# Presentation: 040110

## Procurement Process

- Ernest D. Worsham
- Chief, Ft. Worth Operations Branch

**Notes:**
Training binder materials include:
1. A two-page response to the Survey Comments for Procurement.
2. A two-page document of Helpful Web Sites for Procurement.
3. A copy of 24 CFR 84.40 thru 48 (5 pages).
4. A copy of 24 CFR 85.36 (9 pages).

## Procurement Process

- Methods of Procurement
- Other Aspects of the Procurement Process
- Questions

## I. Methods of Procurement

- Small purchase procedures – 85.36(d)(1)
- Competitive sealed bids – 85.36(d)(2)
- Competitive proposals – 85.36(d)(3)
- Noncompetitive proposals – 85.36(d)(4)

## A. Small Purchase Procedures

- Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the simplified acquisition threshold fixed at 41 U.S.C. 403(11) (currently set at $100,000).

## A. Small Purchase Procedures

- If small purchase procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources.
- Other considerations:
- Document receipt of price or rate quotations from at least three sources.
- Whenever practicable, request quotations or offers from two sources not included in the previous solicitation.

## B. Competitive Sealed Bids(Formal Advertising)

- Bids are publicly solicited and a firm-fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price.
- The sealed bid method is the preferred method for procuring construction, if the conditions in § 85.36(d)(2)(i) apply.

## B. Competitive Sealed Bids

- In order for sealed bidding to be feasible, the following conditions should be present:
- A complete, adequate, and realistic specification or purchase description is available;
- Two or  more responsible bidders are willing and able to compete effectively and** **for the business; and
- The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price.

## B. Competitive Sealed Bids

- If sealed bids are used, the following requirements apply:
- The invitation for bids will be publicly advertised and bids shall be solicited from an adequate number of known suppliers, providing them sufficient time prior to the date set for opening the bids;
- The invitation for bids, which will include any specifications and pertinent attachments, shall define the items or services in order for the bidder to properly respond;

## B. Competitive Sealed Bids

- Requirements (cont.):
- All bids will be publicly opened at the time and place prescribed in the invitation for bids;
- A firm fixed-price contract award will be made in writing to the lowest responsive** **and responsible bidder.
- Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs shall be considered in determining which bid is lowest;
- Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and

## B. Competitive Sealed Bids

- Requirements (cont.):
- Any or all bids may be rejected if there is a sound documented reason.

## B. Competitive Sealed Bids

- Other considerations:
- As with small purchases, receipt of sealed bids must be documented.
- It must be documented that the procurement lend itself to a firm-fixed-price contract and that selection of the successful bidder be made principally on the basis of price.
- The Invitation For Bid (IFB) must be advertised in a publication of general circulation.

## B. Competitive Sealed Bids

- Other considerations (cont.):
- The IFB, including specifications and pertinent attachments, clearly define the items or services needed in order for the bidders to properly respond to the invitation.
- The bids (all) must be opened publicly at the time and place stated in the IFB.
- The contract must be awarded to the lowest responsive and responsible bidder.

## C. Competitive Proposals

- The technique of competitive proposals is normally conducted with more than one source submitting an offer, and either a fixed-price or cost-reimbursement type contract is awarded.
- It is generally used when conditions are not appropriate for the use of sealed bids.

## C. Competitive Proposals

- If this method is used, the following requirements apply:
- Requests for proposals will be publicized and identify all evaluation factors and their relative importance.
- Any response to publicized requests for proposals shall be honored to the maximum extent practical;
-  Proposals will be solicited from an adequate number of qualified sources;
-  Grantees and sub-grantees will have a method for conducting technical evaluations of the proposals received and for selecting awardees;

## C. Competitive Proposals

- Requirements (cont.):
- Awards will be made to the responsible firm whose proposal is most advantageous to the program, with price and other factors considered; and
- Grantees and sub-grantees may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby competitors’ qualifications are evaluated and the most qualified competitor is selected, subject to negotiation of fair and reasonable compensation.

## C. Competitive Proposals

- Requirements (cont.):
- The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services.
- It cannot be used to purchase other types of services though A/E firms are a potential source to perform the proposed effort.

## C. Competitive Proposals

- Other considerations:
- It must be documented that this method of procurement was utilized because conditions were not appropriate for the use of competitive sealed bids.
- The Request For Proposal (RFP) must state clearly and accurately the technical requirements for the goods or services to be procured.
- As with the aforementioned procurement methods, you must solicit proposals from an adequate number of qualified sources, consistent with the nature and requirements of the procurement.

## C. Competitive Proposals

- Other considerations (cont.):
- The RFP must be publicized and you must honor all requests by parties to compete to the maximum extent practicable.
- The RFP must identify all significant evaluation factors, including price or cost where required, and their relative importance.

## C. Competitive Proposals

- Other considerations (cont.):
- Technical evaluations of submitted proposals must be conducted and documented:
- Determine responsible offerors from such evaluations;
- As necessary, conduct negotiations, written or oral, for final contract award; and, then
- Document and make the award to the most responsive, responsible offeror whose proposal is the most advantageous to the grantee after price and other factors have been considered.

## C. Competitive Proposals

- Other considerations (cont.):
- If proposals involving architectural/engineering (A/E) professional services are evaluated with respect to factors other than price, you must document the basis for negotiation of fair and reasonable compensation (See 85.36 (f) for more details regarding what must be done to perform a cost or price analysis).
_**UNDER NO CIRCUMSTANCES SHALL A COST PLUS PERCENTAGE OF COST AND PERCENTAGE OF CONSTRUCTION COST METHODS OF CONTRACTING BE USED.**_

## D. Noncompetitive Proposals

- Procurement by noncompetitive proposals is procurement through solicitation of a proposal from only one source, or after solicitation of a number of sources, competition is determined inadequate.

## D. Noncompetitive Proposals

- Procurement by noncompetitive proposals may be used only when the award of a contract is infeasible under small purchase procedures, sealed bids or competitive proposals and one of the following circumstances applies:

## D. Noncompetitive Proposals

- Circumstances:
- The item is available only from a single source;
- The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation;
- The awarding agency authorizes noncompetitive proposals; or
- After solicitation of a number of sources, competition is determined inadequate.

## D. Noncompetitive Proposals

- Cost analysis, i.e., verifying the proposed cost data, the projections of the data, and the evaluation of the specific elements of costs and profits, is required.
- Grantees and sub-grantees may be required to submit the proposed procurement to the awarding agency for pre-award review in accordance with paragraph 85.36(g).

## D. Noncompetitive Proposals

- Other consideration:
- It must be documented that another method of procurement (small purchases, sealed bids or competitive proposals) was infeasible because the item is only available from a single source, a public exigency or emergency is of such urgency to not permit use of competitive solicitation, after solicitation of a number of sources, competition is determined inadequate, or approval was granted by HUD.

## II. Other Aspects of the Procurement Process

- General provisions/procedures – 85.36(i)
- Bonding and insurance – 85.36(h)
- Contracting with small and minority firms, women’s business enterprise and labor surplus area firms – 85.36(e)

## A. General Provisions/Procedures

- Federal agencies are permitted to require changes, remedies, changed conditions, access and record retention, suspension of work, and other clauses approved by the Office of Federal Procurement Policy.
- There is a host of these other clauses at 85.36(i).

## A. General Provisions/Procedures

- Other considerations:
- It must be documented that award is not made to any party on the General Services Administration’s list of Parties Excluded from Federal Procurement or Non-Procurement Programs.
- The contract file must be documented with the rationale for:
- Selection of the procurement method;
- Selection of contract type;
- Contractor selection or rejection; and
- Basis for the cost or price of the contract.

## A. General Provisions/Procedures

- Other considerations (cont.):
- Procurement procedures must be in place to ensure that:
- Purchase orders and contracts are signed by an authorized program official;
- Items delivered and paid for are consistent with the items contained in the corresponding purchase order and/or contract;
- Timely payment of vendors occurs once requested orders have been delivered, inspected, and accepted and payment of the vendor has been approved;

## A. General Provisions/Procedures

- Other considerations (cont.):
- A cost or price analysis is performed in connection with every procurement action, including contract modifications; and
- Profit is negotiated as a separate element of price where price competition is lacking or a cost analysis is performed.

## A. General Provisions/Procedures

- Other considerations (cont.):
- The contract provisions listed at 85.36(i) are appropriately included in the contract.
- There must be a written code of conduct governing employees, officers or agents engaged in the award and administration of contracts supported by grant funds (See 85.36 (b)).
- There must be a documented system of contract administration for determining the adequacy of contractor’s performance.

## A. General Provisions/Procedures

- Other considerations (cont.):
- There must be documentation that shows your sub-grantees are required to follow applicable procurement policies and procedures in the administration of their contracts and purchase orders.

## B. Bonding and Insurance

- For construction or facility improvement contracts or subcontracts exceeding the simplified acquisition threshold, the awarding agency may accept the bonding policy and requirements of the grantee or sub-grantee provided the awarding agency has made a determination that the awarding agency’s interest is adequately protected.

## B. Bonding and Insurance

- If such a determination has not been made, the minimum requirements shall be as follows:
- A bid guarantee from each bidder equivalent to five percent of the bid price.
- The “bid guarantee” shall consist of a firm commitment such as a bid bond, certified check, or other negotiable instrument accompanying a bid as  assurance that the bidder will, upon acceptance of his bid, execute such contractual documents as may be required within the time specified.

## B. Bonding and Insurance

- Minimum requirements (cont.):
- A performance bond on the part of the contractor for 100 percent of the contract price.
- A “performance bond” is one executed in connection with a contract to secure fulfillment of all the contractor’s obligations under such contract.

## B. Bonding and Insurance

- Minimum requirements (cont.):
- A payment bond on the part of the contractor for 100 percent of the contract price.
- A “payment bond” is one executed in connection with a contract to assure payment as required by law of all persons supplying labor and material in the execution of the work provided for in the contract.

## B. Bonding and Insurance

- Other consideration:
- The contract file must be documented accordingly with respect to bonding and insurance.

## C. Contracting with Small and Minority Firms, Women’s Business Enterprise and Labor Surplus Area Firms

- The grantee and sub-grantee will take all necessary affirmative steps to assure that minority firms, women’s business enterprises, and labor surplus area firms are used when possible.

## C. Contracting with Small and Minority Firms, Women’s Business Enterprise and Labor Surplus Area Firms

- Affirmative steps shall include:
- Placing qualified small and minority businesses and women’s business enterprises on solicitation lists;
- Assuring that small and minority businesses, and women’s business enterprises are solicited whenever they are potential sources;
- Dividing total requirements, when economically feasible, into smaller tasks or quantities to permit maximum participation by small and minority business, and women’s business enterprises;

## C. Contracting with Small and Minority Firms, Women’s Business Enterprise and Labor Surplus Area Firms

- Affirmative steps (cont.):
- Establishing delivery schedules, where the requirement permits, which encourage participation by small and minority business, and women’s business enterprises;
- Using the services and assistance of the Small Business Administration, and the Minority Business Development Agency of the Department of Commerce; and
- Requiring the prime contractor, if subcontracts are to be let, to take the affirmative steps listed in paragraphs 85.36(e)(2) (i) through (v).

## C. Contracting with Small and Minority Firms, Women’s Business Enterprise and Labor Surplus Area Firms

- Other considerations:
- Basically, the contract file must be documented accordingly with respect to the affirmative steps mentioned above.
- If the steps above are not being taken, then the contract file must be documented with the steps that are being taken.

## III. Questions