PROCURING A E CONTRACTS Presenter Mohammad Maljai P E

PROCURING A&E CONTRACTS Presenter Mohammad Maljai, P. E. Caltrans HQ Division of Local Assistance 1/12/2017 1

Objectives • Provide an overview of the federal/State A&E procurement process • Technical resources – Identify and review steps, activities and tasks Local Assistance Procedures Manual (LAPM) – Chapter 10 – Identify and review forms, samples, templates, and checklists • Identify some of the most frequent errors/deficiencies • Minimize risk of losing federal funds due to noncompliance findings Visit Local Assistance Consultant web page http: //www. dot. ca. gov/hq/Local. Programs/AE/index. htm 1/12/2017 2

Caltrans DLA A&E Web Page 1/12/2017 3

Agenda • Definition of an A&E Contract – Purpose of an A&E Contract – Procurement Process/Roles and Responsibilities • Planning for A&E Contracts • Solicitation and Advertisement • Evaluation and Selection • Contract Negotiations • Contract Audits • Contract Execution • Other Considerations 1/12/2017 4

What is an A&E Contract? • A&E contracts are procured based on Qualification Based Selection (QBS), as specified in 40 USC Chapter 11, Sections 1101 -1104, also known as the Brooks Act: – Engineering and Design related services also known as Architectural and Engineering (A&E) services are: • • • 1/12/2017 program management construction management feasibility studies preliminary engineering design • • engineering surveying mapping architectural related services 5

What is an A&E Contract? (Cont’d) – A&E services are required to be performed, approved, or logically/justifiably performed by a person licensed, registered, or certified as an engineer or architect – Over time, it evolved to include licensed or certified environmental scientist/professionals, licensed surveyor and licensed landscape architects • Incidental Non-A&E Services Qualification Based Selection 1/12/2017 6

What is an A&E Contract? • A&E services can also be procured, but under certain conditions, through: – Small Purchase Procedures (less than $150, 000) OR – Non-Competitive (Sole Source) Procedure (a Public Interest Findings (PIF) is required) 1/12/2017 7

Why A&E Contracts? • Why do we contract out? – No in-house engineering (or project professional) staff – Manage peaks on resource demands – Specialized skills • What do we contract out? – Capital transportation project development and implementation components – Capital transportation projects related professional services 1/12/2017 8

State and Federal Laws and Regulations • Caltrans Local Assistance Procedures Manual (LAPM), Chapter 10 • Federal – Title 23 Code of Federal Regulation, Part 172 (23 CFR 172): “Procurement, Management, and Administration of Engineering and Design Related Services” – Final Rule adopted on June 22, 2015 • State – Government Code 4525 -4529: “Contracting with A&E Firms” – California Public Contract Codes 10301 -10381 1/12/2017 9

Contract Life Cycle Procurement Planning Procurement 3 -6 Months Performance Typically 1 -3 Years Close-out 2 Months 1/12/2017 10

Procurement Process PROCUREMENT PLANNING SOLICITATION DOCUMENTS AND ADVERTISEMENT EVALUATION AND SELECTION OF CONSULTANT CONTRACT COST NEGOTIATIONS CONTRACT EXECUTION 1/12/2017 11

STEPS #1 - #3: PROCUREMENT PLANNING #2 #1 #3 q Select project q Identify need for consultant q Estimate cost of consultant work q Set project objectives q Appoint Contract Administrator q Determine project schedule q Segment project work q Determine type of contract (project specific or on-call) q Obtain CTC Allocation/Federal Authorization to Proceed prior to beginning reimbursable work q Define SOW of A&E consultant q Specify products to be delivered q Submit LAPM Exhibit 10 -U, Consultant in Management Position Conflict of Interest Statement, if applicable to DLAE with Request for Federal Authorization to Proceed A&E A&I CT DBE DLAE LAPG LAPM 1/12/2017 = = = = Architectural & Engineering Caltrans Audits & Investigations Caltrans Disadvantaged Business Enterprise Division of Local Assistance District Local Assistance Engineer Local Assistance Program Guidelines Local Assistance Procedures Manual q Determine Method of Payment (MOP): Lump Sum; Cost-Plus. Fixed Fee; Cost Per Unit of Work; or Specific Rate of Compensation MOP RFQ SOW = = = Method of Payment Request for Proposal Request for Qualifications Statement of Qualifications Statement/Scope of Work 12

Procurement Planning • Select project • Set project objectives • Determine project schedule • Identify need for consultants • Appoint Contract Administrator 1/12/2017 13

Procurement Planning • Contract Administrator Role and Responsibilities – Ensures that all records, files and other documents related to the contract procurement and management activities are retained in the contract/project files; – Prepares and distributes solicitation/Advertisements; RFPs/RFQs; – Arranges for preparation of an independent estimate of the value of the work to be contracted out; – Ensures that the selection procedures are followed; – Ensures contract audit and review procedure is followed; – Ensures that fee/profit negotiation is conducted and keeps records; – Monitors the consultant’s progress and reviews/approves the consultant’s invoices; – Closes out the contract at completion, by processing the final invoice and completing a mandatory consultant performance evaluation (Exhibit 10 -S), and final Disadvantaged Business Enterprise (DBE) utilization reports (Exhibit 17 -F). 1/12/2017 14

Procurement Planning Coordination • Segment consultant work Complexity 1/12/2017 15

Procurement Planning • Define scope of consultant work • Specify deliverables • Determine type of contract – Project specific – Multi-phased or Multi-purpose – On-call contracts • Determine method of payment – Actual Cost Plus Fixed Fee – Lump Sum – Specified (Specific) Rate of Compensation – Cost Per Unit of Work 1/12/2017 16

Procurement Planning • Actual Cost Plus Fixed Fee – Actual cost, direct labor, indirect cost rate – Hours per task – Profit/fee (fixed $ amount) – Other Direct Costs (ODC) (material, equipment, travel) • Appropriate for project specific contract when scope of work is well defined • Low risk to consultant as they are reimbursed for actual costs • Requires local agency’s close monitoring and audit • Must carry a maximum (not-to-exceed) dollar amount that includes total actual cost and fixed fee (negotiated) 1/12/2017 17

Procurement Planning • Lump Sum – Actual cost, direct labor, indirect cost rate – Hours per task – Profit/fee (fixed $ amount) – ODCs (material, equipment, travel) – Total amount of contract (unadjustable) – Progress/milestone or one-time only payment • Appropriate for very well-defined scope of work • Consultant assumes responsibility for cost control, and is incentivized to maximize profit • Minimum administrative burden for invoice review and approval 1/12/2017 18

Procurement Planning • Specified Rate of Compensation – For on-call contracts – Actual cost, direct labor, indirect cost rate, and profit/fee (loaded hourly billing rate) – ODCs (material, equipment, travel) • Low incentive for consultant to control cost • Requires constant monitoring by contracting agency • Must carry a maximum (not-to-exceed) dollar amount • Easiest to negotiate 1/12/2017 19

Procurement Planning • Prepare cost estimate of consultant work – Independent Cost Estimate (ICE) – Prior to receiving or review of proposals – Detailed estimate to include: • • • Work or Labor Hours Types or Classifications Estimated labor rates (Direct and Indirect costs) Other Direct Costs (ODCs) Fixed Fee or Profit – Basis for Negotiations – DBE Utilization Goal Setting 1/12/2017 20

Procurement Planning • What is the cost of A&E contracts? – Mostly labor – Multi-disciplines – Professional and sub-professional – Some technical and administrative – Material, equipment, travel or in contract terms, Other Direct Costs (ODC) 1/12/2017 21

Procurement Planning • Methods of cost estimating – Analogous estimating – Parametric estimating – Bottom-up estimating 1/12/2017 22

Procurement Planning • Analogous Method – Previous project(s) – Similar in fact and not in appearance only – Uses Adjustment Factors • Physical characteristics • Labor classifications • Other Direct Costs 1/12/2017 23

Procurement Planning • Bottom-up Method – Estimate hours per each task – Estimate labor hourly rates (reasonable in your market) – Multiply labor hourly rates and hours – Apply labor escalation/inflation factor – Estimate ODCs – Uses Expert Judgment 1/12/2017 24

Procurement Planning • Estimating amount of on-call contract – Historical need/use – Or Use 1 -3 year project delivery plan (what projects to work on) – Contract duration not to exceed five years – Labor market analysis (what are reasonable labor rates) – Annual labor escalation factor – Estimate of ODCs – Specialized services or turnkey type project delivery/ development services 1/12/2017 25

Sample Cost Estimate: Do. Good County Transportation Authority Estimate for On-Call Environmental Services Contract Fiscal Years 2014 -15 thru 2016 -17 Project DESCRIPTION OF Number PROJECT/PROJECT NAME DESCRIPTION OF WORK 14/15 HOURS 100 300 100 60 300 50 110 600 660 900 450 260 200 100 $ $ $ $ $ 200 0 $ $ - 100 TOTALS TOTAL HOURS 200 Pavement rehab & slurry Dillard Paleontology Mitigation Pavement rehab & slurry Dillard Archaeological Pavement rehab & slurry Dillard Biology Pavement rehab & slurry Dillard Air, Noise, Water Managed Lanes South Biological Managed Lanes South Draft Enviro Doc Managed Lanes South CEQA/NEPA Managed Lanes South Public Outreach Brawley Wetland Mitigation Paleontology Mitigation Plan 056300 Brawley Wetland Mitigation Paleontology Mitigation Monitoring 056300 Brawley Wetland Mitigation CEQA/NEPA 16/17 HOURS 110 400 300 300 200 274801 274801 010611 056300 15/16 HOURS 100 $ - 2010 960 810 14/15 $ 11, 000 40, 000 30, 000 20, 000 - 3780 $ 201, 000 15/16 $ 16/17 $ $ 10, 500 31, 500 10, 500 6, 300 $ $ $ 10, 500 -$ 11, 025 $ 6, 615 $ 33, 075 $ 5, 513 $ -$ -$ 11, 000 61, 525 68, 115 94, 575 46, 013 26, 300 20, 000 10, 500 $ $ - $ 22, 050 $ $ -$ 22, 050 - $ 11, 025 $ $ $ $ 100, 800 $ 5% ODC 1/12/2017 Labor rates 14/15 Avg Hourly Rate 15/16 Avg Hourly Rate 16/17 Avg Hourly Rate Escalation $ 100. 00 5% $ 105. 00 5% $ 110. 25 TOTAL $ 25 % contingency 11, 025 $ 78, 278 $ 391, 103 $ 19, 555 $ 410, 658 $ 513, 322 Contract Not-to-exceed amount of $520, 000 26

Procurement Planning Most Frequent Errors/Deficiencies: • No independent cost estimate prior to advertising; “not-to-exceed” $ amount • Inadequate determination of project type (single phase vs. multiple phase vs. on-call) • No method of payment for contract • Poor record keeping and document retention 1/12/2017 27

Procurement Process PROCUREMENT PLANNING SOLICITATION DOCUMENTS AND ADVERTISEMENT EVALUATION AND SELECTION OF CONSULTANT CONTRACT COST NEGOTIATIONS CONTRACT EXECUTION 1/12/2017 28

STEPS #4 - #6: SOLICITATION DOCUMENTS AND ADVERTISEMENT #5 #6 q Prepare RFP or RFQ documents q Prepare to respond to RFP/RFQ questions q Conduct Proposers Conference, if applicable q Receive Proposals or SOQs #4 q Determine solicitation document (RFP or RFQ) q Appoint Consultant Selection Committee q Collect signed Conflict of Interest and Confidentiality Statements (see LAPM Exhibit 10 -T), from all committee members q Determine procurement schedule q Develop technical criteria with level of importance (weights) for evaluation of Proposals or the SOQ 1/12/2017 q Include SOW, evaluation process/criteria, DBE goals, MOP and cost proposal format (see LAPM Exhibit 10 -H), minimum requirement of Proposal or SOQ, Notice to Proposers DBE Information (see LAPM Exhibit 10 -I), submittal deadline q Advertise RFP or RFQ (newspaper, technical publications, web hosting site, other local websites) q Issue RFP or RFQ (direct mailing, web posting) A&E A&I CT DBE DLAE LAPG LAPM = = = = Architectural & Engineering Caltrans Audits & Investigations Caltrans Disadvantaged Business Enterprise Division of Local Assistance District Local Assistance Engineer Local Assistance Program Guidelines Local Assistance Procedures Manual MOP RFQ SOW = = = Method of Payment Request for Proposal Request for Qualifications Statement of Qualifications Statement/Scope of Work 29

Solicitation Documents and Advertisement • 23 CFR 172 requires “Competitive Negotiations” for procurement of A&E consultant services for Federal Aid Highway Program projects. – Qualification Based Selection – Formal solicitation by “public announcement or advertisement” – Fair opportunity for in-state or out-of-state consultants to compete – Clear and concise requirements – Price shall NOT be used as a factor in analysis and selection 1/12/2017 30

Solicitation Documents and Advertisement • Three solicitation methods – One-Step Request For Proposal (RFP) – One-Step Request For Qualification (RFQ) – Two-Step RFQ/RFP 1/12/2017 31

Solicitation Documents and Advertisement 1/12/2017 32

One-Step RFP or RFQ Method • Appoint Consultant Selection Committee – Minimum three members – Subject matter experts and Contract Administrator – Review and evaluate proposals; conduct interviews – Membership should be confidential NOTE: Participation by a Caltrans representative does not relieve the local agency of its responsibility to ensure that proper procurement procedures are followed and all requirements are met. 1/12/2017 33

One-Step RFP or RFQ Method • Develop procurement schedule – Issue date of RFP/RFQ – Minimum of 14 calendar days for advertisement period (Caltrans recommend 4 weeks) – Pre-proposal meeting, if any – Submittal deadline – Anticipated date of interviews (short list) – Anticipated award date (final selection) – Anticipated cost negotiations date 1/12/2017 34

One-Step RFP or RFQ Method • Conflict of Interest and Confidentiality Statement by committee members – Collect and retain signed and dated statements from all panel members 1/12/2017 35

One-Step RFP or RFQ Method • Develop technical criteria for evaluation of proposals 1/12/2017 36

One-Step RFP or RFQ Method • Another Sample Evaluation Criteria/Score Sheet Sample Evaluation Score Sheet WRITTEN PROPOSAL MAXIMUM POINTS 20 Project Understanding and Approach - Consultant has demonstrated a clear and complete understanding of the project requirements, goals and constraints. 25 Quality Control - Consultant has established protocols for ensuring the submittals are complete and timely. 5 References and Availability - Key personnel and team members are available, committed to the project and have solid professional references. 10 Schedule - Consultant has prepared a clear and comprehensive project schedule that properly reflects the scope and objectives of the project. 10 SUBTOTAL PROPOSAL 70 Presentation by Team - Project Understanding, critical issues, innovation, and solutions, ability to communicate effectively. 5 Q&A Portion - Responses to panel questions 25 SUBTOTAL INTERVIEW 30 Qualifications - Qualifications of the firm, Project Manager, Civil Lead, Environmental Lead and sub-consultants has been demonstrated through similar and recent projects and experience. INTERVIEW REVIEWER SCORE TOTAL 100 Aside from the selection process described herein, consultants or their representatives are prohibited from attempting to influence this consultant selection process by contacting the Selection Committee members, elected officials, agency staff , or other individuals and entities involved in selecting the Consultant or awarding the consultant contract. Any such attempt to influence selection outside of the proscribed process will be grounds for disqualification. 1/12/2017 37

One-Step RFP or RFQ Method • Prepare the RFP/RFQ for advertisement – Description of project – Scope of work – Deliverables, schedules, and standards – Evaluation criteria (with weights) and procurement schedule – DBE Utilization Goal (LAPM Exhibit 10 -I) – Method of payment – Cost proposal submittal in a separate sealed envelope (provide a cost proposal template – LAPM Exhibit 10 -H samples) – Contract audit and financial management system requirements – Proposal format and content requirements – Protest procedures and dispute resolution process – For On-call contracts; Maximum length of contract duration, and maximum total contract dollar amount 1/12/2017 38

One-Step RFP or RFQ Method 1/12/2017 39

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DBE Goal Setting Steps 1. Classify work % 2. Determine work category codes 3. Search the CUCP database 4. Apply DBE factors 5. Calculate soft goal 6. Apply 60% factor 7. Round to nearest whole percent 1/12/2017 41

One-Step RFP or RFQ Method • Publish RFP/RFQ (2 -4 weeks duration) – Place advertisement (availability of the RFP/RFQ) – Post on website or clearinghouses AND document it! – Send to mailing lists, in addition to any of the above 1/12/2017 42

One-Step RFP or RFQ Method • During the advertisement period – Allow for “clarification” in writing or at proposer’s conference – Maintain records of information disseminated – Must issue a RFP/RFQ addendum of any new information 1/12/2017 43

One-Step RFP or RFQ Method Document, Document!!! 1/12/2017 44

Two-Step RFQ/RFP Method • Used for: – Establishing a “pre-qualified list” of consultants, or – Multiple on-call contracts for similar services, through single solicitation, or – More complex projects • Require more effort initially 1/12/2017 45

Responsiveness Review • Perform responsiveness review – Initial review of Proposals/or Statement of Qualifications (SOQs) • Completeness and responsiveness • Submittal date and time • Non-responsive submittals must be rejected and documented in contract files – Late submittals – Sent to incorrect location/address – Inadequate number of copies – No DBE Commitment form (Exhibit 10 -O 1 missing) 1/12/2017 46

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Solicitation and Advertisement Most Frequent Errors/Deficiencies: • Lack of evaluation criteria with level of importance (weights) in RFP/RFQ • No Conflict of Interest Statements by selection panel • No method of payment specified in RFP/RFQ • No cost proposal requirement specified in RFP/RFQ • Inadequate/undocumented advertisement method for the RFP/RFQ • Inadequate documentation of a responsiveness review prior to acceptance of the RFP/RFQ 1/12/2017 49

Procurement Process PROCUREMENT PLANNING SOLICITATION DOCUMENTS AND ADVERTISEMENT EVALUATION AND SELECTION OF CONSULTANT Visit the LAB www. localassistanceblog. com Subscribe to DLA Email Notifications www. dot. ca. gov/hq/Local. Programs/sub. htm CONTRACT COST NEGOTIATIONS Visit Local Assistance Consultant web page http: //www. dot. ca. gov/hq/Local. Programs/AE/index. htm 1/12/2017 CONTRACT EXECUTION 50

STEPS #7 - #9: EVALUATION AND SELECTION OF CONSULTANT #7 #8 #9 q Distribute Proposals or SOQs to Consultant Selection Committee members q Send out invitations to short list for interviews Can be done concurrently with Contract Negotiations q Ensure committee members receive the appropriate score sheet to use (see LAPM Exhibit 10 -B) q Develop final ranking of consultants, and notify all interviewees q Convene Selection Committee and evaluate submittals; perform reference checks q Develop final ranking or short list for interviews q Notify proposers of ranking/ short list q Conduct interviews of short list q Retain all original score sheets and summaries q Provide a copy of standard contract language to top ranked consultant and invite for negotiations (see LAPM Exhibit 10 -R for standard contract language and provisions) = = = = 1/12/2017 Architectural & Engineering Caltrans Audits & Investigations Caltrans Disadvantaged Business Enterprise Division of Local Assistance District Local Assistance Engineer Local Assistance Program Guidelines Local Assistance Procedures Manual q Initiate A&E Consultant Audit Review Process (LAPM Figure 10 -3) and send documents (LAPM Exhibit 10 -K) and/or Consultant Audit Request Letter and Checklist request (LAPM Exhibit 10 -A), if applicable, to Caltrans A&I q Collect and store all LAPM Exhibit 10 -Ks in database q Review and evaluate LAPM Exhibit 10 -As and supporting documents, if applicable q Retain all original score sheets and summaries A&E A&I CT DBE DLAE LAPG LAPM q Open and analyze cost proposal from the highest ranked firm MOP RFQ SOW = = = Method of Payment Request for Proposal Request for Qualifications Statement of Qualifications Statement/Scope of Work q Issue Conformance Letter, if applicable q Perform contract audits and reviews, if applicable, or review of CPA audited ICR workpapers to issue Cognizant Letter of Approval 51

Evaluation and Selection of Consultants • Circulate SOPs or SOQs to Selection Committee members • Provide blank score sheets 1/12/2017 52

Sample Score Sheet for Evaluation of Proposals or Statement of Qualifications 1/12/2017 53

Evaluation and Selection of Consultants • Convene the Selection Committee – Review proposals – Complete score sheets – Sign and date all original score sheets – Contract Administrator compiles scores and ranking – If conducting interviews, develop short list of top 3 to 5 firms – If no interviews, finalize ranking of top three firms and request cost proposals in sealed envelopes – Must inform all firms of short list or final ranking 1/12/2017 54

Evaluation and Selection of Consultants • Committee performs reference checks (best practice) – Develop standard questions to ask – Have one person perform reference checks – Compile and document other information gathered independently – Retain records in contract files – Must be done prior to oral interviews, if any 1/12/2017 55

Evaluation and Selection of Consultants • Prepare for interviews of short list – Prepare interview agenda, questions, and score sheets – Send invitation to (short list) firms with: • Format of interview, scoring criteria and time tables • Copy of Standard Agreement (boilerplate) • Request for cost proposals in sealed envelopes to be collected at time of interview 1/12/2017 56

Evaluation and Selection of Consultants • Conduct interviews of short list – Conduct interviews – Collect cost proposals in sealed envelopes – Record interview evaluations on score sheets – Develop final ranking (top three firms) and inform short list of results per regulation 1/12/2017 57

Evaluation and Selection of Consultants • Debriefing of consultants – Best practice – Provide feedback to firms upon request – Should be done after the closeout of the procurement process – Need to select “debriefer” from the Selection Committee – Provide firms’ strengths and weaknesses 1/12/2017 58

Evaluation and Selection of Consultants Most Frequent Errors/Deficiencies: • Lack of retention of original score sheets from the evaluation process • Inadequate documentation during the secondary evaluation process/interview portion • Actual evaluation criteria differ from original described in the RFP/RFQ without appropriate documentation 1/12/2017 59

Procurement Process PROCUREMENT PLANNING SOLICITATION DOCUMENTS AND ADVERTISEMENT EVALUATION AND SELECTION OF CONSULTANT CONTRACT COST NEGOTIATIONS CONTRACT EXECUTION 1/12/2017 60

STEPS #10 - 11: CONTRACT NEGOTIATIONS #11 #10 Can be done concurrently with Contract Execution q Negotiate contract costs with consultant q Prepare and retain record of cost negotiations q Receive and analyze findings of the Conformance Review Letter from Caltrans A&I, if any q Address and resolve all findings by A&I and incorporate into final contract and cost proposal q If negotiations with first ranked firm are unsuccessful, formally terminate cost negotiations with consultant and begin Step #9 with next ranked consultant A&E A&I CT DBE DLAE LAPG LAPM = = = = 1/12/2017 Architectural & Engineering Caltrans Audits & Investigations Caltrans Disadvantaged Business Enterprise Division of Local Assistance District Local Assistance Engineer Local Assistance Program Guidelines Local Assistance Procedures Manual MOP RFQ SOW q Finalize contract, cost proposal q Prepare Contract Approval Checklist (see LAPM Exhibit 10 -C) q Retain copy of contract Conformance Review Letter with documented resolution of all findings q Sign and execute contract = = = Method of Payment Request for Proposal Request for Qualifications Statement of Qualifications Statement/Scope of Work 61

Contract Cost Negotiations • Review cost proposal from top ranked firm – Must be in appropriate format (refer to LAPM Exhibit 10 -H) – Include detailed/broken down labor costs, and Other Direct Costs – Both Prime and Sub-consultants • Initiate contract audit and review process (LAPM chapter 10, Section 10. 3) and submit to Caltrans A&I at conformance. review@dot. ca. gov • Begin contract negotiations with top ranked firm – Compare with the Independent Cost Estimate (ICE) – Document and retain all cost negotiations records 1/12/2017 62

Contract Cost Negotiations Cost/Profit Negotiations 1/12/2017 63

Cost Proposal • Cost proposals include: – Mostly labor • Named Key Staff/Classifications • Multi-discipline; Office/Field • Professional and sub-professional; licensed/unlicensed – Level of Effort (Hours per Task) for Project Specific Contract – Based on the method of payment • Actual cost plus fixed fee • Fixed rate of compensation (On-call contracts) 1/12/2017 64

Cost Proposal (Cont. ) • Cost proposals include: – Labor costs are broken down to: • Actual wage/salary • Indirect cost rate (ICR) • Profit – Other Direct Costs (ODC), such as travel/per diem, rental equipment, or consumable supplies – Both Prime and Sub-consultants 1/12/2017 65

Items Negotiated • Workplan, deliverables and schedules • Hours per Tasks • Classifications, knowledge, education, and experience level of staff • Cost items, ODCs • Profit/fixed Fee • Labor escalation (Multi-year contract) 1/12/2017 66

Items Not Negotiated • Firm’s indirect cost rate - ICR (or overhead) is subject to Audits review (FAR): – Self certified by Consultant in Exhibit 10 -K – Consultant ICR established by Cognizant Letter – Voluntary reduction of consultant indirect cost rate • Firm’s direct labor is subject to verification: – Payroll records – Benchmarking of consultant direct salary rates 1/12/2017 67

Other Direct Costs (ODCs) • Must be itemized and at actual costs • Allowable ODCs: – Materials – Equipment rental – Car rental – Subconsultants • No mark-ups or profit on ODCs are allowed 1/12/2017 68

Profit/Fee Negotiations • Profit (%) – Scope/size – Complexity – Degree of risk – Duration – Number of sub-consultants • No Mark-up (profit) on Sub-consultant work 1/12/2017 69

Sample Cost Proposal Note: Mark-ups are not allowed on Sub-consultant costs and ODCs 1/12/2017 70

Sample Cost Proposal 1/12/2017 71

Sample Cost Proposal 1/12/2017 Note: Mark-ups are not allowed on Sub-consultant costs and ODCs 72

Sample Cost Proposal 1/12/2017 Note: Mark-ups are not allowed on Sub-consultant costs and ODCs 73

Sample Cost Proposal 1/12/2017 74

Contract Audit & Review Risk-based Contract Audit and Review 1/12/2017 75

Contract Audit and Review Process Flowchart • LAPM Chapter 10, Section 10. 3 – State or Federal fund eligible contracts – Risk-based approach for audit and review – Applies to both prime and all subconsultants – Replaces the old Pre-Award process 1/12/2017 76

Risk-Based Contract Audit and Review Process • Required documentation – Contracts < $150, 000 audit or review is optional – Case 1: Contracts > $150, 000 but < $1, 000: • Prime and all subconsultants submit Certification of Contract Costs and Financial Management System (LAPM Exhibit 10 -K) to local agency • Local agency forwards to Caltrans A&I at conformance. review@dot. ca. gov 1/12/2017 77

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Risk-Based Contract Audit and Review Process • Required documentation – Case 2: Contracts > $1, 000 but < $3, 500, 000: • Prime submits A&E Consultant Audit Request Letter and Checklist (LAPM Exhibit 10 -A) to local agency • Local agency forwards to Caltrans A&I at conformance. review@dot. ca. gov • Caltrans A&I performs Conformance Review and provides a letter to local agency within 30 days – Case 3: Contracts > $3, 500, 000 • Prime submits above documents and CPA audited ICR workpapers 1/12/2017 79

http: //www. dot. ca. gov/hq/audits/documents/cognizant_approvals. pdf 1/12/2017 80

Conformance Review by Caltrans A&I • For A&E contracts over $1 M, A&I perform Conformance Review (Exhibit 10 -A and supporting documents) – Review contract fiscal provisions – Review cost proposals (prime and all subs) – Review 10 -Ks (prime and all subs) – Review Internal Control Questionnaire (prime) 1/12/2017 81

Conformance Review by Caltrans A&I (Checklists) 1/12/2017 82

Safe Harbor Rate The Federal Highway Administration (FHWA) developed a national SHR of 110% for eligible consulting firms to use on a test-evaluation basis. The testing period is from July 1, 2013 to July 31, 2017. Purpose: • To remove financial management barriers that may prevent or inhibit new, small, disadvantaged or otherwise eligible A&E firms from entering into federal or state contracts • To provide a framework for A&E firms to establish an adequate cost history to eventually develop a FAR compliant ICR 1/12/2017 83

Safe Harbor Rate (Cont. ) SHR Eligibility Requirements: • Firms that do not have relevant contract cost history to use as a base for developing its own indirect cost rate OR • Firms that do not have a previously accepted ICR by a cognizant agency, or with an audited/accepted actual ICR within the established test period DLA Office Bulletin 13 -07 R http: //www. dot. ca. gov/hq/Local. Programs/DLA_OB/2013/ob 13 -07 r. pdf 1/12/2017 84

Safe Harbor Rate (Cont. ) Additional SHR Requirements: • All firms must have a project/cost accounting system adequate to accumulate and track direct labor and other direct costs by contract, segregating indirect costs, and removing unallowable costs • Fixed hourly labor rates need to be established for calculation of the direct labor portion of contracts • SHR is not adjustable for the term of the contract • No retroactive adjustment to indirect costs will be allowed for contracts utilizing the SHR 1/12/2017 85

Safe Harbor Rate (Cont. ) Procedures (DLA Office Bulletin 13 -07 R): Eligible firms must complete and submit the following to Local Agency with their cost proposals: • Consultant Certification of Eligibility; Contract Costs and Financial Management System (Attachment 1 R) • SHR Supplemental Internal Control Questionnaire (Attachment 2 R) Local Agency must screen submittals before forwarding to Caltrans A&I SHR. request@dot. ca. gov Upon satisfactory review, Caltrans A&I will issue an acceptance/approval. 1/12/2017 86

Safe Harbor Rate (Cont. ) 1/12/2017 87

Safe Harbor Rate (Cont. ) 1/12/2017 88

Safe Harbor Rate (Cont. ) 1/12/2017 89

Conformance Review by Caltrans A&I • A&I issues a Conformance Review to local agency within 30 days • Local agency can begin cost negotiation, but not conclude it, prior to receiving Conformance Review letter • Local agency must address deficiencies identified in the Conformance Review letter, if any • Contract must not be executed until deficiencies are addressed 1/12/2017 90

Caltrans A&I Exhibit 10 -K Database • Contains Exhibit 10 -Ks • Stored at Caltrans A&I intranet site • DLAE confirms that Exhibit 10 -K is on the list for contract 1/12/2017 91

Terminate Cost Negotiations • If unsuccessful in negotiating contract cost with top ranked firm: – Formally terminate negotiations with top ranked firm – Initiate cost negotiation with second ranked firm and repeat steps as before – Repeat steps with third ranked firm, if necessary 1/12/2017 92

Conformance Review by Caltrans A&I Most Frequent Errors/Deficiencies: • • Missing fiscal provisions in Standard Agreement (boilerplate) Missing breakdown of ODCs Missing cost proposals for the subconsultants Incomplete or inadequate cost proposal format used Unallowable method of payment used (rate sheets) Incomplete Internal Control Questionnaire (ICQ) Missing and/or incomplete certification forms (10 -Ks) Inconsistent Indirect Cost Rate (ICR) in 10 -Ks and the cost proposal 1/12/2017 93

Contract Cost Negotiations Most Frequent Errors/Deficiencies: • No documented price/fee negotiations • Contract cost proposal does not meet LAPM standard (Exhibit 10 -H) 1/12/2017 94

Procurement Process PROCUREMENT PLANNING SOLICITATION DOCUMENTS AND ADVERTISEMENT EVALUATION AND SELECTION OF CONSULTANT CONTRACT COST NEGOTIATIONS CONTRACT EXECUTION 1/12/2017 95

STEP #12: CONTRACT EXECUTION #12 q Offer and conduct debriefing meetings with consultant who asked for one q Send copies of executed contract, Contract Approval Checklist (see LAPM Exhibit 10 -C), and DBE Commitment (see LAPM Exhibits 10 -O 1 and 10 -O 2) to DLAE q Close out contract procurement process Caltrans DLAE q Prior to concurring with invoice payment related to consultant services, ensure that district has a copy of the executed consultant contract on file as well as LAPM Exhibits 10 -C, 10 -O 1 and 10 -O 2 q Check A&I database to ensure that LAPM Exhibit 10 -K, if applicable, has been received by A&I Caltrans A&I q Perform Incurred Cost Audit, if selected A&E A&I CT DBE DLAE LAPG LAPM 1/12/2017 = = = = Architectural & Engineering Caltrans Audits & Investigations Caltrans Disadvantaged Business Enterprise Division of Local Assistance District Local Assistance Engineer Local Assistance Program Guidelines Local Assistance Procedures Manual MOP RFQ SOW = = = Method of Payment Request for Proposal Request for Qualifications Statement of Qualifications Statement/Scope of Work 96

Contract Execution • Finalize contract cost proposal • Review final contract/agreement – DBE Commitment and Information (Exhibit 10 -O 1 and 10 -O 2) – Contract Provisions – Cost Proposal • Address all deficiencies identified in the Conformance Review letter prior to contract execution • Complete and file Consultant Contract Reviewer Checklist (LAPM Exhibit 10 -C) 1/12/2017 97

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Contract Execution • Approve and execute contract – Document Board/Council/Contract Approver Authority Action – Execute/sign contract – Issue Notice to Proceed to the consultant • Send copies to DLAE – A&E Contract Reviewer Checklist (Exhibit 10 -C) – Contract DBE Information (Exhibits 10 -O 1 and 10 -O 2) – Executed contract – Any supporting documentation addressing Conformance Letter deficiencies NOTE: Only work performed after Obligation Authority (E -76) approval is eligible for federal/state reimbursement 1/12/2017 102

Contract Execution Most Frequent Errors/Deficiencies: • Lack of Contract Reviewer Checklist (Exhibit 10 -C) • Incomplete fiscal and miscellaneous provisions in final contract • Lack of documented contract approval process 1/12/2017 103

Procurement Process PROCUREMENT PLANNING SOLICITATION DOCUMENTS AND ADVERTISEMENT EVALUATION AND SELECTION OF CONSULTANT CONTRACT COST NEGOTIATIONS CONTRACT EXECUTION 1/12/2017 104

Contract Life Cycle Procurement Planning Procurement 3 -6 Months Performance Typically 1 -3 Years Close-out 2 Months 1/12/2017 105

Other Considerations 1/12/2017 106

Consultant Contract Kickoff Meeting • Ensures communication between all parties • Include prime, subconsultants, and local agency technical staff • Discuss scope limits, lines of communication, accounting/invoicing, progress reporting requirements, and DBE utilization goals • For on-call contracts, schedule meeting at convenience of consultant since there is no reimbursement for this activity 1/12/2017 107

Administer Contract • Local agency’s Contract Administrator shall: – Invoice Caltrans with appropriate format and supporting documentation, including DBE utilization NOTE: A new invoice review process requires DLAE to confirm receipt of Exhibit 10 -Ks (for contracts over $150, 000) prior to approval of invoice – Maintain contract/project files – Review technical products and deliverables – Provide contract oversight and progress meeting records – Review and approve progress payments – Maintain accounting records and other documents 1/12/2017 108

Contract Completion (Close-Out) • Local agency’s Contract Administrator shall: – Pay final contract payments and close out – Complete Consultant Performance Evaluation (LAPM Exhibit 10 -S) – Complete Final Report - Utilization of DBE, First-Tier Subcontractors (LAPM Exhibit 17 -F) – Document lessons learned 1/12/2017 109

Contract Amendment • Modifies terms of original contract; Time and Cost • Change of Scope or Added work must be within original scope of work of the contract • For on-call contracts, the amendment is restricted to the work (task order) that has already been started, and cannot include any new work • Must amend contract prior to original contract expiration date 1/12/2017 110

Small Purchase Procedures • For contracts < $150, 000 (Federal threshold) • Informal and simplified procedures • Open and competitive • Must include “justification for selection” • “Contract-splitting” is not allowed – to circumvent Brooks Act requirements • For contracts + contract amendments < $150, 000 1/12/2017 111

Small Purchase Procedures Required • • • Competitive process (collect three bids) Conflict of interest determination Assigned Contract Administrator Defined scope of work/schedule of deliverables/start and end dates for contract Defined deliverables/prime and subconsultant responsibilities DBE goal for contract Cost estimate prior to receiving bids Best method of payment determination Contract provisions/clauses Evaluation of consultant Contract management responsibilities 1/12/2017 Not Required • No RFP/RFQ • No Selection Committee • No evaluation criteria disclosure requirements • No record of costs/profit negotiations • No audit and review requirement of contract 112

Non-Competitive (Sole Source) Procurement 1. Only one consultant is qualified to perform work 2. Emergency situation 3. Competition is determined to be inadequate after solicitation of a number of sources • Prepare Public Interest Finding (PIF) (Exhibit 12 -F) • Develop adequate scope of work, evaluation factors and cost estimate • Conduct negotiations with consultant to ensure fair and reasonable price for services 1/12/2017 113

Personal Services Contracts • For engineering services • Less than $150, 000 • Characterized by the employer-employee relationship created between the local agency and the contract personnel who essentially perform similar duties as the employees 1/12/2017 114

Non-A&E Consultant Contracts • Federal or state funding • 23 CFR 172 • 2 CFR 200. 317 -200. 326 • California State Public Contract Code 10335 -10381 http: //www. leginfo. ca. gov/cgi-bin/ calawquery? codesection=pcc&codebody=&hits=20 • LAPM Chapter 10 1/12/2017 115

Conflict of Interest Requirements • No contracting agency employee who participates in the procurement, management, or administration of FAHP funded contracts or subcontracts shall have, directly or indirectly, any financial or other personal interest in connection with such contract or subcontract (as specified in 23 CFR 1. 33) • No person or entity performing services for a contracting agency in connection with a FAHP funded project shall have, directly or indirectly, any financial or other personal interest, other than employment or retention by the contracting agency, in any contract or subcontract in connection with such project (as specified in 23 CFR 1. 33) • No person or entity performing services for a contracting agency in connection with a FAHP funded project shall have, directly or indirectly, any financial or other personal interest in any real property acquired for the project (as specified in 23 CFR 1. 33) 1/12/2017 116

Consultant as Agency Engineer or in Management Support Role • Subject to 23 CFR 172 requirements: – Providing oversight of an element of a highway program, function, or services on behalf of local agency, or – Managing or providing oversight of a project, series of projects, and/or work of other consultants or contractors on behalf of local agency • Requires prior approval if Federal-aid project funds reimbursement is sought (Exhibit 10 -U) 1/12/2017 117

Consultant as Agency Engineer or in Management Support Role • City Engineer or equivalent • Local agency must justify use of consultant in management role • Individual or employee of firm • Contract with qualified consultant in professional engineering capacity • Subject to A&E procurement process requirements • Appropriate conflict of interest policies and procedures and standards • Precluded from providing additional services on projects, activities or contracts under its oversight 1/12/2017 118

Consultant as Agency Engineer or in Management Support Role Eligibility Requirement: • Compliance with A&E procurement procedures • Duty statement to document role and responsibilities • Local agency must maintain “Responsible Charge” by full-time public employee • Written policies and procedures to safeguard against conflict of interest concerns – Completion of “Consultant in Management Position Conflict of Interest and Confidentiality Statement” LAPM Exhibit 10 -U, subject to DLAE approval 1/12/2017 119

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Consultant as Agency Engineer or in Management Role • Responsible Charge - a full time public employee (but not limited to): – Contract negotiation, contract payment, consultant performance evaluation. – Being familiar with the contract requirements, scope of services and products to be produced. – Being familiar with the qualifications of the consultant's staff and changes in key personnel. – Attending progress and project review meetings, to ensure project delivery according to schedule milestones. – Ensuring consultant costs billed are allowable and consistent with the contract terms. – Evaluating and participating in decisions for contract modifications. – Documenting contract monitoring activities and maintaining supporting contract records, as specified in 2 CFR 200. 333. 1/12/2017 121

Construction Management Services • Responsibility for general supervision and oversight of construction project shall remain with local agency – Full-time qualified public employee in Responsible Charge to oversee project Resident Engineer (RE) and inspectors – Registered consultant performing construction engineering activities 1/12/2017 122

Design Consultant Performing Construction Management • Advantages: – Project delivery efficiencies • Disadvantage: – Conflict of interest when design error and omissions arise 1/12/2017 123

Construction Management Services: Caltrans Best Practice • Consultant performing project design shall not perform construction management on the same project • Consultant performing construction material quality control testing for construction contract shall not perform Construction Material Quality Assurance on the same project 1/12/2017 124

Miscellaneous Programs • Mitigation and mitigation monitoring work accomplished through the use of A&E consultants – Biological mitigation – Cultural mitigation • Funding obtained through Construction Engineering 1/12/2017 125

Questions and Answers 1/12/2017 126