October 19, 2004
SUBJECT: Policy on the Use of Consultants
REPORT IN BRIEF
At Council's direction, staff has reviewed the City's use of consultants and recommends that an Administrative Policy be initiated to facilitate Citywide consistency in determining when and how consultants should be used as well as how consultants should be selected.
BACKGROUND
In May 2003, as part of its review of the City Manager's proposed budget reductions, Council reviewed a list of open consultant agreements for each department. Council expressed concern about the apparent lack of consistency among departments; and the use of consultants was selected as a Study Issue in 2004.
This report has been prepared in response to Council direction through the Study Issue process.
EXISTING POLICY
There is currently no formal existing policy relating to the use of consultants.
DISCUSSION
In reviewing the City's use of consultants, staff considered the following:
§ What is a "consultant"?
§ When does the City use consultants?
§ How are consultants selected?
§ Who is responsible for the various steps involved when consultants are used, beginning with the identification of the need for a consultant and ending with the award of contract?
§ What can be done to improve the process?
What is a "consultant"?
The term "consultant" can be defined as an expert in a particular field who offers professional advice or services to others. "Consulting services" and "professional services" are often used interchangeably.
The Sunnyvale Municipal Code defines "professional services" as follows:
Services which involve the exercise of professional discretion and independent judgment based on an advanced or specialized knowledge, expertise or training gained by formal studies or experience. Such services include, but are not limited to, those provided by appraisers, architects, attorneys, engineers, instructors, insurance advisors, physicians or other specialized consultants. (Section 2.08.030(n)).
Consultants are independent contractors, and the use of consultants is subject to all relevant Internal Revenue Service rules and regulations.
When does the City use consultants?
Historically, the City has commonly used three types of consultants: technical, training, and management consultants. However, other types of consultants may be used, depending upon circumstances, staffing levels, and unique Departmental needs.
Technical consultants are ordinarily used when a specific expertise is required on a temporary basis that goes beyond that available in-house. Depending upon the City's requirements, contracts for technical consultants may be for "on call" consultation on a time and expenses basis; or they may involve a defined scope of services for a specific project. Depending upon the project, fees may be fixed; or fees may be based upon an estimated number of hours and expenses with a cap on the total amount.
Training consultants are used for employee and organizational development, injury prevention training, and work skills enhancement. Training consultants are also used for recreation programs offered to the public. Contracts for training consultants are ordinarily class specific with a specific training schedule and fixed price per class.
Although less common in recent years, management consultants are used to enhance cooperation among work groups, facilitate communication and address specific organization or personnel-related problems. Management consultants are often paid on a hourly fee basis with a cap on the total contract amount.
How are consultants selected?
The Sunnyvale Municipal Code exempts professional or specialized services from competitive bidding (Section 2.08.070(b) - Purchasing Ordinance). This is a common practice among public agencies. However, nothing in the Purchasing Ordinance precludes the use of competitive bids or proposals, when possible. Section 2.09.070(b) of Public Works Contracting Ordinance also exempts professional or specialized services from competitive bidding. It should be noted that legal business and proceedings are outside the scope of either of these ordinances and are not addressed in this report.
Ordinarily, the effort involved in the selection of a consultant is driven by the cost of the services. For example, there is little justification for spending $5,000 worth of time and effort on a consultant selection process to acquire a $10,000 solution.
Consultants for small dollar contracts are often selected, based upon recommendations from other public agencies, past experience or direct contacts from potential consultants. Although not legally required, consultants for higher dollar or high visibility projects are often selected through a Request for Qualifications or Request for Proposals process.
A Request for Qualifications is an informal process in which a notice is generated to prospective consultants, briefly explaining the City's requirements and requesting a written response from interested consultants, describing their qualifications and experience relative to the project at hand. Consultants may be required to submit a cost proposal with their responses, or pricing may be requested only from those consultants determined to be the most qualified after all submittals are reviewed. References are also checked to determine the satisfaction level of previous clients. If the contract amount is more than $50,000, staff prepares a Report to Council, recommending contract award to the selected consultant. Otherwise, a contract is issued under the City Manager's awarding authority.
A Request for Proposals (RFP) is a formal document which ordinarily invites prospective consultants to submit solutions to a stated problem. Interested consultants then submit proposals which document their responses to the RFP requirements, describe their proposed solutions, identify the costs and often indicate acceptance of the contractual terms and conditions stated in the RFP. Proposals are evaluated, using pre-defined criteria in addition to price. Proposals, as first submitted, are subject to negotiation. As with Requests for Qualifications, if the amount is more than $50,000, staff prepares a Report to Council, recommending contract award to the selected consultant. Otherwise, a contract is issued under the City Manager's awarding authority.
When State and Federal funding is involved, the process for the selection of engineering and architectural consultants is slightly different in that the California Public Contract Code requires that these consultants be selected entirely on the basis of qualifications. Cost proposals are opened only after the most qualified consultant is identified.
Who is responsible for the various steps
involved when consultants are used?
It is common in public agencies for the procurement of consulting services to be accomplished in a decentralized manner--even in agencies that have centralized purchasing systems. This was true in the City of Sunnyvale until January 2000 when the City Council adopted an updated Purchasing Ordinance and a new Public Works Contracting Ordinance, Chapters 2.08 and 2.09 respectively of the Sunnyvale Municipal Code. With the adoption of these ordinances, the procurement of consulting services in Sunnyvale was centralized for the first time.
Standardized Request for Proposals (RFP) templates were developed and posted on the City's Intranet for the use of all City departments. Any Department who has identified the need for a consultant has had the ability to issue its own RFPs, using these templates; or it can ask the Purchasing Division to issue a RFP on its behalf. Proposals are evaluated by the Department requiring the services and the Purchasing Division, using pre-defined criteria. Regardless of who issues the RFP, all contracts are issued by Purchasing Division staff, using contract templates created by the City Attorney.
As with all purchases, contracts valued at $50,000 or less in any one transaction fall within the City Manager's awarding authority; and recommendations are submitted to Council for the award of contracts valued at more than $50,000.
What can be done to improve the process?
Since the ordinance changes in 2000, the process for the use of consultants has been a hybrid between the previously decentralized process and the new centralized process, the intent of which was to retain the best features of both. Better consistency has been achieved in the proposal solicitation and evaluation process through the use of standard solicitation documents; and all records have been centralized within the Purchasing Division.
However, because consulting services are legally exempt from bidding, Departments have retained a great deal of discretion in their use of consultants. For that reason, certain inconsistencies exist in the process. For example, there is an apparent inconsistency in the criteria used by the various Departments to determine when the use of consultants is justified and appropriate. There are also inconsistencies in the level of effort the various Departments expend in reaching out to qualified consultants for City projects. For example, some Departments consistently issue Requests for Proposals to obtain as much competition as possible; and others typically request only one or two informal proposals from specific consultants.
The City Manager has undertaken the process of updating all of the City's Administrative Policies. The use of consultants is an appropriate topic for a new Administrative Policy, the intent of which would be to achieve consensus and consistency in when and how the City contracts for consulting services and formalize the process that has evolved since the ordinance changes in 2000.
FISCAL IMPACT
There is no direct fiscal impact should Council adopt the recommendation set forth in this report.
CONCLUSION
Although there has been progress in standardizing the use of consultants since the Purchasing Ordinance was updated in 2000, opportunities for further improvements still exist.
RECOMMENDATION
Staff recommends that Council request the City Manager to include in the current policy update project the development of an Administrative Policy on the consistent and appropriate use of consultants.
Prepared by:
Elaine Wesely, Purchasing Officer
Reviewed by:
Mary J. Bradley, Director, Finance
Approved by:
Amy Chan
City Manager
Attachments:
A. Proposed Council Study Issue(PDF)