DGS Recommendations to the Governor’s Task Force on Contracting & Procurement Review Report Overview August 12, 2002

2 Agenda  Opening Remarks  Three Reform Themes  Recommendations  Conclusion

3 Goal of Recommendations “The DGS recommendations to the Task Force are designed to strengthen the contracting and procurement processes of the State of California, by improving the quality and openness of the process and by implementing a set of checks and balances to ensure its integrity.”

4 Reform Themes  Ensuring High Quality  Open Process  System of Checks and Balances

5 Definition of Terms  Contracting = Contracting & Procurement throughout report  State Agency = All entities engaged in state contracting (e.g., state agencies, departments, offices, commissions, boards, institutions, hospitals, training facilities, data centers, or other state entity)  Short Term = implement immediately or up to one year  Long Term = implementation takes a year or more

6 Ensuring High Quality

7 High Quality: Quality Assurance  Problem: Lack of consistent oversight for all contract areas  Recommendation 1 (short term): Broaden scope of Quality Assurance program to include CMAS, Master Agreement orders & service contracts  Recommendation 2 (long term): Establish standards and conduct random audits of all types of contracts under DGS authority

8 High Quality: Common Processes  Problem: Multiple bodies of law; lack of comprehensive source for policies & procedures; need for process alignment ; align contracting & procurement  Recommendation 3 (long term): Develop comprehensive & uniform policies, procedures & processes; align contracting & procurement laws

9 High Quality: Training and Certification  Problem: Lack of recognition of contracting as a strategic function; lack of understanding that contracting is a profession; no comprehensive training & certification program  Recommendation 4 (short term): Immerse contracting personnel in training on rules governing use of contract methods & instruments  Recommendation 5 (long term): Provide comprehensive training program for Contracting Officials leading to professional certification

10 High Quality: Ethics and Integrity  Problem: No uniform code of ethics for contracting personnel or vendors; unclear reporting and oversight; lack of meaningful sanctions  Recommendation 6 (short term): Establish standards of conduct for state contracting personnel and vendors, coupled with sanctions for those violating the standards

11 High Quality: Contract Provisions  Problem: Model contract terms and conditions perceived unduly restrictive  Recommendation 7 (short term): Confer with industry representatives and state stakeholders to improve contract provisions to protect the state’s interest and mitigate risks for all parties

12 High Quality: Continuous Improvements  Problem: Industry and state stakeholders not engaged in efforts for continuous improvement of the contracting process  Recommendation 8 (short term): Facilitate industry and state stakeholder participation in continuous improvement of contracting processes through establishment of advisory councils

13 Open Process

14 Open Process: Tracking System  Problem: No single point of data collection and process control for contracts  Recommendation 9 (short term): Implement structured tracking of contracts throughout the contract lifecycle (Contract Administration Tracking System)

15 Open Process: Comprehensive System  Problem: No rule-based visible system to process contracts  Recommendation 10 (long term): Continue implementation of a comprehensive eProcurement system –Public access to contracting opportunities; reverse auctions/dynamic pricing –Link to online policies, procedures & decision support system and online training –Pricing comparisons & historical data –Rules-based approval routing for all transactions (or cannot be awarded) –Comprehensive data collection & reporting

16 System of Checks and Balances

17 Checks & Balances: Further Legal Review  Problem: Insufficient legal review of IT and high risk contracts  Recommendation 11 (short term): Further legal review of high risk transactions; establish a common process for review

18 High Risk Criteria  Dollar Thresholds –Goods/IT Goods > $500K –IT Services > $200K –Non-IT Services > $50K –Large Scale System Integration - ALL  History of protests or litigation  Public safety  Acquisition of unique or specially manufactured goods/services  Complex items  Deviates from standard processes/ terms (e.g., advance payments, modification to warranty/indemnity/ liability verbiage)  High Profile  Potential conflicts of interest  Involves hazardous material  Federal Matching Funds

19 Checks & Balances: Further Legal Review, continued  Recommendation 12 (short term): State agencies will conduct initial review and apply high risk criteria and forward those to DGS for review and approval  Recommendation 13 (short term): DGS should develop and deliver the necessary training to state contracting officials on contract law, regulations & review requirements and how to apply high risk criteria

20 Checks & Balances: Contract Templates  Problem: Lack of model contract templates for various contract methods  Recommendation 14 (long term): Develop model contract templates with standard terms & conditions (available electronically)

21 Checks & Balances: Responsible Official  Problem: There is no single person responsible for all contracting at each state agency  Recommendation 15 (short term): State agencies shall designate a single official responsible for all contracting & procurement within the agency

22 Checks & Balances: Signature Authority  Problem: No designation of specific individual signature authority or clearly defined accountability  Recommendation 16 (long term): Signature authority for contracting officials based on position held, experience, training & certification

23 Conclusion

24 Conclusion  Recommendation 17 (8/20/02): Issue new Management Memo to follow expiration of Executive Order D  Recommendation 18 (short term): Continue provisions of Interim Guidelines, as amended, for up to an additional 90 days to allow time to begin implementing approved reforms