County updates purchasing policy

May 27, 2011
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Companies that do business with Kent County will find that a few tweaks to the county’s purchasing policy become effective this week, as commissioners approved a handful of changes last week. The key changes, however, were raising amount limits for bid-security bonds and sealed bids.

The open market limit for sealed bids and requests-for-proposals had been $20,000 for about a decade. But at the suggestion of the county’s purchasing department, county commissioners raised that limit to $50,000. All bids for more than $20,000 on any items the county wanted to buy had to be approved by the county’s Finance Committee before a purchase could be made. But now the committee will only see purchase requests that are $50,000 and higher, meaning an award can be made by the purchasing office for transactions below $50,000.

“It doesn’t really change the competitive nature of our pricing, but what it does do is it streamlines the process and speeds it along so that we don’t have to wait for Finance Committee approval before we can make that award,” said County Purchasing Manager Jon Denhof, who added that the higher limit puts Kent more in line with other counties in the state.

“It certainly helps our customers who are all the county departments and the vendors themselves, too. Once a bid is awarded, they’d like to get right on with the business rather than have to wait a few weeks to get on an agenda and get final approval before they know the final award. There are a number of those in that price range that we do routinely. It will help us to make an immediate award,” he said.

The change to the bid-security bond amount, raising it from $250,000 to $500,000, means bonds won’t be necessary for bids below the new limit. The county requires a security check for 5 percent of a bid to make sure that a vendor doesn’t retract a bid. A retraction is usually made when a business discovers that the bid it made was too low in comparison to other bids and fears it will lose money if its bid is chosen.

“This disallows that. In other words, it protects the county,” said Denhof of the security check. “If someone submits a bid and then withdraws it, we’re going to take that 5 percent security of the bid price and cash that. In that case, it would be for over $12,000. So it assures us that when someone makes a bid that they’re going to hold to that price.”

The reason behind raising the limit is the county does most of its transactions electronically. As Denhof noted, vendors can’t submit a bond document when they make virtual bids, and the purchasing office can’t have that bond on hand when an electronic bid is opened.

“So this streamlines that process, where we’re able to accept electronic bids up to $500,000 without having to have a bid security in front of us. After $500,000, then they would have to submit a hard copy with the bond in hand for us to have. So this facilitates the electronic-submission process,” he said.

Denhof said the county’s computer system has a security feature that prevents a bid from being opened electronically until a transaction’s deadline date arrives. Only then can electronic bids be opened. “But because we had required a hard-copy bid bond in front of us, they weren’t able to submit their bids electronically without a bond. You can’t submit an electronic bond. So they were submitting a hard copy,” he said. “We wanted to facilitate that electronic-submission process.”

To do that, the county doubled the bid amount that requires a bond to $500,000. “And quite frankly, it’s been very rare that we’ve ever had an issue with having to ever cash a bid bond. I don’t know in my 27 years here that we’ve ever done it.”

Another change to the policy prohibits a vendor from bidding on a county transaction for a year if that bidder withdraws a bid or doesn’t honor a submitted price. Another redeploys surplus county assets among departments. “There are more opportunities to do business with Kent County than 10 years ago,” he said.

Denhof told commissioners that if the only requirement to completing a bid transaction was simply making an award to the lowest bidder, then anyone could do it.

“We have to do due diligence on any bid award. We have to be very sure that the vendor is not only responsive, but that they are also responsible,” he said. “Those are our two watch words we use when we’re making recommendations. Responsive means you’re meeting all the specifications to the letter. Responsible means you have the capacity to deliver the service; that you have a storefront, that you’ve got legal counsel available, that you’ve got a financial statement we can review, and you have references we can check — those kinds of things.”

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