MCPPO Contracting Principles Flashcards

Public Purchasing Objectives

• Primary aim is to acquire materials, services, and facilities for public organizations at the best available price through open and fair competition.

Price vs. Cost

• Price refers to the contract amount.
• Cost encompasses payments made to vendors and other expenses such as time, research, and administration associated with the procurement process.

Key Control Activities for Procurement

• Establish clear authority for transaction approvals.
• Designate specific responsibilities for executing transactions.
• Implement segregation of duties to prevent fraud and errors.
• Maintain control over access to valuable assets and records.
• Continuous monitoring and assessment of the internal control system.

Segregation of Duties

• Prevents any single employee from authorizing, executing, and recording a transaction independently, reducing the risk of fraud and collusion.

Control of Access to Assets and Records

• Secure physical storage of assets and maintain a sign-out system for valuable equipment.
• Limit access to records based on job responsibilities to enhance security and accountability.

Monitoring

• Regular review of transaction processes and reports to ensure accuracy and efficiency of internal controls, weighing the cost of controls against the benefits.

Formation of a Contract

• Four essential elements: mutual assent, offer and acceptance, consideration, and definiteness of contract terms.

Mutual Assent

• Agreement between parties characterized by a "meeting of the minds" regarding contract obligations.

Offer and Acceptance

• A valid contract requires a conscious offer from one party and intentional acceptance from another, detailing essential terms such as parties involved, subject matter, and payment terms.

Consideration

• Value exchanged in the contract, usually money, but can include other forms of value.

Definiteness of Contract Terms

• Contracts must specify parties’ names, subject matter, pricing, essential terms, and conditions. Ambiguities can render contracts unenforceable.

Prior Appropriation Requirement

• Funds must be appropriated before contract execution, and expenditures cannot exceed available appropriations.

Contract Authority

• Public officials must possess authority to enter into contracts for them to be valid and enforceable.

Authority Types

• Express Authority: Direct, written or verbal permission given to an employee to act.
• Implied Authority: Necessary authority implied for an employee to perform their job functions effectively.

Compliance with Laws

• Non-compliance with applicable laws, such as bidding laws, can invalidate contracts and prohibit payment to vendors.

Phases of the Purchasing Cycle

• Consists of needs assessment, source selection, and contract administration.

Needs Assessment Activities

• Involves planning, market research, value analysis, cost calculations, and establishing specifications.

Blanket Contracts

• Established based on estimated annual needs, specifying prices and maximum quantities; used for items like fuel oil and office supplies.

Collective Purchasing Agreements

• Multiple jurisdictions can collaborate to solicit bids, with one acting as the lead jurisdiction.

Market Research Sources

• Utilizes periodicals, trade journals, purchasing associations, and vendor community insights for informed purchasing decisions.

Value Analysis

• Evaluates the function, cost, and efficiency of products or services to identify the best approaches for procurement.

Life-Cycle Cost Calculation

• Considers total costs associated with ownership, including purchase price, operational, and maintenance costs, minus any residual value.

Standard vs. Proprietary Specifications

• Standard specifications encourage bulk purchasing and reduce complexity, while proprietary specifications restrict competition and should be used sparingly.

Quality Requirements

• Establish standards for acceptability and necessary vendor qualifications, crucial for ensuring best value contracting.

Source Selection Processes

• Involves acquiring products or services from vendors via existing contracts or soliciting new bids while ensuring compliance with procurement laws.

Statewide Contracts

• Allow local jurisdictions to purchase without formal competitive processes under specific conditions outlined in MGL c7, section 22A, excluding construction services.

Competitive Procurement

• Adheres to defined solicitation rules, ensuring a fair procurement process and valid contracts.

Contract Administration Components

• Includes quality assurance, financial oversight, vendor evaluation, and thorough record-keeping practices.

Vendor Evaluation

• Essential for documenting both product and vendor performance, preserving warranties, and enhancing future procurement specifications.

Record Keeping Requirements

• Contracts over $10,000 must have maintained files for six years post-final payment, ensuring they are auditor-ready as per MGL c30B standards.