Maximizing $avings Through Innovative Procurement Methods

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1 Maximizing $avings Through Innovative Procurement Methods 1301 East 2nd Street, Sanford, FL (407) Office Betsy J. Cohen C.P.M., CPPO, CPPB January 4, 2016

2 BACKGROUND: BEST PRACTICES IN PUBLIC PROCUREMENT MAXIMIZING SAVINGS THROUGH INNOVATIVE PROCUREMENT METHODS There are key factors crucial to achieve procurement best practices and Seminole County has succeeded issuing different procurement methods through a new construction project The Seminole County Sports Complex! Seminole County Government is in the construction phase of a $28 Million Sports Complex, scheduled to open in May The new complex will sit on county-owned property consisting of 102 acres located in close proximity to the Orlando Sanford International Airport, Sanford, Florida. Seminole County seeks to become one of the top youth sports events destinations in the Country, through the development of this Complex. The new Sports Complex is projected to have 15 baseball/multi-purpose fields, with center fields distances ranging from 315 feet to 385 feet, with the ability to reduce or expand fence distances to host a wide variety of age groups and multipurpose sports in the outfields on a portion of the fields. Field type includes natural turf for the 315 foot fields; artificial turf construction for the balance of the larger fields. The fields are flexible to adjust fence distances to host a wide variety of age groups and multipurpose sports in the outfields. Primary Targeted Sports: Baseball and Softball Secondary Targeted Sports: Lacrosse, Soccer, Football, Rugby, Field Hockey Tertiary Targets: Special Events, Community Events, etc. Other Park Features to include pavilions, playgrounds, paths, picnic areas, batting cages, concession/hospitality buildings each with public restrooms; and an administration building. Our fiscal responsibility is to expand opportunities and seek creative methods that will ensure success of the project. Getting all the stakeholders together to focus on every aspects of a project and to better understand where the money is going with every transaction is crucial when identifying if the project is on budget as projected. The Purchasing and Contracts Division (PCD) was involved in making decisions about how to maximize the budget with the use of the Sales Tax Recovery program and increase savings. The purpose of using this program is to improve fiscal planning to generate savings that will fund the purchase of equipment to be used in the daily operations of the Sports Complex. Among the benefits of using the Sales Tax Recovery Program are cost reduction, process streamlining, use savings to procure components of the project, and more. PCD worked together with Project Management, Contractors and Suppliers, to provide value-added benefits for project success and the value impact is irrefutable. 1

3 INNOVATION IN THE PROCUREMENT PROCESS AND COST SAVINGS: The County Procurement Team was involved from the beginning of the project providing the opportunity to brainstorm and determine the best method of procurement of materials for the construction project and all goods and services that the County will need to complete this project in a successful manner. The County is using Construction Management at Risk contracting for the Seminole County Sport Complex. The construction agreement has language permitting the County, Contractor and Subcontractors, to utilize direct purchase materials during the construction fulfilling all necessary requirements to qualify for the sales tax exemption available for direct purchases by the County. The purchases of some of the commodities and/or services are exempt from the County s Purchasing Code, preserving the sales tax exemption to the benefit of the County. The procedure that the County follows is detailed in the Seminole County Purchasing Code, Section , attached. Some of the requirements are as follows: The County must issue its Purchase Orders directly to the Vendor supplying the materials the Contractor will use and provide the Vendor with a copy of the County s Florida Consumer s Certificate of Exemption; The vendor must issue invoice to the County rather than to the Contractor; The County must pay the vendor directly; The County must issue a Certificate of Entitlement to each vendor affirming that the property purchased from the vendor will become part of a public work. The County and the Contractor must work very closely because there are some instances when the County is not able to use its tax exempt status to purchase materials for example, when the County purchased the lighting for the complex. The Contractor installing the lighting was also selling/manufacturing the materials to the County, which does not qualify for a Sales tax Exemption. PCD undertook this task knowing the need for innovation and creativity was instrumental for project success. The funding was very limited and the savings generated from the sales tax recovery program was needed to procure other items such as, seating, furniture, supplies for the concessions area, etc. PCD recognized there were opportunities to tailor our procurement practices toward promoting innovation while at the same time delivering efficient services to the end user. To further increase the savings, PCD obtained approval from the County Finance Department to process some of the payments of invoices for this project through the County Purchasing Card program. PCD is an important resource and team player for the end user by providing sound and effective procurement practices that ensure project success and savings. PCD is particularly pleased that great savings have been produced using these practical initiatives. 2

4 The innovative procurement methods of using the Sales Tax Recovery program for the construction of the Seminole County Sport Complex and using the Purchasing Card payment for some of those invoices are effective approaches that have provided the County with significant savings within a constraint budget. Although some of the purchases are not suitable for this program and some of the savings might be negated by increased administrative costs incurred to process and monitor the purchases, the county has developed processes, outlined herein, that out-weighs these issues. PCD is notified by the County Project Manager when a payment has been approved by sending signed copies of invoices and proof of delivery via . PCD contact the Supplier and make the payment over the phone for the amount authorized in the invoice(s). The payment is processed through the use of the purchasing card which has allowed the county to become a better business partner. Using the purchasing card to pay for those invoices offers the county an efficient method and internal control for the procurement and payment of the goods. This action reduces the volume of accounts payable transactions and the associated administrative costs. Supplier sends receipt to the PCD which is forwarded to the user department and Contractor. The Supplier charges the card and the county complete the account reconciliation by reducing the construction agreement and Purchase Order(s) by the specified dollar amount including the tax. The difference between the contract amount and the amount paid with the credit card becomes the savings for the county. The county receives financial return or rebate on every dollar spend with the purchasing card program. The use of the card as a payment tool in this case increase efficiency, reduce the workload of accounts payable, simplify the reconciliation process and produce lower overall transaction processing costs per purchase at essentially no cost to the county. In the current economy, every dollar counts and it has been advantageous for the County to look for ways to increase the bottom line savings. In addition to the County incentives, the benefits also extend to the Suppliers by expediting payments, reducing paperwork and lowering the risk of delaying payment. The County as of January 4, 2016 has issued 57 Sales Tax Recovery Purchase Orders including Change Orders in the amount of $6,974, generating a savings in sales tax of $402, Using the traditional method, the County would have received, processed, and issued paper checks payments for 301 invoices. By calculating the processing cost of these transactions and paying those invoices through the credit card program the County has generated an additional $19, in savings and cost avoidance. This saving amount was calculated by multiplying the average cost of processing paper checks (including labor and materials from the County 3

5 Finance offices and Bank processing offices) of $65.00 x 301, the number of invoices. In addition, the credit card program provides the County cash back based on annual purchase volume; therefore, the County is generating additional funding of over $30, based on the payments processed for the Seminole County Sports Complex only. The Seminole County Sports Complex project will not be completed until May 2016 and the savings are anticipated to continue to increase. This is an effort that involves planning, coordination, team work and good communication among the parties involved. We are proud to say that through this project the County has improved procurement processes and has created an environment in which the PCD is perceived as a partner working with departments/divisions where potential upcoming projects can benefit from these results. These efforts are generating savings to the County of over $450, and will continue to generate savings until completion of the project. 4