public purchasing in florida post award processes (rev. 05/27/08)

PUBLIC PURCHASING IN FLORIDA

POST AWARD PROCESSES(REV. 05/27/08)

POST AWARD PROCESSES

So you’ve issued an order or signedcontract…now what??

POST AWARD PROCESSES Documentation

Purchase Order/Contract File Contract Management

Managing changes, receiving goods or services, monitoring performance, resolving problems, approving payment.

Evaluation and Preparation Evaluating contractor performance and

customer satisfaction, developing lessons learned, and transition to new contract.


PURCHASE ORDER/CONTRACT FILE

PURCHASE ORDER/CONTRACT FILE Agencies must maintain a contract

file for each contract. The file must include, but not be

limited to [s.287.042(3)(e) FS]: All pertinent information relating to

the contract during preparatory stages.

A copy of the solicitation & related documents.

PURCHASE ORDER/CONTRACT FILE

The file must include, but not be limited to (cont): Opening of bids/proposals,

evaluation & tabulation. Determination and notice of

award.

PURCHASE ORDER/CONTRACT FILE The chief procurement officer of each

agency shall keep a record of all purchase orders [60A-1.016(3), FAC].

Each agency shall designate at least one employee as a contract administrator, who will maintain a contract file and financial information on all contractual services contracts and serve as liaison with the contract managers and the department (DMS) [287.057(16)FS].

PURCHASE ORDER/CONTRACT FILE Records will be maintained in accordance

with the General Records Schedule published by the Department of State at:

http://dlis.dos.state.fl.us/recordsmgmt/gen_records_schedules.cfm

Records will be made public in accordance with s.119.07 and 815.045, FS.


CONTRACT MANAGEMENT

CONTRACT MANAGEMENT

DEFINITIONS: WHAT IS CONTRACT MANAGEMENT? CONTRACT ADMINISTRATION? COMPARE NIGP AND FLORIDA STATUTES.

CONTRACT MANAGEMENT

NIGP’s “CONTRACT MANAGEMENT” TEXT

Contract Management: “All activity that occurs in the contracting process, i.e., all activities that take place from the establishment of the original requirement until the contract is closed out.”

Contract Administration: “The management of all actions, after the award of a contract, that must be taken to assure compliance with the contract; e.g. , timely delivery, acceptance, payment, closing contract, etc.”

FLORIDA CONTRACT MANAGEMENT

S. 287.057(15): “For each contractual services contract, the agency shall designate an employee to function as contract manager who shall be responsible for enforcing performance of the contract terms and conditions and serve as a liaison with the contractor. The agency shall establish procedures to ensure that contractual services have been rendered in accordance with the contract terms prior to processing the invoice for payment.”

CONTRACT MANAGEMENT

S. 287.057(16) “Each agency shall designate at least one employee who shall serve as a contract administrator responsible for maintaining a contract file and financial information on all contractual services contracts and who shall serve as a liaison with the contract managers and the department.”

CONTRACT MANAGEMENT

What kind of document is necessary?

S. 287.058(1) “Every procurement of contractual services in excess of the threshold amount provided in s.287.017 for Category Two…shall be evidenced by a written agreement embodying all provisions and conditions…In lieu of a written agreement, the department may authorize the use of a purchase order…”

CONTRACT MANAGEMENT

Addressing the award of competitive solicitations, PUR 1001, #17: “The Buyer shall issue a notice of award, … to successful respondent(s), however, no contract shall be formed between respondent and the Buyer until the Buyer signs the Contract .”

CONTRACT MANAGEMENT

The notice of award may be any writing signed by the authorized agency representative, accepting the respondent’s offer, e.g. a letter or email of award, a purchase order, or a contract or agreement.

CONTRACT MANAGEMENT

Who should manage a contract? Generally, a representative of the

entity responsible for the performance to be achieved through the contract.

In Florida state government, most contracts are not managed by purchasing agents, but by contract managers in program divisions, or special contract management organizations.

CONTRACT MANAGEMENT

A contract manager’s file should contain the contract, any amendments, and all reports, complaints, and correspondence materially related to the contract

CONTRACT MANAGEMENT

What should be considered in managing a contractor’s performance?

1. Product specifications and/or service statements of work, such as“Deliverables,” (outputs) a definite or indefinite quantity of goods to be delivered and/or services to be performed, and

“Performance” (outcomes) to beattained. Performance outcomes are often time-related quantity/percentage goals.

CONTRACT MANAGEMENT

2. Schedule

3. Budget/Financial issues

4. Customer Service level

Note: Performance measures, or outcomes can also apply to schedule,

budget/financial and customer service issues.

CONTRACT MANAGEMENT

Outputs can usually be measured easily, like the number of training seminars or case files completed each year.

Outcomes may be tougher, from measuring savings or impact of a service, to determining the level of improvement to service delivery.

CONTRACT MANAGEMENT

What is involved in contract management?1. Reading & understanding the contract2. Communication with the contractor3. Maintenance of records & reports4. Performance monitoring5. Problem resolution/corrective action6. Invoice approval7. Closeout

CONTRACT MANAGEMENT

1. READ AND UNDERSTAND THE CONTRACT, identify Responsibilities of the agency and the contractor

(commodity specs, statement of work, obligations of the parties)

Pricing Schedule, especially critical events Performance Measures Risks Anticipate requirements evolution, and impact on

Specifications, Scope of Work, Cost and Term of Engagement

CONTRACT MANAGEMENT

2. COMMUNICATE, e.g. pre-start meeting, and appropriate level throughout. Cover the four basic elements of contract performance:

a) Requirements, including: Outputs (Deliverables, tasks, standards/quality) and Outcomes (Performance measures).

CONTRACT MANAGEMENT

b) Schedule: milestones, completion

c) Budget: Contract delivered within original budget. Accuracy, adequacy and timeliness of invoices, invoice processing and payment. Financial reporting if required. Types of problems and how to handle. S. 215.422 FS requirements.

CONTRACT MANAGEMENT

d) Customer Service Level (communication, reliability, flexibility, problem resolution, change order negotiation, exceptions, complaints)

CONTRACT MANAGEMENT

3. MAINTAIN RECORDS AND REPORTS

a) Contractor’s Reports: Specify content and frequency, by whom to whom.

b) Contract Manager’s Record: Determine appropriate degree of detail required. May use spreadsheet or special software.

CONTRACT MANAGEMENT

4. MONITOR PERFORMANCE any of 5 ways:

a) Reports, e.g. Contractor’s reports

b) Samples: Scheduled or unscheduled samples (at quantity intervals or temporal intervals)

c) Exceptions (complaints)

d) Surveys of contract users/clients.

e) Direct 100% inspection/monitoring

CONTRACT MANAGEMENT

5. PROBLEM RESOLUTIONa) Lowest level and least formality necessary. Speak, write,

meet.b) Liquidated Damagesc) Complaints to Vendor. Copy State Purchasing with

complaints. d) Requests for Assistance. Send to State Purchasing.e) Default, Cancellation and Suspension. Copy State

Purchasing.f) Reimbursement and cure of deficiencies, Reinstatement.

Notify State Purchasing.

CONTRACT MANAGEMENT

6. PROCESS INVOICES. Review and approve if product/service billed has been delivered, or pre-payment authorized, charges are as per contract, and invoice detail is sufficient for a proper audit.

CONTRACT MANAGEMENT

7. CLOSEOUT: Evaluation, Payment, Analysis and Lessons for the future.

CONTRACT MANAGEMENT

MAKE SURE IT GETS DONE: The contract manager is the agency’s front line resource for seeing that what is supposed to happen, actually happens


CHANGE ORDERS

CHANGE ORDERS

Change orders, or purchase order amendments, are not specifically addressed in Chapter 287, FS, or Rule 60A-1, FAC.

Consider this content to consist of recommendations, rather than rule or law.

CHANGE ORDERS

Change orders are generally of two sorts:

Corrections of errors, omissions or contradictions within terms & conditions, or items/services to be delivered/performed

Addition, deletion or revision of terms & conditions or items of order.

CHANGE ORDERS

All change orders are themselves potential contracts or amendments to contracts, and must be executed by an agent, typically the purchasing officer.

Corrections should be made at the Purchasing Office level either upon request of the customer, or at the discretion of the purchasing officer, with concurrence of the customer. Some corrections may also require concurrence of the vendor, and other approvers in the customer organization.

CHANGE ORDERS

Customer requests for change orders should generally follow the approval requirements of the original order, unless merely corrections to errors made against what was originally authorized. Handle adequately, but not unnecessarily!

CHANGE ORDERS

Change orders are instruments equivalent to purchase orders or contracts, and subject to the same requirements for competition and contract clauses. In some cases, they are covered by the steps taken in preparing the original order, and in some cases, not.

CHANGE ORDERS

Example: Standard bid conditions (PUR 1000) allow additional purchases up to $25,000 within 90 days or award. Larger and/or later purchases would require new procurement processes.

CHANGE ORDERS

Change orders should be within the scope of the original order, i.e. issued within the term and prior to completion of the original order, consistent with the procurement method of the original order, or appropriately reprocured, covered by the referenced contract if any, and for similar or related products/services, subject to similar terms.

CHANGE ORDERS

CAUTION: Although orders may be amended by mutual consent, preserve your fiduciary responsibility and question proposed amendments which transfer risk or cost to the state.

FIDUCIARY: of, relating to, or involving a confidence or trust: as (a) held or founded in trust or confidence (b) holding in trust (c) depending on public confidence for value or currency.


RECEIPT AND ACCEPTANCE


RECEIPT AND ACCEPTANCE ARE TWO DIFFERENT PROCESSES

"Receipt" of goods means taking physical possession of them. [672.103(1) FS].

“Acceptance” of goods occurs when the buyer, after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that the buyer will take or retain them in spite of their nonconformity. [672.606, FS. See also 672.513 abd 672,601 FS]]


Receiving process: Count the packages and compare to the bill of lading document, and inspect for signs of possible concealed damages. Note any shortages or evidence of damages on the bill of lading, sign, and have the delivery person sign.


Receiving process: As soon as practicable, open and

inspect the contents for condition and conformity to the order.

In the event of damages, preserve the packaging and contents, and contact the vendor to inform him, and for instructions on dealing with the carrier.


Receiving process: For non-conformity to the order,

contact the vendor as soon as practicable.

If a partial order, authorize payment for usable portion received, if any, not less than 20 days after inspection, approval and receipt of invoice.[s.215.422(1), FS]


The buyer has a legal obligation to protect and preserve any goods under dispute: If the buyer has before rejection taken physical possession of goods in which he or she does not have a security interest … the buyer is under a duty after rejection to hold them with reasonable care at the seller's disposition for a time sufficient to permit the seller to remove them (672.602, FS)


INSPECTION, DAMAGES & CLAIMS


Claims due to damages in shipment: Buyer must cooperate with seller in providing damaged shipment and its packaging to the carrier for inspection prior to settlement of the claim.

INSPECTION, DAMAGES & CLAIMS Liquidated damages: Damages for

breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. (672.718, FS)


General or Special Conditions of contracts often specify:

Liquidated damages (amount and circumstances)

Limitation of liabilityThese terms reflect an apportionment of risk.


RELEASING OR CALLING A BOND


RELEASING A BOND Typically, bonding companies will

contact you with a form requesting contract progress or completion information.

Report honestly and accurately. Have the contract manager provide status in writing.


Do not fully release a bonding company if its still possible to incur cost from the contractor’s failure.

If the project is complete, but warranties remain and/or latent defects are possible, so note on the status report. Let the bonding company continue to share the risk. Keep a copy of all correspondence in the contract file.


CALLING A BOND Bonds can be called or cashed under

the conditions specified in the contract.

Documentation supporting calling the bond is essentially the documentation of the bidder’s or contractor’s default.


Copy the bonding company with the default notice to the contractor.

Make written demand on the bonding company to complete the contract. Involve your attorney.

RELEASING OR CALLING A BOND Litigation with the bonding company

is always possible, either to dispute the call, or to recover some costs upon project completion.

The bonding company may allege changes in scope, or interference or failure to perform by the agency.


PROMPT PAYMENT REQUIREMENTS AND EXCEPTIONSS.215.422, Florida Statutes

PROMPT PAYMENT REQUIREMENTS & EXCEPTIONS

Approval and inspection of goods or services shall take no longer than 5 working days unless the bid specifications, purchase order, or contract specifies otherwise.

PROMPT PAYMENT REQUIREMENTS AND EXCEPTIONS

The voucher authorizing payment …, shall be filed with the Chief Financial Officer not later than 20 days after receipt of the invoice and receipt, inspection, and approval of the goods or services, except that in the case of a bona fide dispute the voucher shall contain a statement of the dispute and authorize payment only in the amount not disputed.


The warrant in payment of an invoice submitted to an agency of the state or the judicial branch shall be issued not later than 10 days after filing of the voucher authorizing payment.


EXCEPTIONS: The requirement may be waived in whole or in part by the Department of Financial Services on a showing of exceptional circumstances in accordance with rules and regulations of the department.

PENALTY FOR LATE PAYMENT

If a warrant in payment of an invoice is not issued within 40 days after receipt of the invoice and receipt, inspection, and approval of the goods and services, the agency or judicial branch shall pay to the vendor, in addition to the amount of the invoice, interest at a rate as established pursuant to s. 55.03(1) FS on the unpaid balance from the expiration of such 40-day period until such time as the warrant is issued to the vendor. [s.215.422(3)(b) FS]


DEALING WITH PERFORMANCE PROBLEMS, INCLUDING COMPLAINTS & RESOLUTION

DEALING WITH PERFORMANCE PROBLEMS, INCLUDING COMPLAINTS & RESOLUTION Lowest level and least formality necessary.

Have an escalation procedure. Contract manager

In person or by telephone (document) or email with vendor front line staff

In person or by telephone (document) or email with vendor management

Letter Notify the purchasing officer


Purchasing officer Contact vendor management,

seek agreement on resolution Follow up in writing, ranging from

email to letter to formal Complaint to Vendor, DMS form 7017.

Apply liquidated damages if applicable, by invoice or by deduction from payments owed.


COMPLAINT TO VENDOR Follow requirements in rule 60A-

1.006(3). Send a Complaint to Vendor form,

PUR 7017, with receipt requested, with a copy of the purchase order or contract.

DEALING WITH PERFORMANCE PROBLEMS, INCLUDING COMPLAINTS & RESOLUTION State the nature of the failure to

perform. Provide a time certain to correct,

generally not less than 10 calendar days.

State that failure to perform within the time specified will lead to finding the contractor in default and removing him from the agency’s vendor list.


If a term contract is involved, state that the correction and compliance with all other contract terms must continue through the balance of the term of the contract.


If the contractor fails to correct performance within the time specified, issue a letter, receipt requested, stating the contractor has been found in default, the contract is canceled, and that the agency will re-procure or has re-procured the commodities or services, and the amount of the re-procurement if known.


Include in the notice of default that the defaulting contractor will not be eligible for an award by the agency until such time as it is reimbursed for all re-procurement costs, and has satisfied the agency that further defaults will not occur, by furnishing an acceptable corrective action plan.


Include in the notice “point of entry” language pursuant to s.120.57, FS, advising the contractor of the right to petition for an administrative hearing on the intended decision to remove the contractor from the vendor list.


Cost recovery can include both any additional product or service costs, and administrative costs for the re-procurement process.

The agency may select the replacement contractor by going down the original bid list, by re-bidding, or on the open market, as is in the best interests of the State.


Copies of all vendor complaints and default actions must be furnished to the Division of State Purchasing.

The Division now publishes the complaints on its web page at:http://dms.myflorida.com/business_operations/state_purchasing/vendor_information/convicted_suspended_discriminatory_complaints_vendor_lists/vendor_complaint_list


If the complaint is against a state term contract vendor, file the complaint, copy the Division of State Purchasing, and file a Request for Assistance, DMS form 7029.

Agencies may cancel orders against state term contracts, but only State Purchasing can cancel a state term contract.


If reimbursement and an acceptable corrective action plan are received from a defaulted contractor, send the firm a letter reinstating it to your agency vendor list, and copy the Division of State Purchasing.


CONTRACT TERMINATION CLAUSES AND THEIR OPERATION


There are essentially four types of termination clauses in contracts:

1. Termination upon completion (i.e. no “evergreen” contracts).

2. Termination by mutual consent.3. Termination for convenience.4. Termination for cause.


1. TERMINATION UPON COMPLETION (i.e. no “evergreen” contracts).Do not write contracts which require notice of non-renewal prior to termination date. These are set up to, in effect, lead to non-competitive and illegal contracts.


2. TERMINATION BY MUTUAL CONSENTThis clause can, for instance, be used to resolve a dispute or a relationship that just isn’t working.


3. TERMINATION FOR CONVENIENCE

This type of clause should allow for termination for convenience by the State, with reasonable notice to the vendor.

Generally termination for convenience should not be offered to the vendor, unless notice is sufficient for the state to reprocure, and the risks of such a clause are offset by advantages. The state and vendors are NOT in equal peril from such clauses, regardless of vendor representations to the contrary!


4. TERMINATION FOR CAUSEThese clauses reaffirm and supplement the State’s right to terminate for failure to perform, and can add causes such as misrepresentation, actions which endanger continued performance, and changes to legislation which remove the basis or authority for the contract.


REQUESTS FOR ASSIGNMENT TO ALTERNATE PAYEE OR SUCCESSOR


TWO DIFFERENT ISSUES1. Assignment of the payment2. Assignment of the contract to a

successor firm


The UCC (672.210 FS) says: Except as otherwise provided in s. 679.4061, unless otherwise agreed all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on her or him by her or his contract, or impair materially her or his chance of obtaining return performance.


ADDRESS THIS ISSUE IN YOUR SOLICITATION

Assignment of the Contract: The Contract is not assignable except with the prior written approval of the Department.


Assignment of the Payment: Monies which become due hereunder are not assignable except with the prior written approval of the Department, and the concurrence of the Chief Financial Officer of the State of Florida.


Recommended addition: Assignment of the Payment or the

Contract: In the event of such approval, the terms and conditions hereof shall apply to and bind the party or parties to whom the Contract is assigned as fully and completely as the Contractor is hereunder bound and obligated.


Recommended addition: No assignment, if any, shall operate

to release the Contractor from its liability for the prompt and effective performance of its obligations under the Contract.

Assignment of Payment: All invoices must reflect the assignment of payment.


Requests for assignment must be in writing signed by an authorized representative.

Always consult counsel and customer.


EVALUATING CONTRACTOR PERFORMANCE


THIS GENERALLY INCLUDES DELIVERABLES MEETING

SPECIFICATIONS PERFORMANCE MEETING OBJECTIVES SCHEDULE BUDGET AND FINANCIAL ISSUES CUSTOMER SERVICE


Goods or services delivered by a contractor must be inspected and approved within 5 working days in accordance with DFS rule 69I-24, FAC.


Inspection can be 100%, on site Samples Surveys Reports Exceptions


State Purchasing will provide tools for contractor performance evaluation

On MyFloridaMarketPlace, as receipts are recorded

State Term Contract websites include a link to “rate this contract”


And some tools in development include:

A contract management software tool A contractor performance record

database for use in contracting decisions


TRANSITION BETWEEN CONTRACTORS


First rule: MITIGATE RISK. PLAN AHEAD FOR THE NEXT CONTRACTING PROCESS.

Second rule: MITIGATE RISK. PLAN AHEAD FOR THE NEXT CONTRACTING PROCESS.


ADDRESS OWNERSHIP RIGHTS ON TERMINATION, E.G. SOFTWARE CODE, LEASE BUYOUTS, RIGHTS AND OBLIGATIONS REGARDING REMAINING INVENTORY


GOOD CONTRACT/BID CLAUSES If at any time the Contract is

canceled, terminated, or expires, and a Contract is subsequently executed with a firm other than Contractor, Contractor has the affirmative obligation to assist in the smooth transition of Contract services to the subsequent Contractor.

TRANSITION BETWEEN CONTRACTORS Upon termination at expiration or

notice of termination, Contractor shall:a. Stop work under this

Contract on the date, and to the extent specified, in the notice,

b. Place no further orders or subcontracts for materials, services, or facilities except as may be necessary for completion of such portion of the work under this Contract that is not terminated,


c. Complete performance of such part of the work as shall not have been terminated by the Department; and d. Take such action as may be necessary, or as the Department may specify, to protect and preserve any property related to this Contract which is in the possession of the Contractor and in which the Department has or may acquire an interest.


LESSONS LEARNED AND THEIR APPLICATION

LESSONS LEARNED & THEIR APPLICATION

CONSIDER adding a form to your contract file reviewing:

1. CONTRACT PRICING2. EASE OF USE3. PRODUCT/SERVICE SELECTION &

QUALITY4. SUFFICIENCY OF CONTRACT TERMS

FOR AVOIDING COST & RISK


5. CONTRACTOR PERFORMANCE• Meeting specifications &

performance requirements• Delivery• Budget & financial issues• Customer service level


TO DETERMINE THE LESSONS REVIEW YOUR CONTRACT FILE SURVEY YOUR USERS

See for example the surveys placed on state term contract web pages by State Purchasing


When preparing your next similar solicitation, consult your “Lessons Learned” form

TAKE-AWAYS

Read and Understand Document, Document, Document Communicate Measure outputs and performance

regularly Be mindful of timeframes Remember your responsibility and

expectations

public purchasing in florida post award processes (rev. 05/27/08)

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