KAREN E. RUSHING Clerk of the Circuit Court and County Comptroller Audit of the Vendor Selection Process Audit Services Karen E. Rushing Clerk of the Circuit Court and County Comptroller Jeanette L. Phillips, CPA, CGFO, CIG Director of Internal Audit and Office of the Inspector General Audit Team David Beirau, CFE, CIGA Senior Internal Auditor William Bousman Internal Auditor April 15, 2014
TABLE OF CONTENTS Page Summary and Results 3 Opportunities for Improvement and Management Response 7 Appendix A: Procurement Definitions 12 Page 2
Summary and Results The Clerk of the Circuit Court and County Comptroller s Internal Audit Department has completed an audit of the vendor selection process. The audit was planned and conducted in accordance with Generally Accepted Government Auditing Standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The purpose of the audit was to review internal controls and compliance with applicable laws, regulations, policies and procedures. Background The Procurement Department, within the Office of Financial Management, is responsible for the utilization of competitive procurement methods in order to acquire goods and services for Sarasota County. The department works closely with all business units from the initial purchase request to the award of the contract. They seek to solicit and obtain the goods or services needed, at the best possible value for the taxpayers. In accordance with Resolution No. 2013-032, the County Administrator is authorized to approve contracts in amounts of $100,000 or less. Contracts in excess of $100,000 must be authorized by the Board of County Commissioners (BCC). The Procurement Department follows the laws, rules and regulations set forth by the Florida Statutes, as well as County Ordinance 2013-009, signed by the BCC on March 19, 2013. Section 2-211(b) of the ordinance describes the authority and purpose as: The purpose of this article, known as Sarasota County Procurement Code, is to establish procurement policy; to maximize the prudent use of funds; to provide safeguards for maintaining a procurement system of quality and integrity, and to foster effective competition that is fair and open. The ordinance was created, in accordance with the Chapter 125, Florida Statutes, to establish a policy for the procurement of goods and services for Sarasota County. The ordinance and relevant Florida Statutes provides the foundation on which the Procurement Manual was created. The Procurement Manual references applicable Florida Statutes, Sections of the ordinance and Standard Operating Procedures (SOPs) throughout the entirety of the document. The SOPs are incorporated into the Procurement Manual in order to ensure compliance with required rules and regulations. Within the Ordinance and Procurement Manual there are over ten (10) different procurement methods available. Each method references SOPs outlining steps to be followed throughout the procurement process. Revisions to any SOPs specified in the Procurement Manual require Page 3
written approval of the Procurement Official and a new effective date must be assigned. If new or additional SOPs are needed, the revised Procurement Manual must be approved in writing by the Procurement Official, and the revised Manual must be approved in writing by the County Administrator with the new effective date assigned to the revised Manual. During the period of April 8, 2013 to February 20, 2014, the Procurement Department processed a total of eighty-nine (89) solicitations in excess of $100,000. Of those eighty-nine (89) solicitations, fifty-three (53) were Invitation for Bids or (60%) for an estimated amount of $61,506,586, nine (9) were Request for Proposals or (10%) for an estimated amount of $18,400,000, nine (9) were Sole Source procurements or (10%) for an estimated amount of $7,065,000. The remaining eighteen (18) were Waivers from competition or (20%) for an estimated amount of $6,550,096. Solicitations by Procurement Method % 20% 10% 10% 60% Invitation for Bids Request for Proposals Sole Source Waivers Solicitations by Procurement Method $ Amounts Shown in Millions $7.1 $6.6 $18.4 $61.5 Invitation for Bids Request for Proposals Sole Source Waivers *Sampled waivers included: Government Agencies & Non-Profits; Subscriptions, Periodicals, Newspapers; Health & Human Services; Warranties, Licenses, Compatibility. Page 4
Objectives, Scope and Methodology The objectives of this audit were to determine if the Procurement Department's internal controls related to vendor selection are operating effectively and if they are in compliance with applicable laws, rules, regulations, policies and procedures. To meet the objectives of the audit, the procedures performed included, but were not limited to, the following: Obtained an understanding of relevant Florida Statutes, County Ordinance 2013 009, Resolution No. 2013-032, the Procurement Manual and relevant SOPs. Compared sections from relevant Florida Statutes, County Ordinance 2013 009 and Resolution No. 2013-032 to the corresponding section(s) in the Procurement Manual. Performed inquiries of County personnel. Reviewed and tested documentation relating to community outreach, threshold application, local preference, responsiveness, cancellations, and SOPs. Evaluated the internal controls related to the advertisement, review and approval of the solicitation process. Identified opportunities for improvement. In addition, the table below provides specific information related to procurement type, population and sample size for purchases between April 8, 2013 and February 20, 2014: Procurement Type* Population Sample Size Invitation for Bid 53 37 Request for Proposal 9 7 Sole Source 9 6 Waiver of Competition 18 13 Subtotal 89 63 Cancellation** 18 18 Totals 107 81 *95% Confidence Level and a 5% Margin of Error was used in determining the sample size. **The entire population was tested. Page 5
Overall Results Based on the procedures performed, the Procurement Department appears to have internal control issues which have caused the department to be out of compliance with their Standard Operating Procedures. Additionally, there are processes that lack documented Standard Operating Procedures. These areas are detailed in the Opportunities for Improvement section of this report. The following summarizes the result of the audit: Non-Compliance with Standard Operating Procedure #50 Processing Procurement Waivers: The Procurement Department is not in compliance with the signature requirements of Standard Operating Procedure #50 as outlined by the Procurement Manual. Non-Compliance with Standard Operating Procedure #28 Requesting a New Solicitation: The Procurement Department is not in compliance with the departmental solicitation worksheet requirements of Standard Operating Procedure #28 as outlined by the Procurement Manual. Non-Compliance with Standard Operating Procedure #19 Formal Invitation for Bid Process and Standard Operating Procedure #36 Responsiveness and Responsibility Verification: The Procurement Department is not in compliance with the responsiveness requirement of Standard Operating Procedures #19 and #36 as outlined in the Procurement Manual. Lack of Standard Operating Procedure related to Cancellations: There are currently no Standard Operating Procedures related to the cancellation of a solicitation. Lack of written procedures for solicitations greater than $100,000 within Standard Operating Procedure #34 Purchase Requisition Process: Does not contain guidance for Category 4 solicitations greater than $100,000. Page 6
Opportunities for Improvement The audit disclosed certain policies, procedures, and practices that could be improved. The audit was neither designed nor intended to be a detailed study of every relevant system, procedure, or transaction. Accordingly, the Opportunities for Improvement presented in this report may not be all-inclusive of areas where improvement may be needed. Observations and recommendations were made in the following areas: A. Non-Compliance with Standard Operating Procedure #50 - Processing Procurement Waivers B. Non-Compliance with Standard Operating Procedure #28 - Requesting a New Solicitation C. Non-Compliance with Standard Operating Procedure #19 Formal Invitation for Bid Process and Standard Operating Procedure #36 Responsiveness and Responsibility Verification D. Lack of Standard Operating Procedure related to Cancellations E. Lack of written procedures for solicitations greater than $100,000 within Standard Operating Procedure #34 Purchase Requisition Process A. Non-Compliance with Standard Operating Procedure #50 - Processing Procurement Waivers Ensure Compliance with all Standard Operating Procedure steps. Observation Standard Operating Procedure (SOP) #50 requires that a Waiver of Competition form for waivers greater than $100,000 be authorized and signed by the Board. The auditor selected a sample of thirteen (13) solicitations procured between April 2013 and February 2014 and reviewed all related documentation. During review of the files it was noted that seven (7) of the thirteen (13), approximately 54%, Waiver of Competition forms were lacking Board signature. Recommendation Implement a quality assurance process to ensure that all SOPs are performed timely and accurately including but not limited to Board signature. Management Response When the Procurement Code was adopted in March 2013, Procurement began requiring the Board of County Commissioners to sign all Waiver Request forms in excess of $100,000. The Board s signature on the Waiver form authorized the Procurement Official (or designee) to approve Purchase Orders related to the waiver in excess of $100,000. In some instances, the waiver of competition resulted in a two-party contract for products or services that was also signed by the Board of County Commissioners. Page 7
Procurement was advised by Contracts Administration and the Office of the County Attorney that the Board of County Commissioners signature on the Waiver of Competition form was not necessary when the Waiver resulted in a contract that was to be signed by the Board. The Board s signature on the contract authorizes the Procurement Official (or designee) to approve Purchase Orders in excess of $100,000. To resolve this discrepancy, the Procurement office on April 30, 2014 revised the Standard Operating Procedure #50 to reflect the new procedures related to signatures on Waiver of Competition forms. The revised procedures state that if a contract is required as the result of a Waiver of Competition, the Board of County commissioners will sign the contract, and will not be required to sign the Waiver Request Form. The SOP further clarifies that the box above the Board s signature block on the Waiver Request Form should be checked when the Board of County Commissioners will be signing a contract. The revised SOP was issued on April 30, 2014. B. Non-Compliance with Standard Operating Procedure #28 - Requesting a New Solicitation Ensure Compliance with all Standard Operating Procedure steps. Observation SOP #28 requires that all Solicitation Worksheets be completed by the business unit requesting solicitation before the solicitation process can begin. Of the sample tested above, 1 Solicitation Worksheet was missing the total estimated expenditure for the solicitation. Recommendation Implement a quality assurance process to ensure that the requirements of the SOPs are completed timely and accurately. Management Response This observation was investigated by Procurement and it was found that the noted Solicitation was a Unit Price Contract Award for 87 line items. The Solicitation Worksheet was contained in the file and signed by the Department Director. A Unit Price based solicitation results in a contract with multiple line items and a unit price for each. The award is based on a hypothetical quantity model of each line item multiplied by the proposer s unit price. Work is ordered and assigned based on a task order basis as required by the requesting department. The amount and frequency of the task order will vary based on the needs of the requesting department. No work is guaranteed under this type of solicitation. Page 8
The Solicitation Worksheet supplied by the requesting department indicated a dollar value of various-per award in the box on the worksheet indicating the Estimated Expenditure. The requesting department did not have an annual projected expenditure or a total expenditure identified at the time of soliciting for the 87 unit prices. The requesting department (Public Works) identified the account number from which funding was identified. Procurement staff will immediately begin enforcing a requirement for a total dollar estimate when a unit price solicitation is involved. The SOP #28 was changed on April 30, 2014 to reflect this. C. Non-Compliance with Standard Operating Procedure #19 Formal Invitation for Bid Process and Standard Operating Procedure #36 Responsiveness and Responsibility Verification Ensure Compliance with all Standard Operating Procedure steps. Observation SOPs #19 & #36 require that for a bidder to be responsive, all required documentation must be submitted by the response date. The auditor selected a sample of 37 Invitation for Bids (IFB) and 7 Request for Proposal (RFP) solicitations initiated between April 2013 and February 2014 and reviewed all related documentation. During review of the solicitation files, it was noted that 2 of the total 44 IFB s and RFP's inspected contained a No Lobby Affidavit and Immigration Status Affidavit submitted subsequent to the bid closing due date. Recommendation Implement a quality assurance process to ensure awarded bidders are properly deemed to be responsive and all required documentation is complete, timely and accurate. Management Response Procurement investigated this observation and reviewed the two solicitations in question. We concur that the No Lobby Affidavit and Immigration Status Affidavit forms were submitted late. It was determined that in both cases the vendors had difficulty with uploading required forms on the County eprocure system. The Procurement Analyst acted inappropriately as did the Procurement Team Leader in accepting the notarized forms after the due date. The team had made the determination, at that time, that the technical difficulties with eprocure would constitute a minor irregularity. Page 9
This incident has created a training opportunity to make sure that staff is aware and required to follow procedures. The technical solution to this problem was the replacement of eprocure with the new bidding platform called BidSync which occurred on April 2 nd, 2014. D. Lack of Standard Operating Procedure related to Cancellations Create Standard Operating Procedures. Observation Procurement Manual Section 16.2, states that the Procurement Official reserves the right to cancel any solicitation during any phase of the process and cancel any recommended award or recommended contract at any time prior to execution. However, there currently are no SOPs related to the cancellation of a solicitation. Recommendation Create SOPs related to the process of cancelling a solicitation. The process should include appropriate references to the procurement code and the procurement manual. Procedures should require that the Notice of Cancellation be made available to each potential bidder to ensure transparency and also include the reason for the cancellation as well as the date of cancellation. Management Response No Standard Operating Procedure was in place for the termination process of a solicitation. Current practice is to obtain a letter requesting a cancellation from the Director of the department requiring the goods or services. A dated Notice of Cancellation with a brief description of the reason, or future intention, is then posted electronically, by the Procurement Analyst, on the county electronic bidding platform (eprocure/bidsync) for all vendors to read. A new Standard Operating Procedure # 55 has been created on April 30, 2014 in response to the audit observation. This SOP also references language found in both the Procurement Code and the Procurement Manual. E. Lack of written procedures for solicitations greater than $100,000 within Standard Operating Procedure #34 Purchase Requisition Process Modify SOP for Category 4 purchases. Observation SOP #34, related to the Invitation for Bid, Request for Proposal, Sole Source and Waiver of Competition solicitations, provides guidance and instructions for purchase requisitions and Page 10
specifically identifies requirements for Category 1 purchases (single purchase of $5,000 or less), Category 2 Purchases ($5,000.01 - $24,999.99), and Category 3 Purchases ($25,000 - $99,999.99). The auditor observed a lack of guidance for Category 4 Purchases which are for $100,000 or more. Recommendation As provided for with Category 1, 2 and 3 purchases, modify SOP #34 to ensure Category 4 ($100,000) purchase requisitions are prepared to allow for audit of compliance with the competitive purchasing methods outlined in the Procurement Code and Procurement Manual. Management Response On April 30, 2014 Standard Operating Procedure #34 was revised to include specific instructions for requesting Category 4 purchases requisitions. The revised SOP was issued and reviewed with the staff on April 30, 2014. Page 11
Appendix A: Procurement Definitions Cancellation of a Solicitation: Sarasota County reserves the right in any solicitation to accept or reject any or all bids, proposals or offers; to waive minor irregularities and technicalities; or to request resubmission. Also, Sarasota County reserves the right to accept all or any part of any bid, proposal, or offer, and to increase or decrease quantities to meet additional or reduced requirements of Sarasota County. Any sole response may be rejected by the County Administrator or designee. Invitation for Bid (IFB): procurement method that uses competitive sealed bids and are issued by the Procurement Department. Award of bid shall be made to the lowest, responsible, and responsive bidder, unless the requirement for competition is exempted by the Procurement Official. Local Business: means (1) the vendor has paid a local business tax either to Sarasota, Manatee or Charlotte County or is a business entity registered with the State of Florida Division of Corporations indicating a principal office located in Sarasota, Manatee, or Charlotte County or presents other verifiable documents to substantiate business location in Sarasota, Manatee or Charlotte County that are satisfactory to the Procurement Official and, (2) has maintained a permanent physical business address located within the limits of either Sarasota, Manatee or Charlotte County from which the vendor operates or performs business for at least one year prior to the submission of a response to a Sarasota County solicitation and, (3) has at least five full time employees or one principal officer at this location. Local Preference: is the preference given to local businesses in the purchase or commodities and services procured pursuant to Ordinance 2013 009, Section 2-215. Business entities desiring to receive preference as a Local Business are required to affirmatively state and provide documentation as set forth in the solicitation in support of their status as a Local Business. Procurement Official: designee is authorized to issue purchase orders, and execute contracts and amendments thereto at the instruction of constitutional officers who certify in writing that the subject procurement complies with the provisions in County Ordinance 2013 009. Request for Proposals (RFP): procurement method that shall be solicited when the Procurement Official determines that the use of competitive sealed bids is not advantageous to Sarasota County. Award shall be made to the most responsible and responsive proposal according to criteria set forth in the solicitation. Responsiveness: a contractor, business entity or individual who has submitted a bid or proposal that fully conforms in all material respects to the Invitation for Bid/Request for Proposal and all of its requirements, including all form and substance. Page 12
Sole Source: is a procurement method that selects one particular supplier to the exclusion of all others. This decision may be based on lack of competition, proprietary technology, copyright or a suppliers unique capability. Waiver of Competition: The BCC has adopted a list of procurements of goods and services which may warrant a waiver of competition. Approved waivers are valid for a period of twelve months, after which a new request must be presented for consideration. Page 13