STATE OF COLORADO PROCUREMENT MANUAL

STATE OF COLORADO PROCUREMENT MANUAL

ISSUED BY THE: COLORADO DEPARTMENT OF PERSONNEL &

ADMINISTRATION By The

Office of the State Controller, State Purchasing Office, Department of Human Resources, and Office of the State Architect

June 2010

STATE OF COLORADO PROCUREMENT MANUAL

ACKNOWLEDGMENTS

The State of Colorado Procurement Manual (Manual) is the combined effort of State Employees who volunteered their time and talents to improve the State Procurement process.

Barbara Sohnen Beth Christianson Dana Stansbury Denise Kincaid John Utterback Joi Simpson Kevin Edwards Kirsten Jahn-Elfton Lea Ann Baker Linda Shubow Markie Davis Richard Brough Robert Jaros Thirza Kennedy Yvonne Anderson

CONTRIBUTORS: Office of the State Controller, DPA Metro State College Office of the State Architect, DPA State Purchasing Office, DPA State Purchasing Office, DPA Division of Human Resources, DPA Office of the State Controller, DPA Division of Human Resources, DPA Office of the State Controller, DPA Office of the Attorney General Office of Risk Management, DPA Department of Natural Resources Office of the State Controller, DPA Governor's Office of Information Technology Office of the State Controller, DPA

Brenda Lujan RaLea Sluga

SPECIAL CONTRIBUTORS: Office of the State Controller, DPA Office of the State Controller, DPA

Kevin Edwards

CHIEF EDITOR: Office of the State Controller, DPA

CAVEAT

Every attempt is made to update the information presented in this Manual. For additional information, refer to the Authorities listed at the beginning of each section, or contact the appropriate office(s), i.e., Division of Human Resources, State Purchasing Office, and/or Office of the State Controller. Subsequent revisions to State and federal statutes, rules, and laws may conflict with the information presented herein. In such situations, the statutes, laws, and rules control. This Manual is a guide and is not an ultimate authority or legal advice. General principles of law are discussed herein, but these are only general principles subject to many exceptions. If this Manual does not address a specific situation, consult with legal counsel or contact the appropriate Central Approver.

STATE OF COLORADO PROCUREMENT MANUAL

TABLE OF CONTENTS

CHAPTER I. OVERVIEW & INTRODUCTION ........................................................................... I-1 1. Authorities..........................................................................................................................................I-1 2. Procurement Core Processes ..........................................................................................................I-1 A. Processes........................................................................................................................................I-1 B. Participants......................................................................................................................................I-1 3. Purpose of this Manual ..................................................................................................................... I-2 A. Framework and References ............................................................................................................ I-2 B. Contract Managers ..........................................................................................................................I-2 4. How this Manual is Organized .........................................................................................................I-2 5. Ethical Standards and Policies ........................................................................................................I-2 A. State Officials and Employees ........................................................................................................I-2 B. Vendors ........................................................................................................................................... I-3

CHAPTER II. PLANNING..........................................................................................................II-1 1. Authorities.........................................................................................................................................II-1 2. Procurement Team ...........................................................................................................................II-1 3. Needs Assessment...........................................................................................................................II-1 4. Contracting Objectives ....................................................................................................................II-1 5. Research and Cost Estimates.........................................................................................................II-2 A. Initial Research...............................................................................................................................II-2 B. Estimated Costs .............................................................................................................................II-2 C. Pre-Solicitation Discussion.............................................................................................................II-2 6. Authority and Budget.......................................................................................................................II-2 A. Authority .........................................................................................................................................II-2 B. Fund Availability .............................................................................................................................II-2 C. Approvals .......................................................................................................................................II-3 7. Risk Management .............................................................................................................................II-3 A. Process...........................................................................................................................................II-3 B. Factors............................................................................................................................................II-3 C. Resource Allocation .......................................................................................................................II-3 8. Insurance Requirements .................................................................................................................II-4 9. Approvals ..........................................................................................................................................II-4 10. Personal Services Review Requirements....................................................................................II-5 11. Commitment Document .................................................................................................................II-6 12. Purchasing Method ........................................................................................................................II-6 13. Lead Time Information...................................................................................................................II-6 A. Solicitation Drafting.........................................................................................................................II-6 B. Time Frames ..................................................................................................................................II-6 C. Response Time ..............................................................................................................................II-6 D. Solicitation Evaluations ..................................................................................................................II-7 E. Establish Timeline and Responsibility Areas .................................................................................II-7 14. Writing Statements of Work and Specifications .........................................................................II-8

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STATE OF COLORADO PROCUREMENT MANUAL

CHAPTER III. PURCHASING .................................................................................................. III-1 1. Authorities........................................................................................................................................III-1 2. Delegation ........................................................................................................................................III-1 3. Bid Information and Distribution System (BIDS)?CRS ?24-102-202.5 .......................................III-1 A. What is BIDS .................................................................................................................................III-1 B. When to Use BIDS ........................................................................................................................III-1 C. Continuing Development...............................................................................................................III-2 D. Requests for Information...............................................................................................................III-2 E. Access to BIDS..............................................................................................................................III-2 4. Vendor Selection Methods-Procurement Rules: Part 2 of Article 103.......................................III-2 A. Exempt Entities and Procurements-CRS ?24-101-105.................................................................III-2 B. When Formal Competition Required?R ?24-103-201 & R ?24-103-204 ......................................III-3 C. State Price Agreements (SPAs)?R ?24-102-202-01 ....................................................................III-3 D. Small Dollar Purchases (Discretionary)?R ?24-103-204-02 .........................................................III-3 E. Documented Quotes (DQs)?R ??24-103-204-03 .........................................................................III-3 F. Competitive Sealed Bidding/IFBs?R ??24-103-202a & R ?24-103-202b .....................................III-4 G. Competitive Sealed Proposals/RFPs? R ??24-103-203...............................................................III-4 H. Statements of Qualification/Request for Qualifications (RFQs)-CRS ?24-30-1401--1404 ...........III-6 I. Sole Source Procurement?CRS ?24-103-205 ...............................................................................III-6 J. Emergency Procurements?CRS ?24-103-206 ..............................................................................III-6 K. Competitive Negotiation?R ?24-103-208-02.................................................................................III-6 L. Competitive Sealed Best Value Bidding?CRS ?24-103-202.3......................................................III-7 5. Capital Construction?R ?24-103-202(b) ........................................................................................III-7 6. Real Estate Leases?CRS ?24-30-1303(a) ......................................................................................III-7 7. Statutory and Regulatory Requirements ......................................................................................III-7 A. The Controller Statute?CRS ?24-30-202(2) and FR 3-1 ?9.3 ......................................................III-7 B. Procurement Statutes....................................................................................................................III-7 C. Federal Grant Contracts................................................................................................................III-7 8. Contract Pricing...............................................................................................................................III-8 A. Life Cycle Costs.............................................................................................................................III-8 B. Best Value in Source Selections ...................................................................................................III-8 C. Contract Types ..............................................................................................................................III-8 D. Environmentally Preferable Purchasing (EPP) .............................................................................III-8 9. Price Analysis-Contracts................................................................................................................III-8 A. Other Methods of Price Analysis. ..................................................................................................III-9 B. Documenting Price Analysis..........................................................................................................III-9 C. Relationship between Price Analysis and Negotiation..................................................................III-9 10. Cost Analysis-Contracts.............................................................................................................III-10 A. Analyzing Specific Cost Categories ............................................................................................III-10 B. Requesting Cost or Pricing Data .................................................................................................III-11 C. Profit ............................................................................................................................................III-12 D. Cost Plus Percentage Cost Contracts?CRS ?24-103-501 .........................................................III-12 11. Price Analysis-Grants .................................................................................................................III-12 A. Cost Analysis Considerations......................................................................................................III-13 B. Matching Requirements...............................................................................................................III-13 C. Purchases under Grants: ............................................................................................................III-13 12. Price Negotiation in Commercial Contracts?Considerations.................................................III-14

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STATE OF COLORADO PROCUREMENT MANUAL

CHAPTER IV. CONTRACT FORMATION, DRAFTING, AND APPROVAL ........................... IV-1 1. Authorities....................................................................................................................................... IV-1 2. Preface............................................................................................................................................. IV-1 3. Definition of Contracts................................................................................................................... IV-1 4. Elements of Contracts ................................................................................................................... IV-1 A. Offer and Acceptance................................................................................................................... IV-1 B. Legally Enforceable Promises ...................................................................................................... IV-2 C. Mutuality of Obligation.................................................................................................................. IV-2 D. Certainty of Subject Matter........................................................................................................... IV-2 E. Consideration ............................................................................................................................... IV-3 F. Competent Parties ........................................................................................................................ IV-3 5. Commitment Vouchers-CRS ?24-30-202 and FR 2-2 .................................................................. IV-3 6. Types and Classification of Contracts ......................................................................................... IV-3 A. Goods (Supply) Contracts ............................................................................................................ IV-3 B. Service Contracts ......................................................................................................................... IV-4 C. Mixed Contracts ........................................................................................................................... IV-4 7. Contract Categories and Sub-categories of Contracts .............................................................. IV-4 A. Expenditure Contracts .................................................................................................................. IV-4 B. Revenue Contracts....................................................................................................................... IV-5 C. Other Contract Types ................................................................................................................... IV-5 8. Purpose and Formation of Contracts........................................................................................... IV-5 9. Drafting Contracts .......................................................................................................................... IV-5 A. Deciding Which Contract .............................................................................................................. IV-5 B. Form of Contracts......................................................................................................................... IV-6 C. Drafting Tips (See also Chapter VII, Supplemental Materials) .................................................... IV-6 10. Content of Contracts and Modifications .................................................................................... IV-8 11. Payment Terms............................................................................................................................. IV-8 A. Firm, Fixed-Price Payments ......................................................................................................... IV-8 B. Cost Reimbursement Payments................................................................................................... IV-9 C. Time and Material/Labor Hour Payments .................................................................................... IV-9 D. Indefinite Delivery Payments:....................................................................................................... IV-9 E. Maximum Dollar Amount ............................................................................................................ IV-10 12. Time Periods and Dates of Contracts ...................................................................................... IV-10 A. Effective Date ............................................................................................................................. IV-10 B. Statutory Violations..................................................................................................................... IV-10 C. Five Year Maximum ................................................................................................................... IV-10 D. Performance Period ................................................................................................................... IV-10 13. General Provisions..................................................................................................................... IV-10 14. Indemnification by the State-Prohibited .................................................................................. IV-11 15. Limitations of Liability ............................................................................................................... IV-11 A. OSC Fiscal Rule and Policies .................................................................................................... IV-11 B. Examples .................................................................................................................................... IV-11 16. Intellectual Property (IP) ............................................................................................................ IV-12 A. Overview..................................................................................................................................... IV-12 B. Intellectual Property Types ......................................................................................................... IV-12 C. Intellectual Property Rights in Software ..................................................................................... IV-12

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STATE OF COLORADO PROCUREMENT MANUAL

17. Insurance..................................................................................................................................... IV-13 A. Commercial General Liability ..................................................................................................... IV-13 B. Commercial Automobile Liability ................................................................................................ IV-13 C. Umbrella Policies........................................................................................................................ IV-14 D. Professional Liability................................................................................................................... IV-14 E. Environmental Impairment Liability ............................................................................................ IV-14 F. Occurrence vs. Claims-Made Policies........................................................................................ IV-14 G. Workers' Compensation Insurance............................................................................................ IV-14 H. Crime Insurance ......................................................................................................................... IV-14 I. Surety Bonds ............................................................................................................................... IV-15 J. Insurance-State of Colorado Policies.......................................................................................... IV-15 K. Insurance-Governmental Vendors ............................................................................................. IV-15 L. Certificates of Insurance ............................................................................................................. IV-15

18. Health Insurance Portability and Accountability Act.............................................................. IV-17 19. Special Provisions...................................................................................................................... IV-17 20. Exhibits........................................................................................................................................ IV-17 21. Authority to Sign Contracts ...................................................................................................... IV-18

A. Actual Authority .......................................................................................................................... IV-18 B. Apparent Authority...................................................................................................................... IV-18 C. Examples.................................................................................................................................... IV-19 22. Signatures on Contracts............................................................................................................ IV-19 A. Vendor Name ............................................................................................................................. IV-19 B. Agency/IHE Name ...................................................................................................................... IV-19 C. Original Signatures..................................................................................................................... IV-19 D. Names and Titles of all Signatories............................................................................................ IV-19 E. Vendor Signatory Authority ........................................................................................................ IV-19 F. State Signatory ........................................................................................................................... IV-19 23. Funding of Contracts ................................................................................................................. IV-20 A. Funding....................................................................................................................................... IV-20 B. Funding Obligation Authority ...................................................................................................... IV-20 C. Financial Administration ............................................................................................................. IV-20 D. Federally Funded Contracts ....................................................................................................... IV-20 24. Accounting Procedures ............................................................................................................. IV-20 A. Encumbrances............................................................................................................................ IV-20 B. Expenditure and Unencumbered Balance ................................................................................. IV-21 C. Adjust the Encumbered Balance ................................................................................................ IV-21 D. Other Accounting Issues ............................................................................................................ IV-21 25. Review by State Controller or Delegate ................................................................................... IV-21 A. Expenditures............................................................................................................................... IV-21 B. Prices or Rates ........................................................................................................................... IV-21 C. Form and Content ...................................................................................................................... IV-21 D. Risks........................................................................................................................................... IV-21 26. Breach of Contract ..................................................................................................................... IV-22 27. Defenses to Breach of Contract................................................................................................ IV-22 A. Waiver ........................................................................................................................................ IV-22 B. Laches ........................................................................................................................................ IV-22 C. Estoppel ..................................................................................................................................... IV-22 D. Lack of Notice............................................................................................................................. IV-22 E. Impossibility ................................................................................................................................ IV-22 F. Avoiding Defenses to Breach ..................................................................................................... IV-22 28. Remedies-Sources ..................................................................................................................... IV-23 A. Remedies in Contracts ............................................................................................................... IV-23 B. Goods Contracts-Remedies Not Specified-UCC ....................................................................... IV-23 C. Personal Services Contracts-Remedies .................................................................................... IV-24 D. Warranties .................................................................................................................................. IV-24

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