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Audit of PCS Procurement

Processes
July 05, 2018
18-01-023
Audit of PCS Procurement Processes July 05, 2018

Mission

Internal Audit provides independent and objective assurance and consulting


services designed to protect and enhance Health and Human Services (HHS)
programs and operations through a systematic, disciplined approach to evaluating
the effectiveness of risk management, internal control, and governance processes.
We strive to provide insightful, proactive, timely, and innovative advice and
recommendations to help HHS improve the health and safety of Texans.

Team Members

Nicole Kludt, CIA, CGAP, CFE, Project Manager


Frederick Appiah
Susie Belseth, CGAP
Sarah Cason, MBA, CISA, CIA
Christopher Chan, CISA
Amanda Harris
Shatandrea Hill
Cameosha Jones, CGAP
Hea Mee (Haylie) Kwon, CPA, CIA
Stanton Martin
Chanda Riddick, MPAcc, CIA
Erin Sanchez, CIA

HHS Internal Audit Director

Karin Hill, CIA, CGAP, CRMA

HHS Internal Audit Division


Audit of PCS Procurement Processes July 05, 2018

TABLE OF CONTENTS

Executive Summary ....................................................................................... 1

Background ................................................................................................... 5

Audit Results

Procurement processes do not ensure compliance with all state requirements. ... 7

Documentation is not consistently maintained to support the procurement


process and award decisions. ..................................................................... 12

A consistent, efficient, and effective procurement process is not in place. ........ 15

Training is not being consistently provided to staff. ....................................... 18

Controls to ensure the integrity of the procurement process are lacking. .......... 19

Policies and procedures are incomplete and are not updated to reflect current
processes and statutory requirements. ........................................................ 27

Data within the System of Contract Operation and Reporting (SCOR) is not
accurate or complete. ................................................................................ 31

The effectiveness of workflows in CAPPS Financials 9.2 are impacted by the


accuracy of data entry. .............................................................................. 34

Appendix A: Objectives, Scope, and Methodology ............................................ 38

Appendix B: Attributes Tested by Phase .......................................................... 40

Appendix C: Best Practices ............................................................................ 54

Report Distribution ....................................................................................... 64

HHS Internal Audit Division


Audit of PCS Procurement Processes July 05, 2018

EXECUTIVE SUMMARY

This report presents the results of the Audit of PCS Procurement Processes. The
objectives were to:

 Determine:
o Whether current processes comply with state requirements.
o Whether processes are sufficient to protect the integrity of Health and
Human Services procurements.
o Whether processes are consistently followed by agency staff.
o Whether processes are efficient and effective.
 Identify best practices from other state agencies.

The scope included contracts procured from Fiscal Year 2016 through the end of
fieldwork. The scope also included controls related to the procurement process and
relevant information systems.

Procurement processes do not ensure compliance with all state


requirements.

The Procurement and Contracting Services (PCS) Operating Procedures for Request
for Proposals does not have procedures in place to ensure procurements related to
consulting services are published in the Texas Register. Any consulting procurement
that is $15,000 or more is required to be published in the Texas Register as
required by Texas Government Code §2254.029. Testing identified one
procurement that was consulting related that was not posted to the Texas Register.

Additionally, procedures are not in place to ensure the Disclosure of Interested


Parties form is completed for procurements with contracts $1 million or more and
provided to the Texas Ethics Commission as required by Texas Government Code
§2252.908. The Disclosure of Interested Parties form is used to identify those with
a controlling interest in a business entity with whom a governmental entity or state
agency contracts. Twenty-four (80%) of 30 RFPs with contracts that exceeded $1
million did not have the required disclosure form on file with the Texas Ethics
Commission.

The Draft Request for Application (RFA) Process Overview document does not
include procedures to ensure RFAs are sent to the Comptroller’s Contract Advisory
Team – Review and Delegation (CATRAD) when the procurement is $5 million or
more. None of the 12 applicable RFAs were provided to CATRAD as required.

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Audit of PCS Procurement Processes July 05, 2018

For procurements $1 million and more, the procedures do not address the
completion of nepotism forms. Nine (60%) of 15 applicable RFAs did not have the
required nepotism forms on file.

The Disclosure of Interested Parties form is also required to be provided to the


Texas Ethics Commission and there are no procedures to address this requirement.
Five (63%) of 8 applicable RFAs did not have the required disclosure form on file
with the Texas Ethics Commission.

The General Appropriations Act, Article IX, Section 7.04 requires contracts over $50
thousand to be reported to the Legislative Budget Board (LBB) within 30 days of
contract execution or modification. Eighteen (14%) of 125 contracts tested were
not in compliance with the LBB reporting requirements.

Documentation is not consistently maintained to support the procurement


process and awarded procurements.

None of the applicable procurements tested had all the documentation needed to
ensure the procurement process was followed as intended. Documents not
maintained in the file include signed Non-Disclosure forms and signed nepotism
forms. Additionally, documentation of CATRAD review, DIR exemption or approval
and signature of Statement of Work if no exemption was granted was not always
maintained.

A consistent, efficient, and effective procurement process is not in place.

Prior to April 6, 2018, procurement staff indicated they had not been provided
policies and procedures for the RFP procurement process. Additionally, the draft
RFA procedures have not been finalized or distributed to staff and need to be
updated.

Some staff stated they were not aware nepotism forms needed to be completed for
RFAs. Additionally, some staff understood HUB requirements were not applicable to
RFAs, while other staff completed a HUB determination for RFAs.

It was determined that procurement staff were not always involved in the needs
determination, procurement planning and document development phases of the
procurement process. Some divisions within the agency complete a requisition and
their next communication with procurement staff was to provide them with a final
RFP or RFA for posting. Procurement staffs’ lack of involvement in the initial
procurement phases increases the risk that required steps of the procurement
process are not completed. For example, if procurement staff are unaware of all the
individuals who are involved in developing the solicitation they cannot ensure all
Non-Disclosure forms are signed as required.

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Audit of PCS Procurement Processes July 05, 2018

Training is not being consistently provided to staff.

A review of training materials provided by PCS determined training is not being


consistently provided to staff. As of May 30, 2018, PCS has not conducted any
trainings in SFY 2018.

Controls to ensure the integrity of the procurement process are lacking.

The current procurement process relies heavily on the integrity of each


procurement staff. The process does not have checks and balances in place. For
example, proposals are placed in a locked room until it is time to open them
however; the purchaser generally opens the proposals on their own with no
witnesses. It was also determined that divisions within HHSC would request a
specific individual procurement staff member as the purchaser for their
procurements. Consistently having the same procurement staff member work with
the same divisions increases the risk of perception of impropriety.

In addition, an important part of the competitive procurement process is the


completion of an evaluation of the respondent’s proposals. All of the 53 applicable
procurements tested had issues identified with the completed evaluations.

Policies and procedures are incomplete and are not updated to reflect
current processes and statutory requirements.

RFP procedures are not complete. A review of the policies and procedures
determined that although there are procedures related to evaluation preparation,
there are no procedures related to the receipt and opening of responses.

Additionally, the RFA procedures are in draft form, considered to be outdated, and
have not been provided to the procurement staff. Our review also identified the use
of “Rolling” RFPs as a procurement method. However, procurement staff indicated
they did not know what a rolling RFP was and policies or procedures related to
those types of procurements were unavailable.

The HHSC Contract Management guide has also not been updated to reflect Senate
Bill 533 which lowered the threshold for procurements to be sent to CATRAD from
$10 million to $5 million.

Data within the System of Contract Operation and Reporting (SCOR) is not
accurate or complete.

The field within SCOR for “Procurement Type” is not accurate and cannot be relied
upon. A review of the data within SCOR identified 189 blanks within the
“Procurement Type” field, which indicates the data within SCOR is not complete.
Further, 6 (12%) of 50 contracts initially selected for testing were not procured

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through an RFP as labeled. The lack of accuracy and completion within this field
prevented the identification of a complete population of contracts that originated
from an RFP or RFA procurement type.

Additionally, not all contracts from the Department of State Health Services (DSHS)
have been entered in SCOR. Without accurate and complete data, the accuracy of
both internal and external reporting on procurements is at risk.

The effectiveness of workflows in CAPPS Financials 9.2 are impacted by the


accuracy of data entry.

Testing of 100 procurements determined that 18 had a requisition with an initial


requisition amount and an initial estimated amount of $0 or $0.01. As a result, if
these 18 had been entered into CAPPS, as described above, the appropriate
workflows would not have occurred. An additional six procurements did not have
any documentation to support the initial or estimated value of the requisition. If a
requisition does not have the correct initial estimated dollar amount, CAPPS will not
include the appropriate levels of approval within the requisition and executive
management may not approve requisitions when required.

Several best practices related to procurement were identified (refer to the Audit
Results and Appendix C).

The results of this audit indicated additional audit work is needed in specific areas.
As a result, Internal Audit will propose future audits in the following areas:

 CAPPS Financials 9.2


 SCOR
 Contract Management
 Program areas involvement in the initial document development procurement
phase.

We express our appreciation to management and staff in the Procurement and


Contracting Services division, the Department of State Health Services Contract
Management division, and the Department of Family and Protective Services for
their cooperation and assistance during this audit.

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BACKGROUND

Procurement and Contracting Services (PCS) is the centralized office for Health and
Human Services (HHS) that handles procurement and contracting services for the
HHS System, which includes the Health and Human Services Commission and the
Department of State Health Services (DSHS). PCS also handles procurement for the
Department of Family and Protective Services (DFPS). PCS partners with HHS and
DFPS staff to plan procurements, develop solicitation documents, evaluate
proposals, conduct negotiations, award contracts, execute contracts, and manage
and monitor contracts.

Within PCS, the Complex Team is responsible for processing procurements where a
Request for Proposal (RFP) or Request for Application (RFA) is needed. An RFP is a
solicitation requesting submittal of a proposal in response to the required scope of
services and includes some form of a cost proposal. The RFP process allows for
negotiations between a proposer and the issuing agency. An RFA is a solicitation
notice in which HHS announces that grant funding is available and allows
organizations to present applications on how the funding could be disbursed.

RFPs and RFAs follow a similar procurement process in PCS. The procurement
process consists of the following ten phases:

 Determination of Need – The appropriate internal approvals are obtained for


the requisition, determination of Subrecipient or Recipient is completed,
Statement of Work (SOW) is completed, the requisition is assigned to a
purchaser.
 Procurement Planning – RFP/RFA template is completed using the SOW
provided by the program, kick-off meeting is held, timeline is developed, and
Non-Disclosure forms are signed.
 Document Development – Complete final review of solicitation and obtain
appropriate approvals, ensures completion of HUB review and determination,
and ensures external reviews (Contract Advisory Team – Review and
Delegation (CATRAD) and the Department of Information Resources (DIR)
Quality Assurance Team (QAT)) are completed as appropriate.
 Solicitation Process – Ensures posting of solicitation to Electronic State
Business Daily (ESBD), provide notice of solicitation to approved vendors on
the supplemental list, conducts vendor conference, and ensures addendums
are posted to ESBD.
 Historically Underutilized Business (HUB) Compliance – Review of the
respondent’s HUB Sub-contracting plans and document any findings related
to the review.

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 Evaluation Preparation, Response Receipt, and Opening – Obtain acceptance


of sub-criteria and weights with program, legal, and PCS manager, document
response receipts within procurement file, and document the opening of
responses.
 Procurement Evaluations – Coordinate and facilitate evaluation training,
ensure Nepotism Disclosure forms are signed as appropriate, send
notification of conflicts to PCS Associate Commissioner and HHSC Ethics
Office, work with program and legal to obtain responses to clarification
questions, compile and review evaluator scores and identify outliers, resolve
outliers as appropriate, obtain approval of competitive range from program,
submits recommendations for respondents selected to PCS Manager for
approval. The PCS Manager completes a qualitative review of rankings and
approves the purchaser’s recommendation.
 Contract Negotiations – Coordinates discussions and negotiations with all
selected respondents, facilitates and documents the negotiation process,
coordinates best and final offers, and routes all best and final offers to
program and legal for review and concurrence.
 Recommendation for Awards – Drafts the justification for award (Action
Memo for Executive Commissioner approval) and coordinates review of
justification with program and legal, ensures all requirements of RFP/RFA are
incorporated into the final contract, finalizes contract packet, and routes final
contract packet for signatures.
 Contract Award – Post final award to ESBD, complete the procurement file
and obtain PCS Manager approval of file, once approval obtained, forward
procurement file to the Central File room for storage.

An RFA differs from the above process in the HUB compliance phase of the
procurement. The Comptroller of Public Accounts (Comptroller) does not consider
grants to be goods and services as defined by Texas Government Code, Chapter
2161, Subchapter F. Therefore, a determination of subcontracting opportunities
would not need to be made. However, the Comptroller does recommend that an
agency ensures it is in compliance with any HUB type Federal requirements outlined
within the grant.

Additionally, the procurement process includes Executive Commissioner approval


over the selected respondents and grantees. There are also delegation of approvals
that may not be reflected in the summary of the procurement process.

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AUDIT RESULTS

This audit was initiated at the request of the Executive Commissioner on March 19,
2018. The audit focused on the procurement process from needs determination
through contract award. One hundred procurements were tested, 75 were Request
for Proposals (RFPs) and 25 were Request for Applications (RFAs). These
procurements were in various stages of the procurement process ranging from
determination of need to contract award.

Fifty (50%) of the 100 procurements reviewed resulted in 601 contracts awarded.
The audit tested each procurement for 64 attributes1. It is important to note not all
attributes were applicable to each procurement. This is due to the various phases
the procurement was in, whether there was only one or no respondents to the
procurement, as well as the type of procurement. For a complete listing of all
attributes tested see Appendix B. The audit results presented below are based on
applicable attributes.

As part of the audit, best practices were researched, identified, and noted
throughout the audit results. A full listing of best practices identified are located in
Appendix C. Best practices are often considered to be proven practices or processes
that have been successfully used by multiple organizations. For the purposes of this
audit, the primary source for best practices was the State and Local Government
Procurement: A Practical Guide. Second ed., The National Association of State
Procurement Officials, 2015.

Procurement processes do not ensure compliance with all state


requirements.

The Procurement and Contracting Services (PCS) Operating Procedures for Request
for Proposals does not have procedures in place to ensure procurements related to
consulting services are published in the Texas Register as required by Texas
Government Code §2254.029. Any consulting procurement that is $15,000 or more
is required to be published in the Texas Register. One RFP for $1 million was
determined to be consulting based and therefore should have been, but was not
posted to the Texas Register.

Additionally, procedures are not in place to ensure the Disclosure of Interested


Parties form is completed for procurements $1 million or more and provided to the
Texas Ethics Commission as required by Texas Government Code §2252.908. The
Disclosure of Interested Parties form is used to identify those with a controlling

1Attribute sampling is a statistical process typically used in audit procedures to analyze the
characteristics of a given population. Attribute sampling is often used to test whether internal controls are
being followed.

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interest in a business entity with whom a governmental entity or state agency


contracts. Twenty-four (80%) of 30 RFPs with contracts that exceeded $1 million
did not have the required disclosure form on file with the Texas Ethics Commission.

The Draft Request for Application (RFA) Process Overview document does not
include procedures to ensure RFAs are sent to the Comptroller’s Contract Advisory
Team – Review and Delegation (CATRAD) when the procurement is $5 million or
more. Twelve (100%) of 12 applicable RFAs were not provided to CATRAD as
required.

For procurements $1 million and more, the procedures do not address the
completion of nepotism forms. Nine (60%) of 15 applicable RFAs did not have the
required nepotism forms on file.

The Disclosure of Interested Parties form is also required to be provided to the


Texas Ethics Commission and there are no procedures to address this requirement.
Five (63%) of 8 applicable RFAs did not have the required disclosure form on file
with the Texas Ethics Commission.

Procedures are also not in place to ensure HUB subcontracting opportunities are
identified if required by the funding grant.

Staff stated they had been directed by PCS Executive Management that RFAs do not
need to be sent to CATRAD for review as they were grants. However, discussion
with the Comptroller and review of Texas Government Code §2155.140 indicates
that only federally funded grants do not need to be reviewed by CATRAD. If state
funds are included in the grant and awards are to be made to private entities the
solicitation should be provided to CATRAD for review if it meets the $5 million
threshold.

The General Appropriations Act, Article IX, Section 7.04 requires contracts over $50
thousand to be reported to the Legislative Budget Board (LBB) within 30 days of
contract execution or modification. Eighteen (14%) of 125 contracts tested were
not in compliance with the LBB reporting requirements.

The General Appropriations Act, Article IX, Section 7.12 also requires contracts for
more than $10 million have an attestation letter, solicitation documents, and
contract documents reported to the LBB along with the contract award. Eleven
contracts were determined to meet the $10 million threshold. All eleven had the
attestation letter reported to the LBB. However, the solicitation or contract
documents were not reported for any of the eleven contracts.

Compliance with state requirements is important to ensure the procurement


process is completed as required and contract reporting requirements are met.

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Recommendation 1

PCS, in coordination with HHS Legal, should identify all applicable state
requirements for RFPs and RFAs and update their policies and procedures to ensure
requirements are being met.

Management Response

Action Plan

The PCS 160 – HHS Solicitation Checklist – RFPs, RFAs, RFQs and RFOs was
updated, in coordination with attorneys from HHS System Contracting and staff
from the Department of Information Resources (DIR) and the Office of the
Comptroller of Public Accounts (CPA), to include all requirements to be completed
for large procurements. In addition, Compliance and Quality Control (CQC) has
created a Legal Entity Required Screening Guide that includes instructions and web
addresses to use to complete the required vendor checks, outlined on the PCS 160
– HHS Solicitation Checklist – RFPs, RFAs, RFQs and RFOs, and has provided both
of the documents to the procurement staff and uploaded both of the documents to
the PCS SharePoint Forms Folder.

HHSC is currently engaging a consultant to complete an assessment of the current


procurement and contracting practice and assist with a re-design, as necessary. At
that time, operating procedures, processes and manuals will be revised accordingly.

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

May 2018 - The PCS 160 – HHS Solicitation Checklist – RFPs, RFAs, RFQs and RFOs
was updated and uploaded to the PCS SharePoint Forms Folder in May of 2018. The
Legal Entity Required Screening Guide was provided to staff by email on May 22,
2018 and uploaded to the PCS SharePoint Forms Folder.

July 2018 - Comprehensive operating procedures that outline the processes


necessary for RFPs and RFAs will be completed and implemented by July 30, 2018
as PCS OP 570 - Process Overview – Request for Proposals (RFP) and PCS OP 572 -
Process Overview – Request for Applications (RFA) and distributed to staff.

Recommendation 2

PCS should ensure staff are trained on all applicable state requirements.

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Management Response

Action Plan

All PCS certified purchasers and contract specialists have received the statutorily
mandated procurement training that covers all applicable state requirements
necessary for purchasing. However, PCS Management is taking additional steps to
ensure that all applicable state requirements are being completed.

The PCS 160 – HHS Solicitation Checklist – RFPs, RFAs, RFQs and RFOs was
updated, in coordination with attorneys from HHS System Contracting and staff
from DIR and the CPA, to include all requirements to be completed for large
procurements. In addition, Compliance and Quality Control (CQC) has created a
Legal Entity Required Screening Guide that includes instructions and web addresses
to use to complete the required vendor checks, outlined on the PCS 160 – HHS
Solicitation Checklist – RFPs, RFAs, RFQs and RFOs, and has uploaded it to the PCS
SharePoint Forms Folder.

CQC staff are currently drafting operating procedures that outline the processes
necessary for large procurements to comply with state law and the State of Texas
Procurement and Contract Management Guide. Following completion of these
operating procedures, CQC staff will review, revise and draft, where necessary,
operating procedures that outline the process used for IT related purchases,
including RFOs, and smaller purchases or purchases using the Invitation for Bid
(IFB) procurement method as well as the associated checklist(s).

As operating procedures are completed, CQC staff will coordinate with PCS
Management to retrain staff on the applicable state requirements required for each
type of solicitation.

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

July 2018 - PCS Management will continue to ensure that purchasers receive the
statutorily mandated procurement training that covers all applicable state
requirements necessary for purchasing. In addition, as operating procedures are
completed CQC staff will coordinate with PCS Management to retrain staff on the
applicable state requirements required for each type of solicitation, starting with the
RFP, RFA, and RFQ requirements.

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Recommendation 3

PCS should implement a review process to ensure all requirements are being met.

Management Response

Action Plan

The PCS 160 – HHS Solicitation Checklist – RFPs, RFAs, RFQs and RFOs was
updated, in coordination with attorneys from HHS System Contracting and staff
from DIR and the CPA, to include all requirements to be completed for large
procurements. In addition, Compliance and Quality Control (CQC) has created a
Legal Entity Required Screening Guide that includes instructions and web addresses
to use to complete the required vendor checks, outlined on the PCS 160 – HHS
Solicitation Checklist – RFPs, RFAs, RFQs and RFOs, and has uploaded it to the PCS
SharePoint Forms Folder.

In addition, the PCS Manager is required to review the solicitation document and
sign the PCS 138 – Electronic State Business Daily (ESBD) Solicitation Approval,
prior to posting.

CQC staff are currently drafting operating procedures that outline the processes
necessary for large procurements to comply with state law and the State of Texas
Procurement and Contract Management Guide. Following completion of these
operating procedures, CQC staff will review, revise and draft, where necessary,
operating procedures that outline the process used for IT related purchases,
including RFOs, and smaller purchases or purchases using the Invitation for Bid
(IFB) procurement method as well as the associated checklist(s).

The implementation of operating procedures for each type of procurement as well


as associated checklists that include all requirements to be completed during a
solicitation and documented in the associated procurement file should be an
effective tool for staff to use to ensure compliance with agency procedures, state
law, and the State of Texas Procurement and Contract Management Guide, and for
PCS managers to use to ensure that the purchaser has been compliant, as both will
be required to sign and certify the final checklist.

In addition, CQC staff are currently reviewing the terms and conditions included in
the large solicitations as well as the shorter terms and conditions attached to every
purchase order to determine if they comply with state law and the State of Texas
Procurement and Contract Management Guide, and will send recommended
changes to the HHS System Contracting Division to review and finalize, and will
continue to review for updated provisions while reviewing solicitations.

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Audit of PCS Procurement Processes July 05, 2018

Finally, CQC will be sample auditing at different stages of the procurement process
to ensure that staff is complying with policies and procedures, including properly
documenting the procurement file.

HHSC is currently engaging a consultant to complete an assessment of the current


procurement and contracting practice and assist with a re-design, as necessary. At
that time, operating procedures, processes and manuals will be revised accordingly.

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Associate Commissioner, Compliance and Quality Control

Target Implementation Date

Fully Implemented

Documentation is not consistently maintained to support the


procurement process and award decisions.

None of the applicable procurements tested had all the documentation needed to
ensure the procurement process was followed as intended. See Appendix B for a
detailed listing of attributes and testing results. Examples of documentation that
was not maintained included:

 Signed Non-Disclosure forms


 Signed nepotism forms
 Evidence the procurement was sent to CATRAD for review and justifications
provided to CATRAD
 DIR exemption or evidence of approval and signature of Statement of Work
by DIR if no exemption granted
 Internal approvals of the requisition, draft procurement, and final
procurement
 Electronic State Business Daily Posting of procurement, addendums, and
award
 Completed evaluation documents
 Negotiations and Best and Final Offers
 Approvals by executive management of the final award recommendation
 Completed Form 1295 (Disclosure of Interested Parties) on file with the
Texas Ethics Commission

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The following issues identified illustrate the importance of maintaining appropriate


documentation:

 1 procurement indicated the program area management were going to use


external parties to review the draft RFP. However, there was no
documentation that the external parties signed Non-Disclosure forms.
 2 procurements in which respondents were non-compliant with HUB
Subcontracting Plans were awarded a contract with no documentation in the
file to show how the non-compliance issue was resolved.
 1 procurement obtained an exemption from DIR to procure for an
Information Technology award. However, the provided exemption had a not-
to-exceed exceed amount. The final contract exceeded the approved
exemption amount by approximately $187 million. There was no
documentation within the file to support that DIR had approved the increased
award amount.
 1 procurement identified a conflict with an evaluator which was referred to
the Legal division. However, there was no further documentation to indicate
how or whether the conflict was resolved.
 1 procurement had an evaluator that was recused, but there was no
documentation within the file to support the reason for recusal.

In addition, not maintaining all necessary documentation within the procurement


file increases the risk that the agency cannot support its decision and defend its
procurement process in the event of a protest.

Best practices state it is critical that the written record of each key step in the
procurement be sufficient to demonstrate the award decision. The amount of
documentation will depend on the type of evaluation conducted and the complexity
of the item being purchased. The procurement officer needs to look at the
documentation in the file from the view of competing bidders or offerors, the public,
the press, and auditors; and then ask whether it tells a reasonable story about the
process and particularly about the basis for award.2

Recommendation 4

PCS should develop a process and implement controls to ensure all necessary
documentation is maintained in the procurement file to support the procurement
award.

2State and Local Government Procurement: A Practical Guide. Second ed., The National Association of
State Procurement Officials, 2015 (pages 148 – 149)

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Audit of PCS Procurement Processes July 05, 2018

Management Response

Action Plan

The PCS 160 – HHS Solicitation Checklist – RFPs, RFAs, RFQs and RFOs was
updated to include all requirements to be completed for large procurements and
included in the procurement file. At the end of the procurement, the purchaser, as
well as the purchaser’s manager, is required to sign and certify that all actions have
been completed and included in the procurement file. In addition, the Compliance
and Quality Control (CQC) Team will conduct reviews on a sample basis at different
stages of the procurement process to ensure that staff is complying with policies
and procedures, including properly documenting the procurement file.

PCS Management has determined that the procurement file for large procurements
should be kept in an electronic file uploaded to the designated network folder
located under Procurement Resources, and will include a statement in all new
operating procedures that all documents associated with a procurement be stored
in such folder.

HHSC is currently engaging a consultant to complete an assessment of the current


procurement and contracting practice and assist with a re-design, as necessary. At
that time, operating procedures, processes and manuals will be revised accordingly.

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

June 2018 - Partially Completed. Deputy Executive Commissioner, Procurement and


Contracting Services, has directed procurement staff dedicated to large
procurements to track all requirements for the solicitation on the PCS 160 HHSC
Solicitation Checklist – RFPs, RFAs, RFQs and RFOs as well as all relevant internal
correspondence and to continue uploading all documents to the procurement file in
the designated network folder located under Procurement Resources in an email
sent June 28, 2018. In addition, this requirement will be included in all operating
procedures.

August 2018 - PCS Management is currently reviewing how procurement files are
created and maintained for smaller procurements and will make any adjustments, if
necessary.

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Audit of PCS Procurement Processes July 05, 2018

A consistent, efficient, and effective procurement process is not in


place.

The policies and procedures for RFPs provided had an effective date of October
2016. However, prior to April 6, 2018, procurement staff indicated they had not
been provided policies and procedures for the RFP procurement process.
Additionally, the draft RFA procedures have not been finalized or distributed to staff
and need to be updated. Discussions with staff indicated they followed the process
they learned during their informal on-the-job training. However, staff reported they
were discouraged from asking questions of management.

As noted previously, 9 (60%) of 15 RFAs tested did not have signed nepotism
forms when they were applicable. Some staff stated they were not aware nepotism
forms needed to be completed for RFAs. Additionally, some staff understood HUB
requirements were not applicable to RFAs while other staff completed a HUB
determination for RFAs. Per guidance from the Comptroller, state HUB requirements
are not applicable to grants. However, they do recommend the procurement is
compliant with any federal HUB type requirements as dictated by the grant.

Additionally, it was determined that procurement staff were not always involved in
the needs determination, procurement planning and document development phases
of the procurement process. Some divisions within the agency complete a
requisition and their next communication with procurement staff was to provide
them with a final RFP or RFA for posting. Discussions with procurement staff also
identified that they believe some divisions to be exempt from the established
procurement process.

Exempting divisions from the established procurement process and procurement


staffs’ lack of involvement in the initial procurement phases increases the risk that
required steps of the procurement process are not completed. For example, if
procurement staff are unaware of all the individuals who are involved in developing
the solicitation they cannot ensure all Non-Disclosure forms are signed as required.
Additional examples include ensuring a CATRAD review is completed and
appropriate approvals or exemptions are obtained from DIR, when required.

The State of Texas Contract Management Guide states an agency that develops a
contract for the purchase of goods or services that has a value exceeding $5 million
is required to have its contract management office or procurement director verify in
writing that the solicitation and purchasing methods and contractor selection
process comply with state law and agency policy. Therefore, if PCS is not involved
in all aspects of the procurement process, the procurement director would be
unable to verify that the procurement met state requirements and agency policy.

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Audit of PCS Procurement Processes July 05, 2018

Best practices state the procurement professional needs to be a part of planning


from the start. Otherwise the procurement process does not have the chance to
work in the most effective manner.3 Additionally, best practices also state that the
key ingredient to an effective public procurement system is leadership through the
Chief Procurement Officer. Leadership also requires that the person serving as the
Chief Procurement Officer, and those who work under that officer, adopt an attitude
of professionalism, openness, cooperation, and creativity.4

Recommendation 5

PCS should evaluate their procurement process and ensure procedures are included
that require the procurement staff to be a part of the planning process from the
beginning of every procurement.

Management Response

Action Plan

Compliance and Quality Control (CQC) staff are currently drafting operating
procedures that outline the processes necessary for all large procurements to
comply with state law and the State of Texas Procurement and Contract
Management Guide. The following statement has been included in each operating
procedure:

“PCS Purchasers and Managers are responsible for facilitating the procurement
process for [solicitation specific RFP, RFQ, RFA, RFO, Consultant]. In order to certify
the procurement and award process, PCS Purchasers should function as the primary
contact for each step of the process, from identification of the need(s) to contract
award.”

In addition, a statement addressing this issue will be included in the PCS


Procurement Manual/HHSC Contract Management Handbook to make it clear to all
HHS programs/agencies that utilize the services of PCS.

Former PCS Management has allowed certain HHS programs/agencies to bypass the
PCS processes and provide solicitations “ready to post,” which has resulted in many
required steps not being completed, many that are required by state law; therefore,
PCS purchasers and management cannot certify that purchasing methods and
contractor selection process complied with state law and agency policy.

3 State and Local Government Procurement: A Practical Guide. Second ed., The National Association of
State Procurement Officials, 2015 (page 57)
4 State and Local Government Procurement: A Practical Guide. Second ed., The National Association of

State Procurement Officials, 2015 (page 29)

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New PCS Management will communicate, with the assistance of HHS Executive
Management, that all procurements must follow the HHS PCS Procurement
Manual/HHSC Contract Management Handbook and operating procedures, and
purchasers will be instructed to follow all adopted procedures and report any HHS
agency/program to PCS Management that does not follow the adopted processes.

HHSC is currently engaging a consultant to complete an assessment of the current


procurement and contracting practice and assist with a re-design, as necessary. At
that time, operating procedures, processes and manuals will be revised accordingly.

Responsible Manager

Chief Operating Officer

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

Fully Implemented - Deputy Executive Commissioner, Procurement and Contracting


Services, sent an email on June 28, 2018 to all PCS staff with the directive that
purchasers were to be involved throughout the procurement process and that HHS
programs/agencies were not authorized to bypass any steps in the process, unless
specifically authorized by executive management. In addition, Interim Chief
Operating Officer, will provide the same directive to PCS Executive Management for
all HHS programs/agencies.

December 2018 - This directive will be included in all operating procedures and
manuals as they are reviewed and revised over the next six (6) months.

Recommendation 6

HHSC Executive Management should identify the divisions within the agency that
have established their own procurement functions and determine if the agency
would be better served by bringing those functions and associated Full-Time
Equivalents (FTEs) into PCS.

Management Response

Action Plan

HHSC is currently engaging a consultant to complete an assessment of the current


procurement and contracting practice and assist with a re-design, as necessary.
This staffing issue will be reviewed by the consultant and staffing changes will be
made accordingly.

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Audit of PCS Procurement Processes July 05, 2018

Responsible Manager

Chief Operating Officer

Target Implementation Date

December 2018 - Executive Management will review these functions and make a
determination.

Training is not being consistently provided to staff.

A review of training materials provided by PCS determined training is not being


consistently provided to staff. PCS conducted 17 trainings in State Fiscal Year (SFY)
2015, 8 trainings in SFY 2016, 3 trainings in SFY 2017 and, as of May 30, 2018, no
trainings in SFY 2018. Additionally, two PCS purchasers were not in compliance with
the required HHS Ethics for Contracting and Procurement Personnel training.

Procurement staff within the complex team are Certified Texas Procurement
Managers (CTPM) or Certified Texas Contract Developers (CTCD). The Comptroller
requires purchasers to obtain the CTPM to work on procurements over $100,000
and RFPs. The Comptroller recently changed the CTPM to the CTCD as of January 1,
2018. The CTCD has a 24 hour continuing education requirement for procurement
professionals every three years. One of the 24 hours must be ethics related to
maintain certification.

Best practices state training for procurement staff is critical to maintaining a high
level of professionalism within the procurement process. They also state that the
procurement office needs to devote some of its resources to assure the professional
development and certification of procurement staff.5

Recommendation 7

PCS should establish and implement a formal training plan for procurement staff to
ensure they have the requisite training to maintain certifications and understand
their job functions.

Management Response

Action Plan

PCS currently tracks all purchaser certifications including expirations and sends out
reminders about expirations to provide assistance. Individual purchasers and

5State and Local Government Procurement: A Practical Guide. Second ed., The National Association of
State Procurement Officials, 2015 (page 22)

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Audit of PCS Procurement Processes July 05, 2018

contract specialists are responsible for tracking their continuing education and
training to maintain their certifications. In addition, PCS Management will require
managers to include certification and training requirements in PCS employee
evaluations.

PCS Management is currently working on a training plan that includes both


substantive procurement training as well as technical training on the systems used
by HHS to complete the process.

PCS Management is currently working with the Comptroller of Public Accounts (CPA)
Statewide Procurement Division’s Training and Policy Development Program to see
if the CPA can create agency-specific training, advanced purchaser training and
reinstitute the brown bag lunches at the North Complex as well as requesting
continuing education certification for some of the HHSC trainings, such as the HHS
Ethics for Contracting & Procurement Personnel.

Currently, PCS Business Operations staff provides CAPPS Financial training for PCS
staff, as needed or requested by PCS Management. In addition, PCS Business
Operations staff provides a CAPPS, Tips, Tricks and Reminders class for purchasers
every Wednesday where they can ask questions related to system processing.

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

September 2018

Controls to ensure the integrity of the procurement process are


lacking.

The current procurement process relies heavily on the integrity of each


procurement staff member as the process does not have checks and balances in
place. For example, proposals are placed in a locked room until it is time to open
them however; when it is time to open them, the purchaser generally does this on
their own with no witnesses. The proposals are loaded onto a shared drive and a
SharePoint site for the evaluators to review. This increases the risk of the
perception of impropriety.

It was also determined that divisions within HHSC would request a specific
individual procurement staff member as the purchaser for their procurements.
Consistently having the same procurement staff member work with the same
divisions increases the risk that the purchaser may not be able to be unbiased in
their dealings with the division, leading to the perception of impropriety.

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Additionally, an important part of the competitive procurement process is the


completion of an evaluation of the respondent’s proposals. The evaluation of
proposals is based on the scoring criteria and methodology that is defined within
the solicitation. A team of evaluators that are subject matter experts are convened
and will score each proposal. The final scores are compiled by the purchaser and a
recommendation of award is made. Typically, the evaluations are scored with an
evaluation tool that is created using Microsoft Excel.

All of the 53 applicable procurements tested had issues identified within the
completed evaluations. The following issues were identified:

 23 (43%) had evaluations where scores for specific criteria in the evaluator’s
sheets migrated to the incorrect criteria in the master sheet.
 6 (11%) had evaluations where criteria with values in the evaluators sheets
migrated to the master sheet as a blank cell.
 18 (34%) had evaluations where manual entries overrode formulas in the
master sheet, including unacceptable entries.
 10 (19%) had evaluations with blank cells in the evaluator’s sheets migrate
as a “0” value in the master sheet.
 21 (40%) had evaluations use inconsistent formulas in the master sheet.

Additionally, 39 (74%) of 53 procurements had other issues identified with the


evaluation process. The following are examples of other issues identified:

 1 procurement used different evaluation tools to evaluate proposals.


 3 procurements utilized different scoring criteria to evaluate proposals.
 3 procurements had the review of proposals split by teams. For example,
team 1 would evaluate respondents A, B, and C while team 2 would evaluate
respondents D, E, and F. Therefore, not all evaluators reviewed all proposals
received.
 11 procurements did not maintain all the individual evaluator’s scores and
therefore could not be tested.
 9 procurements only had paper copies of the evaluation tool, which limited
testing.
 3 procurements incorrectly weighted scores.
 2 procurements had evaluators that did not score all respondents.

Through testing of the evaluation sheets, instances of excessive criteria were


identified. Criteria are selected by program staff and weighted based on
importance. Evaluation criteria for individual procurements ranged from six to more
than 1,200 items that required scoring. The more items being scored limits the
impact of using weights and increases the difficulty on the evaluator to score
consistently. Meaningful criteria should be identified and used for scoring to
facilitate the selection of the best respondent.

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It was also determined that divisions within the agency did not always identify the
criteria and weights that would be used to score respondents within the solicitation.
Reviews of the solicitation by CATRAD identified the lack of scoring measures and
weights. CATRAD recommended that respondents should be able to easily
understand upon what they are being evaluated and the weight of each of those
criteria. This allows the respondent to better answer the solicitation. This
recommendation was not accepted by the agency.

Evaluating proposals in this manner increases the risk for inconsistency in the
evaluation process. Additionally, proposals should only be scored based on criteria
known to the respondents.

Best practices state each solicitation set forth the criteria to be considered in the
evaluation of bids or proposals for award, and that no factor shall be considered
that is not included in the solicitation.6

Recommendation 8

PCS should establish a quality assurance review process to ensure second level
reviews are being completed throughout the procurement process.

Management Response

Action Plan

HHS has created a Compliance and Quality Control (CQC) Team to review various
stages of the solicitation process for on-going procurements, manage the evaluation
tool and scoring process, and review, revise and create, where necessary,
processes and procedures to ensure compliance with state law and the State of
Texas Procurement and Contract Management Guide.

CQC approved and implemented PCS OP 753 – Process overview – Compliance and
Quality Control Review of Solicitations and Evaluations effective June 11, 2018 to
address the review of solicitations prior to issuance and the entire evaluation
process. In addition, OP 753 requires purchasers to submit the required checklist
for a solicitation to CQC at the midpoint of a procurement to show that the initial
steps have been completed.

CQC staff are currently drafting operating procedures that outline the processes
necessary for large procurements to comply with state law and the State of Texas
Procurement and Contract Management Guide. Following completion of these
operating procedures, CQC staff will review, revise and draft, where necessary,

6State and Local Government Procurement: A Practical Guide. Second ed., The National Association of
State Procurement Officials, 2015 (page 143)

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Audit of PCS Procurement Processes July 05, 2018

operating procedures that outline the process used for IT related purchases,
including RFOs, and smaller purchases or purchases using the Invitation for Bid
(IFB) procurement method as well as the associated checklist(s).

The implementation of operating procedures for each type of procurement as well


as associated checklists that include all requirements to be completed during a
solicitation and documented in the associated procurement file, should be an
effective tool for staff to use to ensure compliance with agency procedures, state
law, and the State of Texas Procurement and Contract Management Guide, and for
PCS managers to use to ensure that the purchaser has been compliant, as both will
be required to sign and certify the final checklist.

Finally, CQC will conduct reviews on a sample basis at different stages of the
procurement process to ensure that staff is complying with policies and procedures,
including properly documenting the procurement file.

HHSC is currently engaging a consultant to complete an assessment of the current


procurement and contracting practice and assist with a re-design, as necessary. At
that time, operating procedures, processes and manuals will be revised accordingly.

Responsible Manager

Chief Operating Officer

Deputy Executive Commissioner, Procurement and Contracting Services

Associate Commissioner, Compliance and Quality Control

Target Implementation Date

Fully Implemented

Recommendation 9

PCS should establish a process to ensure the integrity of opening and recording bids
or proposals.

Management Response

Action Plan

Compliance and Quality Control (CQC) staff has reviewed the “bid room” process
and is working with PCS Management to make the necessary adjustments to ensure
that the process is sound, fair and defensible. All operating procedures involving the
bid room process will require that the updated process be followed; in addition, the

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Audit of PCS Procurement Processes July 05, 2018

operating procedures will outline how bids are to be opened and how to document
such opening.

The purchasers will be provided all operating procedures and will be instructed that
they be followed. All operating procedures and checklists will also be uploaded to
the PCS SharePoint Procedures Folder.

HHSC is currently engaging a consultant to complete an assessment of the current


procurement and contracting practice and assist with a re-design, as necessary. At
that time, operating procedures, processes and manuals will be revised accordingly.

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

July 2018 - Updated PCS OP 210 – Response Handling for Formal and Informal
Solicitations will be completed by July 13, 2018.

Recommendation 10

PCS should establish a process for making assignments to procurement staff that
reduces the risk of the appearance of bias.

Management Response

Action Plan

PCS Management thinks that it would be beneficial for the agency to have
purchasers and contract specialists that are “specialized” in certain areas and
procurement types. This would not preclude staff from being cross-trained to be
able to complete all types of procurements, as PCS Management recognizes that
this is vital, but would increase the level of customer service provided. Most
agencies have procurement staff that are assigned to certain areas or types of
procurements such as federal grants, construction-related procurements, service-
level agreements, information technology purchasers, and other complex
procurements, and such staff become familiarized with their customer program, the
associated legal staff, the relevant areas of state law and associated vendor
requirements, the specific terms and conditions required, federal grant
requirements, funding source issues, and many other requirements that are
program specific.

PCS Management feels that by staffing the division to the proper levels, having
good management in place, creating comprehensive operating procedures and

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checklists, and creating second level reviews, there will be no risk of the
appearance of bias in the procurement process regardless of which purchaser is
handling a specific procurement and by specializing some of the procurement staff
to handle certain types of procurements, it will result in decreasing lengthy
timelines for the solicitation process, increasing the quality of the solicitation
documents and improving customer service.

However, whereas purchasers will be specialized in certain areas of procurements


which may dictate the pool of purchasers that may handle a certain type of
solicitation, assignments will be made by the PCS managers based on workload and
not by request. PCS managers will not assign purchasers in response to a request
for an HHS program/agency for a specific, named purchaser

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

Fully Implemented - At this time, HHS programs/agencies may not request a


specific purchaser. Deputy Executive Director, Procurement and Contracting
Services, sent an email to PCS managers including this directive on June 28, 2018.

September 2018 - The PCS Management plan to specialize purchasers in certain


areas of procurement will be ongoing over the next three months as PCS
Management continues to fill positions and properly staff the division

Recommendation 11

PCS should advise procurement requestors and assist in identifying appropriate


criteria selection that will be used to score respondents. This should be part of the
documented procurement process.

Management Response

Action Plan

Compliance and Quality Control (CQC) staff are currently drafting operating
procedures that outline the processes necessary for large procurements to comply
with state law and the State of Texas Procurement and Contract Management
Guide. Each operating procedure requires the purchaser to work with the HHS
program/agency on the evaluation criteria and sub-criteria to be included in the
solicitation as well as to engage CQC staff in reviewing the criteria and sub-criteria
and creating the evaluation tool.

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Each operating procedure states that scored criteria and sub-criteria be prioritized
and weighted according to their relative importance in delivering best value to the
State; that the number of criteria and sub-criteria should be kept to the essential
minimum and be clearly defined for the vendor community; and that scored criteria
and sub-criteria be designed to assess the extent to which the respondent is able to
meet and exceed the requirements to perform the contract.

HHSC will update the standard language for “oral presentations” or “interviews” in
solicitation documents for certain procurements where the initial scored responses
may not provide enough information to inform contract award. The standard
language will state that a competitive field will be identified and evaluated based on
information presented in the solicitation documents and will define how the oral
presentations or interviews will be scored.

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

September 2018 - Updated language will be included in all solicitations initiated


after September 1, 2018.

Recommendation 12

PCS should establish a requirement that all persons identified to evaluate proposals
score all respondents for their assigned criteria.

Management Response

Action Plan

Compliance and Quality Control (CQC) staff are currently drafting operating
procedures that outline the processes necessary for large procurements to comply
with state law and the State of Texas Procurement and Contract Management
Guide. Each operating procedure states that all persons identified to evaluate
proposals must score all respondents for their assigned criteria.

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

Fully Implemented - Although operating procedures are being drafted and finalized
that include this directive, Deputy Executive Commissioner, Procurement and

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Audit of PCS Procurement Processes July 05, 2018

Contracting Services, sent an email on June 28, 2018 to PCS purchasers and CQC
staff with the directive that all persons identified to evaluate proposals must score
all respondents for their assigned criteria.

Recommendation 13

To increase transparency, PCS should ensure all solicitations include criteria, sub-
criteria, and weights prior to being posted. In addition, the scoring methodology
should be clearly stated.

Management Response

Action Plan

Compliance and Quality Control (CQC) staff are currently drafting operating
procedures that outline the processes necessary for large procurements to comply
with state law and the State of Texas Procurement and Contract Management
Guide. Each operating procedure includes a statement that all solicitation
documents created after September 1, 2108 must include the evaluator score sheet
and an explanation of the scoring methodology as an exhibit to the solicitation.

HHSC will update the standard language for “oral presentations” or “interviews” in
solicitation documents for certain procurements where the initial scored responses
may not provide enough information to inform contract award. The standard
language will state that a competitive field will be identified and evaluated based on
information presented in the solicitation documents and will define how the oral
presentations or interviews will be scored.

Finally, if past contract performance of a respondent including information from the


Vendor Performance Tracking System, prior work performance with an HHS agency,
and other state agencies or other governmental agencies which are familiar with
respondent’s performance, are to be considered as grounds for disqualification, it
must be stated in the solicitation.

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

September 2018 - Updated language will be included in all solicitations initiated


after September 1, 2018.

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Audit of PCS Procurement Processes July 05, 2018

Policies and procedures are incomplete and are not updated to


reflect current processes and statutory requirements.

As previously noted, discussions with procurement staff indicated they had not been
provided policies and procedures for RFP development prior to April 6, 2018. A
review of the policies and procedures provided determined that the Evaluation
Preparation, Response Receipt, and Opening phase are not complete. Although
there are procedures related to evaluation preparation, there are no procedures
related to response receipt and opening of responses. Best practices state bid and
proposal openings should be recorded in some fashion. 7

Additionally, the RFA procedures are in draft form, considered to be outdated, and
have not been provided to the procurement staff. Review also identified the use of
“Rolling”8 RFPs as a procurement method. However, procurement staff indicated
they did not know what a rolling RFP was and when they asked for policies or
procedures related to those types of procurements they were told there might be
some in draft form.

The HHSC Contract Management guide also has not been updated to reflect Senate
Bill 533 which lowered the threshold for procurements to be sent to CATRAD from
$10 million to $5 million.

Having policies and procedures that are outdated or not provided to staff increases
the risk that staff are not completing the procurement process as intended.
Additionally, there is an increased risk of inconsistency within the procurement
process.

Best practices state the central procurement office should publish and maintain
appropriate manuals for procurement personnel that establish day-to-day
procurement procedures in simple, concise language.9 Best practices also state that
an operations manual establishes and describes the internal procedures for the
procurement office. Those procedures should be a practical guide for a procurement
officer. 10

7 State and Local Government Procurement: A Practical Guide. Second ed., The National Association of
State Procurement Officials, 2015 (page 110)
8 Per PCS management, a rolling RFP is used to allow programs to obtain a pool of contractors for a

specific service without posting the RFP multiple times. Having multiple closing dates allows more
vendors to have the ability to respond and become part of the pool of contractors if awarded.
9 State and Local Government Procurement: A Practical Guide. Second ed., The National Association of

State Procurement Officials, 2015 (page 12)


10 State and Local Government Procurement: A Practical Guide. Second ed., The National Association of

State Procurement Officials, 2015 (page 17)

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Audit of PCS Procurement Processes July 05, 2018

Recommendation 14

Policies and procedures for RFPs and RFAs should be comprehensive, updated,
finalized, approved by PCS management, and distributed to staff for
implementation.

Management Response

Action Plan

PCS Compliance and Quality Control (CQC) staff are currently drafting operating
procedures that outline the process necessary for a Request for Applications (RFAs)
and Request for Proposals (RFPs) to comply with state law and the State of Texas
Procurement and Contract Management Guide. The PCS 160 – HHS Solicitation
Checklist – RFPs, RFAs, RFQs and RFOs was updated to include all requirements to
be completed for large procurements, including RFAs and RFPs, and to be included
in the final procurement file. In addition, PCS CQC has created a Legal Entity
Required Screening Guide that includes instructions and web addresses to use to
complete the required vendor checks, outlined on the PCS 160 – HHS Solicitation
Checklist – RFPs, RFAs, RFQs and RFOs, and has uploaded it to the PCS SharePoint
Forms Folder.

Purchasers will be provided the operating procedures and instructed that they be
followed. All operating procedures will also be uploaded to the PCS SharePoint
Procedures Folder.

HHSC is currently engaging a consultant to complete an assessment of the current


procurement and contracting practice and assist with a re-design, as necessary. At
that time, operating procedures will be revised accordingly.

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

May 2018 - Partially Completed. The PCS 160 – HHS Solicitation Checklist – RFPs,
RFAs, RFQs and RFOs was updated and uploaded to the PCS SharePoint Forms
Folder in May of 2018. The Legal Entity Required Screening Guide was provided to
staff by email on May 22, 2018 and uploaded to the PCS SharePoint Forms Folder.

July 2018 - Comprehensive operating procedures that outline the processes


necessary for RFPs and RFAs, will be completed and implemented by July 31, 2018
as PCS OP 570 - Process Overview – Request for Proposals (RFP) and PCS OP 572 -
Process Overview – Request for Applications (RFA) and distributed to staff.

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Audit of PCS Procurement Processes July 05, 2018

Recommendation 15

The HHSC Contract Management Guide and the HHS Procurement Manual should be
updated periodically and consolidated to ensure alignment with procurement
processes and state requirements.

Management Response

Action Plan

The PCS Contract Oversight & Support (COS) has updated the HHS Contract
Management Handbook to include the deficiencies identified in the audit. In
addition, PCS COS plans to review the handbook and make further modifications
during the month of July as they review the handbook yearly to ensure compliance
with any statutory or policy changes Thereafter, Compliance and Quality Control
(CQC) will work with PCS COS to merge the HHS Procurement Manual with the
HHSC Contract Management Handbook to create one comprehensive handbook and
review the final handbook to ensure compliance with state law and the State of
Texas Procurement and Contract Management Guide.

HHSC is currently engaging a consultant to complete an assessment of the current


procurement and contracting practice and assist with a re-design, as necessary. At
that time, the HHS Contract Management Handbook will be revised accordingly.

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Associate Commissioner, Contract Administration

Associate Commissioner, Compliance and Quality Control

Target Implementation Date

August 2018 - PCS COS will review and finalize updates to the HHSC Contract
Management Handbook by August 31, 2108.

December 2018 - Thereafter, PCS COS will work with CQC to merge the guide with
the PCS Procurement Manual and create one comprehensive handbook by
December 31, 2018.

Recommendation 16

PCS should ensure procurement staff are trained on all updated policies and
procedures.

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Audit of PCS Procurement Processes July 05, 2018

Management Response

Action Plan

Prior to 2017, PCS provided several procurement related trainings on updated


policies/procedures; however, when the agency began the CAPPS Fin User
Acceptance Testing those trainings were set aside as staff time and resources were
focused on training PCS staff to use the new system.

Compliance and Quality Control (CQC) staff are currently drafting operating
procedures that outline the processes necessary for large procurements to comply
with state law and the State of Texas Procurement and Contract Management
Guide. The PCS 160 – HHS Solicitation Checklist – RFPs, RFAs, RFQs and RFOs was
updated to include all requirements to be completed for large procurements.
Following completion of these operating procedures, CQC staff will review, revise
and draft, where necessary, operating procedures that outline the process used for
IT related purchases, including RFOs, and smaller purchases or purchases using the
Invitation for Bid (IFB) procurement method as well as the associated checklist(s).

PCS Management will work with the CQC Team to provide training to staff on the
updated policies and procedures.

HHSC is currently engaging a consultant to complete an assessment of the current


procurement and contracting practice and assist with a re-design, as necessary. At
that time, training recommendations will be reviewed and implemented.

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

September 2018

Recommendation 17

HHS Executive management should ensure all agency and program staff involved in
the procurement process are trained on updated policies and procedures. This
should include the importance of not operating outside the procurement process
and ensuring solicitations have the information needed to ensure respondents
understand how their bids or proposals are being scored.

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Management Response

Action Plan

PCS Management is exploring the idea of mandatory training for all HHS
program/agency staff that are involved in the procurement and contracting process.

HHSC is currently engaging a consultant to complete an assessment of the current


procurement and contracting practice and assist with a re-design, as necessary.
This agency-wide training will be reviewed by the consultant and PCS Management
will implement training recommendations at that time.

In addition, Compliance and Quality Control will work with staff to review the HHS
Procurement Manual and the HHS Contract Management Handbook to ensure each
complies with state law and the State of Texas Procurement and Contract
Management Guide and merge the two to create one comprehensive handbook to
provide HHS agency staff a common frame of reference for the solicitations and
development of agency contracts including, procurement methods, planning,
preparing of solicitations, the solicitation process, evaluation and award of a
contract, contracting authority, type and formation.

Responsible Manager

Chief Operating Officer

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

December 2018

Data within the System of Contract Operation and Reporting (SCOR)


is not accurate or complete.

The System of Contract Operation and Reporting (SCOR) is the sole system of
record for the management, reporting and compliance for all HHS contracts. SCOR
is also the system of record for reporting contract requirements as defined by the
Comptroller, LBB, Texas Government Code, and HHS internal policies. SCOR
replaced the HHS Contract Administration and Tracking System (HCATS) on
September 1, 2017 to meet 84th Legislative requirements of Senate Bill 20. Active
contracts with information maintained in HCATS and with an end date after August
31, 2017 were moved to SCOR.

A review of the data within SCOR identified 189 blanks within the “Procurement
Type” field. The “Procurement Type” field is the data field that identifies what type

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of procurement from which the contract originated. Having a blank field indicates
the data within SCOR is not complete. The lack of completion within this field
prevented auditors from identifying a complete population of contracts that
originated from an RFP or RFA procurement type.

A population of contracts was identified that were labeled in SCOR as having been
procured through RFPs to select a sample for testing purposes. It was determined
that 6 of 50 (12%) contracts were not procured through an RFP as labeled. The
contracts were either noncompetitive, interagency contracts, inter-local cooperation
contracts, or an Invitation for Bid. As a result, it was determined the field within
SCOR for “Procurement Type” is not accurate and cannot be relied upon.

It was also determined not all contracts from DSHS have been entered into SCOR.
Without accurate and complete data the agency cannot rely on the information
obtained from the system. Additionally, any reports created from SCOR would not
be complete.

Recommendation 18

PCS management should work with DSHS management to ensure all DSHS
contracts are entered into SCOR.

Management Response

Action Plan

PCS Contract Oversight & Support (COS) documents the requirements related to
SCOR in the SCOR User Manual and SCOR Contract Manager Guide.

For contracts executed after September 1, 2017, the HHS Contract Management
Handbook directs staff to upload an executed contract into the SCOR Contract
module, History sub-module, within ten (10) calendar days from execution.

For contracts executed before September 1, 2017, contracts uploaded into HCATS
migrated to SCOR. However, HHS agencies had different business practices and
reliability with regard to uploading contracts into HCATS and some contracts are so
old that they pre-date HCATS altogether. Different business areas currently have
discretion related to staff direction to upload these contracts into the SCOR
Contract module, History sub-module, and, therefore, this will be an ongoing effort
to identify and require all contracts be uploaded into SCOR.

DSHS programs were not previously required to use SCOR. Perhaps because of that
history, some DSHS programs have been slow to upload contract documents into
SCOR or provide copies so that they can be uploaded on their behalf. COS is
engaged in a project with DSHS to upload documentation to the extent that it is

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made available. To ensure that all contracts are entered into SCOR, DSHS, as well
as all other HHS agencies/programs will be directed to upload all contract
documents or provide copies to COS for uploading. In addition, PCS Management
will explore the current process of uploading future contracts into SCOR to
determine if there is a more efficient manner in which to accomplish this task.

Responsible Manager

Chief Operating Officer

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

December 2018

Recommendation 19

PCS management should establish a process to ensure data within SCOR is


complete and accurate.

Management Response

Action Plan

PCS Contract Oversight & Support (COS) conducts a variety of quality assurance
tests on the completeness and accuracy of information within SCOR.

The majority of SCOR fields are populated from CAPPS as a required field.
Presently, COS is addressing blank fields related to contracts executed prior to
September 1, 2017 for which COS sends reminders to contract managers to
populate the fields, Department and Section, as these are required fields in SCOR
that are not populated from CAPPS.

COS has six (6) dedicated staff that conduct a variety of quality assurance reviews
on the completeness and accuracy of information within SCOR. CAPPS-related field
issues are referred to the purchaser for correction and SCOR-related field issues are
referred to the contract manager for correction. In addition, the COS SCOR Team
manages ongoing projects to address corrections or modifications on a large scale
and as requested by a business area such as updating grant-related information,
entering/correcting LBB data elements, and modifying department identifiers when
reorganizations occur.

PCS Management is currently moving business functions assigned to COS to the


PCS Business Operations that relate to IT systems to determine if any efficiencies
and or additional support would be gained by moving/merging functions.

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Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

September 2018 - PCS Management will review the current processes and
implement adjustments by September 30, 2018.

The effectiveness of workflows in CAPPS Financials 9.2 are impacted


by the accuracy of data entry.

CAPPS Financials 9.2 (CAPPS) was implemented to allow HHS to better track
acquisitions and contracts, providing more transparency and efficiency in the way
they are handled. With CAPPS, all procurement requests and approvals are
managed in one system.

The workflows within CAPPS are dependent upon the accuracy of the data entry.
The origin code entered by the initial requestor as well as the initial estimate of the
total dollar amount for the procurement determines the approval workflow.
Therefore, if a requisition does not have the correct origin code or initial estimated
dollar amount for the procurement, CAPPS will not include the appropriate levels of
approval within the requisition.

The current RFP process allows for a $0 or $0.01 initial requisition amount to
initiate the requisition. However, the initial estimated amount of the award needs to
be completed using the expected amount over the life of the contract including
renewals.

Testing of 100 procurements determined 18 had a requisition with an initial


requisition amount and an initial estimated amount of $0 or $0.01. An additional six
procurements did not have any documentation to support the initial or estimated
value of the requisition. If a requisition does not have the correct initial estimated
dollar amount, CAPPS will not include the appropriate levels of approval within the
requisition and executive management may not approve requisitions when
required.

Additionally, if an approver supports multiple approval roles within the workflow,


their initial approval will count towards all approvals required by that individual.
Once the approver has approved the requisition at the first approval point, CAPPS
will then auto-approve them at later workflow approval points and the requisition
will automatically move to the next individual that needs to approve. Therefore, it is
important that a reviewer is aware of what their approval means when they initially
approve a requisition.

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Recommendation 20

PCS should require the requestor to enter in the appropriate initial estimated
amount based over the life of the contract including renewals.

Management Response

Action Plan

The total contract value including renewals must be entered into the request
document wizard to obtain the correct approvals and the requisition line can be
entered as $0.00. The purchaser should identify this and notify the program area
that their requisition needs to be cancelled and reentered for the correct approvals.
Prior to CAPPS 9.2, the requisition was entered for $.01 and PCS 146 was required
for approvals on the total contract values including renewals.

PCS Management is currently working with HHSC IT ESC to update the description
in the renewal requisition wizard to make it clear that the total contract value
including any potential renewals should be entered for the requisition. In addition,
PCS can provide requisition entry training that explains which requisition
amendment wizard should be chosen to reflect the contract change and the
requirement for requisition entry in detail. Finally, PCS has created “job aids” which
are located on the PCS extranet page found at PCS Training under CAPPS and SCOR
Resources. General requisition entry training can also be found under the iLearn
portal.

A memo from the Interim Deputy Executive Director of PCS was distributed to
executive management staff in a meeting on June 12, 2018 addressing this issue
and providing information on how to fill out a requisition in CAPPS. The memo was
also emailed to all executive staff and program managers by the Acting Chief
Operating Officer on June 15, 2018. The memo also includes a link to ePro
Requisition training and assistance.

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

Fully Implemented

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Recommendation 21

PCS management should work with the CAPPS Financials 9.2 staff to establish and
conduct trainings related to the system workflows, including the approval process,
for requisitions.

Management Response

Action Plan

PCS Management is exploring the idea of mandatory training for all HHS
program/agency staff that are involved in the procurement and contracting process.

HHSC is currently engaging a consultant to complete an assessment of the current


procurement and contracting practice and assist with a re-design, as necessary.
This agency-wide training will be reviewed by the consultant and PCS Management
will implement training recommendations at that time.

Currently, PCS Business Operations staff provides CAPPS Financial training for HHS
program/agency staff, as requested.

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

December 2018

Recommendation 22

PCS management should ensure purchasers do not complete requisitions that have
an initial estimated amount that does not generate appropriate approval workflows.

Management Response

Action Plan

PCS Compliance and Quality Control (CQC) staff are currently drafting operating
procedures that outline the processes necessary for large procurements to comply
with state law and the State of Texas Procurement and Contract Management
Guide. Following completion of these operating procedures, CQC staff will review,
revise and draft, where necessary, operating procedures that outline the process
used for IT related purchases, including RFOs, and smaller purchases or purchases
using the Invitation for Bid (IFB) procurement method as well as the associated
checklist(s). PCS CQC staff will include a statement in all procedures that directs

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the purchaser to reject a requisition that has not gone through the proper operation
and amount approvers based on the total contract value plus renewals. Purchasers
will notify the HHS program/agency to accurately complete and resubmit the
requisition or request the requisition be denied and routed back to the requestor.

Responsible Manager

Deputy Executive Commissioner, Procurement and Contracting Services

Target Implementation Date

Fully Implemented - An email from Deputy Executive Commissioner, Procurement


and Contracting Services, was forwarded to the PCS purchasers on June 28, 2018
with the directive to purchasers and managers that upon receipt of an incomplete
requisition, to notify the HHS program/agency to accurately complete and resubmit
the requisition or request the requisition be denied and routed back to the
requestor

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APPENDIX A

Objectives, Scope, and Methodology

Audit Objectives

 Determine:
o Whether current processes comply with state requirements.
o Whether processes are sufficient to protect the integrity of Health and
Human Services (HHS) procurements.
o Whether processes are consistently followed by agency staff.
o Whether processes are efficient and effective.

 Identify best practices from other state agencies.

Audit Scope

Contracts procured from Fiscal Year 2016 through the end of fieldwork. The scope
also included controls related to the procurement process and relevant information
systems.

Audit Methodology

 Conducted interviews with key personnel from procurement and contracting


to gain an understanding of the procurement process for Request for
Proposals (RFP) and Request for Applications (RFA).
 Conducted a risk assessment to identify the sample of 100 procurements to
review.
 Reviewed and assessed processes, policies, activities and documentation
related to the procurement process for the sample of 100 procurements.
 Reviewed 125 contracts and assessed if they were reported to the Legislative
Budget Board.
 Reviewed the CAPPS Financials eProcurement module approval workflow.
 Conducted a survey through the Texas State Agency Internal Audit Forum
(SAIAF) to obtain best practices related to procurement processes at state
agencies.
 Obtained and reviewed State and Local Government Procurement: A Practical
Guide from the National Association of State Procurement Officials to identify
public procurement best practices across the United States.
 Reviewed and assessed the trainings provided to procurement staff.
 Obtained and reviewed the job descriptions for purchaser’s I-VI positions to
determine requirements.

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Data Reliability

For the purposes of this audit, the Procurement and Contracting Services’ Network
Drive, CAPPS Financials 9.2, and SCOR were used. The Network Drive was used to
access documentation that was reviewed and considered during the audit. A review
of security permissions over the shared drive was determined to be appropriate.
CAPPS Financials eProcurement module was accessed for proper approvals for
requisitions however; it was determined that workflows within the system might not
always require the appropriate approvals for the procurement process (See page
34). Other than workflow approval information, data from CAPPS was not relied
upon. SCOR was used to access the population of contracts within the scope of the
audit however; it was determined that the data within the system was not accurate
or complete (See page 31).

Project Information

We conducted audit work in Austin, Texas from April 2018 to May 2018. The
following individuals provided oversight over the project:

J. Rachelle Wood, CIA, CISA, HHS Internal Audit Manager


Nicole M. Guerrero, MBA, CIA, CGAP, HHS Internal Audit Chief Deputy Director

Internal Audit conducted the audit in accordance with standards contained in the
International Standards for the Professional Practice of Internal Auditing contained
in the International Professional Practices Framework issued by the Institute of
Internal Auditors and Generally Accepted Government Auditing Standards issued by
the Comptroller General of the United States.

Generally Accepted Government Auditing Standards require that we plan and


perform the audit to obtain sufficient, appropriate evidence to provide a reasonable
basis for our issues and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for the issues and conclusions
based on our audit objectives.

The results of this audit indicated additional audit work is needed in specific areas.
As a result, Internal Audit will propose future audits in the following areas:

 CAPPS Financials 9.2


 SCOR
 Contract Management
 Program areas involvement in the initial document development procurement
phase.

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Audit of PCS Procurement Processes July 05, 2018

APPENDIX B

Attributes Tested by Phase

Each attribute tested resulted in either ‘Yes’, ‘No’, or ‘Could Not Be Determined’.
Generally, a ‘Yes’ response indicates evidence of compliance with the attribute while
a ‘No’ response indicates that evidence, or lack of evidence, suggested
noncompliance with the attribute11.

The ‘Could Not Be Determined’ designation indicates that either there was not
enough evidence to support either compliance or noncompliance with the attribute
or that the attribute was dependent on another attribute that was designated
noncompliant12. In most instances, the ‘Could Not Be Determined’ designation
would generally fail the attribute test.

In the tables below, attribute numbers with an “*” are either explicitly required by
statute, or the process is employed to comply with statute. A table listing the
statutes can be found on page 48.

Determination of Need

Total Total Could


Attribute Applicable Total Total Not Be
Attribute Number Procurements Yes No Determined
RFA 25 16 (64%) 9 (36%) 0 (0%)
SOW completed? DN1 RFP 73 31 (42%) 42 (58%) 0 (0%)
Total 98 47 (48%) 51 (52%) 0 (0%)
Is this a major RFA 25 0 (0%) 25 (100%) 0 (0%)
consulting services RFP 75 1 (1%) 74 (99%) 0 (0%)
DN2
procurement
(>$15k)? Total 100 1 (1%) 99 (99%) 0 (0%)
Appropriate RFA 25 22 (88%) 3 (12%) 0 (0%)
approvals obtained DN3 RFP 73 53 (73%) 10 (14%) 10 (14%)
for requisition? Total 98 75 (77%) 13 (13%) 10 (10%)
Appropriate RFA 25 20 (80%) 1 (4%) 4 (16%)
individuals notified RFP 72 54 (75%) 3 (4%) 15 (21%)
DN4
of Kick-Off
Meeting? Total 97 74 (76%) 4 (4%) 19 (20%)
PCS Form 438 RFA 25 22 (88%) 2 (8%) 1 (4%)
(Contractor or
Subrecipient DN5 RFP 73 31 (42%) 16 (22%) 26 (36%)
Determination)
completed? Total 98 53 (54%) 18 (18%) 27 (28%)

11 The exceptions to the ‘Yes’ and ‘No’ responses are DN2, which was a characteristic attribute rather
than a compliance attribute, and SP1, which was the average number of days the solicitation was posted
to ESBD for the sample.
12 For example, attributes PE3, PE4, and PE5 were contingent on PE2. If PE2 was deemed

noncompliant, PE3, PE4, and PE5 could not be determined as a result.

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Procurement Planning

Total Total Could


Attribute Applicable Total Total Not Be
Attribute Number Procurements Yes No Determined
Were the required RFA 22 9 (41%) 1 (5%) 12 (55%)
sections from the
SOW inserted into PP1 RFP 66 25 (38%) 1 (2%) 40 (61%)
the RFP/RFA
correctly? Total 88 34 (39%) 2 (2%) 52 (59%)
RFA 25 20 (80%) 1 (4%) 4 (16%)
Did a Kick-Off
PP2 RFP 72 50 (69%) 3 (4%) 19 (26%)
Meeting occur?
Total 97 70 (72%) 4 (4%) 23 (24%)
Did all persons RFA 25 0 (0%) 15 (60%) 10 (40%)
involved in the
solicitation sign PP3* RFP 73 0 (0%) 39 (53%) 34 (47%)
PCS Form 117a
(NDA)? Total 98 0 (0%) 54 (55%) 44 (45%)

Document Development

Total Total Could


Attribute Applicable Total Total Not Be
Attribute Number Procurements Yes No Determined
Timeline RFA 25 20 (80%) 2 (8%) 3 (12%)
spreadsheet DD1 RFP 72 53 (74%) 7 (10%) 12 (17%)
completed? Total 97 73 (75%) 9 (9%) 15 (15%)
PCS Form 406/407 RFA 3 2 (67%) 0 (0%) 1 (33%)
completed by HUB DD2* RFP 70 59 (84%) 3 (4%) 8 (11%)
Coordinator? Total 73 61 (84%) 3 (4%) 9 (12%)
Appropriate internal RFA 18 11 (61%) 5 (28%) 2 (11%)
approvals obtained DD3 RFP 57 37 (65%) 11 (19%) 9 (16%)
for final draft? Total 75 48 (64%) 16 (21%) 11 (15%)
RFA 0 0 (0%) 0 (0%) 0 (0%)
If IT related, did
DD4 RFP 14 7 (50%) 1 (7%) 6 (43%)
internal IT approve?
Total 14 7 (50%) 1 (7%) 6 (43%)
If IT project ≥$50K, RFA 0 0 (0%) 0 (0%) 0 (0%)
were DIR approval RFP 11 1 (9%) 10 (91%) 0 (0%)
DD5
and signature of
SOW obtained? Total 11 1 (9%) 10 (91%) 0 (0%)
If IT project ≥$1K & RFA 0 0 (0%) 0 (0%) 0 (0%)
≤$5M, exemption RFP 8 2 (25%) 6 (75%) 0 (0%)
DD6
documented if not
using DIR? Total 8 2 (25%) 6 (75%) 0 (0%)
If no DIR exemption,
RFA 0 0 (0%) 0 (0%) 0 (0%)
IT project ≥$50K &
≤$1M, was request
DD7 RFP 1 0 (0%) 1 (100%) 0 (0%)
sent to 3 vendors on
DIR Cooperative
Contract list?
Total 1 0 (0%) 1 (100%) 0 (0%)

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Document Development Continued

Total Total Could


Attribute Applicable Total Total Not Be
Attribute Number Procurements Yes No Determined
If no DIR exemption,
RFA 0 0 (0%) 0 (0%) 0 (0%)
IT project ≥$1M &
≤$5M, was request
DD8 RFP 6 1 (17%) 4 (67%) 1 (17%)
sent to 6 vendors on
DIR Cooperative
Contract list?
Total 6 1 (17%) 4 (67%) 1 (17%)

RFA 0 0 (0%) 0 (0%) 0 (0%)


If IT related and
≥$1M, was RFA/RFP DD9* RFP 10 1 (10%) 9 (90%) 0 (0%)
sent to QAT?
Total 10 1 (10%) 9 (90%) 0 (0%)
RFA 12 0 (0%) 12 (100%) 0 (0%)
CATRAD
recommendations DD10* RFP 31 22 (71%) 5 (16%) 4 (13%)
requested if ≥$5M?
Total 43 22 (51%) 17 (40%) 4 (9%)
Justifications sent RFA 6 0 (0%) 6 (100%) 0 (0%)
back to CATRAD if
DD11* RFP 26 15 (58%) 2 (8%) 9 (35%)
recommendations
were not accepted? Total 32 15 (47%) 8 (25%) 9 (28%)
Was the RFP/RFA RFA 18 9 (50%) 1 (6%) 8 (44%)
sent to vendors on
DD12 RFP 55 22 (40%) 5 (9%) 28 (51%)
the approved
listing? Total 73 31 (42%) 6 (8%) 36 (49%)

Solicitation Process

Total Total Could


Attribute Applicable Total Total Not Be
Attribute Number Procurements Yes No Determined
RFA Average number of days posted to ESBD: 51
Number of days
solicitation posted SP1 RFP Average number of days posted to ESBD: 49
on ESBD?
Total Average number of days posted to ESBD: 50
RFA 17 11 (65%) 0 (0%) 6 (35%)
Solicitation posted
on ESBD for 21 SP2* RFP 55 44 (80%) 2 (4%) 9 (16%)
Days?
Total 72 55 (76%) 2 (3%) 15 (21%)
If a major
consulting services RFA 0 0 (0%) 0 (0%) 0 (0%)
procurement
(>$15K), did
procurement get SP3* RFP 1 0 (0%) 1 (100%) 0 (0%)
posted to Texas
Register for
minimum of 30 Total 1 0 (0%) 1 (100%) 0 (0%)
days?

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Audit of PCS Procurement Processes July 05, 2018

Solicitation Process Continued

Total Total Could


Attribute Applicable Total Total Not Be
Attribute Number Procurements Yes No Determined
RFA 18 14 (78%) 1 (6%) 3 (17%)
Did a Vendor
Conference Occur? SP4 RFP 54 24 (44%) 5 (9%) 25 (46%)
(Recommended)
Total 72 38 (53%) 6 (8%) 28 (39%)
Were addendums RFA 18 9 (50%) 1 (6%) 8 (44%)
(PCS Form 121)
answering SP5 RFP 54 24 (44%) 0 (0%) 30 (56%)
questions from
conference posted? Total 72 33 (46%) 1 (1%) 38 (53%)

HUB Compliance

Total Total Could


Attribute Applicable Total Total Not Be
Attribute Number Procurements Yes No Determined
PCS Form 415 RFA 3 1 (33%) 1 (33%) 1 (33%)
(HUB
Subcontracting HC1* RFP 46 38 (83%) 3 (7%) 5 (11%)
Plan) included in
accepted bids? Total 49 39 (80%) 4 (8%) 6 (12%)

Evaluation Preparation, Response Receipt, and Bid Opening

Total Total Could


Attribute Applicable Total Total Not Be
Attribute Number Procurements Yes No Determined
Notification of RFA 14 4 (29%) 7 (50%) 3 (21%)
acceptance of
evaluation criteria EPRRO1 RFP 48 9 (19%) 10 (21%) 29 (60%)
in procurement
file? Total 62 13 (21%) 17 (27%) 32 (52%)

Were all evaluated RFA 16 9 (56%) 0 (0%) 7 (44%)


bids received
EPRRO2 RFP 50 35 (70%) 1 (2%) 14 (28%)
before the due
date/time? Total 66 44 (67%) 1 (2%) 21 (32%)
Were all bids RFA 16 1 (6%) 0 (0%) 15 (94%)
sealed and opened
EPRRO3 RFP 50 0 (0%) 0 (0%) 50 (100%)
in front of all
evaluators? Total 66 1 (2%) 0 (0%) 65 (98%)

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Procurement Evaluations

Total Total Could


Attribute Applicable Total Total Not Be
Attribute Number Procurements Yes No Determined
RFA 14 11 (79%) 0 (0%) 3 (21%)
Was evaluation
team training PE1 RFP 46 25 (54%) 0 (0%) 21 (46%)
provided?
Total 60 36 (60%) 0 (0%) 24 (40%)
If RFA/RFP >$1M, RFA 15 6 (40%) 9 (60%) 0 (0%)
was Nepotism
Disclosure Form PE2* RFP 35 11 (31%) 21 (60%) 3 (9%)
signed by all
evaluators? Total 50 17 (34%) 30 (60%) 3 (6%)
If conflicts were RFA 10 0 (0%) 0 (0%) 10 (100%)
identified, was the
PCS Associate PE3 RFP 25 0 (0%) 0 (0%) 25 (100%)
Commissioner
notified? Total 35 0 (0%) 0 (0%) 35 (100%)
If conflicts were
identified, did the RFA 10 0 (0%) 0 (0%) 10 (100%)
Deputy Executive
Commissioner PE4 RFP 25 0 (0%) 0 (0%) 25 (100%)
contact the HHSC
Ethics Office for Total 35 0 (0%) 0 (0%) 35 (100%)
guidance?
If conflicts were RFA 10 0 (0%) 0 (0%) 10 (100%)
identified, did the
HHSC Ethics Office PE5 RFP 25 0 (0%) 0 (0%) 25 (100%)
communicate the
outcome to PCS? Total 35 0 (0%) 0 (0%) 35 (100%)
If clarifications were RFA 15 4 (27%) 2 (13%) 9 (60%)
requested, did
purchaser work with PE6 RFP 48 18 (38%) 3 (6%) 27 (56%)
the Program and
Legal? Total 63 22 (35%) 5 (8%) 36 (57%)
Did the criteria/sub- RFA 14 7 (50%) 4 (29%) 3 (21%)
criteria get
transferred to the PE7 RFP 41 20 (49%) 6 (15%) 15 (37%)
evaluation tool
correctly?
Total 55 27 (49%) 10 (18%) 18 (33%)
Were individual RFA 14 2 (14%) 10 (71%) 2 (14%)
evaluator scores
transferred to the PE8 RFP 39 6 (15%) 20 (51%) 13 (33%)
Master Evaluation
Tool Correctly? Total 53 8 (15%) 30 (57%) 15 (28%)

RFA 13 0 (0%) 8 (62%) 5 (38%)


Was reasoning for
outliers PE9 RFP 37 3 (8%) 21 (57%) 13 (35%)
documented?
Total 50 3 (6%) 29 (58%) 18 (36%)
Would the RFA 13 5 (38%) 7 (54%) 1 (8%)
evaluation tool
PE10 RFP 39 15 (38%) 17 (44%) 7 (18%)
calculate the final
scores correctly? Total 52 20 (38%) 24 (46%) 8 (15%)

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Procurement Evaluations Continued

Total Total Could


Attribute Applicable Total Total Not Be
Attribute Number Procurements Yes No Determined
RFA 14 5 (36%) 4 (29%) 5 (36%)
Was an "Approved"
evaluation tool PE11 RFP 40 8 (20%) 8 (20%) 24 (60%)
used?
Total 54 13 (24%) 12 (22%) 29 (54%)
Did QA certify RFA 0 0 (0%) 0 (0%) 0 (0%)
evaluator's scores
PE12 RFP 0 0 (0%) 0 (0%) 0 (0%)
were recorded
accurately13? Total 0 0 (0%) 0 (0%) 0 (0%)
RFA 10 4 (40%) 3 (30%) 3 (30%)
Did program
approve the PE13 RFP 30 10 (33%) 5 (17%) 15 (50%)
competitive range?
Total 40 14 (35%) 8 (20%) 18 (45%)
Purchaser RFA 10 1 (10%) 3 (30%) 6 (60%)
documented ranking
changes (between PE14 RFP 25 3 (12%) 2 (8%) 20 (80%)
weighted and
unweighted)? Total 35 4 (11%) 5 (14%) 26 (74%)

Did PCS manager RFA 10 4 (40%) 3 (30%) 3 (30%)


approve the
PE15 RFP 32 13 (41%) 4 (13%) 15 (47%)
purchaser's ranking
explanation? Total 42 17 (40%) 7 (17%) 18 (43%)
Did Executive RFA 11 4 (36%) 3 (27%) 4 (36%)
Management agree
PE16 RFP 34 12 (35%) 5 (15%) 17 (50%)
with ranking
explanation? Total 45 16 (36%) 8 (18%) 21 (47%)
Documentation of RFA 12 5 (42%) 7 (58%) 0 (0%)
PCS manager
PE17 RFP 45 20 (44%) 25 (56%) 0 (0%)
approval in
procurement file? Total 57 25 (44%) 32 (56%) 0 (0%)

13This process began on April 6, 2018; and therefore was not implemented for procurements in the
sample.

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Contract Negotiations

Total Total Could


Attribute Applicable Total Total Not Be
Attribute Number Procurements Yes No Determined
Were all vendors RFA 13 8 (62%) 0 (0%) 5 (38%)
identified as
potential award CN1 RFP 45 28 (62%) 1 (2%) 16 (36%)
winners negotiated
with? Total 58 36 (62%) 1 (2%) 21 (36%)

Were negotiation RFA 13 7 (54%) 0 (0%) 6 (46%)


results CN2 RFP 45 25 (56%) 3 (7%) 17 (38%)
documented? Total 58 32 (55%) 3 (5%) 23 (40%)
Did all vendors RFA 13 1 (8%) 0 (0%) 12 (92%)
identified provide a
CN3* RFP 45 16 (36%) 0 (0%) 29 (64%)
best and final
offer? Total 58 17 (29%) 0 (0%) 41 (71%)
Were best and RFA 13 0 (0%) 0 (0%) 13 (100%)
final offers routed
CN4* RFP 45 12 (27%) 0 (0%) 33 (73%)
to program and
Legal for review? Total 58 12 (21%) 0 (0%) 46 (79%)

Recommendation for Awards

Total Total Could


Attribute Applicable Total Total Not Be
Attribute Number Procurements Yes No Determined
Executive Mgmt. RFA 11 5 (45%) 2 (18%) 4 (36%)
approve PCS Form RA1 RFP 44 24 (55%) 12 (27%) 8 (18%)
08? Total 55 29 (53%) 14 (25%) 12 (22%)
If MIRP ≥$10M, was RFA 0 0 (0%) 0 (0%) 0 (0%)
contract signed only
by the vendor, RA2* RFP 0 0 (0%) 0 (0%) 0 (0%)
submitted to QAT
and approved? Total 0 0 (0%) 0 (0%) 0 (0%)
If contract ≥$250M
RFA 0 0 (0%) 0 (0%) 0 (0%)
and related to
medical/health care
RA3* RFP 2 1 (50%) 1 (50%) 0 (0%)
services/benefits,
was contract
reviewed by OAG?
Total 2 1 (50%) 1 (50%) 0 (0%)

Respondents RFA 9 7 (78%) 0 (0%) 2 (22%)


approve final RA4 RFP 41 39 (95%) 0 (0%) 2 (5%)
contract packet? Total 50 46 (92%) 0 (0%) 4 (8%)
Vendor filed Form RFA 8 2 (25%) 5 (63%) 1 (13%)
1295 with the TEC RA5* RFP 30 4 (13%) 24 (80%) 2 (7%)
if contract ≥$1M? Total 38 6 (16%) 29 (76%) 3 (8%)
Executed contracts RFA 9 3 (33%) 0 (0%) 6 (67%)
sent to RA6 RFP 41 2 (5%) 0 (0%) 39 (95%)
respondents? Total 50 5 (10%) 0 (0%) 45 (90%)

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Contract Award
Total Total Could
Attribute Applicable Total Total Not Be
Attribute Number Procurements Yes No Determined
RFA 9 6 (67%) 1 (11%) 2 (22%)
Award posted to
CA1* RFP 42 32 (76%) 2 (5%) 8 (19%)
ESBD?
Total 51 38 (75%) 3 (6%) 10 (20%)
RFA 9 2 (22%) 2 (22%) 5 (56%)
Did the PCS
manager review CA2 RFP 41 12 (29%) 5 (12%) 24 (59%)
the completed file?
Total 50 14 (28%) 7 (14%) 29 (58%)

Evaluation Tool Testing

Total Total Could


Attribute Applicable Total Total Not Be
Attribute Number Procurements Yes No Determined
Did scores for RFA 14 8 (57%) 4 (29%) 2 (14%)
specific criteria in
evaluator’s sheets RFP 39 15 (38%) 14 (36%) 10 (26%)
ETT1
migrate to incorrect
criteria in the Total 53 23 (43%) 18 (34%) 12 (23%)
Master Sheet?
Did criteria with RFA 14 2 (14%) 10 (71%) 2 (14%)
values in evaluator’s
sheets migrate to ETT2 RFP 39 4 (10%) 24 (62%) 11 (28%)
the Master Sheet as
a blank cell? Total 53 6 (11%) 34 (64%) 13 (25%)
Did manual entries
RFA 14 5 (36%) 9 (64%) 0 (0%)
override formulas in
the Master Sheet,
ETT3 RFP 39 13 (33%) 13 (33%) 13 (33%)
including
unacceptable
entries?
Total 53 18 (34%) 22 (42%) 13 (25%)
Did blank cells in RFA 14 4 (29%) 9 (64%) 1 (7%)
evaluator’s sheets
migrate as “0” ETT4 RFP 39 6 (15%) 23 (59%) 10 (26%)
value in the Master
Sheet? Total 53 10 (19%) 32 (60%) 11 (21%)

RFA 14 8 (57%) 5 (36%) 1 (7%)


Were inconsistent
formulas used in ETT5 RFP 39 13 (33%) 15 (38%) 11 (28%)
the Master Sheet?
Total 53 21 (40%) 20 (38%) 12 (23%)
Were other issues RFA 14 8 (57%) 6 (43%) 0 (0%)
identified?
(See Controls to
ensure the integrity ETT6 RFP 39 31 (79%) 8 (21%) 0 (0%)
of the procurement
process are lacking
issue on page 19.) Total 53 39 (74%) 14 (26%) 0 (0%)

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Attributes Required By Statute

Attribute Number Statute

PP3 Texas Government Code 2261.252(a)

Each state agency employee or official who is involved in


procurement or in contract management for a state agency
shall disclose to the agency any potential conflict of interest
specified by state law or agency policy that is known by the
employee or official with respect to any contract with a
private vendor or bid for the purchase of goods or services
from a private vendor by the agency.

DD2; HC1 Texas Government Code 2161.252

AGENCY DETERMINATION REGARDING SUBCONTRACTING


OPPORTUNITIES; BUSINESS SUBCONTRACTING PLAN. (a)
Each state agency that considers entering into a contract with
an expected value of $100,000 or more shall, before the
agency solicits bids, proposals, offers, or other applicable
expressions of interest for the contract, determine whether
there will be subcontracting opportunities under the contract.
If the state agency determines that there is that probability,
the agency shall require that each bid, proposal, offer, or
other applicable expression of interest for the contract
include a historically underutilized business subcontracting
plan.

DD10 Texas Government Code 2262.101(e)

The [Contract Advisory] team may review documents under


Subsection (a)(1) only for compliance with contract
management and best practices principles and may not make
a recommendation regarding the purpose or subject of the
contract.

DD9; RA2 Texas Government Code 2054.118

Sec. 2054.118. MAJOR INFORMATION RESOURCES PROJECT.

(a) A state agency may not spend appropriated funds for a


major information resources project unless the project has
been approved by: (1) the Legislative Budget Board in the
agency's biennial operating plan; and (2) the quality
assurance team.

(d) Before a state agency may initially spend appropriated


funds fora major information resources project, the state
agency must quantitatively define the expected outcomes

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Attribute Number Statute

and outputs for the project and provide that information to


the quality assurance team.

Sec. 2054.1184. ASSESSMENT OF MAJOR INFORMATION


RESOURCES PROJECT.

(a) A state agency proposing to spend appropriated funds for


a major information resources project must first conduct an
execution capability assessment to: (1) determine the
agency's capability for implementing the project; (2) reduce
the agency's financial risk in implementing the project; and
(3) increase the probability of the agency's successful
implementation of the project.

(b) A state agency shall submit to the department, the


quality assurance team established under Section 2054.158,
and the Legislative Budget Board a detailed report that
identifies the agency's organizational strengths and any
weaknesses that will be addressed before the agency initially
spends appropriated funds for a major information resources
project.

(c) A state agency may contract with an independent third


party to conduct the assessment under Subsection (a) and
prepare the report described by Subsection (b).

DD11 Texas Government Code 2262.101(d)

A state agency shall: (1) comply with a recommendation


made under Subsection (a)(1); or (2) submit a written
explanation regarding why the recommendation is not
applicable to the contract under review.

SP2 Texas Government Code 2155.083(h)

The state agency shall continue to either: (1) post notice of


the procurement in accordance with Subsection (g) until the
latest of 21 calendar days after the date the notice is first
posted; the date the state agency will no longer accept bids,
proposals, or other applicable expressions of interest for the
procurement; or the date the state agency decides not to
make the procurement; or (2) post the entire bid or proposal
solicitation package in accordance with Subsection (g) until
the latest of 14 calendar days after the date the bid or
proposal solicitation package is first posted; the date the
state agency will no longer accept bids, proposals, or other
applicable expressions of interest for the procurement; or

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Attribute Number Statute

the date the state agency decides not to make the


procurement.

SP3 Texas Government Code 2254.029 through .034

SubChapter B. Consulting Services

Publication in Texas Register Before Entering into Major


Consulting Services Contract. (a) Not later than the 30th day
before the date it enters into a major consulting services
contract (value of contract will exceed $15,000), a state
agency shall file with the secretary of state for publication in
the Texas Register:

(1) an invitation for consultants to provide offers of


consulting services;

(2) the name of the individual who should be contacted by a


consultant that intends to make an offer;

(3) the closing date for the receipt of offers; and

(4) the procedure by which the state agency will award the
contract.

Sec. 2254.034. Contract Void. (a) A contract entered into in


violations of sections 2254.029 through 2254.031 is void.

PE2 Texas Government Code 2262.004 (b)

Before a state agency may award a major contract for the


purchase of goods or services to a business entity, each of
the state agency's purchasing personnel working on the
contract must disclose in writing to the administrative head of
the state agency any relationship the purchasing personnel is
aware about that the employee has with an employee, a
partner, a major stockholder, a paid consultant with a
contract with the business entity the value of which exceeds
$25,000, or other owner of the business entity that is within
a degree described by Section 573.002.

CN3 Texas Government Code 2155.144(d)

These phases support the final verification that the best value
standard was used if applicable.

Texas Government Code 2155.144(d) for all HHS


procurements requiring use of the best value standard:

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Subject to Subsection (e), the agency may consider all


relevant factors in determining the best value, including:

(1) any installation costs;

(2) the delivery terms;

(3) the quality and reliability of the vendor ’s goods or


services;

(4) the extent to which the goods or services meet the


agency ’s needs;

(5) indicators of probable vendor performance under the


contract such as past vendor performance, the vendor ’s
financial resources and ability to perform, the vendor ’s
experience and responsibility, and the vendor ’s ability to
provide reliable maintenance agreements;

(6) the impact on the ability of the agency to comply with


laws and rules relating to historically underutilized businesses
or relating to the procurement of goods and services from
persons with disabilities;

(7) the total long-term cost to the agency of acquiring the


vendor ’s goods or services;

(8) the cost of any employee training associated with the


acquisition;

(9) the effect of an acquisition on agency productivity;

(10) the acquisition price; and

(11) any other factor relevant to determining the best value


for the agency in the context of a particular acquisition.

CN4 Texas Government Code 2155.0755

VERIFICATION OF USE OF BEST VALUE STANDARD.

(a) The contract manager or procurement director of each


state agency shall:

(1) approve each state agency contract for which the agency
is required to purchase goods or services using the best value
standard;

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Attribute Number Statute

(2) ensure that, for each contract, the agency documents the
best value standard used for the contract; and

(3) acknowledge in writing that the agency complied with the


agency’s and comptroller’s contract management guide in the
purchase.

(b) For each purchase of goods or services for which a state


agency is required to use the best value standard, the
comptroller shall ensure that the agency includes in the
vendor performance tracking system established under
Section 2262.055 information on whether the vendor
satisfied that standard.

RA3 Texas Government Code 531.018

Sec. 531.018. CERTAIN CONTRACTS FOR HEALTH CARE


PURPOSES; REVIEW BY ATTORNEY GENERAL. (a) This section
applies to any contract with a contract amount of $250
million or more:

(1) under which a person provides goods or services in


connection with the provision of medical or health care
services, coverage, or benefits; and

(2) entered into by the person and:

(A) the commission;

(B) a health and human services agency; or

(C) any other state agency under the jurisdiction of the


commission.

(b) Notwithstanding any other law, before a contract


described by Subsection (a) may be entered into by the
agency, a representative of the office of the attorney general
shall review the form and terms of the contract and may
make recommendations to the agency for changes to the
contract if the attorney general determines that the office of
the attorney general has sufficient subject matter expertise
and resources available to provide this service.

RA5 Texas Government Code 2252.908 (d)-(e)

DISCLOSURE OF INTERESTED PARTIES.

(d) A governmental entity or state agency may not enter into


a contract described by Subsection (b) with a business entity

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Attribute Number Statute

unless the business entity, in accordance with this section


and rules adopted under this section, submits a disclosure of
interested parties to the governmental entity or state agency
at the time the business entity submits the signed contract to
the governmental entity or state agency.

(e) The disclosure of interested parties must be submitted on


a form prescribed by the Texas Ethics Commission that
includes:

(1) a list of each interested party for the contract of which


the contracting business entity is aware; and

(2) a written, unsworn declaration subscribed by the


authorized agent of the contracting business entity as true
under penalty of perjury that is in substantially the following
form:

"My name is _________, my date of birth is ___________,


and my address is_____________, (Street) (City)
(State) (Zip Code) _______________. (Country) I declare
under penalty of perjury that the foregoing is true and
correct. Executed in _______ County, State of ________, on
the ________ day of ________, ________.(Month)
(Year)__________ Declarant".

CA1 Texas Government Code 441.1855

RETENTION OF CONTRACT AND RELATED DOCUMENTS BY


STATE AGENCIES. Notwithstanding Section 441.185 or
441.187, a state agency: (1) shall retain in its records each
contract entered into by the state agency and all contract
solicitation documents related to the contract; and (2) may
destroy the contract and documents only after the seventh
anniversary of the date: (A) the contract is completed or
expires; or (B) all issues that arise from any litigation, claim,
negotiation, audit, open records request, administrative
review, or other action involving the contract or documents
are resolved.

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APPENDIX C

Best Practices

State and Local Government Procurement: A Practical Guide. Second ed.,


The National Association of State Procurement Officials, 2015

Procurement Policy

Suggestions of fundamentals to include in a successful procurement policy:

 Assurance of consistency of procedures and decision making


 Assurance of consistency of goals, objectives, and policies
 Measurement of the performance of the procurement system in light of its
goals and objectives
 Recognition of procurement as a profession
 Recognition that procurement is a strategic function in government
 Centralized leadership of all aspects of the procurement process
 Recognition that procurement begins with planning user agency contracting
needs
 Assurance of the day-to-day adherence to the spirit of rules and principles of
public procurement, including a balance between accountability, innovation,
and flexibility
 Timing to meet user agency requirements, and to benefit from advantageous
markets and technologies
 Unity of the management of assets through interagency transfer or cost-
effective disposition
 Maintenance of an environment of openness and fairness
 Balance among the need for fiscal accountability, the needs of user agencies,
and opportunities for vendors
 Leadership to advocate all of the above through a central procurement
authority

Requirements of Procurement Officer

A procurement officer must be a good writer, negotiator, presenter, outreach


marketer, and customer service representative. The procurement officer should be
flexible, strategic thinkers, and have good analytical skills to be able to interpret
changing laws, think critically, and conduct and evaluate research. Additionally,
these individuals must have technology expertise and should have well-honed
project management capabilities.

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Employee Retention

The manager of the procurement office needs to make certain that he or she knows
the potential extent of staff departing by examining employees’ ages and years of
services. Additionally, the manager should identify trends and whether others
within the office can replace those departing including any training that may be
necessary. These talent reviews should occur on a regular basis. Taking these steps
makes for greater employee retention. Other nonmonetary incentives may include
such things as a 4-day work week/9-day work schedule, professional development,
job rotation, telecommuting and virtual offices, on-site fitness center, business
casual dress, participatory decision making, and signature authority. Monetary
incentives are also important, but may not necessarily be the single determinant for
an employee who is trying to determine whether or not to stay in a public job. To
stop the outflow of expertise from retirees, the single most important strategy for
the manager of a procurement office is to have a knowledge-transfer/talent-
management plan in place.

Procurement, Leadership, Organization, and Value

Recommended Practices:

 The central procurement office and the Chief Procurement Officer should
define its internal purposes, goals, and objectives to be service, leadership,
and management oriented; and those purposes, goals, and objectives should
address the full spectrum of procurement activities, including: planning,
procurement, quality assurance, contract administration, dispute resolution,
property management and disposal, supplier relations, procurement
consulting and training, and procurement data and technology management.
 The central procurement office and the Chief Procurement Officer should
establish measurements for assessing the performance of the procurement
process, such as processing times, supplier performance data, and client
survey responses.
 The central procurement office should publish and maintain appropriate
manuals for procurement personnel that set forth jurisdiction-wide
procurement goals and objectives and establishing day-to-day procurement
procedures in simple, concise language.
 The Chief Procurement Officer should delegate, but closely monitor,
procurement functions that can logically, effectively, and efficiently be
performed by others. The delegation should be in writing, and the scope of
the delegation should be commensurate with the expertise and resources of
the agency, department, or person to whom the delegation is to be made.
 The central procurement office should establish mechanisms, such as focus
or advisory groups and cross-functional procurement teams, to encourage

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coordination and cooperation to unite the technical expertise of procurement


and program staff and suppliers in carrying out its procurement mission.
 The central procurement office should publish and maintain an internal
procedures manual, a policy manual for agency personnel, and a vendor
manual. These may be in hard copy or electronic form; whichever most
effectively meets the reader’s needs. Configuration control should reside with
the Chief Procurement Officer.

Procurement Staff

Best practices state training for procurement staff is critical to maintaining a high
level of professionalism within the procurement process. They also state that the
procurement office needs to devote some of its resources to assure the professional
development and certification of procurement staff.

Leadership

Best practices state that the key ingredient to an effective public procurement
system is leadership through the Chief Procurement Officer. Leadership also
requires that the person serving as the Chief Procurement Officer, and those who
work under that officer, adopt an attitude of professionalism, openness,
cooperation, and creativity.

The Importance of Competition

Examples of how procurement official’s actions may encourage competition:

 Clearly identifying in the solicitation the need to be filled with a view toward
qualifying the broadest range of commodities, services, construction, and
vendors.
 Restricting sole-source procurements to a limited, well-defined, and
published set of criteria, and documenting the need for a sole-source
decision.
 Staffing the procurement process with truly independent, well-trained
procurement professionals and making sure that they are free to exercise
their professional judgment without political pressure.
 Estimating prices and costs based on thorough market price and cost
research.
 Drafting specifications and scopes of work to be performed and other terms
of the procurement to avoid brand- or sole-vendor limitations.
 Drafting specifications independent of any prospective vendor or brand name
product.

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 Avoiding the bundling of multiple unrelated commodities. Construction, or


services unless it is impossible to obtain the needed product without
bundling.
 Carefully weighing the advantages and disadvantages of partnering in long-
term contracts, even if permitted by law- markets can change rapidly.
 Re-competing a commodity or service if markets change significantly.
 Selecting qualified bidders or vendors inclusively, and avoiding a set of
limitations, such as considering only three bids or proposals.
 Conducting fair contract negotiations that treat all vendors who reach this
stage equally.
 Keeping nonproprietary procurement records open for review so that
unsuccessful vendors can become better equipped to compete in the future.
 Avoiding special advantages for a vendor that are not available to others.
 Handling bid protests, contract claims, and disputes fairly.
 Documenting each stage of the process in a single procurement file or series
of files.

Strategies and Plans

Recommended Practices:

 The procurement office needs to foster a relationship with user agencies that
ensures that those agencies will want to have procurement professionals
involved with them early in the procurement planning process. That requires,
in part, that the procurement office adopt an attitude of keeping an eye on
the big picture and not just the daily business. It also requires that the
procurement officer engage in continual outreach to those agencies and
devise good means for collecting agency needs information and expenditure
data.
 The procurement office must plan for its workload in a manner that permits
regular prioritizing and reprioritizing of work; that assigns work based on the
needs of the procurement, as well as the training and experience of the
procurement officer; and that benchmarks performance through
measurements, such as processing times and customer complaints.
 The procurement office should have a disaster recovery plan that permits
access to its contract information even if its staff doesn’t have access to the
office.
 The procurement office needs to find room in its budget to support staff
access to current market information, such as subscriptions and attendance
at trade shows.
 Procurement officers must be encouraged to think strategically about each
procurement and ensure that they have tools for making strategic decisions.

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Planning

Best practices state the procurement professional needs to be a part of planning


from the start. Otherwise the procurement process does not have the chance to
work in the most effective manner.

Non-Construction Specifications and Scopes of Work

Recommended Practices:

 The central procurement office should develop guidelines for vendor input
into the process of determining agencies’ needs or preparing initial
specifications or scopes of work, so that the agencies and the central
procurement office may obtain the benefits of vendor expertise without
creating unfair bias or a conflict of interest. The use of vendor focus groups
and pre-solicitation conferences should be encouraged.
 Specifications and scopes of work should be closely tailored to the
appropriate level of utility and quality to meet the customer agency’s needs,
should emphasize performance rather than design, and should not call for
features or quality not needed for an item’s intended use.
 To aid in providing commonality for competitive purposes, a specification
should identify the essential characteristics of the item to be purchased. In
drafting and updating specification voluntary standards and specification
information available from other governmental units should be utilized.
 Generally, specifications and scopes of work should provide for commercial
products (off-the shelf items) and not unique or custom-made items.
 Standard specifications should be issued in a prescribed format, properly
indexed, and each should carry a designated time for review and updating.
 To avoid misinterpretation or favoritism to a particular vendor and increase
competition, the use of a brand name should specify or equivalent instead of
or equal.

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Competition: Solicitation and Methods

Recommended Practices:

 Time and date stamp all bids, proposals and quotations upon receipt. This
ensures a proper audit trail in the procurement file. If faxes are permitted.
The facsimile machine should automatically provide a time-date stamp.
 Record bid and proposal openings in some fashion.
 Where an evaluation committee or outside technical personnel are used to
assist in the evaluation of proposals, require those persons to sign a conflict
of interest/confidentiality statement before receipt of copies or proposals to
ensure the integrity of the competitive process.

Noncompetitive and Limited Competition Procurements

Recommended Practices:

 The Chief Procurement Officer should issue written procedures requiring


approval by him/her for various types of procurements involving waiver of
competition or limited competition.
 The central procurement office should have a systematic way of reviewing
and approving or denying the quality and price of commodities produced by
an agency - such as correctional industry - for sale to and use by other
agencies.

Bid and Proposal Evaluation and Award

Recommended Practices:

 A procurement officer should constitute an evaluation committee, where one


is going to be used to assist in the evaluation of bids or proposals, during the
drafting of the solicitation to help in selecting evaluation criteria.
 Where an evaluation committee or outside technical personnel are used to
assist in the evaluation of proposals, require those persons to sign a conflict
of interest/confidentiality statement before receiving copies of proposals to
ensure the integrity of the competitive process.

Evaluations

Best practices state each solicitation set forth the criteria to be considered in the
evaluation of bids or proposals for award, and that no factor shall be considered
that is not included in the solicitation.

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Demonstrate the Award Decision

Best practices state it is critical that the written record of each key step in the
procurement be sufficient to demonstrate the award decision. The amount of
documentation will depend on the type of evaluation conducted and the complexity
of the item being purchased. The procurement officer needs to look at the
documentation in the file from the view of competing bidders or offerors, the public,
the press, and auditors; and then ask whether it tells a reasonable story about the
process and particularly about the basis for award.

Cooperative Purchasing

Recommended Practices:

 Clearly understand the nature of the various participants to ensure that legal
authority exists and requirements for participation are satisfied - use written
cooperative purchasing agreements.
 Use a lead state or agency, but involve other participating states and entities
in the market research, solicitation planning and development, and
evaluation to add expertise and better ensure use of an accepted, compliant
procurement process that promotes best value through full and open
competition.

Quality Assurance

Recommended Practices:

 The central procurement office should establish and maintain a training


program for personnel responsible for receiving shipments from vendors; and
provide the using agency with electronic access to contracts, purchase
orders, and specifications for use by receiving personnel for inspection of
shipments.
 The central procurement office should develop solicitation and contract terms
that accurately and simply describe the level of performance expected by the
commodity sought and the services that the contractor is expected to supply
to maintain that commodity. Those terms should include the establishment of
the warranty that the government desires for the particular commodities or
services. Those terms should establish remedies for instances in which the
vendor’s commodity or service is defective, particularly where the
government desires remedies not provided under applicable law.
 Government personnel who are responsible for receiving and inspecting
items and monitoring and inspecting services should be trained on the limits
of their authority and have ready access to the applicable contract,
specifications, and purchase orders prior to delivery of the commodities.

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 There should be a formal, written reporting system for complaints against


vendors and for deficiencies noted during inspections.
 Inspection reports should be tied to payment procedures so that payments
can be withheld until any problems are resolved satisfactorily.

Contract Management and Contract Administration

Recommended Practices:

 Upon receipt of a request from the client agency to develop a contract


specific to the using agency’s needs, the procurement office should work with
the agency in developing a procurement plan and exchange critical
information that will be useful in the development of the solicitation and
subsequent contract. All parties involved in the procurement need to have a
thorough understanding of the needs of the agency.
 To allow for effective contract management and contract administration, the
central procurement office will be responsible for determining the source
selection method, establishing in conjunction with the client agency critical
timelines for procurement, determining if appropriate terms and conditions
have been selected to help mitigate risks, and providing knowledge of
procurement laws and regulations governing the solicitation method and the
contract award.
 The central procurement office should develop a comprehensive program for
obtaining timely and measurable feedback from the client using agencies
about the commodities and services under contracts award by the central
procurement office. Mechanisms for obtaining feedback may include surveys,
focus groups, and advisory committees.
 Development of a Contract Administration Plan (CAP) would accomplish this
objective and would document all aspects of the procurement process from
the development of the specifications to the closeout of the contract. The
CAP would identify all pre-award and post-award activities and identify
individuals responsible for carrying out the plan.
 The central procurement office should work with the client agency to identify
individuals necessary to develop and monitor the CAP, to include the client
using agency’s procurement officer, the project manager, primary contract
end users, focus groups, and advisory committees to form a Contract
Administration Team. The Contract Administration Team would be involved in
the procurement from the development of the specifications to the closeout
of the contract.
 The central procurement office should maintain a close working relationship
with the client agency personnel who are the primary users of that office’s
contracts, and with the project managers appointed to oversee day-to-day
contract monitoring within a client agency.

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 Procurement officers should periodically make on-site visits to a client agency


when contact performance is proceeding to determine the progress of the
contract.
 Procedures should be in place for the expedient resolution of contract
disputes and claims, and should encourage informal resolution while ensuring
due process to the contractor.

Procurement Program Integrity and Credibility

Recommended Practices:

 The central procurement office should embrace written procedures designed


to detect and prevent the circumvention of procurement and ethics laws and
rules.
 Identify and use a designated person to serve as the standards of conduct
counselor who can help employees understand and apply the various
conflicts rules.
 Make standards of conduct issues a recurring part of procurement training.
 Standard contract terms should address ethical issues and provide that any
violation of those ethical standards is a breach of contract.
 Develop contract and solicitation provisions that address organizational
conflicts of interest issues where there may be competing roles of
consultants and other contractors that make participation by some in a
procurement unfair.

Protests, Disputes, and Claims

Rules to implement the procurement statue/ordinance should:

 Specify that protests and claims must be in writing.


 Specify other informational requirements for protests and appeals.
 Clearly designate to whom the aggrieved bidder or contractor submits a bid
protest, contract claim, or appeal of a bid protest decision on a claim.

eProcurement

The state procurement manual and vendor’s manual should include the rules,
applicable information, and details on how the state eProcurement system is used
throughout the procurement process.

Procurement of Information Technology

Recommended Practices:

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 Information technology (IT) procurements should remain focused on the


business requirements and value to be brought to the business before
identifying possible technology solutions.
 Governance must be effective to enable successful IT procurement. IT
project management and procurement must partner throughout the project
to ensure effective acquisition and contract management.
 Market research should be conducted and information technology vendors
should be engaged before the public entity develops solicitation documents.
 Solicitation documents for IT projects should not be overly proscriptive and
encourage vendors to bring innovative, creative solutions to the table.
 Before investing in technology, use pilots and demonstration projects to test
the technology.
 Don’t allow terms to reduce competition. Use a risk-based approach to
negotiating terms and conditions.

Professional Development

Recommended Practices:

 Executive branch officials and the central procurement office should support
professional certification and encourage professional staff to qualify for
appropriate certification.
 Executive branch officials and the central procurement office should
encourage and support procurement staff participation in training programs
and in membership or affiliation in one or more procurement professional
associations.
 The central procurement office should maintain a current library of
procurement materials such as those addressing technology, contract law,
management theories, and procurement theory.
 The central procurement office should provide continuing management-
administrative experience for professional procurement staff by providing
career paths within the public procurement profession.

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REPORT DISTRIBUTION

Health and Human Services Commission

 Cecile Young, Acting Executive Commissioner


 Kara Crawford, Chief of Staff
 Victoria Ford, Interim Chief Operating Officer
 Karen Ray, Chief Counsel
 Sylvia Kauffman, Inspector General
 Bart Broz, Deputy Executive Commissioner for Procurement and Contracting
Services

Department of State Health Services

 Dr. John W. Hellerstedt, Commissioner


 Jennifer Sims, Associate Commissioner

Department of Family and Protective Services

 Hank L. Whitman, Commissioner


 Chance Watson, Internal Audit Director

Legislative External Entities

 Governor’s Office of Budget, Planning, and Policy


 Legislative Budget Board
 State Auditor’s Office
 Sunset Advisory Commission

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