State Purchasing Directors Meeting March 11 2004 3

State Purchasing Directors’ Meeting March 11, 2004 3: 00 P. M.

Purchasing Directors’ Meeting March 11, 2004 Agenda § Welcome / Meeting Overview § Rule Update § HIPPAA Compliance § Training Program § State Term Contracts – Mail Services and Courier § Governor’s Center for Efficient Government § Blanket Purchase Orders § Open Floor / New Issues § Next Meeting Location / Time 2

Purchasing Directors’ Meeting March 11, 2004 Agenda § Welcome / Meeting Overview § Rule Update § HIPPAA Compliance § Training Program § State Term Contracts – Mail Services and Courier § Governor’s Center for Efficient Government § Blanket Purchase Orders § Open Floor / New Issues § Next Meeting Location / Time 3

Rule Update Workshops and Hearings • Vendor Registration Rule (60 A-1. 030) – Draft published in February 27 FAW with notice of rule development – Workshop March 15, 1: 00 pm • Chapter 60 A-1 General Overhaul – Next rule development workshop March 12, 1: 30 pm – First wave of proposed rules published in March 5 FAW; public hearing March 26, 1: 30 pm • http: //marketplace. myflorida. com/related/proposed_rule. htm 4

Rule Update Statutory Developments • House State Administration Committee Draft Bill (3/9/04) on website with these meeting materials • HB 1533 – use of only in-state residents in performing service contracts • HB 1211/SB 2756 – privatization and oversight 5

Purchasing Directors’ Meeting March 11, 2004 Agenda § Welcome / Meeting Overview § Rule Update § HIPPAA Compliance § Training Program § State Term Contracts – Mail Services and Courier § Governor’s Center for Efficient Government § Blanket Purchase Orders § Open Floor / New Issues § Next Meeting Location / Time 6

Purchasing Directors’ Meeting March 11, 2004 Agenda § Welcome / Meeting Overview § Rule Update § HIPPAA Compliance § Training Program § State Term Contracts – Mail Services and Courier § Governor’s Center for Efficient Government § Blanket Purchase Orders § Open Floor / New Issues § Next Meeting Location / Time 7

Operational Issues Training Program • • First Wave – 36 people – 16 agencies (13 state agencies – 33%) – Content • General Public Procurement • Intermediate Public Procurement • Advanced/Management Public Procurement • Public Purchasing in Florida (FL specific) • Negotiation Strategies • Negotiation in Florida (FL specific) • Contract Management in Florida (FL specific) Jan 7 -9 Feb 16 -18 Mar 15 -19 Mar 29 -30 Apr 21 -22 Apr 23 May 19 -20 May 21 Second Wave to start in September – see website meeting material 8

Purchasing Directors’ Meeting March 11, 2004 Agenda § Welcome / Meeting Overview § Rule Update § HIPPAA Compliance § Training Program § State Term Contracts – Mail Services and Courier § Governor’s Center for Efficient Government § Blanket Purchase Orders § Open Floor / New Issues § Next Meeting Location / Time 9

Courier and Mail Services STCs Purposes of Contract • Mail services is not a core competency of the State of Florida • Provide a service-centric approach to the Governor’s objectives • Integration of Mail & Document management solutions 10

Courier and Mail Services STCs AWI Experience with Mail Service Outsourcing 11

Courier and Mail Services STCs AWI Performance Measures 12

Courier and Mail Services STCs Lessons Learned • Need to fully understand each party’s responsibilities • Best-practices contract management process • Performance measures 13

Courier and Mail Services STCs Courier Contract (991 -160 -00 -1) • Currently under bid • Application of contract pricing • Performance measures 14

Purchasing Directors’ Meeting March 11, 2004 Agenda § Welcome / Meeting Overview § Rule Update § HIPPAA Compliance § Training Program § State Term Contracts – Mail Services and Courier § Governor’s Center for Efficient Government § Blanket Purchase Orders § Open Floor / New Issues § Next Meeting Location / Time 15

Governor’s Center for Efficient Government Mission What: To be the enterprise wide gateway for best business practices in outsourcing… Why: … in order to improve the way state agencies deliver services to Florida’s citizens. See Executive Order 04 -45 (3/11/04) 16

Governor’s Center for Efficient Government Oversight Board • Secretary Bill Simon Department of Management Services • Dr. Jim Zingale Department of Revenue • Secretary José Abreu Department of Transportation • Dr. John Agwunobi Department of Health • Director Susan Pareigis Agency for Workforce Innovation 17

Governor’s Center for Efficient Government Initial Goals • Develop statewide outsourcing standards and a business case template applicable to any proposed outsourcing project. • Review existing outsourcing plans within the state agencies to ensure compliance with Center standards and business case, execution of effective contract language with vendors and implementation of successful change management. • Propose for the Governor’s consideration by July 1 an initial list of specific outsourcing projects and initiatives that can be developed over the next 3 years. 18

Governor’s Center for Efficient Government Standards Create a gateway process for all outsourcing projects: – Business Case – Procurement – Contract management – Change management – Performance measurement 19

Governor’s Center for Efficient Government Project Gate Management Process Current Projects Gate 1 Business Case Stage 1 Gate 2 Procurement Stage 2 Gate 3 Contract Management Change Management Stage 3 Stage 4 Gate 4 Post Implementation Monitor Stage 5 New Projects 20

Governor’s Center for Efficient Government Outsourcing Projects • Review past outsourcing projects to highlight successes and identify any best practices the state already has. • Review of current projects – Craft recommendations for any improvements; assist agency in process to address issues identified. • Recommendations for new initiatives – Create a portfolio of initiatives for the first set to be implemented – different sizes, scopes, policy arenas; complete business cases. – Recommend other outsourcing initiatives that can be implemented through 2006; identify working groups to begin gateway process. 21

Governor’s Center for Efficient Government Employee Transition Management • Develop recommendations for innovative programs to effectively manage transitioning employees and continue to improve upon the State of Florida’s workforce. • Process to help place in or out of state government. • Create incentives for agency management to fully participate in the competition process. 22

Governor’s Center for Efficient Government Contact Information Governor’s Center for Efficient Government 2105 The Capitol Tallahassee, FL 32399 (850) 414 -9200 (850) 414 -9179 (fax) Pam Pfeifer, Director pam. pfeifer@myflorida. com 23

Purchasing Directors’ Meeting March 11, 2004 Agenda § Welcome / Meeting Overview § Rule Update § HIPPAA Compliance § Training Program § State Term Contracts – Mail Services and Courier § Governor’s Center for Efficient Government § Blanket Purchase Orders § Open Floor / New Issues § Next Meeting Location / Time 24

Blanket Purchase Orders Items to Cover Ø Key Considerations Ø Current Processes Ø Issues/Questions Ø Process Illustrations 25

Blanket Purchase Orders Why BPOs? • • • Useful when a need is established for a series of repetitive purchases, but quantity and schedule per delivery are undetermined. A form of centrally controlled decentralization, involving central & specialized personnel and managers when value can be added, and pushing the no-value-added transactions out and down. Are efficient (minimum time and effort) and effective (get them what they need when they need it) for end users to get deliveries “as needed, ” and are efficient for management, budget and purchasing to approve and contract for an entire string of smaller acquisitions at a single point in time. 100 s of BPOs may replace 1, 000 s of “regular” POs. Specify some of all of the following: vendor, ordering office, delivery instructions, contract reference, terms, items (more or less detail), item prices (or price reference), total spending limit, total time during which BPO may be used, and who under against the BPO. 26

Blanket Purchase Orders Key Considerations q In a standard requisition/PO, consistent, detailed item-level data is included in the requisition, order, receipt, and invoice. In a “blanket PO” situation, such detail may be sacrificed for expediency. Now, with the MFMP increased functionality, features, and reporting capabilities, we can better track/analyze/ report our spending practices. Strategic Sourcing is a top priority for the State – it is a proven way to lower the cost of business for agencies. Key to this effort is the visibility into the spending patterns and habits of each agency. Spend at the line Item detail is crucial in improving negotiating positions. However, not all BPOs are for items that depend on this capture of detail for the procurement method applied to the BPO. q Agencies have had unique BPO processes for years, and continue to implement hybrid approaches leveraging current My. Florida. Market. Place functionality. A more standardized approach is desired to assist agencies in complying with DMS purchasing standards, while maintaining the flexibility, expediency, and efficiency of BPOs. 27

Blanket Purchase Orders Options and Issues • Two options – Method 1: Requisition Based – Method 2: Master Agreement Based • Five issues (for each, must consider personnel, time and effort required to establish an MA versus a PO) – Time to approve a requisition from a MA – Sending a BPO through MFMP to a vendor if BPO is a Master Agreement – Clean audit trail for BPO initiated by requisition – Services BPO vs. commodity BPO 28

Blanket Purchase Order Method 1: Requisition–Based Ø User creates a requisition/PO for the BPO. PO typically has a ‘Lot’ that may be a single line item, or a lot for a group of items in one or more commodity codes. PO is issued, and agency performs receipt for each order from BPO – receiving off the original PO Advantages: - Efficient and effective for the customer - Quick and easy method for Purchasing office. Receipt is only action required (Invoicing performed by F&A) - Allows for flexibility in BPO purchasing, BPOs can be made to capture any item/commodity from a vendor, and allow flexibility in delivery quantity and schedule. - No manual encumbrance required in FLAIR - PO automatically transmitted to vendor as agreement documentation Disadvantages: - May not capture line item, or potentially even commodity-level information. Makes reporting/sourcing effort very difficult - Places workload on Invoicing/Payment personnel to add line item information at time of invoice (adding line item info on Invoice e. Form, specifying accounting information for each item, reconciling invoice w/ non-itemized PO, adding commodity information…) Does A/P use commodity numbers or just object codes? - Lack of audit trail and order history (PO and receipt report may not clearly demonstrate what goods/services were purchased. However, past practice may indicate no problem. 29

Blanket Purchase Order Method 2: Master Agreement–Based Ø User creates a Master Agreement for BPO, including all accounting, commodity, and line item information. A release (req) is created each time an agency wants to purchase from the BPO. What about “full line” flexibility, e. g. a BPO to Home Depot for building materials and general hardware items? Advantages: - Line Item information (e. g. Commodity Code, Line Item Description, Part #. . . ) captured for reporting/sourcing purposes - Master Agreement can be amended at any time to adjust to pricing/terms updates. - Reduction of Invoicing/Payment workload – as line item information is carried forward to invoice - Automated tracking of spend on BPO and notification when approaching spending thresholds. Disadvantages: - Requires Requisition and approval flow for each release. Can enhance to avoid this. - Additional effort for Purchasing Office creation of Master Agreement - For purchases of a ‘lot’, initial effort required by Purchasing Office to ensure proper lineitem and/or commodity-level data is captured. What about “full line” flexibility, e. g. a BPO to Home Depot for building materials and general hardware items? - All BPOs would require manual encumbrance in FLAIR (as is current process for other Master Agreements) 30

Blanket Purchase Orders Issue #2: Time to Approve a Requisition from a Master Agreement Ø If a Master Agreement has already been created, then the approvals for a requisition against that MA may be unnecessary. Potential Enhancements: • ‘Blanket PO’ indicator would be placed on Master Agreements. • Purchasing Office builds one Master Agreement, complete with line item information; requisitions created as ‘releases’ off the Master Agreement. How can we handle “full line” BPOs? • Requisitions created from “BPO” Master Agreement would not require a workflow/approval before the order is 31 created.

Blanket Purchase Orders Issue #2: Sending a BPO through MFMP to a Vendor if BPO is a Master Agreement Ø Currently, if an agency uses the Req-PO method for a BPO, the PO may serve as the binding agreement between vendor and agency. In the new approach, Master Agreements would not be automatically sent to a vendor (as they are used for other contracts). Potential Resolution: As many agencies currently do, they can establish the BPO and/or line of credit with the vendor via current, non MFMP avenues. This agreement could be noted in the new Master Agreement. Then, each PO would be a binding release from that BPO. 32

Blanket Purchase Orders Issue #3: Clean Audit Trail for BPO if Initiated by Requisition Ø Under the proposed approach, a requisition would be routed to the Purchasing Agent, who would then create the BPO through a Master Agreement (or route to the rightful contract specialist to do so). The original req would have to be denied, so that an additional PO wasn’t sent to the vendor. This req and the MA would not be dynamically linked. Potential Resolutions: a) Requester could create a Master Agreement Request (MAR) instead of a requisition to trigger the BPO Process. This request could have some specific workflow, based on being a BPO. The MAR would be approved, and the ensuing MA would tie directly back to the MAR, with a clean and dynamically linked audit trail. (Some moderate changes would have to be made to MFMP to accommodate this workflow) b) The Purchasing Agent (or contract specialist) could archive the denied requisition, and make note of the requisition in the comments of the Master Agreement. This would allow any auditor/inquirer to be informed of the requesting requisition, and search it in MFMP to view the details 33

Blanket Purchase Orders Issue #4: Services BPOs vs. Commodity BPOs Ø Often, services BPOs are for a single line item, whereas commodity BPOs are frequently for multiple line items. Do the services BPOs need to follow the same process as the commodity BPO? Some other distinguishing criteria, e. g. , Master Agreement if there’s an itemized STC? 34

Blanket Purchase Orders BPO Process and Data Comparisons This diagram illustrates the item data required for the various stages of a blanket PO lifecycle. Arrows indicate data flow for previously-entered data. 35

Blanket Purchase Orders Process and Data Comparison Notes • Either method (Requisition or Master Agreementbased) can be effectively used for either commodity or service BPOs • Item data can be entered at various points in the process • Better to enter data earlier in the process: • • If entered at the beginning of the process (the Requisition or MA), item data can be re-used; if entered at the end, has to be re-keyed for every invoice the more visibility into the purchase is available and the more re-use of that data available 36

Blanket Purchase Orders Requisition Item Data 37

Blanket Purchase Orders Master Agreement Item Data: Item Level 38

Blanket Purchase Orders Master Agreement Item Data: Item Level 39

Blanket Purchase Orders Receipt Item Data 40

Blanket Purchase Orders Invoice e. Form Item Data 41

Blanket Purchase Orders Invoice Reconciliation Item Data 42

Blanket Purchase Orders Invoice Reconciliation Item Detail Data 43

Purchasing Directors’ Meeting March 11, 2004 Agenda § Welcome / Meeting Overview § Rule Update § HIPPAA Compliance § Training Program § State Term Contracts – Mail Services and Courier § Governor’s Center for Efficient Government § Blanket Purchase Orders § Open Floor / New Issues § Next Meeting Location / Time 44

Purchasing Directors’ Meeting March 11, 2004 Agenda § Welcome / Meeting Overview § Rule Update § HIPPAA Compliance § Training Program § State Term Contracts – Mail Services and Courier § Governor’s Center for Efficient Government § Blanket Purchase Orders § Open Floor / New Issues § Next Meeting Location / Time 45

Purchasing Directors’ Meeting Next Meeting Time: 3: 00 p. m. to 5: 00 p. m. Date: Thursday, April 8, 2004 Location: Dept. of Agric. & Consumer Servs. , 3125 Conner Boulevard Eyster Auditorium (Ground Floor) 46