1. A Guide to the Purchasing Process Arizona School Procurement A Guide to the Purchasing Process Scottsdale Unified School District Governing Board Meeting 11 August 2009 David Peterson, Ass’t Superintendent

2. School District Procurement Includes Small Purchases Large Purchases Warehousing Distribution Contracts Administration Inventory Management Fixed Assets Management Property Disposal

3. Key things We must remember The “rules” exist The rules are not optional The rules apply to every one The rules are specific, but do not provide clear answers for all questions Certain personnel within our school district are charged with enforcing the rules When enforcing the rules, those individuals are doing their jobs, not throwing up roadblocks to prevent you from doing yours There are penalties for not following the rules The most severe of those penalties are assessed against individuals, not school districts You can follow the rules and get your job done

4. School District Procurement is Governed By Arizona Revised Statutes A.R.S. § 15-213, A. is key to procurement Other subsections (B-G) also apply Uniform System of Financial Records (USFR) Applies to purchases of $33,689.00 or less Applies to inventory management Applies to fixed assets management Section VI-G is the applicable section Arizona Department of Education School District Procurement Rules Applies to all procurement with values over $33,689.00 The bid threshold is adjusted annually Applies to procurement protest and claim resolution Applies to disposition of assets Governing Board Policy Sets local requirements for the school district May be more restrictive than the USFR or procurement rules May not be less restrictive

5. Arizona Administrative Code Article 10 School District Procurement Rules Primary source for the “school district procurement code” Authority Arizona Revised Statues §15-213 A, B, C, D, E, F, G

6. History of School District Procurement Code 1984: State Procurement Code adopted. Does not apply to schools. 1984: Legislature directs State Board of Education to adopt procurement rules. 1987: State Board of Education adopts School District Procurement Code (AAC Article 10)

7. Purposes of Procurement Code Increased Public Confidence Ensure Fair and Equitable Treatment Maximize Purchasing Value of Public Monies Foster Competition and Free Enterprise Provide Safeguards for Quality and Integrity Simplify the Procurement Process

8. Bid Thresholds Under $5,000 - no formal competition, use catalog, past experience (District Policy) $5,000 to $15,000 – 3 verbal quotes (USFR and Board Policy) $15,000 to $33,689 – 3 written quotes (USFR and Board Policy) Over $33,689 – Sealed Invitation for Bid or Request for Proposal (ARS 15-213) Bid threshold adjusted annually by DOE

9. Types of Purchases Sole Source Requests for Quotations Invitation for Bids Request for Proposals Professional Services Emergency Procurements Purchasing Cooperatives

10. Sole Source (Copyrighted & Patented – i.e., software) Shall be avoided – Unless… No reasonable alternative exists Governing Board determines in writing Written evidence and determination of the basis for the procurement

11. Request for Quotation Purchases under $33,689.00 Three verbal or three written quotes Purchasing file Each quotation has it’s own specific number and file

12. Competitive Quotations An acceptable quotation includes Date of quote Name of firm Name of person providing quote Item or service offered (description, brand & model) Unit price Extended cost Freight, sales tax & other charges Total cost Warranty, delivery & other important information Name of person obtaining quote Must be provided with the purchase requisition Verbal quotes can be noted on the requisition Written quotes must be on vendor quote form or letterhead

13. Invitation for Bid > $33,689.00 Award requires Governing Board approval Commodity driven Lowest responsive and responsible bidder Cost is the significant evaluation factor

14. Request for Proposal > $33,689.00 Requires Governing Board approval to Issue and Award Functionality driven Cost is only one of the evaluation factors Allows discussions with offerors Allows a best and final offer

15. Bids and proposals are used to make purchases with costs above the competitive sealed bid threshold Bids are… Formal requests for offers from the school district Formal offers from vendors Firm as received. No negotiation is allowed Awarded to the lowest responsible & responsive bidder but not solely Utilized most often for commodity or services purchases where the requirements can be clearly defined and award is based primarily, but not solely, on price Proposals are… Formal requests for offers from the school district Formal offers from vendors Subject to revision by means of best & final offers Awarded to the vendor whose proposal is determined to be most advantageous to the District on factors other than price Utilized most often for commodity or services purchases where the requirements are not clearly defined and award is based primarily on factors other than price

16. Types of Purchases Over Bid Threshold To Governing Board Sole Source (Copyrighted, patented) Emergency (To protect health, safety of student or employees or to protect equip) Existing Cooperatives –State of Arizona, Mohave, GPPCS, US Communities, TCPN, SAVE Formal Solicitations (RFP or IFB)

17. Professional Services Architect, engineer, land surveyor, assayer, legal, geologist and landscape architect Demonstrated competence and qualifications are criteria

18. Exceptions to the Competitive Procurement Requirements Emergency Procurements Have an immediate impact on the health, safety or welfare of the public, employees or students, or the operational capabilities of the district Sole Source Procurements Only one source is available to supply a required material or service Avoid sole source procurement unless it can be documented that there is not a reasonable alternative based upon a functional, operational or programmatic requirement Cooperative Purchasing This is not an exception, but another means of meeting the competitive procurement requirements Multiple public procurement units share contracts, when the contracts meet the requirements of the Procurement Rules

19. Emergency Procurements Immediate and serious need for materials, services or construction Procurement cannot be met through normal methods Seriously threatens the functioning of the district Seriously threatens the preservation or protection of property, public health, welfare or safety Examples: floods, epidemics, natural disasters, riots, fire or equipment failures Governing Board designates a board member or district official to make purchases

20. Purchasing Cooperatives One or more public procurement units Aggregate materials, services or construction Achieve greater cost savings

21. Formal Solicitation Procedures Generally same for IFB or RFP; method for award is difference Approval for issuance obtained Scope of work created –Previous solicitations –Samples from other districts or public entities –Drafting thru committee –Consultants Medical insurance or other complex item

22. Formal Solicitation Procedures Insert terms and conditions and boilerplate Send to registered bidders (bidders list) –Other potential bidders as recommended by users, other districts, consultants Out for bid for 14 days or more Specified time and date for public opening –IFB name and prices are read publicly –RFP only name is read. –All other information is confidential until award

23. Formal Solicitation Procedures Bids/offers are checked for responsiveness –Everything included and signed, bids on time, samples included, bid bonds, licenses IFBs checked for low bidder –User asked to check if product bid meets the minimum specifications RFP given to committee for evaluation –Committee of one or more persons –Construction and A&E have additional requirements - registered architect, number of members

24. Evaluation Committee Chaired by department head or designee Using department recommends members –Conflict of Interest Evaluation criteria jointly decided between using department and purchasing department Code states all “information contained in the proposals shall be confidential as to avoid disclosure... during the process of negotiation”

25. PROTESTS Vendor may file protest with District representative (Director of Purchasing Services) District has 14 days to respond All offerors are notified of protest District response made Options – cancel contract, continue award, re-bid, reject protest, other Certified letter response sent. Vendor may appeal to Governing Board

26. Protest Appeal Must be filed within 10 days to District representative Must set forth the information required for bid protest; Must articulate the precise factual or legal error in the decision of the District Representative. District Representative notify Governing Board and other parties within 3 days

27. Protest Appeal District to provide hearing officer District to provide response to appeal to hearing officer within 7 days Case is heard IAW R7-2-1181 Governing Board sustains or rejects appeal.

28. Checks and Balances Separation of duties: who requests, procures, receives, pays, etc….. Signature requirements Invoice payment authority Outside independent audit Outside legal counsel Open record law Centralization

29. Challenges Units: line item vs aggregate Threshold limits Known demand vs splitting requirements Growing pains Procuring what we need, when we need it, at the lowest competitive cost

30. Cost Means the aggregate cost of all materials and services, including labor performed by force account. Force Account Work performed by the school district’s regularly employed personnel.

31. Change Order A written order which directs the contractor to make changes that the changes clause of the contract authorizes the governing board to order.

32. Change Order Percentage A change order which increases or decreases the contract amount in excess of $15,000.00 or five percent of the contract amount, whichever, is greater may be executed if the governing board determines in writing that the change order is advantageous to the school district.

33. Purchase Requisitions Commonly completed by the ordering sites requestsCreate requests to purchase Used by the Purchasing Department to issue purchase orders Are not the same as purchase orders Must not be used to place orders with vendors Must be accurate, complete & legible Commonly have several stops before they reach the Purchasing Department

34. Purchase Orders 4Must be issued before materials, services or construction items are ordered or received 4Create procurement contracts on behalf of the school district 4Place certain obligations on the vendor & the school district 4Possess certain permissions and restrictions 4Should not be revised or exceeded without approval from the Purchasing Department 4Help control the vendor payment process 4Committing the school district to a purchase before a purchase order is issued creates an after the fact purchase. After the fact purchases are violations of the rules that apply to school district procurement. Serious consequences may result from after the fact purchases.

35. What happens if the rules are not followed? School districts generally have internal procedures to address rules violations. These tend to be geared toward addressing the issue, resolving it to the benefit of all parties, and preventing future occurrences. personal Violations can result in severe personal penalties. These include: Responsibility for the debtRepaying the state Payment of a 20% penaltyPayment of legal fees & court costs Payment of interestA Class IV felony conviction Loss of employmentSeizure of personal assets

36. The rules cost my school money. What can we do? This is a frequent complaint. However, we have found that the lower prices generally result from one or more of the following: Different qualityVendor operates on cash basis Loss leaders Ancillary costs make up the difference Short term saleNo after the sale support Risk of the purchase falls on the buyer

37. Why do we have to buy from the low bidder? If we’ve done our jobs right, the low price is normally the best buy. However, cost is never the only factor considered. We also consider other factors such as quality, delivery time, warranty, purchase terms, etc. A low bid can be rejected if it is documented that it does not comply with all requirements.

38. Governing Board Role in Procurement  How should board members respond to contacts from vendors?  During Actual Procurement the Buyer is the ONLY authorized person allowed to communicate with vendors  During all other times Board members can talk to vendors to get information or discuss products at a Trade Show  Conflict of Interest – File Letter and Announce at Board Meeting  Consent/Non consent items – Routine purchases on Consent. Any Item can be pulled for discussion

39. How Does the New Financial System Help Avoid Problems? Separation of Duties – Overseen by System Administrator Complete Tracking Budget Control – No Money no Requisition Purchases over Bid Threshold must have additional approval System allows Property Control Tracking Industry Leading Audit Trail

40. DISCUSSION