Grant Administration: Section 7.6 Other Procurement Issues

Cost Reasonableness Estimates
2 CFR 200.323 requires grantees to perform a cost or price analysis in connection with every procurement action in excess of the Small Purchase 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, the Grantee must make independent estimates before receiving bids or proposals. Documentation of a cost estimates and cost/price reasonableness will be checked at monitoring.  2 CFR 200.323(a) and Attachment 7-6: Creating Cost Estimates

NOTE: Contractors/consultants that provide a price estimate to assist the Grantee with a Cost Reasonable Estimate are NOT allowed to bid on the RFP/RFQ.

Over Budget Bids
Despite careful cost analyses and safeguards, there are occasions when all bids will exceed available project funds. This section governs the process for dealing with such a situation.

The following options are available for awarding a bid following an overage:
1. Obtaining additional funds from another source and continuing with the original IFB.
2. Rejecting all bids, revising project scope and bid specifications, and issuing a revised IFB (competitive sealed bid) open to the entire public.

Low Bids and Change Orders
To maintain the integrity of the bidding process, the change order process must only be used when (1) the change order work fits within the scope of the original project and (2) the reason for the change is something that was unanticipated or unforeseen at the time the original contract was awarded.
Change orders cannot be used for fundamental redesign of a project and cannot be used to “fix” problems in the project specifications if the municipality was aware of the problems before awarding the contract. (If your specifications have problems, it’s better to issue an addendum—if the problems were discovered before bids are due—or to re-bid the contract.) Change orders also cannot be used to take advantage of a good deal on a construction project—in other words, if you’ve awarded a contract for 500 linear feet of street paving work, you can’t then use a change order to double the number of linear feet included in the contract just because the successful bidder gave you a really great price on the original contract.

NOTE: Total change orders must not exceed 15% of the original contract price.

Add/Deduct Alternates
Grantees are encouraged to use add and deductible alternates for inclusion unless doing so is not practical or not feasible. When deductible alternates are requested, the bid document issued by the grantee must specify the method and order in which alternates will be applied in determining the low bid. Drawings must also clearly show the alternates.

For example, a project might involve the construction of a new community center that includes a portico and a small out-building to accommodate future expansion. The bidding instructions would indicate which items are to be bid as deductible alternates and the order of priority in which they are to be deducted. In this example, assume the portico and out-building are to be bid as deductible alternates, and the order of priority for deducting is first, the out-building, and second, the portico. The grantee would go back through each bid (not just the lowest one) and first subtract the amount each bidder estimated for the out-building from the total amount she/he bid for the project. The grantee would then check to see if any of the adjusted bids are within budget. If so, the grantee can award the bid to the bidder with the lowest adjusted bid. If not, the grantee would repeat the process, this time deducting the cost of the portico from the adjusted bid of each bidder. Depending on the number of deductible alternates specified, the process can be repeated until one of the adjusted bids is within budget.

It is imperative that the grantee’s IFB explicitly state the method of award, including use of any deductible alternates. Failure to be clear and precise on the procedures that will be utilized can cause confusion or disputes among bidders that could, at the very least, cause project delays.

Grant Administration Services
By Contractors/Consultants
Professional grant administrators are often procured by grantees to undertake CDBG projects. Note that any person contracted to perform grant administration services to be paid with grant funds, must be procured following CDBG procurement requirements.

By Regional Planning Commission Staff
A grantee may choose to contract with their Regional Planning Commission (RPC). As quasi-governmental entities, municipalities that have standing contracts with an RPC are not required to procure grant administration services following CDBG procurement requirements. However, a cost estimate must still be completed prior to contracting.

By Grantee Staff
A grantee may instead choose to perform some or all of these services with their own staff member and can be reimbursed for the time an employee spends working on the CDBG project. It is important to note that time sheets must demonstrate the time spent solely on the CDBG project. This method requires source documentation of all costs at time of monitoring.

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