SCAGPO November 16, 2011 The Code in a Nutshell & Avoiding Procurement Audit Findings

1. SCAGPO November 16, 2011 The Code in a Nutshell & Avoiding Procurement Audit Findings South Carolina Budget and Control Board Division of Procurement Services Jimmy Aycock, Manager Audit and Certification

2. CODE’S PRIMARY PURPOSE? • To protect the citizens of our state and you.

3. Procurement Code Application • 11-35-40 • Procurement Code applies regardless of fund source • Applies to procurements or expenditures • Public Funds • Foundations • Revenue Generating

4. General Procurement Competition Thresholds • $0 - $2,500 - Fair and Reasonable (Up to $10,000 for Higher Ed.) • $2,500.01 - $10,000 - Solicitation of 3 Written quotes (May not apply to Higher Ed.)

5. General Procurement Competition Thresholds $10,000.01 - $50,000 - Written solicitation of written quotes, bid or proposals & advertised in SCBO Greater than $50,000 - Formal sealed bidding: IFB, RFP, BVB, FPB, Reverse Auction – Must be advertised in SCBO

6. General Procurement Competition Thresholds • Findings: • Inadequate competition • Reuse old quotes • Artificially divided • Pricing obtained from a catalog • Mandatory Pre-bids (Regulation 19-445-2042)

7. Written Determinations • Required for a variety of processes • Any formal bid solicitation other than low bid – RFP, Best Value, Fixed Price, Reverse Auctions • Sole Sources, Emergencies, Multi-term contracts • Court Case ruled written determinations must contain sufficient factual grounds and reasoning to provide an informed, objective explanation for the decision. • Written determination must stand on its own.

8. Sole Source Procurements • Simply defined, a sole source must be 1) A unique item or service 2) Only available from a single source 3) Must be authorized by agency head or designee above the level of the procurement officer

9. Sole Source Procurements • DO • Search for Competitors • Document Efforts to Find Competition - How do you know it’s a sole source? • DON’T • Play a Bad Hand - if in doubt, compete it • Remember – it’s sole source, not preferred source

10. Sole Source Procurements • Findings: • Inappropriate • Inadequate Justification • Grant Required • Unauthorized • Re-use old authorizations for new procurement • Reporting errors

11. SOLE SOURCE EXCEPTIONS • “This company installed the system and will be more familiar with the location of components and sensors in various buildings.” • Company “is already familiar with the Site because we have employed them in the past for monitoring well samplings & reporting.”

12. SOLE SOURCE EXCEPTIONS The electronic marquee will be used to implement the Character Ed Program. Each marquee will be programmed with character trait reinforcements as well as other information on a daily basis.”

13. Emergency Procurements • Unknown, unforeseen condition which creates a threat to public health, welfare, or safety that arise by reason of floods, epidemics, riots, equipment failure, fire loss, or such other reasons • Condition must create an immediate and serious need

14. Emergency Procurements • Can not be met though normal procurement procedures • Emergency limited to immediate need • As much competition as is practicable shall be obtained

15. Emergency Procurements • Findings: • Fail to address condition that created the emergency • Inappropriate • Go beyond emergency condition • Inadequate Justification • Reporting errors

16. WORST EMERGENCIES • 1992 audit of a university – 13 emergencies that referenced “this annual event” • Bus repairs for annual Chorus tour • Organ & sound system for Christmas Concert • Football field preparation before first game • Honor cords (Caps & gowns) for graduation

17. WORST EMERGENCIES • Audit of a state agency • Upgrade of a waste water treatment plant that the agency had established a PIP for 1 year earlier • A back-hoe/front-end loader for “emergency repairs of fresh and waste water lines throughout the state”

18. WORST EMERGENCIES A roof system for a processing plant. “Since he wasn’t sure there would be sufficient funds, he froze these funds. Now it is an emergency.” Paving of roads. “Dirt roads cause undue wear and tear on state vehicles due to rough surfaces and potholes. Water on the road is a breeding ground for mosquitoes and other pests.”

19. COURT DECISIONS • Sloan v. DOT – Highway emergency • Road widening project that was significantly behind schedule • Contractor abandoned the job • DOT declared an emergency because the project was significantly behind schedule, asserting that the area was unsafe and the citizens and businesses were angry and frustrated

20. SLOAN v. DOT • “DOT contends that the emergency procurement was proper because the statute requires that the DOT Director determine that an emergency exists.” He did. • “DOT asserts that because (the statute) does not limit what can constitute an emergency, the Director’s determination is discretionary . . . Because the alternative would have been to leave the construction project unfinished – and therefore a dangerous work zone – for four to six months.”

21. SLOAN v. DOT • “Sloan, on the other hand, argues that under the plain meaning of “emergency,” there was no emergency in this case because the delays and safety hazards were present throughout the four years of the project.”

22. SLOAN v. DOT • The court wrote: • “An emergency is, by its very nature, a sudden, unexpected onset of a serious condition; an unexpected situation or sudden occurrence of a serious and urgent nature that demands immediate action; a sudden unexpected happening; an unforeseen occurrence or condition; a sudden or unexpected occasion for action.”

23. SLOAN v. DOT • “We hold there was no emergency that existed in September 2004 to substantiate the emergency procurement.” • “We find the DOT’s procurement was invalid.” • Sloan v. DOT(II), 2008, SC Supreme Court

24. Procurement Cards • Visa Card • Most transactions limited to $2,500.00 • Findings: • Artificially divided procurements • Collusive procurements • Violating internal policies and procedures

25. WE ARE ALWAYS WILLING TO HELP • Call us @ 737-0600 • Internet web site: procurement.sc.gov Jimmy Aycock Allen Townsend Lane Warren Mac Stiles Beth Adkins Gail Skinner