Transcript Purchasing Regulations for Boards of Education – An Overview

Contracts and Purchasing
AASBO Certificate Program
April 18 & 20, 2011
David Smith
Contracts and Purchasing
Disclaimer: The opinions expressed in this presentation are
those of David Smith and are not meant to be a legal
interpretation of the law. The material included in this
presentation is dated as of April 2011 and is subject to
change.
Official interpretation of particular questions or situations
should be obtained through the board’s legal council, the
Alabama Attorney General’s office or the Examiners of
Public Accounts.
Contracts and Purchasing
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Competitive Bid Law
Public Works Law
Request For Proposals ( RFP)
Public Contracts
Competitive Bid Law – Legal Authority
for Boards
• Code of Alabama 1975, Section 16-13B-1
through 16-13B-11
• Applies to both County and City Boards of
Education
To What It Applies…
• Applies to the expenditure of funds for labor,
services and work involving $15,000 or more
• Applies to the purchase or lease of materials,
equipment, supplies or other personal property
involving $15,000 or more
Legal Requirement
Requires a contractual agreement entered into
by free and open competitive bidding, on
sealed bids, to the lowest responsible bidder.
Joint Purchasing
16-13-B-1
• Governing bodies of two or more boards (or
county commission/municipality) may
purchase jointly.
• Each governing body must approve joint
purchasing agreement and details by
resolution.
• A Joint Purchasing Agent may be
designated.
Length of Contract Terms
• Purchase or Service Contracts - limited to 3 years
• Lease-Purchase Contracts for capital
improvements, repairs to real property and other
lease-purchase contracts - limited to 10 years
Advertising Requirements
• Post notice on bulletin board outside
purchasing department
• Can do more…but not required!
Bid Lists
• Sealed bids shall also be solicited by sending
notice by mail to all vendors who have filed a
request in writing that they be listed on the
bid list for the particular items being bid.
• If a vendor fails to respond to any solicitation
after the receipt of three solicitations, the
vendor may be removed from the bid listing.
Sealed Bids and Documentation
• Must be sealed when received (except under
reverse auction procedures)
• Opened in public at the hour stated in the
notice
• All original bids and documents pertaining to
the award of the contract shall be retained for
a period of seven years from the date the bids
are opened and shall be open to public
inspection
Bid Bonds/Cashier’s Check
• Bid bonds are no longer required – optional
16-13B-1(d)
Items Exempt from Requirements
• Utility Service (rates fixed by law, regulation,
or ordinance)
• Insurance
Items Exempt from Requirements
(cont.)
Professional Services:
 Attorneys
 Physicians
 Architects
 Teachers
 Superintendents of
Construction
 Artists
 Appraisers
 Engineers
Consultants
Certified Public
Accountants
Public Accountants
Others possessing a
high degree of
professional skill where
the personality of the
individual plays a
decisive part.
Items Exempt from Requirements
(cont.)
• Regular Civil Service
employment contracts
• Fiscal or Financial
Advice or Services
• Products made by
Alabama Inst. For Deaf
and Blind
• Maps/Photographs
from any federal
agency
• Manuscripts, Books,
Maps, Pamphlets, or
Periodicals
• Paying Agents/
Trustees
• Existing contracts for
renewal of sanitation
or solid waste
collection, recycling,
or disposal and those
providing the service
Items Exempt from Requirements
(cont.)
Security Related Services/Products - contractual services and
purchases of products related to, or having an impact upon,
security plans, procedures, measures, or systems, or the security
or safety of persons, structures, facilities, or infrastructures.
Purchases of goods made as a part of any purchasing
cooperative sponsored by the National Association of Counties.
Act 2006-279
 U.S. Communities is the purchasing cooperative
NACO – Purchasing Cooperative
(cont.)
• Purchases may only be made if all of the following occur:
▫ The goods being purchased are available as a result of a
competitive bid process approved by the Alabama Department of
Examiners of Public Accounts of each bid.
 On May 31, 2006, Examiners communicated their approval of
this competitive bidding process used by U. S. Communities.
▫ The goods are either not at the time available to local boards of
education on the state purchasing program or are available at a
price equal to or less than that on the state purchasing program.
▫ The purchase is made through a participating Alabama vendor
holding an Alabama business license if such a vendor exists.
Items Exempt from Requirements (cont.)
• Individual school purchases from monies other than
those raised by taxation or received from state or
county appropriations (i.e., fundraisers, donations)
▫ May have board policy that requires bids
• Legislative Monies– Bid law does apply
Bid Lists
• Sealed bids or bids to be submitted by a reverse
auction procedure shall also be solicited by sending
notice by mail or other electronic means to all persons,
firms, or corporations who have filed a request in
writing that they be listed for solicitation on bids for
the particular items that are set forth in the request.
• If a vendor whose name is listed fails to respond to any
solicitation for bids after the receipt of three
solicitations, the listing may be cancelled.
Items to be considered when
determining the lowest bidder…
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Qualities of the goods proposed to be supplied
Conformity with specifications
Purposes for which required
Terms of delivery
Transportation charges
Dates of delivery
Rejection of a Bid
▫ Awarding authority may reject a bid when the
price is deemed excessive or the quality of
product is inferior.
▫ Must document. If applicable, should announce
budget.
Documentation of Results
• To whom bid was awarded
• Reasons for not awarding to the lowest bidder
▫ Request legal council assistance
• Bid file shall be open for public inspection
Document-Document-Document
Emergencies
• Section 16-13B-3
• Must affect public health, safety or convenience, be
declared in writing by the awarding authority, and
such action and reasons should be immediately
made public by the awarding authority.
• Contracts may be let to the extent necessary to meet
the emergency without public advertisement.
Only One Bid Received
• May accept bid or
• May reject the bid and negotiate the purchase or
contract, provided the negotiated price is lower
than the bid price.
Splitting of Contracts
• No purchase or contract in excess of $15,000 shall be
divided into parts involving amounts of $15,000 or
less for the purpose of avoiding the requirements of
the competitive bid law
Resident Bidder Preferences
• Resident Bidder – has a place of business
within the local preference zone.
• Deemed to be a Responsible bidder.
• Bid is no more than 3 percent greater than
the bid of the lowest responsible bidder.
• In this instance, contract may be awarded to
the resident bidder.
Procedures for Reverse Auction and
Life-Cycle Costs
Legal Authority
16-13-B-4
• Act Number 2008-379, Acts of Alabama
• Effective July 1, 2008 (January 1, 2009 for
Reverse Auction Procedures and Life Cycle
Costing)
Reverse Auctions
Beginning January 1, 2009, the awarding
authority may make purchases or contracts
through a reverse auction procedure.
Examiners Shall Establish Procedures
• No later than November 30, 2008, the
Department of Examiners of Public Accounts
shall establish procedures for the use of reverse
auction and life cycle costs, which shall be
distributed to all contracting agencies and shall
be used in conducting any audits of the
purchasing agency.
• Procedures posted on Examiners website at
www.examiners.state.al.us
Definition of Reverse Auction
A reverse auction is a purchasing process in
which offerors (suppliers) submit bids in
competition to sell services or supplies in an
open environment via the internet; the
auction is an invitation-only, timed event.
Methods of Handling Reverse Auctions
• Acquire necessary software to conduct the
auction on an “in-house” basis
• Contract with a commercial auction host to
conduct the auction as an agent
• Participate through a regional, state, or national
purchasing cooperative
Bidding Process
• A real-time bidding process, usually lasting less than
one hour and taking place at a previously scheduled
time and Internet location, in which multiple
anonymous suppliers submit bids to provide the
designated goods or services.
• A bidding process usually lasting less than two
weeks and taking place during a previously
scheduled period and at a previously scheduled
Internet location in which multiple anonymous
suppliers submit bids to provide the designated
goods or services.
Use of Reverse Auction Allowed if..
• The item to be purchased at a reverse auction is either
not at the time available on the state purchasing
program under the same terms and conditions, OR,
• If available, the lowest price offered in the reverse
auction is equal to or less than the price for which the
item is available on the state purchasing program
under the same terms and conditions
Solicitation of Bids
• Advertised in any manner and for any length of
time as may be determined
• Notice must be sent by mail or other electronic
means to all persons, firms, or corporations who
have filed a request in writing that they be listed
for solicitation on bids for the particular items
that are set forth in the request; may be removed
from listing after three non-responses
• Notification shall include the scheduled time
and internet location
Bid Specifications
• Clear and concise bid specifications must be
developed
• Brand name or equal specification used for the
purpose of describing the base standard of
quality, performance and characteristics – not to
limit or restrict competition
Pre-Screening of Bidders
• Bidders may be pre-screened at the option of the
awarding authority – ensures only responsible
parties submit bids
• Pre-screening must be documented in bid file
• Prospective bidders should submit a notification
of intent to bid in a sealed envelope noting the
bid number on the outer envelope to the
awarding authority/agent within an appropriate
time frame as specified by the awarding
authority
Reverse Auction Process
• Contact person should be designated to answer
questions from suppliers regarding the reverse
auction process
• Online instructions should be provided to bidders
• Bidders will be notified of the start of the reverse
auction through an electronic notification
• Auction will conclude at the previously scheduled
stop time
• Awarding authority is responsible for providing a
secure location and/or website to the reverse
auction
Record of Auction
• An event record of the auction should be
maintained by the awarding authority that will
include the prices offered by the bidders; should
be part of the contract documents/public record
at the conclusion of the event
• Event record must disclose the beginning and
ending times of the auctions
• Bid documents must be retained 7 years in
accordance with the Alabama Competitive Bid
Law
Price Submittals
• Bidders may submit multiple prices during the
event
• The lowest price offered will become the price
portion of the bid response
Award of Contract
• Contracts will be awarded to the lowest
responsible bidder as provided by the Alabama
Competitive Bid Law
Tie Bids
• In the event that multiple bidders submit
identical prices for the same goods or services,
the bid received first will be considered to be the
lowest.
• Any other identical bids received later will be
considered in the order received.
Public Viewing of Auction Event
• The public may attend the internet auction event
which will be conducted such that the names of
the bidders will not be disclosed until after the
completion of the auction, at which time the
event record will be available to the public
Life Cycle Cost Analysis
“A method for evaluating all relevant costs over
the time of a project, product, or measure.”
What are Life Cycle Costs?
• The total cost of ownership over the expected
life of an item
▫ First Costs (Acquisition Costs) – capital
investment costs, purchase and installation
costs
▫ Future Costs (Sustaining Costs) – energy
costs, operating costs, maintenance costs,
capital replacement costs, and financing costs;
any resale, salvage or disposal cost
Legal Authority
• The awarding authority may use life cycle cost
analysis for personal property purchases as
provided by Code of Alabama 1975, Section 1613B-7 (c) (1).
• Not allowed for the purchase of real property
Purchases Below $15,000 Threshold
• Develop written procedures
▫ $ amount for written quotes
 Define number of quotes
 Example Purchases between $5,000-$15,000 require two
written quotes from vendors
 Below $5,000 require two phone quotes
• Transparency/Good Business Practices
• When in doubt “Bid It”
Competitive Bid Law
Questions ???
• When faced with questions- Seek advice
▫ Legal Council
▫ Examiners of Public Accounts
▫ AG Opinions
Public Works Law
Title 39 Code of Alabama
• Applies to any governmental board,
commission, agency, body, authority,
instrumentality, department, or subdivision
of the state, its counties and municipalities.
Public Works Law (cont.)
• Applies to any construction, repair, renovation, or
maintenance of public buildings, structures,
sewers, waterworks, roads, bridges, docks,
underpasses, and viaducts as well as any other
improvement to be constructed, repaired,
renovated, or maintained on public property and to
be paid, in whole or part, with public funds or
with financing to be retired with public funds in
the form of lease payments or otherwise.
Expenditure Threshold
• $50,000
• Section 39-2-2 (a) – “No public
work…involving a sum in excess of $50,000
shall be split into parts involving sums of
$50,000 or less for the purposes of evading
the requirements of this section.”
Advertising Requirements
• Advertise in a newspaper of general circulation in the
county - once each week for three consecutive weeks
• Additional requirement for contracts over $500,000 once in 3 (additional) newspapers of general
circulation throughout the state
Public Works Law
• Receive one bid-May negotiate downward
• No provision for in county or in state
contractors ( Section 39-3-5)
▫ Reciprocal law- Nonresident bidders subject to
same preference granted to Alabama bidders
bidding in their state (Question- contact
building commission)
Provisions for Mistakes by Vendors
• Clerical or calculation errors - low bidder must
provide written notice of withdrawals within 3
days
• Withdrawing bidder cannot work on project in
any way
Project Completion
• Contractor must give notice of project
completion by advertising 4 successive weeks
in a newspaper of general circulation
published in the county
Provisions for Retainage
• No more than 5% of estimated work done and
value of materials shall be retained up to 50%
of work completed
• No additional retainage withheld after 50% of
work completed
• Retainage held until project completion and
acceptance
Professional Services
• Architects, Engineering, Project Management
Services - exempted from the bid process
• Should do RFP for professional services
Emergencies
• No advertising required
• Must still follow other requirements - per
Code 39-2-2(e)
Contract Documents
www.bc.alabama.gov
Contract Documents
Contract Documents
Project Under $50,000
• Request for quotes/estimates
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In writing
District letterhead
Define scope of work
Require license /insurance
Signed estimates
Signed contract
• Treat like a bid without advertising
requirements
Purchasing Procedures
• Centralized Purchasing
▫ One person should be responsible for the
purchasing function
 Knowledge of laws and procedures governing
procurement
 Knowledge of quantity and quality of goods or services
needed by the district
 Knowledge of department budgets and account codes
 Independent of departmental preferences for particular
product or vendor
• Centralized purchasing
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Maintains files for all bids and contracts
Tracks purchases of fixed assets
Inventory control
Risk Management
 Building Insurance
 General Liability
 Vehicles
• Develop a Purchasing Policy and Procedure
Manual
▫ Written procedures on the procurement
process for the school district
 Employees
 Vendors
• Purchasing Policy and Procedure Manual
▫ Procedures for processing of requisitions
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$ thresholds
Approval process
CIS Funds
Emergency purchases
• Purchasing Policy and Procedure Manual
▫ Bidding Procedures
 $ Thresholds
 Competitive bid law
 Public Works Law
▫ Bidding Process
 Time line
 Development of specs
 Advertisement
 Pre-Bid Conferences
 Recommended on all bids
 Insurance/license requirements for vendors
Developing Specifications
• Objectives
▫ Provide best value for tax payer’s dollars
▫ Compliance with legal statutes
▫ Purchase of appropriate products and
services at best pricing
▫ Provide fair competition for all vendors
▫ Provide service to all internal users
Specifications
• Types of Specifications
▫ Qualified Products List (QPC)
 List of products that meet specs
▫ Design Specs
 Professional Architect/Engineer Drawings and
Specifications
▫ Performance Specs
 What product must do or what end result will
be produced
Specifications
▫ Item Specifications
 Specific information that clearly states the level of quality
and performance
▫ Statement of Work (SOW) and/or Services
 Performance based – you tell the contractor what to do,
but not how to do it
• Recommended purchasing practices
▫ Have pre-bid on all contracts
▫ Utilize purchasing co-ops
 US Communities
 Regional co-ops
 State Bids
▫ Joint purchasing contracts
▫ RFP for professional services
 Banking, Engineers, Architects
Specifications
• Who should be involved?
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Knowledgeable Users
Vendors
Professionals
Finance
Other Agencies
Purchasing
Legal?
• Recommended purchasing practices
▫ Use technology to improve procurement
▫ Use procurement/purchasing cards
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Maintenance/Operations
Departmental Supervisors
Principals
Teachers
Booster Clubs
Specifications
• Specification Q & A
▫ Clear
 What to do, how to perform, timing, etc.
 Fair to allow appropriate competition
 Provide sufficient detail to communicate what is
expected
 All aspects included? (insurance, warranty,
delivery, installation, cleanup)
 Allow for significant level of evaluation
Specifications
• Insurance
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Workman’s Comp
Vehicle/Equipment
General Liability
Bonds Required?
Amounts Sufficient for Level Needed?
Specifications
• Freight
▫ Freight on Board (FOB) Destination
 Seller arranges, pays and insures
▫ FOB Destination Freight Collect
 Buyer pays freight but seller owns
▫ FOB Origin
 Buyer accepts ownership at origin
(Not recommended unless employee picking
up)
Specifications
• Warranty
▫ Duration
 Months, Years, Extended
▫ Start Date
 At installation or delivery
▫ What’s Covered
 Full body or limited, installation
▫ Extended Options Available
 What is covered and at what cost?
Contracts
• Purpose
▫ Sets up requirements and obligations of all
parties
▫ Properly executed, binds all parties
▫ Legal Compliance and Authority
▫ Set out any special terms and conditions
Contracts
• Contract Types
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General Operations (fundraisers, vendor)
Bid Contract/Agreement
Construction
Professional Services
Statement of Work
Others
Purchasing Cards
Benefits
• stream line the purchasing process
• teachers will benefit from the optimal
purchasing power for incidental expenses
• reduce (not do away with) the purchase
order paperwork
Benefits
• increase budget control and internal control
• provide better reporting in terms of
who/what/when/how much
• reduce the costs of procurement
• reduce the costs of payments
Purchasing Cards
• Setting Up The Program
▫ AASBO Program
▫ Purchasing Card Agreement
 Appendix A
▫ Procedures
 Appendix B
Conflict of Interest
Alabama Ethics Law
Code of Alabama
(Section 36-25-1- 36-25-30)
Conflict of Interest (Defined)- A conflict on the part
of a public official/public employee between
his/her private interest and the official
responsibilities inherent in an office of public trust
Conflict of Interest
• Does it meet the smell test
• Always check with your Board
Attorney
• Contact the Ethics Commission
• When In Doubt Bid It
Conflict of Interest
A conflict of interest shall exist when a public
official has a substantial financial interest by
reason of ownership, control or the exercise
of power over any interest greater than 5%.
(§ 36-25-5 (f))
Request For Proposal
• Usually done for professional services
exempt under bid law
▫ Architects, engineers, auditors, banking
services etc.
▫ Written request with services defined
Questions?
Contracts and Purchasing
AASBO Certificate Program
April 18 & 20, 2011
David Smith