City Acts to Mend Contract Rules to Help Small Firms

By DAVID GREENBERG

Staff Reporter

The process by which more than $1 billion in contracts is awarded annually by the city of Los Angeles would be streamlined under reforms being proposed this week by Mayor James Hahn and other top city officials.

The measures could also help the city save millions of dollars through a variety of measures, from the wider use of credit cards to taking better advantage of prompt-payment rebates offered by vendors. They also are aimed at opening up the bidding process to small business owners.

The proposals mark a rare occasion when the mayor, city attorney and controller’s offices have joined hands in an effort to ease the process of doing business with the city.

“It’s been years of entering into this bureaucratic maze to get to this place,” said City Controller Laura Chick, who along with Hahn and City Attorney Rocky Delgadillo developed the reforms. “We say we want to help small businesses, but we make it almost impossible for small businesses to do business with the city. We’re going to clean (the process) up.”

Most of the measures can be instituted immediately, while others require City Council approval.

The reforms, which address problems involving construction, professional services and procurement contracts, stem from a meeting the three officials had with 300 disgruntled small business owners in January. Small businesses had long complained about the city’s contracting process.

Many small business owners said they don’t seek city work because of the slow pace of bill paying. They also complained that the bidding process required them to hire lawyers and consultants and involved too much paperwork.

Some also had the perception they could not do business with the city unless they “greased palms,” said Chick. There have been frequent allegations that city contracts are steered toward contributors to elected officials’ campaign coffers.

Devil in details

Specifics on some of the recommendations have yet to be ironed out. For example, Hahn will order city staff members to explore ways to identify and notify local contractors about work up for bid.

Hahn will also create an executive committee to promote contracting opportunities to small, minority and disadvantaged firms. But the body would have no power mandate that contracts go to these firms.

A proposed mandate to require 25 percent of contract work to be conducted by small businesses, contained in an earlier draft, was later removed. “(Our office) did review that and felt it would not be legally permissible,” said Noreen Vincent, an assistant city attorney.

Still, the steps outlined in the report are likely to make significant progress toward leveling the playing field for small businesses, including those owned by women and minorities.

Subcontractors providing professional services will benefit from language that prohibits prime vendors from listing them in their bid proposals, only to remove them after they are awarded the contract. City officials will also evaluate the so-called “bundling” of numerous contracts into one large one a fast-track process that tends to leave out smaller firms.

For instance, L.A.-based power and hand tools supplier Wise Inc. lost its share of a 10-year, $64 million contract last year when the city consolidated seven contracts into one. Later, the prime vendor had trouble keeping up with the orders, and the entire contract was given to a larger, Chicago-based firm.

“It stopped the majority of our business with the city,” said Dan Cowan, president of Wise, which had to lay off two of its 13 employees. “Bundling only complicates the bidding process. Small- to medium-size firms cannot compete.”

Stepped-up efforts to speed payments to vendors would bring an estimated $2.5 million annually to city coffers through rebates that vendors offer for payments made within 30 days of invoice.

Until recently, the city had failed to take advantage of rebates on as much as 35 percent of the contracts. Shortly after taking office in July 2001, Hahn instituted a “timely payment program” that has slashed that rate to 5 percent.

In the new proposal, city departments will be encouraged to use credit cards, direct deposits and electronic payments to ensure prompt payment.

“We had an atrocious record of not paying our bills on time,” said Mario Marin, Hahn’s director of the L.A. Opportunities for Procurement and Services program. “A lot of these vendors are small businesses that can’t carry that debt.”

Chamber wants more

Another bone of contention has been bureaucratic bidding procedures. Under the proposals, the bid process would be streamlined by putting standard language in each contract and eliminating the separate forms vendors must now fill out pertaining to matters like living wage requirements and Americans with Disabilities Act certification.

The city’s Information Technology Agency will also explore ways to conduct business over the Internet, as well as an interactive CD to “walk” contractors through the application process.

A city Web site listing contract opportunities already exists, but only the Department of Water and Power has the technology to handle online bids.

While noting that the reforms are a positive step, the Los Angeles Area Chamber of Commerce is looking for other measures, such as city-issued “bonus points” to prime vendors that use small local businesses.

“It would be a nice incentive for businesses to remain in L.A. or relocate to Los Angeles,” said Brendan Huffman, the chamber’s public policy manager.

Changes in the city’s administrative code or ordinances require council approval on several measures. They include:

> Eliminating multiple contracts for routine services, such as interpreters, temporary staff and court reporters.

> Creation of a centralized unit to oversee consolidation of contract enforcement functions, providing departments with a common point of contact.

> Instructing the council’s Audit and Governmental Efficiency Committee, which Chick chaired for two years when she was on the council, to further review procurement requirements and recommend additional changes to streamline the process.