NCMA Insights: Contracting and purchasing for the fourth largest county in the nation

Tom Temin My guest is Jack Pellegrino. He is the director of purchasing and contracting for San Diego County. And that’s California, correct?

Jack Pellegrino That’s California.

Tom Temin All right. So everything about California tends to be big. Give us a sense of the scope of the county and the scope of the procurement activities that you’re involved with.

Jack Pellegrino Okay. County of San Diego. Little known fact is it’s the second largest county in California, of the 58 counties, and it’s also the fourth largest county by population in the nation. It’s really not only from a population point of view, we’re about 3.3 million residents.

Tom Temin So you would be like the fifth biggest city in the country, too.

Jack Pellegrino We would. We would be, yeah, definitely. in the top handful. Well, also, geographically, what makes us unique is geographically, we’re so large. We are about 4,200 miles as far as the county. We have 75 miles of beautiful beach. If you’ve ever been out to Oceanside, Del Mar, Coronado. So we go all the way from the border all the way up to Orange County and then only inland through to Imperial County, Riverside and San Bernardino. So those are our border.

Tom Temin So it’s a big area. What kind of budgets are you dealing with for procurement?

Jack Pellegrino So we just approved our our fiscal 2024 budget: $8.1 billion as far as the county budget. About 25% of that, Tom, is my procurement spend. So about just under $2 billion, I spend on goods, supplies, services of all type.

Tom Temin What kind of a staff do you have for procurement and contracting?

Jack Pellegrino My total team is 77 people; about 60 of those are procurement officers.

Tom Temin So you make a distinction between, in the title, procurement and contracting.

Jack Pellegrino Correct.

Tom Temin What is that distinction?

Jack Pellegrino Well, procurement is more of a general overall. They’re really synonymous. Procurement tends to be more transactional. It’s usually supplies and services that are more commodity based versus contractors are usually service based. They usually have more complicated scopes of work. And typically we do contracting via what’s called an RFP request for a proposal where we may not award to the lowest price. We use best value, which is other factors: quality, technical capability and price as another factor.

Tom Temin Sure. So when you’re buying a Gradall, that might be the best price. but if you’re buying some kind of a technical service, it’s a different story.

Jack Pellegrino Of that $2 billion, about $600 million of it is health and human services, which is every gamut of health and human services: social services, aging and adult services, behavioral health services. That’s where a lot of our contracts are right now, are behavioral health.

Tom Temin Right. Yeah. So that’s where the quality outcomes and so forth outweigh price.

Jack Pellegrino Absolutely. Because different providers, we do a lot of business with nonprofit providers and as such they all have different cost structures. And really what we’re looking to do is have the best, as you said, outcomes and results for the dollars that we’re spending.

Tom Temin And what about digital services you’re buying? I mean, is the county in that mode that so many locations are to provide better citizen services through digital, online, all of this?

Jack Pellegrino Yes, That’s one of the things that we’re very proud of. If you went out to the County of San Diego website, you would be, I think, very impressed about the amount of access. One of the things that we really work hard at is full transparency in everything we do. For example, this new budget that was just approved, the full budget is out there. We call it “open budget,” and you can see it, by line item about where the money is going, where it’s programed to go.

Tom Temin All right. We’re speaking with Jack Pellegrino. He’s director of purchasing and contracting for San Diego County, California. And at NCMA, you were talking about flow down of federal rules and regulations for procurement. What’s the connection between what the feds do and what a big county does?

Jack Pellegrino Well, it’s all about the dollars, but a lot of my dollars, a significant amount of our dollars come from the federal program.

Tom Temin And every one of them has a string attached.

Jack Pellegrino Absolutely. We follow the full rules promulgated by the Office of Management and Budget. So really, some times the money comes into the state — I have the great state of California above me — so then the state flows it down to me. And then the state puts their rules on top, too. So I have the federal rules with state rules. And then within whatever the grant vehicle is or whatever the program is, contract that comes to us, there’s always agency rules. Maybe [Federal Acquisition Regulation (FAR)] provisions or the other other provisions that are unique to that agency.

Tom Temin So it’s not just the FAR at the federal level, but it’s all of the [Center for Medicare and Medicaid Services] regulations, Health, and Human Services, Labor Department. It goes on and on. Veterans Affairs.

Jack Pellegrino For example, Health and Human Services, they have very specific requirements, as far as who is eligible for reimbursement for those services. So we have to ensure that that is now a flow down in our contract to, as I said, our nonprofit providers.

Tom Temin So it’s a giant compliance exercise. How do you get it abstracted so that it doesn’t eat your work alive?

Jack Pellegrino Well, we really have, I’m blessed with a great staff, and what we do is we have some really wonderful templates that we’ve developed over time, so we always make sure those templates are up to date. So for example, there was some new legislation of something called the Byrd Act. I don’t know if you remember the Byrd Act. We went through and updated all our [representations and certifications] to make sure we’re now in full compliance with that. I would say, Tom, we update those reps and certs and our whole contract template, roll it out once a year to keep up with those flow downs. And then we very consciously, when we got a new program, lay out a compliance manager, and make sure we covered everything.

Tom Temin So there’s no artificial intelligence way to…

Jack Pellegrino Oh, yeah, I’m looking for that. So I’m going to do some shopping here a little bit later, so we’ll see.

Tom Temin All right. The other thing I wanted to ask you about is use of federal contracting vehicles for commodities.

Jack Pellegrino Okay. Here is what I would like to do, and this might be controversial, but I wish Congress would open up all the [General Services Administration] schedules to state and local governments. Right now, I can only purchase off the IT schedule, and also the public safety schedules.

Tom Temin There was consolidation of all the schedules a few years back. But those distinctions for nonfederal purposes are still in place?

Jack Pellegrino Yes. And the only time I was able to do it — and this is a horrible thing — it was during the pandemic, all schedules were open to us during the national emergency. But I don’t know why they’re not with us every day of the week. And really the advantage would be, although I’m a very large county with tremendous resources and buying leverage, there’s 3000 counties in the nation that don’t have the purchasing leverage that I do or the staff to do that. So opening up those federal schedules would help those organizations immensely.

Tom Temin Those would give you more flexibility. You would think that maybe the some of the [National Association of Counties] or the statewide or the [National Association of State Chief Information Officers] contracts, that they oversee it.

Jack Pellegrino Right. And, I’m a member of the Procurement Advisory Board right now. And one of the things we’re looking to do is put together some contracts that will benefit counties. And so I see that in the future. Now, again, I’d like to see the federal government help us a little bit, but…

Tom Temin Well, NASA SEWP is right over there. Maybe could get them to turn the screws.

Jack Pellegrino Maybe. That’s an idea.

Tom Temin All right. Jack Pellegrino is director of purchasing and contracting for San Diego County, California. Thanks so much.

Jack Pellegrino Thank you.

Tom Temin Been a pleasure.

Jack Pellegrino Pleasure.

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