2. Introduction to Procurement for Public Housing Authorities Procurement Planning: Choosing a Contracting Method Unit 2

3. Learning Objectives Identify the four main methods of procurement: small purchase procedures, sealed bidding, competitive proposals and noncompetitive proposals Identify the basic steps for each of the four main methods of procurement Determine which method best suits the work/service to be performed or item(s) to be acquired Identify the basic types of contracts that may be used 2

4. 10 Basic Procurement Steps 1 Develop a Statement of Work (SOW) 2 Complete an Independent Cost Estimate (ICE) 3 Determine rationale for procurement method 4 Solicit & receive quotes/bids/proposals 5 Determine responsive/responsible bidder, as applicable 6 Determine price reasonableness 7 Award contract from solicitation 8 Implement contract administration system 9 Close out the contract 10 Maintain records for minimum of 3 years 3

5. Procurement Planning For each procurement action planned, identify: ▫Scope or Statement of Work (SOW) and type of contract. ▫Short-Term vs. Long-Term Needs (e.g., physical needs assessment) Consider the time restraints: ▫Urgency ▫Type and size of the job ▫Market conditions Develop an Independent Cost Estimate (ICE) for each procurement action before advertising …it’s confidential! Identify the source and availability of funds: ▫Operating vs. Capital Funds or other Develop a schedule for actions planned with due dates 4

6. Methods of Procurement Small Purchase Procedures (SPP) ▫Normally used for purchases less than the simplified acquisition threshold fixed at 41 USC 403(11) currently set at $100,000 or a lesser amount as established by the PHA Sealed Bids ▫Normally used for construction contracts more than $100,000 Competitive Procedures ▫Used when sealed bids and/or small purchases are not practical Noncompetitive Procedures ▫Used when the award of a contract is infeasible under the other procurement methods and one of the following applies:  (A) Item is available only from a single source;  (B) Public Exigency or emergency will not permit a delay;  (C) HUD authorizes the noncompetitive proposal; or  (D) After solicitation of multiple sources, competition is inadequate. 5 24 CFR §85.36(d) describes 4 basic procurement methods:

7. Informal vs. Formal Procurements Informal Procurements: ▫Used when the estimated dollar value of the procurement activity planned is less than the PHA’s Small Purchase Threshold ▫Public advertisement is not required! Formal Procurements: ▫Used when the estimated dollar value of the procurement activity planned equals or exceeds the PHA’s Small Purchase Threshold ▫Any procurement method may be used except SPP ▫Public advertisement is required! 6

8. Procurement Flow Chart 7

9. Competition is key! Per §85.36(c)(1), all procurement transactions must be conducted in a manner providing full and open competition. ▫Examples of restrictive actions include…  Unreasonable qualification requirements on firms  Requiring unnecessary experience or excessive bonding  Non-competitive awards to consultants on retainer contracts  Specifying only a brand name product  In-state or local geographical preferences (unless expressly mandated or encouraged by federal statute, §85.36(c)(2)) Per §85.36(c)(3), grantees will have written selection procedures for procurement transactions ▫Incorporate clear, accurate description of technical requirements ▫Identify all requirements and factors to be evaluated 8

10. Small Purchase Procedures (SPP) Appropriate when the ICE is less than the $100,000 Federal Simplified Acquisition Threshold or lower threshold as specified in the PHA’s Procurement Policy Less formal than the other types of procurement procedures At least an adequate number (3 or more) of oral or written quotes via phone, fax or email should be obtained PHAs may obtain equipment or supplies, or seek professional services typically obtained via the formal solicitation process 9 Develop ICE and SOW Solicit 3 Quotes Perform Price Analysis Execute Purchase Order/Contract (attach forms) Manage Contract

11. Micro Purchases An ICE is not required! Only one (1) quote required if price is considered reasonable (Should obtain new quote prior to repeating purchase) Purchases of like items should be equitably distributed among available suppliers Document with Purchase Order Wage rates not required! 10 A sub-category of SPP costing less than $2,000

12. 11 Sealed Bids Used mostly for construction contracts and purchase of commodities (e.g., equipment and supplies) Used when the cost estimate is more than the $100,000 Federal Simplified Acquisition Threshold or lower threshold specified in the PHA’s Procurement Policy Dependent upon good specifications Two or more bidders willing in the open market Awarded on the basis of price Fixed-price contract Develop ICE & SOW for Bid Proposal Receive Bids and Open Publicly Determine Lowest Responsible and Responsive Bidder Execute Contract (attach forms) Manage Contract

13. Types of Requests for Proposals 12

14. Competitive Proposals Two types of Competitive Procedures: ▫Price Considered during evaluation ▫Price Not Considered during evaluation (A/E and Mixed Finance Development Partners) Project will be based on technical merits and price There are 2 or more qualified offerors in the market Cannot award a firm fixed- price contract 13 Develop ICE and SOW for Proposal Panel Rates and Ranks Submitted Proposals (do not open publicly) Develop Competitive Range or Choose Highest Rated Proposal Contracting Officer negotiates price with highest ranked firm Award and Manage contract

15. Non-Competitive Proposals Used when other methods are not feasible and one of the following circumstances applies: ▫Item is available only from a single source ▫An emergency situation or public exigency exists ▫HUD authorizes ▫After solicitation of a number of sources, competition is determined inadequate, i.e., only one respondent If applicable, use of this method must be justified in writing by the PHA Cost Analysis must be performed in all cases All technical and cost aspects may be “negotiated” with the sole provider 14

16. Contract Types Fixed-Price ▫Firm fixed-price (used for IFB) ▫Fixed-price with economic market adjustment Cost-reimbursement ▫Cost contract with no fee (used for non-profit organizations) ▫Cost-plus-fixed fee (negotiated fee = profit)  Two types based on delivery or performance Indefinite-delivery contracts ▫Definite-quantity ▫Requirements ▫Indefinite-quantity Time and materials and labor-hour Letter contract (mostly used for emergencies for preliminary work) 15 Prohibited types ▫Cost-plus-percentage-of-cost ▫Cost-plus-percentage-of- construction cost

17. Remember… Good planning determines the procurement method and ensures that goods and services are obtained when needed. Follow the Golden Rule: Always provide full and open competition! 16

18. References 24 CFR 85.36(d) PHA Procurement Handbook 7460.8 REV 2 - ▫Chapter/Section 3.1 ▫Chapter/Section 10.1 17