1. 1 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Instructor Michael S. Gifford, C.P.M., CPSD Housing Agency Procurement Assistance (HAPA) Las Vegas, NV Office(866)526-7790 Cell(702)236-0275 E-mail: gifford52@yahoo.com

2. 2 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © What will we accomplish during this seminar?  A renewed commitment to conduct all housing agency (HA) procurement and contract activities in an open, fair, reasonable, justifiable and HUD- compliant manner—an ethical manner.  An ability to locate in the Handbooks and regulations what HUD wants and requires, especially pertaining to ethics; hence, a better understanding of the applicable law(s).  Be more prepared for a HUD/OIG audit and to, therefore, stay out of trouble.  A renewed commitment to ethical standards.  Improved relationships with your Board, your ED/CEO, your clients (staff), your contractors, and the public at large.  Learn and implement “Gifford’s Gospels.”

3. 3 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Gifford’s Gospels No. 1: “If it ain’t written, it don’t exist. No. 2: “There are no coincidences in life—everything happens for a reason.” No. 3: “Whatever we do must be open, fair, reasonable and justified.” No. 4: “Contractors are not our friends—they are our partners.” No. 5: “Nothing is free—there is a price to pay for everything.” No. 6: “Be prepared—if something can go wrong, it will happen at the worst possible moment.” No. 7: “Luck is where preparation and opportunity meet.” No. 8: “He/she who writes the contract, the contract is in favor of.”

4. 4 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 1: Introduction  HUD Handbook 7460.8 REV 2:  7460.8 issued by HUD to explain Part 85.36 in further detail.  Hereinafter “7460.8” or “HPH.”  Specific references herein within “[ ].”  24 CFR 85.36:  aka the Common Rule.  Part 85.36 issued by Congress.  Hereinafter “Part 85.36.”  Specific references herein within “{ }.”

5. 5 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 1: Introduction (con’d)  Important!!!!! Remember, herein: [HPH: 1.2]  “Shall” and “must” mean that an action or item is mandatory and is required by statute or regulation.  “Should” and “may” mean that the action or item serves to provide guidance and/or best practices but is not mandatory. !!!PLEASE NOTE-BEWARE!!!  HUD has used the term “should” a number of times in the HPH and then in another part of the HPH use the term “shall” or “must” in reference to the same issue—an auditor will most likely go with the stricter reference as the requirement.

6. 6 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 1: Introduction (con’d)  “For administrative purposes, PHA’s are considered local governments” [HPH: 1.3]  “Full and open competition” required [HPH: 1.3]  Many other CFR’s apply to procurement. [HPH: 1.3]  Any issue is not addressed in law/regulations but is good business practice: Might be permissible, if justifiable. [HPH: 1.4]

7. 7 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 1: Introduction (con’d)  PHAs must comply with the stricter of Federal rules and State/local rules. [HPH: 1.5]  States. {Part 85.36(a)}  “When procuring property and services under a grant, a State will follow the same policies and procedures it uses for procurements from its non- Federal funds. The State will ensure that every purchase order or other contract includes any clauses required by Federal statutes and executive orders and their implementing regulations.”  Therefore, one procurement policy only!

8. 8 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 1: Introduction (con’d) Public Access to Procurement Information: [HPH: 1.6]  Federal FOI (Freedom of Information)  State “Sunshine” Laws  Consult with your attorney before releasing bids/proposals  Two things always released: Costs for past purchases After award, all costs proposed in response to the competitive solicitation (QSP/IFB/RFP/RFQ) 

9. 9 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 2: Procurement Authority...  Procurement Policy (including a Section on Ethics): [HPH: 2.2]  Appendix 1 (corrected copy)  Combining Policy and Procedures—Not good! Policy approved by Board of Commissioners. Procedures approved by ED.  Section 3.0: “Ethics in Public Contracting” 

10. 10 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 2: Procurement Authority... (con’d)  Delegation of Authority: [HPH: 2.3]  Executive Director (ED): per ACC, always the Contracting Officer (CO).  Must be in writing. Date. Name. Limits ($ amount; types). Restrictions. Signature. 

11. 11 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 2: Procurement Authority... (con’d)  Responsibility of the Contracting Officer. [HPH: 2.4]  Sound judgment.  Ensure fair, impartial and equitable treatment.  Compliance with all laws and Policy.  Best value and greatest overall benefit.

12. 12 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © HUD Procurement Handbook 7460.8 REV 2 Chapter 4 Ethics in Public Contracting

13. 13 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 4: Ethics in Public Contracting  General. [HPH: 4.1]  Ethical standards apply to staff, BOC and retained consultants.  Principles. [HPH: 4.2]  Ensure “impartial” and “fair competitive access.”  Foster the “public’s confidence” in the “integrity of the process.”  Realizing “personal gain... is a breach of public trust.”

14. 14 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 4: Ethics... (con’d)  Requirements for a Written Code of Standards. [HPH: 4.3] {Part 85.36(b)(3)}  Must be in HA’s Procurement Policy.  Conflicts of Interest. [HPH: 4.4] {Part 85.36(b)(3)}  Real or Actual Conflicts vs. Apparent or Perceived Conflicts.  No procurements/contracts with firms associated with HA employees, BOC’s or with life partner or immediate family members.  No procurements/contracts with former employees within one year of termination or separation.

15. 15 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 4: Ethics... (con’d)  Gratuities, Kickbacks, and Use of Confidential Information [HPH: 4.5]  “Contracts are awarded fairly, based on merit, without improper influence”  Gratuities {Part 85.36(b)(3)}  HUD sets standard of “no more than $25.” [HPH: Appendix 1]  Gifford recommends “No” to $25—nothing more than a logo hat or pen.  “It all begins with lunches.”  Kickbacks and Anticompetitive Practices  “Breach of ethical conduct and prohibited.”  Must be reported (in writing) to ED, BOC or HUD (whichever is appropriate).

16. 16 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 4: Ethics... (con’d)  Use of Confidential Information.  Don’t tell potential contractors stuff that they don’t need to know.  Personal gain not allowed.  Prohibition Against Contingent Fees. {Part 85.36(c)&(b)(8)}  No quid pro quo in awarding contracts.  Sanctions. {Part 85.36(b)(11)&(12)}  Written, in Procurement Policy. Gifford’s Gospel: Everything we do must be open, fair, reasonable and justifiable.

17. 17 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 5: Small Purchase Procedures  Competitive Requirements [HPH: 5.3]{Part 85.36(c)(1)}  [HPH 5.3.A] Small Purchases (>$2,000): Must be competitive, in that a “PHA must solicit at least 3 quotes.”  [HPH 5.3.B] Micro Purchases (<$2,000): May solicit one quote only if “price is reasonable.”  [HPH 5.3.C] Prohibition Against Bid Splitting: Must not break down purchases into lower thresholds (Micro or Small) to avoid the requirements of the larger threshold— this means, aggregate all awards to each contractor/contractor or in a commodity/service area and none shall exceed: $2,000 without a quote; and $100,000 (or lower amount if set by State law) without a formal solicitation; To encourage WMBE’s: HA may break awards into lots.

18. 18 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 5: Small Purchase Procedures (con’d)  Rejection and Notification of Unsuccessful Offerors. [HPH: 5.13]  Be courteous! If they don’t get the award, tell them and why (e.g. your cost was higher).  In writing not required by HUD, but I recommend.   Appeals [HPH: 5.14]  Needs to be written in either the Policy or the solicitation (by reference is acceptable).

19. 19 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 6: Sealed Bids (Also applies to RFPs)  Amendments (aka Addendums). [HPH: 6.6]  A change/revision to the IFB information already issued.  The only formal communication between the HA and the prospective respondents—informal (spoken) communications have NO standing.  Must be in writing (remember Gifford’s Gospel: “If it ain’t written, it don’t exist”).  Acknowledgement required (ditto the Gospel above).  If issued too close to the submittal deadline, strongly recommend extending deadline an adequate amount of time to allow prospective respondents to consider and implement the issues detailed within the addendum. 

20. 20 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 6: Sealed Bids (con’d)  Canceling an IFB. [HPH: 6.8]  IFB’s must not be used to “gauge the marketplace”— doing such does not foster public confidence.  Good reasons to cancel: Lowest bid significantly exceeds the HA’s budget. Scope of work or specifications are found to be ambiguous or flawed by the submission of wildly different bids or offer prices.  If canceled, be sure to fully document the justification for doing so to the file. {Part 85.36(b)(9)}

21. 21 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 6: Sealed Bids (con’d)  Bid Opening. [HPH: 6.9]{Part 85.36(d)(2)}  Prior to the bid submittal deadline. [HPH: 6.9.A ]  DO NOT disclose to any inquiry as to how many bids have been received.  Each bid received must be date- and time-stamped by the HA when received.  Stored in a secure place (e.g. locked file cabinet) to ensure not opened or mishandled prior to the submittal deadline.  10 minutes prior to the submittal deadline, standby at front desk to address potential issues pertaining to last minute submittals.  DO NOT receive or open any bid submittal received after the submittal deadline (train staff—especially at the front desk—to understand and comply)—NO MATTER HOW MUCH THE LATE RESPONDENT BEGS!!!!

22. 22 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 6: Sealed Bids (con’d)  Public Bid Opening Process. [HPH: 6.9.B]  Any member of the public is allowed to attend.  At submittal deadline, announce deadline has arrived and that no more bids will be received.  Typically: One staff member opens the bid package and reads aloud the name of the bidder and the bid sum(s), including deductive alternates; One staff member records the name of the bidder and the bid sum(s) on the tabulation or abstract; One staff member witnesses the opening and reading.  The apparent low bidder is identified. 

23. 23 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 6: Sealed Bids (con’d)  Public Bid Opening Process (con’d) [HPH: 6.9.B]  Typically, a copy of the tabulation/abstract is distributed to attendees.  RECOMMEND STRONGLY THAT YOU DO NOT, AT THE BID OPENING (unless required by State/local law): Review the bids for responsiveness at the bid opening in front of the attendees; Allow any of the attendees to inspect or view the bid documents; Discuss the bids or the contents; Maybe—MAYBE!—verify the existence of the bid bond, BUT DO NOT REVIEW AND VERIFY AT THE BID OPENING; The Responsiveness of the bids and the Responsibility of the bidders are verified by the HA in private after the bid opening.

24. 24 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 6: Sealed Bids (con’d)  Equal Bids: [HPH: 6.12.C]  Award determined by “random means of selection,” including (but not limited to): Drawing lots; Drawing cards; Throwing dice; Flipping a coin; Earliest date bid was submitted, which is how many HAs decide ties, is NOT a “random” method.

25. 25 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 7: Competitive Proposals (RFP’s)  Mandatory (HUD-required) forms (con’d) [HPH: 7.2.B]  PLEASE NOTE!: Per HUD [within HPH: 7.2.B], “Only under limited circumstances would construction services be procured by competitive proposals.” Often, HAs use the RFP method for construction instead of more appropriately using the IFB method so that they can evaluate the proposals and then inappropriately eliminate a bidder who they do not want to get the job due to past poor performance by that proposer. Instead, most typically do an IFB for construction. RFP’s for construction are appropriate for developer, “turn- key,” or design-build construction solicitations, NOT regular every-day construction projects.

26. 26 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 7: Competitive Proposals (con’d)  Submission Requirements [HPH: 7.2.C]  Ensure that the submission requirements are consistent with the published evaluation factors  Evaluation Factors, Non-Price [HPH: 7.2.D] {Part 85.36(d)(3)(iii)}  HA must ensure that a “clear written statement” of the evaluation factors is published.  Strongly recommend not just brief phrases such as “Past Experience,” but narrative descriptions such as, “Demonstrated successful past performance (including meeting costs, schedules, and performance requirements) of contract work substantially similar to that required by the solicitation as verified by reference checks or other means.” [HPH: 7.2.D.4.f]

27. 27 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 7: Competitive Proposals (con’d)  Evaluation Factors, Non-Price (con’d)  Factors are “tailored to fit each” RFP.  Non-Price Factors are also called Technical Factors.  Evaluation Factors, Price. [HPH: 7.2.E]{Part 85.36(d)(3)(iii) & Part 85.36(f)}  “Price MUST be factor in making awards.”  Two options: Where Price is Assigned an Explicit Point(s); and Where Price and Other Technical Factors are Considered. I recommend the former ONLY—I do NOT recommend the latter and will not advise on it (the latter is NOT easy to apply).

28. 28 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 7: Competitive Proposals (con’d)  Evaluation Process. [HPH: 7.2.K]{Part 85.36(d)(3)}  The evaluation MUST only be based upon the evaluation factors published in the RFP—factors not written in the RFP MUST NOT be considered.  Unlike sealed bids, proposals are NOT opened publicly (nor is the identity of the proposers publicly disclosed unless required by law—try to avoid as could lead to intimidation).  Be alert to attempts by the proposers to change the published RFP requirements--sometimes called “conditioning offers.” You may (and probably will) reject such proposals as non-responsive.

29. 29 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 7: Competitive Proposals (con’d)  Contract Award (con’d)  Notice to Unsuccessful Offerors [HPH: 7.2.S.2] After award, all proposers shall receive a notice, confirmed back: oIdentify the successful proposer. oIdentify where all proposers placed as a result of the evaluations (both the initial and Best and Finals, if applicable). oIdentify the proposed costs submitted by all proposers (both the initial and Best and Finals, if applicable). oInform each proposer of his/her right to a debriefing and remind each of the right to protest—be sure to set a deadline to submit each (10 days from receipt?!) 

30. 30 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 9: Specifications and Statement of Work  Specifications (con’d)  Contractor-Developed Specifications. [HPH: 9.3.E]{Part 85.36(c)(1)(iv)} Basically, a HA cannot retain a contractor to develop specifications for a HA to use for a competitive solicitation, then allow that same contractor to also respond to the competitive solicitation. NOT FAIR! EXCEPTION: “Prior to the solicitation, all respondents... are provided with materials and information made available to the contractor involved in matter pertinent to the solicitation.” NOT recommended—creates an appearance of impropriety!

31. 31 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Chapter 13: State and Local Laws...  Exceptions to Local Pre-emption. [HPH: 13.2]  Geographic Preferences. [HPH: 13.2.A] A HA must NOT require, consider or give preference to any firm simply because it is located in the local area (e.g. city; county; state; etc.) that the HA is based or located. Accordingly, it is NOT appropriate for a HA Commissioner to put pressure on HA staff to do more business with local firms.  State Prevailing Wage Requirements. [HPH: 13.2.B] If there is ANY Federal (HUD) monies in a construction project, then Davis-Bacon wage rates apply, no matter if State prevailing wage rates are higher or lower.

32. 32 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © Brief Case Studies:  “The Banker Commissioner”  “It’s only lunch!” (a/k/a “Building Relationships”)  “Christmas: The hap-happiest time of the year!”  “Golfing with Architects”

33. 33 Ethics in Public Contracting: Can I Really Do That? Should I Really Do That? Michael S. Gifford, C.P.M., CPSD 2011 © I hope this information is of a help! Thank you!