CITY COUNCIL AGENDA ITEM
ACTION REQUESTED:
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Conduct the first reading of the ordinance amending Chapter 9, Article B Sections 4, 7, 8, 9, and 10 of the Naperville Municipal Code regarding updates to the City’s Procurement Code
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DEPARTMENT: Finance Department
SUBMITTED BY: Raymond Munch, Director of Finance
BOARD/COMMISSION REVIEW
N/A
BACKGROUND:
The City’s Procurement Code (Title 1, Chapter 9, Article B) was completely replaced in 2004 via Ordinance 04-156. Since 2004, there have been updates that were limited in scope. Examples are provided below:
1. Ordinance 11-128: Add language to define the term local vendor and to support opportunities to use local vendors in City procurements.
2. Ordinance 23-035: Update the language to define a responsible bidder for public works construction projects.
When the new Procurement Manager was hired in Fall 2024, she worked with the Chief Procurement Officer (i.e., the Director of Finance) and Procurement Team to identify key areas of the Procurement Code that needed to be updated. Finance Department staff intend to conduct more regular reviews of the Procurement Code moving forward.
DISCUSSION:
The paragraphs below outline the four major updates/changes that staff recommends. A redlined copy with the recommended changes is attached.
1. Procurement Thresholds:
The City’s current procurement thresholds, shown in the table below, were approved by the City Council with the 2004 Procurement Code update. The formal Bid/RFP threshold was set at $25,000 to be consistent with the state of Illinois’ formal Bid/RFP threshold and the $1,000 threshold to require quotes was based upon a spend analysis.
|
Procurement Process |
Current |
Recommendation |
|
Open Market |
Less than $1,000 |
Less than $5,000 |
|
Quotes |
$1,000 to $25,999.99 |
$5,000 to $34,999.99 |
|
Formal Bid/RFP |
$25,000 and greater |
$35,000 and greater |
Staff’s recommendation to increase the procurement thresholds was developed based upon an analysis of the City’s spend over the last three years (2022-2024) and comparison to purchasing thresholds in other municipalities. Staff’s goals when developing spend thresholds were as follows:
• Formal bidding/RFPs should be required for higher dollar value projects. However, because formal procurements require more procurement staff and longer lead times, the best practice is to identify a dollar amount that results in 70-80% of the total annual purchase value but less than 20% of the total number of purchases.
• Limit the total value of open market purchases to 5% or less of the total spend. Operating departments in particular need quick, low low-dollar purchases to perform their work. However, the total annual value of the purchases should be low to ensure the City is receiving competitive bids as the individual purchase costs increase.
The spend analysis indicated that break points of $5,000 and $35,000 met these goals.
|
Threshold |
Number of Purchases |
Total Value of Purchases |
% of Purchases |
% of Purchase Value |
|
Less than $5,000 |
2053 |
$2.79M |
49.5% |
2.4% |
|
$5,000 to $24,999 |
1657 |
$22.43M |
39.9% |
19.7% |
|
$35,000 and greater |
441 |
$87.65M |
10.6% |
76.9% |
Staff also conducted a comparison of the City’s recommended thresholds versus other home-rule communities in the Chicago area. The other communities have increased their open market thresholds to $5,000. While Wheaton is the only community to increase their formal bid/RFP threshold to $35,000, staff recommends increasing the City’s threshold to $35,000 to be consistent with the state of Illinois bid thresholds of $35,000 for school districts and townships. It is expected that other communities will follow suit and data shows that $35,000 is appropriate for the City’s spend.
|
Municipality |
Open Market |
Formal Bid/RFP |
|
Wheaton |
$5,000 |
$35,000 |
|
Schaumburg |
$5,000 |
$25,000 |
|
Aurora |
$5,000 |
$25,000 |
|
Elgin |
$5,000 |
$25,000 |
|
Hoffman Estates |
$5,000 |
$25,000 |
2. Change Order Approval Thresholds
Staff recommends two changes to the change order approval thresholds.
• Increase the dollar amount Change Order threshold for the Chief Procurement Officer from $25,000 to $35,000 to be consistent with the recommended change to the formal Bid/RFP threshold. The City Council approval threshold will remain at $100,000.
• Increase the time extension Change Order threshold for the City Council from 30 days to 90 days to align with the majority of time Change Order requests.
|
Municipality |
Change Order |
|
Wheaton |
90 days |
|
Schaumburg |
30 days |
|
Aurora |
No requirement |
|
Elgin |
180 days |
|
Joliet |
30 days |
3. Single Source Purchases
Currently, the City includes a Sole Source as an approved procurement method, but it is often confused with a Single Source procurement.
A Sole Source purchase occurs when only one supplier can fulfill specific requirements, whereas a Single Source purchase occurs when the entity chooses one supplier from multiple available options to leverage something.
Examples of Single Source procurements include:
• Standardizing to one equipment brand reduces staff training and the number of parts that must be inventoried for maintenance/service.
• A situation where there is a need to meet manufacturer guidelines, warranties and safety standards is necessary to maintain business continuity, to streamline the management of the purchase/contract, or to retain a continuous level of quality and price stability.
Single Source procurement is widely used by local governments and is considered a best practice by the National Institute of Governmental Purchasing (NIGP). Admittedly, many of the procurements currently classified as a Sole Source are most appropriately classified as Single Source and staff recommends adding Single Source purchases as an approved procurement method.
4. Procurement of Construction:
The “responsible bidders ordinance” (RBO), adopted in 2023, added Section 5 to 1-9B-7: Procurement of Construction. This section specifically addresses the requirement for apprenticeship programs, but lacks other standard components of an RBO, such as prevailing wage requirements and disclosure of subcontractors. Proposed changes to this section do not reduce or diminish the changes made in 2023 but rather add clarification based on nearly two years of experience administering the RBO.
FISCAL IMPACT:
N/A