State Agency Contracts State Agency Contracts Considerations for Performance Reviews.
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Transcript of State Agency Contracts State Agency Contracts Considerations for Performance Reviews.
State Agency ContractsState Agency Contracts
Considerations for Performance Reviews
Introduction
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Performance reviews of contracts are not mysterious
Your audit goals and findings will remain the same
What’s typically unknown: criteria, audit tasks, and evidence
Training Objectives
Participants should be able to:
Identify the bodies of criteria that your state has developed to ensure high quality contracts
Identify the key players in contract management and accountability
Develop a checklist of issues to cover in your audit and ideas on how to address those issues
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Part 1 of 3
Audit Criteria:Audit Criteria:
State Laws and Rules State Laws and Rules for Contractsfor Contracts
Audit Criteria:State Laws and Rules
Contract Components
Contract Controls or Review
Contract Management
Contract Administration (if separate)
Ethics
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Contract Components
Section 287.058, Florida Statutes
“Every procurement of contractual services in excess of the threshold amount … shall be evidenced by a written agreement embodying all provisions and conditions…”
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Contract Components(continued)
State and federal statutes… specify components or even specific
language that must be a part of any state agency contract
require basic language (e.g. terms of payment) and details unique to the state (e.g. adherence to public records laws), and
are often specific to the type of purchase, e.g., service, construction, or commodities
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Contract Review
“Each agency shall establish a review and approval process for all contractual services contracts ….which shall include, but not be limited to, program, financial, and legal review and approval. Such reviews and approvals shall be obtained before the contract is executed.”
s. 287.057(19), F.S.
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Contract Management
For each services contract, state agencies should
designate an employee to enforce the contract terms,
establish procedures to ensure that contractual services have been rendered according to the contract terms, and
pay the vendor if these terms have been met
s. 287.057(15), F.S.
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Contract Administration
“Agencies shall designate at least one employee who shall serve as a contract administrator responsible for maintaining a contract file and financial information on all contractual services contracts and who shall serve as a liaison with the contract managers and the department.”
s. 287.057 (16), F.S.
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Ethics of Contracting
Solicitation or acceptance of gifts Conflicting employment or contractual
relationship Unauthorized compensation Misuse of public position Unauthorized commitment of state funds
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Discussion: Part 1
1. What’s the point of these criteria? Do they need to exist?
2. Do these criteria encourage efficiency or are they merely symbolic safeguards? Discuss.
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Players and roles: who will be enforcing the criteria?
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Part 2 of 3
Players and Roles:Players and Roles:
Who Will Be Enforcing Who Will Be Enforcing the Criteria?the Criteria?
Who Ensures Contract Accountability?
Finance and Accounting
Contract Manager
Contract Administrator
Legal Counsel
Auditors
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Finance and Accounting
Source for: Payment history and related support, warrant copies, compliance information
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Contract Planning: Cost principles evaluation Contract Selection: Contractor financial viability
assessment Coordination: Relationship with state financial entity Accountability:
Allocations and Encumbrances Invoice Processing Warrant Distribution
Contract Manager
Source for: Documentation of day-to day vendor communications, activity log, and of changes made based on their feedback to the vendors
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Provider Selection
Contract Preparation
Ongoing Oversight
Review reports and deliverables
Contract Amendments
Monitoring
Closeout
Contract Administrator
Source for: Contract files (correspondence, deliverables), solicitation and award documentation, monitoring results
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Maintain Files
Financial Information
Liaison with contract manager and state purchasing entity
Management Reporting
Legislative Analysis
Technical Research
Legal Counsel
Can be internal or external, and can:
Advise on solicitation methodAssist in negotiations with vendorsApprove contract componentsProvide enforcement support to contract
manager
Source for: resolving questions about contract content, documentation of approval of contract, documentation on actions taken against vendors
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Auditors
Financial, information technology, and performance audits
State audit entities
Third party CPAs (single audit)
Internal Audit/Inspector General
Source for: historical information on the contract that will help determine cause, as well as implications for ongoing performance and compliance.
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Discussion: Part 2
1. Review/Discuss: What kinds of evidence/documentation (beyond the content of the contract) would you look for to determine whether agency staff were adequately safeguarding the state’s interests?
2. Why might it be problematic for a contract manager to also be a contract administrator?
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Players and roles: who will be enforcing the criteria?
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Part 3 of 3
Developing an Audit Checklist Developing an Audit Checklist for Contract Reviewsfor Contract Reviews
Components of the Contracting Process
Planning Decision to Contract Vendor Performance Requirements Solicitation Process (e.g. RFP process) Award Process Award Decision Contract Provisions Monitoring
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Audit Checklist: State Agency Planning
An agency’s plan to contract for services should demonstrate:
what services are needed
how they should be provided
what provisions should be in the contract
how services will be evaluated
what approvals will be required, if any
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Audit Checklist: The Decision to Contract
The agency should have:
Determined whether state law either prohibits contracting for these services or requires the agency to demonstrate its need to contract
Analyzed its business needs, goals, objectives
Conducted a cost/benefit analysis and evaluate options
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Audit Checklist: Vendor Performance RequirementsThe contract should: Clearly state the services expectedClearly define performance standards and
measurable outcomesIdentify how vendor performance will be evaluatedInclude positive or negative performance incentivesIdentify the staff that will be responsible for
monitoring vendor performanceDefine procedures and conditions for modification to
the contract25
Audit Checklist:Solicitation Process
An RFP should…
Clearly state performance requirements and scopeInclude a statement of workIdentify constraints, deadlines, mandatory itemsSpecify required deliverables and payment termsClearly state pricing requirements and evaluation
criteriaAllow sufficient time for vendors to prepare good
proposals
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Audit Checklist: Solicitation Process (continued)
An RFP also should:
Avoid specifications that favor a particular bidder
Specify qualifications for the vendor personnel who would be assigned to the project
Identify federal and state requirements vendors need to know
Outline all communication devices the agency will use to ensure equal access to information by bidders
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Audit Checklist: Award Process
The contract award process should:
Ensure proposals are responsive to agency needs
Ensure contracts are awarded fairly
Assure best value and defensible award decisions
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Audit Checklist: Award Decision
When an agency makes an award decision, it should: Control bids upon receipt to prevent leaks and additional
opportunities to cure deficits. Have appropriate procedures for handling late or
incomplete proposals Ensure that an adequate number of proposals were
received Use a trained, independent evaluation committee Use fixed, clear, consistent scoring scales to measure
proposals against RFP Check vendor references Document award decision and keep supporting materials 29
Audit Checklist: Contract Provisions
Goals of the contract provisions:
Protect the interests of the agency
Identify the responsibilities of all parties to the contract
Define what is to be delivered
Document the mutual agreement, substance, and parameters of the terms
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Audit Checklist: Contract Provisions (continued)
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Scope, terms, renewals
Deliverables and reporting
Payment amounts, schedules
Limits on the state’s liability
Performance standards/incentives
Audit and inspection
Conditions for termination
Conditions for renegotiation and/or price escalation
Tying payments to deliverables
Appropriate signatures/review
Audit Checklist:Contract Monitoring
Goals of monitoring:
Ensure that contractors comply with contract terms
Ensure that performance expectations are achieved
Identify and resolve problems
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Contract Monitoring(continued)
Proper monitoring includes:Assigning a contract manager with adequate skills,
authority, resources, and timeTracking budgets and compare charges to terms an
conditionsEnsuring on-time deliverables and document
acceptance/rejectionWithholding payment until deliverables are receivedRetaining documentation supporting charges against the
contractEvaluating the contractor’s performance against
pre-established criteria33
Discussion: Part 3
Review/Discuss: What controls should be in place to ensure a defensible award?
What did we miss today, or what additional information would your team need to develop findings related to the contracting process?
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Links
National State Auditors Associationwww.nasact.org/
National Association of State Procurement Officers www.naspo.org/
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For More Information
Contact the Florida Legislature’s
OFFICE OF PROGRAM POLICY ANALYSIS AND GOVERNMENT ACCOUNTABILITY
(850) 488-0021