To: State Agency Procurement Coordinators and PT Coordinators

To: State Agency Procurement Coordinators and PT Coordinators

From: Kent Allin, MMD Director

Date: June 28, 2007

Re: Procurement-related legislation

The 2007 legislature devoted considerable attention to state contracting and procurement law, enacting the most changes in one session since the 1998 Procurement Reform Act that created Chapter 16C. This memo provides a summary of the pending changes and how they will affect state agencies. Please distribute it to impacted staff within your organization. These changes become effective on July 1, 2007 unless otherwise indicated. This summary is also available online at the Department of Administration’s Materials Management Division (MMD) website: www.mmd.admin.state.mn.us.

A number of related amendments to Chapter 16C were sponsored by Admin in consultation with our multi-agency Drive to Excellence (D2E) steering committee on sourcing. These codify certain procurement best practices, many of which had initially been spelled out in Governor Pawlenty’s Executive Order 05-07. Inclusion in state statutes ensures that these best practices will continue beyond the term of one governor.

These D2E-related provisions include the following:

·  New or revised definitions for “best and final offer,” “best value,” “enterprise procurement,” “request for proposal or RFP,” “response” and “strategic sourcing.” The common theme for these changes is the state’s ability to use a number of procurement tools and methods when in the state’s best interest. These tools and methods include negotiations, best and final offers, contract consolidation, product standardization, mandatory-use enterprise contracts, spend analysis and life-cycle costing.

·  Admin is to develop policies and procedures to ensure the optimal use of strategic sourcing techniques.

·  Admin may require agencies to participate in the development of enterprise (multi-agency) contracts and may require agencies to accept delegated authority to purchase goods or services for that agency’s exclusive use. However, rest assured that we do not intend to be heavy-handed with this authority. Admin has had similar authority through the governor’s executive order since April 2005 and we have yet to compel an agency to take on work it had not voluntarily accepted. We intend to continue consulting with agencies to identify mutually-beneficial distributions of labor.

·  The commissioners of Admin and Finance may develop policy allowing “routine, low-dollar” procurements without showing an encumbrance in MAPS. This change was intended to simplify the process for agencies using field purchase orders and the state purchasing card.

·  Admin and agencies are encouraged to develop enterprise (multi-agency) professional/technical (P/T) contracts “to the fullest extent practicable.” Agencies can expect to see the p/t contract certification form amended to prompt agencies to consider that option before proceeding unilaterally. Preparation of the contract certification form as early in the procurement process as possible will ensure that time does not become a prohibitive factor when considering a multi-agency approach.

·  Reporting requirements for P/T contracts have been amended to clarify that no post-contract reports are required for P/T contracts at or below $50,000. (Admin had always interpreted the statute this way, but we recently discovered that the Office of the Legislative Auditor disagreed.)

·  Contractors are prohibited from taking action against agencies or employees who have criticized the contractor in the mandatory P/T post-contract reports unless there is clear and convincing evidence that the agency or employee was not acting in good faith. The contractor would need to prove that the agency or employee knowingly provided false or defamatory information with malicious intent and that the contractor was harmed as a result.

·  Reverse auctions are now allowed for a variety of services. However, reverse auctions are not allowed for engineering or architectural services or for building and construction contracts. (“Best and final offers” are also prohibited for building and construction contracts.)

Admin also requested an appropriation to conduct a disparity study – a statistically valid analysis of the state’s use of minority-owned and female-owned small businesses in proportion to the availability of those businesses in the local economy. Such a study is required by federal case law to support a program of race and gender-based procurement preferences such as Minnesota’s “targeted group” program. We requested $850,000 to hire a consulting company with expertise in this complex and specialized field and received an appropriation of $500,000. In light of the reduced appropriation, we will be meeting with local governments and quasi-state agencies that have similar disparity study needs. The tentative plan is to assess whether some of the work can be done jointly and to issue an RFP that defines a flexible scope of work. The scope would ultimately be either expanded or reduced based on the available financial resources and how the various responders price their services.

In a major change to existing law, the concept of “best value” will now apply to building and construction procurement. Admin did not initiate this change, but worked with stakeholders to develop language that should maintain the integrity of a procurement process that allows more flexibility and discretion. Agencies will have the option of awarding construction contracts through the traditional process (lowest responsible bidder meeting specifications) or utilizing requests for proposals (RFPs). The latter method allows the use of multiple evaluation criteria, including but not limited to, the quality and timeliness of the responding vendors’ past work, customer satisfaction with past vendor performance, and the qualifications of vendors’ proposed personnel. Admin has been in touch with other government entities that have used the best value process for construction contracting. We intend to pilot several efforts in-house before developing policy or training for other interested agencies. Feel free to contact MMD if your agency would also like to attempt an early pilot of this technique before it is rolled out more formally.

In another significant break from past practice, the MINNCOR procurement task force has been eliminated, as has the requirement that agencies purchase from MINNCOR if the correctional industries program does not meet its sales goals. The MN Department of Corrections is to be congratulated for its willingness to voluntarily give up these statutory advantages and compete directly for our state agency business on the basis of quality, service and price.

Several other changes to Chapter 16C that had not been initiated by Admin were passed into law. We worked with the involved authors and lobbyists and attempted to develop language that met their policy objectives without being overly burdensome to agencies. In some instances, we succeeded better than in others:

·  Admin has been instructed to develop a website with a searchable data base containing information on state contracts and grants valued in excess of $25,000. However, no money was appropriated for this work, so we do not anticipate being able to do so in the foreseeable future. However, we will make every reasonable effort to collect the data that would be involved if money became available to create the public data base. Consequently, agencies can expect to be receiving policy materials from the Finance and Admin commissioners that revise point of entry requirements in MAPS. We have also developed system requirements that would incorporate this statutory directive into a new or updated MAPS when it is funded and implemented.

·  Before contracting for P/T services, agencies will be required to consider their previous employees on layoff lists who meet the minimum qualifications and whose jobs were eliminated during the four previous years.

·  Agencies may not contract for call-centers or similar services without determining if state employees can provide the service. Even if state employees are not available, the call-center must be located in the United States. (This provision went into effect the day following enactment.)

·  Effective August 1, 2007, certain non-profits will be eligible to purchase from state contracts through the Cooperative Purchasing Venture.

·  Effective August 1, 2007, the option of using “forward pricing” for fuel has been expanded to diesel fuel and to all operations – not just facilities.

·  Admin shall promote the use of individuals with developmental disabilities to provide document imaging services to government.

Lastly, several other provisions in various state statutes were amended so as to affect procurement policy. In each case, Admin successfully lobbied for language changes that preserved the policy intentions but allowed some flexibility for reasonable exceptions:

·  A program has been established that requires manufacturers of household video display devices to develop recycling programs for their used products. Manufacturers’ responsibilities begin September 1, 2007 and increase over time. This relates to state procurement in that agencies may be prohibited from purchasing video display devices from non-compliant manufacturers.

·  Effective January 1, 2008 and subject to listed exceptions, agencies may not purchase products containing PBDEs (flame-retardant chemicals).

·  At least 19% of all state contracts for janitorial services must be awarded to rehabilitation programs and extended employment providers serving workers with disabilities.

As I trust you can see, overall this was a very positive year for procurement-related legislation. We owe our sincere thanks to the members from both parties who worked with us in support of these good government initiatives.

State agencies can expect to see several new or revised policies and related changes to forms and manual materials as these statutory changes are fully implemented. In the meantime, please feel free to contact me at 651-201-2400 or your other contacts in MMD if you have related questions or concerns.