Chapter 5
PURCHASING METHODS
5.1
OVERVIEW OF PURCHASING METHODS
How
do you decide what method to use?
As a
general rule, you must use a competitive process to purchase services. See
11 IAC chapter 106. Executive Order 25 directs
agencies purchasing services to do so as “efficiently and effectively a
possible” and to make “every reasonable effort” to “insure that commitments of
public funds for services be done so as to obtain the most value for the money
spent.” Competition should be open, fair and objective and
should be conducted carefully to ensure those aims are achieved.
In
order to decide what method you may use to purchase services, you need to think
through some initial questions:
• What
services do we want?
• Who are
the likely providers of those services?
• How much
do we expect those services to cost?
Your
answers to these questions will help you decide what method you should use to
select a service provider.
Intergovernmental
agreements If you would like to
contract with another state agency, a political subdivision of the State of
Iowa (cities, counties, public school districts), the federal government,
another state government, or a political subdivision of another state, you may
enter into the contract without using a competitive selection process. You are
not required to purchase services from another governmental entity unless some
provision of law restricts you to using that governmental entity. As a result,
you may want to consider whether you can get a better deal from another service
provider before entering into a contract with a governmental entity without
competitive selection. Other governmental entities also have obligations to
competitively bid their contracts. As a result, you should not contract with
another governmental entity just so that entity can sub-contract out your
agency’s work without a competitive process.
Contracts
with the Private Sector If you think
you are most likely to purchase the services from a private entity (a firm that
is not a governmental entity), you need to estimate
how much you think the services might cost.
One-Year Contracts
• If
the total value of the contract is likely to be less than $5,000 – You may
enter into the contract without using a competitive process. You should note,
however, that seeking competition is always recommended, even though not
required for this dollar range.
• If
the total value of a one-year contract is likely to be $5,000 or more, but less
than $50,000 – You must use a competitive process to select a service
provider unless you have a valid justification for a sole source or emergency
procurement. You may use either an informal or formal competitive process.
• If
the total value of a one–year contract is likely to be $50,000 or more –
You must use a formal competitive process to select a service provider
unless you have a valid justification for a sole source or emergency
procurement.
Multi-Year
Contracts
• If
the contract is for more than one year and the total value of the contract,
including renewals, over all of the years is likely to be less than $15,000
– You may enter into the contract without using a competitive process. Again,
you should note that seeking competition is always recommended, even though not
required for this dollar range.
• If
the contract is for more than one year and the total value of the contract,
including renewals, over all of the years is likely to be $15,000 or more, but
less than $150,000 – You must use a competitive process to select a
service provider unless you have a valid justification for a sole source or
emergency procurement. You may use either an informal or formal competitive
process.
• If
the contract is for more than one year and the total value of the contract,
including renewals, over all of the years is likely to be $150,000 or more – You
must use a formal competitive process to select a service provider
unless you have a valid justification for a sole source or emergency
procurement.
5.2 INFORMAL COMPETITIVE PROCESS
The informal competitive procedure is
described in 11 IAC 106.9. The rules define “informal competition” to
mean:
A
streamlined competitive selection process in which a department or
establishment makes an effort to contact at least three prospective service
providers identified by the purchasing department or establishment as qualified
to perform the work described in the scope of work to provide bids or proposals
to provide the services the department or establishment is seeking.
The process includes the following steps:
• Locate the names and
addresses of at least three firms or individuals that would be qualified to
provide the service. If you cannot locate three prospective providers, you
should prepare an explanation justifying why you contacted less than three
potential service providers and keep a copy of that justification in your
contract file. The justification should include a description of the steps you
took to locate three prospective providers.
• Prepare a solicitation
document. The solicitation document should include a scope of work describing
the type of service required. The document should also include the proposed
project schedule, a request for information on the service provider's
qualifications, a request for the service provider’s cost or fees, and the due
date, time and location to submit responses.
• Post notice of the
solicitation to the TSB website 48 hours before you send contact the vendors
you have identified. If any firm requests an opportunity to submit a proposal,
you should add it to your list of potential service providers.
• Contact the prospective
service providers. You may contact prospective service providers in person, by
telephone, fax, E–mail or letter. This informal competitive process is intended
to be expeditious; however, agencies should provide enough time for firms to
submit complete responses.
• Document the time and
date written responses are received.
• Evaluate the responses
and determine which service provider's proposal most closely meets the
requirements of the solicitation. Enter into contract negotiations with the top
finalist.
• Prepare the contract document
and acquire signatures of both parties.
• Thoroughly
document the entire selection and award process. Prepare auditable
documentation of the competitive process and maintain it in the contract file.
Such documentation should include: the names of the firms contacted and/or
solicited; a copy of the solicitation document; information on how the service
providers responded; an explanation of the evaluation and basis for the award
decision; process; and a copy of the contract.
An example of a Solicitation document used for an informal competitive
process is included at Appendix G.
5.3 FORMAL COMPETITION
With
formal competition, an agency issues a Request for Proposal (RFP) or other
formal solicitation document. Agencies most frequently use RFP’s or Invitations
to Bid (ITB) to purchase services.
Request for Proposals (RFP)
The
RFP is the procurement document most frequently used in state government to
procure services. This document not only serves as the basis for the service
providers to respond but, as importantly, serves as the foundation for the
eventual contract. A well-written, well-considered RFP will help ensure
responsive proposals and positive results. The RFP must provide clear,
unambiguous statements of project goals and objectives, instructions for
submitting the proposals and criteria for proposal evaluation.
Customarily,
the RFP requests that a consulting firm prepare, at its own expense, a proposal
that responds to the specific needs of the agency. Therefore, the RFP must
clearly communicate those needs.
Sample
RFP Format – Please refer to
Appendix P for a sample Request for Proposals. The sample includes annotations
that explain various provisions of the RFP. The terms in this sample represent
a fairly standard approach to a solicitation document.
Other
RFP Elements – RFPs
may include many provisions appropriate to the project, which are not included
in the sample RFP, Appendix P. Some RFPs require the proposer to respond with a “Letter of Intent to Bid,” which
provides the agency an estimate of the number of responses to expect.
Sample RFP Schedule – The following sample schedule of sequential, primary
activities of an RFP process is provided as a guide in developing a procurement
schedule. A complex procurement can take much longer; a simple procurement
could be accomplished in less time.
|
|
Approximate Time to
Complete |
|
1. Develop a detailed
need statement. 2. Draft the RFP. 3. Coordinate review of the draft
RFP with agency staff. 4.Develop a schedule for the RFP. 5. Make arrangements for the vendors conference, if there is one. |
Allow a “chunk” of time i.e. 2 – 8 weeks or more |
|
6. Prepare legal notice of
forthcoming RFP and publish in newspapers. 7. Compile mailing list. 8. Complete final RFP document. 9.AG review if needed. 10. Select RFP evaluators. 11. Draft scoring sheets to be used by
evaluators. |
|
|
12.
Issue the RFP to all interested parties; allowing time for vendor’s to review the RFP. 13. Receive and document written questions
regarding the RFP. 14. Prepare agenda for the vendor conference. |
6 – 18 Weeks |
|
15. Conduct vendor conference (used for more
complex procurements). 16. 16. Send addendum to the RFP including
questions and answers from the vendor conference as well as any written
questions. |
3 – 6 Weeks |
|
17. Accept proposals until deadline for submission. |
|
|
18. 18. Determine responsiveness of proposals. 19.
19. Evaluate proposals and make award determination. 20. Obtain internal agency review and approvals
for award. 21. Announce apparent successful contractor. 22. Notify unsuccessful proposers |
4 – 8 Weeks
|
|
23. Negotiate contract |
4 – 8 Weeks |
|
24. Finalize contract document |
1 – 6 Weeks |
|
25. Complete and submit any required forms. 26. Sign Contract and begin work. |
1 – 6 Weeks |
Legal Review
You
may wish to ask your agency’s assistant attorney general to review the RFP
before it is finalized and released. You should consult with your legal counsel
if you are considering making any changes in the RFP that the sample annotated
RFP included in Appendix P says you should not make or says you should consult
with your attorney before making. If you need to have your assistant attorney
general review the RFP, you should plan on giving the attorney enough time to
fit into his or her schedule and complete the review. You should work with your
assistant attorney general to decide what is the most
effective way to utilize your attorney’s review.
Proposal Preparation
and Submission Instructions
The
RFP should contain instructions on how to prepare the proposal. Specifying a
standardized format for responses will ease evaluation by the agency. Service
providers should understand that failure to follow prescribed requirements and
to submit requested information may result in rejection of the proposal as non-responsive.
Evaluation Criteria
Detailed
evaluation criteria should be developed concurrently with the RFP. The
evaluation criteria must be consistent with the RFP. To use the point score
method, evaluation criteria are individually weighted with a point value
relative to the item's importance to project success.
The following evaluation criteria, not listed in order of significance,
are often used to evaluate proposals:
• Proposer’s project approach and methodology.
• Quality
of project work plan.
• Feasibility
of the proposed schedule.
• Description
of proposed deliverables.
• Project
management and internal controls.
• Firm’s
and staff qualifications and relevant experience.
• Business
references.
• Project cost.
The proposal
evaluation scoring sheet, including specific criteria and the weighting or
point value of each, should be developed prior to issuing the solicitation
document. Appendix D is an example of an
Evaluation Score Sheet. More detailed
questions specific to the project would often be included in an agency’s
scoring sheet depending upon the nature and complexity of the project. The critical point is that the scoring sheet
reflects the requirements stated in the RFP.
Timeline for Responses
Many
factors determine the amount of time between mailing the solicitation document
and the due date for responses. Generally, service providers should be given
enough time to prepare a thorough and comprehensive response. Six to eight
weeks from issuance of the solicitation is a reasonable time for service
providers to prepare responses under most circumstances. The absolute minimum
is two weeks, i.e., ten working days, in the case of a genuinely urgent
situation or a simple project.
If
the timeline is too restrictive on a major procurement, the agency risks
reducing both the quality and the quantity of proposals submitted. Service
providers may not have the opportunity to assemble the best management team or
to prepare a comprehensive technical proposal when unrealistic response dates
are set. In some instances, qualified service providers may not bid if they
think an unrealistic timeframe is being imposed.
Invitation
to Bid (ITB) An ITB, although not
used as frequently to purchase services as RFP’s, may also be used to purchase
services. An agency would use an ITB instead of a RFP when price is the only
factor it will use to select a service provider. You should talk to your legal
counsel and/or the Department of General Services if you think you would like
to do an ITB and need help putting it together.
5.4 5.4 PURCHASING
FROM ANOTHER AGENCY’S CONTRACT
Agencies have indicated an interest in
issuing competitive solicitations for services that allow other agencies to
purchase from their contracts. If an agency is interested in this arrangement,
the Request for Proposals (RFP) must clearly state this intent. Proposers must understand the potential quantity of
services that may be demanded in order to respond with a viable proposal.
The awarding agency is responsible to
comply with all the terms of the RFP and the contract. The agency awards the
contract specifying the scope of work, maximum contract amount and rates for
services, period of performance, etc. As with all other contracts, the scope of
services must be consistent with the description in the solicitation.
5.5 5.5 EXCEPTIONS
TO USING A COMPETITIVE PROCESS
As discussed above, as a general rule
you must use competition to select a service provider to perform services for
your agency when you are purchasing services from a private sector entity. When
you are purchasing services from a governmental entity, competitive selection
is not required. See Section 5.1. In limited circumstances you may have
a valid justification to enter into a contract without having used a
competitive process to select the service provider. These exceptions are
referred to as sole source procurements and emergency procurements. Caution:
These procurement options are intended to be used only in narrow circumstances
and as a method of last resort! There are also increased documentation and
justification requirements if you opt to use a sole source or emergency
procurement.
These procedures do not relieve
Agencies from the responsibility to negotiate a fair and reasonable price for
services purchased using sole source or emergency procurements and to
thoroughly document the procurement action. The contract you enter into as the
result of a sole source or emergency procurement must contain all necessary
terms and conditions required by 11 IAC chapter
107.
Sole Source Procurement
11 IAC 106.3 defines “sole source procurement” as “a purchase of
services in which the department or establishment selects a service provider
without engaging in a competitive selection process.” Rule 106.7 spells
out the justifications for using sole source procurement and also imposes some
additional documentation and reporting requirements if you choose to do sole
source procurement. You should note that the rule specifically says that
“[a] sole source procurement shall be avoided unless clearly necessary and
justifiable.”
There are six justifications found in
11 IAC 106.7(1)that
allow for an agency to use sole source procurement
• An agency determines that one
service provider is the only one qualified or eligible or is quite obviously
the most qualified or eligible to perform the service; or
• The services being purchased
involve work that is of such a specialized nature or related to a specific
geographic location that only a single source, by virtue of experience,
expertise, proximity to the project, or ownership of intellectual property
rights, could most satisfactorily provide the service; or
• An agency is hiring a service
provider to provide peer review services for a professional licensing board
pursuant to Iowa Code chapter 272C; or
• An
agency is hiring the services of experts, advisors, counsel or consultants to
assist in any type of legal proceeding including but not limited to testifying
or assisting in the preparation of quasi–judicial or judicial proceedings; or
• The federal government or other
provider of funds for the services being purchased (other than the state of
Iowa) has imposed clear and specific restrictions on the agency’s use of the
funds in a way that restricts the agency to only one service provider; or
• Applicable law requires,
provides for, or permits use of sole source procurement.
If you are considering using a sole source
procurement to select a service provider, you should carefully consider whether
you in fact have an adequate justification for using sole source procurement
instead of a competitive process. In addition to going through the list of
justifications for using a sole source procurement in subrule 106.7(1), working through the sole source
justification form should help you determine whether you have adequate
justification for a sole source procurement. Chapter 9 provides information on
completing the required forms. You may also wish to consult with your assistant
attorney general before entering into a contract based on sole source
procurement.
The rules also establish
additional administrative requirements that agencies must comply with when
using sole source procurement. These additional requirements include completing
the sole source justification form mentioned above if the value of the purchase
exceeds $5,000 or $15,000 for a multi-year contract. The director of the agency
must sign the sole source justification form, and the director or the
director’s designee must sign the sole source contract. See 11 IAC
106.7(2). Chapter 9 provides additional information on complying with these
additional requirements. Emergency Procurement
IAC 106.3 defines an “emergency” to include, but be limited to
a condition
• That threatens public health,
welfare or safety; or
• In which there is a need to
protect the health, welfare, or safety of persons occupying or visiting a
public improvement or property located adjacent to the public improvement; or
• In which the agency must act to
preserve critical services or programs or in which the need is a result of
events or circumstances not reasonably foreseeable.
An “Emergency procurement” is “an acquisition of a
service or services resulting from an emergency need.” See Rule 106.3.
Rule106.8 spells out the justifications for
using an emergency procurement to select a service provider and also imposes
some additional documentation and reporting requirements if you choose to do an
emergency procurement. You should note that emergency purchases should not
be used as a solution for hardships caused by neglect, poor planning, or lack
of organization by the agency. Also, the procedure does not relieve you from
negotiating a fair and reasonable price and from documenting your procurement
process. The scope and duration of any contract entered into as a result of an
emergency procurement should be limited to what is necessary to respond to the
emergency.
Rule 106.8(1) provides:
106.8(1) When justified. An emergency procurement shall be limited in scope
and duration to meet the emergency. When considering the scope and duration of
an emergency procurement, the department or establishment may consider price
and availability of the service procured so that the department or
establishment obtains the best value for the funds spent under the circumstances.
Departments or establishments should attempt to acquire services, with as much
competition as practicable under the circumstances.
Like sole source procurements, the rules establish
additional administrative requirements that agencies must comply with when
using an emergency procurement. These additional requirements include
completing the emergency justification form mentioned above if the value of the
purchase exceeds $5,000. The director of the agency or the director’s designee
must sign the emergency justification form and the contract. See 11
IAC 106.8(2). Chapter 9 provides additional information on complying with
these additional requirements.
Appendix G: http://das.gse.iowa.gov/procurement/AppG_InformalCompetitiveSolicitation.html
Appendix N: http://das.gse.iowa.gov/procurement/AppN_PurchasingMethodsFlowChart.html
Appendix P: http://das.gse.iowa.gov/procurement/AppP_RequestforProposalAnnotated.html
Appendix D: http://das.gse.iowa.gov/procurement/AppD_EvaluationScoreSheet.html