Office of the State Comptroller - PowerPoint Presentation

Office of the State ComptrollerPUBLIC CONTRACTS LAW AND REGULATIONSnew jersey association of school business officialsOctober 8, 2019 and October 15, 2019 Alysia Walsh, Esq., Staff Attorney Barbara Geary, Esq., Director Procurement Division Contact: contracts@osc.nj.gov

Today’s Agenda Overview of the Office of the State Comptroller (“OSC”)Notice and Submission Requirements of OSC’s Procurement DivisionOSC’s Contract/Bid Submission ProcessOSC’s Pre-Advertisement and Post-Award Review Process Compliance Items Reviewed by OSC Common MistakesPurchasing Agent / Officer Concerns How to Contact OSC2

Overview: Office of the state comptroller The Office of the State Comptroller (“OSC”) was established by statute, N.J.S.A. 52:15C-1 et seq., in 2007An independent office established in the Executive Branch of New Jersey’s State governmentCreated to bring greater efficiency and transparency to the operation of all levels of New Jersey governmentOSC’s MissionPromote the integrity and transparency of government operations by reviewing government contracts and conducting independent audits of government entities and programs throughout New JerseyInvestigate mismanagement of public funds Improve the efficiency and integrity of the Medicaid Program 3

Overview: What We DoThe Office of the State Comptroller has four divisionsAuditConducts audits and reviews the performance of the Executive Branch of State government, public institutions of higher education, independent State authorities, local governments and school districtsInvestigationsDetects and uncovers misconduct, abuse and waste at all levels of New Jersey government by investigating the mismanagement of public funds and the performance of government officers, employees and programs4

Overview: What We Do (continued)Medicaid FraudDetects, prevents and investigates waste, fraud and abuse in the Medicaid, New Jersey FamilyCare and Charity Care programsRecovers improperly expended Medicaid fundsReviews the quality of care given to Medicaid recipientsExcludes or terminates providers from the Medicaid program when necessaryProcurementReviews the legality of public contracts of municipalities, school districts, counties, State agencies, State authorities, local authorities and public institutions of higher education5

Overview: OSC’s Procurement DivisionOSC’s Procurement Division has statutory jurisdiction to review and monitor the process of soliciting proposals for and awarding contracts valued at $2 million or more. N.J.S.A. 52:15C-10OSC contract review includes all contracts:Invitations to Bid, Requests for Proposals, Requests for QualificationsLeases, land sales and concession agreementsAny other agreement that meets the OSC review threshold, except… OSC does not review: Collective bargaining agreements Certain redevelopment agreements6

Notice and Submission Requirements: Procurement Division ReviewExamples of typical reviews include:Construction bidsEducational Services (Chapter 192/193) Professional ServicesLegalArchitects & EngineersAccountantsInsuranceBrokerage consultingCoverage7

Notice and Submission Requirements: Notice RequirementPursuant to N.J.S.A. 52:15C-10, all government units are required to provide notice to OSC as follows:For contracts expected to be greater than $10 million, notice must be submitted to OSC and Pre-Advertisement Review is required at least 30 days prior to advertisement;Includes contract amendments valued at $10 million or greater For contracts greater than $2 million but less than $10 million, Post-Award Notice must be submitted to OSC no later than 20 business days after awardIncludes contract amendments valued at $2 million or greater For emergency contracts greater than $2 million, Post-Award Notice must be submitted to OSC no later than 30 business days after award8

Notice and Submission Requirements: Valuing a Contract for OSC ReviewWhat will the contracting unit spend?For construction contracts, estimate the costs of the engineering and/or construction workIf the exact value of the contract is uncertain, estimate the contract value in good faith using professional judgment as follows:Base the value on prior procurements for similar goods and servicesEstimate a price increase or decrease to reflect market changesFor multi-year contracts, multiply the length of the contract by the yearly contract amountDo not include optional contract extensionsSee N.J.A.C. 17:44-3.29

Notice and Submission Requirements: Alternate Procurement Methods / Specifications Subject to OSC ReviewEach of these alternative procurement methods should be submitted to OSC for review if the monetary thresholds are met:Group Legal Services: N.J.S.A. 18A:18A-3.2County Vocational School Improvement Authority Lease and Design/Build: N.J.S.A. 18A:7G-5aTransportation of Pupils (Subject to Title 39): N.J.S.A. 18A:18A-49.1Emergency Purchases: N.J.S.A. 18A:18A-17School District Public Private Partnerships: N.J.S.A. 18A:18A-6010

OSC Submission Process OSC Notification Forms are available on website http://www.nj.gov/comptroller/divisions/procurement/forms/Electronic submission is preferredEmail completed appropriate OSC Notification Form and required documents to contracts@osc.nj.govA Procurement Staff Attorney will be assigned to review your procurement or contract11

OSC Submission Process: Procurement submission forms Form B1 – Pre-Advertisement Notice for Contracts Valued at $10 million or moreMust submit proposed bid/procurement package 30 days before anticipated advertisement in final formDo not send drawings or plansForm B2 – Post Award Notice for Contracts Valued at $10 Million or moreMust submit final “contract” within 20 business days of awardInclude bid/proposal & any signed formList of bidders and bids received / bid tabulation sheet Documents related to any protest12

13

14

OSC Submission Process: Procurement submission forms (cont.)Form A – Post award Notice for Contracts Valued at More than $2 million but less than $10 millionNotice to OSC required within 20 business days of awardForm D – Post award Notice for Emergency Contracts Valued at More than $2 millionNotice to OSC required within 30 business days of award15

16

17

OSC Submission Process: Required information Required information:Name of the School District / School Board Description of goods/project/serviceCost or Estimated CostSource of Funding – for example – CDBG (Federal), Educational Facilities Construction and Financing Act; SDA Regular Operating District Grants (State), and/or Bonds (Local)Procurement process – Public School Contracts Law or an applicable statutory exceptionAll submissions are assigned an OSC File Number – such as 18-101Please use the OSC File Number on correspondence with OSCPrimary contact listed on form must be School District employee18

OSC’s Review Process: Pre-Advertisement ReviewPre-Advertisement review required for contracts valued at more than $10 millionOSC should receive your initial notice and submission at least 30 days before your proposed advertisement dateOSC’s review period should be considered in bid planningSubmit the entire bid package, including:Invitation to Bid or Request for ProposalSpecificationsScope of workBidder formsDo not send plans or drawings OSC may request additional information and/or documentation. Approval timeline depends on your contracting unit’s responsiveness to OSC’s comments and concerns. 19

OSC’s Review Process: Pre-Advertisement ReviewFor any “2 step” procurement process which involves:A Request for Qualifications to create a pool of bidders;Followed by a Request for Proposals or other solicitation issued to the pool of bidders selected;Contracting entities must submit both the RFQ and RFP to OSC for review for approval before advertisement of the RFQ for contracts valued at $10 million or more20

OSC’s Review Process: Pre-Advertisement ReviewStaff attorneys look for compliance with applicable laws and ensure: Proper statutory processes are being followedBidder instructions are clearLegal requirements are accurateProprietary items contained in the specifications are justifiedThe scope of the work is clear and conciseThe scope of work does not show favoritism toward one bidder over anotherEvaluation criteria (if applicable) are fair and reasonableReviewing attorney sends written comments and interacts with the contracting entity to resolve any issues of non-complianceReviewing attorney provides approval as to whether contracting entity may proceed with advertisement or contractContracting entity may not proceed without OSC’s written approval21

OSC’s Review Process: Post-Award ReviewPost-Award review is required for contracts that are:More than $2 million but less than $10 millionMore than $10 millionAfter contract award, must submit the final contract to OSCEmergency contracts more than $2 million22

OSC’s Review Process: Post-Award ReviewContracting entities should submit:Final Bid Documents, Request for Proposal or other bid solicitationSuccessful bidder’s proposalBid tabulation or evaluation reportBoard of Education resolution of awarding the contractDocuments related to any bid protest and resulting decisional documentsFor exceptions from bidding/competition, identify the statutory exception and justification (e.g. professional services, insurance - N.J.S.A. 18A:18A-5)23

OSC’s Review Process: Purpose of Post-Award ReviewProvide guidance for future procurementsEnsure that bidding process was legally compliantReview evaluation processEnsure that the correct award process was followedUPDATE your bid templates using this guidance24

Compliance Items Reviewed: OSC ChecklistAll ContractsOSC Record Retention Language: N.J.A.C. 17:44-2.2Statement of Corporate Ownership: N.J.S.A. 52:25-24.2Business Registration Certificate: N.J.S.A. 52:32-44EEO/Anti-DiscriminationExhibit A – Goods and ServicesExhibit B – Construction N.J.S.A. 10:2-1 Investment Activities In Iran Disclosure: N.J.S.A. 18A:18A-49.4 ; N.J.S.A. 52:32-58Political Contribution Disclosure: N.J.A.C. 6A:23A-6.3 ; N.J.S.A. 19:44A-20.26 25

Compliance items Reviewed: OSC Document retention noticeInclude OSC document retention language in all contracts:Contractor/Vendor shall maintain all documentation for a period of five years from the date of final payment. Such records shall be made available to the New Jersey Office of the State Comptroller upon request.N.J.A.C. 17:44-2.2Action Item: Add this language to all your invitations to bids, requests for proposals and contracts!26

Compliance items reviewed: OSC ChecklistPublic Works/ConstructionBuy American: N.J.S.A. 18A:18A-20Bid Guarantee: N.J.S.A. 18A:18A-24Consent of Surety: N.J.S.A. 18A:18A-25 Prompt Payment Act: N.J.S.A. 2A:30A-1 et seq.Prevailing Wages: N.J.S.A. 34:11-56.27 Public Works Contractor Registration Act: N.J.S.A. 34:11-56.48 et seq.Named Subcontractors for Listed Specialty Trades: N.J.S.A. 18A:18A-18Classification of Bidders: N.J.S.A. 18A:18A-26 et seq. No Material Adverse Change: N.J.S.A. 18A:18A-32 27

Compliance items reviewed: New Law: Prompt Payment for goods and Services New Law – P.L. 2018, c. 127, § 2, eff. Feb. 1, 2019, codified as N.J.S.A. 18A:18A-10.1Applicable to contracts for goods and services provided after the effective date.Unless otherwise provided for in the contract, the required payment date shall be 90 calendar days from the date specified in the contract or if no required payment is specified in the contract, then the required payment date shall be 90 calendar days from the receipt of a properly executed invoice, or 90 calendar days from the receipt of goods or services, whichever is later. Interest shall not be paid unless goods and services are rendered. Interest shall be paid at the rate specified by the State Treasurer for State late payments to business concerns pursuant to section 4 of P.L.1987, c.184 (C.52:32-35). 28

Common Mistakes Misstatement of the:Business Registration Certificate requirementPublic Works Contractor Registration Act requirementIncomplete or outdated Ownership Disclosure StatementImproper use of brand name items without adequate reason and without allowing the use of an equivalent itemFollowing correct procurement process for health insurance and insurance brokers29

Common Mistakes: Business Registration Certificate RequirementAs amended in 2009, N.J.S.A. 52:32-44 (b) adjusted the deadline for bidders to submit the Business Registration Certificate (BRC) from time of bid to the time of contract award or authorizationNo longer have to reject a bid for failure to submit the BRCThe law does not require bidders to have, or have applied for, a BRC at the time of bidRemoved the contractor’s requirement to provide written notice to its subcontractors of the BRC requirementFor updated guidance from the Department of the Treasury: http://www.state.nj.us/treasury/revenue/busregcert.shtml 30

Common Mistakes: Business Registration Certificate RequirementBRC and Emergency contracts - N.J.S.A. 52:32-44(k):The contractor shall provide the BRC to the School District within two weeks of execution of the contractThe School District shall not pay the contractor until the BRC or proof of registration is provided The School District cannot be held liable for failure to pay the contractor until the contractor provides BRC or proof of registration BRC and Cooperative contracts – N.J.S.A. 52:32-44(j):The School District that awards the initial contract shall receive and maintain the BRC on file. 31

Common Mistakes: Business Registration Certificate RequirementPenalty for failure to provide the BRC or proof of business registration:Pursuant to N.J.S.A. 54:49-4.1, a business organization that fails to provide the BRC or provides false business registration information, shall be liable for a penalty of $25 per day, not to exceed $50,000Include language in the contract requiring that the contractor shall collect and remit to the Director of the Division of Taxation the use tax due pursuant to the Sales and Use Tax Act (N.J.S.A. 54:32B-1 et seq.) on all their sales of tangible personal property delivered into the StateBest Practice: Update Notice to Bidders, Instructions to Bidders and Bidder’s Checklist using Department of Treasury languageRemove the BRC as a mandatory bid item 32

Common Mistakes: Public Works Contractor Registration Act (N.J.S.A. 34:11-56.48 et seq.)N.J.S.A. 34:11-56.51 says:No contractor shall bid on any contract for public work unless it is registered pursuant to the Public Works Contractor Registration ActNo contractor shall list a subcontractor in a bid proposal for the contract unless the subcontractor is registered pursuant to the Act at the time the bid is madeNo contractor or subcontractor, including a subcontractor not listed in the bid proposal shall engage in public work under the contract, unless the subcontractor is registered pursuant to the Act Many bid instructions incorrectly require the submission of the Public Works Registration Certificate at the time of bidBids should not be rejected for failure to include the registration certificate Proper bidder registration can be checked on the Department of Labor and Workforce Development website Best Practice : Update Notice to Bidders, Instructions to Bidders and Bidder’s Checklist to reflect statutory requirement 33

Common Mistakes: Ownership disclosure statement(N.J.S.A. 52:25-24.2)The Ownership Disclosure Statement:Must be submitted with or prior to the bidApplies to corporations, partnerships and limited liability companies Requires the names and addresses of every stockholder, individual partner and member exceeding 10% ownershipIf any 10% or greater interest holder is itself a corporation, partnership or limited liability company, the disclosure must be continued until names and addresses of every non-corporate stockholder, partner and member have been listedN.J.S.A. 52:25-24.2 was amended as of August 31, 2016 by P.L. 2016, c. 43.Adds disclosure requirement for owners of limited liability companiesBidders with any direct or indirect parent entity which is publicly traded may submit the name and address of each publicly traded entity and the name and address of each person that holds a 10 % or greater beneficial interest in the publicly traded entity as of the last annual filing with the SEC or the foreign equivalent, and, if there is any person that holds a 10 % or greater beneficial interest, also shall submit links to the websites containing the last annual filings with the SEC or the foreign equivalent and the relevant page numbers of the filings that contain the information on each person that holds a 10 % or greater beneficial interest. Best Practice: Update Ownership Disclosure form to:Include limited liability companies, Update instructions regarding publicly traded companies; and Ensure instructions clearly state that disclosure must continue until individual names are disclosed 34

Common Mistakes: Ownership disclosure statement 35Owner #1John Smith27 Broad StreetBloomfield, NJ 0700351% OwnershipOwner #2Acme Consultants, Inc.72 Broad StreetBloomfield, NJ 0700349% Ownership In post-award reviews, OSC often finds the disclosure stops at the first level of ownershipIn this example, Owner #2 must disclose the owners/stockholders of Acme Consultants, Inc.The ownership disclosure must continue for each level of ownership until individual names are listed or there is no ownership interest that exceeds 10%

Common Mistakes: Brand Names and Proprietary ItemsSpecifications must be drafted in a manner that encourages free, open and competitive bidding. Specifications must always indicate “brand name or equivalent" itemsSuggested language:Pursuant to N.J.A.C. 5:34-9.2(c), “when a specification uses ‘brand name or equivalent,’ the listed brand name shall serve as a reference or point of comparison for the functional or operational characteristic desired for the good or service being requested. Where a bidder submits an equivalent, it shall be the responsibility of the bidder to document the equivalence claim. Failure to submit such documentation shall be grounds for rejection of the claim of equivalence.”Specifications may not require pre-approval or prequalification of “or equivalent” products. N.J.A.C. 5:34-9.2(d)36

Common Mistakes: Brand Names and Proprietary ItemsIf your bid/contract requires proprietary items, then:Prior to advertising, the purchasing agent must certify in writing why the goods or services are specialized and necessaryResolution awarding the contract shall also describe why the goods or services are specialized and necessarySee N.J.A.C. 5:34-9.1Provide the above documentation to OSC when submitting a contract for review.Best Practice: Advise staff, engineers and consultant to use “brand name or equal” or, preferably general standards such as ASTM, when writing specifications.37

Common Mistakes: health insurance & brokersThere are 3 ways to procure health insurance and insurance brokerage services:Low bid – N.J.S.A. 18A:18A-4 Competitive Contracting – N.J.S.A. 18A:18A-4.1 et seq. Extraordinary Unspecifiable Services- N.J.S.A. 18A:18A-538

Common Mistakes: health insurance & brokersN.J.S.A. 18A:18A-5(a)10 states: Any contract, the amount of which exceeds the bid threshold, shall be negotiated and awarded by the board of education by resolution at a public meeting without public advertising for bids and bidding therefor if:a. The subject matter thereof consists of: 10. Insurance, including the purchase of insurance coverage and consultant services, which exception shall be in accordance with the requirements for extraordinary unspecifiable services39

Common Mistakes: health insurance & brokersEUS Requirements – N.J.A.C. 5:34-2.3Seek and obtain quotesDocument attempts to obtain quotesFile certificate with Board of Education justifying use of EUS – see LFN 2002-2May award based on price and other factors Resolution awarding contract must cite statute N.J.S.A 18A:18A-5(a)10 Notice in newspaper stating nature, duration and amount of contract, description of service provided where contract is made available for public inspection.40

Common Mistakes: health insurance & brokersBrokers are required to disclose any commission that it receives from an insurance carrier:An insurance producer licensed pursuant to P.L.2001, c.210 (C.17:22A-26 et al.) who sells, solicits, or negotiates health insurance policies or contracts to residents of this State shall notify the purchaser of the insurance, in writing, of the amount of any commission, service fee, brokerage, or other valuable consideration that the producer will receive as a result of the sale, solicitation or negotiation of the health insurance policy or contract. If the commission, fee, brokerage, or other valuable consideration is based on a percentage of premium, the insurance producer shall include that information in the notification to the purchaser.N.J.S.A. 17:22A-41.141

Common Mistakes: health insurance & brokersThe following must be included as part of the quotation process:Ownership Disclosure Statement: N.J.S.A. 52:25-24.2EEO/Anti-Discrimination language: “Exhibit A”Iran Disclosure Certification: N.J.S.A. 18A:18A-49.4Business Registration Certificate: N.J.S.A. 52:32-44 prior to award of contract.Political Contribution Disclosure: N.J.A.C. 6A:23A-6.3OSC’s Record Retention Language: N.J.A.C. 17:44-2.242

Common mistakes: Best Practices for Procuringhealth insurance & brokersIf following EUS:Use Request for Quotes to solicit quotes RFQ must include the required statutory formsContract term is limited to 3 years, plus two 1 year extensions or one 2 year extension, per N.J.S.A. 18A:18A-42Extensions are subject to the requirements of N.J.S.A. 18A:18A-42! a. The contract shall be awarded by resolution of the Board of Education upon a finding that the services are being performed in an effective and efficient manner; b. No contract shall be extended so that it runs for more than a total of five consecutive years; c. Any price change included as part of an extension shall be based upon the price of the original contract as cumulatively adjusted pursuant to any previous adjustment or extension and shall not exceed the change in the index rate for the 12 months preceding the most recent quarterly calculation available at the time the contract is renewed; and d. The terms and conditions of the contract remain substantially the same.Pay commission to your broker directlyStay involved in the solicitation process 43

Purchasing agent concerns: Trustee of public fundsPurchasing Agents must maintain independenceAct in the public interestSchool Ethics Act - N.J.S.A. 18A:12-21 et seq.Maintain confidentiality of bids and requests for proposals before issuanceDo not allow a potential bidder to prepare specificationsAll bidders should be treated fairly and kept on equal footingEstablish systems for contract management and oversight44

Purchasing agent concerns: Combating Fraud, Waste & AbuseAssist your departments in planning for procurementsHurried bids often lead to wasteEmergency contracts must meet exception requirementsEncourage and assist in market researchEngage experts/consultants as necessaryConsult with legal counselRegularly update bid templates45

Purchasing agent concerns: Combating Fraud, Waste & AbusePurchasing agents are in a unique position to spotBid-rigging schemes, such as rotating bidsPrice-fixingVendor agreements regarding territories or market allocationIf you see something, say something: OSC’s CONFIDENTIAL HOTLINE 1(855) OSC TIPS46

How to Contact OSC Contact Information: Director Barbara Geary – (609) 292-7416Alysia Walsh – (609) 789-5113Contracts should be submitted electronically to contracts@osc.nj.govFor more information, go to http://www.nj.gov/comptroller/ 47