Finding Text
Criteria or Specific Requirement (Documentation of Procurement File): Uniform Guidance under 2 CFR 200.318(i), provides that a “nonfederal entity must maintain records sufficient to detail the history of procurement.” These records shall include: “rationale for the method of procurement, contractor selection or rejection, and the basis for the contract price.”
Further, Uniform Guidance contains procurement requirements for architectural and engineering services under 200.320(b)(2)(iv). Such policies and procedures for architectural and engineering services provide that competitive proposals for professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation.”
Condition: Capitalization Grants for Clean Water State Revolving Funds, CFDA 66.458: The engineer/construction manager on this project was selected for testing from a population of two vendors over the individually significant threshold of $47,219. The District explains that the District and the engineer/construction manager have a relationship which goes back 60 years. This engineering firm acts as the outside engineer for the District. The District further explains that this engineering firm has successfully completed numerous similar, smaller scale projects for the District and that this engineer is very familiar with the District’s existing system. The District further explains that these criteria were important considerations in selection this engineering firm for engineering services and construction management.
We inquired about documentation of the rationale for the method of procurement, basis of contract price and negotiation of fair and reasonable compensation. The District’s file did not contain documentation of such.
Water and Waste Disposal Systems for Rural Communities, CFDA 10.760: We selected a sample of three from a population of five vendors over the individually significant threshold of $29,516 for this grant. We noted one exception. The District explained the rationale for the vendor selection stating that unique construction material had to match other such construction material previously installed. However, the District did not have documentation of the rational for selection and negotiation of the price in the procurement file.
Cause: It appears that the primary cause of this condition is that the District does not have experience with procurement procedures under Uniform Guidance. Indeed, the District has not been required to have a Single Audit since the fiscal year ending June 30, 2013.
Effect: Without a document which shows a rational for selection of, and arrival at the price, there is no way to monitor this aspect of the procurement process.
Questioned costs: No costs are questioned.
Perspective: We noted extensive documentation of the general contractor procurement with bidding procedures, advertising for bids, etc. In all tests, the District’s explanations as to why a particular vendor was selected appeared reasonable. Nonetheless, the requirement is that the District document the “rationale for the method of procurement, contractor selection or rejection, and the basis for the contract price.”
Perspective Specific to CFDA 10.760. A sample of three was selected from a population of five vendors over the micro-purchase threshold of $10,000. There was one exception. Under attribute sampling, this is an exception rate of 33%. However, we note that the one exception represented only 1.37% of the dollar value of sample selected. Extrapolating the 1.37% to the population, the expected dollar error for debarment checks is $30,353.
Perspective Specific to CFDA 66.458: Initially, we noted that the population was two vendors over the micro-purchase threshold of $10,000. We selected a sample of one with no exceptions. However, it came to our attention that grantor had questioned procurement procedures for the engineer. We determined to test this procurement and noted an exception. Under attribute sampling, this is an exception rate of 50%. However, we note that the one exception represented 19.38% of the dollar value of the total population. As 100% of the population of two was tested, no extrapolation is suggested.
Repeat Finding: This is not a repeat finding.
Recommendation: We would recommend that the District adopt policies and procedures under 2 CFR 200.318(i) and 200.320(b)(2)(iv) requiring documentation of procurement “rationale for the method of procurement, . . . contractor selection or rejection, and the basis for the contract price and also negotiation of fair and reasonable compensation when architectural or engineering services are procured.
Further, we recommend that a monitoring procedure be implemented to review for compliance with these procedures.
Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.