4c. financial: are you ready for the bear claw

4C. Financial: Are You Ready for the Bear Claw? Procurement Under the Uniform Guidance

CAPLAW 2015 National Training Conference

Thursday, June 11, 2015

4 pm – 5:30 pm

Portland Marriott Downtown Waterfront

Handouts:

PowerPoint Slides Reference Materials

Janet Johnson, CPA, CMA Senior Manager Wipfli, LLP [email protected] 608.274.1980


June 10 – 12, 2015 | Portland, OR | Portland Marriott Downtown Waterfront

NONPROFIT AND GOVERNMENT PRACTICE

www.wipfli.com/ngp | 888.876.4992

Reproduction or use of any training materials in this manual, except within a participant’s agency without express written permission is prohibited by copyright law. © Wipfli LLP

Are You Ready for the Bear Claw?

Procurement under the Super Circular

Thursday, June 11, 2015 4:00 pm – 5:30 pm

Presented by:

Janet S. Johnson, CPA, CMA, Senior Manager

Are You Ready for the Bear Claw? Procurement Under Uniform Guidance 1

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Are You Ready for the Bear Claw? Procurement Under Uniform Guidance

Trainer: Janet S. Johnson, CPA, CMA

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Materials/Disclaimer

Please note that these materials are incomplete without the accompanying oral comments by the trainer(s).

These materials are informational and educational in nature and represent the speakers' own views. These materials are for the purchasing agency’s use only and not for distribution outside of the agency or publishing on a public website.

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Introductions

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Outcomes

• Explore the new procurement regulations:– Similarities and differences from the current

regulations

• Your next steps: When will you implement the procurement

regulations?

What must change for your organization?

Who needs to be involved?

How will you document changes, train staff & implement?

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My Agenda

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What’s Changed

Pros and Cons of Early Implementation

Next Steps

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Your Agenda

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Definition

Procurement:• The acquisition of goods and services to be

used internally by the organization or to carry out a grant or contract-funded project

• The procurement process includes the decisionto purchase as well as the process to complete the purchase

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Procurement Regulations

References:• 2 CFR Part 200.317 – 326, applies to all types

of non-Federal entities

• 45 CFR 75.326 – 334, applies to grants from DHHS

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§200.110 Effective Date

Effective DateFederal awarding agencies must implement effective 12/26/2014Audit requirements effective for fiscal years beginning after 12/26/2014

Non-Federal entities may delay implementation of procurement standardsfor 1 fiscal year

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What Is the Bear Claw?

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§200.318 General procurement standards

(a) Must use own documented procurement procedures which reflect applicable laws and regulations

(c) (1)Must maintain written standards of conduct covering conflicts of interest

(2) NEW If the non-Federal entity has a parent, affiliate, or subsidiary organization that is not a government entity, must have written standards of conduct covering organizational conflicts of interest

11§45 CFR Part 75.327

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(d) Avoid purchasing unnecessary or duplicative (NEW) items. Lease vs. purchase analysis where appropriate

(e) Encouraged to enter into state and local intergovernmental or inter-entity agreements NEW

12§45 CFR Part 75.327


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(f) NEW Encouraged to use Federal excess and surplus property

(g) NEW Encouraged to use value engineering in construction projects. (Analysis of each contract item to ensure overall lower cost)

(h) Award contracts to responsible contractors. Consider integrity, compliance with public policy, records of past performance and financial and technical resources

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§45 CFR Part 75.327

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(i) Maintain records with rationale for the method of procurement, selection of contract type, contractor selection and basis for price

(j) NEW May use time and materials contract in some situations

(k) Non-federal entity is responsible for settlement of all contractual and administrative issues

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§45 CFR Part 75.327


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§200.319 Competition

(a) Full and open competition

(b) NEW No geographic preferences unless mandated by statute

(c) Must have written procedures; name brands used only as a description

(d) NEW Pre-qualified contractors: Must ensure lists are current and include enough qualified sources to ensure competition

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§45 CFR Part 75.328

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Pre-Qualified Contractors

Best Practice:• Price comparisons for routine supplies may be

performed at the beginning of the year to identify contractors to be used for the entire year

• Price a list of such items in total, not by individual item, and include shipping

• Ask for discounts for annual purchasing agreements

• Develop a list of qualified contractors

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FAQs from COFAR – August 2014

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§200.320 Methods of procurement to be followed

(a) NEW Micro-purchase:• Aggregate dollar amount per purchase < $3,000

Distribute equitably among qualified suppliers

• May be awarded without competitive quotes

(b) Small purchase procedures:• Up to $150,000 (Simplified Acquisition Threshold)

• Relatively simple and informal

• Competition is required from adequate number of qualified sources

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§45 CFR Part 75.329


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Greater than $150,000 (SAT), use sealed bids or competitive proposals

(c) Sealed bids:(1) Required conditions:

(i) Complete, adequate and realistic specifications

(ii) Two or more responsible bidders

(iii) Selection can be made principally on price

(2) Requirements:(i) For units of government, bids publicly advertised

(ii) Bids include all information needed for proper response

(iii) For units of government, bids publicly opened

(iv) Firm fixed price contract awarded

(v) Bids may be rejected if there is a sound documented reason

19§45 CFR Part 75.329

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Sealed Bids

Use sealed bids when:• The award will be made on the basis of price

and other priced-related factors, and

• It is not necessary to conduct discussions with the responding offerors about their bids

From 48 CFR Part 6.401, Federal Acquisition Regulations

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Sealed Bids

The following conditions should be present:

• Complete, adequate and realistic specifications

• Two or more responsible bidders

• Firm fixed priced contract

• Selection made principally on the basis of price

DOE 10 CFR 600.236(c)(2) & 200.320(d)

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(d) Competitive proposals: Used when conditions not appropriate for sealed bids. Requirements:(1) Bids publicly advertised

(2) Bids solicited from adequate number of sources

(3) Written method for conducting technical evaluations and for selected contractors

(4) Contract awarded to proposer most advantageous to the program, with price and other factors considered

22§45 CFR Part 75.329


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(f) Noncompetitive proposals. Solicitation from only 1 source (sole source). Use in following circumstances:

(1) Item is available only from a single source;

(2) Emergency will not permit a delay resulting from a competitive solicitation;

(3) Federal awarding or pass-through agency expressly authorizes noncompetitive proposal in response to a written request; or

(4) After solicitation, competition is determined inadequate (only 1 proposer)

23§45 CFR Part 75.329

Note: See 200.323 Contract cost and price.

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Sole Source Procurements

• A cost or price analysis is required

• Approval from awarding agency may be required

• Documentation is critical – The need to do a sole sourced procurement and the methods used must be transparent

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§200.321

Contracting with small and minority businesses, women’s business enterprises, and labor surplus area firms (NEW). (A labor surplus area is designated by the Dept. of Labor.)

(a) Non-federal entities must take all necessary affirmative steps to assure minority businesses, women’s business enterprises and labor surplus area firms are used when possible

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* Note: A labor surplus area is designated by the Dept. of Labor.

§45 CFR Part 75.330

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§200.323 Contract cost and price

(a) NEW For procurements over the Simplified Acquisition Threshold, must perform a cost or price analysis before receiving bids or proposals

(b) NEW Must negotiate profit as a separate element of the price for each contract in which there is no price competition and in all cases where cost analysis is performed

(c) The cost plus a percentage of cost and percentage of construction cost methods of contracting must not be used

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§45 CFR Part 75.332


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Cost or Price Analysis

• Cost analysis – review and evaluate each element of cost to determine reasonableness, allocability and allowability

• Price analysis – compare market prices of similar goods/services or bids received to evaluate price to be paid

From 2 CFR 215.45, Administrative Regulations for Nonprofits

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Cost or Price Analysis

• Profit Negotiation – Consider: – Complexity of the work,

– Risk borne by the contractor,

– Contractor’s investment,

– Amount of subcontracting,

– Quality of past performance and

– Industry profit rates.

2 CFR 200.322(b)

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§200.324

Federal awarding agency or pass-through entity review (Reg Flags)

(b) Non-Federal entity may be asked to provide procurement documents if:

(1) Procurement procedures fail to comply with OMB standards;

(2) Procurement exceeds the small purchase threshold and is awarded without competition;

(3) Procurement exceeds the small purchase threshold and specified a brand name product;

(4) Procurement exceeds the small purchase threshold and is awarded to other than the lowest bidder under a sealed bid; or

(5) A contract modification changes the scope to exceed the small purchase threshold

29§45 CFR Part 75.333

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Appendix II. Contract Provisions

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A. Administrative, contractual or legal remedies where contractors violate contract terms (all contracts in excess of $150,000) NEW

B. Termination for cause and convenience (contracts in excess of $10,000) NEW

C. Equal Employment Opportunity

D. Davis-Bacon Act when required by Federal program legislation (construction in excess of $2,000)

E. Contract Work Hours and Safety Standards Act (construction in excess of $100,000; or others involving mechanics or laborers in excess of $2,500)

F. Rights to Inventions Made Under a Contract or Agreement

G. Clean Air Act and Federal Water Pollution Control Act (contracts and subgrants in excess of $150,000)

H. Debarment and Suspension

Check contractors at www.sam.gov, System for Award Management, click on “Search Records”

I. Anti-Lobbying (contractors in excess of $100,000)

J. Procurement of recovered materials (units of government)


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From Policies to Process

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Large NPO – Example

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Amount of Purchase

Approvals Solicitation Process

Documentation of Decision

≤ $3,000 (micro-purchase)

• Project Director • At the discretion of the project director

• Distribute equitably among qualified contractors

• Invoice/receipt

$3,001 ≤ $5,000 • Project Director • Select pre-qualified contractor or

• 2 oral bids

• Memo describing oral bids or

• Procurement checklist

• Receipt/invoice

$5,001 ≤ $25,000 • Project Director and

• Div. Vice-President

• Select pre-qualified contractor or

• RFP process

• Proposals and evaluations or

• Purchase order


$25,001 ≤ $100,000

• Project Director,

• Div. Vice-President and

• Fiscal Office


• RFP process

• Proposals & evaluations or

• Purchase order


> $100,000 • Project Director,

• Div. Vice-President ,

• Fiscal Office and

• Treasurer (or designee)


• RFP process

• Proposals & evaluations or

• Purchase order



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Contract Management

Best Practices:

Develop a contract management process• Who is responsible for ensuring contracts are

carried out successfully?

• What is the monitoring process? – Example: How do you monitor a Weatherization

subcontractor?

• Who signs off on payments?

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Purchasing and Disbursements Internal Control Grid

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Duty A B C D E

Inputs data into contractor master file

Obtains Form W-9 from new contractors

Initiates purchases

Authorizes purchases

Prepares purchase order/requisition

Prepares request for proposal

Administers collection of proposals

Evaluates proposals

Selects contractor

Receives contractor invoice

Approves contractor invoice

Assigns general ledger coding

Inputs invoice into A/P system

Selects A/P to be paid

Runs A/P checks

Reviews checks

Signs checks

Mails checks

Maintains custody of unused checks

Reconciles A/P to general ledger

Performs bank reconciliation

Reviews cancelled checks

Reviews bank reconciliations


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Summary

• Implementation of the new regulations:

– Micro-purchases

– Price analysis for sole source purchases

– Buying agreements

– Federal excess and surplus property

– No geographical preferences

– Labor surplus area firms

– What else?

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Final Advice – Procurement

Questions to ask about your procurement policies & procedures:

1. Do they make sense?

2. Do they work for you?

3. What about the 6:00 news?

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For Information on How We Can Help

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Visit the Wipfli Booth for more details or email

[email protected]


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www.wipfli.com

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Regulation questionsAudit

ProcessHuman Resource

TechnologyLeadership

Evaluation:

Thank You!

Connect with me:

www.facebook.com/WipfliNGP

Bring Wipfli to You:Tammy T. Jelinek

[email protected]

My Wipfli – Access to our experts:

www.wipfli.com/mywipfli


June 10 – 12, 2015 | Portland, OR | Portland Marriott Downtown Waterfront

NONPROFIT AND GOVERNMENT PRACTICE

www.wipfli.com/ngp | 888.876.4992

Reproduction or use of any training materials in this manual, except within a participant’s agency without express written permission is prohibited by copyright law. © Wipfli LLP

Reference Materials

for Are You Ready for the Bear Claw?

Procurement under the Super Circular

Procurement Best Practices Worksheet ................................ 1

Wipfli LLP Page 1

Procurement Best Practices 2 CFR Part 200 Procurement Regulations Worksheet

Regulation

Item

Procedure

Change Written

Procedures? (Y/N)

Next Steps

200.22 & 23 “Contract” and “contractor” replace the use of the word “vendor”

You may decide to change “vendor” to “contractor” but it’s not required

200.318(c)(2) Conflict of interest policy for non-governmental parent, affiliate or subsidiary

If this situation exists for you, must include that entity in your conflict of interest policy

200.318(d) Avoid purchasing duplicative items

How will you track items to avoid duplication? Complications: • Multiple locations • Multiple programs

200.318(f) Enter into buying agreements

• How can you find out about buying agreements in your area?

• Include in written procedures: Before purchasing through a buying agreement, check that it’s the best price

200.318(e) Use Federal excess and surplus property rather than purchasing

How can you find out about Federal surplus property?

200.318(i) Procurement records must include: • Rationale for method

of procurement • Selection of contract

type • Contractor selection

or rejection • Basis for contract

price

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Regulation

Item

Procedure

Change Written

Procedures? (Y/N)

Next Steps

200.319(g) Cannot impose local preferences

Do you have this in your policies?

200.320(a) Micro-purchasing procedures

Can you change your purchasing process to adopt the micro-purchase limit?

200.321 Contracting with small and minority businesses, women’s business enterprises, and labor surplus area firms

Labor surplus areas are designated by the US Dept. of Labor. Review the list of these areas on the DOL website.

200.323 Contract cost and prices analysis required for: • Every procurement in

excess of simplified acquisition threshold ($150,000) before receiving bids, and

• Every sole source contract. (If no price competition, must negotiate profit separately.)

Documentation: • Steps taken to

analyze costs of purchases greater than $150,000

• Steps taken to confirm that the price in a sole source purchase are reasonable

Appendix II. Contract Provisions

New provisions: • Administrative,

contractual or legal remedies for contracts in excess of $150,000

• Termination for cause and convenience for contracts in excess of $10,000

• Mandatory standards relating to energy efficiency

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Regulation

Item

Procedure

Change Written

Procedures? (Y/N)

Next Steps

Construction 200.318(g) Use value engineering for

construction projects Value engineering is a systematic and creative analysis of each contract item or task to ensure that its essential function is provided at the overall lower cost.

200.318(j) Use time and material contracts is no other contract is suitable and the contractor includes a ceiling price that the contractor exceeds at its own risk.

A time and materials contract sets the price at the actual cost of materials and direct labor hours charged at fixed rates. It must include a ceiling price

4c. financial: are you ready for the bear claw

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