HomeMy WebLinkAbout1994-07-12 - AGENDA REPORTS - SHOP LOCAL PREFERENCE STUDYAGENDA REPORT
City Manager Approv
Item to be presented
CONSENT CALENDAR
DATE:
SUBJECT:
DEPARTMENT:
BACKGROUND
July 12, 1994
Shop Local Preference Study
Public Works
As an action item from the City Council Team Building session on May 14, 1994, Council
requested that staff investigate the possibility of increasing the local preference percentage.
The local percentage preference is an informal policy whereby pricing from local suppliers is
reduced, for calculation purposes only, by 1 % since the City realizes this amount in sales tax
revenues from local sales.
To better address Council's request, staff conducted a survey of 13 similar and nearby cities
regarding their local preference percentages (Attachment "A"). Of the 13 cities, 10 indicated
that they had neither a written (ordinance) nor an informal policy for local pricing
preference. However, 3 cities (Palmdale, Burbank, and Glendale) indicated that they did
have an informal policy allowing a 1 % local pricing preference and that the percentage was
directly related to local sales tax revenues. Most research conducted by staff and other
professionals in the field indicated that the preference given was typically related to the sales
tax structure.
The City of Bakersfield went through a similar fact finding process and provided us with the
results of their survey (Attachment "B"). Their survey indicates that the majority of cities
that offer a preference offer a 1 % preference, which illustrates that local suppliers in Santa
Clarita are receiving the same benefits as local suppliers in most other cities referenced in the
study.
Based on staff's survey and the one performed by Bakersfield, the following issues are being
submitted for Council consideration. Increasing the local preference percentage may:
• inhibit fair and open competition amongst otherwise qualified suppliers.
• invite retaliatory measures such as "No Bids" which would not be beneficial to the
City.
APPROVED Age," Item: **E
Shop Local Preference Study
July 12, 1994
Page 2
• provide an artificial, economic "crutch" for local suppliers.
• invite criticism from citizens who own businesses outside of Santa Clarita yet pay
property/sales tax to the City. Concerns are that their companies are being
indiscriminately rejected in favor of local suppliers yet more of their tax money is
being spent in order to support the local suppliers.
Additionally, Section 20162 of the Public Contracts Code prohibits City Council from
awarding a Public Works Project Contract to the second lowest bidder because of locale,
even if the bids are close in pricing.
Although most research conducted by staff and other professional in the field indicated that
the preference given was typically related to the sales tax structure, a few cities went a step
further to help local suppliers by increasing the local supplier preference percentage above
the 1 % they would receive in sales tax. For example, the City of Alameda has enacted an
ordinance to implement a local supplier preference and a resolution urging local shopping
(Attachment "D"). The 5% local supplier preference is not specified in the ordinance as
doing so would decrease the Council's flexibility in increasing or decreasing the percentage
as they feel necessary. The format and wording of the ordinance may be useful in
implementing a similar ordinance/resolution in the City of Santa Clarita.
It should be noted, however, that the use of the "Alameda" approach would be more
confusing for suppliers since it is limited to the purchase of non-professional services,
supplies, and equipment. All federally-, state-, or gas tax funded projects are exempt as well
as professional or consultant services. Using the "Alameda" approach may transform the
current process of awarding bids into a highly political process and would subject Council to
intense local supplier lobbying efforts whenever their bid is, in their estimate, close enough
for Council to invoke the "Alameda" approach. It should also be noted that the current (1 %)
percentage preference is revenue neutral in that the City receives the money back as sales
tax. Increasing the preference percentage will have a negative impact on the City's revenue
in direct proportion to the number of local contracts awarded. In essence, if the preference
percentage is 5 %, then the City will be spending 5 % to receive 1 % in sales tax revenue, thus
generating a negative revenue flow of 4% each time a local purchase is made.
The City has made great strides in meeting its philosophical goals of operating like a
business and shopping local whenever possible. Shopping local remains a priority for staff
as evidenced in Attachment "C". Further, in an effort to help local suppliers do business
with the City, another supplier seminar is tentatively scheduled for the month of October.
Shop Local Preference Study
July 12, 1994
Page 3
RECOMMENDATION
In order to maximize limited funds yet encourage our local economy, staff recommends
maintaining the 1 % local supplier preference, continuing with and enhancing the supplier
outreach programs as outlined in Attachment "C", and further encouraging City departments
to shop local whenever possible.
ATTACHMENT "A"
CITY OF SANTA CLARITA
LOCAL PREFERENCE SURVEY - JUNE 1994
LOCAL
PREF.
AGENCY
AMOUNT
AUTHORITY
COMMENTS
City of Bakersfield
0
n/a
n/a
City of Santa Rosa
0
n/a
n/a
City of Simi Valley
0
n/a
n/a
City of Thousand Oaks
0
n/a
n/a
City of Pasadena
0
n/a
n/a
City of Calabasas
0
n/a
n/a
City of Santa Barbara
0
n/a
n/a
City of Beverly Hills
0
n/a
n/a
City of Glendale
0
n/a
n/a
City of Torrance
0
n/a
n/a
City of Palmdale
1%
informal
no plans to
increase/ formalize
City of Burbank
1 %
informal
" w
City of South Gate
1 %
informal
" "
T 1
ATTACHMENT
KERN COUNTY
LOCAL PREFERENCE SURVEY- APRIL, .1992
LOCAL
PREFERENCE
AGENCY AMOUNT AUTHORITY COMMENTS
COUNTY OF ALAMEDA 5% COUNTY ORDINANCE ENACTED 1/15/91
NO. 0-91-4
COUNTY
OF
SAN BERNARDINO
NONE
HAVE MINORITY GOAL ONLY
COUNSEL ADVICE - ILLEGAL:
COUNTY
OF
SAN LUIS OBISPO
NONE
NONE NOW, BUT BD. OF
SUPV. BEING ASKED TO
INSTITUTE
COUNTY
OF
SANTA BARBARA
NONE
S.B. COUNTY GEN'L LAW
COUNTY VS. CHARTER -
ILLEGAL FOR GEN'L LAW
COUNTY
OF
CONTRA COSTA
NONE
INFORMAL
TIE BID TO LOCAL VENDOR
- ONLY
COUNTY
OF
SACRAMENTO
NONE
INFORMAL
TIE BID TO LOCAL VENDOR
- ONLY
COUNTY
OF
RIVERSIDE
NONE
-
COUNTY
OF
SANTA CRUZ
NONE
COMMITTEE STUDY BY BD.
OF SUPV. COMM. REJECTED
PREFERENCE
COUNTY
OF
SAN DIEGO
NONE
-
COUNTY
OF
MERCED
NONE
INFORMAL
HAD, IN THE PAST, 5%
PREFERENCE. NOW, ONLY
TIE -BREAKER TO LOCAL
COUNTY
OF
BUTTE
$5.00 TO
INFORMAL
IF TOTAL ON BID IS
$10.00
WITHIN $5.00 TO $10.00
DIFF.
ON LARGE BIDS "TIE" GOES
TO LOCAL
COUNTY
OF
TULARE
NONE
TIE BID TO LOCAL VENDOR
- ONLY
COUNTY
OF
VENTURA
NONE
BD. OF SUPV. REQUESTED
STUDY - REJECTED CONCEPT
AFTER STUDY
COUNTY
OF
KINGS
NONE
-
1
ATTACHMENT B
Page 2
LOCAL
PREFERENCE
AGENCY AMOUNT AUTHORITY COMMENTS
COUNTY
OF FRESNO
TIE COUNTY CHARTER (SEE
CHARTER STIPULATES "BUY
COMMENTS)
FROM LOCAL VENDOR IF ALL
OTHER CONDITIONS ARE
EQUAL"
COUNTY
OF KERN
NONE INFORMAL
1% SALES TAX REBATE USED.
AS "TIE BREAKER" ON
LARGE TRANSACTIONS
COUNTY
OF ORANGE
NO RESPONSE
CITY OF
PALM SPRINGS
NONE INFORMAL
TIE BID TO LOCAL VENDOR
- ONLY
CITY
OF
OAKLAND
5%
ORDINANCE 1979
CITY
OF
SACRAMENTO
1%
SALES TAX REBATE
CITY
OF
FRESNO
NONE
TIE BID TO LOCAL VENDOR
CITY
OF
PALO ALTO
NONE
10% FOR RECYCLED
PRODUCTS "A REAL
HEADACHE"
CITY
OF
CERRITOS
1%
INFORMAL
SALES TAX REBATE
CITY
AND COUNTY OF SAN
5%
ORDINANCE, 1989
PART OF MBE/WBE
FRANCISCO
LEGISLATION - REQUIRES
APPLICATION - INSPECTION
CITY
OF
LOS ANGELES
CITY ORDINANCES 153,
1980, AMENDED 1983,
662, 157, 595, 165973
AMENDED 1990
CITY
OF
LAKEWOOD
NONE
-
CITY
OF
SANTA BARBARA
NONE
-
CITY
OF
SAN JOSE
NONE
ISSUE HAS BEEN ADDRESSED
AT CITY COUNCIL MTG - IN
"TALKING" STAGE
CITY OF FREEMONT NONE
CITY OF ALAMEDA 5% CITY ORDINANCE CAN BE INVOKED, AS
NECESSARY, BY CITY
COUNCIL UP TO 5%
2
ATTACHMENT "C"
CURRENT OUTREACH/SHOP LOCAL PROGRAMS
• 1 % Price Break -
The City grants local suppliers a 1 % price break for competitive pricing purposes.
Although the City is invoiced for the full amount quoted/awarded, this price break
assists local suppliers in being more competitive while at the same time, produces
revenues for the City by means of sales tax collections as well as an "funneling funds
back into" the local economy.
• Employee Training -
Employee training has been and will continue to be conducted on several occasions
throughout the year, involving all employees who make purchases on behalf of the
City. This training included not only City Purchasing Policies and Procedures but
also the philosophy/importance of shopping local. While these educational seminars
are a great benefit to employees, modifications can be made to the current system to
better ensure shopping local occurs. Implementation of a Purchasing representative in
each department is an example of a possible modification.
• Minimum of one local quote per purchase -
In an effort to promote local businesses, Purchasing attempts to solicit a quote from at
least one local supplier when possible. As mentioned above, often circumstances do
not permit this practice.
• Blanket Purchase Order Ratio -
Blanket purchase orders are issued to local suppliers for the purchase of commodities
throughout the fiscal year when the total amount to be purchased is unknown.
Purchasing currently maintains a ratio of 95 % local/ 5 % non -local blanket purchase
orders. The reason for 5 % being awarded to non -locals is due to the lack of
availability of local suppliers.
0 DBASE Supplier Files -
Purchasing is currently computerizing all supplier commodity files and information.
There are currently 750 suppliers entered into the DBASE program. The main
purpose of this program is to provide all departments with listings of local suppliers
by commodity. This listing will be updated continuously with new reports distributed
to departments quarterly.
Attachment "C"
Page 2
• Eliminate Bid Fee -
Many local suppliers objected to the bid fee collected for the purchase of
specifications for supplies, services, and equipment. This objection often resulted in
lack of local supplier involvement in the City's bid process. To encourage local
participation in this process, the City eliminated the bid fee requirement for the
purchase of supplies, services, and equipment.
• City Seal On All Bid Advertisements
Local suppliers complained of the difficulty in easily identifying City bid
advertisements in local publications. This resulted in the implementation of the City
seal on all bid advertisements for the purchase of supplies, services, and equipment.
• Computerized Business Card Reader -
Purchasing is currently working with Information Resources to explore the
feasibility/costs of purchasing a Computerized Business Car Reader which would scan
business cards and automatically down load the scanned information into the DBASE
Supplier Files. This would enable local suppliers to be placed into the City's supplier
base immediately following the submittal of a business card to Purchasing.
• "Supplier Seminar - Partners for the Future" -
The City of Santa Clarita, Santa Clarita Valley and Canyon Country Chambers of
Commerce, and Valencia Industrial Association developed and presented a "Supplier
Seminar - Partners for the Future" program on October 22, 1993. There were
approximately 50 attenders who received information on such topics as the Legal
Aspects of Purchasing, Public Works Projects, Formal Bids, and the purchase of
Supplies, Services, and Equipment as well as other topics related to Purchasing. The
responses/evaluations from suppliers were positive with a request for the seminar to
be presented annually. Based on this request, the next seminar has been tentatively
scheduled for Thursday, October 13, 1994,
• Outreach Team
A team consisting of members from General Services, Santa Clarita Valley and
Canyon Country Chambers, Valencia Industrial Association, and an additional local
business owner meet regularly to brainstorm new ideas to improve relations with local
Attachment "C"
Page 3
suppliers. Members of the team also serve as a conduit for local supplier concerns as
well as a source of information to assist local suppliers in developing a business
relationship with the City.
• Mixer. and Luncheon Attendance -
The General Services Manager regularly attends Santa Clarita Valley and Canyon
Country Chambers' Mixers as well as presents information regarding City Purchasing
Policies and Procedures at group luncheons.
• "How To Do Business With The City" brochure
Supplier confusion caused by the City's decentralized system is still often a major
point of contention. Locating the person responsible for the purchase of a certain
commodity proves to be a challenge for many suppliers. To aid the supplier'
circulating information pertaining to his business, Purchasing created a brochure
entitled, "How To Do Business With The City." The brochure provides information
regarding the City's Purchasing Policies and Procedures. It also indicates the City
Purchasing Agent as the official contact for the City. The Purchasing Agent then
ensures the supplier information is computerized and distributed to all departments.
At that point, the department may choose any supplier from the list to request quotes
(if needed.)
PROJECTS IN PROGRESS
• Bid Hotline
Purchasing is currently in the process of implementing a "Bid Hotline" which would
enable suppliers to make one phone call to find out what projects or commodities the
City is currently bidding. This line will also be used to notify suppliers of the
upcoming annual "Supplier Seminar" and any other Purchasing information which
may be of interest to local suppliers.
• Supplier Seminar - "Partners for the Future"
The success of the supplier seminar presented for the first time on October 22, 1993
prompted suppliers to request that the seminar be presented annually. Therefore,
Attachment "C"
Page 4
Purchasing will present the seminar in October 1994 to promote a mutual
understanding of both supplier and City requirements. The seminar represents an
opportunity for key Purchasing personnel to meet with local suppliers in an informal
setting to discuss mutual concerns as well as update suppliers on policy changes.
• Minimum/Maximum Two Local Supplier Quotes
Purchasing would like to implement a "two local supplier quotes" minimum/maximum
for every purchase requiring quotes when local suppliers are available to provide such
services, supplies, and/or equipment. This policy would increase local supplier
participation in the competitive quote process.
• Modify Current Purchasing Policies/Procedures to Increase Checks and Balances
The current Purchasing Policies and Procedures can be modified to increase fair and
adequate local supplier participation. Often the Purchase Requisition reaches
purchasing with quotes already obtained/attached and the item is required
immediately, allowing no time for correction if adopted policies were not followed -
such as local supplier participation. Requiring Purchasing or a department
representative's approval on all purchases over $500 prior to placement will ensure
the City avoids potential legal problems.
• Modify System to Include One Purchasing Representative In Each Department
The current system allows each employee in each department to make purchases as
required. Appointing a representative in each department to monitor purchases would
enable the City to ensure that the adopted Purchasing Policies and Procedures are
being followed. Each representative would attend Purchasing training regularly to
keep up to date on current policies and guidelines.
GS.ftr .94 17<07 FAX 605 286 4186 SNTACLRTA GENSVC �005
.] U tJ - 5- y 4 T tA l-1 1 6 p 5 'e - C. L.. E. WK A L n ht r- D A
ATTACHMENT D
CITY OT AtAMDA ORDINANCE No. 227a
Nov series
AMENDING THE ALA)a DA MUNICIPAL CODS 8Y ADDING
CHAPTER 8 TO TITLE lI THERYOF RELATING To LOCAL
PAxrERENCE IN AWARDING 8ID5 TOR GOODS AND CE1tv1C86
8E ;T ORDAINY.O By THE COUNCIL Or TIM CITY Of ALAMPDA
thati
by addingeCCaeptis.sTht o TWO 11 tthereof toCrtadis hereby amended
PRTFtR"cz
WAS29 A. N finitions
a. ell. ■Local Susiness" shall mean a
person or f 5— irh, for sore than one year
continuously praeeding the makinq Of a City bid, had
an established place of business in the city
manufacturing, procacvinq wholesaling, retailing or
providing materials, supplies or services required by
a City bid.
■cif aids shall mean any
purchase or er or contract for goods and services
over five thousand dollars ($% 000.00) Vhich may be
acquired from local business.
eo. 813, • om etitivee shall moan equal
or lower in price and ab a to pro- da equal or better
goods or asrvices.
Article rchasa■
See. 2- 21. dotifleation. Local businesses
shell not a exelu ed from notification of City bids,
ec. 2-Prtforoncy. City officers
administer Mrs
bids $ al award them to local
businesses Mrs competitive.
ea.
0 t022ids shad mare written finding:
why a participating local business was not
Competitive when an outside business is selected,
6uch findings shall be submlttod to the City Manager.
$/I8/86
06/0"J/94 17 08 FAX 805286 4186 SSTACLRTA (,ENS -VC 006
Jut"— THU 10:51 CITY4CLERK ALAMEDA P.04
ATTACHMENT: D (continueQ)
•!Lett troatan a' This ordinance ohsll Aa .".n full tort• and
date of its fin*, Vassals. the aYplratlon o! thirty (30) day troy the
peeeaq•,
4 06-
A
Attoptl praa n9 � ear of • Counci'i
yt•r
Z
B05..,_P6 4=36
06�09,94 17'09 FAX 805 286 4186 SNTACLRTA CEhSVC aoI
.J U f4 -- 3— 9 4 T H U 10 - 3 2 CITY ^°�
C L 6 R K p L A h !_. D n P 0 5
p ATTACHMENT D (Continued)
1
wasthe dulynand regularlyAdoptedPassedhbyftheOCouncildofathe City of Alankda in regular meetfng assembled on the lit of April, 1986,
by the following vote to wit:
AYES: Councilmembers Corica, Hanna, Lucas. 1lonsef an4 President Dfamant - S.
NOES: None.
ABSENT: Nane.
IN WITNESS WHEREOF, I have hereunto set a� hand and affixed the
Official seal Of said City this 2nd day of April, 1986.
CTty' er O t e ty o? hl`Amei i
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES }
CITY OF SANTA CLARITA }
I, Donna M. Grindey, City Clerk of the City of Santa Clarita, do hereby certify that the
foregoing Ordinance No. was duly adopted at a regular meeting of the City Council
on the day of 19_, by the following vote, to wit:
AYES: COUNCILMEM 3ERS
NOES: COUNCILMEMBERS
ABSENT: COUNCILMEMBERS
City Clerk