Session II

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.

Clearly define vendor qualifications (if applicable)

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?

USFR Compliance Questionnaire