CONTROLLERS FORUM

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CONTROLLERS FORUM
February 25, 2008
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Procurement Contracts
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Overview

• Procurement and Contracts Department PCD
• Central purchasing and contract authority for
  American University
• Responsible for managing the procurement and
  contracts process on a University-wide basis
  including
• Purchase Orders
• Contracts/Legal Agreements associated with the
  acquisition of goods and services

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Who Are We?

• Brian BlairDirector of Procurement Contracts
• Manages, Reviews and Approves University
  Contracts and Purchases
• Evan BradfordBuyer II
• Scientific Equipment Supplies, Athletics,
  Office Supplies, Facilities Maintenance
• Ralph CastiglioneContract Analyst
• Contract Management Supply Chain Administration
  for OUA
• John DannerSr Contract Analyst
• Contract Management Supply Chain Administration
  for Facilities Maintenance
• Mary GreenLead Technology Buyer
• Computers, Software, Audio-Visual, Printers,
  Prepayments, Purchasing Card Program
• Angui MaderaReceiving Clerk
• Receives Delivers Goods to Departments, Records
  Fixed Assets
• Priti Patel
• Buyer I
• - Administration of Contracts and RFPs/Qs,
  Catering, Supplier Analysis
• Hallie PorterAssistant Director Purchasing
• Copiers, Travel Program, Fixed Asset Inventory
  Management, Blanket Purchase Orders
• Marvette SmithBuyer II
• Printing Stationery, Furniture, Water Coolers,
  Promotional Items, Rental Equipment 

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PCD generic contact information

• Contact PCD at pcd_at_american.edu
• Website at
• http//www.american.edu/finance/cop/index.html

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Why are we here?

• Sarbanes Oxley Act
• Resulting audits
• Solid supplier practices
• Clarify PCDs and budget officers
  responsibilities
• Respond to issues in customer service
  satisfaction survey

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Findings of Audits- Sox Review Dated February 2006

• Of the over 130 transactions that we have tested
  in the work noted above, approximately 50 of
  these were not processed through the Universitys
  PO process.
• The recommendation for potential enhancements
  are
• Publish clearer and more specific purchasing
  policies and procedures
• Encourage increased use of the central Purchasing
  System (Datatel)
• Evaluate integrating the decentralized purchasing
  activities into the centralized purchasing
  operation.
• The goal will be to help the University to move
  toward best practices in its purchasing
  activities.

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Audit Findings- October 2007

• TE and Procurement Card Usage resulted in one
  Low risk level concerning changes to initial
  procurement card limits

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6 Keys to Success in Purchasing Goods and
Services at American University
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Keys to Successful Procurement

• 1. Signature Authority
• 2. Unauthorized Categories of Purchase
• 3. Authorized Methods of Procurement
• 4. Strategic Supplier Selection
• 5. Required Documentation
• 6. Code of Ethics

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I. Signature Authority (Who can sign contracts?)

• You must have specific authority to obligate the
  University to sign for goods and services.
• Contract Value - PSA up to 10,000 Division
  Head10,001 to 100,000 Director of
  Procurement and Contracts
  Controller101,000 - 250,000 Assistant VP
  Finance250,001 - 500,000 VP Finance
  Treasurer500,001 - 1,000,000 Presidentover
  1,000,000 Board of Trustees
• - There must be no changes to the AU PSA or PSA
  Work Made for Hire or the terms and conditions,
  vendor must be an existing supplier otherwise
  the PSA or PSA WMFH must be signed by PCD.
  Division Head may not sign if PSA is over 10k,
  changes to the PSA doc itself or if supplier
  wants their Statement of Work signed (which
  should be attached as Exhibit A).

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Differentiating between buying and signing
contracts

• Some employees have been authorized to BUY goods
  and services directly with suppliers via the
  One-Card or Corporate Express for office
  supplies.
• However, the authority to SIGN agreements is
  still limited to designated employees in PCD, the
  Finance Office, the Provosts Office, and the
  Presidents Office.

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Delegation of Purchasing Authority

• Additionally, the Trustees have delegated
  certain authority for buying within the following
  select functional areas
• Employee Benefits - Human Resources
• Food Services Dining Services
• Insurance - Risk Management
• Legal Services - General Counsel
• Library Books - University Library
• Subcontracts on Sponsored Research Office of
  Sponsored Programs
• Auxiliary Services
• Facilities inventory- small purchases

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Samples of Agreements that should be signed by PCD

• Supplier contracts
• Purchase Orders
• Change Orders
• Prepayment forms
• Software License Agreements
• Consulting/Independent Contractor Agreements
• Maintenance and Service Agreements
• Rental and Leasing Agreements
• Hotel and event-related agreements
• All other procurement agreements
• Proposals from vendors

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Real Examples of Contract Clauses (Why we are
here)

• Cancellation clauses in catering and hotel
  contracts
• Contracts that require future use of the vendor
• Evergreen contracts
• Pricing should be itemized and linear
• Indemnification
• Insurance
• K.I.S.S.
• How much is your budget?

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II. Unauthorized categories of purchase (Do not
buy these except through PCD)

• Travelers Checks
• Money Orders
• Furriers and Fur shops
• Bars, Taverns, Night Clubs, Lounges
• ABC Stores
• Hazardous Radioactive Materials (Contact Risk
  Management)
• Illegal or gambling-related
• Live or dead animals
• Personal items
• Controlled substances requiring a DEA license
• Employee relocation and relocation-related
  expenses
• Purchases that involve signing an agreement,
  license, or contract (e.g., leases) - send
  document to PCD
• Long term rentals (1 year or longer)
• Weapons or ammunition
• Donations
• Fuel for a privately-owned vehicle or aircraft
  for personal use
• Items purchased with Plant Fund accounts

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III. Authorized Methods of Procurement (How can
you get it?)

• You must utilize one of the four authorized
  methods for purchasing goods and services
• E-Procurement
• AU One Card
• Purchase Order System
• Invoices under 500

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Blanket Purchase Order (BPO)

• Should be used for repetitive purchases, for a
  particular supplier of goods or services which
  may include multiple shipments and uses the same
  GL account. Volume requirements yield additional
  discounts (those terms will be attached to the
  PO) multiple payments Leasing office equipment
  or a maintenance agreement for goods or services.
  Blankets should include
• 1. The period of time for the performance
• 2. Not To Exceed amount for the blanket
• 3. Scope of goods or services to be included or
  not
• 4. Person authorized to issue releases against
  the blanket

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BPO Requirements

• 1. Placing the order to the company using the
  Blanket PO as reference
• 2. Arranging delivery
• 3. Approving the invoice and forwarding to
  Accounts Payable according to the following
• A. If the amount is fixed, the dean or department
  head will need to authorize automatic payment
• B. If the amount is fixed, and the requisition
  indicated a fixed price over a fixed number of
  months no further approval is needed
• C. Invoices not returned within 15 days and 500
  or less will be processed for payment
• D. The correct blanket PO must be clearly
  visible on the invoice

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Comparison of old vs. new policy
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IV. Strategic Supplier Selection (Where can you
get it?)

• Strategic supplier relationships have been
  established that leverage the Universitys buying
  power and maximize key supplier competencies to
  obtain goods and services at the best value.
• Link to website http//www.american.edu/finance/c
  op/authorizedVendors.html

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V. Required Documentation (When and how should it
be explained?)

• A standard set of bid and justification
  procedures are required to properly document all
  purchases in order to comply with Federal,
  District and University requirements.

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Justification Guidelines when not using preferred
suppliers-
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Justification- Competitive Bidding Requirements

• Any purchase or contract over 5,000 net, OR over
  one (1) year or more
• Bids should be solicited whenever the items can
  be purchased from multiple sources
• 3 verbal or written quotes or fair and reasonable
  justification for items totaling up to 5,000
• 3 written quotes for items totaling more than
  5,000 (5,001) by formal or informal RFP
• Sole source and single source or proprietary
  source must be justified by requisitioner
  confirmed by PCD
• Check Preferred Supplier List. Bid requirement
  is waived when a purchase with an aggregate value
  of 5,000 or more is made from a contract
  (preferred) supplier

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Competitive Bidding (Cont.1)

• Each potential bidder must receive the same
  business information requirements preferably in
  the form of a standard RFP
• Give detailed information for desired product(s)
  and/or services, the delivery location and
  required-by-date
• Provide a copy of Universitys PO Ts Cs
• Obtain at least 3 quotes
• Provide a contact name, phone number and e-mail
  address for suppliers that may have questions
• Clearly define bid submission instructions and
  submittal day and time in addition to selection
  timing and criteria

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Competitive Bidding (Cont.2)

• At no time should one supplier's proprietary
  information be shared with another supplier.
• Please remember to allow sufficient time (usually
  2-3 weeks for standard requests) for the supplier
  to respond to a Request For Quotation, RFP or
  RFI.
• Contact PCD for more information on formal
  requests and any templates you may need.

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Justification- non competitive

• Sole Source- there is only 1 vendor capable of
  providing an item or service, and therefore it is
  not possible to obtain competitive bids
• Single Source- when there are multiple sources of
  supply, but for specific reasons the item or
  service must be purchased from the specified
  vendor

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Sole Source Justification Form

• Supplier/Consultant Selected
• Check the reason that you chose this supplier or
  consultant
• _____ Supplier was the low bidder.
• _____ Supplier provided the best evaluated
  responsible offer (other than low bidder)
  provide evaluation criteria
• _____ Supplier establishes or maintains an
  essential engineering, research, or
  development capability (single source)
• _____ An unusual and compelling urgency
  precludes full and open competition provide
  rationale (single source).
• _____ Compatibility with other components of a
  system already in operation identify
  existing items (single source).
• _____ Only supplier that meets pre-established
  performance characteristics provide listing
  (single source).
• _____ Supplier specifically identified within
  award documentation provide verification
  (single source).
• _____ Supplier/consultant is the only
  manufacturer/provider of this good or service
  (sole source).
• _____ Other.
• Requires explanation attach supporting
  documentation

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Sole Source Justification Form p. 2

• Price/Cost Analysis Based on (Ref. Methods to
  Determine Price Reasonableness Document)
• _____ Adequate price competition
• _____ Comparable to Price Sold to Fed. Govt.
• _____ Catalog/Market pricing
• _____ Historical pricing (- Provide previous
  PO)
• _____ Comparison to in-house estimate
• _____ Comparison to similar items
• _____ Comparable Customers Invoice
• _____ Cost analysis
• _____ Award specifically identifies item/person
  and price (- Provide identifying page from
  customers award)
• Requires further explanation - Summary of
  analysis attach supporting documentation

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Good vs. Poor descriptions of goods and services

• Poor
• Computer
• Services
• Printer
• Business cards
• Item 030405

• Better
• Dell Optiplex
• Translate the attached document from German to
  Spanish by 3/8/08
• HP LaserJet 1200
• Business card for Jane Doe
• Industrial glass cleaner, 12 oz

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Not so good examples of justification

• This company is the best!
• Ive worked with this company for years and Ive
  never had a problem with them.
• Their pricing cant be beat!
• They are the only company that can provide this
  product or service.
• Ive known John for years and he always does what
  he says.
• There is no time to bid it.

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Other poor reasons for justification-

• Uniqueness
• Timeframe
• Incumbency
• Lack of Planning
• Administrative Delay
• Lowest pricing but not substantiated with proper
  bids

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Good examples of waiving the competitive bidding
requirement

• Equipment for which there is no comparable
  competitive product.
• Repairs or replacements of a component for which
  there is no commercially available substitute,
  and which can be obtained only from the
  manufacturer and/or a manufacturers distributor.
  
• An item where compatibility is the overriding
  consideration, such as computer operating
  software enhancements for an existing system.
• Continuation of an existing contract when work is
  so closely related to that of the uncompleted
  basic contract that it would not be feasible to
  consider another potential contractor.
• Ask yourself these questions
• What are the consequences of not purchasing the
  good/service or not contracting with the
  Departments proposed supplier?
• What market research was conducted to
  substantiate the justification for purchasing,
  including evaluation of other items considered?

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VI. Code of Ethics (Why Procurement and
Contracts?)

• Refrain from soliciting or accepting gifts,
  loans, or services from potential suppliers
• Handle confidential information with proper
  consideration
• Impartiality
• Understand the letter and spirit of laws
  governing the purchasing and contracts function
• No personal purchases

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Ethical Issues- Conflicts of Interest

• Avoid conflicts of interest
• Refers to situations in which financial or other
  personal considerations compromise, or have the
  appearance of compromising an individuals
  professional judgment and ability to perform his
  or her responsibilities to AU.
• Conditioning any actual or potential business on
  a charitable gift or contribution to AU.
• Participating in any way in a transaction with a
  Close Relation.
• Soliciting personal gifts or special favors that
  provide or seek to provide to AU goods and/or
  services.
• Accepting personal gifts in excess of 50 that
  are not occasional or modest.

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Whistleblower Policy

• Report Conflicts of Interest to immediate
  supervisor, manager, department chair or dean
• Reports may be made to
• employeerelations_at_american.edu
• academicaffairs_at_american.edu
• dos_at_american.edu
• You cannot be fired for reporting a bona fide (in
  good faith) conflict of interest
• Further questions, please contact the Office of
  Finance

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PO Turnaround

• Procurement Contracts targets a 48 hour
  turnaround to issue Purchase Orders if all
  information is clearly stated on the Purchase
  Requisition and has been competitively bid or
  justified appropriately.
• Current year- 60 within 48 hours 80 within 5
  days and 98 within 10 days.

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Unauthorized Purchases

• Procurement Authority may only be delegated by
  PCD
• An AU employee who makes an unauthorized purchase
  of goods or services may be held personally
  responsible for payment of the charges incurred

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Sales Tax

• The University is exempt from District and
  certain states sales tax.
• Other taxes such as Entertainment Tax, Luxury
  Tax, some Use Taxes and Excise Tax are not
  exempt.
• Upon request, The Procurement and Contracts
  Department will furnish a copy of the
  University's tax exemption certificate with the
  purchase order.
• PCD maintains a list of each state (as well as
  the District) where the University holds a sales
  tax exemption.
• Please contact PCD with any questions regarding
  taxes and their applicability.

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Insurance

• Under a variety of circumstances, outside
  organizations are required to provide evidence of
  commercial general liability insurance and to
  name the University as an additional insured to
  the organization's insurance policy in order to
  be permitted to conduct business on University
  property.
• All such arrangements require a written contract
  or purchase order with the University.
• PCD works with the Office of Risk Management to
  ensure that proper insurance requirements are in
  place before any on-site work begins. Refer to
  the Risk Management website for more details.

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Surplus

• Items that departments no longer use must be
  turned over to the Surplus Program so the
  University capital asset records can be updated
  and the items can be redistributed to other
  departments, sold, donated, or scrapped
• Email hporter_at_american.edu with AU barcode,
  model, serial number for pick up of items

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Environmental Purchasing

• American University is committed to providing a
  safe and healthful environment for its employees,
  students and visitors and managing the University
  in an environmentally sensitive and responsible
  manner. The Procurement and Contracts Department
  works with the Environmental Issues Project Team
  to encourage the use of products that minimize
  adverse environmental and health effects and take
  into consideration costs associated with the full
  product life cycles.
• We are currently working with Ecosense (student
  group) to further the Universitys Green
  Purchasing initiatives.

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Payment Terms

• Net 30 is the standard payment term used within
  the industry and should be the minimum terms
  agreed to for payment length from AU to any
  vendor.
• Net terms of longer than 30 days are advantageous
  to AU and will be secured if possible.
• Deposits and other arrangements within Net 30 are
  not considered standard and will be avoided at
  all costs.

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Vendor Fair

• Each Spring, The Procurement and Contracts
  Department hosts its annual Vendor Fairs
  showcasing over 100 vendors and their products to
  more than 500 campus users.
• Housed in Butler Board Room, the Vendor Fair is
  aimed at providing contract vendors with the
  opportunity to show their products, make new
  contacts, and achieve new business with the
  University.
• Special sections are organized for vendors
  offering environmentally friendly products and
  ergonomics vendors.

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Department Budget Coordinators Role

• A department budget coordinators responsibility
  includes working with PCD on all purchases
  (authorized and unauthorized) of materials,
  supplies, services, and repairs when these goods
  and services are of the following type
• Exceed 500 including tax, freight, and handling
  charges
• Have not been competitively bid or justified and
  are over 5,000 net
• Are considered capital equipment
• Are restricted budget items
• Require a signed contract from the supplier
• Require labor on University premises
• Professional Service Agreement (PSA) over 10,000
  OR PSAs under 10,000 and have material changes
  to the PSA.

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Other items and summary

• Burma Policy
• Scams- toner and phishing
• Catering payments/deposits
• Be wary of vendor contracts

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• Questions and Answers