Budget & Finance Commission

Summary

This agenda item concerns two separate analyses presented to the Budget and Finance Commission by James R. Mueller regarding city contracting practices.

CIP Project Change Orders: Mueller's analysis of 10 Capital Improvement Program (CIP) projects found that year-to-date change orders averaged 19% of the Engineer's estimate, a level considered "problematic/high risk." He notes that contract awards were 128% of the estimate, and final costs were 118% of the estimate, suggesting potential issues with pre-bid investigations, design errors, or scope creep. He also highlighted that paving projects, which are routine, showed significant variances.

Professional Services Procurement: Mueller investigated the city's procurement of professional services (over $10 million annually), noting that the Municipal Code allows for non-competitive, sole-source procurement for broad categories of services. He cited concerns about potential "sweetheart" relationships, overpricing, and lack of quality control, referencing the FM3 cannabis survey contract and the AREAS real estate consulting contract as examples where sole-source justifications were lacking. He also pointed out that automatic multi-year extensions subvert the annual budget process. Mueller recommended stricter discipline for sole-source justifications, elimination of automatic extensions, and review of categories exempt from competition.

Citizen Impact

Residents may be impacted by higher than anticipated costs for city construction projects due to excessive change orders, and potentially overpaying for professional services due to a lack of competitive bidding and automatic contract extensions. The analysis suggests a need for greater transparency and accountability in how city funds are spent on contracts.

Confidence

high

Summary

This report details the City Treasurer's investment portfolio for the first quarter of Fiscal Year 2025-2026 (July-September 2025). The total market value of the general investment portfolio decreased from $90.28 million to $72.91 million, attributed to anticipated cash flow fluctuations. The portfolio's liquidity is 29.3%, with maturities of one year or less. The effective rate of return for the portfolio was 3.23%, which lagged behind the benchmark yield of 4.34%. The report also notes a "Not Compliant" alert in the Corporate Issuer Concentration section, which the Treasurer's office has investigated and resolved as a reporting system feature not reflective of actual policy compliance. The City's investment objectives prioritize safety, liquidity, and then yield.

Citizen Impact

This report is primarily informational for the Budget and Finance Commission. Residents are indirectly impacted by the city's investment performance, as it affects the earnings that can contribute to the General Fund, potentially offsetting other costs or funding services.

Confidence

high

Summary

This item presents questions from the CIP (Capital Improvement Projects) Subcommittee regarding the cost of change orders on current FY CIP projects. An analysis of ten projects shows that Year-to-Date change order costs are 19% of the Engineer's estimate, which is considered a "problematic/high risk level" in municipal construction. This suggests potential issues with pre-bid investigation, design errors, or scope creep. The variance between contract award and estimate is 128%, and between award and final cost is 118%, prompting a serious investigation into the CIP estimating and budgeting process. While volatile material prices, labor shortages, weather, or environmental issues could contribute, the high percentage of change orders, particularly on paving projects, warrants further examination.

Citizen Impact

Residents should be aware that higher than expected change orders on city construction projects could lead to budget overruns, potentially impacting the funding available for other services or future projects. The analysis suggests a need for improved oversight in the budgeting and execution of capital improvement projects.

Confidence

high

Summary

This item presents data on professional services procurement for the City of Redondo Beach, as requested by the Budget and Finance Commission. The attached document, "2026 PURCHASE ORDERS - SERVICE AGREEMENTS," lists various contracts for the fiscal year 2026 across multiple city departments, including City Manager, IT, Finance, Police, Fire, Community Services, Community Development, and Public Works.

Key service agreements detailed include:

• Griffin Structures, Inc. for Measure FP Strategic Planning ($150,000).
• CliftonLarsonAllen LLP for FY24-25 Auditing Services ($94,180).
• Robert Half for temporary staffing in Financial Services ($95,000) and Community Development ($51,715.13).
• Canine Deployment Strategies for K9 training ($19,199.97).
• All City Management Services Inc. for Crossing Guard Services ($138,157.74).
• Transportation Concepts for BCT Ops ($4,443,149.50).
• Athens Services for Residential Trash Services ($5,544,408.72).
• West Coast Arborists Inc. for Tree Trimming Services ($589,476.00).

A letter from James R. Mueller raises concerns about sole source procurement, automatic contract extensions, and potential for favoritism or overpricing. Mueller recommends stricter discipline for sole source justifications, elimination of automatic extensions, and review of categories exempt from competition. Specific examples of concern include contracts with FM3 for cannabis surveys and AREAS for Artesia real estate consulting.

Citizen Impact

This report provides transparency into how the city spends funds on professional services, with significant contracts listed for essential services like trash collection and public safety. Residents can review these expenditures and note concerns raised about procurement practices that could impact fairness and cost-effectiveness of city contracts.

Confidence

high