Arizona School ProcurementA Guide to the Purchasing ProcessA Guide to the Purchasing Process

Scottsdale Unified School District

Governing Board Meeting

11 August 2009

David Peterson, Ass’t Superintendent

School District Procurement School District Procurement IncludesIncludes

• Small Purchases

• Large Purchases

• Warehousing

• Distribution

• Contracts Administration

• Inventory Management

• Fixed Assets Management

• Property Disposal

Key things We must rememberKey things We must rememberThe “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

School District Procurement is School District Procurement is Governed ByGoverned By

Arizona Revised StatutesArizona Revised Statutes

A.R.S. § 15-213, A. is key to procurement

Other subsections (B-G) also apply

Uniform System of Financial Records (USFR)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 RulesArizona 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 PolicyGoverning Board Policy

Sets local requirements for the school district

May be more restrictive than the USFR or procurement rules

May not be less restrictive

Arizona Administrative CodeArticle 10

School District Procurement RulesPrimary source for the “school district procurement code”

AuthorityArizona Revised Statues §15-213

A, B, C, D, E, F, G

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)

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

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

Types of Purchases

• Sole Source

• Requests for Quotations

• Invitation for Bids

• Request for Proposals

• Professional Services

• Emergency Procurements

• Purchasing Cooperatives

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

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

Competitive QuotationsCompetitive QuotationsAn acceptable quotation includesAn 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 requisitionMust be provided with the purchase requisitionVerbal quotes can be noted on the requisition

Written quotes must be on vendor quote form or letterhead

Invitation for Bid• > $33,689.00

• Award requires Governing Board approval

• Commodity driven

• Lowest responsive and responsible bidder

• Cost is the significant evaluation factor

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

Bids and proposals are used to make purchases with Bids and proposals are used to make purchases with costs above the competitive sealed bid thresholdcosts above the competitive sealed bid threshold

Bids are…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

Utilized most often for commodity or services purchases where the requirements can be clearly defined and award is based primarily, but not but not solelysolely, on price

Proposals are…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

Utilized most often for commodity or services purchases where the requirements are not clearly defined and award is based primarily on factors other than priceon factors other than price

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)

Professional Services• Architect, engineer, land surveyor, assayer,

legal, geologist and landscape architect

• Demonstrated competence and qualifications are criteria

Exceptions to the Competitive Procurement Requirements

Emergency ProcurementsEmergency 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 ProcurementsSole 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 PurchasingCooperative 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

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

Purchasing Cooperatives

• One or more public procurement units

• Aggregate materials, services or construction

• Achieve greater cost savings

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

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

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

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”

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

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

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.

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

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

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.

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.

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.

Purchase RequisitionsPurchase RequisitionsCommonly completed by the ordering sites

• Create requestsrequests 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 OrdersPurchase OrdersMust be issued before materials, services or construction items are ordered or

received

Create procurement contracts on behalf of the school district

Place certain obligations on the vendor & the school district

Possess certain permissions and restrictions

Should not be revised or exceeded without approval from the Purchasing Department

Help control the vendor payment process

Committing 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.

What happens if the rules are not followed?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.

Violations can result in severe personalpersonal penalties. These include:

Responsibility for the debt Repaying the state

Payment of a 20% penalty Payment of legal fees & court costs

Payment of interest A Class IV felony conviction

Loss of employment Seizure of personal assets

The rules cost my school money. The rules cost my school money. What can we do? 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 quality Vendor operates on cash basis

Loss leaders Ancillary costs make up the difference

Short term sale No after the sale support

Risk of the purchase falls on the buyer

Why do we have to buy from the Why do we have to buy from the low bidder?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.

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

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

DISCUSSION