Bidding and Procurement

Presentation 12: The Composting Toolkit Funded by the Indiana Department of Environmental Management Recycling Grants Program Developed by the Indiana Rural Community Assistance Program - RCAP

Bidding for services verses conducting services in-house A key first step is determining if a service is best provided in-house vs. contracted-out. Some key decision factors in making this determination: A key first step is determining if a service is best provided in-house vs. contracted-out. Some key decision factors in making this determination: If equipment is involved, will you have sufficient usage to justify the purchase? If equipment is involved, will you have sufficient usage to justify the purchase? If personnel are involved, do you have sufficient staffing to handle this service or (if no) do you have sufficient funding to hire the staff you will need? If personnel are involved, do you have sufficient staffing to handle this service or (if no) do you have sufficient funding to hire the staff you will need? Can you truly provide this service in-house in a less expensive manner than if you contract-out the service? Can you truly provide this service in-house in a less expensive manner than if you contract-out the service?

Contracting Services: A Wide Mix of Alternatives Many communities 100% in-house own and operate composting facilities Many communities 100% in-house own and operate composting facilities Many communities own and operate compost facilities, but may contract out some specific services such as tub grinding or mulch colorization. Many communities own and operate compost facilities, but may contract out some specific services such as tub grinding or mulch colorization. Many communities own the site but fully contract with a private service provider for the operation of the site Many communities own the site but fully contract with a private service provider for the operation of the site Many communities simply contract with a private service provider who owns and operates their own facility Many communities simply contract with a private service provider who owns and operates their own facility

Steps to Effective Contracting Two basic types of contracts: Two basic types of contracts: Service provider model approaches the contract as a typical fee-for-service arrangement or a unit- price arrangement. Service provider model approaches the contract as a typical fee-for-service arrangement or a unit- price arrangement. Partnership model establishes an arrangement where the risks and rewards of the contract are shared by both sides. Partnership model establishes an arrangement where the risks and rewards of the contract are shared by both sides. This type of contract has been shown to be more likely to succeed than the typical service provider contract because both parties are directly invested in the success of the project. This type of contract has been shown to be more likely to succeed than the typical service provider contract because both parties are directly invested in the success of the project.

Steps to a Successful Contract 1. Define services to be contracted: Nature and type? For whom? For how long ? Define expectations clearly and specifically. Define expectations clearly and specifically. To bundle, or not to bundle? To bundle, or not to bundle? What are the likely advantages and disadvantages of combining services? What are the likely advantages and disadvantages of combining services? Contract term and length: Select a contract term length that is appropriate to your needs and agreeable to the contractor. Keep in mind that if you are expecting a contractor to invest in equipment, a five year pay-off time (and thus a 5 year contract) is a reasonable expectation for a contractor. If you are expecting a contractor to build or renovate a facility, a ten year pay-off time (and thus a 10 year contract) is a reasonable expectation for a contractor.)

Steps to a Successful Contract 2. Employ fair and sound selection process You may want to use a pre-qualification system with contractors You may want to use a pre-qualification system with contractors It is often advisable to hold pre-bid meetings for the potential bidders. It is often advisable to hold pre-bid meetings for the potential bidders. 3. Develop a well written, clear and detailed request for proposal (RFP).

Request for Proposals / Requests for Qualifications A RFP is a request for a specific proposal. Cost is often a consideration in a RFP A RFP is a request for a specific proposal. Cost is often a consideration in a RFP A RFQ, by contrast, is a request to know more about a firms qualifications. Thus a RFQ is more generalized in nature and cost is almost never a consideration in an RFQ. A RFQ, by contrast, is a request to know more about a firms qualifications. Thus a RFQ is more generalized in nature and cost is almost never a consideration in an RFQ.

Successful Bids Public bids support transparency. Public bids support transparency. A public bid should be able to look reasonable upon public scrutiny and it should enable us to avoid accusations of favoritism, nepotism and corruption. A public bid should be able to look reasonable upon public scrutiny and it should enable us to avoid accusations of favoritism, nepotism and corruption. Dont structure the proposal in such a way that it dramatically limits the number of qualified bidders. Dont structure the proposal in such a way that it dramatically limits the number of qualified bidders.

Factors That are Likely to Drive up the Cost of Your Bids Vendors bid higher if they have to bid on clauses and other items in the contract that do not have a defined cost. Vendors bid higher if they have to bid on clauses and other items in the contract that do not have a defined cost. Short turnaround time on bids is likely to contribute to higher bids. Short turnaround time on bids is likely to contribute to higher bids. A lack of a pre-bid meeting is likely to contribute to higher bid costs. A lack of a pre-bid meeting is likely to contribute to higher bid costs. A key component of future contracts is likely to be a fuel adjustment clause. Lack of such a clause is likely to drive up bids. A key component of future contracts is likely to be a fuel adjustment clause. Lack of such a clause is likely to drive up bids.

Evaluation Criteria Design your evaluation and selection process to have flexibility. A low bid contract has no flexibility -- you simply take the lowest bid. Design your evaluation and selection process to have flexibility. A low bid contract has no flexibility -- you simply take the lowest bid. Indiana law allows for accepting the lowest reasonable and responsive bid. This means the lowest bid may not always be the most responsive to the bids specifications or that the low-cost is simply unreasonable in terms of the services to be provided and a likely indicator that the contractor does not fully grasp the scope of the work at hand. Indiana law allows for accepting the lowest reasonable and responsive bid. This means the lowest bid may not always be the most responsive to the bids specifications or that the low-cost is simply unreasonable in terms of the services to be provided and a likely indicator that the contractor does not fully grasp the scope of the work at hand.

Contract Negotiations / Contracting Terms A contracts terms must be written in such a way that the parties signing onto the contract can make changes appropriate to changes in business and regulations - flexibility. A contracts terms must be written in such a way that the parties signing onto the contract can make changes appropriate to changes in business and regulations - flexibility. Contracts should be written such that there is an absolute minimum of opportunity for misunderstanding. It should be clear regarding the expectations of all parties involved and as best possible spell out the requirements and expectations for all parties concerned - without ambiguity. Contracts should be written such that there is an absolute minimum of opportunity for misunderstanding. It should be clear regarding the expectations of all parties involved and as best possible spell out the requirements and expectations for all parties concerned - without ambiguity.

Key Contract Negotiation Points YOU drive the contracting process YOU drive the contracting process Any contract must contain a cancellation clause that allows you the option of canceling the contract due to poor service. Any contract must contain a cancellation clause that allows you the option of canceling the contract due to poor service. There also needs to be relieve to the private contractor for the changes in laws that impact the operation. There also needs to be relieve to the private contractor for the changes in laws that impact the operation. Any options for the waste hauler to subsequently increase fees must be stated in the contract. Any options for the waste hauler to subsequently increase fees must be stated in the contract.

Key Contract Negotiation Points Evergreen Clause: No automatic renewal of contract clauses should be accepted. Evergreen Clause: No automatic renewal of contract clauses should be accepted. Insist on a clause in the contract stating that both parties will agree to future modifications of service based on the communitys and businesss requirements. Insist on a clause in the contract stating that both parties will agree to future modifications of service based on the communitys and businesss requirements.

Hot Topics in Contract Negotiations Use of government-owned land Use of government-owned land Feedstock contamination Feedstock contamination Odor management Odor management

Key Contract Elements Scope of Work: Make this as clear and accurate as possible to avoid future disputes. Scope of Work: Make this as clear and accurate as possible to avoid future disputes. Definitions: Key terms should be defined so all parties understand the meaning. Definitions: Key terms should be defined so all parties understand the meaning. Payment: How often, when, where and based on what? Payment: How often, when, where and based on what?

Key Contract Elements Acceptable Waste / Waste Acceptance Criteria / Nonconforming Waste: This is probably the most important protection to include in order to avoid being responsible for a bad load that contaminates an entire facility. Acceptable Waste / Waste Acceptance Criteria / Nonconforming Waste: This is probably the most important protection to include in order to avoid being responsible for a bad load that contaminates an entire facility. Change in Law: The contract should be changed to the extent that there is a change in law, regulation, or another government action that affects performance. Change in Law: The contract should be changed to the extent that there is a change in law, regulation, or another government action that affects performance. Force Majeure: Acts of God, war, insurrection, terrorism, strikes, etc. are valid excuses for delay or nonperformance. Force Majeure: Acts of God, war, insurrection, terrorism, strikes, etc. are valid excuses for delay or nonperformance.

Key Contract Elements Term: How long is the business relationship going to last? Can it be extended? If so, by whom? Term: How long is the business relationship going to last? Can it be extended? If so, by whom? Indemnification: It is very important to try to get mutual indemnification clauses. Indemnification: It is very important to try to get mutual indemnification clauses. Insurance: This clause does no good if not policed. Get certificates of insurance from the contractor and read them. Do the certifications match the coverage asked for? Insurance: This clause does no good if not policed. Get certificates of insurance from the contractor and read them. Do the certifications match the coverage asked for?

Managing the Contract A successful public-private partnership can be defined as the following: the local governments organics stream is successfully recycled without causing nuisance conditions and the private operator can pay its bills and make a profit under the terms of the contract. A successful public-private partnership can be defined as the following: the local governments organics stream is successfully recycled without causing nuisance conditions and the private operator can pay its bills and make a profit under the terms of the contract.

Intergovernmental Interlocal Agreements An alternative to contracting with a private contractor is contracting with another local government agency. An alternative to contracting with a private contractor is contracting with another local government agency. The legal framework for a government-to- government contract in Indiana is the interlocal agreement. The legal framework for a government-to- government contract in Indiana is the interlocal agreement. All the rules discussed throughout this presentation for contracts should be followed if a local government entity is going the route of an interlocal agreement. All the rules discussed throughout this presentation for contracts should be followed if a local government entity is going the route of an interlocal agreement.

Advantages of Interlocal Agreements Takes advantage of economies of scale. Takes advantage of economies of scale. Creates a win-win between two government agencies. Creates a win-win between two government agencies. Improves the sustainability of a program for both contracting agencies. Improves the sustainability of a program for both contracting agencies.

Disadvantages of Interlocal Agreements May be easy to conceptualize but difficult to work out the details of an agreement. May be easy to conceptualize but difficult to work out the details of an agreement. Larger community may attempt to leverage its position against the smaller community Larger community may attempt to leverage its position against the smaller community Small communities should be fully aware of costs before entering into an agreementbe wary of information gaps. Small communities should be fully aware of costs before entering into an agreementbe wary of information gaps.

Indiana Code Interlocal agreements are governed under Indiana Code et seq. Interlocal agreements are governed under Indiana Code et seq. Under Indiana Code, at a minimum, an interlocal agreement must contain the following elements: Under Indiana Code, at a minimum, an interlocal agreement must contain the following elements: Duration of agreement Duration of agreement Purpose of agreement Purpose of agreement The manner of financing, staffing, and supplying the joint undertaking and of establishing and maintaining a budget The manner of financing, staffing, and supplying the joint undertaking and of establishing and maintaining a budget The method that may be employed in accomplishing the partial or complete termination of the agreement The method that may be employed in accomplishing the partial or complete termination of the agreement How the administration of the agreement will be handled How the administration of the agreement will be handled The manner in which any real property is to be obtained in the execution of the agreement The manner in which any real property is to be obtained in the execution of the agreement

Procurement Procedures When you are buying equipment there will always be several models from different manufacturers that all claim equal capabilities. When you are buying equipment there will always be several models from different manufacturers that all claim equal capabilities. The after-the-sale performance may vary enormously. The after-the-sale performance may vary enormously. Incorporating side-by-side demonstrations into the selection criteria can be an invaluable tool. Incorporating side-by-side demonstrations into the selection criteria can be an invaluable tool. Local government entities need to follow state and local government procurement procedures when they purchase equipment. Local government entities need to follow state and local government procurement procedures when they purchase equipment.

QUESTIONS?

Thank You! Additional Questions, Comments, or You Think You Have A Potential Pilot Community Additional Questions, Comments, or You Think You Have A Potential Pilot Community Please Feel Free to Contact Me: Please Feel Free to Contact Me: Mark W. Davis Technical Assistance Provider Rural Community Assistance Program Office: Wireless: (812)