Developing a Compliant Procurement Policy. Bag Lunch Webinar August 29, 2017

Transcription

1 Developing a Compliant Procurement Policy Bag Lunch Webinar August 29, 2017

2 Co-Presenter: Presenter: Jenny E. Herrera, CPA CGMA Rubino & Company, CPAs & Consultants Shareholder Tel:

3 Co-Presenter: Paul H. Calabrese Rubino & Company, Chartered Senior Manager Tel:

4 Sources Uniform Guidance 2 CFR 200 or 45 CFR 75 HHS

5 Overview Regulatory requirements for procurement Types of policies and processes, roles and procedures in a Uniform Guidance compliant procurement system 5

6 The Procurement Standards

7 Uniform Guidance 2 CFR 200 Procurement COFAR FAQ: (11/26/14) Procurement ( ) FAQ All (5) procurement types have the following stds: 1. Purchase complies with NFE s documented procedures in place (audit concern) 2. Purchases are necessary (direct charge to grant) 3. Open competition as required for any of the methods (to obtain best/lowest price) 4. Conflict-of-Interest policy (price is not unduly high, arm s length transactions) 5. Proper documentation of the purchases (audit) 7

8 Uniform Guidance 2 CFR 200 Procurement COFAR FAQ: (11/26/14) Procurement ( ) FAQ [1] Micro-purchases under $3,000 (supplies or services) 1. Purchase orders may be awarded without soliciting any competitive quotations if the NFE considers the cost to be reasonable. 2. To the extent practicable, the NFE must distribute their purchases equitably among qualified suppliers 8

9 Uniform Guidance 2 CFR 200 Procurement COFAR FAQ: (11/26/14) Procurement ( ) FAQ [1] Micro-purchases under $3,000 (supplies or services) EXAMPLE: Purchase of a laptop in the amount of $2,000 can be treated as a micro-purchase No competitive price quotations are required for purchase Cost or price analysis is not required 9

10 Uniform Guidance 2 CFR 200 Procurement COFAR FAQ: (11/26/14) Procurement ( ) FAQ If org has a policy that provides strategic sourcing or bulk purchase arrangements The NFE must consider procuring from 1 of a number of computer / office supply stores Such policies should dictate the purchase of a laptop to be rotated among qualified suppliers if they offer a similar price based on prescribed laptop features 10

11 Uniform Guidance 2 CFR 200 Procurement COFAR FAQ: (11/26/14) Procurement ( ) FAQ [2] Purchases under the Simplified Acquisition Threshold currently set at $150,000 All purchases between $3,000 and $150,000 Small purchase procedures are relatively simple and informal Price or rate quotations must be obtained from an adequate number of qualified sources (number of sources > 1, whereas 1 = sole source) The NFE has discretion as to the amount of qualified sources and the method(s) of obtaining price quotations 11

12 Uniform Guidance 2 CFR 200 Procurement COFAR FAQ: (11/26/14) Procurement ( ) FAQ [2] Purchases under the Simplified Acquisition Threshold currently set at $150,000 Price or rate quotations can be: Written or verbal Vendor price list on website Generated via online search engine Small purchases do not require cost or price analysis 12

13 General Procurement Standards (c)(1),(2) Must have written procurement policy Must have Code of Conduct to manage conflicts of interest. Avoid appearance of family, financial or other interest in vendor Anti-kickback policy No gratuities to federal officials Manage organization conflict of interest such as with affiliates, parent company 13

14 Procurement Standards General Procurement Standards.318 Avoid purchasing unnecessary items.318(d) Initiate process w/ purchase request/p.o. (best practice) If necessary, perform lease vs. buy analysis to ascertain the lowest cost method.318(d) Stipulate the type of procurement: FP, T&M.318(i) Ensure vendors aren t on excluded parties list: Agency Review Risk Posed by Applicants Contracts awarded based on contractor integrity, record of past performance, and financial & technical capability.318(h) 14

15 Procurement General Procurement Standards.318(i)&(j) Maintain records sufficient to detail history of procurement: rationale for method of procurement, contract type, selection or rejection, basis of price Limit the use of Time & Material contracts: only use when no other contract is suitable Set a ceiling price, if contract exceeds ceiling it is at their own risk Higher degree of oversight for effective cost controls and efficient methods 15

16 Procurement Full and open competition without restrictive practices: Unreasonable requirements to qualify to do business Unnecessary experience and excessive bonding Noncompetitive pricing practices between firms/affiliates Noncompetitive awards to consultants on retainer Specify only brand names instead of allowing an equal product offered Avoid the use of geographic preference laws RFP publicized and solicited from an adequate number of qualified sources 16

17 Procurement (f) Procurement by noncompetitive proposals when: (sole source) No Threshold, any level The item is available only from a single source Public emergency will be delayed by competition Awarding agency authorizes noncompetitive proposals After solicitation of a number of sources, competition is determined inadequate More than one source submitting an offer is competition per (d), else sole source 17

18 Contract Cost & Price Must perform cost or price analysis Cost & price analysis performed with every procurement action > $150,000 including contract modifications NFE negotiate profit as a separate element of the price for each contract w/no competition and all cases where cost analysis is performed 18

19 Contract Cost & Price Must perform cost or price analysis A fair and reasonable profit should be based on: Complexity of the work to be performed Risk borne by contractor Contractor s investment The amount of subcontracting The quality of its record of past performance Industry profit rates in the surrounding geographical area for similar work 19

20 Methods of Procurement Procurement by micro-purchases: adequate suppliers under $3,000 no competition Procurement by Small Purchase Procedures under Simple Acquisition Threshold requires adequate number of qualified sources Procurement by sealed bids: fixed price, lowest bid if meet all qualifications Procurement by competitive proposals for fixed price or cost reimbursable 20

21 Uniform Guidance 2 CFR 200 COFAR FAQ Update: (8/29/14) Indirect cost procurements FAQ Since they are not a direct cost procurement, they do not follow the procurement standards Uniform guidance procurement rules do not apply to acquisitions in the indirect cost areas Uniform guidance procurement rules only apply to the acquisition of goods and services that are directly charged to a Federal award. 21

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23 Determination: START Review Agreement per rules Is it a contract or sub-award Pertains to goods & services Yes Has the (5) characteristics of a procurement relationship Result: Contract No Based on programmatic decisions Yes Has the (5) characteristics Of a program No Result: Subaward

24 Contract Procurement of Goods & Services Normally operates in a competitive environment. Provides goods & services within normal business operations Similar goods & services to several different buyers Provides goods & services ancillary to operation of a Federal award. Not to subject to the compliance Requirement of a Federal program. Per the Uniform Guidance 2 CFR (b). A contract is for the purpose of obtaining goods and services for an organization s own needs and creates a procurement relationship with the contractor.

25 Sub-Award Carrying Out a Portion of Program Responsibility for programmatic decision-making Performance measured against the Federal program objectives Complying with Federal requirements Per the terms and conditions It is eligible to receive Federal assistance Uses Federal funds to Carryout the program objectives. Per the Uniform Guidance 2 CFR (a). A sub-recipient award is for the purpose of carrying out a portion of a Federal award and creates Federal assistance relationship with the sub-recipient.

26 What is a procurement system 2 CFR through 326 Policies / procedures, code of conduct Types of procurments based on Threholds per the Bear Claw diagram Contract monitoring & records Processing vendor contracts

27 From COFAR FAQ Dated

28 Procurement System Should Include: Best Practices for Procurement Controls/ Organization Is there a formal staff position devoted to procurement, like a fiscal or business manager? Lines of Authority What are the roles and responsibilities, particularly delegation of authority for different procurement thresholds. Internal Controls Are there documented procedures for acquisitions at the various thresholds and contract monitoring?. Work Flow How do you communicate and coordinate the processing and oversight of contracts? 5 Monitoring Methods Compliance Supplement states: contract monitoring occurs during the pre-award, performance and close-out phases.

29 Technical: PM / PI Vendor either approved in initial budget or Based on budget, initiate purchase request Ensure equipment/materials are per specs. Typical Duties Contract Life-Cycle Monitoring: Grants Adm/Fiscal Mgr Solicit item from vendors via simple or competitive method If competitive, develop formal solicitation, adequate bidders Set up team to review and analyze competitive responses Approve the P.O. with supplier or prepare contract for services Finance: Director + Staff Review purchase request / PO per org. SOP Track direct purchases by vendor by grant Prepare monthly accounting reports to PI Technical: Program Manager - PI Review + approve prepared Purchase Order to vendor/supplier Assist with contract monitoring during performance from Tech. Alert fiscal mgr. that the contract is ready for close-out

30 Procedures for 5 Kinds of Procurement Micro Purchase Small Purchase Procedures Competitive Procurements Sealed Bid Procurements Sole Source

31 Impact of Cost Allowability Subpart E (55) Cost Principles Terms & Conditions Document Support Credits Reasonable Cost Cost Principles Budget approval or limits on vendors Buy American Hire American Fly Amer.Act Retain vendor receipts, invoices, receiving reports Consultant agreements Rebates, refunds, volume or price discounts offset net cost Sound business practices, Arm s length transaction, necessary requirement Direct approval of capital assets purchased direct and used on contract. Materials, supplies and equipment principles.

32 The Process of Micro-Purchases No sole sourcing Office mgr. Is buyer Purchases < $3,000 No competitive quotes Distribute equitably to to suppliers

33 Solicitation Process Procurement is a 3-dimensional process multiple concurrent operations 2 A P/R if < $150,000 results in an internal process of informal quotes vs. >$150,000 results in a formal RFP. 4 Competition from adequate number of sources (no less than 3) with at least 2 qualified bidders, else, sole source. 6 Approved purchase results in a Purchase Order (P.O.) for product and vender agreement for services. 1 To initiate any purchase > $3,000, a Purchase Request (P/R) form is required. It may look like this form. 3 A formal RFP includes: A clear description of technical specifications Description should not unduly restrict competition It should include the minimum essential characteristics and standards of conformance with specs Identify all of the requirements the offeror must fulfill Factors for evaluation Affirmative efforts to utilize small disadvantaged business, minority and women owned business. 5 Complete the Price Analysis Form (shown in next slide). Provide rationale for source selection based on Best Value both price, technical & other factors from evaluation. Verify that awardee is not on the suspended & debarred list Request references to verify vendor s capabilities before awarding PO or contract Depending on the value of the procurement, review and approval by CFO, grants administrator and PI.

34 The Process of Small Purchase Procedures $3k to $150k Quotes Discretion Method Form Simple procedures similar to old OMB Circular A 110 Price or rate quotes obtained from adequate number of qualified sources > 2 Org. has the discretion as to methods of obtaining price quotes Written or verbal price quotes; vendor price list from website; online search

35 Competitive Proposals > $150,000 SAT Vetting Is the proposal vetted via budget / narrative and tacitly approved by agency. If not, compete vendors. Full Open competition: Consider factors such as price, quality, tech. capability, timeliness of delivery, past performance, experience or a vendor s reliability. Decision Final decision based on best value. At least 3 vendors to compete. Maintains a bidders list How does a small org. maintain an adequate bidder list. 2 or more After the evaluation of 3 or more respondents, a minimum of 2 must be qualified bidders, else sole source. Form

36 Sealed Bid Procurements Fixed price > $150,000. Publicly solicited on fixed price, lump sum, competitive basis. First determine that the responsive bid is technically acceptable. Award to lowest price bidder. Solicitation requires a complete specification or purchase description. Minimum level of competition is 2 responsive bidders.

37 Sole Source Public emergency exits Item or service is available from only one source If a single vendor has multiple work statements or deliverables, or milestones; they should be bid separately if over $3,000. Sole Source Form After a competitive solicitation resulted in only one responsive bidder > $150,000 and no re procurement A CPA or law firm and certain professionals may be sole sourced regardless of dollar value because: 1) they are indirect procurements, and/or 2) historical knowledge of unique issues No sole source is required under $3,000. The sole source requirement starts at $3,000 for both the small purchase procedures and competition over $150,000.

38 Cost or Profit Analysis Is Mandatory if > $150,000 i Price analysis is performed by comparing catalog of goods and market based service pricing. Unique services requires cost analysis of each cost element breakdown. Cost/pricing for estimates are allowable, reasonable in accordance of Subpart E cost principles in the UG. If no price competition or cost analysis for unique services, profit must be negotiated based on 6 factors.

39 Records and Contract Monitoring > $150,000 Requires Documentation Basis of award Type of contract, FP or T&M Justification for lack of competition Purchase request Price Analysis form P.O. or contract Solicitation Pre award assessment Designated Rep to monitor Contract / PO Monitoring: Performance - Reporting from vendor or inspection / receipts of goods - Timeliness - Ongoing interface with vendor - Reports provide feedback Check to see if vendor is on the Suspended & Debarred List: Pre award stage Each award year Payments Review Review: Deliverables Timeline Services rendered Review by PI, CFO and grants adm before payment Changes Review by PI for changes to: Scope, delivery or timeline, performance, Changes require a formal modification or amendment to contract or P.O.

40 Vendor Contracts Process 1 Level for contracts or POs > $3,000 micro purchase threshold Vender agreement for unique goods and services Services based on catalog prices Level for Purchase Request / POs > $3,000 and < $150,000 for goods and services > $150,000 competitive RFPs Sole source Service Requests Hours required Proposed work scope Deliverables Payments based on milestones where applicable Unit costs Contract Type Fixed price Lump sum Cost reimbursable Time and material (T&M) NTE cap on T&M Appropriate billing method based on type

41 Vendor Contracts Process 2 Limitations on T&M contracts T&M only used: After a determination that no other contract type is suitable Includes a ceiling price that the vender cannot exceed and is at risk if exceeds it Professional Services Agreements Conforms to the Cost Principle for Professional Services: Description of services Time period Billing rates Termination Budget Consideration Before approval to solicit a procurement, ensure that the contract or P.O. conforms to the approved project plan for an existing budget per the budget s narrative Mandatory Riders Work with Small Disadvantaged Companies 2 CFR 326 reference Appendix II for about 9 additional terms Your invoice, travel formats

42 The Path Forward What s Next? How to We Start the Implementation Process?

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44 Any Questions 44

45 The materials contained herein or discussed in the session or shown in the MS Powerpoint slides, are for illustrative and academic purposes only and should not be considered appropriate for your organization without careful adaptation by experts in the appropriate field of endeavor. DISCLAIMER