CITY OF SUNNYVALE
City Council Study Session Summary
Purchasing/Contract Approval Process
May 4, 2004 – 6:00 PM
West Conference Room

The City Council met in study session at City Hall in the West Conference Room, 456 West Olive Avenue, Sunnyvale, California on May 4, 2004 at 6:00 p.m., with Mayor John Howe presiding.

Mayor John Howe
Vice Mayor Dean Chu
Council Member Fred Fowler
Council Member Melinda Hamilton
Council Member Julia Miller
Council Member Ron Swegles

City Staff Present:

Amy Chan, City Manager
Valerie Armento, City Attorney
Chuck Schwabe, Deputy City Manager
Mary Bradley, Director of Finance
Elaine Wesely, Finance Manager
Noel Dietz, Purchasing Division
Marvin Rose, Director of Public Works

Visitors/Guests Present:

No public comment was presented.
Mayor Howe called the meeting to order at 6:05 p.m.

I. Purpose

Finance Director Mary Bradley opened the presentation, which she noted would provide an overview for Council of Purchasing policies and processes used by the City, in response to a request by Mayor Howe. Copies of the presentation materials are available on file in the Office of the City Clerk.

II. Centralized Purchasing

Elaine Wesely described the legal basis for the City’s centralized purchasing system, which is established by Charter (Sections 1309 and 1317) and defined by ordinance in two chapters (2.08 and 2.09) of the Municipal Code.


III. Procurement Responsibilities

Procurement responsibilities are shared among five main players: Departments, Purchasing, the City Manager, the City Council, and Accounts Payable. Ms. Wesely summarized the role of each in the purchasing process.

Ms. Wesely explained that the awarding authority for City contracts rests with the City Manager for any one transaction of $50,000 or less, and with the City Council for any one transaction valued at more than $50,000. She further explained that if the value of a contract originally awarded for less than $50,000 was subsequently increased to an amount greater than $50,000 or if an amount previously awarded by the Council is insufficient to complete a project, Council would then become the awarding authority for the required contract amendment. Ms. Wesely then paused the presentation for questions.

The Council requested clarification as to what constitutes "any one transaction". Ms. Wesely explained that a transaction is a discrete purchase from a supplier, whether for goods or services. Council inquired as to whether the City’s payment history with a supplier is reviewed before a contract is awarded. Director Bradley noted that it is not necessarily reviewed, since awards are made by transaction and not based on cumulative expenditures with a supplier.


IV. Authorized Procurement Methods

Ms. Wesely resumed the presentation by describing the authorized procurement methods employed by the City. The method used for each procurement is decided by both the dollar amount and the nature of the item or service to be purchased. Purchases over $50,000 are bid formally, while those under $50,000 or for professional services or sole source items may be bid informally.


V. Payment Process

Ms. Wesely stated that approximately 40,000 invoices per year are processed by two Accounts Payable Technicians, who review each payment for accuracy, verification of receipt, authorized approval, payment discounts, legal requirements, contract authorization, etc.


VI. Ethics Policy

Ms. Wesely described the City’s Purchasing Ethics Policy, which is contained in Chapter 2.08.250 of the Municipal Code and mentioned that the policy applies to all City appointed and elected officials.


VII. Questions/Discussion

The meeting was opened for discussion.

Council inquired as to ways the purchasing process could be improved so as to limit the incidence of work being done prior to authorization from the appropriate awarding authority. Director Bradley noted that a letter will be going out to City suppliers reminding them that a contract is required before any work can proceed. City Manager Amy Chan stated that Finance Department staff will be working with suppliers, and reviewing internal practices ensure that procurement policies are followed.

Council members expressed concern about the pricing structure used for engineering design contracts, specifically, the use of time and materials pricing rather than firm fixed price contracts. Director Rose explained that these types of contracts are based on a clear scope of work as known at the time of contract award, but there is no way of anticipating problems that may be encountered as work progresses. For that reason, firm fixed price contracts are not feasible.


Conclusion

The presentation concluded at 7:05 p.m.

Respectfully submitted,
Noel Dietz, Purchasing Division