Texas Housing Association

1. Texas Housing Association Procurement for Dummies MaryAnn Russ, Instructor

2. Please set your cell phone on “vibrate”

3. Why are there procurement rules? • Most of the money we spend is Federal funding rather than money we have raised locally (e.g. rent, management fees, HCV administrative fees) • All Federal funding, including that spent by recipient agencies (HUD) or sub-recipient agencies (PHAs) is subject to Federal procurement rules

4. What do Federal procurement rules require? • Recipient agencies (PHAs) must seek the lowest price from a qualified provider • For purchases of goods and services the actual type of procurement will vary • Price is NOT the only consideration in procurement

5. The OMB “Super Circular” • The Office of Management and Budget (OMB) released new Uniform Guidance for federal funding, (aka the “Super Circular”) in December of 2013 • 2 CFR Part 200 • Combines and supersedes older guidance relating to administrative requirements for Federal Awards impacting PHAs including: • A-87 (Cost Principles for State & Local Gov’ts) • A-133 (Audits of States, Local Gov’ts and Non-Profits) • Many others (A-110, A-122, etc.) • Requirements apply to new federal awards issued by federal awarding agencies on or after December 26, 2014

6. 5 procurement standards from OMB super circular • A PHA must adopt written policies and procedures over procurement that meet the following standards and any other applicable laws and regulations • Costs incurred must be necessary and cost-effective • All procurement transactions must provide full and open competition • The PHA must maintain written standards of conduct covering conflicts of interest • The PHA must maintain documentation on cost and price analysis, and vendor selection, as applicable for selected method of procurement

7. Old procurement regs: 24 CFR § 85.36 • The federal regulations at 24 CFR part 85 (“part 85”) set forth the rules for conducting public procurements • Originally issued in 1988, § 85.36 established OMB procurement requirements in the specific context of public housing program regulation • § 85 was superseded by § 200 - the super circular

8. Strictest procurement law rules • Part 85 required PHAs to use their own procurement procedures that reflected applicable state and local laws and regulations, if the procurements conformed to applicable Federal law • Where local laws are more restrictive than federal rules, the local laws supersede Federal law. Texas state bidding threshold is $50K, OMB threshold is $250K. PHAs must use $50K

9. HUD’s Public Housing Procurement Handbook • HUD Handbook 7460.8 REV 2, dated 2/2007 so it does not include requirements of the OMB super circular • This handbook applies to PHAs actions in the operation, modernization, and development of public housing • Keep in mind that handbooks, while helpful, are trumped by both regulation and statute • They are also less powerful than Board-approved policy

10. Procurement and the Office of the Inspector General (OIG) • There are a lot of things the OIG may not appear to know much about… however • They know regulations • They are experts in procurement • If the OIG comes to visit (whether they say they will examine it or not) procurement will be one of the places they spend time • The goals are policies that are: • Solid (based in Federal law, state law) • Consistently implemented • Generate the documentation required to substantiate purchase decisions

11. Compliance with Procurement rules: • Building Blocks: Compliance in procurement is based on the answers to 3 questions: • Has there been a fair competition? Have we used the most rigorous standards of procurement (between HUD handbook & state laws)? • Do we have the money to buy this? • Do we have proper documentation?

12. Types of Procurements: • Goods, Supplies & equipment • Office supplies • Maintenance and janitorial supplies • Expendable and non-expendable equipment • Professional services • Architects and engineers • Attorneys • Accountants and auditors • Consultants • Non competitive purchases • Utilities • Postage • Some emergency procurements • Construction contracts • Building, demolishing or rehabilitating properties • Mod/construction contracts can be complex, but have a lot of boilerplate information

13. Basic Types of Procurements

14. Requirements for use of Petty Cash: • Amount must be enough to cover purchases over a reasonable period (a week/month) • Account must reconcile • Account must be internally audited • Keep receipts!

15. Types of procurement: 2. Micro purchases This method could be used for purchases over the petty cash limit but not exceeding $10,000 Dominique Blom letter of 3/1/19 pushes threshold to $10,000, (however the Davis Bacon threshold is still at $2,000) • Quote by phone, fax or email sought from reasonable offerors • Usually, only 1 quote is necessary for micro purchases if the price received is considered reasonable • When practical, distribute such buys among offerors • Why? Better prices: avoids monopoly & keeps prices competitive if your vendors know you talk to others providers. • When Micro-purchases exceed $2,000 must include wage rate requirements

16. Documentation • Whenever a procurement requires a quote, bid, etc. the documentation must be “solid” • It’s not good enough to simply keep receipts for micro purchases and other more expensive purchases • Often this documentation is maintained centrally • “Documentation” can be electronic as long as policy permits this, the forms are consistent and items requiring signature are electronically signed (or signed and scanned) • Records must be organized/easily accessible • There should be a form to record oral telephonic quote information • Quotes should be for the same item, in the same quantities • If you can’t get a quote or enough quotes for a micro or other small purchase: • Document who was contacted • Check with fellow staff members

17. Documentation Guidelines: • The PHA must maintain records sufficient to detail the significant history of each procurement action • These records shall include, but not necessarily be limited to, the following: • Rationale for the method of procurement (if not self-evident); • Rationale of contract pricing arrangement (also if not self-evident); • Reason for accepting or rejecting the bids or offers; • Basis for the contract price (as prescribed in this handbook); • A copy of the contract documents awarded or issued and signed by the Contracting Officer; • Basis for contract modifications; and • Related contract administration actions. • The level of documentation should be commensurate with the value of the procurement • Records are to be retained for a period of three years after final payment and all matters pertaining to the contact are closed

18. Quote requirements • All quote records should indicate at a minimum: • Name of vendor • Address • Telephone number • Person at vendor company contacted • Date of quote • Item/price

19. Types of procurements: Small Purchases • Over $10,000 but not exceeding $50,000 • Purchases over $10,000 up to $50,000 (limit in TX) • Federal threshold for small purchases is now $150,000 (super circular) although this exceeds the Texas threshold • At least 3 quotations must be solicited (when reasonable and possible) • Quotations may be made by phone, mail, email, or fax • Documentation of quotations received is kept in file • If fewer than 3 qualified vendors submit quotes, it is a good idea to complete a memorandum explaining the facts

20. Micro Purchases vs Small Purchases • An important distinction between micro purchases and the next tier of procurement (small purchases) is the existence of consistent competition Can typically receive quotes by phone/email/fax for both types of purchases

21. Small purchase + blanket contract benefits • Blanket contracts are like buying in bulk • Here’s items we want, quantity we anticipate needing over 2 years: Please give us a quote for the items drop shipped to our PHA • Once we have a blanket contract, we don’t have to get 3 quotes, (because they’ve already been procured) • PHAs are permitted to procure based on skill and type of service (like the plumbing contractor) • Most vendors are interested in 2 years worth of work • The PHA is typically a “good pay” • Examine recurring purchases • Purchasing the same ($2,000+) maintenance items every month can feel like “road rash” without a blanket contract

22. Types of procurements: 4. Sealed bids • Required for purchases (construction, supply and non-complex service contracts) over $50,000 • (In TX state $50,000 is the threshold to require sealed bids) • Starts with an “Invitation For Bid” (sometimes abbreviated IFB) package advertised to attract bidders • Contracts are for fixed cost or fixed unit cost • Winning bidder will be the lowest priced responsive and responsible bidder • Award of contract often made by Board resolution • (Award not completed until paperwork received, due diligence completed, Contracting Officer signs off, etc.)

23. Sealed bid overview • Preferred method of procurement for large Capital Fund projects • Price is paramount • Bid package may include: • Statement of work or purchase description • Technical/engineering drawings • Plans/specifications or “specs” • HUD procurement forms • May require a contractor deposit when picking up bid packet • This will be returned if the contractor is not awarded the contract • Contractors may stop by PHA office in person to pick up bids (and later to drop off responses

24. Sealed bid addendums • Before bids are accepted you can adjust the specs • Changes to the solicitation can only be implemented by written addendum sent to everyone who picked up a bid package • You can send addendums out via: • First class mail (Certified mail not required) • Courier • Email • IF it was indicated in bid docs “we issue addendums electronically only” and all contractors submit emails • Recommend using “read receipt” • Many times addendums will also extend the due date • Think carefully about addendums to avoid complaints about your process rather than submitted prices

25. Sealed bids: Bonding requirements • Both bid bonds and performance and payment bonds are required for many types of bids at this level • Mistakes by bidders can be rectified in writing before the bid opening, but after the opening only after clear and convincing evidence of a mistake • Bids are secured unopened until they are opened in public (at the date and time specified) with a witness present • Sometimes, all the bidders attend! • Generally need 2 or more responsible & responsive bidders • If only one responsive bid received, award shall not be made unless cost/price analysis verifies reasonableness and HUD gives written permission.

26. Sealed Bid headaches • Sealed bids are the most challenging type of procurement to learn how to prepare correctly • Have the highest level of HUD requirements • Advertising is not cheap • Once you’ve mastered it, the process becomes more of an assembly line of documents

27. Types of procurements: 5. Competitive proposals • Usually used for professional contracts • Used when work cannot be described fully or accurately OR when more than price is a factor in award • Begins with Request for Proposals (RFP) advertised to attract proposers • This document is the equivalent to an Invitation to Bid used for sealed purchases, but the names of these documents are specific to the procurement type • PHA rates and ranks proposals received (typically via committee) • PHA may negotiate price and contract conditions

28. Competitive proposals • When purchasing services, the PHA is the entity (not HUD, and not the Federal Gov’t) that decides which factors may be most important • Price is a factor in a competitive proposal, but not the only factor • The PHA establishes evaluation factors & weights criteria • May negotiate price with the winning vendor • Can issue multiple year contracts • Ex: 2 year contract with 2 year extension option

29. Craft thoughtful RFPs

30. Types of procurements:6 Qualification based selection • Used only for architectural or engineering services • Price is not used as a selection factor • PHA would convene a review committee to rate and rank the QBS proposals received • Highest ranked proposal is awarded the work unless awardee and PHA are unable to agree on cost and terms

31. Qualification based selection thoughts • Dig deep on references • This may mean getting in the car to check out other PHA work for large construction projects • Once you have identified who is best, then negotiate price • How many hours? • What are the hourly rates associated with the actual individuals completing the job? • Negotiations can break down over price (prior to a contract) • In this case, contact the next highest ranked firm

32. Types of procurements: 7 Non competitive Proposals • Rarest form of procurement – sole source • Used only when competition is impossible • This may be because of an emergency • PHA must document its efforts to obtain competitive proposals • Before a non competitive procurement can be made, the HUD Field Office must review and approve it • Can lose a month to 6 weeks waiting on approval • Many PHA’s polices requires a written justification

33. Types of procurements: Cooperative Purchasing/Intergovernmental agreements • When supplies, equipment or services have already been bid by another level of government, a PHA is permitted to piggyback on their procurement using cooperative purchasing or intergovernmental agreements • This is often faster than doing an independent procurement through PHA procedures

34. Cooperative purchasing/Intergov’t example • Typically what you want to do is eyeball the price for peace of mind • State of TX: TxSmartBuy has bid out vehicles at the state level • Say you need a price on a riding lawn mower • You can see the state-published list of vendors with contract numbers • You look it up and can see that the Gravely is listed by HD Supply at $7,800 or something like that… • Good for trucks, tractors, lawn mowers, maintenance supplies, etc.

35. State of TX unique system TxSmartBuy

36. Hierarchy of Purchases based on cost (at sample agency) Typicallyalso require board approval (although not always) Usually require ED/ Contracting Officer approval

37. Reaching procurement thresholds: Large PHAs • While many AMPs may utilize individual layers of procurement, many PHAs monitor procurement centrally • Master contracts are often tracked in a huge spreadsheet • This is to avoid exceeding fixed ceilings in existing contracts • Remember, that you may only see your “piece” of a specific contract • With its own limitations in the context of a much larger contract

38. Cost and price analysis • The PHA is required to have an idea of what goods or services should cost before procurement is undertaken • Petty cash and Micro purchases do not need cost/price analysis • Authority must conduct an “independent cost estimate” (ICE) above the smallpurchase threshold • Not like eBay; we must anticipate costs beforehand to ensure we have funds available

39. Cost and price analysis • Small purchases (over $10,000) may rely upon quotes received so long as 3 quotes are received • The quotes are the “price analysis” for the small purchase • If a reasonable number of quotes is not obtained to establish reasonableness through price competition, the Contracting Officer shall document price reasonableness through other means • Such as prior purchases of this nature, catalog prices, the Contracting Officer’s personal knowledge at the time of purchase, comparison to the ICE, or any other reasonable basis • Under sealed bidding if sufficient bids are received and the low bid is under the ICE, usually a PHA may proceed, otherwise a cost analysis must be conducted • Don’t have to be “under the ceiling” but have to be close • If all bids are well over the ICE you have to perform cost analysis • You may have to go back to the architect to say you budgeted $33-$35M and the low bid was $40M • When sufficient competitive proposals are received, price reasonableness is established • Non competitive proposals ALWAYS require a cost analysis as part of the approval package for HUD

40. Cost Analysis steps • Verify cost and price information, including: • The necessity for, and reasonableness of, the proposed cost • Technical evaluation or appraisal of the proposed direct cost elements • Application of audited or pre-negotiated indirect cost rates, direct labor rates, etc. • Evaluate the effect of the offeror/contractor’s current practices on future costs • Compare costs proposed by the offeror/contractor with the following: • Actual costs previously incurred by the same firm • Previous cost estimates from the same firm or other firms for the same or similar items • The methodology to be used to perform the work (are the costs consistent with the technical approach being proposed?) • The independent cost estimate (ICE) • Verify that the offeror/contractor’s cost proposal complies with the appropriate cost principles • Verify that costs are allowable, allocable, and reasonable

41. Cancelling Solicitations • Sometimes it will be necessary to cancel a solicitation. Reasons include: • The item or service is no longer needed • Funding is not available • Ceilings fell down, so we had to rethink all the other original plans for the CFP monies • The solicitation is inaccurate or incomplete • All the factors needed by the Authority were not taken into account in the original solicitation • Prices exceed available funding • There is reason to believe the bids are flawed (e.g. collusive) • Other good cause in the best interest of the PHA • You may have found a different solution to a problem that requires a new solicitation

42. Collusion may result in debarment When 2 or more bidders get together and say, “let’s just take turns putting in the low bid…” • This is collusion and “price fixing” • It is against the law • The PHA will go to HUD with evidence • HUD will investigate price fixing • These vendors will be debarred • They will not be permitted to bid on any government work, period • On sealed bids all bidders must include a “non—collusive affidavit signed by their CEO

43. Contractor qualifications • The Authority is responsible for due diligence to ensure that prospective contractors are qualified • This means the contractors: • Have the money to complete the contract or can obtain it • Can complete the delivery on time given work on hand • Have satisfactory performance records • Complete work according to our requirements • Pass our own inspections • PHAS CFP deadlines

44. Qualified contractors must • Have a satisfactory record of integrity and ethics • The kinds of things offered to staff aren’t just money • Take PHA staff out to lunch at expensive places • Buy a staff member playoff tickets • Have or can obtain the necessary production, construction and technical equipment and facilities • Can they get good subs? • PHA has to approve subs too, not just the general contractor

45. Qualified contractors must also • Have or be able to obtain the business set-up • Have the necessary organization, experience, accounting and operational controls/technical skills • Can they submit invoices in a timely manner & correctly describe work? • Be otherwise qualified to receive a contract (and not be suspended, debarred or under HUD Denial of Participation) • Not on HUD’s limited denial of participation listing • Can the contractor show that the volume of work is manageable and that they have completed comparable work?

46. Debarred lists • Make sure that all trade contractors and/or all subcontractors are cleared through GSA’s Excluded Parties List System (SAM) • Under both their business or ‘doing business as’ (DBA) names and • Under the individual names of the owners and/or • Under principals associated with the business • Can’t use debarred, suspended, ineligible contractors www.sam.gov • Make sure your contractor is eligible to do business in Texas • Texas Comptroller of public accounts • http://comptroller.texas.gov/procurement/prog/vendor_performance/debarred/ • Make sure your files are well documented

47. Non-responsible contractor • When bids or quotations are received, the PHA verifies the following: • Is the bid complete? (All essential elements must be present) • If a bid bond is required, is it included? • Are performance and payment bonds or labor and materials bonds included if required? • The contractor’s work history – quality and timeliness of work, plus type of work history • Contractor is not suspended, debarred or under a HUD Denial of Participation or limited denial (LDP) • If lowest bidder is not responsible, the PHA notifies the contractor • Contractor may appeal in writing

48. Uh oh – non-responsible prospective contractor • If a prospective contractor is found to be non-responsible, a written determination of non-responsibility would be prepared and included in the official contract file • And the prospective contractor shall be advised of the reasons for the determination

49. Difference between a responsive bid & a responsible bid • Responsive bid: complete, includes all required bid elements, addresses all scope items • When we perform due diligence on responsive bids, first see who is the best bidder • THEN we check references • Responsible bid: presented by a contractor who can actually perform the services/do the work

50. Documentation is everything • Example: Historic scattered site rehabilitations – bid out in groups of 8 totally different units • Incredibly complex renovation work • Window replacements in nationally registered historical neighborhood requiring 8 over 8 pane wood windows • Lead paint abatement was required on extensive exterior woodwork • some of these units were pre-revolutionary war; one of the houses had drain lines that were all cypress wood • Low bidder was lowest by nearly $100,000 (in the 1980s) • However, his only experience prior to this bid was in assembling prefabricated gas stations all over the northeast • When he was not awarded the work, he was upset • After spending a week with a contractor doing this type of work, he withdrew his bid because he realized he would lose tens of thousands of dollars on the job.