Post on 24-Aug-2020
Spring 2017Spring 2017
PACPAC--CCIT SummitCCIT SummitHosted By:y
State Purchasing and Contracts Office
“WORKING TOGETHER”
• SPCO Team
• New Procurement Officials
• First time attendees
• Exec PAC Nominations
EXEC PACEXEC PAC
Group II NominationsGroup II Nominations
Holly HammelDOC
Brenda LujanDOLA
Kim EisenHCPF
Leslie WilliamsDOL
Maggie VanCleefDNR
Joshua BennDPA
Michael CarraraHistory
John WeberDORA
Lisa McGovernDPHE
George KelleyCDPS
Thirza KennedyOIT
Colette DeSonierDOT
Dan HuseCDA
Procurement Modernization bill passes unanimouslypasses unanimously
Gov. John Hickenlooper signs HB 17‐1051 April 4, 2017.
PROCUREMENT MODERNIZATION ACT
• Terminology/Definitions
• Rule-making permissive
Ethics• Ethics
• Procurement trainingProcurement training
• Application of the Code
• Grants
PROCUREMENT MODERNIZATION ACT
• Contracts – multiyear, CMS, terms and conditions
• Market research
Administrative remedies• Administrative remedies
• Confidentiality and CORAConfidentiality and CORA
• Set asides and preferences
• Cooperative purchasing
Can’t Play Video?Can’t Play Video?
NEW POLICIES ISSUED
• Content – Mandatory Provisions in State Contracts
• Model Contracts
• Signature Authority Delegation
f• Signature Page – Form Of
• Statutory Violations• Statutory Violations
FISCAL RULE UPDATES
• Fiscal Rule working group meeting to modify all fiscal rules
• Agencies not in the working group can be part of review group
C t d ft bi ll t t d PO fi l • Current draft combines all contract and PO fiscal rules into Chapter 3
• Working group has reviewed and updated about 1/3 of the rules1/3 of the rules
FISCAL RULE UPDATES
• IT template and associated policy with OIT for internal review and approvalinternal review and approval
• Grant template input received earlier this week p pand are being reviewed internally
G f i fi d f o Grant agreement for private non-profit and for profit entities
o Intergovernmental Grant for our political subdivisions because of their unique risk profile
State Price Agreement Review Committee
• Will review expiring contracts and consider new contracts and categoriescontracts and categories
• To help SPCO make informed decisions about the pportfolio of State Price Agreements
• Representatives from city and county governments, school districts, institutes of higher education, and state executive agenciesstate executive agencies
Procurement Training
• Course catalog has been created
• 30 classes identified
• More training needs to be identified as we begin the rulemaking review
Procurement Rulemaking Process
• Code effective early August 2017
• SPCO to do pre-work prior to Departments joining the process after mid-Julyj g p y
The Office of Management and Budget (OMB)
• State Controller’s Guidance on OMB has to be updatedhttps://www.colorado.gov/pacific/osc/omb-guidancehttps://www.colorado.gov/pacific/osc/omb guidance
• OMB Subrecipient Guidance Group
Grants
• Draft Grant Policy
A Changing Regulatory LandscapeA Changing Regulatory Landscape
A Changing Regulatory LandscapeA Changing Regulatory Landscape
A Changing Regulatory LandscapeA Changing Regulatory Landscape
A Unique SolutionA Unique Solution
2008 - Local physicist develops a potential solution
• Smaller than other systems
• Much cheaper than estimated costs of existing solutions
• Never tested
• Needed funding
New RegulationsNew Regulations
• EPA announces major new regulations for drinking water
• Go in to effect December 2017Go in to effect December 2017
The Sole Source
2011 – Elected to award a Sole Source contract to the physicist’s company
• Outside engineering firm had twice studied possible options
• Caused political upheaval
• Ethics investigations
“This is like saying McDonald’s is the only fast food franchise where you can get a f f f y ghamburger because they put special sauce on their Big Mac”
The Contract
• Sole Source contract was $73.5M
Not incl ding the initial $22 million in f ndingNot including the initial $22 million in funding
• Written as Cost-Plus 15% with no total cap
• Gave Water Authority 3% of future system sales and 5% future licensing proceeds
Estimated profit of up to $200 million
• Local Paper- Greatest seed of economic development p pin decades. Could lead to 100s of new jobs.
The Construction Phase
• Initial estimates for the entire project= $111M
$73.5M Engineering/Design
$37.5M Construction
• Construction split in to three phases, each with its own solicitation
Phase I- many responses, only one under budget
Phase II- fewer responses Phase I winner awardedPhase II- fewer responses, Phase I winner awarded
Phase III- 1-2 responses, Phase I & II winner again awarded.
Questions?
The Aftermath
• Project total costs rose sharply starting in 20132013Increased commodity costs
Increased personnel costs
• In response the City Auditor recommends that • In response the City Auditor recommends that the Authority develop management plan.
• Also request that cost increases be formally recorded via amendment or change orderg
The Aftermath
• Project costs continued to rise
S l S i h h i i ’ • Sole Source contract with physicist’s company rose from $73.5M to $93.5M by 2016
C i l $8M• Construction contracts also rose over $8M
Contract I- awarded at $14M, projected to reach $18M
Contract II- awarded at $7.8M, projected to reach $8.3M
Contract III- awarded at $15M, projected to reach $18.8
• Overall project cost estimates rose from $111M to over $180Min 2017
The Aftermath
• Physicist’s company has made no other sales of their new system, and the Water Authority remains their only customery y
Company appears no longer active
• System goes online and Water Authority takes ownership in fall 2016.
Some conflicting reports as to whether the new system has reduced pollution as expected. Legal action has been threatened or is pending
• Some of the regulations are expected to be repealed by new administration
The Aftermath
• Legal Issues
Construction contractor suing over imposition of liquidated damages
l fil d i f i Local attorneys filed notice of intent to file suit against Water Authority for breach of fiduciary duty for improper sole source.
The Sole Source• Overall project costs rose from $111M to $180M+
• Conflicting reports that system is working as expected
• Numerous legal actions either pending or threatened
• Some regulations expected to be repealed
What went wrong?g
• The Sole Source
• The Contract
• The Procurement Plan for Construction
• Contract Management
What went wrong?What went wrong?
The Sole Source The ContractThe Sole Source The Contract
Was it Legitimate? Cost-plus with no not-to-exceed amountamount
Would you have approved it? Is this appropriate for this type of project?
Why or why not?
What went wrong?What went wrong?
The procurement plan for Contract Admin/ManagementThe procurement plan for construction phases
Contract Admin/Management
Was this the best way to structure Cost-plus with no not-to-exceed amountthe procurement phases? Cost-plus with no not-to-exceed amount
How else could they have structured the procurement? Is this appropriate for this type of project? the procurement?
Questions?
COLORADO COLORADO SCANDALS
DNR CORE MISSION PROJECT
Maggie Van CleefMaggie Van Cleef
Purchasing Director
D t t f N t l RDepartment of Natural Resources
CORE Mission ProjectCORE Mission ProjectSetting the Sceneg
Governor Bill Owens – (1999-2007)
First republican governor in 24 years, after the twelve-year administration of Governor Roy Romer
A i d G W l h D f N l Appointed Greg Walcher as Department of Natural Resources Executive Director (2000-2004)
Setting the SceneSetting the Scene
Under Walcher there was a gradual replacement of li i i i h E i Di ’ most policy positions in the Executive Director’s
Office (EDO) and directors of divisions in the Department
(Amendment S passed in November 2016, making most policy positions in offices of executive directors political appointments This was not the directors political appointments. This was not the case in 2000)
Setting the SceneSetting the Scene
Mistrust between new management and the “rank d fil ” l d l dand file” employees developed
Nationwide recession and TABOR limits reduced Colorado’s Budget Colorado s Budget
As a pro-active measure to expected budget cuts, Walcher’s team issued an RFP for an efficiency study
Request for ProposalsRequest for Proposals
RFP# PAA-303S issued on April 7, 2003, -- a shortened solicitation time was approved by the Purchasing solicitation time was approved by the Purchasing Director
Work scope: “…to research and analyze department operations with the goal of quantifying the proper number of staff and supervisory levels needed for effective Department operations and to reduce operating expenses by consolidating functions and programs.”
RFP outlined an aggressive performance timeline from gg p f fMay 19, 2003 – October 21, 2003
Identified a budget of $150,000
Request for ProposalsRequest for Proposals
The RFP closed on April 28, 2003 and 16 proposals i dwere received
Evaluators used a numeric scoring system
R f h k d References were checked
Evaluators ranked Alta Ventures as the most advantageous proposaladvantageous proposal
Award was made to Alta Ventures, LLC on
May 7 2003May 7, 2003
Proposal FeaturesProposal Features
Alta Ventures- firm partners had a background in i l i d h i i d strategic planning and change in private and non-
profit sectors
Key Stakeholder Team Key Stakeholder Team
Involvement of managers throughout the department
Idea generation and tracking with a final report
Price a) $150,000 or b) $100,000 with 2% of impact savings
ContractContract
DNR chose b) $100,000 with 2% of impact savings
Contract included a payment of $100,000 over two fiscal years and a 4% payment of impact savings over three years capped at $800 000over three years, capped at $800,000
Contract outlined a complex methodology to calculate impact savings
Contract was approved and work began
Project was branded: “CORE Mission Project”
CORE Mission ProjectCORE Mission ProjectImplementationp
Project Structure Functional Teams included Teams from all
administrative support areas (HR, Accounting, Purchasing Budget IT) and for each DNR DivisionPurchasing, Budget, IT) and for each DNR Division.
Functional Teams generated ideas
CORE Steering Committee reviewed ideas and gave CORE Steering Committee reviewed ideas and gave feedback – Made final decisions on ideas
CORE Mission ProjectCORE Mission ProjectImplementationp
Idea Generation/Evaluation Functional Teams met and broke out how time is
spent (purposes)
Brainstormed hundreds of ideas for change for each based on purposes of the work unit
Ideas were recorded and evaluated in an intranet Ideas were recorded and evaluated in an intranet system in phases
In each phase feasible ideas were passed on to p pnext phase, and those not deemed feasible were dropped
Idea Generation/Evaluation Evaluation included feasibility assessments, assigning
projected costs and savings
Idea Types:
Cost savings (FTE)
Income generation
Technology investments (resulting in cost savings)
E h id tt d th h th K St k h ld T Each idea was vetted through the Key Stakeholder Team
CORE Mission ProjectCORE Mission ProjectImplementationp
Idea Generation/Evaluation DNR managers and employees led and staffed the
functional teams
DNR IT staff created the intranet tracking software and calculated IT costs
Ideas generated could be sent to other more Ideas generated could be sent to other more relevant functional teams
IdeasIdeas
IdeasIdeas
CONTROVERSYCONTROVERSY
Articles began appear in the Rocky Mountain News
State employees gave negative information to newspapers
25 i l f 7/28/2003 12/26/2003 25 articles from 7/28/2003 – 12/26/2003
CONTROVERSYCONTROVERSY
Legislature weighed in negatively: Added contracts associated with the CORE Mission
Contracts were criticized
Contingency nature of the payment was contentiousg y p y
Paying contractor for possible fee increases was repugnant
Contract settlement negotiated by the Governor, AG and Controller paid $300,000. Future pcontingency payments were removed from the contract
L i l tiLegislation
24-17-203 through -205 C.R.S. Enacted in the 2004 legislative session
Contingency contracts must be reviewed and approved by the by Office of state Planning and Budget before they can be executed
LegislationLegislation
24-17-203 through -205 C.R.S.D fi i i (24 17 203 C R S )Definition (24-17-203 C.R.S.):
(1) "Contingency-based contract" means a contract entered into by a state agency and a vendor for services that:that:
(a) Requires all or part of the vendor's compensation to be computed by multiplying a stated percentage times the amount of measurable savings in the state agency's amount of measurable savings in the state agency s expenditures or costs of operation that are demonstrably attributable to the vendor's services under the contract; and
(b) Is entered into without the authority of a state statute that specifically authorizes the agency to enter into such a contract.
Lessons LearnedLessons Learned
Partisan Politics Leaders and classified employees need to be aware
of pitfalls when administrations transition
Listen to the other side
Find commonality
Build relationships
Will the changes of Amendment S help?
Lessons LearnedLessons Learned
Partisan Politics The Reunited State of America: How We Can Bridge
the Partisan Divide by Mark Gerzon (book)
Two Paths: America Divided or United by John Kasich (book)
Lessons LearnedLessons Learned
Disagreeing With a Boss or Leader Respect boss’s position-raise issues but let your
boss decide
Establish permission to disagree early on in your relationship
Discuss in private request a one on one meeting Discuss in private – request a one-on-one meeting
Lessons LearnedLessons Learned
Disagreeing With a Boss or Leader Monster.com: “How to disagree with your boss
without loosing your job” by Denene Brox (internet article)article)
Harvard Business Review: “How to Disagree with Your Boss” by Joseph Grenny (internet article)y p y ( )
Google: disagree with your boss
Lessons LearnedLessons Learned
Whistle Blowing The Whistleblower Protection Act of 1989, Pub.L.
101-12 as amended, is a United States federal law that protects federal federal law that protects federal whistleblowers who work for the government and report agency misconduct.
A whistleblower is a person who exposes an illegal act by an employer
D h k J b di i h Do your homework: Just because you disagree with an act does not mean it is illegal
Questions?Questions?
Training Sessions
Title Facilitators Room
Working Together to Incorporate Subject Matter Expertise
Greg GarnerTara LarwickRuth Allender
Blue Spruce
Working Together to Promote Effective Oversight
Nick SevernChristine WeberElyssa Baczuk
Evergreen AElyssa Baczuk
Working Together to Ensure Compliance with the Rules
Joe WeberAmy Risley Evergreen BCompliance with the Rules y y
Brooke Dunng
iBreakout Session #110:55 11:4010:55 – 11:40
Can’t Play Video?Can t Play Video?
Training Sessions
Title Facilitators Room
Working Together to Incorporate Subject Matter Expertise
Greg GarnerTara LarwickRuth Allender
Blue Spruce
Working Together to Promote Effective Oversight
Nick SevernChristine WeberElyssa Baczuk
Evergreen AElyssa Baczuk
Working Together to Ensure Compliance with the Rules
Joe WeberAmy Risley Evergreen BCompliance with the Rules y y
Brooke Dunng
iBreakout Session #21:30 2:151:30 – 2:15
Afternoon BreakAfternoon Break2:15 – 2:302:15 2:30
Common Issues Common Issues d Di id Di iand Discussionand Discussion
What is the best way to handle click through agreements?
What is the impact of procurement What is the impact of procurement modernization on their terms?
Vendors are unwilling to change click-through forms for small and Vendors are unwilling to change click through forms for small and isolated purchases.
O i 1 PO h ifi ll h li k h h Option 1: Issue a PO that specifically negates the click-through agreement or at least negates the objectionable terms (even if the purchase otherwise doesn't need a PO).
Option 2: If vendor will not accept PO, then review the terms of the click-through agreement determine the risk then either a) the click through agreement, determine the risk then either a) request a fiscal rule waiver for the impermissible terms if the risk is zero or extremely low.
Option 3: When the new procurement code is effective, inform vendors that impermissible terms are statutorily negated. NOTE: Do give notice of the statute, to avoid argument over whether State meant to waive the statute.
How do you handle sole sources that are inevitable; for example, procuring IT
products/services that in 5 years could be argued only the incumbent can
i t i h t g i g f d maintain or host going forward.
To procure a new system may not be To procure a new system may not be fiscally reasonable or responsible.
When developing your original procurement need:
• Consider what’s most favorable to the State
• Brand name or equal specifications
• Will this leave a sole source situation?
• Include subject matter experts early on
• Request bid responses to include descriptions of ongoing costs beyond product delivery, system completion, etc.
• Request bid responses to include transition plan for transference under new contract
At i i k th St t th t h it’ • At minimum, make sure the State owns the system when it’s completed
• May require longer term contractMay require longer term contract
• Establish up front
• Price should include any ongoing costs• Price should include any ongoing costs
What does SPCO look at when approving contracts beyond 5 years?
24-103-503 CRS allows multiyear contracts (up to 5 )years)
• Determination from agency purchasing office• Determination from agency purchasing office
• Best interests of the stateBest interests of the state
• Term MUST be included in the solicitation
• Funds available
P t R l R 24 103 503 ll lti Procurement Rule R-24-103-503 allows multiyear contracts (in excess of 5 years)
• Written approval from State Purchasing Director
• Best interests of the state
• Term MUST be included in the solicitation
C diti f l dd d t i l d • Conditions of renewal are addressed to include pricing increases/decreases
• Funds available
Can you provide examples of performance standards for quality,
timeliness, and cost (related to CMS)?
What are tips, tricks on evaluating contractors?contractors?
Deciding what you want to measure for performance really needs to g y p ystart with the drafting of the solicitation. This can be very challenging depending on what is being purchased. There are many ways you can evaluate performance.y y p
Reference the document titled How to Track Vendor Performance available on the CMS website at: available on the CMS website at: https://www.colorado.gov/pacific/osc/cms
• Standards for Quality – compliance, conformity, reliability, support, state-of-the-art
• Standards for Timeliness – time, quantity, lead time, documentation
S d d f C bili • Standards for Cost – stability, accuracy
What parts of the template contracts require OSC approval to modify and which can be changed at the discretion of the agency?
How much can we change the template Statement of Work language?Statement of Work language?
Th i b d f h i l l l d The main body of the contract is legal language used to protect the state and so should only be changed in accordance with the document comments unless OSC accordance with the document comments unless OSC approval is obtained.
The SoW section may be changed at the discretion of the contract drafter. The SoW template as provided by OSC is there to serve as a (hopefully) helpful guideline and is not there to serve as a (hopefully) helpful guideline and is not a mandatory format.
The only time a SoW requires OSC approval is when it conflicts directly with the terms of the main contract.
Can you provide an explanation of when the Can you provide an explanation of when the 2-month holdover period permitted on the OSC personal services contract template
should or should not be used?
The two month “End of Term Extension” provision at Section 2.D. of the personal services contract template p pis designed to permit you to keep your contract in effect up to two months longer. If your contract is about to terminate and you had planned to replace it or modify terminate, and you had planned to replace it or modify it, but an emergency happened and you’re becoming worried that you’re running out of time, you can submit y g , ya notice to extend for up to two months.
Th t th “E d f T E t i ” i i t The two month “End of Term Extension” provision may not be used if the contract, its then current term, expires. The contract must still be in effect for you to send out ythe notice to extend for two months.
Wrap Up
www.colorado.gov/spog p