SCHOOL DISTRICT OF WAUPACA SERIES 600 FISCAL MANAGEMENT CODE: 672.3

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1 SCHOOL DISTRICT OF WAUPACA SERIES 600 FISCAL MANAGEMENT CODE: COOPERATIVE PURCHASING KEY POLICY CONSIDERATIONS School boards have considerable discretion in making purchasing decisions and awarding contracts for the purchasing of goods or services. All purchasing and contracting decisions, however, must be based on reasonable business judgment and must not be arbitrary or capricious. They must also be in compliance with any legal requirements that are applicable to (1) the purchase of the particular product/service, (2) the furnishing or delivery of the particular service or program, and (3) the funding source used to purchase the product or service. Some school boards address cooperative purchasing generally within their district purchasing policies or in a separate general policy on cooperative purchasing. In districts that address cooperative purchasing in policy, the policy language simply addresses the extent to which cooperative purchasing will be pursued in the district; who is authorized to make related decisions; and any exceptions to the district s purchasing policies/procedures that might apply when the district takes advantage of cooperative purchasing programs or interagency agreements for the purchase of goods or services (e.g., waiver of district bidding requirements). School boards should keep in mind related district policies when developing and implementing school district cooperative purchasing-related policies and procedures. For example, policies on such topics as the following may be relevant: board member conflicts of interest, purchasing authority, procurement (including bidding requirements), and conduct standards in purchasing. When implementing district cooperative purchasing policies/procedures and choosing to participate in specific cooperative purchasing or shared services activities, it is very important for school officials to weigh the advantages and disadvantages of the particular cooperative purchasing or shared services option in relation to the district s particular needs and interests. When considering participation in a purchasing cooperative or buying group, school districts may want to consider questions such as the following: What is the organizational structure of the purchasing cooperative or buying group and what other entities are participating in it? What are the membership policies and requirements, including any applicable fees and minimum purchasing requirements? What are the identified benefits for participating in the cooperative/buying group? Are other members satisfied with the cooperative/buying group? How closely do the product or service offerings of the purchasing cooperative/buying group meet the needs of the school district? Do members of the purchasing cooperative/buying group have an opportunity to participate in the development of product/service specifications and procurement contract terms and conditions? Who manages the purchasing cooperative/buying group? Is the cooperative/buying group administered in an ethical manner?

2 Does the cooperative/buying group adhere to applicable state and federal laws and regulations when soliciting bids, entering into procurement contracts with vendors, etc.? How do the cooperative/buying group s procurement policies and practices coincide with the district s goals and policies? When making decisions to purchase goods or services through an existing government procurement contract or entering into a cooperative purchasing or shared services agreement with another entity (or entities), school districts should, at a minimum: Review the contract/agreement for compliance with applicable state and federal laws and regulations and local school district policies. Analyze the product or service specifications, price, delivery terms and conditions, and other factors to ensure that the contract/agreement produces the best value for the district and meets district needs. Compare procurement contracts if there are multiple contracts available for the required product or service. Verify the contract/agreement application and eligibility of the district to participate in the contract/agreement. If the district is intending to piggypack on an existing procurement contract/interagency agreement, contact the lead entity managing the contract/agreement. If entering into an interagency agreement with another entity (or entities) to purchase goods or services, confer with legal counsel to determine whether the agreement is acceptable and if it clearly outlines the expectations and responsibilities of the entities that are a party to the agreement. GENERAL LEGAL CONSIDERATIONS General Authority to Enter into Cooperative Purchasing Agreements for Goods or Services Under section of the state statutes, school districts have general authority to enter into cooperative purchasing agreements with the state or other municipalities, including other school districts, cities, counties, villages and towns, and federally recognized Indian tribes and bands in Wisconsin. This law specifically authorizes any of the parties to these agreements to participate in, administer, sponsor or conduct purchasing transactions under a joint contract for the purchase of materials, supplies, equipment, permanent personal property, miscellaneous capital, or contractual services. Section does not apply to public works contracts under section of the state statutes or to certain construction project contracts involving state facilities under section of the state statutes. School districts also have general authority under section of the state statutes to contract with the state, or any department or agency thereof, or with other municipalities and with federally recognized Indian tribes and bands in Wisconsin for the receipt or furnishing of services or the joint exercise of any power or duty required or authorized by law. This authority is in addition to the provisions of any other statutes specifically authorizing cooperation between municipalities, unless those statutes specifically exclude action under section of the statutes. Contracts executed under section are often referred to as intergovernmental agreements. The municipalities that may participate in such agreements include all of the entities identified above in connection with section agreements, as well as additional public entities such as the public library system. An intergovernmental agreement under section generally binds the contracting parties for the length of time specified in the contract. Typically, such a contract will identify one of the participating parties as the fiscal agent for the agreement. State law expressly

3 provides that section is to be interpreted liberally in favor of cooperative action between municipalities and between municipalities and Indian tribes and bands in Wisconsin. The same public entities, including school districts, that may execute intergovernmental agreements under section also have authority under section of the state statutes to contract with municipalities of another state for the receipt or furnishing of services or the joint exercise of any power or duty required or authorized by statute to the extent that the laws of the other state or of the United States permit the arrangement. Any such inter-state agreement must be submitted to the Attorney General for approval prior to the contract taking effect. Authority to Contract with Other Entities for Specific Types of Services/Activities There are several state laws that provide authority to school districts to enter into contracts with other entities for the provision of specific types of services for students. Examples of such laws are outlined below: CESA Services: School districts and other educational entities may enter into contracts with Cooperative Educational Services Agencies (CESAs) under section of the state statutes for the purpose of providing services to students. Special Education-Related Services: Under state special education laws (section (1) of the state statutes), school boards may contract with private or public agencies for substitute teaching and paraprofessional staffing services, physical or occupational therapy services, orientation and mobility training services, educational interpreter services, educational audiology, speech and language therapy, student transition services for eligible students who are 18 to 21 years old, or any service approved by the state superintendent of public instruction, on the basis of demonstrated need. School boards also have authority under section (26m) of the state statutes to contract with a county children with disabilities education board for special education services. Whole Grade Sharing: School boards of two or more school districts now have authority under section of the state statutes to enter into whole grade sharing (WGS) agreements. WGS agreements must be for one or more entire school years, and may include one or more grades, including pre-kindergarten, 4-year-old kindergarten and 5-year-old kindergarten. Specific requirements, procedures, deadlines, and restrictions applicable to WGS agreements are outlined in this state law provision. Private Education Services: With approval of the state superintendent of public instruction, a school board may contract with private education services for students who need concurrent education and treatment services, the educational portion of which is not available in the schools in which the students are enrolled. This authority is granted under section (26) of the state statutes. Private education services provided under this law may not include religious or sectarian teachings or instruction. Mental Health and Treatment Services: School boards have authority under section (26r) of the state statutes to contract with the Wisconsin Department of Health Services (DHS) for services under section of the state statutes (e.g., mental health outpatient treatment and services). The DHS also has authority under section of the state statutes to, within the limits of available state and federal funds, promote the creation of coalitions among the state, counties, providers of mental health and alcohol and other drug abuse services, advocates for persons with mental illness and alcohol and drug dependency, and other entities to develop, coordinate and provide resources to advance prevention, early intervention, treatment, recovery, opportunities for education, family and peer support, etc. A new state law provision (section 49.45(30c) of the state statutes) requires the DHS to provide reimbursement under the Medical Assistance program to licensed treatment professionals, as defined in section 51.03(6)(a) of the state statutes, for mental health services provided at a school, to the extent federal law allows such reimbursement, regardless of whether the school site is designated as a clinic office and regardless of whether the licensed treatment professional is employed by, a contractor of, or affiliated with a clinic.

4 These changes related to authorized treatment sites may offer new opportunities for schools to partner with third parties in connection with mental health services, including in connection with community schools initiatives. Acquiring School Facilities to Provide Services: School boards have authority under sections (24) and of the state statutes to: (1) enter into a contract with another school board (or school boards) to own, construct, lease or otherwise acquire school facilities, including real estate located within or outside the boundaries of any participating school district, and (2) establish the functions, projects and services to be provided in the facility. Section outlines specific contract requirements and requires school boards to adopt policies related to such contracts. Cooperative Purchasing of Goods or Services Using Federal Grants or Awards The new "Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Grants and Awards" (Uniform Guidance - 2 C.F.R. Part 200) expressly encourage school districts and other non-federal entities receiving federal grants and awards to enter into state and local intergovernmental agreements or inter-entity agreements, where appropriate, for procurement or use of common or shared goods and services. The purpose of doing this is to foster greater economy and efficiency and to promote cost-effective use of shared services. Non-federal entities receiving federal grants and awards (including school districts) are required to use their own documented procurement procedures when making purchases for goods or services utilizing federal funds. The procedures must reflect applicable state, local and tribal laws and regulations and be in conformance with applicable federal law and procurement standards. The procedures must avoid acquisition of unnecessary or duplicative items. Consideration is to be given to consolidating or breaking out procurements to obtain a more economical purchase. Where appropriate, an analysis should be made of lease versus purchase alternatives, and any other appropriate analysis to determine the most economical approach. Non-federal entities making purchases utilizing federal funds are also encouraged to use federal excess and surplus property in lieu of purchasing new equipment and property whenever such use is feasible and reduces project costs. Procurement contracts can only be awarded to responsible contractors possessing the ability to perform successfully under the terms and conditions of the proposed procurement. Consideration is to be given to such matters as contractor integrity, compliance with public policy, record of past performance, and financial and technical resources. Non-federal entities receiving and utilizing federal funds are required to maintain records sufficient to detail the history of the procurement. These records must include, but are not necessarily limited to the following: the rationale for the methods of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cooperative Purchasing for Child Nutrition Programs - The U.S. Department of Agriculture (USDA) has explicitly stated that group purchasing organizations and cooperative purchasing arrangements may be used in federally funded child nutrition programs (e.g., National School Lunch and Breakfast Programs, Milk Program) as long as school food authorities follow federal procurement regulations, including all related USDA regulations, when entering into contractual agreements with entities for goods or services. This includes conducting procurement transactions in a manner providing for full and open competition in a manner as may be applicable to the specific transaction. When considering participation in a cooperative purchasing/buying group or organization, school food authorities must give consideration to the makeup of the purchasing/buying group or organization. State and federal procurement regulations will apply differently depending on the makeup of the purchasing/buying group. For example, according to the USDA in a memo from June 2012 entitled Procuring Services of Purchasing Cooperatives, Group Purchasing Organizations, Group Buying Organizations, etc., school food authorities may generally participate in a cooperative comprised solely of school food authorities without each participating member being required to conduct an independent competitive procurement (e.g., a bid solicitation and evaluation process). The participating members would not

5 each need to engage in an independent competitive procurement process because the cooperative, acting on its own behalf, would follow federal procurement regulations when procuring goods and services for its members. If, on the other hand, a cooperative contains a third party that is not a school food authority or government organization/entity, the school food authority would generally need to conduct its own competitive procurement process to support a decision to join and make purchases through the cooperative. According to the same USDA memo, a school food authority may only enter into an intergovernmental agreement with a state agency or local government agency/entity which allows the school food authority to join or piggyback onto an existing agreement between the state or local governmental entity and a goods or services provider when that agreement was procured in a manner that was fully consistent with applicable federal funds and child nutrition program regulations. Because the local school food authority is ultimately responsible for ensuring compliance with applicable child nutrition program regulations, it is also important for school districts that participate in a cooperative purchasing/buying group to ensure that they have access to documentation from the group s or organization s purchasing processes so that they can verify that solicitations for goods and services comply with applicable federal procurement requirements. Under section 7 C.F.R of the child nutrition program regulations, school food authorities have authority to apply a geographic preference (state, county and/or region) when purchasing unprocessed locally grown and locally raised agricultural products, as further defined in the regulations. Many Wisconsin school districts take advantage of this authority by participating in Farmto-School and other initiatives that encourage relationships with local (as defined by the district) farmers, manufacturers and distributors. If a school district is interested in making local food purchases part of their child nutrition program procurement efforts, the district should keep this goal in mind if the district also considers joining a cooperative purchasing group or organization. In some situations, it may be difficult to pursue locally-sourced purchases through a multi-party cooperative. (Note: School officials making purchases with federal funds in contexts that do not involve unprocessed agricultural products must consider that section 2C.F.R (b) of the federal Uniform Guidance restricts the use of state or local geographic preferences in the evaluation of bids or proposals in many situations.) Cooperative Purchasing or Jointly Providing Benefits (including Health Insurance) School districts can use intergovernmental agreements under section of the state statutes in order to cooperatively procure health insurance and various other benefits for employee groups. Some school districts have entered into intergovernmental agreements under section with other public entities to create a health benefit purchasing cooperative that is aligned with the requirements found in section of the state statutes. Under a health benefit cooperative, the health insurance risk of all of the members is pooled, and all members receive their health care benefits under the group health care policy or plan that is negotiated with an insurer for a three-year period. The insurer, in turn, must offer coverage under the group health care policy or plan to any individual (including the individual s qualifying dependents) who is a member, officer, or eligible employee of a member of the cooperative. A health benefit cooperative structured according to section is subject to additional requirements and restrictions, including with respect to the geographic area from which it draws its members. (Note: The manner in which section defines key terms related to the membership of a cooperative makes it important for a school district to organize such a cooperative in a manner that also complies with section ) Another option is for a local governmental unit (including a school district) and one or more other local governmental units to jointly provide health care benefits to their officers and employees on a selfinsured basis under section (4m) of the state statutes. This option is only available if the local governmental units together have at least 100 employees. Local governmental unit for purposes of this law means a city, village, town, county, or school district. The self-insured plan must comply with all applicable legal requirements. Consortia of Districts Jointly Providing Educational Technology Training for Teachers The DPI has authority under section of the state statutes to award grants to eligible consortia of school

6 districts for the costs of training teachers to use educational technology. These grants are not available to individual school districts on their own. According to this new state law, a consortium is eligible for an educational technology teacher training grant if all of the following apply: 1. The consortium consists of three or more school districts; 2. Each school district s membership in the previous school year divided by that school district s area in square miles is 13 or less; and 3. The consortium applies for a grant. Bidding Requirements Generally, school boards are not required to competitively bid for goods and services except as specifically required by law or agreed to by the district in contracts with state or federal agencies or as a condition of acceptance of a grant or award. Examples of situations in which schools are generally required by law to use competitive bids or formal competitive proposals include (1) most purchases of $150,000 or more that involve the expenditure of federal funds (or any lower dollar threshold set by local policy); (2) the selection of a food service management company for a school food program, if the district uses a management company; (3) the solicitation of sealed bids for the selection of any group health care benefits provider; and (4) before entering into an energy savings performance contract. Section (2) of the state statutes specifically states that, notwithstanding any state statute requiring bids for public purchases, any local governmental unit (including a school district) may make purchases from another unit of government, including the state or federal government, without the intervention of bids. School leaders should note that this special exception in state law does not supersede any applicable federal bidding requirements. Ethical Standards in Purchasing The federal Uniform Guidance for receiving and using federal grants and awards requires non-federal entities (including school districts) that are subject to the Uniform Guidance to maintain written standards of conduct covering conflicts of interest and otherwise governing the actions of its employees engaged in the selection, award, and administration of procurement contracts. The Uniform Guidance also places specific limitations on the participation and conduct of officers, employees, and agents involved in purchasing and contracting supported by certain federal funds. School board members, administrators and other school officials involved in purchasing decisions should also keep in mind state laws on conflict of interest and ethical standards when negotiating and entering into cooperative purchasing agreements for goods or services. For example, section (1) of the state statutes makes it a felony for any public officer or public employee to engage in certain actions with respect to public contracts in which the officer or employee has a direct or indirect private pecuniary interest. Some of the conduct criminalized by the statute involves actions taken in a private capacity, and some involves actions taken in an official, public capacity. For example, even if a board member or district employee abstains from all participation in contractrelated matters in his/her official capacity, the board member or employee can still violate section in his/her private capacity by negotiating, bidding for, or entering into a school district contract that involves aggregate receipts and disbursements of more than $15,000 in any year. Additional parameters for this criminal liability, and limited exceptions thereto, are specified in the statute. Vendors may use a number of approaches to secure the district s business. School officials and employees are reminded that section of the state statutes prohibits any public officer or public employee to directly or indirectly accept or offer to accept any property or personal advantage pursuant to an understanding that he or she will act in a certain manner in relation to any matter which by law is pending or might come before him or her in his or her capacity as such officer or employee. School board members and administrators should also pay particular attention to the requirements of the code of ethics for local government officials and employees specified in section of the state statutes when making purchasing decisions or entering into procurement contracts for goods or

7 services. One of several important provisions within section states that no person may offer or give to a local public official, directly or indirectly, and no local public official may solicit or accept from any person, directly or indirectly, anything of value if it could reasonably be expected to influence the local public official's vote, official actions or judgment, or could reasonably be considered as a reward for any official action or inaction on the part of the local public official. ADDITIONAL RESOURCES May 2016 issue of WASB s subscription policy publication The FOCUS entitled Cooperative Purchasing of Goods and Services Wisconsin Department of Administration State Bureau of Procurement Resources (including VendorNet) CESA Purchasing Resources Wisconsin Department of Public Instruction School Nutrition Program Resource: Buying Groups ADOPTED: REVISED: REVIEWED: LEGAL REFERENCE: CONTRACT REFERENCE: CROSS REFERENCE: The School District of Waupaca does not discriminate on the basis of sex, race, religion, national origin, ancestry, creed, pregnancy, mental or parental status, sexual orientation, or physical, mental, emotional or learning disability.