Report to: General Committee                                                 Report Date: February 25, 2009

 

 

 

SUBJECT:                          Revisions to Purchasing By-Law 2004-341

PREPARED BY:               Alex Moore Ext 4711

 

 

RECOMMENDATION:

 

1. The report entitled “Revisions to Purchasing By-Law 2004-341” be received;

 

2.  The Town of Markham Purchasing By-Law 2004-341 be amended as outlined in the attached staff report;

 

3. And Staff be authorized and directed to do all things necessary to give effect to this resolution.

 

EXECUTIVE SUMMARY:

Not Applicable

 

 

 

PURPOSE:

The purpose of this report is to amend the Purchasing By-law 2004-341 previously approved by Council in December 2004 by incorporating the proposed changes in this report.

 

BACKGROUND:

The Town’s existing Purchasing By-law was approved by Council in December 2004. During the earlier part of 2008, staff began to identify areas within the By-Law as they specifically related to the Contract Award Authority that needed changes to reflect the Town’s growth and the volume of contracts awarded by staff. The requirement to amend the Purchasing By-Law to reflect current business needs was further identified and strongly recommended by staff outside of purchasing department during the E3 process as an area conducive for creating excellence through efficiencies and effectiveness. This suggestion was highlighted as an area for implementation during the presentation to the E3 Executive Steering Committee.

 

In order to identify the needs for efficiencies that was highlighted during the E3 process, a focus group consisting of staff from all commissions met to discuss areas for improvement in the By-Law. The recommendations from the group mainly relate to achieving efficiencies in the purchasing process through:

 

1.      Increasing authority levels for award of contracts to the lowest bidder on Tenders and Request for Quotations (RFQ) (discussed in detail later in the report)

2.      Amending authority to staff for awarding non-competitive contracts

3.      Amending authority to award contracts to public utilities for “Relocates” projects

4.      Administrative changes to reflect current business needs

5.      Reporting to Council

 

Staff also contacted other municipalities to determine general practices and confirm that the recommended changes fall within the accepted parameters of the other surveyed municipalities.

 

 

OPTIONS/ DISCUSSION:

Based on the discussions at the Focus group session the proposed amendments to the Bylaw are classified into:

1.      Increasing authority levels for award of controlled risk contracts on Tenders and Request for Quotations (RFQ)

2.      Amending authority to staff for awarding non-competitive contracts

3.      Amending authority to award contracts to public utilities for “Relocates” projects

4.      Administrative changes to reflect current business needs

5.      Reporting to Council

Throughout the report, most “Proposed Amendments to the By-law” are denoted with bolding and italics.

1. Increasing authority levels for award of contolled risk contracts

The existing By Law provides the following authority to award contracts:

 

 #         Contract Value             Process                                                Authority

1.         < $5k                           Non competitive process                      Authorized Staff

2.*       >$5k and <$50k          Request for Quotation (RFQ)               Director

3.*       >50k and <$100k        Request for Quotation (RFQ)               Commissioner

4.         >$100k and <$350k    Request for Proposal (RFP)                  CAO

5.         >$350k                        Request for Proposal (RFP)                  Council

6. *      >$100k and <$350k    Tender                                                 CAO

7. *      >$350                         Tender                                                 Council

 

* Staff are proposing changes to these items

 

The proposed amendments to the By Law focus on the authority levels to award contracts resulting from RFQ and Tenders. Opportunities for efficiencies exist in contract award process that can be measured by significant time savings due to reduced turnaround period in awarding contracts i.e. time between the closing of bids up to the final award letter to the successful vendor. Keeping the above in view, the approval authority limits for award of contracts has been classified into two categories:

 

Category A – Contract awards that meet the established criteria (discussed below).  Compliance with the proposed criteria should control and minimize the risk of the award  

               

Category B – Contract awards that do not meet the criteria.

 

Established Criteria (to minimize risk of award)

The following criteria must be met to increase authority of staff to award contracts:

  • The award is to the lowest priced bidder
  • The expenses relating to the goods/ services being procured is included in the approved budget (Operating/Capital)
  • The award is within budget
  • The award results from the normal tendering process of the Town (i.e. open bidding through advertisements that meet transparency and enables open participation)
  • The term of the contract is for a maximum of 4 years
  • There are no litigation between the successful bidder and the Town at the time of contract award
  • There are no bidder protests at the time of contract award

 

 

Proposed Amendments #1 to #4

 

#1.       From:

Contract Value             Process                        Authority

>$5k and <$50k                      RFQ                            Director

 

To:

Contract Value             Process                        Authority

>$5k and <$25k                      RFQ                            Manager

 

 

#2.       From:

Contract Value             Process                        Authority

>$50k and <$100k                  RFQ                            Commissioner

 

            To:

            Category A – Meet Criteria

Contract Value             Process                        Authority

>$25k and <$100k                  RFQ                            Director

 

Category B - Do Not Meet Criteria

Contract Value             Process                        Authority

>$25k and <$50k                    RFQ                            Director

>$50k and <$100k                  RFQ                            Commissioner

 

#3.       From:

Contract Value             Process                        Authority

>$100k and <$350k                Tender                         CAO

 

To:

Category A – Meet Criteria

Contract Value             Process                        Authority

>$100k and <$350k                Tender                         Commissioner

 

Category B – Do Not Meet Criteria

Contract Value             Process                        Authority

>$100k and <$350k                Tender                         CAO

 

 

 

 

 

#4        From:

Contract Value             Process                                    Authority

>$350k                                    Tender                                     Council

 

To:

Category A – Meet Criteria

Contract Value             Process                                    Authority

>$350k                                    Tender                                     CAO

 

Category B – Do Not Meet Criteria

Contract Value             Process                                    Authority

>$350k                                    Tender                                     Council

 

The turnaround time for contract awards in the case of tenders >$350k would be reduced to 3 weeks from the existing 6-7 weeks and in the case of RFQ’s $25k to $100k the turnaround time is expected to be reduced to less than 2 weeks from the existing 3 weeks. The increased authority levels to staff will replace the mechanism for approval by Council through an “Award Report to Council” with a “Staff Award Report” that is utilized for internal contract award by staff and hence will be outside the timelines of reports submission to Council.

 

The existing authority levels and process for awarding contracts through RFP will continue. The number of contracts awarded during the past two years through an RFP process for values above $350k has been minimal and therefore amendments to this process is not recommended. Staff will continue to monitor the process and suggest amendments for Council approval should they be required in the future.

 

2. Amended Authority for Awarding Non-Competitive Contracts

The existing By Law provides authority for negotiating contracts without a competitive process.  The authority to award contracts relating to non-competitive procurement is currently as follows:

            Contract value              Authority

>$5k and <$350k                    CAO

>$350k                                    Council

 

Non-competitive procurement process is followed in circumstances:

a.       When the goods are in short supply due to market conditions          

b.      Where there is only one source of supply of goods

c.       Where an extension of an existing contract is cost effective and beneficial

d.      Where the project is privately funded

e.       Where the equipment is specialized (i.e. firefighting vehicles or equipment)

f.        Where for any reason a call for tender does not result in a successful award

g.       Where it is in the Town’s best interest not to solicit a competitive bid

h.       Where it is necessary or in the best interest of the Town to acquire non standard items or Consulting & Professional Services from a preferred supplier

 

 

Proposed Amendment #5

            Contract value                          Authority

>$5k and <$50k                                  Commissioner

>$50k and <$350k                              CAO

 

The proposed amendment will enable Commissioners to award non-competitive contracts up to $50k (15-20 awards annually over the past few years). Non-competitive contracts in excess of $350k will continue to be awarded by Council.

 

3. Authority to Award Contracts to Public Utilities

The existing By Law under the Non Competitive procurement clause allows the awarding of contracts to Hydro Corporations, Public Utilities, Provincial, Federal and Crown Corporations and Toronto and Region Conservation Authority (TRCA) without the requirement of a Tender, RFP or RFQ. The authority to award these contracts are:

Contract value              Authority

Up to $350k                            CAO

>$350k                                    Council

 

Proposed Amendment #6

Construction contracts that have been awarded in accordance with the Purchasing By-law may include a separate element for the relocation of a public utility.  The relocation work must be performed by the owner of the asset (e.g. hydro distribution lines owned by PowerStream).  Staff recommend that these awards for relocates up to a value of $350k, and that are included in the overall project budget, be awarded by the Director of Engineering or the Commissioner of Development Services without a competitive process and without a staff award report to Council.

Contract value Authority

Up to $350k*              Director of Engineering or Commissioner, Development  Services 

*For Relocates Only           

 

This amendment will enable quick turnaround and contract awards which expedite construction and minimize any delay claims.

4. A Proposed Amendment #7 Administrative changes (add definitions, termination, title changes etc,)

The following administrative changes are proposed to be included in the By Law.

a.       Add the title “Chief Information Officer” CIO, to the definition of Director (Part I – 1.)and include the sentence “and shall include any title or position that are deemed to be equal to that of a  Director as approved by Human Resources”

b.      Change all reference to Finance and Administrative Committee (Part I-1.) to read as “General Committee” and include the sentence “and by any other name given to this Committee from time to time

c.       Remove the reference to the Town’s Green Procurement Policy under General Conditions (Part I-2.) and replace with the Town’s environment initiatives as outlined by the Build Markham’s Future Together (BMFT) strategy plan as approved by Council.

d.      Add a paragraph under General Conditions (Part I – 3.) that makes it mandatory for employee or Council to disclose to the Town of any Conflict of Interest relating to Family members (Family member as outlined in the Human Resources policy 505)  who may provide goods or services to the Town.

e.       Add a paragraph under “Expression of Interest” (Part II:-5.) to allow the opportunity for negotiation with a preferred proponent to establish a contract for this project.

b. Part VI: General (Interpretation, item 5)

Replace the reference to the term “Treasurer or the Director, Financial & Client Services may assume at any time any of the authorities, responsibilities and duties imposed upon the Manager of Purchasing under this By-law” to “Treasurer or Designate may assume at any time…..”

c. Add a section to the By Law that deals with termination of contracts

The existing By Law does not include authority for contract termination. The General Terms & Conditions of the Town’s bid document specifies the conditions that are considered as Acts of Default which will result in contract termination. The Town’s Legal Department is the authority to terminate contracts.

Proposed Amendment #8  - Additional Section

Add a section in the By Law that deals with termination of contracts. The authority to terminate contracts subject to prior approval and confirmation from Legal department will be          

Contract value                 Authority

>$5k and <$25k             Director

>25k and <100k             Commissioner

>100k and <$350k         CAO

>$350k                           Council

Notwithstanding the above limits, Council approval will be required based on terms and conditions deemed appropriate and recommended by Legal to do so.

d. Contract Execution (Written Agreements)

The existing By Law provides authority to execute contracts (arising out of the acceptance of a Tender, RFP or RFQ and include purchase orders if contract exceeds $5k) to staff as follows:

Contract value                 Authority

>$5k and <$25k             Director

>$25k and <$100k         Purchasing Manager

>$100k and <$350k       Not specified

>$350k                           Mayor & Clerk

 

 

Proposed Amendment #9

>$5k and <$350k                                Purchasing Manager or Commissioner

5. Reporting to Council

The existing By Law requires the Treasurer to advise the General Committee on a monthly basis all Tenders, RFP’s & RFQ’s awarded by staff that are greater than $50k and less than $350k.

Proposed Amendments #10

The Treasurer shall advise the General Committee on a monthly basis all Tenders, RFP’s & RFQ’s awarded by staff that are greater than $50k.

Benefits of Changes to the By-law

Low risk to Council due to strict rules that surround the delegation of authority to award contracts to Director’s/Commissioner’s and CAO

Reduced number of reports to Staff and Council

Quicker contractual awards (7 weeks to 3 weeks) or (3 weeks to 2 weeks)

Turnaround time reduced from 7 weeks to 3 weeks for Council reports that will be replaced with staff award reports which meet criteria to minimize 15-20 awards annually

Turnaround time reduced from 3 weeks to 2 weeks for staff awards reports which meet criteria and will minimize internal approvals for 50-60 awards annually

Strongly highlighted as an area for efficiencies in the E3 initiative

 

Conclusion

Staff have reviewed the Town’s existing Purchasing By-Law 2004-341 in light of the on-going requirements of the Municipal Act, 2001 and in the context of achieving “E3” efficiency and effectiveness.  The proposed amendments to the Purchasing By-law are recommended to ensure the By-law remains responsive to the need for timely and responsible procurement of goods and services.

 

FINANCIAL TEMPLATE

Not Applicable

 

ALIGNMENT WITH STRATEGIC PRIORITIES:

Not Applicable

 

DEPARTMENTS CONSULTED AND AFFECTED:

All Commissions have been consulted and their recommendations have been incorporated in the revised Purchasing By-law.

 

 

RECOMMENDED

                            BY:    ________________________          ________________________

                                      Barb Cribbett, Treasurer                     Andy Taylor, Commissioner

 

ATTACHMENTS:

Presentation to General Committee March 23, 2009

Amended By Law

 

 

Q:\Finance\SHARED\2009 General Committee Finance\914 Purchasing By-Law amendments.doc