4/16/2012 MRSC PRESENTS A Play in Four Acts How to Outwit Your Auditor! Or: Buying Materials, Supplies, d Equipment E i t in i Compliance C li and with RCWs and WACs 1 Playwright John W. Carpita PE Carpita, Public Works Consultant MRSC (206) 625-1300 [email protected] 2 Starring Toni Nelson Director of Professional Services Vision PS (509) 315-8845 , Ext.210 [email protected] 2 1 4/16/2012 It was a Dark and Stormy Day … (So what else is there in a Western Washington winter?) A sudden screech of tires on the wet pavement outside her tiny office startled Fran out of her reverie? Could this be … the Auditor? The door creaked open. Sam Jones,, her old p nemesis, handed her his card, cackled evilly and said; “Well, shall we see how you did this year in buying shop supplies?” 3 A Disclaimer Before we get any deeper into the plot, please understand that MRSC has an excellent working relationship with the State Auditor Office (SAO) and that this presentation is theatrical and not intended to criticize the SAO in any way. (MRSC), the SAO SAO, and you, way We (MRSC) you as a local government agency, have a common goal of spending public funds properly. 4 2 4/16/2012 Act One Playbill Scene 1: Purchasing and Bidding Goals Scene 2: Categories Scene 3: Purchasing Bid Limits Scene 4: Advertising and Bidding Requirements Act Two Scene 1: Vendor Lists (Informal Competition) Scene 2: Uniform Exemptions Scene 3: Technology Purchases y Equipment p Act Three Scene 1: Piggybacking Scene 2: Equipment Purchases 5 Act 1, Scene 1 Purchasing and Bidding Goals 6 3 4/16/2012 Paralyzed by fear, Fran gasped. It had taken her forever to recover from the audit findings last year. “I don’t think there are any skeletons in the closet this year, but …. What if he finds some more things!” She quickly ran through her mental list of excuses and looked longingly at the back door: her escape route. 7 Setting Your Agency up for a Audit Finding Public Policy Public P bl funds f d must b be spent carefully with propriety in accordance with the law Fair and Open competition Accounting Principles BARS Manuals Expediency VS. Need N d it i now!! Short staffed Buy only from local businesses We know that ABC Co. has the best price, so why bid? Do we really have to bid this? It’s time consuming! Buy now, document later! 8 4 4/16/2012 Purchasing and Bidding Goals Procurement system established by policy and/or ordinance. ordinance Uniform throughout the local agency Concern for ethical appearance Public advertising requirements met P bli bid opening p nin requirements i m nts m Public mett 9 PURCHASING, BIDDING, AND CONTRACT MANAGEMENT SOURCEBOOK http://mrsc.org/subjects/pubworks/sourcebook/sourcebookto c.aspx 10 5 4/16/2012 More Purchasing and Bidding Goals Public works bid law compliance all departments, departments not just public works Recognition of “bid limits” for your agency’s type/size. Acknowledge general principles of minimal competition for small purchases/contracts p p informal competition for larger purchases/contracts formal competition for purchases/contracts over “bid limits” 11 Rock and Roll Moment Finally, your facility manager is installing your agency’s new telephone system. He gave you the impression that all he needed to do was “buy the equipment and plug it in”. However, you notice holes cut in the walls and a sign on the only restroom on your fl floor th thatt it will ill b be closed l s d and nd converted n t d tto a ttelephone l ph n equipment room. Do you take early retirement or ask questions? If you opt to ask questions, what are some of those that come to mind? 12 6 4/16/2012 It was only after the Daily Bugle ran a story on last year’ss audit findings that year Fran had convinced the Mayor and Council that the city needed a set of uniform purchasing policies. Even then, it seems, getting the shop guys and parks department to follow the policies is a thankless task. 13 Act 1, Scene 2 Categories 14 7 4/16/2012 Basic Definitions Local government purchases are generally categorized as: Equipment, Materials and Supplies (goods) Public Works Services Purchased Services Services Non A/E Professional Services A/E Professional Services Under Chapter 39.80 RCW Personal 15 Basic Definitions Equipment, Material and Supply Purchases Supplies, materials, and equipment that are for general government purposes and will not be used to accomplish a specific public works project. Equipment rentals and leases with or without option to purchase. Equipment rentals with operator included may require prevailing wages. 16 8 4/16/2012 RFQs and RFBs Request for Quotes (RFQ) Informal request for prices of purchased services, equipment, i i t materials, t i l and d supplies li or of f a public works project Contract normally awarded to firm with lowest responsible quote Request for Bids Formal (openly advertised) request for prices of services equipment purchased services, equipment, materials materials, and supplies or of a public works project Contract normally awarded to lowest responsible bidder 17 Act 1, Scene 3 Purchasing Bid Limits 18 9 4/16/2012 How does he do that? Sam zeroed in on the backhoe purchase file! I told those PW guys, and the Mayor too that we needed to bid that out . So what if the Mayor’s brother-in-law gave us a $4,000 discount. 19 To Bid … or Not to Bid. That h is the h Q Question. 20 10 4/16/2012 Why Bid Laws? Bid laws were established to prevent fraud, collusion collusion, favoritism favoritism, or fraud improvidence in the awarding of public contracts enable local governments to obtain the best work or supplies at the most reasonable prices provide a fair forum for bidders 21 Equipment, Material and Supply Purchases - Bid Limits Below a certain minimum dollar amount ((“bid bid limit” limit or threshold) threshold), purchases of supplies, materials, and equipment are subject only to agency policies. Above this bid limits, agencies must either use a “vendor list” (informal competition) procedure under RCW 39.04.190 or seek open, competitive bids. Bid limits/thresholds are set by statutes for each type and class of municipal government (most of them, anyway) 22 11 4/16/2012 Purchase of Equipment, Supplies, Services, or Materials Unrelated to a Public Works Project Quotes Allowed Cities and Towns First Class City Over 150,000 First Class City Under 150,000 Code City Over 20,000 Vendor List Allowed (Note A) Competitive Bids Req'd Purchasing policies are set by City Council. Purchasing policies are set by City Council. Purchasing policies are set by City Council. Code City Under 20,000 2nd Class C C City & Towns < $7,500 < $7,500 $ < $15,000 < $15,000 $ > $15,000 > $15,000 $ Over 400 K w/ Purchasing Department < $5,000 < $25,000 > $25,000 Under 400 Kw/ Purchasing Department < $5,000 < $25,000 > $25,000 < $5,000 < $40,000 < $10,000 < $25,000 < $50,000 < $50,000 No bid limits. > $25,000 > $50,000 > $50,000 Counties Under 400 K w/o Purchasing Department Water & Sewer Districts (Title 57 RCW) Fire Districts (Title 52 RCW) Port Districts (Title 53 RCW) Public Utility Districts (Title 54 RCW) Public Hospital Districts (Ch. 70.44 RCW) Housing Authorities (Ch. 35.82 RCW) School Districts (Title 28A.335.190 RCW) Metropolitan Park Districts [Ch. 35.61 RCW] See RCW 54.04.070 & 54.04.082 N/A < $15,000 > $15,000 ?? ?? ?? < $40,000 < $75,000 > $75,000 Except for book purchases. < $40,000 < $50,000 > $50,000 Note A: See RCW 39.04.190. 23 Rock and Roll Moment In Hoedown, a code city of 18,000, the Parks Superintendent wants to buy a new Ford pickup for $14,500, not including sales tax or delivery costs. Do you need to go out for bids or can you call your brother-in-law who is the sales manager at the local dealership and get a quote? What f this were a theodolite f y Engineer? g for the City would the answer be if Need to call for bids in either instance, as total cost (which should include sales tax and delivery costs) is over $7,500 limit for this class and size of city. (Unless the city uses RCW 39.04.190 to set up a “vendor vendor list”.) It’s also not good form to call your in-laws and the auditor may question why you wanted a Ford or Zeiss specifically. 24 12 4/16/2012 “Hey, you did it,” Sam said. “You managed to convince the shop guys to bid out their water meter boxes and lids together in one bid. And I like the way you structured the quotes for miscellaneous water and sewer fittings. g Now we need to work on those parks department folks.” 25 Practical Tips for Applying Purchasing Bid Limits •Anticipated Ant c pated Annual Total otal Cost •Multi Department Requirements •Like Items •meter boxes with lids •Do not consider trade in value when applying bid limits 26 13 4/16/2012 Anticipated Annual Total Cost The parks department bought 300 sprinkler heads, 250 in May, 50 in June and another 100 in July and August, favorite August all from their ‘favorite’ supplier. At $15 apiece, each purchase is under the city’s bid limit of $7,500 but the total is $10,500 for the year Possible Audit Finding? Yes? No? 27 Multi Department Requirements Your county has seven departments, all of which do their own purchasing, presumably in accordance with the adopted purchasing polices. Over the course of a year, purchases of a given widget by all departments exceed $25,000, with no department exceeding the agency’s bid limit of $5,000 for single purchases Possible Audit Finding? Yes? No? Mitigating Factors? 28 14 4/16/2012 Multi Department Requirements The city parks and public works departments both need chlorine. Singly, each department buys $12,000 $12 000 each, each which they do by soliciting quotes from suppliers on the city’s vendor list. The city’s bid limit is $15,000. Possible Audit Finding? Yes? No? Mitigating Factors? 29 Act 1, Scene 4 Advertisement and Bidding Requirements 30 15 4/16/2012 Advertisement and Bidding Requirements Advertisement and bidding requirements by th the ttype and i t vary b d size i of agency. And also by type of procurement: Purchase of goods, materials, etc. Public works contract Services 31 Bid Advertisements Purchases and public works contracts over an agency’s ’ bid limits li it (whether ( h th statutory or self-imposed) require that requests for bids (RFBs) be “advertised”, with a bid due date. se, for how So, where do you advert advertise, long, and do you have to have a public bid opening? 32 16 4/16/2012 Bid Advertisements - Purchases Each type of agency has its own statutory requirements for advertising and bid openings for purchases. EXAMPLES First class and code cities over 20,000 have no advertising requirement for purchases. Code cities under 20,000 must call for sealed bids using advertisement g a formal f Counties must advertise in the official newspaper at least 13days before the bid opening and publicly open and read the bids. 33 Bid Advertisements Regardless of their statutory requirements, i t all ll agencies i can (and ( d should) should post RFQs and RFBs on their websites and/or websites considered as purchasing “portals” ng ahead to Act 3, Scene 1,, Look Looking agencies should include language allowing and encouraging piggybacking 34 17 4/16/2012 Act 2, Scene 1 Vendor Lists for Purchases (Informal Competition) 35 Vendor List RCW 39.04.190 allows authorized local governments to use a “vendor vendor list list” process to purchase equipment, materials and supplies that are not to be used in connection with any public work or improvement Municipalities are to establish vendor list procedures by resolution that are uniform for all departments 36 18 4/16/2012 Vendor List A vendor list is an informal competitive p p process used to secure telephone or written quotes (RFQs) instead of bids (RFBs). Agency must advertise at least twice a year in a newspaper of general circulation that a vendor list (or lists, if you want to keep different vendor lists for different products) p exists. Most often, a single list, with categories is used. 37 Vendor List Whenever possible, at least three quotations should be secured to ensure a competitive process, with the contract being awarded to the lowest responsible bidder as defined in RCW 43.19.1911. Immediately after the award, all bid quotations that you obtain must be recorded and made open for public inspection and be available to those who inquire by telephone. 38 19 4/16/2012 RCW 43.19.1911 (9) 39 Vendor List At least every two months, an agency using i vendor d li lists t mustt h have available il bl tto the public, a list of contracts awarded. The list must contain the name of the vendor, the amount of the contract, a br ef description descr pt on of items tems purchased, brief and the date of the award. 40 20 4/16/2012 Vendor List Can you add vendors to the list at any g at the time of quotes? q time, including YES, if the purpose is to increase competition. What happens if you only have one vendor for a given widget? Find at least two more and add them the list! Don’t be afraid to use the yellow pages (paper l i ) or electronic). Or use a sole source procedure under RCW 39.04.280 if the purchase is truly unique. 41 Vendor List What happens if you only get one quote out of the five RFQs you sent out. out Find out why, if possible. If vendors did not have enough time, extend the time (and don’t open existing quote). If there are no other quotes to be had for love or money, evaluate the single quote to see if it is reasonable. Accept the single quote. 42 21 4/16/2012 Vendor List Purchases below bid limit. Since you have a vendor list already, already you can use the same process for purchases under the bid limit also. But wait a minute, I’m supposed to get three quotes to buy $200 of various office supplies or a $30 shovel?? That’s asinine!! Yes, there is a lower limit below which it is impractical to use a vendor list procedure. What that limit becomes is up to the agency’s legislative body. 43 Act 2, Scene 2 Uniform Exemptions 44 22 4/16/2012 Uniform Exemptions RCW 39.04.280 provides uniform exemptions to p competitive p g requirements q municipal bidding when awarding contracts for equipment, supplies and material purchases and for public works projects. Since 1998, exemptions have been uniform. Statutes governing a specific type of municipality may also include other exemptions from competitive bidding requirements. Thi RCW supplements l t and dd it other th This does nott li limit powers of any municipality that provide exemptions from competitive bidding requirements. 45 Uniform Exemptions Competitive bidding procedures may be waived by resolution of the governing body of the municipality for: Purchases that are clearly and legitimately limited to a single (sole) source of supply Purchases involving special facilities or market conditions Purchases in the event of emergency Purchases of insurance or bonds Public works contracts in the event of an emergency 46 23 4/16/2012 Uniform Exemptions Competitive bidding procedures may be waived the preceding i d under d th di circumstances by adopting either: a resolution at the time of contracting; or by written policies beforehand. A resolution at the time of contracting must state the factual basis for the exception. 47 Uniform Exemptions If written policies are used to waive competitive titi biddi bidding requirements, i t th the contract and a factual basis for the exception must be recorded and open to public inspection immediately after a contract is awarded under those policies. 48 24 4/16/2012 Possible Sole Source Purchase Rationales Licenses, copyrighted, or patented product p or service that no other vendor provides. Why is it mandatory to use this licensed or patented product Were efforts made to find other vendors Existing City equipment, inventory, custombuilt information system, custom-built data inventory system, or similar product or programs programs. Compatibility with existing goods, equipment or services and there are no reasonable alternatives or substitutes. 49 Sole Source Examples Installation of water system security equipment. Proprietary, Proprietary customized software. software Maintenance/repair of radio equipment and repeater site. Official newspaper where there is only one that meets statutory requirements. Water meters if only one dealer. dealer Stun guns (tasers) where certification is needed on a given brand. 50 25 4/16/2012 51 52 26 4/16/2012 Sam pulled out another file and said; “Oh, I see that your parks maintenance supervisor bought a mower at auction. I bet there there’ss a finding lurking in this file.” Then, he smiled. “Aha, great documentation on the need for the mower and comparative prices. I s you u even v n have h v a memo m m see from the Mayor authorizing Joe to bid on the mower and a not to exceed limit for his bidding. No finding here.” 53 Auctions RCW 39.30.045: Any y municipality: p y May purchase any supplies, equipment, or materials at auctions by: Any federal, state, or local government Any private party without public bidding if the items can be obtained at a competitive price Preapproval of an upper bidding limit by the Manager/Council/Commission is advisable 54 27 4/16/2012 Special Facilities or Market Conditions Rationales/Samples Really, really, really good deal that is only for a very short l available il bl f h t time. ti Very good price on an exceptional piece of used equipment. 55 Emergencies An emergency is defined, uniformly for all classes and types of municipalities, municipalities as unforeseen circumstances beyond the control of the municipality that either: present a real, immediate threat to the proper performance of essential functions or will likely result in material loss or damage to property, bodily injury, or loss of life if immediate action is not taken 56 28 4/16/2012 Emergency Contracts Council/Commission Action: If the governing vernin body b dy elects tto waive competitive bidding requirements in the event of an emergency by the terms of written policies adopted by the municipality, immediately after the award of any contract, the contract and the f t lb sis for f the th exception ti must st be b factual basis recorded and open to public inspection. 57 Emergency Contracts When an emergency happens, the designated emergency response person: may declare d l an emergency situation it ti exists i t waive competitive bidding requirements and award all necessary contracts on behalf of the municipality to address the emergency situation If a contract is awarded without competitive bidding due to an emergency, a written finding of the existence of an emergency must be made by the governing body or its designee and duly entered of record no later than two weeks following the award of the contract. 58 29 4/16/2012 Act 2, Scene 3 Technology Purchases 59 Technology Equipment Purchases RCW 39.04.270 authorizes local governments to use a “competitive g p negotiation” process as an alternative to the competitive bid process when purchasing telecommunications, data processing (computer) equipment or software. This process requires, at a minimum the following steps: 60 30 4/16/2012 Technology Equipment Purchases The agency must provide reasonable procedures for technical evaluation of the proposals, identification of qualified sources, and the selection process for awarding the contract. The award must be made to the qualified bidder whose proposal is “most most advantageous” advantageous to the agency and the agency may reject all proposals for good cause and request new proposals 61 62 31 4/16/2012 Act 3, Scene 1 Piggybacking 63 64 32 4/16/2012 Rock and Roll Moment Your Facilities Manager just found this really great deal on widgets g on the Bakersfield, California purchasing Web site that will save the city $80,000 if they can ‘piggyback’ on the contract. What is this guy thinking? We can’t do that! Or can we? RCW 39.34.010 authorizes interlocal agreements with public agencies in any other state. There are a few hoops to jump through, though. 65 Piggybacking Basics A Under 39.34.030: Interlocal Cooperation Act, public agencies g may y exercise two or more p powers cooperatively, including purchasing. Each participating agency must have power to do individually what they agree to do cooperatively. Does not relieve any agency of other statutory obligations with respect to bidding. A contract must be in compliance with the bid limit parameters of each agency. 66 33 4/16/2012 Piggybacking Basics B While desirable, an interlocal agreement does not have to be in place prior to contract award. A contract should be awarded with language about probable use of an interlocal. Except that advertising/notice requirements 39 34 030 (5). (5) are met by RCW 39.34.030 No statutes should prohibit the purchase 67 Statutory Piggybacking RCW 39.34.030 (5) (adopted in 2004) With respectt to t one or more public bli agencies purchasing or otherwise contracting through a bid, proposal, or contract awarded by another public agency or by a group of public agencies, any statutory obligation to provide notice for bids bid or proposals l that h applies li to the h public bli agencies involved is satisfied if the public agency or group of public agencies that awarded the bid, proposal, or contract complied with its own statutory requirements and either 68 34 4/16/2012 Statutory Piggybacking ((i)) p posted the bid or solicitation notice on a web site established and maintained by a public agency, purchasing cooperative, or similar service provider, for purposes of posting public notice of bid or proposal solicitations, or ii) provided an access link on the state's web portal to the notice. 69 If You are the Host Advertise in your official or legal newspaper, like you are always required to do per your codes. Be mindful of features that might limit shared use (local preferences, WMBE, FTA, etc) Document the advertising and posting in the Solicitation and in the Contract to make it easy for others to find. Perhaps include a signed certification. Add language to allow ILA purchasing. There is standard language, although many variations work. Be thoughtful of documenting the purpose of multiple award. d Someone wants to piggyback? Provide the RFP/ITB, Ad, Website “certification,” Bid Tab and contract all in a package. 70 35 4/16/2012 If You are the Host If you want to make it possible for others to piggyback, piggyback it must be posted on a website. website Does it have to be on my website? No, many websites qualify. Ask any friendly local agency, school district, city, county, DIS or cooperative website to post. The law requires it be posted on a website purpose designed for that purpose. Keep a record of where it was posted. Does simply advertising in the Daily Journal of Commerce satisfy all advertising? No 71 72 36 4/16/2012 When you are the piggybacker Office of State Procurement (OSP) ILA just covers OSP. US Communities – register on-line. Sign US Communities Participation Certificate provided f d d by the h vendor d on behalf of the host for each contract (or sign ILA with the agency that hosts the bid/contract). Evaluate each bid piggyback uniquely – use your checklist. Obtain the ITB/RFP, Ad, Bid Tab, Web Site “Certification,” Contract and keep for your files. Evaluate for competitive bid rules (if you have sealed bid requirements), WMBE, other legal prohibitions. Terms and conditions can vary, as long as they don’t violate a legal prohibition. 73 The Piggybacking Checklist 1. 2. 3. 4. 5. 6. Do you each have authority to bid/contract? Is it sponsored by a public or non-profit agency? City, count, state, school district, port, non-profit (such as p established for this US Communities)) or Co-Op purpose. Do your rules require a sealed bid process for this purchase? Was the bid conducted and awarded using consistent to your codes and bid statutes? Was the bid awarded consistent with the ITB instructions? Proper award? Do you have statutory restrictions do you have (do you prohibit in law…..WMBE, Preference, Equal law WMBE Local Preference Benefits, multiple awards?) Advertising – does this bid comply with the new approach – posted on web and host advertisement? 74 37 4/16/2012 Piggybacking - Advertising Requirements Host advertises according to host requirements. requirements Host posts on Web Site. Any website sponsored by any public agency, purchasing cooperative; or similar service provider (E-bid, Builders etc ) Exchange etc.) Brings bid compliant for Interlocal Sharing. 75 Purchases through Interlocal Agreements City Contract #: [Click here and type number] Interlocal Agreement with (government agency or Purchasing Co-Op name): [Click here and type name] Item Description: [Click here and type description] Do you have an Interlocal agreement signed with the Contract Agency? If yes, where is it filed: ______ If no, get a mutually signed Agreement in place before you continue. State t OSP contract t t you may skip ki the th remainder i d off thi this ttestt because b the th OSP contracts t t comply l State OSP Contract #: ______ If a St with remaining requirements and retain the documentation on hand for SAO to review in the OSP offices. Is this a technology contract? If yes, do your own rules allow for technology contracts to be negotiated? If your own rules allow for negotiated IT contracts, you can skip the test. Is this a services contract? If yes, do your own rules allow services to be negotiated? If your own rules allow for negotiated services, you can skip the remainder of the test. Are you using this as only one of multiple quotes, for a small purchase? If yes, you can skip the remainder of the test. Your purchase will not mandate the sealed bid rules. Ch kli t ffor R Checklist Required i dC Compliance li Does the host agency have a requirement to run a newspaper ad in their local paper and did they comply Did they list on a website? If so, state when and the address. Attach proof if possible. Did the bid & award comply with your codes? Did bid avoid any preference Yes No Federal and State contract rules usually don’t require a newspaper ad. For others, attach the ad or place into the file Yes No Always required. Indicate date, address and/or attach or place into the file. Yes No If the bid and award violate your own sealed bid laws, stop. You can not use the bid. Yes No 76 38 4/16/2012 Who can we piggyback with? Can my agency use Federal Contracts? (GSA) [Only certain schedules] Can my agency use State Contracts? (OSP) [Yes] Can my agency buy from US Communities and similar purchasing co-ops? [Yes, but remember that the co-op must have bid in compliance with your agency’s bidding parameters] 77 US Communities Non-profit agency All lead bid agencies g signed g a Master Agreement. g This is on the website. All participating agencies then register which adds your signature to the Master Agreement. This forms the ILA. All bids are posted on the US Communities website, which is compliant to the new RCW. Lead agency also p y y website. posts on their own city/county Individual bids are reviewed for competition, advertising, web posting, award. The Bid, results, ad and web posting should all be on the US Communities website. 78 39 4/16/2012 Act 3, Scene 2 Innovative Ways to Buy “Stuff” 79 Equipment Purchases Sometimes, an agency can’t afford new vehicles hi l and d equipment. i t But most often, even the price of a used vehicle or piece of equipment will exceed the agency's bid limits. A special market condition may exist or an item may be available at an auction. 80 40 4/16/2012 Used Equipment Matrix Criteria Model Year Points 2005 or earlier 2006 2007 2008 2009 2010 2011 10 30 40 50 60 70 80 Over 1600 1200 ‐ 1600 800‐1200 0‐400 0 20 50 75 Open Enclosed 25 50 0‐6000 # 6000 plus 25 50 0‐2 years 2‐4 years 4 plus year 20 50 75 Other Bids 3rd Low Bid 2nd Low bid Lowest Bid 0 25 50 75 Hours Cab Capacity Warranty Price 81 The End! There is a light at the end of every tunnel. Just hope it’s not a purchasing or contracting “train wreck” coming at you! 82 41
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