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RESOLUTION APPROVING FINDINGS IN SUPPORT OF AN EXCEPTION TO THE COMPETITIVE BIDDING PROCESS AND APPROVING A VENDOR POOL FOR THE PURCHASE OF PHYSICAL AND ELECTRONIC MATERIALS FOR THE STOCKTON-SAN JOAQUIN COUNTY PUBLIC LIBRARY SYSTEM
recommended action
RECOMMENDATION:
It is recommended that the City Council adopt a resolution:
1. Approving findings that support an exception to the competitive bidding process
2. Approving an initial list of vendors to establish a Stockton-San Joaquin County Public Library System Procurement Vendor Pool for the purchase of physical and electronic library materials;
3. Authorizing the City Manager or designee to update the vendor pool list and execute vendor agreements; and
4. Authorizing the City Manager to take whatever actions are necessary and appropriate to carry out the purpose and intent of this Resolution.
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Summary
The City received an audit finding that cumulative orders to four library materials vendors exceeded the City Manager’s purchasing authority.
Although no single transaction exceeded the City Manager’s purchasing authority of $75,000, total annual payments to four Library vendors exceeded the limit. These vendors account for approximately 80% of the Library’s annual materials purchases. Currently, the purchasing method available to the Library is the Purchase Order (PO) method, which requires three quotes for purchases over $5,000 and a formal competitive bidding process for purchases over $75,000. However, this method would require over 800 POs annually, a processing time of 10-20 days, and the work of staff from several different departments. The PO method creates such a delay that customer service would be greatly affected and staff would be unable to order, receive and process materials in a realistic timeframe.
Furthermore, there are only a limited number of distributors who provide physical materials aggregated from all publishers and pricing is not competitive because vendor pricing and discount terms are the same for over 80% of materials. Also, the pricing of Library electronic resources is not considered competitive because they are proprietary products, cannot be purchased from multiple vendors, and are dependent on specific interoperability features with other online library products. For these reasons, electronic resources are considered sole source purchases.
Given these considerations, Library staff worked with Procurement staff to determine an appropriate method for buying materials which answered the audit finding, met purchasing standards, and allowed for efficient and timely acquisition of materials.
Staff is recommending an exception to the competitive bidding process and the establishment of a Stockton-San Joaquin County Public Library Materials Vendor Pool List as the best method of resolving this issue. A vendor pool is a list of qualified content providers, reviewed and updated annually by Procurement staff, with whom the library can set up annual POs, reducing the annual number of potential POs from 800 to approximately 25.
DISCUSSION
Background
The City of Stockton manages the Stockton-San Joaquin County Public Library System which is made up of five City and eight County branches and has a materials budget of $1.3 million. The Library purchases physical and electronic items from over 25 vendors. An audit finding on Authorization for Payments (AFP) revealed that cumulative orders to four library vendors (Baker & Taylor, Brodart, Ingram, and Midwest Tape ) exceeded the City Manager’s purchasing authority. These vendors account for approximately 80% of the Library’s annual materials purchases and deliver “shelf-ready” physical materials allowing items to be ordered electronically and received in-house with a barcode, property stamp, spine label, and special packaging. Along with physical processing, these vendors also provide customized catalog records that are loaded into the Integrated Library System for the public to search. By purchasing materials shelf-ready, the Library reduces the wait time for new, highly anticipated items to go into circulation.
The scope of services that are contemplated when ordering from an established vendor includes inventory availability, professionally-curated selection lists to accelerate the buying process, shelf-ready processing, and delivery speed. Additionally, vendors upload electronic ordering information to the ILS (Integrated Library System), give volume and industry discounts, and supply report management tools. The pricing of physical materials is not competitive as pricing, and discount terms are the same from primary industry vendors for over 80% of print library materials.
Curation of electronic resources differs from physical materials in that they are sole source purchases. Platforms and content are unique, proprietary, and specialized. An example would be Rosetta Stone, which is only available for subscription from Ebsco. No other vendor offers Rosetta Stone subscription access. Since electronic resources are not interchangeable and cannot be purchased from a variety of vendors, obtaining three quotes for a single product is not feasible. When purchasing electronic materials, several key factors are analyzed including unique content, relationship to print holdings, and user-friendliness. Electronic resources are hosted virtually and available through vendor platforms via the Library website or mobile applications. The Library reviews its subscriptions annually and avoids multi-year agreements when possible to allow for regular market analysis to evaluate overall cost as well as current product trends. While there are often competing products, SSJCPL only changes products after careful evaluation as major product changes can negatively impact customers’ use of electronic resources.
Present Situation
Library materials purchasing needs are unique. The audit finding recommends not using the AFP process, and the standard PO process is not conducive for the efficient acquisition of materials. For example, the similarity of vendor discounts means seeking multiple quotes or competitive proposals for orders over $5,000 will not result in a lower price. Furthermore, because the Library does not make a specific dollar commitment to any vendor, the use of POs and the need for contract change orders would cause delays in delivery or require overrides in a multi-step process. Even though individual purchases are below the current established expenditure limit, cumulatively the purchases from a vendor may exceed that limit in any given fiscal year.
The Library must change the way that it orders materials. Library and Procurement staff identified the solution of creating a Library Vendor Pool for physical and electronic materials. Each vendor will have a single PO created at the beginning of the fiscal year and payment of invoices will be made against that vendor PO. This solution allows the library to request only 25 POs annually rather than over 800, greatly reducing staff time as well as satisfying the audit finding. Dollar amounts will be assigned to POs based on prior year purchases. This workflow will streamline the process of purchasing and renewing subscriptions.
An initial list of vendors has been created based on past demonstrated performance and includes the four major vendors, with whom there are existing agreements. All vendors on the list meet Library standards, and Library and Procurement staff have developed a procedure for maintaining the vendor list. This procedure addresses adding and removing vendors, what services the library seeks when ordering materials, and the submission of pricing agreements.
FINDINGS
Pursuant to SMC section 3.68.070, Council may approve findings that support an exception to the competitive bidding process. The following proposed findings are recommended to support such an exception to the competitive bidding process and approval of an established vendor list for the acquisition of physical and electronic materials for the Stockton-San Joaquin County Public Library:
1. The Library materials budget is a large budget with many small individual transactions to a relatively small number of specialized and qualified vendors.
2. The individual purchase transactions of library physical and electronic materials from a single vendor are within the City Manager’s purchasing authority of $75,000 but cumulatively may exceed that limit within a fiscal year.
3. The competitive bidding process will not result in cost savings to the Library because:
a. Procurement of library materials between $5,000 and the City Council threshold does not require three quotes because book and media pricing discounts are standard for approximately 80% of such materials.
b. The pricing of SSJCPL physical materials is not considered open market and competitive because the scope of services is very specific and the number of available and qualified vendors able to provide shelf-ready items to SSJCPL is few.
c. The purchase of electronic materials and media is a sole source purchase because products are unique, one of a kind, and specialized. Platforms and services are proprietary and not available for purchase from multiple sources.
4. The alternative vendor pool solution will provide a timely, transparent, and streamlined process for procurement of Library materials. The establishment of this new process will support the competitive opportunity to qualified vendors:
a. An initial list of vendors has been created based on past demonstrated performance, ability to provide shelf-ready physical materials, and currently, provide electronic resource materials.
b. Purchases will be within existing budget appropriation, subject to availability of funds, and according to vendor pool procedures.
c. Additional vendors can be added to the list in the future by submitting a written request proving they meet the designated criteria.
d. Establishment of the pre-approved vendor list does not guarantee that the City will provide such specialized work to the vendors on the list or any particular amount of work.
Financial Summary
There is no direct financial impact to the City from approving a qualified vendor pool for the purchase of library materials. All purchases made from these vendors will be funded through the annual Community Services Library Materials Budget and approved annually by the Stockton City Council and the San Joaquin County Board of Supervisors. There is no impact to the General Fund, or any other unrestricted fund, from this action.