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Financial Management: Procurement

Financial Management: Procurement. Procurement Overview. Procurement Procedures Contract Administration and Awards Internal Controls and Documentation. Page 2. Procurement.

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Financial Management: Procurement

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  1. Financial Management: Procurement

  2. ProcurementOverview • Procurement Procedures • Contract Administration and Awards • Internal Controls and Documentation Page 2

  3. Procurement • Link to appropriate state and federal policies, statutes, and guidelines (e.g., competitive vs. non-competitive, conflict of interest) • Inventory, management, and disposition Page 3

  4. Procurement Regulations • EDGAR, CFR 34, Parts 74-86 and 97-99 9/12/2008 Page 4

  5. Procurement: Definitions and Terms • Competitive Sealed Bid – method of procurement where sealed bids are publicly solicited and a firm fixed price contract is awarded to the responsible bidder whose bid, conforming with all material terms and conditions of the invitation for bids is the lowest in price 9/12/2008 Page 5

  6. Procurement: Definitions and Terms • Competitive Proposals – method of procurement where proposals are requested from a number of sources, is publicized, and either a fixed price or a cost reimbursement type contract is awarded 9/12/2008 Page 6

  7. Procurement: Definitions and Terms • Conflicts of Interest – occur when the individuals responsible for determining bid/proposal responsiveness are over- ruled by other individuals within the organization or individuals responsible for determining responsiveness (or any members of his or her family) has any personal or corporate ties or any financial interest in any of the firms offering a bid/proposal 9/12/2008 Page 7

  8. Procurement: Definitions and Terms • Cost Analysis – evaluating the separate cost elements that make up the total price 9/12/2008 Page 8

  9. Procurement: Definitions and Terms • Cost Plus a Percentage of Cost or Cost Plus a Percentage of Income – an agreement in which the contractor/vendor is provided a specified percentage of profit over and above the actual costs of construction. This type of contract arrangement is not permitted because the contractor/vendor has little incentive to hold down costs • Equipment – tangible, non-expendable, personal property with a useful life of more than one year and having an acquisition cost of $5,000 or more per unit 9/12/2008 Page 9

  10. Procurement: Definitions and Terms • Non-Competitive Proposals – procurement through solicitation of a proposal from only one source, or after solicitation of a number of sources, competition is deemed inadequate • Price Analysis – evaluating the total price; comparing price quotes, market prices, and/or similar information 9/12/2008 Page 10

  11. Procurement: Definitions and Terms • Procurement – process of obtaining goods and/or services in accordance with applicable rules and regulations • Small Purchase Procedures – simple, informal procurement procedures that are used to secure services, supplies, or other property that do not cost more than an established threshold 9/12/2008 Page 11

  12. Procurement: Definitions and Terms • Small Purchase Threshold – threshold established to determine whether an informal or formal procedure should be used for securing services, supplies, or other property • Standards of Conduct – written code or standards of conduct governing the performance of officers, employees, or agents engaged in the awarding and administration of contracts 9/12/2008 Page 12

  13. Procurement: Definitions and Terms • Supplies – all tangible personal property other than equipment • Suspension – either the: 1) temporary withdrawal of the authority to obligate grant funds pending correction action by the grantee or subgrantee or a decision to terminate the grant or 2) action taken by a suspending official in accordance with agency regulations to immediately exclude a person from participating in grant transactions for a period, pending completion of an investigation 9/12/2008 Page 13

  14. Procurement: Making Sure You are in Compliance • Ensuring purchases are necessary • Open competition • Procurement procedures • Vendor selection process • Inventory management 9/12/2008 Page 14

  15. Procurement: Ensuring Purchases are Necessary • All costs have to be necessary for the performance or administration of the federal grant 9/12/2008 Page 15

  16. Procurement: Ensuring Purchases are Necessary • All proposed purchases must be reviewed to avoid unnecessary or duplicative items: • Surplus property • Structure procurement to obtain most economical purchase • Intergovernmental agreement for common goods or services • Lease vs. purchase 9/12/2008 Page 16

  17. Procurement: Open and Full Competition • All procurement transactions shall be conducted in a manner to provide full and open competition to the maximum extent possible: • Entity involved in drafting solicitation may not compete for procurement 9/12/2008 Page 17

  18. Procurement: Open and Full Competition • Solicitations shall clearly establish all requirements the bidder must fulfill in order for the bid to be evaluated 9/12/2008 Page 18

  19. Procurement: Open and Full Competition • Awards must be made to the bidder or offeror whose bid is responsive and most advantageous to the recipient, price, quality, and other factors considered 9/12/2008 Page 19

  20. Procurement: Open and Full Competition • Internal controls require that districts operate within state and federal laws • Don’t skip the rules • Unreasonable requirements on vendors to qualify to do business • Pre-qualified lists should not limit competition 9/12/2008 Page 20

  21. Procurement: Open and Full Competition • Requiring unnecessary experience or excessive bonding • Noncompetitive pricing practices • Noncompetitive awards to consultants on retainer • Organizational conflicts of interest • Specifying a brand name • In-state or local preferences 9/12/2008 Page 21

  22. Procurement: Conflict of Interest • Shall have written standards of conduct governing the performance of employees engaged in the award and administration of contracts – standards must include sanctions for violations 9/12/2008 Page 22

  23. Procurement: Conflict of Interest • Conflict situations: • Financial interest • Acceptance of items of monetary value from contractors (can accept unsolicited gifts of nominal value) 9/12/2008 Page 23

  24. Procurement: Written Procurement Procedures • Shall have written procedures that include (at a minimum): • Measures for avoiding the purchase of unnecessary items • Measures to compare lease vs. purchase (where appropriate) 9/12/2008 Page 24

  25. Procurement: Written Procurement Procedures • When developing solicitations, the Requests for Proposals (RFPs) should include all of the information a bidder needs to respond to the solicitation 9/12/2008 Page 25

  26. Procurement: Written Procurement Procedures • Draft solicitations should include: • A clear and accurate description of technical requirements • Evaluation factors • Functions to be performed • Features of brand names that bidder must meet (when applicable) 9/12/2008 Page 26

  27. Procurement: Written Procurement Procedures • Acceptance of any products/services in metric system of measurement • Preference for products that conserve natural resources (as feasible) • Positive efforts for minority-owned/ women businesses (as feasible) 9/12/2008 Page 27

  28. Procurement: Cost/Price Analysis • Shall perform a cost or price analysis in connection with every procurement action: • Price analysis generally means evaluating the total price – compare price quotes, market prices, or similar information 9/12/2008 Page 28

  29. Procurement: Cost/Price Analysis • Cost analysis generally means evaluating the separate cost elements that make up the total price (including profit) • Goal is to determine reasonableness 9/12/2008 Page 29

  30. Procurement: Type of Procurement Instruments • The type of procurement instrument used is determined by the recipient, but must be: • Appropriate for the particular procurement; and • Promote the best interest of the program Remember: Cannot use “Cost Plus” Contracts! 9/12/2008 Page 30

  31. Procurement: Noncompetitive Contracts • As a practical matter, non-competitive contract raises “red flags” • Ensure that documentation of the contract justifies non-competition (sole source justification) • Role of cost/price analysis even more important 9/12/2008 Page 31

  32. Procurement: Noncompetitive Contracts • Generally, noncompetitive proposals appropriate only when: • The good or service is available only from a single source (sole source) • There is a public emergency • The awarding agency (MDE) authorizes • After soliciting a number of sources, competition is deemed inadequate 9/12/2008 Page 32

  33. Procurement: Awards • Awards must be made to the bidder whose bid is: • Responsive to the solicitation; and • Is most advantageous to the recipient considering price, quality, and other factors 9/12/2008 Page 33

  34. Procurement: Awards • Awards must be made to responsible contractors who possess the potential ability to perform successfully: • Contractor integrity • Past performance • Financial and technical resources 9/12/2008 Page 34

  35. Procurement:Suspension/Debarment • Cannot contract with vendor who has been suspended or debarred • Must verify if contract is $25,000 or more • https://www.epls.gov/ 9/12/2008 Page 35

  36. Procurement: Inventory Management • Different rules for equipment and supplies • Equipment • Federal definition of equipment • Tangible personal property • Useful life of more than one year • Acquisition cost of $5,000 or more 9/12/2008 Page 36

  37. Procurement: Inventory Management • State and federal programs may use an expanded definition, as long as it • includes all property described previously • Supplies • Everything else 9/12/2008 Page 37

  38. Procurement: Use of Equipment • Must use for the program for which it was acquired – even after federal funding for program ceases • May use for other programs if such use is incidental and does not interfere with the original program 9/12/2008 Page 38

  39. Procurement: Use of Equipment If no longer needed: • First transfer to another federal program • Disposition instructions from U.S. Department of Education • EDGAR, CFR 34, Part 80.32 9/12/2008 Page 39

  40. Procurement: Tracking Equipment • Property records • Description, serial number, or other identification, source of the equipment (specify federal grant award), title information, use and condition, and ultimate disposition 9/12/2008 Page 40

  41. Procurement: Tracking Equipment • Physical inventory • At least every two years • All discrepancies must be investigated • Control system to prevent loss, damage, theft • All incidents must be investigated 9/12/2008 Page 41

  42. Procurement: Supplies • Must use for the program for which it was acquired • If no longer needed, and if residual value of unused supplies is more than $5,000 (aggregate value): • First transfer to another program • Compensate U.S. Department of Education for its share 9/12/2008 Page 42

  43. Procurement: Tracking Supplies • EDGAR does not set out any specific tracking requirements • But, as a practical matter, US Department of ED expects subgrantees to track all property purchased with federal funds in order to prove there has been an allocable benefit to the program 9/12/2008 Page 43

  44. Procurement: Allowable Costs • Costs need to have been incurred during the grant period in the grant approval letter • Costs need to be eligible under the terms of the funding source and programs listed in the approved application 9/12/2008 Page 44

  45. Procurement: Allowable Costs • Funding sources must be identified separately in the accounting records by project and grant fiscal year 9/12/2008 Page 45

  46. Procurement: Critical Elements • Necessary Purchases • Competition • Conflict of Interest • Written Procedures • Competitive vs. Noncompetitive Contracts • Awarding 9/12/2008 Page 46

  47. Procurement: Critical Elements • Suspension/Debarment • Contract Administration • Documentation • Inventory Management • Tracking of Equipment & Supplies – Retention & Disposal • Internal Control(s) 9/12/2008 Page 47

  48. Procurement: FAQs • What is the difference between competitive and noncompetitive bidding? • What is a small purchase threshold? 9/12/2008 Page 48

  49. Procurement: FAQs • What are allowable costs? • What are potential conflicts of interest? • What are Standards of Conduct? 9/12/2008 Page 49

  50. Procurement: Other Resources • Excluded Parties List System (suspension and debarment): https://www.epls.gov • EDGAR §80 – Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments 9/12/2008 Page 50

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