The Procurement Paw. Presented by: Clint Everhart, CPA Senior Manager

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1 The Procurement Paw Presented by: Clint Everhart, CPA Senior Manager

2 Learning Objectives: Explain each of the five purchase types in the Uniform Guidance (Sections ) Explain the written policies and procedures required by the Uniform Guidance for Procurement 2

3 Learning Objectives Cont. Explain how the procurement rules interact with other areas in the Uniform Guidance Strengthen your understanding through case study and examples Explain the role that ethics plays in adherence to internal controls 3

4 Uniform Guidance (UG) The requirements under the Uniform Guidance for procurement are sections through tpl Also COFAR/FAQ - content/uploads/2015/09/ Frequently-Asked-Questions.pdf 4

5 Other Sections May Apply There are other sections in the UG that also apply to procurement Definitions & Acronyms Subpart A of UG Such as Cost Principles If the cost isn t allowable, you can t buy it Even if you follow the procurement rules! 5

6 Definitions Example: Subrecipient or Contractor? The relationship, rather than the document title, is the basis for determining which requirements are applicable. Subrecipient means a non-federal entity that receives a subaward from a pass-through entity to carry out part of a Federal program ( ). Contractor means an entity that receives a contract as defined in Contract ( ) explains the roles of subrecipients and contractors. 6

7 Why Change Procurement? Foster Economy and Efficiency Avoid purchasing unnecessary or duplicative items; Consider consolidating or breaking out procurements, and leasing vs purchasing alternatives; Consider entering into intergovernmental agreements or inter-entity agreements for the procurement of common or shared goods and services; and Use Federal surplus equipment and property. 7

8 Must and Should In the Uniform Guidance, the words must and should have very specific meanings MUST = requirement SHOULD = best practice

9 The Toes and Pad Five Toes represent the types of purchases mentioned in the Uniform Guidance The Pad represents general standards 9

10 WHY A PAW? Easy to remember that there are basically 5 types of purchases defined in the Uniform Guidance. (Bear s have 5 toes) VS. 10

11 The Procurement Paw 2. Small Purchases 3. Sealed Bids 4. Competitive Proposals 5. Sole Source 1. Micro- Purchases General Standards: A. Documented Policies B. Necessary C. Full & Open Competition D. Conflict of Interest E. Documentation i. Cost & Price Analysis ii. Vendor Selection 11

12 The Pad The Pad or the center stands for the general procurement standards: Documented Policies Full and open competition Conflict of interest Documentation 12

13 The Toes - Definitions Micro Purchases $3,000 or less No quotes needed Equitable distributions Buy stuff in different places 13

14 The Toes Definitions Cont. The Micro Purchase Threshold is subject to change Already changed to $3,500 Federal Acquisition Regulation (FAR) 48 CFR Subpart 2.1 Other Federal Agencies have changed the Micro Threshold 14

15 The Toes Definitions Cont. National Defense Authorization (NDAA) Act PL Micro purchases $10,000 or less R&D type programs American Innovation and Competitiveness Act PL Micro purchases $10,000 or less National Science Foundation, etc. 15

16 The Toes Definitions Cont. Small Purchases Up to $150,000 Rate quotations No cost or price analysis 16

17 The Toes - Definitions Sealed Bids Greater than $150,000 Construction Projects Price is a major factor Must have price and other qualifications listed 17

18 The Toes - Definitions Competitive Proposals Greater than $150,000 Fixed Price or Cost Reimbursement RFP with evaluation methods 18

19 The Toes - Definitions Sole Source Unique Public Emergency Authorized by agency (or PTE) No competition 19

20 The Pad General Procurement Standards ( ) UG sets the general standards in this section The Non-Federal Entity (NFE) (the grantee) must use its own documented procurement procedures that reflect local law In Oklahoma it is the Oklahoma Purchasing Laws/Regs. 20

21 General Procurement Standards NFE must maintain written standards of conduct that cover conflicts of interest REQUIRED to be in writing Must define how/when a conflict of interest exists and what is considered a conflict 21

22 General Procurement Standards -Conflicts of Interest (In Writing) Non-Federal entities may set standards for situations in which the financial interest is not considered substantial or the gift is an unsolicited item of nominal value. The standards of conduct must provide for disciplinary actions to be applied for violations of such standards. Organizational conflicts of interest could be an issue that bears watching by ED staff. 22

23 General Procurement Standards - Organizational Conflicts of Interest Conflicts arise when a non-federal entity is unable or appears to be unable to be impartial in conducting a procurement action involving a related organization. Written standards of conduct must address organizational conflicts of interest. Does not apply when related organization is a local government, state or Indian tribe. 23

24 General Procurement Standards Cont. Procurement procedures must avoid acquisition of unnecessary or duplicate items NFE is encouraged to use state and local intergovernmental agreements (state contracts) Consolidate or Break-out procurements to obtain an economical purchase 24

25 General Procurement Standards Cont. NFE is encouraged to use Federal excess and surplus property NFE is encouraged to use value engineering clauses in contracts for construction projects MUST award contracts only to responsible contractors 25

26 General Procurement Standards - What Are Responsible Contractors? (h) The non-federal entity must award contracts only to responsible contractors who are able to perform successfully under the terms and conditions of the contract. Consider: Contractor integrity, compliance with public policy, Record of past performance, financial & tech resources, and Possible exclusions (See Suspension and Debarment). 26

27 General Procurement Standards Cont. NFE MUST maintain records in sufficient detail about the procurement Rationale for the method of procurement Selection of Contract Type Contractor Selection/Rejection Basis for the contract price 27

28 General Procurement Standards Cont. Limits/Restrictions on Time and Materials Contracts Must determine that no other contract is suitable Must include statement that includes ceiling price that contractor exceeds at his/her own risk 28

29 General Procurement Standards Cont. Limits/Restrictions on Time and Materials Contracts Cont. Definition of Time and Materials Actual cost of materials Direct labor charged at hourly rates 29

30 General Procurement Standards Cont. NFE ALONE MUST BE RESPONSIBLE To settle all contractual and administrative issues arising out of procurements Use good administrative practice Use sound business judgement 30

31 The Pad - Competition All procurement transactions must be conducted in a manner providing FULL and OPEN competition consistent with UG Competition may not be restrictive 31

32 Competition Cont. What is Restrictive in UG? The UG considers competition restrictive if the contract includes (but not limited to) Unreasonable requirements on firms to qualify Unnecessary experience or excessive bonding Noncompetitive pricing practices between firms or affiliated companies 32

33 Competition Cont. What is Restrictive in UG? Cont. Noncompetitive contracts to consultants that are on retainer contracts Organizational conflicts of interest Specifying only brand name 33

34 Competition Cont. What is Restrictive in UG? Cont. Arbitrary action in procurement process NFE must prohibit the use of statutorily or administratively imposed state, local or tribal geographical preferences Except where the Federal statutes or agreement expressly mandates or encourages geographic preference 34

35 Competition Cont. NFE MUST have written procedures for procurement transactions Auditors will want to review these 35

36 Competition Cont. Written procedures must include: A clear accurate description of the technical requirements for materials Identify all requirements which offerors must fulfill and all factors of how bid will be evaluated NFE must ensure all prequalified lists of persons, firms, or products include enough sources for open and free competition 36

37 The Toes Procurement Methods The Micro Purchase Acquisition of supplies or services In general $3,000 or less Aggregate of all items $3,000 or less Subject to periodic adjustment for inflation 37

38 Procurement Methods Cont. Remember The Micro Purchase threshold is subject to change - Inflation As mentioned now $3,500 Other Federal Agencies are changing their thresholds (Slide 15) 38

39 EXAMPLE 1 PLEASE REFER TO YOUR HANDOUT 39

40 Procurement Methods Cont. Small Purchase Procedures: Simple purchases less than $150,000 ( Simplified Acquisition Threshold) Periodically adjusted for inflation Basically must get quotes but can be informal 40

41 EXAMPLE 2 PLEASE REFER TO YOUR HANDOUT 41

42 Procurement Methods Cont. Sealed Bids (formal advertising): Publicly solicited and a fixed price contract awarded to the best responsible bidder Feasibility Conditions Complete, adequate, and realistic purchase description Multiple responsible bidders 42 Procurement lends itself to a fixed price and decision can be made based principally on price

43 Procurement Methods Cont. Sealed Bids Cont: Requirements Sufficient response time provided and solicited to multiple known suppliers Local and tribal gov. must also publicly advertise bids Invitations to bid must define the items or services (specifications to allow bidder to properly respond) 43

44 Procurement Methods Cont. Sealed Bids Cont.: Requirements Cont. - Opened at the time and place prescribed Local and tribal gov. must open publicly Fixed price contract awarded to lowest responsive and responsible bidder May be rejected for a sound documented reason (document the reason) 44

45 Procurement Methods Cont. Competitive Proposals: Generally only used when sealed bids are not appropriate Similar requirements as sealed bids NFE may use competitive proposal procedures for qualification-based procurements of architectural or engineering services where price is not a selection factor 45

46 Procurement Methods Cont. Competitive Proposals Cont.: NFE MUST have a written method for conducting technical evaluations of the proposal Contracts must be awarded to the responsible firm whose proposal is most advantageous to the program 46

47 Procurement Methods Cont. Competitive Proposals Cont. Must use adequate number of sources, and either a fixed price or cost-reimbursement type contract is awarded. Generally used when conditions are not appropriate for the use of sealed bids. 47

48 Using Brand Names in Procurement Provide a clear and accurate description of the technical requirements to be procured. The description must not unduly restrict competition When impractical to otherwise describe the technical requirements, a brand name or equivalent description may be used as a means to define the procurement. Specific features of the named brand that must be achieved, are to be clearly stated. 48

49 EXAMPLE 3 PLEASE REFER TO YOUR HANDOUT 49

50 EXAMPLE 4 PLEASE REFER TO YOUR HANDOUT 50

51 Procurement Methods Cont. Noncompetitive Proposals: Allows solicitation of a proposal from a single source The item or service is only available through a single source Public emergency 51

52 Noncompetitive Proposals (Sole Source) The Federal awarding agency or passthrough entity expressly authorizes noncompetitive proposals in response to a written request from the non-federal entity; and/or After solicitation of a number of sources, competition is determined inadequate. 52

53 Note: Procurement Methods in COFAR FAQ to -5-1 Micro vs. Small vs. Over Threshold -2 Sole Source for Research -3 Strategic Sourcing and Shared Service -4 Charge Cards -5 Indirect Costs 53

54 Contracting with Small & Minority & Women s Businesses NFE must take all necessary affirmative steps to assure that minority business, women s business, and labor surplus areas are used 54

55 Contracting with Small & Minority & Women s Businesses Cont. Affirmative steps must include: Place these types of business on solicitation lists assure they are on list Divide total requirements into smaller tasks to allow participation by these types of businesses 55

56 Contracting with Small & Minority & Women s Businesses Cont. Affirmative steps must include Cont.: Establish delivery schedules that are able to be used by these businesses Use Small Business Admin and Minority Business Development Agency, etc. Require the prime contractor, if subcontracting, to use affirmative steps 56

57 Procurement of Recovered Materials A NFE that is a state agency or political subdivision must comply with Section 6002 of the Solid Waste Disposal Act. Procure only items designated in EPA guidelines that contain the highest percentage of recovered materials 57

58 Contract Cost and Price NFE must perform a cost or price analysis in connection with procurements over the Simplified Acquisition Threshold of $150,000 Start with independent estimates before receiving bids 58

59 Contract Cost and Price Cont. Negotiating profit as separate element If no price competition and the procurement exceeds the simplified acquisition threshold, non-federal entity must negotiate profit as a separate element of the price. Fair and reasonable profit is an understood and allowable result of the successful completion of a contract. 59

60 Contract Cost and Price - Cont. Costs or prices based on estimated costs for contracts, allowable only to extent costs incurred or estimated are allowable under Cost Principles See Subpart E - Cost Principles 60

61 Contract Cost and Price - Cont. Cost plus a percentage of cost and, Percentage of construction cost methods of contracting MUST not be used (not allowed). 61

62 COFAR FAQ Negotiation of Profit Is negotiation of profit required in sole source contracts from $3,000 to $150,000? No a cost price analysis is not required. 62

63 Federal Agency or PTE Review covers information on Federal Awarding Agency and PTE Reviews NFE must make available on request technical specifications on proposed procurements to ensure item is the one proposed 63

64 Technical Specifications Review Grantees and subgrantees can request review by pass-through entity and Federal agency. If there is an appearance of irregularities, Fed or PTE may still look at it without a request. All the standards for review of procurement procedures are found in (Be aware!). 64

65 Pre-Procurement Review What may be requested? Procurement documents, such as RFPs or Invitations to Bid Independent Cost Estimate 65

66 Pre-Procurement Review Cont. When may be requested? Procurement procedures or operation does not comply with procurement standards Expected to exceed $150,000 and is to be awarded without competition or one bid received Brand Name product specified 66

67 Pre-Procurement Review Cont. When may be requested? Greater than $150,000 and awarded to other than apparent low bidder Contract modification scope or contract increase is more than $150,000 67

68 Requesting Federal Review NFE may request (from awarding agency) their procurement system be reviewed in order to be certified as meeting standards to avoid pre-procurement review NFE may self-certify in writing to Federal Awarding Agency In writing, must cite policies, procedures, etc. 68

69 Bonding Requirements If construction or improvement contracts exceed $150,000 Bid guarantee from each bidder 5% of contract price Performance Bond for 100% of contract price Payment Bond for 100% of contract price 69

70 Contract Provisions The non-federal entity's contracts must contain the applicable provisions described in Appendix II to Part 200 Contract Provisions for non-federal Entity Contracts Under Federal Awards. Federal agency or non-federal entity may require additional provisions. 70

71 Appendix II Contract Provisions Contracts over $150,000 must: Address administrative, contractual or legal remedies in instances Where contractors violate or breach contract terms Provide sanctions/penalties as appropriate 71

72 Appendix II Contract Provisions Cont. Contracts greater than $10,000 must: Address termination for cause and for convenience Address the manner by which it will be effected Address basis of settlement 72

73 Appendix II Contract Provisions Cont. Equal Employment Opportunity (EEO) All federally assisted construction contracts must: Include the EEO clause under 41 CFR (b) and other EEO standards 73

74 Appendix II Contract Provisions Cont. Davis-Bacon Act When required by Federal program legislation all prime construction contracts in excess of $2,000 must include a provision for compliance with Davis-Bacon Act, as amended. Must also include compliance with the Copeland Anti-Kickback Act. 74

75 Appendix II Contract Provisions Cont. Contract Work Hours and Safety Standard s Act Contracts in excess of $100,000 that involve mechanics or laborers must include a provision for this Act. Standard 40 hour week and overtime pay of at least time and a half 75

76 Appendix II Contract Provisions Cont. Rights to Inventions Made Under Contract or Agreements NFE or subrecipient must comply with 37 CFR Part 40: Rights to Inventions Made by Nonprofit Organizations and Small Business Firms Under Government Grants, Contracts and Cooperative Agreements. 76

77 Appendix II Contract Provisions Cont. Clean Air Act (42 U.S.C q.) Contracts and subgrants that exceed $150,000 must contain a provision that requires the NFE to comply with all applicable standards of the Clean Air Act and Federal Water Pollution Control Act 77

78 Appendix II Contract Provisions Cont. Debarment and Suspension A contract award may not be made to parties listed on the System for Award Management (SAM) list of debarred, suspended or otherwise excluded entities 78

79 Appendix II Contract Provisions Cont. Byrd Anti-Lobbying Amendment Contractors that apply or bid for an award greater than $100,000 must file required certification 79

80 Thank you for your attention! Questions? Clint Everhart, CPA 80

Maricopa County Policy/Contract Template Reference. Procurement Standards (http://www.ecfr.gov/cgi-bin/text-idx?node=2: )

Maricopa County Policy/Contract Template Reference. Procurement Standards (http://www.ecfr.gov/cgi-bin/text-idx?node=2: ) 200.317 Procurements by states. When procuring property and services under a Federal award, a state must follow the same policies and procedures it uses for procurements from its non-federal funds. The