Final
STAFF SUMMARY OF MEETING
STATE PROCUREMENT PROCESS
Date:
08/09/2005
ATTENDANCE
Time:
09:04 AM
to
03:55 PM
Adams
X
Felice
X
Place:
HCR 0112
Garcia
X
Hanna
E
This Meeting was called to order by
Houlihan
X
Senator
Groff
Kerr
X
Liston
X
This Report was prepared by
Marshall
X
Marc Carey
Owen
X
Takis
X
Teck
X
Terry
X
Weissmann
X
Groff
X
X = Present, E = Excused, A = Absent, * = Present after roll call
Bills Addressed:
Action Taken:
2nd Meeting of the State Procurement Committee
Department of Health Care Policy and Financing
Higher Education Presentation
Administrative Issues
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9:04 AM - Call to Order
Senator Groff, chair, called the meeting to order and reviewed the day's agenda. He noted that Senator Hanna would not be attending, as she was in Durango with another committee.
9:06 AM - Presentation on Department of Health Care Policy and Financing
Senator Groff called Karen Reinertson, Executive Director of the Department of Health Care Policy and Financing to the table. When she did not appear, Senator Groff called committee members' attention to a letter that he had received from Governor Owens (Attachment A). The letter stated that members of the administration would not be testifying before the committee. Senator Groff noted that he had spoken with each of the executive directors scheduled to testify, and that they were enthusiastic about appearing before the committee to discuss the procurement process and their departments' experiences. Senator Groff noted how disappointed he was that Governor Owens had decided to prohibit the participation of executive departments other than the Department of Personnel and Administration.
Senator Groff stated that he would leave it to the pleasure of the committee for further direction. He noted that Mr. Wells, in his testimony on August 8, had explained how decentralized the process was, and that while he couldn't be specific regarding individual departments, he was willing to come back and attempt to answer questions. Senator Groff stated that committee members would at least be given the opportunity to put any questions they had for specific departments on the public record.
Representative Marshall noted that the Governor's letter states that Jeff Wells is responsible for overall state procurement, but he would not have specific information on departments given the decentralized nature of Colorado's procurement system. Director Wells had noted on August 8 that there were $258 million in sole source contracts last year, and Representative Marshall was concerned that the legislature had no idea how that money was spent. Representative Marshall wondered about the committee's ability to compel the other executive directors to testify. Senator Groff stated that this committee, because of it's non-legislative members, did not have subpoena power.
Senator Takis noted that with the variety of information technology contracts across state departments, she thought it would be useful to compare notes across departments in an effort to identify what lessons had been learned. If the committee's focus was increasing efficiency and saving taxpayer dollars, a review of past experiences was a good place to start. None of the testimony on August 8 touched on reviewing past contracting experiences.
Representative Garcia commented that since it was impossible for Director Wells to know everything with regard to procurement practices of all departments, he didn't feel that it would be productive to invite him back. He was already on record as saying that he didn't have all the knowledge or expertise to answer procurement questions for all state agencies.
Senator Groff closed by stating that since Governor Owens would not allow members of his administration to testify before the committee, in January when the legislature reconvenes, President Fitz-Gerald will appoint members of a select committee on procurement to study issues specific to executive departments and their contracting practices. The select committee will force members of the administration to testify before the General Assembly on procurement issues.
9:20 AM – Committee recess until 3:00 p.m.
2:59 PM
- Reconvene
Senator Groff called the committee back to order, and noted that the previously scheduled meeting for August 23 has been canceled. All agenda items for that day will be moved to the August 22 committee meeting, which will begin at 9:00 am. There will also be a break at 10:00 for the Senate Republican caucus.
3:02 PM -- Higher Education Presentation
Ed Bowditch, Vice Chancellor for Administrative Affairs at Colorado State University, and Steve Schwartz, Vice President for Finance and Administration at Fort Lewis College, provided background on their two institutions. Colorado State University consists of a Fort Collins campus with about 25,000 students and a Pueblo campus with about 4,500 students. The university also maintains agricultural extension and state forest service facilities throughout the state. Fort Lewis College is an undergraduate, liberal arts institution with about 4,000 students, located just outside of Durango. Part of their mission is to educate Native Americans, and they currently enroll about 800 Native American students. Unlike Colorado State, Fort Lewis has no affiliate services.
3:05 -- Colorado State University Presentation
John Utterback, Director of Purchasing at Colorado State University, explained that the university's purchasing office employs seven purchasing agents. They also use the state procurement card, and have an administrative support staff. The office operates under the state procurement code and fiscal rules, and uses BIDS to identify vendors. While BIDS generally provides adequate vendor competition, they can also declare inadequate competition, and search out additional vendors if necessary. BIDS is now a "push-out" system in the sense that, if a vendor signs up in a particular category, they receive an email when the university solicits a bid. Last year, the office did about 4,000 purchase orders for a total of $90 million, 716 contracts for a total of $13 million, and about $32 million on their procurement card program (transactions under the $3,000 level). The vast majority of transactions contracts do not exceed $50,000. Such transactions are delegated to purchasing agents on staff. Mr. Utterback then reviewed a checklist that his purchasing agents use, and noted each contract over $50,000 is reviewed by general council.
Representative Weissmann asked Mr. Utterback to walk the committee through a purchasing example, such as a department ordering $30,000 worth of research equipment. Mr. Utterback responded that once the purchase has been approved, his office would accept the requisition, and put it out for bid depending on dollar level. At $30,000, a competitive documented quote would likely be used. Representative Weissmann asked who is responsible if problems arose with contract fulfillment. Mr. Utterback reiterated that his office is responsible for putting the requisition out for bid and executing the contract. The specific department is responsible for managing the contract and addressing any problems that arise. He is unaware of many vendor disputes.
Senator Teck asked why Colorado State has chosen not to exempt itself from the state procurement system. Mr. Utterback responded that he had interviewed all business officers associated with each college, and all supported remaining in the existing system. While exemption could provide additional cooperative buying opportunities, overall, he thought they were better off remaining in the system. He thought that vendors and contractors would be confused if more institutions built their own procurement processes, and that vendors with a grievance really appreciated the existing protest system (instead of having to go directly to court).
Representative Marshall requested that Mr. Utterback discuss his experience with personal service contracts. Mr. Utterback responded that in his office, such contracts are mostly with consultants hired to assess the academic performance of specific departmental programs or research activities. Institutions of higher education, in contrast to some executive agencies, do not typically contract work to private firms.
Senator Groff requested more detail on the checklist used by purchasing agents at Colorado State. Mr. Utterback stated that the checklist was taken from the state contract manual and customized for the university's use. Senator Groff then asked how the university declares and rectifies noncompetitive situations. Mr. Utterback responded that from BIDS, they can discern if there is an adequate number (usually three or more) of bidders in a particular product or service category. With less than three, they typically search out other vendors. No state guidelines exist for seeking additional vendors.
Senator Owen asked for any recommendations for improving the procurement system. Mr. Utterback responded that many people are already working on a continual basis to improve the system. For example, he is a member of the executive committee of the Purchasing Advisory Council. This committee meets monthly to try and identify rule changes that would increase the system's efficiency. One of their recommendations was the change in the limit for documented quotes from $50,000 to $150,000. This change allows for much quicker turn around, and the use of selection criteria other than price. Mr. Utterback stated that the vendor community was very supportive of this change.
Senator Owen asked if Colorado State ever did selective contracting in the sense of not accepting the lowest bid. Mr. Utterback responded that they do consider other factors than price in making contract awards. Senator Owen then asked who is on executive committee of the Purchasing Advisory Council. Mr. Utterback responded that the committee is elected from 27 or 28 purchasing agencies within state. The purchasing directors from these agencies are represented by seven executive members that meet monthly. The Attorney General's office is involved in the Colorado Contract Improvement Team, and the two groups share membership and interact regularly.
Senator Groff then asked whether there were state guidelines regarding the other factors that could be used as selection criteria. Mr. Utterback responded that such guidelines did exist, and allow the use of factors such as product features, additional services and quality. While it is important to let vendors know ahead of time which selection criteria will be used, they do not always reveal how the criteria will be weighted.
3:20 PM -- Presentation from Fort Lewis College
Wayne Hermes, Purchasing Director for the college, stated that Fort Lewis is leaning towards opting out of the state purchasing system in an effort to attain additional flexibility. Because they are a small college in a fairly isolated town, they would greatly benefit from the ability to work with local contractors. Because any commodity purchase above $10,000 is required to be put on the BIDS system, and registration on BIDS costs only $30, it is often hard to know which specific vendors are responsible and trustworthy. On BIDS, larger Denver contractors will often get the award because their higher volume allows lower per unit prices. This does not include the additional costs of working with someone from a distance. Fort Lewis is also interested in supporting businesses from the local community, because they often find they have to approach these same businesses for fund-raising events. This type of good will is worth it, even if it costs a bit more. Opting out would also allow them to use other agencies such as the Educational & Institutional Cooperative, a cooperative of higher education institutions that bids contracts nationwide, without having to obtain special approval. They could still use the state's price agreements, and utilize the BIDS system if they wished.
To illustrate, Mr. Hermes used the example of recent procurement of equipment for their concert hall. He felt that it was large enough that it had to be placed on BIDS, but did not receive enough competition. They wasted two weeks on BIDS, when in fact they already had a list of potential vendors that might be interested, but were not registered on BIDS. Fort Lewis has also had the reverse experience, where they did not think they could get enough competition through BIDS, so they solicited other bids on their own. Then, the BIDS solicitation did provide two offers, and the state rules will not allow you to accept outside bids, even though they were better. For a small school in rural area that awards primarily small contracts (rarely over $50,000), the BIDS system is too restrictive.
Representative Weissmann asked about the method of communication to other agencies when Fort Lewis has a bad experience with a vendor. Mr. Hermes responded that he always notifies the state purchasing office, but that he does not know what happens to that information.
Mr. Houlihan asked whether either the executive committee of the Purchasing Advisory Council or the Colorado Contract Improvement Team publish reports or minutes from their meetings. Mr. Hermes responded that the Colorado Contract Improvement Team puts out its minutes in a small quarterly report. The executive committee of the Purchasing Advisory Council distributes meeting minutes to members, but not to general readership.
Senator Owen asked for any recommendations for improving the state procurement system. Mr. Hermes responded that the biggest issues with the BIDS system is that it is a pay as you go as opposed to a notification system. If instead it was primarily a notification system and not the only means to notify, you would provide a lot more flexibility to purchasing agents. Many vendors, especially those that are out-of-state or are very large (such as Microsoft) are not interested in paying $35 to register. Their attitude is that if you want to do business with them, you will find them. If you were to take away the registration charge and make it only a notification system, BIDS would no longer be the required first source, and purchasing agents could pursue competition both on and off BIDS from the beginning.
Senator Groff asked if Fort Lewis was choosing to opt out and simultaneously give a preference to Colorado companies or companies located in its area. Mr. Hermes responded that the problem with preferences that take the form of price discounts is that you always end up with reciprocal preferences from other states. Mr. Hermes could see limiting a procurement to a subset of local vendors for convenience reasons. Senator Groff then asked whether Fort Lewis College shared information with the National Association of Educational Buyers (NAEB) or other institutions in Colorado. Mr. Hermes responded that the NAEB had a great listserve, and that it was a great way to communicate with procurement officers of other institutions. Senator Groff asked if Fort Lewis uses a checklist similar to the one used by Colorado State. Mr. Hermes responded that since he was the final reviewer in his office he did not use a formal checklist.
3:48 PM – Public testimony
Nobody had signed up to testify.
3:49 PM -- Administrative Issues
Senator Groff noted that the committee would meet again on August 22. Staff was asked to provide information from other states in the area of procurement policy. Senator Teck noted that he thought it would be interesting to hear from someone knowledgeable with government procurement from a large private organization. He added many issues are similar, and an idea no one had thought of applying to the public sector might be raised. Senator Takis suggested that the committee invite a representative from the local General Services Administration office who would be familiar with federal procurement. Representative Garcia noted that until a special select committee is officially appointed, he would like this committee to move forward.
3:55 PM
Adjourn.
9:06 AM - Presentation on Department of Health Care Policy and Financing
Senator Groff called Karen Reinertson, Executive Director of the Department of Health Care Policy and Financing to the table. When she did not appear, Senator Groff called committee members' attention to a letter that he had received from Governor Owens (Attachment A). The letter stated that members of the administration would not be testifying before the committee. Senator Groff noted that he had spoken with each of the executive directors scheduled to testify, and that they were enthusiastic about appearing before the committee to discuss the procurement process and their departments' experiences. Senator Groff noted how disappointed he was that Governor Owens had decided to prohibit the participation of executive departments other than the Department of Personnel and Administration.
Senator Groff stated that he would leave it to the pleasure of the committee for further direction. He noted that Mr. Wells, in his testimony on August 8, had explained how decentralized the process was, and that while he couldn't be specific regarding individual departments, he was willing to come back and attempt to answer questions. Senator Groff stated that committee members would at least be given the opportunity to put any questions they had for specific departments on the public record.
Representative Marshall noted that the Governor's letter states that Jeff Wells is responsible for overall state procurement, but he would not have specific information on departments given the decentralized nature of Colorado's procurement system. Director Wells had noted on August 8 that there were $258 million in sole source contracts last year, and Representative Marshall was concerned that the legislature had no idea how that money was spent. Representative Marshall wondered about the committee's ability to compel the other executive directors to testify. Senator Groff stated that this committee, because of it's non-legislative members, did not have subpoena power.
Senator Takis noted that with the variety of information technology contracts across state departments, she thought it would be useful to compare notes across departments in an effort to identify what lessons had been learned. If the committee's focus was increasing efficiency and saving taxpayer dollars, a review of past experiences was a good place to start. None of the testimony on August 8 touched on reviewing past contracting experiences.
Representative Garcia commented that since it was impossible for Director Wells to know everything with regard to procurement practices of all departments, he didn't feel that it would be productive to invite him back. He was already on record as saying that he didn't have all the knowledge or expertise to answer procurement questions for all state agencies.
Senator Groff closed by stating that since Governor Owens would not allow members of his administration to testify before the committee, in January when the legislature reconvenes, President Fitz-Gerald will appoint members of a select committee on procurement to study issues specific to executive departments and their contracting practices. The select committee will force members of the administration to testify before the General Assembly on procurement issues.
9:20 AM – Committee recess until 3:00 p.m.