HomeMy WebLinkAbout07- Development Department DEVELOPMENT DEPARTMENT
OF THE CITY OF SAN BERNARDINO
REQUEST FOR COMMISSION/COUNCIL ACTION
FROM: KENNETH J. I-IENDERSON SUBJECT: LOCAL BID PREFERENCE
Executive Director
DATE: February 2, 1994
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Synopsis of Previous Commission/Councit/Committee Action(s):
On January 10, 1994, the Mayor and Common Council directed staff to analyze (2) draft ordinance submitted by
the Mayor and the Downtown Business Association.
On January 24, 1994, the Mayor and Common Council and the Community Development Commission
continued this matter until February 7, 1994.
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Recommended Motion(s):
(Mayor and Common Council)
(Community Development Commission)
MOTION: That the Mayor and Common Council and the Community Development Commission receive and
file the attached memorandum from the Assistant City Administrator to the Mayor and take
whatever action deemed appropriate.
(Y G'!
Adm istrator KENNETH J. HEND RSON
Executive Director
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Contact Person(s): Kenneth J. Henderson/ Stafford W. Parker Phone: 5081
Project Area(s): N/A Ward(s): N/A
Supporting Data Attached: Staff Report;
FUNDING REQUIREMENTS: Amount: $N/A Source: N/A
Budget Authority: N/A
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Commission/Council Notes:
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KJH:SWP:lmp:locpre.cdc COMMISSION MEETING AGENDA
MEETING DATE: 02107/1994
Agenda Item Number:
C I T Y OF S A N B E R N A R D I N O
INTEROFFICE MEMORANDUM
CITY ADMINISTRATOR'S OFFICE
DATE: February 2 , 1994
TO: Mayor Tom Minor
FROM: Fred Wilson, Assistant City Administrator
SUBJECT: Review of Local Bid Preference Ordinance
COPIES: Shauna Clark, Tim Steinhaus, Ken Henderson
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On January 10, 1994 the Mayor and Council considered two draft
ordinances relative to a preference for local bidders on City
purchases of supplies, materials, equipment and services and for
public projects. This item was continued to the meeting of
February 7 , 1994 , to allow for staff input and review.
The City currently does not have a policy of providing any type of
preference in determining the lowest responsible bidder for
contracts or agreements for material, supplies or equipment. The
basis which is currently used in selecting vendors is the lowest
and best bidder as outlined in the City's charter as well as the
Purchasing Ordinance.
PROPOSED DOWNTOWN BUSINESS ASSOCIATION ORDINANCE
The first draft ordinance was requested by the Downtown Business
Association and calculates preference based on a formula. The
formula provides up to a maximum of six percent that could be
credited to local firms based on the following:
1. Bidder receives credit of one percent (1%) for each
successive year their principal office has been located
in the City, up to a maximum of three years.
2 . Bidder receives a credit of one percent (1%) for each
successive year that the bidder has physically located
fifty percent (50%) of its employees in offices located
in the City, up to a maximum of three years.
3 . The documentary information justifying the credits to be
given pursuant to this section shall be provided in
writing at the time the bid is submitted.
The comments received from staff on this proposal include:
1. Administratively, it would be very difficult for the City
to verify compliance with the formula. To do so may
require access to certain sensitive payroll information.
In order to implement this formula, it should be amended
to allow the City the right to audit, annually, each
local vendor who bids on our contracts, to establish
their certification for continuation of the vendor
preference. Without some means of verification, we are
subject to local vendors who can claim whatever they want
to get the preference.
2 . The formula states that credit will be given to bidders
that have physically located 50% of the employees in
offices in the City. In the case of contractors, the
majority of their employees work on job sites, instead of
in the office. The number of employees varies greatly,
depending upon the contracts under construction. These
factors will make it very difficult to verify compliance
with this criteria.
3 . Who is going to administer this vendor preference
program? It appears that the businesses are self-
certifying that they have met the requirements of the
local vendor preference ordinance.
4 . Businesses may be leaving the City, but they are also
leaving the State, primarily from a high cost to operate
within the State. Most of the businesses that leave cite
workers compensation insurance, AQMD, and excessive fees
as the main reasons for leaving.
PROPOSED EIGHT PERCENT PREFERE14CE ORDINANCE
The second ordinance recommends an eight percent preference for
local bidders for comparison purposes with other bidders.
The comments received on this proposal include:
1. An eight percent preference is unrealistic when most
vendor preferences in other cities are usually only one
percent. One percent is the amount of sales tax which is
returned to the City as our local share of any sales tax
transaction which occurs in the City.
2 . Most California businesses are facing similar increases
in their operating costs as are our local San Bernardino
merchants and businesses.
3 . Where does fiscal responsibility to the public enter when
you can get items cheaper elsewhere?
4 . Will out of town bidders continue to bid after they learn
of the local preference? If they stop bidding, local
providers could escalate their prices with the end result
being the City paying an additional eight percent for all
purchases.
5. The City is proposing to purchase thirty vehicles this
year at an estimated cost of $275, 000. With an eight
percent preference in place, it could potentially cost
the City anywhere from an additional $10, 000 - $22, 000
for the purchase.
Another important point to recognize is the impact on local
businesses. One local businessman, Bill Yates, co-owner of Chem
Lite (wholesale provider of janitorial and other supplies) provided
his perspective on the issue. He noted that giving a local
preference, in effect, would put a barrier around the City which
may preclude any outside business from bidding on local contracts.
Furthermore, such a measure could potentially result in other
cities passing similar measures which would then put San Bernardino
businesses at a disadvantage with respect to bidding on outside-
the-city contracts. To put this in perspective, he provided a
hypothetical example in which a business which is San Bernardino
based generates $1 million in sales from activity with the Inland
Empire. Currently, the City receives the entire one percent local
share of sales tax for $1 million in sales regardless of what City
the supplies are actually sent to. If other cities adopt similar
measures, his business could see a decline in sales activity which
will negatively impact our sales tax revenue.
PUBLIC WORK CONTRACTS
With respect to public works contracts, since most of our contracts
are either partially or fully funded with Federal and State Funds,
we would have to verify whether or not a local preference provision
is permissible. According to the Public Works Director,
restrictions do exist for certain transportation funds in this area
which would have to be explored in more detail.
More importantly, much of the work involved with Public Works
contracts is performed by subcontractors who may have a business
outside the City limits. In these cases, the City would not
benefit by providing such a credit since these businesses do not
pay any direct taxes or fees to the City.
OTHER CITIES
Staff has contacted a number of cities inquiring about a local bid
preference. The survey results are provided in Attachment A. The
survey results generally indicate that a maximum of 1% bid
preference is provided to local businesses generally only in the
area of materials, supplies and equipment.
SUMMARY
A local vendor preference, though beneficial at first to the City
and our business community, may ultimately serve as a means of
isolating the City and our businesses from its neighbors and the
opportunities our businesses have outside our own city limits.
If the Mayor and Common Council does make a determination to adopt
such an ordinance, it is recommended that a local bid preference of
one percent be implemented for the purchase of materials, supplies
and equipment. This figure would be consistent with other cities
that have such an ordinance. Further, it is recommended that
public orks contracts be exempted from such an ordinance.
RED ILSON
Assistant City Administrator
attachment
FW/lp
ATTACHMENT "A"
Local Bid Preference
City
Santa Ana 1% sales tax reimbursement (materials, supplies, & equipment)
Huntington Beach 1% sales tax reimbursement (materials, supplies, & equipment)
Ontario 1% sales tax reimbursement (materials, supplies, & equipment)
Pomona In determining lowest responsible bidder, the City will take into
consideration the sales tax which will be returned to the City as a
result of the reward.
Redlands Special consideration might be given to a local vendor to maintain
community goodwill. Again, their price, delivery, schedule,
performance and quality should be comparable to the "Best
Vendor."
Riverside In the procurement of good for the City's requirements, preference
shall be given those vendors having stores or warehouses within the
City of Riverside, provided that price, quality, terms, delivery and
service reputation are determined to be equal.
Chino No administrative policy on local preference but local firms are
given first preference.
Pasadena If the point of sale will be physically from a business located within
the City, the business is considered a "Local Business". Local
businesses receive a 1% bid preference on materials and supplies
only. This means that a local business can be 1% higher than the
lowest out-of-area vendor and receive the contract/purchase order.
Garden Grove Where the services to be provided by a bidder or supplier are
equal, preference shall be given to local merchants when the local
merchants' bids are within two (2) percent of the lowest bid
received, provided the dollar amount represented by the two
percent difference does not exceed five-thousand ($5,000) dollars.
This provision shall only be utilized where bids in the amount of
five-thousand ($5,000) dollars or higher are required.
County of pan Bernardino Utilize, whenever possible, the services of local consultants/firms
to provide consulting services (No financial incentives)
1 ORDINANCE NO.
2 AN ORDINANCE OF THE CITY OF SAN BERNARDINO ADDING SECTIONS
3.04.125, 3.04.130, 12.20.040 AND 12.20.050 TO THE SAN BERNARDINO
3 MUNICIPAL CODE RELATING TO A PREFERENCE FOR LOCAL BIDDERS ON CITY
PURCHASES OF SUPPLIES, MATERIALS, EQUIPMENT AND SERVICES AND FOR
4 PUBLIC PROJECTS.
5 THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO
DO ORDAIN AS FOLLOWS:
6
SECTION 1. Findings
The Mayor and Common Council of the City of San Bernardino
8 do find and declare as follows:
9 A. Firms and businesses located outside the City of
San Bernardino do not pay the City's Utility
10 Users Tax, the City Wide street Lighting and
Street Sweeping Assessment, the various
11 landscaping and lighting district assessments,
and the downtown parking district assessments,
12 all placing them at a significant advantage in
relation to local firms and business which must
13 pay such exactions, when bidding on City projects
or to supply City goods and services. In order
14 to equalize the position of all such bidders it
is necessary to give local firms and businesses
15 a credit.
16 B. Businesses are leaving the City in record
numbers, including the relocation of the Santa Fe
17 yards out of state, the closure of Norton Air
Force Base and its attendant employment and the
18 numerous closure and relocation of small and
medium size businesses from this City, all
19 eroding the City' s property tax base and
significantly decreasing the income to the City
20 from sales tax, utility users tax, license and
users fees making it extremely difficult for the
21 City to provide basic health and safety services
to all of the residents of the City at a time
22 when crime and vandalism are increasing. It is
necessary to encourage local businesses to remain
23 in the City to contribute to the revitalization
of San Bernardino, by providing an increased
24 opportunity for them to do business on City
projects and to provide goods and services to the
25 City.
26 C. In an attempt to encourage businesses to relocate
to the City to offset and discourage increasing
27 gang activity, drugs, vandalism, crime, juvenile
delinquency, joblessness and the abandonment of
28 whole neighborhoods by their owners and
DAB/js (2Preference.0rd) 1 January 7. 1994
'2)OLJVrOW A/ B0r lJless A SS oci•41-104/ ?f .t 7-' 7
I residents, it is necessary to provide an
incentive to do business on City projects and to
2 provide city goods and services.
3 SECTION 2. Section 3.04. 125 is hereby added to the San
4 Bernardino Munici al Code to read as follows:
5 "3 .04.125. Local Bidders.
6 " ( a ) Any formal or informal bid submitted by a
local bidder pursuant to this Chapter shall receive a
7 credit for comparison purposes with other bidders as
8 specified in subsection (b) below.
" (b) ( 1 ) A bidder will receive a credit of 1$ for
9 each successive year the bidder's principal office has
been located in the City of San Bernardino up to a
10 maximum of three years.
11 (2 ) In addition to ( 1 ) above, a bidder will
receive a credit of 1% for each successive year that
12 the bidder has physically located 50% of its employees
in offices located in the City of San Bernardino, up
13 to a maximum of three years.
14 (3 ) The documentary information justifying the
credits to be given pursuant to -this section shall be
15 provided in writing at the time the bid is submitted.
16 SECTION 3. Section 3.04. 130 is hereby added to the San
17 Bernardino Municipal Code to read as follows:
18 "3.04.130 Conflict of Interest.
19 "In addition to the prohibitions, regulations and
restrictions imposed by state law, it shall be
20 unlawful for the Purchasing Agent or any person
involved in the selection process of this Chapter to
21 offer, require, or receive rebates or kickbacks or to
enter into business relationships with a person or
22 entity submitting a bid. It shall also be unlawful
for any bidder or prospective bidder to offer or to
23 give rebates or kickbacks or to enter into business
relationships with any person involved in the
24 selection process of this Chapter. "
25 SECTION 4. Section 12. 20.040 is hereby added to the San
26 Bernardino Municipal Code to read as follows:
27 "12 . 20.040. Local Bidders.
28 " ( a ) Any bid submitted by a local bidder for a
DAB/js (2Preference.Ord) 2 January 7. 1994
I public project pursuant to this Chapter shall receive
a credit for comparison purposes with other bidders as
2 specified in subsection (a) below.
3 "(b) ( 1 ) A bidder will receive a credit of 1% for
each successive year the bidder's principal office has
4 been located in the City of San Bernardino up to a
5 maximum of three years.
( 2 ) In addition to ( 1 ) above, a bidder will
6 receive a credit of it for each successive year that
the bidder has physically located 50% of its employees
7 in offices located in the City of San Bernardino, up
8 to a maximum of three years.
(3 ) The documentary information justifying the
9 credits to be given pursuant to this section shall be
10 provided in writing at the time the bid is submitted.
11 SECTION 5. Section 12.20.050 is hereby added to the San
12 Bernardino Municipal Code to read as follows:
13 1112. 20.050 Conflict of Interest
"In addition to the prohibitions, regulations and
14 restrictions imposed by state law, it shall be
unlawful for any person involved in the selection
15 process of this chapter to, offer, require or receive
rebates or kickbacks or to enter into business
16 relationships with a person or entity submitting a
bid. It shall also be unlawful for any bidder or
17 prospective bidder to offer or to give rebates or
kickbacks or to enter into business relationships with
18 any person involved in the selection process of this
Chapter. "
19
20
21
22
23
24
26
27
28
DAB/js (2Preference.Ord] 3 January 7. 1994
I AN ORDINANCE OF THE CITY OF SAN BERNARDINO ADDING SECTIONS
3.04.125, 3.04.130, 12.20.040 AND 12.20.050 TO THE SAN BERNARDINO
2 MUNICIPAL CODE RELATING TO A PREFERENCE FOR LOCAL BIDDERS ON CITY
PURCHASES OF SUPPLIES, MATERIALS, EQUIPMENT AND SERVICES AND FOR
3 PUBLIC PROJECTS.
4
5 I HEREBY CERTIFY that the foregoing Ordinance was duly
6 adopted by the Mayor and Common Council of the City of San
7 Bernardino at a meeting thereof, held on the
8 day of 1994, by the following vote, to wit:
Council Members: AYES NAYS ABSTAIN ABSENT
9
NEGRETE
10
CURLIN
11
HERNANDEZ
12
OBERHELMAN
13
DEVLIN
14
POPE-LUDLAM
15
MILLER
16
17
18 City Clerk
19
The foregoing Ordinance is hereby approved this day
20 of 1994.
21
22 Tom Minor, Mayor
City of San Bernardino
23 Approved as to form
24 and legal content:
25 JAMES F. PENMAN,
City Attorney
26
27
By:
28
DAB/js [2Preference.Ordl 4 January 7. 1994
1 ORDINANCE NO.
2 AN ORDINANCE OF THE CITY OF SAN BERNARDINO ADDING SECTIONS
3.04.125 AND 12.20.040 TO THE SAN BERNARDINO MUNICIPAL CODE
3 RELATING TO AN EIGHT PERCENT (8%) PREFERENCE FOR LOCAL BIDDERS ON
CITY PURCHASES OF SUPPLIES, MATERIALS, EQUIPMENT AND SERVICES AND
4 FOR PUBLIC PROJECTS.
5 THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO
DO ORDAIN AS FOLLOWS:
6
7 SECTION 1. Findings
The Mayor and Common Council of the City of San Bernardino
8 do find and declare as follows:
9 A. Firms and businesses located outside the City of
San Bernardino do not pay the City's Utility
10 Users Tax, the City Wide street Lighting and
Street Sweeping Assessment, the various
11 landscaping and lighting district assessments,
and the downtown parking district assessments,
12 all placing them at a significant advantage in
relation to local firms and business which must
13 pay such exactions, when bidding on City projects
or to supply City goods and services. In order
14 to equalize the position of all such bidders it
is necessary to give local firms and businesses
15 an eight percent ( 8%) credit.
16 B. Businesses are leaving the City in record
numbers, including the relocation of the Santa Fe
17 yards out of state, the closure of Norton Air
Force Base and its attendant employment and the
18 numerous closure and relocation of small and
medium size businesses from this City, all
19 eroding the City's property tax base and
significantly decreasing the income to the City
20 from sales tax, utility users tax, license and
users fees making it extremely difficult for the
21 City to provide basic health and safety services
to all of the residents of the City at a time
22 when crime and vandalism are increasing. It is
necessary to encourage local businesses to remain
23 in the City to contribute to the revitalization
of San Bernardino, by providing an increased
24 opportunity for them to do business on City
projects and to provide goods and services to the
25 City.
26 C. In an attempt to encourage businesses to relocate
to the City to offset and discourage increasing
27 gang activity, drugs, vandalism, crime, juvenile
delinquency, joblessness and the abandonment of
28 whole neighborhoods by their owners and
DAB/bq (Preference-Ord) 1 January 7, 1994
974 /0)? S %2EF��Es�
1 residents, it is necessary to provide an
incentive to do business on City projects and to
2 provide city goods and services.
3 SECTION 2. Section 3.04.125 is hereby added to the San
4 Bernardino Municipal Code to read as follows:
5 113.04.125. Local Bidders.
6 "Any formal or informal bid submitted by a local
bidder pursuant to this Chapter shall receive an eight
7 percent ( 8$) credit for comparison purposes with other
bidders. For the purposes of this Section, "local
8 bidder" shall be a bidder with its primary place of
business located within. the City of San Bernardino at
9 the time of submitting the bid, or with a place of
business in the City employing at least ten ( 10) full-
10 time employees at such time. "
11 SECTION 3. Section 12-20.040 is hereby added to the San
12 Bernardino Municipal Code to read as follows:
13 1112.20.040. Local Bidders.
14 "Any bid submitted by a local bidder for a public
project pursuant to this Chapter shall receive an
15 eight percent (8$) credit for comparison purposes with
other bidders. For the purposes of this Section,
16 "local bidder" shall be a bidder with its primary
place of business located within the City of San
17 Bernardino at the time of submitting the bid, or with
a place of business in the City employing at least ten
18 ( 10 ) full time employees at such time. "
19
20
21
22
23
24
25
26
27
28
DAB/bg (Preference.Ord) 2 January 7, 1994
Y 1 AN ORDINANCE OF THE CITY OF SAN BERNARDINO ADDING SECTIONS
3.04.125 AND 12.20.040 TO THE SAN BERNARDINO MUNICIPAL CODE
2 RELATING TO AN EIGHT PERCENT (896) PREFERENCE FOR LOCAL BIDDERS ON
CITY PURCHASES OF SUPPLIES, MATERIALS, EQUIPMENT AND SERVICES AND
3 FOR PUBLIC PROJECTS.
4 I HEREBY CERTIFY that the foregoing Ordinance was duly
5 adopted by the Mayor and Common Council of the City of San
6 Bernardino at a meeting thereof, held on the
7 day of 1994, by the following vote, to wit:
8 Council Members: AYES NAYS ABSTAIN ABSENT
9 NEGRETE
10 CURLIN
11 HERNANDEZ
12 OBERHELMAN
13 DEVLIN
14 POPE-LUDLAM
15 MILLER
16
17
City Clerk
18
19 The foregoing Ordinance is hereby approved this day
20 of 1994.
21
Tom Minor, Mayor
22 City of San Bernardino
23 Approved as to form
and legal content:
24 JAMES F. PENMAN,
25 City Attorney
26
27 By:
28
DAB/bg (Preference.Ord) 3 January 7. 1994