Item - 2022.GL32.9
- This item was considered by General Government and Licensing Committee on July 4, 2022 and was adopted with amendments.
GL32.9 - 2021 Annual Controller's Report
- Decision Type:
The General Government and Licensing Committee:
1. Directed the Controller to publish all future Procure to Pay metrics to publicly available dashboards, rather than by report to Committee.
2. Directed the Controller to publish annual consulting expenditure details to the City of Toronto's Open Data Portal, rather than by report to Committee.
3. Directed the Controller as part of the Purchasing Bylaw review to consider ways to tighten the use of non-competitive contracts especially in circumstances where the non-competitive contracts create a dependency that prevents the City from entering into competitive contracts in the future.
This report provides a summary of the key activities, initiatives, and performance indicators for the City's Procure to Pay process, and reports on consulting service expenditures incurred by City Divisions and Agencies and Corporations for the year ending December 31, 2021, with prior year comparatives, where applicable.
Procure to Pay Activities
The Procure to Pay process integrates purchasing and accounts payable activities for the Accounting Services Division and Purchasing and Materials Management Division. The process begins with the selection of goods and/or services, purchasing and ordering activities, receiving activities and invoicing and payment. The Procure to Pay process also includes compliance reviews and reporting in addition to reconciliations. The responsibilities incorporated into the Procure to Pay process are organizational, beginning with the activities of Purchasing and Materials Management Division and ending with payment processing performed by the Accounting Services Division. For the purposes of this report, the Procure to Pay activities being reported include:
- Competitive purchasing activity, procurement cycle times, activities of Purchasing and Materials' Management stores and other procurement information
- A summary of non-competitive purchasing activity valued at $3,000 and above for City Divisions, excluding Accountability Offices, and excluding purchases completed through Schedule A of Chapter 71 - Financial Control
- Contract extensions used to maintain continuity of services from vendors or bridge between competitive processes, and
- Invoice payment cycle times
In 2021, the City issued approximately $3.1 billion procurement in contracts, through the issuance of over 10,430 purchase orders and blanket contracts. The competitive procurement process resulted in the issuance of 9,674 purchase orders and blanket contracts valued at approximately $2.7 billion, representing 85.3 percent of the City's total purchases. The value of all non-competitive purchases for the City totalled $464.3 million, representing 14.7 percent of the City's total purchases. The number of non-competitive purchases decreased by 17.6 percent of total purchases over 2020, but increased by 84 percent in total dollar value due to the Council directed and approved Green Lane Landfill operations contract renegotiation (IE18.9) which reduced costs by 15 percent saving approximately $15 million and the development of a community recreation center.
With respect to procurement cycle times, in 2021 the average time taken to complete a procurement from initiation of the procurement with Purchasing and Materials Management Division until the issuance of a purchasing document was 105 working days, which represents a reduction of 28 days from 2020's 133 days. This reduction in cycle time has been due to major improvements in the evaluation process, award and issuance of Purchase Orders.
City Divisions are able to conduct a three quote process for contracts up to $50,000. In 2021, Divisions issued approximately $46.1 million in purchases, through the issuance of over 8,792 Divisional Purchase Orders, of which $7.6 million was processed under the Non-Competitive Procurement process, through the issuance of 355 Divisional Purchase Orders. 2021 activity represents a reduction of 761 Divisional Purchase Orders compared to 2020. The dollar value of purchases made by Divisional Purchase Orders decreased by $1.6 million from $47.7 million in 2020 to $46.1 million in 2021. In 2021, only 2.4 percent of City purchases were processed using Divisional Purchase Orders.
The value of inventory maintained by the Purchasing and Materials Management Division Stores Unit has increased over the last five years, significantly in the last two years due to COVID-19 specific inventory, such as a six month stockpile of personal protective equipment. In 2021, the warehouse was able to meet the target and achieve an inventory turn rate of 4, which falls within an appropriate turnover range of 4 and 6 for a Maintenance, Repair and Operations organization such as the City of Toronto.
In 2021, the City's invoice payment cycle times remained fairly consistent with prior years, with 90 percent of invoices received paid in 90 days. Payment cycle times are the result of organizational activities, with divisions responsible for receipt of goods and the Accounting Services Division responsible for ensuring that the three-way match process has been appropriately executed prior to invoices being paid.
City divisions and consolidated entities use external consulting services for a number of reasons, with frequency and value varying by year and project. Consulting services supplement critical skill sets and expertise that are needed just-in-time and/or are not available within existing staff complements, as well as enable the City to quickly complete special projects or essential initiatives, or respond to emergency situations while maintaining existing service levels. Procure to Pay activities at the City include the value of consulting expenditures incurred by City divisions. The City obtains external consulting services through formal, competitive procurement processes to ensure that the most competent individuals and/or organizations with relevant expertise are selected. In addition, expenditures for consulting services were also budgeted as part of fiscal 2021.
Overall, the City of Toronto and its consolidated Agencies and Corporations spent $45 million on operating and capital consulting services in 2021, which represents less than 1 percent of the City's 2021 total consolidated expenditures. The City's annual consulting expenditures represent costs that were spent in compliance with competitive procurement processes as well as amounts previously approved by City Council.
The Controller is committed to creating, implementing and maintaining ongoing timely procurement dashboards with relevant key performance indicators and metrics for the Procure to Pay process which will eliminate the need for annual reporting to Committee and Council.
(June 14, 2022) Report from the Controller on 2021 Annual Controller's Report
Appendix A - 2021 Non-Competitive Procurement by Exception Code
Appendix B - Comparison of 2020/21 Non-Competitive Purchases Processed by Divisional Purchase Orders $3,000 up to $50,000
Appendix C - Comparison of 2020/21 Non Competitive Purchases Processed by Purchasing and Materials Management $3,000 up to $500,000
Appendix D - Comparison of 2020/21 Non-Competitive Purchases Awarded by Committee and Council Greater than $500,000
Appendix E - 2021 Consulting Services Expenditure - Operating
Appendix F - 2021 Consulting Services Expenditure - Capital
That the General Government and Licensing Committee:
1. Direct the Controller as part of the Purchasing Bylaw review to consider ways to tighten the use of non-competitive contracts especially in circumstances where the non-competitive contracts create a dependency that prevents the City from entering into competitive contracts in the future.