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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.