BOARD OF COMMISSIONERS TRAINING

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BOARD OF COMMISSIONERS TRAINING

U. S. Department of Housing and Urban Development

PROCUREMENT AND CONTRACTING OVERVIEW

April 2009

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BOARD OF COMMISSIONERS TRAINING SERIES

I. The Commissioner’s RoleII. The Executive Director’s RoleIII. Program ManagementIV. Financial Operations and OversightV. Physical Facilities and Maintenance

VI. Procurement and Contracting OverviewVII. Preventing and Resolving Audit FindingsVIII. Performance Measures

PHAS, MASS, FASS, PASS, SEMAP

IX. Conducting an Effective Board MeetingX. Emergency and Disaster Preparedness

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PROCUREMENT AND CONTRACTING TRAINING

I. The Key to Good Procurement ActionsII. Basic Procurement RequirementsIII. Roles and ResponsibilitiesIV. Procurement PlanningV. Resident Businesses and Section 3VI. Cost and Price AnalysisVII. Types of ProcurementVIII. Types of ContractsIX. Closeout

1. Appendix I – Summary of Procurement Methods Chart2. Appendix II - Glossary

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I. The Key to Good Procurement Actions

• Common Sense• Sound business approach• Integrity and ethical standards• Planning • Internal management controls• Clear and detailed conditions, terms

and specifications• Open and free competition

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Good Procurement Actions Cont’d.• Careful award• Confidentiality• Conformance with Federal, State and Local laws and

regulations• Adherence to the requirements of the HA’s

procurement policies, procedures and contract administration system

• Oversight• Consistent application and enforcement of standards

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The Down Side of Poor Procurement• Cancelled and reissued actions• Poor or untimely service or delivery• Incomplete, inadequate or useless items• Inappropriate acquisition costs• Litigation • Audit findings and repayment $s• Waste and misuse of PHA resources, i.e.

time, personnel, and money

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II. BASIC PROCUREMENT AND CONTRACTING REQUIREMENTS

Housing Authorities are required to develop and use procurement policies and procedures and contract administration systems

Procurement procedures must:• Conform to applicable Federal, State and local laws and

regulations• Provide for internal management controls• Cover all phases of procurement activity from plan

development through award to close out and oversight

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Federal Requirements • 24 CFR 85.36

• Provides regulations and administrative guidance

• Procurement Handbook 7460.8 Rev-1• PIH Procurement Policy

• PIH Notices• State and Local Law Interagency

Agreements

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Procurement and Contracting Policies• Board approved• Written and officially issued• Establish parameters for procurement and

contracting procedures• Designate the Contracting Officer• Establish levels of contracting authority

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• Establish detailed written guidance and operating instructions for implementing ALL procurement and contracting actions

• Incorporate the HA’s applicable internal management controls [IMC] and Standard Operating Procedures [SOP]

• Cover every phase of procurement process• Designations of levels of authority and approval• Contract Administration system• Procurement planning• Determining the procurement methodology• Public Notice• Selection• Award • Monitoring, oversight and evaluation of performance• Closeout

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CONTRACT ADMINISTRATION SYSTEM [CAS]

• Covers every phase of procurement and contracting activity - without exception

• Operational processes

• Authorizations and justifications

• Data/transaction entry and verification,

• Internal management controls and accountability

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• Records modifications and terminations

• Provides documentation and paper trail

• Provides for evaluation of contractor-supplier performance

• Tracks Dollars and Performance Time

• Documents closeouts

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III. Roles and Responsibilities

The Board of Commissioners is responsible for:

• Developing, approving and officially issuing the HA’s procurement policies and procedures

• Appointing a contracting officer and establishing the levels of authority

• Monitoring the contracting officer’s performance, which must comply with 24 CFR Part 85.36

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The Executive Director is responsible for:• Carrying out the procurement policies and procedures

established by the Board

• Developing or revising as appropriate the procurement procedures and obtaining Board approval.

• Serving as the Contracting Officer when so designated and supervision of procurement and contracting by the HC

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The Contracting Officer’s duties are:• Implementing the procurement procedures• Exercising sound judgment in carrying out

procurement and contracting responsibilities • Ensuring that contractors receive impartial, fair

and equitable treatment;• Adherence to high standards of conduct and

avoiding conflicts of interest

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• Providing procurement assistance to HA staff

• Acquiring HA supplies, equipment and services

• Utilizing the advice of specialists in audit, law, engineering and other subjects, as appropriate;

• Analyzing bids and proposals

• Signing all contracts, modifications, purchase orders, intergovernmental purchasing agreements within authority level

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• Detecting and minimizing contract irregularities

• Reviewing and ratifying unauthorized actions upon receipt of adequate justification

• Recommending and instituting remedial action

• Operation of the Contract Administration System

• Supervision and oversight of all HA staff involvement in procurement and contracting.

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IV. Procurement Planning

What -

• are the program requirements

• steps are taken to accomplish it

• is the timing of required actions

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The Procurement Plan

A. Procurement Plan Requirements

• Written

• Approved by the Board

• Directly linked to the PHA Budget and PHA Plan

• Includes all procurement and contracting activity

• Periodically reviewed and modified as appropriate

• Evaluated and monitored by Board and ED

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B. Procurement Plan Scope and Timing• Identifies the item or scope of work required;• Is supported by documentation that includes: the

proposed use and description of item, requesting source, etc.,

• Considers time constraints • Type and size of job, market considerations, urgency of need

• Includes a cost estimate for each procurement action• Identifies the source and availability of funds

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• Sets the schedule and timeframe of all actions • Considers:

• local, state and interagency purchasing agreements• Consolidation vs. breakout and lease vs. purchase options

• Provides for special objectives and programs• Resident contracting, training and employment• Section 3• Multi-year requirements and projections

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V. Resident Businesses and Section 3

Resident-owned businesses, training and employment• Direct HA training and employment of residents is not a

procurement action. • Issuing a contract to a resident owned and staffed company is

a procurement action• Special conditions for resident contracting must be included

in the HA’s policies and procedures.• An alternative procurement process which limits solicitation

to resident-owned businesses can be used• The resident-owned business must be ‘responsible’

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V. Resident Businesses and Section 3

SECTION 3• The 1968 Act requirement that individuals or firms located in or owned

in substantial part by persons residing in the area of a HA project be used when possible.

• Provision for Section 3 actions must be included in the HA procurement plan

• All solicitations must advise contractors of this requirement

• Appropriate clauses must be included in all covered contracts

• Contractors and subcontractors must make good faith efforts to award contracts, purchase supplies or hire and train Section 3 eligible persons or companies

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VI. Cost and Price Analysis

Cost And Price Analysis And Estimates Must Be:

• Independent and Confidential

• Performed as part of procurement planning for all actions including modifications and terminations

• In writing and retained in the HA records

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A cost analysis is usually completed to:• Evaluate the proposals

• A review or comparison of components and the end price or value of the items to be obtained: wages, materials, time/hours, etc.

• received in response to a • IFBs when only one bid is received • RFPS

• Prepare for• negotiations• Contract modifications• Terminations

• PROFIT MUST be negotiated separately when a cost analysis is required

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A Price Analysis is:• A review or comparison of the amount for which the item or service

can be obtained• Usually performed for small purchases and Invitation for Bids

[IFB]s• May be as simple as reviewing prior recent procurements for similar

items and factoring inflation or conducting a simple survey of suppliers.

• More complex analyses may be required for large purchases or contracts including estimated labor categories and hours required, materials needed and subcontractors required, etc.

• Must sufficient enough to properly evaluate offers and proposals

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VII. Types Of Procurements

• Small Purchases• IFB • Competitive

• Qualifications – Based Proposals• Competitive Proposals

• Noncompetitive Proposals

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VII. Types Of Procurements

• Small Purchases• The category covers a range of types of procurements and

materials - copy paper, plumbing supplies, computer software.• $100,000 or lower as set in local law and the HA’s Procurement

Policy. • Less formal than other types of procurement• At least 3 oral or written quotes

• Oral quotes – notes should be made during discussions and follow-up documentation obtained – fax, e-mail, etc., obtained from supplier or sent out as confirmation

• Documentation is required for all small purchases – paper trail for bookkeeping, budget development and audits

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VII. Procurement

Small Purchases Continued• Factors to be considered in setting the small

purchase limit:• The size of the HC and the overall procurement budget• The level of experience of the CO[s] • The HC Board assessment of past CO performance• Local law where appropriate• The CO’s bonding level• Availability of HA Board and ED time for oversight

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VII. PROCUREMENT

INVITATION FOR BID OR SEALED BID• Primarily used for construction contracts and major

purchases of equipment and supplies• Requires public notice of item/work to be obtained• IFBs issued should include:

• A detailed description of item to be purchased, specifications, schedule for delivery, all terms and conditions.

• Deductive alternatives may be included and must be used in the order listed

• Additive alternatives or pre-priced future work may not be included

• Sealed bids are submitted, Firm fixed-price contracts are awarded – negotiation with lowest bidder is not permissible.

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VII. PROCUREMENT

IFB or SEALED BID OPENING• Sealed Bids are received and handled in strictest

confidentiality • Bids are opened in public at the announced time and place• Names of bidders and bid price information is read out • loud and made part of the permanent record• [no other information is made public at this time]

• Any issues raised are taken under advisement and no determinations are made at this time. Information on decisions reached must made available to all bidders.

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VII. PROCUREMENT

• IFB Contract Issuance• Contract issuance is the next step in the IFB

procurement process• Firm fixed-price contracts are awarded• Negotiations with lowest bidder is not

permissible• Contracts will be discussed in more detail in VIII

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VII. PROCUREMENT RFP – REQUEST FOR PROPOSAL

Qualifications-Based Proposals• Used only for A/E• Price is not used as a selection

factor but is negotiated at a later date.

• Bidder must be responsible

Competitive Proposals• Used for procuring

professional and consulting services, including A/E• Ex. Architects, lawyers,

accountants, master plumber

• Price is used as one of the selection factors

• Bidder must be responsible

TWO TYPES

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VII. PROCUREMENTRFP – REQUEST FOR PROPOSAL

• For all competitive proposals, the HA must• Establish an evaluation committee to review the technical factors• A cost analysis must be conducted by the procurement staff before

negotiations. The results are confidential!• Profit must be negotiated separately

• Proposals are time and date stamped at the time of receipt. Late proposals must be marked accordingly at the time of receipt and rejected as required by HA policy.

• Proposals are not opened publicly. No information is made public prior to final decisions for award.

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VII. PROCUREMENTCOMPETITIVE PROPOSALS

PERMISSIBLE ACTIVITIES• The HA may

• Hold a pre-bid conference• Make an award based on initial proposals• Request and receive best and final offers • Conduct negotiations

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VII. PROCUREMENT NONCOMPETITIVE PROPOSALS

Allowed in the following circumstances:• Emergency situations• Procurement under other methods is not feasible• Numerous solicitation efforts have not been successful and

competition is determined to be inadequate• Written justification exists and meets procurement policy• Cost analysis data existed prior to the solicitation• HUD approval is obtained under the original ACC. An

approval is not required under a new ACC.

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VII. PROCUREMENT

RECOMMENDED PROCEDURES FOR ALL PROCUREMENTS

• No withdrawals or corrections are allowed after bid opening unless obvious error – clear and convincing documentation of intended price and error.

• All bids/offers and qualifications of potential contractors/suppliers are reviewed for• Responsiveness – meets all solicitation terms• Price/cost analysis – within guidelines• Responsibility – capacity to fulfill contract

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VIII. Contracts

• Contract – a legal document that outlines • The terms and conditions that guide the performance of

the parties• Pricing and payment arrangements• Established time limits and delivery schedule• Limits, options, incentives and penalties• Clauses and terms required by Federal, State and local

law and HA policies• Provisions for special events and requirements

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VIII. CONTRACTS

• The Contract must: • Be complete – in general if a provision is not in the

contract the supplier/contractor cannot be required to provide the service/product • Modifications of contracts if and when possible are costly and

time consuming and must be mutually agreeable• Exceptions exist contact your legal counsel

• Include all solicitation provisions• Provide guidance and criteria for monitoring,

evaluation of performance, product acceptance/rejection, payment and termination

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VIII. CONTRACTS

• Two basic types of contracts:• Fixed Price – the contractor must deliver the

product or perform the service for the price and other conditions agreed upon.• This is the preferred contract type• Minimizes HA risk and provides maximum incentive for the

contractor to carryout the work effectively and in a timely manner

• The only contract type permitted with a sealed bid procurement

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VIII. CONTRACTS

Cost Reimbursement Contract• The contractor agrees to make best efforts to complete

contract statement of work within estimated agreed upon amount, however, if work is not completed and funds are expended the contractor has no obligation for further performance unless the contract is modified.

• This type of contract:• must be justified prior to issuance• is used in situations where some aspect of the specifications is

not known or complete, e.g.. labor hours

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VIII. CONTRACTS

Prohibited Contract Types:Cost plus a percentage of cost

• Requires HA to pay costs to be incurred in future plus [a commission on those costs] that can not be determined at the time of contract award

• There is no incentive for the contractor for controlling costs or carrying out the contact with “best efforts”

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VIII. CONTRACTS

Prohibited Contract Types Continued: Percentage of construction cost

• Cost is determined by applying a percentage of actual construction costs as a fee to the total construction cost. Similar to process used in A/E costing.

• There is no incentive for timely, cost effective work and frequently has the result of encouraging the contractor to conduct an overly expensive construction job.

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IX. CLOSEOUT

Closeout is the last stage of procurement and CAS • Receipt of product - delivery• Review and inspection• Acceptance • Determination that all contract terms have been fulfilled and no

incentives or penalty clauses should be implemented• Process of acceptance and fulfillment of contract terms, issue order

for payment• Payment• Paper work and final documentation completion

• Evaluation