Agenda Item 8BAGENDA ITEM # 8B
NOVEMBER 13, 2012
CITY COMMISSION MEETING
STAFF REPORT
AGENDA ITEM: Proposed policy on rebidding for service contracts and related
Commission approvals
SUBMITTED BY: Jim Hanson, City Mana
DATE: October 25, 2012
BACKGROUND: A request was made at a recent commission meeting for the staff to propose a
policy that would require all service contracts to be presented for commission
approval at least two meetings before their effective date. Only service
contracts are at issue because contracts for individual engineering or
construction projects can usually be delayed without the interrupting ongoing
services. A second request was made at that meeting to propose a policy on
the dollar value of contracts brought for Commission review. Last, staff was
asked to look at the possibility of posting a schedule of City contracts online.
The City's past policy has been to bid most service contracts for one year
periods with options for two additional renewals at the same price if both the
City and the vendor are pleased with the contract. Some of the service
contracts are for considerably longer periods of time such as the sanitation
services that goes for seven years to allow for amortization of costs for trucks
and toters. The current threshold for bringing contracts to the Commission
for approval has been $25,000.
After discussion with staff, there are several points for the Commission to
consider;
In most cases, it is reasonable to prepare and present contracts for initial
approval or renewal at least two meetings prior to their expiration date.
Staff simply needs to move their calendars ahead. Some concern was
expressed of "lame duck" performance in the final weeks if an existing
contractor were not being recommended for renewal. Adding two more
weeks of delay would simply add more time for questionable service.
However, this is not a major problem. A more important issue is that
some vendors may not be willing to provide pricing that far ahead of the
contract dates. Some insurance carriers are good examples.
The cost to rebid the contracts in staff time was estimated to be
approximately $1,000 for most service contracts. This cost can grow to a
much higher number for complex contracts like sanitation services.
Preparing bids also costs our contractors money which is usually passed
along to their customers.
AGENDA ITEM # 8B
NOVEMBER 13, 2012
The recent direction by the Commission to rebid virtually every contract
yearly rather than renew for additional periods as authorized in the bid
specifications has produced some cost savings for the City during the
recent recession. However, during normal times when there is positive
inflation, rebidding annually can increase the City's cost. One recent
example was the street sweeping contract which was rebid with renewal
for one additional year available. The City's annual cost increased by
$3,300 even though the vendor was willing to extend the contract before
it was rebid.
There can be considerable disruption to the City services in changing
vendors. Janitorial services is a good example where all of the employees
need to have background checks, get familiar with the City facilities and
have security badges issued.
Some contractors provide much better service than others. Some have
been with the City for long term and those relationships have been very
beneficial to the City. A couple of examples are the point repair and
major electric repair contractors. They have become familiar with our
electrical, water and sewer systems and provide high levels service, often
at night or on weekends. In other cases, the City is better off changing
contractors after the first year even though the service provided is not bad
enough to cancel the contracts before their initial expiration.
In some cases there are very few vendors for any particular service.
Sometimes, we can only get one to bid. Rebidding yearly in these cases
does not make sense.
- The low bid for service does not always guarantee good service. Again,
the janitorial contract has been an example. We have had eight different
contractors over the last 12 years. When we do get a higher quality
contractor, we would prefer to stay with them more than one year.
Because there are so many different factors to consider, trying to write a
policy that covers all situations does not make sense. Relying on the best
judgment of the City's top staff, with commission approval for contracts over
$25,000, is the most reasonable solution.
BUDGET: As reported previously, each time the City rebids a contract, the cost for time
of various employees is approximately $1,000 for the simpler contracts.
RECOMMENDATION: There is a need to bid each service contract, or otherwise compare costs, on a
regular basis to ensure good value for the City, accountability and public
trust. The intervals for the contracts should depend upon the nature of the
service. A one year timeframe with renewal options for two additional years
is reasonable for most of the service contracts, however a longer term may be
AGENDA ITEM # 8B
NOVEMBER 13, 2012
advisable for services where City specific knowledge is of benefit. Specific
recommendations are as follows;
1) Direct the staff to prepare and present most contract approvals or
renewals at least two commission meetings before the contract
deadline with an understanding that this provision may not be
obtainable in certain instances.
2) As to the dollar value and frequency for commission approvals, there
are many factors to consider concerning extensions. These would
include performance of the contractor, administrative time and cost to
bid versus the size of the contract, the amount of competition
available, disruption in changing vendors and other factors. The
judgment of the top staff should be utilized as it has in the past to
determine which contracts for service should be extended rather than
rebid if they were within the three year period. A dollar value for
contract approvals by the Commission has been set at $25,000 for
some time and there does not appear to be any overwhelming reason
to change it at this time.
3) Concerning the possibility of listing all contracts online, the City
already has an extensive online service for prospective vendors and
staff answers questions from vendors on a daily basis on a wide
variety of subjects, including when contracts may be up for renewal.
The City's website includes a "Notify Me" option where prospective
vendors can sign up to receive an email whenever a bid is being
requested for a service for which they are interested. It is possible for
the City to prepare a database that can be put online listing all of our
current contracts and timeframes for bids. However, staff has pointed
out that this database would have to be updated on a very regular
(probably weekly) basis to keep it current. This would add a
significant additional responsibility at a time when the City, because
of budget constraints, has been eliminating staff to keep costs and tax
rates down. Consequently, it is the staff's recommendation to keep
the online services for prospective vendors as they have been in the
past.