Contracts and Purchasing

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Contracts and Purchasing

• AASBO Certificate Program
• April 18 20, 2011
• David Smith

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Contracts and Purchasing

• Disclaimer The opinions expressed in this
  presentation are those of David Smith and are not
  meant to be a legal interpretation of the law.
  The material included in this presentation is
  dated as of April 2011 and is subject to change.
• Official interpretation of particular questions
  or situations should be obtained through the
  boards legal council, the Alabama Attorney
  Generals office or the Examiners of Public
  Accounts.

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Contracts and Purchasing

• Competitive Bid Law
• Public Works Law
• Request For Proposals ( RFP)
• Public Contracts

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Competitive Bid Law Legal Authority for Boards

• Code of Alabama 1975, Section 16-13B-1 through
  16-13B-11
• Applies to both County and City Boards of
  Education

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To What It Applies

• Applies to the expenditure of funds for labor,
  services and work involving 15,000 or more
• Applies to the purchase or lease of materials,
  equipment, supplies or other personal property
  involving 15,000 or more

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Legal Requirement

• Requires a contractual agreement entered into by
  free and open competitive bidding, on sealed
  bids, to the lowest responsible bidder.

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Joint Purchasing16-13-B-1

• Governing bodies of two or more boards (or county
  commission/municipality) may purchase jointly.
• Each governing body must approve joint purchasing
  agreement and details by resolution.
• A Joint Purchasing Agent may be designated.

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Length of Contract Terms

• Purchase or Service Contracts - limited to 3
  years
• Lease-Purchase Contracts for capital
  improvements, repairs to real property and other
  lease-purchase contracts - limited to 10 years

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Advertising Requirements

• Post notice on bulletin board outside purchasing
  department
• Can do morebut not required!

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Bid Lists

• Sealed bids shall also be solicited by sending
  notice by mail to all vendors who have filed a
  request in writing that they be listed on the bid
  list for the particular items being bid.
• If a vendor fails to respond to any solicitation
  after the receipt of three solicitations, the
  vendor may be removed from the bid listing.

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Sealed Bids and Documentation

• Must be sealed when received (except under
  reverse auction procedures)
• Opened in public at the hour stated in the notice
• All original bids and documents pertaining to the
  award of the contract shall be retained for a
  period of seven years from the date the bids are
  opened and shall be open to public inspection

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Bid Bonds/Cashiers Check

• Bid bonds are no longer required optional
• 16-13B-1(d)

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Items Exempt from Requirements

• Utility Service (rates fixed by law, regulation,
  or ordinance)
• Insurance

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Items Exempt from Requirements (cont.)

• Consultants
• Certified Public Accountants
• Public Accountants
• Others possessing a high degree of professional
  skill where the personality of the individual
  plays a decisive part.

• Professional Services
• Attorneys
• Physicians
• Architects
• Teachers
• Superintendents of Construction
• Artists
• Appraisers
• Engineers

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Items Exempt from Requirements (cont.)

• Manuscripts, Books, Maps, Pamphlets, or
  Periodicals
• Paying Agents/ Trustees
• Existing contracts for renewal of sanitation or
  solid waste collection, recycling, or disposal
  and those providing the service

• Regular Civil Service employment contracts
• Fiscal or Financial Advice or Services
• Products made by Alabama Inst. For Deaf and Blind
• Maps/Photographs from any federal agency

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Items Exempt from Requirements (cont.)

• Security Related Services/Products - contractual
  services and purchases of products related to, or
  having an impact upon, security plans,
  procedures, measures, or systems, or the security
  or safety of persons, structures, facilities, or
  infrastructures.
• Purchases of goods made as a part of any
  purchasing cooperative sponsored by the National
  Association of Counties.
• Act 2006-279
• U.S. Communities is the purchasing cooperative

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NACO Purchasing Cooperative (cont.)

• Purchases may only be made if all of the
  following occur
• The goods being purchased are available as a
  result of a competitive bid process approved by
  the Alabama Department of Examiners of Public
  Accounts of each bid.
• On May 31, 2006, Examiners communicated their
  approval of this competitive bidding process used
  by U. S. Communities.
• The goods are either not at the time available to
  local boards of education on the state purchasing
  program or are available at a price equal to or
  less than that on the state purchasing program.
• The purchase is made through a participating
  Alabama vendor holding an Alabama business
  license if such a vendor exists.

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Items Exempt from Requirements (cont.)

• Individual school purchases from monies other
  than those raised by taxation or received from
  state or county appropriations (i.e.,
  fundraisers, donations)
• May have board policy that requires bids
• Legislative Monies Bid law does apply

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Bid Lists

• Sealed bids or bids to be submitted by a reverse
  auction procedure shall also be solicited by
  sending notice by mail or other electronic means
  to all persons, firms, or corporations who have
  filed a request in writing that they be listed
  for solicitation on bids for the particular items
  that are set forth in the request.
• If a vendor whose name is listed fails to respond
  to any solicitation for bids after the receipt of
  three solicitations, the listing may be
  cancelled.

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Items to be considered when determining the
lowest bidder

• Qualities of the goods proposed to be supplied
• Conformity with specifications
• Purposes for which required
• Terms of delivery
• Transportation charges
• Dates of delivery

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Rejection of a Bid

• Awarding authority may reject a bid when the
  price is deemed excessive or the quality of
  product is inferior.
• Must document. If applicable, should announce
  budget.

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Documentation of Results

• To whom bid was awarded
• Reasons for not awarding to the lowest bidder
• Request legal council assistance
• Bid file shall be open for public inspection
• Document-Document-Document

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Emergencies

• Section 16-13B-3
• Must affect public health, safety or convenience,
  be declared in writing by the awarding authority,
  and such action and reasons should be immediately
  made public by the awarding authority.
• Contracts may be let to the extent necessary to
  meet the emergency without public advertisement.

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Only One Bid Received

• May accept bid or
• May reject the bid and negotiate the purchase or
  contract, provided the negotiated price is lower
  than the bid price.

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Splitting of Contracts

• No purchase or contract in excess of 15,000
  shall be divided into parts involving amounts of
  15,000 or less for the purpose of avoiding the
  requirements of the competitive bid law

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Resident Bidder Preferences

• Resident Bidder has a place of business within
  the local preference zone.
• Deemed to be a Responsible bidder.
• Bid is no more than 3 percent greater than the
  bid of the lowest responsible bidder.
• In this instance, contract may be awarded to the
  resident bidder.

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Procedures for Reverse Auction and Life-Cycle
Costs
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Legal Authority16-13-B-4

• Act Number 2008-379, Acts of Alabama
• Effective July 1, 2008 (January 1, 2009 for
  Reverse Auction Procedures and Life Cycle Costing)

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Reverse Auctions

• Beginning January 1, 2009, the awarding authority
  may make purchases or contracts through a reverse
  auction procedure.

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Examiners Shall Establish Procedures

• No later than November 30, 2008, the Department
  of Examiners of Public Accounts shall establish
  procedures for the use of reverse auction and
  life cycle costs, which shall be distributed to
  all contracting agencies and shall be used in
  conducting any audits of the purchasing agency.
• Procedures posted on Examiners website at
• www.examiners.state.al.us

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Definition of Reverse Auction

• A reverse auction is a purchasing process in
  which offerors (suppliers) submit bids in
  competition to sell services or supplies in an
  open environment via the internet the auction is
  an invitation-only, timed event.

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Methods of Handling Reverse Auctions

• Acquire necessary software to conduct the auction
  on an in-house basis
• Contract with a commercial auction host to
  conduct the auction as an agent
• Participate through a regional, state, or
  national purchasing cooperative

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Bidding Process

• A real-time bidding process, usually lasting less
  than one hour and taking place at a previously
  scheduled time and Internet location, in which
  multiple anonymous suppliers submit bids to
  provide the designated goods or services.
• A bidding process usually lasting less than two
  weeks and taking place during a previously
  scheduled period and at a previously scheduled
  Internet location in which multiple anonymous
  suppliers submit bids to provide the designated
  goods or services.

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Use of Reverse Auction Allowed if..

• The item to be purchased at a reverse auction is
  either not at the time available on the state
  purchasing program under the same terms and
  conditions, OR,
• If available, the lowest price offered in the
  reverse auction is equal to or less than the
  price for which the item is available on the
  state purchasing program under the same terms and
  conditions

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Solicitation of Bids

• Advertised in any manner and for any length of
  time as may be determined
• Notice must be sent by mail or other electronic
  means to all persons, firms, or corporations who
  have filed a request in writing that they be
  listed for solicitation on bids for the
  particular items that are set forth in the
  request may be removed from listing after three
  non-responses
• Notification shall include the scheduled time and
  internet location

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Bid Specifications

• Clear and concise bid specifications must be
  developed
• Brand name or equal specification used for the
  purpose of describing the base standard of
  quality, performance and characteristics not to
  limit or restrict competition

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Pre-Screening of Bidders

• Bidders may be pre-screened at the option of the
  awarding authority ensures only responsible
  parties submit bids
• Pre-screening must be documented in bid file
• Prospective bidders should submit a notification
  of intent to bid in a sealed envelope noting the
  bid number on the outer envelope to the awarding
  authority/agent within an appropriate time frame
  as specified by the awarding authority

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Reverse Auction Process

• Contact person should be designated to answer
  questions from suppliers regarding the reverse
  auction process
• Online instructions should be provided to bidders
• Bidders will be notified of the start of the
  reverse auction through an electronic
  notification
• Auction will conclude at the previously scheduled
  stop time
• Awarding authority is responsible for providing a
  secure location and/or website to the reverse
  auction

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Record of Auction

• An event record of the auction should be
  maintained by the awarding authority that will
  include the prices offered by the bidders should
  be part of the contract documents/public record
  at the conclusion of the event
• Event record must disclose the beginning and
  ending times of the auctions
• Bid documents must be retained 7 years in
  accordance with the Alabama Competitive Bid Law

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Price Submittals

• Bidders may submit multiple prices during the
  event
• The lowest price offered will become the price
  portion of the bid response

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Award of Contract

• Contracts will be awarded to the lowest
  responsible bidder as provided by the Alabama
  Competitive Bid Law

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Tie Bids

• In the event that multiple bidders submit
  identical prices for the same goods or services,
  the bid received first will be considered to be
  the lowest.
• Any other identical bids received later will be
  considered in the order received.

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Public Viewing of Auction Event

• The public may attend the internet auction event
  which will be conducted such that the names of
  the bidders will not be disclosed until after the
  completion of the auction, at which time the
  event record will be available to the public

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Life Cycle Cost Analysis

• A method for evaluating all relevant costs over
  the time of a project, product, or measure.

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What are Life Cycle Costs?

• The total cost of ownership over the expected
  life of an item
• First Costs (Acquisition Costs) capital
  investment costs, purchase and installation costs
• Future Costs (Sustaining Costs) energy costs,
  operating costs, maintenance costs, capital
  replacement costs, and financing costs any
  resale, salvage or disposal cost

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Legal Authority

• The awarding authority may use life cycle cost
  analysis for personal property purchases as
  provided by Code of Alabama 1975, Section
  16-13B-7 (c) (1).
• Not allowed for the purchase of real property

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Purchases Below 15,000 Threshold

• Develop written procedures
• amount for written quotes
• Define number of quotes
• Example-
• Purchases between 5,000-15,000 require two
  written quotes from vendors
• Below 5,000 require two phone quotes
• Transparency/Good Business Practices
• When in doubt Bid It

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Competitive Bid LawQuestions ???

• When faced with questions- Seek advice
• Legal Council
• Examiners of Public Accounts
• AG Opinions

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Public Works LawTitle 39 Code of Alabama

• Applies to any governmental board, commission,
  agency, body, authority, instrumentality,
  department, or subdivision of the state, its
  counties and municipalities.

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Public Works Law (cont.)

• Applies to any construction, repair, renovation,
  or maintenance of public buildings, structures,
  sewers, waterworks, roads, bridges, docks,
  underpasses, and viaducts as well as any other
  improvement to be constructed, repaired,
  renovated, or maintained on public property and
  to be paid, in whole or part, with public funds
  or with financing to be retired with public funds
  in the form of lease payments or otherwise.

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Expenditure Threshold

• 50,000
• Section 39-2-2 (a) No public workinvolving a
  sum in excess of 50,000 shall be split into
  parts involving sums of 50,000 or less for the
  purposes of evading the requirements of this
  section.

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Advertising Requirements

• Advertise in a newspaper of general circulation
  in the county - once each week for three
  consecutive weeks
• Additional requirement for contracts over
  500,000 - once in 3 (additional) newspapers of
  general circulation throughout the state

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Public Works Law

• Receive one bid-May negotiate downward
• No provision for in county or in state
  contractors ( Section 39-3-5)
• Reciprocal law- Nonresident bidders subject to
  same preference granted to Alabama bidders
  bidding in their state (Question- contact
  building commission)

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Provisions for Mistakes by Vendors

• Clerical or calculation errors - low bidder must
  provide written notice of withdrawals within 3
  days
• Withdrawing bidder cannot work on project in any
  way

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Project Completion

• Contractor must give notice of project completion
  by advertising 4 successive weeks in a newspaper
  of general circulation published in the county

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Provisions for Retainage

• No more than 5 of estimated work done and value
  of materials shall be retained up to 50 of work
  completed
• No additional retainage withheld after 50 of
  work completed
• Retainage held until project completion and
  acceptance

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Professional Services

• Architects, Engineering, Project Management
  Services - exempted from the bid process
• Should do RFP for professional services

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Emergencies

• No advertising required
• Must still follow other requirements - per Code
  39-2-2(e)

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Contract Documentswww.bc.alabama.gov
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Contract Documents
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Contract Documents
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Project Under 50,000

• Request for quotes/estimates
• In writing
• District letterhead
• Define scope of work
• Require license /insurance
• Signed estimates
• Signed contract
• Treat like a bid without advertising
  requirements

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• Purchasing Procedures
• Centralized Purchasing
• One person should be responsible for the
  purchasing function
• Knowledge of laws and procedures governing
  procurement
• Knowledge of quantity and quality of goods or
  services needed by the district
• Knowledge of department budgets and account codes
• Independent of departmental preferences for
  particular product or vendor

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• Centralized purchasing
• Maintains files for all bids and contracts
• Tracks purchases of fixed assets
• Inventory control
• Risk Management
• Building Insurance
• General Liability
• Vehicles

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• Develop a Purchasing Policy and Procedure Manual
• Written procedures on the procurement process for
  the school district
• Employees
• Vendors

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• Purchasing Policy and Procedure Manual
• Procedures for processing of requisitions
• thresholds
• Approval process
• CIS Funds
• Emergency purchases

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• Purchasing Policy and Procedure Manual
• Bidding Procedures
• Thresholds
• Competitive bid law
• Public Works Law
• Bidding Process
• Time line
• Development of specs
• Advertisement
• Pre-Bid Conferences
• Recommended on all bids
• Insurance/license requirements for vendors

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Developing Specifications

• Objectives
• Provide best value for tax payers dollars
• Compliance with legal statutes
• Purchase of appropriate products and services at
  best pricing
• Provide fair competition for all vendors
• Provide service to all internal users

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Specifications

• Types of Specifications
• Qualified Products List (QPC)
• List of products that meet specs
• Design Specs
• Professional Architect/Engineer Drawings and
  Specifications
• Performance Specs
• What product must do or what end result will be
  produced

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Specifications

• Item Specifications
• Specific information that clearly states the
  level of quality and performance
• Statement of Work (SOW) and/or Services
• Performance based you tell the contractor what
  to do, but not how to do it

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• Recommended purchasing practices
• Have pre-bid on all contracts
• Utilize purchasing co-ops
• US Communities
• Regional co-ops
• State Bids
• Joint purchasing contracts
• RFP for professional services
• Banking, Engineers, Architects

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Specifications

• Who should be involved?
• Knowledgeable Users
• Vendors
• Professionals
• Finance
• Other Agencies
• Purchasing
• Legal?

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• Recommended purchasing practices
• Use technology to improve procurement
• Use procurement/purchasing cards
• Maintenance/Operations
• Departmental Supervisors
• Principals
• Teachers
• Booster Clubs

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Specifications

• Specification Q A
• Clear
• What to do, how to perform, timing, etc.
• Fair to allow appropriate competition
• Provide sufficient detail to communicate what is
  expected
• All aspects included? (insurance, warranty,
  delivery, installation, cleanup)
• Allow for significant level of evaluation

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Specifications

• Insurance
• Workmans Comp
• Vehicle/Equipment
• General Liability
• Bonds Required?
• Amounts Sufficient for Level Needed?

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Specifications

• Freight
• Freight on Board (FOB) Destination
• Seller arranges, pays and insures
• FOB Destination Freight Collect
• Buyer pays freight but seller owns
• FOB Origin
• Buyer accepts ownership at origin
• (Not recommended unless employee picking up)

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Specifications

• Warranty
• Duration
• Months, Years, Extended
• Start Date
• At installation or delivery
• Whats Covered
• Full body or limited, installation
• Extended Options Available
• What is covered and at what cost?

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Contracts

• Purpose
• Sets up requirements and obligations of all
  parties
• Properly executed, binds all parties
• Legal Compliance and Authority
• Set out any special terms and conditions

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Contracts

• Contract Types
• General Operations (fundraisers, vendor)
• Bid Contract/Agreement
• Construction
• Professional Services
• Statement of Work
• Others

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Purchasing Cards

• Benefits
• stream line the purchasing process
• teachers will benefit from the optimal
  purchasing power for incidental expenses
• reduce (not do away with) the purchase order
  paperwork

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• Benefits
• increase budget control and internal control
• provide better reporting in terms of
  who/what/when/how much
• reduce the costs of procurement
• reduce the costs of payments

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Purchasing Cards

• Setting Up The Program
• AASBO Program
• Purchasing Card Agreement
• Appendix A
• Procedures
• Appendix B

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Conflict of Interest

• Alabama Ethics Law
• Code of Alabama
• (Section 36-25-1- 36-25-30)
• Conflict of Interest (Defined)- A conflict on
  the part of a public official/public employee
  between his/her private interest and the official
  responsibilities inherent in an office of public
  trust

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Conflict of Interest

• Does it meet the smell test
• Always check with your Board Attorney
• Contact the Ethics Commission
• When In Doubt Bid It

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Conflict of Interest

• A conflict of interest shall exist when a public
  official has a substantial financial interest by
  reason of ownership, control or the exercise of
  power over any interest greater than 5. (
  36-25-5 (f))

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Request For Proposal

• Usually done for professional services exempt
  under bid law
• Architects, engineers, auditors, banking services
  etc.
• Written request with services defined

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Questions?Contracts and Purchasing AASBO
Certificate ProgramApril 18 20, 2011David
Smith