Contracts and Purchasing AASBO Certificate Program April 21 and 22, 2014 David Smith 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 2014 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 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 1
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 2
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 3
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. Items Exempt from Requirements (cont.) Purchases of goods made as a part of any purchasing cooperative sponsored by the National Association of Counties its successor organization, or any other competitive bid nationwide cooperative purchasing program, or other national or regional governmental cooperative purchasing program. Act No. 2012-557 Purchasing Cooperative Section 16-13B-2 (13) Section 16-13B2 (13) Purchases of goods made as a part of any purchasing cooperative sponsored by the National Association of Counties, its successor organization, or any other competitive bid nationwide cooperative purchasing program, or other national or regional governmental cooperative purchasing program. This subdivision shall not apply to goods for which a service or service contract, whether subject to competitive bidding under this chapter or not, is necessary to utilize the goods. Such purchases may only be made if all of the following occur: 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. 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. 4
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 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 Documentation of Results 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. 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 5
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. Section 16-13B-1 Applicability; local preference zone; joint agreement; bid bond (b) Prior to advertising for bids for an item of personal property, where a city or county board of education, thereof is the awarding authority, the awarding authority may establish a local preference zone consisting of either the legal boundaries or jurisdiction of the awarding authority, or the boundaries of the county in which the awarding authority is located, or the boundaries of the core based statistical area (CBSA) in which the awarding authority is located. If no such action is taken by the awarding authority, the boundaries of the local preference zone shall be deemed to be the same as the legal boundaries or jurisdiction of the awarding authority. In the event a bid is received for an item of personal property to be purchased or contracted for from a person, firm, or corporation deemed to be a responsible bidder, having a place of business within the local preference zone where a city or county board of education, thereof is the awarding authority, and the bid is no more than three percent greater than the bid of the lowest responsible bidder, the awarding authority may award the contract to the resident responsible bidder. In the event only one bidder responds to the invitation to bid, the awarding authority may reject the bid and negotiate the purchase or contract, providing the negotiated price is lower than the bid price. Procedures for Reverse Auction and Life-Cycle Costs 6
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. 7
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 8
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 9
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 16-13B-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 10
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. 11
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 Consult with legal council and building commission!! 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 12
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) 13
Project Under $50,000 Request for quotes/estimates In writing District letterhead Define scope of work Require license /insurance Signed estimates Signed contract Treat like a bid without advertising requirements Public Works Law Law Questions??? When faced with questions- Seek advice Legal Council Examiners of Public Accounts Alabama Building Commission Items Exempt from Requirements 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. Preparing a Request For Proposal(RFP) AASBO Electronic Resource Center RFP seeks the best product or service at competitive prices Should be used for all services not applicable to competitive bid law Price is not the only driver Evaluation tool for determining the best fit, best service and best product Always ask for references Consider RFI first Best Practice Utilize the Electronic Resource Center Preparing the RFP Do your research and define the service you are seeking (Scope) Determine how you will distribute RFP Provide the necessary information for vendors to respond ( clear and concise) Establish a reasonable timeline Hold pre proposal meeting to answer questions Identify the information you need and the proposal format Make addendums to RFP if needed Determine the evaluation criteria up front Sourceshttp://www.confluentforms.com/2009/06/6 steps to writingbetter request for.html http://www.werc.org/assets/1/assetmanager/rfpwritingguide.pdf 14
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 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 $ 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 15
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 National Cooperatives Regional co-ops State Bids Joint purchasing contracts RFP for professional services Banking, Engineers, Architects Specifications Who should be involved? Knowledgeable Users Vendors Professionals Finance Other Agencies Purchasing Legal? Recommended purchasing practices Use technology to improve procurement Use procurement/purchasing cards 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 16
Specifications Insurance 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 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 17
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 Alabama Ethics Law Code of Alabama (Section 36 25 1 36 25 30) http://ethics.alabama.gov Conflict of Interest Does it meet the smell test Always check with your Board Attorney Contact the Ethics Commission Questions? Contracts and Purchasing AASBO Certificate Program April 21& 22, 2014 David Smith 18