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State Agency Contracts State Agency Contracts Considerations for Performance Reviews.

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Presentation on theme: "State Agency Contracts State Agency Contracts Considerations for Performance Reviews."— Presentation transcript:

1 State Agency Contracts State Agency Contracts Considerations for Performance Reviews

2 Introduction 2 Performance reviews of contracts are not mysterious Your audit goals and findings will remain the same Whats typically unknown: criteria, audit tasks, and evidence

3 Training Objectives Participants should be able to: Identify the bodies of criteria that your state has developed to ensure high quality contracts Identify the key players in contract management and accountability Develop a checklist of issues to cover in your audit and ideas on how to address those issues 3

4 4 Part 1 of 3 Audit Criteria: State Laws and Rules for Contracts

5 Audit Criteria: State Laws and Rules Contract Components Contract Controls or Review Contract Management Contract Administration (if separate) Ethics 5

6 Contract Components Section 287.058, Florida Statutes Every procurement of contractual services in excess of the threshold amount … shall be evidenced by a written agreement embodying all provisions and conditions… 6

7 Contract Components (continued) State and federal statutes… specify components or even specific language that must be a part of any state agency contract require basic language (e.g. terms of payment) and details unique to the state (e.g. adherence to public records laws), and are often specific to the type of purchase, e.g., service, construction, or commodities 7

8 Contract Review Each agency shall establish a review and approval process for all contractual services contracts ….which shall include, but not be limited to, program, financial, and legal review and approval. Such reviews and approvals shall be obtained before the contract is executed. s. 287.057(19), F.S. 8

9 Contract Management For each services contract, state agencies should designate an employee to enforce the contract terms, establish procedures to ensure that contractual services have been rendered according to the contract terms, and pay the vendor if these terms have been met s. 287.057(15), F.S. 9

10 Contract Administration Agencies 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. s. 287.057 (16), F.S. 10

11 Ethics of Contracting Solicitation or acceptance of gifts Conflicting employment or contractual relationship Unauthorized compensation Misuse of public position Unauthorized commitment of state funds 11

12 Discussion: Part 1 1.Whats the point of these criteria? Do they need to exist? 2.Do these criteria encourage efficiency or are they merely symbolic safeguards? Discuss. 12

13 Players and roles: who will be enforcing the criteria? 13 Part 2 of 3 Players and Roles: Who Will Be Enforcing the Criteria?

14 Who Ensures Contract Accountability? Finance and Accounting Contract Manager Contract Administrator Legal Counsel Auditors 14

15 Finance and Accounting Source for: Payment history and related support, warrant copies, compliance information 15 Contract Planning: Cost principles evaluation Contract Selection: Contractor financial viability assessment Coordination: Relationship with state financial entity Accountability: Allocations and Encumbrances Invoice Processing Warrant Distribution

16 Contract Manager Source for: Documentation of day-to day vendor communications, activity log, and of changes made based on their feedback to the vendors 16 Provider Selection Contract Preparation Ongoing Oversight Review reports and deliverables Contract Amendments Monitoring Closeout

17 Contract Administrator Source for: Contract files (correspondence, deliverables), solicitation and award documentation, monitoring results 17 Maintain Files Financial Information Liaison with contract manager and state purchasing entity Management Reporting Legislative Analysis Technical Research

18 Legal Counsel Can be internal or external, and can: Advise on solicitation method Assist in negotiations with vendors Approve contract components Provide enforcement support to contract manager Source for: resolving questions about contract content, documentation of approval of contract, documentation on actions taken against vendors 18

19 Auditors Financial, information technology, and performance audits State audit entities Third party CPAs (single audit) Internal Audit/Inspector General Source for: historical information on the contract that will help determine cause, as well as implications for ongoing performance and compliance. 19

20 Discussion: Part 2 1.Review/Discuss: What kinds of evidence/documentation (beyond the content of the contract) would you look for to determine whether agency staff were adequately safeguarding the states interests? 2.Why might it be problematic for a contract manager to also be a contract administrator? 20

21 Players and roles: who will be enforcing the criteria? 21 Part 3 of 3 Developing an Audit Checklist for Contract Reviews

22 Components of the Contracting Process Planning Decision to Contract Vendor Performance Requirements Solicitation Process (e.g. RFP process) Award Process Award Decision Contract Provisions Monitoring 22

23 Audit Checklist: State Agency Planning An agencys plan to contract for services should demonstrate: what services are needed how they should be provided what provisions should be in the contract how services will be evaluated what approvals will be required, if any 23

24 Audit Checklist: The Decision to Contract The agency should have: Determined whether state law either prohibits contracting for these services or requires the agency to demonstrate its need to contract Analyzed its business needs, goals, objectives Conducted a cost/benefit analysis and evaluate options 24

25 Audit Checklist: Vendor Performance Requirements The contract should: Clearly state the services expected Clearly define performance standards and measurable outcomes Identify how vendor performance will be evaluated Include positive or negative performance incentives Identify the staff that will be responsible for monitoring vendor performance Define procedures and conditions for modification to the contract 25

26 Audit Checklist: Solicitation Process An RFP should… Clearly state performance requirements and scope Include a statement of work Identify constraints, deadlines, mandatory items Specify required deliverables and payment terms Clearly state pricing requirements and evaluation criteria Allow sufficient time for vendors to prepare good proposals 26

27 Audit Checklist: Solicitation Process (continued) An RFP also should: Avoid specifications that favor a particular bidder Specify qualifications for the vendor personnel who would be assigned to the project Identify federal and state requirements vendors need to know Outline all communication devices the agency will use to ensure equal access to information by bidders 27

28 Audit Checklist: Award Process The contract award process should: Ensure proposals are responsive to agency needs Ensure contracts are awarded fairly Assure best value and defensible award decisions 28

29 Audit Checklist: Award Decision When an agency makes an award decision, it should: Control bids upon receipt to prevent leaks and additional opportunities to cure deficits. Have appropriate procedures for handling late or incomplete proposals Ensure that an adequate number of proposals were received Use a trained, independent evaluation committee Use fixed, clear, consistent scoring scales to measure proposals against RFP Check vendor references Document award decision and keep supporting materials 29

30 Audit Checklist: Contract Provisions Goals of the contract provisions: Protect the interests of the agency Identify the responsibilities of all parties to the contract Define what is to be delivered Document the mutual agreement, substance, and parameters of the terms 30

31 Audit Checklist: Contract Provisions (continued) 31 Scope, terms, renewals Deliverables and reporting Payment amounts, schedules Limits on the states liability Performance standards/incentives Audit and inspection Conditions for termination Conditions for renegotiation and/or price escalation Tying payments to deliverables Appropriate signatures/review

32 Audit Checklist: Contract Monitoring Goals of monitoring: Ensure that contractors comply with contract terms Ensure that performance expectations are achieved Identify and resolve problems 32

33 Contract Monitoring (continued) Proper monitoring includes: Assigning a contract manager with adequate skills, authority, resources, and time Tracking budgets and compare charges to terms an conditions Ensuring on-time deliverables and document acceptance/rejection Withholding payment until deliverables are received Retaining documentation supporting charges against the contract Evaluating the contractors performance against pre-established criteria 33

34 Discussion: Part 3 Review/Discuss: What controls should be in place to ensure a defensible award? What did we miss today, or what additional information would your team need to develop findings related to the contracting process? 34

35 Links National State Auditors Association National Association of State Procurement Officers 35

36 For More Information Contact the Florida Legislatures OFFICE OF PROGRAM POLICY ANALYSIS AND GOVERNMENT ACCOUNTABILITY (850) 488-0021

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