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6.1.B. - Page 8 diminished. 19,20 Additionally, the high cost of labor in the San Francisco Bay Area, coupled with the economic contractions in 2002 and 2008, has placed pressure on public entities to reduce costs by consolidating positions. 21 Under these pressures, decentralized purchasing became the norm throughout the San Mateo County and California.22 Common Practices in Decentralized Purchasing Systems In its investigation, the Grand Jury learned that the cities in San Mateo County generally regulate their decentralized purchasing systems through three primary mechanisms --graduated purchasing authority levels, competitive bidding requirements, and budget controls. All of the Cities delegate purchasing authority to different levels of city employees based on the size of the purchase; higher ranking employees must approve costlier purchases.23 While the exact purchasing authority levels vary between cities, Figure 1 is an example of the allocation of purchasing authority levels for the City of San Mateo. This graduated purchasing authority system, which is like those in other cities, gives individual departments the power to make smaller purchases quickly at market prices, while subjecting larger purchases to increasing scrutiny. FIGURE 1 Award Authorization and Competitive Bidding Requirement Levels for the City of San Mateo24 Purchase Levels Authority Required to Approve Purchase Purchases over $100,000 City Council Purchases between City Manager $50,000 and $99,999 Purchases between Department Head $25,000 and $49,999 Purchase under $25,000 Division Manager Competitive Bidding Requirement Formal Bid Procedure (RFP) Open Market Procedures Open Market Procedures Open Market Procedures The Cities also regulate decentralized purchasing systems through competitive bidding requirements. 25 These requirements are meant to ensure fair market prices by requiring purchasers to obtain multiple vendor bids and to select the lowest responsible bidder. 26 As with purchasing authority, competitive bidding requirements follow a graduated approval system 19 Michael Sposi, "The Effect of Globalization of Market Structure, Industry Evolution and Pricing" Federal Reserve Bank of Dallas, Globalization and Monetary Policy Institute 2013 Annual Report, May 31, 2013: 24. htt )s://www.dallasfed.ora/—/media/documents/institute/annual/2013/annuall3indf 20 Clifford McCue, Jack Pitzer "Centralized vs. Decentralized Purchasing: Current Trends in Governmental Procurement Practices" (2000) 400. 21 Ibid. 22 Interview with City Finance Officials. 23Grand Jury Review of City Procurement Documents. 2'Grand Jury Review of City Procurement Documents. 2'Grand Jury Review of City Procurement Documents. 26 Qualified bidder with the lowest or best bid price, and whose business and financial capabilities, past performance, and reputation meet the required standards. 2017-2018 San Mateo County Civil Grand Jury