February 14, 2006
SUBJECT: Authorization to Increase Expenditures under an Existing Contract for Grounds Maintenance Products (F0501-43)
REPORT IN BRIEF
Authorization is requested to increase expenditures under an existing blanket purchase order with Target Specialty Products of San Jose. This one-year contract was issued under the City Manager’s contract award authority of $50,000. However, with five months remaining on the contract, it is apparent that Council authorization of expenditures above that amount is required.
BACKGROUND
A wide variety of fertilizers, herbicides, and similar products are used in the maintenance of City parks, golf courses and landscaped areas throughout the City. In the past, these products have been purchased primarily from a single supplier who has been awarded the contract as the result of a competitive bidding process.
Recently, however, awarding a contract to a single supplier at fixed prices has become problematic. Due to a volatile market, contracts that require one-year fixed pricing have not been feasible. Product availability has also been an issue; and it has often been necessary to seek products from suppliers other than the City’s contract supplier.
Therefore, in 2005, Purchasing modified its process for purchasing grounds maintenance products and issued a blanket purchase order to each of the three primary local sources: Target Specialty Products of San Jose, Sierra Pacific Turf Supply, Inc., of Campbell; and Verdicon, Inc., of Fremont. Expenditures under each of the purchase orders were expected to be less than $50,000, which is the City Manager’s contract award authority. Staff in the Departments of Public Works and Parks and Recreation were instructed to obtain quotations from each of these three suppliers prior to ordering products and to place each order, based upon price and availability at the time of need.
DISCUSSION
This decentralized approach to informally bidding each purchase has proven effective. However, because Target Specialty Products stocks a more comprehensive variety of City-required products than the other firms, to date, expenditures with Target are nearly $50,000 compared to expenditures of approximately $15,000 each with the other two suppliers. With five months remaining of the one-year contract term, it is obvious that expenditures under the Target blanket purchase order will exceed the City Manager’s contract award authority of $50,000, thereby requiring Council action.
FISCAL IMPACT
Actual usage of grounds maintenance products and, therefore, total costs vary from year to year, depending upon a variety of factors which are impossible to predict. In recent years, total expenditures for these products have typically been in the range of $85,000 to $100,000. However, costs have been higher during the past several months due to increases in manufacturing and distribution costs. To date, total expenditures for grounds maintenance products under the three existing blanket purchase orders are $80,711. Funds are available in various City accounts.
RECOMMENDATION
It is recommended that Council increase authorized expenditures in an amount not to exceed $35,000 under an existing blanket purchase order with Target Specialty Products for grounds maintenance products, making a total contract amount not to exceed $85,000.
Prepared by:
Elaine Wesely
Purchasing Officer
Reviewed by:
Mary J. Bradley
Director, Finance
Reviewed by:
David A. Lewis
Director, Parks and Recreation
Reviewed by:
Marvin Rose
Director, Public Works
Approved by:
Amy Chan
City Manager
Attachments
1. Change Order No. 1 (.pdf)
2. Blanket Purchase Order No (.pdf)