1. July 14, 20092 Rural Electric Cooperatives Procurement/Contracting Guidance Roger Jones Region VIII Disaster Assistance Division

2. July 14, 20093 Applicant Facility Work Cost Public Assistance Grant Eligibility Structure

3. July 14, 20094 Office of Inspector General Audits Federal Grants to RECs from 2000 to 2004: $391 M 9 Audits conducted between 2002-2006 $59.2 million claimed $39.2 million for non-competitive contracts

4. July 14, 20095 Objectives To ensure Rural Electric Cooperatives are knowledgeable of and follow federal procurement standards To identify and offer remedies for recurring contracting problems identified by OIG Audits To ensure REC’s understand documentation requirements

5. July 14, 20096 Federal Contracting RECs should comply with Their own procurement procedures State and local laws and regulations Applicable Federal laws and standards

6. July 14, 20097 Federal Contracting Process Competition Scope of work Qualified proposers/bidders Cost analysis/price reasonableness Contract must comply with all Federal, State and local requirements Documentation Essential Elements

7. July 14, 20098 Acceptable Contracts Lump Sum Unit Price Cost Plus Fixed Fee Time and Materials/Equipment in limited situations

8. July 14, 20099 Unacceptable Contracts Cost Plus Percentage of Cost Contingency Single Source Contracts with Few Terms & Conditions Single Page/Million Dollar Contracts Contracts Verbally Authorized

9. July 14, 200910 OIG Audits: Typical Areas of Noncompliance Full and open competition – 13.36(c)(1) Maintain sufficient documentation – 13.36(b)(9) Cost or price analysis requirement – 13.36(f)(1) Time and materials contract restrictions – 13.36(b)(10)

10. July 14, 200911 OIG Audits: Typical Areas of Noncompliance Cost plus percentage of cost restrictions – 13.36(f)(4 ) Profit negotiated separately - 13.36(f)(2) Lack of a contract administration system – 13.36(b)(2)

11. July 14, 200912 Full and Open Competition Intended for all procurements Avoid restricting competition Placing unreasonable requirements for firms to qualify Requiring unnecessary experience Requiring brand names, but not “or equal” Making noncompetitive awards Other arbitrary actions in the procurement process

12. July 14, 200913 Maintain Sufficient Documentation Facilitates federal grants process Must detail significant history of a procurement Rationale for Method of procurement Selection of contract type Contractor for contractor selection or rejection Basis for contract price

13. July 14, 200914 Cost or Price Analysis Requirement Cost or price analysis Is required for every procurement action Independent estimates must be prepared Goal: defensible and reasonable cost

14. July 14, 200915 Time and Materials Contract Restrictions Should be avoided To be used ONLY If no other contract type is suitable If the contract includes a not to exceed ceiling price Contractor exceeds at his own risk If used immediately after a disaster to restore power Careful applicant monitoring and documentation of work and costs Contact State to ensure proper guidelines are followed

15. July 14, 200916 Cost Plus Percentage of Cost Restrictions Strict prohibition against Contractor Adds overhead/profit percentage to each dollar invoiced Has no incentive to be efficient or cost effective Bears virtually no risk

16. July 14, 200917 Profit Negotiated Separately Required when cost analysis is performed Fair and reasonable profit considers Complexity of the work Amount of contractor risk and investment Amount of subcontracting Quality of past performance Local industry standard rates

17. July 14, 200918 Lack of a Contract Administration System OIG saw no improvement in REC compliance Contract Administration System should Be in place for future disasters Develop and implement written, compliant procedures Ensure adequate competition Structure and award pre-placed contracts Protect future federal grants

18. July 14, 200919 Suggestions Contracts can be developed, and formats, solicitation process, etc. can be shared among the REC network Contracts can be prepared during “normal” non-emergency periods Competitively obtained, pre-placed, pre- priced contracts could help ensure compliance with federal requirements as well as successful response and recovery

19. July 14, 200920 REC Contracting: Summary RECs are NOT exempt from Federal contracting requirements Need effective contract administration and documentation procedures Mutual aid support and time and materials contract format are for emergency response to restore power

20. July 14, 200921 REC Contracting: Summary Use acceptable contract types for permanent recovery work Effective pre-disaster contract planning will help Failure to follow federal contracting requirements could impact eligibility for federal grants assistance

21. July 14, 200922 Special Considerations Special considerations are issues other than program eligibility that could affect the scope of work and funding of a project. These issues include:  Insurance  Floodplain Management  Hazard Mitigation  Environmental Protection / Historic and Cultural Resources  Codes & Standards

22. July 14, 200923 Other Items: Codes & Standards Apply to the repair work being performed (the damaged element/sections only) Be appropriate to the pre-disaster use of the facility Be reasonable, in writing, formally adopted, and implemented prior to the disaster declaration date or be a legal Federal requirement

23. July 14, 200924 Other Items: Codes & Standards Apply uniformly to all facilities of the type being repaired within the applicant’s jurisdiction (cannot allow selective application) Be enforced during the time that it was in effect (may require documentation for prior enforcement) RUS standards are NOT recognized as codes and standards for the purposes of Stafford Act grants

24. July 14, 200925 Other Items: Scope of Work Variations in large project Scopes of Work must have the prior approval from the Grantee (State) and perhaps FEMA

25. July 14, 200926 www.fema.gov Roger Jones 303-235-4907 roger.jones@dhs.gov Colleen McNeese 303-235-4609 colleen.mcneese@dhs.gov