2 CFR 200 Procurement September 2016 Larry Wood U.S. Department of Housing & Urban Development Milwaukee Field Office

If it is NOT written down – It never happened. Basic Tenet If it is NOT written down – It never happened.

2 CFR 200 Notice SD-2105-01 : 26 Feb 2015 Removed 24 CFR 85.36 with transition to 2 CFR 200 Parts 317 to 326 Intended implementation date 31 Dec 2015 HUD – “Lead the Way” Training – Procurement Practices at Public Housing. https://www.hudexchange.info

Official Advice – Wait on Policy Revisions “HUD is revising the HUD PIH Procurement Handbook 7460.8 Rev. 2 to synchronize with the new Part 200. With the exception of the procurement thresholds, the requirements are substantially the same and PHAs should continue to use this handbook.”

Now the real SCOOP – Procurement is about MONEY

PHA Financial Overview First – a look at the financial process, a ReCap

System Thinking Process is intended to take a broad view Look for hidden problems Find Root Causes Make short term and long term plans Change and then monitor results Continuous improvement

A Quick and Easy Guide to the Procurement Process

Funding Overview Process involves ACC – HUD form 53012 5 Year Plan - 24 CFR Part 903 PNA/GPNA PHA Budget Capital Funds - 24 CFR Part 905 Operating Funds LOCCS Accounts Procurement – 2 CFR 200 Parts 317 to 326

ACC HUD Fm 53012 a & b – Your Basic Contract Capital Fund ACC Amendments Fm 52840 Follow 24 CFR Part 905 Follow approved 5 Year plan Obligate within 24 months/Expend in 48 mos. Authorizes HUD to impose penalties for non-compliance.

Now – On to Contracting

Basics of Procurement 2 CFR 200 Governs procurement activities at PHAs PHA’s Procurement Policy & Procedures Sets directives & administrative responsibilities Procurement Handbook for PHAs 7460.8 REV 2 dated February 2007 (Obsolete, but valuable) Provides administrative & managerial guidance PIH Notices and other guidance Provides additional directives State and local laws If more stringent, overrides Federal Law PART 85 - entitled Administrative requirements for grants and cooperative agreements to State, local and Federally recognized Indian tribal governments: There have been no significant regulatory changes to 85.36 since 1988; the last change was in 1995 when the Federal Simplified Acquisition Threshold was increased from $25K to $100K The regulations are the law that PHAs must follow: they are very specific in that they discuss PHA’s responsibilities, codes of conduct, competition, procurement procedures, cost and price analysis, records and contract administration, etc. The POLICY sets the specific directives at a PHA while the PROCEDURES spelled out the how. In recent times, due to the implementation of the Asset Mgmt. mode and the ARRA provisions, HUD has issued new procurement directives. (See Slides 87 & 88.)

First Steps Revise the PHA procurement policy to be IAW 2 CFR 200 Ask for HUD FO advice Issue a Board Resolution adopting the Policy Reach an agreement with the board on the role of the ED

Once the new Policy is in place ED is the Contacting officer – Only person to obligate funds, execute contracts, POs, change orders. Issue Contracts IAW policy Maintain sufficient Records Settle Contract issues/disputes Implement a Contract Administration System Ensure Open Competition

Ensure Competition 2 CFR 200.319 (a) (a) All procurement transactions must be conducted in a manner providing full and open competition consistent with the standards of this section. Some of the situations considered to be restrictive of competition include but are not limited to:

Activities that may restrict Competition: (1) Placing unreasonable requirements on firms in order for them to qualify to do business; (2) Requiring unnecessary experience and excessive bonding; (3) Noncompetitive pricing practices between firms or between affiliated companies; (4) Noncompetitive contracts to consultants that are on retainer contracts; (5) Organizational conflicts of interest; (6) Specifying only a “brand name” product instead of allowing “an equal” product to be offered and describing the performance or other relevant requirements of the procurement; and (7) Any arbitrary action in the procurement process.

10 Basic Procurement Steps Develop a Statement of Work (SOW) Complete an Independent Cost Estimate (ICE) Determine rationale for procurement method Solicit & receive quotes/bids/proposals Determine responsive/responsible bidder, as applicable Determine price reasonableness Award the contract or solicitation Implement contract administration system Close out the contract Maintain records for minimum of 3 years Denotes the 10 basic steps that PHAs must undertake with all procurement activities. However, some of them can be simple actions, such as developing the SOW for the purchase of equipment of materials or determining the rational for the specific procurement method to use. On the other hand, PHAs are poor at developing the ICE or either the Price or Cost Analysis.

3 Methods of Procurement 2 CFR 200.320 Micro Purchase - $3k limit or PHA policy Small Purchase - Under $150k limit or PHA policy Simplified Acquisition - $150k Federal limit, or Policy Competitive Procedures Non Competitive Procedures Note: Above $150k see “Sealed Bids”

Micro Purchases 2 CFR 200.67 A subset of Small purchases. Must be outlined in the PHA procurement Policies. Price limit of $3,000 ($2,000 if Davis Bacon applies) Against regulations to break up purchase to stay under a limit.

Small Purchase Procurement 24 CFR 200.320 Defined by PHA Policy Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources.

Simplified Acquisition Threshold FAR -- Part 13 Simplified Acquisition Procedures “Simplified Acquisition Threshold” means $150,000, some exceptions apply. http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/fardfars/far/02.htm

Competitive Procedures 24 CFR 200.319 Conditions require the use of the method, such as unclear or incomplete specifications. Action is based on technical merits and price. There are 2 or more qualified offerors in the market Cannot award a firm fixed-price contract (e.g., IFB). Formal procurement used when the cost estimate is more than the $150,000 Federal regulatory threshold or the limit specified in the PHA’s Procurement Policy.

Competitive Procedures 7 Steps Develop a Cost Estimate Draft the Request for Proposals (RFP)/ Competitive Based Proposal (CBP) & Publish Receive the bids but DO NOT open them Publicly. Rate the proposals based on Technical merits and price if appropriate. Choose the highest rated proposal. Negotiate the price with the highest ranked firm. Execute a fixed price or cost reimbursement contract.

Sealed Bids 24 CFR 200.320 Fixed price Normally used for Construction Award based on Price ONLY – 5 Steps Develop a Cost Estimate – 24 CFR 200.323 Draft the Request for Proposals (RFP) & Publish Publicly open the bids Determine the lowest responsible and responsive bid. Execute a fixed price contract with the selected bidder.

Non Competitive Procedures 24 CFR 200.320 Only used for Emergencies or when Competition is lacking. PHA or A/E Must perform a Cost Estimate 24 CFR 200.323 Must be Justified by the Cost estimate and other conditions.

Non Competitive Methods Sole Source One source selected due to no competition. The item or service is available from only one entity. Single Source Solicitation sought, but only one bid received. PHA was not aware of the lack of competition resulitng in only one bid. Emergencies and Public Exigencies Justified based on a health and safety issue mandating immediate corrective action. No HUD approval required in order to facilitate a rapid response.

Terms Section 10-8 of the Procurement Handbook All Contracts must have a finite term including options to extend. Not to exceed 5 years including options to extend. Options to extend must be outlined in the original Contract. Extension must be evaluated at each renewal prior to activation – is it still a good choice?

Section 3 per 24 CFR Part 135 Promotes economic opportunities for low-income residents and certified low-income businesses through professional services and other labor contracts For all work funded using operating/capital funds, PHAs must provide - to the greatest extent feasible - employment, training, contracting and other economic opportunities to Section 3 residents and businesses (no $ threshold for PHAs) Reference requirement and attach Section 3 clause to applicable solicitations subject to the requirement Document contract file of efforts undertaken to meet goals Support and promote Minority Business Enterprise (MBE), Woman Business Enterprise (WBE) & Resident-Owned Businesses Goals apply to entire amount of Section 3 covered assistance awarded to a PHA every Fiscal Year Requirements typically apply to construction-type contracts: new constr., rehab, abatement, etc. Goals: 30% for Training and Employment; 10% for Contracts: see regs. Housing Manager’s Procedures Manual for PHA dated Nov. 2005 states that the Section 3 requirements do not apply to purchases of less than $25K involving goods and supplies; this is partially correct. Per regs @ 24 CFR 135, ”Section 3 covered contracts’’ do not include contracts for the direct purchase of supplies and materials except when a contract for materials includes installation. Section 15.2 C of the Proc. Handbook states that the Section 3 requirements do not apply to the direct purchase of supplies and materials unless purchased thru a PHA resident-owned business. Consistent with 24 CFR 85.36(c)(2), Section 3 is a Federal statute that expressly encourages - to the maximum extent feasible - a geographic preference in the evaluation of bids or proposals. Section 3 firm - at least 30% of employees are low-income, or is 51% owned by residents, or the firm subcontracts at least 25% of the value of the work with the Section 3 business concern. MBE – a business enterprise that is 51% or more owned, controlled or actively operated by one or more persons which are classified as part of a racial or ethnic minority group WBE – a business enterprise that is 51% or more owned, controlled or operated by woman/women.

Small Business 24 CFR 200.321 Contracting with small and minority businesses, women's business enterprises, and labor surplus area firms. (a) The non-Federal entity must take all necessary affirmative steps to assure that minority businesses, women's business enterprises, and labor surplus area firms are used when possible. (b) Affirmative steps must follow this section

Federal Labor Standards and Wage Rates For construction and maintenance contracts > $2,000, PHAs must pay workers applicable wages per established classifications of work Davis-Bacon wages for construction work via IFB PHAs must post wages in job site, interview employees and review certified payrolls HUD-determined wages for routine and non-routine maintenance work PHAs must post wages in public places and interview employees, as applicable Davis-Bacon Wages: www.wdol.gov Service contracts are exempt: extermination, security guard services, dumpster/trash pickup, alarm systems, routine servicing and testing of HVAC; inspections of units/bldgs., copier/office equipment maintenance, vehicle service and repairs, etc. Interviews (HUD-11) ensures that work performed and salaries paid to workers are consistent with job classifications reported and wages reported in the payrolls.

Procurement Information: Copy of Procurement Handbook 7460.8 REV 2: www.hud.gov/offices/adm/hudclips/index.cfm Public Housing internet web page: www.hud.gov/offices/pih/index.cfm Regulatory references: List of debarred entities from doing business with the Federal Government LDP: www.hud.gov/enforce GSA: www.epls.gov Wage Rates: www.wdol.gov List acceptable sureties for the issuance of Performance & Payment Bonds: www.fms.treas.gov/c570

Where to Get WI Information HUD Milwaukee Field Office Suite 950 310 West Wisconsin Milwaukee WI 53403-2289 Larry Wood 414-935-6739 (For Now) 9/18/2018 HUD Milwaukee Field Office