AGENDA #5e
MEMORANDUM
TO: Mayor and Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Report on Joint-Purchasing Arrangements and Opportunities with Other Local Governments and the Feasibility of Jointly Hiring New Employee to Study Energy Conservation
DATE: August 27, 2001
This memorandum responds to a Council Member’s request for information on current or potential joint purchasing arrangements with other area local governments, and on the feasibility of area governments jointly hiring a new employee to study energy conservation.
Our inquiry and report on these issues concentrates mainly on contacts with our area local governmental units that include Orange County, Carrboro, Hillsborough, the Orange Water and Sewer Authority, and the Chapel Hill-Carrboro Schools. Regarding purchasing products and issues, an integral part of our response involves information on the N. C. State purchasing contracts in which the Town and all of our area governmental units participate extensively for a wide variety of products. These include such items as most vehicles and heavy equipment used by the Town, recycled paper and almost all office supply products, furniture, and equipment. The availability of such a wide variety of products from State contracts greatly diminishes the Town’s need for joint purchases with other local governments.
DISCUSSION
Extensive Availability and Use of N. C. State Purchasing Contracts By Local Governments:
For more than 30 years, the Town has participated in State contracts offered by the N. C. Division of Purchase and Contracts. Eligibility to participate in State contracts is offered to all local government units in North Carolina, including city, county, and school units. These contracts are based on formal bids taken by the State of N. C. for an extensive variety of products ranging from office supplies and furniture to patrol vehicles and other heavy vehicular equipment. The list of products on State contracts covers most of the items commonly purchased by both the State and most local government units. Other examples include computers and computer related equipment, office equipment and furniture, copiers, lawn mowers, street signs, tires, and batteries.
The Town’s participation in the State contracts has been consistent over the past 30 years because of the significant benefits to the Town and ease of participation. The benefits include efficiencies derived from having a list of proven products readily available for purchase, and knowledge that pricing on these contracts represents the best prices obtainable from formal bids taken by the State that are based on large quantities of a given item.
The additional primary benefit is that purchasing from State contracts eliminates the need for the Town to solicit formal bids for items above certain thresholds established by the N. C. purchasing and contract laws (new threshold of $50,000 for supplies, materials, and equipment, including vehicles). For example, the Town does not need to solicit formal bids on patrol vehicles (as well as numerous other vehicles, equipment and supplies above the formal bid thresholds) when these items are available on State contracts. The resulting savings in time and effort are significant benefits to the Town, and our extensive participation results in a lower level of administrative personnel needed for the purchasing function.
In addition to police vehicles, we purchase a majority of vehicles used by the Town from State contracts, including pick-up trucks, sanitation vehicles, street sweepers, and other heavy vehicular equipment.
Because of the significant benefits noted above, and the extensive products available through State contracts, we plan to continue to participate in these contracts to the maximum extent possible when products suitable for Town needs are available. We estimate roughly that about 50% to 60% of all Town purchases are from items available on State contracts.
General Cooperative Purchasing Efforts and Arrangements with Other Local Governments:
Our discussion with other local governments reveals that all units are very receptive to cooperative purchasing arrangements. However, all the other units have also participated in State contracts over the years in the same manner as the Town. As previously noted, the wide and extensive participation in State contracts greatly diminishes the need for specific purchasing arrangements or any significant joint purchases among the governmental units.
Most items and products used by the Town of Carrboro, Orange County and Hillsborough are similar in nature, and most are available through participation in State contracts. However, these units were definitely receptive to a consolidated joint purchase of a specialty item not available on State contracts should the need arise. The majority of purchases by the school system and by OWASA are less similar than the other government units, so there is less of an anticipated need for joint purchases with these two units.
Another factor which diminishes the need for joint purchasing efforts is new authority passed by the N. C. General Assembly in 1998 allowing all local governments to “piggyback” on purchases of other local governments within a specified time frame. Further information on this authority and the Town’s use of such authority is provided below.
One significant purchasing need identified over the years that could potentially benefit from cooperative arrangements among several governmental units is the purchase of fire trucks and fire equipment. Efforts to address this issue have been initiated by the fire departments leadership in several cities in N. C. A discussion of these efforts and potential benefits is also provided below.
Availability of “Piggyback” Purchasing Authority:
In 1998, the N. C. General Assembly amended its State purchasing laws to allow any local governmental unit to “piggyback” (within a 12 month time frame) on purchases made by another government unit through the formal bid process without having to formally rebid the same item. This procedure saves considerable time and effort, and allows one unit to get the same favorable price already established by another unit. While the law applies to formally bid purchases in other states, our general practice is to limit use of this procedure to items bid within a governmental unit in N. C. In this way, we are assured that we are “piggybacking” a product that was formally bid in the uniform manner that is required for all governmental units in the State.
The Town has used the piggybacking procedure for several purchases within the last two years including a backhoe/loader, parking scooters and an asphalt roller. As previously noted, this authority results in considerable savings of time an effort, but also greatly diminishes the need for joint purchases with other governmental units.
Cooperative Planning Efforts for the Purchase of Fire Trucks and Fire Equipment:
One item that is not, and never has been, available on State contracts is fire protection equipment, in particular fire trucks and related equipment. The purchase of fire trucks and equipment is normally infrequent in any given governmental unit. Therefore, no real standardization and standard models of fire trucks currently exist in the market. As a result, local units are normally forced to buy customized trucks and equipment, usually at premium prices, and with up to a one and one-half year delivery time.
The leadership of the fire departments in several larger cities in N. C. are attempting to address this problem through a cooperative effort to develop specifications for a standard fire truck/pumper that would be suitable for all cities in the group. Their goal is to develop specifications for a standard fire truck that could be built and be readily available in the marketplace so that local governments would not be forced to order a custom firetruck, pay a premium price for it, and have to wait one to two years for delivery.
To accomplish this goal, a group of cities in N. C. began meeting in December of 2000 to develop specifications for a standard fire truck and certain types of standard fire equipment. These units include Raleigh, Cary, Durham Burlington, High Point, Greensboro, Winston Salem and the Town of Chapel Hill. Fire Chief Dan Jones has been among the instrumental leaders is this group and this effort. They are currently in the final phases of developing specifications for a standard fire truck and standard protective clothing. Their goal is to be able have a joint bid for about 25 fire trucks to be shared among the group. Bidding in this quantity should result in a more favorable price than currently available, and allow equipment vendors to bring a standard fire truck to market with ready availability because of the assurance of given buyers.
When this group is ready to bid a standard truck and standard equipment, we anticipate that the purchasing departments in each unit will be available to assist in the bidding process as needed. We believe the efforts and goals of this group are commendable, and anticipate their success will be a good example of the benefits of joint purchasing arrangements for a product not readily available in the market.
Feasibility of Jointly Hiring New Employee to Study Energy Conservation:
Our conversations with other area governments reveals that none of them currently has an employee dedicated primarily to energy conservation, and there are currently no concrete proposals to hire an employee to concentrate solely on energy issues.
The Town and some of the other units do allocate funding for energy conservation measures and issues. For example, in past years, the Town has made appropriations as a part of its Capital Improvements Budget for energy efficiency projects that have been used a in variety of ways designed to effect energy savings, particularly for energy efficient lighting projects. In addition, The Town has received some grant funding for the purchase of alternative fuel vehicles. To date with these grants funds and additional Town funding, we have purchased a total of seven alternative fuel vehicles. The initial cost of these vehicles is higher than traditionally powered vehicles, but we have been pleased to receive grant funding to be a part of the initials efforts to include alternatively powered vehicles in the Town’s vehicular fleet.
Regarding Town building, several years ago the Council adopted policies that address energy conservation and efficiency issues in the design and construction of all new buildings and substantial renovation to existing facilities.
One other energy conservation measure taken in past years has been to periodically hire consultants to conduct a detailed review of our utility bills (telephone, electric, water and sewer, etc.) to ensure that we are being charged appropriate energy rates for consumption, and to ensure that we are not paying for inactive accounts due to billing errors. The consultants have normally been paid solely from any savings to the Town resulting from the consultant’s discovery of incorrect rates or inactive accounts. These studies have been successful in the past in identifying minor utility billings problems that have led to future savings for the Town.
Our inquiry into this issue reveals that neither Carrboro nor Orange County have proposed to hire an employee to study energy conservation issues, and that staff members in both jurisdictions do not believe there would be energy savings sufficient to pay for the cost of an employee. We believe our own energy conservation programs and efforts initiated in past years generate savings that are already reflected in our operating budget. Our own staff concurs with the opinions of Carrboro and Orange County staff, and does not believe that additional savings beyond current efforts would be sufficient to pay for an employee dedicated solely to energy conservation savings.