use of purchasing cooperatives to create “audit-proof” procurements

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EDGE PROCUREMENT EDUCATION SERIES

Maeve E. Cannon, Esquire

AUGUST 24, 2021

SL1 1500040v1

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Public Procurement in NJ is Highly Regulated and has a Long History in NJ Jurisprudence

• Township of Hillside v. Sternin, 25 N.J. 317, 326 (1957): “In this field it is better to leave the door tightly closed than to permit it to be ajar, this necessitating forevermore in such cases speculation as to whether or not it was purposely left that way.”

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Overview of New Jersey Procurement Laws

• New Jersey Government Procurement Laws - govern all procurement processes for State and local government entities, including County and State colleges and school districts, seeking to procure goods and services

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• At the State level, all state agencies are subject to the State Contracting law at N.J.S.A. 52:34-1, et seq.

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Overview (cont’d)

• The Local Public Contracts Law, N.J.S.A. 40A:11-1 et seq.: covers all counties, municipalities, boards, commissions, authorities or agencies which are not State boards, commissions, committees, authorities or agencies as further defined in N.J.S.A. 40A:11-2

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• Also see, Department of Community Affairs Regulations: N.J.A.C. 5:34-1.1 et seq.

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Overview (cont’d)

• The Local Public School Contracts Law, N.J.S.A. 18A:18A-1 et seq. covers all public schools in New Jersey

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• Also see, Department of Community Affairs Regulations: N.J.A.C. 5:34-1.1 et seq.

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Overview (cont’d)

• The County College Contracts Law, N.J.S.A. 18A:64A-25.1 et seq., regulates all purchases by county colleges.

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• The State Colleges Contracts Law, N.J.S.A 18A:64-85 et seq., governs state college purchasing, but see also as to Rowan, N.J.S.A. 18A:64M-9.2; Rutgers, N.J.S.A. 18A:65-1; and Montclair, N.J.S.A. 18A:64N-1

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If there is no exception to bidding available, you must use a competitive process to make purchases.

• As a general rule, under the Local Public Contracts Law, N.J.S.A. 40A:11-4, contracts for goods or services exceeding the bidding threshold shall be awarded only by resolution of the governing body of the contract unit to the lowest responsible bidder after public advertising for bids and bidding thereon.
• Other statutory procurement laws have similar provisions mandating a competitive process as the general rule, unless otherwise permitted.

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Bidding Required If Over the Bid Threshold

Purchases may be made without bidding if they are under the bid threshold, which is adjusted by the Treasurer every 2 or 5 years, depending on the threshold.

• For local governments, the threshold is $17,500 if they do not have a Qualified Purchasing Agent ("QPA") or up to $44,000 if the local entity has a QPA. (N.J.S.A. -40A:11 3, N.J.S.A. 40A:11-6.1, 40A:11-9).
• For local school districts with a QPA, the bid threshold is $44,000 and $32,000 without a QPA (N.J.S.A. 18A:18A-3).
• For County Colleges, (N.J.S.A. 18A:64A-25.3) the bid threshold is $37,500.
• For State Colleges, (N.J.S.A. 18A:64-54) the bid threshold is $35,500. [But, NJIT is $29,100 (N.J.S.A. 18A-64E-18)].

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Bid Threshold (cont’d)

• For local purchasing, purchases that are under the applicable bid threshold but at 15% or more of that amount (N.J.S.A. 40A:11-6.1), the contracting agent shall award a contract after soliciting at least two competitive quotations.
1. At least two competitive quotations must be solicited, no response to the solicitation still satisfies the requirement that quotations be solicited.
2. The local quote threshold is $2,625 without a QPA and $6,600 with one.
3. The public school quote threshold is $4,800 without a QPA and $6,600 with one

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Bid Threshold (cont’d)

• Purchases of supplies that are 15% or less of the applicable bid threshold (N.J.S.A. 40A:11-6.1)
2. For all contracts that are in the aggregate less than 15% of either $17,500 ($2,625) or $4,4000 ($6,600) (depending on if the entity has a QPA), the contracting agent may award the contract without soliciting competitive quotations if previously authorized generally to do so by resolution of governing body.

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Requests for Proposals-Competitive Contracting

• N.J.S.A. 40A:11-4.1 through 4.5: a method of contracting for specialized goods and services in which formal proposals are solicited from vendors, and evaluated under pre-established criteria by the public entity, and the governing body awards a contract from among the formal proposals received and evaluated.
• Unlike competitive bidding, under competitive contracting an award does not have to be made to the lowest bidder, and price is just one factor in the evaluation of proposals.
• However, negotiation of proposal terms is not permitted after submission.

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Requests for Proposals-Competitive Contracting (cont’d)

• Competitive contracting may be used for the following purposes:
1. The purchase or licensing of proprietary computer software designed for contracting unit purposes
2. The hiring of a for-profit entity or a not-for-profit entity for the purpose of:
1. the operation and management of a wastewater-treatment system or a water supply or distribution facility
2. the operation, management or administration of recreation or social service facilities or programs
3. the operation, management or administration of data processing services
3. Homemaker-home health services
4. Laboratory testing services
5. Emergency medical services
6. Contracted food services
7. Performance of patient care services by contracted-medical staff at county hospitals, correctional facilities and long-term care facilities

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Requests for Proposals-Competitive Contracting (cont’d)

• Competitive contracting may be used for the following purposes (cont’d):
8. At the option of the governing body of the contracting unit, any good or service that is exempt from bidding pursuant to N.J.S.A. 40A:11-5
9. Concessions (in which a license or right or benefit is conferred by a public body on private party, even if there is no cost to the public entity)
10. The operation, management or administration of other services, with the approval of the Director of the Division of Local Government Services, which have included such diverse items as cleaning, plowing, extermination, ambulance billing, property tax assessment and operation of an animal shelter

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Competitive Contracting is still an advertised competitive procurement but award does not have to be made to the lowest bidder, since price is just one factor of the evaluation.

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Exceptions to Public Bidding

• N.J.S.A. 40A:11-5 identifies the exemptions from public advertisement of bids. Contracts can be awarded by resolution of the governing body without an advertised procurement process.
• The other purchasing statutes have similar exceptions listed pertinent to the public entity.
• There are also means by which a public entity can “piggy back” onto the competitive process conducted by another public entity, such as purchased from a cooperative purchasing system or purchasing from the State Contract.

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Exceptions to Public Bidding (cont’d)

• Examples of circumstances where a waiver of advertising is permitted at the local level include:
1. professional services
2. extraordinary unspecifiable services
3. Library and educational goods and services
4. The support and maintenance of proprietary computer software or hardware (but not to acquire same)
5. after two unsuccessful bidding efforts
6. after the receipt of three quotations in which one such quotation is 10% less than the State contract price for the identical goods
7. There are many other enumerated exceptions listed in N.J.S.A. 40A:11-5.

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Exceptions to Public Bidding (cont’d)

• Emergency contracts; N.J.S.A. 40A:11-6, N.J.A.C. 5:34-6.1
• Contract price can exceed the bid threshold.
• Must have an actual or imminent emergency affecting the public health, safety or welfare that requires the immediate delivery of goods or the performance of services.
• Contract cannot exceed the duration of the actual emergency and in no case can it be a multi-year contract.
• Pay to play restrictions do not apply.

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Other Ways of Purchasing Without Bidding When Competition is Required

• There are also means by which a public entity can “piggy back” onto the competitive process conducted by another public entity, such as purchased from a cooperative purchasing system or purchasing from the State Contract.
• The purchase can be made because the other party has conducted a competitive process in accordance with New Jersey law, or which satisfies New Jersey law, in awarding a contact and others are permitted to participate in that lawfully awarded contract.
• The underlying contract must be conducted in accordance with New Jersey procurement laws.

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Joint Purchasing System

• N.J.S.A. 40A:11-10: In a Joint Purchasing System, two or more local contracting units agree that one of them will serve as the Lead Agency or “purchasing agent” for the system, as to certain specified purchases. The Lead Agency, in its capacity as purchasing agent, does the purchasing for all the members of the System. It prepares the formal bid specifications; advertises for and receives bids; and executes a contract with the lowest responsible bidder for the full amount of the commodities or services needed by all participants. The amount purchased is established in advance in the bid specifications by the participants.

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Cooperative Purchasing

• A cooperative purchasing system is established by one “lead agency” for the procurement of goods and services which may then be purchased by any other participating entity who is a member in the cooperative purchasing system. N.J.S.A. 40A:11-11; N.J.S.A. 18A:18A-11; and N.J.A.C. 5:34-7.1 through -7.32.
• The Lead Agency submits an application to Local Government Services (LGS) in the Department of Community Affairs (DCA) for review and approval. After approval, the new cooperative pricing system receives an identification number for the co-op. The co-op must renew its registration with LGS every five years.

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What is Edge?

• Edge is an Educational Research and Services Corporation formed in accordance with N.J.S.A. 18A:3B-6.1, which states that :

“The governing board of a public research university or a State college may join with other public research universities, State colleges, county colleges, public institutions of higher education primarily located in the State of New Jersey, and nonprofit independent institutions of higher education that receive direct State aid, to form an educational research and services corporation to be operated exclusively for charitable, scientific, and educational purposes”

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Why Does Edge Have a Co-op?

• According to its authorizing statute, Edge is deemed a local contracting unit and may act as a

“lead agency or contracting unit for the procurement of goods or services concerning educational technology systems and related services by municipalities, fire districts, counties, local authorities subject to the “Local Authorities Fiscal Control Law,” P.L.1983, c. 313 (C.40A:5A-1 et seq.), school districts, county colleges, State colleges, public research universities, nonprofit independent institutions of higher education that receive direct State aid, or any combination of those entities.”

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Edge Can Also Act As Lead Agency for its Higher Ed Member Organizations

• An educational research and services corporation may act as a lead agency or contracting unit for the procurement of goods or services concerning educational technology systems and related services by those entities comprising the educational and research services corporation.
• This is separate from procurements conducted in its capacity as lead agency of the co-op.

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How to Join the Edge Cooperative Purchasing System

• You must pass an authorizing resolution. Edge will supply you with a template for this purpose.
• You must execute a participation agreement with Edge, which Edge will supply to you.
• Edge will submit your enrollment to LGS.
• LGS must approve your membership, which is routinely approved.
• There is no fee to belong to the Edge co-op. Edge’s administrative fees are built into the bid, so that the vendor pays them and members only pay for what they use. (As opposed to co-ops that charge a membership fee, where you may pay for services you never use).

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How to Use the Edge Co-op.

• Join!
• Review Edge’s list of existing contracts found at edgemarket.njedge.net
• Edge includes language in its specifications to authorize the use of its contracts by new members who join the co-op after the initial procurement.
• Vendors are always willing to agree to extend their pricing to new members.
• Contract directly with the vendors to order and pay vendors directly for the goods and services received.

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How Does Edge Decide What to Procure?

• Edge reviews the needs of its member organizations, in both of its lead agency capacities.
• Edge leverages its position as an Educational Research and Services Corporation to access and assess the most current educational technology.
• Edge surveys its members and the vendor community to assess upcoming and existing needs and offerings as to new technologies

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What are the advantages of using �the Edge Co-op?

• Access to Edge’s technical expertise in drafting of technical specifications. Members do not have to research, write and award bids, or participate in sometimes costly bid contests.
• Edge provides its members technical support and assistance in technology purchasing, not just a laundry list of contracts.
• Edge conducts procurements in accordance with New Jersey law and all contracts are subjected to a rigorous competitive process either via bidding or competitive contracting.
• Edge provides cutting edge technology purchasing options quickly as technologies emerge, instead of the current lag with NJ State Contract and other purchasing options.
• Vendor’s access to a larger market for goods and services leads to better pricing and economies of scale.

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Who Can Join the Edge Co-op?

• Municipalities and Counties
• School Districts
• Fire districts
• Local Authorities
• County Colleges
• State Colleges
• Public Research Universities
• Nonprofit Independent Institutions of Higher Ed that receive state aid

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How Are Vendors Awarded an Edge Contract?

• All Vendors participate in a fair and open competitive process either via bidding or competitive contracting.
• All Vendors are encouraged to participate in bids and vendor supplied literature is reviewed by the Co-op, but Edge drafts its own specifications and does not use vendor supplied specifications, which can limit competition.
• All Vendors must be in good standing in New Jersey, including having a NJ Business Registration Certificate.
• Vendors are encouraged to offer their best, competitive prices given the aggregated purchasing of the co-op members as opposed to one-off contracting.

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Comparing Co-op Purchasing with the Use of the NJ State Contract

• The State contract was the original cooperative purchasing. The State purchases goods and services for itself, and extends the contract for use by other New Jersey public entities, based on terms and conditions established by the State.
• While State Contract may be well known, it is not always the cheapest, or most current contracting option.
• Like the State Contract, you do not need to get other quotations to use a co-op contract!
• Like the State, Co-ops can bid based on discount off or cost plus a vendor catalogue, and other forms of multiple award based on member need (like for instance, the well known M003 Contract)

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Comparing National Co-ops with Edge Co-op

• Use of National Co-ops is controlled by Local Finance Notice 2012-10.
• Must ensure that there is compliance with New Jersey law before using a National Co-op.
• Was there any advertisement of the bid in New Jersey?
• The potential for cost savings should include service charges, material and delivery cost.
• National contract must still meet NJ procurement standards for a fair and open competitive process.
• Edge provides NJ-centric compliant procurements and ongoing local assistance to its members.

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Questions?

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