Award of a Contract without Engaging in a Standard Procurement Process - PowerPoint Presentation

1. Award of a Contract without Engaging in a Standard Procurement Process Transitional Costs& Trial Use ContractsThursday, June 15, 2017 SK

2. AgendaDefining Transitional CostsExample – Transitional CostProcurement Code and Rules on Transitional CostsUtah Code 63G-6a-802Administrative Rule R33-8-101bUtah Code 63G-6a-103(94)Best Practices for Transitional Cost AnalysisTrial Use ContractsUtah Code 63G-6a-802.3Utah Code 63G-6a-103(95)

3. What are Transitional Costs?Defined: the cost of changing:From an existing provider of a procurement item to another provider of that procurement item; or From an existing type of procurement item to another type. Utah Procurement Code 63G-6a-103(94)

4. Competing Type of Procurement ItemDefined: a type of procurement item that is the same, equivalent, or superior to the existing type of procurement item currently under contract in all material aspects including:(i) performance;(ii) specifications;(iii) scope of work; and(iv) provider qualifications, certifications, and licensing.Utah Administrative Rule R33-8-101b(1)(a)

5. Example – G suite by Google CloudBusiness License: $10 per user per monthSpecifications: Business email; Video and voice conferencing; Smart shared calendars; Documents, spreadsheets, and presentations; 24/7 support by phone, email, and online; Security and administration controls; Unlimited cloud storage (or 1TB per user if fewer than 5 users); Archive and set retention policies for emails and chats; eDiscovery for emails, chats, and files; Audit reports to track user activity.

6. Utah Code 63G-6a-802The chief procurement officer may award a contract for a procurement item without engaging in a standard procurement process if the CPO determines in writing that:(a) there is only one source for the procurement item;(b) (i) transitional costs are a significant consideration in selecting a procurement item; and(ii) the results of a cost-benefit analysis demonstrate that transitional costs are unreasonable or cost-prohibitive, and that the award of a contract without engaging in a standard procurement process is in the best interest of the procurement unit; or(c) the award of a contract is under circumstances, described in rules adopted by the applicable rulemaking authority, that make awarding the contract through a standard procurement process impractical and not in the best interest of the procurement unit.

7. Utah Code 63G-6a-802(1)(b)Transitional Cost Requirements:Transitional costs are a significant consideration in selecting a procurement item;The results of a cost-benefit analysis demonstrate that transitional costs are unreasonable or cost-prohibitive; andthat the award of a contract without engaging in a standard procurement process is in the best interest of the procurement unit.

8. Are Transitional Costs are Unreasonable or Cost-Prohibitive?"Significant", "unreasonable or cost-prohibitive" transitional costs are defined as costs associated with changing from an existing provider of a procurement item to another provider of that procurement item or from an existing type of procurement item to another type that:(i) constitute a measurably large amount that would likely have an influence or effect on the award of a contract if a competitive procurement were to be conducted for the procurement item being considered; and(ii) provides a compelling justification for not conducting a competitive standard procurement process.Administrative Rule R33-8-101b(c)

9. Example – G suite by Google CloudG Suite License: $10 per user per monthCompetitor: $13 per user per month$3.00 (or 30%) cost increase from competitorAre transitional costs unreasonable or cost-prohibitive?

10. Transitional Costs that must be included in Cost-Benefit AnalysisCosts that are directly associated with changing from an existing provider of a procurement item to a competing provider of that procurement item or from an existing type of procurement item to a competing type of procurement item; andA full lifecycle cost analysis of the existing type of procurement item and competing type of procurement items in order to determine which procurement item is more cost-effective.Utah Administrative Rule R33-8-101b(2)(c)

11. Transitional Costs that may be included in Cost-Benefit AnalysisCosts identified in Subsection 63G-6a-103(94)(b)(i) training costs;(ii) conversion costs;(iii) compatibility costs;(iv) costs associated with system downtime;(v) disruption of service costs;(vi) staff time necessary to implement the change;(vii) installation costs; and(viii) ancillary software, hardware, equipment, or construction costs.Utah Administrative Rule R33-8-101b(2)(c)

12. Transitional Costs that may be included in Cost-Benefit AnalysisCosts offered by a competing provider(s) for a competing type of procurement item in a competitive bid or RFP process conducted within the last 12 months;Costs offered by a competing provider(s) for a competing type of procurement item in a competitive bid or RFP process conducted prior to the most recent 12 months, updated using an applicable price index;Written cost estimates obtained by the conducting procurement unit from a competing provider(s) for a competing type of procurement item; andOther transitional costs determined to be applicable by the chief procurement officer or head of a procurement unit with independent procurement authority.Utah Administrative Rule R33-8-101b(2)(c)

13. Transitional Costs that may not be Considered in a Cost-Benefit AnalysisCosts prohibited in Subsection 63G-6a-103(95)(c):the costs of preparing for or engaging in a procurement process; orcontract negotiation or drafting costs.Data provided by the existing provider for the purpose of establishing:the market value of the existing type of procurement item; ora competing provider's price for a competing type of procurement item;Costs associated with any other procurement item other than the existing type of procurement item or a competing type of procurement item;Non-monetary factors, such as the provider's performance, agency preference, and other data or information not specific to the transitional costs associated with the existing type of procurement item or a competing type of procurement item;Utah Administrative Rule R33-8-101b(2)(c)

14. Transitional Costs that may not be Considered in a Cost-Benefit Analysis (cont.)Factors other than the monetary transitional costs directly associated with changing from an existing provider of a procurement item to a competing provider of that procurement item or from an existing type of procurement item to a competing type of procurement item; andOther transitional costs or other information deemed inappropriate by the chief procurement officer or head of a procurement unit with independent procurement authority.Utah Administrative Rule R33-8-101b(2)(c)

15. Required DocumentationThe conducting procurement unit shall complete a written cost-benefit analysis and submit it to the issuing procurement unit for approval.Publication required if procurement exceeds $50,000 (R33-8-101e).The cost-benefit analysis should not be overly time-consuming to complete or involve hiring costly consultants or financial analysts.Utah Administrative Rule R33-8-101b(5)-(6)

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19. Best Practices for Transitional CostsUnderstand the Procurement Code and RulesUtah Code 63G-6a-802Administrative Rule R33-8-101bUtah Code 63G-6a-103(94)All transitional costs must be documented.Ensure stated transition costs are legitimate and comparable? Comparing “apples” to “apples”Transition cost supported by comparable contract, vendor quote, etc.Sunk costs are NOT part of the cost-benefit analysis

20. Best Practices for Transitional Costs (cont.)Every procurement is different and unique – every transitional cost situation requires analysis.Understand the industry where your procurement resides.Commoditized Goods vs. Services vs. Information TechnologyRecognize – one of the best ways to demonstrate your Transitional Cost analysis is through a standard procurement process (IFB, RFP, AVL, Small Purchase, or Design Professional).

21. Trial Use ContractsTrial Use Contract – means a contract for a for a procurement item that the procurement unit acquires for a trial use or testing to determine whether the procurement item will benefit the procurement unit. Utah Code 63G-6a-103(95).

22. Trial Use Contracts (cont.)Procurement unit may award a trial use contract without engaging in a standard procurement process if the contract is:(a) awarded for a procurement item that is not already available to the procurement unit under an existing contract;(b) restricted to the procurement of a procurement item in the minimum quantity and for the minimum period of time necessary to test the procurement item;(c) the only trial use contract for that procurement unit for the same procurement item; and(d) not used to circumvent the purposes and policies of this chapter as set forth in Section 63G-6a-102.Utah Code 63G-6a-802.3(1)

23. Trial Use Contract ConsiderationsTrial Use contract may not exceed 18 months, unless exception is granted. Publication not required Utah Code 63G-6a-802.3(2),(4)Transitional costs associated with a trial use or testing of a procurement item under a trial use contract may not be included in a consideration of transitional costs. Utah Code 63G-6a-802(2)