Bidding and Bidding and ProcurementProcurement

Presentation 12:Presentation 12:The Composting ToolkitThe Composting Toolkit

Funded by the Indiana Funded by the Indiana Department of Department of Environmental Environmental Management Recycling Management Recycling Grants ProgramGrants Program

Developed by the Indiana Developed by the Indiana Rural Community Rural Community Assistance Program - Assistance Program - RCAPRCAP

Bidding for services verses Bidding for services verses conducting services in-houseconducting services in-house

A key first step is determining if a service is best A key first step is determining if a service is best provided “in-house” vs. “contracted-out.” Some key provided “in-house” vs. “contracted-out.” Some key decision factors in making this determination:decision factors in making this determination: If equipment is involved, will you have sufficient usage to If equipment is involved, will you have sufficient usage to

justify the purchase?justify the purchase? If personnel are involved, do you have sufficient staffing to If personnel are involved, do you have sufficient staffing to

handle this service or (if no) do you have sufficient funding handle this service or (if no) do you have sufficient funding to hire the staff you will need?to hire the staff you will need?

Can you truly provide this service in-house in a less Can you truly provide this service in-house in a less expensive manner than if you contract-out the service?expensive manner than if you contract-out the service?

Contracting Services:Contracting Services:A Wide Mix of AlternativesA Wide Mix of Alternatives

Many communities 100% in-house own and operate Many communities 100% in-house own and operate composting facilitiescomposting facilities

Many communities own and operate compost Many communities own and operate compost facilities, but may contract out some specific services facilities, but may contract out some specific services such as tub grinding or mulch colorization.such as tub grinding or mulch colorization.

Many communities own the site but fully contract Many communities own the site but fully contract with a private service provider for the operation of with a private service provider for the operation of the sitethe site

Many communities simply contract with a private Many communities simply contract with a private service provider who owns and operates their own service provider who owns and operates their own facilityfacility

Steps to Effective ContractingSteps to Effective Contracting

Two basic types of contracts:Two basic types of contracts: Service provider model approaches the contract as Service provider model approaches the contract as

a typical fee-for-service arrangement or a unit-a typical fee-for-service arrangement or a unit-price arrangement.price arrangement.

Partnership model establishes an arrangement Partnership model establishes an arrangement where the risks and rewards of the contract are where the risks and rewards of the contract are shared by both sides.shared by both sides.

This type of contract has been shown to be more likely This type of contract has been shown to be more likely to succeed than the typical “service provider” contract to succeed than the typical “service provider” contract because both parties are directly invested in the success because both parties are directly invested in the success of the project.of the project.

Steps to a Successful ContractSteps to a Successful Contract

1.1. Define services to be contracted:Define services to be contracted:Nature and type? For whom? For how longNature and type? For whom? For how long??

Define expectations clearly and specifically.Define expectations clearly and specifically. To bundle, or not to bundle?To bundle, or not to bundle? What are the likely advantages and disadvantages of combining What are the likely advantages and disadvantages of combining

services?services?Contract term and length: Select a contract term length that is Contract term and length: Select a contract term length that is

appropriate to your needs and agreeable to the contractor. Keep appropriate to your needs and agreeable to the contractor. Keep in mind that if you are expecting a contractor to invest in in mind that if you are expecting a contractor to invest in equipment, a five year pay-off time (and thus a 5 year contract) equipment, a five year pay-off time (and thus a 5 year contract) is a reasonable expectation for a contractor. If you are expecting is a reasonable expectation for a contractor. If you are expecting a contractor to build or renovate a facility, a ten year pay-off a contractor to build or renovate a facility, a ten year pay-off time (and thus a 10 year contract) is a reasonable expectation for time (and thus a 10 year contract) is a reasonable expectation for a contractor.)a contractor.)

Steps to a Successful ContractSteps to a Successful Contract

2. Employ fair and sound selection process2. Employ fair and sound selection process You may want to use a pre-qualification system You may want to use a pre-qualification system

with contractorswith contractors It is often advisable to hold pre-bid meetings for It is often advisable to hold pre-bid meetings for

the potential bidders.the potential bidders.

3. Develop a well written, clear and detailed 3. Develop a well written, clear and detailed request for proposal (RFP).request for proposal (RFP).

Request for Proposals /Request for Proposals /Requests for QualificationsRequests for Qualifications

A RFP is a request for a A RFP is a request for a specific proposalspecific proposal. . Cost is often a consideration in a RFPCost is often a consideration in a RFP

A RFQ, by contrast, is a request to A RFQ, by contrast, is a request to know more know more about a firm’s qualificationsabout a firm’s qualifications. Thus a RFQ is . Thus a RFQ is more generalized in nature and cost is almost more generalized in nature and cost is almost never a consideration in an RFQ.never a consideration in an RFQ.

Successful BidsSuccessful Bids

Public bids support transparency.Public bids support transparency. A public bid should be able to look reasonable A public bid should be able to look reasonable

upon public scrutiny and it should enable us to upon public scrutiny and it should enable us to avoid accusations of favoritism, nepotism and avoid accusations of favoritism, nepotism and corruption. corruption.

Don’t structure the proposal in such a way that Don’t structure the proposal in such a way that it dramatically limits the number of qualified it dramatically limits the number of qualified bidders.bidders.

Factors That are Likely to Drive Factors That are Likely to Drive up the Cost of Your Bidsup the Cost of Your Bids

Vendors bid higher if they have to bid on clauses and Vendors bid higher if they have to bid on clauses and other items in the contract that do not have a defined other items in the contract that do not have a defined cost.cost.

Short turnaround time on bids is likely to contribute Short turnaround time on bids is likely to contribute to higher bids.to higher bids.

A lack of a pre-bid meeting is likely to contribute to A lack of a pre-bid meeting is likely to contribute to higher bid costs.higher bid costs.

A key component of future contracts is likely to be a A key component of future contracts is likely to be a fuel adjustment clause. Lack of such a clause is fuel adjustment clause. Lack of such a clause is likely to drive up bids.likely to drive up bids.

Evaluation CriteriaEvaluation Criteria

Design your evaluation and selection process to have Design your evaluation and selection process to have flexibility. A “low bid” contract has no flexibility -- flexibility. A “low bid” contract has no flexibility -- you simply take the lowest bid.you simply take the lowest bid.

Indiana law allows for accepting the lowest Indiana law allows for accepting the lowest “reasonable and responsive” bid. This means the “reasonable and responsive” bid. This means the lowest bid may not always be the most responsive to lowest bid may not always be the most responsive to the bid’s specifications or that the low-cost is simply the bid’s specifications or that the low-cost is simply unreasonable in terms of the services to be provided unreasonable in terms of the services to be provided and a likely indicator that the contractor does not and a likely indicator that the contractor does not fully grasp the scope of the work at hand.fully grasp the scope of the work at hand.

Contract Negotiations / Contract Negotiations / Contracting TermsContracting Terms

A contract’s terms must be written in such a way that A contract’s terms must be written in such a way that the parties signing onto the contract can make the parties signing onto the contract can make changes appropriate to changes in business and changes appropriate to changes in business and regulations - flexibility. regulations - flexibility.

Contracts should be written such that there is an Contracts should be written such that there is an absolute minimum of opportunity for absolute minimum of opportunity for misunderstanding. It should be clear regarding the misunderstanding. It should be clear regarding the expectations of all parties involved and as best expectations of all parties involved and as best possible spell out the requirements and expectations possible spell out the requirements and expectations for all parties concerned - without ambiguity.for all parties concerned - without ambiguity.

Key Contract Negotiation PointsKey Contract Negotiation Points

YOUYOU drive the contracting process drive the contracting process Any contract must contain a cancellation clause that Any contract must contain a cancellation clause that

allows you the option of canceling the contract due to allows you the option of canceling the contract due to poor service.poor service.

There also needs to be relieve to the private There also needs to be relieve to the private contractor for the changes in laws that impact the contractor for the changes in laws that impact the operation.operation.

Any options for the waste hauler to subsequently Any options for the waste hauler to subsequently increase fees must be stated in the contract.increase fees must be stated in the contract.

Key Contract Negotiation PointsKey Contract Negotiation Points

Evergreen Clause: No automatic renewal of Evergreen Clause: No automatic renewal of contract clauses should be accepted.contract clauses should be accepted.

Insist on a clause in the contract stating that Insist on a clause in the contract stating that both parties will agree to future modifications both parties will agree to future modifications of service based on the community’s and of service based on the community’s and business’s requirements.business’s requirements.

““Hot Topics” inHot Topics” inContract NegotiationsContract Negotiations

Use of government-owned landUse of government-owned land

Feedstock contaminationFeedstock contamination

Odor managementOdor management

Key Contract ElementsKey Contract Elements

Scope of WorkScope of Work: Make this as clear and : Make this as clear and accurate as possible to avoid future disputes.accurate as possible to avoid future disputes.

DefinitionsDefinitions: Key terms should be defined so : Key terms should be defined so all parties understand the meaning.all parties understand the meaning.

PaymentPayment: How often, when, where and based : How often, when, where and based on what?on what?

Key Contract ElementsKey Contract Elements

Acceptable Waste / Waste Acceptance Criteria / Acceptable Waste / Waste Acceptance Criteria / Nonconforming WasteNonconforming Waste: This is probably the most : This is probably the most important protection to include in order to avoid important protection to include in order to avoid being responsible for a bad load that contaminates an being responsible for a bad load that contaminates an entire facility.entire facility.

Change in LawChange in Law: The contract should be changed to : The contract should be changed to the extent that there is a change in law, regulation, or the extent that there is a change in law, regulation, or another government action that affects performance.another government action that affects performance.

Force MajeureForce Majeure: Acts of God, war, insurrection, : Acts of God, war, insurrection, terrorism, strikes, etc. are valid excuses for delay or terrorism, strikes, etc. are valid excuses for delay or nonperformance.nonperformance.

Key Contract ElementsKey Contract Elements

TermTerm: How long is the business relationship : How long is the business relationship going to last? Can it be extended? If so, by going to last? Can it be extended? If so, by whom?whom?

IndemnificationIndemnification: It is very important to try to : It is very important to try to get mutual indemnification clauses.get mutual indemnification clauses.

InsuranceInsurance: This clause does no good if not : This clause does no good if not policed. Get certificates of insurance from the policed. Get certificates of insurance from the contractor and read them. Do the certifications contractor and read them. Do the certifications match the coverage asked for?match the coverage asked for?

Managing the ContractManaging the Contract

A successful public-private partnership can be A successful public-private partnership can be defined as the following: the local defined as the following: the local government’s organics stream is successfully government’s organics stream is successfully recycled without causing nuisance conditions recycled without causing nuisance conditions and the private operator can pay its bills and and the private operator can pay its bills and make a profit under the terms of the contract.make a profit under the terms of the contract.

IntergovernmentalIntergovernmentalInterlocal AgreementsInterlocal Agreements

An alternative to contracting with a private contractor An alternative to contracting with a private contractor is contracting with another local government agency.is contracting with another local government agency.

The legal framework for a government-to-The legal framework for a government-to-government contract in Indiana is the “interlocal government contract in Indiana is the “interlocal agreement.”agreement.”

All the rules discussed throughout this presentation All the rules discussed throughout this presentation for contracts should be followed if a local for contracts should be followed if a local government entity is going the route of an interlocal government entity is going the route of an interlocal agreement.agreement.

Advantages ofAdvantages ofInterlocal AgreementsInterlocal Agreements

Takes advantage of economies of scale.Takes advantage of economies of scale. Creates a win-win between two government Creates a win-win between two government

agencies.agencies. Improves the sustainability of a program for Improves the sustainability of a program for

both contracting agencies.both contracting agencies.

Disadvantages ofDisadvantages ofInterlocal AgreementsInterlocal Agreements

May be easy to conceptualize but difficult to May be easy to conceptualize but difficult to work out the details of an agreement.work out the details of an agreement.

Larger community may attempt to leverage its Larger community may attempt to leverage its position against the smaller communityposition against the smaller community

Small communities should be fully aware of Small communities should be fully aware of costs before entering into an agreement—be costs before entering into an agreement—be wary of information gaps.wary of information gaps.

Indiana CodeIndiana Code Interlocal agreements are governed under Indiana Code 36-1-7 Interlocal agreements are governed under Indiana Code 36-1-7

et seq.et seq. Under Indiana Code, at a minimum, an interlocal agreement Under Indiana Code, at a minimum, an interlocal agreement

must contain the following elements:must contain the following elements: Duration of agreementDuration of agreement Purpose of agreementPurpose of agreement The manner of financing, staffing, and supplying the joint undertaking The manner of financing, staffing, and supplying the joint undertaking

and of establishing and maintaining a budget and of establishing and maintaining a budget The method that may be employed in accomplishing the partial or The method that may be employed in accomplishing the partial or

complete termination of the agreementcomplete termination of the agreement How the administration of the agreement will be handledHow the administration of the agreement will be handled The manner in which any real property is to be obtained in the The manner in which any real property is to be obtained in the

execution of the agreementexecution of the agreement

Procurement ProceduresProcurement Procedures

When you are buying equipment there will always be When you are buying equipment there will always be several models from different manufacturers that all several models from different manufacturers that all claim equal capabilities.claim equal capabilities.

The after-the-sale performance may vary enormously.The after-the-sale performance may vary enormously. Incorporating side-by-side demonstrations into the Incorporating side-by-side demonstrations into the

selection criteria can be an invaluable tool.selection criteria can be an invaluable tool. Local government entities need to follow state and Local government entities need to follow state and

local government procurement procedures when they local government procurement procedures when they purchase equipment. purchase equipment.

QUESTIONS?QUESTIONS?

Thank You!Thank You!

Additional Questions, Comments, or You Additional Questions, Comments, or You Think You Have A Potential Pilot CommunityThink You Have A Potential Pilot Community Please Feel Free to Contact Me:Please Feel Free to Contact Me:

Mark W. DavisMark W. Davis

Technical Assistance ProviderTechnical Assistance Provider

Rural Community Assistance ProgramRural Community Assistance Program

Office: 1-800-382-9895Office: 1-800-382-9895

Wireless: (812) 320-0720Wireless: (812) 320-0720

E-mail: mdavis@incap.orgE-mail: mdavis@incap.org