Tiffany R. Winters, Esq. Brustein & Manasevit, PLLC Fall Forum 2014 Brustein & Manasevit, PLLC Micro Purchases, Sole Sourcing and Property Management Changes

Procurement Applies to Contracts! UGG (Contracts v. Grants) Brustein & Manasevit, PLLC2

Procurement Standards UGG Still provides flexibility for States; all other nonfederal entities follow policies and procedures under Section UGG All nonfederal entities must have documented procurement procedures which reflect applicable Federal, State, and local laws and regulations. Brustein & Manasevit, PLLC 3

SEPARATE PROCEDURES WON’T WORK. 4

The Steps 1. What do you need? 2. How can you buy it? 3. What do you have to do once you have it? Brustein & Manasevit, PLLC5

Types of Property Capital assets Computing devices Equipment Special purpose equipment Intangible property Property Real Property Supplies Brustein & Manasevit, PLLC6

Property Classifications (cont.) UGG Capital assets Tangible or intangible assets use in operations having a useful life of more than one year… Includes: Land, buildings, equipment, intellectual property, software, construction, etc. UGG Computing devices Machines used to acquire, store, analyze, process, public data and other information electronically. Includes accessories for printing, transmitting and receiving or storing electronic information. Brustein & Manasevit, PLLC 7

Property Classifications (cont.) UGG Equipment Tangible, personal property, having a useful life of more than one year and a per-unit acquisition cost of the lesser of the two: The capitalization level established by the non-Federal entity for financial statement purposes, or $5,000 UGG Special Purpose Equipment Equipment which is used only for research, medical, scientific or other technical activities. Includes: x-ray machines, surgical instruments, microscopes, etc. Brustein & Manasevit, PLLC 8

Property Classifications (cont.) UGG Intangible Property Property having no physical existence, such as trademarks, copyrights, patents, etc. See also UGG UGG Property Real property or personal property. Brustein & Manasevit, PLLC 9

Property Classifications (cont.) UGG Personal Property Property other than real property. May be tangible or intangible. UGG Real Property Land and land improvements, structures and appurtenances thereto, but excludes moveable machinery and equipment. See also UGG Brustein & Manasevit, PLLC 10

Property Classifications (cont.) UGG Supplies Anything that is not equipment is considered supplies. A computing device is a supply if the acquisition cost is less than $5000 regardless of the length of its useful life. Brustein & Manasevit, PLLC 11

What if I don’t know whether it’s allowable? UGG Prior Written Approval In order to avoid subsequent disallowance: – Non-Federal entity may seek prior written approval of cognizant agency (for indirect cost rate) or Federal awarding agency in advance of the incurrence of special or unusual costs Brustein & Manasevit, PLLC12

PURCHASING/ PROCUREMENT Brustein & Manasevit, PLLC13

Open Competition UGG (a) All procurement transactions must be conducted with full and open competition. – Must have protest procedures to handle disputes To eliminate unfair advantage, contractors that develop or draft specifications, requirements, statement of work, and invitations for bids or RFPs must be excluded from competing for such procurements. Brustein & Manasevit, PLLC 14

Open Competition (cont.) UGG (a) Situations that restrict competition: Unreasonable requirements on vendors to qualify to do business Requiring unnecessary experience or excessive bonding Noncompetitive pricing practices Noncompetitive awards to consultants on retainer Organizational conflicts of interest Specifying a brand name Any arbitrary action in the procurement process Brustein & Manasevit, PLLC 15

Open Competition (cont.) UGG (b) No In-State or Local Preferences. Must conduct procurements in a matter that prohibits the use of statutorily or administratively imposed state or local geographical preferences in the evaluation of bids or proposals, except where applicable Federal statutes expressly manage or encourage geographical preference. Does not preempt state licensing laws. Exception: architectural and engineering services Brustein & Manasevit, PLLC 16

But I Have a Vendor! Brustein & Manasevit, PLLC17

Sole Sourcing Should Be Limited! UGG (f) Noncompetitive Proposals – Procurement through solicitation of a proposal from only one source and may be used ONLY when one or more of the following circumstances apply: 1. The item is available only from a single source; 2. The public emergency for the requirement will not permit a delay resulting from competitive solicitation; 3. The Federal awarding agency or pass-through entity expressly authorizes noncompetitive proposals in response to written requires from nonfederal entity; or 4. After soliciting a number of sources, competition is determined inadequate. Brustein & Manasevit, PLLC 18

THERE ARE SPECIFIC TYPES OF PROCUREMENT THAT MUST BE FOLLOWED. Brustein & Manasevit, PLLC19

How to Select Your Vendor UGG Methods of Procurement Micro-purchase Small purchase procedures Competitive sealed bids Competitive proposals Noncompetitive proposals Brustein & Manasevit, PLLC 20

Contact Cost and Price UGG Must perform a cost or price analysis for costs in excess of the simplified acquisition threshold ($150,000) Cost analysis generally means evaluating the separate cost elements that make up the total price (including profit) Price analysis generally means evaluating the total price Brustein & Manasevit, PLLC 21

Micro-Purchase UGG (a) Acquisition of supplies and services under $3,000 or less. – $2,000 for acquisitions for construction subject to the Davis-Bacon Act. May be awarded without soliciting competitive quotations if nonfederal entity considers the cost reasonable. To the extent practicable must distribute micro- purchases equitably among qualified suppliers. Brustein & Manasevit, PLLC 22

Small Purchase Procedures UGG (b) Goods or services that costs less than The Simplified Acquisition Threshold ($150,000 under ) – Organization may set lower threshold Must obtain price or rate quotes from an adequate number of qualified sources “Relatively simply and informal” Brustein & Manasevit, PLLC 23

Competitive Sealed Bids UGG (c) Bids are publically solicited. Appropriate when: – A complete, adequate and realistic specification or description of good or service is available; – Two or more responsible bidders are willing and able to compete effectively for the business – Selection of vendor can be made principally based on price and it’s a firm fixed price contract. Brustein & Manasevit, PLLC 24

Competitive Sealed Bids (cont.) Sealed bids must: – Provide sufficient time to submit bids; – Include all specifications so bidder can properly respond; and – Be publicly opened at time and place announced in invitation for bids Any and all bids may be rejected if there is a sound documented reason. Award is made to the lowest responsive and responsible bidder. Brustein & Manasevit, PLLC 25

Competitive Proposals UGG (d) Award contract to responsible vendor whose proposal is most advantageous to the program, considering price and other factors. Generally used when sealed bid is not appropriate. Brustein & Manasevit, PLLC 26

Competitive Proposals (cont.) Request for proposal (RFP) must be publicized and identify all evaluation factors and their relative importance identified. Proposals must be solicited from an adequate number of sources. Must have method for evaluating proposals and selecting the vendor. Contracts must be awarded to the responsible vendor whose proposal is most advantageous to the program, considering price and other factors. Brustein & Manasevit, PLLC 27

Noncompetitive Proposals Noncompetitive contract raises “red flags” Ensure persuasive and adequate documentation to facilitate audit Brustein & Manasevit, PLLC 28

WATCH FOR CONFLICT OF INTERESTS Brustein & Manasevit, PLLC29

Conflicts of Interest UGG and (c) Must maintain written standard of conduct, including conflict of interest policy. A conflict of interest arises when any of the following has a financial or other interest in the firm selected for award: – Employee, officer or agent, – Any member of that person’s immediate family, – That person’s partner, or – An organization which employs, or is about to employ, any of the above or has a financial interest in the firm selected for award. Brustein & Manasevit, PLLC 30

Gratuities UGG (c)(1) Officers, employees, and agents of the non-Federal entity must neither solicit nor accept gratuities, favors, or anything or monetary value from contractors or parties to subcontract. However. the 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. The standards must provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the non-Federal entity. Brustein & Manasevit, PLLC31

Organizational Conflicts of Interest UGG (c)(2) If the non-federal entity has a parent, affiliate, or subsidiary organization that is not a state or local government the entity must also maintain written standards of conduct covering organization conflicts of interest! Brustein & Manasevit, PLLC 32

Duty to Report Conflicts UGG and Must disclose in writing any potential conflict in accordance with applicable Federal awarding agency policy. Must disclosure in a timely manner in writing all violations of Federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the Federal award. Brustein & Manasevit, PLLC 33

THE CONTRACTING PROCESS 34

Suspension and Debarment Brustein & Manasevit, PLLC 35 Cannot contract with vendor who has been suspended or debarred Must Review Contracts over $25,000 Appendix II(I)

Contract Administration UGG Nonfederal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of the contract Brustein & Manasevit, PLLC 36

Contract Provisions UGG Appendix II includes required provisions (many same as previous requirements) – Administrative, contractual, legal remedies – Termination for cause or convenience – Equal Employment Opportunity requirements – Davis-Bacon Act – Etc., all as applicable. Brustein & Manasevit, PLLC 37

INVENTORY Brustein & Manasevit, PLLC38

Equipment Standards UGG (b) States must use, manage and dispose of equipment acquired under a Federal award in accordance with State laws and procedures. Other non-Federal entities must follow (c) through (e). Brustein & Manasevit, PLLC 39

Equipment Standards (cont.) UGG (c) Must have adequate controls in place to account for equipment. Cannot “encumber” the property without approval. Must be used by the program or project for which it was acquired as long as needed (whether supported by Federal funds). When no longer needed may be used by other activities in accordance with priority: Activities funded by the same Federal awarding agency Activities funded by other Federal awarding agencies. Brustein & Manasevit, PLLC 40

Equipment Standards (cont.) UGG (c) Must make equipment available to use on other projects or programs provided that such use will not interfere with the work on the projects or program for which it was originally acquired. When grantee acquiring replacement equipment, the equipment to be replaced may be used as a “trade-in” without recourse to federal agency Brustein & Manasevit, PLLC 41

Inventory Management System UGG (d) Property records – Description, serial number or other ID, title info, acquisition date, cost, percent of federal participation, location, use and condition, and ultimate disposition Physical inventory – At least every two years Control system to prevent loss, damage, theft – All incident must be investigated Brustein & Manasevit, PLLC 42

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What about computing devices? UGG (b)(4) Internal Controls: Regardless of cost, grantee must maintain effective control and “safeguard all assets and assure that they are used solely for authorized purposes.” Brustein & Manasevit, PLLC 44

Disposition of Equipment UGG (e) When equipment is no longer needed, the nonfederal entity must request disposition instructions from the federal awarding agency if required by the terms of the grant. – Over $5,000 – pay federal share (explained in UGG) – Under $5,000 – no accountability Brustein & Manasevit, PLLC 45

Disposition of Supplies UGG If there is a residual inventory of unused supplies exceeding $5,000 in total aggregate value upon termination or completion of the project or program and the supplies are not needed for any other federal award, must compensate the federal government for its share. Brustein & Manasevit, PLLC 46

RECORDS Brustein & Manasevit, PLLC 47

Procurement Records UGG (i) Must maintain records sufficient to detail the history of procurement. These records will include, but are not limited to: – Rationale for method of procurement; – Selection of contract type; – Contractor selection or rejection; and – Basis for the contract price. Brustein & Manasevit, PLLC 48

Methods for Collection, Transmission and Storage of Information UGG When original records are electronic and cannot be altered, there is no need to create and retain paper copies. When original records are paper, electronic versions may be substituted through the use of duplication or other forms of electronic media provided they: – Are subject to periodic quality control reviews, – Provide reasonable safeguards against alteration; and – Remain readable. Brustein & Manasevit, PLLC 49

Good News? – COFAR FAQs: One year grace period for procurement!! – Must document whether you are in compliance with the old or new standard. Brustein & Manasevit, PLLC50

~ Legal Disclaimer ~ Brustein & Manasevit, PLLC 51 This presentation is intended solely to provide general information and does not constitute legal advice or a legal service. This presentation does not create a client-lawyer relationship with Brustein & Manasevit, PLLC and, therefore, carries none of the protections under the D.C. Rules of Professional Conduct. Attendance at this presentation, a later review of any printed or electronic materials, or any follow-up questions or communications arising out of this presentation with any attorney at Brustein & Manasevit, PLLC does not create an attorney-client relationship with Brustein & Manasevit, PLLC. You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances.