offered by

VII. Appendices

Resources mentioned in the Conducting Best Value Procurement Handbook.

Table of Contents

A. Instructions for Submitting Requests for OSD Approval

Instructions for Submitting Requests for OSD Approval of Non-Standard Procurement Transactions

1. Requests for Authorization to Issue Bid for Goods/Services Covered by Statewide Contract

To request authorization, Departments must submit a written request to purchasing.agent@mass.gov with the subject line: “Request for procurement approval” and include the following:

  1. Name of the Department requesting approval;
  2. Contact person regarding the request, including telephone and email information;
  3. The statewide contract (by name and number) for which an exception is sought;
  4. A detailed explanation of why the statewide contract does not meet the Department’s needs; If a request for quote was issued and no acceptable responses were received, include a screenshot of the Summary tab of the bid in COMMBUYS, as well as copies of all attachments.
    Note: In many cases Statewide Contract Vendors can be responsive to buyers’ needs by adding products that fall within the scope of the contract. If a product or service you seek is not currently available but appears to fall within the contract’s parameters, reach out to the OSD Contract Manager to discuss;
    and
  5. The anticipated procurement duration and total procurement value.

A tracking number will be assigned and the sending Department will receive an electronic receipt. Within three business days of receipt, OSD will approve or reject the Department’s request.

2. Using Collective Purchase Contracts, including GSA, or another state’s contracts:

When using contracts administered by the General Services Administration (GSA) or another state, Departments must obtain approval from the Operational Services Division (OSD) prior to use and must adhere to the following policy:

When a Statewide Contract exists:

Departments must request and receive OSD permission, as described in Section C, iii.

When a Statewide Contract does not exist:

A Department must notify the Assistant Secretary for Operational Services at purchasing.agent@mass.gov, in writing, of its interest in purchasing off a GSA or another state’s collective purchase contract. Such notification should include an analysis of whether any current statewide contract or Commonwealth Executive Department contracts could meet (or not meet) their needs and, if such contracts do exist, why the Department is not using such contract. After review, OSD will make a determination of the appropriate next steps including, but not limited to, the following:

  1. Determine if there is a sufficient need for the commodity/service to justify OSD conducting a statewide procurement and then executing a Statewide Contract; or
  2. Recommend that the Department conduct a procurement for the necessary commodity/service using the GSA or another state’s collective purchase contract’s prices and contract terms as the benchmark for best value; or
  3. Approve the Department’s use of the other contract(s) based on the collective purchase competitive procurement exception available under 801 CMR 21.05 (4) and conditional upon the Department adhering to the specific conditions in the GSA or another state’s collective purchase contract(s) to ensure that the contract satisfies the requirements of MGL Chapter 7, section 22 and section 22A. For example, if a Department were using a GSA contract (and the GSA contract was established as a pre-qualification list without price competition), these conditions would include, among other requirements, that a Department seek competitive quotes from the list of “qualified” contractors on the GSA contract to ensure that the “fair, open, and competitive” requirements of the Commonwealth’s procurement statute are met.

OSD will respond to Department requests for a specific commodity/service not on statewide contract, in writing, specifying what action(s) is necessary. Approval to use a GSA or another state’s collective purchase contract(s) will be made on a case by case basis within three business days from receipt of the request.

3. Due Diligence Posting Requirements:

OSD requires that Due Diligence postings meet the criteria outlined below.

Written Request

The Chief Procurement Officer and/or Chief Fiscal Officer of the Department intending to use the Due Diligence posting provision must submit a written request to OSD. All written requests and associated postings in COMMBUYS must reference “Due Diligence posting request” in the document title. The following information must be included in the written request for approval and must be submitted to OSD at purchasing.agent@mass.gov:

  • A detailed description of the commodity or service being offered or sought;
  • Name of the company that is offering the commodity and/or service, if applicable;
  • An explanation of why the Department is seeking to post notice of the offer rather than conduct a competitive procurement, including all research and due diligence conducted by the Department that resulted in the decision to exercise this option;
  • A copy of the Department’s Notice of Intent, including the specifications being sought in the posting, or if a Department is posting a notice of its intention to award a contract to a specific company under any of the three options (Best Value Offer, Intent to Purchase a Proprietary Product or Service, or Intent to Purchase Services from Another Government Entity), and a complete and detailed list of what is being offered by the company. The Notice of Intent will be posted in COMMBUYS if the written request is approved in writing by OSD; see the Due Diligence Posting Template available on the OSD Forms webpage.
  • Proposed duration for posting the notice in COMMBUYS: Please note that, while the timeframe for posting the notice in COMMBUYS may be brief, it must be posted for at least 14 calendar days. World Trade Organization requirements may mandate a longer posting period based on the total dollar value of the potential contract.

Post in COMMBUYS

Once written approval has been received, the Department must post the approval notice in COMMBUYS in the same manner as other bids are posted. If no responses are submitted in response to the notice, the Department may proceed with a contract. If responses are submitted, the Department must conduct a procurement that is fair, open, and competitive or evaluate the responses.

Document in Procurement File

All documentation, correspondence, and information must be retained by the Department in a procurement file.

4. PO Exceptions in COMMBUYS

To request an exception to posting POs in COMMBUYS, an Executive Department must email purchasing.agent@mass.gov. Requests must be submitted by the Agency Head and must include the following information:

  • The object classes and codes associated with the transactions;
  • Description of the existing ordering system and its purpose, including detailed information on the technology used to develop the system, interface with other systems (e.g., MMARS), system security requirements, volume of transactions, number of people using the system;
  • Description of the Department’s business requirements that make use of COMMBUYS impractical or otherwise unnecessary; and
  • Technical and business contacts within the Department for OSD to contact with questions about the system.

B. Procurement Process At-A-Glance

Procurement Process at a Glance - Quick Reference Chart for the Procurement of Goods and Services under 801CMR21.00

Large Procurement

Procurement
Value
Procurement
Process
Procurement
Responsibility
Contract Forms Secondary
Reviews
Large procurement
(Total value greater than $150,000)

Post RFR in COMMBUYS as a Bid. The RFR also may be advertised elsewhere (optional), but must refer Bidders to COMMBUYS.

Must accept written response ONLY online via COMMBUYS.

Supplier Diversity Program (SDP) Plan required.

OSD conducts statewide contract procurements or designates to a Department.

Departments may conduct their own procurement: (1) if the commodity/ service is not available on statewide contract or (2) if the commodity/ service is available on a statewide contract and permission to not use the statewide contract and to procure on own is requested and approved in writing by OSD.

Commonwealth Terms and Conditions (T&C) signed once by each contractor.

Standard Contract Form (SCF).

Other RFR attachments.

Procurements for human and social services use the Commonwealth Terms and Conditions for Human and Social Services Form .

See CTR policy State Finance Law and General Requirements and Good and Services for additional details for contract execution (available on the CTR’s website).

Yes, if greater than $500,000 for services [CT] by CTR

 

Small Procurement

Procurement
Value
Procurement
Process
Procurement
Responsibility
Contract Forms Secondary
Reviews
Small procurement (Total value equal to or less than $150,000)

Post RFR in COMMBUYS as a Bid. The RFR also may be distributed in newspapers (optional) or as required by statute.

Must accept  response ONLY online via COMMBUYS.

Supplier Diversity Program (SDP) Plan encouraged.

As required by the Small Business Purchasing Program, award to a registered small business, if meets all RFR requirements.

This type of procurement is conducted by each Department individually: (1) if the commodity/ service is not available on statewide contract or (2) if the commodity/ service is available on a statewide contract and permission to not use the statewide contract and to procure on own is requested and approved in writing by the Assistant Secretary for Operational Services, or designee.

Commonwealth Terms and Conditions (T&C) signed once by each contractor.

Standard Contract Form (SCF).

Other RFR attachments.

Procurements for human and social services use the Commonwealth Terms and Conditions for Human and Social Services Form .

See CTR policy State Finance Law and General Requirements and Good and Services for additional details for contract execution (available on the CTR’s website).

No, if Department has full delegation.

 

Incidental Purchase

Procurement
Value
Procurement
Process
Procurement
Responsibility
Contract Forms Secondary
Reviews
Incidental purchase (Total value less than $10,000)
 
Reasonable price. See “Incidental Purchase” guidance. This type of procurement is conducted by each Department individually, if the commodity/service is not available on statewide contract.

Invoice. SCF/T&C not required for incidental purchases <$5,000; See chart in Appendix B

for object classes that do not require SCF/T&C for purchases up to $10,000.

C. 801 CMR 21.00 Object Code Limits for Incidental Purchases

801 CMR 21.00 Object Code Limits For Incidental Purchases (INP)

Note: The Expenditure Classification Handbook (ECH) lists Incidental Purchase guidance for each object code.

Incidental Purchase Transaction Matrix

The matrix below provides direction to Departments for making incidental purchases of goods and services that are not available on Statewide Contract.

Incidental Purchases/Purchases
up to $10,000 (purchases NOT
on Statewide Contract)
Transaction Secondary
Review
Contract Documentation Required
Commodity or Service not on Statewide Contract INP (<$5,000) N/A

Object codes in EE, FF, GG, JJ, KK RR do not require T&C/SCF, invoice only*

Object codes in HH, LL, MM, NN do not require T&C/SCF <$5,000, invoice only*

Commodity or Service not on Statewide Contract GAP/GAE/GAX (>$5,000-$10,000) N/A

Object codes in HH, LL, MM, NN require T&C/SCF >$5,000

Commodity or Service not on Statewide Contract RQS/CT/PRC
RPO/PRM (service)
QS/PC/PRC (commodity)
(any amount)
N/A T&C/SCF required if these transactions used

*T&C/SCF is recommended for any purchase requiring complex specifications, performance terms, or contractual terms (such as ownership of deliverables). The AGO has advised against Departments signing vendor contracts, purchase orders, or invoices with contractual terms, including website shopping carts and click-through agreements.

D. Transaction Matrix

The purpose of the matrix below is to give direction to user Departments for purchasing commodities and services. When the “Contract Documentation Required” column indicates that a statewide contract is required, it assumes that there is a statewide contract executed and on file with the Operational Services Division and the Master Agreement (MA) is available for Departmental use.

Statewide Contracts Any Value:

Statewide Contracts
Any Value
Transaction Secondary
Review
Contract Documentation Required
Commodity on Statewide Contract RQS/PC/PRC, N/A MA number referencing a statewide contract. Purchase Order for Commodities and/or Services (or the equivalent).
Commodity leases on statewide contract RQS/CT/PRC
RPO/PRM
N/A MA number referencing a statewide contract. Purchase Order for Commodities and/or Services (or the equivalent).
Services on Statewide Contract RQS/CT/PRC N/A MA number referencing a statewide contract. Purchase Order for Commodities and/or Services (or the equivalent).

 

Incidental Purchases / Purchases up to $10,000 (purchases NOT on Statewide Contract):

Incidental Purchases/ Purchases up to $10,000 (purchases NOT on Statewide Contract) Transaction Secondary
Review
Contract Documentation Required
Commodity or Service not on Statewide Contract INP (<$5,000) N/A

Object codes in EE, FF, GG, JJ, KK, RR do not require T&C/SCF, invoice only*

Object codes in HH, LL, MM, NN do not require T&C/SCF <$5,000, invoice only*

Commodity or Service not on Statewide Contract GAP/GAE/GAX (>$5,000-$10,000) N/A Object codes in HH, LL, MM, NN require T&C/SCF >$5,000
Commodity or Service not on Statewide Contract

RQS/CT/PRC RPO/PRM (service)QS/PC/PRC (commodity)
(any amount)

 

N/A T&C/SCF required if these transactions used

*T&C/SCF is recommended for any purchase requiring complex specifications, performance terms, or contractual terms (such as ownership of deliverables). The AGO has advised against Departments signing vendor contracts, purchase orders, or invoices with contractual terms, including website shopping carts and click-through agreements.

 

<$150,000 - Small Procurements:

<$150,000 - Small Procurements Transaction Secondary
Review
Contract Documentation Required
Commodity or Service not on Statewide Contract

RQS/PC/PRC
(Commodity)

RQS/CT/PRC, RPO/PRM
(Service)

N/A *Standard Contract Form with ink signature and RFR reference number in the MMARS Board Award field are always required. RFR and electronic responses are required through COMMBUYS. Departments must check the “SBPP Only” button when posting a small procurement RFR.
Commodity leases not on Statewide Contract

RQS/CT/PRC
RPO/PRM

 

N/A *Standard Contract Form, with ink signature and RFR reference number in the MMARS Board Award field are always required. RFR and electronic responses are required through COMMBUYS. Purchase Order for Commodities and/or Services (or the equivalent)

 

>$150,000 - Large Procurements:

>$150,000 - Large Procurements Transaction Secondary
Review
Contract Documentation Required
Commodity or Service not on Statewide Contract

RQS/PC/PRC
(Commodity)

RQS/CT/PRC, RPO/PRM
(Service)

Generally, $150,000 or above by OSD *Standard Contract Form with ink signature and RFR reference number in the MMARS Board Award field are always required, Solicitation: two screen shots: (a) the SUMMARY page, including the Related Contract Number value and (b) RULES page specifying “Online Responses Are Accepted.
Commodity leases not on Statewide Contract RQS/CT/PRC, RPO/PRM Generally, $500,000 or above by CTR *Standard Contract Form, RFR, and electronic responses are required through COMMBUYS. A COMMBUYS screen print of the RFR and response files, RFR reference number in the MMARS Board Award field. Purchase Order for Commodities and/or Services (or the equivalent).

*The contractor must sign the applicable Commonwealths Terms and Conditions prior to executing the Standard Contract Form. The applicable Commonwealth Terms and Conditions needs to be signed only once for the contractor to do business with any Commonwealth Department. It must be recorded in the MMARS Vendor/Customer (VCUST) table. Once recorded, Departments should NOT ask contractors to re-sign the Commonwealth Terms and Conditions unless required due to a change in Tax Identification Number or other business change.

E. Additional Bid Specifications Categories and Compensation Structures to Consider

Additional Bid Specification Categories and Compensation Structures to Consider

Performance Contracting: Performance contracting ensures that contract dollars spent by the Commonwealth on the purchase of commodities and services are, in fact, producing the desired results and meeting the requirements of the contract. In general, payment is contingent upon results rather than effort. RFRs should state clearly the services expected, define performance standards and measurable outcomes, identify performance evaluation methods, and include positive or negative performance incentives, if appropriate.

Use of Contractor-Owned Materials During Performance: Sometimes the products are owned or copyrighted by the contractor and are merely provided to fulfill contract requirements. These products should be identified as contractor material, performance requirements, or benefits. A common example of a “benefit” is computer software that is owned and copyrighted by a contractor but is adapted or redesigned specifically for a Department. The Department would contract for this redesign and for a license to use the software. The contract also might include provisions for additional design plans, upgrades, and maintenance. Also, Departments could purchase training manuals and have a usage license. However, the contractor would maintain ownership and copyright of the content and design of the manuals. The contractor has more of an interest in ownership and copyright of the design and content of the manuals, since these tools may be adapted for a variety of different clients.

Departments should weigh carefully the risk of relinquishing any rights to products that have been created or developed utilizing Commonwealth funds, since the Commonwealth may be entitled to recoup a share of any profits and should consult appropriate legal staff when addressing these issues.

Brand Name or Equivalent: Substantially equal specifications should be used unless the SSST determines that:

  • No specification for a common or general use item is available.
  • The nature of the product or the nature of the Department’s requirements makes use of a brand name or equal specification suitable for the procurement.
  • Use of a brand name or equal specification is in the Department’s or Commonwealth’s best interests.

Use of brand name-only specifications or specifications that restrict a commodity to a pre-determined brand or design specifications are the most restrictive forms of competitive procurement and should be used only if essential. When using brand names as part of the specification, procuring Departments should use “or equal,” to substantiate that equivalent products also will be considered. Include additional specifications, i.e., particular design, performance, and other characteristics of the brand name to ensure that the product identified is the product required.

Performance and Payment Timeframes that Continue Beyond the Duration of the Contract: Departments may consider including the language from the RFR - Other Specifications pertaining to term leases, rentals, maintenance, or other agreements for services entered into during the duration of the contract, if the performance and payment time frames extend beyond the duration of the contract. The RFR may state that the terms may remain in effect for performance and payment purposes (limited to a clearly defined timeframe, e.g. “….up to 24 months beyond the final end date of the contract”). However, it also must state that no new leases, rentals, maintenance, or other agreements for services will be executed after the contract has expired. This also applies to “project” services, such as a consultant who is hired for a two-year project in the final year of the contract. Also, any contract termination or suspension will not automatically terminate any leases, rentals, maintenance, or other agreements for services already in place unless the Department also terminates said leases, rentals, maintenance, or other agreements for service, which were executed pursuant to the main contract.

Changes to Performance and Contract Specifications that Require a Formal Contract Amendment: The RFR must specify the types of amendments (formal and administrative) that may occur. Formal amendments require a newly executed Standard Contract Form and are subject to recordkeeping requirements. Administrative changes do not require a formal amendment; however, they must be documented in the procurement file in COMMBUYS. The requirements for executing amendments, including limitations on amendments, must be stated clearly in the RFR. Certain changes, if delineated clearly in the RFR, may be considered administrative changes and will not require a formal amendment. Such changes may include, but are not limited to, certain programmatic changes (which are not so significant that the services no longer reflect those originally procured), clerical changes (but not a change in contractor identity), and budget variations that do not result in an increase to the maximum obligation. The RFR should state the degree to which shifting line items within a budget may be considered administrative. Please note that a formal amendment is required for increases to the maximum obligation even though one of the RFR’s required specifications states that expansion funding may be incorporated into the contract.

Bidder Qualification Criteria:

In addition to delineating the performance specifications, a Department may use this section of the RFR to require Bidders to present:

  • A profile of their firm’s operations, qualifications, and the organization’s capabilities. Departments may request samples of products or copies of reports to verify statements regarding capabilities.
  • Certification that the Bidder is not debarred.
  • A listing of any current or past litigation that may be relevant to the commodities or services provided by the Bidder.
  • A detailed description of the Bidder’s resources and experience relevant to the RFR performance requirements, including specific expertise in serving specific populations, and/or verification that the Bidder is authorized to sell or distribute specific commodities or services.
  • A statement about the historical development of the Bidder’s organization.
  • An organizational chart.
  • A statement on the experience of Bidder’s staff and the total number of employees (distinguishing between administrative staff, management, principal partners or officers, field, technical, and customer support).
  • Copies of professional licenses.
  • Compliance with environmental regulations and/or any other environmental practices that may benefit the Commonwealth.
  • The location of the offices from which the work will be managed and the number of staff employed at each office.
  • The number of years the Bidder has been in business and/or the number of years the Bidder has been in the business identified in the RFR (which may be separate and distinctly different from their main business line).
  • Key personnel of the business and key personnel assigned to meet the Commonwealth’s needs under the contract. (A resume or statement of qualifications must be attached to all consultant contracts pursuant to M.G.L. c. 29, s. 29A.) Departments should review carefully resumes of key personnel to ensure that the skills of the individuals meet those required in the RFR. Departments also should ensure that any changes in key personnel during the contract term require the Department’s pre-approval.

Note: In the development of the list of required documentation, Departments should be mindful of the time and expenses that may be required of the Bidders to respond to the RFR. Only documentation that the Department plans to use in the evaluation process should be required for submission by the Bidders.

Key Personnel: The RFR may require Bidders to provide details on the key personnel associated with the proposed contract work. In addition to naming a contract manager, the Bidder also might be asked for an organizational chart and resumes of the key personnel. This information allows Departments to see the qualities and experience of all key staff, as well as their place in the vendor’s organization.

The contract/project manager is responsible for oversight and management of contract performance and will act as the contact person for receipt of notice and other communications between the parties. The RFR may state that the contract or project manager or any of the agreed upon key personnel may not be changed without prior written notice to the Department or that an agreement must be executed between the contractor and the Department prior to the change. The RFR also may specify that the contract manager be responsible for timely written responses, such as within five business days, for all information requests from the SSSL and attendance at meetings required by the SSSL.

Identification of Subcontractors: A Department should decide whether contractors will be authorized to use subcontractors to complete contract performance and, if so, include this provision in the RFR. Subcontracting is a good opportunity to use the full list of SDO-certified firms that are listed on the Supplier Diversity Office webpage of OSD. Large procurements require the submission of an SDP Plan. For small procurements, Departments may require an SDP Plan for subcontracting relationships. The Commonwealth may require a Bidder to provide a copy of any subcontract and any additional supporting documentation, verifying that the subcontractor is in good standing, e.g., has complied with tax requirements and has not been debarred. Prior approval of the Department is required for any subcontracted service of the agreement. The Commonwealth reserves the right to reject any subcontractor if it is in Commonwealth’s best interest to do so.

All subcontracts should be in writing and contain provisions that are functionally identical to, consistent with, and subject to the provisions of a contract, including reporting and compliance requirements. Unless otherwise provided by law, the Commonwealth is not bound by any provisions contained in any subcontract. Contractors are responsible for the satisfactory performance and adequate oversight of their subcontractors.

Financial Statements: An RFR may require financial statements from Bidders to evaluate their financial stability. Bidders may be required to demonstrate sound financial condition or that appropriate corrective action is being taken to resolve identified financial problems. Bidders also may be required to disclose details of any criminal investigation, indictment, debarment, or other litigation against the firm that might adversely affect its ability to complete its contract performance. In addition to information provided by the Bidder, there are a variety of financial reporting services that may be used by Departments when evaluating the financial strength of a Bidder. Departments may require the independent reports of such services as part of the response.

Benchmarking: Departments may consider informing the Bidders of its intent to use research pertaining to the RFR Key Performance Indicators (KPIs); which may include on-time delivery, customer satisfaction, or prices paid by other purchasers of the commodity or service to establish benchmarks from which to negotiate.

Departments should consider and analyze the prices paid by other Departments, other states, and the federal government (General Services Administration [GSA] contracts) for the same or similar commodity or service to determine the reasonableness of prices offered by the prospective Bidder. Departments may wish to state they will use benchmarking throughout the contract’s duration to keep prices in line with or lower than those paid by other purchasers.

Risk of Loss, Performance Bonds, and Insurance: Pursuant to M.G.L. c. 29, s. 30, the Commonwealth is self-insured. Therefore, contractors are required to bear the risk of loss for any deliverables, data, or their own materials. The risk of loss may not shift to a Department until possession, ownership, and full legal title of the items are transferred to and accepted by a Department. Contract prices usually reflect the contractor’s expenses for providing adequate insurance to cover this risk of loss. Departments should consider whether the procurement warrants a bond or insurance.

Departments may require Bidders to submit performance bonds that usually are based upon a percentage of the contract price to be collected by a Department in the event the contractor breaches or defaults. Performance bonds are required for certain types of procurements, such as construction and other high-risk situations. Performance bonds should be used sparingly and only in high risk situations, since this requirement usually increases the contract price to the Commonwealth and will limit the number of vendors competing for the work.

A Certificate of Liability Insurance (professional or personal injury) also may be required to show evidence of insurance coverage for professional malpractice and/or personal injury that result in connection with the performance of a contract, naming the Commonwealth as an insured party. Further, any contractors that exercise independent judgment or decision making (doctors, attorneys, arbitrators) should carry professional malpractice or personal injury insurance. Independent decision making, even if daily activities are performed on Commonwealth premises and with Department involvement, will take these individuals outside the protections of the Commonwealth under M.G.L. c. 258.

Regardless of their named status in a contract, independent decision making implies independent contractor status and these individuals must be covered by valid insurance policies during the period of the contract. Other positions, such as temporary help, should be covered by their employers. When contracting with individuals who also happen to work for a corporation, partnership, or other entity, Departments should ensure that these individuals’ contract activities also are covered under the entity’s policy. In most instances, contract activities will be outside of the scope of standard insurance policies, therefore, these individuals must obtain separate policies.

Tax Compliance Certification: Although tax compliance is certified when the Bidder executes the Standard Contract Form and Instructions, the SSST also may require the Bidder to demonstrate compliance with Commonwealth’s tax laws pursuant to M.G.L. c. 62C, ss. 49A, 51 and 52 and M.G.L. c. 181, s 16. The SSST may allow the Bidder to do this with a self-certification or may require a Certificate of Good Standing that has been issued by the Massachusetts Department of Revenue (DOR) within the past year. See www.mass.gov/dor for more information.

Bidders are encouraged to apply for a Certificate of Good Standing, even if the SSST has not required it, either online or by faxing a request to DOR at 617-887-6262. DOR will notify the requestor if there are any remaining liabilities or tax requirements. Certificates will be issued only if the organization is in full compliance. Since all applications require extensive research, the Bidder should allow sufficient time to process.

Compensation Structure

Common Compensation Structures that May Be Either Rate or Maximum Obligation:

Project-Based Compensation: Project-based compensation is used when contract performance cannot be divided neatly into severable units. The payment may be a flat rate-, deliverable-, or milestone-based rate structure, or an all-inclusive amount (all related costs, overhead, administrative costs, time, materials, etc.). The Bidder provides an actual or estimated cost for the completed contract performance based on the RFR specifications (which should be very comprehensive). Payment may be based on a schedule of predetermined events or deliverables, or upon completion and acceptance by the Department of the entire project. Contractors who underestimate their costs may not request additional compensation.

Unit-Based Compensation: A unit structure pertains to rates that are set by the unit (per item, hour, day, week, or service). Unit-based compensation is valuable when a performance-based compensation structure is not feasible. Units are customarily independent components of a contract and the number may change depending on the Department’s needs. A Department pays only for the units requested and delivered.

Contingency Fee or Revenue Generating Structure: Contingency fee contracts allow contractors to be paid a percentage fee from revenues collected on behalf of the Commonwealth. These contracts must be legislatively authorized and procured under 801 CMR 21.00 (with an approval of the RFR and accounting mechanisms by the CTR; see 815 CMR 8.00). They are not procurement exceptions.

F. Purchase of Service (POS) Specifications

Purchase of Service (POS) Bid Specifications and Guidance

As previously indicated, 801 CMR 21.00 applies to goods and services, including human and social services. This Policy refers to “commodities and services” when describing requirements applicable to all 801 CMR 21.00 procurements. Human and social service procurements, referred to as “purchase of service,” or POS, often include specialized and unique requirements. These POS-specific requirements and recommendations are summarized below. For the purposes of this Policy, POS refers to human and social services classified under the “MM3” or “M03” object codes in the Office of the Comptroller’s Expenditure Classification Handbook.

Note: Many POS contracts are subject to rate setting pursuant to Chapter 257 of the Acts of 2008. For contracts subject to rate setting, certain of the considerations below will not apply.

Commonwealth Terms and Conditions for Human and Social Services

Most 801 CMR 21.00 transactions use the Commonwealth’s Terms and Conditions. Contracts for human and social services use the Commonwealth Terms and Conditions for Human and Social Services Form, located on the OSD Forms webpage. See CTR policy State Finance Law and General Requirements and Good and Services for additional details for contract execution (available on the CTR’s website).

RFR-Specific POS Considerations

Additional Considerations regarding compensation:

If considering a compensation structure that uses risk sharing, Departments should consult with OSD and their Secretariat prior to using a risk-sharing structure. A waiver of regulation 808 CMR 1.00, Compliance, Reporting and Auditing for Human and Social Services, may be necessary.

Another tool available to determine the value of the outcomes is the analysis of the actual costs experienced by a group of similar programs through the use of the data contained in Uniform Financial Statements and Independent Auditor’s Reports (see the associated guidance entitled General Audit and Compliance Requirements via a link at the end of this document). In these instances, additional factors, such as differences between the services of similar programs and those services being procured, should be considered.

There are several other items that should be noted by human and social service Departments when developing a pricing system. Several of these common issues are discussed below. Other issues may arise, in addition to those identified below, as pricing structures are developed.

Utilization factor for unit rates: Departments may choose to consider anticipated program utilization when developing prices in a unit rate compensation structure. In effect, a slightly higher unit rate is developed to compensate for the fact that the program will not always operate at maximum (peak) capacity due to client absences or other reasons. Since an absence does not alleviate the program’s operating costs, a slightly higher unit rate will mitigate this potential loss. In many programs, a utilization factor may be appropriate if the Department recognizes that there may be vacancies in the program during the contract term which may impair the contractor’s ability to provide services to other consumers in the program. The exact utilization factor that is negotiated should be based on the program’s prior utilization history, if available, or the average for all programs of the same type.

The inclusion of a utilization factor in unit rate contracts may result in a situation where a specific contractor is serving consumers at a higher utilization level than negotiated or anticipated and thus reaches the maximum obligation of the contract (or “bills out”) before the end of the contract period. In this case, the contractor is required to provide services up to the total capacity purchased by the contract (see line 5 of POS Attachment 4: Rate Calculation/Maximum Obligation Calculation Page located on the OSD Forms webpage) for the remainder of the contract period with no additional funding. The application of a utilization factor does not result in the contractor delivering “free” services; rather, in these cases, the contractor has been fully reimbursed for the costs associated with the program in a period of time that is shorter than the full contract duration. Conversely, Departments may be able to reasonably project that a program may be fully utilized during the contract period, and the use of a utilization factor would not be appropriate. As a general rule, utilization factors of 85% to 100% are considered reasonable. Utilization factors of less than 85% are discouraged, except in exceptional circumstances.

Commercial fees for for-profit contractors pursuant to 808 CMR 1.03(6): A number of human and social service contractors are organized on a for-profit basis. To avoid confusion and subsequent audit findings, Departments must be explicit in the contract about the amount of fees in excess of cost, if any, that may be earned by a for-profit contractor. Each contract executed between a Department and a for-profit contractor must either 1) explicitly indicate when a commercial fee has not been established by indicating that the earnings allowance is zero, or 2) clearly indicate the amount of the negotiated earnings allowance, by percentage or dollar amount, in the contract. This requirement of explicitly stating either zero or the percentage or dollar amount negotiated applies to all available compensation structures and all types of POS contracts with the exception of cost reimbursement contracts.

The amount of fees that a contractor may retain must be noted, for informational purposes only, on POS Attachment 3, Fiscal Year Program Budget. A commercial fee may not be added into the price (rate) paid by the Commonwealth. In those contracts where an Attachment 3 is not used, the amount of the commercial fee, if any, must be included within the contract specifications.

Departments may consider several approaches in developing a reasonable commercial fee. To arrive at a commercial fee, Departments may agree upon a fee based on the maximum obligation of the contract or the total payments made by the Department or a percentage of the surplus as defined in 808 CMR 1.03(6). In addition, when determining what is a reasonable fee, Departments may want to consider profit margins of the for-profit industry as a whole, if available, or the limitations on surplus funds generated by not-for-profit contractors of human and social service programs (see 808 CMR 1.03(7)).

It is important to remember that, regardless of the fees derived by the above methods prospectively, for-profit contractors may not retain a commercial fee from a contract with a deficit operating result. In addition, cost reimbursement contracts cannot, by their nature, have a commercial fee identified. Cost reimbursement contracts only pay for actual costs incurred by the provider, and, thus, do not allow for any surplus.

The provisions of the commercial fee also apply to Chapter 71B Approved Special Education Programs for which the Operational Services Division will prospectively negotiate a commercial fee with the private schools. Departments with questions as to an appropriate commercial fee are encouraged to contact OSD or their Secretariat.

Program budgets: Program budgets by their nature tend to focus attention on the level and type of resources needed to attain the anticipated outcomes of the program. However, primary emphasis should be placed on identifying and determining how to attain the desired outcomes and then on the resources that are necessary to accomplish those outcomes. During the RFR process, program budgets may provide important information to Departments in evaluating responses and consequently may be requested. Except for those budgets required as a result of a cost reimbursement compensation structure or for the services that will be paid for with federal funds, program budgets are not required to be attached to human and social service contracts. Contractors, consistent with good practice, should use program budgets to manage expenditures and to plan for the resources needed to accomplish the outcomes of the program.

Compensation Structure Limitations: There are a few limitations on Departments’ ability to negotiate the compensation for human and social service programs. See also the associated guidance entitled General Audit and Compliance Requirements available via a link at the end of this document. Those limitations include:

  • Health care, special education, and other authorized rates: Departments must use prices for programs where those prices have been established pursuant to an independent price setting authority, such as the Division of Health Care Finance and Policy or, in the case of certain special education services, OSD. Under M.G.L. c. 118G, the Division of Health Care Finance and Policy is responsible for establishing rates of payment for “health care services” that include many services which traditionally have been procured by Departments through the Purchase of Service system. Departments must utilize the prices established by the Division of Health Care Finance and Policy for services or programs under its jurisdiction when executing a contract for those services or programs. Further, OSD authorizes, pursuant to 808 CMR 1.06, prices for M.G.L. c. 71B approved private school programs. Departments must utilize the prices authorized by OSD when buying slots in one of these approved programs.
  • The Commonwealth must receive the lowest price: Generally, the negotiated price may not be greater than the lowest price charged by the contractor for the same service to any other public or private purchaser (see 808 CMR 1.03 (4)).
  • No balance billing: The negotiated price must be accepted by the contractor as full payment (see 808 CMR 1.03 (5)).
  • Restrictions on the use of client funds or third-party payments: Any client resources or third-party payments not specifically anticipated in the price and defined in the contract must go to reduce the Department’s contract obligation (see 808 CMR 1.03(5)).
  • Prices may not include any non-reimbursable costs: Prices may not include items that are considered non-reimbursable under the provisions of 808 CMR 1.05.

Other RFR Specification considerations:

  • Incorporate an overview of the needs and characteristics of the individuals to be served.
  • Specific requirements including, but not limited to, staffing patterns and qualifications, hours of operation, linkages or affiliations, specialized equipment, training, supplies, or site requirements.
  • The Discharge Planning Specifications for Certain Procurements and the Employment and Training Specifications for Certain Procurements are required for selected human and social services. These specifications are available via links at the end of this document.
  • See OSD Update 08-03, Purchase-of-Service (POS) Capital Items Procurement Policy, via a link at the end of this section, for specific guidance on procurement of capital items of furnishings and equipment for human and social service programs.

Debriefings and Appeals

Debriefings: Departments must provide an opportunity for debriefing to non-successful Bidders. Non-successful Bidders must request and participate in a debriefing as a prerequisite to filing an administrative appeal. The SSST must specify the individual to whom requests for debriefings should be directed. To facilitate the exchange of information in a timely manner, SSSTs also must identify timeframes for both receipt of debriefing requests (within 14 days of the notification of contract execution) and scheduling of debriefing meetings (within 14 days of the receipt of the request). These timeframes may be modified at the discretion of the SSST. Written documentation of who attended and what was discussed at the debriefing must be placed in the procurement file.

Department Appeals: Pursuant to 801 CMR 21.06(15), non-successful Bidders may, after a debriefing, submit a formal appeal to the SSST or procuring Department. Each SSST is responsible for the development of appeal procedures that are designed to promote and protect the principles of fundamental fairness, as well as to minimize the administrative burden on both SSSTs and Bidders.

The initiation of an appeal by a Bidder may introduce an element of uncertainty into the competitive process for the selected Bidder, the SSST, other purchasers of the service, families, and the individuals being served. For that reason, SSSTs are encouraged to develop procedures for hearing procurement appeals that are streamlined and expeditious. Pending appeals at the Department level shall not prohibit the Department from proceeding with procurement activities and executing contracts. Appeal procedures, must at a minimum, include the following information:

  • The person within the Department to whom requests for an appeal should be directed.
  • Any time limitations for requesting an appeal.
  • Specific grounds for appeal.

Department bids must state that appeals will be considered only when they allege that either:

  • The Department failed to comply with applicable purchase of service regulations and guidelines. These would be limited to the requirements of 801 CMR 21.00 or any successor regulations, the procurement policies and procedures in this Handbook, other policies and procedures issued by OSD, and the specifications of the RFR; or
  • There was a fundamental unfairness in the procurement process.

Administrative appeals are not subject to the formal procedures specified in the State Administrative Procedures on Adjudicatory Procedures and Appeals (M.G.L. c. 30A, s. 10 and s. 11). However, OSD does encourage Departments to provide an opportunity for a hearing or meeting between the parties, as appropriate. Departments may reject appeal requests based on grounds other than those stated above. Information on procedures for appeals to OSD must be included in the RFR (see RFR – Required Specifications for Purchase of Service (POS), on the OSD Forms webpage). All documentation pertaining to appeals must be placed in the procurement file.

Supplier Diversity Plan

See the Supplier Diversity Program (SDP) Form for Purchase of Service (POS) form on the OSD Forms webpage.

POS Attachments

Six contract attachments have been developed specifically to document programmatic and fiscal specifications for human and social service procurements. Instructions for completion and a detailed explanation of the content of each attachment may be found in the associated guidance entitled Purchase of Service Attachment Instructions for Human and Social Services available via a link at the end of this section.

Required Forms/Use of POS Attachments

Commonwealth Terms and Conditions for Human and Social Services

Required attachment to the RFR.

Departments must:

  1. For electronic responses: Inform Bidders the form is included for informational purposes only and will be required at contract execution (if the form is not already on file with CTR); or
  2. For hardcopy responses: Require Bidders to execute as part of the response (if the form is not already on file with CTR).

Purchase of Service Attachments:

  • Attachment 1: Program Cover Page
  • Attachment 2: Performance Measures
  • Attachment 3: Fiscal Year Program Budget
  • Attachment 4: Rate Calculation/Maximum Obligation Calculation Page
  • Attachment 5: Non-Reimbursable Cost Program Offset Schedule
  • Attachment 6: Capital Budget

Optional attachments to the RFR.

Departments have the option to require Bidders to complete as part of their response or complete at time of contract execution.

Attachment 1 is required at contract execution.

Attachment 2 may be required at contract execution.

Attachments 3, 4, 5, and 6 may be required at contract execution, depending on specific requirements.

Associated Policies and Guidance

This information provides links to additional Associated Policies and Guidance resources related to referenced in the Best Value Procurement Handbook.

Contact

Phone

Hours of Operation M-F 9am-5pm

TTY Line (617) 727-2716

Fax

(617) 727-4527

Address

One Ashburton Place, Room 1017
Boston, MA 02108-1552
Date published: September 25, 2018
Last updated: September 25, 2018

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