SAN FRANCISCO HOUSING AUTHORITY
PROCUREMENT POLICY & PROCUREMENT PROCEDURES MANUAL
San Francisco Housing Authority 1815 Egbert Avenue San Francisco, California 94124
Procurement Policy - 1/11/01–– Section I, II, III approved Revised May 29, 2001 Threshold amount changed 2007 Capital Fund Stimulus Grant Procurement Policy added April 9, 2009
Procurement Policy & Procedures Manual (revised 7/15/09)
SAN FRANCISCO HOUSING AUTHORITY
San Francisco Housing Authority 1815 Egbert Avenue San Francisco, California 94124
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 3 PROCUREMENT POLICY TABLE OF CONTENTS I.
PROCUREMENT AUTHORITY AND ADMINISTRATION
CONTRACTOR QUALIFICATIONS AND DUTIES
TYPES OF CONTRACTS, CLAUSES, AND CONTRACT ADMINISTRATION
APPEALS AND REMEDIES
ASSISTANCE TO SMALL, WOMEN, AND MINORITY OWNED BUSINESSES
ETHICS IN PUBLIC CONTRACTING
REFERENCE DOCUMENTS / APPOINTMENT LETTER ATTACHMENT
CAPITAL FUND STIMULUS GRANT PROCUREMENT POLICY (PIH 2009-12 (HA) issued March 18, 2009 XII.
PREFACE This Procurement Policy is established by the Board of Commissioners (Commission) of the Housing Authority of the City and County of San Francisco (the Authority) to provide the Authority staff with a set of policies for procurement of supplies, equipment, services and construction activities.
GENERAL PROVISIONS A.
GOAL OF THE PROCUREMENT POLICY This Procurement Policy is established to provide for the fair and equitable treatment of all persons or firms involved in purchasing by the Authority; assure that supplies, equipment, services, and construction activities are procured efficiently, effectively, and at the most favorable prices available to the Authority; promote competition in contracting; provide safeguards by maintaining a centralized procurement system of quality and integrity; and to assure that Authority purchasing actions are in full compliance with applicable Federal standards, HUD regulations, and State and local laws. The objective of the Contracting/Procurement Division is to add value to the Authority through the procurement of quality goods, services and construction at a fair and reasonable cost. The Contracting/Procurement Division will require a contractor to; meet a minimum of 25% resident employment (monitored on a weekly basis) as well as encourage contractors to exceed this minimum goal; provide maximum contracting opportunities for minority and women owned businesses; and adhere to the term and conditions of any existing labor memorandum of understanding. On competitive proposals, the SFHA will place a higher value during the selection process on those contractors who exceed the minimum 25% of resident employment and provide maximum contracting opportunities for minority and women owned businesses. The Contracting/Procurement Division will provide an introduction to SFHA Procurement briefing to new employees, and will provide continuous training for the staff on current issues, laws, regulations and procurement innovations.
APPLICATION This Procurement Policy applies to all contracts and procurement actions undertaken by the Authority. It shall apply to every expenditure of funds by the Authority for public purchasing, regardless of the source of the funds, including Comprehensive Grant Programs, HOPE VI Programs, and Operating Subsidy funds. Nothing in this Procurement Policy shall prevent the Authority from complying with the terms and conditions of any grant, contract, gift or bequest that is otherwise consistent with law. The term "procurement," as used in this Procurement Policy includes Purchase Orders, Contracts and Contract Modifications, used to obtain supplies, equipment, 4
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 5 services, construction activities, and the lease or rental of supplies, equipment or facilities.
PUBLIC ACCESS TO PROCUREMENT INFORMATION Procurement information shall be a matter of public record to the extent provided in the California Public Records Act (Section 6250).
Under no circumstances, except as stated below, are funds to be obligated by the Authority and members of its staff unless authorized through the proper procurement process as outlined in this Policy or the Authority Procurement Procedures. The Executive Director will take positive action to preclude, to the maximum extent possible, the need for procurement actions to be ratified by the Commission after funds have been expended by the Authority staff. In cases where time is of the essence in order to protect lives, property or in other emergency situations, the Executive Director, acting as the Contracting Officer for the Authority, is authorized to obligate money on behalf of the Authority. The procurement action including related justification documents will be submitted as a resolution to the Commission for prior approval, or ratification if funds have been obligated by the Executive Director's action. NO PRE-PAYMENT / PAYMENT IN ADVANCE FOR GOODS OR SERVICES
The Authority will only authorize payments to vendors or contractors if the following conditions are met: for services, the work must have been rendered and is deemed acceptable; for goods, the items must have been received and accepted; the price is determined to be fair and reasonable. Payments to governmental agencies and public utilities will be made in conformance with the requirements of those entities. F.
COST AND PRICE ANALYSIS A cost or price analysis shall be performed for all procurement actions, including contract modifications, in order to determine price reasonableness.
CANCELLATION OF SOLICITATIONS
An Invitation for Bid, Request for Proposal, Request for Qualifications or other solicitation may be cancelled anytime before opening. 1.
A solicitation may be cancelled and all bids or proposals that have already been received will be returned at any time prior to the awarding of a contract. 2.
Any and all bids may be rejected if there is a sound documented reason. H.
AMENDING PROCUREMENT POLICY OR PROCEDURES 1.
The Procurement Policy of the Authority as stated within this document will only be amended through resolution and approval of the Commission.
The Procurement Procedures of the Authority may be amended at any time at the discretion of the Executive Director, and do not require Commission approval. ECONOMIC OPPORTUNITIES FOR PUBLIC HOUSING RESIDENTS
In order to ensure that employment opportunities are available to Housing Authority residents, the Commission expects all contractors to adhere to the requirements outlined under Section 3 of the Housing and Urban Development Act of 1968 as stated in 24 CFR 135, Determination and Order No. D-109 of Commission Resolution 4604 - Determination and Order to Establish a Goal of Hiring Residents to Constitute a minimum of twenty-five Percent (25%) of the total workforce for all construction contracts performed by the Housing Authority, and other resolutions as the Commission shall adopt from time to time.
Additionally, to ensure Public Housing Authority residents have the best opportunity to apply, be trained and be considered for entry-level jobs outside of housing Authority Contracts, the Authority through the Executive Director will participate in the First Source Hiring Program of the City and County of San Francisco.
PROCUREMENT AUTHORITY AND ADMINISTRATION
CONTRACTING OFFICER The Executive Director is the Contracting Officer with the authority to delegate to the Director of Contracting to act on behalf of the Contracting Officer in carrying out the Authority’s contracting program. B.
PROCEDURES The Authority shall issue operational procedures (Procedures) to implement this Procurement Policy, which shall be based on 24 CFR 85.36 – Procurement, HUD’s Handbook 7460.8 REV. 2, “Procurement Handbook for Public Housing Agencies”, HUD’s Annual Contributions Contract, 24 CFR 941 – Public Housing Development for Public Housing Agencies, 24 CFR 135 – Contracting Opportunities for Project Area 6
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 7 Businesses, 24 CFR 963 – Contracting With Resident Owned Businesses, and the State of California’s Public Contract Code. C.
REVISIONS This Procurement Policy and any later changes shall be submitted to the Commission for approval. The Commission appoints and delegates procurement authority to the Executive Director and is responsible for ensuring that any procurement policies adopted are appropriate for the Authority.
CENTRALIZED PROCUREMENT The Authority maintains a centralized procurement process although specific actions relating to a procurement may be performed outside the contracting department. The Executive Director is responsible for implementing the Procurement Policy. The Contract/Procurement Division ensures for the Executive Director that all departments of the Authority are properly executing Procurement Policies and Procurement Procedures as well as Federal laws, HUD regulations, guildlines and all local laws and ordinances. This will be accomplished through direct participation and reviews of portions of the procurement process performed by Authority staff in other departments and divisions.
The Commission shall approve through resolution all Contracts or commitments of funds that exceed $100,000 dollars. 1.
The Executive Director is hereby authorized to enter into Contracts or commit funds up to $99,999 dollars. 2.
PROCUREMENT METHODS One of the following procurement methods shall be chosen, based on the nature and anticipated dollar value of the total procurement: A.
SMALL PURCHASES 1.
General: Any procurement not exceeding $100,000 may be made in accordance with HUD’s Small Purchase procedures and as authorized in this section. Procurement requirements shall not be artificially divided so as to constitute a small purchase under this section (except as may be reasonably 7
necessary to comply with Section IX, Assistance to Small and Other Businesses) or to constitute purchases not requiring Commission review. Petty Cash Purchases: Small purchases under $50 which can be satisfied by local sources may be processed through the use of a Petty Cash Account (Petty Cash Account not to exceed $500). 2.
Purchases of $2,000 or less: For small purchases below $2,000 only one quotation or bid need be solicited if the price received is considered reasonable and documented in the file. 3.
Purchases over $2,000: For small purchases in excess of $2,000 but not exceeding $100,000 no less than three offerors shall be solicited to submit a price quotation, bid or proposal depending on the complexity of the procurement. 4.
SEALED BIDS For procurements under the Comprehensive Grant Program and the HOPE VI Programs, sealed bidding is the preferred method used for all construction and equipment contracts. (CFR 85.36-(c) (4)(d)(2)(i)).
COMPETITIVE PROPOSALS 1. Request for Proposals (RFP): Competitive proposals may be used if there is an adequate method of evaluating technical proposals (price and other factors considered - CFR 85-36, Evaluation Criteria 7460.8 REV 2, 4-20) and where the Authority determines that conditions are not appropriate for the use of sealed bids. An adequate number of qualified sources shall be solicited and given sufficient time to provide a responsive proposal.
Request for Qualifications (RFQ): The Government Code of the State of California requires the selection of professional services which includes architectural, landscape architectural, engineering, environmental, land surveying or construction project management firms be procured by the Qualification Based Selection Process. 1.
NONCOMPETITIVE PROPOSALS 1.
Conditions for Use: Procurements shall be conducted competitively to the maximum extent possible. Procurement by noncompetitive proposals may be used only when the award of a contract is not feasible using purchase procedures, sealed bids, or competitive proposals, and one of the following applies: a. The item is available only from a sole source, determined by market research or there is a reasonable basis that the Authorityâ€™s minimum need can only be satisfied by a unique supply, service or trade. 8
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 9 b. A public exigency or an emergency situation exists that seriously threatens the public health, welfare, or safety, or endangers property, or would otherwise cause serious injury to the Authority, as may arise by reason of a flood, earthquake, epidemic, riot, equipment failure, or similar event. In such cases, there must be an immediate and serious need for supplies, services, or construction such that the need cannot be met through any other procurement methods, and the emergency procurement shall be limited to those supplies, services, or construction necessary to meet the emergency; c. For those procurements over $100,000 dollars, HUD authorizes the use of a noncompetitive proposal; or d. After solicitation of a number of sources, competition is determined inadequate. 2.
Justification: Each procurement based on noncompetitive proposals shall be supported by a written justification for using such procedures (CFR 85.36 (C) (4)(d)(4)). The Contracting Officer shall approve the justification in writing. In addition, the justification will be submitted to the Board for their consideration and approval, as part of their resolution package.
3. Price reasonableness: The reasonableness of the price for all procurements based on noncompetitive proposals shall be determined by performing a cost analysis. F.COOPERATIVE PURCHASING The Authority may enter into Federal, State of California and local intergovernmental agreements to purchase or use common goods and services as authorized by law. The decision to use an intergovernmental agreement or conduct a direct procurement shall be based on economy and efficiency.
CONTRACTOR QUALIFICATIONS AND DUTIES A.
CONTRACTOR RESPONSIBILITY Procurements shall be conducted only with responsive and responsible contractors and vendors, who have the technical and financial competence to perform and who have a satisfactory record of integrity.
SUSPENSION AND DEBARMENT Purchase Orders or Contracts shall not be awarded to any firm at any tier (subcontractors) which is debarred, suspended, or is otherwise excluded from or 9
ineligible for participation in Federal assistance programs under Executive Order 12549, "Debarment and Suspension."
TYPES OF CONTRACTS, CLAUSES, AND CONTRACT ADMINISTRATION A. CONTRACT TYPES Any type of contract which is appropriate to the procurement and which will promote the best interests of the Authority may be used, however cost-plus-percentage-ofcost and percentage of construction cost methods are prohibited. B.
OPTIONS Options for additional quantities or performance periods may be included in contracts, as long as there is a written determination in file which includes the fund availability, statement as to the continuing need for the item, indication as to whether the option was included and evaluated as part of the basic contract, and a review of the market price to indicate whether the option is still economical for the Authority, consistent with Authority Procedures (24 CFR 85.36(b)(9), 7460.8 REV-1, 62 OPTIONS)
CONTRACT CLAUSES In addition to containing a clause identifying the contract type, all contracts shall include all clauses required by Federal statutes, executive orders, and their implementing regulations, as provided in 24 CFR 85.36 (i).
CONTRACT ADMINISTRATION After the award of a contract, a Contract Administrator will be assigned by the Department Head for appointment by the Contracting Officer, to ensure that the contractors work and performance is acceptable and that they are paid accordingly. The Contracting Officer or his/her delegated representative will appoint an individual to be the Contract Administrator (usually the Project Manager or individual most familiar with the requirement). The Contracting Officer will assure that this individual has the adequate procurement training to exercise their responsibility prior to issuing an appointment letter to the Contract Administrator, outlining their responsibilities (monitor and review payment submittals, assure contractor performance in accordance with the terms and conditions of the contract, monitoring the contractors efforts to assure the minimum 25% resident hiring, approve or reject progress schedules, etc.). (CFR 85.36 (a) (2)) (Appointment Letter attachment)
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 11
CONTRACT MODIFICATION The Executive Director is authorized to approve all contract modifications not to exceed a cumulative total of $50,000 per project. All modifications or amendments in excess of a cumulative total of $50,000 require Commission approval. All modifications (change orders) in excess of 15% of the original contract award price will require a written justification as to the reasons (differing site conditions, change of schedule, unforeseen conditions, monitoring the contractors efforts to assure the minimum 25% resident hiring throughout the life of the project, etc.) and to validate the reasonableness of price.
VII. SPECIFICATIONS AND PURCHASE REQUEST A. GENERAL All specifications shall be drafted to encourage full and open competition. Requester must ensure that they are not unduly restrictive, and do not represent unnecessary or duplicate items. Specification must be included with the Purchase Request. B. All procurement actions will require a Purchase Request to initiate a process signed and approved by the Department Head. This is an internal form prepared by a department in response to a requirement. It is the responsibility of the requesting department to provide complete and accurate purchase information necessary to initiate the procurement action. VIII.
APPEALS AND REMEDIES A.
GENERAL It is the Authority's policy to resolve all contractual issues informally at the Authority level and in conformance with the requirements of the dispute clauses in the contract.
BID PROTESTS A protest against a solicitation must be received in writing before the due date for receipt of bids or proposals and submitted to the Contracting Officer. Protest against the award of a contract must be received in writing and submitted to the Contracting Officer. Bid protests will be resolved in conformance with the requirements of the bid documents.
CONTRACT CLAIMS 11
All claims by a vendor or contractor relating to performance of a contract shall be submitted in writing to the Contracting Officer or designee for a written decision. The Authority, within 60 days, will decide the claim or notify the contractor of the date by which the decision will be made. The contractor may request a conference on the claim. Claims will be resolved in conformance with the requirements of the contract. The Contracting Officer's decision shall inform the vendor or contractor of their appeal rights.
ASSISTANCE TO WOMEN OWNED BUSINESSES, SMALL AND MINORITY OWNED BUSINESSES A.
REQUIRED EFFORTS Consistent with Executive Orders 11625, 12138, and 12432, and Section 3 of the HUD Act of 1968, the Authority shall make efforts to ensure that small and minorityowned businesses, women-owned business enterprises, labor surplus area businesses, and individuals or firms located in or owned in substantial part by persons residing in the area of an Authority development are used when possible.
GOALS The Commission has established the goal of a 20% aggregate involvement of bonafide minority-owned businesses and women-owned business enterprises in construction contracts and procurement activities. The Authority staff will provide documentation of the outreach efforts to meet the goal in the file for each contract procurement.
OUTREACH The Commission's goal is that contractors and vendors doing business with the Housing Authority reflect the diversity of the residents. For each procurement, maximum outreach will be made into the women and minority business community. When appropriate, proposal evaluations will provide additional consideration for offerors providing a higher level of women or minority owned business participation or a higher level of resident employment.
ETHICS IN PUBLIC CONTRACTING The Authority shall adhere to the following code of conduct, consistent with applicable State or local law: A.
CONFLICT OF INTEREST No employee, officer or agent of this Authority shall participate directly or indirectly in the selection or in the award or administration of any procurement if a conflict, 12
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 13 real or apparent, would be involved. Such conflict would arise when a financial or other interest in a firm selected for award is held by:
An employee, officer or agent involved in making the award;
His/her relative (including father, mother, son, daughter, brother, sister, uncle, aunt, first cousin, nephew, niece, husband, wife, fatherinlaw, motherinlaw, soninlaw, daughterinlaw, brotherinlaw, sisterin-law, stepfather, stepmother, stepson, stepdaughter, stepbrother, stepsister, half brother, or half sister);
His/her partner; or,
An organization which employs, is negotiating to employ, or has an arrangement concerning prospective employment of any of the above.
GRATUITIES, KICKBACKS, AND USE OF CONFIDENTIAL INFORMATION Authority officers, employees or agents shall not solicit or accept gratuities, favors, or anything of monetary value from vendors or contractors, potential contractors, or parties to subcontracts, and shall not knowingly use confidential information for actual or anticipated personal gain.
PROHIBITION AGAINST CONTINGENT FEES Vendors or contractors shall not retain a person to solicit or secure an Authority contract for a commission, percentage, brokerage, or contingent fee, except for bona fide employees or bona fide established commercial selling agencies.
XI. REFERENCE DOCUMENTS A.
24 CFR 85.36 - Procurement Website: http://www.access.gpo.gov/nara/cfr/waisidx_00/24cfr85_00.html
24 CFR 135 - Contracting Opportunities for Project Area Businesses Website: http://www.access.gpo.gov/nara/cfr/waisidx_00/24cfr135_00.html
24 CFR 941 - Public Housing Development for Public Housing Agencies Website: http://www.access.gpo.gov/nara/cfr/waisidx_00/24cfr941_00.html
24 CFR 963 - Contracting with Resident Owned Businesses Website: http://www.access.gpo.gov/nara/cfr/waisidx_00/24cfr963_00.html 13
HUD Handbook 7460.8 - Procurement Handbook for Public Housing Agencies Website: http://www.hud.gov/pih/publications/7460-8h/7460-8h.html F. HUD's Annual Contributions Contract Website: http://www.hud.gov/pih/ffmd/finmanagement_faq.html http://www.hudclips.org/sub_nonhud/cgi/pdf/22829a.pdf G. State of California Public Contract Code Website: http://www.leginfo.ca.gov/cgibin/calawquery?codesection=pcc&codebody=&hits=20 E.
CAPITAL FUND STIMULUS GRANT PROCUREMENT POLICY - PROCUREMENT REQUIREMENTS FOR PROCESSING AMERICAN RECOVERY AND REINVESTMENT ACT CAPITAL FUND FORMULA GRANTS (PIH 2009-12 (HA) issued March 18, 2009 X.
The U.S. Department of Housing and Urban Development Office of Public and Indian Housing issued NOTICE PIH 2009-12 (HA) on March 18, 2009. This notice provides public housing authorities information and procedures for processing American Recovery and Reinvestment Act (ARRA) Capital Fund Formula Grants. Regarding procurement with ARRA funding, the following procurement requirements shall be followed: Priorities: PHA’s shall give priority to Capital Fund Stimulus Grant projects that can award contracts based on bids within 120 days from February 7, 2009. 2. State and Local: Any requirements relating to the procurement of goods and services arising under state or local laws and regulations shall not apply to Capital Fund Stimulus Grants. PHA’s shall instead follow the Part 85 requirements. 3. Part 85 Compliance: PHA’s shall amend their procurement standards and policies as necessary in order to expedite and facilitate the use of the funds. This amended policy can be used only for procurements related to Capital Fund Stimulus Grants. This must be done in writing and consistent with PHA policies and procedures (such as Board approval) and labeled as Capital Fund Stimulus Grant Procurement Policy. Specifically, PHA’s shall remove all procurement standards that are contrary to Part 85 or the Recovery Act. Where permitted by Part 85, PHA’s may insert their own procedures provided that they are not contrary to the purpose of the Recovery Act. For example, a PHA may use their existing protest procedures, written codes of standards for employees engaged in the award and administration on the contracts and other procedures as long as they are not contrary to Part 85. It is important to note that PHAs shall continue to follow all Part 85 requirements regarding conflicts of interest, contract cost and price. PHAs may consider bid times than the typical 30 day period of time. 1. HUD Handbook: PHAs may use the Procurement Handbook for Public Housing Agencies (7460.8 rev-2) for guidance. 2. Noncompetitive Proposals: According to 24 CFR 85.36(d)(4), if solicitation of a proposal is only from one source or if the PHA finds that after solicitation of a number of sources, that competition is inadequate, the PHA may award the contract noncompetitively where small purchase procedures, sealed bids, or competitive proposals are infeasible and one of the circumstances in 85.36(d)(4)(i) applies. One such circumstance is public exigency that will not permit a delay resulting from competitive solicitation (85.36(d)(4)(i)(B)). If the PHA finds that 1.
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 15 other competitive methods of procurement are infeasible HUD will support the PHA’s use of the public exigency circumstance based on the purpose and requirements of the Recovery Act. Section 3 of the Recovery Act provides that these funds shall be managed and expended to achieve the purposes specified including commencing expenditures and activities as quickly as possible consistent with prudent management. Further the Recovery Act has imposed expeditious obligation and expenditure requirements on the Capital Fund Stimulus Grants and directs HUD to assist PHAs as necessary to expedite and facilitate the use of these grants. PHAs may use the noncompetitive proposals method, but must do so on a contract-by-contract basis and in compliance with all Part 85 requirements including the requirement for a cost analysis and the conflict of interest requirement. The PHA must ensure that the noncompetitive proposals process followed is clearly captured in their amended Capital Fund Stimulus Grant Procurement Policy. Further, the PHA must maintain records sufficient to detail the significant history of each contract’s procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price (85.36(b)(9). No HUD preaward review is required for noncompetitive proposals as stated in Section 8.4(C), Chapter 8 of HUD Handbook No. 7460.8 Rev. 2. However, all PHAs are reminded that they must make available upon HUD’s request the PHA Capital Fund Stimulus Grant Procurement Policy and any documents requested related to procurement activity as stated in 24 CFR 85.36(g). 3. Force Account: To the extent feasible, the PHA should consider employing existing or additional force account laborers on either a permanent or a temporary basis to perform Capital Fund Stimulus Grant work. See 24 CFR 968.105 and 968.120. No prior HUD approval is required specifically for force account labor, but such work must be incorporated into the Capital Fund planning, budgeting and reporting requirements. 4. Buy American: PHAs shall follow Buy American requirements of section 1605 of the Recovery Act and use only iron, steel and manufactured goods produced in the United States in their projects. 5. Questions: HUD’s PIH Customer Service Center (CSC) can address questions related to HUD’s public housing procurement policy as it relates to the Recovery Act. Energy conservation information can be obtained through the CSC as well. The toll free number is 1-800-955-22332. Emails can be sent to PIHRC@deval.us. HUD will reply to each inquiry. A summary of responses will be posted periodically at the Capital Fund webpage at www.hud.gov/offices/pih/programs/ph/capfund/.
PROCUREMENT PROCEDURES MANUAL
San Francisco Housing Authority Staff: The San Francisco Housing Authority spends millions of dollars each year on supplies, services and construction activities. Procurement of these goods and services is an important and complex responsibility. In order to carry out these responsibilities, the Authority has developed this Procurement Procedures Manual to ensure the procurement process meets the Authority’s Procurement Policy and all applicable regulations, standards, codes and laws. The Procurement Procedures Manual sets forth the operational requirements, procedures and guidance to be followed by all Authority staff involved in any Authority procurement activity. These procedures are intended to: provide for the fair and equitable treatment of all persons or firms involved in the procurement process; to assure that all goods and services are procured efficiently, effectively, and at the most favorable prices available to the Authority; to promote competition; to provide safeguards for maintaining a system of quality and integrity; and to ensure that Authority procurement actions are in full compliance with all applicable regulations, standards, codes and laws. This manual complies with the San Francisco Housing Authority’s Procurement Policy, 24 CFR 85.36 - Common Rule for Grantee Procurement, HUD Handbook 7460.8, “Procurement Handbook for Public Housing Agencies”, HUD’s Annual Contributions Contract, 24 CFR 941 Public Housing Development for Public Housing Agencies, 24 CFR 135 - Contracting Opportunities for Project Area Businesses, 24 CFR 963 – Contracting With Resident Owned Businesses, the State of California’s Public Contract Code, and the other regulations referenced through out the document. Please assure your contracting and procurement activities are conducted in accordance with the Authority’s Procurement Policy and the procedures detailed in this Procurement Procedures Manual.
___________________________________ Executive Director ___________________________________ Date
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 17
TABLE OF CONTENTS
Paragraph Glossary of Public Housing Authority Contracting and Procurement Terms
CHAPTER 1. PROCUREMENT AUTHORITY AND ADMINISTRATION 1.1 1.2 1.3 1.4 1.5
Introduction Purpose Application Public Access to Procurement Information Introduction
Procurement Policy and Responsibilities of Executive Director Responsibilities of Contracting Officer
1.8 Federal Standards 1.9 Audits 1.10 Procurement Planning 1.11 Advance Procurement Plans 1.12 Procurement Request 1.13 Contract File Documentation 1.14 Public Notice 1.15 Solicitation mailing Lists 1.16 Cost Estimates and Analysis of Offers 1.17 Basis for Award 1.18 Funding
CHAPTER 2. PROCUREMENT METHODS AND CONTRACT INFORMATION Section 1. Selection of Method 2.1 General Section 2. Small Purchases 2.2 2.3
General Competition 17
2.4 2.5 2.6 2.7
Petty Cash Purchases Small purchases of $2,000 or less Small purchases over $2,000 Purchase Orders
Section 3. Sealed Bidding 2.8 General 2.9 Conditions for Use 2.10 Invitation for Bids 2.11 Alternate Bids, Add-Ons, and Deducts 2.12 Amendments 2.13 Construction Pre-Bid Conferences 2.14 Solicitation and Receipt of Bids 2.15 Bid Opening 2.16 Award 2.17 Mistakes in Bids 2.18 Bonds Section 4 Competitive Proposals 2.19 General 2.20 Sealed Bidding vs. Competitive Proposals 2.21 Conditions for Use 2.22 Preparing the Request for Proposals 2.23 Evaluation Criteria 2.24 Amendments 2.25 Handling of Proposals 2.26 Proposal Evaluation 2.27 Negotiations 2.28 Award 2.29 Architect/Engineer Services 2.30 Legal and Other Professional Services 2.31 Unsolicited Proposals
Section 5. Noncompetitive Proposals 2.32 General 2.33 Conditions for use 2.34 Justification 2.35 Price reasonableness 2.36 Procedures 18
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Section 6. Cost and Price Analysis 2.37 2.38 2.39 2.40 2.41 2.42 2.43 2.44 2.45
General Terms and Conditions for Use Cost and Price Analysis Techniques How Cost/Price Analysis Applies to Different Procurement Methods Cost Analysis Cost Allowablility Cost Allocability Cost Reasonableness Profit
Section 7. Cancellation of Solicitations 2.46 2.47
General Procedure Section 8. Cooperative Purchasing
2.48 2.49 2.50
General HUD Regulations Content of Agreements Section 9. Contractor Wage Rates
Construction Contracts Technical/Maintenance Wage Rates
CHAPTER 3. CONTRACTOR QUALIFICATIONS AND DUTIES 3.1Contractor Responsibility 3.2Suspension and Debarment 3.3 Limited Denial of Participation 3.4Qualified Bidders Lists
CHAPTER 4. TYPES OF CONTRACTS AND CLAUSES, AND CONTRACT ADMINISTRATION Section 1. Pricing Arrangements and Contract Options 19
4.1 Contract Types 4.2 Options Section 2. Provisions and Clauses 4.3 4.4
Solicitation Provisions HUD Forms
CHAPTER 5. CONTRACT ADMINISTRATION 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9
General Planning for Contract Administration Post-Award Conference and Notice to Proceed Receipt of Items Monitoring and Inspections Acceptance Allowable Costs Contract Modifications Contract Terminations
CHAPTER 6. SPECIFICATIONS 6.1 6.2 6.3
General Limitations Statement of Work (SOW)
CHAPTER 7. APPEALS AND REMEDIES 7.1 7.2 7.3
General Bid Protests Contract Claims
CHAPTER 8. ASSISTANCE TO SMALL AND OTHER BUSINESSES 8.1 General 8.2 Section 3 of the HUD Act of 1968 8.3 Resident-Owned Businesses 8.4 Other Required Efforts
CHAPTER 9. ETHICS IN PUBLIC CONTRACTING 9.1
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 21 9.2 9.3 9.4 9.5 9.6
Conflict of Interest Additional Prohibitions Gratuities, Kickbacks, and Use of Confidential Information Prohibition Against Contingent Fees Sanctions
CHAPTER 10. HUD REVIEW REQUIREMENTS 10.1 10.2 10.3 10.4
General Exemption from Pre-Award Review Comprehensive Grant Program and HOPE VI Program File Submission
CHAPTER 11. STATE AND LOCAL LAWS ON PROCUREMENT 11.1 11.2 11.3
General Common Areas of State Legislation on Procurement Common Areas of Local Laws or Regulations on Procurement
ATTACHMENTS: Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit
1 2 3 4 5 6 7 8 9
Exhibit 10 Exhibit 11 Exhibit 12 Exhibit 13 Exhibit 14 Exhibit 15 Exhibit 16 Exhibit 17 Exhibit 18
Purchase Requisition Purchase Order Request for Fund Encumbrance for Planned Contract Activity Public Notice, Advertisement Cost Estimate Invitation for Bids, Index Sample Addendum HUD-5369, Instructions to Bidders for Contracts Transfer of Construction Activity From Housing Development Department to Contract/Procurement Division Sample Award Letter Sample Bid Bond Sample Performance Bond Sample Payment Bond HUD-5370, General Conditions for the Contract for Construction Request for Proposals, Index Sample Addendum Sample Evaluation Plan Request for Qualifications, Index 21
Exhibit 19 Exhibit 20 Exhibit 21 Exhibit 22 Exhibit 23 Exhibit 24 Exhibit 25 Exhibit 26 Exhibit 27 Exhibit 28 Exhibit 29 Exhibit 30 Exhibit 31 Exhibit 32 Exhibit 33 Exhibit 34 Exhibit 35 Exhibit 36 Exhibit 37 Exhibit 38 Exhibit 39 Exhibit 40 Exhibit 41
HUD-51915, Standard Form of Agreement Between Owner and Design Professional Request for Wage Determination Certified Payroll and Compliance Statement WH-347, Payroll Form HUD-5369, Representations, Certifications, and Other Statements of Bidders HUD-5369-B, Instructions to Offerors, Non-Construction HUD-5369-C, Certifications and Representations of Offerors, Non-Construction HUD-5370-C, General Contract Conditions, Non-Construction Sample Pre-Construction conference Sample Notice to Proceed Sample Receipt Document HUD 51000, Schedule of Amounts for Contract Payments HUD-51001, Periodic Estimate for Partial Payment HUD-51002, Schedule of Change Orders HUD-51003, Schedule of Materials Stored HUD-51004, Summary of Materials Stored Sample Contractor Certificate and release Sample Inspection Report Sample Construction Change Order Sample Amendment Sample Increased Encumbrance Purchase Order Sample Certificate and Release Sample Certificate of Completion
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GLOSSARY OF PUBLIC HOUSING AUTHORITY CONTRACTING AND PROCUREMENT TERMS
Introduction: This glossary contains selected terms and definitions related to federal, states and local contracting and procurement practices that, in many cases, cannot be found in standard, general-purpose dictionaries. It also contains terms associated with the architect/engineer, construction and consultant fields and contract administration functions. The selected definitions are intended to make the terms understandable and usable by Authority staff. Acceptance/acknowledgment: The act of an authorized representative of the Authority accepting or acknowledging that the supplies or services are in conformity with the contract requirements. Act of God: A danger that could not be avoided by human power, any natural cause of damage which is irresistible (e.g., hurricane, flood, lightning), and which is in no way connected with negligence. Amendment: (1) a written revision made to a solicitation, a contract modification to a architect/engineer consultant or professional contract. Arbitration: A process by which a dispute between two contending parties is presented to one or more disinterested parties for a decision. Architect/Engineer (A/E): All professional services associated with the research, design, and construction of facilities. "Asis": A term indicating that goods offered for sale are without warranty or guarantee, and that the purchaser takes the goods at his own risk without recourse against the seller for the quality or condition of the goods. Award: The presentation of a purchase agreement or contract to a bidder, the acceptance of a bid or proposal. Bid: A quotation specifically given to a prospective purchaser upon their request, usually in competition with other offerors. In the sealed bidding method of procurement the offer submitted by a bidder. Bid bond: An insurance agreement in which a third party agrees to be liable to pay a certain amount of money in the event that a specific bidder, if their bid is accepted, fails to sign the contract as bid. 23
Bid opening: The process through which the contents of bids are revealed for the first time to the Authority, to the other bidders, and to the public. Bid sample: A sample required by the Invitation for Bids to be furnished by bidders as part of their bids to establish a quality level for the products being offered. Bidder's list: A list maintained by the Authority setting out the names and addresses of suppliers of various goods and services from whom bids, proposals, and quotations can be solicited. Bill of materials: A list specifying the quantity and character of materials and parts required to produce or assemble a stated quantity of a particular product. Blanket purchase order: A purchase arrangement in which the Authority contracts with a vendor to provide the Authorityâ€™s requirements for an item(s) or a service, on an as-required and often over-the-counter basis. Such arrangements set a limit on the period of time they are to be valid and the maximum amount of money which may be spent at one time or within a period of time. May also be referred to as annual contract, open-end contract. Bona fide: In good faith. Brand name: A product name which serves to identify that product as having been made by a particular manufacturer. A trade name. Breach of contract: A failure without legal excuse to perform any promise, which forms a whole or part of a contract. Breach of warranty: An infraction of an express or implied agreement as to the title, quality, content, or condition of an item sold. Cardinal changes: Modifications to an existing contract which are beyond the general scope of that contract and are so extensive that a new procurement should be used. Cash discount: A discount from the purchase price allowed to the Authority if paid within a specified period, also known as prompt payment discount. Certificate of compliance: A suppliers certification that the supplies or services in question meet certain specified requirements. Certificate of Non-Collusion: A statement signed by a bidder and submitted with his bid to affirm that his bid is made freely without consultation with any other bidder. Also called a NonCollusive Affidavit. Changed conditions: Construction site conditions which differ significantly from conditions indicated in the specifications. 24
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Change order: Unilateral and/or Bilateral action taken by the Contracting Officer within the scope of the contract in order to modify the drawings, designs, specifications, method of shipping or packing, place of inspection, delivery, or acceptance of an existing construction contract. Claim: The aggregate of the operative facts that serve as a basis for a demand for payment, reimbursement, or compensation for injury or damage under law or contract; the assertion of such a demand. Code of ethics: A written set of guidelines within which judgments and considerations of professional ethics and behavior should be made. Collusive bidding: The response to bid invitations by two or more vendors who have secretly agreed to circumvent laws and rules regarding independent and competitive bidding. A secret agreement or cooperation between two or more persons to accomplish a fraudulent, deceitful, or unlawful purpose. Commercial law: That branch of the law that designates the rules that determine the rights and duties of persons engaged in trade and commerce. Competitive proposals: The competitive method of procurement used sealed bidding is not appropriate. Under this method, the Authority issues a Request for Proposals (RFP), soliciting price and technical proposals from potential sources; evaluates the proposals and establishes a competitive range; negotiates with those in the competitive range; receives and evaluates best and final offers; and makes award to the contractor offering the most advantageous proposal, considering price and the technical factors stated in the RFP. Can not be used to select those professional covered by the Qualification-based-selection (QBS) process. Competitive negotiation: A technique for purchasing goods and services, usually of a technical nature, whereby qualified suppliers are solicited, negotiations are carried on with each bidder, and the best offer (in terms of performance, quality of items, price, etc.), as judged against proposal evaluation criteria, is accepted; negotiated award. Confirming order: A purchase order issued to a vendor, listing the goods or services and terms of an order placed verbally. Contingency Fund: Funds established to cover a possible future event or condition arising from presently known or unknown causes, the outcome of which is indeterminate at the present time. Contract: A promise or set of promises for breach of which the law gives a remedy or performance of which the law recognizes a duty, a legal instrument providing for the purchase, lease or barter of property or services for the direct benefit of the Authority. 25
Contract administration: The management of all facets of contracts to assure that the contractor's total performance is in accordance with contractual commitments and that the purchaser's obligations are fulfilled. Contract modification: An alteration that introduces new details or cancels details such as delivery point, date of delivery, contract period, price or quantity but leaves the general purpose and effect of the contract intact. Includes change orders for construction contracts and amendments for other types of contracts. Contract record: A record providing full particulars regarding the orders placed for delivery of goods in a contract so that the volume of purchases against the contract can be determined. Contracting Officer: An official authorized by the Authorityâ€™s Executive Director to enter into or administer procurement contracts and make related determinations and findings. Contractor: One who contracts to perform work or furnish materials in accordance with a contract. Term may describe a contractor, consultant, supplier, or vendor, etc. Convenience termination clause: A contract clause which permits the Authority to terminate, at its own discretion, the performance of work in whole or in part, and to make settlement of the contractor or vendor's claims in accordance with appropriate regulations. Cooperative purchasing: The combining of requirements of two or more entities in order to obtain the benefits of volume purchases and/or reduction in administrative expenses. Cost-reimbursement contract: Contract in which the buyer and seller agree on an estimate of contract costs. The buyer agrees to reimburse the seller for reasonable, allowable, and allocable costs necessary to complete the work. Cure notice: A document the Contracting Officer sends to a contractor to notify the contractor that the contract may be terminated by reason of default if the condition endangering performance of the contract is not corrected in a specified number of days. Damages: Compensation, usually in money, for injury to goods, persons, or property. Debarment: A shutting out or exclusion for cause (as a bidder excluded from the list of qualified bidders). Default: Failure by a party to a contract to comply with contractual requirements; contractor or vendor failure. Defect: A non-conformance of an item with specified requirements. Delivery schedule: The required or agreed time or rate of delivery of goods or services purchased for a future period. 26
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 27 Delivery terms: Conditions in a contract relating to freight charges, place of delivery, time of delivery, and method of transportation. Design specification: A purchase specification delineating the essential characteristics that an item bid must possess to be considered for award and so detailed as to describe how the product is to be manufactured; generic specification. Discount: An allowance or deduction granted by the seller to the buyer, usually when certain stipulated conditions are met by the buyer, which reduces the cost of the goods purchased. However, the seller without reference to stipulated conditions may grant discounts. Disposition: Acting to remove from the premises and control of using Authority goods that are surplus or scrap. Disposition can be accomplished by transferring, selling, or destroying the goods. Emergency purchase: A purchase made without following the normal procurement procedure in order to obtain goods or services quickly to meet an emergency concerning life and safety issues. Equal; (Or equal): A phrase used to indicate the substitutability of products of similar or superior function, purpose, design, and/or performance characteristics. Equal Employment Opportunity Program: A plan to include minority groups or other disadvantaged persons in the work force of businesses affected by the plan. Escalation clause: A clause in a purchase contract providing upward adjustment of the contract price if specified contingencies occur; price escalation clause. Excusable time delay: Failure to perform which is beyond the control and without fault or negligence of the contractor. Expedite: To hasten or to assure delivery of goods purchased in accordance with a time schedule, usually by contact by the purchaser with the vendor. Extend, option to: A part of a contract which contemplates a continuance of the original contract for a further time upon compliance with the conditions for the exercise of the option. Fair market value: A price that would induce a willing purchaser or a willing seller to sell in an open market transaction; the price a property would bring at a fair sale between parties dealing on equal terms. Fair-trade statute: A state law providing that a manufacturer may legally set a minimum resale price for his products and that retailers and distributors must observe that minimum. 27
Fixed price contract: A contract that provides for a firm price which is not subject to any adjustment by reason of cost experience of the contractor in the performance of the contract; one under which the contractor bears the full responsibility for profit or loss. Forfeiture of deposit or bond: A loss by omission, negligence, or misconduct for the performing of or the failure to perform a particular act, (e.g., not accepting a contract when an award is made); breach of contract. Formal advertising: The SFHA may, depending on the solicitation, inform the public with any of the following methods: (1) In the public notice section of a newspaper or other publication according to legal requirements; (2) In various trade journals or publications; and (3) Through the internet using e-procurement systems. Gross negligence: The degree of lack of care that shows a reckless disregard for fife or safety, or that indicates a conscious indifference to the rights of others. Identical bid: A bid that agrees in all respects with another bid. Indefinite Quantity Contract: A contract used for procurements in which the exact number of deliverable items is not known at the time of contracting. The contract provides for a minimum and maximum amount of goods or services which may be ordered under the contract. Independent cost estimate: A written calculation of all items included in the scope of the work, tabulated under appropriate cost headings (direct costs, labor, overhead, and profit). Ineligible bidder: A contractor or vendor who, by reason of financial instability, unsatisfactory reputation, poor history of performance, or other similar reasons, cannot meet the qualifications for placement on the bidders list or for award. Informal bid: An unsealed competitive offer conveyed by letter, telephone, telegram, or other means. Internal controls: Safeguards that ensure that contracting and procurement will be carried out in conformity with applicable federal regulations and Authority policy and procedures. Inspection: Critical examination and/or testing of items to determine whether they have been received or installed in the proper quantity and in the proper condition, and to verify that they conform to the applicable specifications. Inspection report: A report to inform the Authority of the quality or condition of the items delivered. Invitation for Bids: A request which is made to prospective contractors or vendors requesting the submission of a bid on commodities or services.
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 29 Labor-Hour Contract: Contract that provides for the procurement of property or services on the basis of direct labor-hours at specified, fixed hourly rates (which include direct and indirect labor, overhead, and profit). Labor surplus area: A geographical section of concentrated unemployment or underemployment, as designated by the U.S. Department of Labor. Late bid or proposal: A bid or proposal which is received at the place designated in the Invitation for Bids, Request for Proposals, or Request for Qualifications after the hour established by the invitation or request as the time by which all bids or proposals must be received. Latent defect: A defect which could not be discovered by ordinary and reasonable inspection. Lead time: The period of time from date of ordering to date of delivery which the buyer must reasonably allow the vendor to prepare goods for shipment. Lease: A contract conveying from one person (lessor) to another (lessee) real estate or personal property for a term in return for a specified rent or other compensation. Lease-purchase agreement: A rental contract in which the renting party's periodic payments or parts thereof are applied both to fulfill the rental obligation and as installments for eventual ownership of the commodity upon completion of the agreement. Legal notice: A notice that is required by law. Legal notice for some purchases may be the posting of an announcement of the purchase in a public place, the notification of the appropriate bidders from the bidders list, a formal advertisement in a newspaper or newspapers, internet e-procurement system or a combination of these methods. Letter contract: A written authorization to begin work issued prior to the negotiation of a formal contract; only allowed in emergency situations. Level of effort contract: Contract (usually cost-reimbursement type) which specifies the number and type of person-hours which the contractor will apply in pursuing the contract. Liquidated Damages: Normally, an amount of dollars assessed per day for each day a contractor fails to complete the work within the time specified in the contract. Negligence: The failure to do that which an ordinary, reasonable, prudent man would do, or the doing of some act that an ordinary, prudent man would not do. Negotiation: Discussion regarding technical and price proposals with offerors in the competitive range for a contract being awarded using the competitive proposals or noncompetitive proposals method of procurement. 29
Non-competitive proposals: The method of procurement in which the Authority solicits proposals from only one source or a limited number of sources, if justified in writing for one of the following reasons: the item is available only from a single source; public emergency will not allow enough time for a competitive procurement; inadequate response is received to a competitive solicitation; or HUD approves the use of non-competitive proposals. Non-responsive bid: A bid that does not conform to the essential requirements of the Invitation for Bids; nonconforming bid, unresponsive bid. Payment bond: A bond issued by a surety company which assures the prime contractor pays their subcontractor and the Authority to avoid disputes concerning payments to subcontractors. Performance Bond: A bond issued by a surety company which assures that, if the contractor is unable to complete the contract, the surety company will step in to finish the contracted effort. Proposal: In the competitive proposals or non-competitive proposal method of procurement, the offer submitted by a potential contractor. Purchase order: A purchase arrangement in which the Authority contracts with a supplier of or vendor to provide the Authorityâ€™s requirements for an item(s). Offer: The act of one person that gives another person the legal power to create a contract to which both of them are parties; to perform such an act. Qualifications-based-selection: Form of procurement of architect/engineer and several other professional services by competitive proposals in which price is neither requested in the Request for Qualifications nor used as an evaluation factor; instead, technical qualifications only are reviewed and a fair and reasonable price negotiated with the best qualified firm. Quotation: A price or offer submitted by a quoter. Request for Proposals: Under the competitive proposals method of procurement, the Authorityâ€™s written solicitation to prospective offerors to submit a proposal based on the terms and conditions set forth therein. Proposal evaluation and contractor selection is based on the factors for award as stated in the Request for Proposals. Request for Qualifications: Under the qualification-based-selection process, the Authorityâ€™s written solicitation to prospective offerors to submit Statements of Qualifications based on the items and conditions set forth therein. Responders are evaluated on their qualifications rather than price, after which negotiations with the most qualified will be carried out to obtain an equitable agreement. Responsible bidder: One who has the technical and financial capacity to secure the necessary resources to deliver the goods or services.
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 31 Responsive bid: One which conforms exactly to the requirements in the Invitation for Bids. Sanctions: Measures that may be invoked by HUD or the Authority to exclude or disqualify contractors from participation in HUD funded programs (e.g., debarment and suspension). Sealed bidding: The procurement method in which the Authority requests competitive sealed bids. This method of procurement requires that specifications be written describing the requirements of the Authority clearly, accurately, and completely; a public bid opening is held; and evaluation of bids and award of the contract is based on the lowest bid submitted by a responsive and responsible contractor. Show cause letter: A document the Contracting Officer sends to a defaulting contractor to notify the contractor that the contract may be terminated by reason of default unless the contractor can prove within a reasonable amount of time (normally ten days) that the condition was not their fault. Small purchases: Purchases of supplies and non-personal services which do not exceed the HUDâ€™s Small Purchase limitation ($100,000). Specifications: Clear and accurate description of the technical requirements of a service or supply contract. Statement of work: Written definition of work to be performed that establishes standards sought for the goods or services to be supplied; typically used for service contracts. Termination for convenience: Termination of a contract by the Authority on a unilateral basis when it no longer needs or requires the products or services, or when it is in the best interests of the Authority. Termination for default: Termination of a contract when the contractor fails to perform or fails to make progress so as to endanger performance. Time and materials contract: Contract that provides for payment of supplies and services on the basis of incurred direct labor hours (at fixed rates which include direct costs, indirect costs, and profit) and materials (at cost). Time delay: An interruption during which services, supplies, or work are not delivered in accordance with the performance time schedule stated in the contract.
CHAPTER 1. PROCUREMENT AUTHORITY AND ADMINISTRATION Section 1. Preface 1.1
Introduction This Procurement Procedures Manual sets forth the operational requirements, procedures and guidance to the staff of the San Francisco Housing Authority (the Authority) to ensure the Authority obtains supplies and equipment that meet its exact needs and services of the highest caliber through an effective and efficient procurement process which meets all the applicable statues, regulations, standards, codes and laws. The procedures to be followed encompass a wide range of possibilities, from simplified small purchases to complex multi-million dollar construction contracts. Section 2. General Provisions
Purpose The procedures established in this Procurement Procedures Manual are to provide for the fair and equitable treatment of all persons or firms involved in purchasing process by the Authority; to assure that supplies, equipment, services, and construction activities are procured efficiently, effectively, and at the most favorable prices available to the Authority; to promote competition in contracting; to provide safeguards for maintaining a procurement system of quality and integrity; and to assure that Authority purchasing actions are in full compliance with applicable Federal standards, HUD regulations, standards, and State and local laws. The Authority is prohibited from contracting for goods and services without competition unless one of the circumstances described in 24 CFR 85.36(d)(4) is applicable; sole source available, emergency situation, HUD-approved, or inadequate competition received after competitively soliciting. The terms "procurement" and “contract” as used in this Procurement Procedures Manual, includes Purchase Orders, and Contracts and Contract Modifications, to purchase supplies, equipment, services, construction activities, and the lease, or rental of supplies and equipment. The term contractor as used is anyone providing goods and services to the Authority and includes such entities as architect/engineers, construction contractors, consultants, legal services), suppliers, vendors, etc. The Procurement Procedures Manual uses the following defined consistently throughout the text:
“Shall” means that the action is mandatory or required to obtain or retain benefits.
“Must” means that the action is mandatory or required to obtain or retain benefits.
“Should” means that the action is suggested but not required to obtain or retain benefits. C.
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“May” means that the action is permissive or optional and not required to obtain or retain benefits. D.
Application The requirements of the Procurement Procedures Manual apply to all contracts for the procurement of supplies, equipment, services, and construction activities entered into by the Authority after the effective date of this Procurement Procedures manual. The procedures were developed to ensure that the Authority obtains the best quality products and services in the most economical manner while promoting serviceability, efficiency, and stability. They shall apply to every expenditure of funds by the Authority for public purchasing, irrespective of the source of funds, including contracts that do not involve an obligation of funds such as concession contracts. Nothing in these procedures shall prevent the Authority from complying with the terms and conditions of any grant, contract, gift or bequest that is otherwise consistent with law.
Public Access to Procurement Information Since the awarding of contracts by the Authority involves the use of public funds collected from taxpayers, a different standard is applied for Authority procurement information than is the case with private industry procurements and contracts. While private firms are generally entitled to keep information private relating to their purchases, the same is not necessarily true for procurement by the Authority once a purchase order or contract is awarded. Procurement information shall be a matter of public record to the extent provided in the State Freedom of Information Act or similar law and shall be available to the public as provided in that statute. Typically, the purchase order or contract document itself may be made available to interested members of the public upon award, as well as certain other information relating to the procurement process. Section 3. Management of the Procurement Function
Introduction The procurement operation of the Authority is considered a business portion of the Authority’s activities. By effective management of this function, the Authority can fulfill its needs in an efficient manner while obtaining high quality support from vendors and contractors to meet the Authority’s mission. Hence, the importance of conducting thorough procurement cannot be overemphasized, for if the Authority's purchase orders and contracts are inadequate, so will be the service the Authority provides to its residents.
Procurement Policy and Responsibilities of Executive Director The Authority’s Board of Commissioners has approved the San Francisco Housing Authority Procurement Policy to ensure the Authority obtains supplies and equipment that meets its exact needs and services of the highest caliber through an effective and efficient procurement process which meets all applicable statues, regulations, standards, codes and laws. The Board of 33
Commissioners has delegated the Executive Director the responsibility to staff positions within the organization and to implement the Authority’s Procurement Policy. In order to implement the requirements of the Procurement Policy, the Executive Director has appointed a Contracting Officer to carry out the daily activities of the Authority’s procurement and contracting functions. Such appointments shall be made in writing, stating clearly the duties and limitations on the appointee's procurement authority. Part of these responsibilities includes the development and enforcement of the procedures contained with this Procurement Procedures Manual. 1.7 Responsibilities of Contracting Officer Duties of the Authority’s Contracting Officer include the following: A.
Exercising sound judgment in carrying out the contract and procurement responsibilities of the Authority;
Ensuring that vendors and contractors receive impartial, fair, and equitable treatment;
C. Procurement requirements are subject to an annual planning process to assure efficient and economical purchasing; D. Providing procurement and contracting assistance to the departments and divisions physically located away the centralized procurement office; E. Ensuring an independent cost estimate is prepared before issuance of a solicitation package; F. Ensuring there are sufficient funds available to cover the anticipated cost of each procurement before Purchase Order or Contract award, including any subsequent contract modifications; G. Acquiring the supplies, equipment, services, and construction needed by the Authority; H. Developing Requests for Proposals, Request for Qualifications and Invitation for Bid documents and soliciting proposals and bids; I.
Analyzing bids and proposals;
J. Signing all contracts, contract modifications, and intergovernmental purchasing agreements entered into by the Authority; K.
Detecting and minimizing purchase order and contract irregularities; and
L. The Authority complies with applicable HUD regulations, as provide in these operational procedures and the Authority’s Procurement Policy.
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 35 Although contracting authority flows from the Authority’s Board of Commissioners through the Executive Director, the Contracting Officer bears responsibility at the operating level to perform the required tasks from procurement planning through contract administration and closeout. The Contracting Officer is responsible for ensuring that all purchase orders and contracts awarded comply with the requirements of the U. S. Department of Housing and Urban Development (HUD) regulations in 24 CFR 85.36, the Authority’s Procurement Policy, its Procurement Procedures Manual, State and local law, and any other applicable laws, regulations and standards. Section 4. Federal Standards 1.8
Federal Standards The Authority is generally considered a special purpose public body which receives most of its funding from HUD under grants provided under the Annual Contributions Contract (ACC). HUD funding through operating subsidies, modernization, and development is grant funding and must following the requirements as detailed in these procedures. In 1988, at the direction of the Office of Management and Budget (OMB), HUD issued a regulation known as the "common rule" for grantees. Included in this regulation are procurement standards which grantees must follow, located at Title 24 of the Code of Federal Regulations (CFR), specifically at 24 CFR 85.36. These standards provide a set of basic principles that each grantee must adhere to when it contracts for needed items or services. The Authority is also required to follow applicable State or local laws on procurement and contracting. In cases where State or local law is stricter than the Federal standards, then the State or local law will apply. Section 5. Audits
Audits HUD and the Comptroller General of the United States have the right to audit all books, documents, papers, and records of the Authority that are pertinent to financial assistance provided by HUD. HUD will periodically perform audits and management reviews of the Authority’s procurement procedures and practices to determine whether the Authority's procurements meet the requirements set forth in the regulations. The Authority is also responsible for contracting for additional audits as required by HUD. Section 6 Planning, Preparation, and Conduct Of Procurement
Procurement Planning Procurement planning is a useful tool for cost effective procurement. The amount of planning necessary will depend on the size and complexity of the Authority’s needs. Planning can be as simple as examining the inventory, estimating the upcoming year's requirements and budgeting for what is needed, and selecting the appropriate procurement method. Advance Procurement Plans Procurement Plans assist the Authority in using its resources most effectively, e.g., purchasing in bulk where appropriate, scheduling purchases to coincide with projected use, etc. The complexity of planning will, of course, vary with the complexity of the procurement needs. This exercise should be 35
conducted before the next budget year begins, preferably two or three months in advance so that the Authority can plan its procurement and contracting workload around the resources expected to be available, and to enable the Authority to plan its purchase orders and contracts enough in advance to conduct proper public notice to generate competition. Advance procurement plans should identify specific needs for supplies, equipment, services, or construction. Typically, there are recurring needs each year (such as rodent and pest control, elevator maintenance, lawn and grounds maintenance), for which advance procurement plans can easily be submitted by the functional office that has responsibility for the work involved. This may be done by means as simple as just updating the current list of maintenance contracts to indicate which ones will need contractual coverage for the upcoming year. In addition, any new requirements should be identified and planned so that new purchase orders or contracts will be in place in time to provide timely support. A spreadsheet may be developed and posted to indicate the current contracts with their expiration dates, along with the date a new solicitation may need to be issued and a new contract awarded, to ensure that there is no break in coverage. Advance procurement planning based on inventory requirements and warehousing considerations helps to avoid the necessity for uneconomical small purchases and wasteful disposition of outdated items. Consideration should be given to consolidating requests in some cases or breaking them out in others to obtain a more economical purchase. When purchasing items such as equipment, an analysis should be made of leasing alternatives, and a lease should be considered if it is more economical than an outright purchase. 1.12
Procurement Request A Purchase Requisition (Exhibit 1, Purchase Requisition) normally serves as the procurement request for most commodities and supplies ordered by the Authority. After processing and approval of the Purchase Requisition is completed, a Purchase Order (Exhibit 2, Purchase Order) is issued as the contractual document. For those services and construction activities covered by a contract, a Request for Fund PreEncumbrance/Purchase Request for Planned Contract Activity form is used as the procurement request (Exhibit 3, Request for Fund Pre-Encumbrance/Purchase Request for Planned Contract Activity). The request form must include a Statement of Work and a Cost Estimate for the work and is to be approved before soliciting for the service or activity.
Contract File Documentation The Authority must maintain records sufficient to detail the significant history of each of its procurement or contracting activities. Such documentation is particularly important in the event a protest is lodged against the Authority by a vendor or contractor. The documentation is also helpful in speeding up future similar procurements since the Authority will not have to recreate solicitation documents. These records shall include, but shall not necessarily be limited to the following: the rationale for the method of procurement, selection of contract type, vendor or contractor selection or rejection, and the basis for the contract price. The
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 37 level of documentation shall be commensurate with the value of the procurement activity. 1.14
Public Notice For procurements larger than HUDâ€™s Small Purchase limit ($100,000.00), or when seeking sources, public notice (Exhibit 4, sample advertisement) is given of each upcoming procurement by advertising the solicitation package in compliance with HUD 24 CFR 85.36, State and local requirements. The notice shall state, at a minimum, the place, date, and time of the bid opening or proposal due date, the solicitation number, a point of contact for questions or requests for solicitations, and a brief description of the needed item(s) or services. The solicitation must be run for a period sufficient to achieve effective competition, which in the case of paid advertisements, should generally be run not less than once a week for two consecutive weeks. While any of the following solicitation methods can be employed, the Contracting Officer should choose the method, which, considering matters of economy, provides for full and open competition.
1. 2. 3. e-
Advertising in newspapers or other print mediums of local or general circulations. Advertising in various trade journals or publications. E-Procurement. The public procurement may be conducted through the internet using procurement systems provided it is in compliance with 24 CFR 85.36, State and local requirements for full and open competition. In order to broaden the number of vendors and contractors for all sized procurements newspapers of local circulation (e.g., San Francisco Bay View), industry media (trade newsletters, commercial publications, etc.), builders exchanges, minority clearing houses, and the City of San Francisco Bid Opportunities, and various Government, State or Local websites should be used to solicit the procurement. Notices of contract awards is public information.
Solicitation Mailing Lists A solicitation mailing list is useful to obtain maximum competition particularly for procurement of goods and services on a regular basis. When a solicitation mailing list is developed, it should include the names of known vendors and contractors for the type of item being solicited and those who have expressed an interest in the procurement. Inclusion on a mailing list does not necessarily mean that an offeror will be considered at time of purchase order or contract award. Prospective vendors or contractors who fail to response to a number of consecutive procurements may be removed from a mailing list.
Cost Estimates and Analysis of Offers A.
Independent Cost Estimates An Independent Cost Estimate (Exhibit 5, Cost Estimate) of every procurement must be made before soliciting bids or proposals. Such an estimate is needed in preparing for the procurement, since the dollar 37
amount may dictate the method of procurement that can be used (such as small purchases versus sealed bidding, etc.). Depending on the type and size of the procurement, the independent Cost Estimate could be as simple as examining the price paid in the most recent contract and factoring in inflation or changed market conditions. Alternatively, the Cost Estimate for a complex project could be extremely detailed.
Confidentiality The Independent Cost Estimate is considered confidential information which shall not be disclosed outside the Authority. The reason for this protection is assure that vendors or contractors develop their offers independently in order to obtain the true cost of a project. To assist the bidders in understanding the scope of a project, the Authority may disclose a general range of dollars for construction contracts; for example, the estimated price could be described in terms of the following price ranges: less than $25,000, between $25,000 and $100,000, between $100,000 and $250,000, between $250,000 and $500,000, between $500,000 and $1 million; between $1 million and $5 million; between $5 million and $10 million; and more than $10 million.
Development of Cost Estimate In developing the independent Cost Estimate, the Authority may use available published price lists, commercial construction cost estimating publications, known prevailing wage rates, and pricing history from prior contracts. The Cost Estimate should include anticipated labor costs, material expenses, subcontracted items, overhead, profit, and any other cost factor that might have an impact on the eventual contract cost. In the case of commercial items, the Cost Estimates are based on published catalog or market prices.
Analysis of Offers Once offers are received, an analysis must be conducted in accordance with the process outlined Chapter 2, Section 6, of this Procurement Procedures Manual. A cost or price analysis is required for every procurement conducted by the Authority. The level of analysis detail will depend on the size of the procurement. Without such analysis, the Authority will be unable to verify that the price being paid to the vendor or contractor is fair and reasonable.
Basis for Award A fundamental principle of public contracting is that competing vendors or contractors shall be evaluated only on the factors stated in the solicitation. To award a Purchase Order or Contract to a firm based on factors not made public is to risk losing industry's confidence in the Authorityâ€™s fairness. Public trust can only be maintained if the Authority is consistent in its evaluation of all offers in accordance with the terms of each solicitation. Guidance on evaluation factors is included Chapter 2, Section 4, of this Procurement Procedures Manual. The key to a successful procurement is to inform all potential vendors or contractors in clear language the basis on which the Authority plans to award the Purchase Order or Contract. This does not mean that the Authority has no flexibility in making the award decision. For example, in sealed bid procurements, a contract need not be awarded to the low bidder if that bidder is non-responsive or nonresponsible or when using the competitive proposals method of procurement, awards need not be made solely by applying a rigid formula unless this is stated in the 38
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 39 solicitation. Nevertheless, the Authority should be mindful of the need to follow through on its announced intentions by awarding Purchase Orders or Contracts consistent with the published basis for award.
General It is crucial to have an orderly process of purchase, receipt, and payment for all procurements. A Purchase Requisition (Exhibit 1, Purchase Requisition) normally serves as the encumbrance request for most commodities and supplies ordered by the Authority. For those services and construction activities covered by a contract, a Request for Fund Encumbrance for Planned Contract Activity (Exhibit 3, Request for Fund Encumbrance for Planned Contract Activity) form is used as the encumbrance request. Both of these documents ensure funds are available to make the necessary procurements and to set aside those funds from the total available to protect the Authority from spending more than it has available.
Encumbrance Request Each encumbrance request (Purchase Requisition or Request for Encumbrance for Planned Contract Activity) should be routed through the Finance Department for approval. An indication should be made on the face of the request that sufficient funds are available to cover the estimated cost of the items or services requested. The Finance Department may at that time commit funds by recording that the funds are available for the intended purchase.
Reservation and Obligation of Funds Before a contract or purchase order is signed, these documents are to be routed through the Finance Department to reserve the funds. The funds are then frozen and can be used only to pay for the specific contract, agreement, or purchase order.
Payment of Contractors Contracts and purchase orders shall indicate the schedule for payment to the vendor or contractor. In order to maintain good relations with vendors and contractors, the Authority should ensure that work performed is inspected in a timely manner and vendor or contractor invoices are paid promptly for work accepted. Unnecessary delays in either inspection or payment can discourage vendors and contractors from participating in future Authority procurements.
CHAPTER 2. PROCUREMENT METHODS AND CONTRACT INFORMATION Section 1. Selection of Method
2.1 General Once the Authority has decided to directly purchase a required item(s) or service(s), one of the following procurement methods shall be chosen, based on the nature and anticipated dollar value of the total procurement.
Section 2. Small Purchases 2.2
General: Procurements not exceeding $100,000 may be made in accordance with HUDâ€™s Small Purchase procedures and as authorized in this section. The most common methods of making small purchases are by petty cash, purchase orders, blanket purchase orders, and contracts. Procurement requirements shall not be artificially divided so as to constitute a small purchase under this section except as may be reasonably necessary to comply with Chapter 8, Assistance to Small and Other Businesses of this manual.
Competition Authority requirements for supplies, equipment, services and construction activities aggregating greater than $100,000 shall not be broken down into several purchases that are less than the limit merely to permit a purchase under the small purchase procedures. If there is a recurring need for items which is estimated to go over the $100,000 limit sealed bidding or competitive proposal procedures shall be used rather than the small purchase procedures. Typically, the Authority can get lower prices when larger quantities are purchased. In all cases, the Authority must ensure that the price paid for small purchases is fair and reasonable. The most effective way of accomplishing this task is to solicit competitive price or rate quotes from an adequate number of qualified sources. At least three (3) sources are to be solicited.
Petty Cash Purchases Small purchases under $50 which can be satisfied by local sources may be processed through the use of a petty cash account (petty cash account not to exceed $500.00). Petty cash purchases should be kept to the minimum that is absolutely necessary since purchasing in limited quantities does not provide the best price. The supplier's sales ticket should be used to support a petty cash voucher for each purchase. The Authorityâ€™s Finance Director shall ensure that: the account is established in an amount sufficient to cover small purchases made during a reasonable period (e.g., one week); security is maintained and only authorized individuals have access to the account; the account is periodically reconciled and replenished by submission of a voucher to the Finance Director; and, the account is periodically audited by the Finance Director or designee to validate proper use and to verify that the account total equals cash on hand plus the total of accumulated vouchers.
Small purchases of $2,000 or less For small purchases below $2,000 only one quotation or bid needs be solicited if the price received is considered reasonable. Such purchases must be distributed equitably among qualified sources to promote competition and
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 41 avoid repeated use of the same supplier. If practicable, a quotation shall be solicited from other than the previous source before placing a repeat order. 2.6
Small purchases over $2,000: For small purchases in excess of $2,000 but not exceeding $100,000 no less than three offerors shall be solicited to submit a price quotation, bid or proposal. Award shall be made to the offeror providing the lowest acceptable quotation, bid or proposal unless justified in writing based on price and other specified factors. If non-price factors are used, they shall be disclosed to all those solicited. The names, addresses, and/or telephone numbers of the offerors and persons contacted, and the date and amount of each quotation or bid shall be recorded and maintained as a public record. Purchase Orders Purchase orders are normally issued for purchases up to $100,000. The issuance of a purchase order by the Authority and its acceptance by the vendor constitutes a contract. It is crucial, therefore, that the purchase order clearly specify the purchased item(s), service(s), and the terms and conditions of the purchase. The purchase order should be furnished to the vendor to initiate delivery of any item(s) or service(s). The purchase order, when signed by the Authority and sent to the vendor, constitutes an order for performing a service(s) or delivering an item(s) in the quantity specified on the purchase order at the established price. A blanket purchase order is a purchase arrangement in which the Authority contracts with a vendor to provide the Authorityâ€™s requirements for an item(s) or service(s), on an as-required and often over-the-counter basis. Such arrangements shall have a set limit on the period of time the blanket purchase order and the maximum amount of money which may be spent at one time or within a period of time. Section 3. Sealed Bidding
General Competitive procurement for the Authority is conducted by either sealed bidding or competitive proposals. Both methods are equally effective ways of satisfying the Authorityâ€™s needs; however, sealed bidding is preferred in most circumstances in order to obtain the best price. Copies of the solicitations should be provided to anyone submitting a request, because the Authority is required to solicit full and open competition. It should be noted, however, that under Section 3 of the HUD Act of 1968, the Authority shall require that, to the greatest extent feasible, opportunities for training and employment be given to lower income persons residing within the metropolitan area (City and County of San Francisco) and that contracts for work be awarded to Section 3 Business Concerns which are located in or owned in substantial part by lower income persons residing in the same metropolitan area (see Chapter 8. Assistance to Small and Other Businesses).
2.9 Conditions for Use Contracts shall be awarded based on competitive sealed bidding if the following conditions are present: a complete, adequate, and realistic specification or 41
purchase description is available; two or more responsible bidders are willing and able to compete effectively for the work; the procurement lends itself to a firm fixed price contract; and the selection of the successful bidder can be made principally on the basis of price. For procurements under the Comprehensive Grant Program and the HOPE VI program, sealed bidding shall be used for all construction and equipment contracts. It should be noted, sealed bidding shall not be used to procure those professional services that require procurement under the Qualification-Based-Selection process (architects, engineers, etc.). 2.10 Invitation for Bids An Invitation for Bids issued by the Authority shall be in the standardized format as contained in the Master Invitation for Bids available on the Authorityâ€™s Shared Network (Exhibit 6, Invitation for Bids, Index). The specification requirements of all Invitation for Bids shall be drafted so as to promote overall economy for the purpose intended and to encourage competition in satisfying the Authority's needs. Specifications shall be reviewed prior to solicitation to ensure that they are not unduly restrictive or represent unnecessary or duplicative items. Functional or performance specifications are preferred. Detailed product specifications shall be avoided whenever possible. Consideration shall be given to consolidating or breaking out procurements to obtain a more economical purchase (except for, see Chapter 8., Assistance to Small and Other Businesses). for equipment purchases, a lease versus purchase analysis should be performed to determine the most economical form of procurement. The Authority may charge a fee for the Invitation for Bids to offset costs of printing. The following specification limitations shall be avoided: geographic restrictions not mandated or encouraged by applicable Federal law; unnecessary bonding or experience requirements; brand name specifications (unless a written determination is made that only the identified item will satisfy the Authority's needs); brand name or equal specifications (unless they list the minimum salient characteristics and standards to which the item must conform to satisfy its intended use). Specifications shall be scrutinized to ensure that organizational conflicts of interest do not occur (for example, having a consultant perform a study of the Authority's computer needs and then allowing that consultant to compete for the subsequent contract for the computers). 2.11
Alternate Bids, Add-Ons, and Deducts The Authority should not request alternate bids (e.g., two different structural systems). Instead, when necessary because of possible budget overruns, the Authority may specify the most expensive system as the base bid and list deductive alternates in inverse priority order so that in the case of a budget overrun, they may be taken in numerical order as listed until the award can be made within available funds. For example, if the desired drywall thickness is 5/8", but 1/2" thickness is acceptable, the Authority could require all bidders to have a firm fixed price for each thickness or a price for 5/8" along with a factor (such as a percentage) to be deducted if available funding only allows the Authority to purchase 1/2" drywall. Otherwise, bids could not be accepted if only one thickness were priced and funds were insufficient, thus requiring 42
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 43 re-solicitation, or bidders could submit extremely low prices for one thickness, knowing that contract award would be based on the price of the other thickness. The Authority should also be watchful for unbalanced bidding. 2.12
Amendments If a change to a Invitation for Bids becomes necessary after it has been issued, the change shall be accomplished by issuing a written addendum (Exhibit 7, Addendum). The addendum must indicate the number and issue date of the original Invitation for Bids, and should be noted in the Addendum Log for tracking purposes. A copy of the addendum shall be mailed to each prospective bidder who was sent the basic Invitation for Bids, with receipt acknowledgment required. If an addendum needs to be issued just before the scheduled bid opening date, the bid opening shall be postponed for an adequate period of time to permit the potential bidders to fully analyze the change, and to submit timely bids.
Construction Pre-Bid Conferences After the Invitation for Bids for a large or complex project is issued and before bids are due, a Pre-Bid Conference shall be held with prospective contractors to discuss the requirements of the Invitation for Bids. Notices of any scheduled conference shall be included in the Invitation for Bids. The timing of the conference should allow bidders enough time to review the Invitation for Bids and adequate time to revise their bids before the bid opening. At the conference, it should be understood that nothing at the conference would change the terms of the Invitation for Bids unless a subsequent addendum is issued. A summary or transcript of the conference should be sent to all those on the solicitation mailing list, not just those who attended. Attendance at the Pre-Bid conference, while desirable, can not be mandatory, and the lack of attendance should not be a basis for rejecting a bid as non-responsive. Some firms may already be so familiar with the work that attendance is not necessary. Other firms may be unable to schedule a representative to attend, although they may be well qualified to do the work at a reasonable price.
Solicitation and Receipt of Bids An Invitation for Bids shall be issued including specifications and all contractual terms and conditions applicable to the procurement, including a statement that award will be made to the lowest responsible and responsive bidder whose bid meets the requirements of the Invitation for Bids. The Invitation for Bids shall state the time and place for both the receipt of bids and the public bid opening. Each bid shall be date-time stamped upon receipt in order to document its timeliness. Sealed bids shall be stored in a locked bid box, cabinet or safe until the appointed bid opening time to ensure that they are not tampered with. Sealed bids received by the Authority shall be delivered promptly to the site specified in the solicitation. A bidder may withdraw its bid at any time prior to bid opening.
Bid Opening Sealed bidding is a public process, therefore, bids shall be publicly opened and in the presence of at least one witness. To ensure fairness in the award process, any interested parties are permitted to attend the bid opening. 43
To ensure an orderly process, which will stand up to legal challenge if presented, the following procedures are to be adhered to during the bid opening. Bids shall be publicly opened on the scheduled date and time shown in the solicitation. The person opening the bids shall read aloud the bidders' names and the bid prices. This information shall be recorded and made available for public inspection. No commitment shall be made to any bidder at the bid opening. To avoid confusion, it is recommended that questions and disagreements raised by bidders at the opening shall be taken under advisement and a decision resolving any questions or disagreements should be deferred until the Contracting Officer is contacted and had an opportunity to review all the pertinent facts. When the bids received have been publicly opened and read, an abstract or tabulation of all bids shall be prepared showing the names of bidders and prices including alternates if any. This abstract shall become part of the official contract file. A bid received after the time specified for bid opening shall be recorded as a late bid and retained unopened in the contract file. A late bid received before the award is made may only be considered in accordance with the procedures listed in the form HUD-5369, Instructions to Bidders for Contracts (Exhibit 8, form HUD-5369, Instructions to Bidders for Contracts). Award shall be made as provided in the invitation for bids by written notice to the successful bidder. If equal low bids are received from responsible bidders, award shall be made by drawing lots or similar random method. If only one responsive bid is received from a responsible bidder, 1) award shall not be made unless a cost or price analysis verifies the reasonableness of the price and 2) HUDâ€™s approval is obtained if the price is exceeds the HUD approval threshold. After all the documentation requirements of the Invitation for Bids are assembled, the information is transferred to the Contract/Procurement Division by the Transfer of Construction Activity From Housing Development Department To Contract/Procurement form (Exhibit 9, Transfer of Construction Activity From H To Contract/Procurement form). 2.16 Award Contracts shall be awarded on the basis of the following steps: A.
The first step in the contract award process is to review the low bid for responsiveness. The Contracting Officer should examine all bids to ensure that bidders do not attempt to impose conditions or additional terms to their bids. No bid shall be considered for award if the bid is not responsive to the essential requirements of the Invitation for Bids or is submitted by a non-responsible bidder. Conditions and alternatives imposed by a bidder which give the bidder an advantage over other bidders, or limit the Authorityâ€™s rights (such as conditioning the bid on receiving award of another contract as well), or affect price, quantity, quality, or delivery against the best interest of the Authority are causes for bid rejection as non-responsive. Documented previous unsatisfactory performance should also be grounds for determining that the bidder is not responsible. Such determination shall be documented by the Authority in the contract file. After determining responsiveness, the Authority shall determine if the contractor is 44
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 45
responsible. Chapter 3, provides a detailed discussion of assessing responsibility of bidders. Rejection of any bid during the evaluation process shall be fully documented, and all reasons for the rejection stated. Minor informalities in the bid may be waived, as described below under 'Mistakes in Bid." Any bid may be rejected if the Contracting Officer determines in writing that it is unreasonable as to price. Unreasonableness of price includes not only the total price of the bid, but the prices for individual items as well. Any bid may be rejected if the prices for any items are materially unbalanced. A bid is materially unbalanced if there is a reasonable doubt that the bid would result in the lowest overall cost to the Authority, even though it is the lowest bid, or the bid is so grossly unbalanced that its acceptance would be tantamount to allowing an advance payment (such as bidding a very high price for the first items to be provided, and extremely low prices for subsequent items).
If specified in the Invitation for Bids, factors such as discounts, transportation costs and life cycle costs, shall be considered in determining which bid is the lowest. Prompt payment discounts should ordinarily not be used to determine the low bid, because there is no guarantee that such discounts will be taken.
Under the "firm bid" rule, one of the principles upon which sealed bidding is based, the bidder is legally bound by the bid, as submitted, after the bids have been opened. The only exception to this rule is an obvious mistake in the bid, such as a misplaced decimal. The Contracting Officer should carefully review low bids which are significantly above or below the independent cost estimate and request bidders to verify their bids, revise the independent cost estimate if necessary, and review the low bidder's ability to perform at the bid price.
After the Contracting Officer evaluates each timely bid, the responsive and responsible bidder that submits the lowest bid total and meets all specified requirements shall be awarded (Exhibit 10, sample Award Letter) the contract.
F. The Authority may use two-step or multi-step sealed bidding procedures where appropriate. The two step procedure is designed to obtain the benefits of sealed bidding by award of a contract to the lowest responsive, responsible bidder, and at the same time obtain the benefits of the competitive proposals method through the solicitation of technical offers and the conduct of discussions to evaluate and determine the acceptability of technical offers. Under two-step sealed bidding, technical proposals alone are requested first, the proposals are evaluated for acceptability and negotiations or discussions held, if necessary. In the second step, the normal Invitation for Bids process is followed, except that only bidders with acceptable technical proposals may bid, and each bidderâ€™s price is based on its own technical proposal. This method may be used for equipment contracts with performance specifications, rather than detailed design specifications, where the 45
Authority needs a certain level of performance but is not specifying how this performance is achieved. 2.17
Mistakes in Bids Any mistakes in the bid information submitted shall be addressed in the following manner: A.
General Correction or withdrawal of bids before or after contract award requires careful consideration to maintain the integrity of the competitive bidding system, to assure fairness, and to avoid delays or poor contract performance. While bidders should be expected to be bound by their bids (the "firm bid rule"), circumstances may arise where correction or withdrawal of bids is proper and should be permitted.
Review of Bids for Mistakes The Contracting Officer shall carefully review each bid to ensure that the bidders have not made any obvious mistakes in their bids. If a bidder appears to have made a mistake, the Contracting Officer shall immediately bring the mistake to the attention of the bidder by phone to request confirmation of the bid as submitted. The phone call shall be confirmed with a letter pointing out the questionable portion of the bid, how it must be corrected, and the procedures for allowing correction of the bid. The bidder should be asked to reconfirm their bid in writing before award.
C.Minor Informalities The Contracting Officer may waive minor informalities, or allow the bidder to correct them depending on which action is in the best interest of the Authority. Minor informalities are matters of form rather than substance, evident from the bid document, or insignificant mistakes that can be waived or corrected without prejudice to the other bidders; that is, the effect on price, quantity, quality, delivery, or contractual conditions is negligible. Examples include the failure of a bidder to: return the number of signed bids required by the Invitation for Bids; sign the bid, provided that the unsigned bid is accompanied by other material indicating the bidder's intent to be bound (e.g., a signed cover letter or a bid guarantee); complete one or more certifications; or acknowledge receipt of an amendment to the Invitation for Bid, provided that it is clear from the bid that the bidder received the amendment and intended to be bound by its terms, or the amendment had a negligible effect on price, quantity, quality, or delivery. D.Mistakes before Bid Opening A bidder shall be permitted to withdraw or modify its bid by written or telegraphic/facsimile notice prior to bid opening, as provided for in the Invitation for Bids (see Exhibit 8, form HUD-5369, Instructions to Bidders for Contracts). E.Mistakes after Bid Opening The general rule is that a change to a bid after bid opening is not permitted, as this would give the bidder an advantage over other bidders. There are certain exceptions to this rule, however, which are designed to prevent unreasonable results from the sealed bidding process. Corrections of bids should only be allowed if the bidder can provide evidence of the bid price intended 46
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 47 showing how the bid price was calculated but inadvertently listed incorrectly on the bid itself. F.Withdrawal of Bids Withdrawal of a bid is permissible where there is an obvious error in the lowest bid, such as a math error or a misplaced decimal, but the mistake must be readily apparent from the bid itself A bidder may be permitted to withdraw a low bid if a mistake is clearly evident on the face of the bid document, but the intended correct bid is not similarly evident, or the bidder submits written evidence which clearly and convincingly demonstrates that a mistake was made. The Authority shall also require written supporting evidence before allowing withdrawal by the bidder. If the Authority allows withdrawal, it should be without forfeiting the bid bond, upon verification of the error. In cases of alleged mistakes or requests for withdrawal, the decision to allow a correction or withdrawal should only be made after consultation with the Authority's legal counsel. G.
Displacing the Low Bidder To maintain the integrity of the sealed bidding system, a bidder shall not be permitted to correct a bid mistake after bid opening that would cause such bidder to have the low bid, unless the mistake is clearly evident from examining the bid document, such as extension of unit prices or errors in addition.
Correction by Low Bidder An otherwise low bidder shall be permitted to correct a mistake if the intended bid is obvious from the bid document or is otherwise supported by written evidence clearly dated before the submission of the bid. A low bidder should not be permitted to correct a bid for mistakes or errors in judgment (such as pricing a bid with a lower profit margin than might have won the contract).
I .Mistakes after Award Correction of bid mistakes after award shall be subject to the same proof as corrections before award. J.
Documentation Required Decisions to allow correction or withdrawal of mistakes in bids must be properly documented in the contract file. As a minimum, the Contracting Officer shall prepare a written determination, citing the reasons mentioned above.
Bonds In addition to the other requirements of this Procurement Procedures Manual, the bond requirements detailed below are applicable for construction contracts exceeding $25,000.00 as required by State law. In sealed bid construction contracts, three types of bonds or guarantees are required: a bid guarantee, a performance bond, and a payment bond. The purpose of these bonds is to ensure the integrity of the procurement system and successful completion of the contract.
Bid Guarantee from each bidder equivalent to 5% of the bid price is required. The bid guarantee or bid bond submitted by the bidders with their bids assures that, if awarded the contract, the bidder will accept and perform the contract and not attempt to withdraw or otherwise disavow the contract and will execute such contractual documents as may be required within the time specified. A certified check, bank draft, US. Government Bonds at par value, bid bond secured by a surety company may be accepted as a bid guarantee (Exhibit 11, sample Bid Bond). If the bidder does attempt to renege on signing the contract, the surety for the bond is required to step in and take over performance of the contract, or the bonding instrument tendered may be cashed. The surety company must be authorized to do business in the State of California and must be acceptable to the Authority. If the bid guarantee is not submitted with the bid, the Authority shall reject the bid. If a successful bidder fails to accept the award, it forfeits the bid guarantee. The Authority shall not return any bid bonds until the contract has been awarded and the required bonds furnished, or all bids have been rejected, or the time specified for acceptance of bids has expired.
B. A Performance Bond for 100% of the contract price is required from the successful bidder prior to contract signing. Performance bonds are an additional means to ensure that the contract is successfully carried out. The performance bond guarantees that, if the successful bidder is unable to complete the contract, someone (the surety company) will step in to finish the contracted effort that was abandoned by the original contractor (see Exhibit 12, sample Performance Bond). C.
A Payment Bond for 100% of the contract price is required from the successful bidder prior to contract signing. The payment bond is a method of assuring that contractors pay their subcontractors. The payment bond provides a way for the Authority to avoid disputes concerning payment of subcontractors by requiring the recipient of a prime contract to submit a payment bond which guarantees through a surety that subcontractors will be paid (see Exhibit 13, sample Payment Bond).
D. Submission Requirements Performance and payment bonds shall be requested of the successful bidder upon contract award, with the bonds due within a reasonable period of time, typically 10 working days. The performance and payment bonds shall be obtained from one or more of the surety companies listed in the most recently published U.S. Treasury Circular 570 (Department of Treasuryâ€™s Listing of Approved Sureties, internet address http:www.fms.treas.gov/c570/index.html, Circular is updated annually in July).
Inadequate Surety If the low bidder fails to produce acceptable assurance of completion, the Authority shall consider the bid guarantee forfeited and notify the surety company. The amount to be recovered should equal at least the difference between the defaulted bid and the next higher acceptable bid, or the amount by
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 49 which the bid accepted by re-soliciting exceeds the defaulted bid. The defaulting bid should not be rejected until after recovery. F.
Liens Failure to pay subcontractors for work performed in commercial contracts often leads to the filing of mechanic's liens against property owners to obtain payment for services rendered. Accordingly, since Authority contracts require payment bonds to prevent this problem, in order to assure that no liens will be filed against any Authority building or lot of ground, the Authority shall require that each contractor and subcontractor of any tier be prohibited against filing liens as stipulated in form HUD5370, General Conditions of the Contract for Construction (Exhibit 14, form HUD5370, General Conditions of the Contract for Construction). Section 4 Competitive Proposals
General The primary alternative to using sealed bidding for contracts is the competitive (negotiated) proposals method of procurement. The chief advantage of this approach is that it allows the Authority to hold discussions with each offeror to ensure that there is a complete understanding of the work to be undertaken. The competitive proposals technique if done right is no more complex than sealed bidding, however it requires the ability to devote staff resources to the evaluation of proposals and the conduct of negotiations. In addition, no public bid opening is held. As further discussed below, the primary reason for not having a public opening is that there are multiple award factors as compared to the sealed bid price method where the bid is the only factor. Normally, it takes several hours (or even days depending on the complexity of the procurement) to evaluate proposals. Further proposals submitted by offerors are kept in confidence and not released to anyone who has not been granted access by the Contracting Officer. After the award is made, the basis for selection is subject to public inspection. 2.18
Sealed Bidding vs. Competitive Proposals An important difference between sealed bidding and competitive proposals is the finality of initial offers. Under competitive proposals, alterations in the nature of a proposal, and in prices, may be made after proposals are opened; such changes are not allowed in sealed bidding. In addition, under the competitive proposals method, an offer may be withdrawn at any time before award. Further, the competitive proposals method differs from sealed bidding in that it permits discussions with competing offerors and changes in their proposals (including price), and it allows comparative judgmental evaluations to be made when selecting among acceptable proposals for award of the contract. Competitive Proposals allows the Housing Authority to award the contract based on "Best Value" to the Housing rather then low bid.
Conditions for Use The competitive proposals method can be used to select professional services (excluding those professional services requiring selection by the QualificationBased-Selection process) and when the Authority does not have a detailed specification 49
or is uncertain about its requirements. The procurement file should indicate the reason for choosing competitive proposals rather than sealed bidding procedures (the reason could be the complexity of the specifications would generate discussions). 2.22 Preparing the Request for Proposals Request for Proposals issued by the Authority shall be in the standardized format as contained in the Master Request for Proposals available on the Authorityâ€™s Shared Network (Exhibit 15, Request for Proposals, Index). The Authority may charge a fee for the Requests for Proposals to offset costs of printing. Evaluation Criteria The evaluation criteria should be kept simple for each procurement Typical evaluation criteria include: demonstrated understanding of the requirement; appropriateness of the technical approach in the proposal (including labor categories, estimated hours, and skill mix); quality of the work plan; technical capabilities (in terms of factors such as personnel, equipment, and materials); management plan (including staffing of key positions, method of assigning work, and procedures for maintaining level of service, etc.); and demonstrated experience in performing similar work. The contractors should be the experts in their fields, and the SFHA should allow the opportunity to demonstrate innovation and creativity. 2.23
However, you can simplify the evaluation criteria by asking for only the companies Past Performance and Experience in similar work. Looking at the past performance of a commercial firm will identify just how well this firm has done in past jobs, whether the relationship was good, the quality was high and whether there were problems associated with this contractor. Experience will provide you the information as to whether the contractor has demonstrated his skills in a complex environment. Proposal submission requirements and evaluation criteria for a Authority turnkey development project shall be those specified in HUD Handbook 7417.1 REV1, Chapter 6. This handbook explains specific procedures for evaluation and award of turnkey development contracts. 2.24
Amendments If changes are required to the solicitation after issuance but before proposals are due, a written amendment shall be issued to all potential offerors who were sent the original solicitation. If a change to the Request for Proposals is needed after the due date for submission of proposals, the Authority shall issue a written amendment (Exhibit 16, sample Addendum) to all offerors. If the change is so substantial that the Request for Proposals is essentially for a new requirement, the solicitation shall be canceled and a new solicitation issued. Offerors may modify their proposals in writing, however, modifications received after the due date for proposals shall not be considered unless the modification withdraws the offer or makes an otherwise successful offer more advantageous. The content of the late modification may be discussed during negotiations.
Handling of Proposals Proposals received shall be date-time stamped and held unopened in a secure place until the established due date. Since proposals are submitted in confidence and may contain trade secrets or other confidential business 50
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 51 information regarding the offerors approach to the work, proposals shall not be opened publicly. After the closing date, all proposals received shall be opened and evaluated in confidence. Proposals and modifications shall be shown only to Authority personnel who have been authorized by the Contracting Officer as having a legitimate interest in them, on the condition that information in the proposals shall not be released to anyone who has not been authorized by the Contracting Officer. 2.26
Proposal Evaluation A.
Evaluation Plan The approach to evaluation of the proposals will depend upon the complexity of the procurement. It may be relatively simple covering two or three factors or it may be as complex as the approach herein discussed. The operative principle is that the evaluation should be impartial, consistent, and fair. This objectivity must be readily apparent upon review. The evaluation plan (Exhibit 17, sample Evaluation Plan) is an essential tool to assure that proposals are evaluated in a uniform and objective manner. The amount of detail in the plan will depend on the complexity of the procurement. A specific evaluation plan should be developed for each procurement. A written plan for evaluating technical and cost proposals should be established and an evaluation review process established before the Request for Proposals is issued. Failure to take this action until after the solicitation is issued may give the appearance of favoritism toward one or more contractors. The cost or price evaluation will be handled by the Contracting Officer, however, if someone else performs the evaluation, the Contracting Officer shall concur with the recommendation. The technical evaluation requires a detailed evaluation plan to be successful. This plan shall include a rating sheet for each offeror, which lists each of evaluation criteria and the weight assigned. The rating description shall be clearly stated (for example, a rating of "Excellent" or 20 points out of 20 available for a particular evaluation factor means â€Ś., "Good" or 15 of 20 points means â€Ś., etc.). The rating sheets should require the technical evaluator to assign both numerical (or similar) ratings and narrative justifications in the comments section to support the ratings given.
B. Evaluation panel Normally, a selection committee should be appointed to evaluate technical proposals in accordance with the evaluation criteria stated in the Request for Proposals. This selection committee (with a chairperson indicated) should be officially appointed in writing by the Contracting Officer in conjunction with funding department for the effort. The designated chairperson shall be responsible for the deliberations of the committee. Usually, a three person selection committee (or one having an odd number designated as voting members) will be sufficient. Non-voting members, advisors, and a recording secretary may also be designated in the appointment letter. A single person from 51
the funding department could serve in place of a committee but ordinarily should do so only in relatively small procurements. The selection committee performs the following functions: review of all technical proposals (using the Request for Proposals evaluation criteria as standards); meeting to discuss the evaluations and reach a consensus and the rating of each offeror, preparing the evaluation plan for review by the Contracting Officer, participating in negotiations, if requested by the Contracting Officer, evaluating best and final offers, if required, and providing an amended evaluation report based on such evaluations. It may be advantageous to conceal the identity of offers submitted to the selection committee, to ensure objectivity. This can be done by instructing offerors not to include identifying information in their offers (other than by a cover letter) or by covering or deleting the names of the offerors when submitting proposals for technical evaluation. In such cases, the Contracting Officer identifies the offerors by number on a master list that is not disclosed to others. Even if this method of assuring anonymity is not used, the technical evaluators shall not disclose any information in any of the proposals, including the names and number of the offerors, to anyone without the Contracting Officer's permission. In the competitive proposals method of procurement, offerors submit proposals in confidence and expect their proposals to be protected from disclosure to other offerors or individuals. C.
Conduct of evaluation The evaluation shall be based on the evaluation factors set forth in the Request for Proposals. Factors not specified in the Request for Proposals shall not be considered. Initially, proposals should be compared on an individual basis, separately, against the requirements stated in the Request for Proposals, not analyzed in comparison with each other. During the initial evaluation, the Authority should only evaluate the content of the proposals; personal knowledge that is not based on the contractor's written submission should not be part of the initial technical evaluation of the written proposals. The written evaluations will probably be open for inspection after the award of contract is made and will almost certainly be made available in the case of litigation, so evaluators should be especially careful to make the evaluations as thorough, objective, and well-documented as possible. Another important part of the proposal evaluation process is the review of proposals for any exceptions taken to the solicitation. Occasionally, offerors may include conditions regarding State law (â€œchoice of law" clauses that attempt to impose the law of the offeror's State rather than that of the Authority - California); "hold harmless" clauses to avoid certain liabilities; and attorney's fees (to attempt to make the Authority pay the contractor's legal costs if the Authority sues the contractor). Offerors may also try to take exception to certain clauses in whole or in part, such as the termination for convenience clause. The Contracting Officer in
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 53 conjunction with legal counsel should plan to negotiate the removal of such objectionable conditions. D.
Evaluation The evaluation of each technical proposal shall be documented in an evaluation plan. This report shall rank the offerors by technical merit, using point scores or similar methodology. In addition, a narrative must accompany the scores to explain how the selection committee members arrived at the scores.
Cost Proposal The evaluation of cost or price proposals shall be performed by the Contracting Officer or someone on staff knowledgeable in public contract cost and price analysis. The evaluation should be made using the principles as outlined in the Cost and Price Analysis of this manual and any other evaluation process described in the Request for Proposals (such as evaluation of options by adding their prices to a grand total, etc.).
Competitive Range For the purpose of conducting negotiations, proposals should be initially classified as acceptable, potentially acceptable, or unacceptable. The competitive range decision should take into account the evaluation of both technical and cost/price proposals, the evaluation report, and the cost or price analysis so that each proposal is examined in its entirety and the relative rankings of each offeror are compared. Offerors whose proposals are unacceptable should be so notified promptly by letter with the appropriate rationale for such action; such offerors are excluded from the remainder of the procurement. A proposal may be determined unacceptable on technical grounds, if the price is clearly excessive compared to other acceptable offers, or if the offeror is non-responsible. Proposals determined by the Contracting Officer or assigned staff member to be acceptable or potentially acceptable and that have a reasonable chance of award shall be included in the competitive range. This decision shall be in writing and included in the procurement file. When in doubt as to a proposal's potential for becoming acceptable, that doubt should be resolved in favor of including the proposal in the competitive range, so as to promote continued competition. Next, negotiations should be conducted with those offerors in the competitive range.
Pre-Negotiations Objectives Since it is important that the Contracting Officer or assigned staff member be completely prepared for negotiations, it is recommended that the Contracting Officer or assigned staff member prepare a pre-negotiation memo based an the results of the technical and cost evaluations, explaining which offerors are in the competitive range and why, and establishing cost and technical objectives for negotiation with each firm in the competitive range. The technical objectives should be to resolve the questions and issues resulting from the technical evaluation, as documented in the technical evaluation report. The cost or price objectives should be based on the cost or price analysis 53
and should be presented in spreadsheet form, with columns for offered price/cost and the negotiation objectives. 2.27
General Negotiations (also referred to as discussions) are held to promote understanding of the Authority’s requirements and the offerors' proposals and to facilitate arriving at a contract that will be most advantageous to the Authority taking into consideration price and the other evaluation factors set forth in the Request for Proposals. One of the chief functions of the negotiation process is to discuss those problems in the proposals that are described in the technical evaluations. Consequently, negotiation is a team effort, involving the Contracting Officer or assigned staff member and any needed supporting members from technical, audit, or legal counsel offices. Negotiations shall be conducted with ALL offerors within the competitive range. The Contracting Officer or assigned staff member shall treat each offeror equally and shall discuss all issues that arise from the technical and cost/price evaluation, so that each offeror has a complete understanding of the Authority’s position with regard to its proposal. Since proposals are submitted in confidence and may contain proprietary information, auction techniques (revealing one offeror's price to another) and disclosure of any information derived from competing proposals are prohibited; however, the Contracting Officer or assigned staff member should establish negotiation objectives for both technical and cost/price and negotiate with the purpose of achieving those objectives. A memorandum of negotiation objectives should be prepared to outline the goals of the negotiation and to provide a basis for documenting the procurement file with the results of the negotiations, thus helping create a complete record to justify the selection of the winning contractor. Any substantial oral clarification of a proposal shall be reduced to writing by the offeror.
Best and Final Offers After negotiations are completed, the Contracting Officer or assigned staff member shall establish a common date and time for submission of best and final offers. Best and final offers shall be submitted only once; unless the Contracting Officer makes a written determination that it is in the Authority’s best interest to conduct additional negotiations or change the Authority’s requirements and request another submission of best and final offers. Otherwise, no discussion of or changes in the best and final offers shall be allowed before award. Offerors shall also be informed that if they do not submit a notice of withdrawal or best and final offer, their immediate previous offer shall be construed as their best and final offer. After best and final offers are received, a final round of technical and cost/price evaluations must occur. The purpose of this process is to ensure that the contract award decision is based on a complete analysis of offerors' proposals, as modified
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 55 by their best and final offers. The same procedures are followed as in the initial evaluations. C. Award Without Discussions In some instances, the quality of the initial proposals received is such that no purpose would be served by conducting negotiations. In these cases, award may be made without discussions, but only if the Request for Proposals advised all offerors that this procedure might be used and the contract file is documented as to the rationale for such action. D. Price Negotiations Memo This document is the most important document in the contract file from a business perspective, as it explains why the Authority is choosing to make the award (BEST VALUE) to a particular contractor. In the case of litigation, this document will serve as the Authorityâ€™s key documentation for the basis of the award. As part of the contractor selection process for significant contracts, the Contracting Officer or assigned staff member shall prepare a price negotiation memo that summarizes the results of the negotiations and explains the basis for the award decision. The cost/price results can be shown in spreadsheet form, with columns for the offered cost/price, negotiation objectives, and final negotiated cost/price for each offeror in the competitive range. E.Mistakes in Proposals If a mistake in a proposal is suspected or alleged, the proposal may be corrected or withdrawn during any negotiations that are held. If negotiations are not held, or if best and final offers have been received, then 1) the offeror may be permitted to correct a mistake in their proposal and the intended correct offer may be considered if the mistake and the intended correct offer are clearly evident on the face of the proposal; or 2) the mistake is not clearly evident on the face of the proposal, but the offeror submits written evidence which clearly and convincingly demonstrates both the existence of a mistake and the intended correct offer, and such correction would not be contrary to the fair and equal treatment of other offerors. Mistakes discovered after award shall not be corrected unless the Contracting Officer makes a written determination that it would be disadvantageous to the Authority not to allow the mistake to be corrected. 2.28
Award Contracts shall be awarded only in accordance with the terms of the solicitation. Procurements using the competitive proposals method normally take into consideration both price and technical factors. Awards shall only be made to responsible contractors; the Contracting Officer should follow the procedures in Chapter 3, Contractors Qualifications and Duties in determining whether a contractor is responsible. After the selection process is completed, the Contracting Officer shall sent the successful contractor an award letter (Exhibit 10, sample Award Letter) and the unsuccessful contractors a letter thanking them for their time and efforts. A Form HUD-53015 (Turnkey Contract of Sale) shall be used as the award document for a turnkey development. 55
After an award is made, a notice of award shall be posted in an area readily visible by the Public. Such notice shall identify the awardee and the amount of the award. Each unsuccessful offeror should be notified in writing promptly upon award; the notice shall identify the successful contractor, provide a brief explanation of the reasons the unsuccessful offeror was not selected, and provide an opportunity for a debriefing meeting with the Contracting Officer or assigned staff member to discuss any questions. 2.29
Architect/Engineer Services A.
Method of Procurement The Government Code of the State of California requires the selection of professional services which includes architectural, landscape architectural, engineering, environmental, land surveying or construction project management firms be procured by the Qualification–Based–Selection process. Under the Qualifications-Based-Selection process, where price is not used as a selection factor, the Authority issues a Request for Qualifications (Exhibit 18, Request for Qualifications, Index). The document should be developed using the standardized format as contained in the Master Request for Qualifications available on the Authority’s Shared Network and should clearly identify the professional services required and the evaluation factors the competitors Statements of Qualifications will be judged against. The competitors' technical qualifications are evaluated and the most technically qualified competitor is selected, subject to the negotiation of fair and reasonable compensation. The Authority then holds negotiations with the top-rated firm to reach agreement on a fair and reasonable price. If agreement cannot be reached, the Authority will negotiate with the next highest technically rated firm, and so on until a fair and reasonable price is obtained. After evaluation of Statements of Qualifications and price negotiations, a contract shall be awarded to the responsible firm whose qualifications are the most advantageous to the Authority. Again, it should be noted, the QualificationsBased-Selection process can not be used to procure any other types of services. The Authority shall not allow an architect/engineer contractor, on a sole-source basis, to prepare an application on a "no fee” basis, and then compensate that architect/engineer contractor by paying a contingent fee or contracting on a solesource basis to do the design and construction phases. In no event may a Authority use the sealed bidding process to acquire architectural, landscape architectural, engineering, environmental, land surveying or construction project management firm services.
Alternatives There are several alternatives available to the Authority in contracting for architect/engineer services: 56
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A "full-service" approach may be used where the Authority solicits offers using Qualification-Base-Selection process in preparing the Comprehensive Grant Program Comprehensive Plan/Annual Submission (phase I), with options for doing the design and construction phases for a specific Comprehensive Grant Program contract (phase 1). The evaluation criteria in the solicitation must address the qualifications and experience of prospective architect/engineer firms for all tasks. The Authority evaluates the proposals for technical competence, selects the best qualified architect/engineer, and negotiates a price for the initial task. If agreed by the architect/engineer and the Authority, the contract may stipulate that in the event that phase I is not approved, the architect/engineer is not entitled to any payment. The Authority would specify the optional task (design/construction) in the contract without a price because the full scope of the architect/engineer services is not yet known. Upon successful completion of the initial task, the Authority pays the architect/engineer the amount specified in the contract. If the Authority wishes to exercise its option for the additional services, the Authority notifies the architect/engineer and requests a proposal for the work. The Authority conducts a cost analysis, enters into negotiations with the architect/engineer and establishes a mutually acceptable price for the design and construction phases. The Authority then prepares a contract modification, executed by both parties, which authorizes the architect/engineer to begin the design/construction phase work at the negotiated price. If negotiations cannot be satisfactorily concluded, the Authority will have no further obligation to the architect/engineer and may issue a new competitive solicitation for the work.
If the Authority wishes to separate the phase I work (Comprehensive Grant Program Comprehensive Plan/Annual Submission) from design/construction phase work, the Authority would first solicit and contract for the phase I work, then, after phase I approval the Authority would solicit and contract for the design/construction phase work. The architect/engineer who was awarded the phase I contract may compete for the design/construction phase work, provided that the Authority makes all application-related information available to all competing architect/engineer firms and there is no organizational conflict of interest (e.g., award of the contract would result in an unfair competitive advantage).
3. If the Authority wishes to accomplish the above objective, but also procure architect/engineer services for more than one specific service, the Authority may solicit for an indefinite-quantity of architect/engineer services (e.g., design of various administrative or maintenance buildings, where separate orders would be placed for each building as the need arises). The solicitation 57
must state that the services contemplated are not related to a significant rehabilitation project, and the solicitation should define in dollars "a significant rehabilitation project". Because this approach may provide the successful architect/engineer with a substantial level of business and basically confers status as the "resident architect/engineer" the contract shall contain a clause precluding the successful architect/engineer from competing on related architect/engineer work solicited by the Authority during the term of the contract if the other architect/engineer work would result in an organizational conflict of interest (e.g., unfair competitive advantage or impairment of contractor objectivity). With the exception of the full-service approach, the Authority should be sensitive to actual or potential conflicts of interest resulting from the same architect/engineer who was involved in the Phase I being subsequently involved in the related design/construction phase work. C.
Evaluation Factors The following evaluation factors should be used for the development architect/engineer contracts: 1.
Evidence of the architect/engineer or the firm's ability to perform the work, as indicated by profiles of the principals and staff's professional and technical competence and experience and their facilities;
Capability to provide professional services in a timely manner,
Evidence that, where design work is involved, the architect/engineer, is currently registered in the State of California and carries Errors and Omissions insurance (Note: this is a yes or no criterion, if the answer is no, the firm is disqualified-no points scored);
Past performance in terms of cost control, quality of work, and compliance with performance schedules;
Demonstrated knowledge of local building codes; and
6. Other factors, determined to be appropriate by the Authority. D.
Contract Clauses The clauses required by HUD for the Authorityâ€™s architect/engineer contracts are included in form HUD-51915 (Exhibit 19, Standard Form of Agreement Between Owner and Design Professional).
Inadequate Response to Solicitation If the Authority receives fewer than three proposals, the Authority shall analyze and document the reasons (e.g., if public notice was insufficient, the solicitation was unnecessarily restrictive, etc.). Depending on the results of the analysis, the Authority may both reject the proposals and issue a revised solicitation or proceed to evaluate the proposals. If 58
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 59 the Authority proceeds with awarding a contract with only one proposal, a Cost and Price Analysis must be conducted in accordance with Chapter 2, Section 6, Cost and Price Analysis, of this manual. For contracts exceeding the HUD Small Purchase limit ($100,000), HUD's approval must be obtained in accordance with Chapter 10, HUD Review Requirements, of the manual. 2.30
Legal and Other Professional Services A.
Legal Services 1.
General When contracting for legal services, the goal is to acquire the services of a highly qualified firm at a reasonable price. The procurement of legal services should follow the competitive proposal procedures outlined above. The employment of House Counsel is not covered by 24 CFR 8536. Authority’s House Counsel are ineligible to receive procurement contracts for legal services. All services of an Authority’s House Counsel would be part of the employment contract and are not to be procured separately.
Method of Procurement Normally, when legal services are desired outside of the scope of services provided by the Authority’s legal counsel, the Authority’s procurement of the services should be conducted in accordance with the competitive proposals method described above (Note: any contract exceeding two years or for litigation services must be approved by HUD, see Chapter 10, HUD Review Requirements). Noncompetitive proposals may only be used when the other method of procurement is not feasible, an exceptional case where the competitive method can be used under the circumstances to meet the specific need for required legal services, and when additional circumstances apply, namely, legal services are available from only a single source; public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation; after solicitation of a number of sources, competition is determined inadequate; or HUD authorizes the use of non-competitive proposals. An example of a situation considered to violate the requirement of full and open competition in 24 CFR 85.36 would be a noncompetitive award to an attorney on a retainer contract.
3. Litigation services Contracts for litigation services must meet the requirements of the HUD Litigation Handbook 1530. As provided in the Litigation Handbook, with the exception of litigation involving the Authority acting as a Section 8 private developer, the Authority must submit to the HUD Regional Counsel for prior written concurrence, any contract with a private attorney for litigation services involving a Authority program, project, or activity receiving loan, grant or subsidy assistance from HUD. If the services are estimated to cost not more than $25,000 (although the litigation Handbook 59
sets a $10,000 threshold for this requirement, this threshold has been superseded by the $25,000 threshold set forth 24 CFR 8536 (g)(2)(ii)), this concurrence is not necessary. 4.
HUD review. (a)
Such contracts shall make provision for reasonable fees and reimbursement of necessary expenses. If additional funding or budget revision will be required to cover the cost of litigation services, the Authority shall consult appropriate HUD Field Office staff. Upon receiving a request for concurrence where the contract amount is expected to exceed $25,000, if HUD Regional Counsel is satisfied that the Authority has not violated HUD requirements or is otherwise not at fault, the HUD Regional Counsel may authorize the limited use of program funds for the Authorityâ€™s defense to facilitate settlement or obtain judicial definition of the required relief. The contract shall be submitted for the programmatic review and approval of HUD Regional Counsel. Regional Counsel's concurrence signifies that the attorney's fee (proposed contract price) under the contract is an allowable project expense, but is not a certification that there are sufficient project funds available to cover the contract amount.
Fixed-price proposals will be approved only where the issues are uncomplicated, extensive preparation probably is not required, and any trial that may ensue probably will not be lengthy. Ordinarily, a fixedprice proposal in excess of $25,000 shall not be approved but HUD Regional Counsel may approve a higher amount for good cause. For additional information regarding the above litigation services requirements, consult the Litigation Handbook.
Professional Service Contracts 1.
HUD review The Authority shall submit for HUD review and approval any agreement or contract for professional, management, fee accountants, legal or other professional services with any person or firm where the total period or term of the contract, including any renewal or option provisions, is in excess of two (2) years. When reviewing such contracts, HUD will ensure that price competition was obtained for any renewal or option periods.
Executive Directors Executive Directors may be hired as Authority employees or may be retained under an employment contract. For Executive Directors hired under an employment contract, any contract that is in excess of two years requires prior written approval by the local HUD office. Specific guidance regarding comparability for employees including Executive Directors is provided in the Public Housing (PHA) Personnel Policies Handbook 7401.7, dated 10/87, Chapter 2. 60
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Personal vs. Non-personal services There is a distinction between hiring an individual under an employment contract and contracting for non-personal services. The former is considered part of the personnel process subject to civil service rules. The latter is considered procurement contracts subject to the standards in 24 CFR 95-36, and there is no employer-employee supervisory relationship.
Contract Scope of Services In the Authorityâ€™s development of a professional service contract or agreement and HUD's review of these contracts or agreements, the following areas should be considered for inclusion and review: Scope of Service; Compensation, Contract Period, and Option To Extend, Bonding and Insurance; Indemnification and Liability Insurance; and the provisions required by 24 CFR 85.36(i).
Unsolicited Proposals An unsolicited proposal is any offer other than one submitted in response to a solicitation. Award may be made on the basis of an unsolicited proposal only in limited circumstances, based on the unique nature of the proposal, provided that the requirements of 24 CFR 85.36 and the procedures of this manual for noncompetitive proposals are followed and that HUD approval is obtained, regardless of the dollar amount. Unsolicited proposals shall not be used as a means of limiting competition. Section 5. Noncompetitive Proposals
2.32 General Procurement by noncompetitive proposals shall be conducted only if a written justification is made as to the necessity of using this technique, in accordance with the procedures outlined below. 2.33
Conditions for use Procurements shall be conducted competitively to the maximum extent possible. Procurement by noncompetitive proposals may be used only when the award of a contract is not feasible using small purchase procedures, sealed bids, or competitive proposals, and one of the following applies: A.
The item is available only from a single source, based on a good faith review of available sources;
An emergency exists that seriously threatens the public health, welfare, or safety, or endangers property, or would otherwise cause serious injury to the Authority, as may arise by reason of a flood, earthquake, epidemic, riot, equipment failure, or similar event. In such cases, there must be an immediate and serious need for supplies, services, or construction such that the need cannot be met through any other procurement methods, and the emergency procurement shall be limited to those supplies, services, or construction necessary to meet the emergency; 61
For those procurements over $100,000, HUD authorizes the use of a noncompetitive proposal; or
After solicitation of a number of sources, competition is determined inadequate.
Justification: Each procurement based on noncompetitive proposals shall be supported by a written justification for using such procedures. The justification shall include the following information in writing and be approved by the Contracting Officer. A.
Description of the requirement,
B. History of prior purchases and their nature (competitive vs. noncompetitive), C.
The specific exception in 24 CFR 85.36(d)(4)(i)(A) through (D) which applies,
Statement as to the unique circumstances that require award by noncompetitive proposals,
Description of the efforts made to find competitive sources (e.g., advertisement in trade journals or local publications, phone calls to local suppliers, issuance of a written solicitation, etc.),
Statement as to efforts that will be taken in the future to promote competition for the requirement, and
Approval by an official above the Contracting Officer making the award.
2.35 Price reasonableness The reasonableness of the price for all procurements based on noncompetitive proposals shall be determined by performing a cost analysis, as described in Chapter 2, Section 6, Cost and price Analysis, below. 2.36
Procedures The procurement process for noncompetitive proposals generally follows that of the competitive proposals method described above. HUD regulations require HUDâ€™s review and approval of any Authority noncompetitive procurement which exceeds the HUD Small Purchase limit ($100,000). Section 6. Cost and Price Analysis
General A Cost or Price Analysis shall be performed for all procurement actions, including contract modifications. The degree of analysis shall depend on the facts surrounding each procurement. The following discussion on cost and price analysis is provided to assure that within even the most complex procurement the Authority has the tools to perform an adequate cost and price analysis. Again, the reader is reminded that the level of detail needed is dependent upon the size and scope of the procurement. 62
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Terms and Conditions for Use A.
Price Analysis Price analysis is a review and evaluation of a proposed ("bottomline") price for reasonableness without evaluating separate cost elements. Price analysis is the most common technique for evaluating the price of Authority procurements. It must be used in all cases where a cost analysis is not performed. Application of the cost principles in HUD Handbook 2210.18 is not required to conduct a price analysis; however, the introduction to that Handbook provides basic guidance on how to perform a price analysis. If a procurement is based on a noncompetitive proposal, or when only one offer is received, or for other procurements as deemed necessary by the Authority (e.g., when contracting for professional, consulting, or architect/engineer services) the offeror shall be required to submit:
A Cost Breakdown showing projected costs and profit;
Commercial pricing and sales information, sufficient to enable the Authority to verify the reasonableness of the proposed price as a catalog or market price of a commercial product sold in substantial quantities to the general public; or
Documentation showing that the offered price is set by law or regulation. B.
Cost analysis Cost analysis is a review and evaluation of the separate elements of cost which make up the contractorâ€™s cost proposal. It requires that the cost principles in HUD Handbook 2210.18 be used to determine the allowability and allocability of costs. The Handbook contains the cost principles applicable to contracts with for-profit organizations along with instructions for performing a cost analysis. The cost principles are also contained in the Federal Acquisition Regulation or FAR, 48 CFR Chapter 1, Part 31. A Cost Analysis shall be performed if an offeror or contractor is required to submit a Cost Breakdown as part of its proposal. When a Cost Breakdown is submitted: a cost analysis shall be performed of the individual cost elements; the Authority shall have a right to audit the contractor's books and records pertinent to such costs; and profit shall be analyzed separately. Costs shall be allowable only to the extent that they are consistent with applicable Federal Cost principles (for commercial firms, Subpart 31.2 of the Federal Acquisition Regulation, 48 CFR Chapter 1). In establishing profit, the Authority shall consider factors such as the complexity and risk of the work involved, the offerorâ€™s or contractor's investment and productivity, 63
the amount of subcontracting, the quality of past performance, and industry profit rates in the area for similar work.
Cost and Price Analysis Techniques A.
General The first step in cost or price analysis is to compare the prices/costs of the bids or proposals with the in-house cost estimate. This analysis alone is generally insufficient for cost analysis; it is merely a guide to assist the Contracting Officer or assigned staff member in determining the extent to which the offeror or contractor understands the Authority's requirements. It is not uncommon for the in-house cost estimate to be overstated or understated, though, as the Authority will generally not know as well as the offerors or contractors what the true cost of an item will be, in light of market conditions. Cost and price analysis can be a voluminous and complex effort, depending on the level of analysis necessary to determine the reasonableness of the price/cost. However, the complexity should be commensurate with the dollar volume of the contract. A wide range of cost and price analysis techniques are available to the Authority. The guidance detailed below is applicable in to ensuring fair and reasonable contract prices for large, complex procurements for contraction projects, professional services, change orders, or noncompetitive contracts.
Price analysis One or more of the following techniques should be used to perform price analysis: 1.
Compare proposed prices received in response to the solicitation.
Compare prior proposed prices and contract prices with current proposed prices for the same or similar items/services.
Apply rough yardsticks (such as dollars per pound, per square foot, or other units) to highlight significant inconsistencies that warrant additional pricing inquiry.
Compare competitive price lists, published market prices of commodities, similar indices and discount or rebate arrangements.
Compare proposed prices with the independent cost estimates.
C. Small Purchases For small purchases, it is generally sufficient to compare competitive quotes received (usually three), to make a comparison with similar, recent procurements at fair and reasonable prices, or to verify that the offered price is an established catalog or market price of a commercial item sold at that 64
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 65 price to the general public. The procurement file shall be documented with the appropriate rationale. For contracts above the Small Purchase ($100,000) limitation, a formal, written cost or price analysis shall be performed.
Competition In competitive procurements, the force of competition is usually adequate to allow the Authority to make a price reasonableness determination based simply on a comparison of the offered prices. This comparison may point out the need for verification of bids (in sealed bid procurements) or negotiations (in the competitive or noncompetitive proposals methods), if prices of the different offerors or contractors vary widely or seem unusually high or low compared to the independent cost estimate.
Prices Set by Law or Regulation and Catalog/Market Prices There are two additional methods of ensuring price reasonableness: if the price is set by law or regulation and if the price offered is a catalog or market price. In the former case, the Authority has no choice but to pay the established rate (e.g., electric utilities). In the latter case, the Contracting Officer or assigned staff member should analyze the offered price in terms of its commerciality. This involves examining any catalog used by the offeror or contractor to ensure that catalog prices are bona fide prices charged to commercial customers. Any discounts offered to commercial customers should be offered to the Authority, however, consideration must be given to any differing terms and conditions of commercial contracts as compared with public contracts. There may be justification for paying more than the catalog or market price if the Authorityâ€™s contracts demand more of the contractor (in terms of services, warranty, etc.) than do commercial customers.
Market Pricing In some cases, there may be no catalog, but the offered price may qualify as a market price, meaning a price paid by buyers and sellers free to bargain. As with a catalog price, a market price should be verified independently before it is accepted as reasonable. The offeror should be asked to provide evidence of recent sales at the market price to the general public or provide a justification for not charging the Authority the same price or better. The volume of sales should be significant compared to the Authorityâ€™s procurement to ensure that commercial sales are sufficient to establish a bona fide catalog or market price. The goal should be to ensure that the Authority does not pay more than other buyers, particularly commercial customers, normally pay for the same item.
How Cost/Price Analysis Applies to Different Procurement Methods A.
Small Purchases When using the Small Purchase method of procurement, price analysis shall be conducted by obtaining price or rate quotes from an adequate number of qualified sources, normally three, and comparing the quotes or rates to prior purchases of a similar nature. These situations are typical of many Authority procurements and will not require application of the cost principles: 65
Sealed Bidding Purchase of supplies, equipment, and construction are typically accomplished using sealed bidding. (For the Authority to receive funding for modernization work, sealed bidding is mandatory for the procurement of construction activities or equipment. TO BE EDITED) The reasonableness of the price is established by a comparison of the Authorityâ€™s independent cost estimate and the competitive bids received. No further price analysis is required (Note: A cost analysis is required when only one bid is received and the Authority decides not to re-bid the work for some reason).
C. Competitive Proposals In most cases, the Authority will use Competitive Proposals method when acquiring professional, consulting, and architect/engineer services. In order to determine the reasonableness of costs under these types of contracts, the Authority must ask the offerors to submit the elements of their costs, i.e., a cost breakdown. As such, the Authority is required to perform a cost analysis and to apply the cost principles in HUD Handbook 2210.18. While a fixed-price contract (i.e., a contract that provides for a price that is not subject to any adjustment as a result of the contractor's cost experience in performing the contract) may be the result of the competitive proposal method of procurement, the Authority should still apply the cost principles to determine cost reasonableness. However, the application of the cost principles to fixed-price contracts does not require the Authority to negotiate complete agreement with the contractor on every individual element of cost in arriving at an agreement on total price. The final price negotiated by the Authority and the contractor on a fixed-price contract reflects agreement only on the total price. Although use of these cost principles is mandatory in performing a cost analysis, the objective is to negotiate total prices that are fair and reasonable, cost and other factors considered. D.
Noncompetitive Proposals If the Authority has justified procurement by noncompetitive proposals under one of the circumstances in 24 CFR 85.36(d)(4)(i), it must request a breakdown of the proposed costs and use cost analysis (i.e., verifying the proposed cost data, the projections of the data, and the evaluation of the specific elements of cost and profit). This is because, in noncompetitive situations, there is no price competition upon which to base the reasonableness of the cost.
E. Contract Modifications If the Authority is negotiating a contract modification (change orders) to any contract (even if the basic contract was awarded competitively) which changes the scope of work previously authorized and impacts the price or estimated cost, it must use the cost analysis and the principles in HUD Handbook 2210.18 to arrive at a reasonable cost. The only exception to this rule is contract modifications that are based on pricing terms established in the contract document (e.g., Unit Prices).
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 67 F. Contract Terminations If the Authority is terminating either a fixed-price or costreimbursement contract for convenience, or a cost-reimbursement contract for default, it must use cost analysis and the cost principles in HUD Handbook 2210.18 to arrive at a termination settlement. The cost principles in FAR 31.205-42 deals specifically with termination costs. G. Cost-reimbursement Contracts In determining reasonable costs under any costreimbursement contract, the Authority must perform a cost analysis and use the principles in HUD Handbook 2210.18. H. Special Circumstances for Construction and Architect/Engineer Contracts. 1.
This category includes all contracts and contract modifications negotiated on the basis of cost for construction management of construction, alteration or repair of buildings, bridges, roads, or other kinds of real property. It also includes architect/engineer contracts related to construction projects. It does not include contracts for equipment, or other kinds of personal property.
2. The cost principles and procedures in HUD Handbook 2210.18 shall be used in the pricing of contracts and contract modifications in this category if cost analysis is performed (i.e., for all architect/engineer contracts and for those rare occasions where construction may be procured using other than sealed bidding). 3.
Although most construction contracts will be awarded using sealed bidding, modifications to such contracts will require application of these cost principles. Because of widely varying factors in construction work such as the nature, size, duration, and location of the construction project, advance agreements as discussed in Appendix 3 of HUD Handbook 2210.18 (for such items as home office overhead, partners' compensation, employment of consultants, and equipment usage costs) can be particularly important in construction and architect/engineer contracts. When appropriate, they serve to express the parties' understanding prior to the start of work and costs being incurred to avoid possible subsequent disputes or disallowance.
If a schedule of predetermined use rates for construction equipment (e.g., industry or Government-sponsored construction and equipment cost guides; or, commercially published schedules of construction and equipment costs) is used to determine direct costs, all costs of equipment that are included in the cost allowances provided by the schedule shall be identified and eliminated from the contractors other direct and indirect costs charged to the contract.
Cost Analysis A.
General Cost Analysis Information 1.
Cost analysis includes the appropriate verification of the cost breakdown submitted, and the use of this information to evaluate the following: specific elements of cost; the necessity for certain costs; the reasonableness of amounts estimated for necessary costs; the reasonableness of allowances for contingencies; the basis used for allocation of indirect costs; the appropriateness of particular indirect costs to the proposed contract; and the reasonableness of the total cost or price. This analysis is vital to the Authority not only in preparing for negotiations for the award of contracts but also for analyzing proposed contract modifications, because the lack of competition in the latter case poses a serious difficulty for the Authority in ensuring that contractors only receive reasonable compensation.
The reader is reminded that the level of detail and complexity of this analysis shall be commensurate with the dollar value and complexity of the contract. Ordinarily, there will be no need for cost analysis in small purchases (price analysis, as described above, is usually sufficient to ascertain price reasonableness). Where cost analysis is required, the analysis may be brief if the contract value is relatively small or the cost elements are straight forward. For example, in a construction change order proposal for $30,000, where the Authorityâ€™s changes to the specifications only result in added labor hours for three skill categories, and the wage rates are at the HUD Prevailing Wages, the Authorityâ€™s cost analysis may be limited to determining the reasonableness of the number of hours proposed. If, however, the change order proposal was for $250,000 and included added material, new subcontracts, and other items, the Authority should evaluate whether the costs proposed are allowable, allocable, and reasonable, using the more detailed techniques described below.
A cost analysis is required when: (a)
The competitive proposals method of contracting is used and the Authority requests cost proposals broken down by element of cost, such as, acquisition of professional, consulting, architect/engineer services;
The Authority is negotiating a contract with a sole source. The Authority must request a complete cost breakdown and use these cost principles to establish a fair and reasonable price or established cost;
After soliciting sealed bids, the Authority receives only one bid in response that differs substantially from the independent estimate. If 68
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 69 the Authority finds that bid unreasonable and elects not to seek further competition, then the Authority may cancel the solicitation and negotiate a contract price with the sole bidder, following the noncompetitive proposals method. In such a case, the Authority must request a cost breakdown of the price and use the cost principles in HUD Handbook 2210.18 to determine price reasonableness; or, 4.
The Authority is negotiating a modification (including change orders) to any contract which changes the scope of work previously authorized and substantially impacts the price or estimated cost, upwards or downwards. The Authority must request a cost breakdown of the contractor's proposed cost. (Note: Modifications that change the work beyond the scope of the contract must be justified as a noncompetitive action per 24 CFR 85.36(d)(4). If none of those conditions applies, the work must be procured competitively.) The only circumstances under which the Authority does not need to conduct a cost analysis when adequate price competition is lacking is if the price can be established on the basis of a catalog or market price of a commercial product sold in substantial quantities to the general public or the price is set by law or regulation.
B. Techniques The Authority should, as appropriate, use the techniques discussed below to perform cost analysis: 1.
Verify the cost and pricing data and evaluate cost estimates, including: (a)
Necessity for and reasonableness of proposed costs, including allowances for contingencies (which are generally unallowable under the cost principles);
Projection of offerors cost trends;
Technical appraisal (e.g., by an engineer) of proposed direct cost elements;
Application of audited or pre-negotiated (e.g., by the Federal Government) indirect cost rates, labor rates, or other factors.
Evaluate the effect of the offerors current practices on future costs.
Compare costs proposed by the offeror with. (a)
Actual costs previously incurred by the same offeror, 69
Previous cost estimates from the offeror or other offerors for the same or similar items;
The methodology to be used by the offeror with the requirements of the solicitation (i.e., do the costs reflect the technical approach proposed?);
The independent cost estimate (or that of an independent architect, engineer, appraiser, etc.); and
(e) Verify that the offerors cost submissions comply with the cost principles in HUD Handbook 2210.18. 4.
In professional service procurements, if adequate price competition is received, the Authority need not perform an extensive analysis of the proposed labor rates. It may be sufficient to compare the rates of the various offerors to determine if any proposal is significantly higher or lower, along with a comparison to the independent cost estimate or other independent source of pricing information to ensure that the rates are reasonable.
C. Sequence of events The first step in cost analysis is to ensure that the contractor has submitted an adequate cost breakdown of its planned expenses in terms of direct labor, direct material, other direct costs (travel costs, subcontracts, etc.), labor overhead (fringe benefits, FICA, FUTA, etc.), material overhead, general and administrative (G&A) expenses (percentage applied for general office expenditures), and profit/fee. If adequate detail is not received, the contractor should be asked to provide such information as is necessary to perform a proper cost analysis. Then the Authority must determine whether the proposed costs meet three tests: allowability, allocability, and reasonableness. Each test is described below. 2.42
Cost Allowablility Cost allowability for profit-making firms shall be determined in accordance with HUD Handbook 2210.18. The Authority may reference its own cost principles that comply with the applicable Federal cost principles. Some unique features of Federal cost principles are the non-allowability of interest expenses, and certain limitations an travel and per them costs. With regard to such unallowable costs, in the construction industry, commercial cost estimating publications provide standard labor and material rates used by the industry. If such a publication is consulted for cost analysis purposes, these published rates alone are insufficient, as they may include unallowable costs (such as interest). For contracts with nonprofit organizations, the cost principles in OMB Circular A122 shall apply, for contracts or agreements with State and local governments, the cost principles in OMB Circular A87 apply.
Cost Allocability 70
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 71
General After costs have been analyzed for allowability, the Contracting Officer must then determine whether they have been properly allocated. A cost is allocable if it is assignable or chargeable to one or more cost objectives in accordance with the relative benefits received and if it is incurred specifically for the contract; benefits both the contract and other work, and can be distributed to both in reasonable proportion to the benefits received; or is necessary to the overall operation of the business, although a direct relationship to any particular cost objective may not be evident. This principle is best illustrated by contrasting direct costs with indirect costs.
B. Direct vs. Indirect Costs Costs are allocable as direct or indirect costs. Similar costs (those incurred for the same purpose, in like circumstances) shall be treated consistently as either direct or indirect costs. A direct cost is any cost that can be identified specifically with a particular final cost objective. A direct cost shall be allocated only to its specific cost objective. An indirect cost is one identified with no specific final cost objective or with more than one final cost objective. Indirect costs are those remaining to be allocated to the several final cost objectives after direct costs have been determined and charged directly to the contract or other work as appropriate. For example, a contractor should not charge the cost of leasing his main office space as a direct cost; this is a general cost of doing business (considered an indirect cost) that should be allocated over both the commercial and public contracts of the contractor, such costs should be part of an indirect cost pool, of which the Authority only pays its fair percentage. C.
Indirect Cost Pools 1.
Indirect costs shall be accumulated into logical groups or pools, with consideration of the reasons for incurring the costs. Each group should be distributed to cost objectives benefiting from the costs in the group. Each indirect cost group shall be distributed to the cost objectives substantially in proportion to the benefits received by the cost objectives. The number and composition of the groups and the method of distribution should not unduly complicate indirect cost allocation where substantially the same results could be achieved through less precise methods.
The contractor's method of distributing indirect costs may require examination when any substantial difference exists between the cost patterns of the work performed under the contract and the contractor's other work, any significant change occurs in the nature of the business, the extent of subcontracting, fixed asset improvement programs, inventories, the volume of sales and production, manufacturing processes, the contractors products, or other relevant circumstances; or indirect cost groups developed for a contractor's primary location are applied to off-site locations. Separate 71
cost groups for costs allocable to off-site locations may be necessary to distribute the contractor costs on the basis of the benefits accruing to the appropriate cost objectives. 3.
The base period for indirect cost allocation is the one in which such costs are incurred and accumulated for distribution to work performed in that period. Normally, the base period is the contractor's fiscal year. A different base period may be appropriate under unusual circumstances; in such cases, an appropriate base period should be agreed to in advance.
Cost Reasonableness Even if proposed costs are both allowable and allocable, they must finally meet the additional test of reasonableness. Any cost is reasonable if in its nature or amount, it does not exceed that which would be incurred by an ordinarily prudent person in the conduct of competitive business in that industry. In determining the reasonableness of a given cost, consideration should be given to the following factors: A.
Requirements imposed by the contract terms and conditions;
Whether the cost is of a type generally recognized as ordinary and necessary for the conduct of the contractor's business or the performance of the contract;
The restraints inherent in, and the requirements imposed by, such factors as generally accepted sound business practices, arms' length bargaining, and Federal/State laws and regulations;
The action that a prudent business manager would take under the circumstances, including general public policy and considering responsibilities to the owners of the business, employees, customers, and the authority;
Significant deviations from the contractor's established practices which may unjustifiably increase the contractors costs; and
F.Any other relevant circumstances. For example, labor rates proposed should be appropriate for the geographic location of the Authority. Rates paid on similar contracts may be useful for comparison purposes. The complete analysis of each offeror's costs with regard to allowability, allocability, and reasonableness shall be documented in a written cost analysis, which shall serve as the basis for the negotiation objectives relating to cost. 2.45
General Cost analysis also requires that the Authority negotiate profit as a separate element of the price. In negotiating profit, the Authority shall consider the following: 1.
The complexity of the work to be performed; 72
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 73
The risk borne by the contractor;
The contractor's investment;
The amount of subcontracting;
The quality of the contractor's record of past performance, including productivity, and,
Industry profit rates in the surrounding geographical areas for similar work.
Risk A basic principle of profit analysis in public contracts is that profit should be used to reward risk. The Contracting Officer may analyze each individual element of cost assessing the risk involved for each of the proposed costs to determine an appropriate overall negotiation objective for profit. Similarly, contractors who have made significant (high risk) capital investments to be able to perform the type of work needed by the Authority or who can demonstrate high productivity or quality in performing Authority contracts should be rewarded with higher negotiated profit rates. In some cases, there may be standard industry profit rates in a particular geographic area for a certain type of work. Such standard rates may be considered in analyzing profit but should not be accepted by the Authority as acceptable without further analysis of the basis for the industry rate compared to the type of work the Authority requires. Section 7. Cancellation of Solicitations
General An Invitation for Bids, Request for Proposals, Request for Qualifications or other solicitation may be cancelled before offers are due if: the Authority no longer requires the supplies, services or construction; the Authority can no longer reasonably expect to fund the procurement; proposed amendments to the solicitation would be of such magnitude that a new solicitation would be desirable; or similar reasons.
A solicitation may be canceled and all bids or proposals that have already been received may be rejected if: the supplies, services, or construction are no longer required; ambiguous or otherwise inadequate specifications were part of the solicitation; the solicitation did not provide for consideration of all factors of significance to the Authority; prices exceed available funds and it would not be appropriate to adjust quantities to come within available funds; there is reason to believe that bids or proposals may not have been independently arrived at in open competition, may have been collusive, or may have been submitted in bad faith; or for good cause of a similar nature when it is in the best interest of the Authority. 73
The reasons for cancellation shall be documented in the procurement file and the reasons for cancellation and/or rejection shall be provided upon request to any offeror solicited.
A notice of cancellation shall be sent to all offerors solicited and, if appropriate, shall explain that they will be given an opportunity to compete on any resolicitation or future procurement of similar items.
If all otherwise acceptable bids or proposals received in response to a solicitation are at unreasonable prices, or only one bid or proposal was received and the price is unreasonable, the Authority shall cancel the solicitation and either: 1. 2.
Re-solicit the solicitation package; or Complete the procurement by using the competitive proposals method, following the requirements of Chapter 2, Section 4, Competitive Proposals (when more than one otherwise acceptable bid has been received), or by using the noncompetitive proposals method and following the requirements of Chapter 2, Section 5, Noncompetitive Proposals (when only one bid is received at an unreasonable price); provided, that the Contracting Officer determines in writing that such action is appropriate, all bidders are informed of the Authority’s intent to negotiate, and each responsible bidder is given a reasonable opportunity to negotiate. Section 8. Cooperative Purchasing
General The Authority may enter into State of California and local intergovernmental agreements to purchase or use common goods and services. The decision to use an intergovernmental agreement or conduct a direct procurement shall be based on economy and efficiency. Often these contracts offer substantial discounts over what the Authority would be forced to pay if it purchased the items on its own. Use of such agreements greatly simplifies and speeds up the procurement process since Authority does not have to develop specifications or issue solicitations. If used, the intergovernmental agreement shall stipulate who is authorized to purchase on behalf of the participating parties and shall specify inspection, acceptance, termination, payment, and other relevant terms and conditions.
HUD Regulations A.
General HUD's principal regulation governing the Authority’s procurement (24 CFR 85.36) only addresses intergovernmental agreements in passing. 24 CFR 85.36(b)(5) states, “To foster greater economy and efficiency, grantees and subgrantees are encouraged to enter into State and local intergovernmental agreements for procurement of common goods and services.” While the regulation allows and encourages the use of these agreements, it does not 74
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 75 prescribe any particular requirements for them. The regulation is specific, however, in its reference to "State and local intergovernmental agreements." Any proposed agreement should be with a State or local (e.g., city, county,) governmental entity. The term governmental agency also includes other Housing Authorities. Further, some Federal agencies (e.g., Department of Energy) are authorized be law to enter into intergovernmental agreements with non-Federal agencies/organizations such as the Authority. Any proposed “agreement” with a non-governmental entity (e.g., nonprofit organization, commercial firm) should be considered a procurement contract and must be entered into competitively in accordance with 24 CFR 85.36(c). B.
Common Items Furthermore, the regulation appears to limit the purpose of agreements to the “procurement and use of common goods and services.” In the case of “procurement”, the State or locality does the procuring (i.e., enters into contracts with vendors). Then, under an agreement, the Authority may purchase goods or services covered by the contracts at the prices specified in them. The purchases might be made directly from the vendor or indirectly from the governmental entity. Examples of agreements for "procurement" include purchasing computer hardware from a State supply contract, and buying gasoline at the City’s pumps, at the City’s prices. In the case of "use," the Authority and the State or local government agrees to share the resources of the latter in exchange for monetary compensation. An example of "use" is the Authority paying the City for the direct labor cost of additional on-duty police patrols at the Authority’s developments.
Agreement vs. Procurement The regulation refers to the "procurement and use of common goods and services" which are not of a routine nature (e.g., a Authority enters into an agreement with the City to "use" the services of a City employee to provide consulting in drug abuse prevention strategies). In deciding whether it is appropriate for the Authority to obtain services through an agreement rather than a procurement contract, the nature of the required services will be a determining factor. If the services required by the Authority to be provided by a State or local government are part of the normal duties and responsibilities of the government entity's staff, it is permissible for the Authority to "share the services and cost of the staff under an agreement. If, however, the required services are outside of the normal duties and responsibilities of the State or local government's staff, or outside of the normal realm of services provided by the governmental entity (i.e., the entity is serving as a consultant to the Authority in a specialized technical area and would have to hire or otherwise obtain outside expertise), then the State or local government should be considered just another potential contracting source. In that case, the Authority’s requirement would have to be met through the competitive procurement process. 75
Clauses Agreements are not required to, and generally should not contain the contract clauses mandated by 24 CFR 85.36 or the form HUD-5370, General Conditions of the Contract for Construction (Exhibit 14). In fact, the inclusion of those clauses may be completely inappropriate, possibly illegal, and probably unenforceable. Agreements may contain remedies for the violation of their terms by either party. Unlike contracts, however, either party upon reasonable notice to the other may dissolve the contract.
Economy and Competition 1. Inter-agency agreements may be made for reasons of economy and efficiency in such areas as supplemental fire and police service, joint use of warehouse facilities, lease or loan of equipment, provision of personnel resources, use of product testing and inspection facilities, or similar purposes. Other agencies may have staffing or facilities of such capacity that they are able to accommodate the Authorityâ€™s needs at a reasonable cost. 2.
The Authority must ensure that any supplies, services, or construction obtained under other agencies' contracts are purchased in accordance with the terms and conditions of those contracts. For example, some State agencies allow direct placement of purchase or delivery orders with the Contractor, but in other cases, the Authority must go to the State government first for approval. Cooperative purchasing arrangements should be used for economy and efficiency. They shall not be used to avoid competition. The Authority should evaluate the cost and availability of needed items if they were to be purchased on the open market as compared with the cost of relying on another governmental unit's contract or facility.
Content of Agreements A.
General Inter-agency agreements are generally less formal documents than procurement contracts; however, while the two types of instruments differ in significant ways, they have some similarities. Agreements, like contracts, should: be in writing, specify the goods or services to be obtained and the method and amount of payment for those goods or services; state the length of the agreement; and, set forth the responsibilities of each party to the agreement. They may be less detailed in their description of those items than a contract would be.
B. Content of Agreement agreements:
The following areas should be included in any such
Identification of the parties,
Effective date of agreement,
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 77 3.
Any prohibition on displacement of public employees,
Basic purpose of the agreement, Procedures for providing lists of needed items,
Description of items to be purchased,
Identification of lead party for procurement,
Rules to be followed in procurement (e.g., State procurement code),
10. Type of contract (definite or indefinite quantity, etc.), 11. Warranty terms, 12. Any fees to be paid to lead party, 13. Procedures for resolving disputes with contractors, 14. Procedures for resolving disputes between the parties, 15. Any provision for meetings on specification issues, 16. Non-exclusivity clause (right to conduct separate procurements, notwithstanding the existence of a cooperative purchasing agreement), and 17. Authorized signatures and titles.
Section 9. Contractor Wage Rates 2.51
Construction Contracts A.
General In addition to the other requirements in construction contracts, workers including preapprentices, apprentices or trainees employed by Authority, Resident Management Corporations or other contractors under HUD's "Step-Up" or other similar initiatives must be paid wages in accordance with a wage determination: 1) issued pursuant to the Davis-Bacon Act by the Department of Labor, or 2) in the case of non-routine maintenance eligible for Comprehensive Grant Program or HOPE VI Program funding, as determined by HUD. The Authority must request wage rates (Exhibit 20, Request for Wage Rate Determination) from the HUD Regional Labor Relations staff at least 45 days before issuing a solicitation and must 77
incorporate the wage rates in the solicitation without modification. The required clauses implementing Davis-Bacon and HUD-determined wage rates are included on the Form HUD-5370, General Conditions of the Contract for Construction (Exhibit14). B.
Payment The contractor is responsible for paying not less than the applicable wage rates to all employees engaged in work under the contract and ensuring that any subcontractors also pay not less than the applicable wage rates.
Reporting The contractor shall submit a certified payroll report and compliance statement (Exhibit 21, Certified Payroll and Compliance Statement) to the Authority each week during the contract period; from execution of the contract to contract completion and acceptance by the Authority. A separate payroll report shall be submitted for the contractor and each subcontractor. The contractor's report may be submitted on the Payroll Form WH-347 (Exhibit 22, Payroll Form), that includes on its reverse side the required Statement of Compliance. The contractor may substitute other forms including computer-generated forms, instead of the Payroll Form WH-347, provided that all of the required information is included.
Monitoring The Authority is responsible for reviewing the contractor's reports to ensure that the correct wage rates are being paid and for resolving any discrepancies. Refer to the Labor Standards Handbook 1344.1 REV-1 for guidance. The Authority shall retain all payroll reports and certifications for three years from the date of contract completion and acceptance by the Authority.
2.52 Technical/Maintenance Wage Rates Title 42, U.S. Code, Section 1437j (also referred to as Section 12 of the U.S. Housing Act of 1937, as amended), requires that wages prevailing in the locality, as determined or adopted by HUD, shall be paid to: A.
All architects, technical engineers, draftsmen, and technicians employed in development,
All maintenance laborers and mechanics employed in the operation of the project. Thus, in addition to non-routine maintenance contracts referred to in paragraph 2.51 above, contracts for routine maintenance are subject to HUD-determined wage rates. HUD should be consulted for appropriate wage-related clauses to be included in routine maintenance contracts.
Preapprentices, apprentices or trainees may be employed by the Authority, RMCs or other contractors on work subject to HUD-determined wage rates and may be compensated at less than the prevailing wage rate for their craft or work classification provided that they are registered in a job training program(s) which has received the prior approval of the HUD Field Director of Labor Relations.
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 79 Should the Authority wish to discuss the development of such a program, it must contact HUD Labor Relations Staff for assistance.
CHAPTER 3. CONTRACTOR QUALIFICATIONS AND DUTIES 3.1
Contractor Responsibility A.
General Delivery of quality workmanship and services by contractors is a critical Authority responsibility. The Authority’s review of contractors is essential in ensuring that only responsible contractors receive Authority contracts. It is to the Authority’s advantage to carefully assess the contractor’s responsibility before awarding a contract. Finding out after contract award that the contractor is not responsible can be very costly to the Authority, and, ultimately to the residents being served. The evaluation of a contractor's ability to perform a contract is known as determining contractor responsibility. The Authority shall make awards only to responsible contractors possessing the ability to perform successful1y under the terms and conditions of a proposed contract. Consideration shall be given to such matters as contractor integrity, compliance with public policy, record of past performance, and financial and technical resources. Contracts shall not be awarded to any contractor whose previous business and/or performance indicate that it was not responsible. If the Authority is familiar with the contractor and considers it to be responsible, then no formal analysis required; however, if the Authority is uncertain as to the Contractors present responsibility and performance, a further review may be warranted to include an on-site survey and contacts with the contractor's clients, if necessary.
Contractor's ability to Perform The award of a contract to an offeror shall not be made solely on the basis of the lowest evaluated price without considering the firm's ability to perform the required work. Some of the specific factors to consider include (1) whether the contractor performed satisfactorily on other Authority contracts, (2) is the contractor suspended or debarred from Federal contracts, and (3) have other Housing Authorities had satisfactory performance from the contractor. Award without considering the contractors capacity to perform may result in contractor default, late deliveries, or other unsatisfactory performance, with the result that the Authority incurs additional procurement or administrative costs, and acceptable supplies or services may not be furnished within the time required. Such awards are also unfair to other offerors who are capable of satisfactory performance, and tend to discourage them from submitting bids or proposals on future procurements. In order to have reliable data on contractors, the Authority 79
is encouraged to keep records of and inquire about each contractors performance on Authority developments to determine if the contractor's performance was acceptable and if future work should be awarded to such a contractor. The record should include but should not be limited to data on timeliness of delivery/completion, quality of work, compliance with the terms and conditions of contract including wage rate requirements, affirmative action program, etc. C.
Non-responsible contractors A determination of non-responsibility shall be made by the Contracting Officer if, after a thorough pre-award survey, the information obtained does not support a finding that the prospective contractor is responsible. A pre-award survey may entail an on-site inspection of the offeror's facilities, including a review of financial statements, record keeping, production capacity, or similar factors that impact on the ability to perform the contract. Recent unsatisfactory performance regarding either quality or timeliness of delivery is an example of a problem which the Contracting Officer shall consider and resolve as to its impact on the current procurement prior to making an affirmative determination of responsibility. Any determination of non-responsibility shall be included in the official contract file. Bidders or offerors who are found to be non-responsible shall be informed of the reasons for such finding.
Previous Participation In addition to the Authorityâ€™s determination of responsibility, HUD conducts its own review of contractors because HUD may have information which may not be readily available to the Authority. For example, if a contractor has performed poorly, HUD may temporarily suspend the contractor through the issuance of a Limited Denial of Participation (LDP) as described in paragraph 3.3 below. This additional review does not relieve the Authority of its obligation to make its own determination.
Suspension and Debarment A.
General The Authority shall not make award to any contractor or individual who has been suspended or debarred and whose name appears on the U. S. General Services Administration List as described in paragraph D. below. The Authority has access to the listing on the Internet as described below. Each procurement file should indicate that the List was checked and its date.
B. Debarment Debarment by HUD is an exclusion from participation in all Federal programs (including Authority procurements) for a reasonable, specified period of time commensurate with the seriousness of a violation of or failure to perform on other contracts. Such action is taken pending the elimination of the circumstances for which debarment was imposed. Debarment may be imposed for violation of contract clauses, including equal employment opportunity provision, acceptance of contingent fees, or other serious contract violations. The Secretary of Labor may, 80
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 81 independently of HUD, debar a contractor based on violations of the labor standards. C.
Suspension Suspension means a disqualification from all HUD-related programs for a temporary period of time because of adequate evidence that the contractor engaged in criminal, fraudulent, or seriously improper conduct. A contractor is suspended pending investigation and appropriate action by HUD. All suspensions are for a temporary period pending the completion of an investigation and such legal proceedings as may ensue.
Listing - Online Suspension and debarment result in the listing of the subject individual and firm on the U.S. General Services Administration's (GSA) Lists of Parties Excluded from Federal Procurement and Non-procurement Programs. Those listed are ineligible for participation in Federal or federally assisted contracts (including Authority procurements) for the life of the sanction period. The listing may be accessed by personal computer on the internet at http://www.arnet.gov (List of Parties Excluded from Federal Procurement and Nonprocurement Programs). Only HUD or other Federal agencies (such as the Department of Labor, for violations of Secretary of Labor regulations) may take action to suspend or debar a contractor. Additional information about this process is found in HUD regulations at 24 CFR Part 24.
E.Subcontractors The contractor is responsible for determining that potential subcontractors are not an the Lists of Parties Excluded from Federal Procurement or Non-procurement Programs. F.
HUD and Authority Roles The Authorityâ€™s role in debarment and suspension actions is an important one. The Authority should make recommendations to HUD regarding suspensions and debarment and provide evidence involving serious complaints, non-responsibility, and other violations and failures to the HUD Field Office for review. When the Authority takes a proactive approach in these cases, it is protecting not only itself but also other Housing Authorities from nonresponsible contractors. Ultimately, this will save Authority time, money and promote quality workmanship in Authority contracts. The HUD Field Office, if it finds the evidence adequate, substantial, or persuasive, will forward the matter for the appropriate action by HUD Headquarter Office. The HUD Field Office may also, in such cases, take Limited Denial of Participation action.
Limited Denial of Participation A.
HUD Regulations Limited Denial Participation (LDP) is an administrative sanction which involves denial of participation in HUD programs of a contractor on a 81
temporary basis, as provided in 24 CFR 24.700 - 24.713. A HUD Regional Administrator or Field Office Manager may invoke it. A LDP may be imposed for reasons such as irregularities in a contractor's past performance, failure to honor contractual obligations, deficiencies in ongoing construction projects, false certifications or false statements, or any cause for debarment prescribed in 24 CFR 24.305. These restrictions are narrower in scope and effect than suspension and debarment. As with suspension and debarment, the Authority is responsible for referring cases to the HUD Field Office for review and possible action. B.
Effect On Contractor When a LDP is issued, the subject contractor becomes ineligible for participation in HUD programs in which the violation occurred. LDPâ€™s are effective within the program under which the cause arose. A LDP applies only in the geographic jurisdiction of the office imposing it. Such orders remain in effect until the causes are eliminated and the action is withdrawn, or until the life of the sanction has run out (up to 12 months). Before proceeding with any of the above actions, the HUD Field Office and its counsel will consult with the Authority. Action to exclude or disqualify contractors from participation in HUD-related programs must be based upon all available relevant facts. These actions must be used for the purpose of protecting the public and not for punitive purposes. To assure the public of benefits from the competition of interested contractors, these measures will not be instituted for any time longer than deemed necessary, and shall preclude awards only for the duration of the period of LDP, debarment, or suspension.
Qualified Bidders Lists A.
General Prospective bidders or offerors may be prequalified for particular types of supplies, services, and construction activities. Distribution of solicitations shall not be limited to prequalified contractors, nor may a prospective contractor be denied award simply because such contractor was not prequalified. In addition, the fact that a prospective contractor has been prequalified does not necessarily represent a finding of responsibility. Prequalification of offerors based on past experience restricts competition and does not guarantee that qualified contractors will participate, because past performance is not a certain indication of present ability.
Procedures A qualified bidder's list (QBL) should only be established if the Authority has made a determination that it is in the best interest of the Authority. A QBL is a list of bidders who have had their products examined and tested and who have satisfied all applicable qualification requirements for that product. For example, if an item being purchased requires extensive testing and evaluation, a QBL could simplify the process. Since such lists can have a tendency to limit competition, every effort should be made to mitigate any adverse effects on the Authority and to assure that the lists are as broad as possible, including minorities, women and residents as prospective bidders. The Authority should publicize any planned prequalification requirements or QBLs by public notice in the same 82
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 83 manner as a solicitation. All interested parties should be allowed to submit requests for approval. Qualified products lists (QPLs) may be established in a similar manner for specified products rather than contractors, to ensure that only approved supplies are used in Authority procurements. A QPL is a list of products which have been examined, tested, and have satisfied all applicable qualification requirements.
CHAPTER 4. TYPES OF CONTRACTS AND CLAUSES, AND CONTRACT ADMINISTRATION Section 1. Pricing Arrangements and Contract Options 4.1 Contract Types A.
General One of the most important factors in successful procurement is the selection of an appropriate contract type. The contract type sets the pricing arrangement and incentive structure for the contractor and guides the performance of the contract. Therefore, the contract type should give the contractor an incentive to perform efficiently the required work. The Contracting Officer is responsible for deciding which contract type to use; however, if the competitive or noncompetitive proposals method of procurement is used, the contract type is a matter for negotiation with the contractor. In most cases, the Authority should rely on firm fixed-price contracts, because this pricing arrangement poses the least risk to the Authority, as described below. Regardless of the procurement method, each solicitation should state clearly what contract type would be used. The selection of a contract type also has a bearing on the amount of competition that will be received. The Authority should select the contract type that will promote maximum competition, consistent with the adequacy of the Authorityâ€™s description of its needs. The most crucial consideration in selecting the contract type is the amount of risk shared by the parties. In a fixed price contract, the contractor bears the risk of performing the work at a cost greater than anticipated. In a cost reimbursement contract, if the work is not completed by the contractor devoting his best efforts, the Authority bears the risk and must pay the contractor more money if the work is to be completed.
Basic Categories There are two basic categories of contract types: fixed price and cost reimbursement.
1. Under a fixed price contract, the contractor must deliver the product or perform the service for the price agreed on, regardless of the cost incurred. 83
2. In a cost reimbursement contract, the contractor agrees to expend its best efforts to achieve the specified requirement, within the estimated amount established in the contract. If the contract is not fully performed at the time the contractor expends the funds, then the contractor has no obligation for further performance unless the contract is modified to increase the funds. C.
Factors Influencing Contract Type
1. The most important factor influencing the choice of a contract type is the description of what the Authority is buying. Requirements that are complex and unique to the Authority, which have a likelihood of changes in the technical direction and performance uncertainties, normally place greater risk on the Authority. If a need is of particular urgency, it may also require the Authority to assume a greater proportion of risk, or the contract should contain incentives to ensure timely performance. Contracts extending over a relatively long period of time may require a contract type that allows economic price adjustment. Market conditions may also affect the type of contract selected, as unstable conditions may require the Authority to assume more risk than in a stable market situation. 2. It is possible to use performance, delivery, or cost incentives to make the contract type spur the contractor to achieve realistic, measurable targets as set forth in the specification, purchase description, or statement of work Performance incentives should be considered when the Authority desires improvement in performance and performance tests are set out to determine the degree of achieving the desired results. Performance incentives are used to increase the efficiency of contractor performance. For example, there could be a monetary bonus for early delivery. As with all contracts, Authority technical personnel must continuously monitor contract performance. Cost incentives are used to motivate the contractor to manage costs effectively, and should not be considered when there are expected to be a large number of major technical changes in the project. 3.
The preferred contract type for most Authority procurements is the firm fixed-price method. This approach provides for maximum incentive for the contractor to manage costs efficiently, and places less burden on the Authority in administering the contract. There are, however, some inherent risks in using fixed price contracts. If the Authority has not described its needs in accurate and precise terms, resulting in ambiguous specifications, contractors may factor in contingencies in their offers to cover such uncertainties, thus producing unrealistic price proposals. If the Authorityâ€™s needs are not fully defined when the solicitation is issued, there may be a continual redefining of needs during contract performance, which is ill-suited to fixed price contracting. These problems can be avoided by the Authority emphasizing to the architect/engineer and/or other consultants the need to fully and accurately define its needs.
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 85 D. Specific Contract types Each solicitation and contract shall contain a clause identifying the specific contract type used. In addition, the Contracting Officer should prepare a written justification if a cost-reimbursement type of contract is selected. The justification should be included in the contract file, outlining the reasons why the preferred fixed price type is not feasible. This is necessary to document the reasons why the Authority is using a contract type which may be more costly to the Authority than the fixed price management. E
Other Considerations If the sealed bidding method is used, only a firm fixed price or fixed price with economic price adjustment contract type may be used. When contracting by competitive or noncompetitive proposals, any other contract type is permissible. In special cases, a combination of contract types may be advantageous; however, it is essential that their application be clearly defined and that the means for administering the combination type contract is readily available. Other contract types are available in addition to those described above, but the Authority should avoid selecting a contract type that is too complicated for its needs.
F. Prohibited Contract Types The following contract types are prohibited by the common rule on grantee procurement [24 CFR 85.36(f)(4)]: 1. Cost Plus a Percentage of Cost This type of contract is prohibited, because it would bind the Authority to pay costs to be incurred in the future but undetermined at the time the contract is awarded, plus a commission based on the percentage of such future costs. In such a contract, the contractor's profit increases in proportion to its costs incurred in the performance of the contract, which provides no incentive for controlling costs. 2. Percentage of construction Under this method, cost for individual construction related services is determined by applying a percentage of actual construction costs as a fee, such as architect/engineer contract in which the fee is determined based on the total construction cost. Such an arrangement encourages the contractor to design an overly expensive construction project. 4.2
General In many cases, the Authority may need to acquire supplies, services, or construction which the Authority knows will be required for more than just the Authorityâ€™s immediate needs. One method of obtaining firm commitments from contractors for additional quantities or services is to include an option clause in the contract when purchasing the Authorityâ€™s initial needs. The advantage of awarding a contract with options is that it gives the Authority a continued source of supply under contract, at known prices. 85
Definition An option is a unilateral right of the Authority to order additional supplies, services, or construction at the prices specified in the contract. A clause that allows an option to be exercised only at the contractorâ€™s discretion is not an option; instead, this is tantamount to a new procurement, and such clauses shall not be used.
1. An option may only be exercised if the basic contract stated a price for the supplies, services, or construction. An unpriced option may be considered a new procurement. In the case of a cost reimbursement contract, an estimated cost for the option periods should be negotiated and included in the basic award. 2. A further limitation is that options may not continue indefinitely; there must be a finite period for the contract, including all options, and a specific limit on the total quantity to be purchased by option. HUD regulations place a two-year limit on service contracts, unless HUD approval is obtained. 3. Any contract containing options most specify the time by which the Authority must exercise the options. The Authority should allow itself enough time to ensure that funds will be available and a management decision made as to the need for the option quantities. Nevertheless, the Authority does not have an indefinite amount of time to exercise an option, because contractors should not be left in doubt for an extended period of time regarding whether their contract options will be exercised. In order to avoid confusion and/or disputes, the Authority should specify in the contract how many days before contract expiration the remaining option may be exercised. 4. Since options establish a long-term relationship with a single supplier, they should be used with caution and should not be exercised unless there is a clear and obvious reason. For example, the contract is for a very large quantity and substantially lower prices are available compared to smaller quantity purchases. In this case, use of options is clearly advantageous. Alternatively, if prices are expected to be falling or very competitive for an item widely sold in the commercial market, it may be to the Authorityâ€™s advantage not to include many options in contracts, since better prices may be obtainable by conducting a new procurement for future needs. If the Authority decides to include options in a solicitation, the options should be evaluated as part of the contract award, to ensure that the evaluation takes into account the total eventual cost of the entire contract. D.
Exercising Options Before exercising an option, the Authority should document the contract file with a written determination, which should include the following: 1.
2. Statement as to continuing need for the item; 86
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3. Indication as to whether the option was included and evaluated as part of the basic contract; 4. Review of market prices to indicate whether the option is still economical for the Authority, and 5. Any other factors (such as time or disruption to the Authorityâ€™s operations) supporting the Authorityâ€™s decision to exercise the option. E.
Clauses Sample option clauses are provided below. OPTION TO EXTEND THE TERM OF THE CONTRACT The Housing Authority may extend the term of this contract for the period specified herein, by written notice to the contractor by 10 days before the expiration date of this contract. The total duration of this contract, including all options, shall not exceed _______ (years) (months) (days). OPTION FOR ADDITIONAL QUANTITIES The Housing Authority may order additional quantities as specified in this contract at the prices specified for the options. The Housing Authority may exercise the options by written notice to the contractor by ______ (date). Delivery of optional items shall continue at the same rate that like items called for under the contract, unless the parties otherwise agree. All option should be pre-priced unless there is a structured and/or regulated by law. Section 2. Provisions and Clauses
Solicitation Provisions Solicitation provisions are designed to provide information to prospective contractors about the solicitation stage of the procurement process. Terms and conditions, which apply to the contract upon award, are referred to as contract clauses. The Forms HUD-5369, Instructions to Bidders for Contracts (Exhibit 8, form HUD-5369, Instructions to Bidders for Contracts) and HUD-5369-A, Representations, Certifications, and Other Statements of Bidders (Exhibit 23, form HUD-5369-A, Representations, Certifications, and Other Statements of Bidders) contain provisions to be included in all solicitations for construction work. For non-construction procurements, forms HUD-5369-B, Instructions to Offerors (Exhibit 24, form HUD-5369B, Instructions to Offerors) and form HUD-5369-C, Certifications and Representations of Offerors (Exhibit 25, form HUD-5369-C, Certifications and Representations of Offerors) must be used. It may be useful to request that bidders provide samples of their products for a supply contract. In such a case, a provision similar to the following should be included in the invitation for bids: 87
BID SAMPLES Samples of items, when required shall be furnished free of expense prior to the opening of bids. Samples received from the successful bidder will not be returned. Samples received from unsuccessful bidders, upon request, will be returned at the bidders' expense. 4.5
HUD General Conditions A.
There are several clauses required by 24 CFR 85.36(I) that are required to be included in all Authority contracts. Form HUD-5370, General Conditions of the Contract for Construction (Exhibit 14, form HUD-5370, General Conditions of the Contract for Construction) contains clauses to be included in all contracts for construction work. Form HUD-5370-C, General Contract Conditions, NonConstruction (Exhibit 26, Form HUD-5370-C, General Contract Conditions, NonConstruction) includes the clauses necessary for non-construction contracts. Architect/engineer contract clauses are included in Form HUD-51915, Standard Form of Agreement Between Owner and Design Professional (Exhibit 19, form HUD-51915, Standard Form of Agreement Between Owner and Design Professional, Index). Use of these forms is mandatory for the Authority.
Other clauses Other clauses that should be included in Authority contracts in specific circumstances, as needed: 1. Termination for convenience, 2. Termination for default, 3. Equal Employment Opportunity, 4. AntiKickback Act, 5. DavisBacon Act, 6. Contract Work Hours and Safety Standards Act, reporting requirements, 7. Patent rights, 8. Rights in data, 9. Examination and retention of records for three years after closeout, 10. Clean air and water, 11. Energy efficiency standards, 88
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12. Bid protests and contract claims, and 13. Payment of funds to influence certain Federal transactions.
CHAPTER 5. CONTRACT ADMINISTRATION 5.1
General Sometimes, contract administration is the most ignored area in procurement. The urgency of making the contract award often makes post-award issues seem of little concern. Nevertheless, without effective contract administration and monitoring of contractor performance, the efforts made in awarding the contractor may be wasted. The amount of oversight and monitoring will vary with the complexity of the work. Relatively simple contracts may only require limited monitoring. The following procedures are designed to help ensure that proper attention is given to contract administration to provide the Authority with the greatest value for its contract dollar, particularly for more complex purchases.
Planning for Contract Administration Effective management of contracts requires proper planning of both Authority and contractor activities to achieve meaningful results. Relatively simple contracts (e.g., the purchase of office supplies) will not require any significant planning. For more complex contracts, however, it is advisable to develop a formal, written contract administration plan before contract award. This document spells out the respective duties of the various Authority offices and departments that would be involved and provides procedures for regular status reports and progress meetings.
Post-Award Conference and Notice to Proceed A. Following the award of a construction contract, a Pre-Construction Conference (Exhibit 27, Sample Pre-Construction Conference) should be held for discussing all construction and contract administration related issues. Then, a Notice to Proceed (Exhibit 28, Sample Notice to Proceed Letter) should be issued by the Authority to the contractor stating the starting and completion dates and typical contract related information. Both documents are maintained in the contract file for reference. B. For large non-construction contracts, it is desirable to meet with the contractor soon after contract to ensure both parties understand what is expected of them inn the performance of the contract.
C. Any changes that are necessary after contract award must be reflected in a formal contract modification to the contract. Otherwise, the contractor will be held to 89
the strict wording of the contract, rather than any oral agreements or instructions from Authority staff. 5.4
Receipt of Items A.
General The Authority shall establish a system for ensuring that the items required by contract are delivered to an appropriate location where the Authority can ensure that receipt of contracted items is properly handled and documented. For example, a contract for supplies should indicate where (what room or other location, such as a warehouse or loading dock) delivery should be made, and how acknowledgement of receipt will be recorded and provided to the contractor.
Form The Authority should use a standard receiving report to document receipt, inspection, and acceptance (Exhibit 29, Sample Receipt Documentation). The form should contain, as a minimum, the following information: Purchase Order Number, Item Number, Description of Item, date of receipt, place received, person receiving items (printed name, signature, and date), date of Inspection, person inspecting items, if different then person receiving items (printed name, signature, and date), and whether the items were or were not accepted. If not accepted, reasons for rejection.
Monitoring and Inspections A.
1. Receiving quality goods and services has a material impact on the Authorityâ€™s operations as well as the lives of the residents. Failing to ensure receipt of the best value for the funds spent costs the Authority additional money, lost staff time and delayed delivery of the completed product. Consequently, it is a critical duty of the Authority to ensure that it receives quality products. In order to achieve this objective, the Authority must first ensure that it contracts with highly qualified architect/engineer, consultant, and construction contractor firms to design and build proposed contract work. The Authority must then take an active role in holding these firms accountable for the delivery of the completed or project. The Authority must further hold the firms accountable for not only carrying out the necessary work, but equally as important, ensuring that quality of the work performed meets industry standards, regulations, codes and are consistent with the plans and specifications and/or terms of the contract. If the Authority does experience poor performance, it should consider that performance when awarding future contracts. It should also make recommendations to HUD, when appropriate, regarding suspensions and debarments and provide evidence involving serious complaints, non-responsibility, and other violations and failures to the HUD Field Office for review. 2. The Authority shall keep an effective control on all unfilled orders and available obligated funds by maintaining suspense files until deliveries are made. Payment for supplies and services is made only after the delivered item is inspected and found to be 90
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 91 satisfactory. This helps to eliminate disputes that arise when shortages or damages are not discovered until after the payment has been made. 3. While there are numerous promises made and duties assumed by a contractor under the wide variety of Authority contracts presently being used, the heart of performance problems is in either the technical requirements of the contract or in the time for performance. Much of the difficulty in the technical area is involved with the interpretation of specifications. There is no assurance that the articles delivered under a contract will meet those specifications. Whether or not the Authority inspects, accepts, rejects, or takes some other actions with respect to work performed will probability seriously affect its rights against the contractor. Therefore, sound monitoring and inspection is essential to the end product. Monitoring the contractor's performance against the allotted required time is also an important part of contract administration. 4.In addition, for construction and maintenance contracts, the Authority is responsible for monitoring compliance with Labor Standards requirements and HUD Section 3 requirements. B.
In order to ascertain that the Authority is getting what it is paying for, it shall inspect the contractors work, and enforce compliance with the contract specifications. This is especially important since the rules of law and the contract language may, in certain instances, relieve the contractor of liability for defects if the Authority did not require correction before final acceptance. The Authority is not obligated to pay for or accept goods or construction until it has had an opportunity to inspect them. Such inspection, and any rejection resulting therefrom, shall be within a reasonable time after delivery or completion of the activity. If the Authority fails to require the contractor to correct a particular defect because of failure to inspect, when such defect could have been found by reasonable inspection, the Authority may have waived its rights to future rejection based on that particular defect.
2. Acceptance may be assumed to have occurred, with or without concurrence by the Authority, after a reasonable time to inspect the goods or construction has passed, and the Authority has failed to make any notification to the contractor that the goods or construction do not conform to the contract requirements. The Authority must pay at the contract rate for any goods and construction accepted. C.
Construction Contracts 1.
The Authority shall meet with its architect/engineer and contractors on a regular basis to discuss work progress, any problems or deficiencies noted during inspection visits, overdue reports and the construction schedule. The Authority should prepare a written record of the items discussed at each meeting and place a copy in its construction file. The quality of the inspection of the work is critical and the Authority must assure that either the architect/engineer or the designated staff person responsible for inspection is fully qualified and performs the inspections frequently and thoroughly.
Upon being notified by its architect/engineer, designated staff person or HUD of any construction deficiencies, the Authority shall promptly notify the contractor in writing of the deficiencies observed. This notification also shall advise the contractor that failure to make timely corrections would be an infraction of the contract and that the contractor is liable for any resulting losses or delays.
The Authority is also responsible for performing required warranty inspections, including the 11-month warranty inspection required by the Comprehensive Grant Program and HOPE VI Program, during the warranty period and promptly notifying the contractor in writing to remedy any defects relating to manufacturer or contractor warranties on equipment and systems and contractor warranties on materials and workmanship. The contractor is responsible to pay for any damage to other work resulting from such defects.
Information regarding contract administration for Authority contracts is included in the Authorityâ€™s Contract Administration Procedures and in HUD Handbook 7417.1, Chapter 12.
Progress Payments Progress Payments shall be made as follows: a.
The Authority shall require the contractor to prepare a Construction Progress Schedule for each project immediately after the Authorityâ€™s issuance of the Notice to Proceed. The Authority or in some cases its architect/engineer under contract shall review the schedule to determine that the scheduled dates and amount of work to be completed are reasonable and consistent with the contract. In the case where there is an architect/engineer, if the schedule is acceptable, the architect/engineer shall sign the schedule and forward it to the Authority for approval. Upon approval by the Authority, the approved construction progress schedule shall be returned to the contractor.
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 93 b.
The Authority shall require the contractor to prepare a form HUD51000, Schedule of Amounts for Contract Payments (Exhibit 30, also known as a Project Cost Breakdown immediately after execution of the contract (If a Project Cost Breakdown is used, the information required should be similar to that required by form HUD-51000). The Authority and architect/engineer (if applicable) shall review the amounts of payments for various activities against the Construction Progress Schedule to determine that the scheduled work to be completed by the specified dates and the amount of payment for such work are reasonable. If acceptable, the Authority shall approve and return the Project Cost Breakdown to the contractor.
When a progress payment is necessary, the contractor shall submit their payment request on form HUD-51001, Periodic Estimate for Partial Payment (Exhibit 31, form HUD-51001, Periodic Estimate for Partial Payment). The request shall be accompanied by the contractor's written designation of a certifying officer. In addition, the contractor shall submit the following HUD forms or other appropriate forms, if applicable, with each periodical estimate for partial payment: form HUD-51002, Schedule of Change Orders (Exhibit 32, form HUD-51002, Schedule of Change Orders); Form HUD-51003, Schedule of Materials Stored (Exhibit 33, form HUD-51003, Schedule of Materials Stored); and form HUD-51004, Summary of Materials Stored (Exhibit 34, form HUD51004, Summary of Materials Stored). The information shall be realistic and consistent with the information provided by the contractor on their Authority approved Project Cost Breakdown.
The Authority is responsible for making progress payments to the contractor based on the Authority approved Project Cost Breakdown. Generally, progress payments for acceptable work and materials delivered and stored on the site are made at 30-day intervals.
The Authority shall review each contractor request and shall approve the payment if the conditions listed below have been met. If the contractor requests payment for items that have not been acceptably completed, the Authority shall delete those items and adjust the payment accordingly. (1)
The contractorâ€™s request is consistent with the Authority approved Project Cost Breakdown;
The request does not include the amount being retained as retention by the Authority under the contract until the final payment; 93
The work covered by the payment request has been performed in accordance with the construction documents;
The Form HUD-51001, Periodic Estimate for Partial Payment (Exhibit 31), has been properly executed and all applicable supporting documentation submitted; and
The contractor has submitted all required reports, such as certified payroll reports.
The Authority shall retain the original form HUD-51001, Periodic Estimate for Partial Payment and any applicable supporting documentation for its file and return a copy of the Authority approved forms to the contractor. 3.
Time Extensions a.
The contractor is responsible for completing the work within the time established in the contract. The Authority is responsible for monitoring the contractor to ensure that work will be completed as scheduled. The Authority may authorize justifiable time extensions in accordance with the "Default" clause in Form HUD-5370, General Conditions for the Contract for Construction (Exhibit 140 which prescribes the conditions under which a time extension may be granted. The basic principle is that delays arising from unforeseeable causes beyond the control and without the fault or negligence of the contractor may be grounds for allowing a time extension. Such time extensions shall be formalized in a written modification to the contract.
Construction logs: (1)
The Authority shall maintain a construction log to record potential causes for delays which may be used as the basis for granting time extensions or for determining the amount of liquidated damages to be assessed against the contractor. The Authority shall maintain a record of the following. (a)
The daily temperature;
The daily amount of precipitation;
(c) Delays in obtaining labor and materials, including the duration and reason; (d)
Labor disputes or strikes, including the duration and the applicable construction trade; 94
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Delays experienced by others in completing non-contract public improvements (whether on-site or off-site); and
Other causes for delays, such as fires, floods, vandalism or court orders.
In order to be considered for approval by the Authority, requests for time extensions must meet the following criteria: (a)
The contractor must have submitted a written notice to the Authority within 10 calendar days of the start of any delay, and
The severity and extent of adverse weather could not have been reasonably foreseen by the contractor (normal seasonal levels of rain, snow, cold or heat should have been considered by the contractor) or the cause of the delay was beyond the contractor's control.
Documentation Immediately upon receipt of the contractors notification of delay or request for time extension, the Authority shall send a letter of acknowledgement to the contractor. The letter shall indicate that: immediate consideration will be given to the contractor’s request; or the actual delay in work is difficult to determine and consideration will be given to the contractor’s request upon completion of work. The Authority shall review its records to ensure that the information provided by the contractor is accurate, to determine the cause of the delay and the extent that it was within the contractor's control, and to ascertain if the request meets the criteria established above. Based on its review, the Authority shall prepare a "finding of fact" with the assistance of its architect/engineer (if applicable) and attorney and, in order to approve, determine that: a. The contractor's request, as documented by the Authority’s "finding of fact" meets the requirements stated above; and b.
The additional time requested by the contractor is reasonable based on the nature and duration of the delay.
The warranty period for all construction work shall be at least 365 calendar days from the date of final acceptance of the work in question, or such longer period as otherwise specified in the contract. The 95
Authority is responsible for performing required warranty inspections, including the 11-month warranty inspection, during the warranty period and promptly notifying the contractor in writing to remedy any defects relating to manufacturer or contractor warranties on equipment and systems and contractor warranties on materials and workmanship. b.
Upon receipt of Authorityâ€™s written notice, the contractor shall promptly remedy any defects due to the use of faulty equipment or materials, or poor workmanship. The contractor also is responsible for paying for any damage to other work resulting from such defects.
Completion of work a.
Notification The contractor shall provide prompt written notification, to the Authority when all work is completed. A final inspection shall be made when all work is completed. Until the final inspection has been made, the Authority shall not advance any of the retainage or make the final payment to the contractor.
Final Inspection Upon receipt of the contractorâ€™s notification of the date when the work has been completed, the Authority shall conduct a final inspection within 10 calendar days. The final inspection shall be conducted by: an Authority representative; the Authority architect/engineer (if applicable), and a contractor representative.
Post-Inspection Meeting The inspection team shall meet after completing the final inspection to determine whether, the work has been completed in accordance with the construction documents; there are any minor items of incomplete or unsatisfactory work and reach agreement on the items to be included on the final punch list; or there are any major deficiencies which must be corrected by the contractor so that another final inspection can be made before contract settlement.
Documentation Following the final inspection, the Authority shall notify the contractor to submit the following documentation to the Authority: (1)
Where appropriate, a certificate of occupancy issued by the responsible local agency for each building,
One notarized original and two copies of the contractorâ€™s certificate and release (Exhibit 35, Certificate and Release) which indicates: (a)
The work was completed in accordance with the construction documents, including contract modifications,
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 97 except any minor items identified on the Authorityâ€™s proposed certificate of completion; (b)
The total amount due the contractor and a separately stated amount for each unsettled claim (if applicable), against the Authority;
(c) The Authority is released of all claims, other than those stated in the contractor's release; and (d) Wages paid to laborers or mechanics were consistent with the wage rate requirements of the contract and there are no outstanding claim for unpaid wages.
Assignment of all guarantees and warrantees to the Authority, and
"Final" Partial Payment The Authority may accept part of a project for occupancy before contract settlement where the following conditions are met: (a)
The dwelling units to be accepted (except items approved for delayed completion) have been completed and are ready for occupancy,
The general contractor agrees to early occupancy and completion of items approved for delayed completion;
Early occupancy will not unduly inconvenience or represent a safety risk to tenants while the unfinished work is being completed,
The Authority has obtained occupancy permits from the responsible local agency for each unit to be accepted, and
The Authority has executed an occupancy agreement with the general contractor indicating that the Authority partially accepts specified work provided that the contractor accepts the responsibility to complete the project by the established completion date.
Final Payment a.
The Authority shall ascertain that an adequate and notarized certificate and release are received from each construction contractor to assure 97
that the work was in full compliance with the construction contract documentation and that all material, supply, equipment and labor related expenses have been paid in full by the contractor. The Authorityâ€™s payment to the contractor shall be the amount specified in the certificate of completion and shall not include any amount to be retained for disputed items and incomplete work, such as punch list items.
1. All progress inspections should be documented using a Authority Inspection Report (Exhibit 36). The Inspection Report should include a description of the work or service completed and a determination as to whether or not the work or service is acceptable. If payment is made on a unit price basis, quantities must be verified. If payment is made on a time and materials basis, the report should show that the time charged was spent on Authority work, services, or supplies and that materials were charged at cost. A copy of the Inspection Report should be included in the Contract Project File or Purchase Order File (if applicable). Based on the progress report, the Contracting Officer should initiate any needed follow-up actions to ensure that the terms of the contract will be fulfilled or problems resolved. 2. Specific procedures for inspection of construction work are included in HUD Handbook 7485.1, Public and Indian Housing Comprehensive Improvement Assistance and HUD Handbook 7417.1 REV-1, Public Housing Development. In general, some of the specific tasks the Authority should consider are: site visits to observe the contractor's performance; comparing actual performance against scheduled performance; observing any adverse conditions (such as labor problems, over extension of facilities, equipment idle or needing repair, changes in key staff, etc.); interviewing staff to determine if the skill level is sufficient to perform the assigned tasks. The Authority must also ensure that the quantity and quality of supplies and materials are adequate. The Authority should test the materials to insure that they are at the required level of quality and count the inventory to assure that the appropriate amount is received. 5.6
General The Contracting Officer or assigned staff person shall ascertain that supplies received from vendors are inspected and acceptable, that the performance for services was satisfactory and that receiving documents are prepared and processed for payment. This acceptance should not be delayed, since prompt payment will help to ensure good relations with the vendors and contractors. In addition, many contracts allow a discount for prompt payment if made within a specified number of days. Discounts, if offered by the vendor or contractor, should always be taken by the Authority to the greatest extent possible.
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When goods or some construction items do not conform to the contract, there are basically three choices. First, the Authority may reject the items; second, it may require the contractor to correct them, and third, it may conditionally accept them. Ordinarily, contractors will be given an opportunity to correct the defective items.
2. If the items are rejected, the contractor is subject to being declared in default unless it can furnish conforming items or make correction within the required delivery schedule/completion time. If the contractor is required to correct the defects, it would appear that the Authority has elected to have them corrected and may not, therefore, terminate the contract for default until the contractor has had a reasonable opportunity to correct the defects. If the contractor does not correct the defects within the required schedule, the Authority may require delivery/completion of the uncorrected items and negotiate a reduction in the contract price. 3. The choice of which action to take under the circumstances is within the Contracting Officer's discretion. The Authority in the form of registered or certified letter return-receipt requested shall request corrective actions by the contractor. 5.7
Allowable Costs A. General For cost reimbursement contracts, the Authority most be vigilant in reviewing the vouchers or invoices submitted by the contractor to ensure that only allowable costs are charged and paid. Cost allocability for profit-making firms shall be determined in accordance with HUD Handbook 2210.18. The Authority may reference its own cost principles that comply with the applicable Federal cost principles. For contracts with nonprofit organizations, the cost principles in OMB Circular A-122 shall apply, for contracts or agreements with State and local governments, the cost principles in OMB Circular A-87 apply. B. Contract Clause Accordingly, the following clause should be included in an cost reimbursement and any other contracts that contain a cost reimbursement portion: ALLOWABLE COSTS 1.
The Housing Authority shall make payments to the contractor at the times specified elsewhere in this contract, in amounts determined to be allowable by the Contracting Officer in accordance with Subpart 312 of the Federal Acquisition Regulation (if the contractor is a for-profit firm; or OMB Circular A-122 for nonprofit organizations, or OMB Circular A-87 for State and local governments) in effect on the date of this contract and the terms of this contract. 99
Allowable costs include only those recorded costs that, at the time of the request for reimbursement, the Contractor has actually paid for items or services directly for the contract; costs incurred but not necessarily paid for materials issued from the contractor's inventory and placed in use on the contract; direct labor, direct travel; other direct in-house costs; and properly allocable and allowable indirect costs, as shown in records maintained by the contractor for purposes of obtaining reimbursement under Authority contracts; and the amount of progress payments paid to subcontractors under similar cost standards.
At any time before final payment, the Authority may have the contractor's invoices or vouchers audited. Any payment may be reduced by amounts found by the Authority to constitute unallowable costs or adjusted for prior overpayments or underpayments. The Authority may at any time issue to the contractor a written notice of intent to disallow specified incurred or planned for incurrence under this contract that have been determined to be unallowable under the contract terms, and the contractor may submit a written response to the Authority with justification for allowance of the costs. If the contractor does respond within 60 days, the Authority shall within 60 days of receiving the response, either make a written withdrawal of the notice or issue a written decision. Failure to issue a notice under this clause shall not affect the Authorityâ€™s right to take exception to incurred costs
Limitation of Cost Cost reimbursement contracts must also contain a limitation of cost clause requiring the contractor to notify the Authority before the estimated cost is reached.
Contract Modifications A.
General Occasionally, it is necessary to modify a contract or purchase order to reflect changes in the required effort. Contract and purchase order modifications shall be issued in one of the following modification forms: 1.
A bilateral modification (such as a supplemental agreement, in which both parties mutually agree on contract changes) that is signed by both the Contracting Officer and the contractor, or
2. A unilateral modification (a modification that is signed only by the Contracting Officer, such as a change order pursuant to the Changes clause on form HUD5370, General Conditions for the Contract for Construction (Exhibit 14) or administrative modification, such as a change in the address of the payment office).
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 101 Bilateral modifications are the preferred method of modifying contracts and purchase orders. In either case, all contract modifications shall be in writing. Modifications to contracts and purchase orders include: Construction Change Orders (Exhibit 37, Sample Change Order), architect/engineer, consultant and service contract Amendments (Exhibit 38, Sample Amendment), and changes to an existing Purchase Order (Exhibit 39, Sample Increased Purchase Order Encumbrance). B. Change Orders 1.
A change order is a change issued by the Contracting Officer, after the award of a contract, in any of the contract terms, including specifications, completion time, description of the work, etc, within the scope of the contract. All Authority contracts shall contain a Changes clause, such as that on the forms HUD-5370, General Conditions for Contract for Construction (Exhibit 14) or HUD-5370-A, General Conditions for Non-Construction (Exhibit 26). A change order may be issued unilaterally by the Contracting Officer. In such cases, the contractor is entitled to submit a change order proposal to identify any changes in cost or schedules as a result of the change, and the parties negotiate an equitable adjustment.
Change orders may be issued bilaterally if the contractor will agree to the change in advance. When a change is mutually agreed upon, including price adjustment for concessions made by either party, a contract modification document is prepared and signed by both parties to the original contract. Change Orders following: a.
A detailed description of the proposed change in work,
A reference to the applicable working drawings and specifications;
A fixed price (credit, debit, or no change) for the change in contract work;
An estimate of any additional time, if any, required to complete the work
The contractor's itemized breakdown of the cost of materials and labor and an itemized breakdown for any applicable subcontractors; and
The change indicated on the architectural or engineering drawings, if applicable.
Limitations on Change Orders There are limitations on the use of change orders. The Changes Clause prescribes the specific circumstances in which a change order may be issued. Changes such as increasing the number of items being purchased or other types of new work are not considered within the scope of the contract or within the authority of the Changes Clause. Records The Authority shall maintain accurate records and documentation regarding contract modifications by including a register in each contract file. This is required to provide a permanent record of all actions taken in connection with each contract. To provide an overview of all contract modifications and for tracking purposes, the register should include the following information: 1.
The number of the modifications;
A brief description of the modification;
The cost of the modification;
The date submitted to the HUD Field Office for approval, if applicable;
Any critical deadline dates that must be met by the HUD Field Office, if applicable; and
The amount of any additional time required by the contractor.
Contract Terminations A.
General The Contracting Officer may terminate a contract or purchase order for default for any of the following reasons: failure to deliver the supplies, services, or construction as specified; failure to perform work in a timely manner, violation of a contract clause, such as the prohibition against gratuities; repeated violations of labor standards; and similar reasons. Contracts are terminated for reasons described in the termination clauses on Forms HUD-5370, General Conditions for Construction Contracts (Exhibit 14) and HUD-5370-C, General Contract Conditions for Non-Construction (Exhibit 26). The default clauses provide for termination without negotiation when the contractor fails to perform as specified in the contract. Contracts terminated for the convenience of the Authority likewise require immediate work stoppage, but termination costs are negotiated until a satisfactory settlement is reached. Termination Notice The Contracting Officer shall terminate contracts for convenience or default only by a written notice to the contractor. The notice shall be sent by certified mail, return receipt requested. The notice shall, state the following: 1.
That the contract is being terminated for the convenience of the Authority or for default, under the contract clause authorizing the termination;
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 103 2.
Whether the contract is terminated in whole or in part; for partial terminations, identify the specific items being terminated,
If terminated for default, the acts or omissions constituting the default, the Contracting Officer's determination that failure to perform is not excusable, the Authorityâ€™s rights to charge excess costs of reprocurement to the contractor, and the contractor's appeal rights;
The effective date of termination;
The contractor's right to proceed under the unterminated portion, if any, of the contract; and
Any special instructions.
Copies of the notice should be sent to the contractors surety, if any, and any assignee. C.
Termination for Convenience 1.
Settlement Settlement of contracts terminated for convenience shall be handled by negotiated agreement or determination by the Contracting Officer. The contractor shall submit a settlement proposal promptly to the Contracting Officer for the amount claimed as a result of the termination. Whenever possible, the Contracting Officer should negotiate a fair and prompt settlement with the contractor and settle a settlement proposal by determination only when it cannot be settled by mutual agreement.
Compensation A settlement should compensate the contractor fairly for work done and the preparations made for the terminated portions of the contract, including a reasonable allowance for profit (but no profit shall be allowed for settlement expenses). However, the Contracting Officer shall not allow profit if it appears that the contractor would have incurred a loss had the entire contract been completed. Fair compensation is a matter of judgment and cannot be measured exactly. The Contracting Officer should use prudent business judgment in the settlement process, as opposed to strict accounting principles. The parties may agree to a total amount to be paid to the contractor without agreeing on individual cost items or profit.
Termination for Default 1.
General A contract may be terminated for default because of the contractor's actual or anticipated failure to perform its contractual obligations. Under a termination for default, the Authority is not liable for the contractor's costs 103
on undelivered work and is entitled to the repayment of progress payments. If the contractor fails to make progress so as to endanger performance of the contract, the Contracting Officer shall give the contractor a written notice specifying the failure and providing a period of 10 days (or longer period if needed) in which to cure the failure. Upon expiration of the 10 days (or longer period), the Contracting Officer may issue a notice of termination for default, unless the failure to perform has been cured. 2.
Notice If the contractor has failed to perform work within the required time, and a termination for default appears appropriate, the Contracting Officer should, if practicable, notify the contractor in writing of the possibility of the termination. This notice shall call the contractorâ€™s attention to the contractual liabilities if the contract is terminated for default and request the contractor to show cause why the contract should not be terminated for default. If the response to this notice is inadequate or insufficient action is taken in response to it, the contract may then be terminated for default.
Alternatives Alternatives to termination for default, at the Authorityâ€™s discretion, include the following: allow the contractor or the surety to continue performance of the contract under a revised delivery schedule (in exchange for a reduced price or other consideration); permit the contractor to continue performance of the contract by means of a subcontract or other business arrangement with an acceptable third party, provided the rights of the Authority are adequately protected; or if the requirement for the supplies, services, or construction no longer exists, and the contractor is not liable to the Authority for damages, the Authority can execute a no-cost termination settlement agreement.
Repurchase When the supplies, services, or construction are still required after termination, the Contracting Officer shall repurchase the same or similar items against the contractor's account as soon as possible. The Contracting Officer may use any appropriate procurement method for the repurchase (sealed bidding, competitive proposals, or noncompetitive proposals), provided that competition is solicited to the maximum extent practicable to secure the lowest price obtainable under the circumstances, in order to mitigate damages.
CHAPTER 6. SPECIFICATIONS 6.1
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Definitions A specification is a description of a supply, service, or construction activity that is used in procurements to tell prospective vendors and contractors precisely what the Authority requires. A statement of work is a special category of specification general used in the procurement of services. A good specification sets forth actual, minimum requirements, as opposed to desirables. The specification must be written in plain, precise language to enable prospective vendors or contractors to understand fully what the Authority needs. It is the essence of a good contract. It should contain quality assurance terms to provide a means of determining that the contractor meets contractual requirements. If there is an ambiguity in the specification, it will normally be interpreted against the drafter, in this case, the Authority. In construction contracts, therefore, it is essential that the Authority or the Authority require its architect/engineer firms to produce quality specifications that do not lend themselves to misinterpretation. The Authority should stress this concept not only in the Request for Qualifications to select an architect/engineer but also throughout its development of specifications.
Types of Specifications There are three basic types of specifications used in preparing contracts: 1.
Functional or Performance Specifications Such specifications contain performance characteristics desired for the item. The detailed design or exact measurements are not stated. The specifications merely state the overall requirements allowing each contractor to furnish its own item to meet the required performance.
Design specifications Such specifications contain descriptions of the item desired as opposed to performance standards. Depending on the nature of the item, the design specifications may contain precise measurements, tolerances, materials, product tests, quality control and other detailed information, provided they do not render the specifications closed; i.e., the specifications do not limit the competition to one product. The information furnished should be sufficiently detailed to ensure that all items manufactured to the specifications will be exactly the same or constructed in accordance with the design criteria established by the architect or engineer.
Purchase Descriptions Clear and accurate descriptions should be developed. Such descriptions shall not contain features that unduly restrict competition. When it is impractical or uneconomical to make a clear and accurate description, it may be necessary to describe technical requirements for materials, equipment, etc. by reference to brand named products to define performance or other salient requirements. Such references shall be 105
followed by the words of â€œor equalâ€? and the salient characteristics of the item to allow competition. The specifications shall state who will determine the equality. Specifying trade names should be avoided except where there is no other method of clearly designating the required quality of the item desired or where there is justification to specify trade names as described in paragraph 6.2, E. Brand Name Usage, below. When trade names or catalog numbers are used, the bidders shall be informed that such references serve the sole purpose of establishing acceptable quality of product, and that any other products, which meet such quality, are also acceptable. In practice, it is rare to find specifications that fit completely into just one of the above categories. Most specifications contain a combination of design and performance requirements, and may include brand name descriptions of components. Contract performance and time of delivery relate to each other. Failure to meet time requirements is often caused by technical difficulties, while technical difficulties are often caused by the contractor not having enough time available properly to accomplish the job. When preparing contract specifications, the Authority shall ensure that both the technical requirements and delivery time are within the capabilities of qualified bidders. C.
1. The majority of construction work shall be performed under a single construction contract. The Authority may contract separately for portions of the work where required by State law, necessitated by varying wage rate requirements, or in the best interest of the project. Where separate procurement is used, it is critical that the scope of work under each contract is clearly defined without gaps or overlapping of work specified in related contracts and that the Authority has the capability to administer separate contracts. 2. A realistic construction period shall be established for each contract. Such things as type of construction, project size and location, season and prospective weather conditions, and availability of skilled labor and materials should be considered. 3. Whenever feasible, demolition work should be included in the main construction contract. If there is any salvage value, the solicitation should allow for the possibility of a sum being deducted (equal to the salvage value) from the amount to be paid to the contractor.
6.2 Limitations A.
General The Authority shall conduct all procurement transactions in a manner providing full and open competition, consistent with the requirements of 24 CFR 85.36, and the requirements set forth in the Authorityâ€™ Procurement Policy and 106
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 107 this Procurement Procedures Manual. In preparing solicitations, the Authority shall describe clearly and as completely as possible the items or services required and the terms and conditions of the contract. The Authority may request advice from the HUD Field Office in preparing specifications for items which are not regularly purchased. When applicable, specifications developed by HUD may be used. The specifications shall be designed so as to not restrict the bidding to one supplier or contractor. If the time permitted for delivery is a factor for consideration in awarding the contract, the solicitation shall so indicate and, if possible, specify the delivery requirements. There should be a complete understanding between the Authority and the bidders as to what is desired and what will be furnished. Some suggestions are: 1.
Avoid the term "as per sample" unless samples can be supplied to each bidder.
2. Avoid the term "best commercial quality" and similar terms since they are indefinite, and all manufacturers consider their products to be of â€œbest qualityâ€?. B.
Geographic Restrictions The Authority shall conduct procurements in a manner that prohibits the use of statutorily or administratively imposed in State or local geographical preferences in the evaluation of bids or proposals, except in those cases where applicable Federal statutes expressly mandate or encourage geographic preference. For example, under Section 3 of the HUD Act of 1968, the Authority shall require that, to the greatest extent feasible, opportunities for training and employment be given to lower income persons residing within the unit of local government or the metropolitan area (or non-metropolitan area) in which the development is located. See Chapter 8. Assistance to Small and Other Businesses for further discussion. Nothing in this paragraph preempts State licensing laws. When contracting for architect/engineer services, geographic location is a selection criterion (because of the Qualification-Based-Selection process in the State of California) provided its application leaves an appropriate number of qualified firms, given the nature and size of the project to compete for the contract.
C. Section 3 Businesses See Chapter 8 for details. D. Resident-Owned Businesses 24 CFR 963 provides that competition may be limited to resident-owned businesses. Certain restrictions apply, so see Chapter 8 and the regulation for further details. E.
Brand Name Usage
1. Brand name or equal specifications shall not be used unless the Contracting Officer determines in writing that one of the following apply: no other design or performance specification or qualified products list is available; there is a bona fide need for consistency or standardization of inventory, time does not permit the preparation of another form of purchase description (other than a brand nameonly specification); the nature of the Authority’s requirements make use of a brand name or equal specification suitable for the procurement; or use of a brand name or equal specification is in the Authority’s best interests. 2. Brand name or equal specifications shall seek to designate as many brands as are practical as “or equal” references and shall further state that products that are substantially equivalent to those designated will be considered for award. Unless the Contracting Officer determines that the essential characteristics of the brand names included in the specifications are commonly known in the industry or trade, brand name or equal specifications shall include a description of the particular design, functional, or performance characteristics which are required. 3. HUD recognizes that some Authorities believe that standardizing their inventory of equipment and parts is essential to economy and efficiency. At the same time, the Authority must comply with the government-wide procurement standard that requires full and open competition and prohibits the use of specifications that unduly restrict competition. In order to standardize its inventory, the Authority may use specifications or descriptions which use brand names only when accompanied by the term “or equal”. In addition to the named product, any other product that meets the same technical requirements should be considered. A brand name or equal description shall state only the Authority’s actual minimum needs. The specific features of the product (design, functional or performance) that are salient, or essential, in meeting the Authority's minimum needs in order to be considered “or equal” shall be clearly stated. The Authority shall avoid using the brand name specifications as their own. For example, if the Authority specifies a brand name refrigerator, it should determine what are the key elements or features of the product that are essential in meeting the Authority’s needs for inventory standardization. If a key feature is shelving, the particular shelving requirements shall be identified. Alternatively, if the brand name specifies a refrigerator with a 3/4 horsepower motor, another manufacturer may have essentially the same refrigerator (including the specified shelving), only with a 1/2 horsepower motor. Unless the Authority has sound reasons (e.g., past mechanical problems with 1/2 horsepower motors), the Authority should accept the refrigerator with the 1/2 horsepower motor. In all cases, the Authority should give other manufacturers/offerors the opportunity to present reasons or data showing that its product can meet the Authority’s needs. Descriptions or specifications shall also not be written so as to specify a particular product or feature of a product, particular to one manufacturer/offeror. While standardization may be important for economy and efficiency in inventory control, it should not be done at the expense of purchasing higher priced products or products that are less efficient when life cycle factors are considered.
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 109 F. Organizational Conflict of Interest Occasionally, circumstances may arise in which a contractor may not be able to render impartial advice or may be given an unfair competitive advantage by a contract For example, if the Authority awards a contract for a study of its computer needs, it would be improper for the study contractor to be able to recommend that the Authority purchase equipment made or sold by the study contractor. The Authority should try to neutralize such effects by asking contractors to disclose any such organizational conflicts of interest when they submit their offers and to exclude contractors who provide services relating to studies or specification writing from competing for any subsequent contract which is based on such services. A solicitation provision and contract clause should be developed for this purpose and included in those procurements that may be characterized by organizational conflicts of interest. 6.3 Statement of Work (SOW) For construction or supply contracts, the Authorityâ€™s minimum needs are described in the specifications which are issued to contractors to submit bids. For service contracts, a SOW is used for this purpose. A.
Purpose and functions of the SOW The main purpose of a SOW is to provide a basis for mutual understanding of the Authorityâ€™s requirements, as highlighted below:
1. The degree to which requirements can be clearly defined in the SOW generally will dictate whether the sealed bidding or the competitive proposals procurement method will be chosen, as well as the type of contract (i.e., fixed price, cost-reimbursement) to be awarded; a. When released in a solicitation document, the SOW may affect the number of contractors who are willing and able to respond. If the SOW is not definitive, some contractors may not respond, either because of uncertainty about the risks involved or because they do not understand the relationship of the requirement to their own particular capabilities. On the other hand, if the SOW is too restrictive, competent contractors may decline to respond because they believe that the Authority will inhibit their creativity or opportunity to propose alternatives; 3. The clarity and explicitness of the requirements presented in the SOW will invariably enhance the quality of the proposals submitted. A principle of public contract law is that ambiguities in the SOW are interpreted against the drafter, Authority, so it is crucial that the Authority describe its needs in the most definitive terms possible; 4. During the offer evaluation and contractor selection process, the SOW plays a significant role. Clear and precise requirements allow the Authority to establish conclusive baselines on which sound proposal evaluation criteria can be structured; and
5. The SOW becomes the standard for measuring the contractor's performance. When a question arises over an apparent increase in the scope of the work to be performed, the SOW is the baseline document for resolving the question. B.
1. The SOW should define the contractor's obligations and be definitive enough to protect the Authority’s interests, and 2. A contractor taking ultimate direction from the SOW alone should be able to perform the required work, that is, the work statement should provide a clear, unambiguous, and complete basis for effective and efficient performance. Elements of the SOW The particular issues to be addressed in a SOW will vary with the nature, purpose, size, and complexity of the work to be performed. At a minimum, however, every SOW should: D.
Give a precise statement of objectives,
Identify the work to be performed,
Set parameters by which the desired scope of work can be defined and by which progress and results can be measured, and 3.
4. Require some defined “end product” and some tangible form of progress/compliance reporting. D.
A SOW for a level-of-effort (labor-hour) type of requirement should specify:
1. Kind of personnel (labor categories) required to perform the work, and any qualification requirements (experience, certification, etc.), 2.
Nature of work, and
CHAPTER 7. APPEALS AND REMEDIES 7.1
General The integrity of the Authority’s procurement system depends, in part, on the public’s perception of the fairness with which the Authority awards and administers its contracts and purchase orders. Disagreements between the Authority and a contractor may arise before or after contract award, and it is important that the Authority provides a means for contractors to receive an unbiased hearing of their concerns. The Authority alone is responsible, in accordance with good administrative practice and sound business judgement, for settlement of all contractual and administrative issues arising 110
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 111 out of procurements. These include, but are not limited to source evaluation, protests, disputes, and claims. The Authority should seek to resolve all contractual issues in as informal a manner as possible, to avoid the need for litigation. Various forms of alternative dispute resolution have been developed, such as arbitration, mediation, mini-trials, and informal settlement conferences, and should be considered before resorting to the judicial process. It is often appropriate to provide for a review of unresolved contract disagreements by a third party, who can independently assess the merits of the case without a personal interest in the outcome. An expeditious resolution of contract disputes is in the mutual interest of both the Authority and the contractor, as litigation consumes resources that are better devoted elsewhere. 7.2
Bid Protests A. Complaint Information An actual or prospective contractor may protest the solicitation or award of a Authority procurement only for a serious violation of the standards of the Authorityâ€™s Procurement Policy and Procurement Procedures Manual procedures. Complainants should seek resolution of their concerns initially with the Contracting Officer. Such complaints may be oral or written. If the matter is not resolved on this basis, then the contractor may file a formal written protest. The protest should include, as a minimum, the following information:
Name, address, and phone number of the protester;
Identification of the procurement, including solicitation or contract number;
A statement of the reasons for the protest;
Supporting exhibits, evidence, or documents to substantiate any arguments; and
The form of relief requested. B.
Submission The protest must be submitted to the Authority or a designee (such as an Authority employee independent of the matter who can render an impartial opinion), within five calendar days of the bid or proposal opening. The Authority shall issue a decision on the protest as expeditiously as possible after receiving all relevant information requested. The Authority may decide to suspend the procurement if the facts presented in the protest warrant such action; this step should only be taken if the evidence is clear and convincing as to the existence of an impropriety and there is no other means of resolving the matter. The decision to suspend the procurement is a matter within the Authorityâ€™s discretion, as is provided in the Authorityâ€™s Procurement Policy and Procurement Procedures Manual. 111
C.Granting a Protest If a protest is granted (sustained in favor of the protestor), then the solicitation or proposed award should be canceled or revised to comply with the protest decision. If the contract has already been awarded, then the contract may be terminated for convenience and the contract re-awarded to the next eligible offeror or the procurement may be resolicited; however, if the Authority determines in writing that, based on compelling circumstances (such as a condition of emergency or serious disruption of the Authorityâ€™s operations, or if the contract has already been completed) either of these actions would not be in the best interest of the Authority, the Authority may let the award stand and pay the successful protestor bid and proposal costs, along with the costs of filing and pursuing the protest. D.
Denying a Protest If the protest is not granted, the Contracting Officer shall provide a written decision with justification for the denial of the protest. In the written decision, the Authority should explain any appeal rights within the Authority itself. For example, a written request for reconsideration may be filed with the Authority. Such request should contain a statement of the factual and legal grounds on which reversal or modification of the decision is deemed warranted, specifying any errors of law made or information not previously considered.
E.HUD Review Review by HUD of the Authorityâ€™s bid protests is limited to: 1. Violations of Federal laws or regulations (violation of State or local laws will be under the jurisdiction of State of California or the local authorities); and 2. Violations of the Authority's protest procedures for failure to review a complaint or protest. Protests received by HUD other than those specified above are referred to the Authority for resolution. 7.3
Contract Claims A. General A contract claim may be pursued by either the Authority or a contractor, although most often the contractor is the party pursuing the dispute. If a dispute arises under or relating to a contract (including controversies based on breach of contract, mistake, misrepresentation, or other cause for contract modification, reformation, or rescission), and the dispute cannot be resolved by mutual agreement, the Contracting Officer shall, after written request by the contractor for a final decision, promptly issue a written decision. The contractor's claim most be submitted within the time period set forth in the contract. The contractor's claim most identify the nature and scope of the claim, including extra costs sought by the contractor. Before issuing a final decision, the Contracting Officer shall review the facts pertinent to the controversy and secure any necessary assistance from legal, fiscal, or other advisors.
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 113 B.
Contracting Officer's Decision The Contracting Officer shall immediately furnish a copy of the decision to the contractor by certified mail, return receipt requested, and should include in the decision:
A description of the controversy;
A reference to the pertinent clauses in the contract;
A statement of the factual areas of agreement or disagreement;
A statement of the Contracting Officer's decision, with supporting rationale; and
A statement referencing appeal rights; the following paragraph is an example: “This is the final decision of the Housing Authority’s Contracting Officer. This decision may be appealed to the Executive Director. If you decide to make such an appeal, you must: mail or otherwise furnish written notice of appeal to the Executive Director within 30 days of the date of this decision. A copy of the notice of appeal shall be furnished to the Housing Authority’s Contracting Officer from whom the appeal is taken. The notice shall indicate that an appeal is intended, reference the decision from which the appeal is being taken, and identify the contract involved. In lieu of appealing to the Executive Director, you may obtain judicial review of this decision by referring the matter to an independent mediator or arbitrator or by bringing an action in a court of competent jurisdiction” C.
Time for Decision As provided on form HUD5370, General Conditions of the Contract for Construction (Exhibit 14) and consistent with the Authority’s Procurement Policy and Procurement Procedures Manual procedures, if the Contracting Officer does not issue a final decision within 60 days (or other period indicated) after written request by the contractor for a final decision, or a longer period agreed to the by Contracting Officer and the contractor, then the contractor may proceed as if an adverse decision had been received.
Contract Records The Authority shall maintain a complete written and dated record of any actions that may result in a dispute or claim for damages. This is required to protect the Authority’s interest during any litigation proceedings that may subsequently arise. In such instances, the Authority should, at a minimum, maintain the following: a complete and detailed job record, disputes and claims file, cross-referencing other pertinent files, for each dispute or claim; and any correspondence relating to the dispute, including written minutes of any meetings, which identify actions taken by the Authority, its architect/engineer or contractor, and decisions or agreements made concerning the dispute. 113
E.Disputes Clause The Authority’s contracts shall include a Disputes Clause, as contained in form HUD-5370, General Conditions of the Contract for Construction (Exhibit 14) that explains the procedures for handling contract claims.
CHAPTER 8. ASSISTANCE TO SMALL AND OTHER BUSINESSES 8.1
General HUD strongly supports a policy of contracting and providing employment opportunities with residents and resident-owned businesses. Accordingly, the Authority encourages contracting with residents and resident-owned businesses, including Resident Management Corporations (RMC’s), whenever possible. Section 3 of the HUD Act of 1968 A.
This law requires the Authority to make efforts to ensure that individuals or firms located in or owned in substantial part by persons residing in the area of a Authority development are used when possible. The Program regulations describing this program are in 24 CFR Part 135. The form HUD-5370, General Conditions of the Contract for Construction (Exhibit 14) includes a clause implementing this requirement.
Employment and training opportunities for pre-apprentices, apprentices and other training programs for public housing residents will assist the Authority and the RMC’s in meeting resident employment, training, and local contracting objectives under HUD Section 3. Further guidance is provided in HUD Notice 9201SL.
HUD Handbook 8023.1, Implementing Section 3 of the Housing and Urban Development Act of 1968 provides guidance regarding compliance with HUD Section 3 requirements. Some of the important provisions include but are not limited to the following:
1. Solicitations, regardless of the method, must advise prospective contractors of the HUD Section 3 requirements; 2. The HUD Section 3 contract clause must be included in all covered contracts (construction contracts and construction-related contracts such as architect/engineer and consultants who participate in the construction activity or the activities leading up to construction); 3. The Authority and its contractors must make a good faith effort to provide, to the greatest extent feasible, training and employment to lower income residents of the development and surrounding area in connection with the work on an assisted project. In filling vacancies, the Authority and its contractors may post notices at the project site and in the Authority’s offices and may contact resident councils and RMCs, in addition to their other recruitment efforts to meet the requirements of HUD Section 3. 114
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4. The Authority and its contractors must make a good faith effort to award contracts, to the greatest extent feasible, to businesses located in or owned in substantial part by persons residing in the metropolitan area. In meeting this requirement the Authority should consider use of the alternative procurement procedures at 24 CFR Part 963 (See paragraph 8.3 below). 5. Contractors must make a good faith effort to award subcontracts to businesses located in the developments and surrounding area in connection with the work on an assisted project. 8.3
Resident-Owned Businesses A.
HUD issued a final rule of 24 CFR Part 963 which allows Authority to use an alternative procurement process when contracting with businesses owned in substantial part by Authority residents (resident-owned businesses) for public housing services, supplies, or construction. As stated in paragraph 9.1, HUD strongly encourages Housing Authorities to contract with resident businesses to the maximum extent feasible. This has been a proven strategy for moving lowincome persons out of poverty and dependency. The alternative procurement process is based on the established procurement procedures and requirements set forth in HUD regulations 24 CFR 85.36, but limits solicitation to resident-owned businesses. The purpose of this rule is to enhance the economic opportunities available to Authority residents by facilitating the award of Authority contracts to resident-owned businesses that are capable of performing successfully under a proposed Authority contract at a reasonable price.
The alternative procurement process under 24 CFR 963 is as follows:
The Authority prepares an independent cost estimate for the procurement;
2. The Authority selects the appropriate method of procurement (small purchase, sealed bidding, competitive proposals, or noncompetitive proposals); 3.
The Authority solicits a quotation or offer from one or more resident-owned business;
4. The Authority receives quotation(s)/offfer(s) from one or more resident-owned businesses and ensures that: a.
The offeror/quoter has submitted the required certification regarding previous contracts received under the alternative procurement process; and
The total amount of such previous contracts is less than $500,000.
5. The Authority performs a cost or price analysis of the quote(s)/offer(s) received and determines the price that would normally be paid for comparable supplies, services, or construction in the project area. 6. The Authority awards the purchase order/contract to the most advantageous quoter/offeror, consistent with the evaluation factors stated in the solicitation, provided that the price does not exceed the independent cost estimate and the price that would normally be paid for comparable supplies, services, or construction in the project area. 7.
The Authority documents the procurement file and complies with all other applicable procurement requirements of 24 CFR 85.36 or 24 CFR 905.
Other Required Efforts A.
Small Businesses and Labor Surplus Area Businesses 1.
Approximately, 70 to 90 percent of American jobs are generated by small businesses. Consequently, they are referred to as the backbone of American industries. Nevertheless, small businesses have often been unsuccessful in obtaining a fair proportion of public contracts.
HUD regulation 24 CFR 85.36 requires the Authority to take certain steps to ensure participation by small businesses. These steps are outlined in the Authorityâ€™ Procurement Policy. Likewise, the common rule on grantee procurement recommends that similar actions be taken on behalf of labor surplus area businesses (e.g., firms located in areas of high unemployment).
Additionally, in its commitment to expanding contracting activities and job opportunities for residents of public housing, HUD encourages Housing Authorities to contract with resident-owned businesses for needed services, supplies or construction. 24 CFR 963 is designed to facilitate these contracts. This alternative procurement process is based on the established procurement procedures and requirements set forth in HUDâ€™s regulation 24 CFR 85.36, but permits solicitations to be limited to resident-owned businesses.
Under Executive Orders 11625, 12138 and 12432, the Authority, as part of its affirmative action program, shall provide every feasible opportunity for minorityowned enterprises and women-owned enterprises (MBE/WBE) to participate in Authority contracting and purchasing. The Authority may establish, through Board resolution, a goal of a certain percentage of its approved funds, to be awarded to contracts with MBE/WBE construction contractors, architects/engineers, or consultants (for both physical and management improvements), based on a goal 116
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 117 established by HUD. The MBE/WBE goal shall not be a mandatory set-aside or quota. 2.
Where the main construction (or non-construction) contract is awarded to an MBE/WBE, the Authority shall count the entire dollar amount of the contract toward the MBE/WBE goal. Where the main construction (or non-construction) contract is not awarded to an MBE/WBE, but one or more of the subcontracts is awarded to an MBE/WBE, the Authority shall count the dollar value of such subcontract(s) toward the MBE/WBE goal. The Authority shall not double count the dollar value of the main construction (or non-construction) contract and of its subcontracts
CHAPTER 9. ETHICS IN PUBLIC CONTRACTING 9.1
Since the awarding of contracts by the Authority involves the expenditure of taxpayer funds, those Authority employees involved in the procurement process and the Authority’s contractors are held to a higher standard of conduct than those who make private contracts. Procurement officials are expected to follow exemplary standards of conduct. Many State and local governments have enacted laws to enforce the public trust placed in those who work in the public contracting field. To maintain public confidence in the Authority’s fairness, it is essential that high standards of conduct are maintained at all times.
Authority Policy Public employment is a public trust. It’s the policy of the Authority to promote and balance the objective of protecting procurement integrity and the objective of facilitating the recruitment and retention of personnel needed by the Authority. Such policy is implemented by prescribing essential standards of ethical conduct without creating unnecessary obstacles to entering public service.
Impartiality Authority employees must discharge their duties impartially so as to assure fair competitive access to governmental procurement by responsible vendors and contractors. Moreover, they should conduct themselves in such a manner as to foster public confidence in the integrity of the Authority procurement organization. To achieve this purpose, it is essential that those doing business with the Authority also observe the ethical standards prescribed here. Any attempt to realize personal gain through Authority employment by conduct inconsistent with the proper discharge of the employee's duties is a breach of 117
public trust. To fulfill this general standard, employees must also meet the specific standards set forth below. 9.2
Conflict of Interest The ethical standards of this Chapter are intended to avoid actual and apparent conflicts of interest. It is a breach of ethical standards for any Authority employee to participate directly or indirectly in a procurement when the employee knows that: A.
The employee or any relative has a financial interest pertaining to the procurement;
A business or organization in which the employee, or any relative, has a financial interest pertaining to the procurement; or
Any other person, business, or organization with whom the employee or any relative is negotiating or has an arrangement concerning prospective employment is involved in the procurement.
Upon discovery of an actual or potential conflict of interest, an employee shall promptly file a written statement of disqualification and shall withdraw from further participation in the transaction involved. Any employee who has or obtains any benefit from any Authority contract with a business in which the employee has a financial interest shall report such benefit to the Executive Director. Any employee who knows or should have known of such benefit and fails to report such benefit to the Executive Director is in breach of the ethical standards of this Chapter. , 9.3
Additional Prohibitions procurement:
The following additional prohibitions apply to Authority
Restrictions on Employment of Present and Former Employees A present or former Authority employee shall not knowingly act as a principal or agent for anyone other than the Authority in connection with any contract or claim in which the employee participated personally and substantially through decision, approval, disapproval, recommendation, rendering of advice, investigation, or otherwise while a Authority employee, where the Authority is a party or has a direct and substantial interest. A business in which a Authority employee has a financial interest shall not knowingly act as a principal or agent for anyone other than the Authority in connection with any contract or claim. Contemporaneous employment of a Authority employee by persons contracting or actively seeking a contract with the Authority is prohibited.
Prohibition Against Selling to the Authority As provided in the Annual Contributions Contract, a present or former Authority employee shall not engage in selling or attempting to sell supplies, services, or construction services to the Authority for one year following the date such employment ceased. The term "sell" means signing a bid or proposal, negotiating a contract, contacting any 118
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 119 Authority employee for the purpose of obtaining, negotiating, or discussing changes in specifications, price, cost allowances, or other terms of a contract; settling contract disputes; or any other liaison activity with a view toward the ultimate consummation of a sale, although the actual contract is negotiated by another person. 9.4
Gratuities, Kickbacks, and Use of Confidential Information Authority contracts shall include clauses advising prospective contractors of the prohibitions against gratuities and kickbacks. These rules are designed to protect the integrity of the procurement system, to ensure that contracts are awarded fairly, based on merit, without improper influence. A.
Gratuities. It is a breach of ethical standards:
1. For any person to offer, give, or agree to give any Authority employee or former Authority employee a gratuity or an offer of employment; or 2. For any Authority employee or former Authority employee to solicit, demand, accept, or agree to accept a gratuity or an offer of employment; B. Kickbacks and Anti-Competitive Practices It is a breach of ethical conduct for any payment, gratuity, or offer of employment to be made by or on behalf of a subcontractor under a contract to the prime contractor or higher tier subcontractor or any person associated therewith, as an inducement for the award of a subcontract or order. This prohibition applies whether the kickback is made before or after the award of a Authority contract or purchase order. An antikickback clause is included in the form HUD-5370, General Conditions for the Contract for Construction (Exhibit 14) and HUD-5370-C, General Contract Conditions, Non-Construction (Exhibit 26). The Contracting Officer shall report to the Executive Director, the HUD Field Office, and the appropriate State and/or local officials any suspected anti-competitive practices by contractors. An anti-competitive practice is a practice among bidders or offerors that reduces or eliminates competition or restrains trade. An anticompetitive practice can result from an agreement or understanding among competitors to restrain trade, such as submitting collusive bids or proposals, rotating low bids, or follow-the-leader pricing, sharing of the business, or may result from illicit business actions which have the effect of restraining trade, such as controlling the resale price of products or an improper collective refusal to bid. C.
Use of Confidential Information Disclosure of any bids before bid opening (for sealed bid procurements) or information contained in proposals before award (for 119
competitive or noncompetitive proposals procurements) to any person not authorized by the Contracting Officer to receive such information shall be a breach of the ethical standards of this Chapter. It is a breach of ethical conduct for any employee or former employee knowingly to use confidential information for actual or anticipated personal gain, or for the actual or anticipated personal gain of any other person. 9.4 Prohibition Against Contingent Fees It is a breach of ethical conduct for a person to be retained, or to retain a person, to solicit or secure a Authority contract upon an agreement or understanding for a commission, percentage, brokerage, or contingent fee, except for retention of bona fide employees or bona fide established selling agencies for the purpose of securing business. The scope of this prohibition includes the prevention of influence peddling which might occur when a former Authority official is hired on a contingent basis by a business seeking Authority contracts. 9.5 Sanctions The Executive Director and the Board of Commissioners are responsible for establishing sanctions for violation of the ethical standards of this Chapter. Civil and administrative remedies in accordance with State law have been established against employees who breach ethical standards. In addition, the Authority may impose any one or more of the following. A.
Oral or written warnings or reprimands,
Suspension with or without pay for specified periods of time; or
Termination of employment.
The value of anything received by an employee or non-employee in breach of the ethical standards of this Chapter shall be recoverable by the Authority. All procedures under this Chapter shall be in accordance with due process requirements and existing law. In addition, notice and an opportunity for a hearing shall be provided before imposing any suspension or termination of employment. Remedies against contractors may include suspension and debarment, as provided in Chapter 3 of this manual.
CHAPTER 10. HUD REVIEW REQUIREMENTS 10.1
All Programs, Regardless of Funding Source 1.
Contracting Actions The following contracting actions require prior HUD approval:
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 121 a.
Solicitations and contracts by the Authority whose procurement procedures or operation fails to comply with the procurement standards of 24 CFR 85.36(b) [24 CFR 85.36(g)(2)(i)];
Noncompetitive procurements expected to exceed $100,000, including any procurements in which only one bid or proposal is received in response to a solicitation [24 CFR 85.36(g)(2)(ii)];
c. Brand name only procurements expected to exceed $100,000 [24 CFR 85.36(g)(2)(iii)]; d. Awards over $100,000 to other than the apparent low bidder under a sealed bid procurement [24 CFR 85.36(g)(2)(iv)]; e.
Proposed contract modifications changing the scope of a contract or increasing the contract amount by more than $100,000 [24 CFR 85.36(g)(2)(v)];
Contracts for services whose initial period exceeds two years, and any option, extension, or renewal of a contract for services which makes the total length of the contract, as modified, exceed two years;
g.Procurements for legal or other services in connection with litigation; and h.
Procurements which exceed the amount included in the HUD-approved Development Cost Budget or Operating Budget, or exceed the HUDestablished threshold for revisions to the Comprehensive Grant Program Annual Statement, where HUD has issued a notice, of deficiency or corrective action order in this functional area.
Authority Submission Requirement and HUD Approval The Authority shall submit a complete set of documents covering the contracting actions identified in paragraph 10.1, A. above. The HUD Field Office shall review the documents to ensure compliance with 24 CFR 85.36.
B. Comprehensive Grant Program (CGP) and HOPE VI Program The Authority shall submit to the HUD Field Office for prior HUD approval architect/engineer and other professional service contracts, construction solicitations, and contract modifications, where HUD imposes such requirements due to a notice of deficiency or corrective action order. C. HOPE VI Mixed Finance Development(Procurement of Developer) When the Authority is in the process of procurement of a developer, the Mixed Finance Development Rule, in 24 CFR 941 addresses the necessary HUD requirements. 121
Exemption From Pre-Award Review The Authority shall be exempt from the pre-award review required in paragraph 10.1, A. if the HUD Field Office determines that the Authorityâ€™s procurement system complies with the procurement standards required by HUD. [24 CFR 85.36(g)(3)] A.
The Authority may request that its procurement system be reviewed by the HUD Field Office to determine whether its system meets the HUD procurement standards in 24 CFR 85.36 in order for its system to be certified, thereby exempting the Authority from the procurement review requirements established by 24 CFR 85.36(g) and HUD program regulations.
B. The HUD Field Office shall perform any requested review during the next scheduled audit, survey or review to determine if the Authorityâ€™s procurement system complies with the standards of 24 CFR 85.36. The review shall be based on the indepth procurement review checklist in Handbook 7460.7, as revised. If warranted by the results of the review, the HUD Field Office shall grant such exemption and permit the Authority to self-certify its procurement system in the future, as provided in 24 CFR 85.36(g)(3)(ii). C.
Exemptions may be granted for a one-year period and will be automatically renewed each year unless the Authority is found in subsequent reviews to be in noncompliance with 24 CFR 85.36, or the Authority requests that the exemption be rescinded.
Comprehensive Grant Program (CGP) and HOPE VI Program A.
Thresholds for Contracting Actions Under the CGP and HOPE VI programs, HUD does not routinely establish dollar thresholds for prior HUD approval of contracting activities. Therefore, the Authority has no automatic thresholds for either, unless, HUD issues a notice of deficiency or a corrective action order in a functional area. In these cases, HUD would establish thresholds for the functional areas of the CGP and HOPE VI programs in progress.
Award Without Prior HUD Approval For contracting actions other than those identified in paragraph 10.1,A. above and where HUD has not established a threshold, the Authority may award a contract without prior HUD approval if the Contracting Officer determines that the following requirements have been met: 1. The solicitation and contract award were conducted in compliance with State or local laws and Federal requirements; and 2. The contractor is not on the lists of Parties Excluded from Federal Procurement or Non-procurement Programs; and
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 123 C.
Authority Submission and HUD Review and Approval Where approval is required under paragraph 10.1,A. the requirements of paragraph 10.1,A.,2. shall apply. Where HUD establishes a threshold under paragraph 10.1,A. the Authorityâ€™s submission and HUD review requirements as follows: 1.
Architect/Engineer and Other Professional Services Architect/engineer and other professional services contracts before award and contract modifications before issuance, the requirements set forth below apply for Authority submission and for HUD review and approval: a.
Authority Submission The Authority shall submit complete documents relating to the proposed contract award or modification to the HUD Field Office, Director, Office of Public Housing for prior review and approval.
HUD Review and Approval of Contracts After submittal, the HUD Engineer within 14 calendar days of receipt, should review the proposed contract and prepare a letter to the Authority, advising the Authority of any required changes or authorizing the Authority to proceed with execution. In order to assist in the HUD approval, the Authority should assure the proposed contract contains the following: 1) A clear statement of the specific services, including tasks, to be performed; 2)
A description of the methodology to be used in carrying out the services;
An identification of the type and frequency of written reports to be provided to the Authority,
A time frame for completion of all services that is related to and coordinated with the physical improvements;
A payment schedule that is related to the successful completion of specific tasks; and
A total cost that is fair and reasonable. Where the total cost exceeds the approved budget amount and adjustments can be made within the existing budget, the Authority shall be required to submit a budget revision.
c. HUD Review and Approval of Contract Modifications After submittal, the HUD Engineer within 14 calendar days of receipt should review the 123
proposed modification and prepare a letter to the Authority indicating approval, with or without revision, or the reasons for disapproval. 2.
Construction Contract Solicitations Construction contract solicitations before issuance of the Invitation for Bids (Exhibit 6), the requirements set forth below apply for Authority submission and for HUD review and approval: a. Authority Submission When required, the Authority shall submit complete construction (working drawings and construction specifications) and solicitation documents for each proposed construction contract to the HUD Field Office, Director, Office of Public Housing, for review and approval before issuing the solicitation. b.
HUD Review and Approval 1)
Review When submitted, the HUD Engineer should review the solicitation to ensure that it has been completed in accordance with prior conditions of approval imposed by HUD, meets the modernization and energy conservation standards, includes all mandatory clauses/provisions, and is ready for issuance. The HUD Engineer will work with the Authority and in some cases, its architect/engineer to reach agreement on any points in question.
Action The HUD Field Office should normally be completed and the Authority advised of the results within 14 calendar days of receipt of the solicitation. The HUD Engineer will prepare a letter to the Authority indicating approval, with or without modification, or the reasons for disapproval. 2)
Monitoring The HUD Engineer may periodically review copies of solicitations through a onsite review of Authority files. The review should determine whether the documents met the following criteria: 3)
Whether the particular work is subject to Davis-Bacon or HUD determined;
b) The construction documents accurately reflect HUD-approved work and meet the modernization and energy conservation standards; c) The solicitation is complete and includes all mandatory clauses/provisions, including correct wage rates and labor standards contract provisions; and d) The solicitation includes all necessary requirements related to lead-based paint abatement and physical accessibility.
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 125 3.
Construction Contract Modifications Construction contract modifications before issuance, the requirements set forth below apply for Authority submission and for HUD review and approval: a.Submission When required, the Authority shall submit complete documents relating to the proposed construction contract modification to the HUD Field Office, Attention: Director, Office of Public Housing, for review and approval before issuing the modification. b.
HUD Review and Approval 1)
Review When submitted, the HUD Engineer should conduct a prompt review because contract modifications often affect work progress. Where necessary, the HUD Engineer may submit the proposed Authority contract modifications to HUD Labor Relations staff for review, since a change in the scope of work may result in a change in the type of wage rate (from Davis-Bacon to HUDdetermined or vice versa).
Action The HUD Field Office should normally be completed and the Authority advised of the results within 14 calendar days of receipt of the solicitation. The HUD Engineer will prepare a letter to the Authority indicating approval, with or without modification, or the reasons for disapproval.
Monitoring Monitoring of construction contract modifications shall be performed in the same manner as for construction contracts.
Time Extensions The contractor is responsible for completing the work within the time established in the contract. However, the Authority may authorize any justifiable time extensions without prior HUD Field Office review and approval.
Construction Contract Settlement Documents Under the CGP and HOPE VI programs, HUD does not routinely require the Authority to submit construction contract settlement documents. However, where HUD issues a notice of deficiency or a corrective action order as covered by 10.1,A. above, HUD may impose the requirement for either or both of the programs in progress. In such cases, the following requirements apply: 5.
Authority Submission Where directed by HUD, the Authority shall submit to the Director, Office of Public Housing, a copy of all settlement documents, including the following: 125
Certificate of occupancy issued by the local agency responsible, where appropriate;
Assignment of all guarantees and warranties to the Authority,
The final HUD-51001, Periodical Estimate for Partial Payment;
One notarized original and two copies of the contractor's Certificate and Release (Exhibit 40, Sample Certificate and Release), which indicates that the work was completed in accordance with the construction contract (including contract modifications), except any minor items identified on the Authorityâ€™s proposed Certificate of Completion, the total amount due the contractor and a separately stated amount for each unsettled claim, a release of the Authority from all claims other than those stated in the release, and wages paid to laborers or mechanics complied with the contract and no outstanding claims for unpaid wages exist; and
5) The original and one copy of the proposed Certificate of Completion.
HUD Review and Approval When submitted, the HUD Engineer will conduct a review of the contract settlement documents. In order to recommend approval, the HUD Engineer will determine: that all work has been completed in accordance with the construction documents; the proposed Certificate of Completion (Exhibit 41, Sample Certificate of Completion) is acceptable; and the amount to be withheld from the contractor is sufficient to complete any items on the Authorityâ€™s punch list.
HUD Action Normally, the HUD review will be completed and the Authority advised of the results within 21 calendar days of receipt of the contract settlement documents. If the documents are in order, the Certificate of Completion will be returned to the Authority.
File Submission Each file submitted to HUD for review shall contain the documents necessary for HUD to assess the adequacy of the procurement. These documents include items such as the specifications, solicitations, independent cost estimates, abstract of bids or record of negotiations, bid guarantees, etc.
CHAPTER 11. STATE AND LOCAL LAWS ON PROCUREMENT 126
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 127
Common Rule The “common rule” on Housing Authority procurement *24 CFR 85.36(b)] provides that the Authority shall use its own procurement procedures that reflect applicable State and local laws and regulations, provided that they conform to applicable Federal law. Many States and localities have passed laws and regulations on public contracting procedures. These laws are not uniform across the States, so each Housing Authority needs to become familiar with those rules that apply in its local area. State procurement laws may be found in the various State Codes (also referred to as State Statutes).
State Law The Housing Authority needs to be aware of where the State procurement code applies to the Housing Authority. For instance, the Government Code of the State of California requires the selection of professional services which includes architectural, landscape architectural, engineering, environmental, land surveying or construction project management firms be procured by the Qualification–Based–Selection process. In the HUD regulations and most other states, the Qualification-Based-Selection process is limited to architect/engineers.
State Public Housing Laws The States have enacted laws creating Housing Authorities (which may also be referred to as "Local Housing Authorities," "Municipal Housing Authorities," "City Housing Authorities," "Regional Housing Authorities," "Consolidated Housing Authorities," or "Building Authorities," and there may also be a State Housing Authority (such as in Alaska). The State public housing laws generally describe the creation and operation of Housing Authority’s, but they occasionally include laws on procurement that should be adhered to in Housing Authority contracts. Accordingly, each the Housing Authority should maintain the latest version of its State's public housing code.
Local Laws In cases where the State procurement laws are not specifically applicable to the Housing Authority, any applicable local government laws on public contracts should be followed. To carry out its procurement function properly, the Housing Authority should maintain a copy of all such State and local laws affecting procurement and include their substance in the Housing Authority’s own procurement policies and operational procedures. C.
Common Areas of State Legislation on Procurement A.
General Typically, State laws on procurement fall into a few general categories of legislation. Some States have passed detailed "Procurement Codes," based on the American Bar Association's (ABA) Model Procurement Code for State and Local Governments. In these States, detailed procedures are included for nearly all key aspects of public contracting, from types of specifications to contract administration. State Procurement Codes are generally written for the central 127
State purchasing office; however, the provisions of the Code may be applicable to Housing Authority procurement, so it is essential that the Housing Authority obtain a copy of these laws to determine their applicability to its contracts. D.
Common Issues In some States, the laws on procurement are limited to a single issue, such as bonding. Other common areas of legislation are architect/engineer contracting, as several States have passed laws mandating the use of Qualifications-Based-Selection procedures rather than price competition. In the State of California, the Qualification-Based-Selection process is required for the selection of professional services which includes architectural, landscape architectural, engineering, environmental, land surveying or construction project management firms. Most States also have laws establishing a dollar limitation on small purchase procedures. Other areas of procurement legislation recently have included value engineering, noncompetitive contracting, prompt payment of contractor invoices, and limitations on change orders.
Common Areas of Local Laws or Regulations on Procurement In some States, there is much more concern about public contracting at the local level than at the State level, while in others there is a complex structure of both State and local laws on procurement, and in some States there is an absence of laws or regulations at either level. Most commonly, local jurisdictions pass ordinances an construction practices and bonding which the Housing Authority should follow. In some States, however, local governments have adopted detailed Procurement Ordinances based on the American Bar Association's Model Procurement Code for State and Local Governments, such as Knoxville, TN; Anchorage, AK, Eau Clair, WI; Rome, GA, Davenport, IA, Louisville, KY; Lansing, MI; Greeley, CO; Seminole County, FI, Alexandria, VA; Rockville, MD; Kansas City, KS; Kansas City, MO; Atlanta, GA; Boca Raton, FL, Richmond, IA; District of Columbia; Lake County, IL, and Guam. Again, it is important for the Housing Authority to become familiar with each local ordinance relating to procurement.
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 129 EXHIBIT 1 PURCHASE REQUISITION
EXHIBIT 2 PURCHASE ORDER
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 131 EXHIBIT 3 REQUEST FOR FUND ENCUMBRANCE FOR PLANNED CONTRACT ACTIVITY
EXHIBIT 4 PUBLIC NOTICE, ADVERTISEMENT
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 133 EXHIBIT 5 COST ESTIMATE
EXHIBIT 6 INVITATION FOR BIDS, INDEX
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 135 EXHIBIT 7 SAMPLE ADDENDUM
EXHIBIT 8 HUD-5369, INSTRUCTIONS TO BIDDERS FOR CONTRACTS
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 137 EXHIBIT 9 TRANSFER OF CONSTRUCTION ACTIVITY FROM ____________ TO CONTRACT/PROCUREMENT DIVISION
EXHIBIT 10 SAMPLE AWARD LETTER
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 139 EXHIBIT 11 SAMPLE BID BOND
EXHIBIT 12 SAMPLE PERFORMANCE BOND
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 141 EXHIBIT 13 SAMPLE PAYMENT BOND
EXHIBIT 14 FORM HUD-5370, GENERAL CONDITIONS FOR THE CONTRACT FOR CONSTRUCTION
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 143 EXHIBIT 15 REQUEST FOR PROPOSALS, INDEX
EXHIBIT 16 SAMPLE ADDENDUM
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 145 EXHIBIT 17 SAMPLE EVALUATION PLAN
EXHIBIT 18 REQUEST FOR QUALIFICATIONS
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 147 EXHIBIT 19 FORM HUD-51915, CONTRACT FOR DESIGN PROFESSIONAL
EXHIBIT 20 REQUEST FOR WAGE DETERMINATION
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 149 EXHIBIT 21 CERTIFIED PAYROLL AND COMPLIANCE STATEMENT
EXHIBIT 22 WH-347, PAYROLL FORM
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 151 EXHIBIT 23 FORM HUD-5369, REPRESENTATIONS, CERTIFICATIONS, AND OTHER STATEMENTS OF BIDDERS
EXHIBIT 24 HUD-5369-B, INSTRUCTIONS TO OFFERORS, NON-CONSTRUCTION
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 153 EXHIBIT 25 HUD-5369-C, CERTIFICATIONS AND REPRESENTATIONS OF OFFERORS, NON-CONSTRUCTION
EXHIBIT 26 HUD-5370-C, GENERAL CONTRACT CONDITIONS, NON-CONSTRUCTION
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 155 EXHIBIT 27 SAMPLE PRE-CONSTRUCTION CONFERENCE
EXHIBIT 28 SAMPLE NOTICE TO PROCEED
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 157 EXHIBIT 29 SAMPLE RECEIPT DOCUMENT
EXHIBIT 30 HUD-51000, SCHEDULE OF AMOUNTS FOR CONTRACT PAYMENTS
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 159 EXHIBIT 31 HUD-51001, PERIODIC ESTIMATE FOR PARTIAL PAYMENT
EXHIBIT 32 HUD-51002, SCHEDULE OF CHANGE ORDERS
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 161 EXHIBIT 33 HUD-51003, SCHEDULE OF MATERIALS STORED
EXHIBIT 34 HUD-51004, SUMMARY OF MATERIALS STORED
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 163 EXHIBIT 35 SAMPLE CONTRACTOR CERTIFICATE AND RELEASE
EXHIBIT 36 SAMPLE INSPECTION REPORT
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 165 EXHIBIT 37 SAMPLE CONSTRUCTION CHANGE ORDER
EXHIBIT 38 SAMPLE AMENDMENT
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 167 EXHIBIT 39 SAMPLE INCREASED ENCUMBRANCE PURCHASE ORDER
EXHIBIT 40 SAMPLE CERTIFICATE AND RELEASE
SAN FRANCISCO HOUSING AUTHORITY POLICY & PROCUREMENT MANUAL PAGE 169 EXHIBIT 41 SAMPLE CERTIFICATE OF COMPLETION