Decoding the public sector procurement process

By Phyllis Meng, CFM, IFMA Fellow

As a public sector facility manager, is your procurement process a mystery? Do you have difficulty getting what you want?

Many local (city or county), state, and federal rules and regulations govern obtaining goods and services in the public sector.  Depending on the source of funding, a purchase might fall under one or more set of regulations.  If the agency receives federal funding, each federal department has its own rules and regulations.  Some granting agencies that have developed contracting regulations include the Federal Acquisition Regulations (FAR), the Federal Aviation Administration (FAA), the Small Business Administration (SBE), and the Department of Housing and Urban Development HUD).

The funding authority also outlines how the agency may spend the money it receives, including how it can solicit competitive bids: who receives a bid, how long it is advertised, what are the specific terms and conditions, and whether a performance bond is required. 

The Public Contract Code was established for Public Works solicitations.  Public Works are building a building, tenant improvement work, rehabilitation of the building, and other work requiring general contractors and trades people.  The Code defines the threshold for soliciting competitive bids, minimum requirements for solicitations, bid security bonds, advertising, prevailing wage requirements, and the requirement that solicitations be sent to every supplier on the agency’s bid list to ensure that they are offered the opportunity to bid on the project. 

Most government agencies’ boards establish the procurement dollar threshold for various types of purchases, often by price.  For example, purchases under $1,000 typically use a purchase card or check request while those under $5,000 often need three oral or written quotations. Purchases under $25,000 usually require three written bids.

More expensive purchases often require an Invitation for Bid (IFB) or a Request for Proposals (RFP). Those between $50,000 and $100,000 often require a formal procurement, IFB, or RFP. Purchases over $100,000 generally need, in addition, approval of the board. Purchases of services at less than $200,000 for services typically require a formal procurement, IFB or RFP, and approval from the CEO.

Public sector facilities professionals who work with vendors or suppliers on a regular basis should acquaint themselves with the Uniform Commercial Code, the law of commercial transactions that defines what constitutes a contract.  Understanding the Code can prevent facilities managers from talking casually with a vendor and inadvertently establishing a contract that leaves the agency liable for all costs involved. 

The Uniform Commercial Code outlines four distinct activities that constitute a contract.  The first is the offer. The facilities manager asks for a specific product and is quoted a price. Second is acceptance. If the facilities manager agrees to the price, that is acceptance. If not, negotiations ensue, and the discussion returns to step one. The third step is consideration, the amount of money to be paid for the service or item. And, finally, legal purpose; both parties of a contract must be of sound mind and the items being discussed must be legal.

Procuring products and services

The process of procuring products and services in the public sector is not so much complicated as detailed. The first step is defining a need and developing the specifications and/or scope of services/work (SOW). Next, the facilities department develops a cost estimate, which should be close to the final price of the item or service.

The cost estimate assists the purchasing department in determining how to obtain the product or services.  In determining cost estimates, facilities managers often consider the historic cost for previous similar services provided, advice from the consultant who assisted in developing the SOW, and pricing from various companies and consultants that provide the product or service (often available on company websites). Several written sources also prove useful: RS Means, IFMA Research Reports, BOMA Research Reports, Sweet’s Catalog, and Thomas Guide.

Once a preliminary budget is in place, the facilities department obtains bids from at least three vendors or contractors that can perform the work

Internally, the facilities department completes the purchase requisition form and submits it to the various levels of approvals to ensure appropriations are available for the purchase. Procurement staff reviews the requisition and the dollar amount to determine the type of solicitation required for the purchase.

In general, the larger the dollar amount, the greater the requirements, the longer the procurement process and the length of the documentation.

The procurement staff works with the facilities staff on determining the type of procurement and whether a preference will be required (i.e., local, small, minority, disadvantaged), reviewing and revising the specifications, developing a procurement schedule, and preparing the solicitation documents. Procurement and facilities staff jointly work on the solicitation documents to revise and review the final document prior to issuing.

Pre-Performance Conference Checklist

Once the solicitation is issued, vendors and contractors are notified. The facilities management department often holds a pre-bid or pre-proposal conference for all prospective contractors to ask questions about the SOW specifications. Potential bidders must submit their questions in writing. Finally, the facilities department creates an addendum to address the issues raised. Many facilities departments make exceptions for larger projects. First, they often require advertising, which increases the time that the solicitation is on the street. Second, facilities departments sometimes require pre-qualification forms.  These forms are not part of the final proposal or bid but must be submitted so the vendor or contractor can go through a process to determine if they have, or can get, the resources to complete the project.

Bids or proposals are due on a particular date and time, as specified in the solicitation documents.  Bids and proposals are opened in a public forum and each bidder is noted along with the bid. In a bid situation, the facilities manager takes all bids, reviews them for accuracy, checks the references of the lowest bidder, and performs due diligence to ensure that the lowest bidder is also responsive and responsible.  Responsive contractors have prepared the bid correctly and bid on items that the agency needs.  Responsible contractors can complete the job that they bid on.

For an RFP, the facilities management department establishes an evaluation team to evaluate the proposal. The project manager prepares a technical analysis of the recommendation to award the contract.  Depending on the dollar amount the project manager might also seek approval from the agency’s board of directors. 

After obtaining required signatures and approvals (including legal, budget, procurement, and requesting department), the procurement department issues a contract to the vendor or contractor.  The contract contains the specifications or scope of services, compensation, time period to complete the work, and all terms and conditions required to protect the agency and ensure the contractor or vendor completes the work appropriately. 

The contractor can now commence work. The project manager monitors the contractors’ performance to ensure the work is being done timely and properly. When the work is completed, the project manager signs off, the contractor is paid in full, and the contract closed.

Determining specifications

Since facilities requested the funding for the project, the facilities manager must ensure that the specifications are appropriate.  The specifications must be very detailed and include model number, part number, color, function and every other feature needed.

In developing specifications, facilities managers can research products on manufacturers’ websites, through government agencies, and by checking the IFMA Public Sector Facilities Council List Serve. It can also be helpful to check websites such R.S. Means, Local Thomas Guide, and Sweet’s catalog.

In the public sector, contractors can develop a scope of services for an agency. However, public procurement law indicates that if a vendor wrote or assisted in developing the specifications or scope of work, they may not submit a proposal for the project. It would be considered insider information and collusion, which is a conflict of interest and could result in fines, jail time, or bad publicity.

Defining the scope of work

The definition of a Scope of Work/Service is a contractually binding document describing the obligations of two parties for performance of service or delivery of product. The SOW describes the buyer’s needs in clear, concise and unambiguous language.

The SOW is important because it:

• attracts competitors by persuading them to submit offer;
• conveys requirements in a clear and understandable manner to the target audience of potential competitors; and
• states the agency’s needs so that they will be interpreted as interpreted by drafters.

During the contract performance period, the scope of works ensure:

• the buyer gets what it wants;
• creates a standard against which performance will be measured, and
• establishes a legally defensible position in the event of a contract dispute.

Outline for a Typical Statement of Work

Developing an SOW is more difficult than obtaining specifications for a product.  Most facilities contracting require services rather than specific products. Generally, the written SOW contains, at least, an introduction, key assumptions, applicable documents; a needs statement; a list of responsibilities, products and services, and task completion criteria; a clear schedule, and shipping appendices. The needs statement should include a short exposition of the project and its life cycle. It should also discuss the operational environment before, during, and after the work is being performed.

The most difficult part of writing the SOW is defining the complete services required.  If the SOW is not comprehensive, the facilities managers may not receive the services required.  A work breakdown structure is a valuable tool in developing a SOW.

Work Breakdown Structure Example

The work breakdown structure is a task-oriented “family tree” of activities that organizes, defines, and graphically displays the total work to be accomplished in meeting the project objectives. Each descending level of the work breakdown structure represents an increasingly detailed definition of each project objective.  It shows the hierarchical diagram for specific contract and services required, and it outlines the SOW.  It also divides requirements into major phases or tasks.

The work breakdown structure defines the projects needs down to the tiniest detail. Each breakdown is assigned a level and each can be broken down further until the document describes each general task in detail.  The easiest way to develop a work breakdown schedule is by using Post-It notes on a big sheet of paper, building a “tree” with the general requirements on top and detail below.  Post-It notes can make it easy to move tasks from one level to another.

Once the facilities manager completes the work breakdown structure, it is straightforward to complete the SOW. Facilities managers must be careful to use simple definite words and avoid compound construction language or ambiguous words or phrases like:  ‘pleasing lines,’ ‘suitably housed,’ and ‘free from imperfections.’ A SOW should leave no room for misinterpretation.

A well-written scope of work permits the facilities management department to develop an estimate of probable costs. It leaves no uncertainty about the specific tasks involved.  It references only applicable specifics or standards as required for the specific project.  It clearly distinguishes background and general information from seller responsibilities.  In short, a good SOW establishes standards of performance for the seller and ensures a positive outcome for everyone involved.

 
Phyllis Meng has served as a facilities professional for more than 25 years. For more than 19 years, she has been employed by Los Angeles County Metropolitan Transportation Authority.  She is a part of the team that manages and operates the 628,000-sq-ft. 28-story MTA high-rise headquarters in downtown Los Angeles.  Phyllis graduated from Cal State Northridge in 1984.

She has been very active in IFMA since joining in 1989. Over the past 14 years she has served as the President of the Los Angeles Chapter, Chair of the IFMA Foundation, and West Coast Regional Vice President of the IFMA Board of Directors and is currently serving as Immediate Past President of the Public Sector Facilities Council.  She has authored numerous facilities management articles and continues to teach facilities management-related classes. The Association has honored her over the years with a Distinguished Author Award of Excellence, a Distinguished Member Award of Excellence and IFMA Fellow. She can be contacted via e-mail at: MengP@metro.net