CERTIFIED PROCUREMENT PROFESSIONAL (CPP)

CERTIFIED PROCUREMENT PROFESSIONAL (CPP)
Big Sky Public Procurement Association Contract Management Certification Program

Guardians of the Public Trust
“Money is of no value; it cannot spend itself. All depends on the skill of the spender.” – Ralph Waldo Emerson We are all “guardians of the public trust” in that it is our responsibility to strive to obtain the best value for the taxpayers’ dollars. Tell me about yourselves, who are you? Who do you represent? What do you already know about procurement and what are your expectations or questions for this class? I hope that each of us will be able to learn something new today. But not just from me, I’m depending on each of you to ask questions, offer comments and share your experiences with the entire group. We each have much to offer, even those who are new to procurement have things to teach us “old timers”. I learn something new every time I administer a procurement process. Housekeeping: Restroom location, refreshments, vending machines, breaks (approx 1 per hour.), lunch (1 hr on your own), emergency evacuation exit.

THE CONSTITUTION OF THE STATE OF MONTANA
Section 8. Right of participation. The public has the right to expect governmental agencies to afford such reasonable opportunity for citizen participation in the operation of the agencies prior to the final decision as may be provided by law. Section 9. Right to know. No person shall be deprived of the right to examine documents or to observe the deliberations of all public bodies or agencies of state government and its subdivisions, except in cases in which the demand of individual privacy clearly exceeds the merits of public disclosure. Test Question #1

Objectives Understand the function of procurement
Learn where to find resources to help us Practice with some basic tools Know where to go for further information Today we will be reviewing the basics of purchasing. The Dept. of Administration has the responsibility to develop and administer a fair, legal, cost-effective procurement program. Also, part of the purpose stated in MCA is to “make as consistent as possible the procurement laws among the various jurisdictions” this is part of the purpose for being here today.

Procurement is: The acquisition of supplies or services
Includes contracts with or without cost; buying; renting; leasing; or other acquisition method. It includes all functions that pertain to the obtaining of any supply or service Description of requirements; selection and solicitation of sources; preparation and award of contract; and all phases of contract administration. It does not include the acquiring of supplies or services by gift. An organization cannot function without procurement. Our job is vital, necessary and as we’ll discover as we proceed today, much more than the “clerk” position many people perceive it to be! Test Question #2

Effective Public Procurement
Reduces costs and directly improves the quality and timeliness of services rendered by public entities. Test Question #3

For public entities, procurement is a service function, supporting programs by the acquisition of supplies and services.

For potential contractors, it is an opportunity to provide supplies and services to public entities. Sometimes there is a perception of tension between obtaining the “best value” for the organization and the “Build MT” concept. But is this reality? balance, but bottom line, our mission is not economic development See purpose of MT Procurement Act ( ) Try to write “Mt-friendly” specs, think about what elements of the specs you write might be making it difficult for Mt business to compete (e.g. past experience requirements reflect a legitimate need, issuing regional contracts instead of statewide, breaking a large project into smaller pieces; insurance issues, etc.). But in the end, best value is our mission

Procurement Resources
Montana Law/Administrative Rules Dept of Administration General Services Division Website: Montana Operations Manual (MOM) BSPPA Website: bsppa.net Policies and Procedures of Contracting Organization NIGP website: (many of the resources require membership to access.)

Procurement Ethics As employees involved in the expenditure of public funds, we are called upon to avoid even the appearance of impropriety and to conduct our business in a manner above reproach in every respect. I’m sure we all agree with this statement. But how easy is it? We encounter situations everyday that require us to make “judgment calls” – What can I say? What shouldn’t I say? What should I do? What is fair? What is right? Cover: Statement of Purpose Definitions Public Trust – Public Duty Ethical Requirements (Conflict of Interest & Disclosure) Contract Administration Team – What is their interest in the project and potential respondents? Is their a conflict? To what degree?

Ethical Do’s and Don’ts
Do be familiar with MCA and your organization’s code of ethics Don’t accept gifts and gratuities from suppliers - including lunches, clothing, etc. Do avoid the appearance of impropriety – make sure you are contacting more than one firm for drafting specifications; be impartial Do be open about information gathering, solicitation processes, etc. Test questions 8 & 11: Which of the following could be considered as a conflict of interest? Volunteer activities within the community Extensive product knowledge Personal financial investment in a supplier Previous employment in the private sector Members of the contract administration team should: Acknowledge that financial ties to the contractor’s business are acceptable after contract award. Write a code of ethics specific to the activities of the team. Avoid any conflict of interests. Refuse gifts and gratuities, unless they are offered by the approved contractor.

Ethics Resources Montana Code Annotated
Title 2, Chapter 2 – Standards of Conduct Your organization’s published code of ethics (if you don’t have one perhaps you should…) Exercise: Abigail Across the River

“When it comes to public trust, perception is reality.
Reminder… “When it comes to public trust, perception is reality. It is not enough that we do no wrong, we must also try to assure that others believe we have done no wrong.” 1998 Michael Josephson "Ethics is knowing the difference between what you have a right to do and what is the right thing to do.“ Justice Potter Stewart

Procurement Tools City/County Governments
Competitive, advertised bidding required for certain large purchases or construction contracts. Except as provided in and Title 18, chapter 2, part 5, a contract for the purchase of any vehicle, road machinery or other machinery, apparatus, appliances, equipment, or materials or supplies or for construction, repair, or maintenance in excess of $50,000 may not be entered into by a county governing body without first publishing a notice calling for bids. Exceptions – public printing and exigency.

Procurement Tools City/County Governments (cont.)
The notice must be published as provided in Subject to and except as provided in Title 18, chapter 2, part 5, every contract subject to bidding must be let to the lowest responsible bidder. allows political subdivisions to adopt any or all parts of the MT Procurement Act and the accompanying rules. – Newspaper notices: - General circulation - published once a week - in the county where action will take place - must have been in circulation for 12 months preceding award - must be published twice with at least 6 days separation State – Building construction/alteration in excess of $75,000 require newspaper publication. Test question #12

Procurement Tools State Government Total Contract Value:
The initial contract period and any options to renew. Small Purchases: Purchases under $5,000. Limited Solicitations: Purchases with a "Total Contract Value" between $5,001 and $25,000. “Total Contract Value” must be considered first to determine correct tool to be used. Small Purchases: Use technique that best meets organization’s needs. Follow prudent practices (competitive shopping) No documentation required. Limited Solicitation: purchasing tool between $5,000 & $25,000. Informal, written or oral, must be written if considering factors other than cost.

Procurement Tools Formal Bids/Proposals: Purchases over $25,000
Competitive Sealed Bids (Invitation for Bid) Competitive Sealed Proposals (Request for Proposal) Invitation for Bid (IFB): All documents, whether attached or incorporated by reference, utilized for soliciting formal, sealed bids. Award is based on cost & adherence to specs. Request for Proposal (RFP): A formal invitation to provide a solution to a problem or need. Evaluated on stated criteria: qualifications, experience, approach, etc.

Procurement Tools Cooperative Purchasing
Cost savings for local governments and school districts through volume purchasing. May use State term contracts, vehicle requisition time schedule, Central Stores program, and certain commodities needed by MDT. Must sign a Cooperative Purchasing Agreement prior to utilizing state contracts. By law, Montana's political subdivisions may purchase supplies and services in cooperation with the State of Montana. Section , MCA, permits local governments and school districts to take advantage of the cost savings realized by the State's volume purchasing. Test question #5

Procurement Tools MOM 1-0714.00, page 45
Prequalification of Vendors: allowed by ARM Request for Information: Used to gain preliminary information about market, availability and/or specifications for a particular service or item. Cannot be used as a selection method. Can be informal or formal. Prequalification: must be approved by GSD, allowed under the following circumstances: - need exists to limit solicitation to vendors meeting statutory or licensing requirements; or - need exists to minimize time necessary to verify vendor qualifications which otherwise would jeopardize the timely award of contracts. Must provide documentation for the process reflecting capability of selected vendor to adequately perform the contract. The criteria may include: technical expertise, experience, past performance, or other criteria relevant to a particular procurement. Request for Information: used to informally solicit information, may not be used as a selection method to procure a service or commodity. Test question #13

Procurement Tools Direct Negotiation
The formal solicitation process did not provide a responsible or responsive bidder/offeror. Requires SPB approval. When a valid solicitation results in no responsible or responsive bidders or offerors, the procurement officer may: cancel and reissue the solicitation, attempting to increase the number of potential vendors and/or modify specifications to enhance vendor participation, or; Direct Negotiation: if a second procurement would also be unsuccessful and SPB approves, may directly negotiate with a vendor or vendors as to price, delivery and terms. Determination must be in writing, state basis for direct negotiation and selection of vendor, and must be approved by SPB. Test question # 16

Procurement Tools Public Auctions
MCA in lieu of bids city and county governments may purchase vehicles, road machinery or other machinery, apparatus, appliances, equipment, or materials or supplies up to $60,000 at public auctions. Test question #18

Sole Source Procurement
Sole source procedures do not apply to purchases under $5,000 Item or service is available from only one known capable vendor. “Sole source" means an award for a supply or service to the only known capable vendor, (unique nature of the requirement, the vendor, or market conditions). Because this acquisition takes place without the benefit of competition, organizations should be extremely reluctant to pursue this procurement method. Sole source distinguishes itself from “sole brand” in that only one vendor is available to provide the product. With a sole brand request, several vendors are available to distribute a specific brand, therefore competition is required if applicable.

Sole Source Procurement (cont.)
Circumstances might include: Compatibility of current services or equipment, accessories, or replacement parts; No existing equivalent product; or Only one source is acceptable or suitable. Justification required Written justification is required stating why the purchase is a sole source. The justification must be approved by an appropriate organization authority and placed within the permanent file. File documentation also requires a signed, dated quote from the vendor. The procurement officer may conduct negotiations, as appropriate, as to price, delivery, and terms with the sole source vendor to secure the best buy for the organization. The purchase order or contract must indicate the terms, specifications and conditions reached through negotiations. Test question # 27

Sole Source Procurement (cont.)
Organization must maintain records for all sole source purchases. Does not apply to: Professional licenses; Dues to associations; Renewal of software license agreements; or Purchase or renewal of maintenance agreements for software or hardware. Section , MCA, requires organizations to maintain records for all sole source purchases to include: each contractor's name; the amount and type of each contract; and a listing of the supplies or services procured under each contract.

Sole Brand Procurement
Sole brand distinguishes itself from “sole source” in that while there may be only one acceptable manufacturer, several distributors are available, therefore competition is required. Sole brand justification must be provided in writing and stated in the solicitation document. Test question # 22

Exigency Procurement 7-5-2304 and 18-4-133 MCA
An exigency procurement must be limited to those supplies and services necessary to meet the exigency. The determination as to whether a procurement is an exigency must be made by the procuring organization. The determination must be in writing and must state the basis for an exigency procurement and for the selection of the particular vendor. Under very limited circumstances, an organization may need the flexibility to make an "exigency" purchase. Exigency purchases are typically made outside of the normal purchasing procedures due to a sudden and unexpected happening or unforeseen occurrence or condition which requires immediate action. It should never include a situation created by poor planning on the part of the using organization. Need is fundamental to justifying an exigency procurement -- the procedure can not be used to satisfy personal preferences or convenience on the part of the organization, for preventing funds from reverting at the end of the fiscal year, or for any reason that seeks to circumvent regular procurement methods. Examples: Freezer at the State Hospital goes out dam is going to break prison guard tower blown up during riot rock slide blocking interstate highway

Exigency Procurement (cont.)
The purchase procedure used shall be selected to assure that the required supplies or services are procured in time to meet the exigency. However, such competition as is practicable shall be obtained. Record of each exigency procurement must contain: The vendor’s name; Amount and type of contract; List of supplies and services purchased under the contract; and Written documentation justifying the exigency procurement and the basis for the selection of a particular vendor. Start collecting documentation as soon as need is identified and continue throughout the project. The file is completed after the project is completed and all invoices have been received. Test question #6

Limited Solicitations
Purchases with a "Total Contract Value" between $5,001 and $25,000 (State) Can be used for both supplies and services. Does not apply to “controlled items”. Requires three written or oral quotations. Online auctions can be used except for new or used vehicles. For procuring supplies or services with a total contract value between $5,001 and $25,000. Quotes can be oral, written, faxed, or ed. On-line auctions: - Must be approved & reviewed by agency procurement officer - 2 quotes from viable sources must be obtained first, auction price must not exceed the lowest - Online price must include all fees, shipping & handling. - Terms of purchase must include a right to return. Exercise – As a group, let’s try to put together a limited solicitation from this request. How would you approach putting this together? What form would you use? What’s missing? Answer Sheet – The items high-lighted are my comments. Test question #28

Limited Solicitations (cont.)
Must be documented using the “Limited Solicitation” form (State agencies). Must be awarded to lowest acceptable quote if cost is the only consideration. If other criteria will be considered in award decision, the vendors must be provided with all criteria and their relative importance. (This method must be done in writing.) Documentation must include vendors contacted, quotes received, complete product description and/or service requirements, and all award conditions (e.g. delivery requirements, sole brand, and packaging). Documentation is very important – Governor’s Office news articles. A list of common questions and answers can be found on page 33 of the MOM Manual. Test questions # 20 & 25

Building IFB’s and RFP’s MOM 1-0719.00, page 56
Invitation for Bid (IFB) Defined specifications Award made to lowest responsive and responsible bidder Request for Proposal (RFP) Problem/solution specifications Evaluated on stated criteria (cost being only one) Proposal responses may be modified A request for service or commodity is received, specs are complete, authorization has been secured (IT, trade-ins, printing/mailing equipment, records mgmt equip & systems, filing systems, used equipment). What procurement method is best for this project? IFB: direct, straight-forward; fairly quick solution. RFP: allows greater flexibility; offers both contracting organizations and offerors an opportunity to modify their requests or offers as a greater understanding of the organization’s need is gained; multi-step procedure requiring a significantly greater amount of time and effort. Things to consider: 1. the contract needs to be other than a fixed-price type; 2. oral or written discussions may need to be conducted with offerors concerning the technical and price aspects of their proposals; 3. offerors may need to be afforded the opportunity to revise their proposals, including prices; 4. award may need to be based upon a comparative evaluation of differing price, quality, and contractual factors to determine the most advantageous offering; or 5. price will only be one of several criteria considered in determining an award. Once the method has been chosen, we are ready to build the solicitation. Test questions # 4, 10, & 36

Invitation for Bid (IFB)
Section 1: General Requirements Provides a brief overview of the project Contact for all communications Bidders are responsible for reviewing the document Pre-Bid Conference (optional) When/where are bids due Due date/time/location: specific time & zone. Our location says “receptionist’s desk”.

Invitation for Bid (cont.)
Section 2: Delivery Requirements Requested or required delivery date Shipping information Delivery locations Shipping & billing: Where does it go? FOB point. Who gets the bill? Test question # 29

Section 3: Special Terms and Conditions Contract requirements Special conditions Acceptance testing/criteria Mandatory requirements (i.e. proof of licenses, previous related experience, etc.) Special terms/conditions: insurance requirements, laws they need to be aware of, etc. Test question # 7

Section 4: Specifications and Pricing Schedule Fixed pricing or adjustable? Award basis Detailed specifications Award: Item-by-item, All-or-none, Multiple award. Specs: describe the item or service.

Sent to adequate number of viable bidders Public Notice Counties must publish a newspaper notice per , MCA Viable bidder is someone you can reasonably expect to provide the item or supply. Example: you wouldn’t go to a car dealer to buy tires. Adequate number to ensure competition. Use SPB’s registered vendor list. Public Notice Requirements: Posted electronically, facsimile notification; legal ads. : must be of general circulation, published once per week, in county where action will take place.

Opening & Awarding an IFB MOM 1-0722.00, page 68
Must be received at the location listed by the date/time specified Publicly opened Prepare a bid tabulation sheet Receiving Bids: when they are received must be time stamped & stored by someone other than the procurement official. Fax bids must be transmitted and completely received prior to the time set. Late is late, period. Should you accept fax bids? If not, may need to modify boilerplate. Electronic transmissions are not accepted at this time – sent to procurement official (no “lock box” on our system; security verification (not tampered with); complete transmission; etc. Public Opening: bid prices publicly announced; must be an ADA accessible facility. Don’t make an award announcement at this time, use “apparent low” or something similar. Bid tabulation sheet: Name of vendor; Unit price of each item bid; Brand/model bid; Notations if bidding other than "as specified"; alternate bids; exceptions; preference notations, if applicable. Test questions # 33 & 40

Opening & Awarding an IFB (cont.)
Determine if low bidder is “responsive” & “responsible” Apply Preferences Blind Vendor Preference, , MCA Reciprocal Preference, , MCA County Resident, , MCA Send a Request for Documents Notice (if necessary) Issue a Purchase Order (or contract) Responsive bidder – did they give us everything we asked for (i.e. complete literature, samples, etc.)? Responsible bidder – Are they able to perform as specified (i.e. staff and/or equipment is appropriate in size and function, able to meet delivery deadlines, etc.)? Alternate/Substitute Bids: considered only if the vendor is the lowest responsible vendor and their primary bid meets the specifications. Blind Vendor Preference: Section , MCA, awards a 3% preference to blind persons whenever state property is proposed to be made available to private persons for use as a vending facility, see ARM Reciprocal Preference: If the low bidder would receive a percent preference in its resident state, that percent is added to their bid for award purposes and only if a resident bidder would benefit. Used in IFB’s only, no federal funds. Note on tab sheet. County Resident: If there are no our-of-state bidders, can award to county resident that is no more than $500 or 3% higher (whichever is less) than non-county resident. If out-of-state bidder(s) apply Tie Bids: the discretion of the division or the head of a purchasing agency will be used to resolve such bids, except that a bidder offering American-made products or supplies must be given preference. ARM (12); , MCA. Note on tab sheet. Mistakes in bids: procurement officer may allow correction of minor mistakes if the mistake is clearly not attributed to an error in judgment, and the mistake and the intended correct bid or offer is clearly evident on the form of the document. Examples: typographical errors; errors in extending unit prices; transposition errors; arithmetical errors; and signature omitted. After all documents have been collected, issue a PO.

Request for Proposal (RFP)
Cover Page Template Instructions Table of Contents Instructions to Offerors Schedule of Events The RFP Template is in your packets. This will be a quick review just to familiarize you with the form and process. SPB also offers a full-day RFP class. Explain how RFPs are different for MT. Schedule of Events: Give guideline for setting dates. - Issue - Pre-Proposal Conference (questions before) - Written Questions - Written Answers - Due Date - Presentation/Interview - Selection Notification / Contract Award

Request for Proposal (cont.)
Section 1: Project Overview and Instructions Provides a brief overview of project, expected contract term, and who the contact person is. Tells the potential offerors when and where to send questions, and attend pre-proposal conference. Instructions on date, time & location for submitting a response and the number of copies required.

Section 2: RFP Standard Information Notifies the potential offerors of the organization’s rules regarding confidential materials. Describes the evaluation process. Test question #34

Section 3: Scope of Project Core of the RFP. This detailed overview of the purpose of the project should include the description of the contractor’s duties and responsibilities. Section 4: Offeror Qualifications Sets out what qualifications the offeror must possess to fulfill the needs of the project. Section 3 - Written by program personnel; Details project, background, problem, desired outcome; Contractor responsibilities / organization’s responsibilities

Section 5: Cost Proposal Includes information on how the costs are to be presented for this proposal. Section 6: Evaluation Criteria Includes those factors which will be used to appraise and measure an offeror’s response to the RFP.

Appendix A: Standard Terms & Conditions Appendix B: Standard Contract Appendix C: RFP Response Form (optional) T&C’s = Boilerplate (Different for IT than services) Standard contract – gives offerors a chance to review and tell you what terms may preclude them from bidding, increase costs, etc. Organizations should use the standard contract that has been approved by their legal department (if applicable). If SPB is doing the procurement, we will defer to your sample contract.

Opening & Awarding RFP’s MOM 1-0723.00, page 74
RFP’s are not publicly opened Procurement Officer must first review them for confidential information Verify Trade Secret Affidavit is included Verify that all information claimed as confidential is valid as such by Montana law. Copies are given to evaluation committee Receiving procedures same as IFB, not publicly opened. After confidential info has been removed from public copy, they are available for public inspection. Proposal responses can be evaluated by a single individual or by committee. A committee can evaluate them individually and send the results to a chairperson to compile, or have a meeting to discuss (must be public).

Opening & Awarding RFP’s (cont.)
Evaluation Usually done by committee, but can be an individual Conflict of Interest Meetings are public Post the Meeting – 72 hours ADA accessible location All members of the public are welcome Must allow for public comment for any matter not on the agenda that is within the jurisdiction of the agency/organization. Quorum of committee members required Keep Minutes of the Meeting Test questions 19 & 43

What if the committee has questions? Send out written clarification questions Conduct oral interviews and/or demonstrations Site visits Seek best and final offers

Finalize the Evaluation Submit to procurement officer: Completed scoring matrix with scoring justifications Committee meeting minutes Committee recommendation

Send Notices Request for Documents Selection Notice Post to Website Contract Negotiation / Execution If the procurement official agrees with the conclusion they will issue a Request for Documents Notice & “Sorry Charlie” letters. Contract negotiation: finalize services provided and payment schedules. Be careful – changes must be agreed upon by both parties and must be fair to other offerors; contract language must match RFP & boilerplate unless changes were agreed to by both parties and approved by legal unit. Reference RFP, addenda, response, clarifications in contract. Renewals or subsequent changes should be accomplished by way of contract amendment, don’t change contract #’s from year to year.

Elements of a Contract Offer and Acceptance Consideration
Mutuality of Obligation Legality of Purpose Competency of Parties Offer and Acceptance: An offer to sell a thing or provide a service has been made by one party and the other party has accepted the offer. Consideration: Money or some other form of benefit has been agreed upon. Mutuality of Obligation: Both parties understand and agree on what will be done by whom. Legality of Purpose: The contract must be for a legal activity/transaction. Competency of Parties: Both parties must be of sound mind and understanding and must have sufficient authority. Test question #30

Types of Contracts Purchase Orders Dually Signed Contracts
(White paper) Information Technology Term Contracts Construction Memorandum of Agreement Purchase Order: Single signature document, usually resulting from an IFB Dually Signed: Both parties sign agreement to the negotiated terms. Information Technology: Special terms and conditions – detailed SOW. Term Contracts: Cooperative contracts. Construction: Special terms and conditions; spec books; CPS; etc. Memorandum of Agreement: Used between governmental entities; communities; individuals. Any instrument that contains all the elements of a contract is a contract (even napkins)

Pricing Types Fixed Price Cost Reimbursement Other Pricing Types
Contractor is responsible for managing costs Payment is for end result of the contract Cost Reimbursement Contractor is reimbursed for all allowable and allocable costs Total amount is not fixed at outset of contract Other Pricing Types Can the state enter into other types of contracts? Can other organizations? Types of contracts. Any type of contract that will promote the best interests of the state may be used. Approval of accounting system. Except with respect to firm fixed-price contracts, no contract type may be used unless it has been determined in writing by the department that: (1) the proposed contractor's accounting system will permit timely development of all necessary cost data in the form required by the specific contract type contemplated; and (2) the proposed contractor's accounting system is adequate to allocate costs in accordance with generally accepted accounting principles.

Issuing a Contract/Purchase Order
Formalizes a purchase transaction Defines the agreement between the parties. Include all pertinent information Description of item or service Quantity Prices Payment terms Discounts (if applicable) Dates of performance MOM , page 72 Test question # 37

File Management Files must be complete enough to facilitate auditing and should include: Requisition from ordering entity Solicitation with specifications and addenda Public will have access – need to be able to follow what happened. Keep all pertinent information – tracking the process start to finish, but be careful about extraneous, unnecessary or inappropriate materials. Caution and educate your personnel that all information in the file is public, in case of litigation everything can be discovered including old, deleted messages.

File Management (cont.)
List of vendors and advertised notice All bid / proposal responses Tabulation / Offeror Registry All pertinent correspondence Offeror Registry is a listing of all responding offerors. Sometimes RFP’s responses are so numerous and/or large that they are stored in a box or multiple expandable files. I like to have a list to check against to make sure all responses are accounted for. Correspondence: IFB – warranty or delivery info, test results, award approval, etc. RFP - clarifications, BAFO, request for docs letter, “sorry Charlie” letters.

Explanation if awarded to other than low bidder (IFB) Evaluation score sheets, minutes, attendance sheets, committee recommendation (RFP)

Evidence of insurance documents and bonds Signed purchase order or contract Evidence of insurance: Can be the documents themselves or note of receipt. They may be filed elsewhere for monitoring purposes. Bonds: Negotiable documents (CD’s, cashier checks, cash) need to be secured - deposited with accounting or treasurer. PO or Contract: We keep a copy of PO’s and contracts in a separate file as well because the bid files are moved to storage every year but contacts may run 7 years. Amendments and on-going correspondence is kept in the contract file until project/contract is complete, then the entire file is placed with the bid.

Forming & Writing Specifications MOM 1-0713.00, page 41
Description of supply or service being sought. Purpose is not solely to obtain the least expensive items, but the desired quality at the most competitive price.

Forming & Writing Specifications (cont.)
Should do four things: Identify Minimum Requirements Allow for Competitive Bids List Evaluation Criteria and Test Methods Provide for a Fair Award at Lowest Possible Cost Identify Minimum Requirements needed to meet needs. Does not mean substandard, simply those characteristics required to be considered for award. Include every feature that is needed. May describe the physical or functional characteristics, or the nature of the supply or service, or may include requirements for inspecting, testing or preparing item for delivery. Allow for Competitive Bids. Should promote overall economy for the purposes intended, encourage competition among vendors. Competition is the best way to ensure low prices and equitable treatment of vendors. Generally specs based on performance requirements allow for more competition than specs based on design requirements. List Evaluation Criteria and Test Methods. Should state how the supply or service will be evaluated for award. If products will be compared, each vendor needs to know how those comparisons will be made. If an organization is basing an evaluation on physical tests, the testing methods must be stated. If making a comparison of manufacturers' literature describing the requested products, that must be so stated, and vendors must have a chance to provide that information with their bid. Provide for a Fair Award at the Lowest Possible Cost. Specifications should ensure we get supplies needed at reasonable prices, and that award will be made fairly. To perform these functions, specs should be simple and clear, identifying exactly what is needed. Test question # 14

Communicate! Communication is MOST important. All persons involved must be sure that they are being clear about their expectations/desires. Say what you mean and mean what you say – you’ll be stuck with it.

How to Write Specifications
Name of Supply or Service Purpose/Use for Supply or Service Description of Supply or Service / Desired Outcome List Special Requirements A specification should be written from the general to the specific. Name of Supply or Service: Title. List name of the supply or service sought: i.e."compact sedan," or "photocopier maintenance." Do not list a specific brand name in the title. Purpose/Use for Supply or Service: State purpose for which the item will be used- i.e. lawn mower spec: "suitable for daily use (4-6 hours) on a large grounds complex." Vendors should know the intended use to decide what type of product to bid. Description of Supply or Service: List all critical features necessary to meet requirements. Use performance requirements if interested in end product. Use design specs, (how a product is engineered), if interested in how end result will be achieved, or if there is a specific physical requirement. Be aware- it is difficult to draft design specs without being restrictive and limiting competition. Combination of performance and design requirements is often the most ideal specification. Identify minimum requirements making sure it is a product that will satisfy the need. Use brand name-or-equal to identify products of appropriate quality level, can list several brand names and model numbers. This does not indicate a restriction to or acceptance of only those brands, be careful to not imply that only certain brand name(s) are acceptable. Conduct product research to locate additional brands which may meet the needs. If limited to a sole brand, written justification must be provided using SPB's "Sole Brand Justification Form" available on our website. (ARM ) A statement of sole brand designation must be stated in the bid document, reason should be included. List Special Requirements: Service, parts, training, warranty (how long, what does it cover, who to contact), etc. Test question # 44

How to Write Specifications (cont.)
Unusual Conditions Delivery Date Delivery Location Point of Contact For answering questions Receiving Procedures Unusual Conditions: Describe - installation, field test, fiscal year funding source, etc. Delivery Date: Requested or required. Not specified generally 30 days after PO issuance. Delivery Location: Be specific about location and any special requirements. State supplies be shipped F.O.B. destination. Don’t use PO Box address, use street address. Contact Person: List name, address, and phone number of contact person. (Explain difference between IFB/RFP contact person and PO contact.) Receiving Procedures: If necessary, describe receiving procedures (testing, sampling, etc. that will be performed to determine acceptability). Test question # 35

How to Write Scope of Work
Specific Questions to Ask/Answer Why do you need this service? What work is to be performed? Volumes, dimensions, sizes, number, etc. Type of work (repairs, construction, sampling, electrical, engineering). What is the final product we expect when work is completed? or What do you expect as an outcome of the project? Scope of Work / Scope of Project are different terms that basically mean the same thing. 1. Explain you reason/need for the service or item. This will provide an overview of the project. Explain all items in as much detail as possible.

How to Write Scope of Work (cont.)
Who is the point of contact? Who will do the work? Will the contracting entity take responsibility for some parts of the project (preparation, permits, traffic control, etc.)? What is the contractor going to provide? Manpower, equipment, tools, consumables, supplies, materials, fuel, etc. What is the contracting entity going to provide?

Where is the work going to be performed? Is there more than one location? What hours or days are we requiring work to be performed? How do you want the work accomplished? Task Order, specific order of events, etc. Are there any unusual conditions? Special drawings, studies, or reports that need to be provided – either to the contractor of from them? Are there special laws to follow or considerations that need to be made? (EPA, OSHA, asbestos, hazmat, etc.)

When do we want the work performed or completed? Is there more than one deadline date? If reports are required, when do you want them, what format, etc. How will you administer the contract? How will you know when the work is done? What will be the method of acceptance? 15. Will you be inspecting the project? When and how often? Are there testing requirements? 17. Provide the steps that you will follow when accepting the work, prior to payment.

How do you want costs presented? Total Project Cost Task Order Basis (hourly rates) How do you want to be invoiced? Is there a maximum amount you cannot exceed?

Beware of Specification Hazards!
Avoid Unnecessarily Restrictive Specifications Good procurement practice and Montana law require that specifications not be unduly restrictive (Mont. Code Ann. § ). Restrictive specifications only serve to limit competition and in the end, do not promote the overall economy for the purposes intended. Thoughtfully review specifications before beginning a procurement process.

Beware of Specification Hazards (cont.)
Things to consider are: Who developed the specifications? Did they come from a vendor? When was the last time they were updated?

Beware of Specification Hazards (cont.)
Do they always seem to lead to the same brand? Are the requirements still true? Are they drawn from a professional standard? Are they getting the best product? Still True? Do they state requirements that formerly guaranteed a certain level of performance or life cycle prediction that are no longer true? Professional standard? Nationally recognized? Best product or costing money?

Beware of Specification Hazards (cont)
Are the requirements necessary? Is there a reason for eliminating certain products? Are the specifications too narrow? Necessary? Are there requirements that are not necessary and that lead to a purchase of one brand over another for no real reason? Narrow - Are the specifications so narrow that you will be stuck accepting a product that doesn't meet your needs? The harsh reality is that most of the time, you will have to accept the item that your specifications called for, even if something "better" comes along. Time spent researching specifications at the front end of a solicitation is time that is very well spent in ensuring you will be getting the best possible product for your agency organization--and avoiding any allegations of unduly restrictive specifications.

Supporting Statements & Requirements
Use of Standard Statements What are they? Common policy or procedure statements Used in bids, proposals and contracts What is their purpose? Tells vendors the requirements for conducting business with the organization. Alerts them to special conditions or requirements Where do I find them? MOM , page 46

Indemnity & Insurance Requirements MOM 1-0716.00, page 47
Used in solicitations and contracts/PO as appropriate. Purpose of Indemnity Agreements To allocate risk among parties to a contract, and To provide a contractual right to pursue recovery. Hold Harmless/Indemnification in boilerplate: “Contractor agrees to protect, defend & save the organization… harmless from… claims… arising out of services performed or omissions of services… resulting from the acts or omissions of the contractor… except sole negligence of the organization” is intermediate form. Broad form includes the organization’s sole negligence (best type, hard to get). Limited form includes sole negligence of the Contractor only. Test question # 17 and 38

Indemnity & Insurance Requirements (cont.)
Objectives of Insurance Requirements Fairly allocate risk, and Clearly delineate the types and levels of coverage. Indemnity & Insurance go hand-in-hand. Indemnity defines responsibility and sets up the insurance requirements, insurance means little without indemnity. If levels of coverage are too high the contractor may object or increases cost of contract. If levels of coverage are too low provides inadequate protection, significant loss exposure. Requirements should reflect industry practices and the organization’s philosophy. Use current terminology.

Insurance Requirements
Used in bids, proposals and contracts to transfer risk of loss from the organization to the contractor. Five types of insurance that may be required are: Commercial General Liability Automobile Professional Liability Property Workers’ Compensation MOM , page 47 Be careful when you use the Insurance and Workers’ Comp statements, there are two for each – 1 for bid, 1 for contract/PO. Commercial General Liability Insurance: should be required when contractors perform work on organization’s premises or property, other than the routine delivery of supplies. This coverage should be required where supplies or services are procured that may seriously damage information technology networks or other important, critical, or complex systems or processes and thereby damage or create liability for the organization. Automobile Insurance: should be required if the contractor will be transporting employees, guests, clients, or products as part of the contract. Professional Liability Insurance: Professional services carry this type of insurance – medical professions, lawyers, engineers, architects. Covers errors and omissions. Should be required for anyone who gives advice or provides services on which others have reason to rely and may be subject to legal action if the advice or service proves faulty. Should be required for software/hardware development and possibly other IT services. Property Insurance: should be required in any contract that involves renovation or construction of buildings or lease of buildings owned by others. Workers' Compensation insurance or an exemption: should be required in all service contracts. The types of insurance required should be tailored to the project. Test question #38

Insurance Requirements (cont.)
Recommended limits: Low Risk CGL & PL - $300,000/occurrence & $600,000/aggregate Auto - $500,000 per person (personal injury) / $1,000,000 per accident occurrence (personal injury) / $100,000 per accident occurrence (property damage) OR combined single limits of $1,000,000 per occurrence Moderate Risk CGL & PL - $500,000 / $1,000,000 Auto - $500,000 / $1,000,000 / $100,000 High Risk CGL & PL - $1,000,000 / $2,000,000 Property – Replacement Cost Workers’ Compensation – Statutorily Defined Insurance limits are based on the contract risk, not on the contract amount. The auto recommendations have been changed from the per occurrence/aggregate coverage to split limits, based on industry standards. It is a static level for all risk levels. Our forms have been updated, but the MOM has not been yet. Test question # 42

General Insurance Provisions Evidence of Insurance Certificates with specified attachments & amendments Primary Coverage Acceptability of Insurer Deductibles & Retentions Additional Insured Status Notice of Cancellation General Insurance Provisions pertain to all types of insurance. Evidence of Insurance is usually provided on an “Accord form”, tells what type of insurance, amounts, deductibles, coverage dates, etc. Doesn’t tell us anything about the policy and what exceptions may be written into it, not worth paper it’s written on. Always reserve the right to request a copy of the policy. Attachments & amendments: additional insured endorsement, exceptions for hazardous materials or acts of terrorism/war.

Insurance Concerns CGL excludes supervisory acts of the organization Contractor purchases the wrong coverage Coverage is in excess of the organization’s “Claims made” vs. “Occurrence” coverage Fails to name the organization as additional insured Coverage lapses Wrong coverage: buys property or fire & theft instead of CGL. Coverage is in excess of the organization’s contradicts our “primary coverage” statement. Test question # 45

Compliance with Workers’ Compensation Act Compliance with Workers' Compensation Act: required by State law – all workers must be covered, independent contractors can obtain exemption from DLI, corporate officers are exempt by law (get copy of incorporation statement issued by SOS). Should be required in all service contracts. Make sure that the coverage for out-of-state companies is valid in Montana. Accord form usually notes which states it is valid in, reciprocal coverage agreements between most neighboring states. Texas is the only state I know of that does not have a Workers’ Comp law, so companies from there may not have coverage. Have to evaluate risk to determine if require them to purchase coverage or just sign a statement of responsibility. Call us or RMTD if you have any questions about what insurance to require or what limits to use. Model language and guidelines can be found on SPB and Risk Management/Tort Defense Division’s websites.

Supporting Statements & Requirements
Contractor Registration Construction contractors must be registered with DLI ( , MCA) Required for all construction-like projects over $2,500 (combined value of labor and materials) Must confirm prior to contract award Questions? Call DLI at Projects utilizing federal funds may require registration prior to submitting a bid. Always be sure to check federal fund requirements before issuing a procurement, rules can be quite different. Test question # 15

Supporting Statements & Requirements (cont.)
Public Contractor’s Gross Receipts Tax “Public Construction Work” over $5,000 must withhold 1% ( , MCA) Applies to all public contracts at every level of jurisdiction Notification forms must be sent to Department of Revenue and the contractor MOM , page 64 Public Contractor’s Gross Receipts Tax (Contractor Withholding). Pursuant to the DOR administrative rules, the term “construction” should be broadly construed. "Public construction work" includes any work requiring the installation, addition, placement, replacement, or removal of any equipment, parts, structures, or materials exceeding $5,000 whether or not such contracts require performance of service, maintenance, repair, or any other type of work in addition to, or as part of, the work as stated above. (See ARM ) Therefore, this tax applies to anything related to construction, repair, maintenance, etc. However, it does NOT apply to “services” associated with maintaining buildings, such as janitorial services or elevator maintenance (unless it involves structural changes to accommodate new equipment). It does apply to things like carpet installation (if over $5,000), carpet removal (because it typically goes with some sort of improvement/replacement of floor treatment), retrofit of heating, ventilation, and air conditioning systems, removal of phone cables (if it involves conduit removal or wall repair, but not if it just involves pulling wires through conduit), installation of telephone or IT cable (unless it is just an upgrade through existing conduit), etc. If you need assistance in determining whether the contractor withholding tax applies, contact the Department of Revenue at (406) The required forms and questions/answers are available on SPB website. Questions & answers can also be found in the MOM Manual, page 64. Test questions # 9, 31 & 46

Prevailing Wage Required for all “public works contracts” over $25,000 Includes construction and non-construction services Rates must be included in the solicitation and the contract The Department of Labor and Industry must be notified when the project is complete Failure to include this language could result in penalties being assessed against the issuing entity Provision requiring payment of standard prevailing wages, including fringe benefits, must be included in bid document and resulting contract. (Mont. Code Ann. § ) Must include rates for particular job discipline or if project includes many disciplines, include entire book (Heavy Hwy Const., Bldg Const., or Non-const. services). Listing DLI’s website is unacceptable, penalties for erroneous or omitted rates/publications are very high and belong to the issuing organization. “Public works” means all projects using public dollars, except management, office, clerical or licensed professionals (barbers, accountants, lawyers, medical professionals, etc.). The terms “construction” and “non-construction” are defined in section , MCA. Nonconstruction includes: maintenance of publicly owned buildings and facilities, including public highways, roads, streets, and alleys; custodial or security services for publicly owned buildings and facilities; grounds maintenance for publicly owned property; operation of public drinking water supply, waste collection, and waste disposal systems; law enforcement, including janitors and prison guards; fire protection; public or school transportation driving; nursing, nurse's aid services, and medical laboratory technician services; material and mail handling; food service and cooking; motor vehicle and construction equipment repair and servicing; and appliance and office machine repair and servicing. Requires DLI be notified when project is accepted. For assistance concerning prevailing wages contact SPB or DLI at Test questions # 21, 26, 39, & 47

Special Circumstances Organization special requirements Buy “Green”, use “Energy Star” Program Text of RFP or IFB Must Be Consistent with "Boilerplate" Language & Contract Special Circumstances: tool policy at prison, OSHA, drug/alcohol policies, etc. "Boilerplate" Language: The standard statements used in the "boilerplate" that is attached to an RFP or IFB must be consistent with the text of the RFP or IFB. The procurement official must take care to ensure that no conflict exists between the standard statements, the text of the procurement documents and the ensuing contract.

Bid/Proposal Security and Contract Performance Security
Bid or proposal security guarantees vendor will honor bid or proposal and enter into contract if selected. Contract performance security is provided for the fulfillment of contract obligations. Contract performance security is required for construction projects over $50,000. MOM , page 53 Intended as protection for the organization against bad faith or failure on the part of vendors and contractors. Bid/proposal security representation that the bid/proposal is submitted in good faith; must be stated in the IFB/RFP; only helpful in the bidding process, not contract performance; negotiable securities must be returned within 30 days of contract execution. Contract performance security is provided for the fulfillment of contract obligations. This also must be stated in IFB/RFP. Bid/Proposal Security and Contract Performance Security are not required by the Montana Procurement Act. Construction projects under Title 18 Chapter 2 require Contract Performance Security (requires 100% or project cost for all projects over $50,000, no LOC’s). Test questions # 24, 32, & 41

Contract Performance Security (cont.)
Contract security provides for: Faithful performance of the contract Payment of workers and suppliers Faithful performance: Covers costs of finding replacement contractor and paying the difference in contract costs. Payment of workers & suppliers: Unpaid wages, subcontractors, material suppliers. Test question # 41

Types of Security Surety bonds Irrevocable letters of credit CD’s or money market certificates assigned to the contracting entity Certified checks, money orders, cash NO personal or business checks All securities must be payable solely to the organization. Bonds must be verified by State Auditor’s office that the company is a licensed surety company in MT & has a Best’s rating of at least A-; must remain in effect for entire contract period; Contractors must not be allowed to begin work until security has been received, checked & accepted. Surety bonds and letters of credit will only be accepted on the forms supplied by the SPB (available on our website), or agency forms approved by SPB. Certificates of deposit or money market certificates will not be accepted unless assigned only to the organization. All interest income from these certificates must accrue only to the contractor and not the organization. Test question #48

Decision to Require Contract Performance Security Nature of contract Potential cost of completing contract Past history of similar contracts Decision of types to accept and amounts to require is critical to protection of organization’s interest. How easy would it be for the contractor to walk away from the job?

Can the organization afford to self-insure? Number of workers, suppliers involved Are subcontractors involved? Other contract management tools in place?

Contract Enforcement Receipt and Inspection of Supplies
“Let the Buyer Beware” All organizations must inspect and receive supplies shipped directly to them Is the item broken or damaged? Is it the correct item? Correct quantity? Does it meet the specifications? MOM , page 77 External inspection: carefully check the containers before signing the delivery ticket. Note on the ticket any signs of damage and/or incorrect number of cartons and date it. Only sign for what is physically in your possession. Internal inspection: is the packing slip present and correct, does it match the order. Contact the vendor immediately if there are any problems with the order. Test questions # 23 & 49

Contract Enforcement (cont.)
Contract Monitoring - track contract information vendor name, description, duration, renewals, insurance requirements, contact information, special requirements MOM , page 79

Contract Enforcement means paying attention to things like:
Are deadlines being met? Are deliverables coming in at the level of standard anticipated in the contract? Are payments being made according to contract provisions? Are contract modifications being made that are well-documented and comprehensive? Are problems being addressed as soon as they are perceived? Is the organization meeting regularly with the contractor to assure good communication? Time spent on solicitation and writing “iron-clad” contracts is for nothing if not enforced. Emphasis is on effective contract administration. On a day-to-day basis, organizations need to be monitoring contract performance since early detection and correction of nonperformance is critical for the success of the contract.

Contract Enforcement (cont.)
Does the contractor understand exactly what is expected? Is it time to terminate the contract? Is work being verified as to its completeness? Are checklists being used to communicate contract progress? Are progress reports coming in as required? Is it time to get an attorney involved? Is the organization meeting its contractual obligations? It is the contracting organization’s responsibility to ensure that all contract requirements are being met. Remember: the contract is only as good as the enforcement!!!!! Test question #50

CERTIFIED PROCUREMENT PROFESSIONAL (CPP)
It’s all in the fine print of the contract… “It has long been an axiom of mine that the little things are infinitely the most important.” - Sir Arthur Conan Doyle Author, “The Adventures of Sherlock Holmes” Contract Management Certification Program

CERTIFIED PROCUREMENT PROFESSIONAL (CPP)

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