1. Contracts and Purchasing AASBO Certificate Program April 18 & 20, 2011 David Smith

2. Disclaimer: The opinions expressed in this presentation are those of David Smith and are not meant to be a legal interpretation of the law. The material included in this presentation is dated as of April 2011 and is subject to change. Official interpretation of particular questions or situations should be obtained through the board’s legal council, the Alabama Attorney General’s office or the Examiners of Public Accounts. Contracts and Purchasing

3. Competitive Bid Law Public Works Law Request For Proposals ( RFP) Public Contracts

4. Competitive Bid Law – Legal Authority for Boards Code of Alabama 1975, Section 16-13B-1 through 16-13B-11 Applies to both County and City Boards of Education

7. To What It Applies… Applies to the expenditure of funds for labor, services and work involving $15,000 or more Applies to the purchase or lease of materials, equipment, supplies or other personal property involving $15,000 or more

8. Legal Requirement Requires a contractual agreement entered into by free and open competitive bidding, on sealed bids, to the lowest responsible bidder.

9. Joint Purchasing 16-13-B-1 Governing bodies of two or more boards (or county commission/municipality) may purchase jointly. Each governing body must approve joint purchasing agreement and details by resolution. A Joint Purchasing Agent may be designated.

10. Length of Contract Terms Purchase or Service Contracts - limited to 3 years Lease-Purchase Contracts for capital improvements, repairs to real property and other lease-purchase contracts - limited to 10 years

11. Advertising Requirements Post notice on bulletin board outside purchasing department Can do more…but not required!

12. Bid Lists Sealed bids shall also be solicited by sending notice by mail to all vendors who have filed a request in writing that they be listed on the bid list for the particular items being bid. If a vendor fails to respond to any solicitation after the receipt of three solicitations, the vendor may be removed from the bid listing.

13. Sealed Bids and Documentation Must be sealed when received (except under reverse auction procedures) Opened in public at the hour stated in the notice All original bids and documents pertaining to the award of the contract shall be retained for a period of seven years from the date the bids are opened and shall be open to public inspection

14. Bid Bonds/Cashier’s Check Bid bonds are no longer required – optional 16-13B-1(d)

16. Items Exempt from Requirements Utility Service (rates fixed by law, regulation, or ordinance) Insurance

17. Items Exempt from Requirements (cont.)  Professional Services:  Attorneys  Physicians  Architects  Teachers  Superintendents of Construction  Artists  Appraisers  Engineers  Consultants  Certified Public Accountants  Public Accountants  Others possessing a high degree of professional skill where the personality of the individual plays a decisive part.

18. Items Exempt from Requirements (cont.) Regular Civil Service employment contracts Fiscal or Financial Advice or Services Products made by Alabama Inst. For Deaf and Blind Maps/Photographs from any federal agency Manuscripts, Books, Maps, Pamphlets, or Periodicals Paying Agents/ Trustees Existing contracts for renewal of sanitation or solid waste collection, recycling, or disposal and those providing the service

19. Items Exempt from Requirements (cont.)  Security Related Services/Products - contractual services and purchases of products related to, or having an impact upon, security plans, procedures, measures, or systems, or the security or safety of persons, structures, facilities, or infrastructures.  Purchases of goods made as a part of any purchasing cooperative sponsored by the National Association of Counties.  Act 2006-279  U.S. Communities is the purchasing cooperative

20. NACO – Purchasing Cooperative (cont.) Purchases may only be made if all of the following occur : ▫ The goods being purchased are available as a result of a competitive bid process approved by the Alabama Department of Examiners of Public Accounts of each bid.  On May 31, 2006, Examiners communicated their approval of this competitive bidding process used by U. S. Communities. ▫ The goods are either not at the time available to local boards of education on the state purchasing program or are available at a price equal to or less than that on the state purchasing program. ▫ The purchase is made through a participating Alabama vendor holding an Alabama business license if such a vendor exists.

23. Items Exempt from Requirements (cont.) Individual school purchases from monies other than those raised by taxation or received from state or county appropriations (i.e., fundraisers, donations) ▫ May have board policy that requires bids Legislative Monies– Bid law does app ly

24. Bid Lists Sealed bids or bids to be submitted by a reverse auction procedure shall also be solicited by sending notice by mail or other electronic means to all persons, firms, or corporations who have filed a request in writing that they be listed for solicitation on bids for the particular items that are set forth in the request. If a vendor whose name is listed fails to respond to any solicitation for bids after the receipt of three solicitations, the listing may be cancelled.

25. Items to be considered when determining the lowest bidder… Qualities of the goods proposed to be supplied Conformity with specifications Purposes for which required Terms of delivery Transportation charges Dates of delivery

26. Rejection of a Bid ▫Awarding authority may reject a bid when the price is deemed excessive or the quality of product is inferior. ▫Must document. If applicable, should announce budget.

27. Documentation of Results To whom bid was awarded Reasons for not awarding to the lowest bidder ▫ Request legal council assistance Bid file shall be open for public inspection Document-Document-Docum ent

28. Emergencies Section 16-13B-3 Must affect public health, safety or convenience, be declared in writing by the awarding authority, and such action and reasons should be immediately made public by the awarding authority. Contracts may be let to the extent necessary to meet the emergency without public advertisement.

29. Only One Bid Received May accept bid or May reject the bid and negotiate the purchase or contract, provided the negotiated price is lower than the bid price.

30. Splitting of Contracts No purchase or contract in excess of $15,000 shall be divided into parts involving amounts of $15,000 or less for the purpose of avoiding the requirements of the competitive bid law

31. Resident Bidder Preferences Resident Bidder – has a place of business within the local preference zone. Deemed to be a Responsible bidder. Bid is no more than 3 percent greater than the bid of the lowest responsible bidder. In this instance, contract may be awarded to the resident bidder.

32. Procedures for Reverse Auction and Life-Cycle Costs

33. Legal Authority 16-13-B-4 Act Number 2008-379, Acts of Alabama Effective July 1, 2008 (January 1, 2009 for Reverse Auction Procedures and Life Cycle Costing)

34. Reverse Auctions Beginning January 1, 2009, the awarding authority may make purchases or contracts through a reverse auction procedure.

35. Examiners Shall Establish Procedures No later than November 30, 2008, the Department of Examiners of Public Accounts shall establish procedures for the use of reverse auction and life cycle costs, which shall be distributed to all contracting agencies and shall be used in conducting any audits of the purchasing agency. Procedures posted on Examiners website at www.examiners.state.al.us

37. Definition of Reverse Auction A reverse auction is a purchasing process in which offerors (suppliers) submit bids in competition to sell services or supplies in an open environment via the internet; the auction is an invitation-only, timed event.

38. Methods of Handling Reverse Auctions Acquire necessary software to conduct the auction on an “in-house” basis Contract with a commercial auction host to conduct the auction as an agent Participate through a regional, state, or national purchasing cooperative

39. Bidding Process A real-time bidding process, usually lasting less than one hour and taking place at a previously scheduled time and Internet location, in which multiple anonymous suppliers submit bids to provide the designated goods or services. A bidding process usually lasting less than two weeks and taking place during a previously scheduled period and at a previously scheduled Internet location in which multiple anonymous suppliers submit bids to provide the designated goods or services.

40. Use of Reverse Auction Allowed if.. The item to be purchased at a reverse auction is either not at the time available on the state purchasing program under the same terms and conditions, OR, If available, the lowest price offered in the reverse auction is equal to or less than the price for which the item is available on the state purchasing program under the same terms and conditions

41. Solicitation of Bids Advertised in any manner and for any length of time as may be determined Notice must be sent by mail or other electronic means to all persons, firms, or corporations who have filed a request in writing that they be listed for solicitation on bids for the particular items that are set forth in the request; may be removed from listing after three non-responses Notification shall include the scheduled time and internet location

42. Bid Specifications Clear and concise bid specifications must be developed Brand name or equal specification used for the purpose of describing the base standard of quality, performance and characteristics – not to limit or restrict competition

43. Pre-Screening of Bidders Bidders may be pre-screened at the option of the awarding authority – ensures only responsible parties submit bids Pre-screening must be documented in bid file Prospective bidders should submit a notification of intent to bid in a sealed envelope noting the bid number on the outer envelope to the awarding authority/agent within an appropriate time frame as specified by the awarding authority

44. Reverse Auction Process Contact person should be designated to answer questions from suppliers regarding the reverse auction process Online instructions should be provided to bidders Bidders will be notified of the start of the reverse auction through an electronic notification Auction will conclude at the previously scheduled stop time Awarding authority is responsible for providing a secure location and/or website to the reverse auction

45. Record of Auction An event record of the auction should be maintained by the awarding authority that will include the prices offered by the bidders; should be part of the contract documents/public record at the conclusion of the event Event record must disclose the beginning and ending times of the auctions Bid documents must be retained 7 years in accordance with the Alabama Competitive Bid Law

46. Price Submittals Bidders may submit multiple prices during the event The lowest price offered will become the price portion of the bid response

47. Award of Contract Contracts will be awarded to the lowest responsible bidder as provided by the Alabama Competitive Bid Law

48. Tie Bids In the event that multiple bidders submit identical prices for the same goods or services, the bid received first will be considered to be the lowest. Any other identical bids received later will be considered in the order received.

49. Public Viewing of Auction Event The public may attend the internet auction event which will be conducted such that the names of the bidders will not be disclosed until after the completion of the auction, at which time the event record will be available to the public

50. Life Cycle Cost Analysis “A method for evaluating all relevant costs over the time of a project, product, or measure.”

51. What are Life Cycle Costs? The total cost of ownership over the expected life of an item ▫First Costs (Acquisition Costs) – capital investment costs, purchase and installation costs ▫Future Costs (Sustaining Costs) – energy costs, operating costs, maintenance costs, capital replacement costs, and financing costs; any resale, salvage or disposal cost

52. Legal Authority The awarding authority may use life cycle cost analysis for personal property purchases as provided by Code of Alabama 1975, Section 16- 13B-7 (c) (1). Not allowed for the purchase of real property

54. Purchases Below $15,000 Threshold Develop written procedures ▫$ amount for written quotes  Define number of quotes  Example-  Purchases between $5,000-$15,000 require two written quotes from vendors  Below $5,000 require two phone quotes Transparency/Good Business Practices When in doubt “Bid It”

55. Competitive Bid Law Questions ??? When faced with questions- Seek advice ▫Legal Council ▫Examiners of Public Accounts ▫AG Opinions

56. Public Works Law Title 39 Code of Alabama Applies to any governmental board, commission, agency, body, authority, instrumentality, department, or subdivision of the state, its counties and municipalities.

59. Public Works Law (cont.) Applies to any construction, repair, renovation, or maintenance of public buildings, structures, sewers, waterworks, roads, bridges, docks, underpasses, and viaducts as well as any other improvement to be constructed, repaired, renovated, or maintained on public property and to be paid, in whole or part, with public funds or with financing to be retired with public funds in the form of lease payments or otherwise.

60. Expenditure Threshold $50,000 Section 39-2-2 (a) – “No public work…involving a sum in excess of $50,000 shall be split into parts involving sums of $50,000 or less for the purposes of evading the requirements of this section.”

61. Advertising Requirements Advertise in a newspaper of general circulation in the county - once each week for three consecutive weeks Additional requirement for contracts over $500,000 - once in 3 (additional) newspapers of general circulation throughout the state

63. Public Works Law Receive one bid-May negotiate downward No provision for in county or in state contractors ( Section 39-3-5) ▫Reciprocal law- Nonresident bidders subject to same preference granted to Alabama bidders bidding in their state (Question- contact building commission)

64. Provisions for Mistakes by Vendors Clerical or calculation errors - low bidder must provide written notice of withdrawals within 3 days Withdrawing bidder cannot work on project in any way

65. Project Completion Contractor must give notice of project completion by advertising 4 successive weeks in a newspaper of general circulation published in the county

66. Provisions for Retainage No more than 5% of estimated work done and value of materials shall be retained up to 50% of work completed No additional retainage withheld after 50% of work completed Retainage held until project completion and acceptance

67. Professional Services Architects, Engineering, Project Management Services - exempted from the bid process Should do RFP for professional services

68. Emergencies No advertising required Must still follow other requirements - per Code 39-2-2(e)

69. Contract Documents www.bc.alabama.gov

70. Contract Documents

72. Project Under $50,000 Request for quotes/estimates ▫In writing ▫District letterhead ▫Define scope of work ▫Require license /insurance ▫Signed estimates ▫Signed contract Treat like a bid without advertising requirements

73. Purchasing Procedures Centralized Purchasing ▫One person should be responsible for the purchasing function  Knowledge of laws and procedures governing procurement  Knowledge of quantity and quality of goods or services needed by the district  Knowledge of department budgets and account codes  Independent of departmental preferences for particular product or vendor

74. Centralized purchasing ▫ Maintains files for all bids and contracts ▫Tracks purchases of fixed assets ▫Inventory control ▫Risk Management  Building Insurance  General Liability  Vehicles

75. Develop a Purchasing Policy and Procedure Manual ▫Written procedures on the procurement process for the school district  Employees  Vendors

76. Purchasing Policy and Procedure Manual ▫Procedures for processing of requisitions  $ thresholds  Approval process  CIS Funds  Emergency purchases

77. Purchasing Policy and Procedure Manual ▫Bidding Procedures  $ Thresholds  Competitive bid law  Public Works Law ▫Bidding Process  Time line  Development of specs  Advertisement  Pre-Bid Conferences  Recommended on all bids  Insurance/license requirements for vendors

78. Developing Specifications Objectives ▫Provide best value for tax payer’s dollars ▫Compliance with legal statutes ▫Purchase of appropriate products and services at best pricing ▫Provide fair competition for all vendors ▫Provide service to all internal users

79. Specifications Types of Specifications ▫Qualified Products List (QPC)  List of products that meet specs ▫Design Specs  Professional Architect/Engineer Drawings and Specifications ▫Performance Specs  What product must do or what end result will be produced

80. Specifications ▫Item Specifications  Specific information that clearly states the level of quality and performance ▫Statement of Work (SOW) and/or Services  Performance based – you tell the contractor what to do, but not how to do it

81. Recommended purchasing practices ▫Have pre-bid on all contracts ▫Utilize purchasing co-ops  US Communities  Regional co-ops  State Bids ▫Joint purchasing contracts ▫RFP for professional services  Banking, Engineers, Architects

82. Specifications Who should be involved? ▫Knowledgeable Users ▫Vendors ▫Professionals ▫Finance ▫Other Agencies ▫Purchasing ▫Legal?

83. Recommended purchasing practices ▫Use technology to improve procurement ▫Use procurement/purchasing cards  Maintenance/Operations  Departmental Supervisors  Principals  Teachers  Booster Clubs

84. Specifications Specification Q & A ▫Clear  What to do, how to perform, timing, etc.  Fair to allow appropriate competition  Provide sufficient detail to communicate what is expected  All aspects included? (insurance, warranty, delivery, installation, cleanup)  Allow for significant level of evaluation

85. Specifications Insurance ▫Workman’s Comp ▫Vehicle/Equipment ▫General Liability ▫Bonds Required? ▫Amounts Sufficient for Level Needed?

86. Specifications Freight ▫Freight on Board (FOB) Destination  Seller arranges, pays and insures ▫FOB Destination Freight Collect  Buyer pays freight but seller owns ▫FOB Origin  Buyer accepts ownership at origin (Not recommended unless employee picking up)

87. Specifications Warranty ▫Duration  Months, Years, Extended ▫Start Date  At installation or delivery ▫What’s Covered  Full body or limited, installation ▫Extended Options Available  What is covered and at what cost?

88. Contracts Purpose ▫Sets up requirements and obligations of all parties ▫Properly executed, binds all parties ▫Legal Compliance and Authority ▫Set out any special terms and conditions

89. Contracts Contract Types ▫General Operations (fundraisers, vendor) ▫Bid Contract/Agreement ▫Construction ▫Professional Services ▫Statement of Work ▫Others

90. Purchasing Cards Benefits stream line the purchasing process teachers will benefit from the optimal purchasing power for incidental expenses reduce (not do away with) the purchase order paperwork

91. Benefits increase budget control and internal control provide better reporting in terms of who/what/when/how much reduce the costs of procurement reduce the costs of payments

92. Purchasing Cards Setting Up The Program ▫AASBO Program ▫Purchasing Card Agreement  Appendix A ▫Procedures  Appendix B

93. Conflict of Interest Alabama Ethics Law Code of Alabama (Section 36-25-1- 36-25-30) Conflict of Interest (Defined)- A conflict on the part of a public official/public employee between his/her private interest and the official responsibilities inherent in an office of public trust

94. Conflict of Interest Does it meet the smell test Always check with your Board Attorney Contact the Ethics Commission When In Doubt Bid It

95. Conflict of Interest A conflict of interest shall exist when a public official has a substantial financial interest by reason of ownership, control or the exercise of power over any interest greater than 5%. (§ 36-25-5 (f))

96. Usually done for professional services exempt under bid law ▫Architects, engineers, auditors, banking services etc. ▫Written request with services defined Request For Proposal

97. Questions? Contracts and Purchasing AASBO Certificate Program April 18 & 20, 2011 David Smith