Chapter 1
CONTRACTING OVERVIEW
1.1. PROCUREMENT AUTHORITY
The
requirements for service contracting are explained in the following chapters. Agencies
derive legal authority for services contracting either from the agency’s own
enabling act or from Executive Order 25. Examples of some agencies with
independent purchasing authority that includes authority to purchase services
include the Iowa Lottery, the Iowa Communications Network, and the Department
of Transportation. A copy of the Executive Order is included in this Guide
at Appendix E. Rules regarding service contracting are set forth in 11 IAC
chapters 106 and 107. A copy of the rules is included in this Guide
at Appendix H.
1.2.COMPETITIVE
PROCUREMENT – WHEN YOU NEED IT, WHEN YOU DON’T
It is always
advisable to use a competitive procurement process for services. Competition is
required for service contracts when the estimated annual value of the services
contract is equal to or greater than $5,000 or when the estimated value of the
multiyear services contract in the aggregate, including any renewals, is equal
to or greater than $15,000 unless there is adequate justification for a sole
source or emergency procurement pursuant to rule 106.7(18) or 106.8(18) or
another provision of law or if you obtain the service from an intergovernmental
agreement. In keeping with the state’s public policy favoring competition, use
of competition is recommended when feasible even if competition is not
technically required. Executive Order 25 also encourages agencies to use
reasonable efforts to ensure that they use public funds to purchase services in
a way that obtains the best value. You are well advised to
use competitive procurement. Here's why:
• Increased Participation – A competitive process provides a greater number of firms an opportunity to submit proposals/offers to the state and encourages qualified firms to participate.
• Lower Prices – Full and open competition reduces costs since prospective contractors submit their best offers to obtain contracts.
• Higher Quality – Service Providers who develop proposals in a competitive environment pull together the strongest management and technical teams available.
• Innovation – Issuing solicitations to a number of service providers gives an agency the opportunity to select from the most qualified and skilled talent available in the marketplace. An agency may find a service provider's alternative approach to solving a problem more effective than that initially envisioned by staff.
• Favoritism – Unfounded or not, accusations of favoritism can hurt your agency and mar its reputation. Conducting a fair and open competitive process will help avoid any such claims.
• Unsavory
Publicity – Even the best-prepared
contracts can go awry. When they do, you are in a more defensible position when
you have competitively bid your project.
1.3. DEFINING
SERVICES
11 IAC chapters 106 and 107define
services as:
“Service” or
“services” means work performed for a department or establishment or for its
clients by a service provider and includes, but is not limited to:
1.Professional or technical expertise provided by a consultant,
advisor or other technical or service provider to accomplish a specific study,
review, project, task, or other work as described in the scope of work. By way
of example and not by limitation, these services may include the following:
accounting services; aerial surveys; aerial mapping and seeding; appraisal
services; land surveying services; construction manager services; analysis and
assessment of processes, programs, fiscal impact compliance, systems and the
like; auditing services; communications services; services of peer reviewers,
attorneys, financial advisors, and expert witnesses for litigation;
architectural services; information technology consulting services; services of
investment advisors and managers; marketing services; policy development and
recommendations; program development; public involvement services and
strategies; research services; scientific and related technical services;
software development and system design; and the services of underwriters,
physicians, pharmacists, engineers, and architects; or
2. Services
provided by a vendor to accomplish routine functions. These services contribute
to the day–to–day operations of state government. By way of example and not by
limitation, these services may include the following: ambulance service;
charter service; boiler testing; bookkeeping service; building alarm systems
service and repair; commercial laundry service; communications systems
installations servicing and repair; court reporting and transcription services;
engraving service; equipment or machine installation; preventive maintenance,
inspection, calibration and repair; heating ventilation and air conditioning
(HVAC) system maintenance service; janitorial service; painting; pest and weed
control service; grounds maintenance, mowing, parking lot sweeping and snow
removal service; towing service; translation services; and travel service.
Contracts for
services may be awarded to individuals, joint ventures, partnerships,
corporations, or non-profit organizations.
1.4.PROCUREMENT
OF SERVICES
Competitive procurement
of some types of services involves evaluation of proposals based on multiple
factors, rather than relying on price as the determinant factor. Agencies
determine the weighted value of evaluation criteria and negotiate the contract
based on these criteria. This is a different type of procurement process than
when the only factor is determining the lowest cost submitted by a responsible
bidder.
Services are
often more subjective in nature and, therefore, more difficult to specify than
services or products procured through an invitation to bid process. Intangible
properties such as human effort and impartial advice cannot be bought and sold
in the same way as supplies or equipment. Evaluation criteria for service
procurements may include quality, reputation, experience and technical
capabilities among the evaluation criteria. Cost or price is an element in
evaluation but the selection need not be driven by price. The solicitation
document must clearly set forth the evaluation criteria.
1.5. ETHICS AND CONDUCT
State employees
contracting on behalf of the State must maintain the highest ethical standards
and avoid any real or apparent conflict of interest. Ethical conduct on the
part of state employees participating in the contracting process helps to
ensure the fairness of the process. While State statutes address specific
responsibilities of State employees in contracting, general ethical principles
also apply.
Conflicts of Interest: Generally,
a conflict of interest exists whenever a person serving the public may gain a
private advantage, financial or otherwise, through their public capacity. You
can have a conflict of interest even though you never seek a private advantage
or actually gain one.
Iowa Code section
68B.2A(1) prohibits state employees from engaging in
“any outside employment or activity which is in conflict with the persons
official duties and responsibilities.” The statute contains a list of things
that are deemed to be unacceptable conflicts of interest. However, state
employees should keep in mind that the list is not exhaustive; unacceptable
conflicts of interest could exist in other situations as well.
Examples of unacceptable conflicts of interest include:
Outside employment involving the
use of the State’s time, facilities, equipment and supplies or the use of
employment with the State “to give the person or members of the person’s
immediate family an advantage or pecuniary benefit that is not available to
other similarly situated members of the general public.” Iowa Code section 68B.2A(1)(a).
Outside employment involving the receipt of money or
other consideration by the person or member of the person’s family “for the
performance of any act that the person would be required or expected to perform
as a part of that person’s regular duties or during the hours which the person
performs service or work for the state.” Iowa Code section 68B.2A(1)(b).
This provision does not prohibit a state employee from operating a side
business as long as the employee does not contract to be paid separately for
services that he or she would be obligated to perform as part of his or her
state employment and the employee performs the services on his or her own time
using his or her own equipment and supplies. You should note, however, that
other considerations, including individual agency policies, might preclude
operating a side business.
Outside employment that “is subject to the official
control, inspection, review, audit, or enforcement authority of the person
during the performance of the person’s duties or office of employment.” Iowa
Code section 68B.2A(1)(c).
Penalties for
violation of the Section 68B.2A include criminal liability (violation is a
serious misdemeanor) and job–related discipline or sanction. See Iowa
Code section 68B.25. If you are working on a contract involving federal funds,
there may also be federal restrictions on conflicts of interest that you are
obligated to comply with.
Sales to State Agencies: Iowa Code section 68B.3 prohibits state employees from selling, in any one occurrence, goods or services having a value in excess of two thousand dollars unless the sale is made pursuant to an award or contract let after public notice and competitive bidding. (This $2,000 threshold applies only to sales a state employee may make to a state agency. This threshold is separate from the bidding threshold requirements discussed in chapter 5.) There are exceptions for certain kinds of services. You should consult with legal counsel if you need further assistance regarding these provisions.
Penalties for
violation of section 68B.3 include criminal liability (violation is a serious
misdemeanor) and job-related discipline or sanction. See Iowa Code
section 68B.25.
Gift Law: Service providers and potential service providers are restricted donors and you should not accept or solicit gifts from them. Public employees, and members of their immediate families, may not solicit, accept or receive gifts from restricted donors. Iowa Code subsection 68B.22(1). The statute defines “restricted donors” to include several categories of persons. One of the categories is a person who “is seeking to be a party to any one or any combination of sales, purchases, leases, or contracts to, from, or with the agency in which the donee holds office or is employed.” Iowa Code section 68B.2(24). Restricted donors are also prohibited from offering or giving gifts to public employees. Iowa Code subsection 68B.22(2). There are several exceptions to the gift law. You should familiarize yourself with the statute and consult with legal counsel if you have questions about the applicability of the gift law.
Penalties for
violation of the gift law include criminal liability (violation is a serious
misdemeanor) and job-related discipline or sanction. See Iowa Code
section 68B.25.
Disclosure of the Contents of Sealed Bids: Iowa Code section 72.3 prohibits public officers from
revealing the contents of any sealed bid to anyone. Section 72.4 imposes
criminal penalties for violation of 72.3. As a result, if you are conducting a
procurement process or serving on an evaluation committee, you should not
discuss the contents of the proposals with anyone other than other people who
are legitimately involved in the evaluation process (i.e. the issuing officer,
members of the evaluation committee, or a member of the Attorney General’s
office who is advising the agency on the evaluation process).
Bribery:
Additional General Principles
In addition, state employees involved in the contracting process should not:
Have a personal or financial interest in the contract (for example, a state employee should not serve on an evaluation committee if the employee has a financial interest in one of the bidders).
Disclose confidential information gained during the contracting process.
Use one’s official state position to obtain special
privileges or exemptions or to grant special privileges to others.
1.6. SERVICE PROVIDER CONFLICTS OF INTEREST
Agencies need to
provide a level playing field to all potential Service Providers that may want
to respond to a competitive selection process. Potential Service Providers may
have conflicts of interest that could make the playing field “un–level” if they
are not addressed. Occasionally a conflict of interest is severe enough to
disqualify a potential Service Provider from being eligible to receive a
contract, but it is often possible to ensure a level playing field without
disqualifying a potential Service Provider. As a result, it is important that
you think about whether there are any potential conflicts of interest and deal
with them before you issue an RFP or other competitive selection
process. If you are using the Department of General Services to procure the
services, you must disclose any potential conflicts of interest to the DGS
purchasing officer. You may also need to discuss these issues and possible ways
to resolve them with your Agency’s assistant attorney general.
Here are some examples of potential conflicts:
Service Provider Helped Set the Ground Rules
One type of conflict occurs if the Service Provider had an opportunity to influence the selection process. For example, if you used a Service Provider to help you write an RFP, that Service Provider might have an unfair advantage over other potential Service Providers because the Service Provider who wrote the RFP for you could have written the RFP in a way that favors itself. The major concern with this type of conflict of interest is that one potential Service Provider has the opportunity to set the ground rules by which all of the competitors for the contract will be judged, but it also gives that Service Provider more time to put together its proposal than other competitors have. This same problem may exist if you sought the input of some, but not all, potential service providers while working on the scope of work for your solicitation document.
Ideally, you
should consider this issue before you hire a Service Provider to help you write
an RFP or before you start seeking information from potential Service Providers
about what types of services are available. If you hire a Service Provider to
help you write an RFP, it is only fair to tell that Service Provider up front
that it will not be able to submit a proposal in response to the RFP. One way
to try to avoid these problems is to issue a Request for Information (RFI) that
you make available to all potential Service Providers. RFI’s
may sometimes help to “undo” an appearance of a possible conflict if you
received information from some potential service providers while you were
working on your RFP (or other competitive selection document). A sample RFI is
included in this Guide at Appendix O.
Service Provider has Access to Nonpublic Information
A second type of
conflict of interest occurs when, for some reason, one potential Service
Provider has access to nonpublic information that would give it a “leg up” on
the competition. This type of concern is sometimes implicated when an Agency
has had a contract for services with a Service Provider and it is time to
re-bid that contract. One way to deal with this problem is to make the
information (or as much of it as possible) available to the other potential
Service Providers so that all potential Service Providers have access to the
same information. You might establish a Resource Room containing a copy of the
existing contract and all other materials that would be relevant to the
existing contract and the project so that other Service Providers have an
opportunity to review that information and to be on a more level playing field
with the incumbent Service Provider. On some very complex RFP’s it might be
essential that Service Providers review the information in the Resource Room in
order to write an effective proposal. In those cases, you might want to make it
a mandatory RFP requirement that prospective Service Providers use the Resource
Room.
Service Provider Evaluation of Itself
A third type of
conflict of interest occurs when a Service Provider’s work under one government
contract might require evaluation of its own performance under another
government contract. In this situation it may not be possible to alleviate the
conflict, and the Service Provider may be precluded from submitting a proposal.
If you have any doubts or concerns about this type of situation, you should
discuss them with your legal counsel.
Service Provider Relationship with a State Employee
Another type of
conflict of interest arises when a state employee has a relationship with a
potential service provider. Examples of these conflicts include when a
potential service provider is a business run on the side by a state employee
who works for the agency purchasing the services or when the potential service
provider is owned by a family member of a state employee who is in a position
to influence the selection process. Information on addressing conflicts of
interest involving state employees is included in section 1.5 of this Guide.
There may be other fact-specific situations that
raise the question of whether there is a level playing field for the potential
competitors for a contract. You should talk to your Agency’s assistant attorney
general and/or the DGS purchasing officer you are working with if you have any
concerns that a particular procurement situation does not seem entirely fair to
you. As discussed above, it is often possible to address apparent inequities in
a way that will not disqualify potentially well qualified service providers
from submitting proposals if you deal with them head on before you begin the
process.
Appendix B: http://das.gse.iowa.gov/procurement/AppB_ContactsandResources.html
Appendix E http://das.gse.iowa.gov/procurement/AppE_ExecutiveOrderNo25.html
Appendix H: http://das.gse.iowa.gov/procurement/AppH_AdministrativeRules.html
Appendix O: http://das.gse.iowa.gov/procurement/AppO_RFIannotated.html