AASBO Education Programs Advance Purchasing. Session III Bids & Proposals Evaluation & Award of Proposals Contract Administration Overview Managing vendor

AASBO Education Programs

Advance Purchasing

Session III

Bids & Proposals• Evaluation & Award of Proposals

Contract Administration• Overview

• Managing vendor performance

• Reporting vendor performance

• Vendor Payment

• Unacceptable Vendor Performance

• Contract Termination

AASBO Advance Purchasing

You make the call…

• The vendor is well respected in the district, but its initial proposal is unacceptable. What do you do?

• Receipt of a best and final offer was critical for continued consideration of Vendor A. Vendor A’s best and final offer was late. What do you do?

• Acme offered an excellent solution. However, it is much different from any other solution. You want to know if other vendors are capable of offering Acme’s solution. What do you do?

• Proposal pricing is all over the board. How do you compare the pricing?

• You received the committee’s award recommendation. It appears to you that one member’s scoring skewed the results. What do you do?

• When should you use specific numeric scoring to award proposals?• What are the pros and cons of listing points and weights in the RFP?

Evaluation & Award - Proposals

Determining the proposal most advantageous to the school district

• Shall be based solely on the factors set forth in the request for proposals.

• Proposals may be compared.

• Specific numerical weighting may be used.

• Discussions may be conducted with responsible offerors for the purpose of clarification to assure full understanding of, and responsiveness to, the solicitation’s requirements.

• Proposals may be revised via best & final offers.

• A proposal mistake may be corrected through the best and final offer.

• If an offeror does not submit a notice of withdrawal or best and final offeror, that vendor’s immediate previous offer shall be considered the best and final offeror.


Best and final offers•Prior to conducting discussions, determine if proposals are acceptable or unacceptable for further consideration. A determination that a proposal is unacceptable shall be in writing and state the basis of the determination. •If the district determines a proposal is unacceptable, the district shall notify the offeror of the determination and that offeror shall not be afforded an opportunity to amend its offer.

•If discussions are conducted, the school district shall issue a written request for best and final offers. The request shall set forth the date, time and place for the submission of best and final offers.

•Best and final offers shall be requested only once, unless the school district makes a determination that it is advantageous to the school district to conduct further discussions or change the school district's requirements.

•The request for best and final offers shall inform offerors that, if they do not submit a notice of withdrawal or a best and final offer, their immediate previous offer will be construed as their best and final offer.

•Receipt and opening of best and final offers is handled in the same manner as receipt and opening of proposals.


Vendor Presentations• Presentations may be part of proposal evaluation.

• The solicitation should specify that presentations will/may be part of evaluations.

• Presentations should be limited to offerors with a reasonable chance of award.

• Offerors must be provided with sufficient time to prepare, travel & present.

• Offerors must be treated fairly.

• Presentations should be managed.

• Providing an advance list of common questions is acceptable.

• Providing advance notice of expectations and/or limitations facilitates a proper presentation.

• Evaluators may ask questions at presentation sessions.


Numeric Scoring• The solicitation lists the evaluation criteria in relative order of importance. The

scoring matrix must be consistent with the order the criteria are listed in the solicitation.

• Scoring may be weighted. Use caution in assigning weights.

• Generally, it is not required that points or weights for criteria be listed in the RFP.

• Maintain the integrity of the scoring process. Ranking is an excellent means to maintain scoring integrity.

• Group discussion is good. Multiple opinions on the quality of proposals is not necessarily bad.

• Ensure all parties are have the same understanding of the criteria.• Determining a common price score based upon ranking is a valuable tool.• With the exception of price, independent scoring is necessary.

Evaluation & AwardProposals

Numeric Scoring

Weights are reasonable andconsistent with order of criteria inthe solicitation.


Numeric Scoring

Weights are reasonable, but not consistent with order of criteria in the solicitation.


Numeric Scoring

Weight for item 1 is not reasonable. It skews the scoring.


Price Scoring

• Each evaluation criteria has a raw maximum score of 10 points.• Price has a weight of 1.5, giving it a weighted maximum of 15 points.• The lowest price gets the raw maximum of 10 points (Firm B)• Firm A & Firm C receive raw points proportionate to Firm A.• Firm B: ($68.00/$87.30) X 10 = 7.79 points.• Firm C: ($68.00/$89.25) X 10 = 7.62 points.• The Raw point scores are multiplied by 1.5 to determine the calculated (weighted)

point score.• The calculated (weighted) points are transferred to the score sheet.

Pricing Scores 2.2 Purchasing and Materials Management Consulting

Consulting Rate

Raw Score

Calculated Score

Firm A $87.30 7.79 11.68Firm B $68.00 10.00 15.00Firm C $89.25 7.62 11.43

Minimum Rate $68.00


Scoring

Mary Firm A Firm B Firm C1 20.00 20.00 20.002 8.00 14.00 16.003 6.00 11.00 13.504 11.68 15.00 11.435 6.00 10.00 10.006 6.00 9.00 10.00

Total 57.68 79.00 80.93

Nancy Firm A Firm B Firm C1 20.00 20.00 20.002 10.00 12.00 16.003 6.00 10.00 13.504 11.68 15.00 11.435 5.00 10.00 9.006 4.00 9.00 10.00

Total 56.68 76.00 79.93

Tom Firm A Firm B Firm C1 20.00 20.00 20.002 11.00 20.00 18.003 6.50 15.00 13.504 11.68 15.00 11.435 5.00 10.00 9.506 4.00 10.00 10.00

Total 58.18 90.00 82.43

Mary Nancy Tom TotalFirm A 57.68 56.68 58.15 172.51Firm B 79.00 76.00 90.00 245.00Firm C 80.93 79.93 82.43 243.29

RankingMary Nancy Tom Total

Firm A 3 3 3 9Firm B 2 2 1 5Firm C 1 1 2 4


What does it all mean?•No criteria or factors may be used in proposal evaluation that are not set forth in the solicitation. •You have the ability to compare the offers to determine the solution fit for the district.•You have the ability to engage in detailed discussion with offerors.•The rules expressly state that the most advantageous proposal may not be lowest cost.•Best and final offers are valuable tools. Use them, but use them properly.•When using numerical scoring, a lower priority criterion should not be worth more points than higher priority criteria.•When using weighted scoring, reasonable weights must be assigned in order to avoid skewed scoring.•Contract awards that are based upon raw scores may not provide the best results.


• The district ordered Acme Part #12345. The vendor delivered Dow Part #13254. What do you do?

• The contractor is 1 week beyond the specified completion date. What do you do?

• It is 2 weeks before the start of school. The #2 pencils have not arrived. What do you do? What should you consider in making the decision?

• You just received a notice of default on the performance and payment bonds for a construction project. What are your options? What do you do?

• The contract requires that the vendor provide biweekly updates. You met with him twice regarding the problem. Each time he told you a good story and promised to correct the matter. You agreed to give him some slack, but he deliver. What do you do?

• The vendor delivered the ordered desks. The district received the correct item. The school tries the desks for a month and said the vendor sold them the wrong thing. The account rep says he provided the school with a solution that matched their specified requirements. The school wants to return the desks. The vendor says the desks cannot be returned. What do you do?

• The vendor did a great job on a difficult contract. What do you do?

Contract Administration

How would you define contract administration?

Contract Administration is the activities the buyer performs after a contract has been awarded to determine how well the buyer and the contractor performed to meet the contract’s requirements.

Contract administration includes…•All dealings between the buyer and the contractor from the time the contract is awarded until the work is complete, accepted and paid; resolution of disputes, controversies and claims; and/or termination of the contract. •A focus on obtaining supplies and services, in the specified quantity, of the specified quality, on time, and within budget. •The exercise of skill and judgment in determining the proper course of action in administering the contract in order to protect the public interest.•Fair and equitable treatment of all parties to the contract.•Documentation sufficient to substantiate any and all contract decisions.

Overview

• The contract is not complete when the order is placed.

• All contracts require some level of contract administration.

• Contract administration is probably the most overlooked part of school procurement.

• Contract administration is probably the task school personnel are least prepared to perform.

• The primary tool for contract administration is the contract.

• There are a number of things to consider before the contract is written and signed.



Contracts must be complete and legal to be enforceable

Contracts must contain all of the required elements1. Offer and acceptance2. Consideration3. Mutuality of obligation4. Capacity of the parties5. Legality of purpose

Contracts must comply with applicable rules, regulations & statutes1. Common law2. Uniform Commercial Code (UCC)3. Arizona Revised Statutes (ARS)4. Arizona Administrative Code (AAC)5. Uniform System of Financial Records (USFR)6. Board Policies7. AG Legal Opinions8. Others?

Contract administration is performed under the principles of the law of agency

• Agency is the authority to act on behalf of another.

• Agent can act as if he/she is the other party.

• Agent must act within the granted authority.

• An individual acting outside of his/her authority is not an agent.

• Actual and apparent authority.

• Administrative Law (statutes, case law, rules & regulations).

• Criminal Law (punishment, imprisonment, fines).

• Tort Law (civil law, common law, claims, protests).


What is a contract?

A contract is an exchange of promises between two or more parties to do or refrain from doing an act which is enforceable in a court of law.

Contracts include…•A verbal agreement (with specific limitations). •A purchase order. •A procurement solicitation and the awarded bid or proposal.•An owner generated contract in lieu of a procurement solicitation and the awarded bid or proposal.•A vendor generated contract in lieu of a procurement solicitation and the awarded bid or proposal.•A vendor generated contract in addition to a procurement solicitation and the awarded bid or proposal.•An owner or vendor generated contract without a procurement solicitation.



Must there be a purchase order before a contract is established?

Generally, yes.

6.Purchase orders should be prepared for all district expenditures except for exempted items such as salaries and related costs, utilities, and in-state travel, or when a written contract otherwise is prepared.

(USFR, Section VI-G Expenditures, Policies (emphasis added))

Using the solicitation & the purchase order as a contract

Clearly identify the parts of the contract in the solicitation

Develop a clear scope of work

Use clauses that measure compliance• Quantification Based• Qualification Based

Develop the scope of work with contract in mind• Develop the special terms, scope and the contract at the same time

Look for conflicting terms or documents in the vendor’s offer

Contract management documentation• Surveying the using department• Communicating to the vendor


Owner created contract in lieu of solicitation

Clearly identify the parts of the contract in the solicitation

Standard supplemental contract template

Modify the template• Incorporating the solicitation scope• Defining measurable outcomes

Negotiate the final contract within the scope of work


Vendor originated negotiated contract

Read/understand the vendor contract

Ensure complies with applicable requirements

Negotiate acceptable terms (remove terms not in the district’s best interests)

Include quantifiable management tools

Timely review, negotiation and agreement are essential


Types of Contracts (R7-2-1091)

Single purchase contract• A single purchase with one delivery.

Blanket contract• Specified multiple purchases.

Term contract• Multiple as-needed, when-needed purchases over a specified time period.

Multi-term contract (R7-2-1093)• More than one specified time period (term).• Generally limited to a maximum of five years.• Use one year contract w/annual renewals or include funding out clause.• Requires a written determination by governing board or delegated official.

Multiple award contract• More than one vendor is awarded a contract.• Defined in procurement rules & acknowledged by Auditor General (2005).• Must determine that single award is not advantageous and limit award to least

number of suppliers necessary to meet requirements.• Document basis for decisions.


Selecting the right contract

Understand the requirements

Understand the market• Stable vs. unstable markets

Commodities contracts

Services contracts

Leases


How do you determine appropriate contract administration decisions?


See what the contract says!

Managing Vendor PerformanceProvide the tools• Define performance requirements in the contract.• Identify measurement tools in the contract.• Use sound judgment.• Designate a responsible party.

Use the tools• Follow through on the requirements.• Report the outcomes.

Limit managing by exception• Common form of contract administration.• Basically defined as no action taken unless complaints are received from user.• Generally not effective.

Be timely• Follow the contract’s schedule.• Promptly report/address findings.



Managing Vendor PerformanceBe decisive• Avoid the “one more chance” trap.• Make firm action decisions.• Clearly define your decisions & requirements.• Do what you say you will do.

Be reasonable• Responsibility is to do the right thing.• Sometimes doing the right thing means finding in vendor’s favor.• Every decision must be honest, ethical and comply with the contract.

Common vendor performance activities• Receiving and inspection to verify specification compliance & condition of

goods.• Quality assurance testing & review to ensure products perform as desired or

promised.• Milestone monitoring the ensure schedules are met.• Performance assessment.

Reporting Vendor PerformanceRoutine• Receiving reports• Work orders• Payment applications

Defined Reporting• Formal vendor performance report• Formal vendor nonperformance report• Formal product/service/vendor request• Satisfaction surveys• Formal contract volume reports• Others?



• The vendor’s terms are payment of 50% of contract upon signing, 30% upon delivery of goods, and 20% upon acceptance and closeout. What do you do? Would your decision change if this was the only vendor?

• The vendor’s terms are payment for materials when received by the vendor. Progress payments for the balance of the project. What do you do? Would your decision change if this was the only vendor?

• A principal wants to register for a conference. The vendor will not accept a purchase order and will not confirm the registration until payment is received. What do you do?

• The vendor offers a 5% discount if you prepay. What do you do?


Vendor PaymentPrepayment

In accordance with A.R.S. §15-905.N, districts may prepay any item that is normally prepaid in order to procure it or to receive a discounted price. Such items may include insurance premiums, magazine subscriptions, conference registrations, hotel accommodations, airfare, service/maintenance contracts, membership dues, early payments of lease purchases to reduce interest costs, enrollment fees, and payments to vendors that do not accept purchase orders, such as the federal government. Other items not specified may also be prepaid, but must meet the same criteria mentioned above. Districts should prepare written documentation, signed by authorized district management, supporting the decision to prepay such items and retain it with expenditure supporting documentation.

Items not meeting the prepayment specifications of A.R.S. §15-905.N may be paid only after being received.

(USFR, Section VI-G Expenditures, Policies (emphasis added))

Vendor PaymentInterim payments• Materials, service, construction are generally paid after receipt & acceptance.• Interim, or progress, payments meet the requirement.• Interim payments should be based upon a schedule and criteria in the contract.• Under carefully controlled circumstances, interim payments may include stored

goods.“ Upon prior written agreement between the contractor and school district, payment

may be made for materials not incorporated in the work but delivered and suitably stored at the site or some other location, for installation at a later date. An inventory of the stored materials must be provided to school district prior to payment. Such materials must be stored and protected in a secure location, and be insured for their full value by the contractor against loss and damage. Contractor agrees to provide proof of coverage and/or addition of school district as an additional insured upon school district’s request. Additionally, if stored offsite, the materials must also be clearly identified as property of school district and be separated from other materials. School district must be allowed reasonable opportunity to inspect and take inventory of stored materials, on or offsite, as necessary.”



Vendor Payment

Change orders and contract amendments• Revisions to the original scope.• Increase/decrease in negotiated price.• Change order/amendment negotiations and documentation.

Disputes• Check the contract.• Check the law.• Seek counsel.

Unacceptable Vendor PerformanceWhat does the law say?

What does the contract say?

Considerations• Willful nonperformance.• Dishonesty/deceit.• Unforeseen conditions.• Unforeseen occurrences.• Acts of God.• Insolvency

Options• Allow more time.• Approve a substitution.• Approve a change order.• Renegotiate price.• Damages/penalties.• Suspend the contract.• Terminate the contract.



Contract TerminationWhat does the law say?

What does the contract say?

Considerations• Operational impact• Financial impact• Strength of position

Forms of termination• Failure to perform (default)• Termination for convenience• Breach of contract• Delivery failure• Damage• Buyer cancels before seller is obligated to deliver (anticipatory)• Damages (Injury/No injury)

Actions• Communicate to AP contract is breached• Stop payment

Best Practices

• The contract administrator is properly trained

• The contract administrator understands the contract and the expectations for contract management

• The relationship between the contract administrator, contractor and others will be well defined.

• Roles and responsibilities are well defined

• The contract administrator adequately monitors the contract

• Contract performance is sufficiently documented

• The contract administrator properly closes the completed contract.


Documents

AASBO Education Programs Advance Purchasing. Session III Bids & Proposals Evaluation & Award of Proposals Contract Administration Overview Managing vendor