POLICY REPORT
ADMINISTRATION
Date: January 31, 1996
TO: Vancouver City Council
FROM: Corporate Management Team
SUBJECT: Changes to Administrative Authorities
RECOMMENDATION
A. THAT Council increase the transfer limits on normal and non-
recurring operating budget accounts for Department Heads to
$50,000 and $10,000 respectively, and that Department Heads be
authorized to transfer up to $50,000 to/from approved capital
accounts, including the transfer authority to create new
capital accounts up to that amount, all as proposed in this
report.
THAT Council approve a change in the close-out criteria for
capital projects, authorizing Department Heads to close out
capital projects whose expenditures do not exceed 15% AND
$50,000 of the approved budgets. Capital projects that do not
meet this requirement will be reported to Council for
information and approval.
Further that Council request the Park and Library Boards to
adopt these revised authorities as well, subject to the
modifications noted in this report.
B. THAT Council approve a two-tier bid structure reflecting a bid
limit of up to $100,000 for price quotations and a bid limit
of over $100,000 for tenders, including the special purchase
conditions and the advertising change around public notice of
City tenders, all as proposed in this report.
Further that Council request the Park and Library Boards to
adopt the revised bid limits and advertising change as well.
C. THAT Council increase the contract award limits for Purchasing
Manager, Department Head, and City Council approvals to
$100,000, $300,000 and over $300,000 respectively, as proposed
in this report.
Further that Council request the Park and Library Boards to
adopt the revised contract award limits as well, subject to
the modifications noted in this report.
D. THAT Council approve the changes to the contract execution
authorities as proposed in this report.
Further that Council request the Park and Library Boards to
adopt the revised execution authorities as well, subject to
the modifications noted in this report.
E. THAT Council delegate approval authority to Department Heads
for contract change orders as proposed in this report.
Further that Council request the Park and Library Boards to
adopt this revised authority as well, subject to the
modifications noted in this report.
F. THAT Council increase the award limits on consultant contracts
for Department Head and City Council approvals to $30,000 and
over $30,000 respectively, including the changes to the
contract execution authorities, both as proposed in this
report.
Further that Council request the Park and Library Boards to
adopt the revised consultant contract award limits as well,
subject to the modifications noted in this report.
G. THAT Council increase the limit on the City Manager's legal
settlement authority from $20,000 to a maximum of $50,000 as
proposed in this report.
H. THAT Council approve the changes to the City's policy on bid
and performance bonds as proposed in this report.
Further that Council request the Park and Library Boards to
adopt the revised policy as well, subject to the modifications
noted in this report.
I. THAT Council delegate approval authority to Department Heads
to hire contract employees into vacant exempt positions as
proposed in this report.
Further that Council request the Park and Library Boards to
adopt this revised authority as well, subject to the
modifications noted in this report.
J. THAT the Board of Administration by-law be changed as
appropriate to reflect Council action on the above
recommendations.
CITY MANAGER'S COMMENTS
The City Manager RECOMMENDS approval of A, B, C, D, E, F, G, H, I
and J, noting that this report has been prepared by the Corporate
Management Team (the "CMT").
In formulating the recommendations of this report, the CMT has
examined the present administrative authorities around budget
control and the acquisition of goods and services for City
operations, with a view to improving the efficiency and
effectiveness of the City's administrative processes.
We believe the report recommendations accomplish that objective and
reflect the intent of the City's Better City Government initiative.
We also recognize that Council may not share the same conclusion
and welcome that perspective.
COUNCIL POLICY
Amendments to established Council policy require the approval of
Council.
PURPOSE
The purpose of this report is to propose a number of changes to Council
policy dealing with administrative issues around the conduct of City
business. These administrative policies have been reviewed and updated
by Council from time to time since their inception.
BACKGROUND
Staff have periodically submitted reports to Council dealing with
changes to administrative authorities that affect the acquisition of
goods and services, and the effective management of budget resources.
This present report reviews a number of administrative authorities which
should be adjusted to reflect present day market conditions and the way
the City wishes to conduct business in the future. Council will remember
that previous reports dealing with steps to "Better City Government"
outlined a business environment wherein responsibility and authority
would be delegated, as practicable, to empower staff to deliver high
quality, economic programs and services to our customers.
This report is a step in that direction.DISCUSSION
The discussion which follows outlines the policies recommended for
adjustment and the proposed dollar levels and approval authorities under
which City business may be conducted. Council should note that the
"Department Head" authorities recommended in this report apply only to
the heads of Service Groups, Outside Boards and the City Manager and the
Assistant City Manager, commonly referred to as the Corporate Management
Team (CMT). It is not intended that these specific authorities be
delegated to managers, supervisors and other line staff in the
respective organizational units.
The policy areas outlined in this section deal with budget and spending
matters. A companion policy report, dealing with personnel
administration, will be submitted to Council for consideration at a
later date.
Changes to nine policy areas are proposed below.
1. Budget Transfers/Management
During a budget year it is common practice to adjust individual budget
accounts (line items) to reflect changing requirements or movements in
market prices. This situation exists for both the City's operating and
capital budgets.
Operating Budget
(a) Normal Operating Accounts
Present policy limits the amount that Department Heads can transfer
to/from operating budget accounts to $10,000 for a single purpose. There
is a further restriction barring transfers to overtime, business travel
and training, and Department Head discretionary accounts.
Our proposal is to raise the transfer limit to $50,000 on operating
accounts and to remove the transfer restriction on overtime and business
travel and training accounts. The restriction on transfers to Department
Head discretionary accounts will remain.
(b) Non-recurring Operating Accounts
Present policy limits the amount that Department Heads can transfer
to/from non-recurring operating budget accounts to $2,000 for a single
purpose. A non-recurring account is used to fund one-time expenditures
such as purchases of office furniture and equipment.
Our proposal is to raise the transfer limit to $10,000 on non-recurring
accounts.
(c) General Operating Budget Provisions
The administrative system presently in place to govern the processing of
operating budget transfers will be modified to accommodate the changes
proposed above. An annual listing of approved transfers will be provided
to Council for information.
Capital Budget
(d) Approved Projects
Present policy limits the amount that the City Manager can transfer
to/from capital accounts/projects to $50,000. Department Heads must seek
the prior approval of the City Manager for all transfers.
Our proposal is to retain the $50,000 transfer limit but have Council
authorize Department Heads to exercise this transfer authority.
(e) New Projects
Present policy limits the amount that the City Manager can transfer from
existing approved funding to create new capital projects to a maximum of
$50,000. Examples include capital areas which have general funding
approval but specific projects (e.g. opening lanes) may emerge
throughout the budget year.
Our proposal is to retain the $50,000 limit but have Council authorize
Department Heads to exercise this new project authority.
(f) Close-outs
Present policy limits the closing of capital accounts under the City
Manager's authority to those projects whose expenditures do not exceed
15% OR $50,000 of the approved project budgets. Projects not meeting
this criteria must be reported to Council for information and approval.
Our proposal is to have Council authorize Department Heads to close
capital projects and change the acceptance criteria to those projects
whose expenditures do not exceed 15% AND $50,000 of the approved
budgets. Projects not meeting the revised criteria will still be
reported to Council for information and approval.
(g) General Capital Budget Provisions
The administrative system presently in place to govern the processing of
capital budget transfers will be modified to accommodate the changes
proposed above. An annual listing of approved transfers will be provided
to Council for information.We also propose that the Park and Library
Boards be requested to adopt this revised budget transfer/management
authority as well, with appropriate changes to reflect their individual
organization and governance structures.
2. Bid Limits
Bid limits establish dollar limits for the purchase of goods and
services with or without a public tender process. There are presently
three mechanisms which govern the City's purchasing process.
- Pricing - for routine purchases under $10,000 Purchasing Services
obtains prices from internal price records or known suppliers in
verbal or written form.
- Offers - for routine purchases between $10,000 and $50,000
Purchasing Services mails offer requests to known suppliers with a
copy of the request posted on a public notice board in the
purchasing office. Offers are received and opened in public in the
purchasing office.
- Tenders - for purchases over $50,000 Purchasing Services advertises
the tender particulars in two daily newspapers and in the Journal
of Commerce. A copy of the advertisement is posted on the public
notice board in the purchasing office and copies of the tender are
mailed to known suppliers. Tender submissions are received by the
City Clerk and opened in public.
Our proposal is to change to a two-tier bid structure for the purchase
of goods and services and increase the bid limits to reflect market
price changes since the last revision and, more importantly, to improve
the efficiency and effectiveness of the City's purchasing process
overall. The new bid structure and limits would be as follows:
- Quotations - for purchases of up to $100,000 Purchasing Services
will obtain prices from internal price records or solicit prices by
telephone or in writing from known suppliers depending on the value
of the purchase, with a copy of the request for quotation on
purchases over $50,000 posted on the public notice board in the
purchasing office. Written quotations from suppliers will be
received and opened in the purchasing office with prices available
for review on request.
- Tenders - for purchases over $100,000 Purchasing Services will
advertise the tender particulars. A copy of the advertisement will
be posted on the public notice board in the purchasing office and
copies of the tender mailed to known suppliers. Tender submissions
will continue to be received by the City Clerk and opened in
public. Additionally, we propose that the
City advertise in only one daily newspaper or the Journal of
Commerce, whichever is the most appropriate for the commodity or
service being tendered, in order to reduce/contain costs.
- Special Purchases - new or near-new equipment is occasionally
available at substantially reduced prices, usually through a
distress sale. The equipment is offered for sale by a variety of
methods including public auction, bailiff/trustee sale or sealed
bid. In January, 1983, City Council authorized staff to purchase
equipment in this manner without the requirement for calling
tenders. Given the potential financial advantage to the City, we
propose that Council allow the CMT to continue this acquisition
practice on the following basis:
- purchases will be by open competition;
- closed or private negotiations with individuals or suppliers
will not be considered;
- equipment purchases will be limited to established
requirements only for which funding must be approved and in
place;
- purchases up to and including $300,000 will be periodically
reported to Council for information; and,
- purchases of over $300,000 will be immediately reported to
Council.
The revised bid structure and limits and the advertising change will
also apply to situations where Purchasing Services is not involved and
City departments have conduct of the purchasing process (e.g.
Engineering for public works, Facilities Development for construction
and renovations, Building Management for maintenance).
We also propose that the Park and Library Boards be requested to adopt
the revised bid structure and limits and the advertising change as well.
3. Contract Awards
Contract award limits establish the executive body or administrative
position in the City's organization that makes the business decision to
enter into a particular contract for goods and services. Council has
presently delegated the power to award contracts as noted below. In most
cases parallel authorities exist
for the Library and Park Boards and their respective staffs.
- the City's Purchasing Manager for contracts up to $50,000.
- the City's Purchasing Manager and the Department Head concerned for
contracts over $50,000 and up to $100,000, provided the following
conditions are present:
- acceptance of low bid meeting specifications;
- a maximum 5% allowance proportionate to the amount of local
content stated in the tender is given to those bidders whose
tenders reflect local content; and,
- the information regarding the award of tenders is made
available periodically for review by City Council. In the
event the contract is to be awarded to other than the low
bidder (i.e. for best value), then the award must be referred
to the City Manager for approval.
- the City Manager for contracts over $100,000 and up to $200,000.
Due to special circumstances around the construction of Library
Square, City Council authorized the City Manager to approve
contracts up to $400,000, subject to reporting those approvals to
Council on a regular basis.
- City Council for contracts over $200,000.
Our proposal is to change the contract award levels as follows:
- for low bid or best value contracts up to $100,000 to the City's
Purchasing Manager;
- for low bid or best value contracts over $100,000 and up to
$300,000 to the initiating Department Head or Heads. The City's
Purchasing Manager will concur on all best value awards where
Purchasing Services has conducted the tender process; and,
- for all contracts over $300,000 to City Council.
Additionally,
- the 5% allowance proportionate to the amount of local content
stated in the tender will be discontinued.
- the information regarding the award of tenders at the
administrative level will be made available for periodic review by
City Council.
The revised contract award levels will also apply to situations where
Purchasing Services is not involved and City departments have conduct of
the purchasing process. In those cases the initiating Department Head
will be able to award contracts up to the value of $300,000.
The proposed changes to the tender, contract award and contract
execution processes as outlined in this report will require that the
tender and contract documentation are in the standard format approved by
the City's Director of Legal Services, or that any modifications to the
standard format for special circumstances will have been reviewed and
approved by the Director of Legal Services before the applicable tenders
are called.
We also propose that the Park and Library Boards be requested to adopt
the revised contract award limits as well, with appropriate changes to
reflect their individual organization and governance structures.
4. Contract Execution
The contract execution authority establishes who may execute or sign a
contract on behalf of the City once the decision to award a contract has
been made. The signing authority is not necessarily the same person that
is authorized to award the contract.
Presently, routine purchases reflected in the pricing/offer process are
executed by the Purchasing Managers for the City, Park Board and Library
Board respectively. No change to this practice is proposed at the
present time noting, however, that routine purchases would in the future
be conducted by the quotation process proposed above. This execution
authority will also apply to situations where Purchasing Services is not
involved and City departments have conduct of the purchasing process for
quotations. In those cases the initiating Department Head will be the
signing authority.
For tenders, the present signing authorities comprise a combination of
the City's Purchasing Manager, the Department Heads, and the City
Manager depending on the nature of the contract.
Our proposal is to change the authority for contract execution to
correspond with the proposed authority to award a contract. This means
that Department Heads would execute contracts for goods and services up
to their permitted award level, and the Director of Legal Services,
instead of the City Manager, would execute all contracts awarded by
Council. Presently, persons who are authorized to execute contracts on
behalf of the City can only delegate that signing authority if absent,
and then only to those persons appointed in an acting capacity. This
stipulation would remain in place under the proposed change of
authorities.
We also propose that the Park and Library Boards be requested to adopt
the revised contract execution authority as well, with appropriate
changes to reflect their individual organization and governance
structures.
5. Contract Change Orders
Presently, change orders to executed contracts must be approved by the
City Manager and, if the change is significant, reported to City
Council. It can be reasonably argued that Department Heads have been
given the responsibility and authority by Council to manage their
respective operating and capital budgets in a prudent and fiscally sound
manner. Since change orders are a relatively common practice in
construction projects, it seems appropriate that Department Heads should
have the ability to manage this sub-level of budget control as well.
Our proposal is to have Council authorize Department Heads to approve
contract change orders up to the level of the approved budget for the
project. In cases where approval of a change order will exceed the
existing project budget, or the project budget as adjusted by transfer
under the Department Head authority, the matter will be reported to
Council for consideration and approval.
We also propose that the Park and Library Boards be requested to adopt
this revised authority as well, with appropriate changes to reflect
their individual organization and governance structures.
6. Consultant Awards
Consultant awards comprise a special category of City expenditures that
are treated differently than the contract awards for general purchases
of goods and services. The present award limits and execution
authorities for consultant contracts are as follows:
- for contracts up to $5,000 Department Head approval is required;
- for contracts up to $30,000 City Manager approval is required. The
City Manager was authorized by Council to award consultant
contracts up to $100,000 for the Library Square project, with a
similar authority to award contracts related to
corporate/departmental re-engineering work, subject to reporting
those awards to Council on a regular basis; and,
- for contracts over $30,000 City Council approval is required.
For consultant contracts awarded by City Council, the Director of Legal
Services is the authorized signatory.
Our proposal is to have Council authorize Department Heads to award
consultant contracts up to $30,000 and to maintain the requirement of
Council approval for contracts over $30,000, including the City
Manager's authority to award contracts up to $100,000 related to
corporate re-engineering work. The contracts would be executed by the
Department Head, or the Director of Legal Services for Council,
as appropriate. Additionally, the City's administrative systems
will be changed to allow the Budget Office to submit an annual report to
Council identifying all consultant contracts awarded by Department Heads
during the budget year. The individual consultant reports will be filed
with the City Clerk to be made available to members of Council wishing
to review their contents.
The proposed changes to the tender, contract award and contract
execution processes around consultant services as outlined in this
report will require that the tender and contract documentation are in
the standard format approved by the City's Director of Legal Services,
or that any modifications to the standard format for special
circumstances will have been reviewed and approved by the Director of
Legal Services before the applicable tenders are called.
We also propose that the Park and Library Boards be requested to adopt
the revised award limits for consultant contracts as well, with
appropriate changes to reflect their individual organization and
governance structures.
7. Legal Settlements
Present policy authorizes the City Manager, on recommendation of the
Directors of Legal Services/Risk Management, to settle claims against
the City up to an amount of $20,000. Settlements in excess of $20,000
require the approval of Council.
Our proposal is to increase the City Manager's authority for settling
legal claims to a maximum of $50,000, with settlements above that amount
reported to Council for approval.
8. Bid and Performance Bonds
Present policy on bid and performance bonds is discussed below.
(a) Bid Bonds (10% of bid amount)
A Bid Bond is a guarantee that if a bidder's tender is accepted, the
bidder will enter into the contract within the time specified. If the
bidder fails this obligation, the Bid Bond will provide a sum of money
up to the face amount of the bond to bridge the difference between the
amount of the original bid and the amount for which the City legally
contracts with another party to do the work or supply the goods or
services under the tender. The Bid Bond will also provide assurance that
the bidder is bondable by the surety (bonding company) and that the
bidder will provide the City with the specified security, which is
usually a Performance Bond.
Our present policy states that "Bid Bonds are not required for tenders
administered by the City's Purchasing Manager but the City's Purchasing
Manager is authorized to demand Bid Bonds in cases where unusual risk
factors are involved."
Our proposal is to essentially continue with the present policy on Bid
Bonds, but allow the acceptance of cash, a certified cheque or a letter
of credit as an acceptable alternative to a Bid Bond if a Performance
Bond from a bonding company is not required on the contract.
(b) Performance Bonds
A Performance Bond, subject to its limits, provides that the contractor
will complete the contract in accordance with the plans and
specifications, on time, and at the agreed price. Where a maintenance
clause is included in the contract, a Performance Bond automatically
covers the maintenance clause. A Performance Bond is appropriate where
installation, custom work or modification is included in the contract.
Our present policy states that "Performance Bonds are required with
contracts with a value of $50,000 or more for the following types of
purchases, except that the City's Purchasing Manager is authorized to
demand Performance Bonds for any type of purchase regardless of value as
necessary to protect the interests of the City.
- equipment specially manufactured,
- services,
- specialized installations including supply of equipment."
Our proposal is to essentially continue with the present policy on
Performance Bonds but raise the value of the contract to over $100,000
for the types of purchases noted below before a Performance Bond is
required. We additionally propose that cash, a certified cheque or a
letter of credit be approved as an acceptable alternative to a
Performance Bond in certain circumstances as determined by the agency
having conduct of the purchasing process.
- equipment specially manufactured;
- services;
- construction contracts; and,
- specialized installations including supply of equipment.
Performance Bonds must be for 100% of the contract amount except for
construction contracts where the Performance Bond may be 50% of the
contract amount provided there is also a Labour and Materials Payment
Bond for 50% of the contract amount.
We further propose that the City Manager be given the authority to waive
the requirement for a Performance Bond in unusual circumstances, or to
adjust the bond limits as appropriate for the contract.
The revised policy on Bid and Performance Bonds will also apply to
situations where Purchasing Services is not involved and City
departments have conduct of the purchasing process. In those cases the
initiating Department Head will administer the revised policy.
We also propose that the Park and Library Boards be requested to adopt
the revised policy on Bid and Performance Bonds as well, with
appropriate changes to reflect their individual organization and
governance structures.
9. Contract Employees
Our present policy permits the City Manager to fill vacant exempt
positions with contract employees instead of recruiting incumbents on a
regular basis. Solicitor positions in the Law Department are frequently
filled in this manner. Depending on the operating situation, there may
be good rationale to fill exempt positions for a term certain,
especially if organizational changes are expected down the road or if
the position was created for a specific purpose (workload peak shaving,
a special project, or other similar activities).
Our proposal is to have Council authorize Department Heads to fill
vacant exempt positions within their organizational units with contract
employees on a situational basis as may be practicable.
We also propose that the Park and Library Boards be requested to adopt
this revised authority as well, with appropriate changes to reflect
their individual organization and governance structures.
CONCLUSION
We believe that the proposed changes to the policies outlined in this
report will improve the administrative processes of the City. The
proposed changes also take into account the inflationary increases in
prices and the cost of doing business which have occurred since the last
revisions to these policies. Approval of the report recommendations will
empower the Corporate Management Team with more responsibility and
authority for business decisions on routine operating matters.
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