Procurement for "Dummies" - 2017 Texas Emergency Management Conference
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A layperson’s introduction to federal procurement requirements under 2 CFR Part 200 and straightforward guidance on achieving successful and compliant procurements. This presentation will offer practical step by step guidance on how to perform procurement of typical goods and services using federal funding and is designed to be easily understood by laypeople and nontechnical government employees. download here https://cohnreznick.sharefile.com/d-s51dd213ace4405da
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Procurement for "Dummies" - 2017 Texas Emergency Management Conference
- 1. P r o c u r e m e n t f o r " D u m m i e s " – P r a c t i c a l G u i d a n c e o n P u r c h a s i n g w i t h F e d e r a l F u n d s
- 2. 1May 20, 2017 Kent Burgess, Principal, Government & Public Sector Advisory Roman Castillo, Manager, Government and Public Sector Advisory
- 3. Procurement •Acquiring & buying goods or services from an external source. 2May 20, 2017
- 5. Increase subrecipient knowledge of procurement fundamentals 4May 20, 2017 Presentation Goal
- 6. K e y C o n c e p t s
- 7. F e d e r a l G r a n t s Federal Grants • Exist to fund public services & stimulate the economy of the United States. Scarcity •Limited grant dollars. •Heightened responsibility to allocate grant dollars efficiently. Government Investment • Aim to save money in long run. • Maintain economic, health, & social standards. 6May 20, 2017
- 8. P u b l i c E x p e n d i t u r e R i s k s Waste, fraud & abuse Inefficient programmatic results 7May 20, 2017
- 10. R u l e m a k i n g C o n s i d e r a t i o n s Federal procurement regulations Promote public policies Mitigate risks Behavioral economics 9May 20, 2017
- 11. C o s t - R e l a t e d P r i n c i p l e s Good value to taxpayer Prices are competitive Honest and Fair Free and open competition Obtain goods & services as effectively and economically as possible.
- 12. C o s t - R e l a t e d P r i n c i p l e s 11May 20, 2017 Protect taxpayer funds Contain costs
- 13. N o n C o s t - R e l a t e d P r i n c i p l e s 12May 20, 2017 Promote socioeconomic policies
- 14. 13May 20, 2017
- 15. S o c i o e c o n o m i c I m p l i c a t i o n s • Disasters affect local businesses Recognize Need • Local business benefit from working on FEMA funded projects Leverage Federal Funding • Regulations require free and open competition. • “Level playing field” Promote Free and Open Competition 14May 20, 2017
- 16. P r o m o t i n g S o c i o e c o n o m i c P o l i c i e s Do’s • Provide full & open competition • Add qualified small & MBE/WBE to solicitation lists. • When feasible, divide projects into separate procurements so that smaller business can compete for the award. Don’ts • Award contracts to contractors that developed bids/bid specifications on your behalf. • Include unnecessary experience/bonding • Specify in-State or local geographical preferences May 20, 2017 15
- 17. G o l d e n R u l e s Maintain compliance with federal procurement standards to ensure your procurements are eligible for federal grant funding. 16May 20, 2017
- 18. G o l d e n R u l e s 17May 20, 2017 Maintain detailed records of procurement actions.
- 19. R e g u l a t o r y O v e r v i e w
- 20. R e s p o n s i b i l i t i e s FEMA Responsible for enforcing compliance with procurement standards Texas Responsible for ensuring compliance w/ procurement requirements Subrecipient Must conform to Federal law and the procurement standards 19May 20, 2017
- 21. P r o c u r e m e n t R e q u i r e m e n t s Grants awarded prior to December 2014 Grants awarded after December 2014 44 CFR Part 13 (state, local governments, Indian tribal governments) 2 CFR Part 215 (institutions of higher educations, hospitals, PNPs) 2 C.F.R. pt. 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
- 22. R u l e s & R e g u l a t i o n s In accepting Public Assistance subgrants, subrecipients agree to maintain compliance with 2 CFR Part 200 and 44 CFR Part 206. 2 CFR 200 Uniform Administrative Requirements Cost Principles Audit Requirements for Federal Awards. 44 CFR Part 206 Regulations specific to FEMA Public Assistance funding and eligibility criteria.
- 23. 2 C F R PA R T 2 0 0 Uniform Administrative Requirements • Government-wide grants management policies and guidelines. • Determines how grants are awarded, managed, audited, and closed-out • Helps reduce the risk of fraud, waste, & abuse. Cost Principles • Establishes guidance on what costs are allowable, reasonable, and allocable. • Accounting practices must be consistent with these cost principles. • Must provide adequate documentation to support costs charged to the Federal award. Audit Requirements • Establishes thresholds and requirements for Single Audits. • Establishes the basis for determining Federal award amounts expended. • Establishes requirements for auditees and oversight agencies.
- 24. Te r m i n o l o g y Allowable • Necessary and reasonable for performance of Project Worksheet Reasonable • Does not exceed what a prudent person would pay under same circumstances Allocable • Goods or services are assignable or chargeable to a Project Worksheet 23May 20, 2017
- 25. C o m m o n l y C i t e d Topic Regulation Link Purpose of 2 CFR 2 CFR 200.100 Click here Suspension and debarment 2 CFR 200.213 Click here Financial management 2 CFR 200.302 Click here General procurement standards 2 CFR 200.318 Click here Methods of procurement to be followed 2 CFR 200.320 Click here Contract cost and price 2 CFR 200.323 Click here Direct costs 2 CFR 200.413 Click here Cost Principles 2 CFR Part 200, Subpart E Click here
- 26. P r o c u r e m e n t R e g u l a t i o n s Click here for link to 2 CFR 200 Procurement regulations. • Local governments • PNPs • Hospitals • Educational institutions
- 27. G e n e r a l R e q u i r e m e n t s Subrecipients must comply with the procurement requirements enacted by Federal law, executive orders, Federal regulations, and terms of the grant award. • Federal requirements will control over state & local rules for contracting.
- 28. N o n c o m p l i a n c e Noncompliance with these statutes, EOs, regulations, and policies, may result in: 2 CFR 200.338 – REMEDIES FOR NONCOMPLIANCE Temporarily withheld cash payments Denied use of funds for the cost of the activity not in compliance Suspended or terminated Federal award Initiating suspension or debarment proceedings Withholding further Federal awards for the project
- 29. U s e o f E n f o r c e m e n t P o w e r “Enforcement remedies are the vehicle to ensure protection for all taxpayers and Federal missions are accomplished within the programs’ rules and regulations.”With regards to minimizing taxpayer costs, the Department of Homeland Security, Office of the Inspector General says: 28May 20, 2017
- 30. H o w - t o
- 31. P r o c u r e m e n t P r o c e s s Subrecipient procurement process Identify needs Cost Analysis Determine procurement method Create & publicize solicitation Receive proposals Evaluate proposals Award contract Oversee contract work Verify work & issue payment
- 32. A c c e p t a b l e P r o c u r e m e n t M e t h o d s Procurement Method When to use Micro-Purchase • Supplies/services < $3,500.00 Small Purchase • Aggregate dollar amount of service < $150,000.00. Sealed Bids • Preferred method for procuring construction services. Competitive Proposals (RFQ/RFP) • Architectural/Engineering • Can’t award contract exclusively on price due to the nature of the service. Noncompetitive Proposals • Supply/service only available from one source
- 33. M i c r o P u r c h a s e 1. Appropriate when purchasing commodity/services under $3,500.00 (Micro- Purchase threshold. 2. Subrecipients are not required to solicit competitive quotations. 3. Document determination that the price is fair and reasonable. 4. Example: Purchase $1000.00 of concrete mix for a temporary sidewalk repair. 32May 20, 2017
- 34. F a i r & R e a s o n a b l e Lowes Home Depot Ace Hardware 33May 20, 2017
- 35. S m a l l P u r c h a s e 1. Appropriate for routine commercial, fixed price purchase orders. 2. May not be used for purchases over $150,000.00. 3. Must obtain price or rate quotations from an adequate number of qualified sources (3 bid minimum). 4. Must document the procurement history. 5. Should include a cost estimate that shows the total estimated cost to fall below the $150,000.00 simplified acquisition threshold. 34May 20, 2017
- 36. S m a l l P u r c h a s e Project Owner: Needs lawn mowing services. Vendor Date Contacted Service requested MBE/WBE Licensed Willi ng/ Able Quote Quote Expires Kent 5/15/2017 Bi-weekly mowing service @CohnReznick HQ (.6 Acre) N Y Y $35 12/1/2017 Roman 5/15/2017 Bi-weekly mowing service @CohnReznick HQ (.6 Acre) Y N N $40 12/1/2017 Alisha 5/15/2017 Bi-weekly mowing service @CohnReznick HQ (.6 Acre) Y Y Y $25 12/1/2017 Buzzy 5/15/2017 Bi-weekly mowing service @CohnReznick HQ (.6 Acre) N Y Y $49.99 12/1/2017 May 20, 2017 35
- 37. C o m p e t i t i v e P r o p o s a l s 1. Appropriate when contract award cannot be based exclusively on price due to the nature of the service. 2. The Request for Proposals must identify all evaluation factors and their relative importance. 3. Vendors submit offers and the resulting award must be either a 1) fixed- price or 2) cost-reimbursement type contract. 4. Awards do not need to be made to the lowest priced vendor. However, RFP must indicate that the contract award is to be based on some other non- price-related factors (i.e. proper licensing, past performance, technical resources, & etc.). 36May 20, 2017
- 38. C o m p e t i t i v e P r o p o s a l P r o c e s s Steps Cost Analysis Prepare RFP Publicly Advertise Evaluate proposals (price & other factors) Document rationale for determining winner Negotiate price & award contract 37May 20, 2017
- 39. S e a l e d B i d s 1. Preferred method for procuring construction services when adequate specifications exist. 2. The type of contract awarded under sealed bidding is a firm-fixed-price contract. 3. If the contract amount (including contract modifications) exceeds $150,000 a price or cost analysis must be performed. 4. Price analysis is the most commonly used method to determine fair and reasonable prices during sealed bid procurements. 38May 20, 2017
- 40. S e a l e d B i d s P r o c e s s Steps Prepare Invitation for Bid (include specifications) Publicly Advertise Open bids publicly Evaluate submitted bids without public discussion Price Analysis & document winning bidder Award fixed price contract to responsible bidder whose bid is most advantageous considering only price-related factors. 39May 20, 2017
- 41. C o s t o r P r i c e A n a l y s i s If any procurement exceeds $150,000 (simplified acquisition threshold) Subrecipient must perform a cost or price analysis 40May 20, 2017
- 42. C o s t v s . P r i c e Cost •The expense that a business incurs in bringing a product or service to market. Price •Amount customer pays for that product or service. 41May 20, 2017
- 43. C o s t A n a l y s i s Cost Analysis • Review and evaluate separate cost elements (i.e. labor hours, overhead, materials, etc.) and proposed profit or fee in a vendor’s proposal in order to determine a fair and reasonable price. How? • Compare individual cost elements as proposed by the Vendor with previously incurred actual costs for the same work as completed by the Applicant through Force Account Labor. May 20, 2017 42
- 44. P r i c e A n a l y s i s Price Analysis • Once bids are received, a Price Analysis may be conducted. • Examine and evaluate proposed price without evaluating its separate cost elements. How? • Compare proposed prices received in response to the solicitation; • Compare prior (historical) proposed prices & contract prices with current proposed prices for the same or similar goods or services; • Compare offers with competitively published catalog prices, published market prices. May 20, 2017 43
- 45. B o n d i n g R e q u i r e m e n t ( c o n s t r u c t i o n ) If construction contract will exceed $150,000 (simplified acquisition threshold) Then a 5% bid guarantee & a 100% Performance & Payment Bond will be required 44May 20, 2017
- 46. B o n d i n g R e q u i r e m e n t s Bid Guarantee Assurance that the bidder will, upon acceptance of the bid by the NFE, execute such contractual documents. Payment Bond Assure payment as required by law for all persons supplying labor and material. Performance Bond Secure fulfillment of all the contractor’s obligations under such contract. 45May 20, 2017
- 47. R e q u i r e d C o n t r a c t P r o v i s i o n s • Required contract clauses located at 2 CFR 200, Appendix II. • Must be included in all contracts. • Click here for link to Required Contract clauses. May 20, 2017 46
- 48. S u s p e n d e d o r D e b a r r e d • A contractor that is listed on the Excluded Parties List System found at www.SAM.gov as suspended or debarred, CANNOT be awarded a contract funded with Federal assistance. • Subrecipient’s vendors or contractors are not required to register on sam.gov. May 20, 2017 47
- 49. C o s t - p l u s - a - p e r c e n t a g e - o f - c o s t c o n t r a c t i n g • Incentivize contractors to increase costs. • Higher costs more profit. • Potential earnings are uncapped. • Prohibited contract type. May 20, 2017 48
- 50. H i g h - l e v e l r e v i e w Full & open competition; Maintain procurement history records; Take affirmative steps to contract with Small & Minority and/or Women Owned business; Maintain contractor oversight; Maintain written standards of conduct re: award & administration of contacts; Perform cost or price analysis with procurements > $150,000.00; Avoid cost-plus contracts; Include required contract provisions. 49May 20, 2017
- 51. T h a n k y o u
Editor's Notes
- Welcome guests 2. Introduce speakers on next slide ### Thursday, May 18 10:30-11:30 AM
- 1. Introduce Kent 2. Introduce Roman 3. Introduce CR role in Texas. 4. Discuss CR role in performing compliance monitoring on subrecipient procurements 5. (on next page define Procurement).
- 1. Procurement deals with the sourcing, negotiating and the strategic selection of goods and services. 2. In order to make sure your procurements are eligible for grant funding, one must comply with federal procurement standards. 3. Today we’re going to discuss those standards. ### Sourcing = finding and evaluating suppliers
- To accomplish this we will: Examine procurement concepts; and then Clarify subrecipient responsibilities.
- By the end of this session, the goal is to increase everyone’s knowledge of: What the Federal standards are; and Why those standards exist they way they do.
- 1. Let’s begin with our key concepts.
- Federal grants serve to further national public policy interests. With FEMA funding and Block Grant funding, we’re specifically looking to get economies back on track following a disaster. 2. However, grant funding is limited. In many cases, Congress must pass a supplemental appropriations bill to make DR funding available. 3. These federal grant dollars come from taxpayer dollars, so inherently, and justifiably so, we should all apply a high level of fiduciary responsibility in administering grant funding. ### Multihazard Mitigation Council – 2005 study shows that each dollar spent on mitigation saves an average of four dollars. http://www.nibs.org/page/MMC. Scarcity – “the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.” Fiduciary responsibility - duty of care, accountability, & impartiality with taxpayer dollars.
- 1. As with all grant funding, there is always a risk that the DR funds: may not be controlled properly, may be used for purposes other than those intended, and/or may produce inefficient or uneconomic programmatic results. 2. Here, we can think of waste as spending more than what a prudent person would spend given similar circumstances. 3. An “uneconomic programmatic result” could be a situation where an unqualified contractor produced faulty repairs, which then results in additional money having to be spent to correct these problems. ### Bullet Point 1 source - Fiduciary risks as explained by USAID https://www.usaid.gov/sites/default/files/documents/1868/220mae.pdf
- (play video) (discuss on next slide) ### Milton Friedman was an American economist who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory, and the complexity of stabilization policy.
- 1. What Friedman illustrates in that video clip is that there are also behavioral economics to consider when dealing with federal grants and their procurement rules. 2. It’s safe to say that Procurement regulations have to have: the flexibility required to effectively acquire goods and services, but also; protect the taxpayer from the inherent risks. ### Behavioral Economics: “a method of economic analysis that applies psychological insights into human behavior to explain economic decision-making.”
- 1. So on the one hand, procurement regulations exist in order to maximize value to the taxpayer/society and curb costs.
- 1. But that’s not all. 2. Because on the other hand, procurement rules also serve non cost-related purposes. 3. If FEMA; Texas, or you, the Subrecipient, fails to follow procurement rules and regulations, there is also a failure to promote socioeconomic policies of the United States. 4. Specifically, affirmative steps to a contract with Small & Minority and/or Women Owned Business. 5. Small businesses should also have opportunities to compete for work that’s being paid for in part by taxpayer dollars.
- 1. But that’s not all. 2. Because on the other hand, procurement rules also serve non cost-related purposes. 3. If FEMA; Texas, or you, the Subrecipient, fails to follow procurement rules and regulations, there is also a failure to promote socioeconomic policies of the United States. 4. Specifically, affirmative steps to a contract with Small & Minority and/or Women Owned Business. 5. Small businesses should also have opportunities to compete for work that’s being paid for in part by taxpayer dollars.
- (play video) 2. Discuss on next slide. ### Craig Fugate served as President Barack Obama's FEMA Administrator from May 2009 to January 2017.
- 1. In that clip, Administrator Fugate hits the nail on the head when he says the FEMA money can do more than just fund repairs. 2. Those same dollars can simultaneously stimulate the local economy if local businesses get in on the action. 3. Two birds. One stone.
- 1. And this is why there are procurement regulations that encourage full and open competition. 2. If you, the subrecipient, make an effort to cast a wide net when soliciting bids, and you break your federally funded projects into small components, you effectively make it easier for small, local business to compete for that work. 3. Big companies often carry heavy overhead. That’s built into their prices. So, cast a wide net. Not only might you get better prices, you might also provide work for your local business community.
- Most importantly, we need to maintain compliance with federal rules and regulations in order to keep receive and keep the eligible grant dollars. Equally important is documenting your procurement actions so you can demonstrate your compliance to the state & FEMA.
- Most importantly, we need to maintain compliance with federal rules and regulations in order to keep receive and keep the eligible grant dollars. Equally important is documenting your procurement actions so you can demonstrate your compliance to the state & FEMA.
- 1. Those are the key concepts in terms of WHY procurement rules exist the way they do. 2. Now, let’s take a quick look at the regulatory framework that we’re all operating within.
- From FEMA to Subrecipient, each stakeholder has responsibilities in ensuring compliance with the federal regulations. From this point forward, we’re looking at the responsibilities of the subrecipient.
- 2 C.F.R. § 200.317 – 326 became effective on December 26, 2014. Concepts are similar or identical to 44 CFR Part 13. #### For disasters (and their associated projects) declared prior to that date, the relevant procurement standards can continue to be found in 44 C.F.R. § 13.36(a)-(i) (States, local and tribal governments) and 2 C.F.R. § 215.40-48 (Institutions of Higher Education, Hospitals, and Private Non-Profits).1
- 2 CFR part 200 covers Administrative Requirements & Cost Principles and are the basis for the state’s Accounting Reviews and Compliance Monitoring Efforts. When you accept a Federal grant, you are also accepting the responsibility to follow Federal rules and regulations. ##### 2 CFR Part 200 combined and superseded eight OMB Circulars. It also superseded 44 CFR § 13.36.
- 1. The Uniform Administrative Requirements apply to the administration of all federal grants. These are the regulations that determine how grants are awarded, audited, and closed-out. 2. The Cost Principles, also found in 2 CFR Part 200, are a little different. These are the regulations which govern how FEMA, TDEM, and you the applicant, will determine allowable, reasonable, and allocable costs. ##### Known as the “Super Circular” U.A.R. supersedes and combines the requirements of eight existing OMB Circulars (A-21, A-50, A-87, A-89, A-102, A-110, A-122 and A-133).
- When the state and FEMA are reviewing your procurements, their testing procedures will ask: Were the costs Allowable Were the cost Reasonable; and Are the costs Allocable?
- Because the state and FEMA will be reviewing your actions against the regulations, it’s important that you understand where to look when you want the exact phrasing. This table is intended to help you locate some of the more pressing federal regulations that you need to be familiar with when you accept a subgrant. This table is broken out by topic, cites the regulation, and on the far right column you can click a link which will take you to the full regulation text.
- This list is specific to the procurement regulations. Your commissioners, purchasing staff, and audit staff should be familiar with these regulations. in order to avoid non-compliance pitfalls.
- Your staff may know your internal processes and rules, however, in the event that the Federal regulations are stricter, Federal requirements control over state and local rules.
- A failure to comply with these rules and regulations, even unintentionally, can jeopardize your grant funding. FEMA/TDEM have the authority to: Withhold cash payments; Deny use of funds Terminate the Federal award; Start debarment proceedings; & Withhold further Federal awards.
- FEMA’s mission is to assist communities recovering from disasters and they don’t want to hit subrecipients with de-obligations. However, FEMA is responsible for upholding federal laws. As such is the case, they will have to enforce these remedies from time to time. The Office of the Inspector General continuously monitors FEMA to make sure the agency is upholding its end of the bargain.
- Now that we’ve done a high level overview of concepts, rules, and responsibilities, let’s look at the processes subrecipients must follow.
- In many procurement scenarios, especially competitive procurements and sealed bids, your procurement process will generally follow the lifecycle shown in this graphic.
- The regulations place procurements in 5 categories. Micro Purchase Small Purchase (routine commercial) (fixed price purchase order) Sealed bids Competitive proposals; & Noncompetitive proposals
- 1. Describe micro-purchase method.
- 1. Subrecipient must document its determination that the price is fair and reasonable.
- Informal method to acquire services.
- Must document the procurement history.
- Use this method when conditions are not appropriate for the use of sealed bids (due to the nature of the service).
- Awarded to the responsible bidder whose bid, conforming to all the material terms and conditions of the invitation for bids, is the lowest in price.
- The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold….including contract modifications
- ### http://www.investopedia.com/ask/answers/101314/what-difference-between-cost-and-price.asp
- The form of analysis typically used to establish the basis for negotiating contract prices when using the procurement through competitive proposals method.
- Typically used when acquiring commercial items or when using the procurement through sealed bidding method.
- There are bonding requirements for construction contracts exceeding the simplified acquisition threshold.
- If the NFE is procuring neither construction nor facility improvement services, then there are no bonding requirements.
- Contracts must contain the applicable provisions described in Appendix II to the Uniform Rules.
- A contract award must not be made to parties listed on the SAM Exclusions list
- 2 C.F.R. § 200.323(d) explicitly prohibits cost-plus contracts.
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