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EXECUTIVE MANAGEMENT AND AUDIT COMMITTEE JANUARY 20,201 1

SUBJECT: FOLLOW-UP AUDIT OF NON-COMPETITIVE PROCUREMENTS

ACTION: RECEIVE AND FILE

RECOMMENDATION

Receive and file the attached Follow-Up Audit of Non-Competitive Procurements (1 1 - ADM-001).

At the June 2010 Board meeting, the Board requested a follow-up audit on the findings and corrective actions identified in the May 2010 audit report on Non-competitive Procurements and Single BidslProposals. The Board requested a report back in 90 days, so Management Audit presented an interim report on the follow-up audit at the September EMAC meeting. This report presents the results of the completed follow-up audit on Non-competitive Procurements and Single BidsIProposals.

DISCUSSION

The objectives of our follow-up audit were to verify implementation of corrective actions agreed upon from the initial audit in May 2010 and determine compliance with Procurement Policy, Federal and State regulatory requirements for non-competitive procurements and single bidslproposals.

The scope of this audit was limited to the 8 findings noted in the initial audit and reviewed completed procurements for the period May thru October 201 0. Based on data in the Financial Information Systems (FIS), there were 9,805 transactions totaling $125,627,715 for the period reviewed of which 694 were coded as non-competitive procurements totaling $8,341,983. The procurements coded as non-competitive in FIS include small purchases of inventory procurements, internal MTA store orders, warranty

spare parts replacements, first article. While these have been coded as non- competitive, in practice, no competition is possible for these types of transactions.

Non-Competitive Requirements We found improved compliance with non-competitive procurement policy and regulatory requirements including sole source justification, cost price analysis, market survey and delegated authority limit. We noted some files that were non-compliant in signing the checklist, the sole source justification and the non-conflict certification as detailed below.

Summary of Files in Compliance with Procurement Requirements

Documentation of Sole Source Justification I Adequacy of Sole Source Justification 1 Adequacy of Cost / Price Analysis

Market Survey

Signed Sole Source ~ustification'

63%

Delegated Authority Limit

Signed Procurement checklist1

Signed Non-Conflict certification1 I

89%

~ o t e ' Best practice procedures implemented 7/1/10

68%

87%

nfa

Although there was improvement in compliance between the interim report and the final report, there remains some room for improvement. We recommend Procurement Management conduct retraining where files were found to be not fully compliant. We also recommend the Chief Administrative Services Officer direct her management to conduct at a minimum, annual file reviews to verify that Contract Administrators and Managers are complying with all Procurement requirements.

100%

89%

Accuracy of Procurement Summary Form Based on an issue noted in the May 2010 audit report, the Procurement Summary form attached to Board Reports was updated in August 2010 to eliminate the "Notifications Sent" field. Procurement management provided instructions to staff on what information needed to be provided in the "BidslProposals Picked Up" and the "BidslProposals Received" fields to ensure that information provided to the Board was accurate and complete.

95%

100%

28%

Follow-Up Audit of Non-Competitive Procurements

100%

92%

We tested the accuracy of information provided in both fields (bidslproposals picked up and bidslproposals received) by reviewing seven procurement summaries from the October 2010 Board meeting. We found that all seven Board reports contained accurate information in the bids1 proposal received field. However, we found four of seven procurement summary forms did not accurately document the number of bidslproposals picked up by vendors. In three instances, the number of proposals picked up was overstated.

This occurred because staff included every instance the bid or proposal was downloaded. In some cases, more than one person from the same firm downloaded the document, which would result in an overstatement of the number of firms that picked up documents. Management informed us that the number represented in the "BidsIProposals Picked Up" field is the number of times bidlproposals packets were downloaded from the website and does not represent the exact number of vendors who were interested in the procurement.

We recommend Procurement management work with Board staff to clarify what information the Board needs in the Procurement summary form.

Eleven Corrective Actions In addition to testing compliance to non-competitive requirements, we verified that management implemented all 11 corrective action items as agreed to in the May 2010 audit report. Management has implemented all of the following corrective actions:

1. Update procurement checklist to reflect FTA 4220.1f regulations. 2. Conduct training on procurement checklist. 3. Require management to sign off on each procurement checklist. 4. Conduct training on review of procurement specifications and scope of work. 5. Conduct training on delegated authority limits. 6. Establish responsibility for documentation of media buy procurements. 7. Make procurement type field in FIS a mandatory field. 8. Update Board Report template guidance. 9. Require sign off of non-conflict certification by contracting officerlbuyer and

management. 10. Require sign off of the sole source justification by procurement staff, manager

and project manager. 11. Provide a report to board indicating the number of single bidslproposals and non-

competitive procurements awarded for that period.

NEXT STEPS

Management Audit will schedule a follow-up audit next fiscal year to verify continued compliance.


ATTACHMENT(S1

A. Follow-Up Audit of Non-Competitive Procurements (1 1 -ADM-001)

Prepared by: Ruthe Holden, Chief Auditor


Ruthe Holden Chief Auditor

I1

Arthur T. Leahy Chief Executive Officer


@Ma, Interoffice Memo

Date January 5,2011

TO Michelle Caldwell Chief Administrative Services Officer

From Ruthe Holden, Chief Auditor

Subject Follow-up Audit of Non-Competitive Procurements and Single BidsIProposals Report No. 1 1 -ADM-001

Attached is our report on the Follow-up Audit of Non-Competitive Procurements and Single Bids/Proposals.

The report key sections are as follows:

The Executive Summary is an overview of what we audited and found. The Introduction specifics the objectives and the steps taken during the audit. The Audit Results section describes in detail the conditions we found, our recommendations, and management comments. Appendix A contains your management responses on the specific recommendations.

Report Distribution: Julie Ellis Rose Sanchez Audit Administration Acting lnspector General Deputy Inspector General-Audit

Follow-up Audit of Non-Competitive Procurements and Single

Bids/Proposals

REPORT NO. JANUARY 201 1 11 -ADM-001

TABLE OF CONTENTS

.......................................................................... Executive Summary I

Introduction

............................................................................... Background 5

....................................................................................... Scope 8

Methodology .............................................................................. 9

.................................................................................... Audit Results I 0

Appendices

.......................................................... A - Management Response 15

.............................................. B - Delegation of Approval Authority 17

............................................................. C . File Review Summary 18

D . Exception Listing .................................................................... 19

Follow-up Audit of Non-Competitive Procurements and Single Bids/Proposals

EXECUTIVE SUMMARY

Introduction Management Audit Services has conducted a follow-up audit of Non-Competitive Procurements and Single Bids/Proposals. This follow-up audit was requested by the Board to verify corrective actions were taken by management based on our initial audit in May 2010. An interim report was presented to the Board at the September 201 0 meeting to update the Board on the status of the audit findings for the period May thru July 2010. This final report incorporates the interim results as well as the procurements completed in August thru October 2010.

Audit Conclusion Management has implemented all 11 corrective action items as agreed to in the May 2010 audit report (initial audit). As a result, there is improved compliance with non- competitive procurement policy and regulatory requirements including sole source justification, cost price analysis, market survey and delegated authority limit. Further improvements are possible in implementing some of the required procedures through periodic monitoring by management.

Summary of Findings

lnadeauate or Missing Documentation - Remediated For non-competitive procurements, the Procurement Policy and FederalIState Regulations require documentation to justify why sole source procurement was made and a cost/price analysis to verify price reasonableness. We found significant improvements in these three areas.

Figure-A Compliance Summary of Sole Source Justification & CostIPrice Analysis

Documentation of Sole Source Justification 1 45 of 63 71% 1 240124 1 100% I I Adequacy of CostIPrice Analysis 1 35 of 55 1 63% 1 24 of 24 1 100% 1 I

Page 1 of 22


EXECUTIVE SUMMARY

Full and Open Competition - Remediated Procurement Policy requires each non-competitive procurement file include a description of the market survey conducted. We found adequate documentation of market survey or a statement giving the reason why market survey was not needed.

Fiaure-B Com~liance Summarv of Market Survev

We also reviewed two procurements that resulted in single bids and determined that the contract administrator followed the required procedures by contacting non-responsive bidders to verify adequacy of competition. In both situations, the reason the bidders did not bid was because of technical specifications. This requires the procurement to be processed as a sole source, we verified that in both cases it was processed as a sole source and the required internal agency approvals were obtained.

Exceeding Deleaated Approval Authority Limit - Remediated Procurement staff is delegated a specific dollar amount to award procurement actions. Our initial audit found that some procurement staff was exceeding their approval authority however; we did not identify any issues in this area during our follow-up.

Figure-C Com~liance Summary of Delegated Approval Limit

Page 2 of 22


EXECUTIVE SUMMARY

Implementation of Best Practices Based on our initial audit, management agreed to implement three recommended best practices including signing procurement checklist, signing sole source justification and signing non-conflict certification. These controls were implemented in July.

Figure-D Compliance Summary of Best Practice Procedures

Signed Procurement Checklist nla nla I

'procedures implemented 7/1/10

Signed Sole ,Source Justification

Signed Non-Conflict Certification '

Based on sample review of 24 non-competitive procurements we found: 2 of 24 (8%) procurement checklists lacked manager signature. 2 of 24 (8%) sole source justifications lacked manager signature. 5 of 24 (21 %) non-conflict certifications lacked either contract administrator and/or manager signature.

1) We recommend Procurement Management conduct retraining for personnel who did not fully comply. See appendix-D for listing of non-compliant files.

2) We also recommend the Chief Administrative Services Officer direct her management to conduct at a minimum annual review of files to verify that Contract Administrators and Managers are complying with all Procurement requirements. Verifying practices can aid in protecting the integrity of procurement processes.

n/a

n/a

Management has completed the retraining for personnel and initiated a quarterly review of procurement activities as agreed to in the initial audit. In addition, management will continue to participate in the numerous audits such as the Federal Procurement Systems Review, FTA Triennial audits and any grant specific reviews as required.

Accuracy of Procurement Summary Form Based on our initial audit finding in May 2010, the procurement summary form was updated in August 201 0 to eliminate the "Notifications Sent" field and management provided further instructions in the "Bids/Proposals Picked Up" and the "Bids/Proposals Received" fields to provide clear guidance for procurement personnel.

nla

nla

Page 3 of 22

22 of 24

19 of 24

92%

79%

nla

nla

Follow-up Audit of Non-Competitive Procurements and Single BidslProposals

- -

EXECUTIVE SUMMARY

We tested the accuracy of information provided in both fields (bidslproposals picked up and bidslproposals received) by reviewing seven procurement summaries from the October 2010 Board meeting. We found that all seven Board reports contained accurate information in the bids1 proposal received field. However, we found four of seven procurement summary forms did not accurately document the number of bidslproposals picked up by vendors. In three instances, the number of proposals picked up was overstated.

This occurred because staff included every instance the bid or proposal was downloaded. In some cases, more than one person from the same firm downloaded the document, which would result in an overstatement of the number of firms that picked up documents. Management informed us that the number represented in the "Bids/Proposals Picked Up" field is the number of times bidlproposals packets were downloaded from the website and does not represent the exact number of vendors who were interested in the procurement.


Management is currently revising the Procurement summary form in conjunction with the committee created by the CEO to clarify and include data that are more meaningful to the Board. This activity will be completed in January 201 1.

Page 4 of 22

Follow-up Audit of Non-Competitive Procurements and Single BidsIProposals

INTRODUCTION

Background

Non-competitive procurements are actions that lack adequate competition. This can occur from a single bid or proposal or a non-competitive procurement action.

Sinnle Bid or Pro~osal occurs when only one bid or proposal is received in response to a competitive solicitation process, which becomes a non-competitive procurement action. Non-com~etitive occurs when supplies, equipment, materials or services are available from only one responsible source, and no other supplies, equipment, materials or services will satisfy the requirements. Non-competitive procurements also exist when a change or modification is done on an existing contract.

Procurement of supplies, equipment, material and services without competition may be authorized under limited conditions, and are subject to written justification documenting the conditions, which preclude competition. Procurement by non-competitive bid or proposals may be used only when an award of a contract is not feasible using small purchase procedures, sealed bids, or a competitive proposal process.

Non-federally funded solelsingle source procurements are subject to the requirements of California Public Code, Public Utilities Code (PUC) and Government Code. The PUC permits exceptions to competitive bidding requirements contained in PUC 130232 by two-thirds vote by the Board. After two-thirds vote by the Board, the PUC allows the Contracting Officer to proceed without further observance of competitive bidding requirements in the following limited circumstances:

Lower Price on The O ~ e n Market. PUC 130233 allows this approach where after rejecting all bids, that supplies, equipment and materials may be purchased at a lower price in the open market Emergencies in case of great public calamity. PUC 130234 allows emergencies procurements such as extraordinary fire, flood, storm, epidemic, or other disasters and Board determine that the public interest requires immediate expenditure to safeguard life, health, property or public welfare. Immediate Remedial Measures. PUC 130235 allows expenditures for immediate remedial measures to avert or alleviate damages, repairs or restore MTA property. Under this case, the CEO may authorize expenditures without following PUC 130232, 130233 and 130234 to ensure MTA facilities are available to serve the general public transportation needs. Prototype Equioment. PUC 1 30236 allows the Board to direct procurement of prototype equipment or modifications to conduct and evaluate operational testing without further observance of the competitive bidding requirements.

Page 5 of 22


-- -

INTRODUCTION

Non-com~etitive. The Board may direct purchase of supplies, material and equipment when it determines that only a single source exist and the non- competitive procurement is for the purpose of duplicating or replacing supplies, equipment, or material already in use without observance of PUC 130232.

Federally funded solelsingle source procurements are subject to requirements set forth in FTA Circular 4220.1 F Third Party Contracting Guidance. FTA 4220.1 F Chapter VI, Subsection 3.i. requires that procurement by non-competitive proposals be used only when the award of a contract is not feasible under small purchase procedures, sealed bids, or competitive proposals and at least one of the following circumstances applies:

1. The item is available only from a single source; 2. The public exigency or emergency for the requirement will not permit a

delay resulting from competitive solicitation; 3. FTA authorizes non-competitive negotiations; 4. After solicitation of a number of sources competition is determined

inadequate; or 5. The item is an associated capital maintenance item as defined in 49

U.S.C. 5307(a) (1) that is procured directly from the original manufacturer or supplier of the item to be replaced. The Contracting Officer must first certify in writing to FTA: (i) that such manufacturer or supplier is the only source for such item; and (ii) that the price of such item is no higher than the price paid for such item by like customers.

For federally funded non-competitive procurements, a cost analysis is required instead of a price analysis to determine that the price is fair and reasonable. A cost analysis is the requirement to verify the proposed cost data, the projections of the data and the evaluation of the specific elements of costs and profit. For non-federally funded procurements, a cost or price analysis is required to determine that the price is fair and reasonable.

Non-Competitive Process For non-competitive procurements, the Contracting Officer must use the negotiated method of procurement. In each instance where non-competitive procedures are used, the Contracting Officer must do the following:

1. All purchases over the micro-purchase threshold require a written justification that specifically demonstrates that procurement by competitive bid or negotiation is not required by provisions of the Procurement Policy Manual; and

2. Ensure all steps required for justification, documentation, and approvals are completed before the contract is awarded.

Non-competitive procurements cannot be justified based on the following: Lack of adequate advance planning Administrative delays, lack of sufficient personnel, or improper handling of

Page 6 of 22


INTRODUCTION

procurement requests or competitive procedures. Pending budget authority expiration.

Contracting OfficersIBuyers are required to ensure non-competitive procurements are reviewed or approved at the level in the MTA at which the funding must be approved.

The Procurement Policy Manual requires that each non-competitive procurement file include the following:

1. Specific identification of the procurement as non-competitive; 2. The nature or description of the proposed procurement; 3. A description of the requirement, including estimated value or cost; 4. A specific citation to the applicable laws and applicable provisions in the

Procurement Policy Manual that provide legal authority for negotiating the procurement on a non-competitive basis;

5. An explanation of the unique nature of the procurement or other factors that qualify the requirement for non-competitive;

6. An explanation of the proposed contractor's unique qualifications or other factors that qualify the proposed contractor as a non-competitive;

7. A description of the market survey conducted and the results, or a statement of the reasons why a market survey was not conducted, and a list of potential sources contacted or who expressed, in writing, an interest in the procurement;

8. Any other pertinent factors or reason supporting the use of non-competitive procurement.

The Contracting Officer is not required to publicize a solicitation for non-competitive procurement. A letter to request a proposal for non-competitive procurement is permitted and the Contracting Officer should comply with applicable negotiation procedures for Competitive Negotiated Contracts contained in the Procurement Policy Manual. In addition, the Contracting Officer shall ensure each non-competitive contract contains all required clauses, representations, and certifications, in accordance with applicable laws, regulations, or Board adopted policy.

Single Bid and Proposal Process

Single BidsIProposals start as a competitive process and are subject to the Procurement Policy Manual procedures applicable to the competitive procurement procedures. In the event a single bid or proposal is received, the Procurement Policy Manual requires that staff conduct (1) a survey of Vendors to determine why there were no other Bidders and (2) an analysis which documents that the price is fair and reasonable. Also, where competitive bids or proposals are solicited and no responsive bids or proposals are received, an alternative procurement may be permissible under the non-competitive procedures set forth in the Procurement Policy Manual Chapter 11.

Page 7 of 22


INTRODUCTION

Delenation o f Contractinn Authority

The MTA Board specifies the delegated authority to approve contract actions, contract changes, and amendments to contracts. The CEO has the authority to redelegate general contracting authority for contracting to the Executive Officer, Procurement. The Executive Officer, Procurement, has the authority to redelegate this authority to others within Procurement with power of further redelegation.

Refer to the Appendix B for a list of delegated authority. The delegations shown in Appendix B are general ones, and all other existing or future delegations, issued by the CEO or EO Procurement, to the extent to which they would limit the scope of or impose conditions or restrictions upon the exercise of the general authorities cited in Exhibits "A" and "BJJ shall be controlling. The CEO may also delegate authority to execute contract documents for Board approved contract actions to authorized designee(s). Such delegations shall be in writing and shall be with power of further redelegation.

Objectives The objectives of our follow-up audit were to verify implementation of corrective actions as agreed upon from the initial audit in May 2010 and determine compliance with Procurement Policy, Federal and State regulatory requirements for non-competitive procurements and single bids/proposals.

Scope We reviewed non-competitive and single bid procurements from 5/1/10 to 10/31/10.

We conducted this performance audit in accordance with Generally Accepted Government Auditing Standards and the International Standards for the Professional Practice of Internal Auditing. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Page 8 of 22


--

INTRODUCTION

Methodology To determine if corrective actions were implemented we:

Obtained source documentation and reviewed them for evidence of completion lnterviewed procurement management and personnel.

To determine compliance with MTA Procurement Policy Manual, Federal and State regulatory requirements for non-competitive procurements and single bids/proposals we:

Organized our compliance file review into two periods to enable comparative analysis. The interim file review covered files from 5/1/10 to 7/31/10 and the final file review covered 8/1/10 to 10/31/10. For each file review period, we obtained a statistical sample of non-competitive procurement actions and tested them against applicable criteria. lnterviewed contract administrators, buyers and procurement management regarding compliance activities.

To assess the reliability of the data in Financial Information System (FIS), we: lnterviewed systems personnel who is responsible for compiling these data, based on information inputted by procurement staff, and Performed basic reasonableness checks of the data against other sources of information.

We determined that the data were sufficiently reliable for the purpose of drawing a statistically valid sample for our compliance file review.

Page 9 of 22


AUDIT RESULTS

General Assessment Management has implemented all 11 corrective action items as agreed to in the May 2010 audit report (initial audit). The corrective actions are:

1 Update procurement checklist to reflect FTA 4220.1f regulations. 2. Conduct training on procurement checklist. 3. Require management to sign off on each checklist. 4. Conduct training on review of procurement specifications and scope of work. 5. Conduct training on delegated authority limits. 6. Establish responsibility for documentation of media buy procurements. 7. Make procurement type field in FIS a mandatory field. 8. Update board report template guidance. 9. Require sign off of non-conflict certification by contracting officerlbuyer and

management. 10. Require sign off of the sole source justification by procurement staff, manager

and project manager. 11. Provide a report to board indicating the number of single bidslproposals and

non-competitive procurements awarded for that period.

Based on full implementation of all corrective actions, we found improved compliance with non-competitive procurement policy and regulatory requirements including sole source justification, cost price analysis, market survey and delegated authority limit. Further improvements are possible in implementation of best practice procedures through periodic monitoring by management.

Inadequate or Missing Documentation - Remediated For non-competitive procurements, the Procurement Policy and FederallState Regulations require documentation justifying why sole source procurement was made and justifications must be allowable as defined by regulations. In our initial audit, we found 18 of 63 (28%) files did not contain sole source justifications and 22 of 63 (34%) files had inadequate justifications that were not allowable per regulations. For our interim review, we found 2 of 22 (9%) files did not contain sole source justification and 3 of 22 (13%) files had inadequate justifications. During our final review period, all 24 (100%) files contained documentation of sole source justification and were allowable as defined in regulations.

For federally funded non-competitive procurements, a cost analysis is required instead of a price analysis to determine that the price is fair and reasonable. A cost analysis is the requirement to verify the proposed cost data, the projections of the data and the evaluation of the specific elements of costs and profit. For non-federally funded procurements, a cost or price analysis is required to determine that the price is fair and reasonable. In our initial audit, we found 20 of 55 (36%) files had inadequate costlprice

Page 10 of 22


AUDIT RESULTS

analysis and in our interim review, we found 7 of 22 (31%) files. Compliance improved in the final review period with 24 of 24 (1 00%) files containing adequate costlprice analysis.

Full and Open Competition - Remediated Procurement Policy requires each non-competitive procurement file include a description of the market survey conducted. Adequate market surveys are important to determine all sources that meet the requirements of the procurement. In our initial audit, we found 6 of 55 (1 1 %) of files had inadequate market surveys and the interim review we found 1 of 9 (1 1%) were inadequate. Our final review found that an adequate market survey was performed for 95% of files reviewed. Description of the market survey or a statement giving the reasons why a market survey was not needed was documented in the files.

When only one bid is received in response to a solicitation that was issued to multiple sources, procurement personnel must determine if there was adequate competition by contacting those firms solicited to find out why they did not submit bids. If the reason is a restrictive specification or a delivery requirement that only one bidder could meet, there is inadequate competition. If this is the case then the procurement is a sole source and the procurement must be processed as such with internal agency approvals. There were two single bids situations within our review period and in both situations, the contract administrator contacted the non-responsive firms and confirmed that the reason they did not submit bids was because they could not meet the technical specifications. Therefore, the procurements were processed as sole source and appropriate agency approvals were obtained.

Exceedina Deleaated Ap~roval Authority Limit - Remediated Procurement staff is delegated a specific dollar amount to award procurement actions. In our initial audit, we found 8 of 63 (1 2%) files where procurement personnel exceeded their delegated authority limits. In the interim and final review all procurement staff complied with delegated authority limits with 22 of 22 (1 00%) and 24 of 24 (100%) files in compliance respectively.

implementation of Best Practices Based on our initial audit, management agreed to implement three recommended best practices:

1. Contract administratorlbuyer and manager sign the procurement checklist. 2. Contract administratorlbuyer, manager and project manager sign the sole source

justification document. 3. Contract administratorlbuyer and manager sign the non-conflict certification.

Page 11 of 22


AUDIT RESULTS

Management implemented the best practice procedures on 7/1/10. For our interim review, we tested seven procurement files for compliance with best practice procedures and found:

5 of 7 (71 %) procurement checklists lacked manager signature. 5 of 7 (71 %) sole source justifications lacked contract administrator and manager signature. 4 of 7 (57%) non-conflict certifications lacked either contract administrator and/or manager signature.

After our interim review, management conducted further staff training to clarify best practice requirements. After the staff was trained, we tested procurement files completed between July and October 2010. Based on sample review of 24 procurements we found:

2 of 24 (8%) procurement checklists lacked manager signature. 2 of 24 (8%) sole source justifications lacked manager signature. 5 of 24 (21 %) non-conflict certifications lacked either contract administrator and/or manager signature.

Although there was improvement in compliance between interim and final review period, there remains some room for improvement.

1) We recommend Procurement Management to conduct retraining for personnel who did not fully comply. See appendix-D for listing of non-compliant files.

2) We also recommend the Chief Administrative Services Officer direct her management to conduct at a minimum annual review of files to verify that Contract Administrators and Managers are complying with all Procurement requirements.

Management agreed with our recommendations. Management has completed the retraining of personnel and will continue to review the activities each quarter as they prepare the quarterly report to the Board summarizing the non-competitive procurements as agreed to in the initial audit. In addition, they will continue to participate in the numerous audits such as the Federal Procurement Systems Review, FTA Triennial audits and any grant specific reviews as required.

Accuracy of Procurement Summarv Form Based on our initial audit finding in the May 2010 audit report, the Procurement Summary Form was updated in August 201 0 to eliminate the "Notifications Sent" field and management provided further instructions in the "Bids/Proposals Picked Up" and the "Bids/Proposals Received" fields to provide clear guidance for Procurement personnel.

Page 12 of 22


AUDIT RESULTS

We tested the accuracy of information provided in both fields (bidslproposals picked up and bidslproposals received) by reviewing seven procurement summaries from the October 2010 Board meeting. We found that all seven Board reports contained accurate information in the bids/ proposal received field. However, we found four of seven procurement summary forms did not accurately document the number of bidslproposals picked up by vendors. In three instances, the number of proposals picked up was overstated.

This occurred because staff included every instance the bid or proposal was downloaded. In some cases, more than one person from the same firm downloaded the document, which would result in an overstatement of the number of firms that picked up documents. Management informed us that the number represented in the "Bids/Proposals Picked Up" field is the number of times bidlproposals packets were downloaded from the website and does not represent the exact number of vendors who were interested in the procurement.


Management agreed with our recommendation and is revising the procurement summary form in conjunction with the committee created by the CEO to revise the Board templates to clarify and include data that are more meaningful to the Board. This activity will be completed in January 201 1.

Wed Ian 05 09:37:37 201 1

Ruthe Holden Chief Auditor November 201 0

Audit Team: Claudia Casasola Lizzette Espinoza Jason Nishiyama Sangeeta Patel Rose Sanchez Marjorie Villapando

Page 13 of 22


APPENDICES

Page 14 of 22


APPENDIX A

-v

Interoffice Memo

---""."- ---"-- ". -- ---a%--- Ta &th ~ o l d e a

Chief Auditor +.". "-A. .--- ... , .. - ---.,-,, ~~

h m MickftUe topes &ldw&l C b f Aclminiswtiw Services --- w $oUow-zsp &dudit of Nan-Qn1p6dw Ilrr~cur-gmelxts and Single Bids/Promais

- kmrt b. 1 S-ADM-QIOI

Wnasmmt respone to the subjm audit fal1uw:

aerion items as yreed ta in the May 2010 a d i t rqw6: (initial au&tJ, a is imprwd campliatm Mil& non- &mp&iv~? p m r m e n t palicy d r e d a t w q u k e a t s includiq sale source jaMmrtoa test pice amlyda market mmey art$ d&gatec$ autharity Limit. Further h p v e m s ~ are pdbb in implemataticnn af best pncticc ptcacduxs &rou& pmiadic monitoring by mamgnn~nt.~

I. We recommend Procurement Management to conduct tetraining for personnel who did not comply with the best practice procedures.

Z Wgr a h recornme& the ~~&Mnainiotrntjve SeNires ORcer to direct the Emcaxtiw Ogficer ~ T P r o o o m n t and U a ~ e a l Managements and Deputy Exiecutive O%cer sf Invenw Managemt?.nr to candua, at a minimum, annual d e w af sample Qlw tr) w&y &at coaW~& arfmiaiswatsrs and managers are c~mpl$o48, with the be@ practice produws. VeriEying pmcaicets a n aid in prowti% the integrity d proiurcment praeesses,

3. We m m n ~ m d psackzrexnent nxanwtnetxt tci wonk wt& b a r d ~ P R I w cfisrifir tlrmc &$nition of &tag Bdda/Prcipo~als data fie!& nad inwrpomte stasldard definjtiona into pmcurememt sutnmary farm.

Page 15 of 22

Follow-up Audit of Non-Competitive 11 -ADM-001 Procurements and Single BidsIProposals

APPENDIX A

a: Pzul Taylor Rase S a n t k B ~ E fwnr Id Iv&ontcyi Jdie Eftis

Page 16 of 22


APPENDIX B

Exhibit - A Approval for award and for modificationslamendments to purchases, services and miscellaneous contracts other than constructions changes*

Exhibit - B Approval of Construction Contract Change Orders*

Contract awards to $1 00K and modification/amendments sensitive to Inspector General Approves OIG operations and which increase the aggregate contract price by no

more than $100K over the life of the contract

Executive Officer' Approves Delegated by CEO Procurement

Chief Executive Officer

Contract awards to $200K; modifications/amendments which increase

Deputy Chief Approves the aggregate contract price by no more than $100K over the life of the

Executive Officer contract

Chief Approves All Software and hardware license and maintenance renewals Officer

Chief Executive Construction contracts based on lowest responsible bid pursuant to CA

Procurement Delegated by CEO

Chief Executive Officer Deputy Chief Executive

Facilities Construction Change Orders to $1 00K;

Officer Rail Construction Change Orders to $200K

Facilities Construction Change Orders exceeding $loOK; Board of Directors Rail Construction Change Orders exceeding $200K

Officer

Board of Directors

Page 17 of 22

Approves

PUC §130051.9(c)

All other contract awards exceeding $200K and modifications/amendments which increase the aggregate contract price by more than $100K over the life of the contract

Follow-up Audit of Non-Competitive Procurements and Single Bids/Proposals 11-ADM-001

APPENDIX C

f53 Detegatsd Authorrty Limit 55 Of 63

(7) Signed Soh Source

J umn~adon' nta 1 2 6 7 1 28%

Page 18 of 22

Follow-up Audit of Non-Com~etitive Procurements and Sinale Bids/Pro~osals 11-ADM-001

APPENDIX D

14 Rail - Speed Sensor lR215332 19.128 x x x x

Page 19 of 22

Follow-up Audit of Non-Competitive Procurements and Single Bids/Proposals 1 1-ADM-001

APPENDIX D

Page 20 of 22


APPENDIX D

Page 21 of 22

2

5

'

9

10

11

12

Trucks

Procurement of Diwsion Lube Trucks

Modification of ATP Software

Wee-Z Bond Cirwit Replacement on Metro Red Line

Transit Watch Public Awareness Training

Network Storage System

Electric Forkliffs

Electronic Funds Transfer Modification to BIAS and FIS systems

Procurement of Top of Rail & Guard Rail Friction Modifier

Software License Renewal for Digital Map Library

12 Month Agreement for Xerox Printers

Maintenance of SimplexGrinnell Alarm Panels

DR08329

OP39602425

OP39602605

PS26lOLASD-TWPATI

DR08315

OP37902568

PS92402617

DR08331

DR08307

PSI 1642007

FY11112

$ 443.296

$ 367.700

$ 335,730

$ 251.760

$ 162,601

$ 124,185

$ 103,224

$ 83.589

$ 83.398

$ 59.500

$ 45,000

x

X

x

X

X

x

X


APPENDIX D

Page 22 of 22

l6

17

18

19

20

21

22

23

24

Cummins OEM Parts

Ultrasound and Magnetic Particle Testing

Direct Fixation Fasteners for Rail

UFS-Mobile Phone Validator Application License

Driver Evaluation System

Cash Counting & Packaging Services

Maintenance of FSP Mobile Data Computer System

Blackberry Server Support Renewal

Cummins OEM Bus Parts

lR217947

OP39402920

lR218121

DR07989

OP32402611

DR5561

10FSP18

DR08305

lR221009

$ 25,851

$ 25,000

$ 22.500

$ 20,000

$ 19,800

$ 15,000

$ 10,000

$ 9.940

$ 9,174

X

X

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