COMPETITIVE SMALL PROCUREMENTS BUT AS NOTED HEREAFTER SOME
COMPETITIVE SMALL PROCUREMENTS BUT, AS NOTED HEREAFTER, SOME OF THE CONTENTS OF THESE SLIDES APPLY TO SOLE SOURCE AND EMERGENCY SMALL PROCUREMENTS
MDH PRESENTERS Dana Dembrow Joel Leberknight ØMDH Chief of Procurement ØRetired State employee ØAttorney ØFormer State Delegate Ø 10 years as 1 of 3 Members of the Maryland State Board of Contract Appeals Ø Rendered formal decisions on Procurement Protests and Claims filed by vendors Ø Authored almost all decisions (verdicts) during that time 11/2017 Copyright © Maryland Department of Health (Unpublished Work) 38 years full time; 4 years part time. (17 years full time and 2 years part time at MDH) Ø 35 years of Maryland procurement experience, including: Over 8 years as Chief of Procurement at MDH (DHMH) Almost 17 years as Chief of Procurement at the Dept. of Budget & Management (DBM) 2
DETERMINED BY DOLLAR VALUE ONLY; NOT COMPLEXITY • For all State agencies*, a Small Procurement is one that does not exceed $50, 000 in amount • For the full duration of the resulting contract, including any renewal options • Without artificially dividing the scope of the procurement to keep the award below $50, 000 *DGS and MDOT can do construction procurements up to $100, 000 as small procurements Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 3
SPEED, SIMPLICITY & COMPETITION SMALL PROCUREMENT HALLMARKS • Speed • The Minimum required timeframes for conducting small procurements range from 1 to 3 days, depending on which of the 3 small procurement categories applies • Although often it is prudent to allow more time than this to spur competition • Several weeks might be allowed for relatively complex small procurements approaching $50, 000 in value and requiring a proposal response Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 4
SPEED, SIMPLICITY & COMPETITION SMALL PROCUREMENT HALLMARKS (CONT’D) • Simplicity • All content should directly apply to the procurement and should be essential in describing • • What is needed When it’s needed How and when responses are due How an award will be made • There almost no required clauses and no template, per se • i. e. , there is nothing extraneous Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 5
SPEED, SIMPLICITY & COMPETITION SMALL PROCUREMENT HALLMARKS (CONT’D) • Competition • The objective of soliciting bids or offers is to foster competition in obtaining needed items in a cost effective manner. In all small procurements, competition should be sought to the extent practical considering factors such as availability of vendors, dollar value of the procurement, cost of administering the procurement, and time available to make the procurement including delivery time (COMAR 21. 05. 07. 06 A. (1)) Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 6
SOCIO-ECONOMIC OBJECTIVES • MBE • “…each procurement agency shall solicit bids or offers from a sufficient number of certified minority business enterprises…” 21. 05. 07. 06 A. (2) • Can also establish MBE goals for small procurements • Small Businesses • “…procurement agencies shall, consistent with law, attempt to solicit bids or offers from small businesses…” 21. 05. 07. 06 A. (4) • Can conduct small procurements as Small Business Reserve procurements • For small procurements for activities under the jurisdiction of DGS, can give a small business preference • See Section VII B 2 of the MDH Procurement Policy Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 7
NO-NO! ARTIFICIALLY DIVIDING • Reducing the duration or requested quantity of a procurement to try to stay below the small procurement dollar limit, when it is known or likely that 2 or more small procurements would need to occur in the same fiscal year or 12 month period to provide what is actually needed; e. g. , • Three, 4 month procurements for the same activity • Buying 100 of something 5 times when it is known that 500 will be needed during the next 12 months Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 8
ARTIFICIALLY DIVIDING (CONT’D) • Reducing the scope (quantity and/or duration) of a procurement: • Usually means paying higher prices • Foregoing economies of scale, quantity discounts, etc. • Involves extra work for State personnel • Includes trying to keep a procurement below $15, 000 so e. MM notice isn’t required • And perhaps only contacting a few favored vendors Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 9
ARTIFICIALLY DIVIDING (CONT’D) • Does not include doing a procurement for only a single fiscal year or 12 month period when it is known or likely that the need will continue past this duration • Despite the fact that economies of scale and quantity discounts will probably apply for longer durations Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 10
COMAR 21. 06. 03. 09 - MULTI-YEAR CONTRACTS • Requires a determination by the Procurement Officer before a multi-year contract is permitted, as follows: • Special production of definite quantities or the furnishing of longterm services are required to meet State needs • Estimated requirements cover the period of the contract and are reasonably firm and continuing • Serves the best interests of the State by encouraging effective competition or otherwise promoting economies • Also requires a clause that the contract will automatically be cancelled if funds are not appropriated in any fiscal year beyond the first Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 11
ANTICIPATED VALUE VS. ACTUAL AMOUNT • A procurement can be initiated as a small procurement if it is reasonably anticipated that the resulting contract award amount, including any available renewal options, will not exceed $50, 000 • If the actual price of a proposed award(s) would exceed $50, 000, in most instances the procurement has to be cancelled and done over as a regular (non-small) procurement Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 12
REASONABLY ANTICIPATED • Means more than just wishing and hoping • It means the procuring unit has a good reason to expect at least some of the resulting bids/financial offers to not exceed $50, 000 • Often this expectation is based upon history • Past award amounts for the same or similar goods or services • Regular procurements that did not exceed $50, 000 • Prior small procurements for lower quantities* or shorter durations, * since small procurements could not exceed $25, 000 prior to 10/1/2017 *That did not artificially divide what should have been regular procurements Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 13
REASONABLY ANTICIPATED (CONT’D) • Might mean stating in the solicitation that the award amount cannot exceed $50, 000 • But this is only valid if $50, 000 would reasonably accommodate the level of need within the same fiscal year or 12 month period • Otherwise this is just another form of artificially dividing the procurement to allow it to be done as a small procurement • And sometimes stating an amount such as this in the solicitation may lead to higher prices • If vendors think this is how much the State is willing to pay Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 14
ACTUAL AMOUNT • Everything is fine if at least one bidder/offeror submits a bid or proposal that does not exceed $50, 000, and the agency is OK with making an award to this/one of these vendors • i. e. , the small procurement process worked Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 15
ACTUAL AMOUNT (CONT’D) • Recourse if all bids/financial offers from vendors to which the agency is willing to make awards exceeds $50, 000 1. Do the procurement over as a regular (large) procurement 2. Declare an emergency and make an emergency award • In a true emergency situation, when something has to be done now to avoid or mitigate serious damage to public health, safety and welfare • There is no time for a re-procurement • Requires a report of the emergency declaration to the BPW 3. Use own personnel 4. Do without Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 16
ACTUAL AMOUNT (CONT’D) 5. Request the appropriate Control Agency to approve the proposed award from the small procurement solicitation, despite the fact that the award amount is over $50, 000 • Control agencies have the authority to approve an award for more than $50, 000 that results from a small procurement solicitation • At which point it ceases to be a small procurement • First, the MDH Secretary or designee must agree to make an award under these circumstances • If such internal approval is obtained, approval must then be obtained from the appropriate Control Agency Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 17
ACTUAL AMOUNT (CONT’D) • This authority of control agencies to approve awards over $50, 000 resulting from small procurement solicitations is rarely exercised because the control agency has to be convinced: • That it was appropriate to do a small procurement to begin with • It was reasonable for MDH to have initiated the procurement as a small procurement • There is positively no time to do the procurement over • What is needed doesn’t rise to the level that an emergency is justified • In 17 years at DBM, I might have exercised this authority twice • But I also remember refusing to do this and sending at least 1 retroactive small procurement over the small procurement level to the BPW for its approval of what was a voidable contract • A $37, 000 award versus the $25, 000 small procurement limit at that time Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 18
CONTROL AGENCY APPROVAL OVER $50, 000 • The proposed contractor needs to sign a legally sufficient contract with all large procurement clauses & required affidavits • If DBM is the control agency, all contracts over $50, 000 that do not appear on a BPW agenda for individual approval must be reported to the BPW on a Procurement Agency Activity Report (PAAR) • An over $50, 000 award resulting from a small procurement appearing on a PAAR likely would invite questioning from the BPW Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 19
WORDS TO THE WISE: MAKE SURE A SMALL PROCUREMENT WILL BE JUST THAT • Possible consequences of doing a small procurement that results in all awardable responses exceeding $50, 000 might be: • Wasted time and effort • The recommended contractor refusing to sign the State’s regular (large) procurement contract and affidavits • Possibly not having what is needed, when needed Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 20
3 SMALL PROCUREMENT CATEGORIES • There are 3 small procurement categories: 1, 2 and 3 • Category 1 is from $1 to $5, 000 • Category 2 is from $5, 000. 01 to $15, 000 • Category 3 is from $15, 000. 01 to $50, 000 • The significance of the categories involve: • The type of advertising or outreach • The minimum time to an award • The goal for competition • The required documentation Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 21
CATEGORY 1 SMALL PROCUREMENT (DOES NOT EXCEED $5, 000) • The award is based upon the procurement officer’s decision • The procurement officer is usually someone within the MDH unit or facility who has been authorized by OPASS to do small procurements • At this level the emphasis is on • • Getting what is needed fast Minimizing administrative expenses Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 22
CATEGORY 1 SMALL PROCUREMENT (DOES NOT EXCEED $5, 000 - CONT’D) • But in many instances the expenditure of several thousand dollars is a significant purchase • With the distinct possibility of substantial price or qualitative differences from vendor to vendor • And as per slide # 6, the default position is to attempt competition • Also, a Control Agency, such as DGS, may make small procurement delegation contingent upon making an earnest attempt at competition • MDH Procurement authority flows through 1 of the 3 Control Agencies • DGS, DBM and Do. IT • It is important to follow Control Agency dictates, or MDH’s authority to do small procurements may be revoked Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 23
CATEGORY 1 SMALL PROCUREMENT (DOES NOT EXCEED $5, 000 - CONT’D) • Other times, based upon experience, the procuring unit may believe there would be little difference among vendors in terms of price or quality or timeliness of performance • It is presumed that whoever is entrusted to be a procurement officer or make a purchasing decision at this level will make a rational purchasing decision • • They will know which vendors generally have lower prices, better service, faster delivery, etc. And be capable of deciding when making a concerted effort at competition is merited versus not Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 24
CATEGORY 1 SMALL PROCUREMENT MINIMIZING ADMINISTRATIVE EXPENSES • The possibility is that the perceived potential cost difference among vendors offering what is needed is less than the cost in personnel time to try to get a lower price i. e. , it doesn’t make sense to spend several hours of personnel time, at a fully loaded (including the costs of benefits, leave time, pension, etc. , in addition to the direct wages) cost of $100 or more to try to save $25 or $50 • • The juice isn’t worth the squeeze! Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 25
CATEGORY 1 SMALL PROCUREMENT (DOES NOT EXCEED $5, 000 – CONT’D) • Can be conducted (solicited)orally or in-writing Orally: • In-person transaction at vendor’s place of business Calling vendors on the phone • • • If do this should have a script so all vendors are given the same information In-writing • • • Specifications as described in this class Provided to each potential bidder/offeror Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 26
CATEGORY 1 SMALL PROCUREMENTS (DOES NOT EXCEED $5, 000 – CONT’D) • Award Time-frame • • There is no stated minimum timeframe in COMAR for Category 1 small procurements This means that an award can be made whenever the procuring person determines it is appropriate to do so, including: No attempt at competition As soon as 2 bids/proposals are received, or 1 bid/offer is received and the circumstances described on slide 37 apply i. e. , potentially an award can be made within a few hours, 1 day, Etc. But to enhance the likelihood of getting multiple viable bids and especially offers, several days might be permitted before responses to a Category 1 small procurement solicitation are due Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 27
CATEGORY 1 SMALL PROCUREMENT (DOES NOT EXCEED $5, 000 - CONT’D) • Can transact via: 1. 2. 3. 4. A cash register receipt or similar vendor provided receipt The Corporate Purchasing Card (CPC) A Purchase Order A small procurement contract • Evidence of the procurement is the same as above, as well as • Packing slips • CPC billing statements Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 28
CATEGORY 2 SMALL PROCUREMENTS (5, 000. 01 TO $15, 000) • How Conducted • Can be conducted (solicited) orally or in-writing • Except for simple procurements, written solicitation is recommended • There should be a serious attempt at competition • Try to get at least 2 actual responses that are • • Responsive (if bids are requested), or Acceptable (if proposals are requested) • Should contact more than 2 vendors if necessary to get 2 responsive or acceptable responses or to get better responses • Unless there are no known additional vendors in this area of work; or, • Unless there is absolutely no time for additional contacts Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 29
CATEGORY 2 SMALL PROCUREMENTS (5, 000. 01 TO $15, 000 – CONT’D) • Basis for Award How an award selection is made • • As stated in the solicitation, the basis for award can be A. Most favorable bid price • Lowest bid or highest bid for revenue producing contracts B. Most advantageous offer • Best combination of technical offering and price • Both concepts are discussed more in the Competitive Small Procurement Outline Template for Services document which is a handout for this class Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 30
CATEGORY 2 SMALL PROCUREMENTS (5, 000. 01 TO $15, 000 - CONT’D) • Award Time-frame There is no stated minimum timeframe in COMAR for Category 2 small procurements This means that an award can be made • • • As soon as 2 bids/proposals are received, or 1 bid/offer is received and the circumstances described on slide XX apply i. e. , potentially an award can be made within a few hours, 1 day, Etc. But to enhance the likelihood of getting multiple viable bids and especially offers, several days might be permitted before responses to a small procurement solicitation are due Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 31
CATEGORY 2 SMALL PROCUREMENTS (5, 000. 01 TO $15, 000 - CONT’D) • Written contract • There must be some type of written contract 1. A Purchase Order, or 2. A small procurement contract • If a purchase order is used it must contain the clauses contained in the MDH small procurement contract, which is attached as a handout Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 32
CATEGORY 3 SMALL PROCUREMENTS ($15, 000. 01 TO $50, 000 • Must use a written solicitation • A description of what is to be purchased • Must post notice in e. MM at least 3 days before responses are due • • While not specifically stated, as a practical matter these should be 3 working days The resulting award does not need to be posted in e. MM • Aside from using a written solicitation and the 3 days e. MM posting, all provisions described on prior slides for a Category 2 small procurement apply Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 33
SMALL PROCUREMENT CONTRACT REQUIREMENTS 1. Name of parties (MDH & the seller/contractor) • Include the seller’s tax ID # or social Security # 2. Begin & end dates, purchase/delivery date 3. Specifications (Scope of Contract) • Description of what was/is to be purchased 4. The Price or not-to-exceed dollar value of contract 5. Name of Procurement Officer Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 34
SMALL PROCUREMENT CONTRACT REQUIREMENTS (CONT’D) 6. This clause: • “The Contractor shall comply with the provisions of State Finance and Procurement Article, Title 19, Annotated Code of Maryland” • SF & P Title 19 concerns Commercial Non-Discrimination • In addition, there are 8 abbreviated, suggested clauses • These 8 suggested clauses and the above required clause (#6) are included in the MDH small procurement contract, which is a handout to this class • The termination for non-appropriation clause discussed earlier is one of these clauses Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 35
SMALL PROCUREMENT CONTRACT REQUIREMENTS (CONT’D) • A MDH Assistant Attorney General has given a blanket legal approval form and legal sufficiency to this MDH Small Procurement Contract • However, it may be desirable to submit an individual contract for legal approval if there any significant changes or additions to the Small Procurement Contract • And never agree to (sign) a vendor contract without first obtaining OPASS and OAG approval • Which will only be given in the unlikely event the contract has provisions beneficial to the State Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 36
SINGLE RESPONSE • An award can be made if only one responsive bid or acceptable offer is received in response to a solicitation if the procurement officer determines that the price submitted is fair and reasonable, and that the other vendors had reasonable opportunity to respond • Would apply when there was a written solicitation with a specified response time and date Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 37
TIE BIDS • Handled as described in COMAR 21. 05. 02. 14 Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 38
SOLE SOURCE SMALL PROCUREMENTS • For a sole source small procurement there is no solicitation to draft and no distribution, other than to the contractor • The small procurement contract as previously described would be used, unless it is deemed desirable to additional clause • There would be no advertising in e. MM, either before or after the award Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 39
EMERGENCY SMALL PROCUREMENTS • Given the fact that a small procurement of up to $15, 000 can be awarded basically the same day as vendors are solicited, it would be very unusual to have an emergency small procurement of anything below this amount • Between $15, 000 and $50, 000 an emergency award is possible if a good or service was absolutely needed in less than 3 working days to avoid or mitigate serious damage to public health, safety or welfare • Need to attempt competition, limit the emergency in duration and scope to just what is needed to alleviate the emergency condition and use the small procurement contract Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 40
SMALL PROCUREMENT MODIFICATIONS • Small procurements can be modified with the consent of the parties, the same as any other contract • If a modification would cause a small procurement contract to exceed the small procurements limit: • Aside from a description of what is being modified • It is also necessary to add all clauses and affidavits that are required for a regular, over $50, 000 contract, because it will cease to be a small procurement • And obtain legal sufficiency for the modification, the approval of OPASS, the approval of the appropriate Control Agency if now over that Control Agency’s delegation level to MDH ($50, 000 from DGS and Do. IT and $100, 000 from DBM) and, if now over $200, 000, BPW approval Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 41
SMALL PROCUREMENT RECORDS • Must be kept for the later of: • 3 years after final payment, or • An audit by the Legislative Auditors Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 42
SMALL PROCUREMENT RECORDS (CONT’D) • For Category 1 oral contracts must contain: • The name & phone number of person expending funds • Receipt, invoice, repair order, packing slip or voucher • Date of award • Name & address of contractor • Description of item(s) procured Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 43
SMALL PROCUREMENT RECORDS (CONT’D) • For all other small procurements, must generally contain: • Date of award • Name & address of contractor • Name & phone number of the procurement officer • Purchase order or contract • Receiving documentation • Description of item(s) purchased • Copy of bid board notice, if used Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 44
CATEGORY 2 AND 3 REQUIRED SMALL PROCUREMENT RECORDS • Names of vendors solicited directly • Copies of written bids or offers • Signed statement from procurement officer detailing the basis for award • Copy of written solicitation • Copy of e. MM notice and any other advertising • Identification of MBE and small businesses directly solicited • If applicable, an explanation why only 1 response was received • If applicable, why a sole source was justified • Fund certification for a category 3 small procurement Small Procurement Class Copyright 11/2017 - Maryland Department of Health (Unpublished Work) 11/13/2017 45
- Slides: 45