financial management: procurement

11/21/2008

Financial Management:

Procurement

11/21/2008 Page 2

ProcurementOverview

Procurement Procedures

Contract Administration and Awards

Internal Controls and Documentation

11/21/2008 Page 3

Procurement

Link to appropriate state and federal policies, statutes, and guidelines (e.g., competitive vs. non-competitive, conflict of interest)

Inventory, management, and disposition

11/21/2008 9/12/2008 Page 4

Procurement Regulations

EDGAR, CFR 34, Parts 74-86 and 97-99

11/21/2008 9/12/2008 Page 5

Procurement: Definitions and Terms

Competitive Sealed Bid – method of procurement where sealed bids are publicly solicited and a firm fixed price contract is awarded to the responsible bidder whose bid, conforming with all material terms and conditions of the invitation for bids is the lowest in price

11/21/2008 9/12/2008 Page 6


Competitive Proposals – method of procurement where proposals are requested from a number of sources, is publicized, and either a fixed price or a cost reimbursement type contract is awarded

11/21/2008 9/12/2008 Page 7


Conflicts of Interest – occur when the individuals responsible for determining bid/proposal responsiveness are over- ruled by other individuals within the organization or individuals responsible for determining responsiveness (or any members of his or her family) has any personal or corporate ties or any financial interest in any of the firms offering a bid/proposal

11/21/2008 9/12/2008 Page 8


Cost Analysis – evaluating the separate cost elements that make up the total price

11/21/2008 9/12/2008 Page 9


Cost Plus a Percentage of Cost or Cost Plus a Percentage of Income – an agreement in which the contractor/vendor is provided a specified percentage of profit over and above the actual costs of construction. This type of contract arrangement is not permitted because the contractor/vendor has little incentive to hold down costs

Equipment – tangible, non-expendable, personal property with a useful life of more than one year and having an acquisition cost of $5,000 or more per unit

11/21/2008 9/12/2008 Page 10


Non-Competitive Proposals – procurement through solicitation of a proposal from only one source, or after solicitation of a number of sources, competition is deemed inadequate

Price Analysis – evaluating the total price; comparing price quotes, market prices, and/or similar information

11/21/2008 9/12/2008 Page 11


Procurement – process of obtaining goods and/or services in accordance with applicable rules and regulations

Small Purchase Procedures – simple, informal procurement procedures that are used to secure services, supplies, or other property that do not cost more than an established threshold

11/21/2008 9/12/2008 Page 12


Small Purchase Threshold – threshold established to determine whether an informal or formal procedure should be used for securing services, supplies, or other property

Standards of Conduct – written code or standards of conduct governing the performance of officers, employees, or agents engaged in the awarding and administration of contracts

11/21/2008 9/12/2008 Page 13


Supplies – all tangible personal property other than equipment

Suspension – either the: 1) temporary withdrawal of the authority to obligate grant funds pending correction action by the grantee or subgrantee or a decision to terminate the grant or 2) action taken by a suspending official in accordance with agency regulations to immediately exclude a person from participating in grant transactions for a period, pending completion of an investigation

11/21/2008 9/12/2008 Page 14

Procurement: Making Sure You are in Compliance

Ensuring purchases are necessary

Open competition

Procurement procedures

Vendor selection process

Inventory management

11/21/2008 9/12/2008 Page 15

Procurement: Ensuring Purchases are Necessary

All costs have to be necessary for the performance or administration of the federal grant

11/21/2008 9/12/2008 Page 16

Procurement: Ensuring Purchases are Necessary

All proposed purchases must be reviewed to avoid unnecessary or duplicative items:

• Surplus property• Structure procurement to obtain most

economical purchase• Intergovernmental agreement for

common goods or services• Lease vs. purchase

11/21/2008 9/12/2008 Page 17

Procurement: Open and Full Competition

All procurement transactions shall be conducted in a manner to provide full and open competition to the maximum extent possible:

• Entity involved in drafting solicitation may not compete for procurement

11/21/2008 9/12/2008 Page 18


Solicitations shall clearly establish all requirements the bidder must fulfill in order for the bid to be evaluated

11/21/2008 9/12/2008 Page 19


Awards must be made to the bidder or offeror whose bid is responsive and most advantageous to the recipient, price, quality, and other factors considered

11/21/2008 9/12/2008 Page 20


Internal controls require that districts operate within state and federal laws

Don’t skip the rules

• Unreasonable requirements on vendors to qualify to do business Pre-qualified lists should not limit

competition

11/21/2008 9/12/2008 Page 21


Requiring unnecessary experience or excessive bonding

Noncompetitive pricing practices

Noncompetitive awards to consultants on retainer

Organizational conflicts of interest

Specifying a brand name

In-state or local preferences

11/21/2008 9/12/2008 Page 22

Procurement: Conflict of Interest

Shall have written standards of conduct governing the performance of employees engaged in the award and administration of contracts – standards must include sanctions for violations

11/21/2008 9/12/2008 Page 23

Procurement: Conflict of Interest

Conflict situations:

• Financial interest

• Acceptance of items of monetary value from contractors (can accept unsolicited gifts of nominal value)

11/21/2008 9/12/2008 Page 24

Procurement: Written Procurement Procedures Shall have written procedures that

include (at a minimum):

• Measures for avoiding the purchase of unnecessary items

• Measures to compare lease vs. purchase (where appropriate)

11/21/2008 9/12/2008 Page 25

Procurement: Written Procurement Procedures

When developing solicitations, the Requests for Proposals (RFPs) should include all of the information a bidder needs to respond to the solicitation

11/21/2008 9/12/2008 Page 26

Procurement: Written Procurement Procedures Draft solicitations should include:

• A clear and accurate description of technical requirements

• Evaluation factors Functions to be performed

• Features of brand names that bidder must meet (when applicable)

11/21/2008 9/12/2008 Page 27

Procurement: Written Procurement Procedures Acceptance of any products/services

in metric system of measurement

Preference for products that conserve natural resources (as feasible)

Positive efforts for minority-owned/ women businesses (as feasible)

11/21/2008 9/12/2008 Page 28

Procurement: Cost/Price Analysis

Shall perform a cost or price analysis in connection with every procurement action:

• Price analysis generally means evaluating the total price – compare price quotes, market prices, or similar information

11/21/2008 9/12/2008 Page 29

Procurement: Cost/Price Analysis

• Cost analysis generally means evaluating the separate cost elements that make up the total price (including profit)

Goal is to determine reasonableness

11/21/2008 9/12/2008 Page 30

Procurement: Type of Procurement Instruments

The type of procurement instrument used is determined by the recipient, but must be:

• Appropriate for the particular procurement; and

• Promote the best interest of the program

Remember: Cannot use “Cost Plus” Contracts!

11/21/2008 9/12/2008 Page 31

Procurement: Noncompetitive Contracts

As a practical matter, non-competitive contract raises “red flags”

• Ensure that documentation of the contract justifies non-competition (sole source justification)

• Role of cost/price analysis even more important

11/21/2008 9/12/2008 Page 32

Procurement: Noncompetitive Contracts

Generally, noncompetitive proposals appropriate only when:

• The good or service is available only from a single source (sole source)

• There is a public emergency

• The awarding agency (MDE) authorizes

• After soliciting a number of sources, competition is deemed inadequate

11/21/2008 9/12/2008 Page 33

Procurement: Awards

Awards must be made to the bidder whose bid is:

• Responsive to the solicitation; and

• Is most advantageous to the recipient considering price, quality, and other factors

11/21/2008 9/12/2008 Page 34

Procurement: Awards

Awards must be made to responsible contractors who possess the potential ability to perform successfully:

• Contractor integrity

• Past performance

• Financial and technical resources

11/21/2008 9/12/2008 Page 35

Procurement:Suspension/Debarment

Cannot contract with vendor who has been suspended or debarred

Must verify if contract is $25,000 or more

• https://www.epls.gov/

11/21/2008 9/12/2008 Page 36

Procurement: Inventory Management

Different rules for equipment and supplies

Equipment

• Federal definition of equipment Tangible personal property

Useful life of more than one year

Acquisition cost of $5,000 or more

11/21/2008 9/12/2008 Page 37

Procurement: Inventory Management

• State and federal programs may use an expanded definition, as long as it includes all property described

previously

Supplies

• Everything else

11/21/2008 9/12/2008 Page 38

Procurement: Use of Equipment

Must use for the program for which it was acquired – even after federal funding for program ceases

• May use for other programs if such use is incidental and does not interfere with the original program

11/21/2008 9/12/2008 Page 39

Procurement: Use of Equipment

If no longer needed:

• First transfer to another federal program

• Disposition instructions from U.S. Department of Education EDGAR, CFR 34, Part 80.32

11/21/2008 9/12/2008 Page 40

Procurement: Tracking Equipment

Property records

• Description, serial number, or other identification, source of the equipment (specify federal grant award), title information, use and condition, and ultimate disposition

11/21/2008 9/12/2008 Page 41

Procurement: Tracking Equipment

Physical inventory

• At least every two years

• All discrepancies must be investigated

Control system to prevent loss, damage, theft

• All incidents must be investigated

11/21/2008 9/12/2008 Page 42

Procurement: Supplies

Must use for the program for which it was acquired

If no longer needed, and if residual value of unused supplies is more than $5,000 (aggregate value):

• First transfer to another program

• Compensate U.S. Department of Education for its share

11/21/2008 9/12/2008 Page 43

Procurement: Tracking Supplies

EDGAR does not set out any specific tracking requirements

But, as a practical matter, US Department of ED expects subgrantees to track all property purchased with federal funds in order to prove there has been an allocable benefit to the program

11/21/2008 9/12/2008 Page 44

Procurement: Allowable Costs

Costs need to have been incurred during the grant period in the grant approval letter

Costs need to be eligible under the terms of the funding source and programs listed in the approved application

11/21/2008 9/12/2008 Page 45

Procurement: Allowable Costs

Funding sources must be identified separately in the accounting records by project and grant fiscal year

11/21/2008 9/12/2008 Page 46

Procurement: Critical Elements

Necessary Purchases

Competition

Conflict of Interest

Written Procedures

Competitive vs. Noncompetitive Contracts

Awarding

11/21/2008 9/12/2008 Page 47

Procurement: Critical Elements

Suspension/Debarment

Contract Administration

Documentation

Inventory Management

Tracking of Equipment & Supplies – Retention & Disposal

Internal Control(s)

11/21/2008 9/12/2008 Page 48

Procurement: FAQs

What is the difference between competitive and noncompetitive bidding?

What is a small purchase threshold?

11/21/2008 9/12/2008 Page 49

Procurement: FAQs

What are allowable costs?

What are potential conflicts of interest?

What are Standards of Conduct?

11/21/2008 9/12/2008 Page 50

Procurement: Other Resources

Excluded Parties List System (suspension and debarment): https://www.epls.gov

EDGAR §80 – Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments

11/21/2008 9/12/2008 Page 51

Procurement: More Information

Contacts

• MDE: Specific Program Office

• ISD:

11/21/2008

LEA Fiscal

Review Tool

11/21/2008

LEA Fiscal Review Tool

Developed by MDE staff responsible for federal and state fund management

Lists major elements reviewed during an audit performed by MDE state auditors

11/21/2008

LEA Fiscal Review Tool

Lists all items contained within the FMS Self-Assessment Survey and reflected in the Professional Development modules

Purpose

• To assist an LEA in the development of its own plan for improvement of its FMS

11/21/2008

Resources

11/21/2008

ResourcesAll resources identified in this Professional

Development module are available on:

Michigan LearnPort

www.learnport.org

Collaboration Center

Community Room

LEA Financial Management Resources

11/21/2008

Committee

Membership

11/21/2008

MDE/MAISA Monitoring and Compliance Committee

Becky Rocho, Calhoun ISD, (269) 781-5141 [email protected]

Patty Cantú, MDE, Office of Career and Technical Education, (517) 373-3373

[email protected] Mary Ann Chartrand, MDE, Grants Coordination and

School Support, (517) 373-8862 [email protected]

Terri Lynn Giannola, MDE, Office of Career and Technical Education, (517) 373-4670 [email protected]

11/21/2008

Procurement Subcommittee Tom Bean, ISD Chair

Calhoun ISD

(269)789-2476; [email protected] Dan Hanrahan – MDE Chair

MDE – State Aid and School Finance

(517) 335-0521; [email protected] Gus Bishop

Charlevoix-Emmet Intermediate School District

(231) 547-9947; [email protected] Steve Ezikian

Wayne RESA

(734) 334-1451; [email protected] Cheryl Schubel

MDE- Grants Coordination and School Support

(517) 241-2597; [email protected]

financial management: procurement

Documents