Avoiding Pitfalls and Managing Performance

PLANNING STAGE

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Solution or Preventive Measure: Identify other organizations within your

agency or other State agencies that have recently faced a similar need and how that organization handled their procurement.

What procurement vehicle did they use?What method of award?What problems did they encounter in procurement

or managing performance?

Pitfall:Agency identifies a need for contractual services.

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Pitfall:The agency does not know what product,

service or technology the vendor community has available.

Solution or Preventive Measure:Survey current providers through a Request

for Information (RFI) to assess the availability, types, and options of goods and services and to help identify potential suppliers.

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Request For Information (RFI)

The agency prepares a document which: Provides a preliminary description of the

program objectives and goals, and, Solicits input from the vendor community

as to the availability of products, services and/or technology to meet their needs.

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RFI – Mandatory Requirements(Procurement Guidelines, Section Seven, IV.C.3.a)

Notification of the RFI must be published in the Contract Reporter.The RFI is mailed to all potential offerors known by the agency at the time of mailing.An open meeting to solicit additional information is the recommended approach. All offerors responding to the RFI must be notified in writing of questions submitted and kept informed of the any open meetings.

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RFI – Other Requirements

No award may be made under the RFI process.

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Pitfall:Department lacks adequate resources for

managing the project.

Solution or Preventive Measure:Seek outside assistance by identifying

organizations within your agency or other State agencies that may have qualified staff.

Determine if you need to procure the services of a project manager to accomplish your project goals.

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Pitfall:Agency incurs large cost overruns during

project.

Solution or Preventive Measure:At outset of the procurement process, agency

should perform a detailed cost analysis of staff training time, equipment needs, contractual costs, set-aside for contingencies (unexpected events), etc.

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Effective contract management is dependent on four

key elementsMethods used to select the contractors (procurement).Adequacy of contract provisions (contract establishment).Processes used to establish contract payments (rate-setting/reimbursement methodology).Processes used to monitor contractor performance (contract oversight).

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DEVELOPMENT STAGE

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Pitfall:All available procurement vehicles were not

evaluated in developing bid documents.

Solution or Preventive Measure:Review all procurement vehicles to insure the

correct fit. Consider Preferred Sources, OGS centralized contracts, OGS backdrop contracts, discretionary purchasing, IFB’s, RFP’s, single or sole source.

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Pitfall:An RFP was used when an IFB would have fit

the scope of services, causing:An unnecessary administrative burden. Increase in processing time (inception to

commencement of work). Extra cost.

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Solution or Preventive Measure:An IFB should be the best approach if:

Exact technical solution is known.Price is very important.

An RFP should be the best approach if:A technical solution is needed (generally complex

in nature).Technical appraisal outweighs importance of cost.

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Types of services which should be procured by these methods: IFB: Commodity purchases (required);

janitorial; guard duty; auditing.RFP: Modernization of an existing system

(Human Resources, Payroll, Financial Management, etc.); Development of a new system (Electronic Benefits Transfer-EBT, Rebid of MMIS – eMed NY, Connections, etc.).

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Pitfall:Contract performance did not produce a

meaningful result.

Solution or Preventive Measure:RFP/IFB/Contract should,wherever possible:

Specify outcomes of deliverables (clear statement of expected goods and services).

Reflect identifiable measures of performance.Require liquidated damages, a letter of credit or

performance bond.

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Pitfall:A price increase for a renewal year was

negotiated but the original RFP/IFB and contract did not allow for price escalation (no contract escalation clause).

Solution or Preventive Measure:The RFP/IFB and original contract must have

an escalation clause to allow price adjustments.

If not, the amendment would be returned unapproved and the agency would be required to submit a reduced amendment amount.

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Why is Contract Management Important?

Effective contract management is essential to ensure:Contractors produce desired results.Public funds are protected from fraud,

waste, or inefficient use.

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Historical PerspectiveWhat are the Costs of Poor

Contract Management?A Commission placed under conservatorship due to widespread contract mismanagement.An agency circumvents procurement requirements on a $33.7 million contract.Gross fiscal mismanagement of Smart Jobs contracts administered by a State agency.Poor contract performance oversight causing over $100 million in cost overruns (double the original project estimate) and still on-going.

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Liquidated DamagesConsequential Damages:

Vendor’s inability to deliver contract deliverables in accordance with specifications and timeliness, i.e. non-conformance.

Disruption to agency programs. Loss of Federal or other

reimbursement funds.Creates other negative impacts.

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Liquidated DamagesThese losses should be quantified in dollars and

assessed against the vendor.Some examples of non-conformance are:

Not delivering agreed to system up-time percentage.

Not meeting processing standards for claims.Causing systems to be inoperable.

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Liquidated DamagesDirect Damages:

Termination for Cause provision is exercised; agency is forced to rebid.

If termination results in extra costs above the original contract amount, the terminated vendor should be held responsible for the difference.

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Liquidated DamagesThe RFP/IFB/Contract should state a

specific dollar limit for which liquidated damages may be assessed for either consequential or direct damages.

Liquidated damages may be specified in advance if reasonably related to the anticipated harm that will result from default.

Unreasonably high amounts are regarded as penalties that may not be legally enforced under the guide of “liquidated damages.”

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Liquidated DamagesThese damages are not “penalties.”Solely intended to compensate the State for harm caused by default.Availability of liquidated damage remedy intended to have only an incidental incentive/disincentive effect on contractor’s performance.Full assessment (dollars) of liquidated damage clause is not required; the actual assessment should be proportionate to the harm suffered by the State.

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Pitfall: Agency develops an unclear specification and/or

provides insufficient bidding information; this can result in an insufficient number of firms bidding or a bid protest, etc.

Solution or Preventive Measure: Develop clear, detailed specifications allowing bidders

to submit responsive proposals. If needed, seek outside assistance:

Identify other organizations within your agency or other State agencies for qualified staff.

Solicit outside consultant services. Section 163.A of the New York State Finance Law

reminder.

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Pitfall:Agency writes restrictive specifications

resulting in a lack of adequate competition, complaints or protests, etc.

Solution or Preventive Measure:Restrictive specifications may be a reason for

rejection and rebid of a contract. Transaction may be returned to agency unapproved.

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Pitfall:Did not establish criteria prior to receipt of

bids (“lock box”), including the use of a finalist slate, if applicable.

Solution or Preventive Measure:Review Section 163.7 of NYS Finance Law.Contract will be returned unapproved.

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Pitfall:Did not publish relative weights in bid

document (technical vs. cost).

Solution or Preventive Measure:Review Section 163.9.b of NYS Finance Law.The contract will be returned unapproved.

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Pitfall:Price offered should be reviewed objectively.

The content or level of effort should be considered when evaluating the technical proposals.

Solution or Preventive Measure:Technical proposal should include a manning

schedule to help determine if the proposed level of effort is realistic in regard to achieving the end work product.

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Pitfall:Points assigned to cost did not represent a

meaningful worth.

Solution or Preventive Measure:Review intent of State Finance Law, Article 11

(particularly Sections 163.1.j, 163.7 and 163.9.b) and Procurement Guidelines.

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Pitfall:When using the formula in the Procurement

Guidelines, a high dollar bid may skew the points assigned to the mid-range bids.

Solution or Preventive Measure:Use the following recommended formula to

provide a more balanced assignment of cost points.

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Recommended Cost FormulaLow bid / bid being evaluated x maximum points for cost = cost

scoreSample Bid Tabulation

PG Formula (max. pts. 25)

Recommended Formula (max. pts. 25)

$150,000 25.00 25.00

$160,000 24.72 23.44$190,000 23.89 19.74$390,000 18.33 9.62$900,000 4.17 4.17

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Pitfall:Multiple award not in RFP/IFB or without a

defined selection procedure as to how the work will be distributed.

Solution or Preventive Measure:Review Section 163.10.c of NYS Finance

Law.You must define the “up to” number of firms

that can be awarded a contract.You must define your selection procedure for

the actual work (task orders etc.).

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Evaluation and Award Stage

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Pitfall:Agency did not respond to a vendor’s request

for debriefing; did not notify unsuccessful vendors in a timely manner.

Solution or Preventive Measure:Review Procurement Guidelines, Section

Seven, VI.2.Debriefing is mandatory.

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Pitfall:The agency’s application of evaluation scoring

differs from their RFP/IFB/evaluation instrument.

Solution or Preventive Measure:Review State Finance Law, Article 11, and the

Procurement Guidelines. A rebid of the services may be required.

Develop the RFP and evaluation instrument at the same time.

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Pitfall:Award made to a non-responsive bidder, i.e.,

vendor did not meet specification requirements or submit proper forms, etc.

Solution or Preventive Measure:This is not acceptable. The transaction will be

returned to agency unapproved.

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Example: Non-Responsive Bidder

The RFP/IFB requires unlimited liability on the part of the vendor. During negotiation with the awarded vendor, the agency negotiates a lesser liability, creating a material change to the original procurement.Consider and weigh:Reasonableness of this requirement.Necessity of this requirement.Are there a sufficient number of vendors who

will bid on the specific services being procured if this requirement is present?

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Example: Non-Responsive Bidder

Any material change(s) to a procurement document (RFP/IFB) may prejudice other offerors as well as potential offerors who did not submit a bid. These awards are subject to re-bid.

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Use Electronic Payments

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Pitfall:Electronic payments process not used for

payments to vendors.

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Solution or Preventive Measure:Payee completes an Electronic Payments

Authorization Form to enroll in this program.Benefits:

Faster access to cash by your vendors. Direct deposit; access within 24 hours.

Less paperwork to process for New York State. OSC Payment Bureau’s volume:

• 4.6 million transactions annually.• 18,500 daily payments to vendors, municipalities and

employees.Vendor receives e-mail alerts when monies are ready

to be deposited in their accounts.Vendors receive one electronic payment for all their

invoices for that day.

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Solution or Preventive Measure:For further information, contact OSC’s

Bureau of Accounting Operations at (518) 474-4032 or e-mail: epunit@osc.state.ny.us

Visit OSC website at http://nysosc3.osc.state.ny.us/epay/index.htm

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Pitfall:Agency awards a reduced scope of work from

originally requested in the RFP/IFB.

Solution or Preventive Measure:This is not acceptable unless it is a minor

reduction. The agency must be able to defend that any bidder or potential bidder was not prejudiced.

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We strongly recommend publishing your mandatory contract provisions into the RFP or IFB, since:This allows potential bidders to raise concerns

prior to submitting a bid, and,Eliminates a vendor or vendors unwilling to

meet these mandatory provisions, thus avoiding prolonged and fruitless contract negotiations if this vendor is the highest ranked firm; thus saving the agency time and money, and avoiding delay of their program needs being met.

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Summary

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In Summary:

OpennessQuestions and answers are disclosed to all

bidders.No verbal (one on one) communications

with vendors.Debriefing losing vendors upon request.

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In Summary:

FairnessCreate an even playing field.Clear, detailed specifications.No altering of evaluation criteria after bids

have been received.

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In Summary:

Due DiligenceKnowledge of applicable rules and

regulations.Procurement Guidelines.Procurement Stewardship Act.OSC G-Bulletins.

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In Summary:

Achieving GoalsCommunicate your needs/goals and reach

a full understanding with the awarded vendor.

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In Summary:

Following these outlined steps should produce a protest-free procurement and a smooth approval process.