Purchasing Federally Funded

I. Policy Title: Purchasing – Federally Funded

II. Who Does This Policy Affect

All Board of Trustees, HFC employees, and suppliers/contractors.

III. Purpose

To provide clear direction to all HFC employees and to the contracting community on the College’s procurement process when spending federally granted funds; to ensure compliance with required federal laws and regulations; and to execute the purchasing function under principles of ethics, integrity, and sound business practices in order to best serve the interests and mission of HFC.

IV. Policy Statement

1. Scope

This policy applies to all purchases for materials, supplies, equipment, services, contracts, service and maintenance agreements, and leases made using federal funds or flow-through funds (i.e., funds issued at a federal level but administered by the State of Michigan or through a third-party agency). Purchases made for contracts or grants shall follow this policy, or the contract or grant, whichever is most restrictive.

2. Authority

Under the Michigan Community College Act (Public Act 331 of 1966, MCL 389.103 and 121 - 126), the Board has the authority and power to make plans for, to promote, or to acquire, construct, own, develop, maintain, and operate the College. The Board delegates its authority for the acquisition of goods and services and the disposition of property to the College’s President, Vice President of Financial Services, and Purchasing Director.

3. General Procurement Standards

A. Underlying Goals of the Procurement Function:
i. Give first consideration to the objectives and policies of the College.
ii. Strive to obtain the maximum value for each dollar of expenditure.
iii. Obtain required goods and services in the specified form, quality, quantity and time-frame required, and delivered at the most advantageous price.
iv. Ensure competitive bids for the purchase of equipment, materials, and services.
v. Give all recognized and responsible suppliers equal opportunity in furnishing goods and services.
vi. Allow immediate action when conditions pose an imminent threat to the welfare and safety of people or the on-going operations of the College.
vii. Execute purchasing with sound professional business practices necessary to serve the interest of the institution and the interest of the public.
viii. Avoid the intent and appearance of unethical or compromising practice in relationships, actions, and communications.
ix. Promote positive supplier relationships through professionalism, courtesy and impartiality.
x. Achieve efficient and effective management of purchasing affairs, seeking to minimize the cost of purchasing operations.

B. When procuring property and services under a Federal award, HFC shall follow the same policies and procedures used for procurements from its non-Federal funds. HFC shall comply with all State and local laws and regulations and with the requirements of Federal regulations found in 2 CFR 200, §§200.317 through 200.326.

C. Contract administrators must maintain oversight to ensure contractors perform per the terms, conditions and specifications of the contracts and purchase orders.

D. Conflict of Interest and Ethics
i. No employee, officer, or agent of HFC may participate in the selection, award, or administration of a contract if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, his or her close business or personal associate, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract. HFC officers, employees, and agents may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. However, HFC may set standards for situations in which the financial interest is not substantial, or the gift is an unsolicited item of nominal value. This policy does not prohibit the ownership of stock in large publicly owned companies whose stock is listed and sold on a recognized stock exchange. Refer to Board Policies for “Conflicts of Interest, Conflicts of Commitment, Nepotism, and Outside Activities” and “Standards of Conduct and Civility.”
ii. Board members and College employees involved in the procurement process are expected to maintain and follow the highest personal and professional standards of integrity, truthfulness, honesty, and diligence. In order to serve the College community and to maintain public confidence and trust in College operations, these individuals must observe and continuously practice the following Board policies:
(1) Conflicts of Interest, Conflicts of Commitment, Nepotism, and Outside Activities
(2) Standards of Conduct and Civility
iii. While the HFC Office of Development (Foundation) may solicit for philanthropic support from the community and suppliers, at no time will contract awards be based on whether a contribution is received. Purchasing staff shall not participate in soliciting suppliers for contributions.

E. Economical Purchasing
i. Prior to issuing final approval on a requisition, the approving cost center manager must review the proposed purchase to avoid acquisition of unnecessary or duplicative items.
ii. When determining the proper solicitation method, Purchasing shall consider either consolidating or sub-dividing procurements to obtain a more economical purchase.
iii. The operating department requesting the purchase must submit an independent estimate (i.e., proposed budget amount) before requests for bids or proposals are issued.
iv. Where appropriate, a lease versus purchase analysis will be conducted to determine the most economical procurement method.
v. The use of State and local intergovernmental and inter-entity agreements for common or shared goods and services is encouraged (e.g. publicly bid and awarded consortia agreements).
vi. The use of Federal excess and surplus in lieu of purchasing new equipment is encouraged.
vii. The use of value engineering clauses for construction projects of sufficient size is encouraged (value engineering is a systematic and creative analysis of each contract item or task to ensure that its essential function is provided at the overall lower cost).

F. Supplier Selection
i. Award contracts only to responsible contractors with the ability to perform successfully under the terms and conditions of a proposed procurement.
ii. Consider contractor integrity, compliance with public policy, record of past performance and financial and technical resources when awarding.
iii. HFC shall not award a contract to any entity debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities.

G. Records
i. The Purchasing Department shall keep detailed records of all procurement activity conducted as a matter of public record and to satisfy the requirements for federal auditing agencies.
ii. Records shall contain:
(1) Rationale for method of procurement;
(2) Selection of contract type;
(3) Criteria for contractor selection or rejection;
(4) Basis for the contract price (e.g., fixed price, cost reimbursement); and
(5) Verification of contractor’s status on the federal System for Award Management.

H. Time and Materials Contracts
i. Time and materials type contracts may be used only after a determination that no other contract is suitable and if the contract includes a ceiling price that the contractor exceeds at its own risk. Time and materials type contract means a contract whose cost to a non-Federal entity is the sum of:
(1) The actual cost of materials; and
(2) Direct labor hours charged at fixed hourly rates that reflect wages, general and administrative expenses, and profit.
ii. Since this formula generates an open-ended contract price, a time-and-materials contract provides no positive profit incentive to the contractor for cost control or labor efficiency. Therefore, each contract must set a ceiling price that the contractor exceeds at its own risk.
iii. This type of contract requires a high degree of oversight by the contract administrator to assure that the contractor is using efficient methods and effective cost controls.

I. Settlement of Contractual Issues
i. HFC alone shall be responsible for the settlement of all contractual and administrative issues arising out of procurements made with federal funds. These issues include, but are not limited to, source evaluation, protests, disputes, and claims.
ii. The Federal awarding agency will not intervene in contract issues unless the matter is primarily a Federal concern.
iii. Violations of law will be referred to the local, state, or Federal authority having proper jurisdiction.

4. Competition

A. All procurement transactions must be conducted in a manner providing full and open competition consistent with the sound business practices and within the scope of federal and state laws, local ordinances, and Board of Trustees policies.
i. Underlying principles of purchasing by competitive bidding include:
(1) To give all recognized and responsible vendors equal opportunity in furnishing goods and services;
(2) To prevent the favoring of one vendor over another;
(3) To keep district taxpayers informed on business matters pertaining to the College;
(4) To prevent fraud on the part of the purchasing official; and
(5) To promote competition between manufacturers and suppliers.
ii. Some practices that restrict competition include but are not limited to:
(1) Placing unreasonable requirements on firms in order for them to qualify to do business;
(2) Requiring unnecessary experience and excessive bonding;
(3) Noncompetitive pricing practices between firms or between affiliated companies;
(4) Noncompetitive contracts to consultants that are on retainer contracts;
(5) Organizational conflicts of interest;
iii. Specifying only a “brand name” product instead of allowing “an equal” product to be offered and describing the performance or other relevant requirements of the procurement; and
iv. Any arbitrary action in the procurement process.

B. In order to ensure objective contractor performance and eliminate unfair competitive advantage, contractors that develop or draft specifications, requirements, statements of work, or invitations for bids or requests for proposals must be excluded from competing for such procurements.

C. The use of state or local geographical preferences in the evaluation of bids or proposals is discouraged, except in those cases where applicable Federal statutes expressly mandate or encourage geographic preference. Nothing in this section preempts state licensing laws.

Note: When contracting for architectural and engineering (A/E) services, geographic location may be a selection criterion provided its application leaves an appropriate number of qualified firms, given the nature and size of the project, to compete for the contract.

D. All solicitations must:
i. Include clear and accurate descriptions of the technical requirements for the material, product, or service to be procured.
(1) Descriptions must not contain features that unduly restrict competition.
(2) Unreasonably restrictive product specifications should be avoided if at all possible.
(3) Descriptions may include a statement of the qualitative nature of the material, product or service desired and, when necessary, set forth those minimum essential characteristics and standards to which it must conform to satisfy its intended use.
(4) When it is impractical or uneconomical to make a clear and accurate description of the technical requirements, a “brand name or equivalent” description may be used as a means to define the requirements of procurement. The specific features of the named brand which must be met by offers must be clearly stated.
ii. Identify all requirements that suppliers must fulfill and all other factors to be used in evaluating bids or proposals.

E. All prequalified lists of persons, firms, or products used in acquiring goods and services shall be kept current and include enough qualified sources to ensure maximum open and free competition. Potential bidders shall be allowed to qualify during the solicitation period.

5. Procurement Methods Allowed

When spending federally granted funds, HFC shall follow the same policies and procedures as used for procurements from its non-Federal funds. In accordance with Board policy and State law, the thresholds for competitive quotes, bids and contract awards adjust every year on October 1st by the percentage change in the average consumer price index (CPI), as calculated by the Michigan Department of Education.

The following federal procurement methods are allowed if the dollar limits fall within the bidding thresholds set by Board policy.

A. Micro-Purchases < $10,000* – Purchase of supplies or services totaling less than $10,000. Micro-purchases may be awarded without soliciting competitive quotations if the price is considered reasonable. To the extent practicable, micro-purchases must be distributed equitably among qualified suppliers.

B. Small Purchase Procedures (Simplified Acquisition Threshold) < $250,000* – Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources.

C. Sealed Bids (with formal advertising) > $250,000* – Bids are publicly solicited and a firm fixed price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bid method is the preferred method for procuring construction, if the conditions in paragraph (C)(i) of this section apply.
i. In order for sealed bidding to be feasible, the following conditions should be present:
(1) A complete, adequate, and realistic specification or purchase description is available;
(2) Two or more responsible bidders are willing and able to compete effectively for the business; and
(3) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price.
ii. If sealed bids are used, the following requirements apply:
(1) The invitation for bids must be publicly advertised;
(2) Bids must be solicited from an adequate number of known suppliers, providing them sufficient response time prior to the date set for opening the bids;
(3) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond;
(4) All bids will be opened at the time and place prescribed in the invitation for bids and the bids must be opened publicly;
(5) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and
(6) Any or all bids may be rejected if there is a sound documented reason.

D. Competitive Proposals > $250,000* – Competitive proposals are normally conducted with more than one source submitting an offer, with an award of either a fixed price or cost-reimbursement type contract. It is generally used when conditions are not appropriate for the use of sealed bids. If this method is used, the following requirements apply:
i. Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Any response to publicized requests for proposals must be considered to the maximum extent practical;
ii. Proposals must be solicited from an adequate number of qualified sources;
iii. There must be a written method for conducting technical evaluations of the proposals received and for selecting recipients;
iv. Contracts must be awarded to the responsible firm whose proposal is most advantageous to the program, with price and other factors considered; and
v. HFC may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby competitors' qualifications are evaluated and the most qualified competitor is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms are a potential source to perform the proposed effort.

E. Non-competitive Proposals – Sole Source. Procurement by noncompetitive proposals is procurement through solicitation of a proposal from only one source and may be used only when one or more of the following circumstances apply:
i. The item is available only from a single source;
ii. The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation;
iii. The Federal awarding agency or pass-through entity expressly authorizes noncompetitive proposals in response to a written request from HFC; or
iv. After solicitation of a number of sources, competition is determined inadequate.

F. Transaction Splitting – Purchases may not be subdivided in separate orders with the intent to avoid purchasing policy. Activity inconsistent with Board Policy, Purchasing Policy and applicable laws and regulations will be reported to the Vice President of Financial Services for investigation and disposition.

G. * Note: The federal dollar thresholds listed in paragraphs (A) through (D) of this section are published in the Federal Acquisition Regulation at 48 CFR Subpart 2.1 (FAR 2.101). The amounts are subject to adjustment for inflation in years evenly divisible by five.

6. Small and Minority Businesses

A. HFC shall take all necessary affirmative steps to assure that minority businesses, women's business enterprises, and labor surplus area firms are used when possible.

B. Affirmative steps must include:
i. Placing qualified small and minority businesses and women's business enterprises on solicitation lists;
ii. Assuring that small and minority businesses, and women's business enterprises are solicited whenever they are potential sources;
iii. Dividing total requirements, when economically feasible, into smaller tasks or quantities to permit maximum participation by small and minority businesses, and women's business enterprises;
iv. Establishing delivery schedules, where the requirement permits, which encourage participation by small and minority businesses, and women's business enterprises;
v. Using the services and assistance, as appropriate, of such organizations as the Small Business Administration and the Minority Business Development Agency of the Department of Commerce; and
vi. Requiring the prime contractor, if subcontracts are to be let, to take the affirmative steps listed in paragraphs (i) through (v) of this section.

7. Contract Cost and Price

A. Perform a cost or price analysis for procurement actions in excess of the Simplified Acquisition Threshold, including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, make independent estimates before receiving bids or proposals.

B. Negotiate profit as a separate element of the price for each contract in which there is no price competition and in all cases where cost analysis is performed. To establish a fair and reasonable profit, consider the complexity of the work, the risk borne by the contractor, the contractor's investment, the amount of subcontracting, the quality of its record of past performance, and industry profit rates in the surrounding geographical area for similar work.

C. Contract costs and prices should be based on actual costs, not estimated costs. Contracts should set a ceiling price that the contractor exceeds at its own risk. Cost plus a percentage of cost and percentage of construction cost methods of contracting must not be used.

8. Federal Agency Review

Upon request of the Federal awarding agency or pass-through entity, procurement documents such as specifications, requests for proposals, invitations for bids, or cost estimates shall be made available to the requesting agency.

9. Bonding Requirements

Construction or facility improvement projects greater than the Simplified Acquisition Threshold or HFC Board of Trustee approval limits require the following bonds:

A. Bid guarantee (bid bond or certified/cashier’s check) equivalent to 5% of the total bid price.

B. Performance bond equivalent to 100% of the contract price.

C. Payment (Labor & Material) bond equivalent to 100% of the contract price.

10. Contract Provisions

Contracts must contain the applicable provisions described in Appendix II to 2 CFR Part 200 – Contract Provisions for Non-Federal Entity Contracts Under Federal Awards.

11. Contractor Appeal Procedure

Contractors, who have submitted a quote, bid or proposal, may appeal an award decision. A contractor who submits a "No Bid Response" cannot appeal an award. To appeal an award, a contractor must:

A. Request an appeal of the award, in writing, to the Purchasing Director within (48) forty-eight hours of the award.

B. The appeal should contain the bid number, description of the bid, a clear and concise statement of the reason and supporting evidence for the appeal and the desired remedy that the contractor is seeking.

C. The following issues are not considered to be appealable issues:
i. Failure to properly submit a bid per the bid instructions.
ii. Failure to submit a bid on or before the due date and time.
iii. Failure of a bidder to provide the required bid deposit, payment bond, or performance bond by the date and time specified.

D. Following an investigation and review, the Purchasing Director will provide a written decision

12. Reference Documents

A. Title 2: Grants & Agreements | Part 200: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards | Subpart D: Post Federal Award Requirements | Procurement Standards 200.317 – 200.326
https://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=7a619eeee978254008569d...

B. Appendix II to 2 CFR Part 200 – Contract Provisions for Non-Federal Entity Contracts Under Federal Awards
https://www.ecfr.gov/cgi-bin/text-idx?node=ap2.1.200_1521.ii&rgn=div9

V. Definitions

1. Accounts Payable: The value of goods or services received from suppliers and other creditors for which invoices have been received but not yet paid by the buying organization. Also, that branch of an organization which receives invoices and processes payments to suppliers and creditors.
2. Bid: A legally binding offer to sell or to buy. In public-sector purchasing, a bid is an offer in a sealed bidding process.
3. Bid Bond: A surety bond or certified payment included in a bid response that protects the buying organization if the winning bidder fails to undertake the contract under the terms at which they bid.
4. Blanket Purchase Order: A term commitment (usually one year or more) to a supplier for certain goods or services over a predetermined period at predetermined prices, or at prices to be determined based on market or other conditions.
5. Competitive Bidding: A common method of selecting sources for contract awards. Suppliers interested in participating in the process are asked to submit information on prices and other specified elements of performance. Major public-sector purchases commonly are awarded on a sealed bid basis, with the law requiring that the award be made to the lowest responsive and responsible bidder.
6. Consortium: When several organizations combine their purchasing power for selected items to gain leverage in the marketplace and reduce costs. They may form or utilize a centralized buying service or cooperate informally.
7. Disadvantaged Business Enterprise (DBE): Any legal entity, organized to engage in commercial transactions, that is at least 51% owned and controlled by one or more minority persons who are American citizens. Ownership interest in the organization must be real, substantial and continuing.
8. Honorarium: A payment granted in recognition of a special service or distinguished achievement for which custom or propriety forbids any fixed business price to be set.
9. Payment Bond: A surety bond that protects the buying organization against liens that may be filed against the sourcing organization if the prime supplier does not pay its suppliers, subcontractors or employees.
10. Performance Bond: A surety bond that secures the performance and fulfillment of all the undertakings, covenants, terms, conditions and agreements contained in the contract. It is normally accompanied by a payment bond (particularly in a construction contract) and is provided after the submission of a bid bond.
11. Procurement: Organizational function that includes specifications development, value analysis, supplier market research, negotiation, buying activities, contract administration, inventory control, traffic, receiving and stores.
12. Proposal: Submission by a supplier, often made in response to a purchasing organization's request, that forms the basis for negotiations, prior to the creation of a contract. The law may treat a proposal as a binding offer.
13. Purchase: To acquire goods or services by the payment of money or its equivalent; buy.
14. Purchase Order (PO): A legally binding document prepared by a purchaser to describe the terms and conditions of a purchase.
15. Purchasing: A major function of an organization that is responsible for acquisition of required materials, services and equipment.
16. Purchasing Card (P-Card): A payment method whereby requisitioners receive permission to order directly from suppliers for limited dollar value purchases that could not otherwise be made through the purchasing system by using a credit card issued by a bank or major credit card provider.
17. Requester/Requisitioner: The person who initiates a purchase requisition.
18. Requisition: A written or computerized request from an internal user/customer to purchasing for the procurement of goods or services from suppliers.
19. Responsible Bidder: Offerors responding to invitations to bid or requests for proposals who are determined to be capable of fully performing the contract requirements.
20. Responsive Bidder: Offerors responding to an invitation to bid or request for proposal who have submitted a bid that conforms to the invitation for bid.
21. Supplier: An organization that provides goods and/or services to a purchasing organization.

VI. Responsible Party for Administration and Enforcement
Vice President of Financial Services
Purchasing Director
 

VII. Related Documents
Board Policy on Compliance Lobbying and Supplanting of Funds and other Federal and State Laws, Rules, and Regulations
Operations Policy on Compliance Lobbying and Supplanting of Funds and other Federal and State Laws, Rules, and Regulations | HFC Policies (hfcc.edu)
Board Policy on Conflicts of Interest, Conflicts of Commitment, Nepotism, and Outside Activities
Conflict of Interest, Conflicts of Commitment, Nepotism and Outside Activities | HFC Policies (hfcc.edu)
Board Policy on Contract Review Contract Review Policy | HFC Policies (hfcc.edu)
Board Policy on Payment of College Obligations Payment of College Obligations | HFC Policies (hfcc.edu)
Board Policy on Purchasing - General
Board Policy on Standards of Conduct and Civility Standards of Conduct and Civility | HFC Policies (hfcc.edu)
Purchasing Current Year Bidding Limits and Thresholds
Michigan Community College Act of 1966 (Public Act 331 of 1966, MCL 389.1 - 389.195)

VIII. Policy History:
a. Current Policy Adopted by Board: November 25, 2024

This policy supersedes and replaces any and all policies related to this subject