What are NC State Contract Vehicles?
NC State contract vehicles are state contracts established by the (N.C.) Department of Administration for use by state agencies and other public bodies in the state. These contract vehicles were created to provide a uniform contract between the state and the vendor. The primary purpose of NC state contract vehicles is to facilitate the purchasing process by shortening the time frame required for an agency to obtain the needed commodities, supplies or services.
By using a state contract vehicle, an agency or department of the (N.C.) state or local government can avoid the time-consuming formal procurement process. For example, it allows the purchasing agent to enter into a contract with a vendor that does not require advertising for bids or responses, at the same prices and discounts as those agreed to by the North Carolina Department of Administration. The terms and conditions of a state term contract apply to all purchases made through the contract, meaning consistency for the vendor and the agency, board or commission relying on the contract.
The following types of NC state contract vehicles exist:
Statewide 24-hour Term Contracts – These contracts are used when the North Carolina Office of Information Technology Services (ITS) needs to continually purchase certain items or services. These contracts include (for example) telecommunications hardware and software , and they are available to state and federal agencies in North Carolina, and public/private 2-1-1 agencies including the United Way of North Carolina.
State Term Contract Addendums – These contracts are for the purchase of goods and services at fixed statewide pricing. A direct addendum to the state term contract will be issued if an agency or a local government unit wishes to establish an open-ended agency specific contract with a vendor, and it will follow the same terms and conditions of the state term contract. Two types of state term contract addendums exist:
State Term Contract Agency Specific Contracts – This type of contract is equivalent to a standard contract. It is used when an agency desires to obtain a specific commodity or service from a vendor, at fixed prices consistent with prices on a statewide contract.
Local Government Contract Addendums – These contracts are established by local government units such as counties, cities and towns, to procure the same commodities, supplies and equipment from the statewide contract vendors under the same terms, conditions, prices and discounts as apply to the statewide contract.
Types of NC State Contract Vehicles
When you win a state contract, what kind of contract vehicle does the contract use? The State has several options for contract vehicles, and being familiar with these can provide you with a much better understanding of the procurement process and an often (but not always) greater ability to manage your relationship with the State.
The State utilizes contract vehicles other than the "plain vanilla" purchase order, including cooperative agreements, blanket purchase agreements, indefinite delivery contracts, and master services agreements. When the State anticipates only one purchase, the State will probably use a purchase order or a standard contract. When the State anticipates multiple purchases over some time, with some opportunity to renegotiate price and quantity after each purchase, the State will probably use one of the following contract vehicles.
Cooperative Agreement A Cooperative Agreement is a contract between parties (generally parties in different states) that allows an individual state agency to opt into or out of group purchases when the agency finds it advantageous to do so. When the individual agencies have opted in, the contract is effectively available to the general public. Pursuant North Carolina G.S. 143-58, the State may opt into a Collective Purchasing Agreement in place between a party that is not a State Agency and a Federal Government Agency, if the State determines that the agreement is advantageous to the State. In this way, the State can obtain goods and services by participating in group purchases where vendors are able to offer lower pricing based upon economies of scale. While the State does not itself post solicitations or issue notices of awards for a Cooperative Agreement, if the State chooses to opt into a Cooperative Agreement, it may do so by posting a notice to the State Purchasing Website. Like the other types of contract vehicles discussed here, response to a cooperative agreement is usually on a non-exclusive basis.
Blanket Purchase Agreement In its broadest sense, a Blanket Purchase Agreement is an agreement between an agency and vendor that provides the vendor the ability to fill orders for goods/services for the agency from time to time as needed and without consideration for other obligations of the vendor. When an agency has a continuing requirement for specific goods or services, the agency and vendor may enter a contract for the goods or services. However, to allow for flexibility (e.g. where quantities or delivery schedules of goods are uncertain), but still avoid the time and costs of issuing multiple solicitation notices to vendors to fill each individual order (especially for small dollar purchases), the parties agree that the vendor will stand ready to fill individual orders as needed. An example of a blanket purchase agreement is a State-issued contract with an office supply retailer that allows State agencies to purchase office supplies on an as needed basis.
Indefinite Delivery Contract Similar to a Blanket Purchase Agreement, an Indefinite Delivery Contract provides an agency the ability to order goods or services on an as needed or as required basis. Instead of allowing a vendor to fill multiple orders, an Indefinite Delivery Contract is a simple contract for the continuous delivery of goods or services during a specified period of time. This sort of contract often covers a single location (e.g. a school facility).
Master Services Agreement A Master Services Agreement is similar to the blanket purchase agreement, though rather than providing for the purchase of goods, the Master Services Agreement provides for the procurement of services over a period of time as needed and without consideration for the other obligations of the vendor. Like the other types of contract vehicles discussed here, response to a master services agreement is on a non-exclusive basis.
Advantages of State Contract Vehicles
A significant advantage for both vendors and agencies is that State Contract Vehicles offer a streamlined "best and final offer" process for vendor selection. For standard solicitations, a vendor can be awarded by the lowest responsive bidder. However, when multiple vendors are competing for a single piece of business, the solicitation will ask for a best and final offer from all vendors. Such determinations allow non-price factors to be considered, thereby avoiding an award based solely on price. Through the State Contract Vehicle, State Purchasing & Contracting completes a thorough evaluation of all of the non-price criteria through its negotiation of a statewide term contract with the vendor. This is then followed by agency-specific price negotiation with the Statewide term contractor.
The biggest benefit for an agency using State Contract Vehicles is the money it saves because it does not have to run its own procurement. A typical agency should expect around 5 percent in savings as compared to running a full procurement. Even larger savings (16-20 percent) are likely if the commodity is a statewide term contract. Another huge advantage of using State Contract Vehicles is the reduced administrative burden placed on the agency. An agency is not required to choose a vendor from the resulting pool of awards for the State Contract Vehicles. Instead, the agency is allowed to make its decision based on an agency-specific price and technical negotiation process with the Statewide term contract. Without the requirement to conduct a procurement, the agency saves time and is able to buy off a contract without a formal request for proposal.
Qualifying for NC State Contracts
To qualify as a state vendor with the North Carolina Department of Administration (NCDOA), you must complete the application process and satisfy all eligibility requirements. You must also be registered with the NCDOA in order to propose on a NC State contract.
For your business to qualify to transact with the state government as a vendor, it must have a valid Federal Employer Identification Number (FEIN) or the Social Security Administration’s Individual Taxpayer Identification Number (ITIN). You must also have a valid North Carolina General Business License if your business operates within the state. North Carolina does not regulate business licenses; individual cities or counties may have licensing requirements that are based on your location.
Other eligibility requirements for registering with the NCDOA include:
The Application Process
After you’ve downloaded and completed Form SR-1, Statewide Reservation./Vendor Registration Request from the NC Department of Administration, you must submit it to the NCDOA. The application must contain the original ink signature of the authorized agent of your business. In addition, you must also provide a copy of the entity’s federal Form W-9, Request for Taxpayer Identification Number and Certification, and any other documents requested by the NCDOA.
Payment of Any Liabilities Owed to the State
Current North Carolina Vendors are asked to submit proof of their tax account status with the Department of Revenue. For example, tax clearance documents may include receipts, canceled checks or other documents that show that the vendor has paid any debts or liabilities owed to the state of North Carolina.
When submitting your application to the NCDOA, you may also include any information that you feel will assist the NCDOA in performing a background check on your business. For example, you can provide a copy of your business’s literature, such as a brochure, pamphlet or booklet. It’s also helpful to include items that may support your financial integrity, such as a copy of your balance sheet and the names of three financial institutions that do business with your company. In addition, you can attach copies of the profiles of any private-sector vendor references that you have.
The NC E-Procurement System
NC E-Procurement system is an integral part of the contract lifecycle for businesses that have a state contract. The NC E-Procurement is a web-based system that allows vendors to do a number of things, including search for contract opportunities, manage contracts, manage contracts for State Term Contracts, and much more. E-Procurement is a collaborative system designed by the Division of Purchase and Contracts (DPC) in conjunction with the Statewide IT Procurement Office and the Statewide Master IT Purchase and Contracts Office. E-Procurement helps DPC and other state agencies reduce costs, eliminate paperwork and improve customer service.
Vendors are encouraged to regularly monitor the E-Procurement system to identify contract opportunities, such as Requests for Proposals (RFPs), Requests for Quotations (RFQs), and Invitations for Bids (IFBs), in which they might want to participate. Vendors can do this by registering for an account on E-Procurement. Once registered, vendors can log-in to the E-Procurement system and search for contract opportunities. These search results can be narrowed or filtered down in various ways, including contract type, solicitation status, agency code, and even fee status. Vendors should carefully review these solicitations and determine whether they are interested in responding to RFPs, RFQs, or IFBs. To respond to these solicitations , vendors must log into E-Procurement and follow the instructions provided to prepare and submit their bid proposals. E-Procurement provides vendors with an easy way to organize all of the state procurements in which they may want to participate in one place.
In addition to allowing vendors to view solicitations for state contracts, E-Procurement also provides vendors with information on how to register to do business with North Carolina. As part of this process, vendors must submit a completed vendor registration application. Upon receipt of the application, E-Procurement will determine whether the applicant qualifies as a vendor under North Carolina law. If so, E-Procurement will add the applicant to the database of registered vendors and provide the applicant with a vendor number. When the vendor is issued a number, it will receive an email notification. Once a vendor has received a vendor number, it will have to complete its online vendor profile. The online vendor profile serves as the vendor’s wall in E-Procurement and gives the state access to the vendor’s business file. Vendors who are already registered to do business with the state should get a notice from E-Procurement that the registration is expired. Vendors who do not act timely on this notice will be suspended from the E-Procurement system and will no longer be able to conduct business with the state. Once suspended, a vendor will have to contact E-Procurement to reactivate its registration.
Changes in NC State Contracting
Following a failed attempt to switch to an online-only procurement cycle with eProcurement, NC State Contracting is moving forward with significant changes to state contract language and processes. These changes will affect the buying methods used by State and Local Government in North Carolina and should be monitored closely by businesses providing goods or services to state governmental entities.
One change is the requirement that outperform on their statewide contracts with state agencies by at least 5% in order to maintain their contract. It is not yet clear how this will be enforced or whether protests will be allowed where this performance requirement is not met. At present, we have not seen any guidance on what will be considered "outperforming" or what level of sales are necessary for contract participation. For the time being, businesses should examine their contract participation regularly to determine if they are significantly underrepresenting their contract capabilities and whether they need to add contract vehicles to match their availability.
Another change appears to be that RFPs will now be organized under a "two envelope" system where the technical proposals and pricing proposals are submitted separately. This allows bidders to be disqualified for issues with their pricing and eliminates the need to disclose pricing in the first stage of the process. The other likely change to RFPs is that vendors will be required to offer a firm, fixed price for the entire contract term. We have already seen RFPs for both these types of bids issued and expect to see more in the future. If firms do not have the ability or the desire to compete with "low bid" governing units, a firm may want to consider whether they still wish to participate in these bid opportunities.
Lastly, we are starting to see more use of multiple-award contracts where a maximum or base discount from retail is provided for a specific class of items (not just a specific item) and then those items are added to the National Institute of Governmental Purchasing (NIGP) Commodity Codes. As we have discussed previously, these contracts open up opportunities for additional sales for qualifying items and expand the potential buyers. This method is particularly useful for business that already have their base prices set but still wish to see government sales as a substantial part of their business needs. It is uncertain if these contracts will be viewed as quantitative measures of performance or if these contracts can only be compared with other contract opportunities with the same or similar contract terms. Some incentive will have to be used to ensure that these vehicles actually become participating contracts, either by requiring a percentage of sales or some similar mechanism.
State Contract Case Studies
To provide readers a practical example of the successful bid process, we will profile a few companies that have successfully received award of large contracts from the NC state. First, we will look at Connect Inc., an Otsego, Michigan based telecommunication construction company. Connect was the low bidder on the NC DOT Project STP-0709(20), on which they were awarded a contract for $526,160.84. Project STP-0709(20) consisted of replacing luminaires on existing signal and sign structures for the City of Greensboro and City of Winston Salem. Connect was chosen as the low bidder by providing a bid for Unit Price items only. Rather than fill in the cost of materials, labor, equipment and overhead, Connect merely provided a unit price per gallon of paint, with "1" gallon as the quantity. Doing so allowed for high profit potential on "Item No. 25 – 00 73 13.13 Painting Concrete Bases." So, while Connect made only $6.62 on Item No. 4, Labor for Hour by Workers (Unskilled), it made a whopping $1,981.68 on Item No. 25, which is the primary item of work in the project.
First, we see that Connect received the highest percentage of unit price items (33%). In addition, Connect made a very high profit on the majority of its unit price items. Further, this information comes from a project that the state deemed not to require a pre-bid meeting or submittal of requests for information requests to establish a good faith effort, as opposed to the majority of the NC state advertised contracts. While Connect did submit a request for information concerning qualification of suppliers, it does not appear any such information would be necessary for concrete foundations for traffic signals and signs. Thus, it appears likely that Connect is familiar with the requirements of NC DOT contracts and has experience with similar projects in other states.
In contrast, once we go down the line to Item No. 8: Labor by Equipment-Millermatic 252 Wire Feed Welder (Gas or Electric Powered), we see that Connect is now just average with an 18% profit margin. From the perspective of a low bidder who has achieved 33% of the total bids and only received about an 18% markup for them, Connect must be very pleased, considering that they will likely make $190,000 of profit on just a handful of these items. Unlike Item No. 25, Item No. 8 is likely within an average contractor’s expected experience. It relies upon knowledge of welding techniques and application of welding principles in the field. For that reason, we expect many bids would have been submitted for this item, and the low bidders could be easily determined. Thus, probably only contractors with recent experience and simple bidding strategies are more likely to get awarded contracts for this item.
Next, we find the project DB125 that was awarded to C.T. Wilson Construction Co., Inc., a Charlotte based general contractor specializing in civil construction and site preparation. On bids including Detour and Additional Maintenance of Traffic Items, prevailing wage requirements, and the variation of proposed quantities without any coordination meeting or pre-bid meeting, we can assume that Wilson lacked past project experience upon which to rely. It must have followed a strategy that included, among other things, inquiring by phone or email about average square footage of asphalt repairs, to probe for the average square foot price, which it could then improve upon with its bid. In addition, Wilson may also have contacted quality equipment subs to find the hourly rates for equipment, which then allowed it to provide a bid number that is 100% reflective of its expected cost of materials and labor on a unit price basis.
In reviewing these sample bids, we see that for State Highway contracts that are unit price based, prevailing wage based, or require any other-kind of work that requires special skills or general familiarity (e.g. installation of bridges, corrective maintenance of traffic signs) there is a highly specialized knowledge set required for purposes of selecting a low bidder. This is to say that the high skill level of the work renders lots of time spent negotiating proposals and a unified bidding strategy irrelevant, by virtue of the fact that the mix of items to be completed will dictate profitability and the winning bidder would have submitted the same bid no matter if it spent one hour or two days preparing the bid.
On the other hand, we can see that for projects where the total cost of work to be done is mostly undetermined, such as repair projects under full review of the scope of work by the winning bidder, it is useful to anticipate cost overages and demonstrate your familiarity with the work. Specifically, as the prevailing rate of the statewide wage increases from $10 (a 30% increase over the next 1.5 years [12]) for someone earning $20 per hour, the low bidder can still be exposed for repairs by simply using a standard university calculation of labor overages (Labor x 1.5 = cost of labor necessary to make the repairs). In the case of the prevailing wage increase, this only has the impact of increasing the cost of labor to $36 per hour in exchange for a $15 per worker per hour benefit, or a 50% increase in labor (while the project budget only went up implicity with contractors expected to continue to pay only $26 per hour). Not only does the current state of state contract vehicles seem to have the effect of leaving bidders with a large liability for work already completed (i.e. for repairs that they might not wish to complete), but the more labor intensive components of the work ends up being the cost that makes or breaks the contract for contractors (when the unit price makes it appear otherwise).
Winning State Contracts
The importance of understanding the NC state contracting process cannot be overstated if you want to maximize your chances of winning state contracts. However, it is equally important to know how to respond to NC state RFPs, RFBs, and other solicitations. The following tips can be useful in this regard.
- Thoroughly research the RFP itself. Make sure you fully understand all requirements, including timeline, deliverables, cost structures, desired outcomes, etc. Don’t hesitate to ask questions of your NC state contacts if you have any doubts; the last thing you want is to submit a proposal that is incomplete or inaccurate due to misinterpretation of the RFP.
- Focus on building a compelling value proposition, why you are the best firm for the project. When detailing why you should be awarded the contract, be specific regarding how you as a company can meet and exceed any requirements put forth by the state. Only discuss general qualities like "years of experience" or "superior customer service" if you can back those up with specificity and concrete examples.
- If possible , have existing relationships with key decision-makers within North Carolina state government. Understand that the state is making a high level commitment when it selects a company for a contract; a lot of time and money will be spent. If the state is familiar with your organization and how it operates (for example, through small projects you have performed in the past), it is much easier to say yes to a large project than it is to take a chance on an unproven firm.
- Pay attention to form over content. If the state wants your proposal to be a certain page limit and to include certain specific content, stick to those guidelines. There are virtually unlimited good ideas out there, so if you don’t adhere to the format requested by the state they will assume that you don’t really want the contract and you’ll never have a chance to pitch any of those good ideas.
- Don’t be afraid to charge enough to make a profit. While you certainly want to keep costs reasonable and competitive, selling yourself short is a sly way of losing the bid you so desperately sought.