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  Agenda Item   20.    
City Council Meeting
Meeting Date: 03/07/2023  
FROM: Bill Gallardo

Purchasing System Update – Receive Update and Consider Revisions to the City’s Purchasing Policy Limits
Receive update and consider adoption of Resolution No. 2023-012 designating Purchasing Policy Limits and the Local Vendor Preference Amount for the City’s Purchasing System.
The City’s Purchasing Policy (Ordinance No. 1198) defines Open Market, Informal Solicitation and Formal Solicitation purchases of supplies, materials, equipment, and services for both non-Public Works projects and Public Works projects.  The City’s Purchasing Policy also defines the local vendor preference amount and is only used for comparison purposes in connection with Formal Solicitation purchases of supplies, materials, equipment and services.
Periodically, the Purchasing Policy limits need to be revised by resolution to conform to new and revised legislation and to update the purchase limits based on various economic factors.  The last revision to the City’s Purchasing Policy limits was in 2019 with Resolution No. 2019-008 which updated the Public Works projects limits based upon the increased thresholds identified in the amendments of the California Uniform Public Construction Cost Accounting Act (“CUPCCAA”) (Cal. Pub. Cont. Code § 22000 et. seq.).  Whereas, the Purchasing Policy limits for non-Public Works projects remain unchanged. The last update to the non-Public Works projects purchasing limit was in 2017 with Resolution No. 2017-067 which updated the Open Market limit from $3,000 to $5,000.  Purchasing limits for Informal Solicitation and Formal Solicitation remain unchanged and have not been updated since prior to 1987.
Recently, the Purchasing Division received several requests from departments to review the Purchasing Policy limits in regards to non-Public Works projects and consider updating to allow for greater efficiency within the purchasing procedures.  Staff researched this matter further and evaluated purchasing policy limits of neighboring Orange County agencies including Anaheim, Fullerton, Irvine, La Palma, Newport Beach, Placentia, Santa Ana and Yorba Linda.  For reference please find attached the Comparison of Purchasing Policy Limits for the Procurement of Goods and Services for the neighboring cities that were surveyed.  For non-Public Works projects, purchasing limits vary between each agency since they were tailored to the agency’s specific procurement procedures. For Open Market purchases, the purchasing limit typically ranges from $1,000 up to $10,000.  For Informal Solicitation purchases, purchasing limits vary even more between the agencies evaluated. The purchasing limit for Informal Solicitation ranges between $1,001 to $75,000.
Staff also conducted an analysis of the City’s purchasing activity and volume for the past fiscal year from July 1, 2021 to June 30, 2022 and below is summary of purchase orders for non-Public Works projects:
Purchase Order
Level ($)    
No of
Purchase Orders
Purchase Orders
As a Percent of Total
$5,001 to $7,000
15 9%
$7,001 to $25,000
90 58%
$25,001 to $50,000
26 17%
Over $50,001
25 16%
156 100%
It is also important to consider current economic factors and their impact on an agency’s purchasing limit so that it retains purchasing power over time consistent with the intention of the purchasing system.  For reference, the Consumer Price Index for all Urban Consumers (CPI-U) for the Los Angeles-Long Beach-Anaheim area was 5.8 percent as of January 2023 for a twelve-month period.  Based upon this research and analysis, staff is recommending to update the Purchasing Policy limits for Open Market Solicitation, Informal Solicitation and Formal Solicitation for non-Public Works projects.  All other limits are recommended to remain the same.  Additionally, the local vendor preference amount will continue to be 1% of the bid amount. 

The below chart summarizes the current and proposed Purchasing Policy Limits for non-Public Works projects, and if approved, would shift approximately 26 purchases from a formal bidding process to an informal bidding process.  With this recommendation, the "Executed/Signed By" authority would also be increased as follows:
Non-Public Works Projects
Purchasing Policy Limit Current Proposed Executed/Signed By
Open Market $5,000 $7,000 Purchasing Agent, Directors, or Directors' designee
Informal Solicitation $25,000 $50,000 Purchasing Agent or Administrative Services Director
Formal Solicitation > $25,000 > $50,000 Mayor or City Manager

In addition to consistency with other cities, this change would accelerate the purchasing process for parts and services that are needed eliminating delays in necessary repairs or improvements due to the timeframe required under the current policy limits.

As an example, Public Works recently purchased nine utility poles for safety netting at the Brea Creek Golf Course as part of the Arovista Modernization Project with bids ranging between $34,653 to $57,510.  Under the current policy, this required a formal bidding process that took four to six weeks to solicit and prepare a recommendation to the Finance Committee and City Council for final approval. Under the recommended policy limits, this purchase would require an Informal Solicitation allowing staff to obtain three written quotes from vendors and the purchase can be made administratively in a more efficient and timely manner while retaining the lowest responsive bid.  In this example, the delivery time to receive these poles would be reduced and installation could take place sooner.
  • City Council may elect to modify staff's recommended Purchasing Policy Limits for Non-Public Works Projects; or
  • City Council may elect to maintain the current Purchasing Policy Limits.
Finance Committee reviewed this item at their February 28, 2023 meeting and was recommended for City Council approval.
There is no direct fiscal impact with approving the attached resolution.
William Gallardo, City Manager
Prepared by:  Alicia Brenner, Senior Fiscal Analyst
Concurrence: Kristin Griffith, Director of Administrative Services
Current Purchasing Ordinance No. 1198
Comparison of Purchasing Policy Limits for the Procurement of Goods and Services

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