Training Module 9 Bidding, Purchasing, and Leasing

1. Training Module 9Bidding, Purchasing, and Leasing Prepared by RCAP Solutions for the PA Department of Environmental Protection

2. Smallville vs. Middleville Construction

3. Course Overview • Goals of the purchasing process • Purchasing options and procedures • Contracts • Understand legal requirements and avoid conflicts of interest

4. Goals of the Purchasing Process • Buy only what you need • Stick to your budget • Use competitive purchasing as much as possible

5. Additional Government Procurement Goals • Know the law and comply with it • Understand the intention of the law

6. Do you have a process? • Who decides • Identify needs versus wants • Limit the ability to spend among employees • Avoid unnecessary inventories of parts, supplies and office materials

7. Paying the Bills • Time purchases to fit cash flow constraints • Know or negotiate terms of payment before finalizing a purchase • Pay bills only when value is received, but once it is received, pay them on time

8. Procurement Options • Buy • Rent • Lease • Lease-Purchase • Services and Contracted Work

9. Buying • Funds must be available at time of purchase from: • General Funds Savings or Checking • Capital Reserve Account • Borrow the money

10. Renting • Reasons to rent • Disadvantage – high cost • Rental options

11. Leasing • Advantages • Disadvantages • Examples of when leasing works best

12. Lease-Purchase • Little or no money upfront • Equity in the end • More costly than buying outright

13. Contractors • One time or infrequent projects • During busy times when there is not enough manpower • For skilled or specialized tasks

14. Exercise 1: Smallville needs a crane

15. To Bid or Not to Bid… • Usually, government purchases over $10,000 require bidding • Bidding can be used below $10,000 • Once you start the bidding process, you must stick with it

16. Quotes • Minimum three written or telephone price quotations required for all contracts between $4,000 and $10,000 • Not required for purchases under $4,000, but may be a good idea, especially if the item or service will be ordered more than once

17. Exceptions to the Bidding Rule • Public works maintenance or repairs • Any work municipal employees can do themselves • “Sole source” purchases

18. Exceptions to the Bidding Rule • Professional services such as engineers or lawyers • Disaster emergency purchases Although these are allowable exceptions, bidding should be used if possible to ensure the best use of taxpayer dollars.

19. Exercise 2: Which purchases are exempt from bidding?

20. Bidding Procedures • Prepare “RFB “ Request for Bids documents • Advertise • Review proposals or bids after deadline • “Conform” the bids, ask for clarifications if needed • Check references • Select and award bid

21. Government Bidding Procedures • Government must follow certain bidding procedures • Bids must be published in a local newspaper of general publication • Check municipal codes for advertising requirements • Goes to the lowest responsible bidder

22. Bidding Documents • Specifications • Terms and Conditions • Bid format and contract instructions • Directions for Submittal

23. Specify What You Need • Common standard • What is needed by providing project or equipment specifications • Detail! Detail! Detail! • All bid packages sent out must be identical, and any changes in the specifications need to be re-advertised

24. Specify What You Need • Minimum requirements and tolerances • Reference codes or industry standards • Manufacturers’ standard specifications • Brand names

25. Specify What You Need • Recycled products • Minority-owned businesses • Deadline for submitting any questions

26. Exercise 3: Betty’s Chair

27. Advertising • Choose publications, websites, trade journals, etc. that suppliers are likely to read • Right to reject all bids

28. Comparing Bids • Check to make sure all bids fully meet the specifications, schedule, and terms and conditions • Check references and document the bidder is found to be ‘responsible’ • No exceptions

29. Bidding ProceduresAwarding Bids • Award made by public announcement • Contracts exceeding $50,000 must be awarded within 60 days

30. What do you do if no satisfactory bids are received? • Re-bid the item • After 45 days of the 2nd advertisement, negotiate

31. Legal Challenges to Bid Awards • PA courts have ruled that disappointed bidders have no standing to challenge the bidding process • A taxpayer may challenge the bidding process if certain criteria are met

32. Withdrawal of Bids • Withdraw without forfeit • Next lowest bidder • Reject all bids

33. Contracts • Standard contract forms typically include: • Statement of work • Change orders • Payment schedule and interest penalties • Holdback of payments • Liquidated damages • Authority of the consultant • Subcontracts

34. Contracts • Standard contract forms typically include: • Non-discrimination • Final cleanup • Contractor liability • Licenses, permits, and regulations • Anti-bid rigging

35. Bonds • Bid bonds • Performance bonds • Payment bonds

36. Conflicts of Interest In PA, rules permitting officials to have a financial interest in suppliers vary by unit of government: • All officials $500 limit • Counties $0 • Cities $300 • Boroughs $1,000 • First-class Townships $300 • Second-class Townships $500

37. Other Issues • Davis-Bacon Act and Pennsylvania Prevailing Wage Act • Reverse auctions • Create economies of scale

38. Exercise • Take a few minutes to complete the exercise in the workbook

39. Summary

40. Resources • Pennsylvania State Association of Township Supervisors, (717) 763-0930 • Governor’s Center for Local Government Services, (717) 720-7395. This agency has a free publication called the “Purchasing Handbook”. • PA Dept. of Environmental Protection, Technical Assistance and Outreach, (717) 772-4058, Dennis Lee • RCAP Solutions, (814) 861-6093, Don Schwartz, PA/NJ Program Manager • National Institute for Supply Management (formerly NAPM) www.napm.org