Procurement 301ARTs Conference

August 2014

Presented by:Kathryn Hodges

Workshop Objectives• Procurement Principles

o Fair & Open Competitiono Fairness & Integrityo Responsive & Responsible

Contractorso Transparency

• Procurement Practices• Procurement Methods• Short Quiz

o (If we have time)

• Defining Procurement• Regulations• Procurement Process

o Planningo Writing Specifications

• Defining Localo Advertisingo Awarding the Contract

• Contract Elementso Managing the Contract

What is Procurement?

Procurement refers to the purchasing of

GOODS and SERVICES.

Why is Procurement Important?

To ensure that the Purchaser receives

the best and most responsive product or service

at the lowest possible price.

Remember,

PROCUREMENT IS A

PROCESS,

NOT AN EVENT.

Regulations to Follow• 7 CFR Part 3016 (public) and Part 3019 (non-

public)• OBM Circulars

A-87, A-102, A-110, A-122 and A-133• 7 CFR Part 210, Part 215, Part 220, Part 225 and

Part 226, guidance and instructions• State law, regulations and policies that are not in

conflict with Federal requirements• Local law, regulations and policies that are not in

conflict with Federal requirements

PROCUREMENT PROCESS

• Planning• Writing Specifications• Advertising the Procurement• Awarding a Contract• Managing the Contract

Planning(also known as Forecasting)

• Inventory what you have on hand• Identify what you will need, and when, for

your menu(s)• Identify the estimated amount of the

procurement • (Under- or Over- the applicable Small Purchase

Threshold)

• Determine Procurement Method and Document Type

• (Formal or Informal) • (IFB or RFP)

Planning continued• Identify if updated equipment will be

needed • Identify if costs are projected to increase

over the coming year/season• Compare next year’s school population to

this year’s• Identify purchasing trends, if any• Identify the amount of available funding

Writing SpecificationsMaximize the likelihood of receiving the best

possible product or service at the lowest possible price.

• Clearly state what you are looking to purchase

• Everyone bids on the exact same items• Allows you to articulate your needs

Specifications are needed for both the Informal and the Formal

procurement methods.

How can you buy if you don’t know what you want or need!

Writing Clear and ThoroughSpecifications

• Product Name/Variety

• Grade• Size• Quantity• Quality

• Cleanliness• Packaging• Delivery• Food Safety• Farm Practices and

Characteristics

Sections of a Solicitation

• Contract Type• Introduction/Scope• General Descriptions of Goods

and Services• Timelines and Procedures• Technical Requirements• Evaluation Criteria (for RFP only)

Note: Desire for local items can be included in the high-lighted areas.

Adding Local or Geographic

Preference to Your Specifications

Geographic Preference may only be used for unprocessed items.

“Unprocessed” means that the agricultural product retains its inherent characteristic.

These processes are allowed:

Cooling, refrigeration, freezing Peeling, slicing, dicing, cutting, chopping,

shucking, grinding Making patties (no additives) Drying/dehydrating Washing, packaging, bagging, vacuum packing Adding preservation to prevent oxidation Butchering livestock or poultry Pasteurizing

Who defines “Local?”

YOU DO!

However, your definition cannot restrict fair and open competition.

For example, you can include specifications such as “harvested within 48 hours of delivery” that will increase the chances that a local vendor will win the contract, but you cannot say “Only bids from farms within Concord will be accepted.”

Ways to Define “Local”First, identify the sources available to you. (Perhaps issue a RFI, or Request for Information, before you start the procurement process, just to see what is out there.)

Second, breakdown your definition by one of the following choices: or vary by:

• Region Product• State Season• Mileage Special Event

How to Incorporate a Geographic Preference

• Define Local• Decide how much “preference” local

products will receive• Determine what type of procurement

method to use• Be sure your solicitation makes

perfectly clear how the preference will be applied

Advertising the Procurement

The content of the solicitation announcement should be sufficient enough in scope to allow bidders to identify:• The general nature of the goods or services to be

procured;• The method of procurement that will be used

(formal or informal);• How they can obtain the solicitation or more

information; and• The due date for responses to the solicitation.

Due DatesWhen determining due dates, keep in mind:• Complexity of the solicitation requirements;• Time needed for pre-bid/award meetings, site visits,

etc; and• Federal Due dates:

FSMC for all program except SFSP—at least 21 days in advance of due date*

FSMC for SFSP—at least 14days in advance of bid opening* In absence of applicable State or local laws, other

solicitations should be publicly announced at least 21 days before the response is due, unless an emergency or good cause exists for expediting the acquisition.

*NOTE: USDA recommends using a time period of 4-6 weeks.

How to AdvertiseTo allow for Free and Open Competition, use the following ways to advertise your solicitation:

• State designated newspapers• Trade periodicals• Designated internet sites• Direct mailings (informal only)• Other print media that serves the business

community and general public

Awarding a ContractPurposes of a Contract:1. Solemnity of the Commitment

o Requires the parties to seriously consider the effects of performance and nonperformance upon themselves

o Signing the contract is the formality that has the effect of convincing the parties of the importance of their commitments.

2. Record of the deal3. Fulfillment of Numerous Laws4. Dispute Resolution Mechanism5. Feasible and Economically Viable Litigation

One last comment…

The Contract document MUST bear resemblance to the Solicitation

document.

You cannot solicit for one thing and contract for another.

Basic Contract Elements

• Contract Duration• Identification of the Contract’s parties• Scope of Work• Product Specifications• Type of Contract• Renewal Options• Modification and Change Procedures• Default and Breach provisions, remedies,

penalties• Termination rights

Contract Elements continued

• Required Compliance certifications and sanctions• Recordkeeping requirements• Laws and Regulations that govern the contract• Requirements that all costs be the net of all

discounts, rebates and other applicable credits• Clear Methodology for tracking costs• Any Sanitation and Licensing requirements• Professional Certification requirements or

minimum levels of experience or education

Managing the Contract

This is also called “Contract Administration.”

This ensures that contractors perform in accordance with the terms, conditions, and specifications of their contracts, and allows for adequate and timely follow-up of all purchases.

Managing continued

The SFA must monitor the goods and services it receives to make sure it:• Receives the quantity and quality of the

goods and services it requested;• Receives the goods and services on time;

and• Is charged correct amounts within budget.

DisputesContract Administration is important in that it plays an important role in determining the intention of the parties during a dispute.

In the event of a dispute, courts and arbitrators enforce contracts according to the expressed intention of the parties, as interpreted from both• The Language of the Contract; and• The Conduct of the Parties after the contract

has been awarded.

Disputes continued

• If the contract language is unclear, courts will resolve any dispute by discerning and enforcing the intentions of the parties as interpreted by PRACTICE by the parties.

• Even if the language is clear, the CONDUCT of the parties after contract award may shift the original intention to some terms and may cause a party to lose a firm hold on its original rights and benefits.

SFA Responsibilities

Ultimately, it is the SFA’s responsibility to follow each of these Procurement Process steps. The SFA is NOT to be

guided by vendors’ opinions or requests.

Good Procurement Principles

• Fair and Open Competition• Fairness and Integrity• Responsive and Responsible

Contractors• Transparency

Fair and Open Competition

• Competition leads to the acquisition of higher-quality goods and services at the lowest possible price.

• All suppliers are playing on a level playing field

• All have the same opportunity to compete

Fairness and Integrity• No matter how strongly an SFA official may prefer

a particular product or supplier, other comparable products and suppliers must be given every reasonable consideration.

• SFAs must make sure that ethical safeguards exist and are maintained at all levels in the organization, and in all aspects of the procurement process.

• When/If an unethical action is identified, the SFA must immediately take action to correct it.

Responsive and Responsible Contractors

• Responsiveo Vendor’s products or services meets the SFA’s

specifications.

• Responsibleo Vendor can and will successfully fulfill the

terms and conditions of the proposed procurement.

Responsible?The SFA can determine if a contractor is responsible by investigating the contractor’s:• Integrity;• Compliance with public policy;• Record of past performance; and• Financial and technical resources

If it is determined that the contract is NOT responsible:• Carefully document decision• Contractor becomes ineligible for award.

TransparencyEverything done by the SFA must be:

o Clear;o Above-board; ando Out in the open

Transparency enhances:o Accountability (ultimately to the taxpayers);

and o Cost-Effectiveness to the programs

Good Procurement Practices

• Thoroughly understand and communicate needs,

• Thoroughly understand the market and seek as many respondents as possible,

• Review current resources and services to ensure that only necessary purchases are made,

Good Procurement Practices (continued)

• Use procurement process to obtain high-quality goods or services at the lowest possible price,

• Write clear evaluation criteria that are not unduly restrictive,

• Develop a solicitation that contains specifications that are clear and not unduly restrictive,

Good Procurement Practices (continued)

• Publicize the solicitation appropriately to the widest possible audience,

• Allow adequate time for respondents to prepare responsive bids or proposals,

• Ensure transparency in the opening and evaluating of bids and proposals, and

• DOCUMENT THE ENTIRE PROCESS

Procurement Methods• Informal

Under applicable small purchase threshold Still must be competitive

• Formal Over applicable small purchase threshold Can be used if purchase is below small purchase threshold,

as well Competitive Sealed Bid Method (IFB)

Award is based solely on lowest price. Competitive Proposal Method (RFP)

Award factors in technical resources and approach, as well as price

Request for Information

This is a good way to find out:what vendors are out there, where they are, and what they can offer.

It is not to be used to issue contracts.

Invitation to BidThis is used when the contract will be awarded solely on the bid price.

This method is most often used when contracting for GOODS.

Although verbiage can be added to apply geographic preference, the contract award will still be based on the lowest bid, or the lowest evaluated bid.

Request for Proposal

This is used when the contract will be awarded on factors other than bid price.

This method is most often used when contracting for SERVICES.

ANY QUESTIONS

SO FAR?

AShortQuiz

(if we have time)

USDA defines “Local” for SFAs.

Answer• USDA defines “Local” for SFAs.

NOEach SFA defines “local” for their own purposes. However, the definition cannot restrict fair and open competition.

On a formal RFP, I can contact the list of

vendors that I have on file for quotes.

AnswerOn a formal RFP, I can contact the list of vendors

that I have on file for quotes..

Yes and NoYou can contact the list of vendors that you have on file, but you also have to advertise the solicitation.

That list of vendors you have may not include all possible vendors out there that may be interested in responding to your solicitation.

I really like the current company who is providing management

services for my school.It’s okay for me to set a due

date 5 days away so that I don’t have to evaluate anyone else’s

bid, right?

AnswerI really like the current company who is providing

management services for my school.It’s okay for me to set a due date 5 days away so that I don’t

have to evaluate anyone else’s bid, right?

No.Federal due dates are at least 21 days for all programs except SFSP. SFSP due dates are at least 14 days. These are the minimum time frames. USDA recommends allowing 4-6 weeks between the advertising of the solicitation and the due date.

Setting a close due date can restrict fair and open competition. Knowingly restricting competition is an unethical practice.

I’ve issued my IFB for Maple Syrup. A vendor has contacted me with an idea

about using maple cream instead of syrup, which I thought was great. (It’s less messy!)

The samples provided were wonderful. So I’m going to change my IFB to incorporate

that idea.It’s not my fault that no one else produces

maple cream. I’m awarding the contract to my one vendor.

AnswerI’ve issued my IFB for Maple Syrup. A vendor has contacted me with an idea about using maple cream instead of syrup, which I thought was great. The samples provided were wonderful. So

I’m going to change my IFB to incorporate that idea.It’s not my fault that no one else produces maple cream.

I’m awarding the contract to my one vendor.

No.A vendor’s input cannot influence a solicitation that is out there. In this example, the input restricted fair and open competition. While there may have been many vendors willing and able to bid on maple syrup, the SFA was influenced by the vendor to bid on a product that was exclusive to them. This is an unethical practice.

I lost track of time. I can’t go out to bid. This can be considered an

emergency (because school is opening next week) and I need to have bread

for sandwiches on opening day.

AnswerI lost track of time. I can’t go out to bid. This can be

considered an emergency (because school is opening next week) and I need to have bread for sandwiches on opening

day.

NoLack of planning is not considered an emergency and goes against proper procurement process guidelines.

You should, at the very least, obtain telephone quotes from at least 3 bread vendors for a short term contract.And you should go out for formal bid (if you anticipate exceeding the small purchase threshold) immediately for the rest of the year’s bread needs.

Questions?For further information, please feel free to contact:

• Kathryn Hodges (603) 271-3861

Kathryn.hodges@doe.nh.govhttp://www.education.nh.gov/program/nutrition