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Session II

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

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Session II

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  1. 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!!

  2. Session II • Large Dollar Purchases Definition Effect on Purchasing • Large Dollar Purchase Methods Competitive 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 • Compliance Small or Large?

  3. Small Dollar Purchases Definition Small 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 Purchasing Small 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.

  4. Small Dollar Purchase Methods • Petty Cash • Cash Purchase Orders • Purchase Certificates/Limited Value Purchase Orders • Blanket Purchase Orders • Procurement Cards • Cooperative Purchasing

  5. Competitive Quotations • Verbal Quotations • Are 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 Quotations Are 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 Quotations • Come 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.

  6. Competitive Quotations • Successful Quotes Clearly 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?!?

  7. 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 Purchasing Large 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.

  8. 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 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.

  9. Large Dollar Purchase Methods 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.

  10. 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 factor Vendors 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

  11. 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

  12. 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 construction Design-Bid-Build (DBB) Design-Build (DB) Construction Manager at Risk (CMR or CM@R) Job Order Contracting (JOC) • Bid security is required Annual or 1-time bid bond underwritten by surety company licensed to issue bid bonds in AZ A 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 List A.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.

  13. Procurement of Construction

  14. Procurement of Construction

  15. Procurement of Construction

  16. Procurement of Construction

  17. 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

  18. 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

  19. 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

  20. 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.

  21. 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.

  22. 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; or The 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

  23. Compliance • 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.

  24. 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 VI 5. 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.

  25. Small or Large? USFR Compliance Questionnaire

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