1. A Guide for Everyone Who Works with the School District Procurement Process Works with the School District Procurement Process AASBO OCTOBER 19, 2012 MESA, ARIZONA By Bill Munch Exec. Director of Procurement Compliance, Outreach & Training Valley Schools (602) 677-1988 bmunch@vsit.org Purchasing Workshop for Everyone

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

3. Purchasing Workshop for Everyone 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 your 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 Key things you should know

4. Purchasing Workshop for Everyone 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 School District Procurement is Governed By Arizona Revised Statutes A.R.S. § 15-213-A is key to procurement Other subsections also apply Uniform System of Financial Records (USFR) Applies to purchases of $50,000 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 $50,000.00 The bid threshold is no longer adjusted annually Applies to procurement protest and claim resolution Applies to disposition of assets

5. Purchasing Workshop for Everyone Purchases over $50,000 Require formal competitive sealed bids or proposals & quotes do not meet the requirement Competitive Quotations Apply to purchases under the formal bid threshold May be verbal or written 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 and generally have an authorized signature unless a website or email quote

6. Purchasing Workshop for Everyone Bids and proposals are used to make purchases with costs above the competitive sealed bid threshold 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 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 Bids are… Formal requests for offers from the school district Proposals are… Formal requests for offers from the school district Formal offers from vendors Firm as received. No negotiation is allowed Subject to revision by means of best & final offers Awarded to the lowest responsible & responsive bidder Awarded to the vendor whose proposal is determined to be most advantageous to the District

7. Purchasing Workshop for Everyone 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 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

8. Purchasing Workshop for Everyone Commonly completed by the ordering sites requests Create 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 Purchase Requisitions

9. Purchasing Workshop for Everyone 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 Purchase Orders 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.

10. Purchasing Workshop for Everyone Why are there so many rules? School districts spend taxpayer money. As custodians of that money, we have a duty to spend it wisely. The rules, regulations & processes help ensure we do so. Can the rules be waived? No. The rules are in place for a reason and cannot be waived. In fact, most of the rules have been created by, or in response to, legislative action. The rules have been written to provide a reasonable solution for most requirements. 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 Why does everything have to go through the central office? This is generally done as a control feature to ensure compliance with all requirements. Most times, it provides good protection for the district and its employees. It also allows others to focus on business issues and lets school personnel concentrate on teaching students. There is a trend to reduce bureaucracy for small purchases. Efforts in this area include the use of purchase certificates, limited value purchase orders, procurement cards, term commodity & service contracts, etc. Frequently asked questions

11. Purchasing Workshop for Everyone Why does it take so long to get a purchase order after we send in a requisition? There are a number of factors that contribute to purchase order turn-around time. These include: The signature trailIncorrect account codes Lack of fundsNon-compliance with the rules Incomplete requisitionPoorly prepared requisition Missing signaturesUnplanned requirements Workload 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 leadersAncillary costs make up the difference Short term saleNo after the sale support Risk of the purchase falls on the buyer Why do we have to buy from out of state vendors? In general, we are prevented by law from giving any type of local preference. However, there are a number of purchases where we can support local vendors. 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. Frequently asked questions

12. Purchasing Workshop for Everyone What can be done to get quotes faster? The buyer can give deadlines for vendors to respond. If a vendor doesn’t respond within the specified time, a “no quote” can be documented. This helps keep the purchase on track. What if I can’t get three quotes? Document your effort. If you contacted vendors that had reasonable opportunity to quote, we will accept the “no quotes” or contacts as meeting the requirements. However, don’t contact O’Rielly Chevrolet if your looking to buy a copy machine. Why do I have to get quotes, I already know where to get the best buy? The quotation process is designed to ensure and verify that we are spending money wisely. It provides opportunity for vendors and instills confidence in the public. Why do I have to get quotes, when I know no one else can meet my need! We hear this often, and there is a sole source procedure that eliminates the need for competitive quotes or bids. However, this provision should be used very rarely. A sole source determination must be based upon performance, programmatic or operational requirements, not a preference for a particular product or provider. Because of the documentation requirements, completing a sole source purchase can be more difficult and take longer than trying to get quotes. What are the most common mistakes you find department personnel make? There are several: Not allowing enough time for the process Not asking questions “up front” Incomplete documentation Ordering & receiving materials or services before a purchase order is issued Failing to inspect & confirm an order upon receipt Failing to send receiving documents to the Accounts Payable Department Failing to tag capital equipment Signing contractual documents without authority Frequently asked questions

13. Purchasing Workshop for Everyone How do I handle multiple purchases of the same item? Start with what you know at the time Use the total anticipated cost of the materials over the fiscal year Review purchases from prior years to estimate total current year purchases Bid and warehouse the materials Bid the materials on a “will “call basis How do I handle multiple purchases with the same vendor? Start with what you know at the time Determine if the purchases are reasonably subject to competition If certain items are purchased routinely from that vendor, the total cost over the fiscal year may require competitive purchase Multiple purchases for “unanticipated requirements” may not be reasonable for competitive purchase Bid for a percent of discount to be applied to the vendor’s entire product line Document the basis for using that vendor How can I bid maintenance supplies? I don’t know what I need until I need it. Review the prior year’s purchase history Group related items that are routinely purchased Use a percent of discount bid for all items in that group List a sampling of the routinely purchased items in each group and require the bidders list their prices for those items to assist bid evaluation What can I do to make my procurement successful? Allow enough time for the process Ask questions “up front” Provide complete documentation Be fair and be reasonable Avoid after the fact purchases Inspect & confirm orders upon receipt Promptly send receiving documents to the Accounts Payable Department Do not sign contractual documents without authority Frequently asked questions

14. Purchasing Workshop for Everyone FINAL THOUGHT Constant optimism is a force multiplier General Colin Powell