Announcement 2015 Procurement Forum Schedule

2. Announcement2015 Procurement Forum Schedule Effective Immediately The Procurement Forum will be held quarterly. • January 15, 2015 • April 23, 2015 • July 16, 2015 • October 15, 2015

3. January Procurement Forum Agenda • PCS Process for $10K to $50K - Royce Brown • Split Purchasing - Lee Costley • Illegal Immigrant Form Change - Randy Wright • Writing Specifications - Jan Roberts

4. PCS Reporting for $10,000.01 to $50,000.00

5. Where do I find PCS?

6. Guidelines REPORT ONLY All PCS contracts which are between $10,000.01 and $50,000.00 must be reported on the PCS Website. This includes the initial contract term and each time a renewal/extension places the contract in this value range. OSP will place the report submission into the $10,000.01 to $50,000.00 Monthly Report that is looked at (but not “Reviewed”) at the Arkansas Legislative Council Monthly Meeting.

7. Guidelines Cont. OSP-1 FORM SUBMISSION If the Total Amount of the PCS contract is PROJECTED to be over $50,000.00 AT ANY TIME DURING THE CONTRACT DURATION (7 years max), the agency should ALSO submit the OSP-1 Form. This is for history purposes only so that all documentation from the beginning of the contract is placed in OSP's electronic files. Once a renewal is issued that places the contract over $50,000.00, all of the documents on file will be sent to Legislative Review. OSP will check the form and the attachments for correctness of procurement criteria, and once placed into the OSP electronic files, these submissions will be notated as "Executed" in the online PCS Portal. If an agency does not submit the OSP-1 form (and any necessary amendment OSP-1A forms) for a PCS contract, and that contract goes over $50,000.00 at any time during the contract duration, the agency will be required to submit ALL PCS forms since the initial award of the contract. All of these forms will be required BEFORE the contract can go to Legislative Review.

8. Guidelines Cont. Extra Procurement items for PCS Contracts include the following: Legal Services – Must have an Attorney General’s Letter approving the hiring of legal counsel attached to the OSP-1 form. Request for Qualifications (RFQ) – Must have an approval by the OSP Director before advertising the solicitation. This approval document must be attached to the OSP-1 form. Sole Source (SS) Awards – Must have an annual approval by OSP Director or Deputy Director prior to starting the contract. This approval document must be attached to the OSP-1 form. When entered in AASIS: The Outline Agreement Type for PCS must be “PV”. For sole source justifications, Our Reference must be “SS” for contracts between $10K to $50K. If over $50K, this code must be PSC (Professional Service Contract).

9. PCS $10,000.01 to $50,000.00 Monthly Reporting Form

10. Contract/Amendment Submission

11. Enter New Contract/Amendment

12. Reports

13. THE PERRILS OF SPLIT PURCHASING

14. SPLIT PURCHASING 19-11-231. Small procurements. (a) Any procurement not exceeding the amount under § 19-11-204(13), which refers to small procurements, may be made in accordance with small procurement procedures promulgated by the State Procurement Director. (b) However, procurement requirements shall not be artificially divided so as to constitute a small procurement under this section.

15. SPLIT PURCHASING 19-11-234(d) Repeated small quantity procurements to circumvent the competitive bid limits or failure to obtain competitive bids without justification shall constitute a violation of these procedures and shall result in withdrawal of the state agency’s competitive bid privileges.

16. Split Procurement or Not? Scenario# 1 • On 7/5/14, a PO is issued to X Company in the amount of $5,500 for parts needed to repair the A/C in #1 Barracks. On 7/23/14, another A/C unit needs repair and another requisition for parts is made to the same company in the amount of $5,700 . Both of these purchases total more than $10,000 and were issued to the same company in less than 30 days. • Is this considered split procurement? Why or why not?

17. Conclusion • In this case, it appears that the breakdowns were unrelated incidents. Therefore, this would not be considered a split purchase.

18. Split Procurement or Not? • Scenario # 2 • On 8/1/14, a PO is issued to Y Company in the amount of $9,900 for miscellaneous plumbing stock items. On 9/1/14, a PO is issued to Y Company in the amount of $9,900 for miscellaneous plumbing stock items. On 10/1/14, a PO is issued to Y Company in the amount of $9,900 for miscellaneous plumbing stock items. • Is this considered split procurement? Why or why not?

19. Conclusion • In this case, there are two areas of concern. • (1) Because of the regularity of the purchases, this appears to be an attempt to circumvent the bid process by split purchasing, using dollar amounts just under the $10,000 limit. (Better planning) • (2) This gives the appearance of impropriety, and a possible ethical breach by steering business toward one particular vendor. • 19-11-234(d) (loss of ADC’s purchasing authority.) • Better planning and following proper procedures would result in a quote bid for the combined amount or possibly a term contract for plumbing stock items.

20. Split Procurement or Not? • Scenario # 3 a • Miscellaneous material is needed to install HVAC units on a State owned building as budgeted below by commodity group: • HVAC Supplies $35,000.00 • Plumbing Supplies 2,500.00 • Electrical Supplies 4,000.00 Total $41,500.00 What is the best method of procurement? Method A: • Bid all items together as all or none by sealed bid method through OSP?

21. Conclusion • All or none, in this case, would not be the best solution. • It is unlikely any one company will carry all of these unrelated items.

22. Split Procurement or Not? • Scenario #3 b • HVAC Supplies $35,000.00 • Plumbing Supplies 2,500.00 • Electrical Supplies 4,000.00 • Total $41,500.00 • Method B: • Bid all items on one bid with each group as all or none by sealed bid method through OSP.

23. Conclusion This is a workable method that might result in a multiple award with better pricing & easier coordination of shipping & receiving than the previous example.

24. Split Procurement or Not? • Scenario # 3c • HVAC Supplies $35,000.00 • Plumbing Supplies 2,500.00 • Electrical Supplies 4,000.00 • Total $41,500.00 • Method C • Bid HVAC supplies through sealed bid method through OSP. Process plumbing supplies & electrical supplies as 2 separate small order purchases.

25. Conclusion This is another workable method. Send HVAC to OSP for sealed bid. Take multiple quotes for each of the small purchases. Document all vendors contacted, keep records of all quotes received.

26. Split Procurement or Not? • Scenario # 3d • HVAC Supplies $35,000.00 • Plumbing Supplies 2,500.00 • Electrical Supplies 4,000.00 • Total $41,500.00 • Method D: • Bid all items together on sealed bid method through OSP and award to lowest responsive vendor per line item.

27. Conclusion • This would be the least desirable method. Increasedshipping costs from multiple vendors would add to the total project cost. In addition, it would be difficult to track all shipments and record arrival of all items required to complete the project.

28. Split Procurement or Not? • Scenario #4 • Five different building & roofing projects were needed at the same unit over a six month period. • All were awarded to the same vendor. • 2 were awarded by small order method & 3 were competitively bid. 7/22/09 SO Metal Roofing $ 9,039.20 8/10/09 CB Metal Containers & Bldg Sply $10,473.19 10/2/09 SO Metal Roofing $ 6,239.10 12/7/09 CB Metal Structural Frame $10,747.45 1/28/10 CB Metal Roofing $24,908.96 • TOTAL $52,407.90 • Is this considered split procurement? Why or why not?

29. Conclusion • This could be considered split purchasing because the combined total of the two small orders was over the $10,000 limit, because of the short time between the two purchases and the fact that both purchases were made from the same vendor for the same commodity. • There is no problem with the 3 competitive bids, but money could have been saved by bidding all projects with one competitive sealed bid and the split purchase could have been avoided. • By awarding as a term contract, deliveries could be timed so that storage of materials would not have been an issue. • Better planning and combining these purchases could have saved money.

30. Correct Procedure or Not? • Scenario #5 Is it okay to accept bids . . . • . . . if a vendor provides a courtesy quote - vendor can’t fulfill request because location is out of their jurisdiction but they provide a high quote as a favor only? • NO! Anyone can respond to a bid, but to accept a quote from a vendor who cannot fill the request would be a breach of ethics on the part of the buyer. Quotes must be obtained from sources that can & will deliver the goods or services that you are requesting. Always get a minimum of 3 quotes from vendors who are responsible and responsive. • Auditors are trained to verify that buyers are doing due diligence to maximize competition. If a buyer cannot get quotes their efforts must be documented thoroughly in order to not give the appearance of impropriety. Lack of documentation could make it appear that you are steering business towardone vendor. • See 19-11-234. Competitive bidding.

31. Correct Procedure or Not? • Scenario #6 • Is it okay to accept bids . . • . . . if all 3 vendors are under the same franchise, same name - different location, but provide independent pricing?

32. Conclusion • This would certainly give the appearance of impropriety & could foster collusion. • There is a difference between accepting bids and soliciting bids. The buyer should document all vendors contacted and make an effort to maximize competition. • Could this be a sole source purchase? • Exceptions…?

33. USING STATE-WIDE CONTRACTS TO AVOID SPLIT PURCHASING Making use of State Contracts, listed on the Office of State Procurement website, can eliminate the possibility of making a split purchase. All of these contracts have been competitively bid and awarded and may be used for any dollar amount. You are not committing a split purchase if you are using an established state contract. You can find a list of all available State Contracts at: http://www.dfa.arkansas.gov/offices/procurement/contracts/Pages/default.aspx

35. The Illegal Immigrant Disclosure Form for Services • The Illegal Immigrant Disclosure form has been updated. This form is used by vendors who intend to do business with the State. It is required for professional services, technical and general services contracts and any category of construction over $25,000. The form now will be valid for one year from date of the most current submittal. • New features include a validity date range and the last four digits of the vendor tax ID number. • The vendor and Office of State Procurement both receive this confirmation when submitted.

36. The vendor and Office of State Procurement both receive this confirmation when submitted.

37. You will still have the option to login and print the disclosure. If you do not remember your login please call OSP at 501-324-9316 and ask for Judy Owen.

38. WRITING SPECIFICATIONS The variety of commodities and services purchased by the State require attention to specification writing. Writing specifications can be challenging. Be prepared to begin with a rough draft. Definition: A concise statement of a set of requirements to be satisfied by a product, material or a process showing, whenever appropriate, the procedure that will determine whether the requirements have been satisfied.

39. Preparing specifications constitutes a large portion of a procurement professional’s daily work. • To be successful, the process must be a cooperative effort between the requester and the buyer. • The review process should detect whether the specifications are adequate for competition and if they call for a quality level that is suitable for the items intended use(s). • The agency purchasing authority must be responsible for final review and approval. • Specifications also serve to keep state government purchasing transparent.

40. Specifications serve as the basis for obtaining goods and services which are adequate and suitable for the using agency’s needs in a cost effective manner. • Products are constantly being improved, new products are introduced, and the needs of the agency change. • Do not continue to use old solicitations or specifications without verifying their accuracy. Specifications seldom remain static and there is no assurance they will be suitable for future purchases. • The function of preparing and updating specifications must be ongoing.

41. Documents should look professional. Always be careful of correct spelling, proper grammar and punctuation. • Specifications provide for quality control, by assuring that the quality of a commodity or service suites its intended use. • Specifications should not include unnecessary features or service responsibilities that cause price increases.

42. Include in Every Procurement • Specifications Include the 5 Rs– • Right Quality • Right Quantity • Right Time • Right Place • Right Price

43. Where Do I Begin? There are many available sources that can be of assistance to you when you are developing specifications. • Check to see if standard specifications already exist and are current. • Use the internet and e-mail for research.

44. Specifications may be in the form of a description of the physical, functional or performance characteristics of goods and services, a reference brand name, or all of the above! • REMEMBER: If an essential detail or service requirement is left out of the specification, the misunderstanding will result in the procurement of a commodity or service that does not meet the needs of the agency. • FEAR NOT!! A solicitation may be amended, cancelled or not awarded.

45. A good specification should: • Identify minimum requirements. • Allow for a competition • Provide for an equitable award • List methods of assuring contract compliance

46. A good specification should be: • Simple, consistent and exact, but not so specific that a loophole will allow a bidder to evade any of the provisions and thereby take advantage of his competitors or the buyer. • Identified, when possible, with some brand specification already on the market. (Custom goods are expensive) • Reasonable in its tolerances. Unnecessary precision is expensive.

47. Complete in the stipulation of all requirements, either directly or by reference to other specifications, publications, or drawings. (plans and specifications from a plans house) • Flexible. Inflexible specifications defeat progress. If possible, invite vendors to suggest cost saving alternatives or substitutes.

48. Specification requirements should include: • Basic design • Physical dimensions • Weights/units of measure • Percent and type of ingredients • Types/grades of materials, if applicable • Include a description of any required inspection, testing, preparation or condition of delivery.

49. Capable of being verified A specification which cannot be verified is of little value and will result in confusion and possible a no award.

50. That Sounds Easy! • Specifications are clear, accurate, and concise. • Specifications are as flexible as possible and reasonable in its tolerances. • Specifications are capable of being verified. • The specifications are broad enough to attract multiple bidders and allow for competitive bidding.