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APPROVE COOPERATIVE PURCHASING AGREEMENTS THROUGH THE STATE OF CALIFORNIA, NASPO VALUEPOINT, AND THE NATIONAL JOINT POWERS ALLIANCE TO OBTAIN A VARIETY OF GOODS AND SERVICES AT A DISCOUNT
recommended action
RECOMMENDATION
It is recommended that the City Council approve findings and authorize the execution of seven agreements to provide the City access to preferential pricing programs awarded through competitive processes by three cooperative purchasing groups. The seven agreements will allow the City to obtain a variety of goods and services at a discount through competitively priced leveraged procurement agreements. It is further recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of the motion.
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Summary
Under the City’s procurement transformation project, a cross-functional team of City staff representing Administrative Services, Public Works, Information Technology, and Municipal Utilities conducted a review to determine if savings could be achieved through the use of leveraged procurement agreements that combine the purchasing power of multiple entities to achieve more competitive pricing. Public Contract Code allows the State Department of General Services to make these leveraged procurement agreements available to cities. To date, the following cooperative agreements have been identified as offering estimated potential savings of $356,000 annually as described below:
• Industrial and facility supplies - The National Association of State Procurement Officials (NASPO) ValuePoint Cooperative agreement with W.W. Grainger Inc. (Grainger) provides significant discounts to the City. Currently, individual competitive bids are conducted for purchases from Grainger. During the last two years, $257,000 has been spent annually on products from Grainger. The NASPO agreement offers the most competitive pricing and offers discounts averaging 41% with Grainger (estimated discount value of $105,000 annually). The agreement will also provide ‘no cost’ standard delivery on all City orders. Moreover, having a formal contracted relationship will allow the City to utilize new electronic ordering methods with Grainger that will reduce staff processing time for non-inventory purchases. Grainger has a distribution facility in Stockton and is considered a “local” supplier. (Attachment C)
• Maintenance supplies - The NASPO ValuePoint cooperative agreement with Fastenal will provide new discounts to the City. The City already spends an estimated $30,000 per year on supplies from Fastenal. Discounts available through the NASPO ValuePoint agreement will average 23% throughout its term. The agreement will also provide ‘no cost’ standard delivery on all City orders. Fastenal has a distribution facility within Stockton and is a “local” supplier. (Attachment D)
• Heavy industrial products and tooling - The NASPO ValuePoint cooperative agreement with MSC Industrial will provide new discounts for the City on purchases of this supplier’s products. Current annual purchases with MSC Industrial are approximately $92,000. The agreement will also provide ‘no cost’ standard delivery on all City orders. Discounts available in the NASPO ValuePoint agreement will average 56% throughout its term. (Attachment E)
• Motion, hydraulic and pressure fittings - The NJPA cooperative agreement with Motion Industries will provide new discounts for the City on purchases of this supplier’s products. Already a provider to the City, Motion Industries’ sales to the City are approximately $28,000 annually. Discounts under the NJPA agreement will average 32% throughout its term. The agreement will also provide ‘no cost’ standard delivery on all City orders, as well as an additional 1% payment discount for net 10-day processing of invoices. Motion Industries has a distribution facility within Stockton and is a “local” supplier. (Attachment F)
• Playground equipment - Public Works has planned the replacement of certain playground equipment estimated at $250,000 annually. The supplier, Miracle Playsystems, is a provider of equipment that has been used in the past and meets the City’s requirements. Throughout the term of this new NJPA agreement, the City will receive average discounts of 27% across multiple categories of equipment purchased through Miracle Playsystems. (Attachment G)
• Automobile replacement parts - The City has utilized Factory Motor Parts for certain purchases of fleet replacement parts. Approximately $84,000 is spent on products from Factory Motor Parts annually. However, several hundred thousand dollars are spent annually by the City with other firms, which provides an opportunity to further reduce costs for the City through this cooperative agreement. This NASPO ValuePoint cooperative agreement will give the City a 61% discount on purchases of a wide variety of original factory parts and aftermarket products through its term. The agreement will also provide ‘no cost’ standard delivery on all City orders. (Attachment H)
• Dell computer equipment - The City currently makes direct purchases of Dell brand personal computers, laptops, small servers, LAN/WAN equipment and associated peripheral parts from Dell Limited LP (the Dell corporate entity). Approximately $480,000 was spent during the last fiscal year with this supplier. A NASPO ValuePoint cooperative agreement with Dell has been identified as providing significant benefits for the City. Ongoing access to this agreement provides the City with a 13.5% discount off of Dell’s published list prices on key hardware, in any quantity. Additional tiered discounts between 1% and 8% based on order size are also available through this agreement. Additional discounts may be negotiated for key orders, based upon the preferential terms of the cooperative agreement. The agreement also provides ‘no cost’ standard delivery on all City orders. (Attachment I)
To capture the potential savings of $356,000 annually, it is recommended that the Council adopt findings and approve entering into seven agreements that offer competitive pricing through leveraged procurements.
DISCUSSION
Background
A recognized ‘best practice’ for local governments is to utilize cooperative agreements that leverage the combined purchasing power of many entities and provide significant benefits for the participating organizations. Cooperative agreements are established through a formal competitive bidding process that meets City requirements, and thus fulfills the City’s procedural requirements for full and open marketplace competition. The combined leverage of numerous participating entities that are represented by a cooperative purchasing group gives the City the ability to receive preferential pricing, terms and conditions that the marketplace would typically offer only to a much larger organization. For example, the NASPO ValuePoint Cooperative is made up of most of the state-level procurement offices, representing both executive branch agencies and all other governmental organizations in their respective states.
Pursuant to Public Contract Code Sections 10298-10299, the State Department of General Services may consolidate the needs of multiple agencies and leverage the state’s buying power through a competitive process to achieve better pricing for goods and services, and these leveraged procurement agreements are available to cities without further competitive bidding.
Present Situation
A City team consisting of representatives from Administrative Services, Information Technology, Municipal Utilities, and Public Works reviewed more than 65 cooperative agreements offered by the State of California, NASPO ValuePoint, and NJPA. The team conducted detailed reviews resulting in the seven agreements for this first round of recommendations to the City Council for implementation. Annualized discounts of approximately $356,000 are anticipated from participation with these recommended cooperative agreements (Attachment A). In addition, the efficiencies gained by participating in cooperative agreements instead of repetitive City processes will save significant staff time and City resources.
Findings
Stockton Municipal Code section 3.68.070 provides an exception to the City’s competitive bidding requirement in cases where the City Council has approved findings that support and justify the exception. The findings are as follows:
1. The Grainger, Fastenal, and MSC Industrial agreements were each established through a formal competitive bid process conducted by the NASPO ValuePoint Cooperative Purchasing Organization (then named WSCA/NASPO) as represented by the State of Washington (lead agency).
2. The Miracle Playsystems and Motion Industries agreements were established through a formal competitive bid process conducted by NJPA on behalf of its governmental members, of which the City is one.
3. The Factory Motor Parts agreement was established through a competitive bid process recently conducted by the NASPO ValuePoint, as represented by the State of California (lead agency).
4. The Dell agreement was established through a formal competitive bid process conducted by the NASPO ValuePoint, as represented by the State of Minnesota (lead agency).
5. Participation in these seven agreements will provide significant cost savings from lower prices and freight expenses, and more efficiently utilized City resources. These cooperative agreements take advantage of established long-term agreements rather than performing repetitive transactional bidding.
6. The City is currently paying a higher price for the same goods and services, and does not achieve the purchasing volume to obtain the same discounts available through the leveraged procurement agreements negotiated by multi-state cooperatives.
7. Taking advantage of the leveraged procurement agreements negotiated by multi-state cooperative will also save the administrative expense of City staff conducting separate bulk purchasing procurements.
8. Pursuant to Public Contract Code Sections 10298-10299 the State Department of General Services may consolidate the needs of multiple agencies and leverage the state’s buying power through a competitive process to achieve better pricing for goods and services, and these leveraged procurement agreements are available to cities without further competitive bidding.
CONTRACT ACTION
To participate in the leveraged procurement agreements, the City will execute the Cooperative Purchase Agreement template (Attachment B) as modified for each of the seven agreements and approved by the City Attorney’s Office, which are represented by Attachments C through I. This motion provides the City Manager with the ability to execute documents or take actions necessary to utilize the seven cooperative agreements established for the full contract of each and as may be extended by the respective cooperative organizations.
FINANCIAL SUMMARY
Execution of the seven agreements as recommended will affect between $970,707 (current expenditure level) and $1,670,000 (potential future) in annualized expenditures. Based on current spend levels for current providers and budgeted for the playground equipment provider, annual discounts to be received by the City are estimated to be up to $356,000. Six of the agreements (Grainger, Fastenal, MSC Industrial, Motion Industries, Factory Motor Parts, and Dell) each provide free delivery on purchases, a significant financial benefit.
Attachment A - Cooperative Agreements Summary
Attachment B - Template for Cooperative Agreements
Attachment C - W.W. Grainger Inc agreement and associated addenda
Attachment D - Fastenal agreement and associated addenda
Attachment E - MSC Industrial agreement and associated addenda
Attachment F - Motion Industries agreement and associated addenda
Attachment G - Miracle Playsystems agreement and associated addenda
Attachment H - Factory Motor Parts agreement and associated addenda
Attachment I - Dell Limited LP agreement and associated addenda