Training Module 9 Bidding, Purchasing, and Leasing Prepared by RCAP Solutions for the PA Department of Environmental Protection

Smallville vs.

Middleville Construction 1

Course Overview

• Goals of the purchasing process • Purchasing options and procedures • Contracts • Understand legal requirements and avoid conflicts of interest 2

Goals of the Purchasing Process

• Buy only what you need • Stick to your budget • Use competitive purchasing as much as possible 3

Additional Government Procurement Goals • Know the law and comply with it • Understand the intention of the law 4

Do you have a process?

• Who decides • Identify needs versus wants • Limit the ability to spend among employees • Avoid unnecessary inventories of parts, supplies and office materials 5

Paying the Bills

• Time purchases to fit cash flow constraints • Know or negotiate terms of payment before finalizing a purchase • Pay bills only when value is received, but once it is received, pay them on time 6

Procurement Options

• • • • • Buy Rent Lease Lease-Purchase Services and Contracted Work 7

Buying

• Funds must be available at time of purchase from: • General Funds Savings or Checking • Capital Reserve Account • Borrow the money 8

• Reasons to rent

Renting

• Disadvantage – high cost • Rental options 9

Leasing

• Advantages • Disadvantages • Examples of when leasing works best 10

Lease-Purchase

• Little or no money upfront • Equity in the end • More costly than buying outright 11

Contractors

• One time or infrequent projects • During busy times when there is not enough manpower • For skilled or specialized tasks 12

Exercise 1: Smallville needs a crane 13

To Bid or Not to Bid…

• Usually, government purchases over $10,000 require bidding • Bidding can be used below $10,000 • Once you start the bidding process, you must stick with it 14

Quotes

• Minimum three written or telephone price quotations required for all contracts between $4,000 and $10,000 • Not required for purchases under $4,000, but may be a good idea, especially if the item or service will be ordered more than once 15

Exceptions to the Bidding Rule

• Public works maintenance or repairs • Any work municipal employees can do themselves • “Sole source” purchases 16

Exceptions to the Bidding Rule

• Professional services such as engineers or lawyers • Disaster emergency purchases Although these are allowable exceptions, bidding should be used if possible to ensure the best use of taxpayer dollars.

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Exercise 2: Which purchases are exempt from bidding?

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Bidding Procedures

• • • • • • Prepare “RFB “ Request for Bids documents Advertise Review proposals or bids after deadline “Conform” the bids, ask for clarifications if needed Check references Select and award bid 19

Government Bidding Procedures

• Government must follow certain bidding procedures • Bids must be published in a local newspaper of general publication • Check municipal codes for advertising requirements • Goes to the lowest responsible bidder 20

Bidding Documents

• • • • Specifications Terms and Conditions Bid format and contract instructions Directions for Submittal 21

Specify What You Need

• Common standard • What is needed by providing project or equipment specifications • Detail! Detail! Detail!

• All bid packages sent out must be identical, and any changes in the specifications need to be re-advertised 22

Specify What You Need

• Minimum requirements and tolerances • Reference codes or industry standards • Manufacturers’ standard specifications • Brand names 23

Specify What You Need

• Recycled products • Minority-owned businesses • Deadline for submitting any questions 24

Exercise 3: Betty’s Chair

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Advertising

• Choose publications, websites, trade journals, etc. that suppliers are likely to read • Right to reject all bids 26

Comparing Bids

• Check to make sure all bids fully meet the specifications, schedule, and terms and conditions • Check references and document the bidder is found to be ‘responsible’ • No exceptions 27

Bidding Procedures Awarding Bids • Award made by public announcement • Contracts exceeding $50,000 must be awarded within 60 days 28

What do you do if no satisfactory bids are received?

• Re-bid the item • After 45 days of the 2nd advertisement, negotiate 29

Legal Challenges to Bid Awards

• PA courts have ruled that disappointed bidders have no standing to challenge the bidding process • A taxpayer may challenge the bidding process if certain criteria are met 30

Withdrawal of Bids

• Withdraw without forfeit • Next lowest bidder • Reject all bids 31

Contracts

• Standard contract forms typically include: • Statement of work • Change orders • Payment schedule and interest penalties • Holdback of payments • Liquidated damages • Authority of the consultant • Subcontracts 32

Contracts

• Standard contract forms typically include: • Non-discrimination • Final cleanup • Contractor liability • Licenses, permits, and regulations • Anti-bid rigging 33

Bonds

• Bid bonds • Performance bonds • Payment bonds 34

Conflicts of Interest

In PA, rules permitting officials to have a financial interest in suppliers vary by unit of government: • • • • • • All officials Counties Cities Boroughs First-class Townships Second-class Townships $500 limit $0 $300 $1,000 $300 $500 35

Other Issues

• Davis-Bacon Act and Pennsylvania Prevailing Wage Act • Reverse auctions • Create economies of scale 36

Exercise

• Take a few minutes to complete the exercise in the workbook 37

Summary

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Resources

• Pennsylvania State Association of Township Supervisors, (717) 763-0930 • Governor’s Center for Local Government Services, (717) 720-7395. This agency has a free publication called the “Purchasing Handbook”.

• PA Dept. of Environmental Protection, Technical Assistance and Outreach, (717) 772-4058, Dennis Lee • RCAP Solutions, (814) 861-6093, Don Schwartz, PA/NJ Program Manager • National Institute for Supply Management (formerly NAPM) www.napm.org

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