Procurement
October 18, 2013

Considering a sole-source contract? Here are some sound management practices

You’re in a crunch to meet a looming deadline. A couple of your key staff are unexpectedly absent. It’s becoming apparent that you’re going to need some outside help if you’re going to deliver that priority project. You know exactly the person you need to make it happen.

You’ve contracted with her before; you’re familiar with her work, she’s familiar with your organization. She’s reliable, smart, a great writer and she delivers. You get her under contract and you know there will be no need for elaborate instructions or a painful learning curve. You know that she can come in and get it done with minimal fuss. It’s as simple as calling your administration group and getting a contract in place…or is it?

You don’t always have to solicit bids and run a competitive process. Issuing a sole-source contract under $25,000 is allowed under the federal contracting policy. So why all the fuss over a legitimate, permissible contracting procedure?

Sole-source contracting is one of the main issues I hear about. And I’ve recently been getting an increasing number of cases of alleged improper sole-source contracts. Through the work we’ve done looking into these cases, we have found some sound management practices for managers to consider.
Keep these in mind to mitigate your, and your deputy head’s, risks the next time you’re considering issuing a sole-source contract under $25K:

  • Document your needs. Be specific, explicit and take the time to develop expected deliverables and performance indicators; ask yourself, “When this contract is completed what outcome(s) do I expect and by when?”
  • Be realistic about time and cost. You want to avoid having to amend or issue a second contract to the same supplier because the cost crept over the $25K threshold or it took longer to complete the work…or both.
  • Involve contracting staff early in the process. They can help you; keep them up to speed.
  • Use standing offers. SOs are pre-competed. You can also use supply arrangements (SAs), which are lists of pre-qualified suppliers.
  • If SOs or SAs are not available, use the needs document you developed and contact at least three suppliers available to do the work using:
    • Request for quotations;
    • Telephone buys;
    • Invitation to tenders.
  • Once you’ve made the decision to direct your contract, put a note to file explaining why the:
    • contract was not competed;
    • contract is being directed to a particular supplier;
    • price you agreed to is considered fair and reasonable in the absence of competition.
  • Don’t allow work to start before the contract is in place.
  • Monitor the work
  • Keep contracting staff up-to-date on how the work is going. They need to know about potential cost or time overruns as well as the supplier’s ability to deliver.

Once the work is completed take the time to formally assess the contractor’s performance against those expected deliverables and performance indicators you developed. Send a copy to your contracting staff and slip one into your file.
Be sure to confirm the accuracy of the contract amount and contract description for pro-active disclosure reports.

We’ve also seen departments that employ progressive, precautionary techniques such as:

  • Requiring sole source contract reports to be produced on a regular basis for review by the management committee or the procurement review committee;
  • Having an active procurement review committee regularly monitoring the use of sole source contracts.
  • Providing the procurement review committee with sole source risk indicators such as:
    • Contract splitting including:
      • Similar contracts funded by the same “cost” or “fund” center;
      • Contracts having matching, similar or related descriptions;
      • Number of contracts meeting above criteria in a defined period (yearly, or a period suited to the goods/services being monitored);
      • Total value of contracts meeting the preceding three criteria exceeding delegated financial authorities.
    • Clustering of contracts near delegated financial authority thresholds.
    • Amendments that require time extensions or financial modification. 
    • Repetitive contracts, including the number of contracts per supplier over a defined period of time.
  • Requiring senior management or procurement review committee approval for sole source contract time/cost extensions or repeat contract(s) with the same supplier.

Bottom line? Sole-source contracts under $25K are allowed under the contracting policy…just remember what they taught you at that procurement course you took not so long ago.

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