Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors
From: Supervisor Warren Slocum, District 4
Supervisor Noelia Corzo, District 2
Subject: Introduction of an ordinance adopting Chapter 2.89 of Title 2 of the San Mateo County Ordinance Code Regarding Procurement Preference for Local Businesses
RECOMMENDATION:
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Introduction of an ordinance adding Chapter 2.89 of Title 2 of the San Mateo County Ordinance Code regarding procurement preference for local businesses and waive the reading of the ordinance in its entirety.
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BACKGROUND:
As a strategy to operationalize equity in County operations, the Board of Supervisors adopted an Anchor Institution Resolution No. 078744 on March 8, 2022, to ensure the economic opportunities that the County generates are intentionally aligned with our priorities for equity, inclusion, and shared prosperity. One of the key anchor institution strategies to advance shared prosperity is inclusive procurement, which aims to maximize the County’s procurement processes to support an inclusive local businesses ecosystem. The County conducted a Supplier Diversity Study to better understand the utilization and availability of local small and diverse businesses in the local market. The Study made the following general findings:
• The County underutilizes local small and local micro businesses;
• The County substantially underutilizes local small and local micro businesses in professional services contracts and as prime contractors;
• The County substantially underutilizes diverse businesses (minority-, LGBTQ-, women-, and veteran-owned); and
• local small and micro businesses have limited resources, capacity and/or experience to compete for County solicitations.
The Study recommends implementing local, and local small and local micro business measures such as preference points or bid discounts in competitive solicitations, when applicable, to explicitly promote local and local small and micro business participation in County procurement. This is one of multiple recommendations that the Study outlines, and the County has begun implementing other recommendations already related to improving data collection and tracking of vendors. Before the end of the fiscal year, staff will craft an implementation workplan to move other inclusive procurement recommendations forward.
All other Bay Area counties have a local preference ordinance, and two other counties (Alameda County and the City and County of San Francisco) in the Bay Area have a preference program for local small and micro businesses. Santa Clara County is currently exploring the adoption of a local small business preference program.
DISCUSSION:
The purpose of this Ordinance is to promote a strong local economy by giving preference to local businesses, and local small and micro businesses to the extent consistent with the law and interests of the public.
Under the Ordinance, where price alone is the sole evaluation factor for a solicitation for goods and/or services, 5 percent shall be subtracted from a bid submitted by a responsive and responsible Local Business or Local Non-Profit for evaluation purposes. If application of the 5 percent bid discount results in a Local Business or Local Non-Profit bid being the lowest responsive responsible bidder, the contract shall be awarded to the Local Business and Local Non-Profit at the Local Business’ or Local Non-Profit’s original bid price, assuming agreement on other contract terms. In the event of tie between a Local Business or Local Non-Profit and another bidder when applying the five percent reduction, the Local Business or Local Non-Profit shall be given preference.
An additional 3 percent preference shall be given to a Local Business or Local Non-Profit (for a total of 8 percent) if it is a Small Business or Small Non-Profit, or an additional 5 percent preference (for a total of 10 percent) if the Local Business or Local Non-Profit is a Micro Business or Micro Non-Profit.
Under the Ordinance, when price is not the sole evaluation factor for a solicitation (e.g., in the case of a “best-value” solicitation), 5 percent of the total evaluation points awardable will be added to the Local Business or Local Non-Profit score for evaluation purposes. In the event of a tie between a Local Business or Local Non-Profit and another bidder when applying the five percent preference, the Local Business or Non-Profit shall be given preference, assuming agreement on other contract terms.
An additional 3 percent preference shall be given to a Local Business or Local Non-Profit (for a total of 8 percent of total points awardable) if it is a Small Business or Small Non-Profit, or an additional 5 percent preference (for a total of 10 percent of total points awardable) if it is a Micro Business or Micro Non-Profit.
To be eligible for the preference, Small Businesses and Micro Businesses will need to provide proof of California Office of Small Business and Disabled Veteran Business Enterprise Services (OSDS) certification with their bid/proposal documents. Small and Micro Non-Profit organizations will need to provide IRS Tax Form 990 indicating their gross annual revenue.
The County is exempting the application of the preference in the award of contracts where all bids or proposals received are from Non-Profit Organizations. The Supplier Diversity Study found that the vast majority of dollars procured by the County through nonprofits have been procured to local non-profit organizations during the study period. County staff are exploring other measures to address challenges that local small and micro non-profit organizations face in competing for County contracts.
The application of the preference under the Ordinance may be waived by the Board (for Board-level contracts) or Purchasing Agent designee (for other contracts) when:
• Application of the preference would result in additional costs to the County of more than $10,000; or
• When it is in the best interests of the County to waive the application of the preference.
The County is not adding new positions to implement this Ordinance. While County staff cannot currently estimate the fiscal or operational impacts of this proposed Ordinance, County staff will monitor and report back quarterly to the Chief Financial Officer on the following elements:
• Changes to contract cost of services and/or goods where a contract is awarded to the recipient of a preference pursuant to this Ordinance;
• Changes in use of local and local small and micro businesses in County procurement;
• Changes in the number of proposals received for solicitations in order to track impacts on competition for public contracts; and
• Number of waivers requested, approved, and denied.
The Ordinance provides that, for solicitations below the competitive threshold requirements, efforts should be made to solicit proposals and/or bids from Local Small and Micro businesses where possible.
The effective date of the proposed Ordinance will be July 1, 2025.
The County Attorney’s Office has reviewed and approved the proposed ordinance as to form.
EQUITY IMPACT:
The proposed Ordinance is expected to positively impact the ability of underutilized local small and micro businesses to compete in County solicitations. If more contracts are awarded to local small and micro business as a result of this Ordinance, the County will be investing in and sustaining a local ecosystem of small and micro business, a key element of the County’s shared prosperity goal.
FISCAL IMPACT:
While County staff cannot currently estimate the fiscal impact of this proposed Ordinance, County staff will monitor and report back quarterly to the Chief Financial Officer.