Session II Small Dollar Purchases Definition Effect on purchasing Small Dollar Purchase Methods Petty cash Cash purchase orders Purchase certificates/Limited value purchase orders Blanket purchase orders Procurement cards Cooperative purchasing Competitive Quotations Verbal Written Sometimes Three Quotes are not Available!!
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Session II
Small Dollar PurchasesDefinition
Effect on purchasing
Small Dollar Purchase MethodsPetty cash
Cash purchase orders
Purchase certificates/Limited value purchase orders
Blanket purchase orders
Procurement cards
Cooperative purchasing
Competitive QuotationsVerbalWrittenSometimes Three Quotes are not Available!!
Session II
Large Dollar PurchasesDefinition
Effect on Purchasing
Large Dollar Purchase MethodsCompetitive Sealed Bids
Competitive Sealed Proposals
Specialty Competitive Purchases
Large Dollar Purchase Exceptions Sole Source Purchases
Emergency Purchases
Cooperative Purchasing
GSA Contracts
Electronic On-line Bidding
ComplianceSmall or Large?
Small Dollar Purchases
DefinitionSmall dollar purchases are procurements with values below the formal competitive procurement threshold.
While these purchases do not require formal competitive procurement, small dollar purchases represent significant amounts of school district and taxpayer dollars. They should be made with reasonable care and diligence.
Effect on PurchasingSmall dollar purchases follow the principle of the 80/20 rule. That rule states that 80% percent of the results from any effort will be achieved by 20% of the people.
The 80/20 rule would state that 80% of your purchases account for 20% of your procurement dollars. In reality, small dollar purchases probably account for a greater percentage of purchases and lower percentage of purchasing dollars.
Purchasing often uses a lot of effort to spend a proportionately small amount of money. This makes small dollar purchases the most expensive procurements your school district will make.
Purchasing’s goal should be to reduce the effort and cost associated with small dollar purchases.
Small Dollar Purchase Methods
Petty Cash
Cash Purchase Orders
Purchase Certificates/Limited Value Purchase Orders
Blanket Purchase Orders
Procurement Cards
Cooperative Purchasing
Competitive Quotations
Verbal QuotationsAre required for purchases with values of at least $5,000, but less than $15,000.
Use quotation summary form, memo or write on the requisition
Written QuotationsAre required for purchases with values of at least $15,000, but less than the bid threshold.
Must be typed or written on the vendor’s letterhead or quote form. Or, submitted in response to the district’s request for quotation. (A written summary of a verbal quotation is not a written quote.)
All QuotationsCome from vendors. (catalog prices cannot be used for quotes)
Include the name of the person obtaining quote, date of the quotation, name of the firm, person giving quote, description & part number of item quoted, unit price, freight charge (if any), sales tax (if any) for each quotation.
Competitive Quotations
Successful QuotesClearly define the product or service with brand, model, part number, or complete purchase description
Clearly define vendor performance requirements: warranty, delivery time, F.O.B. point, quote deadline, etc.
Generally, requirements should be industry standard
Contact vendors who have a reasonable opportunity to quote
Contact vendors with whom you are willing to purchase
Allow a reasonable amount of time for vendor to prepare quote
Use available resources: fax, email, Internet, etc.
Appropriate documentation shall be provided if the purchase is not made from the lowest quote
Sometimes Three Quotes are not Available!! Document your effort to obtain the quotes
Documentation includes the name(s) of the firm(s) contacted, date(s) of contact, name(s) of person(s) declining to quote, statement that firm declined to quote & why (if reason is stated)
If the purchase is at least $5,000, ask for a written “no quote.” If the vendor does not provide one, prepare documentation as described immediately above.
Are sole source and emergency purchases viable options?!?
Large Dollar Purchases
Definition
Large dollar purchases are procurements with values at or above the formal competitive procurement threshold.
These procurements are governed by detailed rules that must be followed to ensure that the school district enters into legal contracts that are fair to the vendor and beneficial to the district. These purchases should be made with reasonable care and diligence. Failure to do so can result in lost time, inappropriate materials or services, tarnished business relationships, protests, claims, and controversies.
Effect on PurchasingLarge dollar purchases also follow the principle of the 80/20 rule.
The 80/20 rule would state that 80% of your procurement dollars account for 20% of your purchases. Converse to small dollar purchases, large dollar purchases probably account for more than 80% of dollars spent and less than 20% of purchases.
Purchasing’s goal should be to find ways to concentrate its efforts on large dollar purchases.
Large Dollar Purchase Methods
Competitive Sealed Bids Specified method of formal competitive procurement Solicited through an Invitation for Bids (IFB) Formal requests for offers from the school district Formal offers from vendors Firm as received. No negotiation is allowed Awarded to the lowest responsible & responsive bidder Utilized most often for commodity or services purchases where
the requirements can be clearly defined and award is based primarily, but not solelybut not solely, on price
Competitive Sealed Proposals Exception to competitive sealed bidding Solicited through a Request for Proposals (RFP) Governing board must make a written determination that
competitive sealed bidding is not practicable or not advantageous prior to using competitive sealed proposals
Specific requirements should be addressed in the written determination
Formal requests for offers from the school district. Formal offers from vendors. Subject to revision by means of best & final offers. Awarded to the vendor whose proposal is determined to be most
advantageous to the District. Utilized most often for commodity or services purchases where
the requirements are not clearly defined and award is based primarily on factors other than price.on factors other than price.
Multistep Sealed Bidding (R7-2-1035)
Multistep sealed bidding shall be initiated by the issuance of an invitation to submit technical offers. The invitation to submit technical offers shall be issued according to R7-2-1024(A).
Upon completion of phase one, the school district shall issue an invitation for bids and conduct phase two under R7-2-1024 through R7-2-1032 as a competitive sealed bidding procurement, except that the invitation for bids shall be issued only to bidders whose technical offers were determined to be acceptable in phase one.
Large Dollar Purchase Methods
Large Dollar Purchase Methods
Services Of Clergy, Certified Public Accountants, Physicians, Dentists and Legal Counsel
(R7-2-1061) Vendors submit statements of qualifications The school district prepares and issues a request for proposals If price is an evaluation factor The contract is awarded to the vendor whose
proposal is determined to be most advantageous to the school district
If price is not an evaluation factorVendors are evaluated and ranked
The highest ranked vendor submits cost and pricing data
Contract negotiations begin with highest ranked vendor
A contract is awarded or negotiations are terminated
If negotiations are terminated, negotiations start with next highest ranked vendor
Price shall be an evaluation factor unless the school district determines that it is either not practicable or not advantageous to include price as an evaluation factor
A.R.S. 15-914(B) requires that contracts for financial and compliance audits shall be approved by the Auditor General
Large Dollar Purchase Methods
Procurement of Specified Professional Services(R7-2-1117)
Specified professional services include architects, engineers, land surveyors, assayers, geologists, and landscape architects (R7-2-1001-72)
The two methods of award of a contract for specified professional services are the single negotiated fee method of award and the multiple fee proposal method of award
Single negotiated fee is the most common method of award
Vendors submit statements of qualifications
Vendors respond to a request for proposals
Vendors are evaluated and ranked
Contract negotiations begin with highest ranked vendor
A contract is awarded or negotiations are terminated
If negotiations are terminated, negotiations start with next highest ranked vendor
The multiple fee proposal method of award is seldom used
A set of drawings is prepared and stamped
A request for proposals is prepared and issued
Vendors respond to the RFP
Contract is awarded to the vendor whose proposal is determined to be most advantageous to the school district
Large Dollar Purchase Methods
Procurement of Construction(R7-2-1111)
Historically limited to competitive sealed bidding Qualifications based selection authorized alternative
project delivery methods There are now 4 project delivery methods for purchasing
constructionDesign-Bid-Build (DBB)Design-Build (DB)Construction Manager at Risk (CMR or CM@R)Job Order Contracting (JOC)
Bid security is requiredAnnual or 1-time bid bond underwritten by surety company licensed to issue bid bonds in AZA certified or cashier's check.
Various performance & payment bond requirements Insurance protection is needed Various progress payment & retention requirements Best chance of success comes with proper matching of
requirement and methodology See R7-2-1033 for requirements for construction projects
with cost not exceeding $150,000 (Simplified School Construction Procurement Program)
Qualified Select Bidders ListA.R.S. §15-213-I Requires the state board of education to adopt rules authorizing school districts to procure construction services by qualified select bidders list.The rules have not been adopted.
A.R.S. §15-2041-M specifies that until the state board of education adopts the rules, the school facilities board may allow school districts to contract for construction services and materials through the qualified select bidders list method of project delivery for new school facilities.
Procurement of Construction
D-B-B D-B CM@R JOC
Best Suited
For
New projects that are not schedule sensitive nor subject to
change
New, renovation or complex projects that are sequence or schedule sensitive, difficult to define or subject to change.
Approached in a team concept.
New, renovation or complex projects that are sequence or schedule sensitive, difficult to define or subject to change.
Approached in a team concept.
Schedule sensitive, single or multi-trade repair, alteration or renovation projects .
Least Suited
For
New, renovation and/or complex projects that are sequence
or schedule sensitive.
Projects subject to change
New projects easily defined lacking schedule sensitivity.
New projects easily defined lacking schedule sensitivity.
Simple projects with defined work scope lacking schedule sensitivity.
Procurement of Construction
D-B-B D-B CM@R JOC
Selection Process
Selection of architect/
engineer is through single negotiated fee or multiple fee
proposal method.
Selection of construction
manager through
competitive
proposal.
Selection of general
contractor through
competitive bid.
Selection of the design-builder is
through the one-step or
two-step APDM method.
Design-builder is responsible for design & construction.
Selection of architect/
engineer is through single
negotiated fee or multiple fee
proposal method.
Selection of construction
manager at risk through one-step APDM method
Construction manager at risk
serves as, or hires, general
contractor.
Selection of job order
contractor is through the one-step or
two-step APDM method.
Job order contractor
does the work and can do the
design.
Procurement of Construction
D-B-B D-B CM@R JOC
Pros
Familiar delivery method.
Defined scope.
Qualifications based selection.
Team concept.
Common goals & objectives.
Design phase assistance.
Faster schedule delivery.
Less expensive.
Change flexibility.
Fewer claims, legal issues.
Qualifications based selection.
Team concept.
Common goals & objectives.
Design phase assistance.
Faster schedule delivery.
Less expensive.
Change flexibility.
Fewer claims, legal issues.
Qualifications based selection.
Faster schedule delivery.
Reduced up front time &
cost.
Less expensive.
Fewer changes.
Incentive for high quality.
Trade subcontractor may serve as
job order contractor.
Procurement of Construction
D-B-B D-B CM@R JOC
Cons
No design phase
assistance.
Longer schedule duration.
Price not established
until bidding is complete.
Can be more expensive.
Lack of change flexibility.
Adversarial relationships.
More claims and legal
issues.
Owner must provide project
parameters (cost, schedule, quality,
etc.).
Team concept must be
implemented (open
communication, trust,
commitment, etc.).
This may be a cultural problem.
Owner must provide project
parameters (cost, schedule,
quality, etc.).
Team concept must be
implemented (open
communication, trust,
commitment, etc.).
This may be a cultural problem.
Perception of threat to in-house staff.
Requires teamwork to
reach potential.
Need trained owner
personnel to best
administer contract.
Large Dollar Purchase Exceptions
Sole Source Purchases(R7-2-1053)
A contract may be awarded for a material, service or construction item without competition if the governing board determines in writing that there is only one source for the required material, service or construction item
The school district may require the submission of cost or pricing data in connection with a sole source award
Sole source procurement shall be avoided, except when no reasonable alternative source exists
A copy of the written evidence and determination of the basis for the sole source procurement shall be retained in the procurement file by the school district
The school district shall, to the extent practicable, negotiate with the single supplier a contract advantageous to the school district
The governing board must approve the sole source purchase before the contract is issued
Large Dollar Purchase Exceptions
Emergency Purchases(R7-2-1056)
An emergency condition creates an immediate and serious need for materials, services, or construction that cannot be met through normal procurement methods and seriously threatens the functioning of the school district, the preservation or protection of property or the public health, welfare or safety
Some examples of emergency conditions are floods, epidemics, or other natural disasters, riots, fire or equipment failures
An emergency procurement shall be limited to the materials, services, or construction necessary to satisfy the emergency need
The governing board shall designate a board member or members or school district official or officials authorized to make emergency procurements, and may prescribe limiting factors including maximum spending limits with regard to emergency procurements
Large Dollar Purchase Exceptions
Emergency Purchase Procedure(R7-2-1057)
A school district initiating emergency procurement shall prepare a written statement documenting the basis for the emergency and the basis for the selection of the particular contractor
The statement shall be signed by the designated district official authorized to initiate emergency procurements
The designated board member or district official who makes an emergency procurement shall, at the first scheduled governing board meeting following the procurement, provide to the governing board a report concerning the emergency procurement including the following information
1. The basis for the emergency which necessitated the emergency procurement, and why it was impracticable to convene a meeting of the governing board;
2. The basis for the selection of the particular contractor, including an explanation of how the procurement was made with as much competition as was practicable under the circumstances;
3. Why the price paid was reasonable The documentation shall be retained in the procurement file
Large Dollar Purchase Exceptions
Cooperative Purchasing(R7-2-1191)
Cooperative purchasing is not an exception to the competitive purchase requirements, but another option for satisfying those requirements
Multiple public procurement units share contracts, when the contracts meet the requirements of the procurement rules
The administering agency is authorized to collect a fee to cover the costs of administering the cooperative purchasing contract
The buying agency remains responsible for compliance with all competitive procurement requirements
If the administering agency meets the competitive procurement requirements, then the using agency is considered to have met the requirements, just as if it had gone to bid itself
The administering agency must qualify as a public procurement unit before a school district can use its contracts
A cooperative may not be a viable option for a school district if that district’s participation materially alters the scope of the awarded contract.
Large Dollar Purchase Exceptions
GSA Contracts(A.R.S. § 15-213(J))
Awarded by the General Services Administration of the federal government
Use of GSA contracts requires that the governing board determine in writing that all of the following apply:1. The price for materials or services is equal to or less than the contractor's current federal supply contract price with the general services administration.2. The contractor has indicated in writing that the contractor is willing to extend the current federal supply contract pricing, terms and conditions to the school district or charter school.3. The purchase order adequately identifies the federal supply contract on which the order is based.4. The purchase contract is cost effective and is in the best interests of the school district or charter school.
Large Dollar Purchase Exceptions
Electronic On-line Bidding(A.R.S. § 15-213(A)(3))
On-line bidding includes reverse auctions
However, before schools can use on-line bidding one of the following must happen:The Arizona State Board of Education must adopt rules prescribing the use of on-line bidding; orThe Arizona Department of Administration must adopt rules prescribing use of on-line bidding
Neither entity has on-line bidding rules published in the Arizona Administrative Code
Schools must wait for one of the entities to adopt and publish rules before using on-line bidding
The USFR Compliance Questionnaire contains requirements for the following topics:
Verbal Quotations
Written Quotations
Specialty Large Dollar Purchase Methods
Sole Source Purchases
Emergency Purchases
Cooperative purchasing
GSA Contracts
On-line Bidding
A copy of the requirements are included in the supplemental handout.
Compliance
Small or Large?
R7-2-1002. Applicability (Procurement Rules)A. This Article applies to every expenditure of public monies, including federal assistance monies, by a school district as specified in A.R.S. § 15-213(A) for the procurement of all construction, materials and services when the total procurement cost exceeds the maximum amount specified in A.R.S. § 15-213(A)(1)…
USFR Section VI5. Whether to request an oral or written quote is determined by analyzing the known requirements for an item or a collection of items that, in the aggregate, may result in the purchase of the item or items from one vendor.
Small or Large?
8. Based upon review of (_____) expenditures for the procurement of construction, materials, and services that met or exceeded the amount requiring sealed bids, as calculated by the Arizona State Board of Education in accordance with A.R.S. §15‑213, did the District follow the School District Procurement Rules (Arizona Administrative Code R7‑2‑1001 et seq)?
11. Based upon review of (_____) purchases costing at least $5,000 but less than $15,000, did the District obtain and document oral price quotations from at least 3 vendors and follow the guidelines governing competitive purchasing below the dollar limits for sealed bids prescribed by the USFR?
12. Based upon review of (_____) purchases costing at least $15,000 but less than the amount requiring sealed bids, as calculated by the Arizona State Board of Education in accordance with A.R.S. §15-213, did the District obtain written price quotations from at least 3 vendors and follow the guidelines governing competitive purchasing below the dollar limits for sealed bids prescribed by the USFR?
13. Based on the test work performed in questions 8, 11, and 12, did the District analyze the known requirements for an item or a collection of items that, in the aggregate, would result in the purchase of the item or items from one vendor through the use of oral quotes, written quotes, or formal competitive bids/proposals?