Insight into Procurement Strategies and Bidding Process in Hawaii 2017

Procurement Review Hawaii 2017 Everything you wanted to know about Procurement and never wanted to ask.

The games people play . The vendor s goal is to make as much money off of you as possible. Your goal is to limit the amount of money they are making off of you.

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TYPES OF FORMAL BIDS: IFB IFB- - Invitation For Bid Invitation For Bid YOU TELL THE VENDOR WHAT YOU WANT YOU TELL THE VENDOR WHAT YOU WANT You You tell them what product, time of delivery, day of delivery, pack size, how you will tell them what product, time of delivery, day of delivery, pack size, how you will pay, etc. pay, etc. YOU MUST AWARD TO LOWEST VENDOR YOU MUST AWARD TO LOWEST VENDOR NOT ON SERVICE OR IF YOU LIKE THEM OR NOT ON SERVICE OR IF YOU LIKE THEM OR NOT! NOT! Can rarely go with 2 Can rarely go with 2nd lowest bidder. If you do, you have to provide justification and put in writing first. put in writing first. ndlowest bidder. If you do, you have to provide justification and

TYPES OF FORMAL BIDS: RFP RFP- - Request For Proposal Request For Proposal YOU WORK WITH THE VENDOR ON WHAT YOU WANT YOU WORK WITH THE VENDOR ON WHAT YOU WANT You tell them what product, time of delivery, day of delivery, pack size, how you will You tell them what product, time of delivery, day of delivery, pack size, how you will pay, etc. Then they tell you want they will do. pay, etc. Then they tell you want they will do. You score final You score final- -final with evaluation committee. final with evaluation committee. YOU MUST SCORE PRICE AS THE HIGHEST OF ALL CRITERIA YOU MUST SCORE PRICE AS THE HIGHEST OF ALL CRITERIA EX: EX: PRICE 25%, PRICE 25%, WILL PUT ON SHELVES 20%, MON. & THUR. DELIVERY 15%, WILL WILL PUT ON SHELVES 20%, MON. & THUR. DELIVERY 15%, WILL ALLOW CHANGES 24 HRS. BEFORE DELIVERY 10%, Computer Ordering 10%, No ALLOW CHANGES 24 HRS. BEFORE DELIVERY 10%, Computer Ordering 10%, No Re Re- -shelving charges 10%, FILL RATE OF 9% shelving charges 10%, FILL RATE OF 9% - -10% 10%

Action Items Action Items Common Findings Common Findings CODE OF CONDUCT CODE OF CONDUCT Must have a written Code of Conduct Must have a written Code of Conduct Protects employees from engaging in Protects employees from engaging in unethical and unallowable behavior unethical and unallowable behavior Provides disciplinary actions for violations Provides disciplinary actions for violations Protects SFA s reputation Protects SFA s reputation

Conflict of Interest No employee should be involved in the procurement process if they have a conflict of interest. CALLED AT ARMS LENGTH CALLED AT ARMS LENGTH

Action Items Action Items Common Findings Common Findings

Action Items Action Items Common Findings Common Findings CODE OF CONDUCT CODE OF CONDUCT REAL REAL Professional judgement is compromised because of a financial personal benefit. VS PRECEIVED PRECEIVED A reasonable person would think that the professional s judgement is likely to be compromised. Newspaper/Stink Test Newspaper/Stink Test

Conflict of Interest or Not? Sheldon Cooper is the Principal for a Charter School. He awarded a one year contract to his brother who owns a company that vends meals.

Conflict of Interest or Not? Amy Farrah Fowler is the Cafeteria Manger for a Public Amy Farrah Fowler is the Cafeteria Manger for a Public Charter School. She regularly has dinner with her Charter School. She regularly has dinner with her friend, the owner of a vended meals company, but she friend, the owner of a vended meals company, but she always pays for her own dinner. She followed proper always pays for her own dinner. She followed proper procurement procedures and awarded the vending procurement procedures and awarded the vending contract to her friend. contract to her friend.

Action Items Action Items Common Findings Common Findings DISCIPLINARY ACTION FOR VIOLATIONS DISCIPLINARY ACTION FOR VIOLATIONS Must provide disciplinary actions for violations Examples: Verbal warning Written warning Fines Suspension or Termination Police/Legal Action

Action Items Action Items Common Findings Common Findings DISCIPLINARY ACTION FOR VIOLATIONS DISCIPLINARY ACTION FOR VIOLATIONS Soliciting Gifts Is Prohibited 2 CFR 200.318 (c) (1)- The Officers, employees and agents of the non-Federal entity must neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties of subcontractors.

Action Items Action Items Common Findings Common Findings DISCIPLINARY ACTION FOR VIOLATIONS DISCIPLINARY ACTION FOR VIOLATIONS Gratuities, Favors or Gifts 2 CFR 200.318 (c) (1)-Non Federal entities may set standards for situations in which the financial interest is not substantial or the gift is an unsolicited item of nominal value.

Conflict of Interest or Not? Bernadette Rostenkowski Bernadette Rostenkowski- -Wolowitz is the Cafeteria Manger Wolowitz is the Cafeteria Manger for a Public Charter School. Her School s Code of Conduct for a Public Charter School. Her School s Code of Conduct allows her to accept up to $25 annually. allows her to accept up to $25 annually. Leonard Hofstadter owns Tasty Meals (vendor) and sends Leonard Hofstadter owns Tasty Meals (vendor) and sends Bernadette a box of candy at Christmas worth $20. During Bernadette a box of candy at Christmas worth $20. During the summer, Leonard breaks a leg and can t go to a MLB the summer, Leonard breaks a leg and can t go to a MLB baseball game and gives the box seat tickets to Bernadette. baseball game and gives the box seat tickets to Bernadette.

Why Written Procurement Procedures? Why Written Procurement Procedures? Written Procurement Procedures Written Procurement Procedures 1. Ensures purchases made are in compliance with federal, state, and local rules. 2. Provides purchasing staff with a guide on proper procuring which will create a decrease in unallowable transactions.

Why Written Procurement Procedures? Why Written Procurement Procedures? Written Procurement Procedures Written Procurement Procedures 1. Document containing specific information and processes for procurement transactions. 2. Update as procedures change 3. Unique to each SFA 4. Follow your procurement procedures 5. Don t forget a Emergency Procurement Plan.

Action Items Action Items Common HCNP Findings Common HCNP Findings RECORDS RECORDS 2 CFR 200.318(i)- The non Federal entity must maintain records sufficient to detail the history of the procurement. 1. Rational for procurement method 2. Selection of contract 3. Vendor selected or rejected 4. Basis for contract price

Action Items Action Items Common HCNP Findings Common HCNP Findings What NEEDS to be in your What NEEDS to be in your r records: 5. Evaluation 6. Protests 7. Disputes 8. Claims ecords: Keep all written records/notes/phone calls Keep all written records/notes/phone calls

Action Items Action Items Common HCNP Findings Common HCNP Findings OVER RESTRICTING COMPETITION OVER RESTRICTING COMPETITION 1. Placing unreasonable requirements on vendors. 2. Requiring unnecessary experience or excessive bonding.

Action Items Action Items Common Findings Common Findings CONTRACTOR CANNOT: CONTRACTOR CANNOT: Be involved in writing ANY Specifications on any IFB or RFP, etc. Vendor must be excluded from competing for a Vendor must be excluded from competing for a procurement if they helped developed a draft. procurement if they helped developed a draft.

BUY AMERICAN Still being developed for Hawaii by USDA Should still be in all Solicitations until clarified. Clause is not applicable to HI due to: 1. Product not produced or manufactured in Hawaii in sufficient quantities per 7CFR210.21 (d) (3). 2. Competitive bids reveal the cost of the US product is significantly higher than non-domestic. .

Action Items Action Items Common Findings Common Findings What is a Micropurchase ??? What is a Micropurchase ??? 1. New to procurement world. Most don t know: helps the small SFA s with limited vendors. 2. Can procure product without soliciting competitive quotes. No documentation needed. 3. Price must be reasonable. HCNP will use internet to prove pricing.

Action Items Action Items Common Findings Common Findings What is a Micropurchase ??? What is a Micropurchase ??? 4. Distributed equitably among suppliers. Must be roughly distributed to: A.) different vendors B.) money spent at each vendor 5. Must be under $3,500. Save all receipts.

HCNP Suggestions: ALL food, paper, services, chemicals must be under a ALL food, paper, services, chemicals must be under a procurement procedure. procurement procedure. Once you bid out an product or service, then you must do a contract. Give more time than you think for writing a bid (X10!). Bids should be written for 1 year; but can be extended for 4 one year extensions. NO MORE THAN 5 YEARS- TOTAL.

HCNP Suggestions: Did I mention that ALL food, paper, services, Did I mention that ALL food, paper, services, chemicals must be under a contract or procurement chemicals must be under a contract or procurement procedure. procedure. If you roll a bid, make sure you have an escalation clause. Recommend tying it to a National index such as the CPI - Consumer Price Index (Dept. of Labor). Use National Average for food away from home. Bids must be signed by legal authority from SFA.

HCNP Suggestions: Are you sure I mentioned ALL food, paper, services, Are you sure I mentioned ALL food, paper, services, chemicals must be under a contract or procurement chemicals must be under a contract or procurement procedure. procedure. Piggy Back - legal if written into the bid and contract. All items/products are or equal in the procurement world. Taste tests can help get product you want

Action Items Action Items MOST Common Finding MOST Common Finding MONITORING MONITORING 1. Bids Must be monitored: For example: One milk bid in a SFA had 13 price changes (up and down) over the last school year. They claimed they had none and didn t realize the price changes over the year. 2. Monitoring is making sure invoices are correct and charged according to bid/contract. 3. Have a written procedure on how to send product back. 4. Document who monitors your bid prices and how often. Document, document and document

PROCUREMENT VIOLATIONS: USDA still working on standardized penalties for SFAs. USDA still working on standardized penalties for SFAs. May May require SFA to re require SFA to re- -solicit bid. solicit bid. May disallow procured items/pay for items with non May disallow procured items/pay for items with non- - food service food accounts food service food accounts.

Action Items Action Items Common Findings Common Findings 1. Solicitations must be advertised when out to bid. Save proof of advertisement. 2. SFA can talk to vendor UNTIL THE BID IS OUT. If correction is needed then everyone gets the same info. 3. Accurate Data- state approximately for volume usage but make sure you are credible and make sure you say it s approx. or you might be liable for buying any unused product at end of bid. 4. Be flexible- work with your vendor- i.e. delivery window of all day for any day of the week.

Action Items Action Items Common Findings Common Findings 1. Award bid on lowest unit price- must be apples to apples. Example: Pizza 1 = 32 count for $10. Pizza 2 = 15 count for $10.

Action Items Action Items Common Findings Common Findings To Rebid or Make an Addendum? To Rebid or Make an Addendum? 1. 1. Material Change Material Change- - Subjective; how much it effects Subjective; how much it effects the total bid. the total bid. 2. 2. Based on the money amount in bid change. Look Based on the money amount in bid change. Look at % change in total price of bid. at % change in total price of bid. 3. 3. Based on other variables Based on other variables- - Is the change significant to bid to cause other vendors to want to significant to bid to cause other vendors to want to re re- -bid. bid. Is the change

What Drives COSTS UP: What Drives COSTS UP: Since Since most procurement problems can be most procurement problems can be attributed to human error, these issues can attributed to human error, these issues can usually be resolved fairly easily. Make sure usually be resolved fairly easily. Make sure that your procurement system takes these that your procurement system takes these mistakes into account and ensure your mistakes into account and ensure your partnership with a supplier is based on partnership with a supplier is based on mutual understanding. mutual understanding.

HCNP AUDIT HCNP AUDIT Vendor/Contract Management Review 2016 Vendor/Contract Management Review 2016 1. Need for better oversight and accountability at the school level. 2. Need for better tracking and monitoring of contracts and vendors. 3. Need for strengthening controls over vendors.