The Chattanooga City Council approved on first reading Tuesday a change to the municipality's purchasing rules that staff hopes will ease outdated requirements and lower a hurdle for small businesses.
Currently, all purchases of $25,000 and above must go through a competitive bidding process and receive sign-off from the council. Council members are considering changes that would increase that threshold from $25,000 to $50,000.
The body approved the increase on first reading Tuesday, with an amendment from Councilman Ken Smith. That amendment stipulates that the spending limit would receive yearly approval from the council before acceptance of the annual budget.
All ordinances require two readings before they can be officially approved. The council will hear a second reading of the ordinance July 12.
Chief Financial Officer Brent Goldberg explained the rationale behind the change in a memo to council members earlier this month.
"As prices for goods and services increase, the thresholds in place for purchase approvals and bid requirements become obsolete, creating administrative burdens for both the city of Chattanooga and its suppliers," Goldberg wrote.
State law controls those numbers, and Gov. Bill Lee signed a law in May that allows local governments to increase those thresholds to up to $50,000. Chattanooga has increased them before. Before 1991, purchases of $2,500 and above required approval from the council. That ultimately increased to $25,000 in 2014.
Staff have said the changes would not diminish the supervision council members have over city purchases.
Between July 1, 2021, and June 15, 2022, the City Council approved $84.5 million worth of purchases that came from orders of $25,000 or more, according to Goldberg. Roughly 8% of all purchases were between the range of $25,000 to $50,000. In other words, about 92% of all purchases more than $25,000 were also more than $50,000.
"We believe that increasing the threshold does not decrease oversight," Goldberg wrote, "however, this change does significantly benefit small and minority businesses by removing a barrier to entry for procurements between $25,000 and $50,000."
The city could establish differing dollar thresholds so that, for example, purchases of at least $25,000 would still require council approval, but purchases of $50,000 or below wouldn't have to go through a formal bidding process. However, those numbers have historically been the same, Goldberg said.
"Maintaining the same thresholds for approval and bids also significantly increases efficiency, minimizes confusion, provides clear procurement standards and leads to better government," Goldberg said.
Over the past several months, Goldberg said, the city has seen the price for many goods and services become more expensive, crossing the $25,000 mark. That has required sealed bids for purchases that have not previously required them.
"This means the city of Chattanooga is now incurring new costs to procure the same goods and services — cost of labor required for the sealed bid process, advertising costs, increased workflow throughout all levels of government, etc.," Goldberg wrote.