1. 1 BOARD OF COMMISSIONERS TRAINING U. S. Department of Housing and Urban Development PROCUREMENT AND CONTRACTING OVERVIEW April 2009

2. 2 BOARD OF COMMISSIONERS TRAINING SERIES I. The Commissioner’s Role II. The Executive Director’s Role III. Program Management IV. Financial Operations and Oversight V. Physical Facilities and Maintenance VI. Procurement and Contracting Overview VII. Preventing and Resolving Audit Findings VIII. Performance Measures PHAS, MASS, FASS, PASS, SEMAP IX. Conducting an Effective Board Meeting X. Emergency and Disaster Preparedness

3. 3 PROCUREMENT AND CONTRACTING TRAINING I. The Key to Good Procurement Actions II. Basic Procurement Requirements III. Roles and Responsibilities IV. Procurement Planning V. Resident Businesses and Section 3 VI. Cost and Price Analysis VII. Types of Procurement VIII. Types of Contracts IX. Closeout 1. Appendix I – Summary of Procurement Methods Chart 2. Appendix II - Glossary

4. 4 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

5. 5 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

6. 6 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

7. 7 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

8. 8 II. BASIC PROCUREMENT AND CONTRACTING REQUIREMENTS 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

9. 9 II. BASIC PROCUREMENT AND CONTRACTING REQUIREMENTS 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

10. 10 II. BASIC PROCUREMENT AND CONTRACTING REQUIREMENTS 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

11. 11 II. BASIC PROCUREMENT AND CONTRACTING REQUIREMENTS 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

12. 12 II. BASIC PROCUREMENT AND CONTRACTING REQUIREMENTS Records modifications and terminations Provides documentation and paper trail Provides for evaluation of contractor- supplier performance Tracks Dollars and Performance Time Documents closeouts

13. 13 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

14. 14 III. Roles and Responsibilities 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

15. 15 III. Roles and Responsibilities 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

16. 16 III. Roles and Responsibilities 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

17. 17 III. Roles and Responsibilities 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.

18. 18 IV. Procurement Planning What - are the program requirements steps are taken to accomplish it is the timing of required actions ?

19. 19 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

20. 20 The Procurement Plan 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

21. 21 The Procurement Plan 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

22. 22 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’

23. 23 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

24. 24 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

25. 25 VI. Cost and Price Analysis 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

26. 26 VI. Cost and Price Analysis 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

27. 27 VII. Types Of Procurements Small Purchases IFB Competitive Qualifications – Based Proposals Competitive Proposals Noncompetitive Proposals

28. 28 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

29. 29 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

30. 30 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.

31. 31 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.

32. 32 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

33. 33 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

34. 34 VII. PROCUREMENT RFP – 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.

35. 35 VII. PROCUREMENT COMPETITIVE 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

36. 36 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.

37. 37 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

38. 38 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

39. 39 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

40. 40 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

41. 41 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

42. 42 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”

43. 43 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.

44. 44 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