CERTIFIED PROCUREMENT PROFESSIONAL CPP Big Sky Public Procurement

CERTIFIED PROCUREMENT PROFESSIONAL (CPP) Big Sky Public Procurement Association Contract Management Certification Program

Guardians of the Public Trust “Money is of no value; it cannot spend itself. All depends on the skill of the spender. ” – Ralph Waldo Emerson 1803 -1882

THE CONSTITUTION OF THE STATE OF MONTANA • Section 8. Right of participation. The public has the right to expect governmental agencies to afford such reasonable opportunity for citizen participation in the operation of the agencies prior to the final decision as may be provided by law. • Section 9. Right to know. No person shall be deprived of the right to examine documents or to observe the deliberations of all public bodies or agencies of state government and its subdivisions, except in cases in which the demand of individual privacy clearly exceeds the merits of public disclosure.

Objectives • Understand the function of procurement • Learn where to find resources to help us • Practice with some basic tools • Know where to go for further information

Procurement is: • The acquisition of supplies or services – Includes contracts with or without cost; buying; renting; leasing; or other acquisition method. • It includes all functions that pertain to the obtaining of any supply or service – Description of requirements; selection and solicitation of sources; preparation and award of contract; and all phases of contract administration. • It does not include the acquiring of supplies or services by gift.

Effective Public Procurement • Reduces costs and directly improves the quality and timeliness of services rendered by public entities.

Effective Public Procurement • For public entities, procurement is a service function, supporting programs by the acquisition of supplies and services.

Effective Public Procurement • For potential contractors, it is an opportunity to provide supplies and services to public entities.

Procurement Resources Ø Montana Law/Administrative Rules Ø Dept of Administration General Services Division Website: http: //gsd. mt. gov/ Ø Montana Operations Manual (MOM) Ø BSPPA Website: bsppa. net Ø Policies and Procedures of Contracting Organization Ø NIGP website: www. nigp. com (many of the resources require membership to access. )

Procurement Ethics As employees involved in the expenditure of public funds, we are called upon to avoid even the appearance of impropriety and to conduct our business in a manner above reproach in every respect.

Ethical Do’s and Don’ts • Do be familiar with MCA and your organization’s code of ethics • Don’t accept gifts and gratuities from suppliers including lunches, clothing, etc. • Do avoid the appearance of impropriety – make sure you are contacting more than one firm for drafting specifications; be impartial • Do be open about information gathering, solicitation processes, etc.

Ethics Resources Montana Code Annotated Title 2, Chapter 2 – Standards of Conduct Your organization’s published code of ethics (if you don’t have one perhaps you should…)

Reminder… “When it comes to public trust, perception is reality. It is not enough that we do no wrong, we must also try to assure that others believe we have done no wrong. ” 1998 Michael Josephson "Ethics is knowing the difference between what you have a right to do and what is the right thing to do. “ Justice Potter Stewart

Procurement Tools City/County Governments 7 -5 -2301. Competitive, advertised bidding required for certain large purchases or construction contracts. (1)Except as provided in 7 -5 -2304 and Title 18, chapter 2, part 5, a contract for the purchase of any vehicle, road machinery or other machinery, apparatus, appliances, equipment, or materials or supplies or for construction, repair, or maintenance in excess of $50, 000 may not be entered into by a county governing body without first publishing a notice calling for bids.

Procurement Tools • City/County Governments (cont. ) (2) The notice must be published as provided in 7 -1 -2121. (3) Subject to 7 -5 -2309 and except as provided in Title 18, chapter 2, part 5, every contract subject to bidding must be let to the lowest responsible bidder. • 18 -4 -124 allows political subdivisions to adopt any or all parts of the MT Procurement Act and the accompanying rules.

Procurement Tools State Government • Total Contract Value: – The initial contract period any options to renew. • Small Purchases: Purchases under $5, 000. • Limited Solicitations: – Purchases with a "Total Contract Value" between $5, 001 and $25, 000.

Procurement Tools • Formal Bids/Proposals: Purchases over $25, 000 – Competitive Sealed Bids (Invitation for Bid) – Competitive Sealed Proposals (Request for Proposal)

Procurement Tools Cooperative Purchasing • Cost savings for local governments and school districts through volume purchasing. • May use State term contracts, vehicle requisition time schedule, Central Stores program, and certain commodities needed by MDT. • Must sign a Cooperative Purchasing Agreement prior to utilizing state contracts.

Procurement Tools MOM 1 -0714. 00, page 45 • Prequalification of Vendors: allowed by ARM 2. 5. 507 • Request for Information: Used to gain preliminary information about market, availability and/or specifications for a particular service or item. – Cannot be used as a selection method. – Can be informal or formal.

Procurement Tools Direct Negotiation • The formal solicitation process did not provide a responsible or responsive bidder/offeror. Requires SPB approval.

Procurement Tools Public Auctions • 7 -5 -2303 MCA in lieu of bids city and county governments may purchase vehicles, road machinery or other machinery, apparatus, appliances, equipment, or materials or supplies up to $60, 000 at public auctions.

Sole Source Procurement • Sole source procedures do not apply to purchases under $5, 000 • Item or service is available from only one known capable vendor.

Sole Source Procurement (cont. ) • Circumstances might include: – Compatibility of current services or equipment, accessories, or replacement parts; – No existing equivalent product; or – Only one source is acceptable or suitable. • Justification required

Sole Source Procurement (cont. ) • Organization must maintain records for all sole source purchases. • Does not apply to: – Professional licenses; – Dues to associations; – Renewal of software license agreements; or – Purchase or renewal of maintenance agreements for software or hardware.

Sole Brand Procurement • Sole brand distinguishes itself from “sole source” in that while there may be only one acceptable manufacturer, several distributors are available, therefore competition is required. • Sole brand justification must be provided in writing and stated in the solicitation document.

Exigency Procurement 7 -5 -2304 and 18 -4 -133 MCA • An exigency procurement must be limited to those supplies and services necessary to meet the exigency. • The determination as to whether a procurement is an exigency must be made by the procuring organization. The determination must be in writing and must state the basis for an exigency procurement and for the selection of the particular vendor.

Exigency Procurement (cont. ) • The purchase procedure used shall be selected to assure that the required supplies or services are procured in time to meet the exigency. However, such competition as is practicable shall be obtained. • Record of each exigency procurement must contain: – The vendor’s name; – Amount and type of contract; – List of supplies and services purchased under the contract; and – Written documentation justifying the exigency procurement and the basis for the selection of a particular vendor.

Limited Solicitations • Purchases with a "Total Contract Value" between $5, 001 and $25, 000 (State) • Can be used for both supplies and services. • Does not apply to “controlled items”. • Requires three written or oral quotations. • Online auctions can be used – except for new or used vehicles.

Limited Solicitations (cont. ) • Must be documented using the “Limited Solicitation” form (State agencies). • Must be awarded to lowest acceptable quote if cost is the only consideration. • If other criteria will be considered in award decision, the vendors must be provided with all criteria and their relative importance. (This method must be done in writing. )

Building IFB’s and RFP’s MOM 1 -0719. 00, page 56 • Invitation for Bid (IFB) – Defined specifications – Award made to lowest responsive and responsible bidder • Request for Proposal (RFP) – Problem/solution specifications – Evaluated on stated criteria (cost being only one) – Proposal responses may be modified

Invitation for Bid (IFB) • Section 1: General Requirements – Provides a brief overview of the project – Contact for all communications – Bidders are responsible for reviewing the document – Pre-Bid Conference (optional) – When/where are bids due

Invitation for Bid (cont. ) • Section 2: Delivery Requirements – Requested or required delivery date – Shipping information – Delivery locations

Invitation for Bid (cont. ) • Section 3: Special Terms and Conditions – Contract requirements – Special conditions – Acceptance testing/criteria – Mandatory requirements (i. e. proof of licenses, previous related experience, etc. )

Invitation for Bid (cont. ) • Section 4: Specifications and Pricing Schedule – Fixed pricing or adjustable? – Award basis – Detailed specifications

Invitation for Bid (cont. ) • Sent to adequate number of viable bidders • Public Notice • Counties must publish a newspaper notice per 7 -1 -2121, MCA

Opening & Awarding an IFB MOM 1 -0722. 00, page 68 • Must be received at the location listed by the date/time specified • Publicly opened • Prepare a bid tabulation sheet

Opening & Awarding an IFB (cont. ) • Determine if low bidder is “responsive” & “responsible” • Apply Preferences – Blind Vendor Preference, 18 -5 -502, MCA – Reciprocal Preference, 18 -1 -102, MCA – County Resident, 7 -5 -2309, MCA • Send a Request for Documents Notice (if necessary) • Issue a Purchase Order (or contract)

Request for Proposal (RFP) • • • Cover Page Template Instructions Table of Contents Instructions to Offerors Schedule of Events

Request for Proposal (cont. ) • Section 1: Project Overview and Instructions – Provides a brief overview of project, expected contract term, and who the contact person is. – Tells the potential offerors when and where to send questions, and attend pre-proposal conference. – Instructions on date, time & location for submitting a response and the number of copies required.

Request for Proposal (cont. ) • Section 2: RFP Standard Information – Notifies the potential offerors of the organization’s rules regarding confidential materials. – Describes the evaluation process.

Request for Proposal (cont. ) • Section 3: Scope of Project – Core of the RFP. This detailed overview of the purpose of the project should include the description of the contractor’s duties and responsibilities. • Section 4: Offeror Qualifications – Sets out what qualifications the offeror must possess to fulfill the needs of the project.

Request for Proposal (cont. ) • Section 5: Cost Proposal – Includes information on how the costs are to be presented for this proposal. • Section 6: Evaluation Criteria – Includes those factors which will be used to appraise and measure an offeror’s response to the RFP.

Request for Proposal (cont. ) • Appendix A: Standard Terms & Conditions • Appendix B: Standard Contract • Appendix C: RFP Response Form (optional)

Opening & Awarding RFP’s MOM 1 -0723. 00, page 74 • RFP’s are not publicly opened – Procurement Officer must first review them for confidential information – Verify Trade Secret Affidavit is included – Verify that all information claimed as confidential is valid as such by Montana law. • Copies are given to evaluation committee

Opening & Awarding RFP’s (cont. ) • Evaluation – Usually done by committee, but can be an individual • Conflict of Interest – Meetings are public • Post the Meeting – 72 hours • ADA accessible location • All members of the public are welcome • Must allow for public comment for any matter not on the agenda that is within the jurisdiction of the agency/organization. – Quorum of committee members required – Keep Minutes of the Meeting

Opening & Awarding RFP’s (cont. ) • What if the committee has questions? – Send out written clarification questions – Conduct oral interviews and/or demonstrations – Site visits – Seek best and final offers

Opening & Awarding RFP’s (cont. ) • Finalize the Evaluation – Submit to procurement officer: • Completed scoring matrix with scoring justifications • Committee meeting minutes • Committee recommendation

Opening & Awarding RFP’s (cont. ) • Send Notices – Request for Documents – Selection Notice • Post to Website • Contract Negotiation / Execution

Elements of a Contract • • • Offer and Acceptance Consideration Mutuality of Obligation Legality of Purpose Competency of Parties

Types of Contracts • Purchase Orders • Dually Signed Contracts (White paper) • • Information Technology Term Contracts Construction Memorandum of Agreement

Pricing Types • Fixed Price – Contractor is responsible for managing costs – Payment is for end result of the contract • Cost Reimbursement – Contractor is reimbursed for allowable and allocable costs – Total amount is not fixed at outset of contract • Other Pricing Types

Issuing a Contract/Purchase Order • Formalizes a purchase transaction • Defines the agreement between the parties. • Include all pertinent information – Description of item or service – Quantity – Prices – Payment terms – Discounts (if applicable) – Dates of performance MOM 1 -0722. 90, page 72

File Management • Files must be complete enough to facilitate auditing and should include: – Requisition from ordering entity – Solicitation with specifications and addenda

File Management (cont. ) • List of vendors and advertised notice • All bid / proposal responses • Tabulation / Offeror Registry • All pertinent correspondence

File Management (cont. ) • Explanation if awarded to other than low bidder (IFB) • Evaluation score sheets, minutes, attendance sheets, committee recommendation (RFP)

File Management (cont. ) • Evidence of insurance documents and bonds • Signed purchase order or contract

Forming & Writing Specifications MOM 1 -0713. 00, page 41 • Description of supply or service being sought. • Purpose is not solely to obtain the least expensive items, but the desired quality at the most competitive price.

Forming & Writing Specifications (cont. ) • Should do four things: – Identify Minimum Requirements – Allow for Competitive Bids – List Evaluation Criteria and Test Methods – Provide for a Fair Award at Lowest Possible Cost

Communicate!

How to Write Specifications • Name of Supply or Service • Purpose/Use for Supply or Service • Description of Supply or Service / Desired Outcome • List Special Requirements

How to Write Specifications (cont. ) • • Unusual Conditions Delivery Date Delivery Location Point of Contact – For answering questions • Receiving Procedures

How to Write Scope of Work Specific Questions to Ask/Answer 1. Why do you need this service? 2. What work is to be performed? a) Volumes, dimensions, sizes, number, etc. b) Type of work (repairs, construction, sampling, electrical, engineering). 3. What is the final product we expect when work is completed? or 4. What do you expect as an outcome of the project?

How to Write Scope of Work (cont. ) 5. Who is the point of contact? 6. Who will do the work? a) Will the contracting entity take responsibility for some parts of the project (preparation, permits, traffic control, etc. )? 7. What is the contractor going to provide? a) Manpower, equipment, tools, consumables, supplies, materials, fuel, etc. 8. What is the contracting entity going to provide?

How to Write Scope of Work (cont. ) 9. Where is the work going to be performed? a) Is there more than one location? 10. What hours or days are we requiring work to be performed? 11. How do you want the work accomplished? a) Task Order, specific order of events, etc. 12. Are there any unusual conditions?

How to Write Scope of Work (cont. ) 13. When do we want the work performed or completed? Is there more than one deadline date? 14. If reports are required, when do you want them, what format, etc. 15. How will you administer the contract? 16. How will you know when the work is done? 17. What will be the method of acceptance?

How to Write Scope of Work (cont. ) 18. How do you want costs presented? a) Total Project Cost b) Task Order Basis (hourly rates) 19. How do you want to be invoiced? 20. Is there a maximum amount you cannot exceed?

Beware of Specification Hazards! • Thoughtfully review specifications before beginning a procurement process.

Beware of Specification Hazards (cont. ) • Things to consider are: – Who developed the specifications? – Did they come from a vendor? – When was the last time they were updated?

Beware of Specification Hazards (cont. ) – Do they always seem to lead to the same brand? – Are the requirements still true? – Are they drawn from a professional standard? – Are they getting the best product?

Beware of Specification Hazards (cont) – Are the requirements necessary? – Is there a reason for eliminating certain products? – Are the specifications too narrow?

Supporting Statements & Requirements • Use of Standard Statements – What are they? • Common policy or procedure statements • Used in bids, proposals and contracts – What is their purpose? • Tells vendors the requirements for conducting business with the organization. • Alerts them to special conditions or requirements – Where do I find them? MOM 1 -0715. 00, page 46

Indemnity & Insurance Requirements MOM 1 -0716. 00, page 47 • Used in solicitations and contracts/PO as appropriate. • Purpose of Indemnity Agreements – To allocate risk among parties to a contract, and – To provide a contractual right to pursue recovery.

Indemnity & Insurance Requirements (cont. ) • Objectives of Insurance Requirements – Fairly allocate risk, and – Clearly delineate the types and levels of coverage.

Insurance Requirements • Used in bids, proposals and contracts to transfer risk of loss from the organization to the contractor. • Five types of insurance that may be required are: – – – Commercial General Liability Automobile Professional Liability Property Workers’ Compensation MOM 1 -0716. 00, page 47

Insurance Requirements (cont. ) • Recommended limits: – Low Risk • CGL & PL - $300, 000/occurrence & $600, 000/aggregate • Auto - $500, 000 person (personal injury) / $1, 000 per accident occurrence (personal injury) / $100, 000 per accident occurrence (property damage) OR combined single limits of $1, 000 per occurrence – Moderate Risk • CGL & PL - $500, 000 / $1, 000 • Auto - $500, 000 / $1, 000 / $100, 000 – High Risk • CGL & PL - $1, 000 / $2, 000 • Auto - $500, 000 / $1, 000 / $100, 000 – Property – Replacement Cost – Workers’ Compensation – Statutorily Defined

Insurance Requirements (cont. ) • General Insurance Provisions – Evidence of Insurance – Certificates with specified attachments & amendments – Primary Coverage – Acceptability of Insurer – Deductibles & Retentions – Additional Insured Status – Notice of Cancellation

Insurance Requirements (cont. ) • Insurance Concerns – CGL excludes supervisory acts of the organization – Contractor purchases the wrong coverage – Coverage is in excess of the organization’s – “Claims made” vs. “Occurrence” coverage – Fails to name the organization as additional insured – Coverage lapses

Insurance Requirements (cont. ) • Compliance with Workers’ Compensation Act • Model language and guidelines can be found on SPB and Risk Management/Tort Defense Division’s websites.

Supporting Statements & Requirements • Contractor Registration – Construction contractors must be registered with DLI (39 -9 -201, MCA) – Required for all construction -like projects over $2, 500 (combined value of labor and materials) – Must confirm prior to contract award – Questions? Call DLI at 444 -7734

Supporting Statements & Requirements (cont. ) • Public Contractor’s Gross Receipts Tax – “Public Construction Work” over $5, 000 must withhold 1% (15 -50 -206, MCA) – Applies to all public contracts at every level of jurisdiction – Notification forms must be sent to Department of Revenue and the contractor – MOM 1 -0720. 30, page 64

Supporting Statements & Requirements (cont. ) • Prevailing Wage – Required for all “public works contracts” over $25, 000 – Includes construction and non-construction services – Rates must be included in the solicitation and the contract – The Department of Labor and Industry must be notified when the project is complete – Failure to include this language could result in penalties being assessed against the issuing entity

Supporting Statements & Requirements (cont. ) • Special Circumstances – Organization special requirements – Buy “Green”, use “Energy Star” Program • Text of RFP or IFB Must Be Consistent with "Boilerplate" Language & Contract

Bid/Proposal Security and Contract Performance Security • Bid or proposal security guarantees vendor will honor bid or proposal and enter into contract if selected. • Contract performance security is provided for the fulfillment of contract obligations. • Contract performance security is required for construction projects over $50, 000. MOM 1 -0718. 00, page 53

Contract Performance Security (cont. ) • Contract security provides for: – Faithful performance of the contract – Payment of workers and suppliers

Contract Performance Security (cont. ) • Types of Security – Surety bonds – Irrevocable letters of credit – CD’s or money market certificates assigned to the contracting entity – Certified checks, money orders, cash – NO personal or business checks

Contract Performance Security (cont. ) • Decision to Require Contract Performance Security – Nature of contract – Potential cost of completing contract – Past history of similar contracts

Contract Performance Security (cont. ) – Can the organization afford to self-insure? – Number of workers, suppliers involved – Are subcontractors involved? – Other contract management tools in place?

Contract Enforcement • Receipt and Inspection of Supplies – “Let the Buyer Beware” – All organizations must inspect and receive supplies shipped directly to them • Is the item broken or damaged? • Is it the correct item? • Correct quantity? • Does it meet the specifications? MOM 1 -7024. 00, page 77

Contract Enforcement (cont. ) • Contract Monitoring - track contract information – vendor name, – description, – duration, – renewals, – insurance requirements, – contact information, – special requirements MOM 1 -0725. 00, page 79

§ Contract Enforcement means paying attention to things like: üAre deadlines being met? üAre deliverables coming in at the level of standard anticipated in the contract? üAre payments being made according to contract provisions? üAre contract modifications being made that are well-documented and comprehensive? üAre problems being addressed as soon as they are perceived? üIs the organization meeting regularly with the contractor to assure good communication?

Contract Enforcement (cont. ) ü Does the contractor understand exactly what is expected? Is it time to terminate the contract? ü Is work being verified as to its completeness? ü Are checklists being used to communicate contract progress? ü Are progress reports coming in as required? ü Is it time to get an attorney involved? ü Is the organization meeting its contractual obligations? ü It is the contracting organization’s responsibility to ensure that all contract requirements are being met. ü Remember: the contract is only as good as the enforcement!!!!!

CERTIFIED PROCUREMENT PROFESSIONAL (CPP) It’s all in the fine print of the contract… “It has long been an axiom of mine that the little things are infinitely the most important. ” - Sir Arthur Conan Doyle Author, “The Adventures of Sherlock Holmes”