the City's procurement processes are models of
excellence founded on fairness, transparency and sound business processes. In order
to create and sustain excellence, it is important that those entrusted with the
stewardship of City resources expended in the acquisition of the goods and services
required by City departments be well trained in maximizing taxpayer resources through
strict adherence to procurement rules, transparency, the highest ethical standards,
strategic sourcing and best practices. In order to facilitate these goals, the Procurement
Division. be implementing the Procurement Liaison Program. The Procurement
Liaison Program will assure that those departmental staff members responsible for
managing the acquisition of goods and services required by their departments are fully
trained through a curriculum based on the following general topics:
• Overview of the Procurement Liaison Program
• Fundamentals of Procurement Requirements, including Sunshine Law & Public
Records
• Ethics
• Maximizing Enterprise Resource Planning (ERP) Procurement Functionality
• Budgeting
• Small Dollar Purchases
e- Procurement
• Formal Solicitations
Commission Memorandum 7
Procurement Update
• Contract Management & Vendor Performance Management
Each month, Procurement Liaison Program participants will be offered training session
on one of the subjects noted above. The Procurement Liaison Program will be offered
yearly.
Conclusion
The process improvements described herein are examples in action of the new mission
of the Procurement Division, which is...
...dedicated to maximizing. taxpayer resources in the acquisition of goods
and services, through strict adherence to governing law, the highest
ethical standards, strategic sourcing and best practices, transparency and
customer- focus.
The division is committed to continuing process improvements which improve the
efficiency and effectiveness of the process through which the City acquires the goods
and services required, while assuring sound business practices and tight internal
controls& followed.
JLM / AD
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