The Importance of Municipal Procurement Policies and ...€¦ · 10 Federal Procurement...

The Importance of Municipal

Procurement

Policies and Procedures

December 12, 2019

» Understand the importance of new Federal

Uniform Guidance Procurement Policies

» Discuss what procurement polices and

controls should exist to help your municipality

» Identify which policies and controls to look at

more closely

» Identify how other states handle Procurement

Policies

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Today’s Goal

» Over 35+ years of combined experience with

municipalities and school districts

» Direct project experience with over 80 towns, cities and

school districts in the State of Connecticut

» Operational Assessments

» Internal Operational Control Audits

Process and Control Reviews

» Organizational Studies

Departmental Evaluations

» Shared Services

» Implementation Plans/Project Management3

Our Expertise

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Our Presenters

Lindsey Intrieri, PMP, CISA

Advisory Manager

blumshapiro

860.570.6349

[email protected]

860.561.6815

[email protected]

Jeff Ziplow, MBA, CISA, CGEIT

Advisory Partner

blumshapiro

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Purchase Order Policies, Procedures and Protocols

Policies Process

Financial System

People

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Federal Procurement Requirements

• Uniform Guidance Procurement Standards went into effect for fiscal years beginning on or after December 26, 2017

• The Uniform Guidance Procurement Standards were part of the original Super Circular that went into effect in 2015

• Significant changes resulted in a three year delay to comply with regulations

• Federal regulations on purchasing and procurement require a documented, detailed set of practices focused on full and open vendor competition to maximize cost effectiveness

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• Products/Services procured via any

federal grant must meet procurement

policy standards/requirements

• E.g. Federal Child Nutrition Grant

• Municipalities that don’t have these

procurement policies

documented/adopted may have

deficiencies identified in their Financial

Audit or Federal Single Audit

• Internal control significant deficiency

• Compliance finding

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• Should municipalities have different

procurement policies for Federal Grant

Purchases?

• Regulation suggests no. A State must follow

the same policies and procedures it uses

for procurements from its non-Federal funds

• Important for the Municipality and

School District to be in sync with their

procurement policies

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General procurement standards (200.318)

a) The non-federal entity MUST document the procurement policies.

- MUST use documented procurement policies that follow proper laws and regulation.

b) The non-federal entity MUST maintain oversight.

c) Conflict of Interest

1)

2)

d) The non-federal entity's procedures MUST avoid unnecessary or duplicate items.

e)

f)

- To ensure that the contractors perform in accordance with terms, conditions and specifications of their

contracts or purchase orders.

If non-federal entity has a parent, affiliate, or subsidiary organization that is not a state, local government, or

Indian tribe, the non-federal entity MUST also maintain written standards of conduct covering organizational

conflicts of interest.

- MUST maintain written standards of conduct covering conflicts of interest and governing the actions of its

employees engaged in the selection, award and administration of contracts.

- Consideration should be given to consolidating or breaking out procurements to obtain a more economical

purchase.

The non-federal entity SHOULD enter into state and local intergovernmental agreements or inter-entity

agreements where appropriate for procurement or use of common or shared goods and services.

The non-federal entity SHOULD use Federal excess and surplus property in lieu of purchasing new equipment

and property whenever such use is feasible and reduces project costs.

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General procurement standards (200.318) (cont.)g)

h) The non-federal entity MUST only award contracts to those with the ability to perform.

i) The non-federal entity MUST maintain records sufficient to detail the history of procurement.

j)

k)

l) The non-federal entity MUST ensure that the organization for which it is contracting with is not suspended or

debarred from doing business with the U.S. Federal Government prior to entering into a covered transaction. This

must be documented and retained in the procurement file. The non-federal entity may utilize www.sam.gov to

perform this search.

The non-federal entity SHOULD use value engineering clauses in contracts for construction projects of sufficient

size to offer reasonable opportunities for cost reductions.

The non-federal entity alone MUST be responsible, in accordance with good administrative practice and sound

business judgment, for the settlement of all contractual and administrative issues arising out of procurements.

-These issues include, but are not limited to, source evaluation, protests, disputes, and claims. These

standards do not relieve the non-federal entity of any contractual responsibilities under its contracts.

- MUST award contracts only to responsible contractors possessing the ability to perform

successfully under the terms and conditions of a proposed procurement. Consideration will be given to such

matters as contractor integrity, compliance with public policy, record of past performance, and financial and

technical resources.

The non-federal entity MAY use a time and material type of contract only after a determination that no other

contract is suitable and if the contract includes a ceiling price that the contractor exceeds at its own risk.

- These records will include, but are not necessarily limited to the following: rationale for the method of

procurement, selection of contract type, contractor selection or rejection, and the basis for the contract

- Time and materials type of contract means a contract whose cost to the non-federal entity is the sum of

the actual cost of materials and the direct labor charged at a fixed hourly rate. This rate should reflect

wages, general and administrative expenses and profit. Since this formula generates an open-ended

contract price, a time-and-materials contract provides no positive profit incentive to the contractor for cost

control or labor efficiency, there MUST be a ceiling price.

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Competition (200.319)a)

b)

c)

1)

2)

d)

The non-federal entity MUST conduct procurements in a manner that prohibits the use of statutorily or

administratively imposed state, local, or tribal geographical preferences in the evaluation of bids or proposals,

except in those cases where applicable Federal statutes expressly mandate or encourage geographic

preference.

- When contracting for architectural and engineering (A/E) services, geographic location may be a selection

criterion provided its application leaves an appropriate number of qualified firms, given the nature and size

of the project, to compete for the contract.

Incorporate a clear and accurate description of the technical requirements for the material, product, or

service to be procured.

The non-federal entity MUST have written procedures for procurement transactions. These procedures MUST

ensure that all solicitations:

Identify all requirements which the offerors must fulfill and all other factors to be used in evaluating bids or

proposals.

All procurement transactions MUST be conducted in a manner providing full and open competition consistent

with the standards of this section.

- In order to ensure objective contractor performance and eliminate unfair competitive advantage,

contractors that develop or draft specifications, requirements, statements of work , or invitations for bids or

requests for proposals MUST be excluded from competing for such procurements. See embedded

document for some situations considered to be restrictive of competition.

The non-federal entity MUST ensure that all prequalified lists of persons, firms, or products which are used in

acquiring goods and services are current and include enough qualified sources to ensure maximum open and

free competition.

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Methods of procurement to be followed (200.320) - Levels of procurement All non-federal entitys MUST use one of the following methods of procurement depending on the

level of procurement.

a) Procurement by micro-purchase - Not to exceed threshold of $10,000

- Does not require a bid or quote. If practical then distribute equitably among a range of vendors.

b) Procurement by small purchase procedures - Threshold is from $10,001 to $250,000

1)

2)

c) Procurement by sealed bids (formal advertising) - Threshold is $250,001 and greater

1) In order for sealed bidding to be feasible, the following conditions SHOULD be present:

i) A complete, adequate, and realistic specification or purchase description is available;

ii) Two or more responsible bidders are willing and able to compete effectively for the business; and

2) If sealed bids are used, the following requirements MUST apply:

ii) The invitation for bids, MUST define the items or services in order for bidders to properly respond

iv) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder.

v) Any or all bids may be rejected if there is a sound documented reason.

iii) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and

tribal governments, the bids MUST be opened publicly;

Requires that you receive at least 2 quotes. Quotes can be informal, however should be documented and

records maintained.

Price does not need to be the deciding factor however all quotes must be kept in the procurement records.

iii) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder

can be made principally on the basis of price.

i) Bids MUST be solicited from an adequate number of known suppliers, providing them sufficient

response time.

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Procurement By Competitive

Proposals

$250,001 and up

Procurement By Noncompetitive

Proposals (Sole Provider)

$10,000 and up

1. MUST be publicized and identify all evaluation factors

and their relative importance

2. MUST be solicited from an adequate number of

qualified sources

3. MUST have a written method for conducting technical

evaluations of the proposals and selecting

4. Contract MUST be awarded to the responsible firm

whose proposal is most advantageous to the program,

with price and other factors considered

1. May be used only when the item is available from a

single source

2. The public exigency or emergency will not permit a

delay resulting from competitive solicitation

3. Federal awarding agency or pass-through entity

expressly authorizes its use in response to a _____

4. After solicitation of a number of sources competition is

determined inadequate

5. Justification of the use of noncompetitive proposal must

be documented

6. Any research on available from multiple sources must

be documented

7. Documentation of authorization must be retained

8. Any initial solicitations from multiple sources which are

concluded to be inadequate, and such reasoning, must

be documented

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a)

1) Placing qualified small and minority businesses and women's business enterprises on solicitation lists;

2)

3)

4)

5)

6)

Dividing total requirements, when economically feasible, into smaller tasks or quantities to permit maximum

participation by small and minority businesses, and women's business enterprises;

Establishing delivery schedules, where the requirement permits, which encourage participation by small and

minority businesses, and women's business enterprises;

Using the services and assistance, as appropriate, of such organizations as the Small Business

Administration and the Minority Business Development Agency of the Department of Commerce; and

Requiring the prime contractor, if subcontracts are to be let, to take the affirmative steps listed in paragraphs

(1) through (5) of this section.

Contracting with small and minority businesses, women's business enterprises and labor surplus

area firms (200.321)

Non-federal entity MUST take all necessary affirmative steps to assure that minority businesses, women's

business enterprises, and labor surplus area firms are used when possible. Affirmative steps include:

Assuring that small and minority businesses, and women's business enterprises are solicited whenever they

are potential sources;

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Contract cost and price (200.323)

a)

b)

c)

d)

The non-federal entity MUST perform a cost or price analysis in connection with every procurement action in

excess of the Simplified Acquisition Threshold including contract modifications.

- The method and degree of analysis is dependent on the facts surrounding the particular procurement

situation, but as a starting point, the non-Federal entity must make independent estimates before receiving

bids or proposals.

The non-federal entity MUST negotiate profit as a separate element of the price for each contract in which there

is no price competition and in all cases where cost analysis is performed.

- To establish a fair and reasonable profit, consideration must be given to the complexity of the work to be

performed, the risk borne by the contractor, the contractor's investment, the amount of subcontracting, the

quality of its record of past performance, and industry profit rates in the surrounding geographical area for

similar work .

Costs or prices based on estimated costs for contracts under the Federal award are allowable only to the extent

that costs incurred or cost estimates included in negotiated prices

The cost plus a percentage of cost and percentage of construction cost methods of contracting MUST not be

used.

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Federal awarding agency or pass-through entity review (200.324) (Only complete if applicable)

a)

b)

Bonding requirements (200.325)

NOTE:

a) A bid guarantee from each bidder equivalent to five percent of the bid price.

The non-Federal entity MUST make available upon request, for the Federal awarding agency or pass-through

entity preprocurement review, procurement documents, such as requests for proposals or invitations for bids, or

independent cost estimates. See Embedded PDF for criteria.

The non-federal entity MUST make available, upon request of the Federal awarding agency or pass-through

entity, technical specifications on proposed procurements

- The “bid guarantee” MUST consist of a firm commitment such as a bid bond, certified check, or other

negotiable instrument accompanying a bid as assurance that the bidder will, upon acceptance of the bid,

execute such contractual documents as may be required within the time specified.

For construction or facility improvement contracts or subcontracts exceeding the Simplified Acquisition

Threshold, the Federal awarding agency or pass-through entity may accept the bonding policy and requirements

of the non-federal entity provided that the Federal awarding agency or pass-through entity has made a

determination that the Federal interest is adequately protected. If such a determination has not been made, the

minimum requirements MUST be as follows:

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Bonding requirements (200.325) (cont.)

b) A performance bond on the part of the contractor for 100 percent of the contract price.

c) A payment bond on the part of the contractor for 100 percent of the contract price.

Contract provisions (200.326)

a)

- A “performance bond” is one executed in connection with a contract to secure fulfillment of all the

contractor's obligations under such contract.

- A “payment bond” is one executed in connection with a contract to assure payment as required by law of

all persons supplying labor and material in the execution of the work provided for in the contract.

The non-federal entity's contracts MUST contain the applicable provisions described in Appendix II to Part 200 -

Contract Provisions for non-Federal Entity Contracts under Federal Awards.

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Auditors Procurement Assessment Checklist

Procurement Policy Review

Policies

1) Their own policies that comply with State, Local, and Federal Law. 200.318 Yes

2) Standard of conduct over conflicts of interest, and employee

Actions, for those involved in award, or admin of contracts. 200.318 - C Yes

3) Standard of conduct over organizational conflicts of interest

If the Client is considering contracting with a related entity. 200.318 - C2 Yes

4) *If client uses NDAA 2018 thresholds, policy identifies this fact. GAQC Alert N/A

5) Policies must ensure that client will comply with following "Musts"from Uniform Guidance:A) Avoid acquisition of unnecessary of duplicative items. 200.318 - D Yes

B) Award contracts to responsible, capable contractors. 200.318 - H Yes

C) Maintain records to detail procurement decision. 200.318 - I Yes

D) Be responsible for the settlement of all issues. 200.318 - K Yes

E) Conduct procurement providing full / open competition. 200.319 - A Yes

F) Prohibit state or local geographic preferences. 200.319 - B Yes

G) Ensure solicitations contain clear and accurate descriptions. 200.319 - C Yes

H) Detail the minimum essential characteristics and standards. 200.319 - C Yes

I) Identify requirements, and criteria for evaluating bids. 200.319 - C Yes

J) Ensure prequalified lists are current, free and open comp. 200.319 - D Yes

K) Take affirmative steps to assure that small and minority, and Women's businesses are used when possible 200.321 Yes

L) Perform independent cost or price analysis, before bids. 200.323 - A Yes

M) If no competition, negotiate profit as a separate element. 200.323 - B Yes

N) Cannot use price + % of cost, or % of construction cost method. 200.323 - D Yes

O) Comply with section 6002 of Solid Waste Disposal Act. 200.322 Yes

P) Be free from real or apparent conflicts of interest. 200.318 - C1 Yes

Q) Comply with federal cost principals. 200.323 - C Yes

Does the client have procurement policies in place, that at a minimum

address the following?Entity Policies Address the

required items?

Name of Municipality

6/30/2019

* Thresholds are $10,000 and $250,000 if client early adopted provisions of NDAA 2018, and included this in

their procedures.

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MA Procurement Considerations – Procurement Levels

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MA Procurement Considerations – Procurement Levels

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Procurement Considerations – Other Considerations

» Evaluate both Municipal and School District

Procurement Levels

‒ Are they the same?

‒ Do they both meet the Federal Procurement standards

» All “MUST” items need to be in Procurement Policies

‒ Use one of the Level of Procurement methods

‒ Take all necessary affirmative steps to assure that minority businesses,

women's business enterprises are used when possible

‒ Procurement transactions MUST be conducted in a manner providing full

and open competition

‒ Written procedures for procurement transactions

‒ Perform a cost or price analysis in connection with every procurement

action in excess of the Simplified Acquisition Threshold

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Procurement Process

Department makes a purchase (often with

a false PO number for the vendor)

Invoice/Materials are obtained by the

Departments

Department creates a MUNIS purchase requisition to align

with invoice

Purchase requisition is approved

electronically by Department

Director/Head

Purchase requisition is reviewed and

approved by Finance Department (Budget

Coordinator or Internal Auditor)

A

A B

B

The Accounts Payable Clerk

receives all invoices and purchase orders

for sorting and payment processing

MUNIS Purchase Order Process (Current State)


approved by Purchasing Agent

Purchasing Agent generates the

Purchase Order

Purchasing Agent emails the Purchase

Order to the Departments (PDF)

Department compiles their

invoice along with the PDF PO

Funds available? Yes

Accounts Payable Clerk processes

payment (mailed check) to vendor

No

Finance Department must complete a fund transfer (as instructed

by the Finance Director)


approved by Finance Department

(Finance Director)

Departments bring the PO along with

the Invoices back to Finance Department

for payment


manually enters all invoices individually

into MUNIS

The Accounts Payable Clerk checks for available funds to

pay invoice in MUNIS

Transfer completed by the Budget Coordinator

The Accounts Payable Clerk can receive 100s at a time from all Departments

Significant lag time before vendor payment is disbursed (currently

experienced)

Departments are not actively notified that payments have been issued to vendors; must contact Finance for vendor payment inquiry

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Procurement Process

Department makes a purchase (often with

a false PO number for the vendor)

Invoice/Materials are obtained by the

Departments

Department creates a MUNIS purchase requisition to align

with invoice

Purchase requisition is approved

electronically by Department

Director/Head


approved by Finance Department (Budget

Coordinator or Internal Auditor)

A

A B

B


receives all invoices and purchase orders

for sorting and payment processing

MUNIS Purchase Order Process (Edited state)


approved by Purchasing Agent

Purchasing Agent generates the

Purchase Order

Purchasing Agent emails the Purchase

Order to the Departments (PDF)

Department compiles their

invoice along with the PDF PO

Funds available? Yes

Accounts Payable Clerk processes

payment (mailed check) to vendor

No

Finance Department must complete a fund transfer (as instructed

by the Finance Director)


approved by Finance Department

(Finance Director)

Departments bring the PO along with

the Invoices back to Finance Department

for payment


manually enters all invoices individually

into MUNIS

The Accounts Payable Clerk checks for available funds to

pay invoice in MUNIS

Transfer completed by the Budget Coordinator

Departments cannot purchase without approved PO; goods to be orders/received after the approval

This level of approval no longer necessary

Out of order; Finance Director should be final approver (if necessary)

Department can view/print PO in system

Purchasing Agent can send out PO; Departments can receive goods and notify Finance to pay vendor

(MUNIS receiving)

Departments scan invoices into MUNIS

ELECTRONICALLY in MUNIS

Funds were already checked at requisition

entry stage

Necessary transfers would already have

been made

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Procurement Technology (FMS)

» Do your policies match the controls in the FMS?

‒ Purchase Requisition/Order sign-offs

‒ Approval thresholds

‒ Handling of Emergency POs

‒ Ability to overspend a line item

‒ Three way match

• Invoice

• Packing slip

• PO

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Procurement Training - People

» Do you have a training program

‒ Is the training program formalized?

‒ How frequent do you train users?

‒ What happens when users don’t follow Procurement Policies?

‒ Purchase goods/services without a Purchase Requisition/Order?

‒ How do you change the culture?

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Other Procurement Considerations

» Other considerations

‒ Petty Cash is not a replacement for procurement

‒ $100 or less with appropriate receipts

‒ P-Card

‒ Have you implemented P-Cards?

‒ How are they monitored and managed?

‒ Confirm spending limit

‒ Do they conform to Procurement Policies?

‒ Budget Transfers

‒ How are they monitored and managed?

‒ Does the BoF need to sign-off over a certain threshold?

Questions & Answers

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Thank You

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