ITEM 6-E

Council Meeting: August 8, 1995                 Santa Monica, CA

TO:       Mayor and City Council

FROM:     City Staff

SUBJECT:  Recommendation to Reject Bids to Furnish and Deliver
          Miscellaneous Recycled Paper, Bid #2537 and Adopt a
          Resolution Authorizing City Manager to Negotiate and
          Execute a Contract for the Purchase of Miscellaneous
          Recycled Paper

Introduction

This report concerns rejection of bids to furnish and deliver
miscellaneous recycled paper at specified unit prices, plus
applicable sales tax.

Background

In response to published Notices Inviting Bids (published May 25
and 26, 1995) to furnish and deliver miscellaneous recycled paper

in accordance with City specifications, bids were received and
publicly opened and read on June 12, 1995. Proposal forms were
mailed to fifteen vendors and notices were advertised in
accordance with City Charter and Municipal Code provisions.  Nine
proposals were received.

City specifications requested price protection for a period of
one year.  Due to the current volatile paper market, none of the
nine bidders offered guaranteed pricing beyond a sixty (60) day
period.  Most offered only a thirty (30) day price guarantee,
after which time prevailing prices would apply at time of
shipment.

Reason for Volatile Paper Market

In the late 1980's and early 1990's the paper industry was
experiencing a severe slump in orders due to the depressed
economy.  This resulted in the closure of a number of major paper
plants across the country.  As the economy improved in 1994, the
demand for paper products of all types began to rise.  Coupled
with growing demand overseas, particularly in China and Latin
America, the remaining paper manufacturers are running at full
capacity, but the demand is exceeding the supply.

As a result, paper manufacturers are allocating paper products to
their distributors and are not willing to enter into any long-
term agreements for pricing until this situation stabilizes. 
Relief from the upward trend in pricing is expected to occur in
late 1996 or early 1997 as new equipment and mills become
operational.

Budget/Financial Impact


This recommendation does not have a budget or financial impact.

Recommendation

It is recommended that all bids be rejected as non-responsive and
that the attached resolution be adopted allowing the City Manager
to negotiate prices for the purchase of miscellaneous recycled on
the open market.

Prepared By:   Pam Wortham, Purchasing Agent
               Diane Howell, Buyer


                      RESOLUTION NO. _________ (CCS)

                         (City Council Series)

                A RESOLUTION OF THE CITY COUNCIL OF THE CITY
               OF SANTA MONICA TO AUTHORIZE THE CITY MANAGER
                TO NEGOTIATE AND EXECUTE A CONTRACT FOR THE
                 PURCHASE OF MISCELLANEOUS RECYCLED PAPER

     WHEREAS, the City sent out Notices Inviting Bids to furnish
and deliver miscellaneous recycled paper and to guarantee prices
for one year;
                                                             
     WHEREAS, nine responses were received, but all were non-
responsive since the prices were only guaranteed for short
periods of time;

     WHEREAS, staff has determined that the formal bidding
procedures are not conducive to the flexibility needed to obtain
the lowest possible price for miscellaneous recycled paper
because of the rapid change in market prices for the
miscellaneous recycled paper;

     WHEREAS, an open market purchase will permit the City to act
in a timely manner to purchase miscellaneous recycled paper at an
acceptable cost and permit the City to obtain the most
environmentally favorable products which meet City
specifications; and
                                                                  
   WHEREAS, the City Council has been requested to reject the
previously received bids;

     WHEREAS, Santa Monica Municipal Code Section 2.24.100(b)
provides for waiver of the standard bidding requirements, after
rejection of all bids, when necessary to address concerns such as
those set forth above.

     NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES RESOLVE AS FOLLOWS:

     SECTION 1. The City Council hereby rejects all bids for the
miscellaneous recycled paper as non-responsive.


     SECTION 2. In accordance with Santa Monica Municipal Code
Section 2.24.100(b), the City Council finds and declares that
miscellaneous recycled paper may be purchased under more
favorable circumstances in the open market. 

     SECTION 3. In accordance with Santa Monica Municipal Code
Section 2.24.100(b), the City Council authorizes the City Manager
to negotiate and execute a contract for the purchase of
miscellaneous recycled paper.

     SECTION 4. The City Clerk shall certify to the adoption of
this Resolution, and thenceforth and thereafter the same shall be
in full force and effect.

APPROVED AS TO FORM:

___________________________
MARSHA JONES MOUTRIE
City Attorney