THERE ARE HUNDREDS OF WAYS TO ABUSE THE CONTRACTING PROCESS FOR PERSONAL GAIN. OUR FEDERAL AND STATE CONSTITUTIONS RIGHTFULLY REQUIRE THAT A PERSON BE PLACED ON VERY CLEAR NOTICE BEFORE THEIR CONDUCT CAN BE CONSIDERED SUBJECT TO A PENALTY. THIS POLICY IS VERY LONG AND VERY COMPLEX, BUT THIS IS WHAT IS LEGALLY REQUIRED IF FOLKS ARE TO BE HELD ACCOUNTABLE FOR THEIR CONTRACTING MISDEEDS. SO, BEAR WITH IT AND TRY TO UNDERSTAND THAT THIS IS WHAT THE BOARD NEEDS TO DO IF WE ARE TO SMOTHER THE KINDS OF STUFF THAT HAS GONE ON FOR THE PAST 30 OR 40 YEARS, TO THE DETRIMENT OF OUR CHILDREN.
PROPOSED PROCUREMENT POLICY FOR THE DETROIT PUBLIC SCHOOLS
ARTICLE 1 – GENERAL PROVISIONS
PART A – PURPOSES AND APPLICATION
Sec. 1.101 Purposes.
In their general order of importance, the purposes of this policy are:
(1) to provide schools and offices with a procurement system which is prompt, dependable, and responsive to both their routine and more urgent needs;
(2) to get the most value for each dollar spent;
(3) to delegate to the Superintendent final contracting authority for those contracts which are routine, foreseen, budgeted and competitively awarded, and to establish objective criteria by which to review those remaining contracts which involve the exercise of discretion;
(4) to treat all vendors and potential vendors fairly;
(5) to establish policies and self-policing procedures which promote and safeguard the quality and integrity of the procurement system;
(6) to provide for the suspension or debarment of a vendor who subverts or willfully breaches these safeguards;
(7) to enable any interested person to review the public record and satisfy themselves that schools purchasing agents have complied with the requirements of this policy;
(8) to prefer firms which are located within the City of Detroit; and which contribute to its tax and job base; and
(9) to prefer those vendors who are undertaking assertive and voluntary affirmative action commitments to remedy the continuing effects of past discrimination within their firms.
COMMENT: It is best to state the purposes in their relative order of importance. This helps decision-makers to sort out what to do when they can not reconcile and satisfy all objectives, which so often happens. Purposes 1 & 2 are the most important. Purpose 3 both expedites the process and takes the School Board out of that 90% of the contracting activity in which competitive pressures leave little room for abuse. Purposes 4 to 7 address issues which assure the integrity of the procurement process. Purposes 8 & 9 are important to the community whenever they can be accommodated without significant expense to the schools and the children.
Sec. 1.102 Application.
This policy applies to all contracts for the procurement of supplies, services, and construction, entered into by the district, whatever the source of the funds. This policy shall not, however, prevent any school or office from complying with more stringent terms and conditions of any grant, gift, or bequest made to the district.
COMMENT: The current bid policy applies only to some categories of procurement, not to all. Competition is not required except in certain cases. This policy prescribes that competition of a specific kind is required in all but certain defined situations, and even then, that optimum feasible competition is required. The terms supplies, services, and construction are defined in Article 13 to include every possible object of procurement.
PART B – PUBLIC ACCESS TO PROCUREMENT INFORMATION
Sec. 1.201 Public Access to Procurement Information.
Procurement records shall be available to the public at least as provided in the Freedom of Information Act, being Michigan Compiled Laws section 15.231 and its following. In addition; if a record is readily available, it shall be promptly provided – by a person who is responsible for its day-to-day custody – for visual inspection by the requestor. Unless the requestor is a person who is specifically known to have previously altered or destroyed school records to which he or she has been given access, if a custodian of a readily available record fails or refuses to promptly produce it for inspection, he or she shall be subject to a ten-day suspension without pay upon the first infraction and discharged from employment upon the second infraction. If a record is not readily available, or if a copy is requested, the request shall be satisfied as soon as the requestor has paid for the cost of search labor and copy-making as provided by law. A search or copy shall be made free of charge when requested by a reporter for a newspaper of general circulation within the City of Detroit, or for a television or radio news program which is broadcast to an audience in the City of Detroit. A search or copy shall not otherwise be made free of charge unless authorized by the Purchasing Director, or the Superintendent, or his/her designee.
If a vendor is required to provide information of a proprietary or confidential nature in order to document that the vendor is a responsible bidder, that information shall be reviewed by and shall be retained in a separate file by the General Counsel, and that information shall not be disclosed without the permission of the providing vendor or under court order. (See Sec 3.301)
Information which is provided in response to a request for proposals shall not be disclosed to other persons before the review of the proposals has been completed. (See Sec. 3.203)
COMMENT: Free access to public procurement records shall be provided to all persons but those known to have destroyed or altered records to which they have been given access. Free copies are to be promptly provided to the media and to any person who may use them in a manner that ultimately protects the integrity of the procurement process. There should be no opportunity for any person to prune, purge, alter, conceal, or delay access to these records, before they are made available, except in the two cases identified. Copies should not be provided free of cost to persons who may realize an economic benefit from them or to persons who have a known history of making frivolous requests, or unfounded and libelous or slanderous accusations of vendors or staff. The district must beware of lending support to libel and slander for which it might then also be held liable.
Sec. 1.202 District Procurement Records.
(1) Contract File. The Purchasing Director shall assure that all determinations and other written records pertaining to the solicitation, award, or performance of every contract are maintained for the district in a contract file which is accessible for public inspection, with the exceptions noted in section 1.201. If procurement authority is delegated by this policy or by the Purchasing Director to another executive officer, the required public files shall be maintained either centrally or at the delegated office as the Purchasing Director may direct.
(2) Retention of Procurement Records. The Purchasing Director shall assure that all procurement records are retained and disposed of by the district in accordance with records retention guidelines and schedules approved by the School Board.
COMMENT: The District does not presently have well-defined records retention guidelines, but the past event in which 30 boxes of bond-issue records were misplaced has clearly indicated that guidelines are needed and that responsibility must be clearly fixed. This section assumes that such guidelines will be developed and implemented.
(3) Place Required to Inspect Records. At each location at which public procurement records are kept, a desk or counter space shall be provided at which members of the public may inspect those records. A copy of this policy shall also be made prominently available at that space.
Sec. 1.203 Vendor’s Manual.
The Purchasing Director shall develop and provide at cost to all potential vendors a booklet which explains the following:
(1) What kinds of services, supplies and construction are purchased by the district.
(2) How a vendor may be pre-qualified as responsible and placed on bid mailing lists.
(3) How to prepare and submit a bid.
(4) The standard contractual, bonding, equal opportunity, and performance requirements of vendors.
(5) How payments are handled.
(6) How to appeal from a contract manager’s decision.
COMMENT: Sections 1.201 and 1.202 set-up a key feature of this policy. Later in Article 3, we spell-out the competitive bidding requirements and their exceptions in sharp detail. Here we use the concern of the public (and of competitors more specifically) to police compliance with those requirements. As a member of the public, a Board member can of course also check the record.
The procedural requirements of this policy are set forth in great detail because honest and successful competitive bidding absolutely requires such a detailed structure. Once these policies and procedures are established by the Board, however, the execution of the policy is largely delegated to the Superintendent, the Deputy Superintendent for Fiscal Integrity, and the Purchasing Director. This serves both to expedite the procurement process and to focus the time of the School Board upon more significant issues.
If anything goes awry in these routine contracts, the Board can be reasonably assured that it will soon hear about it from other affected parties, because they have an easy and open means of uncovering errors or wrongdoing. The Board also has at its disposal an audit staff who have as their prime duty the discovery of deviations from Board policy, whether deliberate or neglectful.
If vendors are to be treated fairly, each must be enabled to know the ground rules and the manner in which those rules are implemented and enforced. Experience has shown that when vendors are not informed of the procedures for approval and prompt payment, timely service to schools and students is disrupted. The State of Michigan publishes a model handbook of the kind envisioned in Section 1.203.
A large part of this policy is spelled-out in detail in order to eliminate certain ambiguities and conflicts in the case law which deals with procurement issues . Different courts have come to differing conclusions on some issues, because many of these matters are amenable to more than one reasonable conclusion. By choosing one particular approach as a matter of policy, the district can avoid delay and controversy in its own procurement operations. When a purchaser has adopted a specific policy on a matter, and has made it known to the vending community as well as a part of the contract, courts will enforce it, even though the case law may follow a different track. The Model Procurement Code, upon which this policy is based, was developed by several professional associations of public purchasing officers, who selected those options which in their opinion had the greatest practical merit.
Contrary to general public expectations, it is not easy to prosecute unethical conduct as criminal wrong-doing, unless the perpetrator has been given a clear and specific warning that any such conduct rises to be a criminal offense. This is a clear Constitutionally protected right. It is incumbent, therefore, upon the School Board to fire a clear and specific warning across the bows of anyone who may be inclined to take such advantage. In the contracting context, there are hundreds of ways in which contracting trustees could abuse their discretion. It, therefore, takes an extremely complex and lengthy set of policies and procedures to staunch unethical and detrimental conduct.
ARTICLE 2 – OFFICE OF THE PURCHASING DIRECTOR
Sec. 2.101 Authority and Duties.
(1) Duties. In accordance with this policy, and subject to the supervision of the General Superintendent and the Chief Operating Officer, the Purchasing Director shall:
(a) procure or supervise the procurement of all supplies, services, and construction needed by the district.
(b) exercise direct supervision over the district’s central stores and coordinate supervision over all other inventories of supplies belonging to the district;
(c) coordinate the identification of, and sell, trade, or otherwise dispose of surplus supplies belonging to the district; and
(d) establish and maintain programs to develop quality specifications, to effectively administer contracts, and to inspect and accept performance, in cooperation with the schools and offices using the supplies, services, and construction.
COMMENT: This policy establishes the Purchasing Director as the key figure in a unified procurement system.
Under Sec. 2.102, with the permission of the General Superintendent and the Chief Operating Officer, the Purchasing Director may (and should) delegate a good deal of purchasing activity to individual schools and offices, but retain the power and obligation to immediately retract any delegated authority which is neglected or abused. Some later provisions of the policy, such as those for small purchases authority, have been written with such a general delegation in mind.
(2) Rules and Regulations. To implement this policy, the Purchasing Director may issue rules and regulations. If a proposed rule or regulation will affect the rights of any person who is not an employee of the district, it shall be issued only after persons, who are reasonably representative of each class of persons affected, have had reasonable opportunity to review and comment upon the proposed rule or regulation at an advertised public hearing, and only after its approval by the School Board.
COMMENT: If courts are to hold rules and regulations to be valid and enforceable against vendors and other persons who are not district employees, then the School Board must expressly and specifically approve each of those rules after a public hearing in which persons who are representative of each class of persons affected are given reasonable notice and an opportunity to be heard. This is required by principles of due process and equal protection.
Sec. 2.102 Delegations to Other District Officials.
With the approval of the General Superintendent or the Chief Operating Officer, the Purchasing Director may delegate procurement authority which has been vested by this policy in his or her office to other district officials and to subordinate staff in the Purchasing Division. A delegation shall be written as to specified aspects of the procurement of specified supplies, services, or construction. A copy of each written delegation of authority shall be kept on file for public inspection at the office of the purchasing director.
COMMENT: The next article (Article 3) is the core of this policy. It sets-up the standard requirements for competitive bidding, which are:
- An invitation for bids which includes all relevant specifications and requirements.
- Enough public notice and response time to solicit adequate competition.
- Sealed bids, which are opened with witnesses present and read aloud in public by the Secretary of the School Board. The documents must be immediately available for public review. There is no opportunity to alter or tamper with bids.
- A registry for interested bidders so that all who are interested have a chance to bid.
- A defined preference for Detroit-based vendors.
- Strictly defined criteria for correcting or canceling bids. Bidders are held fully accountable. There is no opportunity for bidders to make backroom deals.
- Objective criteria for bid evaluation.
- Prompt award to the lowest responsive and responsible bidder. Bidders can rely upon the time schedule provided in the bid announcement.
- A two-step bid process when the available specifications are inadequate to describe and pinpoint district needs.
- An open public means to cancel all bids, when in the best interests of the district.
ARTICLE 3 – SOURCE SELECTION AND CONTRACT FORMATION
PART A – METHOD OF SOURCE SELECTION GENERALLY REQUIRED
Sec. 3.101 Competitive Sealed Bidding Generally Required.
(1) General Requirement and Exceptions. All procurements of the district shall be awarded by competitive sealed bidding, as set forth in paragraphs (2) through (11), except as is otherwise provided in the following sections of this policy:
3.201 (Small Purchases),
3.202 (Sole Source and Single Response Procurements),
3.203 (Competitive Sealed Proposals),
3.204 (Contracting for Designated Professional Services),
3.205 (Exigent or Emergency Procurements), and
5.401 (Public Announcement and Selection Process for Architect-Engineering and Surveying Services).
COMMENT: There are only six (6) special exceptions to the standard requirements for competitive sealed bidding. They are:
- Small purchases, where standard procedures are likely to cost more in staff time than they can save.
- Requests for Proposals, where it is not practical to write specifications which are good enough to enable an effective bid process. But you still do the best you can.
- Designated professional services, for which schools and support offices contract instead of using in-house staff. Again, schools must do the best that they can to get the best person for the job that needs to be done.
- Sole source and single response procurements, where there is only one available vendor, or where time does not permit rebid, or where the price bid is known to be a low and reasonable one and does not justify the cost and delay of a second round of bidding.
- Exigent or emergency purchases, where the situation does not permit the time needed for a formal award. But managers must still do all they can to foresee and avoid such situations.
- An added option for procuring architectural and engineering services (other than #2 above). This option was developed by the federal government to hire such services for grant projects. It favors professional experience over immediate cost as the most important selection factor because expert front-end services often produce lower long-term costs in building, electrical, heating plant, cafeteria, and other design.
(2) Invitation for Bids. An invitation for bids shall be issued which shall include specifications, and all contractual terms and conditions applicable to the procurement.
(3) Public Notice. Enough public notice of the invitation for bids shall be given to reasonably assure an optimal level of competition. Notice shall be given within a reasonable time, preferably fourteen (14) days but not less than ten (10) calendar days, before the date set forth therein for the opening of bids. This notice may include publication in a newspaper of general circulation, or on the Internet, or in professional and trade bulletins, if those kinds of notice are in fact likely to produce more effective competition. The public notice shall state the place, date, and time of bid opening.
(4) Register of Interested Vendors.
(a) The Purchasing Director shall maintain a register of vendors who have asked to be notified of specified kinds of invitation for bids, and subject to the exception in Section 3.101(5), shall make good faith but not guaranteed efforts to honor those requests. Vendors who request to be added to the register shall be advised in writing that the district makes no warranties, and that failure to provide such a notice or the opportunity to make a bid shall not provide the basis to either invalidate an award to another vendor, nor for a claim for a loss of profits. New listings shall be added without charge.
(b) In order to improve bidding efficiency, the Purchasing Director shall annually review the registry, identify vendors who have not made cost-competitive responses after a reasonable number of bid opportunities, and offer these vendors the option of being removed from the registry, or of making an advance payment of a service fee of $2.00 per notice. There shall be no charge for email notices.
(c) To enhance competition, the Purchasing Director shall annually review the registry and identify those types of supplies, services, and construction for which there are less than ten responsive vendors on the registry, and take those steps needed to increase the number of potential bidders of those types on the registry.
COMMENT: This overall policy is based upon a Model Procurement Ordinance which was developed about 1980 in a $5 million dollar joint effort of the American Bar Association, several associations of state and local purchasing officials, and the federal Departments of Justice, and Health and Human Services.
The Model Procurement Ordinance is based upon a lot of hard-gained experience and costly litigation over the decades. It may seem easy to adopt a policy which simply declares that all purchasing shall be done by sealed competitive bids. But over time, cunning persons have devised dozens of ways to circumvent and subvert such policies. In fact, it takes a lengthy and sophisticated policy to successfully protect the integrity of a procurement process.
Why couldn’t this be done by administrative rule and regulation? It can, but that’s like putting the fox in care of the henhouse. There is a great deal of discretion involved in purchasing some $200 Million of supplies, services and construction each year. There are literally thousands of opportunists “out there” who are ready, willing, and able to corrupt the purchasing process and its agents. Hardly a day goes by when the newspapers do not report a new instance of procurement misconduct somewhere. It is OK for the School Board to set broad policies and to leave the detail to be set by administrative rule and regulation, if that’s the best that can be done. But this is not the case in governmental purchasing. Literally thousands have gone before us and have shared their collective experience in devising an optimal Model Procurement Ordinance to guide us.
There was also another good reason for developing a Model Procurement Code, to standardize procurement practices, so that it would be easier for auditors and procurement managers everywhere to detect questionable practices and purchases. By adopting this policy, we join a national effort to make all governmental spending more effective and honorable. We contribute to efforts to restore public confidence in government itself.
(5) Detroit-based preference. If a procurement is to be paid wholly from sources other than federal funds, and if the past experience of the Purchasing Division demonstrates that there are at least four Detroit-based vendors who have been competitive in providing that specific kind of service, supply, or construction, then the Purchasing Director may limit notice of the invitation for bids to all known Detroit-based vendors of that kind. The Purchasing Director shall not, however, advise vendors of that limitation on invitations until after bids have been opened.
(6) Bid Opening. Bids shall be opened publicly by the Secretary of the School Board in the presence of one or more independent witnesses at the time and place set forth in the invitation for bids. The amount of each bid, and such other relevant information as the Board Secretary deems appropriate, together with the name of each bidder shall be read clearly aloud and recorded. This record and each bid shall be open to immediate public inspection in accordance with Section 1.201 (Public Access to Procurement Information) and the Freedom of Information Act.
(7) Bid Acceptance and Bid Evaluation. Bids shall be unconditionally accepted without alteration or correction, except as authorized in this policy. Bids shall be evaluated based only upon those requirements set forth in the invitation for bids, which may include criteria to determine acceptability such as inspection, testing, quality, workmanship, delivery, and suitability for a particular purpose. Those criteria which will affect the bid price and which will be considered in evaluation for award, shall be objectively measurable, such as discounts, transportation costs or savings, and total or life cycle costs.
(8) Correction or Withdrawal of Bids; Cancellation of Awards.
(a) When appropriate, a bidder may be permitted to correct or withdraw a bid, which contains inadvertent errors, both before and after bid opening. An award or contract may also be canceled based upon such bid mistakes. A notice of this correction policy and procedures shall be included in all invitations for bids.
(b) Mistakes discovered before bid opening may be corrected or withdrawn by written, faxed or other telegraphic notice received in the office designated in the invitation for bids at any time before the time set for bid opening.
(c) After bid opening, no changes shall be permitted in bid prices or in other provisions of bids, which are prejudicial to the interest of the district or to fair competition. After bid opening, a bid may be corrected only if and to the extent that the bidder can show by clear and convincing evidence:
(i) the nature of the mistake,
(ii) that the mistake was not one of business judgement, and
(iii) what bid price had actually been intended.
(d) Instead of bid correction, a low bidder who alleges a material mistake of fact may be permitted to withdraw its bid if:
(i) the mistake is clearly evident on the face of the bid document but the intended correct bid is not similarly evident; or
(ii) the bidder submits evidence which clearly and convincingly demonstrates that a mistake was made.
(e) All decisions to permit the correction or withdrawal of bids, or to cancel awards or contracts based on bid mistakes, shall be supported by a written file determination made by the Purchasing Director.
(f) An invitation for bids shall provide a prominent notice that all bidders shall be held strictly accountable for their bid. If there are no acceptable grounds upon which to correct or withdraw a bid, a low responsive and responsible bidder shall be held strictly responsible to fully perform the contract by it terms or to pay to the district the difference in cost between the low bid and the next lowest bidder, whether or not that will result in a loss to or the bankruptcy of the low bidder.
COMMENT: The bid withdrawal and cancellation process bears extra special scrutiny, because it is so easily used as a means of undermining the competitive bid process when a buyer is known to go easy on bid withdrawals. After bids are opened and known, a low bidder, for example, can go to the next higher bidder and strike a backroom deal to withdraw in exchange for a share of the profits on the higher bid. Or some people who are not really qualified bidders will parasite on the process by making a low bid and then approaching the next lowest bidder with such an offer or a threat to hold up the process. Purchasing agents may then be approached and “encouraged” to look the other way. That’s why a strict and detailed policy is needed and justified on both withdrawals and on evaluations of a bidder’s responsibleness. It should not cause any capable business a hardship if they are given fair notice up-front that they will be held strictly accountable for their promises (bids).
(a) The contract shall be awarded with reasonable promptness by appropriate written notice to the lowest responsive and responsible bidder whose bid meets the requirements and criteria set forth in the invitation for bids.
COMMENT: It is important that bidders be able to rely upon the delivery schedule that is set forth in the invitation for bids. Wholesale and supplier prices are subject to change, but most of that change is predictable. There have been cases in which a vendor has submitted a low bid, but in which the previous supplier is allowed to keep on performing month-after-month, sometimes at an even higher price, while the new contract is being “processed”, raising questions as to why? These practices tend to drive the general level of all bids up as vendors seek to protect themselves. It is much better for the district when bidders have confidence that the bid system is honest and that the performance schedule is dependable.
(b) If the lowest responsive and responsible bid for a construction project exceeds available funds as certified by the Deputy Superintendent for Fiscal Integrity, and such bid does not exceed such funds by more than ten percent (10%), the Purchasing Director is authorized, when time or economic considerations preclude re-solicitation of work of a reduced scope, to negotiate an adjustment of the bid price with the lowest responsive and responsible bidder, in order to bring the bid within the amount of available funds. Any such negotiated adjustment shall be based only upon eliminating independent deductive items which have been specified in the invitation for bids.
(10) Multi-Step Sealed Bidding. If it is not practical at the onset to prepare a specification which is good enough to obtain a bid based on price, an invitation for bids may be issued requesting that unpriced offers be submitted, to be followed by an invitation for bids which will be limited to those first-round respondents whose offers are found to be technically acceptable under the criteria set forth in the first solicitation.
COMMENT: It is not easy to draft specifications which result in limiting competition to products which really meet district needs on the one hand, while getting the best price on the other, especially for items which are seldom purchased. In many cases, the two-step bidding procedure provides a workable answer to these situations. The rationale for limiting second- round competition to those who respond to the first round, is to motivate more vendors to take part in the first round, which calls for more involvement (and thus cost to the vendor).
(11) Cancellation of Solicitations. An invitation for bids, a request for proposals, or other solicitation may be canceled, or any or all bids or proposals may be rejected in whole or in part. Each solicitation issued by the district shall so state. The written reasons as to why cancellation or rejection is in the best interests of the district shall be made part of the contract file. Notice of cancellation or rejection of all bids shall be sent to all businesses solicited. The notice shall identify the solicitation, explain the reason for cancellation or rejection, and, where appropriate, advise that an opportunity will be given to compete on any re-solicitation or any future procurements of similar items.
COMMENT: One key reason to set forth policies in great detail, is because courts tend to enforce them to the letter. They often refuse to recognize circumstances which clearly and reasonably justify an exception, on the theory that it opens the floodgates for both litigation and abuse. Exceptions to a general policy must therefore be expressly granted and clearly defined.
If, for example, the Purchasing Director is to be permitted to omit a newspaper advertisement when it’s not likely to enhance competition, that discretion must be expressly provided.
If the Purchasing Director is to be given discretion to limit competition to Detroit-based firms, that discretion must be expressly provided.
On some points, the case law goes several ways, and it helps avoid contention to spell out how bids are to be handled, for example, in the case of bid correction or withdrawal. These processes have oftentimes become a backdoor for circumventing competitive requirements.
In other cases, the details need to be specified to assure that there is compliance with the spirit of a policy, for example, it’s not enough to just open bids in a public place. They need to be read aloud in front of witnesses. And those in attendance need to be able to immediately inspect the bid documentation. These details have good reason behind them based upon hard experience in the field.
PART B – EXCEPTIONS TO GENERAL REQUIREMENTS
FOR SOURCE SELECTION
Sec. 3.201 Small Purchases.
(1) General. A procurement of twenty thousand dollars ($20,000) or less, is not subject to the several requirements of Section 3.101. These small purchases are, however, subject to all of the public record requirements of Sections 1.201 and 1.202. The Purchasing Director shall develop a system for making small purchases which is quick, simple, flexible, and sensible. Users shall define their needs in terms of performance. Competition shall be sought to the extent that it promises to generate greater buying savings than the cost of the search. Schools and offices shall requisition and purchasing agents shall solicit procurements in amounts which are based upon their reasonable and foreseeable needs and storage capacities, and upon other relevant factors, such as, economies of scale in purchasing, shipping and handling, or the shelf-life or seasonal availability of a product. A procurement shall not be divided merely to qualify it as a small purchase. The Purchasing Director shall delegate small purchase authority to schools and offices to whatever extent it is practicable, and shall advise and assist those schools and offices with prospective vendor listings, tried and proven performance-based specifications, quotation analysis, and standard contractual terms.
(2) Minimum Standards for Small Purchases Over $2,000. Insofar as it is practicable for small purchases in excess of two thousand dollars ($2,000), quotations shall be solicited from a responsible salesperson, at least by telephone, at each of at least three businesses, which are likely to be competitive for the kind of supplies, service or construction desired. Award shall be made to the business offering the lowest acceptable quotation. The name, address, phone number and contact person of each business submitting quotations, and the date and amount of each quotation for each item, shall be recorded and maintained as a public record. The Purchasing Director shall not delegate authority for small purchases over $2,000. to a school or office which neglects or fails to faithfully comply with these record-keeping requirements.
(3) Small Purchases Under $2,000. The Purchasing Director shall establish guidelines for making small purchases of two thousand dollars ($2,000) or less. These guidelines shall seek to obtain reasonable competition for all such supplies, services, or construction being purchased, and for maintaining written records adequate to document the competition obtained, properly account for the funds expended, and facilitate an audit of each small purchase made. In general, the total cost of procurement and documentation efforts should not exceed 10% of the anticipated cost of the item being procured.
COMMENT: Buyers must be encouraged to be practical when making small purchases; it is easy to expend more in purchasing effort than can be recaptured by competitive savings. As a rule of thumb, comparative shopping can save 10% to 15% in price. When comparison shopping efforts cost more than 10% of the ballpark cost of the item, it is time to stop shopping and buy. For example, if a ream of paper is guesstimated to cost $5, then one should not put in more than 50 cents of effort to find the best price. Go to the nearest discount office supply store and let it be. On a $1,000 purchase, however, you could afford to expend $100 in effort to find a better price, and probably come out money ahead. The bottom line is to be sensible and to briefly log the reasons for your purchasing decisions.
Sec. 3.202 Sole Source and Single Response Procurements.
(1) Conditions for Use. A contract of five thousand ($5,000) or more may be awarded without competition when the Purchasing Director determines in writing, after conducting a good faith review of available sources, that:
(a) there is only one source for the required supply, service, or construction item, or
(b) that at least three businesses have been solicited, which were likely to be competitive for the proposed procurement; only one conforming response has been received; based upon prior experience, that response is cost-competitive; and time does not reasonably permit either an extension of the due date to enable more bids to be received, or for a renewal of the invitation.
(2) Delegated Authority. The Purchasing Director shall develop guidelines which schools and offices shall use to make similar procurements of less than five thousand dollars ($5,000). Those over five thousand dollars ($5,000) shall require approval of the Purchasing Director.
(3) Records and Requirements. The Purchasing Director shall conduct negotiations, as appropriate, as to price, terms, and delivery. Cost or pricing data shall be provided if required by Section 3.302. A written analysis of cost or pricing data shall be conducted and placed in the public file when required under Section 3.303. A register of sole source or single response procurements shall be maintained as a public record and shall list each contractor’s name, the amount and type of each contract, a listing of the item(s) procured under each contract, and the identification number of each contract file.
(3) Textbook Selection. When possible, in order to generate reasonable price competition among textbook publishers, textbook review and selection committees shall recommend at least two preferred textbooks for each curriculum need.
(4) School Board Approval. Pursuant to Section 7.101, a sole source or a single response contract for supplies or services which exceeds twenty thousand dollars ($20,000) or for construction which exceeds twenty-five thousand dollars ($25,000) shall be submitted for School Board approval.
Sec. 3.203 Competitive Sealed Proposals.
(1) Conditions for Use. When the Purchasing Director finds that it is not practicable or that it is not advantageous to the district to use competitive sealed bids, a contract may be awarded by use of competitive sealed proposals. This finding and its supporting rationale shall be made in writing and filed in the public record of the contract.
(2) Public Notice. Adequate public notice of the request for proposals shall be given in the same manner as provided in Section 3.101(3) (Competitive Sealed Bidding, Public Notice); except, the minimum time shall be twenty-one (21) calendar days.
(3) Receipt of Proposals. Proposals shall be handled so as not to permit disclosure of the identity of any offeror or the contents of any proposal to competing offerors during the process of negotiation. A register of proposals shall be prepared containing the name of each offeror, the number of modifications received, if any, and a description sufficient to identify the item offered. The register of proposals shall be open for public inspection only after contract award.
(4) Evaluation Factors. The request for proposals shall state the relative importance of price and other evaluation factors to the full extent that those relationships can be reasonably quantified. Cost or pricing data shall also be provided when required under Section 3.302.
(5) Discussion with Responsible Offerors and Revisions to Proposals. If so provided in the request for proposals, discussions may be conducted with responsible offerors, in order to clarify and assure full understanding of, and conformance to, the solicitation requirements. Offerors shall be accorded fair and equal treatment with respect to any opportunity for discussion and revision of proposals and such revisions may be permitted after submissions and prior to award for the purpose of obtaining best and final offers. Discussions shall be scheduled and conducted in a manner which avoids disclosure of the identify of competing offerors, and of any specific ideas, information, or solutions which are derived from proposals submitted by competing offerors. A written cost or pricing analysis shall be prepared when required by Section 3.303, and placed in the public contract file.
(6) Award. Award shall be made to the responsible offeror whose proposal is determined in writing to be the most advantageous to the district, taking into consideration price and the evaluation factors set forth in the request for proposals. No other factors or criteria shall be used in the evaluation. A copy of the written evaluation which states the basis of award shall be filed in the public contract file.
Sec. 3.204 Contracting for Designated Professional Services.
(a) Conditions of Use. The Purchasing Director may provide a school or office with specific written authority to procure the services of accountants, physicians, dentists, nurses, lawyers for routine defense and labor arbitration work, teacher consultants, computer programmers, psychologists, engineers, athletic coaches, special education consultants, or psychiatrists, in accordance with the selection procedures specified in this Section. A school or office needing such services shall first consult with and obtain the approval of the Purchasing Director for both its request for proposals and its proposed contracts.
(b) Exception. Architect-engineering and land surveyor services shall be procured by using the selection procedures set forth in Section 5.401.
(2) Selection Procedure.
(a) Conditions for Use. Except as provided under Section 3.202 (Sole Source and Single Response Procurement) or Section 3.205 (Exigent or Emergency Procurements), the professional services designated in Subsection (1)(a) of this Section shall be procured in accord with this Subsection.
(b) Statement of Qualifications. A person who provides designated types of professional services may at any time submit or amend their resume. A school or office may specify a uniform format for resumes, subject to review and approval of the form by the General Counsel.
(c) Public Announcement and Form of Request for Proposals. Adequate notice of the need for such services shall be given by the school or office through a request for resumes approved by the Purchasing Director. The request for resumes shall describe the services required, list the types of information and data required of each offeror, and state the relative importance of particular qualifications. Notice is deemed adequate if advertised in an appropriate and widely circulated local trade or professional magazine or newsletter. Schools may group together to solicit resumes, and to share the responses.
(d) Discussions. The head of a school or office may conduct discussions with any offeror to determine that offeror’s qualifications for further consideration, but need not speak with more potential providers than those needed to secure a reasonable level of competition. Information derived from proposals shall not be disclosed to other offerors.
(e) Award. Award shall be made to the offeror determined in writing by the head of the school or office procuring the required professional services or a designee of such officer to be best qualified among those actually considered, based upon the evaluation factors set forth in the request for proposals, and based upon negotiation of compensation determined to be fair and reasonable. If compensation cannot be agreed upon with the best qualified offeror being considered, then negotiations will be formally terminated with the selected offeror. If proposals were submitted by one or more offerors determined to be qualified, negotiations may be conducted with such other offeror or offerors, in the order of their respective qualification ranking, and the contract may be awarded to the offeror then ranked best qualified if the amount of compensation is determined to be fair and reasonable.
Sec. 3.205 Exigent or Emergency Procurements.
Notwithstanding any other provisions of this policy, and subject to the approval of the President of the School Board as provided in Article 7, the Purchasing Director may make or authorize others to make exigent or emergency procurements of supplies, services, or construction when it is clearly to the district’s financial advantage as defined in section 7.108 or when there exists a threat to public health, welfare, or safety. Such exigent or emergency procurements shall be made with as much competition as is practicable under the circumstances. A written determination of the basis for the exigency or emergency and for the selection of the particular contractor shall be included in the contract file. As soon as practicable, a record of each exigent or emergency procurement shall be made and maintained as a public register, which register shall set forth the contractor’s name, the amount and type of the contract, a listing of the item(s) procured under the contract, and the identification number of the contract file.
COMMENT: Our foremost objective is to provide each of our schools and offices with what they need when they need it. Emergencies and other urgent and hard-to-foresee needs are bound to occur. Price is important, but not at the expense of wasting substantial teaching and learning time and of sapping school morale and autonomy.
PART C – QUALIFICATIONS AND DUTIES OF BIDDERS AND OFFERORS
Sec. 3.301 Responsibility of Bidders and Offerors.
(1) Determination of Non-responsibility. If a bidder or offeror who otherwise would have been awarded a contract is found non-responsible, the Purchasing Director shall prepare a written determination of non-responsibility, setting forth the basis of finding, and shall promptly send a copy to the non-responsible party. The unreasonable failure of a bidder or offeror to promptly supply information in connection with an inquiry with respect to responsibility shall be sufficient grounds for a determination of non-responsibility. The final determination shall be made part of the contract file and shall be a public record.
(2) Right of Non-disclosure. Information furnished by a bidder or offeror pursuant to this Section shall be reviewed by the General Counsel and kept in a confidential file and shall not be disclosed to any person except necessary staff of the office of the Purchasing Director or the using school or office, without prior written consent by the bidder or offeror, or pursuant to a court order.
(3) Pre-qualification of Vendors as Responsible Bidders. Prospective vendors may be pre-qualified as responsible bidders or offerors for particular types of supplies, services, and construction. Solicitation registers of potential contractors shall include but shall not be limited to pre-qualified vendors.
COMMENT: The disqualification of a bidder is a touchy matter. It can easily disrupt the flow of crucial supplies, services and construction. It can also generate law suits which sap the limited resources of the district. One of the common drawbacks of competitive bidding is that some persons will bid and bid low even when they have little or no ability to follow through. It is important that these bids be screened-out up-front before they foul-up our operations. The Freedom of Information Act allows us to obtain certain sensitive information from bidders and to shield it from the view of both the public and competitors. We must protect this information, or bidders will not be willing to share it, and that will make it impossible to judge the ability of a bidder to carry through.
Sec. 3.302 Cost or Pricing Data.
(1) Required Submissions Relating to the Award of Contracts. A prospective contractor shall submit cost or pricing data when the contract is expected to exceed one hundred thousand dollars ($100,000) and is to be awarded by sole source or single response procurement authority (Section 3.202) or by competitive sealed proposals (Section 3.203).
(2) Exceptions. The submission of cost or pricing data relating to the award of a contract is not required when:
(a) the contract price is based on adequate price competition;
(b) the contract price is based on established catalogue prices or market prices;
(c) the contract price is set by law or regulation; or
(d) the Purchasing Director determines that the requirements of Section 3.302(1) (Cost or Pricing Data; Required Submissions Relating to the Award of Contracts) may be waived and states the reasons in writing.
(3) Required Submissions Relating to Change Orders or Contract Modifications. A contractor shall submit cost or pricing data prior to the pricing of any change order or contract modification, including adjustments to contracts awarded by competitive sealed bidding, whether or not cost or pricing data was required in connection with the initial pricing of the contract, when the change or modification involves aggregate increases or aggregate decreases in costs plus applicable profits that are expected to exceed one hundred thousand dollars ($100,000).
(4) Exceptions. The submission of cost or pricing data relating to the pricing of a change order or contract modification is not required when:
(a) unrelated and separately priced adjustments for which cost or pricing data would not be required are consolidated for administrative convenience;
(b) appropriate unit prices have been established in the initial contract; or
(c) the Purchasing Director determines that the requirements of Section 3.302(3) (Cost or Pricing Data; Required Submissions Relating to Change Orders or Contract Modifications) may be waived, and states the reasons in writing.
(5) Certification Required. If a contractor, actual or prospective, is required to submit cost or pricing data in accordance with this Section, the contractor shall certify that, to the best of its knowledge and belief, the cost or pricing data submitted was accurate, complete, and current as of a mutually specified date, which is prior to the award of the contract or prior to the pricing of the change order or contract modification.
(6) Price Adjustment Provision Required. Any contract award, change order, or contract modification under which the submission and certification of cost or pricing data are required shall contain a provision stating that the price to the district, including profit or fee, shall be adjusted to exclude any significant sums by which the district finds that such price was increased because the contractor furnished cost or pricing data which was inaccurate, incomplete, or not current as of the date agreed upon between the district and the contractor.
COMMENT: When there is little or no competition for a product, the district may find itself at the mercy of the contractor. On larger contracts, cost or pricing data can often help avoid overcharges. The next section requires that a written cost or pricing analysis be done and kept in the contract file. Vendors are less likely to press their advantage when they know that their customers are taking a long hard look at the contract.
Sec. 3.303 Cost or Price Analysis
If cost data or pricing data is required to be submitted, a cost analysis or a price analysis, as appropriate, shall be conducted prior to award of the contract other than one awarded under Section 3.101 (Competitive Sealed Bidding). The written analysis shall be kept in the contract file.
Sec. 3.304 Bid and Performance Bonds on Supply or Service Contracts.
Bid and performance bonds or other security may be requested for supply contracts or service contracts as the Purchasing Director or head of a school or office deems prudent to protect the district’s interests. Any such bonding requirements shall be set forth in the solicitation. Bid or performance bonds shall not be used as a substitute for a determination of a bidder or offeror’s responsibility. A bonding requirement may be waived in the case of a certified minority-owned or women-owned enterprise if its imposition would tend to deny that firm an opportunity to compete for a contract.
PART D – TYPES OF CONTRACTS AND CONTRACT ADMINISTRATION
Sec. 3.401 Types of Contracts.
(1) General Authority. Subject to the limitations of this Section, any type of contract which is appropriate to the procurement and which will promote the best interests of the district may be used, provided that the use of a cost-plus-a-percentage-of-cost contract is prohibited. A cost reimbursement contract may be used only when a determination is made in writing that such contract is likely to be less costly to the district than any other type or that it is impracticable to obtain the supply, service, or construction item required except under such a contract.
(2) Multi-Term Contracts.
(a) Specified Period. Unless otherwise provided by law, a contract for supplies or services may be entered into for any period of time up to five years which is deemed by the Purchasing Director to be in the best interests of the district, provided the term of the contract and conditions of renewal or extension, if any, are included in the solicitation and funds are available for the first fiscal period at the time of contracting. Payment and performance obligations for succeeding fiscal periods shall be subject to the availability and appropriation of funds therefor. A contract for supplies or services for more than two years shall require prior School Board approval pursuant to Section 7.101.
(b) Determination Prior to Use. Prior to the utilization of a multi-term contract, it shall be determined in writing:
(i) that estimated requirements cover the period of the contract and are reasonably firm and continuing; and
(ii) that such a contract will serve the best interests of the district by encouraging effective competition or otherwise promoting economies in district procurement.
(c) Cancellation Due to Unavailability of Funds in Succeeding Fiscal Periods. When funds are not appropriated or otherwise made available to support continuation of performance in a subsequent fiscal period, the contract shall be canceled and the contractor shall be reimbursed for the reasonable value of any non-recurring costs incurred but not amortized in the price of the supplies or services delivered under the contract. The cost of cancellation may be paid from any appropriations available for such purposes.
(3) Multiple Source Contracting.
(a) General. A multiple source award is an award of an indefinite quantity contract for one or more similar supplies or services to more than one bidder or offeror. The obligation to order the district’s actual requirements is limited by the provision of Uniform Commercial Code Section 2.306(1).
COMMENT: Michigan Compiled Laws, section 440.2306 (the Uniform Commercial Code) addresses exclusive buying, selling and dealing arrangements. It provides:
“Sec. 2306. (1) Output, requirements. A term (of a contract) which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.
“(2) Exclusive dealing. A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.”
(b) Limitations on Use. An award may be made to two or more bidders or offerors for similar products when it is necessary for adequate delivery, service, or product compatibility. A multiple source award shall comply with the provisions of Section 3.101 (Competitive Sealed Bidding), Section 3.201 (Small Purchases), Section 3.203 (Competitive Sealed Proposals), and Section 3.205 (Exigent or Emergency Procurements), as pertinent. Multiple source awards shall not be made when a single award will meet the district’s needs without sacrifice of economy or service. Awards shall not be made to simply spread the business, to make available product or supplier selection to allow users to make a preference unrelated to utility or economy, or to avoid resolving a tie bid. Awards shall be limited to the least number of suppliers needed to meet the district’s valid requirements. Multiple-source awards may be made to help achieve remedial program goals.
(c) Contract and Solicitation Provisions. All eligible users of the contract shall be named in the solicitation, and it shall be mandatory that the actual requirements of such users that can be met under the contract be obtained in accordance with the contract, provided that the district shall reserve the right to take bids separately:
(i) if a particular quantity requirement arises which exceeds its normal requirement or an amount specified in the contract; and
(ii) if the Purchasing Director finds that the supply or service available under the contract will not meet a nonrecurring special need of the district.
(d) Intent to Use. If a multiple source award is anticipated prior to issuing a solicitation, the district shall reserve the right to make such an award and the criteria for award shall be stated in the solicitation.
(e) Determination Required. The Purchasing Director shall make a written determination setting forth the reasons for a multiple source award, which shall be made a part of the procurement file.
Sec. 3.402 Contract Clauses and Their Administration.
(1) Contract Clauses. All district contracts for supplies, services, and construction shall include provisions necessary to define the responsibilities and rights of the parties to the contract. The Purchasing Director, after consultation with the General Counsel, may issue clauses appropriate for supply or service contracts, addressing among others the following subjects. The Assistant Superintendent for Physical Plant or his/her designated agent, may do likewise with respect to construction contracts.
(a) the unilateral right of the district to order in writing changes in the work within the scope of the contract;
(b) the unilateral right of the district to order in writing temporary stopping of the work or delaying performance that does not alter the scope of the contract;
(c) variations occurring between estimated quantities of work in the contract and actual quantities;
(d) defective pricing;
(e) liquidated damages;
(f) specified excuses for delay or nonperformance;
(g) termination of the contract for default;
(h) termination of the contract in whole or in part for the convenience of the district;
(i) suspension of work ordered by the district on a construction project;
(j) site conditions differing from those indicated in the contract, or ordinarily encountered, except that a differing site conditions clause need not be included in a contract:
(i) when the contract is negotiated rather than bid;
(ii) when the contractor provides the site or design; or
(iii) when the parties have otherwise agreed with respect to the risk of differing site conditions;
(k) the ethics and anti-kickback provisions required by Article 12; and
(l) when appropriate, the accounting, plant and book inspection provisions set forth in Sections 3.405, 3.406 and 3.407.
(2) Price Adjustments:
(a) Adjustments in price resulting from the use of contract clauses required by Subsection (1) of this Section shall be computed in one or more of the following ways:
(i) by agreement on a fixed price adjustment before commencement of the pertinent performance or as soon thereafter as practicable;
(ii) by unit prices specified in the contract or subsequently agreed upon;
(iii) by the costs attributable to the events or situations under those clauses with adjustment of profit or fee, all as specified in the contract or subsequently agreed upon;
(iv) in such other manner as the contracting parties may mutually agree; or
(v) in the absence of agreement by the parties, by a unilateral determination by the district of the costs attributable to the events or situations under those clauses with adjustment of profit or fee as computed by the district, and subject to the provisions of Article 9 (Appeals and Remedies).
(b) A contractor shall be required to submit cost or pricing data if any adjustment in contract price is subject to the provisions of Section 3.302 (Cost or Pricing Data).
(3) Standard Clauses and Their Modification. The Purchasing Director, after consultation with the General Counsel, may establish standard contract clauses for use in district contracts. If the Purchasing Director establishes any standard clauses addressing the subjects set forth in Subsection (1) of this Section, such clauses may be varied if those variations are supported by a written determination that states the circumstances justifying those variations, and if a notice of that material variation is stated in the invitation for bids or request for proposals.
Sec. 3.403 Contract Administration.
The Chief Operating Officer shall establish and maintain a contract administration system designed to insure that a contractor is performing in accordance with the solicitation under which the contract was awarded and the terms and conditions of the contract. Construction contract administration may be delegated to the Assistant Superintendent of Physical Plant or to his/her designated agent.
Sec. 3.404 Performance Certification and Past Due Payment.
(1) The Chief Operating Officer shall establish a system to assure that the satisfactory performance of each procurement contract is promptly determined and certified, and that payment is promptly ordered.
(2) Unless otherwise agreed in writing, a requisitioning school or office shall take all steps necessary to assure that payment for services, supplies and construction is mailed to the vendor within 45 days after delivery and satisfaction of a contract, or receipt of a complete invoice for the same, whichever is later.
(3) If an invoice received by the requisitioning school or office is filled out incorrectly, or contains a defect or impropriety, the school or office shall notify the vendor within ten days after the invoice is received. The 45-day period shall be extended by each day over five days which the vendor takes to make a correction.
(4) Except as provided in subsection (5), if payment owed by the requisitioning school or office to a vendor is past due, the school or office shall pay to the vendor an additional amount equal to the current annual prime line-of-credit-rate of the time that the payment remains past due. The vendor shall not be required to submit a past due notice to collect the additional amount due.
(5) Subsection (4) shall not apply:
(a) if payment is delayed because of a good faith disagreement between the school or office and the vendor regarding contract performance, unless the dispute is resolved in favor of the vendor, or
(b) if the vendor’s bid or the contract contains an alternate provision for late payment, and that amount is paid instead.
COMMENT: The chronic late payment of vendors ends-up disrupting the flow of supplies and services to schools. When vendors are compensated for late payment at current prime rates of interest and when the budgets of responsible offices and schools are charged directly for those late payments, the problem of late payment can be expected to evaporate. It’s only when someone else pays that the paperflow delay persists. It also become problematic to empower ech school to take charge of its programs, when purchasing delinquencies at some schools impact vendor response to all schools.
(6) The Chief Operating Officer shall also assure that every contract which is awarded to a vendor who may in turn sub-contract a part of the performance to a Detroit-based firm shall include third-party beneficiary provisions which extend to that firm the same kind of prompt payment protection which is provided by this section to the prime contractor.
COMMENT: This section helps assure that Detroit-based suppliers and sub-contractors have an added legal means of being timely paid for their performance. They are thereby enabled to sue for payment and interest based upon these third-party contractual rights. Past experience and complaints have shown that sub-contractors have often been abused by their primes. The only cost to the district is that of sending a witness to authenticate the contract document.
Sec. 3.405 Approval of Accounting System.*
If a proposed contract does not have a firm fixed-price, it shall not be awarded and executed unless it has been determined in writing by the Purchasing Director that the proposed contractor’s accounting system:
(a) will permit timely development of all necessary cost data in the form required by the specific contract type contemplated; and
(b) is adequate to allocate costs in accordance with generally accepted cost accounting principles.
Sec. 3.406 Right to Inspect Plant.
When appropriate, a solicitation shall provide that the district may inspect the part of the plant, place of business, or work site of a contractor or subcontractor at any tier which is pertinent to the performance of any contract awarded or to be awarded by the district.
Sec. 3.407 Right to Audit Records.
When appropriate, a solicitation shall provide that the district shall be entitled to audit the books and records of a contractor or a subcontractor at any tier under any contract or subcontract other than a firm fixed-price contract for which cost or pricing data was not required, to the extent that such documents are pertinent to the performance of that contract or subcontract. The solicitation shall further provide that those documents shall be maintained by the contractor for a period of three years from the date of final payment under the prime contract and by the subcontractor for a period of three years from the date of final payment under the subcontract.
Comment: The School District has no right or power to audit the books of a contractor unless that contractor has agreed in their contract to be subject to such an audit. This provision is an absolute must in all significant contracts.
Sec. 3.408 Reporting of Anti-competitive Practices.
When for any reason, a person suspects collusion or other anti-competitive practices among any bidders or offerors, that person shall transmit the relevant facts to the Michigan Attorney General and to the Wayne County Prosecuting Attorney.
Comment: This provision asserts and requires that any person, and especially any employee who has serious suspicions of wrong-going has an affirmative duty to report it. Failure to report what you know or suspect, can become a cause for discipline and even dismissal.
ARTICLE 4 – BID SPECIFICATIONS
Sec. 4.101 Maximum Practicable Competition.
(1) The Purchasing Director shall compile a comprehensive set of standard specifications for use in district procurement. Specifications may be adapted from models which have been developed by large public- and private-sector organizations. Specifications shall be performance-oriented, shall promote overall economy, and shall encourage maximum practicable competition. Generally, the cost of the effort taken to draft a specification shall not exceed 5% of the cost of the district’s estimated needs for that product for the next two-years. The policy enunciated in this Section applies to all specifications including but not limited to, those prepared for the district by architects or engineers.
COMMENT: The original research needed to draft an adequate and effective specification can be costly. If you spend more on this one aspect of competitive buying than you can save over the next two years, then you can easily defeat your initial purpose of saving on overall costs. You can often save a lot of effort by adapting from models used by other large purchasers.
(2) The Purchasing Director shall include a statement at the end of each specification, which identifies by name all significant models and sources for and contributors to its development, such as, manufacturers product descriptions, salespersons, consultants, and staff members. If a vendor has taken substantial part in determining the content and evaluation factors of a bid specification or request for proposals, that vendor shall be disqualified from award of a contract.
COMMENT: One of the most alluring sources of model specifications is from product suppliers. Using these models often has the practical effect of restricting competition to products of that particular vendor. One of the better ways to flush out such problems is to publish the names of all significant persons and sources which were used in drafting a specification. If the specification restricts fair competition, this disclosure is more likely to spur a corrective complaint. A vendor which has had a significant role in determining the content of bid specifications or evaluation criteria, should not be allowed to bid on that contract.
Sec. 4.102 Qualified Products List.
The Purchasing Director may augment a specification with a listing of those specific brand name products described by model or catalog numbers which have previously been determined to satisfy the specification. This listing shall however be preceded by the following notice:
“Any of the following products will satisfy this specification. Bidding or quotation is also welcomed for any other equivalent product.”
Sec. 4.103 Brand Name or Equivalent Specification.
(1) Use. Brand name or equivalent specifications may be used when the Purchasing Director determines in writing:
(a) that a brand name or equivalent specification is the most cost-effective specification available; and
(b) time does not permit the preparation a better form of purchase description.
(2) Designation of Several Brand Names. A brand name or equivalent specification shall seek to name three, or as many different brands as are practicable, as “equivalents”. It shall explain that the brand names are for the purpose of describing the standard of quality, performance, and characteristics desired, and are not intended to limit competition. It shall further state that substantially equivalent products to those designated will be considered for award.
(3) Required Characteristics. Unless the Purchasing Director determines in writing that the essential characteristics of the brand names included in the specifications are commonly known in the industry or trade, brand name or equivalent specifications shall also include a description of the particular design, functional, or performance characteristics which are required.
Sec. 4.104 Brand Name Specification.
(1) Use. Because use of a brand name specification restricts product competition, it may be used only when the Purchasing Director makes a written determination that only the identified brand name item or items will satisfy district needs.
(2) Competition. The Purchasing Director shall seek to identify sources from which the designated brand name item or items can be obtained and shall solicit those sources to achieve whatever degree of price competition is practicable. If only one source can supply the requirement, the procurement shall be made under Section 3.202 (Sole Source Procurement).
ARTICLE 5 – PROCUREMENT OF CONSTRUCTION,
ARCHITECT-ENGINEER, AND LAND SURVEYING SERVICES
PART A – MANAGEMENT OF CONSTRUCTION CONTRACTING
Sec. 5.101 Responsibility for Selection of Methods of
Construction Contracting Management.
The Assistant Superintendent of Physical Plant or his/her designated agent shall select the appropriate method of construction contracting management for a particular project, based on the district’s requirements, its resources, and the potential contractor’s capabilities. The Assistant Superintendent of Physical Plant shall execute, and include in the contract file a written statement setting forth the facts which led to the selection of a particular method of construction contracting management for each project. These methods may include, among others:
(1) a single prime contractor, including a turnkey or design-build contractor; or
(2) multiple prime contractors managed by:
(a) a designated general contractor;
(b) a construction manager; or
(c) a purchasing agent.
PART B – BID SECURITY AND PERFORMANCE BONDS
Sec. 5.201 Bid Security.
(1) Requirement for Bid Security. Bid security shall be required for all competitive sealed bidding for construction contracts. Bid security shall be a bond provided by a surety company authorized to do business in Michigan, or the equivalent in cash, or supplied in another form satisfactory to the district.
(2) Amount of Bid Security. Bid security shall be in an amount to be determined by the Purchasing Director.
(3) Rejection of Bids for Noncompliance with Bid Security Requirements. If the invitation for bids requires security, and a bidder does not comply in all respects, the bid shall be rejected unless the Purchasing Director determines in writing that the failure is a non-substantial one.
(4) Withdrawal of Bids. If a bidder is permitted to withdraw its bid before award as provided in Section 3.101(8) (Competitive Sealed Bidding; Correction or Withdrawal of Bids; Cancellation of Awards), no action shall be had against the bidder or the bid security.
Sec. 5.202 Contract Performance and Payment Bonds.
(1) When Required-Amounts. When a construction contract is awarded in excess of twenty-five thousand dollars ($25,000), the following bonds or security shall be delivered to the district and shall become binding on the parties upon the execution of the contract:
(a) a performance bond satisfactory to the district, executed by a surety company authorized to do business in Michigan or otherwise secured in a manner satisfactory to the district, in an amount equal to one hundred percent (100%) of the price specified in the contract; and
(b) a payment bond satisfactory to the district, executed by a surety company authorized to do business in Michigan or otherwise secured in a manner satisfactory to the district, for the protection of all persons supplying labor and material to the contractor or its subcontractors for the performance of the work provided for in the contract. The bond shall be in an amount equal to one hundred percent (100%) of the price specified in the contract.
COMMENT: Michigan law requires that construction contractors who do public works provide a performance bond, which is a guarantee that the work will be done for the price bid and more or less within the time specified. Although the law does not require a payment bond, which is a guarantee that subcontractors will be promptly paid, it is only prudent to require one, because the law provides unpaid subcontractors with a lien against the property being improved. The construction industry is a hard field in which to succeed. Not more than ten percent of the firms now in existence will still be around five years from now. Bankruptcy and failure are common. The district must protect itself as best it can, or it will suffer from contractors who push their problems on other contracts off on to those with the district.
(2) Guaranteed or Incremental Bonding: Surety bonds guaranteed by the Federal Small Business Administration or by incremental bonding may be accepted as security for a construction award under this policy. Instead of a surety bond, the guarantee of a mutual-aid trade association may, within the sole discretion of the Purchasing Director, be accepted, if the association has reasonable capabilities of performing, and has had no prior default upon its guarantees.
(3) Reduction of Bond Amounts. After making a written determination that it is permitted by State law and, is in the best interest of the district to do so, and after providing notice to the School Board, the Purchasing Director may reduce the amount of performance and payment bonds up to fifty percent (50%) of the contract price for each bond.
(4) Authority to Require Additional Bonds. Nothing in this Section shall be construed to limit the authority of the district or of the Purchasing Director to require a performance bond or other security in addition to those bonds, or in circumstances other than specified in Subsection (1) of this Section.
(5) Suits on Payment Bonds – Right to Institute. When a contract is let which envisions that a part will be sub-contracted, it shall contain a provision that, any person who has furnished labor or material to the contractor or subcontractors for the work provided in the contract, for which a payment bond is furnished under this Section, and who has not been paid in full within ninety (90) days from the date on which that person performed the last of the labor or supplied the material, shall have the right to sue on the payment bond for any amount unpaid at the time the suit is instituted and to prosecute the action for the amount due that person. However, any person having a contract with a subcontractor of the contractor, but no express or implied contract with the contractor furnishing the payment bond, shall have a right of action upon the payment bond upon giving written notice to the contractor within ninety (90) days from the date on which that person performed the last of the labor or supplied the material. That person shall state in the notice the amount claimed and the name of the party to whom the material was supplied or for whom the labor was performed. The notice shall be served personally or by registered or certified mail, postage prepaid, in an envelope addressed to the contractor at any place the contractor maintains an office or conducts business.
Sec. 5.203 Copies of Bond Forms.
Any person may request and obtain from the district a certified copy of a bond upon payment of the cost of reproduction of the bond and postage, if any. A certified copy of a bond shall be prima facie evidence of the contents, execution, and delivery of the original.
PART C – FISCAL RESPONSIBILITY
Sec. 5.301 Fiscal Responsibility.
Every modification or price adjustment on a construction contract which is in excess of twenty-five thousand dollars ($25,000), and which lacks prior approval of a state or federal grantor agency, shall be submitted for prior approval by the School Board. The appropriate fiscal officer shall report to the School Board as to the effect of the contract modification, or contract price adjustment on the total project budget or the total contract budget. Each modification or adjustment shall be signed and approved by the Assistant Superintendent of Physical Plant.
PART D – ARCHITECT-ENGINEER AND LAND SURVEYING SERVICES
Sec. 5.401 Public Announcement and Selection Process.
(1) Public Announcement. It is the policy of the district to announce publicly all requirements for architect-engineer and land surveying services and to negotiate those contracts on the basis of demonstrated competence and qualifications at fair and reasonable prices. In the procurement of architect-engineer and land surveying services, the Purchasing Director shall request firms to submit a statement of qualifications and performance data.
(2) Selection Process. A selection committee composed of five members, including the Purchasing Director, the Chief Operating Officer, the Assistant Superintendent of Physical Plant, the Director of Architectural Services, and the head of the school or office in need of the architect-engineer or land surveying services, shall conduct discussions with no less than three firms regarding the proposed contract and the relative utility of alternative methods of approach for furnishing the required services and shall select from among them no less than three of the firms deemed most qualified to provide the required services. The selection shall be made in order of preference, based on criteria established and published by the selection committee.
(3) Negotiation. The Assistant Superintendent for Physical Plant shall, with the advice and consent of the Purchasing Director, negotiate a contract with that firm considered to be the most qualified for architect-engineer or land surveying services at compensation which they determine in writing to be fair and reasonable to the district. In making this decision, they shall take into account the estimated value, the scope, the complexity, and the professional nature of the services to be rendered. Should they be unable to negotiate a satisfactory contract with the firm considered to be the most qualified at a price which they determine to be fair and reasonable to the district, negotiations with that firm shall be formally terminated. They shall then undertake negotiations with the second most qualified firm. Failing accord with the second most qualified firm, they shall formally terminate negotiations. They shall then undertake negotiations with the third most qualified firm. Should they be unable to negotiate a contract at a fair and reasonable price with any of the selected firms, the selection committee shall select additional firms in order of their competence and qualifications, and negotiations shall continue in accordance with this Section until an agreement is reached.
ARTICLE 6 – DEBARMENT OR SUSPENSION OF VENDORS
Sec. 6.101 Authority to Debar or Suspend.
After reasonable notice to the person involved and reasonable opportunity for that person to be heard, the Purchasing Director, after consulting with the General Counsel, is authorized to debar a person for cause from consideration for award of contracts. The debarment shall be for a period of not more than three years. After consultation with the General Counsel, the Purchasing Director is authorized to suspend a person from consideration for award of contracts if there is probable cause to believe that the person has engaged in any activity which might lead to debarment. The suspension shall be for a period not to exceed three months. The causes for debarment include:
(a) conviction for commission of a criminal offense as an incident to obtaining or attempting to obtain a public or private contract or subcontract, or in the performance of such contract or subcontract;
(b) conviction under state or federal statutes of embezzlement, theft, forgery, bribery, falsification or destruction of records, receiving stolen property, or any other offense indicating a lack of business integrity or business honesty which currently, seriously, and directly affects responsibility as a district contractor;
(c) conviction under state or federal antitrust statutes arising out of the submission of bids or proposals;
(d) violation of contract provisions, as set forth below, of a character which is regarded by the Purchasing Director to be so serious as to justify debarment action:
(i) deliberate failure without good cause to perform in accordance with the specifications or within time limit provided in the contract; or
(ii) if not beyond the control of the contractor, a recent record of failure to perform or of unsatisfactory performance in accord with the terms of one or more contracts;
(e) violation of contract terms related to district equal opportunity or lack of follow-through on an affirmative action commitment for which a preference was initially extended;
(f) any other cause the Purchasing Director determines to be so serious and compelling as to affect responsibility as a district contractor, such as, debarment by another governmental entity for any cause listed in this policy; and
(g) violation of the ethical standards set forth in Article 12 (Ethics in Public Contracting).
Sec. 6.102 Decision to Debar or Suspend.
The Purchasing Director shall issue a written decision to debar or suspend. The decision shall state the reasons for the action taken and inform the debarred or suspended person involved of its rights to judicial or administrative review. A suspension or debarment by the Purchasing Director shall not take effect before the twenty-one day appeal period to the School Board or to an appropriate court has elapsed.
Sec. 6.103 Notice of Decision.
The Purchasing Director shall mail or otherwise immediately furnish the debarred or suspended person with a copy of the decision required by Section 6.102 (Decision to Debar or Suspend). He or she shall also immediately furnish a copy to the School Board President.
Sec. 6.104 Finality of Decision.
A decision under Section 6.102 (Decision to Debar or Suspend) shall be final and conclusive, unless fraudulent, or unless the debarred or suspended person within twenty-one (21) days after receipt of the decision takes an appeal to the School Board or commences a timely action in court in accordance with applicable law, pursuant to Article 8.
COMMENT: Courts have held that a governmental entity may not debar a firm from responding to its bid solicitations unless it has formally adopted an express debarment policy and has provided notice of this policy to its vendors. It must also provide for an appeals process of the kind provided in Article 9. The district must also allow for a reasonable time in which to make an appeal. Note that a purchase is usually placed on hold until the protest or appeal has been decided. This policy therefore places a twenty-one day limit on appeals. This limit must be made clear to vendors during bid solicitation and in the response to a protest. When this is done, the courts will usually uphold tight time limits. This formal process enables the district to get on with its work within a workable time frame. Without such provisions, a procurement may be held up for months. This places undue pressure on the Purchasing Director to pay-off a vendor to settle a pending dispute, just to get the work done.
Note that a vendor may be debarred not only for a violation of the ethical standards set forth in Article 12, but also for collusion with a district employee to violate those standards. Debarment is one of the more effective ways to enforce ethical standards. It is much more effective than waiting upon law enforcement agencies to intercede. It is also far more effective that just firing an offending employee.
ARTICLE 7 – SCHOOL BOARD APPROVAL OF CONTRACTS
COMMENT: Article 7 is another key part of this total proposal. If the main objective of procurement is to provide schools and offices with what they need, when they need it and at a reasonable cost, then the process requires close and constant day-to-day attention. State law provides for school board approval of contracts for supplies or construction over $23,000 (but does not address contracts for services). The Board approval process typically extends the purchasing process by four to six weeks.
There is a large body of case law which holds that a public body may delegate its governmental contracting authority when there is good reason to do so, so long as reasonable standards and guidelines have been provided by which to limit administrative discretion, or so long as other reasonable oversight measures are also being taken to compensate for the lack of direct decision-making. This policy provides those necessary guidelines, and also provides for an open record-keeping system by which compliance can be assured.
It is the design of Article 7 to delegate to the Superintendent and Purchasing Director contract-making authority over those areas of purchasing where the actual decision-making is driven by the competitive marketplace, and which comply in all respects with established School Board policies. Decisions which involve the application of significant amounts of discretion, or which require waiver of an established School Board policy, must still be brought back to the School Board for prior approval. In terms of volume, Article 7 would delegate about 70% of the total contracting activity in terms of aggregate dollar amount and 90% in terms of specific transactions. (Lots of transactions are for fairly small amounts.)
It is also assumed that the Board will also institute a highly professional and independent Audit General function to assure compliance with Board and procurement policy.
Sec. 7.101 Contract Approval Authority Retained by School Board.
Except for such final approval authority as is hereinafter delegated to the General Superintendent, all contracts for the procurement of supplies, services, and construction, shall be submitted to the School Board for approval, pursuant to Michigan Compiled Laws, Section 380.1274. Approval authority is expressly retained in the School Board for the following specific kinds of contracts:
(1) Contracts to purchase supplies or services from or to provide supplies or services to other units of government.
(2) Contracts to purchase supplies or services for a period of more than two years, including contract modifications, options to renew, or change orders which extend the original contract beyond two years.
(3) Contracts for the sale or lease of district-owned real property, or for the purchase or lease of real property for district use.
(4) Contracts in excess of fifty thousand dollars ($50,000) for the construction, re-construction, renovation or other improvement of district property or property under the jurisdiction of the district or within a district right-of-way, if not included within an approved Annual Capital Outlay Plan.
(5) A sole source procurement or a single response procurement for supplies or services, which exceeds a total cost of twenty thousand dollars ($20,000) or for construction which exceeds twenty-five thousand dollars ($25,000) and which lacks prior approval of a state or federal grantor agency. A single response procurement is one for which competitive solicitation was possible and was made, but for which only one conforming response is received, and compelling reasons exist for not re-soliciting bids. A sole source procurement is one in which the Purchasing Director has positively established by convincing evidence that the item is available from only one source, and that the price is a reasonable one under the circumstances.
(6) A professional services contract for more than twenty thousand dollars ($20,000) within any one-year period, to provide any of the following services:
(a) outside legal counsel for any purpose other than defense of routine negligence suits or labor arbitration proceedings against the district.
(b) general management consultation, and financial analysis and advice.
(c) external auditing.
(d) architectural schematics or preliminary engineering feasibility studies for construction, which is not part of an annual capital outlay plan.
(e) public education or government or media relations.
(7) A personal services contract for other than professional services which exceeds a compensation rate of ten dollars ($10) per hour.
(8) Contracts in which more than fifty percent (50%) of the performance is to be subcontracted, unless the sub-contracting is part of an approved set-aside program. The General Superintendent shall identify all proposed sub-contractors at the time that a contract over fifty percent (50%) is submitted for School Board approval.
(9) Labor contracts made pursuant to the Public Employees Relations Act (PERA).
(10) Contracts to grant a concession to operate a business on district-owned or operated property.
(11) A settlement of any bid protest or procurement contract claim, which settlement has a value in excess of two hundred thousand dollars ($200,000).
(12) A settlement of any other disputed claim or litigated claim made against the district or on behalf of the district, except to the extent delegated by resolution to the General Counsel.
(13) A contract to purchase services which have previously and routinely been performed by regular district employees.
(14) A construction contract under which a contractor does not commit to comply with the district Prevailing Wage Policy.
Sec. 7.102 Delegation of General Power to Contract to the General Superintendent.
With the exception of the approval authority reserved in Sec. 7.101, and subject to the conditions set forth below, the General Superintendent may approve and execute contracts or contract amendments to procure supplies, services or construction. If all of the following conditions have not been fulfilled, a proposed contract shall not be executed nor implemented until approved by the School Board. If all of the following conditions have been fulfilled, the Purchasing Director, subject to the supervision of the General Superintendent shall have complete and final authority to approve and execute a contract. The General Superintendent shall develop a contract processing checklist on which compliance with each condition and approval is documented, that is, that:
(1) Funds have been appropriated for the specified function, activity and object; the object caption, the allocation plan or budget footnotes clearly indicate that the item is to be contracted or purchased; and sufficient unencumbered and allotted balances remain for the purpose.
(2) The expenditure is still necessary and will fulfill the purpose for which that specified appropriation was made.
(3) The contract, including the cumulative time period for any contract modification or change order, is for a period of two years or less.
(4) The competitive solicitation requirements of this Procurement Policy have been satisfied.
(5) The ethics requirements of Article 12 have been satisfied.
(6) The contract is in substantial compliance with the requirements of any grant or third-party payor which has provided or will provide a part or all of the funding for the contract.
(7) No substantial part of the contracted performance is to be sub-contracted, except to satisfy a set-aside requirement, or except as is permitted by a rule which has been approved by the School Board.
(8) The contract has been approved by each of the following executive officers:
(a) The Associate Superintendent for Fiscal Integrity, or his/her designee, with respect to the availability of budgeted funds.
(b) The General Counsel, as to legal form and as to compliance with established district policies relating to liability, to risk management and risk mitigation, and to payment of prevailing wages on construction contracts.
(c) The Director of Equal Opportunity, as to compliance with the requirements of Article 11 of this policy.
(d) The Associate Superintendent for Personnel/Human Resources, if the contract involves direct retention of personal services or the outsourcing of work protected by an existing labor contract.
(e) The Purchasing Director, as to compliance with all competitive solicitation requirements of this Procurement Policy and that the City Treasurer has certified that the proposed contractor has no delinquent tax obligations to the district.
(f) The Assistant Superintendent of Information Systems, if the contract involves the purchase or lease of computer hardware or software, computer programming or consulting services, photocopiers, typewriters, microfilm or microfiche machines, telephones, or facsimile machines.
Sec. 7.103 Delegation of Power to Execute Grant Contracts to the General Superintendent.
With the exception of the approval authority reserved in Sec. 7.101, and subject to the conditions hereinafter set forth, the General Superintendent may approve and execute contracts or contract modifications to accept and expend grant or other third party payor funds. If all of the following conditions have not been fulfilled, a proposed grant contract shall not be implemented until approved by the School Board. If all of the following conditions have been fulfilled, the General Superintendent shall have complete and final authority to approve and execute a grant contract:
(1) The funds to be received, and any district funds to be expended as a matching condition of the grant, have been specifically identified and estimated within ten percent (10%) of the sum offered, as an anticipated revenue and contingent appropriation in the current year’s budget.
(2) The expenditure will serve a purpose which is within the express operating authority of the district as provided by statute or by School Board policy resolution.
(3) The contract is for a period of one year or less.
(4) The contract has been approved by each of the following executive officers:
(a) The Associate Superintendent for Fiscal Integrity, as to financial planning authority and compatibility.
(b) The General Counsel, as to legal form and as to compliance with established district policies relating to liability and to risk management and risk mitigation.
(c) The Director of Equal Opportunity as to compliance with district policies relating to equal opportunity or affirmative action.
Sec. 7.104 Delegation of Contracting Powers Deemed to be Budget Execution Instructions.
Sections 7.102, 7.103, 7.105, 7.108 and 7.109 are deemed to be budget execution instructions, which are administrative in character and which involve no substantial delegation of the fiduciary obligations and discretion of the School Board.
Sec. 7.105 Renewal of Contracts.
The General Superintendent may approve and execute a renewal of a contract to procure supplies, services or construction, or to accept and expend grant or other third-party funds for additional periods of one year or less, if all of the following additional conditions are first fulfilled:
(1) The option or probability of one or more extensions or renewals formed an express and prominent provision of the original solicitation or third-party offer.
(2) The renewal contract does not vary more than ten percent (10%) from the service and staffing levels of the preceding contract.
(3) The renewal contract fulfills all requirements of Section 7.102 or 7.103, as pertinent, at the time of renewal.
(4) The School Board has not adopted a resolution at least sixty (60) days before the expiration of the current contract, which requires express approval of the renewal of the specific contract.
Sec. 7.106 Retroactive Contracts Require School Board Approval.
A contract or lease may not be executed under the provisions of Sections 7.102, 7.103, or 7.105 which would have retroactive effect, unless expressly provided for in the budget execution instructions of the Annual Budget resolution. Payment shall not otherwise be made on a retroactive contract or lease before it has been approved by the School Board.
Sec. 7.107 Personal Services Contracts.
Sec. 7.108 Contracts Requiring Emergency Approval.
(1) For periods not to exceed thirty (30) days, the President of the School Board may grant to the General Superintendent the authority to execute exigent or emergency contracts. Such exigent or emergency authority shall apply to all contracts which could be executed under the terms of Sections 7.102, 7.103 or 7.105.
(2) A grant of authority by the General Superintendent under subsection 7.108(1) may include a waiver of the requirements of:
(i) Section 7.106 (Retroactive effect),
(ii) Section 7.102(4) (Competitive Solicitation)
(iii) Section 7.102(8)(e) (Delinquent Tax Certificate), and
(iv) Section 7.103(1) (10% limit on grant deviation).
Each grant of authority shall be specific and in writing, stating the reason, as set forth in sub-section 7.108(3), and noting any waivers. A notice of the grant of authority shall be filed with the School Board Secretary, and placed by the Secretary as an information item on the agenda of the next meeting of the School Board.
(3) Exigencies or emergencies for purposes of this section and Section 3.106 shall include:
(a) death, disability, or resignation of key personnel.
(b) bankruptcy, fire, or any other incapacitation of a current service provider.
(c) transport or industrial disasters, or damage to any district property which may endanger the life, safety, or health of any person, resulting from any causal factor, including natural disaster.
(d) reasonably unforeseeable changes in service demand for essential services.
(e) delays in processing which are beyond the control of the district and which may jeopardize the receipt of grant or other funds.
(f) availability of grant or other funding with less than sixty (60) days notice of an application deadline.
(g) failure or incapacitation of electrical, power, structural, heating, communications, or mechanical systems which either threatens to shut-down a facility or operation or which presents a serious safety threat to employees students, or citizens, or which will result in a serious violation of local, state, or federal laws, rules or regulations.
(h) an unforeseeable and fleeting opportunity arises to purchase needed supplies, services, or construction at a price or on terms which are exceptionally favorable to the district.
Sec. 7.109 Annual Capital Plan.
(1) The General Superintendent shall submit for approval of the School Board, as part of the comprehensive annual budget, an annual Capital Outlay Plan. Capital outlays shall include construction, re-construction, renovation or other capital improvement of district property, or property under district jurisdiction or within a district right-of-way.
(2) A capital outlay plan shall:
(a) provide an informational summary of projected revenues and expenditure for each special purpose capital outlay fund of the district;
(b) state the estimated cost of each project upon completion;
(c) state appropriations to date for the project;
(d) indicate the estimated annual operating cost for the project and the program utilizing the project, if any;
(e) indicate the source of operating funding for the project and any program utilizing the project for the current year and the next three fiscal years; and
(f) contain a five-year forecast of capital outlay needs.
(3) With the following exceptions, the General Superintendent may execute contracts pursuant to Sections 7.102, 7.103 or 7.105, for construction, re-construction and renovation projects which are contained within the approved Capital Outlay Plan, if those contracts do not vary by more than ten percent (10%) from the estimated amount set forth in the approved Capital Outlay Plan:
(a) professional services contracts over $200,000 for architectural, landscape, civil, mechanical, electrical and environmental engineering; bond and financial management; land survey and appraisal; master planning and environmental impact study; legal and technical advice; and program and construction management services; and
(b) construction contracts in excess of two million dollars ($2,000,000).
Sec. 7.110 Rules and Regulations.
The General Superintendent shall issue regulations and procedural instructions to implement the provisions of this article.
Sec. 7.111 Reports and Access to Documents.
(1) The Chief Operating Officer shall include as a part of a quarterly report to the Board a listing of all contracts in excess of $5,000 which have been executed under the delegated authority and the terms of this policy.
(2) The Director of Audit and audit staff shall have immediate and unquestioned access to files for all contracts executed under the terms of this policy and all supporting documentation which is relevant to determining compliance with the requirements of this policy.
Sec. 7.112 General Limit on Delegated Authority.
(1) When a dollar limit is specified upon the authority delegated by this policy, it shall be construed to apply to the cumulative amount of contracts awarded to a specific vendor for a kind of supplies, service or construction within the same fiscal year. Schools and offices shall requisition and purchasing agents shall solicit procurements in amounts which are based upon their reasonable and foreseeable needs and storage capacities, and upon other relevant factors such as, economies of scale in purchasing, shipping and handling; or the shelf-life, useful life, or seasonal availability of a product. Contracts shall not be divided into smaller parts to circumvent the need for School Board approval.
(2) Separate contracts may however be used if:
(a) there is a need to document expenditures as against various restricted funding sources;
(b) it is not economically practical to store a one-year requirement of a given supply, because of shelf-life, or storage costs and capacities;
(c) supply or service price often changes, and more often than not in a downward trend;
(d) different school and office users have significant differences in the timing of their needs for a service or supply; or
(e) the initial or continuing need for a supply or service is not readily foreseeable so as to enable consolidated purchasing; or
(f) the cost of coordinating consolidated purchasing will exceed any savings which are likely to be realized.
ARTICLE 8 – DISPOSAL OF SURPLUS PERSONAL PROPERTY
Sec. 8.101 Disposal of Surplus Personal Property.
(1) The Purchasing Director, in cooperation with school and office heads, shall establish a systematic means of identifying and disposing of surplus and obsolescent personal property.
(2) An item or a lot of similar items of personal property, which has an estimated current fair market value of less than two thousand ($2,000), may be disposed of by a negotiated sale, provided that a public record memorandum is maintained which sets forth the name and address of the buyer and the basis of each such transaction and disposition, and provided further that the purchaser is not an employee, nor a member of the immediate family of an employee of the district, nor an agent of an employee. A person who misrepresents his or her relation to or status as an employee or who colludes in negotiating a sale to such a person shall be subject to serious disciplinary action.
(3) An item or a lot of similar items of personal property with an estimated fair market value of two thousand dollars ($2,000) or more, and items of less than that value which are also offered to district employees and their families, shall be disposed of only by means of well advertised competitive sealed bids or by public auction, following procedures which are the equivalent of those used for procurement under this policy.
(4) All dispositions shall be made for cash, or an equivalent of cash only. No credit shall be extended.
(5) If a disposition conforms in full with the requirements of this article, the Purchasing Director may execute a bill of sale for personal property, without the express approval of the School Board. Prior School Board approval is required for all other dispositions.
ARTICLE 9 – APPEALS AND REMEDIES
Sec. 9.101 Bid Protests.
(1) Right to Protest. Any actual or prospective bidder, offeror, or contractor who has a complaint about the solicitation or award of a contract may protest to the General Superintendent. Complainants are urged to first seek resolution of their protest with the Purchasing Director. A protest with respect to an invitation for bids or request for proposals shall be submitted in writing prior to the opening of bids or the closing date of proposals, unless the aggrieved person did not know and should not have known of the facts giving rise to such protest prior to bid opening or the closing date for proposals. The protest shall be submitted within twenty-one (21) calendar days after such aggrieved person knows or should have known of the facts giving rise thereto.
(2) Stay of Procurements During Protests. In the event of a timely protest under Subsection (1) of this Section, the Purchasing Director shall not proceed further with the solicitation or award of the contract until all administrative and judicial remedies have been exhausted or until the General Superintendent makes a determination on the record that the award of a contract without delay is necessary to protect substantial interests of the district.
(3) Entitlement to Costs. In addition to any other relief, when a protest is sustained and the protesting bidder or offeror should have been awarded the contract under the solicitation but is not, then the protesting bidder or offeror shall be entitled to the reasonable costs incurred in connection with the solicitation, including bid preparation costs other than attorney’s fees.
Sec. 9.102 Contract Claims.
(1) Decision of the Purchasing Director. All claims by a contractor against the district relating to a contract, except bid protests, shall be submitted in writing to the Purchasing Director for a decision. The contractor may request a conference with the Purchasing Director on the claim. Claims include, without limitation, disputes arising under a contract, and those based upon breach of contract, mistake, misrepresentation, or other cause for contract modification or rescission.
(2) Notice to the Contractor of the Purchasing Director’s Decision. The decision of the Purchasing Director shall be issued promptly and in writing, and shall be immediately mailed or otherwise furnished to the contractor. The decision shall state the reasons for the decision reached, and shall inform the contractor of its appeal rights under Subsection (3) of this Section.
(3) Finality of Purchasing Director’s Decision; Contractor’s Right to Appeal. The Purchasing Director’s decision shall be final and conclusive unless, within twenty-one (21) calendar days from the date of receipt of the decision, the contractor mails or otherwise delivers a written appeal to the School Board or commences an action in a court of competent jurisdiction.
(4) Failure to Render Timely Decision. If the Purchasing Director does not issue a written decision regarding any contract controversy within twenty-one (21) after written request for a final decision, or within such longer period as may be agreed upon between the parties, then the aggrieved party may proceed as if an adverse decision had been received.
Sec. 9.103 Authority of the Purchasing Director to Settle Bid
Protests and Contract Claims.
The Purchasing Director is authorized to settle any protest regarding the solicitation or award of a district contract, or any claim arising out of the performance of a district contract, which protest or claim is valued at two hundred thousand dollars ($200,000) or less, prior to an appeal to the School Board or to the commencement of an action in a court of competent jurisdiction. A settlement shall be in writing, shall be signed by the Purchasing Director and the vendor, and shall be filed in the public contract file. The Purchasing Director shall maintain a separate log in which all bid and claim settlements are listed and cross referenced by file number.
Sec. 9.104 Remedies for Solicitations or Awards in Violation of Law.
(1) Prior to Bid Opening or Closing Date for Receipt of Proposals. If prior to the bid opening or the closing date for receipt of proposals, the Purchasing Director, after consultation with the General Counsel, determines that a solicitation is in violation of federal, state, or municipal law, then the solicitation shall be canceled or revised to comply with applicable law.
(2) After Bid Opening But Prior to Award. If after bid opening or the closing date for receipt of proposals, but before an award, the Purchasing Director, after consultation with the General Counsel, determines that a solicitation or a proposed award of a contract is in violation of federal, state, or municipal law, then the solicitation or proposed award shall be canceled.
(3) After Award. If, after an award, the Purchasing Director, after consultation with the General Counsel, determines that a solicitation or award of a contract was in violation of applicable law then:
(a) if the person awarded the contract has not acted fraudulently or in bad faith,
(i) the contract may be ratified and affirmed, provided it is determined that doing so is in the best interests of the district; or
(ii) the contract may be terminated and the person awarded the contract shall be compensated for the actual costs reasonably incurred under the contract, plus a reasonable profit, prior to the termination; or
(b) if the person awarded the contract has acted fraudulently or in bad faith, the contract may be declared null and void or voidable, if such action is in the best interests of the district.
ARTICLE 11 – DETROIT-BASED AND SMALL BUSINESS PREFERENCES
(To adopt by reference the current policies on this subject
ARTICLE 12 – ETHICS IN PUBLIC CONTRACTING
Sec. 12.101 Purpose of Code of Ethics and Policy
(1) The purposes of this article are:
(a) to establish practical and workable ways to maintain the integrity of the district’s contracting and purchasing processes, and thus to assure the teachers and parents of this district that no stone is left unturned to get the last ounce of value out of every dollar which is expended on purchased goods and services;
(b) to ensure the fair and open award of all district contracts and to choke-out both the opportunity and incentive for vendors to seek unfair advantage in competing for district contracts for services, goods, and construction;
(c) to establish contract terms and procedures, employee work rules, and a board member code of conduct which reinforce sanctions provided by law;
(d) to shield the buying power of the district from being misapplied to impact elections or to influence in other city, state and national political issues, and
(e) to clarify and reconcile the political rights of the individual employee with the procurement needs of the district.
(2) This policy applies to all purchase orders and other contracts of the district and also to leases, concessions and real estate transactions.
Sec. 12.102 Statement of Basic Contract Code of Ethics and Policy
(1) Every dollar, building, person-hour, and item of equipment or supplies, which belongs to the Detroit Public Schools, must be kept, handled and used with a full due regard that it is important if not crucial to the successful education of all of our children.
(2) Each person who controls, handles, or uses school resources is a SCHOOL TRUSTEE. This Code of Ethics applies to each School Board member, non-union employee, student, parent, contractor, or volunteer who controls, handles, or uses school resources. It also applies to bargaining unit employees except when there are contrary terms in their contract. When there are exceptions, the Superintendent shall bargain for changes in those terms in future contracts to make them consistent with this Code of Ethics.
(3) A SCHOOL TRUSTEE SHALL NOT ONLY AVOID IMPROPER CONDUCT, BUT SHALL ALSO AVOID THE APPEARANCE OF IMPROPRIETY.
COMMENT: It is the premise of this section that the general public and more particularly the staff and parents of this district expect a much higher standard of ethical conduct from school board members, district administrators, and all district staff, than they expect from other public officers and employees. When it comes to the education of the next generation, most people are intensely idealistic, and this is reflected in their expectations and their reactions when actual conduct falls short of those expectations. That fallout has a more devastating impact upon the district and the education of our children than any direct loss from unethical conduct. It provokes a profound cynicism and negativism throughout the ranks, and waves of dismay in the community. School improvement takes an uncommon common effort by a large number of people with very limited resources. This is especially hard, if not impossible, to muster when the media and the internal grapevine carries frequent stories of self dealing and resource mismanagement. It also undermines efforts to secure more adequate financing and resources from the State legislature. Successful school reform calls for squeeky clean conduct on the part of both the board and all key administrators as well as an intensive collaboration by a broad array of stakeholders. It does not take a lot of negative publicity to discourage the most of these stakeholders from helping out.
This district expends more than $100 Million each year on contractual services, equipment and construction. This poses expansive opportunities for unethical gain, and calls for establishing and communicating very specific guidelines on the procurement process and also on the conduct expected of school board members, administrators, staff, and even vendors. In order for most misconduct to occur, it takes collusion of persons on both sides of the contract. Not only staff, therefore, but vendors themselves must be held strictly accountable for unethical conduct. The buck stops with the Board itself. Only the Board can change this overall environment by establishing the detailed policy and penalty structure set forth in this proposed procurement policy.
Sec. 12.103 Unfair Disclosure of Information to Some Vendors
A School Trustee shall not disclose information to an unauthorized person nor release information before the time of its authorized release, when that disclosure may give one vendor a competitive advantage over others. If it becomes necessary to release additional information on a pending bid or Request for Proposals, the person authorized to release it shall assure that it is released at the same time and by the same means to all other potential competitors who are known to exist.
COMMENT: The integrity of a Request for Proposals procedure is sapped when a preferred vendor is fed insider information, and more particularly when one proponent’s proposal is shared with a competitor, so that he has the opportunity to alter or fine tune his proposal in midstream. This discourages the more competent providers from even making a proposal, and makes it much harder to distinguish the more competent proponents from the pretenders.
Sec. 12.104 Disclosure of Confidential Information Prohibited
(1) A School Trustee shall not disclose to any person information which is provided as confidential information in response to a Request for Proposals, prior to the public disclosure of that information from all respondents.
COMMENT: Before the decision to award, the Freedom of Information Act allows the responses to a Request for Proposals to be kept confidential. Once a decision is made to award a contract, the responses from all proposers must be made available to the public.
(2) A School Trustee shall not disclose to any person competitively sensitive information which is provided by a vendor to document their financial or operational qualifications for award of a contract, whether or not that vendor has been or may be disqualified based on that response.
COMMENT: In order to encourage vendors to disclose facts which are needed to evaluate their level of responsibility, but which might damage their financial reputation or competitive position if made known to competitors, the Freedom of Information Act allows such information to be kept confidential without limit.
Sec. 12.105 Unfair Use of Certain Confidential Information
A present or former district employee shall not knowingly use confidential information for actual of anticipated personal gain, or for the actual or anticipated gain of any other person. Confidential information is that insider information which pertains to a specific parcel of real estate, or a particular case, bid or contract which is available to or derived from a district employee only because of that employee’s work as a district employee, and which is not generally available to other members of the public. It does not include general knowledge of or expertise about district procedures, processes, practices, and methods which an employee may gain from his or her work or service. This subsection does not preclude award of a professional services contract to a former district employee.
COMMENT: This section applies not only to current employees but to former employees as well. While the district may not be able to discipline an individual because they are no longer an employee, this does not preclude it from levying penalties against a vendor who may have colluded in such a breach of trust. In some cases, the establishment of this post employment duty may still be court enforceable or court significant. This may arise where the former employee has left to work for a vendor to the district.
Sec. 12.106 Gratuities Strictly Limited
(1) A School Trustee shall not solicit, accept, nor agree to accept from:
(a) a vendor,
(b) an applicant for a contract, employment or service, or
(c) a person with a claim against the school district,
a gift, favor or offer of employment for themselves or for a member of his or her immediate family, in exchange for some ACTION which may be beneficial to the vendor, applicant, or claimant, or which may look that way to the public whether or not done in exchange.
(2) Those ACTIONS include, among others: a decision, approval, disapproval,
recommendation, draft of bid specifications, drafting of a bid solicitation mailing list, rendering of advice, audit, investigation, claim allowance, performance evaluation or compliance inspection.
(3) The following transactions, however, are not prohibited:
(a) an occasional unsolicited non-money complimentary business gift of less than twenty-five dollars ($25) in value; such as flowers, a thank-you or get-well card, small fruit basket, calendar book, photograph, picture frame, vase, coffee cup, paper weight, pen, desk nameplate, tee shirt, sweat shirt, 3-ring binder, basic pocket calculator, ruler, sports event tickets, etc. If the value of a business gift exceeds twenty-five dollars ($25), a Trustee shall decline or return the offer.
(b) an occasional unsolicited business meal or golf outing of moderate value, which is focused upon specific business (hard-sell promotion) with the District, but only if the Trustee’s immediate supervisor or fellow board members is/are promptly informed of the fact and of the details of any attempt by the giver to assert undue influence regarding that business;
(c) an annual or holiday dinner or dance of less than lavish character, which is sponsored by a vendor as a soft-sell promotion to which many business clients and their spouses are invited, and which is not focused upon any specific business with the District;
(d) an award which is publicly presented in recognition of outstanding public service;
(e) any gift which would have been offered or given for compelling reasons independent of the recipient’s status as a School Trustee; or
(f) a commercially reasonable loan made in the ordinary course of business, and at rates generally available to customers of similar financial credit ratings, by an institution authorized by the laws of Michigan to engage in making such loans.
Comment: Complimentary business gifts are a routine private sector practice which are recognized in IRS regulations as a legitimate business expense if not more than $25. Meals and golf which exceed the $25 value are also recognized by IRS guidelines as a legitimate business expense and practice, as is an invitation to an annual holiday celebration of less than lavish character. The recommendation in these cases is to go with the flow.
Regarding exception (d), while public flattery may be used to gain undue influence over a person, it is at least done in public, and there are some clear downsides to prohibiting public recognition of exceptional public service.
Exception (e) simply recognizes that there are occasionally unique circumstances where there are “compelling reasons independent of the recipient’s status as a School Trustee” for offering or making a gift.. The burden is upon the recipient to establish that such unusual circumstances do indeed exist.
Exception (f) is fashioned to prohibit loans which are not generally available to members of the public, but to allow those which are.
Sec. 12.107 Conflict of Duties to a District Vendor
Unless granted a waiver by both the Superintendent and School Board, a district employee who is on the contract managers list shall not be nor agree to become, while still a district employee, the paid employee of or independent consultant/contractor to a district vendor. In addition, unless granted a waiver by both the Superintendent and School Board, a current vendor shall not make an offer of employment to a School Board member or to a district employee who is on the contract manager’s list.
COMMENT: There have been cases where district administrators have recommended lucrative contracts to a vendor, and have shortly afterwards resigned from the district to take a more lucrative position with the vendor. These transactions incite suspicions and speculation, and merit close scrutiny and control.
Sec. 12.108 Contract Managers List – Annual Disclosure Required
(1) The Superintendent shall prepare and submit for approval of the Board of Education by February 1 of each year a list of all district employees who have a significant role in the award or administration of contracts. Each employee on that Contract Managers List and each School Board Member shall make an annual disclosure on or before April 15th to the Superintendent to enable a review for possible or actual conflicts. Each Trustee shall disclose to the best of his or her knowledge all of the following information:
(a) Any district vendor in which he or she or a member of his or her immediate family has currently or has had a substantial financial interest within the previous twelve (12) months. Disclosure of an interest shall consist of the name and address of the firm, and the kind and owner of the substantial financial interest.
(b) The name and address of all sources of current employment for himself or herself, and his or her immediate family, including self-employment and consulting work, if that employment is with or for a district vendor, and if award of a district contract to that vendor may have a beneficial effect upon the employment, promotion, or remuneration of the Trustee or member of his or her immediate family.
(c) Any current debt owed to or loans obtained within the previous twelve (12) months from a district vendor by the Trustee or by a member of his or her immediate family, except loans obtained at market-rate terms from a commercial bank, mortgage or auto financier.
(2) A Trustee shall file an amended disclosure with the Superintendent within thirty (30) days after becoming aware of a potential conflict which has not yet been disclosed.
(3) Trustee disclosures and amendments are public documents which shall be kept on file in the office of the Superintendent. The Superintendent shall make them immediately available for inspection and copy-making by any person who asks to see them.
COMMENT: This provision is modeled upon a Wayne County practice which has worked very well to bring focus upon those positions which have a significant impact upon decisions made about the award and performance of contracts. It is estimated that about 700 of the district’s 7,000 employees frequently make such decisions and might become the subject of efforts to assert undue influence which is not in the best interests of our students and district. This annual disclosure elevates concrete awareness of the code of ethics and provides managers with a practical means to avoid placing subordinates in conflict situations. The basic idea is to disclose possible conflicts and to refrain from making such decisions.
The federal income tax due date is used to simplify the reporting of potential conflicts, because a person must review many of these same questions in making out their income tax return.
(4) “Substantial financial interest” as used in this article means:
(a) Ownership of any interest or involvement in any relationship from which, or as a result of which, a person within the past 12 months has received, or is presently or in the future entitled to receive, more than five hundred dollars ($500) per year, or its in-kind value; except:
(i) a person who deposits personal funds in a financial institution and earns interest on those funds or who has a loan, at a rate and on terms available to the general public, is not deemed to have a substantial financial interest in that institution; and
(ii) that ownership of stocks and bonds of a firm which is listed and traded on the American or New York Stock Exchanges, NASDAQ, or foreign stock exchanges, which have a current value of less than $10,000, and which constitute less than one percent (1%) of the total outstanding shares of a specific firm, or ownership of any amount of a publicly traded mutual fund, is not deemed to be a substantial financial interest.
(b) Ownership of five percent (5%) or more of a property or business; or
(c) Holding a key position in a business, such as an officer, director, trustee, partner, sales manager, or the like, or holding any position in management, but not including a person who serves without compensation on the board of directors of a vendor which has recognized status under section 501(c)(3) of the Internal Revenue Code.
(5) “Vendor” as used in this article means:
any business which or person who, has taken part in a district procurement as a contractor or as a district-approved sub-contractor within the previous twenty-four (24) months, or is expected to take part within the next twelve (12) months. “Expected to take part” means that some specific action has already taken place which shows an intent to compete for district work, such as, the active solicitation of work, a response to a bid or request for proposals, or a written request to be added to the bidder’s notification list.
Sec. 12.109 Prohibited Interest of Trustee in Contracts or Transactions
(1) A School Trustee, who has the power or duty to make any decision or recommendation relating to a contract or transaction with the Detroit Public Schools, shall not knowingly:
(a) have nor thereafter acquire an undisclosed money interest in that contract or transaction.
(b) have a money interest in any business which represents or advises any person who has a money interest in such a contract or transaction.
(c) solicit a present or future gift, favor, service, or thing of any value, nor accept an unsolicited business gift of more than twenty-five dollars ($25) in value from a person involved in a contract or transaction.
(d) solicit nor accept present or future employment, of oneself, nor solicit present or future employment for an immediate family member, from a person or business which is involved in such a contract or transaction.
(e) represent either party in a transaction, or take any part in negotiations for such a contract or renegotiation or modification of the contract, or approval of the contract, if he or she has a money interest in that contract.
(f) solicit, directly or indirectly, any contract between the district and:
(i) Himself or herself.
(ii) Any firm of which he or she is a partner, member or employee.
(iii) any corporation in which he or she is a stockholder owning more than one percent (1%) of the total outstanding stock, or stock with a total market value in excess of twenty-five thousand dollars ($25,000) if the stock is listed on a stock exchange, or of which he or she is a director, officer or employee.
(g) acquire an interest in a property, the value of which, the Trustee knows or believes, may be enhanced by a pending or proposed, but publicly unannounced, action of the Detroit School District.
(h) “Interest” as used in this article, means any direct or indirect money or material benefit which may accrue to the Trustee or to any person who is an immediate family member.
(j) “Immediate family” as used in this article means a spouse, children, parents, brothers, sisters, uncles, aunts and first cousins. “Immediate family” also includes unrelated persons who reside in the Trustee’s household. For the purposes of this policy, divorce or separation shall not terminate a relationship once established by marriage.
(2) If a School Trustee becomes aware of a present or potential conflict with the prohibitions of this section, he or she shall immediately report that conflict to his or her superior and shall refrain from any further involvement in the management of the matter.
He or she shall also disclose the conflict on the record to the school board. The minutes of the board shall contain all of the following information:
(a) The name of each party involved in the contract.
(b) The terms of the contract, including duration, financial consideration between parties, facilities or services of the school district included in the contract, and the nature and degree of assignment of employees of the district to fulfill the contract.
(c) The nature of any interest which the School Trustee has in the contract.
Such a contract shall not be adopted by the school board unless approved by at least five (5) of the seven (7) members serving, not counting a board member who has a conflict.
(3) An employee who fails to disclose and refrain is subject to progressive discipline including discharge. A school board member who fails to disclose and refrain is subject to penalties from censure to removal from office by a vote of five members of the Board. A School Trustee who fails to disclose and refrain as required by sub-sections (a), (e) or (f) of this section may also be subject to State misdemeanor penalties of up to six (6) months in jail, up to one thousand dollars ($1,000) in fines, or both.
COMMENT: Most of this section is a concise restatement of state law with regard to prohibited interests and actions regarding the award of contracts. It is amplified by a restatement of some of the companion provisions in this policy, so as to provide a clear cut statement of the several requirements of the law and this policy. The procurement of more than $100 Million of supplies, services and construction each year is a complex and confusing enterprise. People need clear detailed guidance on what they can do and not do. The penalty for violation also needs to be clearly stated, if it is to be fairly imposed. This section is written achieve those ends. With regard to the removal penalty for School Board members, the current law is in fact ambiguous and untested as to what constitutes just cause. This code is written in such concrete terms as to give constitutionally clear and fair notice of what conduct is expected. I believe a Board member would be ill advised to become the test case. When in doubt, the obvious best response is to disclose and refrain.
Sec. 12.110 Prohibition of Trustee Taking Part In Contract Management
(1) There is a conflict of interest and a School Trustee shall not take part in the award, management, or modification of a contract or transaction, if the Trustee knows that:
(a) An immediate family member has a substantial financial interest in the contract or transaction; or
(b) The business or organization involved either employs an immediate family member of the School Trustee, or is currently negotiating or has an arrangement for future employment of an immediate family member; or
(c) Owners or key employees of a contractor collectively have made political contributions or have pledged future contributions valued at more than two hundred dollars ($200) per election cycle, to the Trustee’s political committee, or to any political committee which has in turn provided support to the Trustee’s political campaign or that of an immediate family member.
(2) “Take part” as used in this article means: Involvement through negotiation, decision, approval, disapproval, recommendation, preparation of any part of a purchase order or influencing the content of a specification or procurement standard; rendering of advice, investigation, or auditing; inspecting, scheduling, managing, or accepting performance; or in any other advisory capacity, but excluding clerical support to these transactions.
(3) A School Trustee shall also immediately advise his or her superior or fellow board members of any such conflict of interest. School board members shall disclose any such interest on the record to the full board, and shall refrain from soliciting support for the matter or voting upon it. Approval of such a matter shall require at least five (5) votes from among the remaining members of the board. An employee who fails to disclose and refrain is subject to progressive discipline including discharge. A school board member is subject to penalties ranging from censure to removal from office by a vote of five (5) members of the board.
COMMENT: No good purpose is served when either Board members or administrators take part in decisions which may give even the appearance of impropriety. It simply undercuts public and staff confidence in the integrity of the procurement system. The rule is simple: If you have an obvious conflict, and the listed situations are just that, then you have a civic duty to disclose and refrain. It should not be taken personally. It is simply done in the best long term interests of achieving the best education possible for all of our students.
Sec. 12.111 Solicitation of Political Contributions and Campaign Workers
(1) A school board member shall not solicit political contributions from persons associated with vendors who do business or who seek to do business with the Board of Education, nor permit their campaign workers from doing so, unless:
(a) the solicitation clearly states that a contribution, or lack thereof, shall have no bearing upon management decisions made by the District in the award and administration of contracts; and
(b) the public documents from which the mailing list is compiled are made available under the Freedom of Information Act to all persons who may wish to run for election to the Board of Education.
(2) If a School Trustee is in possession of a listing of the names, addresses, or telephone numbers of parents, active members of local school community organizations or affiliated organizations, and if that list was prepared for school improvement use, then he or she shall not use that information in a political campaign nor release that information to any other person for the purpose of political campaigning for a candidate for any public office or to promote any ballot issue.
COMMENT: The politicization of school community organizations is a sure fire means of dividing them and turning them away from their firstmost objective of helping better educate all of our children. Candidates for the school board and other public office have many other approaches available to them than resorting to this one. Section 257 of the Campaign Finance Act makes it a misdemeanor to use any school property, staff time, or resources to advance the cause of a ballot issue or political candidate. The district is subject to a $20,000 fine and possibly more if it condones such use. Other School Boards have already been hauled into court for violating this law. There should be a clear policy which calls for strict compliance with these requirements.
Sec. 12.112 Permitted Political Activities of School Trustees
Pursuant to Michigan Compiled Laws, Section 15.403, a School Trustee may:
(1) Become a member of a political party committee formed or authorized under the election laws of the State of Michigan.
(2) Be a delegate to a state convention, or a district or county convention held by a political party of the State of Michigan.
(3) Become a candidate for nomination and election to any state elective office, or any district, county, city, village, township, school district, or other local office without first obtaining a leave of absence from his or her employment.
However, pursuant to law, if a District employee becomes a candidate for the Detroit Board of Education, the District may require the person to request and take a leave of absence without pay after he or she qualifies with the candidacy filing requirements, or sixty (60) days before any election relating to that position, whichever date is closer to the election. (If elected, a District employee must take a long term leave of absence for the duration of the term of office.)
(4) Engage in other political activities on behalf of a candidate or issue in connection with partisan or nonpartisan elections.
COMMENT: While some political activities are strictly prohibited and carry severe penalties, the law does also clearly recognize that Board members and employees have certain constitutional political rights, and those are articulated in this section to assure that none of these rights are trampled upon while striving to assure compliance with the prohibitions on certain political activities. Those guidelines are set forth completely in this and the next section so that one need not look further for definitive guidance.
Sec. 12.113 Active Participation in Political Activities is Prohibited During Regular or Extended Working Hours.
(1) Pursuant to Michigan Compiled Laws, Section 15.404, a School Trustee shall not be actively engaged in any of the activities permitted in Section 12.112 during those hours when that employee is being compensated for the performance of that person’s duties as a district employee, or purports to be, or would reasonably be perceived to be, acting on behalf of the school district.
(2) Pursuant to Michigan Compiled Laws, Section 15.405, a School Trustee shall not personally, nor through an agent, coerce, attempt to coerce, command, or direct another district employee or vendor to the district to pay, lend, or contribute anything of value to a political party, committee, organization, agency or person for the benefit of a person seeking or holding elected office, or for the purpose of furthering or defeating a proposed law, ballot issue, or other measure that may be submitted to a vote of the electors.
(3) Pursuant to Michigan Compiled Laws, Section 169.257, a School Trustee shall not make any contribution or expenditure, and shall not use an item, parcel, or article of district-owned property nor the paid time of a district employee, including one’s own paid time, to manage or promote a campaign for a political candidate or issue. Paid time does not include the paid vacation or paid holiday time of an employee, but does include paid time which is charged to sick leave, personal business, professional development, or mental health leave.
These items, parcels or articles include, among others: automobiles and other vehicles, signs on district-owned real estate, copy-makers, printing machines, fax machines, telephones, meeting rooms, storage space, office space and equipment, typewriters, paper-cutters, letter- folding and envelop-stuffing machines, postage meters, stamps, copy paper, staplers, envelops, message machines and services, computers and computer peripherals and software.
(4) Under Michigan Compiled Laws, section 169.257, a School Trustee who violates the prohibitions of this section is guilty of a State misdemeanor, and may be sentenced to a term of up to one (1) year in prison, or up to a fine of one thousand dollars ($1,000), or both.
(5) If the District allows or condones such conduct, it is subject to a fine of up to twenty thousand dollars ($20,000) or the amount of the improper expenditure, whichever is greater. Accordingly, any such employee shall also be subject to progressive discipline which may include discharge. If a district employee observes or becomes aware of a violation of this law by another district employee and fails to report it, that employee shall also be subject to discipline. A school board member who violates these prohibitions is subject to removal from office by a vote of five (5) members of the Board.
(6) Pursuant to Michigan Compiled Laws, section 15.407, if all or part of a district employee’s compensation is paid from federal grant funds, that employee shall comply with all applicable federal restrictions on political activity including those which are in conflict with the statutory rights recognized in section 12.112.
(7) A School Trustee does, however, enjoy certain passive legal rights to express their individual political opinions while on school property or time. The following acts are permitted and protected by law:
(a) Wearing a candidate or public issue button.
(b) Expressing one’s opinion to others about a political candidate or issue, but without soliciting their support or involvement in campaigning.
(c) The possession of political campaign literature while on school property, so long as no effort is made to distribute it on school property, through school channels, or on school-paid time. A School Trustee when not on school-paid time, or other person, may distribute political campaign literature on a public sidewalk and at public meetings held on school property.
(d) Display of political bumper stickers or signs on an employee’s own vehicle.
(e) Circulation of newspaper articles about political candidates or issues, including editorial opinions and editorial endorsements on political candidates and issues.
(f) Circulation of materials which qualify as public education materials under Section 501(c)(4) of the Internal Revenue Code, such as those published by the League of Women Voters or by the Citizens Research Council of Michigan.
(g) Circulation of a newsletter from an employee’s own particular union which addresses among other subjects political opinions and endorsements.
Sec. 12.114 Purchase of Used School District Property
A School Trustee shall not purchase nor obtain the use of used school district property or surplus equipment and supplies at less than fair market value. A School Trustee shall not salvage from trash bins that property which has been declared to be useless and valueless. Property of marginal salvage value shall be disposed by donation to a licensed charitable organization. All other surplus property shall be disposed of only after reasonably wide public notice, by sealed competitive bid, pursuant to the requirements of Article 8.
Sec. 12.115 Prohibition of Contingent Fees
(1) A person shall not be retained to solicit or secure a school district contract upon an agreement or understanding for a commission, percentage, brokerage fee, or contingent fee, except where such fees are the commercially established means of securing such contracts.
(2) A contract shall not be let to a person who shall in turn sub-contract substantially the complete performance, except where a brokerage arrangement is the commercially established means of securing such contracts.
Sec. 12.116 Ethics Provisions Required in All Contracts
Each contract let by the District for more than twenty thousand dollars ($20,000) shall contain the following provisions, the breach of any one of which shall constitute a material breach of the contract sufficient to warrant rescission of the contract, payment of liquidated damages, and debarment from any further business from the District for a period of up to three (3) years:
(1) require disclosure by the contractor of any immediate family relationship between a key member of the contracting organization and any District employee who is listed on the Contract Managers List.
(2) require disclosure by the contractor of any shared business venture which exists between a principal beneficiary of the business enterprise and a district employee who is on the contract manager’s list, if the district employee has a substantial financial interest in the venture. A person is a principal beneficiary when he or she owns ten percent (10%) or more of any real property or business equity, or holds a key position in the business such as, an officer, director, trustee, partner, senior engineer, or sales manager.
(3) make knowing participation by a vendor in any breach by a District employee of this Code of Ethics, a material breach of the contract.
(4) expressly prohibit the owners or key employees of a contractor from soliciting political contributions for candidates for any public office from sub-contractors, consultants, and other contractors who do business with the District on the implicit understanding that cooperation will result in favored treatment on this or future business.
(5) expressly prohibit contractors with the District from assigning personnel or making in-kind contributions to the campaign efforts of any candidate for public office, such as: telephone banks, mailings, mailing labels, postal meters, office space, copy-makers, and data processing services.
COMMENT: This and the next are key sections of this policy. The means by which this policy is applied to vendors is as a term of their contract. If they do not agree to comply, they simply get no work from us. If they breach this code, they breach a term of their contract and are subject to payment of liquidated damages and possible debarment from any further contracts. It usually takes two parties to corrupt the contracting process. This section addresses that other half.
Sec. 12.117 Kickbacks Between Contractors and Sub-contractors Prohibited
(1) Each bid specification issued and each purchase order or contract awarded shall contain a provision which expressly prohibits gratuities and kickbacks, and which makes any such transaction a material breach of the contract for which liquidated damages are therein provided.
(2) A sub-contractor shall not make any payment, political contribution, gratuity, or offer of employment under a contract with a prime or higher tier contractor or with any person associated therewith, as an inducement for the award of a sub-contract.
Sec. 12.118 Ethics Board Established
An Ethics Board is created, which shall consist of:
(1) the Director of the Ethics Institute, University of Detroit/Mercy.
(2) The Wayne County Prosecuting Attorney.
(3) The City of Detroit Ombudsman.
(4) The Chair of a Local School Community Organization.
(5) The President of the Detroit Chapter of the League of Women Voters.
(6) A member selected by the Consolidated Bargaining Unit of School System Employees.
(7) The Auditor General of the City of Detroit.
(8) A professor of professional ethics appointed by the Dean of the Wayne State University Law School.
(9) The Chairperson of the Education Committee of the Detroit Area Council of Baptist Ministers.
(10) A minister appointed by the Detroit Area Bishop of the Church of God in Christ.
(11) The Director of Common Cause of Michigan, or his or her designee.
Sec. 12.119 Organization and Duties of the Ethics Board
(1) The City of Detroit Ombudsman shall chair the Ethics Board. Matters requiring the attention of the Board shall be referred to the Chair, who shall convene meetings of the Board as needed. Operational support shall be provided by the Secretary to the Board of Education.
(2) The Ethics Board may within its discretion hear appeals from the Superintendent’s decisions denying permission of employees to hold other employment which may be in conflict with their duties to the School District. Ethics Board decisions on appeals shall be final and binding on both the appellant and the School District.
(3) The Ethics Board may hear complaints of specific violations of this Policy, make inquiries and render a public statement of its findings and recommendations, including censure or recommendation for removal of a Member of the Board of Education who is found to be in violation of this Code of Ethics.
(4) The Ethics Board shall review the experience of the Detroit Public Schools under this Ethics Policy, and shall recommend those refinements and improvements which it deems desirable.
(5) The Ethics Board may hear cases raised by persons in doubt of their status relative to this Ethics Policy, and render advisory opinions to help resolve those doubts.
(6) Meetings of the Ethics Board shall be held in compliance with the Open Meetings Act.
Sec. 12.120 Fair Notice and Strict Enforcement of State Laws
(1) The Superintendent shall annually provide each employee with a copy of this policy, as well as a clear statement of the requirements and misdemeanor penalties of the Michigan Conflict of Interest Act and the felony penalties of the Campaign Finance Act. Each employee shall also be clearly advised of their rights, liabilities, and protections under the Michigan Whistle-blowers Act beginning at section 15.361, Michigan Compiled Laws.
(2) Under the Whistle-blowers Act, an employee who knows that another School Trustee has violated this Code of Ethics, or a federal, state, or local law may report the violation to a supervisor or another person, agency or organization, including the media. An employee who makes or is about to make such a report shall not be subject to any of the following actions for doing so:
(a) Dismissal from employment.
(b) Withholding of salary increases that are ordinarily forthcoming.
(c) Withholding of promotions that are ordinarily forthcoming.
(d) Demotion in employment status.
(e) Transfer of employment location.
(3) A supervisor shall not take nor recommend that any of the actions set forth in subsection 12.120(2) be taken, unless he or she can establish by a preponderance of evidence that the action was taken or recommended for sound managerial reasons and not in retaliation for whistle-blowing. A supervisor who takes such actions in violation of the Whistle-blowers Act shall be severely disciplined, in addition to the five hundred dollar ($500) civil fine provided by the Act and in addition to payment of the victim’s actual damages and attorney fees.
(4) If a School Trustee, who is found to be in violation of this Code, may also be in violation of the State Conflict of Interest Act or the Campaign Finance Act, disciplinary measures shall not be suspended pending the outcome of the State case, but shall be taken expeditiously, whether or not it may affect the outcome of the State case. All other School Trustees shall provide the Prosecuting Attorney with their full cooperation in pursuing the criminal charge.
(5) All disciplinary decisions made under this Code, other than oral and written reprimands, shall be based upon clear and convincing evidence. Oral and written reprimands may be based upon evidence that a violation is more-probable-than-not.
(6) If violations of the ethical standards set forth in this Article are also violations of Michigan criminal laws, those violations shall be punishable as provided by those laws, in addition to the contractual and work rule sanctions set forth in this Article.
Criminal, civil and administrative sanctions against employees or non-employees which are in existence on the effective date of this policy shall not be impaired nor replaced by this policy.
Sec. 12.121 Reckless and Unfounded Accusations are Discouraged
A School Trustee shall not abuse the purpose and intent of this Code by making reckless and unfounded accusations of violations. If a person has clear and convincing proof of a violation, he or she is encouraged to report it to whomever they wish. If a person is merely aware of suspicious circumstances, he or she should instead report the matter to an appropriate person such as an immediate supervisor, the Superintendent, the Auditor General or Prosecuting Attorney for follow-up. Severe disciplinary measures shall be taken for false and malicious public accusations. Appropriate disciplinary measures shall be taken for making reckless and unfounded public accusations.
Sec. 12.122 New Requirements Are Not Retroactive
The new requirements and penalties of this Code of ethics shall not apply to actions taken by a School Trustee before the date that this Code is adopted.
ARTICLE 13 – DEFINITIONS
Sec. 13.201 Definitions of Terms Which Appear in Boldface in This Policy:
(1) Architect-Engineer and Land Surveying Services. Those professional services within the scope of the practice of architecture, professional engineering, or land surveying, as defined by the laws of the State of Michigan.
(2) Brand Name or Equivalent Specification. A specification limited to one or more items by manufacturer’s names or catalogue numbers to describe the standard of quality, performance, and other salient characteristics needed to meet district requirements, and which provides for the submission of equivalent products.
(3) Brand Name Specification. A specification limited to one or more items by manufacturers’ names or catalogue numbers.
(4) Business. Any corporation, partnership, individual, sole proprietorship, joint stock company, joint venture, or any other private legal entity.
(5) Change Order. A written order signed and issued by the Purchasing Director and also by any other officer authorized to sign and issue the original contract, directing the contractor to make changes which the “Changes” clause of the contract authorizes the district to order without the consent of the contractor.
(6) Contract Modification (bilateral change). Any written alteration in specifications, delivery point, rate of delivery, period of performance, price, quantity, or other provisions of any contract accomplished by mutual action of the parties to the contract.
(7) Construction. The process of building, altering, repairing, improving, or demolishing any district structure or building, or other public improvements of any kind to any public real property. It does not include the routine operation, routine repair, or routine maintenance of existing structures, buildings, or real property.
(8) Contract. All types of district agreements and orders, regardless of what they may be called, for the procurement of supplies, services, or construction.
(9) Contractor. Any person having a contract with the district.
(10) Cost Analysis. The evaluation of cost data for the purpose of arriving at costs actually incurred or estimates of costs to be incurred, prices to be paid, and costs to be reimbursed.
(11) Cost Data. Factual information concerning the cost of labor, material, overhead, and other cost elements which are expected to be incurred or which have been actually incurred by the contractor in performing the contract.
(12) Cost-Reimbursement Contract. A contract under which a contractor is reimbursed for costs which are allowable and allocable in accordance with the contract terms and the provisions of this policy, plus a fee or profit, if provided.
(13) Established Catalogue Price. The price included in a catalogue, price list, schedule, or other form that:
(a) is regularly maintained by a manufacturer or contractor;
(b) is either published or otherwise available for inspection by customers; and
(c) states prices at which sales are currently or were last made to a significant number of any category of buyers or buyers constituting the general buying public, for the supplies or services involved.
(14) Invitation for Bids. All documents, whether attached or incorporated by reference, used for soliciting sealed bids.
(15) Person. Any business, individual, union, committee, club, other organization, or group of individuals.
(16) Price Analysis. The evaluation of price data, without analysis of the separate cost components and profit as in cost analysis, which may assist in arriving at prices to be paid and costs to be reimbursed.
(17) Pricing Data. Factual information concerning prices for items substantially similar to those being procured. Prices in this definition refer to offered or proposed selling prices, historical selling prices and current selling prices. The definition refers to data relevant to both prime and subcontract prices.
(18) Procurement. The buying, purchasing, renting, leasing, or otherwise acquiring of any supplies, services, or construction. It also includes all functions that pertain to the obtaining of any supply, service, or construction, including description of requirements, selection, and solicitation of sources, preparation and award of contract, and all phases of contract administration.
(19) Purchasing Director. The officer who is appointed by the General Superintendent and approved by the School Board to head the Purchasing Division.
(20) Qualified Products List. An approved list of supplies, services, or construction items described by model or catalogue numbers, which, prior to competitive solicitation, the district has determined will meet its requirements.
(21) Request for Proposals. All documents, whether attached or incorporated by reference, utilized for soliciting proposals.
(22) Responsible Bidder or Offeror. A person who has the capability in all respects to fully perform the contract requirements, and the tenacity, perseverance, experience, integrity, reliability, capacity, facilities, equipment, and credit which will assure good faith performance.
(23) Responsive Bidder. A person who has submitted a bid within the time frame specified in the invitation for bids, and which conforms in all material respects to the requirements set forth in the invitation for bids.
(24) Services. The furnishing of labor, time, or effort by a contractor, not involving the delivery of a specific end product other than reports which are merely incidental to the required performance. This term shall not include employment agreements or collective bargaining agreements.
(25) Specification. Any description of the physical or functional characteristics of or the nature of a supply, service, or construction item. It may include a description of any requirement for inspecting, testing, or preparing a supply, service, or construction item for delivery.
(26) Supplies. All property, including but not limited to equipment, materials, printing, insurance, and leases of real property, excluding land or a permanent interest in land.
ARTICLE 14 – TECHNICAL PROVISIONS
Sec. 14.101 Repeal and Amendment of Inconsistent Policies
Other policies or parts of policies which are inconsistent with the provisions of this policy are hereby superceded and amended.
Sec. 14.102 Validity of Whole If Part is Held Invalid
If any provision of this policy or any section, sentence, clause, phrase or word or application thereof, is in any circumstances held by a court of law to be invalid, the remainder of this policy and the application of any section, sentence, clause, phrase or word, shall not be affected.
Sec. 14.103 Effective Date
This policy is effective January 1, 2017.
ARTICLE 10 – COOPERATIVE PURCHASING
Sec. 10.101 Authority to Participate in Michigan Extended Purchasing Program.
The Purchasing Director may satisfy any district need for supplies, services, or construction by placing an order pursuant to a membership in the Extended Purchasing Program offered by the State of Michigan, Department of Management and Budget, Office of Purchasing. A contract which has been awarded by the State of Michigan under that program is deemed to satisfy all requirements of this policy.
The Purchasing Director may also satisfy the competitive solicitation publishing requirements of this policy for supplies and services for contracts of two hundred thousand dollars ($200,000) or less by posting a requirement on the internet procurement bulletin board used by the County of Wayne.